William Kirtley: "There is a massive demand for litigation crowdfunding from litigants"

Leaders League: What do you think about the idea of crowdfunding litigation?

William Kirtley: It’s definitely something which has potential. There are a number of sites today which allow individuals to contribute to litigation, either as an investment or a donation, but it is still a very new area. From our experience helping with a litigation crowdfunding website, there is a massive amount of demand for litigation crowdfunding from litigants, but far too few investors or donors willing to actually fund a case. According to friends in the financial industry, the returns are too far in the future for the general public to be interested. Lawyers are the natural investors, but they fear the ethical repercussions and may have conflicts of interest. 

What advantages can crowdfunding bring over other litigation funding options?

As a lawyer, I suggest clients reach out to a traditional third-party funder first, but also it is interesting to explore online funding platforms.

One benefit of crowdfunded litigation over a traditional TPF is that a TPF will only fund very high value cases, while very small cases can be crowdfunded. Moreover, only about one in twenty applications for third-party funding are successful, and some litigation crowdfunding sites reportedly have higher rates of success. Furthermore, depending on the site used, a litigant can choose the success fee to be offered so can theoretically save money – if, that is, an investor is willing to accept the return that is offered.

The common point in all cases I know of that have been successfully crowdfunded is that the person who wants their case funded had shared it widely. Most, but not all, of the funding also comes from friends and family, rather than complete strangers.

Crowdfunding litigation allows anyone to invest in cases, regardless of their level of legal expertise – do you think people have reservations about investing in an area where they lack expertise?

I think it’s something that worries laypeople, who fear that you must be an expert litigator to know whether a case will win or lose. Interestingly, a convincing study has shown that the more senior litigators get, the worse they become at predicting the outcome of a case, which is counterintuitive. So, I don’t think it is something which should be limited to legal professionals due to the need for expertise.

Of course, as with all investments you should do at least some research first, and the odds are much better if you invest in multiple cases at once.  

Could a third-party funder investor find they are liable for costs arising from a losing case?

In some jurisdictions, notably in the UK, third-party funders may be liable for costs when a funded case loses. In the US, which is a leader in third-party crowdfunding, it is not a cost follows the event system, so they are not facing this potential problem yet. It would be interesting to see how this was decided should a dispute arise.

How do you think attitudes are changing towards third-party funding?

Third-party funding is still a novel idea to much of the public, the vast majority of whom still do not know that it exists or is legal. In the US, the wrestler Hulk Hogan had a case funded by the tech billionaire Peter Thiel, which received widespread media coverage in the US and helped to raise awareness as to the existence of TPF.

The success of firms such as Burford shows that litigation funding can be a remunerative business model. Crowdfunding litigation is even more novel, however. There are over a dozen litigation crowdfunding sites today, but it is still unknown whether they will succeed in the long run. Without big success stories, it’s hard to capture the imagination of investors or the public, which is needed for crowdfunded litigation to really take off.

How do you think technological innovations will affect the work of lawyers?

Arbitration was made for a globalized world, and the internet helps people from different countries to interact and to conduct business, so arbitration should continue to grow, especially if costs can be contained.

Online courts seem like a perfect setup for small cases to be resolved, since they should reduce costs, ease information sharing and save time. I think things like this will work eventually but are still not mainstream. Law is a very traditional field.

Artificial intelligence will also one day be capable of drafting all of our contracts, and perhaps eventually replace litigators and arbitrators, but we aren’t anywhere near that point yet.

The biggest losers from the internet and technological innovations are likely large, international law firms, which have almost entirely lost their advantage of having a global presence and having better access to information thanks to large legal libraries. Today, even a small boutique can have a global presence with a decent internet connection and global contacts, and it can have access to the same legal information as the largest firm for a modest fee. It never made much sense for law firms to adopt an industrial model in terms of organization and to grow to massive sizes, since there are very few economies of scale in the practice of law, but it makes even less sense today due to technology.

B.H.F.