Is there any way to penalize fundraising that is based in part on frivolous lawsuits?

Question

In a purely hypothetical question...let's set the hypothetical in Arizona in the United States as a default jurisdiction for the question, although other U.S. jurisdictions would be useful and of course around the world would be interesting.

Let's posit an individual is crowdfunding an organized effort to compel the government to change something. As a part of that effort, "proof" of the legitimacy of their ongoing fight is the existence of legal claims they are filing in court.

The courts in this scenario have found that not only are these suits without merit, they often do not even pass the frivolous standard and are otherwise ridden with legal errors unbefitting of any serious attempt to actually win in court. Thus, they have had multiple cases dismissed, yet they find ways of continuing to file different objections to the government action to show the people that they are asking for money from that they are still fighting and can absolutely win this thing.

Does using the courts in this way violate any law other than the individual sanctions for improper suits? In particular, is there any way to go after the money being fundraised for an activity that seems on its face to be of fraudulent intent? (I.e. filing cases with 0 chances of winning just to be able to dupe people into thinking their money can be used to help win an unwinnable fight?)

If there was such a way, would it be the state or federal government pursuing the case, or could any private actors have standing? The only ones I could think of are those who donated on the belief of the false claims who later felt defrauded.

Answer 1

Does using the courts in this way violate any law other than the individual sanctions for improper suits?

Not really. Such an organization would probably have to be classified as some form of non-profit other than a 501(c)(3) in most cases, however, since politically motivated litigation usually doesn't qualify as a charitable purpose.

In particular, is there any way to go after the money being fundraised for an activity that seems on its face to be of fraudulent intent? (I.e. filing cases with 0 chances of winning just to be able to dupe people into thinking their money can be used to help win an unwinnable fight?)

No really. If they took money and spent it on the personal benefit of people related to the founders that might be fraud. This is essentially what happened in a non-profit purportedly established to help pay for a border wall. But using the money for a stated purpose of the entities that outsiders see as futile is probably not fraud or a violation of state regulation of entities that are not for profit.

If there was such a way, would it be the state or federal government pursuing the case, or could any private actors have standing?

A state attorney general's office generally has broad supervisory standing to confirm that entities which are not "for profit" are conforming to state law and their governing documents.

Donors might have private causes of action for fraud if there were fraudulent misrepresentations made to secure funding that both the state AG and the Justice Department could also enforce criminally. But, the conduct described does not appear to be fraudulent.

Answer 2

Vexatious litigant

The organization and its members risk overstepping a very thin but highly visible line very quickly: If the Courts believe they are just wasting the court's resources, they - and all their agents - can be declared a vexatious litigant. Once they are vexatious litigants, they can't sue anybody for anyone without a special allowance from the court

arizona deems a Vexatious litigant under Arizona Law:

12-3201. Vexatious litigants; designation; definitions

A. In a noncriminal case, at the request of a party or on the court's own motion, the presiding judge of the superior court or a judge designated by the presiding judge of the superior court may designate a pro se litigant a vexatious litigant.

B. A pro se litigant who is designated a vexatious litigant may not file a new pleading, motion or other document without prior leave of the court.

C. A pro se litigant is a vexatious litigant if the court finds the pro se litigant engaged in vexatious conduct.

[...] E. For the purposes of this section:

1. "Vexatious conduct" includes any of the following:

(a) Repeated filing of court actions solely or primarily for the purpose of harassment.

(b) Unreasonably expanding or delaying court proceedings.

(c) Court actions brought or defended without substantial justification.

(d) Engaging in abuse of discovery or conduct in discovery that has resulted in the imposition of sanctions against the pro se litigant.

(e) A pattern of making unreasonable, repetitive and excessive requests for information.

(f) Repeated filing of documents or requests for relief that have been the subject of previous rulings by the court in the same litigation.

In this case, the organization is running afoul of E1f. It's also noticeable that they might violate Res Iudicata by trying to file an identical lawsuit.

california has a better-described process to become a vexatious litigant under California law. Three of the four ways to become a vexatious litigant require a pro se litigant to act frivolous and meritless in court, and the last makes any vexatious litigant in any other states automatically one in California.

How does that solve the issue?

Once the Organization's members are vexatious litigants, they can't file any suits anymore. Unable to file suits, their credibility breaks away. Should they hire lawyers to try to pursue their frivolous claims and those file the frivolous cases, the result will be those lawyers getting disbarred, and much faster if they bring such frivolous claims again and again. As a result, the organization will bleed itself of the ability to act in this way very quickly and as a result, lose its allegedly credibility-enhancing factor to exactly the contrary.