{"id":163350,"date":"2026-09-22T14:47:52","date_gmt":"2026-09-22T22:47:52","guid":{"rendered":"https:\/\/xira.com\/p\/2026\/09\/22\/california-tells-private-equity-to-keep-its-hands-off-litigation-decisions\/"},"modified":"2026-09-22T14:47:52","modified_gmt":"2026-09-22T22:47:52","slug":"california-tells-private-equity-to-keep-its-hands-off-litigation-decisions","status":"publish","type":"post","link":"https:\/\/xira.com\/p\/2026\/09\/22\/california-tells-private-equity-to-keep-its-hands-off-litigation-decisions\/","title":{"rendered":"California Tells Private Equity To Keep Its Hands Off Litigation Decisions"},"content":{"rendered":"

Gavin Newsom signed AB 2305 on Sunday, which means California now has a blunt statutory answer to the question of what private equity is allowed to do once it has bought its way into a law firm\u2019s back office<\/a>. <\/p>\n

The law bars business entities from interfering with or attempting to \u201cinfluence the professional judgment of a licensed attorney or litigant regarding any substantive litigation decision.\u201d That means which cases a firm takes, which clients it signs, and when it settles. Violators, including the attorneys on the receiving end of the outside money, face statutory damages of $10,000 per violation, or three times whatever the client actually lost, whichever is greater, plus fees and costs. It covers contracts entered starting January 1, 2027. Consumer Attorneys of California, the trade group that pushed the bill, said Monday that the state is \u201csetting the standard for the rest of the country to follow.\u201d<\/p>\n

Colorado and Illinois already have similar measures. California is just the largest legal market to do it, and it lands at the moment the richest firms in the country started taking the meetings<\/a>.<\/p>\n

Trisha Rich, a Holland & Knight partner whose team has closed more than 30 legal industry MSO deals this year, told Reuters<\/a> the new law does not \u201cchange a single thing,\u201d because the attorney professional conduct rules already guard against outside influence on legal decision-making. She noted that the Illinois and Colorado versions haven\u2019t slowed MSO dealmaking in those states, and that no one has brought an enforcement action under those provisions.<\/p>\n

All of that is accurate, but pardon me if I am just the teeniest bit skeptical that MSO advocates aren\u2019t touting a system that exerts indirect, but meaningful control. Earlier this month, we covered Holland & Knight attorneys \u2014 Rich among them \u2014 pitching the MSO as a workaround for the ethics rules that bind law firms<\/a>. In that specific example Rich, et al., were arguing that an MSO could allow firms to circumvent the ethical bar on non-competes. Rich may not think that this is a \u201clegal control\u201d issue, but the reason we have that rule is \u2014 in part \u2014 to allow a lawyer to move to a different firm if it\u2019s in the best interests of a client. That feels at least \u201clegal decision adjacent.\u201d <\/p>\n

Plus there\u2019s still an optics issue when on one hand you\u2019re saying ethics rules are a sufficient safeguard against outside money influencing legal judgment but also that the MSO structure can get be a workaround for other ethics rules.<\/p>\n

There\u2019s also a gap AB 2305 was written to close. The professional conduct rules bind lawyers, and the entity writing the checks is, by design, not a lawyer. California\u2019s law skips the argument about which hat anyone is wearing and attaches a number to the conduct itself.<\/p>\n

Rich is right that Illinois and Colorado haven\u2019t produced an enforcement action yet, but PE\u2019s infestation of legal is still young.<\/p>\n

Earlier:<\/strong> Private Equity Investment In Law Firms Floated As One Neat Trick<\/em> To Get Around Ethical Obligations<\/a>
Private Equity Found A Law Firm That Said Yes<\/a>
The Richest Law Firms Are Looking At Private Equity Cash Because I Guess They Don\u2019t Have Enough Money<\/a>
Private Equity Has Its Eyes On Biglaw\u2019s Second Hundred Firms<\/a><\/p>\n

\n

\"\"<\/p>\n

Kathryn Rubino is a Senior Editor at Above the Law, host of\u00a0The Jabot podcast<\/a>, and co-host of\u00a0Thinking Like A Lawyer<\/a>. AtL tipsters are the best, so please connect with her. Feel free to email\u00a0her<\/a>\u00a0with any tips, questions, or comments and follow her on Twitter\u00a0@Kathryn1<\/a>\u00a0or Bluesky\u00a0@Kathryn1<\/a><\/em><\/strong><\/p>\n

The post California Tells Private Equity To Keep Its Hands Off Litigation Decisions<\/a> appeared first on Above the Law<\/a>.<\/p>\n

<\/em><\/strong><\/p>\n

\"\"<\/figure>\n

Gavin Newsom signed AB 2305 on Sunday, which means California now has a blunt statutory answer to the question of what private equity is allowed to do once it has bought its way into a law firm\u2019s back office<\/a>. <\/p>\n

The law bars business entities from interfering with or attempting to \u201cinfluence the professional judgment of a licensed attorney or litigant regarding any substantive litigation decision.\u201d That means which cases a firm takes, which clients it signs, and when it settles. Violators, including the attorneys on the receiving end of the outside money, face statutory damages of $10,000 per violation, or three times whatever the client actually lost, whichever is greater, plus fees and costs. It covers contracts entered starting January 1, 2027. Consumer Attorneys of California, the trade group that pushed the bill, said Monday that the state is \u201csetting the standard for the rest of the country to follow.\u201d<\/p>\n

Colorado and Illinois already have similar measures. California is just the largest legal market to do it, and it lands at the moment the richest firms in the country started taking the meetings<\/a>.<\/p>\n

Trisha Rich, a Holland & Knight partner whose team has closed more than 30 legal industry MSO deals this year, told Reuters<\/a> the new law does not \u201cchange a single thing,\u201d because the attorney professional conduct rules already guard against outside influence on legal decision-making. She noted that the Illinois and Colorado versions haven\u2019t slowed MSO dealmaking in those states, and that no one has brought an enforcement action under those provisions.<\/p>\n

All of that is accurate, but pardon me if I am just the teeniest bit skeptical that MSO advocates aren\u2019t touting a system that exerts indirect, but meaningful control. Earlier this month, we covered Holland & Knight attorneys \u2014 Rich among them \u2014 pitching the MSO as a workaround for the ethics rules that bind law firms<\/a>. In that specific example Rich, et al., were arguing that an MSO could allow firms to circumvent the ethical bar on non-competes. Rich may not think that this is a \u201clegal control\u201d issue, but the reason we have that rule is \u2014 in part \u2014 to allow a lawyer to move to a different firm if it\u2019s in the best interests of a client. That feels at least \u201clegal decision adjacent.\u201d <\/p>\n

Plus there\u2019s still an optics issue when on one hand you\u2019re saying ethics rules are a sufficient safeguard against outside money influencing legal judgment but also that the MSO structure can get be a workaround for other ethics rules.<\/p>\n

There\u2019s also a gap AB 2305 was written to close. The professional conduct rules bind lawyers, and the entity writing the checks is, by design, not a lawyer. California\u2019s law skips the argument about which hat anyone is wearing and attaches a number to the conduct itself.<\/p>\n

Rich is right that Illinois and Colorado haven\u2019t produced an enforcement action yet, but PE\u2019s infestation of legal is still young.<\/p>\n

Earlier:<\/strong> Private Equity Investment In Law Firms Floated As One Neat Trick<\/em> To Get Around Ethical Obligations<\/a>
Private Equity Found A Law Firm That Said Yes<\/a>
The Richest Law Firms Are Looking At Private Equity Cash Because I Guess They Don\u2019t Have Enough Money<\/a>
Private Equity Has Its Eyes On Biglaw\u2019s Second Hundred Firms<\/a><\/p>\n

\n

\"\"Kathryn Rubino is a Senior Editor at Above the Law, host of\u00a0The Jabot podcast<\/a>, and co-host of\u00a0Thinking Like A Lawyer<\/a>. AtL tipsters are the best, so please connect with her. Feel free to email\u00a0her<\/a>\u00a0with any tips, questions, or comments and follow her on Twitter\u00a0@Kathryn1<\/a>\u00a0or Bluesky\u00a0@Kathryn1<\/a><\/em><\/strong><\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Gavin Newsom signed AB 2305 on Sunday, which means California now has a blunt statutory answer to the question of what private equity is allowed to do once it has bought its way into a law firm\u2019s back office. The law bars business entities from interfering with or attempting to \u201cinfluence the professional judgment of […]<\/p>\n","protected":false},"author":3,"featured_media":163351,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[16],"tags":[],"class_list":["post-163350","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-above_the_law"],"_links":{"self":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/163350","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/comments?post=163350"}],"version-history":[{"count":0,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/163350\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media\/163351"}],"wp:attachment":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media?parent=163350"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/categories?post=163350"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/tags?post=163350"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}