Northern California Record

Wednesday, February 26, 2020

State Bar of California looking into rule change on attorneys sharing fees with non-lawyers

Attorneys & Judges

By Rich Peters | Nov 4, 2019


LOS ANGELES – The State Bar of California is looking at a rule change that would end a general ban on attorneys sharing fees with non-lawyers so non-attorneys could eventually hold financial interests in law firms. However, opponents say this would increase third-party litigation funding, leading to more third-party pressures on civil litigation that might do a disservice to clients.

“If enacted, these rules could turn California courts into casinos and undermine attorney-client privilege by fueling third-party litigation funding,” wrote the U.S. Chamber Institute for Reform, which opposes the change. “These changes would make it even easier for funders to exert undue influence and control over litigation potentially pitting the financial interests of investors against those of a firm’s client.”

For nearly two decades, third-party litigation finance companies have been used to fund civil litigation, such as class-action lawsuits, in exchange for a varied percentage of funds obtained from through settlement of the action. A state regulatory is looking into the issue.

“Changing the rule regarding fee-sharing is among options being discussed by the Task Force on Access Through Innovation of Legal Services (ATILS),” said Teresa Ruano, program supervisor of Office of Strategic Communications & Stakeholder Engagement for the State Bar of California. “The goal of the task force is to explore regulatory changes that could improve access to legal services. Our California Justice Gap study shows that the majority of Californians don’t get legal help when they have actionable civil legal problems.”

ATILS put out for public comment on the potential change in late July, and the public comment period closed Sept. 23. That material describes the pros and cons of the various options, including two alternative options regarding fee-sharing.

“The ATILS effort has received lots of media coverage and social media discussion (under the #ATILS hashtag)," Ruano said. "It has also been discussed at numerous bar association town halls in both northern and southern California. 

“ATILS originally had until year-end 2019 to submit their final report to the Board of Trustees, after which the board would decide what next steps to take," Ruano said. "I believe the task force may request an extension to submit their final report. Regardless, it’s pretty clear that this is a long-term process, which may require additional study and/or an implementation task force to plan next steps once ATILS submits a final report and the Board decides on next steps.”

Editor's note: The Northern California Record is owned by the U.S. Chamber Institute for Legal Reform.

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