This is the fifth installment of the “Bending the Rules” series. Previous installments can be found online at austinlawyeronline.com.
The interest in non-attorney-owned entities providing legal services in such states as Texas, Utah, and Arizona is not without skeptics.
Established by the American Bar Association’s Model Rule 5.4 and enforced by many states’ supreme courts, the rule prohibits fee sharing with and investment in law firms by non-attorneys.
In January 2023, the U.S. Chamber of Commerce Institute for Legal Reform released a report, “The Dangers of Allowing Nonattorney Investment in Law Firms.”
The report’s primary argument is that recent efforts to eliminate or modify Model Rule 5.4 is driven by the “rapidly growing” third-party litigation funding (TPLF) industry. TPLF firms “pay money to a litigant or his or her counsel in a lawsuit in exchange for a contingent interest in any proceeds from the litigation,” the report reads.