Colorado moves to ban fee sharing with nonlawyers

Colorado passed the Colorado Legal Practice Integrity and Fee-Sharing Prohibition Act, which bars lawyers and law firms from sharing legal fees or revenues with nonlawyers or alternative business structures controlled or managed by nonlawyers. The law also prohibits lawyers and firms from entering financial or contractual arrangements with alternative business structures. The measure states that financial arrangements giving nonlawyers an economic interest in law firms, fees, revenues, or case outcomes threaten duties of loyalty, confidentiality, and professional independence. The bill creates a private right of action allowing clients and firms to sue allegedly noncompliant alternative business structures. The act is intended to regulate legal services affecting Colorado clients regardless of where lawyers or firms are located.

"Colorado has passed a bill that bans fee sharing with nonlawyers. Under the bill, known as the Colorado Legal Practice Integrity and Fee-Sharing Prohibition Act, lawyers and law firms in the state are prohibited from sharing legal fees or revenues with nonlawyers or alternative business structures, which are legal entities that are controlled or managed by nonlawyers."

"Lawyers and firms also are prohibited from entering a financial or contractual arrangement with alternative business structures. "Financial arrangements that provide nonlawyers with an economic interest in law firms and their fees, revenues or case outcomes, however structured, threaten a lawyer's duties of loyalty to their client, confidentiality and professional independence," the bill said."

"The bill-which was approved by Colorado lawmakers last week and now awaits Colorado Gov. Jared Polis' signature-creates a private right of action that allows clients and firms to sue allegedly noncompliant alternative business structures. "Alternative business structures have increasingly been used to circumvent long-standing prohibitions on nonlawyer ownership of law firms and the concomitant sharing of attorney fees," the bill said."

""Colorado has a compelling interest in regulating the provision of legal services affecting Colorado clients, regardless of where a lawyer or law firm is located." California also passed legislation banning its lawyers and firms from sharing fees with out-of-state alternative business structures in the fall, according to Law360, which has coverage."

Read at ABA Journal