Colorado moves to ban fee sharing with nonlawyers and alternative business structures

 As you probably know, the rules of professional conduct in most states ban lawyers from sharing fees with non-lawyers and also ban non-lawyers from owning an interest in law firms.  However, in recent years, there has been a strong trend against these types of rules and some states and Puerto Rico have amended them or abandoned them entirely, with others seriously considering doing so too.

I thought this trend was decidedly (although slowly) moving in the direction of recognizing alternative business structures in most states.  But maybe I was wrong.  After some conflicting reports on whether the experiments in Arizona and Utah turned out to be a positive move (see here and here), maybe the trend has slowed down.  And now comes news that in Colorado, the idea appears to have been rejected outright.

The ABA Journal is reporting that 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.

The bill is based on the proposition that “[f]inancial 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.”  This proposition is, as you would expect, challenged by those who support changing the system to allow alternative business structures.

It will be interesting to see if the bill is signed into law and, more importantly, whether it will influence the discussion of the issue in other jurisdictions.

For all my posts on issues related to alternative business structures, go here and scroll down.