Tennessee Supreme Court Keeps Nonlawyer Ownership Rules, Loosens ABA Accreditation Requirement

The Tennessee Supreme Court, in its October 2, 2026, decision in In re: Regulatory Reforms to Increase Access to Quality Legal Representation (No. ADM2025-01403), declined to authorize reforms related to nonlawyer ownership of law firms or fee sharing between lawyers and nonlawyers, noting it "has not identified sufficient need or support" for such changes. Its traditional Rule 5.4 restrictions remain in place, but the court left the door open to revisit the issue as more data becomes available.

For investors looking to deploy capital in Tennessee legal services, management service organization (MSO) structures remain the go-to compliant model. Properly structured MSOs – compensated through flat or hourly fees not tied to profits and without nonlawyer control over legal decision-making – remain compliant under Tennessee's framework. (For comparison to a recent Colorado law, see Holland & Knight's previous alert, "Colorado to Enact HB26-1421, Targeting ABS and MSO Structures in Legal Services," July 13, 2026.)

Other Reforms: Accreditation and Task Forces

While declining to alter ownership rules, the court did amend bar admission rules to reduce reliance on exclusive American Bar Association (ABA) accreditation. Rule 7, Section 2.02 will now require graduation from a school accredited by an "Approved Accreditor" – defined as any entity approved by the Tennessee Supreme Court, including other state supreme courts. The ABA remains an Approved Accreditor.

The court also eliminated the prior requirement under Rule 7, Section 2.02(d) that graduates of non-Tennessee-approved schools demonstrate active practice for three of the preceding five years. Notably, Tennessee preserves its existing pathway for Board of Law Examiners approval of non-ABA schools, under which the Nashville School of Law has operated since 2001.

Additionally, the court established three task forces to study alternative licensure pathways, interstate mobility and limited-licensed paraprofessionals, with appointment orders expected later in 2026 and into 2027. The court also directed the Access to Justice Commission to monitor reform developments in other jurisdictions.

Takeaways and Considerations

Tennessee's decision to preserve Rule 5.4 restrictions provides continuity for firms and investors operating under existing structures, while the accreditation changes and task forces signal continued attention to access-to-justice reforms. Practical effects will depend on further orders and task force work.

Here are some key considerations for stakeholders:

• Keep an Eye on Forthcoming Orders. Amendments to Tennessee Supreme Court Rules and task force appointments are expected later in 2026 and into 2027.
• Think Through Accreditation Strategy. Law schools should assess implications of the Approved Accreditor framework and the possibility that additional accreditors may be recognized.
• Consider Portability. Firms recruiting non-ABA graduates should evaluate where those graduates may be eligible for admission.
• Take a Fresh Look at MSO Structures. Investors and law firm operators should continue to structure compliant MSO arrangements that avoid nonlawyer control over legal judgment or impermissible fee sharing.
• Weigh in on Comment Processes. Stakeholders with views on alternative licensure pathways, paraprofessional licensing or interstate mobility should consider submitting comments if task forces solicit input.

Conclusion

The Tennessee Supreme Court's October 2, 2026, order preserves traditional restrictions on nonlawyer ownership and fee sharing. Although the order also addresses accreditation reform and establishes task forces for further study, the bottom line is clear: The decision to maintain Rule 5.4 restrictions provides continuity for firms and investors operating under existing MSO structures.

If you have questions about these developments, please reach out to the authors or your Holland & Knight relationship attorney.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.