Fortress Law Firm Investment Signals Shift in Legal Industry

Legal ethics attorney Trisha Rich was quoted in a Bloomberg Law article about the emerging trend of outside investments in law firms. Though long-standing ethical rules bar non-lawyers such as private equity firms from having direct ownership, companies and investors are increasingly turning to options such as alternative business structures and management service organizations (MSOs) as a way to enter the legal industry. For example, Fortress Investment Group took a 20 percent economic interest in a Phoenix, Arizona, personal injury firm, and international litigation finance company Burford Capital announced its intent to invest in the U.S. legal market. Ms. Rich, who is currently advising clients on more than a dozen transactions involving MSOs, responded to concerns about the flow of outside capital, commenting that practitioners should take a wait-and-see approach to assess the ultimate effects.

"It's really important for us to collect data and see examples of this in the world and understand if that can work better," she said. "There's a lot of people that will have a look at this and have a knee jerk reaction and say, 'This is not great,' but what they don't have are actual instances of clients or the public being harmed because of structures like this, and we're entitled to see how these structures pan out."

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