Ethics Guidance Lags Private Equity's Interest in Legal Field

Legal ethics attorney Trisha Rich was quoted in a Law360 article examining how state bar ethics committees are responding to growing interest in the use of management service organizations (MSOs) in the legal industry. Thus far, beyond an ethics opinion in Texas, states have largely refrained from issuing formal guidance on MSOs, a structure that proponents contend supports private equity investment in law firms while complying with Rule 5.4 restrictions on nonlawyer ownership. The article noted that most states are not actively evaluating MSO arrangements unless asked, even as some lawmakers consider legislation that would explicitly address this business model. Ms. Rich added that an outright ban on MSOs would run counter to decades of ethics guidance recognizing that law firms can work with outside service providers, so long as the arrangement preserves lawyer independence and avoids fee-splitting.

"For an ethics committee to come out and say you can't do an MSO, that would be undoing a significant body of opinions on how law firms manage relationships with third-party vendors," she said.

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