McDermott's Private Equity Plan Could Test Long-Standing Bans on Outside Funding for Law Firms

Legal ethics attorney Trisha Rich was cited in the American Bar Association (ABA) Journal in an article exploring private equity's burgeoning interest in investing in law firms. The newly combined McDermott Will & Schulte became the latest example of a law firm splitting its administrative functions from its legal practice through creating a management service organization (MSO) that could accept outside investment, raising questions about legal ethics rules and the role of private equity in the industry. ABA Model Rule of Professional Conduct 5.4 prohibits fee-sharing with nonlawyers or allowing nonlawyers to influence a lawyer's professional judgment, and questions about compliance with Rule 5.4 have become more frequent as more firms contemplate moving to the MSO model. Ms. Rich, who has advised on numerous law firm MSO deals, explained that, structured properly, MSOs and alternative business structures (ABS) comply with ethical regulations and can prove valuable for lawyers and private equity investors. She also talked about the Private Equity Legal Alliance, a partnership among consultancies, investors and law firms whose goal is to guide law firms considering outside capital investment. Holland & Knight is a member of the alliance, which formed in the fall of 2025.

"The alliance offers a comprehensive, ethics-first road map that helps investors and firms pursue innovation without compromising the profession's core responsibilities," she commented.

READ: McDermott's Private Equity Plan Could Test Long-Standing Bans on Outside Funding for Law Firms (ABA membership required to read)