Private Equity Move into Law Firms Spurs Pushback in Illinois

Legal ethics attorney Trisha Rich was quoted in Crain's Chicago Business on proposed Illinois legislation aimed at limiting private equity's influence in law firms by barring outside investors from interfering with attorneys' professional judgment and other core law practice functions. She explained that although Illinois already prohibits nonlawyer ownership of firms, investment may still occur through alternative business structures (ABS) and management service organizations (MSOs) that separate back-office services from legal decision-making, a model that has expanded in other states such as Arizona. Ms. Rich emphasized that when structured properly, MSOs can provide capital while complying with ethics rules that require lawyer independence.

"I think a lot of the concern about MSOs comes from people who do not understand how they work," she said. "The law firm has to remain independent. Those lawyers have to stay independent, in charge of the client relationship, in charge of the decisions."

Ms. Rich also published a Holland & Knight alert on this topic.

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