California's AB 931 puts Big Four and private equity-backed legal ventures in the hot seat, shaking up corporate legal partnerships. Here's why corporate America should pay attention. #AB931 #LegalMarket #CorporateCompliance
California Assembly Bill 931 (AB 931), moving steadily through the legislature, marks a critical juncture in the debate over non-lawyer ownership of U.S. law firms, particularly as private equity investors and Big Four accounting firms push aggressively into the legal market.
Introduced in February 2025 and unanimously passed by the California Assembly in April, AB 931 explicitly bars California-licensed attorneys from sharing fees with firms featuring non-lawyer owners or managers. This legislative initiative directly counters Arizona’s more liberal rules, where Alternative Business Structures (ABS) have enabled firms such as KPMG and Deloitte to integrate legal services within their broader consulting and advisory offerings, and private equity firms to invest directly in law firms, typically seeking efficiency and profitability enhancements.
Advocates of AB 931 assert the measure is essential for preserving ethical standards and prioritizing client interests, free from external commercial pressures. Opponents argue the bill restricts innovation, hampers competition, and limits technological advancements that could expand access to cost-effective legal services.
The corporate implications are significant. If signed into law, AB 931 would require many companies to revisit their existing partnerships and referral practices with ABS providers. Firms utilizing multidisciplinary offerings from Big Four accounting firms or legal services funded by private equity entities would face new compliance obligations, potentially complicating multi-state and international legal operations.
California’s regulatory position could also inspire similar legislative action in other states, creating a fragmented national landscape. This scenario would substantially increase the complexity and compliance burdens for corporate legal departments across jurisdictions.
AB 931 now awaits review in the California Senate. Corporate legal leaders and industry stakeholders nationwide are closely monitoring developments, recognizing the bill’s potential to substantially reshape the operational and competitive dynamics within the U.S. legal sector.
Published May 13, 2025.
