February 15, 2023
The article discusses recent changes to regulations in Arizona and Utah that allow for investors who are not attorneys to own law firms, and continuing wariness among law partnerships to embracing this model, despite the potential benefits.
"The unwillingness of partners to give up control over firm operations is one impediment to the expansion of private equity and capital markets funding in law firms, according to Allen Fagin, former chairman of Proskauer Rose who serves as a senior adviser to litigation funder Validity Finance. Fagin said law firms will likely stick with other means of raising capital, such as drawing on their credit without ceding control over their operations. 'The primary reason is law firms are partnerships, and I don’t think they want to cede control over their operations or their destiny by looking for other forms of investment that will entail ownership or governance,' Fagin said."
"Validity Finance CEO Ralph Sutton said his company would buy in to a law firm’s business, rules permitting. Outside sources of funding for a firm’s operations would have the same intended effect as outside funding for a litigation claim, which is to level access to legal representation, Sutton said."