HB 26-1421

HB 26-1421, a Colorado law that has been signed into effect, stops lawyers and law firms from sharing their fees or profits with non-lawyers who are involved in providing legal services. This means that lawyers can't form business partnerships with people who aren’t legally licensed to practice law or give them a cut of the money earned from legal work. The law also allows clients and other affected law firms to sue if they believe this rule has been broken, but it doesn’t allow for financial compensation in all cases. This bill affects how lawyers can structure their businesses and partnerships within Colorado, aiming to maintain professional standards in legal practice.

Official Summary

The act prohibits a lawyer or law firm, in connection with providing legal services concerning a legal right arising in whole or in part in Colorado (legal services), from:Providing any portion of legal fees or revenues to a nonlawyer or an organization that economically participates in the provision of legal services or shares in the profits of legal fees or revenues and is owned or controlled by one or more nonlawyers (alternative business structure);Entering into a financial or contractual arrangement with an alternative business structure, which arrangement relates to providing legal services;Forming an entity recognized under Colorado law with a nonlawyer if any of the activities of the entity consist of providing legal services;Practicing with or in the form of a professional company authorized to provide legal services if a nonlawyer owns an interest in the company or a nonlawyer has the right to direct the judgment of a lawyer; andCompensating a person that provides administrative or nonlegal business services to a lawyer or law firm unless the compensation is not contingent upon a percentage of legal fees or revenues and not determined by reference to recoveries, settlements, or other case outcomes.     The act exempts certain arrangements, activities, and organizations from the prohibitions in the act.     The act also creates a private right of action that allows the following persons to enforce the prohibitions in the act:A person to whom a lawyer or law firm provides legal services that are alleged to be in violation of the act; andA law firm doing substantial business in Colorado that has suffered or may suffer a loss in revenue due to a violation of the act by another law firm, which law firm doing substantial business is not eligible for recovery of economic damages.     A person may seek economic damages, injunctive relief, declaratory relief, and any other relief the circumstances may require for violations of the act. If a court determines that a lawyer, law firm, or other person has violated the act, the court must order the funds received or paid in violation of the act to be disgorged and paid to the state treasurer, except to the extent that the funds are paid as economic damages to a plaintiff. The state treasurer must deposit any disgorged funds into the general fund.     The act repeals on September 1, 2029.(Note: This summary applies to this bill as enacted.)

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