A pioneering Arizona initiative allowing non-lawyers to own law firms has rocked the legal profession, raising questions about whether the change is expanding low-cost services for locals or jeopardizing the profession by placing profits ahead of justice.
Arizona has approved more than 150 applications by non-lawyers to start law firms under the Alternative Business Structure (ABS) model, a program ushered in by the Arizona Supreme Court in 2021 that breaks ranks with the long-honored tradition of lawyer-only ownership.
Other states are reacting. The Washington State Bar Association has approved a pilot program on non-lawyer ownership, while California, Florida, Maryland and Texas have pushed back by restricting lawyers from associating with out-of-state ABS entities.
Michael Skoler, CEO of Sokolove Law, a personal-injury firm based in Chestnut Hill, Massachusetts, said the Arizona model “represents a transformative structural shift.”
“For more than a century, non-lawyer ownership of law firms has been categorically prohibited across the United States, and that prohibition has shaped how legal services are priced and who can access them,” Mr. Skoler told The Washington Times. “Arizona’s decision to permit outside ownership opens the door not only to capital investment, but also operational innovation and new service delivery models.”
Launching the ABS initiative required Arizona to end its adherence to American Bar Association Model Rule 5.4: Professional Independence of a Lawyer, which prohibits fee-sharing and partnerships on legal issues with non-lawyers and non-lawyer ownership.
The Arizona Supreme Court’s aim was to “improve access to justice” for residents unable to afford legal help on low-tech issues such as divorces, debt collection, immigration and evictions by lowering costs through innovation and investment.
“This ABS strategy in Arizona has huge potential for reshaping the legal industry, provided there is adequate regulation in place,” said Edwin Aiwazian, CEO of Lawyers for Justice in Glendale, California. “It would provide the entry point for financial resources, technological advancements and commercial skills which usually aren’t available to most legal firms.”
Nobody disputes the worthiness of the court’s goal. What’s also indisputable is that the program has attracted a stampede of Wall Street investors, hedge fund managers and private equity speculators, spurring fears that the business entities will prioritize the bottom line over the best interests of clients in pursuit of multibillion-dollar mass-tort verdicts.
“The reason we have the Section 5.4 rule is because justice as an idea shouldn’t be driven by profit. It’s meant to be part of the foundation of our society, something people can access that is fair and equitable,” said Yosi Yahoudai, co-founder of J&Y Law, a personal-injury firm in Century City, California. “Once non-attorneys start owning law firms, there’s a real concern that practices become more driven by profits than helping people.”
Investors who now own a stake in an Arizona ABS law firm include Pravati Capital, Melody Capital Management, Kayne Anderson, Counsel Financial, Bespoke Capital Consulting and Virage Capital Management, according to Bloomberg Law. Burford Capital is interested in investing.
Last year, KPMG, one of the Big Four accounting firms, launched KPMG Law US, with a focus on helping business clients with “technology-enabled legal services powered by artificial intelligence.”
“What we’re seeing in Arizona is a fundamental shift as law firms are no longer just legal practices, they’re increasingly becoming investment vehicles,” said Lauren Zelt, executive director of Protecting American Consumers Together, which fights lawsuit abuse. “When outside capital enters the system, the pressure changes. It’s no longer just about representing a client; it’s about maximizing volume, generating leads, and driving up settlement value.”
Concerns about abuses surged in February, when the Arizona Republic ran an explosive series that found 10% of licensees had been accused of mishandling cases, misleading clients or defrauding consumers, with little response from state regulators.
The findings contrasted with a 2025 report by the Rhode Center on the Legal Profession at Stanford University found that only two Arizona ABS firms have been subject to “official disciplinary proceedings.”
The Arizona ABS firms aren’t doing business only in Arizona. They often extend their reach through fee-sharing agreements with out-of-state lawyers. At least two lawsuits have been filed against ABS firms by out-of-state parties.
“Many of the licensed companies operate more like call centers than law firms, generating thousands of leads through advertising, and then dishing them out to ‘partners’ across the country,” the Arizona Republic said in a Feb. 11 article, “Loopholes Let Arizona Law Firm Experiment Spread Nationwide.”
At least one celebrity now owns a piece of an Arizona ABS law firm: Joe Gorga, star of “The Real Housewives of New Jersey,” doesn’t have a law degree, but he has billboards promoting his firm, 10X Law.
State legislators get involved
Arizona isn’t the first to experiment with non-lawyer ownership. Utah introduced its own model in 2020 known as the “regulatory sandbox,” but has since rolled back the program by increasing vetting of applicants and intensifying the focus on underserved consumers.
Before that, the District of Columbia carved out an exception to Rule 5.4 in 1991, allowing law firms to partner with lobbyists and government officials. The program is far more limited than the Arizona model, requiring non-lawyers to support a firm’s legal practice and adhere to the D.C. Rules of Professional Conduct.
The Arizona and Utah programs continue to “spur innovation across law firms, tech companies, and intermediaries” while showing “little to no evidence of consumer harm,” the Stanford report said.
Even so, other states have made it clear that they don’t want their lawyers partnering with the Arizona ABS firms.
California passed legislation effective Jan. 1 that prohibits fee-sharing with firms owned by non-lawyers, while the Texas Center for Legal Ethics said in a 2025 opinion that attorneys may not practice law with a non-lawyer-owned firms.
Bills to forestall ABS firms are advancing in Colorado and Illinois. The Colorado bill, which has bipartisan support, is backed by the Colorado Chamber of Commerce and the Colorado Trial Lawyers Association.
“Protecting the integrity of Colorado’s legal system is critical for maintaining trust in our courts,” Chamber CEO Loren Furman said in a statement. “When non-lawyers have a financial stake in legal fees or case outcomes, the interests of consumers and businesses are no longer the top priority, and litigation costs increase for everyone. This legislation ensures that legal decisions are made in the best interest of Coloradans and not driven by profit.”
With other states looking at the Arizona program in hopes of closing the legal-services gap, however, the issue is far from settled.
Eric Elliott, CEO of VIP Marketing, which provides services for law firms, said the “Arizona ABS model is one of the most debated topics in the firms we advise.”
“Arizona’s experiment is still early, and the data is limited enough that both sides can selectively cite it,” Mr. Elliott said. “I’m not going to overstate conclusions that the evidence doesn’t yet support. What I will say is this: the firms I work with are not dismissing it, and neither should policymakers in states where this conversation is just beginning.”
