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<ns0:Id>20250AB__230597AMD</ns0:Id>
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<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-19</ns0:ActionDate>
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<ns0:ActionDate>2026-03-16</ns0:ActionDate>
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<ns0:ActionDate>2026-03-25</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Kalra</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_ORIGINATING">(Coauthors: Assembly Members Stefani and Zbur)</ns0:AuthorText>
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<ns0:Legislator>
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<ns0:Name>Kalra</ns0:Name>
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<ns0:Name>Stefani</ns0:Name>
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<ns0:Contribution>COAUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Zbur</ns0:Name>
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<ns0:Title> An act to add Article 7.5 (commencing with Section 6134) to Chapter 4 of Division 3 of the Business and Professions Code, relating to attorneys. </ns0:Title>
<ns0:RelatingClause>attorneys</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Corporate investment in litigation practice.</ns0:Subject>
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<html:p>Existing law, the State Bar Act, provides for the licensure and regulation of attorneys by the State Bar of California (State Bar), a public corporation governed by a board of trustees. Existing law regulates, among other things, fee agreements, legal advertising and referral services, the sale of financial products to a client, and the allowable forms of organization of a law practice, including a law corporation. A violation of these provisions may result in disciplinary action against a licensed attorney or other remedies.</html:p>
<html:p>This bill would prohibit a corporate investor involved in any litigation practice, among other things, from interfering with a substantive litigation decision or exercising control over a litigation function.</html:p>
<html:p>This bill would prohibit a corporate investor, or an entity it
controls, from entering into any contract, agreement, or arrangement with a litigation practice if the contract would enable prohibited interference or control under these provisions, and would further prohibit and void a contract or terms that would permit or facilitate prohibited interference or control, as specified.</html:p>
<html:p>This bill would deem a violation of these provisions as cause for the imposition of discipline by the State Bar and subject an attorney and the corporate investor to statutory or actual damages, attorney’s fees and costs, and other relief, as specified. The bill would define terms for these purposes.</html:p>
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<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_2C0F376C-3E0A-4B6C-9188-7515D53DD321">
<ns0:Num>SECTION 1.</ns0:Num>
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Article 7.5 (commencing with Section 6134) is added to Chapter 4 of Division 3 of the
<ns0:DocName>Business and Professions Code</ns0:DocName>
, to read:
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<ns0:LawHeading id="id_FF502718-3892-4975-AEC9-940B988447C8" type="ARTICLE">
<ns0:Num>7.5.</ns0:Num>
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<ns0:LawHeadingText>Corporate Investment in Litigation Practice</ns0:LawHeadingText>
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<ns0:LawSection id="id_1FF54516-8374-4B59-92DF-A7CD86186584">
<ns0:Num>6134.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
The Legislature finds and declares that licensed attorneys and litigants must retain full autonomy over litigation decisions and strategies, free from improper control or interference from corporate investors, private equity firms, hedge funds, or other nonlawyer entities whose primary interest is financial return rather than the interest of the injured individual. The intent of this article is to safeguard the integrity of the judicial process, ensure advocacy remains ethically sound and in the best interest of the individual, and prohibit corporations from controlling or improperly influencing litigation decisions or outcomes.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
This article is intended to ensure
that litigation decisions are exclusively in the hands of licensed attorneys to safeguard against nonlicensed individuals or entities exerting influence or control over the delivery of legal services in this state.
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<ns0:LawSection id="id_F1C3F9ED-C571-4425-860F-58BA39AA4DDB">
<ns0:Num>6134.2.</ns0:Num>
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<html:p>For purposes of this article, the following definitions shall apply:</html:p>
<html:p>
(a)
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“Corporate investor” means any entity, including, but not limited to, a private equity group, hedge fund, investment firm, or any nonattorney corporation, with the primary purpose of raising or managing capital and which participates in a litigation practice through an ownership, financing, or management arrangement.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
“Control” includes, but is not limited to, directing, dictating, or influencing which clients to represent, the scope of client representation, the financial terms of client representation, litigation strategy, settlement decisions, litigation
funding decisions, selection or management of counsel, or any other substantive legal determinations.
</html:p>
<html:p>
(c)
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“Litigation practice” means the representation of parties in judicial, administrative, arbitration, or other adversarial dispute resolution settings by licensed attorneys.
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<ns0:LawSection id="id_FB1B31FA-EC91-4229-879E-53C693940BB0">
<ns0:Num>6134.4.</ns0:Num>
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<html:p>A corporate investor involved in any litigation practice in this state shall not, directly or indirectly, do any of the following:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
Interfere or attempt to influence the professional judgment of a licensed attorney or litigant regarding any substantive litigation decision, including, but not limited to, any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Determination of which client to represent.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Determination of the scope of representation of any client.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Determining the financial terms of any client representation.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Determining legal strategy or theory of the case.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Deciding whether to file, continue, or dismiss a claim or defense.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Making decisions about a settlement offer, negotiation position, or acceptance of proposed resolution.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Determining what evidence to present or how to conduct discovery.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
Advising on appeals, procedural choices, or any litigation timing.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Exercise control over, or be delegated authority for, any of the following litigation functions:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Selecting or directing counsel based on profit maximization rather than client interest.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Setting financial incentives tied to litigation outcomes that compromise attorney independence.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Making decisions about litigation funding allocations or budgeting that may affect case strategy.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Requiring litigation decisions be predicated on investor return metrics rather than client objectives and professional ethics.
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<ns0:LawSection id="id_CCD04BF0-0553-4084-BFC5-9B0A35960FE7">
<ns0:Num>6134.6.</ns0:Num>
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<ns0:Content>
<html:p>The corporate form of a litigation practice, including, but not limited to, a law firm partnership, professional corporation, or limited liability company, shall not affect the applicability of this article.</html:p>
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<ns0:LawSection id="id_099DF62D-E761-484B-8919-A06DF60E8EF1">
<ns0:Num>6134.8.</ns0:Num>
<ns0:LawSectionVersion id="id_160E818D-E842-4353-896D-A246F1063508">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
A corporate investor, or an entity it controls, shall not enter into any contract, agreement, or arrangement with a litigation practice if the contract would enable prohibited interference or control described in this article.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Any contractual provision that permits or facilitates prohibited interference or control pursuant to this article is void, unenforceable, and against public policy.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
A contract between a litigation practice and a corporate investor shall not include a clause that does any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Restrict an attorney
or client from withdrawing from representation in the event of corporate interference.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Prohibit an attorney or client from speaking publicly or reporting corporate interference to the State Bar or other authority.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Impose financial penalties for reporting or resisting corporate influence.
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<ns0:LawSection id="id_C0D4E127-6FF4-4AFD-A19A-E6B2F6F2895B">
<ns0:Num>6134.10.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
A violation of this article shall constitute cause for the imposition of discipline by the State Bar.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
In addition to any discipline imposed pursuant to subdivision
(a), a violation of this article
shall subject the attorney and the corporate investor to the following penalties to be recovered in an action brought by the client:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Statutory damages of ten thousand dollars ($10,000) per violation or
three times the actual damages incurred by the
client, whichever is greater.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Attorney’s costs and fees.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Injunctive or declaratory relief.
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