Law Firm Ownership Could Be Opened to Non-Lawyers in Tennessee

Tennessee is looking at non-lawyer ownership of law firms, a possibility that would create rare access to the profession for investors and corporations.

The state Supreme Court, which says it is worried about an insufficient supply of legal services, is taking comments on whether it should loosen ownership rules. The goal is “to ensure that all Tennesseans have access to affordable quality legal services,” the court said in an order last month.

If a change moves forward, the state will join Arizona and Utah in liberalizing rules to let a broad array of new players put money into firms. A range of participants—KPMG, Fortress Investment Group, Rocket Lawyer, and LegalZoom—have jumped into the fray in those states and proponents see similar possibilities in Tennessee.

Candice Reed, a partner at legal recruiter Latitude, said big-pocketed firms and investors could handle more mundane transactional tasks, leaving traditional firms to pick up the higher level work.

“It may be a little scary and seem like somebody’s treading on our turf initially,” she said. “What it’s actually going to do is create more opportunities for lawyers to focus on the sensitive legal work that most of them would prefer to do anyway.”

The legal market has already been growing in the state: K&L Gates, Jackson Lewis and Womble Bond Dickinson have opened offices in Tennessee since 2021. Holland & Knight merged with a Nashville-based Waller Lansden Dortch & Davis in 2023.

Major offices for Amazon.com Inc. and Oracle Corp are located within the state and it also hosts the headquarters of health giants such as HCA Healthcare Inc., Community Health Systems Inc. and Ardent Health Inc.

The state Supreme Court may be taking a cue from the health care industry, which has loosened regulations on physician ownership, Reed said. That’s “a pretty obvious comparison,” she added. “How could we do something like that within the legal industry?”

Protecting lawyer ownership of firms is “a solution looking for a problem,” said Holland & Knight’s Trisha Rich, a legal ethics lawyer who practices in Chicago. “Many law firms, ours included, are multi-billion-dollar companies now. The people running them are business people that happen to have law degrees.”

State Rules

Every state sets its own legal ethics standards, and the vast majority hew closely to the model rules of professional conduct from the American Bar Association, which declined to comment for this story. The ABA’s rules prohibit non-lawyer ownership of firms in the name of professional independence.

Large states including Florida and California have rejected proposals to liberalize law firm ownership rules and decided to stick with the ABA standard. Brandon Bass, a Brentwood, Tennessee lawyer who is president of the Tennessee Trial Lawyers Association, said he hopes his state follows their lead.

The nightmare scenario is that the state loosens its rules and then a law firm’s corporate owners encourage lawyers to prematurely settle a case, or discourage them from even taking on an unprofitable matter, said Bass, who is with personal injury firm John Day PC.

“We would not see Brown v. Board of Education and the desegregation of American schools if the lawyers that undertook that case were one hundred percent beholden to profits for shareholders,” he said.

Liberalization would benefit larger law firms focused on transactional work at the expense of litigators such as himself, Bass said. “There are some at larger law firms, and particularly multi-state law firms, that view outside investment as a way to grow even larger and consolidate even more,” he said.

Next Steps

While Arizona and Utah are the only two states to formally change their firm ownership rules statewide, Washington State launched a limited pilot program late last year. Puerto Rico changed its rules earlier this year, and Washington, DC, has had its own unique firm ownership rules for decades.

The Tennessee Supreme Court, as it ponders joining the states that made changes, said it wants to hear from the Tennessee Board of Law Examiners, the Tennessee Access to Justice Commission, law schools and other educational institutions, professional organizations, members of the Bar, and the public.

While its order spoke about the need for legal services broadly, “there is a growing concern regarding the lack of access to legal services in rural areas,” the court said.

The panel will accept comments through March 16. There’s no timeline after that as to when it will make a decision, a court spokesperson said.

Reed, the legal recruiter, said she doesn’t see a good reason to stick with the status quo. Since the pandemic, attorneys have moved to Nashville from larger cities because “they can do the same level of sophisticated legal work for large, national and sometimes international companies, but in a city that might be perceived as more livable.” Liberalizing ownership rules would add more competition to that dynamic.

Expanding ownership would supercharge law firm growth by boosting efficiency and providing access to capital and technology, said Brian Faughnan, a solo practitioner in Memphis. Keeping investors out “prevents people with different skill sets from helping firms run themselves better, with skills that lawyers don’t get taught in law school,” he said.