Happy Friday! This week, it’s all about non-lawyer investment in law firms.
Arizona-based personal injury firm Rafi Law Group just landed $125 million from an outside investor — but not for its legal work. Instead, the cash is going into its back office via a management service organization, or MSO, which separates functions like accounting and marketing from legal services to allow investment.
MSOs are generating a lot of interest for law firms. Most states have strict rules that only allow lawyers to own firms. By splitting off the business side, these structures let firms bypass those requirements.
“MSOs keep that separation,” said Brandon Rafi, the firm’s founder. “Attorneys maintain their independence so that they can make those decisions that are best for the clients.”
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Enter the Regulators
Regulators are taking notice. This week, California lawmakers moved forward with a bill that prohibits private equity firms, hedge funds, and other corporate investors from directing or influencing the practice of law. It specifically targets alternative business structures and MSOs.
Assembly member Ash Kalra introduced the bill and has taken particular interest in these structures. His measure from last year, which became law in January, bans California attorneys and firms from sharing contingency fees with out-of-state alternative business structures.
Kalra isn’t the only one who has set his sights on non-lawyer investment. Delaware Chief Judge Colm F. Connolly issued a standing order this week mandating law firms disclose any non-lawyer ownership or investment. This is his second such standing order focusing on legal finance. His order from April 2022 requires litigants to identify third-party funders.
What I’m Reading
- Legal Futures reports that litigation funder Litigation Capital Management lost A$112 million in the second half of 2025 due to two major case losses and an adverse costs order in a third case. The Australia-based funder announced a strategic review last fall after a string of losses.
- David Lat wrote in his Substack Original Jurisdiction that Big Law firms are increasingly representing corporate plaintiffs with the help of legal finance. Elite law firms are becoming more open to representing plaintiffs, and legal finance is helping with the shift.
Business & Practice
Academy Mortgage Whistleblower Loses $8.7 Million Legal Award
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Jones Day Law Firm Says Hackers Accessed Some Clients’ Data
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LISTEN: Yale Law School’s Slide From #1
Yale — the longstanding leader of US News & World Report’s annual law school rankings — has slid to No. 2, a drop that could threaten the law school’s brand, columnist David Lat tells Jessie Kamens in this week’s On The Merits podcast.
Even a one-spot decline can influence where students apply, what articles appear in law reviews, and how future employers consider applicants.
“Law school deans will often poo-poo the rankings,” David says, “but they also have to care about them because other people care about them.”
Read the transcript and listen here and subscribe to On The Merits on Apple Podcasts, Spotify, Megaphone, or Audible.
Commentary & Opinion
Splintered Video Privacy Rulings Won’t Be Fixed by Supreme Court
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Apparel Brands Must Consider Trademark Use in Launch From Day One
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Student-Led ‘Gift Card’ Suits Against Universities Are Trending
The student class-action trend appears here to stay and may indicate a major shift in the student-university relationship.
Big Law Firms Who Surrendered to Trump’s Demands Ended up Losing
The strategy of self-preservation embraced by some of the most prestigious law firms in the face of President Donald Trump’s demands didn’t work. One year later, the firms that caved have lost partners and clients.
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