Fee Sharing with Nonlawyers in Legal Practice

HOUSE BILL 26-1421
BYREPRESENTATIVE(S) Mabrey and Caldwell, Brown, Carter, Duran,
Garcia, Hamrick, Jackson, Joseph, Lieder, Lindsay, McCormick, Nguyen,
Rutinel, Sirota, Titone, Willford, Zokaie, McCluskie, Bacon;
also SENATOR(S) Daugherty and Frizell, Amabile, Benavidez, Kipp,
Snyder, Coleman.
CONCERNING PROHIBITING CERTAIN COMPENSATION ARRANGEMENTS IN THE
LEGAL PROFESSION, AND, IN CONNECTION THEREWITH, CREA TING THE
"COLORADO LEGAL PRACTICE INTEGRITY AND FEE-SHARING
PROHIBITION ACT".
Be it enacted by the General Assembly of the State of Colorado:
SECTION 1. In Colorado Revised Statutes, add part 4 to article 93
of title 13 as follows:
PART4
COLORADO LEGAL PRACTICE INTEGRITY AND
FEE-SHARING PROHIBITION ACT
13-93-401. Short title.
Capital letters or bold & italic numbers indicate new material added to existing law; dashes
through word~ or numbers indicate deletions from existing law and such material is not part of
the act.
•
THE SHORT TITLE OF THIS PART 4 IS THE "COLORADO LEGAL
PRACTICE INTEGRITY AND FEE-SHARING PROHIBITION ACT".
13-93-402. Legislative declaration.
( 1) THE GENERAL ASSEMBLY FINDS THAT:
(a) THERULESOFTHECOLORADOSUPREMECOURTGOVERNINGTHE
PRACTICE OF LAW UNDERSCORE THAT THE INDEPENDENT PROFESSIONAL
JUDGMENT OF LA WYERS IS ESSENTIAL TO THE FAIR ADMINISTRATION OF
JUSTICE AND RESTRICT THE SHARING OF LEGAL FEES WITH NONLA WYERS AND
NONLA WYER OWNERSHIP OR CONTROL OF A LAW FIRM;
(b) FINANCIAL ARRANGEMENTS THAT PROVIDE NONLA WYERS WITH
AN ECONOMIC INTEREST IN LAW FIRMS AND THEIR FEES, REVENUES, OR CASE
OUTCOMES, HOWEVER STRUCTURED, THREATEN A LAWYER'S DUTIES OF
LOYALTY TO THEIR CLIENT, CONFIDENTIALITY, AND PROFESSIONAL
INDEPENDENCE;
( C) EVEN MINIMAL NONLA WYER OWNERSHIP OR PROFIT
PARTICIPATION IN LAW FIRMS COMPROMISES PUBLIC TRUST IN THE LEGAL
PROFESSION;
( d) ALTERNATIVE BUSINESS STRUCTURES HA VE INCREASINGLY BEEN
USED TO CIRCUMVENT LONGSTANDING PROHIBITIONS ON NONLAWYER
OWNERSHIP OF LAW FIRMS AND THE CONCOMITANT SHARING OF ATTORNEY
FEES; AND
(e) COLORADO HAS A COMPELLING INTEREST IN REGULATING THE
PROVISION OF LEGAL SERVICES AFFECTING COLORADO CLIENTS, REGARDLESS
OF WHERE A LA WYER OR LAW FIRM IS LOCATED.
(2) THE GENERAL ASSEMBLY THEREFORE DECLARES THAT THE
PURPOSES OF THIS PART 4 ARE TO:
(a) PROHIBIT NONLAWYER OWNERSHIP AND FEE SHARING IN THE
PROVISION OF LEGAL SERVICES TO THIRD PARTIES;
(b) PREVENT CONTRACTUAL FORMALITIES OR OUT-OF-STATE
ENTITIES FROM CIRCUMVENTING THIS PROHIBITION;
PAGE 2-HOUSE BILL 26-1421
( C) PROTECT CLIENTS AND THE INTEGRITY OF THE LEGAL PROFESSION
IN COLORADO; AND
( d) PROVIDE EFFECTIVE ADDITIONAL ENFORCEMENT MECHANISMS
FOR PROFESSIONALS AND CLIENTS IN COLORADO.
(3) IT IS NOT THE INTENT OF THE GENERAL ASSEMBLY TO:
(a) PROHIBIT OR RESTRICT THE ABILITY OF CREDITORS OR LAWFUL
ASSIGNEES OF CLAIMS TO ENFORCE THE CLAIMS, INCLUDING THROUGH THE
USE OF LA WYERS; OR
(b) ALTER LONGSTANDING PRACTICES RELATED TO DEBT
COLLECTION IF LEGAL SERVICES ARE RENDERED IN COMPLIANCE WITH
APPLICABLE RULES OF PROFESSIONAL CONDUCT.
13-93-403. Definitions.
AS USED IN THIS PART 4, UNLESS THE CONTEXT OTHER WISE REQUIRES:
(1) "ALTERNATIVE BUSINESS STRUCTURE" MEANS AN ENTITY OR
ORGANIZATIONAL STRUCTURE, WHEREVER ORGANIZED OR DENOMINATED,
THAT:
(a) EITHER:
(I) ECONOMICALLY PARTICIPATES IN, PROVIDES, OR HOLDS ITSELF
OUT AS PROVIDING LEGAL SERVICES TO THIRD PARTIES OR THAT EXERCISES
CONTROL OVER THE PROVISION OF LEGAL SERVICES TO THIRD PARTIES; OR
(II) SHARES IN PROFITS OR PERCENTAGES OF LEGAL FEES OR
AMOUNTS A WARDED TO OR RECEIVED BY A LA WYER OR LAW FIRM AS A
RESULT OF THE PROVISION OF LEGAL SERVICES, DIRECTLY OR INDIRECTLY,
REGARDLESS OF WHETHER THE ENTITY OR ORGANIZATIONAL STRUCTURE
EXERCISES ANY CONTROL OVER LEGAL SERVICES; AND
(b) IS OWNED BY, IS CONTROLLED BY, OR ECONOMICALLY
PARTICIPATES IN OR IS FEE SHARING WITH, DIRECTLY OR INDIRECTLY, ONE OR
MORE NONLA WYERS.
PAGE 3-HOUSE BILL 26-1421
(2) (a) "ECONOMICALLY PARTICIPATES IN" INCLUDES EXERCISING
AUTHORITY OR CONTROL OVER LEGAL REPRESENTATION, LEGAL STRATEGY,
LEGAL FEE DETERMINATION, SETTLEMENT DECISIONS, OR THE ALLOCATION
OF LEGAL FEES; FEE-SHARING ARRANGEMENTS; EQUITY INTERESTS; PROFIT­
OR REVENUE-SHARING ARRANGEMENTS; EQUITY OPTIONS; WARRANTS;
CONVERTIBLE OR CONTINGENT EQUITY INTERESTS; PHANTOM EQUITY; OR
ANY OTHER ARRANGEMENT, HOWEVER STRUCTURED OR DESCRIBED, THAT
PROVIDES A NONLA WYER WITH A FINANCIAL INTEREST IN LEGAL FEES, LAW
FIRM REVENUE, OR LAW FIRM PROFIT ABILITY.
(b) "ECONOMICALLY PARTICIPATES IN" DOES NOT INCLUDE A
FINANCIAL INTEREST ARISING SOLELY FROM THE OWNERSHIP OR ASSIGNMENT
OF A CLAIM IF THE PERSON DOES NOT DIRECT OR CONTROL THE
PROFESSIONAL JUDGMENT OF A LA WYER.
(3) (a) "LAW FIRM" MEANS A PARTNERSHIP, PROFESSIONAL
COMPANY, SOLE PROPRIETORSHIP, EMPLOYER OF A LAWYER WHO IS
DIRECTLY EMPLOYED AS IN-HOUSE COUNSEL OR LICENSED UNDER A
SINGLE-CLIENT CERTIFICATION, OR OTHER ENTITY THROUGH WHICH A
LAWYER, LLP, OR COMBINATION OF LAWYERS, LLPS, OR BOTH PROVIDE
LEGAL SERVICES, WHICH ENTITY:
(I) OPERATES FOR PROFIT IN COMPLIANCE WITH RULE 5.4 OF THE
COLORADO RULES OF PROFESSIONAL CONDUCT AND RULE 265 OF THE
COLORADO RULES OF CIVIL PROCEDURE; AND
(11) COMPLIES WITH COLORADO LAW AND SUPREME COURT RULES
GOVERNING LAW FIRM OWNERSHIP AND FEE SHARING.
(b) "LAW FIRM" DOES NOT INCLUDE AN ALTERNATIVE BUSINESS
STRUCTURE OR MANAGED SERVICES ORGANIZATION.
(4) (a) "LAWYER" MEANS AN INDIVIDUAL WHO IS LICENSED TO
PRACTICE LAW IN ANY JURISDICTION IN THE UNITED STATES.
(b) "LA WYER" DOES NOT INCLUDE AN LLP.
(5) (a) "LEGAL FEE" MEANS ANY PAYMENT, COMPENSATION,
REMUNERATION, OR OTHER FINANCIAL CONSIDERATION CHARGED, ASSESSED,
COLLECTED, OR RECEIVED FOR THE PROVISION OF LEGAL SERVICES,
PAGE 4-HOUSE BILL 26-1421
REGARDLESS OF HOW THE PAYMENT IS DESCRIBED, STRUCTURED, OR
ALLOCATED.
(b) "LEGAL FEE" INCLUDES:
(I) CONTINGENT FEES, FLAT FEES, HOURLY FEES, HYBRID FEES,
SUCCESS FEES, PERFORMANCE-BASED COMPENSATION, OR ANY OTHER
ARRANGEMENT THAT COMPENSATES A LA WYER OR LAW FIRM BASED ON THE
PROVISION OF LEGAL SERVICES TO A CLIENT;
(II) ANY PORTION OF A SETTLEMENT, VERDICT, JUDGMENT, AWARD,
RECOVERY, OR PAYMENT RECEIVED ON BEHALF OF A CLIENT THAT IS
ALLOCATED TO THE LA WYER OR LAW FIRM AS COMPENSATION FOR LEGAL
SERVICES;
(III) ANY AMOUNT PAID BY A CLIENT OR THIRD PARTY FOR LEGAL
REPRESENTATION, LEGAL COUNSELING, LEGAL ADVOCACY, LEGAL
INVESTIGATION, LEGAL ANALYSIS, NEGOTIATION, DEMAND SERVICES, OR
LITIGATION-RELATED ACTIVITIES;
(IV) RETAINERS, DEPOSITS, ADV AN CED FEES, OR SECURITY AMOUNTS
INTENDED TO SECURE PAYMENT FOR LEGAL SERVICES, WHETHER
REFUNDABLE OR NONREFUNDABLE; AND
(V) ANY REVENUE OR FINANCIAL BENEFIT DERIVED FROM LEGAL
SERVICES, INCLUDING REVENUE COLLECTED THROUGH AFFILIATED ENTITIES,
SUBSIDIARIES, TECHNOLOGY PLATFORMS, SERVICE PROVIDERS, OR FEE
COLLECTION INTERMEDIARIES.
( c) "LEGAL FEE" DOES NOT INCLUDE:
(I) PAYMENTS MADE SOLELY FOR NONLEGAL GOODS OR SERVICES,
INCLUDING PURELY ADMINISTRATIVE, CLERICAL, OR OPERATIONAL SUPPORT,
IF THE PAYMENTS ARE REASONABLY SEPARABLE FROM COMPENSATION FOR
LEGAL SERVICES;
(II) ORDINARY COURSE REIMBURSEMENTS OF COSTS OR EXPENSES
ADVANCED BY THE LA WYER OR LAW FIRM, INCLUDING COURT FILING FEES,
EXPERT FEES, TRANSCRIPT COSTS, AND OTHER PASS-THROUGH EXPENSES NOT
CONSTITUTING COMPENSATION FOR LEGAL SERVICES;
PAGE 5-HOUSE BILL 26-1421
(III) LAWFUL WAGES, SALARIES, BENEFITS, OR DISCRETIONARY
BONUSES PAID TO A NONLA WYER EMPLOYEE OF A LAW FIRM FOR SERVICES
RENDERED IN THE ORDINARY COURSE OF THEIR EMPLOYMENT;
(IV) AMOUNTS RECOVERED ON A CLAIM BY A PERSON THAT OWNS OR
HAS BEEN ASSIGNED THE CLAIM IF THE RECOVERY DOES NOT CONSTITUTE
COMPENSATION FOR LEGAL SERVICES; OR
(V) ANY STATUTORY OR CONTRACTUAL ENTITLEMENT TO ATTORNEY
FEE REIMBURSEMENT HELD BY A LAW FIRM'S CLIENT OR DIRECT EMPLOYER.
(6) "LEGAL SERVICES" MEANS ANY OF THE FOLLOWING WHILE
ACTING IN A REPRESENTATIVE CAPACITY CONCERNING A LEGAL RIGHT
ARISING IN WHOLE OR IN PART IN COLORADO:
(a) PROTECTING, DEFENDING, OR ENFORCING THE LEGAL RIGHTS OR
DUTIES OF ANOTHER PERSON;
(b) REPRESENTING ANOTHER PERSON BEFORE A TRIBUNAL OR, ON
BEHALF OF ANOTHER PERSON, DRAFTING PLEADINGS OR OTHER PAPERS FOR
A PROCEEDING BEFORE A TRIBUNAL;
( c) COUNSELING, ADVISING, OR ASSISTING ANOTHER PERSON IN
CONNECTION WITH THAT PERSON'S LEGAL RIGHTS OR DUTIES;
( d) EXERCISING LEGAL JUDGMENT IN PREPARING LEGAL DOCUMENTS
FOR ANOTHER PERSON;
( e) EXERCISING LEGAL JUDGMENT TO ADVISE ANOTHER PERSON
ABOUT THE LEGAL EFFECT OF A PROPOSED ACTION OR DECISION;
(f) EXERCISING LEGAL JUDGMENT TO ADVISE ANOTHER PERSON
ABOUTLEGALREMEDIESORPOSSIBLECOURSESOFLEGALACTIONAVAILABLE
TO THAT PERSON;
(g) EXERCISING LEGAL JUDGMENT TO SELECT A LEGAL DOCUMENT
FOR ANOTHER PERSON OR TO PREPARE A LEGAL DOCUMENT FOR ANOTHER
PERSON OTHER THAN SOLELY AS A TYPIST OR SCRIVENER;
(h) EXERCISING LEGAL JUDGMENT TO REPRESENT OR ADVOCATE FOR
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ANOTHER PERSON IN A NEGOTIATION, SETTLEMENT, CONFERENCE,
MEDIATION, OR ALTERNATIVE DISPUTE RESOLUTION PROCEEDING; AND
(i) SOLICITING FEES FOR SERVICES INVOLVING THE EXERCISE OF
LEGAL JUDGMENT.
(7) "LICENSED LEGAL PARAPROFESSIONAL" OR "LLP" MEANS A
LICENSED LEGAL PARAPROFESSIONAL LICENSED UNDER PART 3 OF THIS
ARTICLE 93.
(8) "MANAGED SERVICES ORGANIZATION" MEANS A PERSON OTHER
THAN A LAWYER, LLP, OR LAW FIRM THAT PROVIDES ADMINISTRATIVE,
OPERATIONAL, FINANCIAL, MARKETING, MANAGEMENT, OR OTHER
NONLEGAL BUSINESS SERVICES TO A LA WYER OR LAW FIRM.
(9) "NONLA WYER" MEANS AN INDIVIDUAL WHO IS NOT LICENSED TO
PRACTICE LAW IN ANY UNITED STATES JURISDICTION OR IS NOT AUTHORIZED
TO PRACTICE LAW BY THE COLORADO SUPREME COURT.
(10) (a) "NONPROFIT ORGANIZATION" MEANS A CHARITABLE
ORGANIZATION, AS DEFINED IN SECTION 39-26-102 (2.5).
(b) A NONPROFIT ORGANIZATION IS NOT AN ALTERNATIVE BUSINESS
STRUCTURE AND DOES NOT ECONOMICALLY PARTICIPATE IN THE PROVISION
OF LEGAL SERVICES SOLELY BY VIRTUE OF THE NONPROFIT ORGANIZATION'S
RELATIONSHIP WITH A LA WYER OR LAW FIRM, INCLUDING WHERE THE
LA WYER OR LAW FIRM EARNS LEGAL FEES.
(11) "SUBSTANTIAL BUSINESS IN COLORADO" MEANS THAT A LAW
FIRM GENERA TES MORE THAN TEN PERCENT OF THE LAW FIRM'S ANNUAL
REVENUE FROM LEGAL SERVICES PERFORMED FOR CLIENTS.
13-93-404. Prohibition on nonlawyer ownership and fee sharing
with nonlawyers.
( 1) A LA WYER OR LAW FIRM SHALL NOT, IN CONNECTION WITH
PROVIDING LEGAL SERVICES:
(a) SHARE WITH, PAY TO, ALLOCATE TO, DISTRIBUTE TO, OR PROVIDE
ANY PORTION OF LEGAL FEES OR REVENUES, WHETHER GROSS OR NET, OR
PAGE 7-HOUSE BILL 26-1421
ANY OTHER FINANCIAL BENEFIT DERIVED FROM LEGAL SERVICES, DIRECTLY
OR INDIRECTLY, HOWEVER DENOMINATED OR STRUCTURED, TO ANY
ALTERNATIVE BUSINESS STRUCTURE OR NONLA WYER, OTHER THAN LAWFUL
WAGES, SALARIES, BENEFITS, OR DISCRETIONARY BONUSES PAID TO
NONLA WYER EMPLOYEES OF THE LAW FIRM FOR SERVICES RENDERED IN THE
ORDINARY COURSE OF THEIR EMPLOYMENT;
(b) ENTER INTO ANY FINANCIAL, CONTRACTUAL, OWNERSHIP,
MANAGEMENT, MARKETING, CO-COUNSEL, REFERRAL, OR FEE-ALLOCATION
ARRANGEMENT WITH AN ALTERNATIVE BUSINESS STRUCTURE, WHICH
ARRANGEMENT RELATES TO PROVIDING LEGAL SERVICES;
(c) FORM A PARTNERSHIP, LIMITED LIABILITY COMPANY,
CORPORATION, OR OTHER ENTITY RECOGNIZED UNDER COLORADO LAW WITH
A NONLA WYER IF ANY OF THE ACTIVITIES OF THE ENTITY CONSIST OF
PROVIDING LEGAL SERVICES; OR
(d) PRACTICE WITH OR IN THE FORM OF A PROFESSIONAL COMPANY
THAT IS AUTHORIZED TO PROVIDE LEGAL SERVICES FOR PROFIT IF:
(I) A NONLA WYER OWNS ANY INTEREST IN THE PROFESSIONAL
COMPANY; EXCEPT THAT A FIDUCIARY REPRESENTATIVE OF THE ESTATE OF
A LA WYER OR LLP MAY HOLD THE STOCK OR INTEREST OF THE LA WYER OR
LLP FOR A REASONABLE TIME DURING ADMINISTRATION OF THE ESTATE; OR
(II) A NONLAWYER HAS THE RIGHT TO DIRECT OR CONTROL THE
PROFESSIONAL JUDGMENT OF A LA WYER.
(2) How A COMPENSATION ARRANGEMENT IS CHARACTERIZED DOES
NOT AFFECT WHETHER THIS SECTION APPLIES TO THE COMPENSATION
ARRANGEMENT.
(3) NOTHING IN THIS SECTION:
(a) PREVENTS A CLIENT FROM DIRECTING THE CLIENT'S LA WYER;
(b) PROHIBITS AN ARRANGEMENT IN WHICH ALL OF THE FOLLOWING
ARE SATISFIED:
(I) THE CONTRACT FOR THE ARRANGEMENT PROVIDES FOR A
PAGE 8-HOUSE BILL 26-1421
SPECIFIC , PREDETERMINED DOLLAR AMOUNT FOR CLEARLY DEFINED LEGAL
SERVICES;
(II) A PAYMENT IS NOT MADE, DIRECTLY OR INDIRECTLY, FOR THE
REFERRAL OF LEGAL SERVICES OR THE PURCHASE OF A LEAD FOR A
POTENTIAL CLIENT OR CASE;
(III) THE FEE UNDER THE ARRANGEMENT IS NOT CONTINGENT UPON,
TIED TO, OR OTHERWISE DEPENDENT ON THE ECONOMIC OUTCOME OF ANY
MA TIER OR THE AMOUNT RECOVERED AND IS NOT ADJUSTED, REFUNDED,
CREDITED, OR OTHERWISE MODIFIED BASED ON THE ECONOMIC OUTCOME OR
RECOVERY;
(IV) THE PRIMARY PURPOSE OF THE ARRANGEMENT IS NOT THE
PURSUIT OR RECOVERY OF MONETARY DAMAGES ON BEHALF OF A CLIENT;
AND
(V) THE FEE UNDER THE ARRANGEMENT IS SOLELY FOR IDENTIFIED
SERVICES AND IS NOT PART OF, CONDITIONED UPON, OR COMBINED WITH ANY
OTHER ARRANGEMENT THAT PROVIDES FOR COMPENSATION BASED ON
REFERRALS, CASE OUTCOMES, OR THE CLIENT'S RECOVERY; OR
( c) LIMITS OR REDUCES THE RIGHT OF A CLIENT OR EMPLOYER OF A
LAWYER TO SEEK AND COLLECT OR SETTLE A PAYMENT ON ACCOUNT OF A
STATUTORY OR CONTRACTUAL ENTITLEMENT TO ATTORNEY FEE
REIMBURSEMENT.
13-93-405. Restrictions on arrangements with managed services
organizations.
( 1) A LA WYER OR LAW FIRM PROVIDING LEGAL SERVICES SHALL NOT
COMPENSATE OR ENGAGE A MANAGED SERVICES ORGANIZATION IN ANY
MANNER UNLESS THE COMPENSATION PAID TO THE MANAGED SERVICES
ORGANIZATION IS NOT CONTINGENT UPON OR CALCULATED AS A
PERCENT AGE OF LEGAL FEES, REVENUES, OR PROFITS AND IS NOT
DETERMINED BY REFERENCE TO RECOVERIES, SETTLEMENTS, JUDGMENT
A WARDS, OR CASE OUTCOMES.
(2) NOTHING IN THIS SECTION PROHIBITS COMPENSATION, INCLUDING
FLAT FEE OR HOURLY PAYMENTS, OR ENGAGEMENT OF MANAGED SERVICES
PAGE 9-HOUSE BILL 26-1421
ORGANIZATIONS THAT IS NOT EXPRESSLY PROHIBITED BY THIS SECTION.
13-93-406. Enforcement -private right of action - remedies.
( 1) A PERSON DESCRIBED IN SUBSECTION (2) OF THIS SECTION MAY
ENFORCE THIS PART 4 BY BRINGING A CIVIL ACTION IN A COURT OF
COMPETENT JURISDICTION.
(2) THE FOLLOWING PERSONS MAY ENFORCE THIS PART 4:
(a) A PERSON TO WHOM A LAWYER OR LAW FIRM PROVIDES LEGAL
SERVICES, WHICHLEGALSERVICESAREALLEGEDTOBEINVIOLATIONOFTHIS
PART4; OR
(b) EXCEPTASSETFORTHINSUBSECTION(3)OFTHISSECTION,ALAW
FIRM DOING SUBSTANTIAL BUSINESS IN COLORADO THAT HAS SUFFERED OR
MAY SUFFER A LOSS IN REVENUE DUE TO VIOLATIONS OF THIS PART 4 BY
ANOTHER LAW FIRM, WHICH LAW FIRM DOING SUBSTANTIAL BUSINESS IN
COLORADO MAY ONLY SEEK INJUNCTIVE OR DECLARATORY RELIEF AND
DISGORGEMENT PURSUANT TO SUBSECTION (5)(b) OF THIS SECTION.
(3) A LAW FIRM DESCRIBED IN SUBSECTION (2)(b) OF THIS SECTION
MAY BRING A CIVIL ACTION TO ENFORCE THIS PART 4 ONLY IF THE LAW FIRM
HAS PROVIDED WRITTEN NOTICE OF THE ALLEGED VIOLATION TO THE
ATTORNEY GENERAL AND THE ATTORNEY GENERAL HAS NOT COMMENCED
A CIVIL ACTION AGAINST THE ALLEGED VIOLATOR BEFORE OR WITHIN SIXTY
DAYS AFTER RECEIPT OF THE NOTICE.
(4)(a) THEFOLLOWINGREMEDIESAREAVAILABLEFOR VIOLATIONS
OF THIS PART 4:
(I) FORA PERSON DESCRIBED IN SUBSECTION (2)(a) OF THIS SECTION,
AND IN ADDITION TO ANY OTHER REMEDIES AVAILABLE FOR A VIOLATION OF
THIS PART 4, ECONOMIC DAMAGES IN THE AMOUNT OF THE LEGAL FEES PAID
TO THE LA WYER, LAW FIRM, OR OTHER PERSON IN VIOLATION OF THIS PART
4;
(II) INJUNCTIVE RELIEF;
(Ill) DECLARATORY RELIEF; AND
PAGE 10-HOUSE BILL 26-1421
(IV) ANY OTHER RELIEF THE CIRCUMSTANCES MAY REQUIRE.
(b) A PREY AILING PLAINTIFF IS ENTITLED TO RECOVER ANY
REASONABLE ATTORNEY FEES AND COSTS PAID TO ENFORCE A VIOLATION OF
THIS PART 4.
( 5) (a) A LA WYER, LAW FIRM, OR OTHER PERSON THAT RECEIVES OR
PAYS FUNDS IN VIOLATION OF THIS PART 4 IS LIABLE FOR DAMAGES IN THE
AMOUNT OF THE FUNDS RECEIVED OR PAID IN VIOLATION OF THIS PART 4.
(b) IF A COURT DETERMINES THAT A LA WYER, LAW FIRM, OR OTHER
PERSON HAS VIOLATED THIS PART 4, THE COURT SHALL ORDER THE FUNDS
DESCRIBED IN SUBSECTION (5)(a) OF THIS SECTION TO BE DISGORGED AND
PAID TO THE STATE TREASURER FOR DEPOSIT INTO THE GENERAL FUND;
EXCEPT THAT ANY AMOUNTS AWARDED AS ECONOMIC DAMAGES TO A
PLAINTIFF PURSUANT TO THIS SECTION SHALL BE OFFSET AGAINST THE
AMOUNT OF DISGORGEMENT.
(6) A CONTRACT OR AGREEMENT IN VIOLATION OF THIS PART 4 IS
DEEMED VOID.
13-93-407. Applicability-repeal.
(1) NOTHING IN THIS PART 4 SHALL BE CONSTRUED TO PROHIBIT:
(a) THE PLEDGING OF FUTURE REVENUES, LEGAL FEES, OR
RECOVERIES AS COLLATERAL FORA LOAN; OR
(b) LAWFUL WAGES, SALARIES, BENEFITS, OR DISCRETIONARY
BONUSES PAID TO NONLAWYER EMPLOYEES OF A LAW FIRM FOR SERVICES
RENDERED IN THE ORDINARY COURSE OF THEIR EMPLOYMENT;
( c) NONRECOURSE FUNDING PROVIDED TO A LA WYER OR LAW FIRM
WITH RESPECT TO SPECIFIC, IDENTIFIED LEGAL REPRESENTATIONS, IN WHICH:
(I) THE FUNDING IS PROVIDED SOLELY FOR THE FEES OR EXPENSES OF
SPECIFIC, IDENTIFIED LEGAL REPRESENTATIONS THAT HA VE COMMENCED OR
FOR WHICH THE LA WYER OR LAW FIRM HAS BEEN RETAINED AND NOT FOR
THE SOLICITATION OR ACQUISITION OF FUTURE CLIENTS OR MATTERS;
PAGE I I-HOUSE BILL 26-1421
(II) THE RETURN OF THE PERSON PROVIDING THE FUNDING IS LIMITED
TO A MULTIPLE OF THE FUNDED AMOUNT OR A RA TE OF INTEREST ON THE
FUNDED AMOUNT AND DOES NOT CONSTITUTE A SHARE OF LEGAL FEES, LAW
FIRM REVENUE, AND LAW FIRM PROFITS; AND
(III) THE PERSON PROVIDING THE FUNDING HAS NO RIGHT TO
PARTICIPATE IN OR RECEIVE ANY PORTION OF LEGAL FEES, LAW FIRM
REVENUE, OR LAW FIRM PROFITS EXCEPT FROM THE PROCEEDS OF THE
SPECIFIC, IDENTIFIED LEGAL REPRESENTATIONS; OR
(d) THE PROVISION OF LEGAL SERVICES PROVIDED SOLELY IN
CONNECTION WITH ADMINISTRATIVE MATTERS ARISING UNDER FEDERAL LAW
OR BEFORE A FEDERAL AGENCY.
(2) NOTHING IN THIS PART 4 LIMITS THE COLORADO SUPREME
COURT'S RULE-MAKING, DECISIONAL, OR ENFORCEMENT AUTHORITY AS TO
THE PRACTICE OF LAW IN COLORADO, INCLUDING AS TO THE UNAUTHORIZED
PRACTICE OF LAW AND PROFESSIONAL INDEPENDENCE OF LA WYERS AND
LLPs.
(3) (a) NOTHING IN THIS PART 4 PROHIBITS A LAWYER OR LAW FIRM
THAT PROVIDES LEGAL SERVICES TO A NONPROFIT ORGANIZATION OR
INDIVIDUALS WHO RECEIVE BENEFITS FROM THE NONPROFIT ORGANIZATION
FROM REMITTING TO A NONPROFIT ORGANIZATION THAT PROVIDES OR
SUPPORTS LEGAL SERVICES OR ACCESS-TO-JUSTICE SERVICES ANY FEES OR
REVENUES EARNED FROM ITS REPRESENTATION.
(b) A NONPROFIT ORGANIZATION THAT PROVIDES OR SUPPORTS
LEGAL SERVICES OR ACCESS-TO-JUSTICE SERVICES IS NOT SUBJECT TO THIS
PART4.
(4) THIS PART 4 IS REPEALED, EFFECTIVE SEPTEMBER 1, 2029.
SECTION 2. Act subject to petition - effective date -
applicability. (1) This act takes effect at 12:01 a.m. on the day following
the expiration of the ninety-day period after final adjournment of the
general assembly (August 12, 2026, if adjournment sine die is on May 13,
2026); except that, if a referendum petition is filed pursuant to section 1 (3)
of article V of the state constitution against this act or an item, section, or
part of this act within such period, then the act, item, section, or part will
PAGE 12-HOUSE BILL 26-1421
not take effect unless approved by the people at the general election to be
held in November 2026 and, in such case, will take effect on the date of the
official declaration of the vote thereon by the governor.
(2) This act applies to conduct occurring and contracts and
agreements entered into or renewed on or after the applicable effective date
of this act.
Juli~
SPEAKER OF THE HOUSE
OF REPRESENTATIVES
Vanessa Reilly
CHIEF CLERK OF THE HOUSE
OF REPRESENTATIVES
Jared S. Polis
James Rashad Coleman, Sr.
PRESIDENT OF
THE SENATE
Esther van Mourik
SECRETARY OF
THE SENATE
GOVERNOR OF THE STATE OF COLORADO
PAGE 13-HOUSE BILL 26-1421