LAW FIRM OWNERSHIP

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Full Text of HB5487

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HB5487 - 104th General Assembly

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HB5487 Enrolled
LRB104 20746 JRC 34250 b
1

AN ACT concerning civil law.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 5.
The Attorney Act is amended by adding Section
5
13 as follows:

6

(705 ILCS 205/13 new)
7

Sec. 13.
Protection of clients.
8

(a) As used in this Section:
9

"Allied legal staff" means persons who are not licensed as
10
attorneys and may have access to attorney-client and
11
work-product privileged information in their work, including,
12
but not limited to, paralegals and legal assistants.
13

"Alternative business structure" means any entity that
14
provides legal services and allows persons who are not
15
licensed as attorneys to have ownership or decision-making
16
authority. "Alternative business structure" does not include
17
nonprofit organizations.
18

"Management services organization" means an entity that
19
provides management and administrative support services in
20
exchange for ownership of a law firm's assets or payments.
21

(b) The provisions of this Section apply only to:
22

(1) a licensed attorney or law firm operating in
23

Illinois with annual global revenue from that licensed

HB5487 Enrolled
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LRB104 20746 JRC 34250 b
1

attorney's or law firm's provision of legal services that
2

is less than $300,000,000; in determining a licensed
3

attorney's or law firm's revenue for purposes of this
4

paragraph (1), the determination shall be:

5

(A) made by taking into account the global revenue
6

of any partnership or law firm affiliated with the
7

licensed attorney or law firm, whether or not the
8

affiliated partnership or other law firm is domiciled
9

in Illinois; and
10

(B) based on publicly-available information; and

11

(2) a licensed attorney or law firm that regularly
12

represents clients on a contingent fee basis, where the
13

fee is based on the resolution or outcome of actual or
14

threatened private litigation, and that has derived more
15

than 50% of the attorney's or law firm's revenues from the
16

contingent fee arrangements in each of the preceding 3
17

calendar years; in determining a licensed attorney's or
18

law firm's revenue for purposes of this paragraph (2), the
19

determination shall be made by taking into account the
20

gross global revenue of the attorney or law firm, together
21

with any partnership or law firm affiliated with such
22

attorney or law firm, whether or not such affiliated
23

partnership or other law firm is domiciled in Illinois.

24

Upon request of the Attorney Registration and Disciplinary
25
Commission or another governmental authority or agency charged
26
with administering or enforcing the provisions of this

HB5487 Enrolled
- 3 -
LRB104 20746 JRC 34250 b
1
Section, or upon order of a court of competent jurisdiction, a
2
licensed attorney or law firm shall be permitted to provide a
3
self-certification attesting, under oath, to the fact that (i)
4
the licensed attorney's or law firm's annual global revenue is
5
more or less than $300,000,000, (ii) the licensed attorney or
6
law firm regularly represents clients on a contingent fee
7
basis, as that term is used in this subsection, and derived
8
more or less than 50% of the licensed attorney's or law firm's
9
revenues from contingent fee arrangements in each of the
10
previous 3 calendar years, as determined in accordance with
11
this subsection, or (iii) both (i) and (ii).
12

(c) Any attorney or law firm subject to this Section that
13
is party to an agreement with a management services
14
organization must disclose in all attorney-client contracts
15
that the attorney or law firm is party to such an agreement and
16
the material terms of the agreement. Failure to comply with
17
this duty will subject the lawyer or law firm to the provisions
18
of subsection (g).

19

(d) An entity owned, operated, or controlled in whole or
20
in part by persons not licensed as attorneys, including
21
management services organizations, that is involved with a law
22
firm's or attorney's practice may not do any of the following:
23

(1) interfere with the professional judgment of
24

attorneys in representing clients;
25

(2) exercise control over or be delegated the power to
26

do any of the following:

HB5487 Enrolled
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LRB104 20746 JRC 34250 b
1

(A) to reveal, own, or determine the content of
2

client records or to reveal any attorney-client
3

communications;
4

(B) to select, hire, or terminate attorneys or
5

allied legal staff; or
6

(C) to set competency, productivity, or
7

proficiency parameters for attorneys or allied legal
8

staff;
9

(3) charge any fee to the attorney or law firm that is
10

directly or indirectly based on the attorney's fees,
11

revenues, or profits of the attorney or law firm.
12

The prohibition in paragraph (3) of this subsection does
13
not apply to the repayment of a loan or extension of credit the
14
attorney or law firm is obligated to repay if that the amount
15
of the borrower's obligation is not contingent upon or
16
calculated on the basis of the borrower's attorney's fees,
17
revenues, profits, or other financial performance.
18

(e) Any contract involving management of a law firm or an
19
attorney's practice with any entity owned, operated, or
20
controlled by persons not licensed as attorneys, including
21
management services organizations, may not limit an attorney
22
or allied legal staff member from:
23

(1) competing with that law firm or its practice in
24

the event of termination or resignation; or
25

(2) disparaging or commenting on that law firm or
26

practice as to any issues involving quality of services,

HB5487 Enrolled
- 5 -
LRB104 20746 JRC 34250 b
1

ethical or professional challenges in the practice of law,
2

or revenue-increasing strategies employed by an entity
3

owned, operated, or controlled in whole or in part by
4

persons not licensed as attorneys.
5

(f) An attorney licensed or otherwise authorized to
6
practice in this State may not share legal fees directly or
7
indirectly with an out-of-state alternative business structure
8
unless all the following apply:
9

(1) The attorney is also licensed in the state in
10

which the alternative business structure is approved.
11

(2) The fees are compensation for providing legal
12

services in that state.
13

(3) The law of that state is controlling under Rule
14

8.5 of the Illinois Rules of Professional Conduct or any
15

successor rule.
16

(g) A violation of this Section may constitute cause for
17
the imposition of discipline by the Attorney Registration and
18
Disciplinary Commission and subject the attorney, the
19
management services organization, and the alternative business
20
structure to the following penalties:
21

(1) statutory damages of $10,000 per violation or 3
22

times the actual damages incurred by the client, whichever
23

is greater;
24

(2) attorney's fees and costs; and
25

(3) injunctive or declaratory relief.
26

(h) This Section does not apply to any arrangement for the

HB5487 Enrolled
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LRB104 20746 JRC 34250 b
1
sharing of legal fees if both of the following conditions are
2
satisfied:
3

(1) The arrangement for the sharing of legal fees was
4

ordered or approved by a court or tribunal of competent
5

jurisdiction, including, but not limited to, the
6

establishment or distribution of a common benefit fund in
7

coordinated, consolidated, or multidistrict litigation.
8

(2) The manner by which legal fees are to be allocated
9

is subject to judicial or tribunal oversight and
10

determined by the court to be fair, reasonable, and
11

necessary for the administration of justice.
12

(i) This Section applies only to contracts entered into on
13
or after the effective date of this amendatory Act of the 104th
14
General Assembly.

15

Section 99.
Effective date.
This Act takes effect upon
16
becoming law.

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