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HB 5487

LAW FIRM OWNERSHIP

104th Regular Session Introduced by Diane Blair-Sherlock and 11 co-sponsors

HB 5487 bans non-attorney owned or controlled entities from influencing law firms, protects attorney independence and client confidentiality, and enforces penalties for violations.

Sent to the Governor
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Bill Summary · HB 5487

Summary of HB 5487 (104th Illinois General Assembly)

Purpose and intent

HB 5487 proposes to regulate the involvement of non-attorney owned or controlled entities (including management services organizations) in law firms and attorney practices in Illinois. The core aim is to protect client interests and the professional independence of attorneys by restricting how non-attorney owners and operators can influence, access, or profit from a law firm’s operations and client matters.

Key provisions and changes

  • Definitions

    • “Alternative business structure” (ABS): any entity providing legal services with non-attorney ownership or decision-making authority. Excludes nonprofit organizations.
    • “Management services organization” (MSO): an entity providing management and administrative support in exchange for ownership of a law firm’s assets or for payments.

  • Restrictions on ABS/MSOs and non-attorney ownership (Section 13(a)-(c))

    • Non-attorney owned/controlled entities may not:
    • Interfere with the professional judgment of attorneys.
    • Exercise control over, or be delegated power to:
      • Access or determine client records or attorney-client communications.
      • Select, hire, or terminate attorneys or allied legal staff.
      • Set performance or competency parameters for attorneys or staff.
    • Contracts between a law firm and a non-attorney entity may not restrict an attorney or staff from:
    • Competing with the firm upon termination or resignation.
    • Disparaging or commenting on the firm’s services, ethics/professional issues, or revenue strategies in ways that would harm the firm.

  • Fee sharing and compensation (Section 13(d))

    • Attorneys may not share legal fees with an out-of-state ABS unless:
    • The attorney is licensed in the state where the ABS is approved.
    • The fees are for providing legal services in that state.
    • The law of that state governs under Rule 8.5 (or successor).

  • Disciplinary consequences (Section 13(e))

    • Violations may trigger discipline by the Attorney Registration and Disciplinary Commission.
    • Penalties include:
    • Statutory damages: $10,000 per violation or 3x actual damages (whichever is greater).
    • Attorney’s fees and costs.
    • Injunctive or declaratory relief.

  • Exceptions (Section 13(f))

    • The restrictions do not apply to fee-sharing arrangements that:
    • Are ordered or approved by a court or tribunal (including common benefit funds in multi-district litigation).
    • Are overseen by a court/tribunal and deemed fair, reasonable, and necessary for justice administration.

  • Effective date (Section 13(g))

    • Applies to contracts entered into on or after the act’s effective date.

  • Effective date of act (Section 99)

    • Takes effect upon becoming law.

Who is affected

  • Law firms and lawyers in Illinois that engage or contemplate engaging with non-attorney owned entities, ABS, or MSOs.
  • Non-attorney owners, managers, or investors involved with law firms or practicing entities.
  • Clients of law firms, who could be affected through maintained confidentiality, independence of judgment, and protections against inappropriate influence.
  • Attorneys who may engage in fee-sharing arrangements with out-of-state entities.

Procedural and timeline aspects

  • The bill has advanced through multiple floor and committee stages (Judiciary and Civil, Rules), with amendments noted (House Floor Amendment No. 2 and various committee amendments).
  • The act specifies that its provisions apply to contracts entered into after the effective date.
  • The effective date is the date the act becomes law.

Practical implications

  • Strengthens safeguards against non-attorney control of legal practice, aiming to preserve attorney independence, client confidentiality, and ethical standards.
  • Introduces potential liability and damages for violations, creating a stronger enforcement posture via the Attorney Registration and Disciplinary Commission.
  • Creates a framework for evaluating fee-sharing with out-of-state ABS and requires cross-state licensing alignment and state-law governance for such arrangements.

Note: The summary reflects the bill language as reported in the Engrossed version and its stated purposes, definitions, and penalties.

Compiled from official sources — confirm details with the bill’s official record.

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