Passmore: Start of a major upheaval
The door to external investment in US law firms has opened wide after a private equity house announced a deal with a personal injury firm.
The agreement between Uplift Investors and Louisiana-based Dudley DeBosier Injury Lawyers uses the much-talked-about managed service organisation (MSO) model as a way to get around the bans in most US states on non-lawyer ownership of law firms and fee sharing with non-lawyers.
Under this, the MSO – called Orion Legal – will provide Dudley DeBosier with non-legal operational support services, including marketing, finance, technology, recruitment and administrative infrastructure.
Crucially, Dudley DeBosier will remain 100% owned and controlled by its three founding partners and buy the services it needs from Orion Legal, which is co-owned by Uplift and the partners. The law firm will look to add other personal injury practices to the platform in a bid to consolidate the market.
Chad Dudley, a partner at Dudley DeBosier and a member of Orion Legal’s executive team, said: “We’ve worked closely with Uplift to ensure the structure complies with applicable ethics rules, and we’re excited to combine our operational best practices with Uplift’s extensive experience helping professional services firms scale as we support law firms across North America.”
Will Hausberg, managing partner at Uplift, added: “We believe this partnership represents an important milestone for the broader legal services ecosystem and offers a compelling opportunity to bring scale to a highly fragmented market in a responsible, durable way.”
It has been reported in recent months that top 50 US firm McDermott Will & Schulte is among those considering the MSO model.
Crispin Passmore, former executive director of the Solicitors Regulation Authority and chair of transatlantic consultancy Passmore & Oliver Partners, advised on the Uplift deal. He is the keynote speaker at our Law Firm Growth Summit on 18 March in London (early bird price available until Friday).
He said: “The US legal market is changing. That is because the availability of capital increases a firm’s ability to scale through M&A, deployment of technology and attract and retain talent.
“Personal injury has been at the forefront of this and the Uplift Investors deal with Dudley DeBosier Injury Lawyers in Louisiana is a great example of how new structures are making it easier for law firms to attract the capital they need.
“There is no doubt that we are at the start of a major upheaval of US and therefore global law.”
US firm Holland & Knight has also been at the forefront of advancing the MSO model for legal services and in a briefing last year said: “Lawyers recognize the benefits of being able to hand off the ‘business of law’ while keeping control over the ‘profession of law’ – the actual serving of clients in an attorney/client relationship.”
It pointed too to an ethics opinion issued by the State Bar of Texas last February, which by providing guidance on the use and operation of law firm MSOs “implicitly acknowledges the permissibility of such a structure”.
The opinion put conditions on this, however. The MSO cannot share the fees paid to a law firm, and where a lawyer referred a client to a law-related business in which they have a personal financial interest, like an MSO, they must provide full disclosure to the client, recommend they seek independent legal advice, and obtain informed, written consent.
“While acting only as persuasive authority, Opinion No706 confirms that, when structured correctly, law firm MSOs are a viable option for lawyers, investors and service providers,” Holland & Knight said.
Last month, a legal technology platform that works exclusively with Kentucky law firm Hargrove Firm – and is owned by the same family – took investment from private equity house Conditor Equity.
NetLaw provides the technology to support Hargrove Firm’s delivery of estate planning services to wealth advisory firms.
Holland & Knight advised NetLaw on the deal and is also a member of the recently formed Private Equity Legal Alliance, a consortium of businesses that support PE deals in the law that was set up by Samson Partners Group.
Seth Deutsch, founder and managing partner of Samon, said: “The legal industry in the US is quickly entering a period of unprecedented change – and opportunity… This isn’t about changing what makes the profession special – it’s about helping it evolve in a way that benefits founders and facilitates the right marriages with investment partners.”
In 2021, Arizona became the first and so far only US state to permanently ditch the ban on non-lawyer ownership of law firms and we have been tracking its development since.
We revealed last year the first non-US firm to gain an alternative business structure (ABS) licence in Arizona and then the first UK firm. Almost a year ago, accountancy giant KPMG also obtained an ABS licence in Arizona.
Leave a Comment