Assemblymember Kalra’s AB 2305 to Safeguard the Integrity of the Legal Profession is Sent to Governor

SACRAMENTO - Assembly Bill (AB) 2305, authored by Assemblymember Kalra (D-San José) and sponsored by Consumer Attorneys of California, passed the Legislature with a bipartisan vote and now heads to the Governor. AB 2305 prohibits private equity firms, hedge funds, and other corporate legal funders from directing or influencing the practice of law. This will ensure that decisions about litigation, including case strategy, resolution, and representation, remain solely in the hands of licensed attorneys and their clients.

"I am happy we were able to build on our work with AB 931 last year and now send AB 2305 to Governor Newsom. California will continue to lead the nation by prohibiting corporate legal funders from controlling or influencing litigation decisions," said Assemblymember Kalra. "The principle is simple: when you hire a lawyer, the person making decisions about your case should be your lawyer-not a private equity entity looking for profit."

Until recently, the legal industry largely resisted private equity involvement due to ethics rules against non-lawyer ownership. However, structures like management-service organizations (MSOs) and alternative business structures (ABSs) exploited loopholes by presenting investments as loans. AB 2305 closes these loopholes by blanket prohibiting private equity firms, hedge funds, and other corporate legal funders from directing or influencing the practice of law. Additionally, the bill makes clear that while nonrecourse litigation finance is permitted, it is subject to strict limitations, including the prohibition of funds being used for the solicitation or acquisition of future clients.

"When you're injured, wronged or up against a powerful corporation, the last thing you should worry about is a private equity firm looking to maximize its profits. This bill draws a clear and unambiguous line: in California, attorneys answer to their clients-full stop," said Doug Saeltzer, President, Consumer Attorneys of California. "We are deeply grateful to Assemblymember Kalra for his steadfast leadership and to our legislative champions in both chambers who moved this bill to the Governor's desk. Now we call on the Governor to sign AB 2305 into law. California has always led the nation in protecting consumers and preserving the integrity of our justice system - and with this bill, we will lead again."

AB 2305 is coauthored by Assemblymembers Stefani (D-San Francisco) and Zbur (D-West Hollywood).

###

Assemblymember Ash Kalra represents California's 25th Assembly District, which encompasses the majority of San José, including downtown and open space areas in southeast Santa Clara County. He was first elected in 2016, becoming the first Indian American to serve in the California Legislature in state history, and was re-elected to his fifth term in 2024. Assemblymember Kalra is the Chair of the Committee on Judiciary and also serves as a member on the Housing & Community Development, Labor & Employment, Natural Resources, and Utilities & Energy committees.