Assemblymember Kalra’s Bill to Crack Down on Corporate Influence in Litigation Passes the Assembly

SACRAMENTO - Today, Assembly Bill (AB) 2305, authored by Assemblymember Kalra (D-San Jose) and sponsored by Consumer Attorneys of California, passed the Assembly Floor with a bipartisan vote of 68-0 and now heads to the Senate. AB 2305 prohibits private equity firms, hedge funds, and other corporate investors 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, rather than the investors.

"By prohibiting corporate investors from controlling or influencing litigation decisions, AB 2305 will close emerging loopholes, protect the independence of the legal profession, and ultimately, preserve the integrity of our justice system," said Assemblymember Kalra. "California will continue to lead the nation in safeguarding the legal industry from the influence of private equity investors and give consumers the peace of mind that their attorney is prioritizing their best interest."

Until recently, the legal industry was one of the last industries not to take private equity investment because of longstanding ethics rules prohibiting non-lawyer ownership. However, models like management-service organizations (MSOs) and alternative business structures (ABSs) have continued to find loopholes by creatively restructuring their involvement with law firms, such as classifying their investment as a loan.This risks litigation decisions, such as whether to file a case, how to resolve a case, or whether to pursue a certain strategy, being influenced by investor return expectations over the interests of injured clients or consumers. AB 2305 closes these loopholes by blanket prohibiting private equity firms, hedge funds, and other corporate investors from directing or influencing the practice of law.

"Today the Assembly sent a clear message: accountability in the legal profession is not optional," said Doug Saeltzer, President, Consumer Attorneys of California. "AB 2305 passing off the Assembly floor is a significant step forward in our ongoing effort to give Californians stronger protections and real enforcement tools against bad actors. CAOC sponsored this bill because we believe the same standards we demand of corporations and powerful institutions must apply to us. We're grateful to Assemblymember Kalra for his leadership, and we'll keep fighting until these reforms are signed into law."

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.