SB3812 104TH GENERAL ASSEMBLY

LRB104 16659 JRC 30063 b

104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
SB3812

Introduced 2/6/2026, by Sen. Michael E. Hastings

SYNOPSIS AS INTRODUCED:

705 ILCS 205/13 new

Amends the Attorney Act. Prohibits a private equity group, hedge fund, or any entity owned, operated, or controlled by a private equity group or hedge fund, including management services organizations, that is involved with a law firm or an attorney's practice from: (1) interfering with the professional judgment of attorneys in representing clients; (2) exercising control over or being delegated the power to own or determine the content of client records, select, hire, or terminate the employment of attorneys or allied legal staff in whole or in part based on competency or proficiency; or set competency or proficiency parameters for attorneys or allied legal staff; or (3) charging any fee to the attorney or law firm that is directly or indirectly based on the fees, revenues, or profits of the attorney or law firm. Prohibits an attorney from sharing legal fees directly or indirectly with an out-of-state alternative business structure unless: (1) the attorney is also licensed in the state in which the alternative business structure is approved; (2) the fees are compensation for providing legal services in that state; and (3) the law of that state is controlling under the Illinois Rules of Professional Conduct or a successor rule. Provides for the recovery of statutory damages, attorney's fees and costs, and injunctive or declaratory relief as a remedy for violation. Defines terms. Contains applicability provisions. Effective immediately.

A BILL FOR

AN ACT concerning civil law.

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

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

(705 ILCS 205/13 new)

Sec. 13. Protection of clients.

(a) As used in this Section:

"Alternative business structure" means any entity that provides legal services while allowing non-attorney ownership or decision-making authority of the entity. "Alternative business structure" does not include nonprofit organizations.

"Hedge fund" means a pool of funds managed by investors for the purpose of earning a return on those funds, regardless of the strategies used to manage the funds. A hedge fund includes, but is not limited to, a pool of funds managed or controlled by a private limited partnership.

"Management services organization" means an entity that provides management and administrative support services in exchange for ownership of some or all of the law firm's assets.

"Private equity group" means an investor or group of investors who primarily engage in the raising of capital and who invests, develops or disposes of assets.

(b) A private equity group, hedge fund, or any entity owned, operated, or controlled by a private equity group or hedge fund, including management services organizations, that is involved with a law firm or lawyer's practice may not do any of the following:

(1) Interfere with the professional judgment of attorneys in representing clients.

(2) Exercise control over or be delegated the power to do any of the following:

(A) owning or determining content of client records;

(B) selecting, hiring, or terminating attorneys or allied legal staff in whole or in part based on competency or proficiency; or

(C) setting competency or proficiency parameters for attorneys or allied legal staff.

(3) Charge any fee to the attorney or law firm that is directly or indirectly based on the fees, revenues, or profits of the attorney or law firm.

(c) Any contract involving management of a law firm or attorney's practice with a private equity group, hedge fund, or any entity owned, operated, or controlled by a private equity group or hedge fund, including management service organizations, may not include any provision limiting a attorney or allied legal staff member in that practice from:

(1) competing with that law firm or practice in the event of termination or resignation; or

(2) disparaging or commenting on that law firm or practice as to any issues involving quality of services, ethical or professional challenges in the practice of law, or revenue-increasing strategies employed by the private equity group, hedge fund, or any entity owned, operated, or controlled by a private equity group or hedge fund, including management services organizations.

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

(1) The attorney is also licensed in the state in which the alternative business structure is approved.

(2) The fees are compensation for providing legal services in that state.

(3) The law of that state is controlling under Rule 8.5 of the Illinois Rules of Professional Conduct or any successor rule.

(e) A violation of this Section may constitute cause for the imposition of discipline by the Attorney Registration and Disciplinary Commission and subject the attorney to the following penalties:

(1) statutory damages of $10,000 per violation or 3 times the actual damages incurred by the client, whichever is greater;

(2) attorney's fees and costs; and

(3) injunctive or declaratory relief.

(f) This Section does not apply to any arrangement for the sharing of legal fees if both of the following conditions are satisfied:

(1) The arrangement for the sharing of legal fees was ordered or approved by a court or tribunal of competent jurisdiction, including, but not limited to, the establishment or distribution of a common benefit fund in coordinated, consolidated, or multidistrict litigation.

(2) The manner by which legal fees are to be allocated is subject to judicial or tribunal oversight and determined by the court to be fair, reasonable, and necessary for the administration of justice.

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

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