California restricts corporate investor control over litigation practices as Tennessee declines to open the door to non-lawyer ownership

Neil Vohra, Merrick Doll, David Horniak and Corey Mirman of DLA Piper discuss tightening restrictions on outside investment in US law firms, including California legislation taking effect January 1, 2027, that prohibits corporate legal funders from influencing litigation decisions while preserving a conditional safe harbour for nonrecourse litigation finance, and the Tennessee Supreme Court's decision not to permit non-lawyer ownership or fee sharing, arguing that these developments favour management services organization (MSO) structures over alternative business structures (ABS), while increasing scrutiny of investor control, governance rights and financing arrangements.

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