In August 2020, the Arizona Supreme Court approved non-lawyer ownership or investment in law firms. In a unanimous vote, the Arizona Supreme Court eliminated its ethics rule barring non-lawyers from having an economic interest in a law firm or participating in fee sharing. The Arizona Supreme Court adopted this change with the hope of improving access to justice and to encourage innovation in the delivery of legal services.

While the reform does not take effect until January 1, 2021, it is certainly an interesting development in the world of litigation. The reform approved by the Arizona Supreme Court will require proposed alternative business structures to go through an application process. The Arizona Task Force on the Delivery of Legal Services, which recommended the reform, describes the application process as rigorous.

The Task Force supported the reform with the belief it will pave the way for funding to support the invention of new technology or adoption of existing technology in the legal industry. The Task Force also argued allowing the alternative business structure would strengthen access to justice by promoting free market competition and allowing legal service providers to form multidisciplinary practices with other professions.

The approved reform raises the question as to how the flow of outside money will impact litigation in Arizona. Specifically, to what firms and practice areas will this additional funding go to? Certainly as a business, additional capital and funding is a welcome sight. On the flipside as the investor, you are looking for the opportunity, which will maximize your initial investment.

In this time of nuclear verdicts, it would not be shocking to see the initial wave of investment in law firms flood to plaintiff oriented firms. Why? Well, a small investment and return on a $30 million nuclear verdict sounds a little more appealing than a defense verdict.

With the anticipated additional capital, plaintiff attorneys will likely start to get more creative in their case presentations. They will be able to afford using new technology or existing technology in the courtroom. Plaintiff attorneys may attempt to take advantage of the multidisciplinary practices by partnering with a medical group to treat plaintiffs and help with expert discovery. Plaintiff attorneys will push the envelope even farther to make sure they get the proper verdict to support the outside investment.

TM Takeaway: We are on the edge of litigation in Arizona changing with the flow of non-lawyer money into plaintiff firms. It will be even more important as defense counsel to anticipate the new tactics from plaintiff firms and stay a step ahead in order to prevent a nuclear verdict.

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