“Burford Aims to Buy Stakes in US Law Firms, Rival Private Equity” —

• “Burford Capital is eyeing new territory after investing in lawsuits for nearly two decades: The litigation funder wants to buy stakes in US law firms. Burford is pitching the idea of purchasing a minority stake to several US law firms, according to Travis Lenkner, its chief development officer. The funder is angling itself as an alternative to private equity companies already backing some firms through deals to provide back office services. “
• ‘Burford is probably the most natural investor in this space,’ Lenkner said. ‘We’re not structured predominantly as a private equity fund, so we can be a very patient, permanent investor in a structure like this.'”
• “With $3 billion in market capitalization, publicly traded Burford is big enough to pull its weight in a space mostly inhabited by private equity giants, said Lenkner.”
• “‘Our size and capital structure I think gives us a relative advantage when you’re talking about other investors from within the legal finance space as compared to broader private equity,’ he said.”
• “Lenkner would not specify the number of law firms Burford is in talks with but said it’s a ‘significant pipeline’ for the company. The firms include leading larger firms as well as boutiques, he said. The plan was first reported by Financial Times.”
• “Lenkner said potential conflicts—such as a firm with Burford investment also representing defendants in a Burford-funded case—would be addressed at the beginning of any arrangement. Burford would be a passive minority investor in a service company, meaning it wouldn’t have access to confidential information in any cases, he said.”
• “A few states in recent years have loosened strict restrictions on outside investment in law firms, opening a path for litigation funders, private equity firms, and others to pour money directly into firms. Big Four consultancy KPMG in February won approval to open a US law firm under Arizona’s alternative business structure program. Utah, Puerto Rico and Washington, DC also have relaxed restrictions on non-lawyer ownership of law firms to varying degrees.”
• “In states that don’t allow nonlawyer ownership, some capital providers have used ‘managed service organizations’ as workarounds. Law firms are split in these arrangements, with the legal work flowing through a traditional lawyer-owner operation and the MSO controlling firm assets and selling back-office services to the law firm for a fee. The model has traditionally been used to allow outside investors into accounting firms and medical practices.”
• “Lenkner says Burford is exploring both options, but the MSO structure might be more accessible for national law firms.”
• “‘This is for us an incremental step, but an exciting one,’ said Lenkner. ‘It’s where the profession is going and the question is not whether these transactions will happen, it is how quickly and with whom.'”

“Law Firm MSOs and Legal Ethics Regulations: Lessons from Texas Opinion 706” —

• “The Professional Ethics Committee for the State Bar of Texas (Committee) in February 2025 issued Opinion No. 706, the first ethics opinion that squarely addressed the use of law firm management service organizations (MSOs).1 The Opinion is unique for two reasons. First, it provides guidance for the use and operation of law firm MSOs. Second, in doing so, it implicitly acknowledges the permissibility of such a structure. In the authors’ work in the law firm MSO space, we are asked nearly daily about the ethical permissibility of the relationship between law firms and MSOs. We, like the State Bar of Texas, believe that these relationships can (and currently do) exist entirely within the bounds of the legal regulatory structure – but only when properly planned, controlled and maintained.”
• “By way of background, law firm MSOs function much like the MSOs that have appeared in other professional service industries. As discussed in a previous Holland & Knight article, MSOs exist to assist professional service organizations – such as healthcare companies, accounting companies and law firms – with the administrative challenges that are associated with running those organizations. ‘In a typical MSO arrangement, the professional retains and exercises control over all professional aspects of the relevant practice [while] … the MSO, which is often owned by investors, provides all of the administrative services and nonprofessional personnel needed to support the practice, pursuant to a long-term management services agreement.’2 The aim of the model is to allow the professional to focus primarily on the professional relationship with their client, while the MSO handles the administrative burdens of the business.3 This structure allows an MSO to take advantage of innovating and professionalizing the business needs of the professional organization.4 This dual structure is becoming increasingly popular in the legal profession. Lawyers recognize the benefits of being able to hand off the ‘business of law’ while keeping control over the ‘profession of law’ – the actual serving of clients in an attorney/client relationship.”
• “While the law firm MSO structure goes to at least 2006,5 there are few people openly discussing these models in the legal profession and even fewer people or organizations writing about them. That is one of the reasons that Opinion No. 706 is so interesting to those of us practicing in the law firm MSO space: It is the first ethics opinion to provide guidelines around properly structuring law firm MSOs. More interestingly, the Committee implicitly approves the use of those very structures.”
• “Perhaps the most nuanced portion of Opinion 706 involves the situation where a lawyer refers his or her clients to a company in which the lawyer has an ownership interest.10 In this case, the company is not merely an independent service provider – it becomes part of the lawyer’s financial landscape. This dual role raises conflict concerns under Rule 1.06 and triggers the business-transaction requirements of Rule 1.08.”
• “Here, Opinion 706 draws a careful but firm line: Where a lawyer refers a client to a law-related business in which the lawyer has a personal financial interest,11 the referral constitutes a business transaction with the client.12 As a result, the lawyer must comply with the full set of requirements in Rule 1.08, including:
  • ‘full disclosure of the terms and nature of the transaction
  • a recommendation that the client seek independent counsel
  • informed, written consent from the client”
• “These safeguards ensure that the client understands the lawyer’s dual role and the potential for divided loyalties. The mere fact that the referred services are not strictly ‘legal’ in nature does not eliminate the duty of disclosure. Indeed, the Committee notes that, under the facts presented, it is unclear whether 1) the lawyer’s law firm will be using the Company’s services in the representation of the law firm’s clients or 2) the Company’s services will be engaged in general law firm operations or management. Ultimately, it concluded that in situations that implicate the former, ‘Lawyer A’s investment in the Company may create a conflict of interest and may require written disclosure and informed consent under Rules 1.06 and 1.08.'”
• “Importantly, the opinion does not prohibit such referrals outright (which is consistent with the view other jurisdictions have taken on the increasingly common practice). Rather, it insists that lawyers treat them with the seriousness and transparency required when engaging in any financial transaction with a client.”
• “As the legal marketplace continues to evolve, lawyers must remain vigilant about the ethical implications of innovation. Structuring law firm MSOs can be complicated, and an attorney must be careful to ensure that the needs of attorneys, investors and, most important, clients are met. While acting only as persuasive authority, Opinion No. 706 confirms that, when structured correctly, law firm MSOs are a viable option for lawyers, investors and service providers.”

“Firm’s Failed Tech Venture Foretells Big Law’s AI Sales Struggle” —

• “Norton Rose launched a Chicago office in 2022 with a lofty target: the firm and a tech company owned by a newly recruited partner would introduce 150 clients to a new legal workflow management tool called Proxy.”
• “Three years later, the relationship didn’t record a single sale to a firm customer. The reasons for the failure are laid out in dueling lawsuits filed by Norton Rose and the company, NMBL Technologies, led by now ex-partner Daniel Farris.”
• “The fight comes as firms are making more tech investments than ever, diving headfirst into buzzy artificial intelligence tools. Many of those investments are bound to fizzle out, but consultants expect successful ventures will mimic Norton Rose’s plan: sell tech-enabled legal products rather than traditional billable hours—a new challenge for law firms.”
• “‘Partners are good at selling legal services; selling products is not in their DNA, and that makes it hard,’ said Jeroen Plink, chief operating officer of consultancy LegalTech Hub. ‘Products are typically sold by product salespeople. Most law firms don’t have product salespeople.'”
• “There’s a long history of Big Law ‘innovation’ efforts promising far more than they deliver, but the Norton Rose-Proxy episode offers a rare peak behind the scenes of the concomitant internal fallout.”
• “NMBL argues that Norton Rose’s top leadership never invested in the company the way it promised and threw up bureaucratic roadblocks that made sales of the service impossible. It wants $15 million to make up for the botched rollout.”
• “Norton Rose, meanwhile, says clients weren’t interested in the tool, noting that an e-mail campaign marketing free trials to clients didn’t receive a single response. The law firm wants as much as $250,000, saying it never would have invested in the tool had it known how poorly it was going to perform in the market.”
  Innovative Focus”
• “Cody was heavily involved in the negotiations to recruit Farris and to partner with NMBL, according to the company’s lawsuit, which catalogues a nearly year-long recruiting effort that involved back-and-forth negotiations over Proxy.”
• “One of the hold-ups was over language for getting 150 Norton Rose clients to sign up for the new technology. The law firm didn’t want to sign up 149 clients and be on the hook for not performing, the NMBL complaint says. So the two sides settled on language that made the number a soft target based on Norton Rose providing ‘commercially reasonable good faith efforts to introduce’ that many clients to the product, according to a copy of the agreement.”
• “NMBL says Norton Rose didn’t meet even that less-burdensome requirement—or other aspects of the agreement.”
• “The firm ‘never had any actual interest in investing in and championing Proxy,’ said Andrew Patton, an attorney representing NMBL. Norton Rose used the Proxy agreement to recruit its cofounders to the firm ‘so that NRF could pursue traditional practices,’ he said.”
• “After original discussions that envisioned Norton Rose introducing all new clients to the products, the firm’s leader later insisted that relationship partners would decide whether to do so, according to NMBL’s complaint.”
• “Even after Farris developed training videos and white papers demonstrating the product, as few as 5% of the firm’s lawyers accessed the materials, NMBL’s complaint says. The firm never hired a ‘client success manager’ as the agreement envisioned.”
• “‘The allegations made by NMBL are without merit. We will vigorously pursue this matter, which should be resolved in Texas’ (where the firm’s suit was filed), a Norton Rose spokesperson said.”