California Governor Newsom Signs Bill Barring PE, Hedge Funds from Steering Law Firms
California Governor Gavin Newsom has signed Assembly Bill 2305 into law, which prohibits private equity firms, hedge funds, and litigation funders from directing or influencing the operations of law firms they financially support. The legislation, signed on September 20, 2026, and effective in January, targets alternative business structures and management service organizations that facilitate non-lawyer investment in the legal sector. While the bill allows for non-recourse litigation finance, it explicitly states that funders cannot interfere with the practice of law. This measure aims to maintain the independence and ethical standards of legal practice by preventing external financial entities from exerting undue control over law firms.
