California Governor Newsom Enacts Law Limiting Investor Influence in Law Firms
California Governor Gavin Newsom signed Assembly Bill 2305 into law on September 20, 2026, which aims to restrict investor influence over legal practices. This new legislation, introduced by Assemblymember Ash Kalra, amends California’s Business and Professions Code to safeguard lawyers' independent judgment. The law specifically limits how outside companies, including private equity firms, hedge funds, and other investment groups, can influence key legal decisions such as client choice, scope of work, legal fees, case strategy, and settlements. While AB 2305 does not prohibit all outside funding, it mandates that investors cannot use their financial contributions to control these critical aspects of legal work. The law will apply to covered contracts executed on or after January 1, 2027, providing firms and investors time to review and adjust their existing agreements.
