Key Takeaways
- • Tennessee's Supreme Court declined to lift the state's ban on nonlawyer ownership of law firms, keeping private equity out of direct law firm ownership.
- • Unlike California, Colorado, and Illinois, Tennessee has not imposed additional restrictions on outside investment in legal services, according to Holland & Knight's Josh Porte.
- • Capital is still flowing into legal services through management services organizations (MSOs), which allow investors to back the administrative operations of law firms.
- • The structure lets private equity capture economic exposure to law firm businesses without owning the legal practice itself.
Summary
The Tennessee Supreme Court has declined to lift the state's longstanding ban on nonlawyer ownership of law firms, meaning private equity investors cannot directly own Tennessee law practices. Above the Law reports, however, that capital continues to reach the sector through alternative structures.
Josh Porte, co-chair of Holland & Knight's legal services transactions team, told the Nashville Post that Tennessee has taken a different regulatory path from several other states. Unlike California, Colorado, and Illinois, Tennessee has not imposed additional restrictions on outside investment in legal services. Porte observed that "capital has nevertheless been flowing into legal services" through management services organizations.
MSOs allow investors to back a law firm's administrative and business operations while the legal practice itself remains under lawyer ownership. Through this model, private equity can still obtain a meaningful economic stake in the business side of Tennessee law firms, even though it cannot hold ownership of the legal entities.
The article frames the Tennessee outcome as an example of a state choosing not to add new regulatory barriers beyond the existing ownership ban, leaving the MSO structure as a viable channel for outside capital.
Josh Porte, co-chair of Holland & Knight's legal services transactions team, told the Nashville Post that Tennessee has taken a different regulatory path from several other states. Unlike California, Colorado, and Illinois, Tennessee has not imposed additional restrictions on outside investment in legal services. Porte observed that "capital has nevertheless been flowing into legal services" through management services organizations.
MSOs allow investors to back a law firm's administrative and business operations while the legal practice itself remains under lawyer ownership. Through this model, private equity can still obtain a meaningful economic stake in the business side of Tennessee law firms, even though it cannot hold ownership of the legal entities.
The article frames the Tennessee outcome as an example of a state choosing not to add new regulatory barriers beyond the existing ownership ban, leaving the MSO structure as a viable channel for outside capital.
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