Issues & Trends
What You Need to Know About Proposed Changes to Rules Governing Nonlawyer Ownership in D.C. Law Firms
June 26, 2026
Beginning in 1991 and continuing until several years ago, the District of Columbia was unique among U.S. jurisdictions in permitting lawyers to partner and share fees with nonlawyers in law firms — albeit under limited circumstances set out in D.C. Rule of Professional Conduct 5.4(b).
Under this narrow exception, the firm must have as its sole purpose the provision of legal services to clients, and the nonlawyer who holds a financial interest or exercises managerial authority in the firm must perform professional services that assist the law firm in providing legal services to clients and abide by the Rules of Professional Conduct as if they were lawyers. Lawyer partners and supervisors are vicariously liable for the ethical conduct of the nonlawyer partners, and the nonlawyers must not interfere with the lawyers' independent professional judgment.
This limited exception to the general prohibition on fee sharing with nonlawyers permits law firms in the District to attract and retain top talent by offering nonlawyer professionals ownership interest in the firm, thus enabling firms to offer more innovative and efficient legal services to clients.
In recent years, several jurisdictions have made changes to their prohibitions against nonlawyer ownership, which prompted the D.C. Bar's Innovations in Legal Practice Committee (ILPC) to review said D.C. rule and propose amendments. On April 27, 2026, the Bar approved and transmitted to the D.C. Court of Appeals the ILPC's substantive proposed amendments to Rule 5.4 and Comments (Professional Independence of a Lawyer), as well as minor proposed amendments to the Comments of Rules 5.3 (Responsibilities Regarding Nonlawyer Assistants) and 5.7 (Responsibilities Regarding Law-Related Services). The court is accepting written comments on the proposals until August 12, 2026.
The proposed amendments are aimed at improving client services by allowing law firms that have as their principal (instead of sole) purpose the provision of legal services to clients, and where any other services provided are law-related services, to offer ownership interest in the firm to nonlawyer professionals. If approved, law firms would then be able to respond to client demands for an integrated array of legal and law-related professional services, thus enhancing those firms' ability to compete with organizations and corporations that provide similar services.
If adopted by the court, revised Rule 5.4 would:
- Permit District of Columbia attorneys to cooperate and share fees with nonlawyers in a firm where the firm's "principal" rather than "sole" purpose is the provision of legal services to clients, and where any other services provided by the firm are law-related services;
- Ensure that nonlawyer owners are supervised by lawyers and reiterate protections of the professional independence of lawyers;
- Clarify that a lawyer's responsibilities for the supervision of nonlawyer owners are distinct from the lawyer's responsibilities for the supervision of nonlawyer employees at law firms, including nonlawyer managers who have no financial interest in the firm;
- Require disclosure to prospective and existing clients if a lawyer's representation involves nonlawyer owners;
- Require that law firms with nonlawyer owners register with the D.C. Bar and annually update their registration;
- Require nonlawyer owners to complete the Mandatory Course on the D.C. Rules of Professional Conduct and Practice; and
- Clarify how D.C. attorneys may share fees and provide legal services with firms in jurisdictions that have less restrictive rules about nonlawyer ownership of law firms.
These changes would move nonlawyers with only managerial authority (for example, law firm COOs) out of Rule 5.4's ambit, as managerial authority in a firm does not equal ownership in the firm. The amendments also institute important safeguards such as the requirement for nonlawyer owners to take the D.C. Bar Mandatory Course and for firms to disclose to their clients the extent to which nonlawyer owners are involved in client work. The basic prohibition on fee sharing and the existing parameters of the limited exception to fee sharing would not change.
The developments in other jurisdictions with respect to nonlawyer ownership of firms have informed the ILPC's work. In 2020, Arizona eliminated its version of Rule 5.4 in favor of a licensing framework for alternative business structures that permitted nonlawyer ownership. However, concerns have been raised about the program's implementation and consumer protection. On the other hand, California enacted legislation that prohibits law firms with nonlawyer partners from sharing contingent fees in California matters, effectively banning law firms with nonlawyer partners from practicing in the state or sharing fees with alternative business structures except under very narrow exceptions. Colorado and Illinois have followed suit with their own equivalents of the California model, although the latter legislation is still pending.
The existing D.C. Rule 5.4(b) and proposed amendments to the rule do not allow for private-equity or outside investment, and they require nonlawyer owners in D.C. law firms to have a tangible role and job function, not merely passive financial backing. The proposed amendments further distinguish the District of Columbia from other jurisdictions like Arizona in this manner.
You can read the Bar's letter to the court as well as the ILPC's final report here. To submit comments, email [email protected] or mail them to Clerk, D.C. Court of Appeals, 430 E Street, N.W., Washington, D.C. 20001. The deadline is August 12.
Hamdi Soysal, Tom Mason, and Daraja Carroll are members of the D.C. Bar Innovations in Legal Practice Committee.
