State Bar Act: consumer legal funding.

New exemption from the out-of-state fee-sharing prohibition (Section 6156) for contracts that outline a specific dollar amount for services rendered, involve no payment related to referral of legal services or purchase of a lead, and have no payment contingent on the amount recovered in a specific case.

Removed paragraph (5) from Section 6256(d), which had allowed attorneys to offer or give a gratuity to a person who made a recommendation resulting in employment, provided it was not offered in consideration of future referrals. This narrows the exceptions to the prohibition on paying for client referrals.

Added savings clause stating the fee-sharing prohibition shall not be construed as superseding the holding in Ridgley v. Lew, 55 F. Supp. 3d 89 (2014), which addressed when out-of-state law firms can share fees with California attorneys.

The fee-sharing prohibition now only applies to contracts entered into on or after January 1, 2026, giving existing arrangements a grace period before the ban takes effect.

Expanded 'court of competent jurisdiction' to 'court or tribunal of competent jurisdiction' and 'judicial oversight' to 'judicial or tribunal oversight' in the court-ordered fee sharing exception, broadening it to cover arbitration and other tribunal settings.

New exclusion in Section 6250(j): nothing in the Consumer Legal Funding Act applies to support legal services rendered to an attorney regarding the legal claim, carving out back-office and paralegal-type services from regulation.

Removed the provision (old Section 6255(b)) that stated only attorney's liens related to the legal claim, Medicare liens, or other statutory liens take priority over a consumer legal funding company's lien. The section now only states that contingent rights are assignable.

Document header changed from enrolled bill format (with Assembly and Senate passage dates and blank governor fields) to chaptered law format with 'STATE OF CALIFORNIA AUTHENTICATED ELECTRONIC LEGAL MATERIAL' header and Chapter 565 designation.

Governor's approval date filled in as October 10, 2025, replacing the previously blank fields for date and time of receipt.

A stray subdivision label '(e)' was removed from Section 6156 (the alternative business structure provision). In the amended version, subdivisions ran (a) through (g), then a lone '(e)' appeared, then (h). The enrolled version correctly runs (a) through (h) without the duplicate letter.

The legislative counsel's digest was updated to remove 'as amended' from the bill citation, changing it from 'AB 931, as amended, Kalra' to 'AB 931, Kalra', consistent with standard enrolled bill formatting.

The amendment history dates (listing six prior amendments from March through August 2025) and the vote/appropriation/fiscal committee lines were removed, replaced by standard enrolled bill header showing passage dates and Governor's approval block.

A new subdivision (e) was added to Section 6156 stating: 'This section shall remain in effect only until January 1, 2030, and as of that date is repealed.' This creates a sunset date for the prohibition on attorneys sharing legal fees with out-of-state alternative business structures.

The bill's title was changed from 'to amend, renumber, and add Section 6156' to 'to amend, renumber, and add add, and repeal Section 6156,' reflecting the new sunset/repeal provision.

A typo in Section 6254(a)(4)(B) was corrected: 'publically' changed to 'publicly' in reference to publicly available attorney referral services operated by local bar associations.

New requirement in Section 6251(a)(2): if a consumer legal funding contract is negotiated in a language other than English, the consumer must be provided a copy of the contract in both English and the language in which it was negotiated.

The definition of 'alternative business structure' in Section 6156(c)(1) was narrowed from 'nonattorney ownership, management, ownership or decisionmaking authority' to 'nonattorney ownership or decisionmaking authority,' removing 'management' as a standalone trigger. This means an entity that allows nonlawyer management but not ownership or decisionmaking authority would no longer qualify as an alternative business structure under this bill.

Section 6156(b) was changed so that penalties for violating the fee-sharing prohibition now apply to 'the attorney' rather than 'the attorney or law firm,' narrowing which parties can be directly subject to statutory damages, costs, and injunctive relief.

Added a new Article 17 (Sections 6250-6256) to the Business and Professions Code creating the California Consumer Legal Funding Act, which establishes an entirely new regulatory regime for companies that purchase contingent rights to legal claim proceeds from consumers.

Added new Section 6156 prohibiting California-licensed attorneys or law firms from directly or indirectly sharing legal fees with an out-of-state 'alternative business structure' (defined as any entity providing legal services while allowing nonattorney ownership, management, or decisionmaking authority). Violations carry statutory damages of $10,000 per violation or three times actual damages, attorney's costs, injunctive relief, and State Bar discipline.

Confirmed that contingent rights to legal claim proceeds are assignable by consumers, and established that only attorneys' liens related to the claim and Medicare or other statutory liens take priority over the consumer legal funding company's lien.

Defined key terms including 'consumer legal funding' (a nonrecourse transaction where a company purchases a contingent right to settlement proceeds), 'consumer legal funding company,' 'charges' (all fees above the funded amount, including interest), 'funded amount,' and 'resolution date.'

Required all consumer legal funding contracts to be in writing, drafted in plain English, contain a 5-business-day right of rescission, state the maximum payment, itemize one-time charges, include a repayment schedule, and require the consumer to initial every page. The contract must also include a written attorney acknowledgment attesting to specific conditions; absence of this acknowledgment renders the contract null and void.

Required that the amount paid to the funding company be predetermined based on time intervals from funding date through resolution date, and explicitly prohibited determining payment as a percentage of the recovery from the legal claim.

Prohibited attorneys (or their immediate family) retained by a consumer from having a financial interest in a consumer legal funding company or providing funding directly to that consumer. Also prohibited referring attorneys from holding such interests. Attorneys may not disclose privileged information to funding companies without the consumer's written consent.

Prohibited consumer legal funding companies from paying or accepting referral fees or commissions to/from attorneys, referring consumers to specific attorneys (except public bar referral services), taking any role in conducting the claim or settlement, obtaining waivers of rights including jury trial, paying court costs or attorney fees from funding transaction funds, conditioning funding on terminating current counsel, and assisting fabricated claims. Violations trigger automatic contract termination plus statutory damages of $10,000 per violation or three times actual damages, whichever is greater.

Renumbered existing Section 6155.1 (civil penalties for lawyer referral service violations) to Section 6156, making room for the new fee-sharing prohibition at that section number.

Section 6156 no longer prohibits partnerships, corporations, associations, or other nongovernmental entities employing an attorney from sharing legal fees with an out-of-state alternative business structure. The prohibition now applies only to the individual attorney licensed or authorized to practice in California.

A new exclusion was added to the definition of 'alternative business structure' in Section 6156: nonprofit organizations are explicitly excluded from the definition, meaning fee-sharing with out-of-state nonprofit legal service entities is not restricted by this section.

Violation of the fee-sharing prohibition in Section 6156 is now expressly stated to 'constitute cause for the imposition of discipline by the State Bar of California' as a standalone clause, rather than appearing only as one item in a list of penalties. This makes the disciplinary consequence more prominent and potentially broader in application.

Minor corrections: removed redundant language in the bill title, fixed a typo ('providers provides' changed to 'provides'), and removed an empty subdivision label in Section 6256.

The prohibition on sharing legal fees with out-of-state alternative business structures (Section 6156) is no longer absolute. It now includes an exception where all three conditions are met: the attorney is also licensed in the state where the ABS is approved, the fees compensate for legal services provided in that state, and that state's law is controlling under Rule 8.5 of the California Rules of Professional Conduct.

A new carve-out (Section 6156(d)) exempts court-ordered or court-approved fee-sharing arrangements, such as common benefit funds in coordinated, consolidated, or multidistrict litigation, provided the allocation is subject to judicial oversight and found fair, reasonable, and necessary.

The definition of 'charges' in Section 6250(a) now includes a cap: charges shall not exceed 36 months from the funding date. This limits how long interest and fees can accrue on consumer legal funding transactions.

A new Section 6256(d) prohibits attorneys from compensating, promising, or giving anything of value to a person for recommending or securing their services. Five exceptions are provided: permitted advertising under Rule 7.2, usual charges of legal services plans or qualified referral services, law practice purchases under Rule 1.17, client referrals not otherwise prohibited, and one-time gratuities not tied to future referral promises.

Statutory damages for consumer legal funding company violations (Section 6254(b)(2)) changed from a fixed $10,000 per violation to 'not to exceed' $10,000 per violation, giving courts discretion to set a lower amount.

A new Section 6254(c) requires courts to consider specific factors when setting statutory damages, including the nature and seriousness of misconduct, number of violations, persistence, duration, willfulness, and the defendant's financial condition.

The entire amendment to Section 6068 (attorney duties) was dropped. This provision would have prohibited an attorney from encouraging the commencement or continuance of an action from any corrupt or discriminatory motive of passion or interest. Its removal narrows the bill's scope to consumer legal funding and alternative business structure issues only.

Section 6156 now has an explicit subdivision (a) label added to its first paragraph, and the statutory damages amount was reformatted from '$10,000' to 'ten thousand dollars ($10,000)' in both Section 6156 and Section 6254.

Multiple typo and formatting corrections: 'contact' changed to 'contract' in Section 6251, 'medicare' capitalized to 'Medicare' in Section 6255, 'attorneys' liens' changed to 'attorney's liens' in Section 6255, and minor punctuation adjustments throughout.