California has introduced tougher penalties for lawyers involved in illegal client-solicitation schemes, including mandatory disbarment for specified criminal convictions and civil penalties of $25,000 per violation.
Governor Gavin Newsom signed Assembly Bill 2039 on September 27, strengthening California’s rules against “capping” or “running” — the prohibited practice of paying people or organisations to solicit legal clients.
Under the new law, the State Bar of California must use summary disbarment procedures when a lawyer is convicted of a felony capping offence.
The same process applies to a misdemeanor conviction where a court finds, or the record establishes, that the lawyer acted knowingly and for financial gain.
Once a certified record of a qualifying conviction is received, the California Supreme Court must order disbarment. The State Bar cannot negotiate or recommend a lesser sanction such as suspension, probation, diversion or reproval instead.
The legislation also significantly increases the potential financial consequences of illegal solicitation.
A person, law firm, partnership, association or corporation that violates California’s anti-capping law can face a civil penalty of $25,000 for each violation.
Each client retained and claim filed through unlawful capping activity can constitute a separate violation, and enforcement actions may be brought by the Attorney General, city attorneys or county counsel.
The reforms follow allegations involving claims connected to Los Angeles County’s approximately $4 billion settlement of childhood sexual-abuse cases.
Reuters reported that Los Angeles Times investigations alleged Downtown LA Law Group paid people to recruit clients or become claimants and that potentially false claims were submitted.
The firm has denied wrongdoing. The State Bar and Los Angeles County District Attorney’s Office are investigating, and AB 2039 does not establish that the firm committed misconduct.
The legislation also creates whistleblower protections extending beyond conventional employees.
Employees, former employees, applicants, independent contractors, vendors, clients and others with a professional relationship to an attorney or law firm can be protected when they make good-faith disclosures concerning suspected violations of SRA Disqualifies PM Law’s Bostock — Lawyer Monthly or other laws governing lawyers.
AB 2039 separately introduces stricter controls on loans and financial advances between attorneys and clients.
Those arrangements generally must be contained in a written agreement separate from the retainer, setting out the amount financed, repayment arrangements, charges and potential conflicts.
Lawyers cannot charge clients interest on covered loans or advances, and the arrangements cannot interfere with settlement decisions, litigation strategy or the lawyer’s SRA Fines Ex-Ashley Wilson Partner Wright — Lawyer Monthly.
Clients must also receive written notice that they may seek independent legal or financial advice and generally receive a cooling-off period of at least five business days.
Violations of these financial-assistance provisions can result in restitution or alteration of the agreement, injunctive relief, State Bar discipline and civil penalties of $15,000 per offence.
For law firms, the legislation increases the compliance risks surrounding both client acquisition and financial assistance.
SRA Consults on Third-Party Litigation Funding Rules, lead-generation businesses and payments linked to prospective clients require particular scrutiny because repeated unlawful solicitation involving multiple clients or claims could generate substantial cumulative penalties.
AB 2039 therefore combines mandatory disciplinary consequences, civil enforcement, whistleblower protections and restrictions on attorney-client financial arrangements in a broader effort to tighten professional-conduct controls within California’s legal sector.