What Colorado's HB 26-1421 Means for Law
Colorado's new fee-sharing law changes nothing for a flat-fee MSO that takes no equity or share of legal revenue.
Published 2026-06-10 — Updated 2026-07-22
In June 2026, Colorado enacted HB 26-1421, the Legal Practice Integrity and Fee-Sharing Prohibition Act. It takes effect August 12, 2026, and it is one of the clearest signals yet of where the regulation of legal-services businesses is heading.
Colorado is not alone. California's AB 931, effective at the start of 2026, added restrictions on California lawyers sharing fees with out-of-state alternative business structures while preserving certain specified service arrangements — not a comprehensive MSO statute, but the same regulatory focus on fee-sharing and nonlawyer participation. Illinois lawmakers introduced companion bills in early 2026, and the General Assembly passed House Bill 5487 that May; as of this writing, the bill awaits the Governor's action. The through-line is consistent: states are drawing a hard boundary against arrangements that let nonlawyers own law firms or share in legal fees, revenue, or case outcomes — directly or indirectly.
What the Colorado statute does not do is prohibit the management services model. It expressly preserves flat-fee and hourly compensation to an MSO. What it bars is compensation contingent on, or calculated as a percentage of, a firm's legal fees, revenues, profits, recoveries, settlements, or case outcomes. As Holland & Knight put it in its April 2026 alert on the bill, an MSO consistent with Colorado's Rule 5.4 should largely comply with these strictures.
The statute has teeth, and that is worth taking seriously. It carries a private right of action: clients can recover fees paid in violation, competing firms can seek injunctive relief, courts must order disgorgement, and a contract that violates the act is deemed void. It also looks through form to substance — how an arrangement is labeled does not control whether it crosses the line. A "technology fee" or "platform fee" that quietly tracks a firm's legal revenue is treated as exactly what it is.
This is the environment Relevant was built for. The structure holds every line the statute draws. Relevant Management Services takes no ownership interest in any law firm. Its fees are fixed and tiered to the size of the practice it supports — never a percentage of anything the firm earns. It does not participate in legal fees, revenues, profits, or outcomes by any route, direct or indirect. And the documents match the conduct: the separation written into the agreements is the separation that operates in practice.
A restrictive law is often read as a threat to innovation in legal services. Read carefully, HB 26-1421 does the opposite for a properly structured MSO — it rewards the firms and platforms built on the right side of the line and disadvantages those that weren't. Distance from the line isn't a defensive posture here. It is the foundation the entire platform stands on.