Strengthening Attorney Ethics and Accountability

In 2025, CAOC successfully passed two crucial reforms to protect the integrity of the legal profession and safeguard consumers from misleading or unethical practices in attorney advertising and litigation finance. 

A growing volume of attorney advertising — especially through social media and digital lead generators—has opened the door to deceptive and unethical claims. Vulnerable consumers, often new to the legal system, can be misled by exaggerated promises, hidden affiliations, and unlawful guarantees of recovery. At the same time, the litigation financing industry is operating in a largely unregulated space, with some lenders risking the financial well-being of plaintiffs through unclear terms and excessive fees. We recognize that the right of consumers to seek justice from wrongdoers is paramount; however, changes were needed to stop the abuses and protect consumers.

SB 37 (Umberg) — Protecting Consumer Rights and Public Trust in Attorney Advertising

SB 37, as enacted, strengthens oversight of attorney advertising by closing enforcement gaps in current ethics regulations. While existing ethics rules and statutes already prohibit many of these practices, enforcement has been hampered by limited resources at the State Bar. SB 37: 

• Allows for citizen lawsuits for violations of the current law prohibition on capping in Business and Professions Code 6153.
• Allows for citizen lawsuits for violations of the current law regulating attorney referral services in Business and Professions Code 6155.
• Updates the definition of attorney advertising in statute to better encompass a broader range of communication methods in line with Rule 7.2 of the State Bar's Rules of Professional Conduct.
• Updates statutory prohibitions on attorney advertising in Business and Professions Code 6157.2 and provides aggrieved consumers with a remedy for violations of the statute.

Injuries take many forms. Property damage is perhaps the most straightforward injury to compensate for, since it is usually easy to determine exactly how much money it will take to restore the property to its previous condition. However, many injuries are not as easy to estimate, and that is why having a jury of one’s peers evaluate all facts and changes in a victim’s life is so important. A person who is paralyzed, suffers chronic or acute pain, or loses a limb in an accident cannot be “made whole,” but still deserves compensation for the loss.

AB 931 (Kalra) — Regulating Litigation Financing to Protect Consumers

AB 931 adopts a regulatory framework for providing protections to consumers seeking to obtain a loan via a legal funding agreement. Specifically, AB 931: 

• Requires all contracts for a consumer legal funding transaction to disclose material terms to the consumer.
• Requires that the contracted amount to be paid to the consumer legal funding company is to be a predetermined amount based upon intervals of time from the funding date through the resolution date, and cannot be determined as a percentage of the recovery from the legal claim.
• Prohibits a) a consumer legal funding company from paying or offering to pay commissions, referral fees, or other forms of consideration to any attorney, law firm, or any of their employees for referring a consumer to the company; b) Accepting any commissions, referral fees, rebates or other forms of consideration from an attorney, law firm, or any of their employees; c) Intentionally providing a consumer materially false or misleading information regarding its products or services; d) Referring, in furtherance of legal funding, a customer or potential customer to a specific attorney, law firm, or any of their employees except that a legal funding company may refer a customer or potential customer to a legal referral service approved by the State Bar of California.
• Prohibits an attorney, or the attorney’s immediate family, retained by a consumer from having a financial interest in a consumer legal funding company offering consumer legal funding, and cannot provide consumer legal funding directly to a consumer.
• Prohibits any attorney who has referred the consumer to the consumer’s retained attorney from having a financial interest in a consumer legal funding company offering consumer legal funding to that consumer.
• Additionally, AB 931 bans fee-sharing between California attorneys and out-of-state Alternative Business Structures (ABSs), ensuring the attorney-client relationship remains legally and ethically sound.

These bills work together to promote fairness, uphold professional standards, and empower consumers with the protections they deserve.