by Herrick Lidstone
2026 was a “popular” year for legislation directly impacting lawyers and arguably our ethical obligations. A number of bills affected lawyers directly, and I discuss three of them in this paper.
HB25-1090 – PROTECTIONS AGAINST DECEPTIVE PRICING PRACTICES
Although this bill was adopted in 2025, it became effective January 1, 2026 and has a significant impact on lawyers and other professionals who bill their services by the hour or in many other forms. As I have written in my article, Attorney Engagement Letters and the Colorado Consumer Protection Act,2 this resulted in nearly all attorney engagement letters becoming subject to the Colorado Consumer Protection Act (the “CCPA”) and requiring certain “clear and conspicuous” warnings to be set forth in the engagement letter. Unlike the statement at the beginning of the May/June 2026 article in The Colorado Lawyer,3 I believe that the imposition of these additional requirements to most attorney (and LLP) engagement letters (and those of other professionals) is a significant change to most existing practices.
SB26-174 – PROHIBIT LEAD GENERATION LEGAL MARKETING
S.B.26-174 adds C.R.S. § 6-1-741 to the Colorado Consumer Protection Act (the “CCPA”) prohibiting “lead generation legal marketing.” The statute defines this term as in C.R.S. § 6-1-741(2)(a) as “any form of marketing in which an attorney, law firm, or licensed legal paraprofessional pays money or other compensation to a third party to receive information about a potential client or case.” This definition includes direct or indirect compensation provided to a third party directly, indirectly, on a per-year or per-case basis, or as a subscription model.”
The statute characterizes such practices as “inherently misleading to consumers,” noting they often involved deceptive tactics such as “‘bait-and-switch’ advertising, ‘look-alike’ marketing, impersonation, fraud, and other methods targeting vulnerable consumers seeking legal representation.”4
While the statute imposes restrictions on these activities, it expressly preserves the Colorado Supreme Court’s authority, over the regulation and enforcement of the practice of law in Colorado, including the unauthorized practice of law.”5
The statute also creates a private right of action, allowing affected attorneys, law firms, licensed legal paraprofessionals, and consumers to seek enforcement. A prevailing plaintiff may recover $10,000 per violation, along with reasonable attorney fees and costs.6
Additionally, the attorney general or a district attorney may pursue criminal charges for related offenses, including criminal impersonation, fraud, racketeering, or other violations under Colorado law. C.R.S. § 6-1-741(7).
The law takes effect on August 12, 2026, and applies to conduct occurring on or after that date.7
H.B. 26-1421 – COLORADO LEGAL PRACTICE INTEGRITY AND FEE-SHARING PROHIBITION ACT
In response to developments in states such as Arizona, Utah, and California permitting the sharing of legal fees with nonlawyers through Alternative Business Structures (“ABSs”) and Management Service Organizations (“MSOs”),8 the Colorado General Assembly enacted H.B. 26-1421. This legislation establishes the Colorado Legal Practice Integrity and Fee sharing Prohibition Act (“CLPIFPA”), codified at C.R.S. § 13-93-401, et seq. The Act reinforces and expands existing prohibitions on fee sharing and nonlawyer involvement in the practice of law.9
Core Prohibition. The Act’s central provision, C.R.S. § 13-93-404(1), broadly prohibits lawyers and law firms from sharing legal fees or financial benefits derived from legal services with nonlawyers. The statute provides that a lawyer or law firm shall not, in connection with providing legal services:
“Share with, pay to, allocate to, distribute to, or provide any portion of legal fees or revenues, whether gross or net, or any other financial benefit derived from legal services, directly or indirectly, however denominated or structured, to any alternative business structure or nonlawyer, other than lawful wages, salaries, benefits, or discretionary bonuses paid to nonlawyer employees of the law firm for services rendered in the ordinary course of their employment.”
Subsections (b), (c), and (d) extend this prohibition to a wide range of arrangements and structures that could functionally result in the sharing of legal fees with nonlawyers, reflecting a substance-over-form approach. In practical terms, this provision prohibits both direct and indirect fee-sharing arrangements, regardless of how they are structured or labeled.
Relationship to Existing Ethical Rules. The CLPIFPA largely codifies and strengthens existing provisions of the Colorado Rules of Professional Conduct (“CRPC”) – particularly Rules 1.5, 1.17, and 5.4—which collectively prohibit fee sharing with nonlawyers and safeguard the independence of the legal profession.10
These principles are further reinforced by longstanding ethical guidance. Colorado Ethics Committee Formal Opinion 87 emphasizes that fee sharing with nonlawyers raises “serious questions” concerning the unauthorized practice of law, improper fee division, solicitation, interference with independent professional judgment, preservation of client confidences, and the lawyer’s ability to provide competent representation.
Formal Opinion 106 confirms that a Colorado lawyer may neither pay nor accept referral fees and may not give anything of value in exchange for recommending the lawyer’s services, except in limited circumstances. Rule 7.2(b)(2) provides a narrow exception, allowing lawyers to pay the usual charges of a not-for-profit lawyer referral service or legal services organization. However, because the Colorado Supreme Court has not clearly defined what constitutes a “not-for-profit lawyer referral service,” attorneys must independently determine whether a particular entity qualifies. Generally, a “legal services organization” refers to entities such as legal aid societies or prepaid legal service plans.
Emphasis on Professional Independence. The CLPIFPA explicitly underscores the importance of a lawyer’s independent professional judgment. Section 13-93-402(1)(a) states that the Colorado Supreme Court’s rules governing the practice of law underscore that such independence is essential to the fair administration of justice. These rules restrict both fee sharing with nonlawyers and nonlawyer ownership or control of law firms.
Accordingly, Colorado lawyers who work with or alongside firms in jurisdictions that permit ABSs or MSOs must ensure that such relationships do not compromise their ethical obligations under Colorado law. Even where an out-of-state structure is permissible locally, it may create risks for Colorado practitioners if it results in prohibited fee sharing or undue influence.
Permitted Activities and Clarifications. At the same time, the General Assembly clarified that the Act is not intended to disrupt certain longstanding practices. Specifically, § 13-93-402(3) provides that the CLPIFPA does not:
- prohibit creditors or lawful assignees from enforcing claims, including through the use of lawyers, or
- alter traditional debt collection practices, so long as legal services are rendered in compliance with the applicable rules of professional conduct.
Restrictions on Management Service Organizations. The Act also imposes specific limitations on arrangements with Management Service Organizations. Under § 13-93-405, such arrangements are permissible only if the compensation paid to the MSO:
- is not contingent upon or calculated as a percentage of legal fees, revenues, or profits; and
- is not tied to recoveries, settlements, judgment awards, or case outcomes.
Practical Implications. The CLPIFPA significantly limits the ability of Colorado lawyers to participate in alternative business models involving nonlawyer ownership or revenue sharing. Attorneys must carefully structure any relationships with third parties—including consultants, marketing entities, and out-of-state firms—to avoid arrangements that could be construed as fee sharing.
In sum, the CLPIFPA reaffirms Colorado’s traditionally strict approach to regulating the practice of law and preserving the independence of the legal profession. While other jurisdictions experiment with alternative business models, Colorado lawyers must remain vigilant to avoid fee sharing arrangements—direct or indirect—that could compromise ethical obligations.
CONCLUSION
The 2026 General Assembly adjourned on May 13, 2026.
- Governor Polis signed H.B. 26-1421 (CLPIFPA) which is codified at C.R.S. § 13-93-401, et seq. on June 4, 2026.
- Governor Polis signed S.B.26-174 to prohibit “lead generation legal marketing” by adding C.R.S. § 6-1-741 to the Colorado Consumer Protection Act (the “CCPA”) on June 3, 2026.
Both were signed “administratively” meaning that there was no ceremony for the signing.11
Download the article here.
1 For an updated version, see Lidstone, Herrick K., 2026 Legislation Directly Affecting Colorado Attorneys, available at https://ssrn.com/abstract=6788318.
2 Available at https://ssrn.com/abstract=6111726.
3 “How it impacts fee agreements and why its arrival is not much of a departure,” Black and Rheinheimer, The Total Price Requirement of CRS § 6-1-737, The Colo. L. (May/June 2026) at 44.
4 C.R.S. § 6-1-741(1)(d).
5 C.R.S. § 6-1-741(9).
6 C.R.S. § 6-1-741(6).
7 SB26-174, § 3(2).
8 Arizona and Utah both contemplate that lawyers and law firms may enter into “Alternative Business Structures” – “business entity that includes nonlawyers who have an economic interest or decision-making authority in a firm and provides legal services in accord with Supreme Court Rules 31 and 31.1(c). According to the Task Force on the Delivery of Legal Services, the purpose of the ABS program is “rooted in the idea that entrepreneurial lawyers and nonlawyers would pilot a range of different business forms” that will ultimately improve access to justice and the delivery of legal services.” https://www.azcourts.gov/cld/Alternative-Business-Structure. See a discussion of the Utah program at https://utahinnovationoffice.org/sandbox/.
An alternative to the ABS structure is the MSO structure – Management Service Organizations which became the primary channel for private equity involvement in 2025. https://absfirms.com/private-equity-abs-and-mso-legal-update/
Other states, including Texas and Maryland, issued ethics guidance in 2025 cautioning lawyers against affiliations with out-of-state ABS firms, reinforcing the restrictions similar to those set forth in Colorado.
9 The statute is scheduled to be effective on August 12, 2026. The act applies to conduct occurring on or after the effective date. SB26-174, Section 3(2).
10 Rule 1.5(e) says, simply, that “Referral fees are prohibited.”
11 See “2026 Tracker of Governor’s Actions on Bill,” available at https://cogov.my.salesforce-sites.com/TFA.