A Colorado law now makes any contract involving fee-sharing between lawyers and outside service providers legally unenforceable—and most business owners have no idea.
Most professional services companies working with lawyers in Colorado don't realize they may be operating under contracts that are now legally void.
Colorado's HB1421, which addresses fee-sharing between lawyers and nonlawyers, contains a provision that automatically invalidates entire contracts under specific circumstances. Understanding it matters if you run a legal tech company, litigation finance firm, marketing or lead-generation business, managed services organization, or any other firm that has a financial arrangement with a lawyer or law firm.
Under Section 13-93-406(6) of the Colorado Revised Statutes (found on page 11 of HB1421), any contract between a lawyer or law firm and a nonlawyer business that involves:
is rendered automatically void ab initio—meaning it's treated as if it never legally existed.
This applies to contracts entered into, renewed, or modified on or after the bill's effective date (approximately August 2024). The provision also covers conduct occurring after that date, even if the underlying contract was signed before.
The impact is broad. If you provide services to law firms or lawyers and your compensation model includes any of the three elements above, your contract is at legal risk. This includes:
A void contract is unenforceable. That means:
This creates real risk for cash flow, partnership stability, and business planning. If you've structured a deal around fee-sharing or recovery-based compensation, you may have no legal basis to enforce payment or performance.
Review any existing contracts with Colorado lawyers or law firms. If your compensation model falls into one of the three categories above, the contract is likely affected. Consult with a Colorado business attorney about whether your specific arrangement is covered and what alternatives may be available under the law.
The statute does permit certain exceptions and alternative fee structures—but those require careful legal review and documentation.
This explainer covers the core provision of HB1421 Section 13-93-406(6). For a detailed, business-specific analysis of how this law affects your service model, speak with a Colorado attorney licensed to practice business law.