Madison Obata

Associate Editor

Loyola University Chicago School of Law, JD 2026

The Arizona Supreme Court has approved the accounting firm Klynveld Peat Marwick Goerdeler (KPMG) to enter the practice of law. KMPG will be the first Big Four accounting firm to open its own law firm. This approval has created a stir in the legal community due to conflict and ethical compliance concerns. Although KPMG only has received approval in Arizona, there could be potential issues regarding conflicts, ethical challenges, and fair competition.

Background on KPMG

KPMG is known as one of the Big Four accounting firms, which includes Ernst and Young (EY), Deloitte, and PwC. The Big Four offer a variety of services that are focused on auditing, taxation, market research, and corporate finance.

Before the Arizona Supreme Court’s decision, the Big Four all had law firms or legal operations that were outside the US. Also, clients of accounting firms, like KPMG, would take their legal concerns to their own lawyers or a company’s in-house counsel.

KPMG plans to open up its legal practice by calling themselves KPMG Law US.

Nonlawyers owning law firms

Arizona became the first US state to change the rules when it comes to nonlawyers having an “economic interest” in law firms. However, there have been other states that have attempted to reshape the way law is practiced in the US.

In 2020, Utah initiated a pilot program that “allowed individuals and entitites to explore creative ways to safely allow lawyers and non-lawyers to practice law.” The pilot program aimed to grant lawyers more flexibility with how they could advertise their services. Similarly, in 2024, Washington’s pilot program allowed companies that were not law firms to practice law.

In contrast, other states like California and Florida in 2022 halted allowing specially trained nonlawyers from offering legal services. California passed a bill that limits the ability of non-lawyers to participate or practice aspects of law.

The American Bar Association (ABA) Model Rules of Professional Conduct states in ABA Model Rule 5.4 that a lawyer or law firm cannot share legal fees with a nonlawyer. The rule continues to specify that a lawyer cannot form a partnership with a nonlawyer or practice law for profit with a nonlawyer. However, the Arizona Supreme Court eliminated this rule and created its own licensing system, granting KPMG authority to practice law as an accounting firm.

Impacts and challenges with regulatory and compliance concerns

KPMG Law US will be an independent subsidiary of KPMG to provide legal and consulting services. These legal services will include “technology-powered services” for consulting and other managed services.

Law firms that would traditionally take the outsourced work could face competition if companies like KPMG can offer legal services. A major point of contention with California’s bill about nonlawyers offering legal services was a concern that small and midsize firms would be forced to close up shop.

Although KPMG Law US can only practice under the condition that it cannot perform legal services for audit clients, there are still concerns when it comes to conflicts of interest. There could be overlap with auditing and legal services, and as a new rule, there might not be as much regulation. To avoid violating professional ethics in other states, it will be up to people like David Rizzo, the compliance lawyer for KPMG Law US, to ensure matters that require bar membership in other states are handled by approved lawyers.

During the launch of KPMG Law US, KPMG promoted that the legal services would include integrating legal systems with technology such as artificial intelligence (AI). The use of AI and other technological tools can lead to the abuse of personal data and privacy for future KPMG US Law clients. Also, in an effort to navigate a fair market, a large corporation like KPMG will have an advantage when it comes to creating and using AI tools. This advantage comes from the ability to fund any activity and investment in AI tools unlike small or mid-size law firms. It could make it even harder for smaller law firms to compete with KPMG Law US.

With the formation of KPMG Law US, and maybe more of the Big Four to follow, there will need to be boundaries and reassurance that compliance rules are followed.