California sets $10,000 damages for investor interference in litigation decisions

On September 21, Reuters reported that California Governor Gavin Newsom had signed AB 2305 on September 20, prohibiting capital-raising or capital-managing businesses from influencing substantive litigation decisions and setting statutory damages of $10,000 per violation or three times a client’s damages. The measure addresses investor-backed structures including management-services organizations, although a lawyer involved in more than 30 MSO transactions said similar laws had not changed deal-making or produced enforcement in Illinois and Colorado. Mid-sized firms considering outside capital for technology or operations should document decision rights, settlement authority and client-selection independence before signing an MSO arrangement. The law may not stop capital-backed competitors, but it increases the value of governance evidence showing that commercial partners cannot direct legal judgment.