Jan 14 (Reuters) – KPMG is poised to become the first of the Big Four accounting firms to open a law firm in the United States, taking advantage of loosened law firm ownership rules in Arizona and accelerating the accounting industry’s push into U.S. legal services.
KPMG Law US, a new unit of KPMG US, persuaded a court committee on Tuesday to recommend approval by the Arizona Supreme Court to practice law in the state.
The subsidiary could also serve clients outside Arizona, said Christian Athanasoulas, a U.S. tax practice leader at KPMG, for example as co-counsel with lawyers in other states.
Arizona in 2020 became the first U.S. state to scrap rules barring non-lawyers from having an economic interest in law firms, allowing them to have co-ownership with court approval.
While the Big Four have grown U.S. legal consulting and managed services offerings, most states still allow only lawyers to practice law, own law firms and share legal fees.
KPMG could shake up competition among the Big Four and traditional law firms, legal industry experts said, giving corporate legal departments more options to outsource work.
The Arizona Supreme Court will weigh KPMG’s bid for final approval on Jan. 28, according to Aaron Nash, the court’s certification and licensing director.
KPMG and the three other largest global accounting firms, EY, Deloitte and PricewaterhouseCoopers, all have law firm operations outside the United States. Spokespeople from EY, Deloitte and PwC did not immediately respond to requests for comment.
Reforms like Arizona’s have advanced in some states, driven by arguments that loosening barriers to provide legal services can make advice more affordable, spur innovation and expand access to justice.
Similar efforts have stalled in other states, including California, in part over fears of ethical abuses if providers are not fully bound by professional rules that licensed lawyers must obey.
KPMG Law US “will be governed by the same high ethical standards that apply to other law firms,” a KPMG US spokesperson said.
KPMG is aiming to take on some work that would typically be handled by clients’ own in-house lawyers, Athanasoulas told Reuters.
“We’re not intending to focus, frankly, on any sort of bet-the-company type matters,” he said. “What we do want to focus on are those places where our clients have told us that they are struggling, and that’s largely around large-scale, process-related legal tasks.”
That could include synthesizing and re-drafting vendor and other contracts after a large M&A transaction, for example, he said.
The firm has also said it would offer volume contracting and other managed services. Athanasoulas said the KPMG unit does not plan to focus on litigation work.
The Big Four are unlikely to supplant traditional law firms’ hold on high-level, big-ticket transactional and litigation work, experts said. A growing amount of routine legal work is already being handled by a wider group of industry players than in the past, including in-house legal departments and alternative legal and technology providers.
“Law firms are already sort of under siege in that area,” said Brad Blickstein of legal industry consultancy Blickstein Group.
The accounting firms’ size and tech capabilities could still stand out for corporate legal departments looking to outsource some legal tasks, said David Wilkins, faculty director of the Center on the Legal Profession at Harvard Law School.
“The Big Four are going to be very good at providing certain kinds of legal services that the traditional law firms have typically in the U.S. had a monopoly on,” such as integrating law, project management and technology, he said.
Those areas include “some of the most important issues facing big companies today,” Wilkins said.