California Governor Gavin Newsom signed Assembly Bill 2039 into law on Sunday, sharply increasing penalties for lawyers who pay intermediaries to recruit clients — a practice known in the state as "capping."

The new law imposes a $25,000 penalty for each violation and requires the State Bar of California to seek disbarment of offending attorneys. It strengthens an existing statutory framework: California already prohibited capping and barred lawyers from hiring people to help them recruit clients in hospitals and prisons.

Background of the Legislation

Lawmakers introduced the bill after allegations surfaced that the Downtown LA Law Group, a plaintiffs law firm, used intermediaries to solicit people to submit false claims under a $4 billion sexual abuse settlement with Los Angeles County, Reuters reported. The firm has reportedly denied wrongdoing.

What the New Law Changes

AB 2039 operates on two fronts. First, it attaches a concrete financial sanction — $25,000 per violation — to conduct that previously carried penalties under the state's anti-capping statute. Second, it directs the State Bar of California, the state's attorney disciplinary body, to pursue disbarment against lawyers found to have engaged in the practice.

The combination of a fixed per-violation fine and a mandatory disbarment referral marks a notable escalation from the prior regime, under which capping was prohibited but carried less prescriptive disciplinary consequences.

Practical Consequences for Practitioners

For California practitioners, the practical effect is straightforward: any arrangement under which a lawyer compensates a third party for client recruitment now carries the risk of a $25,000 penalty for each instance and a State Bar disbarment proceeding. Personal injury and plaintiffs' firms that have historically relied on runners, referrers, or other intermediaries — particularly in hospital and prison settings, where such recruitment was already barred — face materially elevated exposure. Firms should audit their client-intake and marketing arrangements to ensure no compensation flows to non-lawyer intermediaries for solicitation, as each individual payment or recruitment arrangement could constitute a separate violation.

The legislation arrives against the backdrop of the allegations surrounding the Downtown LA Law Group and the $4 billion Los Angeles County sexual abuse settlement, which put the issue of intermediary-driven client solicitation under public scrutiny. The firm has denied any wrongdoing, and the new law applies prospectively to the conduct it prohibits.

California's action signals that the state intends to treat paid client recruitment not merely as a professional conduct issue but as a violation warranting the severest available disciplinary sanction.