Mass tort attorney Mikal Watts is building proprietary AI software he plans to sell to personal injury firms through a growing Wall Street structure known as management service organizations, or MSOs. Watts said he's been in talks with investors who are acquiring back-office functions of personal injury firms, grouping them together, and streamlining their processes before plugging in his technology.
"They're out there buying five, six, seven, eight, 10 different traffic firms," Watts said. After the investors consolidate those firms, his goal is to "plug in Watts AI," he said.
The plan shows how a high-profile trial attorney is entering the AI transformation sweeping the legal industry, and how MSOs are being used to bring technology to law firms. Private equity groups have been circling law firms for years, but the MSO model - in which investors buy the business operations of firms without taking an ownership stake in the legal practice itself - is gaining momentum.
Wall Street circles law firms
Watts isn't alone in attracting investor interest. The Financial Times reported that big law firms Paul Weiss, Quinn Emanuel, and Proskauer have had conversations with private equity groups and bankers about taking outside capital through MSOs. Quinn Emanuel spoke with investment bank Guggenheim Securities about what private investment might involve, though the firm had not committed to a sale process.
Brown Rudnick announced it is poaching 34 lawyers from HSF Kramer's intellectual property practice group. Paul Andre, who was HSF Kramer's Silicon Valley office managing partner, said in a statement that Brown Rudnick's "innovative approach to litigation funding" attracted the team.
Burford cuts costs after court loss
Burford Capital is trimming expenses after losing a major court ruling earlier this year. CEO Christopher Bogart said on the company's second-quarter earnings call that it streamlined functions and encouraged retirements to save about $10 million in operating expenses. The firm also won't declare an interim dividend this year.
In March, an appeals court reversed a ruling that ordered Argentina to pay $16.1 billion to investors. Burford funded the case and stood to win a large share of the award. The judgment had been Burford's largest asset, and the loss is still playing out in its portfolio.
"The YPF decision was a shock - it was a shock to us inside the business and it was a shock to the market," Bogart said. "It's not an ideal time for the portfolio to be moving somewhat more slowly than one would wish, when at the same time, we have somewhat more leverage than we might wish."
Bogart also noted some wins, including an arbitration result in a mining case against Cameroon that could bring the firm $200 million.
Legal funding under scrutiny
Eric K. Schuller, president of the Alliance for Responsible Consumer Legal Funding, wrote in The National Law Review about the conflation of consumer legal funding with third-party litigation finance. He said discussions around litigation funding treat vastly different financial products as interchangeable, and legislation targeting one form can sweep up multiple products.
In other industry moves, Simpson Thacher & Bartlett is opening a Chicago office and has hired five corporate partners from Kirkland & Ellis. Debevoise is building curated AI products that rely on partner contributions, and the American Bar Association is moving toward abandoning a law school diversity rule that came under fire after President Donald Trump returned to the White House.
Why this matters for finance professionals
For those tracking legal finance, the Watts deal and the broader MSO trend signal a shift in how litigation funding and firm operations are being packaged for investors. The MSO structure lets private equity buy into law firm economics without running afoul of rules against non-lawyer ownership of legal practices - and AI is becoming the pitch for why those consolidated back offices will generate returns.
Burford's post-YPF belt-tightening shows the flip side: litigation finance remains a high-risk asset class where a single court ruling can force cost cuts and dividend suspensions. Finance professionals evaluating legal investments should watch both the AI-driven consolidation story and the volatility of case outcomes. The intersection of AI, MSOs, and litigation funding is where the next wave of legal industry deals is likely to form. For more on how AI is reshaping legal work, see AI for Legal coverage.
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