By Sara Merken

Sept 3 (Reuters) - Eudia, a venture capital-backed startup that makes an artificial intelligence-powered platform for corporate legal teams, on Wednesday said it has launched a law firm in Arizona under loosened law firm ownership rules.

Palo Alto-based Eudia has opened what it called an "AI-augmented" law firm, Eudia Counsel, that will equip lawyers with its technology to serve corporate clients in areas including contracting and merger and acquisition diligence, according to company leaders.

The firm is the latest in a growing number of firms and businesses that have been licensed as "alternative business structures" (ABS) in Arizona since 2020, when the state scrapped rules barring non-lawyers from having an economic interest in law firms, allowing co-ownership with court approval.

KPMG in February opened a law firm in the state, making it the first of the Big Four accounting firms to be able to practice law in the United States.

Axiom, LegalZoom and Elevate are among other large companies that have launched law firm subsidiaries or affiliates under Arizona's loosened rules. Other entities, such as personal injury law firms partially owned by non-lawyers, are among the others that have been approved.

The Arizona Supreme Court approved Eudia Counsel LLC's application in June, according to a court order.

Eudia, founded in 2023, publicly launched in February with the announcement of a funding round for up to $105 million led by venture capital firm General Catalyst.

The company says its platform combines AI with human expertise. Its customers include DHL, Duracell, Cargill, Intuit, Stripe and the U.S. government, the company said.

Eudia's law firm subsidiary will serve similar clientele, said David Van Reyk, Eudia's co-founder and chief operating officer.

Eudia increasingly sees traditional law firms as competitors, said Omar Haroun, the company's co-founder and chief executive officer.

Law firm billing rates continue to climb, and some customers are "a bit frustrated that none of the apparent value that the firms are getting from AI, if they are using it," seems to be passed on to the customer, he said.

Arizona is the only U.S. state that has permanently changed law firm ownership rules. Utah relaxed its rules through a pilot program, which the state recently scaled back. Other states, including Washington and Indiana, are on the path to starting similar projects.

(Reporting by Sara Merken)