Informed Consent Is Cruicial to a Conflicts Waiver

Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., No. S232946 (Cal. Aug. 30, 2018)

Back in 2016, the Court of Appeal vacated an arbitration award in an attorney fee arbitration, holding that a law firm’s retainer agreement (and the arbitration clause within it) was completely void under Rule of Professional Conduct 3-310(C)(3) due to an undisclosed conflict of interest. At the time the client engaged the firm, the firm was adverse to the client in an unrelated matter. Thus, notwithstanding the agreement’s general forward conflicts waiver, there was no informed consent because the actual conflict was not specifically disclosed. And that meant the law firm couldn’t get paid anything and had to disgorge what it had been paid to date. The Supreme Court granted review.