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Requisite Disclosures for Enforceable Advance Conflict Waivers

IN BRIEF

•  A recent California Supreme Court decision addresses the disclosures required under California law to make a client’s advance conflict waiver enforceable.

•  The decision is not a repudiation of “advance” waivers generally, but a reminder that any client consent to waive a conflict must be an informed one.

 On August 30, 2018, the California Supreme Court rendered a long-awaited decision in Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc.[1] Primarily, the case considers what disclosures are required under California law to make a client’s “advance” conflict waiver enforceable. The decision also addresses when a dormant client is a “current” client and the extent to which a law firm may be entitled to payment for legal services rendered even in the face of a violation of the Rules of Professional Conduct.

Facts

J-M Manufacturing Co., Inc. (J-M) was sued in a qui tam lawsuit alleging misrepresentations about products sold to approximately 200 public entities nationwide. When the qui tam complaint was unsealed, some of those entities intervened as plaintiffs in the lawsuit.

During the litigation, J-M decided to replace its litigation counsel with Sheppard, Mullin.[2] A conflicts check revealed that an attorney in a different Sheppard Mullin office had represented one of the plaintiffs, South Tahoe Public Utility District (South Tahoe), periodically over the previous eight years but only on employment matters.

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