Case Comments

Lowell Anderson

Stetina Brunda Garred & Brucker

ARBITRATION & ILLEGAL CONTRACTS

A conflict arose from a prior representation in which 119 hours were billed over the prior 5 years—with no termination letter. Whether a contract with a new client, waiving past and future conflicts and agreeing to arbitrate all disputes, is legal and therefore enforceable is an issue for judicial determination and any preliminary determination by an arbitrator is not binding on the court. "[A]n attorney contract that has as its object conduct constituting a violation of the Rules of Professional Conduct is contrary to the public policy of this state and is therefore unenforceable." Under Cal. Rule Prof. Conduct 3-110(C) (3), "without informed written consent, ‘an attorney’s firm cannot simultaneously represent a client in one matter while representing another party suing that same client in another matter.’" Sheppard Mullen represented a prior client that was suing a new client but did not notify the new client when the new client signed a waiver of conflicts so the new client did not give "informed" consent. "To be informed, the client’s consent to dual representation must be based on disclosure of all material facts the attorney knows and can reveal." The disclosure obligation applies whether the client is an individual or a sophisticated, multinational corporation with a large law department. Here, the conflict affected the whole of the law firm’s engagement agreement involving a qui tam action, rendering the entire agreement unenforceable—including its arbitration clause. An arbitrator’s award of $1.3 million dollars in fees and interest to the law firm was reversed and remanded for a quantum meruit evaluation. Sheppard, Mullin, Richter & Hampton, LLP v. J-M Mfg. Co, Inc., 6 Cal. 5th 59 (2018).