Sheppard Mullin and Beyond: Advance Waivers, Disclosures, and Arbitration Agreements

By Merri A. Baldwin and Amy L. Bomse

Merri A. Baldwin is a shareholder and co-chair of the Attorney Liability and Conduct Practice Group at Rogers Joseph O’Donnell in San Francisco. She is a member of CLA’s Ethics Committee and Vice-Chair of the State Bar’s Closing the Justice Gap Working Group.

Amy L. Bomse is a shareholder at Rogers Joseph O’Donnell and co-chair of the Attorney Liability and Conduct Practice Group. She serves on the executive committee of the malpractice section of the Bar Association of San Francisco and is a former Chair of the State Bar Committee on Professional Responsibility and Conduct.

In Sheppard Mullin Richter&Hampton LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, the California Supreme Court held that when a law firm fails to disclose a conflict of interest, its engagement agreement is unenforceable as against public policy. The conflict of interest voided the arbitration clause and rendered the normally "final" decision by the arbitrator an unenforceable irrelevance. That landmark decision has now had some time to percolate through the legal system, and parties have begun seeking ways to apply the decision to their matters. Certain recent cases help illustrate the ways in which courts may interpret Sheppard Mullin. Parties have sought to use the decision to challenge arbitration awards, the enforceability of arbitration agreements between lawyers and clients, the adequacy of disclosures made by law firms to clients in representation agreements and conflict waivers, and the sufficiency and enforceability of advance waivers. These cases reinforce the importance of understanding the court’s ruling as this body of case law develops, and help frame practical lessons for lawyers in California moving forward.