Sheppard Mullin vs. J-M Manuf.: A Lesson in Undisclosed Conflicts
By Steven Krongold
Steven L. Krongold specializes in business litigation. For the past 30 years, Mr. Krongold has litigated disputes involving trademarks, copyrights, trade secrets, invasion of privacy, cybersquatting, investment fraud, defamation, and other business-related torts. Mr. Krongold can be reached at the Krongold Law Corp., P.C., located in Orange County, CA.
In Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., 6 Cal. 5th 59 (2018), the supreme court ruled that a panel of arbitrators exceeded its powers and therefore vacated a $1.3 million award of attorney’s fees obtained by a large, national law firm against its former client. The decision addresses an important and recurring issue facing the solo and small firm lawyer: enforceability of advance conflict of interest waivers and the potential forfeiture of fees for violation of ethical rules. Sheppard involved former Rule 3-310(C)(3) (concurrent or simultaneous representation of clients with conflicting interests). The issue is now governed by Rule 1.7. Nonetheless, Sheppard provides insight and guidance on advance waivers and when fees can be recovered despite the rule violation.