The Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. case, pending before the California Supreme Court, will provide California lawyers with further insight regarding whether an advance waiver of a conflict of interest is enforceable, and if so, under what circumstances.  An advance conflict of interest waiver is a waiver given by a client to a law firm to permit the firm to engage in the future representation of a client that would otherwise be prohibited by ethical rules governing conflicts of interest.  A key issue is what disclosure in connection with an advance conflict of interest waiver will be sufficient for informed consent to an advance waiver by a client. Recent judicial decisions have trended toward increased scrutiny of advance waivers of conflicts of interest.  The California Supreme Court has the opportunity in the J-M case to bring clarity to issue.

My earlier article, Forfeiture of Fees Due to Conflict of Interest, in the OC Lawyer magazine, discussed the decision of the appellate court in the same case, and emphasized the importance of conflict management at the inception of every new matter.  In the J-M case, we will see whether the Supreme Court’s decision will “upend countless agreements between lawyers and their clients and wreak havoc on the practice of law,” as the firm described the potential consequences, in the name of public protection.

Proposed Rule 

The California Supreme Court also has the opportunity to provide further guidance to lawyers on this issue through the proposed Rules of Professional Conduct, Rule 1.7, Comment 10, which will address advance conflict waivers, assuming it is adopted by the Supreme Court as proposed.  The proposed language would permit advanced waivers “in compliance with applicable case law.”

The proposed comment also provides further guidance regarding factors that will determine whether the advance consent will be enforceable.  One key factor is “the extent to which the client reasonably understands the material risks that the consent entails.”  Discussing the advance waiver with the client can help the client understand the significance of the waiver.   Under the proposed comment, effectiveness can also turn on whether the lawyer provides a “comprehensive” explanation of the types of future representations that might arise.  In this regard, specificity is helpful.  The experience and sophistication of the client giving consent is also a factor that the proposed rule would take into consideration.  Whether the client is independently represented by counsel in connection with providing the consent is another important factor.  Clients can be given this opportunity, particularly with in-house counsel, to get independent advice before signing.

About Carole J. Buckner

Carole J. Buckner is a Partner and General Counsel with Procopio in San Diego, California. She is an AV Peer Review Rated sole practitioner admitted to the California State Bar in 1984. She holds a BA from the University of California at Berkeley (1980) and a JD from the University of California, Hastings College of the Law in San Francisco (1984). She is available for consulting and legal advice in the field of legal ethics and issues involving professional responsibility, and the law of lawyering.