Sheppard, Mullin, Richter & Hampton v. J-M Manufacturing Co.Annotate this Case
Sheppard Mullin, J-M's former attorneys, sought recovery of attorney fees relating to litigation in which Sheppard Mullin represented J-M. Sheppard Mullin was disqualified from that litigation because, without obtaining informed consent from either client, Sheppard Mullin represented J-M, the defendant in the litigation, while simultaneously representing a plaintiff in that case, South Tahoe. The trial court ordered the case to arbitration based on the parties’ written engagement agreement, and a panel of arbitrators found that the agreement was not illegal, denied J-M’s request for disgorgement of fees paid, and ordered J-M to pay Sheppard Mullin’s outstanding fees. The trial court confirmed the award. The court concluded that, under California law, because J-M challenged the legality of the entire agreement, the issue of illegality was for the trial court, rather than the arbitrators, to decide. The court further concluded that the undisputed facts establish that Sheppard Mullin violated the requirements of California Rules of Professional Conduct Rule 3-310 by simultaneously representing J-M and South Tahoe. Sheppard Mullin failed to disclose the conflict to either J-M or South Tahoe, and it failed to obtain the informed written consent of either client to the conflict. The representation of both parties without informed written consent is contrary to California law and contravenes the public policy embodied in Rule 3-310. Therefore, the trial court erred by enforcing the contract between the parties and entering judgment on the arbitration award based on that contract. Accordingly, the court reversed the judgment. The court remanded for factual findings on the issue of disgorgement of all fees paid to Sheppard Mullin.