US conflicts rules increasingly affect law firms in other jurisdictions, either because they have US offices themselves or, rather more often, because clients impose terms through outside counsel guidelines. They present challenges, because although consent may cure conflicts under US rules (which vary by state), they do not generally do so under the SRA Code of Conduct. Even where they are permitted, however, they may be subject to challenge, and they are one of the topics we cover when providing conflicts workshops for UK and international law firms.
The recent decision in the Californian Supreme Court in Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., 2018 WL 4137013 (Cal. Aug. 30, 2018) (see www.legalrisk.co.uk/news) has been eagerly awaited by many. The Court held by a majority that advance conflicts waivers were ineffective where the law firm should have known that it had a conflict when the waivers were signed. The conflict also rendered an arbitration clause in the engagement unenforceable. The case was remitted for a further hearing on whether the firm was entitled to be paid anything for its services – if it could able to “show that the conduct was not willful, and its departure from ethical rules was not so severe or harmful as to render its legal services of little or no value to the client”.
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