Tuesday, June 30, 2026
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Court of Appeal:
Even ‘Potential’ Conflict May Invalidate Engagement Contract
Opinion Says Judge Properly Denied Request to Compel Former Clients’ Claims to Arbitration Due to Firm’s Failure to Obtain Consent to Representation of Hundreds of Other Alleged Victims in Underlying Case
By Kimber Cooley, associate editor
Div. Seven of this district’s Court of Appeal held yesterday that a judge properly denied a firm’s motion to compel arbitration of claims brought against it by two former clients, saying that the office’s failure to obtain written consent to a potential conflict arising out of the representation of other alleged victims of the same purportedly predatory doctor in underlying litigation rendered the agreement containing the relevant clause unenforceable.
Citing the 2018 California Supreme Court case of Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., which held that an arbitration clause in a legal services agreement was unenforceable due to a conflict arising from the ongoing representation of an adverse party in other litigation, the court declared:
“We conclude that, though Sheppard involved an actual conflict and this case involves a potential conflict, the rule of Sheppard applies. Therefore, the trial court did not err in ruling the law firm’s engagement agreement was unenforceable, and we affirm the order denying the motion to compel arbitration.”
Saying that, while “[n]o California authority has addressed whether a lawyer violates [of the Rules of Professional Conduct] by representing multiple clients suing the same defendants for similar injuries without obtaining informed written consent at the outset of the engagement,” Acting Presiding Justice John L. Segal, writing for the court, noted the potential for material conflicts arising from the possibility of global settlements and other factors. He remarked:
“The trial court could reasonably infer two lawyers who formed a law firm specifically to represent [the doctor’s] former patients…intended to represent as many of those patients as possible. The trial court could also reasonably infer that, rather than try dozens or even hundreds of cases, [the firm] hoped to resolve all of their clients’ cases through an aggregate settlement. Which is exactly what happened.”
Justices Gail Ruderman Feuer and Natalie P. Stone joined in the opinion.
Former-UCLA Physician
The question arose after the University of California Board of Regents reached a $374.4 million settlement in 2022 with more than three hundred patients of Dr. James Heaps, a former UCLA gynecologist accused of sexual assault. The plaintiffs were each represented by Jennifer McGrath and Darren Kavinoky of the West Hollywood-based McGrath Kavinoky LLP.
After a panel of retired judges was appointed to oversee the allocation of the multi-million payout, two of the firm’s clients, referred to in the opinion as “Doe 1” and “Doe 2,” received $1.4 million and $1.7 million, respectively. In 2024, they filed a complaint against the lawyers and the law firm for breach of fiduciary duties, alleging that the attorneys “bullied them” into settling and used an improper method to determine the distribution amounts.
On Dec. 10. 2024, Los Angeles Superior Court Judge Doreen Boxer denied McGrath Kavinoky’s motion to compel arbitration based on an arbitration clause in the firm’s engagement agreements with the two former clients, finding that “at the time Plaintiffs entered into their respective retainer agreements, the likelihood of a conflict of interest arising was high” and that the “failure to disclose this conflict…invalidates the retainer agreement[s].”
Saying that Boxer’s finding was supported by substantial evidence, Segal pointed to Rule of Professional Conduct 1.7(b), which provides:
“A lawyer shall not, without informed written consent from each affected client…, represent a client if there is a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person, or by the lawyer’s own interests.”
Outset of Representation
Rejecting the firm’s assertion that there was no conflict at the time the retainer agreements were signed, the jurist wrote:
“At the outset of the representation,…there was a significant likelihood that McGrath Kavinoky would enter into an aggregate settlement, that some clients might want to settle while others might not, that the defendants’ willingness to settle might be conditioned on a certain percentage of McGrath Kavinoky’s clients participating in the settlement, and that McGrath Kavinoky’s clients would necessarily compete against each other for their share of the settlement.”
Reasoning that “there was a significant risk McGrath Kavinoky’s representation of Doe 1 and Doe 2 would be materially limited by its responsibilities to its other clients,” he opined that “McGrath Kavinoky’s failure to obtain the informed written consent of Doe 1 and Doe 2 violated rule 1.7(b), which under the Supreme Court’s decision in Sheppard made McGrath Kavinoky’s engagement agreements unenforceable.”
He continued:
“McGrath Kavinoky contends a ‘potential conflict that arises during a contract’s performance cannot be used to retroactively invalidate the contract from its inception.’ But as discussed, the trial court also found the potential conflict existed at the outset of the representation, which, absent informed written consent, invalidated the engagement agreements.”
As to the lawyers’ attempt to distinguish Sheppard by highlighting that, in that case, “there was an actual, existing conflict between adversaries, which the law firm knew about but intentionally withheld from the client,” the jurist said:
“McGrath Kavinoky argues it would ‘set a dangerous precedent’ to invalidate engagement agreements ‘because the lawyers failed to foresee conflicts that could possibly arise in the future.’ Rule 1.7(b), however, does not require lawyers to foresee any conflict that could possibly arise in the future; it only requires lawyers to obtain informed written consent if there is a significant risk the lawyer’s representation will be materially limited by the conflict.”
Remarking that the ethical breach renders the agreement unenforceable in its entirety, the court declined to sever the arbitration clause from the remainder of the agreement.
The case is Doe 1 v. McGrath Kavinoky LLP, 2026 S.O.S. 1876.
David E. Fink, Michael C. Godino and Tatiana A. Nikolaeva of the Los Angeles office of Venable LLP acted for the law firm. Representing the plaintiffs were David W. Affeld and Edward E. Johnson of the Century City-based Affeld England & Johnson LLP.
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