Reported / Citable
Background
McGrath Kavinoky LLP was formed in 2020 specifically to represent former patients of UCLA gynecologist Dr. James Heaps, who had sexually abused dozens of patients over many years. When Jane Doe 1 signed her engagement agreement with the firm in January 2020, the firm already represented at least 36 other Heaps victims. By the time the litigation concluded, the firm represented 312 clients — all suing the same two defendants, Dr. Heaps and UCLA, and all looking to share in whatever settlement the defendants would agree to pay.
The firm ultimately negotiated an aggregate settlement of $374.4 million. Doe 1 received $1.4 million and Doe 2 received $1.7 million from that pool, each less the firm’s contingency fee and costs. Both women alleged they had been promised individualized representation aimed at maximizing their individual recovery, and that the firm had instead pressured them into accepting the aggregate settlement and used a flawed allocation process. In June 2024 they sued McGrath Kavinoky for professional negligence, breach of fiduciary duty, fraud, and related claims.
McGrath Kavinoky moved to compel arbitration under provisions in its engagement agreements. The trial court (Los Angeles Superior Court, Judge Barbara Scheper) denied the motion. Applying the California Supreme Court’s 2018 decision in Sheppard, Mullin, Richter & Hampton v. J-M Manufacturing Co., 6 Cal.5th 59, the court held that the firm’s failure to disclose — at the time of engagement — the foreseeable conflict of interest arising from representing hundreds of competing plaintiffs against the same defendant violated California Rules of Professional Conduct, rule 1.7(b), and rendered the entire engagement agreement (including its arbitration clause) unenforceable as against public policy. The firm appealed.
The Court’s Holding
The Second Appellate District, Division Seven, affirmed the order denying arbitration. The court extended Sheppard‘s rule — that an attorney engagement agreement formed in violation of the Rules of Professional Conduct is unenforceable — from actual conflicts (rule 1.7(a)) to potential conflicts (rule 1.7(b)).
Rule 1.7(b) prohibits a lawyer from representing a client where there is a significant risk the representation will be materially limited by the lawyer’s responsibilities to another client, unless the lawyer obtains informed written consent. The court found that when McGrath Kavinoky signed up Does 1 and 2, it was highly foreseeable — indeed, almost inevitable — that representing hundreds of plaintiffs all suing the same defendants would lead to an aggregate settlement in which each client’s recovery would directly compete with every other client’s. That created a significant risk of material limitation on individual advocacy: who to try first, how to allocate settlement dollars, whether to push holdouts to accept a deal. Failing to disclose those risks and obtain written consent at intake violated rule 1.7(b), which under Sheppard renders the entire engagement agreement void as contrary to public policy. The arbitration clause, as part of that voided agreement, cannot be severed and enforced separately.
Key Takeaways
- Law firms representing multiple plaintiffs against the same defendant must disclose at the time of engagement the foreseeable conflicts arising from joint representation — including the prospect of an aggregate settlement in which clients compete for shares of a common pool.
- Failing to obtain informed written consent to those potential conflicts under rule 1.7(b) voids the entire engagement agreement, including any arbitration clause, under the Sheppard doctrine.
- Sheppard now applies to potential conflicts (rule 1.7(b)) as well as actual conflicts (rule 1.7(a)) — the California Supreme Court’s public policy rationale draws no distinction between the two.
- A general advance conflict waiver that does not identify specific potential conflicts remains insufficient to preserve arbitration rights.
- Mass tort and multi-plaintiff plaintiffs’ firms should immediately audit their engagement agreements and intake processes to ensure adequate conflict disclosure when representing groups of clients against common defendants.
Why It Matters
For California’s large and active plaintiffs’ bar — particularly firms handling sexual abuse, mass tort, consumer class actions, or any multi-victim litigation against a common defendant — this decision creates a clear and enforceable obligation: counsel your clients at the start about the specific ways joint representation can disadvantage them individually. The disclosure obligation is not satisfied by a boilerplate conflict waiver buried in the retainer agreement. A firm that skips this step loses its right to enforce arbitration and must litigate malpractice claims in open court, with the attendant publicity risks and jury exposure that arbitration is designed to avoid.
More broadly, the ruling signals that California courts will scrutinize engagement agreements formed in the shadow of predictable conflicts — even when the conflict has not yet ripened at signing. Plaintiffs’ attorneys who represent large groups of clients with related claims should treat the conflict disclosure as a non-negotiable intake step, on par with the engagement letter itself. Defendants and their insurers benefit too: they now have a tool to challenge the enforceability of arbitration agreements in cases where mass-plaintiff firms failed to document individualized conflict counseling.