California Appeals Court Voids Law Firm's Arbitration Clauses After Conflict-of-Interest Disclosure Failures in Sexual Abuse Cases

A California Court of Appeal has ruled that McGrath Kavinoky LLP, a firm representing hundreds of sexual abuse victims, forfeited its contractual right to compel arbitration against two clients after failing to disclose conflicts of interest in cases involving a UCLA gynaecologist convicted of sexual abuse. Justice John L. Segal held that the firm's engagement agreements — which contained arbitration clauses — violated California public policy because of the undisclosed conflicts, affirming a lower trial court ruling. The California Court of Appeal found that a law firm's failure to disclose a significant risk that its representation of one client materially limits its obligations to another client — here, representing multiple victims of the same perpetrator where their interests might diverge — renders its arbitration agreement unenforceable. The ruling has broad implications for law firm risk management: arbitration clauses in retainer agreements are a standard tool for managing fee disputes and professional negligence claims, but courts are willing to void them entirely where the underlying engagement is tainted by undisclosed conflicts. The decision underscores that conflict-of-interest disclosure is not merely an ethical obligation but a gateway to enforcing the procedural protections firms build into their own engagement documents.