Nearly $4 million in fees are at stake in a California Supreme Court fight between a big law firm and a big client over broad advance conflict waivers the firm used in its client engagement letters.

Sheppard Mullin Richter & Hampton LLP got disqualified from representing J-M Manufacturing Co. Inc. in a $1 billion qui tam action because the firm concurrently represented one of the hundreds of defendants in an unrelated matter. The state appeals court held the advance conflict...