The Ninth Circuit stepped into a conflict between former Broadcom CFO William Ruehle and lawyers at Irell & Manella. The disagreement concerned a type of misunderstanding on whether lawyers during an internal company probe are representing a singular executive or the company itself.
At issue was whether Irell clearly explained to Ruehle that it was representing the company and anything he told them could be shared with third parties. They ended up realeing information to the government. Irell lawyers maintained they told Ruehle. Ruehle said he couldn’t remember receiving such notice.
The lower court said the law firm breached its duty of loyalty to Ruehle by revealing his statements to the government and banned the government from using those statements in its trial.
Most famously, the judge also referred the lawyers to the California state bar for disciplinary action. [See my previous post: Attorney-Client Privilege and Internal Investigations]
In this opinion penned by Judge Richard C. Tallman, the court rejected Carney’s analysis and ruled that the “overwhelming evidence” shows that Ruehle’s statements to the Irell lawyers were not made in confidence. Ruehle should have understood that lawyers investigating the stock-option issue would likely share any information he provided with the company’s auditors.
Again, its important realize that once you start including non-lawyers in your communication, you have likely waived the attorney client privilege. The Ninth Circuit focused on the point that Ruehle knew his comments were to be shared with the accountants. You can’t have an expectation that information shared with accountants will have the protection of attorney-client privilege.
if you are a corporate officer subject to an investigation, you need to be aware that statements made during an internal investigation may end up in the government’s file. You can’t always count on the attorney client privilege to protect these statements.