By N. Peter Rasmussen, J.D.
The case arose from alleged backdating improprieties at Broadcom Corp. When the backdating stories appeared in the media, Broadcom asked the law firm of Irell & Manella LLP to head up its internal investigation. The company had employed the Irell firm for many years, and was counsel of record for Broadcom and its management employees named as individual defendants in a then-unrelated securities class action, Jin v. Broadcom Corp. Prior to the interview in question, the Jin plaintiffs amended their complaint to include backdating charges, and shareholders filed a separate derivative claim alleging similar wrongdoing.
Two attorneys from the Irell firm interviewed William Ruehle, the CFO, in his office in June 2006. The lawyers claimed they orally provided Mr. Ruehle with the so-called Upjohn or "corporate Miranda" warning. Such warnings make clear that the corporate lawyers do not represent the individual employee, that anything said by the employee to the lawyers will be protected only by the company’s privilege and that the individual may wish to consult with his own attorney if he has any concerns about his own potential legal exposure. Mr. Ruehle did not recall any such advice, and the district court apparently found his testimony on this question credible.
Subsequently, the Irell lawyers discussed the interview with the company's auditors, and with Broadcom's consent, engaged in an interview with government investigators concerning Mr. Ruehle's statements. The CFO objected and claimed that any statements to the Irell attorneys were protected by his attorney-client privilege and could not be disclosed without his prior written consent.
In a strongly-worded opinion, the district court (CD Cal) agreed with Mr. Ruehle. As described by the trial court, the officer “had a reasonable belief that Irell and Manella were his lawyers prior to the June 1, 2006 interrogation by Irell, and that he never gave informed written consent, either to the dual representation by Irell or the disclosure of privileged information to third parties." The district court suppressed the CFO's statements to the Irell lawyers, and also referred the firm to the California State Bar for possible discipline in light of numerous perceived violations of state rules of professional conduct.
The 9th Circuit disagreed and reversed the suppression order. Initially, the appellate panel found that the trial judge erred in applying the "reasonable belief" standard found in California law. Privilege questions are governed by federal common law, stated the panel, and the burden of proof falls on the party claiming the privilege. In finding that Mr. Ruehle did not meet this burden, the court held that he communicated with the lawyers for the express purpose of disclosure to the company's outside auditors. The court noted that "[a]t no point did the topic of the civil securities lawsuits arise as it might relate to Ruehle personally. Nor did Ruehle ever indicate to the lawyers that he was seeking legal advice in his individual capacity."
State professional conduct questions also did not support suppression, held the court, as state rules of professional conduct cannot provide an adequate basis for the suppression of otherwise admissible evidence. It is the protected nature of the information that is material, and not any claimed ethical violations by counsel, concluded the court.
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