Wednesday, September 30, 2009
The Ninth Circuit Court of Appeals issued a decision in United States v. Ruehle,a case that opens by saying "[w]e here explore the treacherous path which corporate counsel must tread under the attorney client privilege when conducting an internal investigation to advise a publicly traded company on its financial disclosure obligations." The lower court had suppressed "all statements from former CFO William J. Ruehle to attorneys from Irell & Manella LLP, Broadcom's outside counsel, regarding the stock option granting practices at Broadcom." In reversing this decision, the Ninth Circuit, rejected the lower court finding that Ruehle "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 Ninth Circuit found that the lower court had "applied a liberal view of the privilege that conflicts with the strict view applied under federal common law, which governs here." The Ninth Circuit stated that it "reject[s] the district court's contrary finding that an expectation of confidentiality was established because, upon review of the record, we are left with the 'definite and firm conviction that a mistake has been committed' and thus we determine that this factual finding was clearly erroneous." Some thoughts on this decision:
- Although at first glance it may seem like the Ninth Circuit is usurping a factual finding of the lower court, there is more to this picture - it is factual finding, yes, but one that had been determined by a different legal standard. What is interesting here is that the Ninth Circuit chose not to remand to the lower court when changing the operative standard for determining the issue. On the other hand, the court's decision implies that the evidence does not create a factual question.
- Every corporate officer needs to be aware that statements made during an internal investigation may end up in the government's lap. One can't always count on an attorney client privilege to protect these statements.
- Outside counsel's job in conducting internal corporate investigations may have just been made more difficult as one wonders if corporate officers will want to cooperate in corporate counsel's internal review.