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Attorney-Client Privilege Waived in Whistleblower Suit

As a trial winds down on a lawyer's whistleblower case for $8 million against his former employer in San Francisco, a federal judge has already decided a significant issue for in-house counsel on the attorney-client privilege.

U.S. District Court Judge Joseph Spero said that the defendant Bio-Rad waived its privilege when it disclosed documents from a related case. In administrative proceedings with the Department of Labor, attorney Sanford Wadler had alleged the company violated the Foreign Corrupt Practices Act. In the whistleblower case, the company answered with documents from the labor case that contained the allegedly confidential communications.

The judge said Bio-Rad could not use the information against Wadler as a one-sided sword, such as claims that he was fired for poor performance. The confidential information cut both ways, including email between Wadler and others about the company's alleged violations of federal laws.

Federal over State Law

Among the causes of action, Wadler sued for retaliatory discharge under the Public Company Accounting Reform and Investor Protection Act. Trying to prevent evidence of the violations, Bio-Rad said Wadler was prohibited by attorney's ethics from using privileged or conditional information against the company.

California lawyers are barred from breaching client privilege unless the attorney "reasonably believes the disclosure is necessary to prevent a criminal act that the attorney reasonably believes is likely to result in death of, or substantial bodily harm to, an individual."

According to Bio-Rad, no court has previously said how to try a case that requires the disclosure of privileged evidence. Although the state supreme court has established that in-house counsel may sue for wrongful termination, the high court urged lawyers and judges to preserve client confidentiality in the process.

Spero, balancing the applicable federal and state-laws, said federal common law governs the application of the attorney-client privilege. In Wadler's case, he said, federal regulations trumped the state's ethical rules.

Defense Proceeds

The plaintiff having rested, Bio-Rad is making its defense that Wadler used the alleged wrongdoing to make up for failures in his 26 years as Bio-Rad's highest-ranking lawyer. The company blamed him for failing to institute a Foreign Corrupt Practices Act compliance program, which resulted in a $55 million fine for alleged violations in Russia, Thailand, and Vietnam.

Wadler alleges that he found documents in 2012 showing potential kickbacks that Bio-Rad paid to Chinese government entities, and that Bio-Rad was delivering products to Chinese customers without billing them. He engaged outside counsel to investigate, but did not uncover any wrongdoing before he was terminated in 2013.

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