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If In-House Counsel Is the Whistleblower, What Can Be Disclosed?

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By Casey C. Sullivan, Esq. on June 22, 2015 12:59 PM

In-house counsel know how difficult claims of retaliation against whistleblowers can be. Those issues can become even worse when it's a fired in-house lawyer making the retaliation claim.

That's what happened to Sanford Wadler, fired GC for Bio-Rad Laboratories. Wadler claims he was terminated after attempting to report corrupt practices to the company's board. The case raises important questions about how much the attorney can disclose about his former employer and client in order to prove his case.

When Claims Conflict with Confidentiality Requirements

Wadler worked for Bio-Rad Laboratories for over two decades before he was fired, starting as GC in 1989 and being promoted to executive vice president and GC in 2012, according to his complaint. Wadler claims his termination came after he discovered evidence of bribery, record keeping violations, and attempts to circumvent internal anti-corruption controls. After management was unmoved by his reports, Wadler tried to go to the board and was fired. He sued the company in late May, arguing that it had wrongfully terminated him for internal whistleblowing.

Here's where tricky confidentiality issues come into play. Wadler is still bound by attorney-client confidentiality rules even while suing his former employer. The ABA's Model Rules of Professional Conduct allow disclosure of confidential information in order to "establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client." However, Bio-Rad is based out of California, as is Wadler's lawsuit. 

California's stricter confidentiality rule contains no such exemption. In the mid 90's, the California Supreme Court ruled that claims of retaliation by in-house counsel, where a claim can only be established with the disclosure of confidential information, must be dismissed.

A Shift Towards Allowing Disclosure

Thanks to the Supremacy Clause, Wadler will likely be allowed to make disclosures necessary to prove his retaliation claim. Since federal law allows attorney whistleblowing under the Sarbanes-Oxley and Frank-Dodd Acts, Wadler should be able to disclose information necessary to argue that he was wrongfully retaliated against for reporting violations.

Allowing in-house attorneys to act as whistleblowers marks a shift in courts' logic. More and more courts are ruling that attorneys claiming retaliatory firing can disclose otherwise confidential information in trial, according to a whitepaper by Littler Mendelson.

However, that's a 180 degree turn from the historical practice, when courts were highly skeptical as to whether in-house attorneys could sue their employers for retaliation. California is joined by Massachusetts and Pennsylvania in limiting disclosure by former in-house counsel -- in those states, where a claim isn't dismissed outright, a host of restrictive procedures may be implemented, including limiting admissibility of evidence, sealing and protective orders, and in camera proceedings.

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