iA federal jury returned a verdict in favor Bio-Rad Laboratories’ former General Counsel Sanford Wadler in Sanford S. Wadler v. Bio-Rad Laboratories Inc. et al. The jury awarded the former GC $5 million in punitive damages and $5.8 million in back pay.
Jurors determined that Wadler’s February 2013 report to Bio-Rad’s audit committee of the company’s board about his suspicions was protected whistleblower activity under the Sarbanes-Oxley Act. Jurors also concluded that Wadler’s whistleblowing activities were a significant reason the company terminated him a few months later.
The case made headlines in late December when California Federal Magistrate Judge Spero ruled that the Sarbanes-Oxley Act preempts California’s ethical rules regarding the disclosure of attorney-client privileged information, and that an in-house lawyer may use privileged information as the foundation for his retaliation claim. That decision was the subject of a previous blog post. Consideration of that attorney-client privileged information may well have played an important role in the jury’s decision.
Implications for Employers
Like Judge Spero’s December decision, this verdict is a troubling one for employers and one that may further embolden in-house attorneys to file whistleblower suits. As previously noted, Judge Spero acknowledged that “[t]here are few federal circuit court cases addressing the rights of in-house counsel to use attorney-client privileged information in a retaliation suit.”
Indeed, not all circuits would agree with the Judge Spero’s approach. For example, in a similar case involving the balancing of an attorney’s ethical obligation to maintain client confidences and his ability to act as a “whistleblower” (Fair Laboratory Practices Assocs. v. Quest Diagnostics et al., No. 11-1565-cv (2d Cir. Oct. 25, 2013), the Second Circuit ruled that the government’s interest in protecting whistleblowers does not trump the attorney-client privilege.
Thus, whether an employer’s own counsel can use privileged and confidential information in the pursuit of a whistleblower claims varies by jurisdiction. Decisions like Sanford call into question whether employers can truly depend on the attorney client privilege to protect internal communications regarding sensitive subjects (and indeed undermine fundamentally the entire purpose of the privilege). Perhaps employers should be permitted to inquire into conversations between putative whistleblowers and their counsel to plumb subjects like the degree to which the “whistleblowing” is nothing more than an attempt to cover up one’s own misconduct.
