Whistleblower’s Attorney’s Communications with Regulators Found to be Protected by Work Product Doctrine
A California Magistrate Judge in BofI Federal Bank v. Erhart ruled that a whistleblower’s attorney’s communications sent to federal regulators were protected by the attorney work product doctrine. No. 15-cv-2353 (S.D. Cal. Aug. 5, 2016). The court concluded that the whistleblower’s attorney had not waived work product protection through her disclosure to third-party regulators, finding that she and the regulators shared a common interest.
The Company hired the employee in 2013 as an entry-level staff internal auditor. In March 2015, the Company allegedly learned that he failed to complete audits assigned to him and had conducted his own unapproved investigations. The employee then received unpaid leave under the FMLA, but did not return to work after the leave period ended and the Company terminated his employment for alleged job abandonment.
On October 13, 2015, the employee filed suit under Section 806 of SOX and California state law, claiming his employment was terminated for uncovering violations of law and reporting them to his supervisors. Later that day, a newspaper published an article that described the complaint and included a statement from his attorney. The following day, the Company’s stock suffered a 30% decline. The Company then filed suit against the employee, asserting federal computer fraud and state law claims based on his alleged theft of the Company’s confidential and privileged documents. The complaint further alleged that the employee disseminated stolen documents and confidential information to third parties, including in his whistleblower complaint and to the newspaper, which caused the decline in the stock price.
Discovery Dispute Regarding Whistleblower’s Attorney’s Communications with SEC and OCC
Allegedly suspecting that the employee’s attorney was complicit in disseminating information to the media, the Company served a subpoena on her to obtain her non-privileged communications with the media and other third parties. The employee’s attorney objected and the Company successfully moved to compel. She then produced documents concerning her communications with the newspaper and other third parties, but claimed that her communications with two federal regulators, the SEC and the Office of the Comptroller of Currency (“OCC”), were protected as attorney work product. The Company objected and moved for contempt, arguing that the documents were not created in anticipation of litigation and were provided to third parties, which waived any work product protection. Magistrate Judge Stormes sided with the employee’s attorney, finding that
By sending these communications to law enforcement agencies, [the employee’s counsel] did not waive work product protection: ‘[A]ttorney work-product protection is not automatically waived upon disclosure to third parties … because ‘the purpose of the work-product rule is … to protect it only from the knowledge of opposing counsel and his client.’ [citations omitted] Further, ‘[d]isclosure to [a] person with interest common to that of attorney or client is not inconsistent with intent to invoke work product doctrine’s protection and would not amount to waiver.’ [citations omitted] In the context of work product, common interest is more broadly construed to include disclosure to third parties. [citations omitted].
Here, [the employee’s attorney] shared a common interest with the federal regulators to uncover any alleged wrongdoing by [the Company]. Further, the SEC and OCC regulations provide for confidentiality. While those regulations, on their own, may not be enough to protect the communications from disclosure by [the employee’s attorney] to [the Company] in this case, they do show that the agencies will not publicly disclose [the employee’s attorney’s] work product. Therefore, [the employee’s attorney’s] communications with law enforcement agencies—with whom she shared a common interest—did not waive her work product claim.
Implications for Employers
This decision appears to raise novel issues in the whistleblower context, such was whether the whistleblower and regulator’s respective interests are sufficiently aligned to justify the application of the common interest exception.