Will In-House Attorneys Reach for their Whistles?

The news is full of stories about whistleblowers collecting millions from their former employers.  Surely at least a few in-house lawyers fantasize about that kind of payday.  After all, who knows better than an in-house lawyer where the bodies are buried?  But the fantasy usually ends with recollection that attorney-client privilege serves as a gag.

Earlier this month attorney Sanford Wadler proved that the gag may not always be as tight as we thought.  Sanford is the general counsel-turned-whistleblower who was awarded $8 million on Feb. 6 in his suit against former employer Bio-Rad Laboratories.

But it took an unusual—and for Sanford, sometimes unpleasant–set of facts to produce that result.  The most unpleasant fact was that he was fired, as he saw it for doing his job in uncovering possible violation of the Foreign Corrupt Practices Act.  He filed a retaliation complaint with the U.S. Department of Labor, resulting in proceedings in that agency and the Securities & Exchange Commission.

Another unusual circumstance was that in those proceedings Bio-Rad revealed, and allowed Sanford to reveal, a great deal of information that might otherwise have been privileged or protected.  The final and perhaps most unusual circumstance was that, at least as the court saw it, Bio-Rad waited too long to file its motion to exclude information as privileged or protected.

Throughout its 37-page order denying Bio-Rad’s motion, the court made its unhappiness clear.  The order opens with the ominous (for Bio-Rad) words: “On the eve of trial, Defendants have brought a Motion to Exclude.”  The court then explains (more than once) that Bio-Rad filed the motion after the deadline set by the court for dispositive motions and ignored the court’s order to “delineate with precision” on a “line-by-line” basis the evidence it sought to exclude.

But in addition to relying on Bio-Rad’s waiver, late filing, and ignoring its order, the court found that California law on privileged and protected attorney-client material is preempted by Sarbanes-Oxley to the extent California imposes stricter limits than SOX.

The denial of Bio-Rad’s motion cleared the way for Sanford to introduce his evidence.  The jury found it was persuasive, taking only three hours to award him nearly $3 million in back pay and another $5 million in punitive damages.

The case is Wadler v. Bio-Rad Laboratories, Inc., No. 15-cv-02356-JCS (N.D. Calif.).

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