Another reminder has come down regarding the importance of providing proper Upjohn warnings to witnesses in internal investigations.

In April 2009, we issued an alert on the decision by the U.S. District Court for the Central District of California to refer outside counsel to the California Bar for disciplinary proceedings because, in interviews with the former CFO of Broadcom Corporation, outside counsel had failed to make clear that it did not represent the witness. In connection with this ruling, the District Court suppressed the use of statements the former CFO made to outside counsel as being protected from disclosure by the attorney-client privilege.

The U.S. Court of Appeals for the Ninth Circuit has now held that the former CFO's statements were not protected by attorney-client privilege. United States v. Ruehle, No. 09-50161 (9th Cir. Sep. 30, 2009). The Ninth Circuit undertook its own detailed examination of the factual record and held that the former CFO failed to prove that his statements were "made in confidence" because he knew that those statements would be turned over to Broadcom's outside auditors, and "[t]hat he might regret those statements after learning of the subsequent corporate disclosure to law enforcement officials is not material to the privilege determination." The Ninth Circuit’s decision does not impact the District Court’s referral of Broadcom’s outside lawyers to the California Bar for potential disciplinary action.

The Ninth Circuit’s decision further reinforces the importance of providing proper Upjohn warnings when conducting internal investigations. The court begins its opinion by recognizing "the treacherous path corporate counsel must tread under the attorney-client privilege when conducting an internal investigation to advise a publicly traded company of its financial disclosure obligations."

As the District Court and Ninth Circuit decisions demonstrate, the path is treacherous because, if the privilege is not properly preserved, the company jeopardizes its ability to cooperate with the government by waiving the attorney-client privilege. To avoid this result, interviewing counsel must provide proper Upjohn warnings by clearly informing the witness that counsel represents the company, not the witness; the company, not the witness, holds the attorney-client privilege; the witness's statements will be communicated to the client company; and the client company may decide to waive privilege and disclose information it receives to third parties, including the government. See, e.g., In re Grand Jury Subpoena, 415 F.3d 334 (4th Cir. 2005).

For more information on the Ruehle decision or internal investigations, please contact John C. Grugan, or 215.864.8226; or Justin P. Klein, or 215.864.8606. 

Copyright © 2009 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.