Commercial Litigation and Arbitration

Effect of Corporate Counsel’s Failure to Document Upjohn Warning Is Privilege — Ninth Circuit Declines to Adopt Special Test for Assessing Whether Officer’s Statement to Corporate Counsel Is Privileged and, If So, Whether Company May Waive It

From United States v. Ruehle, 2009 U.S. App. LEXIS 21450 (9th Cir. Sept. 30, 2009) (Irell is corporate counsel for Broadcom, and Ruehle was the CFO of the Company at the time of Irell’s internal investigation):

[Failure to Document Upjohn Warnings]

[Footnote 3] At the evidentiary hearing the Irell attorneys testified that they provided Ruehle a so-called Upjohn or corporate Miranda warning. Such warnings make clear that the corporate lawyers do not represent the individual employee; that anything said by the employee to the lawyers will be protected by the company's attorney-client privilege subject to waiver of the privilege in the sole discretion of the company; and that the individual may wish to consult with his own attorney if he has any concerns about his own potential legal exposure. See Upjohn Co. v. United States, 449 U.S. 383, 393-96, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981). Ruehle testified that he did not recall receiving any such warnings.... [T]he district court seems to have disbelieved the Irell lawyers who took no notes nor memorialized their conversation on this issue in writing, and it apparently credited Ruehle's testimony that no such warnings were given. We cannot say that this finding is clearly erroneous on the record before us. ***

[Planned Disclosure to Auditors and Government Means Statements Not Given in Confidence]

First, there is no dispute that Broadcom had an existing attorney-client relationship with Irell and, by electing to reveal the information gathered to Ernst & Young (and later to various agencies of the United States), deliberately waived any corporate attorney-client privilege it held with respect to all matters at issue. Second, the Equity Review and the civil securities suits, to which Ruehle was a party, both concerned the same general subject matter as of June 1, 2006 — i.e., the stock option granting practices of Broadcom. Finally, the district court concluded as a fact that Ruehle reasonably believed that Irell represented him individually with respect to the ongoing civil lawsuits when the June 1, 2006, meeting took place. Because this factual finding is not clearly erroneous, we approach the parties' arguments from the perspective that Irell had attorney-client relationships with both Broadcom and Ruehle individually.

We, however, must inquire further. After all, "[a] party asserting the attorney-client privilege has the burden of establishing the relationship and the privileged nature of the communication." ***

...Typically, an eight-part test determines whether information is covered by the attorney-client privilege:

(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) unless the protection be waived.

*** With the burden properly on Ruehle, and after carefully reviewing and evaluating the record, we hold that Ruehle fails the fourth element of the traditional eight-part privilege test. Ruehle's statements to the Irell attorneys were not "made in confidence" but rather for the purpose of disclosure to the outside auditors. That he might regret those statements after later learning of the subsequent corporate disclosure to law enforcement officials is not material to the privilege determination as of June 2006. ***

[Ninth Circuit Declines to Adopt Special Test for Determining Whether Privilege Exists between Officer and Corporate Counsel or, If So, Whether Corporation May Waive It]

[Footnote 7] The government urges that the special problems presented by joint representation of a corporation and its individual officers counsel adoption of particularized requirements before the individual officer could assert an attorney-client privilege. The Third Circuit in In re Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d 120, 123-24 (3d Cir. 1986), adopted a five-factor test intended to clarify that "any privilege that exists as to a corporate officer's role and functions within a corporation belongs to the corporation, not the officer." Several other circuits have adopted some form of tailored test for joint-representation scenarios. See Ross v. City of Memphis, 423 F.3d 596, 605 (6th Cir. 2005); In re Grand Jury Subpoena (Newparent), 274 F.3d 563, 571-72 (1st Cir. 2001); In re Grand Jury Subpoenas, 144 F.3d 653, 659 (10th Cir. 1998); United States v. Int'l Bhd. of Teamsters, 119 F.3d 210, 215-16 (2d Cir. 1997). We do not decide the propriety of adopting the specialized test of Bevill because, given Irell's longstanding representation of Ruehle as an individual before the instant case arose and in light of the planned disclosure of facts gained in the Equity Review to the third-party independent auditor, this case can be resolved using our usual eight-part test. Accordingly, we leave for another day consideration of the extraordinary requirements of the Bevill five-prong test for establishing attorney-client privilege in a situation where both the executive and the corporation assert that they are dually represented. Similarly, we need not reach and decide in this case whether our circuit should adopt the rule of Newparent: that the corporation, without consent of an executive asserting privilege, can waive the attorney-client privilege in a dual-representation context where the subject matter of the waiver concerns matters of interest to the corporation. 274 F.3d at 572-74. We also need not reach Newparent's further holding that the executive can control the assertion of attorney-client privilege only as to matters segregable from those of concern to the corporation....

[State Ethics Violation Does Not Warrant Federal Suppression of Evidence]

"[A] state rule of professional conduct cannot provide an adequate basis for a federal court to suppress evidence that is otherwise admissible." United States v. Lowery, 166 F.3d 1119, 1124 (11th Cir. 1999); accord United States v. Keen, 508 F.2d 986, 989 (9th Cir. 1974) ("[E]vidence obtained in violation of neither the Constitution nor federal law is admissible in federal courts, even though obtained in violation of state law." (citations omitted)). To be clear, in some cases, material protected by the attorney-client privilege may come to light as a result of counsel's breach of a duty of confidentiality. But it is the protected nature of the information that is material, not the ethical violation by counsel. See Int'l Bhd. of Teamsters, 119 F.3d at 217 (holding that an individual could not assert individual privilege even though the law firm failed to clarify that it represented only his employer, in violation of state rules of professional responsibility).

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