Wednesday, April 29, 2009
"A federal judge's ruling in Los Angeles is getting attention among corporate lawyers because it suggests they need to issue more explicit warnings during internal investigations that they don't represent individual employees. ... Judge [Cormac] Carney said Irell & Manella LLP, a Los Angeles law firm hired by Broadcom to review possibly illegal stock option grants, failed to explain clearly to the executive that it wasn't representing him. The judge went so far as to refer the law firm to the California state bar for disciplinary action, citing 'ethical misconduct.' A spokesman for Irell & Manella [I&M], Charles Sipkins, called the judge's ruling an 'error' and said all of the law firm's disclosures were proper. The government is appealing the ruling, which suppresses all statements to the firm by former Broadcom Chief Financial Officer William Ruehle. ... Lawyers say it already is widespread practice to give some kind of notice in contacts with employees that the lawyer represents the company or its board of directors, not the employee. The Broadcom ruling is likely to make that warning even more precise. 'We're going to see the interview warnings turn into something akin to the Miranda warnings the police give to suspects,' said Streve Crimmons, a former [SEC] lawyer now at Mayer Brown. ... In the Broadcom matter, Mr. Ruehle said in court papers that since the lawyers had represented him personally as well as the company in previous shareholder lawsuits, he thought the same terms applied. ... Judge Carney said the law firm breached its duty of loyalty to Mr. Ruehle by revealing his statments to the government", Kara Scannell at the WSJ, 13 April 2009.
This case is worse than it first appears. I&M should have declined this case as it previously represented Ruehle. Judge Carney went easy on I&M. The DOJ apparently used I&M to circumvent the lawyer-client privilege rules, literally turning I&M into a DOJ "catspaw" and no DOJ lawyer was called to account. Or was the DOJ unaware of I&M's previous representation of Ruehle?