In the Courts

The CFTC ultimately settled with the company, and the DOJ entered a deferred prosecution agreement (DPA) requiring Williams to cooperate in the prosecution of others.

The government indicted Scott Thompson, a former Williams employee, for conspiracy to commit wire fraud and manipulate gas prices. Thompson sought production of the material provided to the prosecutors by Williams. Over the objection of the government and Williams, the Defendant obtained an order compelling the prosecution to produce those documents, material to his defense, which Williams had disclosed to the government. Williams then took this appeal.The circuit court found that documents material to preparation of Thompson's defense should be produced and remanded the case to the district court for such a determination.

The Court of Appeals initially noted that the attorney-client privilege would not apply as the DC Circuit had not adopted a selective waiver, which would allow a party to produce attorney-client privileged materials to one party yet assert that privilege with regards to another. The court found that Williams did not sufficiently protect its right to attorney work product, although potentially available. The court explained that a three-pronged test determined whether there would be a waiver of the work product protection. Under the first prong, it found that Williams was seeking “'to use [the privilege] in a way that is not consistent with the purpose of the privilege.'” Specifically, Williams chose to participate in the voluntary disclosure program in exchange for lenient treatment by the government. Under the second prong, the court found that, although Williams did have some basis to expect confidentiality (based on the language in its letters), it had not shown that production of those materials pursuant to the government's criminal discovery obligations under Brady and Federal Rule of Criminal Procedure 16 violated that expectation. Specifically, the company had requested confidentiality only “to the extent possible,” which presumably would contemplate the government's constitutional obligation to produce material under Brady. Analyzing the third factor, the court found that public policy interests of the work product doctrine favored a waiver. Although this factor contemplated the potential for specific confidentiality agreements, in this case the confidentiality agreement was simply insufficient.

Even absent a claim of work product protection, the court found that, based on Rule 16's provision that the District Court can “for good cause ' deny, restrict, or defer discovery or inspection or grant other appropriate relief,” Williams had some standing under Rule 16 to assert its interest in confidentiality. The court noted that the district court had balanced Williams' interest in confidentiality (to protect from potential third-party litigation) against Thompson's interest in being able to present a defense at trial, and found Thompson's interest less “speculative.”

Remanding the case to the district court, the DC Circuit noted that it did not address Williams's contentions that its production of documents to the government was coerced or that there was a “common-law, federal settlement privilege.”

CA Court Suppresses CFO's Interview with Outside Counsel

On April 1, 2009, the Central District of California held that statements made by defendant William J. Ruehle to corporate counsel during an internal investigation would be suppressed as privileged where corporate counsel also represented Mr. Ruehle in related civil litigation. United States v. Nicholas, No. SACR 08-00139-CJC, 2009 WL 890633, *11 (C.D. Cal. Apr. 1, 2009).

In response to press coverage about stock-option granting practices at Broadcom Corporation, the company retained Irell & Manella LLP to conduct an internal investigation. After that retention, two civil actions related to options granting were filed against current and former officers, including Mr. Ruehle, Broadcom's CFO. Irell undertook the representation of Mr. Ruehle in both the civil matters.

Several days later, attorneys from Irell interviewed Mr. Ruehle about Broadcom's options practices. According to the Irell attorneys, Mr. Ruehle was given an Upjohn warning advising that the attorneys were interviewing him for the company in connection with their investigation into stock option granting practices. This warning did not inform Mr. Ruehle that the statements provided might be shared with the government, that the attorneys did not representing Mr. Ruehle, or that Mr. Ruehle should consult with another lawyer.

Approximately two months later, Irell disclosed the content of Mr. Ruehle's interview to Ernst & Young, Broadcom's auditors. Later, Irell also disclosed Mr. Ruehle's interview to the Securities and Exchange Commission (SEC) and the U.S. Attorney's Office. When information about this disclosure was later produced to Mr. Ruehle during the government's preparation of its criminal case against him, he moved to suppress the materials as privileged.

The district curt found that Mr. Ruehle's statements to Irell attorneys were privileged and ordered their suppression. Analyzing the three-part test for a privileged communication, the court first found that there was an attorney-client relationship between Mr. Ruehle and the Irell attorneys. Mr. Ruehle “reasonably believed that an attorney-client relationship existed” based on their representation of him in the civil matters and their e-mail correspondence with him leading up to his interview (discussing case strategy and asking him to review materials for the defense of the matter).

The court also found the second prong met ' i.e., “that the communication was made in order to obtain legal advice “' based on Mr. Ruhele's testimony and the same e-mail correspondence. The court also determined that the communication was “intended to remain confidential.” Mr. Ruehle testified that he would have at least “stopped and asked some very serious questions” had he known his answers might be disclosed to third parties.

Having found a privileged communication, the court dismissed the government's claim that Irell's Upjohn warning would preclude suppression. Although expressing skepticism that any warning was given, the court found that the warning allegedly provided was “woefully inadequate under the circumstances.” Specifically, the court noted the lack of any notification that the discussions might be shared with third parties, that Irell was not representing Mr. Ruhele, or that Mr. Ruhele should consult with another attorney.

But the court went further, finding that even a proper Upjohn warning would have been insufficient to avoid suppression. Because Mr. Ruehle was an Irell client in related litigation, only “a written waiver of the clear conflict presented by Irell's representation of both Broadcom and Mr. Ruehle” would be sufficient to undo the privilege. The court saved its harshest language for an examination of Irell's ethical breaches toward its client.

DC Circuit Court Denies Company's Attempt to Withhold Internal Investigation Materials

On April 17, 2009, the U.S. Court of Appeals for the District of Columbia held that a company's assertions of privilege over documents produced as part of its cooperation with federal prosecutors and subject to a non-waiver agreement and request for confidentiality would not overcome the government's duty to produce those materials to the former employee being prosecuted. United States v. Williams Companies, Inc. , 562 F.3d 387, 397 (D.C. Cir. 2009).

The Williams Companies (Williams), as a part of cooperation with a Department of Justice (DOJ), Commodity Futures Trading Commission (CFTC), and Federal Energy Regulatory Commission (FERC) investigation into its energy trading practices, retained outside counsel to conduct an internal investigation. As a part of that investigation, outside counsel conducted interviews of employees and analyzed data relating to the company's trading practices. When this material was not produced in response to government subpoenas, the CFTC wrote to Williams indicating that full cooperation would include production of the results of the internal review. Williams produced these materials, noting in its cover letters that it was not waiving privilege, particularly as to other parties and matters and noting its understanding that the government would assist “in preserving the confidentiality” of the materials.

The CFTC ultimately settled with the company, and the DOJ entered a deferred prosecution agreement (DPA) requiring Williams to cooperate in the prosecution of others.

The government indicted Scott Thompson, a former Williams employee, for conspiracy to commit wire fraud and manipulate gas prices. Thompson sought production of the material provided to the prosecutors by Williams. Over the objection of the government and Williams, the Defendant obtained an order compelling the prosecution to produce those documents, material to his defense, which Williams had disclosed to the government. Williams then took this appeal.The circuit court found that documents material to preparation of Thompson's defense should be produced and remanded the case to the district court for such a determination.

The Court of Appeals initially noted that the attorney-client privilege would not apply as the DC Circuit had not adopted a selective waiver, which would allow a party to produce attorney-client privileged materials to one party yet assert that privilege with regards to another. The court found that Williams did not sufficiently protect its right to attorney work product, although potentially available. The court explained that a three-pronged test determined whether there would be a waiver of the work product protection. Under the first prong, it found that Williams was seeking “'to use [the privilege] in a way that is not consistent with the purpose of the privilege.'” Specifically, Williams chose to participate in the voluntary disclosure program in exchange for lenient treatment by the government. Under the second prong, the court found that, although Williams did have some basis to expect confidentiality (based on the language in its letters), it had not shown that production of those materials pursuant to the government's criminal discovery obligations under Brady and Federal Rule of Criminal Procedure 16 violated that expectation. Specifically, the company had requested confidentiality only “to the extent possible,” which presumably would contemplate the government's constitutional obligation to produce material under Brady. Analyzing the third factor, the court found that public policy interests of the work product doctrine favored a waiver. Although this factor contemplated the potential for specific confidentiality agreements, in this case the confidentiality agreement was simply insufficient.

Even absent a claim of work product protection, the court found that, based on Rule 16's provision that the District Court can “for good cause ' deny, restrict, or defer discovery or inspection or grant other appropriate relief,” Williams had some standing under Rule 16 to assert its interest in confidentiality. The court noted that the district court had balanced Williams' interest in confidentiality (to protect from potential third-party litigation) against Thompson's interest in being able to present a defense at trial, and found Thompson's interest less “speculative.”

Remanding the case to the district court, the DC Circuit noted that it did not address Williams's contentions that its production of documents to the government was coerced or that there was a “common-law, federal settlement privilege.”

CA Court Suppresses CFO's Interview with Outside Counsel

On April 1, 2009, the Central District of California held that statements made by defendant William J. Ruehle to corporate counsel during an internal investigation would be suppressed as privileged where corporate counsel also represented Mr. Ruehle in related civil litigation. United States v. Nicholas, No. SACR 08-00139-CJC, 2009 WL 890633, *11 (C.D. Cal. Apr. 1, 2009).

In response to press coverage about stock-option granting practices at Broadcom Corporation, the company retained Irell & Manella LLP to conduct an internal investigation. After that retention, two civil actions related to options granting were filed against current and former officers, including Mr. Ruehle, Broadcom's CFO. Irell undertook the representation of Mr. Ruehle in both the civil matters.

Several days later, attorneys from Irell interviewed Mr. Ruehle about Broadcom's options practices. According to the Irell attorneys, Mr. Ruehle was given an Upjohn warning advising that the attorneys were interviewing him for the company in connection with their investigation into stock option granting practices. This warning did not inform Mr. Ruehle that the statements provided might be shared with the government, that the attorneys did not representing Mr. Ruehle, or that Mr. Ruehle should consult with another lawyer.

Approximately two months later, Irell disclosed the content of Mr. Ruehle's interview to Ernst & Young, Broadcom's auditors. Later, Irell also disclosed Mr. Ruehle's interview to the Securities and Exchange Commission (SEC) and the U.S. Attorney's Office. When information about this disclosure was later produced to Mr. Ruehle during the government's preparation of its criminal case against him, he moved to suppress the materials as privileged.

The district curt found that Mr. Ruehle's statements to Irell attorneys were privileged and ordered their suppression. Analyzing the three-part test for a privileged communication, the court first found that there was an attorney-client relationship between Mr. Ruehle and the Irell attorneys. Mr. Ruehle “reasonably believed that an attorney-client relationship existed” based on their representation of him in the civil matters and their e-mail correspondence with him leading up to his interview (discussing case strategy and asking him to review materials for the defense of the matter).

The court also found the second prong met ' i.e., “that the communication was made in order to obtain legal advice “' based on Mr. Ruhele's testimony and the same e-mail correspondence. The court also determined that the communication was “intended to remain confidential.” Mr. Ruehle testified that he would have at least “stopped and asked some very serious questions” had he known his answers might be disclosed to third parties.

Having found a privileged communication, the court dismissed the government's claim that Irell's Upjohn warning would preclude suppression. Although expressing skepticism that any warning was given, the court found that the warning allegedly provided was “woefully inadequate under the circumstances.” Specifically, the court noted the lack of any notification that the discussions might be shared with third parties, that Irell was not representing Mr. Ruhele, or that Mr. Ruhele should consult with another attorney.

But the court went further, finding that even a proper Upjohn warning would have been insufficient to avoid suppression. Because Mr. Ruehle was an Irell client in related litigation, only “a written waiver of the clear conflict presented by Irell's representation of both Broadcom and Mr. Ruehle” would be sufficient to undo the privilege. The court saved its harshest language for an examination of Irell's ethical breaches toward its client.