Reading Employees Their Rights

Spring 2009Newsletters California Update - Second Quarter 2009

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Everyone who watches police shows knows that people being arrested must be informed of their rights. But what rights do employees have when they are interviewed by attorneys representing their employer? A federal judge in Los Angeles this month took harsh steps when lawyers failed to explain clearly to an executive that they did not represent him individually.

In that case, the semiconductor company Broadcom hired Irell & Manella LLP, a Los Angeles law firm, to investigate whether former CFO William Ruehle illegally granted stock options. Statements obtained in the investigation were provided to the government, which filed criminal charges against Ruehle. The lawyers conducting the investigation for the company said they informed Ruehle that information he provided could be disclosed to the government. But Ruehle denied being so informed. He said he understood that the lawyers were representing him, too, and that his discussions with them were privileged. Supporting his belief was the fact that the same firm did represent both Ruehle and Broadcom in other matters.

U.S. District Court Judge Cormac Carney ruled that Ruehle had a legitimate expectation that what he said to the lawyers would be privileged and confidential. Judge Carney therefore threw out portions of the prosecution’s case against Ruehle that were based on statements he made to the attorneys. He also referred the attorneys to the state bar for disciplinary action.

Used correctly, investigations by outside counsel can be a valuable tool for uncovering facts and demonstrating a company’s commitment to compliance. But this decision highlights the problems that can arise unless lawyers pay careful attention to the privilege and conflict of interest principles that arise when interviewing company employees.