A jury awarded a terminated General Counsel $2.9 Million in compensatory damages and $5 Million in punitive damages for wrongful termination due to his whistleblower activities. In a key ruling, the Court (USDC for Northern District of California) ruled not to exclude evidence provided by the GC that his former employer claimed was privileged under California professional rules. The Court held that federal law preempted the more stringent state law and that federal common law governing privilege applied to his Sarbanes-Oxley Act whistleblower retaliation claim. The GC had raised Foreign Corrupt Practices Act compliance concerns.
OUR TAKE: While we sympathize with the plaintiff in this case, the broader policy of piercing lawyer-client privilege may result in limiting the role of in-house counsel. Because the court can discard privilege, senior management and outside counsel may be less likely to include in-house lawyers in more sensitive matters.