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Cal. R. Prof. Conduct 3-310(E) prohibits a lawyer, without a client's informed written consent, from accepting employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment. This rule is based on the notion that a lawyer may not use information learned in the course of representing a client to that client's detriment in another action. Again, a lawyer may not sacrifice the interests of a former or existing client by using confidential information obtained in the course of the attorney-client relationship to benefit another client.
Irell & Manella LLP (“law firm”) represented Broadcom Corporation (“company”) in connection with the company's internal investigation of its stock option granting practices. At the same time, the law firm also represented defendant William J. Ruehle, the company’s Chief Financial Officer (“CFO”) in connection with two shareholder lawsuits filed against him regarding those same stock option granting practices. During a meeting, the CFO told the law firm about the company's stock option granting practices and his role in them. Later the company directed the law firm to disclose the CFO's statements during an investigation of the company by the government. The government brought a criminal action against the CFO, and sought to use the CFO's statements against him in the criminal proceedings. The CFO objected to the government’s use of his statements to the law firm on the grounds that they were protected by the attorney-client privilege.
Were the CFO’s statements to the law firm protected by the attorney-client privilege, and thus, could not be used by the government in the latter’s criminal action against the CFO?
The court found that the law firm breached its duty of loyalty. During the entire period of these representations, the law firm never obtained the CFO’s informed written consent to its dual representation of him and the company as required by Cal. R. Prof. Conduct 3-310(c). The CFO’s statements to the law firm were privileged attorney-client communications. The law firm disclosed the CFO’s privileged communications to third parties without his consent. Accordingly, the court ordered that all evidence reflecting the CFO's statements to the law firm regarding the stock option granting practices at the company was suppressed. The law firm was referred to the state bar for appropriate discipline.