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United States v. Ruehle - 583 F.3d 600 (9th Cir. 2009)

Rule:

"Suppression" is generally understood to concern invocation of the judicially created exclusionary rule, which is intended to operate as a deterrent to governmental misconduct and, as a necessary corollary, may be invoked to exclude other evidence discovered as the "fruit of the poisonous tree."

Facts:

Defendant William J. Ruehle was the former Chief Financial Officer ("CFO") of Broadcom Corporation ("Broadcom") that came under intense scrutiny for its suspected backdating of company stock options. Following a government investigation, Ruehle was criminally indicted for his involvement in an alleged backdating scheme that ultimately resulted in Broadcom's restatement of its earnings to account for approximately $ 2.2 billion in additional stock-based compensation expenses. At trial in federal district court, the court held an evidentiary hearing and issued an order suppressing all evidence reflecting Ruehle's statements to attorneys from Irell & Manella LLP ("Irell"), Broadcom's outside counsel, regarding the stock option granting practices at Broadcom. The court found that at the initial stages of the inquiry by Irell, an attorney-client relationship also existed with the CFO individually, and not just with Broadcom, and that the lawyers breached their ethical duties to their client Ruehle in disclosing what he had told them in a preliminary interview. The government filed an interlocutory appeal.

Issue:

Were the statements made by Ruehle during an internal company investigation protected by attorney-client privilege and subject to the rule on suppression?

Answer:

No.

Conclusion:

The appellate court reversed the district court's order and remanded the case for further proceedings. The court ruled that Ruehle was obliged by federal law to establish the privileged nature of the communications and, if necessary, to segregate the privileged information from the non-privileged information. Furthermore, the statements were not "made in confidence" but rather for the purpose of disclosure to the outside auditors. The alleged unprofessional conduct by Irell attorneys in counseling Broadcom to disclose, without obtaining written consent from Ruehle, while troubling, provided no independent basis for suppression of the statements.

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