In the Courts

Ninth Circuit Reverses Attorney-Client Ruling, But Lawyers Should Not Breathe Easy

In my article “Who's Your Client?” in the August 2009 issue of this newsletter, I described a district court decision in the Broadcom case finding that the law firm Irell & Manella had improperly disclosed to the government confidential information it gained from an executive it was representing along with his corporate employer. Although the Ninth Circuit reversed the district court's ruling on Sept. 30, its decision highlights the need for continuing vigilance about dual representation.

The Ninth Circuit held that the district court had incorrectly relied on California state law, which presumes the confidentiality of attorney-client communications. Instead, the panel applied federal common law, which puts the burden on the executive to prove that the communications were privileged. Noting that the executive was himself involved in the internal investigation, the circuit court found that he knew Irell was sharing with the company's outside auditor information that company lawyers had obtained from him. United States v. Ruehle, No. 09-50161, 2009 U.S. Dist. LEXIS 21450, at *27 (9th Cir. Sept. 30, 2009).

Lawyers should not take any great solace from the Ninth Circuit opinion. First, the court assumed that the Irell lawyers had never provided an Upjohn warning because they “took no notes nor memorialized their conversation on this issue in writing.” Second, there is no way to know if the district court would have reached the same conclusion without applying the California state law presumption (and whether the Ninth Circuit would have upheld a different finding).

The Ninth Circuit remanded for trial, at which the district court will have to decide the admissibility of any specific company lawyer testimony the government wants to introduce.

Third, the Ninth Circuit labeled as “troubling” Irell's “allegedly unprofessional conduct.” Fourth, the court stressed that “our holding today should not be interpreted as carte blanche approval” of Irell lawyers' testimony about their communications with the executive. The Ninth Circuit referred to the lawyers' proffer, and reminded the district court that it “remains responsible for determining the admissibility of any testimony that may extend beyond factual information,” clearly implying that the company lawyers made disclosures to the government “beyond factual information” that they obtained from the executive.

' Thomas E. Spahn, McGuire Woods

Order Rejecting Plea Agreement Is Not Immediately Appealable

The Ninth Circuit recently held that a district court's rejection of a plea agreement is not immediately appealable. United States v. Samueli, No. 08-50417, 2009 WL 3030371, *1 (9th Cir. Sept. 24, 2009).

During the government's investigation into options backdating, Dr. Henry Samueli, a co-founder of Broadcom, told SEC investigators that he had nothing to do with the company's options-granting practices. However, he later admitted that he had been involved in the options process and knew that his original statement was false. The government obtained Dr. Samueli's agreement to plea guilty to making a false statement in exchange for agreeing not to charge him with securities fraud. After reviewing the presentencing report and the parameters of the plea, the district court rejected Mr. Samueli's plea.

The Ninth Circuit dismissed Dr. Samueli's claim that the district court's order was immediately appealable because it fell under the collateral order doctrine. The court found that the issue of whether the district court would accept the defendant's plea agreement was “conclusively” determined. But the court found that the rejection of Dr. Samueli's plea was not separate from the merits of his matter. Thus, Dr. Samueli did not meet the second prong of the analysis. In addition, the court found that the rejection of Dr. Samueli's plea agreement was sufficiently reviewable after sentencing, missing the third prong of the test. The court found that Dr. Samueli would be well-positioned to appeal his case after sentencing. In addition, at that point, all parties would know how the sentence compared to the plea agreement and would understand the District court's analysis. Therefore, the court found that it lacked the jurisdiction to hear Dr. Samueli's interlocutory appeal.

The court also dismissed Dr. Samueli's claims that the rejection of the plea agreement would be immediately appealable under 28 U.S.C. ' 1292(a)(1) because it is not an injunction or does not have the practical effect of an injunction. Specifically, a plea agreement, if accepted, would not compel any behavior.

_ Kenneth S. Clark, Kirkland & Ellis LLP

Ninth Circuit Reverses Attorney-Client Ruling, But Lawyers Should Not Breathe Easy

In my article “Who's Your Client?” in the August 2009 issue of this newsletter, I described a district court decision in the Broadcom case finding that the law firm Irell & Manella had improperly disclosed to the government confidential information it gained from an executive it was representing along with his corporate employer. Although the Ninth Circuit reversed the district court's ruling on Sept. 30, its decision highlights the need for continuing vigilance about dual representation.

The Ninth Circuit held that the district court had incorrectly relied on California state law, which presumes the confidentiality of attorney-client communications. Instead, the panel applied federal common law, which puts the burden on the executive to prove that the communications were privileged. Noting that the executive was himself involved in the internal investigation, the circuit court found that he knew Irell was sharing with the company's outside auditor information that company lawyers had obtained from him. United States v. Ruehle, No. 09-50161, 2009 U.S. Dist. LEXIS 21450, at *27 (9th Cir. Sept. 30, 2009).

Lawyers should not take any great solace from the Ninth Circuit opinion. First, the court assumed that the Irell lawyers had never provided an Upjohn warning because they “took no notes nor memorialized their conversation on this issue in writing.” Second, there is no way to know if the district court would have reached the same conclusion without applying the California state law presumption (and whether the Ninth Circuit would have upheld a different finding).

The Ninth Circuit remanded for trial, at which the district court will have to decide the admissibility of any specific company lawyer testimony the government wants to introduce.

Third, the Ninth Circuit labeled as “troubling” Irell's “allegedly unprofessional conduct.” Fourth, the court stressed that “our holding today should not be interpreted as carte blanche approval” of Irell lawyers' testimony about their communications with the executive. The Ninth Circuit referred to the lawyers' proffer, and reminded the district court that it “remains responsible for determining the admissibility of any testimony that may extend beyond factual information,” clearly implying that the company lawyers made disclosures to the government “beyond factual information” that they obtained from the executive.

' Thomas E. Spahn, McGuire Woods

Order Rejecting Plea Agreement Is Not Immediately Appealable

The Ninth Circuit recently held that a district court's rejection of a plea agreement is not immediately appealable. United States v. Samueli, No. 08-50417, 2009 WL 3030371, *1 (9th Cir. Sept. 24, 2009).

During the government's investigation into options backdating, Dr. Henry Samueli, a co-founder of Broadcom, told SEC investigators that he had nothing to do with the company's options-granting practices. However, he later admitted that he had been involved in the options process and knew that his original statement was false. The government obtained Dr. Samueli's agreement to plea guilty to making a false statement in exchange for agreeing not to charge him with securities fraud. After reviewing the presentencing report and the parameters of the plea, the district court rejected Mr. Samueli's plea.

The Ninth Circuit dismissed Dr. Samueli's claim that the district court's order was immediately appealable because it fell under the collateral order doctrine. The court found that the issue of whether the district court would accept the defendant's plea agreement was “conclusively” determined. But the court found that the rejection of Dr. Samueli's plea was not separate from the merits of his matter. Thus, Dr. Samueli did not meet the second prong of the analysis. In addition, the court found that the rejection of Dr. Samueli's plea agreement was sufficiently reviewable after sentencing, missing the third prong of the test. The court found that Dr. Samueli would be well-positioned to appeal his case after sentencing. In addition, at that point, all parties would know how the sentence compared to the plea agreement and would understand the District court's analysis. Therefore, the court found that it lacked the jurisdiction to hear Dr. Samueli's interlocutory appeal.

The court also dismissed Dr. Samueli's claims that the rejection of the plea agreement would be immediately appealable under 28 U.S.C. ' 1292(a)(1) because it is not an injunction or does not have the practical effect of an injunction. Specifically, a plea agreement, if accepted, would not compel any behavior.

_ Kenneth S. Clark , Kirkland & Ellis LLP