Bio-Rad Fired GC Case a Perfect Storm of Whistleblowing, Eroding Privilege
The continued stream of in-house counsel and compliance officers becoming whistleblowers has advanced to the point “that it is now a river,” according to attorney Gregory Keating.
Keating, a partner at Choate Hall & Stewart in Boston, says a recent ruling in a case brought by ex-general counsel Sanford Wadler against former employer Bio-Rad Laboratories Inc. highlights three of the hottest whistleblower topics.
First is the growing number of in-house lawyers who are whistleblowers, and all the concerns about eroding attorney-client privilege that accompany such growth. “It is something that raises a lot of tricky questions, to put it mildly,” Keating concedes.
Second is the broadening theory of who is liable in a retaliation suit. In the Bio-Rad case, a federal court in San Francisco held that members of a company’s board of directors can be held individually liable under both the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Keating says the ruling of individual liability appears to be a case of first impression among federal courts.
And third is the widening of the field for plaintiffs. The court agreed with the ousted GC that an employee is protected as a whistleblower even if he complained only internally and not to the U.S. Securities and Exchange Commission or other government agency. “A whole lot of federal courts have struggled with this issue, and we have circuits split on it,” Keating says. “My guess is it will be decided by the Supreme Court, perhaps as early as this term since theBerman case from the Second Circuit is up for a cert petition.”
In Berman, the U.S. Court of Appeals for the Second Circuit held that the internal whistleblower is entitled to the same levels of anti-retaliation protection as anyone who turned to the SEC for help.
Berman contrasts with an earlier Fifth Circuit decision in Asadi v. G.E. Energy, as well as with other district court rulings that have held there is no retaliation protection unless a whistleblower contacts an outside agency.
Keating, who has spent at least the last five years tracking and analyzing changes in whistleblower law, says companies “need to focus on the legal changes because the gates keep widening more and more in terms of the scope of whistleblower protection.” Keating is the management representative, appointed by the Secretary of Labor, serving a second term on the Department of Labor’s whistleblower protection advisory committee.
Keating does not represent Wadler, who filed his case in May alleging that Bio-Rad fired him after he told company leaders that he had reason to believe the company engaged in bribery in China, although an investigation by an outside law firm turned up no evidence of bribery. The company, through outside law firm Latham & Watkins, denied Wadler’s allegations.
The October decision in Wadler did not go to the merits of the case and simply means that the ex-GC can move forward with his case against Bio-Rad.
But Keating says the ruling was a significant and disturbing one. “It stands as a strong beacon for why companies should seriously look at existing protocols and consider training and periodic audits as well as monitoring of activity in this area,” he adds.
Keating’s law firm announced last week that because of the increasing changes in whistleblower law, Keating would also head a newly created whistleblower defense group to help companies deal with the onslaught of complaints. He already chairs Choate Hall’s labor and employment group.