Magistrate Judge Nita Stormes’ recent ruling in BofI Federal Bank v. Erhart suggests that the attorney work product doctrine can protect whistleblowers’ confidential disclosures to government agencies from discovery in civil litigation. A bedrock principle undergirding the SEC Whistleblower Program is that the SEC will not “disclose any information, including information provided by a whistleblower to the Commission, which could reasonably be expected to reveal the identity of a whistleblower.” 5 U.S.C. § 78u-6. While a company would likely encounter substantial hurdles compelling the SEC to produce communications with a whistleblower, the question remained whether a company could use civil litigation to discover confidential disclosures to government agencies.
BofI Federal Bank’s Lawsuit Against Whistleblower Erhart
Charles Matthew Erhart worked for BofI Federal Bank (BofI) as an internal auditor and sued BofI under the Sarbanes-Oxley Act and other whistleblower protection laws. Erhart alleged that BofI terminated his employment in retaliation for disclosing to the bank and federal regulators numerous violations of federal and state law. In particular, Erhart’s whistleblower retaliation complaint alleges that he opposed the bank’s decision to withhold information that was clearly responsive to an SEC subpoena and disclosed improprieties in the CEO’s personal accounts and potential violations of BSA/Know Your Customer rules.
Shortly after Erhart filed his retaliation claim, BofI further retaliated against him by suing him for alleged theft and dissemination of BofI’s confidential, privileged and proprietary information. BofI issued a subpoena to Erhart’s counsel demanding production of documents, including counsel’s communications with the SEC and OCC. Counsel for Erhart asserted that communications with law enforcement are privileged.
Whistleblower Disclosures to Federal Agencies Are Protected by the Work Product Doctrine
Judge Stormes rejected the assertion of the law enforcement privilege protection because the whistleblower’s counsel is not a government entity and did not specifically assert the protection of confidential techniques, procedures, investigations, or personnel of law enforcement. But the court agreed with the whistleblower’s counsel that her communications with federal agencies are protected as work product because the select documents she turned over to federal regulators were prepared in anticipation of litigation.
Judge Stormes held:
Work product immunity is meant “to guard against the divulging of attorney’s strategies and legal impressions, it does not protect facts concerning the creation of work product or facts contained within the work product.” Garcia v. City of El Centro, 214 F.R.D. 587, 591 (S.D. Cal. 2003) (emphasis in original) (citations omitted). . . . By sending these communications to law enforcement agencies, Ms. Gillam did not waive work product protection: “[A]ttorney work-product protection is not automatically waived upon disclosure to third parties . . . because ‘the purpose of the work-product rule is . . . to protect it only from the knowledge of opposing counsel and his client.’” California Sportfishing Protection Alliance v. Chico Scrap Metal, Inc., 299 F.R.D. 638, 645 (E.D. Cal. 2014) (citation omitted). Further, “[d]isclosure to [a] person with interest common to that of attorney or client is not inconsistent with intent to invoke work product doctrine’s protection and would not amount to waiver.” Id. (citing In re Doe, 662 F.2d 1073, 1081 (4th Cir.1981)). In the context of work product, common interest is more broadly construed to include disclosure to third parties. Id. (citing U.S. v. Am. Tel. and Tel. Co., 642 F.2d 1285, 1298-99 (D.C.Cir.1980) (finding no waiver because “the disclosure had occurred under a statutory guarantee of confidentiality on the part of the government”)).
Here, Ms. Gillam shared a common interest with the federal regulators to uncover any alleged wrongdoing by BofI. Further, the SEC and OCC regulations provide for confidentiality. While those regulations, on their own, may not be enough to protect the communications from disclosure by Ms. Gillam to BofI in this case, they do show that the agencies will not publicly disclose Ms. Gillam’s work product. Therefore, Ms. Gillam’s communications with law enforcement agencies—with whom she shared a common interest—did not waive her work product claim.
Judge Stormes also found that BofI failed to demonstrate a substantial need for the documents because BofI’s claims focused on Erhart’s public dissemination of BofI’s confidential information, and not his disclosures to regulators.
Guide to SEC Whistleblower Program
The experienced whistleblower lawyers at Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC, and two of the firm’s attorneys served on the Department of Labor’s Whistleblower Protection Advisory Committee and in senior leadership positions at a government agency that protects whistleblowers.
See our column in Forbes: One Billion Reasons Why The SEC Whistleblower-Reward Program Is Effective.
See our column in Going Concern: Sarbanes-Oxley 15 Years Later: Accountants Need to Speak Up Now More Than Ever.
To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:
Guide to Sarbanes Oxley Corporate Whistleblower Protection Law
The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries. Earlier this year, a former in-house counsel at a biotechnology company recovered $11 million in a SOX whistleblower retaliation case alleging that the company fired him for disclosing violations of the Foreign Corrupt Practices Act.
On the fifteenth anniversary of SOX, leading whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: “Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.” The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.
The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery.