Earlier this month, following three hours of deliberation, a California federal jury found that Bio-Rad Laboratories, Inc. had violated the federal whistleblower provisions by unlawfully firing Sanford Wadler, its former general counsel, and awarded Wadler nearly $11 million in damages.  Wadler had sued his former company under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and California state law, asserting that he was wrongfully terminated in retaliation for investigating and reporting to senior management potential violations of the Foreign Corrupt Practices Act (“FCPA”) in China.  The pre-trial proceedings and three-week trial involved several whistleblower-friendly rulings that promise to generate additional litigation.  Those legal determinations, as well as the jury’s prompt finding of liability and imposition of a substantial award in the face of an aggressive corporate defense, bring to the forefront significant issues relevant to public companies, directors and other corporate stakeholders – not the least of which is the precedent of a general counsel in the role of whistleblower. 

• Expanded Pool of Defendants. Corporate directors of public companies may be within the scope of the Sarbanes-Oxley and Dodd-Frank whistleblower provisions, and thus potentially subject to individual liability.
• Potential Erosion of Privilege. Privileged communications between a whistleblower and the company’s directors, officers, in-house counsel and even outside counsel may be both discoverable and admissible in a whistleblower retaliation action to the extent the whistleblower reasonably believes the communications are necessary to prove his or her claims and defenses.
• Whistleblower Policy. Companies should be vigilant in ensuring that sufficient policies, procedures and training exist to facilitate internal complaints of potential misconduct.
• Importance of Personnel Files. Companies should maintain timely and thorough personnel files, including by conducting regular performance evaluations with written documentation, and should record negative performance issues as they occur.
• Risks of Trial. Companies should pay heed to the evidentiary rulings, broad interpretation of the whistleblower provisions and the jury’s resounding verdict in favor of an attorney-defendant in weighing litigation risk in these kinds of cases.

Please click here to read the full memo.