## Facts

- Broadcom Corporation’s board retained outside counsel, Irell & Manella LLP, to conduct an internal “Equity Review” of Broadcom’s stock-option granting practices amid public scrutiny of backdating.
- William J. Ruehle, Broadcom’s former CFO, was interviewed by Irell during the internal investigation and made statements later alleged to be incriminating.
- Information from the internal investigation, including Ruehle’s statements, was disclosed to Broadcom’s independent auditors (Ernst & Young) and ultimately to government investigators.
- Ruehle was indicted in federal court for conspiracy and securities-related offenses connected to an options backdating scheme that resulted in Broadcom restating earnings to recognize approximately $2.2 billion in additional stock-based compensation expense.
- Ruehle moved to suppress evidence of his statements to Irell, asserting an individual attorney–client privilege and arguing Irell improperly disclosed privileged communications.
- After an evidentiary hearing, the district court found an attorney–client relationship between Ruehle and Irell at the outset, found Ruehle reasonably believed his statements were confidential, suppressed evidence reflecting those statements, and referred Irell to the California State Bar.
- The United States filed an interlocutory appeal under 18 U.S.C. § 3731.

## Issues

1. Whether attorney–client privilege in a federal criminal prosecution is governed by federal common law, and whether the privilege proponent bears the burden of proof.
2. Whether Ruehle established that his interview statements to corporate outside counsel during an internal investigation were made “in confidence,” given the contemplated disclosure to independent auditors and possible regulators.
3. Whether alleged violations of state ethical rules by counsel can justify suppression by expanding or substituting for federal evidentiary privilege requirements.

## Decision

- The Ninth Circuit reversed the suppression order and remanded.
- Federal common law governed privilege in this federal criminal case, and Ruehle, as the proponent, bore the burden to establish privilege.
- Ruehle failed to show the communications were made “in confidence”; the record showed the statements were made with an understanding they would be disclosed outside the company, particularly to Ernst & Young.
- State-law ethical concerns did not create or expand a federal privilege and did not independently support suppression in this prosecution.

## Legal Principles

- In federal criminal cases, attorney–client privilege is governed by federal common law, and it is construed narrowly.
- The party asserting attorney–client privilege bears the burden of proving both an attorney–client relationship and that the specific communications were privileged.
- A communication is privileged only if made for the purpose of obtaining legal advice and made in confidence, without intent or understanding that it will be disclosed to third parties.
- Voluntary disclosure to third parties, and communications made with disclosure clearly contemplated (such as to independent auditors), defeats confidentiality and results in waiver or non-attachment of privilege as to that content.
- Alleged violations of state professional-conduct rules may be relevant to attorney discipline but do not themselves establish a federal evidentiary privilege or require suppression.

## Conclusion

The Ninth Circuit held that Ruehle did not carry his burden to prove an individual attorney–client privilege for statements made to Broadcom’s outside counsel during an internal investigation because the statements were made with an expectation of outside disclosure, and state ethical-rule allegations did not supply a basis to suppress evidence in a federal criminal case.


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