SAN FRANCISCO—For more than two decades, Sanford “Sandy” Wadler was the top lawyer at Bio-Rad Laboratories Inc.
Over the next few weeks, he’ll be the company’s courtroom adversary.
Any trial pitting an in-house lawyer against his chief client has a voyeuristic quality to it. Wadler’s case, a rare whistleblower suit to proceed to trial, will provide a multiweek dissection of internal decisions around a key area of corporate compliance. The dispute has already sparked arguments over attorney-client privilege and is likely to feature testimony from Wadler and Bio-Rad’s outside counsel at Steptoe & Johnson LLP. No matter how it ends, the trial is apt to air dirty laundry for Bio-Rad’s legal department as it goes over in detail the company’s response to allegations of foreign bribery and corrupt dealings.
Wadler, who was fired from his post at the Hercules-based life sciences company in June 2013, maintains that he was forced out because he blew the whistle on potential Foreign Corrupt Practices Act violations by the company in China. During opening arguments Tuesday afternoon, Wadler’s lead lawyer, James Wagstaffe of Kerr & Wagstaffe, said that Bio-Rad had conducted “a retaliatory firing” just months after Wadler had been given an excellent performance review by the company’s CEO.
“If he had not made his report to the audit committee, he would have not been fired,” Wagstaffe said.
Bio-Rad’s lead trial lawyer, John Potter of Quinn Emanuel Urquhart & Sullivan, painted a starkly different picture of what led to Wadler’s ouster. It was on Wadler’s watch as GC, Potter said, that Bio-Rad racked up FCPA violations in Russia, Vietnam and Thailand that resulted in a $55 million settlement with the U.S. Securities and Exchange Commission and U.S. Department of Justice in 2014. Potter said that in a February 2013 memo to the audit committee of Bio-Rad’s board Wadler “set out to reinvent himself—to go from an FCPA slacker to FCPA whistleblower.”
Wadler sued his former employer in May 2015 under the whistleblower provisions of the Sarbanes-Oxley and Dodd-Frank Acts. He’s seeking $8 million in lost pay and stock compensation he claims he’s due as well as an undisclosed amount in punitive damages. The case is being overseen by U.S. Magistrate Judge Joseph Spero of the Northern District of California.
Wadler watched on from head of plaintiff counsels’ table Tuesday sitting with his back to the packed gallery. A few steps away, Bio-Rad’s CEO and chairman, Norman Schwartz, watched from the defense table.
In his opening, Wagstaffe told jurors that metadata from a file on Schwartz’s computer will show that a negative review used to justify Wadler’s firing wasn’t created until a month after he was let go. He also countered the company’s likely argument that Wadler, who was in his 60s when let go, was preparing to retire and isn’t due the amount he claims. Wagstaffe said that for “working lawyers” the average retirement age is “75-and-a-half.”
“The evidence will show that he’s not able to get another job,” Wagstaffe said.
Potter, by contrast, called Wadler’s memo on FCPA issues in China “set-up.” Wadler’s conclusions, Potter said, ran counter to those of lawyers at Steptoe & Johnson, who originally conducted an internal investigation into the company’s broader FCPA issues; lawyers at Davis Polk & Wardwell, who were hired to further vet Wadler’s allegations; and lawyers at the DOJ and SEC, who took a pass on the China-related claims when signing off on a broad settlement deal with the company.
Wadler “knew virtually nothing about the FCPA and even less about business in China,” Potter said.
Bio-Rad’s trial team at Quinn Emanuel took over the case this fall from lawyers at Latham & Watkins and sought to have wide swaths of potential evidence barred from trial arguing that anything that Wadler learned during his employment at Bio-Rad was privileged and confidential. But Spero denied the request and found that the company had waived privilege on some subjects—including reports on the China claims by former Steptoe & Johnson FCPA guru Patrick Norton, now an arbitrator at JAMS, and Davis Polk’s Martine Beamon. Spero found that Bio-Rad’s lawyers waived privilege on those reports when they invoked them defensively in prior court filings.
The case is being heard by a jury of five women and four men, which was chosen Tuesday morning. Trial is expected to last roughly two weeks.
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