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There are dumb mistakes � and then there are really dumb mistakes. Four years ago Matthew Gloss, general counsel of Marvell Semiconductor Inc., and two of his colleagues phoned the legal chief of a rival company, Jasmine Networks Inc. After the call went straight to voicemail, Gloss left a message and hung up. At least he thought he did. Though the Marvell officials didn’t know it, the Jasmine lawyer’s voicemail system was still recording them as they continued to talk on speakerphone � allegedly about how they were stealing their rival’s trade secrets. Gloss’ little telephonic boo-boo has turned into a major headache, not just for Sunnyvale-based Marvell but potentially for in-house lawyers everywhere. That’s because when San Jose-based Jasmine filed its inevitable lawsuit against Marvell, it tried to enter the voicemail message as evidence. Marvell moved to exclude the recording, arguing that it was protected by attorney-client privilege since two company lawyers took part in the conversation. The trial judge sided with Marvell, but the Sixth District Court of Appeal backed Jasmine ( Jasmine Networks v. Marvell Semiconductor, 117 Cal.App.4th 794). By failing to disconnect his phone, Gloss had waived privilege, the court of appeal ruled in April 2004. Moreover, since he is also a company officer � he holds the title of vice president for business affairs � Gloss had the authority to waive privilege on Marvell’s behalf. The appellate decision so worried the Association of Corporate Counsel that it asked the California Supreme Court to review the case. The justices agreed, and Marvell and Jasmine are currently preparing their briefs. ACC is also backing a proposed state law that says privilege can only be waived intentionally and not inadvertently. The measure cleared the Assembly earlier this year and is now before the state Senate. Susan Hackett, ACC’s senior vice president and general counsel, is particularly concerned about the appellate ruling that Gloss could waive Marvell’s privilege because he’s a company officer. Hackett notes that more than 4,000 of her group’s 16,000 national members also hold a vice president title. “Since [Gloss] was performing a legal function, his inadvertent disclosure should be treated in the same manner as it would be for any other lawyer, regardless of any business title the in-house lawyer may carry,” says Hackett. The Marvell saga started in August 2001, when Gloss called Virginia Wei, Jasmine’s director of legal and business affairs. Marvell, which makes semiconductors for telecommunications, was pursuing a buyout of Jasmine, a privately held company that has since gone out of business. Gloss placed the call on a speakerphone because he was accompanied by Kaushik Banerjee, Marvell’s vice president of engineering, and Eric Janofsky, an in-house patent attorney. According to the Sixth District’s ruling, Gloss and his colleagues “openly discussed theft of Jasmine’s trade secrets and the unlawful hiring of [Jasmine's] engineering group as well as the potential consequence of jail for [this] conduct.” Three weeks after the voicemail accident, Jasmine sued Marvell in Santa Clara County Superior Court for misappropriation of trade secrets and related claims. (Jasmine also sued several of its former employees, alleging that they conspired with Marvell.) The trial judge, citing attorney-client privilege, refused to allow the voicemail tape as evidence without even bothering to hear it. The judge said that because Marvell executive Banerjee had been talking with two in-house lawyers � Gloss and Janofsky � their conversation was privileged. In its reversal, the Sixth District held that the tape should be allowed because attorney-client privilege had been waived for three reasons: First, the conversation fell within the crime-fraud exception to privilege. Second, Marvell’s “uncoerced disclosure” � even though it wasn’t intentional � also waived the company’s privilege. This finding ran counter to traditional doctrine, which holds that inadvertent disclosure doesn’t waive privilege. Third, because Gloss was a company officer, he could waive privilege on Marvell’s behalf. (The California Supreme Court has depublished the appellate opinion, which means that it cannot be legally cited until the state high court rules.) Gloss is still at Marvell despite his slipup. He referred questions to the company’s attorney, Peter Bertrand, a partner in the San Francisco office of Buchalter, Nemer, Fields & Younger. Bertrand argues that the appellate court created at least two new standards for waiving attorney-client privilege “and both are dead wrong.” Bertrand adds that Marvell rejects Jasmine’s claims of trade-secret theft. According to Jasmine’s court-appointed bankruptcy counsel, James McManis, the buyout deal fell through after Jasmine filed its suit. Litigation costs subsequently drove Jasmine into bankruptcy, says McManis, a partner at McManis Faulkner & Morgan in San Jose. Wei, Jasmine’s former legal officer, is now with the Sacramento firm of Bartel Eng & Schroder. She has been on maternity leave and did not respond to requests for comment. Whatever the California Supreme Court decides about inadvertent waivers of attorney-client privilege, McManis believes the justices will still uphold the appellate court’s basic ruling � that the Marvell case is a crime-fraud exception to privilege. As a result, corporate counsel shouldn’t worry about any erosion of attorney-client privilege, in McManis’ view. “Honest in-house lawyers, and that’s about 99.9 percent of them, have nothing to worry about as a result of this case,” he says. Sue Reisinger is a senior reporter at Corporate Counsel magazine, which is affiliated with GC California.

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