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For years, it has been nearly impossible for in-house counsel at Texas companies to bring whistleblower suits against their employers, because companies could claim that the attorney-client privilege protected important evidence from disclosure in such litigation. But a recent 5th U.S. Circuit Court of Appeals decision changes all that. The Aug. 24 ruling concerns an appeal of an administrative dismissal of a whistleblower complaint filed by an in-house lawyer. The 5th Circuit held in Willy v. Administrative Review Board, U.S. Department of Labor that the U.S. Department of Labor’s Administrative Review Board incorrectly dismissed the in-house lawyer’s complaint, after the board determined that a key piece of evidence needed to prove his allegations could not be disclosed because of the attorney-client privilege between the lawyer and the company. The 5th Circuit remanded the case to the Administrative Review Board, noting that the case had “endured an odyssey through administrative and judicial tribunals” including four appeals to the 5th Circuit. Coastal Corp. fired Donald J. Willy, then an in-house environmental attorney with the Houston-based company, after a series of events in 1984, according to the 5th Circuit opinion. Willy wrote two reports in 1984, referred to in the opinion as the Belcher Report, in which he concluded that one of the company’s subsidiary oil companies was exposed to liability for allegedly violating several federal environmental statutes. Willy’s supervisors disagreed with some of his conclusions in the Belcher Report and asked him to delete references to some of the alleged violations, which he refused to do, according to the opinion. Coastal fired Willy after his supervisors accused him of contacting state regulatory officials about environmental matters at a Corpus Christi refinery owned by Coastal, the opinion noted. In October 1984, Willy filed a complaint with the U.S. Department of Labor, alleging that Coastal violated federal whistleblower laws by firing him in retaliation for writing the Belcher Report — allegations the company denied. The company alleged the Belcher Report was protected by attorney-client privilege and refused to produce the report as part of the litigation. Nevertheless, an administrative law judge allowed into evidence two draft versions of the Belcher Report that Willy had in his possession. After a series of dismissals and reversals of dismissals by administrative law judges of Willy’s complaint, in February 2004, the Department of Labor’s Administrative Review Board (ARB) issued a final decision and dismissal order. The board concluded that there was no exception to the attorney-client privilege that would allow the Belcher Report to be admitted into evidence; therefore Willy could not prove his complaint. The 5th Circuit found that the ARB incorrectly ruled that Willy could not introduce the Belcher Report. “The case law amply demonstrates the narrower proposition that the attorney-client privilege only prohibits a party from simultaneously using confidential information as both a shield and sword,” wrote Judge Jacques Wiener in an opinion joined by Judges Patrick Higginbotham and Rhesa Barksdale. “Stated differently, the ‘shield and sword’ analogy is conjunctive; it does not stand broadly for the proposition that an attorney may never use confidential information offensively,” the judges concluded. 20+ YEARS Willy, who coincidentally has been employed as a federal administrative law judge in Houston for the past 10 years, says he’s pleased with the ruling. “Look at the Constitution. The Fifth Amendment says you have a right to due process,” Willy says. “How can you not have a right to due process because of your occupation?” Willy represents himself in the case and argued it at the 5th Circuit. Judicial canons prevent judges from representing other people in court but permit judges to represent themselves. Another lawyer who had represented Willy dropped out of the case years earlier, Willy says. “It’s almost impossible to find someone to represent you in a case that’s been pending for 20 years,” Willy says. “I was forced to handle it, because there was no one else to handle it. It would be impossible for me to acquaint them with the case,” which he says contains thousands of pages of documents. J. Richard Hammett, a partner in the Houston office of Baker & McKenzie who represents Coastal, did not return two telephone calls seeking comment before press time on Sept. 1. Mark Edward Papadopoulos, a U.S. Department of Labor attorney who represents the agency in the case, declines comment. Michael Maslanka, a partner in the Dallas office of Ford & Harrison who defends companies in employment suits, says Willy is a big deal for in-house counsel who want to sue their employers — especially when the opinion is put in the context of the Sarbanes-Oxley Act of 2002, which strengthened financial audit requirements in an attempt to prevent corporate fraud. “This is a very empowering case for corporate counsel who believe they’ve been retaliated against under Sarbanes-Oxley,” Maslanka says. “It removes a huge obstacle for them.” Maslanka says he has successfully used the attorney-client privilege to defend companies in Sarbanes-Oxley suits filed by in-house counsel. But Willy gives in-house counsel the same ability to file whistleblower cases against their employers as other employees have, Maslanka says. “I think the lesson to draw from this is, if you haven’t already done so, you make sure you have avenues where corporate counsel can register concerns with corporate governance,” Maslanka says. “The same good management techniques that stop other lawsuits from getting filed now apply to corporate counsel,” Maslanka says. “Human resources has to treat corporate counsel as a potential plaintiff and listen to their concerns.” Rob Roby, a corporate defense attorney and partner in Dallas’ Gwinn & Roby, says the opinion may have a chilling effect on a company’s relationship with its own in-house counsel. “I think it could be very critical in hindering communications that management thought would remain confidential. That’s the real value of the attorney-client privilege,” Roby says. “The goal is to have candid communication to stop things before they happen or fix them once they have happened.” Ken Molberg, a partner in Dallas’ Wilson Williams & Molberg who represents employees in employment disputes, applauds the opinion. “It’s a common-sense approach, frankly. It says people in those positions are entitled to the protection under the law just like other people,” says Molberg, president of the Texas Employment Lawyers Association. “It really has broader implications. There are a series of cases out that circumscribe the rights of HR people who aren’t even lawyers from using documents that will help their cases,” Molberg says. “This speaks very loudly to that line of judicial reasoning.”

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