Compliance officers, general counsel, and other internal gatekeepers have reason to applaud a recent federal appeals court decision that upheld most of an $11 million federal jury award obtained by a whistleblower in a wrongful termination case. 

It’s a shining example of doing the right thing in the face of adversity.

In Wadler v. Bio-Rad Laboratories, a civil complaint, Bio-Rad’s longtime general counsel, Sanford Wadler, alleged he was fired for reporting numerous red flags internally to Bio-Rad’s audit committee concerning questionable conduct in China that potentially violated the Foreign Corrupt Practices Act (FCPA). Six months prior to Wadler filing his complaint, Bio-Rad in November 2014 agreed to a $55 million settlement for making improper payments to foreign officials in Russia, Vietnam, and Thailand in violation of the FCPA. During the trial, Bio-Rad argued that Wadler was terminated, in part, for alleged poor work performance, leading up to the FCPA violations.

Prior to trial, Wadler—and, by extension, all internal gatekeepers—had already scored a precedent-setting victory when U.S. Magistrate Judge Joseph Spero of the Northern District of California, who was overseeing the trial, ruled that whistleblower protections enshrined in the federal Sarbanes-Oxley Act, at least in this case, preempt state law regarding attorney-client privilege, effectively allowing Wadler to use privileged communications and confidential information that was “reasonably necessary” to establish his retaliation case.

Key evidence revealed that an unfavorable performance review of Wadler was created a month after his termination. In February 2017, following a three-week trial and just three hours of deliberation, Wadler was awarded $11 million in damages.

The idea of keeping key evidence of substantial wrongdoing—whatever that wrongdoing may entail—from seeing the light of day, effectively allowing senior executives to hide behind attorney-client privilege, is ludicrous.

Despite Bio-Rad’s arguments on appeal, the Ninth Circuit in its Feb. 26 ruling kept intact most of the jury’s award—$5 million in punitive damages and $2.96 million in back pay. The court did, however, direct the lower court to reduce damages by nearly $3 million, citing last year’s Supreme Court decision in the case Digital Realty v. Somers, which held that the anti-retaliation provision of the Dodd-Frank Act doesn’t protect internal disclosures made by a whistleblower unless that individual also disclosed potential securities law violations to the Securities and Exchange Commission. Because Wadler did not do so, the double backpay authorized under Dodd-Frank will be reversed in Wadler’s case.

One issue remains: The Ninth Circuit found that the district court judge erred when he instructed the jury that “rules or regulations of the SEC” include the statutory provisions of the FCPA’s anti-bribery and books-and-records provisions, falling under Section 806 of the Sarbanes-Oxley Act. The court clarified that the FCPA is a statute.

Some in the legal profession may point to the loss of attorney-client privilege in this case as a negative—but if a company is acting unethically and illegally, it’s only just that the truth be brought to light. General counsel, compliance officers, internal audit, and other gatekeepers who have firsthand knowledge of corporate wrongdoing should be entitled to the same legal protections afforded to any other whistleblower.

The idea of keeping key evidence of substantial wrongdoing—whatever that wrongdoing may entail—from seeing the light of day, effectively allowing senior executives to hide behind attorney-client privilege, is ludicrous. It’s equally ludicrous that attorney-client privilege can shield employers from being called to account for retaliating against an internal whistleblower for ethically performing their duties in good faith.

Kudos here goes to Wadler and his counsel (formerly Kerr & Wagstaffe, and now Wagstaffe, von Loewenfeldt, Busch & Radwic) for scoring a symbolic victory for gatekeeper whistleblowers everywhere.