State High Court Rules General Counsel’s Disclosures of Former Client Info Not Protected by Whistleblower Laws

In a significant ruling on July 25, 2025, the State Supreme Court held that disclosures of former client information by a general counsel (GC) are not protected under state whistleblower laws, marking a pivotal decision for corporate attorneys and compliance officers. The case, which has drawn attention from legal professionals nationwide, clarifies the boundaries of whistleblower protections when it comes to confidential client information.

The court’s decision stemmed from a case involving a former general counsel who disclosed confidential client information, alleging corporate misconduct. The GC claimed that these disclosures were protected under state whistleblower statutes, which typically shield employees from retaliation for reporting illegal activities, fraud, or other violations that serve the public interest. However, the employer argued that the disclosures violated attorney-client privilege and professional ethical obligations, which impose strict confidentiality duties on attorneys.

The State Supreme Court, in a closely watched opinion, ruled that the disclosures did not qualify for whistleblower protection. The court reasoned that whistleblower laws are designed to protect reports of wrongdoing made through proper channels, such as to regulatory bodies like the Securities and Exchange Commission (SEC) or other authorized entities, and not disclosures that breach attorney-client privilege without legal justification. The court emphasized that attorneys, particularly those in roles like general counsel, are bound by state ethical rules that prioritize client confidentiality, except in narrow circumstances, such as preventing ongoing crime or fraud involving the attorney’s services.

Citing precedents like Fundamental Admin. Servs., LLC v. Anderson (2014), the court noted that while some jurisdictions allow limited disclosures of confidential information to establish a claim or defense, such actions must be carefully tailored to avoid unnecessary breaches of privilege. The court found that the GC’s disclosures were overly broad and did not meet the criteria for protected activity under state whistleblower laws. Furthermore, the ruling aligned with federal interpretations, such as the U.S. Supreme Court’s decision in Digital Realty Trust v. Somers (2018), which requires whistleblowers to report directly to regulatory bodies like the SEC to qualify for certain federal protections under the Dodd-Frank Act.

The decision has sparked debate among legal experts. Proponents argue it reinforces the sanctity of attorney-client privilege, ensuring that corporate counsel cannot use whistleblower laws as a shield for unauthorized disclosures. Critics, however, warn that the ruling could deter in-house attorneys from reporting corporate misconduct, particularly in jurisdictions with stringent ethical rules that lack broad exceptions for whistleblowing. The court acknowledged this tension but declined to expand whistleblower protections beyond the legislature’s intent, suggesting that any broadening of protections should come through statutory reform.

This ruling has practical implications for in-house counsel and compliance officers. Legal experts advise that attorneys considering whistleblower disclosures consult with experienced counsel to navigate the complex interplay of state ethical rules and federal regulations, such as the Sarbanes-Oxley Act (SOX) and Dodd-Frank Act. The SEC’s Part 205, for instance, allows attorneys to use certain privileged information to report misconduct under SOX, preempting conflicting state rules, but only when disclosures are “reasonably necessary” to prevent substantial harm or comply with federal law.

The case also underscores the importance of following proper reporting channels. Under state and federal whistleblower laws, protections often hinge on disclosures made to authorized recipients, such as regulators, inspectors general, or Congress, rather than public or unauthorized disclosures. For example, the Whistleblower Protection Enhancement Act of 2012 ensures that federal employees and contractors are protected for disclosures to designated authorities, but not for disclosures that violate confidentiality obligations without legal basis.

The State Supreme Court’s decision is expected to influence how corporations structure their compliance programs and how in-house counsel approach potential whistleblower claims. Companies are now urged to review their employment and separation agreements to ensure compliance with SEC Rule 21F-17(a), which prohibits impeding individuals from communicating with the SEC about securities law violations.

Legal observers note that this ruling may prompt legislative efforts to clarify whistleblower protections for attorneys, particularly in states with restrictive ethical rules. For now, the decision serves as a reminder that whistleblower protections are not absolute and that attorneys must tread carefully when disclosing client information, even in the pursuit of exposing corporate wrongdoing.

For more information on whistleblower protections, attorneys and compliance officers are encouraged to consult resources from the SEC or contact specialized whistleblower law firms for guidance.