DC Circuit Maintains Protections for Internal Investigations


Supposing is good, but finding out is better. ? Mark Twain

Many of the privileges the law recognizes against the compelled disclosure of information exist in order to promote candor. For instance, attorney-client privilege exists because people must be able to remain open and honest with their legal counsel without fear that the substance of their discussions could be required as testimony at a later time. This is largely the same rationale that caused the Supreme Court to classify the substance of corporate internal investigations as privileged for the last 30 years.

Internal investigations give corporations the opportunity to gather the information necessary to obtain effective legal advice regarding fraud, misconduct or noncompliance within their organizations. Typically, these investigations occur under legal supervision, and therefore, the privilege is seldom questioned. However, in a recent case involving contractor giant KBR, a federal district judge saw it differently and ordered the company to produce the files generated as part of an internal investigation, citing two key factors that distinguished it from a typical internal investigation:

  • KBR did not rely upon outside counsel
  • The company relied more heavily upon non-lawyer investigators than is typical

This ruling, however, did not stand for long — a panel of judges from the United States Court of Appeals for the District of Columbia Circuit promptly reversed it, finding that the privileged nature of internal investigations is derived from their ultimate objectives rather than from the specific way in which they are performed. So long as the purpose was ultimately to secure legal advice, the products of such an investigation should remain insulated from disclosure.

Both corporations and their individual employees can face a great deal of uncertainty during an internal investigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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