D.C. Circuit grants petition for mandamus and strongly reaffirms attorney-client privilege for internal investigations

by Dorsey & Whitney LLP

The attorney-client privilege has long protected attorney-client communications made during the course of an internal investigation. Upjohn Co. v. United States, 449 U.S. 383 (1983). Of course, the privilege encourages “full and frank communication between attorneys and their clients,” id. at 389, while allowing companies to navigate “the vast and complicated array of regulatory legislation confronting the modern corporation,” id. at 392. But in March 2014, the United States District Court for the District of Columbia distinguished away nearly all of Upjohn in ordering Kellogg Brown & Root (“KBR”) to produce privileged materials created during an internal investigation. United States ex rel. Barko v. Halliburton, No. 05-cv-1276, 2014 WL 1016784 (D.D.C. Mar. 6, 2014). On June 27, the D.C. Circuit granted KBR’s mandamus petition and vacated the lower court’s order, thereby reaffirming the importance of the privilege for internal investigations. In re Kellogg Brown & Root, Inc., No. 14-5055, 2014 WL 2895939 (D.C. Cir. June 27, 2014).

Harry Barko, a former KBR employee, filed a False Claims Act suit in 2005 that includes allegations that KBR defrauded the federal government through various Iraq War military contracts. During discovery, Barko requested documents related to KBR’s internal investigation into the alleged fraud—an investigation directed and conducted by KBR’s in-house attorneys. KBR resisted Barko’s discovery, claiming that any investigative materials were protected by the attorney-client privilege. Following an in camera review, the district court ordered KBR to produce the records. It ruled that for the privilege to attach to internal investigations, the proponent “must show the communication would not have been made but for the fact that legal advice was sought.” Barko, 2014 WL 1016784, at *2 (internal quotation marks omitted). In applying that rule, the lower court distinguished away the Upjohn protections, and held that KBR’s internal investigation was principally conducted to comply with federal regulations rather than to render legal advice. Id. at *3. KBR filed a mandamus petition with the D.C. Circuit.

In a win for privileged internal investigations, the D.C. Circuit vacated the trial court’s order. The court first reaffirmed Upjohn’s key principles. First, privileged investigations do not depend on whether inside or outside counsel directs the investigation. That is, “a lawyer’s status as in-house counsel ‘does not dilute the privilege.’” In re KBR, 2014 WL 2895939, at *3. Second, “communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney-client privilege.” Id. And third, although investigative counsel is generally required to explain their role and the purpose of the investigation to interviewees, there are no “magic words” necessary to maintain the privilege. Id.

Significantly, the D.C. Circuit also rejected the lower court’s proposed “but for” privilege test. It concluded that the “but for” test “would eliminate the attorney-client privilege for numerous communications that are made for both legal and business purposes and that heretofore have been covered by the attorney-client privilege,” while simultaneously eradicating the privilege for internal investigations. Id. at *4. Without the privilege, businesses may be less willing to seek legal counsel, “which would limit the valuable efforts of corporate counsel to ensure their client’s compliance with the law.” Id. (internal quotation marks omitted). In rejecting the district court’s approach, the court found that the more proper manner in which to frame the privilege inquiry is to ask, “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication.” Id. at *5. In other words, confidential communications made during an internal investigation are privileged, “if one of the significant purposes . . . was to obtain or provide legal advice.” Id.

These longstanding principles are well known among internal-investigation practitioners. But, In re KBR is a much-needed, resounding reaffirmation of Upjohn that dismisses any lingering doubts about the scope of the privilege for internal investigations.



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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