Maintaining The Attorney-Client And Work-Product Privileges In An Internal Investigation

by Robins Kaplan LLP
Contact

Internal investigations conducted without outside counsel risk not being protected by the attorney-client or work-product privileges.  On March 6, 2014, the District Court for the District of Columbia ordered production of documents related to an internal investigation directed by Kellogg, Brown and Root’s (“KBR”) internal law department, rejecting the company’s claims of attorney-client and work product privilege over the materials.  United States ex rel. Barko v. Halliburton Co. et al., No. 1:05-CV-1276 (D.D.C.)

In concluding that the investigation was not primarily designed to obtain legal advice and, thus, not protected by either privilege, the court highlighted the fact that KBR’s in-house counsel did not consult with outside counsel on whether to perform the investigation.  According to the court, this distinguished KBR’s investigation from traditional Upjohn investigations, as the investigation failed the “but for” test – i.e., whether it would have been performed “but for” the desire to obtain legal advice.

The Barko Decision
In 2005, Henry Barko, Jr. filed suit under the qui tam provision of the False Claims Act against KBR and its former parent, Halliburton, alleging that KBR passed on to the United States government inflated construction and services costs in support of military operations in Iraq.  The complaint remained under seal until 2009.

Independent of the suit, KBR implemented a Code of Business Conduct (“COBC”) program to investigate allegations of improper conduct in connection with its various war-zone contracts.  The COBC was administered by the company’s Law Department.  The program allowed KBR employees to report allegations either directly to the Law Department or through other channels.  However reported, these tips were directed to an in-house attorney who would determine whether an investigation should be opened.  Such investigations were conducted by non-attorney investigators working under the direction of KBR’s Law Department.  Witness statements and reports generated in a COBC investigation were marked “attorney-client privilege” and were provided to the Law Department, which was tasked with deciding whether further action, including a possible self-disclosure to the government, was necessary.

Barko moved to compel production of documents related to KBR’s internal investigation of conduct tied to the contract at issue in his case.  KBR claimed attorney-client privilege over the materials, arguing that the investigations were performed at the direction of counsel with the intent of facilitating legal advice.  The company also maintained the documents were protected as work product since the investigations were conducted with a reasonable anticipation of litigation, noting that KBR had been sued 22 times for purported violations of war-zone contracts.

On March 6, 2014, the Honorable James S. Gwin, sitting by designation for the U.S. District Court for the District of Columbia, delivered his ruling.1  Judge Gwin was unpersuaded by KBR’s arguments and ordered the production of the documents.

Judge Gwin’s Memorandum and Order contains a careful review of the facts.  He reviewed KBR’s internal files and called them “eye-openers” because of the volume of fraud claims they contained.  In delivering his ruling, he held that the attorney-client privilege did not apply because KBR performed the investigations “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice,” and he concluded that COBC policies “merely implement” the Defense Department’s regulatory requirements for contractor compliance programs.

Importantly, the court distinguished KBR’s investigations from a traditional Upjohn investigation on the basis that KBR’s in-house attorneys did not confer with outside counsel on whether and how to conduct the investigation.  Accordingly, the court concluded, the investigations “would have been conducted regardless of whether legal advice were sought” and, thus, were not performed “primarily” for the purpose of obtaining legal advice.

The court found further support for its conclusion in the fact that witnesses interviewed in the investigation were not told that the purpose of the interview was to assist KBR in obtaining legal advice and that the confidentiality agreements they signed warned of possible business impact from disclosure of the investigation.  In addition, the court highlighted the fact that the investigators were not attorneys and, thus, employees could not have inferred the “legal nature of the inquiry[.]”

In rejecting KBR’s claim of work product protection, the court cited the same rationale, but also noted the fact that the investigation was conducted prior to the unsealing of the complaint as inconsistent with a claim that the work was performed in anticipation of litigation.

Barko Is Not Alone
Barko joins a growing chorus of decisions in which courts have required disclosure of internal investigation materials, despite the role of in-house counsel. In Allied Irish Banks v. Bank of Am., N.A., the court for the Southern District of New York concluded that attorney-client privilege did not apply to in-house counsel’s investigation because counsel would have produced investigative materials in essentially the same form to address non-litigation purposes. 03-CV- 3748 (DAB) (GWG) (S.D.N.Y. Mar. 26, 2008).  In United States v. ISS Marine, No. 12-481 (D.D.C. Nov. 12, 2012), the District Court for the District of Columbia refused to find an internal investigation report created by in-house counsel privileged where it relied upon interviews performed by a non-lawyer auditor. In In re County of Erie, 473 F.3d 413 (2d Cir. 2007), the Second Circuit applied the so-called “predominant purpose” test to parse in-house government counsel email, upholding privilege for some, while disregarding privilege for others based upon the content of the email.

Aside from the waiver of privilege, employers may also be subject to sanctions for failing to turn over in-house counsel's investigation notes. In EEOC v. Spitzer, the District Court for the Northern District of Ohio ordered a mistrial after it learned that the investigating in-house attorney failed to turn over notes related to the employee’s complaints of discrimination. Nos. 1:06-CV-2337, 1:08-CV-1326, 1:08-CV-1542 (N.D. Ohio May 22, 2013). In its decision to sanction the employer over $300,000 in fees, the court referenced the conflict of interest inherent when an employer uses in-house counsel to conduct such an investigation.

KBR filed an emergency motion on March 7 to seal Judge Gwin’s decision.  But even if KBR is ultimately successful on appeal, it is becoming increasingly clear that investigations conducted purely by in-house counsel increase the risk of courts disregarding the application of the attorney-client privilege.

Lessons from Barko in Conducting Internal Investigations
Whether or not Barko survives on appeal, it is an important reminder of the steps companies should consider taking in order to increase the chances that a court will uphold their claim of attorney-client privilege over materials relating to internal investigations. 

Companies should be clear that they are conducting such investigations for the primary purpose of obtaining legal advice.  Towards that end, companies should consider consulting with outside counsel about the purpose and scope of an investigation before initiating the investigation and involving outside counsel in the investigation itself. It should be clear to all those involved in an investigation, including the investigators and the witnesses, that the company is seeking the information to assist its lawyers in providing legal advice on any further actions the company should take.  Companies should consider the direct involvement of attorneys in conducting witness interviews – particularly interviews of the most important witnesses.  In addition, materials produced in the investigation, including witness statements and investigative reports, should not only be marked “attorney-client privilege,” but should be treated as the company would treat any other privileged materials, ensuring their confidentiality and preventing disclosure to third parties.

1. Nominated by President Clinton in 1997, Judge Gwin normally presides in the Northern District of Ohio.  See http://www.ohnd.uscourts.gov/home/judges/judge-james-gwin/.  He took over the KBR litigation by designation from his court in Cleveland.  See Judge Chucks Protective Order for Halliburton, Courthouse News Service (July 10, 2013) (found at ).

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.

© Robins Kaplan LLP | Attorney Advertising

Written by:

Robins Kaplan LLP
Contact
more
less

Robins Kaplan LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.