On June 27, 2014, the U.S. Court of Appeals for the D.C. Circuit
issued a major decision clarifying the scope of the attorney-client
privilege as applied to corporate internal investigations.
The case, In re Kellogg Brown & Root, Inc., arose out
of a qui tam False Claims Act suit against KBR. The
parties disputed whether the attorney-client privilege protected
from discovery various communications made in connection with
KBR's internal investigation into the alleged misconduct. The
District Court held that a party invoking the attorney-client
privilege must show that the communication would not have been made
but for the fact that legal advice was sought, and that
KBR's investigations, which implemented both federal
contracting regulations and corporate policy, would have been
conducted anyway. The District Court therefore ordered KBR to
disclose the communications at issue to the relator's
counsel.
In a unanimous decision, the D.C. Circuit granted KBR's
mandamus petition and vacated the district court's order. The
Court of Appeals' opinion was authored by Circuit Judge
Kavanaugh and joined in full by Circuit Judges Griffith and
Srinivasan.
Most importantly, the Court of Appeals' clear,
highly-protective standard for asserting the privilege as to the
products of internal investigations represents a major victory for
corporate counsel: "So long as obtaining or providing legal
advice was one of the significant purposes of the internal
investigation," the Court explained, "the attorney-client
privilege applies, even if there were also other purposes for
the investigation and even if the investigation was mandated by
regulation rather than simply an exercise of company
discretion." (Emphases added.)
In so holding, the Court of Appeals rejected the district
court's "but for" test. The Court also rejected the
district court's view that various factors common to corporate
internal investigations categorically disqualify communications
from the protection of the attorney-client privilege. Rather, the
privilege applies "regardless of whether an internal
investigation was conducted pursuant to a company compliance
program required by statute or regulation, or was otherwise
conducted pursuant to company policy." The Court also held
that it was immaterial that the communications were made to
KBR's in-house counsel, rather than outside counsel.
In re KBR is a major victory for corporate counsel
concerned about the applicability of the privilege in internal
investigations. As the Court of Appeals recognized, the District
Court's opinion "relied on a number of factors that
threaten[ed] to vastly diminish the attorney-client privilege in
the business setting" and indeed would "eradicate the
attorney-client privilege for internal investigations conducted by
businesses that are required by law to maintain compliance
programs, which is now the case in a significant swath of American
industry." Under the KBR standard, by contrast, the
privilege will apply if "one of the significant purposes of
the internal investigation" was to consult with in-house or
outside counsel about the company's compliance with regulatory
law.
WilmerHale filed an amicus brief on behalf of the Chamber of
Commerce of the United States, the National Association of
Manufacturers, the Coalition for Government Procurement, the
American Forest and Paper Association, and the Association of
Corporate Counsel, in support of KBR's petition for mandamus.
Amici argued that the district court's "but for"
standard was both unsupported by precedent and illogical, as
in-house lawyers often perform overlapping legal and nonlegal
functions within a company. Amici also explained that denying the
privilege where communications are made pursuant to corporate
compliance programs would penalize companies for adopting such
programs, which federal law generally encourages and often
requires.
The Court of Appeals agreed with all of amici's legal
arguments and quoted the amicus brief's description of the
far-reaching consequences of the District Court's decision:
"As amici added, the District Court's novel approach has
the potential to 'work a sea change in the well-settled rules
governing internal corporate investigations.'"
WilmerHale Partner Carl Nichols oversaw the amicus brief; others
involved include Counsel Elisebeth Cook, former Senior Associate
Leah Litman, and Associate Adam Klein.
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