United States: D.C. Circuit Protects Attorney-Client Privilege In Internal Corporate Investigations

The appellate court clarifies that internal corporate investigations are subject to the attorney-client privilege where one of the significant purposes of the investigation is to secure legal advice for the company.

On June 27, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit held that the attorney-client privilege attaches to internal corporate investigations where one of the significant purposes of the investigation is obtaining legal advice for the company.1 In granting a petition for a writ of mandamus filed by Kellogg Brown & Root, Inc. (KBR), which challenged a lower court ruling compelling production of investigation records in a qui tam action, the D.C. Circuit made clear that reports of voluntary internal investigations do not lose privilege protection just because the investigation was undertaken pursuant to regulatory or corporate obligations. Rather, if a significant purpose of the investigation was to inform legal advice for the company, reports of the investigation should remain protected from disclosure.

Background—Lower Court Applies "But For" Standard

In March 2014, Judge James Gwin, sitting by designation on the U.S. District Court for the District of Columbia,2 ordered that KBR produce several reports, dating from 2004, of internal investigations performed pursuant to KBR's code of business conduct to relator Harry Barko in connection to his False Claims Act qui tam action pending against the company. Barko argued that the reports, which relate to alleged improper conduct by KBR employees, were relevant to his claims that KBR had defrauded the U.S. government under a series of defense contracts. Barko further argued that the reports were not protected by the attorney-client privilege, even though the underlying investigations had been undertaken at the direction of the KBR Law Department. The district court agreed.

The court applied what it called a "primary purpose" test, but held that, for the attorney-client privilege to protect the KBR investigation reports from disclosure, the investigations themselves would not have occurred "but for" the fact that legal advice was being sought.3 Unlike the investigation at issue in the seminal corporate attorney-client privilege case, Upjohn Co. v. United States,4 the court concluded that the KBR investigations were "routine" corporate compliance investigations undertaken pursuant to regulatory requirements of defense contractors that mandate corporate compliance programs. The district court reasoned that, because the KBR investigations satisfied KBR's regulatory requirements, they would have occurred regardless of whether legal advice was being sought. The court held the investigations did not satisfy its "but for" standard and KBR's investigation reports were, therefore, not privileged.5

KBR initially sought to certify the issue for interlocutory appeal but was denied by the lower court. It then filed a petition for a writ of mandamus to the D.C. Circuit, challenging the district court's order.

Attorney-Client Privilege in Internal Investigations—Legal Advice Need Only Be a Primary Purpose, Not the Primary Purpose

The D.C. Circuit agreed with KBR and issued the writ, holding that the district court's ruling constituted clear legal error. In analyzing the underlying privilege claim, the circuit court rejected the lower court's attempt to distinguish KBR's investigations from the investigation conducted in Upjohn, concluding that the two sets of investigations were materially indistinguishable in that both were initiated to gather facts and ensure compliance with the law. Moreover, both were conducted under the auspices of the in-house legal department. The circuit court then explicitly rejected the "but for" standard applied by the lower court and clarified the proper standard that should govern the application of privilege in the internal investigation context. The panel explained that, under this standard, "[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies."6 The privilege applies to internal investigations under this standard, "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."7

Perhaps most significantly, the circuit court recognized the potential damage the district court's ruling could have wrought to the attorney-client privilege—and to corporations seeking to comply with the law through proactive internal investigations—if it had been allowed to stand. Under the lower court's "but for" formulation, "businesses would be less likely to disclose facts to their attorneys and to seek legal advice, which would 'limit the valuable efforts of corporate counsel to ensure their client's compliance with the law.'"8 Instead, the D.C. Circuit recognized that simply because internal investigations can, and often do, serve both business and legal purposes, the dual purpose does not vitiate the privilege.

Conducting Investigations and Maintaining Privilege

Although the D.C. Circuit clarified that the attorney-client privilege attaches to internal investigations "if one of the significant purposes of the internal investigation was to obtain or provide legal advice,"9 clients seeking to ensure that internal investigations retain privilege protections are well advised to take the following steps to remove any doubt as to whether the investigation is privileged:

  • The investigation should be done at the direction and under the supervision of legal counsel. While at the very least, in-house counsel serving in a legal capacity should oversee the investigation, as a best practice, outside counsel should be involved early in the investigative process.
  • Investigators leading employee interviews, even if not legal counsel, should provide Upjohn warnings at the beginning of the interview that clearly state that the investigation is being conducted under the supervision of legal counsel for the purpose of providing legal advice to the company.
  • To the extent possible, all investigatory processes, memoranda, and reports should be prepared by legal counsel acting on behalf of the company and should be clearly marked as subject to the attorney-client privilege and work-product protection.
  • If the investigation uncovers information that may subject the company to civil or criminal liability, outside counsel should be consulted immediately.

Footnotes

1. See In re Kellogg Brown & Root, Inc., No. 14-5055, 2014 WL 2895939 (D.C. Cir. June 27, 2014) (slip op.).

2. Judge Gwin normally sits on the U.S. District Court for the Northern District of Ohio.

3. See United States ex rel. Harry Barko v. Halliburton Co., No. 1:05-CV-1276, 2014 WL 1016784, at *2 (D.D.C. March 6, 2014) (citing United States v. ISS Marine Servs., Inc., 905 F. Supp. 2d 121, 128 (D.D.C. 2012)).

4. 449 U.S. 383 (1981).

5. United States ex rel. Barko, 2014 WL 1016784, at *3 (internal citations omitted) ("The [KBR] investigation was a routine corporate, and apparently ongoing, compliance investigation required by regulatory law and corporate policy. In contrast, the Upjohn internal investigation was conducted only after attorneys from the legal department conferred with outside counsel on whether and how to conduct an internal investigation. As such, the [KBR] investigative materials do not meet the 'but for' test because the investigations would have been conducted regardless of whether legal advice was sought. The [KBR] investigations resulted from the [d]efendants' need to comply with government regulations.").

6. In re Kellogg Brown & Root, 2014 WL 2895939, at *4 (emphasis added).

7. Id.

8. Id. (quoting Upjohn, 449 U.S. at 392).

9. Id. at *5.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions