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General Counsel’s Corner: Protecting Attorney-Client Privilege During Internal Investigations [Higher-Ed/College Athletics Best Practices Alert (Third Quarter 2014)]

Author: Michael L. Buckner, Esquire (Shareholder)

In the case, In re: Kellogg Brown & Root, Inc., et al., a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) granted a petition for mandamus and, in the process, clarified the protections afforded by the attorney–client privilege during internal investigations. See In re: Kellogg Brown & Root, Inc., et al., No. 14-5055, slip op. at 18 (D.C. Cir. June 27, 2014). [Note: A copy of the appellate decision can be downloaded by clicking here.]

According to the facts included in the decision, Harry Barko worked for a defense contractor, KBR. In 2005, Barko filed a federal False Claims Act (31 U.S.C. §§ 3729 – 3733) complaint against KBR and related corporate entities [see United States ex rel. Barko v. Halliburton, No. 1:05-CV-1276 (D.D.C. Mar. 6, 2014): a copy of the decision can be downloaded by clicking here.]. Barko contended KBR and its subcontractors defrauded the federal government “by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq”. Barko requested discovery “related to KBR’s prior internal investigation into the alleged fraud”. KBR conducted the “internal investigation pursuant to its Code of Business Conduct, which is overseen by the company’s Law Department. KBR argued that the internal investigation had been conducted for the purpose of obtaining legal advice and that the internal investigation documents therefore were protected by the attorney-client privilege”. Barko disagreed, and claimed he was entitled to the discovery since “the internal investigation documents were unprivileged business records”. The United States District Court for the District of Columbia, conducted an in camera review of the contested documents. The district court determined the attorney-client privilege protection was not applicable because:

  1. KBR did not demonstrate that “the communication would not have been made ‘but for’ the fact that legal advice was sought”.
  2. KBR’s internal investigation was “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice”.

KBR requested the district court to certify the privilege question to the D.C. Circuit for interlocutory appeal, as well as to stay its order pending a petition for mandamus in the circuit court. The district court denied KBR’s requests. Further, the district court ordered KBR to produce the disputed documents to Barko within days. KBR subsequently filed a petition for a writ of mandamus in the D.C. Court.

The D.C. Circuit granted the writ and concluded (internal citations omitted):

“In the context of an organization’s internal investigation, if one of the significant purposes of the internal investigation was to obtain or provide legal  advice, the privilege will apply. That is true 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.

In this case, there can be no serious dispute that one of the significant purposes of the KBR internal investigation was to obtain or provide legal advice. In denying KBR’s privilege claim on the ground that the internal investigation was conducted in order to comply with regulatory requirements and corporate policy and not just to obtain or provide legal advice, the District Court applied the wrong legal test and clearly erred.”

Although the D.C. Circuit overruled the district court’s interpretation of the attorney-client privilege, colleges and universities should consider the following strategies, practices and tactics to preserve the attorney-client privilege during an internal investigation:

  1. Engage in-house or external legal counsel when conducting internal investigations (to protect privileged information from discovery in other forums). [Note: A claim of attorney-client privilege may be more likely to be sustained by some courts if the internal investigation was performed or supervised by outside legal counsel.]
  2. Retain external legal counsel to conduct the internal investigation if: (a) the in-house counsel possesses a conflict; (b) the in-house counsel cannot manage or complete the inquiry due to time constraints or other issues; (c) the investigation involves sensitive issues that may be more appropriately handled by an external party; or (d) the investigation involves a subject demanding unique expertise or knowledge.
  3. Determine the purpose of the internal investigation, including: (a) an evaluation of the future outcomes relating to the facts (e.g., litigation); (b) an assessment of the privileged nature of the investigation as it relates to the future outcomes; and (c) a notation when the threat of litigation occurred or was evident.
  4. Confirm attorneys document the internal investigation’s purpose in a written document, which should state the investigation is being conducted for the purpose of obtaining legal advice.
  5. Ensure legal counsel completes the following tasks during the internal investigation: (a) provide oversight for, and operate the day-to-day operations of, the investigative process; (b) identify the allegations that are investigated, the witnesses that are interviewed and the evidence that is collected; (c) mark all investigative materials as attorney-client privilege and, if appropriate, attorney work product; and (d) prepare the central investigative materials (e.g., reports).
  6. Provide an Upjohn warning [see Upjohn Co. v. United States, 449 U.S. 383 (1981)] to persons interviewed during the internal investigation. The warning should address the following notions: (a) the inquiry investigation is being conducted at the direction of legal counsel and for the purpose of obtaining legal advice; and (b) the interview is protected by the attorney-client privilege. [Note: Buckner utilizes a written interview notice, as well as provides oral instruction prior to and during an interview, to convey this advice.]
  7. Advise persons involved in the internal investigation (i.e., investigation team, employees producing information and with knowledge of the case) that the inquiry investigation is being conducted at the direction of legal counsel and for the purpose of obtaining legal advice.

Sources: Ted Zwayer, "Protecting the attorney-client privilege during a workplace investigation: Tips & templates", LexisNexis, available at: https://www.lexisnexis.com/lextalk/practice-insights/f/13/t/442.aspx; "In re: Kellogg Brown & Root, Inc., et al.: D.C. Circuit Grants Petition for Mandamus and Protects Attorney–Client Privilege of Internal Investigation in False Claims Act Case”, Jones Day, available at: http://www.jonesday.com/files/Publication/68cfc853-cbe4-41d4-945a-db01f9d0feb6/Presentation/PublicationAttachment/f5fc4fe2-2aa5-456f-bb38-e734efeb8481/In%20re%20Kellogg%20Brown%20Root.pdf.

Contact Michael L. Buckner (954-941-1844; mbuckner@bucknersportslaw.com) for additional information on conducting internal investigations.