Stuart M. Altman, Kathryn Hellings, Ethan Kate, Michael F. Mason, Thomas L. McGovern III, Peter S. Spivack
While companies can breathe a sigh of relief following the D.C. Circuit Court’s recent unanimous ruling in In Re Kellogg Brown & Root, Inc., overturning the District Court’s decision in U.S., ex rel. Barko v. Halliburton Co., there are precautions companies should take to reduce the risk of disclosure of privileged materials generated during internal investigations. While the D.C. Circuit Court’s ruling reinforced the strength of the attorney-client privilege and work product doctrine in the District of Columbia, the lower court’s narrow construction of these protections nevertheless demonstrates the importance of simple precautions companies should consider when undertaking internal investigations in order to reduce the risk of privilege disputes.
Trial court rejects privilege
In its March 2014 decision, the United States District Court for the District of Columbia found that no attorney-client privilege or work product immunity attached to Kellogg Brown & Root’s (KBR) investigation of a qui tam plaintiff’s allegations of corruption related to government subcontracts. KBR’s compliance office conducted an internal investigation, as required both by law under the Federal Acquisition Regulation (FAR) and by its own internal policy. The plaintiff, Barko, sought production of documents related to the company’s internal audits and investigations of his allegations, over which KBR asserted claims of attorney-client privilege and work product immunity. Following an in camera review of these internal records, the court noted that the reports were “eye-openers” in showing that KBR employees had steered business and otherwise provided preferential treatment to a particular third party, who continued to receive contracts despite poor performance and repeated attempts to double bill.
In rejecting KBR’s assertion of the attorney-client privilege, the District Court applied a “but for” test, requiring that KBR show that “the communication would not have been made ‘but for’ the fact that legal advice was sought.” The court found that the attorney-client privilege did not apply here. Because the investigation was undertaken primarily as a result of regulatory requirements and corporate policies, KBR would have conducted the internal investigation regardless of whether they were seeking legal advice. The district court noted in support of its decision that the employees who were interviewed had not been informed that the purpose of the interview was to obtain legal advice, nor would they have been able to infer the legal nature of the interview, given that the interviews were not conducted by attorneys.
The District Court similarly rejected KBR’s argument that the work product doctrine applied. While the District Court acknowledged that documents created by non-attorneys could be protected by the work product doctrine, that protection only applied when the investigation documents were prepared or obtained in anticipation of litigation. The court stressed that the party asserting the work product doctrine bears a heavy burden and must show that the documents were not prepared in the course of ordinary, non-litigation business. In Barko, the District Court determined that because “any responsible business organization would investigate allegations of fraud, waste, or abuse,” this internal investigation was not conducted for litigation purposes and, thus, the documents created during that investigation were not protected by the work product doctrine.
