By Hogan Lovells LLP | July 10th, 2014

Stuart M. Altman, Kathryn Hellings, Ethan Kate, Michael F. MasonThomas L. McGovern IIIPeter 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.

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By Hogan Lovells LLP | May 21st, 2014

By Sarah Cummings and Marisa Cruz

An archaic World War II statute designed to give the federal government extra time to prosecute crimes during times of war – on the theory that the government is too preoccupied with the “rush of the war activities” – has recently reared its head in the context of False Claims Act qui tam actions for the first time in over 50 years. The dramatic and far-reaching consequences of such a tolling of the limitations period for False Claims Act lawsuits have brought renewed attention to this peculiar statute, which seems out of place in an era when the United States fights wars in an entirely different fashion.This update highlights five key and nuanced issues about which practitioners should be aware when considering potential exposure in civil False Claims Act matters.

Typically, a civil action under the False Claims Act must be brought within “6 years after the date on which the violation of [the statute] is committed” or within “3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States…but in no event more than 10 years after the date on which the violation is committed”, whichever is later. However, during times of war, a law codified in the 1940s – the Wartime Suspension of Limitations Act – extends the statute of limitations for prosecution of charges related to fraud offences against the United States. As originally drafted, the statute applied to toll the limitations period only for criminal fraud charges that occurred during wartime. As the Supreme Court long ago articulated, the connotation underlying the Wartime Suspension of Limitations Act “is that offences occurring prior to the termination of hostilities shall not be allowed legally to be forgotten in the rush of the war activities”. In other words, “[t]he fear was that the law-enforcement officers would be so preoccupied with prosecution of the war effort that the crimes of fraud perpetrated against the United States would be forgotten until it was too late”.

This statute has since been amended numerous times and generally now applies to both criminal and civil cases and the tolling period has been extended beyond its original version. As the Fifth Circuit has outlined, the act has three components:

  • a triggering clause;
  • a suspension period; and
  • a termination clause.

Moreover, the Supreme Court has held that the act applies only to offences committed after the triggering clause and before the termination of hostilities. The limitation period then begins to run when hostilities are terminated. Although the act had been dormant for nearly 50 years, a recent flurry of cases has brought it back to the forefront and raised a number of questions and concerns for those facing a False Claims Act lawsuit. Most notably, the Fourth Circuit – the first and only federal appellate court to consider the issue to date – effectively eviscerated the act’s statute of limitations in finding that it was tolled by the Wartime Suspension of Limitations Act during the relevant time period in which the allegedly fraudulent conduct occurred, mostly in 2005. Practitioners should pay close attention to this case as it continues: the defendants have asked the Supreme Court to take up the case. Although the Supreme Court has yet to make a decision, it asked the solicitor general for input on October 7 2013.

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This article was first published in the International Law Office White Collar Crime Newsletter –www.internationallawoffice.com

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