The federal district court in the District of Columbia issued a groundbreaking decision this week that held that documents created during a government contractor’s own internal investigation—conducted under the oversight but not direct supervision of the company’s legal department—are not protected by either the attorney‐client privilege or the similar but distinct attorney work product doctrine. The case is United States ex rel. Barko v. Halliburton Co., et al., Case No. 1:05‐CV‐1276 (D.D.C. 2014). The decision, if it stands on appeal, could drastically affect the way that companies conduct investigations to monitor their compliance with the law.
The attorney‐client privilege and the attorney work product doctrine are two of the oldest and most sacrosanct privileges in the law. Generally speaking, documents and communications exchanged between an attorney and client are protected; that is, the client cannot be forced to disclose those documents during litigation. However, the courts have long held that the privilege only applies when the attorney is providing legal advice. Thus, if an attorney is merely advising a company on how to conduct its business, those communications are not protected. But when an attorney is advising a client on legal principles, those communications fall within the attorney‐client privilege and are protected. Similarly, work product prepared by or at an attorney’s direction in the reasonable anticipation of litigation are also protected, albeit to a lesser degree. Thus, documents prepared by a non‐attorney are protected if the work was performed at an attorney’s direction and the document was prepared in reasonable anticipation of litigation.
The current case emanates from an action brought by a former employee of KBR alleging certain wrongdoing by the company in the performance of its government contracts. During the discovery phase of the litigation, the former employee requested 89 reports created during internal fraud investigations
conducted by KBR. KBR sought to protect those reports from release, citing the attorney‐client privilege and the attorney work product doctrine. The investigations had been primarily conducted by non‐lawyers working for KBR’s code of business conduct division, partially due to the impracticality and cost of sending lawyers to conduct interviews in a war zone. However, KBR’s code of business conduct division is supervised by its legal department and the reports at issue were forwarded to the company’s legal department for analysis and recommendations on action.
The court, quite surprisingly, found that because the “investigations were undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice” they were of a business nature rather than of a legal nature and thus were not privileged. In other words, because the investigations were conducted to examine any claims of wrongdoing submitted to the company’s ethics hotline, pursuant to an established corporate policy required by a standard government contract clause, it was not an investigation conducted pursuant to legal advice and thus not protected.
Also, important to the court’s conclusion was the fact that the employees who were interviewed as part of the investigation were neither informed that the purpose of the investigation was to obtain legal advice nor could they have inferred that the interviews were legal in nature because they were interviewed by a non‐attorney and the non‐disclosure agreements that they signed prior to the interview emphasized the business consequences of the investigation but not the legal consequences.
Additionally, the court reasoned that because these investigations are required by federal procurement regulations, the company would have had to conduct them anyway, regardless of whether they had been advised to do so by an attorney. The court relied on the “mandatory” nature of the investigations in reaching its conclusion that the documents were neither privileged nor protected by the work product doctrine. This reasoning has far reaching implications if it becomes established law that internal investigations, compliance programs and other similar quasi‐legal activities that are required by law are outside the scope of the attorney‐client privilege and work product doctrines. More and more, federal law is requiring companies to have internal compliance programs. For example two of the largest pieces of legislation in recent memory, Sarbanes‐Oxley and the Affordable Care Act, require companies within their purview to maintain compliance programs. And as every government contractor knows, the federal procurement regulations are replete with compliance standards and mandatory reporting requirements.
The consequences of this decision may be far‐reaching and extend beyond the realm of government contracting. In response companies should take certain actions to ensure that they can preserve the benefits of the attorney‐client privilege and attorney work product doctrine. First, companies should modify their code of business conduct to emphasize the legal nature of the code and the potential legal consequences for the company and the individual if the code is violated. Documents which are part of the company’s compliance program, for example employment agreements and investigation forms, should be similarly modified. Second, a company should maintain close supervision of its ethics and compliance department by its legal department and the company should involve its own lawyers, as well as outside counsel, as much as practicable when conducting even routine investigations. That way the legal nature of the investigation will be obvious. Third, interviewees should be advised of the legal nature of the proceedings and the NDA signed by the employee should make clear that the information sought is of a legal nature.
While we will monitor the appeal of this decision, the current holding is a good reminder that while the attorney‐client privilege and attorney work‐product doctrine are powerful shields during litigation proceedings, they may be more difficult to invoke than many believe. It is important that attorneys and clients alike review their procedures to ensure that they are laying the proper groundwork to be able to