In civil litigation in which an internal investigation has been conducted, parties often demand the production of investigative materials that many reflexively consider privileged.  A recent case, however, has called into question certain practices employed by companies in conducting and documenting internal investigations.  Understanding when documents generated during such investigations will be considered privileged by a court – and when they won’t – is critical for anyone who might face a government investigation or subsequent civil litigation. The recent case suggests that if maintaining privilege over the results of an internal investigation is important, the investigation should be conducted by outside counsel and documented with care.

Although internal investigations conducted by counsel to give advice to clients are usually considered privileged, when the investigation is conducted for multiple purposes – some legal but some not – the privileged nature of the documents generated during the investigation is less certain.  In addition, when the fruits of an investigation are used for business or public relations purposes, otherwise privileged documents may be discoverable in litigation. Privilege also may not attach to materials generated during investigations that are required by law in certain heavily-regulated industries such as financial services, defense, or health care. Finally, when investigations are conducted and supervised solely by company personnel and/or non-lawyers, any work product that is generated may not be privileged.  

A recent federal district court case, United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276 (D.D.C) (the KBR Case), illustrates these risks.  The KBR Case involves a claim filed by a private plaintiff against a defense contractor under the US False Claims Act, 31 U.S.C. §§ 3729-33.  Five years prior to the unsealing of the lawsuit, the defense contractor commenced an internal investigation related to the allegations underlying the plaintiff’s claims.  The plaintiff sought discovery of any materials generated by the company during the investigation.  The contractor sought to prevent the materials from being discovered by invoking both the attorney-client privilege and work product doctrine.  The court refused to recognize any privilege in the investigative materials, and ordered their production to the plaintiff.

The court found the following facts persuasive in ruling against the company:

  • The company’s investigators were not attorneys.  These investigators interviewed witnesses, reviewed documents, and prepared reports. 
  • The company decided to launch the investigation because of US regulatory obligations and “corporate policy” rather than for the purpose of obtaining legal advice. 
  • The investigation was commenced without input from outside counsel as to whether and how to conduct the investigation. 
  • Interviewees were not told that the investigation was being conducted for legal reasons. 

Although the district court denied the company’s motion for a stay or interlocutory appeal of the decision, the company has filed a writ of mandamus with the D.C. Circuit seeking to vacate the district court’s order.  The Association of Corporate Counsel has filed an amicus brief in support of the company.

In the meantime, a few key lessons emerge for those who conduct or supervise corporate internal investigations:

  1. If there is any risk that there may be litigation relating to the topic of an investigation, clients are well advised to have litigation counsel involved at the outset. 
  2. Documents – even informal e-mails – need to be drafted to maximize the chance that they will be considered privileged and as if they will someday be disclosed.  Interview memoranda should not be prepared like transcripts, but should contain the lawyers' mental impressions and tactical ideas.  And emails should not contain inflammatory or “amusing” commentary.
  3. Company policies regarding the staffing of internal investigations are important; the roles and participation of outside counsel and non-lawyers require careful consideration. 
  4. Those conducting the investigation should thoughtfully document the purpose for their investigation with applicable privilege rules in mind.  If the purpose of the investigation may erode or eliminate the privilege, the investigative team should understand this risk and proceed accordingly.