D.C. Circuit reverses controversial privilege decision and reaffirms protection of internal investigation documents
In civil litigation in which an internal investigation has been conducted, parties often demand the production of investigative materials that many reflexively consider privileged. 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.
On Friday, the D.C. Circuit reversed a controversial district court decision calling into question common practices employed by companies in conducting and documenting internal investigations. The ruling makes plain that “[i]n 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.” United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276 (D.C. Cir.) (the KBR Case)
Back in March, the trial court in the KBR Case ordered that documents relating to an internal investigation be turned over in discovery because, the court reasoned, the documents had been created by investigators rather than attorneys and were written because of US regulatory obligations and “corporate policy” rather than for the purpose of obtaining legal advice. The initial KBR decision caused corporations conducting internal investigations to question long-held practices, even though many believed that the initial KBR decision was wrongly decided. Our original coverage of the lower court’s March decision can be found here.
On June 27, 2014, the U.S. Court of Appeals for the D.C. Circuit reversed the lower court’s privilege determination, holding that the documents at issue were indeed privileged. This was true regardless of whether the internal investigation was “conducted pursuant to a company compliance program required by statute or regulation, or was otherwise conducted pursuant to company policy.” The D.C. Circuit also held that the privilege applied because the investigators who wrote the privileged documents were acting at the direction of counsel. The Court summarized the test succinctly: “Sensibly and properly applied, the test boils down to whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication” (emphasis added).
The reversal of the March 2014 lower court decision and the clarification from the D.C. Circuit help corporations understand when privilege will apply to internal investigation documents. A few key lessons emerge for those who conduct or supervise corporate internal investigations:
- 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.
- Documents – even informal emails – 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.
- Company policies regarding the staffing of internal investigations are important; the roles and participation of outside counsel and non-lawyers require careful consideration.
- 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.