On March 6, 2013, the United States District Court for the District of Columbia ruled that Kellogg Brown & Root Services, Inc. (“KBR”) must produce to a qui tam relator 89 documents relating to internal investigations conducted by the Company. The court held that neither the attorney-client privilege nor the attorney work-product doctrine barred production or disclosure of the documents. United States ex rel. Barko v. Halliburton Co. et al., Case No. 05-01276 (D.D.C. Mar. 6, 2014). The decision could have widespread implications for companies that conduct internal investigations of whistleblower complaints.
A former employee (Barko) filed a sealed lawsuit asserting claims under the False Claims Act (“FCA”) against KBR. Barko alleged that KBR engaged in improper bidding and billing practices on contracts for work in Iraq. Three years prior to the unsealing of the complaint, KBR conducted an investigation pursuant to its code of conduct. At the conclusion of the investigation, KBR investigators wrote a report, which was transmitted to KBR’s Law Department. During discovery, Barko requested documents relating to KBR’s internal investigations of the subject matter of Barko’s complaint. KBR refused, asserting the attorney-client privilege and/or the attorney work-product doctrine.
The Court’s Holding
The court reviewed the documents in camera and ruled they were not privileged. The court relied heavily on its conclusion that the investigations had been conducted in the ordinary course of business. Department of Defense regulations, the court explained, require contractors like KBR to have codes of business conduct, adopt mechanisms for employees to report potential violations of the codes, conduct internal investigations of potential violations, and make mandatory disclosures to Government agencies of potential violations. The court determined that the attorney-client privilege would apply only if KBR showed that the investigation documents would not have been created but for the fact that KBR sought legal advice. KBR failed to meet this burden, the court held, because the compliance investigations were required by law and company policy. The court also noted that non-attorney investigators were used to conduct interviews and that interviewees were not informed that KBR was conducting the investigation in part to obtain legal advice.
The court held that the documents were not protected by the attorney work-product doctrine for similar reasons. The investigations would have been carried out in the ordinary course of business to comply with statutory obligations and DoD regulations and irrespective of the prospect of litigation. The court noted that the timing of the investigation – more than three years before the qui tam complaint was unsealed – also weighed against finding that the underlying documents were created in anticipation of litigation.
On March 11, 2014, the district court denied KBR’s motion to certify its March 6 decision for interlocutory appeal, and denied the company’s request to stay the effect of the order pending appeal. In its ruling, the court reaffirmed its prior ruling, noting that its finding that the documents were not protected “was not a close question.”
This decision could have a significant impact on companies’ ability to claim attorney-client privilege or work-product protection for internal investigations, particularly when a company’s regulatory obligations require an investigation. Employers should work closely with their legal departments or outside counsel to determine early in the investigative process those investigations intended to be privileged. Employers also should consider whether to have outside counsel conduct the investigation exclusively. If the employer intends to protect a particular investigation or portion of investigation, the employer should document, in detail, the fact that the investigation is being undertaken at the request of the company/client to obtain legal advice and/or in anticipation of potential litigation. Employers should also advise employees who are interviewed or otherwise involved that the investigation is privileged and confidential.