On March 6, a U.S. district court judge, sitting by designation in the District of Columbia, granted a relator's motion to compel and ordered defendants to produce documents constituting the results of the defendants' internal investigations, related to the subject matter of the relator's amended complaint. In discovery, the defendants asserted attorney-client privilege and work product protection in response to relator's requests for "internal audits and investigations" into the alleged misconduct and the related subject matter. The investigations were undertaken by a Director of the Code of Business Conduct ("COBC") and completed by a team of non-lawyers, following receipt of an employee tip about potential misconduct. After the investigations were completed, summary reports were prepared and forwarded to the company's Law Department.
The district court reviewed the summary investigative reports in cameraand noted that they were "eye-openers." The court ruled that the reports were not protected by the attorney-client privilege nor the attorney work product doctrine. The court found that the investigations were "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice." Specifically, the court referred to the Department of Defense regulations that "require contractors to have internal control systems such as [defendants'] COBC program" so that reported instances of alleged misconduct can be investigated and reported. Applying the Upjohn "but for" test used to determine the applicability of the attorney-client privilege, the court concluded that the implementation of these "routine corporate, and apparently ongoing, compliance investigation[s]" were nothing more than the company's implementation of DOD requirements. Accordingly, the court found that the investigative reports "would have been conducted regardless of whether legal advice were sought."
The court also found persuasive that employees interviewed by COBC investigators were never expressly advised that the purpose of these investigations was to obtain "legal advice." The absence of this express notice was, according to the court, further evidence that these reports were not protected under the attorney-client privilege. Finally, the court noted additional characteristics of the investigation that weighed against applying the attorney-client privilege, including that employees were asked to sign confidentiality statements that discussed only potential "adverse business impact" (as opposed to legal implications) if disclosures were made, and that the interviews were conducted by non-attorneys.
Similarly, the court held that these documents were not protected under the work-product doctrine. In its analysis, the court again emphasized the fact that these investigations were conducted "in the ordinary course of business" pursuant to DOD regulatory requirements, and thus these documents were not prepared in anticipation of litigation. The court also highlighted the timing of these investigations, particularly the fact that the investigations were conducted years prior to the unsealing of the qui tamlitigation.
In light of the many statutory requirements, such as the Affordable Care Act, that require strong internal and external controls to prevent any potential misconduct, as well as the highly regulated nature of the current business environment overall, this case has troubling implications for industry. The case teaches that entities should consider engaging counsel early in an investigation if there is likely to be a need to protect the results under privilege. Moreover, the work product of the investigation, such as memoranda, reports, and the like, should make clear that they were prepared for counsel to assist in providing legal advice.