On May 7th, a three-judge panel (Judges Thomas Griffith, Brett Kavanaugh and Sri Srinivasan) of the U.S. Court of Appeals for the D.C. Circuit heard oral argument on the privilege issues raised by documents created as part of an internal investigation. As previously reported in this blog, in U.S. ex rel. Barko v. Halliburton Co., 1:05-CV-1276 (D.D.C. Mar. 6, 2014) the D.C. District Court required that the defendant in an FCA case turn over documents from a related internal investigation. The Court reasoned that since the investigation was not conducted at the behest of in-house counsel, the documents were ordinary business records created to comply with federal regulations and corporate policy. In other words, the Court ruled that they were not created to obtain legal advice.
The petition sets forth the significance of this matter to internal investigations: “It is no exaggeration to say that if the district court’s ruling stands, no defense contractor—and indeed, no public company, given widespread internal-control and auditing requirements under laws such as Sarbanes-Oxley and the Foreign Corrupt Practices Act  —can claim privilege over materials generated in internal investigations, because all such companies face obligations under ‘regulatory law’ (comparable to those the court held rendered KBR’s investigative documents unprivileged.” (Petition at 8) (emphasis in original).
The United States Chamber of Commerce, Association of Corporate Counsel, the National Association of Manufacturers, Coalition for Government Procurement, and American Forest & Paper Association, filed an amicus brief in support of the appeal. The brief argued that the District Court’s ruling “threatens to work a sea change in the well-settled rules governing internal corporate investigations.” (Amicus Brief at 1). As the amicus brief states: “stripping the attorney-client privilege where corporate policy drives employees to report legally significant facts to in-house lawyers would  penalize companies that have effective compliance policies.” (Amicus Brief at 14) (emphasis in original).
Regardless of the Court’s ruling, the decision is almost certainly going to have an impact on compliance policies and internal investigations going forward. Stay tuned to the Sidley FCA Blog for further updates as this case moves forward.