A recent blog post addressed a noteworthy decision in United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276, 2014 WL 1016784 (D.D.C. Mar. 6, 2014), which held that materials relating to an internal investigation were not protected by the attorney-client privilege. The decision was quickly seen as casting doubt on a company’s ability to conduct a privileged investigation of alleged employee misconduct. A petition for writ of mandamus to the Court of Appeals for the D.C. Circuit followed, along with amicus briefs by groups interested in protection of the privilege.
On June 27, 2014, the D.C. Circuit took the rare step of issuing a writ of mandamus in In re Kellogg Brown & Root, Inc. et al., No. 14-5055, 2014 WL 2895939 (D.C. Cir. June 27, 2014), relying on the holding in Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). In Upjohn, the Supreme Court held that information gathered by attorneys for the purpose of providing legal advice to a corporation is protected by the attorney-client privilege.
In United States ex rel. Barko v. Halliburton HAL -3.38% Co., the district court held that the internal investigation was not privileged because it had not been conducted primarily to facilitate the provision of legal advice. Rather, in the court’s view, the investigation had been conducted as a matter of regular company policy under a corporate compliance program, which itself derived from federal regulatory requirements. As a defense contractor, defendant KBR was required by federal regulation to conduct such an investigation. The district court was also influenced by the fact that in-house compliance personnel, not lawyers, had conducted interviews and had not told witnesses that the investigation was protected by attorney-client privilege or otherwise had a legal purpose.
In a unanimous decision, the D.C. Circuit held that the district court’s ruling could not be squared with the holding in Upjohn. The company’s claim of privilege was “materially indistinguishable from Upjohn’s assertion of the privilege in that case,” and the district court committed “legal error” in refusing to treat KBR’s investigation as privileged.
Above all, the D.C. Circuit rejected the test applied by the district court. To determine whether a communication is privileged, courts consider the “primary purpose” of the communication. The district court erred by holding that “the primary purpose of a communication is to obtain or provide legal advice only if the communication would not have been made ‘but for’ the fact that legal advice was sought.” (Emphasis added). Or, as the D.C. Circuit put it, the investigation would not be privileged under the district court’s test “if there was any other purpose behind the communication.”
The district court’s formulation of a “but for” test did not take account of corporate and legal reality, in the D.C. Circuit’s view. Investigations are often conducted for multiple purposes, business as well as legal. KBR conducted its investigation pursuant to a written policy of investigating possible misconduct and Department of Defense regulations. Whereas the district court viewed this as an independent, primary purpose that vitiated the privilege, the D.C. Circuit held, to the contrary, that it was simply another objective alongside the valid purpose of obtaining legal advice.
Likewise, the D.C. Circuit, unlike the district court, assigned little importance to who conducted witness interviews and what was specifically said to those interviewed about the purpose of the investigation. Nor did the D.C. Circuit regard the involvement of outside counsel as essential. What mattered was that lawyers, in this case in-house lawyers, were overseeing a fact-gathering process intended to help provide the company with legal advice. In short, an investigation is privileged according to the D.C. Circuit so long as “one of the significant purposes” of the investigation was to obtain or provide legal advice.
Companies today face legal and regulatory requirements of all kinds, and pursuant to these requirements companies adopt layers of compliance policies and programs. When questions of compliance arise, as they inevitably will, responsible companies investigate them – as a matter of company policy and good corporate governance, and in order to get legal advice as to how to handle the issue. The KBR decision provides some comfort that companies will not lose the attorney-client privilege when they do what is expected of them.