Internal corporate investigations often raise questions regarding legal privileges. In an important attorney-client and work product controversy in the corporate area, last June the DC Circuit Court of Appeals granted a petition for a writ of mandamus in connection with documents the trial court had ordered to be made available to the plaintiff in a False Claims Act case. The case is reported as In re: Kellogg Brown & Root, Inc., 756 F.3d 754 (May 7, 2014). The Court of Appeals, vacating the District Court's document production order, found that the District Court, in United States ex rel. Barko v. Halliburton Co., No. 05-cv-1276, 2014 WL 1016784, at *2 (D.D.C. Mar. 6, 2014), should have carefully reviewed the protections afforded internal legal deliberation protections recognized by the Supreme Court in Upjohn Co. v. U.S.,449 U.S. 383 (1981). In doing so, the Court of Appeals recognized that the attorney-client privilege means that potentially critical evidence may be withheld from the factfinder; however, "our legal system tolerates those costs because the privilege 'is intended to encourage 'full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice.'" It further ordered that "[t]o the extent that Barko has timely asserted other arguments for why these documents are not covered by either the attorney-client privilege or the work-product protection, the District Court may consider such arguments."
During discovery, Barko sought documents related to a prior internal investigation. The internal investigation was pursuant to its Code of Business Conduct, which is overseen by the company's Law Department. The internal investigation had allegedly been conducted for the purpose of obtaining legal advice and that the internal investigation documents therefore were protected by the attorney-client privilege. Barko responded that the internal investigation documents were unprivileged "business records." After reviewing the disputed documents in camera, the District Court determined that the attorney-client privilege protection did not apply because, among other reasons, it has not been shown that "the communication would not have been made 'but for' the fact that legal advice was sought." United States ex rel. Barko., 2014 WL 1016784, at *2 (quoting United States v. ISS Marine Services, Inc., 905 F. Supp. 2d 121, 128 (D.D.C. 2012)). The District Court concluded that the internal investigation was "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice." Id. at *3.
The Court of Appeals found that "[t]he District Court erred because it employed the wrong legal test." "[I]n a key move", the District Court ruled 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," implying that "if there was any other purpose behind the communication, the attorney-client privilege apparently does not apply." The District Court, because it found that the internal investigation was "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice," further concluded that "'the primary purpose of' the internal investigation 'was to comply with federal defense contractor regulations, not to secure legal advice.'"
The Court of Appeals confirmed that "[t]he but-for test articulated by the District Court is not appropriate for attorney-client privilege analysis." It underscored the "that the primary purpose test, sensibly and properly applied, cannot and does not draw a rigid distinction between a legal purpose on the one hand and a business purpose on the other. After all, trying to find the one primary purpose for a communication motivated by two sometimes overlapping purposes (one legal and one business, for example) can be an inherently impossible task." The District Court's "novel approach to the attorney-client privilege... would eradicate the attorney-client privilege for internal investigations conducted by businesses that are required by law to maintain compliance programs, which is now the case in a significant swath of American industry." Finding that the District Court's decision "generated substantial uncertainty about the scope of the attorney-client privilege in the business setting," it concluded that "the District Court's decision is irreconcilable with Upjohn." It then held that "[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion."
The latest decision of the District Court in United States ex rel. Barko was issued, and most of the 150 or so documents generated by communications between Halliburton's in-house counsel and outside counsel qualify for the attorney-client or attorney work product protections. An appendix to the ruling lists these documents, and indicates the basis on which the court determined whether they are privileged.