Lorene F. Schaefer, ESQ., is the managing partner of Win-Win Resolve, a boutique law firm focused on ADR and the management of compliance hotlines, internal dispute resolution programs, workplace investigations and mediations. Her book, “Corporate Counsel’s Guide to Internal Investigations of Harassment, Discrimination and Retaliation Claims,” will be published in 2014 by the ABA. ()
A decision issued on March 6 by the U.S. District Court for the District of Columbia serves as a stark reminder that internal investigations must be carefully structured and executed to garner the protection of the attorney-client privilege and attorney work product doctrine, especially when nonattorneys are being used to assist in the investigation.
In United States ex rel. Barko v. Halliburton, No. 1:05-CV-1276 (D.D.C. slip op. issued March 6, 2014), the court ordered a Halliburton subsidiary to produce documents related to an internal investigation of an alleged Code of Business Conduct violation.
The court found that these documents were not protected under the attorney-client privilege or the work product doctrine because the investigation was a routine business practice and conducted under a federally mandated compliance program. Specifically, the court concluded that the investigation was “a routine corporate … compliance investigation required by regulatory law and corporate policy” and the “investigations would have been conducted regardless of whether legal advice were sought.” Id. at 6. In concluding that the investigation was protected neither by the attorney-client privilege nor by the attorney work product doctrine, the court also highlighted the absence of a number of the traditional hallmarks of an attorney-client privileged internal investigation.
This case is a significant development and even attorneys representing companies not operating under a legally mandated compliance program should be aware of Barko‘s potential implications when conducting internal investigations, especially when nonattorneys are going to be used to assist legal counsel in the investigation.
In Barko, plaintiff-relator Henry Barko filed a qui tam False Claims Act lawsuit against Kellogg Brown & Root Services Inc., KBR Technical Services Inc., Kelly, Brown & Root Engineering Corp., Kellogg, Brown & Root International Inc. and Halliburton Co. (collectively KBR). Barko was a former contract administrator for KBR in Iraq and alleged that KBR provided preferential treatment to subcontractors to inflate the costs of construction services on military bases in Iraq. The complaint alleged that KBR would pass the inflated costs along to the U.S. government and receive additional awards under the Logistics Civil Augmentation Program.
Prior to Barko’s lawsuit being filed, KBR had received an internal report that made allegations similar to those made in the Barko lawsuit. That internal report was routed to the director of the Code of Business of Conduct (COBC), who opened a COBC file to investigate the matter. According to the declaration of KBR in-house counsel Chris Heinrich, the director of the COBC at the time in question was a lawyer in the legal department named Richard Mize, and Mize and Heinrich were “responsible for providing legal advice to KBR in connection with COBC investigations regarding allegations of kickbacks, bribery, fraud or other potential COBC violations involving KBR employees and its subcontractors. These COBC investigations are undertaken by investigators in KBR’s Security Department at my direction and under my supervision, or at the direction and under the supervision of the director. COBC investigators are instructed to keep this work confidential and to disclose it only to me, the director, or other KBR employees whom the director or I have authorized to assist with the investigation.”
In response to discovery requests, KBR cited Upjohn v. United States, 449 U.S. 383 (1981) and asserted the attorney-client privilege and attorney work product doctrine and refused to produce documents related to the internal COBC investigation. Barko filed a motion to compel and after conducting an in camera review the judge granted Barko’s motion.
In granting Barko’s motion to compel, the court began by stating that for KBR to prevail on its assertion of the privilege it must show that the communications were for “the purpose of securing primarily either (i) an opinion on law or (ii) assistance in some legal proceeding.” It called this standard the “but for formulation,” requiring KBR to show that “the communication would not have been made ‘but for’ the fact that legal advice was sought.” Barko at 5.
Applying this standard, the court then distinguished the KBR investigation from the internal investigation conducted in Upjohn. According to the Barko court, KBR’s internal investigation was a “routine” investigation required by regulatory law and corporate policy. In contrast, the Upjohn internal investigation that “was conducted only after attorneys from the legal department conferred with outside counsel on whether and how to conduct an investigation.” Id. at 6.
The court viewed the failure of the investigators to inform witnesses interviewed that the purpose of the interview was to assist KBR in obtaining legal advice as further evidence that the investigation was conducted for a business purpose and not primarily to receive legal advice. The court noted that the confidentiality agreement the employees were asked to assign never mentioned that the purpose of the investigation was to obtain legal advice and that the employees would never have been able to infer the legal nature of the inquiry by virtue of the interviewer as the interviews were conducted by nonattorneys.
Based on the foregoing, the Barko court concluded KBR’s internal “investigation was not for the primary purpose of seeking legal advice” and was “not entitled to the protection of the attorney-client privilege.” Id. at 7. The court also rejected KBR’s attorney work product assertion stating that the work product protection has “no applicability to documents prepared by lawyers in ‘the ordinary course of business or for other non-litigation purposes.’” Id. at 8.
Implications for Legal Counsel
As the U.S. Supreme Court noted over 30 years ago, “[a]n uncertain privilege …is little better than no privilege at all” and it is well-settled law that a corporation has the ability to safeguard its attorney-client privilege and work product when conducting internal investigations. Upjohn, Co. 449 U.S. at 393. The Barko decision stands, however, as a stark reminder that corporations carry the burden to demonstrate that the privilege applies and courts are skeptical of these assertions, especially when the internal investigation is conducted by a nonattorney and supervised only by in-house counsel who often has business responsibilities in addition to providing legal counsel.
The determination of whether the attorney-client privilege and work product doctrines apply in any given case is fact dependent and there is no one “magic bullet” or guaranteed safe haven. With that said, the Barko decision provides a useful roadmap of steps legal counsel can take to maximize the likelihood that a court will deem an internal investigation protected from disclosure by the attorney-client privilege or attorney work product doctrine.
• Company counsel should be consulted early when allegations of workplace misconduct are made and that consultation should be documented. In deciding whether to use in-house counsel or outside counsel to conduct or direct the internal investigation, recognize that judges (including the Barko judge) have a tendency to more easily view the advice of outside counsel as legal advice as compared to in-house counsel who often function as both legal advisors and business advisers.
• Document any threat of litigation.
• If a nonattorney is going to assist in the investigation, the attorney supervising and directing the investigation should give the nonattorney an Upjohn letter formally documenting that the nonattorney is working at the direction of legal counsel to gather facts necessary for the attorney to give the company legal advice.
• Give all witnesses Upjohn warnings and document the same. All individuals who are interviewed should be advised that the investigation is confidential and being done at direction of legal counsel in order to gather facts necessary for the company attorney to provide legal advice. Consider having each witness sign an acknowledgement of the Upjohn warning.
• Mark all documents created during the course of the investigation as attorney-client privileged and attorney work product and maintain the investigation files in a confidential manner.
• Advise company leadership not to discuss the investigation except with legal counsel present and only then with those with a legitimate need to know.