U.S. Justice Department headquarters in Washington. (Photo: Mike Scarcella/ALM)
As the Department of Justice (DOJ) continues its aggressive enforcement of the federal False Claims Act (FCA)—recovering $4.7 billion in FCA cases in FY 2016 alone, including $2.5 billion from the health care industry—it has perhaps never been more important for in-house attorneys to understand their role in conducting internal investigations. Central to the in-house lawyer’s duties in investigating a potential FCA violation is the protection of the company’s attorney-client privilege and any documents covered by the attorney work product doctrine. Sometimes, however, the duality of the in-house counsel job description—that is, as both a business advisor and legal counsel to the company—places the in-house attorney in a potentially precarious position with regard to ensuring that communications and documents relevant to an FCA investigation are afforded such protections.
In-House Counsel and the Attorney-Client Privilege
The Supreme Court has long held that the attorney-client privilege extends to corporate entities. See Upjohn Co. v. United States, 449 U.S. 383, 394-95 (1981). However, although communications between corporate clients and outside litigation counsel are “cloaked with a presumption of privilege,” communications with in-house counsel “involve a much different dynamic” due to the in-house lawyer’s involvement in business, technical, scientific, public relations, and/or advertising issues. U.S. ex rel. Baklid-Kunz v. Halifax Hosp. Med. Ctr., No. 6:09-CV-1002 (M.D. Fla. 2012). General business advice—as opposed to purely legal advice—is not protected by the privilege, because the purpose and intent is not to communicate legal advice. Id.
Courts generally agree that the attorney-client privilege applies to internal investigations conducted by in-house counsel so long as one of the significant purposes of the internal investigation was to obtain or provide legal advice. See In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014). Thus, even if an investigation was conducted pursuant to corporate policies or regulatory obligations (i.e., for business purposes), the privilege still attaches if a significant legal purpose exists as well. See id.
Protect Privilege in False Claims
Act Internal Investigations
In FCA investigations and litigation, the issue of privilege typically arises when the government issues demands for documents (e.g., emails, memos or other reports or communications), testimony or both as part of its investigation. Yet, because FCA complaints are initially filed “under seal” (giving the government time to investigate and determine whether it wants to prosecute the case itself), FCA defendants typically have little to no information as to the underlying allegations.
For this reason, internal investigations play a crucial role in FCA defense, and company attorneys (whether in-house or outside counsel) typically learn about the basis of the government’s case in real time as documents are produced and company employees are interviewed. Ensuring the applicability of the attorney-client privilege, therefore, becomes vitally important as the internal investigation proceeds.
The following are important considerations for in-house attorneys conducting internal investigations in the context of an FCA investigation:
• Attaching the “Confidential—Attorney Client Privilege” designation to a document does not, by itself, serve as a sufficient basis for asserting privilege;
• Funneling a nonprivileged communication or document through an attorney does not encase the communication or document in privilege;
• The place of the in-house legal department within the company’s organizational structure has no bearing on privilege; for example, privilege does not automatically attach to documents sent to the compliance department merely because compliance operates under the supervision of legal;
• Corporate policies and procedures should be updated to specifically indicate that the purpose of all internal investigations is to obtain legal advice; likewise, for each internal investigation, companies should put in writing the specific legal purpose for conducting the investigation;
• All internal investigations (whether conducted by in-house or outside counsel) should be initiated and overseen by an attorney, even if nonattorneys will thereafter be delegated roles within the investigation;
• Communications to and from the legal department should be shared only on a need-to-know basis.
Moreover, when conducting employee interviews, counsel should, without exception, provide Upjohn warnings to ensure that the employee understands who the attorney represents. Indeed, courts have held that where a company failed to provide an Upjohn warning in connection with an employee interview, the attorney-client privilege did not attach to any evidence obtained through the interview. See, e.g., Butler v. Am. Heritage Life Ins. Co., No. 4:13-CV-199 (E.D. Tex. Jan. 29, 2016). Such warnings must convey the following information to the employee:
• The attorney represents the company rather than the employee in his or her individual capacity, and the company, not the employee, holds (and has the ability to waive in its sole discretion) the attorney-client privilege;
• The attorney is gathering information for the purpose of providing legal advice to the company;
• The company does not need to consult with the employee before disclosing what it learns from the employee.
In light of the DOJ’s recent increased focus on holding individuals accountable for corporate wrongdoing (as documented in a September 2015 memorandum issued by then-Deputy Attorney General Sally Yates, sometimes referred to as the “Yates Memo”), Upjohn warnings have perhaps become more important than ever. Indeed, the core principle of the Yates Memo holds that for a company to receive credit for cooperating with a DOJ investigation, the company must disclose all relevant facts relating to the individuals responsible for the misconduct. Thus, in conducting employee interviews (especially interviews of those employees who may have had direct involvement in the alleged wrongdoing), the attorney should make absolutely certain that the employee knows he or she is not speaking to his or her own attorney.
In-house attorneys play an important role as both overseer and liaison in conducting internal investigations related to FCA litigation.
As such, given the government’s ever-increasing attention to potential misconduct by healthcare organizations, in-house attorneys at healthcare companies large and small should familiarize themselves with issues related to preserving and protecting the attorney-client privilege when engaged in conducting FCA-related internal investigations.