A company can have multiple purposes for conducting an investigation. Some are mandated by regulation, compliance programs or internal company policies (all considered business purposes) and others are undertaken solely for legal advice. Even when business and legal purposes are both in play, the ability to preserve attorney-client privilege is critical because the company usually cannot determine at the outset how an investigation will unfold or whether it should be disclosed.
A recent appellate opinion alleviates concern that privilege has been eroded for investigations where compliance, regulatory or other business purposes intersect with legal advice, In re Kellogg Brown & Root, Inc., (D.C. Circuit Court of Appeals, June 27, 2014). In doing so, the court recognized that business efforts are not conducted within silos distinct and mutually exclusive from counsel’s role to give legal advice.
Silos for Compliance/Regulatory Investigations versus Legal Advice
The silo problem is illustrated by a whistleblower case that raised alarm when a district court ordered KBR to turn over prior internal investigation-related documents in discovery. The investigation overseen by KBR’s legal department, had been required by U.S. Department of Defense regulations and conducted pursuant to KBR’s Code of Business Conduct. The district court held there was no privilege when obtaining legal advice was not the “but for” reason for the investigation. Because it was mandated and conducted under the company’s business code, the district court determined that obtaining legal advice was not the “primary purpose” for the investigation so the Supreme Court’s Upjohn privilege test was not met.
This decision supposed that there is but one driving purpose for an investigation: It is either to obtain legal advice or to satisfy business purposes (including compliance or regulatory); but not both. According to this reasoning, the first type of investigation is privileged, but not the second. This creates tension in a world of increasing regulation and attention to corporate compliance, policies and processes. The risk that an investigation will not be privileged unless forcibly placed in a silo housing solely a legal advice function is not optimal for robust and effective compliance, business decision-making, or regulatory efforts.
The Better Analysis – Multiple Roles and Purposes Do Not Preclude Privilege
In reversing the district court’s “but for” test, the D.C. Circuit set out the better analysis. The appellate court recognized the business reality that investigations may serve multiple purposes: “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. It is often not useful or even feasible to try to determine whether the purpose was A or B when the purpose was A and B.”
The appellate opinion underscores Upjohn’s privilege protection and clarifies that an investigation does not lose privileged status simply because it is mandated by regulation or corporate code. So long as obtaining legal advice is one of the significant purposes of the investigation, the privilege applies. This is true even when the investigation involves non-legal personnel.
Steps to Protect Privilege in Investigations
While multiple purposes may not destroy the privilege for an investigation, it is important for companies to take the following tried-and-true steps to invoke its protections. First, document that obtaining legal advice is a significant purpose for an investigation, even if other purposes are recognized or mandated. Second, use counsel (in-house or outside) to conduct the investigation or at least to direct and oversee it. Non-legal personnel involved in the process should document that their materials are prepared at the request of legal counsel or as part of seeking legal advice. Third, inform interviewed employees that the investigation is for the company’s legal advice purposes and should be treated as confidential (traditional Upjohn warnings).
These steps, if well-documented, maximize the company’s ability to assert privilege for an investigation, even if mandated as a business activity.