Alert
Alert
05.20.14
The DC Circuit recently heard oral argument regarding a mandamus petition filed by defendants in a qui tam action. The case sheds light on the best practices that companies should utilize to increase the odds that the attorney-client and work product privileges will shield their internal investigation records.
In United States ex rel. Barko v. Halliburton, filed in 2005, the plaintiff-relator alleges that various Kellogg Brown & Root entities and the Halliburton Company (KBR, collectively) violated the False Claims Act by incurring excessive or fraudulent contract costs and passing those costs onto the U.S. government. The United States declined to intervene, and the case was unsealed in 2009. In February 2014, the plaintiff-relator moved to compel KBR to produce documents related to KBR’s Code of Business Conduct (COBC) investigations of the alleged misconduct. COBC investigations commence upon receipt of a report or anonymous tip of potential wrongdoing from an employee. In the facts of this case, the reports or tips are sent to the COBC director, a company attorney, who determines whether to investigate. If so, the COBC director refers the matter to a non-attorney Security Department manager who, in turn, directs a non-attorney Security Department employee to conduct an investigation. An investigation typically consists of employee interviews and witness statements, and reviewing of documents. The investigation report is then transmitted to the legal department.
KBR refused to produce the COBC investigation records, claiming protection under the attorney-client and attorney work product privileges. After an in camera review of the documents, Judge James Gwin of the U.S. District Court for the District of Columbia disagreed, holding that they were ordinary business records created to satisfy U.S. defense contractor requirements—not to obtain or receive legal advice—and ordering production of the documents. The key facts on which Judge Gwin relied are discussed in two opinions—his Order granting the motion to compel and his subsequent Order denying KBR’s motion for certification of an interlocutory appeal. They include the following:
In its mandamus petition to the DC Circuit, KBR argued that the company’s attorney-supervised efforts to comply with Federal law—i.e., determining if it needed to report wrongdoing to the Federal government—constituted quintessential legal advice and attorney work product. Otherwise, companies would be inhibited from implementing internal controls, voluntary investigations and self-reporting. In his opposition, the plaintiff-relator argued that KBR sought to create a privilege merely by passing internal investigation documents through the hands of counsel. He also argued that KBR’s policy provided a special procedure for investigations whose specific purpose was to obtain legal advice, but KBR did not follow that procedure here.
At oral argument on May 7, 2014, the DC Circuit panel (Judges Griffith, Kavanaugh and Srinivasan) expressed some support for KBR’s position, with Judge Srinivasan suggesting that it would not be possible to separate legal advice from the internal investigations conducted here; they were used to determine the applicability of federal regulations and whether a company needed to make a report under those regulations. However, the Court may not rule on the underlying merits because it must also address whether the matter is properly before it in a mandamus action.
Best Practices
However the DC Circuit rules, the facts of this case provide a road map of the best practices to follow to preserve the attorney-client privilege and work product privilege for internal investigation records:
Download: Recent Decision Reminds Companies to Use Best Practices to Protect Their Internal Investigations