July 2, 2014
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D.C. Circuit Broadly Applies Attorney-Client
Privilege to Internal Investigations
By: Michael J. Missal, David T. Case, Soyong Cho, and Noam A. Kutler
The attorney-client privilege broadly applies to communications made for the purpose of
obtaining or providing legal advice. However, what if an internal investigation has multiple
purposes, some of which are to provide legal advice and some of which are not? On June
27, 2014, the U.S. Court of Appeals for the District of Columbia Circuit held, in In re: Kellogg
Brown & Root, Inc.,1 that such investigations are privileged as long as “one of the significant
purposes” of the internal investigation is to obtain legal advice.2 The privilege is not defeated
“even if there were also other purposes for the investigation and even if the investigation was
mandated by regulation.”3 As a result, “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,” can still be privileged if one significant purpose of the
investigation is to obtain facts necessary to provide legal advice.4
This alert analyzes the Circuit Court and District Court opinions and discusses best practices
that companies should follow to protect the privileged nature of their investigations.
The District Court Decision
In United States ex rel. Barko v. Haliburton, the plaintiff brought a False Claims Act action
alleging that Kellogg Brown & Root, Inc. (“KBR”) defrauded the U.S. government by inflating
costs and accepting kickbacks while administering military contracts.5 During discovery, the
plaintiff sought documents related to KBR’s internal investigations into the alleged fraud,
which KBR claimed were protected by the attorney-client privilege and work product doctrine.
KBR initiated the investigation as a result of a “tip” concerning a potential code of conduct
violation. The regulatory-required compliance program required that KBR follow up.6
The District Court held that the documents were not privileged because the “primary
purpose” of the investigation was not to secure legal advice but instead to comply with
Department of Defense contracting regulations to maintain internal compliance programs.7
The District Court held that the privilege only applied if the company satisfied the “but for”
test. An internal investigation to gather facts to provide legal advice would only be privileged
if “but for” that purpose the company would not have investigated. If the company would
have investigated for regulatory compliance reasons in any event, then the privilege would
not attach no matter what other purposes the investigation served.8 Since the company
would have conducted an internal investigation for non-privileged compliance reasons, the
District Court reasoned, the investigation was not privileged.
The District Court also relied on three bases to distinguish Upjohn, where the Supreme Court
held that an internal investigation was privileged. First, the investigation was conducted by
in-house counsel who did not consult with outside lawyers. The District Court concluded that
this undermined the argument that the investigation was undertaken to obtain legal advice.
Second, the interviews were conducted by non-attorneys, typically investigators from KBR’s
D.C. Circuit Broadly Applies Attorney-Client Privilege to
Internal Investigations
security department. And third, the employees who were interviewed were not informed that
the purpose of the interview was to assist KBR in obtaining legal advice. The District Court
held that the company had to produce all materials concerning the investigation. Had the
District Court’s decision been upheld, it would have prevented the application of the privilege
to internal investigations required by government or corporate compliance policies.9
The D.C. Circuit Reverses
The D.C. Circuit granted mandamus and reversed. It held that the District Court’s “but for”
test “is not appropriate for attorney-client privilege analysis.”10 The Court of Appeals
explained the “primary purpose” test applied to determine whether communications are
privileged “does not draw a rigid distinction between a legal purpose on the one hand and a
business purpose on the other.”11 It is “not correct for a court to try to find the one primary
purpose in cases where a given communication plainly has multiple purposes.”12 Rather, the
test is:
Was obtaining or providing legal advice a primary purpose of the
communication, meaning one of the significant purposes of the
communication?13
The Court cited the Restatement (Third) of The Law Governing Lawyers for the proposition
that “the privilege applies if one of the significant purposes of a client in communicating with
a lawyer is that of obtaining legal assistance.”14 “Sensibly and properly applied,” the D.C.
Circuit stated, “the test boils down to whether obtaining or providing legal advice was one of
the significant purposes of the attorney-client communication.”15 This means that an internal
investigation may be protected if it was conducted “pursuant to a company compliance
program required by statute or regulation, or was otherwise conducted pursuant to company
policy.”16
The Court of Appeals also rejected the three bases on which the District Court distinguished
Upjohn.
First, the fact that in-house counsel did not consult with outside lawyers did not matter
because “Upjohn does not hold or imply that the involvement of outside counsel is a
necessary predicate for the privilege to apply.” “[A] lawyer’s status as in-house counsel
‘does not dilute the privilege.’”17
Second, the fact that the interviews were conducted by non-attorneys did not defeat the
privilege because “communications made by and to non-attorneys serving as agents of
attorneys in internal investigations are routinely protected by the attorney-client privilege.”18
Third, the failure to expressly inform employees that the purpose of the interview was to
assist the company in obtaining legal advice did not defeat the privilege because “nothing in
Upjohn requires a company to use magic words to its employees in order to gain the benefit
of the privilege for an internal investigation.”19 It was enough that employees were told not to
discuss their interviews without the authorization of the KBR General Counsel.
Best Practices Going Forward
While In re: Kellogg Brown & Root, Inc. establishes strong precedent that should provide
companies comfort in conducting investigations arising from their corporate compliance
programs, there are important takeaways for companies to consider in the future.
2
D.C. Circuit Broadly Applies Attorney-Client Privilege to
Internal Investigations
First, companies should document at the outset of an investigation that one of the significant
purposes of the internal investigation is to obtain the facts necessary to provide legal advice.
Second, regardless of whether attorneys or their agents are conducting interviews, all
interviewees should be instructed that the purpose of the interview is to assist the company
in obtaining legal advice (often termed Upjohn instructions). Adequate Upjohn instructions
are important for any internal investigation because they memorialize the privilege and also
properly instruct the witness about the attorney-client privilege in such an interview.
Third, if attorneys are not conducting the investigation, attorneys should actively direct and
monitor the investigation in order to ensure it remains privileged. As part of that monitoring,
it is also prudent for counsel to memorialize contemporaneously the fact that the
investigation is being undertaken to obtain legal advice, and that the people conducting the
investigation are acting at counsel’s request and direction. Active involvement and thorough
documentation throughout the investigation will help demonstrate that a significant purpose
of the investigation was to obtain legal advice.
Fourth, attorneys should give strong consideration to conducting the interviews themselves.
If interviews are conducted by non-attorneys, then a court has a possible complication in
concluding that the investigation was being done for business reasons, rather than to obtain
legal advice. Further, because external attorneys do not wear multiple hats, unlike in-house
counsel, the involvement of outside counsel in an investigation can more clearly demonstrate
the legal nature of the investigation.
Finally, companies should examine not only the D.C. Circuit’s decision in In re: Kellogg
Brown & Root, Inc., but decisions in the jurisdiction in which the investigation is being
conducted, which may articulate the standards differently.20
Authors:
Michael J. Missal
Partner
michael.missal@klgates.com
+1.202.778.9302
David T. Case
Administrative Partner
david.case@klgates.com
+1.202.778.9084
Soyong Cho
Partner
soyong.cho@klgates.com
+1.202.778.9181
Noam A. Kutler
Associate
noam.kutler@klgates.com
+1.202.778.9851
3
D.C. Circuit Broadly Applies Attorney-Client Privilege to
Internal Investigations
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1
No. 14-5055, slip op. (D.C. Cir. June 27, 2014).
Id. at 10 (emphasis added).
3
Id. at 8.
4
Id. at 9.
5
In re Kellogg Brown & Root, Inc., No. 14-5055, slip op. at 1.
6
Id.
7
Id. at *3.
8
United States ex rel. Barko v. Haliburton, 2014 WL 1016784, *2-3, 1:05-CV-1276 (D.D.C. March
6, 2014).
9
In re Kellogg Brown & Root, Inc., at 9 (suggesting that the District Court’s approach “would
eradicate the attorney-client privilege for internal investigations conducted by businesses that are
required by law to maintain compliance programs.”).
10
Id. at 9.
11
Id. at 10.
12
Id. at 9-10 (emphasis in original).
13
Id. at 10 (emphasis in original).
14
Id. at 10, citing 1 RESTATEMENT § 72, Reporter’s Note, at 554.
15
Id. at 10.
16
Id.
17
Id. at 6.
18
Id.
19
Id. at 7.
20
See, e.g., First Chicago Int’l v. United Exchange Co., 125 F.R.D. 55, 57 (S.D.N.Y. 1989)
(Proponent of privilege has to demonstrate that “but for” the need for legal advice the
communication would not have taken place.)
2
4