Attorney-Client Privilege in Internal Investigations Reaffirmed

Analysis:  In re:  Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014)

The attorney-client privilege in internal investigations appears to be as strong as it was 33 years ago when the United States Supreme Court affirmed its existence in Upjohn Co. v. United State, 449 U.S. 383 (1981).  This is good news for companies and their in-house and outside counsel that represent them.  The purpose and importance of this privilege is to allow a client (often a corporation) to freely exchange information with counsel to uncover and correct any potential wrongdoing by the corporation or its employees.  Absence this privilege, a corporation may not make the decision to investigate or appropriately correct the issue, which is a bad outcome for all involved.   

A recent attempt in March of 2014 by a District Court for the District of Columbia to chip away at this privilege was recently rebuffed by the United States Court of Appeals, District of Columbia Circuit.  See In re:  Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014).  Citing the seminal case in interpreting the scope and test for the attorney-client privilege in internal investigations, Upjohn Co. v. United State, the Appellate Court reversed the District Court.

The facts in In Re Kellogg Brown & Root, Inc. involved a whistleblower which filed a qui tam action under the false claims act.  In the course of the litigation, the plaintiff (known as the relator) wanted information gathered by defendant-Kellogg in the course of its internal investigation.  The plaintiff would have greatly benefitted from having the results of the corporation’s internal investigation to include attorney analysis, opinions, and work product.

There were several important facts cited in the analysis of both the District Court and Appellate Court’s opinions.  Three of these facts are important because they differed from those in Upjohn.  One, the internal investigation was conducted by in-house counsel.  Two, the interviews were conducted by non-attorneys.  Three, the interviewed employees were not expressly informed that the purpose of the interview was to assist the company in obtaining legal advice.  Additionally, the lower Court took significant note of the fact that the internal investigation was conducted in part to comply with the Department of Defense regulations requiring contractors to maintain compliance programs and conduct internal investigations into allegations of potential wrongdoing.

The Appellate Court ultimately reversed the lower Court’s holding based on its disagreement with the analysis of the communications between the attorney and corporate client when there are multiple purposes, some of which may not pertain to legal advice.  In reversing the lower Court, the Appellate Court noted that it would continue to follow the “primary purpose” test.  The Appellate Court also went further and noted that there could be more than one primary purpose and used the example of an internal investigation being conducted for both a legal and a business purposes.  The court effectively redefined its “primary purpose” test to include any purpose that is also a significant purpose.

This recent Appellate court decision is important for businesses and their counsel when conducting internal investigations.  In re:  Kellogg Brown & Root, Inc. stands for the proposition that the attorney-client privilege in internal investigations is still alive and well.  However, corporations and their counsel should talk early after discovery of an allegation.  This will enable corporations and their counsel to take certain steps to maximize the likelihood that a court will find in favor of the existence of the attorney-client privilege if challenged.