A couple of weeks ago, we analyzed KBR’s fight to keep its internal investigations… internal. More precisely, KBR sought to keep those investigations protected from discovery under the attorney-client privilege.
At the time of our original blog entry (linked below), the U.S. District Court for the District of Columbia had just ruled that KBR’s internal investigations were not privileged because they were “undertaken pursuant to regulatory law and corporate policy rather than for obtaining legal advice.”
“Not so fast,” said the D.C. Circuit Court of Appeals.
D.C. Circuit Bolsters Internal Investigations/Attorney-Client Privilege Law
In a big win for KBR, the circuit court held that internal investigations made pursuant to regulations or corporate policies can be protected under the attorney-client privilege.
The court granted KBR’s petition for writ of mandamus, calling the lower court’s decision clear error, and ruled as follows:
- Lower Court’s But/For Test Rejected: While the lower court had held that the attorney-client privilege could not exist unless the internal investigations were made “but for” obtaining legal advice, the D.C. Circuit rejected this reasoning.
- Correct Test Stated: The D.C. Circuit held that seeking legal advice must only be “one of the significant purposes” of the internal investigation in order to benefit from the privilege.
- Upjohn Applies: regulatory and corporate policy-driven investigations fall squarely under the protection of the Supreme Court’s Upjohn decision. Thus, as long as the right steps are taken (see below), the attorney-client privilege can apply.
The decision of the D.C. Circuit shows the trend of bolstering the attorney-client privilege with respect to companies. That trend extends to the Fifth Circuit, where the court of appeals recently ruled in favor of Exxon’s claim of attorney-client privilege for its in-house counsel’s advice to the company in a transactional matter. See Exxon Mobil Corp. v. Hill, 751 F.3d 379 (5th Cir. 2014).
Best Practices for Companies
While the D.C. Circuit decision does give companies conducting internal investigations a wider and clearer path to the attorney-client privilege, we believe that prudent companies should continue to take the same measures as before this decision, in order to maintain attorney-client privilege:
- Prior to the start of the investigation (as soon as the company receives the complaint or “hot line” tip), engage with your attorney. For outside counsel, this would include an engagement letter with a sufficiently detailed scope of work. For in-house counsel, there should be a likewise sufficiently detailed scope of work documented between company and counsel.
- Each employee interviewed should be given an “Upjohn Warning” prior to the interview. An Upjohn Warning is a statement by the interviewer to the interviewee stating that 1) the interview is made to gather facts to obtain legal advice; 2) the interview is therefore privileged attorney-client communication; and 3) the interviewee must keep the interview communications confidential. The delivery of this warning should be documented and consistently delivered to all interviewees.
- As we have said, the attorney-client privilege is more easily preserved when the attorney actually conducts the interview. Therefore, we recommend, when at all possible, that attorneys conduct the internal investigations to maintain the privilege. However, if this is not possible, the interviewee must nonetheless be given an Upjohn Warning and the interview communications transmitted directly from the interviewer to the attorney.
- Finally, the attorney must follow through and provide legal advice as to the investigation. This should also be well-documented.
To read our previous blog entry on this case, click here.
If your company is concerned about keeping its internal investigations privileged and confidential, contact David Bond, Partner in Burleson’s Houston office at firstname.lastname@example.org. Burleson’s attorneys can assist in planning your internal investigations (beyond the best practices listed above), drafting Upjohn Warnings, and conducting interviews to help you preserve attorney-client privilege.