Though the decision was vacated, what can the tale of In re: Kellogg Brown & Root potentially teach companies about preserving privilege in future internal investigations? According to a recent article in Today’s General Counsel by Stephen A. Miller and Brian Kint, a great deal.
In 2005, Harry Barko, Jr. a former employee for Kellogg Brown & Root, Inc. — a global engineering, construction and services company based in Houston, Texas — brought a qui tam action against the company under the False Claims Act.
During discovery, Barko demanded that the company produce compliance documents. Kellogg Brown & Root responded by producing documents that demonstrated employees had submitted tips to the company’s ethics and compliance hotline. Then, it withheld the documents, created during the internal code of business conduct investigations in response to the tips, as privileged.
The U.S. District Court for the District of Columbia ruled that these documents were, in fact, not protected by attorney-client privilege. The court noted:
- company in-house counsel did not confer with outside counsel
- the investigation was conducted in part by non-attorney employees
- employees who were interviewed were not informed that the purpose was to provide the company with legal advice
After the company asked the court to stay proceedings and certify the ruling for appeal and the court refused, it filed a petition for a writ of mandamus, asking the D.C. Circuit to vacate the district court’s ruling. It was granted.
During oral argument, the three-judge panel expressed concern that the district court did not use the appropriate test to determine whether the materials were privileged.
- But-for test: communications are privileged only if communication was made solely for the purpose of seeking legal advice.
- Primary purpose test: communications are privileged as long as the primary purpose (among others) is to seek or give legal advice.
Per Miller and Kint: “In today’s business world, most communications have multiple purposes, and strict application of a but-for test would sharply limit the scope of the attorney-client privilege in internal investigations.
The circuit panel concluded that the district court’s privilege ruling was in error. It granted Kellogg Brown & Root’s petition for writ of mandamus and vacated the ruling. The opinion noted that in order for attorney-client privilege to apply, obtaining legal advice only has to be a primary purpose of communication, not the primary purpose.
Miller and Kint conclude their work with steps companies can take to better assert privilege over internal investigation materials
- Have general counsel direct strategy and response for internal investigations.
- Ensure all employee interviews are conducted by attorneys or by employees who make it clear — and to whom it is made clear — that they are working at the direction of attorneys.
- Provide Upjohn warnings before all employee interviews to clarify that the purpose is to gather facts in order for the company to obtain proper legal advice.
- Engage outside counsel to work with general counsel on all internal investigations. This will strengthen the claim that a “primary purpose” of the investigation is to obtain legal advice.
- Protect attorney-client privilege when providing information and materials to regulators.
Finally, the pair advises that considering the district court’s ruling and the time and money spent to fight it, companies may want to direct their efforts to lobbying Congress and certain administrative agencies to clarify that the statutory compliance requirements are not meant to disturb the privileged nature of the inquiries.