Whistleblowing and Attorney-Client Privilege
In “Whistleblower Suit and Attorney-Client Privilege” posted in March of this year, we reported that the federal judge in Barko v. Halliburton Co., a False Claims Act case, called into question the defendants’ efforts to withhold documents based on attorney-client privilege. He ruled that the documents must be turned over to the plaintiff’s attorneys.
That was not the end of the story. On June 27, the D.C. Circuit court issued a different decision. The court found that the documents, produced during internal corporate investigations, were covered under attorney-client privilege, even though, according to the plaintiff, “the documents at issue demonstrate illegal contracting practices and should not be kept secret from the public.” (Wilmoth, 2014)
The earlier ruling was based, in part, on a finding that the company investigators had prepared the documents to comply with federal defense contracting regulations, not to secure legal advice. Consequently, the judge found, the documents were not protected by privilege.
The D.C. Circuit Court, on the other hand, found the decision to be legally wrong.
“The District Court erred because it employed the wrong legal test. … Under the District Court’s approach, the attorney-client privilege apparently would not apply unless the sole purpose of the communication was to obtain or provide legal advice. That is not the law. … The District Court’s novel approach to the attorney-client privilege would eliminate the attorney-client privilege for numerous communications that are made for both legal and business purposes, and that heretofore have been covered by the attorney-client privilege. And the District Court’s novel approach would eradicate the attorney-client privilege for 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.” (D.C. Cir. 2014)
Further, according to the recent ruling, to accept the District Court’s “novel approach” could result in businesses being less likely to disclose facts to their attorneys and to seek legal advice.
This ruling provides businesses some assurance that they can engage in appropriate and required investigations for a variety of reasons, without necessarily breaching attorney-client privilege. However, this case is not over. Barko’s attorney indicates they will appeal, and the D.C. Circuit Court’s ruling specifically leaves open Barko’s right to have arguments heard.
As stated in our earlier post, this case highlights a dilemma for organizations and their compliance and legal teams. They must carefully consider how best to encourage internal reporting and to conduct internal investigations in such a way to appropriately preserve future attorney-client privilege to the greatest extent possible.
Ethical Advocate can assist companies of all sizes in understanding False Claims Act requirements and in creating a culture of ethics and accountability.
D.C. Cir. In re: Kellogg Brown & Root, Inc., No. 14-5055, June 27, 2014. http://www.cadc.uscourts.gov/internet/opinions.nsf/701A3512988256CD85257D04004F78AA/$file/14-5055-1499662.pdf
Wilmoth, Mary Jane. “Three Judge Panel of the D.C. Circuit Court of Appeals Shields Evidence of KBR Contracting Fraud in Iraq War Under Attorney-Client Privilege,” Whistleblowers Protection Blog, June 27, 2014. http://www.whistleblowersblog.org/2014/06/articles/uncategorized/three-judge-panel-of-the-d-c-circuit-court-of-appeals-shields-evidence-of-kbr-contracting-fraud-in-iraq-war-under-attorney-client-privilege/
Note: Kellogg, Brown & Root (KBR) was a subsidiary of Halliburton through 2006. KBR was the contractor involved in the Barko whistleblower lawsuit; KBR staff conducted the investigations and wrote the reports addressed in this attorney-client privilege case.