Privilege Is Necessary to Ensure Successful Internal Investigations

When a company undertakes an internal investigation of suspected wrongdoing, in-house attorneys are often the ones who do the investigating. Very often, in-house lawyers thus take a central role in a company’s compliance function, and one of the first steps that they take at the direction of top management is to conduct a no-holds-barred investigation of the allegations against the company.

That means that companies should be allowed to assert attorney-client privilege for internal documents created in the course of a bona fide investigation by inside counsel. Otherwise, the internal probe will inevitably be hampered and will be ineffective in revealing the truth, as many people will withhold information if they think it will be subject to discovery in a civil lawsuit. If companies are going to continue to have effective compliance functions, the privilege must apply.

This is what is at stake in a current proceeding at the U.S. Court of Appeals for the D.C. Circuit. On May 7, lawyers for Kellogg Brown & Root Services Inc. argued there that a trial court ruling in a whistleblower case should be reversed and that 89 internal documents should be protected from disclosure in the case on the grounds of attorney-client privilege.

Whistleblower Harry Barko had filed a False Claims Act case against KBR, and U.S, District Judge James Gwin of the Northern District of Ohio, sitting by designation, had ordered the disclosure of the documents to Barko, rejecting KBR’s privilege claim

Attorneys from Vinson & Elkins, representing KBR in the appeals court, asserted that denying privilege when counsel initiate investigations pursuant to corporate compliance programs would “penalize companies that have effective compliance policies,” forcing a choice between retaining such policies and the privilege. Legal advice from in-house counsel is especially important for investigations “required by regulatory law,” they pointed out. And forcing a company to leave a compliance program in the hands of outside counsel could “compromise its effectiveness and value.”

The lawyers cited an amicus curiae brief by the Association of Corporate Counsel and others that argued for the privilege.

Corporations, according to the amicus brief, “depend on in-house attorneys . . . to oversee internal investigations needed to ensure compliance with various legal obligations. Amici are concerned that the district court’s ruling will erode the attorney-client privilege and negatively affect how their members conduct internal compliance programs.”

We agree. We hope and expect the appeals court to reverse and to uphold the privilege in this crucial case.

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