July 1, 2014

01 July 2014

D.C. Circuit Enhances Privilege Protections for Internal Investigations

Posted by Ellyce Cooper and Patrick Kennell

Last Friday, the D.C. Circuit issued an opinion in In re Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014), reversing the much discussed privilege ruling in U.S. ex rel. Barko v. Halliburton Co., 1:05-CV-1276 (D.D.C. Mar. 6, 2014), a case we previously wrote about here and here. In reversing the District Court’s opinion, the Court of Appeals held that “[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation.” (Slip Op. at 7-8) (emphasis added).

As readers may recall, in Barko, the D.C. District Court applied a test that would only extend attorney-client privilege to documents if “the communication would not have been made ‘but for’ the fact that legal advice was sought” and required the defendant to turn over documents from a related internal investigation. (Slip Op at 3) (quoting United States ex rel. Barko v. Halliburton Co., No. 05-cv-1276, 2014 WL 1016784, at *2 (D.D.C. Mar. 6, 2014)). In applying this “but for” test to deny attorney-client protection for various documents, the District Court focused on the fact that the investigation was undertaken to comply with federal regulations and corporate policy and was conducted at the behest of in-house counsel as opposed to outside counsel. The district court’s ruling threatened to eliminate work product protection for investigative materials where there was arguably a non-litigation (business) purpose for conducting the investigation.

The D.C. Circuit rejected the trial court’s “but for” test and provided a straightforward test for the applicability of the attorney-client privilege in internal investigations: “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?” (Slip Op. at 10). If so, the court of appeals held, work product protection applies.

Importantly, the Court stated that this test applies “regardless of whether an internal investigation was conducted pursuant to a company compliance program required by statute or regulation, or was otherwise conducted pursuant to company policy.” (Id.). The Court reasoned: “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.” (Slip Op at 9).

Moreover, the Court reaffirmed that the attorney-client privilege applies in internal investigations to both consultations with in-house and outside counsel. (Slip Op. at 6). The Court explained “the District Court noted that in Upjohn the interviews were conducted by attorneys, whereas here many of the interviews in [the company]’s investigation were conducted by non-attorneys. But the investigation here was conducted at the direction of the attorneys in [the company]’s Law Department. And communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney-client privilege.” (Id.)

Finally, it should be noted that the Court reaffirmed the longstanding maxim that “the attorney-client privilege ‘only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney.'” (Slip Op. at 17-18) (quoting Upjohn Co. v. United States, 449 U.S. 383, 395 (1981)).

The relator has indicated that he will seek en banc review of the case. Stay tuned to Original Source for any additional updates on the case.

01 July 2014

Supreme Court Agrees To Hear Important Case Involving First to File and Statute of Limitations

On July 1, the Supreme Court granted the petition for a writ of certiorari in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, a case which will have significant implications for two key issues under the False Claims Act: statute of limitations and the first-to-file bar. The petition raises two questions. The first is “[w]hether the Wartime Suspension of Limitations Act – a criminal code provision that tolls the statute of limitations for “any offense” involving fraud against the government “[w]hen the United States is at war,” 18 U.S.C. § 3287, and which this Court has instructed must be “narrowly construed” in favor of repose – applies to claims of civil fraud brought by private relators, and is triggered without a formal declaration of war, in a manner that leads to indefinite tolling.” As we have previously written, courts are divided on whether the Wartime Suspension of Limitations Act in effect permanently tolls the statute of limitations on civil FCA claims. Notably, the Supreme Court has agreed to address this question notwithstanding the fact that the Solicitor General opposed the request.

The second, equally important issue raised by the petition is “whether, contrary to the conclusion of numerous courts, the False Claims Act’s so-called “first-to-file” bar, 31 U.S.C. § 3730(b)(5) – which creates a race to the courthouse to reward relators who promptly disclose fraud against the government, while prohibiting repetitive, parasitic claims – functions as a “one case- at-a-time” rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing.” As we have discussed in previous posts, there is a split among the circuits on this issue, which the Court has now apparently agreed to resolve – again, over the government’s objection.

The case will not be heard until the Court’s 2015 term (starting in October 2014), meaning a decision is unlikely before next year. We will be following the case closely and provide updates on key developments.

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