USA: Whistleblowing - internal investigation documents may not always be privileged

In a controversial decision, US ex rel Harry Barko v. Halliburton Company, et al, a US District Court ordered an employer to disclose documents generated during an internal investigation into a whistleblower’s complaints.

A whistleblower had complained of corruption and violations of the False Claims Act to Kellogg Brown & Root Services Inc. (“KBR”). KBR therefore conducted an internal compliance investigation under the supervision of its in-house corporate attorneys. Company investigators conducted interviews, reviewed documents, and obtained witness statements. They then wrote reports which were transmitted to supervisors in the Law Department for review and further action.

The whistleblower challenged KBR’s designation of 89 documents generated during that investigation as protected from disclosure under the attorney-client privilege and work product doctrine. In a surprising opinion, the Court ruled that because KBR conducted its internal investigation pursuant to regulatory law and internal compliance policies rather than for the express purpose of obtaining legal advice, KBR was not protected by the attorney-client privilege. Further, the work product doctrine did not apply because KBR did not yet know litigation was a real possibility when the corporate investigation occurred. The Court distinguished KBR’s investigation from an investigation conducted by in-house counsel in close coordination with outside counsel.

The decision is subject to an emergency appeal, in which the US Association of Corporate Counsel and US Chamber of Commerce, as friends of the court, expressed great concern about the impact of the potential erosion of traditional privileges on internal compliance and investigation programs.

Actions for employers

Companies and in-house counsel should monitor this case for its impact on (a) pre-litigation whistleblower complaints, and (b) the retention of outside counsel to ensure protection of the results of internal investigations.