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Unforced Errors Under Upjohn

Over thirty years ago, the Supreme Court clarified how the attorney-client privilege applies to records of internal investigations in Upjohn v. United States, 449 U.S. 383 (1981). Yet putting the principles of Upjohn into practice has continued to be a stumbling block for corporate defendants. Countless corporations over the decades have been unpleasantly surprised to learn that records of their internal investigations were unprivileged and readily available to adverse parties through the discovery process.

A recent example shows how a simple misstep in defining an investigation can undermine later efforts to protect internal documents. In United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276, 2014 U.S. Dist. LEXIS 36490 (D.D.C. Mar. 6, 2014), a corporation launched a series of investigations into potential violations of its Code of Business Conduct. The investigations produced highly inculpatory reports that the investigators transmitted to the corporation’s legal department. The corporation sought to withhold the documents from a qui tam relator by asserting the attorney-client and work product privileges. The court held that the reports must be disclosed because the investigations were “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”

While not every court will take such a narrow view of privilege, corporate clients need to be prepared for such a contingency. For records to remain privileged, the best practice is to begin an internal investigation by referring the complaint to an attorney and asking for legal advice. The attorney, or an investigator directed by the attorney, then gathers facts explicitly for the purpose of providing that legal advice. Any interviews between the attorney or the investigator and any employees will be subject to the attorney-client privilege.

The untimely intervention of management into the investigative process, or the involvement of well-intentioned employees who do not report to the legal team, can have catastrophic consequences when discovery is due. The privileged nature of investigative materials hinges on the ongoing supervision of an attorney acting to provide legal advice. Disclosure to third parties – even an investigator’s disclosure directly to management during the course of the investigation – may inadvertently waive the privilege. A supervisor sitting in on an investigator’s interview with an employee can similarly waive the privilege. Adverse litigants prize unprivileged investigative reports and can often use them to devastating effect.

Appropriately defining the purpose and leadership of an investigation from its inception can help a corporation avoid a nasty surprise after the investigation concludes. Close management of the investigation by an attorney experienced in Upjohn issues can prevent inadvertent waiver of the privilege. With Upjohn past its thirty-third birthday, a responsible corporate client should reasonably expect its internal investigations to remain just that: internal.

Jonathan T. Skrmetti