Preserving Privilege in Internal Investigations

The U.S. Court of Appeals for the D.C. Circuit recently vacated the district court’s decision in In re: Kellogg Brown & Root, a case that could have radically changed the way that companies conduct internal investigations.

The lower court had ruled that the documents at issue were created pursuant to a “compliance investigation required by regulatory law” and therefore were not privileged, because they were created “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”

KBR petitioned for a writ of mandamus, asking the D.C. Circuit to vacate the district court’s ruling. A three-judge panel decided that the district court had erroneously employed the “but for” test, which dictates that communications are privileged only if made for the specific purpose of seeking legal advice, to determine whether materials were privileged.

The Appeals Court favored the “primary purpose” test, which treats communications as privileged if the primary purpose, among many other purposes, is legal advice. Strict application of a but-for test would sharply limit the scope of attorney-client privilege.

This case serves as a reminder that reasonable jurists can evaluate privilege issues differently. Companies may want to consider shifting the fight away from the courts: Instead of waiting for the next adverse ruling, the most fruitful course of action could be lobbying Congress and certain administrative agencies to clarify that statutory compliance requirements are not meant to disturb the privileged nature of those inquiries.