4th Circuit Upholds Privilege for In-House Lawyer-Led Investigation

In a wrongful-discharge case involving Brigadier General (ret.) Steven Anderson, the 4th Circuit reversed a district-court decision and upheld an in-house-lawyer-led internal investigation into Anderson’s alleged conflict of interests. The Court upheld the privilege even though the company–employer disclosed certain investigation results to the Department of Defense (DOD) and the U.S. Army. In re Fluor Intercontinental, Inc., 2020 WL 1487700 (CA4 Mar. 25, 2020). You may read the opinion here.

Improper Conduct?

BG Anderson, a West Point graduate and highly decorated military veteran, worked for Fluor Corporation, a DOD contractor, as its Country Manager for Afghanistan. Fluor received an ethics hotline complaint alleging that Anderson had a potential conflict of interest in Fluor’s plans to award a subcontract for local Afghan labor to Relyant Global.

Internal Investigation

The Fluor legal department, in accordance with its internal policies and procedures, initiated an internal investigation. Fluor’s senior in-house counsel, Karen Douglas, led the investigation but effectively delegated it to Corporate Investigators, most of whom are former law-enforcement officers.

Douglas, however, maintained control over the investigation. She instructed the Corporate Investigator on documents to review and witnesses to interview. She instructed him to advise the witness that the interviews were confidential and privileged. And she instructed him to report the results to her. She used the investigation results to advise Fluor on legal issues related to the purported conflict of interest.

For an excellent example of how to persuade a court that an in-house lawyer conducted a privileged internal investigation, read lawyer Douglas’s declaration, available here.

Disclosure

As a government contractor, Fluor had a regulatory obligation under 48 CFR § 52.203.13 to disclose certain information to the DOD’s Office of Inspector General.

So, Fluor provided the DOD with a “summary of the facts” of the internal investigation and copied the U.S. Army. Did this disclosure waive the privilege that Fluor’s legal department worked so hard to protect?

District Court Ruling

Based on the investigation results, Fluor terminated Anderson’s employment, and Anderson filed a wrongful-discharge suit. Anderson later moved to compel production of Fluor’s investigation materials. While the investigation seems privileged, the question arose whether Fluor waived the privilege over the entire investigation materials by disclosing investigation results to the DOD and U.S. Army

The District Court found that Fluor’s disclosure of its summary factual findings revealed attorney–client communications because it reached conclusions that “only a lawyer is qualified to make.” Thus, it found privilege waiver. And not just waiver—subject-matter waiver.  You may read the District Court’s opinion here.

Reversal

In a per curiam opinion, the 4th Circuit found that the District Court’s conclusion was “clearly and indisputably incorrect.” The Court emphasized that waiver occurs upon a disclosure of a communication or information protected by the privilege. The Court declined to “infer a waiver merely because a party’s disclosure covers ‘the same topic’ as that on which it sought legal advice.”

Courts must “distinguish between disclosures based on the advice of an attorney, on the one hand, and the underlying attorney–client communication itself, on the other.” The District Court’s finding that Fluor’s summary provided to the DOD contained conclusions “only a lawyer could make” was the wrong test.  “Instead, to find waiver, a court must conclude that there has been disclosure of protected communications.” (emphasis by the court).

POP Analysis

For those companies subject to regulation-mandated government disclosures, the 4th Circuit’s focus on disclosure of communications—rather than information on the same topic of those communications—is a distinction worth remembering. The Fluor decision shows that a company can successfully thread the privilege-waiver needle by meticulously avoiding disclosure of an employee’s communications with in-house counsel or its designated investigator.

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