Recent Decision Raises Many Questions About Privilege Of Internal Investigations

Before your company launches its next internal investigation, it would be wise to consider a recent opinion from a federal magistrate judge in the U.S. District Court for the Eastern District of Louisiana, which if stands, elevates the bar for making sure that the documents created in an internal investigation can be protected from discovery in litigation.  The court, applying federal common law of privilege in a maritime action, ordered the production of most documents prepared in an oil and gas company’s internal investigation of an incident over the company’s assertions of attorney-client privilege and work product protection.

Following an incident, one of the company’s in-house attorneys appointed a “Root Cause Analysis (RCA) Team” consisting of six company employees and two in-house lawyers.  The in-house attorney prepared and signed a “Root Cause Investigation Legal Charter,” which instructed the team members to treat and mark all documents associated with their work as “highly confidential.”  In an affidavit filed with the court, the in-house lawyer declared that he retained all of these materials “in strictest confidence as attorney-client information within [the company’s] Law Department.”  Although the court agreed that a few of the documents in which the company asserted privilege over were protected by the attorney-client privilege because they were transmitted to or from counsel for the purpose of rendering or obtaining legal advice, the court’s discussion focused on the great majority of the documents that were allegedly protected only as work product being prepared in anticipation of litigation.  The court also commented that even though the in-house attorney indicated he kept the documents in strict confidence, there was no way of knowing whether the various non-lawyers who received the same information did the same thing.

With respect to work product, the court focused on the reasons and purposes for creating the documents.  The court explained that if the documents would have been created regardless of whether litigation was expected to ensue, then the documents should be deemed to be created in the ordinary course of business and not in anticipation of litigation.  The court then concluded that the company could not establish that the anticipation of litigation was the “primary motivating factor” in creation of the RCA and ordered the documents produced, finding that such an internal investigation is “routinely” conducted by the company following incidents as part of the company’s culture to improve operations and prevent future incidents.

In ordering production, the court cited the following evidence: (1) a newsletter from the company president to the company’s employees following the incident that said, “We are conducting root cause analyses of both incidents and will apply lessons learned.  Our ultimate goal remains the same — an incident and injury-free workplace”; (2) deposition testimony from a company employee (who was not a member of the RCA team) indicating that she knew what a root cause analysis was and that the company routinely conducts them after an incident as part of the company’s “culture”; (3) statements in the company’s HSE handbook indicating that any incident will be promptly investigated “to determine the root cause, and formulate immediate corrective and preventive measures” and that “[d]ata collection and investigation will begin within 24 hours” of any incident; (4) the RCA’s extensive list of “Lessons Learned” and “Recommendations” all were directed at the operations function of the company; (5) the RCA’s identified team members only included the six non-lawyer members; (6) the RCA’s stated “Objectives” do not mention lawyers or litigation and instead indicates that the purpose is to determine what caused the incident and what measures could have prevented it from occurring; and (7) in an email forwarding the RCA’s findings to the company president, a non-lawyer team member indicates that “there is a parallel investigation being conducted by our litigation team with aid of outside counsel in preparation of potential lawsuits.”

We will monitor the case to see if the district judge reviews the magistrate’s opinion, but the opinion underscores the necessity of making sure that if the company desires to keep the documents prepared as part of an internal investigation privileged, then the internal investigation must be set up in a way that distinguishes the investigation from a routine investigation that occurs in the ordinary course of business following most incidents.


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