Five Key Internal Investigation Considerations

Internal investigations are used by companies to learn the facts, identify legal and compliance issues, and resolve concerns across a number of areas, ranging from employment practices to health and safety to financial reporting.  When a company determines to conduct an internal investigation, thinking through these five key issues will help assure a thorough and objective investigation.

  1. Identify the right process owner. This is not the person who will conduct the investigation but the one who authorizes it, receives the report, and takes action on it. The process owner needs to be someone who is independent in the matter. For example, if the investigation involves alleged misconduct by an officer, a committee of the board of directors may need to authorize and oversee the investigation.
  2. Preserve evidence promptly. Take immediate steps to preserve obviously relevant documents and other evidence for the investigation. Making relevant evidence available to the investigator and preserving it for later review is a key step to gaining credibility for your investigation if regulators decide to review the same issues at a later date or if stakeholders question the neutrality of the investigation.
  3. Develop a plan of investigation. A well-thought-out plan of investigation helps establish a baseline understanding between the investigator and the process owner. The plan should establish an initial scope of the investigation, i.e., identify the issue(s) to be considered. The plan should also identify the types of documents that will need to be collected and reviewed and the witnesses who should be interviewed.  In some instances, the plan may identify experts that should be consulted. As the investigation progresses, the scope may need to be expanded, based on consultation between the investigator and the process owner, and additional witnesses or experts may be identified.
  4. Consider the privilege. If the company wants to conduct an investigation that is protected by attorney-client privilege, steps should be taken from the outset to establish and protect the privilege. In many jurisdictions, the privilege is more likely to be upheld if outside counsel serves as the investigator. An engagement letter or memorandum to the file from the process owner or in-house counsel should be written at the outset and should state that the purpose of the investigation is to obtain legal advice. Witness interviews should include appropriate instructions about the privileged nature of the investigation and need for confidentiality. Potential waivers of privilege should be considered before they arise and discussed between the investigator and the process owner. Careful planning can allow the investigator to take steps to minimize or avoid the potential for privilege waiver.
  5. Decide on the form of report. Sometimes a written report is the best format. But finalizing a written report can take time. In some instances, e.g., an accounting restatement where investors have been told not to rely on the company’s existing financial statements, the need for prompt answers may be better served by an oral report or a simple slide show format. As with other key decisions, the investigator should advise and consult the process owner on the form of the final report.

By attending to these five key issues, the investigator and process owner help assure the integrity of the investigation and avoid costly “do-overs.”

Mary L. O’Connor’s practice focuses on representing companies and their officers and directors in commercial litigation and arbitration, securities litigation, internal investigations, and regulatory investigations and enforcement proceedings. Mary is currently listed among the Best Lawyers in Dallas by D Magazine, and the Best Lawyers in America by US News and World Report.

Attorney-Client Privilege in #MeToo Era Investigations

In September 2018, Dallas Basketball Limited, which operates the Dallas Mavericks, released a 43-page report of an internal investigation of alleged sexual misconduct in its business office.  The investigation was conducted by outside counsel and found numerous instances of sexual harassment and other improper workplace misconduct spanning almost twenty years.

The Mavericks are not the first organization to release the results of an internal investigation of sexual harassment and assault claims.  A number of universities and private schools have done so in recent years, and in January 2018, NPR posted on its website an investigation report of sexual harassment in its newsroom.

Against this backdrop of increasing disclosure, organizations conducting internal investigations in the #MeToo era may face pressure to disclose the resulting findings.  But disclosing an investigation report may waive the organization’s attorney-client privilege and work product protection, requiring it to turn over some or all of the underlying investigation materials to adversaries in lawsuits.

In Doe v. Baylor University, No. 16-CV-173-RP (W.D. Tex. Aug. 11, 2017), the court found that Baylor waived the attorney-client privilege as to “the entire scope of the investigation” into Baylor’s handling of sexual assault allegations against Baylor’s athletes. The waiver was based on Baylor issuing a 13-page summary of the investigation and a 10-page list of recommendations to improve its Title IX compliance and support for assault victims. Because the court found that Baylor conducted the investigation in large part over concern for Title IX lawsuits, it held that the interview memoranda, notes, emails, presentations and other documents prepared by the lawyers during the investigation were protected as attorney work product.  However, the large collection of documents amassed by the investigators was discoverable, as were the names of the individuals interviewed.

In another case decided last year, Banneker Ventures, LLC v. Graham, 253 F. Supp. 3d 64 (D.D.C. 2017), the court found that the Washington Metropolitan Area Transit Authority waived its attorney-client privilege by publishing an investigation report of a failed development project.  Because the report made detailed reference to the interviews conducted by counsel, the court found the waiver extended to the interview memos, as well.  The court also found there was no work product protection for the underlying memos because WMATA did not reasonably anticipate litigation at the time of the investigation.

These recent cases illustrate the risk that public release of an investigation report, even a summary report, may require disclosure of the remaining investigation materials in later lawsuits. To reduce this risk, organizations should take steps from the beginning of an investigation to document and protect their privileges, including: (1) documenting in an engagement letter or memorandum that counsel will conduct the investigation for the purpose of providing legal advice, (2) documenting any existing or anticipated litigation arising from the circumstances that triggered the investigation; and (3) taking steps to limit any waiver of privilege during and after the investigation. For specifics on how to preserve privilege, please consult an experienced investigations attorney.

Mary L. O'Connor | Farrow-Gillespie & Heath LLP | Dallas, TXMary L. O’Connor’s practice focuses on representing companies and their officers and directors in commercial litigation and arbitration, securities litigation, internal investigations, and regulatory investigations and enforcement proceedings.

During the course of her career, Mary has been named to the list of Best Lawyers in Dallas by D Magazine, and to the list of Texas Super Lawyers (a Thomson Reuters service) by Texas Monthly Magazine.