Recently, the D.C. Circuit Court of Appeals ruled that a negative inference is not permissible when a party refuses to turn over the results of a privileged internal investigation.
United States v. Halliburton Co., involved an alleged violation of the False Claims Act (“FCA”). The defendant, a government contractor, was accused of submitting false or purposefully inaccurate claims for reimbursement to the government. Defendant moved for the court to dismiss the plaintiff’s suit because there was no dispute of the material facts at issue. The Court of Appeals ruled in favor of the defendant and dismissed the case.
Part of the plaintiff’s FCA suit turned on whether an internal investigation could be used to prove the allegations of false claims against the government. The defendant’s code of business conduct policy required the company to investigate allegations of possible fraudulent claims. Prior litigation determined that the results of the investigation were in fact privileged, and the privilege had not been waived.
In an attempt to make an end-run around the claim of privilege, plaintiff asserted that wrongdoing may be inferred, because the defendant was unwilling to reveal the results of the internal investigation. Conducting a survey of other jurisdictions’ precedent, the Court of Appeals found no support for this position.
The Court of Appeals rejected the plaintiff’s tactic and held that an assertion of privilege in this context cannot create an adverse inference. If an opposing party could create an adverse inference from the assertion of attorney-client privilege over a particular document, people would be discouraged from seeking legal advice and attorneys would be similarly discouraged from giving honest opinions. Such an inference would compromise the logic behind the “oldest of privileges,” to encourage frank and open discussion between lawyer and client.
The entire opinion may be found here.