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August 16, 2015 Practice Points

D.C. Circuit Reaffirms Privilege and Protections over Corporate Investigations

The court vacated a ruling regarding attorney-client privilege and work-product protection that “would ring alarm bells in corporate general counsel offices throughout the country.”

By Eileen H. Rumfelt – August 16, 2015

For a second time, on August 11, 2015, the D.C. Circuit granted a writ of mandamus in the KBR whistleblower False Claims Act suit, again affirming important attorney-client privilege and work-product protections over corporate investigatory material. In so ruling, the D.C. Circuit vacated a ruling that “would ring alarm bells in corporate general counsel offices throughout the country.”

Henry Barko filed a False Claims Act complaint against his former employer, KBR, a defense contractor, alleging fraud associated with its administration of military contracts during the Iraq War. In discovery, he sought reports of KBR’s internal investigation into the alleged fraud, over KBR’s attorney-client privilege and work-product objections. In a 2014 ruling, the district court ordered the production of more than 80 reports, finding that KBR failed to show that the communications would not have been made “but for” the fact that legal advice was sought. The district court held that the reports were made for purposes of regulatory compliance and corporate policy, not for purposes of obtaining legal advice. On KBR’s first petition for mandamus, the D.C. Circuit rejected the district court’s overly restrictive standard as contrary to the U.S. Supreme Court’s Upjohn decision.

On remand, the district court ruled again that the same investigatory reports should be produced, this time under a theory of implied waiver and because the reports contained non-privileged fact work product that was discoverable based on substantial need. The D.C. Circuit rejected both grounds for disclosure and vacated the court’s order.

The district court found implied waiver of the privilege for two reasons, both of which the D.C. Circuit rejected. First, it found that KBR’s vice president (legal) waived the privilege when he testified during a corporate deposition about the disputed investigatory documents, which he admittedly reviewed in preparation for his deposition. The D.C. Circuit rejected that simply reviewing documents in preparation for corporate testimony constituted testimonial reliance on those documents. In fact, to adequately prepare for the topics on which he had been designated, the witness had no choice but to review the documents. To find waiver based on his preparation would be to “allow the attorney-client privilege and work product protection to be defeated routinely by a counter-party noticing a deposition on the topic of the privileged nature of the internal investigation.”

Second, the district court found implied waiver based on KBR’s reference to the reports in a footnote in its summary-judgment brief. The footnote explained that KBR has in the past made reports to the government when its investigation revealed that a legal violation has occurred, but no such reports were made here. According to the district court, KBR impliedly put the reports at issue by seeking an inference that the failure to report to the government meant that no fraud had occurred here. Acknowledging the well-settled adage that the attorney-client privilege cannot be used as both a sword and a shield, the court nonetheless found that the footnote was not sufficiently direct to create a privilege waiver.

With respect to the work-product protections, the D.C. Circuit found that the district court got the law right, but misapplied the law on the facts. Among other things, the order took too broad a view of certain investigatory mental impressions as “background materials.”

In sum, the district court’s error was “‘[c]lear and indisputable’ because the outcomes arrived at by the district court would erode the confidentiality of an internal investigation in a manner squarely contrary to the Supreme Court’s guidance in Upjohn and our own recent prior decision in this case.”

Eileen H. Rumfelt, Miller & Martin PLLC, Atlanta, GA

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