Government contractors face ever-increasing pressure to develop robust compliance programs that, among other things, detect potential violations of laws and regulations—which they are then obliged to report to the agency inspector general and the contracting officer. Like many large contractors, Kellogg Brown & Root's (KBR) law department oversees (and conducts) investigations into potentially reportable violations under a code of business conduct. Although its attorneys' investigations are protected by the attorney client privilege and the work product doctrine, KBR has been locked in a False Claims Act fight with a former employee/relator (Barko) who keeps trying to obtain KBR's privileged internal investigation documents.
The D.C. district court has sided twice with the relator and ordered that KBR's investigative materials be produced. Earlier this week, the D.C. Circuit granted KBR's second mandamus petition and again rejected the relator's arguments that it should be given the company's investigative materials (and vacated the district court's discovery orders). The opinion provides a further excellent discussion of the law related to the attorney client privilege and work product doctrine. Importantly, the D.C. Circuit's opinion provides a powerful assurance to contractors that, when they conduct internal investigations under the direction of counsel and when proper steps are taken to protect the resulting investigatory materials, the attorney client privilege and work product doctrine will protect the contractors' investigations from disclosure to relators in FCA cases (and to the Government).
Relator Barko alleges that "KBR and certain subcontractors defrauded the U.S. Government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq." During discovery, Barko learned that KBR had previously investigated issues related to the alleged fraud and sought documents related to KBR's internal investigation. KBR refused. As we previously explained on this blog, during the earlier round of trial and appellate litigation, the district court reviewed the documents in camera and then ruled they should be produced because they purportedly were not generated in response to a request for legal advice, e.g., the investigation was "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice." The D.C. Circuit rejected that analysis, which could not be reconciled with the Supreme Court's 1981 decision in Upjohn Co. v. United States.
On remand, the trial court was given license by the D.C. Circuit to consider why the privilege might not attach to specific documents related to KBR's internal investigation. The district court found that KBR had effected a subject matter waiver when their litigation counsel testified in response to a 30(b)(6) deposition notice about the subject of the investigation—testimony that was given subject to claims of attorney client privilege and objecting (and refusing to answer) questions that would have invaded the privilege.
The trial court held that KBR waived privilege with respect to its internal investigation materials because (i) under FRE 612 ("writing used to refresh a witness"), KBR had improperly allowed its 30(b)(6) witness to review the investigation materials before being deposed about them, and (ii) KBR had purportedly put the investigation materials "at issue" by relying on them in a summary judgment brief. The appeals court rejected both rulings.
First, Barko argued that he had essentially created a trap into which KBR had fallen. Barko asserted that he could "overcome the privilege by putting" the investigation at issue by noticing it as a 30(b)(6) deposition topic then demanding the investigative materials under Rule 612 when the witness concedes that he had reviewed the materials to prepare for the deposition topic that Barko had noticed. The circuit court held that "[a]llowing privilege and protection to be so easily defeated would defy 'reason and experience' and 'potentially upend certain settled understandings and practices' about the protections for such investigation."
During oral argument, Barko had argued that KBR" could have avoided the trap by having the 30(b)(6) witness review a summary of the investigation documents prepared by someone else, rather than the documents themselves. The appeals court made clear that this position is "absurd," as it would incentivize testimony by persons with second- or third-hand knowledge of an investigation rather than first-hand knowledge, and such "less knowledgeable corporate representatives for deposition[s]" would "defeat the purpose of civil discovery." "This makes no sense."
Second, the district court had found that KBR put its investigation "at issue," i.e., made the privileged matters the subject of a controversy, by purportedly relying on it as the basis of non-liability argument in a summary judgment brief. Generally, a party asserting privilege cannot "disclose as much as he pleases [and] withhold the remainder" of the privileged information. The relator and the district court thought KBR's summary judgment brief had done that by discussing (in a footnote reference) the law department's investigation and the fact that, afterward, KBR did not report wrongdoing—from which "a factfinder could infer that the investigation found no wrongdoing." The D.C. Circuit explained the flaw in Barko's (and the trial court's) inference-laden contention:
Where KBR neither directly stated that the . . . investigation had revealed no wrongdoing nor sought any specific relief because of the results of the investigation, KBR has not "based a claim" or defense upon the attorney's advice.
The trial court also explained that, in the "context of the whole passage" in which it appears, the footnote at issue did not use the investigation to demonstrate KBR's purported innocence.
Finally, the trial court had found that some of the investigation material constituted work product and was subject to production under the "substantial need" exception to that doctrine. Although the trial court described the law concerning the work product doctrine correctly, "the fault lies in [its] application" of the legal rules—which improperly would have "require[d] KBR to produce materials that are attorney-client privileged." The D.C. Circuit rejected the trial court's conclusion and vacated its decision.
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To effectively implement corporate compliance programs and to address the Government's mandatory disclosure requirements, Government contractors—operating in a heavily regulated environment—must be able to conduct internal investigations. When contractors choose to have counsel conduct those investigations, they must be able to rely on the protection of confidential materials generated as a result of those investigations under the attorney client privilege and work product doctrine. The D.C. Circuit's most recent KBR decision recognizes this important need and supports the crucial application of attorney client privilege.
Tags: Attorney-Client Privilege, Work Product Doctrine
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