On August 11, 2015, the D.C. Circuit issued a writ of mandamus vacating two lower court production orders (dated November 20 and December 17, 2014) in a case involving a long-standing dispute over attorney-client privilege protection for internal investigations. See In Re Kellogg Brown & Root, No. 14-5319 (D.C. Cir. decided Aug. 11, 2015). This is Kellogg Brown & Root Inc.’s (KBR’s) second successful petition in the company’s attempt to preserve the privilege of documents KBR created during its in-house counsel’s internal investigation into a whistleblower’s complaints. Issuance of the first writ of mandamus was discussed in our alert Good News for In-House Counsel: The D.C. Circuit Court Restores Attorney-Client Privilege for Internal Investigations.
As stated in our earlier alert, the underlying case involves a False Claims Act qui tam action brought by Harry Barko, a former KBR employee, alleging that KBR and certain subcontractors defrauded the U.S. Government by inflating the costs of construction services on military bases in Iraq. Prior to the initiation of the suit, KBR had conducted an internal investigation in accordance with its Code of Business Conduct and as required by government procurement regulations, to investigate potential violations of law and corporate policy. During discovery, Barko sought documents prepared during the course of KBR’s prior internal investigation, and KBR responded by claiming the documents were protected under the attorney-client privilege and the work product doctrine. With its first writ of mandamus, the D.C. Circuit rejected the District Court’s assertion that the attorney-client privilege did not apply because KBR had not shown that the sole purpose for the communications at issue was to obtain legal advice.
The most recent District Court rulings ordered production of certain documents related to the investigation on the new ground that attorney-client and work product protections were waived by a company officer’s review of the investigation documents in preparation for his deposition. Citing the Federal Rule of Evidence 612, which entitles an opposing party to those documents used by a witness to refresh memory, the lower court balanced the factors for and against disclosure of the documents and concluded that the privileges should be superseded in the interest of fairness.The D.C. Circuit saw no basis for the balancing test employed by the lower court and found it counter to Upjohn v. United States, stating, “It cannot be the case that just stating the documents were privileged constitutes a testimonial reliance on their contents; else, attorney-client privilege and work product production would mean nothing at all in that their mere invocation would entitle an adversary to production of the privileged or protected materials.”
The D.C. Circuit also rejected the lower court’s assertion that the privileges were waived under the “at issue” doctrine when KBR allegedly placed the privileged investigation reports in controversy by including in its motion for summary judgment the corporate officer’s deposition testimony regarding the fact of the investigations and KBR’s reporting duties. Holding that a deposition transcript is merely a record of what was said, the D.C. Circuit found that no waiver occurred because the recitation of facts was neither an argument nor a claim concerning the contents of the privileged investigation documents.
The lower court’s December ruling refuted KBR’s contention that any communication between in-house counsel and an attorney-agent is automatically attorney-client privileged, and found that some of the documents were non-privileged fact work product that was discoverable based on substantial need. The D.C. Circuit agreed that some KBR documents were non-privileged fact work product, but the District Court’s failure to properly distinguish between the fact and opinion work product of KBR’s attorney-agents and investigators led the Circuit Court to reject that production order as well. It is important to remember that attorney-agent communications with in-house counsel, or communications in which the agent steps into the shoes of the attorney are attorney-client privileged. Documents revealing the mental impressions, processes or conclusions of in-house counsel or attorney-agents constitute opinion work product and will be protected if prepared in anticipation of litigation.
This new decision reaffirms the boundary between discoverable materials and those privileged as attorney-client communications or attorney work product. In-house counsel may conduct internal investigations that are privileged and create protected attorney work product materials. Nonetheless, counsel must be careful to distinguish between material that is protected by the attorney-client privilege and material that is protected by the work product doctrine. In addition, counsel must understand that factual work product material receives less protection than opinion work product. Understanding those distinctions will help ensure the creation of investigation materials that will receive the maximum protection. Further, in-house counsel should take care to protect privileged investigation documents by clearly limiting any related deposition testimony or pleadings to the existence, but not the substance, of those documents.