On August 11, 2015, the D.C. Circuit issued an opinion in In re: Kellogg Brown & Root, Inc., 1:05-cv-1276, No. 14-5319 (D.C. Cir., Aug. 11, 2015), granting KBR's petition for writ of mandamus and vacating a district court order which held that KBR had implicitly waived privilege by (1) allowing its Rule 30(b)(6) witness to review privileged internal investigation documents in preparation for his deposition and (2) placing the privilege "at issue" in the litigation. The opinion also vacated a second district court order which found that the plaintiff had shown substantial need for the information in portions of the privileged documents that constituted fact work product.
The KBR case involves a False Claims Act complaint brought against KBR and KBR-related corporate entities by a former employee, Henry Barko. Barko alleged that KBR and certain subcontractors "defrauded the U.S. Government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq."
Barko sought a Rule 30(b)(6) deposition concerning KBR's internal investigation, including the extent to which it was privileged. During the deposition, KBR's witness testified that he had reviewed documents protected by both attorney-client and work product privilege related to the internal investigation in preparation for his deposition. He also responded to questions from KBR's counsel directed at establishing that the internal investigation was protected by both attorney-client and work product privilege. Several days after the deposition, KBR filed a summary judgment motion that included a footnote stating that (1) KBR had an internal Code of Conduct investigative mechanism, (2) KBR would make a disclosure to the government if the investigation showed reasonable grounds to believe that that a violation of the Anti-Kickback Act had occurred, (3) KBR conducted an internal investigation concerning the allegations raised by Barko, and (4) no report to the government was made following the investigation.
The district court relied upon these facts in ruling that there was an implied waiver of attorney-client privilege and work product protection. It held that the documents reviewed in preparation for the Rule 30(b)(6) deposition must be produced under Federal Rule of Evidence 612, which provides that "where a witness has used a writing to refresh memory before testifying, the adverse party is entitled to have it produced … 'if the court decides that justice requires[.]'" The court applied a balancing test in reaching its conclusion, and also held that KBR injected the contents of the privileged documents into the case by questioning its Rule 30(b)(6) witness and by including the footnote in the summary judgment brief.
The D.C. Circuit held that the district court erred when it required production of the privileged documents under Rule 612 and noted that the "balancing test was inappropriate in the first instance" because Rule 612 is only applicable if a witness "uses a writing to refresh memory," and that the mere testimony about the privileged nature of the documents does not entail testimonial reliance on their contents. The court also held that even if the balancing test had been appropriate, the district court's conclusions "would allow the attorney-client privilege and work product protection covering internal investigations to be defeated routinely by a counter-party noticing a deposition on the topic of the privileged nature of the internal investigation" a result that is precluded by the Supreme Court's decision in Upjohn Co. v. United States.
The D.C. Circuit also held the district court's "at issue" ruling was erroneous. The court noted that the mere fact that KBR examined its Rule 30(b)(6) witness did not waive privilege nor did the fact that pages from the deposition transcript were attached to the summary judgment motion as the transcript is "simply a record of what was said, not an argument." The court also rejected the district court's analysis that the footnote in the brief caused an "at issue" waiver because KBR was asking it to "draw an 'unavoidable' inference" that because there was an internal investigation and no disclosure to the government, there was no wrongdoing that was uncovered. The court noted that KBR had "neither directly stated that the [internal] investigation had revealed no wrongdoing nor sought any specific relief because of the results of the investigation," and therefore had not based a claim or defense on privileged advice. Moreover, the court observed that KBR could not have sought an unavoidable inference through the footnote because, as the summary judgment movant, all inferences were to be drawn against it.
The D.C. Circuit also vacated the district court's ruling that portions of the internal investigation materials were "non-privileged fact work product that is discoverable based on substantial need." Although the court rejected KBR's argument "that everything in an internal investigation is attorney-client privileged," it held that the district court had erroneously compelled disclosure of privileged attorney-client communications with KBR employees, including those made to investigators acting at the direction of in-house counsel. The court also held that the district court should not have compelled disclosure of communications between the investigators and in-house counsel which, while not attorney-client privileged, were protected opinion work product because they contained the mental impressions of the investigators.
This opinion is the second time in the case the D. C. Circuit has granted a petition for writ of mandamus in response to the district court's rulings on the privileged nature of KBR's internal investigation documents. In a prior ruling, In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014), the court vacated the district court's decision that certain internal investigation documents were not privileged because KBR had failed to show that the primary purpose of the internal investigation was to obtain or provide legal advice. The court held that the district court's formulation of the primary purpose test, which analyzed whether the sole purpose of the internal investigations was to obtain or provide legal advice, was incorrect. The court held that the primary purpose test "cannot and does not draw a rigid distinction between a legal purpose on the one hand and a business purpose on the other," and that an internal investigation is privileged if "one of the significant purposes" is to obtain or provide legal advice.
The latest KBR opinion can be found here.