On June 27, 2014, the D.C. Circuit Court of Appeals overturned a District Court’s decision which found that documents generated through an internal investigation were not protected by the attorney-client privilege in a qui tam action against a defense contractor brought under the False Claims Act.See In re Kellogg Brown & Root, Inc., 14-5055 (D.C. Cir. June 27, 2014).
The relator worked for Kellogg Brown & Root (“KBR”), a defense contractor, and alleged that KBR and various subcontractors, while administering military contracts in wartime Iraq, had engaged in a scheme to defraud the United States Government by using a subcontracting procedure that inflated costs and accepted kickbacks. See United States ex rel. Barko v. Halliburton Co., 1:05-CV-1276 (D.D.C. Mar. 6, 2014). The relator moved to compel KBR to produce documents relating to its internal investigation of the alleged misconduct. KBR argued that the internal investigation had been conducted for the purpose of obtaining legal advice, and therefore, was protected by the attorney-client privilege. After reviewing the disputed documents in camera, the District Court determined that the attorney-client privilege protection did not apply because, among other reasons, KBR had not shown that “the communication would not have been made ‘but for’ the fact that legal advice was sought.” The court found that the internal investigation was “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”
Following the issuance of this discovery order, KBR asked the District Court to certify the privilege question to the Court of Appeals for interlocutory appeal and to stay the District Court’s order pending a petition for mandamus in the Circuit Court. The District Court denied those requests and ordered KBR to produce the disputed documents to the relator within a matter of days. KBR promptly filed a petition for a writ of mandamus in the Circuit Court.
In its decision regarding the petition for a writ of mandamus, the Court of Appeals found that the District Court had erred and employed the wrong legal test. The D.C. Circuit found that the but-for test applied by the District Court was not appropriate for attorney-client privilege analysis. Rather, under common law and Upjohn Co. v. United States, 449 U.S. 383 (1981), the attorney-client privilege applied to corporations so long as the communication involved was made “for the purpose of obtaining or providing legal advice to the client.” The D.C. Circuit held that, “[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion.”
The D.C. Circuit granted KBR’s petition for a writ of mandamus because the District Court’s erroneous privilege ruling could have potentially far-reaching consequences.