A high-profile qui tam suit against Kellogg, Brown & Root and Halliburton continues to generate important case law relating to the scope of attorney-client privilege and work product protection given to internal investigations.
In the lawsuit, arising out of alleged false claims to the government under Iraq reconstruction-related contracts, federal judge James S. Gwin in Washington, D.C. held, in March 2014, that internal investigation materials were not protected by the attorney-client privilege because the investigation had been conducted as a matter of regular company policy by internal compliance personnel and as required by federal law. (I wrote about Judge Gwin’s ruling in a blog entitled “When Is An Internal Investigation Not Privileged.”) The defendants appealed the ruling, which led to a unanimous decision three months later in In Re: Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014), in which the U.S. Court of Appeals for the D.C. Circuit vacated the district court decision, holding that an internal investigation is privileged so long as “one of the significant purposes” of the investigation is to obtain or provide legal advice. The Court of Appeals remanded the case to the District Court for further proceedings. (I discussed the D.C. Circuit’s opinion in “D.C. Circuit Upholds Claim of Corporate Attorney-Client Privilege.”) That ruling is now subject to a petition for certiorari to the Supreme Court.
Following the remand, the plaintiff once again sought production of internal investigation materials on a new ground – that the defendants had waived privilege through statements made during the litigation. By way of background, when allegations of fraud and kickbacks surfaced, the defendants conducted an internal investigation and did not report the results of the investigation to the authorities. In its most recent decision, the district court held that, under the doctrine of implied waiver, the defendants’ repeated assertions that the internal investigation had yielded no evidence of fraud waived privilege by placing what otherwise would have been privileged matters into controversy.
The recent decision arises from the plaintiff’s deposition of a corporate representative under Federal Rule of Civil Procedure 30(b)(6). The defendants did not permit the witness to answer questions, on privilege grounds, about reports and evidence underlying a corporate decision not to report potential kickbacks to the Department of Defense. At the same deposition, however, defendants’ attorney examined the witness and elicited testimony that defendants’ normal practice and contract terms required it to report reasonable evidence of kickbacks and that after investigating the allegations of this case made no report. The defendants soon after moved for summary judgment using the testimony to support the inference that the privileged documents did not yield any evidence that fraud or kickbacks occurred.
The district court’s decision highlights two concerns when handling the fruits of internal investigations. First, if such fruits are to be protected, the holder of the privilege must be careful not to make arguments in the litigation about an investigation that might, as a matter of fairness, open the door to inquiry. According to the Court, defendant “placed the contents of the documents in question through its own actions” by seeking “a positive inference in its favor based on what [defendants] claim the documents show” and that “fairness dictates that all the documents in question be produced so that [plaintiff is] able to examine the documents and challenge whether the withheld documents actually support the inferences that [defendants’] attorneys suggested to this Court.”
Second, the holder of the privilege must take care that witness preparation does not open the door to inquiry when review of privileged material is used to refresh a witness’s recollection, or is otherwise central to preparing the witness for testimony. Engaging in a “context-specific analysis,” the court found that the defendants’ use of privileged documents to prepare the Rule 30(b)(6) witness warranted disclosure, on grounds of “fairness,” because the witness had reviewed the privileged documents before testifying; “major discrepancies exist between [the witness’s] testimony and the contents of the writings [he] had reviewed”; the documents predominately consisted of investigator-taken statements and investigator reports rather than attorney opinion materials; and the defendant and the deponent repeatedly suggested that “the documents contain nothing.” The Court noted that its order should “not be understood as a blanket rule. In most cases, Rule 30(b)(6) witnesses who have examined privileged materials before testifying will not waive the privilege.”
The November 20 opinion is unlikely to be the final word in this protracted discovery dispute. Defendants immediately filed a Motion for Reconsideration and the Court temporarily stayed its order compelling production pending its decision.