Why it matters: On August 11, 2015, for the second time within a year pursuant to a second writ of mandamus sought in a discovery dispute in the same underlying 2005 False Claims Act case and concerning the same contested documents (phew!), the D.C. Circuit found that the attorney-client and work product privileges protect documents created during corporate internal investigations overseen by in-house counsel. In so doing, the Court again vacated rulings by the district court judge that had ordered the internal investigation documents be produced (this time on the theory that the privileges, albeit applicable, had been waived), and voiced its hope that “this opinion will conclusively resolve the issue on which this case has seemed stuck as with a scratch on a broken record.”
Detailed discussion: On August 11, 2015, the D.C. Circuit in In re: Kellogg Brown & Root, Inc. granted a second writ of mandamus (Second Writ) in favor of defense contractor Kellogg Brown & Root (KBR) in connection with a long-running discovery dispute over internal investigation documents in the underlying 2005 False Claims Act (FCA) case. In granting the Second Writ, the Court vacated a series of orders by the district court that had, in effect, required the production of the documents, finding that “the outcomes arrived at by the District Court would erode the confidentiality of an internal investigation in a manner squarely contrary to the Supreme Court’s guidance in [Upjohn Co. v. United States] and our own recent prior decision in this case” (the Court here was referring to the first writ of mandamus it granted in favor of KBR on June 27, 2014 (First Writ)).
The Court began with a short statement of the facts leading up to KBR’s Second Writ petition in December 2014: In 2005 KBR employee Harry Barko (Barko) filed a qui tam complaint against KBR under the FCA alleging that KBR and certain subcontractors defrauded the government by “inflating costs and accepting kickbacks while administering military contracts in wartime Iraq.” During discovery, Barko sought documents that had been created during an internal investigation overseen by KBR’s in-house law department regarding the alleged fraud (Contested Documents). KBR argued that the Contested Documents were subject to the attorney-client privilege because the internal investigation under which they were created had been conducted for the purpose of obtaining legal advice. After an in camera review of the Contested Documents, the lower court judge ordered them to be produced, holding that the attorney-client privilege didn’t apply because, among other things, KBR failed to show that “the communication would not have been made ‘but for’ the fact that legal advice was sought” and that KBR’s investigation had been undertaken “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice” (First Order). As the result, KBR petitioned the D.C. Circuit for the First Writ in May 2014.
In granting the First Writ on June 27, 2014 and vacating the First Order, the Court relied on the 1981 U.S. Supreme Court case of Upjohn Co. v. United States and its holding that “the attorney-client privilege protects confidential employee communications made during a business’s internal investigation led by company lawyers.” In its opinion, the Court denied KBR’s request that the case be reassigned to a different district court judge (a request resurrected and again denied in the Second Writ) and allowed instead that the judge “might entertain timely arguments for why the privilege should not attach to these documents (that is, arguments other than that they were not prepared primarily for the purposes of seeking legal advice).” Over the next few months, the district court judge did just that, issuing a series of rulings (collectively, Subsequent Orders) that had the combined effect of ordering the production of the Contested Documents, this time because KBR had “impliedly waived” the attorney-client and work product privileges with respect thereto. On December 17, 2014, KBR again petitioned the D.C. Circuit for the Second Writ, which brings us to the Court’s August 11, 2015 opinion.
The Court began its analysis with the question of whether the Second Writ should be granted given that “mandamus is an extraordinary remedy,” and stated that granting mandamus was warranted “if the challenged District Court orders constituted error” and, if so, “whether that error is the kind that justifies mandamus.” The Court found “clear and indisputable error” by the judge in both cases. The first justification given by the district court was that KBR waived the attorney-client and work product privileges via application of Federal Rule of Evidence 612—which provides for production of a document when used to refresh memory before testimony—when one of its in-house attorneys (and designated expert) admitted on the record that he had reviewed the Contested Documents in preparation for his deposition. The Court began by making clear that, in its view, Rule 612 did not apply in this case and the “fairness balancing test” the district court used to make his decision was “inappropriate” and “counter toUpjohn” because it 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. Upjohn teaches that ‘[a]n uncertain privilege, or one which purports to be certain but results in widely varying application by the courts, is little better than no privilege at all.’ ” The second justification given by the district court judge was that KBR waived the privileges for the Contested Documents because it put them “at issue” in connection with the KBR in-house counsel’s deposition and subsequent summary judgment motion pleadings. The Court reviewed the factual record as to this determination and found “clear error” there as well, both as to the judge’s factual analysis about what was put “at issue” and his incorrect application of the law of attorney-client privilege on the one hand and “fact” vs. “opinion” work product privilege on the other (which the Court said he got right) to the facts of the case.
After finding “clear and indisputable” error in the district court’s Subsequent Orders, the Court looked to the law of mandamus to see whether granting the Second Writ was justified, and concluded that it was, because “[j]ust as in the [First Writ], the District Court’s [Subsequent Orders] would generate ‘substantial uncertainty about the scope of the attorney-client privilege in the business setting.’… If allowed to stand, the District Court’s rulings would ring alarm bells in corporate general counsel offices throughout the country about what kinds of descriptions of investigatory and disclosure practices could be used by an adversary to defeat all claims of privilege and protection of an internal investigation. . . . These alarm bells would be well founded. If all it took to defeat the privilege and protection attaching to an internal investigation was to notice a deposition regarding the investigations (and the privilege and protection attaching them), we would expect to see such attempts to end-run these barriers to discovery in every lawsuit in which a prior internal investigation was conducted relating to the claims. Accordingly, we think it is essential to act on this Petition in order to protect our privilege waiver jurisprudence.”
Click here to read the D.C. Circuit’s 8/11/15 opinion granting the Second Writ in In Re Kellogg Brown & Root, Inc. (D.C. Cir. 2015).
Click here to read the D.C. Circuit’s 6/27/14 opinion granting the First Writ in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).