Aug 142015

Barko Round 2: D.C. Circuit Again Steps In to Protect FCA Defendant’s Privilege Over Internal Investigation

Scott D. Stein and Emily Van Wyck
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The D.C. Circuit recently issued another opinion in a case that we have followed closely, In re Kellogg Brown & Root, Inc., No. 14-5319 (D.C. Cir. Aug. 11, 2015).  For the second time, the D.C. Circuit granted a writ of mandamus to address the district court’s ruling that the defendant had waived privilege—and for the second time, the D.C. Circuit has vacated the district court’s orders to produce documents in connection with the results of an internal investigation into potential FCA claims because the orders “would erode the confidentiality of an internal investigation in a manner squarely contrary to the Supreme Court’s guidance in Upjohn and [the Court’s] prior decision in this case.”  Slip Op. at 23.

In the first mandamus proceeding, the D.C. Circuit vacated a district court order that Kellogg Brown & Root (“KBR”) hand over the results of an internal investigation, but allowed the district court to consider other arguments for why the documents may not be covered by attorney-client privilege or work-product protection.  In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).  (See our previous post about that decision here).  In November, the district court found that attorney-client privilege and work-product protection were impliedly waived for these documents because (1) KBR’s 30(b)(6) witness reviewed the documents in preparation for his deposition, and (2) KBR placed the documents “at issue.”  United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276 (D.D.C. Nov. 20, 2014).  KBR petitioned the D.C. Circuit for writ of mandamus on both rulings.

Regarding the first ruling, the D.C. Circuit rejected the district court’s use of a balancing test to determine whether disclosure was proper under Federal Rule of Evidence 612, holding that the rule only applies when a witness “uses a writing to refresh memory.”  The district court’s erroneous application of the rule would render attorney-client privilege and work-product protection meaningless because “their mere invocation would entitle an adversary to production of the privileged or protected materials.”  Slip. Op. at 10.  Further, the Court added that the district court’s conclusion was precluded by Upjohn because it would allow an opposing party to defeat privilege claims “routinely by . . . noticing a deposition on the topic of the privileged nature of the internal investigation.”  Id. at 11.

The Court also rejected the district court’s finding that KBR placed the documents “at issue” by referring to the investigation in its motion for summary judgment in a manner that implied that the investigation did not produce evidence of wrongdoing.  Although the Court recognized that a party may waive privilege or work product protection by partially disclosing information, KBR had not done so.  This reference to the investigation was simply a factual reference rather than an argument that the district court should draw an inference based on the privileged documents.  Moreover, because all inferences were to be drawn in the non-moving party’s favor at that stage of the litigation, the district court could not have drawn an inference in KBR’s favor.

The Court held that the district court had committed “clear and indisputable” error and “[i]f 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.”  Id. at 24.  Although the Court’s opinion upheld the protections of privilege and work-product, the Court stopped short of adopting KBR’s suggestion that “everything in an internal investigation is attorney-client privileged.”  Id. at 19.  Instead, the Court cautioned that parties must appreciate the distinct protections provided by attorney-client privilege and work-product protection, in particular when claiming these protections for materials produced by an agent—such as an investigator in this case—because “there is nothing to be gained by sloppily insisting on both or by failing to distinguish between them.”  Id. at 21.

As before, the Court denied KBR’s request for reassignment to a new judge stating “we have no reason to doubt that the District Court will render fair judgment in further proceedings.”  Id. at 27.

A copy of the D.C. Circuit’s opinion can be found here.

Scott D. Stein

Chicago

sstein@sidley.com

Emily Van Wyck

EmilyVanWyck@sidley.com

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