United States: D.C. Circuit Prevents Disclosure Of KBR's Internal Investigation Materials, Again

Last Updated: September 1 2015
Article by J. Andrew Jackson, D. Grayson Yeargin, Ryan P. McGovern and Mark R. Lentz

For the second time in as many years, the Court of Appeals for the D.C. Circuit struck down a district court order compelling KBR to turn over documents from an internal investigation conducted by KBR into allegations that it defrauded the U.S. government during the Iraq War. The district court initially ruled that KBR's internal investigation documents were not privileged because they were not prepared primarily for the purposes of seeking legal advice. Finding the documents privileged, the D.C. Circuit vacated that ruling and remanded to the district court, noting that the issue was "materially indistinguishable" from U.S. Supreme Court precedent in Upjohn Co. v. United States. But the district court, at the D.C. Circuit's invitation, entertained other timely arguments as to why the privilege should not attach, and once again it ordered disclosure of the internal investigation documents. The D.C. Circuit, however, disagreed and for a second time upheld privilege over the internal investigation documents, cautioning that the district court's reliance on the balancing test for Federal Rule of Evidence 612, the doctrine of "at issue" waiver, and the "substantial need" test "inject[ed] uncertainty into application of the attorney-client privilege and work product protection to internal investigations."

Background

KBR designated Vice President Christopher Heinrich as its Fed. R. Civ. P. 30(b)(6) witness on several identified topics, including a topic addressing any investigation or inquiry of the alleged fraud or any of the matters identified by the relator. At the outset of Heinrich's deposition, counsel for KBR offered a preliminary statement noting that KBR was making Heinrich available subject to claims of attorney-client privilege and work product protection.

During Heinrich's deposition, he testified that he reviewed the now-disputed documents relating to KBR's internal investigation in preparation for the deposition. On cross-examination by counsel for KBR, Heinrich testified that KBR had a contractual duty to report to the Department of Defense ("DoD") if it had reason to believe any violation of the Anti-Kickback Act may have occurred. He also explained that when KBR had made such reports to DoD in the past, that it had treated the investigation itself as privileged and never provided a copy of the investigation itself to the government.

Shortly after the deposition, KBR moved for summary judgment. KBR's memorandum in support of summary judgment acknowledged KBR's practice of making disclosures to the government where an investigation revealed reasonable grounds to believe a violation may have occurred. The memorandum also acknowledged that KBR intended for its investigations to be protected by privilege but noted that it had not asserted privilege over the fact that internal investigations have occurred or the fact that KBR had made disclosures to the government based on those investigations. Finally, the memorandum acknowledged that KBR performed an investigation related to the relator's claims and made no disclosure to the government following that investigation. The memorandum also attached excerpts from Heinrich's testimony and referenced the deposition language in the Statement of Material Facts to Which there is No Genuine Dispute.

Applying a balancing test, the district court on remand found that KBR had to produce the documents under Federal Rule of Evidence 612 on the basis that KBR waived privilege when Heinrich reviewed the documents in preparation for his deposition. The district court also found that KBR impliedly waived privilege under the "at issue" doctrine. After rejecting KBR's request to amend its pleadings to strike the sections that created a waiver, the district court issued a separate order finding that the documents were discoverable fact work product and the relator had shown "substantial need."

Waiver Based on Review in Preparation for Deposition

On appeal from the district court's second ruling, the D.C. Circuit found that the district court erred in applying a balancing test under Federal Rule of Evidence 612. The D.C. Circuit noted that the Rule 612 balancing test applies only where a document is used to refresh a witness's memory. In other words, the writing must have influenced the witness's testimony to be discoverable.

Heinrich did not consult the materials during his deposition, nor did he testify as to the substance of those documents or any other privileged element. Further, as noted by KBR's counsel during the deposition, while Heinrich reviewed the materials prior to the deposition, the company "would not concede that it was for the purpose of refreshing recollection so that he could testify because [KBR has] always consistently taken the position that those reports are subject to the company's attorney-client privilege and attorney work product." The D.C. Circuit agreed and refused to find testimonial reliance to justify application of the balancing test.

Moreover, the D.C. Circuit also held that, even if consideration of the balancing test had been appropriate, the district court erred in its application of that test. Noting that in most cases, 30(b)(6) witnesses who examine privileged materials before testifying will not waive privilege, the district court nonetheless found that fairness dictated disclosure here because of Heinrich's and KBR's repeated suggestion that the documents contain nothing. The D.C. Circuit rejected the district court ruling because it failed to give due weight to the privilege and protection attached to the internal investigation materials and because it would allow privilege claims over internal investigations to be routinely defeated by noticing a deposition on the topic of the privileged nature of the investigation. This result would directly conflict with Upjohn, which teaches that an uncertain privilege is little better than no privilege at all. The D.C. Circuit also found the relator's position that KBR erred by producing a 30(b)(6) witness that had actually reviewed the internal investigation materials "absurd" because such a rule would encourage parties to provide less knowledgeable corporate representatives.

Implied or "At Issue" Waiver

The D.C. Circuit also rejected the district court's conclusion that KBR impliedly waived any protection over the documents in dispute because it actively sought a positive inference in its favor on what it claimed the internal investigation documents showed. The district court reasoned that KBR attempted to use its privilege claim as a sword and a shield by using the fact that it conducts investigations and makes disclosures when it has reasonable evidence of a violation to establish an inference that it had no reasonable evidence of a violation here, since it conducted an investigation but did not make a disclosure. The district court further emphasized that KBR itself had put the materials "at issue" when it solicited Heinrich's testimony on the materials, attached excerpts from the testimony to its motion for summary judgment, referenced the deposition language in its statement of material facts to which there is no genuine dispute, and discussed the "investigative mechanism" in its brief.

Acknowledging that the attorney-client privilege cannot be used as both a sword and a shield, the D.C. Circuit also recognized that general assertions lacking substantive privileged content are insufficient to justify waiver. As to the deposition testimony and the statement of material facts, the D.C. Circuit found that "as a matter of logic—neither could possibly give rise to an inference that places the contents of the deposition at issue." The deposition is merely a record of what Heinrich said, not an argument, and the statement of material facts does not create any inferences to be made or contested in the statements alone. The D.C. Circuit did, however, recognize that waiver could occur during a deposition or statement of material facts where partial disclosure of privileged materials was made.

The D.C. Circuit went on to note that the reference to the investigation in the summary judgment memorandum presented a more difficult question because "a factfinder could infer that the investigation found no wrongdoing." Nonetheless, the D.C. Circuit rejected the district court's position that KBR was asking it to draw an "unavoidable" inference—that the investigation uncovered no wrongdoing. Instead, the D.C. Circuit opined that a different inference could be made—that the investigation showed wrongdoing but KBR made no report to the government. Further, the circuit court noted that because all inferences were to be drawn against KBR in its motion for summary judgment, the district court could not make any inference in KBR's favor based on the contents of the privileged documents. In other words, the district court was prohibited from even making the most favorable inference that it concluded was "unavoidable." In any event, the D.C. Circuit noted that the memorandum merely included a recitation of facts, not an argument or claim concerning the privileged materials.

"Substantial Need"

Finally, the D.C. Circuit disagreed with the district court's order directing KBR to produce certain portions of the report on the basis that the materials were nonprivileged fact work product discoverable based on substantial need. While agreeing with the district court on the law, and rejecting KBR's assertion that everything in an internal investigation is protected by the attorney-client privilege, the D.C. Circuit found that the district court misapplied the law to the documents it ordered to be disclosed.

The circuit court concluded that even a cursory review demonstrated that many of the documents were protected by the attorney-client privilege and that other documents contained the mental impressions of the investigators. Thus, the district court committed clear error in concluding that the materials were only fact work product. Because the district court failed to distinguish between fact and opinion work product, the circuit court did not reach the "substantial need" and "undue hardship" questions.

Recommendations

While the D.C. Circuit's ruling reaffirms the protections from disclosure provided by the attorney-client privilege and work product doctrine, as a matter of practice, counsel should carefully consider its approach before conducting any internal investigation. Counsel should be especially mindful that materials that qualify as work product, but that do not fall under the attorney-client privilege, may be subject to disclosure, especially when the materials constitute fact work product. Further, counsel should be careful in its public use of or reference to privileged or work product protected investigative materials so as to avoid impliedly waiving protection. Likewise, counsel should advise 30(b)(6) witnesses not to disclose the contents of such investigative materials when providing testimony. While statements regarding the existence of such materials generally will not result in waiver, revealing the substance of those materials likely will.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
J. Andrew Jackson
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.