For the second time in just over a year, the DC Circuit granted
the extraordinary remedy of a writ of mandamus to protect a
company's assertion of privilege over materials relating to an
internal investigation. In a significant case concerning the
application of the corporate privilege – and one in which
WilmerHale represented amici arguing against the lower court ruling
– the Court vacated the denial of the protection of the
privilege and warned, "If allowed to stand, the District
Court's rulings would ring alarm bells in corporate general
counsel offices throughout the country." In re Kellogg
Brown & Root, Inc., No. 14-5319, slip op. (DC Cir. Aug.
11, 2015) ("KBR II")
The 2014 Decision – KBR I
KBR, a defense contractor, had conducted an internal investigation
into allegations that it defrauded the United States by inflating
costs and accepting kickbacks while administering military
contracts in Iraq. In connection with a False Claims Act suit
against KBR, the plaintiff sought documents related to the
company's investigation, which KBR opposed on the basis of the
attorney-client privilege. After the District Court rejected
KBR's assertion of privilege, the company sought a writ of
mandamus, which the DC Circuit granted. See In re Kellogg Brown
& Root, Inc., 756 F.3d 754 (DC Cir. 2014) ("KBR
I"). In its opinion, the DC Circuit cited to
WilmerHale's amicus brief on behalf of a coalition of business
associations, which criticized the sea change in privilege doctrine
reflected in the District Court's opinion.
The Court of Appeals analyzed and rejected four separate
justifications that the District Court had asserted in ordering the
documents produced. First, with respect to the District Court's
finding that KBR's internal investigation was conducted by
in-house counsel, the DC Circuit clarified that the Supreme
Court's seminal decision in Upjohn, recognizing the
corporate privilege, "does not hold or imply that the
involvement of outside counsel is a necessary predicate for the
privilege to apply," and that "a lawyer's status as
in-house counsel does not dilute" the force of the privilege.
Second, the Court of Appeals rejected the District Court's
reliance on the fact that the interviews had been conducted by
non-attorneys, holding instead that "communications made by
and to non-attorneys serving as agents of attorneys in internal
investigations are routinely protected by the attorney-client
privilege." Third, the DC Circuit concluded that KBR's
failure to inform employees that the purpose of the interview was
to assist the company in obtaining legal advice was of no moment,
as "nothing in Upjohn requires a company to use magic
words to its employees" to avail the privilege in an internal
investigation and, in any event, employees were told not to discuss
the interviews without the approval of the legal department.
Finally, the Court held that "[s]o long as obtaining or
providing legal advice was one of the significant purposes of the
internal investigation," the privilege applies, "even if
there were also other purposes for the investigation and even if
the investigation was mandated" by DoD regulation.
The 2015 Decision – KBR II
On remand, the District Court found that the "same contested
documents" were discoverable because KBR had "impliedly
waived" the attorney-client privilege and work product
protections. Once again, the company sought a writ of mandamus,
which the DC Circuit again granted. WilmerHale again supported the
petitioner in KBR II on behalf of a broader coalition of
business associations concerned with the uncertainty engendered by
the District Court's opinion.
KBR II has three principal holdings. The first ruling
concerns the interplay between the privilege and Federal Rule of
Evidence 612, which provides that where a witness uses a writing to
refresh his memory before testifying, an adverse party may have the
writing produced "if the court decides that justice
requires" production. The District Court had concluded that
certain documents generated by KBR's investigation must be
produced under Rule 612 on the theory that the company had waived
attorney-client and work product protections when its 30(b)(6)
witness had "reviewed the documents in preparation for his
deposition" on the topic of the internal investigation.
Rejecting this conclusion, the DC Circuit held that the District
Court's reasoning would allow the privilege "to be
defeated routinely by a counter-party noticing a deposition on the
topic of the privileged nature of the internal investigation,"
thereby "potentially upend[ing] certain settled understandings
and practices about the protections" governing internal
investigations.
Second, KBR II addressed whether the company had effected
an "at issue" waiver or "implied waiver" by
making certain references to its internal investigation in a
summary judgment brief. "Under the common-law doctrine of
implied waiver, the attorney-client privilege is waived when the
client places otherwise privileged matters in controversy." In
a footnote in its summary judgment filing, KBR described aspects of
its investigation process without explicitly revealing its
findings. Specifically, the brief stated that the company (1)
generally reported findings of wrongdoing to the government, (2)
had investigated the plaintiff's allegations of kickbacks, but
(3) had made no report of misconduct to the government. The
District Court found that KBR had implicitly argued that its
investigation had found no wrongdoing, and thus had "actively
sought a positive inference in its favor based on what . . . the
[investigation] documents show." According to the District
Court, KBR had impliedly disclosed the conclusion of its internal
investigation. Recognizing that the issue of implied waiver
presented "a more difficult question," the DC Circuit
nevertheless rejected the District Court's finding because (1)
KBR did not intend to make an "unconditional disclosure"
of the results of its investigation; (2) KBR's reference to its
investigation was only a "recitation of facts in the
motion's introduction, not in an argument or claim concerning
the privileged documents' contents"; and (3) as the movant
for summary judgment, all inferences at this stage based on the
contents of the privileged documents were to be drawn
against KBR.
Third, the District Court had concluded that substantial portions
of the investigation-related documents constituted fact work
product, and that the plaintiff had made an adequate showing to
overcome the work product protection. The DC Circuit agreed with
the District Court that not "everything in an internal
investigation is attorney-client privileged," and that pure
fact work product may be discoverable upon a showing of
"substantial need" and "undue hardship." It
nevertheless concluded that the lower court had incorrectly
compelled production of documents—including a report
summarizing employee statements—that went well beyond pure
fact work product and implicated both privileged materials and the
mental impressions of investigators.
Broadly speaking, this series of decisions helpfully clarifies the
scope of the corporate privilege and its potential waiver in
internal investigations. The recent decision in KBR II, in
particular, is an important reminder to remain vigilant about
inadvertently effecting an implied waiver of a company's
privilege. Although the DC Circuit ultimately upheld KBR's
assertion of the privilege, it observed that the company's
discussion of its internal investigation, albeit brief, presented a
relatively close call. A description of a privileged investigation
in the course of litigation may be perceived—as it was by the
District Court—as implicitly trying to convey the
investigation's conclusions. In that regard, KBR II
reinforces the need to consider carefully how privileged
materials—whether arising from an internal investigation or
otherwise—are used in litigation or in discussions with the
government.
WilmerHale's Carl Nichols, Elisebeth Collins, and Adam Klein
filed the amici briefs in both proceedings.
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