United States: Q&A With PubKLaw's Annual Review Panelists: Dickstein Shapiro's David Nadler

Last Updated: September 16 2015
Article by David M Nadler

In anticipation of our Annual Government Contracts Review FY15/16, PubKLaw is interviewing some of the leading attorneys and experts who will speak during the one-day webcast. Today, we interview David Nadler, leader of Dickstein Shapiro's Government Contracts Practice, about a pair of appellate decisions dealing with attorney-client privilege in contractors' internal investigations.

Q: The US ex rel Barko v. KBR case, which alleges that KBR inflated costs and accepted kickbacks on Iraq contracts, has been closely watched because of its treatment of attorney-client privilege in contractors' internal investigations. The relator in the case has sought access to KBR's internal investigation of the kickback claims, and initially won a decision granting access on the grounds that the investigations were performed as part of regulatory compliance and not for the purposes of obtaining legal advice. For starters, why is privilege so critical for contractors? What are some of the risks in decisions, like the overturned Barko district court decisions, that could erode the application of attorney client privilege?

A: The attorney-client privilege is one of the bedrock foundations of the legal profession.The purpose of the attorney-client privilege is to provide for sound legal advice and advocacy by ensuring that clients can speak candidly and openly with their lawyer and disclose all of the information, good and bad, for counsel to make accurate and fully informed legal judgments. The privilege is intended to provide comfort to the client that a disclosure to counsel will not later be used as an admission against their interest.

The main problem with the district court's opinions in Barko is that it was sweeping in its reasoning and, thus, created uncertainty in the business community as to the exact parameters of the privilege. The district court essentially held that any compliance effort conducted pursuant to a regulatory or business reason could not be privileged because it was not conducted specifically to obtain legal advice. However, all companies, especially government contractors, operate in a highly regulated environment so it not practical to separate the various reasons for conducting a review. The court's attempt to separate the compliance and legal reasons for a review could devolve into a slippery slope that would create more confusion as to whether, and when, the privilege applied. The lack of certainty created by the court's decisions would have caused a chilling effect on a company's willingness to conduct internal investigations and to make disclosures.

Q: KBR twice sought, and got, a mandamus order from the D.C. Circuit. How unusual is it for that to happen twice in one case, on the same issue? Why do you think the D.C. Circuit decided that it needed to step in a second time to ensure that the District Court got the privilege question right?

A: Mandamus orders are incredibly rare, so it was highly unusual for the circuit court to get involved twice, but the court had no choice because the district court, after remand, was still trying to reach the same tenuous conclusions about the privilege as it did in its first decision. The district court appears to have tried to circumvent the Circuit by holding that a deponent's review of the privileged investigatory report in preparation for a deposition made those materials not privileged. This alternative approach by the district court was probably viewed by the Circuit as another way to assert that company reviews that were conducted pursuant to a regulatory trigger are not privileged because they were not done specifically for purposes of seeking legal advice, a position that the Circuit had already rejected. I think the main reason that the Circuit took the case again was to reinforce its position againstthe district court's potentially sweeping change to the application of the privilege.

The second issue under review in the appeal—the issue of whether KBR's citation of the deposition testimony to allegedly create an inference that no fraud had occurred—was more difficult for the Circuit to address because the waiver argument was not frivolous. However, the Circuit ultimately held that KBR's use of the testimony did not waive any privilege, but that was a factual determination based on how KBR had used the information.

Q: Imagine for a minute that the D.C. Circuit had supported the district court's original decision that the investigations weren't privileged because they were "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice." What would that have meant for contractors in general?

A: It would have been a nightmare. Government contractors operate in a highly regulated environment so it not practical to differentiate between reviews that are triggered by regulation or policy and those that seek legal advice. Indeed, the regulated nature of government contracts always implicates the need to seek legal advice on the interpretation and application of those regulations. So, the sweeping redefinition of the attorney-client privilege by the district court would have been damaging to all companies, but particularly to government contractors. It would have had a chilling effect on routine compliance efforts, and contractors' willingness to conduct internal investigations and make disclosures.

Q: After remand from the D.C. Circuit, it seemed that KBR had won the battle but lost the war, because the lower court found other reasons to rule that the investigations should be turned over to Barko. The district court held that KBR had waived privilege by using the investigation to prepare a witness that was about to be deposed, and because it had placed them "at issue" by using them in a summary judgment brief, which implied in a footnote that the investigations had found no reportable wrongdoing. Were those more fact-specific findings equally troubling to other contractors as the original "regulatory compliance" reasoning?

No, the waiver issue was unique to the facts of that case, and I don't think that the Circuit took up the appeal for the second time to address that point. Subject matter waiver is an established rule and not especially controversial. The regulatory basis for the district court's ruling, however, was far more troubling because it was so generalized that it could have had profound ramifications on all contractors regardless of the facts of the case.

Q: Where does the second mandamus decision leave us? Does is offer assurance to contractors? Does it offer a useful roadmap of the ways in which companies should carry out and protect internal investigations? Does it merely affirm the status quo that the district court decisions threatened to unsettle?

A: It sure does. The district court decision was a near death experience for the attorney-client privilege in government contracts. The Circuit court decisions were important to restore the status quo and make it clear that there is no special variant of the privilege for government contractors simply because they operate in a highly regulated environment. However, it is important to recognize that the Circuit court decisions, while persuasive, are not binding on other courts outside of D.C., and courts in other jurisdictions are free to adopt the "but for" test that was endorsed by the district court. It is therefore important for companies to follow best practices to establish and protect the privilege including: (1) ensure that counsel is actively involved in the investigation; (2) ensure that internal policies are clear that the purpose of the investigation is to seek or provide legal advice; (3) ensure that the record is clear that the investigation is being directed by counsel who will evaluate the results of the investigation and draft the findings; (4) ensure that counsel participates in the interviews and that all interviews have appropriate Upjohn instructions; (5) ensure that any investigation reports and audits are only addressed and circulated to their intended audience and clearly marked privileged and confidential; (6) ensure that internal policies are up-to-date and comply with applicable regulations, including the mandatory disclosure regulations; and (7) ensure that privilege implications are carefully considered before providing documents to other entities, such as DCAA, and assert the privilege when appropriate.

Q: Is there anything else that contractors can take away from this pair of Circuit Court decisions?

A: Although the Circuit court's Barko decisions provide much needed comfort to government contractors, given the highly regulated environment in which they operate, contractors will always be pressed for privileged information. Given that every review will be fact specific, government contractors should be meticulous in following robust and documented procedures for internal investigations. Moreover, government contractors should regularly review and update their compliance, regulatory, and investigations practices to ensure that there is appropriate legal involvement in both the development of policies and the conduct of investigations.

Previously published by PubKLaw

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
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions