Despite getting a rare Writ of Mandamus from the D.C. Circuit Court of Appeals establishing that its internal investigations were covered by the attorney-client privilege, Kellogg Brown & Root must still turn them over. As predicted in our earlier posts on Barko v. Halliburton, Judge James Gwin has ruled that KBR waived the attorney-client privilege that would otherwise have shielded KBR’s internal investigation documents from discovery. His rationale is reflected in three opinions published in November and December 2014.

In a June 2014 opinion, the D.C. Circuit held that KBR’s internal investigation documents would be privileged if obtaining or providing legal advice was “a primary purpose of the communication, meaning one of the significant purposes. . . .”

But the Court of Appeals also invited the District Court to consider additional arguments that might have been timely asserted as to “why these documents are not covered by either the attorney-client privilege or the work product doctrine.”

That is what Judge Gwin did. When the case returned to the District Court, Barko sought “interviews, reports, and documents that KBR prepared while investigating tips KBR had received that involved the same allegations found in Barko’s complaint.” Barko relied on four arguments to support his claim that KBR had waived any attorney-client privilege or work-product protection over the documents:

  1. KBR put the contents of the documents at issue in the litigation;
  2. KBR’s Rule 30(b)(6) witness reviewed the privileged documents prior to testifying at his deposition;
  3. The documents fell under the crime-fraud exception to the privilege; and
  4. KBR had failed to list these documents on a privilege log when responding to an earlier administrative subpoena from the Defense Criminal Investigative Service (“DCIS”).

In an opinion issued on November 20, 2014, Judge Gwin accepted the first two arguments.

“At issue” waiver

The Court determined that KBR had waived the attorney-client privilege protection by putting the contents of its investigations “at issue” during the 30(b)(6) deposition of a KBR witness and in its summary judgment motion. Judge Gwin focused on the testimony elicited by KBR’s counsel during the deposition. “After stopping [the witness] from being questioned regarding the COBC statements and reports, KBR then had [the witness] testify that KBR’s normal practice and contract terms required it to report any reasonable evidence of kickbacks; however after investigating the allegations in this case, KBR made no report and gave the Department of Defense no refunds.”

KBR relied on this testimony to support its motion for summary judgment. According to Judge Gwin, KBR attempted to convey the message that its COBC investigations “contain no reasonable grounds to believe a kickback occurred:”

KBR has, on multiple occasions, advanced a chain of reasoning. First, whenever KBR has reasonable grounds to believe that a kickback or fraud had occurred, its contracts and federal regulation required it to report the possible violation. Second, KBR abides by this obligation and reports possible violations. Third, KBR investigated the alleged kickbacks that are part of Barko’s complaint. Fourth, after the investigation of the allegations in this case, KBR made no report to the Government about an alleged kickback or fraud.

Judge Gwin concluded that KBR had purposefully “revealed the substantive conclusion of its COBC investigations” and that Barko had been prejudiced by his inability to contest that conclusion. The Court also rejected KBR’s request that it be permitted to strike the references to the COBC investigations in its summary judgment motion to avoid the at-issue waiver.

Waiver through witness preparation

The Court also accepted Barko’s argument that KBR had waived the attorney-client privilege by allowing its 30(b)(6) representative to use the internal investigation documents to prepare for his deposition. Rule 612 of the Federal Rules of Evidence permits an opposing party to inspect documents used to refresh a witness’s recollection. When the documents are reviewed before the witness testifies, they are discoverable “if justice requires.” Judge Gwin acknowledged that, in most cases, reviewing privileged materials before a 30(b)(6) deposition would not result in waiver. But in this situation, he found that the factors weighing in favor of disclosure outweighed the factors against disclosure. One of the factors cited by Judge Gwin was that there were “major discrepancies” between the documents and the deposition testimony.

Crime Fraud Exception and DCIS subpoena

The Court rejected Barko’s remaining arguments. Barko questioned KBR’s use of the completed reports and the reasonableness of its response to a DCIS administrative subpoena. But Judge Gwin concluded that the conduct was insufficient to support a waiver of the attorney-client privilege. There was no evidence that the reports were created in furtherance of a crime or fraud. While the Court took issue with KBR’s response to the DCIS administrative subpoena, the Court found that imposing a privilege waiver in civil litigation is not available as a sanction for failure to comply with an administrative subpoena.

KBR sought reconsideration of the Court’s November 20 opinion or, in the alternative, to have the Court certify the order for interlocutory appeal. The Court denied KBR’s motion on December 17, 2014.

Work product protections unavailable

In a separate opinion issued the same day, the Court addressed “whether portions of the COBC documents are non-privileged fact work product discoverable based on substantial need.” The COBC documents discussed were summary investigative reports that included witness statements, summaries of witness statements, and summaries of subcontractor performance. Absent waiver, Judge Gwin concluded that the witness statements were privileged attorney-client communications. On the other hand, “the reports drafted by KBR investigators, to the extent they do not reveal confidential employee communications, are not attorney-client privileged.”

Judge Gwin held that the investigator’s reports qualified for work product protection because they were prepared in anticipation of litigation. But he also determined that large portions of the reports (such as descriptions of the relevant subcontract bids) were fact work product and not opinion work product. The reports provided “raw factual contract background material for KBR’s legal department” that is “far removed from . . . attorney strategy or opinions.”

The Court ordered KBR to produce redacted versions of the investigator’s reports based on Barko’s substantial need for them. The Court found that the length of time since the events in question made it difficult for Barko to obtain this information himself. The Court cited KBR’s discovery responses, which identified 205 individuals who might have information regarding the case. The Court determined that “[d]eposing so many individuals scattered across the globe, in the hopes that a few might recall useful information ten years after the fact, crosses from necessary diligence to undue hardship.”

Related entries—

Barko v. Halliburton—How the D.C. Circuit’s decision reaffirms the attorney-client privilege in internal investigations (July 10, 2014)

Preserving attorney-client privilege in internal investigations after Barko v. Halliburton (Mar. 25, 2014)