GOVERNMENT PROCUREMENT
PROTECTING THE U.S. ATTORNEY-CLIENT PRIVILEGE
AND ATTORNEY WORK PRODUCT DOCTRINE
Internal Investigations in the Wake of In Re Kellogg Brown & Root, Inc.
756 F.3D 754 (D.C. CIR. 2014)
Under U.S. law, communications between
an attorney and client, as well as documents and information created by or at the
direction of an attorney, may be protected
from compelled disclosure to third parties,
including law enforcement authorities. Two
primary types of protections are available.
Under the “attorney-client privilege,” confidential communications between attorney
and client may be protected from release
to third parties if “made for the purpose of
obtaining or providing legal advice to the
client.” In re Kellogg Brown & Root, Inc.,
756 F.3d 754, 757 (D.C. Cir. 2014). A
second form of protection, known as “the
attorney work product doctrine” protects
“documents and tangible things that are
prepared in anticipation of litigation or for
trial by or for another party or its representative.” Fed. R. Civ. P. 26(b)(3).
The U.S. Court of Appeals for the D.C.
Circuit (“the D.C. Circuit”) recently revisited
the nuances of the attorney-client privilege in
the context of U.S. Government contractors
conducting internal investigations—including
those conducted pursuant to the Mandatory
Disclosure Rule of the Federal Acquisition
Regulation (“FAR”). The D.C. Circuit’s decision in favor of the contractor, Kellogg Brown
& Root (“KBR”), reinforces the vitality of the
privilege, though subsequent decisions in
the district court suggest that KBR may have
won the battle but not the war.
DEFINING THE PARAMETERS OF
THE ATTORNEY-CLIENT PRIVILEGE
In this qui tam action, relator Harry Barko
alleged that KBR violated the Civil False
Claims Act, 31 U.S.C. § 3729 by inflating
costs and accepting kickbacks in connection with the performance of an Army
support services contract for logistics efforts
in Iraq and elsewhere. During discovery,
Barko sought documents relating to KBR’s
internal investigation into the alleged
fraudulent activities. The investigation
had been conducted pursuant to a corporate policy concerning purported code
of conduct investigations. KBR’s code of
conduct reflected the requirements of a
provision known as “the Mandatory Disclosure Rule” (“MDR”), which is applicable to
all U.S. Government prime contractors and
subcontractors. The MDR requires all U.S.
Government contractors to maintain compliance systems to deter, detect and report to
the Government any suspected wrongdoing
involving obtaining or performing a U.S.
Government contract. See 48 C.F.R. §
52.203-13. The KBR documents sought
by Barko included materials and reports
compiled by non-lawyer KBR investigators
that, pursuant to corporate policy, had been
transmitted to the KBR Law Department.
The district court examined the requested
documents in camera (calling them “eyeopeners”) and then rejected KBR’s claim
that the documents were protected from
disclosure by the attorney-client privilege and
attorney work product doctrine. The court
found that, because the investigations were
undertaken for the purpose of complying
with regulatory law and corporate policy,
rather than for the purpose of obtaining
legal advice, the documents fell outside the
parameters of the attorney-client privilege.
The court looked to several factors, including:
• The regulations at issue required
KBR to report possible misconduct to
Government officials,
• KBR’s corporate policy required
routine compliance investigations, and
• Most importantly, that the investigation
was not conducted for the principal
purpose of seeking legal advice.
In so finding, the district court repeatedly sought to distinguish the case from
Upjohn Co. v. United States, 449 U.S.
383 (1981), the landmark Supreme Court
decision holding that companies, like
individuals, enjoy attorney-client and work
product protections that they are entitled to
invoke to protect communications between
company lawyers and employees. Specifically, the district court distinguished Upjohn
on the grounds that KBR did not confer
with outside counsel “on whether and
how to conduct an internal investigation,”
it employed non-lawyer investigators to
conduct interviews, and the investigators did
not provide “Upjohn” warnings during the
interviews (the notice given to an employee
that the attorney represents the company as
opposed to the employee as an individual).
The district court crafted a “but for” test to
determine whether the privilege applied—
requiring KBR essentially to show that the
purportedly privileged communication would
not have occurred “but for” the fact that
legal advice was being requested.
The district court crafted similar parameters
for the work product doctrine, finding that
because the investigation was conducted
by non-attorney investigators and in the
ordinary course of business as required by
Government regulations, the documents
fell outside the protections afforded by the
work-product doctrine.
Protecting the U.S. Attorney-Client Privilege and Attorney Work Product Doctrine: Internal Investigations in the Wake of In Re Kellogg Brown & Root, Inc.
1
GOVERNMENT PROCUREMENT
UPHOLDING UPJOHN: THE D.C. CIRCUIT
REJECTS THE “BUT FOR” TEST
On appeal, the D.C. Circuit overturned
the district court’s decision, finding that
the privilege invoked by KBR could not be
materially distinguished from that examined
in Upjohn; KBR had initiated an internal
compliance investigation in the face of
potential misconduct, and KBR’s in-house
legal department had overseen the investigation. In rejecting the district court’s
Upjohn distinctions, the D.C. Circuit noted
that the involvement of outside counsel was
wholly immaterial to the privilege analysis,
as was the fact that the investigation was
conducted by non-lawyers. The court also
refused to give credence to the district
court’s claim that privilege did not apply
due to the fact that the confidentiality
agreements provided to the interviewees
did not mention that the purpose of the
interviews was to seek legal advice, noting
that the interviewees were directed not to
discuss the interviews with others absent
the consent of the KBR general counsel.
The D.C. Circuit’s decision has particular
significance for U.S. Government contractors. Following the district court ruling, U.S.
Government contractors were facing the
prospect of performing internal investigations pursuant to the MDR without the
protections afforded by the attorney-client
privilege and work product doctrine a­ very
difficult task. The D.C. Circuit’s decision
unequivocally stated that, notwithstanding
that Government contractors are required
by the MDR to conduct investigations,
documents and other information created
through such investigations are entitled to
attorney-client and work product protection
if a significant purpose behind their creation
involves seeking advice of counsel.
Most importantly, the D.C. Circuit rejected
the lower court’s “but for” test, under which
the attorney-client privilege would not
apply unless the sole or primary purpose
of the communication was to obtain or
provide legal advice. Instead, the court
created a new test focusing on whether
obtaining or providing legal advice was a
primary purpose of the communication,
rather than the primary purpose. Under
the circuit court’s test, a communication
falls within the boundaries of privilege as
long as obtaining or providing legal advice
was one of the significant purposes of the
attorney-client communication. In KBR, the
court found it indisputable that one of the
significant purposes of the investigations
was just that.
THE BATTLE RAGES ON IN
THE DISTRICT COURT
Importantly, the circuit court did not
address the district court’s conclusions
with regard to the applicability of the work
product doctrine. The circuit court stated
that on remand, the district court could
consider other arguments timely raised
concerning attorney-client privilege or the
work product doctrine—an invitation that
has been eagerly accepted by the district
court on several occasions.
To date, the district court has issued several
decisions unfavorable to KBR on just those
topics. In particular, the district court has
held that KBR impliedly waived any attorneyclient privilege it possessed with respect to
the investigation documents by putting them
at issue in the litigation through its summary
judgment motion and testimony elicited from
an in-house KBR lawyer. In addition, the district court later held that certain documents
were not privileged and that substantial
portions of others were “fact work product”
the protection of which could and should be
overcome by relator’s showing of substantial
need and undue hardship. KBR filed yet
another petition for a writ of mandamus with
the D.C. Circuit in response to those lower
court rulings and, as of this writing, briefing
on that petition is pending.
Relator Barko has been busy as well. On
November 25, 2014, he petitioned the
Supreme Court for a writ of certiorari to
review the Court of Appeals decision,
contending that the D.C. Circuit has
adopted a new “substantial purpose”
test at odds with established case law.
The Supreme Court, however, denied his
petition on January 20, 2015.
BOLSTERING ATTORNEY-CLIENT
PRIVILEGE PROTECTION IN LIGHT OF
THE EVOLVING LANDSCAPE
The D.C. Circuit decision stands—at least
for the moment—as an important landmark
in the post-2008 MDR era. It makes clear
that—in the District of Columbia at least—a
company may maintain the attorney-client
privilege when conducting an internal
investigation, even one that in part employs
non-lawyers to conduct that investigation,
when the investigation is conducted as part
of a corporate compliance program. The
key, at least in this jurisdiction, is whether
one significant purpose of the investigation
was to obtain or provide legal advice.
However, while the D.C. Circuit’s decision
is undoubtedly a win for corporate defendants, it has its limitations. A number of
courts outside the D.C. Circuit have adopted
a “but for” test similar to that employed by
the district court here. Additional confusion may arise from courts attempting to
distinguish the “significant purpose” test of
the D.C. Circuit from the “primary purpose”
formulation adopted in other courts. And,
as the subsequent history of this case
demonstrates, even a circuit court decision
leaves open the prospect of additional litigation concerning assertions that the privilege
has been waived, as well as microscopic
examinations on a document-by-document
basis of individual communications and
whether they pass whatever test applies for
privilege purposes.
Protecting the U.S. Attorney-Client Privilege and Attorney Work Product Doctrine: Internal Investigations in the Wake of In Re Kellogg Brown & Root, Inc.
2
GOVERNMENT PROCUREMENT
While we continue to watch the developments of this case, we note a number of
measures that prudent companies might
consider to bolster potential protections:
• U.S. companies are well-advised to
provide documented and complete
Upjohn instructions at the start of
any employee interview dealing with
a compliance matter, no matter
who conducts the interview (though
ideally, interviews would be conducted
by outside counsel or by in-house
counsel who perform truly legal rather
than business functions).
• Additionally, it is imperative that U.S.
Government contractors draft and
implement written MDR protocols
or procedures for initial intake and
triage of any allegations of potential
misconduct, assignment of allegations
for review, assessment to determine
whether disclosure is warranted, and
documentation of the entire process
and maintenance of documentation
for an appropriate period.
- The protocol/procedure
should require preparation of
documentation at the outset of an
investigation establishing that the
investigation will be conducted
at the express direction of and
under the supervision of counsel
for the purpose of securing legal
advice and (when appropriate) in
anticipation of litigation.
WEEDING OUT THE FACTS:
PROTECTING OPINION WORK
PRODUCT
Another issue of note, as mentioned briefly
above, is the district court’s ruling that
certain investigatory documents and portions of others were not protected by the
attorney work product doctrine. The district
court found the particular subset of documents at issue to be “fact” work product
that “scrupulously avoided” stating any conclusions or opinions about the investigation.
Thus, although the court acknowledged
that occasionally a collection of facts can
reveal an attorney’s mental impressions, the
reports at issue here merely presented raw
factual materials and were therefore “far
removed from the core of the work product
protection for attorney strategy or opinions.”
The distinction between fact and opinion
work product was examined instructively in
another recent decision by the same district
court, U.S. ex rel. Landis v. Tailwind Sports
Corp., No. 1:10-cv-00976 (D.D.C., filed
Jan. 12, 2015). In that case, the district
court judge applied a traditional work
product test previously used in the D.C.
Circuit. The judge stated that documents
should not be withheld in discovery on the
basis of the attorney work product doctrine
unless the documents have been “sharply
focused or weeded” by counsel. The court
then addressed the discoverability of two
sets of documents. The first set consisted of
summaries of interviews conducted by civil
lawyers and drafted by an investigator on
the civil litigation team. Because attorneys
conducted the interviews and formulated
the topics covered and questions asked in
order to determine whether to intervene
in the case, the court determined that the
investigator’s reports of the interviews constituted opinion work product. In contrast,
the court found that the second set of documents consisted of “substantially verbatim
agent [non-lawyer] summaries” of openended discussions of issues relevant to the
investigation. With those documents, the
court determined that an attorney had not
“sharply focused or weeded” the content of
the summaries and therefore found them to
be discoverable fact work product.
In a number of U.S. jurisdictions, fact work
product, unlike opinion work product, may
be discoverable if the requesting party can
demonstrate a substantial need for the
materials to prepare its case and cannot,
without undue hardship, obtain their
substantial equivalent by other means. Contractors conducting internal investigations
should take appropriate steps to ensure that
documents generated in the course of an
internal investigation are properly structured
to confer opinion work product protection
on important documents prepared at the
direction of attorneys.
13743
- The protocol/procedure should
provide for the type of documentation that will be maintained
with respect to any intake matter
or investigation, and how and
where the documentation will
be maintained.
- Finally, the protocol/procedure
should state (as appropriate) that
documentation generated in the
course of an investigation has been
created for the purpose of obtaining
or providing legal advice and/or in
anticipation of litigation, and at the
express direction of counsel, and is
transmitted to counsel if created by
non-lawyers.
AUTHORS
Robert J. Sherry
Dallas/San Francisco
robert.sherry@klgates.com
Stuart B. Nibley
Washington, D.C.
stuart.nibley@klgates.com
Amy M. Conant
Washington, D.C.
amy.conant@klgates.com
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