I t
Internal
l Investigations
I
ti ti
P
Privileged
i il d or Not?
N t?
Mark Lowes
Vice President – Litigation
KBR
Barko Lawsuit: Background
 KBR provided basic support services to the U.S. military in Iraq under an umbrella contract
called LOGCAP III. Services spanned everything from provision of housing, laundry, water
and, well drilling.
 Th
The llawsuitit arises
i
under
d th
the U
U.S.
S False
F l Claims
Cl i Act
A t (31 U
U.S.C.
S C § 3729).
3729) B
Barko
k alleges
ll
th
thatt
KBR submitted false claims to the Government by colluding with a subcontractor to inflate
prices because of kickbacks. The case is pending in the D.C. District Court and has a
jjudge
g from Ohio assigned.
g
2
Barko Lawsuit: The Investigation
 After receiving hotline “tips” alleging improper relationships between KBR employees and
the subcontractor, KBR initiated internal investigations under its Code of Business Conduct
( COBC ).
(“COBC”)
 COBC Investigations directed by the Law Department and executed by in-theater
security investigators acting at direction and under supervision of Law Department, per
the COBC.
COBC
 Witnesses informed of the confidential nature of the review and instructed to keep the
information confidential.
 In-house
I h
COBC counsell review
i reports
t generated
t d by
b investigators,
i
ti t
consider
id llegall
implications (including whether disclosure or corrective action is appropriate), and
advise the Company accordingly.
3
Barko Seeks Investigation Files
 Barko was deposed and has no personal knowledge of any material fact.
 Barko attempted to fill the “gap” in his knowledge by requesting KBR’s internal
investigation.
 Barko filed a motion to compel all documents related to the COBC investigations. KBR
opposed on the grounds of attorney-client privilege and the work product doctrine, citing
Upjohn Co. v. United States, 449 U.S. 383 (1981).
 It was well-settled since Upjohn that communications related to internal investigations
conducted at the direction and under the supervision of lawyers for the purpose of
obtaining legal advice are protected by the attorney-client privilege.
 When made “in
in anticipation of litigation,
litigation ” are also protected as attorney work product.
product
4
Barko Lawsuit: District Court ruling
The District Court ordered production of all COBC-related documents:
 Created out of whole cloth, an unusual standard – i.e., a party must show the
communication would not have been made “but
but for
for” the fact that legal advice was sought.
sought
 Concluded KBR’s COBC Investigation failed the “but for” test because it was undertaken
pursuant to regulatory law and corporate policy rather than to obtain legal advice.
advice
 Rejected KBR’s work-product claim, finding that there was no reasonable “belief that
litigation was a real possibility.
possibility ”
 Distinguished KBR’s COBC Investigation from Upjohn further:
 KBR investigation
i
ti ti was directed
di t d by
b in-house
i h
counsell ((nott outside
t id counsel).
l)
 KBR investigators who conducted interviews were not lawyers.
 Interviewed employees were not informed that interviews were for legal advice.
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Barko Lawsuit: First Mandamus Petition
 KBR took immediate action
 Within 24 hours of disclosure order
order, KBR filed a motion for certification of interlocutory
appeal.
 Within 24 hours of the denial of that motion,
motion KBR filed a petition for mandamus in the
D.C. Circuit.
 Amici Curiae – “Friends
Friends of the Court
Court”
 Chamber of Commerce, National Ass’n of Manufacturers, Coalition for Gov’t
Procurement, American Forest & Paper
p Ass’n, and Ass’n of Corporate
p
Counsel filed a
joint amicus brief in support of KBR’s petition.
 Amici argued that the District Court’s ruling reached beyond the Barko matter, and
undermined
d i d corporate
t iinvestigations
ti ti
across th
the entire
ti bbusiness
i
community.
it
6
DC Circuit Grants KBR’s Petition
The DC Circuit granted KBR’s petition for mandamus and vacated the District Court’s
disclosure order:
 Rejected the “but
but for
for” test,
test finding clear legal error
error.
 Applied a “primary purpose” test: whether obtaining or providing legal advice is “one of the
significant purposes” of the communication.
 Held that KBR’s privilege claim was “materially indistinguishable” from that in Upjohn.
 Found that KBR’s harm could not be remedied by post-judgment appeal.
The District Court’s decision could have “potentially far-reaching consequences” and “broad
and destabilizing effects” for the business community at large.
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Standard for Finding Privilege
Evolution of privilege standard:
 Communication must be “for the purpose of securing primarily” legal services or advice. In
re Grand Jury, 475 F.3d 1299, 1304 (D.C. Cir. 2007).
 “[T]he communication [must] not have been made ‘but for’ the fact that legal advice was
sought.” Barko district court decision.
 “So long as obtaining or providing legal advice was one of the significant purposes,” the
investigation is privileged.
privileged In re Kellogg
Kellogg, Brown and Root
Root, 756 FF.3d
3d 754
754, 758
758-59
59 (D
(D.C.
C Cir
Cir.
2014).
Contrast Barko “significant
significant purpose
purpose” test with:
 “So long as the predominant purpose of the communication is legal advice, these [arguably
non-legal] considerations and caveats are not other than legal advice or severable from
it.”
t In ree Cou
County
ty oof Erie,
e, 4733 F.3d
3d 413,
3, 4200 ((2dd C
Cir. 2007)
00 )
 “[I]f ‘in light of the nature of the document and the factual situation in the particular case,the
document can be fairly said to have been prepared or obtained because of the prospect of
litigation.’” In re CV Therapeutics, Inc. Securities Litig. No. C-03-3709 SI (EMC), 2006 WL
1699536 (N
(N.D.
D C
Cal.l JJune 16
16, 2006) ((applying
l i Ni
Ninth
th Ci
Circuitit llaw))
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Status on Remand
We are headed back to Appellate Court on second mandamus.
 Trial Court found waiver of attorney client privilege and attorney work product privilege.
 Basis of waiver was answers to non privileged communications.
communications
 Court found need for materials to prosecute relator’s claim.
 Second mandamus petition pending.
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Basic Language
 KBR disagrees that this language – appropriately seen as Upjohn warning in a
privileged
i il d iinvestigation
ti ti – violates
i l t D
Dodd-Frank
dd F k Act
A t § 21F(h) or C
Commission’s
i i ’
implementing Rule 21F-17
10