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Tuesday
Aug112015

Breaking: Federal appeals court protects KBR internal investigation documents from civil discovery

The U.S. Court of Appeals for the District of Columbia Circuit ruled Tuesday that documents produced during an internal corporate investigation are protected by attorney client privilege and don't have to be disclosed to a whistleblower who alleged the company took kickbacks from subcontractors during the Iraq war.

In 2014, a federal district court ordered Kellogg Brown & Root to produce documents requested by Harry Barko, a former KBR subcontracts administrator.

Barko had filed a False Claims Act complaint in 2005 that alleged KBR and certain subcontractors defrauded the U.S. government by inflating costs and taking kickbacks while administering military contracts in wartime Iraq.

The district court ordered the documents released. It said the attorney client privilege didn't apply because, among other reasons, KBR had not shown that "the communication [in the documents] would not have been made 'but for' the fact that legal advice was sought."

The district court also said KBR's internal investigation was "undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice."

KBR appealed the order.

The appeals court ruled Tuesday in favor of KBR and its claim of attorney client privilege

"KBR had conducted that internal investigation pursuant to its code of business conduct, which is overseen by the company's law department," the appeals court said.

If allowed to stand, the district court's rulings would ring alarm bells in corporate general counsel offices throughout the country about what kinds of descriptions of investigatory and disclosure practices could be used by an adversary to defeat all claims of privilege and protection of an internal investigation.

The appeals court continued:

These alarm bells would be well founded. If all it took to defeat the privilege and protection attaching to an internal investigation was to notice a deposition regarding the investigations (and the privilege and protection attaching them), we would expect to see such attempts to end-run these barriers to discovery in every lawsuit in which a prior internal investigation was conducted relating to the claims. Accordingly, we think it is essential to act on this petition in order to protect our privilege waiver jurisprudence.

The three-judge appellate panel then granted KBR's petition for a writ of mandamus vacating the earlier orders that required KBR to produce the investigation documents.

A copy of the August 11, 2015 appellate opinion is here (pdf) courtesy of Whistleblowers.org.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.