D.C. Circuit Agrees to Hear KBR Petition Challenging Whistle-Blower Disclosure Orders

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By Yin Wilczek

March 13 — In a case that may have significant implications for the attorney-client privilege, a federal appeals court has agreed to take up Kellogg Brown & Root Inc.'s second mandamus petition regarding the disclosure of documents to whistle-blower Harry Barko.

In a March 12 order, the U.S. Court of Appeals for the District of Columbia also granted KBR's request for an emergency stay of recent rulings by the U.S. District Court for the District of Columbia directing the company to disclose 89 documents related to an internal investigation on possible kickbacks conducted pursuant to its Code of Business Conduct.

Oral argument will take place May 11. In its March 13 order scheduling the oral argument, the appellate court did not identify the judges that will comprise the hearing panel, saying that such information usually is available 30 days before the argument takes place.

The D.C. Circuit previously held in June 2014 that the documents were shielded by the attorney-client privilege and work product doctrine. Commenters said the decision dramatically expanded privilege protections for internal corporate investigations.

Oral Argument to be Scheduled 

The D.C. Circuit directed its clerk to calendar the case for oral argument. It also denied a joint request by several business groups—including the Association of Corporate Counsel and the U.S. Chamber of Commerce—to participate as amici in support of KBR.

KBR's attorney John Elwood, a partner at Vinson & Elkins LLP, Washington, March 13 told Bloomberg BNA that the D.C. Circuit's stay order reflects its “conclusion that KBR is substantially likely to obtain mandamus relief.”

Attorneys from Kohn, Kohn & Colapinto LLP representing Barko did not immediately respond to a request for comment.

In Nov. 20 and Dec. 17 decisions, Judge James Gwin concluded that KBR waived its attorney-client privilege by questioning its in-house attorney about the substance and results of the internal investigation.

KBR filed its mandamus petition in December asking the appeals court to vacate the order and to reassign the case to a different judge.

Legal Error?

In a March 13 e-mail, Elwood said the district court erred in “at least three ways” by requiring the disclosure of the documents. The errors included its conclusion that KBR waived its privilege by “making general, non-privileged statements that it had complied with obligations to disclose kickbacks to the government.”

“The district court’s order relies on an aggressive and unprecedented reading of the ‘at issue' waiver doctrine,” Elwood said.

“The order has grave implications for companies’ ability to conduct internal investigations, which are crucial to corporate compliance efforts,” he added. “We are hopeful that the D.C. Circuit will correct the district court’s errors.”

For his part, Barko asserted that KBR was trying to wield the attorney-client privilege both as “a sword and a shield” because it used the documents it said were privileged in a summary judgment motion to “assert an undisputed material fact that it complied with laws and regulations”.

Meanwhile, ACC Vice President and Chief Legal Strategist Amar Sarwal told BBNA that the D.C. Circuit should again recognize the crucial role that in-house counsel play in internal investigations and reverse the district court's rulings.

“Although our amicus request was denied as a matter of timing, the D.C. Circuit Court, in the very same order, confirmed that our position—attorney-client privilege should prevail in the case—should be considered on the merits,” Sarwal said.

Second Mandamus Request 

This is the second mandamus petition filed by KBR involving the same 89 documents generated during the company's internal investigations of the relationship between certain KBR employees and the awarding of contracts to a Jordanian subcontractor, Daoud & Partners.

A former KBR employee, Barko sued the company in 2005 and then-KBR parent Halliburton under the qui tam provisions of the False Claims Act. He alleged that KBR “used a subcontract procedure which vastly inflated the costs of constructing laundry facilities and providing laundry services” on three military bases in Iraq. The whistle-blower sought the 89 documents to support his lawsuit.

The D.C. Circuit granted KBR's first mandamus petition, reversing in June 2014 Gwin's ruling that the attorney-client privilege did not apply because KBR had not conducted its investigation for “the primary purpose” of securing legal advice.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The court's order is available at http://www.bloomberglaw.com/public/document/In_re_Kellogg_Brown__Root_Inc_et_al_Docket_No_1405319_DC_Cir_Dec_/3.