D.C. Panel Appears Skeptical Over Finding That KBR Waived Privilege for Inside Probe

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By Yin Wilczek

May 11 — A three-judge D.C. Circuit panel May 11 appeared skeptical about a district court's decision that KBR Inc. must turn over documents sought by whistle-blower Harry Barko.

During oral argument, the panel from the U.S. Court of Appeals for the District of Columbia focused much of its attention on the district court's conclusion that Kellogg Brown & Root waived its attorney-client privilege for certain internal investigation reports because KBR attorney Chris Heinrich referred to the documents in his deposition.

Judge Robert Wilkins said his concern arose from the fact that most corporate compliance programs are administered by in-house attorneys. To preserve the privilege over internal investigations, must companies have someone other than in-house counsel testify about the investigation? he asked.

The other members of the panel were Judges David Tatel and David Sentelle.

Mandamus Petition

The case involves a mandamus petition filed by KBR in December asking the D.C. Circuit to vacate rulings issued Nov. 20 and Dec. 17 by U.S. District Court for the District of Columbia Judge James Gwin. KBR also asked the appellate court to reassign the case to a different judge.

In the decisions, the district court found that KBR waived its privilege over confidential communications produced during an internal investigation into possible kickbacks by questioning Heinrich about the substance and results of the probe. The court also concluded that KBR affirmed the waiver by relying on portions of Heinrich's deposition testimony in support of its summary judgment motion against Barko.

Gwin's ruling sparked the ire of the business community, which argued that it could hinder corporate compliance efforts by impeding companies in gathering facts after they discover potential misconduct.

At the oral argument, KBR's attorney—John Elwood, Vinson & Elkins LLP, Washington—argued that Gwin committed “indisputable” legal error by, among other actions, not allowing KBR to disavow and withdraw its allegedly waiver-inducing assertions. The lower court's rulings in this case are “outliers,” Elwood told the panel.

However, Barko's attorney—Michael David Kohn from Kohn, Kohn & Colapinto LLP, Washington—countered that KBR itself “injected” the internal investigation reports into the litigation by having Heinrich testify under Fed. R. Civ. P. 30(b)(6) and then questioning him about the documents.

Who Should Testify?

Wilkins aggressively questioned Kohn. Was KBR's mistake producing someone with first-hand knowledge of the reports to testify under the rule? he asked. Should the company have produced the “least knowledgeable person” to preserve its privilege? the judge added.

Tatel asked Kohn from a policy perspective what harm Barko would suffer should he not be able to rely on the internal investigation documents.

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

The D.C. Circuit granted KBR's first mandamus petition in June 2014, at that time reversing 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