KBR Trying to Use Privilege as ‘Sword and Shield,' Whistle-Blower Argues

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By Yin Wilczek

Feb. 9 — Whistle-blower Harry Barko asked a federal appeals court not to review a district court's conclusion that internal investigation materials he sought in his case against Kellogg Brown & Root Inc. were not shielded by privilege.

In a Feb. 6 brief, Barko told the U.S. Court of Appeals for the District of Columbia that KBR was trying to use the attorney-client privilege as “both a sword and a shield.”

Barko argued that the company used the documents it claims are privileged in a summary judgment motion to “assert an undisputed material fact that it complied with laws and regulations.”

“In other words, it asked the district court to draw an inference that KBR’s [Code of Business Conduct] investigative process cleared the company of having to report wrongdoing, while at the same time claiming that information about its investigation is privileged,” the whistle-blower asserted.

Barko also argued that in any case, KBR's mandamus petition should be denied because the company failed to meet the high standard for review.

Mandamus Petition 

In December, KBR submitted a mandamus petition 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, Gwin found that the attorney-client privilege did not protect factual summaries prepared by a non-attorney investigator and sent to in-house KBR attorneys. The judge also concluded that KBR had waived the privilege by questioning its in-house attorney about the substance and results of the internal investigation.

Several business associations have supported KBR in a recent amicus filing, saying that Gwin's decisions could have adverse ramifications for internal investigations and corporate compliance programs.

In his Feb. 6 brief, Barko disputed that claim. He argued that the district court's Nov. 20 and Dec. 17 rulings will not dissuade companies from conducting internal investigations because it was KBR's conduct that resulted in a waiver of privilege.

“Companies do not routinely call their in-house attorney to testify about compliance investigations, or seek to use such testimony or other information about privileged investigations offensively as a ‘sword' in litigation,” Barko said. “In the rare situation where, as here, a party makes a strategic decision to place privileged information at issue to defeat claims, it waives the privilege.”

Second Mandamus Petition by KBR 

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 in 2005 sued KBR 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 the first mandamus petition. In June 2014, the appellate court reversed 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. 

The U.S. Supreme Court subsequently denied Barko's certiorari petition.

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

Barko's brief is available at http://www.bloomberglaw.com/public/document/In_re_Kellogg_Brown__Root_Inc_et_al_Docket_No_1405319_DC_Cir_Dec_/1.