Stay current on changes and developments in corporate law with a wide variety of resources and tools.
By Yin Wilczek
Feb. 24 — Kellogg Brown & Root Inc. told a federal appeals court that a lower court committed “clear legal errors” in directing it to disclose documents to whistle-blower Harry Barko.
In a Feb. 23 filing to the U.S. Court of Appeals for the District of Columbia Circuit, KBR said the errors include “fundamental misapplications” of “at issue” waivers of privilege.
The closely watched case has important ramifications regarding the scope of privilege protections for corporate documents, including materials produced during internal investigations.
In Nov. 20 and Dec. 17 decisions, Judge James Gwin of the U.S. District Court for the District of Columbia ordered KBR to turn over, among other materials, factual summaries prepared by a non-attorney investigator that were part of the company's Code of Business Conduct (COBC) reports from an internal investigation on possible kickbacks.
Gwin also concluded that KBR had waived the attorney-client privilege by questioning its in-house attorney about the substance and results of the internal investigation.
In December, KBR filed a mandamus petition asking the D.C. Circuit to vacate the rulings. The company also asked the appellate court to reassign the case to a different judge.
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.
Barko disputed that claim in a Feb. 6 brief, arguing that the district court's latest rulings will not dissuade companies from conducting internal investigations because it was KBR's conduct that resulted in a waiver of privilege.
In its Feb. 23 filing, KBR argued that the “innocuous statement” by KBR attorney Chris Heinrich that the company adheres to its contractual obligation to report suspected kickbacks to the government does not constitute an implied waiver.
Triggering “implied waiver” on such a general statement of legal compliance “is a trap that will discourage corporations from conducting internal investigations,” the company said.
“Under the district court's rationale, any corporate representative—whether an attorney or not—who testifies that the corporation follows procedures for identifying, investigating, and reporting fraud may risk waiver through even general comments on the litigation at issue,” KBR continued. “The prospect of such unexpected and irrevocable waivers highlights the need for mandamus.”
KBR also argued that Gwin should be removed, saying the judge's “continued disclosures of privileged material” and “sua sponte pursuit of novel theories”—among other actions—“create the appearance of a concerted effort to circumvent” the D.C. Circuit's prior mandamus decision.
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.
Barko, a former KBR employee, 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 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 email@example.com
To contact the editor responsible for this story: Kristyn Hyland at firstname.lastname@example.org
The filing is available at http://www.bloomberglaw.com/public/document/In_re_Kellogg_Brown__Root_Inc_et_al_Docket_No_1405319_DC_Cir_Dec_/2.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)