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For Second Time, D.C. Circuit Finds Error in District Court’s Privilege Rulings

09.29.15

(Article from Insurance Law Alert, September 2015)

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The District of Columbia Circuit took the unusual step of issuing a second writ of mandamus in a discovery dispute, concluding that the district court erred in requiring the production of documents pertaining to a company’s internal investigation of alleged fraud.  In re Kellogg Brown & Root, Inc., 796 F.3d 137 (D.C. Cir. 2015). 

In a qui tam action brought under the False Claims Act, an employee sought the production of documents created in connection with an internal investigation conducted by his employer, KBR.  Last year, the District of Columbia federal district court ordered KBR to produce the documents, finding that attorney-client privilege did not apply.  As discussed in our July/August 2014 Alert, the District of Columbia Circuit granted a writ of mandamus vacating the district court’s order.  In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).  There the D.C. Circuit held that a company’s internal investigation documents are protected by attorney-client privilege so long as “obtaining or providing legal advice was one of the significant purposes of the internal investigation . . . even if there were also other purposes for the investigation and even if the investigation was mandated by regulation.”  On remand, the district court again ordered the production of the documents, this time on the basis that privilege was impliedly waived.  Last month, the D.C. Circuit issued a second writ of mandamus, ruling that the district court erred in finding waiver. 

The D.C. Circuit ruled that KBR did not waive privilege either by (1) allowing its designated deposition witness to review the privileged documents in preparation for his testimony, or (2) placing the documents “at issue” in the litigation.  First, the court ruled that the attorney-client privilege and work-product protection covering internal investigations are not defeated by a counter-party noticing a deposition on the topic of the privileged nature of the investigation.  As the court noted, “[a]llowing privilege and protection to be so easily defeated would defy ‘reason and experience.’”  Second, the court held that testimony about the privileged nature of the investigation could not be a basis for finding “at issue” waiver because a “deposition transcript is simply a record of what was said, not itself an argument.”  The court further held that references to the internal investigation in KBR’s summary judgment memorandum did not constitute “at issue” waiver because KBR did not explicitly rely on the results of the investigation as a defense.  Rather, KBR merely mentioned, as part of a  “recitation of facts,” that it had conducted an internal investigation and had not reported any wrongdoing to the government.  Based on this circumstance, the D.C. Circuit held that it was error for the district court, in ruling on the motion for summary judgment, to infer that KBR was affirmatively relying on the contents of the investigation documents and had thus placed the documents “at issue” in the litigation.