KBR Internal Investigation Documents Are Privileged, D.C. Circuit Says

Plaintiff Barko worked for Kellogg Brown & Root, a defense contractor and former subsidiary of Halliburton.  He filed a False Claims Act claim against KBR:

In essence, Barko alleged that KBR and certain subcontractors defrauded the U.S. Government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq. During discovery, Barko sought documents related to KBR’s prior internal investigation into the alleged fraud.  KBR had conducted that internal investigation pursuant to its Code of Business Conduct, which is overseen by the company’s Law Department.

KBR argued that the internal investigation had been conducted for the purpose of obtaining legal advice and that the internal investigation documents therefore were protected by the attorney-client privilege. . . .

After reviewing the disputed documents in camera, the District Court determined that the attorney-client privilege protection did not apply because, among other reasons, KBR had not shown that “the communication would not have been made ‘but for’ the fact that legal advice was sought.” . . . KBR’s internal investigation, the court concluded, was “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”

. . . The District Court . . . ordered KBR to produce the disputed documents to Barko . . .

The D.C. Circuit granted KBR's petition for writ of mandamus, holding that the District Court's privilege ruling was clearly legally erroneous under Upjohn v. United States, and that it was otherwise appropriate to grant the writ: 

[T]he District Court also distinguished Upjohn on the ground that KBR’s internal investigation was undertaken to comply with Department of Defense regulations that require defense contractors such as KBR to maintain compliance programs and conduct internal investigations into allegations of potential wrongdoing. The District Court therefore concluded that the purpose of KBR’s internal investigation was to comply with those regulatory requirements rather than to obtain or provide legal advice. In our view, the District Court’s analysis rested on a false dichotomy. So long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion.

The D.C. Circuit rejected KBR's request to reassign the case to a different District Judge.  In re Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014).