KBR’s Privilege Still Uncertain, Judge Says

     WASHINGTON (CN) – A whistle-blower may yet access internal KBR documents after a federal judge ordered the defense contractor to let him review more information.
     Harry Barko sued KBR in 2005 when it was a Halliburton subsidiary called Kellogg Brown & Root Services. He claimed the company inflated contracts and won kickbacks for contracts in Iraq.
     While Halliburton claimed that attorney-client privilege shielded it from disclosing documents related to its internal investigation of such claims, Barko maintained that the documents were nothing more than standard business records and therefore not protected.
     U.S. District Judge James Gwin previously ruled that the attorney-client privilege did not apply to certain documents because KBR failed to show that “the communication would not have been made ‘but for’ the fact that legal advice was sought.” Gwin also found that KBR had undertaken the internal investigation “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”
     KBR won a reversal of that order this past July, however, with the D.C. Circuit finding that the lower court’s order “would have potentially far-reaching consequences” that “would potentially upend certain settled understandings and practices.”
     Reconsidering the issue of privilege on remand, Gwin last week demanded briefing on what KBR disclosed to the government and when, among other things.
     “In providing this information, the parties shall describe whether KBR’s disclosure dealt with Daod [& Partners] or with the contracts involved with this litigation,” the opinion published Friday states.
     He also wants to know whether the disclosure to the government involved Daod, and if it involved any other contracts associated with the case.
     Gwin did rebuff attempts by KBR to shield a May 13, 2004, email from KBR President and CEO Andy Lane to all of his employees.
     “In the email KBR’s president ‘has disclosed to the government the possibility that one or two of our former employees may have received ‘kick backs’ from a selected contractor and we are cooperating with the appropriate authorities as they conduct this investigation,'” Gwin wrote.
     “The email … Is not related to obtaining legal advice,” Gwin said. “The document is non-confidential.”
     In KBR’s earlier appeal to the D.C. Circuit, it found support in amicus briefs from the U.S. Chamber of Commerce, National Association of Manufacturers, Coalition for Government Procurement, American Forest & Paper Association, and the Association of Corporate Counsel.
     The D.C. Circuit had taken issue with Gwin’s attempt to distinguish KBR’s case from the 1981 U.S. Supreme Court case Upjohn v. U.S.
     Gwin characterized Upjohn as saying that an internal investigation begins after in-house counsel confers with outside counsel. He said in KBR’s case the investigation was conducted in-house without consulting outside lawyers.
     “But Upjohn does not hold or imply that the involvement of outside counsel is a necessary predicate for the privilege to apply,” Judge Brett Kavanaugh wrote for the three-judge panel. “On the contrary, the general rule, which this court has adopted, is that a lawyer’s status as in-house counsel ‘does not dilute the privilege.'”
     Last year, Gwin, who took over the case by designation from his court in Cleveland, also vacated a protective order covering documents that could disclose trade secrets.

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