In re Kellogg Brown & Root, Inc.

• Citation: 756 F.3d 754
• Decision Date: 02 September 2014
• Docket Number: No. 14–5055.,14–5055.
• Parties: In re KELLOGG BROWN & ROOT, INC., et al., Petitioners.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

756 F.3d 754

In re KELLOGG BROWN & ROOT, INC., et al., Petitioners.

No. 14–5055.

United States Court of Appeals, District of Columbia Circuit.

Argued May 7, 2014.

Decided June 27, 2014.

Rehearing En Banc Denied Sept. 2, 2014.

On Petition for Writ of Mandamus (No. 1:05–cv–1276).

John P. Elwood argued the cause for petitioners. With him on the petition for writ of mandamus and the reply were John M. Faust, Craig D. Margolis, Jeremy C. Marwell, and Joshua S. Johnson.

Rachel L. Brand, Steven P. Lehotsky, Quentin Riegel, Carl Nichols, Elisebeth C. Cook, Adam I. Klein, Amar Sarwal, and Wendy E. Ackerman were on the brief for amicus curiae Chamber of Commerce of the United States of America, et al. in support of petitioners.

Stephen M. Kohn argued the cause for respondent. With him on the response to the petition for writ of mandamus were David K. Colapinto and Michael Kohn.

Before: GRIFFITH, KAVANAUGH, and SRINIVASAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge KAVANAUGH.

KAVANAUGH, Circuit Judge:

More than three decades ago, the Supreme Court held that the attorney-client privilege protects confidential employee communications made during a business's internal investigation led by company lawyers. See Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). In this case, the District Court denied the protection of the privilege to a company that had conducted just such an internal investigation. The District Court's decision has generated substantial uncertainty about the scope of the attorney-client privilege in the business setting. We conclude that the District Court's decision is irreconcilable with Upjohn. We therefore grant KBR's petition for a writ of mandamus and vacate the District Court's March 6 document production order.

I

Harry Barko worked for KBR, a defense contractor. In 2005, he filed a False Claims Act complaint against KBR and KBR-related corporate entities, whom we will collectively refer to as 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. Barko responded that the internal investigation documents were unprivileged business records that he was entitled to discover. See generallyFed.R.Civ.P. 26(b)(1).

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.” United States ex rel. Barko v. Halliburton Co., No. 1:05–cv–1276, ––– F.3d ––––, ––––, 2014 WL 1016784, at *2 (D.D.C. Mar. 6, 2014) (quoting United States v. ISS Marine Services, Inc., 905 F.Supp.2d 121, 128 (D.D.C.2012)). 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.” Id. at ––––, 2014 WL 1016784, at *3.

KBR vehemently opposed the ruling. The company asked the District Court to certify the privilege question to this Court for interlocutory appeal and to stay its order pending a petition for mandamus in this Court. The District Court denied those requests and ordered KBR to produce the disputed documents to Barko within a matter of days. See United States ex rel. Barko v. Halliburton Co., No. 1:05–cv–1276, 2014 WL 929430 (D.D.C. Mar. 11, 2014). KBR promptly filed a petition for a writ of mandamus in this Court. A number of business organizations and trade associations also objected to the District Court's decision and filed an amicus brief in support of KBR. We stayed the District Court's document production order and held oral argument on the mandamus petition.

The threshold question is whether the District Court's privilege ruling constituted legal error. If not, mandamus is of course inappropriate. If the District Court's ruling was erroneous, the remainingquestion is whether that error is the kind that justifies mandamus. See Cheney v. U.S. District Court for the District of Columbia, 542 U.S. 367, 380–81, 124 S.Ct. 2576, 159 L.Ed.2d 459 (2004). We address those questions in turn.

II

We first consider whether the District Court's privilege ruling was legally erroneous. We conclude that it was.

Federal Rule of Evidence 501 provides that claims of privilege in federal courts are governed by the “common law—as interpreted by United States courts in the light of reason and experience.” Fed.R.Evid. 501. The attorney-client privilege is the “oldest of the privileges for confidential communications known to the common law.” Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). As relevant here, the privilege applies to a confidential communication between attorney and client if that communication was made for the purpose of obtaining or providing legal advice to the client. See 1 Restatement (Third) Of The Law Governing Lawyers §§ 68–72 (2000); In re Grand Jury, 475 F.3d 1299, 1304 (D.C.Cir.2007); In re Lindsey, 158 F.3d 1263, 1270 (D.C.Cir.1998); In re Sealed Case, 737 F.2d 94, 98–99 (D.C.Cir.1984); see also Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976) ( “Confidential disclosures by a client to an attorney made in order to obtain legal assistance are privileged.”).

In Upjohn, the Supreme Court held that the attorney-client privilege applies to corporations. The Court explained that the attorney-client privilege for business organizations was essential in light of “the vast and complicated array of regulatory legislation confronting the modern corporation,” which required corporations to “constantly go to lawyers to find out how to obey the law, ... particularly since compliance with the law in this area is hardly an instinctive matter.” 449 U.S. at 392, 101 S.Ct. 677 (internal quotation marks and citation omitted). The Court stated, moreover, that the attorney-client privilege “exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.” Id. at 390, 101 S.Ct. 677. That is so, the Court said, because the “first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant.” Id. at 390–91, 101 S.Ct. 677. In Upjohn, the communications were made by company employees to company attorneys during an attorney-led internal investigation that was undertaken to ensure the company's “compliance with the law.” Id. at 392, 101 S.Ct. 677; see id. at 394, 101 S.Ct. 677. The Court ruled that the privilege applied to the internal investigation and covered the communications between company employees and company attorneys.

KBR's assertion of the privilege in this case is materially indistinguishable from Upjohn's assertion of the privilege in that case. As in Upjohn, KBR initiated an internal investigation to gather facts and ensure compliance with the law after being informed of potential misconduct. And as in Upjohn, KBR's investigation was conducted under the auspices of KBR's in-house legal department, acting in its legal capacity. The same considerations that led the Court in Upjohn to uphold the corporation's privilege claims apply here.

The District Court in this case initially distinguished Upjohn on a variety of grounds. But none of those purported distinctions takes this case out from under Upjohn 's umbrella.

First, the District Court stated that in Upjohn the internal investigation began after in-house counsel conferred with outside counsel, whereas here the investigation was conducted in-house without consultation with outside lawyers. But Upjohn does not hold or imply that the involvement of outside counsel is a necessary predicate for the privilege to apply. 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.” In re Sealed Case, 737 F.2d at 99. As the Restatement's commentary points out, “Inside legal counsel to a corporation or similar organization ... is fully empowered to engage in privileged communications.” 1 Restatement§ 72, cmt. c, at 551.

Second, the District Court noted that in Upjohn the interviews were conducted by attorneys, whereas here many of the interviews in KBR's investigation were conducted by non-attorneys. But the investigation here was conducted at the direction of the attorneys in KBR's Law Department. And communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney-client privilege. See FTC v. TRW, Inc., 628 F.2d 207, 212 (D.C.Cir.1980); see also 1 Paul R. Rice, Attorney–Client Privilege in the United States § 7:18, at 1230–31 (2013) (“If internal investigations are conducted by agents of the client at the behest of the attorney, they are protected by the attorney-client privilege to the same extent as they would be had they been conducted by the attorney who was consulted.”). So that fact, too, is not a basis on which to distinguish Upjohn.

Third, the District Court pointed out that in Upjohn the interviewed employees were expressly informed that the purpose of the interview was to assist the company in obtaining legal advice, whereas here they were not. The District Court further...