The ability to preserve privilege for highly sensitive internal investigations conducted at the direction of attorneys is alive and well. In a closely watched decision on the scope of the attorney-client privilege as applied to internal investigations, the D.C. Circuit granted defense contractor Kellogg Brown & Root’s (“KBR”) petition for a writ of mandamus and vacated a district court’s order that privileged documents from an internal investigation must be produced.

The long-standing principal that the attorney-client privilege applies to internal investigations that are directed by company lawyers stems from the Supreme Court’s decision in Upjohn Co. v. United States, 449 U.S. 383 (1981). But the dispute in In re KBR did not revolve around the existence of the privilege; instead it concerned how easily that privilege can be waived.

Harry Barko worked for KBR and filed a False Claims Act complaint against KBR alleging that KBR defrauded the U.S. Government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq. During discovery in the case, Barko sought documents that were created as a part of KBR’s internal investigation that resulted from his earlier complaints to the company about the same issues. The internal investigation had been conducted at the direction of KBR’s legal department.

Barko argued that KBR waived privilege during a Rule 30(b)(6) deposition of KBR’s person most knowledgeable about the internal investigation. KBR’s witness reviewed the internal investigation documents in preparation for the deposition. The witness testified about the internal investigation generally, explaining that it was performed in response to Barko’s complaint. But he refused to answer questions about the substance of the investigation, arguing that such information was privileged.

Barko also argued, and the district court agreed, that KBR has “impliedly waived” the attorney client privilege in its motion for summary judgment. KBR argued that one could infer that no wrongdoing occurred because, had KBR’s investigation revealed possible wrongdoing, KBR would have reported it to the government. The district court concluded that because KBR “actively sought a positive inference in its favor based on what KBR claims the documents show,” the documents should be discoverable. Even if that were not the case, the documents would still be discoverable because Federal Rule of Civil Procedure 612 allows a party to obtain documents a witness uses to refresh his or her recollection before testifying, notwithstanding any privilege or work product protection.

The D.C. Circuit strongly rejected the district court’s rationale. Acknowledging that mandamus is a “drastic and extraordinary” remedy, the court nonetheless granted the petition and agreed with KBR that the district court’s decision “run[s] contrary to precedent by injecting uncertainty into application of attorney-client privilege and work product protection to internal investigations.” As for the district court’s finding that KBR had sought a “positive inference” based on the fact that KBR did not report the results of the investigation to the government, the D.C. Circuit found it significant that KBR only set forth the facts about its investigation in the fact section of its summary judgment motion; NBR did not actually argue for an inference based on the investigation. The D.C. Circuit also found Rule 612 inapplicable because the deponent did not “rely” on the documents during the testimony except to state that they were privileged.

The upshot for companies is that they can continue to rely on the attorney-client and attorney-work-production protections for internal investigations conducted at the direction of counsel. Companies need not fear that merely disclosing that an investigation occurred will result in waiving the privilege as applied to the contents of the investigation. Nonetheless, there is clearly a line that should not be crossed (i.e. making arguments based on the findings of such investigations), if an employer desires to preserve its privilege.