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United States ex rel. Barko v. Halliburton Co.

United States District Court, D. Columbia.

December 17, 2014

UNITED STATES OF AMERICA ex rel. HARRY BARKO, Plaintiff-Relator,
v.
HALLIBURTON COMPANY et al, Defendants

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[Copyrighted Material Omitted]

Page 534

For HARRY BARKO, United States of America ex rel, Plaintiff: Anthony C. Munter, LEAD ATTORNEY, PRICE BENOWITZ, LLP, Washington, DC; David K. Colapinto, Michael David Kohn, Stephen M. Kohn, LEAD ATTORNEYS, KOHN, KOHN & COLAPINTO, LLP, Washington, DC.

For HALLIBURTON COMPANY, KELLOGG BROWN & ROOT SERVICES, INC., KELLOGG BROWN & ROOT SERVICES, INC., KBR TECHNICAL SERVICES INC, KELLOGG BROWN & ROOT ENGINEERING CORPORATION, KELLOGG BROWN & ROOT INTERNATIONAL, INC., A Delaware Corporation, KELLOGG BROWN & ROOT INTERNATIONAL, INC., A Panamanian Corporation; And any other entities doing business under the name Kellogg Brown and Root, KELLOG BROWN & ROOT, Defendants: Craig D. Margolis, LEAD ATTORNEY, Alden Lewis Atkins, Tirzah S. Lollar, VINSON & ELKINS, LLP, Washington, DC; John Martin Faust, LEAD ATTORNEY, LAW OFFICES OF JOHN M. FAUST, PLLC, Washington, DC; John Randall Warden, U.S. DEPARTMENT OF JUSTICE, Washington, DC.

For DAOUD & PARNTERS INC., Defendant: Daniel H. Bromberg, LEAD ATTORNEY, QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP, Redwood Shores, CA; Christine H. Chung, PRO HAC VICE, QUINN EMANUEL URQUHART & SULLIVAN LLP, San Francisco, CA; Christopher Tayback, Scott L. Watson, PRO HAC VICE, QUINN EMANUEL URQUHART & SULLIVAN LLP, Los Angeles, CA.

For UNITED STATES OF AMERICA, Movant: Beverly Maria Russell, LEAD ATTORNEY, U.S. ATTORNEY'S OFFICE, Washington, DC.

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OPINION AND ORDER

[Resolving Docs. 180, 216, 217]

JAMES S. GWIN, UNITED STATES DISTRICT JUDGE.

In an earlier order, the Court concluded that KBR's Code of Business Conduct (" COBC" ) documents were not attorney-client privileged because they were not created for the primary purpose of securing legal advice.[1] The Court of Appeals vacated this order because " [i]n the context of an organization's internal investigation, if one of the significant purposes of the internal investigation was to obtain or provide legal advice, the privilege will apply." [2]

The Court of Appeals remanded, stating: " [t]o the extent that [Plaintiff-Relator] Barko has timely asserted other arguments for why these documents are not covered by either the attorney-client privilege or the work-product protection, the District Court may consider such arguments." [3]

Separately, this Court has found that KBR waived any attorney client privilege over the COBC documents.[4] Because KBR has indicated it may seek interlocutory review of this waiver ruling, the Court separately considers whether certain summary reports prepared by a KBR investigator are otherwise subject to disclosure.

In this order, the Court considers whether portions of the COBC documents are non-privileged fact work product that is discoverable based on substantial need.[5] The COBC documents include two long reports from KBR investigator Richard Ervin sent to William Rice and Chris

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Heinrich, in-house counsel for KBR. These reports include witness statements and summaries of those statements. If KBR had not otherwise waived its privilege, the witness statements are attorney-client privileged. But more important to this decision, Ervin's reports contains summaries of KBR's subcontracts with Daoud & Partners Inc. (" Daoud" ) and summaries of Daoud's performance under those subcontracts. The two reports are reproduced several times in KBR's in camera production.[6]

KBR argues that both of the reports are, in their entirety, attorney-client privileged, opinion work product protected, and, alternatively, not subject to the substantial need exception to fact work product protection.[7] Barko responds that the investigator's factual summaries are not attorney-client privileged and do not qualify for fact work product protection, or in the alternative, are discoverable based on substantial need.[8]

For the following reasons, the Court DENIES Barko's request to compel production of witness statements contained in the COBC reports but GRANTS Barko's motion to compel production of parts of the COBC reports because they are discoverable fact work product and Barko shows substantial need. KBR will produce portions of the reports, with redactions as explained in this order. KBR will make these disclosures by 4:00PM on December 26, 2014.

The Court ORDERS Barko not to disclose the contents of the documents. If Barko uses or refers to the documents in subsequent filings in this case, the Court orders that such filings be made under seal. This order will remain in effect unless modified or lifted by the Court.

I. Background

Barko sued certain government contractors who provided services and materials to support the United States war effort in Iraq.[9] He brings qui tam claims on behalf the United States and says these contractors defrauded the United States by submitting false claims. In general, Barko alleges KBR wrongly gave subcontracts to Daoud & Partners (" Daoud" ) despite terrible contract performance. In part, Barko claims Daoud obtained the contracts by bribing KBR employees responsible for awarding and supervising the subcontracts.

Barko also says KBR was conflicted when it awarded subcontracts to Daoud. KBR was seeking to do business in Jordan. As a foreign company, KBR needed a Jordanian sponsor to work in Jordan. Daoud, a Jordanian company, agreed to act as KBR's Jordanian sponsor. The Plaintiff says KBR failed to supervise Daoud contracts or terminate Daoud contracts

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for nonperformance to benefit KBR's Jordanian effort. And Plaintiff Barko alleges American citizens paid the cost of Daoud's failure to complete contracts as Daoud had agreed. Barko sued both KBR and Daoud. Daoud has settled with the Plaintiff and with the United States.

With the government contracts, KBR agreed to set up an anti-fraud, anti-kickback monitoring system. KBR established a third-party monitored tip line to receive reports of potential contract fraud or kickbacks. KBR received calls complaining that contract awards and payments to Daoud were fraudulent. KBR received tip calls alleging that certain KBR employees were likely receiving kickbacks and that those employees were aggressively steering contracts and payments to Daoud.

After receiving these tips, KBR tasked Richard Ervin, an investigator working for KBR's legal department, to investigate the fraud and kickback allegations. Ervin assembled emails and other documents related to the Daoud contracts. Ervin also took statements from witnesses. Finally, Ervin summary reports discussing the award, payment, and supervision of contracts with Daoud.

II. Standards

The attorney-client privilege protects confidential communications between clients and attorneys if one of the significant purposes of the communication is receiving legal advice.[10] The privilege prevents disclosure of confidential communications, but does not stop discovery of underlying factual information, even if that information finds its way into employee statements.[11] The statements are protected; the underlying information is not.

The privilege applies in the corporate context and protects confidential communications made by company employees to company lawyers, acting as such.[12] The Court of Appeals has already determined that a significant purpose of the COBC investigations was to secure legal advice.[13]

The privilege also protects confidential communications between a client and agents acting at the direction of client's attorneys. " 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." [14] The privilege " focuses on the attorney-client relationship. Thus . . . communications that do not involve both attorney and client are unprotected." [15]

While work product protection has a broader scope than attorney-client privilege, the protection it offers is also less absolute.[16] The work product doctrine was announced in Hickman v. Taylor [17] and has been codified in part by Civil Rule 26(b)(3), which states:

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(A) Documents and Tangible Things. Ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent). But, subject to Rule 26(b)(4), those materials may be discovered if:
(i) they are otherwise discoverable under Rule 26(b)(1); and
(ii) the party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.
(B) Protection Against Disclosure. If the court orders discovery of those materials, it must protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of a party's attorney or other representative concerning the litigation.[18]

A document is prepared " in anticipation of litigation" if " 'in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.'" [19] The party preparing the document must have actually believed that litigation was a real possibility, and this belief must have been objectively reasonable.[20]

Rule 26 draws a distinction between " fact" and " opinion" work product. Opinion work product, which reveals the attorney's mental impression, opinions, legal theories or strategy, " is virtually undiscoverable." [21] But " under certain circumstances purely factual material embedded in attorney notes may not deserve the super-protection afforded to a lawyer's mental impressions." [22]

In Hickman, the Court explained that the work product doctrine balances the tension between protecting an attorney's mental impressions and facilitating meaningful discovery:

Where relevant and non-privileged facts remain hidden in an attorney's file and where production of those facts is essential to the preparation of one's case, discovery may properly be had. . . . Were production of written statements and documents to be precluded under such circumstances, the liberal ideals of the deposition-discovery portions of the Federal Rules of Civil Procedure would be stripped of much of their meaning. But the general policy against invading the privacy of an attorney's course of preparation is so well recognized and so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production through a subpoena or court order.[23]

III. Analysis

A. Attorney-client Privilege

The COBC reports include copies of witness statements signed by KBR employees and given to KBR investigators.

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Investigator Ervin attached these statements to his reports and sent them to KBR lawyers. The Court finds that these employee statements are confidential communications between corporate employees and the agents of an attorney, and are attorney-client privileged.

KBR also argues that the reports themselves, drafted by Ervin and sent to KBR lawyers, are attorney-client privileged. First, KBR argues that Upjohn Co. v. United States and the Court of Appeals's opinion granting KBR's mandamus petition protect the communications between KBR investigators and lawyers. KBR argues that the reports fit the standard articulated in Upj ...


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