Key Ruling Issued on Privilege Waivers

By Kevin T. Barnett and Michael Wagner

Photo: iStock

The Fourth Circuit recently rejected a trial court’s ruling that a contractor’s mandatory disclosure submission waived its attorney-client privilege over the underlying internal investigation. In re Fluor Intercontinental, Inc., the court confirmed that “government contractors should not fear waiving attorney-client privilege” when making mandatory disclosures.

In early 2019, Steven Anderson sued Fluor for wrongful termination in the Eastern District of Virginia alleging that his firing violated various whistleblower protection statutes. Before the termination, Fluor had submitted a mandatory disclosure to the Defense Department Inspector General, stating that it had investigated Anderson’s conduct and concluded that Anderson “used his position ... to pursue [improper opportunities] and ... to obtain and improperly disclose nonpublic information.” The investigation led to Anderson’s termination and a subsequent criminal investigation into his conduct.

During discovery, Anderson requested internal investigation documents, such as witness statements, reports and interview summaries. Fluor objected to each by asserting the attorney-client privilege and work product protections. The court found a broad subject matter waiver and ordered Fluor’s immediate compliance.

The trial court ultimately directed Fluor to turn over all of its internal investigation materials on the same subject matter as four statements in the mandatory disclosure submission. These statements were: Plaintiff “appears to have inappropriately assisted”; “Fluor considers [that] a violation”; Plaintiff “used his position ... to pursue [improper opportunities] and ... to obtain and improperly disclose nonpublic information”; and “Fluor estimates there may have been a financial impact ... [due to] improper conduct.”

In analyzing these statements, the district court applied Federal Rule of Evidence 502(a), which provides that the disclosure of privileged communications only results in a subject matter waiver if: the wavier is intentional; the disclosed and undisclosed communications or information concern the same subject matter; and they ought in fairness to be considered together.

The court found that these statements were “legal conclusions which characterize Plaintiff’s conduct in a way that reveals attorney-client communications.” The court then found that Fluor voluntarily disclosed these privileged statements to the government in its written disclosure, emphasizing that Fluor characterized its disclosure as “voluntary” in its answer. It also rejected the argument that the disclosure was not voluntary because it was required by the Mandatory Disclosure Rule. The court interpreted the “so-called Mandatory Disclosure Regulation” as requiring “mere notice that the contractor has credible evidence” and “does not require disclosure of investigatory findings, the credible evidence which triggers the requirement, a summary, or any details.”

Fluor petitioned the Fourth Circuit for a writ of mandamus, arguing that the statements at issue did not reveal any attorney-client communications. Rather, it said the statements were merely Fluor’s investigation findings. Fluor also challenged the court’s interpretation of the Mandatory Disclosure Rule, explaining that contractors were expected to provide details about their investigations and conclusions as part of a mandatory disclosure submission.

The Fourth Circuit concluded that “the district court’s ruling that Fluor’s disclosure waived attorney-client privilege is clearly and indisputably incorrect.” In doing so, it found that the district court erroneously found that the four statements revealed attorney-client communications in the first place. It reasoned that the disclosure of non-privileged facts or conclusions cannot effect a waiver, even if the facts/conclusions are on the same subject matter of other privileged communications. Thus, disclosing the four non-privileged statements could not result in a privilege waiver.

The Fourth Circuit also corrected the district court’s misconceptions about the Mandatory Disclosure Rule. It noted that Fluor’s disclosure was not voluntary, but was made “pursuant to a regulatory scheme mandating disclosure of potential wrongdoing.” It then stated that the “vague or incomplete disclosures” suggested by the district court would be “patently at odds with the policy objectives of the regulatory disclosure regime at issue.”

There are several key takeaways from this case. First, and most important, the Fourth Circuit’s ruling erases a troubling lower court precedent in a jurisdiction home to myriad government contractors and government agencies — most notably the Defense Department. It reaffirmed the long-standing principle that mandatory disclosure submissions do not require a privilege waiver over the underlying investigation.

Second, this case suggests that government contractors may enjoy a special status when appealing privilege decisions stemming from regulatory disclosure obligations. Although courts disfavor the immediate appeal of discovery orders, both the D.C. Circuit and now the Fourth Circuit have granted the extraordinary remedy of mandamus to cure an erroneous privilege decision impacting contractors.

Third, the ruling provides a helpful reminder that disclosures should reveal facts — and only facts. Contractors should take pains to ensure there is no implicit disclosure of attorney-client communications or work product in any disclosure. According to the court, the privilege is not waived by reciting facts or even legal conclusions, but it is waived when directly quoting witness statements or disclosing other protected communications between attorney and client. Contractors are well-advised to review a draft disclosure from the perspective of a district court judge who might be inclined to find a privilege waiver. 

Kevin Barnett is an associate and Michael Wagner is a partner at Covington & Burling LLP.

Topics: Defense Contracting, Ethics, Ethics Corner

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