John Elwood, right, and Craig Margolis, left, of Vinson & Elkins.
John Elwood, right, and Craig Margolis, left, of Vinson & Elkins. (Photo: Diego M. Radzinschi/NLJ.)

The U.S. Court of Appeals for the D.C. Circuit on Wednesday waded into a dispute between the lawyers for a whistleblower and Kellogg Brown & Root Services Inc. over whether the company can withhold papers it says are protected by attorney-client privilege.

John Elwood of Vinson & Elkins, representing KBR, argued before a three-judge panel that a lower court judge erred in compelling the company to produce 89 documents related to the False Claims Act suit filed against it by purported whistleblower Harry Barko.

The papers, which concern KBR’s investigation into the alleged wrongdoing, didn’t lose the protection of attorney-client privilege even though the company conducted the probe to comply with regulatory law, he said.

KBR was investigating whether it and a subcontractor, Daoud & Partners Inc., had an inappropriate relationship that potentially involved kickbacks. Daoud built and staffed laundry facilities in Iraq for the U.S. military.

In a March 6 ruling, enforcement of which the D.C. Circuit has stayed, U.S. District Judge James Gwin wrote that KBR hadn’t conducted its probe for the purpose of obtaining legal advice. Instead, the company acted to comply with regulatory law and corporate policy, leaving it without the protection afforded by attorney-client privilege, he wrote.

Elwood told D.C. Circuit judges Thomas Griffith, Brett Kavanaugh and Sri Srinivasan that he disagreed with Gwin’s position.

“In order to comply with the regulatory purpose, you may very well need legal advice,” he said.

Stephen Kohn of Kohn, Kohn & Colapinto, representing the whistleblower, said Gwin had made “absolutely no error.” KBR left the investigation in the hands of nonlawyers, he said.

“The investigators wrote the questions, not the lawyers,” Kohn said.

Kavanaugh observed that any opinion the court writes would receive close scrutiny. The Association of Corporate Counsel, the U.S. Chamber of Commerce and other business groups are following the case closely.

The organizations filed an amicus curiae brief, which argues that Gwin’s ruling “threatens to work a sea change in the well-settled rules governing internal corporate investigations.”

In writing an opinion, it would be “important to get the semantics” right about the applicability of the attorney-client privilege, Kavanaugh said.

Contact Andrew Ramonas at aramonas@alm.com.