Required Disclosures to the Government did not Waive Attorney Client Privilege, 4th Circuit Finds

Attorney-client privilege is a cornerstone of the American legal system. It protects conversations between an attorney and their client from disclosure during litigation. The goal of this protection is to allow an attorney to provide the best representation possible by protecting client communications from being later leveraged during litigation. Sometimes, however, invocation of attorney-client privilege protections can be complicated by required disclosures.

But federal contractors are required to notify the government about various circumstances that may impact their role as contractors. What if there is a conflict between mandatory government disclosures and attorney-client privilege? In a recent decision, the 4th Circuit Court of Appeals was asked to determine whether certain mandatory disclosures under the FAR waived attorney client privilege.

The attorney-client privilege decision in Fluor Intercontinental, Inc. v. U.S. District Court (O’Grady), 803 F. App’x 697 (4th Cir. 2020), is part of a larger wrongful termination case. In 2017, Fluor initiated an internal investigation into a potential conflict of interest. The investigation focused on a Fluor employee, Steven Anderson, and his conduct with another contractor, Relyant Global, LLC. Mr. Anderson was a project manager in Afghanistan, and had allegedly leveraged information he learned in his project manager capacity to assist Relyant with recurring concrete contracts with the German military. At the time, Fluor was evaluating Relyant as a potential subcontractor.

Fluor’s legal department led the conflict of interest investigation, and provided guidance to Fluor’s management regarding risk exposure. In addition, the legal department also provided counseling on various federal notice requirements imposed by the FAR, as Fluor was currently performing various federal government contracts. At the conclusion of the investigation, Fluor believed that Mr. Anderson’s actions had potentially resulted in criminal liability. Mr. Anderson was subsequently fired by Fluor.

Based on its investigation findings, Fluor also determined that it was required to make a disclosure to the government under FAR 52.203-13(b)(3)(i), which requires contractors to report in writing whenever “the Contractor has credible evidence that a[n] . . . employee . . . of the Contractor has committed . . . [a] violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations . . . or . . . [a] violation of the civil False Claims Act[.]” Concurrently, Fluor also notified the government that it had concerns about Mr. Anderson’s conduct. Fluor’s notice included the following statements:

(1) “Anderson had a financial interest in and appears to have inappropriately assisted [a] Fluor supplier and potential subcontractor”;

(2) “Fluor considers this a violation of its conflict of interest policy and Code of Business Conduct and Ethics”;

(3) “Anderson used his position as the [Afghanistan] project manager to pursue Relyant concrete contracts with the German military, and Mr. Anderson used his position as the [Afghanistan] project manager to obtain and improperly disclose nonpublic information to Relyant”; and

(4) “Fluor estimates there may have been a financial impact to the Government because Mr. Anderson’s labor was charged to the contract task order while he engaged in improper conduct.”

Mr. Anderson subsequently sued Fluor, alleging he was wrongfully terminated. During the discovery process before trial, Mr. Anderson sought copies of Fluor’s internal investigation file. In response, Fluor asserted that the file was subject to attorney-client privilege and objected to turning it over.

Importantly, while attorney-client privilege can provide powerful protections, it is also remarkably easy to waive such protections. The most common way to waive attorney client privilege is to share privileged information with another individual. Once this happens, the privilege can be deemed waived, and the information (or at least a subset of that information) formally subject to protection is now discoverable for the opposing party’s review.

As the parties had reached an impasse, they called on the District Court Judge to make a decision. According to the Judge, Fluor had waived its right to attorney-client privilege with respect to the four disclosing statements it made to the government regarding Mr. Anderson’s conduct. Beyond just the disclosure statements, the privilege waiver also meant that all documents in the investigation file that resulted in those disclosure statements would also need to be released.

As the District Court’s decision would result in substantial portions of Fluor’s internal investigation file being turned over to Mr. Anderson, Fluor appealed the disclosure order to the Court of Appeals for the 4th Circuit. Fluor argued the District Court had made a legal error concluding that the required disclosures under the FAR waived Fluor’s attorney client privilege.

The 4th Circuit agreed. In reaching its decision, the 4th Circuit drew a distinction between communications between attorney and client versus public disclosures made by clients on advice of their attorneys. According to the 4th Circuit, “the fact that Fluor’s disclosure covered the same topic as the internal investigation or that it was made pursuant to the advice of counsel doesn’t mean that privileged communications themselves were disclosed.” Since Fluor’s disclosures under FAR 52.203(b)(3)(i) were not direct communications between an attorney and their client, the mandatory disclosures did not waive Fluor’s privilege with respect to the underlying investigation.

Beyond addressing the immediate question of attorney-client privilege, the 4th Circuit also noted the unique position Fluor was in as a government contractor. As the Court explained, “requiring Fluor to produce privileged materials is particularly injurious here, where Fluor acted pursuant to a regulatory scheme mandating disclosure of potential wrongdoing.” Indeed, the 4th Circuit explained that “Government contractors should not fear waiving attorney-client privilege in these circumstances.”

Ultimately, Fluor stands for the important proposition that federal contractors and their attorneys do not waive privilege merely by satisfying reporting requirements under the FAR. Of course, there could be ways that privilege could still be waived through required disclosures, but the 4th Circuit’s decision does provide clear direction that mere disclosure statements are not enough to fully waive attorney client privilege.

More importantly, the case also stands as pragmatic approach to enforcing the regulatory schemes imposed on federal contractors. We frequently note on this blog how Uncle Sam often has a disproportionate amount of power in the federal contracting realm, and that power is often mechanically enforced, regardless of the practical realities. The Fluor decision demonstrates a more practical approach to addressing federal contracting law, which is a refreshing change.

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