SHELL OIL CO., ET AL. V. ROBERT WRITT, No. 13-0552, 2015 Tex. Lexis 452 (Tex. May 15, 2015)
Most corporate counsel understand that when a governmental entity begins investigating your company's compliance with the laws governing various business activities – environmental, securities, foreign trade, or other regulated matters – timely cooperation can be paramount.
But should you have any other concerns? Should your "antennas be up" for something else?
The recent Texas Supreme Court decision in the Shell case shows the potential for third-party claims such as defamation in connection with statements made in the course of a governmental investigation. The result in that case was favorable for Shell, but the Supreme Court's analysis demonstrates that might not always be the outcome.
Shell was the subject of a Foreign Corrupt Practices Act (FCPA) investigation brought by the U.S. Department of Justice (DOJ). Shell agreed to perform an internal investigation and report the results to the DOJ. The DOJ identified several individuals as potential witnesses and "persons of interest" and requested that Shell produce additional information related to them; one was Shell employee Robert Writt.
Shell's report to the DOJ identified Writt as a bad actor in the FCPA matter. Shell then terminated Writt and "made a deal" with the DOJ to pay a $30 million fine.
Writt in turn sued Shell in Texas for defamation and wrongful termination, claiming Shell's report to the DOJ falsely accused him of approving bribery payments and participating in illegal conduct. A key issue in Writt's defamation claim was whether Shell's statements to the DOJ were protected by an absolute privilege or by a more limited conditional privilege that provided less protection to Shell.
In the trial court, Shell obtained summary judgment on the defamation claim by arguing that its report and the statements in it were absolutely privileged because they were furnished to the DOJ preliminary to a proposed judicial proceeding. The court of appeals reversed, holding that Shell had not conclusively established that a criminal judicial proceeding against Shell or Writt was ongoing, actually contemplated or under serious consideration by either the DOJ or Shell at the time Shell provided its report.
The Texas Supreme Court reversed the court of appeals. It stated that the test for whether a communication occurring before the onset of judicial proceedings is absolutely privileged includes both subjective and objective components: The communication must relate to a proceeding that is actually contemplated in good faith and under serious consideration by a witness or possible party to the proceeding. Shell met this test by arguing that there was "...no doubt about its seriously contemplating the possibility of an FCPA criminal proceeding when it furnished the report to the DOJ, given the fact that it was a target of the DOJ's investigation and the undisputed facts that its self-investigation (1) took over eighteen months, (2) involved both outside and inside counsel as well as forensic, (3) cost over $10 million, and (4) recommended disciplinary actions for staff members as a result of Shell's dealings with [its contractor]."
The Supreme Court concluded that, "...when the DOJ's leverage over Shell vis-à-vis the FCPA and its somewhat draconian potential penalties are considered, it is manifest that Shell was, practically speaking, compelled to undertake its internal investigation and report its findings to the DOJ.... Shell's providing its report to the DOJ was an absolutely privileged communication."
While Shell is important because it establishes an absolute defense to potential third-party defamation claims arising from certain internal investigations, its clarification that absolute privilege may not always exist is equally important. In particular, when a person is merely communicating information of public interest to a public officer or private citizen authorized to take action if the information is true, the statements are only conditionally privileged. See Shell, 2015 Tex. LEXIS 452, at * 20-21 (citing Restatement (Second) Torts § 598 and Gulf Atlantic Life Ins. Co. v. Hurlbut, 749 S.W.2d 762, 767-68 (Tex. 1987)).
Clients and their in-house counsel must be cognizant of these distinctions and the nature of pending investigations to carefully evaluate the potential consequences of any statements made to public officers. Knowing how to proceed cautiously, while still fully cooperating, is critical to coming out of the investigation unscathed because the absolute immunity granted in the Shell decision may not apply to your situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
