© 2014 The Texas Lawbook.
By Janet Elliott (November 10) – AUSTIN – The Texas Supreme Court heard arguments Nov. 6 in a defamation case that could have profound implications for federal corruption investigations of companies doing business overseas.
At issue is whether companies that cooperate with criminal investigations over potential violations of the Foreign Corrupt Practices Act should be immune from defamation suits filed by employees who are implicated in the probes.
National business groups have weighed in, saying that companies may decide to not conduct internal investigations or cooperate in federal bribery cases if doing so exposes them to litigation filed by their employees. Six former attorneys general have called the lower court ruling “seriously flawed.”
James C. Ho filed an amicus brief for the U.S. Chamber of Commerce, National Association of Manufacturers and American Petroleum Institute. He said the court of appeals decision “could make Texas a magnet for fishing-expedition suits from employees seeking to discover these reports through litigation against the many companies that have a significant presence in Texas.”
The case has its origins in a Department of Justice investigation into a scheme to bribe Nigerian customs officials in connection with a Shell oil and gas project. Royal Dutch Shell in 2010 agreed to pay $48 million in penalties as part of a larger settlement involving other oil and gas service companies accused of paying bribes to import equipment and vessels into Nigeria and other foreign counties.
Robert Writt, a former Shell engineer, was in charge of approving the reimbursement requests of a contractor hired to import equipment. According to Writt’s brief, he raised concerns about suspect invoices and only paid them when instructed to do so by his supervisor.
After Writt was terminated, he learned that Shell’s report to the DOJ had accused him of facilitating the bribery scheme. He sued Shell Oil Co. and Shell International E&P Inc. for defamation.
After the trial court issued a take-nothing summary judgment, Writt appealed. He argued that Shell should not be granted immunity because its statements about his conduct were not made in connection with the Justice Department’s prosecution of the contractor, which had already concluded.
Shell countered that it made the report while it was under DOJ scrutiny and ultimately was prosecuted.
The 1st Court of Appeals in 2013 ruled 2-1 that Shell was not entitled to summary dismissal of Writt’s lawsuit because the report was prepared during the company’s voluntary internal investigation.
In the opinion, Justice Terry Jennings concluded that Shell would be adequately protected with a conditional privilege. Justice Harvey Brown dissented, saying that public policy favors an absolute privilege.
The former attorneys general said the ruling could impede future investigations.
“If absolute privilege is to be denied for statements to law-enforcement authorities unless a judicial proceeding has been commenced or ‘proposed,’ valuable evidence likely will be denied to law-enforcement authorities, or its production seriously impeded, at the investigative stage of cases, when it is most valuable,” the former AGs said in an amicus letter.
Justice Eva Guzman asked about the court of appeals’ reasoning that granting absolute immunity could encourage companies to falsely shift blame to an employee.
“I think it fundamentally misunderstands a judicial proceedings privilege, which specifically contemplates that it might on occasion immunize malicious falsehoods, but that that is greatly outweighed by the benefits to the administration of justice in encouraging free and full disclosure from the vast majority of honest participants in the judicial process,” Stokes said.
Robert Dubose, who argued for Writt, said Texas is not among the 10 states that have declared all communications with law enforcement are privileged. He said that the court of appeals was correct to apply a conditional privilege to Shell’s statements about Writt, given the 21-month lag between the time Shell made statements and the beginning of judicial proceedings against Shell.
“We have to be concerned about protecting people’s reputation as well as encouraging communication,” Dubose said.
© 2014 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.
If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.