© 2015 The Texas Lawbook.
By Janet Elliott and Mark Curriden
AUSTIN – (May 18) – Information provided voluntarily by businesses to federal prosecutors as part of a foreign corruption investigation is covered by absolute privilege – even if those details contain false allegations that would otherwise be considered defamatory, the Texas Supreme Court ruled Friday.
The state’s highest court ruled that Houston petroleum engineer Robert Writt cannot sue Shell Oil Company for defamation because the supposedly slanderous allegations were part of the oil giant’s response to a U.S. Department of Justice investigation into violations of the Foreign Corrupt Practices Act.
“We conclude that Shell’s statements were made preliminary to a proposed judicial proceeding and were absolutely privileged,” Justice Phil Johnson wrote for the unanimous court.
Scores of businesses and federal law enforcement followed the litigation, claiming that an adverse ruling could hamper FCPA investigations and resolutions.
Houston appellate lawyer Macey Reasoner Stokes, who represents Shell, praised the state Supreme Court decision because the oil company’s statements “were absolutely privileged because they were made in serious contemplation of a possible judicial proceeding.
Robert Dubose, a Houston lawyer with Alexander Dubose Jefferson Townsend who represented Writt, did not respond to a request for comment.
The origins of the case date to 2007, when the U.S. Department of Justice started investigating Shell and a subcontractor for possible violations of the FCPA by participating in a scheme to bribe Nigerian customs officials in connection with a deep-water oil and gas project off the coast of Nigeria.
As part of the investigation, Shell officials told federal prosecutors they would conduct an internal investigation of the matter and provide the authorities with the findings – a maneuver that many companies undertake in hopes of getting charges or penalties reduced.
In a 129-page report provided to authorities, Shell officials said that Writt approved and facilitated the bribes, violated the company’s ethics policies and then lied about his role in interviews with Shell lawyers. The company fired Writt.
In 2010, the Justice Department hit Royal Dutch Shell, which is Shell Oil’s parent company, with a $30 million penalty – about half the amount that could have been levied. The government brought no charges against Writt.
Writt, who lives in Houston and works as a manager for BHP Billiton, sued Shell for defamation and wrongful termination of his job, claiming the energy company’s allegations about him were lies that slandered his good reputation.
In his lawsuit, Writt claims that he initially raised concerns with Shell senior management about suspect invoices being paid to subcontractors working with Nigerian officials and that he recommended that the company refuse to make questionable invoices.
Shell officials initially followed his recommendation, declining to make the apparent bribes, court records show.
But Writt claims that Shell superiors reversed their decision and instructed him to make the payments after losing millions of dollars a day because the company’s oil and gas project was shut down because those allegedly receiving the bribes would not allow Shell to import production equipment into the country.
A Houston trial judge initially rejected Writt’s case based on Shell’s argument that the report was covered by immunity because it was part of the government’s official investigation and prosecution. The court of appeals in Houston reversed the decision, saying that Shell issued the report voluntarily and, as a result, it did not qualify for absolute privilege or immunity.
Plaintiff’s lawyers argue that companies have nothing to worry about as long as they don’t make intentionally false and defamatory comments about those identified in the reports given to federal prosecutors.
The justices, however, sided with Shell, pointing out that company cooperation is essentially a part of the litigation.
“The fact that a formal proceeding does not eventually occur will not cause a communication to lose its absolutely privileged status,” Justice Johnson wrote. “In Texas, the absolute privilege is also extended to quasi-judicial proceedings and other limited instances in which the benefit of the communication to the general public outweighs the potential harm to an individual.
“In sum, the summary judgment evidence is conclusive that when Shell provided its internal investigation report to the DOJ, Shell was a target of the DOJ’s investigation and the information in the report related to the DOJ’s inquiry,” the court ruled. “The evidence is also conclusive that when it provided the report, Shell acted with serious contemplation of the possibility that it might be prosecuted.”
Charles Parker, a partner at the Houston law firm Yetter Coleman, said that the Supreme Court’s decision will impact nearly every corporate case being investigated by the U.S. Securities and Exchange Commission in Texas.
“The DOJ’s investigations and threats of prosecutions forces companies to do extraordinarily expense internal investigations,” said Parker, who specializes in securities litigation. “As a practical matter, the DOJ and SEC force companies to waive attorney-client privilege and reveal the results of their internal investigations.”
If companies do not “voluntarily” reveal the results of their internal inquiry, Parker said, the companies often face much harsher financial penalties for not cooperating.
The full court opinion can be found at www.txcourts.gov/media/978884/130552.pdf.
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