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Texas high court: Shell FCPA report to DOJ is ‘absolutely privileged’

The Texas Supreme Court issued a long-anticipated opinion Friday in Shell Oil Co. v. Writt, holding that an internal investigation report Shell provided to the U.S. Department of Justice about potential FCPA violations is “absolutely privileged” in a defamation proceeding and cannot be used to form the basis of a defamation claim.

The decision overturned a Texas Court of Appeals ruling that Shell’s communications with the DOJ about its internal investigation were only entitled to a “qualified privilege.” The lower court approach would have permitted former Shell employee Robert Writt to pursue a defamation action for statements the company made about Writt to federal prosecutors.

Writt had alleged that Shell defamed his character when the company “voluntarily” reported to the DOJ on the findings of an internal investigation the company conducted into its relationship with Panalpina — an investigation that culminated in the company’s 2010 FCPA settlement with U.S. enforcement authorities. Writt claimed that Shell’s internal investigation report falsely implicated him in the payment of bribes and accused him of providing inconsistent statements during multiple interviews conducted in the course of the investigation.

The trial court initially granted summary judgment in favor of Shell, dismissing Writt’s suit on the basis that Shell enjoyed an “absolute privilege” to make statements to the DOJ regarding its internal investigation. The Texas Court of Appeals overturned this decision, refusing to characterize a “voluntary” pre-prosecution internal FCPA investigation as a judicial proceeding. Instead, the Court of Appeals held that Shell was only entitled to qualified privilege, under which a speaker can still be liable for defamation if the speaker “knows the matter to be false or does not act for the purpose of protecting the interest for which the privilege exists.” 

The Texas Supreme Court said “at all relevant times” Shell had been the target of a DOJ FCPA investigation and asserted that this investigation, which eventually resulted in a criminal settlement with Shell, satisfied the standard that “the possibility of a proceeding must have been a serious consideration at the time the communication was made.” 

The Supreme Court also highlighted “the DOJ’s leverage over Shell vis-à-vis the FCPA and its somewhat draconian penalties…,” which “compelled [Shell] to undertake its internal investigation and report its findings to the DOJ.” The court specifically pointed to the dramatic increase of FCPA enforcement actions before mid-2007 when the DOJ notified Shell of its investigation, noting that “businesses that chose not to cooperate were subject to substantially greater punishments….”

At a time when the DOJ and SEC have become increasingly vocal in calling for companies under investigation to secure and provide evidence of individual culpability, a decision that did not provide Shell with absolute privilege could have had a far-reaching impact on how companies conduct internal investigations and cooperate with enforcement authorities. 

As it stands, the Texas Supreme Court’s decision in Shell Oil Co. v. Writt may incentivize cooperation by companies in the early stages of the enforcement process by providing certainty to potential corporate defendants, particularly those located in Texas, that good faith efforts to disclose the results of internal investigations and expose individual culpability will not leave them open to defamation claims.

The Texas Supreme Court’s opinion in Shell Oil Company v. Robert Writt (No. 13-0552 dated May 15, 2015) is here (pdf).

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Austen Walsh is an associate in Miller & Chevalier in Washington, D.C. and practices in all areas of international corporate compliance and investigations.

Marc Alain Bohn is a contributing editor of the FCPA Blog. He’s Counsel to Miller & Chevalier and an editor of the firm’s FCPA Winter Review 2015.

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