Why it matters: On May 15, 2015, the Texas Supreme Court ruled that an internal investigation report provided by Shell Oil Company to the DOJ in 2009 in connection with an FCPA investigation enjoys “absolute privilege” and therefore cannot be the basis for a defamation case against the company. The Court based its finding on the fact that Shell Oil Company was a target of the DOJ’s investigation at the time and submitted the internal investigation report to the DOJ in “serious contemplation of the fact that it might be prosecuted.”
Detailed discussion: On May 15, 2015, the Texas Supreme Court ruled in the case of Shell Oil Company and Shell International, E&P, Inc. v. Robert Writt that an internal investigation report provided to the DOJ by Shell Oil Company (Shell) in 2009 enjoys “absolute privilege” and therefore could not be the basis for a subsequent defamation suit against the company.
A brief summary of the background: In February 2007, Shell contractor Vetco Gray (Vetco) had been convicted and fined $26 million for criminal violations of the FCPA resulting from bribes it had paid to Nigerian customs officials through Panalpina, Inc. (Panalpina), a freight forwarding and customs clearing company. Five months later, in July 2007, the DOJ notified Shell in writing that it was commencing an investigation into Shell’s engagement of Panalpina. Shell agreed to cooperate with the DOJ and voluntarily conduct an internal investigation into its dealings with Panalpina. Shell also agreed to report its findings to the DOJ, with the understanding that the DOJ would treat the report as confidential.
The DOJ subsequently identified several individuals as potential witnesses and persons of interest in its investigation and requested that Shell produce information about them. One of the individuals so identified was Writt, a Shell employee who worked on the Bonga project and whose duties included serving as the contract holder between Shell and Vetco and approving Vetco’s reimbursement expenses. Over the course of its internal investigation, Writt was interviewed several times by Shell’s outside counsel about his knowledge of the potentially illegal payments made to Panalpina. In February 2009, Shell included those interviews as part of its internal investigation report (2009 report) provided to the DOJ, which established that Writt was aware of “several red flags” concerning Panalpina’s customs clearing process and had provided inconsistent information about what he knew. At the same time, Shell terminated Writt’s employment, stating in the termination letter that Writt’s conduct in connection with the Bonga project was a “significant, substantial and unacceptable” violation of Shell’s business principles and employee code of conduct. Writt then sued Shell both for wrongful termination and for defamation, claiming that the report contained false accusations that he had approved bribery payments and participated in illegal conduct.
While Shell’s summary judgment motion was pending in Writt’s wrongful termination/defamation case, the DOJ formally charged Shell with criminal violations of the FCPA which led to the DOJ and Shell entering into a DPA in 2010. The district court in Writt’s case subsequently granted Shell’s summary judgment motion with respect to the defamation claim, finding that the 2009 report was absolutely privileged. While Writt’s wrongful termination claim proceeded to trial (the jury found against him), Writt appealed the summary judgment decision as to the defamation claim. The court of appeals reversed, finding that the 2009 report only enjoyed a conditional privilege because, at the time it was turned over to the DOJ, it could not be “conclusively established” that Shell did so under a serious threat of prosecution or “preliminarily to a proposed judicial proceeding.” The court of appeals reasoned that, prior to the DOJ formally initiating criminal proceedings against Shell in 2010, Shell’s internal investigation and cooperation with the DOJ were voluntary, and the fact that the criminal proceedings were later initiated did not change the “conditionally privileged” nature of the 2009 report.
The Texas Supreme Court reversed the court of appeal’s decision and reinstated the district court’s, stating at the outset that the question before it on de novo review was “whether the providing of a report regarding possible criminal activity to a government agency was an absolutely privileged communication or a conditionally privileged one.” After an analysis of the two kinds of privileges available in defamation cases under Texas law, “absolute privilege and conditional or qualified privilege,” and the situations in which each such privilege would apply, the Texas Supreme Court agreed with Shell and held that the absolute privilege would apply to the 2009 report because “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 information in the report related to the DOJ’s inquiry. The evidence is also conclusive that when it provided the report, Shell acted with serious contemplation of the possibility that it might be prosecuted.” Thus, the Court held that “Shell’s providing its report to the DOJ was an absolutely privileged communication.”
See here to read the Texas Supreme Court’s decision in Shell Oil Company and Shell International, E&P, Inc. v. Robert Writt, No. 13-0552 (Tex. 2015).