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Texas Supreme Court: Companies Shielded from Defamation Claims for Statements in Internal Investigation Reports

Last week, the Texas Supreme Court joined the majority of jurisdictions in holding that a company enjoys an absolute privilege when providing the Department of Justice (DOJ) with an internal investigation report containing statements later alleged by an employee to be defamatory. The decision in Shell Oil Co. v. Writt, __S.W.3d__ (Tex. 2015)should provide Texas companies comfort that cooperating with regulatory and law enforcement agencies will not expose them to liability for defamation.

TexasThe Writt case arose from an FCPA investigation of Panalpina, a contractor Shell employed to provide freighting and customs-clearing services for a deep-water drilling project off the coast of Nigeria. At DOJ’s request, Shell conducted an internal investigation and provided the DOJ with its confidential findings.

The report that Shell submitted to DOJ contained allegations of misconduct by employee Robert Writt, whom the DOJ had identified as a person of interest during the investigation. Shell terminated Writt, who then sued for wrongful termination and defamation. Shell responded that the report’s findings were entitled to an absolute privilege against allegations of defamation. Under Texas law, a witness enjoys absolute privilege against defamation over statements “preliminary to a proposed judicial proceeding.” James v. Brown, 637 S.W.2d 914, 917 (Tex. 1982) (quoting Restatement (Second) of Torts § 588 (1981)). Such statements must bear “some relation to a proceeding that is actually contemplated in good faith and under serious consideration by the witness or a possible party to the proceeding.” Restatement (Second) of Torts § 588 cmt. e.

The Texas Supreme Court agreed with Shell, finding that the record sufficiently established that Shell reasonably believed it could face criminal proceedings when it furnished the report, and that the information in the report related to the investigation. Citing the dramatic rise in recent FCPA enforcement activity and the stiff penalties suffered by companies that fail to cooperate with the government, the court found that Shell effectively was compelled to comply with the DOJ’s requests that it conduct an investigation and turn over its findings. Thus, the findings in the report were absolutely privileged as statements preliminary to a proposed judicial proceeding.

Companies should remain aware, however, that unsolicited communications to law enforcement authorities still enjoy only qualified privilege. Clark v. Jenkins, 248 S.W.3d 418, 434 (Tex. App. 2008).

© 2019 Proskauer Rose LLP.


About this Author

Sigal P. Mandelker, White Collar Defense Attorney, Proskauer Law Firm

Sigal Mandelker is a Partner in the New York office. She is a member of the firm’s White Collar Defense & Investigations, Appellate, International Practice, and Privacy Groups. Sigal represents individual and corporate clients in connection with government investigations and prosecutions, including white collar criminal defense, the FCPA, anti-money laundering matters, SEC and related enforcement matters, internal investigations, public corruption, and cyber security. She has a broad range of experience in domestic and international enforcement matters, appellate litigation,...

Jonathan Siegelaub, Litigation Attorney, Proskauer Rose Law Firm

Jonathan Siegelaub is an Associate in the Litigation Department, resident in the New York office.

Phillip J. Caraballo-Garrison, Litigation Attorney, Proskauer Law Firm

Phil Caraballo is a senior Associate in the Litigation Department, resident in the New York office, where he also represents the Litigation Department on the Associate Council. His practice focuses on white collar criminal defense and corporate investigations, appellate litigation, and complex civil litigation at both the state and federal levels.

As a member of the White Collar Defense & Investigations Group, Phil represents clients in prosecutions involving a broad array of federal and state crimes, including insider trading, racketeering...