When Criminal Law and the First Amendment Meet: Can Internal Investigation Reports Be Defamation?

At the end of an internal investigation, outside counsel frequently prepares a written report. That written report may be for the Board of Directors only or it may be passed along to the Department of Justice.

In the report, the company has every incentive to name names. It will label the supposed employee-wrongder as “rogue” or an “outlier” to the normally-excellent compliance culture.

But what if the company gets it wrong when it reports to the government? Can the employee being blamed sue the company for defamation based on statements in the report? I’ve handled a few defamation cases myself, but it’s rare to see criminal law and defamation in the same case.

A recent Texas case is addressing this issue. Depending on how it turns out, companies may need to think a lot more carefully before blaming someone.

Robert Writt, a former project manager for Shell International E&P, Inc. has sued the Texas-based oil giant for defamation based on a report that Shell submitted to the Department of Justice concerning Mr. Writt’s alleged involvement in a number of Foreign Corrupt Practice Act (FCPA) violations.

The Alleged FCPA Violations and Shell’s Report

Many of the underlying facts are not in dispute. Both parties agree that Shell’s contractors abroad were suspected of violating the FCPA. The principal focus of the Texas Court of Appeal’s opinion was Panalpina, Inc. Panalpina is a global freight-forwarding company that helps clients like Shell move their goods across international borders.

Both parties agree that in 2007, the DOJ approached Shell regarding its operations in Nigeria. DOJ investigators suspected Panalpina of bribing Nigerian officials to allow Shell employees easier access to goods and logistics services. Shell met with the DOJ and, after a brief consultation, Shell’s managers voluntarily agreed to conduct an internal investigation.

Eighteen months later, Shell gave the DOJ its information on its contractors’ possible FCPA violations. In a report prepared by its outside counsel, Shell outlined a plan to deter future FCPA violations by disciplining “certain staff” and sending “certain individuals” into its consequence management program.

The report went on to implicate Mr. Writt in the alleged FCPA violations.

According to the Appeals Court’s opinion, Shell’s memorandum contained a section titled “Overview on Robert Writt.” At this point, Shell’s story diverges from Mr. Writt’s. Shell stated that Mr. Writt approved a number of payments to Panalpina. Moreover, Shell told the DOJ, Mr. Writt knew that these payments were reimbursement for bribes made to Nigerian officials.

Additionally, the Shell report allegedly claimed that Mr. Writt failed to report other illegal conduct of which he was aware and provided inconsistent statements during interviews with Shell investigators.

Basically, Shell accused him of a crime.

Mr. Writt’s account differs slightly, as you can imagine. While he suspected Shell’s contractors of illegal activity, Mr. Writt says that he did not knowingly approve any bribe payments. Mr. Writt also contends that he did not commit any FCPA violations. Instead, he maintains that he reported the alleged bribes to his superiors at Shell.

The Defamation Suit

Not surprisingly, given its view of what happened, Shell fired Mr. Writt. In response, Mr. Writt filed a suit against Shell alleging wrongful termination and defamation. Although the trial court in the First District of Texas dismissed Mr. Writt’s wrongful termination claims, it agreed to hear arguments on the defamation issue.

The trial court then ruled that Shell’s statements were insulated by Shell’s absolute privilege as statements made in connection with a judicial proceeding.

The Scope of Absolute Privilege

In case you have forgotten this from studying for the bar exam, there are certain categories of statements that are absolutely privileged. One category is for statements made by legislators in the course of their official duties.

If we didn’t have that, imagine the lawsuits for what members of Congress say during debates on the floor.

A second type of absolute immunity covers statements made in the course of a judicial proceeding. If those statements weren’t protected, then every plaintiff would be sued for defamation by every defendant because every defendant believes that the plaintiff’s statements in the complaint are false.

Shell argued that its statements to the Department of Justice were protected by absolute judicial immunity.

The First Appeal

Mr. Writt appealed the trial court’s decision to grant Shell complete immunity.

Last year, the Texas Court of Appeals held that Shell’s statements were not protected by absolute privilege because they were made before the DOJ initiated any proceedings.

Nevertheless, the court found that Shell should be afforded a conditional (or qualified) privilege for its statements. The statements were of “sufficiently important public interest” in aiding the prevention of crime and apprehension of criminals to merit protection against liability for defamation.

The Second Appeal

The case is currently on appeal to the Texas Supreme Court. However, the briefs are under seal so we don’t know precisely what is being argued.

In the interest of full disclosure, Shell’s lawyers are from my former firm, Baker Botts L.L.P.

So, Do Companies Need To Worry?

Defamation is a serious tort and one for which punitive damages are available. Plus, accusing someone of a crime is, in most places, “defamation per se.” This means that the statements are so serious that damages are presumed and need not be specifically proven.

One of the problems with bringing defamation actions, however, is that the defendant rarely has the deep pockets to pay for a judgment. But if the defendant is a corporation like Shell, that calculus changes.

Plus, let’s assume that one of the company’s defenses is that the statements in the internal investigation report are true. It then exposes itself to civil discovery on the scope and results of the investigation. This is a dangerous spot for a company that perhaps has not self-reported all of the investigation’s findings.

So, yes, companies have a reason to worry if the Texas court rules against Shell. This case gives individual employees, however, a sliver of hope that their employers will think twice before blaming them.

This entry was posted in FCPA, internal investigation and tagged , . Bookmark the permalink.

One Response to When Criminal Law and the First Amendment Meet: Can Internal Investigation Reports Be Defamation?

  1. Pingback: Another Reason Why Corporate Executives Will Be Scapegoats in Internal Investigations | Grand Jury Target

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