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.

The 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...