Robert Writt v. Shell Oil Company and Shell International, E&P, Inc. ( 2013 )

Opinion issued June 25, 2013.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00201-CV
———————————
ROBERT WRITT, Appellant
V.
SHELL OIL COMPANY AND SHELL INTERNATIONAL, E&P, INC.,
Appellees
On Appeal from the 189th District Court
Harris County, Texas
Trial Court Cause No. 2009-65221
DISSENTING OPINION
For more than one hundred years, Texas defamation law has artfully
balanced two fundamental interests: a citizen’s right to his good name and a
citizen’s right to free speech. Communications made in the context of judicial
proceedings invoke two additional and equally important interests: a citizen’s right
to petition for redress and the administration of justice. When the judicial
proceedings are criminal in nature, a citizen’s interests in the deterrence and
prosecution of crime are added to the balance. And when the government
investigates a potential crime and calls on a citizen to respond with information,
society’s interest in encouraging cooperation with the investigation comes into
play. In the defamation equilibrium, we safeguard these fundamental interests
through privileges.
The Court’s new opinion initially focuses on the public policy interests that
it concludes require denying Shell an absolute privilege for its statements made in
response to a Department of Justice inquiry on possible violations of the Foreign
Corrupt Practices Act. According to the Court, recognition of an absolute privilege
“would have the very dangerous effect of actually discouraging parties from being
truthful with law-enforcement agencies and instead encourage them to deflect
blame to others without fear of consequence.” I respectfully disagree.
For criminal prosecutions, our jurisprudence has reached a careful accord—
we afford a qualified privilege to statements made by a private citizen who
approaches a governmental authority with criminal allegations, but we afford an
absolute privilege to communications made to prosecuting governmental
authorities during or in contemplation of criminal proceedings. When a citizen,
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corporate or otherwise, is approached by a law-enforcement agency for
cooperation in an ongoing investigation of a contemplated criminal prosecution,
the administration of justice requires absolute privilege, which encourages the
citizen’s full and unreserved cooperation in the agency’s information-gathering
efforts, unhampered by fear of retaliatory lawsuits. Shell’s cooperation with the
DOJ falls into this category, and the trial court correctly afforded it absolute
privilege. In reaching a contrary holding, the Court gives insufficient weight to
both the benefits of an absolute privilege and the costs of a conditional privilege
that depends on a speaker’s subjective good faith. The Court’s holding inevitably
will create a fact issue in many cases. And a conditional privilege frustrates the
kind of frankness, cooperation, and self-reporting that is vital to the DOJ’s
prevention and prosecution of corporate misconduct in international business
dealings under the FCPA. I believe the balance of the benefits and costs of an
absolute privilege for statements made by a potential target of a DOJ investigation,
as well as the detriments of requiring jury trials in many of these cases, warrants an
absolute privilege. I therefore respectfully dissent.
Hurlbut is not controlling
Before turning to the policy issues, I first will address the only Texas
Supreme Court opinion that considers the scope of a privilege for a claimed
defamatory statement that is not part of a judicial proceeding: Hurlbut v. Gulf
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Atlantic Life Insurance Co., 749 S.W.2d 762 (Tex. 1987). I disagree with the Court
that Shell is only entitled to a qualified privilege under Hurlbut.
In that case, Gulf Atlantic Insurance Company proposed that Hurlbut “form
a partnership to serve as the administrator of a proposed health insurance trust
which would sell and service group health insurance policies underwritten by Gulf
Atlantic” and then later instructed Hurlbut to start selling policies under the trust
agreement. Id. at 764. A potential client who became concerned when Hurlbut
could not produce a copy of the master policy from Gulf Atlantic contacted the
Attorney General’s office to complain. Id. at 764. Gulf Atlantic suggested a
meeting with Hurlbut to resolve the matter. Id. When Hurlbut arrived for the
meeting, he was surprised to be met by an assistant attorney general “assigned to
investigate the group health insurance program” sold by Hurlbut. Id. During the
meeting, Gulf Atlantic’s president made a defamatory statement about Hurlbut. Id.
The Texas Supreme Court refused to apply an absolute privilege. Id. at 768. The
Court explained that the absolute privilege attaches only to a “select number of
situations which involve the administration of the functions of the branches of
government.” Id. And the Court held that “the occasion of Gulf Atlantic’s
communication to the assistant attorney general in this case is best analogized to
the conditional privilege described in section 598 of the Restatement.” Id.
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Hurlbut is distinguishable because it is an instigation case—Gulf Atlantic
was not self-reporting in response to a criminal probe. Hurlbut was a salesperson,
not a Gulf Atlantic employee, who sold insurance policies under a trust agreement
with Gulf Atlantic. Hurlbut had formed a separate partnership (at Gulf Atlantic’s
behest) before the incident arose. Thus, Gulf Atlantic reported to evade potential
criminal liability by implicating another company (Hurlbut and his partnership),
not to confess guilt. Thus, unlike this case, Hurlbut involved the instigation of
prosecution against someone else, not a confession of culpability. In conclusion
Hurlbut does not answer whether cooperation with an FCPA investigation by the
DOJ implicates one of the “select number of situations which involve the
administration of the functions of the branches of government” and therefore
requires the recognition of an absolute privilege. Id. at 768. It does, however,
suggest that our focus should be on public policy considerations, i.e., the
administration of government.
Public policy favors granting an absolute privilege
The rule granting absolute privilege is “one of public policy” so both the
Court and I begin our analysis here. Reagan v. Guardian Life Ins. Co., 166 S.W.2d
909, 913 (Tex. 1942).
5
A. The policy reasons that statements made in contemplation of judicial
proceedings are absolutely privileged
Statements made “during the course of judicial proceedings” are absolutely
privileged. Bird v. W.C.W., 868 S.W.2d 767, 771 (Tex. 1994). This privilege
protects parties not only from liability “but also from the danger of even an
unsuccessful civil action.” RESTATEMENT (SECOND) OF TORTS ch. 25, topic 2, tit. B,
intro. note (1977).
Absolute privileges are recognized to protect public policy interests deemed
sufficiently important to trump the rights of individuals who would otherwise have
a claim against a person. See Reagan, 166 S.W.2d at 913 (absolute privilege is
founded on public policy “that the good it accomplishes in protecting the rights of
the general public outweighs any wrong or injury which may result to a particular
individual”); Zarate v. Cortinas, 553 S.W.2d 652, 654 (Tex. Civ. App.―Corpus
Christi 1977, no writ) (absolute privilege applies to conduct that otherwise would
be actionable “because the defendant is acting in furtherance of some interest of
social importance which is entitled to protection even at the expense of
uncompensated harm to the plaintiff’s reputation”). An absolute privilege for
statements made in judicial proceedings is “based on the policy of protecting the
judicial process,” Briscoe v. LaHue, 460 U.S. 325, 334, 103 S. Ct. 1108, 1115
(1983) (quoting Imbler v. Pachtman, 424 U.S. 409, 439, 96 S. Ct. 984, 999 (1976)
(White, J., concurring)), particularly from “intimidation and self-censorship,” id. at
6
341–42, 103 S. Ct. at 1119. See also RESTATEMENT (SECOND) OF TORTS ch. 25,
topic 2, tit. B, intro. note (1977) (absolute privileges exist to protect persons in
limited circumstances when law wants individuals to “be as free as possible from
fear that their actions in that position might have an adverse effect upon their own
personal interests.”). “The administration of justice requires full disclosure from
witnesses, unhampered by fear of retaliatory suits for defamation.” James v.
Brown, 637 S.W.2d 914, 917 (Tex. 1982). And because the administration of
justice is a process that encompasses more than simply judicial proceedings, the
absolute privilege reaches statements made preliminary to a proposed judicial
proceeding, as well as informal complaints made to a prosecuting attorney or other
proper officer preliminary to a proposed criminal prosecution. RESTATEMENT
(SECOND) OF TORTS § 587. An individual speaker who makes a defamatory
statement “may not deserve the privilege, nevertheless, the law grants the privilege
to protect the integrity of the process.” Attaya v. Shoukfeh, 962 S.W.2d 237, 239
(Tex. App.—Amarillo 1998, pet. denied); accord Hernandez v. Hayes, 931 S.W.2d
648, 654 (Tex. App.—San Antonio 1996, writ denied) (“The absolute privilege is
as much a protector of the process as it is a protector of those who avail themselves
of the process.”).
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B. Absolute privilege encourages cooperation, which aids enforcement
efforts
Absent an absolute privilege, the threat of liability may deter a company
from fully cooperating in an FCPA investigation. When a corporation accepts
some fault for its conduct, it is necessarily attributing the fault to individuals who
are its agents, officers, or employees. Thus, a corporation’s frank acceptance of its
fault, by its very nature, will often result in some individuals within the company
disagreeing with that assessment. If the identified individuals and entities may sue
for defamation, a company will have a disincentive to cooperate and accept
responsibility. If absolute privilege is not available, a cooperating party runs the
risk of defamation actions by anyone identified as having involvement in a
potentially prohibited transaction. This risk creates a disincentive for companies to
conduct their own investigations, to make frank assessments of fault, and to
communicate findings to the DOJ.
Without corporate cooperation, more of the burden of the investigation shifts
to the government, requiring the DOJ to piece together knowledge and
understanding that the company already has from its involvement in the
transaction. The DOJ may have to use formal judicial processes to obtain
documents and testimony and then invest additional effort to review the
information and ascertain its relevancy, when the corporation easily could identify
and assimilate the key documents and important transaction details. And some
8
information is difficult to obtain without an inside perspective—corporations
fearful of defamation liability may be reluctant even to identify those responsible
for certain decisions, and the decision-maker on paper is not always the decision-
maker in practice. Thus, creating disincentives to full disclosure imposes
significantly greater costs on the DOJ and hampers its efforts to investigate FCPA
violations.
The detection of foreign corrupt practices, cooperation of persons engaged in
such conduct, and deterrence of future violations are all enhanced by creating full
incentives for disclosure of information to the DOJ. The extraterritorial aspects of
FCPA violations make them costly and time-consuming to investigate. Delayed
responses, language barriers, and lack of jurisdiction may hinder the FCPA’s
enforcement. Cooperation from individuals and companies willing to undertake
internal investigations or to assist the DOJ in its efforts can help overcome these
obstacles. Recognition of an absolute privilege, therefore, promotes the policy
goals underlying the FCPA by aiding law enforcement through increased access to
information and efficiency.
To deny absolute privilege here would be to chill the free flow of
information and impair the DOJ’s ability to conduct its investigations and enforce
the FCPA. See 5-State Helicopters,146 S.W.3d 254, 259 (Tex. App.—Fort Worth
2004, pet. denied) (stating that adopting “a rule that private citizens’
9
communications to a quasi-judicial body about a matter that the entity was
authorized to investigate and resolve would not be privileged unless and until the
proceeding reached the administrative hearing stage . . . would have a chilling
effect on the free flow of information and deter rather than aid the decision-making
body’s efforts to obtain necessary information.”); Attaya, 962 S.W.2d at 239
(stating that absolute privilege “is intended to protect the integrity of the process
itself and to insure that the decision-making body gets the information it needs.”).
Without incentives to cooperate, enforcement of the FCPA would be curtailed.
Robert W. Tarun, The Foreign Corrupt Practices Act Handbook: A Practical
Guide for Multinational General Counsel, Transactional Lawyers and White
Collar Criminal Practitioners, 190 (2nd ed. 2012) (stating that “DOJ and SEC do
need companies to voluntarily disclose because their resources are limited.”); see
also Examining Enforcement of the Foreign Corrupt Practices Act: Hearing
Before the Subcomm. on Crime and Drugs of the S. Comm. on the Judiciary, 111th
Cong. 8 (Nov. 30, 2010) (statement of Greg Andres, Acting Deputy Assistant Att’y
Gen., Crim. Div., Dep’t of Justice) (stating that, in many cases, DOJ relies on “the
self-disclosure and cooperation of corporations” and that self-disclosure is an
important factor in cases that get resolved).
The process is thus designed to promote cooperation through incentives such
as better settlement prospects and more lenience in the Federal Sentencing
10
Guidelines, as discussed below. “[The companies] make a decision to disclose and
in return for their disclosing and their investigating, in large part, their own
criminal conduct, they get meaningful credit with the department and that credit
goes into the decision whether to file an information or charge the company,
whether to enter a deferred prosecution or non-prosecution agreement.” See Philip
Segal, Coming Clean on Dirty Dealing: Time for A Fact-Based Evaluation of the
Foreign Corrupt Practices Act, 18 FLA. J. INT’L L. 169, 177 n.28 (2006). These
incentives are less effective when offset or overshadowed by the potential for
defamation litigation and liability.
C. Absolute privilege recognizes the precarious position of corporations
involved in questioned transactions
Absolute privilege also recognizes that companies feel compelled to provide
information, often against their own interest and those of their employees, to avoid
larger penalties. A company like Shell is, in the face of a DOJ inquiry, in a
quandary: it can provide inculpatory statements regarding actions taken on its
behalf by its employees, recognizing that it is exposed to a defamation claim. Or it
can face criminal prosecution or penalization for a failure to comply and cooperate
adequately with the DOJ’s investigation. See, e.g., U.S. v Kay, 513 F.3d 432, 454–
55 (5th Cir. 2007) (affirming FCPA and obstruction of justice convictions against
corporate president who failed to disclose documents subpoenaed during SEC
investigation and failed to disclose misconduct in testimony given during
11
investigation).1 The qualified immunity adopted by the Court protects Shell for all
but those statements made with actual malice. But the reason that absolute
privilege extends even to malicious untruths is not because such statements are
rendered less deserving of protection in the context of a judicial or quasi-judicial
proceeding; it is because balancing of the rights at issue in such proceedings
demands immunity—i.e., protection against “the danger of even an unsuccessful
civil action”—rather than the opportunity to litigate state of mind. See
RESTATEMENT (SECOND) OF TORTS ch. 25, topic 2, tit. B, intro. note (1977).
Encouraging witnesses to share requested information about possible criminal
violations with a trained government investigator whose job is to separate fact
from fiction should be encouraged—even at the cost of some defamatory
statements going without remedy—when a witness does not initiate the
investigation and faces prosecution for any false statements. See Clemens v.
McNamee, 608 F. Supp. 2d 811, 816–17 (S.D. Tex. 2009), aff’d, 615 F.3d 374 (5th
Cir. 2010). Similarly, Shell’s cooperation with the DOJ was essential to lowering
its potential liability in fines—either through agreed disposition with the DOJ or in
post-trial sentencing—and withholding information could have subjected Shell to
federal prosecution. See 18 U.S.C. § 1505 (criminalizing, in relevant part, anyone
1
Kay, a criminal case, does not discuss whether an absolute privilege applies to
statements made during the SEC investigation.
12
who, “with the intent to avoid, evade, prevent, or obstruct compliance . . . with any
civil investigative demand . . . , willfully withholds . . . any documentary material,
answers to written interrogatories, or oral testament, which is the subject of such
demand”); Kay, 513 F.3d at 455 (affirming obstruction of justice conviction for
withholding documents and making false statements during FCPA investigation).
In the context of an ongoing government investigation, there are enormous risks to
maliciously implicating an innocent person in an FCPA violation. The potential
consequences to a company like Shell are themselves adequate to protect the
interests of Writt and similarly situated employees from malicious defamation.
D. Sound public policy distinguishes between solicited and unsolicited
communications 2
2
The Restatement goes further, recognizing an absolute privilege for informal
complaints made to a prosecuting attorney or similar governmental authority.
RESTATEMENT (SECOND) OF TORTS, § 587, cmt. b (providing that absolute
privilege applies to “information given and informal complaints made to a
prosecuting attorney or other proper officer preliminary to a proposed criminal
prosecution whether or not the information is followed by a formal complaint or
affidavit”); id. § 598 cmt. e (“Formal or informal complaints to a prosecuting
attorney or other law enforcement officer concerning violations of the criminal
law are absolutely privileged under the rule stated in § 587”). A number of states
have adopted this approach. See e.g., Correllas v. Viveiros, 572 N.E.2d 7, 11
(Mass. 1991) (statements made to police or prosecutors before trial are absolutely
privileged if they are made in context of proposed judicial proceeding);
McGranahan v. Dahar, 408 A.2d 121, 124 (N.H. 1979) (applying absolutely
privilege to complaints and statements to prosecuting authority during pre-arrest
investigation because they constitute part of initial steps in judicial proceeding);
Bergman v. Hupy, 221 N.W.2d 898, 901−02 (Wis. 1974) (applying absolute
privilege to statements to assistant district attorney while seeking issuance of
criminal complaint); Block v. Sacramento Clinical Labs, Inc., 182 Cal. Rptr. 438,
442−43 (Cal. Ct. App. 1982) (holding that report prepared “upon the request of the
office of the district attorney in furtherance of its investigation whether there was
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When a criminal investigation is ongoing, the governmental authority—a
neutral and objective investigator—has determined that there is some threshold
level of evidence or other grounds for suspicion to justify an investigation on the
subject matter. In such a circumstance, the allegedly defamatory statements are not
the initial cause of the governmental authority’s decision to investigate. This
lessens, though it does not eliminate, the risk that the speaker’s defamatory
statements, alone, could spur government action against the defamed party. And
when the speaker is approached as a potential target of the investigation, as Shell
was here, it may also lessen the efficacy of a speaker’s defamatory statements—a
governmental authority may treat finger-pointing by suspected lawbreakers with
heightened skepticism. Thus, the governmental authority’s role as adjudicator of
truth and fiction is implicated.
In light of these policies, numerous Texas cases have distinguished between
statements that are made pursuant to an ongoing or already contemplated
proceeding (which fall within the privilege) and statements that caused or were
intended to cause the initiation of a proceeding (which do not fall within the
privilege). Although both statements are “preliminary to” a judicial proceeding in a
probable cause to initiate criminal charges” was absolutely privileged because
there are strong policy reasons to “assure free and open channels of
communication between citizens and public agencies and authorities charged with
the responsibility of investigating wrongdoing”). It is unnecessary to decide
whether to apply the Restatement prosecutorial privilege here, but many of the
reasons for that privilege do apply here, as discussed herein.
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temporal sense, protection is only provided to the first because it does not cause the
criminal investigation or proceeding. Compare San Antonio Credit Union v.
O’Connor, 115 S.W.3d 82, 99 (Tex. App.—San Antonio 2003, pet. denied)
(holding that criminal complaint was not absolutely privileged because “no judicial
proceedings had been proposed” when complaint was filed); Clark v. Jenkins, 248
S.W.3d 418, 433 (Tex. App.—Amarillo 2008, pet. denied) (holding that absolute
privilege was not available when statements were “preliminary in nature—i.e.,
designed to launch an investigation that might lead to legal action”); Smith v.
Cattier, No. 05-99-01643-CV, 2000 WL 893243, at *4 (Tex. App.—Dallas July 6,
2000, no pet.) (not designated for publication) (noting that witness’s failure to
negate that his communication with law enforcement authorities had “initiated,
procured, and caused” criminal investigation into plaintiff’s actions); Zarate, 553
S.W.2d at 655–56 (holding that complaints filed with sheriff’s office to initiate
criminal investigation into financial improprieties were not entitled to absolute
privilege); Vista Chevrolet, Inc. v. Barron, 698 S.W.2d 435, 438 (Tex. App.—
Corpus Christi 1985, no writ) (declining to apply absolute privilege to criminal
theft complaint made to law enforcement authorities), with Perdue, Brackett,
Flores, Utt & Burns v. Linebarger, Goggan, Blair, Sampson & Meeks, L.L.P., 291
S.W.3d 448, 453 (Tex. App.—Fort Worth 2009, no pet.) (applying absolute
privilege to law firm’s statements about competing law firm in memo to city
15
council before council meeting regarding extension of competing firm’s contract
with city); 5-State Helicopters, 146 S.W.3d at 259 (applying absolute privilege to
helicopter company’s letters to FAA complaining of inspector’s actions in course
of FAA inspection and investigation); Shanks v. AlliedSignal, Inc., 169 F.3d 988,
994 (5th Cir. 1999) (applying absolute privilege statements made as part of
“ongoing” National Transportation and Safety Board accident investigation);
Clemens, 608 F. Supp. 2d at 823–24 (applying absolute privilege to solicited,
involuntary statements made to federal prosecutors and investigators and to
commission formed by Major League Baseball “as part of an ongoing
proceeding”).
These distinctions—between who initiated the contact between the speaker
and the governmental authority and whether the governmental authority already
had cause to investigate—are also important because, among other reasons, a
private citizen generally has no legal obligation to investigate, ascertain the truth
of, and report on the criminal activities of others. Cf. TEX. PEN. CODE ANN.
§ 38.17−.171 (requiring person to report only two specific categories of offenses
under certain circumstances). But when a governmental authority has
independently commenced investigatory proceedings and reached out to a private
citizen for information, the citizen may be subject to penalization for interfering or
failing to cooperate. See, e.g., TEX. PEN. CODE ANN. § 37.09(a)(1), (c) (West Supp.
16
2011) (prohibiting person who is aware of investigation or official proceeding from
concealing “any record, document, or thing with intent to impair its verity,
legibility, or availability as evidence in the investigation or official proceeding”
and “making such conduct punishable” as third degree felony or higher); 18 U.S.C.
§ 1505 (prohibiting obstruction of proceedings before federal departments,
agencies and committees, with penalties including fine and imprisonment). And,
with respect to FCPA investigations and prosecutions, the DOJ has informed
corporate citizens like Shell that a “corporation’s timely and voluntary disclosure
of wrongdoing and its willingness to cooperate in the investigation of its agents” is
one of the factors the DOJ considers when “conducting an investigation,
determining whether to bring charges, and negotiating plea agreements.” See
Deputy Attorney General’s Federal Prosecution of Corporations (June 16, 1999),
available at www.justice.gov/criminal/fraud/documents/reports/1999/charging-
corps.PDF, last accessed on June 20, 2013. Moreover, if the matter is not resolved
with the DOJ and proceeds to trial, the Federal Sentencing Guidelines dictate that
the timing and nature of a corporation’s cooperation and self-reporting to the DOJ
or other appropriate governmental authority be taken into account in setting fines.
See U.S.S.G. § 8C2.5.
It is therefore not surprising that several federal courts have concluded that
statements made as part of an ongoing criminal investigation are entitled to an
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absolute privilege under Texas law. See Clemens, 608 F. Supp. 2d at 824
(“[Assistant U.S. Attorney] Parrella’s investigation, much like the NTSB’s
investigation at issue in Shanks, was an ongoing proceeding.”); Shanks, 169 F.3d at
993–94 (holding that, under Texas law, “NTSB accident investigations are quasi-
judicial proceedings, from which it would follow that any communications made
during such investigations are absolutely immune from suit”). In the same vein, the
Texas Supreme Court applied an absolute privilege in a defamation case based on a
letter written to a grand jury foreperson charging a violation of the criminal law in
Hott v. Yarbrough, 245 S.W. 676, 678−79 (Tex. 1922).
E. Conclusion on policy analysis
Whether to recognize an absolute privilege or qualified privilege is based
upon public policy considerations that “treat[] the ends to be gained by permitting
defamatory statements as outweighing the harm that may be done to the reputation
of others.” RESTATEMENT (SECOND) OF TORTS ch. 25, title B, introductory note
(1977); cf. Harlow v. Fitzgerald, 457 U.S. 800, 813, 102 S. Ct. 2727, 2736 (1982)
(stating that “[t]he resolution of immunity questions inherently requires a balance
between the evils inevitable in any available alternative”).The balancing of these
interests is difficult and reasonable minds can disagree about the weight to be
given to each interest and the impact of recognizing—or refusing to recognize—
privileges for defamatory statements.
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On the one hand, there are societal and individual costs associated with
giving Shell an absolute privilege—Writt will lose his right to file a lawsuit
accusing Shell of defamation. Shell has an incentive to blame lower level
employees, who are less capable of defending themselves. So its statement has
characteristics of both instigation and self-reporting in response to a formal request
for disclosure by a prosecuting authority. As a potential target, Shell’s
investigation of its own employees may not be entirely independent or objective.
On the other hand, balanced against the individual’s interest in protecting his
reputation are a number of important societal factors implicated by an FCPA
investigation. Statements made in response to a request by the DOJ as part of an
FCPA investigation are analogous to statements solicited by prosecutors as part of
their investigation. Courts have made a policy decision that complaints to
prosecutors are entitled to an absolute privilege even when they are false and
malicious. Such protection encourages reporting. Moreover, the prosecutors
themselves, as part of their investigation, examine the speaker’s motivations. And
if the prosecutor determines that statement is false and malicious, the harm created
by the statement is limited to a particular audience and is minimized.
A statement that contains a malicious misstatement may materially advance
the prosecutor’s investigation by revealing an effort to deflect blame and thus
implicating the speaker’s own culpability and leading to the discovery of other
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important facts. And investigations of events occurring overseas involving multiple
parties may well result in disagreements on the facts, and thus increase the
potential for error. Opening the door to defamation lawsuits that permit the
factfinder to second-guess the speaker’s motivation may well lead to intolerable
self-censorship and might dissuade a timorous corporation from freely stating its
view of the facts. Self-censorship may be further exacerbated by the potential for
damages, presumed or punitive, that exists in FCPA investigations. Certainly the
individual’s right to the protection of his own good name is important, but when a
statement is only published to one audience―an audience that is under a duty to
investigate it and determine its accuracy, as the DOJ is charged―and is done so at
that agency’s request, it is necessary to protect some false statements made with
malice in order to protect other speech that public policy strongly seeks to
encourage. Self-reporting in response to a criminal probe should be fostered as
good policy, and there is some confidence in the truthfulness of the statements
made in connection with these sorts of reports, because false statements could
subject the speaker to further criminal liability.
I believe that merely granting a qualified privilege does not properly balance
these interests here. A qualified privilege requires a determination that the speaker
acted in good faith, a subjective inquiry that will often require a jury. The
combination of the broad powers granted both in law and in practice to the DOJ in
20
investigating and resolving FCPA matters and the DOJ’s solicitation of Shell’s
cooperation in its ongoing investigation lead me to conclude that public policy is
best implemented by securing “the utmost freedom” for Shell to respond and
provide information to the DOJ. Cf. RESTATEMENT (SECOND) OF TORTS § 585
cmt. c (primary purpose of granting absolute privilege for statements by judges is
to give them “the utmost freedom” in performing their tasks); id. § 587 cmt. a
(absolute privilege granted to parties to judicial proceedings is “based upon the
public interest in according to all men the utmost freedom of access to the courts”).
Shell’s role in providing evidence in connection the investigation is of
“fundamental importance in the administration of justice. The final judgment of
[the DOJ on whether to prosecute a possible FCPA violation] must be based on the
facts as shown by [its statements], and it is necessary therefore that a full
disclosure not be hampered by fear of private suits for defamation.” RESTATEMENT
(SECOND) OF TORTS § 588 cmt. a. As part of its determination, the DOJ—much like
a jury—attempts to separate fact from fiction. Briscoe, 460 U.S. at 335, 103 S. Ct.
at 1115 (quoting Imbler, 424 U.S. at 439, 96 S. Ct. at 999 (White, J., concurring))
(noting that courts’ ability “to separate truth from falsity, and the importance of
accurately resolving factual disputes in” judicial proceedings warrant absolute
privilege in order to give witnesses “every encouragement to make a full disclosure
of all pertinent information within their knowledge.”). The DOJ’s prosecutorial
21
role requires it to remain neutral and objective in analyzing the evidence presented
to it, again much like a jury or factfinder. See Berger v. United States, 295 U.S. 78,
88 (1935). Finally, the DOJ even offers inducements to companies like Shell to
cooperate in the form of credits used in its settlement formula. Here, the DOJ
began its own investigation and solicited Shell’s cooperation, and I believe these
policies warrant encouraging such cooperation through an absolute privilege.
Shell’s statements were made in contemplation of judicial proceedings
The Court correctly identifies the principal legal issue here: whether Shell’s
statements to the DOJ were made preliminary to or in serious contemplation of a
judicial proceeding and are thus absolutely privileged. The Court holds that Shell’s
statements do not fit within the judicial proceedings privileges, concluding instead
that the statements are more in the nature of an unsolicited criminal complaint and
thus not entitled to absolute privilege. Although it is undisputed that Shell’s
statements here were not made during a judicial proceeding, I agree with Shell that
its communications to the DOJ were made in contemplation of a judicial
proceeding—the criminal prosecution that the DOJ did in fact initiate.
The judicial privilege applies to statements made in judicial proceedings
when the statement satisfies three elements: (1) the contemplation of or existence
of a proceeding (2) that is judicial or quasi-judicial in nature and (3) related to the
statements. See Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 452. With
22
respect to the first element, the privilege extends not only to statements in the
formal proceeding itself but also to statements made before a proceeding is
formally commenced if a proceeding is contemplated, proposed, or in its
preliminary stages. See Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 452;
5-State Helicopters, 146 S.W.3d at 257 (stating that absolute privilege applies to
“communications made in contemplation of or preliminary to a quasi-judicial
proceeding”); Watson v. Kaminski, 51 S.W.3d 825, 827 (Tex. App.—Houston [1st
Dist.] 2001, no pet.) (stating that “absolute privilege includes communications
made in contemplation of and preliminary to judicial proceedings”); see also
RESTATEMENT (SECOND) OF TORTS § 588 cmt. e (stating that, in regard to
communications preliminary to “proposed judicial proceeding,” absolute privilege
applies “when the communication has 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,” and that “bare possibility that the proceeding
might be instituted is not to be used as a cloak to provide immunity for defamation
when the possibility is not seriously considered”). The “preliminary to” a judicial
proceeding test is applied to lawyers, witnesses, and potential parties in
contemplated judicial (and quasi-judicial) proceedings. RESTATEMENT (SECOND) OF
TORTS §§ 586 & cmt. a, 588 cmt. e.
23
Relying on the “preliminary to” language in section 587 of the Restatement,
Shell points out that the DOJ ultimately filed a criminal proceeding against Writt
and therefore contends that its statements were preliminary to a judicial
proceeding. Relying on the “contemplated proceedings” language found in
comment e to section 588 and a number of Texas cases, Writt responds that Shell
must prove that either the prosecuting authority had a subjective intent to file
charges at the time the statements were made—i.e., that the DOJ “actually
planned” to file criminal charges at the time of Shell’s statements—or that,
objectively, the prosecuting authority “had sufficient information to initiate
criminal proceedings” before the statement was made. Writt contends that a
criminal proceeding initiated seventeen months after Shell’s communication does
not satisfy this burden.
The Restatement’s alternative formulations of the test that expand absolute
privilege from judicial proceedings to matters preliminary to judicial proceedings
include two components: (1) a temporal component that focuses on the timing of
the statements (the “preliminary to” statement of the rule) and (2) a subjective
component that focuses on whether a speaker or a possible party to the proceeding
contemplated a proceeding at the time the statements were made (the “in
24
contemplation of” statement of the rule).3 See, e.g., Bell v. Lee, 49 S.W.3d 8, 11
(Tex. App.—San Antonio 2001, no pet.) (applying judicial privilege when writer
was contemplating future litigation at time of allegedly defamatory letter); Watson,
51 S.W.3d at 827 (applying absolute privilege to attorney’s letter offering not to
bring similarly situated parties’ claims against company in exchange for payment
because letter contemplated suit if payment was not made); RESTATEMENT
(SECOND) OF TORTS § 588 cmt. e (stating that preliminary to “proposed judicial
proceeding” prong of inquiry is satisfied “when the communication has 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”). Thus,
the fact of a subsequent proceeding does not, alone, establish when the speaker or
possible party first contemplated the proceeding; the speaker may have
contemplated the proceeding only after the allegedly defamatory statements. See,
e.g., Hurlbut, 749 S.W.2d at 764 (declining to apply absolute privilege even
though parties allegedly defamed were ultimately arrested and imprisoned).
Conversely, the absence of a formal proceeding does not establish that a speaker
did not seriously contemplate such a proceeding at some point. See, e.g., Bell, 49
3
The contemplation component of absolute privilege is normally invoked by a
speaker who is the party (or the party’s attorney) initiating the proceedings, such
as a district attorney or a plaintiff in civil litigation. But there is no good reason
that the rule should not also apply to speakers who are potential defendants in a
proceeding and speak to the party conducting the investigation.
25
S.W.3d at 11 (applying privilege even though litigation contemplated at time of
letter was not ultimately initiated).
Relying on San Antonio Credit Union v. O’Connor, Writt contends that
Shell’s evidence proved only an active DOJ “investigation,” not an actual or
planned “proceeding,” which is not sufficient to invoke the privilege. See 115
S.W.3d at 99 (stating that “an investigation into criminal activity does not amount
to a ‘proposed judicial proceeding.’”). The court in San Antonio Credit Union
stated, in the context of a statement made to a prosecuting authority, that “[a]
judicial proceeding would only be ‘proposed’ when the investigating body found
enough information either to present that information to a grand jury or to file a
misdemeanor complaint.” Id.
I would not follow San Antonio Credit Union—which is not binding on this
Court—for three reasons. First, the court’s definition of when a proceeding is
“proposed” is not founded in the case law, could only apply to proposed “judicial”
proceedings, not “quasi-judicial” proceedings, and would necessarily exclude
prosecutions under the FCPA, which are pursued without a grand jury or
misdemeanor complaint. See id. Second, San Antonio Credit Union ignores the
distinction made by other Texas cases between absolutely privileged statements
that are made pursuant to an ongoing or already contemplated proceeding and
26
qualifiedly privileged statements that caused, or were intended to cause, the
initiation or contemplation of a proceeding.
Third, the absolute privilege defense is designed to encourage a speaker to
freely communicate. In the civil litigation context, a potential plaintiff who speaks
before the litigation commences knows his or her intent—whether he or she
intends to file a lawsuit—but in the criminal context the speaker who is a potential
defendant cannot know the intent of the prosecuting authority. Nor is the speaker
privy to all the information gathered by the prosecuting authority such that the
speaker could attempt to assess whether probable cause to commence a criminal
prosecution existed at the time. In order to provide assurances to a speaker—the
reason for recognizing immunity in the first place—the contemplation test in the
criminal context should not focus on the subjective intent of, or objective proof
available to, the prosecuting attorney; rather, it should focus on the speaker’s
subjective mental state. And when the criminal investigation is not initiated by the
speaker and the speaker is responding to an inquiry by a prosecutor about the
potential criminal misconduct, I would hold that the speaker as a matter of law
contemplates judicial proceedings.
For all of these reasons, I would hold that Shell’s communications to the
DOJ were made in relation to judicial proceedings that were contemplated at the
time of the communications and thus are absolutely privileged.
27
Shell’s communications to the DOJ were made as part of a
quasi-judicial proceeding
An absolute protection also protects statements made as part of, or
preliminary to, a quasi-judicial proceeding. I would alternatively hold that Shell’s
statements were made as part of a quasi-judicial proceeding.4
A governmental entity has quasi-judicial power if it has the power and
authority to investigate and “draw conclusions from such investigations.” Parker v.
Holbrook, 647 S.W.2d 692, 695 (Tex. App.—Houston [1st Dist.] 1982, writ
denied); see also Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 453 (quasi-
judicial power includes the power to investigate and decide issues); Clark, 248
S.W.3d at 431 (same). The policies for extending absolute privilege to quasi-
judicial proceedings are virtually identical to those for judicial proceedings: (1)
citizens should have the unqualified right to communicate with decision-making
governmental agencies without the fear of civil litigation and (2) the administration
of justice will be better served by full disclosure from witnesses who are not
4
Although Shell contends that its statements were in contemplation of judicial
proceedings and focuses on whether “the important public policy considerations
underlying the absolute privilege for judicial proceedings” apply here, it also
argues that the evidence demonstrates that the DOJ investigation “would . . .
satisf[y]” the elements of a quasi-judicial proceeding. We may consider whether
the DOJ’s investigation constitutes a quasi-judicial proceeding because Writt
raised the issue in its original appellant’s brief, Shell addressed it as an alternative
argument in its brief, and the test used by courts in determining whether a
proceeding is quasi-judicial aids in identifying policy considerations that should be
considered in the delicate balancing that influences whether an absolute privilege
should apply here.
28
deterred by the threat of retaliatory lawsuits for defamation. See 5-State
Helicopters, 146 S.W.3d at 257; Darrah v. Hinds, 720 S.W.2d 689, 691 (Tex.
App.—Fort Worth 1986, writ ref. n.r.e.). And, like the courts, executive and
administrative agencies with decision-making discretion often have procedures and
processes designed to enable them to obtain and sift through information to
decipher fact from fiction. Thus, public policy often favors allowing such entities
unfettered access to information over restrictions that encourage truthfulness but
also limit the information available for the decision-making process. “The absolute
privilege is intended to protect the integrity of the process and ensure that the
quasi-judicial decision-making body gets the information it needs.” 5-State
Helicopters, 146 S.W.3d at 257.
The DOJ’s FCPA investigation satisfies most of the elements of quasi-
judicial power. 5 The DOJ is statutorily imbued with the duty to prosecute offenses
5
This Court has identified six factors for determining whether a governmental
entity is functioning in a quasi-judicial capacity: (1) whether it has the power to
exercise judgment and discretion; (2) whether it has the power to hear and
determine or to ascertain facts and decide; (3) whether it has the power to make
binding orders and judgments; (4) whether it has the power to affect the personal
or property rights of private persons; (5) whether it has the power to examine
witnesses, to compel the attendance of witnesses, and to hear the litigation of
issues on a hearing; and (6) whether it has the power to enforce decisions or
impose penalties. Parker, 647 S.W.2d at 695. Other courts have also adopted these
six factors. See, e.g., Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 453;
Fiske v. City of Dallas, 220 S.W.3d 547, 551 (Tex. App.—Texarkana 2007, no
pet.); Alejandro v. Bell, 84 S.W.3d 383, 391 (Tex. App.—Corpus Christi 2002, no
pet.). A governmental agency “need not have all of the above powers to be
considered quasi-judicial, but certainly the more of these powers it has, the more
29
against the United States. See 28 U.S.C. § 547 (2006). With respect to the FCPA,
the DOJ is given wide latitude in establishing and carrying out the procedures by
which violations are investigated and prosecuted and in determining what and
when to investigate or prosecute. See 15 U.S.C. § 78dd-2, -3; see also Clayco
Petroleum Corp. v. Occidental Petroleum Corp., 712 F.2d 404, 409 (9th Cir. 1983)
(observing that DOJ has “discretion” in bringing enforcement actions and
“[t]herefore, any governmental enforcement represents a judgment on the wisdom
of bringing the proceeding, in light of the exigencies of foreign affairs”). The
DOJ’s authority includes the authority to investigate the facts, draw conclusions
about whether prosecution is appropriate, and determine what penalties and
conditions to impose in any settlement. See 28 U.S.C. §547; 15 U.S.C. § 78dd-2, -
3. U.S. Attorneys have the authority to settle FCPA claims asserted by United
States. 28 C.F.R. §§ 0.160, 0.161. Additionally, the DOJ is authorized to issue
opinions as to whether a prospective transaction would violate the FCPA. See 28
C.F.R. §§ 80.1, et seq. The DOJ also has the power to examine witnesses and to
compel the production of witnesses and other evidence. See 15 U.S.C. § 78dd-
3(d)(2).
To the extent that the DOJ’s investigative powers under the FCPA do not
meet every element of the criteria for defining a quasi-judicial proceeding, that is
clearly is it quasi-judicial in the exercise of its powers.” See Parker, 647 S.W.2d at
695; see also Hernandez, 931 S.W.2d at 651; Shanks, 169 F.3d at 994.
30
primarily because the DOJ’s determinations must ultimately be either proven in
court or resolved through an agreement approved by a court. And that failure is not
enough to disqualify the DOJ from acting in a quasi-judicial manner because,
while “[a] governmental entity’s power to decide a controversy presented by an
allegedly defamatory statement is a key factor in determining whether the
defamatory statement relates to the exercise of quasi-judicial power,” it is not a
necessary element. See Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 452.
Thus, even without the power to make final decisions, an agency proceeding
may be deemed quasi-judicial when a statute confers upon the agency “the power
to conduct investigations and hearings.” Reagan, 166 S.W.2d at 913. The DOJ
meets this test because it has the power to conduct investigations and here
summoned Shell to meet and provide documents.
The absence of final decision-making authority was not conclusive in Putter
v. Anderson, 601 S.W.2d 73, 77 (Tex. Civ. App.—Dallas 1980, writ ref’d n.r.e.).
The court there concluded that the police department’s internal affairs division
exercised quasi-judicial power because it could investigate complaints received,
determine whether the complaints were justified, and then make recommendations
to the police chief or a disciplinary board for discipline. Id. The internal affairs
division was not required to be empowered to mete out punishments itself in order
31
to act in a quasi-judicial capacity. Id. The DOJ’s authority under the FCPA is at
least as great as that of the internal affairs division in Putter. Id.
Moreover, Shell met its burden of demonstrating that the statements were
made during a quasi-judicial proceeding by presenting uncontroverted evidence
that, although the DOJ had not yet initiated formal judicial proceedings directed at
Shell at the time of Shell’s statements, the DOJ had initiated formal judicial
proceedings against other entities with whom Shell did business in connection with
the questioned transactions and had initiated its own informal inquiry of Shell.
Therefore quasi-judicial proceedings—proceedings which are often the only and
final proceedings for FCPA violations—against Shell had commenced regardless
of whether it had determined that formal judicial proceedings would be necessary.
Specifically, Shell has presented evidence of the following facts about the DOJ’s
activities relating to potential FCPA violations by Shell and its employees during
Shell’s Bonga project in Nigeria:
• In February 2007 Vetco, an oil-field-services company that was a Shell
contractor on the Bonga project, entered into a criminal plea agreement in
which it agreed to pay a $26 million fine for illegally bribing Nigeria
officials through a forwarding and customs clearance company.
• Before contacting Shell, the DOJ had begun investigating Panalpina, an
investigation that eventually revealed that Vetco made its bribery payments
to Nigerian custom officials through Panalpina for the purpose of facilitating
the importation of materials for the Bonga project.
• Less than six months later, in July 2007, the DOJ’s Criminal division, fraud
section, informed Shell that it had “come to [the DOJ’s] attention that [Shell]
32
has engaged the services of Panalpina, Inc.,” a freight forwarding and
customs clearing agent for Vetco, and “that certain of those services may
violate the [FCPA].” In the letter, the DOJ requested a meeting with Shell in
the DOJ’s Washington, D.C. office to discuss the matter and requested that
Shell collect certain date to provide to the DOJ at the meeting.
• Shell agreed during the meeting to investigate its dealings with Panalpina
and to produce documents and information to the DOJ including information
about Writt, who was a project manager responsible for approving
reimbursement requests on the Bonga project and understood that the DOJ
would conduct its own investigation for possible FCPA violations by Shell
and its employees.
• In its July 17, 2007 letter, the DOJ specifically requested that Shell produce
documents and information relating to Writt.
• Shell began its investigation in August 2007, using outside counsel, in-house
counsel, accountants from KPMG, former FBI agents, and former law
enforcement officers, and interviewing Writt during that month.
• Shell’s investigation culminated in its February 5, 2009 report entitled
Nigerian Customs Issues on the [Shell’s] Bonga Project and in the
Temporary Importation of Vessels into Nigerian waters “with the
understanding that [it] would be treated confidentially.”
• Shell Nigeria entered into a deferred prosecution agreement in November
2010 in which it acknowledged responsibility for its employees engaging in
conduct violating the anti-bribery provision of FCPA. The terms of the
agreement specifically state that the DOJ entered into this agreement in part
because Shell Nigeria “cooperated with” the investigation, undertook
remedial measures, “agreed to continue to cooperate with . . . any ongoing
investigation” by the DOJ into potential violations of FCPA, and agreed to a
$30 million fine.6
6
Shell’s evidence with respect to the DOJ’s investigation and settlement of the
FCPA case against Shell is largely uncontroverted. In his response to Shell’s
motion for summary judgment, Writt addressed Shell’s privilege defense primarily
on legal grounds. The only evidence he cited in this regard—an expert affidavit
from a law professor who previously worked at the DOJ—related to whether the
DOJ had “the final word on whether a crime ha[d] occurred.”
33
For all of these reasons, Shell’s communications to the DOJ were made in
contemplated or ongoing quasi-judicial proceedings and should be afforded the
same privilege.
Conclusion
The issue here is of extraordinary importance to the many international
companies in Texas that face FCPA inquiries from the DOJ. Absolute privilege is
recognized in limited circumstances because it creates a bright-line rule upon
which witnesses may depend, thereby incentivizing witnesses to make expressions
that may serve important public interests without fear of being subjected to civil
litigation. Shell’s statements here did not trigger or instigate a criminal
investigation; they were part of Shell’s communication to the DOJ reporting the
results of its internal self-investigation and information gathering, spurred by the
DOJ’s request for information and cooperation in its ongoing investigation to
determine whether and whom to prosecute for violations of the FCPA. As such,
they should be, and I believe under existing law are, absolutely privileged.
I therefore respectfully dissent.
Harvey Brown
Justice
34
Panel consists of Justices Jennings, Sharp, and Brown.
Justice Brown, dissenting.
35