Robert WRITT, Appellant v. SHELL OIL COMPANY and Shell International, E & P, Inc., Appellees.
Appellant, Robert Writt, challenges the trial court's rendition of summary judgment in favor of appellees, Shell Oil Company and Shell International, E & P, Inc. (collectively, “Shell”), in Writt's suit against Shell for defamation. In two issues, Writt contends that the trial court erred in granting Shell summary judgment as Shell did not have an absolute privilege to make defamatory statements about him to the United States Department of Justice (“DOJ”), he presented evidence of the damages caused by Shell's defamation, and damages are presumed as a matter of law on his claim for defamation per se.
We reverse and remand.
In his petition, Writt alleges that, as an employee of Shell, he was charged with the responsibility of approving payments to contractors on certain Shell projects in foreign countries, including Nigeria. During the course of his work, Writt learned that certain Shell contractors were under investigation “by various governmental agencies” for making and receiving illegal payments and one of Shell's vendors had pleaded guilty to violating the Foreign Corrupt Practices Act (“FCPA”).1 Writt further alleged that, in response to an informal inquiry to Shell from the DOJ, Shell had “voluntarily” submitted to the DOJ a report in which Shell “falsely accused him” of “engaging in unethical conduct” in connection with the payment of “bribes” and providing inconsistent statements during multiple interviews conducted by Shell as part of its internal investigation. Writt asserted a claim for defamation2 against Shell for the allegedly false statements contained in its report to the DOJ. Specifically, Writt alleged that Shell, in its report, falsely stated that Writt had been involved in illegal conduct in a Shell Nigerian project by recommending that Shell reimburse contractor payments he knew to be bribes and failing to report illegal contractor conduct of which he was aware.
In its summary-judgment motion, Shell argued that because the statements made in its report to the DOJ were “absolutely privileged,” they could not give rise to a defamation claim. Shell asserted that federal regulations authorize the DOJ to prosecute violations of the FCPA,3 it “agreed with the DOJ to undertake the internal investigation,” it furnished the report to the DOJ “with the understanding that the facts in the report would be used by the DOJ in determining whether or not to prosecute Shell for FCPA violations,” and the report related to the DOJ investigation.4
In support of its summary-judgment motion, Shell attached a copy of a July 3, 2007 letter from the Fraud Section of the DOJ's Criminal Division in which the DOJ stated that it had come to the DOJ's “attention” that Shell had engaged the services of Panalpina, one of Shell's freight forwarding contractors, and “certain of those services may [have] violate[d] the [FCPA].”5 In its letter, the DOJ requested a meeting at the DOJ's Fraud Section office to discuss “Shell's engagement of Panalpina.” The DOJ further requested that, in advance of the meeting, Shell “prepare and provide the Fraud Section a spreadsheet detailing in what countries Shell has used the services of Panalpina” and “the total amount of payments for such services for the past five years.”
Shell also attached to its motion the affidavit of Michael Fredette, Shell's Managing Counsel. Fredette testified that, after receiving the DOJ's letter, Shell representatives met with the DOJ “and agreed to conduct an internal investigation into its dealings with Panalpina” with “the understanding that it would ultimately report its findings” to the DOJ. He noted that the DOJ “would conduct its own investigation for possible violations of the [FCPA] and other laws” by Shell and its employees. Fredette explained that Shell, beginning in August 2007, conducted its investigation, which “culminated in a written report” that it submitted to the DOJ on February 5, 2009.
Additionally, Shell attached to its summary-judgment motion a July 17, 2007 letter from the DOJ's Fraud Section to Shell confirming the DOJ's “understanding that Shell intend[ed] to voluntarily investigate its business dealings” with Panalpina. In this letter, the DOJ requested that Shell produce certain documents and information pertaining to the time period of June 2002 through June 2007. The DOJ also specifically requested that Shell provide it with the current location of a number of individuals, including Writt, who had been associated with a Shell project in Nigeria from January 1, 2004 to December 31, 2005. And the DOJ instructed Shell to submit its proposed investigative plan to the DOJ with details regarding “the estimated volume of documents implicated,” the “number of individuals to be interviewed,” and the “proposed duration of the investigation.”
Finally, Shell attached to its motion a copy of the February 5, 2009 report that it provided to the DOJ. In the report, Shell set forth the basic background facts of the investigation, explained that the DOJ had contacted Shell and met with its representatives regarding allegations of criminal violations, and noted that Shell had “agreed to conduct an internal investigation” and “work with the DOJ to establish an investigative plan.” It also noted that the DOJ had requested that Shell “produce ten categories of documents and other information in connection with its investigation .” Shell then made findings and recommendations to deter future “potential violations” of Shell's business principles, recommended disciplinary action for “certain staff,” and noted that the “investigation team” had identified “certain individuals to the relevant Shell managers for consequence management.” Shell also included in the report specific references to Writt, discussed his conduct in relation to Shell's dealings with its contractors, and detailed the information that Writt had provided during Shell's investigation.
In his response to Shell's summary-judgment motion, Writt asserted that Shell, in its report to the DOJ, had falsely described him as a major participant in illegal conduct. Citing Shell's report, Writt noted that he had informed Shell that he had suspected certain illegal activity and had objected to Shell reimbursing certain vendors for illegal payments. Nevertheless, Shell informed the DOJ that Writt had approved payment of certain bribes, had denied suspecting that bribery was occurring, and had failed to take action to stop the bribery on seventeen separate occasions. Further citing Shell's report to the DOJ, Writt also complained that Shell informed the DOJ that he had provided inconsistent statements during his interviews. Writt argued that because, under Texas law, “[s]tatements made to prosecutorial agencies like the DOJ receive at most a qualified privilege,” Shell was not entitled to summary judgment on the ground that it enjoyed an “absolute privilege” to make the statements. In addition to the report, Writt attached to his response his deposition and affidavit testimony. In his testimony, Writt explained that he had been suspicious of certain payments made by a Shell contractor beginning in 2004, he subsequently learned that one of Shell's contractors had pleaded guilty in February 2007 to FCPA violations, and he had notified Shell personnel about an internal investigation being conducted by the contractor and the contractor's subsequent guilty plea to FCPA violations.
In its reply, Shell noted that on November 4, 2010, the DOJ “open[ed] a judicial proceeding and file[d] a criminal information based at least in part on the information provided by Shell in the course of the investigation.” Shell then entered into a Deferred Prosecution Agreement with the DOJ, and it attached a copy of the agreement to its reply. In the agreement, the DOJ noted that Shell had cooperated in its investigation and agreed to continue cooperating in any ongoing investigation. Shell also agreed to the payment of a monetary penalty.
Standard of Review
To prevail on a summary-judgment motion, a movant has the burden of proving that it is entitled to judgment as a matter of law and there is no genuine issue of material fact. Tex.R. Civ. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995). When a defendant moves for summary judgment, it must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) plead and conclusively establish each essential element of its affirmative defense, thereby defeating the plaintiff's cause of action. Cathey, 900 S.W.2d at 341. When deciding whether there is a disputed, material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex.1985). Every reasonable inference must be indulged in favor of the non-movant and any doubts must be resolved in his favor. Id. at 549.
Here, the parties dispute whether Shell's claim of absolute privilege is properly characterized as a defense or an affirmative defense for which Shell had the burden of proof. Compare Clark v. Jenkins, 248 S.W.3d 418, 433 (Tex.App.-Amarillo 2008, pet. denied) (stating that absolute privilege is “affirmative defense to be proved”), with CEDA Corp. v. City of Houston, 817 S.W.2d 846, 849 (Tex.App.-Houston [1st Dist.] 1991, writ denied) (citing Reagan v. Guardian Life Ins. Co., 140 Tex. 105, 166 S.W.2d 909, 913 (Tex.1942)) (stating that “absolute privilege is not a defense” and that “absolutely privileged communications are not actionable.”). Regardless of the different characterizations of the absolute privilege in Texas, a defendant is entitled to summary judgment on the basis of absolute privilege only if the evidence conclusively proves the privilege's application. See Hurlbut v. Gulf Atl. Life Ins. Co., 749 S.W.2d 762, 768 (Tex.1987) (holding that evidence did not conclusively establish application of absolute privilege); see also Thomas v. Bracey, 940 S.W.2d 340, 343 (Tex.App.-San Antonio 1997, no writ) (“Whether an alleged defamatory matter is related to a proposed or existing judicial proceeding is a question of law to be determined by the court.”).
In his first issue, Writt argues that the trial court erred in granting summary judgment in favor of Shell because Shell did not have an absolute privilege to make defamatory statements about him in its report to the DOJ during the DOJ's “prosecutorial investigation.” Writt asserts that there is “no summary judgment evidence that the DOJ had initiated any legal proceedings against Shell” at the time it made the defamatory statements in its report.
“An absolutely privileged communication is one for which, by reason of the occasion upon which it was made, no remedy exists in a civil action for libel or slander.” Reagan, 166 S.W.2d at 912. When the absolute privilege applies to a communication, there is no action in damages, “and this is true even though the language is false and uttered or published with express malice.” Id.; see also Hurlbut, 749 S.W.2d at 768 (stating that when absolute privilege applies, “the actor's motivation is irrelevant” and privilege is “not conditioned upon the honest and reasonable belief that the defamatory matter is true or upon the absence of ill will on the part of the actor”). Thus, the absolute privilege may be properly characterized “as an immunity.” Hurlbut, 749 S.W.2d at 768.
The absolute privilege, or immunity, is “based chiefly upon a recognition of the necessity that certain persons, because of their special position or status, should be as free as possible from fear that their actions in that position might have an adverse effect upon their own personal interests.” Restatement (Second) of Torts ch. 25, title B, introductory note (1977). To accomplish this end, “it is necessary for them to be protected not only from civil liability but also from the danger of even an unsuccessful civil action.” Id. Under the Restatement, these persons include “Judicial Officers,” “Attorneys at Law,” “Parties to Judicial Proceedings,” “Witnesses in Judicial Proceedings,” “Jurors,” “Legislators,” “Witnesses in Legislative Proceedings,” and “Executive and Administrative Officers.” Id. §§ 585591 (emphasis added).
In contrast, the “qualified” or “conditional” privilege concerning communications may be defeated when it is abused, i.e., when the “person making the defamatory statement knows the matter to be false or does not act for the purpose of protecting the interest for which the privilege exists.” Hurlbut, 749 S.W.2d at 768. The distinction between the absolute privilege and the conditional or qualified privilege is that “an absolute privilege confers immunity regardless of motive whereas a conditional privilege may be lost if the actions of the defendant are motivated by malice.” Id.
The conditional privilege “arises[s] out of the particular occasion upon which the defamation is published” and is “based upon a public policy that recognizes that it is desirable that true information be given whenever it is reasonably necessary for the protection of the actor's own interests, the interests of a third person, or certain interests of the public.” Restatement (Second) of TortsS ch. 25, title B, introductory note (emphasis added). As noted in the Restatement:
In order that this information may be freely given it is necessary to protect from liability those who, for the purpose of furthering the interest in question, give information which, without their knowledge or reckless disregard as to its falsity, is in fact untrue.
Id. The conditional privilege, which protects an actor from liability, but not civil action, for providing information the actor believes to be true applies to “Communications to One Who May Act in the Public Interest.” Id. at § 598.
Texas recognizes that the “immunity” conferred by the absolute privilege attaches only to a “select number of situations which involve the administration of the functions of the branches of government, such as statements made during legislative and judicial proceedings.” Hurlbut, 749 S.W.2d at 768. The Texas Supreme Court has explained that communications made “in the due course of a judicial proceeding” are absolutely privileged, and this privilege “extends to any statement made by the judge, jurors, counsel, parties or witnesses, and attaches to all aspects of the proceedings, including statements made in open court, pre-trial hearings, depositions, affidavits and any of the pleadings or other papers in the case.” James v. Brown, 637 S.W.2d 914, 91617 (Tex.1982). Additionally, the application of the absolute privilege to communications made in the course of judicial proceedings has been extended to apply “to proceedings before executive officers, and boards and commissions which exercise quasi-judicial powers.”6 Reagan, 166 S.W.2d at 913. However, “[a]ll communications to public officials are not absolutely privileged.” Hurlbut, 749 S.W.2d at 768 (citing Zarate v. Cortinas, 553 S.W.2d 652 (Tex.App.-Corpus Christi 1977, no writ)).
In defining the scope of communications to which the absolute privilege applies, the Texas Supreme Court has referred to relevant provisions in the Restatement (Second) of Torts. Id. (citing Restatement (Second) of Torts §§ 583612 (1977)). For example, in James, the court considered the appropriate privilege to apply to a psychiatrist's statements referenced in reports that were filed with a probate court. 637 S.W.2d at 917. The court considered the application of Restatement section 588, entitled “Witnesses in Judicial Proceedings,” which provides:
A witness is absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding or as a part of a judicial proceeding in which he is testifying, if it has some relation to the proceeding.
James, 637 S.W.2d at 917 (quoting Restatement (Second) of Torts § 588 (1981)) (emphasis added). Noting that the “administration of justice requires full disclosure from witnesses, unhampered by fear of retaliatory suits for defamation,” the court held that the absolute privilege applied to the psychiatrist's reports as well as a letter written by an attorney in the case that was deemed written “in contemplation” of the judicial proceeding. Id.
More recently, the supreme court considered the appropriate privilege to apply to statements made by an insurance agency's representative to an assistant attorney general who had been assigned to investigate a group health insurance program being sold by the agency. Hurlbut, 749 S.W.2d at 768. The court considered both Restatement sections 588 and 598, which is entitled “Communication to One Who May Act in the Public Interest.” Id. at 767–78. Section 598 provides,
An occasion makes a publication conditionally privileged if the circumstances induce a correct or reasonable belief that
(a) there is information that affects a sufficiently important public interest, and
(b) the public interest requires the communication of the defamatory matter to a public officer or a private citizen who is authorized or privileged to take action if the defamatory matter is true.
Restatement (Second) of Torts § 598 (emphasis added) (quoted in Hurlbut, 749 S.W.2d at 768). Noting that the evidence before it did not conclusively establish that the allegedly defamatory statements were made to a public official or were made in the course of a judicial or quasi-judicial proceeding, the court held that the agency's communications to the assistant attorney general were “best analogized to the conditional privilege” set forth in section 598 and, thus, the statements were not absolutely privileged. Hurlbut, 749 S.W.2d at 768.
Texas courts of appeals have also addressed the application of the absolute and conditional privileges to various communications. In Zarate, the Corpus Christi Court of Appeals considered the appropriate privilege to apply to allegedly slanderous statements made in a criminal complaint filed with a local sheriff's office. 553 S.W.2d at 654. The court acknowledged that communications published in the course of a judicial proceeding are absolutely privileged and the privilege for such statements extends to “proceedings before executive officers, boards or commissions which exercise quasi-judicial powers.” Id. at 655. Turning to the facts before it, the court determined that only a qualified privilege applied to communications “of alleged wrongful acts to an official authorized to protect the public from such acts.” Id. The court acknowledged that “strong public policy consideration[s]” dictate that communications like the criminal complaint before it “be given some privilege against civil prosecution for defamation” and it is “vital to our system of criminal justice that citizens be allowed to communicate to peace officers the alleged wrongful acts of others without fear of civil action for honest mistakes.” Id. (emphasis added). But the court concluded that such communications did not fall “within the traditional areas of absolute privilege” recognized in Texas. Id . The court further noted that applying the absolute privilege under the circumstances before it “would unnecessarily deny those innocent victims of maliciously or recklessly filed complaints an opportunity to seek remuneration for their injury.” Id. (emphasis added); see also Vista Chevrolet, Inc. v. Barron, 698 S.W.2d 435, 436 (Tex.App.-Corpus Christi 1985, no writ) (holding that only conditional privilege applied to criminal theft complaint made to law-enforcement authorities).
In Clark v. Jenkins, the Amarillo Court of Appeals considered the appropriate privilege to apply to allegedly defamatory statements made by a civil rights group accusing the plaintiff of having a criminal history in a memorandum published to a congressman and the DOJ's Civil Rights Division. 248 S.W.3d 418, 42325 (Tex. App .-Amarillo 2008, pet. denied). The court, after reviewing Texas privilege law, noted that, “[c]learly, all communications to public officials are not absolutely privileged.” Id. at 432 (citing Hurlbut, 749 S.W.2d at 768). The court explained that “[i]nitial communications ‘to a public officer ․ who is authorized or privileged to take action’ are subject to only a qualified privilege, not absolute immunity.” Id. (quoting Hurlbut, 749 S.W.2d at 768). Moreover, the “filing of a criminal complaint is not absolutely privileged because, at that point, no judicial proceedings have been proposed and no investigating body has discovered sufficient information to present to a grand jury or file a misdemeanor complaint.” Id. Citing both the Texas Supreme Court's opinion in Hurlbut and the Corpus Christi Court of Appeals's opinion in Zarate, the court concluded that “initial” communications “of alleged wrongful or illegal acts to an official authorized to protect the public from such acts [are] subject to a qualified privilege.” Id. Because the defendant, who had published the memo to the DOJ, produced no evidence indicating that the DOJ “was actively contemplating, investigating, or litigating any civil rights violations” at the time of publication, and because the defendant's allegations made in the memorandum “were preliminary in nature, i.e., designed to launch an investigation that might lead to legal action,” the court held that the defendant's statements made to the DOJ “were not part of an executive, judicial, or quasi-judicial proceeding, and were not subject to an absolute privilege.”7 Id. at 433.
In Darrah v. Hinds, the Fort Worth Court of Appeals considered the appropriate privilege to apply to statements made by a bank in a writ of sequestration filed with a court. 720 S.W.2d 689, 69091 (Tex.App.-Fort Worth 1986, writ ref'd n.r.e.). The court noted that the absolute privilege applies to communications made in the course of or “in contemplation” of judicial proceedings, while the qualified privilege applies to communications of wrongful acts to officials authorized to protect the public from such acts, such as criminal complaints. Id. at 691. Noting that the affidavit was filed and acted upon by the county court, the court held that the absolute privilege applied to the statements made in the writ of sequestration. Id. at 691–92.
In Smith v. Cattier, the Dallas Court of Appeals, within the context of a jurisdictional analysis, considered whether the absolute privilege applied to statements made to the Federal Bureau of Investigation (“FBI”) by one business associate concerning another business associate. No. 05–99–01643–CV, 2000 WL 893243, at *34 (Tex.App.-Dallas July 6, 2000, no pet.) (not designated for publication). The court noted that, under Texas law, “[a]bsolute immunity does not extend to unsolicited communications to law enforcement officials or initial communications to a public officer ․ authorized or privileged to take action” and, under such circumstances, “the actor is entitled to only a qualified privilege which may be lost if the defendant's actions are motivated by malice .” Id. at *4 (citations omitted). The court concluded that because the defendant had failed to demonstrate that he was not involved in referring the plaintiff to the FBI or “instigating the investigation,” and because the defendant failed to “negate” the plaintiff's claim that the defendant had “initiated, procured, and caused” the commencement of the criminal investigation into plaintiff's actions, the defendant had failed to establish that he was entitled to absolute immunity.”8 Id.
Finally, a federal district court in Texas recently considered the appropriate privilege to apply to allegedly defamatory statements made by a witness during Major League Baseball's (“MLB”) investigation, which was conducted in conjunction with a federal investigation, into the illegal use of steroids. See Clemens v. McNamee, 608 F.Supp.2d 811, 82325 (S.D.Tex.2009). The court noted that, under Texas law, communications “to government agencies as part of legislative, judicial, or quasi-judicial proceedings are entitled to absolute immunity so long as they are made as part of an ongoing proceeding, they are not unsolicited, and they are made to an agency whose findings need not be approved or ratified by another agency.”9 Id. at 823–24.
Having reviewed the Texas common law addressing the scope of the absolute privilege and its application in different factual scenarios,10 we now turn to the arguments made by the parties in the instant case. Writt argues that only the qualified privilege applies to Shell's statements made in the report to the DOJ because there is no summary-judgment evidence that the DOJ had initiated any legal proceedings against Shell at the time it submitted the report. Writt asserts that our disposition of this case is controlled by the Texas Supreme Court's opinion in Hurlbut, which indicates that statements made by Shell in its report to the DOJ were not absolutely privileged. Shell counters that the absolute privilege applies to “statements solicited in an ongoing government investigation.” Focusing on the Clemens opinion, Shell asserts that “Texas law distinguishes between statements solicited by government officials or agents as part of an ongoing investigation,” to which the absolute privilege applies,” and “unsolicited statements unilaterally proffered to government officials for the purpose of instigating or launching such an investigation or proceeding,” to which the qualified privilege applies. Shell notes that, in preparing the report, it was under the “continuing threat of prosecution for FCPA violations” as well as the “penalty of perjury” for any misstatements contained in the report. Shell emphasizes that it was ultimately prosecuted by the DOJ for conspiracy to violate the FCPA.
We hold that the summary-judgment evidence does not conclusively establish the applicability of the absolute privilege to the complained-of statements made by Shell in the report to the DOJ. See Hurlbut, 749 S.W.2d at 768 (stating that defendant was entitled to summary judgment on basis of absolute privilege only if evidence conclusively proves the privilege's application). Although Shell established that it made the report in its effort to cooperate with the DOJ, Shell actually prepared the report during the course of its own voluntary “internal investigation.”
Shell did present evidence that it conducted its internal investigation in response to a DOJ inquiry after attending a meeting requested by the DOJ. However, there is no evidence conclusively establishing that a criminal case had been filed against Writt or Shell, or that a criminal prosecution was actually being proposed against either Writt or Shell, at either the time the DOJ contacted Shell or when Shell submitted its report to the DOJ. The summary-judgment evidence establishes that the DOJ initially contacted Shell on July 3, 2007, five months after a Shell contractor, Vetco Gray, had already pleaded guilty to violating the FCPA in connection with payments made through Panalpina. And Shell submitted the complained-of report to the DOJ on February 5, 2009. The DOJ did not, in Shell's words, “open a judicial proceeding and file a criminal complaint” against Shell until November 4, 2010, 21 months after Shell submitted its report. Just because the DOJ ultimately filed a judicial proceeding against Shell does not establish that it was proposing that one be filed when it contacted Shell on July 3, 2007 or received Shell's report on February 5, 2009.
Moreover, the report itself indicates that Shell also prepared it for important internal purposes. For example, Shell included in the report its findings and recommendations made to deter future “potential violations” of Shell's business principles, it recommended disciplinary action for “certain staff,” and it stated that the “certain individuals” had been “identified” for “consequence management” by Shell. In its report, Shell was not proposing that either it or Writt should be prosecuted for a crime.11
Our conclusion that the absolute privilege does not apply to the statements made by Shell to the DOJ is based upon our review of Texas case law, which reveals that allegedly defamatory statements contained within criminal complaints, and other similar information provided by private parties to prosecutorial and law enforcement agencies prior to the initiation of criminal proceedings, are not subject to the absolute privilege. See Clark, 248 S.W.3d at 423–24; Zarate, 553 S.W.2d at 654. These holdings comport with the general recognition that the absolute privilege applies only to communications made in judicial proceedings and those communications made preliminary to or in serious contemplation of a judicial proceeding. See Hurlbut, 749 S.W.2d at 767 (citing Restatement (Second) of Torts § 588); James, 637 S.W.3d at 917; Zarate, 553 S.W.2d at 654; see also San Antonio Credit Union, 115 S.W.3d at 99 (stating that “an investigation into criminal activity does not amount to” proposed judicial proceeding and proposed judicial proceeding exists when investigating body finds “enough information either to present that information to a grand jury or to file a misdemeanor complaint”).
In Hurlbut, a client of an insurance agency contacted an agent of the agency and the office of the Texas Attorney General after becoming concerned that the agency could not produce a copy of a master policy that the agency was selling. 749 S.W.2d at 764. The agent, after receiving this telephone call, then contacted the agency to inquire about the policy. Id. A representative of the agency reassured him and suggested he meet with the agency to “straighten out the matter.” Id. When two insurance agents arrived at this purported meeting to straighten things out, they were “surprised by the appearance” of an assistant attorney general who had been “assigned to investigate” the insurance policy being sold by the agency. Id. At the meeting, an agency representative told the assistant attorney general that its employed agents did not have the authority to write the insurance policy that they were writing. Id. Thus, the agency effectively accused the agents of wrongdoing. The agents then accompanied the assistant attorney general to a local office and “cooperated in the investigation.” Id. The Texas Supreme Court explained that the allegedly defamatory statements made by the agency representative at the meeting with the insurance agents were “best analogized” to the circumstances in which a conditional privilege applied. Id. at 768; see also Gulf Atl. Life Ins. Co. v. Hurlbut, 696 S.W.2d 83, 8990 (Tex.App.-Dallas 1985), rev'd, 749 S.W.2d 762 (providing additional factual background and indicating that agency representative had originally, falsely informed a city attorney that the agents were not authorized to write the insurance policy and a city attorney had then reported this information to the office of the Texas Attorney General).12
Again, here, although the record establishes that the DOJ contacted Shell to discuss Shell's engagement of Panalpina in Nigeria, there is nothing in the record that conclusively establishes that, at that time, the DOJ had filed a criminal proceeding against either Shell or Writt. Nor is there any summary-judgment evidence conclusively establishing that the DOJ, at the time that it contacted Shell, was acting in a manner preliminary to filing a criminal proceeding against either Shell or Writt. Similarly, Shell has not conclusively established that it actually contemplated in good faith and took under serious consideration the possibility of a judicial proceeding. And there is no evidence conclusively establishing that Writt, prior to Shell sharing its report with the DOJ, had been implicated in the alleged commission of a crime or reported to a law-enforcement agency for an alleged criminal act. Thus, the statements in Shell's report, at least as they pertained to Writt, were more in the nature of information provided by a private party to a prosecutorial agency implicating another in wrongful conduct. And, as noted above, Texas courts have indicated that a conditional privilege is more suitable to protect such statements.13
Under the Restatement, Shell's communication is protected by the conditional privilege as a “Communication to One Who May Act in the Public Interest.” See Restatement (Second) of Torts § 598. As such, given that a “sufficiently important public interest” may have “require[d]” that Shell make the communication to the DOJ, whether solicited by the DOJ or not, “to take action if the defamatory matter [were] true,” Shell enjoys the adequate protection of the conditional privilege, not immunity.14 See id. Section 598 is “applicable when any recognized interest of the public is in danger, including the interest in the prevention of crime and the apprehension of criminals, the interest in the honest discharge of their duties by public officers, and the interest in obtaining legislative relief from socially recognized evils.” Id. § 598 cmt. d (emphasis added). And section 598 is specifically “applicable to defamatory communications to public officials concerning matters that affect the discharge of their duties.” Id. § 598 cmt. e (“Communications to Public Officials ”).
And even if Shell could possibly be considered as a “witness” having made “communications preliminary to a proposed judicial proceeding,” it would be entitled to the absolute privilege accorded a witness in a judicial proceeding only if its communications to the DOJ had “some relation to a proceeding that is actually contemplated in good faith and under serious consideration․” Id. § 588 cmt. e. As emphasized in the Restatement, the “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.” Id . (emphasis added).
In support of its argument that the complained-of statements in the report that it submitted to the DOJ are absolutely privileged, Shell relies greatly upon Clemens, 608 F.Supp.2d at 823–25. In Clemens, the court noted that the evidence before it demonstrated that the pertinent witness, Brian McNamee, had been interviewed by an Assistant United States Attorney as part of a federal investigation into the distribution of steroids. Id. McNamee and his counsel met with the prosecutor and agents from the FBI and the Internal Revenue Service numerous times, and McNamee had been told that his “witness status” could be reviewed if he “chose not to co-operate” and he was subject to prosecution for making false statements during these interviews. Id. at 824. The evidence also demonstrated that the prosecutor told McNamee that speaking to the MLB Commission “was part of his co-operation with the investigation in order to maintain his witness status.” Id. Prior to the interviews with the MLB Commission, the prosecutor told McNamee that their proffer agreement would cover the interviews and he could face prosecution for any false material statements. Id. McNamee agreed to these terms and participated in three interviews with the MLB Commission, the interviews were all arranged by federal agents or Assistant United States Attorneys, and prosecutors and FBI agents participated in all interviews between McNamee and the MLB Commission. Id. The federal district court determined that the evidence established that the investigation was an “ongoing proceeding,” McNamee's statements “should be protected” “[a]s a matter of public policy,” McNamee was “compelled” to make his statements to the MLB Commission “as part of a judicial proceeding,” and McNamee's statements “should be treated with immunity.” Id. at 823–25.
In the instant case, the facts established in the summary-judgment record do not demonstrate that the DOJ ever granted Shell any type of “witness status.” Nor is there any evidence here of a formalized investigative process of the type engaged in by the MLB Commission with the assistance of federal prosecutors and the FBI. The Clemens opinion reveals that McNamee's statements to the MLB Commission were made in furtherance of its regulatory and oversight functions and preliminary to a proposed criminal proceeding that was actually contemplated. Indeed, McNamee had been granted “witness status.” Id. at 824. Moreover, to the extent that the court's opinion in Clemens could possibly be read as applying the absolute privilege beyond how Texas courts have applied it, we note that the Clemens opinion is not controlling authority on this Court. Rather, we are bound to follow the guidance and reasoning provided by the Texas Supreme Court in Hurlbut.
In sum, the summary-judgment evidence presented in the trial court below does not conclusively establish that, at the time Shell prepared its report following its “internal investigation” and submitted it to the DOJ, a criminal judicial proceeding against either Shell or Writt was either ongoing or “actually contemplated” or under “serious consideration” by the DOJ or Shell. See Restatement (Second) of Torts § 588, cmt. e. Rather, the communication made by Shell in its report to the DOJ and complained of by Writt is protected by the conditional privilege as a “Communication to One Who May Act in the Public Interest.” See Restatement (Second) of Torts § 598.
Accordingly, we hold that the trial court erred in granting Shell's summary-judgment motion. We sustain Writt's first issue. And we reverse the judgment of the trial court and remand for proceedings consistent with this 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. In the defamation equilibrium, we safeguard these fundamental interests through privileges.
With respect to criminal prosecutions, our jurisprudence has reached a careful accord—we afford a qualified privilege to statements made when a private citizen approaches a governmental authority with criminal allegations, but we afford absolute privilege to communications made to prosecuting governmental authorities during or in contemplation of criminal proceedings. When a citizen, 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 an 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. By reaching a contrary holding, the Court frustrates the kind of cooperation and self-reporting that is often vital to the DOJ's prevention and prosecution of corporate misconduct in international business dealings. I therefore respectfully dissent.
Shell's Statements to the DOJ Are Privileged
The Court correctly identifies the principal issue here: whether Shell's statements to the DOJ were made preliminary to or in serious contemplation of a judicial (or quasi-judicial) proceeding and are thus absolutely privileged. The Court concludes that Shell's statements do not fit within either the judicial or quasi-judicial proceedings privileges, holding instead that the statements are more in the nature of an unsolicited criminal complaint and thus not entitled to absolute privilege. I part company with the Court here for three reasons. First, Shell's communications to the DOJ were made in contemplation of a judicial proceeding—the criminal prosecution that the DOJ did in fact initiate. Second, Shell's statements were made as part of the DOJ's investigation, which is a quasi-judicial proceeding. Third, additional public policy considerations illustrate why absolute privilege is appropriate for communications made under the circumstances of this case.
A. 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). Under the Restatement, the absolute privilege applies not only to statements made preliminary to a proposed judicial proceeding, but also to informal complaints made to a prosecuting attorney or other proper officer preliminary to a proposed criminal prosecution. Id. § 587.
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 v. Guardian Life Ins. Co., 140 Tex. 105, 166 S.W.2d 909, 913 (Tex.1942) (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, 75 L.Ed.2d 96 (1983) (quoting Imbler v. Pachtman, 424 U.S. 409, 439, 96 S.Ct. 984, 999, 47 L.Ed.2d 128 (1976) (White, J., concurring)), particularly from “intimidation and self-censorship,” id. at 342, 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 the 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.”); James v. Brown, 637 S.W.2d 914, 917 (Tex.1982) (“[The] administration of justice requires full disclosure from witnesses, unhampered by fear of retaliatory suits for defamation.”).
B. Shell's communications were made in contemplation of a judicial proceeding
It is undisputed that Shell's statements were not made during a judicial proceeding. Shell's contention on appeal is that its statements are absolutely privileged because they were made preliminary to and in contemplation of a judicial proceeding.
The judicial privilege applies to statements made in judicial proceedings when the statement satisfies three elements: (1) the 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 v. Linebarger, Goggan, Blair, Sampson & Meeks, LLP., 291 S.W.3d 448, 452 (Tex.App.-Fort Worth 2009, no pet.). With 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 id.; see also 5–State Helicopters, Inc. v. Cox, 146 S.W.3d 254, 257 (Tex.App.-Fort Worth 2004, pet. denied) (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.
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 of the Restatement 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—that is, 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 test has 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 the speaker or a possible party to the proceeding1 contemplated a proceeding at the time the statements were made (the “in contemplation of” statement of the rule). 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 the 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 v. Gulf Atlantic Life Ins. Co., 749 S.W.2d 762, 764 (Tex.1987) (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 S.W.3d at 1112 (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 82, 99 (Tex.App.-San Antonio 2003, pet. denied) (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 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 or contemplation of a proceeding (which do not fall within the privilege). Although both statements are “preliminary to” a judicial proceeding in a temporal sense, protection is only provided to the first because it does not cause the criminal investigation or proceeding. Compare id. at 99 (holding that criminal complaint was not absolutely privileged because “no judicial proceedings had been proposed” when complaint was filed); Clark, 248 S.W.3d at 433 (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”); Zarate, 553 S.W.2d at 65556 (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); Smith v. Lattier, 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), with Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 450 (applying absolute privilege to law firm's statements about competing law firm in memo to city 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. Allied Signal, Inc., 169 F.3d 988, 994 (5th Cir.1999) (applying absolute privilege to statements made as part of “ongoing” National Transportation and Safety Board accident investigation); Clemens v. McNamee, 608 F.Supp.2d 811, 82324 (S.D.Tex.2009), aff'd, 615 F.3d 374 (5th Cir.2010) (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”); see also Smith, 2000 WL 893243, at *4 (observing that absolute immunity does not extend to “unsolicited communications” to officials).
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.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.A. § 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 January 30, 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.
Third, several federal courts have concluded that statements made as part of an ongoing criminal investigation are entitled to an 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 (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 Hott v. Yarbrough, 112 Tex. 179, 245 S.W. 676, 67879 (Tex.1922), the Texas Supreme Court applied an absolute privilege to a defamation claim based on a letter written to a grand jury foreperson charging a third party with fraud. I would follow these authorities rather than San Antonio Credit and distinguish between solicited and unsolicited communications for three policy reasons.2
First, when a criminal investigation is ongoing, the governmental authority—a disinterested party—has determined that there is some threshold level of evidence or other ground for suspicion that justifies an investigation on the subject matter. 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.
Second, 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 begins knows his or her intent—whether he or she intends to file a lawsuit—but in the criminal context the speaker who is the target of the investigation 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 exists 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 authority but on the subjective mental state of the speaker. And when the criminal investigation is not initiated by the speaker and the speaker is responding to an inquiry by a prosecutor about potential criminal misconduct by the speaker, 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.
C. 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.3
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 ref'd n.r.e.); see also Perdue, Brackett, Flores, Utt & Burns, 291 S.W.3d at 453 (stating that quasi-judicial power includes 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 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 investigation of Shell under the Foreign Corrupt Practices Act (FCPA) satisfies most of the elements of quasi-judicial power,4 and, 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 clearly is it quasi-judicial in the exercise of its powers.” See Parker v. Holbrook, 647 S.W.2d 692, 695 (Tex.App.-Houston [1st Dist.] 1982, writ ref'd n.r.e.); see also Shanks, 169 F.3d at 994; Hernandez v. Hayes, 931 S.W.2d 648, 651 (Tex.App.-San Antonio 1996, writ denied). The DOJ is statutorily imbued with the duty to prosecute offenses 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. United States Attorneys have the authority to settle FCPA claims asserted by United States. 28 C.F.R. §§ 0.160–161. 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, 80.3. 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 FCPA do not meet every element of the criteria for defining a quasi-judicial proceeding, that is 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. 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.
In Reagan v. Guardian Life Insurance Co., the Texas Supreme Court stated that an agency proceeding may be deemed quasi-judicial when a statute confers upon the agency “the power to conduct investigations and hearings.” 166 S.W.2d at 913. The DOJ, which has the power to conduct investigations and which summoned Shell to meet and to provide documents, meets this test.
In Putter v. Anderson, the Dallas Court of Appeals concluded that the police department's internal affairs division exercised quasi-judicial power because it could investigate complaints, determine whether the complaints were justified, and then make disciplinary recommendations to the police chief or a disciplinary board. 601 S.W.2d 73, 77 (Tex.Civ.App.-Dallas 1980, writ ref'd n.r.e.). The internal affairs division was not required to be empowered to mete out punishments itself in order to act in a quasi-judicial capacity. See id. The DOJ's authority under the FCPA is at least as great as that of the internal affairs division in Putter. See 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 judicial proceedings directed at Shell at the time of Shell's statements, the DOJ had initiated judicial proceedings against other entities with whom Shell did business in connection with the transactions in question and had initiated its own investigation. Therefore, quasi-judicial proceedings—proceedings which are often the only and final proceedings for FCPA violations—had been initiated against Shell regardless of whether the DOJ had determined that formal judicial proceedings were 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 Nigerian officials through a forwarding and customs clearance company.
• Before contacting Shell, the DOJ began investigating Panalpina. The investigation eventually revealed that Vetco bribed Nigerian customs officials through Panalpina in order to facilitate the importation of materials for the Bonga Project.
• Less than six months later, in July 2007, the DOJ's Fraud Section informed Shell that it had “come to [the DOJ's] attention that [Shell] 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 data 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. Shell 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 by interviewing Writt and by using outside counsel, in-house counsel, accountants from KPMG, former FBI agents, and former law enforcement officers.
• Shell's investigation culminated in its February 5, 2009 report entitled “Nigerian Customs Issues on the 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 stated 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. 5
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.
D. Other public policy considerations favor application of an absolute privilege to Shell's communications to the DOJ
1. An absolute privilege encourages cooperation and 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 with 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 for its wrongdoings. If an 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 their findings to the DOJ.
Without corporate cooperation, more of the investigatory burden will be shifted to the government, requiring the DOJ to piece together knowledge and understanding that the company already has from its involvement in the transaction. While the DOJ may have to sift through copious documents and testimony to obtain the information it needs and to ascertain what information is relevant, the corporation may easily identify and assimilate the key documents and important transaction details. And some 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, apprehension of persons engaged in such conduct, and deterrence of others from engaging in such conduct are all enhanced by creating incentives for cooperation with and disclosure of information to the DOJ. The extraterritorial aspects of FCPA violations make them undoubtedly costly and time-consuming to investigate. Delayed responses, language barriers, and lack of jurisdiction may hinder enforcement of the FCPA. Cooperation from individuals and companies willing to undertake internal investigations or to assist in the DOJ's investigation helps to overcome these obstacles. Therefore, recognition of an absolute privilege benefits the government through increased access to information, greater efficiency in investigation, and promotion of the policy goals underlying the FCPA.
To deny absolute privilege here would be to chill the free flow of information and to impair the DOJ's ability to conduct investigations and enforce the FCPA. See 5–State Helicopters, 146 S.W.3d at 259 (stating that adopting “a rule that private citizens' 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 v. Shoukeh, 962 S.W.2d 237, 239 (Tex.App.-Amarillo 1998, no pet.) (stating that the 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.”); see also 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.”); 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 designed to incentivize cooperation through better settlement prospects and more lenience in the Federal Sentencing Guidelines. “[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.
2. An absolute privilege recognizes the precarious position of corporations involved in questioned transactions
An 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 culpatory statements regarding its employees and risk exposure to a defamation claim or it can face criminal liability for failure to adequately comply and cooperate 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 investigation). 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 culpable in the context of a judicial or quasi-judicial proceeding; it is because balancing 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).
In Clemens, Roger Clemens brought defamation claims against Brian McNamee for statements McNamee made to federal authorities who interviewed McNamee as part of their investigation of Clemens's alleged steroid use. 608 F.Supp.2d at 816–17. McNamee asserted that his statements were covered by the quasi-judicial privilege because they were made in cooperation with federal officials and under the threat of federal prosecution. Id. at 823–24. The federal district court agreed, noting that federal authorities agreed to give McNamee witness status only if he cooperated in the investigation and informed him that he could face prosecution for any false statements, and the Fifth Circuit affirmed. Id. at 824. 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.
3. Conclusion on policy analysis
Whether to recognize an absolute privilege or a 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, 73 L.Ed.2d 396 (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. That said, I believe that merely granting a qualified privilege does not properly balance these interests here.
The combination of the broad powers granted both in law and in practice to the DOJ in investigating and resolving FCPA matters and the DOJ's solicitation of Shell's cooperation in its ongoing investigation lead to the conclusion 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 (observing that 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 (noting that 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 their [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 warrants 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 role requires it to remain neutral and objective in analyzing the evidence presented to it, again much like a jury or other factfinder. See Berger v. United States, 295 U.S. 78, 88, 55 S.Ct. 629, 79 L.Ed. 1314 (1935). Finally, the DOJ began its own investigation and solicited Shell's cooperation. The DOJ even offers incentives to companies like Shell for their cooperation in the form of credits used in the DOJ's settlement formula. These policies warrant encouraging such cooperation through an absolute privilege.
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 regarding the results of its internal self-investigation, which was spurred by the DOJ's request for information and cooperation in its own ongoing investigation to determine whether and who to prosecute for FCPA violations. As such, I believe that Shell's statements should be, and under existing law are, absolutely privileged.
I therefore respectfully dissent.
TERRY JENNINGS, Justice.
Justice BROWN, dissenting.