Texas Supreme Court Weighs in, with Relevant Implications for Whistleblowers
July 16, 2015 — In addition to the more common forms of retaliation – e.g., changes in employment status – whistleblowers are also increasingly subject to counterclaims and lawsuits for conduct related to blowing the whistle. Some, for instance, have been accused of libel and trade libel for providing information to the government. While several defenses to this claim may exist in the whistleblower context, the Supreme Court of Texas has clarified the difference between two: absolute and conditional privilege.
In 2007, the Department of Justice (“DOJ”) formally notified Shell that it was investigating the company’s potential violations of the Foreign Corrupt Practices Act (“FCPA”). The company agreed to cooperate with the government’s investigation, and identified several persons of interest, including an employee named Robert Writt. The company also conducted an internal investigation, and concluded that Writt was aware of the FCPA violations. The company provided its findings to the DOJ. Shell terminated Writt, and Writt sued the company for wrongful termination and defamation in Texas court. While Writt’s actions were pending in Texas, Shell was formally charged with violating the FCPA’s anti-bribery, record-keeping, and internal-control provisions in the course of doing business in Nigeria. The company entered into a deferred prosecution agreement with the DOJ, and settled the allegations brought by the Securities and Exchange Commission.
In its defense to Writt’s defamation charge, Shell argued that its statements to the DOJ about Writt’s knowledge of and role in the FCPA violations were absolutely privileged – and therefore not actionable defamation – as they were made as part of a quasi-judicial proceeding. Writt, on the other hand, argued that the statements were only subject to conditional privilege, which may be waived where the statements do not concern the public interest or the public interest does not require the communication of the statement to a public officer. The Supreme Court of Texas agreed with Shell, noting that witnesses are “absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding or as part of a judicial proceeding.” Because Shell was a potential target of a government investigation, the information it provided to the government was absolutely privileged.
These privileges, as clarified by the court in the Writt case, have important implications for whistleblowers: as far as Texas law is concerned, individuals who report allegedly defamatory statements to the government in connection with a False Claims Act or SEC Whistleblower case enjoy conditional privilege with respect to those statements. Absent abuse of the privilege by making false statements with malice or knowledge of their falsity, for instance, these statements will be protected. In contrast, individuals that are the target of a government investigation – including whistleblowers in some cases – have an absolute privilege from defamation claims even when the alleged defamatory statements were made in connection with, but in advance of, a potential judicial proceeding. This means they enjoy immunity from defamation suits, even if the formal proceeding never takes place.
While whistleblowers should remain vigilant and their counsel should continue to ensure that their clients’ conduct comports with the law, they should also know that when they step forward to blow the whistle in the public interest, tried and true defenses are available for the counterclaims that defendants bring against them.
Caitlyn Silhan is an attorney at Waters & Kraus, LLP in the Dallas office. She represents whistleblowers in False Claims Act and SEC whistleblower actions, focusing her practice on federal and international law.