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Defamation Claim Advances By Former Biomet Argentina Employee Against Zimmer Biomet Holdings

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Foreign Corrupt Practices Act enforcement actions rarely tell the whole story about the facts and circumstances relevant to the underlying action. Thus, it is nice (from the perspective of getting a more complete alleged picture including specific names relevant to an FCPA enforcement action) when civil litigation is filed in connection with an FCPA enforcement action.

Such is the case regarding a recent civil action filed by Alejandro Yeatts, who from 2005 to September 2015 was employed by Biomet Argentina, in which he alleges various tort claims against Zimmer Biomet Holdings. Although the court recently dismissed Yeatts’s intentional infliction of emotional distress and negligent infliction of emotional distress claims, the court denied Zimmer’s motion to dismiss Yeatts’s defamation claim meaning the claim will advance to the next stage in litigation.

This post summarizes Yeatts’s defamation claim and the court’s recent decision (Yeatts v. Zimmer Biomet Holdings, 2017 WL 1375117 (N.D. Ind., Apr. 17, 2017).

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Texas Supreme Court Dismisses Defamation Claim Against Shell And Concludes That Providing An Internal Investigation Report To The DOJ Is “Absolutely Privileged”

Defamation

Shell Oil Company v. Writt is a civil defamation case that has been closely followed by the corporate community given its impact on conducting internal investigations and cooperating with government enforcement agencies.

This recent opinion by the Texas Supreme Court will be welcome news to the corporate community because the court concluded that providing an internal investigating report to the DOJ is “absolutely privilege” under the defamation laws.

In terms of background, as stated by the Texas Supreme Court:

“Shell Oil Company and Shell International,E&P,Inc.(collectively, Shell) received an inquiry from the Department of Justice (DOJ) regarding possible violations of the Foreign Corrupt Practices Act by one of its contractors. Shell met with the DOJ, agreed to perform an internal investigation and report the results to the DOJ, and then did so. Robert Writt, who was employed by Shell until his employment was terminated following the investigation, sued Shell for wrongful termination and for defamation. Writt’s defamation claim was based on Shell’s furnishing the DOJ its report that contained allegedly defamatory statements about him. [His defamation claim was based on allegations that in the report provided to the DOJ, Shell falsely accused him of approving bribery payments and participating in illegal conduct.] Shell asserted that it was absolutely privileged to provide the report to the DOJ and moved for summary judgment. The trial court granted Shell’s motion; the court of appeals reversed.”

In the words of the Texas Supreme Court, the court of appeals:

“[H]eld that the summary judgment evidence did not conclusively establish that at the time Shell provided its report to the DOJ a criminal judicial proceeding against either Shell or Writt was ongoing, actually contemplated, or under serious consideration by either the DOJ or Shell. Therefore, the report was only conditionally, not absolutely, privileged. The court reasoned that Shell cooperated with the DOJ during an ongoing investigation and created the report as a part of its own voluntary internal investigation, but that those actions were not enough to conclusively establish that Shell provided the report under a serious threat of prosecution; nor was the fact the DOJ eventually initiated a criminal proceeding against Shell conclusive evidence that such a proceeding was actually contemplated or under serious consideration by the DOJ as of the time Shell provided the report.”

The Texas Supreme Court addressed the following question: “whether the providing of a report regarding possible criminal activity to a government agency was an absolutely privileged communication or a conditionally privileged one.”

As noted by the court, Texas recognizes two classes of privileges applicable to defamation suits: absolute privilege and conditional or qualified privilege. “An absolute privilege is more properly thought of as an immunity because it is based on the personal position or status of the actor. . . . Such immunity, however, attaches only to a limited and 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.”

Shell argued that an absolute privilege extends to the report and the statements in it because it was furnished to the DOJ preliminary to a proposed judicial proceeding. It argues that the information contained in its report, including information about Writt, was solicited by the DOJ during an ongoing FCPA investigation; Shell compiled and provided the report under serious and good faith contemplation of a judicial proceeding; and those circumstances are sufficient for an absolute privilege to apply.

Writt did not assert that Shell’s providing the report to the DOJ was not privileged; he simply urges that the court of appeals was correct in classifying Shell’s communication as being conditionally privileged. He argued that Shell’s report was provided during an ongoing investigation, but not as a communication preliminary to a judicial proceeding or as part of a quasi-judicial proceeding

The Texas Supreme Court concluded “that Shell’s statements were made preliminary to a proposed judicial proceeding and were absolutely privileged.”

According to the Texas Supreme Court:

“The summary judgment evidence establishes that at all relevant times, Shell was a target of the DOJ’s investigation.”

[…]

“[W]hen the DOJ’s leverage over Shell vis-à-vis the FCPA and its somewhat draconian potential penalties are considered, it is manifest that Shell was, practically speaking, compelled to undertake its internal investigation and report its findings to the DOJ.”

“From the time Shell was first contacted by the DOJ to the time it provided its report to the DOJ, FCPA compliance was of great concern for U.S. businesses operating overseas and potential violations were not taken lightly. Moreover, businesses that chose not to cooperate were subjected to substantially greater punishments if a DOJ prosecution was successful.”

“In sum, the summary judgment evidence is conclusive that when Shell provided its internal investigation report to the DOJ, Shell was a target of the DOJ’s investigation and the information in the report related to the DOJ’s inquiry. The evidence is also conclusive that when it provided the report, Shell acted with serious contemplation of the possibility that it might be prosecuted.”

As noted in the Texas Supreme Court opinion:

“Six former United States Attorneys General, Michael B. Mukasey, Benjamin R. Civiletti, Edwin Meese, III, 1 Richard L. Thornburgh, William P. Barr, and Alberto R. Gonzales, submitted an amicus curiae letter in support of Shell. The Chamber of Commerce of the United States of America, the National Association of Manufacturers, and the American Petroleum Institute submitted an amicus curiae brief in support of Shell.”

See this prior post concerning the underlying 2010 FCPA enforcement action against Royal Dutch Shell.

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