By Kelline R. Linton,
Texas businesses reporting employee crime are protected from defamation suits
The Texas Supreme Court recently issued a long-anticipated opinion that protects companies forced to report their employees to authorities for criminal activities. In Shell Oil Co. v. Writt, the Court held that an international investigation report that Shell provided to the U.S. Department of Justice (“DOJ”) about potential Foreign Corrupt Practices Act (“FCPA”) violations was “absolutely privileged” and could not lead to defamation claims by the employees. However, the Court cautioned that companies that voluntarily report their employees might still face civil liability.
The Court noted that under the FCPA, businesses that choose not to cooperate in DOJ investigations are subject to substantially greater punishments. For this reason, Shell was compelled to undertake its international investigation and report the findings to the DOJ.
What does this mean? The DOJ and SEC have become increasingly adamant for companies under investigation to secure and provide evidence of employee culpability. This Court ruling protects such companies from potential civil liability when they make good faith efforts to disclose the results of an international investigation and expose individual culpability. We are available if you have any questions about such investigations.
(Shell Oil Company v. Robert Writt, No. 13-0552 (May 15, 2015)).
Bifurcation of FCA trial provides businesses new defense tactic
In a recent decision, a federal judge took the unusual step to split a False Claims Act (“FCA”) trial into two parts—bifurcation of the element of falsity from the element of scienter, with the issue of falsity tried first.
In U.S. ex rel. Paradies v. AseraCare, Inc., the U.S. District Court for the Northern District of Alabama explained bifurcation lies squarely within the court’s discretion. The court found bifurcation was warranted in this case because it allowed the government to use sampling and extrapolation to prove falsity; therefore, the court wanted to ensure that the government could not present unrelated evidence to indirectly relieve itself of the burden to prove falsity. For example, the government indicated it would seek to present evidence of the company’s general corporate practices at trial, but the court held that allowing such general “pattern or practice” evidence before the jury decides whether any claim is false would be unduly prejudicial to the company.
What does this mean? This is possibly the first case that a federal judge has bifurcated the issues in an FCA trial. In this context, bifurcation places a harder burden on the government because it forces the government to prove all the required elements of an FCA claim, while limiting the government’s introduction of evidence. This case potentially unveils a valuable new defense tool for companies facing an FCA claim. We will continue to monitor this case for any new developments. In the meantime, we are available if you have any questions.