Legal Crisis Strategies : Crisis Communications Lawyer & Attorney : McDermott Will & Emery Law Firm : Risk Mitigation, Mass Litigation

We’ve talked before about crisis prevention in general. With any of the crises we’ve seen this summer, it would be hard to say, “This came completely out of the blue.” That’s because we all have an inkling of what could happen but few of us want to think about the worst case scenario. But without actually identifying potential crises, a company can never prevent it and will, in turn, not be prepared to deal with it effectively.

So CEOs and General Counsels need to think like their security officers and analyze the risk of a crisis by looking at the company’s vulnerability to a specific threat and identifying ways to lower that risk. Every police officer, federal agent and emergency manager knows the equation:

Risk = Threat x Vulnerability

Threats come in all forms. If you are a food processing company, it could come in the form of some health outbreak caused by a system failure or product tampering. There could be a catastrophic accident (such as we’ve seen recently in the Gulf), environmental harm, either from the accident or manufacturing processes, technological breakdowns, rogue employees (some rogue stockbrokers come to mind). The best way to prevent these potential crises is to sit down with senior management to examine the worst case scenarios, in order of likelihood, and assess the reputational, legal and economic damage each could do to the company.

Next, identify what systems are already in place to prevent these threats from occurring.  Where a company can really benefit economically from a crisis audit is by helping the General Counsel see what systems, trainings, and compliance regimes are in place, inadequate, or not properly implemented.  Do a cost/benefit analysis on what else could be done to reduce the threat. Sometimes it just isn’t economically feasible to “harden” every target, but keep in mind the cost of the potential legal liability if your inaction could be found “negligent.”

Third, develop a plan of action in the event that this threat becomes a reality. Make it specific, even down to potential messages that could be used in the first few hours. Identify which managers would be on the “crisis response” team and which law firms you would use to handle that particular type of crisis. 

Finally, but probably most importantly, make sure these crisis audits are done under privilege, through the auspices of the General Counsel. Bring in unit managers and, ultimately, your PR team, but make sure that all communications go through the legal department.

A crisis audit, if done regularly, will also help you establish an “early warning system” and avoid the crisis before it hits.

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General Stanley McCrystal, Virginia Senator George Allen and Carly Fiorina, among others, have learned the hard way that in today’s 24/7 news, blog, twitter and YouTube world, nothing is “off-the-record” and everything, even the most petty remarks, are up for endless debate. Those “off-the-cuff” remarks, whether told to a reporter allegedly under an “off-the-record” ground rule or caught on video or audio can so quickly shift focus from the person’s real message to a debate over inconsequential subtext that can derail careers, candidacies and reputations.

Even actions matter. Take the pictures of Tony Hayward, BP’s battered and buffeted CEO, who had complained that he wanted his “life back” after the oil spill, and moved back to Britain at the orders of the Chairman. The very first days after his arrival he was photographed on a yacht in crystal clear waters, which did not go unnoticed at the White House, with Chief of Staff Rahm Emanuel commenting, “Well, to quote Tony Hayward, he’s got his life back, as he would say.”

Does this mean you should never engage with the media? No. With or without the mainstream media, there are more and more blogs, citizen journalists and just plain “watchers” out there. In fact, the Democratic National Committee is working on replicating that “Macaca Moment” of Senator Allen’s by organizing “The Accountable Project,” by encouraging people to go to Republican events and upload videos to show candidates engaged in gaffes, double-speak and hypocrisy.

Unfortunately, this kind of “gotcha” citizen journalism means no one is ever truly “off” the record. Which is why a company should warn key managers, the public face of the company, to guard against those embarrassing photos, quotes, and quips that can be caught on a camera-phone and uploaded instantly to Facebook, Twitter or a consumer website. Facebook and Linkedin are nice, but having lived and worked in Russia for the last 20-odd years, after the spy scandal broke last week, I immediately checked my friends and “LinkedIn” list for any of the suspects. You never know.

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No matter what your crisis is, and no matter what your media strategy may be, the best way to manage a crisis is to respond to reporters and to do so in a timely manner. It may sound obvious, but too many companies fail to do this, whether because executives have stuck their heads in the sand, don’t feel prepared to talk with the media, or simply don’t make media inquiries a priority. But ignoring the media is a huge mistake that can be easily avoided.

No “no comment,” please!

When a crisis situation breaks, it is imperative to put together, at a minimum, a statement—no matter how short—that will serve as your response to media inquiries until you are prepared to provide further information. Even if it is something as generic as, “we are taking this situation seriously and conducting a full investigation.” Anything is better than a “no comment,” which can leave the public with the impression that you or your company has something to hide. 

Proactive Media Strategy

Depending on the circumstances, adopting a proactive media strategy can be the most effective way to manage a crisis situation. This requires some fact-finding ahead of time so that you can work closely with one or several reporters as events unfold. Even if there is some uncertainty surrounding the situation, building a rapport with reporters and providing them with the facts is the best way to get accurate, balanced coverage of an issue. News outlets can report the best facts you have on your side only if your provide those facts to them. Stated differently, take every opportunity to balance a bad story with all of your best facts—including the story of what you are doing to take accountability for what went wrong. This last step is the key to protecting your reputation and repairing trust among your stakeholders and customers in the aftermath of a crisis.

Rapid Response

Being prepared for the onslaught of media inquiries is a critical part of managing a crisis. We often work with our clients to set up rapid response operations, which is simply a small group of individuals tasked with receiving, organizing, and responding to media inquiries. Those in charge of responding to reporters should be one or two people who are very familiar with all of the relevant facts, statements, and/or messages (depending on your particular strategy) which should be vetted by executives and attorneys. These individuals should have experience working with the media, and should be prepared and available to return phone calls well within reporters’ deadlines.

When you are unprepared for a rush of media coverage, your side of the story becomes, “Company X was not immediately available for comment.” This is not as bad as a “no comment,” but it is a wasted opportunity to balance the story with good facts, and perhaps more importantly, a wasted opportunity to handle the negative facts. Obtaining balanced coverage requires ensuring that reporters have facts to report—whether positive or negative.

Conclusion

It is a worthwhile exercise to conduct a “fire drill” scenario to plan ahead for a negative event. Identify ahead of time who will comprise your team of inside employees and outside advisors that you will call when a crisis breaks. Make sure you plan for good communication and organization, especially when it comes to handling the media. Urge your executives to view each media inquiry as an opportunity rather than an annoyance, and you will see what the power of communication can do to shape public opinion.

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Whenever I have been faced with counseling a CEO going before the press or Congress to answer for the worst judgments by persons in the CEO’s organization, the tension between reliance upon the regime of legal rights and the decision to accept a broader responsibility is inevitably on the agenda. This is a difficult position to navigate when simultaneously juggling legal liability, duties to shareholders, and long-term reputation concerns. 

In 1974, Soviet dissident Alexander Solzhyenitsyn delivered an address at Harvard University in which he critiqued Western (read “U.S.”) society for its over-reliance on law compared with doing what is “right.” A piece of that address is well worth considering in the wake of so many recent corporate crises: 

Western society has given itself the organization best suited to its purposes, based, I would say, on the letter of the law. The limits of human rights and righteousness are determined by a system of laws; such limits are very broad.

People in the West have acquired considerable skill in using, interpreting and manipulating law, even though laws tend to be too complicated for an average person to understand without the help of an expert. Any conflict is solved according to the letter of the law and this is considered to be the supreme solution. If one is right from a legal point of view, nothing more is required, nobody may mention that one could still not be entirely right, and urge self-restraint, a willingness to renounce such legal rights, sacrifice and selfless risk: it would sound simply absurd.

One almost never sees voluntary self-restraint. Everybody operates at the extreme limit of those legal frames. An oil company is legally blameless when it purchases an invention of a new type of energy in order to prevent its use. A food product manufacturer is legally blameless when he poisons his produce to make it last longer; after all, people are free not to buy it.

I have spent all my life under a communist regime and I will tell you that a society without any objective legal scale is a terrible one indeed. But a society with no other scale but the legal one is not quite worthy of man either. A society which is based on the letter of the law and never reaches any higher is taking very scarce advantage of the high level of human possibilities. The letter of the law is too cold and formal to have a beneficial influence on society. Whenever the tissue of life is woven of legalistic relations, there is an atmosphere of moral mediocrity, paralyzing man’s noblest impulses.

(Emphasis added.) 

It is absolutely clear that any divergence between a company’s assertion of its legal rights, even in the most polite and appropriate way, and the public’s perception of what is ethical behavior poses the ultimate serious issue for crisis management. For example, a company that cause a crisis in which people or property are injured may take responsibility by saying that it will pay “all legitimate claims.” Immediately, the media and public will ask whether that company is relying on a litigation strategy to determine what a legitimate claim will be—certainly a legal right—or whether the company is promising to accept responsibility for damage to others from its conduct that might even be the result of its business partners’ actions and decisions? Will legitimate or even peripheral claims be paid outside of litigation? 

In a legal-political-business and environmental catastrophe, can a company, as a representative of the corporate business community, claim that it can comply with ethical and moral values and set aside legal principles? A company facing a complex crisis is in the most difficult position possible to parse such distinctions. The irony such companies face is that, in order to maintain their long-term reputation in the marketplace, they must act ethically and ‘do the right thing.’ However, ‘doing the right thing,’ in some cases, may mean taking financial responsibility to the point where a company cannot survive in the long-term. Even with the best intentions, drawing the line between a legal floor and an ethical ceiling can be difficult and risky. For this reason, a company must have a clear understanding of its constituents, its risks, and must surround itself with a proven and trustworthy set of advisors. More thoughts on this next week…

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In the face of a recall, a disaster, or a crisis, too many attorneys counsel their clients to avoid apologizing and to avoid taking responsibility in order to minimize their legal exposure.  These lawyers would likely have their clients believe that doing so would “open the floodgates of litigation,” or “provide evidence of wrongdoing that would strengthen claims.”

The truth is that if your company was involved in a large-scale crisis, it will likely face some litigation or at a minimum, a government investigation.  And, there are many ways to take responsibility without stating that your company was at fault.  In short, focus on solutions and leave the finger-pointing for the courtroom. 

If there are a number of people and companies involved in the crisis at hand—there usually are—you may not be solely at fault, or you may not be at fault at all.  Nevertheless, it’s important to let the public, your customers, and your employees know that you are stepping up to the plate.  By stating that your company is, for example, “doing everything possible to rectify the situation,” or “working closely with authorities and partner companies to bring about a solution,”  and “paying the costs of remediation,” you are neither accepting fault or pointing fingers.  But, importantly, you are working on repairing the trust of the public, lawmakers, and your regulators.

In particular, if your company is involved in a crisis in which people are injured, it is imperative to express some regret about the events that occurred.  And, it is possible to craft an apology that does not expose you to additional liability.  It’s not easy, but it’s possible.  (For more on apologies, see our post, The Art of the Apology).

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Just about every day since the digital revolution began, plaintiffs, regulators, prosecutors and members of Congress roll out damning and spicy quotes from email exchanges between employees as the basis of their litigation, investigation, charges or public hearings. And then there are voice mails, Facebook, mySpace and Linkedin messages to consider as well as those quicky emails and texts sent from blackberries and cell phones. We all remember them…the government convictions in recent years based almost solely on email or the love notes to a fellow employee that result in the boss getting fired. What can any CEO or general counsel do to protect against these inflammatory emails, taken out of context, often making assertions and not stating facts, from becoming the basis of legal action against his or her company and employees?

One simple solution is training and educating employees on how their words in emails and any electronically sent or saved message do matter. These are not “private” messages and once on a computer, particularly a company computer, they are discoverable and usable by your adversary in any way they want, either as evidence in the legal arena or to inflame customers, shareholders, or potential jurors in the court of public opinion. Most people don’t write emails thinking they will be blown up by an adversary, scrutinized for meaning and interpreted to their best advantage. What you meant to say may not be much of a defense against what you did say in black and white in front of the jury. 

While people pour over their transaction documents and briefs, rarely do they take that care over emails about those same documents—emails that can be much more telling about motivation and which can be more easily found and discoverable. Why? Because emails are electronically searchable and often sent around to a wider array of people, including non-attorneys or others outside the company,, that could amount to a waiver of privilege.

Therefore the best way to manage a crisis from a damning email is to prevent that damning email from being written in the first place.  Employees need to be told, “Unless you want this email blasted on the front page of the New York Times, or blown up on a placard in front of the Senate Judiciary Committee, the Golden Rule should be : Don’t hit send.”

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The tragic and deplorable terrorist attacks in the Moscow subway should remind everyone that crisis management begins at home. Press reports quoted many panicked Muscovites lamenting that they could not locate loved ones and had little information as to whether they were dead or alive. Cell phone towers were unable to keep up with demand, as millions tried to check in with their family and friends who were among the 500,000 people traveling on the subway at that time.

            Things could have been far worse if the attacks had continued, or the government had decided to order an evacuation of parts of the city. So how does one prepare for the unthinkable? You think about it by identifying the most likely terrorist or criminal threats and natural disasters and planning for them. You should also know and understand the plans of your workplace and community. You talk to family members about what to do in the event of an emergency by picking meeting locations, with one near home and one removed from home, in the event that your home is in the “hot zone.” You also develop a crisis communications plan for staying in touch if you are separated when the crisis occurs or afterward.

            The potential liability already exists for companies that do not properly plan for natural or man-made disasters. For example, after 9/11, several lawsuits were filed against companies, accusing employers of negligence for not having adequate evacuation plans or informing their employees about those plans. Some suits alleged the foreseeable risk of such an attack because the World Trade Center (WTC) was at risk for fires and had been the target of terrorist attacks in the past, specifically, in 1993. The court allowed cases to go forward against the WTC defendants because it agreed with plaintiffs that these risks were reasonably foreseeable. In re September 11 Litigation, 280 F. Supp. 2d 279, 301 (SDNY 2003).

            To mitigate the risk of liability from accusations of negligence, companies too must have plans, educate their employees about those plans and, most importantly, exercise those plans. The federal government has an excellent website with tools and information that can help you or your workplace formulate a plan.

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In time of crisis it is important for companies to establish a pro-active media strategy that includes working with a reporter to get a “predicate story” written. The predicate story tells the whole story—good, bad and ugly—in one place, and serves as a base line story for all subsequent media coverage.

Why is this a good idea? First and foremost, with many issues, and especially in a crisis or litigation, you want to get out ahead of a story. You want to get the facts in the press so that someone else does not get to the public first with distorted facts. The predicate story is the most effective way to do this for several reasons. 

Specifically, in a crisis, you want to get the story in and out of the media cycle as quickly and accurately as possible. A predicate story can help do this by being the definitive story on the issue. But, it can only be effective if the story covers all the facts—both good and bad. 

A predicate story also allows the subject an opportunity to get messages and on-the-record comments into the story. This will ensure that the coverage of the issue is balanced with your facts.

You may also be able to negotiate an embargo with a reporter writing a predicate story. In this agreement, a reporter will agree to not publish the story until a certain date. For example, if you are about to file a complaint against a defendant, you may negotiate an exclusive story to a reporter who agrees to wait to publish the story until the date the complaint is filed. This will give the facts in the complaint maximum effect in the court of public opinion, and generally bring attention to your case.

Start by finding the right reporter to write the story. It is always good to work with a reporter that you know and trust, but any reporter who has been balanced and thoughtful in the past is a good one to approach. Be sure to provide the reporter the resources he/she needs to do his/her job, such as access to key documents and people knowledgeable about the facts. Finally, remember that a predicate story will take some time to write; therefore, you want to start early to give the reporter an opportunity to investigate the facts and to get comments from others. If a predicate story is to do its job, it will take time. 

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For a public figure or corporation, apologizing requires more than simply saying, “I’m sorry.” An effective, sincere apology depends as much on the words you say as it does on the context: timing, meaning, setting and actions. But let’s start with the basics. What constitutes a good apology?

First, acknowledge your fault or offense, and apologize for it. This may sound obvious, but it is not. Too many public figures manage to sidestep this painful but necessary step. For all of the missteps Mark McGwire has made, he did directly apologize for using steroids saying, “It's time for me to talk about the past and to confirm what people have suspected. I used steroids during my playing career and I apologize.”

Many times, corporate executives are reticent to admit fault when things go wrong for fear of legal liability. Not acknowledging some kind of responsibility for the situation can easily endanger your customers’ long-term trust. There is always a way to craft an effective, sincere factual apology while avoiding damaging your position in litigation.

Second, offer your sincere regret for the actions or omissions and the effect they had on others, and take actions to make amends. In 2007, Jet Blue Airlines offered a public apology to its customers for a terrible week of delays and cancellations that left many of its customers stranded. In response, it issued an effective apology, which began: 

Dear JetBlue Customers,

We are sorry and embarrassed. But most of all, we are deeply sorry.

Last week was the worst operational week in JetBlue’s seven year history.

Jet Blue also did one better—it created a Jet Blue Customer Bill of Rights that provides guidelines for what customers are entitled to when various types of delays and cancellations occur. Similarly, as we recounted a few weeks ago, Johnson and Johnson took responsibility for its Tylenol crisis and responded by creating tamper-proof packaging. The creation of “new facts” makes the apology more effective.

Third, don’t allow the drip, drip, drip of truth to render your apology insincere, or don’t 99 percent apologize. When former Senator John Edwards publicly apologized in 2008 for his 2006 affair with Rielle Hunter, he acknowledged that he was previously untruthful with the public about the affair. 

In 2006, I made a serious error in judgment and conducted myself in a way that was disloyal to my family and to my core beliefs.  I recognized my mistake and I told my wife that I had a liaison with another woman, and I asked for her forgiveness.  Although I was honest in every painful detail with my family, I did not tell the public. When a supermarket tabloid told a version of the story, I used the fact that the story contained many falsities to deny it.  But being 99% honest is no longer enough. 

But even worse, he denied in that apology that he fathered Ms. Hunter’s baby with or without knowing the truth, saying, “I am and have been willing to take any test necessary to establish the fact that I am not the father of any baby, and I am truly hopeful that a test will be done so this fact can be definitively established.” His decision to continue denying paternity required him to make yet another public apology in January 2010, saying, “It was wrong for me ever to deny she was my daughter and hopefully one day, when she understands, she will forgive me.” His repeated denials also ensured that his credibility will forever be questioned. 

Fourth, don’t wait until the “perfect time.” The right time to apologize is as soon as you realize that you or your company is responsible for an act or omission. Waiting too long can result in your audience feeling as if anything you do is “too little, too late.” 

Fifth, know your audience. Even though you may be apologizing to family, friends, customers, sponsors or others, either personally or through appropriate channels, you cannot leave out the media. Ultimately, the media will transmit your message—often with editorial comments—all over the world. Let the media be part of the process, and answer their questions. They are the best way for you to get your story, your facts and your apology into every article written on your particular crisis.

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