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Your Litigation Strategy
May Be Killing Your Client's Business
For individuals and corporate entities alike, lawsuits arise from interactions with other parties. Some of these interactions involve prominent parties. Thus, the ensuing lawsuits will attract the attention of the media. Other times, these interactions arise under interesting circumstances or involve novel applications of the law. Here too, the ensuing lawsuits will attract the attention of the media. When defending these lawsuits in a court of law, attorneys would not dream of missing an opportunity to use any and all tools available to them in the course of their defense.
But something different happens when attorneys are faced with making their clients' cases in the court of public opinion. Attorneys are notoriously gun shy when it comes to commenting publicly on lawsuits in which their clients are involved. In keeping quiet, attorneys allow opposing parties to shape the public narrative through court filings and media statements. Often, the best an attorney will do when confronted with the opportunity to make a public statement about litigation involving his client is to describe the allegations as being "without merit," and promising to "vigorously defend" the lawsuit. Calling such a statement a "statement" is being charitable. It is really a "nonstatement statement"—a close cousin of the Watergate-era "nondenial denial."
When an attorney chooses not to comment substantively on a lawsuit against a client, the client suffers. The client damages its brand and reduces the goodwill the client and its representatives have built among their key constituencies. A damaged brand and reduced goodwill could lead to fewer customers, lower revenues,and lower profits. How, you ask, "could my 'measured' approach to speaking publicly about litigation against one of my clients damage its reputation and cause financial harm?" Because radio silence regarding a lawsuit means that three key constituencies of the party being sued are not hearing that party's side of the story: current and future customers; current and future employees; and additional audiences whose perception that the party's reputation has been damaged could affect the ability for that party to operate normally. These three groups just so happen to be the key audiences most closely tied to the ability for a party to generate revenues and profits.
Imagine one of the business services providers you rely on the most has been sued because one of its top executives allegedly discriminated against minority employees, or allegedly harassed LBGTQ employees, or refused to pay female rainmakers the same commission percentage as male rainmakers. An article about the complaint, a leaked deposition transcript, or summary judgment motion focuses, with great detail, on the alleged "very bad things" the service provider did that led to the lawsuit. You are disgusted by the conduct you have read about. It goes against the values you hold dear. In response, your service provider says something to a reporter about looking forward to its day in court. It makes no effort to defend itself in the media. No one from the provider has reached out to you to—as a valued client—to defend its conduct. In the meantime, you question whether you can continue to retain this provider's services in light of these allegations. You are well aware of the provider's competitors being able to provide services to you that are at least comparable in quality to your current provider. You know there are two sides to the story, but you don't ever hear the provider's side of the story. And you do not have the time to track down court filings because you are too busy with keeping your head above water and running your own business. Perhaps worst of all, your friends and colleagues know you use this provider and are questioning the basis for your loyalty to this provider in the face of the allegations of the lawsuit.
Welcome to the minds of current customers of a business that has been sued. Yes, that party may be able to mitigate reputational damage by speaking directly to its customers about the litigation. That is an effective tactic, but one that is rarely recommended given the nature of attorneys to discourage their clients from speaking about pending lawsuits. Still, those current customers may be so put off by the allegations that they take their business elsewhere. As for prospective customers, they can't be reached through direct communications. They do, however, read the news, including articles about lawsuits filed against a party in which its attorney has made no effort to defend the client and protect its reputation. In the absence of any public defense of the allegations, these potential customers have no desire to associate with an entity that is alleged to have supported (or at least failed to stop) conduct that a potential customer may find repugnant.
Now, imagine this service provider is not your service provider but is instead the organization that employs you. And you are of the same ethnicity as the plaintiff alleging racial discrimination. Or you work with the employees alleged to have sexually harassed your female coworker. Or you are a newly-minted female executive, and another female executive alleges that the organization has an unjust pay gap within its management. You have questions. And yet, your employer has not taken advantage of the publicity surrounding the lawsuit to reassure you—via its statements to the media—that its mission is to create an inclusive environmental that treats all genders, ethnicities, and sexualities equally. Naturally, your friends and family have seen the allegations and have asked you, in the absence of any public defense of the allegations, how you could possibly work in such an environment. You begin looking for a position at new organization that can accommodate your values, your innovative way of conducting business, and, by the way, your book of business.
As with its current customers, this organization can easily reach out to its current employees to educate them about a suit against the organization. Most will not, but it is possible. But what about future employees (including executives) and board members? In the course of their due diligence in connection with an interview, they will surely come across articles about the lawsuit. Articles that will be devoid of any semblance of a defense against the lawsuit's allegations. These potential employees could have skills that help to increase the organization's revenues and profitability. But in the absence of any public defense of the allegations, they have no interest in joining an organization that does not appear to represent certain values they hold dear.
Finally, there are other key audiences whose perception that an organization's reputation has been damaged could affect the ability for the organization to operate normally. Politicians and government regulators looking to make an example out of that organization. Plaintiffs attorneys who smell a class action lawsuit and begin recruiting whistleblowers from within that organization. Other attorneys who think they can do a better job defending that organization, in part because they too are bound by the Pennsylvania Rules of Professional Conduct and know that Rule 3.6 (trial publicity) is not a legitimate excuse for failing to mount a public defense of a lawsuit. Business and community leaders who once picked up the phone when that organization's executives called but who now don't want to be perceived as being associated with that organization. Suppliers and vendors whose services were instrumental to the organization's growth but who, now too, do not want to be perceived as being associated the organization. The list goes on. Even a settlement of the lawsuit, without a powerful public defense, will not be enough in the minds of these audiences to wash away the taint of the lawsuit's allegations from the organization's reputation.
The fact that a lawsuit has been filed against an individual or organization, on its own, is unlikely to cause that party reputational harm and financial consequences. But when that party's attorneys fail to mount a public defense of its actions, its reputation begins to suffer. Ironically, attorneys would not dare dream of missing an opportunity to file opposition papers or reply briefs in a court of law. And yet, when they fail to publicly defend their clients in the court of public opinion, they are missing the equivalent opportunity to do so. That means preventing clients from speaking to their current and future customers and employees, as well as other parties whose negative reactions to a lawsuit could detrimentally impact the clients' business prospects. In keeping quiet, an attorney creates a vacuum which his client's key audiences will likely fill with conjecture that does damage to the client's reputation.
With enough missed opportunities in the court of public opinion, reputational harm will become financial ruin. The attorney's client will see its customers, employees, and other key audiences take their business, skills and ideas elsewhere to avoid guilt by association. They will seek shelter with a client's competitors. As a result, the client's revenues will plummet, with profits following suit. And, of course, outside counsel will see its realization rate drop as the client's financial health has been devastated and limited funds remain with which to pay legal fees.
Attorneys would be wise to publicly defend their clients outside of a court of law and do all that they can to prevent an adverse ruling in the court of public opinion. Such an adverse ruling will turn a legal victory into a Pyrrhic victory. Just ask Arthur Andersen in Andersen v. United States, 544 U.S. 696 (2005) (unanimously overturning the accounting firm's conviction of obstruction of justice due to flawed jury instructions). •
Special to the Law Weekly Wayne Pollock is the founder and managing attorney of Copo Strategies in Philadelphia, a boutique law firm that helps parties involved in legal disputes make their case in the court of public opinion.
Reprinted with permission from the January 10, 2017, online edition of The Legal Intelligencer/Pennsylvania Law Weekly © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or firstname.lastname@example.org.
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