DEALING WITH A COMPANY CRISIS:
Are You Prepared for the Inevitable Attack?
Association of Corporate Counsel
San Diego Chapter
September 11, 2014
McKenna Long & Aldridge, LLP
Christian D. Humphreys
4435 Eastgate Mall, Ste. 400
San Diego, CA 92014
619-595-5488
[email protected]
Jan Strode
CEO Advisors
CEO
619-890-4040
[email protected]
Dealing with a Company Crisis:
Are You Prepared for the Inevitable Attack?
 What Is a Crisis and How Do They Arise?
 What Is Crisis Management?
 Consequences of a Crisis
 How Lawyers Approach a Crisis
 The Conflicts that May Arise
 Legal Considerations
 Developing a Crisis Management Plan
 Role of Outside Counsel
 The Reporter’s Perspective
 Psychology of a Crisis
 Checklist for the C Suite
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What Is a Crisis and How Do They Arise?
 Execution of a Search Warrant
 Attacks by a Consumer Advocacy Group
 A Former Employee Turns Whistleblower
 Information Security Breaches
 The Filing of a High-Profile Lawsuit
 Executives are Indicted or Otherwise Misbehave
 Restatement of Earnings
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What Is a Crisis and How Do They Arise?
 New Legislation Is Proposed That Threatens Your Industry
 A Serious Injury Involving Your Product with Media Attention
 Federal or State Enforcement Action
 Product Recalls Due to Safety Issues
 Environmental Disasters – e.g. The BP Oil Spill
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What Is Crisis Management?
 It is a company’s ability to be prepared for—and respond
appropriately to—unforeseen events which may disrupt your
business or endanger the safety or reputation of:
 People
• Company Personnel
• Purchasers/Users
 Information
 Systems
 Property
 Business
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Consequences of a Crisis
 The consequences of a crisis can be far and wide and can lead to
devastating results. What happens or is done on one front will
impact what happens on another
 Litigation (in every
form and any forum)
 Law Enforcement
 Regulatory
 Legislative





The Investment Community
The Marketplace
The Press
Business Partners
Employees
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How Lawyers Approach a Crisis
 Assume every press release or public statement your company
issues now will be an exhibit in future litigation
 All public statements, including those by executives who may have
no official authority to speak for or bind the company, can also be
considered admissions of wrongdoing
 Speaking publicly about a matter that may be the subject of future
litigation is rarely advantageous to the future litigant
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How Lawyers Approach a Crisis
 Immediately commence a thorough internal investigation before
taking positions that may bind the company in future litigation. There
is major tension here between the need to address the press and
knowing the facts
 Protecting Attorney-Client Privilege is paramount, and requires
attorneys to be involved in all internal investigations and decisions
about any statements or actions
 Make sure key employees are all on the same page about what they
are saying and what they are hearing on the ground
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The Conflicts that May Arise
 Weigh the desire to fully investigate and collect the facts, versus
“getting in front of the story” quickly
 Lawyers want only to protect their clients’ interests in future
litigation. Executives are motivated by business concerns: damage
to the brand, decreased sales, plummeting stock price
 Carefully consider what a company says publicly to avoid
admissions, but crises change constantly and may require “rapid
response”
 Spin is no longer acceptable. If what the company says seems
misleading it can negatively impact a company’s appearance to
jurors, regulators, lawmakers and the public
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Legal Considerations
 Think About Documents Immediately
 Get a Sense of What Has Already Been Created & Now Cannot Be
Destroyed
 Document Retention Policy: Have One Before A Crisis Hits
 Litigation Hold Memorandum As Soon As Litigation Appears
Reasonably Likely
 Avoid Creation of “Smoking Guns”
 Have Key Employees Think Strategically About What They Put Into All
Documents
 Monitor Chatter: Internal and External
 See What Your Employees Are Emailing About the Crisis, Even
Casually, to One Another
 Employee Social Media Usage—Monitor or Block?
 Google Alerts & News/Media Monitoring
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Legal Considerations
 One Message, One Voice
 Designate One Spokesperson And Create Cohesive Talking Points
 Every Inquiry May Be Media In Disguise—Advise All Employees
 Privilege Protections
 Involve Counsel In Deliberations and Drafting For Maximum Protection
 Label All Documents Carefully To Ensure Protection
 Avoid Admissions or Creating Liability
 Any Statement May Constitute An Admission of Wrongdoing/Liability
 In Rare Cases, Public Statements Can Lead To Criminal Liability:
InterMune CEO Steve Harkonen Was Tried & Convicted of Wire Fraud
Because of a Press Release
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Legal Considerations
 Talk To Your Experts Right Away
 Determine Your Internal And External Experts And Get Them On Board
And Involved Early
 Involve Counsel Where Possible For Consultants You Do Not Intend To
Have Testify, To Bolster Work Product Protections
 “Circle the Wagons”—Future Witnesses
 Interview The Employees Who May Be Key Witnesses Someday
 Record Their Recollections While Fresh And Ensure Consistency
 Make Sure They Are Particularly Aware of the Importance of Their
Documents and Communications
 Respond To Them and Guide Them Early In A Crisis
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Developing a Crisis Management Plan
 A Crisis Management Plan will allow a company to respond more
effectively to unforeseen situations while:
 Minimizing the harm from any issue
 Maximizing response efforts
 Maximizing recovery efforts
 Maximizing company’s reputation
 Minimizing business interruptions
 Minimizing potential criminal or regulatory liability
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Developing a Crisis Management Plan:
Team Composition
 Typically, a well-positioned company has a Crisis Management
Team composed of various elements of the organization including:
 Management
 Legal
 Operations
 IT
 Public Relations/Corporate Communications
 External Media Crisis Expert
 The Team is a formal organization within the structure of the
Company.
 The Team maintains the ability to speak for the corporation in times
of crisis.
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Developing a Crisis Management Plan:
Communication Plan
 Allows an organization to communicate effectively when an
emergency occurs
 Easy to read; easily updateable
 Technology-friendly involving multiple ways for the organization to
communicate during times of crisis
 Uses multiple means of communication (telephone, cell phone, pagers,
Blackberries, emails, etc.)
 Test, Test and Retest
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Role of Outside Counsel
 Triage – You have no time; deal with what is most important
 Objective risk assessment
 Ascertaining local rules/procedures/customs in locales where the
company operates
 Identification and selection of local, and specialized, counsel
 Conducting the fact investigation, including interviewing witnesses
and pulling together documents
 Protecting privileges and confidential or proprietary information
 Identification, selection and engagement of potential experts and
other outside assets
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Role of Outside Counsel
 Formulating practical strategy consistent with a realistic assessment
of how a crisis is likely to unfold
 Provide expertise on lessons learned from other crises
 Assistance in identification and training of spokesperson(s)
 Input and coordination in mapping out corporate communications
strategy, including working with in-house and outside media experts
 Making certain public responses, corporate disclosures, and
litigation defense are accurate and consistent
 Coordinating expert assistance to test factual, tactical and/or
substantive assumptions
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Role of Outside Counsel
 Assisting in the assessment of disclosure obligations (internal and
external)
 Working with in house counsel, risk manager, and insurance to
evaluate coverage
 Assessing potential conflicts of interest
 Preserving and making the record (an on-going process)
 Making certain all critical components of the company are on the
same page, including management, legal, corporate
communications, marketing, manufacturing, regional offices,
international offices, and so on, once strategy is agreed upon
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The Reporter’s Perspective
 It is not the job of a reporter to report the truth
 It is not the job of a reporter to accurately report the facts on all
sides of an issue
 It is not the job of the audience to determine the truth from the facts
the reporter has assembled
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The Reporter’s Perspective
 Given the previous slide it is essential, during a crisis, that you:
1) Know the facts surrounding your circumstance
2) Stay close to and with the facts. Don’t elaborate, don’t embellish
3) Remember, brevity is always best. The facts seldom require long,
complicated answers. The more you say the more likely you are to blur the
facts an open yourself to additional inquiry by the reporter
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The Psychology of a Crisis
 Companies often face trauma–and sometimes death-in the form of a
public or legal crisis
 The C suite becomes chaotic and the issues are fast changing.
CEO’s, like surgeons, are expected to save the day
 And as in emergency care, the first moments of a corporate crisis
are often the most critical– they can help avert an oncoming disaster
or they can fuel it
 During the intensity and disorientation of a crisis, CEO’s and their
teams usually rely on their managerial acumen and leadership skills
and all too often miss basic and necessary steps, thus harming the
“patient”
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The Psychology of Crisis
 What you MUST be aware of BEFORE heading into a Crisis:
1)
Realize you and your company are going down a path of very
unfamiliar territory
2)
Powerful people have a hard time relinquishing POWER and
CONTROL
3)
On a good day you have 30 minutes to garner Trust and Act.
4)
Remaining calm is key
5)
Powerful people are accustom to YES people-in a crisis you are not
going to conduct business as usual
6)
Most effective use of power is behind the scenes and BEFORE the
event
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Check List for the C Suite
 Based on our team’s experience in managing a multitude of crisis,
listed below is a checklist for executive teams facing a high stakes
public problem
 It may seem simple but just like in an airplane or emergency roomchecklists are imperative)
1)
Speak quickly (but do not speculate)
2)
Speak to the concerns and needs of victims
3)
Speak with one voice
4)
Carefully select your messengers
5)
Talk to your own family
6)
Take out the garbage
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Check List for the C Suite
7)
Match communication with action
8)
Remember that email is forever
9)
Remember sorry is a good word
10)
Quantify both legal and reputational liability
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Conclusion
 Crises Occur – Be Ready
 Develop a Crisis Management Plan
 Have Buy in from Senior Management
 Guard the Privilege
 Get Your Arms Around Documents Early – and Do Not Create Bad
Ones
 One Designated Voice
 Avoid Admissions of Liability or Fault
 Test, Test and Retest
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Questions?
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Thank you
McKenna Long & Aldridge, LLP
Christian D. Humphreys
4435 Eastgate Mall, Ste. 400
San Diego, CA 92014
(619) 595-5488
[email protected]
Jan Strode
CEO Advisors
CEO
619-8904040
[email protected]
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