Litigation Communications in People v. Grasso - Introduction

( This is the first of six posts examining the litigation communications strategies in the lawsuit challenging the $139.5 million paid by the New York Stock Exchange to its CEO, Richard Grasso, shortly before the NYSE Board asked for his resignation.)

The turmoil surrounding Goldman Sachs has made Wall Street once again the lead story in the nation’s news media. It also provides an occasion to examine the role litigation communications played in a high profile lawsuit that involved the epicenter of Wall Street, the New York Stock Exchange.

The case was The People of the State of New York, by Eliot Spitzer, as Attorney General of the State of New York v. Richard A. Grasso, Kenneth G. Langone and the New York Stock Exchange, Inc. It was initiated by Attorney General Spitzer to force Mr. Grasso to return $100 million of the $139.5 million he received from the NYSE when he signed what turned out to be his final employment contract on August 27, 2003. The legal battle was waged from May 2004 until July 1, 2008, when a New York appellate court ruled that Grasso could keep all of his compensation.

Following his victory, Grasso gave an interview to PRWeek, where he discussed the role litigation communications played in his defense to the lawsuit. “Grasso bullish on PR’s worth,” PRWeek, July 21, 2008. Since the interview reveals Grasso’s public relations strategy, the fight over his compensation provides a good example of the use of communications in litigation.

This introduction serves two purposes. The first is to advise that a comprehensive review requires multiple posts. A post next week will begin by providing the background of the dispute. Subsequent posts will examine the twists and turns of the litigation and conclude by studying the communications strategy of Grasso and, to a lesser extent, that of his co-defendant, Kenneth G. Langone.

The second purpose of this introduction can best be described as a “point of personal privilege.” A few weeks after the NYSE fired Grasso, I participated in the NYSE’s Closing Bell Ceremony as a member of a delegation led by then-ABA President Dennis W. Archer. The photograph accompanying this introduction was taken just as Mr. Archer finished pounding the gavel, signaling the end of trading for the day. You can see my face over his right shoulder underneath the U.S. flag. The photograph shows that we ended trading on October 7, 2003, a day that the Dow finished up 22.67 points, or 0.2 percent, at 9,594.98. It was the fourth-straight day the Dow had closed up.

I had two distinct impressions after spending a day inside 11 Wall Street. First, the trading floor is much smaller than it appears on television; larger than a tennis court but smaller than a basketball court. Second, the building did not have the feel of an office building; instead it felt more like an exclusive private club.

Reputation Management in the Digital Age

Much of "litigation public relations" involves managing the client's reputation during a lawsuit or legal crisis. While the rise of YouTube, Facebook, MySpace, Twitter, LinkedIn, and others - the "Social Media" websites - have made reputation management more difficult, they have also opened new avenues for engaging the public. Earlier this year, Douglas J. Wood, a partner with the law firm Reed Smith, published an article discussing ways in which legal counsel can address and deal with the legal risks social media presents for corporate clients. In the following excerpt of his article, Wood discussed how United Airlines became the target of a YouTube video aimed at the company’s reputation:

United Airlines broke a passenger's guitar. They handled his complaint through traditional procedures, eventually refusing to pay for repairs. The musician launched a scathing, but admittedly entertaining, video on YouTube making United look incompetent. To date, there have been nearly six million views of the video.

United responded through traditional means, issuing a press release that said, "We will fully investigate what regretfully happened."

But United didn't satisfy the disgruntled musician.

So along came another video attack on YouTube with more than a half-million views. And a third video is promised.

Worse, in a recent flight, United managed to lose the same musician's bags, an event that was reported to millions in the blogosphere. The story was a lead item on CNN's Situation Room, reported by anchor Wolf Blitzer. According to the London press, United's stock value fell ten percent—$180 million—because of this flub.

While one can certainly question whether the London press reports are accurate, the fact remains that the video had a serious impact on United's equity. And to add insult to injury, Sen. Barbara Boxer, D-Calif., is championing the Airline Passenger Bill of Rights Act of 2009, citing the United debacle.

Last year Domino’s Pizza was blindsided by the posting of YouTube videos showing two employees doing disgusting things to food that was being prepared for delivery. Business Insider labeled Domino’s slow response to the crisis as one of the fifteen biggest PR disasters of the decade:

Domino's waited two days to respond, and in the meantime nearly one million people viewed the videos on YouTube. Simultaneously, the blogs and Twitter were ablaze with discussion of the incident. The pizza company soon fired the two employees and issued an apology (via YouTube video,) but the damage was already done.

In an article about the incident in the New York Times, a Domino spokesman acknowledged that the company’s response was sluggish:

As the company learned about the video on Tuesday, Mr. McIntyre said, executives decided not to respond aggressively, hoping the controversy would quiet down. “What we missed was the perpetual mushroom effect of viral sensations,” he said. . . . “We realized that when many of the comments and questions in Twitter were, ‘What is Domino’s doing about it’ ” Mr. McIntyre said. “Well, we were doing and saying things, but they weren’t being covered in Twitter.” . . . “It elevated to a point where just responding isn’t good enough,” Mr. McIntyre said.

One lesson from the United and Domino’s incidents is that reputation management often requires an immediate response, and a recognition that the public needs to be engaged not only in traditional media, but also in the medium that is creating the “buzz.”

Thankfully, in most instances, public relations support for a legal matter does not descend into a full-blown immediate crisis. In most instances there is time to involve all the key players - such as public relations, investor relations, government relations, outside and in-house lawyers, and digital and multimedia communications professionals - in the communications plan. There is usually time to brainstorm about the likely course a legal matter will take, and to prepare key talking points and media releases to targeted audiences for each scenario. This advance planning will not only aid in managing reputation over the course of the legal matter, but will also provide a framework if an immediate crisis erupts.

Testing a Lawsuit's News Value

Several lawyers have asked me how should they determine the newsworthiness of a particular legal matter. Although each situation is unique, I tell them to consider the following:

Do you or your clients face:

• Publicity-seeking opponents?
• A unique or unusual lawsuit?
• Well-known attorneys or parties?
• A matter with a large sum of money at stake?
• A matter involving a current hot media topic?
• The application of new law, or the new application of old law?
• A matter where the outcome will have broad implications?
• A matter with political or regulatory aspects?
• A matter with a compelling human interest angle?

If the answer to any of these questions is "Yes," I suggest that they consult with their clients to craft a media strategy well in advance of the first media call. Lawyers and clients should work together to develop the basic themes to be communicated and to agree on who will be handling media inquiries over the course of the case.