Knockout

When filing a lawsuit, it is not unusual for lawyers to engage the media as part of a strategy to publicize the alleged sensational nature of the defendant's conduct and thus "soften up" the other side. In "A Litigation Communications Strategy Gone Awry?" I commented that before embarking on such a media campaign, lawyers should make sure that their clients can withstand the scrutiny and not have skeletons in their closets that undercut the message. However, helping a client explain a previously undisclosed embarrassing incident pales in comparison to being sanctioned when the court finds that the media campaign has been waged on behalf of a frivolous lawsuit.

That was the situation Manhattan Supreme Court Justice Paul Wooten confronted last week when he dismissed a lawsuit that Angelica Cecora had filed against former Olympic boxing gold medalist and welterweight champion Oscar De La Hoya, alleging assault, battery, false imprisonment and intentional infliction of emotional distress. Cecora's suit, which sought $5 million in damages, stemmed from an alleged sexual encounter between her, her roommate, and De La Hoya in the Ritz Carlton Hotel in Manhattan. After Judge Wooten granted De La Hoya's motion to dismiss the complaint, he addressed De La Hoya's motion for sanctions against Cecora and her attorney on the grounds that the claims of false imprisonment and intentional infliction of emotional distress were brought primarily to harass or injure him. Judge Wooten granted the motion, ruling that the two causes of action were "completely without merit in law and were undertaken primarily to harass or maliciously injure the defendant." Judge Wooten specifically cited Cecora's media campaign in support of his ruling:

"The Court notes that plaintiff and her attorney's intentional appeal to the media, including a press conference on the steps of the Supreme Court building on the date of the court appearance, and plaintiff's attorney's attempt to embarrass the defendant in front of the media in the courtroom by making an issue of defendant's absence from the Court on the date of oral argument, knowing that it is common practice in civil cases for only attorneys to appear, is further evidence that plaintiff's motivation for maintaining two frivolous causes of action was to harass and maliciously injure the defendant. . . . The conduct of plaintiff is sanctionable for asserting and maintaining two frivolous causes of action, and the conduct of her attorney has crossed the line from zealous advocacy to that which is sanctionable."

Judge Wooten imposed a $500.00 sanction on both Cecora and her attorney, and also ruled that Cecora was required to reimburse De La Hoya for his reasonable attorneys fees and costs.

Cecora v. De La Hoya, 112787/11

People Power

Perhaps it was only a coincidence that the Susan G. Komen for the Cure/Planned Parenthood Federation of America funding controversy occurred the same week that Facebook filed the paperwork for its initial public offering. However, no matter how fortuitous the timing of these events, Facebook CEO Mark Zuckerberg could not have planned a better example to illustrate Facebook’s mission and his vision of the power of social media.

While the media seemed to focus largely on the issue of how wealthy the IPO might make those with equity in Facebook, almost completely overlooked was a letter to potential investors that Mr. Zuckerberg tucked in the IPO documents. In this letter Mr. Zuckerberg states that Facebook's mission is “to make the world more open and connected,” and he outlines how Facebook approaches this mission so that “everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do.”

Mr. Zuckerberg’s letter is organized around the three goals Facebook strives to achieve; (1) to strengthen how people relate to each other, (2) to improve how people connect to businesses and the economy, and (3) to change how people relate to their governments and social institutions. As to the latter, Mr. Zuckerberg writes that: “By giving people the power to share, we are starting to see people make their voices heard on a different scale from what has historically been possible. Over time, we expect [our institutions] will become more responsive to issues and concerns raised directly by all [the] people rather than through intermediaries controlled by a select few.”

What Mr. Zuckerberg refers to has been called “democratization and disintermediation” - the public's unprecedented access to information coupled with the decline of the traditional intermediaries between businesses, government, and the public. Social media fuels democratization and disintermediation, helping people to gather, share information, and directly affect institutional decisions. Prior to the Komen/Planned Parenthood controversy, the power of social media to lead to changes in institutional decisions was displayed in three other instances during the past eight months, involving Netflix, Bank of America, and Verizon Wireless.

Netflix – In July, 2011, Netflix announced that it would begin charging separately, at $8.00 per month, for its DVD delivery and streaming services. Prior to this pricing change, subscribers who wanted only DVD delivery paid $8.00 per month, while those who wanted DVD delivery and streaming paid $10.00 per month. The pricing change meant that DVD delivery and streaming would now cost $16.00 per month, a 60 % increase. Although Netflix projected that some of its 25 million subscribers would cancel due to the price changes, the cancellation rate exceeded projections, and Netflix informed investors that it expected to lose one million subscribers by September 30th. Many of the departing subscribers left blistering comments on Netflix’s website and Facebook page. Netflix then compounded the problem by announcing on September 17^th that it was going to spin-off its DVD delivery service into a new company called Qwikster. The effect of this decision was that subscribers who wanted both the streaming service and DVD delivery would have to visit two websites, manage two accounts, and pay two monthly bills. Once again, tens of thousands subscribers left comments denouncing the breakup plan on Netflix’s website and Facebook page. Finally, on October 9^th, after losing millions of subscribers and seeing its stock lose almost two-thirds of its value, Netflix surrendered, announcing that it was keeping its new pricing structure but abandoning the Qwikster plan. Netflix e-mailed all of its former subscribers about its decision, and its CEO, Reed Hastings, went on YouTube to apologize to its current and former subscribers.

Bank of America – In October, 2011, Bank of America, announced that beginning in January, 2012, it would charge its account holders a $5.00 per month fee for using a debit card to make purchases. Again the negative reaction was swift, as BofA customers went to the internet to criticize the charge. One BofA customer started an online petition at Change.org that quickly attracted 300,000 signatures of support. By the end October, when it became clear that the other major banks, which had also considered adding a monthly fee for credit card use, were not going forward, BofA dropped its plan.

Verizon Wireless – On December 29^th Verizon Wireless announced that it would begin charging its customers a $2.00 “convenience fee” if they made one-time payments on the company’s website using a debit or credit card. The internet and social media criticism of the planned fee was immediate and massive. Online petitions were circulated, and the uproar caught the attention of the FCC, which announced that it was undertaking an investigation of Verizon Wireless. In less than a day Verizon Wireless announced that it was scrapping the fee, “based on [customers] input.”

Susan G. Komen for the Cure - This brings us to the aforementioned Susan G. Komen for the Cure (“SGK”)/Planned Parenthood funding controversy. On Tuesday, January 31, 2012, SGK announced that it was cutting funding to Planned Parenthood for breast cancer exams and other breast-health programs because of SGK’s new rule that prohibited grants to organizations under government investigation. (In September 2011 the House Oversight and Investigations Subcommittee initiated an investigation into whether Planned Parenthood used federal funds for abortion services in violation of the Hyde Amendment.)

SGK’s decision sparked some praise but even more outrage. By Wednesday, February 1, 2012, fewer than twenty-four hours after the decision was announced, there were more than 3,000 comments to a post on SGK’s Facebook page explaining its decision to cut funding, and opponents far outnumbered supporters. At least two online petitions, one from Credo Action and the other from SignOn.org, were established to pressure SGK to reverse its decision. Planned Parenthood sent out mass emails and placed telephone calls requesting that supporters take action against the decision. In addition, it launched a Breast Health Emergency Fund to ensure continued funding to Planned Parenthood affiliates that would lose their SGK grants, and raised almost three million dollars from more than 10,000 donors. Among the donors was New York Mayor Michael R. Bloomberg, who pledged one dollar for every new one dollar donation made to Planned Parenthood, up to $250,000. Another $250,000 was received from the Amy and Lee Fikes family foundation, which issued a statement encouraging “others to join us in replacing the funds lost, so that no woman’s health is imperiled by Komen’s unfortunate decision.”

The next day, Thursday, February 2, 2012, SGK added to its problems when it offered a different explanation for its funding decision. In a conference call with the media, SGK founder and Chief Executive Nancy G. Brinker said the decision was due to policy changes intended to improve how grantees are selected. Ms. Brinker explained that although women received clinical breast exams at Planned Parenthood clinics, patients are referred to other medical facilities for mammograms, biopsies, and cancer treatment. Ms. Brinker referred to this as “pass-through” services: “We look at the quality of the grants. We don’t like to do pass-through grants anymore.” SGK’s shifting explanation added fuel to the fire of those who claimed that the initial decision was politically motivated to mollify SGK funders who were upset with SGK’s affiliation with Planned Parenthood.

Ms. Brinker’s explanation failed to quell the uproar, and on Friday, February 3, 2012, SGK issued a statement rescinding its decision.

The New Reality - As noted by Mr. Zuckerberg in his letter to investors: “By giving people the power to share, we are starting to see people make their voices heard on a different scale from what has historically been possible. These voices will increase in number and volume. They cannot be ignored.” Businesses must take into account this new reality in their decision-making processes. Currently, most companies might consult their chief legal officer or chief financial officer before making a decision, and afterwards task their communications personnel with disseminating the decision to the press, employees, investors, and other stakeholders. This decision-making model is on its way to obsolescence. The new reality requires a company to not only consider the legal and financial implications, but to also consider the public relations implications of an institutional decision. Democratization and disintermediation requires that companies be transparent in their decision-making, and think strategically about how decisions are communicated. In the new reality, the chief communications officer must be as important as the chief legal and financial officers in the decision-making process.

Chip Shot

Last week, in “Pulp Fiction,” I wrote about the response from Minute Maid Orange Juice, a division of PepsiCo, to a class-action lawsuit alleging that it was deceiving consumers when it advertised its pasteurized not-from-concentrate orange juice as “100% Pure and Natural.” This week, another PepsiCo division, Frito-Lay, is in the deceptive advertising spotlight.

Just in time for the Super Bowl, a resident of New York filed a class action lawsuit Monday alleging that Frito-Lay was deceiving consumers by advertising that its Tostitos and SunChips products are made from “all-natural ingredients.” The plaintiff alleges that the snacks are not “natural” because they contain corn and oils made from genetically modified plants. The suit alleges that “genetically modified organisms are created artificially in a laboratory by swapping genetic material across species to exhibit traits not naturally theirs. Since a reasonable consumer assumes that seeds created in such a way are not ‘all natural,’ advertising Tostitos and SunChips as natural is deceptive and likely to mislead a reasonable consumer.”

The New York lawsuit is similar to one filed in California last month, which also alleges that genetically modified organisms are not “all natural.” As one food blogger noted, “I don’t care what a food label says, if consumers think chips are somehow ‘all-natural,’ then we have a bigger problem.”

I do not think it is a coincidence that this lawsuit was filed at the beginning of a week when many consumers are planning their Super Bowl parties. When asked for a comment on the lawsuit, a Frito-Lay spokesperson said the company was confident the labeling on its packaging “complies with all regulatory requirements.”

Considering that the New York lawsuit is the second one alleging deceptive advertising, I would have expected a more robust statement. Claiming that the packaging “complies with all regulatory requirements,” does not answer the question these lawsuits are likely to raise in the consumer’s mind, that is: “What’s in the chips?” I do not think it would compromise Frito-Lay’s legal position to emphasize, for example, that all the ingredients are clearly stated on the label, and that the chips are made from three ingredients; corn, oil, and salt.

Pulp Fiction

I have previously written about consumer lawsuits and the danger they pose to corporate reputations if not properly handled, both in the court of law and the court of public opinion. Particularly nettlesome are the consumer class actions that allege a food product is mislabeled or deceptively advertised. These lawsuits are a dagger aimed at the heart of the brand. Many of these lawsuits originate in California, which may have one of the strongest consumer protection statutes in the California False Advertising Law.

The latest such lawsuit to come out of the Golden State is a class action alleging that Tropicana’s pasteurized “not-from-concentrate” (NFC) orange juice, which Tropicana advertises as “100% pure and natural,” is neither “pure” nor “natural.” Instead, the complaint alleges that the orange juice “is a product that is scientifically engineered in laboratories, not nature.”

The basis for the claim of deceptive advertising derives from the way pasteurized NFC orange juice gets from the orange groves to your refrigerator. After picking, the oranges are sent to a processing facility, where they are squeezed. The resulting juice is then pasteurized and stored in tanks where it goes through a process known as “deaeration,” which removes oxygen from the juice so that it can be stored up to a year.

The difficulty for the juice companies is that pasteurizing, deaerating, and storing orange juice causes the juice to lose a degree of flavor and aroma. To compensate, “flavor packs” are added prior to packaging and shipping the juice.

The plaintiffs single out Tropicana, but other major orange juice companies, such as Minute Maid and Florida’s Natural, also use flavor packs. The plaintiffs allege that the addition of the flavor packs means that Tropicana is violating the False Advertising Law by advertising its NFC juice as “100% pure and natural:”

“[T]ropicana NFC juice undergoes extensive processing which includes the addition of aromas and flavors … . This extensive processing changes the essential nature of the NFC juice … . It is not natural orange juice. It is instead a product that is scientifically engineered in laboratories, not nature, which explains its shelf-life of more than two months.”

So what is a flavor pack? Although the plaintiffs claim that “[f]lavor packs are unnatural and are products of science,” the citrus industry asserts that flavor packs are created by recapturing the volatile organic compounds released from the orange juice during pasteurization and adding them to orange byproducts such as pulp and peel. Further, the industry adds that the Food and Drug Administration does not require that flavor packs be included in the labeling of pasteurized juice because flavor packs are made from oranges.

Although I have questions about the merits of the lawsuit, my purpose here is not to delve deeply into that subject. Instead, my purpose is to examine Tropicana’s public response. I believe that lawsuits directed at the nature and quality of food products need a forceful public response to minimize potential damage to the brand. When questioned about the lawsuit, Tropicana issued the following bland written statement:

“Our juice is safe, nutritious and Tropicana remains committed to offering great-tasting 100 percent orange juice with no added sugars or preservatives. We take the faith that consumers place in our products seriously and are committed to full compliance with labeling laws and regulations.”

Tropicana is owned by PepsiCo. Its statement is similar to the one issued by Taco Bell, which used to be owned by PepsiCo, when a California class action lawsuit accused it of not having beef in its tacos:

“Taco Bell prides itself on serving high quality Mexican inspired food with great value. We’re happy that the millions of customers we serve every week agree. We deny our advertising is misleading in any way and we intend to vigorously defend the suit.”

I noted at the time that Taco Bell’s statement was problematic, because while it was “vigorously defend[ing] the suit,” its customers were likely asking “What’s in the tacos?” As I wrote about in “Where’s The Beef,” eventually Taco Bell aggressively responded to the lawsuit in the media, and when the plaintiffs tried to quietly drop the case, Taco Bell resisted and in doing so, generated more favorable publicity.

As far as I can tell, the Tropicana lawsuit has not garnered the same degree of media attention as the Taco Bell lawsuit did when it was filed, so perhaps a more aggressive public response by Tropicana is not warranted. But it is early, and there are many decision points in a lawsuit that may bring more attention to these allegations. If that happens, Tropicana should look to the public response strategy employed by its cousin, Taco Bell.

The Appeal of Amanda Knox

There is much discussion today concerning the role of public relations in the overturning of Amanda Knox's conviction for the murder of her roommate, Meredith Kercher. Shortly after Ms. Knox was arrested in 2007, her family hired Gogerty Marriott, a Seattle public relations agency to deal with the initial barrage of media inquiries. Over the past four years the agency, along with friends of Ms. Knox and her family, conducted a public relations campaign on her behalf. Ms Knox's supporters contend that the media campaign was necessary to counter the negative image of Ms. Knox presented in the British and Italian press. Not surprisingly, the Italian prosecutors contend that those acting on Ms. Knox's behalf used the media to interfere in the case. Both the New York Times and Wall Street Journal published articles today examining the controversy:

A Court Fight and a Tireless Battle Over an Image (NYT);

Knox's Exit Leaves Questions (WSJ).

Litigation Does Not Take Place in a Vacuum

James F. Haggerty, author of In The Court of Public Opinion: Winning Strategies For Litigation Communications (American Bar Association Publishing 2009) has written an article examining the effect of public opinion in the U.S. Department of Justice's antitrust lawsuit to block the AT&T/T-Mobile merger, and the U.S. Federal Housing Finance Agency's lawsuit against seventeen banks over mortgage securities bought by Fannie Mae and Freddie Mac. Mr. Haggerty points out that both cases demonstrate the importance of effective communication in legal matters where public perception plays a role:

There is a valuable lesson in these cases for all companies facing the prospect of major litigation. High-profile lawsuits don't occur in a vacuum, and the relative strength or weakness of the parties can be greatly affected by the public response to a lawsuit's announcement. In this modern media age, communicating publicly about major litigation needs to be handled with the same seriousness as any other aspect of the case. Sometimes, the impact of this public communication can actually be greater than anything that happens within the courthouse walls.

How Public Perception Drives the Resolution of High-Profile Cases

Did Bank of America's Aggressive PR Posture Hurt or Help?

In this article, James F. Haggerty, the author of In The Court of Public Opinion: Winning Strategies For Litigation Communications, examines whether Bank of America's litigation communications strategy in response to the lawsuit filed by institutional mortgage investors led to a loss of shareholder confidence in the bank.

Did Bank of America's Aggressive PR Posture Hurt or Help?