Pulling Back The Curtain, Part I

Has a federal district court judge found inspiration in Toto, Dorothy's dog in The Wizard of Oz?  While a great deal of attention has been paid to the patent infringement trial pitting Apple against Samsung, which resulted in a $1 billion jury verdict in Apple's favor at the end of last week, recent events in a case involving another patent infringement trial, this one featuring Oracle against Google, have caught the attention of the legal and public relations communities.

Oracle had sued Apple, alleging that elements of Apple's Android operating system contained misappropriated items from Oracle's Java code.  Early in May, 2012, the jury found that Apple had infringed Oracle's copyrighted program, but the jury deadlocked on whether Apple's infringement fell within the "fair use" doctrine.  The jury later found that Google had not infringed two Oracle patents.

On August 7, 2012, U.S. District Court Judge William Alsup, who had presided over the trial, issued an order requiring the attorneys on both sides to file a statement by August 17th "identifying all authors, journalists, commenters or bloggers who have reported or commented on any issues in this case and who have received money (other than normal subscription fees) from the party or its counsel during the pendency of this action."

Judge Alsup's order was procedurally and substantively unusual.  As to procedure, the order came two months after the trial had ended, and neither side had requested the issuance of such an order.  Judge Alsup issued the order on his own volition, saying that he was "concerned that the parties and/or counsel herein may have retained or paid print or internet authors, journalists, commentators or bloggers who have and/or may publish comments on the issues in this case."  Judge Alsup justified the order by stating that it would be useful for the appellate court to know "whether any treatise, article, commentary or analysis on the issues posed by this case are possibly influenced by financial relationships to the parties or counsel."

The substance of the order, that a judge wanted to know whether bloggers and others were being paid by the parties to comment on the case, caused both the legal and public relations communities to speculate on what led to its issuance.  One thought was that the disclosure in April by Florian Muller, a prominent blogger who had been critical of Google, of his financial ties to Oracle may have led Judge Alsup to wonder whether there were other undisclosed relationships between bloggers and the parties.  Another thought was that a July 27th San Jose Mercury News article had brought attention to the "vast shadow army of law firms, public relations specialists, trade organizations, pundits, think tanks and academics [that] has emerged to dominate the debate over Google," and the fact that "many of them are paid for their opinions."  The article began with a specific example:

"Scott Cleland hates Google for a living.  For the past five years, the McLean, Va.-based analyst has churned out an endless stream of anti-Google papers, memos, research, testimony -- even a book: 'Search & Destroy: Why You Can't Trust Google Inc.' While his views that Google is a dangerous monopolist once seemed like a fringe theory, it has now drawn the attention of antitrust and privacy regulators throughout the world.  'I feel less lonely,' Cleland said. 'I have a strong belief that the wheels of justice turn slowly, but they turn truly.'  But as Cleland's crusade has gained popularity it has also gained funding -- to a degree that he won't disclose -- from Google's competitors, including Microsoft. While he insists that his influential views remain his own, the financial connection begs the very real question of whether he is a hero or a paid corporate hit man -- and whether the debate he pushes is a legitimate intellectual discussion or a commercial enterprise."

Members of the legal community also questioned the scope of the order, whether Judge Alsup had the power to issue it, and whether it was constitutional.  See, for example, "Alsup Goes Fishing With Wide Net."  However, since neither Oracle or Google challenged the order, the issues of power and constitutionality were unlikely to be addressed.  Similarly, questions as to the scope of the order would have to wait until Judge Alsup reviewed the parties' submissions to see whether they had complied.

Getting favorable media for clients, or neutralizing unfavorable media, is a large part of the public relations raison d'etre. Within the public relations community however, Judge Alsup's order revealed differing attitudes as to the propriety of paying bloggers.  PRWeek interviewed representatives of several agencies, and the consensus seemed to be that it is an acceptable practice to pay bloggers as long as the compensation is disclosed.  However, as I blogged about in "Social Media and Astroturfing," this is no more than the law requires.  Payments to bloggers for favorable reviews are required to be disclosed by the Federal Trade Commission, and the FTC has brought enforcement actions against companies that failed to make the required disclosure.  Hill + Knowlton Strategies expressly forbids compensation to bloggers.   Steve Barrett, a PRWeek editor,  wondered whether, even with disclosure, paying bloggers is appropriate:

"Am I the only one who feels extremely uneasy and uncomfortable about this whole paying bloggers debate?  . . .  [i]f a brand or an agency is paying these bloggers to write about brands, that has gone way beyond PR's traditional territory of earned media into the paid media environment - or, as it is also known, advertising.  That's an area that is fraught with danger in my opinion."

When the August 17th deadline for compliance arrived, Oracle confirmed in its submission that it had a paid consulting relationship with Florian Mueller.  As for Google, it notified Judge Alsup that the scope of his order created a group too large to list, but it assured Judge Alsup that it had not compensated anyone "to report or comment on any issues in this case" or otherwise struck a "quid pro quo" arrangement for favorable coverage.  In response, Judge Alsup issued a new order expressing his dissatisfaction with Google's submission:

"in the court's view, Google has failed to comply with the August 7 order.  . . .  Google suggests that it has paid so many commenters that it will be impossible to list them all. Please simply do your best but the impossible is not required. Oracle managed to do it. Google can do it too by listing all commenters known by Google to have received payments as consultants, contractors, vendors, or employees."

Judge Alsup required Google to supplement its filing by August 24, directing it to "disclose those commenters that can be identified after a reasonably diligent search,"  with the following clarification of  his original order:

"Payments do not include advertising revenue received by commenters. Nor does it include experts disclosed under Rule 26.  . . .  As for organizations receiving money, they need not be listed unless one of its employees was a commenter. Gifts to universities can be ignored."

Google filed its supplemental disclosure on August 24th.  I'll discuss what was in it, and the reaction to it, on Tuesday, September 4th.  Have a good Labor Day Holiday.

Proceed With Caution

“Litigation Support” is the term we use at Hill + Knowlton Strategies to describe how those of us who work in the legal communications space help lawyers, and their clients, meet the communications challenges posed by highly visible and newsworthy lawsuits.  Many lawyers, for good reason, are reluctant to “argue the case in the press,” but in today’s environment not having a communications strategy or not responding to media inquiries may not be an option.  Having someone experienced in public relations contend with the media is important to assure accurate reporting, as many stakeholders, such as vendors, customers, shareholders, analysts, and employees, may be following the lawsuit in news reports as it unfolds.    Because of the interests of stakeholders, the lawyer or the client may need to have a particular position communicated, and the pr professional can help craft the message.  In all instances, the pr professional must work closely with the lawyer to make sure that communications with the media are consistent with the lawyer’s legal strategy.  Finally, in communicating with the media, the lawyer and the pr professional must be cognizant of the ethical rules concerning trial publicity, especially if the case involves a jury trial.  For example, most jurisdictions have adopted a variation of ABA Rule of Professional Conduct 3.6, which provides in part that: 

"a) A lawyer who is participating or has participated in the investigation or litigation of a matter shall not make an extrajudicial statement that the lawyer knows or reasonably should know will be disseminated by means of public communication and will have a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter."

When the patent infringement trial pitting Apple against Samsung resumed Friday, August 3, 2012, the judge presiding over the case, U.S. District Judge Lucy Koh, had to address the issue of whether a press release issued on behalf of Samsung shortly after the jury trial began, purportedly in response to media inquiries, crossed the line drawn by the California version of ABA Rule 3.6.  As has been widely reported, Apple has sued Samsung alleging Samsung has infringed on Apple’s patents by manufacturing smartphones and tablet computers that copy the look and feel of the iPhone and iPad. For those interested in a quick primer on the lawsuit, here is a segment of CNBC's Squawkbox that featured one of my former partners at Jenner & Block, Brad Lyerla, an experienced intellectual property lawyer. 

After discovery had been closed and evidentiary hearings had been held on the exhibits to be used at the trial, Samsung requested permission to add as exhibits a series of slides that it contended shows that Apple's iPhone design was derived from the Sony Walkman. According to news reports, Samsung’s request had been denied three times before the trial began with jury selection on Monday, July 30, 2012.

Before opening statements began on Tuesday, July 31, 2012, John Quinn, managing partner in the firm representing Samsung, Quinn Emanuel Urquhart & Sullivan, LLP, asked Judge Koh to reconsider the decisions excluding the slides. Judge Koh denied the request, and after Mr. Quinn continued to argue the issue, threatened to sanction him if he persisted.  Although Mr. Quinn stopped arguing the matter in court, “Samsung has decided to make [its argument] in the court of public opinion.”  The sequence of events was chronicled by one reporter covering the trial: 

“At 2:48 p.m., after openings were done and a suave Apple industrial designer was testifying, a Samsung press statement hit our inbox (along with those of other reporters) with a link to the excluded slides. (The linked material has since been removed, but All Things D snagged it.)” 

 The link to the disputed slides, which some reported came from a public relations firm, was accompanied by the following statement:

 “The Judge’s exclusion of evidence on independent creation meant that even though Apple was allowed to inaccurately argue to the jury that the F700 was an iPhone copy, Samsung was not allowed to tell the jury the full story and show the pre-iPhone design for that and other phones that were in development at Samsung in 2006, before the iPhone. The excluded evidence would have established beyond doubt that Samsung did not copy the iPhone design. Fundamental fairness requires that the jury decide the case based on all the evidence.”

One reporter characterized it as “[a] brazen statement, particularly the last line which seems to express hope that members of the jury will see the excluded evidence.”  Another reporter asked “[w]hat was John Quinn thinking when he authorized a press statement . . . discussing exhibits the judge had specifically barred that very morning?”

Later, after the jury had been dismissed for the day, Apple’s lawyers brought the matter to Judge Koh’s attention, arguing that the press release “was an intentional attempt to pollute the jury.”  Judge Koh was reported to have been angry, which was expressed to Samsung's lawyers:

" 'Call Mr. Quinn,' she told the Samsung legal team. 'I'd like to see him today.' When they told her he had already gone back to Los Angeles for an event, Koh ordered Quinn to file a declaration by Wednesday. 'I want to know who drafted the press release, who authorized it from your legal team,' Koh said, 'and I want Mr. Quinn's declaration as to what his role was.' "

Mr. Quinn filed his declaration Wednesday, August 1, 2012, and essentially doubled-down.  He asserted that he authorized issuing the slides to respond to media inquiries, that the information in the slides where already in the public record, and that he authorized the statement that accompanied the slides because “Samsung has every right to defend itself in the public domain from unfair and malicious attacks.”

Apple’s lawyers responded to Mr. Quinn’s declaration with a letter to Judge Koh asserting that “Mr. Quinn’s declaration does not address two of the Court’s questions: who drafted the statement and who released it.”  Apple’s lawyers followed up the letter with a motion seeking sanctions, arguing that the press release was “the latest in a string of litigation misconduct,” and suggesting that the proper sanction would be for Judge Koh to issue judgment in Apple’s favor by ruling that the patents at issue in the case are valid and infringed by Samsung.

It was highly unlikely that Judge Koh would summarily rule in Apple’s favor, so it was no surprise when she denied Apple's motion at the beginning of Friday's proceedings.  After saying that she would "not let any theatrics or any sideshows distract us from what we are here to do," Judge Koh separately brought each member of the jury into the courtroom to ask whether they had read anything about the case since it had recessed on Tuesday.  One juror said that he had seen headlines about the case on the internet, but had not read any of the stories.  After each juror assured Judge Koh that they could be impartial, witness testimony resumed.

That may not, however, be the end off the matter.  Judge Koh said the press release seemed like "a willful attempt to propagate excluded evidence," which she may investigate further at the end of the trial.  Mr. Quinn correctly stated in his declaration that the information was already part of the record.  In fact, it was contained in the trial brief Samsung filed the Saturday before the trial began.   That being the case, Judge Koh may be persuaded that the reporters seeking to understand the issue simply could have been provided a link to the brief.  I suspect that she may still want to know who drafted the press release, and who decided that it should be sent to reporters other than those requesting the information.

A Nutty Settlement

In a February 2011 post, "This Is Getting Nutty," I wrote about a class action lawsuit that had been filed against Ferrero USA Inc., the United States subsidiary of the company that produces Ferrero Chocolates and Tic-Tac breath mints, over the ingredients in its hazelnut spread, Nutella. The complaint alleged that Ferrero USA violated California consumer protection laws by representing that Nutella is a healthy, nutritious, and balanced breakfast for children. The lawsuit alleged that the name plaintiff, Athena Hohenberg, the mother of a four-year-old child, bought Nutella after she saw advertisements showing mothers serving their children the product and declaring that the spread was a healthy and nutritious breakfast. According to the complaint: "Nutella, however, contains 70% saturated fat and processed sugar by weight. Both of these ingredients significantly contribute to America's alarming increases in childhood obesity, which can lead to life-long health problems." The complaint alleges that Ms. Hohenberg was "shocked" when she learned that Nutella was not healthy and "was the next best thing to a candy bar."

At the time I commented that although numerous bloggers had ridiculed the lawsuit, I noted that because California has some of the strictest consumer protection laws, the case could prove troublesome for Ferrero,  and it would be interesting to see whether Ferrero would vigorously defend the advertising and ingredients in Nutella in a manner similar to the way Taco Bell defended the ingredients in its beef tacos.

Ferrero has decided to settle the case. According to the settlement documents, Ferrero will pay up to $4 for every jar of Nutella bought in California since August 2009, or bought anywhere else in the United States since January 2008. The settlement amount may reach $6,000,000; a total of $3,050,000 for the consumer "buyback," and fees "not to exceed Three Million Dollars ($3,000,000)" for the lawyers. In addition, plaintiffs' counsel can petition the court for a further fee award of up to 30% of the $3,050,000 in the consumer "buyback" fund.

Finally, Ferrero has also agreed to modify the Nutella label to give more prominence to nutritional information, to replace and no longer air three Nutella commercials, and to modify the content of the website for Nutella.

Documents related to the lawsuit and the settlement can be viewed at nutellaclassactionsettlement.com.

Under the Hood

I have written previously that litigation does not occur in a vacuum, and I like to highlight for the readers of this blog the behind the scenes public relations battles that often take place as each side in a contentious matter seeks an advantage in the court of public opinion. In that regard, it should not be surprising that many of the players in the Trayvon Martin matter have employed public relations specialists or strategies to advance their side of this tragic incident.

First up is Ryan Julison, president of Julison Communications, a small communications firm in Windermere, Florida. Mr. Julison has been handling communications and advising Trayvon Martin’s family pro bono. PRWeek US has recently published a profile of Mr. Julison and discussed his work in the Trayvon Martin matter. “Martin family spokesman tells how a local story became a national outrage.”

On the other hand, the public relations efforts on behalf of George Zimmerman, who is now charged with second degree murder for shooting Trayvon Martin, have been evolving. According to an article by Frances Robles of McClatchy Newspapers:

“One self-described friend of George Zimmerman’s who made the rounds on national television was outed as a co-worker who didn’t seem to know him all that well. Another was portrayed as a thinly veiled racist with a checkered criminal history. And on his first TV interview, Zimmerman’s stammering attorney, Craig Sonner, didn’t understand the law the case is based on. But now, after weeks of withering media coverage lambasting him and his supporters, the cast of Zimmerman allies that has until recently been lampooned on TV has been replaced with an aggressive media campaign and message: George Zimmerman is not a racist, and he shot Trayvon Martin to save his own life. Zimmerman appears poised to ratchet up the damage control by having more of his relatives go public, launching a website and hiring a veteran criminal defense attorney with a solid reputation and experience on TV.”

After this opening, Ms. Robles details how the much criticized early public relations efforts on Mr. Zimerman’s behalf became more co-ordinated and more effective under attorney Hal Uhrig, who represented Mr. Zimmerman until the day before he was charged with second degree murder. Ms. Robles concludes with a quote from Natalie Jackson, the attorney representing Trayvon Martin’s parents, who dismissively claims: “It’s a PR strategy, a propaganda campaign.” It is an interesting position to take, considering that, according to Mr. Julison, it was Ms. Jackson who recruited Mr. Julison to handle public relations for Trayvon Martin’s parents.

Finally, there is the city of Sanford, Florida, where Trayvon Martin was shot. Last month the city retained Massey Communications to help repair its image and “work to restore trust in the community's police department.” “Florida city works to rebuild trust after Martin tragedy.” According to PRWeek US, Massey Communications is providing crisis consultations for the Trayvon Martin case, including public and media relations strategy, copywriting of press releases, talking points, prepared statements, and spokesperson preparation.

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.