Trends in Litigation: Crisis Management
By Karen Dunn, Michael Gottlieb, Heather King and Lee Wolosky
One of the biggest challenges that can confront any twenty-first century company is the sudden emergence of a crisis. This can take many forms, including an allegation of wrongdoing from inside or outside the company; a breach of security, such as when private customer data is compromised; or a shift in the geopolitical landscape. Whatever the cause, these crises often have two things in common: they arise unexpectedly and, if not managed properly from the outset, they can quickly spiral out of control, threatening the business itself.
When a company is engulfed by such an event, its problems are rarely confined to a single courtroom or the offices of a single regulator. Most often, events that pose the greatest risk involve actual or threatened litigation, intense media scrutiny, and overlapping inquiries by state, federal, or foreign regulators. Failing to coordinate responses on all of these fronts, from the moment the crisis emerges, risks prolonging investigations, invites unnecessary litigation, and ultimately increases the threat to the company’s reputation and profitability.
And wherever the company’s headquarters are located, it is hard to imagine a major controversy these days that does not involve some corner of Washington, whether it is a civil enforcement action, a criminal investigation, or a congressional inquiry. Since the financial crisis of 2008, regulatory oversight of financial institutions and public companies has intensified. Meanwhile, U.S. antitrust enforcement has deepened, and Congress has ramped up its investigations of businesses accused of wrongdoing.
In this environment, among the most important factors determining success or failure during a crisis is the company’s choice of legal counsel. Outside counsel must investigate swiftly and thoroughly, and they must ensure that positions taken before regulators or in litigation are consistent both with arguments made publicly and with the company’s long-term strategic interests. Outside counsel must also make sure that deliberations and communications forged in crisis are protected to the maximum permissible extent by applicable legal privileges.
Companies will also have a significant advantage if they choose lawyers who have experience in different branches of government, including the White House, Congress, and executive agencies such as the Department of Justice, the Federal Trade Commission, and the Securities and Exchange Commission. These days, no intelligent response to a multi-dimensional business crisis can ignore Washington.
One of us, Heather King, recently participated in a two-year global public policy and legal defense of Bank of New York Mellon in a $22.5 billion claim filed by the Russian government in Russian court. The work involved meeting with various branches of the U.S. and Russian governments to explain how the lawsuit was damaging to business interests in both countries and to their respective economies. Ms. King worked with members of the U.S. Congress and with the State, Treasury, and Commerce departments to raise policy arguments for bilateral discussions with the Russian government, and to explore a face-saving exit for the Russian government. Our strategy contributed to a settlement for $14 million, less than 1 percent of claimed damages.
Currently, we serve as global lead counsel for Burisma, the leading private gas producer in Ukraine. Our work for the company includes leading the public policy and media strategy related to U.S.-Ukraine energy security issues. We also counsel a large global company contending with the trifecta of litigation, regulatory investigation, and media scrutiny. Typically in this type of engagement, we work closely with in-house lawyers and government relations and communications professionals, as well as with a company’s outside consultants.
Companies facing enterprise-threatening crises benefit when they hire outside counsel who, in addition to knowing their way around a courtroom, are savvy crisis managers skilled in navigating the corridors of Washington. For years, Boies, Schiller & Flexner has excelled in handling the most complex and high-profile public-facing matters, and our lawyers have sharpened the skills needed to defend our clients both in the courtroom and in the broader public arena. We’ve learned that only an integrated approach can ensure that strategy remains the same across all aspects of a major controversy. And we have an established track record of counseling clients through crises, helping them emerge stronger and more profitable on the other side.
Karen Dunn (firstname.lastname@example.org) is a partner in the Washington, DC, office of Boies, Schiller & Flexner. She is a former federal prosecutor and former associate counsel at the White House under President Obama.
Michael Gottlieb (email@example.com), a partner in Washington, is also a former federal prosecutor and former associate counsel at the White House under President Obama.
Heather King (firstname.lastname@example.org), a partner in Washington, was special assistant and policy advisor to the Senate office of former senator Hillary Rodham Clinton.
Lee Wolosky (email@example.com), a partner in New York, served at the White House as the director for transnational threats on the National Security Council under presidents Clinton and George W. Bush.