Class-action litigation has become a recurring reality corporations must address. Firms need to take pre-emptive action to ensure their stories are heard.
Class-action lawsuits have acquired a mystique not connected to other types of litigation. The involvement of a large number of plaintiffs can lend immediate legitimacy to claims and suggest a major media story with broad impact. Further, the potential for significant damages makes them seem more serious than other lawsuits.
After soaring to record numbers three years ago, class-action filings tapered off in 2003 and 2004, but only slightly, according to the Institute for Crisis Management's 2004 business crisis trend report. Class-action lawsuits are "still up way over almost any other kind of business crises that North American businesses face," ICM president Larry Smith notes.
Experts say companies need to do a better job of communicating to the media that a class action, until certified, is like any other lawsuit. "Either when a class action is filed or especially when a class action is certified there is an aura or presumption of danger or threat to the defendant," says Steven Hantler, assistant general counsel for DaimlerChrysler. "That needs to be rebutted because, even when certified, there's no determination by the judge whatsoever on the merits of the lawsuit."
It is vital, then, to implement a strategic communications plan as soon as a plaintiff's lawyer files a class-action petition with the court. This strategy can include direct communication with a company's most important stakeholders, recruitment of third-party legal experts, and formation of coalitions with similarly affected businesses.
"The plaintiffs' bar has what I call a playbook for class-action litigation that makes it difficult for corporate defendants to engage meaningfully in the court of public opinion if they get in too late," says Harlan Loeb, head of litigation communications in the Chicago office of Financial Dynamics. "In that respect, it's essential that corporations involved in class-action litigation consider the panoply of strategic options that they have to engage in communications strategy."
Plaintiffs' lawyers recognize that class actions offer a unique PR opportunity because every plaintiff is a potential news story. "You have a large number of individual human-interest stories, each of which can be placed in the media," says Karen Doyne, Burson-Marsteller's MD, crisis and issues management, in Washington, DC.
Plaintiffs' lawyers long ago abandoned any line between trial in the courtroom and trial in the court of public opinion, experts say. When doing battle in class-action cases, companies should be prepared for media inquiries and perhaps a media onslaught, depending on how aggressive lawyers are.
"Historically, corporate defendants believed that a response of 'no comment' to a media request about a lawsuit was a risk-free and cost-free approach," Hantler says. "It's not. It's a very costly approach because what happens is all of the inches in print media coverage and all of the seconds in electronic media coverage are de- voted to the plaintiff's presentation of the lawsuit without any of the positions or facts that the defendant would otherwise give."
As with any high-profile litigation, class-action suits generally require corporate defend- ants to get their stories out to their most important audiences promptly and emphatically. "Part of the reason it's so important to do that early is that typically the goal of the plaintiffs' lawyers in these cases is not to win the trial," Doyne says. "In fact, it's not even to go to trial, but to force the corporate defendant to settle as soon as possible and for a large sum of money."
Media coverage and a web presence are particularly important to plaintiffs' attorneys, she adds, because they need visibility, not only to advance their cases and pressure the corporate defendants, but also to recruit claimants for the class.
Hantler says DaimlerChrysler aims to be proactive when faced with a class action because of the potential risk to product reputation. The company follows a "platform" approach to litigation in which its PR and legal departments are full partners in developing the auto company's communications plan. "We view the communications department as one of our best resources and allies because it is the intent of the trial bar to try as many cases as they can in the court of public opinion to force companies to settle," he notes.
In a class-action case, plaintiffs' lawyers often obtain controversial documents from the defense during the discovery process. The corporate defense team, then, should not be surprised when the plaintiff's lawyers use the documents in court or leak them to the press.
"But in many cases, the communications team has not been told about the existence of those documents," Doyne says. "Being prepared to deal with media and others to explain and answer those documents is important. You don't want to be doing that in the five minutes after the document is either introduced in court or shows up on the front page of the paper."
During a 1999 case that went to trial in which the plaintiffs argued that air bags in Chrysler vehicles manufactured between 1988 and 1991 were defective, the company began briefing the press on its position before the trial began. Even though the company lost the case at trial for $62.5 million, a large number of post-verdict news stories were critical of the lawsuit and the judicial system for allowing the case to go forward. Hantler attributes the positive coverage to the company's pre-emptive strategy of demonstrating to the media its position that the case did not have merit. "We predicted to the media that we would prevail on appeal and the case would be decertified. We did prevail on appeal; the case was decertified," he says.
Companies that are active communicators with stakeholders tend to create a "home alarm-system effect on plaintiffs' lawyers," Loeb argues. "The plaintiffs' lawyers will go find an easier target."
Do research your legal adversary to learn communications tactics that the plaintiff's law firm has used in previous class-action cases
Do ensure a good working relationship between your PR and legal departments so that the groups are conveying a unified message
Do educate the media on the definition of a class action, as well as on the rules and procedures for such litigation; a class action, for example, must be certified by a judge before it can proceed to trial
Don't let the opposition pull you off your communications plans, especially in the early period of a class-action lawsuit, when the plaintiff's side will be aggressive in terms of PR tactics
Don't protest too much. There's a middle ground where you can tell your company's story and lay the groundwork for reinforcing your company's image in the post-lawsuit period
Don't say "no comment" to media requests about class-action lawsuits. Surveys indicate that most customers and shareholders will think you are liable