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Lawyers for Wal-Mart must feel as if they are living out their worst nightmare —defending the world’s biggest retailer against a class action racketeering lawsuit even as they await the outcome of a federal grand jury probe into the company’s outsourcing practices.
On November 10, 2003, lawyers in Newark, New Jersey, filed a class action suit against Wal-Mart, claiming that the retailer had violated federal racketeering law (RICO) by working in concert with outsider cleaning companies to deprive the part-time workers of overtime wages. (The suit stems from raids staged by federal authorities a month earlier that netted some 250 illegal workers at 60 Wal-Mart stores in 21 states.) The class action complaint also alleges that Wal-Mart and its contractors failed to make required workers compensation and Social Security payments, and failed to withhold federal payroll taxes. The defendants are also charged with mail fraud, wire fraud, hiring illegal immigrants and a “pattern of racketeering activity” to thwart United States and state employment statutes.
Simultaneously, a federal grand jury in Pennsylvania is investigating whether Wal-Mart had any role in the hiring of the illegal immigrants. Federal officials say their wiretaps of conversations by company executives suggest the executives knew that the contractors were using undocumented workers—allegations that could mean criminal charges and fines of as much as $10,000 per illegal worker.
An army of Wal-Mart attorneys no doubt is burning the midnight oil mapping out strategy for a vigorous—and perhaps protracted—defense in New Jersey as well as in Pennsylvania. How these cases will be resolved remains unknown. Meantime, the press has not spared any ink in reporting every turn of events, and will continue to do so. Much of that ink is being used to report statements by the plaintiff ’s attorneys in the Newark lawsuit.
When a client is dealing with a bad situation—whether it is an event that leads to potential civil liability or potential criminal charges—conventional advice from in-house counsel and hired defense lawyers has usually been: “No news is good news.” In other words, tell the press nothing, “and tell it to them slowly.” At the other end of the spectrum is the oft-heard public relations dictum: “Get it all out, and get it out immediately.” The best course of action typically lies somewhere in between, and must be decided based on the situation at hand, with decisions often made on the fly.
Notwithstanding the Fifth Amendment, corporations (and high-level managers and celebrities) are almost always considered to be guilty until proven innocent in the eyes of the public. In a pre-Enron scandal survey by Daimler- Chrysler, more than 60 percent of Americans equated a corporate “no comment” with “I’m guilty.” The numbers have only gotten worse since Enron. As we’ve seen in recent years, negative press about corporate conduct—especially misconduct —can have an immediate and significant impact on a company’s bottom line—if the company survives—and the defense’s typical practice of saying nothing (and saying it slowly) simply does not serve the client’s best interest.
So what can defense attorneys learn from the Wal-Mart experience?
For one, be proactive. The first step is to not wait for the crisis to occur. Lawyers do not need to have public relations skills, but they do need to have enough appreciation and understanding of media to recognize the early warning signs of an impending media crisis. Ask your client: Who is tracking the media? What is their litigation and PR crisis experience? Who are likely opposing voices? And what would this situation look like in its worst light? Sadly, it is not unusual for this conversation to take place only after a reporter has already called with an impending deadline on the story. A very bad time to start learning about the media.
Know how to reach all of your highprofile crisis team members now. Most crises begin in the middle of the night or after regular business hours. You need 24-hour global access and cannot waste valuable crisis time trying to find your team members’ home phone numbers.
Do not wait for your client to spot the crisis. When you see the clouds of media interest begin to form, advise your client to prepare, well before the first reporter calls. That preparation includes having a company media crisis team in place, bringing together representatives from in-house counsel, your outside law firm, the head of the division directly involved —for example, the production or scientific department—the head of human resources for crises that involve personnel issues (and they usually do)— your in-house publicity team, and an outside PR firm that will be called upon for this event.
Work from the start with your media team, making every effort to protect privilege. Traditionally, this means that the outside law firm hires the media team (though passing through billing to the client) and then meets and speaks with the members regularly (which often can be several times a day). Not only is this essential to properly plan an appropriate media strategy, but it implies to a court that may later review the relationship that the parties had every expectation and intent that they were protecting privilege. The media team needs to mark all e-mails and documents confidential to further imply an expectation of privilege.
Do not allow your client or its crisis team to speculate or second-guess about the media. Instead, they should be instructed to prepare all media documents as if an outside party were reading them (there may be exceptions to this rule when fundamental strategies are discussed, in which case oral communication is usually superior). It is not an unheard-of strategy for an opposing side, frequently but not always the a member of the plaintiffs’ bar, to attack the media representation—e.g., “look how they tried to ‘spin’ this!”—if attacking the party or law firm proves unwise or unsatisfactory.
The fear of breach of privilege often leads defense attorneys to hide information from their own media counselors. While this tendency is obviously understandable, it is unwise and leads to the probability that your public relations efforts will ultimately backfire and cause your client more harm. A breach of trust with your media team will lead to an unintended breach of trust with reporters, the very people who are the first authors of your client’s history. All it takes is for one relationship to disintegrate because the reporter feels lied to or misdirected, and the coverage will surely go negative. Don’t hide information from your crisis counselors. Like you, they cannot offer their best advice if they don’t have the complete picture. If you cannot trust your crisis counselors with sensitive information, find new ones.
Wal-Mart has spent millions of advertising dollars to create—and defend—its image of a friendly, fun place to shop where the consumer is paramount and prices are kept low. The last thing the giant retailer wants to be associated with is a sweatshop where alien workers scrub floors and wash windows night after night while being stripped of money due them and benefits they’ve earned. In these latest crises, Wal-Mart’s media team members have done well reinforcing the “good guy” image—so far. To weather these latest legal storms, they must work in concert with Wal- Mart’s defense attorneys and not just recognize the role of the media in crisis situations; they must do all they can together to make sure that, above all, the media does no harm.
Richard S. Levick, a DRI member, is president of Levick Strategic Communications in Washington, D.C.; he can be reached at rlevick@levick.com. Christopher G. Caldwell is an attorney with Caldwell, Leslie, Newcombe & Pettit in Los Angeles; he can be reached at caldwell@clnp.com.
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