PREPARING FOR A CRISIS: The Roles of In-House and Outside Counsel

1. PREPARING FOR A CRISIS:The Roles of In-House and Outside Counsel New Jersey Corporate Counsel Association Annual Dinner November 17, 2011 Greenberg Traurig, LLP Peter A. Antonucci 200 Park Avenue New York, New York 10166

2. What is Crisis Management What is a Crisis How Do Crises Occur Diverse and Potentially Far-Reaching Consequences of a Crisis Dangers of the Modern Media How Lawyers Approach a Crisis The Conflicts that May Arise Public Relations Activities that Can Cause Lawyers Concern Preparing For A Crisis: The Role Of Counsel

3. Legal Considerations Think About Documents Immediately Avoid Creation of Smoking Guns Monitor Chatter—Internal and External One Message, One Voice Privilege Protections Avoid Admissions or Creating Liability Talk to Your Experts Right Away Circle the Wagons With Your Key Witness It is Critical that You Develop A Crisis Management Plan Composition of a Crisis Management Team Formulation of a Crisis Communication Plan Realistic Options and Lessons Learned Role of Outside Counsel Ethical Issues Faced by In-House Counsel Conclusion Preparing For A Crisis: The Role Of Counsel

4. What is Crisis Management • It is a company’s ability to be prepared for –- and respond appropriately to –- unforeseen events which may disrupt your business or endanger the safety or reputation of: • People • Company Personnel • Purchasers/Users • Information • Systems • Property • Business

5. What is a Crisis • Crisis events include: • Loss of Life • Mass product failure • Technology failures • Major infrastructure failure • Natural disasters or fires • SEC violations • Leadership failures • Work place violence • Corporate governance • On average, a large company is hit by a crisis once every seven years.

6. How Do Crises Occur • Product recalls due to safety issues • Attacks by a consumer advocacy group • A former employee turns whistleblower • The filing of a high-profile lawsuit • Executives are indicted • Restatement of earnings • New legislation is proposed that threatens your industry • A serious injury involving your product with media attention • Federal or state enforcement action

7. Litigation (in every form and any forum) Law Enforcement Regulatory Legislative The Investment Community The Marketplace The Press Business Partners Employees Diverse and Potentially Far-Reaching Consequences of a Crisis • The consequences of a crisis can be far and wide and can lead to devastating results. What happens or is done on one front will impact what happens on another.

8. Dangers of Modern Media • Plaintiff’s attorneys, consumer groups and “citizen journalists” may mask their biases by appearing to be legitimate news outlets. • Reporters rarely have time to delve into the science or medicine when working on deadline. They may prefer a pre-packaged report and run with it, without time to thoroughly fact-check it. • Social media can allow well-meaning employees to accidentally make confidential information about a company’s internal response permanently public. • Twitter, Facebook, MySpace, LinkedIn, Blogs, etc. • Nothing is easily removed from the internet.

9. How Lawyers Approach a Crisis • Assume every press release or public statement your company issues now will be an exhibit in future litigation. • All public statements, including those by executives who may have no official authority to speak for or bind the company, can also be considered admissions of wrongdoing. • Speaking publicly about a matter that may be the subject of future litigation is rarely advantageous to the future litigant.

10. How Lawyers Approach a Crisis • Conduct and complete a thorough internal investigation before taking positions that may bind the company in future litigation. • Protecting Attorney-Client Privilege is paramount, and requires attorneys to be involved in all internal investigations and decisions about any statements or actions. • Make sure key employees are all on the same page about what they are saying and what they are hearing on the ground.

11. The Conflicts that May Arise • Weigh the desire to fully investigate and collect the facts, versus “getting in front of the story” quickly. • Carefully consider what a company says publicly to avoid admissions, but crises change constantly and may require “rapid response.” • Spin is an art, but if it seems misleading it can negatively impact a company’s appearance to jurors, regulators, lawmakers and the public. • Lawyers want only to protect their clients’ interests in future litigation. Executives are motivated by business concerns: damage to the brand, decreased sales, plummeting stock price.

12. Public Relations Activities that Can Cause Lawyers Concern • Common Mistakes • Trying to control the media’s coverage by giving the media information to report that is favorable to the company’s position, but not always complete. • Attempting to downplay a story’s significance, in the hope the media and public are quickly distracted, even in situations where the allegations are serious. • To avoid the appearance of uncertainty, not waiting for a thorough investigation to be complete before the company makes a public statement.

13. Legal Considerations • Think About Documents Immediately • Get a Sense of What Has Already Been Created & Now Cannot Be Destroyed • Document Retention Policy: Have One Before A Crisis Hits • Litigation Hold Memorandum As Soon As Litigation Appears Reasonably Likely • Avoid Creation of “Smoking Guns” • Have Key Employees Think Strategically About What They Put Into All Documents • Monitor Chatter: Internal and External • See What Your Employees Are Emailing About the Crisis, Even Casually, to One Another • Employee Social Media Usage—Monitor or Block? • Google Alerts & News/Media Monitoring

14. Legal Considerations • One Message, One Voice • Designate One Spokesperson And Create Cohesive Talking Points. • Every Inquiry May Be Media In Disguise—Advise All Employees. • Privilege Protections • Involve Counsel In Deliberations and Drafting For Maximum Protection. • Label All Documents Carefully To Ensure Protection. • Avoid Admissions or Creating Liability • Any Statement May Constitute An Admission of Wrongdoing/Liability. • In Rare Cases, Public Statements Can Lead To Criminal Liability: InterMune CEO Steve Harkonen Was Tried & Convicted of Wire Fraud Because of a Press Release.

15. Legal Considerations • Talk To Your Experts Right Away • Determine Your Internal And External Experts And Get Them On Board And Involved Early. • Involve Counsel Where Possible For Consultants You Do Not Intend To Have Testify, To Bolster Work Product Protections. • “Circle the Wagons”—Future Witnesses • Interview The Employees Who May Be Key Witnesses Someday. • Record Their Recollections While Fresh And Ensure Consistency. • Make Sure They Are Particularly Aware of the Importance of Their Documents and Communications. • Respond To Them and Guide Them Early In A Crisis.

16. It is Critical that Every Responsible Company Develop a Crisis Management Plan • A Crisis Management Plan will allow a company to respond more effectively to unforeseen situations while: • Minimizing the loss of life • Maximizing response efforts • Maximizing recovery efforts • Maximizing company’s reputation • Minimizing business interruptions

17. Composition of a Crisis Management Team • Typically, a well-positioned company has a Crisis Management Team composed of various elements of the organization including: • Management • Legal • Operations • IT • Public Relations/Corporate Communications • Etc. • The Team is a formal organization within the structure of the Company. • The Team maintains the ability to speak for the corporation in times of crisis.

18. Formulation of a Crisis Communication Plan • Allows an organization to communicate effectively when an emergency occurs • Easy to read; easily updateable • Technology-friendly involving multiple ways for the organization to communicate during times of crisis • Uses multiple means of communication (telephone, cell phone, pagers, black berries, e-mails, etc.) • Test, test and retest

19. Role of Outside Counsel • Triage • Objective risk assessment • Ascertaining local rules/procedures/customs in locales where the company operates • Identification and selection of local, and specialized, counsel • Conducting the fact investigation, including interviewing witnesses and pulling together documents • Protecting privileges and confidential or proprietary information • Identification and selection of potential experts and other outside assets

20. Role of Outside Counsel Cont’d • Formulating practical strategy consistent with a realistic assessment of how a crisis is likely to unfold • Provide expertise on lessons learned from other crises • Assistance in identification and training of spokesperson(s) • Input and coordination in mapping out corporate communications strategy, including working with in-house and outside media experts • Making certain public responses, corporate disclosures, and litigation defense are accurate and consistent • Coordinating expert assistance to test factual, tactical and/or substantive assumptions

21. Role of Outside Counsel Cont’d • Assessing disclosure obligations (internal and external) • Conducting an insurance evaluation and tending to provision of notice to all applicable insurers • Assessing potential conflicts of interest • Preserving and making the record (an on-going process) • Making certain all critical components of the company are on the same page, including management, legal, corporate communications, marketing, manufacturing, regional offices, international offices, and so on, once strategy is agreed upon.

22. Ethical Issues Faced by In-House Counsel • As in-house counsel, whom do you represent? • Hypothetical crisis: While the interests of the corporation and its management are typically aligned, disagreement among or misconduct by the principals or management of an entity creates divergent goals. For example, a senior member of management establishes an off-balance sheet transaction, which ultimately requires a restatement of corporate earnings, putting the entire corporation at risk. • Issue: Is the duty of in-counsel to the individual or to the corporation? Can in-house counsel effectively represent the individual and the corporation? What are the dangers of the dual representation?

23. Ethical Issues: Representation of the Entity and the Individual • May in-house counsel represent the individual and the corporation? • RPC 1.13 suggests that the engagement of an attorney by a corporation does not necessitate that the attorney also represents those individuals affiliated with the entity. • However, RPC 1.13 does not expressly prohibit an attorney from representing both.

24. Ethical Issues: Representation of the Entity and the Individual, cont’d • What must in-house counsel do upon discovery of the off-balance sheet transaction? • According to RPC 1.13, if in-house counsel discovers misconduct such as insider trading, s/he must: • Ask the offender to reconsider his or her actions • Advise the corporation that a secondary legal opinion should be sought • Advise the highest member of the organization of the misconduct • If the highest member of the organization refuses to act, in-house counsel must resign pursuant to Rule 1.16.

25. Revealing Attorney-Client Communications as In-House Counsel • In-house attorneys are supposed to serve as whistleblowers for the corporation. • If an attorney encounters potential misconduct by an executive, to what extent may the lawyer reveal information that would otherwise be confidential? • Crime-Fraud Exception as codified in RPC 1.6: Requires an attorney to promptly reveal the misconduct.

26. Ethical Issues Faced By In-House Counsel • Navigating conflict of interest issues can be complex, particularly where in-house counsel faces the risk of precluding herself from representing the corporation. Outside counsel can be an enormous aid in these situations.

27. Toyota’s Slow Awakening to a Deadly Problem February 2, 2010 • “‘In the Fall of 2009, Toyota announced problem with floor mats and blames ‘unintended acceleration.’” • “Toyota’s handling of the problem is a story of how a long-trusted carmaker lost sight of one of its bedrock principles.” • “‘If we found anything, we would take appropriate action,’ said Toyota spokesman, Mike Michels.” • “The company said on Nov. 2 that ‘there is no evidence to support’ any other conclusion, and added that its claim was backed up by the federal traffic safety agency.”

28. Toyota’s Slow Awakening to a Deadly Problem February 2, 2010 • “But, in fact, the agency had not signed on to the explanation, and it issued a sharp rebuke. Toyota’s statement was ‘misleading and inaccurate,’ the agency said. ‘This matter is not closed.’” • “Last week, Toyota announced that it was voluntarily halting production of vehicles.” • “Last week, the transportation secretary, Ray LaHood, said in an interview with a Chicago radio station that Toyota had halted production of recalled vehicles ‘because we asked them to.’”

29. Toyota’s Slow Awakening to a Deadly Problem February 2, 2010 • “‘It thinks it can control this crisis, and in the process has thrown its own credibility out the window,’ said Mr. Kane, the safety consultant whose firm has documented thousands of reports of unintended acceleration.” • “‘Every day is a lesson and there is something to be learned,’ Yoshimi Inaba, Toyota’s top executive in North America, said at the Detroit auto show in January. ‘This was a hard lesson.’” • “In Davos, Switzerland, on Friday, Akio Toyoda, the grandson of Toyota’s founder who now heads the company, told a Japanese broadcaster that he was ‘deeply sorry’ for the problems.” • “In addition to cases related to individual accidents, several class-action suits have been filed against Toyota.”

30. Conclusion • Crises occur – Be Ready. • Develop a Crisis Management Plan. • Have Buy In from Senior Management. • Guard the Privilege. • Get Your Arms Around Documents Early – And Don’t Create Bad Ones. • One Designated Voice. • Avoid Admissions of Liability or Fault. • Test, Test and Retest.

31. Questions?

32. Thank You Peter A. Antonucci Greenberg Traurig, LLP 200 Park Avenue New York, New York 10166 antonuccip@gtlaw.com (212) 801-9200