Legal Aspects of Corporate Crisis Management

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Thinking of using a public relations firm to help manage a corporate crisis?  Divergent interpretations of the privilege rules have led to differing legal opinions on whether communications between a PR firm and the company or defense counsel are privileged.  A California state court of appeals decided last month that such communications were not privileged, illustrating the privilege risk that can arise in communications with PR firms.

No California exception available

Behunin v. Superior Court involved an unsuccessful real estate investment deal.  “As part of a plan to induce the Schwabs to settle” the resulting lawsuit, Behunin’s lawyers hired a public relations firm to create a website linking the Schwabs and their Indonesian investments to the family of former Indonesian dictator Suharto.

In Schwab’s suit against Behunin for libel and slander, he sought to discover communications among Behunin, his counsel and the PR firm about the creation of the website.

The court of appeals, denying a writ of mandamus, concluded that although California law may extend privilege to some communications with a PR consultant, privilege did not apply here:  Behunin failed to prove that communications with the PR firm were reasonably necessary for his lawyer to represent him in the underlying case.

Section 952 of California’s evidence code codifies exceptions to the usual rule that disclosing a lawyer-client communication to a third person destroys the privilege. But the Behunin court bluntly said in this case that “There is no ‘public relations privilege’ in California,” and that no exception to the general rule applied to the PR firm’s involvement in generating negative publicity that “would help get the Schwabs to the settlement table.”

  • Behunin did not provide evidence proving that the communications among the lawyer, the PR consultant and himself were reasonably necessary to assist the lawyer in representing him, the court ruled.  Rather than being able to show that the lawyer and consultant were involved together in “developing, discussing, or assisting in executing a legal strategy,” it appeared that the lawyer only acted as a liaison in hiring the PR firm.
  • Nor, said the court, was the PR consultant the functional equivalent of the client’s employee (a status which could potentially raise the privilege shield).  There was no detailed factual showing that the consultant was responsible for a key corporate job, had a close working relationship with the company’s principals on critical matters, and had information that no one else at the company possessed.

Differing opinions on PR firms

The application of privilege and work-product principles has generated opinions that have extended the privilege to communications among lawyers, clients and PR firms.  See King Drug Co. v. Cephalon, Inc. (E.D. Pa. 2013) (privilege applied; consultants preparing business and marketing plans were the client’s “functional equivalent”).  Other opinions are to the contrary.  See Kirby Pemberton v. Republic Services, Inc. (E.D. Mo. 2015) (no privilege; no Missouri authority extends privilege to public relations consultants, and privilege should be narrowly construed); McNamee v. Clemens (E.D.N.Y. 2013) (no privilege; PR firm only provided standard services not necessary in order to provide legal advice, and therefore disclosing documents to firm resulted in waiver).

Takeaway – caution required

Managing the media can be an important part of managing a corporate crisis.  Creating and preserving privilege in this setting demands caution, and involves a nuanced analysis that can be both fact-specific and jurisdiction-specific.

  • Stephen Williger, of Thompson Hine’s Cleveland office,  will present the keynote address, “Legal Aspects of Corporate Crisis Management,” at the 2017 Continuity Insights Management Conference in Denver, April 24-26.  He will speak on the legal aspects of pre-crisis planning, mitigation, remediation, and recovery.  Conference program   Registration