Crisis ManagementIssues For First Responders

ACC CLE Presentation

April 15th and 22nd, 2010

Presenters

• Darren McCarty• Jon Shepherd• Alan Struble• Darren Hauck

Number of Potential Crisis Scenarios

• Physical Catastrophes

• Major Shareholder Injunctions

• Government Investigations

• Massive Products Liability Exposure

• Others

Common Issues

– Overwhelms Organizational Capacity

– No Road Map or Infrastructure In Place

– Immediate Need for Expertise

– Need for Quick Prioritization and Decision Making Ability

I. Physical Catastrophe

• Fires, explosions, etc.• On the scene

– Owner/client– Police, fire departments– Government agencies– Insurers– Media

• All over the site – and off-site– Physical, electronic and documentary evidence

First Steps

• Assemble the team– In physical catastrophe, involves more than just

professionals (infrastructure, etc.)– Cross Disciplinary

• Taking control– Of the site of a catastrophe– Dealing with relevant government agencies

• OSHA, ATF, etc.

– Management structure/organization responsible for responding

First Steps

• Communications/PR• Insurance

– Review policies– Provide notice to carriers

• Internal communications– Information to flow through lawyers

First Steps

• Litigation hold memorandum– Distribute to all relevant individuals– IT department

• Reviewing the evidence– Forensics team– Document review– Witness interviews

Evidence Summary

1) Before conducting an investigative interview, make prepared Upjohn statement

2) The Upjohn statement should be memorialized in contemporaneous notes or memoranda – Be careful about cutting & pasting in interview memoranda; can undermine

credibility/accuracy of contemporaneous record

3) Use headers/footers to affirmatively claim work product protection on documents (even those not produced by lawyer)

4) If cooperating with a government investigation, assume that all investigative documents will eventually be disclosed – Govern written and electronic communications accordingly– Limit written reports and conclusions – particularly problematic if findings and

conclusions change in process

Preparing on the Front End

• If physical catastrophe is a possibility, have a team in place– Legal, forensic, PR– Plan for the unthinkable

• Document retention policies – In place– In compliance

Preparing on the Front End

• Know the regulatory environment

• Recognize potential for follow on claims – Criminal vs. civil

II. Company Crisis

“STRIKE SUIT” TO STOP ASSET SALE/MERGER

“STRIKE SUIT” TO STOP ASSET SALE/MERGER

R2 Investments, LDC v. Carl C. Icahn, et al., CA No. 1862-N in the Delaware Court of Chancery.

November 2005 – XO Communications announces sale of assets to company controlled by XO Chairman Carl Icahn.

December 2005 – minority shareholder R2 Investments, LDC sues to enjoin the asset sale.

March 2006 – XO Communications announces termination of asset sale.

ENTIRE FAIRNESS DOCTRINE – Fair Process and Fair Price

Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983)“The concept of fairness has two basic aspects: fair dealing and fair price. The former embraces questions of when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained. The latter aspect of fairness relates to the economic and financial considerations of the proposed merger . . . . However, the test for fairness is not a bifurcated one as between fair dealing and price. All aspects of the issue must be examined as a whole since the question is one of entire fairness. However, in a non-fraudulent transaction we recognize that price may be the preponderant consideration outweighing other features of the merger.”

R2 Investments, LDC v. Carl C. Icahn, et

al. – WHAT DID THE EVIDENCE SHOW?

“We need to bend over backwards to make it look like we are maximizing shareholder value.”

Robert Knauss, Chairman of the Special Committee of the XO Communications,

Inc. Board, October 21, 2005

Merger/Asset SaleReacting to Strike Suit

• External notifications of lawsuit(s)– SEC filings– Notice to carrier(s)– Press release?– Talking points for media/other inquiries

• Internal notifications– Document hold memorandum– Remember to include IT Department

Merger/Asset SaleReacting to Strike Suit

• Decision on Counsel – deal lawyers or new firm?• Often multiple complaints in more than one jurisdiction

– Usually first-filed takes precedence– Sometimes can pick which lawsuit to push forward: jurisdiction, judge, plaintiff’s counsel – Agree to accept service, agree to expedited schedule, protective order

• Coordinate with board advisors– Document production strategy– Depositions– Different strategies for buyer, seller

Merger/Asset SaleReacting to Strike Suit

• Document production, review• Discovery from plaintiffs!• Depositions• Preliminary injunction briefing

– Get an early start as you know most of what the plaintiff will argue

• Settlement issues

ATTORNEY-CLIENT PRIVILEGE

Texas Rules of Evidence, Rule 503. Lawyer-Client Privilege

(b) Rules of Privilege.

(1) General rule of privilege. A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client:

(A) between the client or a representative of the client and the client's lawyer or a representative of the lawyer;

(B) between the lawyer and the lawyer's representative;

(C) by the client or a representative of the client, or the client's lawyer or a representative of the lawyer, to a lawyer or a representative of a lawyer representing another party in a pending action and concerning a matter of common interest therein;

(D) between representatives of the client or between the client and a representative of the client; or

(E) among lawyers and their representatives representing the same client.

ATTORNEY WORK PRODUCT

Texas Rules of Civil Procedure, Rule 192.5. Work Product

(a) Work Product Defined. Work product comprises:

(1) material prepared or mental impressions developed in anticipation of litigation or for trial by or for a party or a party's representatives, including the party's attorneys, consultants, sureties, indemnitors, insurers, employees, or agents; or

(2) a communication made in anticipation of litigation or for trial between a party and the party's representatives or among a party's representatives, including the party's attorneys, consultants, sureties, indemnitors, insurers, employees, or agents.

(b) Protection of Work Product.

(1) Protection of Core Work Product-Attorney Mental Processes. Core work product--the work product of an attorney or an attorney's representative that contains the attorney's or the attorney's representative's mental impressions, opinions, conclusions, or legal theories--is not discoverable.

(2) Protection of Other Work Product. Any other work product is discoverable only upon a showing that the party seekingdiscovery has substantial need of the materials in the preparation of the party's case and that the party is unable without undue hardship to obtain the substantial equivalent of the material by other means.

Crisis ManagementIssues For First Responders

ACC CLE Presentation

April 15th and 22nd, 2010