TACO BELL: HELP I’M BEING SUED

Posted in Business Crises We Create, Crisis Communication Response, Liability Communications, Litigation Communications, RETAIL FOOD CHAINS, Taco Bell, What to do when you are sued on February 16th, 2011 by mnayor

Ouch! On January 25th it was reported that Taco Bell had been hit with a class action suit asserting that the company’s claim that it uses seasoned beef or seasoned ground beef in its products is false. Plaintiffs allege that the Company’s beef mixture is only 35% beef with the rest a mixture of oats, soy, maltodrextrin and soy lecithin and water. Monetary damages are not claimed. The plaintiffs want to compel Taco Bell to be honest in its advertising.

After a couple of weeks we have not heard from Taco Bell other than it will “vigorously defend the suit”. No damage control here.

Perhaps the Company feels the public will soon forget all about the suit. And maybe it will. After all, not too many people expect ground fillet mignon in their $1.00 wraps. But then again, not too many people expect adulterated food either. Time will tell whether sales are negatively impacted. So what’s a company to do?

Honesty. It’s a difficult concept to play with sometimes. The public likes your product the way you make it. You actually disclose some information on your website (how many people research product ingredients on a website before purchasing?). No harm has apparently been done (although some of the additives are common allergens).

How about some real facts. Instead of ducking down and waiting for the shots to subside (along with the jokes), why not deal with the issue head on. Research carefully. Analyze your products and make full disclosure. Publicize the nutrition value of each product as well.

Most companies and their attorneys play it very close to the chest when they are being sued. But it is not always necessary to be 100% tight-lipped. The goal of any company in this type of circumstance should be to be as up-front as possible without exposing itself to greater liability. In this instance Taco Bell isn’t even being sued for monetary damages. And as for potential suits in the future, any good laboratory can discover the ingredients in Taco Bell products. There are no secret formulas.

After analysis, the Company should make a determination whether it wants to change its recipes or not. It is conceivable that TB may announce that it is retaining its recipes because of their good nutritional values. It may change the wording of its “beef” content. It may upgrade its recipes (with great fanfare). Or it may just let the marketplace decide and let the chips fall where they may. If it chooses the latter it takes a risk (that may be justified in its mind) but it has not taken advantage of the opportunity to sell itself and burnish its image if it can inform the public about some positive information.

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WHAT TYPE OF RESPONSE DOES YOUR CRISIS NEED?

Posted in Crises Communication, Crisis Communication Failures, Crisis Communication Response, Liability Communications on November 10th, 2010 by mnayor

On November 4th, a Rolls Royce engine on a Qantas A380 Airbus blew apart near Singapore. While there were no deaths or injuries there will likely be financial consequences to the three main players in this story: The Australian airline itself, Qantas; Airbus, the pan-European aerospace company; and Rolls Royce Group, plc the manufacturer of the Trent 900 engines.

There has been much press about the incident and the consequences would appear to be a direct function of how quickly the problem is diagnosed and resolved. Qantas and Rolls Royce are both busily inspecting and analyzing specifications, tolerances and operations that could affect performance.

Because Qantas has the most direct relationship with passengers, it has been the most visible and, seemingly, the most direct and quickest in taking action in this crisis. It has taken its fleet of six A380’s out of service at least temporarily and has made major efforts to redeploy aircraft around the world. Additionally it has provided its passengers with a multitude of assistance in order to avoid as much disruption as possible. Its website has detailed instructions to aid passengers.

Rolls Royce made a statement on November 4th and published it on its website.It stated that safety was its first priority and calmly explained that it has “well established processes to collect and understand information relating to the event and to determine suitable actions”. It then finished with a list several self-serving statements about how terrific the company is, the most recent expenditures on R&D, its revenues and its order book. Its November 8th statement advised that it was working closely with Airbus, and that the incident was unrelated to any of its other engines. While the statements exude a coolness and stiff upper lip mentality that Americans are not quite used to, they also reflect competence and a no-nonsense approach that should reflect well on the company, if it is able to determine and fix the problem in a matter of days.

Finally, turning to Airbus itself, the manufacturer of the A380, a search of its website uncovers nothing. There is a highlighted special report on the latest updates on the WTO Boeing-Airbus dispute but no reference to the Qantas incident. The Press Centre tab brings up many articles, all good, about Airbus. A search of its website does not uncover one mention of the incident.

Three different companies, three different types of response. And perhaps rightly so. Obviously, the closer to the consuming public the more urgent the need for a corporate public response. In the case of Qantas there are passengers who need to be immediately tended to. And potential customers need to be considered. One step down is Airbus whose customer base is the airlines themselves, a much smaller market in numbers. At the bottom rung is Rolls Royce whose customer base is tiny. The bottom line is that crisis communication has to be tailored to the complexity of the situation, a company’s responsibilities, and its stakeholders. Crisis communication is not one-size-fits-all. Less communication and more technical expertise and greater effort to solve the problem would have been far more preferable in the BP Gulf oil spill debacle.

Rolls must make good. Qantas can always buy different planes, although it might take awhile. Airbus could always buy different engines, although that could take awhile. Both Qantas and Airbus could suffer financially in the process but can always rebound. But Rolls will certainly suffer the most if it doesn’t fix the problem fast. Strange that it would be criticized for its lack of communication at a time when 100% of its energy appears to be devoted to fixing the problem, as reported by The Wall Street Journal writer Daniel Michaels, on November 9th. Crisis management is more than communication. If Rolls Royce makes a quick diagnosis and resolves all issues expeditiously, it should be praised for its efforts.

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PREEMPTION: THE TWO EDGED SWORD IN CRISIS MANAGEMENT

Posted in Business Crises of our own making, Business Crises We Create, Crisis Communication Strategy, Crisis Litigation, Crisis Management, Crisis Mitigation, Liability Communications, Litigation Communications on November 3rd, 2010 by mnayor

 Crisis management and product liability are inextricably linked. Whenever a product fails and causes injury or damage to buyers, a crisis can erupt. The liability of manufacturers and vendors have tightened dramatically over the last hundred years, from the theory of caveat emptor or let the buyer beware, to today, in some cases, strict liability. State laws on matters of health (including the environment) and safety have provided consumers with greater and greater protections over the years.

Businesses of all kinds must be more diligent than ever. Even if negligence and/or misrepresentation are not at issue, a company can still find itself in a great deal of trouble. Accusations concerning causation, erroneous manufacturers’ claims, and customer-product incompatibility can raise the specter of liability and place a company at risk.

Not all products are 100% safe for all people at all times. Thus the concept of warning labels has taken on greater importance, especially in those situations where use may be abused, inappropriate or be accompanied by additional risks. We see this more and more in such industries as pharmaceuticals, foods, toys, automobiles and cosmetics. In today’s world some warnings may not be deemed sufficient because they are either not perceived as strong enough or not evident enough on packaging.

In recent years some companies and even whole industries have looked to preemption as a form of product liability protection from individual and class action suits. Federal preemption is the trumping of federal law over state law when that is the express or implied intention of Congress. Most product liability law is state law through a state’s police powers, and ultimately its state statutes, its common law and court decisions. Oftentimes, federal laws are not as tough as state laws and therefore afford more protection to business. Federal legislation, and even federal regulations, sometimes takes precedence. In fact several agencies of the federal government such as the U.S. Food and Drug Administration, The Federal Trade Commission and its Bureau of Consumer Protection, the Consumer Product Safety Commission, and the National Highway Traffic Safety Administration have declared that some of their specific regulations preempt state law and bar or limit consumer redress. 

Federal court decisions have been mixed. In one recent Supreme Court decision the Court ruled that a medical device manufacturer could not be sued by a consumer because the manufacturer had won FDA approval. But in another, the Court held that a patient was not barred from suing a pharmaceutical company for damages just because the product displayed an FDA-approved label.

Preemption may create a dilemma for a company. Certainly, successful preemption can provide the type of protection that can avoid financial calamity. On the other hand, combative and bellicose pursuit of a safe harbor can have an extremely negative effect on a company’s reputation. It is quite easy to appear as consumer-be-damned if preemption coverage is not handled discretely. Reputation management is equally as important, and a company must strike a balance between finding that safe harbor and doing the right thing, between securing financial escape and retaining and developing public support, respect and even admiration.

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JOHNSON & JOHNSON: CRISIS MANAGEMENT IN FREE-FALL

Posted in Business Crisis Management, Crisis Communication Failures, Crisis Communication Response, Liability Communications on October 5th, 2010 by mnayor

 The Today show on September 21st dusted off a fairly old story. Ortho Evra, a birth control patch introduced in 2002 and produced by J&J subsidiary Ortho McNeil was in the news again. Since the time of its introduction the patch has been the subject of thousands of court complaints. The product allegedly has the effect of causing deep vein thrombosis, pulmonary embolisms, heart attacks, strokes and death, all stemming from the fact that it can deliver twice as much estrogen to the body as regular birth control pills. J&J has received years of bad press about this subject. No claim has ever gone to trial and J&J continues settlements that total many tens of millions of dollars.

 The Today show reported that it had recently uncovered a 2005 resignation letter from a former J&J vice president saying that he could not remain in his position knowing the high levels of estrogen delivered by the product. The show also reported that another former vice president was suing the Company for wrongful termination based on his whistle-blowing efforts even before the product was introduced to the public.

 Now switch gears to J&J’s non-prescription products. Over the last year, the Company has gone through a slew of product recalls, including infants’ and children’s Tylenol, for reasons including contamination and the presence of foreign matter. The Company also conducted what is termed a “phantom” recall of Motrin by hiring a third party to buy up the product on store shelves in order to avoid adverse publicity. J&J maintains that it did so under an agreement with the Food and Drug Administration. The House of Representatives investigated the recalls, and questioned the alleged agreement with FDA when it heard CEO William Weldon at the end of September. Weldon acknowledged at the hearing that J&J had let the public down by not maintaining its high standards. An F.D.A. official testified that the Company had an inadequate quality system at a number of its facilities. One lawmaker declared that J&J’s failures would mar its reputation for years.

 J&J’s 1982 handling of the Tylenol scare is often cited as the quintessential example of crisis management in modern corporate history. Back then cyanide had been found in bottles of Tylenol in the Chicago area. J&J immediately issued public warnings, called a product recall, created tamper-proof packaging, and before long was fully back in business. The Company was up-front and willing to bite the bullet in the best interests of the public. Unfortunately that does not appear to be the philosophy today.

J&J’s website states that “The values that guide our decision making are spelled out in Our Credo. Put simply, Our Credo challenges us to put the needs and well-being of the people we serve first.” Maybe so, but it appears as if a new breed of management has taken the reins at J&J – new cutting -edge types whose sole concentration is on the bottom line. Yet it might be this competence and cool business efficiency that will have the effect of undermining the extraordinary 120 year old reputation of this venerable institution. The abilities of current management must be tempered with sensitivity and responsibility to the public in order to salvage and maintain the invaluable good will of one of America’s great corporations. Hopefully the lessons learned will again set management on the right course.

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GOLDMAN SACHS PART II

Posted in Crisis Communication Failures, Crisis Communication Strategy, Crisis Litigation, Legislative Advocacy, Liability Communications, Litigation Communications on April 29th, 2010 by admin

Being sued is one thing. Hopefully you can defend yourself. Proving your or your company’s innocence can be a full-time job. A good defense not only saves you money – damages, including punitive damages – it also saves your reputation. In fact, the costs of litigation, as high as they are, can, in part, be chalked up to the cost of good public relations. Guilty parties, however, pay the price.

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GOLDMAN SACHS PINSTRIPES TO PRISON STRIPES

Posted in Crisis Communication Failures, Crisis Communication Response, Crisis Litigation, Liability Communications, Litigation Communications on April 29th, 2010 by admin

I’m only kidding. I don’t think any of them will go to jail. They are smart. And they are wily. They did terrible things, low down and scurrilous, greedy, selfish, un-American, with the best interests of themselves at heart – but NOT ILLEGAL.

Years ago capitalism meant something. Something constructive and creative. Today the meaning has been reduced to “getting yours”, no matter what the cost is to others. Getting yours often means selling thin air, creating nothing and selling it for a premium. And that is what Wall Street often does. It creates “products” – financial products that create nothing. The products are nothing more than new casino games people can bet on. And Goldman created many, especially ones that let some of their clients bet against the U.S.A. Now Goldman says it gave its clients what they wanted. I doubt it. It’s hard to envision clients coming up with these schemes and asking Goldman to create the vehicles. Easier to envision is a group of Goldman players sitting around a conference table kicking ideas back and forth about what they think they can sell.

But, I digress. The point is that Goldman is in crisis mode. The players have been severely criticized for bobbing and weaving before the Senate and not being forthright and not admitting their culpability. But hold on. Individual members of the firm and the firm itself have been sued. This situation perfectly demonstrates the conflict that often arises between a company’s legal counsel and its PR people.

Wouldn’t it be nice and perhaps even productive if Goldman threw itself on the mercy of public opinion. We are a forgiving nation. We love it when someone or some thing is brought to its knees. We then go on to the next biggest thing on the national agenda. We have short memories. But what’s a company, individual or non-profit to do when litigation or administrative sanctions are staring them in the face. There are a few things: deny outright, regret the situation but make no admission, blame someone else, plead ignorance, admit some unintentional mistakes were made, etc. None of the options are particularly pleasing. Two were in plain sight at the Goldman hearings: outright denial that anything wrong was done, and secondly, admit fuzzily that some mistakes may have been made. But certainly no one wanted to get his you-know-what caught in the wringer, or be responsible for the downfall of his employer or former employer.

The moral of the story for crisis management is that, depending on the circumstances, one must be very careful. Legal advice that is tantamount to “No Comment” or “I can’t discuss this because it is in the courts” may at times have its place in crisis management. P.R. and marketing types are not always right and neither are the lawyers who are protecting a client’s interests. But there are often ways to take advantage of situations – to explain, to be contrite, to regret situations, all without admitting liability. It’s up to you, the individual client, to weigh the advise and find the intelligent path that both protects you and your company’s interests and at the same time deals constructively with the crisis and public perception.

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