Litigation PR is often mistakenly thought of as a form of crisis communications.
Out-of-court settlements happen in almost 90% of litigation cases. Exerting pressure on the other side while defending your client’s reputation is therefore part of the bargaining over the price which will most likely happen at some point to be agreed to settle the case. Arguably, in this respect, litigation PR may also be regarded as a distant relative of financial communications, not crisis communications only.
A dangerous extreme is to believe that placing an unwanted attention on the opposite side will ensure a fast track to getting ‘the right verdict’. It can be a public verdict that will influence a court decision/ make the other side settle the case on unfavorable terms for them.
This thinking may lead to disaster. Anything you say as part of the litigation PR campaign can be regarded by a judge as undue influence on the court. Like in financial communications, discretion is a top priority.
Therefore, many lawyers advocate that litigation PR should be narrowed to a press release / holding statement formulation. Reacting to litigation following classic crisis comms scheme may even be counter-effective. Litigation PR is so much more than this.
How Grayling helped BNY Mellon settle the $22 billion case for a very tiny portion of the contested sum just by PR is a great example. This classic litigation PR case also demonstrates how pro-active actions, if done discreetly in full cooperation with the lawyers (Clifford Chance in our case), may instantly and positively change the game.
Russia v BNY Mellon
In May 2007 the Russian Federal Customs Service sued The Bank of New York Mellon seeking $22 billion in damages for the alleged non-payment of custom duties by the bank on the transfer of funds out of Russia.
This litigation grows out of the unlicensed transmission of $7 billion out of Russia in 1996-1999 through the facilities of The Bank of New York, without the bank’s knowledge, by Lucy Edwards, a former BoNY VP, and her husband, Peter Berlin.
The case originated with Podhust Orseck, trial lawyers in Florida, who had made similar attempts to apply the US RICO law (Racketeer Influenced and Corrupt Organizations Act; provides for extended penalties for criminal acts) in foreign jurisdictions on previous occasions.
The case was heard in the Moscow Arbitrazh Court.
Through the bank’s Depository Receipt Business BNY Mellon serviced and supported 12% of the market value of Russian shares ($127 billion) on behalf of international investors.
Respect the Russia First concept (“everything by, for and the benefit” Russia as espoused by Putin and Medvedev): above all, avoid attacking Russia or its court system or make any comments that may imply non-professionalism or corruption on the part of Russian officials.
Do not use threatening economic rhetoric: Deutsche Bank and other competitors would always be ready to take up the Bank’s depositary receipts business in Russia. The Russian Government and the Kremlin were very well aware of this.
Make US lawyers from Florida who ‘set up the Russian Federation’ the main target for BNY Mellon’s attack, especially within Russia. Russian officials must see that there is always a friendly way out for closing down the case, or bringing the size of the alleged damages down, by pointing to ‘bad US lawyers’ who have been non-professional and set them up. Always ‘keep a way out’ open for Russian officials
At the same time be decisive in explaining to BNY Mellon’s investors and stakeholders that the case is without merit, while outside Russia the bank’s interests are well protected.
A story about how the US lawyers from Podhurst Orsek (hired by the Russian government) potentially may have to sue the Russian Federation to get their 29% success fee even if the case against BNY Mellon is won has been successfully generated by Grayling in Vedomosti, the leading Russian business daily (a JV of the FT and WSJ in Russia). The article entitled ‘Why Suit Against The Bank of New York Threatens Russia. Following Noga’s Steps’ appeared on March 24, 2008 on the front page (in absence of any hard news related to the story).
The Vedomosti story has been followed and picked up by Bloomberg, Rossiyskaya Gazeta (Russian Government’s Daily) and Parlamentskaya Vlast (Russian Parliament’s bi-weekly), made top news at the RBC business newswire and splashed on the Russian Internet; raising concern about how the case was originated (Podhurst Orsek tried similar litigations in other jurisdictions and every time failed) and whether the Russian Federal Customs Service has been ‘set up’ by the US lawyers.
Intensive background work with the media in Moscow and outside Russia dovetailed into the Bank’s own ongoing investor relations program; while Grayling stepped-up background briefings in Moscow to assure on the details of the case.
The same day the news went out onto the market, BNY Mellon held an IR conference to which Grayling connected the leading Russian and international media present in Moscow and Grayling followed up with individual meetings / calls.
IR conference call followed up with financial media in Moscow (Grayling) and elsewhere (BNY-M). The stock price recovered and the impact of the case upon the stock price was viewed more objectively.
Grayling has successfully completed the project to advise BNY-M on its PR litigation strategy in Russia and effect media relations in Moscow in the name of the bank. The Bank has settled the case with the Russian Customs for a tiny portion of the contested sum.