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“We’re not just going to put this behind us to make us feel good.” -Bank of America CEO Brian T. Moynihan, October 2010 “This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us.” -Bank of America CEO Brian T. Moynihan, June 2011 The recent announcement that Bank of America is close to an $8.5 billion settlement to end litigation claiming the bank misled large institutional mortgage investors is fascinating on many levels. Overall the bank will take a $20 billion charge against earnings. The New York Times Dealbook blog said the settlement surprised Wall Street, “which was expecting a protracted fight.” The payout—and enormous public attention it garnered—also raises concerns that the settlement might encourage large institutional investors to pursue similar lawsuits against other big banks, JP Morgan Chase & Co. and Wells Fargo. For corporate counsel and the lawyers who represent them in these cases, Bank of America’s public posture in the months leading up to settlement brings up some interesting legal communications questions: Is it better to definitively assert that you will fight these claims, then settle? Or do you just raise expectations with such statements, creating a firestorm of publicity when the unexpected—but likely inevitable—settlement does occur? In Bank of America’s case, it does appear that their public statements were hurting. A widely reported statement from CEO Brian Moynihan in November 2010 stated that the battle had devolved into “hand-to-hand combat.” Along with the quote above, these public comments led media, the investment community, and other key stakeholders to believe that the bank was going to dig in its heels and fight the litigation for a long time. The investor community reacted negatively. Indeed, since the “hand-to-hand combat” statement, Bank of America’s stock had been on a downward slide. On the day the settlement was announced, the bank’s stock rose about 3%. Clearly, despite the price tag, news of the settlement was received positively by at least some public audiences. Of course, the vast majority of lawsuits settle—in the civil context, estimates are between 95 and 98 percent of cases filed will be resolved long before the facts are ever brought before judge or jury. Yet while it is axiomatic at this point that a bland “No comment” tends to make you look guilty, a new cliché has emerged in recent years that appears equally damaging. It goes something like this: “We deny these allegations and will defend ourselves vigorously in each of these cases.” In many ways, it is the “No comment” of the new millennium. Why are such Churchillian pronouncements a problem? In the end, it’s all about expectations. Before public audiences—whether it’s the media, investors, customers. or regulators—no company should ever underperform expectations: not with earnings, and not with the progress and results of legal matters. Consider the original Merck Vioxx trial from several years back as an example of the effect of expectations on public perception. As you may recall, Merck was hit with a $253 million verdict in August 2005 (an amount, by the way, that was overturned on appeal). More than half a decade and a global Vioxx settlement later, it is sometimes forgotten that the first Vioxx trial was a case Merck was convinced it would win. In fact, company lawyers arranged the trial dates to ensure the Ernst case would go first, believing the issue of causation made it a winner. And significantly, Merck expressed this faith publicly: “This is a good case for us,” said their spokesman. By contrast, the plaintiffs’ side kept downplaying expectations, stating that it was common to lose the first several cases as plaintiffs learn what works and what doesn’t with juries. When the actual verdict was announced, it created a media firestorm. And within a month, 2,200 additional Vioxx lawsuits had been filed. In the end, Merck was subject to more than 20,000 Vioxx suits. Pfizer, by contrast, whose Celebrex and Bextra products were quite similar drugs, was subject to a fraction of the number of cases. To Merck’s credit however, after some dismal initial public relations missteps, they did begin to play the PR game as well as the plaintiffs did—and in the end, their proper conditioning of public expectations was rewarded. When the $4.85 billion global settlement of the Vioxx litigation was announced in November 2007, The New York Times noted: The settlement vindicates Merck’s risky decision to take cases to trial rather than agree to a quick, early settlement. By aggressively defending itself, Merck exposed the weaknesses in many plaintiffs’ cases. Some plaintiffs could not prove they had taken the drug, and others were overweight, smoked, or had other risk factors for heart attacks. Clearly, Merck’s legal and communication teams had spent considerable time ensuring the media would understand its strategy and significance of its decision to settle, even after initially vowing to take each and every Vioxx case to trial. In other words, it’s not how vigorously you vow to fight that matters, but how accurately you manage expectations of public audiences as you move to inevitable settlement. James F. Haggerty, an attorney and communications consultant, is CEO of PRCG/Strategic Communications and the author of In The Court of Public Opinion: Winning Strategies For Litigation Communications (American Bar Association Publishing, 2009).

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