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In recent months, many companies (public and private) have faced tough issues arising from financial problems, employee layoffs and other negative developments. Some companies have faced even more difficult issues, such as acts of terrorism, corporate scandals, inquiries regarding accounting irregularities and bankruptcy. Without question, these are times that can be challenging to in-house counsel. In a crisis, in-house lawyers frequently must address and resolve issues that are unfamiliar to their law practice, and they usually must act quickly. The stakes are often high, and the public spotlight can be blinding. In the throes of a crisis, in-house lawyers often turn to outside counsel and need their support more than ever. So how can outside counsel assist in such a situation? Step No. 1: Determine whether a crisis exists. Everyone has a bad day now and then. But is it a true crisis? Most lawyers answer this question by asking whether a particular development is material for the company. A securities lawyer might go further and ask whether the item is reasonably likely to have a material adverse effect on the financial condition of the company and its subsidiaries, taken as a whole. The point is that one generally must look at the consequences of the particular development to define its impact. Outside counsel may provide immediate assistance by helping in-house counsel determine that a perceived crisis is, in fact, not a true crisis at all. By discussing the circumstances in detail, defining the worst-case scenarios and considering all angles of a particular problem, the perspective offered by outside counsel often can be valuable to in-house counsel in such a pressure-packed moment. Step No. 2: Define the issues. Assuming that a true crisis exists, it is imperative to define the relevant legal issues immediately. What are the effects under existing contracts? Who needs to be notified? How should the matter be disclosed? Does the company know enough yet to make a public disclosure? What are the other legal and business implications? Obviously, there are a myriad of questions to address in any such situation. In most cases, in-house counsel can identify issues just as effectively as outside counsel. Both are typically lawyers who have spent their careers spotting important legal issues and finding ways to work through them. But outside counsel may offer important support that may broaden the in-house lawyer’s horizons in such a situation. In particular, outside counsel may offer timely and useful legal training to an in-house lawyer as to the specific issues raised. For example, the Sarbanes-Oxley Corporate Fraud and Accountability Act of 2002 and related Securities and Exchange Commission rule-making changed the landscape for securities lawyers over the past six months and now raise difficult new disclosure issues for public companies in their periodic filings. In-house lawyers at public companies are learning about these new laws, and outside counsel frequently provide this training. Disclosure issues relating to a crisis would in most cases require extensive current analysis with these issues in mind. CRISIS MANAGEMENT PLAN Step No. 3: Manage the crisis to its conclusion. Most business consultants would advise a company experiencing a crisis immediately to prepare a crisis management plan. Such a plan would address the action items necessary to resolve the problem at hand, isolate it, mitigate damages and navigate through the troubled waters ahead. How can outside counsel assist in this process? Outside counsel can assist in the preparation of a crisis management plan and help coordinate the implementation of its components. Specifically, outside counsel may be able to assist with the following issues: • Staffing. Outside counsel may be able to provide attorneys, paralegals or other firm staff to assist its client in the management of a plan that may require heavier staffing than the client ordinarily needs. • Referrals. Outside counsel also may introduce the client to other experts that may provide useful guidance with the crisis at hand. For example, the crisis may allow for insurance recoveries by the client, and outside counsel may be able to introduce the client to experts accustomed to such claims. • Public disclosure. Outside counsel also may assist in the preparation of press releases and other public disclosures that are complete and thorough, but that successfully isolate the effects of the crisis. • Quick response. Often the best solution to a crisis is the one that resolves it as quickly as possible. Whether through one of the steps listed above or other means, outside counsel should work 24/7 with its client to manage the crisis at hand in a manner that addresses the client’s goals. Step No. 4: Bring in the cleanup crew. No crisis is ever particularly clean. In addition to management time, a crisis often involves extensive amounts of legal organization and documentation. In-house counsel can work with outside counsel to handle any such resulting mountain of paperwork and should look to outside counsel to provide the necessary backup to confirm that such documentation is in good order. Increased public attention levels and the frequent presence of plaintiffs lawyers sensing a possible claim make such attention to detail not just desirable, but mandatory. As a young lawyer, one of the senior partners in my firm taught me an important lesson in client management: Never panic. Actually, I think the sage advice was, “Never freak out, especially in front of a client.” Clients can perceive panic, which can have a snowball effect and worsen an already bad situation. Any panic by outside counsel will not improve the situation and generally will be unproductive at best. It is the calm and collected outside counsel who, carefully considering the issues presented and the client’s business objectives, can partner with in-house counsel to conquer any crisis and see it to the door. Taylor H. Wilson is a partner in the business transactions section of Haynes and Boone in Dallas.

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