Public Exposure and Settlement Strategy

Part of my mantra is that lawyers, PR people and their clients need to start integrating communications and perception concerns into legal strategy at the earliest possible opportunity. Simply put, you just can't wait until The New York Times is on the story before considering the effect of such coverage on your company and your case.

Here is an example of a company that apparently believed that if it settled the case, they could head off a New York Times article already underway. The case involved a lawsuit brought by the Indiana Children's Wish Fund, a "make-a-wish"-type organization. The suit was brought against Morgan Keegan, a brokerage firm in Memphis, over a mutual fund from Morgan Keegan that had invested in mortgage securities that subsequently tanked. It appears that by the time the company got around to settling, the NYT reporter had already done considerable work on the story. And with such an interesting fact pattern, it was just too good a story to pass up, despite the settlement.

The lead to the New York Times piece gives you a sense of just how difficult the facts were against Morgan Keegan, regardless of any legal consideratons as to liability:

The Indiana Children’s Wish Fund, which grants wishes to children and teenagers with life-threatening illnesses, got an early Christmas gift nine days ago. Morgan Keegan, a brokerage firm in Memphis, made an undisclosed payment to the charity to settle an arbitration claim; the Wish Fund said it had lost $48,000 in a mutual fund from Morgan Keegan that had invested heavily in dicey mortgage securities.

Coming less than two months after the charity filed its claim, and as a reporter was inquiring about its status, the settlement is a rare consolation for an investor amid all the pain still being generated by the turmoil in the once-bustling mortgage securities market. Before the Wish Fund reached its settlement, its mortgage-related losses meant that nine children’s wishes would go ungranted.

Nine wishes to sick children ungranted? I'd suggest considerations of settlement should have been top-of-mind well before The New York Times started chasing the story.Just as bad facts make bad law, sometimes bad facts make for media coverage that far outweighs the culpability of the parties involved. Now I am not privy to all the circumstances surrounding this particular case, but I suspect Morgan Keegan may well have gotten a bit of a bad rap, given the turmoil that engulfed the industry as a whole. But this case is a lesson for anyone who belives that public attention ends when the lawsuit does. In the court of public opinion, the rules are sometimes quite different.