In recent years many investors have lost significant sums via a range of investments, products and tax avoidance schemes recommended to them by advisers. These investors may well have the potential to bring legal claims. However many may have been deterred from doing so by concerns about adverse publicity if the choice of investment or fund reflects badly on them; perhaps the scheme turned out to be morally dubious or a sham.
So what are the reputational implications for taking such matters to court and how can they be managed?
High profile commercial litigation in a public forum conflicts with the natural desire of many wealthy investors to protect reputation and maintain privacy. For those investors for whom discretion is key, looking for ways of resolving the dispute without recourse to litigation is likely to be their priority. However, sometimes litigation is impossible to avoid and the scale of losses may be too great to resolve the dispute without bringing proceedings. In such cases, the potential reputational fall-out has to be considered at the outset and a strategy put in place for dealing with issues as the case progresses. A co-ordinated strategy will be all the more important for investors with global interests as cultural and political factors may play a part in strategy and suing in one jurisdiction may open a can of worms in another jurisdiction.
Parties to litigation may try to damage the other side’s reputation or reputational damage may be collateral to the litigation. The fear of a publicly fought case can be a strong incentive not to sue, as parties are reluctant to have dirty laundry aired in public. Reputational dangers can lurk at every stage of the litigation process. In a defence to claims of this sort, the opponent may lay the blame at the door of particular individuals. Disclosure rules mean that internal communications that investors would prefer to keep under wraps may be read out in court. Witnesses can speak their mind with impunity in court and journalists are free to report fairly and accurately what goes on in court and witnesses can take advantage of this.
However, it is important to bear in mind that reputational concerns cut both ways and both sides’ point of view have to be considered in determining litigation and reputational strategy. In reputational terms, the wind is blowing against those firms which recommended poorly performing schemes and products. The investor can use such reputational considerations to their advantage and it may prove helpful in securing early resolution. Furthermore, if the investor is one of a number of investors with potential claims, they can group together to use the press to throw a spotlight on the wider issues, and to turn the tide of public opinion.
It is vital to look beyond the first step of suing – however strong the case, capturing the king may not be much good if the queen is sacrificed along the way. So it is best to ensure that those pursuing the commercial litigation on your behalf properly understand your concerns and have the necessary skills to set up and implement a pro-active reputation management strategy. The lawyers should tailor the claim to narrow the issues, avoid areas of sensitivity, safeguard commercially sensitive information where possible and keep your wider interests in mind.
Once proceedings are underway in high profile litigation, journalists will always ask questions. It is important to engage with them. Answering journalists’ questions needs to be done in a way that gets the key message across: if the journalist has misunderstood the claim, it needs to be explained to them. Using commercial litigators with a network of contacts within the media and an appreciation of how the media operates, is likely to represent a significant advantage to you.
Concerns about negative press coverage should not deter investors from pursuing legitimate claims which could result in significant redress. Winning a claim can generate its own positive press. With an appropriate strategy in place, you should be able to capture the king while retaining the queen.