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Honey, the TV Would Like to Know If We’re Done Fighting…

James Haggerty  |  02.12.2015

Samsung and the PR Perils of “Standard Legal Practice”
Corporate Counsel

February 12, 2015 (link here)

I’ve learned two things this week:

1. Even in this information age, many lawyers still don’t understand that they live in a world where more than just legal issues matter.

2. I really need to start watching what I say in front of my television set.

These two revelations actually stem from the same news event: reports that electronics giant Samsung had recently updated the terms of service for its voice-activated televisions, adding language that seemed to indicate that its “Smart TV” line might actually be eavesdropping on its customers’ conversations and supplying that data to an unnamed third party. Specifically, the language in the terms of service read:

“Please be aware that if your spoken words include personal or other sensitive information, that information will be among the data captured and transmitted to a third party through your use of Voice Recognition.”

By mid-week, a public outcry over the Orwellian nature of the clause had forced the company to backtrack, issuing a blog post that identified the third-party company receiving the data and assuring the public that “Samsung will collect your interactive voice commands only when you make a specific search request to the Smart TV by clicking the activation button either on the remote control or on your screen and speaking into the microphone on the remote control.”

Surely this could have been written into the terms of service in the first place, and the whole privacy-violating black eye avoided (a black eye that will cost Samsung—not just in reputation, but probably in television sales). Indeed, the fact that Samsung was in this mess in the first place provides a lesson for lawyers and communications specialists alike: action that seems sound from a strictly legal perspective can ultimately cause significant reputational harm to your company and its broader business agenda. Lawyers in particular need to be attuned to implications of legal strategies and legal language, lest the reputational baby be thrown out with the legal bathwater.

Put a bit more bluntly: lawyers need to lose the tin ear when it comes to the public ramifications of what used to be “standard legal practice.” We live in an era where you must assume all public documents will be noticed, and “boilerplate language” is no longer an excuse for communication blunders. Nor is falling back on the old line that “my job is to be as aggressive as possible in defending the company’s legal interests . . . it’s up to others to worry about broader concerns.”

In my view, that is 20th century legal thinking in a 21st century world.

How often does this happen? In my experience, all the time. Just last week I had a client file a layoff notification with the State of New York, informing state labor officials that a New York factory was closing, with a loss of dozens of jobs. The publicly available document failed to mention that all employees had been rehired at a new, larger facility across the border in New Jersey. It wasn’t legally relevant or necessary . . . so why mention it?

Why indeed? The headlines in the local newspaper the next day read (I’m paraphrasing here): “Company Lays Off 50 Employees, Shuts Down Operation.” Had the legal team been attuned to the broader playing field, that story could easily have been: “Company Moves Entire Workforce Into Larger Facility in Anticipation of Growth..”

Or consider a litigation-related example from just a few weeks ago: retailer Saks Fifth Avenue was sued for discrimination by a transgender employee in Texas, who alleged violations of Title VII of the Civil Rights Act. In response, the company’s lawyers filed a motion to dismiss with what, no doubt, appeared to them to be a very standard defense: that “transsexuals are not a protected class under Title VII.”

A solid argument from a strictly legal perspective, but the problem lies in the fact that Saks has proclaimed itself for years as a staunch supporter of transgender rights. As Gerald Storch, chief executive officer of Saks parent Hudson’s Bay Co., told The New York Times in the wake of a public backlash to the motion: “It’s preposterous to think that in any way Saks Fifth Avenue is anything but a strong advocate for LGBT rights.”

Here’s the point: you can’t have it both ways—at least not from the public’s perspective. You are either a strong advocate for LGBT rights or you’re not. So inevitably, at the end of January Saks withdrew its motion, stating it will fight the case on its merits, but that “[o]ur position is, and always has been, that it is unacceptable to discriminate against transgender individuals.”

How could this happen? My guess is that well-meaning local attorneys in Texas either weren’t aware of the company’s overall policy, or didn’t quite appreciate the negative ramifications of filing a motion that so contradicted that policy.
Interestingly, there is a flip side to this concern: often in the rush to ensure that there is no reputational damage, organizations can take action from a policy or PR perspective that runs afoul of longstanding legal, or even constitutional, principles.

There was a recent trend in the banking sector, for example, to close the accounts of large clients in certain industries (such as those businesses that deal primarily in cash transactions), in the name of managing “reputational risk.” As my client, attorney Sheila Tendy, recently pointed out in American Banker, in the interest of minimizing this risk, banks began closing the accounts of some large religious institutions—in apparent violation of Title II of the Civil Rights Act, which protects against religious discrimination in public accommodations. This, too, highlights the all-too-common disconnect between the legal and public relations functions in large organizations: in-house lawyers need to be monitoring the policy and positions of their company, because just as you can raise reputational risk through legal action, business decisions made in the interest of reputation can have unintended legal consequences.

In the end, I believe that lawyers need to heed the advice of Justice Anthony Kennedy from the U.S. Supreme Court case Gentile v. State Bar of Nevada (501 U.S. 1030, 1043): “An attorney’s duties do not begin inside the courtroom door. He or she cannot ignore the practical implications of a legal proceeding for the client . . .”

This was true in 1991, but such advice is even more relevant today, in a world where every contractual term and legal strategy poses reputational risk, and efforts to mitigate impact on reputation can have unintended consequences in the eyes of the law.