Actions taken during a crisis often make things worse. One reason is that fundamental management rules change, but that's hard for many executives to accept.

1. HEALTH CARE LITIGATION NEWSLETTER
6th Edition, Volume 2
March, 2003
Susan Wood-O'Leary, Co-Chair Rush-Presbyterian
St. Luke's Medical Center
1653 West Congress Parkway, Suite 101 Chicago, IT.. 60612-3839
Phone: (312) 942-7828
E-Mail: susanwo.leillY@rush.edu
Timothy J. Thomason, Co-Chair Mariscal Weeks McIntyre &
Friedlander, P.A.
2901 North Central Avenue, Suite 200 Phoenix, AZ 85012
Phone: (602) 285-5026
E-Mail: tim.thomason@mwmf.com
CHAIRS' COLUMN
By the time you receive this Edition of the Newsletter, the Section of Litigation
meeting in Houston likely will be over. We were the primary sponsor of four programs for
Houston and a co-sponsor for a fifth. We hope that those of you who attended the
Houston conference found it enjoyable and educational.
The "big" ABA Annual Meeting is in San Francisco this August. We hope you can
attend. At it, we will be co-sponsoring a program on preparation of witnesses. In
addition, we will have a Health Law Committee meeting, with both business and Cl..E
components. The San Francisco meeting runs from August 7 through August 13,2003.
Our committee meeting likely will be on Friday, August 8.
This issue features two very interesting and timely articles. We hope that you find
them helpful.
If you have any interest in becoming more active in the committee, please let us
know. There always is a lot of interesting work to do.
Timothy J. Thomason Susan Wood O'Leary

2. What Were They Thinking?
Why Smart Managers Make Things Worse in a Crisis
By Mark Schannon
Most times, litigators are allowed to do their work in relative quiet and tranquility.
Companies getting sued these days are about as newsworthy as rug bum. The hysteria,
media obsessions and demands, and public battles between plaintiff and corporate
lawyers are relatively rare, which allows the majority of cases to be waged inside the
courtroom, not the court of public opinion.
Then, of course, events occur such as a young girl being given the wrong heart and
lung in a transplant surgery at Duke University Hospital, and all bets are off. From a
crisis response perspective, Duke actually handled it about as well as it could, accepting
responsibility, moving quickly to settle with the family, and quickly finding a second
heart/lung even though medically questionable.
However, according to a new study conducted at Washington University School of
Medicine in St. Louis by Dr. Thomas Gallagher, and recently published in Journal of the
American Medical Association, Duke's quick response is not the norm. He found that
doctors, partly out of fear of lawsuits, are less willing to talk about their patients want. As
we shall discuss below, that approach usually results in more lawsuits and larger
awards.
The study noted, "Patients in this study wanted physicians to apologize. Physicians
also wanted to apologize but were reluctant to do so for fear of litigation." That
reluctance usually backfires; the less information victims have in the midst of a tragedy,
the more angry and suspicious and the less likely to be accommodating they become.
The long-term implications of the events at Duke are just being felt. The February 25,
2003 edition of the New York Times had a front-page story about the effect of the Duke
tragedy on proposed federal medical malpractice legislation, with some saying that the
bill is all but dead. Senator Orrin Hatch, the judiciary committee chairman, in an attempt
to salvage the bill said that he was pressing for a provision that would allow jury awards
to exceed the proposed $250,000 cap in cases where there was "proof of gross
negligence."
But, was the Duke incident "gross negligence?" After all, it appears to have been
caused by a computer entry error substituting "A" or "0" when entering blood type. The
real tragedy at Duke is that the failure was not one of crisis response but crisis
preparedness, an area where the only' word to describe many hospitals is dismal.
The Duke incident is an excellent example of those times when it's hard to
distinguish between the lawsuit and the media circus. Even before one gets into court,
the media, government, self-appointed experts, advocacy groups, and outraged citizens
have set the context in the court of public opinion, and it is from that court that juries
must be selected.
Imagine trying to get an impartial juror in the middle stages of the silicone breast
implant hysteria. Our research showed that over 95% of Americans knew of the product
(more than could name the President of the United States) and the vast majority thought
it harmful. It is in these cases a corporation's legal team's ability to successfully litigate
depends heavily on how well or poorly his organization responds to the intensity of the
2

3. situation. Conversely, for the plaintiff lawyer, the more absurd the behavior of the
corporation, the easier the job. Some companies act as if they were working for the
plaintiff bar.
Which leads to a serious question deserving of sober consideration: Why do such
smart people act like blithering idiots when a crisis hits?
That's when a corporation's ability to litigate successfully depends on how the
company responds. Conversely, for the plaintiff lawyer, the more absurd the behavior of
the corporation, the easier the job. There are times when it seems that some companies
are working for the plaintiff bar. Which leads to a serious question deserving of sober
consideration: Why do such smart executives act like blithering idiots when a crisis hits?
Senior corporate executives are not stupid. Stupid people don't get to run multi-billion
dollar organizations. But people learn behaviors that become second nature. The more
successful the managers, the more dependent they become on those behaviors that
created success. Everything corporate leaders have learned leads them to believe that
they:
• Have the power and authority to be "a" , if not "the" major factor in the outcome
of a situation
• Have the credibility to command respect and gain the benefit of the doubt
• Have the knowledge and experience to manage virtually all challenges
Understand the dynamics of change to manipulate external events with ease
In a crisis or intense external situation, each of these assumptions is wrong. The
business world may be screwy in normal times, but there are unwritten rules for climbing
the corporate ladder, which generally assume that the world is rational, change is linear,
one can assign probabilities to future possibilities, and facts have power. Whether these
statements are true or not, they are true enough that they become the foundation for
how successful managers operate.
But everything changes in a crisis. Crises are non-rational, non-linear, non-
predictable events where power is immediately transferred from inside an organization to
the outside, credibility disappears, emotions trump facts, particularly in the early, critical
stages, and past experience, much like the stock market, is no guarantee of future
performance. Most importantly for rising-star managers, the disruptive nature of a crisis
means that their past successful behaviors turn toxic, yet many continually default to
them.
The reason, contrary to what some have argued, isn’t arrogance, isolation, or
stupidity. Powerful forces, often beyond the control of the manager, have a powerful
influence on behavior. Studies of brain chemistry have determined that past successful
behaviors create chemical rewards in the brain. Changing those behaviors denies the
reward, causing increased anxiety. Add to that the unexpected, unusual, intense
external pressure brought on by a crisis those results in powerful emotional responses
such as anger, fear, and resentment, among others, and it’s no wonder that most senior
managers fall back on the tried and true.
The difficulty in dealing with this physiological and psychological trauma leads to the
hypothesis that crises are almost always the result of corporate mismanagement. In the
3

4. absence of massive corporate corruption, a properly handled incident or issue will not
erupt into a crisis.
I have identified some 19 "rules" that truly are valuable for corporate success but that
accomplish exactly the opposite in a crisis. I will only mention a few of the more
interesting, but let me set a context by referring to the findings of Dr. Daniel Kahneman,
a psychologist and professor at Princeton, one of the two 2002 Nobel Prize winners in
economics. In numerous experiments, Kahneman and his team established a few
simple truths2
:
• Losses have more power over how people form opinions than gains, which
means that accusations of harm will always win over responses about benefits
• "First impressions shape subsequent judgments"
• Vivid impressions are a greater factor in decision making than" more abstract but
more accurate information."
Now, let's consider some rules for climbing the corporate ladder.
• Power is an essential tool of management, being the means for expanded
span of control. The truly successful managers, and this is not meant to be
derogatory, are those who learn how to use the levers of power to get the
organization to allocate to them more than their fair share of corporate resources.
The more senior the manager, the greater his or her power.
However, in a crisis, power immediately shifts to external audiences, and most
managers are ill-prepared to adjust their behavior accordingly. Even worse,
credibility is also an immediate victim, disappearing with startling suddenness. One
can accept a loss of power with some dignity left intact, but the loss of credibility can
cause intense emotional trauma. Power is defined by external relationships;
credibility involves internal values and belief systems.
And as if the internal shifting of power weren't bad enough, those pesky ill-
informed and irrational consumer groups instantly have the same media and
governmental credibility that CEO's once had, and the company's science,
rationality, and technical abilities suddenly become liabilities rather than assets.
• I will determine when and how information is disseminated. In normal times,
information is a tool controlled by management to gain certain strategic ends. The
control is never perfect, but by and large you understand what various audiences’
need, when they need it, and how useful or powerful it will be in furthering your
interests. Marketing people are wonderfully skilled at controlled leakage to stimulate
market and investor interest.
The problem is that in a crisis most managers continue to believe that they have
that advantage. Enron, Ford, Firestone, Exxon, Andersen, WorldCom, Tyco, and a
host of others certainly had control over when and how much information they would
provide to external audiences. Look how well they did. Meanwhile, their critics were
dominating the news with vivid images and explosive charges. In a crisis, the more
you try to control information dissemination, the more trouble you'll create.
4

5. The failure to make information available when external forces demand it creates
ambiguity, which is always assumed to be negative. There is an information vacuum
out there, and it will be filled by someone.
Rapid response does not mean giving away the store. Some information will
cause serious damage to potential legal considerations, and other information needs
to be put in a context that accurately portrays the truth. No one expects you to have
all the answers immediately, but they do expect, nay demand (and remember that
the power has shifted) is that you provide what information you have, explain what
you don't have, and give a sense of when that will be available, followed by frequent
updates. Ironically, the more open you are the less interested they will become
because the thrill will dissipate. As a general rule, controversy is fed by speculation
and suspicion; information quiets speculation and alleviates Suspicion.
And, most important for litigators, in the 20+ years I've spent handling crises and
litigation communication, I never once had a situation where we could not satisfy the
outside world's need for information while at the same time protecting the company's
legal options. But we never ignored the fundamental reality that the external
demands for information had to be satisfied. Fight that and you lose.
• Never let them see you sweat. The great sin in most corporations is to appear
uncertain, to show weakness, to admit a loss of power or control. Start to sweat and
your subordinates go into panic mode. As the leader, you must stay above the fray.
But the rule often transcends sweating to showing emotion, and the inability to show
emotion is dangerous in any situation.
This rule gets distorted under intense pressure and it morphs from never letting
them see you sweat to never letting them see you as human. What was perceived as
strength is now seen as insensitivity, which causes stress within your employee
ranks and intensifies external audience outrage, which in turn makes it easier for
plaintiff lawyers to portray you as that rich, corporate fat cat who sacrifices innocent
people on the altar of profits. One can express sadness, regret, and sorrow for the
sufferings of victims without admitting liability.
• Logic, reason, science or some version will generally win the day. I grant
that if a company is truly innocent, that will likely at some point be known, but it is
most often too late. Just think of the Dalkon Shield, silicone breast implants, Audis,
saccharine, Alar, Bendectin, cell phones—all vindicated while billions were wasted in
frivolous lawsuits.
• Benefits sell products and services. This rule is very dangerous for corporate
litigators. You're fighting a product liability claim while the marketing people are
running ads and promotions about the product's benefits. But that's all the marketing
people have ever known. How many times has your company, when under attack,
defaulted to promoting the benefits, assuming that people will tolerate serious risk if
only they knew how important your product was?
This is but a skeleton discussion of how rules of success can make a bad situation
intolerable. The important issue is what does this mean for litigators?
For plaintiff lawyers, with whom I've had little direct experience, if you aren't already
5

6. devoting some of your time to driving the corporation crazy so it does lots of dumb
things, you should be. With the ability to find people who are willing to make virtually any
charge and the willingness of the media to listen, you can both keep the company on the
defensive and so pollute the public's view of the situation that you walk into the
courtroom with a great advantage. Understand how corporations will often default to
counter-productive behaviors and capitalize on those.
On the other hand, watch carefully those corporations who quickly get into the
marketplace with well-thought out, compassionate responses, or who offer generous
solutions without admitting liability. Anything done by a company that drains energy
(outrage) from the system weakens your case.
For corporate lawyers, you should not pretend that your world is defined simply by
the case. How your company or client responds from a communications perspective
significantly affects your ability to be successful, which means you must both engage in
the broader effort, but also realize that success in the court of public opinion does not, if
done correctly, damage your case in the courtroom. Part of the trick is finding people
trained in litigation communications who understand the constraints you're under and
with whom you can work cooperatively.
The primary function of a corporation in a crisis that entails major litigation is to lower
the level of debate, drain energy out of the system, as I describe it, and minimize
outrage by being cooperative, understanding, sensitive, and responsive. To the extent
that you can facilitate that kind of behavior, you make your own job in the courtroom a lot
easier.
------------------------------------------------------
Mark Schannon is a 25+ year veteran of issues and crisis management and litigation
communication, having worked on issues such as Agent Orange, the Copper-7 IUD,
dioxin, PCBs, the cellular telephone brain cancer scare, silicone breast implants,
Bridgestone/Firestone, numerous pharmaceutical, hospital, and medical device
issues, food contamination issues, and a host of others. He frequently speaks and
conducts training on issues and crisis management and communication theory and
can be reached at mschannon@cox.net.
2
November 5, 2002 New York Times article by Erica Goode, "On Profit, Loss and the
Mysteries of the Mind."
6

7. devoting some of your time to driving the corporation crazy so it does lots of dumb
things, you should be. With the ability to find people who are willing to make virtually any
charge and the willingness of the media to listen, you can both keep the company on the
defensive and so pollute the public's view of the situation that you walk into the
courtroom with a great advantage. Understand how corporations will often default to
counter-productive behaviors and capitalize on those.
On the other hand, watch carefully those corporations who quickly get into the
marketplace with well-thought out, compassionate responses, or who offer generous
solutions without admitting liability. Anything done by a company that drains energy
(outrage) from the system weakens your case.
For corporate lawyers, you should not pretend that your world is defined simply by
the case. How your company or client responds from a communications perspective
significantly affects your ability to be successful, which means you must both engage in
the broader effort, but also realize that success in the court of public opinion does not, if
done correctly, damage your case in the courtroom. Part of the trick is finding people
trained in litigation communications who understand the constraints you're under and
with whom you can work cooperatively.
The primary function of a corporation in a crisis that entails major litigation is to lower
the level of debate, drain energy out of the system, as I describe it, and minimize
outrage by being cooperative, understanding, sensitive, and responsive. To the extent
that you can facilitate that kind of behavior, you make your own job in the courtroom a lot
easier.
------------------------------------------------------
Mark Schannon is a 25+ year veteran of issues and crisis management and litigation
communication, having worked on issues such as Agent Orange, the Copper-7 IUD,
dioxin, PCBs, the cellular telephone brain cancer scare, silicone breast implants,
Bridgestone/Firestone, numerous pharmaceutical, hospital, and medical device
issues, food contamination issues, and a host of others. He frequently speaks and
conducts training on issues and crisis management and communication theory and
can be reached at mschannon@cox.net.
2
November 5, 2002 New York Times article by Erica Goode, "On Profit, Loss and the
Mysteries of the Mind."
6