Navigating Mass Tort Restructuring: Effective Strategic Communications Tips

The restructuring process has the potential to create fear and disruption for every stakeholder in a company or organization. Talented employees may depart, vendors may seek to change terms, prospective customers may decamp to competitors, and regulators may second-guess the company’s go-forward prospects. Restructuring communications strategies help promote business continuity and mitigate risk, ultimately maximizing value.

When mass tort litigation or legacy liabilities impel a company to seek a comprehensive restructuring the issues at stake are especially intense and sensitive, driving media and stakeholder scrutiny and, frequently, misunderstanding. As a result, the strategies and tactics deployed in mass tort Chapter 11 cases extend well beyond the boundaries of traditional public relations or crisis communications.

This article gives a snapshot of the strategic communications considerations for a company or organization looking to address its mass tort liabilities in an incourt restructuring process.

1. Explain the Rationale

Companies evaluate varied options and alternatives when faced with litigation. The decision to engage in an incourt restructuring process to resolve litigation liabilities is not made in haste. Thus, the first element of building a narrative around the restructuring is also the most complicated in a mass tort Chapter 11 case. Why is the company choosing this path? What is it trying to achieve? Why is it truly necessary?

It is difficult to craft a narrative that both protects the organization and avoids or addresses stakeholder scrutiny that arises when a company denies responsibility for certain actions. This concept is particularly difficult in product liability and asbestos cases. In some of these cases, firms have spent years or even decades defending their products, services, and reputation against tort claims.

It is necessary to first understand the nuances of the mass tort context and underlying litigation at issue to develop an overall communications strategy that gives a sense of justice for plaintiffs while also protecting the firm’s legacy. When a company decides to use the Bankruptcy Court as a venue to resolve mass tort litigation, it is essential for it to provide a clear explanation as to why this is the best path forward.

2. Strike a Balanced Tone and Narrative

Beyond the “why” of the filing for Chapter 11 protection to address tort claims, there is plenty more to balance from a narrative standpoint. There is no one-size-fits-all approach. Substantive considerations that need clear narrative-building include:

• Placing the specific company’s mass tort Chapter 11 restructuring in the context of the broader mass tort/Chapter 11 landscape, from both historical and current perspectives.
• Whether there is a “limited fund” for the benefit of tort claimants or a solvent debtor (or strongly capitalized parent company) that can fully compensate tort claimants and the corresponding public and stakeholder perceptions of these issues.
• Admission or acceptance of responsibility for underlying injuries and tort, and the interplay with the company’s risk and insurance management, including any public company reporting obligations.
• Empathy for victims and acknowledgement of concepts of justice, including jury trial rights and timely compensation.

Further, a company will need to assess certain foundational inputs as it is attempting to build a narrative, such as details on what has been said to date about the litigation; whether a narrative shift is needed; and public, regulatory, and stakeholder understanding of the underlying litigation, including any science-specific issues.

These narratives are hard to get right. What serves as a clear explanation in one case will not work effectively in another, even if the substance of the underlying litigation is the same. Most importantly, it is critical to affirm the narrative with a balanced tone while navigating natural dissension throughout the process.

3. Test the Messages

As the prior points note, getting to the right narrative is complicated. Conducting message testing can be instrumental to finding the right tone while developing and deploying the narrative strategy. Organizations can use market research and polling tactics to get insight on what a broad base of representative stakeholders think of core messages. Going into the field to test language, down to individual words, enables the organization to identify the most constructive words and phrases to use, as well as those to avoid.

The preferred language can then be built into the comprehensive multi-stakeholder communications strategy. That includes not just press releases and external-facing microsites, but legal filings and courtroom advocacy as well. And with a large enough data set, messages can even be tested across audiences, enabling tailoring and nuance.

Another benefit of this strategy is that it provides actionable intelligence to help make strategic decisions quickly. Organizations can become fixated on innate feelings around the narrative, rather than on data. Message testing enables a company to quickly arrive at agreed-upon language to develop and deploy stakeholder communications that control the narrative.

4. Define Implications (and Terms!) for Debtor and Non-Debtor Audiences

As with any restructuring, educating stakeholders is a critical part of a process. Company stakeholders who have spent years following mass tort cases may be familiar with the contours of that litigation—motions, settlement terms, judgments, etc.—but may not understand the language and unique terminology used in Chapter 11, including the automatic stay, or have the needed context concerning how a company’s liabilities can be comprehensively addressed in Bankruptcy Court. The reverse is true as well: companies may have stakeholders who have previous experience with Chapter 11 but none with mass torts and may not be familiar with the roles of a future claims representative or a tort claimants’ committee. Of course, there are always stakeholders with no experience with either mass torts or Chapter 11.

Education of all stakeholders, regardless of background, cannot be given short shrift, considering that the debtor and/or any non-debtor parent company and affiliates will seek to continue operating as usual during the Chapter 11 case and need to engage with varying stakeholders, including customers, suppliers, and vendors, to ensure the business is maintained.

The need for clarification is greater when there are substantial non-debtor audiences, particularly those of a well-capitalized parent company and especially one based outside the U.S.

There is also a tendency, particularly with international entities and parent companies, to try to “explain away” Chapter 11 and downplay the term “bankruptcy.” Rather than hide from the term, it is important to educate stakeholders on how the U.S. Chapter 11 process is a unique legal scheme that differs from a liquidation proceeding and represents a comprehensive solution to legacy liabilities and issues. Resulting media coverage is likely to lead with the term “bankruptcy” in any event, further underscoring the importance of stakeholder education and ensuring that the company has a balanced and informative narrative.

5. Anticipate External Scrutiny, Concerns, and Engagement

Seeking to resolve mass tort litigation through the bankruptcy process comes with a tremendous amount of scrutiny from elected officials, regulators, litigants, subject matter experts and commentators, and the public, in addition to the parties directly involved in the bankruptcy case. This scrutiny can range from filings made with the Bankruptcy Court to statements made to the press to congressional hearings to social media conversations. Even before a bankruptcy is pursued to address mass tort litigation, leaks to the press of any such deliberations, investigative reporting, and general speculation can immediately impact a company already facing mass tort litigation. The bankruptcy process only intensifies the spotlight.

For instance, there are currently five separate pieces of legislation awaiting action in Congress that would impact the ability of companies to manage mass tort liabilities through the U.S. bankruptcy process. And in February 2022, a hearing of the Senate Judiciary Subcommittee on Federal Courts, Oversight, Agency Action, and Federal Rights was held and included several subject matter experts, as well as tort victims and advocates, commenting on the impact and virtue of bankruptcy as a mass tort liability management tool.

Any effective communications strategy must not only anticipate scrutiny from a number of sources and in a variety of forums but plan for it with a clear understanding of likely supportive and detracting voices.

6. Take Time to Prepare Tactics

Communications planning, like all contingency planning, takes time and requires multi-scenario strategy considerations and development. If a company has been facing ongoing litigation for years (if not decades), it likely has a communications advisor or public relations firm. As an integral member of the management and advisor working group, a strategic communications advisor will lead development of the communications contingency planning strategy, including messaging, timeline, and collateral development needs. This is not an overnight task.

In addition, a comprehensive public relations strategy, including responses to potential leaks at different points of the overall strategic timeline, is a priority to be established at the outset of the mass tort liability management exercise. As noted earlier, a media leak can intensify the public spotlight at any time.

Tactically, the messaging and public relations strategy will manifest from a core set of documents—key messages, leak strategy, and frequently asked questions—to myriad communications collateral, including stakeholderspecific communications, talking points, and development of a microsite, among others. Comprehensive research to identify key stakeholders, audiences, influencers, and media members as well as the ideal communications channels is also critical to any communications strategy, especially in the increasingly complex context of a mass tort Chapter 11 strategy.

7. Communications Don’t End with the Filing

As with any communications strategy around a disclosure event, a carefully crafted rollout at the time of filing will help ensure that stakeholders hear from the company first. However, a mass tort Chapter 11 case introduces additional complexity, and potentially time, to a traditional Chapter 11 communications strategy, because the plan process is substantially focused on one creditor group: the victims of the underlying mass tort.

While an economic settlement in a reasonable time frame is possible, mass tort Chapter 11 cases have historically been mired in extensive litigation during the Chapter 11 case, including with respect to any litigation injunction for the benefit of nondebtor entities and estimation of claims before a plan of reorganization process can substantially commence.

This complexity and extended timeline require ongoing communications, including alignment with the Chapter 11 legal strategy and media relations, to ensure accuracy and consistency throughout the case. Importantly, ensuring that the overarching messaging and balanced tone and narrative remain at the forefront is critical. Just as important is seeing around corners, anticipating scrutiny, and planning communications— whether proactive or reactive—for anticipated case milestones.

Conclusion

A carefully considered and comprehensive communications strategy with a clear and balanced narrative is integral to a mass tort Chapter 11 restructuring. The compelling and sometimes sensitive underlying injuries in such cases ensure an acute focus and spotlight on companies seeking to resolve mass tort liability. As such, restructuring communications in the mass tort context must take into account not only reputation management but also stakeholder trust, business continuity, and the responsible resolution of mass tort liability.

The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.

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