McCann Erickson appears to have snatched defeat from the jaws of a trivial victory in settling its talent-poaching lawsuit against MDC Partners (MDCA) for zero dollars, according to an internal MDC email that says the pair were on the verge of settling for $200,000 when the suit went public. (See the full email after the jump.)
McCann accused Kirshenbaum Bond Senecal + Partners, an MDC agency, of taking key executives who should have been bound by non-compete contracts.
The events are a warning to managers: Letting your anger get the better of you -- by asking your lawyers to wreak revenge upon your enemies -- is often a bad idea. It opens a Pandora's Box of unpredictable events, many of which can heap humiliation upon the executive who starts the fight.
That's pretty much what happened here: The cash-free settlement -- in which MDC gets to keep all the staff it "stole" from McCann -- indicates that all McCann has achieved is to turn a nominal win into a PR fiasco that forced a tactical retreat. I predicted the suit would be settled because:
- it was doing nothing except drawing attention to McCann's problems (and by comparison, MDC's successes), which include numerous layoffs in the wake of client losses.
Ad Age suggests that McCann's purpose in bringing the suit was to signal to other agencies that they should expect trouble if they attempt to poach their talent.
- the suit failed to name Kirshenbaum's new CEO, Lori Senecal (pictured), as a defendant, even though its factual basis relied on a claim that she broke a non-compete contract when she left McCann.
But in the world of McCann, $200,000 is a negligible sum, not worth suing over in the first place. The fact that it was quickly settled -- and the amateur-hour error of not naming Senecal -- suggests that it was filed more in anger than in strategy, and made to "go away" when it became obvious that it was doing McCann more harm than good.
The Kirshenbaum email, originally sent to employees by MDC CEO Miles Nadal, indicates that the matter was going away on its own when McCann made the mistake of leaking a copy of the suit to Adweek. Nadal wrote:
McCann knew there was no economic implications to any of their allegations but they were desperate to attempt to stop employees and clients from leaving their agency. They proactively approached us to settle this lawsuit with some concessions that included not hiring their talent or signing their clients, along with a meaningless settlement of $200,000. We were negotiating in good faith a significantly modified arrangement to terminate the litigation when McCann leaked the news of their lawsuit to AdWeek last night.
The pace and result of the events suggest that circumstances are controlling McCann's management and not the other way around.
Miles Nadal's email to staff at KBS+P re McCann Erickson:
Dear KBS+P Partners
As you may have read in the trades in the last 24 hours, McCann Ericson has made the decision to both sue MDC Partners and KBS+P for allegedly poaching individuals and clients and has accused individuals leaving McCann with taking proprietary intellectual property. Nothing could be further from the truth. KBS+P and MDC Partners and all named parties have and will continue to operate at the highest levels of integrity and have completely honored all agreements. No one has done anything wrong. None of the former McCann employees who were hired by KBS+P or MDC Partners used or misappropriated any proprietary information by McCann or of McCann's clients. These unfair and untruthful claims are patently false and inaccurate. But even more important, they are hurtful and are meant to personally attack and embarrass some of the finest and most talented professionals in the business today. This is a desperate attempt by McCann to move the focus away from their massive loss of clients and talent and shift the attention to a meaningless but high profile litigation.
Here's what was going on. McCann knew there was no economic implications to any of their allegations but they were desperate to attempt to stop employees and clients from leaving their agency. They proactively approached us to settle this lawsuit with some concessions that included not hiring their talent or signing their clients, along with a meaningless settlement of $200,000. We were negotiating in good faith a significantly modified arrangement to terminate the litigation when McCann leaked the news of their lawsuit to AdWeek last night.
I want to be perfectly clear. MDC will stand behind and defend itself, KBS+P and the individuals involved completely and fully. I take this matter personally and am very disappointed by the actions taken by McCann. It is unfortunate that their mass exodus of clients, talent and morale has forced McCann to resort to such unprofessional tactics.
Yesterday was a seminal event in the life of the new revolution at KBS+P. MDC and I are more enthusiastic, more dedicated and more confident in the transformational revolution and its success in building KBS+P into one of the greatest agencies in the history of the industry. In the end, achieving this goal is what really matters--for ourselves and our clients. As your tagline says, "Do Things That Matter." From MDC's point of view KBS+P matters!!!! We have the utmost respect, admiration and confidence in Lori and her leadership, both personally and professionally. The last 24 hours has only strengthened our resolve.
Please feel free to contact me directly at any point if you or your clients would like clarification of this situation. I will keep you apprised of developments as they occur.
Miles S Nadal
Chairman and CEO
MDC Partners Inc.
45 Hazelton Ave.
Toronto, Ontario M5R-2E3
Tel(416) 548 5548
Fax (416) 960-9555
CDN Cell [redacted]
USA Cell [redacted]