McCann's Talent-Poaching Suit: Even If It Wins, It's Still a Loser
McCann Erickson will probably win its talent-poaching lawsuit against MDC Partners (MDCA), but the litigation simply underlines that the once-mighty New York agency is losing the business battle.
And it shows that even if you have the law on your side, that's often no substitute for business success. It's the market and your clients that determine 90 percent your fortunes, not the law.
Thus, one might ask whether the suit was worth filing, as the headlines it has created have merely reminded clients and competitors that McCann is on a losing streak that's so damaging it threatens to bring another year of declining revenues to its parent, Interpublic (IPG).
Let's take the legal technicalities first. McCann claims that MDC hired former McCann New York president Lori Senecal (pictured, apparently on Halloween) just one day after she resigned from McCann on Aug. 17, 2009. That occurred in violation of her contract which contained a two-year ban on working for competing companies if she left McCann, the agency alleges. She received $1 million in annual compensation for this inconvenience.McCann also claims her contract has a one-year ban on soliciting McCann employees if she did end up somewhere else. Four McCann employees have since followed Senecal to MDC's Kirshenbaum Bond Senecal + Partners unit, where she's now the CEO.(Oddly, the suit doesn't name Senecal, even though she's the one who signed the agreement with McCann.)
The lawsuit quotes the contract at length and in detail -- which is usually the sign of a strong case. It also adds this juicy gossip:
For at least two months before her August 17, 2009 resignation, Senecal entirely disregarded her contractual and fiduciary duties to McCann ...... because she was being wooed on a daily basis by MDC boss Miles Nadal.
Could Nadal and Senecal really have forgotten what her McCann contract said before she jumped ship? That's unlikely. (The pair aren't that dumb, surely?)
Nadal probably viewed the contract the way he views everything in his life: as one more term to be negotiated during an acquisition deal. And that's how this will end: MDC will settle with McCann for a fee, which will be written off as a one-time charge on MDC's books that will be ignored by Wall Street. (It probably won't even be large enough to be material and may not ever be disclosed.)
The big stumbling block will be whether McCann insists on an injunction against Senecal working for MDC, per its contract, which it mentions on the final page of its lawsuit. In theory, if McCann goes to trial on this -- very unlikely -- and wins, Senecal could be sidelined from MDC for a year.
That leaves us with the question of why McCann brought the suit in the first place. Employees are streaming out of McCann right now because of its Verizon loss and other client defections. No amount of lawyering is going to keep them inside. Even if McCann gets its injunction and a couple of million dollars in compensation for Senecal, will that make any meaningful difference to the agency's real problems?
Related:
Image from Senecal's Facebook page.