Bill Hobbs has a good roundup of the way the WKPA lawsuit imbrogolio fell out. Ad Age gave McCartin a chance to give his rationale for ending the suit:

"It had really taken on a life of its own and it had really become more of a distraction to the business at hand, which is to advance the tourism industry in Maine," Tom McCartin, president of WKPA, said about his reasons for dropping the suit. "And above all, as I think any good agency would tell you, we have the interests of our client at heart."

Read the next paragraph, and you'll find that the client was getting pretty peeved at the blog-storm:

Dann Lewis, director of the Maine Office of Tourism, was not available for comment. But he had told Ad Age earlier that the suit was affecting his office staffers time more than his state's image. "The only thing that's hurting us is it's distracting a number of my staff from dealing with the issues that really matter here -- our day-to-day activity in promoting tourism to Maine."

Which goes right back to what I said about this at the beginning - WKPA created a Negative PR Event. Maine will get past this (and I would not be surprised if they get past it by ending the contract with WKPA). WKPA, on the other hand, is going to have to live with this for awhile. As they pitch clients, those clients will be doing something that didn't occur to WKPA before all this - looking them up in the search engines. Before this, a search for WKPA gave back inocuous results. Possibly disturbing for reasons of omission - i.e. - "why is an ad agency so invisible on the web?" - but not negative.

Now? It's pretty much all bad, and it'll stay that way for a good while. That will almost certainly hurt their business. The only question at this point is whether they've learned anything by it. A smart company would put a summary of this on their own website, admitting that they were in error - and apologizing for it. That way, people searching for corporate references would find an explanation that came from someone other than critics. Don't hold your breath though - their website is a pure Flash thing. Utterly non-sticky, and utterly useless.