WSJ: Accounting Rule Would Allow Lawyers to ‘Extort Settlements’

Attorney-Client Privilege

WSJ: Accounting Rule Would Allow Lawyers to ‘Extort Settlements’

Posted Aug 7, 2008, 07:42 am CDT
By Molly McDonough

A proposed Financial Accounting Standards Board rule that would require companies to account for the potential cost of litigation will do less to offer transparency than it will be a boon for trial lawyers, a Wall Street Journal editorial maintains.

"The real gift is to the trial lawyers, who will be able to use the information to extort settlements and influence jury verdicts," the Journal opines.

The FASB rule change, as proposed, requires companies facing litigation to estimate the cost of attorney fees and the potential payout.

"For a company in high-stakes litigation, that means showing its hand to plaintiffs' attorneys, allowing them to gauge management's upper estimate of what the case is worth," according to the Journal opinion. "The effect will be to force corporate defendants to fight lawsuits with one hand tied behind their backs."

The ABA is among the critics of the proposed rule change, in part because it would result in a waiver of the attorney-client privilege.

The ABA's comments, filed Tuesday, are here (PDF).

Comments

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Posted by khazeh - 3 weeks, 6 hours, 49 minutes ago

The WSJ editorial page’s parroting of ILR talking points is “news”....why?
Posted by William A. Vlasek - 2 weeks, 6 days, 7 hours, 15 minutes ago

What crap! !st this is a proposal. 2nd a case has to go a long long way before information like this is forced out. 3rd there are all kinds priviledge problems here within the particular litigation and even more other pending cases which leads to 4th. Would the report (if listed at al)l be lumped together and full of caveats as to make it worthless?
What this really is-- Is a chance to expose trith about the cost of claims—some about which the truth is rarely told
Posted by william a vlasek - 2 weeks, 6 days, 7 hours, 13 minutes ago

My 8th grade english teacher is rolling over in her grave
Posted by NCLawyer - 2 weeks, 6 days, 4 hours, 31 minutes ago

Please. No one who’s ever participated in settlement negotiations has failed to take the cost of litigation into account. When you are reporting to an insurance company, you’re required to submit a budget. And any plaintiff’s lawyer worth his/her salt can guess at the cost of litigation for the other side and uses that information in negotiations.

And the WSJ editorial? More of the same WSJ conservative business lobby sh---ing on lawyers generally. I wish someone would cover THAT angle for a change.

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