WSJ: Accounting Rule Would Allow Lawyers to 'Extort Settlements'
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).
