Similar to the fallout from Enron, the Great Recession of 2007 saw many accounting firms back in the cross-hairs for allegedly failing to warn of the impending financial doom. Many of these entities (turned plaintiffs) were massive companies with billions in assets, leading to protracted and expensive litigation. While some cases settled to avoid further legal costs, one major accounting firm was recently found liable for violating audit standards for one of its major bank clients prior to the Great Recession. The presiding judge is now set to proceed to the damages phase of the trial, where it will be determined the extent to which damages were caused by the violations.
Following the progress of this case to either a damages award or settlement is of interest to all accountants and the attorneys who defend them, as runaway verdicts can be as damaging for professional negligence claims as they are in personal injury defense. It is often said in the personal injury arena that verdicts and settlements in the hundreds of millions can harm plaintiffs’ attorneys looking to reign in client expectations, while defense attorneys lament trying cases in front of juries with these awards fresh in their minds.
Massive settlements and verdicts impact the professional liability landscape and impact expectations. The result of yet another Recession-era claim alleged to be in the hundreds of millions will certainly be of interest to would-be plaintiffs as well as accountants and other professionals.