TheCorporateCounsel.net

Earlier this year, Meredith blogged about the Pegasystems case, which highlighted the potential perils of reflexively characterizing claims made by the plaintiff in a lawsuit as being “without merit.”  This Goodwin blog highlights some things that companies should consider as they draft litigation disclosure post-Pegasystems, and this excerpt offers up some specific examples of alternative disclosure that might be appropriate:

In reviewing litigation disclosures in filings with the SEC, close attention needs to be paid to the language asserting that a litigation against the company is “without merit.” To mitigate risk, and after consultation with the company’s auditors, it may be best to avoid such language and rely on statements such as the following:

– We intend to vigorously pursue our claims against [defendant] in this matter.
– We intend to vigorously defend against the claims brought by [plaintiff] in this matter.
– We are unable to reasonably estimate possible damages or a range of possible damages in this matter given the uncertainty as to how a jury may rule if this ultimately proceeds to trial.
– We dispute these allegations and plan to vigorously defend ourselves.
– We have defenses to the claims raised in this lawsuit.

The blog points out the need to consult with auditors concerning this disclosure, because it may well have an impact on whether they believe that a reserve for the litigation should be established.

– John Jenkins