Scapegoat litigation drains U.S. economy, study asserts.

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Government and private lawsuits seeking damages from auditors, lawyers and investment bankers in connection with savings and loan failures will cause significant damage to the U.S. economy by raising the cost of business investment, according to a study by the American Tort Reform Association (ATRA).

Litigation against professionals is termed "scapegoat litigation" because, ATRA says, the targeted defendants are not the parties directly responsible for the financial losses. Under the rule of joint and several liability, parties that are minimally at fault, but have "deep pockets," may be forced to pay the entire settlement.

The study, The Economic Effects of Scapegoat Litigation, found such lawsuits will seriously impair U.S. competitiveness by raising the cost of equity capital by as much as 1.3% over the next five years. Small firms, the study concluded, will suffer disproportionately--with their equity financing costs rising as much as 2.4%.

The economic fallout of scapegoat litigation will reduce the overall size of the U.S. gross national product by an average of $17.8 billion annually between 1992 and 1996, the study concludes.

According to ATRA President Martin F. Connor, recent judgments, such as the $338 million judgment against Price Waterhouse for a disputed audit and the $150 million...

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