America Online Inc has reached a preliminary settlement in one of its oldest class action lawsuits, paying out a $35m settlement. It dates back to the company’s accounting practices in 1995 and 1996. Prior to its switch to flat rate pricing in December 1996, AOL discontinued its practice of capitalizing the marketing costs that arose from acquiring new subscribers over a two-year period in October 1996. That resulted in a massive $385m hit to its third quarter, which ends with the calendar year. The case that has been settled, subject to final documentation and court approval, was Orman versus AOL and it related to the capitalization of those marketing costs and their public disclosure. As part of the settlement, AOL will make payments up to $35m, a substantial part of which will be covered by AOL’s insurance.
