Clifford Chance escapes £130m derivatives negligence claim as case settles

JP Morgan’s £130m legal battle with Berlin’s public transport provider BVG in which Clifford Chance was implicated for allegedly providing negligent advice has settled.

The mammoth battle was one of the first cases involving derivatives concluded by European public bodies to get to trial.

Transport provider BVG was accused by JP Morgan of having spread risk by insuring a deal through a collateralised debt obligation (CDO) in 2007. BVG joined Clifford Chance to the $210m (£130m) claim as a third-party defendant, alleging that the firm’s German operations gave negligent advice in relation to the transaction.  

The case kicked off in the High Court at the end of January, but settled early last week after seven weeks of legal argument.

One Essex Court’s Laurence Rabinowitz QC, instructed for JP Morgan alongside Fountain Court’s Richard Handyside QC and David Murray by Linklaters partner Kathryn Ludlow, told the court that the timing of the deal “could hardly have been worse” as it coincided with the financial crash.

He contended that BVG needed to accept it had been “unfortunate” in racking up the losses.

Countering, Brick Court Chambers’ Tim Lord QC and Simon Salzedo QC instructed by Addleshaw Goddard partner Michael Barnet, argued that it was not sophisticated enough to understand the financial mechanics and that it had been misled into the transaction.

It argued that Clifford Chance, which was represented by Essex Court Chambers’ David Foxton QC, Stephen Houseman QC, was conflicted because it simultaneously advised both JP Morgan and BVG.

The firm denied the claims.

The case was originally expected to run for ten weeks, but is understood to have settled seven weeks in.

It was one of the largest professional negligence claims against a solicitors’ firm in recent years (6 January 2014).

The case is the second of the top 20 cases of 2014 identified by The Lawyer to settle before judgment (6 January 2014).

Earlier this month, a $1.5bn dispute involving Russian oligarch Vasily Anisimov and the estate of the late Georgian businessman Arkady ‘Badri’ Patarkatsishvili settled on the court steps (14 March 2014).

The legal line-up:

For the claimant JP Morgan
One Essex Court ’s Laurence Rabinowitz QC and Richard Handyside QC and David Murray from Fountain Court instructed by Linklaters partner Kathryn Ludlow.

For the defendant BVG
Brick Court Chambers ’ Tim Lord QC, Simon Salzedo QC, Simon Birt and Richard Blakeley instructed by Addleshaw Goddard partner Michael Barnett. German lawyer for BVG is Noerr partner Christine Volohonsky.

For the third-party defendants Clifford Chance
Essex Court Chambers ’ David Foxton QC, Stephen Houseman QC and Tom Ford instructed by Clyde & Co partner Richard Harrison.