Oceans apart

The US justice system protects lawyers from being sued by dissatisfied clients to a greater degree than its English counterpart. John Keeney and Giles Hutt put paid to a popular misconception and examine the key differences between the two systems

There is a general perception that it is easier to succeed in negligence and other liability claims in the US than in ­England. However, a recent Court of Appeal case has shown that this is not always the case.

When solicitors are sued for negligence they are often able to avoid liability by ­arguing that their actions or advice, although defective, did not actually cause loss. This is particularly true when proceedings are brought by a large company rather than a small business or individual, since the courts tend to take the view that directors of ­substantial corporations are experienced businesspeople who can look after themselves, evaluate legal and other professional advice and put it into a ­commercial perspective before acting on it.

However, it is still the case that it is ­easier in some ways to sue a lawyer for negligence in England than the US, and the Court of Appeal’s recent judgment in Levicom v ­Linklaters (2010) has made it easier still.

The case centred on a dispute between telecoms businesses in the Baltic States and the meaning and implications of a ­shareholders’ agreement that had allegedly been breached.

Linklaters advised that the breach was “clear”, and on that basis its client, ­Levicom, turned down a ­substantial settlement offer and issued ­arbitration proceedings against the other companies. The arbitration did not go well for Levicom and in the end it settled the action on relatively unfavourable terms. Levicom then sued Linklaters for what it saw as lost ­settlement money and the cost of pursuing the ­arbitration, arguing that the firm had ­provided overly optimistic advice regarding the merits of its case.

The UK approach

In the High Court Mr Justice Andrew Smith agreed that Linklaters had been ­negligent, if only in expressing its views in ways that did not sufficiently rein in the optimism of its client. But he found that Levicom would have proceeded with the arbitration ­whatever Linklaters had said, so only ­awarded Levicom damages of a token £5 and refused to award costs. The Court of Appeal took a different view, ­deciding ­unanimously that Linklaters had been ­negligent in more ­serious ways – for example, it found that the firm had been wrong to say that the breach of the ­shareholders’ agreement was “clear”.

The appeal court sent the case back to the High Court for an assessment of Levicom’s damages. One appeal judge, Lord Justice Jacob, went so far as to say that, when a solicitor advises that their client has a strong case and the client sues rather than settles the claim, the evidential burden shifts so that the solicitor has to prove that their advice was not causative. In Jacob LJ’s view, ­Linklaters had been unable to do this.

The US approach

The Court of Appeal’s decision widens the divide that already exists between the ­English and US approaches to negligence claims of this kind. The law varies to some extent between states, but in general a US court would dismiss any claim based on comparing two settlements, one real and the other hypothetical.

In the US, what is important is the ­’proximate cause’ of the claimant’s failure to obtain more compensation than it ­eventually settled for. The term is ­interpreted strictly, so the ’proximate cause’ of ­Levicom’s relative failure was in the first instance its tactical decision to reject the earlier ­settlement offer and more generally the terms of the shareholders’ agreement itself. From a US perspective, the fact that ­Levicom was offered more money at an ­earlier stage in its dispute and turned this down on Linklaters’ advice is simply not actionable.

A further aspect of the Levicom case that is alien to US courts is Jacob LJ’s ­presumption that the evidential burden might in certain circumstances shift from the client to the lawyer, so that it is for the latter to prove that the advice did not cause their client’s loss.

Underlying the US approach on both these points is a public policy of discouraging secondary litigation by disappointed ­litigants against their lawyers, since every litigation has a losing party.

Common ground

Where the two systems of law do ­converge, however, is in agreeing that a client who has been advised negligently by their lawyer to issue proceedings has a right, at least, to reclaim some of the costs of those ­proceedings after they fail. This is ­illustrated in Taylor v Feissner (1994) from the Court of Special Appeals of Maryland, in which a client sought compensation for age ­discrimination but missed a procedural deadline before instructing lawyers, who then allegedly missed another.

The Court of Special Appeals saw the first error as the proximate cause of the client’s ultimate failure to obtain compensation, so refused to order the lawyer to reimburse his client for this loss. But it nevertheless agreed that the lawyer should return fees spent fighting a hopeless case.

John Keeney  is a partner and Giles Hutt a lawyer in, respectively, the Washington DC and London offices of Hogan Lovells