International Legal Malpractice Advisors, LLC Washington, D.C. Ethan S. Burger Preventing Legal Malpractice in Connection with International Matters
What is Legal Malpractice? Professional Negligence Violation of Ethical Duties Non-fulfillment of Contractual Obligations Breach of Fiduciary Duties Applicability of Foreign Standards
Globalization of the World Economy According to WTO, from 1973 to 1999 the volume of international trade in goods grew from $578 to $5,473 billion. Foreign Direct Investment (FDI) increased significantly. Cross border trade in services now represents approximately 20% of the volume of the world s trade in goods. According to U.S. Department of Commerce, in 1999, the U.S. imported $844 million in legal services and exported $2.56 billion these figures are low due to the manner in which law firms are organized. Determining country of origin of goods becoming increasingly complex.
Are American Lawyers Prepared to Operate in this Environment? Determining governing law. Ascertaining applicable foreign law. Divergence between official norms and real practice. Effect of absence of the rule of law in many countries (role of corruption). By what standards are lawyers to be judged? U.S.? Foreign? Today? Tomorrow?
Elements of Legal Malpractice in the U.S. (Tort Theory) Duty of Care Breach of Standard of Care Causation (distinction between transactional and litigation malpractice discussed below). Injury/Damages
Elements of Malpractice Case (Contract Theory) Existence of express or implied contract Breach Damages (Mitigation Expected)
The Standards for Judging How Lawyers Perform Are Changing In LDCs and states undergoing economic transition, the law and practice is becoming ascertainable. Was the proper manner for servicing clients used? (i) use of local counsel, (ii) affiliates, or (iii) creating subsidiaries. Piercing the corporate veil where lawyers are seconded, receive salaries out of two offices, corporate formalities are not observed, or main office plays role in managing all officers.
Lawyer and Law Firm s Potential Liabilities Joint Ventures Who is the client? Multiple roles of lawyers and (accounting) firms. Misrepresentation, fraud and conspiracy? Missing deadlines for tenders, etc. Not knowing local practice and importance of knowing the local language. Foreign Corrupt Practices Act (i) criminal and (ii) securities components. OECD Anti-Bribery Convention implementation.
Ethics and Malpractice Danger of shifting goal posts. Protection of business judgment rule is decreasing business risk is replaced by blaming the lawyers. The importance of a lawyers turning down work and referring to specialists.
Transactional Malpractice is Different from Litigation Malpractice But for causation is generally the test but must be a substantial factor in outcome. Query whether the Viner v. Sweet, 70 P.3d 1046 (Cal. 2003) changed things? Need to establish it was more likely than not that client would have achieved a better outcome absent attorney s negligence. Substantial factor alone is not usually enough (other elements of tort or contract claim). Transactional malpractice takes a less structured approach to causation due to difficulty in establishing damages. See Section 432(1) of the Restatement (Second) Torts.
What is the Scope of the Problem? American Bar Association data from 1990-95 are not representative. Insurance companies data is proprietary. Cases are settled quietly. Arbitrations are not reported. Damages are likely to be VERY large.
Law Firm Management Issues As law firms get larger, management gets more difficult. As law firms develop multiple offices, exercising control and maintaining standards become more difficult. Multi-national/cultural firms present special problems.
Methods for Settling Malpractice Non-Adversarial Informal negotiations. Cases Mediation where client anticipates an on-going relationship with law firm or fears that the law firm knows about the skeletons in its closet. The parties themselves create solutions memorialized in a contract (issue of enforceability of contract arises). Adversarial Methods: Arbitration both institutional and ad hoc. No publicity. Arbitrators may seek justice, rather than merely apply the law. Litigation the number of jurisdictions where it is desirable to litigate are few (e.g. U.S., U.K., Canada; drawbacks to plaintiffs of bringing suit where discovery is limited and punitive damages are not available or large; problems of clogged courts; problems concerning the quality of judges and fairness of the judicial process; and the issue of speed of resolution).
Issues to Watch Consequences of Sarbanes-Oxley Act and its foreign counterpart. The lawyer deputized for law enforcement purposes (e.g. money laundering role of USA Patriot Act, FATF, etc.). International regulation of lawyers a natural result of the extension of the World Trade Organization.
ILMA s Principal Services Auditing of law firms to assess potential malpractice exposure for improper performance of international work. Offering of expert witnesses and screening of expert witnesses. Assist law firms to improve their standard of care with respect to matters having international elements. Serve as consulting counsel on international legal malpractice matters.