A $300 Million Proof-Reading Error Leads to Suit Against BigLaw, Orrick and Cleary

Remember back in the before-times, when we got excited over a missing Oxford comma leading, as reported in the New York Times, to a $5 million settlement?  Peanuts.  

Now, according to Bloomberg Law,  Terraform Power LLC (Terraform) was required to pay $300 million because M&A attorneys put the plural “buyers” in an agreement that should have referenced a singular “buyer.”  Terraform, alleging legal malpractice, is seeking to recover over $300 million from the powerhouse law firms of Orrick, Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton.  The firms say that the claims are without merit.  How lawyerly!

In the underlying transaction, TerraForm and another company SunEdison, Inc. (SunEdison) acquired two corporate entities collectively referred to as First Wind.  Terraform acquired First Wind’s operating  facilities; SunEdison acquired the rest of First Wind’s portfolio.  While most of the payment provisions of the Purchase and Sale Agreement (PSA) obligated one or the other “buyer,” the provision at issue, an acceleration provision referenced “buyers” and thus obligated both entities to make the Accelerated Earnout Payment upon the occurrence of an Acceleration Event.  SunEdison’s bankruptcy was such an Event, and guess what!  It occurred.

Plaintiffs in the underlying action sought recovery of the Earnout Payment from Terraform.  Terraform’s defense was mutual mistake.  The Supreme Court for Manhattan County, New York State, charged with construing the PSA, noted that “it is not economically illogical, as part of the deal as a whole, for plaintiffs to have negotiated and for defendants to have agreed to pay the accelerated-earnout obligation in the event of, among other things, SunEdison’s bankruptcy.” In addition, the court found that the plural “buyers” was used in 22 of 24 drafts of the PSA and therefore was unlikely to have been the product of a mutual mistake on the part of the drafters.  Finding no factual basis for Terraform’s mutual mistake argument, the court entered a $231 million judgment against Terraform, plus 9% pre-judgment interest going back to 2016.  Terraform then settled with First Wind and now is after the attorneys.

According to the Complaint, the mistaken term “buyers” obligated the company to pay $300 million based on the occurrence of an event that was outside of Terraform’s control.  Terraform contends that it never would have agree to any such provision, that attorneys at both firms knew that, and that the plural “buyers” therefore must be a product of attorney malpractice.  Attorneys at both firms call the plural term a “scrivener’s error.”  Terraform alleges that attorneys at both firms caught the error but never corrected it. 

Dear Reader, should you ever find an error on this blog that could expose us to hundreds of millions of dollars in liability, please use the comment function (or e-mail) to notify us of our mistakes.  Actually, given the standard income of Internet keyboard warriors, hundreds of dollars of exposure would suffice to put us in the poorhouse, and should anyone request any further scrivening from us, we should be obliged to offer Bartleby’s response.  Spare us that fate!

H/T to Mitu Gulati (right), with an assist from @HoffProf.  Some Virginia contracts profs know the importance on staying on this blog’s good side.  Others, well. . . .