Oops! The One-Word Mistake That Could Cost These Big Law Firms $300 Million

legal fees and law firm pricing

What a difference a word makes – particularly if its the wrong word in a multimillion dollar contract and two Big Law firms are on the hood for as much as $300 million.

Orrick Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton allegedly made an error in a 2014 deal that split assets of a solar and wind farm operator between two buyers: TerraForm and Sun Edison Inc.  

TerraForm, a renewable energy producer, has filed a malpractice complaint in the New York state court seeking $300 million because M&A attorneys at the firms used the world “buyers” instead of “buyer” in the purchase agreement.

Sun Edison entered bankruptcy in 2016, which event lead to the complaint.

“The fatal one-word error that Orrick and Cleary failed to correct obligated TerraForm, in addition to SunEdison,” the lawsuit alleged,   “even though TerraForm had never agreed to assume this obligation.”

The provision has already been before the courts with a New York State Court judge ruling in December that it was not obvious that the term “buyers” in the “accelerated event” provision was a mutual mistake by the parties. The court noted that the term was included in 22 of the 24 draft versions of the contract.

“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,” Justice Jennifer Schechter.

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