BY ROY STROM

Oct. 14, 2021, 12:59 PM; Updated: Oct. 14, 2021, 3:10 PM

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TerraForm says Orrick, Cleary lawyers botched deal to buy First Wind

Renewable energy producer wants at least $310 million for malpractice

One mistakenly pluralized word could cost law firms Orrick, Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton hundreds of millions of dollars.

TerraForm Power LLC was on the hook for $300 million in payments because M&A lawyers at the firms allowed the word “buyers” instead of “buyer” into a purchase agreement, the company said in a lawsuit filed Wednesday in New York state court.

The renewable energy producer is seeking damages of at least $310 million from the law firms in the malpractice suit. Orrick and Cleary both said the allegations are without merit.

The alleged error came in the drafting of a 2014 transaction that split up the assets of First Wind Holdings, a developer and operator of solar and wind farms, between two buyers: TerraForm, which bought the company’s existing assets, and SunEdison Inc., which acquired its unbuilt development projects.

SunEdison agreed to pay up to $510 million if the developments became operational, according to the complaint.

The dispute appears to be over a second, similar provision that tied those future payments to both “buyers” for what the contract called “accelerated events.” Those events included a bankruptcy by SunEdison, which occurred in 2016, triggering the dispute.

TerraForm alleges the term “buyers” must have been a mistake because it would not have agreed to be on the hook for events that were out of its control.

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

The provision has been scrutinized before.

A New York State Court judge in December last year said 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.

Schechter ruled against TerraForm, issuing a $327 million judgment against the company.

Following that ruling, TerraForm says it notified Orrick and Cleary that it intended to settle with First Wind, and the law firms declined to participate in the settlement negotiations. The companies settled the dispute in April.

TerraForm alleges that at Cleary lawyers initially flagged the incorrect term but lawyers at Orrick didn’t incorporate the correction. Attorneys at both firms agreed the pluralized word was a “scrivener’s error” after the sellers requested an earnout payment from TerraForm in 2015, the suit says.

“TerraForm Power’s allegations are completely without merit, and we intend to defend ourselves vigorously in Court,” Shannon Lynch, a Cleary firm spokeswoman said in a statement.

Howard Mintz, an Orrick spokesman, said in a statement, “The lawsuit is without merit and irresponsibly mischaracterizes the circumstances of our representation. We will respond accordingly.”

TerraForm is represented Marc Kasowitz and a team of lawyers at Kasowitz Benson Torres.

The case is Terraform Power Parent, LLC v.Orrick, Herrington & Sutcliffe, N.Y. Sup. Ct., docket number not available, complaint 10/14/21.

(Adds detail on previous ruling in dispute. )

https://news.bloomberglaw.com/business-and-practice/orrick-cleary-sued-over-300-million-one-word-error-in-sale

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312573)

https://aboutblaw.com/Z2G

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312627)

dat wld seem to make their argument weaker, they are fuking connected comps, if sunedison went BK then other party wld want to rape terra, amright

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312643)

sounds fuking retarded though, why didnt the terra faggots have inhouse counsel reviewing that shit? they had to sign it

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312634)

Although SunEdison was TerraForm’s majority controlling shareholder,

SunEdison and TerraForm were each independent public companies with different businesses.

Accordingly, a key task for Orrick was to ensure that the PSA properly delineated which assets

were being purchased and which obligations were being assumed by which party. Moreover, as

counsel for both parties, it had an obligation not to favor one over the other in carrying out its

responsibilities

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312676)

To the extent Orrick claims (incorrectly) that the word “Buyers” was the deal,

Orrick failed to alert TerraForm, and make sure TerraForm understood and accepted, that

Section 2.04(g) exposed TerraForm to a half-billion-dollar earnout liability which could be

triggered by events, including events like SunEdison relocating an executive’s office, totally

outside of TerraForm’s control. Orrick instead led TerraForm to believe the exact opposite. For

example, on November 12, after Orrick circulated draft Board resolutions authorizing

TerraForm’s entering into the First Wind Transaction, Orrick’s Lopez responded to a TerraForm

in-house attorney’s question about the earnout by confirming that “SUNE is responsible for the

earnout payments.”

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312678)

Committee in connection with the First Wind Transaction. Cleary’s team was led by partners,

Ethan Klingsberg and Chantal Kordula, and associates, Manoj Nair and Charles Allen

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312683)

https://ardeapartners.com/the-team/

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312751)

"Re: Did you incorporate my redlines?"

(http://www.autoadmit.com/thread.php?thread_id=4947374&forum_id=2#43312843)