DOES SPELLING COUNT?

It appears the adage, spelling counts, is accurate. In fact, it may count for more than one quarter of one billion dollars in a single case.

In October 2021, TerraForm Power LLC filed a $310 million malpractice lawsuit against two M&A law firms on opposite sides of a deal when a pluralized word in a contract resulted in TerraForm being obligated for $300 million in “accelerated event” costs. The filing made national headlines in Bloomberg, among other news outlets.

While at first blush the TerraForm Power case might appear to be a simple contract error – and both law firms claim the suit is without merit — the matter at hand may not be so simple. The language at issue was included in 22 of 24 draft versions of the contract with neither party objecting nor correcting the pluralization.

If the courts find in favor of TerraForm Power, both law firms might find themselves leaning on their attorney professional liability insurance to pay the claim. Even for billion-dollar firms like those involved, a successful claim of this magnitude can test the limits of a typical professional liability policy. At minimum, most firms able to cover such a loss would expect to see steep rate increases, if and when, the policy comes up for renewal.

It’s one thing if a law firm loses on the merits in court when sued by a client. However, insurers are likely to hesitate in continuing to underwrite liability coverage for any firm that might face claims as large as those in the TerraForm case if the error is proved to be self-inflicted.

Even if the courts side with the firms in question and find TerraForm’s lawsuit meritless, the reputation damage will be significant. Individuals and businesses — not to mention the courts — may take a dim view of attorneys and their law firms that fail to pay close attention to the basics of producing quality work product. Another headline-grabbing example can be found in a 2004 typo-riddled request for attorney’s fees that went beyond the legal watercooler and landed in The New York Times. The error-laden filing resulted in a rebuke from the judge in his official ruling as well as a reduction in the fees requested.

To err is human. To be negligent can be considered malpractice.