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Always Read the Fine Print, Even If You Have a Lawyer

Always Read the Fine Print, Even If You Have a Lawyer

Sunday, 24 October, 2021 - 04:45

Suppose you hire a plumber to fix a leak. While the plumber works, you’re busy on your laptop. An hour later, he tells you he’s done and hands you a bill. In theory, you could decline to pay until you’ve crawled beneath the sink to check the newly welded joint for signs of moisture. But a professional has just told you that the problem is fixed, so you’ll probably just write the check.


That example comes to mind in the wake of the $310 million malpractice lawsuit filed last week by TerraForm Power against a pair of the nation’s most prestigious law firms. All we have at the moment is the plaintiff’s version of the facts, an account the defendants deny, but the suit serves as a reminder that words, like numbers, matter. Lawyers aren’t engineers, but even the most trivial of errors can lead to disaster.


TerraForm Power is a renewable energy concern that recently found itself on the wrong end of a $327 million court judgment. The complaint in the new lawsuit charges that TerraForm lost that case only because the law firms that advised it in the underlying transaction — Orrick Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton — failed to notice that the agreement mistakenly included the word “buyers” rather than the word “buyer.”


That’s it. A supposedly stray “s.” That’s the malpractice case.


The details of why the change from singular to plural might make a difference in the meaning of the contract aren’t relevant to our present purposes. Consider instead why people and companies hire lawyers in the first place.


Much of the work that lawyers do — and, certainly, most of the work that transactional lawyers do — involves translating the client’s needs and desires into the language of the law. A client wants to divide her assets after death, or buy a house, or engage in a swap; the lawyer’s task is to supply the magical incantation that will lead the courts to carry those wishes into execution.


But suppose the lawyer picks the wrong words? Should something as small as making the singular plural lead to malpractice liability for the firm?


I’m a lawyer, so I’ll give a lawyer’s answer: It depends.


Like the law of torts generally, malpractice law is a tool to force professionals to internalize the costs of their mistakes rather than leaving them for others to pay. But not every claim involves a breach of duty, and not every breach of duty will lead to liability.


A much-discussed 2001 New York case involved allegations that a law firm, in revising a complicated settlement agreement, erroneously reduced the amount its client would receive in event of the counterparty’s default from $2 million to $6 million. The client hadn’t read over the new version before signing because the lawyer said, incorrectly, that only the first paragraph had been changed. The New York Court of Appeals ruled that the lawsuit could go forward.


But later decisions narrowed the holding. In 2007, the New York courts dismissed a seemingly similar lawsuit, where the plaintiff claimed that a drafting error by his attorneys — using “may” when they should have used “must” — had cost him hundreds of thousands of dollars. The courts threw out the case because “the agreement itself recites that the client had been apprised of his rights and had been given the opportunity to weigh all the facts likely to influence his decision.”


Other courts have reached similar results. The message is clear: Even when your own lawyer approves a document, read before you sign.


But such an explanation, for all the sense it makes in the abstract, calls into question the reason people hire lawyers in the first place. Of course it’s true that rereading whatever your lawyer has drafted or approved might improve accuracy; it’s also true that if you wanted to read all those pages of boilerplate, you would’ve gone to law school.


As a practical matter, clients often hire lawyers in order to spare themselves the duty of reading. Once a lawyer has reviewed a document, the client will naturally find the details less salient: “The lawyer’s gone over it,” the client thinks, “so it must be OK.” And the client, being a busy person, signs. That courts think people should behave differently doesn’t mean that clients who don’t bother to read what they’ve paid their lawyers to read are being careless or irrational.


Again, let me be clear: For all I know, TerraFirm’s claims are bunkum. And I certainly don’t believe law firms should be subjected willy nilly to the risk of malpractice suits, particularly for trivial errors. But whatever happens in this case, I hope that courts will recognize that one of the main reasons people hire a lawyer is so that they don’t have to read.


Bloomberg


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