Compass Lexecon’s Clients, D.E. Shaw Composite Holdings, L.L.C. and Madison Dearborn Capital Partners IV, L.P. Achieve Victory in $230 Million Contractual Payment Dispute

Compass Lexecon’s clients D.E. Shaw Composite Holdings, L.L.C and Madison Dearborn Capital Partners IV, L.P., (“Plaintiffs”), represented by Debevoise & Plimpton LLP (“Debevoise & Plimpton”), obtained a successful summary judgment ruling awarding them $230,893,998.54 in damages relating to a contractual payment due under a Purchase and Sale Agreement. Compass Lexecon expert Rajiv Gokhale submitted expert reports in which he provided a damage estimate which was relied upon for the award.

The case concerned whether TerraForm LLC and TerraForm Inc. (collectively, “TerraForm” or the “Defendants”) were liable for an earnout payment due under a Purchase and Sale Agreement (the “PSA”). TerraForm LLC acquired First Wind’s operating renewable energy facilities and non-party SunEdison acquired the rest of First Wind’s portfolio. The PSA defined TerraForm LLC and SunEdison as “Buyers”. Under the PSA, an “Accelerated Earnout Payment” would become immediately due and payable by both Buyers upon the occurrence of a specified “Acceleration Event,” which occurred in May 2016 after SunEdison’s bankruptcy filing.

Plaintiffs sought to hold TerraForm LLC liable for the aggregate Accelerated Earnout Payment and also to hold TerraForm Inc. liable as a guarantor of TerraForm LLC’s payment obligation. Plaintiffs moved for summary judgment arguing that the PSA unmistakably established TerraForm LLC’s primary liability for the accelerated payment as one of the delineated Buyers, and that damages should be computed based on the PSA’s definitions and formulas.

Defendants responded that the word “Buyers” appeared in the PSA in reference to the Accelerated Earnout Payment only because of a mutual mistake, and instead should have read that SunEdison would deliver the accelerated payments. Defendants also argued that the acceleration obligation was unenforceable because the PSA did not set forth clearly the amount owed.

Compass Lexecon and Rajiv Gokhale were retained by Plaintiffs through their counsel Debevoise & Plimpton. Mr. Gokhale filed reports and was deposed. Mr. Gokhale concluded that the aggregate Accelerated Earnout Payment due was $230,893,998.54, and that contemporaneous economic evidence demonstrated that TerraForm was expected to benefit from its purchase of First Wind.

On December 22, 2020, the Honorable Jennifer G. Schecter of the Supreme Court of the State of New York found that the PSA must be enforced as written, and therefore granted summary judgment to Plaintiffs on the mutual-mistake defense. The Court found TerraForm Inc. to be liable as guarantor of TerraForm LLC’s obligation. The Court further rejected Defendants’ argument that the PSA did not contain any formula for computing the Accelerated Earnout Payment and ruled that Plaintiffs were entitled to the full amount of their requested award of $230,893,998.54 in damages, plus 9% statutory pre-judgment interest, as Mr. Gokhale’s opening expert report estimated.

Compass Lexecon worked closely with counsel from Debevoise & Plimpton including Shannon Rose Selden, Wendy B. Reilly and Melanie Burke, who successfully represented Plaintiffs in this matter. In addition to Mr. Gokhale, the Compass Lexecon team included Pavithra Kumar, Noah Mathews and Monica Xie in Compass Lexecon’s New York office.