Law firm beats malpractice lawsuit against electric vehicle company

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A Pennsylvania law firm has not been sued for malpractice over advice related to a joint venture involving electric vehicle technology, the Second Circuit has ruled.

EVIP Canada Inc. and Terracap Ventures Inc. have hired Schnader Harrison Segal & Lewis LLP and his attorney Joel Handel to represent them in a joint venture with Brammo Inc. to develop technology for electric vehicles. EVIP and Terracap say Brammo then diluted the preferred shares they received under the joint venture.

EVIP and Terracap sued their attorney, claiming they committed professional misconduct by failing to negotiate a deal that would have allowed Brammo not to dilute the shares. The district court granted the defendants’ motion for summary judgment, saying the plaintiffs lacked standing to sue.

The United States Court of Appeals for the Second Circuit ruled Aug. 31 that the plaintiffs had standing but failed to plead the essential elements of a malpractice claim against attorneys. The plaintiffs failed to demonstrate that the defendants breached a duty of care, according to the appeals court.

The court rejected the argument that the defendants should have obtained a minority approval clause which would have neutralized the dilution.

“But the record shows that plaintiffs understood the implications of a minority approval provision, that they knew the closing documents lacked such a provision, that they requested Brammo directly for a minority approval provision. three days before closing, that Brammo declined their request, and that the plaintiffs nonetheless remained eager to complete the transaction,” the opinion reads.

Plaintiffs are represented by Lynn Occhipinti LLP. Defendants are represented by Elman Freiberg PLLC.

The case is EVIP Canada, Inc. c. Schnader Harrison Segal & Lewis LLP2d Cir., No. 21-00947, 8/31/22.

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