Investors in a solar panel manufacturing company, which authorities described as a Ponzi-like scheme, sued several Big Law firms in a California state court for legal malpractice.
The defendants “used their professional status to encourage Plaintiffs to invest in solar energy as a tax savings,” the Dec. 17 complaint alleges. But their “representations were false,” and the plaintiffs claim they wouldn’t have invested without their “false assurances.”
GEICO Corporation, Progressive Casualty Insurance Company, and others allege they invested in DC Solar, a company that manufactured and leased mobile solar generators, because of “substantial market demand” that law firms Nixon Peabody, Foley Lardner, and Bryan Cave touted.
Other defendants include financial advisers such as CohnReznick Capital Markets Securities LLC.
GEICO alleges it invested $342 million between 2015 and 2018 in the alleged scheme. Progressive alleges it invested more than $150 million between 2016 and 2018. The other plaintiffs also allege they invested millions.
The alleged scheme was exposed in 2019 by the FBI, which said DC Solar used new investments to pay off older ones and fund its founders’ lifestyles.
The company filed for bankruptcy in February.
The complaint alleges that the law firms “provided legal opinions” that the investments “were real transactions that more likely than not would pass muster with the Internal Revenue Service.”
But the firms knew or should have known the transactions “were a sham,” the plaintiffs say. As a result, they “were duped into participating in transactions that no reasonable person would have entered” had the firms told the truth about the “schemes,” they allege.
Foley Lardner, for instance, issued “cookie-cutter” legal opinions on the DC Solar transactions “without verifying the accuracy of the factual assumptions,” the complaint alleges.
The firms “were a substantial, direct and proximate cause” of the plaintiffs’ “substantial losses,” the complaint says.
Causes of Action: Legal malpractice; professional malpractice; negligent misrepresentation; breach of fiduciary duty; violations of Ohio securities law; violation of Maryland Code; violations of Arizona securities law; violations of Pennsylvania securities law; violation of California corporations code; violation of Connecticut Uniform Securities Act.
Relief: Actual, compensatory and consequential damages in an amount to be proven at trial; rescission or rescissory damages; pre-judgment and post-judgment interest; further legal and equitable relief as determined by the court.
Response: Nixon Peabody said in a Dec. 26 statement that “DC Solar is a former client for whom we provided syndication tax credit advice for a number of solar deals. Its principals are accused of extensive fraud. Once we learned of such allegations against DC Solar, we discontinued our relationship.”
Bryan Cave and CohnReznick didn’t immediately return a request for comment. Foley Lardner declined to comment.
Attorneys: Thomas, Alexander, Forrester & Sorensen LLP represents the plaintiffs.
The case is Solar Eclipse Investment Fund III, LLC v. CohnReznick LLP, Cal. Super. Ct., No. 19STCV45775, complaint filed 12/17/19.