- This year marks the 30th anniversary of the first efforts of the Business Law Section on opinion practice.
The Business Law Section’s Legal Opinions Committee was not formed until 1989. By then the TriBar Opinion Committee (TriBar, formed in 1974 and originally comprised of members of the County, City and State Bars of New York) and the California Bar Business Law Section Corporations Committee (CalBar) were six years into a dispute about the proper approach to the remedies opinion.
TriBar’s 1979 report stated that the remedies opinion covered “each and every” undertaking of the Company in the agreement that was the subject of the opinion. CalBar’s approach was that only “essential” undertakings in the agreement were covered by the remedies opinion. As a result of the dispute, the recipient of a remedies opinion could not be certain which meaning the opinion giver intended.
Early in 1988, the section’s leadership was enlisted to try to resolve this unhappy situation by James Fuld, a New York lawyer who had been instrumental in the formation of TriBar. He had authored what continues to be regarded as the seminal article on legal opinion practice (Legal Opinions in Business Transactions, 28 Bus. Law. 915 (1973)).
A number of those in section leadership positions had extensive experience with third-party legal opinion practice (opinion practice). A planning committee with geographically dispersed membership was appointed, consisting of Brad Clark (Calif.), Dick Deer (Ind.), Pat Garrett (Tex.), Joe Hinsey (Mass.), Herb Wander (Ill.), and Arthur Field (N.Y.) with Henry Wheeler (Mass.) as chair. Rather than merely seeking to resolve the NY-California dispute over the remedies opinion, the planning committee decided to call a national conference on opinion practice as the first step in an effort to move toward a national consensus. More than a year went into the planning of what has come to be referred to as the Silverado Conference. Articles on a variety of opinion subjects were prepared to guide the discussion at the conference.
The conference was held in 1989 in California. Those interested in opinion practice from across the country met and worked together, often for the first time. Attendee discussions established that there was a national consensus on most opinion practice issues. The idea of a section-sponsored comprehensive opinion practice statement gained broad support, but the attendees made no progress in resolving the NY-California remedies opinion dispute (which was not resolved until a 2004 CalBar Report which stated that the diligence involved in the two approaches did not vary significantly. See 60 Bus. Law. 907).
At the end of the conference, all attendees were invited to join a new Section Legal Opinions Committee (chaired by Henry Wheeler). Most of the 72 attendees did so. Fuld did not participate in Silverado or the work of the committee directly, but his influence was nonetheless significant in these efforts.
In order to educate the bar on legal opinion practice, a National Institute on Third-Party Legal Opinions was organized under the chairmanship of (now Judge) Tom Ambro and Truman Bidwell. The Institute was held in Chicago, New York, and San Francisco in 1990. Materials prepared for the Silverado Conference were used for the National Institute. Interest in what had been discussed at the Silverado Conference was high across the country.
Joe Hinsey, who had practiced law in New York but by then was teaching at the Harvard Business School, took the leadership role in the proposed report. After considering a number of possible formats, the committee adopted a novel approach. The report was not to be a statement of customary opinion practice. Instead, it was to present an alternative to customary opinion practice. The alternative was a contract-based approach that came to be called the Legal Opinion Accord (the Accord). In arguing for the Accord approach, Hinsey maintained that customary opinion practice was a “slippery slope” that would defeat all efforts to achieve the precision required for an effective opinion practice.
The drafting effort for the Accord was intensive. A drafting committee of 18, functioning under the direction of Hinsey, prepared materials for committee review. Work on the Accord was completed in just two years. The strength of the Accord was that it provided a common starting point for opinions. It did so by incorporating the Accord document by reference in opinion letters. That was intended to allow the opinion giver and recipient’s attorney to limit their opinion negotiations to divergences from the Accord document. Material divergences were to be specified in the opinion letter.
The text of the Accord was circulated as an “exposure draft” in The Business Lawyer in February 1991. Many comments were received. The final version of the Accord was published as part of a report of the committee in the November 1991 issue of The Business Lawyer. The Accord was 47 pages long. Mastery of the Accord document by both opinion giver and recipient’s attorney was required to use it effectively. The Accord did not purport to be a statement of customary practice. It resolved uncertainty on a variety of legal opinion questions and followed established custom when that was clear.
Quite a number of attorneys began to use the Accord and expressed satisfaction with its approach, but there was also sustained and significant criticism of the Accord approach. Some attorneys regarded the Accord document as unfairly favoring the opinion giver. Others were not interested in “fixing” what they saw as a well-functioning system. Many opinion preparers and recipient’s attorneys declined to master the Accord document for a variety of reasons. Accord opinions were not accepted by many institutional lenders. In the end, Accord usage was diminished, and the Accord was not utilized to any significant extent in major transactions.
We think of the Accord as one of those remarkably intelligent efforts we see from time to time that are influential because of their ideas, but are not widely used for their intended purpose. The Accord helped to advance a national consensus on opinion practice, although it provided an alternative to customary opinion practice. Many attorneys concerned with opinion practice keep a copy of the Accord on their bookshelf for reference.
As part of the 1991 Legal Opinions Committee report that included the Accord, the Guidelines (fully titled Certain Guidelines for the Negotiation and Preparation of Third-Party Legal Opinions) were also issued. The Guidelines dealt with topics that did not seem to the drafting committee to “fit” into the Accord. They were less than 10 pages long and were stated to be applicable whether an Accord or customary practice opinion was given. This project of the committee proceeded at the same time the Accord was prepared by the committee. (The Guidelines were updated in 2002 by Guidelines II, with Steve Weise as the reporter. See 57 Bus. Law. 875.) The Guidelines and Guidelines II have achieved broad acceptance.
In a remarkable burst of energy, in the four years 1988–1991, the committee was formed and made a lasting contribution to opinion practice. It held the only national conference ever on opinion practice. It followed up with a National Institute on Third Party Legal Opinions in three cities across the country, and it issued both the Accord and Guidelines. After more than 25 years, both of them still have significance in opinion practice.
The year 2018 marks the 30th anniversary of the first efforts of the Business Law Section regarding opinion practice. These early efforts have been continued and expanded under the leadership of the committee chairs. Steve Weise succeeded Henry Wheeler as chair; thereafter the following served as chair: (now Judge) Tom Ambro; Don Glazer; Arthur Field; Carolan Berkley; John Power; Stan Keller; Tim Hoxie; and the current chair, Ettore Santucci.