Summary of Selected Recent Business Law Section Legal Opinions Committee Community Discussion Activity, May 2019 – December 2019

This summary of Business Law Section Legal Opinions Committee Community Discussion activity among its members does not necessarily represent the views of that committee or the Committee on Legal Opinions in Real Estate Transactions, but rather reflects views of individual members of the Business Law Section Committee on Legal Opinions on current practice topics. The comments referred to below may be viewed by members of the Business Law Section Legal Opinions Committee at that Committee’s “Discussion” web page.

1. Opinion Contains All Legal Information Material to Lender. Leanne McGrory, Wilmington, DE, reported that she received a form of opinion letter from a lender that begins “This legal opinion contains all the legal information which in our/my best professional opinion is material to the Lender providing the above-referenced Loan to Borrower.” She noted that she was inclined to strike the language because it goes well beyond the typical formulation (e.g., “we have reviewed what it deems necessary in order to provide the requested opinions”), and asked whether others had seen the language.

The replies from the committee members were quick, numerous, and unanimous. Many of the replies confirmed that the request was overreaching and that the language should not be included. Several respondents went into more detail. Stanley Keller, Boston, MA, characterized the request as “inappropriate negative assurance of the worst kind since it is amorphous and ambiguous.”

Robert Grauman, New York, NY, commented that the request may violate:

(a) § II.B of the Legal Opinion Principles (1998) (“An opinion letter covers only law that a lawyer in the jurisdiction(s) whose law is being covered by the opinion letter exercising customary professional diligence would reasonably be expected to recognize as being applicable to the entity, transaction, or agreement to which the opinion letter relates.”), [compare § 6.2 of the Statement of Opinion Practices (2019) (“An opinion on the law of a jurisdiction covers only the law of that jurisdiction that lawyers practicing in the jurisdiction, exercising customary diligence, would reasonably recognize as being applicable to the client or the transaction that is the subject of the opinion.”), see also § 3.2 of the Core Opinion Principles (2019)], and

(b) §§ 1.1 and 1.2 of the Guidelines for the Preparation of Closing Opinions (2002) (“[1.1 Purpose] … the closing opinion serves as a part of the recipient’s diligence, providing the recipient with the opinion giver’s professional judgment on legal issues concerning the opinion giver’s client, the transaction, or both, that the recipient has determined to be important in connection with the transaction.” “[1.2 Coverage] The opinions included in a closing opinion should be limited to reasonably specific and determinable matters that involve the exercise of professional judgment by the opinion giver…”) [compare § 7.1 of the 2019 Statement (“The opinions included in a closing opinion should be limited to reasonably specific and determinable matters of law that involve the exercise of professional judgment...”); see also § 1.3 of the 2019 Core Principles].

Scott Collins, Seattle, WA, encouraged the opinion giver to rationalize not including the requested language. He noted that customary practice would not endorse giving the opinion and that the request may violate the “Golden Rule.” This could supplement the rationalization suggested by Robert Grauman.

2. Enforceability Opinions on Swap Documents. Michael Sherman, Philadelphia, PA, reported that he had represented companies receiving swaps in many transactions. He noted that it was rare to be asked to provide an enforceability opinion on the swap documents, and in the few instances where a request was made, the request was dropped after he pushed back. He sought confirmation that such an opinion is not market.

None of the respondents indicated that such an opinion was appropriate. Joseph Heyison, Stamford, CT, wrote that opinions have been given by law firms in almost every commercial jurisdiction to ISDA and ISDA members. If the party requesting the opinion or its parent is a member of ISDA, they can access copies of the ISDA opinions on the ISDA website and rely on them, even if the entity receiving the swap cannot.