Summary of Selected Recent Business Law Section Legal Opinions Committee Community Discussion Activity: November 2020 – May 2021

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. Effect of Existing Defaults on Enforceability. John Stockton, Harrison, NY, asked about the necessity of assumptions in an opinion letter dealing with an amended loan agreement. Borrower’s counsel proposed to assume that: (a) “no unwaived Events of Default or breaches” exist under the Existing Loan Agreement (NY enforceability) and (b) all parties “have complied and will comply with all of the terms and conditions of the Existing Financing Documents, and no default or event of default has occurred and is continuing thereunder” (California authorization, execution, and delivery opinion).

David Peterson, Orlando, FL, did not see why an existing default should be relevant. Charles Menges, Richmond, VA, agreed, suggesting that defaults are not relevant unless the loan amendment documents provide that they are not effective if there is any existing default. In the absence of such provisions, he considers to be adequate an assumption that the existing loan documents are valid, bind and enforceable, have not been otherwise amended and are in full force and effect immediately before the execution and delivery of the amendment documents.

2. Cross-Border Guaranty and Opinion by Borrower’s Counsel. Vikas Varma, Goshen, NY, described a guaranteed loan where borrower and lender were located in Israel, borrower’s subsidiary was a Delaware corporation, and the loan documents and guaranty were governed by Israeli law. He asked whether it was reasonable for a US lawyer to be asked to opine that “The choice of Israeli law to govern the Documents would be recognized and given effect to by the courts of the relevant Jurisdiction and accordingly if proceedings were brought against the Guarantor before those courts, those courts would apply the laws of the State of Israel as the proper law of the Documents. A judgment of the courts of the State of Israel would be recognized and enforced in the relevant Jurisdiction by the courts of the relevant Jurisdiction. An Israeli address for service of proceedings will bind the Guarantor.” The question generated a number of responses.

Stanley Keller, Boston, MA, and Robert Grauman, Waltham, MA, both referred to Cross-Border Closing Opinions of U.S. Counsel, 71 Bus. Law. 139 (2015), authored by the Legal Opinions Committee of the Business Law Section of the ABA and available at that Committee’s Legal Opinion Resource Center. They also noted that upstream guarantees involve questions of corporate power, which is a matter of internal affairs governed by the law of the jurisdiction of organization. Mr. Grauman noted that an assumption as to enforceability under Israeli law would be necessary and that an analysis of what proceedings are necessary for approval (e.g., the Delaware GCL explicitly provides for such a guarantee, but the NY BCL could require shareholder approval – obviously not an issue since the shareholder is the parent borrower, but simply a procedural hoop to jump through). He also noted the need to flesh out the reference to “relevant Jurisdiction”, e.g., whether it refers to the law of the jurisdiction of the opinion giver or the law of the jurisdiction of organization.

Barry Fischer, Chicago, IL, and Marshal Grodner, Baton Rouge, LA, both referred to the 2005 Uniform Foreign-Country Money Judgments Recognition Act and its predecessor, the 1962 Uniform Foreign Money Judgments Recognition Act. Charles Menges, Richmond, VA, may attach to the letter a list of the various conditions of the Uniform Act as enacted in Virginia.

Marshal Grodner also noted that the choice of law opinion is the regular analysis of the law of the relevant jurisdiction. Mark Duedall, Atlanta, GA, provided a sample of a reasoned choice of law opinion which he described as the most he ever gives or gets.

John Williams, Wilmington, DE, provided a war story and a link to a reported Delaware case which granted the defendant’s Motion to Vacate Foreign Judgment. Abd Alwakhad v. Amin, No. L-21-489, 2005 WL 2266662 (Del. Super. Ct. Sept. 14, 2005). The court gave three reasons for its judgment. First, the notice received by the defendant did not comport with due process in that (a) the initial documents were in Hebrew, a language not spoken or read by the defendant, (b) the translated documents were not sent by a court, but from a private attorney, and (c) the translated documents did not state whether the defendant was obligated to respond or face a default judgment. Second, it was not established that the foreign court had personal jurisdiction over defendant. And finally, there was evidence that the judgment may have been obtained by fraud. The Uniform Acts includes these reasons that require or permit a court to not recognize a foreign judgment.