Laws Commonly Excluded from the Coverage of Third-Party Legal Opinions

Last summer The Business Lawyer published an article entitled “Laws Commonly Excluded from the Coverage of Third-Party Legal Opinions in U.S. Commercial Loan Transactions,” 76 Bus. Law. 889 (2021). In the article the authors identify and discuss numerous laws that in the views of the co-authors are commonly not expected to be addressed in third-party legal opinions delivered in the U.S. commercial loan context. The article sets forth their reasons for their exclusion and that there are texts, footnotes and annexes that provide citations and other authorities on the subjects of the article. The authors state that while they do not take the position that the list of commonly excluded laws are recognized by customary practice as always excluded from the coverage of third-party legal opinions, that in their consensus and as supported by the numerous cited reports these laws are commonly excluded. Among the treatises supportive of referenced to support their position are both the 2012 Real Estate Report and the Real Estate Local Counsel Report.

The article identifies three types of customarily excluded laws that are normally excluded from third-party legal opinions: (i) laws that are excluded by customary practice even when recognized as applicable to the transaction, (ii) laws that are rarely, if ever, addressed in the loan context, and (iii) laws that are sometimes expressly covered when both applicable and significant to a transaction or the entity.

The article identifies the following laws as excluded by customary practice even when they are recognized as applicable to the transaction:

• laws of jurisdictions not expressly stated in the covering opinion letter,
• municipal and other local laws,
• securities laws,
• tax laws,
• insolvency laws,
• anti-trust laws, and
• fiduciary duty requirements

The laws that are rarely, if ever, addressed in the loan context were listed as follows:

• anti-fraud laws,
• laws addressing privacy matters,
• laws addressing immigration and naturalization,
• laws addressing occupational, safety and health or other similar matters,
• laws addressing labor, pension or other employee rights and benefits,
• laws addressing corrupt practices,
• laws addressing racketeering, criminal or civil forfeiture, or other criminal acts (including mail and wire fraud),
• laws addressing zoning, land use, subdivisions, building or construction matters,
• the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and laws applicable to swaps and other derivatives, commodity (and other) futures and indices, and other similar instruments,
• laws addressing foreign asset or trading controls, emergencies, national security, terrorism or money laundering,
• laws addressing other aspects of foreign investment, including Section 721 of the Defense Production Act of 1950, as amended and the related regulations overseen by the Committee on Foreign Investment in the United States (“CFIUS”), and
• possible judicial deference to acts of sovereign states (including judicial action given effect to governmental actions or foreign laws affecting predators’s rights).

In the final grouping the article cites examples of what the authors considered commonly excluded laws that are sometimes expressly covered when both applicable and significant to the transaction entity. The examples listed are:

• environmental laws,
• the Hague Securities Convention,
• laws relating to security interests in specialized forms of collateral (examples such as patents, trademarks, trade secrets, and registered copyrights, vessels documented under the laws of the United States, (c) aircraft and certain related aircraft parts and equipment and (d) rail cars, locomotives and rolling stock, and
• laws applicable to regulated industries.

The same group of co-authors previously issued an article entitled “Common Qualifications to a Remedies Opinion in the U.S. Commercial Loan Transactions,” 70 Bus. Law 121 (2014), where they addressed the question of what constitutes common practice with respect to qualifications to enforceability opinions.