At the closing of many business transactions, counsel for the company delivers to the other party – e.g., the investor, lender or acquirer – a letter, commonly referred to as a “closing opinion,” in which counsel provides that other party (the opinion recipient) legal opinions on various matters it has asked counsel to address. Though each closing opinion must be tailored to the specific transaction, closing opinions in general tend to address many of the same matters in similar ways from transaction to transaction.
The meaning of opinions and the work required to support them are based on the customary practice of lawyers who regularly give and who regularly advise opinion recipients regarding opinions of the type being given in the transaction. Customary practice allows opinions to be expressed in only a few words and permits the lawyers preparing them to rely on many unstated assumptions and limitations. By amplifying the meaning of abbreviated opinion language, customary practice provides the framework for preparing and interpreting opinions, thus facilitating the opinion process.
As recognized in the Restatement (Third) of the Law Governing Lawyers, Section 95 (Reporter’s Note to Comment c), customary practice is described and discussed in bar association reports and scholarly writings. In 1998, the Boston Bar Association’s (“BBA”) Legal Opinions Committee of the Business Law Section issued a statement in which it characterized the then new TriBar Opinion Committee’s report, “Third-Party ‘Closing’ Opinions,” 53 Bus. Law. 591 (1998), and the “Legal Opinion Principles,” 53 Bus. Law. 831 (1998), published by the American Bar Association’s (“ABA”) Legal Opinions Committee of the Business Law Section as providing a helpful description of the customary practice followed by Massachusetts lawyers in the preparation and interpretation of closing opinions. In 2002, the ABA’s Legal Opinions Committee issued revised “Guidelines for the Preparation of Closing Opinions,” 57 Bus. Law. 875 (2002) (the “Guidelines”), and, following its 1998 report, the TriBar Opinion Committee supplemented that report with several additional reports. In 2008, the “Statement on the Role of Customary Practice in the Preparation and Understanding of Third-Party Legal Opinions,” 63 Bus. Law. 1277 (2008) (the “Customary Practice Statement”), was published. The Customary Practice Statement was approved by many bar associations and other lawyer groups, including the Boston Bar Association, and described the principal elements of customary practice that form the basis for legal opinion practice.
In its 1998 statement, the BBA had noted the desirability of a “more streamlined opinion letter” that omitted disclaimers, qualifications and assumptions which the Legal Opinion Principles made clear are understood to apply, as a matter of customary practice, whether or not stated expressly. Subsequently, the BBA Legal Opinions Committee prepared a streamlined form of closing opinion that could be used by both opinion givers and opinion recipients. That streamlined form, prepared under the supervision of this article’s authors and representing the work of lawyers in many Boston-area firms, was endorsed by the BBA as a useful document to facilitate the closing opinion process and enhance the efficiency of business transactions and was published in the January/February 2006 issue of the Boston Bar Journal.
Subsequently, effort was undertaken to develop a statement of opinion practices that could be endorsed by many bar associations and other lawyer groups as expressing a national consensus on key aspects of opinion practice based upon customary practice. That effort produced the current “Statement of Opinion Practices” and related “Core Opinion Principles” which updates the Legal Opinion Principles in their entirety and selected provisions of the Guidelines. The Statement and the Core Opinion Principles have been approved by many bar associations and other lawyer groups, including the BBA Council on March 19, 2019. The Core Opinion Principles are derived from the Statement and can be incorporated by reference in or attached to a closing opinion by those who desire to do so.
The authors of this article have updated the BBA Streamlined Form of Closing Opinion to refer to the Core Opinion Principles and to reflect developments in legal opinion practice since 2006 (as updated, the “Streamlined Form”).
The Streamlined Form is not intended to be prescriptive. Rather, reflecting a broad consensus on acceptable opinion practices, the Streamlined Form is designed to serve as a helpful starting point for lawyers in drafting closing opinions and as guidance on the opinions lawyers can advise clients to accept. The Streamlined Form addresses an unsecured bank loan. Attachment A to the Streamlined Form includes opinions that would typically be given on the issuance of stock. The explanatory notes to the Streamlined Form, while intended to provide helpful information, cannot substitute for the extensive literature that exists on closing opinions.
The Streamlined Form seeks to address opinion issues in a balanced way. Some noteworthy features are:
- The language used to incorporate deﬁnitions from the underlying agreement is more precise than language often used in closing opinions.
- The Form avoids the use of the phrase “to our knowledge,” which courts have not consistently interpreted as a limitation. Note 22 suggests a formulation that makes clear that this phrase, if used, is intended as a limitation.
- The Form sharpens the description in the introductory paragraphs of the factual investigation undertaken, thus avoiding the suggestion that the opinion preparers conducted a broader investigation than actually performed. The description also makes clear that the opinion preparers may have relied on certiﬁcates of public ofﬁcials for legal matters.
- The corporate status opinion does not use the terms “duly incorporated” or “duly organized” for the reasons explained in note 9. The elimination of these terms has been widely accepted by opinion recipients.
- Paragraph 4 contains a more precise formulation of the no violation of law and no breach or default opinions than appeared in the original form.
- Note 17 provides an analysis of the Restatement approach for determining when the governing law provision in an agreement should be given effect. The Restatement approach has been adopted in Massachusetts and many other states.
- Note 18 addresses opinions on the enforceability of forum selection provisions. Although rarely seen in domestic transactions, separate opinions on the enforceability of forum selection provisions are often given in cross-border transactions.
- The Form proposes a formulation of the no-litigation “opinion” that is narrower than the one often used in the past. (The “opinion” is a factual conﬁrmation and therefore more accurately referred to as a no-litigation conﬁrmation). Use of a narrower formulation is an alternative to declining to cover litigation at all. The omission of any statement regarding litigation in closing opinions has gained increased acceptance.
- The Form includes a provision, often referred to as the “Wachovia provision,” that makes clear limitations on the right of assignees of notes to rely on a closing opinion.
- Attachment A addresses opinions on a corporation’s outstanding capital stock and rights to acquire stock. It also includes a form of opinion that the issuance of the stock does not require registration under the Securities Act of 1933.
- The Form leaves space for exceptions rather than identifying particular exceptions, including those that are commonly taken.
No form can accommodate every factual situation or eliminate the need for lawyers to exercise care in preparing closing opinions. Nevertheless, lawyers who have treated the streamlined form of closing opinion as a starting point in drafting their closing opinions have found that it improves the efﬁciency of the opinion process. We are hopeful that its approach will continue to gain acceptance to the mutual beneﬁt of both opinion givers and opinion recipients.
Donald W. Glazer is Advisory Counsel to Goodwin Procter LLP and co-author of the treatise, Glazer and FitzGibbon on Legal Opinions. Stanley Keller is a Senior Partner in the Boston office of Locke Lord LLP.