OPINION LETTERS IN REAL ESTATE

First Run Broadcast: September 13, 2016

1:00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes)

Most real estate transactions involve one several opinion letters from counsel. Opinion letters

cover a range of topics from title to the property and the absence of security interests to the

authority to enter into an agreement and its enforceability, tax or other compliance, and a variety

of other matters. These letters, which important parts of due diligence, help identify, limit and

allocate risk in transactions. They are often closing conditions. Letters must be prepared and

delivered, or a transaction will not be financed or closed. This program will provide you a guide

to the types and practical uses of opinion letters in real estate transactions and how to draft their

most essential provisions.

Drafting and using opinion letters in real estate transactions

Understanding the role of the attorney, context of transaction, the negotiating process,

and costs of the opinion

Types of letters – validity enforceability, title and security interests, taxes, compliance

and more

Major components of letters – factual assumptions, qualifications, judgment and

limitations

Rights, reliance interests and expectations of the recipient of the letter

Professional standards for preparing opinion letters

Speaker:

Richard R. Goldberg is a retired partner, resident in the Philadelphia office of Ballard Spahr,

LLP, where he established an extensive real estate practice, including development, financing,

leasing, and acquisition. Earlier in his career, he served as vice president and associate general

counsel of The Rouse Company for 23 years. He is past president of the American College of

Real Estate Lawyers, past chair of the Anglo-American Real Property Institute, and past chair of

the International Council of Shopping Centers Law Conference. Mr. Goldberg is currently a

Fellow of the American College of Mortgage Attorneys and is a member of the American Law

Institute. Mr. Goldberg received his B.A. from Pennsylvania State University and his LL.B.

from the University of Maryland School of Law.

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Opinion Letters in Real Estate Teleseminar

September 13, 2016 1:00PM – 2:00PM

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Please note: This form is for your records in the event you are audited Sponsor: Vermont Bar Association Date: September 13, 2016 Seminar Title: Opinion Letters in Real Estate Location: Teleseminar - LIVE Credits: 1.0 MCLE General Credit Program Minutes: 60 General Luncheon addresses, business meetings, receptions are not to be included in the computation of credit. This form denotes full attendance. If you arrive late or leave prior to the program ending time, it is your responsibility to adjust CLE hours accordingly.

LEGAL_US_W # 64534214.5

OPINION LETTERS IN BUSINESSAND REAL ESTATE TRANSACTIONS

Professional Education Broadcast Network

Peter J. TennysonPaul Hastings LLP

Costa Mesa, California

LEGAL_US_W # 64534214.5 1

I. INTRODUCTION1

A law firm or lawyer representing a client involved in a lending, business or real estatetransaction may be requested to deliver a legal opinion of some sort regarding the transaction.The transactions involved may range from private placements of stock, sales of a privately heldcompany or its assets, mergers of public or private companies, private or public offerings of debtor equity securities and related loan transactions. The preparation and negotiation of the legalopinion is often the subject of much time and effort. A lack of standardization of legal opinionsmay increase the frustration, delay, expense and waste efforts. The relative costs involved indelivering an opinion need to be adequately measured against the benefits to the client, or theclient’s interests suffer.

Although legal opinions were first given following the Civil War, generally relating torailroad bond issuances and became common in many significant business deals by the 1950’s,the first organized attempt to summarize practices was an article by James Fuld in 1973, and thefirst bar report on opinions was not published until 1979. Various efforts have been made,particularly since the 1990’s, to standardize opinion procedure. One notable effort that has notachieved widespread acceptance but is often cited is the ABA Legal Opinion Report published in47 Business lawyer 167 (1991). This report proposed a form of opinion and agreedinterpretations popularly referred to as the “Accord” and is referred to below as the “ABAReport” or the “Accord.” While the Accord’s format of opinion is not widely used, itsdiscussion of concepts and standard approaches is regularly cited. Appendix A to this outlinelists a number of other reports discussing forms of opinion and their interpretations which havebeen published, but this should not be considered an exhaustive bibliography. Citations to thesematerials in this discussion generally use the titles identified in Appendix A. Appendix Bdiscusses real estate opinions.

This outline generally focuses on the types of opinions a practitioner might be asked todeliver to a third-party recipient on behalf of his or her client in the context of a businesstransaction. The many other transactions in which opinions may be required, including opinionsrendered directly to a client, opinions related to securities laws, real estate title opinions, taxshelter opinions, “true-sale” opinions, audit response letters and opinions in partnershiptransactions, are beyond the scope of this outline.

This outline discusses the purposes of opinions, approaches to negotiating the opinion,ethical issues involved, types of matters often covered, the bases and assumptions for suchopinions, typical exceptions, qualifications and limitations, and other related matters.

1 An earlier version of this outline was written by Charles Cain, Senior Vice President of Legal and Public Affairsat Banner Pharmacaps, Inc. for the North Carolina Bar Association’s “Basics of Business Law” Program andpreviously updated in 2006 by John R. Miller, Robinson, Bradshaw & Hinson, P.A., Charlotte, North Carolina.Richard Goldberg of Ballard Spahr provided valuable real estate insight on a prior version of these materials. Theircontributions are acknowledged but any errors are the author’s.

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II. PURPOSES OF OPINION

The common purpose of the traditional legal opinion to third-party buyers and lenders isto satisfy a condition of a loan or acquisition agreement. While the specific requirement is veryclear, the basis for it lies in its significant unstated purposes as part of the negotiating process,including replacing or confirming “due diligence” review. Third-party opinions assure therecipient that a lawyer has placed his or her reputation and skill behind a process of review andverification of the legal context of the transaction. This has a sometimes less noble purpose ofproviding an additional source of recovery but also can, in the process of negotiating andpreparing an opinion. uncover legal questions and possible conflicts with other transactions thatmight otherwise go unseen. It also helps when the recipient of the opinion, and its counsel, arenot familiar with the laws of another state in which the counter party is based. These may thenbe eliminated by changes in the documents and by obtaining consents of those involved in theother transactions.

There are several purposes for which a legal opinion generally should not be used. Anopinion should not serve the purpose of merely repeating the client’s factual representations andwarranties or of shifting to the attorney the risk of an acknowledged uncertainty. See Third-Party“Closing” Opinions: A Report of the TriBar Opinion Committee, 53 Bus. Law. 591 (1998) (the“TriBar Report”). Most opinion givers believe that representations and warranties should placethe burden of misstatement of facts on those most intimately acquainted with the facts, not on thelawyer. Despite this, as discussed below in the context of “no litigation” opinions, third partieshave sometimes sought to have lawyers repeat or conform factual matters and in recent timessought recovery against opinion givers, especially when the maker of the actual similarrepresentation and warranty is not solvent enough to provide recovery. Furthermore, a legalopinion should not be required where the costs of delivering the opinion outweigh the benefits ofreceiving it. An example is the opinion that a corporation is qualified to do business in everystate in which the character or quantity of business done so requires. See Glazer & FitzGibbon.Similarly, opinions that are rendered innocuous as the result of necessary qualifications orassumptions result in little value, and should be avoided (e.g., an opinion based on hypotheticalfacts).

Generally, attorneys should remember the “Golden Rule”: It is not appropriate to insistupon any opinion the requesting lawyer would be unwilling to give in like circumstances.

In recent years, many have questioned whether opinions should continue to be requestedand rendered. The argument generally questions whether the costs in time and money arejustified, especially when the recipient has its own counsel examine or re-examine many of theissues addressed. In addition, the risks to the opinion given are usually far out of proportion tothe fees paid. For these and other reasons, opinions are no longer requested in most large publicacquisitions, and are also becoming the exception rather than the rule, in private saletransactions. However opinions are still regularly expected in loan transactions, particularly insecured syndicated loans. This outline and presentation will thus generally focus on the types ofopinions given in lending transactions and private placements of securities.

Perhaps in response to litigation against law firms based on opinions, efforts tostandardize and document opinion practice continue. The ABA’s committee on legal opinions

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(part of the Business Law Section) formed the “Working Group on Legal Opinions” which meetstwice a year to discuss opinion practice, and which has recently decided to form the WGLOFoundation to continue this focus.

These discussions have led to some consensus about the type of language to use inspecifying who may rely on an opinion, the scope of opinions about limited liability companies,and, more recently the discussion of cross-border opinions. Groups like the WGLO and the statebars in New York, California and other states publish guidelines or recommendations, perhaps inthe hope courts will use them as evidence of current practices and standards.

III. NEGOTIATING THE OPINION

A. Best to Begin Early.

Although the opinion is formally delivered at the closing, the opinion should not bethought of merely as a “closing document” since its provisions often affect the substance orstructure of the transaction itself. In fact many benefits of the opinion are derived from thereview needed to prepare it and the uncovering of issues that must be resolved. Perhaps the mostcommon and yet most avoidable mistake made in negotiating and preparing opinion letters isbeginning too late in the course of the transaction. The opinion should be negotiated at the sametime as the written agreement between the parties, and the substance of the required opinionshould either be set forth in the text of the agreement or appear in a proposed form of opinionattached. To provide some flexibility for making minor changes prior to the closing, the finalagreement may provide that the parties agree to deliver and accept an opinion “in substantiallythe form attached hereto.” But an agreement that provides for a favorable opinion “on such legalmatters as receiving counsel or its client may reasonably request,” creates an unnecessary riskthat the closing may be delayed because the parties’ counsel are later unable to agree on what isreasonable. Also, if counsel deems it necessary to render a reasoned opinion on any particularaspect of the transaction, this possibility should be made known as early as possible so that theparties can consider alternative structures that may eliminate the need for other than a “clean”opinion.

B. Understand the Context of the Transaction.

Although standardized terminology and provisions typically appear in corporate or realestate transaction opinion letters, the appropriateness of such provisions must be evaluated ineach transaction. An opinion that was reasonable to request or give in one transaction may notbe reasonable in another similar transaction because of the lawyer’s relationship with the client,knowledge of or ability to confirm the facts, the costs associated with giving the opinion or ahost of other reasons.

C. Understand Standard Terms and Practices.

Although each opinion must conform to the particular transaction, lawyers should befamiliar with the standard terminology and practices that have evolved over the years for similartransactions. The reports and treatises referred to above describe many of those terms, andseveral suggest opinion formats. Because many firms have developed their own forms, this

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discussion does not attempt to suggest a single standard. The attorney should be aware thatcertain opinions are expected to be given (and can be given with minimal diligence), even if theyare of little apparent value to the receiving party. Even though this practice has diminished (forexample with the disappearance of the Public Utility Holding Company Act, an opinion about itsnon-applicability was for some period still commonly requested) it survives in some forms. Alawyer who attempts to deviate from the norm should be prepared to support his or her reason fordoing so. Standards, do, however, deviate depending on the circumstances. See, e.g. “Relianceon Opinion” below.

D. Be Reasonable.

Both the requesting and the opining attorney should avoid taking an adversarial posturetoward negotiating the opinion letter. Counsel should remember that an opinion is not awarranty or guarantee by the opining lawyer that the receiving party will suffer no harm withrespect to the transaction in question. Instead, an opinion is given to provide added assuranceregarding legal issues relating to the transaction and to facilitate the due diligence process. Therequesting lawyer should ask only for an opinion as to matters reasonably necessary to protectthe client’s interests and for which the necessary investigations or legal conclusions arereasonable for the opining lawyer under the circumstances. If the required investigation can bedone equally well by both parties (e.g., a litigation search or lien search) legal opinions on suchmatters essentially represent statements of fact and are often inappropriate. By asking for more,the requesting lawyer improperly forces the opining lawyer to assume the risk of factual or legaluncertainties that are beyond his or her power to eliminate or to make assumptions that make theopinion meaningless. To the extent that a lawyer is unable to give an unqualified favorableopinion, the recipient is duly warned of a legal risk that can then be evaluated and dealt with inthat particular transaction. Furthermore, a requesting or opining lawyer should not use theprovisions of an opinion as bargaining chips to obtain a concession on a business point. Thescope of an opinion should be governed by professional and ethical considerations, separate fromthe process of negotiating the best deal for the client.

E. Understand Your Role.

The nature of the opinion, and the related investigation and due diligence, will depend inpart on the opining lawyer’s relationship with the client and the lawyer’s role in the transaction.The general counsel for a business being acquired may reasonably be expected by the buyer togive an extensive opinion regarding business and operational matters, such as compliance withlicensing requirements, knowledge of pending or threatened litigation, or the status ofrelationships or contracts with key customers or suppliers. However, in-house counsel,especially in larger companies, face many of the same difficulties that outside lawyers face andmany decline as a matter of policy to issue such opinions. Special counsel engaged for thelimited purpose of a particular transaction may properly limit their opinion to matters aboutwhich the lawyers involved have knowledge, perhaps with some agreed-upon obligation toinquire or investigate. Also, the opining attorney should evaluate early in the opinion processwhether there is a need to associate local counsel or special counsel with expertise in a particulararea, such as securities or environmental laws. Because in many instances the other party and itscounsel will also investigate many of the same issues, formalizing the result of the investigationin a formal opinion may not be cost-effective. For this, among other reasons, there is a

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developing (and almost universal) trend not to render opinions in large public company mergers.Given that in such a merger the acquired company and its holders are in a practical sense not asource of recovery for misrepresentations or mistakes, having a law firm “on the hook” for suchissues lacks proportion.

F. Understand the Costs.

When negotiating the terms of an opinion letter, both the requesting and opining counselshould be aware of the difficulty, and therefore the cost, of giving certain opinions. Dependingon the size of the transaction, both in absolute dollars and in relation to the businesses of theparties, certain opinions may require an unjustifiable investment of time and expense. Forexample, the opinion that the client has all licenses and permits necessary for the conduct of theclient’s business could involve significant time, investigation and expense that may not bewarranted in each situation. Rather than render such an opinion, it may be entirely reasonablefor the attorney to insist that this is really a business issue and that the other side should acceptthe client’s representations or other assurances on this point. In a regulated industry it may beappropriate to request opinions about particular licenses or permits, although even in this casethe opinion may essentially be a statement of fact.

Another area, particularly in smaller transactions, likely to cause problems is a request foran opinion that all of a client’s stock is validly issued, fully paid and non-assessable. Theprocess of identifying the resolutions and other records related to each share issuance is costlyand time-consuming and records of payment may be hard to trace. While it may be helpful to alater-stage investor or a purchaser, the degree of certainty obtained from the work needed for anopinion may not be justified. Obviously, facts may make a difference. If there are only two orthree holders the burden may be less.

It is especially important that from the outset clients understand the time and expenseinvolved in giving an opinion, if for no other reason than to avoid unpleasant surprises when theyreceive the bill for legal services. Also, the payment of all or part of such fees by the requestingparty may be a subject of negotiation in the transaction and should be resolved early.

G. Use Available Resources.

A greater number of reference sources are available to today’s opinion giver than in thepast. By using these sources, the opinion giver can not only expedite the preparation process, buthe or she can adopt a standardized approach to one or more opinion topics. The result should beless time and attention required to be devoted to the opinion by the giver and the recipient.Useful referral sources include Glazer, the Accord, the ABA Guidelines, the ABA Principles,and the TriBar Report, as well as the various state reports, most of which are published in theAppendices to the Glazer treatise.

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IV. ETHICAL ISSUES

A. General.

The ABA’s Model Rules of Professional Conduct (the “Rules”) do not expressly addressa lawyer’s ethical considerations in rendering an opinion in a commercial transaction. However,three basic ethical obligations govern the lawyer’s role: (i) the lawyer must be competent torender the opinion, (ii) the lawyer must preserve the attorney-client privilege, and (iii) thelawyer’s conduct must be beyond reproach. The proper remedy for a violation of the ethicalrequirements of the Rules is through the disciplinary process, and not civil liability. However,the lawyer’s duties to a client are dictated, in part, by the Rules and therefore a violation of theRules may be evidence of breach of duty. See, e.g., Vance v. Robinson, 292 F. Supp. 786(W.D.N.C. 1968). Certain violations of ethical duties, such as rendering opinions without thelegal knowledge or experience required to be “competent,” likely will also constitute a breach ofthe attorney’s duty to represent a client with such skill, prudence and diligence as lawyers ofordinary skill and capacity commonly possess and exercise in the performance of the tasks thatthey undertake. The applicable standard is that of members of the profession in the same orsimilar locality under similar circumstances. Rorrer v. Cooke, 313 N.C. 338, 356, 329 S.E.2d355, 366 (1985). There has been recent concern over this because Fortress Credit Corporationsued the Dechert firm, arguing it should have detected forged signatures and other defects.Although the case was ultimately resolved in Dechert’s favor 83 AD3d 61S 934 NYS2d 119(2011), the costs and adverse publicly generated concern about the lack of proportion betweenthe fees involved and the exposure sought.

B. Competence to Render Opinion.

Each state has rules of professional conduct which apply to a lawyer’s ethical duty toclients and third parties. When rendering an opinion, the lawyer must not only consider whetherclient confidences may be revealed (usually permitted because the client has explicitly consentedto such disclosure by requesting the opinion be issued) but also what duties the opinion giverhas assumed to the recipient. The Dean Foods case discussed below and the more recent case ofSanto Nostrand, LLC v. Cozean O’Connor [Supreme Court of County of New York, August 10,2009] seem to apply a malpractice/negligence standard. It is noteworthy that in the SantoNostrand case, which involved a zoning opinion, the standard applicable was that of lawyersexperienced in this particular specialty. Such concerns often lead general practitioners to seekspecialized counsel for such issues, and lead out-of state counsel to seek opinions of localcounsel.

Use of Special and Local Opinions. The lawyer should only opine on those matterswithin his or her legal knowledge and competence. The transaction involved may require thatthe lawyer render an opinion regarding a substantive area of law in which he or she is notknowledgeable or regarding the laws of another jurisdiction. If the lawyer lacks the legalcompetence to render the opinion, then the lawyer should associate another lawyer who iscompetent to render the opinion. In relying upon the specialist’s opinion, the lawyer should referto the specialist’s opinion in the primary opinion letter (with the better practice being to appendthe specialist’s opinion to the primary opinion letter whenever possible), restate the substance ofthe specialist’s opinion and state that the lawyer is relying solely on the specialist’s opinion and

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has not made an independent inquiry into the facts underlying the specialist’s opinion. Manyfirms prefer, instead, to deliver the specialist opinion and disclaim any independent opinion onthe issue, reasoning that to do otherwise “adopts” the opinion or “endorses” it, when the reasonfor the specialist opinion was the primary firm’s lack of the skill or experience needed to do so.

The lawyer rendering the primary opinion should be satisfied that the specialist iscompetent to render the opinions given. This requires special care to assure that the specialistunderstands the transaction and the issues involved. The opining lawyer should evaluate thespecialist’s assumptions, limitations, and qualifications and determine the reasonableness of theopinion. If the lawyer has any reason to doubt the validity of the specialist’s conclusions, thelawyer should discuss them with the specialist and advise the client of the nature andsignificance of any problem. The issues discussed above also apply to the need for, and use of,opinions from local counsel where laws of other states or ordinances of other local governmentsare involved. In each transaction involving such issues, the attorneys involved should determinethe need for a “specialist” in such local issues.

A Maryland opinion report states:

“The opinion giver may rely on opinions issued by local counsel with respect to the lawsof a foreign jurisdiction if satisfied as to the competence of local counsel. If the use of a localcounsel opinion is adopted, the Maryland opinion giver should take care to ensure that itsopinion is no broader as to substantive matters than those substantive matters addressed in theopinion of local counsel upon which reliance is placed.

“Reliance upon or reference to local counsel’s opinion does not require the opinion giverto investigate independently or otherwise verify the opinion of local counsel. The opinionrecipient should presume that such local counsel’s opinion is the sole basis of knowledge of theopinion giver as to the substantive matters covered by the local counsel’s opinion unlessotherwise specifically stated. Any statement in an opinion that the opinion giver concurs in theopinion of local counsel, or that the opinion of local counsel is satisfactory in form andsubstance, implies a broader scope of responsibility of the opinion giver to conduct its ownreview.”2

1. Preparation and Factual Investigation. The opining lawyer mustundertake such investigation of the facts and review of the relevant statutes and case law as isreasonable for the lawyer to render the specific opinion. This duty includes gathering andreviewing all facts and legal documents that form the foundation for the opinion. Most firmsspecifically list the documents covered and reviewed.

2. Reliance on Certificates. Often, the lawyer requires the aid ofprofessionals working with the client on the project (e.g., architects and engineers) in order toestablish the factual basis necessary to render the opinion. If the lawyer is asked to opine on amatter such as compliance with zoning law, building codes or OSHA regulations, the lawyermight be remiss to opine on such matters without consulting a professional who isknowledgeable about the subject. The lawyer must evaluate the reasonableness of the various

2 Maryland Opinions Project Report dated June 14, 2007 revised October 6, 2009.

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certificates received and upon which the ultimate opinion is based, and reasonably believe thatthey are truthful. It is good practice to obtain the professional’s opinion in writing together withthe professional’s consent to the lawyer’s reliance on the opinion, and the lawyer should state inthe opinion that reliance is made on the specific certificates as the factual basis for the opinion.

C. Client Confidentiality.

A lawyer has the obligation to preserve the client’s confidential information. In thetypical transaction, the lawyer rendering an opinion is providing it for someone other than thelawyer’s client (e.g., the lender or the other party to a transaction), and the opinion might containinformation that is or could be considered confidential (such as the existence of pending orthreatened litigation). “Confidential information” within the context of Rule 1.6 is closelyrelated to the ethical duty that is protected by the evidentiary attorney-client privilege. SeeAnnotated Model Rule of Professional Conduct, Rule 1.6 (5th ed. 2002). But the term alsoencompasses other information gained in the professional relationship that the client hasrequested be held inviolate or the disclosure of which would be embarrassing or would be likelyto be detrimental to the client. The rule applies to all information relating to the representation ofthe client, whatever the source of information.

Under certain circumstances, however, confidential information of the client may bedisclosed. Rule 1.6(a) permits disclosure when it is (i) impliedly authorized by the client in orderto carry out the goals of the representation or (ii) expressly authorized by the client but only afterconsultation with him or her. If a loan commitment contains an express obligation for the lawyerto render an opinion and the client has signed and returned the loan commitment to the lender,consent to the lawyer’s disclosure in the opinion letter is probably implied. However, the lawyerwould be well advised also to obtain his or her client’s express consent to disclose those opinionsto the lender, especially in transactions in which the commitment letter does not specificallyidentify the substance of the opinions required.

D. Lawyer’s Conduct.

Rule 3.3(a) states: “A lawyer shall not knowingly make a false statement of fact or lawto a tribunal or fail to correct a false statement of material fact previously made to thetribunal….” A tribunal includes an administrative agency, such as the Securities and ExchangeCommission. Rule 1.0(m). In addition, Model Rule 4.1 states that in the course of representinga client a lawyer shall not knowingly make a false statement of material fact or law to a thirdperson or fail to disclose a material fact when disclosure is necessary to avoid assisting acriminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

The lawyer cannot succumb to the client’s insistence to provide the exact form of opinionthat the other party requires if the opinion is not accurate. Further, the opining lawyer may notrely on a certificate of the client or of another person as the basis of a legal opinion if the lawyerknows the certificate is inaccurate or misleading, even though the lawyer may qualify that theopinion is based solely on the client’s certificate. If the lawyer must reveal factual informationthat the client has requested be held confidential, but which information forms a necessary basisfor the legal opinion or if the lawyer cannot truthfully give an opinion, the lawyer should discusswith the recipient an acceptable modification of the opinion language or refuse to give the

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opinion. If the recipient does not consent to a modification or omission of the objectionableopinion, the lawyer then has a duty to withdraw from representing the client in that transactionrather than violating the confidences of his client or giving the opinion when the lawyer knowsor has reason to know that it is without foundation.

V. FRAMEWORK OF THE OPINION

The form and content of opinions have developed over time through custom, negotiation andcommon usage. Although the opining lawyer must analyze each opinion in the context of theparticular transaction, developing an understanding of commonly accepted opinion forms and“standard” terminology will expedite the negotiation and drafting process. The common practiceis for legal opinions to be embodied in letter format, and each component is significant and ofconsequence. A typical structure of an opinion is outlined below, and a narrative discussionfollows with respect to various components:

Identification of transaction and parties

Scope of examination

Assumptions made

Knowledge qualification (which firm attorneys’ knowledge is included)

Actual “opinion” paragraphs

Exceptions, qualifications and limitations

Law covered in the opinion (U.S. federal, state(s), non-U.S. jurisdiction)

Who may or may not rely on the opinion

A. Date.

An opinion is typically dated and “speaks” as of the closing date of the transaction. Theopinion also is typically signed and delivered at the closing. An “escrow” arrangement can bestructured, however, under which the opinion is dated the closing date but is executed in advanceand delivered to counsel for one of the other parties on the condition that the opinion can bereleased on the closing date upon receipt of instructions to that effect from the opining attorney.The escrow arrangement is more frequently used in situations where counsel know each otherwell or have an established working relationship. Delivery of opinions by telecopy followed bydelivery of the conforming executed original is also an accepted practice.

B. Reliance on Opinion.

Care should be taken to identify specifically and accurately the addressee(s) since theaddressee is generally the only person expressly entitled to rely on the opinion. Most opinionstraditionally included a provision, typically appearing at the end of the opinion, to the effect thatthe opinion is for the benefit of the addressee only and may not be used or relied upon by anyother person without the prior written consent of the opining attorney. While such limitationsmay not be respected by the courts in all cases, they do express the intent of the parties and may

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be helpful in limiting the scope of the opining attorney’s liability. See Restatement Third, TheLaw Governing Lawyers, § 51(2) (2000). If it has been agreed that parties other than theaddressee will be entitled to rely on the opinion, such as counsel for one of the other parties or aparticipant in a loan transaction, a “reliance letter” is often used to confirm that the opinion isalso for the benefit of certain additional parties. The typical reliance letter is very short andsimply refers to the principal opinion and recites that the addressee of the reliance letter may relyon the principal opinion to the same extent as if the principal opinion were addressed to theadditional party. Lawyers rendering opinions in areas such as municipal bonds, and public debtor equity offerings, often face an assumption their opinion is addressed to a broad audience. Thatissue is beyond the scope of this discussion.

Limitations on Reliance.

In the 2000’s, increasing focus began to be placed on the “reliance” portions of a legalopinion. Firms and lawyers had customarily stated that only the persons named in a particularopinion, such as the buyer, or a buyer and its lender, could rely on that opinion and that no oneelse was authorized to do so. In connection with large, syndicated loans it is not uncommon forthe syndicate to change significantly over time. Agents and lenders putting together suchsyndications feel that it materially increases their ability to do so if closing opinions inconnection with the loan or other financing in question follow a standard format and state thatthey may be relied upon by persons becoming participants in the syndication. This is usuallyconsidered appropriate because it is not practical for those who buy loan interests in asyndication to repeat the initial due diligence and it is time consuming and expensive to negotiateand issue multiple reliance letters. In practice, there is some basis to wonder whetherparticipants actually read the opinion, or simply get assurances that an opinion in a standardformat was issued, which opens the door to questions about actual reliance.

Law firms have expressed concern about permitting broad reliance. This is particularlyimportant in troubled economic circumstances, because if a loan encounters financial trouble,participants may sell their portion of the loan to so-called “vulture funds,” which are more likelythan traditional lenders to view the opinion giver as a deep pocket and to make a claims in anattempt to recover a portion of the defaulted loan. And in difficult times, even more traditionallenders may seek any available source of recovery. Even if the law firm is successful indefending its opinion, the costs of doing so are significant, there is a significant amount of timeloss and distraction, reputations may be damaged, and malpractice premiums are likely toincrease. Firms also express concern over the possibility of multiple claims by differentsyndicate members, perhaps even leading to litigation in different jurisdictions. Further, someopinion givers have felt that successors and assigns may not appreciate the nuances of thenegotiation that led to a particular opinion, and therefore, may rely on it in a somewhat naïvefashion.

Parties putting loan syndications together have not agreed that these objections justifiednon-reliance language. A leading policy statement, issued by the Loan Syndications and TradingAssociation, Inc. statement of standards in 2005, included the following item as Item 3:

“3. Borrower’s Counsel’s Legal Opinion. In connection with the… negotiation of the Transaction Documents (as defined below),

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the Administrative Agent shall request, on behalf of the lenders,that the Borrower’s Counsel’s legal opinion permit reliance byassignees.”

Most banks wanting to serve as administrative or syndication agents accept this as thestandard, or norm, in opinions on syndicated loans. They instruct the law firms negotiating atransaction for them not to deviate from this standard.

One large bank went further and published a standard policy on the type of assignabilitylanguage it would accept. This statement is reproduced in part below:

Policy on Assignability of Opinions In Syndicated Loan Transactions

As Administrative Agent in syndicated lending transactions, Xexpects to receive an opinion from borrower’s counsel that extendsto the benefit of successors and assigns. Over the last few years afew influential law firms active in representing borrowers insyndicated loan transactions have refused to provide opinions thatextend to successors and assigns and instead specifically limitedthose who may benefit from the opinion to the initial lenders. Thisis contrary to the traditional market for borrower’s opinions, theLSTA standards and the presumed expectation of loan purchasersin the secondary market.

X expects to continue to receive an opinion from borrower’scounsel that extends to successors and assigns. When representingX as Administrative Agent, the following language, whilequalified, is the minimum acceptable in this respect.

“At your request, we hereby consent to reliance hereon by anyfuture assignee of your interest in the loans under the CreditAgreement pursuant to an assignment that is made and consentedto in accordance with the express provisions of Section [___](reference to the assignment Section of the Credit Agreement) ofthe Credit Agreement, on the condition and understanding that: (i)this letter speaks only as of the date hereof, (ii) we have noresponsibility or obligation to update this letter, to consider itsapplicability or correctness to any person other than itsaddressee(s), or to take into account changes in law, facts or anyother developments of which we may later become aware, and (iii)any such reliance by a future assignee must be actual andreasonable under the circumstances existing at the time ofassignment; including any changes in law, facts or any otherdevelopments known to or reasonably knowable by the assignee atsuch time.”

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This language quoted above has been adopted by a number of large law firms. However,debate over the issue continues. Some firms representing syndication agents continue to ask formore general reliance language, and some firms continue to seek more limited reliance. Somefirms limit such reliance to those becoming part of the syndicate within a stated number of daysafter the initial closing, and some firms add a requirement that “reasonable” reliance can occuronly after consulting a law firm experienced in giving and receiving opinions about similartransactions.

C. Role of Counsel/Description of the Transaction.

The typical opinion states the capacity in which the opining lawyer has acted bydescribing the nature of the engagement and identifying the client in the context of thetransaction. (e.g., “We have acted as counsel to ABC Corp. (the “Company”) in connection withthe Loan Agreement dated April 1, 2010, between the Company and XYZ Bank.”) It hassometimes been thought appropriate to designate whether the lawyer is “general,” “special” or“local” counsel, depending on the circumstances. As a practical matter, these designationsprobably have little significance and little effect on the extent of the attorney’s responsibility inpreparing the opinion. Many firms omit such a designation and are more specific whendescribing the scope of a limited engagement. The “general counsel” designation, however, mayimply a closer relationship with the client and perhaps imposes a higher standard on the opiningattorney. See Glazer § 2.5.2. For this reason many firms refuse to include it.

D. Reason for the Opinion.

The opinion will typically identify the section of the agreement between the parties to thetransaction, if any, which requires the opinion (e.g., “This opinion is delivered pursuant to § 7.2of the Loan Agreement.”). This short statement clarifies the reason for the opinion and refers thereader to the operative agreement for additional information regarding the transaction. Unlessthe opinion evidences the client’s consent to giving the opinion in this fashion or in anotherform, it is possible that opining counsel will not be deemed to have a duty of care to the opinionrecipient (with whom the attorney-client relationship does not exist).

E. Definitions.

The definitions in the opinion should be consistent with those in the agreement to whichthe opinion relates. This can be done either by cross-referencing the agreement (e.g.,“Capitalized terms used herein and not otherwise defined shall have the meanings specified inthe Agreement,”) or by redefining each term in the opinion as it is used in the agreement towhich the opinion relates.

F. Documentary Examination Assumptions.

A number of assumptions have become generally accepted in connection with the opininglawyer’s documentary examination. The assumptions normally seen include assumptions as tothe authenticity of all documents submitted as originals, the genuineness of all signatures (otherthan those of the lawyer’s client), the legal capacity of natural persons, that copies of documentssubmitted for review conform to the executed originals and that there are no undelivered orundocumented modifications to the documents reviewed. In an era when closing often occurs by

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the exchange of electronically sent signatures, even the assumption that the opining firm’s clientshave executed the document may be appropriate. While each of these assumptions, and oftenadditional assumptions to similar effect, are frequently included in the opinion itself, often citedcommentary indicates that such assumptions are implicit and should be understood and need notbe set forth in the opinion itself. TriBar Report at 615; See Accord § 4. The issue ofassumptions and a duty to investigate were among those hotly contested in the “Dechert” case,83 A.D. 3d 615, 934 N.Y.S. 2d 119 (2011). The complaint alleged Dechert acted wrongly inonly reviewing documents provided as copies and never meeting the actual client. The trial courtdenied Dechert’s motion to dismiss. On November 29, 2011, the Appellate Division reversedand granted Dechert’s motion to dismiss. According to the Appellate Division, there was nofraud because of the lack of scienter on Dechert’s part, and there was no legal malpracticebecause Fortress (the lender) was not a client of Dechert’s. As to negligent misrepresentation,the Appellate Division ultimately found that the complaint did not state a cause of action. Thecourt’s reasoning is not entirely clear, but appears to be based on Fortress’ failure to allege in itscomplaint that Fortress had instructed Dechert to investigate over and beyond a review of thedocuments and to verify and report on the legitimacy of the transaction. Although not clearlystated, the court appears to hold that this higher level of review and verification was beyond whatwould be expected by “customary practice” in issuing a legal opinion. The court cited theassumptions taken by Dechert and clearly stated in the opinion letter as to genuineness ofsignatures and the disclaimer in the opinion letter of any inquiry into the accuracy of factualrepresentations or certificates. This is one of the very few legal opinion cases which wasdisposed by a motion to dismiss or summary judgment, since the court usually finds that factualmatters remain in dispute. The result compels the opining law firms to settle rather than endure atrial. Law firms should not become complacent, since it is not certain that in the future, the courtwould be familiar with the customary practice in rendering opinion letters, and the nuancedlanguage of the opinion letters (including disclaimers and assumptions), as well as the AppellateDivision did in the Dechert case.

G. Other Assumptions.

In addition to documentary examination assumptions, an opinion will frequently containa number of other assumptions. Such assumptions are appropriate with respect to factual mattersas to which the attorney should not be expected to have direct knowledge or as to other matterswhich the recipient of the opinion agrees may be assumed. An assumption often seen infinancing opinions, for example, is that the lender “has full power and authority to enter into theloan agreement and make the loan, has taken all necessary action to enter into the loan agreementand has duly executed and delivered the loan agreement.” Another assumption that gives manyattorneys additional comfort is that the lender will enforce its rights under the applicable loandocuments in good faith and in a commercially reasonable manner.

The attorney should avoid assumptions that constitute legal conclusions, unless theaddressee of the opinion has specifically agreed to such an assumption. For example, suchassumptions are common about the other party, as noted above, even though a legal conclusion isinvolved. Extensive reliance on assumptions that constitute conclusions of law can be misleadingand in effect render an opinion useless. For example, if the factual issues relating to a fraudulentconveyance question are assumed (e.g., an assumption of solvency), the opinion that a fraudulentconveyance has not occurred would be of no real value. Also, it is not appropriate for an

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attorney to assume a state of facts that is inconsistent with information as to which he or she hasactual knowledge. Accord § 4.6.

H. Qualifications.

Virtually all opinions will contain qualifications of some type. The qualifications may beset forth generally, if they apply to the opinion as a whole, or specifically if the qualificationapplies only to a particular portion of the opinion. If the qualification is applicable only to aspecific section of the opinion, language such as “subject to . . .” or “except . . .” is sometimesincluded in the particular section of the opinion and sets forth the nature of the qualification. Thegeneral type of qualification normally appears only once in the opinion, often in a listing ofseveral qualifications, and is set forth in language such as “we express no opinion with regardto . . .” or “our opinion in paragraph __ is subject to . . .” or “enforceability of _______________may be limited by . . . .” This is particularly true in real estate transactions in jurisdictions whichlimit or specify forms of foreclosures.

There is significant debate as to the nature and extent of the qualifications that should beset forth in the opinion. One body of thought is that many qualifications are implicit and shouldbe considered a part of any opinion, and need not be set forth in the opinion itself. A contraryphilosophy suggests that all qualifications need to be specifically set forth in the text of theopinion.

The Accord attempted to deal with many of the typical qualifications by permitting theopining attorney simply to include in his or her opinion the “Equitable Principles Limitation” andthe “Other Common Qualifications” exceptions, as set forth in §§ 13 and 14 of the Accord,thereby giving the opining attorney the benefit of most, if not all, of the desired qualifications.

But since most opinions do not incorporate the Accord by reference, because manylenders will not accept this, the concerns and obvious problems with the “laundry list” approachhave led to several forms of “generic” qualifications that have become fairly accepted in currentpractice. One of these is the qualification in an opinion in a loan transaction that the loandocuments will provide for the “practical realization” of the “intended benefits” or “principalbenefits” to the lender. These qualifications, however, may leave unclear exactly what theprovisions are that the lender feels are crucial. One approach is to use language such as:

Certain of the remedies under the terms of the Agreement may befurther limited or rendered unenforceable by applicable law, but inour opinion such law does not, subject to the other qualificationsand exceptions stated elsewhere in this opinion, make the remediesafforded by the Agreement inadequate for the practical realizationof the principal benefits purported to be provided thereby.

N.C. Opinion Report § 10.4. There exists significant debate about the scope, meaning andappropriateness of such a paragraph, which continues. Many firms will not include such aparagraph, or use it only for specific types of documents, such as mortgages.

Many real estate practitioners prefer:

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Certain remedies, waivers and other provisions of the transactiondocuments might not be enforceable; however, suchunenforceability does not render the transaction documents invalidas a whole or preclude (i) the judicial enforcement of theobligation of the Company to repay the principal, together withinterest thereon (to the extent not deemed a penalty), as provided inthe transaction documents/note, (ii) the acceleration of theobligation of the Company to repay such principal, together withsuch interest, upon a material default by the Company in thepayment of such principal or interest, and (iii) the foreclosure inaccordance with applicable law of the lien on and security interestin the collateral created by the security documents upon maturityor upon the acceleration pursuant to (ii) above.

I. Back-Up Certificates and Reviewed Documents.

The opinion typically describes any certificates that have been obtained (such as officers’certificates) and that provide a factual basis for the opinion. The opinion also normally recitesthat certificates of public officials (such as good standing certificates) have been relied upon.The opinion may list all documents reviewed by the opining lawyer or may simply state that thelawyer has examined such corporate documents and records as he or she deems necessary inconnection with rendering the opinion. Unless there is a clear reason for limiting the scope ofcounsel’s review (such as in a situation where special counsel has been retained to reviewdesignated loan documents), many attorneys will refuse to accept an opinion that expressly limitscounsel’s review to only certain designated documents. If, however, a review of the listeddocuments is the sole basis for the opinion, the opinion should so state. Language to thefollowing effect is often used to set forth the nature and extent of counsel’s documentary review:

We have been furnished with and have examined originals orcopies, certified or otherwise identified to our satisfaction, of suchagreements, corporate records, instruments, certificates of officersand representatives of the Company, certificates of public officialsand other documents as we have deemed necessary as a basis forthe opinions hereafter set forth. As to matters of fact material tosuch opinions (other than facts constituting conclusions of law), wehave relied upon the representations and warranties contained inthe Agreement and upon certificates of principal officers of theCompany.

J. Reference to Local Counsel.

Typically, an opinion of local counsel, if any, will be delivered with the opinion of theprincipal attorney. The principal opinion will reference the local counsel’s opinion and willappropriately limit the scope of the principal opinion or state the degree of its reliance on thelocal opinion. As a rule, a requesting attorney who receives a local counsel’s opinion shouldassume that such opinion is the sole basis of knowledge of the principal lawyer as to matterscovered by that opinion. The principal lawyer should avoid stating that he concurs in the opinion

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of local counsel or that such opinion is “satisfactory in form and substance” since such languagemay place a greater responsibility or duty to investigate on the principal lawyer. Accord § 8(e).

K. Expression of the Opinion.

The substance of the opinion is normally preceded by a single introductory phrase similarto the following:

Based upon and subject to the foregoing, we are of the opinion that:

The introductory language is typically not phrased in such a way to limit the scope of theopining attorney’s investigation, and often includes additional language to make it clear that theattorney has conducted such investigation as he or she has deemed appropriate under thecircumstances. This broader formulation often appears in language as follows:

Based upon and subject to the foregoing, and based upon suchother investigations of fact and law as we have deemed necessary,we are of the opinion that:

Unless otherwise clearly indicated, however, the opinion recipient normally can assumethat the opinion giver has undertaken such inquiry and investigation as the opinion giver hasdeemed appropriate to enable him or her to render the requested opinion. Accord § 2.

L. Opinion Signature.

There are a variety of permissible methods for signing opinions, including manuallysigning the name of the firm (which is a frequently used practice) or typing the name of the firmabove the signature of a particular partner. Generally, only partners in a law firm sign opinionsin transactional matters, so that the authority of the signing lawyer will be clear.

VI. SPECIFIC OPINIONS AND DILIGENCE PROCEDURES

Set forth below are several of the more commonly delivered opinions in commercialtransactions, followed by a general discussion of what each opinion means (and what it does notmean) and certain common diligence procedures:

Company existence and good standing

Seller’s existence, good standing, corporate power and authority

Capitalization

No preemptive rights

New shares validly issued and fully paid

Foreign corporation good standing

Due authorization, execution and delivery

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Enforceability

No litigation

Governing law issues

The procedures discussed below represent good practice based on personal experience andvarious authorities (see, e.g., Jacobs, Opinion Letters in Securities Matters: Text-Clauses-Law(1993) [hereinafter cited as “Jacobs”]; Glazer), but are by no means intended to be exhaustive.

A. Corporate Status Opinions.

Lenders or acquirors routinely seek assurance that the corporation has been properlyformed and has not lost its status as a corporation. A typical formulation is:

The Company is a corporation in existence under the laws of theState of [____________].

1. Elements of the Opinion. Each component of this opinion has aparticular meaning.

a. Is a Corporation. The language “is a corporation” is normallyunderstood to mean that the requirements for incorporation of the company under applicable lawhave been met in all material respects and that the corporation has not subsequently ceased toexist, whether by liquidation, merger into another company, suspension of its charter fornonpayment of taxes or otherwise. See Glazer, § 6.2. It seems to be well established that thisopinion does not address operational issues relating to whether the corporation has all licensesand permits necessary for the conduct of its business or whether grounds may exist for piercingthe corporate veil. Also, commentary in this area indicates that inconsequential defects in theincorporation process should not prevent counsel from rendering this opinion. Glazer § 6.2.1 at151.

The corporate statutes of many states provides that the Secretary of State’s filing ofArticles of Incorporation is conclusive proof that the incorporator has satisfied all conditionsprecedent to incorporation except in a proceeding by the State to cancel or revoke thecorporation or involuntarily dissolve the corporation. Many attorneys therefore feel comfortablein rendering the “is a corporation” opinion based only on a certified copy of the Articles ofIncorporation unless they are actually aware of some significant defect in the incorporationprocess. Glazer § 6.2.2. Others feel, however, that a detailed review of corporate records isrequired in each instance. Id.

This opinion is often expressed “is incorporated” or “is duly incorporated.” Thesephrases are synonymous and mean that the entity will be legally recognized as a corporation.

The Model Business Corporation Act provides that “[a] certificate of existence orauthorization issued by the Secretary of State may be relied upon as conclusive evidence that thedomestic or foreign corporation is in existence or is authorized to transact business in this state.”Model Business Corporation Act, §1.28 (3rd ed. 2002). Thus, an attorney in many states shouldbe able to give the opinion that the borrower “is a corporation,” “is incorporated” or “is duly

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incorporated” in reliance on a Certificate of Existence, as of the date of the Certificate, regardlessof when the corporation was formed or the applicable statute under which it was incorporated.However, the attorney may not be justified in giving an opinion that the corporation is “dulyorganized” solely in reliance on a certified copy of the corporate charter, as discussed below.

b. In Existence. The “in existence” opinion confirms that thecorporation remains incorporated and that it has not been dissolved or otherwise ceased to exist(such as by expiration of a stated period of existence) subsequent to its formation date. If stepstoward a liquidation of the corporation have been taken but not completed, the nature of suchaction should be disclosed in the opinion, even though a corporation may continue to existvalidly while such proceedings are pending. A review of the corporation’s charter documentsand its minute book should disclose whether any dissolution proceedings have been instituted orwhether for other reasons the corporation has ceased to exist.

c. Duly Organized. The “is a corporation” opinion does notencompass “due organization.” “Duly organized” means that the company “is a corporation”and that certain additional actions have been taken. These additional actions are generallyunderstood to include the adoption of corporate bylaws, the election of corporate officers anddirectors and the issuance of stock to one or more shareholders. As with the “is a corporation”opinion, the “duly organized” opinion should not be construed to mean that, in the judgment ofthe opining attorney, there is no basis for piercing the corporate veil.

If the opinion giver is asked, and agrees, to give a “due organization” opinion, and if theopinion involves a company that has been in existence for many years, its corporate records withrespect to its organization and its authorization of various corporate transactions may beincomplete or unavailable. If, after diligent investigation, the attorney finds this to be the case,the attorney may be entitled to rely upon the presumption of regularity and continuity (seeRogers v. Hill, 289 U.S. 582, 591 (1933)); i.e., where there is no known basis for reaching adifferent conclusion (other than the fact of incomplete or missing corporate records), relianceupon the presumption of regularity and continuity might be appropriate in the circumstances.Georgia Report, supra p. 3, at 25; See also, TriBar Report § 2.4. For example, direct evidencethat the Company received payment years ago of the subscription price for its shares may not beavailable, although its current financial statements reflect the payment in its capital account. Thepresumption of regularity and continuity might provide a reasonable basis for an opinion that theshares of the company are fully paid and nonassessable. The attorney will need to determine theappropriateness of this presumption under the circumstances, taking into account the reason forthe incomplete or missing corporate records (if known) and the importance of the missingrecords to the opinion being expressed. The attorney should also consider whether reliance onthe presumption of regularity and continuity is sufficiently material to an opinion given inreliance on such presumption to require disclosure in the opinion letter. If such disclosure iswarranted, language similar to the following might be used:

In connection with our opinion in paragraph ___ below concerningthe due organization of the Company, our investigation revealedthat certain corporate records concerning [specify] were eithermissing or incomplete. Accordingly, we have relied upon the

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presumption of regularity and continuity to the extent necessary toenable us to express such opinion.

The issue of whether a corporation was duly organized is, of course, determined withreference to the corporation statutes in effect at the time of organization. The certificate ofexistence or good standing issued by the relevant Secretary of State confirms the continuedexistence of the corporation and provides evidence that its charter has not been revoked orsuspended, that it has not been merged into or consolidated with another corporation and that novoluntary or involuntary proceedings with respect to the dissolution of the corporation arepending.

d. Good Standing. The statement that a company “is in goodstanding” is used in some states, such as Delaware, but the term has no definitive meaning underthe laws of Model Act states or under customary opinion practice in those states. The goodstanding certificate previously issued by the Secretary of State in those states was discontinuedand was replaced with a Certificate of Existence. Opinions as to such corporations should notstate that a corporation is in “good standing.” If the opinion giver nevertheless renders anopinion to the effect that the corporation is in good standing, the opinion giver should considerqualifying or defining the phrase “in good standing” in the opinion letter.

e. Tax Good Standing. Upon written authorization and request by acorporation, the state of incorporation’s department of revenue will usually issue what iscommonly referred to as a “tax good standing letter.” Such a letter will typically certify that thecorporation has filed all state franchise and income tax returns and has paid the taxes shown dueon those returns, and that there are no outstanding franchise and income tax assessments. Suchletters are frequently obtained as part of the closing documentation for financing, acquisition andother transactions. The use of a tax good standing letter may be helpful in qualifying or definingthe meaning of “good standing” in an opinion letter or giving assurances to an opinion recipientas to good standing in lieu of a good standing opinion. In recent years the slowness of somestates in issuing such certificates has caused difficulty in rendering such an opinion unless therewas ample advance planning.

f. Good Standing Generally. Often an opinion is requested that thecorporation is qualified to transact business “in all jurisdictions in which failure to qualify wouldhave a material adverse effect on its financial condition,” or “wherever the nature of itsproperties or business requires it,” or “wherever it owns or leases any material properties orconducts any material business.” Such opinions require substantial additional investigation bythe opining lawyer, including a thorough understanding of the company’s business and ananalysis of its property wherever located. Thus more recent practice has found attorneysdeclining to give the comprehensive foreign qualification opinion. The ABA’s guidelinesdiscourage the opinion recipient from requiring a comprehensive foreign qualification opinion.Obtaining verification of the company’s qualification and good standing as a foreign corporationqualified to do business in a particular jurisdiction generally involves nothing more thanobtaining copies of the relevant certificates of qualification and/or good standing and renderingthe opinions solely based on a review of those certificates. In reality, the opinion recipientshould merely rely on the certificates of good standing from the foreign jurisdictions and not

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request even a specific foreign qualification opinion. The opinion says nothing more than thecertificates and asking for it increases costs without a corresponding benefit.

2. Diligence Procedures. The diligence procedures necessary to render the“corporate status” opinion will vary depending on whether the opinion addresses the “dueorganization” of the company or uses the “is a corporation” alternative. The latter opinion canbe given primarily in reliance on a certificate from the Secretary of State and a review of thearticles of incorporation together with an officer’s certificate as described in (v) below. Anattorney giving the more comprehensive “duly organized” opinion might consider the followingdiligence procedures:

(i) Obtain a copy of the business corporation code in effect atthe time of organization.

(ii) Obtain a certified copy of the articles of incorporation fromthe Secretary of State.

(iii) Examine the certified articles of incorporation to insure thatthe requisite items are included and that the articles areotherwise in proper form for filing.

(iv) Examine the company’s minute book or other appropriateevidence of corporate action to confirm that a properorganizational meeting was held, bylaws adopted, officerselected, a registered agent and registered office designated,stock certificates issued and other organizationalprocedures required under the Bylaws and corporation codeas then in effect were completed.

(v) Obtain an officer’s certificate to the effect that the companyhas not been administratively dissolved nor have the boardof directors or shareholders taken any action with respect tothe dissolution of the company.

(vi) Obtain a certificate of existence from the Secretary of State.

B. LLC Status Opinions.

More and more frequently, lawyers are asked to deliver opinions regarding the status oflimited liability companies. The appropriate opinion language regarding the organization andstatus of an LLC would generally be as follows:

The Company is a limited liability company in existence under thelaws of the State of [___________].

The analysis of the various elements of the opinion is substantially the same as that for acorporation. The Secretary of State’s office will generally certify copies of Articles ofOrganization or Articles of Formation and issue Certificates of Existence with respect to LLCs.

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An attorney delivering a status opinion on an LLC would need to confirm that the Articles wereproperly completed, executed and filed with the Secretary of State. Filing of the Articles of anLLC by the Secretary of State is likewise typically conclusive evidence of the organization of theLLC, except in a proceeding by the state to cancel or revoke the Articles or involuntarilydissolve the LLC. The furnishing of a Certificate of Existence by a Secretary of State is likewisetypically conclusive evidence that the LLC is in existence or authorized to transact business inthe state.

The opinion that the company “is a limited liability company,” or is “duly formed” maybe given in reliance on a reasonably current certified copy of the Articles of Organization orFormation and a Certificate of Existence, regardless of when the LLC was formed. However,note that in some states the adoption of an operating agreement is a necessary component. Theopinion giver should be satisfied that the Articles of Organization and, if required, the operatingagreement, meet the minimum requirements of the relevant statutes.

The opinion that the LLC is “in existence” usually means that it continues to be an LLC,that it has not been dissolved and that its articles of organization have not been revoked orsuspended. It also means that the LLC has not been merged into any other LLC in a transactionin which the LLC was not the survivor and that, in the case of an LLC whose term is limited, theterm of the LLC has not expired. The Certificate of Existence issued by the Secretary of Statecan generally be relied upon as to the continued existence of the LLC and as conclusive evidencethat the articles of organization have not been revoked or suspended.

Because many LLC’s or limited partnerships are formed in Delaware, and because manyelements of a typical opinion, such as how an action is approved or authorized, depend on theLLC’s operating agreement, or on the limited partnership agreement, concern has arisen thatsuch opinions amount to rendering opinions on Delaware contract law. As a result, many firmsinclude language similar to the following:

We are not engaged in practice in the State of Delaware and,without limitation, we do not express any opinion regarding anyDelaware contract law. We have assumed without independentinvestigation that the limited liability company agreement/limitedpartnership agreement of [Borrower] is (a) a legal, valid andbinding obligation of each party thereto, enforceable against it inaccordance with its terms, (b) in full force and effect, and (c) theentire agreement of the parties pertaining to the subject matterthereof; to the extent that our opinions in opinion paragraphs [X, Yand Z] are dependent on the interpretation of such agreement, it isbased on the plain meaning of the provisions thereof in light of the[Delaware Limited Liability Company Act/Delaware LimitedPartnership Act].

C. Authorization and Issuance of Stock.

A purchase of stock or other corporate transaction will often require an opinion regardingthe authorization and status of the outstanding shares, substantially as follows:

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The Company’s authorized shares consist of _____ common shares[and ______ preferred shares], of which _____ common shares[and ______ preferred shares] are outstanding. The outstandingshares have been duly authorized and validly issued and are fullypaid and nonassessable.

The purpose of such opinions typically is to assure a purchaser of stock that it isacquiring full shareholder rights to the extent provided by the corporation’s articles ofincorporation and to confirm that party’s relative position with respect to the ownership of thecorporation. The latter goal is sometimes satisfied only by extensive work, and might be moreappropriately met by a direct examination of the stock ledger. It is generally understood that anopinion on the status of a corporation’s stock relates only to corporate law and does not addresscompliance with other laws, such as federal securities laws or state “blue sky” laws. Glazer§ 10.2.1. It also appears to be understood that the typical stock opinion does not cover fiduciaryduty questions that might be used to challenge the validity of an issuance of stock. Id.

1. Elements of Opinion. The elements of the stock opinion are as follows:

a. Authorized and Outstanding Shares. The phrase “authorizedshares consist of _____ common shares, of which _____ common shares are outstanding”addresses two issues. The first clause is a statement of the number and types of sharesauthorized for issuance under the corporation’s articles of incorporation. The second clause is astatement as to shares that corporate records indicate are held by the corporation’s shareholders.Some commentators believe that, because the issue is primarily factual, lawyers are justified inrefusing to include this statement as part of a capitalization opinion. See, e.g., Glazer § 10.10.However, the opinion has been generally accepted as appropriate to request and deliver. See,e.g., Georgia Report, supra p. 3, at 104. Where counsel is not opining on valid legal issuance ofthe shares, the due diligence necessary to give an “outstanding” opinion may be an unjustifiedexpense. An alternative is to have the opinion recipient rely on a certificate from the transferagent or corporate secretary. Audited financial statements are also an alternative source ofconfirmation.

b. Duly Authorized. The opinion that shares are “duly authorized”generally means that stock with the attributes indicated is permitted under the applicablecorporate statutes and under the corporation’s charter documents and bylaws. The opinion givershould confirm that the necessary corporate steps were taken to create the shares, whether byoriginal articles of incorporation or amendment, and that such provisions continue in effect.However, the opinion does not cover the adequacy of disclosure information contained in proxymaterials or whether directors or shareholders acted in accordance with their fiduciaryobligations in authorizing creation or issuance of the shares. The opinion giver should confirmthat the articles of incorporation describe the attributes of the shares as required by applicablecorporate law, and that sufficient authorized shares of the appropriate class were available at thetime of issuance, and that appropriate board action occurred.

A capital structure consisting of a single class of common stock normally poses noproblems from a due authorization standpoint. More complex structures involving lengthypreferred stock provisions will necessarily require additional time and effort on the part of the

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opining attorney to confirm that the stated characteristics of the stock are permitted by theapplicable corporate statutes.

If a corporation acquires its own shares, such shares constitute authorized but unissuedshares, except where the articles of incorporation prohibit the reissue of acquired shares, inwhich case the articles of incorporation are to be amended to reduce the number of authorizedshares by the number of shares acquired.

c. Validly Issued. The opinion that stock has been “validly issued”is understood to mean that (i) the corporation has sold or otherwise transferred the shares incompliance with its constituent documents and applicable corporate law, and (ii) the corporationhas not taken any action, nor failed to take action, where the result would be to deprive the sharesof their validly issued status. In rendering the “validly issued” opinion, counsel should besatisfied that the preemptive rights (if any) of existing shareholders have been complied with orare not applicable with respect to the issuance in question. Also, in rendering this opinion, theopining attorney should be satisfied that the issuance of shares is not void or voidable due to lackof a required regulatory approval by a state or federal authority. Id. The issuance of sharespursuant to mergers, recapitalizations and similar transactions may also require additionaldiligence on the part of the opining attorney to confirm that all shareholder votes and othercorporate requirements have been satisfied. It is worth noting that Delaware recently added to itscorporations law Section 204 setting out procedures to ratify stock issuances that failed to fullyconform to the statute.

The “validly issued” opinion would also generally require confirmation that thecorporation’s board of directors determined that the consideration received or to be received forthe shares is adequate or fair. Note, however, that in many states it is not necessary for the boardof directors to state its determination of the specific fair value to the corporation of non-cashconsideration paid for shares. See Model Business Corporation Act, § 6.2).

d. Fully Paid and Nonassessable. The opinion that shares are “fullypaid and nonassessable” requires consideration both of the terms for the particular issuance ofshares and the applicable corporate statutes. The “fully paid” opinion has been defined to meanthat “the consideration required by the resolution or other corporate action authorizing theirissuance has been received in full by the Company, and that the consideration received satisfiedthe requirements, if any, of state corporation law and the requirements, if any, in the Company’scharter and bylaws.” TriBar Report at 650. The lawful forms of consideration are specified inthe relevant corporation statute. In rendering this opinion, counsel typically treats actual receiptof the consideration for shares as a question of fact and relies as to such receipt uponrepresentations and warranties contained in the applicable agreement or upon an officer’scertificate to that effect. Stock dividends and stock splits, however, for which no consideration isactually received, may require additional diligence to confirm that appropriate transfers from thecorporation’s surplus accounts to stated capital have been made. See TriBar Report at 651;Glazer, §§ 10.7 – 10.8. In some instances, particularly with older companies, it may beimpossible for the corporation or the opining attorney accurately to determine whether theappropriate consideration was received. In such cases, the opining attorney should make anappropriate exception.

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The “nonassessable” opinion is intended to confirm that the holder of the shares is notliable for further assessment in connection with the purchase or ownership of the shares. Manycorporate statutes confirm that shares issued or disposed of for the statutorily permitted types ofconsideration are nonassessable. The Model Business Corporation Act, § 6.21, provides that“when the corporation receives the consideration for which the board of directors authorized theissuance of shares, the shares issued therefor are fully paid and nonassessable.” State bankinglaws, however, often contain provisions for the assessment of a bank’s shareholders in the eventof an impairment of capital.

In opining that shares are “fully paid and nonassessable,” the opining attorney must becareful to take into account the corporation code requirements at the time the shares were issued.

e. Stock Ownership and Transfer. In addition to the “dulyauthorized, validly issued, fully paid and nonassessable” opinion, the lawyer may also be askedto opine that the stock of a corporation “is owned of record by the individuals and in the amountsset forth in the stock purchase agreement, free of any restrictions on transfer or otherencumbrances, and that endorsement and delivery of the certificates representing the stock willpass all of the right, title and interest of the selling shareholders to the purchaser, free and clearof any adverse claim or encumbrance.” This opinion can be inordinately expensive because itrequires a careful examination of the stock certificates and stock books of the corporation andreliance by the opining attorney on representations in the stock purchase agreement regardingownership and ability to transfer the shares or on a separate shareholder certification to theattorney. Also, because Article 8 of the Uniform Commercial Code, provides that a “protectedpurchaser” of stock (a purchaser for value in good faith without “notice” of an adverse claim)acquires the rights of the seller and acquires the stock free of any adverse claim, unless thepurchaser has been a party to a fraud or illegality affecting the stock. UCC §§ 25-8-301, 302 and25-201(25), this opinion is not, at least as to the transfer of title, necessary. Further, because ofthese provisions, there is usually a need for a key assumption that the purchaser is a “bona fidepurchaser”. The opining attorney will also want to verify that no legends giving notice of ashareholders’ agreement or other agreement that might restrict transfer of the stock appear on thecertificates for the shares being sold. If any such legend does appear, the attorney must verifythat the restrictions of the agreement (such as a right of first refusal) have been satisfied orwaived.

2. Diligence Procedures. The diligence procedures for the stock opinionmight include the following:

(i) Review relevant provisions of the state businesscorporations code in effect at the time the shares wereissued.

(ii) Review the corporation’s articles of incorporation,including all amendments, as certified by the Secretary ofState.

(iii) Review the corporation’s bylaws as certified by anappropriate officer, in effect on all relevant dates.

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(iv) Review actions of the board of directors to determineprocedural and substantive compliance with the then-existing provisions of the Business Corporation Act, thecorporation’s articles of incorporation and bylaws.

(v) If shareholder action is relevant, review shareholders’actions for the same purpose as stated in (iv) above.

(vi) Obtain officers’ certificates as to factual matters, e.g.,delivery of shares pursuant to authorizing resolutions andreceipt of required consideration.

The opining attorney should also consider confirming that the certificates for outstandingshares are in the proper form required by the applicative Business Corporation Act, that theyrepresent the proper number of shares, were executed by the appropriate corporate officers andwere in fact delivered. Since delivery of the share certificates is a factual matter, the opiningattorney should be able to rely on a certificate of a corporate officer as to the delivery. Absentfacts to the contrary, the opining attorney should be able properly to rely on the corporation’sstock ledger as to the delivery of shares and the number of shares delivered.

As noted above, a comprehensive corporate stock opinion can impose significant duediligence burdens on the opining attorney, particularly if corporate records have been lost or areincomplete. The opinion recipient should recognize that the expense of such an investigationmay far outweigh its value. Unless evidence exists to the contrary, the opining attorney may beable to give the opinion, despite incomplete records, based on a presumption of regularityrelating to the shares, as described above, but such an opinion has little value and is sometimesnot used.

D. Corporate or LLC Power and Corporate or LLC Authority Opinion.

This opinion may take the following form:

The Company has the corporate power to enter into and performthe Agreement; the execution, delivery and performance of theAgreement has been duly authorized by all necessary corporateaction on the part of the Company, and the Agreement has beenduly executed and delivered by the Company.

For an LLC, the typical formulation would be:

The Company has the power under the Company’s Articles ofOrganization, Operating Agreement and the _____ LimitedLiability Company Act to execute, deliver and perform itsobligations under the Transaction Documents.

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1. Elements of Opinions.

a. Corporate Power. The language “has the corporate power toenter into and perform the Agreement” generally means that the transaction will not be enjoinedor otherwise challenged by the corporation or third parties on the ground that the actions takenby the corporation in connection with the transaction were ultra vires, i.e., beyond thecorporation’s statutory and charter powers. This opinion was more relevant when chartersexplicitly stated a corporation’s purposes and powers, but is less needed today because statutesand charters are more broadly written. Unless a corporation’s articles of incorporation limit itscorporate purposes, there are no limits under the Model Business Corporation Act on acorporation’s statutory purposes unless it is engaged in an unlawful business, and, unless thearticles or the Business Corporation Act specifically provides otherwise, there are no limits onthe exercise of a corporation’s powers other than those limitations on the powers of anindividual.

For an LLC, this opinion speaks solely to legal capacity and power under applicablestatutes and the LLC’s articles of organization and operating agreement. The opinion addressesthe Company’s capacity to take action, not matters such as statutory provisions that subject theCompany to fines or penalties or require it to obtain licenses or permits. Contrast this languageto the opinion language typically used for a corporation, referring to the “corporate power” toexecute, deliver and perform obligations.

The “corporate power” opinion does not mean that proper authorization of the transactionhas been obtained (that is typically dealt with in a different portion of the opinion). It also doesnot mean that the transaction is permitted by, or does not violate, any other agreement to whichthe entity may be a party, or that it is enforceable generally (these are also dealt with in otherportions of the opinion). The opinion also does not mean that the corporation has obtainedlicenses, permits or approvals necessary for the lawful conduct of its business.

The opining attorney must review carefully (a) the relevant Business Corporation Act,(b) any other applicable law which limits or defines the power of the entity (for example, apartnership cannot engage in the commercial banking business), and (c) the articles ofincorporation and bylaws of the corporation, all to determine that all necessary authority existsand that there are no restrictions on the entity. Although not commonly encountered in practice,it is possible that a corporation could be organized solely for a specific purpose (e.g.,manufacturing widgets) and therefore would not have the power to engage in any other business.

If the opinion applies to an entity other than a corporation, e.g., a partnership or LLC,then the opining attorney must carefully review the governing documents (partnership agreementor operating agreement) to determine whether any restrictions have been placed on the scope ofpermitted activities by the entity that would restrict its ability to engage in transactions of thenature covered by the opinion.

In an opinion addressing the power and authority of an LLC, the opining attorney mustreview the LLC’s Articles of Organization or Articles of Formation, and in most cases itsoperating agreement, to determine whether the LLC is member-managed or manager-managed.The opining attorney should then review the Articles of Organization and the LLC’s Operating

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Agreement to determine that all required procedures have been followed to authorize themember-managers or managers to act on behalf of the LLC to execute and deliver the transactiondocuments and to perform their terms.

b. Authorization, Execution, Delivery and Performance. Thesecond element of this opinion, regarding the authorization, execution, delivery and performanceof the agreement, is intended to assure the opinion recipient that the corporation has taken allcorporate action necessary, in accordance with the applicable statute. its articles of incorporation,its bylaws and its corporate resolutions, to approve or ratify the execution and delivery of thetransaction documents and all performance by the corporation under such documents. In givingthis opinion, the attorney should generally also be able to give the opinion that the corporationhas been “duly organized.” If the due organization opinion cannot be given, then appropriateassumptions and disclosures must be made. See, e.g., Freestate Land Corp. v. Bostetter, 292Md. 570 (1982) for a discussion of an attorney’s inability to give the “due organization” opinionunder these circumstances.

Typically, the opining attorney will rely upon a certificate signed by an authorized agentof the corporation to which is attached copies of the governing documents, an incumbencycertificate as to the identity of the individuals acting on behalf of the corporation and resolutionsauthorizing the specific transaction. The attorney generally may rely upon such a certificate, orthe substantial equivalent, without the need to investigate and confirm whether the meeting atwhich the resolutions were adopted was duly called pursuant to proper notice, attended by aquorum, etc. Of course, the opining attorney should make clear in the opinion that the opinion isgiven exclusively in reliance on the certificate.

2. Diligence Procedures. The opinion regarding proper authorization,execution and delivery can require substantial due diligence. See, e.g., Jacobs, supra p. 12, at6-8 through 6-35, 7-17 through 7-20.4 and 7-43 through 7-60. The diligence procedures mightinclude the following:

(i) Review of corporation’s articles of incorporation, certifiedby the Secretary of State, and bylaws, certified bycorporation’s secretary.

(ii) Review of resolutions authorizing execution and deliveryof the transaction documents and performance by thecorporation of the documents.

(iii) Review of an officer’s certificate certifying that theresolutions relied on are true, complete and correct andhave not been amended or revoked since the date adopted,the incumbency of officers and directors and otherappropriate matters.

(iv) Review of the applicable statute as to the corporateauthority.

(v) Review of final execution copy of transaction documents.

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Although limited liability companies are promoted as requiring fewer formalities thancorporations, in practice opinion givers are not comfortable without such evidences of formalauthorization.

E. Remedies Opinion.

Virtually all transactional opinions will include an opinion that:

The Agreement constitutes the legal, valid and binding obligationof the Company, enforceable against the Company in accordancewith its terms.

This opinion will be given subject to several exceptions. The remedies opinion isobviously one of the most important parts of the opinion, since it focuses on whether rights of theparties are enforceable as stated in the transaction documents. Accordingly, the remediesopinion often receives the most time and attention in the opinion rendering process. In someinstances, especially in real estate transactions, this opinion is directly qualified rather than beinggiven as as shown above and then qualified.

1. Elements of Opinion.

a. Meaning of Terms. There are a number of variations on theremedies opinion. Some attorneys feel that the terms “valid and binding” and “enforceable”have the same meaning and that the word “enforceable” may therefore be deleted with no realconsequence. Other lawyers feel that the term “enforceable” should be used but that thelanguage “in accordance with its terms” is inappropriate because such language may imply thatthe discretionary remedy of specific performance will be available.

The remedies opinion generally means (i) a valid contract has been formed; (ii) a remedywill be available with respect to each promise or undertaking of the Company in the Agreementor such promise or undertaking will otherwise be given effect and (iii) each remedy expresslyprovided for in the Agreement will be given effect as stated. As a prerequisite to these legalconclusions, the opinion giver must first be satisfied that a contract has been formed underapplicable law (See Accord § 10(a)), that the Company validly exists in its jurisdiction oforganization and that all actions or approvals by the Company necessary to bind the Companyhave been taken or obtained. See Accord § 10.4. The remedies opinion should not coverenforceability against parties to the transaction documents other than the Company.

b. Exceptions.

(1) Insolvency; Equitable Principles. Twowell accepted exceptions to the remedies opinion are the insolvency exceptionand the equitable principles limitation. These typically qualify the remedieslanguage by a further statement to the effect that enforceability of the particularagreement is subject to or limited “by applicable bankruptcy, insolvency,reorganization, fraudulent conveyance, moratorium or other similar state orfederal debtor relief laws from time to time in effect and which affect theenforcement of creditors’ rights or the collection of debtors’ obligations in

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general, and by general principles of equity (including the possible unavailabilityof specific performance or injunctive relief), regardless of whether suchenforceability is considered in a proceeding in equity or at law.”

The reason for the insolvency exception is obvious, since bankruptcy, insolvency orsimilar laws may under certain circumstances release a party from performance of its obligations.The insolvency exception does not include laws that affect creditors generally but are not of acharacter similar to those listed in the exception. Thus, for example, usury laws or a provision ofthe Uniform Commercial Code that would affect the enforceability of a provision in theagreement but is not grounded in bankruptcy, insolvency or similar concepts would not beincluded in the bankruptcy exception and should be specifically referenced in the opinion letter,if applicable.

The equitable principles limitation is intended to address the possible unavailability ofdiscretionary equitable remedies, such as specific performance and injunctive relief. Theexception also is intended to limit application of the opinion to situations where a court, byapplying equitable principles, concludes that certain contractual provisions are unconscionable orunreasonable and therefore unenforceable. See TriBar Report at 625. If an opinion recipientwho has only been damaged insignificantly by an immaterial breach seeks to enforce a remedy,the equitable principles limitation also encompasses the refusal of a court to reward that party’soverreaching pursuit of disproportionate relief.

The need for the exception for fraudulent conveyance doctrines was recently affirmed inthe in re Tousa decision (Bankruptcy, SD Fla 2009), which aggressively applied such doctrinesand refused to honor a “savings” clause.

(2) Penalty Provisions. In addition to thegeneral equitable principles limitation, the opining attorney may want to considerspecific additional exceptions regarding contractual provisions that may bedeemed unreasonable or a penalty and thus unenforceable. For example, anexception is sometimes seen in financing opinions to the effect that no opinion isexpressed with regard to enforceability of provisions in the loan agreement thatimposes penalties, forfeitures, late payment charges or an increase in rate ofinterest upon occurrence of an event of default. The opining attorney may alsowant to negotiate a carve-out in the remedies opinion for other provisions of theoperative documents, such as noncompetition agreements, or perhaps issue areasoned opinion regarding such matters.

(3) Practical Realization. The “practicalrealization” or “principal benefits” exceptions to the remedies opinion have alsoseen use in recent years in financing opinions, particularly in real estatetransactions. As noted above, such an opinion remains somewhat vague and itsmeaning is subject of debate See also Accord §§ 10, 11, 12, 13 and 14.

(4) Recovery of Attorneys Fees. One exceptionfrequently seen in the remedies opinions of attorneys in some states is anexception for a statute that contains required procedures and limitations relating to

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the recovery of attorneys’ fees upon any note, conditional sale contract or otherevidence of indebtedness. Such statutes may for example, require that the holderof a note, upon maturity or in the event of a default, notify the maker in advanceof an intent to enforce the attorneys’ fees provision and then afford the maker fivedays from the mailing of such notice in which to pay the outstanding balancewithout the attorneys’ fees.

(5) Waiver of Jury Trial. Some states haveenacted laws that render unenforceable any contract provision requiring a party towaive his right to a jury trial. Most opinion givers include an exception to theremedies opinion for “waiver of procedural, substantive or constitutional rights,including without limitation the waiver of the right to a jury trial . . ..”

(6) Fraudulent Conveyance. Of concern tomany lawyers is the fraudulent conveyance opinion, particularly in the context ofa leveraged buyout. Section 12 of the Accord provides that the standardbankruptcy exception includes a fraudulent conveyance limitation. There hasdeveloped a general consensus that legal opinions can reasonably excludefraudulent conveyance questions, due to the factual issues involved concerningmatters such as solvency, capitalization and ability to pay debts as they mature.See ABA Guidelines § I.B.(1) (fraudulent transfer opinion should not berequested absent “special and compelling circumstances”). In this regard, theopinion recipient considering whether to seek a fraudulent transfer opinion shouldbear in mind that if the opining attorney assumes all of the key factual issuesrelating to whether a fraudulent transfer has occurred, the opinion will be of noreal benefit.

(7) Venue. Some states have enacted laws thatprovide that any provision in any contract entered into in that state that requiresthe prosecution of any action that arises from the contract to be instituted or heardin another state is against public policy and is void and unenforceable.

(8) Usury. In financing transactions, theopinion giver will want to check not only relevant statutes, but also case law tosee if usury savings clauses have been declared to be unenforceable. If theAgreement also contains a provision providing for interest at a “default rate,”which rate is higher than the rate otherwise stipulated in the Agreement, it may belikely, but not certain, that the courts of that state will enforce such a provision.The law disfavors penalties, and it is possible that interest at the “default rate”may be held to be an unenforceable penalty, to the extent such rate exceeds therate applicable prior to a default under the Agreement.

(9) Guaranties. Many attorneys include intheir opinions regarding enforceability of guaranties a qualification stating thatenforcement of the guaranty may be limited by statutory provisions relating to thedischarge of guarantors under certain circumstances. These statutes generallyprovide for the discharge of a guarantor, to the extent he or she is prejudiced, if

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the creditor, after notice from the guarantor, fails to use all reasonable diligence torecover against the principal obligor and to realize upon any collateral held for theobligation. Most lender-prepared documents have elaborate waivers of suchrights, and some jurisdictions have statutory or case law provisions limiting thevalidity of such waivers. Some attorneys therefore believe it necessary to explainthese statutes in detail, as well as the possible consequences of noncompliancewith the statutes.

For guaranties of individuals, the following exception should also be considered: “Weexpress no opinion as to the enforceability of any provision of the Guaranty against the estate ofa deceased or incompetent guarantor to the extent of advances made after such guarantor’s deathor incompetency.”

(10) Indemnification Agreements. Indemnifica-tion sections of an agreement may be held invalid as contrary to public policy.Indemnification may also be limited under certain securities laws, as noted above.Furthermore, contractual agreements providing for the indemnification of officersand directors may be limited by the corporation statute.

(11) Noncompetition Agreements. Noncompe-tition agreements are by their nature restrictive and are carefully scrutinized bythe courts. In general, restrictive covenants are valid and enforceable only if theyare supported by adequate consideration, are reasonable and not against publicpolicy. in some other states, notably California, such agreements are valid only inconnection with the sale of a business. Since a determination of enforceabilitydepends upon the particular facts and the application of a reasonableness standardby the court, attorneys should exclude such agreements or covenants from theremedies opinion. In the event that an enforceability opinion on a noncompetitionagreement is specifically negotiated, the opinion giver should give a reasonedopinion and recite the applicable facts underlying the opinion.

2. Diligence Procedures. The attorney rendering a remedies opinion willneed to analyze each transaction document in light of the issues described above. The attorneywill also need to review applicable legal requirements for the formation of a contract andwhether those requirements have been complied with. The attorney should also review theCompany’s governing documents, resolutions of directors authorizing the transaction andexecution, delivery and performance of the transaction documents, an officer’s certificateconfirming the absence of dissolution and non-abandonment by the corporation, an incumbencycertificate, and relevant laws and statutes bearing upon whether a contract has been formed underapplicable law and whether necessary actions or approvals have been taken or obtained.

F. No Breach or Default Opinion.

This opinion may take the following format:

The execution and delivery by the Company of the TransactionDocuments and the performance by the Company of its obligations

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therein (i) do not violate the Articles of Incorporation or Bylaws ofthe Company, (ii) do not breach or result in a default under anyOther Agreement, and (iii) do not violate the terms of any CourtOrder. For purposes hereof, (A) the term “Other Agreement”means those agreements listed on [the disclosure schedule to theAgreement] [the officer’s certificate attached hereto] and (B) theterm “Court Order” means any judicial or administrative judgment,order, decree or arbitral decision that names the Company and isspecifically directed to it or its properties and that is listed on [thedisclosure schedule to the Agreement] [the officer’s certificateattached hereto] or that is known to us.

1. Elements of Opinion.

a. Terminology. Often the terms “violate,” “breach” and “default”are used interchangeably. Care should be taken with these terms. It would not appear that acorporation could be “in default” under its articles of incorporation or bylaws, but it could causea “violation” of its articles of incorporation or bylaws.

Similarly, the term “conflict” often appears in the “no breach or default” opinion inconjunction with, or in lieu of, the terms “breach,” “violation” or “default.” The meaning of theterm “conflict” does not appear to be as precise as the other terms when used in this context. Theopinion that the company’s performance of its obligations under the transaction documents doesnot “conflict” with its other agreements could be taken to refer to potentially adverseconsequences that do not rise to the level of a “breach” or “default” under the agreement. SeeAccord, Commentary, § 15.2.

b. No Violation of Articles and Bylaws. The “no breach or default”opinion is typically in two components: the first confirms that execution and delivery by thecompany of the transaction documents and performance by the company of its obligations underthe transaction documents will not violate the company’s charter or bylaws. This portion of theopinion is fairly straightforward; there is typically little need for the opinion giver to use expressor implied qualifications or exceptions. The opinion is, to a certain extent, duplicative of theopinion that the agreement has been “duly authorized” but it is customarily requested anddelivered.

c. No Breach or Default Under Agreements. The secondcomponent of the “no breach or default” opinion is that the execution by the company of thetransaction documents and performance of its obligations thereunder does not breach or cause adefault under specified agreements to which the company is a party. In rendering this opinion,the opinion giver should focus on three principal issues: (i) what agreements are intended to becovered by the opinion, (ii) what types of breaches or defaults are intended to be addressed, and(iii) to the extent the subject agreements are governed by laws other than the laws of the opiniongiver’s state, what law is applicable?

In identifying the agreements covered, the preferred approach is to list the agreementsthat are subject to review in an officer’s certificate or otherwise expressly to cross reference the

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agreements to an external source, e.g., a schedule to an acquisition agreement. The Accord takesthis approach, limiting coverage of the “no breach or default” opinion to other agreements thatare “specifically identified, or those that can be identified in a manner that is described, in theOpinion Letter.” Accord § 15(a).

Another approach is to limit the opinion to agreements that are “known” to the opiniongiver. This may be a common approach, but it raises a number of interpretive issues regardingthe scope of inquiry comprehended by that term. The Accord discourages use of knowledgereferences in most cases. Accord, Commentary, § 6.4. When limiting the “no breach or default”opinion to “known” agreements, the opinion giver should consider the meaning of the knowledgelimitation. Often the opinion giver will rely upon a certificate of an officer of the companyidentifying the contracts by which the company is bound. The opinion giver should then reviewthe contracts so identified.

A third approach is to limit the subject agreements to “material” agreements. Unless theterm “material” is defined, however, this qualification can create uncertainty regarding exactlywhich agreements are material in the context of the company’s business. Again, the opiniongiver should consider including a definition of “material” (e.g., only agreements involving morethan a specified dollar amount). See, e.g., ABA Guidelines § 3.2.

Occasionally, an opinion is requested not only on agreements “to which the company is aparty” but also on agreements “by which the company is bound” or “to which the company or itsproperty is subject.” These phrases could bring within the scope of the opinion agreements towhich the company is not a party such as preincorporation agreements, unauthorized actions byofficers having apparent authority, etc. These phrases typically should not be included.

The opinion giver must also address the issue of what kinds of violations, breaches ordefaults should be noted. Generally, only violations that are readily ascertainable from the faceof the agreement are deemed addressed by the opinion. See, e.g., Glazer § 16.3.5. The opiniongiver, however, should also consider whether covenants of a financial or numerical nature orrequiring computation should be addressed. If it is obvious from the face of the document thatconsummation of the transaction will violate a financial covenant in a company’s agreement,then the opinion giver may have a duty to bring the possible violation to the attention of theopinion recipient. The safe course is to obtain a certificate from the company’s chief financialofficer or outside accountants with respect to covenants of a financial or numerical nature, andexpressly to state in the opinion that as to such covenants, the opinion giver relied upon thatcertificate. Another approach is to disclaim any analysis of such covenants.

Many of the subject agreements may be governed by the laws of a state other than theone covered in the opinion. In those instances, the opinion giver is often entitled to assume thatthe terms of the agreement have the meaning that would be ascribed to them by the courts of itshome state. Of course, if the opinion giver knows that the other state interprets an importantterm differently, disclosure to the opinion recipient may be required. See, e.g., Accord,Commentary, § 15.6. Thus some opinion givers purport only to consider the “plain meaning” ofa reviewed agreement.

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The opinion giver may be asked to opine that the Company’s execution and delivery ofthe Agreement and performance of its obligations therein will not, under the Company’s OtherAgreements, result in the creation or imposition of any lien on the Company’s properties orassets. The same concerns cited above regarding identification of the “Other Agreements” applyto the “no creation of lien” opinion. The opinion giver should limit the opinion to liens createdunder Other Agreements, in order to avoid delivering an opinion on liens arising by operation oflaw. That opinion involves primarily a factual determination.

d. No Violation of Court Orders. The third component of thisopinion is that the Company’s execution, delivery and performance of the Agreement does notviolate the terms of any Court Orders. The opinion on Court Orders covers only judgments,orders, decrees or arbitral decisions that name the Company and are specifically directed to it orits properties. Accord § 15.7. The term Court Order includes all directives of the courts,including temporary restraining orders, injunctions and judgments. The definition of CourtOrders includes not only those specifically identified in the disclosure schedule to the Agreementor in an officer’s certificate, but also those that are known to the opinion giver. Many firms willlimit this opinion to the state in which they practice, even if they do a search, because they maynot be confident they know all the places to search in another state. This is a distinction from theopinion covering Other Agreements. The universe of Court Orders is not likely to be as large asthe universe of Other Agreements. The opinion may also cover decisions of arbitrators that areidentified in the manner described above or known to the opinion giver and that are specificallydirected to the Company or its properties.

2. Knowledge Qualification. The “knowledge limitation” may be expressedin a variety of ways (e.g., “to our knowledge,” “known to us”). Unfortunately, the commentatorsare not in agreement as to the meanings of the various phrases except to conclude that thephrases indicate there is some lack of factual investigation or knowledge by the opining lawyer.Further, one phrase, “nothing has come to our attention,” can be ambiguous in meaning. It istypically limited to a specific circumstance such as a public offering of securities where theopinion describes the context in which the phrase is to be understood. See TriBar Report at 618,fn 58. The opining attorney should elaborate on the meaning of whatever phrase is used as aknowledge limitation in the opinion, specifying what actual investigations were undertaken, ifany, or stating that such opinion is based solely on a review of certain specified documents andofficers’ certificates. See also Accord § 6-A (defining “actual knowledge” as a “consciousawareness” by the opining attorney).

As a general rule, the knowledge of each lawyer in a firm is attributed to the firm as awhole, and facts contained in written material in the firm’s files could be deemed to be part ofthe knowledge of the firm. Therefore, the size of the law firm of the opining attorney may alsoneed to be taken into consideration in expressing the knowledge limitation of a particularopinion. In this regard, it may be possible to negotiate a limitation based upon the actualknowledge of the opining attorney or of a limited group of lawyers working for a client on aparticular matter. Many large firms require such a limitation because of the practical limitationson, and expense of, such a search. See Accord § 6-B (discussing the concepts of “PrimaryLawyers” and “Primary Lawyer Group”) and the discussion of the Dean Foods case below.

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3. Diligence Procedures. The opinion giver should review a copy of thecompany’s articles of incorporation and all amendments, certified as complete by the Secretaryof State as of a current date. The opinion giver should also review a copy of the company’sbylaws, certified to be complete and unamended as of a current date by the secretary or otherauthorized officer of the company.

Depending on how the documents are identified for purposes of the opinion (whetherthrough an officer’s certificate or otherwise), the opinion giver should review those documentsfor any violations, breaches or defaults that would result from the company’s execution, deliveryand performance of the transaction documents. If the opinion giver sets forth a materialitystandard or incorporates such a standard by reference to another transaction document, theopinion giver should obtain an officer’s certificate stating that the list of agreements attached is acomplete and accurate list of all agreements which meet the materiality standard. The opiniongiver should consider obtaining an accountant’s certificate with respect to the company’scompliance with financial or numerical covenants.

The opinion giver should obtain a certificate from the Company’s officers listing allapplicable judgments, orders, decrees and arbitral decisions. The opinion giver should alsoconsider a search to obtain copies of any judgments, orders, decrees and arbitral decisionsconstituting Court Orders from the appropriate court or regulatory authority, and review theircontents to determine whether the Company’s execution, delivery and performance of theAgreement would violate any of their terms, or may limit the opinion to judgments with which itis already familiar.

G. No Violation of Law Opinion.

This opinion might take the following form:

The execution and delivery by the Company of the TransactionDocuments, and performance by the Company of its obligationstherein, do not violate applicable provisions of statutory laws orregulations.

1. Elements of the Opinion. The suggested form of the “no violation oflaw” opinion is limited to “statutory laws or regulations” of the applicable jurisdiction. Mostopinion letters will specify that they are limited to the laws of [a particular state] and, possibly,federal laws; thus, this opinion would apply to statutes and regulations of the United States and[the state of ___________]. The opinion generally should not be interpreted to cover commonlaw doctrines, such as those of contract or tort, that have not been enacted by a legislature.Glazer § 13.2.2.3.

The opinion giver should consider whether exception should be made for laws notintended to be covered within the scope of the opinion, e.g., securities laws and antitrust laws.The Accord (§ 19) omits numerous specialized laws from the reach of the opinion. The opiniongiver should consider whether the laws listed in the Accord, and possibly other laws, should beexpressly excluded. The opinion giver should particularly give special consideration totransactions involving companies within regulated industries. The exception for laws not

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intended to be included within the scope of the opinion could be set forth in a broader“exceptions” provision. By limiting the overall opinion to the laws of a particular state, it isgenerally viewed that the “no violation of law” opinion does not address local laws, includingordinances, zoning restrictions, rules and regulations adopted by counties and municipalities. Toavoid any doubt, however, the opinion giver often will include an express exception for locallaws.

Often, opinion givers will limit the “no violation of law” opinion with an appropriateknowledge qualification, e.g., “ . . . applicable provisions of statutory laws or regulations knownto us.” The knowledge limitation could apply only to the facts on which the opinion is based,e.g., “we have not become aware of any information which would lead us to believe that . . .,” orit could qualify the “statutory laws or regulations” to which the opinion refers. Sometimes thisis accomplished by a statement that a firm has considered only “laws and regulations which inour experience are normally applicable to transactions of the type covered by this opinion.” SeeGlazer § 13.2.2.6.

Another approach is to limit the “no violation of law” opinion to “material” violations orto laws which are “material” to the company and its business, or both. This approach raisesquestions regarding the definition of the concept of “materiality.” Technically, in order todetermine whether a law or a specific violation is material, opining counsel would first have toidentify all applicable laws and all violations of those laws. Id.

The “no violation of law” opinion typically addresses either the “consummation” of thetransactions by the client, or the “performance by the client of its obligations” under thetransaction documents. Reference to “consummation” of the transactions limits the opinion tothe company’s obligations up to and including the closing. Id. § 13.2.3. Reference to thecompany’s “performance” of its obligations under the transaction documents includes thecompany’s post-closing obligations under those documents.

The “no violation of law” opinion is generally based on the opinion giver’s general legalknowledge and familiarity with the company and its business, combined with such specificresearch and review as may be appropriate under the circumstances. If the opinion giver is notexperienced in an area of law that is clearly relevant to the transaction, he or she should considerobtaining assistance from counsel qualified in that area, or carve out that area from the opinion’scoverage with an express exception. See ABA Guidelines § 2.2. In certain circumstances, itmay be advisable to obtain an officer’s certificate regarding factual representations, but that isnot typically necessary.

2. Diligence Procedures. In determining whether the transaction violatesany applicable laws, the opinion giver should give specific regard to whether the companyoperates in an industry that is regulated, such as banking, trucking, securities investments orbroadcasting. If the company’s activities involve areas of the law in which the opinion giver isnot experienced, the opinion giver should either make an express exception or consult withsomeone who has such expertise.

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H. General Compliance with Laws.

The attorney may be asked to opine that the client is in compliance with all applicablelaws, rules and regulations. Such an opinion may require a very broad factual and legalinvestigation, covering such specialized areas as environmental law (see below) and licensingissues. This opinion in many instances simply cannot be given and should not be requested, dueto time constraints and the diligence and expense that would necessarily be involved. Accord§ 16, Commentary ¶ 16.5; ABA Guidelines § 4.3. If such an opinion is given, it should beappropriately qualified to make the scope of the attorney’s investigation clear. The opinionshould also be qualified to make clear the laws that it addresses and those that it does not.

I. Environmental Law Opinions.

In view of the significance of compliance with environmental laws, the attorneysinvolved in transactions should be prepared to spend significant time assessing environmentalconcerns, whether or not the attorney issues a legal opinion with respect to such matters. Mostfirms, however, in lieu of issuing a formal legal opinion on environmental matters, will agree toassist the other party and its counsel in obtaining the desired degree of comfort from third-partysources, such as environmental consultants, engineers and regulatory authorities. Sinceextensive reliance on such sources would necessarily be required in an environmental opinion,the attorney can argue that the opinion itself would have very little meaning and that, in view ofthe time and expense that would be involved, the opinion should not be requested. If an opinionis nevertheless required, however, both its scope and the degree of investigation involved shouldbe made absolutely clear. If an environmental law opinion is not being rendered, the attorneymay want to consider a specific disclaimer to confirm affirmatively that the attorney is notopining on environmental issues. A comprehensive treatment of environmental law opinions isoutside the scope of this outline.

J. Regulatory Approval Opinion.

Depending on the nature of the client’s business, it may be appropriate to request andgive an opinion that “no approval, authorization or other action by, or filing with, anygovernmental authority is required in connection with the execution and delivery by thecorporation of the agreement.” This language, or an opinion that includes authorizationsrequired by the “consummation of the transactions contemplated by the agreement,” relates toauthorizations required by the agreement at or before the closing. However, if the opinionincludes authorizations required for the “performance” of the agreement, post-closingauthorizations should also be included and additional assumptions may be necessary. If thecorporation is engaged in a regulated industry, the attorney should consider referencingspecifically any approval from the regulatory authority that has or has not been obtained.

K. Statement of No Litigation.

Lawyers are less frequently than in prior decades, but still sometimes asked to opineregarding litigation involving a party to a transaction. Rather than a legal opinion involving legalanalyses and conclusions, this confirmation is more appropriately phrased as a statement of fact.A typical statement is often requested as follows:

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To our knowledge, there is no action, suit or proceeding at law orin equity or by or before any governmental instrumentality oragency or arbitral body, now pending or overtly threatened againstthe Company, except as listed on [the disclosure schedule to theAgreement] [the officer’s certificate attached hereto].

Although such an opinion is considered not to be an opinion about the merits of a claimor the probable outcome,3 the opining lawyer should go through the same analysis that would beundertaken in preparing a letter to auditors to be sure that the judgments regarding materiality aresound. The attorney will also want to consider obtaining appropriate officers’ certificates tosupport the opinion. If the lawyer is general counsel for the client, the requesting party mayargue that the “to our knowledge” qualification should be deleted with respect to pendingactions. Conversely, special counsel may try to strengthen the qualification by stating that theopinion is based solely on certificates provided by the officers of the company or, alternatively,that the opinion is based solely upon a specifically described investigation by the opining lawyer.For example, the lawyer could specifically identify public records that have been reviewed orcould state that no public records have been reviewed. The opinion should be clear, however, asto whether public records have been examined. See Accord § 17 (opining attorney is notexpected to review court or other public records; counsel need only check its own “litigationdocket” or functional equivalent).

Dean Foods was a 2004 decision of a Massachusetts trial court which held a law firmliable for over $9 million in damages and costs because it gave a standard “no litigation”paragraph as part of a legal opinion. The facts are somewhat complicated and we set forth belowpart of the discussion in an article by Donald W. Glazier and Arthur Norman Field found inBusiness Law Today:

“In December 2004, the Massachusetts Business Court, following a bench trial thatlasted several days, held a Boston law firm liable to the recipient of a closing opinion — theacquiring company in an acquisition — for more than $9 million in damages and costs. DeanFoods v. Pappathanasi, 2004 WL 3019442 (Mass. Super.). The basis for liability was negligentmisrepresentation stemming from the firm's giving a no- litigation opinion without disclosing inthe opinion a matter the court found the firm should have disclosed.”

As Messrs. Field and Glazer noted:

“Decisions in legal opinion cases that go beyond the summaryjudgment stage are unusual. A decision after a full trial thatanalyzes the issues in a sophisticated way (as Dean Foods did) isvirtually unique. While having no formal precedential value, DeanFoods has been receiving widespread attention from lawyers acrossthe country and is likely to be influential in future litigation.”

3 The opinion giver ordinarily should not be requested to express an opinion on the expected outcome of pending orthreatened litigation. ABA Guidelines § 4.7.

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The court’s opinion extensively quoted from the firm’s internal memoranda, but thesalient parts were summarized by Field and Glazer as follows:

“At the closing of an acquisition, the acquiring company(Acquirer) received an opinion from the law firm representing theacquired company (the Company) that to the firm's knowledge,without investigation, except as disclosed in a schedule to theacquisition agreement: (a) there was no investigation of any kindpending or threatened against the Company and (b) the Companywas not "subject to any... continuing" governmental investigation.

‘The opinion also stated that the firm had no knowledge that any ofthe Company's representations on which it was relying wereuntrue. Three months after the closing, the Company received a"target letter" from the U.S. attorney. Ultimately, it pleaded guiltyto aiding and abetting tax fraud and paid a $7.2 million fine. TheAcquirer sued the firm for negligent misrepresentation in issuingthe opinion…..

“The transactional lawyer who prepared the opinion and thesecond-partner opinion reviewer had no prior relationship with theCompany…..”

One problem the case presents is that the partners with the long-time relationship did noteven appear to know that on opinion was being given. This clearly points out some problemsfirms can avoid in giving opinions. To continue with the summary from Field and Glazer:

“The transactional lawyer knew that the U.S. attorney hadsubpoenaed documents from the Company relating to theCustomer in connection with a grand jury investigation intowhether the Customer had committed tax fraud. While preparing adisclosure schedule to the acquisition agreement, he spoke brieflyto the litigator who had represented the Company in that matterand at the request of the Company had looked into whether theCompany had aided the fraud.

“The litigator advised him that he did not believe the Company hadaided the Customer's fraud. In addition, he gave him his"guesstimate" that the investigation "had probably gone away, with[the Customer] paying a civil fine with heavy penalties for taxevasion."

On the basis of what he heard from the litigator, the transactionallawyer recommended to the chief executive officer of theCompany that to be safe the matter should be listed in thedisclosure schedule to the agreement. The chief executive officerresponded that … he did not want to list the matter unless

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disclosure was clearly required. The transactional lawyer advisedhim that disclosure was not required, and the matter was notdisclosed in the schedule.”

The opinion letter in Dean Foods appears to have expressly disclaimed responsibility forconducting an independent factual investigation. Field and Glazer point out that “The judgeviewed this limitation as irrelevant.” [emphasis added]. They go on to point out that: “In lightof what the transactional lawyer knew, the judge concluded that customary diligence requiredthat the transactional lawyer do more before giving the opinion than simply rely on theconclusion of someone who did not even know that an opinion was being given and whoseadvice was directed to the question of whether the Company should disclose a matter in aschedule to the agreement.”

The Dean Foods judge also noted in his decision that the firm did not follow its ownwritten procedures in preparing the opinion.

Field and Glazer offer several lessons from Dean Foods (a full discussion of their“lessons” is found in the July/August 2005 issue of Business Law Today). Among the “lessons”they discuss are the following:

“1. The standard to which lawyers are held in preparing opinions iscustomary diligence.” They believe this is likely to be a national,not a local standard.

“2. Opinion preparers need to be familiar with the literature onclosing opinions. The Dean Foods decision is replete withreferences to the TriBar Opinion Committee's 1998 report, "Third-Party Closing Opinions," and quotes extensively from that report.”While their view may be influenced by the fact that Field andGlazer were co-reporters for that document, the fact is that lawfirms across the country tend to consider the report and itssuccessors in negotiating opinions.

We should also note in this context that a California appellate court held that a law firmcould be liable for misrepresentations when it prepared the client’s disclosure schedules. Thecase apparently settled before trial, and the issue does not directly relate to opinions, but is worthremembering, especially because the knowledge gained during schedule preparation may verywell be relevant to an opinion.

The request for a “no litigation” opinion inevitably raises a host of other issues:

is the statement limited to litigation affecting the transaction?

will the opinion giver make conclusions about the materiality of thelitigation?

what is “threatened” or “overtly threatened” litigation, and is there adistinction?

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will “investigations” be covered? (Even before Dean Foods some firmsrefused to include this concept on the basis that the term is too vagueand undefined)

Attempts to limit the scope of the “no litigation” paragraph may not always be successful.As Field and Glazer noted:

“While limitations in an opinion letter may be helpful in defendingan opinion, if those preparing a no- litigation opinion haveknowledge (or even a suspicion) of relevant and adverseinformation, limitations may provide false comfort. Theknowledge they have may be judged later to have raised a red flag,requiring further inquiry into the facts before deciding whether amatter calls for disclosure.”

The aftermath of Dean Foods has seen two trends developing in legal opinions:

Some firms refuse to give “no litigation” or other “knowledge-based”statements, on the basis that these statements of fact and are not really legalconclusions. This is widely resisted by the lending community and firms whoregularly represent borrowers find it difficult to maintain this position,especially if the borrower is a regular client. However many firms limit theopinion to a statement about litigation in which they are involved.

Firms who do give this type of opinion have increasingly turned towardspecifically naming the lawyers in the firm whose knowledge is covered bythe opinion. Sample language follows:

“Statements in this opinion which are qualified by the expression "toour knowledge", "of which we have knowledge", "known to us" or"we have no reason to believe" or other expressions of like import arelimited solely to the current actual knowledge of _____ and _______(and expressly exclude the knowledge of any other person in this Firmand any constructive or imputed knowledge of any information,whether by reason of our representation of the Loan Parties orotherwise). We have not undertaken any independent investigation todetermine the accuracy of any such statement, and any limited inquiryundertaken by us during the preparation of this opinion should not beregarded as such an investigation.”

While some institutions, including a couple of New York investment banks, continue topress for statements about the knowledge of any lawyer in the firm, the limitation to specificlawyers has for the most part been accepted. Many firms follow the practice of naming onlysome of the senior lawyers on the transaction in this statement, and have increasingly tended notto refer to “lawyers devoting substantive attention to the transaction” or “lawyers activelyinvolved in representation of the Company in connection with this transaction.”

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This issue becomes increasingly important for larger firms. In a small firm it might intheory be possible to inquire of every lawyer in the firm whether they had any knowledge aboutlitigation or about other items with respect to which factual statements are sometimes requested.In a large, multi-office firm, there is no practical way to do this. When lawyers in several officesmay have performed services for the client, even the possibility of sending emails to all personswho billed time to a client matter frequently runs into problems of timing and cost. Lawyersmay be out of their office and away from email on vacation or otherwise unavailable to answer.If a large number of lawyers must be contacted, the cost to do so becomes prohibitive, and in theview of clients, far outweighs the benefit to the receiver of the opinion. In a related area, itshould be noted that law firms giving what are commonly referred to as “audit letters” (these arein fact opinions) in connection with a corporation’s financial statements will sometimesexplicitly state that they have only made inquiry of lawyers who, according to the firm records,spent more than five hours of billable time with respect to the particular client.

By disclosing all legal proceedings in a disclosure schedule or officer’s certificate, theobligation of determining the materiality of any particular legal proceeding is avoided. Thedisadvantage of the disclosure schedule or officer’s certificate is that it may become so extensiveas to make the statement cumbersome. If this occurs, then the opinion recipient and the opiniongiver may reduce the list of legal proceedings to material legal proceedings, provided they canestablish objective criteria for legal proceedings that are required to be disclosed.

If the knowledge limitation noted above is included, this opinion does not imply a reviewof court dockets has been made unless specifically so stated in the opinion.

There may also be some uncertainty regarding what constitutes “threatened” litigation.Under one interpretation, threatened litigation means “that a potential claimant has manifested tothe client an awareness of and present intention to assert a possible claim or assessment unlessthe likelihood of litigation (or of settlement when litigation would normally be avoided) isconsidered remote.” ABA Statement of Policy Regarding Lawyers’ Responses to Auditors’Requests for Information, 31 Bus. Law. 1709 (1976). The phrase “overtly threatened” probablyincludes both oral and written threats. This phrase does not include unasserted claims that mightarise from an existing state of facts but which are better left to the audit (either formal orinformal) process.

L. UCC Opinions.

Lenders often ask for an opinion regarding the status of the lender’s security interest inpersonal property pledged by the borrower. Some of the more frequently requested opinions arediscussed below. A complete treatment of UCC opinions, however, is outside the scope of thispaper.

Title Opinions. The opining lawyer should not give an opinion regarding the borrower’stitle to personal property, since title to personal property, in contrast to real property, is notverifiable from the public records (other than motor vehicles and other property with certificatesof title). The opining attorney should also resist giving an opinion as to priority of securityinterests in personal property inasmuch as UCC-11 Search Requests cannot disclose prior filingsin a different jurisdiction or against the borrower under the borrower’s previous name. If an

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opinion is nonetheless required, the following is a possible format for an opinion regarding theabsence of liens against the client’s personal property:

There are no liens, mortgages, encumbrances, security interests,charges or other rights of third parties of record with respect topersonal property of the Company located in ________________against which such an interest may be perfected by the filing of aUCC financing statement against the Company in the office of theSecretary of State of [State] or the office of the Register of Deedsof _______________ County, [State], except as set forth inExhibit A to the Agreement. With respect to filings made in theoffice of the Secretary of State of [State], this opinion is basedsolely upon the response of the office of the Secretary of State of[State] dated _________________, to our search request.

1. Creation of the Security Interest. An opinion concerning the securityinterest initially addresses the lender’s concern as to whether its security interest has “attached,”i.e., when it would be enforceable against the borrower (also sometimes referred to as “creation”opinion). Enforceability (and therefore attachment) requires that (1) value has been given;(2) the debtor has rights in the collateral or the power to transfer rights in the collateral to asecured party; and (3) one of several other conditions has been met (generally, that the debtor hasauthenticated a security agreement that provides a description of the collateral). UCC § 9-203.

Because the second element of attachment, “rights in the collateral,” involves a factualinquiry as to the Borrower’s title to personal property, which cannot be verified by the attorney,attorneys often avoid opining as to attachment, but instead opine as to the “creation” of a securityinterest in the “Borrower’s right, title and interest in the collateral.”

The opinion that a security agreement is sufficient to create a security interest means thatall steps necessary to bring a security interest into existence under applicable commercial,corporate and contract law have been taken, such as:

(i) the borrower has “authenticated”4 a security agreement5

that provides a description of the collateral; and

(ii) value has been given (i.e., funds advanced, a line of credithas become immediately available or a bindingcommitment to extend funds has been made).

In order to give the “sufficient to create” opinion, the attorney will need to be satisfiedthat the above requirements have been met.

4 Authenticate means “to sign” or to execute or otherwise adopt a symbol, or encrypt or similarly process a “record”… with the present intent to identify the person and adopt or accept a “record.” UCC § 9-102(7).

5 A “security agreement” is “an agreement that creates or provides for a security interest.” UCC § 9-102 (73).

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2. Perfection of Security Interest. The opinion on the perfection of thesecurity interest addresses the lender’s concern that its security interest is enforceable againstthird parties, including (subject to exceptions) a trustee in bankruptcy. Such an opinionconfirms:

(i) that the correct method has been utilized to perfect thesecurity interest;

(ii) where the method of perfection involves the filing offinancing statements, that:

(1) the financing statements comply withrequirements of Article 9 of the applicable UCC;

(2) the borrower has taken all steps requiredunder applicable corporate law and the borrower’s charter and bylaws to authorizethe execution and filing of such financing statements; and

(3) the financing statements have been filed inthe proper places required under the UCC;

(iii) where the collateral consists of fixtures, a fixture filing hasbeen made in the applicable real estate filing system;

(iv) the security interest has not been terminated and has notlapsed; and

(v) that steps required to perfect the security interest have beentaken in each jurisdiction in which such steps are required,which requires a determination of where the collateral islocated.

UCC Security Interest Opinions at 670-674, 676-678. The perfection opinion necessarilyrequires that the attorney be satisfied that the above-listed requirements have been satisfied.

The attorney delivering a perfection opinion must also consider what law governs theperfection of the security interest in the collateral. UCC § 9-301 sets out mandatory choice oflaw rules for perfection and the effect of perfection of UCC security interests. In formulating itsopinion request, the opinion recipient needs to consider all of the jurisdictions in which it willrequire an opinion on perfection. Formerly, this decision ordinarily was made on a practicalbasis that stressed the value of the collateral in each jurisdiction. UCC Security InterestOpinions, supra at 377. Under the “new” Article 9, the general rule (subject to certainexceptions) is that the law governing perfection of security interests in both tangible andintangible collateral is the law of the jurisdiction of the debtor’s location. UCC § 9-301(1).6

6 Location is determined under UCC § 9-307.

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Because the UCC requirements regarding the additional steps that are necessary to betaken in order to maintain the perfection of security interests over time and in other events arewell understood, express reference to them in the opinion letter is considered unnecessary.Similarly, where a security interest is perfected by possession, it is evident that eventssubsequent to the date of the opinion letter (e.g., failure of the secured party, its agent or a baileewith notice, to maintain possession of collateral) can affect continued perfection adversely.Accordingly, it is generally unnecessary either expressly to assume that the secured party willmaintain continuous possession in the same location or to identify the risks to the secured party ifpossession is not maintained.

3. Priority of Security Interest. A lender is also concerned as to thepriority of its security interest in the event that it must enforce its security interest against thirdparties. Attorneys generally avoid opining as to the priority of security interests because thefactual inquiry required to determine not only the time of perfection of the lender’s securityinterest but those of competing claimants in an unlimited number of jurisdictions may beunreasonable, impossible or unjustifiable in light of the expense of providing such an opinion.This task is especially complicated where the collateral consists of many types of personalproperty located in various counties and states. The opining attorney must consider not onlycompeting security interests perfected by filings under the UCC, but also security interests thatmay be perfected under the UCC without filing (such as security interests in instruments that areperfected by the secured party’s possession of the collateral). Additionally, the opining attorneymust consider liens that are based on statutes other than the UCC, such as tax, judgment,mechanics’ and landlord liens. Such statutory liens may have a priority over previouslyperfected security interests under the UCC. The opining attorney should also be aware thatcompeting liens and security interests may not be discoverable through a UCC search. Not onlymay federal, state and local liens be filed separately from UCC financing statements, but it ispossible that a financing statement may be mis-indexed, lost, filed in a jurisdiction where theproperty or debtor was formerly located, filed against a prior owner of the collateral or containerrors in the debtor’s name. Because of the complications associated with the priority opinion, ifthe opinion is nevertheless given, with all of the necessary qualifications and exceptions, theopinion may be so qualified as to render it virtually incomprehensible to most readers, therebydefeating its purpose and making it of marginal benefit to the recipient.

For the reasons cited above and because of the expense, opinion recipients often do notinsist on UCC priority opinions where perfection occurs by filing a financing statement,especially in loan transactions where the lender’s counsel ordered the search reports.

M. Real Estate Opinions.

A lawyer typically does not opine as to the client’s title to real property in commercialtransactions because title insurance is usually provided for that purpose. Where title insurance isinvolved, the opinion often states that “we express no opinion as to the Company’s title to anyreal property or as to the priority of the lien of the Deed of Trust, since we understand that youare relying upon a policy of title insurance with respect to such matters.” However, if titleinsurance will not be obtained, it may be appropriate for the attorney to give such an opinion. Ifso, the opinion should be in the form of the typical real estate title opinion (which is outside thescope of this outline except for Appendix B), with appropriate qualifications and exceptions.

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N. Choice of Law Opinions.

Where an out-of-state lender or foreign corporation is involved in a transaction, theoperative agreements may provide that the contractual relationship between the parties will begoverned by the laws of another state. Some states follow the doctrine of lex loci celebrationis(also known as lex loci contractus), which provides that a contract will be governed by thesubstantive law of the state where the last act required to make a binding contract takes place.Other states and the Restatement (Second) of Conflicts of Law have adopted the “reasonablerelation” test so as to permit non-consumer contracting parties to choose the applicable state lawas long as the transaction bears a relation to such state.

Uniform Commercial Code § 1-301 contains the UCC’s basic choice of law provision—which is based on the reasonable relation concept and provides as follows:

(c) Except as otherwise provided in this section:

(1) an agreement by parties to a domestic transaction that any or allof their rights and obligations are to be determined by the law ofthis State or of another State is effective, whether or not thetransaction bears a relation to the State designated; and

(2) an agreement by parties to an international transaction that anyor all of their rights and obligations are to be determined by thelaw of this State or of another State or country is effective, whetheror not the transaction bears a relation to the State or countrydesignated.

Accordingly, subject to certain exceptions set out in UCC § 1-301, such as the perfectionprovisions of Article 9 of the UCC, when a non-consumer transaction governed by the UCCbears a relation to one state and also to some other state or nation, the parties may agree that thelaw of either jurisdiction will govern their contract.7

The simplest solution to a choice of law issue is to avoid the opinion altogether byexplaining the state of the law to the opinion recipient and excluding from the opinion any matterrelating to the choice of law provision in the transaction documents. Another approach is todetermine the concerns of the opinion recipient and attempt to address them without having togive an opinion on the choice of law provisions. For example, if a lender is concerned with theusury laws, it is generally very easy to give a usury opinion in a commercial loan transaction. Itmay also be possible to restructure the facts of the transaction so that a court would give moreweight to the choice of law provision. For example, with sufficient other factors present, if thetransaction is closed in the jurisdiction designated in the choice of law provision in the loandocuments, the choice of law provision would stand a better chance of enforcement by a court.

7 Under the revised UCC, the choice of law provision in a consumer transaction must bear a “reasonable relation” tothe State or nation designated and application of that jurisdiction’s law may not deprive the consumer of theprotection of consumer-protective laws that would otherwise apply. UCC 1-301(e).

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Another solution is to have counsel in each jurisdiction that has contacts with thetransaction assume that the law of his or her state will apply and then opine as to theenforceability of the documents based upon that assumption. In such a situation, no attorney isrequired to opine as to the enforceability of a choice of law provision, but the lender or otherparty to the transaction is assured that the agreements involved are enforceable regardless ofwhich state’s laws apply: Under this approach, the following qualification could be made to theremedies opinion:

For purposes of our opinions, we have disregarded the choice oflaw provision in the Agreement and, instead, have assumed that theAgreement is governed exclusively by the internal, substantivelaws and judicial interpretations of the State of [___________].

VII. INTERNAL REVIEW PROCEDURES

Legal opinions in acquisitions and other business transactions present special challengesfor law firms, especially larger law firms. One challenge is in keeping up with currentdevelopments in the customs and practices regarding legal opinions. As can be seen from thisoutline, in recent years there has been a flurry of activity on the subject and it becomes more andmore difficult for each individual lawyer to stay abreast of the developing norms and standardsfor legal opinions while also keeping up with substantive developments in his or her ownpractice area.

Another challenge is to maintain consistency and standard opinion practices within thelaw firm. In larger firms, lawyers regularly preparing and negotiating similar types of opinionsmay rarely have occasion to work together and compare their wisdom and experience.Individual lawyers in the same firm may develop their own opinion forms and practices. Thiscan result in great embarrassment, if not liability risk, such as when Partner A refuses to providea “standard” opinion that Partner B regularly requires opposing counsel to provide.

Another challenge is to maintain “quality control,” to see that each opinion letter given inthe name of the firm meets professional standards and creates no grounds for professionalliability.

In response to these challenges, most large law firms and many smaller or medium-sizedfirms have adopted special internal policies and procedures for giving legal opinions. Manyhave also established “opinion committees” with various degrees of responsibility.

Described below are some possible opinion policies, procedures and systems that a lawfirm could implement in response to the challenges discussed above.

A. Policy Statements.

To have an effective policy on legal opinions, the firm must develop, articulate andcommunicate some sort of statement of that policy. Many firms have a “Practice Manual,” and astatement of opinion policies and procedures is an apt subject for inclusion in such a manual.

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As lawyers often tell their clients, policies and procedures should not be adopted unlessthey will be followed, so care should be taken to adopt policies and procedures that are expectedto be followed. Failure to do so could result in liability to the firm and the opining attorney.

Such statements typically (a) define the types of opinions covered, (b) prescribe who mayissue opinions in the name of the firm, (c) prescribe fundamental formalities of the opinion letter,such as dating, format, limitations as to applicable law, etc., (d) prescribe the procedure forreview of opinions by other lawyers or committees and the responsibilities of the reviewinglawyers, and (e) prescribe the documentation to be maintained in support of the opinion as wellas procedures for retention of copies of the opinion itself.

B. Review Procedures.

It may be required that at least a specified number of lawyers in the firm or a specifiednumber of partners, or a designated group, be involved in preparing and issuing the opinion. Ifso, it is important to prescribe the scope of review by the reviewing lawyers.

Even in firms that have no formal peer review, one partner may consult another ondifficult or close questions. Peer review has a number of benefits: it insulates the attorney incharge of the transaction to some extent against pressure by the client to give an overly broadopinion; it is an excellent shield against unreasonable demands by lawyers on the other sidewhile the opinion’s content is being negotiated and it should lessen the chances of success of anysuit attacking the opinion as false. See Jacobs, p. 12, at Intro-43. When the reviewer is a singlepartner rather than a committee, the partner should regularly practice in the area of law to whichthe opinion relates, he or she should have had no contact with the transaction other than in areviewing capacity, and he or she should have no relationship with the client or any other partyto the transaction. Id.

No matter who is the reviewer, the extent of the review should be the same. It shouldinclude a careful reading of the document(s) to which the opinion relates, an examination of thedue diligence memorandum and other backup information, confirmation that the opinion is inproper form and a particular focus on any unusual clauses in the agreement or in the opinion.

C. Opinion Forms.

The firm, or practice groups or committees within a firm, could develop forms forrecurring types of opinions and establish policies as to opinion language and format.

D. Central Opinion Files.

The firm could establish a central opinion file, to which copies of all or specifiedopinions would be sent to be available for review by other attorneys in the firm as a resource forpreparing subsequent opinions and “comparing notes.” In an era where most firms keep theirfiles in electronic form, this can be seen as duplicative, but many firms use software that allowssearching for opinions and supporting documents.

LEGAL_US_W # 64534214.5 49

E. Opinion Committee.

The firm could establish an opinion committee, with special responsibilities relating toopinion policies and procedures. Those responsibilities could range from acting as an “advisoryboard” for individual lawyers requesting advice and assistance as to particular opinion matters, toactually reviewing all or specified types of opinions. Within that range of responsibilities couldbe a charge to keep up with and report to the firm on matters of opinion practice, to monitoropinion practices and procedures, to develop opinion forms and to act as final arbiter onquestions of opinion policy and opinion language.

LEGAL_US_W # 64534214.5 1

APPENDIX A

OPINION REPORTS AND TREATISES

“Classic” Opinion Reports

Third-Party “Closing” OpinionsTriBar Opinion Committee, 53 Bus. Law. 591 (February 1998)

Special Report of the TriBar Opinion Committee: U.C.C. Security Interest Opinions – RevisedArticle 9TriBar Opinion Committee, 58 Bus. Law. 1449 (August 2003)

Special Report of the TriBar Opinion Committee: The Remedies Opinion – Deciding When toInclude Exceptions and AssumptionsTriBar Opinion Committee, 59 Bus. Law. 1483 (August 2004)

Special Report by the TriBar Opinion Committee: Opinions in the Bankruptcy Context: RatingAgency, Structured Financing, and Chapter 11 TransactionsTriBar Opinion Committee, 46 Bus. Law. 717 (February 1991)

Supplemental TriBar LLC Opinion Report: Opinions on LLC Membership InterestsThe Business Lawyer, Vol 66, August 2011

Legal Opinion PrinciplesCommittee on Legal Opinions, ABA Section of Business Law, 53 Bus. Law. 831 (May 1998)

Guidelines for the Preparation of Closing Opinions (“ABA Guidelines”)Committee on Legal Opinions, ABA Section of Business Law, 57 Bus. Law. 875 (February 2002)

Closing Opinions of Inside CounselCommittee on Legal Opinions, ABA Section of Business Law, 58 Bus. Law. 1127 (May 2003)

Legal Opinions in SEC FilingsTask Force on Securities Law Opinions, ABA Section of Business Law, 59 Bus. Law. 1505(August 2004)

Negative Assurance in Securities OfferingsTask Force on Securities Law Opinions, ABA Section of Business Law, 59 Bus. Law. 1513(August 2004)

Law Office Opinion PracticesCommittee on Legal Opinions, ABA Section of Business Law, 60 Bus. Law 327 (November 2004)

California Opinion Reports(2002 Compilation by California State Bar of Previous Reports)

LEGAL_US_W # 64534214.5 2

Third Party Legal Opinion ReportABA Business Law Section (the “Accord”), 47 Business Lawyer (November 1991)

Treatises:

“Field & Smith”Field & Smith Legal Opinion in Business Transactions (PLI 2nd ed. 2008)

“Glazer & FitzGibbon” or “Glazer”Donald W. Glazer, Scott FitzGibbon & Steven O. Weise, Glazer & FitzGibbon on LegalOpinions: Drafting, Interpreting and Supporting Closing Opinions in Business Transactions (3rded. 2008)

Recently Published Reports:

Taken from Spring 2014 Newsletter of the Legal Opinion Committee of the ABA Business LawSection Committee

ABA Business Law Section 2007 No Registration Opinions – Subcommittee on Securities LawOpinions

2009 Effect of FIN 48 – Committee on Audit Responses

2009 Negative Assurance – Subcommittee on Securities LawOpinions

2010 Sample Opinion – Committee on Mergers and Acquisitions

2011 Diligence Memoranda – Task Force on Diligence Memoranda

2013 Survey of Office Practices – Committee on Legal Opinions

Legal Opinions in SEC Filings (Update) – Subcommittee onSecurities Law Opinions

Revised Handbook – Committee on Audit Responses

ABA Real PropertySection (and others)

2012 Real Estate Finance Opinion Report of 2012

Arizona 2004 Comprehensive Report

California 2007 Remedies Opinion Report Update

2007 Comprehensive Report Update

2009 Venture Capital Opinions

2010 Sample Opinion

LEGAL_US_W # 64534214.5 3

Florida 2011 Comprehensive Report Update

City of London 2011 Guide

Maryland 2009 Restatement of 2007 Comprehensive Report

Michigan 2009 Statement

2010 Report

New York 2009 Substantive Consolidation – Bar of the City of New York

2012 Tax Opinions in Registered Offerings – New York State BarAssociation Tax Section

North Carolina 2009 Supplement to Comprehensive Report

Pennsylvania 2007 Update

Tennessee 2011 Report

Texas 2006 Supplement Regarding Opinions on IndemnificationProvisions

2009 Supplement Regarding ABA Principles and Guidelines

2012 Supplement Regarding Entity Status, Power and AuthorityOpinions

2013 Supplement Regarding Changes to Good Standing Procedures

TriBar 2008 Preferred Stock

2011 Secondary Sales of Securities

2011 LLC Membership Interests

2013 Choice of Law

Multiple Bar Associations 2008 Customary Practice Statement

TABLE OF CONTENTSPage

LEGAL_US_W # 64534214.5 i

I. INTRODUCTION ............................................................................................................. 1

II. PURPOSES OF OPINION ................................................................................................ 2

III. NEGOTIATING THE OPINION...................................................................................... 3

A. Best to Begin Early ................................................................................................ 3

B. Understand the Context of the Transaction ........................................................... 3

C. Understand Standard Terms and Practices ............................................................ 3

D. Be Reasonable........................................................................................................ 4

E. Understand Your Role ........................................................................................... 4

F. Understand the Costs ............................................................................................. 5

G. Use Available Resources ....................................................................................... 5

IV. ETHICAL ISSUES ............................................................................................................ 6

A. General ................................................................................................................... 6

B. Competence to Render Opinion............................................................................. 6

C. Client Confidentiality............................................................................................. 8

D. Lawyer’s Conduct.................................................................................................. 8

V. FRAMEWORK OF THE OPINION ................................................................................. 9

A. Date ........................................................................................................................ 9

B. Reliance on Opinion .............................................................................................. 9

C. Role of Counsel/Description of the Transaction.................................................. 12

D. Reason for the Opinion ........................................................................................ 12

E. Definitions............................................................................................................ 12

F. Documentary Examination Assumptions ............................................................ 12

G. Other Assumptions............................................................................................... 13

H. Qualifications....................................................................................................... 14

I. Back-Up Certificates and Reviewed Documents................................................. 15

J. Reference to Local Counsel ................................................................................. 15

K. Expression of the Opinion ................................................................................... 16

L. Opinion Signature ................................................................................................ 16

TABLE OF CONTENTS(continued)

Page

LEGAL_US_W # 64534214.5 ii

VI. SPECIFIC OPINIONS AND DILIGENCE PROCEDURES.......................................... 16

A. Corporate Status Opinions ................................................................................... 17

B. LLC Status Opinions............................................................................................ 20

C. Authorization and Issuance of Stock ................................................................... 21

D. Corporate or LLC Power and Corporate or LLC Authority Opinion .................. 25

E. Remedies Opinion................................................................................................ 28

F. No Breach or Default Opinion............................................................................. 31

G. No Violation of Law Opinion.............................................................................. 35

H. General Compliance with Laws........................................................................... 37

I. Environmental Law Opinions .............................................................................. 37

J. Regulatory Approval Opinion.............................................................................. 37

K. Statement of No Litigation................................................................................... 37

L. UCC Opinions...................................................................................................... 42

M. Real Estate Opinions............................................................................................ 45

N. Choice of Law Opinions ...................................................................................... 46

VII. INTERNAL REVIEW PROCEDURES.......................................................................... 47

A. Policy Statements................................................................................................. 47

B. Review Procedures............................................................................................... 48

C. Opinion Forms ..................................................................................................... 48

D. Central Opinion Files........................................................................................... 48

E. Opinion Committee.............................................................................................. 49

APPENDIX A................................................................OPINION REPORTS AND TREATISES

PROFESSIONAL EDUCATION BROADCAST NETWORK

Speaker Contact Information

OPINION LETTERS IN REAL ESTATE

Richard Goldberg

Ballard Spahr, LLP - Philadelphia

(o) (215) 864-8730

(m) (215) 837-8401

goldbergr@ballardspahr.com

John S. Hollyfield

Norton Rose Fulbright, LLP - Houston

(o) (713) 651-3717

john.hollyfield@nortonrosefulbright.com