The Legal Ethics of Drafting Legal Opinions: Outside Counsel Perspective

The Legal Ethics of Drafting Legal Opinions: Outside Counsel Perspective

1.    Written Legal Opinions

a. Introduction

 i. Written legal opinions delivered on behalf of clients of a law firm should represent the institutional conclusion of the law firm with regard to the matter covered, subject to any expressly stated reservations. The reputation of the law firm should support its opinions. As a result, the law firm should require that institutionalized procedures are followed when written opinions are issued.

ii. A law firm should provide for the review of certain opinions prior to issuance. Many law firms establish opinion review committees to consult with attorneys on the form, substance and content of written opinions. Guidelines should be adopted that clearly define what type of opinions are subject to review procedures and what those procedures are

 b. Determining what is and is not a written legal opinion

i.                    Traditionally, a written legal opinion is in letter form, and is signed either by a member of the law firm or by the law firm itself. A signature by the law firm is preferable, because it is consistent with the position that the opinion represents the institutional conclusion of the law firm.

ii.                   Any writing can contain a legal opinion. For example, written memoranda often contain legal opinions.

iii.                 Whether or not an e-mail contains a legal opinion has not been adequately addressed by many law firms. 1 This outline is based upon the author’s personal experiences derived from over 30 years’ experience in the private practice of law. Unless the context otherwise indicates, the outline assumes that the attorney issuing the opinion is in private practice. However, many of the observations regarding outside lawyers also apply to in-house counsel. This outline does not constitute legal advice regarding the preparation and issuance of legal opinions.

 (1) Conclusions of law stated in an e-mail may rise to the level of an opinion, but may not be rendered with the care and procedures that should be applied to an opinion.

(2) The informality of drafting and sending an e-mail may lead the sender to make statements that would not be made in letter form. Attorneys should take the same care in drafting e-mail as they do in hard copy letters and memoranda.

(3) Attorneys should take greater care in determining the content of an e-mail, particularly if it contains a legal opinion, because of the ease and informality with which e-mail is circulated.

iv. Legal opinions involve conclusions of law as applied to facts that are either known to or assumed by the law firm.

(1) Legal opinions usually should not contain representations of fact by the law firm.

(2) If an opinion does make a representation of fact, it should be carefully drafted so that the representation is within the expertise of the law firm.

(a) Opinions should not be given if they are outside the expertise of the law firm.

(b) If an opinion is given by Law Firm A to Law Firm B, and Law Firm B relies on Law Firm A’s opinion in issuing an opinion to a third party, then Law Firm B should ascertain that Law Firm A had sufficient expertise to issue the opinion.

(3) The issue of whether a lawyer has adequate expertise to issue a representation of facts often arises with respect to valuation. This arises frequently in the context of Stark Law, Anti-Kickback Statute and tax-exempt status opinions, where fair market value is often a critical factor in the analysis.

(4) Attention should also be given to adequate due diligence and documentation in the file to support the representation of fact.

c. Signing the written legal opinion

i. Law firms have varying policies. Some law firms permit opinions to be signed only by partners or shareholders. Other firms permit any licensed attorney to sign an opinion.

ii. The author believes that the best policy is for a formal opinion to be signed by the law firm, and not an individual, to emphasize that the opinion represents the institutional conclusion of the law firm.

iv.                E-mail raises special concerns relating to signature. Signatures can be attached, but law firm policy is often silent regarding signing and issuance of opinions in e-mail form.

d. Unwritten legal opinions

i. A legal opinion can also be delivered verbally. Care should be taken in verbally expressing legal opinions.

ii. It is often difficult to document later the precise nature of a verbal opinion, because memories will differ and fade, and notes may be inaccurate.

iii.When a particularly sensitive matter is being discussed, it may be appropriate for an attorney to confirm the advice in written form, to minimize disagreements regarding the nature of the advice.

iv. When discussing a matter with a client, it may be appropriate to verbally advise the client whether, and to what extent, you are giving a legal opinion. v.File memoranda may be appropriate in certain circumstances to document an attorney’s contemporaneous understanding of what she or he did or did not say.

v.                  Unwritten opinions often arise in the context of litigation, where an attorney may discuss likelihood of success, possibly in terms of percentages. While verbal communications are essential between attorney and client, severe misunderstandings of what was said can occur years later where the litigation does not turn out well for the client.

e. Liability for negligent opinions:

The Restatement Second, Torts § 299A sets a liability standard for legal advice as the absence of application of “the skill and knowledge normally possessed by members of that profession or trade in good standing.”

 f. In-house legal opinions

 i. In-house counsel frequently issue legal opinions. Questions arise whether in-house legal opinions constitute valid legal opinions or whether they are more in the nature of a representation by the in-house counsel’s employer.

ii. The answer to this question depends in part upon the recipient of the legal opinion. Recipients can include:

 (1) The in-house counsel’s employer

 (2) A third party related to the employer.

(3) A third party unrelated to the employer.

(4) An outside law firm that is asked to rely on the opinion in issuing its own opinion.

iii. The answer to the questions also depends on the nature of the opinion and the purpose for which it is issued.

 iv. For example, in a business transaction, such as a financing, a third party legal opinion is often required. Often, the third parties want the opinion prepared by an outside law firm, which has assets, malpractice insurance and its reputation, all of which are independent of the client. However, in other circumstances a legal opinion from in-house counsel is acceptable to third parties.

iv.One issue to consider in this situation is to what extent does a third party receiving an in-house legal opinion get more protection than it would receive from a representation and warranty in a legal agreement, given that the opinion is issued by the same entity that signed the legal agreement.

vi. Another question is how to reconcile liability created by a legal opinion issued by an in-house counsel with limitations on liability and indemnification contained in the definitive agreement. Does the definitive agreement limit the employer’s exposure under the legal opinion?

vii. Outside counsel are sometimes asked to rely on in-house legal opinions, to reduce the work and expense of the outside counsel. Questions arise as to whether an in-house legal opinion is substantively different from an officer’s certificate. Also, questions arise regarding the ethical ability of an outside law firm to sue a former client for an erroneous opinion on which the outside law firm relied