All About Legal Opinion Letters
A legal opinion letter is an assurance from a lawyer to his or her client, opposing counsel, or some other entity, that a certain set of conditions exists. For example, when buying a home, your closing agent will likely need a legal opinion letter so they can be certain there aren’t any outstanding liens on the property. It is a legal means of assuring that the facts stated in the letter are, indeed, facts.
Legal opinion letters have a purpose in business transactions too. For instance, if you’re considering hiring an individual to work in your business or start a joint venture with them, you might ask them to provide a legal opinion letter assuring that the facts presented in their resume or business plan are true . In this way, you are assured that you’re working with someone honest from the start; or, you know to look elsewhere.
Anyone may request a legal opinion letter (provided they have authority over the legal facts of a situation), but they are most often requested by one party in a business venture or transaction, such as a lender, potential investor, or a buyer. In the case of real estate, they are often requested by a borrower and issued by the escrow/title company managing the closing.
What Makes up a Legal Opinion Letter?
As part of our opinion, we will include the following components:
Introductory Elements. These components do two things: identify the opinion letter recipient, and set out the context for the opinion letter. Recitals. These set out background facts or information which either are relied on or that the opinion is limited to. Legal Analysis. Here a legal opinion letter will answer the question(s) presented, provide an analysis of the assumptions on which the legal opinion letter is based and the scope of the opinion letter. Conclusion. This will include the opinions being rendered. Note: The Appendix may be used to include additional qualifications or assumptions that were unnecessary or impractical to include in the body of the opinion letter. Disclaimers. These serve to limit liability, or make clear what is not covered and therefore outside the scope of the legal opinion letter. This may also include qualifications, and the qualifications may be included in the body of the opinion letter or provided separately as an appendix. Separate Assumption Letter. This only includes assumption.
How to Write a Legal Opinion Letter
A. When is a legal opinion letter appropriate?
As a general rule, an independent registered municipal advisor ("IRMA") that provides advice to an issuer or a conduit borrower with respect to the issuance of municipal securities, whether in a competitive or negotiated sale, or in a bank loan transaction, should provide a legal opinion letter to such issuer or conduit borrower. In doing so, such IRMA will provide comfort to its clients as a result of the receipt of independent legal advice, as opposed to agency role of the manager.
B. How to draft a legal opinion letter
i IRMA’s need to conduct due diligence
In drafting a legal opinion letter and the legal analysis underlying the opinion, the IRMA must conduct some level of due diligence, including review of material transaction documents or legal theories at issue, and then express a legal opinion, preferably in writing or policy, put a process in place to be able to determine the appropriate extent of review for different types of transactions and issues.
ii IRMA’s representation of issuer or conduit borrower
To the extent the comprehensive review and detailed legal analysis is not done, the IRMA should make this clear in its legal opinion letter. There should be clearly stated limitations to the legal opinion letter. To the extent the IRMA does not conduct these procedures, the IRMA should consider its relationship with its client, including (a) forming an opinion that is the result of sufficient review by counsel to the IRMA; or (b) subcontracting on behalf of the IRMA the task of performing all legal opinions to another counsel.
iii Relying on counsel
Further, to the extent the IRMA is not counsel to the issuer or conduit borrower, or, in the case of a bank loan transaction, the IRMA is not lender’s counsel, then the IRMA may rely on the advice of issuer’s counsel if the IRMA has no reason to know that the advice of counsel is erroneous. The IRMA must continue to conduct its own due diligence sufficient to support its own advice in the transaction.
iv Format of the legal opinion letter
If the IRMA and its counsel will be relied upon for a legal opinion letter, it is good practice for the IRMA to confirm that its counsel will draft the document. In addition, while the disclaimer may be presented at the bottom of the letter, the IRMA should also clearly state in the body of the letter that the letter does not constitute a formal legal opinion, but rather, is provided only as factual disclosures by the IRMA, not as legal advice. Further, the confidential nature of the legal opinion letter should also be expressed clearly in the letter and that it should not be circulated generally.
C. How to review a legal opinion letter
I. The IRMA may either review the letter or have counsel review the letter. Selected IRMA’s may also retain counsel to review those sections of the letter for legal soundness. To the extent an IRMA does not have legal counsel available in-house or at hand, the IRMA may have its counsel avail a third party to review the sections of the letter. As a general rule of thumb, the IRMA should ensure that the facts of the transaction and an appropriate opinion are presented while limiting the scope of legal analysis or advice offered in the letter.
Different Types of Legal Opinion Letters
There are several types of legal opinion letters that an attorney may issue depending on the scope, context and underlying transaction. The most commonly requested types of opinions fall into three categories: enforceability, validity and corporate authority.
In an enforceability opinion, the attorney will opine that the contract in question is legally enforceable against a party after its execution. In connection to this type of opinion, the issuing attorney may further provide that the underlying contract is admissible in evidence, free from defenses and duly executed and delivered.
In a validity opinion, the contracting attorney will opine that the agreement to be signed or being signed is valid and has been duly authorized, executed and delivered. A validity opinion may also include an enforceability opinion, discussed immediately above.
A corporate authority opinion is often done in the context of a legal opinion letter related to a corporate transaction for a corporation or other business entity. In such an opinion letter, the issuing attorney will state that a corporation has the authority to execute and be bound by a specific document. An enforceability opinion may be included as a component in this type of opinion.
Legal Opinion Letter Sample
- TITLE. The title contains the subject matter of the opinion letter. I like to use a title along the lines of the following "FAIR PLAY, INC.; BILLING PROTECTION AGREEMENT".
- LISTING THE PARTIES. The opinion letter identifies the parties to the agreement, by name and by type, in both the opening section and the third section. I like to use the following "FAIR PLAY, INC., a corporation organized under the laws of the State of California (hereinafter referred to as the "Corporation"), and BILLING PROTECTION SYSTEMS, a New Jersey corporation (the "Licensee")."
- IDENTIFYING THE AGREEMENT. The opinion letter provides a brief summary of the type of agreement, and summary of key terms of the agreement. For example: below is the third section of the integrative opinion letter template, which lists who are the parties, and briefly describes the agreement terms: Section 2. Opinion . We have reviewed the Agreement and the Exhibits referred to in the Agreement. We have also had discussions with the Corporation’s corporate officers … and other corporate officers, and … We have also conducted a due diligence investigation into the Corporation and the business owned by it. The due diligence investigation included the following: … We believe that we have obtained sufficient legal experience, knowledge, understanding and familiarity with the Corporation and its business, and we have examined the Agreement and the Exhibits referred to in the Agreement, and we have also inquired into the legality and enforceability of the Agreement.
- THE BODY OF THE OPINION. Letter opinions may not consist of mere legal conclusions, but instead should contain background facts about the parties and the transaction.
- CLOSING SECTION, CONCLUSION AND SIGNATURE. The closing section of the legal opinion letter is in writing, signed, and dated by the attorney.
Guidelines for Writing Legal Opinion Letters
Ensuring Clarity
Because legal opinion letters are often used to make significant decisions, it is crucial that they be as clear as possible. Ambiguities in the text can lead to misunderstandings and potentially costly consequences. To enhance clarity:
Be Specific.
Depending on your level of experience and familiarity with the relevant practice area, the temptation may be strong to leave something out. Doing so, however, could cause you to miss something important or worse, leave out a potentially disastrous problem. Spending a few more minutes covering every possible angle is certainly preferable to having to come back later and explain why you forgot to discuss an issue in the first place. Lawyers often feel that they sound repetitive when they explain concepts that seem obvious to them, but the potential for misunderstanding demand that concepts that are potentially relevant be discussed. As long as they are clearly labeled, the chances of confusion are minimal.
If you believe that your client may not be familiar with legal terminology, simplify your discussion of the issues, avoiding unnecessary technical language or jargon.
Be Concise.
Your reader may choose to skim your legal opinion letter in order to find the section of most interest. For this reason, using clear and comprehensive headings is essential. Breaking your discussion into sections by subject matter, and summarizing the most relevant points at the beginning and end of your discussion, if appropriate, will help readers locate their areas of interest quickly. Using lists and short paragraphs will also keep your presentation easy to read.
Use Good Grammar
While the requirements may vary by jurisdiction, proper spelling and good grammar are extremely important. Aside from the fact that most courts require such standards for documents filed in a court proceeding, clients do not tend to appreciate the fact that their lawyers do not know the difference between "there" and "their." Because the cost of a typing error is minimal, it is well worth the price to have your writing perfect before it is distributed to others.
Formatting
The format you use will depend on local customs and personal preference, but the following suggestions are appropriate in most circumstances:
Signature and Closing. The usual notary and signature lines are appropriate, and if you are comfortable with the style of informal closing such as "Sincerely", it is acceptable. You should be careful, however, not to sign legal documents under a non-legal closing such as "Yours Truly". It is suggested that you sign under "Very Truly Yours".
Legal and Ethical Considerations
Confidentiality is one of the many ethical issues lawyers must keep in mind when issuing a legal opinion. ABA Formal Opinion 463 states that a "lawyer must keep confidential the fact that an opinion was requested or that it was provided, except to the extent that the client may disclose these facts." Alternatively, while Rule 1.6(a) of the Model Rules of Professional Conduct ("MRPC") permits a lawyer to reveal or use information covered by the attorney-client privilege only to the extent that the client gives informed consent or the disclosure is impliedly authorized to carry out the representation, Rule 1.6(b)(4) allows for a lawyer to reveal information "to secure legal advice about the lawyer’s compliance with these Rules." The issue of confidentiality can be avoided merely by including broad confidentiality disclaimers both in the inquiry letter and in the opinion itself, and general language disclaimers will be explored further in the next section.
ABA Formal Opinion 479, issued in February 2018, confirms the longstanding understanding that an attorney’s role in preparing legal opinion letters is to render independent judgment on behalf of the client. In other words, as explained in the opinion, "a lawyer’s provision of a legal opinion letter does not disqualify the lawyer from representing the recipient adverse to the client in subsequent litigation." The question of fiduciary duties versus professional rules also has been raised in connection with the preparation of legal opinions and trust agreements. As it is good practice to reassure the client in the legal opinion that he or she has not intentionally created his or her own separate fiduciary that may supersede the lawyer’s opinions in the legal opinion by including specifics, the lawyer may choose to take a little creative license by stating that "other than those specifically stated herein, this opinion is subject to comment 10 to MRPC 1.7" within the legal opinion letter, or by stating that the opinion is based "only as to the facts set forth therein" in the first paragraph of the legal opinion letter .
Additionally, if the lawyer is going to go beyond the four-corners of the lawyer’s record retention obligations, and remain available for future representations to the recipient of the legal opinion, then he or she needs to make sure that the opinions do not inadvertently limit future clients by stating their position on a specific issue, which they may need to state for a client in the future in order to comply with the MRPC. The best way to do this is to recite the facts in detail so that the legal opinion can be distinguishable, and to limit the risks of unintended consequences from later representations by setting forth all of the facts in the legal opinion letter to the legal opinion itself. Assistant Professor Steven C. Bennett of Maurice A. Deane School of Law at Hofstra University, in his treatise, Legal Opinion Letters, 3d Ed. (2016) (Professor Bennett cites to the 2009 edition of this text), cautions against issuing opinions with "too many layers of complexity or problems." Professor Bennett suggests that instead of issuing a separate legal opinion letter for each transaction, the lawyer perhaps should provide an "umbrella" opinion.
Then there are also issues of conflicts of interests between the client and the legal opinion letter, as well as between the client and the recipient of the legal opinion letter to consider. If a lawyer were to represent both the client and recipient of their legal opinion letter as well, the conflicts of interests would need to be explicitly waived in writing as permitted by MRPC 1.7(b). Further, what opinions are permissible will depend upon the issuance of the legal opinion letter in reliance and whose reliance upon the legal opinion letter is intended, and this all ties back to confidentiality, as the identity of the client and the recipient of the opinion letter needs to be kept private from others. Finding creative ways to write the legal opinion so that it comply with the MRPC, and ensuring that both the client’s and recipient’s interests are kept confidential from each other where necessary, are essential legal and ethical considerations in the drafting of a legal opinion.