Presenting a live 90-minute webinar with interactive Q&A Article 9 Security Interests: Complexities in Drafting Legal Opinions Determining Scope and Limitations, Balancing Interests of Opinion Giver and Recipient, and Assessing Applicability of Other States' Law TUESDAY, NOVEMBER 19, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Herrick K. Lidstone, Jr., Attorney, Burns Figa & Will , Greenwood Village, Colo. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Anatomy of a Legal Opinion By Herrick K. Lidstone, Jr. (303) 796-2626 hklidstone@bfwlaw.com November 19, 2013 Paper available at http://ssrn.com/abstract=2261767
Disclaimer • Nothing contained herein shall be construed to provide legal, tax, or accounting advice. • The author reserves the right to assert positions contrary to those asserted herein 6
Identifying Legal Opinions • Informal and formal advice to client • Oral or written • Third party legal opinions – Formal – Closing of a transaction – Required by the operative agreement 7
Guidance for Opinions • Understanding client’s business • Understanding the business transaction • Understanding attendant law • Understanding customary practice as applicable to specific situation • Applying state guidance 8
Delaware – Corporation or LLC? • Many lawyers believe they are competent to give opinions on Delaware corporations under DGCL. (Row 10) – Includes Delaware Constitution and DGCL case law • LLC laws are different – Delaware (and most states) are contractual more than statutory – Opinion on enforceability of operating agreement includes all of Delaware case law on contracts – Different result for status, power, and authorizing actions? (Page 14) 9
Negotiate the Opinion Early • There are many issues that may arise between opinion giver and recipient • Don’t let them arise between opinion giver and client by raising them late in the game • Ensure that those negotiating the opinion understands customary practice • Don’t blindly use prior forms 10
Consider Ethical Issues • Rule 2.3 – An attorney may undertake an evaluation of a matter affecting a client for use by a person other than the client if the attorney believes that such evaluation is consistent with his or her duties to the client, and if requested by the client. • Rule 1.1 – The lawyer must be competent in the facts, law, and customary practice to render the opinion. Article 9 contains complex rules of application. The attorney working on the Article 9 opinion may not be the same working on the other more customary opinions. 11
Ethical Issues, too • Rule 1.6 – The lawyer must preserve the confidentiality of client information and only make disclosure of confidential information with client consent. • Rules 1.2, 2.1, and 4.1 – The lawyer’s conduct must conform to the requirements of the law and must be characterized by independent judgment and truthfulness in statements to others. 12
Bottom Line • Opinion Letter is the Attorney’s risk • Not the client’s risk • Risk management in the opinion letter practice is a major discussion point in national conferences 13
Available Literature • American Bar Association’s Legal Opinion Resource Center at http://www.abanet.org/buslaw/tribar/home.s html • 1991 Accord • 1998-2013 TriBar reports • ABA’s Principles (1998) and Guidelines (2002) • Statement of Customary Practice (2008) • TriBar report on Revised UCC Article 9 (2003) • State Bar reports 14
Addressee and Right to Rely • Row 1 - Note that legal opinion is legal advice to one not your client • Addressee has a right to rely without investigation • Reliance must be justifiable (See rows 21 and 60) • The opinions expressed herein are given to you solely for your use in connection with the Transaction and may not be relied upon by any other person or entity or for any purpose whatsoever without our prior written consent. • Different issues if loan is being syndicated. 15
Customary Practice • Row 6 • This letter and the opinions contained herein shall be interpreted in accordance with customary practice. • Define customary practice by reference to – ABA Principles – other national guidance – State reports? 16
Documents Reviewed • Row 7 • In connection with rendering the opinions set forth herein, we have examined the Transaction Documents, the Company’s Articles of Incorporation and its Bylaws, each as amended to date, the minutes of a special meeting of the Company’s Board of Directors dated _____, 200x, and such other documents, agreements and records as we deemed necessary to render the opinions set forth below. 17
Assumptions • Row 8 • Execution and Delivery • Genuineness of signatures • Authenticity of documents to the original 18
Forum Selection Row 13 • We express no opinion with respect to agreements to submit to the jurisdiction of any particular court or other governmental authority (either as to personal jurisdiction or subject matter jurisdiction); waiver of service of process requirements which would otherwise be applicable; and provisions otherwise relating to jurisdiction, service of process, or venue of courts. • M/S Bremen cases – but still doubt? 19
Reliance on Facts • Representations by client and the other parties in Transaction Documents (Row 15) • Information from government agencies (Row 17) • Other information known to us (Row 18) • May not rely on facts if to do so is unreasonable in the circumstances 20
Knowledge Row 19 • When used herein, the phrase “known to us” or “to our knowledge” or words of similar import limits the statements it qualifies to the actual knowledge of the lawyers in this firm who have had active involvement in negotiating the Transaction, preparing the Transaction Documents, or preparing this Opinion Letter without further independent investigation. • Limited group of lawyers 21
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