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The following excerpt is taken from Annual Review of Developments in Business and Corporate Litigation, 2006 Edition by the Committee on Business and Corporate Litigation, Copyright 2006 by the ABA Section of Business Law. Reprinted here with permission. The material contained herein represents the
opinions of the authors and editors and should not be construed to be the action of either the
American Bar Association or the Section of Business Law unless adopted pursuant to the bylaws of
the Association. Nothing contained herein is to be considered as the rendering of legal advice for
specific cases, and readers are responsible for obtaining such advice from their own legal counsel.
To request reprint permission, contact the Manager, Copyrights and Licensing, at (312) 988-6102.
For the complete excerpt, click here
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Message from the Chair, Linda C. Hayman
Today the third party legal opinion is a fixed component in the closing of
most large transactions. It is steeped in tradition and aspects of it are
difficult to explain to attorneys not regularly involved with opinions,
particularly attorneys from outside the U.S. Why, for example, is the
closing opinion delivered by counsel to the borrower when the lender's own
counsel drafted the documents and is certainly more familiar with them?
How can the transaction documents be hundreds of pages long and yet the
closing opinion that comments on them be only three or four pages long?
And, my favorite question: why not use plain English?
Lawyers have been issuing third party legal opinions for a hundred years or
more. The legal opinions themselves are written in a combination of plain
English and stylized jargon. The glue that makes the opinion process work
is that the participants have a common understanding of the jargon. It is
nothing short of remarkable that essentially the same words are used in
legal opinions that are delivered not only in every state and county in the
U.S., but also in every conceivable type of business transaction.
This national uniformity was neither accidentally achieved nor is it easily
maintained. It has been over a decade since a national meeting bringing
together the leadership of the opinion practice world has been organized.
However, on October 17, legal opinion experts and legal opinion policy
makers will be assembling in New York City to attend the Legal Opinion Risk
Management Symposium, co-chaired by Judge Thomas L. Ambro and Arthur N.
Field. Arthur and Tom (and the members of the study committee) have worked
for the last year to bring together recognized experts, authors and
reporters in the area of legal opinions practice, the heads of legal
opinion committees for a significant number of law firms, representatives
of insurers, rating agencies and institutions who regularly receive legal
opinions as well as leaders of many state and local bar association legal
opinion committees.
Aside from the diverse experiences and the impressive credentials of those
who will be meeting in October, the focus of this effort is noteworthy:
risk management.Participants will tackle topics such as law firm management
of legal opinions in a multi-office setting, the responsibilities of
counsel to recipients and the nature and prosecution of claims against
givers as well as those who receive opinion. The results of discussions on
these topics will be reported through
The Business Lawyer, the
Legal Opinion Resource
Center and the
Committee on Legal Opinions Web site.
The new focus on risk management is not merely a result of the increasing
size of the transactions. While there have been few reported cases
involving legal opinions, in the past few years claims have increased in
size and frequency. The malpractice liability for opinion givers is now
well established. Today, the courts appear to see the remedy as one
for negligent misrepresentation applying malpractice standards as to lawyer
conduct.
With this as background, it is timely that lawyers from across the country
are coming together in October to address ways to manage legal opinion
risk.
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Linda C. Hayman
Chair, ABA Section of Business Law
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Financial Developments in the Pacific Rim.
Since, 1978, it is estimated that per capita income in China has increased
seven times, 400 million people have risen from extreme poverty, and a
middle class of 100 million people has developed. Also, since 1978, China's
banking system has undergone significant modernization. During the
1991-1992 timeframe, the Shanghai and Shenzhen Stock Exchanges were
established. These developments, among others, have led to the enormous
expansion of the economy of China.
The Bankruptcy Reform Act of 2005 One Year Later.
The Bankruptcy Reform Act of 2005 was the most comprehensive amendment to
the Federal bankruptcy laws in more than two decades. The Act has had a
very significant impact on business as well as consumer bankruptcies.
Drafting Skills for Business Lawyers.
Learn how to draft better legal documents—draft clearly, eliminate
"legalese", understand the rules of evidence governing contract
interpretation, and learn about ethical rules that relate to drafting.
Erosion of Privilege in Business Law.
Since the mid 1990s, the principal law enforcement and regulatory
authorities in the United States have developed policies and guidelines
that are designed to induce corporations and other business entities to
waive, or not to assert, applicable attorney-client and work product
privileges and protections.
Important Case Law Developments in Partnerships and LLCs.
2006 has been a busy year for litigation involving partnerships and LLCs.
Review the latest cases, including tax cases, as presented at the annual
ABA meeting in August.
Status of Hedge Fund Regulation in Doubt - Special eSource update.
On June 23, 2006, the U.S. Court of Appeals for the District of Columbia
Circuit vacated SEC Rule 203(b)(3)-2 and related rule amendments which
effectively require many hedge fund managers to register as investment
advisers under the Investment Advisers Act of 1940. The Court found the
Rule to be arbitrary and beyond the SEC's authority. The SEC has indicated
that it intends to pursue new rulemaking in the near future that will
affect hedge fund managers. The ability of state authorities to regulate
hedge funds is limited by federal preemption. However, states retain
certain authority with respect to hedge funds and hedge fund managers.
Delaware Update - Amended Alternative Entity Laws.
2006 has been an active year for legislation with several acts amending
certain alternative entity laws
Venture Capital Investing in Asia.
While the major markets of the United States, Europe and Israel have
experienced significant growth in venture capital funding since the dot com
bust in 2001-2002, China and India are clearly the emerging markets for
venture capitalists and private equity funds. Furthermore, various studies
have projected that India will be the fastest growing economy during the
next several decades.
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Committee Spotlight
To learn more about or join the committees that contributed to this month's practice points, just click on the committee name below.
Section members are eligible to join the Section's committees at no
additional cost. Become involved or simply stay in the information
flow. It's FREE!
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Thousands of American women lawyers experienced in addressing business
challenges are beginning to transition out of active law practice. As
American boards face the need for independent directors, these women can
bring to business governance independent judgment and a deep
understanding of business, financial and management issues.
The ABA Section of Business Law is
developing the DirectWomen initiative to
enable women lawyers leaving private practice to prepare for service as
independent directors. The centerpiece of this initiative is the
DirectWomen Institute, an annual training program taking place on March
28-30, 2007 at the Waldorf-Astoria Hotel in New York, that will bring
together experienced women directors and recognize their service, while
harnessing their expertise for the benefit of participants - senior women
lawyers with backgrounds in business law.
For more information and for details on sponsorship opportunities, contact
Sue Daly at 312-988-6244, via email at suedaly@staff.abanet.org or go to
www.directwomen.org.
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