In the years before and after the publication of the 1989 Report, commentators expressed
concern about the substance, form and proliferation of written legal opinions in business
17 Concerns focused on the usefulness of opinions, the increased cost to clients of
the preparation and delivery of opinion letters, and the risk of liability of lawyers rendering them.
This Report discusses the general understanding of what is meant by the term "legal
opinion" in the business law context and the characteristics that distinguish legal opinions
expressed in an opinion letter from informal legal advice. The principal objective of this Report
is to assist lawyers in the preparation of opinion letters by examining common formats and by
identifying and discussing the meanings generally ascribed to certain customarily used terms and
phrases. In those instances where language customarily found in specific legal opinions is
reasonably subject to differing interpretations, that fact is noted.
In addition to these general topics, this Report discusses the following issues:
1. The matters to be considered in requesting and providing opinion letters, such as
guidelines for determining when and if a specific legal opinion should be requested in a
particular business transaction, including cost-benefit considerations, and the appropriate content
of such opinions.
2. The standard of care required under California law, with particular attention to the
standard of care in rendering opinions in specialized areas of the law, such as securities law.
Unresolved issues regarding the standard of care are also noted, and the Committee's view on
them is sometimes presented. The Committee emphasizes that this Report is not, however,
intended to establish an independent measure of the standard of care or to constitute evidence of
the standard of care.
3. The nature and extent of the "diligence" investigation an opinion giver
customarily undertakes before issuing particular types of opinions, such as the way factual
information upon which an opinion is based is obtained, determining appropriate factual
assumptions to be included in the opinion letter, and analyzing the extent to which additional
legal research is appropriate.
The most common context in which an opinion letter is given is to a third party at the
request of a client. In that context, the opinion letter is typically referred to as a "third-party
legal opinion" or, if given at the closing of a business transaction, a "closing opinion."
Report addresses the giving of third-party legal opinions by California lawyers, including
opinion letters nominally requested by and addressed to the client, but intended by the opinion
giver to be relied on by a third party, such as the legal opinion ("
Exhibit 5 opinion") rendered by
securities counsel to their client in connection with an offering of securities registered under the
Securities Act of 1933 (as amended, the "
Lawyers may also from time to time be asked to render a legal opinion to their own
clients. For example, a financial institution may request not only a closing opinion from
borrower's counsel, but also a legal opinion from its counsel. As another example, a client may
request a tax opinion from its counsel to provide a basis for the avoidance of penalties if the tax
aspects of a transaction are later challenged by the Internal Revenue Service.
While an opinion giver must exercise due care in rendering an opinion letter, whether
addressed to a third party or to the opinion giver's client, other considerations apply when an
opinion is rendered to a lawyer's own client.
22 As the commentary to Section 95 of the
Restatement (addressing opinions to third parties) notes, a third-party recipient of a lawyer's
opinion "does not thereby become the client of the lawyer, and the lawyer does not thereby
undertake all duties owed to a client, such as confidentiality or avoidance of conflicting
interests . . . ."
23 Moreover, in rendering a third-party legal opinion, "a lawyer does not
undertake to advise the third person except with respect to the questions actually covered by the
Accordingly, except as specifically noted, this Report does not address the separate
considerations that may be relevant when an opinion giver is rendering an opinion to its client,
and references in this Report to "opinions" are to third-party opinions.
Finally, Appendix B to this Report lists the authorities cited in this Report and Appendix
C contains a bibliography of articles and other publications on the subject of legal opinions and
17 See Appendix C, Bibliography. Back
18 As noted in Part III, Section A.2 of this Report, however, the Restatement looks to Bar reports such as this
Report for guidance on the standard of care applicable to lawyers for purposes of establishing the lawyer's
discharge of his or her duty of care. For a discussion of standard of care issues in rendering securities law
see Part V, Section E of this Report. Back
19 See generally James Fuld, Legal Opinions in Business Transactions--An Attempt to Bring Some Order Out
of Some Chaos
, 28 BUS. LAW. 915 (1973) [hereinafter Fuld]. Back
20 Securities Act of 1933, 15 U.S.C. §§ 77a -- 77aa. See Special Report of the Task Force on Securities Law
Opinions of the ABA Section of Business Law,
Legal Opinions in SEC Filings, 59 BUS. LAW 1505 (2004)
SEC Filings Report]. Back
21 See Jasper Cummings, Jr., The Range of Legal Tax Opinions, With Emphasis on the "Should" Opinion, TAX
NOTES 1125 (February 17, 2003).
22 See RESTATEMENT § 16 and § 95, comment c. Section 16 of the Restatement outlines the duties of a lawyer
to his or her client, which duties include the obligation to proceed "in a manner reasonably calculated to
advance a client's lawful objectives, as defined by the client after consultation," the obligation to "act with
reasonable competence and diligence," the obligation to "comply with obligations concerning the client's
confidences and property, avoid impermissible conflicting interests, deal honestly with the client, and not
employ advantages from the client-lawyer relationship in a manner adverse to the client," and to "fulfill valid
contractual obligations to the client."
See also CAL. BUS. & PROF. CODE § 6068(e) (lawyer to "maintain
inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client").
23 See RESTATEMENT § 95, comment c. Back
24 Id. Arthur Norman Field observes that "[a]ny opinion letter to the client likely represents only one aspect of
the lawyer's duty to the client." Arthur Norman Field, LEGAL OPINIONS IN BUSINESS TRANSACTIONS § 15:1
(2004) [hereinafter FIELD TREATISE]. Field discusses legal opinions to clients in chapter 15 of his treatise.