January 2005

The Accountant/Attorney Liability Reporter

Inside this issue:



Guide to Drafting Opinion Letters

The issuance by an attorney of a legal opinion is crucial in completing many business transactions. Indeed, without the issuance of such opinions, many of these transactions would not occur. An opinion letter gives the recipient the author’s ‘professional judgment as to how the highest court of the jurisdiction whose law is addressed would appropriately resolve the issues covered by the opinion on the date of the opinion letter.’1 Opinion letters are typically drafted at the request of a client or third party, and may cover a wide range of subject matters. Because the use of opinion letters has increased and the reliance by third parties facilitates business transactions, it is crucial to a law firm to standardize the drafting and issuing of opinion letters. Consequently, this article addresses many of the common themes and elements attorneys should consider in drafting opinion letters.

Law Firm Ordered to Pay $7.2 Million for Negligence in Suit Involving Opinion Letter

A Massachusetts Superior Court judge ordered a Boston law firm (“law firm”) to pay $7.2 million in damages in a civil action against attorneys for negligent misrepresentation in connection with the preparation and issuance of an opinion letter. See Dean Foods Co. v. Pappathanasi, Civil Action No. 01-2595 BLS, Suffolk Superior Court (van Gestel, J. December 3, 2004).

Court Rejects Challenge to Sarbanes-Oxley

A federal judge in Birmingham Alabama, rejected the first court test of the Sarbanes-Oxley Act of 2002. The Act requires, among other things, top executives of public corporations to vouch for the financial reports of their companies. Fired HealthSouth Corporation’s Chief Executive Officer Richard Scrushy challenged the Act as unconstitutionally vague claiming it should not be a part of the indictment accusing him of fraud at HealthSouth. U.S. District Court Judge Karen O. Bowdre disagreed with the argument holding the indictment valid. No appeal is planned.

Partial Summary Judgment Granted to Law Firm in Suit Involving Opinion Letter

In a civil action against a law firm for negligent misrepresentation, negligence, misrepresentation, breach of contract, and violation of G.L. c. 93A, § 11, the Massachusetts Superior Court granted partial summary judgment in favor of the law firm, ruling that the competing interests of the parties negated any duty the law firm would otherwise have owed the plaintiffs as nonclients with whom it engaged in a business transaction and that there was no contractual relationship between the parties. National Bank of Canada v. Hale & Dorr, LLP, 2004 Mass. Super. LEXIS 142. The Court denied summary judgment due to genuine issues of material fact regarding whether the law firm’s failure to include information in an opinion letter was a false statement at the time it was made, whether the statements contained in the opinion letter were relied on by the plaintiffs, and whether other litigation, not mentioned in the opinion letter, had a materially adverse effect on the law firm’s client and the plaintiffs as third party beneficiaries of the contract between the law firm and its client.

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