November 16, 2021

Legal Opinions: Recent Chancery Decision Provides Guidance

It isn’t often that legal opinions and the process by which they are rendered are key issues in a dispute, but they assumed center stage in the Delaware Chancery Court’s recent decision in Bandera Master Fund v. Boardwalk Pipeline Partners, (Del. Ch.; 11/21).  The opinion is nearly 200 pages long, but Francis Pileggi has a terrific blog that briefly summarizes the decision’s key lessons for lawyers asked to provide legal opinions.  This excerpt addresses the Court’s discussion of the limitations of relying on factual representations in rendering an opinion:

– Notably, the court reasoned that an opinion giver could not establish good faith by relying: “… on factual representations that effectively establish the legal conclusion being expressed.” Id. (citation omitted.)

– The Court amplified its reasoning by observing that: “If the factual representations are ‘tantamount to the legal conclusions being expressed,’ then the opinion giver is regurgitating facts, not giving an opinion in good faith.” Id. (citation omitted.)

– Although an opinion giver may establish the factual predicate for an opinion by making assumptions that certain facts are true, the Court cautioned that: “If an assumption or a set of assumptions effectively establishes the legal conclusion being expressed, then the opinion giver cannot properly rely on those assumptions , as doing so vitiates the opinion.” Id. (citations omitted.)

The case involved a legal opinion that was a condition to one party’s ability to exercise a contractual call right, and the process by which that opinion was rendered became a prime focus when the exercise of that right was challenged. In some respects, the decision represents the flip side of the Delaware Supreme Court’s decision in The Williams Companies v. Energy Transfer Equity L.P., (Del. 3/17), in which a law firm’s inability to render a tax opinion upon which a multi-billion dollar merger was conditioned was front and center.

John Jenkins