CURRENT MONTH (January 2022)
TriBar Issues New Guidance for Third-Party Closing Opinions on LLCs
By Ryan J. Maerz, Esq.
The TriBar Opinion Committee (the “Committee”) released the eagerly awaited 2021 revision of Third-Party Closing Opinions: Limited Liability Companies (the “2021 Report”) in Volume 77 of The Business Lawyer. The 2021 Report aggregates and replaces the Committee’s 2006 report of the same name and the 2011 supplemental report regarding opinions on LLC membership interests (collectively, the “Prior Reports”).
The 2021 Report provides thoughtful analysis and valuable guidance regarding the issuance of opinions on LLCs, and seasoned opinion preparers will recall many substantive concepts from the Prior Reports; those concepts have been updated to reflect contemporary ideologies of the Committee and have been annotated with recent case law to support them. The 2021 Report also includes several provisions that variously expand upon or depart from those in the Prior Reports, including provisions relating to the issuance of opinions on Delaware LLCs by non-Delaware lawyers, reliance on the currentness of documents obtained from reliable sources, and status and power opinions in the context of dissolution.
A new subsection in the 2021 Report contains a discussion of relevant considerations with respect to the period before delivery of an opinion letter (e.g., implications of actions purportedly taken by an LLC prior to its due formation). The Committee elected, however, to publish the 2021 Report without addressing opinions on the enforceability of an LLC’s operating agreement; these complex opinions, and their implications, will be subject to further study and discussion.
Ethics and Professional Responsibility
Proposed Amendments to Model Rules Comments: Lawyer Due Diligence
In late December, two Standing Committees in the Center for Professional Responsibility — the Standing Committees on Ethics and Professional Responsibility and the Standing Committee on Professional Regulation — released a Discussion Draft of potential amendments to the Comments (N.B., not the blackletter text) accompanying some of the Model Rules of Professional Conduct. The comments in question pertain to the following rules: 1.0 (Terminology), 1.1 (Competence), and 1.2 (Scope of Representation and Allocation of Authority between Client and Lawyer).
The amendments contained in the Discussion Draft focus on lawyers’ due diligence obligations under the ABA Model Rules of Professional Conduct with respect to client onboarding and client confidentiality. The focus is largely on the “knowledge” standard in the Terminology section of the Model Rules, and its application to client due diligence. The proposed revision to the comments there would expand the concept of a lawyer’s knowledge beyond direct observation to encompass credible information provided by third parties, reasonable factual inferences, and other circumstances; an ostrich-like approach to those other sources of information would be regarded as willful blindness that would not prevent knowledge from being ascribed to the lawyer.
The impetus for this initiative is a resurgence of concerns about the future of self-regulation in the wake of the Corporate Transparency Act and increased pressure from the Treasury Department about combating money laundering. That pressure has increased as a result of publication in recent years of the Panama Papers, the Paradise Papers, and the Pandora Papers, to say nothing of the 60 Minutes – Global Witness exposé televised a few years ago.
The two Standing Committees are hosting a roundtable/public hearing from 1:30 to 3:30 p.m., PST, on February 11, during the upcoming ABA Midyear Meeting in Seattle.