CHAPTER 15.09. No Litigation

• Jurisdiction: United States

15.09. No Litigation

The "no litigation" opinion is a statement to the effect that there is no outstanding litigation involving the borrower, the collateral, or both.¹⁴¹ It is a controversial opinion for many reasons, not least of which is that it is not actually a legal opinion. Rather, it is a statement of fact intended to give assurance to the opinion recipient of the absence of certain events. As with any other negative assurance statement contained in an opinion letter, opinion authorities view such a request as inappropriate.¹⁴² The request is especially inappropriate where the opinion giver serves as local counsel in Delaware and is opining on certain security documents involving Delaware proper-ty.¹⁴³ Notwithstanding its inappropriateness and essential meaninglessness, opinion recipients often request it. In essence, this opinion makes the opinion giver a party to the transaction by providing factual representations to the lender, even though the borrower will be making the same representations in the loan transaction documents.

In any event, opinion practice has evolved over recent years such that the no litigation opinion is usually stated as a confirmation of the results of a search performed by the opinion giver of applicable court records. This makes the opinion no more than a statement of search results that the opinion recipient or recipient counsel could undertake themselves or that could be given to the opinion recipient by the borrower, and therefore the confirmation statement seems meaningless.

Finally, opinion practice has developed to the point where this "no litigation" statement is expressly phrased as a factual confirmation and often placed in a separate section of the opinion letter rather than included among the opinion paragraphs. However, it is not clear whether such phrasing or placement changes the liability of the opinion giver should the confirmation be incorrect.

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Notes:

^[141] For a general discussion, see D. Glazer and A. Field...