Malpractice in the Line of Duty: Who Catches the Bullet?

Use and reliance on internal counsel opinions, in the place and stead of opinions rendered by external counsel, appears to be on the rise, attributable to two factors. First, equipment leasing and finance companies are increasingly adding highly skilled internal counsel to their corporate staff, as the leasing and finance business becomes increasingly subjected to various tax, accounting and securities laws. Second, the seemingly inexorable upward trend of external counsel fees has caused some companies to seek significant transactional cost savings by bringing “in house” as much legal work as possible in any given transaction ' including the delivery of closing legal opinions to third parties.

In such transactions, internal counsel for the lessee or lessor, or the borrower, is asked to render a legal opinion not to its corporate or partnership employer, but instead to the counterparty to the transaction at hand. Internal counsel, who may have considered the delivery of such opinions as merely ministerial or routine in the past (because of the relatively narrow scope of such internal opinions, when compared to the typically broader scope of accompanying external counsel opinions) are confronting the hard reality that as the scope of internal opinions they are requested to issue increases, so too does their personal exposure for malpractice if such opinions turn out to be incorrect.