Cost-Benefit Analysis and Third-Party Opinion Practice
Jonathan C. Lipson
Temple University - James E. Beasley School of Law
Business Lawyer, Vol. 63, August 2008
Temple University Legal Studies Research Paper No. 2009-5
Practitioner literature and bar association reports frequently exhort lawyers and clients to use cost-benefit analysis (CBA) to answer important questions about third-party closing opinion practice, including whether to have an opinion in a given transaction at all. Yet, this literature rarely considers seriously what is meant by cost-benefit analysis, or whether it is in fact an appropriate decision tool in this context. This essay fills that gap, by examining what CBA can - and cannot - do for third-party closing opinion practice. Among its benefits, CBA should help to orient discussions about whether to have a closing opinion around an opinion's economic and informational value, rather than claims that an opinion is (or is not) traditional or market in a particular context. But, CBA is an imperfect tool. Cost-benefit analyses can be manipulated to mask costs or to exaggerate benefits. More fundamentally, CBA may treat ethically questionable practices as cost-justified, and may fail to account for certain important professionalizing benefits of closing opinion practice. The essay suggests ways that CBA can and cannot help to improve closing opinion practice.
Number of Pages in PDF File: 35
Keywords: legal opinion, closing opinion, opinion letter, cost benefit analysis, benefit cost analysis, Pareto, Kaldor-Hicks, professionalism, professional ethics, legal malpractice, legal ethics
JEL Classification: K12, K22
Date posted: December 15, 2008 ; Last revised: January 29, 2009
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