Cost-Benefit Analysis and Third-Party Opinion Practice

35 Pages Posted: 15 Dec 2008 Last revised: 29 Jan 2009

See all articles by Jonathan C. Lipson

Jonathan C. Lipson

Temple University - James E. Beasley School of Law


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.

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

Suggested Citation

Lipson, Jonathan C., Cost-Benefit Analysis and Third-Party Opinion Practice. Business Lawyer, Vol. 63, August 2008; Temple University Legal Studies Research Paper No. 2009-5. Available at SSRN:

Jonathan C. Lipson (Contact Author)

Temple University - James E. Beasley School of Law ( email )

1719 N. Broad Street
Philadelphia, PA 19122
United States

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