## Facts

- Garelick Farms, Inc., a Dean Foods subsidiary, purchased West Lynn Creamery under a June 30, 1998 stock purchase agreement.
- The sellers represented in the agreement that no litigation or governmental investigations were pending or threatened against West Lynn at closing.
- West Lynn had previously received a grand jury subpoena and was the subject of a criminal investigation related to alleged anticompetitive conduct.
- Rubin and Rudman LLP represented West Lynn and the sellers and had prior involvement with matters related to the investigation.
- As a closing condition, sellers’ counsel provided a third-party legal opinion letter to the buyer stating, in substance, that “to our knowledge” no litigation or governmental investigation was pending or threatened against West Lynn.
- The opinion included typical qualifications, including reliance on client representations and no independent investigation of litigation or investigations.
- The criminal investigation had not ended at the time of closing; in 2001 West Lynn pleaded guilty, paid a $7.2 million fine, and incurred approximately $2.17 million in related fees and expenses.
- Dean Foods/Garelick sued the sellers, Rubin and Rudman, and certain partners, alleging negligence and negligent misrepresentation based on the opinion letter and related conduct.

## Issues

1. Whether opinion counsel who provides a closing opinion to a non-client buyer may owe a duty of care supporting claims for negligence and negligent misrepresentation.
2. Whether “to our knowledge” language and standard limitations (reliance on client representations; no independent investigation) bar liability when the firm had, or should have had, information indicating an ongoing criminal investigation.
3. Whether the buyer plausibly and reasonably relied on the opinion, and whether the opinion could be a proximate cause of losses tied to the investigation.
4. (Discovery ruling) Whether counsel may instruct a deponent not to answer deposition questions solely because they are “hypothetical” under Mass. R. Civ. P. 30(c).

## Decision

- The court held that a law firm issuing a third-party closing opinion addressed to, and intended for reliance by, the buyer may owe the buyer a duty of care and may be liable for negligence or negligent misrepresentation if the opinion is materially misleading and not prepared with reasonable care.
- The court declined to treat “to our knowledge” wording and customary limitations as categorical defenses where evidence could support that lawyers had, or should have had, information making the no-investigation assurance false or misleading.
- The court allowed the reliance and causation theories to proceed on a record supporting that the opinion was a closing condition and could have been a substantial factor in the decision to close, with resulting foreseeable losses.
- In the deposition dispute, the court ruled that an instruction not to answer cannot rest solely on a question’s “hypothetical” character; Rule 30(c) limits such instructions to privilege or protection concerns, though objections to form remain available.

## Legal Principles

- A lawyer or law firm may be liable to a non-client for negligent misrepresentation (and related negligence) when the lawyer supplies information for the guidance of a specific third party in a transaction and the third party’s reliance is intended or reasonably foreseeable.
- Standard opinion limitations (including reliance on client representations and no independent investigation) do not permit an opinion giver to ignore information in the firm’s possession that makes the opinion materially misleading.
- “To our knowledge” in an opinion letter can require consideration of what the opinion lawyers actually knew and what they reasonably should have known based on the firm’s prior work and internal communications.
- At the pretrial stage, reliance and proximate cause may be triable where an opinion was a condition to closing and an inaccurate opinion plausibly contributed to transaction-related losses.
- Under Mass. R. Civ. P. 30(c), counsel may not direct a deponent not to answer absent grounds tied to privilege or protection from improper disclosure; “hypothetical” is not, by itself, a proper basis.

## Conclusion

The court recognized potential tort liability for third-party closing opinions where a buyer is an intended recipient and the opinion’s knowledge-qualified assurances may be misleading in light of information known (or reasonably knowable) within the firm, and it limited deposition instructions not to answer to the grounds specified in Rule 30(c).


Dean Foods Co. v. Pappathanasi, 18 Mass. L. Rptr. 598 (Mass. Super. Ct. 2004)