A recent Supreme Court of Florida decision has determined that a corporation is statutorily responsible for attorney fees incurred by directors defending themselves against lawsuits - even if the lawsuit was originally filed by the corporation itself against the directors.
Indemnifying Attorney Fees
In the case - Wendt v. La Costa Beach Resort Condominium Association - directors of a condo association filed an action for indemnification after the condo association originally filed suit against the directors.
Indemnity is generally the "right of an injured party to claim reimbursement for loss, damage, or liability for a person who has such a duty," as defined by Black's Law Dictionary. The right to seek indemnity by corporate directors is governed by statute in Florida, which states, "A corporation shall have power to indemnify any person, who was or is a party to any proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation."
Essentially, the directors in Wendt claimed that since they were being sued in their capacity as directors, that the condo association was required by statute to pay their attorney fees in defending the action - regardless of the fact that the suit against the directors was actually filed by the condo association in the first place.
Florida Supreme Court's Decision
In reaching their decision, the Florida Supreme Court initially commented that nothing in the plain language of the indemnification statute prevents "indemnification of directors when the underlying proceeding is between the corporation and its directors."
Moreover, the court concluded that since the legislature had expressly enumerated various restrictions on indemnification, but never excluded suits between directors and corporations, to exclude indemnification is these circumstances would be counter to the plain language of the statute.
In addition, the court noted that multiple District Courts of Appeals in Florida had previously held that corporate officers and directors are statutorily entitled to seek indemnification from corporations after successfully defending claims brought against them by the corporation.
Corporate officers or directors are often made to be the scapegoats when things don't go well for corporations - especially given the current economic climate in the US. Officers and directors need to be vigilant and protect themselves from lawsuits; particularly against allegations of breaches of fiduciary duties. If you are an officer of director who has been accused of breaching a fiduciary duty, contact an experienced attorney in your area today to be advised of your rights and options.
