In The Fallstaff Group, Inc., et al., v. MPA Brickell Key, LLC, et al., (Fla. 3d DCA August 6, 2014), the Third District Court of Appeal reaffirmed the importance of specifically including language allowing recovery of attorney’s fees and costs incurred in seeking indemnification under an indemnification agreement, even if that indemnification agreement is broadly written.
The Fallstaff decision stems from an agreement by MPA Brickell Key, LLC (“MPA”) to sell real property on Brickell Key to Fallstaff Group, Inc. (“Fallstaff”). Due to disputes that arose prior to closing, MPA and Fallstaff entered into a letter agreement (the “Letter Agreement”) whereby Fallstaff agreed “to indemnify and hold harmless [MPA] and all of its equity holders, officer, employees, agents and representatives with respect to any liability under or in connection with [an agreement with a neighboring property owner FBEC-Brickell Key Centre, L.P. (“FBEC”)] (including any liability with respect to legal fees or court costs).”
After closing, the neighboring property owner, FBEC, filed suit against MPA alleging breach of their agreement. MPA paid funds to FBEC under a settlement agreement, and then filed a complaint against Fallstaff seeking indemnification, plus attorney’s fees and costs incurred by MPA in the action with FBEC.
The trial court found that MPA was entitled to indemnification from Fallstaff and that MPA was entitled to reasonable attorney’s fees and costs incurred in the litigation with FBEC, and incurred in seeking indemnification. Fallstaff appealed.
In addition to affirming that MPA was entitled to indemnification, the Fallstaff court made two different findings with respect to attorney’s fees and costs. First, the Fallstaff court found that Fallstaff must indemnify MPA for the settlement payment to FBEC and legal fees and costs incurred in defending against FBEC’s claim. Second, however, the Fallstaff court found that MPA was not entitled to attorney’s fees and costs for seekingindemnification. The Fallstaff court found that in the absence of language expressly establishing such a right, MPA was not entitled to such fees and costs. Because such language did not exist in the Letter Agreement, the Fallstaff court found that MPA was not entitled to attorney’s fees and costs incurred in seeking indemnification.
Fallstaff is notable in that it reminds parties that, while they may collect attorney’s fees and costs under an indemnification agreement, they cannot collect attorney’s fees and costs incurred in seeking indemnification unless such a right is specifically included in an indemnification agreement. Not including the right to recover attorney’s fees and costs in seeking indemnification in an indemnification agreement may present a financial conundrum should a party seek to collect on the indemnification agreement, because the cost of seeking to collect may outweigh the amount of the indemnification. Parties need to be wary of this and other pitfalls when entering into indemnification agreements.