Adweiss Lllp v. Daum
208 So. 3d 760
| Fla. Dist. Ct. App. | 2016Background
- Plaintiffs: Adweiss, LLLP and Adweiss, LLC sued defendants John A. Daum and JAD Services LLC; defendants moved for advancement of attorney fees and costs under the LLC Agreement.
- Governing law: Parties agreed Delaware law governs substantive issues.
- Contract provision at issue: Paragraph 6.6 of the LLC Agreement obligates the Company to “indemnify, defend and hold harmless” managers and related persons, and excludes indemnification for willful misconduct or gross negligence.
- Trial court granted defendants entitlement to advancement and awarded $115,102 in advancement fees and costs; plaintiffs appealed both entitlement and amount.
- Central factual contention (raised by plaintiffs): defendants allegedly made a surreptitious and illegal withdrawal of $858,146; court declined to deny advancement on unclean-hands basis because wrongdoing was not yet adjudicated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether paragraph 6.6 authorizes advancement of defense fees (vs. mere indemnification) | 6.6 provides indemnification only; the word “defend” is surplus if it means advancement | The phrase “indemnify, defend and hold harmless” unambiguously includes a duty to defend now and thus advancement of attorney fees | The term “defend” is meaningful and, under Delaware precedent, supports entitlement to advancement; entitlement affirmed |
| Whether the $115,102 award should stand as entered | Plaintiffs: amount may be unreasonable or include improper items; entitlement does not resolve reasonableness/scope | Defendants: sought full advancement for fees and costs incurred in defending the action | Trial court’s award reversed; remanded for evidentiary hearing on reasonableness and scope of requested fees/costs |
| Whether defendants’ alleged wrongful conduct (unclean hands) bars advancement | Plaintiffs: defendants’ alleged illegal withdrawal of $858,146 makes them ineligible for advancement | Defendants: advancement cannot be denied absent a judicial determination of wrongful conduct | Court rejected unclean-hands defense at this stage because wrongdoing not adjudicated; entitlement stands |
Key Cases Cited
- Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393 (Del. 2010) (contract interpretation reviewed de novo and provisions must be given effect to avoid surplusage)
- Majkowski v. American Imaging Management Servs., Inc., 913 A.2d 572 (Del. Ch. 2006) (an indemnification clause lacking “defend” does not confer advancement; inclusion of “defend” suggests active payment of defense costs)
- Winshall v. Viacom Int’l, Inc., 76 A.3d 808 (Del. 2013) (where contract expressly imposes only a duty to indemnify, courts generally do not find a separate duty to defend or to advance defense costs)
- Lear Corp. v. Johnson Electric Holdings Ltd., 353 F.3d 580 (7th Cir. 2003) (no duty to defend means no duty to pay defense outlays on a current basis)