970 N.W.2d 860
Iowa2022Background:
- WMG, L.C. was a family-owned Iowa LLC; Joseph Goche was a manager removed in 2017 after disputes with his siblings, the other members.
- WMG owned farmland leased to NCJC, a corporation owned by Joseph; multiple suits followed among WMG, Joseph, NCJC, and other members.
- Joseph incurred attorney fees both defending WMG’s breach-of-fiduciary claims and prosecuting indemnification claims against WMG under Iowa Code § 489.408(1).
- The district court ordered WMG to reimburse fees Joseph incurred defending against WMG’s claims but denied “fees on fees” for costs of enforcing the indemnity claim; the court of appeals majority affirmed and awarded fees on fees.
- The Iowa Supreme Court granted further review and held § 489.408(1) limits indemnification to debts incurred “in the course of … activities on behalf of the company,” so fees incurred litigating against the company are not recoverable; it vacated the court of appeals decision and reversed the district court award.
- The Court noted the statute does not expressly mention attorney fees, refused to rewrite Iowa’s statute to adopt later uniform-act amendments, and declined to decide whether “fees on fees” could be recovered when indemnification otherwise applies.
Issues:
| Issue | Plaintiff's Argument (Goche) | Defendant's Argument (WMG) | Held |
|---|---|---|---|
| Whether § 489.408(1) permits a manager to recover attorney fees incurred litigating against the LLC | Fees are a “debt… incurred by a manager in the course of … activities” as a manager and thus reimbursable under § 489.408(1) | Statute limits indemnity to debts incurred in activities on behalf of the company; litigation against the company is not on-behalf activity and thus excluded | Held for WMG: § 489.408(1) does not cover fees incurred suing or defending against the company |
| Whether “fees on fees” (fees to enforce an indemnity claim) are recoverable under § 489.408(1) | Fees incurred enforcing the statutory indemnity are part of the recoverable debt and should be awarded | Fees-on-fees are not recoverable here because the underlying statutory indemnity does not apply; statute lacks express fee-shifting language | Not decided: Court reversed the indemnity award and expressly declined to reach whether fees-on-fees could be awarded where indemnification otherwise applies |
Key Cases Cited
- NCJC, Inc. v. WMG, L.C., 960 N.W.2d 58 (Iowa 2021) (discusses related litigation and fees under contract provisions)
- Guardianship & Conservatorship of Radda v. Washington State Bank, 955 N.W.2d 203 (Iowa 2021) (reaffirms American rule and limits on fee shifting)
- Homeland Energy Solutions, LLC v. Retterath, 938 N.W.2d 664 (Iowa 2020) (interpreting indemnity language and intent to shift attorney fees)
- Botsko v. Davenport C.R. Commission, 774 N.W.2d 841 (Iowa 2009) (statutory authorization to recover attorney fees must be clear and unequivocal)
- Branstad v. State ex rel. Nat. Res. Comm’n, 871 N.W.2d 291 (Iowa 2015) (statutory fee authorization must appear clearly within the statute)
- In re Estate of Bockwoldt, 814 N.W.2d 215 (Iowa 2012) (permitting recovery of fees incurred litigating extraordinary fee awards in probate)