Law360 published an article on July 29 authored by Olshan real estate partner Gregory Jaske entitled “Recent Decisions Caution Against Broad Indemnity Provisions” (or here for Law360 subscribers).
In the article Greg provides insight on the importance of drafting indemnity provisions with appropriate restrictions citing cases such as Cashman Equipment Corp. v. Kim Marie Shaughnessy and Builders FirstSource-Southeast Group, LLC v. Palmetto Trim and Renovation. In Cashman, the dispute focused on Shaughnessy’s actions as the Chief Financial Officer for Cashman Equipment Corp. (CSC) and Servicio Marina Superior, LLC (SMS). Shaughnessy had established a Woman Business Enterprise (WBE) owned by her and an insurance trust affiliated with the plaintiff and of which she was a trustee, and after leaving her roles at CSC and SMS, she acquired the trust’s interest. While Shaughnessy was found at trial to have breached her fiduciary duty to the trust, the court held that she was nonetheless entitled to indemnification from the plaintiff because such a breach did not specifically preclude her right to indemnity under the applicable indemnity provisions. The latter case referenced highlights Builders FirstSource-Southeast Group (BFS), a construction company that outsourced labor from subcontractors for a development. The project experienced deficiencies causing the company to sue Palmetto Trim and Renovation for compensation. However, the Court of Appeals upheld the lower court’s application in which there must be “clear and unequivocal” intent of an obligation to indemnify a party for such indemnitee’s own negligence (which BFS lacked). Greg suggests that “Business owners and their attorneys should review the objectives of each contractual indemnity provision, discuss their primary objectives in the enforcement thereof, and seek to ensure that the same are compliant under applicable law, and will not be viewed unfavorably when a court is applying principles of equity, asking, ‘is the obligation fair to the indemnitee?’”
PartnerGreg maintains a broad-based real estate practice that includes negotiating and structuring LLC and other joint ventures, acquisitions, purchase and sale agreements, development agreements, ground leasing and borrower-side ...