Wednesday, March 17, 2010

Florida Supreme Court To Decide Whether Corporation Should Be Forced To Indemnify For Officers Criminal Acts

Update: On June 9, 2011, the Florida Supreme Court reversed the underlying opinion in this case. The Florida Supreme Court's opinion can be viewed HERE.

On Monday, the Florida Supreme Court entered an order accepting jurisdiction in Banco Industrial de Venezuela, C.A. v. de Saad (SC10-21).  The order can be viewed HERE.  This case was previously discussed HERE, when the Third District entered an order denying a motion to stay mandate. The decision that will be reviewed was released by the Third District on September 16, 2009 and can be viewed HERE. The jurisdictional briefs can be viewed at the links below:

The Petitioner's Brief on Jurisdiction summarizes the issues in the case as follows:
The Third District misapprehended the significant differences between Delaware’s and Florida’s indemnification statutes. Florida’s Legislature, as a matter of public policy, enacted an indemnification statute that prohibits a corporate officer from seeking indemnification if the officer knowingly violated the law or entered into a transaction for an improper personal benefit. Section 607.0850(7), Fla. Stat. There is no such similar prohibition in Delaware law. To the contrary, Delaware’s statute mandates indemnification even in cases where the Florida Legislature (as evidenced by its specific adoption of subsection (7)) has determined such an indemnification obligation would be offensive both to the public interest and the legitimate business community. The Third District disregarded Florida law, and instead imposed Delaware’s indemnification law on BIV-Miami, a foreign corporation merely doing business in Florida. Ignoring Florida law to blindly follow Delaware law is not reasoned judicial decision-making. See Stuart R. Cohn, Dover Judicata: How Much Should Florida Courts Be Influenced By Delaware Corporate Law Decisions?, 83 Fla. Bar J. 20, 21 (Apr. 2009) (“The prominence of Delaware courts should not . . . lead to an overly submissive attitude or one that gives undue influence to Delaware decisions . . . [T]here are considerable differences between Florida and Delaware that ought to provide caution to Florida courts.”).
This issue is one of critical public importance for all corporations doing business in Florida. Corporations should be able to depend on the Legislature’s considered judgment that no corporation doing business in Florida should be forced to indemnify and pay for the criminal acts of a wayward corporate officer.
The Third District also created a direct and express conflict by allowing the trial court to resolve the quintessential jury question of which reasonable interpretation of de Saad’s employment contract was more reasonable, simply rejecting BIV’s understanding that it could suspend her until there was clarification as to whether she engaged in wrongdoing. The Third District created additional direct and express conflicts with Florida law governing whether factual disputes (such as to who breached first) can be resolved on summary judgment, whether the doctrine of mitigation exists in Florida contract law, and whether summary judgment can be granted when a party has well-pled unresolved affirmative defenses. These issues are of great importance to all parties who contract for goods or services in Florida.


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