Court Opinion

ID: 4098762
Source: CourtListenerOpinion
Date Created: 2016-11-16 16:08:22.756765+00
Date Added: 2024-06-11T07:45:37.588134
License: Public Domain

Third District Court of Appeal
                                State of Florida

                         Opinion filed November 16, 2016.
          Not final until disposition of timely filed motion for rehearing.

                                ________________

                                 No. 3D16-531
                          Lower Tribunal No. 13-27747
                              ________________

  Adweiss LLLP, a Florida Limited Liability Limited Partnership,
     and Adweiss LLC, as General Partner of Adweiss LLLP,
                                    Appellants,

                                         vs.

 John A. Daum, individually, and JAD Services, a Florida Limited
                      Liability Company,
                                     Appellees.

      An Appeal from the Circuit Court for Miami-Dade County, John
Schlesinger, Judge.

       Law Office of Dennis Grossman, and Dennis Grossman; Law Office of Max
R. Price, P.A., and Max R. Price, for appellants.

      Philip D. Parrish, P.A., and Philip D. Parrish; Loren S. Granoff, P.A., and
Loren S. Granoff, for appellees.

Before ROTHENBERG, FERNANDEZ, and LOGUE, JJ.
         ROTHENBERG, J.

         Adweiss, LLLP, a Florida Limited Liability Limited Partnership, and

Adweiss, LLC (“the LLC”), a Delaware Limited Liability Company (collectively,

“the plaintiffs”), appeal from an order granting John A. Daum’s and JAD Services

LLC’s (collectively, “the defendants”) motion for advancement of attorney’s fees

and costs (“Entitlement Order”), and from an order awarding $115,102 to the

defendants in advancement fees and costs (“Awards Order”). For the reasons that

follow, we affirm the Entitlement Order, but reverse the Awards Order and remand

for an evidentiary hearing.

         Applying Delaware law,1 the trial court found that pursuant to paragraph 6.6

of the LLC’s Limited Liability Company Agreement (“LLC Agreement”), the

defendants are entitled to the advancement of attorney’s fees and costs. Paragraph

6.6 provides in relevant part as follows:

         6.6. Indemnity. The Company shall indemnify, defend and hold
         harmless (i) the Managers, (ii) any person designated to act on behalf
         of the Managers, . . . (severally, the “Indemnitee” and collectively, the
         “Indemnitees”), from and against any claims, losses, liabilities,
         damages, fines, penalties, costs and expenses (including, without
         limitations, fees and disbursements of counsel and other
         professionals) arising out of or in connection with any act or failure to
         act by an Indemnitee pursuant to this Agreement, or the business and
         affairs of the Company, to the fullest extent permitted by law;
         provided, however, that the Company shall not be required to
         indemnify an Indemnitee for any loss or damage which the
         Indemnitee may incur as a result of such Indemnitee’s willful

1   The parties agree that Delaware law governs the substantive issues in this appeal.

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      misconduct or gross negligence.

(emphasis added).

         The primary issue presented below and here on appeal is whether the

inclusion of the term “defend” in the phrase “indemnify, defend and hold

harmless,” as set forth in paragraph 6.6 of the LLC Agreement, provides for the

advancement of attorney’s fees and costs to the defendants for their defense of the

action filed by the plaintiffs. Based on our de novo review of the LLC Agreement,

see Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393 (Del. 2010)

(noting that the trial court’s interpretation of a contract is reviewed on appeal de

novo), we conclude that the term “defend” unambiguously provides for the

advancement of attorney’s fees and costs, and therefore, we affirm the Entitlement

Order.

      The     plaintiffs   suggest   that   paragraph   6.6   merely   provides   for

indemnification, not for advancement. It is undisputed that paragraph 6.6 provides

for indemnification based on the inclusion of the phrase “indemnify . . . and hold

harmless.” Thus, the plaintiffs’ suggestion would render the inclusion of the term

“defend” meaningless. As stated by the Delaware Supreme Court in Kuhn, we

must read the agreement “as a whole” and “give each provision and term effect, so

as not to render any part of the contract mere surplusage.” Kuhn, 990 A.2d at 396-

97 (emphasis added) (footnote omitted). Thus, the inclusion of the term “defend”

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in the phrase “indemnify, defend and hold harmless” signifies much more than an

obligation to “indemnify” because the term “defend” is not necessary if the

purpose of the phrase was merely to provide for indemnification.

      Although the terms “advancement” or “advance” are not utilized in

paragraph 6.6, courts in Delaware have suggested that the term “defend” means

something more than “indemnify.”        For example, in Majkowski v. American

Imaging Management Services, Inc., 913 A.2d 572 (Del. Ch. 2006), the Court of

Chancery rejected Mr. Majkowski’s argument that he was entitled to advancement

based on a provision in a limited liability company agreement that states that the

company “shall indemnify and hold harmless the member(s) and their affiliates.”

The court noted that the provision was “a standard, straight-forward

indemnification provision, devoid of any advancement rights.” Id. at 587. The

court, however, suggested that if the agreement “used the word ‘defend,’

Majkowski would have a stronger argument because the obligation to ‘defend’

comes closer to suggesting the active employment of attorneys and continual

payment as the attorneys’ fees are incurred.” Id. at 587 n.39.

      Similarly, in Winshall v. Viacom International, Inc., 76 A.3d 808, 820 (Del.

2013), a provision in a merger agreement imposed a duty to “indemnify,” but not a

duty to “defend.” The Delaware Supreme Court rejected the defendants’ argument

that the merger agreement also imposed an “independent duty to pay defense

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costs,” and in doing so, stated as follows:

       Where parties to a merger agreement intend to create separate duties
       to indemnify and to defend, they employ an “indemnify and defend
       against claims” clause or similar language to that effect. But where,
       as here, the contract expressly imposes only a duty to “indemnify,” as
       opposed to “indemnify and defend,” the courts generally hold that
       there is no duty to defend.

Id.   In support, the Delaware Supreme Court cited to Lear Corp. v. Johnson

Electric Holdings Ltd., 353 F.3d 580, 584 (7th Cir. 2003), which stated: “[N]o

duty to defend means no duty to pay for the outlays of defense on a current basis.”

       Based on Majkowski and Winshall, we affirm the trial court’s determination

that the phrase “indemnify, defend and hold harmless” entitles the defendants to

the advancement of attorney’s fees and costs to defend the action filed against

them by the plaintiffs.     Any other holding would render the term “defend”

meaningless.2    Although we affirm the entitlement to the advancement of

attorney’s fees and costs, we reverse the amount awarded and remand for an

evidentiary hearing to give the plaintiffs an opportunity to contest the

reasonableness and scope of the attorney’s fees and costs requested by the

defendants, and in doing so, the trial court is specifically instructed not to award

2 We reject the plaintiffs’ secondary argument that the defendants are not entitled
to the advancement of fees and costs because they are guilty of unclean hands
based on the surreptitious and illegal withdrawal of $858,146. At this point, there
has been no determination as to whether the funds were illegally withdrawn, and
therefore, this allegation cannot be the basis for denying the advancement of fees
and costs.

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any fees and costs relating to the defendants’ counterclaims filed against the

plaintiffs.

       Affirmed in part, reversed in part, and remanded for further proceedings

consistent with this opinion.

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