Wendt v. La Costa Beach Resort Condominium Association, Inc., No. SC09-1914 (June 9, 2011)

Florida Supreme Court holds that F.S. 607.0850 provides for indemnification to the directors of a condo association when sued by the association itself.

In July 2003, La Costa Beach Resort Condominium Association, Inc. (La Costa) brought suit against three directors of the timeshare condominium for breach of fiduciary duty. After the verdict, the directors moved for a new trial and brought a separate indemnification action, pursuant to F.S. 607.0850, against La Costa for expenses incurred in defending La Costa's suit. The trial court dismissed the directors' indemnification action with prejudice on various grounds. On appeal, the 4th District Court of Appeals affirmed the trial court, holding that because there is no statutory right to indemnification in actions between a corporation and its own directors, the directors did not state a cause of action. At the same time the 4th DCA certified conflict with the 1st DCA's decision in Turkey Creek Master Ass'n v. Hope, 766 So.2d 1245 (Fla. 1st DCA 2000), which stated that F.S. 607.0850 provides for indemnification in cases in which a corporation has sued its own agent. Indemnity is generally defined as the "duty to make good any loss, damage, or liability incurred by another" or "[t]he right of an injured party to claim reimbursement for its loss, damage or liability from a person who has such a duty." Black's Law Dictionary, 837 (9th Ed. 2009). F.S. 607.0850 is Florida's corporate indemnification statute setting forth the conditions under which corporate directors, officers, employees and agents are entitled to indemnification. The plain language of F.S. 607.0850 does not prevent indemnification of directors when the underlying proceeding is between the corporation and its directors. The district courts applying F.S. 607.0850 have routinely held that the statute provides for indemnification when the underlying lawsuit is between the corporation and its director, officer, employee or agent. See O'Brien v. Precision Response Corp., 942 So.2d 1030 (Fla. 4th DCA 2006) (holding that a corporate officer successfully defending claims brought against him by the corporation is statutorily entitled to seek indemnification for attorneys fees under 607.0850); Turtle Creek, 766 So. 2d at 1247 (however, 607.0850 also provides for indemnification in a case such as this one where a corporation has sued its own agent); Nat'l Portland Cement Co. v. Goudie, 718 So.2d 274 (Fla. 2d DCA 1998); Myakka Valley Ranches Improvement Ass'n v. Bieschke, 610 So.2d 3 (Fla. 2d DCA 1992); and Alternative Dev., Inc. v. St. Lucie Club & Apartment Homes Condo. Ass'n, 608 So.2d 822 (Fla. 4th DCA 1992). The Court also noted that the 4th DCA's reasoning and conclusion in Wendt are at odds with the plain language of the statute, which clearly sets forth various restrictions on when indemnification is proper, and none of these restrictions exclude lawsuits between a corporation and its director. The Court concluded that F.S. 607.0850 authorizes corporate directors to seek indemnification from the corporation for actions brought against the directors by the corporation itself. It quashed the 4th DCA's decision in Wendt and approved the 1st DCA's reasoning in Turkey Creek on the conflict issue.

Case Law Alert - 4th Qtr 2011