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A former vice president of Banco Industrial de Venezuela in Miami can sue the bank under Florida’s indemnification statute despite the fact that the bank is headquartered in Caracas. The state’s 3rd District Court of Appeal unanimously ruled last week that Esperanza de Saad can sue her former employer to recoup nearly $1.6 million in legal expenses she spent defending herself against federal money laundering charges in 1999. The decision overturned Miami-Dade Circuit Judge Bernard Shapiro’s February 2002 dismissal of de Saad’s claim. Shapiro ruled that Banco Industrial is a foreign corporation not bound by the indemnification law. But the three-judge appellate panel ruled that because the Miami branch was operating under special authorization from the Florida Department of State, the bank is subject to Florida law. Florida Statute 607.0850 requires corporations to pay legal expenses for employees who successfully defend themselves against criminal charges or lawsuits related to their jobs. “Section 607.0850 applies to BIV Miami given the fact that it is qualified to do business in Florida and thus assumes the same liabilities imposed upon a domestic corporation,” stated the opinion written by Judge Joseph Nesbitt. Judges Mario Goderich and Melvia Green concurred. Under Florida Statute 607.1505, foreign corporations with valid certificates of authority are subject to “the same duties, restrictions, penalties and liabilities imposed upon domestic corporations.” In rendering its decision, the 3rd District Court of Appeal relied primarily on this portion of Florida law governing business organization and corporations. This is the first time a Florida appellate court has considered whether foreign companies, including out-of-state U.S. corporations, are subject to the indemnification statute. “If there was any question about a foreign corporation’s responsibility under Florida law, that’s been clarified now,” said William Petros, a solo practitioner in Miami who represents de Saad. “As long as they have a certificate of authority, they accept all the same privileges and responsibilities as domestic corporations.” But others argue that this puts companies in the position of having to comply with different requirements in every state. “What if the company has officers in all 50 states?” asked Stanley Wakshlag, a shareholder at Akerman Senterfitt in Miami who handles corporate litigation. “The extent of indemnification it offers its employees shouldn’t be dependent on where that officer is employed.” In July 2000, de Saad’s conviction on 10 federal money laundering counts and one count of conspiracy was overturned. A federal judge ruled that the government had failed to prove during her five-week trial in U.S. District Court in Los Angeles that de Saad knew she was processing drug money. Following the reversal, de Saad pleaded guilty to one count of structuring a transaction to evade a reporting requirement as part of a plea agreement with the federal government. She received one year of probation and a $50,000 fine. In 2001, de Saad filed suit against Banco Industrial in Miami-Dade Circuit Court to recoup her legal expenses under Florida’s indemnification law. She also alleged breach of contract, claiming Banco Industrial wrongfully terminated her employment agreement following her arrest in one of the largest money laundering probes in U.S. history. She claimed the bank owes her more than $500,000 in backpay. De Saad’s case will now go back to the trial court for a hearing on the merits of her case. “Under Florida statute, there’s absolutely no question that she was successful on the merits in the money laundering case,” Petros said. “All she has to prove was that she ultimately won those charges for which she is seeking reimbursement of fees.” In February, the 3rd District Court of Appeal ruled that one of the attorneys that represented de Saad in the criminal trial, Joseph Beeler of Ferrell Schultz Carter Zumpano & Fertel in Miami, can intervene in her indemnification lawsuit against Banco Industrial. De Saad still owes Beeler more than $1 million. But Banco Industrial’s attorney, Lawrence Gordich, said de Saad still has a long way to go to prove her claims against the bank. “All the appellate court did was decide that she’s allowed to bring the indemnification claim,” said Gordich, a partner at Ruden McClosky Smith Schuster & Russell in Miami. Given her guilty plea to the transaction structuring charge, Gordich said, de Saad is unlikely to win her indemnification claim against Banco Industrial, considering she wasn’t entirely successful in her defense. Petros, however, argues that the two cases are entirely separate because the transaction structuring charge was a new count federal prosecutors brought against de Saad after her first conviction was overturned. It had nothing to do with the money laundering sting, Petros said. Last week’s appellate ruling in de Saad’s favor, which is law throughout Florida because there are no conflicting appellate rulings from other districts, applies to tens of thousands of companies. There are 47,400 active and 116,300 inactive foreign corporations now registered in Florida. A foreign corporation includes out-of-state companies, as well as those headquartered in other countries. The majority of those registered in Florida are U.S. companies based in other states. All foreign corporations that do regular business in Florida are required to get a certificate of authority from the Florida Department of State’s Division of Corporations. To keep their certifications active, foreign corporations must file annual business reports with the department and designate a local contact who can be served with lawsuits. Under certain circumstances, foreign corporations are not required to register, such as in cases of interstate commerce and limited partnerships with Florida companies. The benchmark is whether the company has set up shop within the state, with local offices and employees, said Henry Mendia, a partner at Steel Hector & Davis in Miami who specializes in international litigation. “A foreign corporation that engages in regular business in Florida should be treated just like a Florida corporation,” Mendia said. “There’s no reason to treat them more favorably.” But Stanley Wakshlag said the appellate ruling could lead to chaos. It could subject corporations to rules that vary from state to state and hamper them from establishing uniform operating guidelines. “When dealing with how a corporation is formed, structured and operates, there’s a lot to be said for being governed by one law, presumably the law of the state where it’s incorporated,” Wakshlag said. While it’s reasonable to allow Florida citizens to sue foreign corporations in their home state in cases involving product liability and breach of contract, indemnification is a different story, Wakshlag argued. Indemnification has more to do with the internal operations of a corporation, rather than the company’s relationship with the public, he said.

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