The catalyst for this essay is an Oct. 1 article in the Law Journal, “Scope of Indemnification Rights Under LLC Law Limited,” which reported a decision of the Appellate Division, First Department that denied a claim for reimbursement of legal fees incurred to obtain indemnity under the indemnity provision of an LLC operating agreement. The indemnity clause under the operating agreement was silent on the subject: it did not provide for reimbursement of legal expenses incurred by a party to establish its right to indemnity. Thus, court’s ruling is clearly correct.
Though the article focuses on indemnities under LLC operating agreements, the principle applies to all indemnities: under LLC operating agreements, partnership agreements, consulting agreements, employment contracts, licenses of intellectual property, and straight on ’til morning. And this concern with indemnities is merely a portal to a broader issue: the right to reimbursement of legal costs in any dispute arising under any contract.
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