Post by Sapphire Capital on Jul 6, 2014 4:14:10 GMT 4
Public Policy Voids Indemnification Clause
In Crown v. Kobrick Offshore Fund, Ltd., 85 Mass. App. Ct. 214 (2014), a stock subscription agreement contained an indemnification clause in favor of the issuer. The defendant/ issuer prevailed on a securities fraud claim, and sought recovery of its legal fees in a counterclaim alleging this indemnification clause. The Appeals Court rejected the issuer's claim even while acknowledging that the issue was one of "uncertainty in Massachusetts, given the dearth of appellate guidance on this issue." After examining Federal and Massachusetts cases, it concluded that Massachusetts public policy aligns with the public policy of the Federal Securities Act as set forth by those federal district courts that have refused to enforce such indemnification provisions.
In Crown v. Kobrick Offshore Fund, Ltd., 85 Mass. App. Ct. 214 (2014), a stock subscription agreement contained an indemnification clause in favor of the issuer. The defendant/ issuer prevailed on a securities fraud claim, and sought recovery of its legal fees in a counterclaim alleging this indemnification clause. The Appeals Court rejected the issuer's claim even while acknowledging that the issue was one of "uncertainty in Massachusetts, given the dearth of appellate guidance on this issue." After examining Federal and Massachusetts cases, it concluded that Massachusetts public policy aligns with the public policy of the Federal Securities Act as set forth by those federal district courts that have refused to enforce such indemnification provisions.