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In Tangas v. Int'l House of Pancakes, LLC, No. 18-3217, 2019 WL 2591719 (6th Cir. June 25, 2019), the court of appeals vacated summary judgment and remanded the case for trial as to whether the defendants must indemnify its former employee, a franchise business consultant, for the legal fees that she incurred when the Federal Bureau of Investigation (FBI) indicted as co-conspirators her and a franchise owner in her assigned territory for money laundering and hiring undocumented workers, and then dismissed the charges against her. Because the dismissed charges related to her duties as a representative, the plaintiff argued that the defendants should pay her legal fees. In contrast, the defendants contended that she acted in bad faith and is not covered by their indemnification provision. The court of appeals determined that the defendants made conscious choices to create expansive indemnification rights in their governing documents under Delaware law, but determined that there are disputed issues of fact as to whether the plaintiff is entitled to their protection. Critical to its determination that the indemnity clause could cover the plaintiff, the court of appeals disagreed with the district court's conclusion that an employee of a subsidiary company serves at the request of its parent company only when the parent company appoints the employee to a specific condition. In addition to resolving the factual disputes over whether the plaintiff was serving a subsidiary at the request of the parent, a trier of fact must also examine whether the plaintiff acted in good faith. The defendant also argued that indemnity should not apply to the plaintiff as a former employee and that most of her legal bills were incurred after her termination. The court of appeals ruled that the distinction between former and current employees is irrelevant because the plaintiff's rights vested under the agreement when the FBI began investigating her before she was fired.

Food and Beverage Law Update: July 2019

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