IARUSSI v. LOBBYTOOLS INC (2023)

Appellant Sarah Michael and her then-husband ran a multimillion-dollar corporation together. For a while, business was going well. But the couple eventually divorced, and the company sued Michael for releasing trade secrets to competitors. Ultimately, the company dropped the suit. But Michael still had to pay her lawyers. Citing two statutory grounds, she moved for indemnification of her attorney's fees. The trial court denied her motion, and Michael now challenges that decision. We agree with the trial court and affirm.

I.

For over a decade, Michael was an officer for Appellee LobbyTools, Inc., an online service providing subscription-based legislative bill tracking. She was married to majority shareholder and chair John Iarussi. Over time, the relationship deteriorated, and the two divorced. LobbyTools accused Michael of violating her confidentiality and noncompete agreements. Ostensibly, she disclosed confidential information to competitors. The company cut her corporate power and sued.

Among other relief, LobbyTools wanted Michael to return all trade secret information. The company moved for a temporary injunction immediately preventing Michael from possessing or using any confidential information. The trial court denied the request. It held that Michael retained the right to some information during the divorce proceedings. But the court made clear that if Michael continued to possess such information afterward, she would face serious sanctions.

Finding the decision to be fair enough, LobbyTools voluntarily dismissed its action without prejudice. Yet Michael was still on the hook to pay her attorneys. So she sought fee indemnification from LobbyTools under sections 607.0850 and 768.79, Florida Statutes (2018). The trial court denied her motion, and Michael brings this timely appeal.

II.

We review statutory interpretation issues de novo. Tierra Holdings, Ltd. v. Mercantile Bank, 78 So. 3d 558, 561 (Fla. 1st DCA 2011).

We begin with Florida's Business Corporation Act. Section 607.0850, Florida Statutes (2018),¹ sets out when a corporation must pay litigation expenses on behalf of a director, officer, employee, or agent. To start, an officer (like Michael) must be sued (or prosecuted) “by reason of the fact” that she holds the position. § 607.0850(1), Fla. Stat. (2018); see also Banco Indus. De Venezuela C.A., Miami Agency v. De Saad, 68 So. 3d 895, 899 (Fla. 2011). If “successful on the merits or otherwise,” the company must indemnify the eligible party. § 607.0850(3), Fla. Stat. (2018).²

To prevail on appeal, Michael must meet these requirements. She does not. LobbyTools did not sue Michael by virtue of her position. Rather, the company sued because of her alleged conduct (retaining trade secret information and disclosing confidential information to competitors).

The facts are analogous to those before the Florida Supreme Court in De Saad. There, the United States prosecuted de Saad for money laundering while she was vice-president of the company Banco Industrial de Venezuela. De Saad, 68 So. 3d at 896. The trial court acquitted her of most counts, and she pleaded guilty to one count of money structuring. Id. De Saad then sought indemnification from the company under section 607.0850. Id. at 897. The Florida Supreme Court decided against de Saad, reasoning, in part, that the United States’ prosecution of de Saad was not “by reason of the fact” that she held her position with the company. Id. at 900. Rather, she was prosecuted because of her alleged conduct. Id. Thus, she was ineligible under section 607.0850. Id.

Just as de Saad was prosecuted for her alleged money laundering, Michael was sued because of her alleged disclosure of confidential information. Neither litigation was brought “by reason of the fact” that de Saad or Michael held their positions. Id. Michael is thus likewise barred from relief under section 607.0850.

Michael alternatively argues that she is entitled to indemnification under Florida's offer of judgment provision, section 768.79, Florida Statutes (2018). But that statute only provides a remedy when a case is dismissed with prejudice. MX Invs., Inc. v. Crawford, 700 So. 2d 640, 642 (Fla. 1997) (“We conclude that section 768.79, Florida Statutes (1991), does not provide a basis for the award of attorney fees and costs unless a dismissal is with prejudice.”) (emphasis added). LobbyTools dismissed the action without prejudice. Michael is therefore ineligible for indemnification under section 768.79.

Because Michael is not entitled to indemnification under either statute, we affirm.

Affirmed.

FOOTNOTES

1.   The relevant indemnification provisions have since been revised and renumbered, effective January 1, 2020. See Ch. 2019-90, § 107, Laws of Fla.

2.   As the statute's plain language makes clear, being “successful on the merits or otherwise” is not the only requirement for mandatory indemnification. § 607.0850(3), Fla. Stat. (2018) Rather, the requirement pertains to “any proceeding referred to in subsection (1) or subsection (2).” Id. (emphasis added); De Saad, 68 So. 3d at 899–900. Under those provisions, if a party is not sued “by reason of the fact” that she held her position in the company, id. § 607.0850(1) & (2), then she is not eligible for mandatory indemnification under subsection (3).

Nordby, J.

Roberts and Winokur, JJ., concur.