How to Get the Other Side to Pay for Your Lawyer – Exceptions to the American Rule
In Texas, we operate under the American Rule, which basically means you have to pay for your own lawyer. But there are some exceptions to the American Rule in Texas.
When a Company Sues Its Director or Officer – Defense and Indemnity Obligations
The one I want to talk about is in the case of a lawsuit of a company against its director or officer. Oftentimes, In the employment contract or the bylaws of the company, there are obligations that the company pay for director or officer defense and indemnity of lawsuits. This can be for lawsuits brought by third parties but it can also be defense and indemnity of lawsuits brought by the company against the officer and director. This is a valuable tool for officers and directors who find themselves defendants in lawsuits
The Trouble with Defense and Indemnity Obligations
The problem with defense and indemnity obligations are, often that requires the officer or director to pay for their lawyer the entirety of the pendency of the lawsuit. As a result, officers and directors are often forced to settle lawsuits on terms they believe are unjust because they just can bear the burden of the defense cost.
Obligation of Advancement of Attorney Fees
In some contracts and some bylaws, there is an obligation for the advancement of attorneys fees. This obligation offers the officer and director an opportunity to get the company to pay for his attorney’s fees as they are incurred. This is an extremely valuable tool for an officer or director who has been sued by his own company. If you are successful in your advancement claim, suddenly the company is having to pay its own lawyer, as well as pay yours. This gives the officer or director an opportunity to resolve the case sooner rather than suffer through years of litigation.
The issues in advancement claims are complex, they are affected not only by the obligations presented in the documents but the facts of the lawsuit itself. Analyzing the facts and these documents is something that we do at Richards Rodriguez & Skeith LLP. Visit our contact page to get in touch with our office for a consultation if you would like further information.