Apparently some companies don’t know what indemnity means.

In Johansen v. Liberty Mutual, 118 F.4th 142 (5th Cir. Sept. 25, 2024) the Fifth Circuit Court of Appeals was happy to educate lead-supplier Digitas, Inc.

This story is old as time.

Liberty Mutual buys warm transfer leads from Digitas, Inc. One of those leads happened to result in phone calls to Ken Johansen, a man who was formerly famous for bringing TCPA suits (but no longer.) Johansen does what he does (or did) and files a TCPA class action against Liberty Mutual.

Although the Johansen suit resolved, the battle over indemnity for the lawsuit did not. Liberty Mutual demanded Digitas, Inc.–the lead supplier– defend and indemnify it in the Johansen suit. But Digitas did not.

Digitas claimed it did not owe indemnity because LM did not formally tender defense to Digitas and the underlying suit resolved without a finding of liability.

These were not terribly strong arguments and the Fifth Circuit Court of Appeals rejected each of them last month.

The Court found under the applicable contract terms indemnity was owed regardless of whether the underlying suit resulted in a finding of liability–very common–and that LM merely had to notify Digitas of the suit, not give it advise it to choose its own counsel and control the defense (although Digitas had the opportunity.)

So now Digitas has to pay LM for the cost of defending the TCPA suit, which it should have just done from the start and saved a bunch of dough.

Couple of take aways:

1. Lead suppliers need to keep in mind obligations they owe to defend suits and take that seriously;
2. Lead buyers should be looking to push liability onto the party that actually screws up–i.e. provides fake leads. And, of course, indemnity is owed even if the underlying case does not resolve in a finding of liability;
3. Third-party lead purchases ALWAYS carry risk. So lead buyers need to be thoughtful about who they are working with– a failure to honor an indemnity obligation is a pretty big deal.