What are the Auntie Annes franchisee's obligations regarding the employment of counsel when assuming the defense of a claim?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
You shall have the right, upon written notice delivered to the Indemnified Party within 15 days thereafter assuming full
responsibility for Losses resulting from such claim, to assume and control the defense of such claim, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel. If (i) the Indemnified Party shall have been advised by counsel that there are one or more legal or equitable defenses available to it that are different from or in addition to those available to you and, in the reasonable opinion of the Indemnified Party, the counsel that you have selected could not adequately represent the interests of the Indemnified Party because such interests could be in conflict with your interests, (ii) you do not assume responsibility for such Losses in a timely manner, (iii) the claim involves any elements of the Intellectual Property, or (iv) you fail to defend a claim with counsel reasonably satisfactory to the Indemnified Party as contemplated above, then the Indemnified Party shall have the right to assume the defense of any claims and employ counsel of its own choosing and you shall pay the reasonable fees and disbursements of such Indemnified Party's counsel as incurred; provided that in any case, you shall not be obligated to pay the expenses of more than one separate counsel for all Indemnified Parties taken together. In connection with any claim, the Indemnified Party or you, whichever is not assuming the defense of such claim, shall have the right to participate in such claim and to retain its own counsel at such party's own expense.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, if a third party brings a claim against Auntie Annes or its affiliates related to the franchisee's business operations, the franchisee may be required to defend and indemnify Auntie Annes. If the franchisee chooses to assume the defense, they must provide written notice to Auntie Annes within 15 days and employ counsel that is reasonably satisfactory to Auntie Annes. This includes responsibility for payment of the counsel's fees and disbursements.
However, Auntie Annes has the right to assume the defense and choose its own counsel under certain conditions. These conditions include situations where Auntie Annes's counsel advises that there are different or additional legal defenses available to Auntie Annes that the franchisee's counsel cannot adequately represent due to potential conflicts of interest. This also applies if the franchisee does not assume responsibility for the losses in a timely manner, if the claim involves elements of intellectual property, or if the franchisee fails to defend the claim with reasonably satisfactory counsel.
If Auntie Annes assumes the defense, the franchisee is responsible for paying the reasonable fees and disbursements of Auntie Annes's counsel, but the franchisee will not be obligated to pay the expenses of more than one separate counsel for all indemnified parties. Regardless of who is defending the claim, the other party has the right to participate in the claim and retain their own counsel at their own expense. Both parties are required to keep each other informed about the defense's status and cooperate in good faith.