Under what circumstances can the Indemnified Party approve a proposed settlement of a Third-Party Claim related to Camp Margaritaville?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
Any Indemnified Party shall be entitled, upon written notice to the Indemnifying Party, to the timely appointment of counsel by the Indemnifying Party for the defense of any Third-Party Claim, which counsel shall be subject to the commercially reasonable approval of the Indemnified Party.
If, in the Indemnified Party's commercially reasonable judgment, a material conflict of interests exists between the Indemnified Party and the Indemnifying Party at any time during the defense of the Indemnified Party, the Indemnified Party may appoint independent counsel of its choice for the defense of the Indemnified Party as to such Third-Party Claim.
- (b) Participation in Defense.
Regardless of whether the Indemnified Party has appointed counsel or selects independent counsel:
- (i) the Indemnified Party shall have the right, at its sole cost and expense (except as provided in (ii) below), to participate in the defense of any Third-Party Claim and approve, on a commercially reasonable basis, any proposed settlement of such Third-Party Claim, unless: [A] such settlement involves only the payment of money other than by the Indemnified Party; [B] the Indemnifying Party pays all amounts due in connection with or by reason of such settlement and, as part thereof; and [C] the Indemnified Party is unconditionally released from all liability in respect of such Third-Party Claim; and
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, an Indemnified Party has the right to approve any proposed settlement of a Third-Party Claim on a commercially reasonable basis. However, this right is subject to certain exceptions.
Specifically, the Indemnified Party's approval is not required if the settlement meets all of the following conditions: the settlement involves only the payment of money other than by the Indemnified Party, the Indemnifying Party pays all amounts due because of the settlement, and the Indemnified Party is unconditionally released from all liability concerning the Third-Party Claim.
This means that Camp Margaritaville franchisees may need to be actively involved in settlement negotiations to protect their interests unless the settlement is straightforward and they are fully released from liability. Franchisees should carefully review any proposed settlement terms and seek legal counsel to ensure their rights are protected.