According to Mr. Neugebauer, the Housing and Economic Recovery Act of 2008, which created the new federal overseer of Fannie and Freddie Mac, allowed for the indemnification contracts to be voided.
Mr. DeMarco and Mr. Pollard replied that refusing to honor the indemnification contracts would have resulted in additional legal bills because the executives would have sued.
The provision in the one-year contract involves indemnification.
On Tuesday, McHugh responded to Blumenauer, explaining that KBR has not asserted its claims under the contract's indemnification clause.
Sellers usually want to wrap all their post-deal exposure into one section of one contract -- indemnification -- instead of having to worry about any number of other legal claims where buyers can attempt to pin problems back on them.
For example, Mr. Siegler said, many management contracts contain "indemnification clauses" that could make the co-op ultimately liable for the negligence of the managing agent.
Jonathan S. Abady, a lawyer whose firm, Emery Celli Brinckerhoff & Abady, has handled suits against the city and private agencies in cases involving abused and neglected children, said "there does appear to be a uniform indemnification provision" in the contracts the city has with such agencies.
More than 120 military contracts include indemnification clauses -- essentially, promises that the Pentagon will pick up the tab if contractors are sued.
No one uses the party of the first part or the party of the second part anymore, but third parties are still in contracts, and M&A indemnification provisions typically spell out how buyer and seller will respond when some other person makes a claim against one of them or the company.
But, Mr. Grayson pointed out: "If these companies had gone into receivership instead of conservatorship, the trustee in bankruptcy or the receiver would have been free, legally, to reject these contracts that called for indemnification.
Judge Levine wrote a very vocal dissent from the Fourth District Court's majority decision to invalidate the indemnification agreement, saying the importance of upholding contract rights should prevail over public policies protecting the rights of an injured child.
