Background
Salt and Light Energy Equipment L.L.C. obtained a $3 million revolving line of credit from Origin Bancorp, Inc., doing business as Origin Bank. The loan was secured by a security interest and governed by a Revolving Credit and Security Agreement containing an indemnification provision requiring the borrower to cover attorney’s fees arising from claims or defenses relating to the collateral, liabilities, or loan documents.
Salt and Light later sued Origin for alleged violations of Texas Business and Commerce Code §§ 1.304 and 9.607(c), and added a business-disparagement claim. After the district court granted Origin summary judgment and the Fifth Circuit affirmed, the district court awarded Origin $909,334.10 in defensive attorney’s fees under the agreement. Salt and Light appealed only the fee award.
The Court’s Holding
The Fifth Circuit affirmed. Assuming without deciding that the contractual provision was an indemnity clause, the court held that Texas’s fair-notice requirements—including the express-negligence and conspicuousness rules—did not apply because Salt and Light had not asserted a negligence claim. Section 1.304 imposes an obligation of good faith, not ordinary care, and its breach does not create a negligence cause of action under Texas law.
The court also rejected Salt and Light’s argument that the provision improperly disclaimed Origin’s nonwaivable statutory duties. Origin sought fees for successfully defending the good-faith and business-disparagement claims, not indemnification for its own statutory violation. The court characterized that application as contractual fee shifting and noted that Salt and Light identified no authority making it unenforceable. It did not decide whether the provision would be enforceable if Origin sought indemnification for its own breach of a statutory duty.
Key Takeaways
- Texas’s express-negligence and conspicuousness requirements did not govern because Salt and Light asserted no negligence claim.
- A statutory obligation of good faith is distinct from a duty to exercise ordinary care and does not itself make a claim negligence-based.
- Enforcing the agreement to recover fees for successfully defending these claims did not amount to disclaiming Origin’s statutory duties.
Why It Matters
The decision confirms that Texas fair-notice rules for indemnification against a party’s own negligence are not automatically triggered whenever a contract provision is labeled as indemnification. The nature of the underlying claim matters.
For lenders and borrowers, the ruling also illustrates that broadly drafted loan-document provisions may support substantial fee awards in litigation between the contracting parties, while leaving unresolved whether the same language could cover fees or liability arising from the protected party’s own statutory breach.