The Enforceability of Partial-Principal Indemnity Agreements and the Reasonableness Standard for Settlements under North Carolina Law

Introduction

This commentary examines the Fourth Circuit’s unpublished decision in Front Row Motorsports, Inc. v. Michael DiSeveria, No. 24-1626 (4th Cir. Apr. 28, 2025). The case arises from Front Row Motorsports’ purchase of a NASCAR charter from BK Racing, LLC and the subsequent discovery of a bank lien on the charter. Two of BK Racing’s principals, Michael DiSeveria and Ronald C. Devine, executed an indemnity agreement obligating them to defend and indemnify Front Row against claims by Union Bank and Trust. After settling a foreclosure suit with Union Bank for $2.1 million, Front Row sought reimbursement from DiSeveria and Devine, who refused. Key issues include:

Whether an indemnity agreement signed by only two of three principals was enforceable;
Whether indemnification of a civil conspiracy claim offends public policy;
The adequacy of consideration supporting the indemnity;
Whether Front Row’s $2.1 million settlement with Union Bank was reasonable.

Summary of the Judgment

The Fourth Circuit affirmed the district court’s grant of summary judgment to Front Row on all but one issue and, after a bench trial, affirmed the finding that the settlement was reasonable. The appellate court held:

The indemnity agreement was valid and enforceable under North Carolina law even though one BK principal (Wayne Press) did not sign.
No North Carolina public policy barred indemnification of a civil conspiracy claim in a civil foreclosure action.
Front Row provided adequate consideration by paying the second $1 million installment and forbearing setoff rights.
The district court did not clearly err in finding Front Row’s $2.1 million settlement reasonable given a potential $9 million liability and prior higher settlement offers.

Analysis

Precedents Cited

The Fourth Circuit relied on established contract-interpretation and summary-judgment standards:

Wilson v. Prince George’s Cnty., 893 F.3d 213 (4th Cir. 2018) – de novo review of summary judgment under Fed. R. Civ. P. 56(a).
Brown v. Between Dandelions, Inc., 849 S.E.2d 67 (N.C. Ct. App. 2020) – North Carolina law: contract interpretation and existence are questions of law.
Brundle ex rel. Constellis v. Wilmington Tr., N.A., 919 F.3d 763 (4th Cir. 2019) – clear-error review of factual findings after a bench trial.
National Federation of the Blind v. Lamone, 813 F.3d 494 (4th Cir. 2016) – legal conclusions de novo review.

Legal Reasoning

The court’s reasoning can be broken into four pillars:

Condition Precedent and Merger Clause. The indemnity agreement contained no language making Press’s signature a condition precedent. The merger clause barred extrinsic evidence suggesting otherwise. Under North Carolina law, absent explicit conditions, partial execution does not defeat a fully integrated agreement.
Public Policy. The appellants argued that one claim was styled as a “business conspiracy” under Virginia statute, implying a criminal conspiracy. The court observed that Union Bank’s suit was purely civil (collection and foreclosure), so indemnifying it did not violate public policy.
Consideration. DiSeveria and Devine contended Front Row gave no new consideration. The court held that Front Row’s forbearance of setoff rights and payment of the final $1 million installment upon learning of the lien satisfied the bargain requirement.
Reasonableness of Settlement. Under North Carolina law, an indemnitee’s settlement is binding if made in good faith and reasonable under the circumstances. The district court credited evidence of a potential $9 million exposure and prior settlement offers over $2.1 million. The Fourth Circuit found no clear error.

Impact

This decision underscores several practical lessons for contract drafters and litigants:

Integration Clauses Matter: A clear merger clause will bar extrinsic arguments about unwritten conditions to liability.
Multi-Signer Indemnities: If a contract does not explicitly require every principal to sign, obligors cannot rely on a holdout signer to escape liability.
Settlement Strategy: Courts will uphold reasonable settlements in light of potential exposure—document risk assessments and prior settlement offers.
Consideration in Amendments: Even forbearance of legal rights (e.g., setoff) can constitute adequate consideration for modifications or side-agreements.

Complex Concepts Simplified

Indemnity Agreement: A promise by one party to reimburse and defend another against specified losses or claims.
Lien: A legal claim on property to secure payment of a debt; here, Union Bank held a lien on the NASCAR charter.
Merger Clause: A provision stating that the written agreement is the complete and final expression of the parties’ understanding.
Summary Judgment: A pre-trial decision granting judgment as a matter of law if no material facts are in dispute.
Bench Trial vs. Jury Trial: A bench trial is before a judge only; factual findings in a bench trial are reviewed for clear error on appeal.

Conclusion

Front Row Motorsports, Inc. v. DiSeveria clarifies that under North Carolina law:

An indemnity agreement need not be signed by every intended obligor unless the contract expressly so requires;
Indemnification of civil conspiracy or foreclosure claims does not violate public policy;
Payment after discovering a lien and forbearance of legal rights provide sufficient consideration;
Courts will uphold reasonable, good-faith settlements when the indemnitee faces substantial exposure.

The Fourth Circuit’s decision offers valuable guidance for drafting indemnity provisions, assessing consideration in contractual modifications, and structuring settlements to withstand judicial scrutiny.