Waltuch v. Conticommodity Services, Inc. case brief summary
88 F.3d 87
SYNOPSIS: Appellant employee sought review of an order, entered by the United States District Court for the Southern District of New York, denying appellant's claim against appellees, his former employer and its corporate parent, for indemnification of litigation expenses incurred by appellant in defending work-related litigation.
FACTS:
-After the silver market crashed, customers sued appellant employee, a former silver trader, and appellees, his former employer and its corporate parent.
-Appellees settled the private lawsuits.
-Appellant, who had also been sued by a regulatory agency, resolved the regulatory case by paying a fine and accepting a six-month trading bar.
-Appellant then sued appellees for expense indemnification.
-When the lower court ruled for appellees, appellant sought review.
-The court reversed in part and affirmed in part.
HOLDING:
The court agreed with the lower court that an article of incorporation which required appellees to indemnify appellant for such expenses regardless of whether appellant acted in good faith was invalid and unenforceable because it exceeded the scope of indemnity granted to corporations by Del. Code Ann. tit. 8, § 145(a). The court found, however, that appellant was entitled to indemnity under Del. Code Ann. tit. 8, § 145(c) (1991) for private lawsuit expenses.
ANALYSIS:
Appellant did not make any payment or assume any liability in connection with the settlement, meaning that he had been "successful on the merits or otherwise," and was entitled to indemnity without regard to good faith.
OUTCOME: The lower court's ruling denying appellant former employee's indemnity claim against appellees, his former employer and its corporate parent, was affirmed in part and reversed in part. The court found a private grant of indemnity invalid because it exceeded the powers given corporations by law, but the court held that appellant was entitled to indemnity under a statutory provision because he had been "successful on the merits or otherwise."
NOTES:
Indemnification must be consistent with current DE law.
-In Hibbert, it was held that Hibbert was entitled to indemnification under the plain terms of a company bylaw that did not draw a distinction between P and D directors.
-There is no power to indemnify W if he did not act in good faith.
-Article Ninth has no good faith requirement.
-Conti argues that 145(a) of DE law, which does have a good faith requirement, fixes the outer limits of the corporation’s power to indemnify.
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88 F.3d 87
SYNOPSIS: Appellant employee sought review of an order, entered by the United States District Court for the Southern District of New York, denying appellant's claim against appellees, his former employer and its corporate parent, for indemnification of litigation expenses incurred by appellant in defending work-related litigation.
FACTS:
-After the silver market crashed, customers sued appellant employee, a former silver trader, and appellees, his former employer and its corporate parent.
-Appellees settled the private lawsuits.
-Appellant, who had also been sued by a regulatory agency, resolved the regulatory case by paying a fine and accepting a six-month trading bar.
-Appellant then sued appellees for expense indemnification.
-When the lower court ruled for appellees, appellant sought review.
-The court reversed in part and affirmed in part.
HOLDING:
The court agreed with the lower court that an article of incorporation which required appellees to indemnify appellant for such expenses regardless of whether appellant acted in good faith was invalid and unenforceable because it exceeded the scope of indemnity granted to corporations by Del. Code Ann. tit. 8, § 145(a). The court found, however, that appellant was entitled to indemnity under Del. Code Ann. tit. 8, § 145(c) (1991) for private lawsuit expenses.
ANALYSIS:
Appellant did not make any payment or assume any liability in connection with the settlement, meaning that he had been "successful on the merits or otherwise," and was entitled to indemnity without regard to good faith.
OUTCOME: The lower court's ruling denying appellant former employee's indemnity claim against appellees, his former employer and its corporate parent, was affirmed in part and reversed in part. The court found a private grant of indemnity invalid because it exceeded the powers given corporations by law, but the court held that appellant was entitled to indemnity under a statutory provision because he had been "successful on the merits or otherwise."
NOTES:
Indemnification must be consistent with current DE law.
-In Hibbert, it was held that Hibbert was entitled to indemnification under the plain terms of a company bylaw that did not draw a distinction between P and D directors.
-There is no power to indemnify W if he did not act in good faith.
Otherwise, the good faith clause would have no meaning.
145(c) affirmatively requires corporations to indemnify its officers and directors for the successful defense of certain claims.
Success is sufficient to constitute vindication (under 145(c)). W’s settlement vindicated him.
-Article Ninth has no good faith requirement.
-Conti argues that 145(a) of DE law, which does have a good faith requirement, fixes the outer limits of the corporation’s power to indemnify.
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