Indemnification Claim Dismissed as Premature

Huff v.  Longview Energy Co., C.A. No. 8453-CS (Del. Ch. Aug. 12, 2013).

This short letter ruling granted a motion to dismiss a claim for indemnification pursuant to DGCL section 145(c) based on the reasoning that the claim was premature in light of the underlying judgment being subject to a pending appeal.  Even though a judgment was rendered against the claimant directors in Texas for breach of the fiduciary duty of loyalty, the directors claimed in this matter that they were still successful for the limited purposes of Section 145(c). In addition, that Texas judgment against them (for nearly $100 million) was pending appeal.

Indemnification is typically not a ripe claim until the underlying litigation on which it is based is final and all appeals completed. The Delaware Court of Chancery explained in this pithy decision why the issue of whether the claimant-directors were “successful” in the underlying litigation would not be addressed, for purposes of Section 145, until the underlying Texas litigation was completely ended and all appeals exhausted.