The Delaware Court of Chancery in Daugherty v. Highland Capital Management, L.P., C.A. No. 2017-0488-SG (Del. Ch. June 29, 2018), primarily addressed the issue of laches and equitable tolling that constituted the majority of the 29-page decision, but the last two pages relating to indemnification are the most memorable parts of the opinion. The procedural history of the case is relatively lengthy and somewhat involved.
The most noteworthy aspect of this case is the indemnification claim. The parties in this case were involved in lengthy litigation in Texas after which the party seeking indemnification brought suit in Delaware. One of the issues was whether it took too long to proceed in Delaware. The indemnification claim was not barred by laches based on an extensive analysis by the court of the facts of the case.
The most widely applicable bullet points from this case regarding indemnification are the following:
- “A cause of action for indemnification accrues when the officer or director entitled to indemnification can be confident any claims against him have been resolved with certainty.” See footnote 120 (quotations omitted).
- The court explained that the “certainty” required as a prerequisite for indemnification “requires the resolution of any appellate review.”
- As a general matter, “adjudicating indemnification claims piecemeal is highly inefficient.” See footnote 122.
- The court also rejected the defense that the indemnification claims related to personal contractual obligations as opposed to acts performed in the name of the entity against whom indemnification was sought, but the court found at the early pleading stage it was reasonably conceivable that the claimant was acting in his position as an employee of the entity with respect to at least some of the claims defended in the Texas litigation for which he is seeking indemnification.