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Keywords

attorneystatutemotionsummary judgmentcorporationlegal counselprosecutorgood faithgrand jurymotion for summary judgment

plaintiffdefendantattorneystatutemotionsummary judgmentcorporationgood faithgrand jurymotion for summary judgment

Related Cases

Stewart v. Continental Copper and Steel Industries, Inc., 67 A.D.2d 293, 414 N.Y.S.2d 910, 1979-2 Trade Cases P 62,876

Facts

Stewart was employed by Continental Copper and Steel Industries, Inc. from 1971 to 1976, serving as both Vice-President and President. In 1977, he was contacted by a federal prosecutor regarding an investigation into the copper wire industry and was advised to retain legal counsel. After hiring an attorney and testifying before a grand jury under a grant of immunity, Stewart sought indemnification for the legal fees incurred, which the corporation denied, claiming his appearance did not meet the criteria for indemnification under their corporate bylaws or Delaware law.

The basic facts underlying this controversy are not in dispute. Plaintiff was employed by defendant, a Delaware corporation, from November 15, 1971 until his resignation on August 31, 1976, in the capacity of both Vice-President and President. In June of 1977, plaintiff was contacted by Brian Robbins, an Assistant United States Attorney, who sought to interview him in New York City concerning the Justice Department's on-going investigation in the copper wire industry.

Issue

Is Stewart entitled to indemnification for legal expenses incurred while testifying before a federal grand jury under Delaware's indemnification statute and the corporation's bylaws?

Rule

Under Delaware law, specifically Title 8 Del.C. s 145, a corporation may indemnify any person who was or is a party to any threatened, pending, or completed action, suit, or proceeding by reason of their position as an officer or employee, provided they acted in good faith and in a manner they reasonably believed to be in the best interests of the corporation.

Analysis

The court found that Stewart was indeed a 'party' to the grand jury investigation, as he was advised to hire an attorney and was a target of the investigation. The court emphasized that the indemnification statute is designed to protect corporate officials from unjustified claims and to encourage them to serve without fear of personal financial loss. Since Stewart was never indicted and had cooperated with the investigation, he qualified for indemnification under both the corporation's bylaws and Delaware law.

Conclusion

The Appellate Division reversed the lower court's decision, granted Stewart's motion for summary judgment, and denied the corporation's motion, remanding the case for an assessment of reasonable attorney fees.

Who won?

Stewart prevailed in the case because the court determined he was entitled to indemnification under Delaware law, as he was a party to the grand jury investigation and had not been found liable for any misconduct.

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