Int'l Airport Center v. Citrin, Jacob ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-2073
INTERNATIONAL AIRPORT CENTERS, L.L.C., et al.,
Plaintiffs-Appellants,
v.
JACOB CITRIN,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 8104—Wayne R. Andersen, Judge.
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ARGUED AND DECIDED MAY 31, 20061—OPINION JULY 25, 2006
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Before POSNER, WILLIAMS, and SYKES, Circuit Judges.
POSNER, Circuit Judge. This appeal is a sequel to our
reversal earlier this year of the district court’s dismissal of
the plaintiffs’ suit for failure to state a claim. 440 F.3d 418
(7th Cir. 2006). Because the suit had been dismissed on the
pleadings, we assumed that the facts alleged in it were true;
we made no factfindings. The complaint alleged that the
defendant, Citrin, had, while employed by the plaintiffs
(IAC for short), committed a breach of his fiduciary obliga-
1
With notation that an opinion would follow.
2 No. 06-2073
tions to his employer when he deleted certain company data
from the laptop that IAC had lent him to use in his work.
The only question we decided was whether, if the facts
alleged in the complaint were true (and, to repeat, we made
no findings on that score), the defendant had, as charged in
the complaint, violated the federal Computer Fraud and
Abuse Act, 18 U.S.C. § 1030. We answered “yes” and so sent
the case back to the district court for further proceedings.
Citrin then asked IAC—and when IAC refused brought
suit in the Delaware Chancery Court for an order compel-
ling IAC—to advance him money for the attorneys’ fees and
other expenses that he was incurring to defend against
IAC’s suit. Citrin’s employment contract required IAC to
indemnify him for any damages he might incur if he
was sued based on acts performed in connection with
the company’s business and prevailed in the suit, but also
to pay his expenses of defending any suit based on such acts
“in advance of the final disposition of such action . . . upon
receipt of an undertaking by [him] to repay such amount
plus reasonable interest in the event that it shall ultimately
be determined that [he] was not entitled to be indemnified.”
Thus, if and when Citrin is found in our case to have
breached his fiduciary duty to IAC, he will not be entitled
to indemnity and therefore he will have to repay any money
advanced to him by the company. His Delaware suit seeks
advancement of the $1.3 million in attorneys’ fees that he
claims to have incurred already.
IAC is chartered in Delaware and concedes that Delaware
law governs Citrin’s contractual entitlement to the advance
that he is seeking. Nevertheless it asked the district court to
enjoin him from litigating the Delaware suit, on the ground
that the suit is a collateral attack on our ruling that IAC has
stated a claim against him under the federal computer fraud
No. 06-2073 3
statute. The district court denied the motion for a prelimi-
nary injunction, and IAC has appealed.
The Delaware suit is not a collateral attack on our rul-
ing. Citrin is not asking the Delaware court to hold, contrary
to our decision, that IAC has failed to state a claim under
the federal computer statute. He is not asking to be indem-
nified on the ground that he is innocent of the charge of
breach of fiduciary obligation. That would require a ruling
on the merits of IAC’s claim and he is not asking for that.
All he is asking is that in advance of the final disposition of
the suit in federal district court he receive his litigation
expenses in accordance with the terms of his employment
contract. And since entitlement to advancement is inde-
pendent of the merits of the suit for which the money is
sought, Ridder v. CityFed Financial Corp., 47 F.3d 85, 86-87
(3d Cir. 1995); Citadel Holding Corp. v. Roven, 603 A.2d 818,
822 (Del. 1992); Senior Tour Players 207 Management Co. LLC
v. Golftown 207 Holding Co. LLC, 853 A.2d 124, 128 (Del. Ch.
2004); Stephen A. Radin, “ ‘Sinners Who Find Religion’:
Advancement of Litigation Expenses to Corporate Officials
Accused of Wrongdoing,” 25 Rev. Litig. 251, 268-69 (2006),
the claim for advancement is not a compulsory counterclaim
to that suit. For the claim does not arise out of the litigation;
it arises out of the employment contract.
It is true that Citrin could have asked the district judge
to order the advancement of fees, since the federal dis-
trict court would have subject-matter and personal juris-
diction of a suit by Citrin against IAC arising out of the
contract, though this would have required the judge to
interpret Delaware law. But requiring IAC to defend the
advancement suit in Delaware, the state whose law governs,
can hardly be thought a hardship to the company
or otherwise inappropriate. The only issues in the Delaware
4 No. 06-2073
suit are the applicability of the contractual advancement
clause to Citrin’s defense in the district court proceeding
(specifically, whether IAC’s suit concerns a matter arising
out of Citrin’s employment by the company) and the
amount of litigation expense that Citrin has incurred. If any
evidentiary hearing is required, it will surely be brief.
What is true is that “advancement” is rather a Delaware
specialty, see, e.g., Homestore, Inc. v. Tafeen, 888 A.2d 204,
211-13 (Del. 2005); Radin, supra, at 251-53, and though it has
spread to other states, American College of Trial Lawyers,
“The Erosion of the Attorney-Client Privilege and Work
Product Doctrine in Federal Criminal Investigations,” 41
Duquesne L. Rev. 307, 331-33 (2003), Delaware not only
permits advancement clauses but encourages them. See, e.g.,
8 Del. Code § 145; Homestore, Inc. v. Tafeen, supra, 888 A.2d
at 211. So Delaware judges might be more favorably
disposed to claims such as Citrin’s than other judges,
including federal judges in the Seventh Circuit, would be.
And so there is an element of “forum shopping” in Citrin’s
decision to seek advancement in Delaware rather than in
Chicago, where it could do so without a separate litigation.
But more must be shown to justify an injunction against
proceeding in what would be after all a perfectly natural
and proper forum in which to bring such a suit.
The federal Anti-Injunction Act provides, moreover, a
compelling alternative ground for the district judge’s denial
of IAC’s motion for an injunction. The Act forbids, with
narrow exceptions, a federal court’s enjoining litigation in
a state court. 28 U.S.C. § 2283. Although one of the excep-
tions is for cases in which the grant of an injunction by the
federal court is “necessary . . . to protect or effectuate [the
federal court’s] judgments,” there is no indication that the
Delaware court is hostile to the federal Computer Fraud and
No. 06-2073 5
Abuse Act and will express that hostility by seeking to
reexamine our ruling that IAC has stated a claim under the
Act. If it did, moreover, its judgment would be denied
preclusive effect in the federal litigation. In re
Bridgestone/Firestone, Inc., Tires Products Liability Litigation,
333 F.3d 763, 766 (7th Cir. 2003).
AFFIRMED.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-25-06