Shawn Evans v. Avande, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SHAWN EVANS, )
)
Plaintiff, )
)
v. ) C.A. No. 2018-0454-LWW
)
AVANDE, INC., )
)
Defendant. )
MEMORANDUM OPINION
Date Submitted: March 11, 2022
Date Decided: June 9, 2022
Sean J. Bellew, BELLEW LLC, Wilmington, Delaware; Jenny Li, BAILEY &
GLASSER, LLP, Wilmington, Delaware; Counsel for Plaintiff Shawn Evans
Thad J. Bracegirdle, BAYARD, P.A., Wilmington, Delaware; Jerome R. Bowen,
BOWEN LAW OFFICES, Las Vegas, Nevada; Counsel for Defendant Avande, Inc.
WILL, Vice Chancellor
This decision is the latest chapter in an advancement-turned-indemnification
action filed in 2018. The court previously held at the summary judgment stage that
Shawn Evans, the former CEO of Avande, Inc., could not demonstrate his
entitlement to partial indemnification as a matter of law in connection with claims
Avande asserted against him. Those underlying claims were for tortious interference
and defamation (on which Evans technically prevailed) and for breach of fiduciary
duty (on which he was found liable). Because Avande did not cross-move for
summary judgment on Evans’s entitlement to partial indemnification, this matter
proceeded to a trial on a stipulated paper record.
Two primary questions are before the court. One, whether the tortious
interference and defamation claims were brought by reason of Evans’s former
corporate capacity. And two, whether Evans partially succeeded on the fiduciary
duty claim.
On the first issue, Avande has met its burden of showing that there is no causal
link between Evans’s status as a former officer of Avande and the tortious inference
and defamation claims. The record in the underlying action indicates that those
claims solely concerned Evans’s post-termination conduct. Despite Evans’s
assertion that his use of Avande’s confidential information was necessary for his
alleged conduct, Avande did not make such an allegation in the plenary action.
1
On the second issue, Avande has demonstrated that Evans did not succeed but
was found liable. Undeterred by his failure to persuade the court at the summary
judgment stage, Evans once again advances a novel theory of proportional
indemnification under which Avande would be obligated to indemnify him. That
argument is no more convincing now than it was before. It also contravenes the
claim-by-claim approach to indemnification consistently followed by Delaware
courts.
Accordingly, judgment is entered in favor of Avande.
I. RELEVANT BACKGROUND
Unless otherwise noted, the facts described in this section were proven by a
preponderance of the evidence. To the extent that any conflicting evidence was
presented, I have weighed it and made findings of fact accordingly.1
A. The Plenary Action
Defendant Avande, Inc. is a privately held Delaware corporation that provides
medical claims management services to insurance companies and healthcare
organizations.2 Plaintiff Shawn Evans served as the Chief Executive Officer of
1
Facts drawn from the Declaration of Thad J. Bracegirdle (Dkt. 71) submitted in
conjunction with Defendant’s Pre-Trial Opening Brief (Dkt. 70) are referred to according
to the numbers provided on the declaration’s exhibit list (cited as “DX __”). Both parties
cited to those exhibits in their pre-trial briefs.
2
DX 12 ¶¶ 1-2.
2
Avande from February 23, 2016 until his termination on February 15, 2018.3 Evans
also served as a director of Avande over that same period.4 Following Evans’s
termination, Avande performed an audit through which it discovered various suspect
transactions undertaken by Evans while he was serving as CEO.5
Avande filed litigation against Evans in this court on March 22, 2018 (the
“Plenary Action”). Avande asserted claims for: (1) breach of fiduciary duty based
on alleged self-dealing transactions and improper expenditures; (2) tortious
interference, defamation, and conversion based on acts that Evans allegedly
committed after his termination; and (3) a declaratory judgment that Evans had been
removed from his position as CEO.6 Trial was held in February 2019, at which
Avande sought over $5.3 million in damages.7
Chancellor Bouchard issued a post-trial Memorandum Opinion on August 13,
2019. The court found that Evans breached his fiduciary duty of loyalty in
connection with certain of the transactions Avande challenged at trial.8 For example,
the court found that Evans acted in bad faith by authorizing Avande to make
3
Id. ¶ 8.
4
Id.
5
DX 16 at 5-6.
6
DX 9 ¶¶ 18-38.
7
DX 16 at 1.
8
Id. at 8-19.
3
payments that he knew violated the law.9 The court also found that Evans committed
self-dealing by causing Avande to enter into business relationships with companies
in which he held an ownership interest, such as a payment of more than $200,000 to
DC Risk Solutions, Inc., a company wholly owned by Evans.10 As to the other
challenged transactions, the court found that Avande had not proven that they
involved a conflict of interest, were made in bad faith, or constituted waste.11 The
court also held that Avande had abandoned its claims for declaratory relief, tortious
interference, defamation, and conversion.12
On September 4, 2019, the court entered a Judgment Order implementing the
August 13, 2019 Memorandum Opinion.13 The Judgment Order stated that, with
regard to the breach of fiduciary duty claim, “[j]udgment [wa]s entered in favor of
Avande, and against Evans” for certain transactions but that “judgment [wa]s . . .
entered in Evans’s favor and against Avande” for others.14 The Judgment Order also
stated that “judgment [wa]s entered in favor of [Evans], and against Avande,” for
the declaratory relief, tortious interference, defamation, and conversion claims.15
9
Id. at 15-16.
10
Id. at 16-19.
11
Id. at 10-19.
12
Id. at 7.
13
DX 17.
14
Id. at 2-3.
15
Id. at 4.
4
Evans was found liable for $21,817.70 in damages, plus pre- and post-
judgment interest, and Avande was granted an equitable accounting to determine the
entire fairness of payments to DC Risk and quantify additional damages.16 Based
on the results of that accounting, the court subsequently awarded Avande additional
damages (jointly and severally against Evans and DC Risk) of $43,687.77, plus pre-
and post-judgment interest.17
B. This Advancement and Indemnification Action
On June 12, 2018, Evans sent a letter to Avande demanding advancement for
expenses incurred in connection with the Plenary Action. He sent a separate letter
eight days later detailing those expenses.18 The parties were unable to agree on
whether Evans was entitled to advancement.19 Evans commenced this action on June
25, 2018.20
On September 28, 2018, the parties agreed to stay the advancement
proceeding pending the final disposition of the Plenary Action, which Avande
appealed.21 The stay was lifted on November 12, 2020 after Avande voluntarily
16
DX 16 at 19-20.
17
DX 19 ¶¶ 18.
18
Verified Compl. for Advancement Exs. E, G (Dkt. 1).
19
See Verified Compl. for Advancement Ex. F.
20
Dkt. 1.
21
Dkt. 21.
5
dismissed its appeal.22 On November 17, 2020, Evans filed an amended complaint
seeking indemnification under 8 Del. C. § 145, Avande’s bylaws, and Avande’s
certificate of incorporation for fees incurred in connection with the Plenary Action
and an award of fees-on-fees.23
On December 31, 2020, Avande filed a motion for judgment on the pleadings,
arguing that Evans’s claim for indemnification was not ripe because he had not
complied with a notice requirement in Avande’s bylaws.24 On January 5, 2021,
Evans filed a motion of summary judgment, contending that he was entitled to
indemnification for all expenses he had incurred in the Plenary Action except for the
portion of the breach of fiduciary duty count on which he was held liable.25 After
argument, I denied Avande’s motion for judgment on the pleadings and took the
summary judgment motion under advisement.26
On September 23, 2021, I issued a Memorandum Opinion granting in part and
denying in part Evans’s motion for summary judgment.27 In that decision, I held
that Evans was entitled to indemnification for the expenses incurred in the Plenary
22
Dkt. 28.
23
Verified Amended Compl. for Indemnification ¶¶ 36-52 (Dkt. 29).
24
See Dkts. 31-32.
25
See Dkts. 33-34.
26
For additional details, see the transcript of the court’s June 25, 2021 oral ruling. Oral
Arg. Tr. 75-86 June 25, 2021 (Dkt. 51).
27
Dkt. 54.
6
Action for the declaratory judgment and conversion claims. But could not reach that
conclusion as a matter of law with regard to the fiduciary duty, tortious interference,
or defamation claims.28 My decision indicated that, had Avande cross-moved for
summary judgment, I might have found in its favor on those issues.29 Because
questions of Evans’s entitlement remained unresolved, the matter proceeded to trial.
After pre-trial briefing, a trial on a stipulated paper record regarding the
remaining entitlement issues was held on March 11, 2022.30
II. LEGAL ANALYSIS
Evans seeks indemnification for all fees and expenses he incurred in
defending the tortious inference and defamation claims in the Plenary Action. He
also seeks indemnification for a portion of the expenses incurred in defending the
breach of fiduciary duty claim.
The parties agree that Avande bears the burden of proving that Evans is not
entitled to indemnification.31 “The burden of proof in civil cases in Delaware is
28
Evans v. Avande, Inc., 2021 WL 4344020, at *3 (Del. Ch. Sept. 23, 2021).
29
Id. at *9 n.86.
30
See Dkts. 63, 70, 73-74, 77.
31
Dkt. 64 ¶ 3; see Horne v. OptimisCorp, 2017 WL 838814, at *3 (Del. Ch. Mar. 3, 2017)
(“[U]nder 8 Del. C. § 145(c) . . . the ultimate burden of proof is on the defendant
corporation to prove that the indemnitee is not entitled to indemnification.”), aff’d, 177
A.3d 69 (TABLE) (Del. 2020).
7
typically one of preponderance of the evidence.”32 “Proof by a preponderance of the
evidence means proof that something is more likely than not.”33
Evans argues that he is entitled to mandatory indemnification under 8 Del. C.
§ 145(c). That section provides:
To the extent that a present or former director or officer of
a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this section, or in
defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including
attorneys’ fees) actually and reasonably incurred by such
person in connection therewith.34
In determining whether an individual succeeded “on the merits or otherwise,” “the
Court’s focus is narrowly upon the outcome of the underlying action.”35 In addition,
the covered individual must have been made a party to the underlying proceeding
“by reason of the fact that [she] is or was” an officer or director.36 Avande’s bylaws
32
In re Coverdale, 1987 WL 758002, at *3 (Del. Ch. Aug. 3, 1987).
33
Revolution Retail Sys., LLC v. Sentinel Techs., Inc., 2015 WL 6611601, at *9 (Del. Ch.
Oct. 30, 2015).
34
8 Del. C. § 145(c).
35
Horne, 2017 WL 838814, at *3 (quoting 8 Del. C. §145(c)); see Perconti v. Thornton
Oil Corp., 2002 WL 982419, at *3 (Del. Ch. May 3, 2002) (“A party eligible for mandatory
indemnification under § 145(c) must demonstrate . . . that the party was successful on the
merits or otherwise.” (quoting Cochran v. Stifel Fin. Corp., 2000 WL 1847676, at *9 (Del.
Ch. Dec. 13, 2000))); see also Sun-Times Media Grp. v. Black, 954 A.2d 380, 397 (Del.
Ch. 2008) (explaining that one’s “entitlement to indemnification . . . only becomes ripe
once the underlying proceeding is truly final”).
36
8 Del. C. § 145(b)-(c); see Brown v. Rite Aid Corp., 2019 WL 2244738, at *4 n.40 (Del.
Ch. May 24, 2019) (“Unlike Sections 145(a) and (b), Section 145(c) does not include the
‘by reason of the fact that the person is or was a director, officer, employee or agent of the
8
and certificate of incorporation provide for indemnification “to the fullest extent
permitted by [Delaware] law.”37
The parties do not dispute that Evans succeeded on the tortious interference
and defamation claims in the Plenary Action.38 His entitlement to indemnification
for those claims turns on whether Avande has proven that they were not brought
against Evans by reason of the fact that he was an Avande director or officer.
The parties also do not dispute that Avande’s breach of fiduciary duty claim
was brought against Evans by reason of the fact of his corporate status.39 Evans’s
entitlement to indemnification for that claim depends on whether Avande has proven
that he was not successful.
For the reasons discussed below, I find that Avande has met its burden of
proof on each issue.40
corporation’ language. But it incorporates the language by extending mandatory
indemnification to ‘any action, suit or proceeding referred to in subsections (a) and (b) of
this section.’”).
37
DX 1 § 9 (“Subject to any provisions in the bylaws . . . [Avande] shall indemnify, to the
fullest extent permitted by [Delaware] law, any director or officer of the Company . . . .”);
DX 10 §§ 5.2, 5.3 (tracking the statutory language of 8 Del. C. §§ 145(b) and 145(c),
respectively); see Evans, 2021 WL 4344020, at *3-4 (describing the relevant provisions of
Avande’s bylaws and certificate of incorporation).
38
See Def.’s Pre-Trial Opening Br. 20; Pl.’s Pre-Trial Answering Br. 15-16 (Dkt. 73).
39
See Def.’s Pre-Trial Opening Br. 20; Pl.’s Pre-Trial Answering Br. 25.
40
I therefore need not address Avande’s argument that Evans’s unclean hands are an
independent basis to deny him the indemnification he seeks.
9
A. The Tortious Interference and Defamation Claims
Evans asserts that Avande’s tortious interference and defamation claims were
brought by reason of the fact of his corporate role. That is so, he says, because those
claims concerned his possession of confidential information—the identities of
Avande’s vendors and creditors—obtained while he was CEO of Avande.41 Avande
disagrees, contending that the claims addressed post-termination conduct with no
link to Evans’s role as an officer or director.
A claim is deemed to have been brought “by reason of the fact” that a party is
or was an officer or director of a corporation if there is a “causal connection or
nexus” between the underlying claim and the party’s “corporate function or ‘official
[corporate] capacity.’”42 That link is shown “if the corporate powers were used or
necessary for the commission of the alleged misconduct.”43 The causal connection
requirement may be satisfied where the claim concerns “allegations relating to post-
separation use of [the corporation’s] confidential information learned pre-
separation.”44
41
Pl.’s Answering Br. 15-24.
42
Homestore, Inc. v. Tafeen, 888 A.2d 204, 213 (Del. 2005) (quoting Perconti v. Thornton
Oil Corp., 2002 WL 982419, at *4 (Del. Ch. May 3, 2002)).
43
Bernstein v. TractManager, Inc., 953 A.2d 1003, 1011 (Del. Ch. 2007) (explaining that
the link must derive from conduct that occurred when the individual was an officer or
director).
44
Ephrat v. MedCPU, Inc., 2019 WL 2613281, at *7 (Del. Ch. June 26, 2019); see Carr v.
Glob. Payments Inc., 2019 WL 6726214, at *6 (Del. Ch. Dec. 11, 2019) (“If the claim as
pled relies on the misuse of confidential information learned while an officer or director, it
10
“Delaware courts typically determine whether there is a ‘causal connection’
by ‘examining the pleadings in the underlying litigation.’”45 But this court has
refrained, in advancement and indemnification proceedings, from inferring the use
of confidential information. It has, instead, looked to whether such use was
specifically alleged in the pleadings in the plenary action.
In Ephrat v. MedCPU, Inc., for example, two former officers of a corporation
allegedly breached contracts by soliciting the corporation’s customers and
employees after the officers’ employment had concluded.46 The court did not
analyze whether the identities of customers and employees constituted company
confidential information but, instead, reviewed the allegations contained in the
underlying pleadings. Because those pleadings stated only that the actions were
taken after the defendants left the company and did not provide that they “use[d]
‘pertains to’ the party’s former position, and that party is entitled to advancement under
the standard applicable here.”); Brown v. LiveOps, Inc., 903 A.2d 324, 326 (Del. Ch. 2006)
(finding the causal connection requirement satisfied where a former officer allegedly
misappropriated corporate trade secrets obtained while serving as an officer).
45
Charney v. Am. Apparel, Inc., 2015 WL 5313769, at *16 (Del. Ch. Sept. 11, 2015)
(quoting Holley v. Nipro Diagnostics, Inc., 2014 WL 7336411, at *8 (Del. Ch. Dec. 23,
2014)); see Marino v. Patriot Rail Co., 131 A.3d 325, 346 n.24 (Del. Ch. 2016) (collecting
cases where Delaware courts have examined the pleadings in underlying proceedings in
assessing the “by reason of the fact” requirement); Weaver v. ZeniMax Media, Inc., 2004
WL 243163, at *4 (Del. Ch. Jan. 30, 2004) (“The Court must seek to discern the nature of
the claims which [the officer or director] is called upon to defend by reading the
[complaint] as a whole and providing a reasonable interpretation of the substance of the
allegations of each count.”).
46
2019 WL 2613281, at *8 & nn.81-83.
11
confidential information . . . obtained by reason of the fact of their positions with
[the company] in doing so,” no “nexus or causal connection” was established
between the claims and the defendants’ officer roles.47
Similarly, in Carr v. Global Payments Inc., a former officer of a corporation
allegedly breached restrictive covenants by soliciting the corporation’s employees.48
The court initially granted an order advancing expenses for the breach of contract
claim because the complaint in the plenary action alleged that the defendant’s
“misuse of [the corporation’s] confidential information [was] intertwined with his
unlawful . . . solicitation.”49 The complaint was subsequently amended to “remove[]
allegations of the misuse of confidential information,” and the company successfully
moved to modify the advancement order.50 The court then determined that the
defendant was no longer entitled to advancement for the breach of contract claim
because the company did not specifically allege “any post-termination misuse of
confidential information . . . that he learned while Chairman and CEO.”51
47
Id. at *8.
48
2019 WL 6726214, at *2.
49
Id. at *2, *7.
50
Id. at *3.
51
Id. at *9. Evans cites to several cases where the court found a causal connection between
a claim and the post-separation use of confidential information sufficient to award
advancement or indemnification. A review of the pleadings in those actions reveals that
each contained specific allegations regarding a former corporate official’s use of
confidential information that directly related to the claim. In Pontone v. Milso Industries
Corporation, the “gravamen” of the allegations concerned a “scheme” facilitated by
12
As in Ephrat and Carr, the pleadings in the Plenary Action are devoid of an
allegation that Evans used Avande’s confidential information in the commission of
the purported acts giving rise to the claims at issue. Avande alleged that Evans
committed tortious inference and defamation after his termination by making false
statements to and attempting to cancel or prejudice Avande’s relationships with its
vendors, creditors, and other third-parties. Regarding tortious interference, the
complaint stated:
27. In the time since Evans was validly terminated as
Avande’s CEO on February 15, 2018, he has taken (and
continues to take) various acts with the intent and effect of
canceling or prejudicing the Company’s relationships
and/or accounts with third parties such as vendors, service
providers and lenders.
28. Through the acts alleged herein, Evans has
intentionally interfered with Avande’s contracts and/or
valid business relationships with third parties. In so doing,
Evans has wrongfully induced or caused the third parties
“confidential proprietary and trade secret information” and each claim in the underlying
complaint alleged the use of confidential information. 100 A.3d 1023, 1051 (Del. Ch.
2014). In Brown v. LiveOps, Inc., the plenary complaint alleged that a former officer
gained access to the corporation’s trade secrets and other confidential information and
based each of the claims on the alleged misappropriation of that information. 903 A.2d
at 330. In Zaman v. Amedeo Holdings, the complaint stated that former agents of a
corporation breached their fiduciary duties and contractual obligations by disclosing the
corporation’s confidential information to a competitor. 2008 WL 2168397, at *30-31 (Del.
Ch. May 23, 2008). And in Ephrat, the court found a link between claims against officers
for misappropriation of confidential information and breach of contract for failure to return
confidential information and allegations in the pleadings that the officers had taken and
used company confidential information. 2019 WL 2613281, at *8-9.
13
to breach their contractual and/or business relationships
with Avande.52
Regarding defamation, the complaint stated:
31. In the time since Evans was validly terminated as
Avande’s CEO on February 15, 2018, he has
communicated with vendors and creditors of Avande and
falsely stated that the Company is unable to pay its debts
as they become due and payable. At the same time, Evans
has solicited Avande’s vendors and creditors to take legal
action against the Company for the purpose of increasing
the Company’s expenses and driving it into bankruptcy.
Evans has intentionally made false statements to Avande’s
vendors and creditors for the purpose of damaging the
Company’s relationships with these third parties and with
the knowledge that the Company’s solvency and ability to
pay debts would be critical to them.53
The complaint did not, however, state that the identities of those third parties
constituted confidential information. Nor did it allege that Evans gained possession
of that information solely in his capacity as a director or officer of Avande.
The trial record from the Plenary Action further supports a finding that a
causal link is lacking. Avande did not contend at trial or in its pre-trial briefing in
the Plenary Action that the defamation or tortious inference claims implicated use
52
DX 9 ¶¶ 27-28.
53
Id. ¶ 31.
14
of confidential information.54 Evans also testified at that trial that he did not believe
he was restricted from contacting Avande employees after his termination.55
Accordingly, neither the tortious interference nor defamation claim in the
Plenary Action was brought “by reason of the fact” that Evans was an officer or
director of Avande. Evans is not entitled to mandatory indemnification for those
claims.
B. The Fiduciary Duty Claim
Evans argues that he is entitled to proportional indemnification for the breach
of fiduciary duty claim. In particular, he contends that his entitlement to
indemnification should reflect that he was found liable for approximately $85,000
of damages in connection with the aspects of the breach of fiduciary duty claim for
which he was held liable—far less than the $5.3 million Avande sought at trial.56
Evans also asserts that he saw partial success on the fiduciary duty claim because
54
See DX 13 at 49; DX 14 at 86; DX 15 at 15, 51; Def.’s Pre-Trial Reply Br. Ex. A at 22-
25 (Dkt. 74).
55
See DX 13 at 11.
56
In the September 4, 2019 Judgment Order, Evans was found to be liable for $21,817.70
in connection with certain self-dealing transactions, plus another $5,725.15 in pre-
judgment interest. DX 17 at 2. The Judgment Order also ordered an equitable accounting
with respect to all payments Avande made to DC Risk before Evans was terminated as
CEO. Id. After that accounting, Evans and DC Risk were found jointly and severally liable
for an additional $43,687.77, plus another $14,087.81 in pre-judgment interest. DX 20
at 1-2.
15
judgment was entered in his favor regarding certain of the challenged transactions.57
Avande insists that no indemnification is warranted because the court ultimately
found Evans liable for breaching his fiduciary duties to Avande.
As Avande points out, this court has already heard and rejected Evans’s
position. My summary judgment decision observed that “[t]he court [wa]s aware of
no authority where ‘partial success’ was analyzed based on the percentage of
damages a prevailing party recovered against an indemnitee.”58 It also outlined the
practical problems that would arise if an overly granular approach was taken to
partial indemnification.59 Most critically, it explained that “on the ‘claim, issue or
matter’ of whether Evans breached his duty of loyalty, he did not prevail.”60
57
Pl.’s Answering Br. 26-27.
58
Evans, 2021 WL 4344020, at *6.
59
Id. at *6 n.58.
60
Id. at *6. Professor Folk’s seminal report on the 1967 amendments to the Delaware
General Corporation Law addressed the question of whether an officer or director could be
indemnified if she was held partially liable in an action against her. Ernest Folk, Folk
Report 88, https://delawarelaw.widener.edu/files/resources/folkreport.pdf (quoting
Essential Enters. Corp. v. Dorsey Corp., 182 A.2d 647, 655 (Del. Ch. 1962)). He discussed
the phrase “any claim, issue, or matter” as intended to solve the need, raised by then-
Chancellor Seitz, to clarify “whether the statute permits an allocation of expenses when
directors have been adjudged liable as to some but not all of the claims asserted against
them.” Id. (emphasis added). Professor Folk emphasized that the Court of Chancery
should be empowered to “allocate indemnifiable expenses and items when a director is
adjudged liable as to some but not all claims to the extent that the court deems fair and
equitable.” Id. (emphasis added). In other words, the focus of Section 145(c) was on
claims, rather than sub-issues.
16
Evans chose to continue to press this argument at trial despite these decisions
and the court’s strong signaling that, had Avande cross-moved for summary
judgment, he would have been found to lack entitlement to partial indemnification
for the breach of fiduciary duty claim as a matter of law. Notwithstanding his efforts
at repackaging it, Evans’s theory of proportional indemnification is no more
persuasive now than it was earlier in this case. As an initial matter, “issues already
decided by the same court should be adopted without relitigation.”61 In any event,
Evans did not raise any new evidence or precedent supporting his theory that the
ratio between damages sought and awarded is the basis by which one’s success in
an underlying proceeding should be measured.
Moreover, Delaware courts evaluate whether a party was successful “on the
merits or otherwise” under Section 145(c) on a claim-by-claim basis.62 That is,
61
Del. Dep’t of Nat. Res. & Envtl. Control v. Food & Water Watch, 246 A.3d 1134, 1138
(Del. 2021) (quoting May v. Bigmar, Inc., 838 A.2d 285, 288 n.8 (Del. Ch. 2003)); see
Carlyle Inv. Mgmt. L.C.C. v. Moonmouth Co., 2015 WL 5278913, at *7 (Del. Ch. Sept. 10,
2015) (holding that the law of the case doctrine “applies to decisions rendered by a court
that arise again later in the same court, in the same proceeding—i.e., a ruling at the
summary judgment stage that also applies at the post-trial stage”).
62
See Rite Aid Corp., 2019 WL 2244738, at *8 (“Whether a party seeking indemnification
was successful is determined claim by claim.”); Paolino v. Mace Sec. Intern., Inc., 2009
WL 4652894, at *8 (Del. Ch. Dec. 8, 2009) (describing “Delaware’s overarching approach
to Section 145, in which claims are evaluated individually or in appropriate groupings [of
claims]”); Zaman, 2008 WL 2168397, at *25-33 (conducting claim-by-claim analysis);
MCI Telecomm. Corp. v. Wanzer, 1990 WL 91100, at *11 (Del. Super. June 19, 1990)
(holding that a director who was found liable on one of the four counts brought against him
was entitled to mandatory indemnification for the three counts on which he was not found
liable); Evans, 2021 WL 4344020, at *5 (explaining that Delaware courts have generally
17
partial indemnification is granted in instances success on some—but not all—
claims.63 When determining whether a party was successful in defending against a
claim, “this court looks strictly at the outcome of [the claim in] the underlying
action.”64 It is unnecessary for the court to “further inquir[e] into the ‘how’ and
‘why’ of the result” because “the only relevant consideration is ‘what the result was,
not why it was.’”65
Consistent with that approach, I assess whether Evans succeeded “on the
merits or otherwise” in defending the breach of fiduciary duty claim in the Plenary
Action. The record in that action plainly demonstrates that he did not. Rather, Evans
was found liable for breaching his duty of loyalty to Avande. He is therefore not
entitled to partial indemnification in connection with his defense of that claim.
III. CONCLUSION
For the foregoing reasons, Avande has proven by a preponderance of the
evidence that Evans is not entitled to mandatory indemnification for expenses
incurred in his defense of the tortious interference, defamation, or breach of fiduciary
duty claims in the Plenary Action. The parties are directed to submit a final order
made the determination of whether one succeeded on the merits or otherwise “claim by
claim”).
63
See MCI, 1990 WL 91100, at *9; May, 838 A.2d at 288 (explaining that a claimant
“should only be indemnified in an amount that reflects her limited success”).
64
Hermelin v. K-V Pharm. Co., 54 A.3d 1093, 1107 (Del. Ch. 2012).
65
Id. (quoting Waltuch v. Conticommodity Servs., Inc., 88 F.3d 87, 96 (2d Cir. 1996)).
18
within ten days of this decision. The plaintiff is further directed to file a Rule 88
affidavit consistent with this court’s November 22, 2021 case scheduling order.
19