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Stifel Financial Corp. v. Cochran6/13/2002
erm, that conviction was reversed on appeal to the 10th Circuit, who held that Cochran had not violated any law.
Section 6.4 of Stifel's bylaws contains an indemnification provision, which provides:
The Corporation [Stifel Financial] shall indemnify to the full extent authorized by law any person made or threatened to be made a party to any action, suit, or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he ... is or was a director, officer or employee of the Corporation or any predecessor of the Corporation or serves or served any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor of the Corporation.
Pursuant to this bylaw, Cochran filed the present action on August 4, 1999, seeking indemnification from Stifel for (1) the $1.2 million arbitration judgment; (2) all fees, costs, and expenses incurred in connection with the arbitration action, the criminal proceeding, and the SEC investigation; and (3) all fees, costs, and expenses incurred in bringing the indemnification action.
II.
Procedurally, the Court of Chancery resolved the contentions before it through denial of Stifel's motion to dismiss and a later grant of partial summary judgment in favor of Stifel. This appeal arises primarily from the Court of Chancery's disposition of Stifel's motion to dismiss. A motion to dismiss a complaint presents the trial court with a question of law and is subject to de novo review by this Court on appeal. Malone v. Brincat, 722 A.2d 5, 9 (Del. 1998). Moreover, this case presents questions of statutory interpretation, also warranting de novo review. Moore v. Wilmington Housing Authority, 619 A.2d 1166, 1167 (Del. 1993).
Stifel contends that Cochran's indemnification claims are barred by 10 Del. C. § 8111's one year statute of limitations. It is undisputed that Cochran's claims would be untimely if the one year limitation period were applicable. The Court of Chancery, however, determined that Cochran's claims were governed by the three year limitation contained in 10 Del. C. § 8106. Because Cochran's claims were clearly brought within three years, the trial court denied Stifel's motion to dismiss Cochran's complaint as untimely. We agree that the three year limitation period prescribed in 10 Del. C. § 8106 applies to Cochran's indemnification claims.
The one year limitation period contained in 10 Del. C. § 8111 is applicable to claims for "wages, salary, or overtime for work, labor or personal services performed." By contrast, § 8106's three year limitation applies to actions "based on a detailed statement of the mutual demands in the nature of debit and credit between parties arising out of contractual or fiduciary relations," "based on a promise," and "based on a statute." The question posed is whether Cochran's indemnification claims are properly characterized as employment claims or contract/statutory claims.
In Sorensen v. Overland Corp., the United States District Court for Delaware held that a corporation's agreement to indemnify its director for litigation expenses is a benefit conferred for officer or director service rendering an indemnification claim subject to Delaware's one year period of limitation, pursuant to 10 Del. C. § 8110. Sorensen, 142 F. Supp. 354, 361 (D. Del. 1956), aff'd, 242 F.2d 70 (3d Cir. 1957). The District Court explained that " he word 'benefits' is embracing and covers all advantages growing out of the employment," including indemnification. Id. at 360. Federal decisions interpreting Delaware statutory law are, of course, not binding on this Court or the Court of Chancery. City Investing Co.
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