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Stifel Financial Corp. v. Cochran6/13/2002
the "fullest extent permitted by law" and there is no express prohibition in the law against indemnification of expenses incurred in prosecuting the indemnification suit, he is entitled to pursue this claim. Stifel counters that indemnification of "fees on fees" is not clearly provided for by § 145, and is thus not available under Delaware law.
The Court of Chancery determined that Cochran could not press this claim because neither Stifel's bylaws nor § 145 provide for "fees on fees," citing VonFeldt v. Stifel Financial Corp., 1997 WL 525878, *2 (Del. Ch. 1997) and Mayer v. Executive Telecard, Ltd., 705 A.2d 220, 225 (Del. Ch. 1997). In Mayer, the Court of Chancery held that neither § 145 nor the corporation's bylaw mandating indemnification to the fullest extent permitted by law allowed recovery of fees incurred in enforcing indemnification rights. Mayer, 705 A.2d at 221-24; but see Model Bus. Corp. Act Ann. § 8.54(b) (granting courts discretion to determine whether to also award "reasonable expenses to obtain court-ordered indemnification").
Although this Court has not passed on the availability of "fees on fees" in the context of indemnification suits, we have held, in a claim for workers' compensation, that it is appropriate to award attorneys' fees for time spent on a fee application pursuant to 19 Del. C. §§ 2127(a), 2350(f). DiGiacomo v. Board of Public Educ. in Wilmington, 507 A.2d 542, 547 (Del. 1986). The reasoning of DiGiacomo is equally applicable here. Both the workers' compensation and the indemnification statutes are intended to be remedial in nature. An attorney representing a former director who is being denied statutorily authorized indemnification must seek compensation from his client or remain uncompensated, a result "inimical to the interests" of the former director and contrary to the express purpose of § 145 to protect directors from personal liability for corporate expenses. Id; see also Bagby v. Beal, 606 F.2d 411, 415-16 (3d. Cir. 1979) (holding that in statutory fee award cases, plaintiff's attorneys are entitled to compensation for time spent preparing the fee petition and successfully appealing the fee award).
Section 145(a) defines the circumstances under which a Delaware corporation is permitted to indemnify its officers or directors. As even the Mayer court conceded, the language of § 145(a) permitting indemnification to a party "in any action" can be read literally to encompass the indemnification action itself. Mayer, 705 A.2d at 224. This Court has emphasized that the indemnification statute should be broadly interpreted to further the goals it was enacted to achieve. See generally, Hibbert v. Hollywood Park, Inc., 457 A.2d 339, 344 (Del. 1983); VonFeldt v. Stifel Financial Corp., 714 A.2d 79, 84 (Del. 1998). The invariant policy of Delaware legislation on indemnification is to "promote the desirable end that corporate officials will resist what they consider unjustified suits and claims, secure in the knowledge that their reasonable expenses will be borne by the corporation they have served if they are vindicated." Folk, on Delaware General Corporation Law sec. 145 (2001). Beyond that, its larger purpose is "to encourage capable men to serve as corporate directors, secure in the knowledge that expenses incurred by them in upholding their honesty and integrity as directors will be borne by the corporation they serve." Id.
As we stated in VonFeldt, we will "eschew narrow construction of the statute (section 145) where an over literal reading would disserve" these policies. VonFeldt, 714 A.2d at 84-85 (also noting the Court's aversion to "undue formalism" and refusing to engage in a "hyper-technical exercise"). Additionally, without an aw
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