The opinion of the court was delivered by: Del Pesco
Upon Plaintiff's motion for Summary Judgment and Motion to Dismiss Counterclaim
Plaintiff Abraham J. Salaman ("Salaman's), a former director of defendant National Media Corporation ("National Media"), a Delaware corporation, filed this action in the Court of Chancery on November 22, 1991, seeking specific enforcement of National Media's alleged obligation under its bylaws to advance litigation expenses incurred by Salaman in defending certain class and derivative actions asserted against him. Salaman requested preliminary and permanent injunctive relief.
On January 15, 1992, following a determination by the Court of Chancery that it lacked subject matter jurisdiction, this action was transferred to the Superior Court pursuant to 10 Del.C. § 1902.
Salaman has filed a Motion for Partial Summary Judgment and a Motion to Dismiss National Media's First Counterclaim.
Salaman was a director of National Media. After he left the board of directors of National Media, he was named a defendant in two lawsuits. Salaman claims that under National Media's bylaws, National Media is obligated to advance Salaman his litigation expenses. Salaman has requested National Media to advance his litigation expenses. While National Media initially did so, it now refuses.
A determination of Salaman's right to an advancement of expenses begins by examining National Media's bylaws and the complaints in the two suits against Salaman.
In July, 1990, National Media adopted bylaws which contained a provision for advancement of expenses and indemnification for its officers and directors. At that time, Salaman was a director of National Media.
National Media's bylaws require National Media to indemnify its directors for all expenses, judgments, and settlements incurred in all "Indemnified Events." Bylaws, Article V, Section 1.2.1 National Media's bylaws define an "Indemnified Event" to include:
Article V, Section 1.1(e).
National Media's bylaws also require National Media to advance expenses, prior to final Disposition, incurred in defense of an Indemnified Event, including but not limited to attorney's fees.
Expenses incurred with respect to an Indemnified Event shall be paid prior to the Disposition or completion of such Indemnified Event upon the request of [the director] accompanied by a statement of such expenses. shall be required to execute an undertaking or other document required by law. Payment shall be made within ten business days after such statement and receipt of executed undertaking or other document.
Expenses are defined in Article V, Section 1.1(c), which provides,
"Expenses" shall refer to all disbursements, costs or expenses reasonably incurred by the director directly or indirectly in connection with any indemnified Event, including, but not limited to, fees and disbursements of counsel, accountants or other experts employed by the director in connection with any Indemnified Event, including all such expenses, distribution and costs of investigation in connection with or prior to the initiation of any proceeding relating to an Indemnified Event.
In December, 1990, Salaman was named a defendant in a class action lawsuit filed in the Federal District Court for the Eastern District of Pennsylvania, In Re: National Media Corporation Securities Litigation, C.A. No. 90-7574. *fn1 The class consists of all purchasers of common stock of National Media between February 19, 1990, and November 5, 1990. The class action sets forth allegations against Salaman based on his having served as Vice Chairman of the Board of Directors (the "Board") of National Media. The class action alleges that the individual defendants, including Salaman:
Further, each defendant was sued individually:
as a conspirator and aider and abettor and the liability of each arise from the fact that he has engaged in all or part of the unlawful acts, plans, schemes or transactions to defraud . . . .
The gravamen of the class action is an alleged scheme by the board of directors National Media to tout its marketing program "Amazing Discoveries" and exaggerate future profits to artificially inflate the value of National Media stock. Amazing Discoveries is a television program known as an "infomercial" during which ...