C.A. No. 3892-VCP (Del. Ch. August 14, 2009) (Parsons, V.C.)
In this opinion on cross-motions for summary judgment, the Court of Chancery ruled that a former officer’s action for indemnification and advancement was not barred by laches, even though he did not bring his suit until after the analogous statute of limitations period for contract claims had expired.
The plaintiff, Wesley O’Brien, was a former CEO and COO of Precision Response Corporation (“PRC”). After terminating O’Brien from those positions for cause in late 2002, PRC brought fiduciary duty claims against him in arbitration. In January of 2005, the arbitration panel issued its decision rejecting PRC’s claims but ruling that each party was responsible for its own costs. On the basis of that decision, a Florida state court ruled that O’Brien was not entitled to indemnification from PRC pursuant to his contract under the doctrine of res judicata. That decision was vacated fourteen months later by an appellate court. However, before the lower Florida court could determine the amount of fees O’Brien was entitled to on remand, PRC filed for bankruptcy.
Once it became clear that he would not be able to recover from PRC, O’Brien filed suit in July of 2008 in the Delaware Court of Chancery against IAC/InterActiveCorp (“IAC”), PRC’s former parent, which had assumed PRC’s indemnification obligations in a merger agreement eight years previously. In the instant decision, the Court ruled on O’Brien’s motion for summary judgment on the issue of advancement for fees incurred in connection with the Delaware action, and on IAC’s cross-motion for summary judgment on O’Brien’s claim for indemnification and advancement on the grounds that O’Brien’s suit was time-barred because he had delayed more than three years after the arbitration giving rise to his claim for indemnification had definitively concluded.
In denying IAC’s motion and granting O’Brien’s, the Court ruled that O’Brien’s suit was not untimely. Under laches, a claim brought in equity will be time-barred only if the plaintiff delays unreasonably in asserting it. Although the analogous three-year statute of limitations on contract claims creates a presumptive time period during which an indemnification or advancement claim must be filed or else be barred as untimely, the Court is not bound by the statute where “unusual or extraordinary circumstances” would make its application inequitable. Here, “extraordinary circumstances” existed because for fourteen months – from when the Florida state court ruled that O’Brien was not entitled to indemnification until the appeals court vacated that decision – O’Brien could not be faulted for failing to press his claim against IAC. Accordingly, O’Brien’s claims against IAC were timely.
The full opinion is available here.