We’ve a weak spot for legal instances.  We even have a weak spot for doom-scrolling,  inevitably provoked by the nation’s insane politics during the last eight years.  And we now have a weak spot for visiting close by Delaware, residence of tax-free buying, wonderful seashores, Dogfish Head Brewery, and judges who know company regulation.  We stay in a kind of “tri-state areas,” and if we have been offered with a selection of being earlier than a choose in Pennsylvania, New Jersey, or Delaware, our first selection could be the First State.  Delaware judges normally get to the center of the matter, interpret statutes accurately, and rarely interact in fantasy.  Maybe you seen how a Delaware choose not too long ago steered a really excessive profile case towards settlement by issuing no-nonsense rulings.  We’ve been in that very same choose’s courtroom.  He’s lightning sensible and wastes zero time.

So think about our giddiness when Bexis flipped us a Delaware Chancery Courtroom case involving a criminally convicted drug government who sought indemnification from his former firm based mostly on a pardon from former President Trump.  Intermune, Inc. v. Harkonen, 2023 Del. Ch. LEXIS 108 (Del. Chancery Ct. Might 10, 2023), is a legal-political-corporate feast. The choose was actually cooking. Convey an enormous spoon and put on a bib.

In Intermune, the plaintiff was a drug producer.  Thus, so far as we’re involved, we’re already in man-bites-dog territory.  However the drug firm was not trying to chunk a canine; it was trying to chunk its former CEO.  Extra particularly, the corporate was trying to take a chunk out of the previous CEO’s declare for indemnification.  Sit again and revel in this odd story. In 2009, a federal jury discovered past an affordable doubt that the CEO acted with intent to defraud when he directed his firm to concern a “false and deceptive press launch [in 2002] in regards to the outcomes of one of many Firm’s scientific trials.” (Bexis wrote about this legal case .) The corporate and its insurers had superior the CEO’s protection prices.  After the CEO was convicted, the insurer demanded its a refund from the corporate, invoking a coverage exclusion for crimes involving intentional fraud.  The corporate refused, the dispute went to arbitration, and the insurer received.  Now the problem was between the corporate and the CEO as to who was on the hook for the CEO’s protection prices.  The CEO claimed that underneath Delaware regulation, the corporate was required to indemnify him.  The corporate filed an motion for a declaratory judgment that the previous CEO was not entitled to indemnification.  The events then filed cross motions for abstract judgment and the problem was packaged neatly for the court docket.

Or was it actually so neat?  There was a protracted lead as much as this case.  The previous CEO had litigated his conviction for 9 years, all the way in which to the Supreme Courtroom, and misplaced each time.  Let’s listing the losses:

• the jury discovered the CEO responsible,
• the trial court docket denied his movement for acquittal,
• the trial court docket denied his movement for a brand new trial,
• the appellate court docket denied his direct attraction,
• the previous CEO misplaced a petition for writ of error coram nobis,
• he misplaced a collateral attraction, and
• his two petitions for a writ of certiorari to the U.S. Supreme Courtroom have been denied. 

The authorized system had not handled the previous CEO kindly.  However the political system rode to the rescue.  On January 19, 2021, on the subsequent to final day of the Trump presidency, the previous CEO acquired a Trump presidential pardon. Such a pardon, after all, qualifies as a Very Large Deal.  You would possibly even say it was Big.  However did it make any distinction underneath Delaware regulation relating to company indemnification?  Part 145(c) of the Delaware Basic Company Legislation supplies {that a} company officer is entitled to indemnification if he was “profitable on the deserves or in any other case.”  Did the presidential pardon make the previous CEO profitable?  The court docket in Intermune answered with a powerful No.  A presidential pardon doesn’t remove a conviction, or erase guilt, however solely restores all “primary civil rights” that the conviction had taken away.  Additional, indemnification of authorized bills shouldn’t be a such “primary” civil proper.  Furthermore, because the court docket reasoned, “even when, one way or the other, company officer indemnification certified as a company civil proper restored by a federal pardon, [the CEO] by no means misplaced it as a result of he by no means had it.” Neither is a pardon an adjudication of innocence.  The pardon arrived with a letter from the U.S. Pardon Legal professional.  That letter defined that, “though full and unconditional,” the pardon didn’t “erase or expunge” the CEO’s conviction or “point out his innocence.”  The CEO was convicted; he didn’t “succeed.”  Getting a pardon shouldn’t be “success,” not less than not within the sense related underneath part 145(c).  Because the Intermune court docket defined, “convictions don’t represent success, on the deserves or in any other case.  The Pardon didn’t overturn [the CEO’s] conviction.  Finish of story.”

Nicely, it was not fairly the top of the story.  The previous CEO had one other argument in help of indemnification, although it was equally devoid of advantage.  The previous CEO contended that indemnification must be interpreted broadly in his favor, and that he must be permitted to relitigate the problem of whether or not he had acted in good religion in issuing the press launch.  The CEO asserted that sure post-conviction occasions, together with the place the corporate unsuccessfully took in opposition to the insurer, supported his declare of appearing in good religion.  The Intermune court docket reasoned that part 145 included preclusion rules.  Dangerous religion was a component of the crime for which the CEO was convicted.  The conviction really determined the problem of fine religion, and the CEO had a full and honest alternative to litigate his intent.  By this level, the Intermune court docket counted up the variety of instances the CEO had litigated intent, and the end result was spectacular:  “[The CEO] litigated intent not less than ten instances.  Including the insurance coverage arbitration brings the determine to 12.  The quasi-legal memorandum makes 13. … [The CEO] seeks to make use of this continuing as a fourteenth alternative to relitigate his mind-set.  However there’s nothing new.”

What in regards to the firm’s earlier arguments in opposition to the insurer?  The CEO mentioned that the corporate “admitted” through the events’ insurance coverage arbitrations that he “acted with an indemnifiable mind-set.”  The Intermune court docket disagreed.  First, the corporate’s arbitration place in favor of indemnification was not a “concession of truth.”  Second, “[u]nder Part 145, [the CEO’s] conviction is what issues, not what the Firm as soon as considered it.”  Third, the CEO’s argument runs afoul of Delaware regulation’s preclusion of company indemnification of “crimes dedicated with unhealthy religion intent.”  The CEO would possibly genuinely disagree together with his conviction, however such disagreement doesn’t allow him “to redo his prosecution.”