Indemnification Extended to Officer's Post-Employment Actions
Co-authored by Dean N. Razavi.
The Delaware Chancery Court granted indemnification to an officer who defended claims against him arising from representations he allegedly made before a merger, and for related conduct that occurred after that merger.
Plaintiff Danenberg, former CEO of Fitracks, sued Fitracks (which was acquired by Aetrex in 2008) for advancements of attorneys’ fees and expenses incurred in a suit by Aetrex against Danenberg. During and after acquisition negotiations, Aetrex and Danenberg negotiated the terms of a new company that would receive an exclusive license to facilitate orders of Aetrex goods. In the underlying case, Aetrex sued Danenberg personally for misrepresentations made in those negotiations. Danenberg argued that because he was Fitracks’ CEO during the negotiations, he was entitled to indemnification. Fitracks and Aetrex then tried to limit their claims only to representations Danenberg made post-closing. The court nevertheless granted Danenberg indemnification for both pre- and post-merger conduct, finding that the post-closing continued negotiations of the license agreement “represent[ed] a continuation of the pre-merger negotiations.”
Danenberg v. Fitracks, No. 6454-VCL (Del. Ch. Jan. 3, 2012).
