Delaware Business Litigation Report

Chancery Denies Plaintiff’s Request for Advancement and Indemnification Based on the Broad Release and Finds No Success on the Merits under DGCL Section 145(c)

Kokorich v. Momentus, Inc. C.A. 2022-0722-MTZ (Del. Ch. May 15, 2023)
Delaware law establishes mandatory indemnification rights under 8 Del. C. § 145(c) where a director or officer was "successful on the merits or otherwise" in the underlying proceedings. Sections 8 Del. C. § 145 (a) and (b) are enabling provisions that explain what additional rights a corporation can offer. In this case, the Court denies the Plaintiff's advancement and indemnification claims because he released such claims against the Company and did not achieve success on the merits.

The Court determined that Plaintiff waived his claims for advancement and indemnification, including his claim for fees on fees, under a broad release provision in his Stock Repurchase Agreement with the Company. Accordingly, even though the Indemnification Agreement and Bylaws in this case made the permissive statutory advancement and indemnification rights mandatory, Plaintiff relinquished those rights. The Court further found that Plaintiff did not achieve success on the merits or otherwise in connection with a government investigation. Therefore, he was not entitled to mandatory indemnification under 8 Del. C. § 145(c). The Court explained that to be deemed successful on the merits, Plaintiff had to avoid an adverse result. In this case, the investigation concluded after Plaintiff divested his business interest, which allowed the Company to continue operations. However, the result for the Plaintiff was still adverse, as he had to give up his interest at a price below market value.

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