Considerations in Corporate Indemnification of Directors and Officers
October 2004
Introduction
From a historical perspective, there was considerable doubt whether a corporation could financially protect its directors and officers from personal liability. During the 1940s the courts found that corporate expenditures for the purpose of director and officer indemnification or insurance were ultra vires because such payments were not considered to be directly for the benefit of the corporation itself.1 (Ultra vires means an act or acts performed without or beyond the scope of corporate authorities as determined by charter or incorporation laws.) Despite this prohibition, other courts recognized indemnification and reimbursement as permissible and consistent with public policy. The rationale was that this protection encourages sound corporate management which was viewed as a prerequisite to responsible corporate activity.2
The somewhat contrary results of these earlier decisions prompted the enactment of statutes permitting or requiring indemnification in all states and, in most instances, authorizing corporations to purchase D&O insurance. In enacting these indemnification statutes, the various state legislatures sought to balance two conflicting interests. On one hand, they recognized the need to punish unfaithful fiduciaries and create a deterrence to improper conduct. On the other hand, they wished to provide protection for aggressive corporate managers willing to undertake good faith risks in the legitimate pursuit of profit. Most states accomplished this balance by crafting indemnification statutes that permit financial protection if the director's or officer's actions satisfied stated standards of conduct.
These indemnification statutes were enacted many years ago and virtually all corporations, through their charter and bylaws, mandate indemnification consistent with those statutes. Today, many corporations and their risk managers ignore indemnification issues when evaluating and structuring a risk management program for the firm's directors and officers, presumably because they assume that indemnification protection is adequate. This assumption, however, ignores recent statutory amendments, case law and new state-of-the-art indemnification concepts.
When evaluating the scope of a company's indemnification promise, risk managers need to understand that the broader and more protective the provision, the greater the corporation's potential liability to its directors and officers for indemnification reimbursement. Although most corporate managers, understandably, wish to afford the maximum protection available to directors and officers, this in turn creates the maximum potential corporate exposure. Thus, the decision to maximize indemnification protection should be periodically re-evaluated.
Indemnification Statutes
Each state has designed its own unique indemnification statutes. These are typically contained within the state's corporation laws. Given the prevalence of incorporation in the state of Delaware, many states now follow or have patterned their own indemnification statutes after Delaware's.3
The Delaware statute has both mandatory and permissive aspects. The Delaware indemnification statute merely permits a corporation to indemnify certain protected persons for certain loss or expenses actually and reasonably incurred in connection with a claim. The corporation is obligated by statute to indemnify for expenses incurred if the person has been successful on the merits or otherwise in defense of the claims against the person. For example, Section 145(a) of the Delaware statute provides that the corporation “may” indemnify directors and officers for pending or threatened suits, while Section 145(c) provides that the corporation “shall” indemnify directors and officers who have been successful on the merits of a case against them. Because the statute is primarily permissive, a director or officer is not entitled to indemnification unless the corporation's certificate of incorporation, bylaws or other internal document specifically mandates indemnification.
Indemnification created by the Delaware statute can be triggered while the underlying lawsuit against the director or officer is still pending if the complaint alleges facts sufficient to permit the court to presume no liability. For example, in Dunham v. Brick,4 the complaint alleged reliance by the defendant directors and officers upon the advice of accountants and, therefore, the court presumed for purposes of indemnification that the directors and officers had no liability. Nevertheless, mandatory statutory indemnification was not available because the corporation, rather than the directors and officers, paid the settlement amount.5
The Delaware statute permits indemnification of any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the corporation. Because the statute applies to directors and officers who are made a “party” to a proceeding, the Delaware Supreme Court has ruled that indemnification is not limited to defendants. Indemnification is available regardless of the director's or officer's role in the litigation, including as a plaintiff, intervener, or amicus curiae.JD66 Amicus curiae means “friend of the court.” The individual so designated is not a party to an action but has a strong interest in or views relative to the underlying subject matter.
The courts have also broadly interpreted the required capacity in which an individual must act in order to trigger the indemnification statute. In Heffernan v. Pacific Dunlop GNB Corp.,7 the court ruled that the Delaware indemnification statute applies to suits against directors and officers in their official capacity, or when suit arises more tangentially from their role, position or status as a director. In Heffernan, a former director and shareholder was sued for failure to disclose material information when he sold his stock in the company to another corporation. Although he was sued in his capacity as a shareholder (which would not alone trigger indemnification) the court permitted an indemnification claim against the corporation. The court reasoned that his status as a director put him in a position where, in performance of his duties as a director, he either learned or should have learned of the material information which he did not disclose to the purchaser when he sold his stock.8
Standard of Conduct
The Delaware statute permits indemnification only if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the corporation. With respect to a criminal proceeding, the person must also have had no reasonable cause to believe their conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere does not alone create a presumption that the person's conduct did not satisfy the statutory standard. Nolo contendere means a plea with the consent of the court, in which the defendant neither admits nor denies the charges. It may not be used against the defendant in a subsequent civil action.
Indemnifiable Loss
In any proceeding other than one by or in the right of the corporation (i.e., a derivative action) the corporation is permitted to indemnify expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnified person in connection with the proceeding. In a derivative case where the corporation sues the directors, any recovery inures to the corporation. If the corporation indemnified the directors for amounts they owed the corporation, the result would be circular and perhaps meaningless. Therefore, the Delaware statute permits indemnification of expenses only—not judgments or amounts paid in settlement—in proceedings brought by or in the right of a corporation, including most notably derivative suits. Even as to expenses, no indemnification is permitted if the indemnified person is adjudged liable to the corporation. The exception is where a court determines that despite the adjudication of liability to the corporation and in view of all the circumstances, the person is fairly and reasonably entitled to indemnity for expenses.
In any event, indemnification in all proceedings is available only if and to the extent the indemnitee is obligated to pay the amount for which indemnification is sought. If the person has no personal liability, there is nothing to indemnify.9
Indemnification Procedures
Permissive indemnification must be authorized on a case-by-case basis upon a determination that indemnification is proper in the circumstances because the person has met the applicable standard of conduct. This determination must be made by one of the following:
1. By the board of directors by majority vote of a quorum consisting of directors who are not parties to the proceeding;
2. If such a quorum of the Board is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or
3. By a majority vote of all stockholders.
If a corporation does not conform to the proper procedure in approving indemnification, not only is the indemnification payment arguably improper, but also coverage under the corporate reimbursement insuring clause of a D&O insurance policy may be jeopardized.10
Note, a court can make its own independent determination whether the standard of conduct was met, regardless of the determination by the directors or the stockholders.11
If the disinterested directors deny indemnification, the person seeking the indemnification may seek to judicially enforce the indemnification rights by asserting a claim against the corporation, but may not assert a claim against the disinterested directors. The indemnification claim is based in contract, not tort, and therefore, may be made only against the corporation.12
Advancement
The determination of whether an applicable standard of conduct has been met typically cannot be made until the end of the proceeding against the indemnified person. Because of this, the Delaware statute permits a corporation to pay in advance of the final disposition of the proceeding the expenses incurred by a director or officer in defending the proceeding. Such advancement is authorized only if the indemnified person submits to the corporation a written undertaking to repay the amounts advanced if it should ultimately be determined that he or she is not entitled to be indemnified by the corporation.
Advancement is legally distinct from indemnification. If an internal indemnification provision mandates only indemnification, no advancement is required.13 The right to advancement of expenses can be much broader than the right to indemnification. In Citadel Holding Corp. v. Roven,14 the Delaware Supreme Court interpreted an indemnification agreement as requiring a corporation to advance expenses incurred by a director sued by his corporation for violations of Section 16(b) of the Securities Exchange Act of 1934 (i.e. the short-swing profit prohibition). Advancement was permitted even though the indemnification agreement clearly prohibited indemnification of any liability or expense in connection with a Section 16(b) claim, whether or not successful. The court, however, permitted the corporation to seek repayment from the director of those advanced costs at the conclusion of the litigation. The court further ruled that the corporation was obligated to advance not only the expenses incurred in defending the 16(b) claim, but also the expenses incurred in prosecuting a counterclaim against the corporation arising from the same matters as alleged in the original complaint by the corporation. The court considered this counterclaim as an affirmative defense which triggered the advancement obligation.15
A bylaw advancement provision is not invalid because it permits advancement with respect to federal securities law claims or because it does not include a good faith or best interest of the corporation standard.16 In order to qualify for advancement of expenses, a defendant director or officer need only raise genuine issues of fact or law relating to liability and need not show a probability of success on the merits.17 Defendant directors and officers are also not required to post a bond or enter into an undertaking to repay the advanced expenses if ultimately not entitled to indemnification.18
Nonexclusivity
The indemnification and advancement of expenses recognized by the Delaware statute is not deemed exclusive of any other rights which may be available to a person under a bylaw, agreement, vote of stockholders or disinterested directors. For this reason, corporations can provide additional protection for their directors and officers through carefully drafted bylaws or other internal corporate documents.
The courts have not yet resolved the issue whether non-exclusivity clauses in the statute permits indemnification otherwise prohibited by the indemnification statute. For example, can an internal corporate indemnification provision authorize or require a corporation to indemnify settlements by or judgments against its directors and officers in derivative suits? At least one court has held that the non-exclusivity clause permits this type of expansion of the indemnification statute.19 Another recent case held the opposite, finding that the non-exclusivity clause does not authorize indemnification otherwise prohibited by the indemnification statute.20
Many commentators agree that the non-exclusivity clause is subject to public policy constraints.21 In determining these constraints, the courts may look to the constraints adopted by the legislature when it drafted the indemnification statutes. For this reason, courts may be reluctant to permit corporations to indemnify for settlements or judgments in derivative suits pursuant to an internal indemnification provision. At least one court has rejected the argument that public policy bars indemnification pursuant to a non-exclusivity clause. In PepsiCo., Inc. v. Continental Casualty Co.,22 a New York court interpreting Delaware law held that the non-exclusivity clause permits a corporation to indemnify without following the procedural requirements of the Delaware statutes. The court reasoned that the statutory indemnification provisions are simply “fall back” provisions that the corporation may or may not implement. It is questionable though, whether a Delaware court would be as willing to permit the non-exclusivity clause to circumvent these statutory provisions.
Partnership Indemnification
Unlike corporation statutes, state partnership statutes vary significantly with respect to indemnification rights and powers. Some states have partnership statutes which closely parallel the detailed indemnification rights and procedures applicable to corporations. Other states have extremely broad provisions. For example, the Delaware Revised Uniform Limited Partnership Act provides:
Subject to such standards and restrictions, if any, as are set forth in its partnership agreement, a limited partnership may, and shall have the power to, indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever.
Delaware Revised Uniform Limited Partnership Act Section 17-108
The Delaware Chancery Court has recognized that this statute is broader than the statutory indemnification provisions applicable to corporations, and defers completely to the contracting parties to create and delineate the rights and obligations with respect to indemnification and advancement of expenses.23
Internal Indemnification Provisions
A corporation's internal indemnification provisions in its certificate of incorporation or bylaws are crucial if the corporation wishes to assure maximum financial protection to its directors and officers. The primary goal of such provisions is to mandate the indemnification and advancement that is otherwise permitted by the Delaware statute. However, numerous other “bells and whistles” can be included within such a provision to assure maximum protection, such as:
1. Indemnification “to the full extent permitted by law.”
2. A requirement for indemnification rather than merely permitting the corporation to indemnify.
3. A requirement for the advancement of defense expenses subject only to an unsecured obligation to repay the expenses if a court subsequently determines the indemnification was not permitted.
4. Shifting the burden of proof to the corporation to prove that the director or officer is not entitled to the requested indemnification.
5. Requiring the corporation to reimburse the director or officer for any expenses incurred in the claim against the corporation for such indemnification if the director or officer is successful in whole or in part.
6. A provision that the director or officer has a right to an appeal or an independent de novo determination as to indemnification entitlement. (De novo is defined as new, second, or independent.)
7. The express statement that the indemnification rights constitute a contract which is intended to be retroactive to events occurring prior to its adoption, and which shall continue to exist even after the rescission or restrictive modification of these rights. Alternatively, a separate indemnification contract could be executed between the corporation and the director or officer. If the bylaw indemnification rights differ from rights created by an indemnification statute, the broader rights will likely apply.24
8. A provision that any director or officer who serves a subsidiary of the corporation, or any employee benefit plan of the corporation or such subsidiary, is deemed to be providing such service at the request of the corporation. Thus, the director or officer of the subsidiary will be entitled to indemnification from the subsidiary and the parent corporation.
9. A requirement for indemnification of expenses incurred by a director or officer as a plaintiff in a suit, only if the board of directors approves prosecution of the suit by the director or officer.
When drafting such broad, ultra-protective provisions, the corporation must decide whether only its directors and officers will be entitled to these broad protections or if others will be included.
A sample Delaware indemnification provision is included elsewhere in this section.
Although the Delaware statute permits indemnification of employees and agents, most corporations do not include such persons in the internal indemnification provisions, and instead rely upon the board of director's ability to indemnify such persons as appropriate under the circumstances. Indemnification of others than directors and officers can obligate the corporation to expend funds for persons it may not wish to indemnify; i.e., agents of the corporation. A few companies deem it appropriate to include employees within the broad indemnification provisions, although it is highly questionable whether it is appropriate to include agents, which can include outside legal, accounting and investment banker professionals.
Because directors and officers face uninsured exposures in pollution and regulatory claims or claims by other insured directors and officers, the scope of indemnification protection can be crucial. Therefore, periodic, competent review and revision of a corporation's internal indemnification provisions should be an essential element of any risk management program.
Outside Directorship Liability
Virtually every state indemnification statute permits corporations to indemnify persons serving at the request of the corporation as directors, officers, employees or agents of an outside entity. The Delaware statute [Section 145(a)] is typical and states in part as follows:
A. A corporation may indemnify any person who was or is a party…to any threatened, pending or completed action, suit or proceeding…by reason of the fact that he…is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise….
Delaware Indemnification Statute, Section 145(a)
Important aspects of this statute include the following.
Protected Persons
The statute applies to any person (not just directors and officers of the corporation), serving as an outside director at the request of the corporation.
The statute also applies to any position with an outside entity. Although the term “outside directorship” is frequently used, it is somewhat of a misnomer since a person serving at the request of the corporation as a director, officer, employee or agent of the outside entity is eligible for protection. For example, if a person provides consultation or other assistance to an outside entity such that the person is deemed to be an agent of that outside entity, outside directorship liability indemnification protection may apply.
The statute applies to service with any enterprise, including a corporation, partnership, joint venture, trust, or employee benefit plan. Outside directorship liability indemnification may be afforded by a parent corporation to all directors and officers of all subsidiaries or affiliates, thereby providing backup indemnification protection to the subsidiary directors and officers in the event that the subsidiary is legally or financially unable to provide indemnification. To implement such a concept, a provision similar to the following could be inserted in the parent corporation's mandatory bylaw indemnification provision:
A. Any person serving (i) as a director or officer of another corporation of which a majority of the shares entitled to vote in the election of its directors are held directly or indirectly by the Corporation, or (ii) in any capacity any employee benefit plan of the Corporation or of any corporation referred to in clause (i), shall be deemed to be doing so at the request of the Corporation.
Sample subsidiary D&O indemnification wording.
Absent such a provision, the parent corporation is not required to indemnify directors and officers of a subsidiary.25
Request for Indemnification
The statute does not require a written request by the corporation that the individual serve in the outside directorship position. Presumably an oral request can trigger the indemnification authorization, so long as it can be proven that the oral request was, in fact, made. Similarly, the statute does not require the request for service as an outside director to be by the corporation's board of directors, officers or any particular person. Any person with actual or apparent authority to make the request on behalf of the corporation may bind the corporation.
In light of the foregoing, anyone with an expectation of outside directorship liability indemnification protection, may have a basis for seeking indemnification since the statute alone contains no controls or limitations. For example, comments by an employee's supervisor or written policy statements encouraging employees to be active in civic or community organizations or suggesting to employees that they “support” or “help out” another entity may be sufficient to invoke outside directorship liability indemnification protection.
Indemnified Claim
The statute applies to any claim against a person serving in an outside director position. When evaluating this indemnification exposure, one should consider not only the breach of duty in statutory claims typically covered under a D&O insurance policy, but also claims typically excluded by D&O insurance. Bodily injury and property damage claims against an outside director can create a potentially enormous indemnification liability to the corporation, particularly if the corporation does not maintain adequate general liability insurance.
Mandatory Protection
The Delaware statute, like all other state indemnification statutes, merely permits, but does not require corporations to indemnify outside directorship liability. Many corporations restate verbatim the state indemnification statute in their bylaws and simply change the word may to shall in order to mandate the statutorily authorized indemnification. Under that type of corporate indemnification provision, the extremely broad, largely uncontrolled outside directorship liability exposure becomes a legal obligation of the corporation. The corporation may incur legal obligations, which may or may not be covered by insurance, as a result of conduct by virtually any employee of the parent corporation or any subsidiary.
To control this unintended and potentially large exposure, corporations may implement an outside directorship program pursuant to which only those positions specifically approved by a defined corporate procedure qualify for outside directorship liability indemnification protection.
Bankruptcy Issues
Two issues typically arise in connection with indemnification when a corporation is in bankruptcy: (1) is the indemnification claim disallowed in its entirety? and (2) if not disallowed, what priority is given to the claim?
Section 502(e)(1)(B) of the Bankruptcy Code disallows any claim against a bankruptcy estate for reimbursement or contribution if the person seeking reimbursement is “liable with the debtor” and the claim is contingent at the time the bankruptcy court determines the allowance or disallowance of claims. If the suit against the director or officer which gives rise to the indemnification claim asserts allegations which, if proven, could create liability for the debtor corporation, but for the automatic stay, the indemnification claim can be denied if the claim was contingent at the time the bankruptcy court determines the allowance and disallowance of claims.
If the indemnification claim is allowed, the bankruptcy court must determine what priority to give the claim for purposes of determining its payment. If the indemnification is treated as an administrative expense, it is given first priority and will likely be paid in full or at least substantially so. However, bankruptcy courts generally have denied administrative expense treatment for D&O indemnification claims on the theory that such claims do not arise from a transaction with the debtor-in-possession, but rather from an obligation by the debtor that arose prior to the bankruptcy filing.26
Some courts, though, have held that present directors and officers of the debtor-in-possession may be entitled to priority treatment since the indemnification of such individuals constitutes an important benefit to the bankruptcy estate by assuring qualified management. Under that reasoning, the corporation's ongoing indemnification obligation constitutes a transaction with the debtor-in-possession during the bankruptcy proceeding.27
Need for D&O Insurance
The perceived need for D&O insurance is based upon the premise that financial protection through applicable state indemnification statutes may be inadequate. Historically, the primary areas in which indemnification has been deemed inadequate to provide sufficient protection are as follows:
1. The ability to indemnify for derivative suit judgments or settlements is severely limited or prohibited by most state indemnification statutes. The Delaware statute does not authorize indemnification of settlements or judgments in suits brought by or on behalf of the corporation, which includes derivative suits. This limitation is intended to avoid the circularity which would result if funds received by the corporation were simply returned to the person who paid them. On the other hand, D&O insurance policies typically provide coverage for derivative suit settlements or judgments, subject to various “conduct” exclusions. A few states have recently amended their indemnification statutes to limit or eliminate this restriction on indemnification, at least under certain circumstances.28
2. Indemnification of claims under the registration and anti-fraud provisions of the federal securities laws may be precluded by public policy or by pre-emption. The SEC's long-standing view is that such indemnification is against public policy and is unenforceable.29
The SEC does not regard the maintenance of D&O insurance to be contrary to public policy, even when the corporation pays the premium for such insurance.30
Public policy may limit indemnification under other federal statutes (e.g., RICO or Anti-trust laws) where Congress intended personal liability as a deterrent.31 Also, Congress expressly prohibited indemnification of individuals adjudged liable under the Foreign Corrupt Practices Act of 1977.32 Neither Congress nor public policy prohibits indemnification for liability under CERCLA.33 Some D&O insurance policies provide coverage for certain securities and other federal law claims, subject to various “conduct” exclusions.
3. No indemnification is permitted unless certain standards set forth in the applicable indemnification statute are satisfied as determined by the designated person or body. The Delaware statute requires the director or officer to have acted in good faith and in the reasonable belief that his or her actions were in, or at least not opposed to, the best interests of the corporation. A determination whether indemnification is proper in a given circumstance is to be made by the disinterested members of the board, by special counsel appointed by the board, by shareholders, or by a court.
D&O insurance may provide protection for acts which do not satisfy this “good faith” and “reasonable belief” standard so long as the insurance coverage does not otherwise violate public policy. D&O insurance may also provide protection for a director or officer when the incumbent board chooses, for whatever reason, not to make the required determination and further refuses to submit the question to special counsel or the shareholders. This circumstance is apt to arise, for example, in the aftermath of a hostile takeover.
4. The corporation may be financially able to fund the indemnification, either because it is insolvent or because of cash flow restraints. The “1992 Directors and Officers Liability Survey” conducted by The Wyatt Company concluded that the average reported defense costs per case by U.S. business corporations for all reported closed D&O claims was $677,000, and that the average reported payment to claimants was $3.26 million. In some cases, the payment of such large defense costs and settlements could impair a corporation's other business activities and, thus, this potential deficiency in indemnification protection may be equally applicable to both insolvent and solvent companies.
Subject to the coverage limitations and exclusions a D&O insurance policy insures that adequate resources will be available for the defense of the corporate managers and any settlement or judgment incurred by them.
5. Either the applicable law or the corporation's articles of incorporation or bylaws may be modified to reduce or eliminate indemnification for directors or officers. Because protection is probably determined by the indemnification in effect at the time the indemnification is sought, rather than when the act giving rise to the claim occurred, such subsequent modification may reduce or eliminate protection otherwise expected by directors or officers. Here again, this situation may arise after a hostile takeover.
6. Unique regulations applicable to certain financial institutions also limit the ability to indemnify directors and officers. For example, 12 C.F.R. §7.5217 prohibits indemnification of expenses, penalties or other payments incurred in an administrative proceeding or action by a bank regulatory agency which results in a final order assessing civil money penalties or requiring payments to the bank. This section also prohibits insurance coverage in connection with an order assessing penalties.
When the Resolution Trust Corporation assumes control of a failed savings and loan, the corporation's indemnification obligations are not acquired by the RTC. Indemnification for the directors and officers in a suit by the RTC “is simply unavailable.”34
7. From the corporation's point of view, D&O insurance also shifts the risk of liability for indemnification claims to a third party. Thus, in addition to assuring the directors and officers financial protection, D&O insurance also serves as a risk management tool to address potentially large corporate exposure.
Conclusion
Corporate indemnification of directors and officers is complex and raises difficult management, legal and financial issues. Because the law relating to indemnification is constantly evolving — along with the creative application of the law—a corporation's indemnification program should similarly evolve. Absent careful and periodic analysis and state-of-the-art implementation of indemnification planning, directors and officers may forego financial protection which is otherwise available for uninsured exposures, and thereby subject their personal assets to unnecessary risk. This analysis is also important when a corporation (1) maintains a higher deductible under the corporate reimbursement section of its D&O insurance policy as compared to the deductible applicable to the directors and officers personally, or (2) as certain corporations consider alternative D&O insurance products which provide only D&O insurance and no corporate reimbursement coverage.
NOTES
1. See eg, New York Dry Dock v. McCollum, 16 N.Y.S.2d 844 (S.Ct., 1939); Bailey v. Bush Terminal Co., 56 N.E. 2d 39 (N.Y. 1944).
2. See eg., In re: E.C. Warner Co., 45 N.W.2d 388 ( Minn. 1950); C.F. Solimine v. Hollander, 19 A.2d 344 (N.J. Eq. 1941).
3. See Delaware Indemnification Statutes, Section 145, Delaware General Corporation Law, Appendix pages DEL145-1–3.
4. 1993 Conn. super LEXIS 80 (Conn. Sup. Ct. , Middlesex, Jan. 11, 1993).
5. Waltuch v. Conti Commodity Services, Inc., 1993 U.S. Dist. LEXIS 13066 (S.D.N.Y., September 17, 1993).
6. Hibbert v. Hollywood Park, Inc., 457 A.2d 339 (Del. 1983).
7. Heffernan v. Pacific Dunlop GNB Corp., 7 1992 U.S.App. LEXIS 12595 (7th Cir., June 5, 1992).
8. See also, Barry v. Varry, 824 F.Supp 178 (D. Minn. 1973).
9. See, In the Matter of Liquidation of W.M.B.I.C. Indemnity Corp., 1993 Wisc. App. LEXIS 318 (Mar. 18, 1993).
10. See eg., MacMillan, Inc. v. Federal Ins. Co., 741 F.Supp. 1079 (S.D.N.Y. 1990); Atlantic Permanent Federal Savings & Loan Assoc. v. American Casualty Co., 839 F.2d 212 (4th Cir. 1988); Waldoboro Bank v. American Casualty Co., 775 F.Supp. 432 (D. Maine, 1991).
11. Heffernan v. Pacific Dunlop GNB Corp., 1993 U.S.Dist. LEXIS 5 (N.D. Ill. Jan 5, 1993); Waltuch v. Conticommodity Services, Inc., 1993 U.S.Dist. LEXIS 1306 (S.D.N.Y., Sept. 17, 1993).
12. Pope v. American Airlines, Inc., 1993 U.S.Dist. LEXIS 8896 (N.D. Ill. June 30, 1993).
13. Advanced Mining Systems v. Frickle, 1992 W.L. 187615 (Del. Ch., July 4, 1992)
14. Citadel Holding Corp. v. Roven, 603 A.2d 811 (Del. 1992).
15. See also, Megeath v. PLM International, Inc. Case No. 930369 (Cal. Sup. Ct. San Fran., Mar. 18, 1992).
16. Heffernan v. Pacific Dunlop GNB Corp., 1993 U.S. Dist. LEXIS 5 (Jan. 5, 1993).
17. Sequa Corp. v. Gelmin, 1993 U.S. Dist. LEXIS 10005 (S.D.N.Y. July 21, 1993).
18. Sequa Corp. v. Gelmin, supra; Fidelity Federal Savings & Loan v. Felicetti, Case No. 92-0643 (Ed. Pa., Aug. 5, 1993).
19. Heffernan v. Pacific Dunlop GNB Corp., 1993 U.S. Dist. LEXIS 5 (N.D. Ill, Jan. 5. 1993).
20. Waltuch v. Conti-commodity Services, Inc., 1993 U.S. Dist. LEXIS 13066 (Sept. 17, 1993).
21. See eg., R. Balotti & J. Finklestein, The Delaware Law of Corporations and Business Organizations, Section 4.16, at 4-319 (2d Ed. 1990).
22. PepsiCo., Inc. v. Continental Casualty Co., 640 F.Supp. 656, 660 (S.D.N.Y. 1986).
23. Delphi Easter Partners Limited Partnership v. Spectacular Partners, Inc., 1993 Del. Ch. LEXIS 159 (Del. Ch. Ct., Aug. 6, 1993).
24. See Slottow v. American Casualty Co., 1993 U.S.App. LEXIS 19872 (9th Cir., Aug. 4, 1993).
25. Stoddard v. Michigan National Corp., Case No. 125552 (Mich. App., April 8, 1992).
26. See eg., In re: Baldwin-United Corp., 43 B.R. 443 (S.D. Ohio 1984); In re: Consolidation Oil and Gas, Inc., 110 B.R. 535, 538 (Bankr. D.Col. 1990); In re: Amfesco Industries, Inc., 81 B.R. 777 (Bankr. E.D.N.Y. 1988).
27. See eg., In re: Sahlen & Assocs., Inc., 113 B.R. 152, 153 (Bankr. S.D.N.Y. 1990); In re: Bladwin United Corp., supra; contra, Christian Life Center v. Silva, 821 F.2d 1370, 1374 (9th Cir. 1987); In re: Amfesco Industries, Inc. 81 B.R. 777, 784.
28. See eg., Indiana Code §23-1-37; New York Bus. Corp. Law §722.
29. See 17 C.F.R. §§229.510 and 229.512(i). This position has received some judicial support, See eg., Globus v. Law Research Service, Inc., 418 F.2d 1276 (2nd Cir. 1969), cert. denied, 397 U.S. 913 (1970); Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101 (4th Cir. 1989); First Golden Bancorporation v. Weiszman, 942 F.2d 726 (10th Cir. 1991); Odette v. Shearson, Hammill & Co., 394 F.Supp. 946 (S.D.N.Y. 1975); Ades v. Deloitte & Touche, 1993 U.S. Dist. LEXIS 12901 (S.D.N.Y. Sept. 17, 1993).
30. See 17 C.F.R. §237.461(c).
31. See, SEQUA Corp. v. Gelmin, 1993 U.S. Dist. LEXIS 10005 (S.D.N.Y. July 21, 1993).
32. 15 U.S.C. §78ff(c)(4) and §78dd-2(b)(4).
33. See, 42 U.S.C. §9607(e); Witco Corp. v. Beckhus, 1993 U.S. Dist. LEXIS 17289 (D. Del., Oct. 22, 1993).
34. RTC v. Greenwood, Case No. 92-CV-002 (D. Minn., Aug. 23, 1993).