Indemnification And The Circle Of Litigation

Cycle Graphic

An employee sues his employer for, among other things, violations of the California Labor Code.  The quondam employer responds with a counterclaim against its erstwhile employee claiming that to the extent it is liable, the employee is partially liable for creating that liability.  The employee responds with a reply counterclaim seeking indemnification based on Section

When Officers Must Indemnify The Corporation

Much attention is focused on the power of corporations to indemnify corporate officers and other agents.  In California, this is addressed by Corporations Code Section 317, which establishes the power to provide indemnification, and Section 204(a)(11) which allows corporations to include a provision in the articles authorizing indemnification in excess of that expressly permitted by Section

Court Holds California Statute Does Not Bar Insurance for Defense Of Criminal Actions Filed By Federal Prosecutors

California Insurance Code Section 553.5(b) prohibits insurers from providing a defense for certain types of claims, including criminal claims.  Does statute preclude a defense for all criminal claims or just some?  In Mt. Hawley Ins. Co. v. Lopez,  215 Cal. App. 4th 1385 (2013), the Court of Appeal considered the question at some length.  After

But Wait, California May Require Even More In Annual Reports To Shareholders

Yesterday’s blog discussed California’s requirement that many domestic and foreign corporations send financial statements to their shareholders.  If a corporation has 100 or more holders of record (determined in accordance with Section 605), then the annual report must also provide a brief description of the following: Any transaction during the previous fiscal year involving an amount in excess

Are Charter Indemnification Provisions Contracts?

Public companies typically include provisions in their articles and bylaws that mandate indemnification of directors and officers.  Often, these provisions include a statement to the effect that the rights to indemnification are a contract right.  However, declaring that a contract exists does not necessarily establish a contract.  Fortunately, the California Civil Code provides some rules for

I’ve Been Thinking About Conversion, But I Haven’t Decided To Convert

Conversion can be a sensitive subject for some.  In California, corporate conversions are a relatively new phenomenon, having made their first appearance with legislation enacted in 2002 (SB 399 (Ackerman)).  The General Corporation Law (GCL) rather unhelpfully defines a “conversion” as “a conversion pursuant to Chapter 11.5  . . . [of the Corporations Code]”.  Cal. Corp.

Should Your Articles Of Incorporation Include A Choice of Law Provision?

In yesterday’s post, I considered the fundamental question of why indemnification provisions are included in articles of incorporation.  State general corporation laws typically contain express provisions empowering or authorizing corporations to indemnify other persons, including directors, officers and agents.  For example, California has its Section 317, Delaware has Section 145 and Nevada has NRS 78.7502.  When an indemnity provision is

Some Observations On Indemnification Provisions In Articles Of Incorporation

Over the years, I’ve read many articles of incorporation that include provisions relating to indemnification of officers, directors and others.  Today’s post will cover a few questions and observations that have occurred to me over the years.  I’ll cover more of these “Why is there air?” type questions in future posts. Vice Admiral James Stockdale

The Corporations Code Can Make Suing Your Former Employees Costly

Supreme Court Justice Felix Frankfurter once told the following story about Oliver Wendell Holmes, Jr. and Ralph Waldo Emerson.   When Holmes at the urging of his father visited the great author, Emerson asked “Young man, have you read Plato?”  When Holmes said no, Emerson said: You must. You must read Plato.  But you must hold him at

Worlds In Collision – Agency Law And A Director’s Fiduciary Duties

Some of you may recall the consternation that arose when former Chancellor Chandler seemed to classify directors as agents of the shareholders.  Unisuper, Ltd. v. News Corp., No. 1699  (Del. Ch. Dec. 20, 2005) (“the board’s power—which is that of an agent’s with regard to its principal —derives from the shareholders, who are the ultimate holders of power