Waltuch v. Conticommodity Services, Inc.

United States Court of Appeals for the Second Circuit · 1996 · Corporations

88 F.3d 87

Updated July 19, 2026

corporationsindemnificationDelaware General Corporation Law § 145DelawareDGCL 145good faithnonexclusivitymandatory indemnification

Facts

Waltuch was Conticommodity's vice-president and chief metals trader and incurred about $1.2 million in unreimbursed legal fees defending numerous private silver-market suits against him and the company. Those private suits were all settled and dismissed with prejudice; Conticommodity paid more than $35 million in settlement, while Waltuch was dismissed without making any settlement contribution. Waltuch also incurred $1 million in legal fees in a CFTC enforcement proceeding that ended in a settlement including a $100,000 fine and a six-month trading ban. He sought indemnification under Article Ninth of the corporation's articles and under Delaware General Corporation Law § 145.

Issue

Does DGCL § 145(f)'s nonexclusivity language allow a Delaware corporation to indemnify an officer even if he did not act in good faith, notwithstanding the good-faith limitation in § 145(a)? Separately, is an officer 'successful on the merits or otherwise' under § 145(c) when private suits against him are dismissed with prejudice without any payment or assumption of liability by him, even though the corporation paid to settle the overall litigation?

Rule

A Delaware corporation may grant indemnification rights beyond those expressly provided in DGCL § 145, but those rights must be consistent with the substantive limits of § 145; therefore § 145(f) does not authorize indemnification that bypasses the good-faith requirement of § 145(a). Under § 145(c), success is determined by the outcome, not the reasons behind it, and an officer is 'successful on the merits or otherwise' when claims against him are dismissed with prejudice without payment or assumption of liability by him.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Blue Harbor Logistics, a Delaware corporation based in Seattle, adopts a bylaw stating that every officer "shall be indemnified for all defense costs, judgments, fines, and settlements arising from third-party claims related to corporate service, whether or not the officer acted in good faith." Priya Desai, the company's operations chief, seeks reimbursement after resolving a customer fraud suit, but the parties stipulate that she cannot establish good faith.

If Priya sues to enforce the bylaw, which is the strongest argument under Delaware law as interpreted by the majority opinion?

Explanation. The majority held that § 145(f)'s nonexclusivity language allows additional rights only if they are consistent with the substantive limits of § 145. In third-party actions, § 145(a) limits corporate indemnification power to persons who acted in good faith and in a manner reasonably believed to be in or not opposed to the corporation's best interests. A bylaw that mandates indemnification even without good faith exceeds that power and is invalid to that extent. (Derived from Waltuch v. Conticommodity Services, Inc. (n.d.).)