                                                   EFiled: Jul 31 2015 02:29PM EDT
                                                   Transaction ID 57638053
                                                   Case No. 8481-VCN
      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE


FRANCIS S. BRANIN, JR.,                    :
                                           :
                        Plaintiff,         :
                                           :
            v.                             :     C.A. No. 8481-VCN
                                           :
STEIN ROE INVESTMENT COUNSEL,              :
LLC, STEIN ROE INVESTMENT                  :
COUNSEL, INC., and ATLANTIC                :
TRUST GROUP, INC., together d/b/a          :
ATLANTIC TRUST PRIVATE                     :
WEALTH MANAGEMENT,                         :
                                           :
                        Defendants.        :



                         MEMORANDUM OPINION

                         Date Submitted: April 24, 2015
                          Date Decided: July 31, 2015



John M. Seaman, Esquire and Steven C. Hough, Esquire of Abrams & Bayliss
LLP, Wilmington, Delaware, and Louis P. DiLorenzo, Esquire, Michael I.
Bernstein, Esquire, and Michael P. Collins, Esquire of Bond, Schoeneck & King,
PLLC, New York, New York, Attorneys for Plaintiff.

Robert J. Katzenstein, Esquire of Smith, Katzenstein & Jenkins LLP, Wilmington,
Delaware, and John F. Cambria, Esquire and Daniella P. Main, Esquire of Alston
& Bird LLP, New York, New York, Attorneys for Defendants.




NOBLE, Vice Chancellor
      Plaintiff Francis S. Branin, Jr. (“Branin” or the “Plaintiff”) began working

for Defendant Stein Roe Investment Counsel LLC (“SRIC LLC”) in 2002. Shortly

thereafter, he was sued by his former employer, Bessemer Trust, N.A.

(“Bessemer”). After a decade defending against Bessemer’s allegations, all claims

against Branin were dismissed with prejudice. Plaintiff then sought to enforce a

purported indemnification right against Defendants.1 The Court must now resolve

cross-motions for summary judgment, where the fundamental issue is whether

Branin’s claim for indemnification (for expenditures related to litigation begun in

2002, but not resolved with finality until 2012) is time-barred.

                                I. BACKGROUND

A. Branin Joins SRIC LLC

      Branin resigned from Bessemer on July 12, 2002. He had worked there

since late 2000, when he, and seven other principals of an investment management

firm, sold to Bessemer all of the firm’s assets, included client accounts and related

goodwill.    In 2001, as his relationship with Bessemer deteriorated, Branin

discussed employment opportunities with SRIC LLC, another investment

management firm.      Switching companies was complicated by his sale of his

clients’ goodwill to Bessemer. Branin explained to SRIC LLC that Bessemer’s


1
  Defendants are SRIC LLC, Stein Roe Investment Counsel, Inc. (a successor
entity), and Atlantic Trust Group, Inc. (Stein Roe Investment Counsel, Inc.’s
parent).
                                          1
purchase was governed by a New York common law doctrine that prevented him

from soliciting his former clients. However, he could provide information to his

former clients and accept their business if they approached him.2 After Branin and

SRIC LLC agreed to a compensation agreement, Branin resigned from Bessemer

and executed an employment agreement with SRIC LLC.

B. Bessemer Sues Branin

      Some of Branin’s former clients soon followed him to SRIC LLC.3

Bessemer responded by suing Branin in New York state court on November 22,

2002 (the “New York Action”), charging him with improperly soliciting its clients

and impairing its goodwill, in violation of a New York implied covenant. Branin

removed the action to federal court.      After a decade of litigation, Bessemer

unconditionally dismissed, with prejudice, any and all claims against Branin.4




2
  Branin’s contract with Bessemer did not include an express covenant regarding
noncompetition or non-solicitation.
3
  At one point, $205 million of the $228 million worth of client assets managed by
Branin at SRIC LLC had been managed at Bessemer.
4
  The action was heard in the United States District Court for the Southern District
of New York and appealed to the United States Court of Appeals for the Second
Circuit. The Second Circuit certified a question of New York law to the New York
Court of Appeals. The New York high court’s answer to the certified question was
favorable to Branin’s position.
                                         2
C. Branin’s Quest for Indemnification

      After successfully defending against the New York Action, Branin turned to

this Court for an order requiring Defendants to indemnify him for the expenses he

had incurred. His purported right to indemnification arises from and is governed

by SRIC LLC’s Amended and Restated Limited Liability Company Operating

Agreement, dated January 2, 2001, as amended (the “Operating Agreement”).5

The parties debate which version of the Operating Agreement applies.

      When the events underlying the New York Action occurred, and when

Bessemer filed suit, the Operating Agreement’s indemnification provision was set

forth in the First Amendment to the Operating Agreement (the “First

Amendment”):

      Indemnification. No Member, Manager or employee of the Company
      shall be liable to the Company, any other Member or any other Person
      who has an interest in the Company for any loss, damage or claim
      incurred by reason of any act or omission performed or omitted by
      such Member, Manager or employee in good faith on behalf of the
      Company and in a manner reasonably believed to be within the scope
      of the authority conferred on such Member, Manager or Employee by
      this Agreement, except that this sentence shall not apply to any
      Member, Manager or employee of the Company in respect of any
      such loss, damage or claim incurred by reason of such Person’s gross
      negligence or willful misconduct. To the full extent permitted by
      applicable law, each Member, Manager or employee of the Company
      shall be entitled to indemnification from the Company for any loss,

5
 Transmittal Aff. of John F. Cambria, Esq., Nov. 24, 2014 (“Cambria Aff.”) Ex. 1.
Branin had initially advanced two alternative grounds for indemnification, but
withdrew his second and third counts. See Stipulation and Order of Dismissal of
Counts II and III of the Verified Am. Compl., Oct. 21, 2013.
                                        3
      damage or claim by reason of any act or omission performed or
      omitted by such Person in good faith on behalf of the Company and,
      as applicable, in a manner reasonably believed to be within the scope
      of the authority conferred on it by this Agreement, except that no
      Member, Manager or employee shall be entitled to be indemnified in
      respect of any loss, damage or claim incurred by it by reason of such
      Person’s gross negligence or willful misconduct by such Person with
      respect to such acts or omissions; provided, however, that any
      indemnity under this Section 8.7 shall be provided out of and to the
      extent of Company assets only, and no Member shall have personal
      liability on account thereof.6

      On February 11, 2003, several months after Bessemer commenced the New

York Action, SRIC LLC’s members adopted the Second Amendment to the

Operating Agreement (the “Second Amendment”).7         The Second Amendment

revised the indemnification provision in an attempt to remove the New York

Action from its scope:

      [N]o Member, Manager or employee shall be entitled to be
      indemnified in respect of any loss, damage or claim incurred by
      reason of such Person’s . . . breach of any agreement, express or
      implied, entered into by such Person with one or more outside
      parties prior to such Person’s association with the Company . . . .8

      In December 2004, Branin first requested indemnification for fees and

expenses that he had incurred in the New York Action.9 Defendants refused those

demands, asserting in part that “any debate over indemnification is premature,


6
  Cambria Aff. Ex. 2 (First Amendment) § 8.7.
7
  The Operating Agreement explicitly allowed members to vote to amend it.
8
  Cambria Aff. Ex. 3, at § 8.7.
9
  Transmittal Aff. of John M. Seaman, Esq., Nov. 24, 2014 (“Seaman Aff.”)
Ex. 12.
                                        4
given that an outcome in the Bessemer litigation is still pending.”10 Defendants

rejected further demands for indemnification, which Branin made in 2005, 2006,

2008, and 2012.11

             II. NATURE AND STAGE OF THE PROCEEDINGS

       The New York Action was resolved with finality on July 24, 2012, with all

claims against Branin dismissed with prejudice. Branin initiated this action for

indemnification on April 17, 2013, and both sides moved for judgment on the

pleadings. Defendants argued in part that the Second Amendment controls their

indemnification obligation. Because the Second Amendment purportedly excluded

the New York Action from its scope, Defendants contended that they are not

required to indemnify Branin.      Branin disagreed, arguing that Defendants’

obligation to indemnify him vested when Bessemer began the New York Action.

Accordingly, the broader First Amendment dictates Branin’s indemnification right,

entitling him to relief.

       The Court issued a Memorandum Opinion and Order (the “June 30

Decision”),12 denying both motions. The Court concluded that Branin’s contingent


10
   Seaman Aff. Ex. 16, at 2.
11
   See Seaman Aff. Exs. 13-20 (correspondence between Branin’s counsel and
Defendants regarding indemnification).
12
   Branin v. Stein Roe Inv. Counsel, LLC, 2014 WL 2961084 (Del. Ch. June 30,
2014). Branin had withdrawn his second and third counts. See supra note 5. The
June 30 Decision thus addressed Branin’s first count, which sought
indemnification pursuant to the Operating Agreement.
                                        5
right to indemnification vested on November 22, 2002, when the New York Action

commenced, and it was not rescinded by subsequent amendment. Therefore, the

First Amendment governs Defendants’ indemnification obligation. However, the

Court could not resolve on the record before it whether Branin had acted in good

faith on SRIC LLC’s behalf and in a manner reasonably believed to be within the

scope of his authority. Therefore, it could not determine whether Defendants must

indemnify him.

      The parties subsequently agreed to a Stipulation and Order on Liability,

Leave to Amend Answer, and Briefing Schedule (the “Stipulation”).13             The

Stipulation resolved the open factual issues in Branin’s favor and allowed

Defendants to amend their answer to add as affirmative defenses the statute of

limitations and laches. Defendants added those defenses, asserting that a necessary

consequence of the June 30 Decision was that the statute of limitations for Branin’s

indemnification claim began running on November 22, 2002. Branin then moved

to strike the new affirmative defenses and for summary judgment on the remaining

issues in the action.14 Defendants also moved for summary judgment on the issue

of liability, relying on their new defenses.




13
  Transaction ID 56268236.
14
  Those issues include liability, damages, prejudgment interest, and entitlement to
fees on fees.
                                           6
      After considering the motions, the Court will strike Defendants’ affirmative

defenses and grant summary judgment in Branin’s favor on Defendants’ liability to

indemnify him. Branin is also entitled to prejudgment interest and fees on fees.

                                 III. ANALYSIS

      The Court will grant a motion for summary judgment when “there is no

genuine issue as to any material fact and . . . the moving party is entitled to a

judgment as a matter of law.”15      Where, as here, the parties cross-move for

summary judgment and do not raise any material factual issue, the “Court . . .

deem[s] the motions to be the equivalent of a stipulation for decision on the merits

based on the record submitted with the motions.”16 “[T]he usual standard of

drawing inferences in favor of the nonmoving party does not apply.”17 The central

issue to be resolved is whether the statute of limitations on Branin’s

indemnification claim began to run when his contingent right to indemnification

vested in November 2002.18




15
   Ct. Ch. R. 56(c).
16
   Ct. Ch. R. 56(h). Again, the Stipulation resolved the open factual issues
identified in the June 30 Decision.
17
   Farmers for Fairness v. Kent Cnty., 940 A.2d 947, 955 (Del. Ch. 2008).
18
   As will be seen, the Court concludes that the statute of limitations did not begin
to run until 2012, when the New York Action was resolved with finality.
Alternatively, even if it had started to run in 2002, the continuing breach doctrine
would have effectively postponed commencement of the time bar period until
2012. Thus, Branin prevails from either perspective.
                                         7
A. The June 30 Decision Did Not Address Accrual for
   Statute of Limitations Purposes

      The parties agree that contractual indemnification claims are subject to a

three years statute of limitations, which typically begins to run only after the party

“entitled to indemnification can be confident any claim against him . . . has been

resolved with certainty.”19 While “the question of when a claim for contractual

indemnification accrues depends on the contractual language,”20 the law and policy

developed in the 8 Del. C. § 145 context is instructive.

             Generally, the matter on which the claim for indemnification is
      premised may be said to have been resolved with certainty only when
      the underlying investigation or litigation is definitely resolved. “The
      implicit rationale for this conclusion is that the person seeking
      indemnity should not have to rush in at the first possible moment but
      rather should be able to wait until the outcome of the underlying
      matter is certain.” A successful result on a claim for indemnification
      in the trial court, for example, does not cause the statute of limitations
      to begin running if an appeal is taken. Until the final judgment of the
      trial court withstands appellate review, the outcome of the underlying
      matter is not certain.21

      Here, the First Amendment (which governs Defendants’ indemnification

obligation) conditions SRIC LLC’s indemnification obligation: Defendants are not

liable to indemnify employees for acts not taken in good faith on behalf of the

company or in a manner reasonably believed to be within the scope of the

19
   Scharf v. Edgcomb Corp., 864 A.2d 909, 919 (Del. 2004) (internal quotation
marks omitted).
20
   LaPoint v. AmerisourceBergen Corp., 970 A.2d 185, 197 (Del. 2009).
21
    Scharf, 864 A.2d at 919 (quoting Simon v. Navellier Series Fund, 2000
WL 1597890, at *9 (Del. Ch. Oct. 19, 2000)).
                                          8
employee’s authority.22 Branin could not have enforced his indemnification right

until the nature of his conduct underlying the New York Action was established.

      As a matter of litigative efficiency, it makes little sense for this court
      to decide claims for indemnification - as opposed to claims for
      advancement of litigation expenses - in advance of a non-appealable
      final judgment. There is simply too great a risk that the appellate
      courts will take a different view than the trial court for it to make
      much sense to grapple with indemnification claims until the
      underlying litigation is concluded with finality.23

      The underlying New York Action was not dismissed until July 24, 2012.24

Branin initiated this action thereafter. Until that action concluded, Branin could

not have demonstrated satisfaction of all the indemnification prerequisites, i.e., that

his actions had been in good faith and reasonably believed to have been within his

authority. Branin suggests that the case law is clear—for purposes of the statute of

limitations, his indemnification claim accrued in July 2012; therefore, this action is

timely.

      Before the June 30 Decision, Defendants would have concurred that

Branin’s indemnification claim could not accrue for statute of limitations purposes

before final resolution of the New York Action.          They now suggest that the


22
   First Amendment § 8.7. Also, one could not be indemnified for acts done with
gross negligence or willful misconduct. The First Amendment did not provide for
advancement. Indemnification was not dependent upon prevailing in the
underlying action as it was in Scharf.
23
   Simon v. Navellier Series Fund, 2000 WL 1597890, at *9 (Del. Ch. Oct. 19,
2000).
24
   Seaman Aff. Ex. 10.
                                          9
June 30 Decision held otherwise, quoting certain language from the opinion.

Defendants note that the Court framed the primary issues then at issue as follows.

First, “when does an indemnification cause of action accrue and will it accrue

irrevocably even if the indemnitee is on notice that the agreement which provides

for indemnification may be modified?”25 Second, “[i]f Branin had a viable cause

of action for indemnification after Bessemer sued him, could Defendants defeat it

by later amending their indemnification agreement?”26

      The Court concluded “that Branin’s right to indemnification . . . accrued

under the First Amendment . . . [and] was not unilaterally rescinded because of the

Second Amendment.”27

      If [Branin] satisfies the other substantive requirements of the
      indemnification provision, SRIC LLC’s liability for the claim (the
      cost of defending against Bessemer in the New York Action) was
      fixed before the Second Amendment. Additionally, although SRIC
      LLC’s liability for future indemnification claims was limited by the
      Second Amendment, that agreement did not purport to modify or
      eliminate (and did not modify or eliminate) any liability that already
      existed under the [Operating] Agreement.28




25
   Branin, 2014 WL 2961084, at *3.
26
   Id.
27
   Id. at *8. The Court alternatively stated that Branin’s “right did not ‘fail to vest’
and was not otherwise rescinded by the second amendment to the company’s
operating agreement.” Id. at *10. The Court clearly used the words “vest” and
“accrue” interchangeably throughout the June 30 Decision.
28
   Id. at *8.
                                          10
      In context, the Court’s holding is clear: Branin’s contingent right to

indemnification under the Operating Agreement vested when Bessemer initiated

the New York Action on November 22, 2002. That was the issue briefed and

argued by the parties. The June 30 Decision does not reference any statute of

limitations. When the Court authored the opinion, “[b]oth sides agreed, based on

clear case law, that any issue of indemnification was premature prior to final

resolution of the [New York] Action for the expressed reason that Branin’s cause

of action for indemnification did not accrue until that point.”29      Neither side

addressed the timing of accrual for statute of limitations purposes.

      Nonetheless, Defendants emphasize a footnote in the June 30 Decision:

            In a different context [from this action], indemnification may
      depend upon the indemnitee’s final success (or otherwise prevailing)
      on the claim. In this instance, Branin did not prevail on the Bessemer
      claim for roughly ten years. Because SRIC LLC did not base its
      indemnification duties upon the indemnitee’s prevailing, there is no
      argument that its liability to indemnify the claim was somehow
      delayed until Branin ultimately prevailed. Under the terms of the First
      Amendment, SRIC LLC’s liability to indemnify matured in late
      2002.30

      The footnote was attached to the end of this sentence: “Branin, thus, had a

right, [as of 2002,] in the nature of contract, to indemnification by SRIC LLC for

the Bessemer claim and the expenses that he would reasonably incur in defending


29
   Answering Br. in Opp’n to Pl.’s Mots. for Summ. J. and to Strike Affirmative
Defenses 31.
30
   Branin, 2014 WL 2961084, at *5 n.39 (citations omitted).
                                         11
against it.”31   One familiar with the context of the June 30 Decision would

understand that the Court addressed vesting for purposes of coverage under the

First Amendment, not accrual for statute of limitations purposes. The question that

must now be addressed is whether the Court’s choice of words requires it to

recognize that the statute of limitations began to run when the New York Action

was filed.

      Defendants suggest that because the Court determined that Branin’s

contingent indemnification right “accrued” on November 22, 2002, the law of the

case doctrine dictates that the statute of limitations has run. Allowing for the two

years during which the parties agreed to toll the statute of limitations, Branin’s

claim for indemnification has allegedly been time-barred since November 22,

2007. Defendants bear the burdens of proof and persuasion with respect to their

affirmative defenses.32

      “[O]nce a matter has been addressed in a procedurally appropriate way by a

court, it is generally held to be the law of that case and will not be disturbed by that

court unless compelling reason to do so appears.”33 The Court determines in its

discretion whether the law of the case doctrine is applicable, and the doctrine “is


31
   Id. at *5.
32
   See Scharf, 864 A.2d at 915.
33
   May v. Bigmar, Inc., 838 A.2d 285, 288 n.8 (Del. Ch. 2003), aff’d, 854 A.2d
1158 (Del. 2004) (quoting Odyssey P’rs v. Fleming Co., 1998 WL 155543, at *1
(Del. Ch. Mar. 27, 1998)).
                                          12
not an absolute bar to reconsideration of a prior decision that is clearly wrong,

produces an injustice or should be revisited because of changed circumstances.”34

Additionally, “[i]f an issue is not presented to a court with the benefit of full

argument and record, any statement on that issue by that court is not a holding with

binding force.”35

      Nonetheless, the law of the case doctrine “applies to and comprehends . . .

all matters decided by necessary implication.”36 Thus, if the Court decides an issue

in a party’s favor, that party will not be heard to object to the consequences

naturally flowing from the holding. Defendants submit that despite the parties’ and

the Court’s lack of focus on the statute of limitations issue, the Court’s holding

necessarily implies that the statute of limitations has run.

      Defendants’ argument must be rejected because the vesting of a right under

a contract and the accrual of a claim for statute of limitations purposes are not

inextricably tied together.37 Although the June 30 Decision interchangeably uses


34
   Gannett Co., Inc. v. Kanaga, 750 A.2d 1174, 1181 (Del. 2000).
35
   In re MFW S’holders Litig., 67 A.3d 496, 521 (Del. Ch. 2013), aff’d sub nom.
Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014).
36
   RGC Int’l Investors, LDC v. Greka Energy Corp., 2001 WL 312454, at *8 n.34
(Del. Ch. Mar. 7, 2001) (quoting In re MCA, Inc., 774 A.2d 272, 279 n.25 (Del.
Ch. 2000)).
37
   For example, in Scharf, the Supreme Court explained that “[a] successful result
on a claim for indemnification in the trial court . . . does not cause the statute of
limitations to begin running if an appeal is taken.” 864 A.2d at 919-20. Although
the statute would not run, it is clear that the plaintiff’s right to indemnification was
vested, subject to the outcome of the appeal.
                                           13
the words “vest” and “accrue,” as well as “right” and “cause of action,” no matter

the word choice, the Court was only making one determination, i.e., when Branin’s

contingent contractual right was confirmed. Accrual for statute of limitations does

not naturally flow from that conclusion.38 The Court concluded that “if [Branin]

satisfies the other substantive requirements of the indemnification provision, SRIC

LLC’s liability for the claim (the cost of defending against Bessemer in the New

York Action) was fixed before the Second Amendment.”39 In contrast, for a claim

to accrue or mature for statute of limitations purposes, the plaintiff must be able to

bring suit. Here, the standards giving rise to Branin’s rights were fixed as a

contractual matter as of a date certain in 2002. Yet, Branin could not have filed his

indemnification action at that point because the New York Action was ongoing.

Until that litigation concluded, the Court would have been unequipped to

determine whether Branin had acted in good faith and in a manner reasonably

believed to be within his authority.40 The Court would have therefore been unable

to conclude whether indemnification was warranted.           Moreover, the Court’s



38
   One would expect that the Court would have been explicit if it had intended to
depart from precedent regarding the statute of limitations.
39
   Branin, 2014 WL 2961084, at *8.
40
   Accepting Defendants’ current argument would potentially decrease litigation
efficiency by promoting the parallel and simultaneous litigation of an underlying
action and a related indemnification claim. That would create the possibility for
conflicting judgments, and even if that circumstance were avoided, resources could
be wasted.
                                         14
conclusion in no way addressed the implications of a continuing breach, a topic to

which the Court now turns.

B. This Action Would Be Timely under the Continuing Breach Exception

      Assuming that Branin’s cause of action for indemnification accrued for

statute of limitations purposes on November 22, 2002 (which it did not),

Defendants had a continuing duty to indemnify him during the course of the New

York Action. If Branin had obtained a judgment for indemnification in 2005,

Defendants would still have been liable for his future expenses because his

indemnification right had vested under the First Amendment. Clearly, requiring

Branin to sue continually to enforce his indemnification right would have been

inefficient. Fortunately, “[i]n cases of a continuing contract, and a continuing

breach, the statute begins to run only when full damages can be determined and

recovered.”41   Here, if Defendants had a continuing duty to indemnify, then

Branin’s out-of-pocket expenses could be considered a continuing injury.

“[W]here there is a continuing injury whose damages cannot be determined until

the cessation of the wrong, the statute of limitations begins to run no earlier than

the last date of that wrong.”42




41
   Oliver B. Cannon & Son, Inc. v. Fid. & Cas. Co. of N.Y., 484 F. Supp. 1375,
1390 (D. Del. 1980).
42
   Id. (analogizing to Delaware law for continuing torts).
                                        15
      If Branin’s damages were continuously accruing, then the statute of

limitations would be appropriately suspended for the period during which

liabilities grew. Additionally, as discussed, Branin would not have been entitled to

indemnification had his actions underlying the New York Action been taken in bad

faith or outside the scope of his authority. Had Branin been required to seek relief

in this Court during the pendency of the New York Action, this Court would have

been forced to either (i) independently review Branin’s conduct underlying the

New York Action (potentially arriving at a conclusion in conflict with another

court) or (ii) stay its proceedings. The most reasonable rule, and the one employed

by the Court on countless occasions, is that the statute of limitations on Branin’s

indemnification claim did not begin to run until the underlying litigation was

resolved.43

      Because his claim is timely and the previously unsettled factual issue

concerning whether he acted in good faith and in a manner reasonably believed to

be within his authority has been resolved in his favor, Branin is entitled to

summary judgment on Defendants’ obligation to indemnify him. 44




43
  See supra Section III.A.
44
  Defendants have not contested the reasonableness of Branin’s fees and expenses,
which totaled $3,063,736.24. Aff. of Francis S. Branin, Jr. in Supp. of Pl.’s Mot.
for Summ. J. ¶ 13; Aff. of Michael P. Collins in Supp. of Pl.’s Mot. for Summ. J.
¶¶ 13-14.
                                        16
C. Branin Is Entitled to Prejudgment Interest at the Legal Rate

      Branin is entitled to prejudgment interest, which “is awarded as a matter of

right.”45 Interest shall be assessed from August 13, 2012, when Branin’s counsel

wrote to Defendants demanding indemnification “[n]ow that the outcome of the

underlying Bessemer litigation has been ‘resolved with certainty’ . . . .”46 Branin

has suggested that interest should run from when he expended funds in the New

York Action, arguing that “[i]f interest began to run after the underlying action

[was] resolved (as Defendants propose), an indemnitor could unfairly force an

Indemnitee to bear the lost time value of money for years simply by challenging

the indemnitee’s right to indemnification in court.”47


45
   Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992).
46
   Seaman Aff. Ex. 20, at 8. That letter attached a breakdown of the amount due
and owing to Branin. See O’Brien v. IAC/InterActive Corp., 2010 WL 3385798, at
*16 (Del. Ch. Aug. 27, 2010), aff’d sub nom. IAC/InterActiveCorp. v. O’Brien, 26
A.3d 174 (Del. 2011) (“[P]rejudgment interest generally is awarded from the date
of a demand for indemnification . . . .”); Zaman v. Amedeo Hldgs., Inc., 2008
WL 2168397, at *39 (Del. Ch. May 23, 2008) (“Pre-judgment interest shall be
assessed at the legal rate from the date the [Plaintiffs] first sought indemnification
or advancement for fees and expenses they have proven their entitlement to in this
case.”).
47
   Opening Br. in Supp. of Pl.’s Mot. for Summ. J. and Mot. to Strike Defs.’
Affirmative Defenses (“Pl.’s Opening Br.”) 33. Branin cited Sletten v. Navellier
Series Fund, a Nevada federal case that applied Delaware law, in support of this
argument. 2003 WL 21919352 (D. Nev. June 20, 2003). The Sletten court held
that “[w]here . . . liability accrues over time, interest is calculated from the date
each payment was due. Therefore, Plaintiff is entitled to prejudgment interest on
each installment he paid, from the date on which he paid it.” Id. at *5 (citation
omitted). Although Sletten dealt with indemnification, it cited Citadel Hldg., a
case involving advancement. 603 A.2d at 826. In the advancement context, a
                                         17
      However, “[i]n the contractual setting, pre-judgment interest should . . . not

accrue until the point at which the defendant has, without justification, refused to

live up to its obligation to make payment.”48 The Operating Agreement granted

Branin a right to indemnification, but not to advancement. 49 As discussed, supra

Section III.A, a request for indemnification is properly made once the underlying

litigation is resolved or when the threshold standard can be practicably addressed.

Lacking a right to advancement, Branin was responsible for fronting the costs of

his defense. Defendants breached no obligation to indemnify him while the New

York Action was pending because, for instance, determination of his good faith

would not have been a reasonable effort until the outcome of (and reasons for the

outcome of) the New York Action was known.

      Regarding the appropriate interest rate, “[w]here there is no expressed

contract rate, the legal rate of interest shall be 5% over the Federal Reserve

discount rate including any surcharge as of the time from which interest is

due . . . .”50 The Court has broad equitable discretion to fix a rate, but “where a

damages claim . . . [is] ‘legal, rather than equitable, in nature,’ the statutory rate



defendant’s obligation to pay may accrue over time because the defendant agreed
contractually to cover expenses as they are incurred. In that context, interest may
be calculated from dates preceding resolution of the underlying litigation.
48
   Citrin v. Int’l Airport Ctrs. LLC, 922 A.2d 1164, 1167 (Del. Ch. 2006).
49
   Branin recognizes this point. See Pl.’s Opening Br. 33-34 n.6.
50
   6 Del. C. § 2301(a).
                                         18
should be applied.”51 Here, there is no principled reason to depart from the legal

rate. Additionally, the statute has been interpreted as providing for simple interest

only.52 While the Court has questioned the rule of awarding simple interest, it

cannot legitimately reinterpret the statute.53 Branin’s argument for compound

interest rests on little more than the observation that the Court has the power to

award it, but the circumstances of this case do not warrant an award other than

prejudgment simple interest at the statutory legal rate.54

D. Branin Is Entitled to Fees on Fees

      The Operating Agreement provides indemnification “[t]o the full extent

permitted by applicable law.”55 As in the corporate context, that language provides

Branin the right to recover fees incurred in successfully prosecuting his




51
   Brandin v. Gottlieb, 2000 WL 1005954, at *29 (Del. Ch. July 13, 2000) (quoting
Am. Gen. Corp. v. Cont’l Airlines Corp., 622 A.2d 1, 14 (Del. Ch. 1992), aff’d, 620
A.2d 856 (Del. 1992)). “As a general matter, it makes sense for the Court of
Chancery to apply the statutory rate where the damage case before it is identical to
a claim that could have been brought in Superior Court were there no need for this
court to decide other equitable issues.” Id.
52
   Brandin, 2000 WL 1005954, at *28.
53
   Id. at *29.
54
    Branin asked the Court to adopt the rate of return on one of Defendants’
investment funds, arguing that the fund’s overall investment methodology closely
tracks his own. Pl.’s Opening Br. 37. Alternatively, he recommended the overall
average market returns as evidenced by the S&P 500. Id. at 38. Neither of these
measures is appropriate.
55
   First Amendment § 8.7.
                                          19
indemnification claim.56 He is entitled to all fees and expenses reasonably incurred

in prosecuting this action.57

                                IV. CONCLUSION

         Branin’s motion to strike Defendants’ affirmative defenses and for summary

judgment is granted.       Defendants’ motion is denied.     Branin is entitled to

prejudgment simple interest at the statutory rate running as of August 13, 2012, as

well as “fees on fees.”

         Counsel are requested to confer and to submit an implementing form of

order.




56
   DeLucca v. KKAT Mgmt., L.L.C., 2006 WL 224058, at *15 (Del. Ch. Jan. 23,
2006).
57
   The portion of expenses a plaintiff may recover must be commensurate with his
level of success on his indemnification action. Pontone v. Milso Indus. Corp., 100
A.3d 1023, 1058 (Del. Ch. 2014).             Branin’s complete success on his
indemnification claim entitles him to recover all reasonable fees and expenses.
Despite Defendants’ assertions to the contrary, a judgment entitling Branin to his
“fees on fees” is not advisory in nature.
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