## Facts

- Norton D. Waltuch served as Conticommodity Services, Inc.’s vice president and chief metals (silver) trader during the 1979–1980 silver market volatility.
- After the market collapse, private plaintiffs filed multiple civil actions against Conti and Waltuch alleging fraud and market manipulation.
- The private civil actions were resolved through settlements funded by Conti (over $35 million); the claims against Waltuch were dismissed, and he paid nothing personally.
- The CFTC brought an administrative enforcement proceeding against Waltuch based on the same conduct; it ended in a settlement imposing a monetary penalty and a six-month trading ban.
- Waltuch incurred roughly $2.2–$2.3 million in attorneys’ fees and related defense costs across the civil actions and the CFTC matter.
- Conti advanced more than $1.1 million toward Waltuch’s fees, later seeking recoupment.
- Waltuch sued for indemnification of his remaining expenses under an expansive charter provision (Article Ninth) and DGCL § 145; Conti resisted based on a special committee’s conclusion that Waltuch lacked the required good faith.

## Issues

1. Whether a corporate charter indemnification provision may authorize indemnification beyond DGCL § 145(a) by omitting or avoiding the statute’s good-faith limitation.
2. Whether DGCL § 145(c) requires indemnification when claims against an officer are dismissed as part of settlements paid by the corporation, leaving the officer with no personal payment or liability.
3. Whether DGCL § 145(c) mandates indemnification for defense costs in an administrative enforcement proceeding resolved by accepting sanctions and a monetary penalty.

## Decision

- The Second Circuit affirmed that indemnification under Article Ninth could not exceed DGCL § 145(a) and therefore remained subject to § 145(a)’s good-faith requirement.
- Because Waltuch did not establish (and stipulated he would not litigate) the requisite good faith, he could not recover indemnification under the charter provision for matters governed by § 145(a).
- The court reversed in part, holding that DGCL § 145(c) required Conti to indemnify Waltuch for defense expenses from the private civil suits because he was “successful on the merits or otherwise” when the actions were dismissed without any payment by him.
- The court held § 145(c) did not require indemnification for the CFTC proceeding because Waltuch accepted a penalty and a trading ban and thus was not “successful.”
- The case was affirmed in part and reversed in part consistent with these rulings.

## Legal Principles

- DGCL § 145(a) permits indemnification in third-party proceedings only if the officer or director acted in good faith and in a manner reasonably believed to be in, or not opposed to, the corporation’s best interests.
- Corporate charter or bylaw indemnification provisions are enforceable only to the extent they are consistent with DGCL § 145; private ordering cannot authorize indemnification that the statute forbids.
- DGCL § 145(c) imposes mandatory indemnification (“shall indemnify”) for reasonable defense expenses when the person is “successful on the merits or otherwise” in a proceeding covered by § 145(a) or (b).
- “Successful on the merits or otherwise” is outcome-based and includes dismissal without adverse judgment or personal payment by the individual, even if the corporation funds a global settlement.
- A resolution that includes sanctions and a monetary penalty is not “success” under § 145(c), so mandatory indemnification does not apply; permissive indemnification, if any, remains subject to § 145(a)’s good-faith requirement.

## Conclusion

The court held that Delaware corporations cannot use charter provisions to evade DGCL § 145(a)’s good-faith limitation, but they must indemnify defense expenses under § 145(c) when an officer is dismissed from civil litigation without personal payment, while no mandatory indemnification is owed for an enforcement settlement that imposes penalties.


Waltuch v. Conticommodity Servs., Inc., 88 F.3d 87 (2d Cir. 1996)