Leon Gilbert v. Unisys Corporation
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Opinion
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
LEON GILBERT and MICHAEL ) MCGARVEY, ) ) Plaintiffs, ) ) v. ) C.A. No. 2023-0513-PAF ) UNISYS CORPORATION, ) ) Defendant. )
MEMORANDUM OPINION
Date Submitted: July 2, 2024 Date Decided: August 13, 2024
John M. Seaman, E. Wade Houston, Joseph A. Sparco, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Nicholas G. Hill, Rebecca M. Borkovich, MCGUIREWOODS LLP, Atlanta, Georgia; Attorneys for Plaintiffs Leon Gilbert and Michael McGarvey.
David E. Ross, Eric D. Selden, ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; Martin L. Roth, P.C., KIRKLAND & ELLIS LLP, Chicago, Illinois; Haley S. Stern, Amanda Lamothe-Cadet, Maylynn Chen, KIRKLAND & ELLIS LLP, New York, New York, Attorneys for Defendant Unisys Corporation.
FIORAVANTI, Vice Chancellor Plaintiffs Leon Gilbert and Michael McGarvey are former employees of
Defendant Unisys Corporation (“Unisys” or the “Company”). Both Gilbert and
McGarvey joined the Company in early 2021—Gilbert as a Senior Vice President
and McGarvey as a Vice President—to help build and grow the Company’s new
Digital Workplace Solutions business unit (“DWS”).
In early 2023, Gilbert and McGarvey left Unisys to return to their previous
employer. Unisys responded with a lawsuit in Pennsylvania federal court, accusing
Gilbert and McGarvey of having stolen Unisys information and asserting a variety
of claims. Plaintiffs seek advancement of their legal fees and expenses incurred in
defending themselves in the Pennsylvania action. Unisys maintains that it has no
obligation to do so.
For the reasons explained below, the court concludes that both Plaintiffs are
entitled to advancement of their legal fees and expenses in the Pennsylvania action.
Accordingly, judgment will be entered in their favor.
I. BACKGROUND
These are the facts as the court finds them after trial. 1
1 Other factual findings are contained in the analysis of the claims. The trial record consists of trial testimony from seven witnesses, deposition testimony from seven witnesses, and approximately 200 exhibits. Attentive readers will observe that, as a result of gaps in the parties’ numbering scheme, the exhibit numbers range into the high 200s. The deposition testimony is cited as “Dep.”; trial exhibits are cited as “JX”; stipulated facts in the pre-trial
2 A. Unisys and Its Advancement Rights
Defendant Unisys is an information technology company headquartered in
Blue Bell, Pennsylvania. 2 Unisys is a Delaware corporation.3 The Company offers
broad indemnification and advancement rights under its certificate of incorporation
and its bylaws. A brief summary of those provisions will help set the stage for the
parties’ dispute.
B. Unisys’s Certificate of Incorporation and Bylaws
1. Indemnification and advancement provisions
Section 2(a) of Article X of the Company’s Restated Certificate of
Incorporation, dated April 29, 2010 (the “Certificate”), 4 grants indemnification and
advancement rights to individuals involved in a legal action “by reason of the fact”
that they (i) served as directors or officers of Unisys or (ii) served at the request of
Unisys as a director, officer, employee, or agent “of another corporation or of a
order are cited as “PTO”; and references to the docket are cited as “Dkt.,” with each followed by the relevant section, page, paragraph, exhibit, or docket number. Citations to testimony presented at trial are in the form “Tr. # (X)” with “X” representing the surname of the speaker, if not clear from the text. After being identified initially, individuals are referenced herein by their surnames without regard to formal titles such as “Dr.” No disrespect is intended. 2 PTO ¶ 2. 3 Id. 4 JX 1.
3 partnership, joint venture, trust or other enterprise, including service with respect to
employee benefit plans.” 5 Section 2(a) provides, in pertinent part:
Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law. . . .
The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. 6
5 Id. Art. X § 2(a). 6 Id.
4 Section 2(b) of Article X of the Certificate provides that an individual may
file suit against Unisys to recover any unpaid indemnification or advancement
claims, and “if successful in whole or in part,” is entitled to expenses for prosecuting
such claims. 7
2. Selection of Unisys’s officers
The Certificate does not define “officer.” To determine whether someone
serves as an officer, one must refer to Article IV of the Company’s Amended and
Restated Bylaws, dated December 14, 2022 (the “Bylaws”). 8
Section 1 of Article IV of the Bylaws provides that the officers of the
Company “shall be chosen by the Board of Directors and shall be a Chief Executive
Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, a
Controller and such other officers as may be elected in accordance with the
provisions of Section 3 of this Article IV.” 9
7 Id. Art. X § 2(b). Section 2(b) states, in pertinent part: If a claim under Paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. 8 JX 112. 9 Id. Art. IV § 1. “The Vice Presidents shall perform such duties as may from time to time be assigned to each and any of them by the Board of Directors or by the Chief Executive
5 Section 2 states that the Company’s officers, “except those appointed by
delegated authority pursuant to Section 3 of this Article IV, shall be elected annually
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
LEON GILBERT and MICHAEL ) MCGARVEY, ) ) Plaintiffs, ) ) v. ) C.A. No. 2023-0513-PAF ) UNISYS CORPORATION, ) ) Defendant. )
MEMORANDUM OPINION
Date Submitted: July 2, 2024 Date Decided: August 13, 2024
John M. Seaman, E. Wade Houston, Joseph A. Sparco, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Nicholas G. Hill, Rebecca M. Borkovich, MCGUIREWOODS LLP, Atlanta, Georgia; Attorneys for Plaintiffs Leon Gilbert and Michael McGarvey.
David E. Ross, Eric D. Selden, ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; Martin L. Roth, P.C., KIRKLAND & ELLIS LLP, Chicago, Illinois; Haley S. Stern, Amanda Lamothe-Cadet, Maylynn Chen, KIRKLAND & ELLIS LLP, New York, New York, Attorneys for Defendant Unisys Corporation.
FIORAVANTI, Vice Chancellor Plaintiffs Leon Gilbert and Michael McGarvey are former employees of
Defendant Unisys Corporation (“Unisys” or the “Company”). Both Gilbert and
McGarvey joined the Company in early 2021—Gilbert as a Senior Vice President
and McGarvey as a Vice President—to help build and grow the Company’s new
Digital Workplace Solutions business unit (“DWS”).
In early 2023, Gilbert and McGarvey left Unisys to return to their previous
employer. Unisys responded with a lawsuit in Pennsylvania federal court, accusing
Gilbert and McGarvey of having stolen Unisys information and asserting a variety
of claims. Plaintiffs seek advancement of their legal fees and expenses incurred in
defending themselves in the Pennsylvania action. Unisys maintains that it has no
obligation to do so.
For the reasons explained below, the court concludes that both Plaintiffs are
entitled to advancement of their legal fees and expenses in the Pennsylvania action.
Accordingly, judgment will be entered in their favor.
I. BACKGROUND
These are the facts as the court finds them after trial. 1
1 Other factual findings are contained in the analysis of the claims. The trial record consists of trial testimony from seven witnesses, deposition testimony from seven witnesses, and approximately 200 exhibits. Attentive readers will observe that, as a result of gaps in the parties’ numbering scheme, the exhibit numbers range into the high 200s. The deposition testimony is cited as “Dep.”; trial exhibits are cited as “JX”; stipulated facts in the pre-trial
2 A. Unisys and Its Advancement Rights
Defendant Unisys is an information technology company headquartered in
Blue Bell, Pennsylvania. 2 Unisys is a Delaware corporation.3 The Company offers
broad indemnification and advancement rights under its certificate of incorporation
and its bylaws. A brief summary of those provisions will help set the stage for the
parties’ dispute.
B. Unisys’s Certificate of Incorporation and Bylaws
1. Indemnification and advancement provisions
Section 2(a) of Article X of the Company’s Restated Certificate of
Incorporation, dated April 29, 2010 (the “Certificate”), 4 grants indemnification and
advancement rights to individuals involved in a legal action “by reason of the fact”
that they (i) served as directors or officers of Unisys or (ii) served at the request of
Unisys as a director, officer, employee, or agent “of another corporation or of a
order are cited as “PTO”; and references to the docket are cited as “Dkt.,” with each followed by the relevant section, page, paragraph, exhibit, or docket number. Citations to testimony presented at trial are in the form “Tr. # (X)” with “X” representing the surname of the speaker, if not clear from the text. After being identified initially, individuals are referenced herein by their surnames without regard to formal titles such as “Dr.” No disrespect is intended. 2 PTO ¶ 2. 3 Id. 4 JX 1.
3 partnership, joint venture, trust or other enterprise, including service with respect to
employee benefit plans.” 5 Section 2(a) provides, in pertinent part:
Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law. . . .
The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. 6
5 Id. Art. X § 2(a). 6 Id.
4 Section 2(b) of Article X of the Certificate provides that an individual may
file suit against Unisys to recover any unpaid indemnification or advancement
claims, and “if successful in whole or in part,” is entitled to expenses for prosecuting
such claims. 7
2. Selection of Unisys’s officers
The Certificate does not define “officer.” To determine whether someone
serves as an officer, one must refer to Article IV of the Company’s Amended and
Restated Bylaws, dated December 14, 2022 (the “Bylaws”). 8
Section 1 of Article IV of the Bylaws provides that the officers of the
Company “shall be chosen by the Board of Directors and shall be a Chief Executive
Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, a
Controller and such other officers as may be elected in accordance with the
provisions of Section 3 of this Article IV.” 9
7 Id. Art. X § 2(b). Section 2(b) states, in pertinent part: If a claim under Paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. 8 JX 112. 9 Id. Art. IV § 1. “The Vice Presidents shall perform such duties as may from time to time be assigned to each and any of them by the Board of Directors or by the Chief Executive
5 Section 2 states that the Company’s officers, “except those appointed by
delegated authority pursuant to Section 3 of this Article IV, shall be elected annually
by the Board of Directors, and each such officer shall hold office for a term of one
year and until a successor is elected and qualified, or until such officer’s earlier
resignation or removal.” 10
Section 3 provides the Company’s board of directors (the “Board”) with
discretion to elect “such other officers, which may include, at the Board’s discretion,
the Chair of the Board and a Vice Chair.” 11 The Board “may delegate to any officer
or committee the power to appoint subordinate officers and to retain or appoint
employees or other agents, or committees thereof, and to prescribe the authority and
duties of such subordinate officers, committees, employees or other agents.” 12
Between 2021 and June 2023, there were over 150 individuals with the title
of Vice President at Unisys. 13 The Board did not, however, formally elect all of
Officer. A Vice President or Vice Presidents may have such additional designations as the Board may approve.” Id. Art. IV § 6. 10 Id. Art. IV § 2. 11 Id. Art. IV § 3. 12 Id. 13 Tr. 165:23–166:7 (Thomson) (“Q: And Unisys has fewer than 200 vice presidents; correct? A: That sounds about right. . . . Q: More or less than 150? A: I would think it’s a little more.”).
6 those individuals as officers. 14 Neither Gilbert nor McGarvey were formally elected
as officers by the Board. 15
C. Unisys’s Business Restructuring
1. Unisys transitions to a global business unit model
Through 2019, Unisys conducted business under a regional siloed model with
four regional sectors: (1) United States and Canada; (2) Latin America; (3) Europe,
Middle East, and Africa; and (4) Asia Pacific. 16 In 2020, Unisys began a
“transformational journey” to replace its regional siloed model with a global
business unit model. 17 In March 2020, Unisys sold its federal government contracts
business (the “Federal Sale”) and planned to use the proceeds to invest in other areas
14 Altabef Dep. at 12:14–21 (“We have many people who have titles that might be seen as, you know, a vice president, for instance, that is not elected -- or a senior vice president, that is not elected as an officer of the company, but still has a title of vice president or senior vice president.”). 15 Tr. 39:10–13 (Gilbert) (“Q: You agree you were not elected as an officer by the Unisys board of directors at any Unisys board meeting; correct? A: That is correct.”); id. at 79:23– 80:2 (McGarvey) (“Q: To the best of your knowledge, you were never elected as an officer by the board of Unisys; correct? A: Not that I’m aware of.”); see Pls.’ Proposed Findings of Fact ¶ 71. 16 Altabef Dep. at 49:18–23 (explaining that prior to Unisys’s business reorganization, it operated its business “around geographies”); Ebrahimi Dep. at 15:11–12. 17 JX 41 at UNISYS_ADV_00022428; Ebrahimi Dep. at 16:15–23 (“So at the time we did not have business units as they are defined today, and those business unit solutions, or our products. We had practices and a variety of other models in order to sell our solutions. The BU model actually created clarity in the market for our solutions and for what we sell and -- and really propelled us into a global go-to-market approach.”).
7 of its business. 18 Following the Federal Sale, Unisys retained McKinsey &
Company and AlixPartners to advise the Company on restructuring its business
operations through an initiative titled “Project Minerva.” 19 McKinsey advised the
Company that it could “transform its portfolio” by “focus[ing] on growing 2-3
meaningful businesses,” 20 including by transitioning from selling traditional end
user services (“EUS”) to end user experience services (“EUX”). 21
Beginning in the second half of 2020, Unisys set out to transform DWS to
differentiate Unisys in the marketplace. 22 The Company’s specific focus was on
“adding value to our clients in the area of DWS through design-thinking,
differentiated end-user experience and increased productivity” and “expand[ing] on
our legacy [EUS] approach to one of [EUX].” 23 Unisys expected that DWS would
“lead the market” by “rapidly . . . creating new EUX offers.” 24
18 JX 41 at UNISYS_ADV_00022428; Altabef Dep. at 46:12–47:11; JX 42 at 2. 19 Altabef Dep. at 119:20–120:3; id. at 47:12–48:13. 20 JX 20 at UNISYS_ADV_00000908. 21 Id. at UNISYS_ADV_00000915. 22 PTO ¶ 12. 23 JX 155 at UNISYS_ADV_00034252; see also JX 42 at 4 (explaining at a January 2021 investor presentation that Unisys is “doubling down in [EUX]” because “there is a dramatic difference between the growth of [EUX] versus the very modest flat growth of the rest of the market” in DWS). 24 JX 41 at UNISYS_ADV_00022431.
8 As of January 1, 2021, Unisys restructured its operations into four business
units: (1) DWS; (2) Cloud & Infrastructure Solutions (“C&I”); (3) ClearPath
Forward Franchise (“CPF”); and (4) Business Platforms Service (“BPS”). 25 DWS,
C&I, and CPF are considered “strategic lines of business,” while BPS is a “‘non-
core’ line of business.” 26 Following the restructuring, Unisys analyzed its new
corporate structure to determine if it affected the Company’s reporting obligations
and determined that DWS, C&I, and CPF were “reportable segments” that required
separate reporting under GAAP. 27 Unisys has since presented information on its
25 JX 22 at UNISYS_ADV_00028059; JX 90 at 6 (“In January 2021, the company changed its organizational structure to more effectively address evolving client needs.”); JX 155 at UNISYS_ADV_00034252 (explaining that one of the “strategic outcomes from Project Minerva” was a focus on four business units and listing DWS, C&I, CPF, and BPS as the four business units). 26 JX 28 at UNISYS_ADV_00029673. 27 Id. at UNISYS_ADV_00029672; JX 22 at UNISYS_ADV_00028063–64. “GAAP- mandated segment reporting disclosures are designed to provide decision-useful information about smaller components of a larger public entity to allow users of its financial statements to make informed judgments regarding the public entity as a whole.” JX 143 ¶ 11 (footnotes omitted). Reporting companies must identify any operating segments, which, definitionally, engage in business activities from which the corporation may recognize revenues and incur expenses, the results of which the corporation’s chief operating decision maker regularly reviews to assess performance and resource allocation, and for which discrete financial information is available. Id. ¶ 20; JX 147 ¶ 14. “Reportable Segments are defined as Operating Segments or aggregations of Operating Segments for which revenue, profit or loss, or assets exceed 10 percent of the combined entity’s revenue, profit or loss, or assets.” JX 147 ¶ 13 (internal quotation marks omitted).
9 DWS, C&I, and CPF reportable segments in its public filings. 28 Each reportable
segment is managed by a senior vice president. 29
2. Unisys hires Gilbert and McGarvey
On January 6, 2021, Unisys formally offered Gilbert a position “in our Digital
Workplace Services organization as the Senior Vice President, Digital Workplace
Services,” and Gilbert began at Unisys the next month. 30 Prior to being hired by
Unisys, Gilbert served as the head of Digital Workplace Practice (“DWP”) at Atos
SE (“Atos”), a French information technology company. 31
Gilbert executed an employment agreement with Unisys on April 26, 2024. 32
Gilbert’s employment agreement is based on the form of employment agreement
that Unisys’s uses for its executive officers, which the Company refers to as the
change in control employment agreement. 33 Gilbert’s employment agreement
provided, in part:
28 See, e.g., JX 90 at 6, 22–23 (listing DWS, C&I, and Enterprise Computing Solutions as reportable segments in the Company’s 2021 annual report on Form 10-K and presenting segment results); JX 159 at 6, 24–25 (same for the Company’s 2022 annual report on Form 10-K). 29 Tr. 158:13–15 (Thomson). 30 JX 39 at GM_DelLit_0000236; Tr. 5:3–5 (Gilbert). 31 JX 24 at UNISYS_ADV_00023616; PTO ¶ 5. 32 JX 65. 33 PTO ¶ 17; compare JX 3 (form of employment agreement), with JX 65 (Gilbert April 2021 employment agreement).
10 The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board is causing the Company to enter into the Employment Agreement with Executive. 34
In addition to his employment agreement, Gilbert executed a severance
agreement with Unisys. 35 Katherine Ebrahimi, then the Senior Vice President and
Chief Human Resources Officer of Unisys, counter-signed Gilbert’s employment
agreement and his severance agreement for Unisys. 36 Ebrahimi was an officer of
Unisys. 37 Ebrahimi did not have express authority from the Board to designate
34 JX 65 at GM_DelLit_0000011; PTO ¶ 17. 35 JX 66. The severance agreement attached a form release providing, in part, that the signatory was “not releasing . . . (ii) any claims for indemnification under the Company’s certificate of incorporation or bylaws and/or directors & officers liability insurance coverage . . . .” Id. at 10. Gilbert executed the release. PTO ¶ 18. 36 JX 65 at GM_DelLit_0000024; JX 66 at UNISYS_ADV_00015295; PTO ¶ 19. 37 PTO ¶ 19.
11 officers of the Company. 38 At no time did Unisys ever publicly represent or tell
Gilbert that he was an officer of the Company. 39
As the leader of the DWS business unit, Gilbert had approximately 6,500
employees under his management. 40 All employees who work within the DWS
business unit are employees of Unisys. 41 Gilbert served as Senior Vice President
and General Manager of DWS and “as a member of the Unisys Executive Leadership
Team” during his tenure at Unisys. 42 According to the “Leadership” section of
Unisys’s website, Gilbert was one of only fifteen members of the Leadership team. 43
Nine members of the Leadership team held the title of Senior Vice President, as
Gilbert did. 44 The Leadership team’s fifteen members included Peter Altabef,
38 See Ebrahimi Dep. at 79:3–81:4. 39 See Tr. 39:10–23 (Gilbert) (“Q: You agree you were not elected as an officer by the Unisys board of directors at any Unisys board meeting; correct? A: That is correct. Q: None of the Unisys individuals you met with during the hiring process told you you were being hired as an officer of Unisys; correct? A: Correct. They told me that I was being hired as an executive of Unisys. Q: And, in fact, you never discussed who was an Unisys officer and who was not an officer while being recruited to Unisys; correct? A: It was never a discussion during that or any other meeting in my time at Unisys.”). 40 Id. at 146:6–10 (Thomson). 41 Id. at 146:14–16 (Thomson); Def.’s Proposed Findings of Fact ¶ 55; Pls.’ Proposed Findings of Fact ¶ 46. 42 PTO ¶ 3. 43 Id. ¶ 24 (citing JX 113). 44 JX 113; PTO ¶ 24.
12 Unisys’s Chief Executive Officer and Debra McCann, Unisys’s Chief Financial
Officer. 45
When Gilbert first joined Unisys, Gilbert recommended that Unisys hire
McGarvey, who was then a Vice President and Chief Technology Officer of DWP
at Atos. 46 On February 22, 2021, Unisys hired McGarvey to serve as the “Vice
President of Solutions Management” for DWS. 47 McGarvey’s offer letter described
DWS as Unisys’s “Digital Workplace Services organization.” 48 During his tenure
at Unisys, McGarvey reported directly to Gilbert. 49 A December 1, 2021, Unisys
organization chart identified McGarvey as a member of Unisys’s “Enterprise
Leadership.” 50 While serving as Vice President of Solutions of DWS, McGarvey
functioned as the chief technology officer, or CTO, of DWS, 51 but he did not have
45 JX 113; PTO ¶ 24. JX 164 at GM_DelLit_0000244 (saying that Gilbert “would like for us to get my DWP 46
CTO ASAP”); JX 167 at GM_DelLit_0000433. 47 JX 47 at 1. 48 Id. 49 Id. (“You will be reporting to the SVP and GM of Digital Workplace Services.”). 50 JX 85 at UNISYS_ADV_00017699. 51 Tr. 71:18–20 (McGarvey) (“[I]n DWS, I was sort of functioning as both the head of portfolio and the chief technical officer as one.”); Thomson Dep. at 34:25–35:2 (“Mike McGarvey would have been his, I’ll say, chief technology officer of the DWS Business.”); Tr. 186:23–187:1 (Thomson) (Q: And to confirm, this is you characterizing Mr. McGarvey as the CTO of DWS; right? A: It is.”).
13 that official title. At no time did Unisys ever tell McGarvey or publicly represent
that he was an officer of the Company. 52
3. Acquisition of Unify Square
In 2021, Unisys looked for opportunities to expand DWS through M&A. 53
During a March 2021 Board meeting, Gilbert recommended that Unisys acquire
Unify Square, Inc. (“Unify Square”). 54 The “target of the 2021 Unify Square
acquisition under Gilbert’s leadership” was its PowerSuite EUX offering. 55 At the
meeting, the Board resolved to submit a letter of intent to Unify Square “with respect
to the Proposed Transaction including a purchase price of up to $155 million” and
authorized Unisys’s “Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, General Counsel and Secretary or any other officer of the
Corporation with the title of ‘Vice President’ or higher . . . to negotiate, execute and
deliver the LOI, the Purchase Agreement and any related definitive agreements[.]” 56
52 See Tr. 79:9–13, 79:23–80:2, 82:12–17 (McGarvey). 53 JX 155 at UNISYS_ADV_00034252 (explaining that the DWS transition will “include partner investments, additional offerings from Unisys, and potentially, the addition of key solutions from other companies via acquisition”); JX 68 at UNISYS_ADV_00027922 (discussing how M&A activity to build out solutions for DWS and C&I “supports the long- term plan and can contribute to future revenue and profit margin growth”). 54 JX 54 at UNISYS_ADV_00011956 (describing Gilbert as having explained “how Unify Square’s capabilities complement those of the DWS business and how the skill sets of the combined entity would compare to those of key competitors in the DWS space”). 55 JX 170 at 4; accord Tr. 174:13–15 (Thomson). 56 JX 54 at UNISYS_ADV_00011958.
14 Gilbert worked with the M&A team to negotiate the Unify Square acquisition, but
did not execute Unisys’s letter of intent or the purchase agreement. 57
On June 3, 2021, Unisys acquired Unify Square for a purchase price of $150.4
million. 58 After closing the acquisition, Unisys placed three of its employees, Erin
Mannix, Gary Polikoff, and John Bereschak, on the Unify Square board of directors
(the “Unify Square Board”). 59 That same day, the Unify Square Board, acting via
unanimous written consent, appointed Gilbert to serve as the President of Unify
Square. 60
Unisys held Unify Square as a wholly owned subsidiary after the
acquisition. 61 On June 4, 2021, Gilbert, Altabef, and Ebrahimi led Unify Square’s
all-hands integration meeting. 62 Gilbert oversaw the integration of Unify Square
into DWS. 63 While integrating Unify Square into DWS, Unisys continued to make
57 Tr. 28:12–29:10, 52:3–13, 53:12–14 (Gilbert). 58 JX 90 at 45; see JX 73 at UNISYS_ADV_00013000. 59 Tr. 179:5–9 (Thomson); see JX 74 at UNISYS_ADV_00012984. Mannix was a Unisys officer who served as Vice President, Chief Accounting Officer and Corporate Controller at Unisys. JX 137 at 6. Polikoff was a Unisys officer who served as Assistant Treasurer at Unisys. Id. at 7. Bereschak served in Unisys’s treasury function. Tr. 178:8–10 (Thomson). 60 JX 74 at UNISYS_ADV_00012983. 61 JX 88 at UNISYS_ADV_00027935. 62 JX 75 at UNISYS_ADV_00012509. 63 Tr. 175:6–8 (Thomson); id. at 179:10–14 (Thomson).
15 headway in the EUX space. On November 18, 2021, Unisys also acquired “the
Mobinergy group of companies . . . to advance the company’s experience-focused
Digital Workplace Solutions set” by incorporating an EUX offering that Mobinergy
had provided. 64
On December 3, 2021, six months after Unisys’s acquisition of Unify Square,
the Board voted to merge Unify Square into Unisys, resolving that “the preservation
of the separate existence of Unify Square . . . is no longer desirable in the conduct
of the Corporation’s and its subsidiaries’ businesses, taken as a whole.” 65
D. The Pennsylvania Action
After leading the DWS business unit for two years, Gilbert and McGarvey
departed Unisys in early 2023 and returned to work for Atos. 66
On February 13, 2023, Unisys filed a complaint against Gilbert and McGarvey
in the United States District Court for the Eastern District of Pennsylvania (the
“Pennsylvania Action”). 67 In the Pennsylvania Action, Unisys alleges that Gilbert
and McGarvey improperly solicited talent from Unisys and downloaded thousands
of Unisys documents containing critical business strategies and technologies prior
64 JX 90 at 6; JX 170 at 2, 5. 65 JX 88 at UNISYS_ADV_00027935–36. 66 Tr. 4:23–5:5 (Gilbert); id. at 67:20–68:11 (McGarvey). 67 PTO ¶ 25 (citing JX 118).
16 to their departures from Unisys. 68 Unisys’s amended complaint in the Pennsylvania
Action asserts claims against Gilbert and McGarvey under the Defend Trade Secrets
Act, under the Pennsylvania Uniform Trade Secrets Act, and for breach of contract. 69
The operative complaint in the Pennsylvania Action alleges that Gilbert and
McGarvey participated in Unisys’s “confidential discussions at the highest executive
level, including those related to Unisys’[s] confidential company-wide strategies”
and “were privy to Unisys’[s] proprietary technical documents, design ideas,
business strategies, customer lists and strategies, pricing, product planning, cost
management, design guidelines, and research and development (‘R&D’) efforts
while employed at Unisys.” 70 It further alleges that Gilbert and McGarvey
“misappropriated Unisys’[s] confidential information and trade secrets to benefit
themselves and Atos, and to allow Atos to unfairly compete against Unisys by using
Unisys’[s] trade secrets” and breached “Proprietary Information/Non-Compete and
Compensation Agreements” that they signed as Unisys employees. 71
68 JX 118 ¶¶ 6, 9, 12, 28, 37, 40. 69 JX 125 ¶¶ 62–101. The amended complaint in the Pennsylvania Action, which Unisys filed on March 8, 2023, added Atos and Atos IT Solutions and Services, Inc. (“Atos IT”), a wholly owned subsidiary of Atos, as defendants and asserted a claim for tortious interference with contract against both. Id. ¶¶ 1, 19, 102–108; see JX 126. The amended complaint is the operative complaint in the Pennsylvania Action. 70 JX 125 ¶ 4. 71 Id. ¶¶ 67, 79, 89–90, 98–99.
17 On February 27, 2023, Plaintiffs demanded advancement from Unisys for
legal expenses incurred in connection with the Pennsylvania Action (the “Demand
Letters”). 72 In his Demand Letter, Gilbert asserted that he was entitled to
indemnification and advancement under Section 2(a) of Article X of the Certificate
and 8 Del. C. § 145 “[b]ecause [he] was made a party to the [Pennsylvania Action]
by reason of the fact of his service as Senior Vice President and General Manager
for DWS at Unisys and a member of the Unisys Executive Leadership Team[.]” 73
McGarvey similarly demanded indemnification and advancement “[b]ecause [he]
was made a party to the [Pennsylvania Action] by reason of the fact of his service as
Vice President of Solution Management, DWS at Unisys[.]” 74 Each Demand Letter
was accompanied by a signed undertaking. 75
On March 15, 2023, Plaintiffs sent a second advancement demand to Unisys,
asserting that they had incurred more than $800,000 in legal fees and costs in
defending the Pennsylvania Action to date and requesting that “Unisys promptly
advance the $520,175.92 incurred in February 2023.” 76 On March 23, 2023, Unisys
72 JX 121; JX 122; PTO ¶ 27. 73 JX 121 at 1. 74 JX 122 at 1. 75 JX 121 at 3–4; JX 122 at 3–4. 76 JX 128; PTO ¶ 33.
18 refused Plaintiffs’ advancement demand. 77 Unisys asserted that Plaintiffs were “not
directors or officers of Unisys.” 78 Unisys also asserted that the Pennsylvania Action
did not challenge any actions that Gilbert and McGarvey had taken in a covered
capacity. 79
Gilbert and McGarvey separately sought advancement from Atos in
connection with the Pennsylvania Action in February 2023. 80 Atos agreed to
advance Gilbert and McGarvey litigation expenses incurred in the Pennsylvania
Action through Atos IT, “conditioned upon the [Plaintiffs’] agreement to seek to
obtain advancement, and ultimately to seek indemnification, from Unisys.” 81 Atos
and its insurers have advanced approximately $4.5 million in fees incurred by
Plaintiffs in the Pennsylvania Action. 82
77 JX 130. 78 Id. at 2. 79 PTO ¶ 34; JX 130 at 2. In addition, Unisys asserted that Gilbert and McGarvey were not entitled to advancement because they had not met the standard of conduct for indemnification. JX 130 at 3–4. 80 JX 257; JX 279. 81 JX 257 at 2; JX 279 at 2; see also JX 267 at 2. 82 JX 267 Ex. A; see also JX 267 at 2 (stating that Plaintiffs have not paid any of their expenses incurred defending the Pennsylvania Action out of pocket).
19 E. Procedural History
After Unisys denied Plaintiffs’ demands for advancement, Plaintiffs
commenced this advancement action on May 9, 2023, seeking advancement and fees
on fees. 83 On June 7, 2023, Plaintiffs moved for judgment on the pleadings on all
counts in the complaint. 84 After briefing and oral argument, the court issued a
telephonic ruling on October 27, 2023, denying Plaintiffs’ motion for judgment on
the pleadings. 85
After heated discovery practice, 86 Plaintiffs were granted leave to file an
amended complaint. 87 The court held a one-day trial on April 1, 2024. 88 After the
trial, the court requested supplemental submissions, the last of which were received
on July 2, 2024. 89 On July 22, 2024, Plaintiffs informed the court by letter
83 Dkt. 1. That same day, Plaintiffs provided Unisys’s outside counsel with copies of invoices documenting legal expenses from the Pennsylvania Action for which they seek advancement. PTO ¶ 36. Defendant answered the original complaint on May 26, 2023. Dkt. 8. 84 Dkt. 18. 85 Dkts. 18, 20–21, 25, 29. 86 Dkt. 37 (Plaintiffs’ February 19, 2024 Motion to Coordinate Expedited Discovery); Dkt. 39 (Plaintiffs’ February 23, 2024 Motion to Compel); Dkt. 55 (Defendant’s March 14, 2024 Motion for a Protective Order); Dkt. 74 (Defendant’s March 19, 2024 Motion for Continuance); see Dkts. 53–54, 56, 59, 69–70, 76 (addressing discovery disputes). 87 Dkt. 76. 88 Dkt. 100. 89 Dkts. 113, 115, 117, 124–25.
20 submission that trial in the Pennsylvania Action is scheduled to begin on October
22, 2024.90
II. ANALYSIS
As the parties seeking advancement, Plaintiffs bear the burden to demonstrate,
by a preponderance of the evidence, that they are entitled to advancement. Sassano
v. CIBC World Mkts. Corp., 948 A.2d 453, 463–64 (Del. Ch. 2008). “Proof by a
preponderance of the evidence means proof that something is more likely than not.
It means that certain evidence, when compared to the evidence opposed to it, has the
more convincing force and makes you believe that something is more likely true
than not.” Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb.
18, 2010) (internal quotation marks omitted).
Section 145 of the Delaware General Corporation Law (the “DGCL”)
provides the “statutory framework for when and how a corporation may provide
advancement to an officer, director, employee, or agent of the corporation.”
Sassano, 948 A.2d at 460. Section 145(e) provides that expenses incurred by an
officer or director in defending a legal proceeding, including attorneys’ fees, “may
be paid by the corporation in advance of the final disposition of such action . . . upon
receipt of an undertaking . . . to repay such amount if it shall ultimately be
90 Dkt. 126.
21 determined that such person is not entitled to be indemnified by the
corporation . . . .” 8 Del. C. § 145(e). In other words, a right to advancement is,
effectively, a loan. See Advanced Min. Sys., Inc. v. Fricke, 623 A.2d 82, 84 (Del.
Ch. 1992) (“[T]he decision to extend advancement rights should ultimately give rise
to no net liability on the corporation’s part. The corporation maintains the right to
be repaid all sums advanced, if the individual is ultimately shown not to be entitled
to indemnification. Thus the advancement decision is essentially simply a decision
to advance credit.”).
Section 145(f) of the DGCL permits a corporation to grant advancement rights
in its corporate documents or by separate contract. See Homestore, Inc. v. Tafeen,
888 A.2d 204, 212 (Del. 2005). Unisys provides advancement rights in Article X of
the Certificate.
“‘General rules of contract interpretation apply when construing the
provisions of a company’s charter or bylaws.’” Centrella v. Avantor, Inc. (Centrella
II), 2024 WL 3249274, at *5 (Del. Ch. July 1, 2024) (quoting Krauss v. 180 Life
Scis. Corp., 2022 WL 665323, at *3 (Del. Ch. Mar. 7, 2022)). “Delaware adheres
to the ‘objective’ theory of contracts, i.e. a contract’s construction should be that
which would be understood by an objective, reasonable third party.” Osborn ex rel.
Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (internal quotation marks
omitted). When a contract is clear and unambiguous, the court “will give effect to
22 the plain-meaning of the contract’s terms and provisions.” Id. at 1159–60; see
Rhodes v. bioMerieux, Inc., 2024 WL 669034, at *7 (Del. Ch. Feb. 19, 2024)
(explaining that Delaware courts look to “the plain meaning of the advancement
provision[s]” in determining whether to award advancement (alteration in original)
(internal quotation marks omitted)). “The Court will read a contract as a whole and
we will give each provision and term effect, so as not to render any part of the
contract mere surplusage.” Perik v. Student Res. Ctr., LLC, 2024 WL 181848, at *3
(Del. Ch. Jan. 17, 2024) (internal quotation marks omitted). “This approach places
great weight on the plain terms of a disputed contractual provision, and we interpret
clear and unambiguous terms according to their ordinary meaning. We do not
consider extrinsic evidence unless we find that the text is ambiguous.” Cox
Commc’ns, Inc. v. T-Mobile US, Inc., 273 A.3d 752, 760 (Del. 2022) (footnotes and
internal quotation marks omitted), reargument denied (Mar. 22, 2022). “A contract
is not rendered ambiguous simply because the parties do not agree upon its proper
construction. Rather, a contract is ambiguous only when the provisions in
controversy are reasonably or fairly susceptible of different interpretations or may
have two or more different meanings.” Rhone-Poulenc Basic Chems. Co. v. Am.
Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).
Advancement is “purely permissive,” but many Delaware corporations
“provide for mandatory advancement as an enticement to attract qualified
23 individuals to serve as directors and officers.” Holley v. Nipro Diagnostics, Inc.,
2014 WL 7336411, at *7 (Del. Ch. Dec. 23, 2014); see also Homestore, 888 A.2d at
211 (explaining that advancement is “an especially important corollary to
indemnification as an inducement for attracting capable individuals into corporate
service”). “Rights to indemnification and advancement are deeply rooted in the
public policy of Delaware corporate law in that they are viewed less as an individual
benefit arising from a person’s employment and more as a desirable mechanism to
manage risk in return for greater corporate benefits.” Kaung v. Cole Nat’l Corp.,
884 A.2d 500, 509 (Del. 2005).
Section 145 serves the dual policies of: (a) allowing corporate officials to resist unjustified lawsuits, secure in the knowledge that, if vindicated, the corporation will bear the expense of litigation; and (b) encouraging capable women and men to serve as corporate directors and officers, secure in the knowledge that the corporation will absorb the costs of defending their honesty and integrity.
VonFeldt v. Stifel Fin. Corp. (VonFeldt II), 714 A.2d 79, 84 (Del. 1998). “We
eschew narrow construction of the statute where an overliteral reading would
disserve these policies.” Id. As such, Delaware policy “supports the approach of
resolving ambiguity in favor of indemnification and advancement.” Miller v.
Palladium Indus., Inc., 2012 WL 6740254, at *3 (Del. Ch. Dec. 31, 2012), aff’d, 72
A.3d 502 (Del. 2013) (TABLE); accord Blankenship v. Alpha Appalachia Hldgs.,
Inc., 2015 WL 3408255, at *18 (Del. Ch. May 28, 2015). Stated differently, if there
is any ambiguity in the scope of an advancement provision, the court generally errs
24 on the side of providing advancement. See OrbiMed Advisors LLC v. Symbiomix
Therapeutics, LLC, 2024 WL 747567, at *4 (Del. Ch. Feb. 23, 2024).
Plaintiffs proffer three theories under which they believe they are entitled to
advancement from Unisys. First, they argue that they were officers of Unisys.
Second, they argue that Gilbert is entitled to advancement because he was Unify
Square’s President after Unisys acquired it. Third, both Plaintiffs argue that they are
entitled to advancement because they served an enterprise at the request of Unisys.
The court addresses each theory in turn.
A. Plaintiffs Are Entitled to Advancement as Officers of Unisys.
First, Plaintiffs argue that they are entitled to advancement because they were
officers of Unisys. The parties agree that officers of Unisys are entitled to
advancement. They disagree as to whether Plaintiffs were officers.
Plaintiffs contend that they were chosen by the Board and served as Vice
Presidents, and that each conveys officer status. Defendant contends that there were
only two ways to become officers—election by the Board or appointment as a
subordinate officer—and that neither occurred here.
The Certificate does not define “officer.” The Bylaws do not expressly define
officer, but they do identify categories of officers and how they are selected. Article
IV of the Bylaws, titled “Officers,” sets forth as follows:
25 Section 1. Number, Qualifications and Designation The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, a Controller and such other officers as may be elected in accordance with the provisions of Section 3 of this Article IV. Any number of offices may be held by the same person.
Section 2. Election and Term of Office The officers of the Corporation, except those appointed by delegated authority pursuant to Section 3 of this Article IV, shall be elected annually by the Board of Directors, and each such officer shall hold office for a term of one year and until a successor is elected and qualified, or until such officer’s earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. . . .
Section 3. Other Officers, Committees and Agents The Board of Directors may from time to time elect such other officers, which may include, at the Board’s discretion, the Chair of the Board and a Vice Chair, and appoint such committees, employees or other agents as it deems necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as are provided in these bylaws, or as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or committee the power to appoint subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. 91
The Bylaws identify two categories of officers. First, there are officers who
are expressly identified by title. These are “a Chief Executive Officer, a President,
91 JX 112 Art. IV §§ 1–3 (emphasis added).
26 one or more Vice Presidents, a Secretary, a Treasurer, [and] a Controller.” 92 Section
1 states that these “shall” be officers. 93 The court labels these as “mandatory
officers.” See Zurich Am. Ins. Co. v. St. Paul Surplus Lines, Inc., 2009 WL 4895120,
at *7 n.55 (Del. Ch. Dec. 10, 2009), as revised (Apr. 14, 2010) (“In both contracts
and statutes, the term ‘shall’ is used to make an act mandatory.”); Homestore, 888
A.2d at 212 (construing “shall” as contained in an advancement bylaw as
“mandatory”); see also Stockman v. Heartland Indus. P’rs, L.P., 2009 WL 2096213,
at *6 (Del. Ch. July 14, 2009) (“[T]he plain meaning of ‘shall be advanced’ is that
advancement is mandatory.”); see, e.g., Centrella v. Avantor, Inc. (Centrella I), C.A.
No. 2022-0876-NAC, at 8:24–9:2 (Del. Ch. Dec. 14, 2022) (TRANSCRIPT) (“The
mandatory officers comprise a finite list of persons who ‘shall be elected by the
Board.’”). The second category comprises “other officers as may be elected” 94 “at
the Board’s discretion.” 95 These are “discretionary officers.” See Centrella I, C.A.
No. 2022-0876-NAC, at 9:8–10 (“The discretionary officers are persons who ‘the
Board may elect’ or the ‘Board may appoint,’ all in its discretion.”); see also Pulier
v. Computer Scis. Corp., C.A. No. 12005-CB, at 16:20–19:21 (Del. Ch. May 12,
92 Id. Art. IV § 1. 93 Id. 94 Id. 95 Id. Art. IV § 3.
27 2016) (TRANSCRIPT) (contrasting a bylaw section providing that “the officers of
the Corporation shall be elected by the Board of Directors and shall be,” which the
court described as “stat[ing] who must be an officer,” against a second section stating
that “the Board of Directors may also elect,” which the court characterized as
“permissive”).
Plaintiffs do not contend that they were elected as officers by the Board or
appointed by officers with authority to appoint officers. Plaintiffs argue that they
were hired with the titles of Vice President and, therefore, they are officers entitled
to mandatory advancement under the plain language of the Bylaws.
The Defendant contends otherwise. Defendant argues an officer is only
someone who is elected by the Board or appointed as a subordinate officer. In other
words, Defendant maintains that carrying a Vice President title does not equate with
officer status. To reach that status, says Unisys, one must also be formally elected
by the board or appointed as an officer by someone with the authority to appoint
officers of the Company. Hence, Unisys argues that there are two classes of Vice
Presidents, those who are officers and those who are not officers.
Defendant points to this court’s transcript ruling in Pulier, which rejected its
plaintiff’s argument that anyone with the title of vice president was an officer under
the bylaws at issue in that case. C.A. No. 12005-CB. There, a section titled
“Principal Officers” provided that “the officers of the Corporation shall be elected
28 by the Board of Directors and shall be a Chief Executive Officer, a President, a
Secretary and a Treasurer.” Id. at 16:20–17:1. The following section, titled “Other
Officers,” stated that “the Board of Directors may also elect one or more Vice
Presidents, Assistant Secretaries and Assistant Treasurers, and such other officers
and agents, as it shall deem necessary.” Id. at 17:2–7. The court rejected the
plaintiff’s contention that all vice presidents were officers by operation of the
certificate alone, contrasting the mandatory language of the first section with the
permissive language of the second. Because of this construction, the court explained
that the second section “gives a nonexclusive list of what positions such officers
might hold, which include the position of vice president. Logically, however, that
language does not require the inverse inference that merely because an individual
holds the title of vice president, he or she must be an officer.” Id. at 19:13–18. The
Pulier court reasoned that, under that construction, a vice president would only be
an officer if elected by the board, and because the evidentiary record did not show
that the plaintiff had been elected, the court concluded that he was not an officer. Id.
at 18:18–19:6, 19:18–21; 20:11–12. But the Pulier court also opined, more broadly,
that the phrases “shall be elected by the Board of Directors and shall be [enumerated
positions]” and “may also elect [other positions]” unambiguously provided that
“individuals only become officers of CSC through board election.” Id. at 16:20–
17:7, 19:18–21.
29 This court reached a similar result in Centrella I. C.A. No. 2022-0876-NAC.
There, the bylaws classified officers in two groups, which the court referred to as
mandatory officers and discretionary officers. The officers in the first group were
identified as “Chief Executive Officer, President, principal financial officer,
principal accounting officer, and Secretary.” Id. at 8:24–9:7. The bylaws stated that
these officers “shall be elected by the Board.” Id. at 9:1–2. The discretionary
officers were persons who the Board “may elect” or “may appoint,” and included “a
Vice President, a Treasurer, an Assistant Treasurer, or an Assistant Secretary.” Id.
at 9:8–13. The plaintiff, a Vice President, sought advancement under a bylaw
requiring advancement to officers. Ruling on cross motions for summary judgment,
the court concluded that, under these bylaws, a mere Vice President title did not
confer officer status, but that there remained material issues of fact as to whether the
plaintiff had been elected. 96 Reaching this “straightforward conclusion” under the
plain language of the bylaws, the court drew no distinction between mandatory and
discretionary officers in this regard: “Although there are two types of officer classes,
one detail remains the same: Under the bylaws, only the board may designate an
‘officer’ of the company.” Id. at 9:14–17.
96 The plaintiff went to trial on a different theory and prevailed. See Centrella II, 2024 WL 3249274, at *5, *17.
30 Here, the language of the Bylaws differs in two respects. First, the Bylaws
state that officers “shall be chosen,” not “shall be elected.” It is clear that the
Bylaws’ drafters did not intend “chosen” to mean only “elected,” a word they used
separately in each of the following sections. See Sanders v. Wang, 1999 WL
1044880, at *9 (Del. Ch. Nov. 8, 1999) (declining to add a term where other
language demonstrated that the drafters “knew how to authorize this type of material
alteration when they so desired”). But it is not far off. Reading Sections 1, 2, and 3
of the Bylaws together, they provide that the Board could choose directors through
the two mechanisms discussed at the beginning of Section 2—election and
appointment—by which the Board or its designated agent would choose an officer.
Therefore, Section 1 provides that officers must be “chosen by the Board” and
identifies mandatory officer positions that the Board must fill. Section 3 provides a
mechanism by which the Board may add other types of officer positions not specified
in Section 1. Sections 2 and 3 then provide the methods by which the Board chooses
officers—either by election or appointment.
Second, unlike in Pulier and Centrella I, vice presidents are placed in the
mandatory section of the Bylaws, indicating that this is a position to be held by an
officer. Though addressing permissive officer positions, the Pulier and Centrella I
courts noted that even under the mandatory language in the first section of their
respective bylaws, “individuals only become officers [] through board election.”
31 Pulier, C.A. No. 12005-CB, at 19:20–21; accord Centrella I, C.A. No. 2022-0876-
NAC, at 9:14–17 (“[a]lthough there are two types of officer classes, one detail
remains the same: . . . only the board may designate an ‘officer’ of the company”).
Plaintiffs contend that by the plain language of Section 1, all vice presidents
“shall be” officers. The Plaintiffs’ argument as to the correct interpretation of the
Bylaws is grounded in a reasonable person’s understanding of the Bylaws and,
Plaintiffs maintain, a common understanding that a Vice President is an officer. This
argument chiefly relies upon Aleynikov v. The Goldman Sachs Group, Inc., 2016
WL 3763246 (Del. Ch. July 13, 2016) (ORDER).
In Aleynikov, the plaintiff was a vice president of a subsidiary of Goldman
Sachs Group, Inc. (“Goldman Parent”) and sought advancement from Goldman
Parent to defend against claims that Goldman Parent and the subsidiary had brought
against him. The plaintiff had previously sought advancement in the federal courts
to defend against criminal claims related to the same conduct. In the earlier federal
advancement proceeding, the plaintiff was denied advancement. In a critical
appellate ruling in that case, the Third Circuit held that, in the event the bylaw was
ambiguous, the trial court could not construe the provision against Goldman Parent
under the doctrine of contra proferentem. Aleynikov v. The Goldman Sachs Gp., Inc.
(Federal Aleynikov), 765 F.3d 350, 367 (3d Cir. 2014).
32 In the Delaware advancement action, the court was faced with interpreting the
advancement bylaw and, specifically, whether the plaintiff was an officer of the
Goldman Parent subsidiary where he worked. Goldman Parent’s bylaws required,
in pertinent part, advancement to any “officer of . . . a subsidiary of the Corporation”
and further stated that “when used with respect to a subsidiary or other enterprise
that is not a corporation . . . , the term ‘officer’ shall include in addition to any officer
of such entity, any person serving in a similar capacity or as the manager of such
entity.” Aleynikov, 2016 WL 3763246, at *1 (alterations in original). In the federal
proceedings, the Third Circuit, applying Delaware law, held that the definition of
officer under the Goldman Parent bylaws was ambiguous and the doctrine of contra
proferentem could not be used to resolve the ambiguity. Aleynikov, 2016 WL
3763246, at *2.
In the subsequent advancement proceeding in Delaware, this court found that
Federal Aleynikov’s rulings on ambiguity and contra proferentem were preclusive
under principles of res judicata. Id. at *2, *7. Nevertheless, this court made clear
that had it not been precluded from doing so, it would have resolved the ambiguity
in the bylaw against Goldman Parent under the doctrine of contra proferentem. See
id. at *6–7.
The court noted that the federal courts’ conclusion that the definition of officer
was ambiguous was an “implicit” finding that “[a]n individual with the title ‘Vice
33 President’ could reasonably conclude that he was an ‘officer’ who was entitled to
advancement rights under the Bylaws.” Id. at *3. The court then carefully explained
how “[a] set of ‘officers’ that encompasses ‘vice presidents’ is consistent with the
widespread understanding of who typically comprise the officers of an entity.” Id.
at *4. 97
Aleynikov also seemingly rejected the notion that a corporation could escape
its advancement obligation by not engaging in the formal act of electing a vice
president as an officer. “A reasonable individual with the title ‘Vice President’
would not think that he could not be an officer simply because his offer letter did not
refer to the board of directors or a similar governing body having taken formal action
to appoint him.” Id. at *6; see id. (“A person like Aleynikov, who received the title
97 For example, vice presidents are considered officers under federal securities laws. See 17 C.F.R. 240.3b-2 (“The term officer means a president, vice president, secretary, treasury or principal financial officer, comptroller or principal accounting officer, and any person routinely performing corresponding functions with respect to any organization whether incorporated or unincorporated.”). As Aleynikov explained, the Rules defining “officer” solely under Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) were amended in 1991 to provide that officer means “an issuer’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the issuer in charge of a principal business unit, division or function . . . [or] any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the issuer.” Id. at *5 (quoting 17 C.F.R. § 240.16a-1); see also id. (explaining that “[t]he New Deal-era definitions proved too expansive for purposes of reporting short-swing profits,” motivating the narrowing of Section 16’s applicability from “officers” to “executive officers”). Therefore, it appears that by virtue of their titles alone, Plaintiffs would be officers under the Exchange Act. See Aleynikov, 2016 WL 3763246, at *5 (noting that though the amendments “narrow[ed] the coverage of the short-swing provisions,” “other officers were still officers”).
34 of ‘Vice President’ in an offer letter signed by another ‘Vice President,’ therefore
could reasonably believe that he had been given an officer position.”). 98 Former
Chief Justice Strine, while a Vice Chancellor, offered a similar view: “The bylaws
specifically indicate that there can be more than one vice president. . . . [A]nd when
the bylaws of the company let officers, key officers make other officers, I think it’s
pretty, to me—there’s no real rebuttal evidence.” Kale v. Wellcare Health Plans,
Inc., C.A. No. 6393-VCS, at 65:1–3, 65:17–20 (Del. Ch. June 13, 2011)
(TRANSCRIPT). Both cases emphasized that any ambiguity in the construction of
the bylaws should be construed in favor of the party seeking advancement. See id.
at 67:23–68:2 (“[W]hen a document can be read in two reasonable ways, then you
read it in favor of the party seeking advancement or indemnification when it’s not a
98 Gilbert’s offer letter was signed by Tim Golden, the Director of Global Talent Acquisition, and copied Eric Hutto, the President and Chief Operating Officer, and Ebrahimi, the then Senior Vice President and Chief Human Resources Officer. See JX 39 at GM_DelLit_0000237. Ebrahimi signed Gilbert’s employment agreement. See JX 65 at GM_DelLit_0000024. That agreement represented that the “Board . . . determined that it is in the best interests of the Company and its stockholders to assure that the Company will have [Gilbert’s] continued dedication” and that “IN WITNESS WHEREOF, . . . pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf . . . .” Id. at GM_DelLit_0000011, GM_DelLit_0000024. McGarvey’s offer letter was signed by a Human Resources Manager, not a Vice President. JX 47 at 3. However, Gilbert specifically requested that Unisys bring over “my DWP CTO” and McGarvey was brought on to fulfill a similar role. JX 164 at GM_DelLit_0000244; Tr. 71:18–20 (McGarvey); Thomson Dep. at 34:25–35:2; Tr. 186:23–187:1 (Thomson). Additionally, McGarvey’s interviews were with Hutto and Lisa Madion, the Senior Vice President of Corporate Services. JX 43. While the evidence is weightier with respect to Gilbert than McGarvey, the difference is immaterial based on the Bylaws in this case.
35 specifically negotiated agreement.”); Aleynikov, 2016 WL 3763246, at *5 (“The
doctrine of contra proferentem appropriately holds Goldman Parent to the promises
it implicitly made ‘to parties who did not participate in negotiating’ the Bylaws.”).
There is a tension between the transcript rulings in Pulier and Centrella I,
which held that an election was a pre-requisite for officer status, and Aleynikov and
Kale, which took a broader view and relied on contra proferentem. Admittedly,
some of the discussion in Aleynikov, despite its careful and detailed analysis, is dicta.
But so are Pulier and Centrella I on the issue of whether a bylaw that denominates
Vice Presidents as mandatory officers precludes persons with that title from
receiving mandatory advancement unless the board of directors formally chooses
them as officers or expressly designates another officer to do so, as both resolved
whether discretionary officers were entitled to advancement.
A reasonable person standing in the shoes of a prospective indemnitee like
Gilbert or McGarvey ought to be able to look at the advancement provisions in the
Certificate and the description of officers in the Bylaws and clearly determine
whether they are entitled to advancement. See Aleynikov, 2016 WL 3763246, at *3
(“Goldman Parent drafted its Bylaws unilaterally. Goldman Parent therefore was in
the best position to remove any ambiguity [and] should be held responsible for the
reasonable expectations created by its Bylaws.”); Stockman, 2009 WL 2096213, at
*5 (“The contra proferentum approach protects the reasonable expectations of
36 people who join a partnership or other entity after it was formed and must rely on
the face of the operating agreement to understand their rights and obligations when
making the decision to join.”). “[A]dvancement provisions [serve] as an inducement
which promotes the same salutary public policy that is served by indemnification:
attracting the most capable people into corporate service.” Homestore, 888 A.2d at
218. Were a prospective officer to read a corporation’s certificate and bylaws, they
should be able to rely on a reasonable interpretation thereof. One can easily imagine
a prospective officer reading the Bylaws, seeing that vice presidents “shall” be
officers, and concluding that they would be an officer entitled to advancement. 99
Here, consistent with the persuasive reasoning in Aleynikov, the court finds that
reasonable individuals who are hired as Unisys Vice Presidents by persons with
authority to bestow the title can reasonably conclude under the Bylaws that they are
99 That is, as Defendant highlights, not what happened here. Neither of the Plaintiffs testified that they considered the availability of advancement or indemnification in deciding to join Unisys, and both testified that they have never read the Certificate or Bylaws. Tr. 5:11–15 (Gilbert); id. at 68:18–22 (McGarvey). But “because Delaware adheres to an objective theory of contracts, the contract’s construction should be that which would be understood by an objective, reasonable third party,” and whether the Plaintiffs read the Certificate or Bylaws is beside the point. Exelon Generation Acqs., LLC v. Deere & Co., 176 A.3d 1262, 1267 (Del. 2017); cf. Pellaton v. Bank of New York, 592 A.2d 473, 477 n.6 (Del. 1991) (“[A] person signing a contract, having the capacity and the opportunity to read its contents, cannot avoid the contract on the ground that he/she signed the contract without reading it.”).
37 officers of the Company. Plaintiffs’ reading of Article IV is a reasonable one. Thus,
at a minimum, the Bylaws are ambiguous.
Plaintiffs contend that in the advancement context, ambiguity must be
construed in their favor under the doctrine of contra proferentem. See Stockman,
2009 WL 2096213, at *5 (explaining that “the onus is on the drafter to be clear”
because “it is critical that the governing instruments of entities be interpreted
consistently and that they be applied in a predictable manner” and concluding that
“any ambiguities in [the Certificate or Bylaws] should be resolved in favor of the
reasonable expectations of [the Plaintiffs] regarding their indemnification and
advancement rights”). Plaintiffs are correct. That Unisys doled out Vice President
titles to dozens of employees is of its own doing. Unisys “easily could have clarified
whether or not the title of ‘Vice President’ was an officer title for purposes of
advancement and indemnification.” Aleynikov, 2016 WL 3763246, at *5; see also
Kale, C.A. No. 6393-VCS, 64:9–10 (“[I]f companies wish to be clear, then you say
‘officer will mean.’”). Unisys did not. Therefore, the ambiguity must be resolved
in Plaintiffs’ favor. Stockman, 2009 WL 2096213, at *5; see also Aleynikov, 2016
WL 3763246, at *6 (“Applying the doctrine of contra proferentem and holding an
entity to the presumptive implications of the title it chooses to bestow facilitates the
summary disposition of advancement proceedings.”).
38 Therefore, the court concludes that Plaintiffs were officers of Unisys, and are
entitled to advancement as such.
B. Gilbert’s Service as President of Unify Square Entitles Him to Advancement.
Plaintiffs next argue that Gilbert served as Unify Square’s President at
Unisys’s request, and that he is being sued because of his service in that capacity. 100
Defendant argues that it did not request that service and is not suing Gilbert by reason
of his having served as the President of Unify Square.
1. Gilbert served as the President of Unify Square at Unisys’s request.
Defendant argues that Gilbert did not serve as the President of Unify Square
at Unisys’s request because it was the Unify Square Board, not Unisys, that
technically elected Gilbert to that position. Plaintiffs counter that Defendant’s
argument places form over function and must be rejected.
Plaintiffs analogize this situation to that in VonFeldt II. 714 A.2d 79. There,
Mr. VonFeldt served as a director, employee, and officer of Stifel Nicolaus
Corporation (“SNC”), a wholly owned subsidiary of Stifel Financial Corporation
(“Stifel Financial”). Id. at 80. At the trial level, this court denied VonFeldt’s claim
100 Plaintiffs did not raise this issue in their motion for judgment on the pleadings. They added this theory only in response to materials produced in discovery after the court denied the motion for judgment on the pleadings.
39 for advancement because he failed to carry his evidentiary burden to establish that
he was serving SNC at the request of Stifel Financial. VonFeldt v. Stifel Fin. Corp.
(VonFeldt I), 1997 WL 525878, at *1 (Del. Ch. Aug. 18, 1997), aff’d in part, rev’d
in part, 714 A.2d 79 (Del. 1998). On appeal, the Supreme Court reversed and held
that “as a matter of law, the request to serve as an officer and employee of a wholly-
owned subsidiary is inferred from the director’s election to the subsidiary’s board.”
VonFeldt II, 714 A.2d at 85.
Defendant contends VonFeldt II is distinguishable from this case. There,
Stifel Financial, the parent, had elected VonFeldt as a director, whereas here, Gilbert
was not among the three directors that Unisys elected to the Unify Square Board,
which in turn selected Gilbert as Unify Square’s President.101 This distinction does
not undermine VonFeldt II’s application in this case.
Where, as here, a parent corporation acquires a target corporation, elects a
new board for the target consisting only of the parent’s employees, and that board
appoints another employee as the target’s new president—all in the same day—the
court infers that the new president’s service is at the request of the parent
corporation. “Although the facts in this case are different, the fundamental reasoning
101 Defendant also contends that VonFeldt was being sued only by reason of his service of SNC, not Stifel Financial, while Gilbert is being sued by reason of conduct that implicates his service of both Unify Square and of Unisys. This is true—but it is sufficient that Gilbert is being sued by reason of, at least partially, his service of Unify Square.
40 of [VonFeldt II] applies.” Zaman v. Amedeo Hldgs., Inc., 2008 WL 2168397, at *19
(Del. Ch. May 23, 2008) (holding, based on the specific facts of that case, that the
plaintiffs were entitled to advancement because they had been empowered by the
companies’ sole beneficial owner).
Even if the distinction between this case and VonFeldt II prevents the court
from inferring Gilbert served as an officer as a matter of law, Gilbert has met his
evidentiary burden as a matter of fact. The timeline of events leading to Gilbert’s
selection as Unify Square’s President is crucial. Three closely related events
occurred on June 3, 2021: (1) Unisys closed the acquisition of Unify Square; 102 (2)
Unisys immediately appointed three of its employees to the Unify Square Board; 103
and (3) the Unisys-appointed directors appointed Gilbert as President of Unify
Square by unanimous written consent. 104 Then, the very next day, Altabef, Gilbert,
and Ebrahimi led an all-hands meeting of Unify Square’s employees to discuss the
integration of Unify Square into Unisys and, specifically, the DWS business unit. 105
The unmistakable conclusion to draw is that Gilbert’s selection as Unify Square’s
President was hard-wired into Unisys’s process of acquiring Unify Square. This
102 JX 73. 103 Tr. 175:15–19 (Thomson). 104 JX 74. 105 JX 75.
41 conclusion is further bolstered by the facts that Gilbert was the head of the business
unit into which Unify Square was to be integrated, 106 Gilbert had recommended the
acquisition and played a role in the acquisition process, 107 and Gilbert led the post-
acquisition integration process as well. 108 The contrary conclusion—that the Unify
Square Board, comprising three Unisys employees, decided to independently
appoint Gilbert as its President without any direction from Unisys—would require
the court to suspend disbelief, both as a general matter and on the specifics of this
record. The court finds that Gilbert served Unify Square at the request of Unisys.
2. Gilbert is being sued by reason of his having served as the President of Unify Square.
Defendant argues that it is suing Gilbert because of his alleged theft of
Unisys’s information, not by reason of his having served as the President of Unify
Square. Defendant argues that the Pennsylvania Action alleges theft of Unisys trade
secrets, not Unify Square trade secrets. Defendant highlights that, at the time
Plaintiffs allegedly downloaded files and conveyed them to Atos, Unify Square had
been merged into Unisys for over a year and Unisys had a direct entitlement to those
106 Id. 107 JX 54 at 3–4; Tr. 28:12–29:10 (Gilbert). 108 Tr. 175:6–8 (Thomson).
42 documents and trade secrets. Defendant also alleges that Gilbert and McGarvey
misappropriated information wholly unrelated to Unify Square.
Plaintiffs counter that Gilbert played a critical role in the integration of Unify
Square into Unisys after the acquisition, and that some of the materials Defendant
alleges Plaintiffs misappropriated related to that process. Plaintiffs also emphasize
that, in line with the broader policy behind advancement, courts have broadly
construed the “by reason of the fact” analysis and erred in favor of advancement.
“Under Delaware law, the ‘by reason of the fact’ standard, or the ‘official
capacity’ standard, is interpreted broadly and in favor of indemnification and
advancement.” In re Genelux Corp., 2015 WL 6390232, at * 4 (Del. Ch. Oct. 22,
2015) (cleaned up); accord Centrella II, 2024 WL 3249274, at *12. “An individual
is not sued ‘by reason of the fact’ that he or she is a director [or officer] simply
because certain allegations against the individual arguably give rise to breach of
fiduciary duty claims.” Bernstein v. TractManager, Inc., 953 A.2d 1003, 1016 (Del.
Ch. 2007) (footnote omitted). Rather, one is sued by reason of the fact of one’s
service in a covered capacity only “if there is a nexus or causal connection between
any of the underlying proceedings . . . and one’s official corporate capacity . . .
without regard to one’s motivation for engaging in that conduct.” Homestore, 888
A.2d at 214. The focus of the inquiry, in these circumstances, is whether the
allegedly illicit “scheme is alleged to have employed the corporate powers (or, for
43 example, confidential inside information acquired through the corporate status)
conferred upon the officer by virtue of his status.” Perconti v. Thornton Oil Corp.,
2002 WL 982419, at *7 (Del. Ch. May 3, 2002). 109 Where, as here, an action alleges
misappropriation or misuse of the corporation’s confidential information,
“allegations relating to post-separation use of confidential information learned pre-
separation are ‘by reason of the fact’ of Petitioners’ positions.” Ephrat v. medCPU,
Inc., 2019 WL 2613281, at *7 (Del. Ch. June 26, 2019).
This court has found advancement and indemnification rights triggered by
covered persons’ post-termination conduct when the challenged conduct “involved
the misuse of confidential information that the director or officer obtained in that
role.” Perik, 2024 WL 181848, at *6; see, e.g., Ephrat, 2019 WL 2613281, at *7–8
(finding that the plaintiffs were entitled to advancement in connection with claims
alleging that “confidential information and trade secrets” were “still in their
possession after [their] separation from employment with medCPU” and applying
109 Compare Perconti, 2002 WL 982419, at *7 n.35 (explaining that a hypothetical criminal suit alleging that the plaintiff “had randomly robbed one of Thornton’s gas stations on a Saturday night” would have involved his employer, but that indemnification of his expenses would not be required “because none of his corporate powers or other attributes of his corporate status were used in, or were necessary for, the commission of the robbery as described”), with id. at *6–7 (finding that indemnification was required based on the facts of that case because the misconduct alleged “demonstrates a course of abuse of his corporate position” because “it was [the plaintiff’s] status as officer that enabled him to embezzle”).
44 the same reasoning to the plaintiffs’ alleged violations of non-competition
agreements (alteration in original) (internal quotation marks omitted)). The inquiry
is not focused on when the individual seeking advancement allegedly misused the
information—rather, the court looks to when and in what capacity they originally
acquired it.
Under our law, the relevant point of inquiry is not when Gilbert allegedly
misappropriated information in connection with leaving Unisys, but rather when he
first learned that information and in what capacity he originally aided in its
development. Gilbert did not learn about that information for the first time when he
was leaving Unisys—he was already aware of it from his day-to-day responsibilities,
which included running DWS and integrating Unify Square as its President. 110 Had
Gilbert been alleged to have taken and misappropriated trade secrets related to Unify
Square from Unify Square while that entity still existed, an ensuing action against
him would have been by reason of his having learned those secrets from his service
as President of Unify Square. That Unisys subsequently merged Unify Square out
110 A declaration that Unisys submitted in support of the motion for a temporary restraining order in the Pennsylvania Action explained that “Unisys prepared documentation related to the design, implementation, and strategies of Unify Square’s platform,” “[b]ased on their roles, Mr. Gilbert and Mr. McGarvey were intimately familiar with these documents,” “[b]oth Mr. Gilbert and Mr. McGarvey had access to this information during the course of their employment with Unisys and were aware of the highly confidential and sensitive nature of these materials they took,” and “[w]e consider these materials to be our trade secrets.” JX 117 ¶¶ 13–14, 16–17.
45 of existence does not alter the capacity in which Gilbert first had access to this
information.
The complaint in the Pennsylvania Action identifies a broad swath of
information as trade secrets, including information specific to Unify Square and its
integration into Unisys’s DWS business unit. 111 Unisys’s allegations as to what
information constitutes a trade secret is not limited to documents. Nor does the
complaint in the Pennsylvania Action limit its claims and allegations to periods when
Gilbert was not the President of Unify Square. Indeed, Unisys points to a January
2023 conversation between Gilbert and an Atos Senior Vice President as evidence
of Gilbert’s intent to misuse information that he obtained while at Unisys:
Gilbert then made clear to [an Atos SVP] that he would use his knowledge from Unisys to push Atos forward, stating that he “spent [the] last 2 years in the model Atos is trying to get to, so [he] know[s] what works and doesn’t. Have to now show [Atos’s CEO] the same.” 112
111 For example, the original and operative complaints in the Pennsylvania Action both allege that “several downloaded documents include confidential information related to the architecture design for Unisys’[s] communications platform as well as internal presentations that discuss the integration of Unify Square with Unisys.” JX 118 ¶ 49; JX 125 ¶ 60; see also JX 117 ¶ 17 (averring that “strategies relating to the incorporation of Unify Square” into the DWS Platform are trade secrets). “The Court must seek to discern the true nature of the [] claims” in the Pennsylvania Action. Imbert v. LCM Int. Hldg. LLC, 2013 WL 1934563, at *6 (Del. Ch. May 7, 2013); Gasgarth v. TVP Invs., LLC, C.A. No. 2018-0621-JTL, at 72:3–8 (Del. Ch. Dec. 7, 2018) (TRANSCRIPT) (“[T]he fact that we usually look at the pleadings doesn’t prevent the Court from looking at the overall litigation scenario. Nor does it prevent the Court from considering discovery in the rare case, such as this one, where there actually was discovery and a trial record.”), aff’d, 216 A.3d 869 (Del. 2019) (TABLE). 112 JX 125 ¶ 52.
46 Unisys seeks injunctive relief against Gilbert by the “actual and threatened
misappropriation” of information acquired in that two-year span, a period that
included Gilbert’s term as President of Unify Square. 113 Admittedly, this court
cannot presume to know how the Pennsylvania Action will play out or how Unisys
will present its case. But based on the Pennsylvania complaint and the affidavit filed
in support of a temporary restraining order, the court cannot conclude that Gilbert
was not made a party to that proceeding by reason of the fact that he was an officer
of Unify Square, at least not in part. To be sure, Plaintiffs have not made a
compelling showing on this point. But in this circumstance, the court should err on
the side of awarding advancement. Underbrink v. Warrior Energy Servs. Corp.,
2008 WL 2262316, at *7 (Del. Ch. May 30, 2008) (“The ‘by reason of the fact’
standard, or the ‘official capacity’ standard, is interpreted broadly and in favor of
indemnification and advancement.”); see Holley, 2014 WL 7336411, at *9 (“In
advancement cases, the line between being sued in one’s personal capacity and one’s
corporate capacity generally is drawn in favor of advancement with disputes as to
the ultimate entitlement to retain the advanced funds being resolved later at the
indemnification stage.”).
113 Id. ¶ 56; see id. ¶¶ 74–75, 86–87, Prayer for Relief ¶ 1.
47 Defendant notes that the Pennsylvania Action alleges that Gilbert took much
more information than that relating to Unify Square, such as trade secrets relating to
Mobinergy, another company Unisys acquired during Plaintiffs’ tenure at Unisys.
Unisys emphasizes that Gilbert did not hold an elected officer position when
obtaining Mobinergy information. Unisys argues, by parity of reasoning, that this
shows that its claims against Gilbert had nothing to do with his service as Unify
Square President. Since holding a position at Mobinergy was not necessary for
Plaintiffs to access that information, Defendant contends that neither was it
necessary for Gilbert to have held an officer position at Unify Square to acquire its
trade secrets.
As Senior Vice President of DWS, Gilbert would have the same access to this
information by virtue of his position regardless of whether he had been appointed
President of Unify Square. But while his time as Unify Square’s President was not
necessary for him to have access to the information he allegedly stole, it is a
sufficient nexus for advancement. Having multiple sources of the same information
does not diminish Gilbert’s right to advancement of the costs of defending a suit
alleging that he misappropriated that information. See Brown v. LiveOps, Inc., 903
A.2d 324, 330 (Del. Ch. 2006) (concluding that the plaintiff was entitled to
advancement where the “gravamen of the underlying complaint is that [plaintiff] had
access to proprietary information by reason of the fact that he was a director and
48 officer of [the company] and that he wrongly used that information for his personal
benefit”); Pontone v. Milso Indus. Corp., 100 A.3d 1023, 1052, 1054 (Del. Ch. 2014)
(observing that the plaintiff’s alleged misappropriation of confidential and
proprietary information “learned during his time as a director and officer underlie
nearly all of the claims” asserted against him in the underlying dispute and
concluding that plaintiff was entitled to advancement “by reason of” his former role
as a director or officer); cf. Perik, 2024 WL 181848, at *6 (explaining that “claims
must concern confidential information obtained through their service as a director or
officer” and observing that its plaintiff did not appear to have obtained the relevant
information by reason of his covered service).
Therefore, the court concludes that Gilbert is being sued by reason of his
service of Unify Square, where he served at the request of Unisys, and is entitled to
advancement under Section 2(a) of Article X of the Certificate.
C. Gilbert and McGarvey Served as Employees of an Enterprise at Unisys’s Request.
Both Plaintiffs argue that they are entitled to advancement by reason of their
service to the DWS business unit. Specifically, Plaintiffs contend that DWS is an
enterprise under the terms of the Certificate, that they served DWS at the request of
Unisys, and that they are entitled to advancement because they are being sued by
reason of that service. Defendant does not contest that Plaintiffs served DWS at its
49 request and are being sued by reason of their having served DWS. Instead,
Defendant argues that DWS is not an enterprise. 114
The pertinent provision of the Certificate provides for mandatory
indemnification of and advancement to each person sued by reason of the fact that
the person “is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans.” 115
This provision is broad, almost directly mirroring the language of 8 Del. C. §
145(a) and 8 Del. C. § 145(e), with one obvious difference. Sections 145(a) and (e)
of the DGCL are enabling provisions. Kaung, 884 A.2d at 509 (“Section 145 of the
DGCL vests Delaware corporations with the capacity to protect their present and
former corporate officials from expenses incurred in connection with litigation and
other legal proceedings.”). They create no requirements or obligations for a
corporation. Compare 8 Del. C. § 145(e) (providing that expenses incurred by
“persons serving at the request of the corporation as directors, officers, employees
or agents of another corporation, partnership, joint venture, trust or other enterprise
114 See Def.’s Post-Trial Answering Br. 25 (arguing that DWS is not an enterprise in part because “any employee of a corporation is also necessarily an employee of some subcomponent of the corporation”). 115 JX 1 Art. X § 2(a).
50 may be so paid upon such terms and conditions, if any, as the corporation deems
appropriate” (emphasis added)), with id. § 145(c)(1) (mandating that “[t]o the extent
that a present or former director or officer of a corporation has been successful on
the merits . . . such person shall be indemnified” (emphasis added)); see Homestore,
888 A.2d at 212 (“The advancement authority conferred by section 145(e) is
permissive.”); Miller, 2012 WL 6740254, at *3 (“The Delaware General
Corporation Law allows for, but does not require, advancement. . . . [A]bsent a
bylaw or contractual provision that makes advancement mandatory, Delaware law
leaves the decision to advance expenses to the business judgment of the board.”).
Sections 145(a) and (e) provide tools to corporate drafters—ones that drafters
need not and often do not use to the fullest extent possible. “Corporations do not
typically extend mandatory advancement rights to employees and agents, instead
reserving such rights for directors and officers appointed by the directors.” Sassano,
948 A.2d at 460. “Yet, here, although not required by Delaware law, the
[Certificate’s] drafters went out of their way to do just that.” Centrella II, 2024 WL
3249274, at *6. As this court recently observed in Centrella II, one “way to
communicate ‘to the fullest extent under the law’ would be simply to copy relevant
portions of the indemnification and advancement statute into the [Certificate], but
change the statute’s permissive language to be mandatory. The drafters of the
[Certificate] seem largely to have adopted this approach . . . .” Id. at *6 n.77. So
51 too here. Compare 8 Del. C. § 145(e) (providing that expenses incurred by “persons
serving at the request of the corporation as directors, officers, employees or agents
of another corporation, partnership, joint venture, trust or other enterprise may be so
paid upon such terms and conditions, if any, as the corporation deems appropriate”
(emphasis added)), with JX 1 Art. X § 2(a) (providing that “Each person who [] is
or was serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, . . . shall be
indemnified and held harmless by the Corporation to the fullest extent authorized by
the Delaware General Corporation Law . . . . The right to indemnification . . . shall
include the right to be paid by the Corporation the expenses incurred in defending
any such proceeding . . . .” (emphasis added)). The language of Sections 145(a) and
(e) is permissive and sets the outer limits of what a corporation can do. By almost
directly copying that language into the Certificate and making it mandatory, the
drafters have communicated a clear intent to provide extremely broad advancement
and indemnification rights.
With the issue now framed, the question is whether DWS is an enterprise. The
parties’ positions, as analyzed below, are succinctly stated as follows: Plaintiffs
contend that an enterprise is an organization with a business purpose, and that an
52 enterprise may exist within an entity, whereas Defendant argues that an enterprise
must be a separate legal entity external to Unisys.
Defendant’s argument relies on the interpretive canon ejusdem generis, which
“applies when there is an enumeration or listing of specific things, followed by more
general words relating to the same subject matter, in which case the general words
are interpreted as meaning things of the same kind as the specific matters to which
the parties refer.” 11 Williston on Contracts § 32:10 (4th ed.). Specifically,
Defendant contends that an enterprise must be an entity because it follows a list of
entity types. 116
116 Defendant also argues that accounting principles support its interpretation of enterprise. Defendant’s expert, R. Harold Schroeder, explained that segment reporting pursuant to the Financial Accounting Standards Board’s (“FASB”) Topic 280 provides investors with information about components of a reporting corporation. Because these segments are part of the reporting for the reporting entity, “[r]eportable segments are just components, in effect, of the reporting entity.” Tr. 206:16–17 (Schroeder). Defendant argues that DWS is a reportable segment of Unisys, a reportable segment is part of the reporting entity, and that a reporting segment is, therefore, not an enterprise. But merely because DWS is a reportable segment of Unisys does not mean it is not an enterprise, and Unisys did not provide any reason why a reportable segment could not be an enterprise. Schroeder also explained that FASB used to refer to these segments as a “segment of a business enterprise” and the phrase “public business enterprise,” abbreviated as “enterprise,” to describe reporting entities. Id. at 207:9–209:5, 211:9–17 (Schroeder). But Defendant does not show why historic FASB rules should be the touching point for determining the meaning of the word enterprise. Additionally, FASB itself no longer uses the word “enterprise,” instead having fully transitioned to the more precise “entity.” Id. at 208:19–23 (Schroeder).
53 But as Plaintiffs note, the canon of ejusdem generis is a secondary interpretive
rule which the court need not reach and, in any event, its application here does not
counsel the conclusion Defendant proffers. Although some of the forms referenced,
like “corporation” and “trust” are distinct legal entities, others, like “joint venture”
and “employee benefit plan,” are not definitionally so. Even when applied, the
canon of ejusdem generis “will not preclude the inclusion of things not of the same
class or kind when it appears the parties so intended.” 11 Williston on Contracts §
32:10 (4th ed.). Conducting a joint venture or managing an employee benefit plan
as a separate entity may be a prudent course of action, and that is the course Unisys
took with respect to each. 117 But a “joint venture” merely describes a multi-party
undertaking of a common business goal—it is not a type of entity. Warren v.
Goldinger Bros., 414 A.2d 507, 509 (Del. 1980) (identifying the elements of a “joint
venture” as “(1) a community of interest in the performance of a common purpose,
(2) joint control or right of control, (3) a joint proprietary interest in the subject
matter, (4) a right to share in the profits, (5) a duty to share in the losses which may
be sustained” (internal quotation marks omitted)); Sheppard v. Carey, 254 A.2d 260,
117 Tr. 149:5–11 (Thomson).
54 263 (Del. Ch. 1969) ( “A joint adventure is not created by operation of law. 118 It is
derived from agreement of the parties but that agreement may be expressed or it may
be implied. . . . No particular formality is required for the establishment of such a
relationship.” (citations and internal quotation marks omitted); see, e.g., id. at 263–
64 (finding that the parties who acted in concert to acquire a corporation, including
timing other business dealings and borrowing funds together to have on hand the
necessary capital, were “engaged in a joint enterprise”). This court has, similarly,
treated as an enterprise an organization that was not, itself, a separate legal entity.
See Sassano, 948 A.2d at 464, 470 (concluding, post-trial, that a business unit that
was an “unincorporated, non-legal entit[y] with no employees, no payroll, and no
revenue of any sort” was an “enterprise”). Had the drafters of the DGCL or the
Certificate intended “enterprise” to mean separate legal “entity,” one would expect
them to have used the word “entity”—and omitted “joint venture.” See, e.g.,
Aleynikov, 2016 WL 3763246, at *1 (noting that the bylaws of the company provided
that “when used with respect to a Subsidiary or other enterprise that is not a
118 The Sheppard court used, interchangeably, the phrases “joint venture,” “joint adventure,” and “joint enterprise.” “Joint venture” is the modern usage. Compare Wah Chang Smelting & Ref. Co. of Am. v. Cleveland Tungsten Inc., 1996 WL 487941, at *3 (Del. Ch. Aug. 19, 1996) (citing Sheppard for the proposition that “Joint ventures do not arise by operation of law.”), with J. Leo Johnson, Inc. v. Carmer, 156 A.2d 499 (Del. Ch. 1959) (discussing the contours of “joint adventures”); see also Wah Chang, 1996 WL 487941, at *4 (identifying J. Leo Johnson as recognizing “a broad definition of ‘joint venture’” that Warren subsequently distilled into elements).
55 corporation . . . , the term ‘officer’ shall include in addition to any officer of such
entity, any person serving in a similar capacity . . . .” (alteration in original)
(emphasis added)). Instead, looking to the plain meanings of the words chosen and
forgone, it is apparent, consistent with Sassano, that a more expansive meaning than
“entity” was intended. This is in accord with the broad nature of Sections 145(a)
and (e) as enabling provisions that set the outside scope of what a corporation can
do. Specifically, if a corporation wanted to provide advancement or indemnification
rights to employees of an inter- or intra-entity enterprise, Sections 145(a) and (e)
permit it to do so. Unisys was not required to adopt an advancement provision
mirroring the statutory limits, but it did.
Defendant’s contention that an “other enterprise” must be external to Unisys
is similarly unavailing. The word “another” before “corporation” serves to set apart
the advancing corporation from other corporations, and in Section 145, the word
“other” before “enterprise” emphasizes its broad definition and role as a list-ending
catch-all. The caselaw also demonstrates that an enterprise need not be external to
the advancing entity. See, e.g., VonFeldt II, 714 A.2d at 85–86 (finding that a wholly
owned subsidiary was an “other enterprise[]”). To accept Defendant’s reading of
the statutory language would frustrate and unnecessarily limit the scope of persons
eligible for potential advancement, preventing corporations from providing
advancement rights to persons serving within the corporate structure. See id. at 84
56 (“We eschew narrow construction of the statute where an overliteral reading would
disserve these policies.”).
Defendant further argues that Plaintiffs’ proposed definition of enterprise is
overly broad, and over-inclusive. The court does not, however, need to accept
Plaintiffs’ proffered definition to conclude that DWS is an enterprise. Rather, by
way of comparison to what this court found was an enterprise in Sassano, regardless
of where the line is drawn, DWS falls on the “enterprise” side. A discussion of that
case is apt here.
In Sassano, CIBC World Markets Corp.’s (“CIBC”) bylaws extended
advancement rights to “officers with management supervisory functions and
directors” and “those who serve another corporation, partnership, joint venture, trust
or other enterprise at the request of [CIBC], and are sued by reason of their office or
service.” 948 A.2d at 460 (alteration in original) (internal quotation marks omitted).
The Sassano court’s core holding was that the plaintiff was entitled to advancement
because he was a nominal officer of CIBC with management supervisory functions.
But the Sassano court also opined that, had he received his title from the strategic
business unit (“SBU”) in which he served, he would have been entitled to
advancement because he was being sued by reason of his officer position with or
service of that “enterprise.”
57 Defendant minimizes this portion of Sassano as an alternative holding that
turned on the specific question of whether CIBC or the World Markets SBU (“World
Markets”) had conveyed the Managing Director title on the plaintiff. The court
found, after trial, that CIBC had conveyed Sassano’s officer title, entitling him to
advancement as a CIBC officer. The court then explained that, even if World
Markets had conveyed the title, Sassano would have been entitled to advancement
because World Markets was an enterprise, and that if Sassano had received his title
from World Markets, he would have served as an officer of that enterprise and been
sued in that capacity. Defendant argues that the alternative holding stated only that,
were the Sassano court to agree that World Markets had conveyed Sassano’s title, it
would then have to find the World Markets was an enterprise.
Defendant misreads Sassano’s alternative holding. The court concluded that
World Markets could not, as a factual matter, have conferred an officer title. Id. at
464–65. But it also unambiguously stated that “[c]learly World Markets is, if not a
legal entity, an ‘enterprise.’” Id. at 470. World Markets was an enterprise even
though it could not have conveyed a title. This is best demonstrated by the Sassano
court’s description of its conclusion as “more tenable than CIBC’s, which would
have this court hold that Wealth Management exists at two extreme ends of a
spectrum—substantive enough to confer officer titles to individuals, but not
substantive enough to be an ‘enterprise.’” Id. at 470. In other words, the Sassano
58 court concluded that something may lack the capacity to convey a title and still
constitute an enterprise. It then concluded that, were Sassano’s title to have been
conveyed by World Markets instead of CIBC, thereby disqualifying Sassano for
advancement as a CIBC officer, he nevertheless would have been entitled to
advancement by reason of his position as a World Markets officer under those facts,
because World Markets was an enterprise. In sum, Sassano found that World
Markets was an enterprise irrespective of whether it had or could grant Sassano his
title.
To determine whether DWS is an enterprise, it is instructive to discuss what
led the Sassano court to conclude that World Markets was an enterprise. In that
case, Canadian Imperial Bank of Commerce (“Canadian Imperial”) had operating
subsidiaries in every country in which it did business. CIBC was Canadian
Imperial’s registered broker-dealer for its business in the United States. Canadian
Imperial did not, however, do business by country. Instead, it organized its global
operations and marketing into SBUs that were structured along product lines.
Divisions within the same Canadian Imperial subsidiary might belong to different
SBUs. For example, CIBC had a Private Client Services division, which operated
under the broader Wealth Management SBU, and an Investment Banking division,
which fell within World Markets. The court further observed that “[a]lthough there
seems to have been an organizational hierarchy within Wealth Management and
59 World Markets, these SBUs were unincorporated, non-legal entities with no
employees, no payroll, and no revenue of any sort.” Id. at 464. Looking at the whole
picture presented of World Markets after trial, the Sassano court concluded that
World Markets was an enterprise.
The operations of Unisys are strikingly similar to those of Canadian Imperial.
As Altabef outlined, “we have subsidiaries for specific countries to doing [sic]
business,” but “we don’t really think of the business in terms of subsidiaries.” 119
Instead, Altabef explained that “what is important to the company are the operating
entities in which the company does business. Whether it is our finance team, our
legal team, any of the four business units. That is the way we think of the
company.” 120 Like Canadian Imperial, Unisys (post-Project Minerva) organized its
business into international, product centered units that operated as one, despite
fragmentation between different legal entities in different jurisdictions.
Unisys argues that DWS was not an enterprise because it could not, for
example, hire employees or enter into contracts. 121 But an enterprise need not have
those functions. As the Sassano court found, World Markets was an enterprise
119 Altabef Dep. at 108:9–10, 109:5–6. Unisys has “70 or so subsidiaries.” Id. at 108:3. 120 Id. at 109:14–19. 121 Tr. 23:19–21, 47:22–24, 147:18–148:4.
60 despite not having a formal legal existence, employees, payroll, “revenue of any
sort,” or the ability to convey an officer title. 948 A.2d at 464–65, 470.
In this case, it is straightforward to conclude that each of Unisys’s reportable
segments operated as a standalone enterprise. In determining that each of the
segments should be reported separately, Unisys observed: “Although there are
shared Cloud and Security components between the three core BUs, the rest of the
solutions that the BUs offer is indigenous to the specific BU that offers the solution.
The go-to-market, margin profile and delivery mechanisms are all unique.” 122
Unisys envisioned that “[t]he distribution method will be unique between the BUs.
Use of Inteliserve for DWS, CloudeForte for C&I and ClearpathForward Operating
system as the base for CPF will all be unique per BU.” 123 More broadly, Unisys
intended “to run the business by Business Unit (BU) and that there will be senior
leadership responsible for each BU” and that “the compensation structure will be
primarily aligned to BU results (i.e. each segment manager will ‘own’ a discrete
P&L and be compensated based on the results of that P&L) and their contribution to
the total company.” 124 And, as executed, these business lines functioned in many
ways like standalone businesses. DWS “acted like a business within a business,
122 JX 22 at UNISYS_ADV_00028062. 123 Id. at UNISYS_ADV_00028063. 124 Id. at UNISYS_ADV_00028060–61.
61 meaning that we were organized, we had marketing that was very specific to DWS.
We would show up in presentations specifically as Digital Workplace Solutions. We
would -- we had our own P&L which my compensation was directly tied to.” 125 The
segments treated each other like separate enterprises, with “[i]ntersegment sales and
transfers [] priced as if the sales or transfers were to third parties.” 126 Unisys also
engaged in M&A to grow specific segments, and reported on its annual report on
Form 10-K that the goodwill determined by the allocation of Unify Square’s
purchase price had been recorded in DWS. 127
In Sassano, this court observed that “[c]learly World Markets is . . . an
‘enterprise,’” indicating that, for the Sassano court, it was not a close question. 948
A.2d at 470. Here, Plaintiffs have made at least as strong a showing as reflected in
125 Tr. 75:21–76:2 (McGarvey). 126 JX 90 at 22; accord Tr. 171:10–13 (“Q: As to Unisys reportable segments, intersegment sales and transfers are priced as if the sales or transfers were to third parties; correct? A: That is correct.”). 127 JX 90 at 46 (“Goodwill determined by the allocation of the purchase price has been recorded in the company’s DWS segment and is not deductible for tax purposes.”); id. at 85 (Thomson’s signature on the Form 10-K); Tr. 172:10–15 (Thomson) (confirming that he signed the Form 10-K in his capacity as the executive vice president and CFO of Unisys); but see Tr. 172:16–173:23 (Thomson) (testifying that this description of the treatment of the goodwill from the deal was “technically inaccurate” because “‘Recording’ is a very specific accounting term. That means you recorded it in a trial balance or a general ledger. DWS has neither.”).
62 Sassano. Based on the post-trial record before it in the present action, the court
concludes that DWS was an “enterprise.”
Finally, Defendant contends that the extension of advancement rights in this
manner is commercially unreasonable. The court disagrees. The DGCL enables a
corporation to provide advancement to employees and agents who serve other forms
of business endeavors at the corporation’s request. The statute does not limit
corporations’ ability to provide advancement to only persons serving legal entities.
At the same time, corporations do not have to offer advancement in the first instance.
“No Delaware corporation is required to provide for advancement of expenses.”
Homestore, 888 A.2d at 218. When a corporation does, it has broad powers and
flexibility to tailor its advancement regime to suit its unique needs and desires. “If
an entity wishes to grant advancement rights to all of its employees, it can. If an
entity wishes to extend advancement rights further to agents, it can. Whether an
entity wishes to grant advancement rights broadly or narrowly is a decision for the
entity.” Aleynikov, 2016 WL 3763246, at *6. When a corporation mandates
advancement to the full extent of what is permissible under the statute, it must honor
the attendant obligations that flow from that decision. The drafters here made that
full extent mandatory, and the court must give effect to the clear language of the
Certificate. “Because Delaware adheres to the objective theory of contract
interpretation, the court looks to the most objective indicia of that intent: the words
63 found in the written instrument.” Sassano, 948 A.2d at 462 (footnote omitted).
Unisys “voluntarily extended its indemnification duties to cover circumstances
where indemnification is permissive by default.” VonFeldt II, 714 A.2d at 85.
“Parties have a right to enter into good and bad contracts, the law enforces both.”
Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010).
Therefore, the court finds that Gilbert and McGarvey served as employees of
an enterprise at Unisys’s request and, under Section 2(a) of Article X of the
Certificate, are entitled to advancement from Unisys because they are being sued in
the Pennsylvania Action by reason of the fact that they so served.
D. Plaintiffs are Entitled to Advancement of Outstanding and Future Fees in the Pennsylvania Action and Fees on Fees in This Action.
In its pretrial brief and its post-trial answering brief, Defendant argues that
Plaintiffs are not entitled to advancement because Atos has been paying Plaintiffs’
fees in the Pennsylvania Action. 128 Defendant argues that under Pontone, Plaintiffs
are not entitled to advancement for litigation expenses already advanced by Atos.
See 100 A.3d at 1045 (holding that its advancement plaintiff “does not have standing
with respect to claims for advancement of the expenses that already have been
paid”); see also id. (holding that the unavailability of advancement of such funds
128 Def.’s Pretrial Br. 31; Def.’s Post-Trial Answering Br. 43–44.
64 was “without prejudice to any claim that [the secondary payor] may have for
contribution against [the defendant] in the indemnification stage of this matter”).
Plaintiffs did not address this argument in their pretrial brief or their post-trial
opening brief, and made only passing reference to the argument in a footnote of their
post-trial reply brief, without addressing the case law. And even there, Plaintiffs
merely argued that “[t]o the extent that Atos has advanced fees to Plaintiffs for the
Pennsylvania Action, Atos has done so solely as a voluntary secondary payer with a
right of recovery against the primary obligor, Unisys.” 129 Arguments that are not
presented in briefs are waived. Emerald P’rs v. Berlin, 2003 WL 21003437, at *43
(Del. Ch. Apr. 28, 2003) (“It is settled Delaware law that a party waives an argument
by not including it in its brief.”), aff’d, 840 A.2d 641 (Del. 2003) (TABLE); Roca v.
E.I. du Pont de Nemours & Co., 842 A.2d 1238, 1242 n.12 (Del. 2004) (“[I]ssues
adverted to in a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived.” (alteration in original) (internal quotation
marks omitted)). A passing reference in a footnote does not suffice. See Sabree
Env’t & Constr., Inc. v. Summit Dredging, LLC, 149 A.3d 517 (Del. 2016) (TABLE)
(“[S]tandalone arguments in footnotes are usually not considered fairly raised in any
court.”); In re Tesla Motors, Inc. S’holder Litig., 2018 WL 1560293, at *20 (Del.
129 Pls.’ Post-Trial Reply Br. 32 n.9.
65 Ch. Mar. 28, 2018) (ruling that an “‘argument’ consist[ing] of a passing reference in
a footnote in their Opening Brief” was “not properly briefed” and “deemed waived,”
observing that “failure to raise a legal issue in the above-the-line text of a brief
generally constitutes waiver of that issue”). But even if the court were to consider
Plaintiffs’ argument, it does not help them for present purposes. Plaintiffs contend
only that Atos—a non-party to this action—might have a claim against Unisys for
fees that it has advanced on Plaintiffs’ behalf. That issue is not before the court in
this action, and Plaintiffs did not expound upon any implications it may have with
respect to their entitlement to advancement from Unisys. 130
On the other hand, as Pontone recognized, Plaintiffs’ inability to obtain
advancement from Unisys for amounts already advanced by Atos does not alter
Unisys’s obligations to advance Plaintiffs their outstanding and future costs in the
Pennsylvania Action. 100 A.3d at 1046 (“The fact that a third party is willing to
honor its contractual commitments to the plaintiff if called upon to do so should not
serve as a basis for a defendant to escape its own, independent and commensurate,
contractual obligations.”). Therefore, Defendant must advance to Plaintiffs their
future expenses, and those expenses incurred and not already advanced by Atos.
130 See Creel v. Ecolab, Inc., 2018 WL 5733382, at *5–8 (Del. Ch. Oct. 31, 2018) (collecting cases).
66 Additionally, Plaintiffs are entitled to their fees incurred in procuring their
advancement rights in this action. Section 2(b) of Article X of the Certificate
provides that if a claimant under Section 2(a) brings suit to enforce their right to
advancement or indemnification and is “successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim.” 131 Plaintiffs
have successfully established their entitlement to advancement. Therefore, they are
entitled to recover their fees under the Certificate.
III. CONCLUSION
In conclusion, Plaintiffs were officers of Unisys, and are entitled to
advancement as such. In addition, Gilbert is entitled to advancement through his
former service as President of Unify Square, and both Plaintiffs are entitled to
advancement by reason of their service of DWS at the request of Unisys. Plaintiffs’
receipt of the fees for this litigation from Atos pursuant to its voluntary assumption
of liability subject to Plaintiffs’ seeking advancement from Unisys does not preclude
Plaintiffs’ ability to receive advancement for outstanding and future costs. Finally,
because they were successful in whole or in part, Plaintiffs are entitled to recover
their fees incurred in this proceeding from Defendant.
131 JX 1 Art. X § 2(b).
67 The parties shall confer and submit an implementing order within five days of
this opinion.
Related
Cite This Page — Counsel Stack
Leon Gilbert v. Unisys Corporation, Counsel Stack Legal Research, https://law.counselstack.com/opinion/leon-gilbert-v-unisys-corporation-delch-2024.