Fasciana v. Electronic Data Systems Corp.

829 A.2d 178 (2003)

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Fasciana v. Electronic Data Systems Corp.

Delaware Court of Chancery
829 A.2d 178 (2003)

Facts

In May 1995, Electronic Data Systems Corporation (EDS) (defendant) purchased FACS Incorporated (FCI). John Fasciana (plaintiff) represented FCI and its shareholders in the sale. Thereafter, Fasciana continued to provide legal services for FCI, which operated as a division of EDS called Global Financial Markets Group (GFMG) beginning in 1996. The purchase agreement contained incentives for FCI’s former shareholders. Fasciana’s law firm held $2 million in an escrow account that could be earned by FCI’s former shareholders based on FCI’s performance during the remainder of 1995. Further, EDS agreed to pay up to $14 million to FCI’s former shareholders if GFMG met specified earnings targets during its first three years. In 2001, a federal grand jury indicted Fasciana for participating in a scheme to defraud EDS by inducing EDS to make payments pursuant to the incentives and receiving kickbacks, as set forth in a 39-paragraph indictment. EDS also filed a civil lawsuit against Fasciana in a Texas federal court and pleaded the same factual background as the indictment in a 61-paragraph complaint. Both pleadings contained a few paragraphs alleging that Fasciana made material misrepresentations on EDS’s behalf to two clients of GFMG. Under its bylaws, EDS agreed to indemnify and advance the expenses incurred by any agent of the corporation to the fullest extent permitted by Delaware’s corporate-indemnification statute. Accordingly, after EDS refused Fasciana’s request for an advancement of expenses to defend himself in the legal proceedings, Fasciana initiated an action to obtain the advancement (the advancement action). Fasciana responded to certain general defenses raised by EDS, and the court awarded Fasciana a partial advancement to respond to the few paragraphs concerning the alleged material misrepresentations made as EDS’s agent. Fasciana subsequently moved for a full award of attorney’s fees and expenses incurred for bringing the advancement action.

Rule of Law

Issue

Holding and Reasoning (Strine, J.)

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