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Waltuch v. Conticommodity Services, Inc.
United States Court of Appeals for the Second Circuit
88 F.3d 87 (2d Cir. 1996)
Norton Waltuch (plaintiff) was a silver trader for Conticommodity Services, Inc. (Conti) (defendant). When the silver market crashed, silver speculators brought multiple lawsuits against Waltuch and Conti. All of the suits settled with Conti paying the settlements. As a result of Conti’s payments, Waltuch was dismissed from the suits with no settlement contribution. However, in defending himself in the suits, Waltuch spent approximately $1.2 million out of his own pocket. In addition to the civil suits, the Commodity Futures Trading Commission (CFTC) brought an enforcement proceeding against Waltuch. That proceeding settled as well, with Waltuch agreeing to a fine and a six-month ban on trading. Waltuch spent an additional $1 million in defending himself in the CFTC proceeding. Waltuch brought suit against Conti, seeking indemnification of his various legal expenses. Waltuch first claimed that a provision in Conti’s articles of incorporation categorically required Conti to indemnify him. Conti claimed that a Delaware law barred the claim by allowing indemnification only if the corporate officer acted in good faith, which Waltuch did not establish. Waltuch’s second claim was that a different provision of that Delaware law required Conti to indemnify him because he was “successful on the merits or otherwise” in the civil suits (this statute did not apply to the CFTC proceeding). Conti responded that its settlement payments were partially on Waltuch’s behalf so he was not actually successful in the suits. The United States District Court for the Southern District of New York agreed with Conti on both claims. Waltuch appealed.
Rule of Law
Holding and Reasoning (Jacobs, J.)
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