Delaware Supreme Court Affirms Indemnification Decision Applying Traditional Laches Analysis. In IAC/Interactivecorp. V. O'Brien (No. 629, 2010, Del. Supr. August 11, 2011), the Delaware Supreme Court applied the doctrine of laches to a corporate indemnification claim, finding that the claim was not barred even though the analogous statute of limitations would have run. The case arose out of breach of fiduciary claims against Wesley O'Brien, CEO of Precision Response Corporation (PRC). In 2000, PRC was acquired by Defendant IAC/Interactivecorp., who assumed PRC's obligations to under its indemnification agreement with O'Brien. Two years later, IAC sued O'Brien for breach of fiduciary duties and fraudulent inducement in connection with a recently consummated merger, and PRC refused to advance O'Brien's legal fees. In 2005, an arbitration panel found that PRC was not entitled to recovery on its claims against O'Brien; in the meantime, O'Brien sued PRC in Florida for breach of contract based on the failure to indemnify and to advance fees. The litigation dragged on until 2008, when PRC filed for bankruptcy. O'Brien then sued IAC in Delaware Chancery Court for indemnification and advancement of his attorneys' fees and expenses in the arbitration, the Florida action and the Delaware action. The Court of Chancery granted O'Brien summary judgment, applying a traditional laches analysis rather than applying the analogous statute of limitations.

Sitting en banc, the Delaware Supreme Court affirmed. The Supreme Court cited the following factors that could bear on a laches analysis: (1) whether the plaintiff had been pursuing his claim, through litigation or otherwise, before the statute of limitations expired; (2) whether the delay in filing suit was attributable to a material and unforeseeable change in the parties' personal or financial circumstances; (3) whether the delay in filing suit was attributable to a legal determination in another jurisdiction; (4) to the extent to which the defendant was aware of, or participated in, any prior proceedings; and (5) whether, at the time this litigation was filed, there was a bona fide dispute as to the validity of the claim. Reviewing the facts in light of these factors, the Supreme Court first noted that O'Brien had promptly sought advancement against PRC and had filed suit in Florida before the arbitration was even concluded. In addition, IAC, the party ultimately responsible for PRC's indemnification and advancement obligations, had controlled the Florida litigation. The Court also noted that O'Brien had initially lost the Florida litigation at the trial court level, and that he could not in good faith proceed against IAC during the period, when the decision was on appeal, which lasted over a year. PRC's unexpected bankruptcy and the fact that the Florida courts held that O'Brien's claims were meritorious helped persuade the Court that the unusual circumstances of this case justified the Chancery Court's decision to disregard the statute of limitations, that O’Brien’s delay in filing suit against IAC was not unreasonable, and that IAC was not prejudiced by the delay. The Court also affirmed the Chancery Court's award of attorney's fees, including fees that included a 20% success fee and a contingent arrangement. The Court noted that 8 Del. C. §145(a) permitted indemnification for fees "actually and reasonably incurred" and that "the fact that the amount of the fee is not set until the result is obtained does not change the fact that the fee is incurred based on hours or work performed for the client."  Link to Supreme Court opinion: http://courts.delaware.gov/opinions/download.aspx?ID=158920.  Link to Chancery Court opinion:  http://courts.delaware.gov/opinions/download.aspx?ID=143910.