Tuesday, January 13, 2009
Over at Concurring Opinions, fellow contracts prof and fellow Sidley & Austin alum, Nate Oman (pictured) [at this point we exchange the secret S&A signal of recognition across cyberspace], has an interesting commentary on a Washington Post news story about an environmentalist who bid on land contracts in Utah in order to postpone their exploitation by the oil and gas industries. University of Utah economics student, Tim DeChristopher ended up buying leaseholds on 22,000 acres. Unfortunately, he has no means of paying the $1.8 million he bid on the 13 properties he won at auction.
De Christopher is represented by Pat Shea, who headed the Bureau of Land Management under President Clinton. Shea describes DeChristopher as virtuous and the legal system as Kafkaesque. This explains the fate of Joseph K during the 1990s. Professor Oman has some sympathy for the DeChristopher, but ultimately, I think DeChristopher is better off with his current attorney, Professor Oman thinks DeChrisopher ought to pay for what he bid on, and since he lacks capital, his only means of doing so is with"moderate" jail time, just enough to deter other potential DeChristophers out there from pulling the same stunt. By the way, Professor has no problem with environmentalists with means who enter into good faith agreements to purchase land in order to prevent them from being used for oil and gas exploration.
This case arose in the aftermath of a set of lawsuits against Waltuch which related to his speculative trades in silver while a vice president at Conticommodity Services,Inc. The silver market collapsed in 1980, and Conticommodity's clients sued Waltuch and the corporation in connection with Waltuch's activities. In addition, the Commodities Futures Trading Commission (CFTC) brought an enforcement action. Waltuch spent $2.2 million defending himself in these actions and he sought reimbursement of those expenses under the 9th Article of Conticommodity's Articles of Incorporation, which provided, inter alia, for indemnification of officers for expencses incurred in connection with litigation.
The claims brought by Conticommodity's clients were dismissed as to Waltuch, after Conticommodity paid $35 million in settlement of all claims. The CFTC proceeding was also settled, with Waltuch agreeing to pay a $100,000 and to a six-month hiatus in his futures trading activities.
The case addresses the extent to which Delaware law requires corporations to indemnify officers who have claims against them dismissed and the extent to which it permits indemnification with respect to claims that resulted from bad faith conduct. The answers, provided are that: a) corporations must indemnify officers who are successful regardless of the reasons for their success but that b) corporations may not indemnify oficers who act in bad faith. In Waltuch's case, he was entitled to reimbursement of expenses in the action brought by Conticommodity's clients, because he was dismissed as a defendant in that case after Conticommodity paid a settlement. However, in the CFTC proceedings, he was not "successful," and so that action is governed by Delaware's General Corporation Law s. 145(a), which requires that an officer entitled to reimbursement act in "good faith." Because Waltuch conceded that his actions were not in good faith, he was not entitled to reimbursement of expenses incurred defending himself in the CFTC proceeding. The Court thus refused to enforce the 9th Article of Conticommodity's Articles of Incorpration to the extent of the conflict with the Delaware statute.
Waltuch v. Conticommodity Services, Inc.
Delaware's state legislation
Where good faith's omitted
Even though it's permitted
By the Articles of Incorporation.
Monday, January 12, 2009
In what appears to be an exclusive, FlopTurnRiver.com reports that Full Tilt Poker has filed a motion to dismiss a law suit brought in November by former Full Tilt employee and professional poker player, Clonie Gowan (pictured, sporting Full Tilt logos). According to Gowan's Wikipedia entry, Full Tilt is an online poker site based in Aruba. Gowan's suit alleges that she was promised 1% ownership of Tiltware, the company that provides Full Tilt's software, in return for promoting Full Tilt as a celebrity representative. Since Gowan estimates Tiltware's value at $4 billion, her suit seeks $40 million in damages.
Gowan's claim seems to be based on an oral agreement entered into in 2004. The relationship soured in 2007 when Gowan, according to the suit, was excluded from a payment made to all members of the Full Tilt team. She entered negotiations with Full Tilt, which offered her $250,000, but she rejected that offer as inadequate. She was dropped from Full Tilt's "roster of pros" in November 2008, and the suit followed. The suit names a number of Gowan's professional poker rivals. One of these rivals is quoted in the FlopTurnRiver.com report saying, in a manner rather flushed, that he did not appreciate Gowan's conduct and that she should go straight back whence she came before her entire career collapsed like a house of cards.
As reported in the Times of London, Dow Chemical is seeking up to $2.5 billion in a suit filed against the government of Kuwait for breach of contract. Dow claims entitlement to the damages after Kuwait pulled out of a planned $17.4 billion joint venture. Forbes describes the $2.5 billion as a "break up fee" included in the agreement that set up the joint venture. Dow CEO Andrew Liveris, whose job may be on the line according to Forbes, explains the lawsuit in this interview with the Wall Street Journal. Clearly, the stakes are high, as Dow depends on its business relationships in the region but is also in need of the cash it was expecting this deal to generate so that it could pursue its other business objectives.