Case Title: Kramer v. Liberty Property

Citation: 408 Md. 1

Docket Number: 23/08

State: maryland

Court: Maryland Supreme Court

Date: 2009-03-23T00:00:00Z

Document:
Richard L. Kramer v. Liberty Property Trust f/ka/ Republic Property Trust, No. 23,
September Term 2008
Corporations Law — Indemnification and Advancement of Expenses — Statutory
Interpretation — A “proceeding” within the meaning of Md. Code (1975, 2007 Repl. Vol.)
§ 2-418 of the Corporations and Associations Article is an actual or threatened adjudicative
or administrative process, or any stage of either process, including an investigation.  The
term “proceeding” does not, however, comprise a corporation’s internal governance
functions, such as the removal of a director or officer for cause.  
Corporations Law — Indemnification and Advancement of Expenses — Under governing
documents providing advancement rights to a trustee “made a party [to a proceeding] by
reason of service in such capacity,” there must exist a nexus between the “proceeding” and
the trustee’s official status as a prerequisite to an advancement.
In the Circuit Court for Baltimore City
Case No. 24-C-07-003152
IN THE COURT OF APPEALS
OF MARYLAND
No. 23
September Term, 2008
RICHARD L. KRAMER
v.
LIBERTY PROPERTY TRUST
f/k/a REPUBLIC PROPERTY TRUST
 
Bell, C.J.
Harrell
Battaglia
Greene
Murphy
Adkins
Barbera,
JJ.
Opinion by Greene, J.
Filed:  March 23, 2009
Section 2-418 of the Corporations and Associations Article, Md. Code (1975, 2007
Repl. Vol.), authorizes a corporation to indemnify or advance expenses to a director who is
a “party” to a “proceeding.”  Under the statute, a “‘[p]arty’ includes a person who was, is,
or is threatened to be made a named defendant or respondent in a proceeding.”  Id. § 2-
418(a)(6).  “‘Proceeding’ means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative.”  Id. § 2-418(a)(7).  In
this advancement case, pursuant to the governing documents of Republic Property Trust
(“Republic”), we must determine whether the expenses incurred by Richard L. Kramer,
Republic’s former Chairman and trustee, following an internal investigation, and in response
to a recommendation that he either resign or face “further action,” were incurred in
connection with a “proceeding” under § 2-418.  If so, then we must determine whether
Kramer was made a “party” to the “proceeding” by reason of his status as a trustee of
Republic.
Kramer, the appellant, contends that he incurred his expenses in a “proceeding”
within the meaning of § 2-418.  Specifically, he asserts, “[I]t is well-established that
adversarial actions taken by companies against their officers or directors constitute
‘proceedings’ that trigger the right to mandatory advancement.”  (Appellant’s brief at 16-17.)
Kramer further contends that he was made a “party” to the “proceeding” by reason of his
status as a trustee of Republic, because “he was the express target of the efforts to investigate
his conduct and oust him from his positions as Chairman and Trustee of Republic.”
(Appellant’s brief at 25.)  Liberty Property Trust (“Liberty”), the appellee and Republic’s
2
successor-in-interest, disagrees with Kramer, contending that there was no “proceeding” to
which Kramer was made a “party” by reason of his status as a trustee.
We hold that a “proceeding” within the meaning of § 2-418 is an actual or threatened
adjudicative or administrative process, or any stage of either process, including an
investigation.  The term “proceeding” does not, however, comprise a corporation’s internal
governance functions, such as the removal of a director or officer for cause.  Although the
internal investigation in this case was a “proceeding” under § 2-418, it was not one to which
Kramer was made a “party” by reason of his status as a trustee of Republic.  The
investigation focused upon Kramer, not because of his status as a trustee of Republic, but
because of his involvement with another entity, Republic Properties Corporation (“RPC”).
Furthermore, Republic’s actions following the internal investigation, during which it
considered the recommendation that Kramer either resign or face “further action,” did not
constitute a “proceeding” within the meaning of § 2-418.  Therefore, Kramer is not entitled
an advancement, and we shall affirm the judgment of the Circuit Court for Baltimore City.
I.
A.
Republic’s Governing Documents
Republic was a Maryland real estate investment trust (“REIT”) engaged in the
acquisition, development, ownership, management, control, and disposition of real property.
During the pendency of the instant litigation, Republic merged with Liberty and ceased to
3
exist.  Liberty assumed Republic’s liabilities, including the liabilities to which Republic
committed itself through its governing documents.
Republic’s governing documents, its Declaration of Trust and Bylaws, contained,
among other things, a commitment to indemnify its trustees for certain expenses incurred in
their service as trustees.  Included was the imperative that Republic advance to its trustees
such expenses as incurred.  Article IX, § 9.3 (“Indemnification”) of the Declaration of Trust
provided:
To the maximum extent permitted by Maryland law in effect
from time to time, and in accordance with applicable provisions
of the Bylaws, the Trust shall indemnify . . . any present or
former Trustee or officer who has been successful in the defense
of a proceeding to which he or she was made a party by reason
of service in such capacity, against reasonable expenses incurred
by the Trustee or officer in connection with the proceeding and
shall pay or reimburse, in advance of [the] final disposition of
the proceeding, such reasonable expenses.
(Emphasis added.)  Likewise, Article XI (“Indemnification and Advance of Expenses”) of
the Bylaws provided, in pertinent part:
To the maximum extent permitted by Maryland law in effect
from time to time, the Trust shall indemnify . . . any Trustee or
officer . . . who has been successful, on the merits or otherwise,
in the defense of a proceeding to which he or she was made a
party by reason of service in such capacity, against reasonable
expenses incurred by him or her in connection with the
proceeding . . . .  In addition,  the Trust shall pay or reimburse,
as incurred, in advance of [the] final disposition of a
proceeding, reasonable expenses incurred by a Trustee or
officer or former Trustee or officer made a party to a
proceeding by reason of such status, provided that the Trust
shall have received: (i) a written affirmation by the Trustee or
officer of his or her good faith belief that he or she has met the
1See Md. Code (1975, 2007 Repl. Vol.), § 2-418 (“Indemnification of directors,
officers, employees, and agents”).  Section 2-418 provides, in pertinent part: 
§ 2-418.  Indemnification of directors, officers, employees,
and agents.
(a) Definitions. — (1) In this section the following words have
the meanings indicated.
* * * *
(6) “Party” includes a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding.
(7) “Proceeding” means any threatened, pending or
completed  action, suit or proceeding, whether civil, criminal,
administrative, or investigative.”
* * * *
(f) Payment of expenses in advance of final disposition of
action. — (1) Reasonable expenses incurred by a director who
is a party to a proceeding may be paid or reimbursed by the
corporation in advance of the final disposition of the proceeding
. . . .
4
applicable standard of conduct necessary for indemnification by
the Trust as authorized by these Bylaws and (ii) a written
undertaking by or on his or her behalf to repay the amount paid
or reimbursed by the Trust if it shall ultimately be determined
that the applicable standard of conduct was not met. . . .
* * * *
Any indemnification or payment or reimbursement of the
expenses permitted by these Bylaws shall be furnished in
accordance with the procedures provided for indemnification or
payment or reimbursement of expenses, as the case may be,
under Section 2-418 of the MGCL for directors of Maryland
Corporations.[1]
(Emphasis added.)
In addition to providing indemnification and advancement rights, Republic’s
Declaration of Trust set forth certain procedures with respect to matters of corporate
5
governance.  Under Article VIII, § 8.2 (“Voting Rights”), the shareholders of Republic were
to elect its trustees.  Pursuant to Article V, § 5.3 (“Resignation, Removal or Death”), a
trustee of Republic could only be removed for cause, by a two-thirds vote of the
shareholders. 
B.
Kramer’s Request for an Advancement
Richard L. Kramer was the Chairman of the Board of Trustees and a trustee of
Republic.  Steven A. Grigg served as Republic’s President and Chief Development Officer.
In addition to their positions with Republic, Kramer and Grigg co-owned RPC, an affiliate
of Republic engaged in real estate development in the City of West Palm Beach, Florida. 
 The events pertinent to this case began in October of 2004, when the West Palm
Beach Community Redevelopment Agency (“CRA”) voted to approve a Professional
Services Agreement (“PSA”) between the City and RPC for a project known as “City
Center.”  Subsequently, in November of that year, RPC entered into a consulting agreement
with West Palm Beach City Commissioner Raymond Liberti, who also served on the CRA.
Although Kramer was active in engaging the assistance of Commissioner Liberti, it was
Grigg who, on behalf of RPC, executed the consulting agreement and two of the three
extensions thereto.  
After Commissioner Liberti entered into the consulting arrangement with RPC, the
CRA voted to amend the PSA on three occasions.  The first amendment inured to the benefit
2On December 20, 2005, Republic completed its initial public offering (“IPO”) of
securities.  Republic was formed on July 19, 2005.  That day, Republic formed Republic
Property Limited Partnership (“RPLP”), a Delaware limited partnership through which it
conducted substantially all of its operations.  In connection with Republic’s IPO, RPLP
entered into an agreement with RPC whereby RPC assigned its interest in the City Center
PSA to RPLP in exchange for 100,234 RPLP partnership units.
6
of RPC.  The second and third amendments inured to the benefit of Republic because, on
December 19, 2005, the CRA voted to approve an assignment of the PSA from RPC to
Republic.2
 In May of 2006, federal prosecutors charged Commissioner Liberti with fraud and
corruption in abuse of his elected position.  Although these charges had nothing to do with
Republic or RPC, the local press revealed that RPC paid consulting fees to Liberti while he
was voting on matters affecting RPC.  The press also reported that federal and State
prosecutors knew about RPC’s consulting arrangement with Commissioner Liberti and that
State prosecutors planned to conduct a grand jury investigation into Liberti’s dealings with
RPC.
In response to the potential criminal investigation into RPC’s dealings with
Commissioner Liberti, Republic’s Audit Committee engaged the law firm of Shulman,
Rogers, Gandal, Pordy & Ecker, P.A. (“Audit Committee Counsel”) to investigate the extent
of Republic’s involvement.  According to Audit Committee Counsel, its “focus” of the
investigation consisted of the following:
(i) assessing the nature of the dealings between Commissioner
Liberti and Mr. Grigg in connection with the City Center project
and other projects in Florida, (ii) the legality of the consulting
7
agreements entered [into] between Commissioner Liberti and
Mr. Grigg, (iii) who associated with [Republic] knew about the
consulting agreements and when, (iv) whether [Republic] had
a duty to disclose the consulting agreements to the City of West
Palm Beach or to others, and (v) whether [Republic]
contravened any laws in connection with the consulting
agreements.
Audit Committee Counsel also examined “whether (i) Mr. Grigg’s conduct in Florida . . .
provide[d] a basis for [Republic] to terminate Mr. Grigg for cause, and (ii) any other facts
and circumstances learned in the course of the investigation suggest[ing] violations of law,
contract, and corporate governance or ethical standards.”  As such, Republic recommended
that Grigg take a leave of absence during the investigation and be prohibited from accessing
company e-mail and materials.
Beginning in July of 2006, Audit Committee Counsel reviewed more than 40,000
documents and interviewed several persons, including Kramer, Grigg, Commissioner Liberti,
and Robert Sanders, an attorney who allegedly suggested to Grigg that RPC hire
Commissioner Liberti as a paid consultant.  Kramer did not retain private counsel during the
internal investigation.  He cooperated initially, providing reasonable access to RPC
documents.  In his interview with Audit Committee Counsel, however, Kramer sought to cut
short questioning.  In addition, in the course of attorney Robert Sanders’s interview with
Audit Committee Counsel, Kramer placed extensive limitations on Sanders’s ability to
answer questions.  The most significant of the subjects that Audit Committee Counsel could
not explore were the consulting agreements between Commissioner Liberti and RPC.
3Specifically, Audit Committee Counsel noted:
It is an open question whether Richard Kramer’s active efforts
to restrict and limit the investigation and access to relevant
information, considered in combination with the detailed
Upjohn warning given to and read by Richard Kramer and his
admitted knowledge of a federal criminal investigation, could
or may constitute obstruction of justice under 18 U.S.C. § 1512.
(See, e.g., United States v. Zar, Cr. No. 04-331 (ILG) (E.D.N.Y.
Criminal Information) filed April 8, 2004).  We do not express
an opinion as to this issue because the only cases applying this
(continued...)
8
Eventually, Kramer began to question and challenge the authority of Republic’s Audit
Committee to conduct the investigation, appearing at a meeting of the Audit Committee and
insisting that “this folly must stop now.”
On October 31, 2006, Audit Committee Counsel issued a report detailing the findings
of its internal investigation and providing certain recommendations.  Of particular
importance, Audit Committee Counsel found that Commissioner Liberti “cast at least eight
votes affecting RPC and/or Republic.”  In addition, Audit Committee Counsel recommended
that Grigg’s employment with Republic be terminated for cause.  Pertaining to Kramer,
Audit Committee Counsel observed that Kramer questioned vigorously, in several e-mails,
Grigg’s competence and “whether [Grigg] should play any role in [Republic].”  While
“offer[ing] no prediction as to whether federal or state prosecutors w[ould] bring charges in
connection with Commissioner Liberti’s dealings with RPC, Mr. Grigg, and Richard
Kramer,” Audit Committee Counsel also opined that Kramer’s actions could possibly serve
as the basis for a criminal obstruction of justice charge against him.3  Thus, Audit Committee
3(...continued)
theory to date were three criminal informations in connection
with Computer Associates, which resulted in guilty pleas by the
three charged executives.  (E.g., id.)
9
Counsel concluded that Kramer’s conduct during the investigation did not reflect an
appropriate “tone at the top.”  As such, Audit Committee Counsel recommended that
Republic seek the voluntary resignation of Kramer as Chairman and member of the Board
of Trustees; if Kramer would not resign, then Audit Committee Counsel recommended that
the Board “evaluate, weighing all material considerations, whether to take further action.”
In response to the recommendations of Audit Committee Counsel,  Kramer retained
the law firm of Williams & Connolly, L.L.P. to “defend” him.  Also in response, on
November 30, 2006, Republic’s Board held a special meeting to, among other things,
remove Kramer from office.  The Board adjourned the meeting without taking such action,
however.
Following the November 30 board meeting, Republic’s outside counsel agreed that
Kramer would be able to appear before the Audit Committee on January 8, 2007,  to respond
to the recommendations of Audit Committee Counsel.  Kramer requested that his attorneys
be provided with the documents that Audit Committee Counsel relied upon in concluding
that he should be removed from office.  Republic’s outside counsel agreed initially to
produce the documents but recanted soon thereafter.  Also around this time, on December
11, 2006, on the basis of Republic’s governing documents, Kramer requested that Republic
4In so doing, Kramer further stated:
Lest there be any doubt that [Republic], through its investigative
actions and challenges to my status as a Trustee, has begun a
proceeding against me, I would refer you to the definition of
proceeding in Section 2-418 of the Maryland General
Corporation Law: “threatened, pending or completed action, suit
or proceeding, whether civil criminal, administrative or
investigative.”
5According to the materials submitted to this Court, Kramer’s attorneys began
working on the instant matter on October 31, 2006.  On that day, their duties were limited
to reviewing Audit Committee Counsel’s report.  Thereafter, their work consisted of
corresponding with Republic and its outside counsel, and the instant lawsuit.
10
advance to Kramer the “legal expenses incurred by [him] in connection with the proceeding
[Republic] ha[d] begun against [him] as a Trustee of [Republic].”4  With this request, Kramer
submitted his attorneys’ time records,5 an affirmation stating that he had met the applicable
standard of conduct necessary for indemnification, and an undertaking promising to repay
the amount advanced if it was later determined that the standard of conduct was not met.
Republic denied Kramer’s request, which is the subject of the instant lawsuit.
On January 1, 2007, Republic’s General Counsel wrote to Kramer that “a reckoning
is coming upon Grigg, and you can get yourself caught up in it, we can join forces in support
of it or you can get out of the way.”  Kramer never appeared at the January  8, 2007,
meeting of Republic’s Audit Committee, and on January 18, Republic’s outside counsel
agreed finally to provide Kramer with the documents that Kramer requested.  Only a small
fraction of the documents were provided, however, and Republic’s outside counsel informed
11
Kramer that no other documents would be produced later.  Furthermore, Republic’s outside
counsel delivered to Kramer’s attorneys the following ultimatum:
The Audit Committee does not intend to allow further delay.  If
you would like to schedule a meeting before the end of the
month for your client to address the conclusions of [Audit
Committee Counsel’s] report that concern him (i.e., his failure
to cooperate with the investigation), please let me know.  If your
client does not choose to avail himself of this opportunity, then
the Audit Committee will proceed accordingly.
Kramer never appeared before the Audit Committee, and on May 3, 2007, in the
Circuit Court for Baltimore City, Kramer filed a complaint against Republic to collect the
expenses for which advancement was denied.  On October 4, by way of the Republic/Liberty
merger, Republic ceased to exist, and Kramer no longer held a position to defend.  On
November 2, the Circuit Court heard argument on the parties’ cross-motions for summary
judgment.  Deciding that there was no “proceeding” that triggered Kramer’s right to an
advancement under Republic’s Bylaws, the court stated:
The Court has before it a motion for summary judgment
as filed by Plaintiff, basically saying that it was a threatened or
actual proceeding and there was right of Plaintiff Kramer, to
have — to seek counsel, have counsel, in those matters.
The defendant, Republic Property Trust, has, in fact,
argued in a cross-motion, motion to dismiss, in the alternative,
a motion for summary judgment, stating that all of these matters
are internal and there was no actual proceeding or no definable
proceeding or no proceeding within the meaning of 2-418.
That under the circumstances, the Court recognizes the
argument.  It appears that the real issues here was [sic] around
whether or not Plaintiff would remain as a member of the
6See Gentile v. Singlepoint Financial, Inc., 787 A.2d 102 (Del. Ch. 2001) (holding
that, under the company’s bylaws, a former officer and director was entitled to advancement
for expenses incurred in a “Proceeding” comprising an internal investigation and subsequent
lawsuit), aff’d, 788 A.2d 111 (Del. 2001).
12
Board, as well as, in his position as chairman.  It appears very
clear, from the arguments made and the affidavits and other
information submitted, that the defenses by Kramer was [sic]
over whether or not he would be able to defend his position and
remain as chairman and member of the Board.
It is the Court’s finding, that after argument and review
of the facts and circumstance[s], the cases cited — and we do
appreciate your argument as to Gentile[6] and your
interpretations on both sides.
This Court does find . . . that there was not a proceeding
within the actual meaning of the statute and that these were
internal matters.
Defendants motion for summary judgment is hereby
granted.  Plaintiff’s motion for summary judgment is hereby
denied.
Kramer appealed the order of the Circuit Court to the Court of Special Appeals.  We
issued a writ of certiorari prior to any proceedings in the intermediate appellate court.  For
our review are two questions:
(1) Did the trial court err in concluding that an action to remove
a trustee from the board of a Maryland “REIT” for an alleged
breach of fiduciary duty was not a “proceeding” within the
meaning of Section 2-418 of the Maryland Code?
(2) Did the trial court err in denying appellant’s motion for
summary judgment where he “was made a party to a proceeding
by reason of such status” as a trustee and officer?
II.
7 Section 2-418(e) is inapplicable in this case.
13
Section 2-418 of the Corporations and Associations Article authorizes a corporation
to indemnify or advance expenses to a director who is a “party” to a “proceeding.”
Authorizing advancement is subsection (f), which provides:
(f).  Payment of expenses in advance of final disposition of
action. — (1) Reasonable expenses incurred by a director who
is a party to a proceeding may be paid or reimbursed by the
corporation in advance of the final disposition of the proceeding
upon receipt by the corporation of:
(i) A written affirmation by the director of the director’s good
faith belief that the standard of conduct necessary for
indemnification by the corporation as authorized in this section
has been met; and
(ii) A written undertaking by or on behalf of the director to
repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.
(2) The undertaking required by paragraph (1)(ii) of this
subsection shall be an unlimited general obligation of the
director but need not be secured and may be accepted without
reference to financial ability to make the repayment.
(3) Payments under this subsection shall be made as provided
by the charter, bylaws, or contract or as specified in subsection
(e) of this section.[7]
Md. Code (1975, 2007 Repl. Vol.), § 2-418(f).  Regarding the difference between
advancement and indemnification:
Indemnification is the right to be reimbursed for all out of
pocket expenses and losses caused by an underlying claim.  The
right is typically subject to a requirement that the indemnitee
have acted in good faith and in a manner that he reasonably
believed was in the best interests of the company.  As a result,
an indemnification dispute generally cannot be resolved until
after the merits of the underlying controversy are decided
because the good faith standard requires a factual inquiry into
14
the events that gave rise to the lawsuit. Advancement, by
contrast, is a right whereby a potential indemnitee has the ability
to force the company to pay his litigation expenses as they are
incurred regardless of whether he will ultimately be entitled to
indemnification.  Advancement is typically not conditioned on
a finding that the party seeking advancement has met any
standard of conduct.  A grant of advancement rights is
essentially a decision to advance credit to the company’s
officers and directors because the officer or director must repay
all sums advanced to him if it is later determined that he is not
entitled to be indemnified. 
Majkowski v. American Imaging Mgmt. Servs., 913 A.2d 572, 586-87 (Del. Ch. 2006)
(footnotes omitted) (emphasis in original).  Nevertheless, the authorization to indemnify or
advance expenses under § 2-418 depends, generally, upon whether the expenses to be
reimbursed or advanced were (or will be) incurred in a “proceeding” to which the indemnitee
or potential indemnitee was made a “party.”
Section 2-418 provides that the term “‘[p]arty’ includes a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding.”  Md. Code (1975,
2007 Repl. Vol.), § 2-418(a)(6).  “‘Proceeding’ means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, or investigative.”  Id. § 2-
418(a)(7).
The requirement that one be a “party” to a “proceeding” under § 2-418 to obtain an
advancement was incorporated into the governing documents of Republic.  Republic’s
Bylaws provided, in pertinent part:
Article XI
15
Indemnification and Advancement of Expenses
To the maximum extent permitted by Maryland law in effect
from time to time, the Trust shall indemnify . . . any Trustee or
officer . . . who has been successful, on the merits or otherwise,
in the defense of a proceeding to which he or she was made a
party by reason of service in such capacity, against reasonable
expenses incurred by him or her in connection with the
proceeding . . . .  In addition,  the Trust shall pay or reimburse,
as incurred, in advance of [the] final disposition of a
proceeding, reasonable expenses incurred by a Trustee or
officer or former Trustee or officer made a party to a
proceeding by reason of such status, provided that the Trust
shall have received: (i) a written affirmation by the Trustee or
officer of his or her good faith belief that he or she has met the
applicable standard of conduct necessary for indemnification by
the Trust as authorized by these Bylaws and (ii) a written
undertaking by or on his or her behalf to repay the amount paid
or reimbursed by the Trust if it shall ultimately be determined
that the applicable standard of conduct was not met. . . .
* * * *
Any indemnification or payment or reimbursement of the
expenses permitted by these Bylaws shall be furnished in
accordance with the procedures provided for indemnification or
payment or reimbursement of expenses, as the case may be,
under Section 2-418 of the MGCL for directors of Maryland
Corporations.
(Emphasis added.)  Thus, as Kramer agrees, his entitlement to an advancement under
Republic’s Bylaws depends upon two things: first, that he incurred his expenses in
connection with a “proceeding” under § 2-418; and second, that he was made a “party” to
the “proceeding” by reason of his status as a trustee of Republic.  
In analyzing Kramer’s entitlement to an advancement, we begin by noting that the
parties filed cross-motions for summary judgment.  The Circuit Court granted summary
8In pertinent part, Maryland Rule 2-501(f) provides:
The court shall enter judgment in favor of or against the moving
party if the motion and response show that there is no genuine
dispute as to any material fact and that the party in whose favor
judgment is entered is entitled to judgment as a matter of law.
. . .
16
judgment in favor of Liberty and denied Kramer’s motion.  In considering a trial court’s
grant of a motion for summary judgment, this Court reviews the record in the light most
favorable to the non-moving party.  Doe v. Board of Elections, 406 Md. 697, 711, 962 A.2d
342, 350 (2008); Anderson v. The Gables, 404 Md. 560, 570, 948 A.2d 11, 18 (2008); see
Rhoads v. Sommer, 401 Md. 131, 148, 931 A.2d 508, 518 (2007) (“We review the record in
the light most favorable to the non-moving party and construe any reasonable inferences that
may be drawn from the facts against the moving party.”).  If there is no genuine dispute of
material fact, this Court must determine whether the trial court correctly entered summary
judgment as a matter of law.  See Maryland Rule 2-501(f)8; Doe, 406 Md. at 711, 962 A.2d
at 350.  Here, there is no dispute of material fact.  
Next, we recognize that this case involves an issue of statutory interpretation.  In
Smith v. State, 399 Md. 565, 578-79, 924 A.2d 1175, 1182 (2007), we explained our
principles of statutory interpretation as follows:
Our goal, when interpreting statutes, is to “identify and
effectuate the legislative intent underlying the statute(s) at
issue.”  Gilmer v. State, 389 Md. 656, 662, 887 A.2d 549, 553
(2005); Cain v. State, 386 Md. 320, 327, 872 A.2d 681, 685
(2005); Derry v. State, 358 Md. 325, 335, 748 A.2d 478, 483
(2000); Pete v. State, 384 Md. 47, 57-58, 862 A.2d 419, 425
17
(2004); Graves v. State, 364 Md. 329, 345, 772 A.2d 1225, 1235
(2001).  See also Harris v. State, 331 Md. 137, 148-49, 626
A.2d 946, 951 (1993) (“‘[T]he search for [legislative] intent is
most accurately described as an effort to discern some general
purpose, aim, or policy of the statute.’”); In re Keith G., 325
Md. 538, 542, 601 A.2d 1107, 1109 (1992); Mustafa v. State,
323 Md. 65, 73, 591 A.2d 481, 485 (1991) (“Our focus is,
therefore, centered upon the statute's policy or purpose.”).  The
best source of legislative intent is the statute's plain language,
and when the language is clear and unambiguous, our inquiry
ordinarily ends there.  Gilmer, 389 Md. at 663, 887 A.2d at 553;
Cain, 386 Md. at 327, 872 A.2d at 685; Pete, 384 Md. at 57-58,
862 A.2d at 425; Drew, 379 Md. at 327, 842 A.2d at 6; Whack
v. State, 338 Md. 665, 672, 659 A.2d 1347, 1350 (1995); State
v. Thompson, 332 Md. 1, 6-7, 629 A.2d 731, 734 (1993).  “In the
interest of completeness, however, we may look at the purpose
of the statute and compare the result obtained by use of its plain
language with that which results when the purpose of the statute
is taken into account.”  Harris v. State, 331 Md. 137, 146, 626
A.2d 946, 950 (1993).  See also Robey v. State, 397 Md. 449,
454, 918 A.2d 499, 502 (2007); Stanley v. State, 390 Md. 175,
185, 887 A.2d 1078, 1084 (2005).  In other words, the resort to
legislative history is a confirmatory process; it is not undertaken
to seek contradiction of the plain meaning of the statute.  Robey,
397 Md. at 454, 918 A.2d at 502; Stanley, 390 Md. at 185, 887
A.2d at 1084.  In such instances, we may find useful the context
of a statute, the overall statutory scheme, and archival legislative
history of relevant enactments.  Robey, 397 Md. at 454, 918
A.2d at 502.
We begin our statutory analysis by determining what constitutes a “proceeding”
within the meaning of § 2-418, as that determination is dispositive in this case.  In other
words, if we conclude that Kramer did not incur his expenses in a “proceeding,” then we
need not consider whether Kramer was made a “party” to any “proceeding” by reason of his
status as a trustee of Republic.  See Shearin v. E.F. Hutton Grp., Inc., 652 A.2d 578, 593
(Del. 1994) (noting that the first step in analyzing one’s entitlement to indemnification is
9Although not commenting directly upon what constitutes a “proceeding” subject to
advancement or indemnification, other state courts, as well as the federal courts, have also
made similar, general observations regarding the definition of the term “proceeding.”  See,
e.g., Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 329 (2d Cir. 2005) (recognizing that
the term “‘proceeding’ refers to the progression of a lawsuit or other business before a court,
agency, or other official body”); Statter v. United States, 66 F.2d 819, 822 (9th Cir. 1933)
(“‘[P]roceeding’ means the form in which actions are to be brought and defended, the
manner of intervening in suits, of conducting them, the mode of deciding them, of opposing
judgments and of executing.” (internal quotations and citations omitted)); Datron, Inc. v.
CRA Holdings, Inc., 42 F. Supp. 2d 736, 743 (W.D. Mich. 1999) (commenting that “in
common parlance and understanding, the term [‘proceeding’] has a legal connotation and is
customarily limited to the actions before judicial and quasi-juridical tribunals”); State ex rel.
Johnson v. Indep. Sch. Dist., 109 N.W.2d 596, 602 (Minn. 1961) (“‘Proceeding’ includes
(continued...)
18
determining “whether the expense incurred (or to be incurred) has been incurred in
connection with a covered proceeding”).  Neither this Court nor the Court of Special Appeals
has yet clarified what constitutes a “proceeding” within the meaning of § 2-418.  We have
opined, however, in the context of an administrative proceeding, that “[t]he word
‘proceedings’ is a term of broad scope, encompassing both the investigative and adjudicative
functions of an administrative agency.”  Banach v.  St. Comm’n on Human Rel., 277 Md.
502, 509-10, 356 A.2d 242, 247 (1976) (citing United States v. Fruchtman, 421 F.2d 1019,
1021 (6th Cir. 1970) (“‘[P]roceeding’ is a term of broad scope, encompassing both the
investigative and adjudicative functions of a department or agency.”), cert. denied, 400 U.S.
849, 91 S. Ct. 39, 27 L. Ed. 2d 86 (1970)).  We have also noted that “any initial step before
a judicial tribunal preliminary to the commencement of a civil suit or a criminal prosecution
is a proceeding.”  State v. Ensor and Compton, 277 Md. 529, 544, 356 A.2d 259, 267 (1976)
(internal quotations and citation omitted).9
(...continued)
actions and special proceedings before judicial tribunals as well as proceedings pending
before quasi-judicial officers and boards.”); State ex rel. J.S., 642 A.2d 430, 434 (N.J. Super.
Ct. Ch. Div. 1994) (noting that the term “proceeding” is “construed to include all methods
of invoking the action of the courts”); Towry v. Kiser, 55 P.3d 509, 510 (Or. Ct. App. 2002)
(“The plausible meanings of ‘proceeding’ thus refer either to steps within a single action, for
example, a pretrial show cause ‘proceeding’ or, alternatively, to the entire course of litigation
itself.”).
19
Because we are guided by “ordinary, popular understanding of the English language”
when interpreting a given statute, we shall first turn to the dictionary to aid our statutory
analysis.  See Stoddard v. State, 395 Md. 653, 668-69, 911 A.2d 1245, 1254 (2006) (applying
definitions contained in Black’s Law Dictionary to interpret the meaning of the word
“incident” as it appears in the Maryland Code).  As we have noted, § 2-418 defines a
“proceeding,” in broad terms, as “any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative.”  Md. Code (1975, 2007
Repl. Vol.), § 2-418(a)(7).  According to Black’s Law Dictionary, an “action” is “[a] civil
or criminal judicial proceeding,” and a “suit”  is “[a]ny proceeding by a party or parties
against another in a court of law.”  BLACK’S LAW DICTIONARY 31, 1475 (8th ed. 2004).  In
addition, Black’s Law Dictionary defines a “proceeding” as: “1. The regular and orderly
progression of a lawsuit, including all acts and events between the time of commencement
and the entry of judgment.  2. Any procedural means for seeking redress from a tribunal or
agency.  3. An act or step that is part of a larger action. . . .”  BLACK’S LAW DICTIONARY,
supra, at 1241; see also WEBSTER’S II NEW COLLEGE DICTIONARY 902 (3d ed. 2005)
(providing the legal definition of “proceeding” as “[l]itigation” or “[t]he act of instituting or
10In 1981, the General Assembly revised § 2-418 to define the term “proceeding”
as follows:  “‘Proceeding’ means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative.”
11See generally MODEL BUS. CORP. ACT ANN. (4th ed. 2008).
20
conducting litigation”); EDWIN E. BRYANT, THE LAW OF PLEADING UNDER THE CODES OF
CIVIL PROCEDURE 3 (1894) (“‘Proceeding’ is a word much used to express the business done
in courts.”).  Thus, based on the express language of the statute, as illuminated by these
definitions, we conclude that a “proceeding” within the meaning of § 2-418 is an actual or
threatened adjudicative or administrative process, or any stage of either process, including
an investigation.
Having concluded that the term “proceeding” involves a process that is civil, criminal,
administrative, or investigative in nature, we need not resort to external sources to determine
legislative intent.  Nevertheless, “[i]n the interest of completeness,” we shall venture beyond
the express language of the statute to confirm that our interpretation is correct.  Smith, 399
Md. at 578, 924 A.2d at 1182.  The portion of § 2-418 defining the term “proceeding” has
its origin in Senate Bill 756 of the 1981 General Assembly’s legislative session,10 as evolved
from Md. Ann. Code art. 23, § 60 (1951).  In the Department of Legislative Services’s Bill
File on Senate Bill 756 is an “Explanation of Senate Bill 756: Indemnification” that
provides, “This Bill is designed to provide uniformity with the Model Act.”11  Addressing
the policies underlying § 2-418, the explanation further provides:
The Bill would provide a more workable arrangement for
providing appropriate protection for directors and officers which
21
is of key importance in view of the increased number of suits,
increased cost of litigation, and desire on the part of many
companies to broaden management to include persons
representing a variety of points of view.
See also JAMES J. HANKS, JR., MARYLAND CORPORATION LAW § 6.21[a] (2008 Supp.)
(“Many of the provisions of Section 2-418 are based upon the indemnification provisions
of the Model Business Corporation Act . . . .  Thus, the Official Comment to the Model Act
is a particularly valuable aid in interpreting Section 2-418.”).
Because § 2-418 is based upon the Model Business Corporation Act (the “Model
Act”), we shall examine the Model Act in detail.  As the Model Act appeared in 1981, when
the General Assembly enacted the version of § 2-418 relevant to this case, the Model Act
defined “proceeding” exactly as the term appears in § 2-418: “Proceeding means any
threatened, pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative.”  Changes in the Model Business Corporation Act Affecting
Indemnification of Corporate Personnel, 36 BUS. LAW. 99, 103 (1980).  The inclusion of
this language in the text of the Model Act, which had not before contained a definition of
“proceeding,” was not substantive.  Changes in the Model Business Corporation Act
Affecting Indemnification of Corporate Personnel, supra, at 110 (noting that the definition
of the term “proceeding” was added to eliminate inconsistencies in the statutory language).
Nevertheless, the drafters of the Model Act, the Committee on Corporate Laws of the
American Bar Association, recognized that “[n]ew types of proceedings ha[d] emerged such
as investigations of illegal payments conducted under the direction of a committee of the
 
12See 2 MODEL BUS. CORP. ACT ANN., supra, at 367 (“Indemnification (including
advance for expenses) provides financial protection by the corporation for its directors
against exposure to expenses and liabilities that may be incurred by them in connection with
legal proceedings based on an alleged breach of duty in their service to or on behalf of the
corporation.  Today, when both the volume and the cost of litigation have increased
dramatically, it would be difficult to persuade responsible persons to serve as directors if
they were compelled to bear personally the cost of vindicating the propriety of their conduct
in every instance in which it might be challenged.” (emphasis added)).
22
board of directors.”  Changes in the Model Business Corporation Act Affecting
Indemnification of Corporate Personnel, supra, at 101.
In 1994, the Committee on Corporate Laws modified the then-current definition of
a “proceeding” to its most recent iteration: “Proceeding means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, or investigative and whether
formal or informal.”  2 MODEL BUS. CORP. ACT ANN., § 8.50 at 367, 371 (4th ed. 2008).
The Official Comment to the Model Act provides that the term “proceeding” should be read
broadly:
The broad definition of “proceeding” ensures that the benefits
of this subchapter will be available to directors in new and
unexpected, as well as traditional, types of litigation or other
adversarial matters, whether civil, criminal, administrative, or
investigative.  It also includes arbitration and other dispute
resolution proceedings, lawsuit appeals, and petitions to review
administrative actions.
Id., § 8.50 at 374-75.  Notwithstanding this acknowledgment that “proceeding” is a term of
broad scope, the Committee has not exhibited any intent to expand the definition of the term
beyond “legal proceedings.”12  
23
Many other states in addition to Maryland have enacted indemnification and
advancement laws based upon the Model Act.  See JOSEPH WARREN BISHOP, JR., LAW OF
CORPORATE OFFICERS AND DIRECTORS: INDEMNIFICATION AND INSURANCE, § 6 at 9 (2003)
(noting that all but seven jurisdictions have enacted indemnification statutes based on a
version of the Model Act).  One such state is Delaware, whose statute, similar to Maryland’s,
provides the following with respect to advancement:
(e) Expenses (including attorneys’ fees) incurred by an officer
or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action,
suit, or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section . .
.  .
DEL. CODE ANN. tit. 8, § 145(e) (1974, 2001 Repl. Vol.) (emphasis added).  Due to this
similarity, and because the Delaware courts have gained a reputation for their expertise in
matters of corporate law, we deem decisions of the Delaware Supreme Court and Court of
13According to the Delaware State Courts’ website,
[t]he Court of Chancery has jurisdiction to hear and determine
all matters and causes in equity. . . .  In today's practice, the
litigation in the Court of Chancery consists largely of corporate
matters, trusts, estates, and other fiduciary matters, disputes
involving the purchase and sale of land, questions of title to real
estate, and commercial and contractual matters in general. When
issues of fact to be tried by a jury arise, the Court of Chancery
may order such facts to trial by issues at the Bar of the Superior
Court (10 Del. C., 369). 
Delaware 
State 
Courts, 
Delaware 
Court 
of 
Chancery, 
Jurisidiction,
http://courts.delaware.gov/Courts/Court%20of%20Chancery/?jurisdiction.htm.  In addition,
the Court of Chancery “is perceived to have a deep body of case law and a high level of
expertise” in the field of corporate law.  J. Robert Brown Jr., The Irrelevance of State
Corporate Law in the Governance of Public Companies, 38 U. RICH. L. REV. 317, 347
(2004); see also Teamsters Local Nos. 175 & 505 Pension Trust Fund v. IBP, Inc., 123 F.
Supp. 2d 514, 519 (D. S.D. 2000) (“[T]he Delaware chancery court . . . has earned a
reputation for its ‘expertise concerning corporate governance.’”); In re Ivan F. Boesky Sec.
Litig., 129 F.R.D. 89, 97 (S.D.N.Y. 1990) (noting that “Delaware has long been recognized
as the fountainhead of American corporations and that its Courts of Chancery are known for
their expert exposition of corporate law”).  Appeals from the Court of Chancery are taken
to the Supreme Court of Delaware.  DEL. CONST. art. IV, § 11, cl. 4.
24
Chancery13 to be highly persuasive as to our interpretation of what constitutes a “proceeding”
within the meaning of § 2-418.
The Delaware courts have held that an “action, suit or proceeding” subject to
indemnification or advancement includes an internal investigation.  See Homestore, Inc. v.
Tafeen, 888 A.2d 204 (Del. 2005) (holding that a corporation was required to advance to its
officer the expenses incurred during an internal audit and subsequent lawsuits); see also
Citadel Holding Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992) (affirming that a corporation
was required to advance to its former director the costs of defending the federal securities
25
law action that the corporation brought against him); Hibbert v. Hollywood Park, Inc., 457
A.2d 339, 341-44 (Del. 1983) (concluding that a company’s former directors were entitled
to indemnification for costs incurred in connection with litigation challenging their removal
from the board); Sun-Times Media Group, Inc. v. Black, 954 A.2d 380, 396 (Del. Ch. 2008)
(noting that “an action, suit or proceeding refers to a discrete administrative or judicial
matter involving a particular subject and encompasses all its stages”); Essential Enters.
Corp. v. Automatic Steel Prods., Inc., 164 A.2d 437, 442 (Del. Ch. 1960) (concluding that
directors were “entitled to indemnification for the costs reasonably incurred by them in
successfully defending the action attacking their status as directors”); JOHN F. OLSON &
JOSIAH HATCH III, DIRECTOR AND OFFICER LIABILITY, INDEMNIFICATION AND INSURANCE
§ 5:11 (2007) (noting that “courts construing the Delaware statute have not been tempted to
read any types of limitations into ‘action, suit, or proceeding,’” and the phrase encompasses
“grand jury investigations, informal SEC investigations and internal corporate
investigations”).  Regarding the policies underlying indemnification and advancement, the
Supreme Court of Delaware has observed:
Indemnification encourages corporate service by capable
individuals by protecting their personal financial resources from
depletion by the expenses they incur during an investigation or
litigation that results by reason of that service. . . .
Advancement is an especially important corollary to
indemnification as an inducement for attracting capable
individuals into corporate service.  Advancement provides
corporate officials with immediate interim relief from the
personal out-of-pocket financial burden of paying the significant
26
on-going expenses inevitably involved with investigations and
legal proceedings.
Homestore, Inc., 888 A.2d at 211 (footnote omitted); see Hibbert, 457 A.2d at 344 (noting
that the policy of indemnification “‘is to encourage capable men [and women] to serve as
corporate directors, secure in the knowledge that expenses incurred by them in upholding
their honesty and integrity as directors will be borne by the corporation they serve’” (quoting
E. FOLK, THE DELAWARE GENERAL CORPORATION LAW 98 (1972))).  
Notwithstanding the broad scope of what constitutes an “action, suit or proceeding”
subject to advancement or indemnification, and consistent with the policies underlying
indemnification and advancement, the Court of Chancery has recognized that the phrase is
not boundless and excludes internal matters of corporate governance.  In Donohue v.
Corning,  949 A.2d 574, 575 (Del. Ch. 2008), a company removed its managing partner,
Mark Donohue, purportedly for cause.  Alleging an improper removal, Donohue then sued
the company and sought an advancement of his litigation expenses pursuant to the
advancement provision of the company’s Limited Liability Company Agreement.  Id.  The
advancement provision provided, in pertinent part: 
To the fullest extent permitted by law, the Company shall
indemnify and hold harmless . . . Covered Persons from and
against all liabilities and expenses . . . incurred in connection
with the defense or disposition of any claim, action, suit, or
proceeding, whether civil, criminal, or investigative . . . .  The
Company shall advance such expenses to the Covered Person
upon receipt of an undertaking from such Covered Person to
repay the advanced amount if it is ultimately determined that
such Covered Person was not entitled to indemnification.
 
14Donohue was a “Covered Person” under the Limited Liability Company Agreement
because of his status as managing partner.  Donohue v. Corning,  949 A.2d 574, 575 n.4
(Del. Ch. 2008). 
27
Donohue, 949 A.2d at 576 (emphasis added).14  The court held that Donahue was not entitled
to an advancement because he did not incur his expenses in defending or disposing of an
actual or threatened “proceeding,” thereby noting that a removal for cause is not a
“proceeding.”  Donohue, 949 A.2d at 580.
Turning to the instant case, our review of Maryland legislative history, the Model
Business Corporation Act, and the Delaware courts’ construction of what constitutes an
“action, suit or proceeding” subject to advancement or indemnification confirms that a
“proceeding” within the meaning of § 2-418 involves an actual or threatened adjudicative
or administrative process, or any stage of either process, including an investigation.  The
term “proceeding” does not, however, comprise a corporation’s internal governance
functions, such as the removal of an officer or director for cause.  Thus, we reject as
unpersuasive Kramer’s reliance on Gentile v. Singlepoint Financial, Inc., 787 A.2d 102 (Del.
Ch. 2001), aff’d, 788 A.2d 111 (Del. 2001), for his contention that all internal adversarial
proceedings are deemed to be “proceedings” under § 2-418.
In Gentile, in connection with the firing and removal of the plaintiff director, John
Gentile, the defendant company conducted an internal investigation into Gentile’s conduct.
Gentile, 787 A.2d at 103-04.  The company then filed a lawsuit against Gentile for, among
28
other things, breach of fiduciary duty.  Gentile, 787 A.2d at 104.  Pursuant to the company’s
bylaws, Gentile demanded an advancement of his legal expenses, including those expenses
incurred during the company’s internal investigation of him.  Gentile, 787 A.2d at 105.  The
company’s bylaws provided that “[r]easonable expenses incurred by an Indemnitee who was
or is a witness or was or is threatened to be made a named defendant or respondent in a
Proceeding shall be paid or be reimbursed by the Corporation at reasonable intervals in
advance of the final disposition of such Proceeding . . . .”  Gentile, 787 A.2d at 106.  In
addition, the bylaws defined a “Proceeding” as “any threatened, pending or completed action,
suite [sic] or proceeding, whether civil or criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit or proceeding.”  Id. (alteration in
original).  The court held that “[t]here is little question that . . . the internal investigation
identified in Gentile’s demand meet[s] the literal definition of a “Proceeding.”  Gentile, 787
A.2d at 106-07.  Further, the court opined that “to the extent Gentile has incurred any
expenses relating directly to the company’s internal investigation . . . those costs or expenses
are covered by the mandatory language of [the company’s] bylaws.”  Gentile, 787 A.2d at
105 n.8. 
Here, like in Gentile, there was an internal investigation.  Specifically, Republic
engaged Audit Committee Counsel to investigate the extent of Republic’s involvement in
potential criminal activity in West Palm Beach, Florida.  Although this investigation was
clearly a “proceeding” within the meaning of § 2-418, the Bylaws of Republic set forth an
15In Homestore, Inc., the relevant governing document provided, in pertinent part:
Each person who was or is . . . involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (the “Proceeding”), by reason of the fact that such
person . . . is or was a director or officer of the Corporation . .
. shall be indemnified and held harmless by the Corporation to
the fullest extent permitted by the Delaware General
Corporation Law.”
Homestore, Inc. v. Tafeen, 888 A.2d 204, 212 (Del. 2005) (emphasis added).
29
additional requirement before a trustee or officer may obtain an advancement for expenses
incurred in connection with a “proceeding.”  That is, the trustee or officer must have been
“made a party [to the proceeding] by reason of service in such capacity.”
  Under § 2-418, a “‘[p]arty’ includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.”  That one be made a “party” to a
“proceeding” by reason of his or her official status to be entitled to an advancement is not
a requirement unique to the Bylaws of Republic.  In Delaware, for example, advancement
and indemnification provisions typically contain such language.  E.g., Homestore, Inc., 888
A.2d at 212.15  For a “proceeding” to be by reason of one’s official status, there must exist
a nexus or causal connection between the underlying proceeding and one’s official status.
Homestore, Inc., 888 A.2d at 214.  For example, “[t]his connection is established if the
corporate powers were used or necessary for the commission of the alleged misconduct”
giving rise to the “proceeding.”  Bernstein v. Tractmanager, Inc., 953 A.2d 1003, 1011 (Del.
Ch. 2007).
30
Illustrating a “proceeding” to which a director was made a “party” by reason of his
official status is Gentile.  In that case, Gentile received the following letter before the
defendant company investigated his alleged misconduct:
Since the Company [SinglePoint] terminated your employment
for cause on July 30, 1999, the Company has begun an
investigation into your conduct as a former officer and director
of the Company.  While you were an officer and director, you
owed the Company a duty of utmost good faith and loyalty.
From what the Company has uncovered so far, you have
breached that duty on numerous occasions.
Gentile, 787 A.2d at 104 (alteration in original).  The court held that Gentile was a “named
defendant or respondent” in the internal investigation and, therefore, a “party.”  Gentile, 787
A.2d at 107.  Although the court did not comment directly on the matter, it is also apparent
that Gentile was made a “party” by reason of his official status, because the company
investigated Gentile’s conduct in his capacity as an officer and director of the company.
Gentile, 787 A.2d at 104.
In Stifel Financial Corp. v. Cochran, 809 A.2d 555, 562 (Del. 2002), the court held
that a “proceeding” was not by reason of one’s official corporate capacity.  In that case, a
company terminated its officer and director, Robert Cochran, for cause.  Stifel Financial
Corp., 809 A.2d at 557.  Cochran then refused to repay excess compensation and the balance
of a promissory note, as was required by his employment agreement, and the company
commenced an arbitration action against him to recover those amounts.  Id.  Cochran then
filed an indemnification action pursuant to the company’s bylaws, which provided:
31
“The Corporation [Stifel Financial] shall indemnify to the full
extent authorized by law any person made or threatened to be
made a party to any action, suit, or proceeding, whether
criminal, civil, administrative or investigative, by reason of the
fact that he . . . is or was a director, officer or employee of the
Corporation or any predecessor of the Corporation or serves or
served any other enterprise as a director, officer or employee at
the request of the Corporation or any predecessor of the
Corporation.” 
Id. (alteration in original).  The court held that Cochran’s defense of the excess compensation
and promissory note claims was not susceptible to indemnification under the company’s
bylaws because those claims were not directed at Cochran in his official capacity as an
officer and director.  Stifel Financial Corp., 809 A.2d at 562.  The Court went on to note that
“[a]lthough Cochran’s termination is the event that triggered the relevant provisions of the
employment contract, Cochran’s decision to breach the contract was entirely a personal one,
pursued for his sole benefit.”  Id.
Here, like in Stifel Financial Corp., there was no nexus between the internal
investigation — a “proceeding” within the meaning of § 2-418 — and Kramer’s status as a
trustee of Republic.  Republic’s Audit Committee conducted an internal investigation
primarily to investigate the dealings between RPC and Commissioner Liberti.  As evident
from the facts that Grigg executed consulting agreements between RPC and Liberti, and that
Grigg was asked to take a leave of absence during the investigation, Audit Committee
Counsel’s main concern was Grigg.  Thus, Grigg’s name figures prominently within the
acknowledged “focus” of Audit Committee Counsel’s investigation.
 
16Indeed, the internal investigation ended when Audit Committee Counsel issued its
report on October 31, 2006.  No further investigation occurred beyond that date, and
Kramer’s lawyers did not act to suggest otherwise.  For example, Kramer’s lawyers did not
represent him in an interview, and any document production following the issuance of Audit
Committee Counsel’s report was done at the behest of Kramer, not Republic.
32
Audit Committee Counsel’s investigation concerned Kramer because of his
ownership in the RPC venture, as it was RPC that entered into the consulting arrangement
with Commissioner Liberti.  Although Audit Committee Counsel eventually uncovered
certain deprecatory e-mails from Kramer to Grigg that it found suggestive of Kramer’s
unfitness to be a trustee, those communications were not discovered in an investigation of
Kramer as a trustee.  Moreover, Kramer cannot contend that he was made a “party” to the
internal investigation by reason of his status as a trustee because the investigation culminated
in the conclusion that Kramer failed to convey, during the course of the investigation, an
appropriate “tone at the top.”  This conclusion by Audit Committee Counsel may implicate
Kramer’s fiduciary duties to Republic, but Kramer’s reliance upon it blurs the distinction
between the investigation and its aftermath.16  It ignores the reason why Kramer became of
interest to Audit Committee Counsel in the first place, thereby placing undue weight upon
the fact that Kramer coincidentally held positions with both RPC and Republic.  If anyone
made Kramer a “party” to the internal investigation by reason of his status as a trustee, it was
Kramer himself, who obstructed Audit Committee Counsel’s ability to meaningfully
interview attorney Robert Sanders and challenged the authority of Republic’s Audit
Committee.  Kramer cannot reasonably argue that such actions, taken for his personal benefit
33
as co-owner of RPC, somehow make him subject to the advancement provision of
Republic’s Bylaws. 
Having concluded that the internal investigation in this case, though a “proceeding,”
was not one to which Kramer was made a “party” by reason of his status as a trustee of
Republic, Kramer’s entitlement to an advancement necessarily hinges on our determination
that some other “proceeding” occurred during the period in which Republic considered Audit
Committee Counsel’s recommendation that Kramer either resign or face “further action.”
Because Kramer did not incur his expenses in an actual civil, criminal, or administrative
matter, we must determine whether there was a threatened “proceeding.”  A “threat” is: “1.
A communicated intent to inflict harm or loss on another or on another’s property . . . .   2.
An indication of an approaching menace . . . . [or] 3. A person or thing that might well cause
harm.”  BLACK’S LAW DICTIONARY, supra, at 1519.  Here, the only other conceivable threats
made to Kramer were that he could resign or face “further action,” that a “reckoning was
coming upon Grigg and [Kramer] could get [him]self caught up in it,” and that “the Audit
Committee w[ould] proceed accordingly” if Kramer did not appear before the Audit
Committee.  We do not deem these words sufficient to constitute a threatened “proceeding.”
Cf. Schoon v. Troy Corp., 948 A.2d 1157, 1170 (Del. Ch. 2008) (holding that a “proceeding”
was “unquestionably threatened” where a company named its director in a counterclaim).
Rather, at best, the declaration indicates that Kramer would be removed from office for cause
if he did not resign.  A removal for cause, which would have been accomplished by
17We note, however, that our holding is limited to what constitutes a “proceeding”
under § 2-418 and who is a “party” to such a “proceeding” under the Bylaws of Republic.
A company may, pursuant to the non-exclusivity provision of § 2-418(g), obligate itself to
provide additional advancement rights if it so chooses.  See WILLIAM E. KNEPPER & DAN A.
BAILEY, 2 LIABILITY OF CORPORATE OFFICERS AND DIRECTORS, § 22 at 33 (7th ed. 2006)
(noting that a non-exclusive provision “allows a corporation to liberalize indemnification of
their corporate directors even beyond what the statutes now provide and permit a corporation
to establish its own corporate policies for indemnification”).  Section 2-418(g) provides:
(g) Validity of indemnification provision. — The
indemnification and advancement of expenses provided or
authorized by this section may not be deemed exclusive of any
other rights, by indemnification or otherwise, to which a director
may be entitled under the charter, the bylaws, a resolution of
stockholders or directors, an agreement or otherwise, both as to
action in an official capacity and as to action in another capacity
while holding such office.
The propriety of such contracts would, however, be limited by public policy considerations.
KNEPPER & DAN A. BAILEY, supra, § 22 at 35; JAMES J. HANKS, JR., MARYLAND
CORPORATION LAW § 6.21[i] (2007 Supp.).
34
shareholder vote with respect to Kramer’s status as a trustee, and by the Board with respect
to Kramer’s status as Chairman, is a matter of internal corporate governance and is not a
“proceeding” within the meaning of § 2-418.  See Donohue, 949 A.2d at 576.  Accordingly,
because there was no “proceeding” to which Kramer was made a “party” by reason of his
status as a trustee of Republic, we shall affirm the judgment of the Circuit Court for
Baltimore City.17 
JUDGMENT OF THE CIRCUIT
COURT FOR BALTIMORE
CITY 
AFFIRMED, 
WITH
COSTS.