for legal fees she incurred defending herself from a federal criminal investigation and indictment arising out of her employment with the pallies fine equity and i have l l c the dispute here  design equity bylaws and nd i have l l c membership agreement as the facts are set forth at length and i briefs i will not restate them in seoul but rather will address facts as they relate to the issues  person i resent the fact that he or she was serving at the request of the corporation as a director employee cetera and so long as they were acting in good faith the district court agreed with dynamic with his argument that because could not show appellant tangas could not show that she had a specific directive from dynamical data service and f t c that she cannot prove she was serving at the request this conclusion is not supported by delaware law the district have court which then became dynamically for fifteen years approximately before i hop out of the existed there was a code of conduct that and i cited to a lot of language in that document that basically said we're all one in which her market was toured to reach out to her ari who was the subject of the criminal investigation and indictment his restaurant for a particular part of the conversation where they said look you need to directly to appellant you need to work on getting this guy wearing needs to be so i started to a lot of those instances in the briefs where there was complete control and this idea that we were all serving fine equity so as person the question is whether and i'm not correct if the question is whether the rights vested or whether she ceased to be a covered person upon terminal action absolutely your honor that the question is and i  believe through the breach you can i believe i have doesn't dispute that she was a cover person up until the point that she was terminated their contention is that as soon as they fired her she was no longer covered person and we believe that this is contrary to delaware law number one the are the the agreement itself doesn't use former or current agreement defines a covered person as to basically stating you are covered person if the conduct for which you see condemned if occasion arises by reason of your employment with the company we liken it in our birthright agree to an occurrence claim as opposed to a claims made meaning if you were an employee and acting in good faith when this arose you're entitled to indemnification the the district court's conclusion would mean that i have to always and a lot of them could be easily disproven the fact that she you know she's being accused of using her position as s b c to help mr out commit fraud and there's absolutely no truth to any of that the indicted for mail fraud she was indicted for harboring illegal aliens and for it's clear using her position to help him and not just simply was not true her failure to report to sloan we're not let's say she had reported it she still could have been indicted on all the things that she's she's accused of the other piece of conduct they point to is her refusal to participate in the investigation but again this is this is after the fact she was investigated and indicted because of her role as the f t c not because she didn't participate in the indictment i think if you follow the language of the contract there are two reasons just don't hold up and also we would we would argue that there was no reasonable investigation into not fraud just before dynamic when he testified that she didn't conduct an investigation that she read the indictment she read the documents provided to her by the f help so i believe that there are factual issues if the court does decide that those allegations are related or arise from the indictment i think there's a factual issue as to whether or not there was an investigation into whether or not she really was guilty of those things london marie and i'm not sure whether i'm correct or not is that there was information in the briefing or in the records that a presumably on a penalty and the speaking reimbursement for that is that correct that she'd like to have her legal fees repaid she did she did pay the legal fees by withdrawing everything from her as we after we a brief summary judgment the district court asked us to specifically brief briefs whether or not the delaware business judgment rule applied and then that argument i think our st argument was no that the contract controls that this should be decided on that the language of the agreement says that the business judgment will should not apply but that i believe i and that sort of a road after we finished briefing summary judgment was a nd round of briefing car i mean i agree with that i think that under the contract i mean i think my st argument is that these accusations of bad conduct are not related to the indictment but i agree with you if the court  agree that they are sufficiently related that there should be a trial to determine whether or not this tank is actually did  my st request would be that the court find that pursuant to the language of the agreement that she's entitled to them this occasion and that if the court finds that the  the language was if the court finds that the loan and the failure to participate in the  investigation are related to the claims for which she thinks indictment then yes i think there needs to be a child i think i need to be every now and to determine whether or not there was fraud on this conduct good afternoon this is time to go on on behalf of the defendants happily let me address one issue that was brought up in the questioning and the question about whether or not there's a bad face there is no claim in this lawsuit that the defendants acted in bad faith there's no breach of any implied duty of bad faith alleged in the amends complaint and if you look at the conduct that is complained about whether or not i did enough to investigate the underlying claims for in the indictment we don't think that's relevant because it's simply a contract case and the contract does not impose any standard as to which i hop would need to follow as far as what it needs to do what facts it needs to investigate or not  investigate and i'll explain a little bit why i think there really was no investigation needed because we're really relying on the admissions of ms tangas to let me revert back to where appellant counsel started and that's with the dine equity bylaws so the main issue there is whether or not ms tangas served at the request of din equity i think the facts are important with some this tangas started as a franchise business consultant back in two thousand and three and certainly there's no evidence that in two thousand three dine equity requested that she serve and that role as franchise business consultant and in fact they couldn't do that because dine equity didn't exist until two thousand seven additionally if we look at out the post dying equity absorption of both i hop in applebee's this tank is claims in our briefing that it was a seamless transition and she kept doing the same job delaware law on that not so much that someone has to serve a formal request in order to have the language that you're serving at the request but it it is a fact t relationship there to that issue in making that determination i agree that there needs to be facts but there are no facts here they're well supported by what about what about the fat the argument that you're opposing counsel mike that this was a one entity that the documents show that the entity was dying and woody on behalf of yeah go ahead and explain why you think they've done equity bylaws don't function here share so they are the bylaws of a corporate entity and the only corporate entity in this case is dying equity i hop is a limited liability company and the and those bylaws cannot by definition apply to a limited liability company a limited liability company shirt so the unlike the vile laws the code of conduct by it's own terms applies to all employees of dine equity all employees of l c and all employees of applebee's so they have all agreed upon a common code of conduct which we assert in our brief is quite common  so that's why these are i hopped that's their code of conduct also it's not just dying equities it's shared amongst all though the record is that christine son who is an attorney employed by dine equity under a shared services agreement provides legal counsel to both i veil between i hop and dine equity has been ignored and should be pierced there's simply no claim that there's any fraudulent or improper conduct that would cause a court to disregard the corporate status of dine activity and the limited liability status of a tolly on subsidiary they are treated as separate entities now there are facts if you look at the case law where one entity will affirmatively go to the other and an employee of it's own and will direct one of its employees to do some work for related entity we don't have  yes she talked with her about the problems with the elk franchises she told her what to do about it i'm struggling with your distinction among these entities how did she have the capacity bank that unless she was authorized to do so by a corporate relationship sure so if you look at that event and when it happened it happened in two thousand and four so at the time ms stewart was the c e o of i hop corp ok in two thousand and four and again dine equity didn't exist until two thousand and seven so corp in two thousand and four so i don't think the folks wanted stewart's role and in the issues surrounding the discharge i don't believe she had any role that i've seen see i don't have that fact and the only involvement that i'm aware of through the record created in this case was back in two thousand and four where there was a discussion about alec and then later her involvement was that there was an award given to miss tangas and on the award had the logos of diane equity i hop and applebee's for fraud and willful misconduct for and then the really doesn't apply because the loan that miss tangas or partner gave to mr tal flowery was not disclosed i think the argument is has been that that's that can't form the basis of an exclusion because that loan is not an element of  money laundering claim or immigration violation claim and our point to that is that we believe the brief is is suggests that it needs to be related to an element of the criminal charge and that's just not correct the term claim is defined under the indemnification agreement and it really provides for all types of losses claims demands liabilities except arising from any and all claims demands actions suits or proceedings criminal civil administrator or investigative so we're really the fact that this alone was absolutely part of the criminal proceedings it was in the indictment it was evidence that the the prosecutor set forth or brought forward to try and prove collusion between miss tangas and the franchisee now our position is we don't need to prove every single allegation that the prosecutor put that but in the indictment in fact i don't think we need to prove anything the only thing we are relying on are things that tangas has admitted she admits that her partner made a loan out of a joint bank account she admits that the code of conduct a requires employees to avoid any type of relationship that might interfere with their ability to make independent judgments on the company behalf or might even create the appearance of impropriety she admits that the loan ran contrary to her role as an f t c and could be perceived as an ethical she admits that you're supposed to report and the conclusion that that's put out there is that she was compromised her role as an f t c was compromised as a result of  that i'm saying if you read the f b i notes and the indictment that's the end it's capable conclusion i mean i'm not holding words that appear in the indictment so i'm not suggesting that but i'm i'm saying the reason that fact is in the indictment and the context of that whole loan and the discussion of the loan is that miss tangas because of that loan if her employer knew about it they might have terminated her why because she's compromised and since he had flowered he had that fact she could not be independent and therefore that whole mess happened why that was indicted it was actually dismissed without prejudice and we don't know why and so there was a statement in the brief basically saying that she was cleared of  all misconduct and i i guess i wouldn't go that far i don't think that's really accurate i mean just that the indictment against her was dismissed without prejudice why we don't know there's nothing in the record to establish that i i guess i wouldn't want to speculate if you don't need any indemnification unlike a corporate entity in delaware the delaware elysee does not need any it's its one hundred percent up to the elysee so you can draft it any way you want you can make it as limited as you want you can withdraw it you know contractually however you would like to do that so since it's not a required benefit we believe that it's controlled exclusively by the words contained in the operating agreement we also cited and i'm struggling to find that case i apologize for that but judge carr i believe also cited it too and i know it's in our brief think the case basically says that if if the language does not contain the word former then the court should construe it article eight is present in former employees and then it goes on and says by contrast the nd sentence of that very same article who wants covered and i know that because don equity laws tell me that i'm really struggling with not only the fact that you said they are completely separate entities but the fact that you're using language for on dine equity separate document in order to understand or to draw a conclusion about on h is that employees someone who is receiving a paycheck but w two all those things a person who can contribute to the company for one k who can be on the health insurance who can get all the other benefits of being an employee and miss tangas was not when she incurred these expenses well you could do that it's a limited benefit and and the case law and delaware talks about why do we have and then the the why do we have insurance directors and officers insurance why to have these benefits to protect people who are serving in these roles and the answer is if you don't have those you're going to have a hard time recruiting people so that you know counsel can be critical of this benefit and say it's not good enough it ends but i would say lots of benefits and if i'm no longer employed with my company i can no longer contribute to my forty one k there's lots of benefits and acting on behalf of or for the corporate entity and i'm struggling with the with the idea that you can cut that off particularly in light of delaware law mean isn't doesn't their work i thought supported by our analysis i believe you're you're going down the road of section one hundred and forty five of the delaware corporate code that can only apply if the dine equity by laws apply it is completely irrelevant to an l l c is operating agreement there is no such corollary under delaware's that i don't think the concept of vesting i don't technically using that term and this technical sense i don't think applies at all it's whether or not the benefit exhibit the employee benefit doesn't exist yes or no and that's a counter that's a matter of contract and interpretation there is zero public policy involved if you're going talking about indemnification of a corporate employee different ballgame altogether david and i believe in in her deposition is that the case was indicted because it was none of that was true she did not collude with mr al she did not help him defraud i have most of the things that she was accused of doing in the indictment were not even things that she could have had access to during her job such as mis reporting claims and hiring of illegal aliens she had no back office access in that way she was dismissed because nothing in that indictment was true she acknowledged in fact she brought to the f b i s attention this loan to back in two thousand and four and she it was an example of why she knew this guy had money problems and she acknowledged that as soon as she found out about it she was furious and she made her partner give that a get that money back and she confronted mr elk about it and that testimony is in the record exactly she didn't know that it was not something and that was good for her job she couldn't report it because she at the time she testified that all in that's moments had to be reported she did not consider to be an investment she wanted it put out of she was seen as the money back she about it anymore maybe that was the wrong decision but i mean i guess the idea that she would have been terminated or that she wouldn't have been moved from the out a cow and yet speculation maybe that's true was she was upset about that and then when it was over it was over and i think you know one of the record is that she never let up on the stroke her reports there's no evidence that she ever let that incident cloud her judgment and anyway  nt says that she was that her partner was getting insurance to her and partner was getting paychecks there's not one iota of documentation to support any of that it was never true in fact the documentation that we presented in this lawsuit was that miss tankards was very critical of mr out she worked hard she complained about him she wrote report she pushed her boss about why are we giving this guy breaks  know the evidence was that she never let up on him and i think that the language in each agreement i will agree with my colleague and that i think this is a contractual matter and the contract and to the extent there is the allegation that her failure to comply with the investigation was was well for misconduct again that claimed is not that got conduct does not arise from the claims in the indictment  unilaterally extinguished and the chancery court and our said no it cannot so you can't distinct extinguish that right by germination otherwise you've got an illusory contract i mean i know benefits and when you get fired but this is a promise that if we send you out to work with these people and you get indicted because these people are criminals we're going to defend you and then well we're going to fire you and when i get out of that promise i mean that's that's not a contract that's an illusion i have one other question on delaware well my understanding is that it generally requires an examination of the marriage before addressing an indian this attention dispy is that correct not are we and a lot of this case love relates to the mandatory indemnification provisions for corporations and corporate officers i believe that an investigation i believe delaware law support the idea that you have to actually go out look at the merits and look to see what the conduct was not just read allegations i believe that that is what delaware law requires i don't believe that that was done in this case i'm not making and  dillon pointed out that there is no claim for bad faith and he's absolutely correct we've not alleged bad faith what we have said was to the court district court question of whether this business judgment rule should be honored you know my answer was no the contract applies and so i guess the question is if there is i can understand how it would be unnecessary to examine the merits if everything were agreed upon but where we have a dispute this that these that the the loan and the failure to participate in the agreement or in the investigation are excludable as bad conduct then i agree that we have to go have a trial to determine whether or not that was fraud or misconduct i think that the contract says that the clients need to for what you see condemns the cation fraud cannot arise from those claims and my st contention is have disconnected and judge tranch yes normally we would place you in a sub conference to confer but obviously that's not necessary given that the three of you are there so unless you have questions  unless you have questions for me i'll just disconnect from the courtroom and used you can disconnect from there thank you so much thank you judge bye bye bye