IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

INTERMUNE, INC. and ROCHE 

HOLDINGS, INC.,

Plaintiffs,

v.

W. SCOTT HARKONEN, M.D.,

Defendant.

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C.A. No. 2021-0694-NAC

POST-TRIAL MEMORANDUM OPINION

Date Submitted: September 22, 2023

Date Decided: August 1, 2024 

Karen A. Jacobs, Megan W. Cascio, Courtney Kurz, MORRIS, NICHOLS, ARSHT & 

TUNNELL LLP, Wilmington, Delaware; Laurie Carr Mims, Benjamin D. Rothstein, 

Candice Mai Khanh Nguyen, Melissa Cornell, Catherine C. Porto, KEKER, VAN 

NEST & PETERS LLP, San Francisco, California; Counsel for Plaintiffs InterMune, 

Inc. and Roche Holdings, Inc.

Michael A. Weidinger, Megan Ix Brison, PINCKNEY, WEIDINGER, URBAN & 

JOYCE LLC, Wilmington, Delaware; Elizabeth Sandza, Richard Sandza, SANDZA 

LAW, PLLC, Washington, D.C.; Counsel for Defendant W. Scott Harkonen, M.D.

COOK, V.C. 
1 

Delaware holds corporations accountable for their advancement obligations. 

But this case serves as a reminder that advanced sums sometimes must be repaid. 

Defendant Dr. W. Scott Harkonen was the Chief Executive Officer of 

InterMune, Inc. (“InterMune” or the “Company”). Following the issuance of a 

misleading press release in 2002, Dr. Harkonen became the center of a federal 

government investigation and criminal trial. To fund his sophisticated and wellresourced defense, Dr. Harkonen requested and accepted very sizeable

advancements. The Company funded the advancements via several director and 

officer (“D&O”) insurance policies and from its own coffers. The advanced sums were

subject to repayment if the litigation was found to be non-indemnifiable under Section 

145 of the Delaware General Corporation Law (“DGCL”). A federal jury subsequently 

convicted Dr. Harkonen of felony wire fraud in 2009. Dr. Harkonen then embarked 

on nearly a decade of unsuccessful appeals to overturn that conviction.

In light of the wire fraud conviction, two of the Company’s excess D&O

insurance providers demanded, in arbitration, that InterMune and Dr. Harkonen 

repay the sums advanced to Dr. Harkonen to litigate the wire fraud charge. In 2019, 

InterMune and Dr. Harkonen settled with the two insurers. InterMune paid the 

settlements in full and retained its right to sue Dr. Harkonen for recovery. 

InterMune is exercising that right with this litigation. 

Dr. Harkonen raised many of his defenses to InterMune’s claim for the first 

time on the eve of trial. These defenses are both procedurally improper and 
2 

prejudicial to InterMune, which was deprived a fair opportunity to address the 

defenses in discovery and in its trial preparation. 

And despite not filing a single counterclaim, Dr. Harkonen seeks a declaration 

that the Company must reimburse him for various legal expenses he accrued in a 

related California Medical Board disciplinary proceeding, two insurance arbitrations, 

advancement negotiations with InterMune, and a presidential pardon. Dr. 

Harkonen’s claims, like his untimely defenses, are also improper. 

The parties appeared before this Court for trial on a paper record. Based on 

my findings and our law, Dr. Harkonen is responsible for the legal expenses incurred 

in litigating his wire fraud conviction, and the Company is therefore entitled to 

recover the amounts it seeks in this action. Dr. Harkonen’s claims do not fare any 

better. In addition to being procedurally improper, each of Dr. Harkonen’s claims is 

either untimely or fails to satisfy the requirements for indemnification under Section 

145.

I. FACTUAL BACKGROUND

The preponderance of the evidence supports the following findings of fact. 

Fortunately, the material facts are undisputed or otherwise not subject to reasonable 

dispute.1

1 Citations in the form of “JX — ([Descriptor])” refer to the joint exhibits the parties 

submitted for trial. Citations in the form of “TT —” refer to the trial transcript. Where 

appropriate, I have taken judicial notice of the decisions and filings in Dr. Harkonen’s 

criminal proceedings, his collateral challenges to those proceedings, and the insurance 

arbitrations. See D.R.E. 201(b)(2), (c)–(d), 202(a)(1). Relevant decisions include United 

States v. Harkonen (Harkonen I), 2009 WL 1578712 (N.D. Cal. June 4, 2009); United States 

v. Harkonen (Harkonen II), 2010 WL 2985257 (N.D. Cal. July 27, 2010); United States v. 
3 

A. The Creation of InterMune

InterMune is a biotechnology company incorporated in Delaware with its 

principal place of business in California.2 During his tenure at InterMune, Dr. 

Harkonen served both as the Company’s CEO and as a director on its board. 

Under InterMune’s bylaws (the “Bylaws”), the Company agreed to advance to 

its directors and officers “all expenses incurred by any director or officer” in 

connection with proceedings related to their role at the Company.3 Additionally, the 

Company agreed to “indemnify its directors and officers to the fullest extent not 

prohibited by the DGCL or any other applicable law[.]”4 

But the advancements were conditioned “upon [the] receipt of an undertaking” 

stating that the director or officer would repay advanced funds to the Company “if it 

should be determined ultimately that such person is not entitled to be indemnified 

Harkonen (Harkonen III), 2011 WL 13250647 (N.D. Cal. Apr. 18, 2011), aff’d, 510 F. App’x 

633 (9th Cir. 2013); United States v. Harkonen (Harkonen IV), 510 F. App’x 633 (9th Cir.),

cert. denied, 571 U.S. 1110 (2013); Harkonen v. United States (Harkonen V), 571 U.S. 1110 

(2013); United States v. Harkonen (Harkonen VI), 2015 WL 4999698 (N.D. Cal. Aug. 21, 

2015), aff’d, 705 F. App’x 606 (9th Cir. 2017); United States v. Harkonen (Harkonen VII), 705 

F. App'x 606 (9th Cir. 2017), cert. denied, 139 S. Ct. 467 (2018); Harkonen v. United States

(Harkonen VIII), 139 S. Ct. 467 (2018); InterMune, Inc. v. Harkonen (Harkonen IX), 2023 WL 

3337212 (Del. Ch. May 10, 2023).

2 InterMune, Inc. v. Harkonen, C.A. No. 2021-0694-NAC, Docket (“Dkt.”) 167, PreTrial Stipulation Order (“PTO”) ¶¶ 1, 3. In 2014, Roche Holdings, Inc. acquired the Company 

and agreed in the merger agreement to honor the Company’s indemnification and 

advancement obligations. JX 558 § 6.06 (a)–(b) (Roche Merger Agreement). For simplicity, 

I will only refer to InterMune throughout the opinion, regardless of whether the time in 

question is pre- or post-acquisition.

3 JX 14 § 43(c) (Bylaws).

4 Id. § 43(a). 
4 

under [the Bylaws] or otherwise.”5 The Bylaws also shifted the claimant’s fees to the 

Company if the claimant is “successful in whole or in part” in enforcing “[a]ny right 

to indemnification or advances granted by [the Bylaws.]”6 

On March 22, 2000, the Company and Dr. Harkonen entered into an indemnity 

agreement (the “Indemnity Agreement”), whereby the Company “agree[d] to hold 

harmless and indemnify [Dr. Harkonen] to the fullest extent authorized or permitted 

by the provisions of the Bylaws and the [DGCL.]”7 Further, the Indemnity 

Agreement, like the Bylaws, obligated the Company to advance to Dr. Harkonen “all 

expenses [he] incurred” in proceedings related to his employment at the Company.8 

But, again, this was conditioned on the “receipt of an undertaking by or on behalf of 

[Dr. Harkonen] to repay said amounts if it shall be determined ultimately that [he] 

is not entitled to be indemnified under the provisions of this Agreement, the Bylaws, 

the [DGCL] or otherwise.”9 The Indemnity Agreement also mirrored the Bylaws by

requiring the Company to pay for the legal fees the claimant incurred enforcing “[a]ny 

right to indemnification or advances granted by this [Indemnity] Agreement[.]”10 The 

5 Id. § 43(c). 

6 Id. § 43(d). 

7 JX 15 § 2 (Indemnity Agreement). 

8 Id. § 8 (emphasis added). 

9 Id.

10 Id. § 9. 
5 

Indemnity Agreement was governed by Delaware law.11 Neither the rights granted 

under the Bylaws12 nor the rights granted under the Indemnity Agreement are 

exclusive.13

B. Press Release and Dr. Harkonen’s Departure

In 2000, InterMune received a license to commercialize interferon gamma-1b, 

better known by its brand name—Actimmune.14 Before InterMune received the 

rights to Actimmune, a preliminary study was published in the New England Journal 

of Medicine suggesting that interferon gamma-1b improved lung function in certain 

patients with idiopathic pulmonary fibrosis (“IPF”).15 But the researchers noted that 

a larger study would need to be conducted to confirm the drug’s potential effectiveness

in treating lung diseases.16 InterMune set off to conduct such a study.

From October 2000 through August 2002, InterMune ran a clinical trial to test 

the effectiveness of Actimmune in treating IPF.17 In August of 2002, Dr. Harkonen 

drafted and issued a press release, on behalf of the Company, announcing the results 

11 Id. § 14. 

12 JX 14 § 43(e).

13 JX 15 § 11.

14 PTO ¶ 16; Harkonen I, 2009 WL 1578712, at *1.

15 JX 6 at 5 (NEJM Article). 

16 Id.; Harkonen I, 2009 WL 1578712, at *2.

17 PTO ¶ 17. 
6 

of its Actimmune clinical trial.18 The press release claimed that Actimmune 

“[r]educes mortality by 70% in Patients with Mild to Moderate [IPF]” and quoted Dr. 

Harkonen praising the study: “We are extremely pleased with [the clinical study’s] 

results, which indicate Actimmune may extend the lives of patients suffering from 

[IPF].”19 

The press release, however, misrepresented the clinical study results. 

Contrary to the press release, “overwhelming, undisputed evidence [showed] that the 

[clinical] study was a failure.”20 Yet the press release characterized the study, which

“missed its primary endpoint as well as all ten of the secondary endpoints[,]”21 as “a 

major breakthrough” with “results [that] will support the use of Actimmune and lead 

to peak sales in the range of $400–$500 million per year[.]”22 

A consultant who led the data monitoring committee for the Actimmune 

clinical trial commented that “if the press release were rated on a scale from 1 to 10, 

10 being the most misleading, [the consultant] considered the press release a 10.”23 

As a federal judge observed, Dr. Harkonen’s follow-on “analyses were conducted with 

18 JX 177 (Press Release).

19 Id.

20 Harkonen II, 2010 WL 2985257, at *10.

21 Id.

22 JX 177.

23 JX 387 at 4 (Form 302 for Dr. Thomas Fleming). 
7 

fraudulent intent.”24 Dr. Harkonen simply “cut that data and slice[d] it until [he] got 

the kind of results [he was] looking for.”25 Yet, “in the face of the [clinical] trial’s 

objective failure,” Dr. Harkonen nonetheless issued a press release that described the 

clinical trial as a success.26 

On June 30, 2003, less than a year after issuing the press release, Dr. 

Harkonen resigned as the Company’s CEO.27 On September 25, 2003, the Company 

and Dr. Harkonen entered into a mutual release (the “Mutual Release”), which was 

governed by California law.28 Through the Mutual Release, “[t]he Company . . . fully 

release[d Harkonen] . . . from and against any and all claims . . . connected with or 

relating to any and all acts . . . occurring on or before the Board Resignation Date.”29 

Additionally, the parties agreed that the releases were “full and final releases 

covering all known and unknown, suspected or unsuspected injuries, debts, claims or 

damages as to the released matters only.”30 But the Mutual Release did not modify 

24 Harkonen IV, 510 F. App’x at 636.

25 JX 502 at 190 (David Cory Direct Examination at California Trial). 

26 Harkonen II, 2010 WL 2985257, at *10.

27 PTO ¶ 4; JX 361 § 1(a) (Mutual Release). 

28 JX 361 § 18. 

29 Id. § 4. The Board Resignation Date was defined as September 25, 2003. Id. § 11.

30 Id. § 5. 
8 

Dr. Harkonen’s advancement and indemnification rights.31 It did, however, include

a prevailing party provision.32

C. Prosecution and Insurance Policies

In 2004, the U.S. Department of Justice (the “DOJ”) launched an investigation 

into the Company’s promotion of Actimmune.33 Several years later, on March 18, 

2008, a grand jury indicted Dr. Harkonen “for fraudulently promoting . . . Actimmune 

(interferon gamma–1b) by putting out false and misleading information about the 

drug’s effectiveness in treating [IPF].”34 Dr. Harkonen was indicted on one count of 

felony misbranding and one count of felony wire fraud.35 

Dr. Harkonen, with the money advanced to him by the Company and its D&O 

insurance policies, assembled a well-qualified legal team.36 His defense attorneys 

included counsel from several prestigious law firms and a now-sitting judge of the 

Superior Court of California.37

31 Id.

32 Id. § 20.

33 PTO ¶ 19.

34 Harkonen I, 2009 WL 1578712, at *1. 

35 JX 470 (Criminal Indictment); PTO ¶ 21.

36 Harkonen VI, 2015 WL 4999698, at *2. 

37 Id.
9 

The Company had several layers of D&O insurance—a $10 million primary 

policy and four excess policies of $5 million apiece.38 Only two of the five policies are 

relevant to the matter before me: one with Arch Specialty Insurance Company 

(“Arch”) and the other with Old Republic Insurance Company (“Old Republic”).39 

By November 2008, the Company had depleted its primary D&O insurance 

policy along with its first layer of excess D&O coverage.40 The Company expected its 

second layer of excess coverage to be depleted by the end of 2008.41 Needless to say, 

the cost of litigating Dr. Harkonen’s charges with a large and prestigious legal team 

was substantial. 

In November 2008, Arch informed the Company that Arch did not intend to 

provide advancement to fund Dr. Harkonen’s litigation of his criminal charges.42 On 

December 1, 2008, in light of the already exhausted policies and Arch’s denial of 

coverage, Dr. Harkonen sent a letter to the Company (the “December 2008 Letter”)

to remind it that “InterMune independently owes obligations to Dr. Harkonen to fund 

his ongoing defense[s]” under the Bylaws, the Indemnity Agreement, and the 

DGCL.43 The next day, on December 2, 2008, Dr. Harkonen signed an undertaking 

38 JX 590 (Old Republic Arbitration Ruling).

39 PTO ¶ 30. 

40 Id. ¶ 29. 

41 Id.

42 JX 475 at 2 (Arch Letter Declining Coverage); PTO ¶ 31.

43 JX 477 (December 2008 Letter).
10 

(the “Undertaking”) requesting advancement from the Company.44 In the 

Undertaking, Dr. Harkonen pledged to repay the sums advanced and paid by the 

Company “if it shall be determined ultimately that [Dr. Harkonen is] not entitled to 

be indemnified under the provisions of the Indemnity Agreement, the [Bylaws], 

Delaware General Corporation Law, or otherwise.”45

Two days later, on December 4, 2008, Dr. Harkonen initiated arbitration 

proceedings to compel Arch to provide him with advancement for his criminal 

defense.46 InterMune also initiated arbitration against Arch on January 13, 2009.47 

On May 28, 2009, the arbitration panel issued an interim order for Arch to advance 

Dr. Harkonen’s legal expenses.48

On September 29, 2009, following a six-week trial and four days of jury

deliberation, the jury delivered its verdict.49 The jury acquitted Dr. Harkonen of the 

misbranding charge but found him guilty of felony wire fraud.50 Although the wire 

44 JX 476 (Undertaking).

45 Id.

46 JX 478 (InterMune’s Demand for Arbitration). 

47 Id.

48 JX 484 at 21 (Ruling on Arch Arbitration); PTO ¶ 34.

49 Harkonen II, 2010 WL 2985257, at *2.

50 JX 574 at 40 (Arch Arbitration Demand) (attaching the verdict form from Dr. 

Harkonen’s wire fraud conviction); PTO ¶ 22. Although the PTO states the jury “acquitted 

him on one count of mislabeling,” all other documents, including the verdict form and even 

other paragraphs in the PTO, refer to the charge as one of “misbranding.” Compare

PTO ¶ 22, with JX 470, JX 574, and JX 590.
11 

fraud charge carried the potential for twenty years of imprisonment, a $250,000 fine, 

and three years of supervised release,51 the court ultimately sentenced him to three 

years of probation with six months of home confinement, and ordered Dr. Harkonen

to pay a $20,000 fine and complete 200 hours of community service.52 

D. Subsequent Litigation

On December 4, 2009, Dr. Harkonen filed a motion for a judgment of acquittal

and a motion for a new trial.53 He claimed “that the government failed to present 

sufficient evidence such that the jury could find, beyond a reasonable doubt, that he 

knowingly made a false or fraudulent statement with the intent to defraud.”54 

Having blown through the Arch policy by the end of 2009,55 Dr. Harkonen drew from

InterMune’s Old Republic policy, which kicked in on January 26, 2010 but was 

depleted by the end of June 2010.56 

Soon after, on July 27, 2010, the U.S. District Court of the Northern District of 

California denied Dr. Harkonen’s post-trial motions in their entirety.57 In light of Dr. 

51 JX 470 at 3. 

52 PTO ¶ 24.

53 Harkonen II, 2010 WL 2985257, at *2.

54 Id. at *3. 

55 PTO ¶ 35.

56 JX 590 at 2. 

57 Harkonen II, 2010 WL 2985257, at *20; PTO ¶ 23.
12 

Harkonen’s wire fraud conviction, Arch sought to recoup the amounts it paid to Dr. 

Harkonen under the D&O policy, citing the policy’s fraud exclusion.58

Dr. Harkonen subsequently requested relief from his wire fraud conviction, 

this time on the basis that he was entitled to a new trial based on “newly discovered 

evidence” found in an amicus brief to the U.S. Supreme Court.59 In the amicus brief, 

the United States government argued “that statistical evidence is not the only 

reliable indication of causation[.]”60 The District Court noted that “it [was] unclear 

how the [amicus] brief is ‘newly discovered evidence,’”61 and explained that the 

amicus brief did not change the fact that Dr. Harkonen materially misrepresented 

the clinical trial in the press release.62 On April 18, 2011, the District Court denied 

Dr. Harkonen’s motions for a new trial.63 

E. Reining In Fees

The bills continued to roll in at what InterMune described as a “profligate 

rate.”64 On September 11, 2011, the Company’s in-house counsel reached out to Dr. 

58 JX 574. The fraud exclusion barred coverage for claims arising out of a “deliberate 

criminal or deliberate fraudulent act.” Id. at 5. 

59 Harkonen III, 2011 WL 13250647, at *1. Dr. Harkonen also filed a motion for a new 

trial, alleging a Brady violation. Id.

60 Id. at *8.

61 Id.

62 Id. at *5. 

63 Id. at *10.

64 Dkt. 153, Pls.’ Opening Pre-Trial Br. (“Pls.’ OB”) at 7. 
13 

Harkonen to challenge the reasonableness of his litigation expenses, writing that “we 

find it difficult to accept that fees of approximately $4 million—fees incurred before 

even the opening appellate brief has been filed—can be necessary and reasonable in 

a matter involving a single defendant and a single claim.”65 In response to the 

Company’s hesitancy at the ever-growing litigation costs, on September 16, 2011, Dr. 

Harkonen’s Delaware counsel reached out to the Company to enforce Dr. Harkonen’s 

“rights to advancement and indemnification under Article XI of the InterMune 

Bylaws.”66

Shortly after the Company’s in-house counsel questioned the reasonableness 

of Dr. Harkonen’s litigation costs, Dr. Harkonen hired another lawyer for his legal 

team.67 The Company’s counsel again disputed the reasonableness of Dr. Harkonen’s 

legal expenses and argued that there was “no reason why Dr. Harkonen should need 

to supplement his existing (and sizeable) legal team.”68

On December 13, 2011, the Company and Dr. Harkonen entered into a 

settlement agreement (the “2011 Settlement Agreement”) to address the Company’s 

obligation to advance Dr. Harkonen’s legal expenses.69 The 2011 Settlement 

Agreement attempted to settle the ongoing disputes surrounding the reasonableness 

65 JX 533 (Simon Email to Harkonen).

66 JX 621 at 16 (Collins Email to InterMune).

67 JX 537 (Simon Email to Haddad).

68 Id.

69 JX 539 (2011 Settlement Agreement); PTO ¶ 51.
14 

of Dr. Harkonen’s legal expenses by setting budgets for legal expenses through 

2012.70 In the 2011 Settlement Agreement, the Company also agreed to pay almost 

$2 million of Dr. Harkonen’s outstanding legal expenses.71 Dr. Harkonen asserts that 

he incurred $90,132.83 in legal expenses from his Delaware counsel in resolving the 

advancement dispute that led to the 2011 Settlement Agreement.72

F. More Federal Court Litigation

On May 16, 2011, Dr. Harkonen appealed his wire fraud conviction to the U.S. 

Court of Appeals for the Ninth Circuit.73 Dr. Harkonen advanced several arguments

on appeal, including that the evidence was insufficient to support his conviction, the 

First Amendment protected the fraudulent press release, the jury instruction was 

improper, and the District Court had misapplied the law.74 On March 4, 2013, a 

Ninth Circuit panel rejected each of these arguments and affirmed the District 

Court’s ruling.75 On August 5, 2013, Dr. Harkonen petitioned the U.S. Supreme 

70 JX 539.

71 Id. §§ 1–2. This payment consisted of a $1.7 million payment to Sidley Austin and

a $141,746 payment to Dennis Riordan. 

72 See JX 656 at Overview (May 2023, Harkonen Legal Expenses). 

73 Harkonen III, 2011 WL 13250647, appeal docketed, No. 11-10242 (9th Cir. May 16, 

2011). 

74 Harkonen IV, 510 F. App’x at 635–39. 

75 Id.; PTO ¶ 25.
15 

Court for a writ of certiorari, which the Supreme Court denied on December 16, 

2013.76 

Following the U.S. Supreme Court’s certiorari denial, the Company wrote to 

Dr. Harkonen’s counsel that, “in light of the final judgment in the case, as of 

December 16, 2013, it has been determined that Dr. Harkonen is not entitled to be 

indemnified by InterMune.”77 

On July 30, 2014, Dr. Harkonen filed a petition for a writ of error coram nobis, 

arguing he was the victim of ineffective counsel.78 On August 21, 2015, the U.S.

District Court for the Northern District of California denied his petition, noting that 

for every example Dr. Harkonen asserted was evidence of ineffective counsel, “ample 

evidence supports a finding that each of these strategic decisions was objectively 

reasonable[.]”79

Dr. Harkonen again appealed to the U.S. Court of Appeals for the Ninth 

Circuit, arguing the District Court erred in denying his petition for a writ of error 

coram nobis.80 On December 4, 2017, the Ninth Circuit concluded that “the district 

76 Harkonen V, 571 U.S. at 1110; PTO ¶ 26. 

77 JX 554 at 1 (Topel Email to InterMune). 

78 Harkonen VI, 2015 WL 4999698, at *1; PTO ¶ 27. The writ of error coram nobis is 

available to convicted persons who are ineligible for habeas corpus relief (which is only 

available to convicted persons in custody). Because Harkonen was on probation rather than 

in custody, he was ineligible for habeas corpus relief. See 28 U.S.C. § 2255(a).

79 Harkonen VI, 2015 WL 4999698, at *10. 

80 Harkonen VII, 705 F. App’x at 607; PTO ¶ 27.
16 

court did not abuse its discretion” and affirmed the lower court’s ruling.81 Dr. 

Harkonen then sought a writ of certiorari from the U.S. Supreme Court of the United 

States for a second time. The Supreme Court subsequently denied his petition for 

writ of certiorari on November 5, 2018.82 

G. Medical Board of California Disciplinary Action

Dr. Harkonen’s wire fraud conviction also had professional ramifications. In 

2011, the Medical Board of California (the “MBC”) brought a disciplinary action 

against him based on the 2002 press release and his subsequent wire fraud 

conviction.83 The MBC asserted two causes for the action: (1) Dr. Harkonen was 

convicted of a crime related to the practice of medicine, which violated California’s 

Business and Professions Code (the “CBPC”) and (2) Dr. Harkonen made false 

statements related to the practice of medicine, also in violation of the CBPC.84 The 

Company offered to provide an attorney to defend Dr. Harkonen in the MBC action,85

but Dr. Harkonen declined the offer, opting to select his own counsel.86 

81 Harkonen VII, 705 F. App’x at 607; PTO ¶ 27.

82 Harkonen VIII, 139 S. Ct. at 467; PTO ¶ 27.

83 JX 561 (MBC Decision).

84 Id.

85 JX 530 (InterMune Letter Confirming Defense for MBC Litigation).

86 JX 526 (Riordan Letter Confirming Retainer and Representation). 
17 

On December 13, 2012, in connection with the MBC proceeding, an 

administrative law judge issued an order revoking Dr. Harkonen’s medical license.87 

Despite not having used his medical license for many years,88 Dr. Harkonen 

challenged the order.89 On August 26, 2013, the Superior Court of the State of 

California for the County of San Francisco granted Dr. Harkonen’s challenge on the 

basis that “the administrative law judge excluded all of petitioner’s evidence.”90 The 

court remanded the matter for reconsideration by the MBC.91 

On February 20, 2015, the administrative judge in the MBC proceeding issued 

her second ruling, where she again found cause for discipline under each of the two 

alleged CBPC violations.92 The punishment, however, was modified. Rather than

revoking Dr. Harkonen’s medical license, the judge ordered Dr. Harkonen to pay all 

past due medical license renewal fees, complete a clinical training program, and

enroll in a professionalism program.93 Dr. Harkonen paid the fees but failed to 

complete the training courses due to health complications that made program 

87 JX 561 at 20; PTO ¶ 47.

88 JX 561 at 2.

89 PTO ¶ 48. 

90 JX 561 at 11.

91 Id. at 12.

92 Id. at 5–6. 

93 Id. at 8–9; PTO ¶ 49.
18 

attendance and further medical practice impractical.94 Dr. Harkonen remains 

unlicensed, and his medical license has been canceled.95 Dr. Harkonen seeks 

indemnification for $415,224.82 in legal fees he incurred from the MBC proceeding.96 

H. D&O Insurance Litigation

The primary D&O insurance policy, which was incorporated into both the Old 

Republic and the Arch policies, provides:

The Insurer shall not be liable to make any payment for Loss in 

connection with any Claim made against an Insured . . . arising out of, 

based upon or attributable to the committing of any deliberate criminal 

or deliberate fraudulent act by the Insured if a judgment or final 

adjudication or an alternative dispute resolution proceeding adverse to 

the Insured(s) establishes that such deliberate criminal or deliberate 

fraudulent act was committed.97

On November 12, 2014, Old Republic demanded arbitration to recover the full 

$5 million under its policy, plus pre-judgment interest.98 InterMune and Dr. 

Harkonen were co-defendants in the arbitration, and both advocated for the mutually 

beneficial position that Dr. Harkonen’s conduct did not fall within the fraud exception 

of the insurance policy, although InterMune asserted that Dr. Harkonen would be 

responsible for the payments if the arbitrations were to result in a claw-back.99 

94 Dkt. 175, Harkonen Dep. Tr. from April 12, 2023, at 69:19–70:24; PTO ¶ 50.

95 JX 567 (Riordan Email to MBC); PTO ¶ 50.

96 JX 656 at Overview. The fees spreadsheet allocates $413,824.82 to Riordan & 

Horgan and $1,400 to G. Dubcoff. Id.

97 JX 657 § 4 (AIG Insurance Policy). 

98 JX 559 (Old Republic Demand for Arbitration). 

99 JX 566 (InterMune’s Counterclaim).
19 

On October 8, 2018, Arch filed a motion for partial summary judgment in its 

arbitration proceeding against Dr. Harkonen and InterMune, arguing that the 

advancements it paid to Dr. Harkonen under its D&O policy fell under the fraud 

exception.100 Arch consequently sought to recoup the full $5 million it paid under the

D&O policy, plus prejudgment interest of $4.5 million.101 Several months later, on 

February 22, 2019, Old Republic filed a motion for summary judgment in its 

arbitration, also seeking reimbursement for the full $5 million it paid out under the 

D&O policy, plus prejudgment interest.102 

On June 25, 2019, the panel in the Old Republic arbitration concluded that Old 

Republic was entitled to reimbursement for the “portion of the defense costs advanced 

by Old Republic [that] are attributable solely to defense of the wire fraud count.”103 

On July 6, 2019, the Arch arbitration panel likewise concluded that Arch was entitled 

to reimbursement “for the fees and costs advanced that are attributable to the Wire 

Fraud count” and for “fees and costs [that] were incurred to defend against the 

allegations relating to the press release.”104 

100 JX 574 at 6. 

101 Id. at 17.

102 JX 576 at 28 (Old Republic Motion).

103 JX 590 at 7. 

104 JX 591 at 8:11–16 (Arch Arbitration Ruling).
20 

On September 19, 2019, InterMune and Dr. Harkonen settled Old Republic’s

arbitration claim.105 The parties calculated the settlement amount by excluding Dr. 

Harkonen’s legal expenses “incurred prior to the September 29, 2009, jury verdict” 

since those invoices “arguably could be said to be allocable to the defense of the 

misbranding count . . . .”106 Dr. Harkonen approved and signed the Old Republic 

settlement agreement.107 The Company paid the Old Republic settlement in full, 

subject to a reservation of rights against Dr. Harkonen.108 

Soon thereafter, on October 31, 2019, the parties settled the Arch dispute.109 

As with the Old Republic settlement, the Arch settlement reflected the 

“reimbursement of defense costs solely applicable to the wire fraud claim.”110 Dr. 

Harkonen likewise approved and signed the Arch settlement.111 The Company again 

105 PTO ¶ 43; see JX 593 (Brown Email Regarding Old Republic Settlement).

106 JX 593 at 8. 

107 JX 596 at 8 (Old Republic Settlement Agreement); JX 594 (Brown Email with Old 

Republic Settlement Terms); Dkt. 175, Harkonen Dep. Tr. from April 14, 2023, at 20:5–17, 

27:9–20.

108 JX 596 at 4; PTO ¶ 45. Dr. Harkonen agreed to the reservation of rights provision

by signing the settlement agreements. See JX 596 at 8; Dkt. 175, Collins Dep. Tr. from April 

18, 2023, at 98:5–14 (testifying that Harkonen knowingly and specifically agreed to the 

reservation of rights provision).

109 JX 600 (Arch Settlement Agreement).

110 Dkt. 175, Brown Dep. Tr. from March 15, 2023, at 107:13–108:8.

111 JX 600 at 9; JX 598 (Collins Email in Arch Settlement).
21 

paid the settlement in full while preserving the right to seek reimbursement from Dr. 

Harkonen.112 

I. Presidential Pardon

In 2020, following the settlements with the D&O insurers, Dr. Harkonen began 

the process of soliciting a presidential pardon.113 On January 19, 2021, thenPresident Trump granted Dr. Harkonen’s pardon application (the “Pardon”).114 Dr. 

Harkonen requests that the Company indemnify him for the $125,274.58 of legal 

expenses he incurred while seeking the Pardon.115 Needless to say, both parties have 

endured a lengthy and costly legal process due to Dr. Harkonen’s wire fraud 

conviction.116

112 JX 596 at 4; JX 600 at 4. 

113 JX 603 (Pardon Application).

114 JX 606 (Presidential Pardon).

115 JX 656 at Overview. 

116 In addition to the foregoing litigation, Dr. Harkonen brought separate actions 

against his defense counsel, Dr. Thomas Fleming, the DOJ, and the U.S. Department of 

Health and Human Services. See Harkonen v. Topel, S.F. Super. Ct., CGC-11-513608, Aug. 

23, 2011 (Dr. Harkonen suing Topel); Harkonen v. Fleming, 880 F. Supp. 2d 1071 (N.D. Cal. 

2012) (Dr. Harkonen suing Dr. Fleming); Harkonen v. U.S. Dep’t of Just., 2012 WL 6019571 

(N.D. Cal. Dec. 3, 2012) (Dr. Harkonen suing the DOJ); Harkonen v. Sebelius, 2013 WL 

5734918 (N.D. Cal. Oct. 22, 2013) (Dr. Harkonen suing the U.S. Department of Health and 

Human Services). Each of the cases was eventually dismissed. Moreover, both the Company 

and Dr. Harkonen have noted that there are significant legal expenses neither party is 

seeking to recover from the other; Dr. Harkonen claims to have incurred $2 million in legal 

fees for which he is not seeking indemnification and the Company claims to have advanced 

an additional $6 million to Dr. Harkonen for which it is not seeking indemnification. Dkt. 

168, Def.’s Opening Pre-Trial Br. (“Def.’s OB”) at 2 n.2; Pls.’ OB at 20 n.4.
22 

J. This Litigation

The Company filed this action on August 11, 2021.117 On May 10, 2023, I

granted partial summary judgment in favor of the Company (the “Summary 

Judgment Opinion”), holding that the Pardon did not render Dr. Harkonen’s wire 

fraud litigation “successful on the merits or otherwise” for purposes of

indemnification under DGCL Section 145(c).118 Additionally, I concluded that Dr. 

Harkonen, who was convicted of federal wire fraud, may not relitigate the issue of 

“good faith” under Section 145(a) since the guilty verdict required proving that Dr.

Harkonen had acted in bad faith—and Dr. Harkonen had a full and fair opportunity 

to challenge the conviction through the appellate process.119 In the Summary 

Judgment Opinion, I also rejected Dr. Harkonen’s defense that the Company’s 

statements in the arbitration proceedings should be viewed as judicial admissions

that invalidate its claim for repayment under DGCL Section 145.120

The Company now seeks repayment for the settlement amounts it paid to Arch 

and Old Republic for the advancements paid from the D&O policies to Dr. Harkonen 

for his unsuccessful defense of his wire fraud charge. Dr. Harkonen, in turn, seeks 

indemnification for the legal expenses he incurred while litigating the MBC action, 

enforcing his advancement rights, engaging in arbitration with Arch and Old 

117 Dkt. 1, Verified Compl. 

118 Harkonen IX, 2023 WL 3337212, at *8. 

119 Id. at *20. 

120 Id. at *20–21. 
23 

Republic, and seeking the Pardon. A trial on the paper record was held on September 

11, 2023. 

II. LEGAL ANALYSIS

The corporation, rather than the employee, bears the burden of proof in an 

advancement claw-back action.121 Likewise, “in the case of a mandatory 

indemnification provision, the burden rests on the party from whom indemnification 

is sought to prove that indemnification is not required.”122 The applicable evidentiary 

burden in this post-trial context is proof by a preponderance of the evidence.123 

“[P]roof by a preponderance of the evidence means proof that something is more likely 

than not.”124 

The Bylaws provide that “the corporation shall indemnify its directors and 

officers to the fullest extent not prohibited by the DGCL or any other applicable 

law[.]”125 “By using the phrase ‘shall indemnify,’ the [B]ylaw[s] not only mandate[] 

indemnification; [they] also effectively place[] the burden on [the Company] to 

demonstrate that the indemnification mandated is not required.”126 The Company

121 VonFeldt v. Stifel Fin. Corp., 1999 WL 413393, at *3 (Del. Ch. June 11, 1999). 

122 Stockman v. Heartland Indus. P’rs, L.P., 2009 WL 2096213, at *13 (Del. Ch. July 

14, 2009).

123 United Rentals, Inc. v. RAM Hldgs., Inc., 937 A.2d 810, 834 n.112 (Del. Ch. 2007).

124 Narayanan v. Sutherland Glob. Hldgs. Inc., 2016 WL 3682617, at *8 (Del. Ch. July 

5, 2016).

125 JX 14 § 43(a). 

126 VonFeldt, 1999 WL 413393, at *3. 
24 

therefore bears the burden of proof by a preponderance of the evidence in this case, 

not only on its affirmative claims against Dr. Harkonen but also with respect to Dr. 

Harkonen’s requests for indemnification against the Company. 

A. D&O Settlement Indemnification

The Company seeks a judgment requiring Dr. Harkonen to repay to the 

Company the $5,906,927.02 the Company paid to Arch and Old Republic to settle the 

actions for repayment of the advanced sums used by Dr. Harkonen to litigate his wire 

fraud charge. 

DGCL Section 145 governs corporate indemnification of directors and 

officers.127 “By enacting § 145, our General Assembly helped ensure that capable 

persons would be willing to serve as directors, officers, employees, and agents of 

Delaware corporations. But those indemnification and advancement provisions are 

not a blank check for corporate officials.”128 Thus, under Section 145(e), a corporation 

may provide advancements to its officers “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 

127 See 8 Del. C. § 145.

128 Fasciana v. Elec. Data Sys. Corp., 829 A.2d 178, 186 (Del. Ch. 2003).
25 

authorized in this section.”129 This ensures that “the Company’s remedy for 

improperly advanced fees [is] recoupment at the indemnification stage.”130 

As I explained in the Summary Judgment Opinion, Dr. “Harkonen is not 

entitled to indemnification under Section 145(c)[,]” and Dr. “Harkonen is precluded 

from establishing good faith under Section 145(a) because his [wire fraud] conviction 

is conclusive evidence that he acted in bad faith.”131 Dr. Harkonen is therefore 

ineligible to be indemnified for the advanced amounts he spent defending his wire 

fraud charge and appealing his conviction.

The risk of advancement repayment was always a known possibility. The 

Bylaws and the Indemnity Agreement both require that InterMune indemnify Dr. 

Harkonen only “to the fullest extent not prohibited by the DGCL.”132 And the Bylaws 

and the Indemnity Agreement expressly state that Dr. Harkonen must repay the 

advanced amounts if it is “determined ultimately that [he] is not entitled to be 

indemnified under” the DGCL.133 Indeed, the Undertaking confirmed Dr. Harkonen’s

obligation to repay advanced sums “if it shall be determined ultimately that [he is] 

129 8 Del. C. § 145(e); see also Marino v. Patriot Rail Co., 131 A.3d 325, 336–37 (Del. 

Ch. 2016). 

130 Mooney v. Echo Therapeutics, Inc., 2015 WL 3413272, at *6 (Del. Ch. May 28, 2015) 

(citing Holley v. Nipro Diagnostics, Inc., 2014 WL 7336411, at *13–14 (Del. Ch. Dec. 23, 

2014)).

131 Harkonen IX, 2023 WL 3337212, at *8, *13 (explaining why Dr. Harkonen is barred 

from recovering under both Sections 145(a) and 145(c)). The Pardon does not change this 

outcome. Dr. “Harkonen remains unsuccessful, pardoned or not.” Id. at *10.

132 JX 14 § 43(a); JX 15 § 8. 

133 JX 14 § 43(c); JX 15 § 8.
26 

not entitled to be indemnified under the provision of the Indemnity Agreement, the 

[Bylaws], Delaware General Corporate Law, or otherwise.”134

The record confirms that both settlements reflect only the amounts 

attributable to the wire fraud count and the subsequent interest thereon.135 The 

arbitrations leading to the settlements each concluded that the D&O insurers—Arch 

and Old Republic—were entitled to recover the amounts attributable to the wire 

fraud defense and appeals.136 Dr. Harkonen’s former attorney even testified that the 

settlement amounts were based on the arbitration panels’ “interlocutory award that 

said that [the insurers] were going to be able to recover fees allocable to the . . . wire 

fraud conviction.”137 Dr. Harkonen must therefore repay the Company for the 

$5,906,927.02 it paid to settle the insurance disputes arising from Arch and Old 

Republic’s payments to him to litigate his wire fraud charge. 

134 JX 476.

135 See, e.g., JX 593 at 8–9; JX 596; Dkt. 175, Brown Dep. Tr. from March 15, 2023, at 

100:5–11 (explaining that counsel for Old Republic calculated the final settlement figure by 

“figur[ing] out how much of the defense costs” were “clearly applicable to the wire fraud 

claim,” in order to “pay his client back for that amount plus interest”); id. at 106:21–107:1 

(explaining that InterMune “accepted [Old Republic’s] proposal and did a deal that called for 

a payment back, again, to the penny, for the costs incurred for the wire fraud count”); JX 600

at 3; see also JX 597 at 3–4 (Brown Email to InterMune) (explaining that the Old Republic 

settlement approach “inform[ed]” InterMune’s approach to the Arch settlement); Dkt. 175, 

Brown Dep. Tr. from March 15, 2023, at 107:13–108:8 (explaining that, like the Old Republic 

settlement, the Arch settlement represented a “buyout of what [Brown] thought was [Arch’s] 

only remaining claim, which was reimbursement of defense costs solely applicable to the wire 

fraud claim”).

136 See JX 590; JX 591.

137 Dkt. 175, Collins Dep. Tr. from April 18, 2023, at 99:11–13.
27 

Dr. Harkonen was convicted of felony wire fraud. Accordingly, Dr. Harkonen 

was found to have acted in bad faith. Despite numerous opportunities on appeal to 

overturn the conviction, his conviction was repeatedly and conclusively affirmed. Dr. 

Harkonen is therefore not entitled to indemnification for his defense of that wire 

fraud conviction under DGCL Section 145.138 

B. Dr. Harkonen’s Unsuccessful Defenses

Dr. Harkonen raises several defenses, attempting to prevent this conclusion. 

Dr. Harkonen argues that (1) the Company waived and released all claims under the 

Mutual Release, (2) the Company is barred by hold harmless provisions in the 

Indemnity Agreement and the Mutual Release, (3) the settlement payment was 

voluntary, (4) the Company’s claims are time-barred, (5) the Company is barred by 

the unclean hands doctrine, and (6) the settlements themselves are not advancement 

fees. I discuss each defense in turn. 

1. The Mutual Release

Dr. Harkonen argues that InterMune waived and released its claims against 

him via the Mutual Release in 2003. InterMune counters that, among other things,

Dr. Harkonen waived this defense by waiting until pre-trial briefing to raise it. 

138 The Company also asserts that it may recover the settlement amounts from Dr. 

Harkonen because it reserved the right to hold Dr. Harkonen responsible in the settlement 

agreements themselves. Both settlement agreements provided that the settlements would 

“not limit or otherwise compromise any rights or obligations that InterMune and/or 

Harkonen have or may have vis-à-vis one another, including . . . [the] ultimate responsibility 

at law, in equity, or otherwise for the [s]ettlement [a]mount[.]” JX 596 at 4; JX 600 at 4. 
28 

“Court of Chancery Rule 8(c) requires a defendant responding to a complaint 

to set forth ‘any . . . matter constituting an avoidance or affirmative defense.’”139 

“Generally, an affirmative defense must be pled or the defense is waived.”140 In the 

interests of both fairness and efficiency, parties are expected to assert defenses “early 

and loudly.”141 In deciding whether to allow a late defense, courts consider whether 

failure to raise the defense sooner “caused prejudice to a party without notice of the 

defense by making it difficult, if not impossible, to fairly face the issue for the first 

time during trial.”142 

Nowhere in Dr. Harkonen’s affirmative defenses did he assert the Mutual 

Release as a defense to InterMune’s claims. Dr. Harkonen raised eleven affirmative 

defenses in his answer to the Complaint (the “Answer”), spanning nearly thirty 

pages.143 Yet none of them can be fairly read to give notice of this Mutual Release 

defense. The closest of the eleven merely asserts that InterMune’s claims are “Barred 

139 In re Nantucket Island Assocs. Ltd. P’ship Unitholders Litig., 2002 WL 31926614, 

at *2 (Del. Ch. Dec. 16, 2002) (alteration in original). 

140 James v. Glazer, 570 A.2d 1150, 1153 (Del. 1990) (citations omitted); see also

Anderson v. Hill, 2020 WL 2128738, at *5 n.35 (Del. Ch. May 5, 2020) (“[T]he failure to raise 

an affirmative defense may constitute a waiver, if that defense is not raised in a timely 

fashion.”).

141 In re Nantucket Island Assocs., 2002 WL 31926614, at *4.

142 Alexander v. Cahill, 829 A.2d 117, 128–29 (Del. 2003). Then-Vice Chancellor Strine 

ruled on at least two occasions that defenses raised in the final months before trial were 

barred due to the prejudicial nature of changing arguments after the other side had 

conducted discovery and created a litigation strategy based on the pled claims and defenses. 

See In re Nantucket Island Assocs., 2002 WL 31926614, at *3; In re PNB Hldg. Co. S’holders 

Litig., 2006 WL 2403999, at *22 n.117 (Del. Ch. Aug. 18, 2006).

143 See Dkt. 52, Answer to the Verified Compl. (“Answer”) at 40–69.
29 

by Controlling Documents and Law.”144 But even if I were to ignore the 

extraordinarily vague nature of that phrase, the explanatory paragraph mentions 

several documents on which the defense is founded, and the Mutual Release is 

notably absent. And when confronted with this point in the briefing and at trial, Dr. 

Harkonen did not identify anything that would have put the Company on notice of 

this defense until shortly before trial. 

The Company asserts that this late defense is prejudicial. The Company raises 

specific examples of information it would have requested in discovery, had it been put 

on notice of the Mutual Release defense now raised by Dr. Harkonen.145 The 

Company suggests this prejudice is even more severe here since Dr. Harkonen raised 

the defense shortly before a trial on the paper record, meaning there would be no live

cross-examination of Dr. Harkonen about the Mutual Release at trial.146 I agree with 

the Company—defenses should not be raised on the eve of trial. Dr. Harkonen’s

failure to raise his Mutual Release defense before the pre-trial briefs, let alone “early 

and loudly,” means the defense is waived.

But even if I were to consider the Mutual Release defense, Dr. Harkonen 

subsequently signed and delivered the Undertaking to the Company.147 Both the 

144 Id. at 42. 

145 See Dkt. 160, Pls.’ Answering Pre-Trial Br. at 17–18.

146 Id. at 18.

147 At trial, Dr. Harkonen’s counsel astonishingly argued that the Undertaking is “a 

worthless document” that “has no legal effect[.]” TT 109:8–9, 21–22. Dr. Harkonen’s counsel

also surprisingly argued that this Court should not consider the December 2008 Letter
30 

December 2008 Letter demanding advancement and the Undertaking that the letter 

references cite the Indemnity Agreement and Dr. Harkonen’s obligation to repay 

advanced amounts if it is determined that Dr. Harkonen is not entitled to be 

indemnified.148 If there was any doubt whether the Mutual Release covered Dr. 

Harkonen’s obligation to repay future advanced sums arising out of future litigation, 

Dr. Harkonen’s subsequent signing and delivery of the Undertaking in 2008 confirms 

that, before this litigation, Dr. Harkonen believed it did not.149 In addition, Dr. 

Harkonen’s Mutual Release defense presumes that the Company could choose to 

ignore Section 145’s limitations on indemnification for bad faith conduct. Dr. 

Harkonen fails to explain how this squares with the statute.150 

demanding advancement and specifically referencing the Undertaking. TT 106:12–15. 

Regardless of what Dr. Harkonen may argue now, the December 2008 Letter makes plain 

the broad scope he intended the Undertaking to be given when he was demanding the 

Company open its checkbook. See JX 477. 

148 JX 477 (referencing Dr. Harkonen’s obligation “to repay said amounts if it shall be 

determined that [Dr. Harkonen] is not entitled to be indemnified under the provisions of this 

Agreement, the By-Laws, the Code or otherwise” (quoting JX 15 § 8)); JX 476 (referencing 

Dr. Harkonen’s obligation to repay “if it shall be determined that [he is] not entitled to be 

indemnified under the provisions of the Indemnity Agreement, the By-Laws of InterMune, 

Delaware General Corporation Law, or otherwise”).

149 See Kennecott Corp. v. Union Oil Co., 196 Cal. App. 3d 1179, 1189 (Cal. Ct. App. 

1987) (“The conduct of the parties after execution of the contract and before any controversy 

has arisen as to its effect affords the most reliable evidence of the parties’ intention.”). 

150 In addition, as highlighted by the Company during trial, “all contracts for 

advancement and indemnification are subject to an implied reasonableness term.” Reddy v. 

Elec. Data Sys. Corp., 2002 WL 1358761, at *5 (Del. Ch. June 18, 2002) (citing Citadel Hldg.

Corp. v. Roven, 603 A.2d 818, 823 (Del. 1992)). 
31 

In sum, the Mutual Release defense was waived. But even if I were to consider 

it, the releases found in the Mutual Release do not reach the Company’s claims 

against Dr. Harkonen in this action.

2. Hold Harmless Provisions

Dr. Harkonen next argues that the hold harmless provisions in the Mutual 

Release and the Indemnity Agreement bar the Company from recovery.151 But this 

defense, like the Mutual Release defense, was raised for the first time in the pre-trial 

briefings, which was too late for InterMune to focus its discovery on the hold harmless 

provisions of the two agreements. 

The only pled affirmative defense that could potentially be construed to give 

InterMune notice of this defense is, again, the vague sixth affirmative defense: 

“Barred by Controlling Documents and Law.” But even this defense, although it notes 

that “InterMune’s claim is barred by its Indemni[ty] Agreement” is unrelated to the 

hold harmless provisions.152 A full reading of the affirmative defense confirms that 

that it is limited to the context of the Pardon, not as it relates to the provisions of the 

Indemnity Agreement.153 And, as noted previously, the Mutual Release is absent 

from the defenses entirely. So, for the same reasons the Mutual Release defense was 

waived, the hold harmless provisions defense is also waived. 

151 JX 15 § 2; JX 361 § 5. 

152 Answer at 42.

153 Id.
32 

But, again, even if I were to consider this defense, it would fail for the same 

reasons the Mutual Release defense fails. As mentioned above, Dr. Harkonen’s 

subsequent Undertaking confirms Dr. Harkonen’s obligation to “repay said amounts 

advanced[.]”154 And, importantly, this argument too is premised on the notion that 

the Company could ignore the bad faith limitations of Section 145. 

Thus, Dr. Harkonen waived the hold harmless provisions defense. But even if 

I were to consider the untimely defense, it fails for the additional reasons described 

above. 

3. Voluntary Payment

Dr. Harkonen next suggested that InterMune’s payments to settle the D&O 

insurance claims were voluntary payments that cannot be recovered. The Company 

devoted not insignificant portions of its briefing to rebutting this defense. And Dr. 

Harkonen ultimately withdrew the defense of voluntary payment at trial.155 

4. Time-Barred

Next, Dr. Harkonen suggests that InterMune’s claims are time-barred.156 The 

Company again asserts that the defense is raised too late in the litigation process. 

Dr. Harkonen’s second affirmative defense in the Answer asserted

“InterMune’s claim is barred, in whole or in part, on the equitable principle of 

154 JX 476. 

155 TT 74:1–2.

156 Def.’s OB at 18.
33 

Laches[.]”157 Yet timeliness has hardly been the center of Dr. Harkonen’s defense 

arguments, and there is a strong argument that the statute of limitations defense 

under 10 Del. C. § 8106 does not fall within the laches affirmative defense identified 

by Dr. Harkonen in the Answer. But I recognize that the Company was on notice 

that Dr. Harkonen could raise a timeliness defense and therefore address this defense 

on its merits. 

“[B]ecause indemnification is a right conferred by contract, under statutory 

auspice, actions seeking indemnification are subject to the three-year limitations 

period . . . .”158 A claim for indemnification or for repayment of advancement due to 

a lack of entitlement to indemnification are mirror images of each other. They accrue 

at the same stage and are subject to the same three-year limitations period. 

“Delaware courts decline to exercise jurisdiction over a case unless the 

underlying controversy is ripe, i.e., has ‘matured to a point where judicial action is 

appropriate.’”159 “[N]umerous decisions of our Court of Chancery have consistently 

held that an indemnity claim does not accrue until the underlying action is 

resolved.”160 Thus, a claim for indemnification “only becomes ripe once the 

157 Answer at 40.

158 Stifel Fin. Corp. v. Cochran, 809 A.2d 555, 559 (Del. 2002); see also 10 Del. C.

§ 106(a).

159 XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1217 (Del. 2014)

(quoting Stroud v. Milliken Enters., Inc., 522 A.2d 476, 480 (Del. 1989)).

160 Connelly v. State Farm Mut. Auto. Ins. Co., 135 A.3d 1271, 1280 n.36 (Del. 2016) 

(collecting DGCL Section 145 precedent).
34 

underlying proceeding is truly final.”161 This is, in part, to “reduce the chance that 

the court will engage in a wasteful exercise in predictive justice, only to see its work 

undone by a reversal of the trial court’s judgment in the underlying matter.”162 Since 

repayment claims depend on a party’s rights to indemnification, repayment claims in 

indemnification cases likewise only become ripe when the underlying action is 

resolved. 

The claim for repayment became ripe at the earliest on November 5, 2018, 

when Dr. Harkonen exhausted his final appeal upon the U.S. Supreme Court denying

his petition for writ of certiorari163 or, at the latest, in 2019 when the settlement 

liabilities were incurred. InterMune filed its Complaint on August 11, 2021, well 

within the three-year window under either alternative. 

Dr. Harkonen’s time-bar defense therefore fails.

5. Unclean Hands

The unclean hands defense is the only defense that both the Company and Dr. 

Harkonen agree was properly raised at the pleading stage. Yet, although properly 

raised, it is inapplicable. 

161 Sun-Times Media Gp., Inc. v. Black, 954 A.2d 380, 397 (Del. Ch. 2008).

162 Simon v. Navellier Series Fund, 2000 WL 1597890, at *9 (Del. Ch. Oct. 19, 2000). 

163 But I question whether InterMune could have brought the claims in 2018, prior to 

the D&O settlements. The Undertaking limited the Company to recovering only “expenses 

[that] are not paid by insurance.” JX 476. Indeed, incurring the expense is a logical 

prerequisite to the request for repayment. And the Company did not make the repayment 

request until the Company settled with Arch and Old Republic in 2019 once the Company 

ultimately incurred the expense. But even if the claims began to accrue once Dr. Harkonen 

exhausted his appellate reviews, the claims would still be within the statute of limitations.
35 

“The doctrine of unclean hands is ‘[e]quity’s maxim that a suitor who engaged 

in his own reprehensible conduct in the course of [a] transaction at issue must be 

denied equitable relief . . . , a rule which in conventional formulation operated in 

limine to bar the suitor from invoking the aid of the equity court . . . .’”164 “The Court 

of Chancery has broad discretion in determining whether to apply the doctrine of 

unclean hands.”165 “The question of unclean hands is factual . . . .”166 But, although

the question of whether unclean hands applies is factual, under the doctrine of 

collateral estoppel, “once an issue is actually and necessarily determined by a court 

of competent jurisdiction, that determination is conclusive in subsequent suits based 

on a different cause of action involving a party to the prior litigation.”167

Much of Dr. Harkonen’s unclean hands defense is an improper attempt to 

relitigate his original wire fraud conviction and his relevant state of mind. Indeed, 

Dr. Harkonen’s affirmative defense of unclean hands spans almost twenty pages of 

the Answer, and much of the substance mirrors the arguments he made in his prior 

cases.168 Consistent with the doctrine of collateral estoppel, I refuse to reconsider 

164 RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816, 875–76 (Del. 2015) (alteration in 

original) (quoting McKennon v. Nashville Banner Publ’g. Co., 513 U.S. 352, 360 (1995)).

165 SmithKline Beecham Pharms. Co. v. Merck & Co., Inc., 766 A.2d 442, 448 (Del. 

2000) (citing Nakahara v. NS 1991 Am. Tr., 718 A.2d 518, 522 (Del. Ch. 1998) (“[T]he 

decisional authority is almost universal in its acceptance that courts of equity have 

extraordinarily broad discretion in application of the doctrine [of unclean hands].” (citations 

omitted))). 

166 Collins v. Burke, 418 A.2d 999, 1004 (Del. 1980).

167 Hercules Inc. v. AIU Ins. Co., 783 A.2d 1275, 1278 (Del. 2000). 

168 See Answer at 42–68.
36 

whether Dr. Harkonen was properly convicted of wire fraud. Numerous judges have 

already reviewed the matter, and all have determined the same thing—Dr. Harkonen 

remains guilty of wire fraud. 

As InterMune points out, however, although Dr. Harkonen’s defense of unclean 

hands may have started as an attempt to relitigate his conviction, it has evolved over 

the life of this case.169 Indeed, Dr. Harkonen’s original unclean hands defense 

asserted in his affirmative defenses involved InterMune’s actions that “irreparably 

harmed Dr. Harkonen’s reputation and ability to . . . properly defend himself at his 

criminal trial and in subsequent actions by the U.S. government.”170 This theory 

more or less continued into Dr. Harkonen’s pre-trial opening brief where he asserted 

that InterMune’s “misrepresentations led to Dr. Harkonen’s underserved criminal 

record and the loss of his brilliant career.”171 Yet, now, Dr. Harkonen asserts that 

this Court should accept his unclean hands defense because InterMune’s “20-year 

pattern of adopting irreconcilable positions depending on which way direction the 

wind blew should prevent [the Company’s] recovery on [its] claims in this equitable 

action.”172

Dr. Harkonen attempts to walk a fine line in making his most recent unclean 

hands argument because, as I explained in the Summary Judgment Opinion, “[t]he 

169 TT 47:21–49:5.

170 Answer at 57–58.

171 Def.’s OB at 32.

172 Dkt. 169, Def.’s Answering Pre-Trial Br. (“Def.’s AB”) at 16.
37 

legal theories of the Company’s arbitration counsel [were] not judicial admissions”173

and do not provide an avenue for Dr. Harkonen to “disguise the wolf of 

indemnification for a willful violation of positive law in the sheep’s clothing of a 

judicial admission.”174 Indeed, to accept Dr. Harkonen’s position “would enable 

corporations to indemnify conduct that Section 145 has deemed nonindemnifiable.”175 That is neither our law nor in line with the equitable principles 

upon which Dr. Harkonen professes to call.

None of this should detract from the fact that Dr. Harkonen was convicted 

based on his actions. It does not matter, for purposes of this analysis, how strongly 

Dr. Harkonen now believes he should not have been convicted, or even if he may

otherwise be an upstanding citizen. 

This has been fought up and down. Dr. Harkonen has had ample opportunity 

to fight his conviction, and much of that fight was done on the Company’s dime. The 

Company’s efforts to win the insurance arbitrations, or at least minimize any award, 

are not unclean hands. If they were, companies would be confronted with conflicting 

and strange incentives. 

Dr. Harkonen voluntarily accepted and enjoyed the full benefit of advancement 

to defend himself in the federal wire fraud litigation. But these advancements were 

subject to an undertaking in which he acknowledged and committed to satisfy his

173 Harkonen IX, 2023 WL 3337212, at *21.

174 Id. at *22. 

175 Id. at *20.
38 

repayment obligations under the Indemnity Agreement and the DGCL. Even if in 

seeking to minimize any arbitration award the Company took positions in the 

insurance arbitrations that were advantageous to Dr. Harkonen, that does not 

eliminate Dr. Harkonen’s obligation to repay the advancements under the 

Undertaking and DGCL Section 145’s limitations on indemnification for actions 

taken in bad faith.

Dr. Harkonen’s unclean hands defense is therefore inapplicable in this case. 

6. Scope of the Undertaking

Dr. Harkonen’s final defense is that only a portion of the settlement amounts 

constitute “fees” within the scope of the Undertaking.

Dr. Harkonen raised this final defense for the first time at trial.176 I asked

counsel whether this defense had been briefed,177 and counsel responded that she 

would confirm.178 I did not receive a response to my question at trial. In light of this 

defense and other new arguments made by Dr. Harkonen at trial, I requested that

the parties submit letters to this Court identifying arguments presented at trial that 

had not been briefed.

The Company filed its letter first, noting that Dr. Harkonen asserted this 

defense, along with several other arguments, for the first time at trial.179 Dr. 

176 TT 102:21–103:5.

177 Id. 103:18–23.

178 Id. 104:4–6. 

179 See Dkt. 185, Def.’s Post-Trial Letter.
39 

Harkonen then filed his letter and confirmed that this defense was indeed made for 

the first time at trial, but that the Court should nonetheless consider it.180 Dr. 

Harkonen then dedicated a significant portion of his letter to arguing his newest 

defense. 

“It is difficult to address th[is] theor[y] because [Dr. Harkonen] only mentioned 

[it] briefly, did not develop the arguments, and did not provide any supporting [legal] 

authority other than bare citations to provisions of the [Undertaking]. A court need 

not address arguments that are presented in such a cursory and elliptical manner.”181 

Indeed, “issues adverted to in a perfunctory manner, unaccompanied by some effort 

at developed argumentation, are deemed waived.”182 By mentioning the defense for 

the first time in passing at the trial on a paper record, the defense is waived. The 

analysis ends there. 

But even if I were to consider the defense, it would not change the outcome. 

InterMune and Dr. Harkonen spent many months in the arbitrations working to 

minimize the amount the Company and, thus, Dr. Harkonen would need to repay to 

the D&O insurers. Not only did InterMune take lead in negotiating to minimize the 

settlement payment, but InterMune also agreed to pay the amount in full in the first 

180 Notably, this was not the only argument raised by Dr. Harkonen for the first time 

at trial. See Dkt. 184, Pls.’ Post-Trial Letter.

181 AB Stable VIII LLC v. Maps Hotels & Resorts One LLC, 2020 WL 7024929, at *78 

(Del. Ch. Nov. 30, 2020), aff’d, 268 A.3d 198 (Del. 2021).

182 Roca v. E.I. du Pont de Nemours & Co., 842 A.2d 1238, 1242 n.12 (Del. 2004) 

(internal quotation marks and citations omitted). 
40 

instance, while reserving its right ultimately to hold Dr. Harkonen responsible for 

the settlement amount. 

The record confirms the general calculations of the settlements, and they were 

not a hodge podge of concessions, as suggested by Dr. Harkonen in his supplemental 

letter. The settlement amounts instead reflected an approximation of the 

advancements used to litigate the wire fraud charge plus interest. In the Old 

Republic settlement, for example, InterMune’s counsel noted that settlement 

discussions were less of a compromise and more of “an application of the principles 

laid out” in the Old Republic arbitration panel’s ruling.183 And, in both arbitrations, 

the settlements reflected only the amounts Dr. Harkonen used to litigate his wire 

fraud charge and conviction.184 

Let us also not forget that Dr. Harkonen had a seat at the table for both 

settlements. Dr. Harkonen approved and signed the settlements, which included

InterMune’s reservation of rights to hold Dr. Harkonen ultimately responsible for the 

settlement amounts.

There is little doubt that these settlements reflected the advancement amount

Dr. Harkonen used for the wire fraud litigation, which was both non-indemnifiable 

and not covered by the D&O insurance policies. The untimely nature of Dr. 

Harkonen’s defense is further evidence of that understanding; no one questioned 

183 JX 592 at 2 (Brown Letter for Old Republic Settlement). 

184 JX 593 (describing the Old Republic settlement amount); Dkt. 175, Brown Dep. Tr. 

from March 15, 2023, at 107:13–108:8 (describing the Arch settlement amount).
41 

whether the settlements approximated the amounts for which Dr. Harkonen was 

required to repay until I asked at trial whether that argument had been made in the 

briefing, and counsel seized the opportunity to make the late argument in a post-trial 

letter to the Court. This defense thus fails.

7. Conclusion 

Dr. Harkonen must repay the Company the $5,906,927.02 it seeks in this 

action as repayment of advanced sums for which Dr. Harkonen is not entitled to 

indemnification. The advancements were not foisted upon Dr. Harkonen; he

voluntarily demanded their payment and gave the Undertaking. Dr. Harkonen then

accepted and enjoyed the full benefit of very substantial advancements of attorneys’

fees, conditioned only on an obligation to repay if he were ultimately ineligible for 

indemnification. Given that Dr. Harkonen is ineligible for indemnification, he now 

has the obligation to repay the advanced amounts he received to litigate his wire 

fraud charge.

C. Dr. Harkonen’s Requests for Indemnification

Dr. Harkonen requests indemnification “under 8 Del. C. § 145(c)” for expenses

incurred in (1) litigating the MBC action, (2) seeking advancements from the 

Company, (3) litigating the D&O insurance arbitrations, and (4) seeking the 

Pardon.185 

Before I address Dr. Harkonen’s “counterclaims,” I note that, in yet another 

strange twist in this case, they were never pled. Not a single counterclaim is raised 

185 Def.’s OB at 41.
42 

in Dr. Harkonen’s Answer.186 That alone is fatal to the counterclaims’ viability. But, 

at trial, counsel for the Company stated that although Dr. Harkonen never formally 

pled his “counterclaims” for indemnification, the Company nonetheless asks me “to 

resolve as many of the open issues between these parties as possible[.]”187 

Given the parties’ mutual desire for an adjudication of Dr. Harkonen’s 

“counterclaims,” I will, with great reluctance, consider them. Ultimately, however, 

in addition to being procedurally improper, Dr. Harkonen’s indemnification 

counterclaims are unsuccessful.

1. Medical Board of California

Dr. Harkonen argues that, under Section 145(c), the Company must indemnify 

him for the $415,224.82 he incurred while litigating in his MBC disciplinary 

proceeding. The claim, however, is untimely. In addition, Dr. Harkonen was not 

“successful” in the proceeding. 

As discussed above, indemnification claims must be brought within three years

after the underlying action is resolved. It is difficult to see how the MBC proceeding 

was not an independent proceeding before a medical licensing and disciplinary board. 

Because the MBC proceedings concluded in 2015, nearly a decade ago, any

indemnification claim Dr. Harkonen might have once had relating to the proceeding 

186 At oral argument on September 15, 2022, Dr. Harkonen’s counsel observed that 

“[t]his is not a case where Dr. Harkonen is seeking indemnification of the money he paid out 

of pocket.” Dkt. 48, Tr. for September 15, 2022, Hr’g at 9:4–5. That continued to be the case 

on September 30, 2022, when Dr. Harkonen filed his Answer without asserting a single 

counterclaim. See Answer at 40. 

187 TT 134:19–20. 
43 

accrued then too. Dr. Harkonen thus asserts his “counterclaim” long after the threeyear limitations period ran. 

But, even if I were to look past this, Dr. Harkonen was unsuccessful in his 

MBC litigation and therefore does not qualify for indemnification under DGCL 

Section 145(c). In determining whether a party is “successful” under Section 145(c), 

the party “need only prevail—in a strictly legal sense—in terms of the outcome of the 

proceeding.”188 And, as this Court has recognized, an individual may be unsuccessful 

in the legal sense, even when a settlement does not require a monetary payment or 

admission of liability.189

“[I]n a strictly legal sense,” Dr. Harkonen was unsuccessful in his MBC 

proceedings because in both proceedings the administrative judge ruled that “cause 

for license discipline exists[.]”190 Dr. Harkonen nonetheless maintains that this 

litigation was a success because “he achieved the result he sought.”191 But the 

administrative judge ultimately ruled against Dr. Harkonen, finding cause for 

discipline under each of the two alleged CBPC violations—albeit imposing a lesser 

punishment than that issued in the original ruling. Lessening a punishment, 

however, is not a “success” under Section 145(c) for the same reason that Dr. 

188 Evans v. Avande, Inc., 2021 WL 4344020, at *4 (Del. Ch. Sept. 23, 2021) (citing 

Hermelin v. K-V Pharm. Co., 54 A.3d 1093, 1107 (Del. Ch. 2012)).

189 See, e.g., Huret v. MondoBrain, Inc., 2022 WL 1232582 (Del. Ch. Apr. 27, 2022). 

190 JX 560 at 7 (MBC’s Decision After Non-Adoption).

191 Def.’s AB at 41.
44 

Harkonen’s wire fraud conviction was not a success under Section 145(c) despite the 

penalty ultimately imposed being substantially less than the maximum or requested 

sentence pursued by federal prosecutors. 

Dr. Harkonen therefore is not entitled to indemnification for the costs incurred 

in the MBC proceeding because the claim is both untimely and he was unsuccessful

in the respective proceeding. 

2. Advancement Rights

Dr. Harkonen next argues that the Company must indemnify him for the 

$90,132.83 he incurred in enforcing his advancement rights. But, as the Company 

properly points out, this “counterclaim” is also brought too late.

Fees on fees claims are claims for indemnification.192 As discussed above, 

indemnification claims must be brought within three years under the statute of 

limitations.193 The Bylaws and the Indemnity Agreement both grant Dr. Harkonen 

the right to recover fees incurred while enforcing his right to advancements.194 But 

Dr. Harkonen’s claim accrued on December 13, 2011, when Dr. Harkonen and 

InterMune entered into the 2011 Settlement Agreement. Yet Dr. Harkonen asserted

192 See Fasciana, 829 A.2d at 183–84. 

193 See also 10 Del. C. § 8106(a).

194 JX 14 § 43(d).
45 

this fees-on-fees “claim” over a decade after the 2011 Settlement Agreement. This 

claim, like the MBC indemnification claim, is therefore untimely.195 

3. Insurance Arbitrations

Next, Dr. Harkonen asserts that the Company must indemnify him for the 

legal expenses he incurred during the insurance arbitration which amounts to

$201,238.18 in the Old Republic arbitration and $326,368.36 in the Arch arbitration. 

Even setting aside Dr. Harkonen’s failure to plead this (or any) counterclaim, 

Dr. Harkonen was not “successful” in the insurance arbitrations such that Section 

145(c) mandates indemnification. The arbitrators in both arbitrations ruled that the 

amounts associated with defending Dr. Harkonen’s wire fraud charge fell under the 

policies’ exclusion for claims “attributable to the committing of any deliberate 

criminal or deliberate fraudulent act[.]”196 The D&O insurers were therefore entitled 

to recoupment for the defense costs incurred on behalf of Dr. Harkonen in litigating

the wire fraud charge. The parties then settled, with the Company paying the 

settlement amounts in the first instance, but reserving, with Dr. Harkonen’s express 

agreement, its right to hold Dr. Harkonen ultimately responsible, which the Company 

then exercised via this action. 

This conclusion is further confirmed in light of my ruling that Dr. Harkonen is 

responsible for the full settlement amounts. If anything, the Company accorded Dr. 

195 The Company makes several other arguments, including waiver and the 

reasonableness of the underlying fees. I need not reach these given my analysis above. 

196 JX 657 § 4(c). 
46 

Harkonen a benefit by paying the amounts required to resolve arbitration with the 

insurers. It would be strange to say that, in doing so, the Company placed itself on 

the hook for Dr. Harkonen’s very substantial attorneys’ fees in participating in an 

arbitration that squarely rejected the arguments against liability and that resulted 

in cash outflows that he must now repay in full. So, although Dr. Harkonen delayed 

his payment of the liability, he cannot assert that he successfully “avoided an adverse 

result.”197 

Additionally, even if I were to consider Dr. Harkonen as eligible for 

indemnification in litigating a claim caused by his bad faith actions, he expressly 

agreed, in both the Old Republic settlement and the Arch settlement, to bear his “own 

respective costs and fees” incurred during the arbitrations.198

Dr. Harkonen, therefore, cannot look to the Company for indemnification for 

the legal expenses he incurred participating in the arbitrations with Arch and Old

Republic. 

4. Presidential Pardon

Lastly, Dr. Harkonen demands that the Company indemnify him for the 

$125,274.58 he incurred in seeking the Pardon. 

197 Hermelin v. K-V Pharm. Co., 54 A.3d 1093, 1107 (Del. Ch. 2012). Alternatively, 

one might conceive that the bad faith determination itself vitiated Dr. Harkonen’s right to 

indemnification. See Evans, 2021 WL 4344020, at *6 (commenting that a director “adjudged

to have acted in bad faith . . . can hardly assert that he is entitled to indemnification for a 

claim where that integrity was found lacking”). 

198 See JX 600 at 5; JX 596 at 4. 
47 

Dr. Harkonen’s framing of the Pardon, like his counterclaims and defenses, 

has changed over the course of this litigation. Prior to the Summary Judgment 

Opinion, Dr. Harkonen framed the Pardon as the ultimate successful defense of his 

wire fraud conviction, thereby absolving him of his duty to repay the advanced 

amount used to defend the wire fraud charge. In the Summary Judgment Opinion, 

however, I noted that under Section 145(c)—the only provision under which Dr. 

Harkonen seeks indemnification here—indemnification is only available for directors 

and officers who have “been successful on the merits or otherwise in defense of any 

action, suit or proceeding[.]”199 The Pardon, however, like most pardons, “does not 

erase or expunge the record of conviction and does not indicate innocence.”200 

Therefore, as I explained in the Summary Judgment Opinion, the Pardon does not 

constitute success for his wire fraud proceeding under Section 145(c).201 So even

viewing the Pardon as part of the criminal wire fraud proceeding,202 Dr. Harkonen 

was therefore unsuccessful in his wire fraud defense.

Having found no luck when considering the Pardon as an extension of the 

underlying wire fraud proceeding, Dr. Harkonen now asks me to consider the Pardon

as its own proceeding. Dr. Harkonen tries to strike an awkward balance by stating 

199 Harkonen IX, 2023 WL 3337212, at *8 (quoting 8 Del. C. § 145(c)(1)).

200 JX 606; see also Harkonen IX, 2023 WL 3337212, at *10–13.

201 Harkonen IX, 2023 WL 3337212, at *10–13. 

202 Although in issuing the Summary Judgment Opinion I questioned whether the 

Pardon should be considered as part of the wire fraud proceeding. See id. at *9 n.62. 
48 

that the Pardon was both in defense of his criminal charges and separate from the 

criminal proceeding itself.203 And although related to the criminal wire fraud, Dr. 

Harkonen further suggests the Pardon was a separate “effort to restore his 

reputation.”204

But even assuming the Pardon constitutes its own proceeding, Section 145 

requires that the expenses be incurred “in defense of” that proceeding.205 And 

although this Court “adopt[s] a broad reading of the phrase ‘in defense[,]’”206 that 

broad reading has its limits.207

Here, Dr. Harkonen received the Pardon in January 2021, a decade after his 

wire fraud conviction and years after his underlying wire fraud conviction became 

final and non-appealable. The Pardon, when separated from the criminal wire fraud 

proceeding, cannot be viewed as “in defense of” a proceeding, even when allegedly 

pursued to vindicate one’s perceived reputation. As this Court has held in prior 

decisions, there are distinctions to be drawn between defensive actions taken by 

directors and officers in litigation related to their service, and affirmatively filed suits 

initiated by directors and officers.208 In this instance, even assuming the Pardon 

203 See Def.’s OB 53–59. 

204 Id. at 56. 

205 8 Del. C. § 145(c).

206 Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 824 (Del. 1992).

207 See generally Baker v. Impact Hldg., Inc., 2010 WL 2979050 (Del. Ch. July 30, 

2010).

208 Id. at *7–9. 
49 

process might be deemed a separate “proceeding” as Dr. Harkonen advocates, his 

obtaining the Pardon was not “in defense of” that proceeding. And, to the extent Dr. 

Harkonen argues the Pardon was “in defense of” the underlying felony wire fraud 

proceeding, the Summary Judgment Opinion explains at length why that argument 

must be rejected. Dr. Harkonen therefore is not entitled to indemnification under 

DGCL Section 145(c). 

D. Fees on Fees

Dr. Harkonen also requests an award of fees on fees for this action. Given that

Dr. Harkonen did not prevail on any claim, Dr. Harkonen is not entitled to fees on

fees. 

* * *

The only remaining questions relate to interest. Although the Company 

devoted a significant portion of its briefing to interest questions, that briefing was 

directed to arguments concerning any potential award of interest in Dr. Harkonen’s 

favor. And, for his part, Dr. Harkonen did not address an interest award to the 

Company at all. “In Delaware, prejudgment interest is awarded as a matter of 

right.”209 And, “[a]s a general rule, interest accumulates from the date payment was 

due to the plaintiff[.]”210 “Prejudgment interest accrues at the legal rate set forth in 

209 Pontone v. Milso Indus. Corp., 100 A.3d 1023, 1058 (Del. Ch. 2014) (quoting Roven, 

603 A.2d at 826).

210 Moskowitz v. Mayor of Wilmington, 391 A.2d 209, 210 (Del. 1978). 
50 

6 Del. C. § 2301(a) and is compounded quarterly.”211 “Under Delaware law, where 

neither party submits evidence showing the appropriate rate of interest, the court 

typically awards 5% over the Federal Reserve discount rate compounded 

quarterly.”212 

Accordingly, InterMune is entitled to pre-judgment interest at the legal rate 

provided in 6 Del. C. § 2301(a), compounded quarterly.

III. CONCLUSION

For the foregoing reasons, InterMune is entitled to recover the $5,906,927.02 

it paid to settle the D&O insurance claims; Dr. Harkonen is ultimately responsible 

for those legal expenses incurred in litigating his wire fraud conviction. Additionally, 

Dr. Harkonen’s unpled counterclaims for indemnification each fail. The parties are 

directed to confer and provide a form of order implementing this decision.

211 Creel v. Ecolab, Inc., 2018 WL 5733382, at *10 (Del. Ch. Oct. 31, 2018).

212 Sweeney v. Sweeney, 2024 WL 3040424, at *14 n.172 (Del. Ch. June 18, 2024). 

Additionally, “Delaware courts routinely grant post-judgment interest in advancement 

cases.” Underbrink v. Warrior Energy Servs. Corp., 2008 WL 2262316, at *19 (Del. Ch. May 

30, 2008). So, I further grant InterMune “post-judgment interest on the full amount of the 

judgment, including that part comprised of pre-judgment interest, compounded quarterly at 

the legal rate under 6 Del. C. § 2301(a).” Id. (footnote omitted) (citing Brandin v. Gottlieb, 

2000 WL 1005954 (Del. Ch. July 13, 2000)).