COURT OF CHANCERY

OF THE

STATE OF DELAWARE

TAMIKA R. MONTGOMERY-REEVES

VICE CHANCELLOR

Leonard Williams Justice Center

500 N. King Street, Suite 11400

Wilmington, Delaware 19801-3734

Date Submitted: July 12, 2018

Date Decided: October 31, 2018

Kurt M. Heyman, Esquire

Aaron M. Nelson, Esquire

Heyman Enerio Gattuso & Hirzel LLP

300 Delaware Avenue, Suite 200

Wilmington, DE 19801

Eric Lopez Schnabel, Esquire

Robert W. Mallard, Esquire

Alessandra Glorioso, Esquire

Dorsey & Whitney LLP

300 Delaware Avenue, Suite 1010

Wilmington, DE 19801

RE: W. Jerome Frautschi et al. v. Ecolab, Inc.

Civil Action No. 12951-VCMR

Dear Counsel:

This letter opinion addresses Plaintiffs’ Motion for Summary Judgment. For 

the reasons stated below, the motion is denied as to W. Jerome Frautschi’s claims. 1

I. BACKGROUND

The facts in this opinion derive from the pleadings, the parties’ submitted 

affidavits, and exhibits cited therein.2

 

1

 I address the claims of the Pleasant T. Rowland Revocable Trust and the W. Jerome 

Frautschi Living Trust, plaintiffs in this action, in a separate letter opinion issued 

today. 

2

 Ct. Ch. R. 56(c). 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 2 of 10 

This action involves Frautschi’s request for indemnification from Ecolab, Inc. 

(“Ecolab”), a Delaware corporation in the business of providing water, hygiene, and 

energy technologies.3

 In February 2008, Ecolab acquired Ecovation, Inc. 

(“Ecovation” or the “Company”) through a merger.

4

 Ecovation was a Delaware 

corporation in the business of providing sustainable wastewater treatment and 

renewable energy solutions.5

 Diane C. Creel was the President, Chief Executive 

Officer, and Chair of the Board of Directors of Ecovation.6

 Frautschi served 

Ecovation as a director from May 2004 until November 2005.

7

 Two trusts, the 

Pleasant T. Rowland Revocable Trust and the W. Jerome Frautschi Living Trust 

(together, the “Trusts”), invested significantly in the Company when it was 

struggling financially.8

Ecovation provided for indemnification of directors and officers in its 

Amended and Restated Certificate of Incorporation (the “Charter”) and its Bylaws 

 

3

 Verified Am. and Supplemental Compl. for Indemnification ¶ 27 (“Compl.”). 

4

 Id. ¶ 4; id. Ex. C. 

5

 Nelson Aff. Ex. C ¶ 19. 

6

 Compl. ¶ 30. 

7

 Id. 

8

 See id. ¶ 3. 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 3 of 10 

(the “Bylaws”).9

 As part of the merger, Ecolab agreed to provide advancement and 

indemnification to Ecovation’s current and former directors and officers, including 

Frautschi, to the same extent as those current and former directors and officers were 

entitled to advancement and indemnification under Ecovation’s Charter and 

Bylaws.10

This case involves Frautschi’s right to indemnification for fees and expenses 

incurred in actions filed in the New York Supreme Court (the “Ahlers Action”) and 

in the United States District Court for the Western District of New York (the “ITV

Action”).

11 Both underlying actions involved allegations that Creel provided 

material nonpublic inside information to Frautschi and the Trusts regarding Ecolab’s 

 

9

 Nelson Aff. Ex. F art. V, § 1, at 9; id. Ex. G, at 16-17. Ecovation was formerly 

known as AnAerobics, Inc.; the Charter and Bylaws reflect the former name. 

10 Id. Ex. H § 7.5(a) (“[Ecolab] and [Empire Acquisition, Inc.] jointly and severally 

agree that all rights to indemnification and advancement of expenses for acts or 

omissions occurring prior to the [merger] (including acts or omissions in connection 

with this Agreement and the consummation of the transactions contemplated 

hereby) now existing in favor of the Company’s current and former directors and 

officers (each a ‘D&O Indemnified Party’) as provided in the Company’s Governing 

Documents, and in any indemnification agreements with the D&O Indemnified 

Parties, will survive the Merger and will thereafter continue in full force and effect 

in accordance with their terms. [Ecolab] and [Empire Acquisition, Inc.] jointly and 

severally will advance expenses to and indemnify the D&O Indemnified Parties to 

the same extent as the Indemnified Parties currently are entitled to advancement of 

expenses and indemnification.”). 

11 Compl. ¶ 1.
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 4 of 10 

desire to acquire Ecovation.

12 Allegedly using that information, the Trusts

purchased stock from other investors who were not privy to the highly confidential 

information.13 According to those investors, the Trusts made a large profit from the 

inside information when Ecolab acquired Ecovation in February 2008.

14

In the Ahlers Action, the plaintiffs asserted claims for breach of fiduciary duty, 

interested director transactions, breach of the Charter, and unjust enrichment against 

Creel, Frautschi, and the Trusts.15 The defendants prevailed on summary 

judgment.16 The New York Appellate Division, Fourth Department, affirmed the 

trial court’s order on June 30, 2017.17 The parties filed no further appeals.18

In the ITV Action, the plaintiff asserted claims against Creel, Frautschi, and 

the Trusts.19 The claims against Frautschi included claims for breach of fiduciary 

 

12 Nelson Aff. Ex. A ¶¶ 96-102; id. Ex. C ¶ 328. 

13 Id. Ex. A ¶¶ 106-22; id. Ex. C ¶¶ 325-28. 

14 Id. Ex. A ¶¶ 128; see id. Ex. C ¶¶ 375.

15 Id. Ex. C ¶¶ 391-442. 

16 Id. Ex. E, at 29-30; see generally id. Exs. D, E. 

17 Id. Ex. E. 

18 Compl. ¶ 23. 

19 See generally Nelson Aff. Ex. A. 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 5 of 10 

duty, aiding and abetting breach of fiduciary duty, securities fraud, common law 

fraud, and civil conspiracy.

20

In April 2017, the parties to the ITV Action reached a settlement agreement.21 

The total settlement amount was $4.65 million.22 Frautschi paid $835,000 of the 

settlement,23 and the parties apportioned the remaining amounts to Creel and the 

Trusts.24 Ecolab did not contribute any money to the settlement.25

Throughout both actions, Ecolab provided advancement of defense costs to 

Frautschi, first through its directors’ and officers’ liability policy and later, when that 

policy was exhausted, from its own funds.26 

II. ANALYSIS

In their Motion for Summary Judgment, Frautschi and the Trusts seek 

summary judgment on all counts of their Verified Amended and Supplemental

 

20 Id. ¶¶ 134-39, 155-61, 186-215. 

21 See generally Nelson Aff. Ex. V. 

22 Id. § 2. 

23 Id. § 3(c). 

24 Id. § 3(a), (b), (d). 

25 Compl. ¶ 92. 

26 Id. ¶¶ 75, 77. 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 6 of 10 

Complaint, including full indemnification of Frautschi’s portion of the settlement, 

indemnification for his attorneys’ fees in the Ahlers and ITV Actions at his counsel’s 

standard hourly rates, and fees-on-fees for this action to enforce his indemnification 

rights.27 

A. Standard of Review

Summary judgment will be “granted if the pleadings, depositions, answers to 

interrogatories and admissions on file, together with the affidavits, show that there 

is no genuine issue as to any material fact and that the moving party is entitled to a 

judgment as a matter of law.”28 The movant bears the initial burden of demonstrating 

that there is no question of material fact.29 When the movant carries that burden, the 

burden shifts to the nonmoving party “to present some specific, admissible evidence 

that there is a genuine issue of fact for a trial.”30 When considering a motion for 

 

27 Pls.’ Opening Br. 2. Plaintiffs also seek full indemnification of the Trusts’ portions 

of the settlement, payment of the Trusts’ attorneys’ fees in the ITV and Ahlers

Actions, and fees-on-fees for this action to enforce their indemnification rights. Id. 

I address those portions of their motion in a separate letter opinion. 

28 Twin Bridges Ltd. P’ship v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 

2007) (citing Ct. Ch. R. 56(c)). 

29 Deloitte LLP v. Flanagan, 2009 WL 5200657, at *3 (Del. Ch. Dec. 29, 2009). 

30 Id. (citing Watson v. Taylor, 829 A.2d 936 (TABLE), 2003 WL 21810822, at *2 

(Del. Aug. 4, 2003)).
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 7 of 10 

summary judgment, this Court must view the evidence and the inferences drawn 

from the evidence in the light most favorable to the nonmoving party.31 Even so, the 

non-moving party may not rely on allegations or denials in the pleadings to create a 

material factual dispute.32

B. Indemnification for Frautschi’s Portion of the Settlement

Frautschi claims that under 8 Del. C. § 145(a) and Ecovation’s Charter and 

Bylaws, as a former director, he is entitled to indemnification from Ecolab for his 

portion of the settlement.

33 Ecolab argues that (1) Frautschi’s entitlement to 

indemnification is limited to claims against him by reason of his former director 

status, (2) Frautschi has no right to indemnification as a trustee of one of the Trusts, 

and (3) Frautschi is not entitled to indemnification because the settlement was not 

“reasonable.”34

Some of the claims in the ITV Action are based on Frautschi’s role as a 

director of Ecovation. For example, the ITV Complaint alleges that Frautschi 

 

31 Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977); Fike v. Ruger, 754 A.2d 254, 

260 (Del. Ch. 1999), aff’d, 752 A.2d 112 (Del. 2000). 

32 Ct. Ch. R. 56(e). 

33 Compl. ¶¶ 138-39, 148. 

34 Def.’s Opp’n Br. 27-32, 36-38, 40-48. 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 8 of 10 

breached the fiduciary duty that he, as a director, owed to the stockholders of 

Ecovation because he allegedly worked with Creel to induce Ecovation’s Board of 

Directors to accept agreements that were unfavorable to Ecovation’s stockholders.35 

Other claims, however, include allegations that occurred much later in time 

than the period when Frautschi served as a director, May 2004 to November 2005. 

For example, the ITV Complaint alleges that Frautschi intentionally omitted and 

actively concealed that Ecovation was negotiating a merger with Ecolab.36 These 

alleged negotiations did not start until January 2007, over a year after Frautschi was 

no longer a director.37 If Frautschi had such information, it most likely was because 

he was trustee or agent of the Trusts and in that role helped Ecovation obtain 

financing from the Trusts.38

Frautschi is a trustee of the W. Jerome Frautschi Living Trust.39 Frautschi 

argues that any actions he allegedly took after he resigned as director were as trustee 

 

35 Nelson Aff. Ex. A. ¶¶ 135, 137-38. 

36 Id. ¶¶ 188-90. 

37 Id. ¶¶ 96-100. 

38 See id. ¶ 102. 

39 Compl. ¶ 155. 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 9 of 10 

of his Trust and that these actions are indemnifiable under the terms of the Trusts’ 

financing to Ecovation.40 Frautschi, however, cites no law to support this claim.41

Further, Frautschi is a trustee for only one of the two Trusts.42 The parties do 

not explain whether, and in what capacity, Frautschi acted for the second Trust, the

Pleasant T. Rowland Revocable Trust. He may have been acting as trustee or agent, 

but again, the parties have not provided any documents or law to support or refute 

Frautschi’s claim that he is entitled to indemnification for his actions related to the 

second Trust.

The Trusts have their principle places of business in Wisconsin,43 and I 

presume that Wisconsin trust and agency law governs. However, neither party has 

cited any relevant Wisconsin law or argued that another state’s law governs.

Because the parties address this issue in such a cursory fashion without 

supporting documents and law, I am unable to determine whether there is a genuine 

 

40 Pls.’ Opening Br. 26 n.16; see Compl. ¶ 157. 

41 See Pls.’ Opening Br. 26, 29-30. Frautschi cites only to the Trusts’ source of 

indemnification. He fails to explain why that source of indemnification also applies 

to him. Id. 29-30. 

42 Compl. ¶¶ 155-56. 

43 Id. ¶¶ 25-26. 
Frautschi et al. v. Ecolab, Inc.

C.A. No. 12951-VCMR 

October 31, 2018 

Page 10 of 10 

dispute of material fact, nor can I decide whether one of the parties is entitled to 

judgment as a matter of law. This issue directly controls Frautschi’s claim for 

indemnification. Further, this issue affects Frautschi’s other two claims, his claim 

for attorneys’ fees incurred in the Ahlers and ITV Actions and his claim for fees-onfees in this action. 

III. CONCLUSION

For the foregoing reasons, I DENY the Motion for Summary Judgment as to 

Frautschi’s claims.

IT IS SO ORDERED. 

Sincerely,

/s/Tamika Montgomery-Reeves

Vice Chancellor

TMR/jp