COURT OF CHANCERY OF THE STATE OF DELAWARE L ORI W. W ILL V ICE C HANCELLOR L EONARD L. W ILLIAMS J USTICE C ENTER 500 N. K ING S TREET , S UITE 11400 W ILMINGTON , D ELAWARE 19801

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Date Submitted: October 2 0 , 202 2 Date Decided: January 1 9 , 202 3

Dav i d E. R o s s , Esquire Anthony M. Calvano , Esquire Ross Aronstam & Mor itz LL P 1313 N . Market St

reet , S uite 1001 Wilmington, Delaware 198 01 Bartholomew J. Dalton , Esquire Michael C. Dalton , Esquire Dal ton & Associates , P.A. 1106 W

. 10 th St reet Wilmington
, Delaware 1 9 8 06

Adam Balick , Esquire Melony And erson , Esquire Michael C. Smith, Esquire Balick & Balick, LLC 711 Ki ng St reet Wil mington, D elaware 19801

RE: Steven E. Schwartz v. Cognizant Technology Solutions Corporation
, C .A. No. 2021

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- LWW

Dear Counsel:

I w rite r eg ar ding the defendant ’ s Motion for an Accounting and Set Off of

Advanced Fees Incurred in Plaintiff ’ s Injunction Action (the “ Motion ” ).
Cognizant Technology Solutions Corporation seeks a n order compelling plaintiff

Steven E. S ch wartz to provide a certified accounting for leg al fees an d expenses

in curred in this c ase and permitting Cognizant t o offset those costs against future

advances made to Schwartz.C.A . No. 2021

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January 19, 2023 Page 2 of 8

The M otion is procedurally peculiar. It is brought in n either an advancement

n or a n indemnification proceedin g, but rat h er amid a plenary action

. It concerns

both previously advanced fees and those that could be sought in the future. For
reasons of jud icial efficiency and practicality
, the Motion is denied.

I. B ACKGROUND

Sc hwa rtz is t he former Executive Vice President
, Chief Legal Officer, and
Corporate Affairs Officer of Cognizant

. 1 He is a defendant in various la ws uits
arising from alleged violations of the Foreign Corrupt Practices Act

. 2 I n December

2019, Schwartz broug ht an a dvan cement action in thi s court that invoked an

Indemnification Agreement with Cogniza nt

. 3 Chancellor Bouchard entered an

order grantin g partial summary judgment in Schwartz ’ s favor in April 2020 (the

“ Implementing Order ” )

. 4 Co gnizant has since ho nored i ts o bligation to advance

c ertain fees and expenses to Schwartz

.

1 Verified Comp l. for Inj. Relief (“Compl.” ) ¶ 4 (Dkt. 1).

2 See Sch wartz v. Cogn izant Tech. Sols. Corp

. , 202 2 WL 880 2 49
, at *2 ( Del. Ch. Mar. 25, 2022) ( describing lawsuits and investigations); s e e , e .g. , United States v. Coburn
, 4 39 F. Supp. 3 d 361 (D.N.J

. 2020 ) ; S.E.C. v . Coburn
, 2 019 WL 6013139 (D.N.J. Nov. 1 4, 2019 ) ; In re Cognizant Tech. Sols. Corp. S ec. Liti g. , 20 20 WL 3026564 (D.N.J. June 5, 2020 ) ; In re Cognizant Tech . Sols. Corp. Deriv. Litig. , 2 022 WL 44 83595 (D.N.J. Sept. 27, 2022 ) ( d ismissing der ivat ive claims ; appeal filed ).

3 Schwartz v . Cognizant Tech. Sol s. Corp. , C.A. No. 2019

- 1004

- A G B (Del. Ch.) ; s ee Compl. Ex

. G § 10 (Dkt. 2).

4 Schwartz
, C .A. No. 2019

- 1004

- AGB (Del. Ch. Apr. 17, 2020) ( ORDER)

.C.A . No. 2021

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January 19, 2023 Page 3 of 8

I n June 2021, Cognizant sued Schwartz ’ s federal counsel in the United

States Dis trict Court for the Southern District of New York for purported

fraudulent billi n g p ractice s (the “ Federal Acti on ” )

. 5 I n response , Schwartz fil ed
the present anti

- suit inju nction action i n this court (the “ Injunction Action ” ) on July 21, 2021

. Two motions in the Injuncti on Action followed.

First, Schwartz filed a motion for an anti

- suit injunction and civil contempt. 6
Specifically, Sch wartz a sked the court to enjoin Co gnizant from prosecuting th e

F ederal A ction and to hold C ognizant in civil con temp t for vio lating the
Implementing Order

. I denied that motion in a March 25, 202 2 memorandum
opinion , expla ining that th is court canno t bar a part y fr o m proceeding in an in

pe rsona m lawsuit in a federal court with jurisdiction. 7 I also held that S chwartz

failed to identify any violation of the Implementing Order b y Cognizant. 8
Second, Cognizant filed a Moti on for Clarifi c atio n that aske d the court t o

r e vise the Implementing Ord er by requir ing Schwartz to certify that his

5 See Cognizant Tech. Sols . Corp . v. Bohr er P LLC , 2 022 WL 172 0319 ( S.D.N.Y. May 27, 2022) ( granting the d efendants ’ motion to dismiss due to a Delaware forum selection clause )

. 6 Dkt. 2 9.

7 Sch wartz v. Cognizan t Tech. Sols. Corp. , 2022 W L 880 2 49 , at * 3 ( Del. Ch. Mar. 25, 202 2)

. 8 Id

. at *6 ( “ Cognizant did not viol ate the Dismissal Order by filing the SDN Y Action. Nor did it ‘ fai l to obey ’ the I mplement in g Order. ” )

.C.A . No. 2021

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January 19, 2023 Page 4 of 8

advancement requests did not conce rn the Federal Action

. 9 I denied th at motion in

a March 14 , 2022 letter opin ion. 10 I explained that th e Implementing Order
unambiguou sly “ makes cl ear that only ce rtified expe nses for [a federal criminal
action and an action brought by the Securities and Exchange Commission] are presumed to be reasonable for purp ose s of adv ancement. ” 11

For a time, Cognizan t advanced the fees and expense s Schwartz incur red in

th e Injunction Action witho u t objection

. Cognizant “believed it was not required

to advance those ex penses, [but] did so to avoid a premature dispute with Schwartz

and additional (albeit unfounded ) cl aims that it should b e held in c ontempt for

vi ol ating the Implement ing Order. ” 12 It no longe r wishes to do so.
On May 25, Cognizant sent a letter to Sch wartz ’ s Delaware counsel
demanding that S chwartz “ repay the expens es Cognizant advanced to him in

connection with ” the I njunction Act ion

. 13 It a ssert ed that Schw artz was not

entitled to advancement or indemnification for the Injunction Action under the

9 Dk t. 40

. 10 Schwartz v. Cognizant Tech. Sols. Corp. , C.A. No. 2021

- 0634

- LWW (Del. Ch. Mar. 1 4, 2022) ( Dkt

. 46 ) ( “ Letter Decision ” )

. 11 Id. at 4.

12 See D e f

. ’ s Mo t. for an Accounting and Set Off of Advanced Fees Incurred in Pl

. ’ s Inj

. A ct ion (D kt. 49) ( “ De f. ’ s Acct. Mot. ” ) ¶ 17

. 13 Id. Ex. C at 1

.C.A . No. 2021

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January 19, 2023 Page 5 of 8

terms of the parties ’ Indemnification Agreement

. 14 Sch wartz ’ s counsel rejected
Cognizant ’ s demand

. 15

Co gnizant subsequently filed the Motion. It seeks a determination that

Schwartz is not entitled to advancement or indemnification for fees incurr ed in the

I njunction Action under the Ind emnification Agreement and C o gniza nt ’s bylaws

.
And i t requests an order requiring Schwartz to provide an accou nting of such fees
and permit ting Cognizant to o ffset th e to tal a gainst future requests for

advancement. Schwartz opposes the Motion as premature since the underlying

ac tions have not conclude d

. 16

II. ANA LYSIS

The fees and expenses at issue in the Motion can be assessed in two
categories: ( 1) those a lready advanced by Cognizant
, and (2) those that Schw artz
might demand advancement for in the future.
Regarding the forme r, it would be inappropriate to order Schwartz to
undertake an accounting now

. In Kaung v. Cole National Corp

. , the Delaware
Supreme Court ex plained th at a part y ’ s right to recoup previously advanced funds

should not be addressed until an ultima te determinati on of indemnification is

14 See id

. Ex. C at 2

- 3.

15 See id. Ex. D at 2.

16 Pl. ’ s Opp ’ n to Def

. ’ s Acct . Mot. (Dkt. 53) ¶ 22

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January 19, 2023 Page 6 of 8

made. 17 Permitting Co gnizant to offset expenses after an accounting is not

mean ingfully different from the rep ayment cont emplated in Kaung

. It would still
require the court to undertake a granular review of fees before a non

- appealable
final judgment has been rendered

. 18
Regarding the l atter, it would also be improvident to opine on whet her

Schwartz is ent itled to future advancement for the Injunc tion Ac ti on. This is , of

course, not an adv ancement action . Yet Cogniza nt essent ially asks me to treat it as

such

.

17 884 A.2d 500, 5 0 9 (Del. 2005) ( holding that the Cour t of C h ancery ’ s determination of liability for su ms previously adv ance d voluntar ily was “ premature , just as a d irect

rec oupment claim would have been by [the defendant] for fees i t advanced ” ) ; see also Perryman v. Stimwave Techs., Inc. , 2021 WL 1423468, at *2 (Del. Ch. Apr. 15, 20 21).

18 See Hampshire Grp . Ltd. v

. Kuttner , 2010 WL 2739 995, at *53 (Del. Ch. J uly 12, 2010) ( “ Rather than violate settled principles that dictate that ind emnif ication claims be addresse d when the underlying matter for which indemnificatio n is sought is final, I prefer to foll ow t he proper order a nd address ind emnification in a later procee ding

. ” ) ; Paolino v. Mace Sec. Int ’ l , Inc. , 985 A.2d 392, 397 (Del. Ch . 2009 ) ( “ It would be ineffic i en t and wasteful for the partie s and [the court] to deal w ith indemnification while the underlyi ng landscape cont inues to evolv e. ” ); Fasciana v. Elec . Da ta Sys . Corp. , 829 A.2d 160, 177 (Del. Ch. 2003) ( “ Unless some gross prob lem arises, a balance of fairnes s and efficiency . . . counsel[s] deferring fights about deta ils until a final inde mnification pr oceed ing. ” ) ; Simo n v. Navellier Series Fund
, 2000 WL 1597890, at *9 (Del. Ch. Oct. 19, 2000) ( “ As a matter of li tigati ve efficiency, it makes little sense for this court to decide claims f

or indemnification

— as opposed to claims for advancemen t of litigation exp enses

— in adv ance of a non

- appealable fin al judgment. ” )

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January 19, 2023 Page 7 of 8

I appreciate that Cognizant is wary of violating the Impleme nting Order, b ut

I decline to advise on whethe r Cognizant might run afoul of it

. 19 If Cognizant

believes in good fai th that the I n junction Action i s not advanceable, it can refuse

Schwartz ’ s future requests

. Should Schwartz insist that he is ent itled to

advancement, he can pursue a claim under the proper procedural framework

. 20

Co gnizant has not presented any spec ial hardship or unique facts that might

warrant a break from standard procedure in ad judicating a dvancem ent and

indemn ification claims. It chose to advance

- and

- wait rather than to with h old fees

and po tentially face an ad vancement action

. 21 It unders tandably now wishes to
change course

. Bu t I see little benefit to the partie s or the court f rom resolving a dispute about entit lement to advancement and recoupment during this plenary
proceedi ng

. 22

The Motion is the refore denied.

19 I note that I have previously opined on the meaning of the Implement ing Order

. See Letter Decision at 3

- 4 ; Sch wartz , 202 2 W L 880 2 49 , at * 6

. 20 See 8 Del. C

. § 145

. 21 See Def

. ’ s Acct. Mot

. ¶ 1 7

. 22 See Reinhard & Krei nberg v. Dow Chem. Co. , 2008 WL 868108, at * 5 (Del. Ch. Mar. 28, 2008) ( “ [T ]h is Court does not re lish and will not perform t he task of playground monitor, refereeing needless and inefficient skirm ishes in the s andbox. ” )

.C.A . No. 2021

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January 19, 2023 Page 8 of 8

Finally, it is unclear to me what i s left for the court to resol ve in the

I njunction Action. Schwart z ’ s request for an anti

- suit injunction was denied as a

matter of law

. The Federal Action was d ismissed and subsequently refiled in
Delaware Sup erior Court. 23 Schw artz insists that his request for a declaratory
judgment that Cognizant violated the Implement ing Order remains to be resolved

.
B ut this c ou rt held othe rwise in denyin g Schwartz ’ s request for a finding of

contempt. 24 Within 3 0 days of this decision, Schwartz is directed t o file a letter

de scribing whethe r he intends to press his claims and setting forth a proposed

cours e of action to rea ch a final resolution

.

Sincere l y yours , /s/ Lori W. Will

Lori W. W ill Vice Chancellor

23 See Def. ’ s Acct. Mot. ¶ 13 n.1

. 24 Sch wartz , 2022 W L 880 2 49 , at * 6

. Other than the Motion, this case has been dormant since my March 25 memorandum opinion was issued.