Opinion ID: 3029917
Heading Depth: 2
Heading Rank: 6

Heading: Defendants’ Requests for Indemnification

Text: In or around May 1999, about six months after the Armor Shield litigation was initiated, defendants first requested that ASTM indemnify them for their reasonable attorney’s fees, costs, and expenses as well as for any liability they might incur with respect to that litigation pursuant to ASTM Bylaw No. 10.1. But even earlier, ASTM President James Thomas, via letter expenses related to the Armor Shield litigation that WRA had paid on his behalf. 10 As Rogers had done with WRA, Baach entered into a formal agreement with Corrpro whereby he agreed to remit to Corrpro any monies he recovered from ASTM (pursuant to its indemnification provision) as reimbursement for the attorney’s fees, costs, and expenses related to the Armor Shield litigation that Corrpro paid on his behalf. Neither Baach nor Corrpro, however, assumed any similar obligation to reimburse National Union. 11 The district court, in an unchallenged determination, found that National Union paid $700,000 of the settlement which we note is onehalf of the total settlement paid by all the defendants but more than onehalf of what Corrpro paid. 11 dated December 2, 1998, had agreed that ASTM would reimburse Bushman for his reasonable attorney’s fees and costs arising from the Armor Shield litigation “unless and until it becomes apparent to ASTM that Armor Shield’s allegations concerning your conduct are supported by evidence. That is, until ASTM believes that you operated outside the auspices of the Society, in bad faith, or in a manner that was not in the best interests of the Society.” J.A. at 982-83. On August 26, 1999, ASTM’s Executive Committee met via telephone conference call to consider what by then had become defendants’ repeated requests for indemnification. At the time, “[i]t was the Committee’s judgment, after thorough discussion, that it was not possible to say with assurance at this time that all of the requirements for the granting of indemnification contained in ASTM’s by-laws (and in the Pennsylvania not-for-profit corporation law) had been met by any of the parties requesting indemnification . . . .” ASTM, 2005 WL 1941653, at  (internal quotations and citations omitted). Accordingly, the Executive Committee concluded it could not grant any of the defendants indemnification or, in the case of Bushman, continued indemnification. The Executive Committee made clear, however, that its judgment was not “final” but rather was subject to change depending upon additional information and developments in the case. Subsequently, the Board during a meeting held October 12-13, 1999, voted to approve the Executive Committee’s denial of defendants’ indemnification requests.12 12 In its findings of fact, the district court observed that notwithstanding defendants’ repeated offers “to present evidence, provide information or answer any questions that ASTM may have had regarding the allegations in the Armor Shield complaint . . . . ASTM gave the defendants no opportunity whatsoever to present any information or evidence to either the Board of Directors or the Executive Committee . . . .” ASTM, 2005 WL 1941653, at  (internal citations omitted). The court further observed that: In deciding that the defendants were not made parties to the Armor Shield suit by reason of the fact that they were serving on a committee operating under the auspices of 12 After the parties finalized the settlement in the Armor Shield litigation in 2002, defendants again requested that ASTM indemnify them for their settlement costs and attorney’s fees and costs in that litigation. But neither the Board nor the Executive Committee took any action in response to defendants’ renewed request for indemnification. the Society and that they were not acting in good faith and in a manner which they reasonably believed to be in, or not opposed to, the best interests of the Society, Plaintiff ASTM considered only the allegations contained in Armor Shield’s complaint and amended complaint. ASTM undertook absolutely no investigation whatsoever to determine the veracity of those averments, despite the fact that it believed the allegations against it in the Armor Shield pleadings to be false and that it had voted to uphold the findings of its own Committee on Standards that its internal regulations and balance requirements had been followed by the E-50 and G-01 Committees in their development of the ES-40 and G- 158 standards. Id. (internal citations omitted). The Board and Executive Committee were not, however, in the dark about the Armor Shield litigation. With respect to their knowledge of it, ASTM notes that in April 1999, Thomas O’Brien, ASTM’s outside counsel, made a presentation to the entire Board summarizing the allegations in the Armor Shield litigation based on his review of the pleadings and outlining the legal and factual bases of the antitrust claims raised. O’Brien also explained the substance of a motion to dismiss that he had drafted on ASTM’s behalf. Morris Brooke, ASTM’s general counsel supplemented Brown’s presentation with a white paper circulated to the Executive Committee that “‘walked the [E]xecutive [C]ommittee members through an analysis and an understanding of the . . . not-for-profit laws of the state of Pennsylvania.’” Appellant’s br. at 17 (quoting J.A. at 126). Finally, inasmuch as most members of the Executive Committee also were serving on the Board when Sharp filed his appeal regarding the creation of G-158, they were “familiar with the facts underlying the controversy . . . even prior to hearing the presentations and reviewing the materials prepared by counsel.” Id. 13