Opinion ID: 196516
Heading Depth: 1
Heading Rank: 4

Heading: indemnification claim

Text: 30 Nadal-Ginard contends that the district court, in a rush to judgment, failed to thoroughly address his claims for indemnification by BCHF. Specifically, he argues that the court neglected to review the facts underlying two BCHF decisions, both instances in which the court found Nadal-Ginard's participation to amount to fiduciary breaches. Accordingly, he requests that this court reverse the district court's denial of his indemnification claims with respect to each decision. For several reasons, we decline the invitation. 31 A thorough examination of the district court's opinion does not bear out Nadal-Ginard's main contention. Indeed, while the district court did not include a recitation of the facts underlying these decisions in its indemnification discussion, it had no reason to do so, as it had examined both circumstances in great detail in previous sections of the opinion. The fact that it incorporated these findings by reference into the indemnification discussion does not constitute error. As such, we turn to examine the validity of the district court's conclusions. 32 We begin our analysis by examining the two grounds on which Nadal-Ginard asserts his entitlement. Nadal-Ginard first claims a right to indemnification from BCHF based on Article VIII of the BCHF Bylaws. 8 This provision provides that BCHF will indemnify any liabilities and expenses incurred by an officer or director because of the position he or she holds. There is a prerequisite that must be satisfied in order to be entitled to indemnification, however: the BCHF director, officer, or employee must have acted in good faith in the reasonable belief that his or her action was in the best interests of BCHF. 33 Nadal-Ginard turns to Chapter 180, Section 6C, of the Massachusetts General Laws for further support of his indemnification claim. This statute provides that a officer or director of a corporation shall not be held liable for the performance of his or her duties if performed in good faith and in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position ... would use under similar circumstances. Mass.Gen.L. ch. 180, Sec. 6C. The statute provides that an officer or director acts in good faith when acting on, inter alia, the advice or opinions of counsel, providing the officer or director did not have knowledge regarding his or her actions that would cause such reliance to be unwarranted. See id. 34 It is the latter portion of the Massachusetts statute on which Nadal-Ginard relies in asserting his claim. He argues that BCHF should indemnify him for damages arising out of two transactions, as, in both cases, he acted on the advice of an attorney. We examine the merits of these claims after first reviewing the underpinnings of the transactions in question. 35 The first fiduciary breach arose out of his involvement in determining his BCHF salary. We need not tarry in reviewing the circumstances underlying this transaction, as we have already devoted a good portion of the opinion to doing so. See supra part III. We need only make note of the new wrinkle that Nadal-Ginard adds in his effort to obtain indemnification: his contention that he acted as he did because Nadeau represented to him that to do so was legal. 36 The second fiduciary breach for which Nadal-Ginard claims a right to indemnification arose out of his actions in directing BCHF funds to be deposited into a Guardian Life Insurance Escrow Account, established for the purpose of paying premiums to the Guardian Life Insurance Company on a $6,000,000 life insurance policy in Nadal-Ginard's name. 9 The court found that Nadal-Ginard did not, at any time, disclose the existence of the Escrow Account to the other BCHF Board members, nor did he obtain authorization to make payments to such an account. Because this transaction was clearly self-interested, the court held that the payment of BCHF funds to the Escrow Account amounted to a breach by Nadal-Ginard of his fiduciary duty of loyalty, and therefore included the sum total of the payments in its judgment for BCHF. 37 The basis for Nadal-Ginard's indemnification argument for the Escrow Account damages mirrors that with respect to his compensation. He argues that the Guardian Escrow Account was the brainchild of Gary Banks, an attorney to whom Nadal-Ginard turned for advice in 1987. Nadal-Ginard claims that because Banks created the Guardian Life Insurance Escrow Account, he should have been able to assume that it was structured in conformity with the law. As a result, he argues that he is entitled to indemnification for the portion of the damages equaling the BCHF payments to the Escrow Account. 38 At trial, Nadal-Ginard did not prevail on either argument. First, the district court discredited Nadal-Ginard's contention that he relied upon the advice of the attorneys. Second, the district court found that neither attorney ever affirmatively advised Nadal-Ginard as to the legality of his actions in either transaction. On appeal, Nadal-Ginard does not challenge the district court's interpretation of either the BCHF Bylaw or the Massachusetts statute. Instead, he contends that there was insufficient evidence on which to support the court's conclusions. 39 In reviewing this claim, we are mindful that we review findings of fact for clear error. See Texaco Puerto Rico, Inc. v. Department of Consumer Affairs, 60 F.3d 867, 875 (1st Cir.1995). When those findings of fact are based on the credibility of witnesses, great deference is given to the district court's findings. See Maness v. Star-Kist Foods, Inc., 7 F.3d 704, 708 (8th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 2678, 129 L.Ed.2d 813 (1994); cf. Inwood Lab., Inc. v. Ives Lab., Inc., 456 U.S. 844, 855, 102 S.Ct. 2182, 2189, 72 L.Ed.2d 606 (1982). Indeed, [i]n the absence of egregious lapses in such a perception, appellate courts leave it undisturbed. Charves v. Western Union Telegraph Co., 711 F.2d 462, 464-65 (1st Cir.1983). 40 Here, we find no error. Nadal-Ginard points to nothing in the record, nor do we find anything on our own, to suggest that the district court's discrediting of Nadal-Ginard's testimony is egregious. Indeed, the district court pointed out that Nadal-Ginard failed to comply with the requirements in the documents as he understood them, never mind comply with interpretations offered by counsel. Further, there is ample evidence in the record unrelated to these transactions which lends support to the district court's findings. 41 Even assuming that Nadal-Ginard's credibility was not at issue, Nadal-Ginard fails to clear the next hurdle. That is, Nadal-Ginard fails to direct this court to any place in the record evidencing the fact that either attorney advised Nadal-Ginard that he was legally entitled to act as he did. An attorney's representation as to the legality of a particular corporate structure does not mean that an officer or director can act in any manner he or she chooses within the confines of that structure. Indeed, an officer is bound further by the confines of the law. So it is here: the fact that both Nadeau and Banks advised Nadal-Ginard that the corporate structures in question were legally valid does not absolve Nadal-Ginard from liability incurred by his improper actions. Accordingly, we find no error on the part of the district court, and now proceed to address Nadal-Ginard's two remaining allegations of error.