Opinion ID: 1887226
Heading Depth: 1
Heading Rank: 7

Heading: Greenberg's Settlement Provided Scharf's Certainty

Text: A cause of action for indemnification accrues when the officer or director entitled to indemnification can be confident any claim against him ... has been resolved with certainty. [32] The parties to this appeal agree that certainty requires an [a]bsence of doubt, [33] and is an objective, reasonable-person standard. The parties also agree that Edgcomb bears the burdens of proof and persuasion with respect to its affirmative defense that Scharf's claim was barred by the three-year statute of limitations. Generally, the matter on which the claim for indemnification is premised may be said to have been resolved with certainty only when the underlying investigation or litigation is definitely resolved. [34] The implicit rationale for this conclusion is that the person seeking indemnity should not have to rush in at the first possible moment but rather should be able to wait until the outcome of the underlying matter is certain. [35] A successful result on a claim for indemnification in the trial court, for example, does not cause the statute of limitations to begin running if an appeal is taken. Until the final judgment of the trial court withstands appellate review, the outcome of the underlying matter is not certain. In its post-trial opinion, the Court of Chancery recognized that [s]tatutes of limitations are most fairly and predictably applied with reference to a single, well-defined moment in time. [36] Unfortunately, the Court of Chancery then shifted its focus and stated: in this case the question is not precisely when could Scharf have been `confident' that the SEC investigation of him had `been resolved with certainty.' [37] Instead, the question is whether as of September 17, 1993, three years before he filed his complaint in this action, Scharf could have been `confident' that the SEC investigation against him had been `resolved with certainty.' [A]ll statutes of limitation[s] and all statutory appeal requirements are, by their very nature, `harsh' in that they arbitrarily establish jurisdictional prerequisites for initiating or maintaining a suit. [38] When a plaintiff fails to file a timely complaint, a jurisdictional defect is created that cannot be excused. [39] Therefore, it is imperative to identify a date certain when any statute of limitations begins to run. The single, well-defined moment in time when the statute of limitations begins to run on claims for indemnification is when the outcome of the underlying matter is certain. This involves a two-part analysis. First, the underlying matter must be identified. Second, the date when the outcome of that underlying matter was resolved with certainty must be determined. In this case, the underlying matter was the SEC Staff's belief that Greenberg, a close personal friend of Scharf, and others had engaged in illicit insider trading with the benefit of nonpublic information provided by Scharf. The Court of Chancery found that the SEC's potential allegations against Scharf and the SEC Complaint against Greenberg were interrelated. [40] The Court of Chancery also found that, during the pendency of the proceedings against Greenberg, there was a real possibility that the SEC could discover other information incriminating Scharf or that others, such as Greenberg, could implicate him. [41] In denying Edgcomb's pretrial motion to dismiss Scharf's complaint on the basis that it was untimely, the Court of Chancery held that, if all of the allegations in Scharf's complaint were true, Scharf could not be confident that the underlying matter that gave rise to his claim for indemnification had been resolved with certainty until Greenberg reached a settlement with the SEC in July 1994. [42] At trial, Edgcomb had the burden of proving its affirmative defense by establishing that Scharf's claim for indemnification accrued on a date certain that was three years prior to the filing of his complaint. For the reasons stated in this opinion, the Court of Chancery's undisputed findings of historical fact reflect that Edgcomb failed to establish that either the SEC's May 1991 letter or its June 1992 Complaint against Greenberg provided Scharf with confidence that the outcome of the underlying SEC matter involving him had been resolved with certainty. The dispositive inquiry in this proceeding is to ascertain the date certain on which Scharf could be confident that the outcome of the underlying matter  Greenberg's improper use of non-public information provided by Scharf and the SEC's potential claims against Scharf  had been resolved. When Scharf's lawyers testified that Scharf was still under jeopardy until Greenberg settled with the SEC based upon what we know, the context is significant. The same lawyers who were representing Scharf's interests were simultaneously defending Greenberg in the SEC matter. The record reflects that the lawyers at Fried Frank, who were jointly representing both men, were never confident that the SEC's potential claims against Scharf had been resolved with certainty, after the SEC Complaint was filed against Greenberg. Edgcomb's expert did not consider the views of Scharf's attorneys as unreasonable. The record reflects objective credible evidence that a reasonable person in Scharf's position could not be confident that the underlying matter  Greenberg's improper use of non-public information provided by Scharf and the SEC's potential claims against Scharf  had been resolved with certainty, until Greenberg settled with the SEC. Therefore, as a matter of law, we hold the three-year statute of limitations began to run on Scharf's claims for indemnification on the date when Greenberg settled with the SEC: July 7, 1994. Consequently, the complaint for indemnification that Scharf filed on September 17, 1996 was timely.