Opinion ID: 78393
Heading Depth: 1
Heading Rank: 11

Heading: Scrushy's public policy argument for advancement of attorneys' fees

Text: Scrushy makes the same public policy argument for advancement of fees as he did for reimbursement of settlement amounts. He argues that Delaware law supports advancement of litigation fees for officers and directors to ensure that they will resist unjustified claims, and to encourage qualified individuals to serve. See Stifel Fin Corp., supra . He notes that an innocent officer might have difficulty proving his innocence if attorneys' fees are not advanced. We note at the outset that the instant Bar Order expressly carves out and reserves to Scrushy his claim for contractual reimbursement of fees if he prevails in the Federal Actions (as required by the PSLRA). However, it is true that in the absence of fee advancement, an innocent officer or director might have difficulty proving his innocence, and thus might have difficulty realizing a prevailing status. As noted above, however, these policy arguments supporting advancement of legal fees must be balanced against countervailing policies in favor of settlements and against indemnification in the securities litigation context. HealthSouth might well have been reluctant to contribute $215 million [11] for the settlement if it thought it would continue to be liable for endless legal fees to fund Scrushy's individual defense against the same violations, especially as HealthSouth and the underlying plaintiffs perceive Scrushy as a central figure in the violations. In other words, absent a bar of any claim by Scrushy for advancement of legal fees, HealthSouth would have bought only a limited peace. [12] In addition, the precedent discussed above suggests that advancement of legal fees might be inconsistent with the policies underlying the securities laws. See discussion in Part III.A.4, supra. Although the policy against before-the-fact indemnification of participants in securities violations probably would not be inconsistent with advancement of fees to an outside director who the evidence suggested was excusably ignorant of the violations, we discuss below the fact that Scrushy made no showing in the district court that he was merely an innocent bystander with respect to the violations at issue here. In sum, we cannot conclude that public policy considerations support Scrushy's challenge to the bar of his contractual claim against HealthSouth for advancement of legal fees.