Opinion ID: 2359851
Heading Depth: 1
Heading Rank: 27

Heading: order re: motion to bar defendants from indemnification by corporation

Text: Plaintiffs have filed a motion to bar defendants from indemnification by the corporation, pursuant to AS 10.06.490. It appears that plaintiffs are seeking only to bar indemnification on the non-prevailing claims. As with prior rulings in this case, this court starts with the consistent premise that the corporation Leisnoi, Inc. (Leisnoi) is not a party to this lawsuit. Thus, the question of whether the corporation failed to abide by AS 10.06.490 is not a question on which this court can grant relief. This court is asked to determine if there is any statutory bar for the defendants to receive indemnification by the corporation. The answer is no. Looking at the statute, AS 10.06.490(a) applies to this dispute. Alaska Statute 10.06.490(b) does not apply, as it addresses shareholder derivative actions. Under AS 10.06.490(a), the conduct of the directors must be in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation. This court's findings of fact and conclusions of law specifically found that the defendant directors acted in good faith and in Leisnoi's best interest. On the breach of fiduciary duty, this court found that the directors were negligent in not knowing about the federal requirement to conduct an audit. This does not bar indemnification. Further, AS 10.06.490(c) provides that where a director has been successful on the merits or otherwise in defense of an action or proceeding referred to in (a) or (b) of this section, or in defense of a claim, issue, or matter in the action or proceeding, the director shall be indemnified. Clearly, from this court's findings of fact and conclusions of law, the defendant directors were successful in defense of this action. The minor victory of the plaintiffs on one claim pales beside the overwhelming victory of the defendants. Again this is not a bar to indemnification. Lastly, this court finds that AS 10.06.490 has been satisfied, as there was a resolution by the majority of the directors who were not parties to the action to indemnify the defendant directors. Accordingly, there is no bar to the defendant directors receiving indemnification provided by Leisnoi. The motion to bar indemnification is DENIED. Dated Sept 26/08 /s/ Sen K. Tan Superior Court Judge