Opinion ID: 1567838
Heading Depth: 1
Heading Rank: 2

Heading: The Right Created by the New Jersey Statute and the Conflict of Laws.

Text: Beneficial is a Delaware corporation. The law of Delaware is, of course, determinative of the liability of the officers and directors to the corporation and that of the corporation to its officers. Gallup v. Caldwell, 3 Cir., 120 F.2d 90. On March 31, 1941, Article X of the By-Laws was adopted by the vote of Beneficial's stockholders which, as we have stated, provides for the indemnification by the corporation of directors and officers against any claim or liability to which any of them might become subject by reason of his office. Indemnification is restricted, however, to claims or demands not arising because of the director's or officer's negligence or wilful misconduct. See note 1 supra. Article X finds sanction in Section 2(10) of the Delaware Corporation Law, 44 Delaware Laws, c. 125, Section 1, p. 442. The by-law was couched in the terms of the Delaware statute subsequently enacted. The law of Delaware is important in the instant case only because it authorizes Beneficial to indemnify the defendants in the instant case if the plaintiff cannot maintain her cause of action. No substantial conflict-of-laws question appears under the circumstances for the obligation of indemnification created by Article X under the Delaware law would be enforceable against Beneficial in any State. The right of the officers and directors of Beneficial to indemnification under the by-law is analogous to a contract right. While a district court of the United States is compelled in diversity cases to follow the rule of law prevailing in the State in which the court sits, Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, and Jackman v. Equitable Life Assurance Society, 3 Cir., 145 F.2d 945, we entertain no doubt that a State court of New Jersey would enforce freely and fully any liability arising under the contract. R.S. 14:3-15 simply provides a means whereby the corporation may recoup any losses which it may have sustained by reason of the indemnification of its directors or officers. The Legislature of New Jersey in enacting the statute intended to prevent losses to both domestic and foreign corporations and to their stockholders by unjustified [3] litigation. We think that it is enough to state now that we can perceive no dichotomy between the laws of New Jersey and Delaware which would permit the plaintiff or the intervener to escape the impact of R.S. 14:3-15, if it is otherwise applicable.