Litigation

Chancery Court Reviews Corporate Issues Involving Sultan of Brunei

By Francis G. X. Pileggi, Esq.

In Zaman v. Amedeo Holdings, Inc., 2008 WL 2168397 (Del. Ch., May 23, 2008), read opinion here, the Delaware Chancery Court reviews corporate issues involving the ultra-rich Sultan of Brunei, and the London barristers of his brother, but more importantly for the readers of this blog, the court analyzes the barristers' claims for advancement and indemnification as well as "fees on fees". In the course of making its decision, it necessarily recites the background facts of royal family battles that could be part of movie script.

Among the details that compel a reading of the whole decision, is the following nugget: "... the Sultan preceded his 2004 legal campaign by amending Brunei's constitution to declare himself infallible and immune from any obligation to appear in court (or for his designees to appear), and to subject anyone who criticized him to criminal punishment."

The opinion in its original format is over 100 pages long and though it makes for very interesting reading, I only have time today to highlight the key issues decided by the court.

1. Are the plaintiffs entitled to indemnification for a federal lawsuit filed by the defendant entities against them, as well as a related proceeding in London?;

2. Are the plaintiffs entitled to advancement for an ongoing lawsuit in state court in New York? ; and

3. Are the plaintiffs entitled to fees for prosecuting the current case for advancement and indemnificiation?

However, in order to decide the foregoing issues, the court had to resolve a long list of subsidiary issues and to sort out a bewildering array of interlocking parent companies and affiliated companies formed in different countries around the world but which ultimately held assets in the U.S. owned by the Sultan and/or his brother.

Notably, the Chancery Court allowed advancement for certain counterclaims brought by the plaintiffs in the New York state court proceedings against them because the Chancery Court considered them compulsory counterclaims under the traditional test used in Delaware and federal civil procedure, and thus they are deemed to be part of a defense for purposes of DGCL Section 145.

The court also concluded that the plaintiffs were entitled to 80% of the costs of prosecuting their case for advancement and indemnification as they "substantially prevailed on their claims."

There is so much more factual background and legal analysis to this case that is both entertaining and educational, but I must return to paying clients -- though I hope to add to the summary of this fascinating case  at a later time. 

Full post as published by Delaware Corporate and Commercial Litigation Blog on May 29, 2008 (boomark / email).