Baker v. Health Management Systems, Inc.

772 N.E.2d 1099 (2002)

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Nature of the Case

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Facts

Siegel (P) was the Chief Financial Officer of Health Management Systems, Inc. (D). In that capacity, he was joined as a party defendant in several securities fraud class actions. P had joined D after the beginning date of the class period when the misconduct had occurred, and he even purchased stock in D during the relevant period instead of selling like his co-defendants. All claims against P were dismissed by stipulation and P applied for reimbursement of his attorneys' fees and expenses. D denied them. P moved in the District Court for indemnification from D, including reimbursement for legal expenses that he incurred in making his motion for indemnification. P claimed $84,784.37 in attorneys' fees and costs. The court denied P's application only insofar as he sought such 'fees on fees.' On appeal, the United States Court of Appeals for the Second Circuit certified the following question: Where a corporate officer is 'successful' in the defense of an underlying action, within the meaning of New York Business Corporation Law § 723(a), where the corporation unsuccessfully contests the duty to indemnify and contests with partial success the amount of indemnification, and where there is no bad faith on the part of the corporation * * * does the phrase 'attorneys' fees actually and necessarily incurred as a result of such action or proceeding,' as used in New York Business Corporation Law § 722(a), provide for recovery of reasonable fees incurred by a corporate officer in making an application for fees before a court (as authorized by New York Business Corporation Law § 724[a])?'