Fuhlendorf v. Isilon Systems, Inc.
Annotate this Case
Download PDF
EFiled: Nov 9 2010 4:31PM EST Transaction ID 34267749 Case No. 5772-VCN COURT OF CHANCERY OF THE STATE OF DELAWARE JOHN W. NOBLE VICE CHANCELLOR 417 SOUTH STATE STREET DOVER, DELAWARE 19901 TELEPHONE: (302) 739-4397 FACSIMILE: (302) 739-6179 November 9, 2010 David J. Teklits, Esquire Morris, Nichols, Arsht & Tunnell LLP 1201 North Market Street Wilmington, DE 19801 Re: Samuel T. Hirzel, Esquire Proctor Heyman LLP 1116 West Street Wilmington, DE 19801 Fuhlendorf v. Isilon Systems, Inc. C.A. No. 5772-VCN Date Submitted: November 3, 2010 Dear Counsel: The parties agree that Plaintiff Stuart W. Fuhlendorf is entitled to advancement of expenses incurred in defending several proceedings arising out of his employment with Defendant Isilon Systems, Inc.1 Although Isilon has advanced substantial sums to fund Plaintiff s defense costs, its enthusiasm for that effort has waned and the parties are now engaged in a dispute over the reasonableness of the amounts sought by the Plaintiff pursuant to Isilon s 1 The Court awaits submission by counsel of a form of order implementing their agreement that the Plaintiff is entitled to summary judgment as to his right to advancement. Kevin M. Coen, Esquire Samuel T. Hirzel, Esquire November 9, 2010 Page 2 advancement obligation an obligation created by the Indemnification Agreement between the Plaintiff and Isilon. Both Delaware law and the Indemnification Agreement recognize that the value of advancement will be impaired if payment is not made promptly and if additional burdens are imposed upon the indemnitee at a time when he is burdened by the underlying litigation for which advancement is appropriate. Nevertheless, the fees and expenses sought by way of advancement must be reasonable. Despite Plaintiff s undertaking to repay any sums improvidently advanced, neither the Indemnification Agreement nor Delaware law can fairly be read as requiring Isilon to honor clearly unreasonable advancement requests. This Court has addressed a similar impasse in Duthie v. CorSolutions Medical, Inc.2 Although some level of review is necessary, it is not appropriate to review Plaintiff s requests with the same degree of scrutiny that would be expected in an indemnification proceeding. Duthie sets forth an appropriate procedure to be followed: 2 2008 WL 4173850 (Del. Ch. Sept. 10, 2008). Kevin M. Coen, Esquire Samuel T. Hirzel, Esquire November 9, 2010 Page 3 (1) (2) Isilon shall identify those fees which it asserts fall outside the standard of Delaware law for advancement; its counsel shall certify their good faith belief that the advancement of such fees is not appropriate; (3) The fees as to which there is no dispute shall be promptly paid; (4) The fees as to which any dispute remains shall be submitted to a Special Master;3 and (5) 3 Plaintiff s counsel, if they have not already done so, shall certify in good faith that the fees and expenses for which advancement has been sought were incurred reasonably as a matter of sound professional judgment; The costs of the Special Master will be divided equally between the parties, except that the entire cost of the Special Master will be borne by Isilon if it turns out that its objections to payment of the fees for which advancement has been sought have been made without good cause.4 Correspondence from counsel after oral argument evidences the contentiousness of this dispute and further persuades the Court that appointment of a Special Master is, unfortunately, unavoidable. 4 Duthie, 2008 WL 4173850, at *2. Isilon appears to believe that paying fifty percent of Plaintiff s advancement requests constitutes reasonable conduct. There appears to be but the Court does not now determine no rational, non-arbitrary basis for that bright line. Any proposed rollback from the advancement requests submitted by Plaintiff must be supported by a good faith basis. In addition, it is imperative that Isilon s review of the Plaintiff s advancement requests be accomplished expeditiously. A leisurely review will necessarily frustrate the Plaintiff s rights. The Court will not now set a timetable, but, if delays ensue, it will, on application, establish a turnaround time. Kevin M. Coen, Esquire Samuel T. Hirzel, Esquire November 9, 2010 Page 4 If necessary, the Court will appoint the Special Master. In this instance, it seems better to ask the parties to attempt to agree upon someone to serve in that capacity. Whether the parties should look to Delaware for someone with expertise in our indemnification law or whether they should look to Seattle because that is where the fees are being incurred is a question that the Court leaves in the first instance to them. IT IS SO ORDERED. Very truly yours, /s/ John W. Noble JWN/cap cc: Register in Chancery-K
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
