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FIDELITY FED. S&L ASSN. v. FELICETTI

August 4, 1993

Fidelity Federal Savings and Loan Association; Wilmington Savings Fund Society, FSB; and Star States Pennsylvania Corporation, Plaintiffs,
v.
Armondo Felicetti; Louis Scarcia; Louis A. Iatarola, individually; Louis A. Iatarola, Realty Appraisal Group, Ltd.; and Fidelity and Deposit Company of Maryland, Defendants.



The opinion of the court was delivered by: BY THE COURT; J. CURTIS JOYNER

 Joyner, J.

 August 4, 1993

 Presently before the Court is the motion of defendants Armondo Felicetti and Louis Scarcia for partial summary judgment as well as the plaintiffs' cross motion for partial summary judgment.

 On June 2, 1993, this Court granted defendants Felicetti and Scarcia's motion to amend their answers to include counterclaims for mandatory advancement and reimbursement of expenses and indemnification pursuant to the Bylaws of Star States Pennsylvania Corporation ("Star States"). By way of this motion defendants Felicetti and Scarcia seek advancement of expenses which will be incurred in defending this case, reimbursement for expenses plus interest already incurred by defendants in defending this case and reimbursement for expenses incurred by defendants in prosecuting their counterclaims and this motion for partial summary judgment. Likewise, plaintiff's seek partial summary judgment that defendant Felicetti and Scarcia are not entitled to advancement of expenses in connection with their efforts to seek such advancements and in defending this action.

 Standard

 In considering a motion for summary judgment, the court must consider whether the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show there is no genuine issue as to any material fact, and whether the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). This court is required to determine whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). In making this determination, all reasonable inferences must be drawn in favor of the nonmoving party. Anderson, 477 U.S. at 256, 106 S. Ct. at 2512 . While the movant bears the initial burden of demonstrating an absence of genuine issues of material fact, the nonmovant must then establish the existence of each element of its case. J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990) citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986).

 Background

 Plaintiffs, Fidelity Federal Savings and Loan Association ("FidFed"), Wilmington Savings Fund Society, FSB ("WSFS") and Star States have brought this action against, among others, Armondo Felicetti who served as President of FidFed from approximately 1977 through February 1990 and Louis Scarcia who served as Vice President of FidFed from approximately September 1975 through May 1989. Felicetti and Scarcia also served as officers of FidFed's parent, Diversified Investment Group, Inc. ("DING") until February 2, 1990. In their complaint, plaintiffs allege that Felicetti and Scarcia participated in the conduct of FidFed through a pattern of racketeering activity, breached their fiduciary duties and committed fraud and civil conspiracy with respect to various construction loans made by FidFed while Felicetti and Scarcia were officers of FidFed.

 These motions revolve around Article V of those Bylaws entitled "Personal Liability of Directors and Indemnification." Section 502 of the Bylaws provides for mandatory indemnification of directors and officers who were or are a party to a lawsuit as a result of their position with the corporation. That section reads in full:

 
Mandatory Indemnification of Directors and Officers. The Corporation shall, to the fullest extent permitted by applicable law, indemnify its directors and officers who were or are a party or are threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not such action, suit or proceeding arises or arose by or in the right of the fact that such director or officer is or was a director, officer, employee, general partner, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise (including service with respect to employee benefit plans), against expenses (including but not limited to, attorneys' fees and costs), judgments, fines (including excise taxes assessed on a person with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by such director or officer in connection with such action, suit or proceeding, except as otherwise provided in Section 504 hereof. A director or officer of the Corporation entitled to indemnif-ication under this Section 502 is hereafter called a "person covered by the Section 502 hereof."

 Section 503 provides:

 
Section 503. Expenses. Expenses incurred by a person covered by section 502 hereof in defending a threatened, pending or completed civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation, except as otherwise provided by Section 504.

 Lastly, Section 504 enumerates a number of circumstances under which the corporation's indemnification obligations are exonerated, including "if a final unappealable judgment or award establishes that such director or officer engaged in ...


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