New Delaware Case Favors Indemnity for Investment Pros
A recent case from the Delaware Chancery Court, Stockman v. Heartland Industrial Partners, L.P. decided important issues relating to the indemnification of private equity and venture capital professionals by their affiliated funds, in connection with their service as directors and officers of the funds’ portfolio companies. The decision was largely in favor of the investment professionals and will likely result in their prevailing on claims to be indemnified by the fund. Like any of the cases involving the critical issue of indemnification, this one both provides new guidance and confirms the importance of carefully applying existing rules of the road when crafting investment partnership agreements. The case arose from a failed investment by Heartland Industrial Partners in Collins & Aikman Corp., a manufacturer of automotive interior components. David Stockman, a co-founder of Heartland, and Michael Stepp, a Heartland managing director, served as officers and directors of Collins & Aikman. After exhausting all available insurance policies, they sued Heartland when the firm refused to advance funds for their legal defense expenses in various civil and criminal cases related to Collins & Aikman.
