Gary Wunderlich v. B. Riley Financial, Inc.

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PAUL A. FIORAVANTI, JR. LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

Date Submitted: December 18, 2020
Date Decided: March 24, 2021

Samuel T. Hirzel, Esquire Raymond J. DiCamillo, Esquire
Jamie L. Brown, Esquire Russell C. Silberglied, Esquire
Heyman Enerio Gattuso & Hirzel LLP Kevin M. Gallagher, Esquire
100 S. West Street, Suite 400 Angela Lam, Esquire
Wilmington, DE 19801 Richards, Layton & Finger, P.A.
920 North Market Street
Wilmington, DE 19801

RE: Gary Wunderlich v. B. Riley Financial, Inc. et al.,
Civil Action No. 2020-0453-PAF

Dear Counsel:

In this action, Plaintiff Gary Wunderlich seeks indemnification from

Defendants B. Riley Financial, Inc. (“B. Riley”) and Wunderlich Securities, Inc.,

now known as B. Riley Wealth Management, Inc. (“WSI”). Wunderlich further

seeks a declaratory judgment in his favor regarding his indemnification rights.

Defendants have filed a Motion to Dismiss (the “Motion”) Plaintiff’s Complaint in

its entirety. This letter opinion resolves the Motion.
Gary Wunderlich v. B. Riley Financial, Inc. et al.,
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I. Factual Background

a. Wunderlich and B. Riley

In 1996, Wunderlich founded non-party Wunderlich Investment Company,

Inc. (“WIC”), a Delaware corporation, and WSI, a Tennessee corporation and WIC’s

operating subsidiary. 1 Wunderlich was a director and officer of WIC and WSI. 2

In 2017, B. Riley acquired WIC through a Merger Agreement (the “Merger

Agreement”), dated May 17, 2017. Through operation of the Merger Agreement,

WIC and WSI became wholly-owned subsidiaries of B. Riley. 3 After the merger

closed on July 3, 2017, Wunderlich became a director and an officer of B. Riley and

continued to serve as a director and officer of WIC and WSI.4 On the same date the

merger closed, Wunderlich executed an Indemnification Agreement with B. Riley.5

In late July 2017, Dominick & Dickerman, LLC (“D&D”) and Michael John

Campbell (collectively, the “Claimants”) initiated an arbitration proceeding in the

Office of Dispute Resolution of the Financial Industry Regulatory Authority

(“FINRA”) against WSI and Wunderlich (the “Arbitration”). The Claimants

1
The facts are drawn from the Complaint and the documents integral thereto.
2
Compl. ¶¶ 9, 12.
3
Id. ¶ 17.
4
Id. ¶¶ 9, 12, 30; id. Ex. 3.
5
Compl. ¶¶ 17, 19.
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asserted claims for common law fraud, negligent misrepresentation, securities fraud,

breach of contract, and violations of FINRA rules in connection with WSI’s 2015

acquisition of D&D.6 Wunderlich was named as a respondent in the Arbitration

proceeding by reason of the fact that he was a director and officer of WIC. The

Defendants “assumed all control and responsibility for the defense of the Arbitration

Proceeding from its outset, including the selection and payment of counsel” and the

payment of legal fees and expenses incurred in the defense of the Arbitration

Proceeding.7

During the pendency of the Arbitration, B. Riley and Wunderlich agreed to

part ways. The terms of their separation are memorialized in a November 4, 2018

severance agreement (the “Severance Agreement”). Pursuant to the Severance

Agreement, Wunderlich’s employment with B. Riley terminated, and he resigned

from all positions he held at B. Riley and its subsidiaries, which included his director

and officer positions at B. Riley, WSI, and WIC. 8

The Arbitration culminated in an Award against WSI and Wunderlich and in

favor of Claimants on April 7, 2020. The Award held WSI and Wunderlich jointly

6
Id. ¶¶ 23, 24; Pl.’s Answering Br. 12.
7
Compl. ¶ 27.
8
Id. ¶¶ 9, 12, 30; see id. Ex. 2 § 13.
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and severally liable for approximately $10.5 million. 9 In May 2020, Claimants filed

a petition to confirm the Award in the United States District Court for the Southern

District of New York (the “Confirmation Action”). The following day, B. Riley

filed a petition to vacate the Award in the same court on behalf of itself and

Wunderlich (the “Vacatur Action”).10

On April 23, 2020, Wunderlich formally demanded that B. Riley “confirm”

that it would indemnify him for “all costs, expenses, awards, losses and liabilities

incurred by reason of the fact that he was an officer or director” of B. Riley, WIC,

and WSI, including defense costs for the Arbitration and payment of the Award. 11

On June 3, 2020, the Claimants, WSI, and Wunderlich executed a settlement

agreement resolving all claims asserted in the Arbitration.12 Through the Settlement

Agreement, Defendants agreed to pay an amount to resolve all claims against

9
Compl. ¶ 35.
10
Id. ¶ 37.
11
Id. ¶ 40; id. Ex. 7, final page.
12
See Compl. ¶ 38 (“Rather than litigating the competing claims in the New York Actions,
the parties reached a confidential settlement agreement . . . executed on or about June 3,
2020, wherein Defendants agreed to pay an amount to resolve all claims against Defendants
and Mr. Wunderlich (and extinguishing all liability on the Award) in exchange for releases
of all Claimants’ known and unknown claims against Defendants and Mr. Wunderlich.”);
id. ¶ 38 n.1 (“The Settlement Agreement’s terms do not permit disclosure of its terms.”).
Plaintiff’s answering brief appears to clarify that the settlement agreement was “between
the Claimants, [WSI], and Mr. Wunderlich.” Pl.’s Answering Br. 17.
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Defendants and Wunderlich in exchange for releases of Claimants’ claims against

Defendants and Wunderlich. During settlement negotiations, however, Defendants

threatened to pursue claims against Wunderlich for actions relating to the Arbitration

and to recover from Wunderlich amounts Defendants paid in the Settlement

Agreement. 13

On June 10, 2020, Wunderlich initiated this action seeking indemnification

against Defendants.

b. The Claimed Sources of Indemnification

Wunderlich points to several sources for his rights to indemnification.

i. The WIC Bylaws and the WSI Bylaws

Wunderlich contends that he is entitled to indemnification under the bylaws

of WIC and WSI. Article VII of the WIC Bylaws contains broad indemnification

rights for current and former directors and officers of WIC. It states that WIC shall

“indemnify, to the fullest extent permitted by the Delaware General Corporation

Law . . . any person who was or is a party or is threatened to be made a party to any

threatened, pending, or completed action . . . by reason of the fact that such person .

. . is or was a director or officer of the corporation . . . or is or was a director or

13
Compl. ¶ 39.
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officer of the corporation serving at the request of the corporation as a director or

officer, employee, or agent of another corporation.”14 Section 10 of Article VII

further states that “[t]he rights to indemnification and advancement of expenses

conferred by this Article VII shall continue as to a person who has ceased to be a

director or officer.”15

Article VI of the WSI Bylaws is similar and states that WSI shall “to the fullest

extent permitted by applicable law . . . indemnify any and all persons” who have

served as WSI’s directors or officers.16 The WSI Bylaws also state that the

“indemnification shall continue as to a person who has ceased to be a [d]irector or

officer” and that the indemnification provided by the WSI Bylaws “shall not be

deemed exclusive of any other” indemnification rights.17

ii. The Merger Agreement

Wunderlich argues that he is entitled to indemnification as a third-party

beneficiary of the Merger Agreement, because it “expressly affirmed, assumed and

continued” the indemnification and advancement obligations of WIC and WSI.18

14
Id. Ex. 5, Art. VII § 1.
15
Id. § 10.
16
Compl. Ex. 4, Art. VI.
17
Id.
18
Compl. ¶¶ 2, 18.
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Wunderlich specifically relies upon Section 5(r)(i) of the Merger Agreement, which

states that “all rights to indemnification, advancement of expenses and exculpation

by [WIC] now existing in favor of each Person who is now, or has been . . . an officer

or director of [WIC] . . . shall survive the Merger Closing Date and shall continue in

full force and effect for the six year period following the Merger Closing Date.”19

Section 5(r)(ii) further provides that B. Riley’s and WIC’s indemnification

obligations “shall not be terminated or modified in such a manner as to adversely

affect any director or officer to whom this [section] applies without the consent of

such affected directed or officer.”20

iii. The Indemnification Agreement

Wunderlich argues that, in addition to his indemnification rights under the

WIC and WSI Bylaws, he possesses indemnification rights against B. Riley pursuant

to the Indemnification Agreement. Section 2 of the Indemnification Agreement

provides Wunderlich the right to indemnification if he is “involved . . . in any

Proceeding by reason of . . . an Indemnifiable Event, whether the basis of the

Proceeding is the Indemnitee’s alleged action in an official capacity as a director or

19
Compl. Ex. 3 § 5(r)(i).
20
Id. § 5(r)(ii).
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officer or in any other capacity while serving as a director or officer.”21 Under the

Indemnification Agreement, Wunderlich is entitled to indemnification “to the fullest

extent permitted by the DGCL against any and all Expenses, liability, and loss,”

including “any amounts paid or to be paid in settlement” for amounts “reasonably

incurred or suffered by [Wunderlich] . . . in connection with such Proceeding.”22

“Proceeding” and “Indemnifiable Event” are defined terms. The

Indemnification Agreement defines “Proceeding” as “any threatened, pending or

completed action, suit, investigation or proceeding, and any appeal thereof . . .

whether conducted by [B. Riley] or any other party, that [Wunderlich] in good faith

believes might lead to the institution of any such action.”23 “Indemnifiable Event”

is defined as “any event or occurrence that takes place either prior to or after the

execution of this Agreement, related to the fact that the Indemnitee is or was a

director or officer of [B. Riley], or is or was serving at the request of [B. Riley] as a

director, officer, employee, or agent of another corporation[.]”24 The

Indemnification Agreement further provides that the rights provided to Wunderlich

21
Compl. Ex. 1 ¶ 2.
22
Id.
23
Id. ¶ 1(e).
24
Id. ¶ 1(d).
Gary Wunderlich v. B. Riley Financial, Inc. et al.,
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under that agreement are not exclusive of any other statute, certificate of

incorporation, or bylaws.25

II. Analysis

Wunderlich’s Complaint contains four counts. Count I is an indemnification

claim for “reasonable attorneys’ fees and other expenses incurred in connection with

defending against and pursuing vacatur of the Award and negotiating the terms of

the Settlement Agreement resolving the amounts owed under the Award,” with

interest. Compl. ¶ 48. Count II seeks indemnification for Wunderlich’s fees and

expenses incurred in this action, or “fees-on-fees.” Id. ¶¶ 49–51. Count III requests

a declaratory judgment obligating Defendants to indemnify Wunderlich for any

contribution claim that Defendants “may seek to assert against him in connection

with the Arbitration Proceeding, the Award, the Settlement Agreement (or amounts

paid in connection therewith).” Id. ¶ 57. Count IV alleges that B. Riley’s failure to

tender payment in response to Wunderlich’s indemnification demand breached the

Indemnification Agreement. Id. ¶¶ 58–64.

Defendants have moved to dismiss the Complaint in its entirety pursuant to

Court of Chancery Rule 12(b)(6) for failure to state a claim upon which relief can

25
Id. ¶ 8.
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be granted. Defendants have moved to dismiss Count III for the additional reason

that it does not present a ripe dispute.

This letter opinion first addresses Defendants’ ripeness argument before

addressing whether the Complaint states claims for indemnification.

a. The Declaratory Judgment Claim Is Not Ripe.

Count III seeks a declaratory judgment that Defendants must indemnify

Wunderlich for any award of contribution that they may seek against him in

connection with the Arbitration Proceeding, the Award, and the Settlement

Agreement. Defendants contend this claim is not ripe because Defendants have not

initiated any contribution action against Wunderlich.

This Court may decline to exercise jurisdiction over a case if the underlying

dispute is not ripe. To determine whether Count III presents a ripe claim, the court

must engage in a “common sense assessment of whether the interests of the party

seeking immediate relief outweigh the concerns of the court in postponing review

until the question arises in some more concrete and final form.” XL Specialty Ins.

Co. v. WMI Liquidating Trust, 93 A.3d 1208, 1217 (Del. 2014) (internal citations

omitted). As the Delaware Supreme Court elaborated:

Generally, a dispute will be deemed ripe if litigation sooner or later
appears to be unavoidable and where the material facts are static.
Conversely, a dispute will be deemed not ripe where the claim is based
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on uncertain and contingent events that may not occur, or where future
events may obviate the need for judicial intervention.

Id. at 1217–18 (internal citations omitted). The Delaware Supreme has emphasized

that “our courts will decline ‘to enter a declaratory judgment with respect to

indemnity until there is a judgment against the party seeking it.’” Id. at 1218

(quoting Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 572 A.2d 611, 632 (Del. Ch.

2005)).

Count III does not present a ripe claim because “future events may obviate the

need for judicial intervention.” XL Specialty, 93 A.3d at 1218. Defendants have not

asserted a contribution action against Wunderlich, and Wunderlich does not

presently owe any amounts to be paid in connection with the Settlement Agreement.

If Defendants do not assert a contribution claim against Wunderlich, judicial

intervention may be unnecessary. Further, the material facts are not static. The

nature of the claim and the amount sought for contribution against Wunderlich

remain uncertain. In this regard, Defendants have represented that they are presently

seeking payment from an insurer for the amounts paid under the Settlement
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Agreement, which could offset or, according to Defendants, potentially eliminate

the possibility of any contribution litigation against Wunderlich.26

Wunderlich argues that Count III is ripe because he “has an interest in

promptly resolving this controversy” and because the Complaint “alleges that B.

Riley requested voluntary contributions from [him], repeatedly reserved its rights to

sue him for contribution, recently threatened to do the same, and has withheld

presently due indemnification funds.” 27 At oral argument, Wunderlich’s counsel

further insisted that the “[t]he possibility of future fact development is, frankly, over”

and that “judicial economy favors proceeding” with Count III at the same time as

the other Counts in the Complaint.28

These arguments are not persuasive. Wunderlich has not cited any case in

which this court has determined that a declaratory judgment claim for

26
After the completion of briefing and oral argument, Plaintiff and Defendants each
submitted letters regarding the extent to which the action seeking payment from an insurer
for the Settlement Agreement could offset or eliminate Wunderlich’s potential liability to
Defendants. See Dkts. 27 & 29. The precise terms of the Settlement Agreement are not
available to the court because the parties have not provided that information. It is therefore
not possible for the court to determine how much Plaintiff could be liable for contribution
in the event that Defendants prevail against the insurer. Based on the record before the
court, however, the possibility of recovery from the insurer remains a material factor in
any potential subsequent contribution action and accordingly, this factor weighs in favor
of dismissal without prejudice.
27
Pl.’s Answering Br. 24.
28
Oral Arg. Tr. 31:5–11.
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indemnification arising from an unasserted claim was ripe. The assertion that “the

possibility of future fact development is . . . over” is contrary to the record before

the court. As described above, future developments in the insurance action and the

initiation of any contribution litigation by Defendants against Wunderlich would be

material to this action. Wunderlich’s interest in clarifying his legal rights is

understandable, but he is not currently liable to any party for any portion of the

Award because Defendants have paid the amounts owed in the Settlement

Agreement. In the absence of any contribution action, Wunderlich is not liable for

any amount under the Settlement Agreement.29

For the foregoing reasons, Count III of the Complaint is dismissed without

prejudice to Wunderlich’s ability to reassert the claim in the event that Defendants

seek to pursue a contribution claim against him.

29
Wunderlich argues that he is presently owed indemnification for “expenses incurred in
connection with the Vacatur Action and negotiating the Settlement Agreement.” Pl.’s
Answering Br. 28. As Wunderlich acknowledges, these expenses “are presently before
this Court in Count I,” id., and they are not the subject of Count III, which relates
exclusively to an anticipated claim for contribution. See Compl. ¶ 57.
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b. The Complaint States a Claim for Indemnification.

Defendants argue that Plaintiff has not stated a claim for indemnification or

for breach of the Indemnification Agreement in Counts I and IV of the Complaint.

In resolving a motion to dismiss for failure to state a claim:

all well-pleaded factual allegations are accepted as true; (ii) even vague
allegations are well-pleaded if they give the opposing party notice of
the claim; (iii) the Court must draw all reasonable inferences in favor
of the non-moving party; and ([iv]) dismissal is inappropriate unless the
plaintiff would not be entitled to recover under any reasonably
conceivable set of circumstances susceptible to proof.

Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (internal citations and

quotation marks omitted); accord Central Mortg. Co. v. Morgan Stanley Mortg.

Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011).

Defendants do not dispute the broad scope of the indemnification provisions

in the WSI and WIC bylaws. Instead, Defendants principally argue that Wunderlich

waived his indemnity rights when he executed the Severance Agreement. Central

to this decision is whether the indemnification provisions in the bylaws are preserved

through a carve-out in the Severance Agreement, which, in turn, requires the

construction of the terms of the Merger Agreement. Defendants also contend that

the Indemnification Agreement does not apply to events occurring before its
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execution. All of these issues require application of well-settled principles of

contract construction.30

“‘Delaware adheres to the objective theory of contracts, i.e., a contract’s

construction should be that which would be understood by an objective, reasonable

third party.’” Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (quoting NBC

Universal v. Paxson Commc’ns Corp., 2005 WL 1038997, at *5 (Del. Ch. Apr. 29,

2005)); accord Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014). When a

contract’s language is clear and unambiguous, the Court will give effect to the plain

meaning of the contract’s terms and provisions. Osborn, 991 A.2d at 1159-60. The

contract is to be read as a whole, giving effect to each term and provision, so as not

to render any part of the contract mere surplusage. Id. at 1159. “At the motion to

30
The Indemnification Agreement and the WIC Bylaws are governed by Delaware law.
The Merger Agreement and Severance Agreement are governed by New York law. The
parties have briefed and argued the Motion exclusively in reliance on Delaware law.
Neither side has argued that New York law would differ from Delaware law regarding any
legal issue implicated by the Motion. See Pine River Master Fund Ltd. v. Amur Fin. Co.,
Inc., 2017 WL 4548143, at *10 n.71 (Del. Ch. Oct. 12, 2017) (observing that “Delaware
and New York apply the same general contract principles”) (citing Viking Pump, Inc. v.
Century Indem. Co., 2 A.3d 76, 90 (Del. Ch. 2009)); see also Standard General L.P. v.
Charney, 2017 WL 6498063, at *9–10 nn. 71 & 83 (Del. Ch. Dec. 19, 2017) (analyzing
Delaware and New York law where the parties did not address the applicability of New
York law, but observing: “This approach ends up being an academic exercise because no
issue has been presented where the analysis and results would differ in any material respect
under either state’s law.”). The Merger Agreement contains a New York choice of forum
provision (Compl. Ex. 3 § 10(i)), and the Severance Agreement provides for arbitration of
disputes (Compl. Ex. 2 § 23), but the parties have not raised those provisions in the briefing.
Gary Wunderlich v. B. Riley Financial, Inc. et al.,
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dismiss stage, ambiguous contract provisions must be interpreted most favorably to

the non-moving party. Thus, ‘[d]ismissal, pursuant to Rule 12(b)(6), is proper only

if the defendants’ interpretation[s] [are] the only reasonable construction[s] as a

matter of law.” Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *8 (Del. Ch.

Sept. 18, 2014) (emphasis in original) (quoting VLIW Tech., LLC v. Hewlett-Packard

Co., 840 A.2d 606, 615 (Del. 2003)).

The Severance Agreement contains a general release by Wunderlich stating:

In consideration of the Severance Package, [Wunderlich] waives,
releases and forever acquits and discharges [WIC] and its parent, past,
present and future, including [B. Riley], and each of their affiliates . . .
from any and all claims, known or unknown, which [Wunderlich] has
ever had or which [Wunderlich] has now, including, but not limited to,
any claims of . . . breach of contract, . . . or any other claims arising out
of or relating to [Wunderlich’s] employment, or the termination of
[Wunderlich’s] employment, with [WIC]. 31

Wunderlich argues that he did not forfeit his indemnification rights because

the Severance Agreement contains a carve-out that preserves his rights to indemnity

that “aris[e] under” the Merger Agreement and the Indemnification Agreement:

Excluded from the General Release are any of the Executive’s rights to
indemnity arising under the Merger Agreement by and among B. Riley
Financial, Inc., Foxhound Merger Sub, Inc. Wunderlich Investment
Company, Inc. and Stockholder Representative, dated as of May 17,
2017 and the rights of the Executive pursuant to the July 3, 2017
Indemnification Agreement. Also excluded from the General Release

31
Compl. Ex. 2 § 2.
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are Executive’s rights arising under the Merger Agreement not
specifically addressed herein.32

Defendants argue that the Severance Agreement extinguished Wunderlich’s

indemnification rights because those rights originate from the WIC Bylaws, not the

Merger Agreement. Defendants argue that the only possible indemnification rights

that “aris[e] under” the Merger Agreement are contained in Section 8 of the Merger

Agreement. That provision enumerates the obligations of the purchaser and the

sellers to indemnify each other for certain claims relating to the Merger Agreement,

such as claims relating to breaches of representations and warranties in the Merger

Agreement. 33 According to Defendants, Section 5(r) of the Merger Agreement only

“acknowledged the existence of other preexisting indemnification rights owed by

WIC.” 34 At oral argument, Defendants took this argument a step further, insisting

that Section 5(r) was a not a “new right,” but an “abridgment of a right” because

Wunderlich’s indemnification rights were subject to a six-year tail.35

Wunderlich has stated a claim for indemnification in Count I of his Complaint

because he has advanced a reasonable interpretation of the WIC Bylaws, the Merger

32
Id.
33
Compl. Ex. 3 § 8.
34
Defs.’ Opening Br. 20.
35
Oral Arg. Tr. 14:15–23.
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Agreement, and the Severance Agreement. 36 The Severance Agreement does not

merely preserve Wunderlich’s indemnification rights contained in Section 8 of the

Merger Agreement, but instead, maintains all indemnification rights arising under

the Merger Agreement.

The WIC Bylaws provide Wunderlich with broad indemnification rights. In

Section 5(r)(i) of the Merger Agreement, B. Riley agreed that “all rights to

indemnification” existing at the time of the Merger Agreement “as provided in the

certificate of incorporation or by-laws of [WIC] . . . shall survive the Merger Closing

Date and shall continue in full force and effect for the six year period following the

Merger Closing Date.”37 Section 5(r) of the Merger Agreement obligates

Defendants to maintain Wunderlich’s indemnification rights in the WIC Bylaws for

at least a six-year period following the Merger Agreement. By its terms, Section

5(r) imposes an obligation on B. Riley, and is not a mere “acknowledgment” or

36
In his Answering Brief, Wunderlich argued that he is entitled to indemnification under
WIC’s Amended and Restated Certificate of Incorporation. Pl.’s Answering Br. 8–9.
Defendants argued that Wunderlich may not amend his complaint through briefing. Defs.’
Reply Br. 15–16. Because the motion to dismiss the indemnification claim is denied, this
Court need not address this issue.
37
Compl. Ex. 3 § 5(r)(i).
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“abridgment” of Wunderlich’s indemnification rights, as Defendants argue.38 An

objectively reasonable third-party could therefore conclude Wunderlich’s rights to

indemnification under the WIC Bylaws “aris[e] under” the Merger Agreement

because B. Riley is obligated to maintain those rights under Section 5(r) of the

Merger Agreement.

For this reason, Julian v. Julian, 2009 WL 2937121 (Del. Ch. Sept. 9, 2009)

is inapposite. Defendants rely on Julian for the proposition that the only rights that

“arise under” a contract are those that exist within its four corners. In Julian, the

court evaluated an arbitration clause that required all claims “arising out of or

relating to” a contract to be settled by arbitration. Id. at *5. The Court held that the

phrase “relating to” extended the arbitration clause beyond the “four corners” of the

contract. Julian is factually inapposite because the relevant language in the Merger

Agreement and the Severance Agreement are different from the arbitration provision

at issue in Julian. Here, the Merger Agreement can be reasonably interpreted to

obligate B. Riley to provide Wunderlich indemnification rights. Julian thus does

38
See id. § 5(r)(ii) (referencing Section 5(r) as imposing “obligations” upon B. Riley and
WIC); id. § 5(r)(iii) (requiring “proper provision” to be made for the assumption of the
“obligations set forth in this Section 5(r)” in the event of a future merger or asset sale).
Gary Wunderlich v. B. Riley Financial, Inc. et al.,
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not mandate a conclusion that Wunderlich’s indemnification rights do not “aris[e]

under” the Merger Agreement.39

At this stage, Wunderlich has advanced a reasonable interpretation of the

Severance Agreement, Merger Agreement, and WIC Bylaws entitling him to

indemnification under the WIC Bylaws. Dismissal at this stage “‘is proper only if

the defendants’ interpretation[s] [are] the only reasonable construction[s] as a matter

of law.’” Veloric, 2014 WL 4639217, at *8 (quoting VLIW Tech., LLC, 840 A.2d at

615). The Court cannot determine as a matter of law that the Severance Agreement

only released the indemnification rights listed in Section 8 of the Merger Agreement

to the exclusion of any indemnification rights set forth at Section 5(r) in the same

contract. Because Defendants have not advanced the only reasonable interpretation

of the Merger Agreement and the Severance Agreement, their motion to dismiss

Count I is denied. 40

39
Compl. Ex. 2 § 2.
40
Because Plaintiff has presented a reasonable interpretation of the Severance Agreement
and the Merger Agreement as preserving his indemnification rights under the WIC Bylaws,
the court does not reach the issues of whether (1) the release is limited to rights as an
employee and does not extend to rights as an officer or director, and (2) whether Plaintiff’s
claim for indemnification falls within the Severance Agreement’s carveout for “any rights
or claims that may arise after the effective date of [the] Agreement.” Compl. Ex. 2 § 2; see
Pl.’s Answering Br. 40–42.
Gary Wunderlich v. B. Riley Financial, Inc. et al.,
C.A. No. 2020-0453-PAF
March 24, 2021
Page 21 of 22

Wunderlich has also stated a claim for breach of the Indemnification

Agreement. Defendants argue that Wunderlich has not stated a claim for

indemnification under the Indemnification Agreement because the event that caused

the Arbitration was his conduct in 2014 and 2015, before B. Riley acquired WIC

through the Merger Agreement.

Defendants’ argument is a non-sequitur. Wunderlich alleges that “Defendants

assumed all control and responsibility for the defense of the Arbitration Proceeding,”

Compl. ¶ 27, and it is a reasonable inference that his participation in the related

Vacatur Action and settlement negotiations may have been an event “related to the

fact that [Wunderlich] is or was a director of officer of [B. Riley]” or to the fact that

he “[served] at the request of [B. Riley] as a director, officer, employee, or agent” of

another entity. See Compl. Ex. 1 § 1(d) (defining “Indemnifiable Event”). Some of

Wunderlich’s costs relating to the Arbitration may not be indemnifiable. As

Defendants concede, however, the Indemnification Agreement “covers . . . activities

that were performed at the request of B. Riley Financial” or that were “related to

service as an officer or director of B. Riley Financial.” Defs.’ Reply Br. 21–22.

Because the Complaint pleads facts from which it can be reasonably inferred that

Wunderlich participated in an Indemnifiable Event in his capacity as an officer or

director of B. Riley, the motion to dismiss Count IV must be denied.
Gary Wunderlich v. B. Riley Financial, Inc. et al.,
C.A. No. 2020-0453-PAF
March 24, 2021
Page 22 of 22

As a final matter, Defendants argue that Count II, Wunderlich’s claim for fees-

on-fees in enforcing his indemnification rights, should be dismissed because he has

not identified any applicable indemnification provisions. Because Wunderlich has

stated a claim for indemnification, including through the WIC Bylaws, the motion

to dismiss Count II is denied. See Stifel Fin. Corp. v. Cochran, 809 A.2d 555, 561

(Del. 2002) (analyzing Section 145 of the DGCL and noting that, “without an award

of attorneys’ fees for the indemnification suit itself, indemnification would be

incomplete”); see also Compl. Ex. 5 Art. VII § 1 (requiring WIC to provide

indemnification “to the fullest extent permitted by the Delaware General

Corporation Law”).

For the foregoing reasons, the motion to dismiss Count III as unripe is granted,

and the motion to dismiss Counts I, II, and IV is denied.

IT IS SO ORDERED.

Very truly yours,

/s/ Paul A. Fioravanti, Jr.

Vice Chancellor