Internal Affairs Doctrine Blocks Indemnity Claim

Allen Matkins
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Allen Matkins

Section 78.7502 of Nevada Revised Statutes broadly authorizes, but does not require, a corporation to indemnify its directors, officers, employees or agents.  NRS 78.751 requires the corporation to indemnify directors, officers, employees or agents that successfully defend an indemnifiable. 

When Kazuo Okada sued a Japanese corporation for indemnification for expenses and attorneys' fees incurred in litigation that was voluntarily dismissed, the defendants argued that the internal affairs doctrine necessarily means that NRS 78.502 does not apply.  In a recent ruling U.S. District Court Judge Richard F. Boulware, II agreed and dismissed the claims.  Judge Boulware, however, did not dismiss the claims against a Nevada corporation from which Mr. Okada also seeks indemnification.  Universal Entertainment Corporation v. Aruze Gaming America, Inc., 2020 U.S. Dist. LEXIS 96681.  

Readers of the decision should note that it quotes the earlier version of NRS 78.7502.  The Nevada legislature substantially amended the statute last year.  2019 Nev. Stats. ch. 19, §§ 15 & 16.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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