Justice Elizabeth H. Emerson


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Brancato defendants moved for Challenge Graphics Services (CGS) to indemnify them for costs and expenses related to the defense of this action under Business Corporation Law §§722, 723, and 724. A prior decision found in plaintiff’s favor on the breach of contract claim asserted against defendants Anthony and Roseann Brancato, in favor of Joseph Brancato on the same claim, and in favor of all defendants on the remaining causes of action. Anthony was substituted for Roseann and moved for indemnification. BCL §722 was permissive, allowing, but not requiring a corporation to indemnify directors and officers if the prescribed standard of conduct was satisfied. Yet, indemnification was mandatory under § 723 if a director or officer was successful “on the merits or otherwise,” and any outcome not resulting in a finding of liability was considered a “success.” The court found this motion premature as Brancatos sought indemnification for over $475,000 in fees they incurred in defense of this action, but the record did not reflect they sought indemnification from CGS before making this motion. Also, the motion was not made on CGS, as required by §724. Thus it could not be determined if indemnification would be consistent with a corporate provision disallowing same.