IN RE: NAVIDEA BIOPHARMACEUTICALS LITIGATION

Background

Navidea Biopharmaceuticals, Inc. sued Michael Goldberg for breach of contract, breach of the duty of good faith and fair dealing, breach of fiduciary duty, and a declaration of the parties’ contractual rights and obligations. Goldberg brought counterclaims against Navidea and third-party claims against Macrophage Therapeutics, Inc., Navidea’s subsidiary.

Goldberg sought indemnification—payment of fees he had already incurred—and advancement—payment of fees before the litigation ended—for his legal expenses. The court had previously dismissed Navidea’s breach-of-fiduciary-duty claim against Goldberg and found that he was entitled to fees connected with defending that claim. Goldberg also sought advancement for defending Navidea’s remaining claims in this case and Macrophage’s claims in a separate Delaware Chancery Court action.

Magistrate Judge Freeman recommended that the court decline to exercise authority over the fee request related to the Delaware action, find Goldberg entitled to indemnification for reasonable fees from the fiduciary-duty defense, find him entitled to advancement for reasonable fees defending Navidea’s remaining claims, deny any specific fee amount until Goldberg submitted adequate applications, and adopt a procedure for future advancement requests. The parties objected, and Judge Caproni reviewed those objections before adopting the recommendation.

Rulings

Delaware action. The court declined to exercise ancillary jurisdiction, meaning authority over a related side issue, concerning advancement of fees from the Delaware action. The court found that the two cases involved different parties, claims, and alleged conduct. It also found that deciding the Delaware fee request would burden this court because it was unfamiliar with that case’s history, legal posture, billing records, and Delaware legal market.

Fees for the fiduciary-duty defense. The court held that Goldberg was entitled to indemnification for fees and costs he actually and reasonably incurred in successfully defending Navidea’s fiduciary-duty claim. The court did not award a specific amount. Goldberg’s billing records did not identify which time entries concerned that claim, as opposed to Navidea’s other claims, his counterclaims, or his third-party claims. The court ordered him to submit a properly supported application by September 30, 2020, including records identifying the time each attorney spent and the nature of the work. The court warned that failure to comply would likely result in treating his indemnification request as withdrawn with prejudice, but it did not make that withdrawal ruling in this opinion.

Advancement for Navidea’s remaining claims. The court held that Goldberg was entitled to advancement of reasonable fees and costs incurred to date while defending Navidea’s remaining claims, provided that he gave the required undertaking to repay the money if he was ultimately found not entitled to indemnification. The undertaking did not need to be secured. The court found that Navidea’s claims could plausibly relate to Goldberg’s service as an agent of Macrophage at Navidea’s request, although it did not finally decide whether that relationship existed.

Again, the court awarded no specific amount because Goldberg’s records did not separate work on Navidea’s remaining claims from work on the fiduciary-duty claim, the Delaware action, and Goldberg’s own claims. Goldberg was ordered to submit a properly supported advancement application by September 30, 2020. The court stated that failure to comply would likely result in treating the advancement motion as withdrawn with prejudice, but it did not make that withdrawal ruling in this opinion.

The court did not rule at this stage on whether Goldberg could obtain advancement for prosecuting counterclaims. It allowed him to address that issue in a later application, including whether any counterclaims were compulsory and used to defeat or offset Navidea’s claims. The court rejected advancement for Goldberg’s third-party claims against Macrophage because he had not supported that request.

Fee-advancement procedure and disposition

The court adopted Magistrate Judge Freeman’s proposed procedure for future advancement requests and added a requirement that the parties meet for at least one hour to discuss disputed amounts for the relevant period.

In the conclusion, the court stated that Goldberg’s applications for advancement or indemnification of attorneys’ fees and expenses were granted in part and denied in part. It adopted the Report and Recommendation in its entirety, required properly supported applications by September 30, 2020, referred those applications to Magistrate Judge Freeman for another recommendation, and directed the Clerk to terminate the motion at docket entry 64.