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Will your company defend you? Proving your innocence in a securities class action may be a luxury you can no longer afford.

Article Excerpt
The well-established principle that indemnified directors and officers who are sued are entitled to have their companies advance their defense costs, without any prior showing of lack of culpability, is under attack. Ironically, the attackers' chosen weapon is a provision of the Private Litigation Securities Reform Act (PSLRA), a law whose principal purpose was to protect public companies and their directors and officers from unfounded and potentially extortionate lawsuits. Under the laws of Delaware and other states, a corporation's charter, bylaws or indemnification agreements may require it to advance a corporate official's defense costs, subject only to the official's promise to repay the advance if he or she ultimately is found not to have been entitled to indemnification. The right to have defense costs advanced is an important inducement to qualified persons to serve as directors and officers of public companies.

In the recent securities class action involving HealthSouth Corporation and its founder and former CEO, Richard Scrushy, HealthSouth settled, Scrushy did not (he was not even invited to participate in the settlement talks), and a federal court of...

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