Under motion sequence 001, defendant Northbridge Capital Management, Inc. (Northbridge) moves for summary judgment dismissing plaintiff's complaint, and plaintiff cross moves for partial summary judgment finding Northbridge liable for the advancement of defense costs, including attorney fees, incurred by the plaintiff Estate in defending claims originally asserted against its decedent, Peter Molyneux, in the underlying state court action (see Williams v Sidley Austin Brown & Wood, LLP, 11 Misc 3d 1064[A], 816 NYS2d 702 [Sup Ct, NY County 2006] and Williams v Sidley Austin Brown & Wood, LLP, 13 Misc 3d 1213(A), 824 NYS2d 759 [Sup Ct, NY County 2006], affd __AD2d__, 2007 WL 611248 [1st Dept 2007])(collectively Sidley).

A proponent of a motion for summary judgment must tender sufficient evidence to eliminate any material issues of fact from the case, and establish a prima facie right to judgment (JMD Holding Corp. v Congress Financial Corp., 4 NY3d 373 [2005]; Alvarez v Prospect [*2]Hosp., 68 NY2d 320 [1986]; Friends of Animals, Inc. v Associated Fur Mfrs., Inc., 46 NY2d 1065 [1979]). Failure to establish a prima facie case, requires denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). Once this showing is made, however, the burden shifts to the opponents of the motion, to submit evidence, in admissible form, sufficient to establish the existence of material and triable issues of fact (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Mere conclusions, expressions of hope, or unsubstantiated allegations are insufficient for this purpose (id).

Plaintiff commenced this action to determine the Estate's right to the advancement of legal expenses, including attorney's fees, incurred in defense of Sidley, for reimbursement of amounts incurred by having to bring this enforcement action, and for the entry of a judgment against Northbridge for amounts already expended. Plaintiff asserts a right to advancement and reimbursement pursuant to the Northbridge bylaws, which state, in pertinent part, at Article XI section (1)(a):

Each person who was or is made a party or is threatened to be made a party or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative...by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, ...whether the basis of such proceeding is alleged action in an official capacity as director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights...), against all expense, liability and loss (including attorneys' fees, judgments, fines....and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators.... (emphasis added).

Sections 145(a) and (b) of the Delaware General Corporation Law (8 Del Code Ann § 145 ) give corporations the power to indemnify current and former corporate officials for expenses incurred in legal proceedings "by reason of the fact that the person is or was a director, officer, employee or agent of the corporation." Defendant argues that the allegations in Sidley concern Molyneux's activities in relation to two other corporations named as defendants in that action, Braxton Management, Inc. and Brandonton Management, Inc., and that Sidley, therefore, was not commenced against Molyneux "by reason of" his being an officer or director of Northbridge.

Under Delaware law, if there is a nexus or causal connection between any of the underlying proceedings and one's official capacity, those proceedings are "by reason of the fact" that one was a corporate officer, without regard to one's motivation for engaging in that conduct (Homestore, Inc. v Tafeen, 888 A2d 204, 214 [Del 2005]; Perconti v Thornton Oil Corp., 2002 WL 982419, *4 [Del Ch 2002]). As has become apparent in Sidley, and as clarified by the [*3]September 22, 2005 affidavit Peter Molyneux, submitted prior to his death in support of a motion to dismiss in Sidley, and annexed in reply here, Braxton and Brandonton are shell corporations set up by Northbridge and/or its affiliate corporation, Deerhurst Management Company, Inc. (Deerhurst), for the sole purpose of facilitating the tax shelter transaction at issue in Sidley. The second amended complaint in Sidley lumps all of the entities, Northbridge, Deerhurst, Braxton, Brandonton, and Beckenham Trading Company, Inc. (Beckenham), together, and denominates them the "Deerhurst Defendants. " According to Molyneux, Northbridge, Deerhurst and Beckenham are different arms of the same "firm," and the inference can be drawn from the affidavit previously submitted by Molyneux in Sidley, that but for his position with Northbridge, Molyneux would not have been involved in setting up and managing transactions through Braxton and Brandonton.

Defendant submits no affidavit from a person with personal knowledge, or other evidence, regarding the nature of the relationships between these entities, or which would otherwise negate the causal connection between the allegations in Sidley and Molyneux's position as an officer and director of Northbridge. Accordingly, Northbridge has failed to demonstrate, prima facie, that Molyneux's Estate is not entitled to advancement or indemnification of defense costs incurred as a result of Sidley under the very broad and generous provisions of Article XI section (1)(a) of its bylaws, or the Delaware General Corporation Law, and its attempt to use the inability of plaintiffs in Sidley to sort out the relationships between the Northbridge entities, prior to discovery in that action, is disingenuous.

Section 145(c) of the Delaware General Corporation Law allows corporate officials to defend themselves in legal proceedings, secure in the knowledge that, if vindicated, the corporation will bear the expense of litigation (Homestore, Inc. v Tafeen, 888 A2d at 211; VonFeldt v Stifel Fin. Corp., 714 A2d 79, 84 [Del 1998]). The mandatory right to indemnification under 145 (c), requires a successful defense on the merits or otherwise, and thus, cannot be determined until the conclusion of the underlying proceeding. The right to the advancement of legal expenses, however, is not dependent on the right to indemnification (Homestore, Inc. v Tafeen, 888 A2d at 212; Citadel Holding Corp. v. Roven, 603 A2d 818, 822 [Del 1992]).

With respect to the advancement of legal costs prior to the conclusion of the

underlying proceeding, the Delaware Statute is permissive, allowing corporations to provide for the payment of advance expenses to officers and directors, only upon provision of an undertaking, and to others, such as former officers, directors, employees or agents, on such terms as the corporation deems appropriate (8 Del Code Ann §145[e], [f]; Homestore, Inc. v Tafeen, 888 A2d at 211-12; Reddy v Electronic Data Systems Corp., 2002 WL 1358761, *4 [Del Ch 2002]). The Northbridge by-laws are drafted to provide officers and directors the maximum coverage allowable under the law, stating, in pertinent part:

....The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition: provided, however, that if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as director or officer (and not in any other capacity in which service was or is rendered by such [*4]person while a director or officer...) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking by or on behalf of such director or officer, to repay all amounts advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers (emphasis added).

Northbridge acknowledges that, at the time of the transactions underlying the Sidley complaint, and at the time of his death, Molyneux was a managing director and officer of Northbridge. Plaintiff asserts that the Estate is ready, willing and able to post an undertaking for the amounts advanced. The bylaws establish, prima facie, that the Estate is entitled to the advancement of costs and attorneys fees, and Northbridge has failed to raise a triable issue of fact that would inhibit enforcement of the contract by Molyneux's Estate, with respect to the costs and fees incurred in Sidley (see Zuckerman v City of New York, 49 NY2d at 562). Accordingly, plaintiff's cross motion for partial summary judgment, which is in the form of a request for declaratory relief with respect to the Estate's right to advancement under the Northbridge bylaws, is granted, to the extent of those expenses reasonably incurred (Homestore, Inc. v Tafeen, 888 A2d at 218; Citadel Holding Corp. v Roven, 603 A2d at 823-24 [Delaware law implicitly limits contracts for advancement of expenses to those expenses that are reasonably incurred]).

Defendant raises no argument in relation to the additional affirmative defenses asserted in answer to the complaint, and the parties do not discuss plaintiff's right to recover the costs and fees associated with this action, as asserted in the first cause of action alleged in the complaint. These matters, accordingly, are not addressed here, except to note that reimbursement for costs incurred in any action to determine plaintiff's right to advancement or indemnification is expressly provided for under Article XI (1)(b) of the Northbridge bylaws.

Accordingly, for the reasons set forth above, it is:

ORDERED, that defendant's motion for summary judgment dismissing plaintiff's complaint is denied; and it is further

ORDERED, that plaintiff's cross motion for partial summary judgment on the second cause of action alleged in the complaint is granted, as set forth herein above, to the extent that it is hereby

ADJUDGED, that Northbridge Capital Management Inc. is liable to plaintiff for the advancement of reasonable costs and attorneys' fees, incurred in defense of Williams, et al v Sidley Austin Brown & Wood, LLP, et al, (Sup. Ct., NY County Index No. 600808/05), upon the filing of an undertaking by plaintiff in an amount to be determined; and it is further [*5]

ORDERED that the issue of the amount of such reasonable costs and attorneys fees payable by Northbridge Capital Management Inc., and the amount of the corresponding undertaking, is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties enlarging the reference, as permitted by CPLR § 4317 (a), to include the reasonable amount of costs and attorneys' fees incurred in this action, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue(s); and, it is further

ORDERED that a copy of this order with notice of entry shall be served on the Special Referee Clerk (Room 119) to arrange a date for the reference to a Special Referee.

Dated:__________________ENTER:

______________________________

J.S.C.