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March 16, 1994


The opinion of the court was delivered by: CHARLES S. HAIGHT, JR.

 HAIGHT, District Judge:

 Plaintiffs Sequa Corporation ("Sequa") and Sequa Capital Corporation ("SCC") seek, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the Ninth Counterclaim of defendant GBJ Corporation ("GBJ") and all counterclaims asserted by defendants Jeffrey J. Gelmin ("Gelmin") and Topaz Capital Corporation ("Topaz"). In addition, pursuant to Rule 12(f), plaintiffs move to strike the Fifth and Ninth Affirmative Defenses of defendants GBJ, Gelmin, and Topaz.


 The history of this litigation was set forth previously in an opinion reported sub nom. GBJ Corp. v. Sequa Corp., 804 F. Supp. 564 (S.D.N.Y. 1992), familiarity with which is assumed. Subsequently, Sequa's and SCC's counterclaim and third-party complaint was recast as the "Complaint" with Sequa and SCC denominated as "Plaintiffs" and with GBJ, Gelmin, and Topaz denominated as "Defendants."

 In this motion, the Court addresses whether the defendants have sufficiently alleged a right to indemnification under the various agreements entered into with SCC. In July 1985, SCC and GBJ entered into a Consulting Agreement whereby GBJ and Gelmin agreed to perform services for SCC relating to the capital equipment leasing business. SCC subsequently entered into an Indemnity Agreement and Undertaking with GBJ and Gelmin *fn1" ("Indemnity Agreement" dated December 1, 1989). Pursuant to this agreement, SCC indemnified GBJ and Gelmin against "claims" *fn2" of any kind and nature, including reasonable legal fees and expenses that might be incurred in defending against suits imposed on, incurred by, or asserted against GBJ or Gelmin due to the performance of their duties under the Consulting Agreement. Indemnity Agreement P 2(a). Excluded from the Indemnity Agreement are claims which are the result of GBJ's or Gelmin's gross negligence or willful misconduct. Indemnity Agreement P 2(a). Defendant Gelmin also claims a right to indemnification under a separate agreement dated August 8, 1989 ("Gelmin Agreement"). This agreement indemnifies Gelmin for "liabilities, losses, damages, costs and expenses" specifically arising out of or in connection with his service as an officer or director of an SCC affiliate. Gelmin Agreement P 1.

 Defendant Topaz seeks indemnification under the Indemnity Agreement as well. Pursuant to an Assignment and Agreement dated March 7, 1991 ("Assignment and Agreement"), Topaz and GBJ assigned to SCC all of their rights, title, and interest in certain Cal Pacific agreements dated January 14, 1991. In return, SCC agreed to provide coverage to Topaz, GBJ, and Gelmin under the Indemnity Agreement. Assignment and Agreement P 6.

 Defendants allege, without more, that if they are held liable to Sequa or SCC on any claims asserted in this action (except for those claims based on willful misconduct), SCC must indemnify defendants and reimburse their reasonable legal expenses pursuant to the above-mentioned indemnification agreements. Answer PP 109-121. In an attempt to further bolster their position that the indemnification agreements cover claims between the parties, defendants have submitted the Affidavit of Jeffrey Gelmin ("Gelmin Affidavit"). On this motion, the Court must decide whether the various indemnification agreements cover defendants' RICO-related expenses and, more generally, whether the agreements apply to claims asserted between the parties to those agreements.


 I. Indemnification of RICO Liability and Defense-Related Expenses

 It is well-established, and defendants do not argue otherwise, that indemnification is not available for RICO liability. Friedman v. Hartmann, 787 F. Supp. 411, 418 (S.D.N.Y. 1992); Academic Indus., Inc. v. Untermeyer Mace Partners, Ltd., 1992 WL 73473, at *6 (S.D.N.Y. Apr. 1, 1992); Department of Economic Dev. v. Arthur Andersen & Co., 747 F. Supp. 922, 931-32 (S.D.N.Y. 1990); Minpeco, S.A. v. Conticommodity Serv., Inc., 677 F. Supp. 151, 154 (S.D.N.Y. 1988). Indemnification is unavailable for RICO liability because it would be contrary to public policy for a court to allow an intentional tortfeasor to escape liability. In this action, plaintiffs base their RICO allegations on the willful misconduct of mail and wire fraud. Defendants contend, however, that they are entitled to indemnification of their RICO defense-related expenses in the event that they are successful in defending against plaintiffs' RICO claims.

 Courts in the Second Circuit generally have not drawn a distinction, as defendants have, between indemnification for RICO liability and indemnification for defense-related expenses in a RICO action. *fn3" See generally, Friedman, 787 F. Supp. at 418 (indemnification rights are unavailable in a RICO action). A distinction may be recognized, however, where there is a clear contractual right to such indemnification. Paddington Partners v. Bouchard, 1992 U.S. Dist. LEXIS 13076 (S.D.N.Y. Sept. 1, 1992), adopting Magistrate's Report and Recommendation, 1991 U.S. Dist. LEXIS 20769 (S.D.N.Y. Dec. 11, 1991).

 Following the dismissal of plaintiff's RICO claims in Paddington Partners, defendant Jeffries & Co. recovered RICO defense-related expenses pursuant to a contract of indemnification with co-defendant Econocom. The court determined that the most rational reading of Jeffries' contract of indemnification--which provided for interim payment of litigation expenses by Econocom--was that Jeffries is entitled to an advance of such expenses subject to recoupment if Jeffries ultimately is found guilty. Id. at *37-38. In interpreting the contract at issue in Paddington, the court drew an analogy to § 725 of the New York Business Corporation Law. Pursuant to § 725, and § 723(c) which is incorporated by reference, an indemnitor is entitled to recoupment of any expenses advanced to its officers and directors in the event that such individuals are found not entitled to indemnification. In a RICO context, this means that unless such officers and directors are found liable under RICO, they are entitled to indemnification pursuant to the terms of their contract. The Paddington court determined that Econocom and Jeffries intended to accomplish the same result as BCL § 726 in their indemnification agreement. Counsel for Econocom, in fact, conceded that under the contract Jeffries was entitled to indemnification if all claims against Jeffries were dismissed. Id. at *36.

 The Paddington court's analysis affects this Court's interpretation of the Gelmin Agreement most directly. That agreement expressly indicates an intent to mirror the indemnification rights provided in BCL §§ 721 to 726. Defendant Gelmin, thus, would be entitled to indemnification of RICO defense-related expenses if he is successful in defending against plaintiff's RICO claims and if the RICO claims were asserted against him in his capacity as an officer or director of an SCC affiliate. As discussed in Part ...

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