Andre G. Bouchard.

The Delaware Court of Chancery on Tuesday denied Virginia-based information technology firm Computer Sciences Corp.'s bid to recoup about $18 million it had paid for an executive to defend against criminal investigations into an alleged bribery scheme stemming from the company's purchase of ServiceMesh Inc. in 2013.

Chancellor Andre G. Bouchard said in a 10-page letter opinion that the request by Computer Sciences, or CSC, for indemnification was “unreasonable” under the terms of its equity purchase agreement to acquire ServiceMesh for $260 million.

According to court documents, ServiceMesh's president, Eric Pulier, became the target of the federal probes, which accused the founder and former executive vice president of engineering a side deal to inflate ServiceMesh's revenue and trigger $98 million in earn-out payments from CSC to himself and other ServiceMesh equity holders.

All charges against Pulier were dropped in December 2018, according to news reports.

Before the case was dropped, the court ruled in 2017 that Pulier was entitled to advancement because the supposed bribery scheme involved his conduct as an officer of ServiceMesh. CSC, which is incorporated in Nevada and headquartered in Falls Church, Virginia, footed part of the bill of ServiceMesh's behalf, advancing Pulier approximately $18 million, the company said in court filings.

CSC, which sued Pulier in 2015, earlier this year moved for summary judgment on its indemnification claims. The firm argued that the the terms of the equity purchase agreement extended to any advancement claims that derived from the SeviceMesh board's approval of the acquisition or related transactions.

Bouchard, however, found the indemnification provision's scope was much more narrow. In order to trigger an indemnification obligation, he said, the underlying claims must challenge the board's authorization and approval of the agreement itself and not any tangential misconduct resulting from the deal.

“CSC's interpretation focuses on whether there is a nexus between the claims for which advancement was provided and the EPA or its related transactions rather than whether there is a nexus between the board's approval of the EPA or its related transactions and the claims for which advancement was provided,” he wrote in a letter to the parties.

“CSC does not contend that the ServiceMesh board ever authorized or approved the side agreement or that the side agreement was one of the transactions contemplated by the EPA. Nor could it,” Bouchard said. “This is because the claims for which Pulier obtained advancement from ServiceMesh all proceed from the premise that Pulier engineered the side agreement to circumvent the earnout provision in the EPA through an illegal scheme that the ServiceMesh board never authorized.”

An attorney for Pulier declined to comment. Counsel for CSC did not return a call Tuesday afternoon seeking comment on the ruling.

CSC was never accused of wrongdoing in connection with the acquisition.

CSC is represented by Peter J. Walsh, Jacob R. Kirkham and Jay G. Stirling of Potter Anderson & Corroon.

Pulier is represented by Martin S. Lessner, Elisabeth S. Bradley and Daniel M. Kirshenbaum of Young Conaway Stargatt & Taylor.

The case is captioned Computer Sciences Corp. v. Pulier.