Labor & Employment Law Daily Wrap Up, Remedies, Damages—Md. Sup. Ct.: No mere employee, director is entitled to indemnification, (Jul 24, 2025)

By Anne Sherry, J.D.

The director was also a corporate employee, but the lawsuit he successfully defended against implicated his fiduciary duties.

Maryland’s highest court ruled that a director who also served as an officer and employee was entitled to indemnification for his costs in defending a lawsuit by the corporation. In its complaint and other filings, the corporation invoked the defendant’s role as a director, connecting the fiduciary duties he owed with the lawsuit’s theory of liability. The corporation’s choice to allege a broad duty of disclosure came with the risk of triggering the defendant’s statutory indemnification right, which risk has now come to pass (Hyperheal Hyperbarics, Inc. v. Shapiro, No. 42 (Md. Sup. Ct. July 17, 2025)).

Background. Hyperheal Hyperbarics, Inc. is a provider of hyperbaric oxygen therapy (HBOT) and wound care. The defendant, Eric Shapiro, founded the company in 2012. He was employed by Hyperheal as a certified HBOT technician, and he also served as a director and an officer.

In 2018, Hyperheal sued Shapiro alleging that Shapiro exceeded the scope of his employment and violated his fiduciary duties by prescribing HBOT treatments despite not being a licensed physician. The lawsuit also sought indemnification from Shapiro of payments Hyperheal made to reimburse Tricare and to settle a qui tam lawsuit, among other costs. A jury returned a verdict in Shapiro’s favor on both counts, and Hyperheal did not appeal.

Shapiro sent Hyperheal a demand for his $500,000 in legal costs. He cited Hyperheal’s charter, which requires the company to identify “all of its present and former directors and officers in connection with any proceeding... to the fullest extent permitted by and in accordance with the laws of the State of Maryland,” and a Maryland statute requiring a corporation to indemnify a prevailing party who was made a party “by reason of service” as a director.

Indemnification required. The state High Court read the three subsections of the relevant statute together to mean that indemnification is required when a director wins a lawsuit in which he was sued because he served in the “capacity” as a director.

In Kramer v. Liberty Property Trust, 408 Md. 1 (2009), the Court explained that the capacity requirement applies where there is “a nexus or causal connection between the underlying proceeding and one’s official status.” While Shapiro’s demand provided the Court its first opportunity to explore the nexus requirement in a lawsuit filed by the corporation itself, this did not change the analysis. The capacity requirement is met “if, regardless of their merits, any of the factual allegations, causes of action, and/or legal theories alleged or asserted by the plaintiff implicate the individual’s role or status as a director.”

Under these principles, Shapiro was entitled to indemnification. Throughout the trial, Hyperheal invoked Shapiro’s role as a director and the fiduciary duties he owed in that role. For instance, the complaint’s misrepresentation count invoked his service as a director to satisfy the reasonable reliance element. In Hyperheal’s motion for summary judgment, it argued that it was entitled to implied indemnity due to the “special relationship” between the parties by virtue of Shapiro’s status as a director. Hyperheal did not object to the trial court’s jury instruction that an officer and director occupies a fiduciary relationship that requires disclosure, and the company built on this theme of nondisclosure in its closing argument.

The Court did not credit Hyperheal’s argument that Shapiro also owed fiduciary duties in his capacity as an employee, and thus that the company wasn’t necessarily suing Shapiro in his capacity as a director. The essence of an employee’s duty is not to allow undisclosed conflicts between his interests and those of his employer, while here, the allegation was that Shapiro acted to increase Hyperheal’s revenues and profits. As a litigation strategy, Hyperheal alleged a broad, unspecified duty of disclosure deriving at least in part from what Hyperheal believed were duties owed by directors. This could have given the jury a basis to find that Shapiro breached his duties without having to determine the specific capacity in which he did so. But it came with the risk that an adverse verdict could trigger Shapiro’s statutory indemnification right.

The case is No. 42.

Judge: Gould, S.

Attorneys: Donald James Walsh (RKW, LLC) for Hyperheal Hyperbarics, Inc. Neil Lebowitz (Lebowitz Law Firm) for Eric Shapiro.

Companies: Hyperheal Hyperbarics, Inc.

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