Willkie Secures Dismissal for Kartoon Studios, Inc. in $10 Million-Plus Indemnification Suit

October 14, 2026

On October 13, 2026, Willkie won a complete dismissal in Empery Asset Master, Ltd. et al. v. Kartoon Studios, Inc., Index No. 650906/2026, in which hedge funds Empery Asset Management and Brio Capital sought to make Willkie client Kartoon Studios, Inc., the NYSE American-listed global children's entertainment company, cover more than $10 million in legal fees.

Empery and Brio claimed to have spent that sum defending a federal securities lawsuit in the Southern District of New York that accused them of acting as a "group" with other investment funds to reap short-swing trading profits by virtue of trading in Kartoon Studios stock. After a federal jury found that neither Empery nor Brio had formed or joined a Section 16(b) group, the funds commenced a separate lawsuit arguing that the indemnity provisions in their 2020 securities purchase agreements made Kartoon Studios liable for multiple years of defense costs, plus fees for bringing the indemnity lawsuit. (Empery and Brio had made profits exceeding $100 million after selling their Kartoon shares.)

Justice Anar Rathod Patel of the New York Supreme Court's Commercial Division dismissed the lawsuit, holding that the contractual indemnity provisions in the Securities Purchase Agreement covered only the funds' purchase of Kartoon Studios securities, not their later sales, and that a Section 16(b) claim necessarily rests on both. The court also held that a securities-law carveout in the agreements independently barred coverage, whether or not the funds were found liable in the underlying federal action. It dismissed the complaint in its entirety.

The ruling is a significant win for public companies that raise capital from institutional investors, and it reinforces that New York courts will enforce indemnity provisions exactly as written. An indemnity that covers buying securities does not cover a later lawsuit over selling them. As the court put it, "No amount of mining of the record in the Federal Action entitles Plaintiffs to a contractual right that the parties did not agree to."

The Willkie team was led by Litigation Department Chair Tariq Mundiya and included partners Jeffrey B. Korn and Zeh S. Ekono and associate Lily Grisafi.

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