Chancery Recognizes Advancement for Fees Incurred to Reply to Company’s Affirmative Defenses

Fillip v. Centerstone Linen Services, LLC, C.A. No. 8712-ML  (Del. Ch. April. 14, 2014).

Why This Master’s Report is Highlighted: This 23-page letter ruling includes a thoughtful analysis about why the former officer of a company should be entitled to advancement for the fees he incurred in order to respond to affirmative defenses asserted by the company in response to a claim by the former officer–which defenses raised issues about his performance as a corporate officer.

This Master’s Final Report is subject to exceptions and de novo review by Vice Chancellor Glasscock, whose previous review, and affirmance, of a prior Master’s Report in this case was highlighted on these pages. Similar to the frustration experienced in proceedings pursuant to DGCL section 220, this decision features an eminently quotable introduction that reflects the frustration over the duration of matters that are supposed to be summary in nature:

Anecdotally, it often seems that a company challenging a former official’s right to advancement faces the same odds as a gambler placing a large bet on a long-shot at the racetrack. Although rational heads frequently prevail in business litigation, advancement cases rarely boast that feature, and this case is no different. This advancement proceeding has been pending for more than nine months and the company has pressed its arguments at length before two different judicial officers, but has yet to achieve anything more than a pyrrhic victory that likely was erased by the fees it has paid its own attorneys and the fees it has been ordered to pay on behalf of the plaintiff. That trend continues in this latest iteration of the parties’ dispute. Unfortunately, Centerstone has been victorious in delaying the inevitable and this case has tested the outer limits of any reasonable definition of a “summary proceeding.”