Courtesy of The Wall Street Journal Law Blog, here is a post about the recent decision by Judge Kaplan in the KPMG case in federal court in New York, dismissing charges against most of the accused KPMG executives due to the failure of KPMG to fulfill their advancement obligations and the resulting inability of most of the defendants to properly defend themselves. Why am I writing about it on this blog? Because it directly relates to the many cases summarized on this blog, under Delaware law, in connection with the important (and in the KPMG case, indispensable) right to advancement of legal fees that many corporations owe to their executives pursuant to either an agreement or bylaws and the provisions of the Delaware General Corporation Law. See, e.g., here for my summary of a recent decision enforcing such a right and discussing other Delaware cases addressing the corporate obligation of advancement.
The KPMG case is an current, "real life" example of why the right of advancment is so important. If one, by contrast, merely had the right of indemnification (i.e., being forced to wait until the lawsuit and appeals were concluded before being entitled to reimbursement of fees paid), then in most cases it would be a hollow and perhaps useless benefit, as most people could not "finance" in the meantime the millions of dollars often required to pay for an adequate defense of serious litigation. Of course, this topic also raises the issue of "how much justice can you afford" and how more advantageous–and necessary–it is to have copious resources when doing battle in the courtroom. Here is a more detailed analysis of the KPMG case by Kevin LaCroix of The D & O Diary.