Pontone v. Milso Industries Corp., C.A. No. 7615-VCP (Del. Ch. Oct. 6, 2014).

Why This Case is Important:  This decision of the Delaware Court of Chancery granted interlocutory appeals requested by both parties due to the arguable inconsistency in cases applying the Delaware Supreme Court decision in Citadel Holding Corp. v. Roven, 603 A.2d 818 (Del. 1992), regarding what types of counterclaims are subject to advancement of fees.

Bottom Line Reasoning: The Court of Chancery reasoned that the parties would benefit and it would be in the interest of justice to have greater clarity on the issue of what types of counterclaims are advanceable.  The court explained that:  “Advancement cases can be quite contentious, time-consuming, and expensive.  A decision clarifying when counterclaims are advanceable would avoid unnecessary litigation and resolve at least some potential advancement disputes before they occur.”  Slip op. at 11.

Prior decisions in this case by the Court of Chancery have been highlighted on these pages.  The prior opinions of May 29, 2014, regarding a dispute over which counterclaims were compulsory and therefore advanceable, also addressed exceptions to a Special Master Report.  On September 3rd, the court denied a motion for reargument.

The court discusses Supreme Court Rules 41 and 42 which govern interlocutory appeals.  Both parties to the case sought interlocutory appeals based on slightly different arguments that had in common that several decisions of the Court of Chancery were not consistent with the two-prong test of the Delaware Supreme Court in Roven in connection with which counterclaims are advanceable, or subject to advancement of fees.  See, e.g., Zaman v. Amedeo Holdings, Inc., 2008 WL 2168397 (Del. Ch. May 23, 2008) (Strine, V.C.).  See also cases cited at footnote 18 of the letter decision in this case with citations to cases that are arguably not consistent with Roven, or at least internally inconsistent.