This post was prepared by an Eckert Seamans attorney.
The Court of Chancery recently awarded an applicant, Eric Pulier, all of his requested fees and expenses for advancement even though some of the expenses incurred related to the defense of claims asserted against SRS, a defendant not seeking advancement. In Pulier v. Computer Sciences Corp., No. 12005-CB (Transcript)(Del. Ch. Aug. 7, 2017), a former officer and director of ServiceMesh before its merger with CSC, Pulier, faced a civil suit alleging that he engaged in misconduct prior to the merger. The background facts of this action were discussed more fully in a prior summary on these pages.
CSC defended against the advancement application on two grounds. First, CSC contended that the allegations against Pulier related to his individual conduct independent and separate from his status as an officer and director of ServiceMesh. The Court quickly dispensed with this argument.
CSC next argued that two of Pulier’s four claims for advancement related to expenses incurred in defense of claims pending against SRS, and not against Pulier. CSC contended that these legal fees should not be advanced because they were not incurred for Pulier’s benefit.
Chancellor Bouchard granted all of Pulier’s requests for advancement, finding that the expenses incurred by Pulier against the CSC-versus-SRS claims “contain virtually identical allegations” to those claims raised against Pulier. Relying upon Fitracks, the Court found that CSC must indemnify Pulier for all of his legal expenses, which benefitted multiple defendants including Pulier and would have been necessarily incurred even if Pulier were the sole defendant.
Takeaway: The Court of Chancery continues to grant advancement claims to applicants even when only one of many parties is entitled to advancement when the legal bills incurred were necessary in the event the applicant were the sole defendant. The Court of Chancery also continues to demonstrate reluctance to parse through the piecemeal minutiae of law firm bills for advancement defenses for allocation purposes.