A recent Delaware Court of Chancery bench ruling granted advancement in connection with defensive counterclaims against a former officer and director. In Dodelson v. AC Hold Co., Inc., C.A. No. 2019-0029-SG (transcript) (Del. Ch. May 21, 2019), the court interpreted the provisions of a charter with advancement provisions, and reasoned that advancement was warranted.
An issue arose about whether or not the advancement provision in the charter expressly covered former officers and directors.
The court reasoned that the advancement provision referred to coverage for “indemnified parties”, and the definition of “indemnified parties” was incorporated by reference in the court’s interpretation. The court reasoned that the definition applied to former officers and directors as well. The court also distinguished the Chancery decision in Charney v. American Apparel, Inc., which was highlighted on these pages, and which the court found was based on language different from that present in this matter.
Many advancement decisions have been highlighted on these pages over the last 14 years, and this 13-page transcript ruling can be generally categorized as representing the overwhelming body of case law that grants advancement when it’s a “close call.” See, e.g., recent advancement decision highlighted.
The court reasoned that at best for the corporation, the provision was ambiguous–and ambiguous provisions are construed against the drafter, which in this case is the corporation. That was a second reason to grant advancement in addition to the court’s interpretation of the applicable language.
Postscript: Thanks to Kurt Heyman of Heyman Enerio Gattuso Hirzel LLP, the winning attorney in this case, for forwarding the transcript ruling.