In a rare example of the Court of Chancery denying a a former corporate officer’s advancement claim–after an initial decision granting it–the court changed its prior opinion, after a complaint in the underlying case was amended to limit the underlying claims at issue to post-employment breach of contract claims, and based on that amendment the court determined that the challenged actions, as amended, were not taken by the claimant as a former officer or former director, and therefore the duty for advancement was not triggered. See Carr v. Global Payments, Inc., C.A. No. 2018-0565-SG (Del. Ch. Dec. 11, 2019), in which the Court also noted that confidential information was not alleged to have been misused after the role as former officer ended.
The focus of the amended complaint was an alleged violation of a non-compete agreement, which this and other cases have viewed as primarily an employer/employee dispute–not an advancement matter. Also noteworthy was the court’s analysis of the provisions of the LLC agreement granting advancement–which relied on different wording than that contained in DGCL Section 145. The court expressed initial skepticism, as have other cases, when an attempt is made to amend an underlying complaint solely for purposes of evading an otherwise valid advancement obligation. This case proved different.
This case should be compared with the recent decision highlighted on these pages styled Ephrat v. medCPU, Inc., which provided a comprehensive analysis of Delaware case law involving advancement claims related to confidential data taken by a former officer and director–but primarily misused after the role of director and officer ended. See also Charney case highlighted on these pages, with a similar denial for post-employment activity.
Notably, the Carr case involved an acknowledgement that, despite this ruling, advancement was still required for underlying claims for breach of fiduciary duty.