The Curo decision sets out in detail the limits of that review. Most significantly, the Court of Chancery's review is very limited with respect to what claims will be denied advancement. In the meantime, the party who is required to pay advancement must pay at least 50 percent of the amount sought. 2012) (the Fitracks procedures).īriefly, the Fitracks procedures require that senior Delaware counsel for the parties review invoices for fees and expenses, meet to resolve any disputes and then no more frequently than quarterly, submit any still disputed amounts to the Chancery Court for its decision. If so, then the parties will often be required to follow the procedures set out in Danenberg v. The Court of Chancery will then first determine if advancement is required. Typically, that court will treat such a suit "summarily," meaning the litigation will be given priority on the curt's docket and scheduled for as prompt a hearing as circumstances permit. Once the advancement claim is denied, the claimant has the right to file suit in the Delaware Court of Chancery to compel payment, 8 Del. Under those circumstances, it is no surprise that corporations and other legal entities have sometimes resisted the advancement claims of their former directors or officers. 21), involved an advancement claim for $5,121,651.73 and other decisions have involved similar large amounts. Moreover, apart from the irritant of having to pay an allegedly "bad actor's" fees, the right to advancement often involves real money. None of those defenses generally works, however. More frequently, corporations have argued that the defendant's actions leading to filing suit did not "arise out the defendant's actions" as a director or officer (the commonly used qualifier in advancement contracts that must be met before fees are advanced). For example, corporations have claimed they were fraudulently duped into hiring the defendant and therefore the advancement contract should be rescinded. Over the last few years, corporations have tried to avoid that obligation in many ways. Thus, if their corporation later claims that the director acted improperly, such as by obtaining an unauthorized benefit or by deliberately neglecting her duties, that director will ask the corporation to pay for her defense. How then is that not just possible, but a regular occurrence?ĭelaware law permits a corporation to agree to pay an officer or director's litigation expenses "in advance of the final disposition of such action, suit or proceedings." Persons considering serving on the boards of directors of a publicly traded corporation almost always insist that such "advancement rights" be provided to them, by contract or corporate bylaw. There is perhaps one single obligation that most aggravates corporate boards of directors: Paying your opponent's legal fees when you are convinced he has done you wrong.
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