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Court Of Chancery Explains The “Personal Claim” Exception To Advancement Rights

Mooney v. Echo Therapeutics Inc., C.A. 10054-VCP (May 28, 2015)

In the area of what claims are subject to the right to have fees advanced to a former officer or director, there is no more often disputed issue than whether the claim asserted arose out of the role as an officer or director or was instead a “personal” claim. This may be the definitive decision on how to decide that issue.

Some basic principles help: (1) if the dividing line between the official and the personal is not clear, then advancement is granted, (2) just because the claim may be cast as involving an employment agreement does not mean advancement should be denied, and (3) offensive litigation (such as a libel suit) is more likely to be held to be personal as compared to a response to a counterclaim.