Delaware Business Litigation Report

Chancery Declines to Follow Transcript Ruling, Finds Plaintiff is Entitled to Advancement of Fees Incurred in Underlying Action Pre-Undertaking

Day v. Diligence, Inc., C.A. No. 2020-0076-SG (Del. Ch. May 7, 2020)

By letter ruling, the Court of Chancery held that plaintiff, a director and former officer of the entity defendant, (“Plaintiff”), was entitled to the advancement of attorneys’ fees incurred prior to Plaintiff’s submission of an undertaking. Defendant, Diligence, Inc. (“Defendant”), argued that a recent Transcript Ruling in the Court of Chancery, Salomon v. Kroenk Sports & Entertainment, LLC, C.A. No. 2019-0858-JTL (Del. Ch. Feb. 26, 2020), supported the proposition that advancement rights do not ripen prior to the provision of an undertaking, and therefore, Plaintiff was not entitled to the advancement of pre-undertaking fees. The Court found that Defendant’s interpretation of Salomon was “not persuasive as a matter of doctrine or the Delaware General Corporation Law,” noting that neither the language of nor the policy behind Section 145(e) of the DGCL “limit advancement to sums incurred post-undertaking.” Moreover, the Court noted that Transcript Rulings, as a general matter, have no precedential value and “at most” offer “persuasive authority." For these reasons, the Court ruled for the Plaintiff and denied Defendant’s objection to the advancement of Plaintiff’s fees.

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