Delaware Business Litigation Report

Court Of Chancery Explains "In Connection With" Test

Rizk v. Tractmanager, Inc., C.A. 9073-ML (May 30, 2014)

Often corporate bylaws or charters provide for advancement of attorney fees to directors and officers for acts taken in connection with "their duties to the company or by reason of their service as an officer or director."  Then when it comes time to pay up to former officials, the company tries to avoid its obligation by arguing the underlying litigation involved an employment contract and is not "in connection with" or by reason of performing their official duties.  This decision by a Master in Chancery reviews the case law and explains why that defense usually does not work.

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