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Court of Chancery Upholds Advancement for Attorney

Jackson Walker LLP v. Spira Footwear Inc., C.A. 3150-VCP (Del Ch. June 23, 2008)

Recently, whether outside counsel is entitled to advancement under a corporate bylaw that provides for payment of the fees incurred by “agents” has become a hot issue. When the attorney is acting as an “agent” depends on whether he is acting on behalf of the company in its relationship with a third party. Thus, an attorney who files litigation meets the test, but one who advises the company on a legal issue does not for lack of acting with a third party.

This somewhat odd distinction reflects a policy of restricting advancement of fees to attorneys who are expected to have the possible cost of litigation built into their fees and malpractice coverage.

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