I’ve previously written in a general fashion on the topic of advancement of legal expenses here, but the Delaware Court of Chancery’s most recent opinion, in addition to being a unique read, provides additional insight and information on the topic for those looking to learn more.
On December 28, 2010, the Delaware Court of Chancery issued an oral opinion (Katzman v. Comprehensive Care Corp., No 5892-VCL), which can be read here in transcript form, regarding the often-overlooked and critical distinction between two entirely different legal concepts: advancements for legal expenses and indemnification. A portion of the transcript identifying the often-overlooked distinction reads:
. . .I’m going to start with a few basic principles of indemnification and advancement rights that don’t seem to be fully understood but which have [a] controlling impact on this case. The first is that indemnification and advancement are separate and distinct.
Transcript at p.4 ln 10-17 (emphasis added). The opinion goes on to further describe the numerous distinctions between the widely misunderstood, yet frequently intermingled, legal concepts.
In addition to expounding upon the significant distinctions between the two legal concepts, the Court also addresses when, during litigation, the right to advancement ends. Citing other opinions, the Delaware court made clear that advancement rights extend beyond the trial stage of litigation and include appeals: “An advancement right remains live until the final disposition of the claim on the merits. Final disposition includes the resolution of any appeal. Thus, advancement rights remain live through appeal.” See Transcript at p. 8 ln 16-23.
For those looking to learn more about advancement rights and relevant cases on the topic, the opinion is also helpful as it is full cites to several cases on the issue.
Finally, the opinion provides unique insight and instruction, from a judge’s point of view, regarding the filing of Rule 11 motions – a very interesting read. See Transcript at p. 13-17.
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