Two recent decisions from the Delaware Court of Chancery address well-settled but important nuances of the right to advancement. A third ruling leaves a gap in this area of the law: other than fees on fees, what remedy is available, if any, for the denial of advancement over several years until it is granted after appeal.
In Lippy v. Mixedbread AI, Inc., C.A. No. 2026-0493-DH (BWD) (Del. Ch. Oct. 19, 2026), the court’s letter ruling affirmed the “well-reasoned decision” of the magistrate and upheld the holding that fees are advanceable for responding to affirmative defenses to a complaint against the covered officer, which implicated his performance as a corporate official. The court cited several decisions for the well-settled position that fees incurred for “defending against” affirmative defenses are advanceable. Id. at 4. See cases cited at footnote 1. The court rejected the argument that fees related to the affirmative defenses were not covered because they were not incurred “by reason of the fact that the plaintiff is or was an agent of the corporation”. The court also noted that it was premature to decide whether the fees were “reasonably incurred” at the entitlement stage. See footnote 3.
In a second ruling, in the matter of Walker v. Icon Management Aggregator L.P., C.A. No. 2026-0733-CDW, Order (Del. Ch. Oct. 21, 2026), the court cited to well-settled caselaw to explain that fees incurred to pursue compulsory counterclaims were covered by advancement.
The court instructed that fees for the counterclaims are advanceable because they arise from the same dispute and serve to defeat or offset the claims against the defendants in the underlying action. The underlying action sought declarations that an amendment to a partnership agreement that the former CFO was a party to, regarding a call right and notice exercising that right, was valid and enforceable.
The court recited the familiar two-part test to determine when a mandatory counterclaim is advanceable: if it is (1) “necessarily part of the same dispute, in the sense that it qualifies as a compulsory counterclaim under the prevailing Delaware and Federal procedural standard,” and (2) “advanced to defeat, or offset the affirmative claims”. Id. at 9 (citations omitted). The court also relied on caselaw explaining the two-part test and reasoned why, as applied to this case, that authority supported advancement. The court also predictably granted fees-on-fees to the extent of success on the merits of the advancement claims. Id. at 15. Although these two short decisions are unremarkable, they remind us of important nuances of well-settled advancement law, and to that extent are noteworthy.
The third recent Chancery decision involving advancement is notable for what it does not say. In Invictus Special Situations Master I, L.P. v. Invictus Global Management, LLC, et al., C.A. No. 2023-1099 NAC (Del. Ch. Nov. 5, 2026), the court refused to grant a remedy, based on the facts of the case, for the denial of advancement for over two years–until the Delaware Supreme Court granted it after an interlocutory appeal. That high court decision was highlighted on these pages.
Other than granting fees-on-fees, I am not aware of a decision that addresses a gap in the law on this topic regarding the irreparable harm that follows the denial of advancement for several years–all the while forcing a defendant to fund his own defense, contrary to the public policy behind advancement.
The most recent letter ruling recounted the tortuous and tormenting procedural history over several years of the case–but did not note that our firm only entered their appearance in the case about two months before this latest decision, taking over for another firm that handled the case from the beginning.
Recent Comments