In the most recent advancement decision issued by the Court of Chancery, Charney v. American Apparel Inc., C.A. No. 11098-CB (Del. Ch. Sept. 11, 2015), the Court declined to grant advancement to Plaintiff, Dov Charney, who was a former director of the company at the time he sought advancement.
Below are a couple of key takeaways from this decision:
- The Court interpreted the phrase “related to the fact” in the indemnification agreement at issue as analogous to “by reason of the fact” – language which is used under Section 145 of the Delaware General Corporation Law (“DGCL”) – “which requires a nexus or causal connection between the claims in the underlying proceeding and one’s official corporate capacity to obtain advancement.”
- The Court also found that Charney was not entitled to advancement because the company’s corporate charter mandates advancement only for current directors or officers, which Carney was not at the time of the filing of the underlying lawsuit for which Charney sought advancement.