Not uncommonly, a former director or officer of a Delaware corporation will bring a claim for advancement against the company to defend his or herself in a lawsuit arising “by reason of the fact” that he or she was or director of officer, under Section 145 of the DGCL.
Less commonly, however, is an advancement claim brought in order to affirmatively intervene in a case. But that is precisely what occurred in the recent decision of In re Genelux Corporation, C.A. No. 10612-VCP (Del. Ch. Oct. 22, 2015). There, the former CEO and Chairman of the Board intervened in a case in which the corporation was a defendant (but not the former CEO), where his actions were being challenged.
In upholding the former CEO’s claim for advancement, the Court viewed the intervention as the equivalent of a mandatory counterclaim, which prior Delaware cases have found eligible for advancement. Notably, the court found that if the former executive had not intervened, he might otherwise be barred on collateral estoppel grounds from arguing that he had discharged his fiduciary duties properly.
If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.