Nicholas Day v. Diligence, Inc. ( 2020 )

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: April 16, 2020
Date Decided: May 7, 2020
Ashley R. Altschuler, Esq. Paul J. Lockwood, Esq.
Ethan H. Townsend, Esq. Daniel S. Atlas, Esq.
Harrison S. Carpenter, Esq. SKADDEN, ARPS, SLATE, MEAGHER &
Aaron P. Sayers, Esq. FLOM LLP
MCDERMOTT WILL & EMERY LLP One Rodney Square
The Nemours Building P.O. Box 636
1007 North Orange Street, 4th Floor Wilmington, Delaware 19899
Wilmington, Delaware 19801
RE: Nicholas Day v. Diligence, Inc.
C.A. No: 2020-0076-SG
Dear Counsel:
The entity Defendant—of which the Plaintiff is a director and former
officer—in this action for advancement of attorney’s fees has objected to the
Plaintiff’s first and second fee invoices. I held Oral Argument on the Defendant’s
objections on April 16, 2020, and reserved judgment on whether the Plaintiff is
entitled to fees incurred before submitting an undertaking to the Defendant, fees
otherwise advanceable here. The parties have joined on this issue, despite the fact
that the amount is not significant in light of the total advancement sought. The
Defendant has attempted to rely on a recent Transcript Ruling of this Court, Salomon
v. Kroenke Sports & Entertainment, LLC,1 which it characterizes as supporting the
proposition that the Plaintiff may receive advancement only for those fees incurred
after an undertaking was provided, because prior to that date the advancement right
had not yet ripened.2
Transcript Rulings generally have no precedential value in this Court and they
should ordinarily not be relied on as precedent—at most they offer persuasive
authority. Rulings from the bench most often “reflect that the court intended to
decide a particular dispute,” not to advance the common law.3 They tend to be
informal, and often fail to be cabined in the way a jurist typically limits her rationale
in a written decision. They are made in light of the fact that they will have no
precedential value. This consideration is stronger where, as here, the transcript itself
reflects that the ruling was limited to the case sub judice.
For the forgoing reasons, I decline to rely on the Salomon transcript. More
fundamentally, the Defendant’s interpretation of Salomon—only permitting
advancement of expenses incurred after the submission of an undertaking—is not
persuasive as a matter of doctrine or the Delaware General Corporation Law
(“DGCL”). The Defendant’s proffered rule would require an individual entitled to
1
C.A. No. 2019-0858-JTL (Del. Ch. Feb. 26, 2020) (TRANSCRIPT).
2
Defendant Diligence Inc.’s Objections to Plaintiff’s First and Second Invoices, D.I. 11, ¶ 21
3
High River Ltd. P'ship v. Occidental Petroleum Corp., 2019 WL 6040285, at *7 n.77 (Del. Ch.
Nov. 14, 2019).
2
advancement to submit an undertaking before engaging counsel in order to ensure
maximum eligibility for advancement, despite the fact that the fees incurred pre-
undertaking may be indemnifiable. Section 145(e) of the DGCL provides:
Expenses (including attorneys’ fees) incurred by an officer or director
of the corporation in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by the corporation as
authorized in this section.4
This section permits a corporation to pay fees in advance of a final disposition of an
action where the eligible party has submitted an undertaking. It provides that the
advancement payment itself must await the undertaking. The very nature of an
undertaking is to permit advance payment of reimbursable fees, with the purpose of
ensuring that the entity has the legal (although not always practical) ability to recoup
amounts advanced if they ultimately prove not indemnifiable. Nothing in the
language of the statue, or the policy implicit therein, limits advancement to sums
incurred post-undertaking, to my mind. The Defendant, I note, has pointed to none.
Nor has it cited to precedent, other than the transcript mentioned above.
4
8 Del. C. § 145(e) (emphasis added).
3
Therefore, the Defendant’s objection to the Plaintiff’s fees is denied to the
extent such objection is based on the incurrence of such fees before the submission
of an undertaking.
To the extent the foregoing requires an order to take effect, it is SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
4