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Chancery Addresses Advancement Claim in Context of Compulsory v. Permissive Counterclaim

By Francis G. X. Pileggi, Esq.

 In Reinhard & Kreinberg v. The Dow Chemical Co., 2008 WL 868108 (Del. Ch., Mar. 28, 2008), read opinion here, the Chancery Court addressed the issue of advancement in the context of a counterclaim. The court determined that only compulsory counterclaims and not permissive counterclaims would be subject to advancement. The court left for another day the determination about whether the counterclaim involved was permissive or compulsory.

 Here is a money quote from the court's opinion, that may be applicable to many cases:

Advancement agreements require a hefty dose of
good faith on the part of both sides in order to work.
Given the context in which advancement often arises
(i.e., a dispute between the company and its former
directors/officers), good faith cooperation is
undoubtedly difficult to muster. Nevertheless, this
Court does not relish and will not perform the task of
playground monitor, refereeing needless and
inefficient skirmishes in the sandbox. FN31.   As this
Court has stated before, “a balance of fairness and
efficiency concerns would seem to counsel deferring
fights about details until a final indemnification
proceeding.” FN32

FN31. Cf.  Fasciana v. Electronic Data Sys.
Corp., 829 A.2d 160, 177 (Del. Ch.2003)
(“[T]he function of a § 145(k) advancement
case is not to inject this court as a monthly
monitor of the precision and integrity of
advancement requests.”).
FN32.  Id.

Full post as published by Delaware Corporate and Commercial Litigation Blog on April 05, 2008 (boomark / email).