In Hyatt v. Al-Jazeera America Holdings II, C.A. No. 11465-VCG (Del. Ch. Mar. 31, 2016), the Delaware Court of Chancery considered the extent to which a dispute must relate to an officer or director’s corporate duties before advancement of costs is triggered. In an opinion carefully delineating when a “nexus or causal connection exists between the underlying proceedings and the defendant’s official corporate capacity,” Vice Chancellor Sam Glasscock III held that two former directors of Current Media LLC, which was acquired by Al-Jazeera International (USA) Inc., were entitled to advancement in connection with certain claims that required them “to defend actions taken in their official capacity,” but not with respect to claims that did not “turn on” their “actions as director and officer.”
In December 2012, Current entered into a merger agreement with Al-Jazeera, pursuant to which Current became a wholly owned subsidiary of Al-Jazeera. Prior to the closing in January 2013, plaintiffs Joel Hyatt and Al Gore Jr. resigned from their positions with Current. In the merger agreement, Al-Jazeera “agreed to indemnify and advance fees and expenses to Current’s former officers and directors” under certain circumstances. In addition, the merger agreement established an escrow account to satisfy any “damages associated with Current and suffered by Al-Jazeera [after the] merger.” Al-Jazeera was permitted to seek indemnification for such damages from the escrow fund by submitting a written “claim certificate” to the members’ representative designated in the merger agreement: plaintiff Hyatt.
