Companies considering agreements to advance legal costs to directors and officers (commonly known as “advancement provisions”) should take note of the Delaware Supreme Court’s recent decision in Trascent Management Consulting v. Bouri. In Trascent, the Delaware Supreme Court unequivocally held that advancement provisions will be strictly enforced according to their terms in pending litigation, including the requirement that a company provide advancements unless and until the court reaches a final decision regarding whether indemnification is required at all. The court held so even where, as in Trascent, the company sues the purportedly indemnified individual for fraudulently inducing their agreement to the very contract containing the advancement and indemnification provisions.
The facts of Trascent appear to have given the court little cause for pause in enforcing the advancement provision during the ongoing litigation. Trascent Management Consulting, a global consulting firm, hired George Bouri to join the nascent company as a senior executive with oversight over key areas within the company. After 16 months on the job, Trascent fired Bouri and sued him for, among other things, violating his employment agreement. When Bouri sought advancement to defend himself against Trascent’s claims pursuant to the plain language of the operative contracts, Trascent refused. Bouri then filed counterclaims and moved for summary judgment to enforce the advancement provision.
