DELAWARE DENIES INTERLOCUTORY APPEAL OF ORDINARY ADVANCEMENT ENTITLEMENT DECISION

By: Scott Waxman and Rich Minice

In Sider et al. v. Hertz Global Holdings, Inc., C.A. No. 2019-0237-KSJM; C.A. No. 2019-0240-KSJM; C.A. No. 2019-0243-0243-KSJM; CA. No. 2019-0246-KSJM (Del. Ch. June 17, 2019), the Delaware Court of Chancery re-affirmed its support for advancement consistent with corporate bylaw provisions and denied the Hertz Global Holdings, Inc. (the “Defendant”) motion seeking immediate appellate review of advancement entitlement. The Court held that Defendant’s concern that plaintiffs would be unable to repay any advanced expenses, which they could later be found not to have been entitled to, did not outweigh Delaware’s preference for advancement. Defendant’s recourse for recouping advanced expenses is via “indemnification or on appeal after issues of reasonableness have been resolved.”

Sider arises from Defendant’s filing for certification of an interlocutory appeal from a May 14, 2019 bench ruling granting advancement pursuant to Defendant’s bylaws (the “Ruling”) and four orders implementing the Ruling (the “Advancement Orders”). The Ruling and the Advancement Orders were ordinary in every sense, creating a monthly advancement process consistent with Danenberg for “making and objecting to advancement demands.”

The Court recognized that Defendant, like all similarly situated corporate defendants, may be unlikely to recover advancement payments should it prevail in the underlying litigation. Defendant’s concerns must be balanced against Delaware’s “long established policy against piecemeal appeals,” which requires the Court exercise its discretion in granting any immediate appellate review of advancement decisions. “Were [the] Court to exercise its discretion [and grant immediate appellate review] every time a plaintiff was held to be entitled to advancement, the rule would cease to serve the ‘infrequent harsh case’ and would become a procedure commonly employed.”

Defendant alleged the Delaware favor for advancement to be an unequal process which favors the advancement claimant unfairly, an argument which the Court dismissed. The Court noted that the procedural process governing advancement is necessarily lopsided in favor of claimants because the policy of Delaware “favors advancement when it is provided for” in the company’s organizational documents. Because Defendant’s situation is not “infrequent,” a requirement for Rule 54(b) relief, the Court denied the motion for entry of a final judgment.

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