In Meyers v. Quiz-Dia, C.A. No. 9878-VCL (Del. Ch. March 16, 2018), Vice Chancellor J. Travis Laster addressed the question of whether a party that paid the legal fees and expenses of persons entitled to indemnification could be subrogated to their rights to recover losses incurred in defending against claims filed against them. Laster had previously held that the plaintiffs, Greg MacDonald and Dennis Smythe, were entitled to indemnification from two limited liability companies for expenses incurred in defending against claims related to decisions they made while officers of the companies in Meyers v. Quiz-DIA (Del. Ch. June 6, 2017) (the entitlement decision). However, the entitlement decision did not quantify the amount of the indemnification award, and when the parties could not agree on the amount, they returned to the Court of Chancery to decide.

Consumer Capital Partners LLC had been paying the expenses that MacDonald, Smythe and other former officers of Quiznos had incurred in defending a lawsuit filed against them in Colorado (the Colorado action) for violation of federal securities laws and common law fraud in connection with a restructuring of Quiznos and its subsidiaries. Consumer Capital was owned by the family that controlled Quiznos, and MacDonald and Smythe were part of their management team as well as former officers of the two LLCs, subsidiaries of Quiznos (the companies). Consumer Capital joined as an additional plaintiff in the Court of Chancery action and asserted claims for subrogation of the indemnification rights held by MacDonald and Smythe against the companies. The companies argued that Consumer Credit could not meet the requirements for subrogation for any of Smythe’s fees or for the vast majority of MacDonald’s fees.