In a recent case, Vice Chancellor Sam Glasscock considered whether to grant a corporation’s motion to modify an earlier advancement order where the corporation subsequently amended its claims against a former officer and director in order to eliminate the grounds for advancement. In Carr v. Global Payments, C.A. No. 2018-0565-SG (Del. Ch. Oct. 31, 2019), Glasscock held that amendment can eliminate advancement obligations, but only if the amendment and amending party’s representations alter the claim in such a manner that assures the court that the party originally entitled to advancement will not face litigation by reason of the fact of the party’s corporate capacity.

The facts of the case were not complicated. Heartland Payment Systems, a Delaware corporation, brought suit in a New Jersey court against Carr, the founder and former chairman and CEO of Heartland, for breach of fiduciary duty and breach of contract. The breach of fiduciary duty claims concerned alleged insider trading. The breach of contract claims concerned alleged breaches of the noncompete and nonsolicitation clauses of Carr’s employment contract. The latter included allegations that he competed and solicited Heartand employees using confidential compensation and contact information obtained while Carr was a corporate official. Carr demanded advancement for his litigation expenses from Heartland but Heartland refused the request. Carr then filed an action in the Delaware Court of Chancery to compel advancement. Glasscock, in a bench ruling, found that Carr was entitled to advancement for both the breach of duty and the breach of contract claims.