• Delaware Court Of Chancery Summarily Grants LLC Members’ Motion For Summary Judgment For Advancement Of Legal Expenses
   

  03/02/2021
  On February 4, 2021, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery granted a motion for summary judgment on entitlement to legal fees brought by unitholding members of Benchmark Investments, LLC and Benchmark General, LLC.  Agahi, et al. v. Benchmark Investments, LLC, et al., No. 2020-0784 (Del. Ch. Sept. 15, 2020).  Plaintiffs asserted claims against the companies for advancement of legal expenses incurred in connection with their defense against claims brought by the companies against them in a separate underlying action for alleged tortious interference and breach of contract.  The Court granted plaintiffs’ motion for summary judgment without oral argument, finding it “clear from the complaint” in the underlying action that plaintiffs were entitled to advancement of legal fees under the indemnification and advancement rights conferred by the operative LLC agreements.
  
  The LLC agreements provided in relevant part for indemnification and advancement for losses to which covered persons “become subject by reason of (i) [a]ny act or omission or alleged act or omission performed or omitted to be performed on behalf of the [companies], . . . in connection with the business of the [companies]; or (ii) [t]he fact that such [c]overed [p]erson is or was acting in connection with the business of the [companies] as a . . . member.”  The companies’ claims in the underlying action against plaintiffs arose from an alleged investigation plaintiffs undertook relating to certain transactions by the companies’ managing member.  In that action, the companies are seeking (i) a declaration that plaintiffs—as mere members of the LLCs—do not have managerial authority and (ii) damages allegedly caused by unauthorized contacts with the companies’ accounting firm and a key business partner.  In the advancement action, the companies argued that plaintiffs’ actions were outside the scope of their authority and thus not performed “on behalf of” of or “in connection with the business of” the companies.  
  
  The Court held that the language of the LLC agreements provided “broad and mandatory indemnification and advancements rights to its members” and entitled plaintiffs to advancement of their fees.  Specifically, the Court found that the complaint in the underlying action made it clear that there was a “sufficient nexus” between the claims and “acts or omissions ‘performed on behalf of . . . any member . . . in connection with the business of the [companies],” as well as “action ‘in connection with the business of the [companies] as a . . .  member.’”
  CATEGORY: Attorneys’ Fees
  

LINKS & DOWNLOADS

• Agahi, et al. v. Benchmark Investments, LLC