Case Summary:  Harrison v. Quivus Systems, LLC, C.A. No. 12084-VCMR (Del. Ch. Aug. 5, 2016) (Transcript).
 
Subject:  Action by former CEO, John Harrison (“Harrison”), seeking advancement and fees on fees from his former employer, Quivus Systems, LLC (“Quivus”), concerning an action initiated by derivatively on behalf of Quivus against Harrison in the District of Columbia, alleging misconduct by Harrison in his capacity as CEO that was detrimental to the LLC and in violation of the LLC agreement. 
 
Posture:  Telephonic rulings of the court on cross motions for summary judgment. 
 
Holding:  The Court granted Harrison’s motion for summary judgment and denied Quivus’s, finding that Quivus’s LLC agreement requires Quivus to advance Harrison’s expenses and to pay fees on fees.  (Tr. at 14). 
 
Reasoning:

• The Court noted that unlike a typical advancement proceeding under DGCL § 145, this case involves an LLC and is governed by Section 18-108, which “defers completely to the contracting parties to create and to limit rights and obligations with respect to indemnification and advancement.  (Tr. at 11).  See also Tr. at 12-13 (quoting Fillip v. Centerstone Linen Servs., LLC, 2013 WL 6671663, at *5 (Del. Ch. Dec. 3, 2013)).
• Section 18-108 provides:  "Subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever."   (Tr. at 11).
• Here, the advancement provision of the LLC agreement states: 

Subject to any limitations set forth in the [Delaware LLC] Act, the Company shall indemnify and advance expenses to each present and future Member or Manager of the Company (and, in either case, his heirs, estate, personal representatives or administrators) to the full extent allowed by the laws of the State of Delaware, both as now in effect and as hereafter adopted. The Company may indemnify and advance expenses to any employee or agent of the Company who is not a Member or Manager (and his heirs, estate, personal representatives or administrators) to the same extent as to a Member or Manager, if the disinterested Members determine that it is in the best interests of the Company to do so. The Company shall also have the power to contract with any individual Member, Manager, employee, or agent for whatever additional indemnification the Members shall deem appropriate.

•  ​Quivus argued that Harrison was not entitled to advancement under this provision because he is not a “present [or] future” CEO (which position is included in the definition of “Manager” under the agreement), but a “former” CEO. 
• Characterizing Quivus’s argument as similar to a scene from Spaceballs (yes, the Mel Brooks movie… Tr. at 16-17), the Court rejected Quivus’s interpretation of the LLC agreement.
• Instead, the Court found that in order to retain any meaning in the word “future” and the clause “and his heirs, estate, personal representatives or administrators,” the only reasonable and unambiguous interpretation is that advancement and indemnification rights vested “[w]hen the parties adopted the agreement” and inured to all then-present and future Managers, including Harrison.  (Tr. at 18-19).  The Court also noted with approval Vice Chancellor Laster’s reasoning concerning the timing of vesting in Marino v. Patriot Rail Corp., 131 A.3d 325, 343 n.19 (Del. Ch. 2016), in which VCL noted that “[i]t seems more straightforward to me, therefore, to speak of vesting through service” and that advancement and indemnification rights under DGCL § 145 should vest when a person accepts the indemnifiable position.  (Tr. at 24).    
• The Court reiterated the policy arguments supporting advancement, and in summation, stated:  “There is no requirement that advancement provisions be written broadly or in a mandatory fashion. But when an advancement provision is, by its plain terms, expansively written and mandatory, it will be enforced as written. The advancement provision here is such a provision.”  (Tr. at 22-23).
• The Court granted Harrison’s request for fees on fees, noting:  “In Delaware, the right to advancement ‘to the fullest extent of the law’ includes, absent an express exclusion in the governing documents [which did not exist here], reasonable fees and expenses incurred in prosecuting an advancement action.”  (Tr. at 24).
• To address the parties’ final question of how to proceed with the submission of bills, the Court directed the parties to agree to an order in the same form as that used in Konstantino v. AngioScore, C.A. No. 9681–CB.  (Tr. at 28).