Advancement Rights – "By Reason Of The Fact" Standard Discussed

In a prior post, we discussed the "by reason of the fact" requirement in Delaware advancement proceedings. In that post, we addressed the recent decision of Lieberman v. Electrolytic Ozone, Inc., C.A. No. 10152-VCN (Del. Ch. Sept. 5, 2015) which qualified as an uncommon finding that the claims for which advancement is sought do not qualify under the statutory "by reason of the fact" standard.

A recent Court of Chancery decision, Hyatt v. Al Jazeera America Holdings II, LLC, C.A. No. 11465-VCG (Del. Ch. Mar. 31, 2016) shed more light on this standard. Vice Chancellor Glasscock found that the former directors seeking advancement were sued "by reason of the fact" that they were directors in connection with a lawsuit over a merger agreement escrow account.