IN THE SUPREME COURT OF THE STATE OF DELAWARE

UNDERWRITERS AT LLOYD S LONDON , Defendant Below, Appellant,

v. LEGION PARTNERS ASSET MANAGEMENT, LLC, a Delaware Limited Liability Company , Plaintiff Below, Appellee. § § § § § § No. 398, 2020 § § Court Below

– Superior Court § of the State of Delaware § § C.A. No. N19C

- 08

- 305 § § §
Submitted: November 25 , 2020 Decided: December 2 , 2020
Before VAUGHN , TRAYNOR , and MONTGOMERY
- REEVES , Justices.
ORDER
After careful consideration of the notice of interlocutory appeal , the supplemental notice of appeal, and their exhibits , it appears to the Court that : (1) In May 2018, Justin P. Albert , a former employee of Legion Partners Asset Management, LLC (“Legion”), fi led an action in the Los Angeles Superior Court (the “LASC Action”) against Legion and two of its principal directors, managers, and officers, Raymond T. White and Christopher S. Kiper. Albert alleged that White and Kiper had breached their fiduciary duti es and violated federal law by leaking confidential information to a news outlet. Albert also asserted claim s against2

Legion for retaliation and wrongful termination. On the same day that Albert
initiated the LASC A ction, Legion filed a demand for arbitr ation with the American Arbitration Association, asserting that Albert had violated the terms of his employment with Legion by interfering with Legion’s business partnerships and revealing confidential information to third parties. 1 On July 27, 2018, t he LASC Action was stayed to allow arbitration to proceed on the employment

- related claims. (2) On August 22, 2018, Albert filed a counterclaim in the arbitration proceedings (the “Counterclaim”) against Legion for wrongful termination and violation of California’s whistleblower statute. Although White and Kiper were not named as defendants in the Counterclaim, the Counterclaim relied on the same alleged wrongful acts that formed the basis of the LASC Action. Before arbitration concluded, Legion notified its insurance carrier, Underwriters at Lloyd s London (“Underwriters”) , that it sought coverage under its directors’ and officers’ liability policy (“the Policy”) for the costs incurred in defendin g the Counterclaim. Underwriters denied Legion coverage because White and Kiper were not parties to
the Counterclaim

. Legion then initiated this action in the Superior Court seeking a judicial declaration that Underwriters had a duty to defend the Counte rclaim.

1 Legion asserted that Albert had violated Legion’s Employment Agreement as well as its Confidentiality and Intellectual Property Agreement. Both agreements contained arbitration clauses requiring the arbitr ation of disputes arising from Albert’s employmen t.3

(3) On September 25, 2020, the Superior Court granted Legion’s motion for partial summary judgment , holding that the allegations made in the Counterclaim triggered Underwriters ’ duty to advance defense costs under the express language of the Policy (the “Opinion”)

. 2 Specifically, the Superior Court found that
Underwriters had a duty to advance defense costs because Legion had incurred defense costs (a “loss” as defined by the P olicy) arising from the Counterclaim (a “claim” as defined by the Policy) , which was based on Legion’s errors, neglect, acts, or omissions, through White and Kiper, arising from White and Kiper’s alleged act of leaking confidential information (a “wrongful act” as defined by the Policy). The Superior Court directed the parties to allocate the defense costs between covered and
uncovered claims as contemplated by the Policy. Underwriters filed a motion to
reargue , which the Superior Court denied on October 29, 2020 (the “Order”)

. 3 (4) On November 6, 2020, Underwriters asked the Superior Court to certify an interlocutory appeal from the O pinion and the Order (collectively, the “Decisions”) under Supreme Court Rule 42

. Underwriters maintained that the
Decis ions decided a substantial issue of material importance , 4 namely the scope of insurance coverage provided by the Policy

. Underwriters also argued that the

2 Legion Partners Asset Mgmt., LLC v. Underwriters at Lloyds London , 2020 WL 5757341 (Del. Super. Ct. Sept. 25, 2020). 3 Legion Partners Asset Mgmt., LLC v. Underwriters at Lloyds London , 2020 WL 6338359 (Del. Super. Ct. Oct. 29, 2020). 4 Del. Supr. Ct. R. 42( b)(i).4

following Rule 42(b)(iii) factors weighed in favor of granting interlocutory review:
the Decisions decided issues of first impression in Delaware ; 5 considerations of justice warrant interlocutory review; 6 and interlocutory review may terminate the litig ation. 7 Legion opposed the application. (5 ) On November 23, 2020 , the Superior Court denied Underwriters’ application for certification of an interlocutory appeal. 8 Although the Superior Court did not dispute Underwriters’ assertion that the Decisions involved a substantial issue of material importance , it concluded that the Rule 42 (b)(iii) factors did not weigh in favor of certification of an interlocutory appeal

. The Superior Court
found

— rightly, in our view

—

that it had not decided issues of first impression but
had merely applied the unambiguous language of the Policy to the pleadings in the underlying litigation

. The Superior Court also (i) rejected Underwriters’ argument that interlocutory review would serve considerations of ju stice , and (ii) observed that
the most efficient wa y to resolve this case is for the parties to determine the
allocation of defense costs

— the only remaining issue pending in the Superior
Court

— after which a direct appeal may be taken

. We agree with the Su perior
Court ’s conclusion.

5 Del. Supr. Ct. R. 42(b)(iii)(A). 6 Del. Supr. Ct. R. 42(b)(iii)(H). 7 Del. Supr. Ct. R. 42(b)(iii)(G). 8 Legion Partners Asset Mgmt., LLC v. Underwriters at Lloyds London , 2020 WL 6875211 (Del. Super. Ct. Nov. 23, 2020).5

(6 ) Applications for interlocutory review are addressed to the sound
discretion of the Court. 9 Giving due weight to the Superior Court’s analysis and in the exercise of our discretion, this Court has concluded that the application for interlocutory review does not meet the strict standards for certification under Supreme Court Rule 42(b). Exceptional circumstances that would merit
interlo cutory review of the Superior Court’s decision do not exist in this case, 10 and the potential benefits of interlocutory review do not outweigh the inefficiency, disruption, and probable costs caused by an interlocutory appeal. 11 NOW, THEREFORE, IT IS ORDER ED that the interlocutory appeal is
REFUSED.
BY THE COURT:

/s/ Gary F. Traynor Justice

9 De l. Supr. Ct. R. 42(d)(v). 10 Del. Supr. Ct. R. 42(b)(ii). 11 Del. Supr. Ct. R. 42(b)(iii).