IN THE SUPREME COURT OF THE STATE OF DELAWARE

TRASCENT MANAGEMENT §

CONSULTING, LLC, § No. 126, 2016

§

Plaintiff-Below, § Court Below: Court of Chancery

Appellant, § of the State of Delaware

§

v. § 

§ C.A. No. 10915-VCM

GEORGE BOURI, §

§

Defendant-Below, §

Appellee. §

§

Submitted: October 19, 2016

Decided: November 28, 2016

Before STRINE, Chief Justice; HOLLAND and SEITZ, Justices. 

Upon appeal from the Court of Chancery. AFFIRMED.

Michael W. Arrington, Esquire, Michael W. Teichman, Esquire, Parkowski, 

Guerke & Swayze, P.A., Wilmington, Delaware; Michael S. Gardner, Esquire

(Argued), Eric P. Haas, Esquire, Jeremy D. Camp, Esquire, Gardner Haas PLLC, 

Dallas, Texas, for Appellant.

Todd C. Schiltz, Esquire (Argued), Ryan T. Costa, Esquire, Drinker Biddle & 

Reath LLP, Wilmington, Delaware; Damian Christian Shammas, Esquire, Law 

Offices of Damian Christian Shammas LLC, Morristown, New Jersey, for 

Appellee.

STRINE, Chief Justice:
I. INTRODUCTION

An LLC—Trascent—hired a top executive—George Bouri—and installed 

him as a part owner, Managing Principal, and member of the Board of Managers of 

Trascent with responsibility for human resources, IT, and finance, positions Bouri 

occupied for about sixteen months.1 When Trascent terminated Bouri and sued 

him, for among other things, violating his employment agreement, Bouri sought 

advancement to defend himself in accordance with the plain language of both his 

employment agreement and Trascent’s LLC agreement.

2

 Belatedly in the process 

of defending Bouri’s motion for summary judgment, Trascent argued that the same 

employment contract on which many of its claims against Bouri were premised 

was induced by fraud and that Bouri could not receive advancement because the 

employment agreement was thereby invalid (and presumably that he would not 

have become a member of Trascent’s board, and thus be entitled to advancement, 

under the LLC agreement absent that contract). The Court of Chancery refused to 

countenance that defense to advancement, relying on the plain language of the 

agreements, which required that advancement be provided until a court made a 

final, nonappealable determination that indemnification was not required, and on 

the summary nature of the proceedings under 6 Del. C. § 18-108, the LLC 

 

1 Appellant’s Opening Brief Ex. C at 4, 6 (Transcript of January 29, 2016 Court of Chancery 

Oral Ruling on Defendant-Counterclaim Plaintiff’s Motion for Partial Summary Judgment) 

[hereinafter Chancery Ruling]. Bouri had also been involved with Trascent’s predecessor for a 

short period of time.

2

Id. at 7–10.
2

analogue to 8 Del. C. § 145. Trascent has appealed, alleging that the Court of 

Chancery erred in making that ruling.

But we find it did not. Where a party has employed an officer under a 

contract where that party agreed to provide for advancement for certain claims 

until a court’s final judgment that the officer is not entitled to indemnification, that 

party may not escape the obligation by injecting into a summary advancement 

proceeding a defense based on the argument that the underlying contract under 

which the parties are operating is invalid altogether, because of fraud in the 

inducement. As the Court of Chancery properly found, to allow such a defense,

identical to what is properly a plenary claim on which Trascent has the burden of 

persuasion, would permit Trascent to escape its clear promise to make 

advancement until a court found indemnification inappropriate. Sanctioning a

defense of that kind would undermine the clear statutory purpose for providing a 

summary proceeding for advancement cases, by allowing entities to employ 

officers and directors under a promise of contractual rights and then seek to deny 

them those advancement rights in their contracts of employment by injecting into a 

statutory summary proceeding, by way of defense, a plenary claim that the 

underlying contract was induced by fraud. Sanctioning that defense would 

undermine the General Assembly’s purpose in making advancement proceedings 

summary in nature, by enabling an employer to engage a key manager on a 
3

promise of advancement, and then introduce into summary proceedings for the 

enforcement of that right, a complicated plenary claim the basis for which will, as 

in this case, often overlap with the merits of the very claims triggering the 

manager’s advancement rights. Thus, this Court agrees with the Court of 

Chancery’s decision and affirms.

II. ANALYSIS

The sole argument of Trascent on appeal is that the Court of Chancery erred 

by enforcing the plain language of the employment agreement and LLC agreement, 

which contain almost identical language, giving Bouri a right to advancement:

Unless a determination has been made by final, nonappealable order 

of a court of competent jurisdiction that indemnification is not 

required, [Trascent] shall, upon the request of Executive, advance or 

promptly reimburse Executive’s reasonable costs of investigation, 

litigation or appeal, including reasonable attorneys’ fees; provided, 

however, that Executive shall, as a condition of Executive’s right to 

receive such advances or reimbursements, undertake in writing to 

repay promptly the Company for all such advancements and 

reimbursements if a court of competent jurisdiction determines that 

Executive is not entitled to indemnification . . . .

3

 

The LLC Agreement’s advancement provision varies only in its use of ―Covered 

Person‖ instead of ―Executive.‖4 Trascent argues that Bouri fraudulently induced 

 

3 App. Appellant’s Opening Br. at A-198 (George Bouri Employment Agreement).

4

Id. at A-221 (Trascent Management Consulting, LLC Operating Agreement). The parties do 

not dispute that Bouri is an ―Executive,‖ ―Covered Person,‖ or that he incurred losses for 

purpose of these proceedings. Chancery Ruling at 12.
4

the employment contract and LLC agreement5by making misrepresentations to 

Trascent’s founder during employment negotiations.6 Specifically, Trascent 

alleges that Bouri was not truthful about the circumstances surrounding his 

departure from his previous employer,7and materially misstated his personal 

financial situation.8 Trascent argues that it relied on these misrepresentations and 

never would have entered into the employment agreement or made him a manager

under the LLC agreement if it had known the truth.9 Yet, in the over sixteen 

months Bouri was associated with Trascent and its predecessor—much less the 

longer period where Rakesh Kishnan, Trascent’s founder, had engaged with Bouri

to encourage Bouri to join the firm—Trascent did not become aware of the alleged 

fraud. 

 

5 During oral arguments, Trascent made a puzzling argument that the LLC agreement that 

formed Trascent and to which Rakesh Kishnan—Trascent’s founder—and Itay Fastovsky—

Trascent’s other principal employee—were also parties in addition to Bouri was generally 

unenforceable. Trascent bases this argument on the premise that Bouri fraudulently procured his 

status as manager—and therefore a Covered Person entitled to advancement under the LLC 

agreement—through the same misrepresentations Trascent alleged Bouri employed to procure 

his employment agreement. But, in reality, taking into account the contents of the briefs and the 

Court of Chancery record, Trascent’s argument more reasonably appears to be that absent 

Bouri’s alleged misrepresentations of his background, which led to his employment agreement, 

Bouri would not have been appointed Manager under Article IV of the LLC agreement or 

otherwise been granted a position falling within the definition of Covered Person under the LLC 

agreement’s Article VI and that therefore Bouri should not receive the benefit of the LLC 

agreement’s protections for principal employees.

6 Appellant’s Opening Br. at 23–24.

7

Id. at 8.

8

Id. at 7–8.

9

Id. at 24.
5

In rejecting Trascent’s plea that it was entitled to refuse advancement until 

its newly minted claim for fraud in the inducement was adjudicated, the Court of 

Chancery relied on authority including Tafeen v. Homestore, Inc.10 and DeLucca v. 

KKAT Mgmt.

11

 In Tafeen, the Court of Chancery rejected an argument that an 

officer’s alleged fraudulent inducement of his employment contract meant that he 

was not entitled to advancement provided under the company’s bylaws.12 Instead, 

the Court of Chancery distinguished between underlying conduct that might give

rise to a fraud-in-the-inducement action against the officer and facts relevant to the 

court’s limited analysis establishing the officer’s right to advancement in summary 

proceedings, observing that the purpose of an advancement proceeding was ―to 

determine [the officer’s] entitlement to advancement under [the company’s] 

governing rules.‖

13

 The Tafeen court ignored conduct-related allegations that could 

form substantive causes of action for the purposes of the advancement proceeding, 

even when those allegations, if true, suggested the officer obtained the benefit of 

 

10 2004 WL 556733 (Del. Ch. Mar. 22, 2004), aff’d 888 A.2d 204 (Del. 2005). See Chancery 

Ruling at 16–19 (discussing Tafeen).

11 2006 WL 224058 (Del. Ch. Jan. 23, 2006). See Chancery Ruling at 18–19 (discussing 

DeLucca).

12 2004 WL 556733 at *5. 

13 Id. As was the case in Tafeen, even if Trascent’s fraud in the inducement claim on Bouri’s 

employment agreement was cognizable in a summary advancement proceeding, it would not 

defeat Bouri’s claim for entitlement to advancement under the LLC agreement. Id. As the 

Tafeen court observed, ―[t]he Advancement Bylaw is not dependent upon Tafeen’s employment 

contract.‖ Id. at *5. As in Tafeen, allowing the substantive claims to be adjudicated now would 

encourage any employer offering advancement at the outset of an employment relationship to 

turn around and add a fraud in the inducement claim to a dispute to avoid making good on that 

obligation by injecting considerations of the merits of a deeper plenary claim into what ought to

be summary proceedings.
6

advancement improperly, and instead only analyzed the obligations to advance 

expenses the employer had to the officer at the outset of the litigation.

14

Similarly, in DeLucca, the Court of Chancery confronted a former employer 

making various arguments, both about the text of the advancement provision and 

the former employee’s underlying conduct, to avoid providing advancement to the 

former employee. The Court of Chancery declined to credit those arguments, 

observing that ―when an advancement provision is, by its plain terms, expansively 

written and mandatory, it will be enforced as written.‖15 

Here, the Court of Chancery reasoned that a plaintiff—Trascent—who had 

plainly promised its officer—Bouri—advancement could not escape that important 

obligation by suggesting that the employment contract was invalid, thereby 

delaying the officer’s right to receive advancement until the plaintiff’s plenary 

claim could be adjudicated.16 Rather, the Court of Chancery held that the right to 

advancement should be honored and enforced in accordance with the contract’s 

plain terms to which Trascent and Bouri agreed at the beginning of Bouri’s work, 

leaving Trascent with the right to proceed to prove that the contract was invalid 

and to recoup any improperly paid advancement in a plenary proceeding, such as a

proceeding on indemnification or in the underlying suit for which advancement

 

14 Id.

15 2006 WL 224058 at *13.

16 Chancery Ruling at 18–20.
7

Bouri seeks to fund his defense. The Vice Chancellor tied this ruling to the plain 

language of the contract, stating ―the contract language is clear: until a court 

determines that Trascent is not obligated to indemnify Mr. Bouri, Trascent must, 

upon Mr. Bouri’s request and undertaking, cover both the legal fees and costs Mr. 

Bouri has incurred and those that he will incur as this litigation continues.‖17

Trascent knew when it entered the contract that Bouri would be entitled to 

advancement ―[u]nless a determination has been made by final, nonappealable 

order of a court of competent jurisdiction that indemnification is not required.‖

18

 

Thus, Trascent knew it agreed to provide a right, subject to expedited specific 

enforcement, and it could not reasonably believe that it could deny that right 

simply by alleging that the contract was invalid. Trascent may later show that

Bouri is not entitled to indemnification by proving that the entire employment 

agreement or the advancement provision was invalid and fraudulently induced. 

But, Trascent cannot refuse to provide advancement by arguing that Bouri has the 

duty in an advancement proceeding to disprove Trascent’s belated allegations. 

That is especially so in this case when Trascent sued Bouri to enforce its rights 

under the same contract in which Bouri’s right to advancement is set forth, when it 

was Trascent’s own decision to sue that triggered Bouri’s right to advancement, 

and when there is a great deal of overlap with Trascent’s substantive claims which 

 

17 Id. at 13.

18 App. Appellant’s Opening Br. at A-221 (George Bouri Employment Agreement).
8

seek to deprive Bouri of the benefits of his previous employment and lose any 

further rights under the employment agreement and LLC agreement, including 

advancement, on the grounds that he induced his hire by fraud. 

Equity requires that any fraud in the inducement claim be brought with 

alacrity, because it hazards great prejudice to allow a party to reap the benefits of a 

contract for itself while reserving the right to claim the contract is invalid. Here, 

Trascent not only employed Bouri as a Managing Principal for sixteen months19

without seeking to rescind the contract but then sued Bouri on the contract.20 

Recognizing that allowing Trascent to avoid its contractual duty to make 

immediate advancement payments by making a belated fraudulent inducement 

claim would impede the efficiency of the summary mechanism provided by 8 Del. 

C. § 145(k) and impair the public policies served by contractual advancement 

provisions made in reliance upon that provision of the DGCL as well as the 

Limited Liability Company Act, the Court of Chancery properly refused to delay 

enforcing the plain language of the contract. This determination was sound and in 

keeping with our state’s public policies.21 ―Advancement is an especially 

 

19 Chancery Ruling at 4, 6 (noting that Bouri entered the Employment Agreement on January 1, 

2014, and was terminated on April 8, 2015); see also id. at 8–9.

20 App. Appellant’s Opening Br. at A-84 to -86 (Plaintiff Trascent Management Consulting, 

LLC’s First Amended Complaint) (alleging Bouri’s breach of his Employment Agreement).

21 The Court of Chancery’s sensible decision has an analogy in another context, where similar 

incentives for unproductive gamesmanship arise. Parties to agreements to arbitrate disputes 

often have second thoughts when a dispute actually comes. To escape their promise to arbitrate, 

these parties then argue that the contract requiring arbitration was induced by fraud and that they 
9

important corollary to indemnification as an inducement for attracting capable 

individuals into corporate service.‖22 Thus, we affirm the Court of Chancery’s 

well-reasoned decision.

 

therefore do not have to arbitrate, at least until the contract is shown to be untainted by fraud. 

Much like contracts for advancement, this state’s public policy favors enforcement of valid 

arbitration agreements and therefore these arguments have been rejected by our courts (and the 

federal courts). See, e.g., Elf Atochem North America, Inc. v. Jaffari, 727 A.2d 286, 292, 295 

(Del. 1999); SBC Interactive, Inc. v. Corporate Media Partners, 714 A.2d 758, 761 (Del. 1998). 

―A claim of fraud in the inducement of the contract generally—as opposed to the arbitration 

clause itself—is for the arbitrators and not for the courts.‖ Karish v. SI Intern., Inc., No. 2002 

WL 1402303 at *4 (Del. Ch. June 24, 2002) (quoting Prima Paint Corp. v. Flood & Conklin 

Mfg. Co., 388 U.S. 395, 400 (1967)); see also Carlyle Inv. Mgmt. L.L.C. v. Nat’l Indus. Grp. 

(Holding), 2012 WL 4847089, at *10 (Del. Ch. Oct. 11, 2012), aff'd, 67 A.3d 373 (Del. 2013) 

(―Under Delaware and federal law, a party cannot escape a valid forum selection clause, or its 

analogue, an arbitration clause, by arguing that the underlying contract was fraudulently induced 

or invalid for some reason unrelated to the forum selection or arbitration clause itself.‖). This

practice rightly avoids parties attaching an attack on the validity of the underlying agreement to 

every contract dispute to avoid its previously made promise to arbitrate. As illustrated by 

Trascent’s late-arriving claims in this case, the temptation to renege exists for those who initially 

promised advancement too.

22 Homestore, Inc. v. Tafeen, 888 A.2d 204, 211 (Del. 2005).