IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 

)

SCOTT PONTONE, )

)

Plaintiff, )

 )

v. ) C.A. No. 8842-VCP

)

MILSO INDUSTRIES CORPORATION )

and THE YORK GROUP, INC., )

 )

Defendants. )

 )

OPINION

Submitted: April 2, 2014

Decided: August 22, 2014

Philip A. Rovner, Esq., Jonathan A. Choa, Esq., POTTER ANDERSON & CORROON 

LLP, Wilmington, Delaware; Valeria Calafiore Healy, Esq., HEALY LLC, New York, 

New York; Attorneys for Plaintiff. 

Brian M. Rostocki, Esq., John C. Cordrey, Esq., REED SMITH LLP, Wilmington, 

Delaware; Steven Cooper, Esq., Danielle J. Marlow, Esq., REED SMITH LLP, New 

York, New York; Attorneys for Defendants. 

PARSONS, Vice Chancellor.
1

This is an action by a former officer and director of two Delaware companies for 

advancement from those companies of the legal fees and expenses he has incurred in 

underlying litigation between the parties in a federal court in Pennsylvania. Although the 

Pennsylvania action has been pending since 2010, the complaint only seeks 

indemnification from January 2013. The Pennsylvania litigation at issue in this case is 

the same underlying litigation at issue in a related case pending before this Court, Harry 

Pontone v. Milso Industries, et al., Civil Action No. 7615-VCP. The plaintiff in this case, 

Harry Pontone‘s son, claims he is entitled to mandatory advancement from both 

defendants. The defendants have moved to dismiss the plaintiff‘s claims, however, for 

lack of standing. The defendants contend the plaintiff has no standing because he has a 

right to mandatory advancement and indemnification from his new employer or client, 

which company has paid the plaintiff‘s legal fees and expenses through at least the end 

of 2012 and allegedly has continued to pay them to this day. According to the 

defendants, because the plaintiff has incurred no out-of-pocket expenses, he has no 

standing to seek advancement from them. Instead, the defendants contend, his new 

employer and co-indemnitor‘s only remedy would be to seek contribution from the 

defendants at the indemnification stage of these proceedings. The plaintiff opposes the 

motion to dismiss and insists that he does have standing to pursue his claims for 

advancement of the fees and expenses he has incurred since January 2013. 

For the reasons stated in this Opinion, I grant in part, and deny in part, the 

defendants‘ motion to dismiss. Specifically, I grant the motion as to any legal fees and 

expenses incurred since January 1, 2013 that have been paid by the plaintiff‘s current 
2

employer or client, on the ground that the plaintiff lacks standing to pursue those claims. 

I deny the motion to dismiss with respect to any fees and expenses incurred since January 

1, 2013 that have not been paid by the co-indemnitor. As to those fees and expenses, the 

plaintiff is entitled to advancement from at least the one defendant that clearly owes a 

mandatory advancement and indemnification obligation to the plaintiff. 

This matter is also before the Court on the plaintiff‘s co-pending motion for partial 

summary judgment. That motion requests an order that the plaintiff is entitled to 

advancement from the defendants under their bylaws. The defendants oppose this motion 

on several grounds. For the reasons stated herein and consistent with my ruling on the 

defendants‘ motion to dismiss, I grant partial summary judgment of advancement against 

one of the two defendants as to the unpaid legal fees and expenses, and deny it as to the 

other, because there are disputed issues of fact as to whether the other defendant‘s 

advancement obligation is permissive or mandatory. I also deny summary judgment of 

advancement as to certain of the numerous counterclaims the plaintiff in this action has 

asserted in the underlying action. For all but one of the affected counterclaims, I rely on 

the same rulings and reasoning I articulated in the related action before me involving 

Harry Pontone. The one additional counterclaim for which I denied advancement is for 

false and misleading advertising. 

Lastly, based on my rulings on the two pending motions, I grant the plaintiff 

advancement as to 75% of his ―fees on fees‖ in prosecuting this action.
3

I. BACKGROUND1

A. The Parties

Plaintiff, Scott Pontone, is an individual residing in New York. Defendants are 

The York Group Inc. (―York‖), a Delaware corporation wholly owned by Matthews 

International Corporation (―Matthews‖), and Milso Industries Corporation (―New 

Milso‖), a Delaware corporation wholly owned by York. York and New Milso are active 

in the death care industry and, in particular, casket manufacturing. From July 2005 

through May 2007, Scott Pontone served as a director and Executive Vice President for 

York and New Milso.

B. Facts

1. Old Milso is Acquired by Matthews

Until mid-2005, Scott Pontone was the Vice President of Old Milso, a New York 

regional casket company founded by Scott Pontone‘s grandparents in the 1930s. Old 

Milso was run by Scott Pontone and his father, Harry Pontone.2 In early 2005, Matthews, 

a newcomer to the casket industry, expressed interest in purchasing Old Milso. Among 

other things, Matthews sought to take advantage of Old Milso‘s established business 

presence in New York, where Matthews previously had not been active. The parties 

 

1 Unless otherwise noted, the facts recited herein are drawn from the well-pled 

allegations of the Verified Complaint, together with its attached exhibits, and are 

presumed true for the purposes of Defendants‘ motion to dismiss.

2 Harry Pontone is the plaintiff in a related advancement action before this Court. 

Pontone v. Milso Indus. Corp., C.A. No. 7615-VCP (Del. Ch.). 
4

reached a deal after Matthews promised that, following the acquisition, Scott and Harry 

Pontone would remain in leadership positions similar to those they had held at Old Milso. 

To implement the transaction, Old Milso entered into an Asset Purchase 

Agreement (―APA‖) with York and New Milso, a newly formed acquisition subsidiary. 

The APA reflected, among other things, that Harry and Scott Pontone would become 

officers and directors of Matthews‘ new casket business, which was to be run through 

York and New Milso. Accordingly, Scott and Harry Pontone executed employment 

agreements with York and New Milso. On July 11, 2005, Scott Pontone became the 

Executive Vice President of York and New Milso and a director of both companies. 

Harry Pontone became the President and a director of both companies. 

In 2007, Scott and Harry Pontone brought suit to enforce certain of their rights 

under the employment agreements they entered into with York. The suit resulted in a 

settlement reached in May 2007. As part of the settlement agreement, Scott Pontone 

resigned from his positions with York and New Milso. Scott3also agreed not to compete 

with or to solicit the customers of York and New Milso for a period of three years, during 

which they continued to pay him a salary. 

After the expiration of that three-year period, on May 30, 2010, Scott entered into 

a consulting arrangement with Batesville Casket Company (―Batesville‖). Batesville is a 

 

3

For simplicity and to avoid confusion, this Opinion sometimes uses only the given 

name of either Scott Pontone or Harry Pontone, as the parties do in their papers. 

The use of first names does not imply familiarity and intends no disrespect.
5

leading manufacturer and distributor of caskets in the United States and competes with 

York and New Milso in the New York region where Old Milso previously conducted 

business. Pursuant to the consulting arrangement, Scott was to assist Batesville in 

marketing its products in the New York metropolitan market and in parts of Texas. Scott 

formalized his relationship with Batesville through a consulting agreement between 

Batesville and an entity created by Scott, the Pontone Casket Company (―PCC‖), of 

which Scott is the sole owner (the ―Consulting Agreement‖).4

2. The Pennsylvania Action

On August 16, 2010, York and New Milso, along with their corporate parent 

Matthews, instituted an action against Scott Pontone and Batesville in the United States 

District Court for the Western District of Pennsylvania (the ―Pennsylvania Action‖),5

challenging the propriety of their consulting arrangement. On February 28, 2011, the 

plaintiffs in the Pennsylvania Action (the ―Pennsylvania Plaintiffs‖) filed an amended 

complaint, joining Harry Pontone and PCC as defendants. 

The central allegation of the Pennsylvania Plaintiffs is that Scott and the other 

defendants in the Pennsylvania Action engaged in a wrongful scheme to induce several of 

 

4 Opening Br. in Supp. of Defs.‘ Mot. to Dismiss (―Defs.‘ Opening Br.‖) Ex. 2. The 

Consulting Agreement was expressly referenced in the Complaint. Moreover, 

Plaintiffs have waived any objection to the Court‘s consideration of the exhibits 

attached to Defendants‘ Opening Brief in ruling on this motion to dismiss. See

Pl.‘s Answering Br. in Opp‘n to Defs.‘ Mot. to Dismiss (―Pl.‘s Answering Br.‖) 

26-27. I therefore consider the Consulting Agreement to be properly before me on 

Defendants‘ motion to dismiss.

5

See York Gp., Inc. v. Pontone, 2014 WL 896632 (W.D. Pa. Mar. 6, 2014); York 

Gp., Inc. v. Pontone, 2012 WL 3127141 (W.D. Pa. July 31, 2012).
6

the Pennsylvania Plaintiffs‘ employees and many of their most lucrative customers to 

move to Batesville. As to Scott, the amended complaint in the Pennsylvania Action 

alleges that he, in his capacity as Executive Vice President, played a central role in the 

operations of York and New Milso and had ―continuous and unrestricted access to highly 

proprietary confidential information and trade secrets‖ concerning their business and 

customers.6 The Pennsylvania Plaintiffs allege that Scott misappropriated their 

confidential information and trade secrets by using them to help Batesville solicit the 

Pennsylvania Plaintiffs‘ employees and customers in his role as Batesville‘s consultant. 

The Pennsylvania Plaintiffs claim that these actions violated Scott‘s employment 

contracts with York and New Milso, which included confidentiality, non-compete, and 

non-solicitation provisions, as well as the common law. 

The Pennsylvania Plaintiffs asserted numerous claims against Scott, including for 

breach of contract, tortious interference with contract, unfair competition, unjust 

enrichment, and trademark infringement. In response, Scott asserted a number of 

counterclaims in the Pennsylvania Action. That action is still pending.

3. York and New Milso’s Indemnification and Advancement Bylaws

York and New Milso each have bylaws addressing indemnification and 

advancement. New Milso‘s indemnification and advancement obligations are covered in 

 

6 Compl. Ex. 1 ¶ 40.
7

Section 2.15 of its bylaws.7 Section 2.15(a) of the New Milso bylaws, entitled ―Right to 

Indemnification,‖ states in relevant part: 

Except as prohibited by law, every director and officer of 

[New Milso] shall be entitled as of right to be indemnified by 

[New Milso] against all expenses and liability . . . incurred by 

such person in connection with any actual or threatened 

claim, action, suit or proceeding . . . whether brought by or 

against such person or by or in the right of the Corporation or 

otherwise, in which such person may be involved, as a party 

or otherwise, by reason of such person being or having been a 

director or officer of [New Milso] . . . (such claim, action, 

suit, or proceeding hereinafter being referred to as an 

―Action‖); provided, however, that no such right to 

indemnification shall exist with respect to an action brought 

by an indemnitee . . . against [New Milso] (an ―Indemnitee 

Action‖) except . . . . [if] the Indemnitee Action is instituted 

under Paragraph (c) of this Section and the indemnitee is 

successful in whole or in part . . . .8

Section 2.15(a) defines ―expenses‖ and ―liability‖ as follows: ― ̳expenses‘ means all 

expenses actually and reasonably incurred, including fees and expenses of counsel 

selected by an indemnitee; and  ̳liability‘ means all liability incurred, including the 

amounts of any judgments, excise taxes, fines or penalties and any amounts paid in 

settlement.‖9

 

7 Choa Aff. in Supp. of Pls.‘ Opp‘n to Defs.‘ Mot. to Dismiss (―Choa Aff. I‖) Ex. 1 

§ 2.15. The bylaws of York and New Milso are ―expressly referred to and relied 

upon in the complaint‖; therefore, they are properly subject to the Court‘s 

consideration on Defendants‘ motion to dismiss. In re Tyson Foods, Inc., 919 

A.2d 563, 585 (Del. Ch. 2007).

8 Choa Aff. I Ex. 1 § 2.15(a).

9

Id.
8

Section 2.15(b) of the bylaws of New Milso, entitled ―Right to Advancement of 

Expenses,‖ provides: 

Every indemnitee shall be entitled as of right to have the 

expenses of the indemnitee in defending any Action or in 

bringing and pursuing any Indemnitee Action under 

Paragraph (c) of this Section paid in advance by [New Milso] 

prior to final disposition of the Action or Indemnitee Action, 

provided that the Corporation receives a written undertaking 

by or on behalf of the indemnitee to repay the amount 

advanced if it should ultimately be determined that the 

indemnitee is not entitled to be indemnified for the 

expenses.

10

Bylaw Section 2.15(c), entitled ―Right of Indemnitee to Bring Action,‖ states: 

If a written claim for indemnification under Paragraph (a) of 

this Section or for advancement of expenses under Paragraph 

(b) of this Section is not paid in full by [New Milso] within 

30 days after the claim has been received by [New Milso], the 

indemnitee may at any time thereafter bring an Indemnitee 

Action to recover the unpaid amount of the claim and, if 

successful in whole or in part, the indemnitee shall also be 

entitled to be paid the expense of bringing and pursuing such 

Indemnitee Action.11

York‘s indemnification and advancement obligations are addressed in Article VII 

of its bylaws.12 The preamble to Article VII states that ―[York] shall indemnify and 

advance expenses under this Article VII to the fullest extent permitted by applicable law 

 

10 Id. § 2.15(b).

11 Id. § 2.15(c).

12 Choa Aff. I Ex. 2 art. VII.
9

in effect on the date of adoption of these Bylaws and to such greater extent as applicable 

law may thereafter permit.‖13 

Section 2 of Article VII of York‘s bylaws, entitled ―Obligation to Indemnify in 

Actions, Suits or Proceedings by or in the Right of the Corporation‖ provides in relevant 

part: 

[York] shall indemnify any person who was or is a party to 

any threatened, pending, or completed action or suit by or in 

the right of [York] to procure a judgment in its favor by 

reason of the fact that he is or was a director, officer, 

employee or agent of [York] . . . except that no 

indemnification shall be made in respect of any claim, issue 

or matter as to which such person shall have been adjudged to 

be liable to [York.]14

Section 7 of Article VII, entitled ―Expenses Payable in Advance,‖ states: 

Expenses incurred in defending or investigating a threatened 

or pending action, suit or proceeding may be paid by [York]

in advance of the final disposition of such action, suit or 

proceeding upon receipt of an undertaking by or on behalf of 

the director, officer, employee or agent to repay such amount 

if it shall ultimately be determined that he is not entitled to be 

indemnified by [York] as authorized in this Article VII.15

4. Scott Pontone Requests Advancement from York and New Milso

On January 17, 2013, in the related advancement proceeding brought by Harry 

Pontone against York and New Milso, this Court granted partial summary judgment in 

favor of Harry, upholding his right to receive advancement from New Milso for expenses 

 

13 Id.

14 Id. § 2.

15 Id. § 7.
10

incurred in defending the Pennsylvania Action.16 Subsequently, Scott Pontone elected to 

seek advancement from New Milso and York for the legal fees and expenses he had 

incurred in the Pennsylvania Action since January 2013. Before Scott submitted a 

request for advancement to New Milso and York, however, he executed a loan agreement 

with Batesville on April 7, 2013 (the ―Loan Agreement‖).17 Pursuant to that agreement, 

Batesville agreed to provide Scott with funds to pay his legal fees and expenses in the 

Pennsylvania Action and in an advancement proceeding against York or New Milso 

before this Court, subject to various terms discussed in greater detail infra.

On July 24, 2013, Scott, by counsel, wrote to Defendants York and New Milso to 

demand advancement for the attorneys‘ fees and expenses he had incurred in connection 

with the Pennsylvania Action from January 2013 through June 2013. Scott‘s counsel‘s 

letter also provided an undertaking guaranteeing his repayment of funds advanced should 

he ultimately be deemed ineligible for indemnification. On August 23, 2012, Defendants, 

by counsel, responded that they regarded the facts relevant to Scott‘s claim for 

advancement as ―fundamentally different‖ from those relevant to his father‘s claim.18 

Nonetheless, for the stated purpose of avoiding further litigation costs, New Milso 

expressed its intent to grant Scott‘s advancement request to the extent it determined that 

 

16 Pontone v. Milso Indus. Corp., C.A. No. 7615-VCP, at 52-79 (Del. Ch. Jan. 17, 

2013) (TRANSCRIPT). The Court found York‘s bylaws ambiguous as to whether 

they provided for mandatory or permissive advancement. Id. at 61-63. The Court 

denied, therefore, summary judgment as to Harry Pontone‘s entitlement to 

advancement from York. Id.

17 Compl. Ex. 2.

18 Defs.‘ Opening Br. Ex. G.
11

the requested ―categories of fees and expenses are permissible under Delaware law, are 

reasonable, and are reasonably necessary in defense of the claims asserted against 

Scott.‖19 York declined to pay any advancement.

Dissatisfied with the responses of New Milso and York to his advancement 

requests, Scott commenced this advancement proceeding against New Milso and York on 

August 26, 2013. Since then, Defendants have moved to dismiss, arguing primarily that 

Scott lacks standing to pursue advancement from them because he is entitled to and has 

been receiving mandatory advancement from Batesville, and ultimately will be entitled to 

indemnification by Batesville, under the terms of the Consulting Agreement and the Loan 

Agreement. I therefore consider it helpful to review the relevant terms of those 

agreements.

5. The Consulting and Loan Agreements

Both the Consulting Agreement and the Loan Agreement include terms that are 

relevant to Scott‘s ability to obtain funding from Batesville to pay for his litigation 

expenses. Paragraph 17 of the Consulting Agreement, entitled ―Indemnification,‖ 

provides in relevant part:

[Batesville] agrees to indemnify, defend and hold harmless 

[PCC], its owners, agents, employees (including [Scott] 

Pontone and Wynn) and assigns, against any and all third 

party claims, damages, losses, liability, expenses and costs 

(including reasonable attorneys‘ fees) that may be incurred by 

or asserted against [PCC] or any such owner, agent, employee 

or assign on account of or arising out of this Agreement, 

including the provision of Services hereunder, except only to 

 

19 Id.
12

the extent any such claim, damages, losses, liability, 

expenses, or costs are found by a court in a final, non 

appealable order to have resulted from unauthorized 

representations or contractual commitments made by [PCC] 

to third parties or from [PCC]‘s negligence or willful 

misconduct.20

The relevant obligations of Scott and Batesville under the Loan Agreement are 

governed by a number of provisions in that agreement. The stated purpose of the Loan 

Agreement, as expressed in its recitals, is to provide for a loan from Batesville to Scott 

(the ―Loan‖) of all funds necessary for Scott ―to pay all fees, expenses, and costs 

previously incurred and to be incurred‖ by him and PCC in the Pennsylvania Action and 

by him in this advancement proceeding (―Qualifying Expenses‖).21 The Loan consists of 

an initial loan advance and subsequent loan advances that Scott may request from 

Batesville. Section 2(a) of the Loan Agreement provides in relevant part: 

On the date hereof [April 7, 2013] . . . [Batesville] shall make 

a Loan Advance to [Scott Pontone] in the amount of 

$388,535.81 (the  ̳Initial Loan Advance‘). The Initial Loan 

Advance represents the unpaid balance of fees and expenses 

incurred through January 31, 2013 by [Scott Pontone], plus a 

$15,000 retainer payable to Delaware counsel retained by 

[Scott Pontone] to act as local counsel in connection with the 

Advancement Proceeding.22

 

20 Defs.‘ Opening Br. Ex. B ¶ 17.

21 Compl. Ex. 2.

22 Id. § 2(a).
13

And Section 2(b) provides: ―From time to time hereafter, within 30 days after each 

written request therefor by [Scott], [Batesville] shall make additional Loan Advances to 

Borrower, to fund Qualifying Expenses invoiced after the date hereof.‖23

Section 3 of the Loan Agreement requires Scott to use any surplus advancement 

obtained from York or New Milso to repay the Loan. That section provides:

If and to the extent any of the [Pennsylvania Plaintiffs] 

actually pay any monies to [Scott] that are claimed by [him] 

in the Advancement Proceeding (each an ―Advancement 

Payment‖), [Scott] shall make a repayment of a portion of the 

unpaid balance of the Loan equal to the amount (if any) of the 

Advancement Payment that remains after [Scott] has paid all 

outstanding invoices in respect of Qualifying Expenses.24

On the other hand, if Scott is ultimately required to repay any Advancement Payment (or 

portion thereof) to any of the Pennsylvania Plaintiffs, Section 4 of the Loan Agreement

requires Batesville to make an additional loan advance to Scott Pontone to cover the 

amount of that advancement repayment.25

Section 5 addresses forgiveness of the Loan by Batesville. That section provides: 

Except as provided in Section 6, the entire unpaid balance of 

the Loan shall be deemed forgiven by [Batesville], and 

automatically shall be extinguished and cease to be an 

obligation of [Scott Pontone], upon the occurrence of either 

of the following contingencies: (a) a dismissal with prejudice 

of the claims against [Scott] and [PCC] in the [Pennsylvania] 

Litigation; or (b) entry of final judgment in the 

 

23 Id. § 2(b).

24 Id. § 3.

25 Id. § 4.
14

[Pennsylvania] Litigation that has become subject to no 

further appeal.26

Section 6, entitled ―Repayment Obligation Contingent Upon Counterclaim,‖ 

provides in relevant part: 

[I]n the event that [Scott Pontone] and/or PCC prevail on any 

counterclaim, after final judgment and expiration of any 

appeals . . . , [Scott] and/or PCC shall repay to [Batesville] 

any prior defense fees paid by [Batesville] up to the amount 

of any remaining counterclaim recovery minus any costs 

incurred by [Scott] or PCC to the extent not previously paid 

by [Batesville]. 

It is the intent of the parties that the aggregate amount of all 

repayments required of [Scott] under this Section 6 will not 

cause [him] to incur any net financial cost in respect of the 

[Pennsylvania] Litigation and the Advancement Proceeding 

(taking into account (i) all payments required to be made to 

any Plaintiffs in the [Pennsylvania] Litigation by [Scott] on 

account of fees, costs, damages or otherwise, and (ii) all 

amounts actually received by [Scott] as damages or 

indemnification awards).27

Section 12 of the Loan Agreement specifies that, ―[e]xcept as effected herein, this 

Agreement does not otherwise modify the Consulting Agreement or any other 

agreements between [Scott Pontone], [Batesville] and [PCC], which remain in effect, 

including terms therein addressing indemnity.‖28

 

26 Id. § 5.

27 Id. § 6.

28 Id. § 12.
15

C. Procedural History

On August 23, 2013, Scott Pontone filed his Verified Complaint (the 

―Complaint‖) against Defendants, York and New Milso. In his Complaint, Scott seeks 

advancement of the legal fees and expenses that he has incurred in connection with the

Pennsylvania Action since January 2013 and that he continues to incur. On September 

24, 2013, Defendants moved to dismiss the Complaint under Court of Chancery Rule 

12(b)(6) on the grounds that Scott lacks standing to pursue his advancement claims. 

After filing his opposition to Defendants‘ motion to dismiss on December 6, 2013, Scott 

Pontone moved for partial summary judgment on December 16 on the issue of his 

entitlement to advancement from Defendants. After full briefing on Defendants‘ motion 

to dismiss and Scott‘s motion for partial summary judgment, I heard argument on both 

motions on April 2, 2014. This Opinion constitutes my rulings on Defendants‘ motion to 

dismiss and Plaintiff‘s motion for partial summary judgment. I address the motions in 

that order.

II. Defendants’ Motion to Dismiss

A. Parties’ Contentions

Defendants contend that Scott Pontone lacks standing to assert his advancement 

claims because Batesville is obligated to and has been advancing Scott‘s fees and 

expenses in connection with the Pennsylvania Action, pursuant to the terms of the 

Consulting Agreement and the Loan Agreement. In that regard, Defendants assert that 

the Loan Agreement is not a bona fide loan agreement and is, instead, a disguised 

mandatory advancement and indemnification agreement. Because, according to 
16

Defendants, Scott has been and will continue receiving mandatory advancement from 

Batesville, and ultimately will be indemnified by Batesville, Defendants argue that Scott 

cannot demonstrate that he has suffered or stands to suffer any out-of-pocket expenses. 

Defendants further aver that the existence of such out-of-pocket expenses is a prerequisite 

under Delaware law for him to have standing to assert his advancement claims. 

Moreover, in light of Scott‘s receipt of advancement from Batesville, Defendants claim 

that any payment of advancement from them would result in an improper double payment 

to Scott for the same set of fees and expenses.

Scott does not concede that all of his litigation costs and expenses have been paid

by Batesville and maintains that any amounts he has received from Batesville under the 

Loan Agreement are, in fact, in the nature of a loan. Nonetheless, Scott argues that, even 

if Defendants were correct that he is entitled to and has been receiving mandatory 

advancement of his litigation costs and expenses from Batesville, and ultimately will be 

entitled to be indemnified by Batesville for those costs and expenses, that fact would not 

deprive him of standing to seek advancement from the Defendants. In that regard, Scott 

notes that Defendants‘ bylaws do not condition advancement on ―out-of-pocket‖ 

payments and are expressly non-exclusive of his other advancement and indemnification 

rights. He also claims that, under Delaware law, he has standing to seek advancement for 

any legal expenses for which he is or will be liable, regardless of whether he has paid 

those expenses himself or previously collected advancement from another source. 

Moreover, Scott contends that there is no risk of him receiving double payment for the 

same set of expenses, because if any funds advanced to him by Defendants exceed the 
17

amount of his outstanding unpaid expenses, he is required, under the Loan Agreement, to 

use the excess amount to repay the Loan from Batesville.

B. Legal Standard

Defendants‘ motion to dismiss is governed by Court of Chancery Rule 12(b)(6).

29

 

For purposes of a motion to dismiss under Rule 12(b)(6), the Court will ―assume the 

truthfulness of the well-pled allegations of the complaint‖30 and afford the plaintiff ―the 

benefit of all reasonable inferences.‖31 If the well-pled allegations in the complaint

would entitle the plaintiff to relief under any ―reasonably conceivable‖ set of 

circumstances, the Court must deny the motion to dismiss.32 The Court, however, need 

not ―accept conclusory allegations unsupported by specific facts.‖33 Moreover, failure to 

plead an element of a claim precludes entitlement to relief and, therefore, is grounds to 

 

29 See Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1285 (Del.

2007) (―[W]here a party is not arguing that the court lacks the authority to grant 

the relief requested to any plaintiff (i.e., lacks subject matter jurisdiction), but 

rather is arguing that the court cannot grant relief to these particular plaintiffs, the 

motion is more properly decided under Rule 12(b)(6) because the plaintiff has 

failed to plead a necessary element of a cognizable claim, not because the court 

does not have jurisdiction.‖)

30 Superwire.com, Inc. v. Hampton, 805 A.2d 904, 908 (Del. Ch. 2002) (citing

Solomon v. Pathe Commc’ns Corp., 672 A.2d 35, 38 (Del. 1996)).

31 Id. (quoting In re USACafes, L.P. Litig., 600 A.2d 43, 47 (Del. Ch. 1991)) 

(internal quotation marks omitted).

32 Central Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 

536 (Del. 2011); see also Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 813 n.12 

(Del. 2013).

33 Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing 

Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).
18

dismiss that claim.34 Nonetheless, the Court must ―accept even vague allegations as  ̳well 

pleaded‘ if they give the opposing party notice of the claim.‖35 Generally, on a motion to 

dismiss under Rule 12(b)(6), the Court will consider only the complaint and the 

documents integral to or incorporated by reference into it.36

Defendants‘ motion to dismiss turns on the question of standing. ―The term 

 ̳standing‘ refers to the right of a party to invoke the jurisdiction of a court to enforce a 

claim or to redress a grievance. Standing is a threshold question that must be answered by 

a court affirmatively to ensure that the litigation before the tribunal is a  ̳case or 

controversy‘ that is appropriate for the exercise of the court‘s judicial powers.‖37 ―Unlike 

the federal courts, where standing may be subject to stated constitutional limits, state 

courts apply the concept of standing as a matter of self-restraint to avoid the rendering of 

advisory opinions at the behest of parties who are  ̳mere intermeddlers.‘‖38 To establish 

standing, a plaintiff or petitioner generally must demonstrate: (1) that he or she suffered 

an injury-in-fact (i.e., an invasion of a legally protected interest), (2) caused by the 

 

34 See Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 972 (Del. Ch. 2000) 

(Steele, V.C., by designation).

35 Central Mortg., 27 A.3d at 535.

36 See Allen v. Encore Energy P’rs, 72 A.3d 93, 96 n.2 (Del. 2013).

37 Dover Historical Soc’y v. City of Dover Planning Comm’n, 838 A.2d 1103, 1110 

(Del. 2003) (citing Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 

1991)).

38 Stuart Kingston, Inc., 596 A.2d at 1382 (citing Crescent Park Tenants Assoc. v. 

Realty Equities Corp. of New York, 275 A.2d 433, 437-38 (N.J. 1971)).
19

complained of conduct of the defendant, and (3) that could be redressed by a favorable 

decision by the Court.39 

Defendants appear to challenge Scott Pontone‘s standing on the ground that he 

cannot demonstrate an injury-in-fact, because he cannot show that he has or will suffer 

any out-of-pocket expenses due to his mandatory advancement and indemnification rights 

from Batesville. To determine whether Scott has standing, I first consider a factual 

premise of Defendants‘ argument, namely, that Scott is entitled to mandatory 

advancement and indemnification from Batesville under the Consulting Agreement and 

the Loan Agreement. Based on the record before me, even if it were limited to the 

allegations in the Complaint and the terms of the Consulting Agreement, there does not 

appear to be any dispute that the indemnification provisions in the Consulting Agreement 

are mandatory. I therefore find that to be true. The Loan Agreement applies to the time 

period in and after January 2013. Based on my review of the Loan Agreement and the 

arguments presented on the motion to dismiss, I conclude that the Loan Agreement 

effectively provides Scott with mandatory rights to advancement. 

I must then consider whether it is reasonably conceivable that Defendants‘ bylaws 

provide Scott with a right to advancement of his costs and expenses in the Pennsylvania 

Action, notwithstanding his mandatory advancement and indemnification rights from 

Batesville. I find that such an interpretation is reasonably conceivable. Finally, I address 

 

39 See Dover Historical Soc’y, 838 A.2d at 1110-11 (citing Soc’y Hill Towers 

Owners’ Ass’n v. Rendell, 210 F.3d 168, 175-76 (3d Cir. 2000)).
20

whether, under Delaware law, Scott is the proper party-in-interest with standing to assert 

his advancement claims against Defendants. I conclude that he is.

1. Scott Pontone’s advancement and indemnification rights from Batesville

I agree with Defendants that Scott Pontone‘s rights under the Loan Agreement and 

the Consulting Agreement approximate rights of mandatory advancement and 

indemnification for his litigation expenses incurred in connection with the Pennsylvania 

Action. As for Scott‘s advancement rights from Batesville, the Loan Agreement provides 

that ―within 30 days after each written request therefor by [Scott], [Batesville] shall make

additional Loan Advances to Borrower, to fund Qualifying Expenses invoiced after the 

date hereof.‖40 ―Qualifying expenses‖ include ―all fees, expenses, and costs previously 

incurred and to be incurred‖ in the Pennsylvania Action and in this action.41 The 

implication of these provisions is that Scott is contractually entitled to request and receive 

funding from Batesville for his litigation costs incurred in connection with the 

Pennsylvania Action, which amounts to a mandatory advancement right. 

Scott also appears to have indemnification rights from Batesville under the terms 

of the Loan Agreement and the Consulting Agreement. Under the Loan Agreement, all 

amounts lent to Pontone for his Qualifying Expenses are forgiven upon either: ―(a) a 

dismissal with prejudice of the claims against [Scott] and [PCC] in the [Pennsylvania] 

Litigation; or (b) entry of final judgment in the [Pennsylvania] Litigation that has become 

 

40 Compl. Ex. 2 § 2(b) (emphasis added).

41 Compl. Ex. 2.
21

subject to no further appeal.‖

42

 As dismissal or a final judgment in the Pennsylvania 

Action is likely inevitable, and there is no requirement that the final judgment in the 

Pennsylvania Action be favorable to Pontone for the Loan to be forgiven, forgiveness of 

the Loan would appear to be guaranteed. In light of the inevitable Loan forgiveness, 

there seem to be only two circumstances under which Scott might be required to repay 

any portion of the Loan, each of which is specifically provided for under the Loan 

Agreement. Before the Loan is forgiven, Scott is required to repay the Loan to the extent 

that he obtains advancement from Defendants, in excess of his outstanding Qualifying 

Expenses.43 After the Loan is forgiven, Scott is still liable to repay Batesville to the 

extent that he succeeds on his counterclaims in the Pennsylvania Action and has money 

left over after paying all of his remaining litigation costs and expenses.

44

 Apart from 

these two exceptions, Scott appears to be effectively indemnified for any Qualifying 

Expenses for which he receives funding under the Loan Agreement. 

Moreover, Scott‘s rights under the Loan Agreement are without prejudice to his 

rights under the Consulting Agreement, which also provides him with indemnification. 

Specifically, under that agreement, Batesville ―agrees to indemnify, defend and hold 

harmless‖ Scott ―against any and all third party claims, damages, losses, liability, 

expenses and costs (including reasonable attorneys‘ fees) that may be incurred by or 

 

42 Id. § 5.

43 Id. § 3.

44 Id. § 6.
22

asserted against [him] . . . on account of or arising out of this Agreement.‖45 As Scott is 

being sued in the Pennsylvania Action principally due to the actions he took working as a 

consultant for Batesville, his litigation expenses in that action would appear to fall within 

the scope of the indemnified expenses under the Consulting Agreement.

The Loan Agreement and the Consulting Agreement, therefore, appear to provide 

Scott with the functional equivalent of mandatory advancement and indemnification 

rights from Batesville as to his litigation costs and expenses in the Pennsylvania Action. 

Thus, in analyzing Defendants‘ motion to dismiss, I proceed on the premise that Scott has 

mandatory advancement and indemnification rights from Batesville under the terms of 

the Loan Agreement and the Consulting Agreement. 

Based on the allegations in the Complaint and the documentary evidence referred 

to by the parties without objection, I also find that the only reasonable inference 

supported by the record on the Motion to Dismiss is that Scott has not paid any out-ofpocket expenses in connection with the Pennsylvania Action since January 2013. Scott is 

liable for out-of-pocket expenses, however, for any unpaid invoices from his legal 

counsel in the past few months and for any unbilled time and expenses. In this regard, I 

also note that the Complaint alleges that Batesville has agreed to provide Scott Pontone 

with funds under the Loan Agreement ―to cover his legal fees and expenses that are the 

subject of Scott Pontone‘s request for advancement and indemnification with the 

 

45 Def.‘s Opening Br. Ex. B ¶ 17.
23

understanding that Scott Pontone would seek advancement and eventually 

indemnification from Defendants and repay any resulting amounts to Batesville.‖46

2. Notwithstanding his rights from Batesville, Pontone has a contractual right to 

mandatory advancement from Defendants

For purposes of their motion to dismiss, Defendants do not dispute that New 

Milso‘s bylaws provide for mandatory advancement or that Scott would be entitled to 

receive advancement from them for at least some of his litigation costs in the 

Pennsylvania Action, if he were not already collecting advancement from another source. 

Defendants argue, however, that because Scott currently is receiving and is entitled to 

continue receiving advancement from another source, namely, Batesville, he cannot 

demonstrate that he has or will suffer any out-of-pocket expenses and has no right to 

collect advancement from Defendants under their bylaws. Scott disputes Defendants‘

contention and asserts that their bylaws do not impose an ―out-of-pocket‖ expense 

requirement and are expressly non-exclusive. Despite Batesville‘s payment of his past 

litigation expenses under the Loan Agreement, therefore, Scott asserts that he has a right 

under Defendants‘ bylaws to collect advancement from them for the litigation expenses 

in the Pennsylvania Action since January 2013 that he seeks to recoup. 

I have reviewed Defendants‘ bylaws and considered the arguments of both sides. 

Based on that review, I conclude that at least the bylaws of Defendant New Milso

47

 

46 Compl. ¶ 46.

47 As discussed infra with respect to Plaintiff‘s Motion for Partial Summary 

Judgment, Defendants do not concede, and the record at this point is not 

sufficiently clear, that the advancement rights contained in York‘s bylaws are 
24

entitle Scott Pontone to advancement for, at a minimum, any of his outstanding legal 

expenses incurred in the Pennsylvania Action since January 2013 for which he has not 

yet requested or received funding from Batesville under the Loan Agreement, and for the 

future costs and expenses that he presumably will incur in that action. 

At the outset, I note that bylaws entitling the directors of a Delaware corporation 

to advancement are adopted under the auspices of Section 145(e) of the Delaware 

General Corporation Law (the ―DGCL‖).48 That section authorizes advancement of the 

expenses a director incurs in defending an action so long as the director undertakes ―to 

repay such amount if it shall ultimately be determined that such person is not entitled to 

be indemnified by the corporation.‖49 It further provides that ―such expenses . . . may be 

so paid upon such terms and conditions . . . as the corporation deems appropriate.‖50

As this Court has held, ―[w]hen a corporation agrees to make mandatory the 

permissive authority to provide advancement and indemnification conferred by Sections 

145(a), (b), and (e) of the General Corporation Law, the corporation confers a contractual 

 

mandatory, rather than permissive. For purposes of this section concerning 

Defendants‘ Motion to Dismiss, I need not decide whether the York advancement 

right is mandatory, because it is sufficient to find, as I do, that the New Milso 

bylaw provides a mandatory right of advancement. Moreover, I am convinced that 

it is at least reasonably conceivable that the York bylaws also provide for 

mandatory advancement.

48 8 Del. C. § 145(e).

49 Id.

50 Id.
25

fee-shifting right on the covered person.‖51 The scope of Scott Pontone‘s contractual 

right to advancement from Defendants is properly determined, in the first instance, by 

reference to the language of the relevant bylaws.52

York and New Milso‘s bylaws provide, respectively, that covered individuals are 

entitled to obtain advancement for ―[e]xpenses incurred‖ and for ―expenses actually and 

reasonable incurred‖ in a qualifying action.53 Although neither set of bylaws defines the 

term ―incur,‖ accepted meanings of that term include ―to become liable and subject to‖54

and ―[t]o suffer or bring on oneself (a liability or expense).‖55 Thus, a party incurs an 

expense once he becomes liable for that expense. 

Scott Pontone is, at a minimum, liable for any outstanding legal expenses incurred 

in the Pennsylvania Action since January 2013 for which he has not yet requested or 

 

51 Danenberg v. Fitracks, Inc., 58 A.3d 991, 996 (Del. Ch. 2012).

52 See Schoon v. Troy Corp., 948 A.2d 1157, 1165 (Del. Ch. 2008).

53 Choa Aff. I Ex. 1 (New Milso‘s bylaws) § 2.15(b) (―Every indemnitee shall be 

entitled as of right to have the expenses of the indemnitee . . . paid in advance 

. . . .‖), § 2.15(a) (―[E]xpenses means all expenses actually and reasonably 

incurred‖); id. Ex. 2 (York‘s bylaws) art. VII preamble (―The Corporation shall 

indemnify and advance expenses‖), art. VII § 7 (―Expenses incurred . . . may be 

paid by the Corporation in advance‖).

54 Agere Sys., Inc. v. Worthington Steel Co., 2013 WL 4958220 (Del. Super. Sept. 

12, 2013), aff’d, 89 A.3d 478 (Del. 2014) (quoting Webster’s New Collegiate 

Dictionary (9th ed. 1983)).

55 Ameristar Casinos, Inc. v. Resorts Int’l Hldgs., LLC, 2010 WL 1875631, at *9 

(Del. Ch. May 11, 2010) (quoting Black’s Law Dictionary 341 (2d Pocket ed. 

2001)).
26

received funding from Batesville under the Loan Agreement.56 If, for example, at the 

time of this ruling, Scott‘s counsel in the Pennsylvania Action had performed 100 hours 

of work for which they had not yet been paid, Scott would be liable for paying for those 

legal services. The fact that Scott had not yet paid for those services out-of-pocket, and 

potentially could request funding for those expenses under the Loan Agreement, would 

not change the fact of his present liability.57 He therefore properly could be said to have 

incurred those expenses and to have a right to advancement for those expenses from (at 

least) New Milso under the terms of its bylaws. Scott similarly would have a right to 

advancement from New Milso, under its bylaws, for his future legal expenses in 

connection with the Pennsylvania Action as they were incurred, assuming that he does 

not first obtain advancement for those expenses from Batesville.

The mere fact that Scott has a contractual right to request and receive 

advancement from Batesville, and has received advancement from Batesville in the past, 

does not undermine his independent contractual rights to advancement under the bylaws 

of York and New Milso. Had Defendants so desired, their bylaws could have stated that 

York and New Milso will provide advancement only to the extent that covered 

 

56 For purposes of Defendants‘ Motion to Dismiss, I need not reach the issue of 

whether Scott Pontone can be said to have ―incurred‖ expenses as to attorneys‘ 

fees, for example, for which he already has obtained advancement from Batesville. 

57 Agere Sys., Inc., 2013 WL 4958220, at *9 (holding that the defendant‘s argument 

that ―costs are  ̳incurred‘ only when a party pays costs out-of-pocket is incorrect 

and erroneous‖).
27

individuals are unable to obtain advancement from other sources.58 The bylaws do not

contain such a provision, however. Rather, York and New Milso‘s bylaws provide 

indemnification and advancement rights that are expressly non-exclusive of any other 

rights to advancement and indemnification a covered individual may have. 

In that regard, Section 2.15(e) of New Milso‘s bylaws, entitled ―Non-Exclusivity; 

Nature and Extent of Rights,‖ provides: ―[t]he rights to indemnification and advancement 

of expenses provided for in this Section shall (i) not be deemed exclusive of any other 

rights, whether now existing or hereafter created, to which any indemnitee may be 

entitled under any agreement . . . or otherwise.‖59 And, Section 8 of Article VII of 

York‘s bylaws provides: ―[t]he indemnification and advancement of expenses provided 

by, or granted pursuant to, the other sections of this Article VII shall not be deemed 

exclusive of any other rights to which those seeking indemnification and advancement of 

expenses may be entitled under any Bylaw, agreement, contract . . . or otherwise.‖60 

These provisions indicate that Defendants intended the advancement rights conferred by 

their bylaws to be broadly available to covered individuals, notwithstanding any similar 

rights a covered individual might have from other sources.

 

58 See, e.g., DeLucca v. KKAT Mgmt., L.L.C., 2006 WL 224058, at *7, *15 (Del. Ch. 

Jan. 23, 2006) (applying contract provision providing ―to the extent that any 

Indemnified Person may be entitled to indemnification with respect to any Loss, 

such Indemnified Person first shall be required to seek indemnification and/or 

insurance benefits from the Target Company before seeking indemnification from 

the Company pursuant to this Section 4.4.‖)

59 Choa Aff. I Ex. 1 § 2.15(e).

60 Choa Aff. I Ex. 2 art. VII § 8.
28

For the foregoing reasons, I conclude that, based on the terms of New Milso‘s 

bylaws, Scott Pontone has a contractual right to advancement for, at a minimum, any of 

his outstanding legal expenses incurred in the Pennsylvania Action since January 2013 

for which he has not yet requested or received funding from Batesville under the Loan 

Agreement, and for the future costs and expenses that he will incur in that action. I also 

conclude that Scott had a contractual right to advancement from New Milso for his 

outstanding legal expenses incurred in the Pennsylvania Action from January 1, 2013 and 

even earlier. To the extent those legal expenses have been paid by Batesville, however, 

Defendants assert that Scott has not suffered any out-of-pocket loss and, therefore, has no 

standing to maintain an advancement claim against either York or New Milso for such 

expenses. Because the arguments as to expenses that admittedly have been paid by 

Batesville and those that have not been paid or requested yet are different, I analyze those 

two time periods separately in this Opinion. 

In this vein, I pause briefly to address a concern Defendants repeatedly expressed 

in the briefing on their Motion to Dismiss and reiterated at oral argument61 that if the 

Court were to award advancement to Scott, he would be receiving a double payment. 

Defendants asserted at argument, for example, that: ―if we are ordered to now pay [Scott] 

Pontone, he will recover twice. What he will do with the money I do not know, but this 

 

61 Defs.‘ Opening Br. 2 (―Put simply, a plaintiff cannot seek to be paid twice for the 

same fees and expenses.‖); Defs.‘ Reply Br. 1 (―Delaware law therefore precludes 

the double recovery Scott Pontone seeks.‖); Id. at 9 n. 6 (In the context of 

subrogated claims brought by insurers, ―there is no double recovery.‖); Id. at 15 n. 

10 (―Similarly here, Scott Pontone has shown no such intent on the part of 

Defendants . . . to allow multiple recoveries by him.‖).
29

will be a second payment.‖62 This argument is a red herring. If Scott has received an 

invoice from his counsel that he either has not submitted to Batesville or which Batesville 

has not paid, there would be no double payment. As to the legal fees and expenses Scott 

incurred before January 1, 2013, he is not seeking advancement from York or New 

Milso. Once again, therefore, there is no risk of a double payment or recovery. Finally, 

for fees and expenses Scott incurred after January 1, 2013 that have been paid by 

Batesville, and conceivably might give rise to a double payment or recovery, I have 

determined for the reasons discussed in Section II.B.3.b infra that Scott has failed to 

allege sufficient facts to support a reasonable inference that he has standing to enable him 

to pursue those claims in his own right. 63

3. Scott Pontone’s standing to seek advancement from Defendants

a. The relevant case law and the Parties’ contentions

Defendants argue that, whatever advancement rights Scott Pontone may have 

under their bylaws, under Delaware law, he lacks standing to pursue the claims he has 

asserted in this litigation and is not the proper party in interest to assert those rights. 

Defendants argue that this is so because he is not at risk of suffering any loss if the 

advancement he requests from them is denied, due to the mandatory advancement and 

indemnification he will receive from Batesville. In support of their argument, Defendants 

 

62 Tr. 57. 

63 I note, however, that even in this third circumstance, it is unlikely that there would 

be a double payment, because of the requirement in Section 3 of the Loan 

Agreement that Scott must use any surplus advancement obtained from New 

Milso or York to repay the Loan. See supra note 24 and related text. 
30

principally rely upon this Court‘s decision in Levy v. HLI Operating Co.,

64 in which the 

Court held that parties who had been fully reimbursed for certain expenses by one 

indemnitor lacked standing to pursue indemnification for the same expenses from a 

different indemnitor. Scott asserts that this case is distinguishable from Levy on 

numerous grounds, including that Levy addressed standing to bring indemnification, not 

advancement, claims. In that regard, Scott contends that the facts present here are more 

analogous to those in Schoon v. Troy Corp.,

65 in which the court held that a party 

receiving voluntary advancement from one source had standing to pursue mandatory 

advancement from another. Because Levy and Schoon are the most pertinent cases to the 

standing issue before this Court, those decisions merit more detailed exposition. 

The plaintiffs in Levy were six former directors of HLI Operating Company, Inc. 

(―Old Hayes‖) who had been named as defendants in multiple securities lawsuits relating 

to restatements of Old Hayes‘s financial results. The plaintiffs had agreed to pay $1.2 

million each to settle certain of those lawsuits, and they subsequently requested 

indemnification from Old Hayes for those payments pursuant to their indemnification 

rights under Old Hayes‘ bylaws and various indemnification agreements. Old Hayes 

rejected the directors‘ request, and, in response, they filed suit. 

In the course of the litigation, discovery revealed that JLL Fund, a major 

shareholder of Old Hayes that had appointed four of the plaintiff directors (the ―JLL 

 

64 924 A.2d 210, 214 (Del. Ch. 2007).

65 948 A.2d 1157, 1159 (Del. Ch. 2008).
31

Representatives‖), had made the settlement payments for each of the JLL Representatives 

pursuant to contractual indemnification obligations it owed to them. Based on that 

information, Old Hayes moved for summary judgment against the JLL Representatives, 

arguing that they had suffered no injury and therefore lacked standing to bring an 

indemnification claim. The Court agreed and granted summary judgment in favor of Old 

Hayes, holding as follows:

When a purported indemnitee has all of his indemnifiable 

expenses paid in full and cannot show an out-of-pocket loss, 

he has no claim for indemnification under section 145. The 

relevant provisions of that statute empower a corporation to 

provide indemnification of only those amounts ―actually . . .

incurred by the person . . . .‖ This language is best understood 

as a statutory embodiment of the common law of 

indemnification, which generally recognizes that a party who 

― ̳has not and will not sustain any actual out-of-pocket loss‘

as the result of a claim raised against it has no 

indemnification claim . . . .‖ Therefore, under this reading of 

section 145, once a co-indemnitor fully reimburses its 

indemnitee for indemnifiable liabilities, the indemnitee lacks 

standing to assert an indemnification claim against the other 

indemnitor in the indemnitee‘s own right.66

The Court further held that, as the real party-in-interest, the indemnitor who fully 

satisfied its obligation to its indemnitee could sue the co-indemnitor in its own name on a 

theory of contribution.

Schoon was decided shortly after Levy by the same Vice Chancellor. In Schoon, 

this Court considered the standing of a party presently receiving advancement from one 

source to pursue advancement from another. The plaintiffs in Schoon were Richard 

 

66 Levy, 924 A.2d at 222.
32

Schoon and William Bohnen, a current and former director of the defendant, Troy 

Corporation (―Troy‖). The plaintiffs had been appointed to Troy‘s board of directors by 

Steel Investment Company (―Steel‖), a major Troy stockholder. In two previously-filed 

actions, Troy had asserted or attempted to assert breach of fiduciary duty claims against 

the plaintiffs. In response, the plaintiffs requested advancement from Troy under the 

terms of its bylaws, which provided for mandatory advancement for directors of all fees 

and expenses incurred in defending threatened or pending claims. After Troy refused to 

advance funds to cover all of the claimed fees and expenses, the plaintiffs filed suit 

against Troy for advancement.

The Court resolved the advancement claims on cross-motions for summary 

judgment. In its decision, the Court determined that Bohnen, as a former director of 

Troy, no longer was entitled to advancement under its bylaws due to a bylaw amendment 

that Troy had adopted. The Court then turned to Schoon‘s right to advancement. Earlier 

in the proceedings, the plaintiffs disclosed that Steel had been advancing their expenses 

in the previously-filed actions and in the instant advancement action. Steel was under no 

legal obligation to provide advancement to the plaintiffs and was doing so voluntarily, 

subject to a commitment by them to repay any amounts they received as advancement or 

indemnification from Troy.

Troy argued that, under Levy, Schoon lacked standing to bring his advancement 

claim because he had not suffered an actual loss. The Court in Schoon rejected this 

argument, noting that the facts before it were distinguishable from those in Levy because 

unlike the JLL Fund in Levy, which had a mandatory indemnification obligation to the 
33

JLL Representatives in that case, Steel was not obligated to advance Schoon his costs and 

was doing so voluntarily. The Court found this to be significant for two primary reasons. 

First, the Court noted that, in contrast to the JLL Representatives, it was not 

certain that Schoon ―has not and will not sustain any actual out-of-pocket loss,‖ because 

he ―has no assurance that Steel will continue advancing his costs and is obliged to repay 

those amounts to the extent he recovers them from Troy.‖67 The Court thus held that 

―Schoon has articulated sufficient injury to establish his standing.‖68 

Second, the Court found that accepting Troy‘s arguments would inequitably 

reward it. In that regard, the Court noted that because Steel voluntarily undertook to pay 

Schoon‘s fees and expenses without obligation, it would have no claim for contribution 

against Troy, because a contribution claim requires a party to ―show concurrent 

obligations existed to the same entities.‖69 Thus, the Court observed that ―were the court 

to accept Troy‘s argument that Schoon also lacks standing, no party could sue Troy. This 

result would inequitably reward Troy for failing to discharge its advancement obligations. 

The better approach is to allow Schoon to press his claim.‖70

The Schoon Court also cited DeLucca v. KKAT Management, L.L.C.71 in support 

of its decision that Schoon had standing. The plaintiff in DeLucca sought to enforce 

 

67 Schoon, 948 A.2d at 1175.

68 Id.

69 Id. (quoting Levy, 924 A.2d at 220).

70 Schoon, 948 A.2d at 1175.

71 2006 WL 224058 (Del. Ch. Jan. 23, 2006).
34

mandatory advancement rights against the defendant companies in that action but was 

receiving advancement from a separate company in the meantime. The defendants 

argued that, because the plaintiff had not been making any payments directly, she could 

not demonstrate a loss and, therefore, could not pursue advancement from them. The 

Court in DeLucca disagreed and found that the plaintiff could demonstrate an economic 

loss because she owned the company that was advancing her costs. The DeLucca Court 

also emphasized, however, that embracing the defendants‘ argument would provide a 

―perverse incentive‖ that would encourage companies to refuse to provide advancement 

in the hopes that the person owed advancement would ―find an affluent aunt, best friend, 

or other third party to front her defense costs,‖ thereby forfeiting her advancement 

rights.72 The Court in DeLucca noted that ―[t]he incentives for such refusal are already 

abundant . . . and there is no legal or equitable justification for adding to them . . . .‖73 

Thus, the Schoon Court found that the policy considerations underlying the Court‘s 

decision in DeLucca also supported its decision that Schoon had standing to pursue his 

advancement claims.

Defendants argue that, under Levy, Scott Pontone lacks standing to assert an 

advancement claim against them because he is entitled to mandatory advancement and 

indemnification from Batesville and, therefore, he ―has not and will not sustain any actual 

 

72 Id. at *9.

73 Id.
35

out-of-pocket loss.‖74 They assert that this case does not fit within Schoon because the 

advancement the plaintiff was receiving from a third party there was voluntary, not 

mandatory. Defendants contend this was ―critical‖ to the Court‘s determination that the 

plaintiff had standing. For his part, Scott argues that Levy is inapposite because it was an 

action for indemnification—not advancement—involving claims made after the 

underlying action had terminated and after all of the former directors‘ litigation costs had 

been paid by a third party indemnitor. Rather, Scott maintains that advancement cases 

such as Schoon and DeLucca are more analogous to the instant case and support the 

proposition that a corporate defendant cannot escape its advancement obligations merely 

because a plaintiff has been receiving advancement from another source, whether on a 

mandatory or a voluntary basis.

b. Plaintiff’s claims for advancement for expenses incurred from January 2013 

to the present that already have been paid

As stated supra, there is neither an allegation in the Complaint nor an indication in 

the documentary evidence referred to by the parties to support a reasonable inference that 

Scott Pontone has paid or is liable for any out-of-pocket expenses in connection with the 

Pennsylvania Action, with the exception of only the most recent invoices for legal fees 

and expenses that remain unpaid and any completed work that has not yet been billed. 

Such liability for out-of-pocket expenses presumably relates to a fairly recent period, 

after June 30, 2014, for example. As to the claims for advancement of expenses up to 

that point, I infer that they have been paid by Batesville already, and I conclude, 

 

74 Defs.‘ Opening Br. 20.
36

therefore, that Scott has no standing to assert a claim for indemnification under Levy. 

Extending the reasoning of Schoon, I conclude that Scott does not have standing to 

pursue a claim for advancement of those expenses, either. Because I find that Scott does 

not have standing with respect to claims for advancement of the expenses that already 

have been paid, I grant Defendants‘ motion to dismiss that aspect of Scott‘s advancement 

claim, without prejudice to his right to seek leave of Court to amend his Complaint if, in 

fact, he has suffered out-of-pocket expenses during the time period in question (from 

January 1, 2013 through June of this year).75 This dismissal is also without prejudice to 

any claim that Batesville may have for contribution against New Milso in the 

indemnification stage of this matter.

c. Plaintiff’s claims for advancement from January 2013 to the present that 

have not been paid

Having reviewed the relevant case law, I conclude that, under Delaware law, Scott 

Pontone has standing to pursue, at a minimum, advancement from Defendants for the 

litigation expenses he has incurred and will incur in the Pennsylvania Action and for 

which he has not already received advancement from Batesville under the Loan 

Agreement. In my view, Scott has a contractual right to receive advancement from at 

least Defendant New Milso for at least those litigation expenses, and Defendants‘ refusal 

to honor their obligations in that regard presents an injury-in-fact that gives Scott Pontone 

 

75 If the last period for which Batesville paid Scott Pontone‘s legal fees and expenses 

is some other recent date in 2014, I would expect the parties to incorporate that 

corrected date in an order implementing the rulings in this Opinion.
37

standing, regardless of his presumed ability to request and receive mandatory 

advancement and indemnification from another source.

Notwithstanding Defendants‘ protestations to the contrary, this decision does not 

conflict with this Court‘s decision in Levy. The Court in Levy was determining the 

plaintiff‘s standing to pursue an indemnification claim, not an advancement claim. In its 

analysis, the Court looked to the language of the subsections of 8 Del. C. § 145 that 

address indemnification, which authorize a corporation to provide indemnification only 

of amounts ―actually . . . incurred by the person.‖76 The Court held that this language 

should be read as incorporating the restriction from the common law of indemnification 

that a party who ― ̳has not and will not sustain any actual out-of-pocket loss‘ as the result 

of a claim raised against it has no indemnification claim.‖77 The indemnitee‘s losses had 

been paid at the time of the Court‘s decision in Levy. 

As an initial matter, it is not apparent to me that the reasoning of Levy should be 

mechanically extended to advancement. A corporation‘s authority to provide 

advancement is addressed in its own subsection of Section 145, namely, Section 145(e), 

that uses distinct language from the subsections addressing indemnification and permits 

advancement of ―expenses incurred.‖78 Moreover, as this Court consistently has held, 

―advancement and indemnification, although obviously related, are  ̳distinct types of 

 

76 Levy, 924 A.2d at 222 (quoting 8 Del. C. § 145(a)-(c)).

77 Id. (quoting Perno v. For–Med Med. Gp., P.C., 176 Misc.2d 655, 673 N.Y.S.2d 

849, 851 (N.Y. Sup. Ct. 1998)).

78 8 Del. C. § 145(e).
38

legal rights‘ and . . . the right to advancement is not ordinarily dependent upon a 

determination that the party in question will ultimately be entitled to be indemnified.‖79 

To the contrary, ―Section 145(e) . . . expressly contemplates that corporations may confer 

a right to advancement that is greater than the right to indemnification and recognizes that 

advances must be repaid if it is ultimately determined that the corporate official is not 

entitled to be indemnified.‖80

Nonetheless, even if the restriction articulated in Levy were extended to 

advancement, it would not bar Scott‘s standing in this case. The Levy Court‘s 

determination that plaintiffs had not and would not incur any out-of-pocket expense was 

driven by the fact that they already had been fully reimbursed by a third party for the 

settlement payment for which they sought to be indemnified by the defendant. Here, 

Scott seeks advancement for the expenses he has incurred and will continue to incur in 

the ongoing Pennsylvania Litigation, at least some portion of which has not yet been paid 

for by Batesville. Defendants‘ argument as to why Scott nonetheless will not incur any 

out-of-pocket expenses going forward is that he will be able to request and obtain 

advancement, and ultimately indemnification, from Batesville for any unpaid present and 

future expenses. 

This argument is unpersuasive. Were the Court to accept Defendants‘ argument, it 

would mean that any time a plaintiff held and pursued advancement and indemnification 

 

79 Senior Tour Players 207 Mgmt. Co. v. Golftown 207 Hldg. Co., 2004 WL 550743, 

at *2 (Del. Ch. Mar. 10, 2004)

80 Homestore, Inc. v. Tafeen, 888 A.2d 204, 212-13 (Del. 2005).
39

rights from a party that was willing to honor its obligations, it would lose the ability to 

enforce any other advancement rights it might have as to other parties, and have to wait 

until the conclusion of the relevant proceedings for the co-indemnitors to sort out their 

respective rights. This cannot be the law. The fact that a third party is willing to honor 

its contractual commitments to the plaintiff if called upon to do so should not serve as a 

basis for a defendant to escape its own, independent and commensurate, contractual 

obligations. In other words, an indemnitee having two essentially co-equal sources of 

advancement and indemnification should have the right to switch from one to the other in 

the middle of litigation, if he decides to do so. The indemnitee could not recover twice 

and presumably would have to stop accepting advancement in the first instance from the 

first indemnitor. Thus, unlike the situation in Levy, it would not be a foregone conclusion 

that he would not have any out-of-pocket expenses. For similar reasons, I also find that 

this Court‘s decisions in Schoon and DeLucca support the conclusion that Scott Pontone 

has standing to pursue advancement. 

This result avoids the ―perverse incentive‖ cautioned against in Schoon and 

DeLucca. According to Defendants, once a plaintiff begins to collect advancement from 

a source that owes him mandatory advancement and indemnification rights, the plaintiff 

loses standing to pursue advancement from any other source. This creates a perverse

incentive for companies to delay paying advancement in the hopes that they will be let 

off the hook. 

Indeed, this case illustrates that possibility to some extent. Because Defendants 

here vigorously contested Harry Pontone‘s advancement claims in related litigation in 
40

this Court, it is not surprising that Scott initially chose to seek and obtain advancement 

from Batesville. In January 2013, this Court entered an Opinion that largely granted 

Harry Pontone‘s claims for advancement. Promptly thereafter, Scott Pontone attempted 

to obtain advancement from Defendants rather than his client, Batesville. I see nothing 

nefarious or suspicious about Scott‘s conduct. In that regard, I note, for example, that 

Scott alleges in his Complaint that Batesville‘s commitment to paying his litigation 

expenses is negatively impacting his employment relationship. Rather, Scott‘s decision 

reflects the economic advantage he enjoys by having at least two separate, mandatory 

sources of advancement.81 

In conclusion, in light of the foregoing analysis, Scott Pontone at least has 

standing to pursue advancement for the qualified expenses for which he has not yet 

received advancement from Batesville. As to those expenses, dismissal for lack of 

standing therefore would be inappropriate.

Having concluded that Scott has standing to pursue advancement from Defendants 

as to the expenses he has and will incur in the Pennsylvania Action for which Batesville 

 

81 For these reasons, I also conclude that Defendants‘ argument that the doctrine of 

unclean hands bars Scott Pontone from recovering on his advancement claim is 

without merit. Apart from their baseless criticism of Scott‘s decision to seek 

advancement from Defendants in the middle of their underlying litigation, the only 

other basis for Defendants‘ unclean hands argument is that the Loan Agreement is 

a sham transaction. The Loan Agreement may have been drafted with cases like 

Levy and Schoon in mind, but that is understandable because this is a complicated 

area of the law. The likelihood that the parties to that agreement attempted to 

remain within the confines of the relevant case law, while also giving effect to 

Scott‘s and Batesville‘s goal of providing Scott with full advancement and 

indemnification, is simply not the type of behavior that the doctrine of unclean 

hands seeks to deter.
41

has not yet provided him advancement, I now consider Scott‘s motion for partial 

summary judgment as to his entitlement to advancement for those expenses.

III. MOTION FOR SUMMARY JUDGMENT

A. Legal Standard

Under Delaware law, ―[s]ummary judgment is granted if the pleadings, 

depositions, answers to interrogatories and admissions on file, together with the 

affidavits, show that there is no genuine issue as to any material fact and that the moving 

party is entitled to a judgment as a matter of law.‖

82

 When considering a motion for 

summary judgment, the evidence and the inferences drawn from the evidence are to be 

viewed in the light most favorable to the nonmoving party.83 Summary judgment will be 

denied when the legal question presented needs to be assessed in the ―more highly 

textured factual setting of a trial.‖84 The Court also ―maintains the discretion to deny 

summary judgment if it decides that a more thorough development of the record would 

clarify the law or its application.‖85 

 

82 Twin Bridges Ltd. P’ship v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 

2007) (citing Ct. Ch. R. 56(c)).

83 GMC Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 

2012) (quoting State Farm Mut. Auto. Ins. Co. v. Patterson, 7 A.3d 454, 456 (Del. 

2010)); Judah v. Del. Trust Co., 378 A.2d 624, 632 (Del. 1977).

84 Schick, Inc. v. Amalgamated Clothing & Textile Workers Union, 533 A.2d 1235, 

1239 n.3 (Del. Ch. 1987) (citing Kennedy v. Silas Mason Co., 334 U.S. 249, 256–

57 (1948)).

85 Tunnell v. Stokley, 2006 WL 452780, at *2 (Del. Ch. Feb. 15, 2006) (quoting 

Cooke v. Oolie, 2000 WL 710199, at *11 (Del. Ch. May 24, 2000)).
42

Under Section 145(k) of the DGCL, ―[t]he Court of Chancery may summarily 

determine a corporation‘s obligation to advance expenses (including attorneys‘ fees).‖86 

Indeed, ―summary judgment practice is an efficient and appropriate method to decide‖ an 

advancement dispute, ―as the relevant question turns on the application of the terms of 

the corporate instruments setting forth the purported right to advancement and the 

pleadings in the proceedings for which advancement is sought.‖87

I consider, in turn, Scott Pontone‘s entitlement to advancement from York and 

New Milso.

B. Scott’s Entitlement to Advancement From York 

Scott asserts that he is entitled to mandatory advancement from York of his fees 

and expenses in the Pennsylvania Action. York‘s bylaws authorize advancement, but it is 

unclear whether they provide for advancement that is mandatory or permissive in nature. 

The preamble to Article VII of York‘s bylaws suggests mandatory advancement, stating 

that ―[York] shall indemnify and advance expenses under this Article VII to the fullest 

extent permitted by applicable law in effect on the date of adoption of these Bylaws and 

to such greater extent as applicable law may thereafter permit.‖88 On the other hand, 

Section 7 of Article VII of York‘s bylaws, entitled ―Expenses Payable in Advance,‖ 

suggests that advancement is only permissive, stating that: 

 

86 8 Del. C. § 145(k).

87 Weinstock v. Lazard Debt Recovery GP, LLC, 2003 WL 21843254, at *2 (Del. Ch. 

Aug. 8, 2003) (citing Reddy v. Elec. Data Sys. Corp, 2002 WL 1358761, at *3 

(Del. Ch. June 18, 2002), aff’d, 820 A.2d 371 (Del. 2003)).

88 Choa Aff. I Ex. 2 art. VII.
43

Expenses incurred in defending or investigating a threatened 

or pending action, suit or proceeding may be paid by [York] 

in advance of the final disposition of such action, suit or 

proceeding upon receipt of an undertaking by or on behalf of 

the director, officer, employee or agent to repay such amount 

if it shall ultimately be determined that he is not entitled to be 

indemnified by [York] as authorized in this Article VII.89

Scott Pontone asserts that the language in the preamble of Article VII, by its plain 

terms, establishes conclusively that he has a mandatory advancement right against York, 

to the fullest extent of the law. Scott also argues that the two relevant bylaw provisions 

can be read in harmony if the second provision is interpreted as providing for permissive 

advancement in circumstances beyond those provided for by Delaware law—for 

example, in instances where a York employee is sued not by reason of his or her official 

capacity. Furthermore, Scott argues that any perceived ambiguity should be resolved 

against the drafter, Defendant York, under the doctrine of contra proferentem. 

York contends that Article VII‘s preamble cannot be the ―final word‖ on 

advancement and indemnification, or it would render the remaining sections of that 

article superfluous. York also notes that Article VII‘s preamble is a general provision 

and the twelve sections that follow are more specific. Therefore, under the rule of 

contract interpretation that specific provisions should prevail over general provisions, 

York argues that the language in Section 7 is controlling and that its bylaws should be 

interpreted as providing only for permissive advancement. York further argues that, at a 

 

89 Id. § 7.
44

minimum, its bylaws are ambiguous and their meaning, therefore, cannot be resolved on 

Scott‘s motion for summary judgment.

In the related advancement proceeding brought before this Court by Scott‘s father, 

Harry Pontone, I considered the interpretation of York‘s bylaws on a motion for partial 

summary judgment by Harry. Counsel for the parties raised substantially the same 

arguments on that motion as they do here as to the proper interpretation of York‘s 

bylaws. In an oral ruling on that motion, I found York‘s bylaws to be ambiguous and 

declined to grant summary judgment on the issue of Harry‘s entitlement to advancement 

from York.90 In that regard, I stated as follows:

In this instance I believe that both [parties‘] interpretations 

are reasonable, given the apparent inconsistency in the 

drafting between the preamble or the lead-in sentence that 

clearly refers to mandatory advancement, and, then, Section 

7, which is written in permissive terms. As I‘ve indicated, 

it‘s my preliminary view that Pontone is correct and that this 

should be a case of mandatory advancement. . . . But I 

recognize the . . . principle that‘s been referred to by the 

defendants, that the more specific provisions generally are to 

be given preference over the general. There‘s at least a 

colorable argument in that regard here. So for purposes of 

summary judgment, it strikes me that this is not a situation 

that I should jump to the contra proferentem conclusion or 

application of that principle, but rather it would be one where, 

if the parties considered it necessary, we could go on to 

further proceedings. There might be discovery related to this 

issue.91

 

90 Pontone v. Milso Indus. Corp., C.A. No. 7615-VCP, at 52-79 (Del. Ch. Jan. 17, 

2013) (TRANSCRIPT).

91 Id. at 62-63.
45

Notwithstanding my prior ruling, Scott Pontone argues that I should reconsider my 

interpretation of York‘s bylaws and hold that they provide for mandatory advancement 

because York has not come forward with any additional evidence to support its proposed 

interpretation. I reject this argument for two reasons. First, on a motion for partial 

summary judgment, it is the moving party’s burden to prove the absence of a genuine 

issue of material fact, and the court will resolve doubts in the non-movant‘s favor.92 

Second, Scott has not identified any evidence developed in discovery that would enable 

the Court to conclude, as a matter of law, that York‘s bylaws mean what Scott contends 

they do.

No new evidence or arguments have been presented that cause me to question my 

previous ruling that York‘s bylaws are ambiguous as to whether they provide for 

mandatory or permissive advancement. I therefore reach the same conclusion here. 

Thus, I hold that there is a genuine issue of material fact that precludes summary 

judgment as to Scott‘s entitlement to advancement from York.

C. Scott’s Advancement Claim Against New Milso 

By contrast to Scott Pontone‘s advancement rights under York‘s bylaws, it is 

undisputed that Scott, as a former officer and director of New Milso, has mandatory 

advancement rights under New Milso‘s bylaws. In that regard, Section 2.15(b) of New 

Milso‘s bylaws provides that ―[e]very indemnitee shall be entitled as of right to have the 

 

92 Citizens Coal., Inc. v. Cty. Council of Sussex Cty., 773 A.2d 1018, 1022-23 (Del. 

Ch. 2000) (citing Brown v. Ocean Drilling & Exploration Co., 403 A.2d 1114, 

1115 (Del. 1979)).
46

expenses of the indemnitee in defending any Action . . . paid in advance by [New Milso] 

prior to final disposition of the Action,‖ subject to the requirement that ―[New Milso] 

receiv[e] a written undertaking by or on behalf of the indemnitee to repay the amount 

advanced if it should ultimately be determined that the indemnitee is not entitled to be 

indemnified for the expenses.‖93 In Section 2.15(a), ―indemnitee‖ is defined, in relevant 

part, as ―each director and officer of New Milso‖; ―expenses‖ are defined as ―all 

expenses actually and reasonably incurred‖; and ―Action‖ is defined as ―any actual or 

threatened claim, action, suit or proceeding . . . in which [the indemnitee] may be 

involved, as a party or otherwise, by reason of such person being or having been a 

director or officer of [New Milso].‖94

Scott Pontone asserts that, under Section 2.15(b) of New Milso‘s bylaws, he is 

entitled to advancement from New Milso for the fees and expenses he has incurred and 

will continue to incur in the Pennsylvania Action. New Milso raises two principal 

arguments as to why the advancement Scott requests is outside the scope of New Milso‘s 

obligations. First, New Milso argues that the Pennsylvania Action was not brought 

against Scott ―by reason of‖ his having been a director or officer of New Milso and, thus, 

is not a qualifying action for purposes of advancement. Second, New Milso contends 

that, even if the Pennsylvania Action was brought ―by reason of‖ Scott‘s former role as 

an officer and director of New Milso, Scott‘s counterclaims in that action were not 

 

93 Choa Aff. I Ex. 1 § 2.15(b).

94 Id. § 2.15(a).
47

asserted ―in defending‖ the action and, therefore, at a minimum, the fees and expenses 

associated with his counterclaims are not eligible for advancement. I address these issues 

in turn.

1. Was the Pennsylvania Action brought “by reason of” Scott Pontone’s former 

role as an officer and director of New Milso?

The ―by reason of‖ limitation in New Milso‘s advancement bylaws is consistent 

with the statutory language contained in Section 145(a) of the DGCL, which authorizes 

indemnification when a person is made or threatened to be made a party to an action or 

proceeding ―by reason of the fact‖ that the person is or was a director or officer.95 Under 

Delaware law, ―[t]he  ̳by reason of the fact‘ standard, or the  ̳official capacity‘ standard, 

is interpreted broadly and in favor of indemnification and advancement.‖96 As the 

Delaware Supreme Court held in Homestore, Inc. v. Tafeen, ―if there is a nexus or causal 

connection between any of the underlying proceedings . . . and one‘s official corporate 

capacity, those proceedings are  ̳by reason of the fact‘ that one was a corporate officer, 

without regard to one‘s motivation for engaging in that conduct.‖

97

 The requisite 

connection is established ―if the corporate powers were used or necessary for the 

commission of the alleged misconduct.‖98

 

95 8 Del. C. §145(a).

96 Underbrink v. Warrior Energy Servs. Corp., 2008 WL 2262316, at *7 (Del. Ch. 

May 30, 2008) (citing Weaver v. ZeniMax Media, Inc., 2004 WL 243163 (Del. Ch. 

Jan. 30, 2004)).

97 888 A.2d 204, 214 (2005).

98 Bernstein v. TractManager, Inc., 953 A.2d 1003, 1011 (Del. Ch. 2007).
48

In the Harry Pontone advancement proceeding, I concluded that Harry was made a 

party to the Pennsylvania Action by reason of his former role as an officer and director of 

Defendants and, therefore, was entitled to advancement from New Milso of his costs and 

expenses in that action.99 One factor I relied upon in reaching that conclusion was that 

the Pennsylvania Plaintiffs asserted a breach of fiduciary duty claim against Harry as well 

as numerous other claims that were based on his misuse of information obtained in his 

capacity as an officer and director.

Although both Scott and Harry Pontone served as officers and directors of New 

Milso and the allegations asserted against Scott by the Pennsylvania Plaintiffs are 

substantially similar to those asserted against his father, Defendants argue that two key 

distinctions compel the conclusion that Scott is not a defendant in the Pennsylvania 

Action ―by reason of‖ his role as a former New Milso officer and director. Those two 

distinctions are that, unlike Harry Pontone: (1) Scott has not been expressly accused of a 

breach of fiduciary duty in the Pennsylvania Action; and (2) Scott was not serving as an 

officer or director at the time of the alleged misconduct. Having re-examined the 

amended complaint in the Pennsylvania Action, I find that, notwithstanding these 

distinctions raised by New Milso, Scott was made a party to the Pennsylvania Action ―by 

reason of‖ his former corporate office.

As to the first distinction, although it is true that the Pennsylvania Plaintiffs have 

not brought an express count for breach of fiduciary duty against Scott Pontone, the 

 

99 Pontone v. Milso Indus. Corp., C.A. No. 7615-VCP, at 64-72 (Del. Ch. Jan. 17, 

2013) (TRANSCRIPT).
49

claims they have asserted against him—including for breach of contract, tortious 

interference with contract, unfair competition, unjust enrichment, and trademark 

infringement—are nonetheless inextricably intertwined with and based on his former role 

as an officer of New Milso. In that regard, the gravamen of the allegations in the 

Pennsylvania Complaint is that Scott and Harry Pontone engaged in a wrongful scheme 

to divert employees and customers away from New Milso and toward Batesville, and that 

this scheme was facilitated by the confidential proprietary and trade secret information 

they acquired from serving as directors and officers of New Milso. 

In its factual background, the Pennsylvania Complaint emphasizes that Scott 

played a central and important role in the management and operations of York and New 

Milso during his time as an officer of those companies. It also states that: 

In their capacities as, respectively, President and Executive 

Vice-President, Harry and Scott had continuous and 

unrestricted access to highly proprietary confidential 

information and trade secrets of Plaintiffs, including, but not 

limited to: information concerning their past, present and 

prospective business contacts; past, present and prospective 

customers; customer lists, including key customer contact 

information; customer purchasing histories, trends and 

requirements; sales information; distribution information; 

information regarding Plaintiffs‘ marketing strategies and 

other marketing information; information regarding 

employees, including the terms of employment and 

contractual covenants; and information regarding Plaintiffs‘ 

internal policies and practices.100

In describing the alleged wrongful scheme perpetrated by Scott and Harry 

Pontone, the Pennsylvania Complaint alleges that ―[o]nce Scott . . . joined Batesville, [he] 

 

100 Compl. Ex. 1 ¶ 40.
50

moved quickly—with Harry‘s acquiescence and assistance—to use the customer contacts 

and relationships, and the confidential and proprietary information regarding customer 

requirements, pricing and discounts that they gained access to while employed by 

Plaintiffs, to target the largest accounts Harry handled . . . .‖101 The Pennsylvania 

Plaintiffs‘ allegation that Scott misappropriated confidential and proprietary information 

learned during his time as a director and officer underlie nearly all of the claims they 

assert against him.

For example, in support of their breach of contract claim against Scott, the 

Pennsylvania Plaintiffs allege that ―Scott Pontone breached the confidentiality provisions 

of the APA (Section 12.1) and his Employment Agreement (Section 4.01) by, inter alia, 

disclosing to Batesville Plaintiffs‘ customer lists and customer information, trade secrets 

and other proprietary information.‖102 In support of their unfair competition claim 

against all of the defendants in the Pennsylvania Action, the Pennsylvania Plaintiffs 

allege that ―Defendants‘ misconduct described above—including, but not limited to, 

Defendants‘ misappropriation of Plaintiffs‘ customer lists, requirements, and other 

confidential information, [and] Defendants‘ use thereof to solicit Plaintiffs‘ customers 

and employees . . . —constitutes unfair methods of competition.‖103 And, in support of 

their unjust enrichment claim against all defendants, the Pennsylvania Plaintiffs allege 

that ―[a]s a result of the actions of Defendants alleged above, including but not limited to 

 

101 Id. ¶ 120.

102 Id. ¶ 128.

103 Id. ¶ 186.
51

their . . . improper misappropriation of Plaintiffs‘ business relationships, business 

contacts, and proprietary information, Defendants have profited at the expense of 

Plaintiffs.‖104

This Court has held previously that where the claims asserted against a defendant 

in an action are based on the misuse of confidential information that the defendant 

learned in his or her official corporate capacity, that action qualifies as being asserted ―by 

reason of‖ that corporate capacity.105 Based on this analysis, I find that the claims 

asserted against Scott in the Pennsylvania Action are based largely on his misuse and 

misappropriation of confidential and proprietary information that he learned in his 

capacity as an officer or director of New Milso. This is sufficient to support the 

conclusion that Scott was made a party to the Pennsylvania Action ―by reason of‖ his 

former role as a New Milso officer or director, even in the absence of a claim against him 

for breach of fiduciary duty.

 

104 Id. ¶ 192.

105 Brown v. LiveOps, Inc., 903 A.2d 324, 330 (Del. Ch. 2006) (concluding that 

underlying claims arose ―by reason of the fact‖ that plaintiff was a director or 

officer of defendant because ―[t]he gravamen of the underlying complaint is that 

[plaintiff] had access to proprietary information by reason of the fact that he was a 

director and officer of [defendant] and that he wrongly used that information for 

his personal benefit.‖); see also Perconti v. Thornton Oil Corp., 2002 WL 982419, 

at *7 (Del. Ch. May 3, 2002) (holding that the relevant inquiry for purposes of the 

―by reason of‖ standard ―is into whether the [wrongful] scheme is alleged to have 

employed the corporate powers (or, for example, confidential inside information 

acquired through the corporate status) conferred upon the officer by virtue of his 

status‖).
52

In addition, I note that, although the Pennsylvania Plaintiffs have not asserted an 

express claim for breach of fiduciary duty against Scott, the complaint contains 

allegations suggesting that he, in fact, did owe such a duty to the Pennsylvania Plaintiffs 

and arguably raising an inference that he breached that duty through the wrongful 

conduct challenged in the complaint. In that regard, the Pennsylvania Complaint asserts 

that ―as with Harry, the fiduciary duty and confidentiality provisions set forth in Section 

12.1 of the APA and Sections 1.07 and 4.01 of Scott‘s Employment Agreement continue 

indefinitely.‖106 The Pennsylvania Complaint further alleges that Section 1.07 of Scott‘s 

Employment Agreement imposed on him ―a fiduciary duty of loyalty.‖107 The 

Pennsylvania Complaint also asserts that ―in addition to his contractual obligations to 

Plaintiffs, Scott was also subject to certain common law obligations to Plaintiffs, 

including the duty of loyalty, a fiduciary duty as an officer, and the duty to maintain the 

confidentiality of Plaintiffs‘ confidential and proprietary information.‖108 These 

allegations, when coupled with the Pennsylvania Plaintiffs‘ claims that Scott misused the 

confidential and proprietary information that he learned as an officer and director for his 

own benefit and to his unjust enrichment, arguably raise an inference that he breached his 

fiduciary duties. Particularly in light of these fiduciary allegations in the Pennsylvania 

Complaint, I reject as hypertechnical and overly formalistic Defendants‘ argument that 

 

106 Compl. Ex. 1 ¶ 35.

107 Id. ¶¶ 28, 34.

108 Id. ¶ 36.
53

Scott is not a party to the Pennsylvania Action ―by reason of‖ his former corporate office 

because no express claim for breach of fiduciary duty has been raised against him.109

As to the second distinction identified by Defendants, although it is true that Scott 

Pontone was no longer an officer or director of Defendants when the alleged wrongful 

scheme to usurp their customers and employees for Batesville commenced, I find that the 

claims challenging Scott‘s participation in that scheme nonetheless arise by virtue of his 

former position as an officer and director of New Milso. This is so because the 

confidential and proprietary information that allegedly enabled and facilitated the 

wrongdoing was acquired by Scott during his tenure as an officer and director. Notably, 

the Pennsylvania Complaint specifically avers that the confidential and proprietary 

information acquired by Scott during his employment with Defendants and later allegedly 

misused by him remained valuable despite the passage of time: 

Consistent with the tightly-knit nature of the death care 

industry, . . . the confidential nature of information regarding 

[Plaintiffs‘] customers—particularly with respect to key 

contact information and preferences—did not become stale 

merely because of the passage of time. Likewise, given the 

extensive continuity of the product mix in the casket industry, 

the confidential nature of information regarding matters such 

as product preferences and purchasing histories did not 

quickly become stale. Thus, much of the confidential and 

proprietary information to which Scott had access before his 

separation from Plaintiffs has retained its confidential and 

 

109 See Reddy v. Elec. Data Sys. Corp., 2002 WL 1358761 (Del. Ch. June 18, 2002) 

(rejecting defendant‘s argument that because it did not specifically allege that 

plaintiff had committed a breach of fiduciary duty in the underlying action, that 

action was not a proper subject of advancement).
54

proprietary status—and value to Plaintiffs—to the present 

day.110

For the foregoing reasons, I conclude that Scott, like his father, was made a party 

to the Pennsylvania Action ―by reason of‖ his former role as a director or officer of New 

Milso. Therefore, under Section 2.15(b) of New Milso‘s bylaws, Scott is entitled to 

advancement for the expenses he incurs ―in defending‖ that action.111

2. Is Scott entitled to advancement for his counterclaims in the Pennsylvania 

Action?

Among other expenses, Scott seeks advancement for the litigation expenses he has 

incurred in connection with the counterclaims he has asserted in the Pennsylvania Action. 

Scott has asserted a number of counterclaims against the Pennsylvania Plaintiffs, all but 

two of which mirror counterclaims that also were asserted by Harry Pontone.112 In Harry 

Pontone‘s advancement proceeding, I ruled on the issues pertaining to Harry‘s 

entitlement to advancement for his counterclaims in a Memorandum Opinion that 

addressed Defendants‘ exceptions to the Second Report of the Special Master appointed 

in that proceeding.113 The parties agree that my ruling as to which of Harry‘s 

counterclaims are subject to advancement is controlling as to any corresponding 

counterclaims that have been asserted by Scott Pontone.114 Therefore, I adopt that ruling 

for purposes of this case

115 and need not address those counterclaims further. The two 

counterclaims Scott has asserted that do not correspond to counterclaims asserted by 

 

110 Compl. Ex. 1 ¶ 35.

111 Choa Aff. I Ex. 1 § 2.15(b).
55

Harry Pontone are Scott‘s counterclaims for defamation and for false and misleading 

advertising.

In Citadel Holding Corp. v. Roven,

116 the Delaware Supreme Court considered 

whether the ―in defending‖ language in an advancement provision extended to the 

assertion of various counterclaims. Adopting a broad reading of the phrase ―in defense‖ 

in the litigation context, the Court held that advancement was required for the 

compulsory counterclaims at issue in that case, because they were ―necessarily part of the 

same dispute and were advanced to defeat, or offset‖ the affirmative claim.117 Under the 

test articulated in Roven, and refined by subsequent case law,118a counterclaim will be 

 

112 Specifically, both Scott and Harry Pontone asserted against the Pennsylvania 

Plaintiffs counterclaims for breach of contract, breach of the implied covenant of 

good faith and fair dealing, tortious interference with prospective business 

advantage, unjust enrichment, unfair competition, abuse of process, and 

declaratory judgment and injunctive relief on restrictive covenants. Choa Aff. in 

Supp. of Pl.‘s Br. in Supp. of Mot. for Partial Summ. J. (―Choa Aff. II‖) Ex. 4.

113 Pontone v. Milso Indus. Corp., 2014 WL 2439973 (Del. Ch. May 29, 2014).

114 See Defs.‘ Answering Br. in Opp‘n to Pl.‘s Mot. for Partial Summ. J. 8-9; Pl.‘s 

Reply Br. in Further Supp. of His Mot. for Partial Summ. J. 20.

115 Harry Pontone has moved for reargument on the Court‘s May 29, 2014 ruling, and 

that motion remains pending. Nothing in this Opinion is intended to reflect the 

Court‘s disposition as to the motion for reargument. 

116 603 A.2d 818 (Del. 1992).

117 Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 824 (Del. 1992).

118 See, e.g., Zaman v. Amedeo Hldgs., Inc., 2008 WL 2168397, at *35 (Del. Ch. May 

23, 2008); Reinhard & Kreinberg v. Dow Chem. Co., 2008 WL 868108, at *3 

(Del. Ch. Mar. 28, 2008); Gentile v. SinglePoint Fin., Inc., 787 A.2d 102, 109-10 

(Del. Ch. 2001).
56

considered to be ―defending‖ and thus advanceable, if it is: (1) ―necessarily part of the 

same dispute,‖ in the sense that it qualifies as a compulsory counterclaim under the 

prevailing Delaware and federal procedural standard, and (2) ―advanced to defeat, or 

offset‖ the affirmative claims.119 Under Federal Rule of Civil Procedure 13 and its 

Delaware analog, a counterclaim is compulsory if it, among other requirements, ―arises 

out of the transaction or occurrence that is the subject matter of the opposing party‘s 

claim.‖120

In light of the foregoing standard, I next consider whether Scott is entitled to 

receive advancement for his counterclaims for defamation and for false and misleading 

advertising.

a. Defamation

Scott has asserted a counterclaim for defamation against the Pennsylvania 

Plaintiffs, alleging that, on numerous occasions, they ―knowingly caused false, 

misleading, and untrue statements to be made or published to customers and news outlets 

or agencies with the intent of defaming Scott Pontone.‖121 Among the specific examples 

provided in the counterclaim, Scott asserts that ―on or about September 21, 2010, the

Casket & Funeral Supply Association of America (―CFSA‖) published an email with a 

 

119 See Pontone v. Milso Indus. Corp., 2014 WL 2439973, at *7 (Del. Ch. May 29, 

2014); Paolino v. Mace Sec. Int’l, Inc., 985 A.2d 392, 399-400 (Del. Ch. 2009).

120 Fed. R. Civ. P. 13(a)(1); accord Del. Ct. Ch. R. 13(a).

121 Choa Aff. II Ex. 4 ¶ 259.
57

statement that CFSA had confirmed information regarding the instant lawsuit.‖

122

 He 

further alleges that:

The statement was made and confirmed, on information and 

belief, by Plaintiffs‘ directors, officers, agents, 

representatives, or employees. The statement that was 

published in the CFSA email and newsletter was false, untrue, 

misleading, and defamatory. Plaintiffs were aware that Scott 

Pontone‘s non-compete expired May 30, 2010, yet they 

nonetheless caused an untrue statement regarding the instant 

lawsuit to be published with reckless disregard for the truth 

and with the malicious intent of injuring, or otherwise causing 

harm and loss to Scott Pontone‘s trade, business, or 

profession.123

In Duthie v. CorSolutions Medical, Inc.,

124 this Court addressed whether the 

plaintiffs in that action, whom the Court had found to be entitled to advancement in 

defending underlying litigation brought by the defendants, were ―entitled to advancement 

of fees incurred in affirmatively asserting defamation claims against the Defendants 

based on public statements which the Defendants have made about them regarding the 

matters already in litigation.‖125 The Court held that:

Where a party holding a right to advancement is the target of 

defamation by his adversary, the ability to ―defend oneself‖ 

includes the capacity to respond to such attacks by filing 

defamation actions. Because the alleged defamatory attacks 

reprise the same charges as advanced in the litigation and 

because the adverse party has already brought litigation 

involving the same allegations, it is neither practicable nor 

 

122 Id. ¶ 262.

123 Id. ¶ 263.

124 2008 WL 4173850 (Del. Ch. Sept. 10, 2008).

125 Id. at *1.
58

reasonable to attempt to draw some line defining which 

defensive strategy, even though it may involve an assertion of 

affirmative claims, is appropriate.126

The Court concluded that the counterclaims for defamation in Duthie were a ―necessary 

part of the same dispute‖ and awarded the plaintiffs advancement of their fees and 

expenses incurred in asserting those claims.

I consider the facts relevant to Scott‘s defamation counterclaim to be analogous to 

the facts surrounding the defamation counterclaims at issue in Duthie. As in Duthie, 

Scott‘s counterclaim alleges that Defendants committed defamation by, inter alia, 

spreading false statements echoing the very charges Defendants are advancing in the

underlying litigation, including that Scott has acted in violation of the contractual 

obligations he owes to them. Consistent with the ruling in Duthie, therefore, I conclude 

that Scott‘s defamation counterclaim is compulsory and a ―necessary part of the same

dispute.‖ Success on that counterclaim also would likely produce an offsetting damages 

award and negate any of the Pennsylvania Plaintiffs‘ contractual claims premised on 

Scott‘s non-competition obligations extending beyond May 30, 2010. Thus, I hold that 

Scott‘s defamation counterclaim was asserted ―in defending‖ the underlying action, and 

that he is entitled to advancement from New Milso for his fees and expenses incurred in 

connection with that counterclaim.

 

126 Id.
59

b. False and misleading advertising

Scott also has asserted a counterclaim for false and misleading advertising against 

the Pennsylvania Plaintiffs. In that counterclaim, Scott alleges that the Pennsylvania 

Plaintiffs ―engaged in acts of false, deceptive, and misleading advertising,‖ by, among 

other things: giving false information about their headquarters, implying that Harry 

Pontone remained affiliated with the Company after he had resigned, implying that 

members of the Pontone family had leadership roles in the Matthews casket division 

when they did not, distributing caskets made by others as their own, and placing improper 

designations of origin on their products.127 The counterclaim further alleges that 

―[c]onsumers have been confused by Plaintiffs false and misleading advertising‖ and that 

it has damaged Scott, PCC, and consumers.

128

 

Having considered Scott‘s counterclaim for false and misleading advertising in 

relation to the affirmative claims asserted against him in the Pennsylvania Action, I 

conclude that his counterclaim is not sufficiently related to the affirmative claims to be 

considered compulsory or a ―necessary part of the same dispute.‖ 

As previously noted, under Federal Rule of Civil Procedure 13(a) and its Delaware 

analog, a counterclaim is compulsory if it, among other requirements, ―arises out of the 

transaction or occurrence that is the subject matter of the opposing party‘s claim.‖129 The 

test used to determine whether a claim and counterclaim arise out of the same 

 

127 Choa Aff. II Ex. 4 ¶ 294.

128 Id. ¶¶ 296-97.

129 Fed. R. Civ. P. 13(a)(1); accord Del. Ct. Ch. R. 13(a).
60

―transaction or occurrence‖ is whether the two bear a ―logical relationship.‖130 Whether 

two claims bear a logical relationship to one another may be informed by considerations 

such as whether they share issues of fact and law in common or would involve 

presentation of the same evidence.131

Scott argues that his counterclaim for false and misleading advertising is 

necessarily part of the same dispute as the affirmative claims because, if he proves that 

counterclaim, it will help to demonstrate that any reduction in New Milso‘s business is 

the result of its own poor business practices—in deceiving and confusing customers—

rather than the result of any wrongful scheme by him. I find that argument insufficient to 

demonstrate a ―logical relationship‖ for purposes of establishing that the counterclaim is 

compulsory. 

The legal and factual issues implicated by the affirmative claims—including 

whether Scott breached his contractual duties to New Milso, tortiously interfered in New 

Milso‘s contractual relations, infringed on its trademark, engaged in unfair competition, 

or was unjustly enriched—are largely distinct from those implicated by a false and

misleading advertising claim against New Milso. In that regard, I note that, in order to 

 

130 See Mott v. State, 49 A.3d 1186, 1188–89 & n.8 (Del. 2012); Pontone v. Milso 

Indus. Corp., 2014 WL 2439973, at *9 (Del. Ch. May 29, 2014).

131 See Mott, 49 A.3d at 1188–89 & n.8; Pontone, 2014 WL 2439973, at *9; 

Transamerica Occidental Life Ins. Co. v. Aviation Office of Am., Inc., 292 F.3d 

384, 389–90 (3d Cir. 2002).
61

establish a false advertising claim under the Lanham Act,132 upon which Scott has based 

his counterclaim,

133 a plaintiff must prove: 

1) that the defendant has made false or misleading statements 

as to his own product [or another‘s]; 2) that there is actual 

deception or at least a tendency to deceive a substantial 

portion of the intended audience; 3) that the deception is 

material in that it is likely to influence purchasing decisions; 

4) that the advertised goods traveled in interstate commerce; 

and 5) that there is a likelihood of injury to the plaintiff in 

terms of declining sales, loss of good will, etc.134

At least the first four of those elements are wholly distinct from the elements at issue in 

the Pennsylvania Plaintiffs‘ affirmative claims. This lack of overlap also suggests that 

Scott‘s assertion of the false and misleading advertising claim in the Pennsylvania Action 

does not substantially promote judicial economy, a policy underlying Rule 13(a).

135

For the foregoing reasons, I conclude that Scott‘s counterclaim for false and

misleading advertising is not logically related to the affirmative claims in the 

Pennsylvania Action and, therefore, is not compulsory or a ―necessary part of the same 

dispute.‖ Assertion of that counterclaim, therefore, does not qualify as ―defending‖ for 

purposes of New Milso‘s bylaws, and expenses incurred by Scott in connection with the 

counterclaim are not subject to advancement.

 

132 15 U.S.C. § 1125.

133 Choa Aff. II Ex. 14 at 24-25.

134 Pernod Ricard USA, LLC v. Bacardi U.S.A., Inc., 653 F.3d 241, 248 (3d Cir. 

2011).

135 Transamerica Occidental Life Ins. Co., 292 F.3d at 389.
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D. Fees on Fees

Section 2.15(c) of New Milso‘s bylaws provides that, if New Milso does not 

timely pay a request for indemnification or advancement, the indemnitee may commence 

an ―Indemnitee Action‖ to recover the unpaid amount and ―if successful in whole or in 

part, the indemnitee shall also be entitled to be paid the expense of bringing and pursuing 

such Indemnitee Action.‖136 Although a literal reading of New Milso‘s bylaw suggests

that Scott is entitled to indemnification for all ―fees on fees‖ related to this advancement 

action if he is even partially successful, this Court, under Section 145 of the DGCL, will 

―only award that amount of fees that is reasonable in relation to the results obtained.‖137 

Determining an appropriate award of ―fees on fees‖ based on the results obtained 

by a plaintiff in an advancement or indemnification action ―is a nonscientific inquiry that 

simply involves a reasoned consideration of the issues at stake in the case and an 

assessment of the plaintiffs‘ level of success.‖138 In this action, Scott has succeeded in 

establishing his entitlement to advancement for the fees and expenses he has incurred and 

will incur in the Pennsylvania Action that have not yet been paid by Batesville. The 

record indicates that the amount of those fees over time is likely to be substantial. On the 

other hand, Scott has failed to demonstrate that he is entitled to advancement for 

 

136 Choa Aff. I Ex. 1 § 2.15(c)

137 Schoon v. Troy Corp., 948 A.2d 1157, 1176 (Del. Ch. 2008) (quoting Fasciana v. 

Elec. Data Sys. Corp., 829 A.2d 178, 185 (Del. Ch. 2003)) (internal quotation 

marks omitted).

138 Zaman v. Amedeo Hldgs., Inc., 2008 WL 2168397, at *39 (Del. Ch. May 23, 

2008).
63

previously incurred fees and expenses that Batesville already has funded. Based on the 

level of Scott‘s success in this action, including on Defendants‘ motion to dismiss and his 

motion for partial summary judgment, I hold that he is entitled to 75% of the reasonable 

―fees on fees‖ that he has incurred in connection with this advancement proceeding.

E. Prejudgment Interest

―In Delaware, prejudgment interest is awarded as a matter of right.‖139 A party 

from whom advancement is improperly withheld ―is entitled to interest computed from 

the date of demand,‖ defined as the date on which the party ―specified the amount of 

reimbursement demanded and produced his written promise to pay.‖140 Scott made an 

initial demand for advancement and provided an undertaking to New Milso on July 24, 

2013 and has made additional monthly requests for advancement since that time, all of 

which New Milso has rejected.141 Each of those requests specified the monetary amount 

of advancement requested. Thus, I hold that, as to any legal expenses Scott has incurred 

in the Pennsylvania Action since January 2013 that have not yet been paid by Batesville, 

Scott is entitled to receive prejudgment interest from New Milso at the legal rate running 

from July 24, 2013 or the date that advancement for such legal expenses was requested 

from New Milso, whichever is later. For future advancement requests from Scott, New 

 

139 Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992) (citing Moskowitz v. 

Mayor & Council of Wilm., 391 A.2d 209 (Del. 1978)).

140 Roven, 603 A.2d at 826 & n.10.

141 Choa Aff. II Ex. 5-9, 20-21.
64

Milso shall have a commercially reasonable period of ten days to provide the requested 

advancement before prejudgment interest shall begin to accrue.

IV. CONCLUSION

For the reasons stated in this Opinion, I grant in part and deny in part Defendants‘ 

motion to dismiss for lack of standing. I grant that motion in that I hold Scott lacks 

standing to pursue advancement for legal expenses he has incurred in the Pennsylvania 

Action for which he already has received funding from Batesville. I deny the motion in 

that I hold Scott has standing to pursue advancement for legal expenses he has incurred 

and will incur in the Pennsylvania Action for which he has not received funding from 

Batesville.

I grant in part and deny in part Scott‘s motion for partial summary judgment. I 

grant that motion in that I hold Scott is entitled to receive advancement from New Milso 

for his expenses incurred in the Pennsylvania Action, subject to the limitations specified 

in this Opinion. I deny the motion in that there remains a genuine issue of material fact 

as to whether Scott is entitled to receive mandatory advancement from Defendant York. 

Finally, I award ―fees on fees‖ and prejudgment interest as specified herein.

Counsel for Plaintiff shall circulate a proposed form of order implementing these

rulings and file the proposed order within fifteen days of the date of this Opinion.142 If 

the parties are unable to agree on the form of order, they shall file their respective 

 

142 The Court will hold a telephone conference with counsel on August 27, 2014 at 

11:00 a.m. to discuss certain preliminary matters regarding the form of order.
65

proposal with a supporting letter of not more than five pages in length within fifteen days 

of this Opinion.