## Facts

- Electronic Data Systems Corporation (EDS), a Delaware corporation, acquired FACS Incorporated (FCI) in 1995; John E. Fasciana represented FCI and its shareholders in the sale and later performed legal work connected to the acquired business.
- The acquisition included incentive-related provisions, including an escrow and potential additional payments to former FCI shareholders based on post-acquisition performance targets.
- In 2001, a federal grand jury indicted Fasciana, alleging he participated in a scheme to defraud EDS by causing improper incentive payments and receiving kickbacks.
- EDS also sued Fasciana in a Texas federal civil action based on substantially the same alleged misconduct.
- The indictment and civil complaint largely alleged conduct adverse to EDS, but included limited allegations that Fasciana made material misrepresentations to clients while communicating on EDS’s behalf.
- EDS had a bylaw providing advancement and indemnification to its “agents” to the fullest extent permitted by DGCL § 145.
- Fasciana demanded advancement of litigation expenses for defending the criminal case and the Texas civil action; EDS refused, disputing both his “agent” status and whether the proceedings were “by reason of” any agency role.

## Issues

1. Whether outside counsel can qualify as a corporate “agent” eligible for advancement under DGCL § 145 and a bylaw extending advancement to agents.
2. Whether the criminal indictment and civil complaint asserted claims against Fasciana “by reason of” actions taken in his capacity as EDS’s agent, as opposed to conduct hostile to EDS.
3. If only some allegations relate to an agency capacity, whether advancement must cover the entire proceedings or may be limited to the agency-related portions.

## Decision

- The Court of Chancery held that outside counsel can be an “agent” for purposes of DGCL § 145 and EDS’s bylaw when acting on the corporation’s behalf and subject to its control in the relevant matter.
- The court found that most allegations concerned a scheme adverse to EDS and were not brought “by reason of” Fasciana’s alleged agency status.
- The court ordered only partial advancement: EDS had to advance expenses for defending against the discrete allegations that Fasciana made misrepresentations on EDS’s behalf to clients, but not for the broader conspiracy and fraud allegations against EDS.
- The court rejected a proceeding-wide advancement obligation where only a small subset of allegations implicated covered, capacity-based conduct.

## Legal Principles

- Under DGCL § 145, “agent” is a functional category; a person may qualify when acting on the corporation’s behalf and subject to the corporation’s control in the relevant conduct.
- Advancement and indemnification depend on the capacity-based nexus: the claims must be asserted “by reason of the fact” of the person’s service as an officer, director, employee, or agent.
- A corporation is not required to fund a defense for allegations that the claimant acted against the corporation merely because other allegations arise from covered conduct.
- Courts may parse pleadings and tailor advancement to expenses reasonably attributable to covered, agency-capacity allegations rather than ordering all-or-nothing advancement.

## Conclusion

The court required EDS to advance expenses only for the limited allegations tied to Fasciana’s actions on EDS’s behalf, holding that outside counsel can qualify as an “agent” under DGCL § 145 but that advancement is confined to claims brought by reason of that agency capacity.


Fasciana v. Elec. Data Sys. Corp., 829 A.2d 178 (Del. Ch. 2003)