## Facts

- Gary O. Marino served as Patriot’s Chairman, President, and CEO from 2004 until June 18, 2012, and indirectly held significant equity interests through entities in Patriot’s ownership chain.
- Patriot, a Delaware entity, was involved in negotiations with Sierra Railroad Company concerning a potential transaction, including a non-disclosure agreement (2005) and a letter of intent (2007).
- Litigation between Patriot and Sierra followed; Sierra asserted claims including breach of the NDA and letter of intent.
- After Parent sold Patriot’s stock, Marino resigned his positions, and sale proceeds were distributed up the ownership chain in a manner that avoided flowing through Grandparent’s accounts.
- In the underlying federal action, a jury awarded Sierra more than $50 million against Patriot and Grandparent.
- Sierra later filed a post-judgment motion seeking to add Marino as a judgment debtor based on (i) the transfer of sale proceeds and (ii) Marino’s alleged litigation-related representations about not rendering defendants judgment-proof.
- Patriot’s charter provided indemnification and advancement for directors and officers “to the fullest extent permitted by law.”
- Marino demanded advancement from Patriot for fees and expenses incurred opposing the post-judgment motion; Patriot refused, contending any rights ended when Marino left office and that the motion targeted post-resignation conduct.
- The parties filed cross-motions for summary judgment on advancement and agreed there were no material fact disputes.

## Issues

1. Whether a charter provision granting advancement and indemnification “to the fullest extent permitted by law” provides continuing advancement rights to a former officer/director for claims tied to conduct undertaken while serving.
2. Whether advancement is available for portions of a claim based solely on a former officer/director’s conduct after resignation, rather than conduct taken in an official capacity during service.

## Decision

- The Court of Chancery granted Marino’s motion in part and denied it in part, and granted Patriot’s cross-motion in part and denied it in part.
- The court held Marino was entitled to advancement for aspects of Sierra’s post-judgment motion that were “by reason of the fact” of his service as an officer/director (i.e., tied to challenged pre-resignation actions taken in that capacity).
- The court held Marino was not entitled to advancement for aspects of the post-judgment motion based solely on his post-resignation actions, when he was no longer an officer/director.
- The court required Patriot to advance fees and expenses only for the covered portions of the defense, effectively parsing the post-judgment motion into covered and non-covered components.

## Legal Principles

- Under Delaware law, advancement turns on whether the proceeding is brought “by reason of the fact” that the individual is or was a corporate officer or director.
- Standard “to the fullest extent permitted by law” charter language generally preserves advancement rights for claims arising from actions taken during service, even if asserted after the individual leaves office, absent a specific limitation in the grant.
- Advancement generally does not extend to conduct undertaken after service ends when the challenged actions are not connected to the individual’s former official capacity.
- When a proceeding includes mixed allegations, a court may allocate advancement by separating covered (in-capacity, during-service) aspects from non-covered (post-service, out-of-capacity) aspects.

## Conclusion

The court held that a former corporate officer/director retains charter-based advancement rights for claims tied to actions taken while serving in that role, but the corporation need not advance expenses for claims based solely on the individual’s post-resignation conduct.


Marino v. Patriot Rail Co. LLC, 131 A.3d 325 (Del. Ch. 2016)