The dispute centers on a $10 million conflict between Invictus Special Situations Master I, L.P., a private fund containing ERISA assets, and its former fiduciaries. The fund filed a complaint against Invictus Global Management, LLC, Invictus Special Situations I GP, LLC, and principals Cindy Chen Delano and Amit Patel in October 2023. The fund alleged the defendants breached their partnership and management agreements by withholding fund assets and information after their removal in September 2023.
Defendants counterclaimed for advancement of defense costs under the fund's governing documents. The fund argued that ERISA Section 1110 voids any provision allowing an ERISA-regulated plan to advance funds to a fiduciary using plan assets. The Court of Chancery agreed, ruling in May 2025 that the advancement provisions were invalid at the time they were entered into.
Justice Valihura, writing for the court en banc, distinguished between advancement and indemnification. The court noted that while federal courts have found ERISA Section 1110 voids certain indemnification provisions, advancement with proper undertakings is different. Justice Valihura wrote that while the rights to indemnification and advancement are correlative, they remain discrete and independent rights, with advancement having a much narrower scope.
The court emphasized that advancement provides corporate officials with immediate interim relief from the personal out-of-pocket financial burden of paying the significant ongoing expenses inevitably involved with investigations and legal proceedings. The ruling balances Delaware's strong policy favoring advancement rights against federal ERISA protections.
The Delaware Supreme Court held that the Court of Chancery had misapplied federal precedent, particularly Secretary United States Department of Labor v. Koresko. Justice Valihura wrote that the claims for which defendants seek advancement are not ERISA claims, as the fund has repeatedly acknowledged.
Crucially, the court noted that the advancement sought here would not abrogate the fund's right to recover from defendants for ERISA breaches because the advancement is expressly contingent on an undertaking. The fund's governing documents define "Disabling Conduct" broadly to include a material breach of fiduciary duties, meaning any breach of fiduciary duties under ERISA would constitute non-indemnifiable conduct.
The case was remanded to the Court of Chancery for further proceedings.