In Fillip v. Centerstone Linen Services LLC, C.A. No.8712-VCG (Del. Ch. Feb. 27, 2014), the Delaware Court of Chancery addressed whether a plaintiff was entitled under the limited liability company agreement of Centerstone Linen Services LLC to advancement of legal expenses in litigation between Karl Fillip and the company. In making its determination, the court also assessed whether the applicable provision of the LLC agreement was ambiguous. Moreover, the court’s decision could have implications on the interpretation of language in indemnification provisions in contracts generally.
Ex-CEO Files Action Against Centerstone
Fillip is one of six managers of the company and, until October 2012, served as the company’s chief executive officer. In October 2012, Fillip resigned from his position as CEO, purportedly for “good reason” under the terms of his employment agreement. Fillip made an unsuccessful demand on the company that the company pay amounts allegedly owed to Fillip under his employment agreement. He then filed an action against the company seeking that the company pay him these amounts, as well as declaratory and injunctive relief with respect to restrictive covenants under his employment agreement. After the company filed its answer and counterclaims, Fillip asserted that he was entitled under Article 3.7 of the LLC agreement to indemnification and advancement of costs, losses and liabilities in respect of the claims. Centerstone moved to dismiss and Fillip moved for summary judgment.
