In Gilbert v. Unisys, the Delaware Court of Chancery ruled that information technology company Unisys Corp. must advance legal fees incurred by two former employees. The underlying lawsuit filed by the company in Pennsylvania federal court alleges trade secret infringement by the former employees. After analyzing the advancement provisions in the company’s certificate of incorporation, Vice Chancellor Paul A. Fioravanti Jr. sided with the plaintiffs, former vice presidents Leon Gilbert and Michael McGarvey. “When a corporation mandates advancement to the full extent of what is permissible under the statute,” the court explained, “it must honor the attendant obligations that flow from that decision.” The court applied the doctrine of contra proferentem on whether “vice president” was an officer title for purposes of advancement and indemnification. As drafter of the corporate documents, the court explained, Unisys easily could have clarified what an officer was. But because it did not, the court resolved the ambiguity “against the offeror.”

Indemnification covers costs and damages after legal proceedings, whereas advancement provides upfront funds for legal costs, usually without repayment if the individual is not at fault. Section 145 of the Delaware General Corporation Law provides the statutory framework for when and how a corporation may provide advancement to an officer, director, employee or agent of the corporation. Section 145(e) provides that expenses incurred in defending a legal proceeding “may be paid by the corporation in advance of the final disposition of such action … upon receipt of an undertaking … to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation … .” “In other words, a right to advancement is,” as the court put it, “effectively, a loan.”