Kevin Leiske v. Robert Gregory Kidd

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE CHRISTIAN DOUGLAS WRIGHT LEONARD L. WILLIAMS JUSTICE CENTER MAGISTRATE IN CHANCERY 500 NORTH KING STREET, SUITE 11400 WILMINGTON, DE 19801-3734

Date Submitted: February 6, 2026 Date Decided: February 12, 2026

Richard P. Rollo, Esquire Margaret M. DiBianca, Esquire Travis S. Hunter, Esquire DiBianca Law, LLC Alexandra M. Ewing, Esquire 1201 N. Orange Street, Suite 504 Richards, Layton & Finger, P.A. Wilmington, DE 19801 One Rodney Square 920 North King Street Wilmington, DE 19801

Re: Kevin Leiske, et al. v. Robert Gregory Kidd, et al., C.A. No. 2025-0426-CDW

Dear Counsel:

This letter resolves the parties’ disputes regarding the terms of the

Order Establishing Procedure for Payment of Advancement and Fees-on-Fees

to Plaintiffs (“Fitracks Order”).1 Because the parties are familiar with the

background of this litigation, I dispense with a recitation of facts. I am

entering the Fitracks Order contemporaneously with the filing of this letter.

1 See Dkt. 80 (plaintiffs’ letter concerning proposed Fitracks order); Dkt. 81 (defendants’ letter concerning proposed Fitracks order). The parties’ respective proposed terms for the Fitracks Order are reflected in the marked proposed order submitted with their letters. See Dkt. 80, Ex. E; Dkt. 81, Ex. A. Paragraph references in this letter are to the paragraphs as they appear in the parties’ proposed Fitracks order. C.A. No. 2025-0426-CDW February 12, 2026 Page 2 of 10

Advancement for Plaintiffs’ Defensive Fees and Expenses in the

JAMS Arbitration (¶ 1 n.1). Vice Chancellor Will resolved this issue in her

February 9, 2026 letter order in favor of plaintiffs,2 so I adopt plaintiffs’

proposed language for footnote 1 of the Fitracks Order.

Jointly and Severally (¶¶ 1, 2). Defendants did not explain in their

letter why I should strike the phrase “jointly and severally” from paragraphs

1 and 2 of the Fitracks Order, so they have waived it.3 I note that “jointly and

severally” appears to be unnecessary in light of paragraph 24’s statement that

all payment obligations under the Fitracks Order “shall be joint and several.”

In any event, the Indemnification Agreements impose obligations on multiple

parties and use the term “jointly and severally” to describe those obligations,4

so paragraphs 1 and 2 of the Fitracks Order will do the same.

Incurred or To Be Incurred (¶¶ 1, 2). I reject defendants’ proposal

to strike the phrase “to be incurred” in paragraphs 1 and 2 of the Fitracks

2 Dkt. 82. 3 E.g., Emerald P’rs. v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”). 4 See Am. Compl. Exs. 1–3 at ¶¶ 1, 2, 3(c), 6(g). Paragraph 5 of the Indemnification Agreements, which sets forth defendants’ advancement obligations, does not include the phrase “jointly and severally.” Defendants do not argue, nor would I find, that the omission is evidence that the parties intended the advancement obligation to be several while the indemnification obligation to be joint and several. C.A. No. 2025-0426-CDW February 12, 2026 Page 3 of 10

Order. As with “jointly and severally,” defendants waived the issue by not

raising it in their letter.5 But I would have rejected the proposal even if they

had argued it. A Fitracks order sets in place a process to govern payment of

advancement going forward, that is, fees and expenses incurred to date and to

be incurred in the future.6 Eliminating this language would introduce

unnecessary ambiguity into the intended scope of the Fitracks Order.

Successfully Prosecuting (¶ 2). I reject defendants’ proposal to add

the phrase “successfully prosecuting” in paragraph 2 of the Fitracks Order

because I think it is unnecessary in light of my adoption of defendants’

proposed language for paragraph 23 below. If plaintiffs are successful in

whole or in part in presenting future applications for an award of disputed

fees, they will be entitled to their reasonable fees and expenses.

“Or Fees-on-Fees” and “Or the Advancement Action” (¶¶ 10, 13).

Plaintiffs argue these phrases in paragraphs 10 and 13 of the Fitracks Order

are needed “to ensure that Demands can include Fees on Fees.”7 While “or

the Advancement Action” strikes me as unnecessary because the first whereas

5 See Emerald P’rs., 726 A.2d at 1224. 6 A “Future Demand” to use the parties’ chosen term. 7 Dkt. 80 at 3. C.A. No. 2025-0426-CDW February 12, 2026 Page 4 of 10

clause of the Fitracks Order already defines fees and expenses incurred in

connection with this “Advancement Action” as “Advanceable Claims,”

defendants do not, as far as I can tell, directly address either phrase in their

letter submission, so I include them.

Deadlines to Object to Demands and Make Payments (¶¶ 12, 14, 15,

17). For future demands, 10 days to raise any objections and to make

payments is both common in Fitracks orders in my experience and should be

sufficient for defendants with monthly submissions. For the initial demand,

15 days is also common and should be sufficient here. Plaintiffs have waited

long enough.

Payment/Escrow Percent Threshold (¶ 15). Fifty percent has been the

standard threshold since the original Fitracks procedure was implemented8

and I have seen it utilized even in cases where no claims have been excluded

from advancement and there are no difficult allocation issues. Plaintiffs’

suggestion that there is something nefarious about defendants’ proposal to use

the standard threshold percentage is overwrought. If defendants do try to use

8 See Danenberg v. Fitracks, Inc., 58 A.2d 991, 1003 (Del. Ch. 2012). C.A. No. 2025-0426-CDW February 12, 2026 Page 5 of 10

that threshold in an abusive manner, plaintiffs have the ability to seek relief

from the court.

Rule 88 Applications (¶ 20). I decline the parties’ proposal to permit

the submission of fee disputes more frequently than quarterly, at either

monetary threshold. It is not a standard provision insofar as my experience

with Fitracks orders is concerned,9 and it is unrealistic to expect the court to

deal with these on a monthly basis as starting point. I am willing to reconsider

this for good cause shown, but we will start with quarterly submissions.

Cost Shifting for Disputed Amounts (¶ 23). I adopt defendants’

proposed language for paragraph 23. I continue to believe, as I stated in dicta

during my January 2 bench ruling,10 that an unconditional fees-on-fees

provision like Section 7(d) in the Indemnification Agreements is not

impermissible for all parties in all circumstances, given Delaware’s status as

9 As with the 50% payment/escrow threshold, quarterly submission of fee disputes was part of the original Fitracks procedure. See id. 10 See Tr. of Jan. 2, 2026 Tel. Rpt. of the Magistrate on Cross-Mot. for Summ. J. 30–31, Dkt. 67. My statement was dicta then because it was not necessary to my ruling. Cf. In re MFW S’holders Litig., 67 A.3d 496, 521 (Del. Ch. 2013) (explaining that dicta includes “judicial statements on issues that would have no effect on the outcome of [the] case”), aff’d sub nom., Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014). Vice Chancellor Will agreed my statement was dicta. See Leiske v. Kidd, 2026 WL 265493, at *5 (Del. Ch. Feb. 2, 2026). C.A. No. 2025-0426-CDW February 12, 2026 Page 6 of 10

a “contractarian state that holds parties’ freedom of contract in high regard.”11

But this case is not an appropriate vehicle to explore that view because the

parties negotiated for a different standard, one that I did not have in mind

when I delivered my bench ruling.

Under Section 6 of the Indemnification Agreements, the parties agreed

that “[i]t is the intent of this [Indemnification] Agreement to secure for

Indemnitee rights of indemnity that are as favorable as may be permitted under

the [Delaware General Corporation Law] and public policy of the State of

Delaware.”12 Our court has held that unconditional fees-on-fees provisions

are incompatible with the Delaware General Corporation Law and public

policy (at least public policy applicable to Delaware corporations). Having

chosen to tie themselves to this standard, I hold the parties to it.

In Levy v. HLI Operating Company,13 an indemnification agreement

contained an unconditional fees-on-fees provision similar to Section 7(d)

11 See, e.g., Sunder Energy, LLC v. Jackson, 332 A.2d 472, 487 (Del. 2024). Unfortunately, during my bench ruling I mentioned only the principle of contractual freedom under the LLC Act, see 6 Del. C. § 18-1101(b), even though the Indemnification Agreements are not limited liability company agreements, and no Delaware limited liability company is a party to them. 12 Am. Compl. Exs. 1–3, § 6. 13 924 A.2d 210 (Del. Ch. 2007). C.A. No. 2025-0426-CDW February 12, 2026 Page 7 of 10

here, requiring the indemnitor to advance “any and all expenses (including

attorneys’ fees)” incurred by the indemnitee “in connection with any action

brought by the [i]ndemnitee for . . . advancement . . . regardless of whether

the [i]ndemnitee ultimately is determined to be entitled to such . . .

advancement[.]” 924 A.2d 210, 217 (Del. Ch. 2007). Vice Chancellor Lamb

held such provisions are invalid under Delaware law, at least as they apply to

Delaware corporations and the Delaware General Corporation Law.

The court first explained such provisions are inconsistent with relevant

precedent:

A contractual agreement for indemnification of fees on fees, then, cannot overstep this bright-line legal boundary. A party must succeed (at least to some extent) on its underlying indemnification action to have a legally cognizable claim for monies expended in forcing its indemnitor to make it whole. Because a Delaware corporation cannot take actions which our law does not countenance, a contract provision which mandates indemnification for fees on fees in unsuccessful litigation is invalid since it flouts the lucid precepts of Cochran and Fasciana.

Id. at 225–26 (discussing Stifel Fin. Corp. v. Cochran, 809 A.2d 555 (Del.

2002) and Fasciana v. Elec. Data Sys. Corp., 829 A.2d 178 (Del. Ch. 2003)).

The court then explained they are also inconsistent with the framework of 8

Del. C. § 145: “[S]ection 145(e), consistent with the holdings in Cochran and C.A. No. 2025-0426-CDW February 12, 2026 Page 8 of 10

Fasciana, is best read as limiting a corporation’s power to indemnify fees on

fees to those situations where success is achieved on the underlying claim.”

Id. at 226. Finally, the court explained, such provisions also “contravene[]

notions of sound public policy”: “The law should not encourage directors and

officers to bring non-meritorious indemnification claims against the

corporation, and the provision at issue here clearly creates a perverse incentive

to do so.”14 The Levy court’s holding has been followed in subsequent cases,15

14 Id. at 226–27. 15 See, e.g., Manche v. MVMT Labs, Inc., C.A. No. 2025-1407-CDW, Order Denying Pet’r’s Mot. for Recons. of Magistrate’s Dec. 11, 2025 Ltr. Decision, Dkt. 16 (applying Levy and declining to enforce an unconditional fees-on-fees provision identical to Section 7(d)); Nielsen v. EBTH, Inc., 2019 WL 4755865, at *15 (Del. Ch. Sept. 30, 2019) (discussing Levy and referring to an unconditional fees-on-fees provision identical to Section 7(d) as “too broad”); Lieberman v. Electrolyte Ozone, Inc., 2015 WL 5135460, at *7 (Del. Ch. Aug. 31, 2015) (“Unfortunately for Plaintiffs, Delaware corporations lack the contractual power to compensate a party for fees and expenses incurred while pursuing a failed underlying claim.”) (citing Levy); Schoon v. Troy Corp., 948 A.2d 1157, 1176 (Del. Ch. 2008) (rejecting demand for payment of the full amount of fees and expenses incurred pursuant to bylaw provision granting indemnification “if successful in whole or in part” and citing Levy). The court also declined to allow unconditional fees-on-fees in Pontone v. Milso Industries Corporation, without citation to Levy. 2014 WL 2439973, at *12–14 (Del. Ch. May 29, 2014) (discussing Fasciana, 829 A.2d at 184, and Schoon, 948 A.2d at 1176). Also, in Rhodes v. bioMérieux, Inc., the plaintiff, represented by the same law firm as plaintiffs here, made the same argument in his summary judgment opening brief regarding the scope of Section 7(d). Compare C.A. No. 2023-1079-BWD, Dkt. 18 at 30–31, with C.A. No. 2025-0426-CDW, Pls.’ Opening Br. in Support of Their Mot. for Summ. J. at 14, Dkt. 30. He did not address unconditional fees-on-fees in his reply brief or at oral argument, effectively abandoning the point. See C.A. No. 2023-1079-BWD, Dkts. 25, 36. The court C.A. No. 2025-0426-CDW February 12, 2026 Page 9 of 10

and I follow it here, leaving for another day and another case the question of

when, if ever, an unconditional fees-on-fees provision is enforceable

according to its terms.

Confidentiality Stipulation (¶ 26). I accept the parties’ proposal to

dispense with a separate confidentiality order but have added language to

confirm that the requirements of Court of Chancery Rule 5.1 apply to any

documents filed with the court reflecting or including information derived

from the invoices.

Modifications to the Order (¶ 27). I have modified the first sentence

of this paragraph to clarify that the parties’ ability to modify time periods in

the Fitracks Order does not include the “[n]ot more frequently than quarterly”

time period in paragraph 19. In light of my ruling with regard to paragraph

23, I agree with defendants’ proposal to eliminate the second sentence.

The Validity of the Indemnification Agreements (¶ 28). The proposed

additional language in paragraph 28(ii) is redundant with the language in

paragraph 28(i), but plaintiffs say they do not object to its inclusion, so I have

added it to the Fitracks Order.

awarded the plaintiff fees-on-fees proportionate to his success. See 2024 WL 669034, at *15 (Del. Ch. Feb. 19, 2024). C.A. No. 2025-0426-CDW February 12, 2026 Page 10 of 10

This is a Report under Court of Chancery Rule 144(b)(1). Under Court

of Chancery Rule 144(c)(2)(A), exceptions to this Report are stayed pending

issuance of a final report in this case.

Very truly yours,

/s/ Christian Douglas Wright

Magistrate in Chancery

CDW/slk