Attorney Affidavits Help Officer Win Advancement

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By Michael Greene

Aug. 14 — Attorney certifications helped the Delaware Chancery Court to reach an Aug. 14 decision that former founder and chairman of Home Diagnostics Inc. George Holley was entitled to an advancement of expenses charged by two consulting firms.

The dispute revolved around whether the fees were non-advanceable because they related solely to a criminal action. Holley claimed that the fees related both to a criminal action and a Securities and Exchange Commission action.

In ruling that the plaintiff was entitled to an advancement, Vice Chancellor Donald F. Parsons Jr. found that certifications provided by Holley's attorneys provided the best evidence that the disputed fees would have been incurred in defending the SEC action, regardless of whether the criminal action ever existed.

Multiple Proceedings 

After Nipro Diagnostics Inc. acquired Home Diagnostics, the SEC began investigating Holley for insider trading related to the merger.

Holley eventually pleaded guilty to two counts of insider trading in the U.S. District Court for the District of New Jersey. An SEC action which initially proceeded in tandem with the criminal action remains ongoing.

In a prior ruling, the chancery court held that Holley was entitled to advancement for expenses related to the ongoing SEC action, despite his guilty plea in the criminal action.

Advanceable Expense

Nipro claimed that the disputed fees were non-advanceable because at least some of the work occurred while the SEC action was stayed.

However, the court concluded that proper inquiry was “whether these fees would have been incurred if only the SEC action existed, notwithstanding the fact that the SEC action was stayed.”

Noting that the court is ill-equipped to answer this hypothetical question, Parsons wrote: “I take Plaintiff’s attorneys’ certifications as the best evidence that the Disputed Fees would have been incurred solely in defense of the SEC Action.”

He further reasoned that Nipro failed to provide any evidence that would convince the court otherwise, such as invoices that showed that the consulting firms allocated charges among the actions.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

The opinion is available at http://www.bloomberglaw.com/public/document/Holley_v_Nipro_Diagnostics_Inc_No_9679VCP_2015_BL_261720_Del_Ch_A