344 S.W.3d 41
Tex. App.2011Background
- Perspectiva Group, Inc. and Aguilar formed a company in 1992; Aguilar served as officer/director.
- In 2006 a joint venture with Native Contractors led to litigation over fiduciary duties and breach of the venture agreement.
- Perspectiva settled with Native and acquired Native's claims; Perspectiva then asserted cross-claims against Aguilar and others for conspiracy and fiduciary breaches.
- Allegations included moonlighting by Perspectiva employees through a competing company and sharing revenue with Aguilar.
- Perspectiva bylaws §12.1–12.4 provide indemnification and advancement; Aguilar sought advancement of defense costs under §12.4, with a written undertaking to repay if standards aren’t met.
- Perspectiva’s board denied advancement; Aguilar moved to compel advancement, triggering a mandamus petition in the trial court and then on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 12.4 requires mandatory advancement | Aguilar: 'shall be paid' creates mandatory advancement upon undertaking. | Perspectiva: 'may be accepted' gives board discretion whether to advance. | Mandatory advancement unless discretionary language controls; here may is permissive but context makes advancement mandatory. |
| Whether attorney's fees are within 'reasonable expenses' to be advanced | Reasonable expenses include attorney's fees under §12.1; advancement should cover fees. | Bylaw language separately defines expenses; fees may not be included. | Reasonable expenses, including attorney's fees, must be advanced upon Aguilar's written undertaking. |
| Whether unclean hands or fiduciary breach can bar advancement | Aguilar’s alleged fiduciary breaches could negate advancement. | Delaware law allows advancement despite alleged fiduciary breaches; unclean hands may apply to indemnification, not advancement. | Unclean hands/ fiduciary breach cannot defeat advancement; underlying conduct is irrelevant to advancement. |
| Whether the board's 'best interests' rationale justifies denial of advancement | Advancement cannot be denied merely by asserting it's not in the corporation's best interests. | Director discretion to act in the corporation's best interests can defeat advancement. | Advancement cannot be denied on the ground of 'best interests'; bylaws control and do not permit this override. |
Key Cases Cited
- Homestore, Inc. v. Tafeen, 888 A.2d 204 (Del.Supr. 2005) (advancement supports immediate defense relief; independent from indemnification)
- Kaung v. Cole Nat'l Corp., 884 A.2d 500 (Del.Supr. 2005) (independence of advancement from indemnification; relevance to fiduciary duty)
- Bayliss v. Cernock, 773 S.W.2d 384 (Tex.App.-Hou. [14th Dist.] 1989) (distinguishes advancement from indemnification; bylaw enforcement context)
- Ridder v. CityFed Financial Corp., 47 F.3d 85 (3d Cir. 1995) (directors can follow bylaw advancements; best-interests not controlling)
- In re Prudential Insurance Co. of America, 148 S.W.3d 124 (Tex. 2004) (adequacy of appellate relief and exceptional-circumstances mandamus standard)