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Sider v. Hertz Global Holdings, Inc.

Court of Chancery of Delaware

June 17, 2019

SCOTT SIDER, Plaintiff,
v.
HERTZ GLOBAL HOLDINGS, INC., Defendant. J. JEFFREY ZIMMERMAN, Plaintiff,
v.
HERTZ GLOBAL HOLDINGS, INC., Defendant. ELYSE DOUGLAS, Plaintiff,
v.
HERTZ GLOBAL HOLDINGS, INC., Defendant. MARK P. FRISSORA, Plaintiff,
v.
HERTZ GLOBAL HOLDINGS, INC., Defendant.

          ORDER DENYING ENTRY OF FINAL JUDGMENT AND CERTIFICATION OF INTERLOCUTORY APPEAL

          McCormick Vice Chancellor

         1. This Order resolves an issue not previously addressed directly by this Court: In the ordinary case, should a defendant be permitted immediate appellate review of a decision granting entitlement to advancement, although disputes concerning the reasonableness of advancement fees remain unresolved?

         2. Defendant Hertz Global Holdings, Inc. ("Hertz") filed a motion for entry of a final judgment pursuant to Court of Chancery Rule 54(b) or certification of an interlocutory appeal[1] from a May 14, 2019 bench ruling (the "Ruling")[2] and four May 23, 2019 orders (one for each plaintiff) implementing the Ruling (the "Advancement Orders").[3] The Ruling held that the plaintiffs are entitled to advancement under Hertz's bylaws. This is an ordinary case. The summary judgment motions on the issue of entitlement presented no truly novel or complicated issues; the outcome hinged on well-settled law concerning the "by reason of the fact" standard.[4] The Advancement Orders memorialized the Ruling and further set in place a monthly process, consistent with that established in Danenberg v. Fitracks, Inc., [5] for making and objecting to advancement demands.

         3. Court of Chancery Rule 54(b) provides that "[w]hen more than 1 claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, the Court may direct the entry of a final judgment upon 1 or more but fewer than all of the claims or parties only upon an express determination that there is not just reason for delay and upon an express direction for the entry of judgment."[6] Thus, to grant Hertz's motion, "the Court must find that (1) the action involves multiple claims or parties, (2) at least one claim or the rights and liabilities of at least one party has been finally decided, and (3). . . there is no just reason for delaying an appeal."[7]

         4. Hertz's motion fails on the third element of this standard. Although "[a] determination of whether there is just reason for delaying an appeal is addressed to the sound discretion of the Court, "[8] the "long established policy against piecemeal appeals requires that this Court exercise that discretion sparingly. Indeed, Rule 54(b) exists to create 'a discretionary power to afford a remedy in the infrequent harsh case . . . .'"[9] Rule 54(b) is not an invitation for this Court to flood the Supreme Court's docket.[10]

          5. To argue the third element, Hertz contends that advancement rights include meaningful timing issues[11]-the right to payments "in advance of the final disposition" of the proceedings giving rise to the claims.[12] To Hertz, this timing cuts both ways: Just as it is critical for a Court to deem a claimant entitled to advancement on an expedited basis, it is critical for the Court to permit Hertz to press its appellate arguments before being compelled to make such payments.[13] Hertz emphasizes its concern that payment of what it believes is unwarranted advancement will result in irreparable harm, particularly if the plaintiffs are unable to repay the amounts advanced in the event Hertz prevails in the underlying litigation.[14]

         6. Hertz's argument ignores the frequency with which this issue arises. This litigation followed the form of most advancement disputes before this Court. The Court first resolved on a paper record (as is the preferred course[15]) the issue of entitlement to advancement, and then set forth a procedure for presenting and resolving disputes over the reasonableness of requested fees and expenses.[16] The situation in which Hertz now finds itself is not unique to Hertz; nor are the arguments Hertz makes for relief under Rule 54(b). Rather, Hertz's concern-that absent immediate appeal, it will pay advancement that it may later be unable to recoup through indemnification proceedings-is one shared by the many litigants declared obligated to pay advancement during the entitlement phase. If this Court were to exercise its discretion under Rule 54(b) every time a plaintiff was held to be entitled to advancement, "the rule would cease to serve the 'infrequent harsh case' and would become a procedure commonly employed."[17]

         7. Hertz rightly notes that Delaware's procedural process governing advancement presents a lopsided dynamic favoring advancement claimants. In my view, this dynamic is consistent with Delaware policy-it should be easier to turn the "advancement spigot" on than to turn it off.[18] In short, "[t]he policy of Delaware favors advancement when it is provided for, with the Company's remedy for improperly advanced fees being recoupment at the indemnification stage, "[19] or on appeal after issues of reasonableness have been finally resolved.[20]

          8. Because Hertz's situation is not "infrequent," it does not present the rare instance in which this Court will grant Rule 54(b) relief. Hertz's motion for entry of a final judgment pursuant to Court of Chancery Rule 54(b) is DENIED.

         9. Supreme Court Rule 42 permits certification of interlocutory appeals when "the order of the trial court decides a substantial issue of material importance that merits appellate review before a final judgment."[21] If the "substantial issue" requirement is met, this Court will then analyze whether "there are substantial benefits that will outweigh the certain costs that accompany an interlocutory appeal."[22] The rule recognizes eight factors relevant to this balancing assessment.[23]

         10. The Ruling and Advancement Orders resolve a "substantial issue," because entitlement to advancement speaks directly to the merits of the plaintiffs' claims, not collateral matters.[24] On balance, however, the benefits of permitting interlocutory appeal from the Rulings and Advancement Orders do not outweigh the costs. Ignoring all but the eighth "substantial benefits" factor, Hertz repackages its Rule 54(b) argument to contend that "review of the interlocutory order may serve the considerations of justice."[25] As discussed above, Delaware's reluctance to permit piecemeal appeals is not overcome by Hertz's generic "timing" argument common to many litigants before this Court.[26]

         11. Hertz's request for certification of interlocutory appeal pursuant to Supreme Court Rule 42 is also DENIED.

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