IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`DAVID GROSHOFF and :
`EFFENDI LEONARD, :
`:
`Plaintiffs, :
`:
`v. : C.A. No. 2025-0568-SEM
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`AYANA BIO, LLC, :
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` Defendant. :
`PLAINTIFFS’ OPENING BRIEF IN SUPPORT
`OF MOTION FOR SUMMARY JUDGMENT
`HEYMAN ENERIO
`GATTUSO & HIRZEL LLP
`Samuel T. Hirzel, II (# 4415)
`Luke P. Edwards (# 7306)
`222 Delaware Avenue, Suite 900
`Wilmington, DE 19801
`(302) 472-7300
`shirzel@hegh.law
`ledwards@hegh.law
`Attorneys for Plaintiffs David Groshoff
`and Effendi Leonard
`Date: June 26, 2025
`EFiled: Jun 26 2025 03:42PM EDT
`Transaction ID 76540235
`Case No. 2025-0568-SEM
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`i
`TABLE OF CONTENTS
`PRELIMINARY STATEMENT...............................................................................1
`STATEMENT OF FACTS........................................................................................2
`I. PLAINTIFFS’ TENURE AS OFFICERS AND THE
`INVESTIGATION................................................................................2
`II. THE UNDERLYING ACTION AND AYANA’S
`COUNTERCLAIMS ............................................................................4
`III. THE LLC AGREEMENT’S RELEVANT PROVISIONS ..................7
`IV. AYANA DENIES PLAINTIFFS’ ADVANCEMENT
`DEMAND.............................................................................................9
`V. THIS LITIGATION............................................................................10
`ARGUMENT ..........................................................................................................10
`I. DELAWARE LAW INSTRUCTS THAT SUMMARY JUDGMENT
`IS THE APPROPRIATE MECHANISM FOR GRANTING
`ADVANCEMENT, AND THAT DOUBTS SHOULD BE
`RESOLVED IN FAVOR OF ADVANCEMENT..............................10
`II. AYANA’S COUNTERCLAIMS TRIGGERED PLAINTIFFS’
`ADVANCEMENT RIGHTS. .............................................................12
`III. AYANA’S FORMALISTIC REVISIONS DID NOT
`EXTINGUISH PLAINTIFFS’ ADVANCEMENT RIGHTS. ...........14
`IV. THE INVESTIGATION TRIGGERED PLAINTIFFS’
`ADVANCEMENT RIGHTS AS BOTH AN INVESTIGATIVE
`PROCEEDING AND THREATENED LITIGATION. .....................19
`A. The Investigation was an Investigative Proceeding. ................19
`B. The Investigation was Threatened Litigation. ..........................21
`V. PLAINTIFFS ARE ENTITLED TO FEES-ON-FEES.......................22
`CONCLUSION .......................................................................................................24
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`ii
`TABLE OF AUTHORITIES
`Cases
`Brady v. i2 Techs. Inc.,
`2005 WL 3691286 (Del. Ch. Dec. 14, 2005) .....................................................20
`Brown v. LiveOps, Inc.,
`903 A.2d 324 (Del. Ch. 2006) ............................................................................17
`Carr v. Glob. Payments Inc.,
`2019 WL 6726214 (Del. Ch. Dec. 11, 2019) ...............................................16, 17
`Centrella v. Avantor, Inc.,
`2024 WL 3249274 (Del. Ch. July 1, 2024), aff’d sub nom. Avantor,
`Inc. v. Centrella, ___ A.3d ___, 2025 WL 1379023 (Del. 2025).......................18
`City of Newark v. Donald M. Durkin Contr., Inc.,
`305 A.3d 674 (Del. 2023)...................................................................................15
`Danenberg v. Fitracks, Inc.,
`58 A.3d 991 (Del. Ch. 2012) ..............................................................................12
`DeLucca v. KKAT Mgmt., L.L.C.,
`2006 WL 224058 (Del. Ch. Jan. 23, 2006) ........................................................15
`Freeman Fam. LLC v. Park Ave. Landing LLC,
`2019 WL 1966808 (Del. Ch. Apr. 30, 2019)......................................................22
`Gentile v. GPB Cap. Hldgs., LLC,
`2024 WL 4941050 (Del. Ch. Nov. 27, 2024).....................................................11
`Greco v. Columbia/HCA Healthcare Corp.,
`1999 WL 1261446 (Del. Ch. Feb. 12, 1999)......................................................11
`Holley v. Nipro Diagnostics, Inc.,
`2015 WL 4880418 (Del. Ch. Aug. 14, 2015).....................................................13
`Hyatt v. Al Jazeera Am. Hldgs. II, LLC,
`2016 WL 1301743 (Del. Ch. Mar. 31, 2016) .....................................................23
`Keller v. Steep Hill, Inc.,
`2023 WL 5624215 (Del. Ch. Aug. 31, 2023).....................................................16
`
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`
`
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`iii
`Krauss v. 180 Life Sci. Corp.,
`2022 WL 665323 (Del. Ch. Mar. 7, 2022) .........................................................11
`Maffei v. Palkon,
`___ A.3d ___, 2025 WL 384054 (Del. 2025).....................................................15
`Marino v. Patriot Rail Co.,
`131 A.3d 325 (Del. Ch. 2016) ............................................................................20
`Mooney v. Echo Therapeutics, Inc.,
`2015 WL 3413272 (Del. Ch. May 28, 2015) .....................................................12
`Nielsen v. EBTH Inc.,
`2019 WL 4755865 (Del. Ch. Sept. 30, 2019).....................................................12
`OrbiMed Advisors LLC v. Symbiomix Therapeutics, LLC,
`2024 WL 747567 (Del. Ch. Feb. 23, 2024)........................................................21
`Osborn ex rel. Osborn v. Kemp,
`991 A.2d 1153 (Del. 2010).................................................................................20
`Perik v. Student Res. Ctr., LLC,
`2024 WL 181848 (Del. Ch. Jan. 17, 2024) ........................................................10
`Senior Tour Players 207 Mgmt. Co. LLC v. Golftown 207 Hldg. Co.,
`LLC,
`853 A.2d 124 (Del. Ch. 2004) ............................................................................10
`Sider v. Hertz Glob. Hldgs., Inc.,
`2019 WL 2501481 (Del. Ch. June 17, 2019) (ORDER) ....................................12
`Stifel Fin. Corp. v. Cochran,
`809 A.2d 555 (Del. 2002)...................................................................................23
`Sun-Times Media Grp., Inc. v. Black,
`954 A.2d 380 (Del. Ch. 2008) ............................................................................12
`Tafeen v. Homestore, Inc.,
`2005 WL 789065 (Del. Ch. Mar. 29, 2005) .......................................................20
`Vortex Infrastructure Holdco LLC v. Kane,
`2024 WL 3887117 (Del. Ch. Aug. 21, 2024).....................................................15
`
`
`
`
`
`
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`iv
`Wagner v. BRP Grp., Inc.,
`316 A.3d 826 (Del. Ch. 2024) ............................................................................11
`Statutes
`6 Del. C. § 18-108 ...................................................................................................11
`Rules
`Ct. Ch. R. 56 ............................................................................................................11
`Other Authorities
`Threat, Black’s Law Dictionary (11th ed. 2019).....................................................21
`William D. Johnston, Flexibility Under Delaware Law in Drafting
`Advancement Provisions on a “Clear Day,” and Potential Surprises
`for Those Who Do Not Take Advantage of That Flexibility,
`13 Del. L. Rev. 21, 29 (2011).............................................................................15
`
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`
`1
`PRELIMINARY STATEMENT
`Plaintiffs David Groshoff and Effendi Leonard (together, “Plaintiffs”) sued
`Defendant Ayana Bio, LLC (“Ayana” or the “Company”) in the Superior Court of
`California to obtain remedies for Ayana’s retaliatory and discriminatory conduct in
`connection with Plaintiffs’ roles as officers of Ayana (the “Underlying Action”).
`Ayana continued its pattern of retaliation by moving to file specious counterclaims
`against Plaintiffs, which alleged that Plaintiffs violated their duties as Ayana officers
`by supposedly concealing their marriage from Ayana and misrepresenting
`Groshoff’s qualifications (the “Original Counterclaim”). Confronted with the fact
`that Plaintiffs enjoy broad indemnification and advancement rights in connection
`with their roles as Ayana officers, Ayana reframed its counterclaim to emphasize
`Groshoff’s role as Ayana’s outside counsel immediately before he was hired by
`Ayana’s Chief Executive Officer and appointed as an officer by Ayana’s Board (the
`“Revised Counterclaim”). The Revised Counterclaim, however, does not allege any
`conduct separate or distinct from what was alleged in the Original Complaint—it
`merely rewords the same allegations from the Original Counterclaim, which Ayana
`has tacitly acknowledged triggered Plaintiffs’ advancement rights.
`Delaware law does not countenance, much less reward, such gamesmanship.
`Instead, this Court has consistently held that a company must truly abandon the
`claims giving rise to advancement in order to moot the advancement rights. Where
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`the same underlying conduct remains at issue or the threat of advancement-
`triggering claims still looms, the Court will not deprive officers of their contractual
`advancement rights.
`All of Ayana’s actions against Plaintiffs—both leading to and including the
`Revised Counterclaim—arise from Plaintiffs’ roles as Ayana officers. The
`indemnification and advancement provisions of Ayana’s operating agreement are
`therefore triggered, so Ayana must advance Plaintiffs’ reasonable expenses,
`including attorneys’ fees. Plaintiffs’ Motion for Summary Judgment should be
`granted.
`STATEMENT OF FACTS
`I. PLAINTIFFS’ TENURE AS OFFICERS AND THE INVESTIGATION
`Leonard was integral to Ayana’s founding in September 2021 and, shortly
`thereafter, was appointed as Ayana’s Chief Technology Officer (“CTO”). Compl.,
`Ex. B (hereinafter, “UC”) ¶ 22. Groshoff—who is married to Leonard—was
`retained as outside counsel for Ayana in July 2022. Id. ¶¶ 28–29. Ayana’s Chief
`Executive Officer (“CEO”), Frank Jaksch, Jr., was apparently pleased with
`Groshoff’s work because, in February 2023, Jaksch chose to hire Groshoff as
`Ayana’s Chief Legal Officer (“CLO”). Id. ¶ 33.
`That pleasure dissipated, however, as Groshoff’s new role involved
`monitoring Jaksch’s compliance with the law. As the complaint in the Underlying
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`Action details, Jaksch—who has a long, documented history of fraudulent conduct,
`including judicial findings that he made false allegations against at least one former
`employee—routinely ignored proper governance practices, improperly gave
`preferential treatment to his associates from a prior business, refused to address
`Latham & Watkins LLP’s (“Latham”) conflicts as Ayana’s outside counsel,
`demeaned Ayana’s LGBTQ+ employees, openly used slurs, and refused to
`reasonably accommodate disabilities (including Leonard’s). Id. ¶¶ 35–49, 66–81.
`On each occasion, it fell to Ayana’s CLO, Groshoff, to address Jaksch’s unlawful
`conduct.
`Following months of tension between Groshoff and Jaksch, Groshoff
`prepared to bring his concerns to Ayana’s Board at a July 24, 2023 meeting. Id. ¶
`50. But Jaksch had a different plan. When Groshoff and Leonard came into the
`office on July 18, 2023, they were each informed that Ayana had tasked Latham with
`formally investigating Plaintiffs’ alleged failure to disclose their marriage (the
`“Investigation”). Id. ¶¶ 51–52. This baseless accusation was plain pretext for
`retaliation. Jaksch did not even wait for the Investigation to occur before he told
`Groshoff and Leonard to pack up their workstations, return any of Ayana’s property
`in their possession, and leave the premises. Id. ¶ 53. Nor was Latham interested in
`receiving documents that would refute the blatantly false allegation that Groshoff
`and Leonard concealed their marriage. Id. ¶¶ 55–58.
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`The threat of litigation was apparent: Ayana had hired an outside firm to drum
`up evidence to support the false but serious allegation that two senior officers had
`breached their fiduciary duties to the Company. Plaintiffs were also warned not to
`speak to anyone affiliated with Ayana—including each other—about the
`Investigation, with an unsubtle, if unspoken, “or else” attached to that demand. Id.
`¶ 53. Moreover, Plaintiffs were aware that Jaksch has a “history of using
`coordinated SLAPP litigation to chill dissent.” Id. ¶ 54. Accordingly, Groshoff and
`Leonard each felt compelled to retain counsel to defend their respective interests in
`connection with the Investigation. Id. ¶ 58. On August 8, 2023, three weeks after
`Plaintiffs were notified of the Investigation and immediately told to back their bags,
`they were officially terminated as Ayana officers. Id. ¶ 17.
`II. THE UNDERLYING ACTION AND AYANA’S COUNTERCLAIMS
`On March 22, 2024, Plaintiffs filed their complaint in the Underlying Action.
`Their claims pertain to discrimination based on sexual orientation and marital status,
`retaliation, failure to accommodate disabilities, wrongful termination, and hostile
`work environment under California law. On August 27, 2024, Ayana fired back
`with the Original Counterclaim—proposing nine counts against Plaintiffs based
`upon Plaintiffs’ alleged actions as Ayana officers. Compl., Ex. C (hereinafter, “Orig.
`Ccl.”).
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`The first few sentences of the Original Counterclaim’s “Factual Background”
`explains that Leonard was Ayana’s CTO and Groshoff was its CLO until they were
`terminated in August 2023. Id. ¶¶ 8, 9. The substance of Ayana’s pleading removes
`any doubt that Plaintiffs’ official roles are at the heart of the allegations. For
`example, the first cause of action alleges breach of fiduciary duty and pleads that
`Leonard owed fiduciary duties to Ayana and breached those duties by not disclosing
`his marriage or Groshoff’s alleged lack of qualifications. Id. ¶¶ 66–67. It makes
`largely identical allegations against Groshoff, noting the duties Groshoff owed as
`outside counsel “and as [Ayana’s] CLO.” Id. ¶ 68 (emphasis added). Ayana’s
`second cause of action—fraudulent concealment—similarly notes that Plaintiffs
`“were fiduciaries to Ayana” and discusses the actions Leonard and Groshoff took in
`their official capacities to carry out the alleged fraud. Id. ¶¶ 74–77. The third cause
`of action—intentional misrepresentation—is not only based upon conduct Plaintiffs
`allegedly took as officers but also supports its reliance argument by noting Ayana
`would have “no reason to believe that [Plaintiffs], as fiduciaries, would abuse their
`positions[.]” Id. ¶ 87 (emphasis added). Each of the Original Counterclaim’s other
`counts—negligent misrepresentation, constructive fraud, breach of the implied
`covenant, unauthorized practice of law, unjust enrichment, and unfair competition—
`similarly relies on the same allegations regarding Plaintiffs’ conduct as Ayana
`officers and the damage caused by their retention of those roles. Id. ¶¶ 90–123.
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`In response to Ayana’s Original Counterclaim, counsel for Plaintiffs raised
`the indemnification rights that Ayana grants to its officers under its limited liability
`company agreement (the “LLC Agreement”). Compl., Ex. H at 7–8. But rather than
`satisfying its obligation or withdrawing its proposed counterclaim, Ayana simply
`rephrased the same substantive allegations in the Revised Counterclaim, which it
`submitted in connection with its motion for leave to file counterclaims. The Revised
`Counterclaim’s primary change is removing Leonard as a named defendant. See
`Compl., Ex. D (hereinafter, “Rev. Ccl.”). But the Revised Counterclaim does not
`actually remove the claims against Leonard—it simply reasserts them as breaches
`abetted by, and in conspiracy with, Groshoff. See, e.g., id. ¶¶ 53–54 (“Leonard owed
`fiduciary duties to Ayana Bio as its CTO . . . . With Groshoff’s aiding and abetting,
`and in conspiracy with Groshoff, Leonard breached his fiduciary duties to
`Ayana[.]”).
`The Revised Counterclaim’s other main edit is deleting the express references
`to Groshoff’s tenure as CLO. But unlike backspacing words in a pleading, Ayana
`cannot erase the reality that it did make Groshoff an officer and granted him the
`attendant protections. Nor can Ayana erase the fact that the complained-of conduct
`would have taken place, if at all, while Groshoff was an officer. The absurdity of
`Ayana attempting to separate segments of an alleged continuous course of conduct
`is displayed by the fact that the Revised Counterclaim’s story has a beginning, a
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`middle, but no end. Instead, to avoid express references to Groshoff’s official
`capacity, Ayana was forced to remove its allegations about how it purportedly
`‘discovered’ the alleged fraud, the ensuing Investigation, and Plaintiffs’ termination.
`Compare Orig. Ccl. ¶¶ 49–64 with Rev. Ccl. ¶¶ 47–48. Doubtlessly, Ayana will
`eventually have to reinsert those details to litigate its ‘new’ theory.
`III. THE LLC AGREEMENT’S RELEVANT PROVISIONS
`The LLC Agreement provides broad, mandatory advancement rights to
`Ayana’s officers. See Compl., Ex. A (hereinafter, “LLCA”). LLC Agreement
`Section 10.3(a) provides in relevant part:
`In any threatened, pending or completed action, suit or proceeding,
`whether civil, criminal, administrative or investigative, to which a
`Covered Person was or is a party, or is threatened to be made a party
`(or was or is otherwise involved in, as a witness, deponent or
`otherwise) that arises directly or indirectly from (i) the activities of
`such Covered Person under and within the scope of this Agreement
`or (ii) the management of the affairs of the Company, the Company
`shall indemnify and hold harmless such Covered Person for, from and
`against, and reimburse such Covered Person for, all expenses, including
`attorneys’ fees, judgments, fines and amounts paid in settlement,
`actually and reasonably incurred by such Covered Person in connection
`with the defense or settlement of such action, suit or proceeding, or the
`appeal therefrom, unless it is determined in accordance with Section
`10.3(b) below that (i) such Covered Person’s actions constituted willful
`misconduct, or (ii) such Covered Person failed to act in good faith and
`in a manner reasonably believed by such Covered Person to be in or not
`opposed to the best interests of the Company, . . . . The foregoing shall
`include any action, suit or proceeding by or in the right of the Company
`to procure a judgment in its favor; provided that (x) if in such action,
`suit or proceeding the Covered Person shall have been adjudged to be
`liable, such indemnification shall be provided only if, and only to the
`extent that, the court in which such action, suit or proceeding was
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`brought shall determine upon application that, despite the adjudication
`of liability but in view of all circumstances of the case, the Covered
`Person is fairly and reasonably entitled to indemnification for such
`expenses as such court shall deem proper and (y) if such action, suit or
`proceeding is settled between the Covered Person and the Company,
`such indemnification shall not include any amounts paid by Covered
`Person to the Company in settlement thereof, except to the extent
`authorized by the Company in its sole discretion.
`LLCA § 10.3(a) (emphases added). LLC Agreement Section 1.1 defines “Covered
`Person” to include “any officer of the Company.” Id. § 1.1.
`LLC Agreement Section 10.3(b) provides:
`Expenses (including attorneys’ fees and expenses) incurred in
`defending any action, suit or proceeding subject to Section 10.3(a) shall
`be paid by the Company in advance of the final disposition of such
`proceeding upon receipt of an undertaking (which need not be secured)
`by or on behalf of the Covered Person to repay such amount if it shall
`ultimately be determined, by a court of competent jurisdiction or
`otherwise, that the Covered Person is not entitled to be indemnified by
`the Company as authorized hereunder.
`Id. § 10.3(b) (emphasis added).
`LLC Agreement Section 10.3(j) adds:
`The right to exculpation, indemnification and advancement of
`expenses conferred in Section 10.2 and Section 10.3 shall be a
`contract between the Company and each Covered Person. Any repeal
`or modification of Section 10.2 and Section 10.3 shall not adversely
`affect any right or protection hereunder of any Covered Person in
`respect of any proceeding (regardless of when such proceeding is first
`threatened, commenced or completed) arising out of, or related to, any
`act or omission occurring prior to the time of such repeal or
`modification. Notwithstanding anything to the contrary, any right or
`protection provided under Section 10.2 or Section 10.3 shall be
`deemed to vest at the time that the act or omission occurred,
`irrespective of when and whether a proceeding challenging such act
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`or omission is first threatened or commenced. The rights provided
`hereunder shall inure to the benefit of any Covered Person.
`Id. § 10.3(j) (emphasis added).
`IV. AYANA DENIES PLAINTIFFS’ ADVANCEMENT DEMAND
`In light of the above contractual rights, Plaintiffs demanded indemnification
`and advancement for the expenses incurred due to the Investigation and Ayana’s
`counterclaims in the Underlying Action via letter dated January 3, 2025. Compl.,
`Ex. E. Ayana ignored that demand. Plaintiffs sent a second demand letter on April
`22, 2025, attaching Plaintiffs’ undertakings to repay and promising litigation if
`Ayana continued to ignore its obligation. Compl., Ex. F.
`Ayana responded on April 28, 2025, and denied its advancement obligations.
`Compl., Ex. G. Ayana first claimed that the Investigation was not a covered
`proceeding by wrongly asserting that only in-court litigation is covered by the LLC
`Agreement’s indemnification provisions and by ignoring the word “threatened.” Id.
`at 1–2. With respect to the costs Plaintiffs incurred in opposing the Original
`Counterclaim, Ayana primarily responded that the arguments made in opposition
`were incorrect and so the fees incurred “cannot be construed as ‘reasonable.’” Id. at
`2. Nevertheless, Ayana invited Plaintiffs to turn over “all relevant billing entries”
`for work that Ayana had previewed it would not “construe[] as ‘reasonable.’” Id.
`As for the continuing defense of the Revised Counterclaim, Ayana relied on its
`pretextual, non-substantive revision of its claims to declare that advancement is not
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`warranted. Id. at 3. Ayana did acknowledge it would “consider” a request from
`Leonard “[t]o the extent Leonard actually and reasonably incurs legal fees as a
`‘witness, deponent or otherwise’ in Ayana Bio’s prosecution of its cross-claims
`against Groshoff.” Id.
`V. THIS LITIGATION
`Following months of Ayana ignoring and then denying Plaintiffs’
`advancement demands, Plaintiffs filed this action on May 21, 2025. On May 29,
`2025, the Court issued an assignment letter instructing the parties to confer on the
`disputes to be resolved and agree upon a schedule for promptly resolving such
`disputes. (D.I. 5). The parties submitted a proposed schedule on June 12, 2025,
`which contemplates resolving Plaintiffs’ entitlement to advancement through a
`dispositive motion for summary judgment. (D.I. 8).
`ARGUMENT
`I. DELAWARE LAW INSTRUCTS THAT SUMMARY JUDGMENT IS
`THE APPROPRIATE MECHANISM FOR GRANTING
`ADVANCEMENT, AND THAT DOUBTS SHOULD BE RESOLVED IN
`FAVOR OF ADVANCEMENT.
`“Summary judgment is an appropriate way to resolve advancement disputes
`because ‘the relevant question turns on the application of the terms of the corporate
`instruments setting forth the purported right to advancement and the pleadings in the
`proceeding for which advancement is sought.’” Perik v. Student Res. Ctr., LLC,
`2024 WL 181848, at *2 n.15 (Del. Ch. Jan. 17, 2024) (quoting Senior Tour Players
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`207 Mgmt. Co. LLC v. Golftown 207 Hldg. Co., LLC, 853 A.2d 124, 126–27 (Del.
`Ch. 2004)). “Under Court of Chancery Rule 56, summary judgment is appropriate
`when ‘there is no genuine issue as to any material fact and . . . the moving party is
`entitled to judgment as a matter of law.’” Krauss v. 180 Life Sci. Corp., 2022 WL
`665323, at *3 (Del. Ch. Mar. 7, 2022) (omission in original) (quoting Ct. Ch. R.
`56(c)).
`As a Delaware limited liability company (an “LLC”), Ayana chooses to
`provide advancement in its LLC Agreement pursuant to 6 Del. C. § 18-108, which
`permits LLCs to “indemnify and hold harmless any member or manager or other
`person from and against any and all claims and demands whatsoever.” Id.
`(emphasis added). Thus, through its operating agreement, an LLC can “provide
`indemnification and advancement unconstrained by any statutory standards.”
`Wagner v. BRP Grp., Inc., 316 A.3d 826, 847–48 (Del. Ch. 2024); see also Gentile
`v. GPB Cap. Hldgs., LLC, 2024 WL 4941050, at *3 (Del. Ch. Nov. 27, 2024) (noting
`“[t]he scope of a party’s right to indemnification under a limited liability company
`agreement is therefore governed by contractual principles[.]” (citation omitted)).
`Among the relevant contractual principles is that governing documents, which are
`unilaterally drafted by the entity, should be strictly construed against the entity. See
`Greco v. Columbia/HCA Healthcare Corp., 1999 WL 1261446, at *13 (Del. Ch.
`Feb. 12, 1999) (collecting authority).
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`Relatedly, the Court of Chancery has “reiterated[d] that any doubts should be
`resolved in favor of advancement. The 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.” Mooney v. Echo Therapeutics, Inc.,
`2015 WL 3413272, at *6 (Del. Ch. May 28, 2015) (emphasis added) (citations
`omitted). Put differently, Delaware law holds “it should be easier to turn the
`‘advancement spigot’ on than to turn it off.” Sider v. Hertz Glob. Hldgs., Inc., 2019
`WL 2501481, at *4 (Del. Ch. June 17, 2019) (ORDER) (quoting Sun-Times Media
`Grp., Inc. v. Black, 954 A.2d 380, 402 (Del. Ch. 2008)).
`II. AYANA’S COUNTERCLAIMS TRIGGERED PLAINTIFFS’
`ADVANCEMENT RIGHTS.
`There can be no doubt that the allegations Ayana put forth in the Original
`Counterclaim triggered Plaintiffs’ advancement rights. Ayana’s own conduct
`confirms as much. Ayana’s denial letter demonstrates that its only substantive
`dispute with respect to fees incurred with respect to the Original Counterclaim is that
`such fees were not “reasonable.” Compl., Ex. G at 2. But the reasonableness of fees
`is a corollary question that only arises once entitlement is established. See Nielsen
`v. EBTH Inc., 2019 WL 4755865, at *7 n. 52 (Del. Ch. Sept. 30, 2019) (The Court
`“only address[es] the narrow entitlement issue at this stage, reasonableness of fees
`will follow, pursuant to the procedures adopted in Danenberg v. Fitracks, Inc., 58
`A.3d 991 (Del. Ch. 2012).”); see also D.I. 5 (“The Court will first address the issue
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`of entitlement to advancement and, if advancement is warranted, establish a
`procedure for challenges to the requested fees.”). Accordingly, by resorting to
`disputes regarding the amount 1 instead of disputing Plaintiffs’ entitlement, Ayana
`effectively admits that Plaintiffs are entitled to advancement. Ayana’s attempt to
`swap in the Revised Counterclaim to avoid the facial appearance of advanceable
`claims further demonstrates Ayana’s recognition of the consequences of its
`allegations.
`Even if Ayana had not conceded Plaintiffs’ entitlement to advancement
`through its conduct, Plaintiffs’ entitlement is straightforward. Both Plaintiffs were
`officers of Ayana—i.e., “Covered Persons” under LLCA § 1.1—and the Original
`Counterclaim is expressly based on their conduct in that regard. See, e.g., Orig. Ccl.
`¶¶ 8, 9. Likewise, the claims Ayana brought are undeniably a civil suit. Thus,
`because Ayana’s counterclaims against Plaintiffs are a civil suit “that arises directly
`1 In its denial letter, Ayana also notes that “any fees attributable to Groshoff’s
`‘defense’ to the Motion in his capacity as outside counsel are outside the scope of
`indemnification.” Compl., Ex. G at 2. For one thing, the matter in dispute here is not a
`circumstance in which one person is split between two different “capacities”—such as
`when an individual is simultaneously both a shareholder and director and has distinct rights
`and obligations in each role. The Original Counterclaim alleges a single, continuous course
`of conduct that was allegedly motivated entirely by personal interests. By the time Ayana
`conducted the Investigation and brought the Original Counterclaim, Groshoff’s “capacity”
`as Ayana’s outside counsel had long been extinguished. In any event, this is an issue of
`the allocation of expenses, which, like reasonableness, is irrelevant at the entitlement stage.
`Moreover, Delaware law holds that “fees [a]re wholly advanceable if the expenses would
`have been incurred for the advancee’s own defense, regardless of the existence of other co-
`defendants.” Holley v. Nipro Diagnostics, Inc., 2015 WL 4880418, at *1 (Del. Ch. Aug.
`14, 2015) (citation omitted).
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`or indirectly from” Plaintiffs’ activities as Ayana officers, Plaintiffs are entitled to
`advancement under the LLC Agreement. LLCA § 10.3(b).
`III. AYANA’S FORMALISTIC REVISIONS DID NOT EXTINGUISH
`PLAINTIFFS’ ADVANCEMENT RIGHTS.
`Ayana will, of course, vigorously wave its Revised Counterclaim as evidence
`that it nullified the advancement rights its Original Counterclaim triggered.2 Not so.
`Ayana’s belief that it can rescind Plaintiffs’ advancement rights through an
`amendment to the form, but not the substance, of its pleading overlooks both the
`language of the LLC Agreement and well-established Delaware law.
`First, the text of the LLC Agreement applies to civil suits that “arise[] directly
`or indirectly from” the person’s actions as an officer. LLCA § 10(a) (emphasis
`added). So, even if the Revised Counterclaim were not directly predicated on
`Groshoff’s actions as CLO, it still falls within Section 10(a)’s scope because it arises
`out of facts allegedly discovered in connection with Groshoff’s tenure as CLO and
`responds to claims Plaintiffs brought because of discrimination they endured as
`officers and retaliation for their official acts.
`2 Leonard—who is still alleged in the Revised Counterclaim to have breached his
`fiduciary duties and conspired with Groshoff—was an officer at all times discussed in the
`Revised Counterclaim, so his expenses in connection therewith would be advanceable
`regardless of Groshoff’s entitlement. Ayana appears to acknowledge this. See Compl.,
`Ex. G at 3 (“[T]he Company will consider any request from Leonard for payment of such
`fees in advance of the final disposition of the proceedings[.]”). As discussed above, issues
`regarding the amounts and reasonableness of fees incurred are resolved at later stages.
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`Indeed, “Delaware courts recognize the phrases ‘relating to’ and ‘arising out
`of’ as ‘paradigmatically broad terms.’” Vortex Infrastructure Holdco LLC v. Kane,
`2024 WL 3887117, at *4 (Del. Ch. Aug. 21, 2024) (quoting City of Newark v.
`Donald M. Durkin Contr., Inc.¸ 305 A.3d 674, 680 (Del. 2023)). And, in the
`advancement context, this Court has recognized phrases including “arising out of”
`as “far-reaching terms often used by lawyers when they wish to capture the broadest
`possible universe.” DeLucca v. KKAT Mgmt., L.L.C., 2006 WL 224058, at *10 (Del.
`Ch. Jan. 23, 2006) (emphasis added). Ayana chose to expand upon the already broad
`phrase “arising from” by explicitly adding the term “indirectly.” LLCA § 10.3(a).
`Ayana’s choice to include such broad language on a “clear day” cannot be
`overridden by its remorse now that a dispute has arisen. See Maffei v. Palkon, ___
`A.3d ___, 2025 WL 384054, at *21 n.187 (Del. 2025) (citing William D. Johnston,
`Flexibility Under Delaware Law in Drafting Advancement Provisions on a “Clear
`Day,” and Potential Surprises for Those Who Do Not Take Advantage of That
`Flexibility, 13 Del. L. Rev. 21, 29 (2011)). The Revised Counterclaim, even if not
`explicitly premised on Groshoff’s position as an officer, is tethered by reality to
`Groshoff’s official role and, at the very least, indirectly arises therefrom. For that
`reason alone, the Revised Counterclaim falls under Section 10(a) and is thus
`advanceable.
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`Second, even if the LLC Agreement only provided advancement for suits
`directly based on conduct taken as an officer, Delaware courts have consistently
`rejected the sort of technicality-based misdirection that Ayana is attempting. As the
`Court of Chancery has observed:
`“Delaware law recognizes the potential for parties to eliminate their
`advancement obligations by amending their claims.” But such efforts
`can prompt the Court's “skepticism,” and the Court “ought be wary
`of artful attempts at pleading around such a right.” Indeed, the Court
`has acknowledged that it would be “inequitable” to allow a company to
`escape its obligations through “mere relabel