Delaware Court of Chancery Opinion on Fitracks Order

C OURT OF C HANCERY OF THE S TATE OF D ELAWARE C HRISTIAN D OUGLAS W RIGHT M AGISTRATE IN C HANCERY L EONARD L. W ILLIAMS J USTICE C ENTER 500 N ORTH K ING S TREET, S UI TE 11400 W ILMINGTON, DE 19801-3734 Date Submitted: February 6, 2026 Date Decided: February 12, 2026 Richard P. Rollo, Esquire Travis S. Hunter, Esquire Alexandra M. Ewing, Esquire Richards, Layton & Finger, P.A. One Rodney Square 920 North King Street Wilmin g ton, DE 19801 Margaret M. DiBianca, Esquire DiBianca Law, LLC 1201 N. Orange Street, Suite 504 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 Paymen t 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’ le tter concerning proposed Fitracks order); Dkt. 81 (defendants’ letter concerning proposed Fitracks order). The parties’ respective proposed terms for the Fitracks Order are reflected in th e marked proposed order submitted with their letters. See Dkt. 80, Ex. E; Dkt. 81, Ex. A. Paragraph references in this letter are to the paragra phs as they appear in the pa rties’ proposed Fitracks order.

C.A. No. 2025-0426-CDW February 12, 2026 Page 2 of 10 Advancement for Plaintiffs’ Defens ive Fees and Expenses in the JAMS Arbitration (¶ 1 n.1). Vice Chancellor Will reso lved 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 Agre ements impose obligations on multiple parties and use the term “j ointly and severally” to de scribe 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 incurre d” 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 I ndemnification Agreements, which sets forth defendant s’ advancement obli gations, does not include the phrase “jointly and s everally.” Defenda nts do not argue, nor would I find, that the omission is evidence that the parties intended the advancement obligation to be several while the i ndemnifi cation obligation t o be joint and several.

C.A. No. 2025-0426-CDW February 12, 2026 Page 3 of 10 Order. As with “jointly and severa lly,” 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 para graph 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 th eir 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 De mands can include Fees on Fees.” 7 While “or the Advancement Action” strikes me as unnecessary because the first wh ereas 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 “Advanc eable Claims,” defendants do not, as far as I can tell, directly addre ss 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 monthl y submissions. For the initial demand, 15 days is also common and should be suff icient here. Plaintiffs have waited long enough. Payment/Escrow Percent Threshold (¶ 15). Fifty percent has been the standard threshold since the original Fitracks procedure was implemented 8 and I have seen it utilized even in cases where no cl aims h ave been excluded from advancement and there are no diffi cult allocation issues. Plaintiffs’ suggestion that there is something nefari ous 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, pl aintiffs have the ability to seek relief from the court. Rule 88 Applications (¶ 20). I decline th e parties’ proposal to permit the submission of fee disputes more frequently than quarterly, at either monetary threshold. It is not a sta ndard 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 st arting 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 paragr aph 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 circ umstances, 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 th e 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 Chan cellor Will agreed my statement was dicta. See Leiske v. Kidd, 2026 WL 265493, at *5 (D el. 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 ve hicle to explore that view because the parties negotiated for a different standa rd, one that I did not have in mind when I delivered my bench ruling. Under Section 6 of the Indemnifica tion Agreements, the parties agreed that “[i]t is the intent of this [Inde mnification] Agreement to secure for Indemnitee rights of indemnity that are as favorable as ma y be permitted under the [Delaware General Corporation Law] and public policy of the State of Delaware.” 12 Our court has held that unc onditional 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 me ntioned only the principl e of contractual freedom under the LLC Act, see 6 Del. C. § 18-1101(b), ev en though the Indemnification Agreements are not limite d liability company ag reements, 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 advan ce “any and all expe nses (including attorneys’ fees)” incurred by the inde mnitee “in connection with any action brought by the [i]ndemnitee for . . . a dvancement . . . regardless of whether the [i]ndemnitee ultimately is determ ined to be entitled to such . . . advancement[.]” 924 A.2d 210, 217 (Del. Ch. 2007). Vice Chancellor Lamb held such provisions are invalid under Dela ware law, at least as they apply to Delaware corporations and the Dela ware General Corp oration Law. The court first explained such provisi ons 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 su cceed (at least to some extent) on its underlying indemnification action to have a legally cognizable claim for monies expended in forcing its indemn itor to make it whole. Because a Delaware corpor ation cannot take actions which our law does not c ountenance, 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 corpor ation’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 po licy”: “The law should not encourage directors and officers to bring non-meritorious indemnification claims against the corporation, and the provision at issue he re clearly creates a perverse incentive to do so.” 14 T h e 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 Reco ns. of Magistrate’s Dec. 11, 2025 Ltr. Decision, Dkt. 16 (applying Levy and declining to enforce an un conditi onal 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 Sec tion 7(d) as “too broad”); Lieberman v. El ectrolyte Ozone, Inc., 2015 WL 5135460, at *7 (Del. Ch. Aug. 31, 2015) (“Unfortunately for Plaintiffs, Delaware corporations lack th e contractual power to compensate a party for fees and expenses incurre d while pursuing a failed un derlying claim.”) (citing Levy); Schoon v. Troy Corp., 948 A.2d 1157, 1176 (D el. Ch. 2008) (rejecting demand for payment of the full amount of fees and expenses incurred pursuant to bylaw provision granting i ndemnification “i f successful in w hole or in part” and citing Levy). The court also declined to a llow 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 1 176). Also, in Rhodes v. bioMérieux, Inc., the plaintiff, represented by the same law firm as plain tiffs here, made the same argument i n his summary judgment opening brief rega rding 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 Th eir Mot. for Summ. J. at 14, Dkt. 30. He did not address unconditional fees-on-fe es 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 anothe r day and another case the question of when, if ever, an uncondi tional fees-on-fees provision is enforceable according to its terms. Confidentiality Stipulation (¶ 26). I accept the parties’ proposal to dispense with a separate confidentia lity 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 reflec ting or including information deri ved from the invoices. Modifications to the Order (¶ 27). I have modified the first sentence of this paragraph to clarify that the pa rties’ 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 re gard to paragraph 23, I agree with defendants’ proposal to eliminate the second sentence. The Validity of the Inde mnification Agreements (¶ 28). The proposed additional language in pa ragraph 28(ii) is redundan t 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 Chan cery Rule 144(b)(1). Under Court of Chancery Rule 144(c)(2)(A), excepti ons 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