Is There a 6th Amendment Right to Advancement of Legal Fees? In One Unique Case, A Court Says Yes.
A federal criminal case in the Northern District of California raises an unusual scenario involving the interplay between a defendant’s right to counsel of his choice under the Constitution and a corporate officer’s right to advancement of legal fees under Delaware law. Aubrey Shelton is a former senior VP of Delaware corporation RepairPal, Inc. On August 15, 2023, the United States government indicted Shelton on three counts of bank fraud, five counts of wire fraud, and four counts of tax evasion. The indictment alleged that Shelton embezzled millions of dollars from RepairPal over eight years. According to the indictment, Shelton used his control of the company’s payroll account to submit false information about his compensation to the payroll processor, inflating his salary and bonus and representing that he was entitled to receive “executive loans” and “reimbursements” for expenses he did not actually incur. In the criminal proceeding, Shelton sought to have his former employer advance legal fees for his defense, relying on a broad indemnification agreement he had signed with the company in 2020.
A Rare Advancement Trial Ends in a Rare Result
Following a bench trial, the Delaware Court of Chancery recently denied a company director’s advancement of legal fees in connection with an alleged investigation into that director’s conduct. This is a double-rarity of sorts. Advancement disputes rarely go to trial, and advancement is rarely denied. As befits a post-trial ruling, unique facts resulted in a unique result.
