On April 13, 2026, the Delaware Supreme Court, sitting en banc, reversed the Court of Chancery and held that Section 1110 of the Employee Retirement Income Security Act of 1974 ("ERISA") does not bar the advancement of litigation expenses from fund assets when such advancement is sought for the defense of state-law claims and is conditioned on a written undertaking to repay. The decision in Invictus Global Management, LLC et al. v. Invictus Special Situations Master I, L.P. is a significant win for ERISA fiduciaries and fund managers seeking to preserve their contractual advancement rights and should be carefully studied by any entity that serves, or has served, as an ERISA fiduciary under a fund's governing documents. 

Background

The case arose from a dispute involving Invictus Special Situations Master I, L.P. (the "Fund"), a privately held investment fund containing ERISA assets. Defendants — the Fund's former general partner, management company, and two individual principals — were removed from their positions in September 2023. The Fund then brought state-law claims in the Court of Chancery alleging breach of two of the Fund’s governing documents — a Partnership Agreement and a Management Agreement — including claims that Defendants withheld information and approximately $10 million in fund assets after the Fund removed two of the Defendants as its general partner and management company, respectively. 

Defendants counterclaimed for advancement of their defense costs under the Partnership and Management Agreements, which provided for mandatory advancement of expenses upon receipt of a written undertaking to repay any advanced amounts if the recipient was ultimately found not entitled to indemnification. In response, the Fund asserted that ERISA Section 1110, which renders void as against public policy any provision in an agreement which purports to relieve a fiduciary from liability for any responsibility, obligation, or duty, rendered the advancement provisions void.

The Court of Chancery agreed with the Fund, relying on federal case law — principally the Third Circuit's non-precedential decision in Secretary United States Department of Labor v. Koresko — and Department of Labor guidance to conclude that the advancement provisions were invalid at the time they were entered into. The Court further stated that a bar on advancement was particularly appropriate where Defendants sought advancement for claims on which they had already been adjudicated to have misappropriated Fund assets and their failure to demonstrate an ability to repay advanced sums. 

The Supreme Court's Reasoning

The Supreme Court reversed, holding that the advancement requested by Defendants does not violate Section 1110 of ERISA. The Court's analysis rested on two central pillars.

Advancement and indemnification are distinct rights. The Court emphasized that advancement is an interim measure designed to relieve the immediate financial burden of litigation, not a final determination of liability. Unlike indemnification, which is a permanent shifting of liability, advancement is inherently provisional: if the recipient is ultimately found not to be entitled to indemnification, the advanced sums must be repaid. Because the Fund retains its right to recoup advanced amounts, advancement does not abrogate the Fund’s right to recovery from fiduciaries in the way ERISA Section 1110 is designed to prevent. 

The advancement sought is for state-law claims and is conditioned on an undertaking. The Court found it dispositive that Defendants were seeking advancement only for expenses incurred defending state-law claims in state court — not federal ERISA claims — and that the Partnership and Management Agreements expressly conditioned advancement on a written undertaking to repay. Moreover, the Partnership Agreement's definition of "Disabling Conduct" swept broadly enough to include any breach of fiduciary duties under ERISA, meaning the Fund retained the right to recover from Defendants for any ERISA fiduciary duty breaches. 

The Court distinguished Koresko on multiple grounds; namely, that case involved ERISA claims (not state-law claims) and the operative trust documents did not appear to condition advancement on an undertaking to repay. Notably, the Fund itself conceded at oral argument that it could not identify any case in which any court had applied Section 1110 to bar advancement for state-law fiduciary duty claims. 

The Court also declined to follow the Ninth Circuit's approach in Johnson v. Couturier, which analyzed advancement in the context of a preliminary injunction involving ERISA claims, finding it inapplicable where no federal ERISA claims were at issue and no preliminary injunction standard was being applied. 

Finally, the Court rejected the Fund's argument that Defendants were required to demonstrate an ability to repay advanced funds, holding that the Partnership and Management Agreements conditioned advancement solely on an undertaking requirement, which had been satisfied.

Key Highlights

• ERISA Section 1110 does not categorically bar advancement from fund assets. The Delaware Supreme Court held that advancement conditioned on a repayment undertaking does not relieve a fiduciary of responsibility or liability in violation of Section 1110.
• Advancement for state-law claims is permissible. Where the underlying claims sound in state law and are brought in state court, advancement does not implicate ERISA fiduciary duties and is not barred by Section 1110.
• The undertaking requirement is critical. The written undertaking to repay preserves the fund's right to recoup advanced sums if liability is ultimately established, preventing the exculpatory effect Section 1110 targets.
• The Third Circuit's Koresko decision is distinguishable. The Court found Koresko inapplicable where the claims at issue are state-law claims and advancement is conditioned on an undertaking.
• Delaware policy favoring advancement carries weight. The Court noted that the result balances Delaware's strong policy favoring advancement against the federal interest in protecting ERISA plan assets.