USAB NY, INC. v. GLIC HEALTH, LLC

── USAB NY, INC. v. GLIC HEALTH, LLC ── Court: Court of Chancery of Delaware Date: May 20, 2026 Category: General IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE USAB NY INC., Plaintiff, v. C.A. No. 2026-0052-CDW GLIC HEALTH LLC, Defendant. REPORT DENYING PLAINTIFF’S MOTION FOR JUDGMENT ON THE PLEADINGS Date Submitted: May 7, 2026 Date Decided: May 20, 2026 Kurt M. Heyman, Elizabeth A. DeFelice, HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware; Joseph L. Motto, Michael J. Stern, WINSTON & STRAWN LLP; Counsel for Plaintiff Stephen C. Norman, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Counsel for Defendant WRIGHT, M.  One member of a Delaware limited liability company seeks advancement from the entity for fees and expenses it is incurring in prosecuting direct and derivative litigation it initiated against the entity’s other two members. It contends the word “defend” always creates an advancement right when used in the sequence of “indemnify, defend, and save harmless,” and unambiguously compels the entity to advance the member’s offensive litigation fees and expenses. Considering the entity’s operating agreement in light of applicable Delaware law, I conclude the term “defend” is ambiguous and I cannot grant the member’s motion for judgment on the pleadings. I. BACKGROUND Plaintiff USAB NY Inc. is one of two 50% members of defendant Glic Health LLC. 1 Last November, USAB sued Glic’s other 50% member and manager, Christopher Jacobs, for “breaches of contract, bad faith, willful misconduct, self-dealing, breaches of fiduciary duties, creation of false records, and abuse of his position as Managing Member and Chief Executive Officer of Glic[.]”2 USAB also asserted aiding and abetting claims against Glic’s non- voting member and Chief Operating Officer, Alexander Glovsky. 3 1 USAB is owned by Sean Conaghan. See Verified Compl. for Advancement ¶¶ 2, 6, Dkt. 1 (“Complaint” and cited as “Compl.”). 2 Verified Compl. ¶¶ 1–3, USAB NY Inc. v. Jacobs, C.A. No. 2025-1386-JTL (Del. Ch.) (“Underlying Action”), Compl. Ex. B. 3 Id.  USAB now seeks advancement of its fees and expenses incurred in the Underlying Action under language in Glic’s operating agreement that requires Glic to “indemnify, defend, and save harmless” USAB “from any loss, cost, damage, fee[,] . . . or expense incurred by reason of [USAB]’s status” as a member. 4 Because “indemnify” and “save harmless” work together and do not create a right to advancement,5 USAB focuses its attention on “defend.” According to USAB, the plain and unambiguous meaning of “defend” as used in the Operating Agreement requires Glic to fund USAB’s offensive litigation against Jacobs and Glovsky on an ongoing basis. 6 Stated colloquially, USAB argues “defend” unambiguously means “advance” and “advance” unambiguously includes “attack,” so “defend” unambiguously means “attack,” and I must recognize this transitive 7 construction of the Operating Agreement as the only reasonable interpretation of its terms. 4 Second Am. & Restated Ltd. Liab. Operating Agreement § 3(h)(iv), Compl. Ex. A (“Operating Agreement”). 5 See Morgan v. Grace, 2003 WL 22461916, at *3 (Del. Ch. Oct. 29, 2003) (rejecting argument “indemnify and save harmless” provision in LLC agreement created an advancement right); Majkowski v. American Imaging Mgmt. Servs., LLC, 913 A.2d 572, 588–90 (Del. Ch. 2006) (explaining “indemnify and hold harmless” does not create an advancement right). 6 See Opening Br. in Support of Pl.’s Mot. for J. on the Pleadings 13–17, Dkt. 14 (“Opening Br.”); Reply Br. in Support of Pl.’s Mot. for J. on the Pleadings 8–12, Dkt. 18 (“Reply Br.”); Verified Compl. for Advancement ¶¶ 24–25, 29, Dkt. 1. (“Compl.”). 7 See iBio, Inc. v. Fraunhofer USA, Inc., 2016 WL 4059257, at *11 n.108 (Del. Ch. July 29, 2016) (“Under the transitive property of equality, if a=