The Delaware Supreme Court Addresses Advancement to Fiduciaries of ERISA Funds

The Delaware Supreme Court has clarified the rules for legal expense coverage in high-stakes fiduciary disputes, ruling on April 13, 2026, that federal law does not automatically block companies from paying the legal fees of ERISA fund fiduciaries.

The decision in Invictus Global Mgmt. LLC v.

The case centered on a group of fiduciaries who were removed from their roles and subsequently sued by the fund they once managed. When these individuals sought advancement of their legal fees—a standard provision in many organizational documents meant to cover costs while a case is ongoing—they were initially rebuffed.

The Court of Chancery had ruled that such payments would violate Section 1110 of ERISA, which declares void any agreement intended to relieve a fiduciary of their responsibilities or liabilities.

The lower court’s reasoning was clear: by paying for a defense, a fund might effectively shield a fiduciary from the financial consequences of their own misconduct. However, the Delaware Supreme Court viewed the mechanism of advancement differently. In a ruling detailed by Morris James LLP, the state’s highest court determined that advancement is not the same as a permanent release from liability.

The Supreme Court’s decision rests on a specific legal safeguard: the written undertaking. Under Delaware law, parties receiving advancement are typically required to sign an agreement promising to repay those funds if it is later determined that they do not meet the legal standard for indemnification.

Because these individuals remained on the hook to return the money if they were found to have breached their duties, the court reasoned that the advancement did not grant them an “impermissible” escape from ERISA obligations.

The Delaware Supreme Court Addresses Advancement to Fiduciaries of ERISA Funds

“Advancement that is expressly contingent on an undertaking does not have the … impermissible effect of relieving a fiduciary for liability or responsibility under ERISA Section 1110, because a breach of fiduciary duties could result in liability to repay advancement in accordance with the undertaking.”

This distinction is vital for businesses and the professionals who serve on their boards. It preserves the ability of funds to support their fiduciaries during litigation without running afoul of federal public policy. The ruling ensures that while fiduciaries can access the resources necessary to mount a defense, they do not receive a “get out of jail free” card; if the litigation proves they acted improperly, the debt remains.

For those in the financial and legal sectors, the ruling provides a necessary layer of predictability. Without the ability to secure advancement, many qualified individuals might be deterred from serving in fiduciary roles for fear of the ruinous cost of litigation, regardless of the merits of the case.

By validating the use of repayment undertakings, the court has balanced the need for fiduciary accountability with the practical realities of legal defense costs.

The decision effectively moves the focus from the payment of fees to the ultimate liability for misconduct.

The litigation remains a reminder of the complex interplay between state corporate law and federal regulatory frameworks. As funds and fiduciaries look to this precedent, the focus will likely shift toward the precision of the written undertakings themselves. The strength of these agreements—and the ability to enforce repayment—now stands as the primary barrier against the concerns raised by the lower court.

With this reversal, the defendants are permitted to move forward with their claims for advancement, provided they adhere to the repayment obligations outlined in the court’s opinion. The decision resolves a significant point of tension for ERISA-regulated entities operating within Delaware’s legal jurisdiction.

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