A Delaware court recently denied a motion from USAB NY Inc. seeking advancement of legal fees in its ongoing litigation against GLIC Health LLC. The ruling, issued by the Court of Chancery on May 20, 2026, has implications for how limited liability companies interpret their operating agreements regarding legal expenses. This decision affects USAB, GLIC, and their members, highlighting the complexities of legal interpretations in corporate governance.
The case, identified as C.A. No. 2026-0052-CDW, revolves around USAB's request for GLIC to cover its legal fees incurred while pursuing claims against GLIC's other member, Christopher Jacobs, and Chief Operating Officer, Alexander Glovsky. USAB argues that the language in GLIC's operating agreement obligates the company to advance these costs, but the court found the term "defend" to be ambiguous.
Background
USAB NY Inc. is a 50% member of GLIC Health LLC, which is also co-owned by Christopher Jacobs. In November 2025, USAB filed a lawsuit against Jacobs, alleging breaches of contract, bad faith, self-dealing, and other misconduct. The suit also includes claims against Glovsky for aiding and abetting Jacobs' actions. USAB is seeking to have GLIC cover the legal fees associated with this lawsuit based on the operating agreement's provision that requires GLIC to "indemnify, defend, and save harmless" its members.
USAB contends that the term "defend" within the operating agreement should be interpreted as a right to advancement of legal fees. This interpretation is crucial for USAB as it seeks to navigate the financial burdens of ongoing litigation. However, GLIC disputes this interpretation, leading to the court's involvement.
The Ruling
The court ruled against USAB's motion for judgment on the pleadings, stating that the language in the operating agreement is not unambiguous. The judge, whose name was not specified in the opinion, emphasized that the term "defend" does not clearly imply an obligation for GLIC to advance legal fees for USAB's offensive litigation. The court noted, "I cannot grant judgment on the pleadings because the language in the Operating Agreement upon which USAB bases its demand for advancement of its offensive litigation expenses is not unambiguous."
Furthermore, the court highlighted that the language used in the operating agreement does not clearly indicate that GLIC is required to cover USAB's legal costs in this context. The judge referenced previous cases to support the conclusion that the term "defend" does not equate to a right to advancement of legal fees, especially for offensive litigation initiated by the member seeking advancement.
Impact
This ruling has significant implications for USAB and GLIC, as it clarifies the limitations of advancement rights in Delaware limited liability companies. It underscores that the language in operating agreements must be explicit in granting such rights. The decision could set a precedent for future cases involving similar disputes over the interpretation of legal fee advancements in corporate governance.
Moreover, this ruling may influence how other limited liability companies draft their operating agreements, prompting them to be more precise in their language regarding indemnification and advancement rights. Members of LLCs may need to be more cautious and ensure that their agreements clearly outline the scope of legal fee coverage to avoid ambiguity.
What's Next
USAB's options moving forward may include appealing the court's decision, although details regarding an appeal were not specified in the court filing. Additionally, the parties are expected to confer and submit a proposed scheduling order to address the entitlement issue in the ongoing litigation.