ERISA § 1110 Does Not Void Contractual Advancement for State-Law Defense Costs When Subject to Repayment Undertaking

Case: Invictus Global Management, LLC v. Invictus Special Situations Master I, L.P.
Court: Supreme Court of Delaware
Date: April 13, 2026
Disposition: Reversed and remanded (interlocutory appeal from the Court of Chancery)

1. Introduction

This interlocutory appeal sits at the intersection of Delaware’s pro-advancement policy and ERISA’s anti-exculpation rule. The plaintiff fund, Invictus Special Situations Master I, L.P. (the “Fund”), held ERISA assets and had governing documents (a Partnership Agreement and Management Agreement) that granted “Indemnified Persons”/“Covered Persons” rights to indemnification and, critically, advancement of litigation expenses upon delivery of a written undertaking to repay if indemnification is ultimately unavailable.

After the Fund removed the defendants (IGM, Invictus GP, Cindy Chen Delano, and Amit Patel) from their fiduciary roles, the Fund sued in Delaware state court on state-law claims (principally breach of the governing agreements) and obtained rulings that defendants withheld information and approximately $10 million of Fund assets. Defendants counterclaimed for advancement under the Fund’s documents.

The central legal issue became whether ERISA § 1110 (29 U.S.C. § 1110)—which voids contractual terms that “purport[] to relieve a fiduciary from responsibility or liability” for ERISA duties—categorically bars advancement paid from ERISA plan assets, even where (i) the litigation is state-law only and (ii) the advancement is subject to a repayment undertaking. The Court of Chancery, relying primarily on Third Circuit authority and DOL guidance, held the advancement provisions void and unenforceable. The Delaware Supreme Court reversed.

2. Summary of the Opinion

The Delaware Supreme Court held that ERISA § 1110 does not bar the requested advancement in this case because:

  • The advancement sought is for defending state-law claims in state court, so it does not “relieve” defendants of responsibility or liability for duties “under” ERISA within the meaning of § 1110.
  • Advancement here is expressly conditioned on a written undertaking to repay if indemnification is unavailable, and the governing documents broadly exclude indemnification for “Disabling Conduct,” including material breaches of fiduciary duty—thereby preserving the Fund’s right to recover for ERISA breaches.
  • The Court of Chancery’s reliance on Secretary United States Department of Labor v. Koresko was misplaced; that non-precedential decision involved an ERISA enforcement action and did not address advancement conditioned on an undertaking for state-law claims.
  • Neither ERISA nor the contracts imposed an extra-contractual requirement that defendants prove ability to repay as a prerequisite to advancement.

The Court reversed the ruling that ERISA barred advancement and remanded to the Court of Chancery.

3. Analysis

3.1. Precedents Cited

A. Statutory-interpretation and review framework

  • ACE Am. Ins. Co. v. Rite Aid Corp. and Rapposelli v. State Farm Mut. Auto. Ins. Co.
    These cases provided the Delaware standards of review: de novo review of summary judgment and de novo review of statutory interpretation. They functioned as the doctrinal gateway that allowed the Court to independently evaluate ERISA § 1110’s text and the Chancery court’s ERISA analysis.
  • Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc. and Hughes Aircraft Co. v. Jacobson
    Cited for the familiar interpretive sequence: begin with the statutory text. Their role was to anchor the Court’s ERISA analysis in “plain language” methodology.
  • Blue Beach Bungalows DE, LLC v. State
    Although a Delaware statutory case, it reinforced the same point—start with plain text to determine legislative intent—supporting the Court’s decision to read § 1110 narrowly as written (relief from ERISA responsibility/liability), rather than as a broad policy-based prohibition on any plan-funded advancement.

B. ERISA fiduciary-duty context

  • Cunningham v. Cornell Univ. and Tibble v. Edison Int'l
    These Supreme Court ERISA decisions were used to summarize ERISA’s fiduciary framework: § 1104’s “prudent person” standard and § 1106’s categorical bars on certain conflicted transactions. Their principal influence was contextual: § 1110 protects enforceability of those fiduciary obligations by voiding exculpatory clauses.

C. The anti-exculpation principle under ERISA § 1110

  • Johnson v. Couturier (with its quotation chain to IT Corp. v. Gen. Am. Life Ins. Co.)
    Johnson supplied the “words exonerating itself are without effect” framing and was central to the Fund’s argument that advancement is exculpatory. The Delaware Supreme Court distinguished Johnson on multiple axes: (i) it arose in a preliminary-injunction posture; (ii) it involved defense of ERISA claims, not state-law claims; and (iii) the indemnification/advancement structure there risked leaving the plan with “no recourse” for ERISA fiduciary breaches because indemnification/repayment hinged on a narrow carve-out (deliberate wrongful acts/gross negligence) that did not track ERISA’s broader liability standards. In short, Johnson illustrated when advancement can become effectively exculpatory—but did not establish a categorical bar applicable here.
  • 29 C.F.R. § 2509.75-4 and Perelman v. Perelman
    The Court relied on DOL’s interpretive bulletin for the key distinction it draws: third-party indemnification that leaves the fiduciary “fully responsible and liable” may be permissible, while plan-paid indemnification can be void if it abrogates the plan’s recovery. Perelman was cited as an example where indemnification was permissible because it came from the employer rather than the plan. The Court used this guidance not to impose a categorical plan-asset ban, but to focus on the functional question: does the arrangement actually “relieve” ERISA responsibility or liability?

D. The Court of Chancery’s main authority and its limits

  • Secretary United States Department of Labor v. Koresko (and the background federal decisions Solis v. Koresko)
    The Chancery court treated Koresko as effectively establishing that ERISA § 1110 voids advancement from plan assets. The Delaware Supreme Court held that reliance was overstated: (i) Koresko is a Third Circuit non-precedential opinion; (ii) it involved an ERISA enforcement action for fiduciary breaches, not state-law claims; (iii) it did not address advancement conditioned on an undertaking; and (iv) its concern about abrogating plan recovery implicitly presupposed an advancement mechanism lacking the repayment protections present here.
  • Additional federal decisions mentioned in the opinion—Walsh v. Reliance Tr. Co., Moore v. Williams, Pudela v. Swanson, and Cent. States, Se. & Sw. Areas Pension Fund v. Am. Nat'l Bank & Tr. Co.—served to demonstrate that some courts have treated advancement as not inherently prohibited “until liability is determined,” and that DOL has been cited for the proposition that advancement is not per se improper in all circumstances. The Court used these authorities to underscore the absence of any cited case barring advancement for state-law defense costs.

E. Delaware advancement doctrine (used as a conceptual comparator)

  • Kaung v. Cole Nat'l Corp., Homestore, Inc. v. Tafeen, Citadel Holding Corp. v. Roven, and Advanced Min. Sys., Inc. v. Fricke
    These cases supplied the core conceptual distinction the Court imported into its ERISA analysis: advancement is “interim relief,” separate from ultimate indemnification, and should generate “no net liability” if repayment is required when indemnification is unavailable. The Court leveraged this distinction to reject the Fund’s “advancement equals exculpation” theory—because with a repayment undertaking, the fiduciary remains ultimately on the hook.
  • Gandhi-Kapoor v. Hone Cap. LLC, In re Adelphia Commc'ns Corp., and Senior Tour Players 207 Mgmt. Co. LLC v. Golftown 207 Holding Co., LLC
    These citations reinforced advancement’s function and mechanics (immediate defense-cost liquidity; undertaking as a familiar condition to advancement). They supported the Court’s view that undertaking-backed advancement is structurally akin to a credit extension rather than a substantive exoneration.
  • Weil v. VEREIT Operating P'ship, L.P., White v. Curo Tex. Hldgs., LLC, Blankenship v. Alpha Appalachia Hldgs., Inc., and Reddy v. Elec. Data Sys. Corp.
    These cases were invoked in the discussion rejecting an “ability to repay” condition not found in the contract. The point: advancement is governed by the operative agreement; if the agreement conditions advancement only on an undertaking, courts should not add extra prerequisites (such as proof of solvency) as a matter of Delaware advancement principles. The Court applied that logic to the ERISA overlay here.

F. ERISA fee-shifting and “making the faithful fiduciary whole”

  • Packer Engineering, Inc. v. Kratville and Leigh v. Engle
    Though presented in a note, these Seventh Circuit decisions reflect the idea that reimbursing a fiduciary wrongly accused does not “relieve” responsibility and can be consistent with ERISA’s structure, especially in light of fee-shifting under 29 U.S.C. § 1132(g)(1). They provided additional support for the Court’s non-categorical approach to indemnification/advancement issues.

G. Additional authorities about clause scope and per se violations

  • Woznicki v. Raydon Corp., McMaken on behalf of Chemonics Int'l, Inc. Emp. Stock Ownership Plan v. GreatBanc Tr. Co., and Harris v. GreatBanc Trust Co.
    These cases were cited to illustrate how indemnification carve-outs that fail to exclude per se ERISA violations (e.g., § 406 prohibited transactions) may “run afoul” of § 1110. Their relevance in this opinion was largely comparative: the Invictus documents’ “Disabling Conduct” definition and ERISA-compliance provisions were broad enough to preserve plan recovery for ERISA breaches, reducing § 1110 concerns.

H. Administrative guidance on advancement

  • U.S. Dep't of Labor, Advisory Opinion No. 77-66/67A (E.R.I.S.A.)
    The Court cited this advisory opinion for the proposition that DOL has, at least in some settings, stated that advancement-providing indemnification provisions “do not contravene” § 1110. The Fund relied on it to argue that “ability to repay” is required; the Court rejected the inference that DOL thereby imposed an ERISA-wide mandatory “proof of ability to repay” prerequisite.

3.2. Legal Reasoning

A. The Court’s operative interpretive move: tie § 1110 to ERISA responsibility/liability

The Court read ERISA § 1110(a) as doing one thing: voiding provisions that “purport[] to relieve a fiduciary from responsibility or liability” for ERISA duties. This textual focus drove two limiting principles:

  • Claim-type limitation (as litigated here): the advancement request was for defending state-law claims; the Fund itself repeatedly maintained its complaint did not arise under ERISA. The Court therefore treated the advancement as not directly operating to relieve “responsibility or liability” under ERISA.
  • Functional limitation (plan recovery preserved): where advancement is contingent on a repayment undertaking and indemnification is unavailable for “Disabling Conduct” that includes fiduciary breaches (and where the documents require ERISA-compliant fiduciary conduct), the plan’s right to recover for ERISA breaches is not “abrogated.”

B. Advancement vs. indemnification: separateness does analytical work under ERISA

The Court emphasized (drawing from Kaung v. Cole Nat'l Corp., Homestore, Inc. v. Tafeen, and Advanced Min. Sys., Inc. v. Fricke) that advancement is an interim mechanism, distinct from the merits-based ultimate indemnification determination. That distinction mattered because:

  • With an undertaking, advancement operates like temporary credit, not permanent exoneration.
  • The Fund’s key § 1110 theory—“advancement shifts defense burden onto participants”—was incomplete unless advancement is effectively non-recourse. The undertaking and broad non-indemnifiability for fiduciary breaches undercut the claim that advancement “relieves” ERISA liability.

C. Why Koresko did not control

The Court did not deny that plan-paid advancement can violate § 1110 in some circumstances; instead, it held that the Court of Chancery treated Koresko as broader than it is. The distinguishing facts the Court found decisive were:

  • Koresko involved ERISA fiduciary-breach enforcement claims; Invictus involved state-law claims.
  • Invictus required a written undertaking to repay; Koresko did not appear to turn on or even address an undertaking requirement.
  • The concern in Koresko—that advancement “would effectively” abrogate plan recovery—was less persuasive where repayment is contractually required if indemnification is unavailable.

D. The Court’s rejection of a judicially imposed “ability to repay” condition

The Court of Chancery viewed inability to repay as making advancement particularly inappropriate. The Delaware Supreme Court rejected that approach on the record and framing presented:

  • The governing documents conditioned advancement on a written undertaking, not on proof of solvency.
  • ERISA § 1110’s text does not add a free-standing “ability to repay” requirement; DOL guidance cited did not compel that conclusion.

Notably, the Court did not decide whether ERISA § 1106 (prohibited transactions/extension of credit) independently bars this advancement; it declined to address that alternative argument in the first instance.

3.3. Impact

The decision’s practical holding is narrow but important: in Delaware state-court litigation over fund governance documents, ERISA § 1110 is not a categorical trump card against advancement where (i) the claims are state-law claims and (ii) advancement is conditioned on an undertaking that preserves ultimate recovery, especially where the contractual scheme broadly excludes indemnification for fiduciary breaches and requires ERISA-compliant conduct.

Likely implications include:

  • Drafting: ERISA-adjacent funds and sponsors may draft advancement/indemnification provisions to better track § 1110 concerns (explicit undertaking language; clear non-indemnifiability for ERISA breaches; express preservation of plan recovery; careful carve-outs that encompass § 406 per se violations, not merely “gross negligence”).
  • Litigation positioning: parties asserting an ERISA § 1110 defense to advancement will need to show how the particular advancement mechanism actually “relieves” ERISA responsibility/liability (e.g., non-recourse advancement, no meaningful repayment mechanism, or indemnification carve-outs that leave ERISA liability effectively covered).
  • Federal-state coordination: the opinion reinforces that ERISA defenses, even if powerful, do not automatically transform state-law disputes into ERISA enforcement actions—and that courts may be attentive to the pleaded-claims posture when assessing § 1110.

4. Complex Concepts Simplified

  • Advancement vs. indemnification: Advancement is payment of defense costs now; indemnification is the right to keep those payments after the case ends. If indemnification is unavailable, the recipient must repay advanced amounts (if an undertaking is required and enforceable).
  • ERISA § 1110 (often called “§ 410”): It voids contract terms that try to excuse or limit a fiduciary’s liability for ERISA duties. The key question is whether the provision actually “relieves” ERISA responsibility/liability.
  • DOL interpretive bulletin (29 C.F.R. § 2509.75-4): DOL distinguishes between (a) a third party paying for a fiduciary (potentially like insurance) and (b) the plan paying for the fiduciary (which can be void if it eliminates the plan’s ability to recover).
  • Undertaking to repay: A written promise to return advanced funds if it turns out the recipient was not entitled to indemnification. It is the mechanism that can prevent advancement from becoming a de facto exculpation.
  • Interlocutory appeal: An appeal taken before the case fully ends, allowed here to resolve a controlling question (whether ERISA bars advancement) that would materially affect the litigation.

5. Conclusion

Invictus Global Management, LLC v. Invictus Special Situations Master I, L.P. establishes that ERISA § 1110 does not automatically invalidate advancement provisions in ERISA-asset fund governing documents when advancement is sought to defend state-law claims and is conditioned on a repayment undertaking that preserves the fund’s ability to recover for ERISA breaches. The Court’s analysis is text-driven and functional: § 1110 targets true exculpation, not every interim fee-payment mechanism, and Koresko does not compel a categorical anti-advancement rule in materially different circumstances.