In re Care One LLC Advancement Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE CARE ONE LLC ) Consolidated
ADVANCEMENT LITIGATION ) C.A. No. 2025-1286-CDW (NAC)

ORDER REGARDING EXCEPTIONS

WHEREAS1

A. Petitioners Elizabeth Straus and Androsky Lugo seek advancement

from their former employer Care One LLC (“Care One”) for legal fees and expenses

incurred in connection with a prior pending action in the United States District Court

for the District of New Jersey, captioned Care One, LLC, et al. v. Elizabeth Straus

and Androsky Lugo, No. 2:25-12742-JKS (“RICO Action”).2 Petitioners claim an

entitlement to advancement as former Care One officers under the company’s 2006

Amended and Restated Limited Liability Company Agreement (“2006 LLC

Agreement”).3 Although Care One, at the direction of its majority owner and CEO

Daniel Straus,4 amended the 2006 LLC Agreement to eliminate advancement rights

for everyone except Daniel (“2010 Amendment”),5 Petitioners insist that their then-

vested advancement rights remain in effect.

1 Citations to “Dkt.” refer to the docket in this matter.
Citations to “Report” refer to the
Magistrate’s Final Report available at Dkt. 46. Where the facts are undisputed, the Court
cites the Report for expediency.
2 Report at 78.

3Report at 78-81; see Plaintiffs Androsky Lugo’s and Elizabeth S. Straus’ Motion for
Summary Judgment (“MSJ Opening Br.”), Ex. B (“2006 LLC Agreement”) § 7.2(d).
4 Because Petitioner Elizabeth Straus and relevant non-party Daniel Straus share a last

name, the Court refers to them using their first names. No familiarity or disrespect is
intended.
5 See Report at 81-82; MSJ Opening Br., Ex. D (“2010 Amendment”). See also MSJ Opening

Br., Ex. C (“2015 LLC Agreement”) (limited indemnification to Daniel alone).
B. In January 2026, Petitioners moved for summary judgment on their

advancement claims (“PMSJ”).6 Care One cross-moved for summary judgment,

arguing Petitioners are not entitled to advancement because (1) Elizabeth was not an

officer; (2) Petitioners’ conduct underlying the RICO Action occurred after Care One

eliminated officer advancement rights; and (3) equitable estoppel and unclean hands

barred advancement for Lugo (“DMSJ”).7 After oral argument on February 11, 2026,

the Senior Magistrate in Chancery issued a final report (“Report”) granting the PMSJ

and denying the DMSJ.8 The Senior Magistrate held (1) Section 7.2(d) of the 2006

LLC Agreement entitled Petitioners to advancement for the RICO Action; (2) the

2010 Amendment did not eliminate those previously vested rights; and (3) there was

not “clear evidence of [Lugo’s alleged] underlying inequitable conduct.”9

C. On February 16, 2026, Care One timely filed exceptions to the Senior

Magistrate’s Report (“Exceptions”).10 The Exceptions only challenge the Senior

Magistrate’s ruling that equitable estoppel and unclean hands do not obviate Lugo’s

6 See Report at 78; MSJ Opening Br.

7 See Defendant Care One, LLC’s Answering Brief in Opposition to Plaintiffs’ Motion
for
Summary Judgment and Opening Brief in Support of Cross-Motion for Summary Judgment
(“MSJ Opp’n Br.”) (Dkt. 26).
8 Report at 93-94.After the Senior Magistrate’s ruling Care One voluntarily dismissed the
RICO Action. See Defendant Care One, LLC’s Opening Brief in Support of Exceptions to
Senior Magistrate’s February 11, 2026 Rulings on Cross-Motions for Summary Judgment
(“Exceptions Opening Br.”) at 1-2 (Dkt. 40).
9 Id. at 82-93.Notably, in so ruling the Senior Magistrate held “that Section 7.2(d) in the
2006 [LLC] [A]greement is unambiguous.” Id. at 82-83.
10 See Defendant Care One, LLC’s Notice of Exceptions to the February 11, 2026 Telephonic

Final Report of the Senior Magistrate on Cross-Motions for Summary Judgment (Dkt. 36).

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advancement rights.11 Specifically, Care One argues the Senior Magistrate applied

the wrong burden of proof and improperly weighed disputed material facts, most

importantly Daniel’s Affidavit in support of DMSJ (“Daniel’s Affidvit”).12

IT IS ORDERED this 1st day of April, 2026 as follows:

1. A hearing on the Exceptions is unnecessary. The Court has considered

the Report and record before the Senior Magistrate de novo.13

2. Delaware public policy favors advancement.14 The Court typically

“summarily determine[s] a corporation’s obligation to advance expenses (including

attorneys’ fees).”15 Often, “[s]ummary judgment is an appropriate way to resolve

advancement disputes because ‘the relevant question turns on the application of the

terms of the corporate instruments setting forth the purported right to advancement

and the pleadings in the proceedings for which advancement is sought.’”16 Yet, a fact-

intensive equitable defense directed to former in-house counsel’s entitlement to

advancement, based on that counsel’s involvement in amending the advancement

11 See Exceptions Opening Br. at 1-9, 24-52.
Because Care One does not take exception to the
Senior Magistrate’s ruling that the 2006 LLC Agreement grants Petitioners advancement
rights, this order and any further developments in this case do not impact Elizabeth’s right
to advancement for the RICO Action.
12 See id. at 24-52; Affidavit of Daniel E. Straus (Dkt. 26).

13 Wells Fargo Bank, NA v. Strong, 2014 WL 6478788, at *3 (Del. Ch. Nov. 19, 2014) (“This

Court reviews the legal and factual findings of a Master’s report de novo.” (citing DiGiacobbe
v. Sestak, 743 A.2d 180, 184 (Del. 1999)).
14 Riker v. Teucrium Trading, LLC, 2023 WL 4411609, at *2 (Del. Ch. July 7, 2023)

15 O’Brien v. IAC/Interactive Corp., 2009 WL 2490845, at *7 n.39 (Del. Ch. Aug. 14, 2009).

16 Ahmed v. JPMorgan Chase & Co., 2026 WL 251542, at *5 (Jan. 21, 2026) (quoting Rhodes

v. bioMerieux, Inc., 2024 WL 669034, at *7 (Del. Ch. Feb. 19, 2024)).

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right contrary to his client’s instructions and without advising the client of that

outcome, may preclude resolution of the dispute at summary judgment.17

3. The Court agrees with Petitioners that the Senior Magistrate did not

suitably consider Daniel’s Affidavit,18 which stands uncontroverted regarding several

key points and, in conjunction with other evidence, creates genuine issues of material

fact concerning whether inequitable conduct eliminates Lugo’s advancement rights.19

Daniel’s Affidavit states under oath that Daniel (1) delegated Care One’s day-to-day

management to officers like Lugo;20 (2) told Lugo he wanted the 2010 Amendment “to

make sure no one besides [Daniel] could ever [] claim to be entitled to mandatory

advancement”;21 and (3) “played no substantive role in [the 2010 Amendment’s]

drafting or content,” but “relied entirely on Lugo.”22 Other evidence, including Lugo’s

own affidavit, supports those assertions.23

17 See, e.g., Lee v. Linmere Homes, Inc., 2008 WL 4444552, at *6 (Del. Super. Oct. 1, 2008).

18 Indeed, the Report does not mention Daniel’s Affidavit or discuss the assertions made

therein. See Report.
19 See Boerger v. Heiman, 965 A.2d 671, 673 (Del. 2009) (“Summary judgment may not be

granted where, as here, there are material issues of fact in dispute.”).
20 Daniel Aff. ¶¶ 2-3, 6-7.

21 Id. ¶ 21.

22 Id. ¶¶ 21, 23.

23 See Affidavit of Androsky Lugo in Support of Reply Brief of Androsky Lugo and Elizabeth

S. Straus in Support of their Motion for Summary Judgment and Answering Brief in
Opposition to Care One, LLC’s Opening Brief in Support of Motion for Summary Judgment
(“Lugo Aff.”) ¶¶ 7-14 (touting Lugo’s extensive authority at Care One, where he “was
responsible for everything[.]” (internal quotation marks omitted)), 18 (“[Daniel] directed me
to amend the 2006 LLC Agreement to eliminate advancement and indemnification rights[.]”)
(Dkt. 29); MSJ Opp’n Br., Ex. 19 at 84-85 (Lugo stating he participated in discussions with
outside counsel regarding drafting the 2010 Amendment and Daniel did not “review the
amendment before it was adopted[.]”), 166-67 (Lugo stating he “understood what the intent
was and what was needed to be accomplished” concerning the 2010 Amendment); id., Exs.
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4. Additionally, Daniel’s Affidavit states (1) Lugo told Daniel the 2010

Amendment “would accomplish [his] directive to eliminate mandatory officer

advancement in full”; (2) Lugo “never advised [] that there was any risk that any [] []

officer could later claim to have such rights”; (3) Daniel “had no reason to doubt Lugo’s

assurances”; and (4) if Daniel knew vested advancement rights remained in effect he

would have insisted on waivers from officers like Lugo.24 Neither Lugo’s affidavit nor

any other evidence refutes those points.25 Indeed, Lugo’s affidavit states Care One’s

Delaware Counsel made clear that only a waiver could eliminate previously vested

advancement rights.26 According to Daniel’s Affidavit, Lugo, Care One’s general

13-14 (emails from Lugo to Care One’s outside counsel instructing them regarding the 2010
Amendment’s purpose).
24 Daniel Aff. ¶¶ 21-27.

25 See generally Lugo Aff.Petitioners argued nothing cited by Care One indicates that Lugo
made the affirmative statement that the 2010 Amendment would be effective to eliminate all
advancement rights, even for existing officers. Reply Brief of Androsky Lugo and Elizabeth
S. Straus in Support of their Motion for Summary Judgment and Answering Brief in
Opposition to Care One, LLC’s Opening Brief in Support of Motion for Summary Judgment
at 22 (Dkt. 29). Yet, unsworn assertions cannot overcome a contrary sworn affidavit at
summary judgment. See Gilliland v. Motorola, Inc., 859 A.2d 80, 85-86 (Del. Ch. 2004).
26 Lugo Aff. ¶ 18. Lugo’s affidavit does assert that Daniel knew that “an explicit waiver
agreement” was needed to eliminate vested advancement rights. Id. To the extent that
assertion contradicts Daniel’s Affidavit “the Court, on summary judgment, cannot weigh such
conflicting evidence or make credibility determinations.” Cercacor Lab’s, Inc. v. Metronom
Health, Inc., 2025 WL 1180186, at *14 (Del. Super. Apr. 23, 2025); see Cerberus International
Ltd. v. Apollo Management, L.P., 794 A.2d 1141, 1150 (Del. 2002).

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counsel,27 never informed Daniel that he needed individual waivers to eliminate

vested contractual rights.28

5. Petitioners do not meaningfully dispute that Daniel’s Affidavit raises

factual issues.29 Instead, Petitioners argue “Daniel’s self-serving affidavit, which is

unsupported by anything else in the record, is insufficient on its own to create a

genuine issue of material fact.”30 Not so. As discussed, documents and Lugo’s own

affidavit support several relevant statements in Daniel’s Affidavit. That some

assertions in Daniel’s Affidavit stand alone is of no moment – a proper affidavit by

itself is evidence for summary judgment purposes.31 True, Delaware courts have

27 Lugo Aff. ¶ 10. The Delaware Supreme Court has long held that “in Delaware [] an attorney

is bound by a fiduciary duty in his dealings with his client. As a fiduciary, ‘an attorney is
bound to the highest degree of fidelity and good faith. Strict adherence to this rule of conduct
is required by time honored, deeply rooted concepts of public policy.’” In re Kennedy, 442 A.2d
79, 89 (Del. 1982) (quoting Melson v. Michlin, 223 A.2d 338, 344 (Del. 1966)). Accordingly,
“[i]t is a lawyer’s duty to promptly keep his client reasonably informed and to give
straightforward and honest advice.” Murrey v. Shank, 2011 WL 4730549, at *1 (Del. Super.
Aug. 30, 2011).
28 Daniel Aff. ¶¶ 22-27.

29 See Answering Brief of Androsky Lugo and Elizabeth S. Straus in Opposition to Care One,

LLC’s Exceptions to Senior Magistrate’s February 11, 2026 Rulings at 16 (“Aside from
Daniel’s self-serving affidavit, the record evidence supports the conclusion reached by the
Senior Magistrate.”), 18 (“[N]othing cited by Care One outside of Daniel’s self-serving
affidavit . . .”), 22 (“there is nothing in the record (aside from Daniel’s self-serving affidavit).”)
(Dkt. 50) (emphases added).
30 Id. at 20-23 (citing Paul Elton, LLC v. Rommel Delaware, LLC, 2021 WL 641588, at *5

(Del. Ch. Dec. 30, 2021)).
31 See Kaminski v. Kaminski, 1995 WL 106497, at *2 (Del. Ch. Feb. 24, 1995) (citing Ch. Ct.

R. 56(e)); Tolliver v. Musser, 2026 WL 226606, at *5 n.60 (Del. Super. Jan 28, 2026)
(“Evidence presented in a self-serving affidavit is enough to thwart a summary judgment
motion, unless it fails to meet the usual requirements of any other form of evidence at that
stage.” (citation modified)).

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rejected affidavits “bereft of specific factual support,”32 “filled with hearsay, legal

conclusions, and self-serving justifications”33 or that “merely reassert [allegations]

from the complaint.”34 Yet, Daniel’s Affidavit is no such affidavit – it contains specific

factual assertions made based on Daniel’s personal knowledge.35 Therefore, I am

compelled to conclude it was improper for the Senior Magistrate to disregard Daniel’s

Affidavit in granting PMSJ.36

6. The Court concludes upon a de novo review that Daniel’s Affidavit and

the other evidence discussed, viewed in the light most favorable to Care One, could

allow a rational trier of fact to conclude that Care One carried its substantive

32 Trustwave Holdings, Inc. v. Beazley Insurance Company, Inc., 2024 WL 1112925, at *22

(Del. Super. Mar. 14, 2024).
33 Paul Elton, 2021 WL 641588, at *5.

34 Wilson v. Metzger, 2021 WL 2355230, at *1 (Del. Super. June 9, 2021).

35 See generally Daniel Aff.

36 See Cerberus, 794 A.2d at 1151 (“If the matter depends to any material extent upon a

determination of credibility, summary judgment is inappropriate. . . . If a trial court must
weigh the evidence to a greater degree than to determine that it is hopelessly inadequate
ultimately to sustain the substantive burden, summary judgment is inappropriate.”).

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evidentiary burden to prove unclean hands or equitable estoppel.37 Thus, the Senior

Magistrate erred by granting PMSJ on Care One’s equitable defenses.38

7. Accordingly, the Court sustains Petitioners’ Exceptions and overrules

the portion of the Senior Magistrate’s Report granting PMSJ on Care One’s equitable

defenses. The parties are instructed to contact the Court to schedule a prompt trial

to resolve this advancement dispute.

/s/ Nathan A. Cook
Vice Chancellor Nathan A. Cook

37 See id. at 1149-50; see Nevins v. Bryan, 885 A.2d 233, 249 (Del. Ch. 2005), aff’d, 884 A.2d

512 (Del. 2005) (“The party claiming estoppel must demonstrate that: (i) they lacked
knowledge or the means of obtaining knowledge of the truth of the facts in question; (ii) they
reasonably relied on the conduct of the party against whom estoppel is claimed; and (iii) they
suffered a prejudicial change of position as a result of their reliance. . . . Furthermore,
equitable estoppel must be proven by clear and convincing evidence.”); Tafeen v. Homestore,
Inc., 2004 WL 556733, at *6 (Del. Ch. Mar. 22, 2004) (“The equitable doctrine of unclean
hands bars litigants who have acted inequitably from seeking what might otherwise be
available relief. This Court uses the doctrine to protect the integrity of itself and those who
come before it.”); Stone & Paper Investors, LLC v. Blanch, 2021 WL 3240373, at *23 (Del. Ch.
July 30, 2021), aff’d, 312 A.3d 1155 (Del. 2024) (“The Defendants bear the burden of
persuasion to establish unclean hands by a preponderance of the evidence.”).
38 See Cerberus, 794 A.2d at 1150-51 (“The judge who decides the summary judgment motion

may not weigh qualitatively or quantitatively the evidence adduced on the summary
judgment record. The test is not whether the judge considering summary judgment is
skeptical that plaintiff will ultimately prevail. Stated differently, the judge as gate-keeper
merely considers whether the finder of fact could come to a rational conclusion either way,
not whether that conclusion would be objectively reasonable.”).

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