Indemnification, Advancement, and the Price of “Screwing Up”: Lessons from Javice v. JPMorgan

In the world of business law, “indemnification” is one of those concepts that shows up everywhere yet rarely gets the attention it deserves. You see it buried in operating agreements, tucked into bylaws, glossed over in employment contracts, and copied forward in every merger agreement like a family heirloom no one really understands.

At its core, indemnification is simple: If you screw up, and it costs me money, you pay me back. That’s it. But of course, nothing in law is ever really that simple. Because the next question is: Who decides if you actually screwed up? And that’s where things get messy, and expensive.

From Indemnification to Advancement: When the Bills Start Rolling In

In most contracts, the indemnification obligation doesn’t truly kick in until someone, a judge, jury, or arbitrator, decides who’s at fault. That could be years down the line. Meanwhile, the legal bills are piling up.

Enter the concept of "advancement", the legal concept that says, “You agree to pay my legal bills now, until we figure out who actually messed up.” Think of it as the pre-judgment version of indemnification. Basically, a cash-flow lifeline, and for executives and officers who find themselves accused of wrongdoing in the course of their corporate duties, it can be key.

If the investigation ends in your favor, great! The company covered your defense as intended. But if it turns out you were, in fact, the one who “screwed up,” that advancement turns into a very large, and very awkward loan and you may owe it all back. That’s the world we’re living in after the saga that unfolded in the Charlie Javice v. JPMorgan case.

The Case: When “Startup Founder” Meets “Delaware Chancery”

Charlie Javice was the founder and CEO of a startup called Frank, which promised to make college financial aid simple. JPMorgan Chase acquired Frank in 2021 and then came the fallout. JPMorgan accused Javice of fabricating user data to inflate the company’s value and federal investigations followed. Javice was terminated “for cause” and predictably, the lawsuits began.

Here’s where it gets interesting. Javice’s corporate documents, the bylaws of Frank and related agreements, included rights to both indemnification and advancement. Those rights are common in Delaware corporations and are designed to encourage competent people to take leadership roles without fear of being bankrupted by legal fees later. But JPMorgan argued that Javice had waived those rights through the merger documents and her resignation letter. In their view, she had signed away the very safety net she was now trying to use.

Delaware’s Take: Waiver Must Be Clear and Unequivocal

The Delaware Court of Chancery didn’t buy it. In July 2023, Chancellor Kathaleen McCormick denied JPMorgan’s attempt to block Javice’s advancement rights and in doing so emphasized a critical principle: if a company wants to eliminate or limit someone’s right to indemnification or advancement, it must do so clearly and unequivocally.

That phrase: “clear and unequivocal” is doing a lot of work here. It means Delaware courts will not allow a company to quietly slip in language that retroactively erases an executive’s legal protections. If you want to strip a departing officer of advancement, you’d better spell it out in unmistakable terms.

In this case, the resignation letter didn’t meet that bar. Its general release language wasn’t specific enough to waive a vested right under the company’s bylaws. The merger agreement also didn’t explicitly override those protections. So, under Delaware law, Javice was still entitled to have her legal expenses advanced, and even as she fought the bank accusing her of fraud.

Policy Over Optics: Why Delaware Favors Advancement

You might wonder why Delaware, the corporate capital of the world, seems to lean so heavily toward protecting executives, even those accused of misconduct. The answer is policy, not sympathy.

Delaware wants talented people to serve as directors and officers without constantly fearing personal ruin from a corporate lawsuit. To make that system work, the courts have intentionally created what Chancellor McCormick called a “lopsided dynamic favoring advancement claimants.” It’s easier to turn the advancement spigot on than off.

Why? Because defense costs are immediate and crushing, while indemnification fights can take years. If executives had to front millions in legal fees and wait for a verdict before getting reimbursed, few would ever take these positions in the first place. Advancement ensures they can mount a proper defense while the facts play out. So, in other words: advancement isn’t a moral judgment; it’s a governance tool.

The Practical Fallout: Expensive Lawyers, Expensive Lessons

Once the court confirmed Javice’s entitlement to advancement, she hired elite, and very expensive, counsel. Those fees are now being advanced under Delaware’s Danenberg v. Fitracks protocol, which governs how advancement invoices get submitted and challenged.

That’s an enormous financial burden for JPMorgan, especially given the possibility that it may never recover those amounts if Javice can’t repay them after a final determination. But that’s how Delaware designed it: advancement is supposed to favor the individual in the short term, leaving reimbursement to be sorted out later.

And, for transactional lawyers, this case is a flashing red light. If you want to avoid your buyer being forced to advance legal fees to the very executive accused of defrauding them, your waiver provisions need to be bulletproof; explicit, individualized, and preferably acknowledged by the executive herself. That “intent to waive” must be provable, and undeniable.

The Broader Lesson: Paper Your Protections Like It’s Litigation Day One

For founders, executives, and in-house counsel, this case offers a simple takeaway: your indemnification and advancement clauses are not boilerplate. They are your seatbelt. Draft them like you expect the car to crash. If you’re selling your company, understand exactly what rights you’re keeping or giving up. If you’re acquiring one, make sure the merger agreement explicitly addresses existing advancement and indemnification rights; not in passing, but in black-and-white language that would hold up under Delaware scrutiny. And if you’re a lawyer drafting resignation or separation agreements, take a breath before you copy that “general release of all claims” paragraph. You might be erasing something your client actually still wants. Or leaving intact something they desperately meant to eliminate.

Final Thoughts

Indemnification and advancement are the legal world’s version of “break glass in case of emergency.” You never think about them until everything’s on fire. But as Javice v. JPMorgan shows, the difference between having those protections and losing them often comes down to a few words in a contract drafted years earlier.

So, before the next “screw up” happens, whether yours or someone else’s, take a fresh look at those clauses. Something we are happy to do for you at Mattiace Tetro LLC, just schedule a 15 minute call here. We look forward to guiding y

ou.