COURT OF CHANCERY
OF THE
STATE OF DELAWARE
BONNIE W. DAVID COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DE 19947
Date Submitted: September 25, 2026
Date Decided: October 19, 2026
William Burton, Esq. Sean T. O’Kelly, Esq.
Brittany M. Giusini, Esq. O’Kelly & O’Rourke, LLC
Gabriella Mouriz, Esq. 824 N. Market Street, Suite 1001A Barnes & Thornburg LLP Wilmington, DE 19801
222 Delaware Ave., Suite 1200
Wilmington, DE 19801
RE: Julius Lipp vs Mixedbread AI, Inc.,
C.A. No. 2026-0493-DH (BWD)
Dear Counsel:
This letter opinion resolves exceptions (the “Exceptions”) to the Magistrate in
Chancery’s August 10, 2026 report (the “Report”) in this advancement action.
Magistrate’s Report [hereinafter Report], Dkt. 25.
The plaintiff, Julius Lipp (“Plaintiff”), was a co-founder of, and served as a
director and the Chief Technology Officer (“CTO”) for, defendant Mixedbread AI,
Inc. (the “Company”), a Delaware corporation. Report at 2. In June 2025, the
Company terminated Plaintiff’s employment, purportedly for “cause.” Id. at 1, 5–6.
Plaintiff sued the Company in the U.S. District Court for the Northern District of
California, alleging claims that include breach of Plaintiff’s employment agreement.
Id. at 4–5. The Company answered that complaint, asserting three counterclaims Julius Lipp vs Mixedbread AI, Inc.,
C.A. No. 2026-0493-DH (BWD)
October 19, 2026
Page 2 of 6
and sixteen affirmative defenses. Id. at 5. The Company later voluntarily dismissed
its counterclaims but retained its affirmative defenses. Id. at 5. One affirmative
defense—the “Third Affirmative Defense”—is relevant on Exceptions. That
defense asserts that the Company terminated Plaintiff for “cause” because he
disparaged the Company’s Chief Executive Officer in front of officers, directors,
employees, and investors; created a toxic work environment; and failed to fulfill his
obligations as the Company’s CTO. Id. at 6.
In April 2026, Plaintiff initiated this action, seeking advancement of expenses
under Section 6.3 of the Company’s bylaws, which states:
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the
corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of the
indemnified party to repay such amount if it shall ultimately be
determined by final judicial decision from which there is no further
right to appeal that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.
Verified Petition For Advancement, Dkt. 1, Ex. A § 6.3. Section 6.1 of the bylaws
provides in part:
The corporation shall, to the maximum extent and in the manner
permitted by the Delaware General Corporation Law, indemnify each
of its directors and officers against expenses (including attorneys’ fees),
judgments, fines, settlements and other amounts actually and
Julius Lipp vs Mixedbread AI, Inc.,
C.A. No. 2026-0493-DH (BWD)
October 19, 2026
Page 3 of 6
reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. Id. § 6.1.
The action was assigned to a Magistrate in Chancery, who, on August 10,
issued the Report, concluding that Plaintiff is entitled to advancement of expenses
incurred in defending against the Third Affirmative Defense. Report at 23.
On August 12, the Company filed the Exceptions. Resp’t Mixedbread AI,
Inc.’s Notice Of Exceptions To The Final Report Of The Magistrate In Chancery,
Dkt. 26. Briefing on the Exceptions concluded on September 25. Resp’t
Mixedbread AI, Inc.’s Opening Br. In Supp. Of Its Exceptions To The Final Report
Of The Magistrate In Chancery [hereinafter DOB], Dkt. 31; Pet’r’s Answer To
Resp’t’s Exceptions To Magistrate’s Report, Dkt. 32; Resp’t Mixedbread AI, Inc.’s
Reply Br. In Supp. Of Its Exceptions To The Final Report Of The Magistrate In
Chancery, Dkt. 34. Oral argument is unnecessary.
I have reviewed the record and the Magistrate in Chancery’s determinations
de novo. See DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999). After close
review of the Report, the briefing and record below, and the parties’ submissions on
Exceptions, I conclude that “[t]he M[agistrate]’s well-reasoned decision is supported
by the factual record and h[is] conclusions of law are proper.” In re Est. of Erdman,
2011 WL 2191680, at *1 (Del. Ch. May 26, 2011).
Julius Lipp vs Mixedbread AI, Inc.,
C.A. No. 2026-0493-DH (BWD)
October 19, 2026
Page 4 of 6
The Company raises two primary arguments on Exceptions, neither of which
has merit. First, the Company argues that affirmative defenses cannot trigger
advancement obligations because responding to affirmative defenses is not
“defending.” DOB at 11–12. This Court has held that “the policies underlying
advancement justify the payment of fees when an officer defends against affirmative
defenses that implicate his performance as a corporate official, much in the same
way the assertion of counterclaims by a corporation can require advancement.”
Mooney v. Echo Therapeutics, Inc., 2015 WL 3413272, at *10, *13 (Del. Ch. May
28, 2015) (concluding expenses incurred “in defending against” two affirmative
defenses were advanceable).1 The Magistrate in Chancery appropriately addressed
1
See Fillip v. Centerstone Linen Servs., LLC, 2013 WL 6671663, at *12 (Del. Ch. Dec. 3, 2013), as corrected (Dec. 11, 2013) (awarding advancement of expenses incurred “[i]n resisting the affirmative defenses that accuse [the plaintiff] of egregious misconduct when serving as [the defendant-company’s] CEO”); see also, e.g., Riker v. Teucrium Trading, LLC, C.A. No. 2022-1030-LWW, at 18:18–21 (Del. Ch. June 13, 2023) (TRANSCRIPT) (“[I]n Mooney v. Echo Therapeutics, the court held that where an indemnitee initiated an action, the indemnitee’s litigation against affirmative defenses asserted by the indemnitor was advanceable.”); Creelman v. Genalyte, Inc., C.A. No. 2020-0899-KSJM, at 62:19–22 (Del. Ch. Dec. 22, 2020) (TRANSCRIPT) (awarding advancement of expenses incurred in defending against affirmative defenses, noting that the parties “concede[d] that affirmative defenses generally can form the basis for an advancement demand” under Mooney); Ferri v. Ferri, C.A. No. 2017-0128-TMR, at 10:17–24 (Del. Ch. June 15, 2017) (TRANSCRIPT) (awarding advancement for the plaintiff’s “defense to the affirmative defenses” in a plenary lawsuit where “[t]he company ha[d] conceded” this was required).
Julius Lipp vs Mixedbread AI, Inc.,
C.A. No. 2026-0493-DH (BWD)
October 19, 2026
Page 5 of 6
this authority in the Report. See Report at 12–17. To the extent the Company argues
Mooney was incorrectly decided,2 I am disinclined to retread decade-old precedent.
Second, the Company asserts that expenses in connection with the Third
Affirmative Defense are not advanceable because they are not incurred “by reason
of the fact that [Plaintiff] is or was an agent of the corporation.” DOB at 27–29.
Again, the Third Affirmative Defense asserts that the Company terminated Plaintiff
for “cause” because he disparaged the Company’s CEO, created a toxic work
environment, and failed to fulfill his obligations as CTO. Each of these theories
“involve[s] a nexus between the alleged wrongdoing and [Plaintiff’s] official
capacity . . . .” Mooney, 2015 WL 3413272, at *10. Plaintiff could make
disparaging comments to officers, directors, employees, and investors because he
had access to them as CTO, and he could influence the work environment because
he was a high-ranking officer. Id. at *8–10; Creelman, C.A. No. 2020-0899-KSJM,
Tr. at 61:16–62:16. The Report therefore properly concluded that expenses incurred
in defending against the Third Affirmative Defense are advanceable.3
2
DOB at 19–21.
3
The Company argues that an award of fees-on-fees should be adjusted if its other bases for Exceptions are sustained. DOB at 29. Because they are not, this basis for Exceptions is denied. In addition, the Company argues that advancement should be limited to fees “reasonably incurred.” Id. It is premature to decide this issue at the entitlement stage. Julius Lipp vs Mixedbread AI, Inc.,
C.A. No. 2026-0493-DH (BWD)
October 19, 2026
Page 6 of 6
In sum, after de novo review, I am satisfied that the Exceptions should be
denied, and that the Report must be adopted and affirmed.
Sincerely,
/s/ Bonnie W. David
Bonnie W. David
Vice Chancellor
cc: All counsel of record (by File & ServeXpress)
Stipulation And [Proposed] Order Establishing Procedure For Payment Of Advancement To Pet’r, Dkt. 13; see Danenberg v. Fitracks, Inc., 58 A.3d 991, 1003–04 (Del. Ch. 2012).