765 F.3d 350 (3rd Cir. 2014), 13-4237, Aleynikov v. Goldman Sachs Group, Inc.
|Citation:||765 F.3d 350|
|Opinion Judge:||FISHER, Circuit Judge.|
|Party Name:||SERGEY ALEYNIKOV v. THE GOLDMAN SACHS GROUP, INC., Appellant|
|Attorney:||Karen A. Chesley, Esq., Christopher E. Duffy, Esq. ARGUED, Boies, Schiller & Flexner, New York, NY; A. Ross Pearlson, Esq., Wolff & Samson, One Boland Drive, The Offices at Crystal Lake, West Orange, NJ, Counsel for Appellant. John A. Boyle, Esq., Kevin H. Marino, Esq. ARGUED, John D. Tortorella,...|
|Judge Panel:||Before: FUENTES and FISHER, Circuit Judges, and JONES II,[*] District Judge. FUENTES, Circuit Judge, dissenting in part. FUENTES, Circuit Judge, dissenting in part.|
|Case Date:||September 03, 2014|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Aleynikov is a computer programmer who worked as a vice president at GSCo in 2007 through 2009. After accepting an employment offer from another company, Aleynikov copied source code developed at GSCo into computer files and transferred them out of GSCo. He was convicted of violations of the National Stolen Property Act, 18 U.S.C. 2314, and the Economic Espionage Act, 18 U.S.C. 1832. The... (see full summary)
Argued: January 21, 2014
[Copyrighted Material Omitted]
On Appeal from United States District Court for the District of New Jersey. (D. N.J. No. 2-12-cv-05994). District Judge: Honorable Kevin McNulty.
Appellee Sergey Aleynikov is a computer programmer who worked at Goldman, Sachs & Co. (" GSCo" ) from 2007 through 2009 and held the title of vice president. After accepting an employment offer from another company, Aleynikov copied source code developed at GSCo into computer files and transferred them out of GSCo. He was indicted by a federal grand jury and convicted of violations of the National Stolen Property Act, 18 U.S.C. § 2314, and the Economic Espionage Act, 18 U.S.C. § 1832. The United States Court of Appeals for the Second Circuit reversed his conviction, concluding that his conduct did not violate federal law. He was then indicted by a New York grand jury for violations of New York law and this criminal case remains pending.
Aleynikov brought this suit in the United States District Court for the District of New Jersey seeking indemnification and advancement for his attorney's fees from Appellant the Goldman Sachs Group, Inc. (" GS Group," and together with GSCo, " Goldman" ). He seeks indemnification for attorney's fees expended in defending against the federal criminal charges and advancement of attorney's fees for the state criminal charges, along with " fees on fees" incurred in obtaining indemnification and advancement. He claims his right to indemnification and advancement under a portion of GS Group's By-Laws that applies to non-corporate subsidiaries like GSCo, providing for indemnification and advancement to, among others, officers of GSCo. Following expedited discovery in aid of defining the term officer, the District Court granted summary judgment in Aleynikov's favor on his claim for advancement but denied it on his claim for indemnification and denied Goldman's cross-motion for summary judgment. Goldman appealed.
We are asked to interpret the meaning of the term officer in GS Group's By-Laws and determine whether Aleynikov is entitled to indemnification and advancement due to his title of vice president. We conclude that the term officer is ambiguous and that the relevant extrinsic evidence raises genuine issues of material fact precluding summary judgment. We therefore vacate the District Court's grant of summary judgment in Aleynikov's favor
on the advancement issue. While we exercise supplemental appellate jurisdiction over the District Court's denial of Goldman's cross-motion for summary judgment, as urged by Goldman, we affirm the District Court's denial of summary judgment in Goldman's favor.
GS Group is a corporation organized under the laws of the state of Delaware. GSCo is a New York limited partnership and non-corporate subsidiary of GS Group. Section 6.4 of GS Group's By-Laws addresses indemnification for and advancement of legal fees and costs for, among others, officers of GS Group and officers of GS Group's corporate and non-corporate subsidiaries including GSCo. This Section provides that for non-corporate subsidiaries, " the term 'officer,' . . . shall include in addition to any officer of such entity, any person serving in a similar capacity or as the manager of such entity." App. 118.
As a limited partnership and non-corporate subsidiary of GS Group, GSCo is not required to have officers. GSCo has appointed officers pursuant to a written resolution process, but this process was not widely disseminated. It has no other formal appointment processes for officers. GSCo employs tens of thousands of employees. Approximately one-third of those employees hold the title of vice president. Someone with the title of vice president is more senior than someone with the title of analyst or associate, but less senior than someone with the title of managing director.
Aleynikov worked as a computer programmer for GSCo from May 7, 2007 until June 30, 2009, although his last day in the office was June 5, 2009. While at GSCo, he developed source code for Goldman's high-frequency trading system and held the title of vice president in GSCo's equities division. He did not supervise other employees or transact business on behalf of GSCo. He exercised no management or leadership responsibilities. As a part his employment, Aleynikov agreed to keep all proprietary information belonging to GSCo confidential.
In late April 2009, Aleynikov accepted an employment offer from Teza Technologies, a startup company in the high-frequency trading business. On his last day in GSCo's offices, Aleynikov copied GSCo's source code into computer files and transferred those files to a server in Germany. On July 1, 2009, Goldman contacted federal law-enforcement authorities to report the transfer of the files. Two days later, FBI agents arrested Aleynikov.
Aleynikov was indicted by a federal grand jury in the Southern District of New York in February of 2010. He moved to dismiss all three counts against him; the District Court granted his motion as to one but denied it as to the other two counts. He proceeded to trial on the two counts: (1) a violation of the National Stolen Property Act, 18 U.S.C. § 2314; and (2) a violation of the Economic Espionage Act, 18 U.S.C. § 1832. Following an eight-day trial in the United States District Court for the Southern District of New York, a jury found Aleynikov guilty on both counts. He was sentenced to 97 months of imprisonment.
Aleynikov served 51 weeks in prison while his appeal was pending. On February 16, 2012, the United States Court of Appeals for the Second Circuit reversed his conviction and ordered him acquitted and released immediately, concluding that his conduct did not violate federal law. See United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012).
On August 2, 2012, New York state authorities arrested Aleynikov and charged him with state crimes based upon the same alleged conduct. On September 26, 2012, a New York grand jury indicted him on two charges: (1) unlawful use of secret scientific material in violation of N.Y. Penal Law § 165.07; and (2) unlawful duplication of computer-related material in violation of N.Y. Penal Law § 156.30(1). The state criminal case remains pending.
On August 24, 2012, Aleynikov and his counsel sent a letter to Goldman seeking indemnification for over $2.3 million in attorney's fees and costs incurred in connection with the federal criminal proceedings and advancement of attorney's fees and costs related to the ongoing state criminal proceedings. The letter asserted that Aleynikov was entitled to indemnification and advancement under the By-Laws.
On September 25, 2012, Aleynikov initiated this case in the United States District Court for the District of New Jersey seeking indemnification and advancement, as well as " fees on fees" incurred in attempting to obtain indemnification and advancement.
At the same time, Aleynikov filed a motion for summary judgment and requested entry of a preliminary injunction. On December 14, 2012, the District Court denied Aleynikov's summary judgment motion and request for a preliminary injunction, concluding that the factual record was insufficient to establish Aleynikov's entitlement to indemnification and advancement under the By-Laws. The District Court ordered expedited discovery to establish in the record the process for appointing officers and the practice of indemnifying employees at GSCo, in order to discover the meaning of the term officer in the By-Laws.
Following expedited discovery, the parties filed cross-motions for summary judgment. On October 16, 2013, the District Court granted Aleynikov's motion for summary judgment with respect to his claims for advancement and advancement-related fees. The District Court analyzed Section 6.4 the By-Laws for ambiguity, exploring the plain meaning of vice president and concluding that the meaning of this term was unambiguous and entitled Aleynikov to indemnification and advancement. It proceeded to consider the extrinsic evidence anyway, concluding that the evidence submitted did not raise any genuine issues of material fact. Finally, the District Court explained that even if there were an issue of fact, it would apply the doctrine of contra proferentem to construe any ambiguities against Goldman, the unilateral-drafter of the By-Laws. It denied Aleynikov's motion for summary judgment with respect to indemnification and indemnification-related fees pending further discovery on the total monetary amount due. The District Court also denied Goldman's cross-motion for summary judgment. Goldman filed a timely notice of appeal and sought to stay the District Court's order pending appeal and to expedite the appeal. This Court denied Goldman's motion for a stay pending appeal, granted its motion to expedite the appeal, and referred the additional issue of the Court's appellate jurisdiction to the merits panel. After oral argument, we stayed the District...
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