United States Court of Appealss3.amazonaws.com/.../files/aleynikov-brief-goldman-sachs.pdf · United States Court of Appeals for the Third Circuit Case No. 13-4237 SERGEY ALEYNIKOV,

United States Court of Appeals for the

Third Circuit

Case No. 13-4237

SERGEY ALEYNIKOV,

Appellee,

– v. –

THE GOLDMAN SACHS GROUP, INC.,

Appellant.

–––––––––––––––––––––––––––––– ON APPEAL FROM THE OPINION AND ORDER ENTERED IN THE UNITED STATES DISTRICT

COURT FOR THE DISTRICT OF NEW JERSEY, NEWARK AT NO. 2:12-CV-05994 (KM)

BRIEF ON BEHALF OF APPELLEE

KEVIN H. MARINO, ESQ.

JOHN D. TORTORELLA, ESQ. JOHN A. BOYLE, ESQ. MARINO, TORTORELLA & BOYLE, P.C. Attorneys for Appellee 437 Southern Boulevard Chatham, New Jersey 07928 (973) 824-9300

Case: 13-4237 Document: 003111469575 Page: 1 Date Filed: 12/02/2013

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................................................................... ii

JURISDICTIONAL STATEMENT .......................................................................... 1

STATEMENT OF THE ISSUES............................................................................... 2

STATEMENT OF RELATED CASES AND PROCEEDINGS .............................. 3

STATEMENT OF THE CASE .................................................................................. 4

STATEMENT OF THE STANDARD OF REVIEW ............................................. 12

SUMMARY OF THE ARGUMENT ...................................................................... 13

ARGUMENT ........................................................................................................... 22

I. THE DISTRICT COURT’S ORDER SPECIFICALLY ENFORCING ALEYNIKOV’S PROVISIONAL RIGHT TO ADVANCEMENT IS LEGAL, NOT EQUITABLE, AND THUS IS NOT IMMEDIATELY APPEALABLE. ............................................................................................. 22

II. THE DISTRICT COURT CORRECTLY DETERMINED THAT ALEYNIKOV, AS A VICE PRESIDENT OF GSCO, WAS AN “OFFICER” WITHIN THE MEANING OF §6.4[3] OF GS GROUP’S BY-LAWS. .................................................................................. 24

A. Delaware Law Favors Broad Application Of Advancement Provisions And Resolution Of Advancement Disputes On Summary Judgment. ................................................................................. 24

B. The District Court Correctly Held That §6.4[3] Is Unambiguous On Its Face And Includes Vice Presidents Within The Term “Officer.” .................................................................................................. 26

1. The District Court Correctly Held That the Term “Officer” Unambiguously Includes Vice Presidents. ......................... 27

a) The District Court Correctly Held That It Is Reasonable To Interpret The Term “Officer” To Include A “Vice President.” ..... 28

b) The District Court Correctly Held That Goldman’s Proffered Interpretation Of “Officer” Was Unreasonable. ............................ 35

2. The District Court Applied The Correct Standard When Reading The Term “Officer” Unambiguously In Aleynikov’s Favor. .............................................................................. 38


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3. The Undisputed Facts Do Not Support Goldman’s Interpretation Of The Term “Officer” In §6.4[3]. ............................... 41

C. The District Court Properly Held That, Even If “Officer” Were Ambiguous, Two Rules Of Construction Mandate Resolving That Ambiguity In Aleynikov’s Favor. ............................................................ 45

D. Expedited Discovery Did Not Reveal Any Evidence That An Objectively Reasonable Third Person Would Know Of Goldman’s Secret Process And Interpretation. ........................................................... 52

CONCLUSION ........................................................................................................ 62


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TABLE OF AUTHORITIES

Cases

Abi Jaudi & Azar Trading Corp. v. Cigna Worldwide Insurance Co., 391 F. App’x 173 (3d Cir. 2010) .......................................................................... 23

ACLU of N.J. v. Black Horse Pike Reg’l Bd. of Educ., 84 F.3d 1471 (3d Cir. 1996) ................................................................................. 12

Activision Blizzard v. Hayes, 2013 WL 6053804 (Del. Nov. 15, 2013) ............................................................. 47

Bank of N.Y. Mellon v. Commerzbank, 65 A.3d 539 (Del. 2013) ............................................................................... passim

Brakke v. Idaho Dep’t of Corr., 2012 WL 4409905 (D. Idaho Sept. 25, 2012) ...................................................... 29

Brown v. City of Pittsburgh, 586 F.3d 263 (3d Cir. 2009) ................................................................................. 24

Brown v. LiveOps, Inc., 903 A.2d 324 (Del. Ch. 2006) ....................................................................... 25, 46

Brown v. State, 36 A.3d 321 (Del. 2012) ....................................................................................... 37

C.R.A. Realty Corp. v. Crotty, 878 F.2d 562 (2d Cir. 1989) ................................................................................. 30

Centaur Partners, IV v. National Intergroup, Inc., 582 A.2d 923 (Del. 1990) ..................................................................................... 39

Cohen v. Bd. of Trs. of UMDNJ, 867 F.2d 1455 (3d Cir. 1989) ............................................................................... 23

Confederate Motors, Inc. v. Terny, 859 F. Supp. 2d 181 (D. Mass. 2012)................................................................... 25

Council of the Dorset Condo. Apts. v. Gordon, 801 A.2d 1 (Del. 2002) ......................................................................................... 36

DeLucca v. KKAT Mgmt., L.L.C., 2006 WL 224058 (Del. Ch. Jan. 23, 2006) .................................................. passim

Doeblers’ Pa. Hybrids, Inc. v. Doebler, 442 F.3d 812 (3d Cir. 2006) .......................................................................... 12, 41


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DuPont de Nemours v. Rhone Poulenc, 269 F.3d 187 (3d Cir. 2001) .......................................................................... 23, 24

Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) ............................................................................ 42, 50

EMC Corp. v. Allen, 1997 WL 1366836 (Mass. Super. Dec. 15, 1997) ................................................ 31

Fagin v. Gilmartin, 432 F.3d 276 (3d Cir. 2005) ................................................................................. 12

Fasciana v. Electronic Data Sys. Corp., 829 A.2d 160 (Del. Ch. 2003) .............................................................................. 25

GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776 (Del. 2012) .......................................................................... 38, 39, 50

Gold v. Sloan, 486 F.2d 340 (4th Cir. 1973) ......................................................................... 30, 33

Guillory v. Aetna Ins. Co., 415 F.2d 650 (5th Cir. 1969) ................................................................................ 38

Harrah’s Entertainment, Inc. v. JCC Holding Co., 802 A.2d 294 (Del. Ch. 2002) .............................................................................. 50

HLTH Corp. v. Axis Reins. Co., 2009 WL 33266259 (Del. Super. Ct. Sept. 30, 2009) .......................................... 26

Homestore, Inc. v. Tafeen, 888 A.2d 204 (Del. 2005) .................................................................. 24, 25, 31, 47

In re Borders Group, Inc., 453 B.R. 459 (Bankr. S.D.N.Y. 2011) ................................................................. 30

In re Foothills Tex., Inc., 408 B.R. 573 (Bankr. D. Del. 2009) ..................................................................... 31

In re NMI Systems, Inc., 179 B.R. 357 (Bankr. D.D.C. 1995) ..................................................................... 30

In re Public Access Technology.com, Inc., 307 B.R. 500 (Bankr. E.D. Va. 2004) .................................................................. 30

Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392 (Del. 1996) .................................................................. 40, 48, 49, 58


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Kershner v. Mazurkiewicz, 670 F.2d 440 (3d Cir. 1982) ................................................................................. 22

KFC Nat’l Council and Advertising Coop., Inc. v. KFC Corp., 2011 WL 350415 (Del. Ch. Jan. 31, 2011) .......................................................... 49

Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393 (Del. 2010) ..................................................................................... 39

L.Q. v. P.Q., 466 A.2d 1213 (Del. 1983) ............................................................................ 35, 38

Lorillard Tobacco Co. v. American Legacy Found, 903 A.2d 728 (Del. 2006) ..................................................................................... 28

Masonic Home of Del., Inc. v. Certain Underwriters at Lloyd’s London, 2013 WL 5872283 (Del. Oct. 30, 2013)............................................................... 27

MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 204 (3d Cir. 2005) .......................................................................... 12, 40

Miller v. Palladium Indus., 2012 WL 6740254 (Del. Ch. Dec. 31, 2012) ................................................ 39, 46

Mylan Inc. v. SmithKline Beecham Corp., 723 F.3d 413 (3d Cir. 2013) ................................................................................. 40

NAACP v. N. Hudson Reg’l Fire & Rescue, 665 F.3d 464 (3d Cir. 2011) ................................................................................. 12

Norton v. K-Sea Transp. Partners L.P., 67 A.3d 354 (Del. 2013) .......................................................................... 40, 47, 52

Pell v. E.I. DuPont de Nemours & Co., Inc., 539 F.3d 292 (3d Cir. 2008) ................................................................................. 23

Playtex FP, Inc. v. Columbia Casualty Co., 609 A.2d 1087 (Del. Super. Ct. 1991).................................................................. 50

Price v. Socialist People’s Libyan Arab Jamahiriya, 389 F.3d 192 (D.C. Cir. 2004) ............................................................................. 23

Ridder v. Cityfed Fin. Corp., 47 F.3d 85 (3d Cir. 1995) ..................................................................................... 25

Saber v. Finance Am. Credit Corp., 843 F.2d 697 (3d Cir. 1988) .......................................................................... 22, 23


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Shiftan v. Morgan Joseph Holdings, Inc., 57 A.3d 928 (Del. Ch. 2012) ................................................................................ 48

SI Mgmt. v. Wininger, 707 A.2d 37 (Del. 1998) ................................................................................ 48, 49

Sinclair Television Group v. Mediacom Communications Corp., 2008 WL 276533 (D. Md. Jan. 29, 2008) ............................................................ 42

Stifel Fin. Corp. v. Cochran, 809 A.2d 555 (Del. 2002) ..................................................................................... 25

Stockman v. Heartland Industrial Partners, L.P., 2009 WL 2096213 (Del. Ch. July 14, 2009) ....................................... 7, 21, 37, 49

Sun-Times Media Group, Inc. v. Black, 954 A.2d 380 (Del. Ch. 2008) .............................................................................. 26

Ter Bush & Powell, Inc. v. State Tax Comm’n, 395 N.Y.S.2d 762 (3d Dep’t 1977) ............................................................... 29, 45

United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012) ..................................................................................... 4

Viking Pump, Inc. v. Century Indem. Co., 2 A.3d 76 (Del. Ch. 2009) .................................................................................... 50

Zimmerman v. Crothall, 62 A.3d 676 (Del. Ch. 2013) ................................................................................ 51

Statutes

28 U.S.C. § 1291 ................................................................................................. 1, 22

28 U.S.C. § 1292(a)(1) ...........................................................................................1, 2

8 Del. C. § 145 ............................................................................................ 24, 25, 31

Securities Exchange Act of 1934, 15 U.S.C. § 78p ....................................................................................... 32, 33, 34

Rules

3d Cir. L.A.R. 28.1(a)(2) ........................................................................................... 3

Fed. R. Civ. P. 30(b)(6) ............................................................................................ 55

Fed. R. Civ. P. 54(b) ........................................................................................... 1, 22


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Regulations

17 C.F.R. § 240.16a-1 ....................................................................................... 32, 33

17 C.F.R. § 240.3b-2 ................................................................................... 32, 33, 34

17 C.F.R. § 240.3b-7 ................................................................................................ 55

Other Authorities

Black’s Law Dictionary 1702 (9th ed. 2009) .......................................................... 28

Ownership Reports and Trading by Officers, Directors and Principal Stockholders, 53 Fed. Reg. 49,997 (proposed Dec. 13, 1988) ............................. 34

Webster’s New Universal Unabridged Dictionary 2036 (2d ed. 1983) .................. 28


1

JURISDICTIONAL STATEMENT

The order under review, which granted partial summary judgment to

Plaintiff-Appellee, Sergey Aleynikov (“Aleynikov”), on his claim for advancement

of legal fees and expenses, is not immediately appealable under 28 U.S.C. §1291

because it neither resolves all claims as to all parties nor has been designated final

under Fed. R. Civ. P. 54(b). It is not immediately appealable under 28 U.S.C.

§1292(a)(1) because it calls for the provisional payment of money in an action at

law, not equity.


2

STATEMENT OF THE ISSUES

1. Whether an order directing Goldman1 to provisionally advance

Aleynikov’s fees and expenses pending the outcome of state criminal proceedings

against him is an immediately appealable injunction under 28 U.S.C. §1292(a)(1).

(Raised by 10/30/13 Text Order.) Proposed answer: No.

2. Whether the district court correctly determined that Aleynikov, as a

Vice President of GSCo, was an “officer” under the advancement provision of GS

Group’s By-Laws (the “By-Laws”) given the plain meaning of that term, Delaware

law mandating a liberal interpretation of advancement provisions in a corporation’s

constitutive documents, and Delaware’s robust policy of resolving ambiguities in

such documents against the corporation that drafted them. (Raised: A77; Objected

to: A205; Ruled upon: A28,A33.) Proposed answer: Yes.

1 “Goldman” refers to Appellant, The Goldman Sachs Group, Inc. (“GS Group”) and/or its wholly owned subsidiary Goldman, Sachs & Co. (“GSCo”). GS Group and GSCo are used where necessary to distinguish between them.


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STATEMENT OF RELATED CASES AND PROCEEDINGS

Pursuant to 3d Cir. L.A.R. 28.1(a)(2), Aleynikov is aware of three related

cases: this case, Aleynikov v. The Goldman Sachs Group, Inc., 12 Civ. 5994,

pending in the District of New Jersey, in which his claims for indemnification and

“fees-on-fees” invoke the By-Law at issue here; United States v. Aleynikov, 10 Cr.

0096 (the “Federal Case”), the Southern District of New York case in which the

Second Circuit acquitted him of charges based on the conduct underlying the

cross-claims and affirmative defenses pending below; and People v. Aleynikov,

Ind. No. 4447/2012 (the “State Case”), the pending New York Supreme Court case

underlying Aleynikov’s advancement claim.


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STATEMENT OF THE CASE

On March 22, 2007, GSCo, a non-corporate subsidiary of GS Group,

extended a written offer to Aleynikov to become a Vice President in GSCo’s

Equities Division. (A1105,A1108.) From May 7, 2007 through June 30, 2009,

Aleynikov was a GSCo Vice President and computer programmer developing

source code for its high-frequency trading (“HFT”) business. (A70,A1109.) On

July 1, 2009, Goldman contacted federal law-enforcement authorities and reported

that Aleynikov had electronically transferred HFT files and source code outside of

Goldman one month earlier. (A70,A1109.) Two days later, FBI agents arrested

Aleynikov. (A70,A1109.) In February 2010, a federal grand jury indicted him for

three crimes. (A70-71.) Aleynikov moved to dismiss all three charges; the court

granted his motion as to one but denied it as to the other two. (A71,A1109.)

Aleynikov was tried, convicted, and sentenced to 97 months in prison.

(A71,A1109.)

While his appeal was pending, Aleynikov spent 51 weeks in prison. On

February 16, 2012, the day of oral argument, the Second Circuit summarily

reversed his conviction and ordered him acquitted and released immediately.

(A71-72,A1110.) The court later explained that his conduct did not violate federal

law. United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012).

On August 2, 2012, New York authorities arrested Aleynikov and charged


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him with state crimes based on the conduct alleged in the Federal Case.

(A72,A1110.) On September 26, 2012, a New York grand jury indicted him for

two crimes in the State Case. (A718-20,A1110.) Aleynikov pleaded not guilty.

(A643,A1110.) His motion to suppress is pending.

At the time of Aleynikov’s state arrest, the press reported that Goldman was

paying GSCo Vice President Fabrice Tourre’s legal fees in an SEC enforcement

action. (A598-99,A604-05.) Aleynikov’s counsel reviewed the By-Laws and

found that they mandate indemnification of former GSCo officers. (A73,A1111-

12,A117-18.) Specifically, By-Law §6.4[3]2 promises that GS Group will

indemnify and advance legal fees incurred by anyone named in a criminal

proceeding because he was an “officer” of a GS Group subsidiary (such as GSCo)

and states, “when used with respect to a Subsidiary ... that is not a corporation

[GSCo is a partnership] ... 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.” (A73,A1111-12,A117-18(emphasis supplied).)

On August 24, 2012, Aleynikov demanded that under Delaware General

Corporation Law (“DGCL”) and the By-Laws, GS Group pay him: (1)

2 Section 6.4 defines “officer” differently for purposes of GS Group, its corporate subsidiaries and its non-corporate subsidiaries. (All.) Aleynikov adopts the district court’s convention of referring to the provision of §6.4 relevant to GSCo, a non-corporate subsidiary, as “§6.4[3].”


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indemnification in the Federal Case; and (2) advancement in the State Case.

(A122-26,A1112-13.) Aleynikov provided an Undertaking to repay the advanced

monies if it was ultimately determined that he was not entitled to indemnification.

(A122-27,A1113.) When GS Group refused, Aleynikov filed this action (A65) and

sought a preliminary injunction on advancement and summary judgment. (A169.)

In response, GS Group submitted affidavits regarding the manner in which

GSCo appoints its officers. (A1020-22,A1024-28.) Gregory Palm, GS Group’s

General Counsel, stated that “GS Group and GSCo. appoint their officers by means

of formal resolution processes [and] have a discrete number of officers who

occupy the most senior managerial positions of each company.” (A1021(¶3).)

Matthew Tropp, GSCo Associate General Counsel, swore that “[t]o appoint an

officer of GSCo., the sole general partner adopts a written resolution electing a

particular person to hold a particular office of GSCo.” (A1025(¶7).) Goldman

argued that Aleynikov was not an officer of GSCo because he was not appointed

by that process. (A1026,A47[Doc.#42] at 27.) At oral argument, Goldman stated

that it paid employees’ legal fees “from time to time” as “permissive

indemnification” but never indemnified or advanced fees to a GSCo vice president

under the mandatory indemnification provisions of its By-Laws. (A47[Doc.#42] at

37.) In its December 14, 2012 opinion, the court described the “essential issue” as

whether Aleynikov is an “officer” of GSCo under §6.4[3] for purposes of


7

indemnification and advancement. (A169.) The court observed that in §6.4[3],

“an ‘officer’ is defined as, inter alia, ‘any officer,’” concluding, “This is not

helpful; indeed, it is circular.” (A179.)

Notwithstanding that observation and a Delaware Chancery decision,

Stockman v. Heartland Industrial Partners, L.P., 2009 WL 2096213, at *5 (Del.

Ch. July 14, 2009), holding that ambiguities in corporate By-Laws should be

resolved in favor of indemnification and advancement under contra proferentem

and finding parol evidence irrelevant in interpreting a corporation’s constitutive

documents, the district court declined to declare Aleynikov an officer at that

juncture. (A169.) Instead, the court ordered expedited discovery to permit

exploration of (a) whether Goldman had a process for “clearly distinguish[ing]”

officers from non-officers; and (b) its historical practice regarding payment of

employees’ legal fees, after which he invited renewed summary judgment motions.

(A169,A194-95.) As the court later explained, that discovery “was intended to

establish whether there was somewhere, for example, a stated definition of the

term ‘officer’ as used in By-Laws § 6.4[3], or a pattern of indemnifying GSCo

employees that would suggest such a definition.” (A12.)

Discovery revealed that Goldman (1) had no formal, written policy stating

that the only way to become a GSCo officer was by written consent of its general

partner (A902(73:2-8),A1153,A1175(130:20-131:5;217:23-218:5)); and (2) does


8

not (a) disclose its written consents to anyone but a select few within its legal

department, (A950(266:14-21-24),A647,A1007-18)); or (b) advise employees that

only those appointed by that process are officers under §6.4[3]. (A950(266:22-

24),A647,A1007-18,A1001-4(67:20-23;70:9-13;74:3-25;78:24-79:7;79:22-80:14).)

During discovery, Goldman disavowed its counsel’s statement that GS

Group provides permissive indemnification to GSCo employees. (A1046-47.)

Instead, after it was revealed that Goldman had paid the legal expenses of fully 51

of the 53 employees (including 15 GSCo vice presidents) who incurred them

during a six-year period (A1251-54,A1105-07), Goldman claimed it did so not as

permissive indemnification under its By-Laws but as a matter of “business

discretion” outside the By-Laws. (A1237-42.)

The parties renewed their cross-motions for summary judgment following

expedited discovery. (A57(Doc.#130),A58(Doc.#143).) Aleynikov did not, as

Goldman contends, merely “repeat[]” arguments raised on his original application

(GSb16), but instead showed that the premise on which that application was denied

— that Goldman had established a process that “clearly distinguished” GSCo

officers from non-officers and a history of discretionary, not mandatory,

indemnification payments (A169,180-83) — was undisputedly false. To the

contrary, Goldman conceded that its “rarely used” resolution “process” was never

“reduced to a writing” and was known only to “the discrete group within the Legal


9

Department which has implemented it over time.” (A58(Doc.#145) at 7.)

After extensive briefing and oral argument, the court granted Aleynikov’s

renewed summary judgment motion on his advancement and advancement-related

fees claims and denied the parties’ cross-motions on indemnification and

indemnification-related fees pending further discovery (the “October 16th

Opinion”). (A3-36.) The court employed a multi-step analysis to determine

whether Aleynikov was entitled to advancement under §6.4[3]. First, the court

considered whether §6.4[3] is ambiguous with respect to a vice president’s status

as an officer entitled to advancement. (A27.) The court found that “[t]he usual

and ordinary meaning of vice president, supplemented by [case law discussed in

the Opinion], makes out a fair case that [§6.4[3]] is unambiguous,” that it “may be

enforced as written, as a matter of law, and that advancement of fees should be

awarded.” (A28.)

That determination, the court correctly noted, “might well end the matter,

because the public policy in favor of advancement counsels against consideration

of parol evidence, even when the language is somewhat unclear.” (A29.)

Nonetheless, “in the interest of thoroughness,” the court took the second step of

considering the parol evidence developed in discovery, concluding that it was not

“sufficient to raise a material issue of fact” because it was either irrelevant to an

interpretation of §6.4[3] or supported Aleynikov’s position. (A17-24,A29.)


10

As a third and final step, the court “indulge[d] Goldman’s position one step

farther” and assumed “that the term ‘officer’ carries with it some ambiguity as

applied to the vice president of an LLP.” (A30.) But the court concluded that even

if some ambiguity existed, any resulting fact issue would be immaterial “in light of

the Delaware doctrine of contra proferentem,” which requires that ambiguous

terms in a corporate governance document, such as a by-law, be construed against

the document’s drafter. (A30.) As a result, the court “construe[d] [§6.4[3]] against

its corporate drafter, Goldman, and [held] that the term ‘officer’ encompasses

Aleynikov’s position as a vice president of GSCo.” (A33.)

On October 28, 2013, Goldman moved for a stay pending appeal and to

expedite the appeal. Goldman did not first seek a stay in the district court; instead,

the day it filed its stay motion here, Goldman wrote the district court requesting a

temporary stay pending this Court’s ruling on its stay motion. (A62[Doc.#182].)

In an Order and Opinion dated October 29, 2013, after noting that Goldman

had “skipped the preliminary steps” (by not seeking a stay before it) (A614), the

court stayed its October 16th Order for seven days only to give this Court an

opportunity to consider Goldman’s stay motion. (A618.) The court also explained

why it felt GS Group was unlikely to prevail on appeal:

I applied the doctrine of contra proferentem, which has some quirks in Delaware. One of these is that, as to corporate bylaws, and as to the issue of advancement in


11

particular, the court must—generally on a paper record—resolve doubtful cases in favor of the employee. That said, there is room for disagreement. But any difficulties were largely created by Goldman’s carelessness in the manner in which it drafted its By-Laws, as well as its liberal conferral of the title of vice president, which it now claims to be an empty title. A vice president is generally considered an “officer,” the word in the By-Laws that I was called on to construe. At least, under Delaware law, I believe that Aleynikov was entitled to assume that when entering into the employment relationship.

(A615.)

In an Order dated October 30, 2013, this Court directed Aleynikov to

“address the issue of this Court’s jurisdiction over the appeal in his response to

[Goldman’s] motions,” (10/30/13 Order.) On November 12, 2013, this Court

denied Goldman’s motion for a stay pending appeal, granted its motion to expedite

the appeal, and referred “[t]he issue of this Court’s jurisdiction, the parties

responses, and the appellant’s reply … to the merits panel.” (Doc.# 003111449565

at 2.)


12

STATEMENT OF THE STANDARD OF REVIEW

If the Court determines that the order requiring advancement is an

appealable injunction, it will review that order for abuse of discretion. NAACP v.

N. Hudson Reg’l Fire & Rescue, 665 F.3d 464, 476 (3d Cir. 2011); Doeblers’ Pa.

Hybrids, Inc. v. Doebler, 442 F.3d 812, 819 (3d Cir. 2006).3 An abuse of

discretion exists where the district court’s decision “rest[s] upon a clearly

erroneous finding of fact, an errant conclusion of law, or an improper application

of law to fact.” Id. (both quoting ACLU of N.J. v. Black Horse Pike Reg’l Bd. of

Educ., 84 F.3d 1471, 1476 (3d Cir. 1996)).

Under “New Jersey’s choice-of-law rules,” which apply in this diversity

case, “the law of the state of incorporation governs internal corporate affairs.”

Fagin v. Gilmartin, 432 F.3d 276, 282 (3d Cir. 2005). “Since it is undisputed that

Delaware provides the substantive law for this dispute,” this Court must “turn to

that state’s law of contract to determine whether summary judgment was properly

awarded.” MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 204, 210 (3d Cir.

2005).

3 Contrary to Goldman’s suggestion, Doebler did not apply or propose de novo review of orders granting injunctions. (GSb18.)


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SUMMARY OF THE ARGUMENT

The court’s holding that “officer” in §6.4[3] includes vice presidents such as

Aleynikov, which is explained in the October 16th Opinion, the December 14th

Opinion, and the October 29th Stay Opinion, was substantively correct and

procedurally sound.

The court’s initial take on the definition of officer in §6.4[3] was that it is

“less than clear;” “not helpful;” and “circular.” (A179.) That observation alone

justified summary judgment in Aleynikov’s favor. While there is powerful

evidence that §6.4[3]’s definition of officer clearly includes vice presidents —

from the SEC’s definition of officer in 17 C.F.R. §240.3b-2 (“The term officer

means a … vice president …”) to the By-Laws’ own use of the term in §1.7 and

§4.1 (adverting to vice presidents and “other officers”) — it does not clearly

exclude vice presidents. As a result, that definition is at best (for Goldman)

ambiguous. Because, as the court would ultimately note, “Delaware law makes an

exception to the usual rule that extrinsic evidence will be considered to resolve an

ambiguity [and instead provides that] ... corporate instruments, unlike negotiated

contracts, will be construed against the corporation,” any perceived ambiguity in

§6.4[3] could properly have been construed against Goldman at the outset pursuant

to “Delaware’s robust application of contra proferentem in this context.”

(A31n.17.)


14

Such a determination would have honored “Delaware’s strong statutory

policy in favor of immediate advancement of fees” — which holds that “a court

will tolerate some ambiguity, and will not resort to parol evidence” when

interpreting an advancement provision (A13-14) and “dictates that the By-Laws be

read liberally in favor of indemnification and advancement” (A17) — and the By-

Laws’ own expressed intent to provide that benefit “to the fullest extent permitted

by law.” (A118,A1111-12.) But the court chose not to immediately apply contra

proferentem, which it described as “an interpretive device of last resort.” (A184.)

Instead, the court denied the parties’ motions and authorized expedited discovery,

to be followed by renewed motions for summary judgment.

The court’s decision to stay its hand was, as it explained, based on (a) its

reading of Goldman’s affidavits to assert that it had “established a process of

appointment that clearly distinguishes between officers and non-officers” (A169

(emphasis supplied)); and (b) Goldman’s assertion that it “from time to time”

exercised its discretion to pay employees’ legal fees as “permissive

indemnification,” but that its By-Laws did not require it to do so. In ordering

discovery on these subjects, the court expressed its willingness to consider

extrinsic evidence as to whether Goldman had resolved any ambiguity in §6.4[3]

by making clear to an objectively reasonable person in Aleynikov’s position that

“officer” in that provision was not intended to include vice presidents.


15

Under Delaware law — which mandates that ambiguities in a corporation’s

constitutive documents, such as by-laws, be construed against it, particularly as

concerns indemnification and advancement — evidence that Goldman had (a) an

appointment process outside its By-Laws that “clearly distinguished” officers from

non-officers or (b) a history of discretionary indemnification decisions, was not

relevant to the meaning of “officer” in §6.4[3]. But in what it would later term

“the interest of thoroughness,” the court gave Goldman the opportunity to develop

such evidence. (A31n.17.)

Discovery did not bear out Goldman’s claims. First, it revealed — as a

matter of undisputed fact — that although GSCo appoints its few senior-most

officers by written consent of its general partner, that appointment “process” does

not “clearly distinguish” GSCo’s officers from its non-officers, for one simple

reason: it is a secret process. As the court found, far from putting an objectively

reasonable observer on notice that “any officer” in §6.4[3] was intended to mean

“only those officers appointed by formal process,” GSCo’s “unknown, nonpublic

appointment policy” (A21) fails to “explain how a reader of … [§]6.4[3] would

know that ... an ‘officer’ is, and only is, an individual who has been appointed by

written resolution of the general partner.” (A18.) That is particularly so because

§6.4[1] and [2] expressly limit the definition of officers of GS Group and its

corporate subsidiaries to those appointed officers, while §6.4[3] does not. By the


16

court’s sound reasoning, Goldman is “free to designate anyone it wishes as an

‘officer’ according to procedures known only to a ‘discrete group within the Legal

Department.’ But in doing so, GSCo does not define, or alter, the meaning of

Section 6.4 of the By-Laws.” (A20-21.) Thus, while Goldman claimed it has a

process that “clearly distinguishes” officers from non-officers — i.e., a process that

makes clear to an objectively reasonable reader the distinction on which it now

relies — discovery revealed that it does not. A secret process does not make

anything clear to those not in on the secret.

Second, discovery was equally unsupportive of Goldman’s claim that it had

only indemnified employees “from time to time” on a “purely discretionary” basis.

Of the 53 employees who required separate counsel in the past six years —

including Goldman CEO Lloyd Blankfein, an appointed officer undisputedly

entitled to indemnification — Goldman (a) paid the legal fees of 51, denying

payment only to Aleynikov and one other individual; and (b) invoked the attorney-

client privilege as to its reasons for those decisions.

The facts revealed in expedited discovery, viewed in the light most favorable

to Goldman, were as follows: (1) its process for appointing its handful of senior-

most officers is known only to a “discrete group within [its] Legal Department”

(A18) and thus does not “clearly distinguish” officers from non-officers in the eyes

of any objectively reasonable person; and (2) it has historically paid virtually all


17

the legal fees incurred by its employees and will not reveal its basis for doing so,

meaning that its payment history is unsupportive of the By-Laws interpretation it

posits. Thus, a discovery process that itself reflected “the extent to which the court

has indulged Goldman’s position” (A31n.17) did not advance that position. Under

the circumstances — Delaware law that compels a ruling in Aleynikov’s favor and

ancillary discovery that reveals no disputed facts, much less a genuine issue of

material fact — the court properly granted Aleynikov’s renewed motion for

summary judgment on advancement.

The court’s reasoning, explained in three opinions comprising 68 pages,

should not be disturbed. As a threshold matter, this Court does not have

jurisdiction to hear this appeal because, among other things, the district court’s

order awards provisional relief in an action at law pending resolution of an ongoing

indemnification proceeding and thus is not immediately appealable. Nor should

the Court exercise its discretion to invoke the rarely-used doctrine of pendent

appellate jurisdiction over the denial of Goldman’s cross-motion for summary

judgment.

If the Court finds it has jurisdiction, it should affirm the district court’s

ruling for the reasons expressed in the opinion on appeal. Goldman’s contention

that the court misapplied the summary judgment standard is belied by that

carefully reasoned opinion as presaged by the December 14th Opinion


18

(incorporated by reference in the opinion on appeal) and confirmed in the October

29th temporary stay Opinion.

Goldman proceeds from the erroneous notion that the court’s initial finding

that Aleynikov failed to establish a substantial likelihood of success on the merits

precluded it from granting his renewed motion for summary judgment. In refusing

the parties’ joint request that he determine whether “officer” included vice

presidents on a paper record, however, the court simply deferred decision on the

merits pending discovery. When discovery was complete, he made that

determination in a manner that was explicitly mindful of and scrupulously adherent

to the summary judgment standard, stating, “The usual and ordinary meaning of

vice president, supplemented by ... case law [holding that a statute’s reference to

officers included vice presidents], makes out a fair case that the By-Law here is

unambiguous. Even resolving every material factual issue in favor of Goldman, I

find that the By-Law may be enforced as written, as a matter of law, and that

advancement of fees should be awarded.” (A28)(emphasis supplied).) The court

continued, “I am emboldened in that analysis by my belief that the policy of the

statute dictates a broad and liberal construction of indemnification and, especially,

advancement under the By-Laws.” (A28.)

That is right as a matter of substance and procedure. Goldman’s claim that

the court did not view all evidence in the light most favorable to it is inaccurate.


19

As its ruling reflects, the court assumed that the facts were exactly as Goldman

portrayed them: that it appoints officers of GSCo by formal process; that its officer

appointment process entails securing the written consent of its general partner and

is known only to a discrete few within its legal department; that the written

consents were not made generally available within GSCo; that in using the term

“officer” in §6.4[3] it did not intend to include vice presidents such as Aleynikov;

and that it paid the legal fees of 51 out of 53 employees outside the context of its

By-Laws. In ruling for Aleynikov despite accepting those contentions, the court

correctly concluded that they did not raise a genuine issue of material fact

sufficient to delay that ruling. Goldman refuses to accept that those undisputed

facts compel summary judgment against it, but they do. Section 6.4[3] is a

unilaterally-drafted corporate By-Law that (a) promises indemnification and

advancement to “officers” (which by its plain meaning includes vice presidents);

but (b) does not define officers by reference to an appointment process. If the

meaning of such a by-law could ever be altered by the existence of such a process

— and, as the district court noted, that is far from evident — it most assuredly

could not be altered by a secret appointment process.

Goldman’s position can be summarized as follows: because the court

permitted discovery into the meaning of §6.4[3], it was bound to either (a) find that

the provision as written clearly excluded vice presidents; (b) resolve any ambiguity


20

in the provision in Goldman’s favor; or (c) conduct a trial on the issue. That is

simply not so. The court indulged Goldman by not ruling in Aleynikov’s favor at

the outset. But ordering discovery in an excess of caution is not tantamount to a

binding prediction that it will reveal relevant evidence, much less evidence that

favors one party. Here, beyond being irrelevant to the proper interpretation of a

Delaware corporation’s by-law promising indemnification and advancement to

undefined “officers,” the undisputed facts revealed in discovery — particularly,

that Goldman’s vaunted appointment process was undisclosed and that it paid the

legal fees of virtually everyone to incur them — beyond being irrelevant, did not

advance Goldman’s reading of its own By-Law.

In addition to mischaracterizing the court’s application of the summary

judgment standard and contending that the court resolved factual issues in reaching

its decision, Goldman erroneously contends that §6.4[3]’s use of officer is “facially

unambiguous” and does not include Vice Presidents; that §6.4[3] is unambiguous

when viewed in context; that even if §6.4[3] is ambiguous, that ambiguity is easily

resolved in Goldman’s favor by resort to extrinsic evidence; and that contra

proferentem cannot be used to determine whether a corporate by-law applies to an

employee.

None of these arguments is availing when considered in light of Delaware

case law — which may help explain why Goldman does not even cite the


21

Delaware Chancery Court’s directly applicable ruling in Stockman, on which the

district court expressly and repeatedly relied. In Stockman, the court granted the

plaintiff summary judgment on his claim for advancement, holding that

ambiguities in the defendant’s partnership agreement “should be resolved in favor

of the reasonable expectation of [its] indemnities regarding their indemnification

and advancement rights.” As the district court held, quoting Stockman:

“where the contract in dispute is an entity’s organizing document ... a dispositive order following motion practice may be appropriate even where the contract is ambiguous.... The contra proferentem approach protects the reasonable expectations of people who join a partnership or other entity after it was formed and must rely on the face of the operating agreement to understand their rights and obligations when making the decision to join.”

(A30-31(emphasis in original)(quoting Stockman, 2009 WL 2096213, at *5).)

That observation is particularly pertinent here, where §6.4[3] expressly provides

that officers “shall be presumed to have relied” on the By-Law’s promise of

indemnification and advancement. (A118.) Under Delaware law, any ambiguity

in §6.4[3] would compel a ruling in favor of Aleynikov. The facts revealed in

discovery, viewed in the light most favorable to Goldman, compel the same

conclusion.


22

ARGUMENT

I. THE DISTRICT COURT’S ORDER SPECIFICALLY ENFORCING ALEYNIKOV’S PROVISIONAL RIGHT TO ADVANCEMENT IS LEGAL, NOT EQUITABLE, AND THUS IS NOT IMMEDIATELY APPEALABLE.

The district court’s order is not final within the meaning of 28 U.S.C. §1291,

and no part of it could have been made final under Fed. R. Civ. P. 54(b). Indeed,

the district court catalogued the matters that are not final, including Aleynikov’s

indemnification claim and Goldman’s affirmative defenses. (A34-35.) Goldman

argues, however, that an order to pay fees is an injunction immediately appealable

under the narrow exception in 28 U.S.C. §1292(a)(1). This Court construes that

exception with “great care and circumspection.” Kershner v. Mazurkiewicz, 670

F.2d 440, 447 (3d Cir. 1982).

The panel that heard Goldman’s motion for a stay called for briefing on the

question of appellate jurisdiction; that briefing revealed a circuit split on the

question of whether orders for specific performance are injunctions. In this

Circuit, an order to pay money in an action at law is not an injunction. Saber v.

Finance Am. Credit Corp., 843 F.2d 697, 702 (3d Cir. 1988). The motions panel

denied the stay and referred the issue of the Court’s jurisdiction and the parties’

written submissions on that issue to the Merits Panel. (Doc.#003111449565.) To

avoid duplicative briefing, Aleynikov incorporates by reference and respectfully


23

refers the Court to the jurisdictional analysis in his opposition to the stay motion,

which explains in detail not only the law of this Circuit, but also the extensive

Delaware precedent making clear that actions for advancement are actions at law,

not suits in equity. (Doc.#003111442330 at 15-19.)

Goldman continues to rely on the other side of the circuit split while

ignoring this Court’s decision in Saber. Goldman does cite Cohen v. Bd. of Trs. of

UMDNJ, 867 F.2d 1455 (3d Cir. 1989) (en banc), but ignores that Cohen accepted

Saber’s holding. Id. at 1467. Goldman also relies on Pell v. E.I. DuPont de

Nemours & Co., Inc., 539 F.3d 292, 307 (3d Cir. 2008), but Pell involved an

equitable right of action created by a federal statute (ERISA), not a right of action

at law created by a State.

Finally, even assuming this Court has jurisdiction over the district court’s

advancement award, it should decline Goldman’s invitation (GSb26) to invoke the

“narrow” and “sparingly” used doctrine of “pendent appellate jurisdiction” to

address the denial of Goldman’s cross-motion for summary judgment. DuPont de

Nemours v. Rhone Poulenc, 269 F.3d 187, 203 (3d Cir. 2001). As this Court has

reiterated, “pendent appellate jurisdiction is often suggested, occasionally

tempting, but only rarely appropriate.” Abi Jaudi & Azar Trading Corp. v. Cigna

Worldwide Insurance Co., 391 F. App’x 173 (3d Cir. 2010) (quoting Price v.

Socialist People’s Libyan Arab Jamahiriya, 389 F.3d 192, 199 (D.C. Cir. 2004)).


24

Surely there is no need to address Goldman’s cross-motion for summary judgment

in order to provide “meaningful review” of an appealable order. DuPont, 269 F.3d

at 203. Even where appealable and non-appealable rulings are “‘closely

intertwined,’” as Goldman contends here (GSb26), there is no “compelling reason”

for this Court to review the denial of Goldman’s summary judgment motion,

particularly since that motion sought relief still pending before the district court.

The order “did not dispose of [Aleynikov’s] primary claim” for indemnification;

all of Aleynikov’s claims are still subject to further proceedings that would lead to

a “final judgment.” Brown v. City of Pittsburgh, 586 F.3d 263, 298 (3d Cir. 2009).

The Court should therefore find that it lacks jurisdiction to hear this appeal.

II. THE DISTRICT COURT CORRECTLY DETERMINED THAT ALEYNIKOV, AS A VICE PRESIDENT OF GSCO, WAS AN “OFFICER” WITHIN THE MEANING OF §6.4[3] OF GS GROUP’S BY-LAWS.

A. Delaware Law Favors Broad Application Of Advancement Provisions And Resolution Of Advancement Disputes On Summary Judgment.

DGCL §145(a) and (b) authorizes Delaware corporations like GS Group “to

indemnify their current and former corporate officials from expenses incurred in

legal proceedings ‘by reason of the fact that the person is or was a director, officer,

employee or agent of the corporation.’” Homestore, Inc. v. Tafeen, 888 A.2d 204,

211 (Del. 2005) (quoting DGCL §145(a),(b).) Because an officer’s right to


25

indemnification cannot be established until after his defense “has been successful

on the merits or otherwise,” id. at 211, DGCL §145(e) allows for advancement to

provide “corporate officials with immediate interim relief from the personal out-of-

pocket financial burden of paying the significant on-going expenses inevitably

involved with investigations and legal proceedings.” (A176.)

As the district court acknowledged, advancement and indemnification serve

the important public policy goals of encouraging qualified persons to serve as

officers and directors. (A14(quoting Fasciana v. Electronic Data Sys. Corp., 829

A.2d 160, 170 (Del. Ch. 2003).) See also Stifel Fin. Corp. v. Cochran, 809 A.2d

555, 561 (Del. 2002). To further these goals, Delaware courts construe §145 and

indemnification and advancement provisions broadly. Id.; Brown v. LiveOps, Inc.,

903 A.2d 324, 327-28 (Del. Ch. 2006) (confirming right to advancement of former

officer accused of misappropriating software for use by competing enterprise).

Advancement is considered “an especially important corollary to indemnification

as an inducement for attracting capable individuals into corporate service.”

Homestore, 888 A.2d at 211.

Although indemnification requires a demonstration of “success on the merits

or otherwise,” advancement is solely “dependent on the scope of the claims

asserted against the corporate official, not the merits.” Confederate Motors, Inc. v.

Terny, 859 F. Supp. 2d 181, 187 (D. Mass. 2012) (applying Delaware law) (citing


26

Ridder v. Cityfed Fin. Corp., 47 F.3d 85, 87 (3d Cir. 1995)). Nor is advancement

withheld when the officer is accused of serious offenses; indeed, “it is precisely in

the circumstance when a business official is accused of serious wrongdoing that

the right to advancement is critical.” DeLucca v. KKAT Mgmt., L.L.C., 2006 WL

224058, at *11 (Del. Ch. Jan. 23, 2006). Moreover, that right “does not go away

simply because the entity from which advancement is sought is alleging that [the

officer] has committed perfidious acts against it.” Id.

Given Delaware’s strong public policy favoring the timely resolution of

advancement disputes and its recognition that such disputes can be resolved

summarily, the court properly granted Aleynikov’s motion for summary judgment

on advancement. See HLTH Corp. v. Axis Reins. Co., 2009 WL 3326625, at *2 &

n.9 (Del. Super. Ct. Sept. 30, 2009); Sun-Times Media Group, Inc. v. Black, 954

A.2d 380, 388 (Del. Ch. 2008).

B. The District Court Correctly Held That §6.4[3] Is Unambiguous On Its Face And Includes Vice Presidents Within The Term “Officer.”

In holding that Aleynikov, as a Vice President, was an officer of GSCo

entitled to advancement under the By-Laws, the court first found that the language

of §6.4[3], on its face, establishes that a vice president is an officer entitled to

advancement and indemnification because “[t]he usual and ordinary meaning of

vice president, supplemented by [case law finding vice presidents to be officers],


27

makes out a fair case that the By-Law here [§ 6.4[3]] is unambiguous.” (A28.)

The court relied on dictionary definitions of the term “vice president” and cases

finding that individuals holding the title “vice president” were officers in

concluding that “[i]t is uncontroversial that a ‘vice president,’ at least in the

corporate context, is a kind of officer.” (A27-28.) Ultimately, the court correctly

concluded that because §6.4[3] is unambiguous, the provision “may be enforced as

written, as a matter of law, and [thus] advancement of fees should be awarded.”

(A28.)

1. The District Court Correctly Held That the Term “Officer” Unambiguously Includes Vice Presidents.

Under Delaware law, a “contract is ambiguous only when it is susceptible to

more than one reasonable interpretation.” Masonic Home of Del., Inc. v. Certain

Underwriters at Lloyd’s London, 2013 WL 5872283, at *1 (Del. Oct. 30, 2013).

Here, the court correctly concluded that Aleynikov’s interpretation accords with

the plain meaning of “officer,” the text of the By-Laws, and cases interpreting that

term; it also comports with the SEC’s definition of officer. Goldman’s proffered

interpretation, by contrast, is unsupported by the dictionary definitions it advances,

inconsistent with the text of the By-Laws themselves, and contrary to settled

principles of contract construction. Under Delaware law, that is sufficient reason

to adopt Aleynikov’s interpretation and reject Goldman’s. See Smartmatic Int’l


28

Corp. v. Dominion Voting Sys. Int’l Corp., 2013 WL 1821608, at *4 (Del. Ch.

May 1, 2013) (“If parties introduce conflicting interpretations of a term, but one

interpretation better comports with the remaining contents of the document or

gives effect to all the words in dispute, the court may, as a matter of law and

without resorting to extrinsic evidence, resolve the meaning of the disputed term in

favor of the superior interpretation.”).

a) The District Court Correctly Held That It Is Reasonable To Interpret The Term “Officer” To Include A “Vice President.”

In determining the plain meaning of a term that is not defined in a written

instrument, Delaware courts look to dictionaries for assistance. Lorillard Tobacco

Co. v. American Legacy Found, 903 A.2d 728, 738 (Del. 2006). Here, the district

court began by correctly observing the “uncontroversial” principle that standard

dictionaries define “a ‘vice president,’ at least in the corporate context,” as “a kind

of officer.” (A27.) That observation was supported by Black’s Law Dictionary and

Webster’s Dictionary, both of which define a “vice president” as a type of

corporate “officer.” (A27 (quoting Black’s Law Dictionary 1702 (9th ed. 2009);

Webster’s New Universal Unabridged Dictionary 2036 (2d ed. 1983).) Unable to

challenge these uncontroversial definitions, Goldman argues instead that the court

should not have looked to the definition of a “vice president” because that term

“does not appear in § 6.4 of the By-Laws.” (GSb33-34.) This is sophistry. The


29

taxonomical question answered by the court was whether a “vice president” is a

species of “officer” for purposes of indemnification.4 Noting that the title “vice

president” connotes “officer” answered this question as well as noting that

“officer” includes “vice presidents.” Moreover, while the word “vice president”

does not appear in §6.4, it does appear in §1.7 and §4.1; in those By-Laws

provisions, as in the dictionary definitions on which the district court relied, a

“Vice President” is referred to as a kind of “officer.” (A115.) As discussed below,

the SEC’s definition of officer also includes vice presidents.

The district court buttressed its conclusion with case law defining the term

“officer” in analogous settings. (A27-28.) Specifically, in Brakke v. Idaho Dep’t

of Corr., 2012 WL 4409905, at *3 (D. Idaho Sept. 25, 2012), the court noted that

“[t]he title ‘Regional Vice President’ connotes an officer role to a normal

observer.” And in Ter Bush & Powell, Inc. v. State Tax Comm’n, 395 N.Y.S.2d

762, 763-64 (3d Dep’t 1977), the court determined that a corporation could not

escape claims that employees were not “officers” when it deliberately conferred

upon them titles like “vice-president” to “assist them in their sales efforts.”

4 Similarly sophistic is Goldman’s argument that if “officer” were interpreted according to its plain language, “there would be no need to ‘elect’ any officers and give them such ‘powers and duties’ by way of formal resolution.” (GSb48.) The question here is whether vice presidents are officers within the meaning of §6.4[3]. Of course there would be reasons to “elect” officers for other purposes, such as the “regulatory purposes” for which the written consents were adopted. (A1257(¶ 9).)


30

Having received the “business benefits” of conferring that title, the corporation

could not escape the “tax consequences” of that decision. Id. at 763.

Goldman does not mention these cases, instead citing securities and

bankruptcy law decisions analyzing whether an employee is an “officer” under

statutes intended to protect against “insider” abuses. (GSb42.) Those cases

support Aleynikov’s position, not Goldman’s. Each began with the presumption

that a “vice president” is an “officer” under the plain meaning of the term. The

courts overcame that presumption by looking past the employee’s title to examine,

for example, the putative officer’s access to inside information or ability to treat

creditors preferentially, to further the teleological goals unique to the statutes they

applied.5 Such functional analysis is plainly inapposite in the context of §6.4[3],

5 See C.R.A. Realty Corp. v. Crotty, 878 F.2d 562, 565 (2d Cir. 1989) (presuming, under an SEC interpretive rule, a “vice president” is an “officer” under §16(b) of the Exchange Act, but deferring to the SEC’s view that “this rule should [not] be rigidly applied” to punish officers not privy to inside information); Gold v. Sloan, 486 F.2d 340, 342, 351 (4th Cir. 1973) (presuming “vice presidents” were “officers” but finding this “‘titular’” status not determinative of whether they enjoyed the access the title was designed to capture); In re NMI Systems, Inc., 179 B.R. 357, 368 (Bankr. D.D.C. 1995) (implying that individual’s “title of vice president and mid-management responsibilities” would have been sufficient to “make him an officer” but for the preference-avoidance statute’s focus on whether the employee was positioned to advantage himself at the expense of creditors); In re Public Access Technology.com, Inc., 307 B.R. 500, 506 (Bankr. E.D. Va. 2004) (following NMI to conclude an individual’s “title of Executive Vice President,... without more, [was] not sufficient to find that [he] was an “officer’” under the Bankruptcy Code, because the relevant Code provision is designed to impose an obligation that is unfair to impose on all officers); In re Borders Group, Inc., 453


31

which defines officer to include any officer in addition to the separate category of

those functioning as officers or managers of the entity.

The same is true of two other cases cited by the district court (A28n.16),

EMC Corp. v. Allen, 1997 WL 1366836, at *2 (Mass. Super. Dec. 15, 1997) (“The

plain meaning of that word [officer] includes an individual who holds a position as

vice president.”) and In re Foothills Tex., Inc., 408 B.R. 573, 574 (Bankr. D. Del.

2009) (“A person holding an officer’s title is presumptively an officer.”). These

cases, like those cited by Goldman, only performed a “deeper analysis” to further

ends different than those implicated here.

The goal of Delaware’s advancement law is to further “the public policy

behind section 145” — that is, to “encourage[] corporate service by capable

individuals by protecting their personal financial resources from depletion by the

expenses they incur during an investigation or litigation” — through “enforcement

[of advancement provisions] by courts when corporate officials ... are accused of

serious misconduct.” Homestore, 888 A.2d at 218. Because “the scope of an

advancement proceeding is usually summary in nature and limited to determining

the issue of entitlement in accordance with the corporation’s own uniquely crafted

B.R. 459, 469 (Bankr. S.D.N.Y. 2011) (noting the title of “Executive Vice President” or “Senior Vice President” was not, “by itself,” sufficient “to establish that an individual is a director or officer” under the Bankruptcy Code, based on the specific purpose of holding individuals accountable based on their functional role).


32

advancement provisions,” id. at 213, the analysis begins and ends with the text of

the By-Laws, without reference to extrinsic evidence.

Moreover, the district court’s determination that “officer” in §6.4[3]

unambiguously includes vice presidents is consistent with the explicit definition of

“officer” promulgated by the SEC. 17 C.F.R. §240.3b-2. SEC Rule 3b-2

expressly provides that “[t]he term officer means a ... vice president ... and any

person routinely performing corresponding functions with respect to any

organization whether incorporated or unincorporated.” Id. Thus, when GSCo

offered Aleynikov the job of Vice President in its Equities Division, a reasonable

person in his position would have understood — as he undisputedly did — that the

title denoted an officer’s position. (A27(“I received an offer letter that stated that I

was vice president so I assumed that was an officer position.”).)

Goldman itself adverts to the definition of “officer” in Rule 3b-2 to make the

point that the SEC “superseded” the rule for purposes of §16 of the Securities

Exchange Act. (GSb38.) Goldman’s argument ignores that Rule 3b-2 remains the

operative definition of “officer” under the securities laws for all purposes except

those of §16. 17 C.F.R. §240.16a-1 (Rule 16a-1 applies “solely to section 16 of

the [Exchange] Act and the rules thereunder”). Moreover, Goldman’s reliance on

Rule 16a-1 underscores that (i) unless amended for a particular purpose, “officer”

is understood to include all persons denominated vice-president; and (ii) if


33

Goldman wished to limit the class of officers entitled to advancement and

indemnification to vice presidents serving a policy-making function, as the SEC

did twenty five years ago, in 1988, when it adopted Rule 16a-1, Goldman could

(and presumably would) have drafted the By-Laws to accomplish that purpose.

Many of the cases on which Goldman relies for the proposition that having

the title vice president does not make one an officer are §16 cases predating the

SEC’s rule change. In that context, courts found application of Rule 3b-2’s broad

definition of officer too draconian given its use as a proxy for possession of inside

information. (GSb42.) In Crotty, for example, the court held that an employee’s

duties and responsibilities (and, particularly, whether he has access to inside

information), rather than his title, determine whether he was an “officer” for §16(b)

purposes. 878 F.2d at 565. Disregarding Rule 3b-2’s definition, the Crotty court

mitigated the harsh impact of applying §16(b) to individuals who lack access to

inside information by crediting an SEC Interpretive Release stating that “‘[t]he

reporting and short-swing profit recovery provisions of §16 were intended to apply

to those officers who have routine access to material non-public information, not

those with particular titles.’” Id. at 565 n.3; see also Gold, 486 F.2d at 351.

Because Rule 3b-2’s broad definition of officer to include all vice presidents did

not suit the narrow purpose of §16, the SEC amended Rule 3b-2 for §16 purposes

to define officer to include only those vice presidents “‘in charge of a principal


34

business unit, division or function.” (GSb38.) The emphasized language, as

Goldman explains, was added because “the SEC worried that ‘[i]f applied literally,

the Rule 3b-2 definition of ‘officer’ [which encompasses a “vice president”

without any limiting language, 17 C.F.R. §240.3b-2] can be too broad;’” and the

SEC had “‘particular concern’ over the ‘inclusion of ‘all vice presidents in the

definition.’” (GSb38 (quoting Ownership Reports and Trading by Officers,

Directors and Principal Stockholders, 53 Fed. Reg. 49,997, 50,000 (proposed Dec.

13, 1988) (emphasis supplied by Goldman)).

Goldman’s argument makes Aleynikov’s point. When the SEC determined

that the general definition of “officer” did not serve its purpose in a particular

statute, the SEC adopted a new, more limited definition for purposes of that statute.

If Goldman wished to restrict the rights of advancement to those officers appointed

by written consent of the general partner, it was free to change the definition of

“officer” in that context, just as the SEC did in the §16 context. But Goldman’s

contention that the commonly understood meaning of the term “officer” does not

encompass vice presidents cannot be squared with the authorities on which the

district court relies or with Rule 3b-2, on which Goldman itself inexplicably relies.

In short, the district court properly limited its inquiry to the plain meaning of

the term “officer” in §6.4[3] of the By-Laws, which encompasses persons, such as

Aleynikov, who hold the title of “Vice President.”


35

b) The District Court Correctly Held That Goldman’s Proffered Interpretation Of “Officer” Was Unreasonable.

Goldman’s proffered interpretation of “officer,” unlike Aleynikov’s, is

unsupported by any accepted definition of the term, conflicts with the plain

language of the By-Laws, and violates the “well-established principle that in

construing a contract a court cannot in effect rewrite it or supply omitted

provisions.” L.Q. v. P.Q., 466 A.2d 1213, 1217 (Del. 1983); see also Conner v.

Phoenix Steel Corp., 249 A.2d 866, 868 (Del. 1969).

Goldman cites dictionary definitions defining “officer” by the degree of

“‘trust, authority, or command’” the officer’s position entails, arguing that

Aleynikov does not meet this definition because he lacked “managerial

responsibilities.” (GSb34.) Aside from being irrelevant (Aleynikov was an officer

by virtue of his title, not his job responsibilities), these definitions do not support

Goldman’s present argument that “officers” are those individuals — and only those

individuals — “appoint[ed]” pursuant to the “written resolutions of [its] General

Partner.” (A18,A1257(¶11) (“Formal, written resolutions of the General Partner

are the sole process by which GSCo appoints officers and no GSCo officer has

been appointed except by formal, written resolution of the General Partner.”).)

Thus, even GSCo “managing directors” — managers by any definition — are “not

considered GSCo officers unless they are appointed to an officer’s position by


36

means of GSCo’s formal, written resolution process.” (A1259(¶22).) Attempting

to escape this obvious consequence of its flawed interpretation, Goldman makes

the desperate argument that its “managing directors manage less senior employees,

not GSCo itself.” (GSb47n.8.) Thus, under Goldman’s curious reading of its own

By-Laws, “vice presidents” are not “officers” and “managing directors” are not

“managers.”

Goldman’s interpretation also conflicts with two settled canons of

construction. First, because Goldman defines “officer” as only those appointed by

its general partner, its definition excludes those §6.4[3] “officers” expressly

defined by their function, i.e., those officers who “serv[e] in a similar capacity [to

an ‘officer’] or as the manager of such entity.” (A118.)6 Goldman’s interpretation

violates Delaware’s mandate that courts “interpret contractual provisions in a way

that gives effect to every term of the instrument.” Council of the Dorset Condo.

Apts. v. Gordon, 801 A.2d 1, 7 (Del. 2002).

Second, Goldman could easily have limited the definition of “officer” of its 6 Goldman argues that its August 9, 2005 resolution removing all elected officers and replacing them with a new slate of elected officers confirms that no unelected officer is an “officer” under §6.4[3]. (GSb47.) But §6.4[3] expressly includes functional officers within its definition of officer. In other words, Goldman itself acknowledges the existence of persons entitled to indemnification and advancement other than those appointed officers by written consent of its general partner. Aleynikov has never contended that he was such a person. But Goldman’s acknowledgement simply cannot be squared with its “officer-means-appointed-officer-only” construction.


37

non-corporate subsidiaries — as it asks the Court to do — to refer only to those

“elected or appointed pursuant to formal process.” Goldman’s ability to add this

limiting language is demonstrated by the text of §6.4 itself, which includes such

language in two other places:

“[O]fficer,” when used with respect to [GS Group], shall refer to any officer elected or appointed ...

“[O]fficer,” ... when used with respect to a Subsidiary or other enterprise that is a corporation, shall refer to any person elected or appointed ...

(A118 (emphasis added).) There is no basis under Delaware law to engraft the

missing appointment requirement onto §6.4[3]. See Stockman, 2009 WL 2096213,

at *7 (it was “unreasonable” to engraft a modifier that the company used in other

provisions of the partnership agreement but did not include in the provision at

issue); DeLucca, 2006 WL 224058, at *13 (it is the obligation of the corporation,

not a court, to “delimit the circumstances in which [a corporation is] obliged to

advance funds” through careful drafting).

Indeed, under the doctrine of expressio unius est exclusio alterius, the

omission of the limiting language “elected or appointed” in §6.4[3] is presumed to

be intentional. See, e.g., Brown v. State, 36 A.3d 321, 325 (Del. 2012)

(recognizing that under this doctrine, “where a form of conduct, the manner of its


38

performance and operation, and the persons and things to which it refers are

affirmatively or negatively designated, there is an inference that all omissions were

intended….”); Guillory v. Aetna Ins. Co., 415 F.2d 650, 652 (5th Cir. 1969) (“[I]f

Aetna meant to insure only ‘corporate officers,’ elected or appointed through

established procedures, it could have simply said just that.”).

The district court properly rejected Goldman’s attempt to rewrite its By-

Laws retroactively to include a more precise definition of officer — which it could

easily have included, but deliberately chose not to include — to the detriment of

Aleynikov, who had no role in drafting the By-Laws. See L.Q., 466 A.2d at 1217.

2. The District Court Applied The Correct Standard When Reading The Term “Officer” Unambiguously In Aleynikov’s Favor.

Goldman erroneously contends that in finding §6.4[3] unambiguous on its

face without considering extrinsic evidence, the court misapplied the summary

judgment standard. (GSb27-30.) In the first place, the court did consider extrinsic

evidence, viewed all of it in the light most favorable to Goldman, and concluded,

“I do not believe that this parol evidence is sufficient to raise a material issue of

fact.” (A29-30.) Moreover, the Delaware Supreme Court has “long upheld awards

of summary judgment in contract disputes where the language at issue is clear and

unambiguous.” GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36

A.3d 776, 783 (Del. 2012); see also Centaur Partners, IV v. National Intergroup,


39

Inc., 582 A.2d 923, 926 (Del. 1990). The threshold “ambiguity” determination is a

question of law that must be made within “the contract’s four corners,” GMG, 36

A.3d at 783, and is determined “through the lens of what a reasonable person in the

position of the parties would have thought the contract meant,” Kuhn Constr., Inc.

v. Diamond State Port Corp., 990 A.2d 393, 396 (Del. 2010); see also Miller v.

Palladium Indus., 2012 WL 6740254, at *3 (Del. Ch. Dec. 31, 2012) (“Whether

applying a bylaw or a contract, the Court uses a reasonable third-party’s reading of

the pertinent terms.”).

Goldman’s argument that the court’s ruling “resulted from a misapplication

of the summary judgment standard” (GSb28) ignores that the court reviewed

extrinsic evidence, determined that it was irrelevant, and adhered to the principles

of law discussed above. Goldman erroneously contends that the court (i) was

required to resolve reasonable alternative readings “‘at trial’” (GSb29); (ii)

somehow overlooked the “bounty,” “wealth,” or “raft” of “one-sided,”

“uncontroverted,” “undisputed” and “extensive” “extrinsic evidence,” which it

declares was “overwhelming[ly],” “entire[ly],” and “grossly imbalance[d]” in its

favor, (GSb7GSb8,GSb17,GSb19,GSb20,GSb27,GSb29,GSb36,GSb49); and (iii)

made “multiple factual, logical and inferential errors” (GSb44) although there was

“no conflict whatsoever in the evidence,” (GSb28).

Beyond mischaracterizing the extrinsic evidence uncovered in discovery,


40

which directly undermines its position, Goldman’s argument overlooks (a) the

established rule that “extrinsic evidence” is not relevant to determine whether a

“contract is ambiguous,” Norton v. K-Sea Transp. Partners L.P., 67 A.3d 354, 360

(Del. 2013); and (b) that even if the court found the term ambiguous, it is “not

appropriate” to consider “extrinsic evidence” to construe the meaning of a by-law

in whose drafting Aleynikov played no role. Kaiser Aluminum Corp. v. Matheson,

681 A.2d 392, 397 (Del. 1996); Bank of N.Y. Mellon v. Commerzbank, 65 A.3d

539, 551 (Del. 2013). Delaware law differs from the New Jersey law on which

Goldman relies (GSb29) because, “[u]nder New Jersey law ..., courts must always

consider all of the relevant evidence that will assist in determining the intent and

meaning of the contract when making ambiguity determinations.” Mylan Inc. v.

SmithKline Beecham Corp., 723 F.3d 413, 419 (3d Cir. 2013); MBIA, 426 F.3d at

214 (distinguishing Third Circuit cases “consider[ing] extrinsic evidence in

determining whether an agreement is unambiguous” by noting that “[t]hese cases

... were not decided under Delaware law.”). Stated simply, the district court did

not make any “factual” findings — much less “multiple factual, logical and

inferential errors” (GSb44) — by following controlling Delaware law and

recognizing the irrelevance of extrinsic evidence in finding §6.4[3] unambiguous

on its face.

Goldman’s argument that the court’s prior denial of a preliminary injunction


41

precluded it from awarding Aleynikov summary judgment (GSb27-28) is equally

meritless. Goldman procured that denial (and forestalled summary judgment) by

suggesting it had an “established practice[]” that might be evidenced through a

“preexisting written policy,” that would have put third parties like Aleynikov on

notice of its interpretation of “officer.” (A12,A180-181.) Expedited discovery

revealed no evidence to support that assertion. The district court’s initial denial of

Aleynikov’s preliminary injunction is irrelevant to this Court’s review of its

subsequent grant of summary judgment. Doebler, 442 F.3d at 819.7

3. The Undisputed Facts Do Not Support Goldman’s Interpretation Of The Term “Officer” In §6.4[3].

Goldman argues that its anomalous interpretation of “officer” is supported

by the following “undisputed background facts”: (1) GSCo has a process for

appointing officers; (2) Aleynikov was not appointed under that process; (3)

Goldman has paid the legal fees of GSCo analysts and associates; and (4) “there

7 Goldman’s argument apparently proceeds from a misreading and misapplication of Doebler. In that case, the district court entered a preliminary injunction, which was affirmed on appeal. 442 F.3d at 820. Thereafter, the district court granted summary judgment and entered a permanent injunction based on the grant of summary judgment. Id. The court of appeals concluded that in that procedural posture, it was crucial to distinguish between the standards for summary judgment and preliminary injunction. The district court’s preliminary factfinding, which was appropriate on a preliminary injunction, was inappropriate on summary judgment, and therefore a permanent injunction based on the inappropriate factfinding was reversed. Id. Here, by contrast the district court’s grant of summary judgment was based on interpreting the By-Laws as a matter of law.


42

are no communications from which it could be implied or inferred that [Aleynikov]

was an officer of GSCo or had any officer-like responsibilities.” (GSb36-37.)

Goldman relies on Sinclair Television Group v. Mediacom Communications

Corp., 2008 WL 276533 (D. Md. Jan. 29, 2008), for the proposition that

considering extrinsic evidence is proper. (GSb37.) That reliance is misplaced. In

Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997),

upon which Sinclair relied, the court stated that while “[t]here may be occasions

where it is appropriate for the trial court to consider some undisputed background

facts to place the contractual provision in its historical setting[,] ... the trial court

must be careful in entertaining background facts to avoid encroaching on the basic

principles” that “[i]f a contract is unambiguous, extrinsic evidence may not be used

to interpret the intent of the parties, to vary the terms of the contract or to create an

ambiguity.” Id. at 1232 & n.7. Goldman urges the Court to do precisely that:

consider extrinsic facts to establish that it did not subjectively intend to extend

mandatory advancements rights to GSCo vice presidents, notwithstanding

§6.4[3]’s plain language to the contrary.

Discovery revealed that, as the court correctly found, these “background

facts” are entirely irrelevant to an interpretation of §6.4[3]. That Goldman has an

appointment process, that Aleynikov was not appointed pursuant to that process,

and that Goldman paid non-officer employees’ legal fees simply do not aid in the


43

interpretation of a By-Law that extends advancement rights to officers without

reference to an appointment process or Goldman’s payment history. Neither does

the fact that Aleynikov never “told anyone” and that no one ever “told him” he was

an officer. (GSb53;GSb37.) The By-Laws do not require knowledge of the rights

they confer; to the contrary, they conclusively “presume” reliance on them.

(A118.) And, as shown herein, vice presidents have a reasonable expectation that

their employers will indemnify them if they become ensnared in the investigations

and lawsuits that are ubiquitous in the industry. GSCo offered Aleynikov the

position of “Vice President in the Equities Division of [GSCo]” in an offer letter

signed by another GSCo Vice President. (A1106-07.) This could only have led

him, as it would any objectively reasonable person, to believe he was being offered

an officer’s position. (A963(38:4-11).)

GS Group’s primary argument to the contrary is that its advancement

obligation must be “contextualized” within the “financial services industry,” which

employs thousands of vice presidents. (GSB37.) But the context of that highly

regulated industry demonstrates precisely why it is reasonable for vice presidents

to believe — indeed, expect — that they will be protected by their employer from

ruinous legal bills in the foreseeable event they become involved in an

investigation or lawsuit. Indeed, GSCo’s industry representative, the Securities


44

Industry Financial Markets Association (“SIFMA”),8 has espoused this very view.

(A576-588.)

Aleynikov, whom Goldman now casts as a “mid-level computer

programmer,” was undisputedly a talented programmer whom GSCo recruited

aggressively (A807-08(52:7-54:25)) and was the highest paid programmer in his

subgroup (A807). The reasonable expectation that a Vice President like Aleynikov

would be indemnified in the event of an investigation or lawsuit reflects the

sensitivity and highly regulated nature of this line of work, not its variable degree

of “supervisory responsibilities.” (GSb37.) That Goldman now seeks to diminish

the office of Vice President as a position that “‘means nothing,’” is “‘no big deal,’”

or is equivalent to that of a “‘receptionist’” (GSb37-38) would certainly surprise

current and prospective GSCo Vice Presidents in the Equities Division responsible

for investing, trading, or designing platforms to invest the firm’s and clients’

capital each day. It would also surprise the investors who entrust their money to

GSCo, who interact with and rely on GSCo Vice Presidents.

In arguing that the title Vice President is largely meaningless within the

financial industry, Goldman cites to (a) articles regarding title inflation at financial

institutions; and (b) its claim that approximately one-third of its employees are

8 GSCo is a member of SIFMA. (A59[Doc.#153] at 20 n.4.)


45

Vice Presidents. (GSb37-38.) But as the district court correctly held:

It may be the case that Goldman (or the industry of which it is a part) has been profligate in conferring the title of vice president. If so, Goldman must bear the consequences of that profligacy. Goldman might easily have chosen to be more sparing with job titles, or to confer them in some other way. It might easily have drafted its By-Laws to restrict indemnification to a well-defined class. It did not.

(A25.) Indeed, the articles Goldman cites demonstrate that corporations benefit by

using arguably inflated titles as surrogates for “pay raises and bonuses” and to

“impress potential customers.” (A468-70.) Having “chosen to award the title of

vice president for good and valid business reasons,” Goldman cannot avoid the

“implications of that decision.” (A28(citing Ter Bush, 395 N.Y.S.2d at 763-64).)

C. The District Court Properly Held That, Even If “Officer” Were Ambiguous, Two Rules Of Construction Mandate Resolving That Ambiguity In Aleynikov’s Favor.

While concluding that §6.4[3] is unambiguous on its face, the court

“indulge[d] Goldman’s position one step farther,” assuming “that the term ‘officer’

carries with it some ambiguity as applied to the vice president of an LLP.” (A30.)

The court concluded that summary judgment was nonetheless warranted because

“Delaware substantive law establishes that an ambiguity in an advancement

provision does not give rise to a material issue of fact when the ambiguity was

introduced by the corporate drafter.” (A30.) In “constru[ing] By-Law section


46

6.4[3] “against its corporate drafter, Goldman …, hold[ing] that the term ‘officer’

encompasses Aleynikov’s position as a vice president of GSCo” (A33), the court

correctly applied two settled principles of construction mandating resolution of any

ambiguity in Aleynikov’s favor.

First, to bolster its conclusion that the plain meaning of officer includes vice

presidents, the court invoked the “broad and liberal construction” Delaware courts

have applied to “indemnification and, especially, advancement under the By-

Laws.” (A28.) In so doing, the court faithfully applied Delaware law, which

resolves “ambiguit[ies] in favor of indemnification and advancement.” Miller,

2012 WL 6740254, at *3; see also Brown, 903 A.2d at 327-28 (discussing the

“broad[] constru[ction]” Delaware law requires of “mandatory advancement

provisions”); DeLucca, 2006 WL 224058, at *7 (applying the “interpretative

principle” that, given Delaware’s “strong public policy in favor of assuring key

corporate personnel that the corporation will bear the risks resulting from

performance of their duties,” courts must “read indemnification contracts to

provide coverage when that is reasonable.”).

Goldman argues that this policy is limited to situations when “‘key corporate

personnel’” invoke advancement or indemnification rights. (GSb40.) That

misstates the law. Delaware’s policy “encourages corporate service by capable

individuals” — not “key” individuals — “by protecting their personal financial


47

resources from depletion by the expenses they incur during an investigation or

litigation” through “enforcement [of advancement provisions] when corporate

officials ... are accused of serious misconduct.” Homestore, 888 A.2d at 218. Of

course, this policy benefits the “key corporate personnel” referenced in DeLucca,

but it is by no means limited to such individuals, and nothing in DeLucca or

Delaware law suggests that it is. Indeed, Goldman’s position is at odds with

SIFMA’s acknowledgement that “[i]ndemnification of employees and

advancement of their fees are essential” to enable firms like GSCo to “recruit[] and

retain[] top talent.” (A576.)

Second, the Delaware Supreme Court has a long tradition of applying contra

proferentem in various settings to place the interpretative risks created by

ambiguous language upon corporate drafters.9 See Commerzbank, 65 A.3d at 551

(applying contra proferentem to resolve “ambiguous” provision in “LLC

Agreement” and related documents in securityholder’s favor); Norton, 67 A.3d at

360 (“If the contractual language [in the limited partnership agreement] at issue is

9 The established authority applying contra proferentem was not broken by Activision Blizzard v. Hayes, 2013 WL 6053804 (Del. Nov. 15, 2013), which Goldman assured this Court, in its unsuccessful stay motion, would “no doubt address [contra proferentem’s] limited role.” (Doc.#003111434330 at 17n.10.) That decision has now issued, and holds that the Chancery Court misread an unambiguous charter provision concerning a “‘merger’” or other “‘business combination.’” It does not address contra proferentem at all, much less upset Delaware’s longstanding application of it.


48

ambiguous and if the limited partners did not negotiate for the agreement’s terms,

we apply the contra proferentem principle and construe the ambiguous terms

against the drafter.”); Kaiser, 681 A.2d at 397 (applying contra proferentem to

resolve “ambiguity” against drafter of certificates governing debt securities); SI

Mgmt. v. Wininger, 707 A.2d 37, 43 (Del. 1998) (applying contra proferentem to

construe a limited partnership agreement against its drafter). The doctrine is one of

“last resort” (GSb17,GSb20,GSb53,GSb54) not because its use is uncommon but

because courts look to the plain meaning of the text and other principles of

construction before applying it. Shiftan v. Morgan Joseph Holdings, Inc., 57 A.3d

928, 935-936 (Del. Ch. 2012) (“Our Supreme Court has frequently invoked this

doctrine of contra proferentem to resolve ambiguities about the rights of investors

in the governing instruments of business entities”) (emphasis supplied). That is

precisely what the court did here.

Goldman advances two arguments for why contra proferentem does not

require that drafting ambiguities be resolved in Aleynikov’s favor. First, Goldman

contends that Delaware “courts look at extrinsic evidence to resolve ambiguity

before applying contra proferentem.” (GSb54.) But Delaware courts certainly do

not consider extrinsic evidence of the drafter’s intent where, as here, the written

instrument in question was not the product of bilateral negotiation. Commerzbank,

65 A.3d at 551 (“Here, an inquiry into what the parties intended would serve no


49

useful purpose, because it would yield information about the views and positions

of only one side of the dispute — the Bank, the Company, and Trust II. This case

does not fit the conventional model of contracts ‘negotiated’ by and among all the

interested parties.’”); SI Mgmt., 707 A.2d at 43-44 (“Because the articulation of

contract terms in this case appears to have been entirely within the control of one

party — the General Partner — that party bears full responsibility for the effect of

those terms. Accordingly, extrinsic evidence is irrelevant to the intent of all parties

at the time they entered into the agreement.”); Matheson, 681 A.2d at 397 (it was

“not appropriate” to rely upon “extrinsic evidence” to interpret ambiguities in a

securities certificate because it would bear only on the thoughts and positions of

the issuer and underwriter); KFC Nat’l Council and Advertising Coop., Inc. v.

KFC Corp., 2011 WL 350415, at *14 (Del. Ch. Jan. 31, 2011) (“In the case of

entities whose governing instruments were not the product of bilateral negotiation,

parol evidence is typically not relevant in resolving any ambiguities.”); Stockman,

2009 WL 2096213, at *5 (“[I]n the case of an entity with ongoing operations, key

constituents, including directors, officers, and employees, look to the governing

instrument’s words, and not some obscure archive of parol evidence”); DeLucca,

2006 WL 224058, at *6 (when “construing corporate instruments,” “resort to parol

evidence” is “rarely ... appropriate or even helpful”).

Goldman supports its argument by selectively quoting cases involving


50

bilaterally negotiated contracts. Harrah’s Entertainment, Inc. v. JCC Holding Co.,

802 A.2d 294, 309 (Del. Ch. 2002), for example, stated that “[o]rdinarily, when

corporate instruments are ambiguous, the court must consider the relevant extrinsic

evidence in aid of identifying which of the reasonable readings was intended by the

parties.” (GSb54-55 (quoting Harrah’s at 309 & n.33 (citing Eagle Industries, 702

A.2d at 1232).) But Harrah’s went on to explain that this “general rule” is

“inapplicable” when a court is asked to construe an agreement “drafted solely by

the corporate general partner.” Id. at 309. Harrah’s thus drew the critical

distinction between a bilaterally-negotiated contract (as in Eagle Industries), in

which extrinsic evidence may be relevant to elucidate the intent of negotiating

parties, and a unilaterally-drafted contract, such as the By-Laws, in which extrinsic

evidence serves no “useful purpose.” Commerzbank, 65 A.3d at 551; see also

GMG, 36 A.3d at 784 (“Extrinsic evidence, such as prior communications and

course of dealing, must be considered by the factfinder to resolve the ambiguity as

to [the contracting counterparty’s] remedy.”); Playtex FP, Inc. v. Columbia

Casualty Co., 609 A.2d 1087, 1092 (Del. Super. Ct. 1991) (“Because this was a

negotiated contract, not a contract of adhesion, the doctrine of reasonable

expectations is not applicable.”); Viking Pump, Inc. v. Century Indem. Co., 2 A.3d

76, 101 & n.78 (Del. Ch. 2009) (citing the rule in Eagle Industries and discussing

the relevance of the contracting parties’ “course of conduct”); Zimmerman v.


51

Crothall, 62 A.3d 676, 697-98 (Del. Ch. 2013) (“Here, the Operating Agreement

was negotiated by the parties.”).

Second, Goldman argues that contra proferentem does not apply here

because this case concerns whether a plaintiff, as opposed to a plaintiff’s “claim,”

was within the scope of the advancement provision. (GSb56.) Goldman cites no

support for this argument, instead hyperbolizing that the district court’s opinion

was the first to apply the “doctrine of contra proferentum to the threshold question

of whether a plaintiff was a party to or intended beneficiary of a corporate

instrument providing for advancement.” (GSb56-57.) That statement overlooks

DeLucca, which analyzed whether the plaintiff was “within the class of persons

who are generally covered by the Operating Agreement’s advancement

provisions.” 2006 WL 224058, at *7. DeLucca ultimately resolved that question

based on the plain meaning of the agreement, but its prefatory discussion of contra

proferentem indicates that it was fully prepared to apply that doctrine if it found

the agreement ambiguous. Id. at *6.

Goldman’s argument also reflects a fundamental misunderstanding of both

contra proferentem and principles of contract interpretation. There is no such

thing as “standing” to invoke a principle of construction (GSb57); these principles

inhere in the interpretation of every contract. The doctrine applies whenever one

party exercises sole control over the drafting of the contract in question. See


52

Norton, 67 A.3d at 360 (contra proferentem applies if third parties “did not

negotiate for the agreement’s terms”).

D. Expedited Discovery Did Not Reveal Any Evidence That An Objectively Reasonable Third Person Would Know Of Goldman’s Secret Process And Interpretation.

In the October 16th Opinion, after concluding that §6.4[3] is unambiguous

as to the meaning of “officer” (A28), the court noted that “might well end the

matter, because the public policy in favor of advancement counsels against

consideration of parol evidence, even when the language is somewhat unclear.”

(A29.) Despite correctly finding that resort to extrinsic evidence is inappropriate

in this context, the court — in an abundance of caution — considered the extrinsic

evidence introduced in this case. (A17-25,A29.)

In an attempt to manufacture a factual dispute warranting reversal, Goldman

mischaracterizes the court’s analysis, claiming it considered parol evidence as

necessary to interpret §6.4[3] in Aleynikov’s favor. (GSb40.) But the October

16th Opinion makes clear that the court did no such thing. To the contrary, the

court stated that consideration of parol evidence was not necessary or appropriate

for two reasons: (1) §6.4[3] is not ambiguous; and (2) the doctrine of contra

proferentem mandates that any ambiguity be resolved in Aleynikov’s favor without

resort to parol evidence as to Goldman’s intent when unilaterally drafting the By-

Laws. (A14,A29.) The court made clear that it considered extrinsic evidence only


53

“in the interest of thoroughness” and to “indulge[] Goldman’s position,” not

because it was “required to do so.” (A31n.17.)

Ultimately, the court concluded that (a) the evidence regarding Goldman’s

alleged officer-appointment process did not support its position and thus did not

create a material issue of fact, (A21); and (b) the evidence regarding Goldman’s

history of providing advancement and indemnification either supported

Aleynikov’s position or was irrelevant, (A22,A29). The conclusions were correct.

As to the alleged “process that clearly distinguished officers from non-

officers,” the court found that process was neither written nor publicized:

Goldman does not [] point to any document wherein this procedure — appointment by resolution — is established or memorialized. Nor does Goldman explain how a reader of By-Laws Section 6.4 would know that, for a non-corporate subsidiary, specifically a New York limited liability partnership, an “officer” is, and only is, an individual who has been appointed by written resolution of the general partner.

(A18 (emphasis in original).) As a result, the court found, there was nothing that

would allow anyone within or without Goldman to know that only those appointed

by written resolution would be considered officers:

Nothing in any document before me says that non-corporate “officers” for purposes of indemnification (or any other purpose) are limited to individuals designated by written consent. No one could discern from reading any generally promulgated document that [those appointed officers by written resolution] ... are the only


54

individuals that meet the definition in Section 6.4[3] of the By-Laws.

(A19.) Thus, the court concluded, Goldman’s appointment policy was “unknown,”

“nonpublic” and “potentially inequitable to employees, who have only the By-

Laws to go by in determining whether they are eligible for indemnification [and]

advancement.” (A21.)

The court’s conclusions — that (a) Goldman’s appointment process is not

disclosed publicly or within Goldman and not memorialized in any writing; and (b)

there is no document stating that only those appointed by written consent are

officers — are the only ones supported by the undisputed evidence. (A902(73:2-

8),A949(264:20-23),A987(11:16-20),A1153(130:20-131:5),(A1175(217:23-18:5).)

Goldman does not contend otherwise, having conceded that its process was not

communicated beyond the “‘discrete group within the Legal Department which has

implemented it over time.’” (A16.)

Further, Goldman’s written consents evidence only that certain GSCo

executive officers were appointed to their positions by written consent, not that

every GSCo officer attained his position in that way.10 (A1007-18.) In any event,

10 Goldman argues that its August 9, 2005 written consent appointing certain officers, discussed above at n.6, makes clear that the appointment-by-resolution process is the sole avenue for becoming a GSCo officer because it states that “all persons previously elected as officers of [GSCo] are hereby removed as officers of [GSCo].” (GSb44-46.) Leaving aside that the resolution and its language are


55

it is undisputed that GSCo does not make available to the public or to GSCo vice

presidents the written consents appointing certain officers, (A950(266:14-

21),A950(266:22-24)), which it has designated “Confidential” in this litigation.

(A342-353.)11

Significantly, when directly asked how, by simply reading §6.4, one could

determine the officers of GSCo, Goldman’s 30(b)(6) representative responded, “I

think one would look to see who are the officers appointed as officers of [GSCo].”

(A991(27:9-11).) But when asked, “Why would one look to an appointment

irrelevant because no one in Aleynikov’s position ever saw it, the resolution speaks only to the removal of “elected” officers and says nothing about those individuals, like Aleynikov, who became officers for purposes of §6.4 by other means. Indeed, §6.4 expressly states that for its purposes (as opposed to more general ones), “officer” not only includes officers, but also those who serve in a similar capacity or as the manager of such entity. By Goldman’s lights, the August 9, 2005 resolution even deprived those §6.4 officers of their officer status, although their status was plainly not dependent on election or appointment. In the same vein, By-Law §4.1 expressly provides that, as to GS Group, election by the Board is just one way to become an officer. The provision provides that an existing officer can be authorized to appoint others as Vice Presidents, Treasurers and Secretaries. (A115.) Thus, even if the August 9, 2005 resolution had been publicly available, it would not have established that the appointment-by-resolution was the sole means to become an officer of GSCo for purposes of advancement and indemnification. 11 Goldman suggests that it identified GSCo’s officers in public filings. (GSb15.) But the SEC and FINRA forms to which Goldman adverts call for disclosure of “Executive Officers,” a term separately defined by the SEC in 17 C.F.R. § 240.3b-7 for certain regulatory purposes having nothing to do with the definition of officer under §6.4[3]. (A375-90.) This definitional distinction only highlights that Goldman could have limited the right to advancement to Executive Officers when it drafted the By-Laws, but chose not to.


56

process when no appointment process is referred to in this provision of the

bylaws?,” he responded, “I don’t know.” (A991(27:12-15).) He also admitted that

his conclusion that Aleynikov was not an officer was arrived at this simply: he

“went to look at the records of those who were appointed officers of GS Co.[,]

... did not find a resolution appointing Mr. Aleynikov an officer of GS Co.[,] ...

[a]nd based upon that, ... determined that he was not an officer of GS Co.”

(A947(255:14-24.)

But Goldman admits that those consents were never made publicly available

or disclosed within the firm, (A950(266:22-24),(A1001(67:20-23)), and that vice

presidents and other employees were not advised of the purported policy that the

only way to become an officer for purposes of indemnification and advancement

was to be appointed by written consent. (A1002-3(70:9-13;74:3-25),A1004(78:24-

79:7;79:22-80:14).) Stated simply, Goldman admits that no one beyond a select

few in its legal department has ever (a) seen the confidential written consents

appointing GSCo’s Executive Officers; or (b) been advised that only those

appointed by such consents are officers of GSCo.

Because the appointment-by-written-consent procedure is not made known

to those people, like Aleynikov, who are presumed — by the terms of the By-Laws

themselves (A118) — to have relied on §6.4 in deciding to accept employment

with Goldman, the court concluded that “GSCo’s appointment procedure has little


57

to say about the interpretive issue before the Court, and does not in itself suffice to

create a material, triable issue of fact.” (A21.) Goldman contends that in so ruling,

the court “discredited” or “misconstrued” the “evidence of its appointment process

because there is no basis in law or fact [] to require that such information

[regarding its appointment procedure] appear in a ‘generally promulgated

document.’” (GSb44-45.) Goldman reasons that it was “incorrect to place any

weight on the fact that Goldman [] did not ‘promulgate even a rough rule of

recognition to the effect that the written-consent process is the means by which

officers may be distinguished from non-officers’” because “the resolutions

themselves make clear that they are precisely what distinguish officers from non-

officers.” (GSb47-48.) In the end, Goldman believes all that matters is that (a) it

had an appointment procedure; and (b) Aleynikov was not appointed an officer

pursuant to it. (GSb43-44 (“The fact that Aleynikov was never appointed an

officer of GSCo by its ‘only process for appointing officers’ should have ended the

inquiry.”).)

But in focusing solely on the existence of its appointment procedure and

ignoring whether that procedure (or the fact that it was the only way to become a

§6.4[3] officer) was made known to anyone outside a small cabal within its legal

department, Goldman misses the point. The court did not discredit or reject

Goldman’s evidence of a practice of appointing certain officers by way of written


58

consent of its general partner. To the contrary, the court credited that assertion and

evidence completely. (A13.) It concluded, however, that since the appointment

process was not made known to those individuals “who have only the By-Laws to

go by in determining whether they are eligible for indemnification [and]

advancement,” (A21), its existence is irrelevant to whether Aleynikov is entitled to

advancement and indemnification. The court thus correctly recognized that “under

Delaware’s substantive contract law, certain factual issues proffered by the

defendant/drafter are not deemed ‘material’ to the court’s decision.” (A31.)

Finally, Goldman contends that “the existence of [its appointment] process

precluded summary judgment in Aleynikov’s favor,” (GSb46), but that process

could only conceivably be relevant if it were publicized in a way that put an

objectively reasonable person on notice as to who was and who was not an officer

of GSCo for purposes of §6.4[3]. (A19,A169.) Where the governing principle in

interpreting the meaning of “officer” as used in By-Law §6.4[3] — assuming an

ambiguity — is the reasonable expectation of those individuals who must rely on

that provision in determining whether they are entitled to indemnification and

advancement, Commerzbank, 65 A.3d at 552; Matheson, 681 A.2d at 395, an

unwritten process of appointing officers that is never made known to those

individuals has no bearing on the interpretive analysis, as the court correctly held.

As for Goldman’s admission that it often pays the legal fees of those it


59

contends are not officers, the court correctly found that, regardless of Goldman’s

shifting characterization of those payments,12 the fact that it (a) paid the legal fees

of 51 of 53 employees (including fifteen vice presidents) in the past six years and

refused to pay only Aleynikov’s fees and those of one other individual; and (b)

“has never cited a person’s status as vice president as a reason for refusing to

provide advancement or indemnification” is “persuasive evidence that a vice

president is an officer entitled to advancement or indemnification under the By-

Laws.” (A22,A1053.) That “course of conduct,” the court reasoned, “would lead

a reasonable observer to conclude that a wide range of employees, not just a few

higher-ups, are entitled to advancement and indemnification.” (A21.)

Alternatively, accepting as true Goldman’s contention that its legal-fee

payments were entirely discretionary and made outside the By-Laws, the court

correctly held that those payments were irrelevant to determining whether

Aleynikov, as a GSCo Vice President, was an officer entitled to advancement and

indemnification because GSCo’s “indemnification decisions and the By-Laws

occupy separate worlds” according to Goldman’s own position. (A24.) In other

words, if the decision to pay legal fees was purely discretionary and made

12 The court noted that Goldman “back-pedaled” from its counsel’s characterization of the payments as “permissive indemnification” at the first oral argument but concluded that the change of terminology “makes no difference” as to Aleynikov’s entitlement to advancement and indemnification. (A21.)


60

independent of the By-Laws, Goldman’s historical payment practice, by definition,

could not aid the objectively reasonable observer’s understanding of the By-Laws.

On appeal, Goldman attacks only the court’s conclusion that there is no

contemporaneous evidence that its legal-fee payments were made as a matter of

business discretion, not pursuant to the By-Laws. (GSb48-52.) Indeed, Goldman

argues that there is a “raft of evidence making absolutely clear that its payments of

legal fees ... were made on a purely discretion basis outside the By-Laws.”

(GSb49.) Leaving aside that there is no such evidence, Goldman cannot and does

not dispute that: (1) its practice of paying the legal fees of a broad range of

employees, whether discretionary or mandatory, would lead anyone unaware of the

reasons for those payments to conclude that the right to advancement and

indemnification is vested in a group far broader than its most senior officers; and

(2) assuming Goldman’s legal-fee payments were discretionary and independent of

the By-Laws, they are entirely irrelevant to the interpretation of those By-Laws.

As to the first conclusion, Goldman has never contended, and has produced

no evidence to suggest, that it publicly disclosed or made known within the firm

that it was paying individuals’ legal fees as a matter of business discretion and not

pursuant to its By-laws. As with an officer-appointment process kept secret and

not disclosed to anyone, Goldman’s internal and undisclosed characterizations of

its payment of legal fees could not have affected the reasonable expectations of


61

someone in Aleynikov’s position as to whether he was an officer entitled to

indemnification and advancement. All that a reasonable observer could possibly

have known was that Goldman had advanced the legal fees of individuals, other

than its most senior executives, who were accused of serious misconduct —

including, as the court noted, “GSCo vice presidents … Tourre, who was sued by

the SEC, and Neil Morrison, who was the subject of administrative proceedings

based on his alleged involvement in a Massachusetts pay-to-play scheme.” (A23.)

Accordingly, even if there was evidence that GSCo paid legal fees as a matter of

business discretion, independent of the By-Laws, that evidence was irrelevant.

Goldman fails even to address the court’s second conclusion: that evidence

of its payment history is irrelevant. That evidence certainly does not create a

genuine issue of material fact that warranted denying Aleynikov summary

judgment.

In sum, the court correctly concluded that extrinsic evidence regarding

Goldman’s officer-appointment process and history of legal-fee payments would

not create a genuine issue of material fact even if it were proper to consider that

evidence in considering Aleynikov’s entitlement to advancement.


62

CONCLUSION

For the reasons set forth above, Aleynikov respectfully submits that if the

Court finds jurisdiction over this appeal, it should affirm the district court’s

decision.

Dated: December 2, 2013 Respectfully submitted, Chatham, New Jersey

MARINO, TORTORELLA & BOYLE, P.C. By: /s/ Kevin H. Marino Kevin H. Marino John D. Tortorella John A. Boyle 437 Southern Boulevard Chatham, New Jersey 07928-1488 (973) 824-9300 Attorneys for Plaintiff-Appellee

Sergey Aleynikov


CERTIFICATION OF ADMISSION TO BAR

I, Kevin H. Marino, certify as follows:

1. I am a member in good standing of the bar of the United States Court of

Appeals for the Third Circuit.

2. Pursuant to 28 U.S.C. § 1746, I certify under penalty of perjury that the

foregoing is true and correct.

/s/ Kevin H. Marino Kevin H. Marino December 2, 2013


CERTIFICATE OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32(a) AND LOCAL RULE 31.1

Pursuant to Fed. R. App. P. 32(a)(7)(C), I certify the following:

This brief complies with the type-volume limitation of Rule

32(a)(7)(B) of the Federal Rules of Appellate Procedure because this brief

contains 13,924 words, excluding the parts of the brief exempted by Rule

32(a)(7)(B)(iii) of the Federal Rules of Appellate Procedure.

This brief complies with the typeface requirements of Rule 32(a)(5) of

the Federal Rules of Appellate Procedure and the type style requirements of

Rule 32(a)(6) of the Federal Rules of Appellate Procedure because this brief

has been prepared in a proportionally spaced typeface using the 2008 version

of Microsoft Word in 14 point Times New Roman font.

This brief complies with the electronic filing requirements of Local

Rule 31.1(c) because the text of this electronic brief is identical to the text of

the paper copies, and the Vipre Virus Protection, version 3.1 has been run

on the file containing the electronic version of this brief and no viruses have

been detected.

/s/ Kevin H. Marino Kevin H. Marino December 2, 2013


AFFIDAVIT OF SERVICE DOCKET NO. 13-4237 -------------------------------------------------------------------------------X Sergey Aleynikov, vs. The Goldman Sachs Group, Inc. -------------------------------------------------------------------------------X

I, Elissa Matias, swear under the pain and penalty of perjury, that according to law and being over

the age of 18, upon my oath depose and say that:

on December 2, 2013 I served the within Brief on Behalf of Appellee in the above captioned matter upon:

Christopher E. Duffy, Esquire Boies, Schiller & Flexner 575 Lexington Avenue 7th Floor New York, NY 10022 A. Ross Pearlson, Esquire Wolff & Samson One Boland Drive The Offices at Crystal Lake West Orange, NJ 07052 via electronic filing and electronic service as well as Express Mail by depositing 2 copies of same, enclosed in a post-paid, properly addressed wrapper, in an official depository maintained by United States Postal Service. Unless otherwise noted, copies have been sent to the court on the same date as above for filing via Express Mail. Sworn to before me on December 2, 2013 /s/ Robyn Cocho /s/ Elissa Matias Robyn Cocho Elissa Matias Notary Public State of New Jersey No. 2193491 Commission Expires January 8, 2017

Job # 250829


Documents

United States Court of Appealss3.amazonaws.com/.../files/aleynikov-brief-goldman-sachs.pdf · United States Court of Appeals for the Third Circuit Case No. 13-4237 SERGEY ALEYNIKOV,