ALEYNIKOV v. THE GOLDMAN SACHS GROUP, INC.

Filing 174

REDACTED OPINION. Signed by Judge Kevin McNulty on 10/16/13. (nic, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

SERGEY ALEYNIKOV,

Civ. No. 12-5994 (KM)

Plaintiff,

[REDACTED]
OPINION

V.

THE GOLDMAN SACHS GROUP, INC.,
Defendant.

KEVIN MCNULTY, U.S.D.J.:
This matter comes to court on a renewed motion for summary judgment
(ECF 130) brought by the plaintiff, Sergey Aleynikov, against defendant
Goldman Sachs Group, Inc. (“GS Group”), the parent company of his former
employer, Goldman, Sachs & Co. (“GSCo”). Also before the court is a cross
motion by GS Group and GSCo (together, “Goldman”)’ for summary judgment
(ECF 143). This opinion should be read in conjunction with my prior opinion in
this case, dated December 14, 2012 (ECF No. 44), which established the legal
and procedural context for this renewed motion and cross motion.
Aleynikov seeks indemnification for legal fees and expenses he has
already incurred in a federal criminal case that concluded, after appeal, in
dismissal of the charges (the “Federal Case,” 10 Cr 0096 (S.D.N.Y.)). He also
seeks advancement of legal fees and expenses for his ongoing defense of a
criminal case thereafter filed in New York state court based on the same facts
(the “State Case,” People v. Aleynikov, Indictment No. 4447/12). There is a
fundamental
distinction
between
indemnification
and advancement.
Indemnification is a claim for fees incurred in a case that has already
concluded in plaintiff’s favor; it is a claim for damages based on events
concluded in the past. Advancement of fees, on the other hand, is designed to
Goldman, Sachs & Co. joined GS Group’s Counterclaims as a Counterclaim
Plaintiff. Aleynikov repeatedly has pointed out that GSCo joined the action without
leave of court. That defect is acknowledged, but it is easily remedied and, for purposes
of my decision here, irrelevant.
1

1

fund an ongoing case, and the recipient of the funds is required
to pay them
back should he be unsuccessful in that case.
For the reasons expressed below, I will grant Aleynikov’s motion
for
summary judgment with respect to his claim for advancement
of fees only.
Defendants shall pay to Aleynikov’s counsel, Marino Tortorella
& Boyle, P.C.
(“MTB”), (1) reasonable fees and expenses incurred to date for Aleyni
kov’s legal
defense in the State Case; (2) reasonable fees and expenses
that Aleynikov
incurs for his ongoing defense in the State Case, on a rolling basis
until a final
judgment is reached; and (3) “fees on fees,” i.e., fees and expens
es in this
action that can reasonably be apportioned and attributed
to the issue of
advancement.
As to indemnification, summary judgment is denied. I deny the motion
in
part because any dollar amount due has not yet been proven; issue
s as to, for
example, MTB’s fee arrangements with Aleynikov in the federal
criminal case
may require exploration. But I am primarily motivated by
concerns of
procedural fairness. In December 2012 I denied Aleynikov’s
motions for
summary judgment and a preliminary injunction. I did, howev
er, order
expedited discovery, based primarily on my perception that the
advancement
claim should be explored as quickly as possible. Advancement
is both timesensitive (the funds are needed in pending legal proceedings
now) and
provisional (the funds must be paid back if plaintiff is not succes
sful). As to
indemnification, however, neither is true. It follows that, as to
indemnification,
Aleynikov should not reap an advantage from what amounted
to a limited
priority in discovery. Goldman has had little or no opportunity
for discovery on
the counterclaims it filed shortly after my earlier ruling. Thus, even
if I were to
grant summary judgment on indemnification, I would stay
that part of my
judgment. Goldman should have the opportunity to litigate its
counterclaims,
which might substantially offset any amounts found owing
on Aleynikov’s
indemnification claim. When both sides’ remaining claims
are ripe, I will
entertain motions for summary judgment or try them, as appr
2
opriate.

In the interim the parties may, through discovery, fill in whatever gaps
remain
in the indemnification issues. For example, Goldman’s counsel
referred at oral
argument to the need to explore MTB’s fee arrangements with Aleynikov
in connection
with the Federal Case. Whether or not that concern is valid,
it is certainly true that
discovery to date has been expedited, has been most urgently
directed to the
advancement issue, and may have been incomplete as to indemnificatio
n.
2

2

I.

Procedural Background

Aleynikov initially filed a complaint and petition for a preliminary
injunction, as well as a motion for summary judgment, seeking
(1) indemnification for legal costs and fees arising from his
successful defense of the Federal Case, in which it was alleged
that, while employed as a vice president at GSCo, Mr. Aleynikov
stole proprietary computer source code;
(2) advancement of legal costs and fees for his defense of the State
Case, which was filed after the dismissal of the Federal Case and
arose from the same factual allegations; and
(3) advancement of attorneys’ fees and expenses incurred in this
civil action seeking indemnification and advancement (“fees on
fees”).
See Motion for Summary Judgment by Sergey Aleynikov, Sep. 25, 2012, ECF
No. 2 (“P1. 1st MSJ”) and Order to Show Cause for a Preliminary Injunction,
Sep. 25, 2012, ECF No. 4 (“Pet. PT”). GS Group moved to dismiss Aleynikov’s
Complaint, opposed the preliminary injunction motion, and, in the alternative,
sought summary judgment. See Def.’s Mem. in Resp. to Order to Show Cause
and Opp. to Pl.’s Mot. Summ. J. and in Support of Def.’s Mot. to Dismiss or for
Summ. J., Oct. 12, 2012, ECF No. 22 (“Def. Opp. & MSJ”).
After briefing and oral argument, this Court denied Aleynikov’s petition
for a preliminary injunction and denied both parties’ dispositive motions. See
Opinion of Dec. 14, 2012, ECF No. 44 (Dec. Op.). In short, I held that the
record was undeveloped with regard to an essential issue: Was Aleynikov an
“officer” of GSCo, and therefore eligible for indemnification and advancement of
legal fees? See Dec. Op. at 2. I ordered expedited discovery. See id. at 27-28.
Just a week later, on December 21, 2012, GS Group and GSCo
3
answered Aleynikov’s Complaint and filed counterclaims against him, based on
Aleynikov’s alleged theft of Goldman’s valuable computer code. The
counterclaims allege breach of contract, misappropriation of trade secrets, and
conversion. Goldman also seeks a declaratory judgment that it would have no
liability to Aleynikov for malicious prosecution. See Answer & Counterclaims,
December 21, 2012, ECF No. 51 (“Counterclaims”). Aleynikov moved to dismiss
those Counterclaims. See Motion to Dismiss the Counterclaim by Sergey
Aleynikov, January 11, 2013, ECF No. 62 (“MTD Counterclaim”).
3

As noted above, at n. 1, I refer to these two entities collectively as “Goldman.”
3

Months of discovery and discovery disputes ensued. Goldman urged that
expedited discovery commence only after its counterclaims had been properly
joined. That procedure, said Goldman, would permit all claims to be explored
together in discovery. Def. Letter of December 19, 2012, ECF No. 47. The
Court, however, maintained its original course, limiting the scope of discovery
to “the issues identified in the District Court’s December 14, 2012, Opinion
and Order,” and set a discovery schedule to be completed by March 1, 2013.
See Discovery Order of Magistrate Judge Hammer, December 21, 2012, ECF
No. 52 (“Dec. 21, 2012 Disc. Or.”). This had the effect of permitting discovery to
go forward on Aleynikov’s claims—especially the advancement claim—while
delaying it as to other issues.
Aleynikov took the depositions of Adam Schlesinger (“Schlesinger”),
Aleynikov’s former supervisor, see Certification of Kevin H. Marino in Support
of Plaintiff’s Motion for Summary Judgment, July 24, 2013, ECF No. 133
(“Marino Cert.”), Ex. 6; Gregory K. Palm (“Palm”), GS Group’s General Counsel,
id. Ex. 7; and Matthew E. Tropp (“Tropp”), GSCo’s Associate General Counsel,
id. Ex. 8. After completing those initial depositions, Aleynikov sought to depose
GS Group and GSCo via two representatives designated pursuant to Fed. R.
Civ. P. 30(b)(6). Norman Feit (“Feit”), Director of Litigation and Regulatory
4
Proceedings, and a Managing Director of GSCo, was deposed as GSCo’s
representative on the topic of the payment of legal fees and expenses to nonclerical employees. See id. Ex. 10. Tropp was deposed as the representative on
the topic of the term “officer” as used in GS Group’s By-Laws. Id. Ex. 11. GS
Group was permitted to depose Aleynikov on the limited issue of his
employment status and the basis for his belief that he was an officer of GSCo.
See id. Ex. 9. In addition, both sides were permitted ten interrogatories, ten
document production demands, and ten requests to admit. See Dec. 21, 2012
Disc. Or.; Marino Cert., Exs. 18 & 19; Declaration of Melissa A. Salimbene in
Opposition to Aleynikov’s Motion for Summary Judgment, August 7, 2013, ECF
No. 149 (“Salimbene Deci.”), Exs. 8, 19, 21, 30, 33.

“Notice or Subpoena Directed to an Organization.
The named
organization must then designate one or more officers, directors, or managing agents,
or designate other persons who consent to testify on its behalf; and it may set out the
matters on which each person designated will testify.
The persons designated must
testify about information known or reasonably available to the organization.” Fed. R.
Civ. P. 30(b)(6).
...

...

4

On July 24, 2013, Aleynikov filed the renewed Motion for Summary
Judgment that is now before the Court. See Motion for Summary Judgment
by
Sergey Aleynikov, July 24, 2013, ECF No. 130 (“P1. Renewed MSJ”). Goldm
an
opposes the motion and has cross-moved for summary judgment. See CrossMotion for Summary Judgment by the Goldman Sachs Group, Inc., Augus
t 7,
2013, ECF No. 143 (“Def. Renewed Opp. & MSJ”). I heard oral argument
on
August 21, 2013.
II.

Legal Background: Summary Judgment Standards and the
December 2012 Opinion

A. Cross-Motions for Summary Judgment
A court “shall grant summary judgment if the movant shows that there
is
no genuine dispute as to any material fact and the movant is entitle
d to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett
,
477 U.S. 317, 322 (1986) (summary judgment is appropriate where “there
is no
genuine issue of any material fact and the moving party is entitle
d to a
judgment as a matter of law.”); Alcoa, Inc. v. United States, 509 F.3d 173,
175
(3d Cir. 2007). Summary judgment is desirable because it elimin
ates
unfounded claims without resort to a costly and lengthy trial, Celotex, 477
U.S.
at 327, but a court should grant summary judgment only “if the pleadin
gs,
depositions, answers to interrogatories, and admissions on file, together
with
the affidavits, if any, show that there is no genuine issue as to any materi
al fact
and that the moving party is entitled to judgment as a matter of law.”
Id. at 322
(citing Fed. R. Civ. P. 56(c)). “[S]ummary judgment will not lie if the
dispute
about a material fact is ‘genuine,’ that is, if the evidence is such
that a
reasonable jury could return a verdict for the nonmoving party.” Anders
on v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The burden of showin
g that no
genuine issue of material fact exists rests initially on the moving party.
Celotex,
477 U.S. at 323. Once the moving party has made a properly supported
motion
for summary judgment, the burden shifts to the nonmoving party to “set
forth
specific facts showing that there is a genuine issue for trial.” Anders
on, 477
U.S. at 247-48 (citing Fed. R. Civ. P. 56(e)). In evaluating a summary judgm
ent
motion, a court must view all evidence in the light most favora
ble to the
nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
475
U.S. 574, 587 (1986); Goodman v. Mead Johnson & Co., 534 F.2d 566, 573
(3d
Cir. 1976).

5

Of course an issue cannot be “material” and judgment cannot be
required “as a matter of law” except in relation to the substantive law governing
a claim. See Fed. R. Civ. P. 56. In this diversity case, that substantive law is
Delaware state law.
B. Indemnity, Advancement and “Officer” Status: The Court’s
December 2012 Opinion
The parties agree that the availability of advancement or indemnity
depends heavily on one disputed issue: whether Aleynikov was an “officer” of
GSCo within the meaning of Section 6.4 of the GS Group By-laws. I assume
familiarity with the Court’s Opinion of December 14, 2012, but will recap
briefly here.
5

Here is some of the critical (and essentially undisputed) factual and procedural
background:
5

GSCo is a “broker-dealer” limited liability partnership organized
under the laws of New York State. It is a non-corporate subsidiary of GS
Group, the Goldman Sachs parent company, which is incorporated in the
State of Delaware.
Mr. Aleynikov was employed by GSCo from May 7, 2007 through
June 30, 2009 (his last day in the office was June 5). There he was part
of a team of computer programmers responsible for developing source
code relating to GSCo’s high frequency trading system. During his
employment at GSCo, Aleynikov held the title of “vice president.”
In April 2009, Mr. Aleynikov accepted an employment offer from
Teza Technologies, a start-up company based in Chicago. Before leaving
GSCo in June, Aleynikov allegedly copied and transmitted to his home
computer and other devices, via a server in Germany, hundreds of
thousands of lines of confidential source code. About a month later,
Aleynikov flew to Teva’s offices carrying a laptop and flash drive that
allegedly contained the stolen source code. Immediately upon his return,
he was arrested by the FBI at Newark Liberty International Airport and
charged federally.
After an eight day jury trial in the United States District Court for
the Southern District of New York, Mr. Aleynikov was convicted of (1)
theft of trade secrets in violation of the Electronic Espionage Act (“EEA”)
(18 U.S.C. § 1832(a)(2) and (4)), and (2) transportation of stolen property
in interstate commerce in violation of the National Stolen Property Act
(“NSPA”) (18 U.S.C. § 2314). ECF 1 (“Compi.”), ¶f 20-21; see also United
States v. Aleynikov, 737 F. Supp. 2d 173 (S.D.N.Y. 2010). On March 18,
2011, Aleynikov was sentenced to 97 months of imprisonment. Compl. ¶
22. On direct appeal, the United States Court of Appeals for the Second
Circuit reversed the decision of the district court, reasoning that, while
Aleynikov breached his confidentiality obligations to Goldman, his
6

As stated in that Opinion, the starting point is Section 145 of the
Delaware General Corporation Law (“DGCL”). Delaware corporate law
authorizes indemnification of legal expenses when the person has been
successful in the underlying proceeding. “Section 145(a) and (b) of the
Delaware General Corporation Law gives corporations the power 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 Del. Code Ann. tit. 8, § 145(a) & (b)). Indemnification
is not appropriate “until after the defense to legal proceedings has been
successful on the merits or otherwise.” Id.
In addition, DGCL Section 145(e) authorizes the advancement of
6
expenses being incurred in pending proceedings. Its aim is to provide

conduct did not fall within the scope of the charged federal offenses. See
United States v. Aleynikov, 676 F. 3d 71 (2d Cir. 2012). Accordingly, a
Judgment of Acquittal on both counts was entered on June 5, 2012.
Compl. Ex. B. Shortly thereafter, on August 2, 2012, Aleynikov was
rearrested in New Jersey and then indicted by a Manhattan Grand Jury
on two counts of “Unlawful use of Secret Scientific Material,” in violation
of NY Penal Law § 165.07, and one count of “Unlawful Duplication of
Computer Related Material,” in violation of NY Penal Law § 156.30(1). See
Marino Cert., Ex. 4.
Mr. Aleynikov has been represented by the New Jersey law firm of
Marino, Tortorella & Boyle (“MTB”) since April 2010. According to the
Complaint, Aleynikov was “rendered impecunious” after paying about a
quarter of the legal fees incurred during his defense of the federal
charges.
Dec. Op. at 3-4.
6

(e) Expenses (including attorneys’ fees) incurred by an officer or director of the
corporation in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys’ fees) incurred by former directors and officers or other employees and
agents of the corporation or by persons serving at the request of the corporation
as directors, officers, employees or agents of another corporation, partnership,
joint venture, trust or other enterprise may be so paid upon such terms and
conditions, if any, as the corporation deems appropriate.

Del. Code Ann. tit. 8,

§

145(e) (West 2012).
7

“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.” Id. at 211 (internal quotation omitted).
The right to indemnification and the right to advancement are “separate
and distinct.” Indemnification depends upon whether the officer’s defense in
underlying litigation has succeeded. Advancement, by contrast, depends on the
pendency, not the merits, of the claims asserted against the corporate official.
See Ridder v. CityFed Fin. Corp., 47 F.3d 85, 87 (3d Cir. 1995) (“Under
Delaware law, appellants’ right to receive the costs of defense in advance does
not depend upon the merits of the claims asserted against them, and is
separate and distinct from any right of indemnification they may later be able
to establish.”).
The December 2012 Opinion analyzed the extent to which Goldman, in
its By-Laws, implemented the authority granted by the Delaware General
Corporation Law. Section 6.4 of GS Group’s By-laws provides for indemnity
and advancement of legal fees as follows:
The Corporation shall indemnify to the full extent permitted by law
any person made or threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person or such
person’s testator or intestate is or was a director or officer of the
Corporation, is or was a director, officer, trustee, member,
stockholder, partner, incorporator or liquidator of a Subsidiary of
Expenses, including attorneys’ fees, incurred
the Corporation
by any such person in defending any such action, suit or
proceeding shall be paid or reimbursed by the Corporation
promptly upon demand by such person and, if any such demand is
made in advance of the final disposition of any such action, suit or
proceeding, promptly upon receipt by the Corporation of an
undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be
indemnified by the Corporation. The rights provided to any person
by this by-law shall be enforceable against the Corporation by such
person, who shall be presumed to have relied upon it in serving or
continuing to serve as a director or officer or in such other capacity
as provided above.
.

.

.

.

Salimbene Decl., Ex. 1 (“By-Laws”) § 6.4.

8

Thus, if certain conditions are met, indemnification and advancement are
mandatory. By-laws § 6.4 (“shall be paid or reimbursed by the Corporation”).
The By-Laws do, however, restrict indemnification and advancement to
particular persons, including “officers,” a defined term:
the term “officer,”
[1] when used with respect to the Corporation, shall refer to any
officer elected by or appointed pursuant to authority granted by
the Board of Directors of the Corporation pursuant to clauses (i),
(ii), (iii) and (iv) of Section 4.1 of these by-laws,
[2] when used with respect to a Subsidiary or other enterprise that
is a corporation, shall refer to any person elected or appointed
pursuant to the by-laws of such Subsidiary or other enterprise or
chosen in such a manner as is prescribed by the by-laws of such
subsidiary or other enterprise or determined by the board of
directors of such Subsidiary or other enterprise, and
[3] when used with respect to a Subsidiary or other enterprise that
is not a corporation or is organized in a foreign jurisdiction, 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
.

(By-Laws § 6.4; numbering of categories [1], [2] and [3] and line breaks added
for ease of reference.)
7
GSCo, a New York limited liability partnership, is “a Subsidiary or other
enterprise that is not a corporation” and it therefore falls within By-laws
Section 6.4 Category [3], quoted above. Under Section 6.4[3], an “officer” is
defined as “any officer of such entity, [and] any person serving in a similar
capacity or as the manager of such entity.” Aleynikov does not claim that he
served “in a similar capacity” to an officer or that he served as “manager” of
GSCo. Rather, Aleynikov claims to be an “officer” of GSCo because he held the
title of “vice president.”
As I observed ten months ago, “the phrasing of Category [3] is less than
clear. It begins by stating that ‘the term ‘officer’ shall include in addition to any
Thus, for a non-corporate subsidiary, an ‘officer’ is
officer of such entity.
defined as, inter alia, ‘any officer.”’ Dec. op. at 12.
...‘

Sometimes GSCo is referred to in the papers as a limited partnership. I take
this to be a shorthand reference, but in any event the distinction is not material to the
issues here.
9

In discussing this issue the first time around, I reasoned:
A “vice president”—Aleynikov indisputably held that title—would
ordinarily be considered an “officer” in a corporate context. In a
non-corporate partnership entity like GSCo, however, “officer” and
“vice president” have no fixed definition. Moreover, it does not
appear that Aleynikov, a computer programmer, performed
functions normally associated with the status of officer or
manager. The definition of a non-corporate “officer” in GS Group’s
By-laws is circular and unhelpful. Aleynikov argues that I should
therefore let the burden of ambiguity fall on GS Group, take the
title of “vice president” at face value, and declare him eligible for
advancement of fees. GS Group urges, however, that “vice
president” can be something of a courtesy title in its industry. It
further alleges that it has established a process of appointment
that clearly distinguishes between officers and non-officers. If true,
this would be highly relevant; an entity may decide whom to
designate as an officer. But because GS Group points to no such
written policy, because it is in possession of all the facts on this
point, and because there has been no discovery, it would be unfair
to conclude from a blanket statement in an affidavit that it is true.
Aleynikov is entitled to probe these matters.
Dec.

op.

at 2.

I stated then that the day might come when I would have to rely on
contra proferentem, and construe the By-Laws against their drafter, Goldman.
8
In the meantime, however, I ordered expedited discovery. Such 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.

8

“Plaintiff suggests that if the Court finds the GS Group’s By-laws to be
ambiguous, it should employ the interpretive principle of contra
proferentem, ‘which is that ambiguities in a contract should be construed
against the drafter.’
[T]he answer to this question of contract
interpretation may turn on matters of fact that cannot be resolved on the
present record. At some point the Court may have to employ interpretive
tools of ‘last resort,’ but to do so at this stage would be premature.”
...

Dec. Op. at 17.
10

III.

Discussion

Despite a more developed factual record, a renewed round of briefing,
and helpful oral advocacy from both sides, I still find this to be a close
question. I do resolve the advancement issue in Aleynikov’s favor. My decision,
as foreshadowed in the December 2012 Opinion, largely concerns the issue of
whether Aleynikov, as a vice president of GSCo, is an “officer” for purposes of
By-Laws § 6.4[3]. The following discussion has several interrelated
components.
First, I read the By-Laws in keeping with the Delaware state law policy
favoring advancement of fees, a remedy that is intended to be emergent and
provisional. Delaware case law confirms my conclusion that by-laws are to be
read liberally to effectuate that policy. (Section 3.A, infra.)
Second, I consider certain parol evidence that has emerged from
discovery. (Section III.B, infra) In the end, parol evidence may not be central to
the legal issues, but I consider it to the extent it may shed light on ambiguities
in the By-Laws or interpretive issues. GSCo has submitted evidence that it
appoints officers by resolution. For purposes of this motion I give that evidence
full credence, but I note that Goldman itself acknowledges that this procedure
is independent of the By-Laws. It therefore sheds little light on the
interpretation of § 6.4[3]. Aleynikov submits evidence that Goldman has paid
the legal fees of 51 of 53 persons who sought them, including 15 who, like him,
were vice presidents. Goldman’s insistence that it elects to make such
decisions on a discretionary basis, even given due credit, at best neutralizes
this evidence as a guide to the scope of mandatory indemnification under By
Laws § 6.4[3]. Goldman’s evidence of title inflation, too, does not bar summary
judgment, particularly if the burden of any resulting uncertainty rightly falls on
Goldman.
Third, I consider the record in light of Delaware law. (Section III.C., infra.)
Delaware interprets potential ambiguities in by-laws under ordinary rules of
construction of contracts. Plain language, supplemented by case law
interpretations, suggests that a vice president be considered an officer.
Further, Delaware will not consider extrinsic evidence when the instrument in
question is a business entity’s constitutive charter, for example, a partnership
agreement. Where, in particular, the clause in question is an advancement

11

provision, a court will tolerate some ambiguity, and will not resort to parol
evidence. (Section III.C. 1, infra.)
Fourth—and perhaps most important—is the special status of the
Delaware contra proferentem rule with respect to corporate bylaws. Where a
person has joined a business organization, and has had no opportunity to
participate in the drafting of its constitutive documents, ambiguities will not
merely be tolerated, but will affirmatively be interpreted against the drafter. In
such a case, a dispositive order following motion practice may be appropriate
even when an advancement or indemnification provision in a bylaw or
partnership agreement is ambiguous. Under this robust doctrine, even
assuming arguendo that Goldman has raised issues of fact, those issues cease
to be material ones for purposes of summary judgment. (Section III.C.2, infra.)
Finally, I deal with the remaining, less controversial elements of an
advancement claim, award partial summary judgment to Aleynikov, and
fashion procedures to govern the relief awarded.
A. The pro-advancement policy of DGCL Section 145 and the emergent,
provisional advancement remedy
I read Goldman’s By-Laws and analyze this summary judgment motion
in light of Delaware’s strong statutory policy favoring advancement of fees and
expenses. That policy is expressed in an advancement remedy that is both
emergent and provisional. Immediate advancement of fees is required, subject
only to an unsecured undertaking to repay them if the applicant is
unsuccessful in the underlying litigation. That statutory policy suggests that
the By-Laws should be read liberally and expansively.
The public policy served by authorizing the advancement and
indemnification of litigation expenses is well-settled. Without it, corporations
would find it difficult to retain high-quality directors and officers, willing to
make socially useful decisions that involve economic risk. By authorizing
indemnity and advancement within certain guidelines, the General Assembly
sought to encourage well-qualified persons to serve as directors and officers of
Delaware corporations and, in that capacity, to be willing to commit their
corporations, after the exercise of good faith and care, to risky transactions
that promise a lucrative economic return. Fasciana v. Elec. Data Sys. Corp.,
829 A.2d 160, 170 (Del. Ch. 2003) (citing Mayer v. Executive Telecard, Ltd., 705
A.2d 220, 223 (Del. Ch. 1997) (“[The] purpose [of § 145] is to encourage capable
12

persons to serve as officers, directors, employee or agents of Delaware
corporations, by assuring that their reasonable legal expenses will be paid.”);
Hibbert v. Hollywood Park, Inc., 457 A.2d 339, 343—44 (Del. 1983) (the policy of
Delaware’s indemnification statute is to encourage corporate officials to resist
unjustified lawsuits and to encourage capable individuals to serve as corporate
officials); Scharf v. Edgcomb Corp., No. 15224, 1997 WL 762656, at *4 (Del. Ch.
Dec. 4, 1997) (“Indemnification provisions authorized by statute and
incorporated into bylaws.
demonstrate the desire to broaden the flexibility of
decision making by eliminating the chilling effect of potential personal liability
on the part of officers and directors.”)).
.

.

That statutory policy, liberal enough as to indemnification, is particularly
liberal as to advancement.
[DGCL] Section 145(e), however, expressly contemplates that
corporations may confer a right to advancement that is greater
than the right to indemnification and recognizes that advances
must be repaid if it is ultimately determined that the corporate
official is not entitled to be indemnified.
Homestore, 888 A.2d at 2 12—13.
Of course, as stated in the December 2012 Opinion, the statute grants a
corporation the option to advance fees and expenses; it does not require the
corporation to do so. I also observed that Aleynikov did not possess any
particular high-level decision-making authority. Nevertheless, with those
9
caveats, I find that the statute does strongly favor advancement, even in
doubtful cases. The By-Laws grant advancement “to the full extent permitted
by law,” and therefore must be read, at least in a general way, as implementing
the policy of the Delaware statute.
The strength of the statutory pro-advancement policy is confirmed by the
emergent and provisional nature of the advancement remedy. Both the statute
and the By-Laws require immediate assistance with legal expenses, reserving
the company’s right to repayment once litigation has ended.
It is not much of an exaggeration to say that the statue and By-Laws
require immediate assistance, postponing the issue of whether such assistance
For those reasons, I found the public policy factor to be neutral for purposes of
the preliminary injunction application, particularly because there had been no
discovery as to the “officer” issue.

9

13

is deserved. They do not distinguish between “worthy” and “unworthy”
recipients. They do not distinguish between claims brought by Goldman and
claims brought by outsiders. See By-Laws § 6.4 (advancement is available in
any proceeding brought “by reason of the fact” that a person is an officer of the
company); see also DGCL § 145(e) (advancement of expenses of “defending any
civil, criminal, administrative or investigative action, suit or proceeding”). In
contrast to indemnification, which is reserved for persons who prevail in the
underlying case, advancement is indifferent as to the underlying merits. Thus
the Court is not to predict, or base its decision on, the likelihood of Aleynikov’s
prevailing in the New York criminal case. See Homestore, 888 A.2d at 214 (“The
limited and narrow focus of an advancement proceeding precludes litigation of
the merits of entitlement to indemnification for defending oneself in the
underlying proceedings.”); see also Ridder, 47 F.3d 85. In short, the
advancement provision almost explicitly prioritizes speed over accuracy.
To put it another way, the statute and By-Laws contemplate that funds
may be advanced to persons who in the end may not to be entitled to keep
them—most commonly, perhaps, because such persons ultimately are
convicted in the underlying criminal case or lose the underlying civil litigation.
Of course, the advancement remedy has a backstop. It is provisional to the
extent that a person who receives advancement of fees must furnish an
“undertaking” to pay them back if he or she is unsuccessful in the underlying
litigation. But an “undertaking,” the parties agree, is nothing more than a
promise; no further security is required.
The lesson to be drawn is that advancement is urgent; the applicant’s
defense is to be funded now, while the action is pending. Otherwise, the parties
might just as well await the outcome and seek indemnification. An award of
advancement, if not expeditious, may be valueless. See United States v. Stein,
452 F. Supp. 2d 230, 270 (S.D.N.Y. 2006) (“there is a strong public interest in
the timely resolution of any disputes concerning advancement of defense
costs”) (vacated on other grounds). Accordingly, the statute contemplates a
truncated proceeding, ordinarily on a paper record. See DeLucca v. KKAT
Mgmt., L.L.C., No. Civ.A. 1384-N, 2006 WL 224058 at *6 (Del. Ch. Jan. 23,
2006) (“Advancement cases are particularly appropriate for resolution on a
paper record, as they principally involve the question of whether claims pled in
a complaint against a party.
trigger a right to advancement under the terms
of a corporate instrument.”).
.

.

14

The imperative of a provisional, immediate remedy, then, is not so much
a matter of court procedure as it is embedded in the state’s substantive law. I
agree that determination of Aleynikov’s claim to advancement “cannot wait
until the underlying case is over.” Stein, 452 F’. Supp. 2d at 272—73. The
advancement question should be resolved early.
Delaware’s strong statutory policy in favor of immediate advancement of
fees has an interpretive dimension. It dictates that the By-Laws be read
liberally in favor of indemnification and advancement. DeLucca, 2006 WL
224058 at *7 (holding that, where reasonable, indemnification contracts should
be read in favor of indemnification in light of Delaware’s pro-indemnification
policies); Delphi Easter Partners Ltd. P’ship v. Spectacular Partners, Inc., 1993
WL 328079 at *2, Del. J. Corp. L. 722, 726 (Del. Ch. Aug. 6, 1993) (holdin
g
that courts should construe limited partnership agreements “so as to achieve
where possible the beneficial purposes that indemnification can afford”). I will
therefore read By-Laws § 6.4[3] as broadly as I reasonably can.
B. Parol evidence that has emerged from discovery.
The parties have completed the limited, expedited discovery ordered by
Magistrate Judge Hammer. Their renewed submissions essentially point
to
three major categories of parol evidence that may bear on the “officer” questio
n:
(a) GSCo’s appointment procedure; (b) GSCo’s track record of indemnifying
personnel; and (c) the effect of title inflation on the meaning of “vice president.”
Before considering how this evidence fits into the substantive law, I will discus
s
its significance from the point of view of the summary judgment standard.

1. GSCo ‘s appointment procedure
By-Laws Section 6.4 [1] and [2] clearly specify an appointment procedure
by which “officers” of parent and subsidiary corporations may be identified.
To
simplify slightly, such an appointment must be pursuant to the author
ity
granted by the By-Laws of the corporate entity. Indeed, Section 6.4[1] explici
tly
incorporates By-Laws Section 4.1, which sets forth the appointment proced
ure
for the Goldman parent corporation.’° By contrast, By-Laws Section 6.4[3], the
category relevant here, eschews any such rule of recognition. It does not

By-Laws Section 4.1 provides that “the Board of Directors
may elect (i) one or
more Chairmen of the Board and/or one or more Vice Chairmen of the Board from
among its members, (ii) one or more Chief Executive Officers, one or more Preside
nts
and/or one or more Chief Operating Officers, (iii) one or more Vice Presidents,
one or
more Treasurers and/or one or more Secretaries
10

...

...

15

specify, even generically, any appointment procedure by which an “officer”
entitled to indemnification may be recognized.
Goldman attempts to fill in that gap with evidence of established
practices of GSCo. Initially, Goldman relied on the affidavit of Matthew Tropp,
managing director and an Associate General Counsel of GSCo. Tropp stated
that GSCo has a practice of appointing its officers only by “formal resolution,”
and noted that there is no such resolution appointing Aleynikov. Def. Opp. &
MSJ at 14. In support, Tropp pointed to GSCo’s Partnership Agreement; that
Agreement, however, contains neither a definition of “officer” nor a procedure
for appointing officers. I noted that “before accepting the generalities in Mr.
Tropp’s affidavit, a fact finder would want to see some of those underlying
facts, which are in Defendant’s control.” Dec. op. at 13-15.
In discovery, Goldman produced eleven “Written Consents of the General
Partner of Goldman, Sachs & Co” which named or removed officers of GSCo.
See Marino Cert. Ex. 12; Salimbene Deci. Ex. 9. All of those resolutions are
designated as “confidential.” In addition, Goldman’s Response to Interrogatory
No. 3 lists seventeen individuals “who have been appointed officers of GSCo
pursuant to its resolution process and have served in that capacity at any time
from 2007 through the date of [the Interrogatory].” See Marino Cert. Ex. 18.
Goldman does not, however, 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 oniy is, an individual who has been appointed
by written resolution of the general partner. Goldman makes no apologies for
this:
The uncontradicted testimony of Mr. Palm and of Matthew Tropp,
the house lawyer responsible for governance issues at GSCo and
affiliated domestic entities, establishes that this procedure has
invariably been followed in the few instances when it has
appointed officers. Their uncontradicted testimony further
establishes that such formal, written resolutions of the General
Partner are the sole process by which GSCo appoints officers.
That the process has not been reduced to writing is unremarkable
despite Aleynikov’s suggestion that it is therefore contrived; it is
rarely used and well-understood by the discrete group within the
legal department which has implemented it over time: “in
overseeing the process of appointing officers, it happened so
infrequently, and we understood that the process by which officers
were appointed, that there was no need to take the extra step and
.

16

memorialize in writing something that was easily handled.” Tropp
30(b)(6) Dep. 69:2-23; see also Palm Dep. 222:20-225: 16, 226:25228: 14.
ECF 145 (“Def. Renewed Opp. & MSJ Brief’), at 6-7.
Goldman also maintains that the persons occupying these appointive
positions (if not the appointment procedure itself) are identified publicly in
filings with the SEC and FINRA. Id. at 8; see Salimbene Deci. Ex. 9. That
circumstance, however, tends to suggest that many of these appointments have
a regulatory purpose. (For example, most are risk or compliance officers.) It
does not shed light specifically on the issue of whom should be considered an
officer for purposes of the indemnification By-Law.
Goldman thus proffers evidence of a practice, not a policy, with its roots
apparently in regulatory, but anyway not indemnificatory, concerns. This
evidence does not solve the definitional issue: the meaning of the term “officer”
in Section 6.4 [3] of the By-Laws. 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 the seventeen
individuals listed in Interrogatory No. 3, see Marino Cert. Ex. 18, are the only
individuals that meet the definition in Section 6.4 [3] of the By-Laws. Nor did
Goldman ever promulgate in advance 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.
On summary judgment I cannot find, as Aleynikov urges, that GSCo’s
appointment process was “contrived” as a post hoc justification for denying him
indemnification. But GSCo’s appointment by written consent of a small
number of officers, even taken at face value, takes us only so far.
For one thing, GSCo acknowledges—indeed, positively revels in—a
certain disconnect between its operating documents and its practices. Goldman
here and in related contexts, see section III.B.2, infra, indicates that it operates
at its own discretion, without resort to any specific authority granted by the
By-Laws or the constitutive documents of the partnership. As a result,
Goldman does not even contend that the real-life appointment process is
prescribed by, e.g., the By-Laws or Partnership Agreement. That circumstance
suggests to me that praxis may have little to say about what was intended by
Section 6.4[3] of the By-Laws.

17

Goldman’s practice-based approach also gives rise to certain anoma
lies.
Thus, for example, Goldman contends that GSCo, as a New York
limited
liability partnership, “is not required to have any officers as a govern
ance
matter.” Def. Renewed Opp. & MSJ Brief at 5 (citing Palm Dep.). By Goldm
an’s
reasoning, there might be no person at GSCo who would be entitle
d to
advancement and indemnification.” But the parties broadly agree that
Section
6.4 [31 is intended as a “catchall,” extending the scope of the By-Laws to
“cover
a range of domestic and foreign entities that are not structured
as
corporations.” See Dec. op. at 12. And everyone similarly agrees that
there is a
policy in favor of indemnification. That inclusive mandate seems incons
istent
with an approach that would deny indemnification and advancement
altogether
in a form of business organization commonly used within the
Goldman
organization and elsewhere.
Similarly, Goldman cites what amounts to an unwritten rule that “even
employees with the functional title of managing director, senior
to vice
president, are not considered GSCo officers unless appointed to
an officer’s
position by means of GSCo’s resolution process.” See Def. Renewed
Opp. &
MSJ Brief at 8 (citing Palm Dep.). That position seems to pull against
the plain
language of By-Law Section 6.4[3], which extends to “the manager
of such
entity.” Moreover, it seems to read the limiting language of By-Laws
Section
6.4[1] and [2] into Section 6.4[3], which everyone agrees is distinct.
Sections
6.4[1] and [2] explicitly identify an appointment procedure by which
an officer
may be recognized; Section 6.4[3] makes no attempt to do so, even generic
ally.
None of this is to suggest that Goldman is exceeding its authority, or
that
the By-Laws mandate some other procedure for the appointment of “office
rs” in
the partnership context. What is clear is that Goldman reserves
for itself a
broad range of discretion, parallel and unrelated to what is prescribed
by the
By-Laws. It follows that Goldman’s practices cannot be relied on
as an
expression of what Section 6.4[3} of the By-Laws means; Goldman
impliedly
acknowledges that its practices do not rest on the authority of that
By-Law.
The upside of such a freewheeling management style is flexibi
lity; the
downside, however, is that procedural categories can become blurred.
So it may be that GSCo is free to designate anyone it wishes
as an
“officer” according to procedures known only to a “discrete group
within the

of course, an employee might still argue that he or she served “in a similar
capacity” to that of an officer, but if “officer” is not defmed, and there are
no officers, it
might be hard to identify the relevant comparison.
11

18

Legal Department.” But
in doing so, GSCo do
es not define, or alter,
meaning of Section 6.4
the
of the By-Laws.
In passing, I note also th
at this unknown, nonpub
lic appointment policy
is potentially inequitable
to employees, who have
only the By-Laws to go
determining whether the
by in
y are eligible for indem
nification, advancement,
perhaps other privileges
or
of employment. That conc
ern is heightened where
discussed below, the fir
, as
m’s course of conduct wo
uld lead a reasonable ob
to conclude that a wide
server
range of employees, no
t just a few higher-ups,
entitled to advancement
are
and indemnification.
My point here, however,
is that GSCo’s appointme
nt procedure has little
to say about the interp
retive issue before the
Court, and does not in
suffice to create a material
itself
, triable issue of fact.

2. GSCo’s track record of ind
emnification and advancem
ent
In the last six years, Go
ldman has paid the leg
al fees of 51 of the 53
persons at GSCo who inc
urred (and, presumably
, sought) such fees. Of
15 held the title of “vice
these,
president” of GSCo. From
this, Aleynikov draws the
lesson that his title of “vi
ce president” entitles him
to be considered an “offic
who is entitled to ind
er”
emnification or advanc
ement of fees. Not so
Goldman. In all cases bu
, says
t one it paid the legal fee
s because it wanted to,
because it had to; this wa
not
s a matter of business
discretion, not of entitlem
under By-Laws Section
ent
6.4. Def. Renewed Opp.
& MSJ Brief at 12-15.
In my December Opini
on, I reasoned that
Goldman’s “permissive
2
indemnification” of pe
rsons whom it did not
recognize as officers “cou
viewed as favorable evide
ld be
nce for GS Group, but
it could also be viewed
an attempt to explain aw
as ‘spin’
ay past indemnity decis
ions that are inconsisten
with GS Group’s interp
t
retation of the By-laws
here.” Dec. Op at 15.
that a “finder of fact would
1 wrote
.
want to test” that issue.
Id. at 15—16.’
—

12

GS Group first submitted
that, in some cases, it
employees who were not
had chosen to indemnif
officers as a matter of “pe
y
rmissive indemnification.”
Opp. & MSJ Brief at 17 and Dec.
See Def.
Op. at 15. Defendant later back-pe
that when it chooses to ind
daled, decla
emnify a non-officer emplo
yee, or even an officer, it do ring
as matter of “business discre
es so
tion.” Goldman no doubt
has its reasons for choosin
form of terminology over
the
g one
terminology makes no differ other. For purposes of my analysis here, however,
ence.
the
Counsel for Aleynikov have
gotten miles of tracti
“spin,” implying that I em
braced that characterizati on out of my use of the word
on or predicted that it wo
borne out by discovery. To
uld be
be clear (and I think I wa
s), I identified “spin” as one
of two
19

Discovery has supplemented the record. Over a six-year period, some
53
persons associated with GSCo were considered for advanc
ement or
indemnification of legal fees. Of these 53, Goldman paid the fees of
51. And of
those 51, 15 were GSCo vice presidents. See Marino Cert., Ex. 15 (March
21,
2013 Letter from Ross Pearison). Aside from Aleynikov, Goldman has
denied
advancement or indemnification to only one person who sought it. That
person,
it is true, was a GSCo vice president. See n. 14, infra. But, as noted,
Goldman
granted advancement or indemnification to 15 other GSCo vice preside
nts. And
Goldman has never cited a person’s status as vice president as
a reason for
refusing advancement or indemnification.
On its face, this would constitute persuasive evidence that a
vice
president is an officer entitled to advancement or indemnification
under the
By-Laws. “Persuasive,” of course, is not “conclusive.” On summary
judgment,
the court is not to weigh the evidence or make factual finding
s, but must
determine the nature and extent of any material conflict in the eviden
ce.
Goldman suggests that there is a material issue of fact becaus
e its
payment of legal fees in all cases was discretionary. According to Goldm
an, it
acted in the best interest of the firm, without reference to Section 6.4
of the By
Laws, and its acts therefore cannot be taken as evidence that
Section 6.4
would have required such indemnification. In only one case, that
of Rajat
Gupta, does Goldman admit that it advanced legal fees pursua
nt to its
obligation under the By-Laws.’
4
contrary possibilities that, in the absence of evidence, could not be assum
ed and
would have to be explored through the discovery process.
14

See ECF 131 (“P1. Renewed MSJ Brief”) at 23-25; Def. Renewed
Opp. & MSJ
Brief at 12-15. Rajat Gupta was a Goldman Sachs board member who
was convicted
of conspiracy and securities fraud and sentenced to two years’
imprisonment.
According to a New York Times article, which does not clearly identify
a source for the
information, “The cost of Mr. Gupta’s legal defense, which has thus far
exceeded more
than $30 million.
has been paid for by Goldman because the bank’s bylaws require
it to pay the legal fees of its top officers and directors. But under a deal reache
d before
his trial, Mr. Gupta agreed that if he was found guilty of insider trading
, he would
reimburse the bank for the legal fees advanced to him. Goldman must
continue to pay
his
bills
until
the
resolution
of
his
appeal.”
See
http: / / dealbook.nytimes.com/20 13/02 / 25/ rajat-gupta-ordered-to-reimburse
goldman-sachs-6-2-million/?_r=0.
The single example of a refusal to pay fees was that of GSCo vice preside
nt
[REDACTED]. Asked to explain the disparate treatment of [REDA
CTED] and others,
.

.

20

Voluntary or mandatory? It is possible that nearly every GSCo employee
whose legal fees were “permissively” paid by Goldman had a colorable claim of
right under Section 6.4 of the By-Laws. According to the list furnished by
Goldman, three are corporate officers of GS Group, clearly eligible pursuant to
Section 6.4[1] and Section 4.1 of the By-Laws. Many of the rest hold the title of
“Managing Director” of GSCo. A “managing director” would have at least a
colorable claim to be an officer or a “person serving
as the managei” of
GSCo. And, as noted above, some fifteen of those who received advancement or
indemnification were, like Aleynikov, vice presidents of GSCo.
...

Lloyd Blankein, Chairman and Chief Executive Officer of GS Group, is an
“officer” by any definition. Goldman, however, now attributes its payment of
Blankfein’s legal fees to its discretion, not to its indisputable obligation under
the By-Laws. Goldman advanced the legal fees of GSCo vice presidents Fabrice
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. Here again, however, Goldman claims that
it did so only as a matter of business discretion, “in the best interest of the
firm.” When asked to further explain its decision, Goldman invoked attorneyclient privilege.
The trouble is that, except as to Gupta, Goldman made no
contemporaneous statement of the basis for any of these indemnification or
advancement decisions. Goldman says it paid the legal fees of 51 individuals at
GSCo, not because they were officers (though some of them were), and not
because they were entitled to advancement and indemnification (though some
of them were), but because Goldman wished to do so. Thus Goldman
characterizes even the most clearly mandatory indemnifications as
discretionary. And it assigns them this discretionary status only now, after the
fact, without any contemporaneous evidence. In some cases, it invokes
attorney-client privilege, walling off its decisions from the fact-finding process.

Goldman invoked the attorney-client privilege. At oral argument, Goldman’s counsel
implied that the [REDACTED] refusal constituted evidence that vice presidents are
ineligible under the By-Laws. The emails that document the [REDACTED] request and
denial, however, do not contain any reference to the By-Laws. See Salimbene Decl.,
Exs. 17-18. True, one email does state that [REDACTED] was “not entitled to
indemnification or advancement” (emphasis added). But no reference was made to
[REDACTED]’s title of vice president specifically, or to the By-Laws generally, in this
connection.
21

I am in search of a “genuine” issue of fact, i.e., one for which the evidence
is in conflict. In opposition to certain historical facts, all I have is Goldman’s
post hoc characterization: a convenient classification that does not even truly
rule out the alternative, but uneasily coexists with it. The authority for
a
business organization’s action is not a fixed and provable historical occurrence,
like a car going through a red light; its reality is legal and executory, depend
ing
for its existence on a contemporaneous declaration and the organi
zing
documents of that entity. Then, when it made indemnification decisio
ns,
Goldman presumably had the power to eschew the By-Laws and invoke
its
discretion; now, its freedom to retroactively classify its acts as discretionary is
more limited. Then, Goldman’s statement that an act was discretionary might
have been enough to make it so; now, not so much. For this reason, I
am
inclined to think that this alleged conflict in the evidence is not enough to raise
a triable issue.
In the alternative, however, there is a view that does not require me to go
so far. Assume arguenclo that, on summary judgment, I cannot definitively
say
whether Goldman’s many indemnification decisions were truly and solely
discretionary. Even so, Goldman’s position implies, at best (best
from
Goldman’s point of view, that is) that the indemnification history is irrelev
ant to
the interpretation of the By-Laws. In Goldman’s account, its indemnificat
ion
decisions and the By-Laws occupy separate worlds. If I draw all inferences
in
favor of Goldman’s “discretionary” rationale, it still tells us nothing about
who
is or is not an officer of GSCo for purposes of By-Laws Section 6.4. That
in
many ways leaves us where we started, with a definitional or semantic issue.
3. Title Inflation
Aleynikov argues that, as a “vice president,” he is an officer under the
“plain and commonly-understood meaning” of the term. Goldman replies
that
Aleynikov’s job designation reflects title inflation in the financial service
s
industry. “Vice president is merely a functional title, because it connotes a level
of seniority between associate and managing director, and as disting
uished
from an officer title, which is somebody who has been appointed throug
h the
process.” See Marino Cert, Ex. 8 (“Tropp Dep.”) at 248:16—23). The title of
vice
president, says Goldman, is held by “thousands at the firm and across
the
financial services industry.” Def. Renewed Opp. & MSJ Brief at 1,
24-27.
According to Goldman, the indemnification provision of the By-laws could
not

22

have been intended to cover so many.’
5
That alleged title inflation, assuming (as I must) that it exists, may not
have the significance that Goldman ascribes to it. For one thing, Goldman’s
bounteous assignment of the title of vice president is not alleged to be confined
to partnerships and other non-corporate entities. Rather, it is alleged to be a
universal characteristic of the financial services industry, an industry that does
much of its business in corporate form. For example, GS Group (i.e., Goldman
Sachs Group, Inc.), is a corporation, as are at least some of its subsidiaries.
There seems to be no dispute that corporate vice presidents—however many
there may be—are covered by Section 6.4. So even taking Goldman’s account at
face value, it cannot be just the sheer number of vice presidents, or the
industry’s over-exuberance in bestowing the title, that bars Aleynikov’s position
from consideration.
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.
I observe in passing that the folkways of the financial services industry
are not necessarily determinative here. I also consider it likely that the average
person in the street would consider a vice president to be an officer. At this
procedural stage, I will not resolve such issues factually. But here, as in
sections III.B. 1 & 2, above, I must determine whether this issue is a genuine,
material one that stands in the way of summary judgment on advancement.
For the reasons expressed here, and below, I do not believe that it is.

Goldman contends that Aleynikov’s claim that he believed he was an officer is
not credible because he did not seek to invoke the By-Laws until three years after he
was arrested. See Marino Cert, Exh. 9 (“Aleynikov Dep.”) at 94:395:2 (“This goes to
show that the idea that he’s an officer is an after-the-fact creation by him”). In
addition, Aleynikov admits that, before his arrest, he never read the By-Laws or
considered his right to advancement and indemnification, id. 96:6—97:14. I do not find
these facts to be material. Aleynikov’s possession of rights does not necessarily depend
on his prior awareness of them. See Bylaws § 6.4 (person is “presumed to have relied”
on By-Law by virtue of having served in a covered position); see also Section III.C.2,
infra.
15

23

C. Summary Judgment: Advancement
I have considered and sifted some of the parol evidence bearing on the
definition of “officer.” I now proceed to the nub of the issue: whether any
genuine, material issue of fact precludes judgment in favor of Aleynikov as a
matter of law. I focus here on advancement, rather than indemnification. In
light of the foregoing discussion, I interpret the definition of “officer” in the By
Laws broadly. I then discuss the Delaware version of the doctrine of contra
proferentem, pursuant to which a business entity’s organizing documents, even
if ambiguous, may be construed against the drafter in the context of summary
judgment. Finally, I discuss the less controversial elements of the advancement
claim, the scope of the remedy, and the disposition of remaining claims.
1. The role of ambiguity

By-Laws are interpreted in accordance with “the rules used to interpret
statutes, contracts, and other written instruments.” See Gentile v. Singlepoint
Fin., Inc., 788 A.2d 111, 113 (Del. 2001) (interpretation of by-law regarding
mandatory advancement of fees); Centaur Partners IV v. National Intergroup,
Inc., 582 A.2d 923, 928 (Del. 1990) (“general rules of contract interpretation”
apply to corporate charters and by-laws). Perhaps that is nowhere more true
than where, as here, the bylaws touch on the mutual rights and
responsibilities of employers and employees.
Those ordinary rules of contract interpretation are well known. Perhaps
less well known, however, is the manner in which Delaware applies them in the
context of a business’s bylaws or organizational agreements:
In general terms, corporate instruments such as charters and
bylaws are interpreted in the same manner as other contracts.
Absent ambiguity, their meaning is determined solely by reference
to their language. To demonstrate ambiguity, a party must show
that the instruments in question can be reasonably read to have
two or more meanings. And “[m]erely because the thoughts of party
litigants may differ relating to the meaning of stated language does
not in itself establish in a legal sense that the language is
ambiguous.”
Ordinarily, 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.
There are situations, however, when this general rule is
24

inapplicable. For example, when a court is asked to construe a
limited partnership agreement drafted solely by the corporate
general partner, it will resolve all ambiguities against the general
partner as drafter and in favor of the reasonable expectations of
the public investors.
Harrah’s Entertainment, Inc. v. JCC Holding Co., 802 A.2d 294, 309-10 (Del.
Ch. 2002) (footnoted case citations omitted). (The final sentence relates to the
doctrine of contra proferentem, discussed in the next section.)

Under those rules, the plain and ordinary meaning of “vice president” is,
of course, the starting point and touchstone of the analysis. My first task is to
determine whether the language of this By-Law is plain, or whether it is
ambiguous—even though, as noted, the law provides that some ambiguity
would not in itself be fatal.
Aleynikov testified at his deposition that he believed himself to be an
officer and reasonably relied on the common meaning of his title. See
Deposition of Sergey Aleynikov, Marino Cert., Ex. 9 (Aleynikov Dep.) at 37:5—18
(“it’s common knowledge that vice presidents are officers.”); 38:4—22 (“I received
an offer letter that stated that I was vice president so I assumed that was an
officer position.”).
It is uncontroversial that a “vice president,” at least in the corporate
context, is a kind of officer. See Black’s Law Dictionary 1702 (9th ed. 2009)
(“vice president
(2) A corporate officer of mid-level to high rank, usu. having
charge of a department”) (emphasis added); Webster’s New Universal
Unabridged Dictionary 2036 (2d ed. 1983) (“vice president
(3) in some
corporations, any of several officers, each in charge of a separate department”)
(emphasis added). The title of vice president has some accepted meaning in a
corporation. By-Laws Section 6.4, however, has effectively transplanted that
title, without further explanation or elaboration, to this LLP.
...

...

There are a few cases that discuss the plain meaning of “vice president,”
albeit in contexts far removed from that of this case. For example, in Brakke v.
Idaho Dep’t of Corr., No. 1:11-cv-00455 (LMB), 2012 WL 4409905 (D. Idaho
Sept. 25, 2012), a defendant, Corizon, Inc., contended that process had not
been served on a corporate “officer,” as required by Fed. R. Civ. P. 4(d)(3).
Dolan, the person who received the complaint, stated that “while he is a vice
president, he is ‘not an officer of Corizon, Inc., nor [is he] a managing or
general agent.”’ The court demurred, reasoning that the “title ‘Regional Vice
25

President’ connotes an officer role to a normal observer,” and held that Dolan
was an “officer” able to accept service.
In Ter Bush & Powell, Inc. v. State Tax Comm’n, 58 A.D.2d 691, 395
N.Y.S.2d 762, 763—64 (3d Dep’t 1977), the court interpreted a franchise tax
statute that applied to salary and compensation paid to “elected or appointed
officers.” The taxpayer company sought to exempt “compensation paid to eight
individuals having the title of vice-president or senior vice-president.” The
company claimed that these were “honorary” titles, given to salespeople who
lacked any real executive authority. The court held that the statute’s reference
to “officers” was unambiguous, and that it could not be “read so as to include
an implied exemption for compensation paid to individuals who hold the titles
of executive positions but arguably do not fulfill the functions thereof. Taxpayer
chose to elect certain individuals as officers, and it must be construed to have
known that this would subject such individuals’ compensation to inclusion in
computation of the franchise tax.” Goldman, too, chose to award the title of
vice president for good and valid business reasons. Ter Bush implies that,
Goldman must abide by the implications of that decision.’
6
The usual and ordinary meaning of vice president, supplemented by this
case law, 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. 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. (See Section
III.A, above.)

As I pointed out in my December 2012 opinion, most of the other cases cited by
Aleynikov are unhelpful, because they relied on factors in addition to the title of “vice
president.” See, e.g. In re Foothills Texas, Inc., 408 B.R. 573 (Bankr. D. Del. 2009) (fact
that employees of Chapter 11 debtor held title of “vice president” did not determine
whether they were “officers” of debtor for purpose of bankruptcy statute limiting
retention payments to insiders); Roller Bearing Indus., Inc. v. Paul, 3:05-CV-508-S,
2010 WL 1257715, *2 (W.D. Ky. Mar. 26, 2010) (“[w]hile a title might not be enough
on its own to justify finding an employee to be an officer of a company,” annual reports
in which individual was labeled “Vice President and identified as an officer” were a
sufficient basis); EMC Corp. v. Allen, 975972B, 1997 WL 1366836, *1, *3 (Mass. Super.
Dec. 15, 1997) (former vice president who “[t]hroughout his employment at EMC
worked in senior marketing positions
had access to confidential proprietary
information [and] was compensated over $1 million dollars in salary, bonuses and
stock options” was likely an “officer” within the meaning of a non-compete agreement).
16

.

.

.

26

.

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:
Although advancement provisions in corporate instruments often are
of less than ideal clarity, rarely is resort to parol evidence
appropriate or even helpful, as corporate instruments addressing
advancement rights are often crafted without the involvement of
the parties who later seek advancement and often with little
negotiation between any contending parties at all. Those factors
are not problematic, however, as they tend to reinforce the legal
policy of this State, which strongly emphasizes contractual text as
the overridingly important guide to contractual interpretation.
DeLucca, 2006 WL 224058 at *6 (emphasis added). In other words, the policy
animating the Delaware statute is that, where advancement is concerned, some
contractual ambiguity will be tolerated.
Nevertheless, I briefly consider the parol evidence discussed more fully
above. GSCo’s appointment procedure, even if I grant Goldman’s assertions the
status of fact, does not assist us in the interpretation of By-Laws Section
6.4[3]. Goldman reserves to itself a wide range of discretionary procedures,
untethered to the particulars of this By-Law. (See Section III.B. 1, supra.)
GSCo’s history of indemnifying or advancing fees to a broad range of vice
presidents and others is in Aleynikov’s favor. That evidence is nominally, but
not materially, contradicted; Goldman offers only a post hoc characterization of
its decisions as discretionary, rather than mandatory under the By-Laws. But
having failed to produce any contemporaneous evidence of that, Goldman
cannot invoke corporate procedures against Aleynikov; to do that, a party must
have turned square corners itself. Setting that aside, this evidence would be at
best neutral; even Goldman’s interpretation of the facts implies that these
indemnification decisions have no bearing on the interpretation of the By-Law
in question. (See Section III.B.2, supra.) Finally, Goldman attempts to rebut the
plain implications of the title vice president by referring to title inflation in its
industry. One trouble with this argument is that it applies just as strongly to
corporate vice presidents, who indisputably are covered. Another is that the
decision of whom to designate as vice president and how specifically to restrict
the class of persons eligible for indemnification is entirely within Goldman’s,
not Aleynikov’s, control. (See Section III.B.3, supra.)
Given Delaware’s liberal interpretive principles with respect to
advancement, see DeLucca v. KKAT Mgmt., supra, I do not believe that this
parol evidence is sufficient to raise a material issue of fact. On that basis alone,
27

I would award advancement. At any rate, even if there were an issue of fact, it
would cease to be a material one in light of the Delaware doctrine of contra
proferentem, discussed below.
2. The special status of contra proferentem with respect to bylaws
I will indulge Goldman’s position one step farther. Having assumed
arguendo that the parol evidence should be considered, I will further assume
that the term “officer” carries with it some ambiguity as applied to the vice
president of an LLP. Nevertheless, 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.
I pause for an observation. Even in cases of ordinary ambiguity, I do not
believe the letter or spirit of the Delaware statute permits the Court to take the
easy option of simply denying the motion and leaving the parties to prepare the
matter for trial some months, or years, in the future. As to advancement of
fees, it is now or never. If there is no basis for a decision now, so be it, but if
there is a valid way to decide the issue now, it should be decided. See Section
III.A, supra; DeLucca v. KKAT Mgmt., supra.
One valid avenue to such a decision is the Delaware doctrine of contra
proferentem. The purpose of a written contract is to express a bargain between
two parties so each knows what to expect prospectively. But if the terms of the
contract fall short of that goal—if they are ambiguous—the burden of that
ambiguity should fall on a party who was solely responsible for the drafting of
the contract. That is the principle of contra proferentem—that “ambiguous terms
should be construed against their drafter.” Stockman v. Heartland Indus.
Partners, L.P., CIV.A. 4227-yeS, 2009 WL 2096213, *5 (Del. Ch. July 14,
2009); see also Twin City Fire Ins. Co., v. Delaware Racing Assoc’n, 840 A.2d
624, 630 (Del. 2003) (discussion of the doctrine).
Under Delaware law, the doctrine of contra proferentem has particular
force with respect to the governing or constitutive documents of a business
organization. Almost by definition, a person who joins such an organization will
not have had the opportunity to negotiate the terms of such documents.
“[W]here the contract in dispute is an entity’s organizing document, like the
Partnership Agreement, a dispositive order following motion practice may be
appropriate even where the contract is ambiguous.” Stockman, 2009 WL
2096213 at *5 (emphasis added; interpreting an indemnification and
advancement provision in a partnership agreement).

28

When an agreement
makes promises to parties who did not
participate in negotiating the agreement, Delaware courts apply the
general principle of contra proferentem, which holds that
ambiguous terms should be construed against their drafter. 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.
.

.

.

Id. See also SIMgmt. L.P. v. Wininger, 707 A.2d 37, 43 (Del. 1998)(”[A}mbiguous
terms in the Agreement should be construed against the General Partner as the
entity solely responsible for the articulation of those terms.”); cf Penn Mut. Life
Ins. Co. v. Oglesby, 695 A.2d 1146, 1149—50 (Del. 1997) (“[lIt is the obligation of
the issuer of securities to make the terms of the operative document
understandable to a reasonable investor whose rights are affected by the
document.”). In this peculiar context, then, Delaware law not only tolerates
some ambiguity, but resolves it against the business entity whose organizing
documents are at issue.
The Delaware courts, moreover, apply the contra proferentem doctrine in
a variety of contexts, including that of a dispositive motion. See, e.g., Stockman,
supra; Werner v. Miller Tech. Mgmt., L.P., 831 A.2d 318, 333 (Del. Ch. 2003)
(applying contra proferentem to partnership agreement in the course of denying
motion to dismiss); In re Nantucket Island Assocs. Ltd. P’ship Unitholders Litig.,
810 A.2d 351, 361 (Del. Ch. 2002) (construing ambiguous limited partnership
agreement against the general partner who drafted it, granting plaintiffs’
motion for summary judgment and denying cross-motion); see also Harrah’s
Entertainment, Inc., , 802 A.2d at 309—10 (Del. Ch. 2002) (applying principle by
analogy in corporate charter context in post-trial opinion).’ This is not to
7
suggest that Delaware’s procedural law supplants federal summary judgment
procedures in federal court. Rather, under Delaware’s substantive contract law,
certain factual issues proffered by the defendant! drafter are not deemed
“material” to the court’s decision.’
8
Delaware’s robust application of contra proferentem in this context highlights
the extent to which the Court has indulged Goldman’s position. I have considered the
paroi evidence in the interest of thoroughness; it is far from clear, however, that the
Court is required to do so. Delaware law makes an exception to the usual rule that
extrinsic evidence will be considered to resolve an ambiguity. As discussed above,
corporate instruments, unlike negotiated contracts, will be construed against the
corporation. Harrah’s Entertainment, Inc., 802 A.2d at 309-10.
17

18

In any event, Delaware’s summary judgment standard is identical to that of the
29

Thus, in Stockman, supra, the court granted summary judgment on a
claim for advancement of fees. It held that “any ambiguities in Heartland’s
Partnership Agreement should be resolved in favor of the reasonable
expectations of Heartland’s Indemnitees regarding their indemnification and
advancement rights.” 2009 WL 2096213 at *5
Goldman responds that Aleynikov, when he came to work, did not really
have any “expectation” with respect to Section 6.4 of the By-Laws; indeed, he
never read the By-Laws until he sought advancement and indemnification
some years later. See Marino Cert, Ex. 9 (Aleynikov Dep.) at 94:3—95:2. But the
By-Laws themselves provide that a person will be “presumed to have relied” on
them by virtue of having served in a covered position. See Bylaws § 6.4. More
broadly, Aleynikov’s may possess a right despite his prior unawareness of it.
Were it not so, each employee would have different rights, commensurate with
his or her diligence in reading the corporate fine print. By their nature,
constitutive documents such as bylaws and partnership agreements are meant
to structure the affairs of everyone associated with a business entity:
As a practical matter, it is critical that the governing instruments
of entities be interpreted consistently and that they be applied in a
predictable manner. To introduce the consideration of parol
evidence when issues regarding subjects like indemnification come
up would create unpredictable results, reduce the incentives for
clear drafting, and undermine the ability of investors, officers, and
other relevant constituencies to rely on the written text of
governing instruments in deciding whether to invest in, work for,
or supply debt capital to entities. Thus, where an entity’s governing
instmments are involved, the onus is on the drafter to be clear.”
Stockman, 2009 WL 2096213 at *5 (emphasis added). Goldman cannot escape
from its burden as drafter by recourse to Aleynikov’s ignorance of his rights.
Whether or not Aleynikov actually read and relied on the By-Laws—and
Federal Rules. The movant must demonstrate “that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.”
Del. Ct. Ch. R. 56(c).
Aleynikov initially sought a preliminary injunction, and in the alternative urged
the Court to approach this case as a “summary advancement proceeding” in the
Delaware Court of Chancery, see P1. App. & MSJ at 9-10; see Confederate Motors, 859
F. Supp. 2d at 184, 188 (internal quotations and citations omitted); Kaung v. Cole Nat’l
Corp., 884 A.2d 500, 509 (Del. 2005). I held that I could not, consistent with the
doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), conduct a state summary
proceeding within a federal action. See Dec. Op. at 23. The point here is different;
Delaware cannot dictate federal summary judgment procedure, but its substantive
contract law, in this diversity case, may dictate whether an issue is material.
30

realistically, how many employees do?—he was entitled to rely on the rights
granted by the By-Laws.’
9
For this additional reason, I construe By-Laws Section 6.4[3] against its
corporate drafter, Goldman, and I hold that the term “officer” encompasses
Aleynikov’s position as a vice president of GSCo.
3. Remaining elements of a claim for advancement
I deal more briefly with the remaining, less controversial elements of
Aleynikov’s claim for advancement of fees and expenses.
As I have found that Aleynikov is an officer pursuant to Section 6.4131 of
the By-Laws, the only remaining question is whether the criminal charges
against him were brought “by reason of the fact” that he was an officer of the
company. See DGCL § 145(e); Salimbene Deci., Ex. 1 (By-Laws) § 6.4. “The
phrase ‘by reason of’ can be equated to ‘by virtue of,’ ‘by force of,’ or ‘by the
authority of’.
‘[B]y reason of’ convey[s] the concept of a causal connection
or nexus between
the charges alleged in the criminal proceedings and the
corporate function or official corporate capacity of the [individual charged].”
Perconti v. Thornton Oil Corp., CIV. A. 18630-NC, 2002 WL 982419, at *4 (Del.
Ch. May 3, 2002). See also Homestore, Inc., 888 A.2d at 214 (“if there is a
nexus or causal connection between any of the underlying proceedings
contemplated by section 145(e) and one’s official corporate capacity, those
proceedings are ‘by reason of the fact’ that one was a corporate officer, without
regard to one’s motivation for engaging in that conduct.”).
.

.

.

.

.

.

Aleynikov submits that “the State Action against Aleynikov clearly arose
from and has a nexus to his position at GSCo: he is alleged to have stolen
GSCo computer source code while he was a vice president of the company.
the State Action is based on the contention that Aleynikov employed his
corporate powers to acquire proprietary source code from GSCo. He therefore
did so ‘by reason of the fact’ that he was an officer of GSCo within the meaning
of the By-Laws and the DGCL.” P1. Renewed MSJ Brief at 27-28. I agree. And at
any rate, Goldman does not seem to contest that Aleynikov’s criminal
proceedings arise “by reason of’ his position at Goldman.
.

And if, as Goldman asserts, Aleynikov’s knowledge is critical to establishing
their mutual obligations, then Goldman’s reliance on an admittedly confidential,
unpublicized method of choosing officers becomes still more problematic. See Section
III.B.1, supra.
19

31

Goldman may understandably find this result galling; it believes that
Aleynikov has stolen its property. If there is any comfort, it may lie in the fact
that Goldman has also indemnified and advanced fees in cases where the
conduct was alleged to be unlawful and, in the broader sense, no less harmful
to Goldman, even if Goldman was not the direct or intended victim.
Based on all of the foregoing, I grant Aleynikov’s motion for summary
judgment as to liability on the issue of advancement only. Goldman’s crossmotion for summary judgment is denied as to the issue of advancement.
Still outstanding are the question of the amount of fees and the
calculation of “fees on fees” (i.e., fees and expenses incurred in this action with
respect to the claim on which Aleynikov has prevailed). As to these issues, the
parties will follow the procedures outlined in the Conclusion of this opinion and
the accompanying order.
D. Summary Judgment: Indemnification and other issues
I do not grant summary judgment as to indemnification. Goldman does
not dispute that Aleynikov was “successful” in defending the Federal Action, a
prerequisite for indemnification. See Perconti, 2002 WL 982419, at *4 (“Section
145(c) assures indemnification to the corporate officer who has been
‘successful’ in the criminal proceeding. It does not require a determination that
the corporate officer was “innocent.”); Stockman, 2009 WL 2096213, at *10
(Del. Ch. July 14, 2009) (“An indemnitee in a criminal proceeding is successful
any time she avoids conviction: ‘[sluccess is vindication
any result other
than conviction must be considered success.”’) (quoting Merritt-Chapman &
Scott Corp. v. Wolfson, 321 A.2d 138, 141 (Del. Super. 1974)).
...

Nevertheless, the indemnification claim—an ordinary claim for damages
based on events already concluded—is not marked by the same urgency that
infuses the advancement claim. Further, there is reason to think that the
indemnification issues have not been fully fleshed out by the limited discovery
that has been granted to date. I also agree with Goldman that any judgment
based on the indemnification claim should be held off until Goldman’s
affirmative defenses and counterclaims have been explored in discovery and
decided. (I note that Aleynikov’s motion to dismiss those counterclaims is
pending.) Goldman correctly points out that it has not yet had significant
discovery on certain affirmative defenses, including allegations that Aleynikov
has overstated the amount of attorney’s fees actually incurred in the Federal
Action. In addition, Goldman has filed significant counterclaims for damages,
32

and these, if established, might substantially offset any indemnification award.
It is possible, too, that the State Case might be concluded while this one
remains pending; indeed, under one possible scenario, a repayment obligation
could arise under Aleynikov’s undertaking. Of course we simply do not know at
this point; the resolution of all these matters is not yet final.
In short, even if the indemnification claim could now be decided and
reduced to an amount certain, I would withhold judgment until all remaining
issues have ripened. A fortiori, I will do so given the unsettled posture of the
claims and the need for further discovery.
CONCLUSION
Pursuant to Section 6.4[3] of GS Group’s By-Laws, Aleynikov is entitled
to advancement of legal fees and expenses arising from his defense of the State
Action, as well as duly apportioned “fees on fees” in this civil action.
For the reasons stated above, Plaintiff’s motion for summary judgment is
GRANTED IN PART as to advancement only. Defendant is ordered to pay
Aleynikov’s legal fees and expenses incurred to date in connection with the
State Action, and to pay such fees and expenses periodically as they are
incurred going forward.

Magistrate Judge Hammer will supervise the payment process, unless it
proves too unwieldy, in which case a Special Master may be appointed. The
parties are directed to cooperate in order to focus on matters truly in dispute.
They are advised that, if a Special Master must be appointed, the Court may
order that the parties share the expense as a nonreimbursable cost.
MTB and Aleynikov shall submit copies of their bills and time records in
support of periodic applications for fees and expenses. They may do so
monthly, bimonthly, quarterly, or at such longer intervals as may seem
advisable. Descriptions of services may be reasonably redacted to avoid
disclosure of privileged material. Goldman will be given a reasonable period of
time, to be set by the Magistrate Judge, to review such submissions and
submit any objections.
MTB and Aleynikov may also submit copies of bills and time records to
document claims for “fees on fees” in this action. Those materials will be
accompanied by a reasonable proposal to determine whatever portions of such
fees and expenses are fairly attributable to the issue of advancement. Again,
descriptions of services may be reasonably redacted to avoid disclosure of

33

privileged material. Goldm
an will be given a reasonable
period of time, to be set
by the Magistrate Judge, to
respond.
As in any fee situation, bil
ls will be scrutinized for
reasonableness. The
Court expects counsel to co
nfer and reach reasonable
accommodations, and it
will not indiscriminately
award “fees on fees” for the
litigation of disputes it
deems excessive or unreaso
nable.
Plaintiff’s motion for su
mmary judgment is oth
erwise DENIED.
Goldman’s cross-motion
for summary judgment is
DENIED. Both of these
denials are without prejud
ice to renewal if and as ap
propriate when discovery
is complete.
An appropriate order follow
s.

KEVIN MCNULTYY
)
United States District Ju
dge

Dated: October 16, 2013

34