Sergey Aleynikov v. Goldman Sachs Group Inc , 765 F.3d 350 ( 2014 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
No. 13-4237
______
SERGEY ALEYNIKOV
v.
THE GOLDMAN SACHS GROUP, INC.,
Appellant
______
On Appeal from United States District Court
for the District of New Jersey
(D. N.J. No. 2-12-cv-05994)
District Judge: Honorable Kevin McNulty
______
Argued Tuesday, January 21, 2014
Before: FUENTES and FISHER, Circuit Judges, and JONES
II,* District Judge.
(Filed: September 3, 2014 )
Karen A. Chesley, Esq.
Christopher E. Duffy, Esq. ARGUED
Boies, Schiller & Flexner
575 Lexington Avenue
7th Floor
New York, NY 10022
A. Ross Pearlson, Esq.
Wolff & Samson
One Boland Drive
The Offices at Crystal Lake
West Orange, NJ 07052
Counsel for Appellant
*
The Honorable C. Darnell Jones, II, District Judge for
the United States District Court for the Eastern District of
Pennsylvania, sitting by designation.
2
John A. Boyle, Esq.
Kevin H. Marino, Esq. ARGUED
John D. Tortorella, Esq.
Marino, Tortorella & Boyle
437 Southern Boulevard
Chatham, NJ 07928
Counsel for Appellee
______
OPINION OF THE COURT
______
FISHER, Circuit Judge.
Appellee Sergey Aleynikov is a computer programmer
who worked at Goldman, Sachs & Co. (“GSCo”) from 2007
through 2009 and held the title of vice president. After
accepting an employment offer from another company,
Aleynikov copied source code developed at GSCo into
computer files and transferred them out of GSCo. He was
indicted by a federal grand jury and convicted of violations of
the National Stolen Property Act, 18 U.S.C. § 2314, and the
Economic Espionage Act, 18 U.S.C. § 1832. The United
States Court of Appeals for the Second Circuit reversed his
conviction, concluding that his conduct did not violate federal
law. He was then indicted by a New York grand jury for
violations of New York law and this criminal case remains
3
pending.
Aleynikov brought this suit in the United States
District Court for the District of New Jersey seeking
indemnification and advancement for his attorney’s fees from
Appellant the Goldman Sachs Group, Inc. (“GS Group,” and
together with GSCo, “Goldman”). He seeks indemnification
for attorney’s fees expended in defending against the federal
criminal charges and advancement of attorney’s fees for the
state criminal charges, along with “fees on fees” incurred in
obtaining indemnification and advancement. He claims his
right to indemnification and advancement under a portion of
GS Group’s By-Laws that applies to non-corporate
subsidiaries like GSCo, providing for indemnification and
advancement to, among others, officers of GSCo. Following
expedited discovery in aid of defining the term officer, the
District Court granted summary judgment in Aleynikov’s
favor on his claim for advancement but denied it on his claim
for indemnification and denied Goldman’s cross-motion for
summary judgment. Goldman appealed.
We are asked to interpret the meaning of the term
officer in GS Group’s By-Laws and determine whether
Aleynikov is entitled to indemnification and advancement due
to his title of vice president. We conclude that the term
officer is ambiguous and that the relevant extrinsic evidence
raises genuine issues of material fact precluding summary
judgment. We therefore vacate the District Court’s grant of
summary judgment in Aleynikov’s favor on the advancement
issue. While we exercise supplemental appellate jurisdiction
over the District Court’s denial of Goldman’s cross-motion
for summary judgment, as urged by Goldman, we affirm the
District Court’s denial of summary judgment in Goldman’s
favor.
4
I.
A.
GS Group is a corporation organized under the laws of
the state of Delaware. GSCo is a New York limited
partnership and non-corporate subsidiary of GS Group.
Section 6.4 of GS Group’s By-Laws addresses
indemnification for and advancement of legal fees and costs
for, among others, officers of GS Group and officers of GS
Group’s corporate and non-corporate subsidiaries including
GSCo. This Section provides that for non-corporate
subsidiaries, “the term ‘officer,’ . . . shall include in addition
to any officer of such entity, any person serving in a similar
capacity or as the manager of such entity.” App. 118.
As a limited partnership and non-corporate subsidiary
of GS Group, GSCo is not required to have officers. GSCo
has appointed officers pursuant to a written resolution
process, but this process was not widely disseminated. It has
no other formal appointment processes for officers. GSCo
employs tens of thousands of employees. Approximately
one-third of those employees hold the title of vice president.
Someone with the title of vice president is more senior than
someone with the title of analyst or associate, but less senior
than someone with the title of managing director.
Aleynikov worked as a computer programmer for
GSCo from May 7, 2007 until June 30, 2009, although his
last day in the office was June 5, 2009. While at GSCo, he
developed source code for Goldman’s high-frequency trading
system and held the title of vice president in GSCo’s equities
division. He did not supervise other employees or transact
business on behalf of GSCo. He exercised no management or
leadership responsibilities. As a part his employment,
5
Aleynikov agreed to keep all proprietary information
belonging to GSCo confidential.
In late April 2009, Aleynikov accepted an employment
offer from Teza Technologies, a startup company in the high-
frequency trading business. On his last day in GSCo’s
offices, Aleynikov copied GSCo’s source code into computer
files and transferred those files to a server in Germany. On
July 1, 2009, Goldman contacted federal law-enforcement
authorities to report the transfer of the files. Two days later,
FBI agents arrested Aleynikov.
Aleynikov was indicted by a federal grand jury in the
Southern District of New York in February of 2010. He
moved to dismiss all three counts against him; the District
Court granted his motion as to one but denied it as to the
other two counts. He proceeded to trial on the two counts:
(1) a violation of the National Stolen Property Act, 18 U.S.C.
§ 2314; and (2) a violation of the Economic Espionage Act,
18 U.S.C. § 1832. Following an eight-day trial in the United
States District Court for the Southern District of New York, a
jury found Aleynikov guilty on both counts. He was
sentenced to 97 months of imprisonment.
Aleynikov served 51 weeks in prison while his appeal
was pending. On February 16, 2012, the United States Court
of Appeals for the Second Circuit reversed his conviction and
ordered him acquitted and released immediately, concluding
that his conduct did not violate federal law. See United States
v. Aleynikov, 676 F.3d 71 (2d Cir. 2012).
On August 2, 2012, New York state authorities
arrested Aleynikov and charged him with state crimes based
upon the same alleged conduct. On September 26, 2012, a
New York grand jury indicted him on two charges: (1)
unlawful use of secret scientific material in violation of N.Y.
6
Penal Law § 165.07; and (2) unlawful duplication of
computer-related material in violation of N.Y. Penal Law
§ 156.30(1). The state criminal case remains pending.
On August 24, 2012, Aleynikov and his counsel sent a
letter to Goldman seeking indemnification for over $2.3
million in attorney’s fees and costs incurred in connection
with the federal criminal proceedings and advancement of
attorney’s fees and costs related to the ongoing state criminal
proceedings. The letter asserted that Aleynikov was entitled
to indemnification and advancement under the By-Laws.
B.
On September 25, 2012, Aleynikov initiated this case
in the United States District Court for the District of New
Jersey seeking indemnification and advancement, as well as
“fees on fees” incurred in attempting to obtain
indemnification and advancement.
At the same time, Aleynikov filed a motion for
summary judgment and requested entry of a preliminary
injunction. On December 14, 2012, the District Court denied
Aleynikov’s summary judgment motion and request for a
preliminary injunction, concluding that the factual record was
insufficient to establish Aleynikov’s entitlement to
indemnification and advancement under the By-Laws. The
District Court ordered expedited discovery to establish in the
record the process for appointing officers and the practice of
indemnifying employees at GSCo, in order to discover the
meaning of the term officer in the By-Laws.
Following expedited discovery, the parties filed cross-
motions for summary judgment. On October 16, 2013, the
District Court granted Aleynikov’s motion for summary
judgment with respect to his claims for advancement and
advancement-related fees. The District Court analyzed
7
Section 6.4 the By-Laws for ambiguity, exploring the plain
meaning of vice president and concluding that the meaning of
this term was unambiguous and entitled Aleynikov to
indemnification and advancement. It proceeded to consider
the extrinsic evidence anyway, concluding that the evidence
submitted did not raise any genuine issues of material fact.
Finally, the District Court explained that even if there were an
issue of fact, it would apply the doctrine of contra
proferentem to construe any ambiguities against Goldman,
the unilateral-drafter of the By-Laws. It denied Aleynikov’s
motion for summary judgment with respect to
indemnification and indemnification-related fees pending
further discovery on the total monetary amount due. The
District Court also denied Goldman’s cross-motion for
summary judgment. Goldman filed a timely notice of appeal
and sought to stay the District Court’s order pending appeal
and to expedite the appeal. This Court denied Goldman’s
motion for a stay pending appeal, granted its motion to
expedite the appeal, and referred the additional issue of the
Court’s appellate jurisdiction to the merits panel. After oral
argument, we stayed the District Court’s order pending our
resolution of this appeal.
II.
A.
The District Court had diversity jurisdiction over this
case under 28 U.S.C. § 1332. Aleynikov challenges our
appellate jurisdiction. Before we turn to the merits of the
case, “we must first be satisfied that this court has appellate
jurisdiction.” Metro Transp. Co. v. North Star Reinsurance
Co., 912 F.2d 672, 675 (3d Cir. 1990). “We exercise plenary
review over all jurisdictional questions.” Belitskus v.
Pizzingrilli, 343 F.3d 632, 639 (3d Cir. 2003).
8
The District Court’s order does not constitute a final
decision, so it cannot be appealed under 28 U.S.C. § 1291.
Goldman contends that we have jurisdiction over its appeal of
the District Court’s order granting summary judgment under
28 U.S.C. § 1292(a)(1), which provides for appellate
jurisdiction over interlocutory orders that grant injunctive
relief. Although the District Court did not use the term
“injunction” in its order, that is not determinative; we must
evaluate the nature of the relief granted to determine whether
the remedy is injunctive. Cohen v. Bd. of Trustees of the
Univ. of Med. & Dentistry of N.J., 867 F.2d 1455, 1466 (3d
Cir. 1989) (en banc) (“If the order grants part of the relief
requested by the claimant, the label put on an order by the
district court does not prevent the appellate tribunal from
treating it as an injunction for the purposes of section
1292(a)(1).”).
For a district court’s order to be considered an
injunction for the purposes of § 1292(a)(1), “[t]he order must
not only adjudicate some of the relief sought in the complaint;
it must also be of such a nature that if it grants relief it could
be enforced pendente lite by contempt if necessary.” Id. at
1465 (citing Wright, Miller, Cooper & Gressman, Federal
Practice & Procedure, § 3922, 29 (1977)). Alternatively,
“specific enforcement of contractual undertakings by an order
against the person has been regarded as a classic form of
equitable relief . . . . and if it is granted the order falls within
section 1292(a)(1).” Id. at 1468.
The order here adjudicated relief sought in
Aleynikov’s complaint and appears to be enforceable through
the District Court’s contempt powers, given the ongoing and
immediate nature of the obligation and the role that the
9
District Court assumed in overseeing the payments.1
Alternatively, the order could be seen as one for specific
performance of a contractual duty. It compels Goldman to
advance attorney’s fees in order to fulfill its alleged
contractual obligation under the By-Laws. The obligation is
immediate, ongoing, indeterminate, and could be repaid
depending on the outcome of the state criminal proceeding.
Under the factors set forth in Cohen, the District Court’s
order appears to be an immediately appealable injunction.
Aleynikov contends that the order merely requires the
payment of money in an action at law, and is therefore not an
appealable injunction. An order is legal if it compels the
payment of money that is past due or compels specific
performance of a past due monetary obligation. Pell v. E.I.
DuPont de Nemours & Co. Inc., 539 F.3d 292, 307 (3d Cir.
2008). But where an order for the payment of money is
forward-looking and involves an amount that cannot be
calculated with specificity, it is equitable. Id. Here, the
District Court’s order is clearly forward-looking and
1
The District Court’s order stated that Goldman was to
pay Aleynikov’s legal fees and expenses “periodically as they
are incurred going forward” and appointed a Magistrate Judge
to “supervise the payment process.” App. 1. It ordered that
Aleynikov and his attorneys should “periodically submit
copies of their bills and time records in support of periodic
applications for fees and expenses.” Id. And “Goldman will
be given a reasonable period of time, to be set by the
Magistrate Judge, to review such submissions and submit any
objections.” Id. at 2. By prescribing the procedure for the
payments and appointing a Magistrate Judge to oversee that
process, the District Court assumed a continuing role in
enforcing its order.
10
indeterminate, as it requires Goldman to pay Aleynikov’s
attorney’s fees as he incurs them.
We hold that the District Court’s order requiring the
advancement of legal fees is injunctive and therefore
immediately appealable under 28 U.S.C. § 1292(a)(1). We
join our sister circuits who have concluded the same under
similar conditions. See Westar Energy, Inc. v. Lake, 552 F.3d
1215, 1222-23 (10th Cir. 2009) (concluding that an order
granting an executive advancement was an immediately
appealable injunction because it required specific
performance of a contract); Pac. Ins. Co. v. Gen. Dev. Corp.,
28 F.3d 1093, 1096 (11th Cir. 1994) (holding that an order
directing an insurer to advance legal fees pursuant to an
insurance policy was an immediately appealable injunction).
Goldman also urges us to exercise our pendent
appellate jurisdiction over the issues raised in its cross-motion
for summary judgment, which the District Court denied.
Pendent appellate jurisdiction “allows an appellate court in its
discretion to exercise jurisdiction over issues that are not
independently appealable but that are intertwined with issues
over which the appellate court properly and independently
exercises its jurisdiction.” E.I. DuPont de Nemours & Co. v.
Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d
187, 202-03 (3d Cir. 2001). The doctrine is “narrow,” and
“should be used sparingly, and only where there is sufficient
overlap in the facts relevant to both the appealable and
nonappealable issues to warrant plenary review.” Id. at 203
(internal quotation marks and emphasis omitted) (quoting In
re Montgomery Cnty., 215 F.3d 367, 375-76 (3d Cir. 2000)).
The appealable order – the District Court’s partial
grant of summary judgment ordering that Goldman advance
Aleynikov’s attorney’s fees for his state criminal action –
11
raises the issue of the meaning of officer as used in
Goldman’s By-Laws and whether the term includes
Aleynikov. Goldman’s cross-motion for summary judgment
also turned on the meaning of the term officer and whether
Aleynikov could be considered one. Therefore, our
adjudication of the issues properly before us would
necessarily resolve whether Goldman’s cross-motion was
properly denied. We would not need to evaluate additional
facts or legal arguments to resolve Goldman’s cross-motion.
Because the issues are so intertwined, this is one of the
relatively rare instances where we should use our discretion to
exercise pendent appellate jurisdiction. We will therefore
reach the issue of whether the District Court erred in denying
Goldman’s cross-motion for summary judgment; however, as
we conclude below that the By-Laws are ambiguous and
genuine issues of material fact preclude summary judgment,
the District Court did not err in denying Goldman’s motion.
B.
Having satisfied ourselves that we have appellate
jurisdiction, we turn to the standard of review. “We review a
grant of summary judgment de novo, and thus apply the same
standard as that used by the District Court.” Am. Eagle
12
Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 580-81 (3d Cir.
2009).2
Summary judgment is proper “if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). “An issue is genuine only if there is a sufficient
evidentiary basis on which a reasonable jury could find for
the non-moving party, and a factual dispute is material only if
it might affect the outcome of the suit under governing law.”
Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). In conducting our review, we view the record in the
light most favorable to the non-moving party and draw all
reasonable inferences in that party’s favor. Bowers v. NCAA,
475 F.3d 524, 535 (3d Cir. 2007). A motion for summary
judgment is properly denied if “a fair-minded jury could
return a verdict for the plaintiff on the evidence presented.”
Anderson, 477 U.S. at 252.
III.
The propriety of the District Court’s grant of summary
judgment in Aleynikov’s favor hinges on the interpretation of
2
Our review is plenary even though the District
Court’s grant of summary judgment operated as an injunction.
Ordinarily we review a district court’s grant of an injunction
for abuse of discretion. Bennington Foods LLC v. St. Croix
Renaissance, Grp., LLP, 528 F.3d 176, 178 (3d Cir. 2008).
But where, as here, the injunction results on a summary
judgment motion, our review is plenary. See Cureton v.
NCAA, 198 F.3d 107, 113 (3d Cir. 1999) (exercising plenary
review over an entry of a permanent injunction on a motion
for summary judgment).
13
the term officer. We will begin with a brief overview of
corporate by-laws and indemnification and advancement
provisions under Delaware law.3 We will then consider
whether, in the context of Section 6.4 of Goldman’s By-
Laws, the word officer is ambiguous and, if so, whether
extrinsic evidence can resolve this ambiguity.
A.
Delaware has enacted statutory provisions giving
corporations and their subsidiaries the ability to provide for
mandatory indemnification and advancement in their
corporate charters, by-laws, and other agreements. Section
145 of the Delaware Code allows business entities to
indemnify or provide advancement to an individual involved
in a lawsuit by reason of fact that he or she is or was a
director, officer, employee, or agent of the corporation,
partnership, or other enterprise. 8 Del. Code § 145(a), (e).
This “allows corporate officials to defend themselves in legal
proceedings ‘secure in the knowledge that, if vindicated, the
corporation will bear the expense of litigation.’” Homestore
Inc. v. Tafeen, 888 A.2d 204, 211 (Del. 2005) (quoting
VonFeldt v. Stifel Fin. Corp., 714 A.2d 79, 84 (Del. 1998)).
Indemnification and advancement are related but
distinct avenues by which a business entity pays for an
individual’s legal expenses. In both, the corporation pays the
legal expenses of the officer, director, or other employee
when that individual is accused of wrongdoing in the course
of performing duties to the corporation. For indemnification,
the corporation reimburses the individual for his or her legal
3
The parties agree that this case is governed by
Delaware law, as GS Group is a corporation organized under
the laws of the state of Delaware.
14
expenses once he or she has been successful in the underlying
proceeding on the merits or otherwise. Homestore, 888 A.2d
at 211. For advancement, on the other hand, the corporation
pays legal expenses on an ongoing basis in advance of the
final disposition of the lawsuit, provided that the individual
must repay the amount advanced if it turns out he or she is not
entitled to be indemnified – i.e., he or she is not successful on
the merits or otherwise in the underlying lawsuit. 8 Del.
Code § 145(e).
Advancement provides individuals “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.”
Homestore, 888 A.2d at 211. Section 145(e) – providing for
advancement – is permissive, but many corporate charters,
by-laws, and agreements set forth mandatory advancement
provisions. Id. at 212. The right to advancement survives
even if the entity from which advancement is sought “is
alleging that the plaintiff has committed perfidious acts
against it.” DeLucca v. KKAT Mgmt., LLC, No. 1384-N,
2006 WL 224058, at *11 (Del. Ch. Jan. 23, 2006).
The Delaware General Assembly’s enactment of the
statute promoting advancement “plainly reflect[s] a
legislative determination to avoid deterring qualified persons
from accepting responsible positions with financial
institutions for fear of incurring liabilities greatly in excess of
their means.” Ridder v. CityFed Fin. Corp., 47 F.3d 85, 87
(3d Cir. 1995). Mandatory advancement provisions are
“broadly construed” in order to provide individuals entitled to
advancement with “immediate interim relief.” Brown v.
LiveOps, Inc., 903 A.2d 324, 327 (Del. Ch. 2006).
15
B.
We turn now to our analysis of the By-Laws. By-laws
are interpreted in accordance with “the rules used to interpret
statutes, contracts, and other written instruments.” Gentile v.
SinglePoint Fin., Inc., 788 A.2d 111, 113 (Del. 2001). The
terms are given their plain meaning, like terms in any other
contract. Activision Blizzard, Inc. v. Hayes, No. 497, 2013
WL 6053804, at *3 (Del. Nov. 15, 2013). “To be ambiguous,
a disputed contract term must be fairly or reasonably
susceptible to more than one meaning.” Alta Berkeley VI
C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012). “[T]he
fact that the parties offer two different interpretations does not
create an ambiguity.” Activision Blizzard, 2013 WL
6053804, at *3. We analyze the By-Laws for ambiguity
“through the lens of ‘what a reasonable person in the position
of the parties would have thought the [By-Laws] meant.’”
Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d
393, 396 (Del. 2010) (quoting Rhone-Poulenc Basic Chem.
Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1197 (Del.
1992)). We begin by inquiring whether the relevant provision
of Section 6.4 of the By-Laws is unambiguous. Then,
concluding that the relevant provision is ambiguous, we look
beyond the By-Laws to attempt to determine the parties’
meaning. Finally, we consider whether the doctrine of contra
proferentem properly applies here.
1.
The By-Laws’ use of the term “officer” is crucial to
the outcome, because a person is entitled to indemnification
and advancement under the By-Laws if he or she is made a
party to an action by reason of the fact that he or she “is or
was a director, officer, trustee, member, stockholder, partner,
incorporator or liquidator of a Subsidiary of [GS Group].”
16
Ohio App. 117. Aleynikov’s only claim to indemnification and
advancement rests on whether he is an “officer” of GSCo, a
subsidiary of GS Group, as he does not, and cannot, claim
any other entitlement under the By-Laws.
For the purposes of indemnification and advancement
concerning subsidiaries that are not corporations, like GSCo,
the By-Laws state: “the term ‘officer’ shall include in
addition to any officer of such entity, any person serving in a
similar capacity or as the manager of such entity.” App. 118.
Yet, after stating the applicable law on contract interpretation,
the District Court observed that “the plain and ordinary
meaning of ‘vice president’ is, of course, the starting point
and touchstone of the analysis.” App. 27. It then proceeded
to evaluate the dictionary definition and meaning of vice
president in the case law to conclude that the usual and
ordinary meaning of vice president is unambiguous and
means that Aleynikov is an officer. The District Court’s
focus of its analysis on the meaning of the term vice
president, which does not appear at all in Section 6.4 of the
By-Laws, was its first and most significant error. The term
officer appears in the relevant language of the By-Laws, and
it is the interpretation of the term officer that determines
whether Aleynikov is entitled to advancement. In analyzing
whether vice president is ambiguous, the District Court
analyzed a term that does not appear in the relevant portion of
the contract.
Having noted this crucial error of interpretation, we
move to the text of the relevant part of Section 6.4 to
determine whether it is unambiguous. At first blush, the
definition of “officer” with respect to non-corporate
subsidiaries is fairly circular. “Officer,” as used in the By-
Laws, includes: (1) any officer; (2) a person serving in a
similar capacity; or (3) a person serving as the manager of the
17
non-corporate subsidiary. We read the first use of “officer”
as setting forth a contractual category.4 It defines “officer”
for the purposes of entitling a person qualifying under that
definition to indemnification and advancement. For this
reason, this apparent circuity – defining “officer” as including
any officer – is not problematic in and of itself. But the
second use of the word officer in this provision remains
undefined. From the face of the instrument, it is not
immediately apparent what characteristics make someone an
officer.
We look to the dictionary definition of officer for
“assistance in determining the plain meaning” of this
undefined term. Lorillard Tobacco Co. v. Am. Legacy
Found., 903 A.2d 728, 738 (Del. 2006). We look here first
“because dictionaries are the customary reference source that
a reasonable person in the position of a party to a contract
would use to ascertain the ordinary meaning of words not
defined in the contract.” Id. Black’s Law Dictionary defines
officer as “a person who holds an office of trust, authority, or
command.” Black’s Law Dictionary 1193 (9th ed. 2009).
Merriam Webster defines it similarly. See Merriam-Webster
Collegiate Dictionary (11th ed. 2009) (“One who holds an
office of trust, authority, or command.”). According to
American Heritage Dictionary, an officer is “[o]ne who holds
an office of authority or trust in an organization, such as a
corporation.” Am. Heritage Dictionary of the English
4
To avoid confusion, we use “officer,” with quotation
marks, when referring to the term as used in the first sense –
the contractual category defining the term for the purposes of
indemnification and advancement. We use officer, without
quotation marks, when discussing the term as used within the
definition.
18
Language (5th ed. 2013). Random House College Dictionary
adds to the definition an element of election or appointment,
defining officer as “a person appointed or elected to a
position of responsibility or authority in an organization.”
Random House Coll. Dictionary (Revised Ed. 1980).
We can glean from these definitions that the plain
meaning of the term officer is someone holding a position of
trust, authority, or command. Only one of the four definitions
suggests that for a person to be considered an officer, he or
she must be elected or appointed to that position. We
therefore conclude that the election or appointment
requirement cannot properly be considered a part of the
ordinary, dictionary definition of officer.
Equipped with this definition of officer, we consider
whether the use of this definition gives meaning to the
provision that “‘officer’ shall include in addition to any
officer of such entity, any person serving in a similar capacity
or as the manager of such entity.” App. 118. Applying the
dictionary definition here results in the reading that “officer”
as a contractual category is defined as someone holding a
position of trust, authority or command and a person serving
in a similar capacity. This reading results in a tautology –
officer as defined using the dictionary definition and “any
person serving in a similar capacity” mean the same thing.
Using the dictionary definition, therefore, does not result in
an unambiguous provision; rather, what appears at first blush
to be circular instead becomes repetitive.
Goldman suggests that we should read this clause as
providing that an “officer” for the purposes of
indemnification and advancement includes: “general
purpose, normal-course officers of non-corporate entities,”
along with people serving in similar capacities and managers.
19
Goldman Br., at 31. Goldman maintains that at GSCo, these
“general purpose, normal-course officers” are those, and only
those, appointed by formal, written resolution of the General
Partner of GSCo. This definition is unavailing for several
reasons. First of all, there is no generally promulgated
document stating who such “general purpose, normal-course
officers” are at GSCo or stating that officers are appointed
only by written resolution of the General Partner.5 Therefore,
it is not apparent that these “normal-course officers” would be
readily ascertainable, such that the plain meaning of the term
officer in the By-Laws would be apparent as applied to
GSCo. Second, to read this provision in the way Goldman
urges – that officers are “general purpose, normal-course
officers” appointed pursuant to written resolutions of
Goldman’s General Partner – we would have to violate 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). Finally, this
reading would conflict with the dictionary definition of
officer – someone holding a position of trust, authority, or
5
We discuss the import of these written resolutions in
significantly more detail below. Since we find the provision
in the By-Laws to be ambiguous, the resolutions may indeed
be of use in determining what the contract means as to
officers at GSCo. But they cannot supply the meaning of the
term when the By-Laws make no mention of appointment by
written resolution and Goldman can point to no generally
promulgated documents identifying officers as appointed only
by written resolution. A supplied definition cannot be a
term’s “plain meaning” if it can be known only to a select few
in the organization when the readership of the provision is far
wider than these select few.
20
command. We therefore decline to adopt Goldman’s reading.
If there were a readily-identifiable, industry-specific
common meaning of the term officer, the application of this
meaning would perhaps render Section 6.4 of the By-Laws
unambiguous. We analyze ambiguity “through the lens of
‘what a reasonable person in the position of the parties would
have thought the contract meant.’” Kuhn Constr., Inc., 990
A.2d at 396 (quoting Rhone-Poulenc Basic Chem. Co., 616
A.2d at 1197). If there were a common meaning of the term
officer in the non-corporate investment banking industry,
such that its plain meaning would be apparent from the face
of the By-Laws to “a reasonable person” in that industry, we
could apply that meaning and conclude that the provision is
unambiguous. But we have not been supplied with such a
commonly-understood meaning of the term officer.
We therefore conclude that the provision of the By-
Laws defining “officers” for the purposes of indemnification
and advancement at non-corporate subsidiaries as “any officer
of such entity, [and] any person serving in a similar capacity
or as the manager of such entity” is ambiguous. App. 118. It
is circuitous, repetitive, and most importantly, “fairly or
reasonably susceptible to more than one meaning.” Alta
Berkeley VI C.V., 41 A.3d at 385. Officer could mean simply
someone occupying a position of trust or authority, or it could
mean someone elected or appointed to that particular position,
or it could mean something else entirely in the relevant
industry. The failure to define the term suggests that it has, or
was meant to have, some meaning that would be obvious to
readers of the document. Unfortunately, we cannot ascertain
that meaning from the face of the document or by resorting to
21
dictionary definitions.6
2.
“When the provisions in controversy are fairly
susceptible of different interpretations or may have two or
more different meanings, there is ambiguity. Then the
interpreting court must look beyond the language of the
contract to ascertain the parties’ intentions.” Eagle Indus.,
Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232
(Del. 1997). In looking at extrinsic evidence to interpret an
ambiguous contractual provision, “a court may consider
evidence of prior agreements and communications of the
parties as well as trade usage or course of dealing.” Id. at
1233.
We pause to note that resorting to extrinsic evidence in
this case is problematic. Because the By-Laws are a
unilaterally-drafted agreement – neither Aleynikov nor the
many other employees of GSCo who would be interested in
whether they are eligible for indemnification or advancement
had any part in drafting them – many types of extrinsic
6
Goldman urges us to use “undisputed background
facts” in aid of finding the term’s plain meaning. But we
cannot use these undisputed background facts here. The
evidence held out as “undisputed background facts” regarding
title inflation relates to the term vice president, not officer, so
we cannot use it in analyzing officer for ambiguity. We
cannot use evidence held out as “undisputed background
facts” regarding the appointment process for officers at
GSCo, because there are genuine issues of material fact
regarding whether that process should be considered for
determining who an officer is at GSCo.
22
evidence in this case would be irrelevant. “[U]nless extrinsic
evidence can speak to the intent of all parties to a contract, it
provides an incomplete guide with which to interpret
contractual language.” SI Mgmt. L.P. v. Wininger, 707 A.2d
37, 43 (Del. 1998) (emphasis in original). “[A]lthough
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.”
DeLucca, 2006 WL 224058, at *6. However, as we discuss
below, it is inappropriate to apply the doctrine of contra
proferentem and construe the ambiguities against the
unilateral drafter, because we are considering whether
Aleynikov can even claim status as a party benefited under
the By-Laws. So we are left in a bind: most extrinsic
evidence should not be considered because Goldman
unilaterally drafted the By-Laws, yet we should not construe
ambiguities against Goldman because we are trying to
determine if Aleynikov even is a party to the contract.
We conclude that there are two types of extrinsic
evidence that are relevant to resolving the ambiguity
presented here: “course of dealing” evidence and “trade
usage” evidence. Eagle Indus., 702 A.2d at 1233. These
types of extrinsic evidence go beyond the subjective intent of
the drafting party to shed light on how reasonable individuals
in the investment banking industry and at GSCo specifically
would have interpreted the term officer. The parties have
introduced three categories of extrinsic evidence that we may
properly consider as evidence of course of dealing and trade
23
usage.7 Evidence of GSCo’s procedure for appointing
officers and of GSCo’s record of providing indemnification
and/or advancement can properly be viewed as evidence of
GSCo’s course of dealing with the title officer and with
awards of indemnification and advancement. Evidence of
title inflation in the investment banking industry and industry
usage of the title of vice president can be viewed as evidence
of trade usage of titles that may connote officer-status to
people inside the investment banking industry. We evaluate
each type of extrinsic evidence to determine whether this
evidence is relevant and helpful in resolving the ambiguity
and whether there are genuine issues of material fact
regarding this evidence that preclude summary judgment.
Goldman offered evidence from discovery regarding
GSCo’s procedure for appointing and removing officers. It
produced eleven documents titled “Written Consent of the
General Partner of Goldman, Sachs & Co.” These documents
appointed and/or removed individuals as officers of GSCo.
Goldman also introduced evidence that the persons occupying
the position of officer, as appointed in the documents, were
7
Aleynikov introduced evidence that he believed he
was an officer of GSCo. But he also admitted that he had
never read the By-Laws or considered his right to
indemnification and advancement before his arrest. We do
not consider this extrinsic evidence for two reasons. First, it
would not be appropriate to consider “self-serving parol
evidence submitted by the parties, whose recollections as to
the intended meaning of the agreements predictably differ.”
MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 204, 214 n.4
(3d Cir. 2005). Furthermore, as the District Court observed,
“Aleynikov’s possession of rights does not necessarily
depend on his prior awareness of them.” App. 25.
24
publicly identified in regulatory filings.
In considering the interpretive value of this extrinsic
evidence, the District Court erred in improperly weighing the
evidence to neutralize the value of GSCo’s process for
appointing officers. See Anderson, 477 U.S. at 249 (“[A]t the
summary judgment stage the judge’s function is not himself
to weigh the evidence and determine the truth of the matter
but to determine whether there is a genuine issue for trial.”).
The District Court discounted the weight of the appointment
procedure because Goldman did not point to a document that
established or memorialized this procedure for appointing
officers. It also discounted the evidence about identifying
officers in public filings, reasoning that the evidence
suggested that the appointments had a regulatory purpose,
which had no bearing on the meaning of officer for
indemnification and advancement purposes. Finally, it
discounted the evidence because the Written Consents were
labeled “confidential” and the appointment process was not
widely disseminated to the GSCo employee population.
While these considerations may indeed weigh on whether the
appointment procedure deserves credence in interpreting the
terms of the contract, this is a factual determination for the
jury to decide. The District Court erred in improperly
weighing and discounting the value of this evidence.
Goldman introduced evidence about its record of
providing indemnification and/or advancement to other
individuals at GSCo. Over a six year period, fifty-three
people associated with GSCo were considered for
advancement and/or indemnification. Of these fifty-three,
Goldman paid the attorney’s fees for fifty-one. Aside from
Aleynikov, Goldman refused to pay indemnification and/or
advancement for one other person who sought it, also a GSCo
vice president. However, of the fifty-one whose fees
25
Goldman paid, fifteen were GSCo vice presidents. Goldman
put forward evidence suggesting that for at least some of
these individuals, Goldman was invoking its discretion in
agreeing to pay the fees, even if the individual was not
necessarily entitled to indemnification or advancement under
the By-Laws.
The District Court discounted this evidence as a post-
hoc characterization of the payment decisions and expressed
doubt as to the discretionary nature of the payments, drawing
particular attention to the fact that for some of these
individuals, indemnification and advancement were clearly
mandatory under the By-Laws. We decline to discount this
evidence for these reasons. While for some of the
individuals, indemnification and advancement would have
been clearly due under the By-Laws, this does not preclude
Goldman from first determining whether it wants to pay
attorney’s fees, and then, if it decides it does not want to do
so, determining whether it must. While the characterization
of these decisions as discretionary could diminish their
relevance to interpreting the By-Laws, we leave that question
to the District Court at trial. Depending on how this evidence
of Goldman’s “course of dealing” is presented, it could have
some relevance to the meaning of the term officer.8 If the
8
The dissent contends that this “course of dealing”
evidence does not speak to the mutual understanding of the
contracting parties, and is therefore irrelevant. We agree, to a
certain extent, that this evidence could have no relevance.
Nevertheless, we leave this question to the District Court to
decide based upon the substance of the evidence and the
manner in which it is presented.
26
District Court finds this evidence relevant and admissible, it
is up to a jury to determine how these prior instances of
indemnification and advancement bear on the meaning of the
term officer at GSCo.
Goldman introduced “trade usage” evidence, which
Aleynikov has not rebutted, from publications like The
Economist and The Los Angeles Times and deposition
testimony showing that title inflation in the financial services
industry is prevalent and the title of vice president is not
particularly meaningful. See App. 465 (“[I]n the investment
banking and brokerage industries, just about everyone is a
If Goldman’s past decisions regarding indemnification
and advancement are all characterized as discretionary, they
would have no value in establishing Goldman’s course of
dealing in providing indemnification and advancement under
the By-Laws, which is the issue here. But in the record before
this Court, Goldman has not characterized all of its decisions
as discretionary. The evidence of some instances where
Goldman advanced attorney’s fees as required under the By-
Laws, as opposed to in its discretion, could be relevant as
course of dealing evidence.
Similarly, the evidence regarding Goldman’s
appointment procedure could have no relevance. We are only
presented with the Written Consents, which are marked as
confidential. If these Written Consents were not widely
disseminated, and the individuals identified therein were not
held out as officers to the employee population of GSCo, the
evidence would be irrelevant. But if instead, these
individuals were known to the employee population as
officers or the employee population knew of the appointment
process, even if the Written Consents were not publicized, the
evidence would be relevant.
27
vice president . . . .”); App. 468 (“Almost everybody in
banking from the receptionist upwards is a president of some
sort.”); App. 470 (“[M]anagement titles such as senior vice
president . . . have spread so widely that ‘in many cases being
a vice president means nothing.’”). The evidence tends to
show that vice president is merely “a functional title, because
it connotes a level of seniority between associate and
managing director, and as distinguished from an officer title,
which is somebody who’s appointed through the process.”
App. 945.
The District Court discounted this evidence of title
inflation and the industry understanding of the term vice
president. The District Court placed the burden of this
inartfully-bestowed title on Goldman, penalizing Goldman for
the industry’s profligacy in conferring the title of vice
president. The District Court also confusingly observed that
“the folkways of the financial services industry are not
necessarily determinative here,” App. 25, even though the
norms of the relevant industry are properly considered
extrinsic evidence, Eagle Industries, Inc., 702 A.2d at 1233,
and are relevant to ambiguity, which considers how a
reasonable person in the position of the parties would
interpret the contract term, Kuhn Construction, Inc., 990 A.2d
at 396. We emphasize yet again that it is the meaning of the
term officer – the term appearing in the By-Laws – that the
extrinsic evidence must aid in interpreting. But the industry
usage of the term vice president is still relevant extrinsic
evidence. Aleynikov hangs his hat only on his vice president
title in claiming entitlement to advancement, and industry
usage of this term informs industry understanding of who
qualifies as an officer, and in particular, whether a GSCo vice
28
president can be considered an officer.9
Goldman’s extrinsic evidence raises genuine issues of
material fact. “[W]here reasonable minds could differ as to
9
The dissent argues that due to the unilateral nature of
a company’s governing document, there can be no relevant
evidence regarding the mutual understanding of the
agreement’s meaning. We disagree. Evidence of “trade
usage” of the terms officer and vice president seems to us to
be particularly relevant to the parties’ mutual understanding,
as it addresses the reasonable expectations of employees at
GSCo.
Each industry has its idiosyncratic terms and titles, the
meaning of which is widely known to members of the
industry and the individual companies, but which suggest a
different meaning to those on the outside. Goldman has
suggested that the term “vice president” falls into this
category. Therefore, evidence of title inflation in the
financial services industry and evidence of GSCo employees’
views on the meaning of “officer” and “vice president” are
particularly relevant to informing how a reasonable employee
at GSCo would interpret the term officer in the By-Laws.
Aleynikov is free to present his own evidence with
respect to the meaning of this term at GSCo, which he did not
do before this Court except to present his own subjective
view. The evidence presented to this Court strongly suggests
that to the extent that Aleynikov understood himself to be an
officer, this was unreasonable in the relevant industry, given
the trade usage of the words “officer” and “vice president.”
We stop short of making this determination, as it is a factual
question to be resolved by a jury. But such evidence of trade
usage is surely relevant to shed light on the parties’
reasonable understanding of the terms of the agreement.
29
the contract’s meaning, a factual dispute results and the fact-
finder must consider admissible extrinsic evidence. In those
cases, summary judgment is improper.” GMG Capital Invs.,
LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 783
(Del. 2012). A jury must determine the interpretive value of
Goldman’s extrinsic evidence in resolving the ambiguity in
the By-Laws.
3.
The District Court concluded that even if the term
officer was ambiguous, the concept of contra proferentem
would apply to resolve any ambiguities against the corporate
drafter, here, Goldman. The doctrine of contra proferentem
is well established in Delaware contract law. When one side
of a contract was unilaterally responsible for the drafting,
courts apply contra proferentem and construe ambiguous
terms against the drafter. Norton v. K-Sea Transp. Partners
L.P., 67 A.3d 354, 360 (Del. 2013).
Goldman contends that we should not apply the
doctrine of contra proferentem here because we are presented
with the threshold question of whether a person was a party to
or intended beneficiary of a corporate instrument. Aleynikov
argues that contra proferentem applies whenever one party
has sole control over the drafting of the agreement and
Delaware courts do not consider extrinsic evidence of a
drafter’s intent when the agreement was not the product of
bilateral negotiation.
We have found no Delaware case law specifically
addressing whether contra proferentem can and should apply
where there is ambiguity over whether a plaintiff is a party to
or beneficiary of a contract. Generally, the cases in which the
Delaware courts have applied contra proferentem have
concerned situations in which it was clear that the party
30
invoking the doctrine had rights under the agreement and the
ambiguity went to the scope of those rights. See e.g., Norton,
67 A.3d at 360 (discussing contra proferentem in the context
of a dispute involving a limited partnership agreement
between limited partners, a general partner, and the board of
directors). In particular, the courts have applied the doctrine
to construe an ambiguity in an insurance policy against the
insurance company that drafted the policy where the policy-
holder – clearly a party to the agreement – had no role in
drafting the ambiguous provision. See e.g., Twin City Fire
Ins. Co. v. Delaware Racing Ass’n, 840 A.2d 624, 630-31
(Del. 2003) (applying contra proferentem to construe an
ambiguity in an insurance policy’s exclusion provision
against the insurance company where the insured had no role
in drafting the exclusion).
While we have found no case law directly on point, a
close reading of the applicable Delaware case law suggests
that the doctrine is inapplicable here. The Delaware Court of
Chancery has written that contra proferentem “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.” Stockman v.
Heartland Indus. Partners, L.P., Nos. 4227-VSC, 4427-VCS,
2009 WL 2096213, at *5 (Del. Ch. July 14, 2009) (emphasis
added). This language suggests that contra proferentem
applies to determine the scope of a person’s rights under a
contract which they had no role in drafting; it does not
suggest that the doctrine applies to determine whether a
person has rights and obligations under – i.e., whether he or
she is a party to or beneficiary of – a contract.
“[T]he bylaws of a Delaware corporation constitute
part of a binding broader contract among the directors,
31
officer, and stockholders formed within the statutory
framework of the [Delaware General Corporation Law].”
Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d
934, 939 (Del. Ch. 2013).10 Once it is determined whether or
not a person qualifies as an officer under the By-Laws, contra
proferentem might appropriately apply to resolve any
ambiguities in the scope of the right to indemnification and
advancement. However, we conclude that contra
proferentem has no application in resolving whether a person
has rights under the contract at all – here, whether Aleynikov
10
The dissent criticizes our “reliance” upon this case
because it does not concern contra proferentem. We do not
cite this case for contra proferentem principles, but rather as a
statement of the parties to the By-Laws as a contract. The
proposition that by-laws are a contract among certain
stakeholders is not novel or controversial. See, e.g. Airgas,
Inc. v. Air Prods. and Chems., Inc., 8 A.3d 1182, 1188 (Del.
2010) (“Corporate charters and bylaws are contracts among
the corporation’s shareholders; therefore, our rules of contract
interpretation apply.”). We rely upon this case for the sole
purpose of demonstrating that Aleynikov’s status as a party to
the By-Laws is in question, because he has not established
that he is a director, officer, or stockholder of Goldman.
32
is an officer of GSCo. 11 Applying the doctrine of contra
proferentem in this circumstance would put the cart before the
horse. It would have us resolve ambiguities in favor of a non-
drafting individual in order to determine whether that non-
drafting individual was even subject to the agreement.
We therefore decline to apply the doctrine of contra
proferentem and hold that the District Court erred in doing so.
While resort to some types of extrinsic evidence specifically
relating to Goldman’s intent might be inappropriate, as
discussed above, resort to extrinsic evidence regarding course
of dealing and trade usage to resolve the ambiguity does not
seem inappropriate even where Goldman unilaterally drafted
the agreement. The use of course of dealing and trade usage
evidence of the sort we discussed above “can speak to the
intent of all parties to a contract,” SI Mgmt. L.P., 707 A.2d at
43 (emphasis in original), as it addresses the general
operations at GSCo and who reasonable people in the
11
The dissent maintains that we should apply contra
proferentem to construe ambiguities in the By-Laws against
Goldman because, among other reasons, doing so furthers the
public policy of protecting the reasonable expectations of
stakeholders who join an entity after the governing document
has been drafted. We note that this case does not implicate
this public policy. It is undisputed that Aleynikov did not
review any part of the By-Laws before he began working at
GSCo or during his time there. App. 428. Nor did Aleynikov
expect that Goldman would pay his legal fees if he was sued
or charged criminally; he admitted that the “thought never
crossed [his] mind.” App. 430. Furthermore, as discussed in
more detail in footnote 9, infra, consideration of trade usage
extrinsic evidence protects the reasonable expectations of
employees at GSCo.
33
investment banking industry would consider an officer to be.
Absent consideration of Aleynikov’s subjective views on his
officer-status, which would be neither helpful nor appropriate,
this is the closest we can get to ascertaining how employees at
GSCo, who may or may not be eligible for indemnification
and advancement at some point, would view the language of
the contract. On remand, the fact finder should consider the
extrinsic evidence presented and determine whether that
evidence resolves the ambiguity to ascertain “which of the
reasonable readings [of the term officer] was intended by the
parties.” Harrah’s Entm’t, Inc. v. JCC Holding Co., 802
A.2d 294, 309-10 (Del. Ch. 2002).
IV.
For the foregoing reasons, we vacate the District
Court’s order granting summary judgment in Aleynikov’s
favor on the advancement issue and remand to the District
Court for further proceedings consistent with this opinion.
Because we have concluded that the relevant terms of the By-
Laws are ambiguous and there are genuine issues of material
fact raised in resolving that ambiguity, summary judgment is
not appropriate for either party at this time. Therefore, while
we exercise supplemental jurisdiction over the District
Court’s denial of Goldman’s cross-motion for summary
judgment, we conclude that motion was properly denied and
affirm the District Court on this issue.
34
FUENTES, Circuit Judge, dissenting in part.
I agree with the majority that the term “officer” as
used in the advancement provision of the By-Laws is
ambiguous. But unlike the majority, I believe that Delaware
has clearly stated the rule for deciding between competing
interpretations of an ambiguous term: courts should construe
the ambiguous term in the corporate instrument against the
drafter, rather than inviting the use of extrinsic evidence to
decipher the term’s meaning. Delaware has never suggested
that there is an exception to its contra proferentem rule where
the ambiguity concerns “whether a plaintiff is a party to or
beneficiary of a contract.” Maj. Op. at 28. Thus, I would
resolve the ambiguous term “officer” against Goldman Sachs
and conclude, as a matter of law, that Sergey Aleynikov, a
vice president at Goldman, was an officer and therefore
entitled to advanced legal fees. I believe Delaware law
compels this conclusion, as does the public policy animating
Delaware’s interpretation of governing documents.
I therefore dissent.
I.
Under Delaware law, a court generally must allow a
case involving an ambiguous contract to proceed to trial, so
that the finder of fact may “consider the relevant extrinsic
evidence in aid of identifying which of the reasonable
readings was intended by the parties.” Harrah’s Entm’t, Inc.
v. JCC Holding Co., 802 A.2d 294, 309 (Del. Ch. 2002)
(citing Eagle Indus. v. DeVilbiss Health Care, Inc., 702 A.2d
1228, 1232 (Del. 1997)). However, Delaware follows a
different rule where the ambiguous contract at issue is a
1
firm’s governing document. Stockman v. Heartland Indus.
Partners, LLP, 2009 WL 2096213, at *5 (Del. Ch. July 14,
2009). Where such a governing document “makes promises
to parties who did not participate in negotiating the
agreement, Delaware applies the general principle of contra
proferentem,” and construes ambiguous provisions against the
drafter without resorting to extrinsic evidence. Id.; see also
SI Mgmt. L.P. v. Wininger, 707 A.2d 37, 42-44 (Del. 1998)
(applying contra proferentem when interpreting a partnership
agreement); Shiftan v. Morgan Joseph Holdings, Inc., 57
A.3d 928, 935 (Del. Ch. 2012) (applying contra proferentem
when interpreting a certificate of incorporation).
This rule applies where the ambiguous provision at
issue concerns advancement.1 See Stockman, 2009 WL
2096213, at *5; DeLucca v. KKAT Mgmt., L.L.C., 2006 WL
224058, at *6 (Del. Ch. Jan. 23, 2006). Indeed, if anything,
Delaware’s impulse to construe governing instruments
against their drafters applies with greater force to
advancement provisions, because “Delaware has a strong
public policy in favor of [advancement].” Id. at *7; see also
Homestore, Inc, 888 A.2d at 211 (Del. 2005).
1
Advancement is related to, but distinct from,
indemnification. Indemnification provides reimbursement of
legal expenses incurred by corporate officials in legal
proceedings, while “[a]dvancement provides 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.” Homestore, Inc. v. Tafeen, 888 A.2d 204, 211
(Del. 2005).
2
Goldman’s By-Laws “make[] promises [of
advancement] to parties who did not participate in negotiating
the agreement.” See Stockman, 2009 WL 2096213, at *5.
Under Delaware law, then, Goldman must clearly notify its
employees whether they are entitled to advancement under its
By-Laws. See id. As the majority explains, Goldman has
failed to do so. See Maj. Op. at 21. It has drafted an
advancement provision susceptible to more than one
interpretation. Accordingly, Delaware law requires us to
apply the doctrine of contra proferentem and construe the
provision against Goldman.
II.
The majority has declined to apply Delaware’s contra
proferentem doctrine to the advancement provision of the By-
Laws, because, it says, this dispute concerns whether
Aleynikov is entitled to benefits under the By-Laws and not
what those benefits include. The majority draws this
distinction from its survey of Delaware cases: they apply
contra proferentem to ambiguities as to the scope of a
particular benefit, but are silent as to whether contra
proferentem applies to ambiguities concerning an individual’s
entitlement to the benefit at all.
But the fact that Delaware has not applied contra
proferentem in this exact circumstance does not mean that it
would not do so were it given the opportunity. And given the
clear language in Delaware case law stating that contra
proferentem applies to ambiguous provisions of governing
documents, I believe that it is not appropriate to craft an
exception to Delaware’s rule, unless the public policies
motivating the rule are inapplicable to these circumstances.
3
In my view, however, the policies supporting Delaware’s use
of contra proferentem would plainly be furthered by applying
the doctrine to this case. Specifically, construing the
advancement provision against Goldman would (1) assure
relevant stakeholders that they could reasonably rely on the
face of governing documents of Delaware corporations, and
(2) encourage Goldman to redraft the advancement provision
in its By-Laws.
A.
Generally speaking, persons working for, and
contracting with, a firm do not take part in the drafting of the
document that creates the firm and governs its conduct.
Rather, these persons and entitled—referred to here as the
firm’s stakeholders—conduct business with the firm after the
governing document is drafted, and they must then decide
whether to interact with the company based upon the
representations of a unilaterally drafted document. See
Stockman, 2009 WL 2096213, at *5 (noting that a firm’s
stakeholders “look to the governing instrument’s words”
when determining whether to engage with a company); see
also Bank of N.Y. Mellon v. Commerzbank Capital Funding
Trust II, 65 A.3d 539, 551 (Del. 2013). Delaware’s robust
application of contra proferentem accounts for this reliance
interest by “protect[ing] 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.” Stockman, 2009 WL 2096213, at *5. This
“in turn benefits the entity by encouraging [stakeholders] to
provide their capital, be it human or financial, at a lower cost
than they would if they faced greater uncertainty.” Id. at *8.
4
By rejecting the District Court’s application of contra
proferentem, we open the door for the finder of fact to
determine a governing document’s meaning using extrinsic
evidence. But as the Delaware Chancery Court has noted,
looking to extrinsic evidence to make sense of these
documents, rather than construing them against their drafters
as a matter of law, contravenes the public policy outlined
above. Specifically, doing so “undermine[s] 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.” Id.
at *5. Such an outcome is bad for that firm’s employees, its
investors, and its shareholders.
The reasonable expectation of a vice president that he
is an officer of a corporation (and is entitled to the benefits
provided for in the By-Laws) is the very sort of expectation
that Delaware corporate law clearly protects. Aleynikov
“join[ed Goldman] . . . after it was formed” and “rel[ied] on
the face of [its By-Laws]”—that is, a vague promise that he
was an officer entitled to advancement—“to understand [his]
rights and obligations when making the decision to join.” See
id. Honoring this reasonable expectation would assure other
stakeholders that they, too, may rely on governing documents
when doing business with entities organized in Delaware.
By contrast, today’s majority opinion does not honor
Aleynikov’s reasonable expectations about the meaning of
Goldman’s By-Laws. In fact, as I explain below, it privileges
the subjective views of Goldman about the meaning of the
term “officer” over the reasonable expectations of its
employees. Doing so “undermine[s] the ability of . . .
5
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.” See id.
B.
Delaware’s application of contra proferentem serves
another, related public policy: it encourages corporations to
draft clear corporate instruments and ensures that “governing
instruments of entities [are] interpreted consistently and that
they [are] applied in a predictable manner.” Stockman, 2009
WL 2096213, at *5; accord Penn Mut. Life Ins. Co. v.
Oglesby, 695 A.2d 1146, 1149-50 (Del. 1997) (noting that it
is incumbent on an issuer of securities to make the terms of
its operative documents clear to a reasonable investor). By
contrast, resorting to extrinsic evidence in construing
ambiguous corporate instruments, as the majority does,
“create[s] unpredictable results [and] reduce[s] the incentives
for clear drafting.” Stockman, 2009 WL 2096213, at *5.
By construing the advancement provision against
Goldman, we would incentivize Goldman to rewrite the
provision, so that it unambiguously states which of its
employees are officers. But today’s ruling encourages
Goldman to do the opposite: keep the ambiguous language in
place, thereby giving many persons the reasonable
expectations they will receive advancement, while reserving
the right to make unpredictable post hoc determinations about
which former employees should be advanced attorney’s fees
and which shouldn’t. Such an outcome is inconsistent with
Delaware law.
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III.
Aside from contravening Delaware’s public policy, the
majority’s decision also misapplies Delaware’s decisional
law. The majority suggests that Delaware’s contra
proferentem doctrine applies only in resolving the scope of
rights promised by a governing agreement, but that it “has no
application in resolving whether a person has rights under the
contract at all.” Maj. Op. at 30. This is so, the majority
states, because “‘[t]he bylaws of a Delaware corporation
constitute part of a binding broader contract among the
directors, officers, and stockholders.’” Id. at 29 (quoting
Boilermakers Local 154 Ret. Fund. v. Chevron Corp., 73
A.3d 934, 939 (Del. Ch. 2013)). In other words, the majority
appears to suggest that, under Delaware law, one is entitled to
the protections of contra proferentem only where the plaintiff
is definitely a director, officer, or shareholder, but not where
his membership in one of these groups is in question.
There are several problems with this position. First,
Boilermakers Local 154, the case relied on by the majority,
does not concern contra proferentem. It says nothing at all
about when that doctrine applies to the interpretation of a
firm’s governing document.
Second, Delaware case law contradicts the notion that
a corporate instrument is construed against the drafter only
where the plaintiff is indisputably a shareholder, officer, or
directors. Indeed, the Chancery Court has explained that
contra proferentem protects all persons or entities “who
provide benefits to the entity” and who “rely on [the
governing document] in making their decisions about whether
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to participate in the entity’s activities.” Stockman, 2009 WL
2096213, at *8. The Delaware Courts believe that ensuring
all relevant stakeholders that they can rely on their reasonable
expectations about the meaning of governing instruments is
essential to the existence of a smoothly running marketplace.
As an employee, Aleynikov was entitled to rely on promises
made to him in the By-Laws. See id. at *5 (noting that the
“concerns” motivating Delaware’s robust application of
contra proferentem in this context are “equally applicable to
the directors, officers, and employees” of an organization);
see also 8 Del. C. § 109(b) (providing that a corporation’s by-
laws may contain provisions relating to “the rights or powers
of,” among others its “employees”).
Third, the majority does not explain why Delaware
would apply contra proferentem where a governing document
is vague as to the benefit’s scope, yet would not apply the
doctrine where the document is vague as to who receives it.
As I note above, applying the doctrine in both contexts
furthers Delaware public policy by encouraging clearer
drafting, and by protecting the reasonable expectations of the
relevant stakeholders.
In short, neither Delaware case law, nor Delaware
public policy, favors the exception to Delaware’s contra
proferentem doctrine set forth by the majority. I therefore
believe that we are obliged to apply contra proferentem here,
and construe the advancement provision of the By-Laws
against Goldman.
IV.
8
Today’s ruling sanctions the consideration of two
categories of so-called “course of dealing” evidence: (1)
evidence that Goldman invoked its discretion in agreeing to
pay the legal fees of individuals in similar positions to
Aleynikov; and (2) internal Goldman documents that
“appointed and/or removed individuals as officers of GSCo,”
as well as “evidence that the persons occupying the positions
of officer, as appointed in the documents, were publicly
identified in regulatory filings.” Maj. Op. at 24. This
evidence does not speak to the mutual understanding of the
contracting parties. I therefore believe it is irrelevant and
cannot be considered by the finder of fact.
In Delaware, “[t]he goal in reviewing the extrinsic
evidence is to determine if there is a meaning of the [contract]
such that an ‘objectively reasonable party in the position of
either bargainer would have understood the nature of the
contractual rights and duties to be.’” KFC Nat’l Council &
Adver. Co-op., Inc. v. KFC Corp., 2011 WL 350415, at *15
(Del. Ch. Jan. 31, 2011) (emphasis added); see also
Restatement (Second) of Contracts, § 223(1) (explaining that
admissible “course of dealing” evidence concerns “a
sequence of previous conduct between the parties to an
agreement which is fairly to be regarded as establishing a
common basis of understanding for interpreting their
expressions and other conduct” (emphasis added)).
By contrast, evidence that goes only to the subjective
belief of one of the contracting parties about the meaning of
the contract is irrelevant. See In re IBP, Inc. S’holders Litig.,
789 A.2d 14, 55 (Del. Ch. 2001). As I explain above, rarely
does an individual employed by, or investing in, a firm take
part in the drafting of its governing document. Accordingly,
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where a person’s rights under a firm’s governing agreement
are at issue, there is no meeting of the minds as to the
document’s meaning. And by extension, of course, there can
be no relevant evidence concerning the parties’ mutual
understanding of the agreement’s meaning. See, e.g., Bank of
N.Y. Mellon, 65 A.3d at 551 (in interpreting limited liability
company agreement, extrinsic evidence “yield[s] information
about the views and position of only one side of the dispute,”
and is therefore “unhelpful” in deciphering the contract’s
meaning); Kaiser Aluminum Corp. Matheson, 681 A.2d 392,
397 (Del. 1996) (consideration of extrinsic evidence to
discern meaning of certificate of designation was
inappropriate).
At best, the evidence that Goldman invoked its
discretion when providing legal fees to some of its former
employees demonstrates the sincerity of Goldman’s
subjective belief that it is not required to indemnify and
advance fees to vice presidents under the By-Laws. This
evidence says nothing at all about Aleynikov’s reasonable
expectation that he would receive advancement and
indemnification when he joined Goldman. Neither the
majority nor Goldman has suggested that Aleynikov knew,
when he began working for Goldman, that Goldman believed
it had the discretion to provide attorney’s fees to vice
presidents.
The same goes for the evidence that Goldman
appointed its officers by formal resolution. There is no
evidence that Aleynikov knew of these internal documents or
regulatory filings when he joined the firm. Nor, I assume, is
the majority suggesting that Aleynikov had a duty to scour
10
Goldman’s regulatory filings to understand the scope of his
benefits.
Both categories of evidence, then, speak only to
Goldman’s views about what it means to be an officer in its
organization. Neither category speaks to what both sides’
expectations were when entering into the contract. Thus, the
evidence is “unhelpful” in divining the meaning of the
advancement provision of the By-Laws. See Bank of N.Y.
Mellon, 65 A.3d at 551. Worse, by allowing the finder of fact
to consider evidence of Goldman’s subjective belief about the
meaning of its poorly drafted advancement provision, we
privilege Goldman’s unilateral view about what its By-Laws
mean over the reasonable expectations of its employee. As I
explain above, this contravenes Delaware public policy,
which resolutely protects the reasonable expectations of
persons interacting with Delaware corporations. Stockman,
2009 WL 2096213, at *5.
The majority’s rationale for using this evidence is that
the majority is “left in a bind” after declining to apply contra
proferentem. Maj. Op. at 23. To be sure, declining to use
contra proferentem where a contract is unilaterally drafted
leaves us with no satisfactory mechanism to determine the
meaning of the governing agreement. That is why we should
apply Delaware’s rule of interpretation to construe ambiguous
provision of the By-Laws against Goldman.
V.
In sum, I would construe the advancement provision of
the By-Laws against Goldman. The distinction drawn by the
majority not only lacks any basis in Delaware law, it also
11
lacks any clear policy rationale. In fact, Delaware public
policy would be benefited by construing the advancement
provision in the By-Laws against Goldman. Moreover, by
declining to use contra proferentem, the majority has invited
the use of improper extrinsic evidence to determining what
the parties meant. For these reasons, we should conclude that
Aleynikov is an officer under the By-Laws and is entitled to
advancement of his legal fees from Goldman.
I therefore respectfully dissent.
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