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Not All Vice Presidents Are Officers and Entitled to Corporate Indemnification

Aleynikov v. Goldman Sachs Grp., Inc.

Addressing the meaning of the term “officer” in a company’s bylaws, the U.S. Court of Appeals for the Third Circuit vacated a district court’s summary judgment that a computer programmer (who was also a vice president) was an “officer” entitled to indemnification because the term was ambiguous and remanded the case for trialAleynikov v. Goldman Sachs Grp., Inc., Case No. 13-4237 (3d Cir., Sept. 3 2014) (Fisher, J.) (Fuentes, J., dissenting in part).

The computer programmer worked for a non-corporate subsidiary, the officers of which are entitled to indemnification under the parent corporation’s bylaws, which define “officer” to include actual officers and “any person serving in a similar capacity or as the manager of such entity.” The non-corporate subsidiary used the term “vice president” to communicate that an individual was more senior than an “analyst” or “associate” but less senior than a “managing director.” Approximately one-third of the non-corporate subsidiary’s employees were “vice presidents,” including the computer programmer.

On his last day of employment with the non-corporate subsidiary, the programmer stole his employer’s source code. He has since faced both federal- and state-level prosecutions for his conduct. He also sued his former employer’s parent for indemnity under the parent’s bylaws. On summary judgment, the district court found the bylaws unambiguous and that the programmer was entitled to indemnification because he was a vice president.  Goldman Sachs appealed.

The 3d Circuit vacated, finding the term “officer” in the bylaws ambiguous. The court was not convinced by the district court’s facile analysis, which hinged on the meaning of a term “vice president,” which was not part of the bylaws. It was more interested in the meaning of “officer.” After consulting several dictionaries (and lamenting the absence of any evidence of an “industry-specific common meaning” of the term), the court settled on a plain meaning of “officer” as “someone holding a position of trust, authority, or command,” which created a tautology when applied to the bylaws, which would consider an officer to be that and anyone serving in a similar capacity or as a manager of an entity. In effect, the term was “circuitous, repetitive, and most importantly, fairly or reasonably susceptible of more than one meaning.” That left the court in a world of extrinsic evidence, which “raise[d] genuine issues of material fact,” which would have to be resolved by a jury. (Dissenting in part, Judge Fuentes would have resolved the ambiguity against the parent corporation.)

As the 3d Circuit noted, the bylaws “are a unilaterally-drafted agreement,” leaving the parent corporation in complete control over its contents. More careful drafting by the parent corporation may have avoided the ambiguity result (and upcoming trial).

© 2019 McDermott Will & Emery

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About this Author

Joshua D. Rogaczewski, Insurance Litigation Attorney, McDermott Will, Law Firm
Partner

Joshua David Rogaczewski is a partner in the law firm of McDermott Will & Emery LLP and based in McDermott’s Washington, D.C., office.  Joshua focuses his practice on complex civil litigation, insurance advice, and Virginia state-court litigation.  He has co-authored several articles, including “6th Circ.’s New Approach On Retiree Health Benefits,” Law360 (Jan. 29, 2013), and “Does the policy fit the crime? Recent Bernard Madoff-related coverage disputes place crime insurance in the spotlight...

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