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Aleynikov v. Goldman Sachs Group, Inc.

United States District Court, D. New Jersey

March 23, 2018



          KEVIN MCNULTY United States District Judge

         Plaintiff Sergey Aleynikov sues the Goldman Sachs Group ("GSG"), the parent company of his former employer, seeking advancement and indemnification of legal costs in connection with criminal proceedings brought against him. The GSG bylaws mandate advancement and indemnification of legal fees for "officers" involved in legal proceedings arising from their employment with the company. Mr. Aleynikov, whose position bore the designation of vice president, claims he was an "officer" within the meaning of the bylaws; GSG disagrees, stating that it awards the title of vice president to ordinary employees. I write here for the parties, and have already written several opinions in this and related matters. Familiarity with the background is therefore assumed.

         This court granted summary judgment to Mr. Aleynikov on the officer/fee advancement issue. The Third Circuit overturned that decision, holding that this Court had misapplied Delaware state law. In a later, related action, the Delaware Chancery Court conducted a summary bench trial. While expressing misgivings about the correctness of the Third Circuit's interpretation of Delaware law, the Delaware court nevertheless held that it was bound, via res judicata, by the Third Circuit's decision. Mr. Aleynikov, it held after trial, was not an "officer" entitled to advancement and indemnification. The Delaware Supreme Court affirmed.

         Now, back in this Court, Goldman is making a sort of issue preclusion double-bank-shot. Goldman claims the Third Circuit decision on appeal from this Court bound the Delaware court-and that the Delaware court decision now binds this Court. Mr. Aleynikov responds that I remain free to deem him an officer under the GSG bylaws, and should do so. For the reasons stated herein, I will grant Goldman's motion and deny the motion of Aleynikov.

         I. BACKGROUND[1]

         A. Criminal Cases Against Mr. Aleynikov

         Plaintiff Sergey Aleynikov worked at Goldman, Sachs 85 Co. ("GSCo") from 2007 to 2009. (Compl. Iffl 10, 15). He worked as a computer programmer and held the title of "vice president." (Compl. % 15).[2] Mr. Aleynikov was charged in a criminal complaint for allegedly transferring source code out of GSCo. (Compl. If 17). He was indicted by a federal grand jury and convicted under the National Stolen Property Act, 18 U.S.C. § 2314, and the Economic Espionage Act, 18 U.S.C. § 1831. (Compl. HI 17-22); see United States v. Aleynikov, 737 F.Supp.2d 173 (S.D.N.Y. 2010). The U.S. Court of Appeals for the Second Circuit reversed his convictions, holding that his conduct did not violate federal law. United States v. Aleynikov, 476 Fed.Appx. 473 (2d Cir. 2012). In that case, Mr. Aleynikov allegedly incurred legal fees and expenses exceeding $2.3 million. (Compl. H 26).

         Mr. Aleynikov was promptly re-indicted based on the same facts, this time by a New York state grand jury for violations of New York law. That state case, too, was tried. The jury was unable to reach a unanimous verdict on the first count (unlawful use of secret scientific material), returned a guilty verdict on the second count (unlawful use of secret scientific material), and reached a not-guilty verdict on the third count (unlawful duplication of computer related material). People v. Aleynikov, 15 N.Y.S. 3d 587 (N.Y. Sup. Ct. 2015). Mr. Aleynikov moved the trial court for an order of dismissal. Id. The court granted Aleynikov's motion, finding insufficient evidence, and dismissed the first and second counts. The New York Supreme Court, Appellate Division, reversed that order of dismissal. People v. Aleynikov, 48 N.Y.S.3d 9 (App. Div. 2017). It reinstated the jury's verdict and remanded the matter for sentencing. That remand has not occurred, however, because on April 20, 2017, the New York Court of Appeals granted leave to appeal. People v. Aleynikov, 80 N.E.3d 410 (N.Y. 2017). That appeal has been argued and a decision is pending.

         B. DNJ Advancement and Indemnification Action

         On September 25, 2012, Mr. Aleynikov sued Goldman Sachs Group ("GSG"), the parent company of GSCo, in the District of New Jersey; he sought advancement and indemnification for legal fees, as well as "fees on fees" associated with obtaining that relief. Aleynikov v. Goldman Sachs Group, Inc., 2013 WL 5739137 (D.N.J. Oct. 22, 2013); (ECF No. I).[3] He argued that he was entitled to mandatory indemnification and advancement under GSG's bylaws as an "officer." (Compl. H 31). This court granted summary judgment for Mr. Aleynikov. 2013 WL 5739137; see also 2012 WL 6603397 (Dec. 14, 2012).

         That grant of summary judgment was reversed by the U.S. Court of Appeals for the Third Circuit. Aleynikov v. Goldman Sachs Group, Inc., 765 F.3d 350 (3d Cir. 2014). The Third Circuit, over a dissenting opinion by Judge Fuentes, found that (a) fact issues remained as to whether Mr. Aleynikov was an "officer" for the purposes of GSG's advancement and indemnification provision and (b) that, for purposes of construing that provision, the doctrine of contra proferentem was inapplicable. Id. The Court of Appeals reasoned as follows:

[C]Jontra 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.

Id. at 366.[4]

         On remand, Aleynikov renewed his motion for summary judgment, citing the views on contra proferentem and related public policy grounds expressed in Judge Fuentes's dissent. I denied that motion, holding that the statements in the dissent did not detract from the majority's overruling of my prior decision.[5]

         C. Delaware Advancement Action

         On February 10, 2015, Mr. Aleynikov instituted a related action in Delaware Chancery Court to obtain advancement for legal fees incurred while defending counterclaims brought by GSG against Aleynikov, as well as related "fees on fees." Aleynikov v. Goldman Sachs Group, Inc., No. 10636-VCL (Del. Ch. July 13, 2016). The Delaware Chancery Court issued its decision on July 13, 2016. The learned Vice Chancellor ("VC") J. Travis Laster, applying New Jersey issue preclusion law, found that the Third Circuit's prior decision precluded the Delaware Chancery Court from applying the doctrine of contra proferentem. Id. at *2-3.

         VC Laster wrote, however, that "I am personally inclined to think that this case presents precisely the type of situation where the doctrine of contra proferentem should and does apply." Id. at *3. VC Laster thoroughly explicated his view of applicable Delaware law, stating in effect that he, writing on a clean slate, would disagree with the Third Circuit's view. Id. Nonetheless, holding that "issue preclusion prevents] relitigation of wrong decisions just as much as right ones, " VC Laster applied the Third Circuit's analysis and declined to apply contra proferentem. Id. at *8.

         VC Laster tried the factual issues. Without the benefit of contra proferentem, VC Laster held, he was bound to find that the evidence of whether Mr. Aleynikov qualified as an officer was "in equipoise." Id. at *9. Thus, "[b]ecause Aleynikov had the burden of proof, he failed to prove that someone who held the bare title of Vice President, ' but who otherwise held a position with the responsibilities of an employee, qualified as an officer for purposes of advancement under the Bylaws." Id.

         Mr. Aleynikov appealed VC Laster's decision to the Delaware Supreme Court, which affirmed his application of issue preclusion. Aleynikov v. Goldman Sachs Group, Inc., 155 A.3d 370 (Del. 2017) (unpublished table opinion). The Delaware Supreme Court noted that while VC Laster "express[ed] concern on whether the Third Circuit's ruling accorded with Delaware Law, [he] applied the appropriate principles of law and concluded that he was not free to re-adjudicate issues already decided in the federal action." Id.

         D. Return to DNJ

         On March 10, 2017, GSG returned to this Court and moved for judgment on the pleadings in this advancement and indemnification action. (ECF No. 344). Mr. Aleynikov, too, moved for judgment on the pleadings. (ECF No. 347). This case has been through many twists, turns, and reversals of fortune, and each party, when it deemed itself to have the advantage, sought to enshrine it in a binding ruling. The court's instinct was therefore to await the final outcome in the New York proceedings before ruling further. (ECF no. 364 (administratively terminating motions without prejudice)). In response to the Court's inquiry, however, counsel for both parties agreed that this motion may be decided without the benefit of the ultimate decision of the New York Court of Appeals. (ECF nos. 364, 365, 366) The motions have therefore been reinstated (ECF nos. 370, 371), and I address them now. The essential dispute is whether the prior Third Circuit and Delaware decisions preclude relitigation of the issue of whether Mr. Aleynikov, who held the position of vice president, was an "officer" under the GSG bylaws.


         A. Motion for Judgment on the Pleadings

         A motion for judgment on the pleadings is often indistinguishable from a motion to dismiss, except that it is made after the filing of a responsive pleading. Fed.R.Civ.P. 12(h)(2) "provides that a defense of failure to state a claim upon which relief can be granted may also be made by a motion for judgment on the pleadings." Turbe v. Gov't of Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991). Accordingly, when a Rule 12(c) motion asserts that the complaint fails to state a claim, the familiar Rule 12(b)(6) standard applies (making due allowance, of course, for any factual allegations that are admitted in the responsive pleading). Id. Thus, the moving party bears the burden of showing that no claim has been stated. See Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005).

         I thus take allegations of the complaint as true and draw reasonable inferences in the light most favorable to the nonmoving party. Philips v. Cty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). I am also permitted to consider "extraneous documents that are referred to in the complaint or documents on which the claims in the complaint are based" without converting this motion into one for summary judgment. Morano v. BMW of N. Am., LLC, 928 F.Supp.2d 826, 830 (D.N.J. 2013) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997); Pension Benefit Guar. Corp. v. White Consol. Indus. Inc., 998 F.2d 1192, 1996 (3d Cir. 1993)). In particular, I may take notice of the Delaware courts' opinions:

[O]n a motion to dismiss, we may take judicial notice of another court's opinion-not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity. See Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991); United States v. Wood, 925 F.2d 1580, 1582 (7th Cir. 1991); see also Funk v. Commissioner, 163 F.2d 796, 800-01 (3d Cir. 1947) (whether a court may judicially notice other proceedings depends on what the court is asked to notice and on the circumstances of the instant case).

         S, Cross Overseas Agencies, Inc. v. WahKwong Shipping Grp. Ltd., 181 F.3d 410, 426-27 (3d Cir. 1999). See generally Fed. R. Evid. 201.

         The existence of those Delaware state court opinions is therefore noted. The legal effect of those opinions, however, is the issue to be decided here.

         B. ...

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