A recent Chancery decision is notable partly because it falls within the minority of advancement cases that deny advancement of fees to a former employee who was given the title of vice president. Its application may be limited due to procedural quirks and its reliance on New Jersey law. In Aleynikov v. The Goldman Sachs Group, Inc., C.A. No. 10636-VCL, Order and Final Judgment (Del. Ch., July 13, 2016), the Court of Chancery’s post-trial decision features an unusual result in that a vice president was denied advancement, but the 17-page Order of the court was based primarily on the doctrine of “issue preclusion”, and in particular how that concept was construed under New Jersey case law. Thus, it may not be of widespread usefulness in other Delaware corporate litigation regarding advancement.
The Court of Chancery also explained why it disagreed with an analysis of the doctrine of contra proferentem as applied by the U.S. Court of Appeals for the Third Circuit, but nonetheless felt constrained by its decision based on the doctrine of issue preclusion. Notwithstanding its obligation to follow that prior ruling, for much of the 17-pages of the Order, the Court of Chancery explained why it disagreed with the Third Circuit and why it would have reached a different conclusion. This case is now on appeal before the Delaware Supreme Court.
This case should be compared to another recent decision which also shares the uncommon result of denying advancement to someone with the title of an officer. See Pulier v. Computer Sciences Corp., highlighted on these pages. That separate case was also impacted by the application of another state’s law.
The procedural history of this case is somewhat tortuous. Initially, the United States District Court for the District of New Jersey granted summary judgment in favor of Aleynikov on the advancement issue, but on appeal, the United States Court of Appeals for the Third Circuit reversed and vacated the trial court’s ruling. Aleynikov then filed the instant action in Delaware seeking an interpretation of his rights under Delaware law. On April 28, 2016, the Court of Chancery held a one-day trial.
Useful Aspects of Decision
Based on the finding that the court was bound by a prior ruling of another court, which in turn was based on New Jersey law, this Order has limited application, and that is one reason the court likely explained its 17-page decision in the form of an Order, as opposed to a formal opinion. Nonetheless, the Court’s discussion of the doctrine of contra proferentem, as well as the concept of in pari materia when interpreting the bylaws of a parent company and the different bylaws of its subsidiaries, could have useful application. Also useful is the truism observed by the court that corporations have the authority to extend the benefits of advancement not only to officers but also to all employees and agents of a company. See DGCL Section 145(e).
Compare Recent Similar Holding
This case should be compared to another recent Chancery decision in a separate matter that also reached the unusual conclusion of not awarding advancement; and that case was also based on non-Delaware law and the constrained interpretation of the word “officer” under Nevada law and Nevada bylaws. See Pulier v. Computer Sciences Corp., et al., C.A. No. 12005-CV (transcript) (Del. Ch. May 12, 2016), as highlighted on these pages here.