Sergey Aleynikov, a former Vice President of Goldman Sachs, was convicted of trade secret theft in 2009 under federal law.  After serving one year in prison, his conviction was overturned.  Shortly thereafter, Aleynikov was again charged in New York State court under the same set of facts.  The state charges are still pending.  This case has generated legal costs in the amount of $2.5 million, and Aleynikov has sued Goldman for the payment of these legal bills on grounds that Goldman’s bylaws requires it to indemnify its officers for legal expenses.  The lower court held in favor of Aleynikov, and Goldman appealed to the Third Circuit.

Goldman argues that although Aleynikov was a vice president, he was not technically an officer necessitating the advancement of legal fees.  Goldman’s bylaws state that legal advancements will be paid to officers, but does not define the characteristics of that job title.  The Third Circuit’s analysis focused on whether Aleynikov was considered an “officer” as defined by the bylaws.  The Court ultimately held that that term “officer” was ambiguous and the case must go back to the lower court to determine the definition and rule whether Goldman should pay Aleynikov’s legal fees.

This decision serves as a reminder that ambiguous terms in bylaws can have a significant impact when a former employee seeks indemnification from the company after allegedly committing a wrongdoing.