Aleynikov v. Goldman Sachs Group, Inc.

Facts

P was employed by GSCo from May 7, 2007, through June 30, 2009. P was part of a team of computer programmers responsible for developing source code relating to GSCo's high frequency trading system. During his employment at GSCo, P held the title of 'vice president.' In April 2009, P accepted an employment offer from Teza Technologies, a start-up company based in Chicago. Before leaving GSCo in June, P allegedly copied and transmitted to his home computer and other devices, via a server in Germany, hundreds of thousands of lines of confidential source code. About a month later, P flew to Teva's offices carrying a laptop and flash drive that allegedly contained the stolen source code. Immediately upon his return, he was arrested by the FBI at Newark Liberty International Airport and charged federally. Aleynikov (P) filed the action in New Jersey federal court, seeking to compel Goldman (D) to advance his legal fees in the New York criminal case, on the theory that he was an officer of Goldman Subsidiary. P seeks indemnification for legal fees and expenses he has already incurred in a federal criminal case that concluded, after appeal, in dismissal of the charges. P also seeks advancement of legal fees and expenses for his ongoing defense of a criminal case thereafter filed in New York state court based on the same facts. Ds answered P's Complaint and filed counterclaims against him, based on P's alleged theft of D's valuable computer code. The counterclaims allege breach of contract, misappropriation of trade secrets, and conversion. P was convicted of (1) theft of trade secrets in violation of the Electronic Espionage Act ('EEA') and (2) transportation of stolen property in interstate commerce in violation of the National Stolen Property Act ('NSPA'). The Second Circuit reversed the decision of the district court, reasoning that, while P breached his confidentiality obligations to D, his conduct did not fall within the scope of the charged federal offenses. P was rearrested in New Jersey and then indicted by a Manhattan Grand Jury on two counts of 'Unlawful use of Secret Scientific Material,' in violation of NY Penal Law § 165.07, and one count of 'Unlawful Duplication of Computer Related Material,' in violation of NY Penal Law § 156.30(1). P has been represented by the New Jersey law firm of Marino, Tortorella & Boyle ('MTB') since April 2010. P was 'rendered impecunious' after paying about a quarter of the legal fees incurred during his defense of the federal charges. D's By-laws provides for indemnity and advancement of legal fees as follows: The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation, is or was a director, officer, trustee, member, stockholder, partner, incorporator or liquidator of a Subsidiary of the Corporation . . . . Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon demand by such person and, if any such demand is made in advance of the final disposition of any such action, suit or proceeding, promptly upon receipt by the Corporation of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person, who shall be presumed to have relied upon it in serving or continuing to serve as a director or officer or in such other capacity as provided above. P claims to be an 'officer' of D because he held the title of 'vice president.' 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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