Are Vice Presidents "Officers" Entitled to Advancement and Indemnification?
Numerous Court of Chancery decisions have addressed whether a “vice president” constitutes an “officer” entitled to advancement and indemnification. These decisions reached varying results concerning whether non-elected “vice presidents” are entitled to advancement under bylaws requiring the election of “officers.”
In Aleynikov v. The Goldman Sachs Grp., Inc., constrained by the preclusive effect of a prior Third Circuit decision, Vice Chancellor Laster concluded that the plaintiff, a “vice president,” was not entitled to advancement under the definition of “officer” in the relevant bylaws. The Third Circuit reached its holding by concluding that the doctrine of contra proferentem had “no application” in determining whether a person who did not draft the governing agreement was subject to it. In applying the Third Circuit’s decision to rule in the defendant’s favor, the Vice Chancellor explained why—had the issue been presented to him in the first instance—he would have been inclined to apply the doctrine of contra proferentem in the plaintiff’s favor, for a number of reasons, including the following: First, the defendant drafted its bylaws unilaterally, and was best positioned to remove any ambiguities on the issue, and should be “held responsible for the reasonable expectations created by its [b]ylaws.” Second, a “vice president” could reasonably conclude that he was an “officer” entitled to advancement under the bylaws for a host of reasons, including the use of the term “vice president” by the other provisions of the governing bylaws, Section 158 of the Delaware General Corporation Law, commercial and investment banks, historical sources, federal securities laws, and the defendant’s prolific use of the term in its employee ranks. The Court further observed that the sheer number of vice presidents in the defendant entity is not a good reason to deny advancement to a person holding that title. Additionally, the Court reasoned that it was unreasonable to conclude that a “vice president” was not an officer simply because the governing board did not take formal action to appoint him. Nevertheless, the Court held itself bound by the doctrine of issue preclusion to “wrong decisions just as much as right ones,” and thus concluded that contra proferentem could not apply under the circumstances. The Court also held that the plaintiff could not meet his burden based on extrinsic evidence demonstrating that the meaning of “officer” included vice presidents. Accordingly, the Court denied the plaintiff’s claim for advancement, and the Delaware Supreme Court affirmed.