01a0167p.06

,QUH=DSWRFN\HWDO 1R
1RWDEO\ WKLV VDPH EDQNUXSWF\ FRXUW FRUUHFWO\ DSSOLHG 2KLR ODZ RQ
WKLV LVVXH LQ DW OHDVW WZR VXEVHTXHQW FDVHV 6HH ,Q UH %XUQKDP %5
DW ,Q UH 6DODPRQH %5 DW
WKHSUHVXPSWLRQWKDWWKHPRUWJDJHZDVSURSHUO\H[HFXWHG
7KHUHIRUHEHFDXVHLWLVFOHDUWKDWDQ2KLRFRXUWZRXOGKDYH
KHOGWKDWWKHSUHVXPSWLRQRIYDOLGLW\RIWKLVPRUWJDJHKDGQRW
EHHQRYHUFRPHE\FOHDUDQGFRQYLQFLQJHYLGHQFH,ZRXOG
KROGWKDWWKHEDQNUXSWF\FRXUW¶VILQGLQJRIIDFWWRWKHFRQWUDU\
LVFOHDUO\HUURQHRXV
6HFWLRQ D YHVWVWKH7UXVWHHZLWKFHUWDLQVWURQJDUP
SRZHUVWRDYRLGWUDQVIHUVWKDWZRXOGEHYRLGDEOHE\DMXGLFLDO
OLHQ FUHGLWRU XQVDWLVILHG H[HFXWLRQ FUHGLWRU RU ERQD ILGH
SXUFKDVHU RI UHDO SURSHUW\ DV WKRVH DUH GHILQHG XQGHU
DSSOLFDEOHVWDWHODZ6HH%DVKY&KHFN ,QUH&KHFN
%5 %DQNU1'2KLR :KHWKHUWKH7UXVWHH
FDQEHWUHDWHGDVHLWKHUDMXGLFLDOOLHQFUHGLWRURUDERQDILGH
SXUFKDVHURIUHDOHVWDWHIRUWKHSXUSRVHRIH[HUFLVLQJVWURQJ
DUP SRZHU XQGHU VHFWLRQ D LV GHWHUPLQHG XQGHU
DSSOLFDEOH VWDWH ODZ DV RI WKH WLPH WKH EDQNUXSWF\ LV
FRPPHQFHG 6HH 2ZHQV$PHV.LPEDOO &R Y 0LFKLJDQ
/LWKRJUDSKLQJ&R ,QUH0LFKLJDQ/LWKRJUDSKLQJ&R
)G WK&LU
%HFDXVH&KDVH¶VPRUWJDJHZDVSURSHUO\UHFRUGHGEHIRUH
WKH =DSWRFN\V ILOHG WKHLU EDQNUXSWF\ SHWLWLRQ WKH 7UXVWHH
FDQQRW XQGHU 2KLR ODZ VWDQG LQ WKH VKRHV RI D ERQD ILGH
SXUFKDVHUZLWKRXWQRWLFH6HH&LW\RI7ROHGRY%URZQ
1( 2KLR 1RUFDQ&KDVH¶VYDOLGOLHQEH
DYRLGHGE\WKH7UXVWHHVWDQGLQJLQWKHVKRHVRIDK\SRWKHWLFDO
MXGLFLDOOLHQFUHGLWRU6HH%DQNRI&OHYHODQGY6WXUJHV)
&DV '2KLR 7KHUHIRUH,ZRXOGKROGWKDW
WKHEDQNUXSWF\FRXUWHUUHGDVDPDWWHURIODZZKHQLWDOORZHG
WKH 7UXVWHH WR DYRLG &KDVH¶V PRUWJDJH LQ WKH =DSWRFN\¶V
SURSHUW\ $FFRUGLQJO\ , ZRXOG UHYHUVH WKH RUGHU RI WKH
EDQNUXSWF\FRXUW

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU
)LOH 1DPH DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB
,QUH%(51$5' / =$372&.<
DQG*/25,$ - =$372&.<
'HEWRUV
BBBBBBBBBBBBBBBBBBBBBBBB
'$9,' 2 6,021&KDSWHU
7UXVWHH
3ODLQWLII$SSHOOHH
Y
&+$6( 0$1+$77$1 %$1.
'HIHQGDQW$SSHOODQW
;!

1
1R
$SSHDOIURPWKH%DQNUXSWF\$SSHOODWH3DQHO
RIWKH6L[WK&LUFXLW
1R²5DQGROSK%D[WHU%DQNUXSWF\-XGJH
$UJXHG0DUFK
'HFLGHGDQG)LOHG0D\
%HIRUH-21(6%$7&+(/'(5DQG&/$<&LUFXLW
-XGJHV

-- 1 of 10 --

,QUH=DSWRFN\HWDO 1R
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' $PHOLD $ %RZHU 0F)$''(1
$662&,$7(6&OHYHODQG2KLRIRU$SSHOODQW6WHSKHQ'
+REW&OHYHODQG2KLRIRU$SSHOOHH21%5,()$PHOLD
$%RZHU0F)$''(1 $662&,$7(6&OHYHODQG2KLR
IRU $SSHOODQW 6WHSKHQ ' +REW &OHYHODQG 2KLR IRU
$SSHOOHH
-21(6 - GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK
&/$<-MRLQHG%$7&+(/'(5- SS GHOLYHUHG
DVHSDUDWHGLVVHQWLQJRSLQLRQ
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
1$7+$1,(/5-21(6&LUFXLW-XGJH3ODLQWLII$SSHOOHH
'DYLG 2 6LPRQ LV WKH WUXVWHH RI %HUQDUG DQG *ORULD
=DSWRFN\¶V EDQNUXSWF\ HVWDWH 'XULQJ WKH FRXUVH RI WKH
=DSWRFN\EDQNUXSWF\SURFHHGLQJV6LPRQILOHGDQDFWLRQWR
VHWDVLGHDPRUWJDJHWKDWWKH=DSWRFN\VJUDQWHGWR'HIHQGDQW
$SSHOODQW&KDVH0DQKDWWDQ%DQN ³&KDVH´ 6LPRQDVVHUWHG
WKDW WKH %DQNUXSWF\ &RGH¶V VWURQJ DUP FODXVH DOORZV WKH
HVWDWH WR DYRLG WKH PRUWJDJH EHFDXVH LW ZDV QRW SURSHUO\
H[HFXWHG XQGHU 2KLR ODZ 7KH EDQNUXSWF\ FRXUW RUGHUHG
MXGJHPHQWIRU6LPRQ7KH%DQNUXSWF\$SSHOODWH3DQHORIWKH
6L[WK &LUFXLW ³%$3´ DIILUPHG WKH EDQNUXSWF\ FRXUW¶V
GHFLVLRQ &KDVH QRZ DSSHDOV WKH %$3¶V GHFLVLRQ WR WKLV
&RXUW)RUWKHUHDVRQVVWDWHGEHORZZH$)),50WKH%$3¶V
GHFLVLRQ
,)DFWV
,Q)HEUXDU\RIWKH=DSWRFN\VUHILQDQFHGWKHLUKRPH
ZLWK&KDVH7KHVHFRQGPRUWJDJHZDVH[HFXWHGRQ)HEUXDU\
WK LQ WKH =DSWRFN\¶V KRPH DQG *DU\ :LOOLDPV RI )LUVW
6HUYLFH7LWOH$JHQF\VHUYHGDVWKH³FORVHU´7KHPRUWJDJH
1R ,QUH=DSWRFN\HWDO
DFNQRZOHGJPHQW RQ WKH UHFRUGHG PRUWJDJH GRHV QRW
UHQGHU WKH PRUWJDJH LQHIIHFWLYH IRU SXUSRVHV RI
FRQVWUXFWLYH QRWLFH
,Q HYDOXDWLQJ WKH YDOLGLW\ RI WKH =DSWRFN\¶V PRUWJDJH
QHLWKHU WKH EDQNUXSWF\ FRXUW QRU WKH %$3 FRQVLGHUHG WKDW
2KLRODZDFFRUGVJUHDWZHLJKWWRDQRWDU\SXEOLF¶VWHVWLPRQ\
DQG GLVFRXQWV D PRUWJDJRU¶V WHVWLPRQ\ ZLWK UHJDUG WR WKH
FLUFXPVWDQFHV VXUURXQGLQJ WKH H[HFXWLRQ RI D PRUWJDJH
,QVWHDG WKH EDQNUXSWF\ FRXUW GLVFRXQWHG WKH QRWDU\¶V
WHVWLPRQ\WKDWKHDOZD\VIROORZHGFRPSDQ\SROLF\²UDWKHU
WKDQ FUHGLWLQJ LW ZLWK WKH ³JUHDW ZHLJKW´ UHTXLUHG E\
&RVKRFWRQ1DWLRQDO%DQN²DQGFUHGLWHGWKHWHVWLPRQ\RIWKH
PRUWJDJRUVWKHRQO\FRPSHWLQJHYLGHQFHEHIRUHWKHFRXUW
ZKLFKXQGHU3DUDPRXQWDQGLWVSURJHQ\LVLQVXIILFLHQWDVD
PDWWHU RI ODZ WR RYHUFRPH WKH WHVWLPRQ\ RI WKH QRWDU\
+HOEOLQJY.UXHJHU²WKHRSLQLRQKHDYLO\UHOLHGXSRQE\WKH
PDMRULW\²PDNHVWKHVDPHPLVWDNH$QGLWLVGLVWLQJXLVKDEOH
RQLWVIDFWV
,Q .UXHJHU WKH NH\ IDFWRU LQ GLVFUHGLWLQJ WKH QRWDU\¶V
WHVWLPRQ\ZDVWKDWWKHRWKHUZLWQHVVZDVOLNHWKHQRWDU\D
FORVHU IRU WKH PRUWJDJH FRPSDQ\ 7KH EDQNUXSWF\ MXGJH
IRXQGLQFUHGLEOHWKHQRWLRQWKDWRQHFORVHUZRXOGKDYHEHHQ
FDOOHGDZD\IURPKLVRZQEXV\VFKHGXOHWRJRWRWKHKRPHRI
FXVWRPHUVRIDQRWKHUFORVHULQRUGHUWRZLWQHVVDPRUWJDJHKH
ZDV QRW FORVLQJ 6HH .UXHJHU :/ DW
7KRVHDUHQRWWKHIDFWVKHUH&RQVHTXHQWO\HYHQLI,ZHUHWR
DJUHHWKDW.UXHJHUSDVVHVPXVWHUXQGHUWKH5XOHVRI'HFLVLRQ
$FW DQG,GRQRW ,WKLQNLWLQDSSOLFDEOHWRWKLVFDVHZKLFK
SUHVHQWVYHU\GLIIHUHQWIDFWV
$V D PDWWHU RI 2KLR ODZ LQ WKH IDFH RI 0U :LOOLDPV¶V
WHVWLPRQ\WKDWKHZRXOGQRWXQGHUDQ\FLUFXPVWDQFHVFORVH
DORDQZLWKRXWWKHSURSHUQXPEHURIZLWQHVVHVEHLQJSUHVHQW
WKHGHEWRUV¶WHVWLPRQ\LVVLPSO\QRWVXIILFLHQWWRRYHUFRPH

-- 2 of 10 --

,QUH=DSWRFN\HWDO 1R
2KLR 5HY &RGH † SURYLGHV
$ $Q\ UHFRUGHG PRUWJDJH LV LUUHEXWWDEO\ SUHVXPHG WR EH
SURSHUO\ H[HFXWHG UHJDUGOHVV RI DQ\ DFWXDO RU DOOHJHG GHIHFW
LQ WKH ZLWQHVVLQJ RU DFNQRZOHGJPHQW RQ WKH PRUWJDJH
XQOHVV RQH RI WKH IROORZLQJ DSSOLHV
7KH PRUWJDJRU XQGHU RDWK GHQLHV VLJQLQJ WKH
PRUWJDJH
7KH PRUWJDJRU LV QRW DYDLODEOH EXW WKHUH LV
RWKHU VZRUQ HYLGHQFH RI D IUDXG XSRQ WKH
PRUWJDJRU
% (YLGHQFH RI DQ DFWXDO RU DOOHJHG GHIHFW LQ WKH
ZLWQHVVLQJ RU DFNQRZOHGJPHQW RQ WKH PRUWJDJH LV QRW
HYLGHQFH RI IUDXG XSRQ WKH PRUWJDJRU DQG GRHV QRW
UHEXW WKH SUHVXPSWLRQ WKDW D UHFRUGHG PRUWJDJH LV
SURSHUO\ H[HFXWHG
& 7KH UHFRUGLQJ RI D PRUWJDJH LV FRQVWUXFWLYH QRWLFH RI
WKH PRUWJDJH WR DOO SHUVRQV LQFOXGLQJ ZLWKRXW
OLPLWDWLRQ D VXEVHTXHQW ERQD ILGH SXUFKDVHU RU DQ\
RWKHU VXEVHTXHQW KROGHU RI DQ LQWHUHVW LQ WKH SURSHUW\
$Q DFWXDO RU DOOHJHG GHIHFW LQ WKH ZLWQHVVLQJ RU
WKH 2KLR 6XSUHPH &RXUW LQ 3RWWHU IRU WKH VWUHQJWK RI WKLV
SUHVXPSWLRQ
7KLVSULQFLSOHUHVWVXSRQWKHVRXQGHVWUHDVRQDQGXSRQ
XQGLVSXWHGDXWKRULW\DQGLIQRWDGKHUHGWRE\WKHFRXUWV
RU ZKHQ SODLQO\ GLVUHJDUGHG LV QRW HQIRUFHG E\
UHYLHZLQJ FRXUWV WKH VHFXULW\ DQG VDIHW\ UHSRVHG LQ
GHOLEHUDWHO\ZULWWHQLQVWUXPHQWVZLOOEHIULWWHUHGDZD\
DQGWKH\ZLOOEHOHIWWRDOOWKHXQFHUWDLQW\LQFLGHQWWRWKH
LPSHUIHFWDQG VOLSSHU\PHPRU\ RIZLWQHVVHV
3RWWHU2KLR6WDW
7KHQHZO\HQDFWHG2KLR5HY&RGH†GRHVQRW
DSSO\WRWKH=DSWRFN\¶VPRUWJDJHEHFDXVHWKDWPRUWJDJHZDV
H[HFXWHGLQ)HEUXDU\ RI %XWWKH2KLR/HJLVODWXUH¶V
DFWLRQLVLQVWUXFWLYH²2KLRODZZKLFKSUHYLRXVO\GLVIDYRUHG
VXFK FKDOOHQJHV QRZ H[SUHVVO\ SURYLGHV WKDW DEVHQW D
VKRZLQJRIIUDXGWKHSUHVXPSWLRQRIYDOLGLW\RIDUHFRUGHG
PRUWJDJH PD\ QRW EH RYHUFRPH E\ HYLGHQFH RI GHIHFWLYH
H[HFXWLRQRIWKDWPRUWJDJH
1R ,QUH=DSWRFN\HWDO
EHDUV WKH VLJQDWXUHV RI %HUQDUG DQG *ORULD =DSWRFN\ DV
PRUWJDJRUV RI *DU\ :LOOLDPV DV ZLWQHVV DQG RI ³7D\ORU
/OR\G´DVZLWQHVV
2Q $SULO WKH =DSWRFN\V ILOHG IRU &KDSWHU
EDQNUXSWF\ 'XULQJ WKRVH SURFHHGLQJV WKH %DQNUXSWF\
7UXVWHH 'DYLG 2 6LPRQ ILOHG DQ DGYHUVDU\ SURFHHGLQJ
DJDLQVW&KDVH7KH7UXVWHHDVVHUWHGWKH³VWURQJDUP´SRZHU
RI86&† D DOORZVWKHHVWDWHWRDYRLGWKH&KDVH
PRUWJDJHEHFDXVHLWZDVQRWYDOLGO\H[HFXWHGXQGHU2KLRODZ
6SHFLILFDOO\6LPRQFODLPHGWKDWWKHPRUWJDJHGRFXPHQWVGLG
QRW FRPSO\ ZLWK 2KLR 5HYLVHG &RGH † ZKLFK
UHTXLUHV WKDW D PRUWJDJH EH VLJQHG LQ WKH SUHVHQFH RI WZR
ZLWQHVVHV
$WWULDOERWK%HUQDUGDQG*ORULD=DSWRFN\WHVWLILHGWKDW
WKH\VLJQHGWKHPRUWJDJH DWWKHLUGLQLQJURRPWDEOHLQWKH
SUHVHQFHRI*DU\:LOOLDPV7KH\ERWKLQVLVWHGWKDW:LOOLDPV
ZDVWKHRQO\ZLWQHVVSUHVHQWDWWKHVLJQLQJDQGWKDWWKH\GLG
QRW NQRZ DQ\ SHUVRQ E\ WKH QDPH RI 7D\ORU /OR\G ,Q
UHVSRQVH &KDVH RIIHUHG WKH WHVWLPRQ\ RI *DU\ :LOOLDPV
:LOOLDPVWHVWLILHGWKDWKHKDGQRVSHFLILFUHFROOHFWLRQRIWKH
HYHQWVRI)HEUXDU\DQGWKDWKHGLGQRWNQRZRIDQ\
SHUVRQE\WKHQDPHRI³7D\ORU/OR\G´+RZHYHU:LOOLDPV
DOVRVWDWHGWKDWWKHFRPSDQ\ZLWKZKLFKKHZDVHPSOR\HGDW
WKHWLPHRIWKH=DSWRFN\FORVLQJ)LUVW6HUYLFH7LWOH$JHQF\
PDLQWDLQHGDSROLF\RIQRWFORVLQJORDQVXQOHVVWZRZLWQHVVHV
ZHUHSUHVHQW+HFODLPHGWKDWKHZRXOGQRWKDYHVLJQHGDQG
QRWDUL]HG WKH =DSWRFN\ PRUWJDJH LQ FRQWUDYHQWLRQ RI WKDW
SROLF\EHFDXVHVXFKDFWLRQVZRXOGKDYHOHGWRKLVGLVPLVVDO
$IWHUZHLJKLQJWKHHYLGHQFHWKHEDQNUXSWF\FRXUWIRXQG
WKDWWKH&KDVHPRUWJDJHZDVQRWYDOLGO\H[HFXWHGXQGHU2KLR
ODZEHFDXVHWKHUHZDVRQO\RQHZLWQHVVSUHVHQWDWWKHVLJQLQJ
RIWKHPRUWJDJHGRFXPHQWV6HH6LPRQY&KDVH0DQKDWWDQ
%DQN ,QUH=DSWRFN\ %5 %DQNU1'2KLR
7KHFRXUWKHOGWKDWVLQFHWKHPRUWJDJHZDVQRWYDOLGO\
H[HFXWHG6LPRQFRXOGDYRLGWKHPRUWJDJHXQGHU86&
† D ZKLFK DOORZV EDQNUXSWF\ WUXVWHHV WR DYRLG

-- 3 of 10 --

,QUH=DSWRFN\HWDO 1R
WUDQVIHUVRISURSHUW\WKDWFRXOGEHDYRLGHGE\DMXGLFLDOOLHQ
FUHGLWRU,GDW&KDVHDSSHDOHGWKLVGHFLVLRQWRWKH%$3
7KH %$3 UHYLHZHG WKH EDQNUXSWF\ FRXUW¶V OHJDO
GHWHUPLQDWLRQV GH QRYR DQG LWV IDFWXDO GHWHUPLQDWLRQV IRU
FOHDUHUURU,WKHOGWKDWWKHWULDOFRXUWGLGQRWFRPPLWFOHDU
HUURUZKHQLWIRXQGWKDWRQO\RQHZLWQHVVZDVSUHVHQWDWWKH
VLJQLQJRIWKH&KDVHPRUWJDJHDQGWKDWWKHPRUWJDJHZDVQRW
YDOLGO\ H[HFXWHG XQGHU 2KLR ODZ 6HH 6LPRQ Y &KDVH
0DQKDWWDQ%DQN ,QUH=DSWRFN\ %5 %$3
WK&LU 7KH%$3DOVRFRQFOXGHGWKDW6LPRQFRXOG
DYRLGWKH=DSWRFN\V¶PRUWJDJHXQGHUWKHEDQNUXSWF\FRGH
8QOLNHWKHWULDOFRXUWKRZHYHUWKH%$3UHOLHGRQ6HFWLRQ
D DQG UHDVRQHG WKDW VLQFH D ERQD ILGH SXUFKDVHU
ZRXOG KDYH EHHQ DEOH WR DYRLG WKH LPSURSHUO\ H[HFXWHG
PRUWJDJHWKH7UXVWHHFRXOGDOVRDYRLG&KDVH¶VFODLP,GDW
7KH%$3DOVRKHOGWKDW&KDVHGLGQRWKDYHDQHTXLWDEOH
ULJKWRIVXEURJDWLRQDJDLQVWWKHEDQNUXSWF\HVWDWH,GDW
2Q0D\&KDVHILOHGDWLPHO\QRWLFHRIDSSHDOWRWKLV
&RXUW:HUHYLHZWKHEDQNUXSWF\FRXUW¶VOHJDOKROGLQJVGH
QRYRDQGLWVIDFWXDOGHWHUPLQDWLRQVIRUFOHDUHUURU6HH&RU]LQ
Y )RUGX ,Q UH )RUGX )G Q WK &LU

,,%DFNJURXQG
7KH³VWURQJDUP´FODXVHRIWKH%DQNUXSWF\&RGH86&
† D JUDQWV D EDQNUXSWF\ WUXVWHH WKH SRZHU WR DYRLG
WUDQVIHUV RI SURSHUW\ WKDW ZRXOG EH DYRLGDEOH E\ FHUWDLQ
K\SRWKHWLFDOSDUWLHV6HFWLRQ D SURYLGHV
7KH7UXVWHHVKDOOKDYHDVRIWKHFRPPHQFHPHQWRIWKH
FDVHDQGZLWKRXWUHJDUGWRDQ\NQRZOHGJHRIWKHWUXVWHH
RURIDQ\FUHGLWRUWKHULJKWVDQGSRZHUVRIRUPD\DYRLG
DQ\WUDQVIHURISURSHUW\RIWKHGHEWRURUDQ\REOLJDWLRQ
LQFXUUHGE\WKHGHEWRUWKDWLVYRLGDEOHE\±
DFUHGLWRUWKDWH[WHQGVFUHGLWWRWKHGHEWRUDWWKH
WLPHRIWKHFRPPHQFHPHQWRIWKHFDVHDQGWKDWREWDLQV
DWVXFKWLPHDQGZLWKUHVSHFWWRVXFKFUHGLWDMXGLFLDO
OLHQ RQ DOO SURSHUW\ RQ ZKLFK D FUHGLWRU RQ D VLPSOH
1R ,QUH=DSWRFN\HWDO
)XUWKHUPRUHWKH2KLR/HJLVODWXUHKDVHQDFWHGOHJLVODWLRQ
WKDWWDNHV2KLRODZRQHVWHSIXUWKHU$UHFHQWEDQNUXSWF\
FRXUWRSLQLRQH[SODLQV
,Q WKH ODVW IHZ \HDUV FKDSWHU WUXVWHHV LQ WKLV GLVWULFW
KDYHHOLFLWHGWHVWLPRQ\IURPVHYHUDOGHEWRUVDWWKHLU
FUHGLWRUV¶ PHHWLQJ WKDW RQO\ RQH RI WKH WZR QDPHG
DWWHVWLQJ ZLWQHVVHV ZDV DFWXDOO\ SUHVHQW ZKHQ WKH
PRUWJDJHRQWKHLUSURSHUW\ZDVVLJQHG7KLVKDVUHVXOWHG
LQ WKH WKUHDW WKDW D VXEVWDQWLDO QXPEHU RI PRUWJDJHV
ZKRVH YDOLGLW\ DQG HQIRUFHDELOLW\ DUH RWKHUZLVH
XQTXHVWLRQHG FRXOG EH DYRLGHG E\ WUXVWHHV LQ
EDQNUXSWF\ ,Q UHVSRQVH WR WKDW WKUHDW WKH 2KLR
OHJLVODWXUHHQDFWHG2KLR5HY&RGH†ZKLFKLQ
JHQHUDOZRXOGSUHFOXGHLPSHDFKPHQWRIWKHDWWHVWDWLRQ
DQGDFNQRZOHGJPHQWRIDIDFLDOO\YDOLGPRUWJDJHH[FHSW
LQFDVHVRIDFWXDOIUDXGDQGZRXOGPDNHWKHUHFRUGLQJRI
D IDFLDOO\ YDOLG PRUWJDJH FRQVWUXFWLYH QRWLFH WR DOO
SHUVRQVLQFOXGLQJVSHFLILFDOO\ERQDILGHSXUFKDVHUVWKXV
FXWWLQJRIIWKHWUXVWHH¶VDWWDFNXQGHUVHFWLRQ H RIWKH
%DQNUXSWF\ &RGH +RZHYHU 2KLR 5HY &RGH
†EHFDPHHIIHFWLYH-XQH>DQG@
HYHU\RSLQLRQLQZKLFKWKLVVHFWLRQKDVEHHQFRQVLGHUHG
KDVGHQLHGLWUHWURDFWLYHDSSOLFDWLRQ
,QUH-HDQQHWWH:LOOLDPV%5DW$OWKRXJKWKH
:LOOLDPVFRXUWKHOGWKDWWKH2KLRVWDWXWHGLGQRWDSSO\WRWKDW
FDVHWKHFRXUWGHWHUPLQHG²RQIDFWVYHU\VLPLODUWRWKRVHLQ
WKLVFDVH²WKDWWKH7UXVWHHGLGQRWPHHWKHUEXUGHQRISURRI
QHFHVVDU\ WR RYHUFRPH WKH SUHVXPSWLRQ RI YDOLGLW\ RI WKH
PRUWJDJHH[SODLQLQJWKDW³WKHSRLQWZKHUHHYLGHQFHRQWKLV
LVVXH EHFRPHV FOHDU DQG FRQYLQFLQJ LV PXFK FORVHU WR WKH
SRLQWZKHUHLWGLVSHOVUHDVRQDEOHGRXEWWKDQZKHUHLWVDWLVILHV
WKHSUHSRQGHUDQFHWHVW´,GDW4XRWLQJWKHYHQHUDEOH
2KLRFDVHRI3RWWHUY3RWWHU2KLR6W WKH
FRXUWVDLG³>7@KHSUHVXPSWLRQLVVRVWURQJO\LQIDYRURIWKH
LQVWUXPHQWWKDWQRWKLQJVKRUWRIDFOHDUDQGFRQYLQFLQJ
VWDWHRIIDFWZLOOZDUUDQWWKHFRXUWWRLQWHUIHUH´:LOOLDPV
%5DW,WKLQNLWLVZRUWKQRWLQJWKHUHDVRQJLYHQE\

-- 4 of 10 --

,QUH=DSWRFN\HWDO 1R
6HH DOVR 6LPRQ Y )LUVW 8QLRQ 0RUWJDJH &RUS ,Q UH %XUQKDP
%5 %DQNU 1' 2KLR VDPH %DXPJDUW Y )RUG
&RQVXPHU )LQ ,Q UH 6DODPRQH %5 %DQNU 1' 2KLR
VDPH
PRUWJDJH DSSHDUHG WR KDYH EHHQ SURSHUO\ H[HFXWHG DQG
UHFRUGHG 7KH DSSHOODWH FRXUW KHOG ³,W >WKH PRUWJDJH@
WKHUHIRUH FDUULHV ZLWK LW D SUHVXPSWLRQ RI YDOLGLW\ DQG LQ
RUGHUWRGHVWUR\LWVHIIHFWDVDPRUWJDJHLWPXVWEHVKRZQWR
EHGHIHFWLYHE\WKHFRQWHVWHUVDQGE\DSUHSRQGHUDQFHRIWKH
HYLGHQFH´&RVKRFWRQ1DW¶O%DQNY+DJDQV1(
2KLR&W$SS $VLQWKHFDVHQRZEHIRUHXVWKH
QRWDU\DQGZLWQHVVHVLQ&RVKRFWRQ1DWLRQDO%DQNWHVWLILHG
WKDWWKH\KDGQRLQGHSHQGHQWNQRZOHGJHRUUHFROOHFWLRQRIWKH
VLJQLQJEXWWKDWWKH\QHYHUVLJQHGDQ\LQVWUXPHQWDVZLWQHVVHV
RUDVQRWDU\XQOHVVWKHSDUWLHVZHUHSUHVHQWDQGVLJQHGWKH
LQVWUXPHQWLQWKHLUSUHVHQFH7KHFRXUWKHOG³7KLVLVDOOWKDW
FRXOGUHDVRQDEO\EHH[SHFWHGXQGHUWKHFLUFXPVWDQFHVDQGD
SRVLWLYHVWDWHPHQWRIDQLQIOH[LEOHUXOHDOZD\VDGKHUHGWRE\
D QRWDU\ RU ZLWQHVV PXVW FDUU\ JUHDW ZHLJKW LQ WKH
FRQVLGHUDWLRQRIWKHLUHYLGHQFH´,G (PSKDVLVDGGHG
0RUHUHFHQWO\DQRWKHU2KLRFRXUWRIDSSHDOVUHLWHUDWHGWKH
2KLR6XSUHPH&RXUW¶VUXOHWKDWWKHSUHVXPSWLRQRIYDOLGLW\
IORZLQJ IURP D GHHG WKDW DSSHDUV RQ LWV IDFH WR KDYH EHHQ
H[HFXWHG LQ GXH IRUP PD\ EH RYHUFRPH RQO\ E\ FOHDU DQG
FRQYLQFLQJHYLGHQFHDQGWKDWWKHEXUGHQRISURRILVRQWKH
SDUW\FKDOOHQJLQJWKHYDOLGLW\RIWKHGHHG¶VH[HFXWLRQ6HH
:HDYHUY&URPPHV1(G 2KLR&W$SS
2WKHU UHFHQW 2KLR GHFLVLRQV KDYH KHOG H[SOLFLWO\ WKDW LQ
FRQWUDVW WR WKH JUHDW ZHLJKW WKDW PXVW EH DFFRUGHG WR WKH
WHVWLPRQ\RIWKHQRWDU\WKHWHVWLPRQ\RIWKHPRUWJDJRUV³LV
LQVXIILFLHQW LQ ODZ WR RYHUFRPH WKH FHUWLILFDWH RI
DFNQRZOHGJPHQWE\WKHQRWDU\´3DUDPRXQW)LQ&RY%HUN
1(G 2KLR&W$SS 6HH6RFLHW\1DW¶O
%DQNY$QGUDVLF1R:/DW 2KLR&W
$SS1RY IROORZLQJ3DUDPRXQW
1R ,QUH=DSWRFN\HWDO
6HFWLRQ $ RI WKH 2KLR 5HYLVHG &RGH VWDWHV WKDW ³>D@OO
GHHGV ODQG FRQWUDFWV DQG LQVWUXPHQWV RI ZULWLQJ SURSHUO\ H[HFXWHG IRU
WKH FRQYH\DQFH RU HQFXPEUDQFH RI ODQGV VKDOO EH UHFRUGHG LQ WKH
RIILFH RI WKH FRXQW\ UHFRUGHU RI WKH FRXQW\ LQ ZKLFK WKH SUHPLVHV DUH
FRQWUDFWFRXOGKDYHREWDLQHGVXFKDMXGLFLDOOLHQZKHWKHU
RUQRWVXFKDFUHGLWRUH[LVWV
DFUHGLWRUWKDWH[WHQGVFUHGLWWRWKHGHEWRUDWWKH
WLPHRIWKHFRPPHQFHPHQWRIWKHFDVHDQGREWDLQVDW
VXFKWLPHDQGZLWKUHVSHFWWRVXFKFUHGLWDQH[HFXWLRQ
DJDLQVW WKH GHEWRU WKDW LV UHWXUQHG XQVDWLVILHG DW VXFK
WLPHZKHWKHURUQRWVXFKFUHGLWRUH[LVWVRU
DERQDILGHSXUFKDVHURIUHDOSURSHUW\RWKHUWKDQ
IL[WXUHVIURPWKHGHEWRUDJDLQVWZKRPDSSOLFDEOHODZ
SHUPLWV VXFK WUDQVIHU WR EH SHUIHFWHG WKDW REWDLQV WKH
VWDWXVRIDERQDILGHSXUFKDVHUDQGKDVSHUIHFWHGVXFK
WUDQVIHUDWWKHWLPHRIWKHFRPPHQFHPHQWRIWKHFDVH
ZKHWKHURUQRWVXFKDSXUFKDVHUH[LVWV
86&† D
$VWUXVWHH'DYLG6LPRQLVHQWLWOHGWRDYRLGWKH=DSWRFN\V¶
PRUWJDJHXQGHUVHFWLRQ D LIDK\SRWKHWLFDOERQDILGH
SXUFKDVHUZRXOGEHDEOHWRDYRLGWKLVPRUWJDJH6LQFHWKLV
PRUWJDJHFRQFHUQVUHDOSURSHUW\ORFDWHGLQ2KLRWKLVLQTXLU\
LVJRYHUQHGE\2KLRODZ6HH:DWVRQY.HQOLFN&RDO&R
,QF)G WK&LU
,Q2KLRWKHUHDUHWKUHHPDMRUSUHUHTXLVLWHVIRUWKHSURSHU
H[HFXWLRQRIDPRUWJDJH WKHPRUWJDJRUPXVWVLJQWKH
PRUWJDJHGHHG WKHPRUWJDJHU¶VVLJQDWXUHPXVWEHDWWHVWHG
E\WZRZLWQHVVHVDQG WKHPRUWJDJRU¶VVLJQDWXUHPXVWEH
DFNQRZOHGJHG RU FHUWLILHG E\ D QRWDU\ SXEOLF RU RWKHU
GHVLJQDWHGRIILFLDO 6HH2+,2 5(9 &2'( $11†
$QGHUVRQ ,IDQ\RQHRIWKHVHSUHUHTXLVLWHVLVQRWPHW
WKHPRUWJDJHLVQRWYDOLGO\H[HFXWHGDQGLWPD\EHDYRLGHGE\
DVXEVHTXHQWERQDILGHSXUFKDVHUZKRGRHVQRWKDYHDFWXDORU
FRQVWUXFWLYHNQRZOHGJHRIWKHSULRUPRUWJDJH

-- 5 of 10 --

,QUH=DSWRFN\HWDO 1R
VLWXDWHG DQG XQWLO VR UHFRUGHG RU ILOHG IRU UHFRUG WKH\ DUH IUDXGXOHQW VR
IDU DV UHODWHV WR D VXEVHTXHQW ERQD ILGH SXUFKDVHU KDYLQJ DW WKH WLPH RI
SXUFKDVH QR NQRZOHGJH RI WKH H[LVWHQFH RI VXFK IRUPHU GHHG RU ODQG
FRQWUDFW RU LQVWUXPHQW´ 2+,2 5(9 &2'( $11 † $ $QGHUVRQ

,,,:DVWKH0RUWJDJH3URSHUO\([HFXWHG8QGHU
2KLR/DZ"
,QWKLVFDVHWKHRQO\SUHUHTXLVLWHDWLVVXHLVZKHWKHUWKH
PRUWJDJRUV¶ VLJQDWXUHV ZHUH SURSHUO\ DWWHVWHG WR E\ WZR
ZLWQHVVHV$VQRWHGDERYHWKHPRUWJDJHEHDUVWKHQDPHVRI
WZRZLWQHVVHV*DU\:LOOLDPVZKRDOVRVHUYHGDVFORVHUDQG
³7D\ORU/OR\G´$WWULDOWKH=DSWRFN\VERWKWHVWLILHGWKDWQR
SHUVRQE\WKHQDPHRI7D\ORU/OR\GZDVSUHVHQWLQWKHLUKRXVH
ZKHQWKH\VLJQHGWKHPRUWJDJH,QFRQWUDVW*DU\:LOOLDPV
DVVHUWHG WKDW DOWKRXJK KH GLG QRW UHPHPEHU FORVLQJ WKH
=DSWRFN\¶VPRUWJDJHDQGGLGQRWNQRZDQ\RQHE\WKHQDPH
RI7D\ORU/OR\GWKLVSHUVRQPXVWKDYHEHHQSUHVHQWEHFDXVH
KHDOZD\VDGKHUHGWR)LUVW6HUYLFH¶VSROLF\ZKLFKIRUELGLWV
HPSOR\HHV IURP FORVLQJ ORDQV XQOHVV WZR ZLWQHVVHV ZHUH
SUHVHQW8SRQUHYLHZLQJWKLVHYLGHQFHWKHEDQNUXSWF\FRXUW
FRQFOXGHGWKDW0U:LOOLDPVZDVWKHRQO\ZLWQHVVSUHVHQWDW
WKHVLJQLQJRIWKH&KDVHPRUWJDJHDQGWKDWWKHPRUWJDJHZDV
QRWSURSHUO\H[HFXWHG,QUH=DSWRFN\%5DW7KH
%$3KHOGWKDWDOWKRXJKDIDFLDOO\YDOLGPRUWJDJHLVSUHVXPHG
WR KDYH EHHQ SURSHUO\ H[HFXWHG WKH EDQNUXSWF\ FRXUW¶V
KROGLQJZDVQRWFOHDUO\HUURQHRXV,QUH=DSWRFN\%5
DW
2QDSSHDO&KDVHDUJXHVWKDWWKHEDQNUXSWF\FRXUWDQGWKH
%$3 HUUHG EHFDXVH WKH\ GLG QRW DSSO\ WKH FRUUHFW OHJDO
VWDQGDUGZKHQWKH\GHWHUPLQHGWKDW*DU\:LOOLDPVZDVWKH
RQO\ZLWQHVVSUHVHQWDWWKHVLJQLQJRIWKH=DSWRFN\PRUWJDJH
&KDVH SRLQWV RXW WKDW XQGHU 2KLR ODZ D IDFLDOO\ YDOLG
PRUWJDJHEHDUVDSUHVXPSWLRQRIYDOLGLW\DQGWKDWWKRVHZKR
FRQWHVW VXFK D PRUWJDJH PXVW SURYH WKH LQVWUXPHQW LV
GHIHFWLYHE\FOHDUDQGFRQYLQFLQJHYLGHQFH6HH&RVKRFWRQ
1DW¶O %DQN Y +DJDQV 1( 2KLR $SS D
1R ,QUH=DSWRFN\HWDO
6HH DOVR 6KHUOXQG Y /LQFROQ 1DW¶O /LIH ,QV &R 1R
:/ DW WK &LU -XO\ ³,QGHHG XQOHVV &RQJUHVV RU WKH
&RQVWLWXWLRQ UHTXLUH RWKHUZLVH WKH $FW PDQGDWHV DSSOLFDWLRQ RI UHOHYDQW
VWDWH ODZ HYHQ LI WKH EDVLV IRU MXULVGLFWLRQ LV D IHGHUDO TXHVWLRQ´ :DWVRQ
Y 0F&DEH )G WK &LU ³$SSOLFDWLRQ RI WKH 5XOHV
RI 'HFLVLRQ $FW 86& † GRHV QRW GHSHQG RQ WKH
MXULVGLFWLRQDO EDVLV IRU DQ DFWLRQ >FLWDWLRQV RPLWWHG@ 7KH ODZ WR EH
DSSOLHG E\ D IHGHUDO FRXUW GHSHQGV RQ WKH QDWXUH RI WKH LVVXH XQGHU
FRQVLGHUDWLRQ ,I WKH LVVXH LV D IHGHUDO PDWWHU IHGHUDO ODZ ZLOO DSSO\ ,I
WKH LVVXH FRQFHUQV D QRQIHGHUDO PDWWHU VWDWH VXEVWDQWLYH ODZ DSSOLHV´
86&† 5XOHVRI'HFLVLRQ$FW %XWWKHPDMRULW\
GRHVQRW
5DWKHUWKDQDGKHUHWRZKDW2KLR¶VVWDWHFRXUWVKDYHVDLG
DERXW2KLRODZWKHPDMRULW\IROORZV+HOEOLQJY.UXHJHU ,Q
UH .UXHJHU 1R $GY 1R :/
%DQNU 1' 2KLR -XQ ,Q VR GRLQJ ,
EHOLHYHWKHPDMRULW\UXQVDIRXORIWKH5XOHVRI'HFLVLRQ$FW
EHFDXVHWKH$FWDSSOLHVQRWRQO\WRDVWDWH¶VVXEVWDQWLYHODZ
EXWWRWKHVWDWHFRXUWV¶FRQVWUXFWLRQRIWKDWODZ6HH'RJJUHOO
Y*UHDW6RXWKHUQ%R[&R,QFRI0LVV)G
WK&LU +HQFHZHFDQQRWGLVSHQVHZLWKZKDW2KLR
FRXUWVKDYHVDLGDERXW2KLRODZVLPSO\EHFDXVHZHPLJKW
SUHIHUWKHDQDO\VLVDQGUHVXOWRIIHUHGE\DIHGHUDOEDQNUXSWF\
MXGJH¶VYLHZRI2KLRODZ
$WLVVXHLQWKLVFDVHLVKRZDQ2KLRFRXUWZRXOGUHVROYHWKH
LQFRQVLVWHQF\EHWZHHQWKHWHVWLPRQ\RIWKHGHEWRUVDQGWKH
WLWOHFRPSDQ\UHSUHVHQWDWLYHZLWKUHJDUGWRWKHH[HFXWLRQRI
WKHPRUWJDJH2KLRODZLVFOHDURQWKLVTXHVWLRQDQGKDVEHHQ
FOHDUIRUDORQJWLPH,QWKH2KLR6XSUHPH&RXUWKHOG
WKDW ³ZKHUH D SDUW\ ZKR KDV LQ IDFW VLJQHG D GHHG WKDW
SXUSRUWVWREHDFNQRZOHGJHGLQGXHIRUPRIODZFODLPVWKDW
WKHFHUWLILFDWHLVIDOVHWKHVHFXULW\RIWLWOHDQGWKHUHSRVHRI
VRFLHW\UHTXLUHWKDWKHVKRXOGHVWDEOLVKWKHIDFWE\FOHDUDQG
FRQYLQFLQJSURRI$PHUHSUHSRQGHUDQFHLVQRWVXIILFLHQW´
)RUGY2VERUQH1( 2KLR 1HDUO\KDOI
DFHQWXU\ODWHUDQ2KLRFRXUWRIDSSHDOVDGGUHVVHGDFDVHLQ
ZKLFKWKHPRUWJDJRUVVRXJKWWRLQYDOLGDWHDPRUWJDJH
WKH\ KDG JUDQWHG WKH &RVKRFWRQ %DQN 2Q LWV IDFH WKH

-- 6 of 10 --

,QUH=DSWRFN\HWDO 1R
BBBBBBBBBBBBBBBBB
',66(17
BBBBBBBBBBBBBBBBB
$/,&( 0 %$7&+(/'(5 &LUFXLW -XGJH GLVVHQWLQJ
&KDVH0DQKDWWDQ %DQN ³&KDVH´ DSSHDOVWKHRUGHURIWKH
EDQNUXSWF\FRXUWDIILUPHGE\WKH%DQNUXSWF\$SSHOODWH3DQHO
RI WKH &RXUW RI $SSHDOV IRU WKH 6L[WK &LUFXLW ³%$3´
SHUPLWWLQJWKH7UXVWHHLQ%DQNUXSWF\WRDYRLGWKHGHEWRUV¶
PRUWJDJHWR&KDVHEHFDXVHLWKDGQRWEHHQSURSHUO\H[HFXWHG
%HFDXVH,EHOLHYHWKDWWKHPDMRULW\HUUVRQWZRIURQWV,PXVW
UHVSHFWIXOO\GLVVHQW
)LUVWGHFLVLRQDOODZIURP2KLR¶VVWDWHFRXUWVVKRXOGFRQWURO
WKHPDMRULW\¶VDQDO\VLV%XWLWGRHVQRW,QVWHDGDEDQNUXSWF\
FRXUW RSLQLRQ ZKLFK GRHV QRW FRQWURO WKLV SDQHO¶V
LQWHUSUHWDWLRQ RI 2KLR ODZ GULYHV WKH PDMRULW\¶V DQDO\VLV
6HFRQGWRWKHH[WHQWWKDWWKHPDMRULW\SXUSRUWVWRLQWHUSUHW
DQGDSSO\GHFLVLRQDOODZIURP2KLR¶VFRXUWV,EHOLHYHWKH
PDMRULW\PLVUHDGVWKDWGHFLVLRQDOODZ
7KHPDMRULW\DFNQRZOHGJHVWKDWWKHTXHVWLRQRIZKHWKHUD
PRUWJDJHRQUHDOSURSHUW\LVYDOLGIDOOVVTXDUHO\ZLWKLQWKH
GRPDLQRIWKHODZRIWKHVWDWHZKHUHWKHSURSHUW\LVORFDWHG
6HH:DWVRQY.HQOLFN&RDO&R,QF)G
WK&LU ³3URSHUW\ODZLVDQGPXVWEHDFUHDWXUHRI
VWDWHODZZLWKSHFXOLDUQXDQFHVLQHDFKMXULVGLFWLRQ´ ,QWKLV
FDVHWKHODZLV2KLR¶V:KHQIDFHGZLWKDTXHVWLRQRI2KLR
ODZWKHPDMRULW\PXVWLQWHUSUHWDQGDSSO\WKDWODZDVZRXOG
2KLR¶V VWDWH FRXUWV 6HH & + (QWP¶W ,QF Y -HIIHUVRQ
&RXQW\)LVFDO&W)G WK&LU
1R ,QUH=DSWRFN\HWDO
IDFLDOO\ YDOLG PRUWJDJH ³FDUULHV ZLWK LW D SUHVXPSWLRQ RI
YDOLGLW\DQGLQRUGHUWRGHVWUR\LWVHIIHFWDVDPRUWJDJHLW
PXVWEHVKRZQWREHGHIHFWLYHE\WKHFRQWHVWHUV´ VHHDOVR
+HOEOLQJY:LOOLDPV ,QUH:LOOLDPV %5
%DQNU1'2KLR &LWLQJ3DUDPRXQWY%HUN&KDVH
DUJXHVWKDWWKHSUHVXPSWLRQRIYDOLGLW\LVVRVWURQJWKDW2KLR
FRXUWVKDYHHVWDEOLVKHG D SHUVHUXOHWKDWWKHPRUWJDJRU¶V
WHVWLPRQ\ VWDQGLQJ DORQH LV QRW VXIILFLHQW WR LQYDOLGDWH D
IDFLDOO\YDOLGPRUWJDJH1(G 2KLR$SS
&KDVHFRQFOXGHVWKDWVLQFHWKH=DSWRFN\V¶WHVWLPRQ\LVWKH
RQO\HYLGHQFHWKDWWKHPRUWJDJHZDVQRWSURSHUO\H[HFXWHG
6LPRQKDVQRWLQWURGXFHGVXIILFLHQWHYLGHQFHWRGHPRQVWUDWH
WKDWWKHPRUWJDJHZDVQRWYDOLGO\H[HFXWHG
$ 'LGWKH%DQNUXSWF\&RXUW(UUE\)DLOLQJWR$SSO\
D3HU6H5XOH"
8QGHU 2KLR ODZ D IDFLDOO\ YDOLG PRUWJDJH GRHV EHDU D
VWURQJSUHVXPSWLRQRIYDOLGLW\+RZHYHU2KLRFRXUWVKDYH
QRWH[SOLFLWO\HVWDEOLVKHGDSHUVHUXOHWKDWSUHFOXGHVDSDUW\
IURPUHO\LQJVROHO\RQWKHPRUWJDJRU¶VWHVWLPRQ\WRHVWDEOLVK
WKDWDPRUWJDJHKDVEHHQLPSURSHUO\H[HFXWHG,Q3DUDPRXQW
Y %HUN ZKLFK WKH GHIHQGDQW FLWHV D SODLQWLII PRUWJDJHH
FKDOOHQJHGWKHYDOLGLW\RIDSULRUPRUWJDJHRQWKHJURXQGV
WKDWLWZDVQRWSURSHUO\H[HFXWHG,G7KHSODLQWLIISUHVHQWHG
WKHWHVWLPRQ\RIWKHPRUWJDJRUVDKXVEDQGDQGZLIHZKR
WHVWLILHG WKDW WKH ZLIH GLG QRW VLJQ WKH PRUWJDJH LQ WKH
SUHVHQFHRIWKHQRWDU\RUWKHZLWQHVVHVEXWUDWKHUVLJQHGWKH
PRUWJDJH LQ WKH FDU RXWVLGH WKH EDQN 7KH 2KLR &RXUW RI
$SSHDOVUHMHFWHGWKHHYLGHQFHKROGLQJWKDWWKHWHVWLPRQ\RI
WKH PRUWJDJRUV ³LV LQVXIILFLHQW LQ ODZ WR RYHUFRPH WKH
FHUWLILFDWHRIDFNQRZOHGJHPHQWE\WKHQRWDU\´,G7KH&RXUW
VWDWHGWKDW³>V@LQFHWKHHYLGHQFHUHODWLQJWRDFNQRZOHGJHPHQW
LVFRQILQHGWRWKHWHVWLPRQ\RIWKHPRUWJDJRUVLQWKLVFDVHLW
LVQRWVXIILFLHQWWRVXSSRUWDILQGLQJFRQWUDU\WRWKHFHUWLILFDWH
RI DFNQRZOHGJHPHQW DQG WKH DIILUPDWLYH WHVWLPRQ\ RI WKH
QRWDU\KLPVHOI´,GDW
:KLOH WKH 3DUDPRXQW FDVH KROGV WKDW WKH WHVWLPRQ\ RI
PRUWJDJRUV LV QRW VXIILFLHQW WR RYHUFRPH WKH FHUWLILFDWH RI

-- 7 of 10 --

,QUH=DSWRFN\HWDO 1R
$W OHDVW RQH EDQNUXSWF\ FRXUW LQ WKH 1RUWKHUQ 'LVWULFW RI 2KLR VHHPV
WR KDYH WDNHQ WKH SRVLWLRQ WKDW WKH 3DUDPRXQW FDVH FUHDWHG D UXOH WKDW D
PRUWJDJRU¶V WHVWLPRQ\ VWDQGLQJ DORQH FDQ QHYHU RYHUFRPH D QRWDU\¶V
DIILUPDWLYH WHVWLPRQ\ UHJDUGLQJ WKH DWWHVWDWLRQ RI ZLWQHVVHV 6HH
6DODPRQH Y )RUG &RQVXPHU )LQDQFH %5 %DQNU 1'
2KLR %XUQKDP Y )LUVW 8QLRQ 0RUWJDJH &R %5
%DQNU 1' 2KLR $OWKRXJK LW LV SRVVLEOH WR H[WUDSRODWH WKLV
KROGLQJ IURP WKH IDFWV DQG ODQJXDJH RI WKH 3DUDPRXQW FDVH ZH GR QRW
EHOLHYH WKDW WKH 3DUDPRXQW &RXUW LQWHQGHG WR FUHDWH D QHZ SHU VH UXOH LQ
LWV EULHI SHU FXULXP RSLQLRQ ZKLFK LV RQO\ D OLWWOH RYHU RQH SDJH LQ OHQJWK
7KLV SHU VH UXOH LV QRW HQXQFLDWHG E\ WKH SODLQ ODQJXDJH RI WKH FRXUW¶V
GHFLVLRQ ZKLFK UHIHUV RQO\ WR ³DFNQRZOHGJHPHQW´ DQG LW LV QRW VXSSRUWHG
E\ DQ\ RI WKH FDVHV WKDW WKH 3DUDPRXQW &RXUW FLWHG 6HH )RUG Y 2VERUQH
2KLR 6W 0DFN Y (GHOVWHLQ 2KLR /DZ $EV 2KLR
$SS :KLWH Y (DVW 2KLR *DV &R 2KLR /DZ $EV
2KLR $SS VHH DOVR +HOEOLQJ Y :LOOLDPV ,Q UH :LOOLDPV
%5 %DQNU 1' 2KLR
)XUWKHUPRUH HYHQ LI 3DUDPRXQW GLG HVWDEOLVK WKDW D GHEWRU¶V WHVWLPRQ\
FDQQRW VWDQGLQJ DORQH RYHUFRPH D QRWDU\¶V DIILUPDWLYH WHVWLPRQ\
UHJDUGLQJ DWWHVWDWLRQ LW LV QRW FOHDU WKDW WKLV KROGLQJ ZRXOG EH GHFLVLYH LQ
WKLV FDVH $OWKRXJK *DU\ :LOOLDPV WHVWLILHG WKDW KH QHYHU FORVHG D ORDQ
ZLWKRXW WZR ZLWQHVVHV SUHVHQW KH ZDV XQDEOH WR UHPHPEHU DQ\ RI WKH
GHWDLOV RI WKLV FORVLQJ LQFOXGLQJ WKH LGHQWLW\ RI WKH VHFRQG ZLWQHVV
$OWKRXJK D SRVLWLYH VWDWHPHQW RI DQ LQIOH[LEOH UXOH LV JLYHQ JUHDW ZHLJKW
LW LV QRW FOHDU WKDW :LOOLDPV¶ VWDWHPHQW FRQVWLWXWHV ³DIILUPDWLYH WHVWLPRQ\´
PHQWLRQHG LQ 3DUDPRXQW
DFNQRZOHGJHPHQW WKH FRXUW¶V ODQJXDJH FOHDUO\ GRHV QRW
H[WHQG WR DOO FDVHV LQ ZKLFK D SDUW\ UHOLHV VROHO\ RQ WKH
WHVWLPRQ\RIWKHPRUWJDJRUVWRSURYHWKDWWKHPRUWJDJHZDV
QRW SURSHUO\ H[HFXWHG 6HH :LOOLDPV %5 DW
KROGLQJWKDW3DUDPRXQW¶VSHUVHUXOHRQO\DSSOLHVWRFDVHVLQ
ZKLFKWKHPRUWJDJRU¶VWHVWLPRQ\LVUHEXWWHGE\DFHUWLILFDWH
RI DFNQRZOHGJHPHQW 7KH 2KLR 6XSUHPH &RXUW KDV
GHFOLQHG WR H[WHQG WKH SHU VH UXOH WR DQ\ FDVH LQ ZKLFK D
FHUWLILFDWHRIDFNQRZOHGJHPHQWZDVQRWDWLVVXH,G FLWLQJ
&LWL]HQV1DW¶O%DQNLQ=DQHVYLOOHY'HQLVRQ1(G
2KLR6W :LOOLDPVRQY&ODUVNDGGHQ2KLR6W

,QWKLVFDVHWKHSHUVHUXOHLVQRWDSSOLFDEOHEHFDXVHWKH
PRUWJDJRUV¶WHVWLPRQ\ZDVQRWUHEXWWHGE\WKHFHUWLILFDWHRI
1R ,QUH=DSWRFN\HWDO
ERQD ILGH SXUFKDVHU ZLWKRXW NQRZOHGJH 6HH $PLFN Y
:RRGZRUWK 1( 2KLR 6W HTXLWDEOH
VXEURJDWLRQ ³LV QHYHU DOORZHG DJDLQVW DQ LQWHUYHQLQJ ERQD
ILGHSXUFKDVHUZLWKRXWQRWLFHQRURQHZKRRFFXSLHVDOLNH
SRVLWLRQ´ 6LQFHWKH%DQNUXSWF\&RGHJLYHVWUXVWHH6LPRQ
WKHULJKWVRIDERQDILGHSXUFKDVHUZLWKRXWDFWXDONQRZOHGJH
DQGQRFRQVWUXFWLYHNQRZOHGJHKDVEHHQHVWDEOLVKHG6LPRQ
LVHQWLWOHGWRWKHULJKWVRIDVXEVHTXHQWERQDILGHSXUFKDVHU
ZLWKRXW NQRZOHGJH RI WKH SULRU PRUWJDJH $FFRUGLQJO\
&KDVH LV QRW HQWLWOHG WR EH VXEURJDWHG WR WKH ULJKWV RI
1DWLRQVEDQN
9,&RQFOXVLRQ
)RU WKH IRUHJRLQJ UHDVRQV ZH $)),50 WKH %$3¶V
MXGJPHQW

-- 8 of 10 --

,QUH=DSWRFN\HWDO 1R
7KH ORQJ VWDQGLQJ UXOH WKDW DQ LPSURSHUO\ H[HFXWHG PRUWJDJH GRHV
QRW SURYLGH FRQVWUXFWLYH QRWLFH KDV UHFHQWO\ EHHQ FKDQJHG E\ VWDWXWH 6HH
2KLR /HJLV 6HUY %DQNV%DOGZLQ 2KLR 5HYLVHG &RGH
VHFWLRQ SURYLGHV WKDW EHJLQQLQJ RQ -XQH D GHIHFWLYHO\
H[HFXWHG EXW UHFRUGHG PRUWJDJH FDQ EH FRQVWUXFWLYH QRWLFH WR WKLUG SDUWLHV
LQFOXGLQJ ERQD ILGH SXUFKDVHUV +RZHYHU 6HFWLRQ LV QRW
DSSOLFDEOH LQ WKLV FDVH EHFDXVH WKH =DSWRFN\V ILOHG IRU EDQNUXSWF\ RQ
$SULO RYHU RQH \HDU EHIRUH WKLV VWDWXWH ZDV VFKHGXOHG WR WDNH
HIIHFW 6HH :LOOLDPV %5 DW
Y&HQWHUUH%DQN1DW¶O$VV¶Q ,QUH6DQG\5LGJH2LO&R
)G WK&LU 0F&DQQRQY0DUWVRQ
)G G &LU ,Q UH .LP %5
%$3WK&LU
6HFRQGDOWKRXJKWKLVFRXUWKDVKHOGWKDWWKH%DQNUXSWF\
&RGH¶VVWURQJDUPFODXVHGRHVQRWLPPXQL]HDWUXVWHHZKR
KDVFRQVWUXFWLYHNQRZOHGJHRIDSULRUPRUWJDJHLWLVTXLWH
FOHDUWKDW6LPRQGLGQRWKDYHFRQVWUXFWLYHNQRZOHGJHRIWKH
=DSWRFN\V¶PRUWJDJHZLWK&KDVH6HH2ZHQ$PHV.LPEDOO
&RY0LFK/LWKRJUDSKLQJ&R ,QUH0LFK/LWKRJUDSKLQJ
&R )G WK&LU SHUFXULDP $W
WKH WLPH WKDW WKH =DSWRFN\V ILOHG IRU EDQNUXSWF\ 2KLR ODZ
SURYLGHGWKDWDQLPSURSHUO\H[HFXWHGPRUWJDJHGRHVQRWSXW
DVXEVHTXHQWERQDILGHSXUFKDVHURQFRQVWUXFWLYHQRWLFH6HH
$PLFNY:RRGZRUWK1( 2KLR 7KDPHV
Y$VLD¶V-DQLWRULDO6HUY,QF1(G 2KLR
$SS $VQRWHGDERYHWKH=DSWRFN\PRUWJDJHZDVQRW
SURSHUO\H[HFXWHGEHFDXVHLWVIRUPDWLRQZDVQRWDWWHVWHGWRE\
WZRZLWQHVVHV$FFRUGLQJO\6LPRQGLGQRWKDYHFRQVWUXFWLYH
QRWLFHRIWKH&KDVHPRUWJDJHDQGLVHQWLWOHGWRDYRLGLWDVD
VXEVHTXHQWERQDILGHSXUFKDVHU
9,V&KDVH0DQKDWWDQ(QWLWOHGWREH(TXLWDEO\
6XEURJDWHGWRWKH5LJKWVRI1DWLRQVEDQN"
2Q DSSHDO &KDVH DOVR DUJXHV WKDW LW LV HQWLWOHG WR EH
VXEURJDWHGWRWKHULJKWVRIWKHKROGHURIWKH=DSWRFN\V¶ILUVW
PRUWJDJH1DWLRQVEDQN6HH6WUDPDQY5HFKWLQH1(
2KLR6W +RZHYHUDVWKH%$3SRLQWHGRXWWKH
GRFWULQH RI HTXLWDEOH VXEURJDWLRQ GRHV QRW DSSO\ DJDLQVW D
1R ,QUH=DSWRFN\HWDO
,Q DFFRUGDQFH ZLWK † 0U :LOOLDPV¶V QRWDULDO
DFNQRZOHGJHPHQW RQ WKH PRUWJDJH DW LVVXH PHUHO\ FHUWLILHV WKDW WKH
GHEWRUV SHUVRQDOO\ DSSHDUHG EHIRUH KLP DQG H[HFXWHG WKH IRUHJRLQJ
LQVWUXPHQW DQG ³DFNQRZOHGJHG WKDW WKH\ GLG H[DPLQH DQG UHDG WKH VDPH
DQG GLG VLJQ WKH IRUHJRLQJ LQVWUXPHQW DQG WKDW WKH VDPH LV WKHLU IUHH DFWV
DQG GHHG´ 2+,2 5(9 &2'( $11 †
DFNQRZOHGJPHQW$VQRWHGDERYHWKHPRUWJDJRUVDOOHJHG
WKDWWKHPRUWJDJHZDVQRWSURSHUO\H[HFXWHGEHFDXVHRQO\RQH
ZLWQHVVDWWHVWHGWRWKHVLJQLQJRIWKHPRUWJDJH*LYHQWKDW
WKHQRWDU\¶VFHUWLILFDWHRIDFNQRZOHGJHPHQWGRHVQRWSXUSRUW
WRFHUWLI\WKDWWZRZLWQHVVHVZHUHSUHVHQWZKHQWKH=DSWRFN\V
VLJQHG WKH PRUWJDJH WKH FHUWLILFDWLRQ LV LUUHOHYDQW WR WKH
IDFWXDO GLVSXWH LQ WKLV FDVH $FFRUGLQJO\ WKH EDQNUXSWF\
FRXUWGLGQRWHUUE\UHIXVLQJWRDSSO\DSHUVHUXOH
% 'LGWKH%DQNUXSWF\&RXUW(UUE\)DLOLQJWR*LYH
*DU\:LOOLDP¶V7HVWLPRQ\WKH3URSHU:HLJKW"
,QWKHDOWHUQDWLYH&KDVHDUJXHVWKDWWKHEDQNUXSWF\FRXUW
HUUHGE\IDLOLQJWRJLYHWKHSURSHUZHLJKWWR*DU\:LOOLDPV¶
WHVWLPRQ\ WKDW KH DGKHUHG WR KLV FRPSDQ\¶V SROLF\ RI QRW
FORVLQJ D ORDQ XQOHVV WZR ZLWQHVVHV DUH SUHVHQW &LWLQJ
&RVKRFWRQ1DWLRQDO%DQNY+DJDQV&KDVHDVVHUWVWKDWXQGHU
2KLRODZ³DSRVLWLYHVWDWHPHQWRIDQLQIOH[LEOHUXOHDOZD\V
DGKHUHGWRE\DQRWDU\RUZLWQHVVPXVWFDUU\JUHDWZHLJKWLQ
WKH FRQVLGHUDWLRQ RI WKHLU HYLGHQFH´ 1( 2KLR
$SS &KDVHDOOHJHVWKDWWKHEDQNUXSWF\FRXUWGLGQRW
JLYH:LOOLDPV¶WHVWLPRQ\³JUHDWZHLJKW´DQGDUJXHVWKDWLILW
KDG LW ZRXOG QRW KDYH IRXQG WKDW RQO\ RQH ZLWQHVV ZDV
SUHVHQWDWWKHPRUWJDJHFORVLQJ
$OWKRXJKLWLVWUXHWKDWDQRWDU\¶VWHVWLPRQ\WKDWKHDOZD\V
DGKHUHG WR DQ LQIOH[LEOH UXOH LV JLYHQ ³JUHDW ZHLJKW´ WKLV
HYLGHQFHLVQRWFRQFOXVLYH6HH+HOEOLQJY.UXHJHU ,QUH
.UXHJHU 1R $GY 1R :/
DW %DQNU1'2KLR-XQ DQRWDU\¶V
WHVWLPRQ\WKDWKHLQYDULDEO\UHTXLUHGDVHFRQGZLWQHVVWREH
SUHVHQW ZDV QRW FRQFOXVLYH ,Q WKLV FDVH WKH EDQNUXSWF\
FRXUWFUHGLWHG:LOOLDPV¶WHVWLPRQ\WKDWKHQHYHUFORVHGDORDQ

-- 9 of 10 --

,QUH=DSWRFN\HWDO 1R
XQOHVVWKHUHZHUH WZRZLWQHVVHV+RZHYHUWKHFRXUWDOVR
IRXQG WKDW WKLV HYLGHQFH ZDV RXWZHLJKHG E\ WKH 7UXVWHH¶V
FOHDUDQGFRQYLQFLQJHYLGHQFHWKDWRQO\RQHZLWQHVVKDGEHHQ
SUHVHQWDWWKHVLJQLQJRIWKH=DSWRFN\V¶PRUWJDJH$VWKH
EDQNUXSWF\ FRXUW LQGLFDWHG VHYHUDO IDFWRUV VXSSRUW WKLV
ILQGLQJ
$KRPHUHILQDQFLQJFORVLQJLVDQH[WUDRUGLQDU\HYHQWIRU
WKHFRQVXPHU
:KHUHWKHFORVLQJRFFXUVLQWKHKRPHRIWKHUHILQDQFLQJ
DSSOLFDQW LW FDQ EH UHDVRQDEO\ H[SHFWHG WKDW WKH
KRPHRZQHUV ZRXOG KDYH JUHDWHU FRJQL]DQFH RI ZKLFK
LQGLYLGXDOV ZHUH LQ WKHLU SHUVRQDO UHVLGHQFH IRU DQ
H[WUDRUGLQDU\HYHQWVXFKDVDFORVLQJ
7KH SXUSRUWHG VHFRQG ZLWQHVV /OR\G 7D\ORU >7D\ORU
/OR\G@LVQRWDQLQGLYLGXDONQRZQWRHLWKHURIWKH'HEWRUV
RU E\ WKH QRWDU\ :LOOLDPV ,Q IDFW :LOOLDPV KDV QR
SHUVRQDOUHFROOHFWLRQRIWKLVSDUWLFXODUFORVLQJ
7KH'HEWRUVWHVWLILHGXQHTXLYRFDOO\WKDWQRRQHE\WKH
QDPHRI7D\ORU>/OR\G@ZDVLQWKHLUKRPHRQ)HEUXDU\
RUDWDQ\RWKHUSRLQWLQWLPH
7D\ORU >/OR\G@ DFFRUGLQJ WR :LOOLDPV ZDV QRW DQ
HPSOR\HHRIWKH)LUVW6HUYLFH7LWOH$JHQF\
*ORULD=DSWRFN\¶VPRWKHUZDVDWWKH'HEWRU¶VUHVLGHQFH
RQWKHFORVLQJGDWHEXWGLGQRWSDUWLFLSDWHLQWKHH[HFXWLRQ
RIWKHFORVLQJGRFXPHQWV
,QUH=DSWRFN\%5DW
:H DJUHH WKDW WKH HYLGHQFH LQWURGXFHG DW WULDO FUHDWHV D
VHULRXVGRXEWDVWRWKHYDOLGLW\RI7D\ORU/OR\G¶VVLJQDWXUH
,I:LOOLDPVKDGEURXJKW/OR\GZLWKKLPWRWKHKRXVHWRDFWDV
DZLWQHVVLWVHHPVWKDW:LOOLDPVZRXOGDWOHDVWUHFRJQL]HWKH
QDPH 2Q WKH RWKHU KDQG LI /OR\G KDG EHHQ D IULHQG RU
QHLJKERURIWKH=DSWRFN\VLWVHHPVOLNHO\WKDWWKH\ZRXOG
NQRZ ZKR KH ZDV 7KH IDFW WKDW ERWK WKH =DSWRFN\V DQG
1R ,QUH=DSWRFN\HWDO
,W LV DOVR ZRUWK QRWLQJ WKDW *DU\ :LOOLDPV ZRUNHG SDUW WLPH IRU D
PRUWJDJH FRPSDQ\ ZKHQ KH JDYH KLV WHVWLPRQ\ LQ WKLV FDVH DQG WKHUHIRUH
KDG DQ LQWHUHVW LQ YLQGLFDWLQJ KLV SURIHVVLRQDO DFWLRQV $OWKRXJK WKLV IDFW
GRHV QRW FRPSOHWHO\ GLVFUHGLW :LOOLDP¶V WHVWLPRQ\ LW FHUWDLQO\ VXSSRUWV
WKH EDQNUXSWF\ FRXUW¶V ILQGLQJ 6HH +HOEOLQJ Y .UXHJHU ,Q UH .UHXJHU
1R $GY 1R :/ DW %DQNU 1'
2KLR
:LOOLDPVWHVWLILHGWKDWWKH\GRQRWNQRZZKR7D\ORU/OR\GLV
VXJJHVWVWKDWDVHFRQGZLWQHVVZDVQRWSUHVHQWDWWKHFORVLQJ
RIWKH=DSWRFN\V¶PRUWJDJH
$ ILQGLQJ RI IDFW LV FOHDUO\ HUURQHRXV ZKHQ DOWKRXJK
WKHUHLVHYLGHQFHWRVXSSRUWLWWKHUHYLHZLQJFRXUWLVOHIWZLWK
WKH GHILQLWH DQG ILUP FRQYLFWLRQ WKDW D PLVWDNH KDV EHHQ
FRPPLWWHG /XSHU Y &ROXPELD *DV RI 2KLR ,QF ,Q UH
&DUOHG,QF )G WK&LU *LYHQWKH
HYLGHQFHLQWKLVFDVHZHGRQRWEHOLHYHWKDWWKHEDQNUXSWF\
FRXUW¶V ILQGLQJ WKDW FOHDU DQG FRQYLQFLQJ HYLGHQFH
GHPRQVWUDWHGWKDWRQO\RQHZLWQHVVZDVSUHVHQWDWWKHVLJQLQJ
RI WKH =DSWRFN\V¶ PRUWJDJH ZDV FOHDUO\ HUURQHRXV
$FFRUGLQJO\ZHDIILUPWKH%$3¶VGHFLVLRQWKDWWKH&KDVH
PRUWJDJHZDVQRWSURSHUO\H[HFXWHGXQGHU2KLRODZ
,9,V6LPRQHQWLWOHGWR$YRLGWKH'HIHFWLYHO\([HFXWHG
0RUWJDJHDVD6XEVHTXHQW%RQD)LGH3XUFKDVHU"
$VQRWHGDERYHDERQDILGHSXUFKDVHUPD\RQO\DYRLGDQ
LPSURSHUO\H[HFXWHGPRUWJDJHXQGHU2KLRODZLIKHGRHVQRW
KDYHDFWXDORUFRQVWUXFWLYHNQRZOHGJHRIWKDWWUDQVDFWLRQ2Q
DSSHDO &KDVH DUJXHV WKDW 6LPRQ KDG NQRZOHGJH RI WKH
=DSWRFN\V¶PRUWJDJHZLWK&KDVHDQGWKHUHIRUHKHFDQQRW
DYRLGWKH&KDVHPRUWJDJH7KLVFODLPLVZLWKRXWPHULW
)LUVW JLYHQ WKDW WKH VWURQJ DUP FODXVH RI WKH IHGHUDO
%DQNUXSWF\ &RGH SURYLGHV WUXVWHHV ZLWK WKH ULJKWV RI D
K\SRWKHWLFDO ERQD ILGH SXUFKDVHU ³ZLWKRXW UHJDUG WR DQ\
NQRZOHGJHRIWKHWUXVWHH´6LPRQ¶VDFWXDONQRZOHGJHGRHV
QRWXQGHUPLQHKLVULJKWWRDYRLGDSULRUGHIHFWLYHO\H[HFXWHG
PRUWJDJH6HH86&† D 6DQG\5LGJH2LO&R,QF

-- 10 of 10 --