00a0307p.06

99-3854Court of Appeals for the Sixth CircuitSep 8, 2000

Full text

6WRXWHWDOY-'%\ULGHUHWDO 1R
:HVLPLODUO\DJUHHZLWKWKHGLVWULFWFRXUW¶VFRQFOXVLRQWKDW
3ODLQWLIIVIDLOHGWRPHHWWKHUHTXLUHPHQWRI5XOH E WKDW
FRPPRQLVVXHVSUHGRPLQDWHRYHULQGLYLGXDOLVVXHV6HH)HG
5&LY3 E ,QWKLVFDVHWKHGLVWULFWFRXUWGHWHUPLQHG
WKDWWKHIDFWXDOFRUHRIWKHFDVHZDVZKHWKHUHDFKSXWDWLYH
FODVVPHPEHUUHOLHGXSRQIDOVHUHSUHVHQWDWLRQVRUIDLOXUHVWR
GLVFORVHDQGLIVRZKDWGDPDJHVZHUHSUR[LPDWHO\FDXVHGE\
WKDW UHOLDQFH :H ILQG WKDW WKLV GHWHUPLQDWLRQ GLG QRW
FRQVWLWXWHDQDEXVHRIGLVFUHWLRQE\WKHGLVWULFWFRXUWLQOLJKW
RIWKHIDFWWKDWDQ\UHVROXWLRQRIWKHIUDXGRUWKH7,/$FODLPV
UHTXLUHV DQ LQGLYLGXDO DVVHVVPHQW RI ZKDW GRFXPHQWV WKH
FXVWRPHUUHYLHZHGDQGLQZKDWPDQQHUZKDWUHSUHVHQWDWLRQV
'HIHQGDQWVPDGHWRHDFKFXVWRPHUDQGZKHWKHUWKHFXVWRPHU
VHOHFWHG WKH H[WHQGHG VHUYLFH DJUHHPHQW 6HH &DVWDQR Y
$PHULFDQ 7REDFFR &R )G WK &LU
³>$@IUDXGFODVVDFWLRQFDQQRWEHFHUWLILHGZKHQLQGLYLGXDO
UHOLDQFHZLOOEHDQLVVXH´
$V ZH ILQG WKDW WKH GLVWULFW FRXUW FRUUHFWO\ FRPSHOOHG
DUELWUDWLRQDQGWKDWWKHGLVWULFWFRXUW¶VUHIXVDOWRFHUWLI\DFODVV
GLGQRWFRQVWLWXWHDQDEXVHRIGLVFUHWLRQZH$)),50WKH
RUGHUVRIWKHGLVWULFWFRXUW
7KH +RQRUDEOH :LOOLDP 6WDIIRUG 6HQLRU 8QLWHG 6WDWHV 'LVWULFW -XGJH
IRU WKH 1RUWKHUQ 'LVWULFW RI )ORULGD VLWWLQJ E\ GHVLJQDWLRQ

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
-$0(6 ' 67287 6+,5/(< $
%52:1
3ODLQWLIIV$SSHOODQWV
Y
-' %<5,'(5 DND'RFKHUW\
0RWRUV,QF 7 -
$&&(37$1&( &25325$7,21
GED&DUQRZ$FFHSWDQFH
&RPSDQ\
'HIHQGDQWV$SSHOOHHV
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ
1R²-DPHV6*ZLQ'LVWULFW-XGJH
$UJXHG-XQH
'HFLGHGDQG)LOHG6HSWHPEHU
%HIRUH6,/(5DQG&/$<&LUFXLW-XGJHV67$))25'
'LVWULFW-XGJH

-- 1 of 6 --

6WRXWHWDOY-'%\ULGHUHWDO 1R
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 6\OYLD 0 $QWDOLV 0855$< 0855$<
6DQGXVN\ 2KLR IRU $SSHOODQWV *DU\ : -RKQVRQ
:(6721 +85' )$//21 3$,6/(< +2:/(<
&OHYHODQG 2KLR IRU $SSHOOHHV 21 %5,() 6\OYLD 0
$QWDOLV-RKQ70XUUD\0855$< 0855$<6DQGXVN\
2KLR IRU $SSHOODQWV *DU\ : -RKQVRQ -RKQ $ $OEHUV
:(6721 +85' )$//21 3$,6/(< +2:/(<
&OHYHODQG2KLR:LOOLDP).ROLV-U:,&.(16+(5=(5
3$1=$/RUDLQ2KLRIRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
&/$< &LUFXLW -XGJH 3ODLQWLIIV -DPHV ' 6WRXW DQG
6KLUOH\$%URZQDSSHDOWKHGHQLDORIWKHLUPRWLRQIRUFODVV
FHUWLILFDWLRQ DQG GLVPLVVDO RI WKLV DFWLRQ IRU IUDXG DQG
YLRODWLRQVRIWKH2KLR&RQVXPHU6DOHV3UDFWLFHV$FWDQGWKH
IHGHUDO 7UXWK LQ /HQGLQJ $FW DULVLQJ IURP 3ODLQWLIIV¶
SXUFKDVHV RI XVHG PRWRU YHKLFOHV IURP 'HIHQGDQWV -'
%\ULGHUDND'RFKHUW\0RWRUV,QFDQG7 -$FFHSWDQFH
&RUSRUDWLRQ)RUWKHIROORZLQJUHDVRQVZH$)),50
,
'RFKHUW\0RWRUVLVDFORVHO\KHOG2KLRFRUSRUDWLRQZKLFK
KDVVROGXVHGPRWRUYHKLFOHVVLQFHDQGZKLFKDGYHUWLVHV
LWVHOI DV SURYLGLQJ ILQDQFLQJ WR FRQVXPHUV ZLWK LPSHUIHFW
FUHGLW UHFRUGV 7KH FRUSRUDWLRQ RZQV WKUHH -' %\ULGHU
IUDQFKLVHVLQQRUWKHUQ2KLR(DFKIUDQFKLVHKDVDPDQDJHU
ZKRUHSRUWVWR'RFKHUW\0RWRUV¶H[HFXWLYHYLFHSUHVLGHQW
(DFKIUDQFKLVHKDVDVHUYLFHGHSDUWPHQWZKLFKSHUIRUPV
UHSDLUVRQO\RQYHKLFOHVSXUFKDVHGDW-'%\ULGHUWKHVHUYLFH
GHSDUWPHQWGRHVERWKZDUUDQW\DQGQRQZDUUDQW\ZRUN3ULRU
WR VDOH HDFK YHKLFOH LV LQVSHFWHG E\ 'RFKHUW\ 0RWRUV
1R 6WRXWHWDOY-'%\ULGHUHWDO
XQGHUVWDQGLQJRIWKHSXUFKDVLQJWUDQVDFWLRQDQGHDFKEX\HU¶V
XQGHUVWDQGLQJRIWKHWHUPVDQGEHFDXVHVRPHEX\HUVGLGQRW
SXUFKDVH WKH H[WHQGHG VHUYLFH DJUHHPHQW ZH ILQG WKDW WKH
GLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQ6HH3HWHUVY&DUV
WR *R )5' :'0LFK ILQGLQJ XQGHU
VLPLODUIDFWVWKDWDFXVWRPHU¶VLQGLYLGXDOGHFLVLRQWRSXUFKDVH
DQ H[WHQGHG VHUYLFH DJUHHPHQW PLOLWDWHV DJDLQVW FODVV
FHUWLILFDWLRQ
6LPLODUO\ZHDJUHHWKDWWKHGLVWULFWFRXUWGLGQRWDEXVHLWV
GLVFUHWLRQ LQ GHWHUPLQLQJ WKDW 3ODLQWLIIV DUH QRW DGHTXDWH
UHSUHVHQWDWLYHV RI WKH SXWDWLYH FODVV 6HH )HG 5 &LY 3
D 8QGHU5XOH D DSODLQWLIIVHHNLQJWRUHSUHVHQW
WKH FODVV PXVW GHPRQVWUDWH WKDW KH RU VKH ZLOO IDLUO\ DQG
DGHTXDWHO\UHSUHVHQWDQGSURWHFWWKHLQWHUHVWVRIWKHFODVV6HH
,QUH$PHULFDQ0HG6\V,QF)G WK&LU
7KHFRXUWUHYLHZVWKHDGHTXDF\RIFODVVUHSUHVHQWDWLRQ
WRGHWHUPLQHZKHWKHUFODVVFRXQVHODUHTXDOLILHGH[SHULHQFHG
DQGJHQHUDOO\DEOHWRFRQGXFWWKHOLWLJDWLRQDQGWRFRQVLGHU
ZKHWKHU WKH FODVV PHPEHUV KDYH LQWHUHVWV WKDW DUH QRW
DQWDJRQLVWLFWRRQHDQRWKHU6HHLG,QWHUHVWVDUHDQWDJRQLVWLF
ZKHQWKHUHLVHYLGHQFHWKDWWKHUHSUHVHQWDWLYHSODLQWLIIVDSSHDU
XQDEOHWR³YLJRURXVO\SURVHFXWHWKHLQWHUHVWVRIWKHFODVV´,G
7KH GLVWULFW FRXUW GHWHUPLQHG WKDW 6WRXW DQG %URZQ KDG
LQWHUHVWVDQWDJRQLVWLFWRWKHUHPDLQGHURIWKHSXWDWLYHFODVV
EHFDXVH6WRXWKDGDOUHDG\ILOHGDQGYROXQWDULO\GLVPLVVHGD
VHSDUDWH LQGLYLGXDO DFWLRQ LQ VWDWH FRXUW DJDLQVW WKH VDPH
'HIHQGDQWV WKXV SUHVHUYLQJ KLV ULJKW WR SXUVXH WKDW VXLW
VKRXOG WKH FODVV DFWLRQ FODLP EH GLVPLVVHG WKH QDPHG
3ODLQWLIIVREWDLQHGUHSDLUVRUDOWHUQDWLYHSURSRVHGUHVROXWLRQV
IURP'HIHQGDQWVZKLFKGLIIHUIURPRWKHUFODVVPHPEHUV±
%URZQ UHFHLYHG D FRPSOHWH HQJLQH UHSODFHPHQW DQG
'HIHQGDQWVRIIHUHGWRIXOO\UHIXQGWR6WRXWWKHSXUFKDVHSULFH
RIKLVYHKLFOHDQGWKHQDPHG3ODLQWLIIV¶FODLPVDULVHIURP
GLIIHUHQW WUDQVDFWLRQV DQG DOOHJHG LQMXU\ WKHUHIRUH FDXVLQJ
DEVHQWFODVVPHPEHUVWRSRWHQWLDOO\ORVHWKHEHQHILWRIKDYLQJ
WKHIDFWVRIWKHLUVHSDUDWHFDVHVDGHTXDWHO\SUHVHQWHG:H
ILQG WKDW WKH GLVWULFW FRXUW¶V GHFLVLRQ EDVHG RQ WKHVH
FRQVLGHUDWLRQVQRWWRFRQVWLWXWHDQDEXVHRILWVGLVFUHWLRQ

-- 2 of 6 --

6WRXWHWDOY-'%\ULGHUHWDO 1R
PXVW EH VR QXPHURXV WKDW ³MRLQGHU RI DOO PHPEHUV LV
LPSUDFWLFDEOH´ WKHUHPXVWEH³TXHVWLRQVRIODZRUIDFW
FRPPRQWRWKH FODVV´ WKHFODLPVRIWKHUHSUHVHQWDWLYH
SDUW\PXVWEH³W\SLFDO´RIWKHFODVVDQG WKHUHSUHVHQWDWLYH
SDUW\ PXVW EH DEOH WR ³IDLUO\ DQG DGHTXDWHO\ SURWHFW WKH
LQWHUHVWV RI WKH FODVV´ )HG 5 &LY 3 D 5XOH E
UHTXLUHVWKDWWKHFRXUWILQGWKDWFRPPRQTXHVWLRQVRIODZRU
IDFWSUHGRPLQDWHRYHULQGLYLGXDOLVVXHVLQWKHFDVH
3ODLQWLIIVVHHNWRFHUWLI\DFODVVFRPSULVLQJDOOSHUVRQVZKR
SXUFKDVHG DQ DXWRPRELOH IURP 'RFKHUW\ 0RWRUV WKDW ZDV
ILQDQFHG E\ &1$& EHWZHHQ DQG WKH SUHVHQW 7KH\
DOOHJHWKDW'HIHQGDQWVGHIUDXGHGHYHU\PHPEHURIWKLVFODVV
E\VHOOLQJWKHPXVHGYHKLFOHVZLWKFRQFHDOHGGDPDJHDQGWKDW
HYHU\PHPEHUKDVLQFXUUHGVXEVWDQWLDOUHSDLUFRVWVLQRUGHUWR
UHPHG\WKDWGDPDJH
7KH GLVWULFW FRXUW IRXQG WKDW 3ODLQWLIIV¶ FODLPV ZHUH QRW
W\SLFDORIWKHFODVVXQGHU5XOH D WKDW3ODLQWLIIVZHUH
QRWDGHTXDWHUHSUHVHQWDWLYHVRIWKHSURSRVHGFODVVXQGHU5XOH
D DQGWKDWQHLWKHU6WRXWQRU%URZQVKRZHGDVXIILFLHQW
UHODWLRQVKLSEHWZHHQWKHLUH[SHULHQFHVDQGWKHH[SHULHQFHVRI
SXWDWLYHFODVVPHPEHUV5XOH D W\SLFDOLW\³GHWHUPLQHV
ZKHWKHUDVXIILFLHQWUHODWLRQVKLSH[LVWVEHWZHHQWKHLQMXU\WR
WKHQDPHGSODLQWLIIDQGWKHFRQGXFWDIIHFWLQJWKHFODVVVRWKDW
WKH FRXUW PD\ SURSHUO\ DWWULEXWH D FROOHFWLYH QDWXUH WR WKH
FKDOOHQJHGFRQGXFW´6SUDJXH)GDW7KLV&RXUW
KDV VXPPDUL]HG WKLV VWDQGDUG ³>D@V JRHV WKH FODLP RI WKH
QDPHGSODLQWLIIVRJRWKHFODLPVRIWKHFODVV´,G
:HILQGWKDWWKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQ
LWV ILQGLQJ QRWLQJ WKDW WKH GLVWULFW FRXUW LGHQWLILHG
GLVFUHSDQFLHV EHWZHHQ 3ODLQWLIIV DQG WKH RVWHQVLEOH FODVV
PHPEHUVUDQJLQJIURPWKHW\SHRIFDUWKHGHJUHHRIUHSDLUV
QHFHVVLWDWHGWKHUHVSRQVHWRWKRVHUHSDLUVWKHSXUSRVH IRU
ZKLFKWKHFDUZDVSXUFKDVHGWKHLQGLYLGXDOFLUFXPVWDQFHV
DQGWUDQVDFWLRQVVXUURXQGLQJHDFKSXUFKDVHLQFOXGLQJHDFK
FODVVPHPEHU¶VXQGHUVWDQGLQJRIWKHWHUPVDQGFRQGLWLRQVRI
WKHLU SXUFKDVH DJUHHPHQWV DQG WKH H[WHQW RI WKH LQMXU\
VXIIHUHG %HFDXVH 3ODLQWLIIV¶ FODLPV UHVW RQ WKHLU
1R 6WRXWHWDOY-'%\ULGHUHWDO
HPSOR\HHVZKRSHUIRUPD³VDIHW\FKHFN´'RFKHUW\0RWRUV
DOVR SHUPLWV FXVWRPHUV WR WDNH YHKLFOHV IRU D SUHSXUFKDVH
LQVSHFWLRQDWDPHFKDQLFRIWKHLUFKRLFH
'RFKHUW\ 0RWRUV RIIHUV ILQDQFLQJ WKURXJK 7 -
$FFHSWDQFH&RUSRUDWLRQWRWKRVHLQGLYLGXDOVZKRPD\QRW
TXDOLI\ IRU WUDGLWLRQDO ILQDQFLQJ VXFK DV EDQNV RU FUHGLW
XQLRQV7 -RZQVWKUHH&DU1RZ$FFHSWDQFH&RUSRUDWLRQ
³&1$&´ IUDQFKLVHVORFDWHGDWHDFK-'%\ULGHUGHDOHUVKLS
&1$&SURYLGHVVWDQGDUGL]HGJXLGHOLQHVIRUWKHSURFHGXUHIRU
FORVLQJ D VDOH DQG ORDQ %\ULGHU SHUVRQQHO DUH WUDLQHG WR
KDQGOHVDOHVDQGILQDQFLQJWUDQVDFWLRQVLQDXQLIRUPPDQQHU
$ &1$& UHSUHVHQWDWLYH KDQGOHV WKH FORVLQJ RQ HDFK
FXVWRPHU¶VSXUFKDVHZKLFKLQFOXGHVLQGLYLGXDOSUHVHQWDWLRQ
RIDSRZHURIDWWRUQH\IRUYHKLFOHUHJLVWUDWLRQDQGOLFHQVH
IHGHUDO RGRPHWHU VWDWHPHQW 2KLR WHPSRUDU\ UHJLVWUDWLRQ
DSSOLFDWLRQ%HVW([WHQGHG6HUYLFH$JUHHPHQW LIDSSOLFDEOH
%X\HU¶V 2UGHU 5HWDLO ,QVWDOOPHQW &RQWUDFW DQG 6HFXULW\
$JUHHPHQW LQVXUDQFH UHVSRQVLELOLW\ IRUP %X\HU¶V JXLGH
FKHFNOLVWDQGFXVWRPHUVXUYH\TXHVWLRQQDLUH&ORVLQJVDWWKH
6DQGXVN\ GHDOHUVKLS DUH YLGHRWDSHG E\ D ZDOO PRXQWHG
FDPHUD IRU WUDLQLQJ DQG TXDOLW\ DVVXUDQFH SXUSRVHV 7KH
&1$& UHSUHVHQWDWLYH SURYLGHV D EULHI H[SODQDWLRQ RI HDFK
GRFXPHQWDQVZHUVTXHVWLRQVDERXWWKHGRFXPHQWVDQGJLYHV
EX\HUV DQ RSSRUWXQLW\ WR UHYLHZ WKH SDSHUZRUN SULRU WR
VLJQLQJ$IWHUODWHFXVWRPHUVZHUHDOVRSUHVHQWHGZLWK
DUELWUDWLRQDJUHHPHQWVZKLFKDUHVHSDUDWHZULWWHQDJUHHPHQWV
LQQRUPDODQGEROGIDFHGW\SH
9HKLFOHV SXUFKDVHG DW 'RFKHUW\ 0RWRUV FRPH ZLWK D
OLPLWHGZDUUDQW\IRUWKUHHPRQWKVRUPLOHV&XVWRPHUV
PD\SXUFKDVHDQH[WHQGHGVHUYLFHDJUHHPHQWZKLFKFRYHUV
WKHVDPHLWHPVDVWKHOLPLWHGZDUUDQW\RUWKH\PD\GHFOLQHLW
7KHUHLVQRILQDQFLDOLQFHQWLYHIRU'HIHQGDQWV¶HPSOR\HHVLI
DFXVWRPHUSXUFKDVHVDQH[WHQGHGVHUYLFHDJUHHPHQW7KH
H[WHQGHGVHUYLFHDJUHHPHQWLVSUHVHQWHGDWWKHVDPHWLPHDV
WKHRWKHUGRFXPHQWVDVSDUWRIFORVLQJ
7KH YLGHRWDSHV RI 3ODLQWLIIV¶ WUDQVDFWLRQV VKRZ WKDW WKH
GRFXPHQWVZHUHLQGLYLGXDOO\SUHVHQWHGWR3ODLQWLIIVIRUWKHLU

-- 3 of 6 --

6WRXWHWDOY-'%\ULGHUHWDO 1R
UHYLHZDQGVLJQDWXUH7KH&1$&UHSUHVHQWDWLYHSURYLGHGD
K\SRWKHWLFDO H[DPSOH WR 6WRXW RI KRZ WKH DUELWUDWLRQ
DJUHHPHQWPLJKWZRUN%URZQDOVRUHYLHZHGWKHDUELWUDWLRQ
DJUHHPHQWSULRUWRVLJQLQJ8QGHU%URZQ¶VDJUHHPHQWWKH
RQO\ GLVSXWH QRW VXEMHFW WR DUELWUDWLRQ LV D FODLP E\
'HIHQGDQWVWKDWVKHIDLOHGWRPDNHSD\PHQWVRQDWLPHO\EDVLV
LQ FRPSOLDQFH ZLWK WKH FRQWUDFWV KHU DUELWUDWLRQ LV WR EH
FRQGXFWHGWKURXJKWKH%HWWHU%XVLQHVV%XUHDX8QGHU6WRXW¶V
DJUHHPHQW WKH RQO\ FODLPV QRW VXEMHFW WR DUELWUDWLRQ DUH
FODLPVXQGHUDQGFODLPVUHODWLQJWRUHSRVVHVVLRQDQG
UHSOHYLQ RI WKH YHKLFOH KLV DUELWUDWLRQ LV WR EH FRQGXFWHG
WKURXJK WKH $PHULFDQ $UELWUDWLRQ $VVRFLDWLRQ %RWK
3ODLQWLIIV SXUFKDVHG H[WHQGHG VHUYLFH DJUHHPHQWV ODVWLQJ
HLJKWHHQPRQWKVRUPLOHVIRU%URZQXWLOL]HGWKH
H[WHQGHGVHUYLFHDJUHHPHQWIRUUHSODFLQJWKHHQJLQHLQDFDU
VKHKDGSXUFKDVHG
2Q 'HFHPEHU 3ODLQWLIIV -DPHV ' 6WRXW DQG
6KLUOH\$%URZQLQGLYLGXDOO\DQGRQEHKDOIRIDOOVLPLODUO\
VLWXDWHG LQGLYLGXDOV ILOHG D FODVV DFWLRQ FRPSODLQW LQ WKH
8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH1RUWKHUQ'LVWULFWRI2KLR
DJDLQVW-'%\ULGHUDND'RFKHUW\0RWRUV,QFDQG7 -
$FFHSWDQFH &RUSRUDWLRQV GED &DU1RZ $FFHSWDQFH
&RPSDQ\7KHFRPSODLQWDOOHJHGYLRODWLRQVRIWKH7UXWKLQ
/HQGLQJ$FW ³7,/$´ 86&†WKH2KLR&RQVXPHU
6DOHV3UDFWLFHV$FW ³2&63$´ 2KLR5HY&RGH†
DQGFRPPRQODZIUDXG
'HIHQGDQWVPRYHGWRVWULNHWKHFODVVDFWLRQDOOHJDWLRQVWR
VWD\ WKH SURFHHGLQJV DQG WR FRPSHO DUELWUDWLRQ XQGHU WKH
SDUWLHV¶DUELWUDWLRQDJUHHPHQW3ODLQWLIIVPRYHGWRFHUWLI\WKH
SURSRVHGFODVV7KHGLVWULFWFRXUWGHQLHG3ODLQWLIIV¶PRWLRQ
IRUFODVVFHUWLILFDWLRQKROGLQJWKDW3ODLQWLIIV¶FODLPVZHUHQRW
W\SLFDO RI WKH SXWDWLYH FODVV WKDW LQVXIILFLHQW FRPPRQDOLW\
H[LVWHG DPRQJVW WKH SXWDWLYH FODVV PHPEHUV DQG WKDW
3ODLQWLIIVZHUHLQDGHTXDWHUHSUHVHQWDWLYHVIRUWKHFODVV
'HIHQGDQWV PRYHG IRU VXPPDU\ MXGJPHQW RQ DOO RI
3ODLQWLIIV¶ FODLPV 3ODLQWLIIV PRYHG IRU SDUWLDO VXPPDU\
MXGJPHQW RQ WKHLU 7,/$ FODLP 7KH GLVWULFW FRXUW GHQLHG
1R 6WRXWHWDOY-'%\ULGHUHWDO
XQFRQVFLRQDEOH LW PXVW EH RQHVLGHG GHQ\ WKH OHVV
DGYDQWDJHGSDUW\PHDQLQJIXOFKRLFHLQDFFHSWLQJWKHWHUPVRI
WKH FRQWUDFW DQG LQYROYH D VLWXDWLRQ VXFK WKDW WKH OHVV
DGYDQWDJHG SDUW\ FDQQRW REWDLQ WKHLU GHVLUHG SURGXFW RU
VHUYLFHV H[FHSW E\ DFTXLHVFLQJ WR WKH IRUP FRQWUDFW 6HH
:LOOLDPV 1(G DW &RRN - GLVVHQWLQJ
3ODLQWLIIV KDYH SUHVHQWHG QR HYLGHQFH EH\RQG WKHLU
VSHFXODWLRQVWKDW'HIHQGDQWVZRXOGKDYHUHIXVHGWRVHOOWKH
YHKLFOHVKDGWKH\UHIXVHGWRVLJQWKHDUELWUDWLRQDJUHHPHQWV
QRUGRWKH\GHPRQVWUDWHWKDWWKH\FRXOGRQO\SXUFKDVHVLPLODU
YHKLFOHV E\ DJUHHLQJ WR WKH DUELWUDWLRQ DJUHHPHQWV
)XUWKHUPRUHWKHGLVWULFWFRXUWIRXQGDQGZHDJUHHWKDWWKH
DUELWUDWLRQ SURYLVLRQV DUH QRW VR RQHVLGHG DV WR EH
XQFRQVFLRQDEOH QR HYLGHQFH VKRZV WKDW WKH OHJLWLPDWH
DUELWUDWLRQRUJDQL]DWLRQVZLOOIDLOWRIDLUO\DQGHTXDOO\RYHUVHH
3ODLQWLIIV¶FODLPV,QWKHDEVHQFHRIDQ\IDFWXDOHYLGHQFHWKDW
WKHVH DJUHHPHQWV ZHUH HQWHUHG LQWR IUDXGXOHQWO\ RU
PLVWDNHQO\ DQG DEVHQW DQ\ VKRZLQJ E\ 3ODLQWLIIV WKDW WKH
DUELWUDWLRQDUUDQJHPHQWVDUHWKHPVHOYHVRQHVLGHGRUXQIDLU
ZHDIILUP
,,,
:HWXUQWRWKHLVVXHRIWKHGLVWULFWFRXUW¶VGHQLDORIFODVV
FHUWLILFDWLRQ:HQRWHILUVWWKDWDVZHKDYHIRXQGWKDWWKH
GLVWULFW FRXUW FRUUHFWO\ FRPSHOOHG DUELWUDWLRQ WKLV LVVXH LV
UHOHYDQW RQO\ WR WKH H[WHQW WKDW LW PD\ EH DVVHUWHG LQ
DUELWUDWLRQDVDEDVLVIRUGDPDJHVRUDWWRUQH\V¶IHHV
7KLV &RXUW UHYLHZV D GLVWULFW FRXUW¶V UXOLQJ RQ FODVV
FHUWLILFDWLRQIRUDQDEXVHRIGLVFUHWLRQDVWKHGLVWULFWFRXUW
UHWDLQV EURDG GLVFUHWLRQ LQ GHWHUPLQLQJ ZKHWKHU DQ DFWLRQ
VKRXOGEHFHUWLILHGDVDFODVVDFWLRQ6HH6WHUOLQJY9HOVLFRO
&KHP&RUS)G WK&LU
8QGHU JRYHUQLQJ ODZ D FRXUW PD\ FHUWLI\ D FODVV LI LW
SHUIRUPV³ULJRURXVDQDO\VLV´RIWKHUHTXLUHPHQWVRI)HGHUDO
5XOHRI&LYLO3URFHGXUH*HQHUDO7HO&RY)DOFRQ
86 DFFRUG 6SUDJXH Y *HQHUDO 0RWRUV
&RUS)G WK&LU 5XOH D VHWV
IRUWK IRXU SUHUHTXLVLWHV WR FODVV FHUWLILFDWLRQ WKH FODVV

-- 4 of 6 --

6WRXWHWDOY-'%\ULGHUHWDO 1R
:H QRWH WKDW 3ODLQWLIIV DUH QRW DVVHUWLQJ WKDW WKHLU FODLPV IDOO XQGHU
WKH H[FHSWLRQV IURP DUELWUDWLRQ GHWHUPLQHG E\ WKH ODQJXDJH RI WKH
DUELWUDWLRQ DJUHHPHQW LWVHOI
VKRZLQJWKDWWKHDUELWUDWLRQSURYLGHGLQWKRVHDJUHHPHQWVZDV
DQLQHIIHFWLYHDQGLQDFFHVVLEOHIRUXPZLWKWKHSRWHQWLDOIRU
VXEVWDQWLYHO\ XQIDLU DUELWUDWLRQ IHHV RU SURFHGXUHV ,Q WKLV
FDVHWKHDUELWUDWLRQDJUHHPHQWVFOHDUO\VSHFLI\WKHHVWDEOLVKHG
RUJDQL]DWLRQZKRVHUXOHVZLOOJRYHUQWKHDUELWUDWLRQ:HILQG
'HIHQGDQWV¶DUJXPHQWRQWKLVSRLQWSHUVXDVLYH
3ODLQWLIIV DOVR DUJXH WKDW WKH DUELWUDWLRQ DJUHHPHQWV DUH
XQFRQVFLRQDEOH DQG XQHQIRUFHDEOH DV DJDLQVW 2KLR SXEOLF
SROLF\%XWWKLV&RXUWDQGWKH6XSUHPH&RXUWKDYHGLVDJUHHG
VHHLQJ³QRWKLQJLQWKHDFWLQGLFDW>LQJ@WKDWWKHEURDGSULQFLSOH
RIHQIRUFHDELOLW\ LVVXEMHFWWRDQ\DGGLWLRQDOOLPLWDWLRQVRI
VWDWHODZ´)HUUR&RUS)GDW FLWLQJ6RXWKODQG
&RUS86DW 7KH)$$JRYHUQVDOODVSHFWVRI
DUELWUDWLRQSURFHGXUHDQGSUHHPSWVLQFRQVLVWHQWVWDWHODZ6HH
'RFWRU¶V$VVRF,QFY&DVDURWWR86
0RVHV+&RQH86DW
,Q WKLV FDVH 3ODLQWLIIV¶ FODLP IRU IUDXG YLRODWLRQV RI
2&63$DQG7,/$UHODWHWRWKHSXUFKDVHRIWKHLUYHKLFOHVDQG
DULVH XQGHU WKHLU SXUFKDVH DQG ILQDQFH FRQWUDFWV ZLWK
'HIHQGDQWV%HFDXVHZHSUHYLRXVO\IRXQGWKDWWKHSDUWLHV
IDLUO\DJUHHGWRDUELWUDWHWKHVHW\SHVRIFODLPVZHILQGWKDW
QHLWKHU WKLV &RXUW QRU WKH 2KLR FRXUWV KDYH WKH DELOLW\ WR
PDQGDWHMXGLFLDOUHVROXWLRQRIWKHVHGLVSXWHVLQYLRODWLRQRI
WKHSDUWLHV¶DJUHHPHQW3ODLQWLIIVSRLQWWRWKH2KLR6XSUHPH
&RXUWGHFLVLRQRI:LOOLDPVY$HWQD)LQDQFLDO&RPSDQ\
1(G 2KLR FHUWGHQLHG6&W
LQVXSSRUWRIWKHLUDUJXPHQW+RZHYHUZHQRWHWKDW:LOOLDPV
FRQVLGHUV2KLR¶VREOLJDWLRQWRFRPSHODUELWUDWLRQXQGHUWKH
2KLR $UELWUDWLRQ $FW 2KLR 5HY &RGH $QQ †
$QGHUVRQ DQG QRW XQGHU WKH )$$ DV LQ WKLV FDVH
(YHQLI:LOOLDPVZDVUHOHYDQWZHILQGLWGLVWLQJXLVKDEOHDV
3ODLQWLIIV KDYH QRW HVWDEOLVKHG WKDW WKHVH DJUHHPHQWV OLNH
WKRVH LQ :LOOLDPV DUH XQHQIRUFHDEOH DGKHVLRQ FRQWUDFWV
8QGHU2KLRODZLQRUGHUIRUDQDUELWUDWLRQSURYLVLRQWREH
1R 6WRXWHWDOY-'%\ULGHUHWDO
'HIHQGDQWV¶ PRWLRQ WR VWD\ WKH SURFHHGLQJV EXW JUDQWHG
'HIHQGDQWV¶ PRWLRQ WR FRPSHO DUELWUDWLRQ KROGLQJ DIWHU
UHYLHZ RI WKH UHFRUG LQFOXGLQJ WKH YLGHRWDSH RI 3ODLQWLIIV¶
WUDQVDFWLRQVWKDWWKHDUELWUDWLRQDJUHHPHQWVZHUHHQIRUFHDEOH
XQGHU 2KLR DQG IHGHUDO ODZ DQG GLVPLVVLQJ 3ODLQWLIIV¶
DPHQGHG FRPSODLQW ³ZLWKRXW SUHMXGLFH WR UHLQVWDWHPHQW
VKRXOGIXUWKHUSURFHHGLQJVEHQHHGHGDIWHUDUELWUDWLRQ´7KH
GLVWULFW FRXUW GLG QRW UXOH RQ HLWKHU SDUW\¶V PRWLRQ IRU
VXPPDU\MXGJPHQW
3ODLQWLIIVDSSHDOHGWRWKLV&RXUW
,,
7KLV &RXUW UHYLHZV WKH UXOLQJ RI WKH GLVWULFW FRXUW
FRPSHOOLQJDUELWUDWLRQGHQRYR6HH)HUUR&RUSY*DUULVRQ
,QGXV)G WK&LU
8QGHUWKH)HGHUDO$UELWUDWLRQ$FW86&† ³)$$´
DZULWWHQDJUHHPHQWWRDUELWUDWHGLVSXWHVZKLFKDULVHVRXWRI
DFRQWUDFWLQYROYLQJWUDQVDFWLRQVLQLQWHUVWDWHFRPPHUFH³VKDOO
EH YDOLG LUUHYRFDEOH DQG HQIRUFHDEOH VDYH XSRQ VXFK
JURXQGVDVH[LVWDWODZRULQHTXLW\IRUWKHUHYRFDWLRQRIDQ\
FRQWUDFW´ 7KH )$$ ZDV GHVLJQHG WR RYHUULGH MXGLFLDO
UHOXFWDQFHWRHQIRUFHDUELWUDWLRQDJUHHPHQWVWRUHOLHYHFRXUW
FRQJHVWLRQDQGWRSURYLGHSDUWLHVZLWKDVSHHGLHUDQGOHVV
FRVWO\DOWHUQDWLYHWROLWLJDWLRQ6HH$OOLHG%UXFH7HUPLQ[&RV
Y'REVRQ86 0DVWUREXRQRY
6KHDUVDQ/HKPDQ+XWWRQ,QF86
:KHQDVNHGE\DSDUW\WRFRPSHODUELWUDWLRQXQGHUDFRQWUDFW
DIHGHUDOFRXUWPXVWGHWHUPLQHZKHWKHUWKHSDUWLHVDJUHHGWR
DUELWUDWHWKHGLVSXWHDWLVVXH6HH0LWVXELVKL0RWRUV&RUSY
6ROHU &KU\VOHU3O\PRXWK ,QF 86
&ODLPV UHODWLQJ WR IUDXG LQ WKH PDNLQJ RI WKH DUELWUDWLRQ
DJUHHGDUHGHWHUPLQHGE\WKHFRXUW6HH&%6(PSOR\HHV
)HG &UHGLW 8QLRQ Y 'RQDOGVRQ /XINLQ DQG -HQUHWWH 6HF
&RUS)G WK&LU &RXUWVDUHWR
H[DPLQHWKHODQJXDJHRIWKHFRQWUDFWLQOLJKWRIWKHVWURQJ
IHGHUDO SROLF\ LQ IDYRU RI DUELWUDWLRQ 6HH 6ROHU &KU\VOHU
3O\PRXWK86DW$UQROGY$UQROG)G
WK &LU /LNHZLVH DQ\ DPELJXLWLHV LQ WKH

-- 5 of 6 --

6WRXWHWDOY-'%\ULGHUHWDO 1R
FRQWUDFW RU GRXEWV DV WR WKH SDUWLHV LQWHQWLRQV VKRXOG EH
UHVROYHGLQIDYRURIDUELWUDWLRQ6HH6ROHU&KU\VOHU3O\PRXWK
86DW
:KHQFRQVLGHULQJDPRWLRQWRVWD\SURFHHGLQJVDQGFRPSHO
DUELWUDWLRQXQGHUWKH$FWDFRXUWKDVIRXUWDVNVILUVWLWPXVW
GHWHUPLQHZKHWKHUWKHSDUWLHVDJUHHGWRDUELWUDWHVHFRQGLW
PXVWGHWHUPLQHWKHVFRSHRIWKDWDJUHHPHQWWKLUGLIIHGHUDO
VWDWXWRU\ FODLPV DUH DVVHUWHG LW PXVW FRQVLGHU ZKHWKHU
&RQJUHVV LQWHQGHG WKRVH FODLPV WR EH QRQDUELWUDEOH DQG
IRXUWKLIWKHFRXUWFRQFOXGHVWKDWVRPHEXWQRWDOORIWKH
FODLPV LQ WKH DFWLRQ DUH VXEMHFW WR DUELWUDWLRQ LW PXVW
GHWHUPLQHZKHWKHUWRVWD\WKHUHPDLQGHURIWKHSURFHHGLQJV
SHQGLQJ DUELWUDWLRQ 6HH &RPSXVHUYH ,QF Y 9LJQ\ ,QW¶O
)LQDQFH/WG)6XSS 6'2KLR
3ODLQWLIIVDUJXHWKDWWKHGLVWULFWFRXUWLQFRUUHFWO\IRXQGWKDW
WKHSDUWLHVKDGDJUHHGWRDUELWUDWHWKHGLVSXWHDQGWKDWXQGHU
WKH )$$ &RQJUHVV LQWHQGHG 3ODLQWLIIV WR DUELWUDWH WKHLU
FODLPV3ODLQWLIIVILUVWFRQWHQGWKDWWKHUHZDVQRDJUHHPHQWWR
DUELWUDWH+RZHYHUWKHUHFRUGLQGLFDWHVWKDWWKHSDUWLHVGLG
DJUHHWRDUELWUDWHWKHYLGHRWDSHVKRZV3ODLQWLIIVUHYLHZLQJ
WKHGRFXPHQWVHQJDJLQJLQGLVFXVVLRQVFRQFHUQLQJWKHPDQG
UHDGLQJWKHPSULRUWRVLJQLQJ³2QHZKRVLJQVDFRQWUDFWLV
SUHVXPHG WR NQRZ LWV FRQWHQWV DQG LI KH KDV KDG DQ
RSSRUWXQLW\WRUHDGWKHFRQWUDFWZKLFKKHVLJQVKHLVERXQGE\
LWVSURYLVLRQV´6HDUV5RHEXFN &RY/HD)G
WK&LU 7KLV&RXUWDSSOLHV³WKHFDUGLQDOUXOH
WKDWLQWKHDEVHQFHRIIUDXGRUZLOIXOGHFHLWRQHZKRVLJQVD
FRQWUDFW ZKLFK KH KDV KDG DQ RSSRUWXQLW\ WR UHDG DQG
XQGHUVWDQG LV ERXQG E\ LWV SURYLVLRQV´ $OOLHG 6WHHO DQG
&RQYH\HUV,QFY)RUW0RWRU&R)G WK
&LU 3ODLQWLIIVVHHPWRDUJXHWKDWWKHUHLVIUDXGLQWKH
WUDQVDFWLRQEXWSRLQWWRQRDFWXDOHYLGHQFHWKDWHLWKHUWKH\
ZHUH GHFHLYHG LQWR VLJQLQJ VRPHWKLQJ WKH\ EHOLHYHG WR EH
RWKHUWKDQDQDJUHHPHQWWRDUELWUDWHRUWKDWWKH\KDGQRWLQ
IDFWVLJQHGWKHDUELWUDWLRQDJUHHPHQW$EVHQWDQ\HYLGHQFH
FRQWUDU\WRWKDWHYLGHQWLQWKHUHFRUG± WKDW WKHDUELWUDWLRQ
DJUHHPHQWVZHUHVHWIRUWKLQVHSDUDWHGRFXPHQWVLQUHJXODU
DQG EROGSULQW W\SH WKDW 3ODLQWLIIV UHDG DQG UHYLHZHG WKH
1R 6WRXWHWDOY-'%\ULGHUHWDO
DUELWUDWLRQDJUHHPHQWVWKDW3ODLQWLIIVKDGDQRSSRUWXQLW\WR
DVNWKH&1$&UHSUHVHQWDWLYHDERXWWKHDJUHHPHQWVEXWGLG
QRWGRVRDQGWKDW3ODLQWLIIVVLJQHGWKHDJUHHPHQWV±ZHILQG
WKDW3ODLQWLIIVFOHDUO\DJUHHGWRUHVROYHWKHLUGLVSXWHVWKURXJK
ELQGLQJDUELWUDWLRQ
3ODLQWLIIVDOVRDUJXHWKDW&RQJUHVVGLGQRWLQWHQG3ODLQWLIIV
WRDUELWUDWHWKHFODLPVUDLVHGDJDLQVW'HIHQGDQWVDUJXLQJWKDW
WKH7UXWKLQ/HQGLQJ$FWLVDUHPHGLDOFRQVXPHUSURWHFWLRQ
VWDWXWHZKLFKZRXOGEHXVXUSHGE\LPSRVLQJDUHTXLUHPHQW
IRUDUELWUDWLRQ
,WLVVHWWOHGDXWKRULW\WKDWGRXEWUHJDUGLQJWKHDSSOLFDELOLW\
RI DQ DUELWUDWLRQ FODXVH VKRXOG EH UHVROYHG LQ IDYRU RI
DUELWUDWLRQ 6HH HJ 0RVHV + &RQH 0HP¶O +RVS Y
0HUFXU\&RQVWU&RUS86 )HUUR
)GDW,ISDUWLHVFRQWUDFWWRUHVROYHWKHLUGLVSXWHVLQ
DUELWUDWLRQUDWKHUWKDQLQWKHFRXUWVDSDUW\PD\QRWUHQHJHRQ
WKDW FRQWUDFW DEVHQW WKH PRVW H[WUHPH FLUFXPVWDQFHV 6HH
6RXWKODQG &RUS Y .HDWLQJ 86 'HDQ
:LWWHU5H\QROGV,QFY0F&R\)G WK&LU
$ GLVWULFW FRXUW¶V GXW\ WR HQIRUFH DQ DUELWUDWLRQ DJUHHPHQW
XQGHUWKH)$$LVQRWGLPLQLVKHGZKHQDSDUW\ERXQGE\WKH
DJUHHPHQW UDLVHV FODLPV DULVLQJ IURP VWDWXWRU\ ULJKWV 6HH
6KHDUVRQ$PHULFDQ ([SUHVV Y 0F0DKRQ 86
5,&2 'RUVH\Y+&36DOHV,QF)6XSSG
Q 1',OO 7,/$ *RRGZLQY)RUG0RWRU
&UHGLW &R ) 6XSS 0'$OD 7,/$
3ODLQWLIIVFLWHWKH(OHYHQWK&LUFXLW&RXUWRI$SSHDOVFDVHRI
5DQGROSK Y *UHHQ 7UHH )LQDQFLDO &RUSRUDWLRQ )G
WK&LU FHUWJUDQWHG6&W
ZKLFKWKH6XSUHPH&RXUWKDVUHFHQWO\JUDQWHGFHUWLRUDULWR
FRQVLGHU LQ VXSSRUW RI WKHLU DUJXPHQW ,Q 5DQGROSK WKH
(OHYHQWK &LUFXLW GHWHUPLQHG WKDW DQ DUELWUDWLRQ DJUHHPHQW
³IDLO>HG@ WR SURYLGH WKH PLQLPXP JXDUDQWHHV UHTXLUHG WR
HQVXUHWKDW>WKHSODLQWLII¶V@DELOLW\WRYLQGLFDWHKHUVWDWXWRU\
ULJKWV ZLOO QRW EH XQGRQH E\ VWHHS ILOLQJ IHHV VWHHS
DUELWUDWRUV¶IHHVRURWKHUKLJKFRVWVRIDUELWUDWLRQ´)G
DW'HIHQGDQWVDUJXHQRWZLWKRXWPHULWWKDW5DQGROSK
LVGLVWLQJXLVKDEOHIURPWKLVFDVHLQWKDW5DQGROSKLQYROYHGD

-- 6 of 6 --

Continue your research in ChatGPT or Claude

Connect Omnilex to search the legal corpus from your AI assistant.