01a0059p.06

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
6$1'86.< 0$// &203$1<
3HWLWLRQHU
&URVV5HVSRQGHQW
Y
1$7,21$/ /$%25 5(/$7,216
%2$5'
5HVSRQGHQW
&URVV3HWLWLRQHU
1257+($67 2+,2 ',675,&7
&281&,/ 2) 7+( 81,7('
%527+(5+22' 2)
&$53(17(56 $1' -2,1(56 2)
$0(5,&$ $)/&,2
,QWHUYHQRU
;!

1
1RV
2Q3HWLWLRQIRU5HYLHZDQG&URVV$SSOLFDWLRQ
IRU(QIRUFHPHQWRIDQ2UGHU
RIWKH1DWLRQDO/DERU5HODWLRQV%RDUG
1R&$
$UJXHG'HFHPEHU
'HFLGHGDQG)LOHG0DUFK

-- 1 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
%HIRUH:(//)25'6,/(5DQG%$7&+(/'(5
&LUFXLW-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DYLG $ )DQWDX]]L <RXQJVWRZQ 2KLR IRU
3HWLWLRQHU 'DYLG $ )OHLVFKHU 1$7,21$/ /$%25
5(/$7,216%2$5'$33(//$7(&2857%5$1&+
:DVKLQJWRQ '& IRU 5HVSRQGHQW 6WHSKHQ $ 0DUNXV
8/0(5 %(51( &OHYHODQG 2KLR IRU ,QWHUYHQRU
21%5,() 'DYLG$)DQWDX]]L<RXQJVWRZQ2KLRIRU
3HWLWLRQHU 'DYLG $ )OHLVFKHU 1$7,21$/ /$%25
5(/$7,216%2$5'$33(//$7(&2857%5$1&+
:DVKLQJWRQ'&IRU5HVSRQGHQW6WHSKHQ$0DUNXV(ULF
06FKUHLEPDQ8/0(5 %(51(&OHYHODQG2KLRIRU
,QWHUYHQRU
:(//)25' - GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ
ZKLFK 6,/(5 - MRLQHG %$7&+(/'(5 - S
GHOLYHUHGDVHSDUDWHFRQFXUULQJRSLQLRQ
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
+$55<::(//)25'&LUFXLW-XGJH%HIRUHWKLVFRXUW
LV DQ DSSHDO IURP D GHFLVLRQ E\ D GLYLGHG 1DWLRQDO /DERU
5HODWLRQV%RDUG ³1/5%´ LQYROYLQJKDQGELOOLQJE\XQLRQ
PHPEHUVLQWKHPDOORZQHGDQGRSHUDWHGE\6DQGXVN\0DOO
&RPSDQ\ ³6DQGXVN\´
6DQGXVN\LVDSULYDWHOLPLWHGSDUWQHUVKLSWKDWRZQVDQG
RSHUDWHV 6DQGXVN\ 0DOO ³PDOO´ DQ HQFORVHG PDOO LQ
6DQGXVN\2KLR7KHPDOOFRQWDLQVQLQHW\VL[VWRUHVDQGD
FHQWUDOFRQFRXUVHZKLFKSURYLGHVDFFHVVWRWKHVWRUHVDQG
ZLWKLQWKHFRQFRXUVHDUHSODFHVWRVLWDQGDOVRVSDFHOHDVHGIRU
ERRWKV 7KH PDOO PDQDJHU LV UHVSRQVLEOH IRU HQIRUFLQJ
6DQGXVN\¶VSROLF\DJDLQVWKDQGELOOLQJDQGVROLFLWDWLRQRIPDOO
1RV 6DQGXVN\0DOO&RY1/5%
BBBBBBBBBBBBBBBBBBBBB
&21&855(1&(
BBBBBBBBBBBBBBBBBBBBB
$/,&(0%$7&+(/'(5&LUFXLW-XGJHFRQFXUULQJ,
FRQFXULQWKHPDMRULW\RSLQLRQ,ZULWHVHSDUDWHO\WRKLJKOLJKW
ZKDWLQP\YLHZLVWKHFUXFLDOLVVXHLQWKLVFDVHQDPHO\
ZKDWOHYHORIGHIHUHQFHWKLVFRXUWVKRXOGDIIRUGWKH1/5%
ZKHQ LW LQWHUSUHWV 6XSUHPH &RXUW SUHFHGHQW ,Q RUGHU WR
DFFHSW WKH %RDUG¶V DUJXPHQWV RQH PXVW ILUVW DFFHSW WKH
SUHPLVHWKDW+ROO\)DUPVJRYHUQVWKDWLVVXH7KLVLVQRWWKH
FDVH+ROO\)DUPVVSHDNVRQO\WRWKHOHYHORIGHIHUHQFHGXH
WRWKH%RDUG¶VLQWHUSUHWDWLRQRIWKH1/5$LWGRHVQRWDGGUHVV
WKHGHIHUHQFHGXHWRWKH%RDUG¶VLQWHUSUHWDWLRQRIMXGLFLDOO\
FUHDWHG H[FHSWLRQV $FFRUGLQJO\ ZH UHYLHZ WKH 1/5%¶V
LQWHUSUHWDWLRQRIWKH%DEFRFNH[FHSWLRQGHQRYR
,Q &OHYHODQG 5HDO (VWDWH 3DUWQHUV WKLV FLUFXLW VTXDUHO\
DGGUHVVHGWKHTXHVWLRQRIZKHWKHUWKH%DEFRFNGLVFULPLQDWLRQ
H[FHSWLRQUHTXLUHVDQHPSOR\HUWRVXIIHUQRQHPSOR\HHXQLRQ
WUHVSDVVHUV RQ LWV SURSHUW\ LI WKDW HPSOR\HU DOORZV RWKHU
RUJDQL]DWLRQVRFFDVLRQDODFFHVV2QIDFWVQHDUO\LGHQWLFDOWR
WKRVHSUHVHQWHGKHUHZHSODLQO\UHMHFWHGWKHDUJXPHQWSXW
IRUWKE\WKH%RDUGDQGKHOGWKDW³WKHWHUPμGLVFULPLQDWLRQ¶DV
XVHGLQ%DEFRFNPHDQVIDYRULQJRQHXQLRQRYHUDQRWKHURU
DOORZLQJHPSOR\HUUHODWHGLQIRUPDWLRQZKLOHEDUULQJVLPLODU
XQLRQUHODWHGLQIRUPDWLRQ´&OHYHODQG5HDO(VWDWH3DUWQHUV
)G DW $Q HPSOR\HU¶V JUDQWLQJ FKDULWDEOH RU
PHUFKDQW JURXSV DFFHVV WR WKH PDOO SXUVXDQW WR LWV SROLF\
ZKLOH EDUULQJ XQLRQ SURWHVWHUV VLPSO\ GRHV QRW TXDOLI\ DV
GLVFULPLQDWLRQXQGHU%DEFRFN
$FFRUGLQJO\,FRQFXUZLWKWKHFRQFOXVLRQWKDWWKLVFRXUW
VKRXOGEHJXLGHGE\RXUGHFLVLRQLQ&OHYHODQG5HDO(VWDWH
3DUWQHUV EXW HPSKDVL]H WKDW +ROO\ )DUPV LV VLPSO\
LQDSSOLFDEOHWRDQ\FDVHWKDWLQYROYHVLQWHUSUHWDWLRQRIFRXUW
GHFLVLRQV

-- 2 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
RI6XSUHPH&RXUWDQG6L[WK&LUFXLWGHFLVLRQVGHQRYR:H
GRQRWGHIHUWRWKH%RDUGZLWKUHVSHFWWRWKHLQWHUSUHWDWLRQRI
MXGLFLDO SUHFHGHQW :H GR KRZHYHU JLYH GHIHUHQFH LQ
PDWWHUVRIVWDWXWRU\FRQVWUXFWLRQRIWKH1/5$E\WKH%RDUG
VRORQJDVLWVLQWHUSUHWDWLRQRIWKHVWDWXWHLVUHDVRQDEOH7KH
%RDUGKDVH[SUHVVO\QRWHGWKDWWKHLQDFFHVVLELOLW\H[FHSWLRQ
LV QRW DSSOLFDEOH KHUH +RZHYHU WR WKH H[WHQW WKDW WKH
%RDUG¶VEULHIPD\EHUHDGWRDUJXHWRWKHFRQWUDU\ZHQRWH
WKDWWKHXQLRQKDVIDLOHGWRVKRZWKDWLWFDQQRWRWKHUZLVHJHW
LWV PHVVDJH DFURVV DQG ZH WKHUHIRUH UHMHFW WKH %RDUG¶V
DUJXPHQWWKDWQRQHPSOR\HHXQLRQRUJDQL]DWLRQVPD\KDQGELOO
WRSXEOLFFRQVXPHUVFRQFHUQLQJDPDOOWHQDQW¶VFRQWUDFWLQJ
ZLWKDQRQXQLRQFRQVWUXFWLRQFRPSDQ\
&OHYHODQG5HDO(VWDWH3DUWQHUVLVFRQWUROOLQJSUHFHGHQWLDO
DXWKRULW\EXWLILWZHUHQRWZHZRXOGDGKHUHWR6DQGXVN\¶V
UDWLRQDOHWKDWWKHXQLRQKDVGHPRQVWUDWHGQRKDQGELOOLQJULJKW
XQGHU WKH FLUFXPVWDQFHV KHUH (YHQ LI WKH GLVFULPLQDWLRQ
H[FHSWLRQZHUHUHOHYDQWLQWKLVFDVHZHZRXOGQRWFRQVWUXH
LWLQWKLVFDVHDVXUJHGE\WKH%RDUGEHFDXVHWKHFRQGXFWRI
WKHQRQHPSOR\HHXQLRQKDQGELOOHUVLVQRWVLPLODUFRQGXFWWR
WKDW RI FLYLO DQG FKDULWDEOH RUJDQL]DWLRQV ZKR REWDLQHG
SHUPLVVLRQIURP6DQGXVN\WRXVHWKHPDOOLQDOLPLWHGZD\
GHHPHGEHQHILFLDO
0RVWRIWKHFDVHDXWKRULW\FLWHGE\WKH%RDUGLQRXUYLHZ
LVLUUHOHYDQWRQO\SHULSKHUDOO\UHODWHGWRWKHLVVXHLQWKLVFDVH
RU LV JHQHUDOO\ VXSSRUWLYH RI 6DQGXVN\¶V DUJXPHQW :H
FRQFOXGHWKDWWKH%RDUG¶VLQWHUSUHWDWLRQRIWKHODZXQGHUWKH
VWLSXODWHGIDFWVLVQRWUHDVRQDEOHQRULVLWSHUVXDVLYH
7KLVFDVHGRHVQRWLQYROYHRUJDQL]DWLRQDOULJKWVLWGRHVQRW
LQYROYHHPSOR\HHSLFNHWLQJRUKDQGELOOLQJDQGLI6DQGXVN\
LVGHHPHGWREHDQHPSOR\HULWKDVQRWHQFRXUDJHGRUDOORZHG
KDQGELOOLQJ E\ SHUVRQV VLPLODUO\ VLWXDWHG WR WKH XQLRQ
RUJDQL]HUVLQWKLVFDVH
$FFRUGLQJO\ZHGHFOLQHWRHQIRUFHWKHRUGHURIWKH%RDUG
DQGZH5(9(56(LWVGHWHUPLQDWLRQ
1RV 6DQGXVN\0DOO&RY1/5%
6DQGXVN\ PDLQWDLQV D SROLF\ ³QRW WR SHUPLW DQ\ VROLFLWLQJ H[FHSW
RFFXSDQWV VWULFWO\ LQ DFFRUGDQFH ZLWK WKHLU SULRU ZULWWHQ DJUHHPHQW ZLWK
WKH 6KRSSLQJ &HQWHU KDQGELOOLQJ OHDIOHWLQJ SLFNHWLQJ RU SDWUROOLQJ
FROOHFWLYHO\ FDOOHG μVROLFLWDWLRQ¶ E\ DQ\ SHUVRQV RQ WKH SULYDWHO\ RZQHG
SURSHUW\ RI WKH 6KRSSLQJ &HQWHU $OO 3HUVRQV HQJDJLQJ LQ VXFK
VROLFLWDWLRQ ZLOO EH DVNHG WR OHDYH WKH 6KRSSLQJ &HQWHU SURSHUW\ DQG LI
WKH\ UHIXVH PD\ EH DUUHVWHG IRU FULPLQDO WUHVSDVV´
7KH KDQGELOO DVNHG WKH ³JHQHUDO SXEOLF´ QRW WR SDWURQL]H $WWLYR
³EHFDXVH WKH\ DUH XQGHUPLQLQJ FRQVWUXFWLRQ ZDJH DQG EHQHILW VWDQGDUGV
LQ WKLV DUHD E\ HPSOR\LQJ &UDZIRUG´
FXVWRPHUV 5HVSRQVLEOH IRU WKH JRRG ZLOO DQG VXFFHVVIXO
PDUNHWLQJRIWKHPDOOWKHPDQDJHUGHFLGHVZKHWKHUWROHDVH
VSDFHIRUWHPSRUDU\GLVSOD\V3HUPLVVLRQIRUWHPSRUDU\XVH
LVJUDQWHGLQZULWLQJDQGPD\EHJUDWLVDVGLUHFWHGE\WKHPDOO
PDQDJHU
7KHPDOOGULYHZD\VKRZHYHUDUHSRVWHGZLWKVLJQVZKLFK
UHDG³VROLFLWLQJDQGSRVWLQJRIELOOVSURKLELWHG´2QHRIWKRVH
VLJQVLVRQWKHGULYHZD\LQIURQWRIWKH6HDUVVWRUHDWRQHHQG
RIWKHPDOODQGWKH$WWLYRORFDWLRQQRZLQFRQWURYHUV\LV
QHDU 6HDUV DQG LWV PDOO HQWUDQFH 7KH PDOO HQWUDQFH ZDV
SRVWHGZLWK³QRVROLFLWLQJ´VLJQV
,Q 1RYHPEHU LQWHUYHQRU 1RUWKHDVW 2KLR 'LVWULFW
&RXQFLORI&DUSHQWHUV8QLWHG%URWKHUKRRGRI&DUSHQWHUV
-RLQHUVRI$PHULFD$)/&,2 ³XQLRQ´ OHDUQHGWKDWDPDOO
WHQDQW$WWLYRKLUHGDQRQXQLRQFRQVWUXFWLRQFRQWUDFWRU5
(&UDZIRUG&RQVWUXFWLRQ&R ³&UDZIRUG´ WRUHQRYDWHLWV
VWRUH ,Q 1RYHPEHU DQG 'HFHPEHU WKH XQLRQ GLVWULEXWHG
KDQGELOOV XUJLQJ PDOO FXVWRPHUV QRW WR SDWURQL]H $WWLYR
EHFDXVH RI LWV KLULQJ RI D QRQXQLRQ FRQWUDFWRU ZKLFK WKH
XQLRQFRQWHQGHGKDGXQGHUPLQHGORFDOZDJHVWDQGDUGV7KH
XQLRQKDQGELOOHUVZHUHQRWHPSOR\HHVRI6DQGXVN\$WWLYRRU
&UDZIRUG7KHXQLRQDOVRWKUHDWHQHGWRKDQGELOODQRWKHUPDOO
WHQDQW 2IILFH0D[ WR SURWHVW LWV KLULQJ RI D QRQXQLRQ
FRQWUDFWRU 6DQGXVN\¶V DWWRUQH\ QRWLILHG WKH XQLRQ¶V
UHSUHVHQWDWLYHRQ1RYHPEHUWKDWDQ\KDQGELOOHUVRQ
PDOOSURSHUW\ZRXOGEHFRQVLGHUHGWUHVSDVVHUVDQGZRXOGQRW
EHSHUPLWWHGWRKDQGRXWVXFKKDQGELOOV2Q'HFHPEHU

-- 3 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
WKHXQLRQDJDLQKDQGELOOHGLQVLGHWKHPDOOQHDU$WWLYR¶V
HQWUDQFHDQGDPDOOVHFXULW\JXDUGWROGWKHKDQGELOOHUVWKH\
ZHUHQRWSHUPLWWHGWRKDQGELOORQWKHPDOOSURSHUW\DQGPXVW
OHDYH 7KH KDQGELOOHUV OHIW EXW UHWXUQHG WKH QH[W GD\ DQG
0RQWHYLGHRWKHPDOOPDQDJHUDJDLQDVNHGWKHPWROHDYHDQG
GHOLYHUHG D OHWWHU IURP 6DQGXVN\¶V DWWRUQH\ 7KH XQLRQ
KDQGELOOHUVOHIWVKRUWO\EXWUHWXUQHGRQ'HFHPEHU
DQGUHIXVHGWROHDYHDWWKHVHFXULW\JXDUG¶VUHTXHVW:KHQWKH
PDOO PDQDJHU FDOOHG WKH 3HUNLQV 7RZQVKLS SROLFH DQG WKH
KDQGELOOHUV UHIXVHG WR REH\ WKH SROLFH¶V RUGHUV WKH\ ZHUH
DUUHVWHGIRUWUHVSDVVXQGHU2KLR5HY&RGH†
7KH XQLRQ WKHQ SURPSWO\ ILOHG DQ XQIDLU ODERU SUDFWLFH
FKDUJH DJDLQVW 6DQGXVN\ DQG RQ -DQXDU\ WKH
1/5%¶V *HQHUDO &RXQVHO LVVXHG DQG ODWHU DPHQGHG D
FRPSODLQWDOOHJLQJWKDW6DQGXVN\KDGYLRODWHG† D RIWKH
$FW86&† D 7KHSDUWLHVDJUHHGWRZDLYHD
KHDULQJ EHIRUH DQ DGPLQLVWUDWLYH ODZ MXGJH ³$/-´ DQG
WUDQVIHU WKH FDVH WR WKH %RDUG LWVHOI IRU D GHFLVLRQ RQ
VWLSXODWHGIDFWV7KH%RDUGDFFHSWHGWKHVWLSXODWHGUHFRUGDQG
PRWLRQWRWUDQVIHUWKHFDVHWRWKH%RDUGIRUGHFLVLRQ1HDUO\
IRXU\HDUVODWHUWKH%RDUGIRXQGWKDW6DQGXVN\YLRODWHGWKH
$FWDQGLVVXHGLWVGHFLVLRQ6DQGXVN\ILOHGDWLPHO\SHWLWLRQ
IRU UHYLHZ DQG WKH %RDUG ILOHG D FURVVDSSOLFDWLRQ IRU
HQIRUFHPHQW 7KLV FRXUW JUDQWHG WKH XQLRQ¶V PRWLRQ WR
LQWHUYHQHLQWKLVFRQWURYHUV\
,QDGGLWLRQWRILOLQJWKHFRPSODLQWRQ-DQXDU\WKH
5HJLRQDO'LUHFWRURIWKH1/5%QRWLILHG6DQGXVN\E\OHWWHUWR
FHDVHWKHWUHVSDVVSURVHFXWLRQDJDLQVWXQLRQUHSUHVHQWDWLYHV
ZLWKLQVHYHQGD\V9HU\SURPSWO\6DQGXVN\LQIRUPHGWKH
5HJLRQDO 'LUHFWRU DQG WKH FOHUN RI WKH FRXUW LQ ZKLFK WKH
SURVHFXWLRQZDVSHQGLQJWKDWLWZRXOGQRWWDNHDQ\IXUWKHU
DFWLRQ LQ WKH WUHVSDVV SURVHFXWLRQ XQOHVV WKLV FDVH ZHUH
UHVROYHGLQLWVIDYRU/DWHUWKHORFDOFRXUWGLVPLVVHGERWK
WUHVSDVVFKDUJHVDJDLQVWWKHXQLRQUHSUHVHQWDWLYHVDQGDWWKHLU
UHTXHVWVHDOHGWKHUHFRUGZLWKRXWRSSRVLWLRQE\6DQGXVN\
7KHVSHFLILFLVVXHEHIRUHWKLVFRXUWLVZKHWKHU6DQGXVN\
PD\EHFRPSHOOHGWRSHUPLWQRQHPSOR\HHXQLRQPHPEHUVWR
1RV 6DQGXVN\0DOO&RY1/5%
1RU GR ZH ILQG 5HVWDXUDQW &RUS RI $PHULFD Y 1/5% )G
'& &LU WR EH RI DQ\ FRPIRUW WR WKH %RDUG 5HVWDXUDQW &RUS
VLPSO\ KHOG WKDW RQH VLQJOH LVRODWHG FRQWDFW DW OXQFK E\ D SURXQLRQ
HPSOR\HH FRXOG QRW EH WKH VXEMHFW RI GLVFKDUJH EDVHG RQ D QRVROLFLWDWLRQ
UXOH
HYHQPRUHμSHULSKHUDO¶´)GDW7KHXQLRQ¶VDFWLYLW\
LQ WKH LQVWDQW FDVH UHODWHV WR D SHULSKHUDO ULJKW RQO\ DQG
GHVHUYHVOHVVSURWHFWLRQXQGHUWKH$FW,Q*UHDW6FRWWKH
DFWLYLW\ZDVGLUHFWHGWRZDUGWKHWDUJHWHPSOR\HUDQGLWVZDJH
VWDQGDUGVLQWKLVFDVHWKHKDQGELOOLQJLVHYHQPRUHUHPRWHLW
LVGLUHFWHGDWDFRQWUDFWRUGRLQJEXVLQHVVZLWKDWHQDQWRIWKH
DOOHJHG³HPSOR\HU´6DQGXVN\
:HDOVRQRWHWKDW6SDUNV1XJJHW,QFY1/5%)G
WK &LU FLWHG LQ WKH %RDUG¶V EULHI GRHV QRW
VXSSRUWWKHGLVFULPLQDWLRQH[FHSWLRQXUJHGE\WKH%RDUG7KH
%RDUG QRWHG LQ IDFW WKDW 6SDUNV 1XJJHW IRXQG QR
GLVFULPLQDWLRQGHVSLWHWKHIDFWWKDW³WKHHPSOR\HULWVHOIKDG
GLVWULEXWHGDQWLXQLRQKDQGELOOV´
7KH%RDUGDOVRFLWHVLQLWVDWWHQXDWHGDUJXPHQWLQLWVEULHI
GHDOLQJ ZLWK WKH GLVFULPLQDWLRQ H[FHSWLRQ 'DYLV
6XSHUPDUNHWV ,QF Y 1/5% )G '& &LU
ZKLFKLQYROYHGHPSOR\HHVVHHNLQJWRSDUWLFLSDWHLQ
FRPSDUDEOH DFWLYLWLHV DQG GHFLGHG WKDW WKH HPSOR\HU
GLVFULPLQDWHGE\GHQ\LQJRQHXQLRQDFFHVVZKLOHJUDQWLQJ
DQRWKHUXQLRQDFFHVV(YHQPRUHGLVWLQJXLVKDEOHLV8QLWHG
3DUFHO 6HUY ,QF Y 1/5% )G WK &LU
ZKLFK GHFLGHG WKH ULJKWV RI HPSOR\HHV GLVWULEXWLQJ XQLRQ
OLWHUDWXUHWRRWKHUHPSOR\HHVLQDQRQZRUNDUHDWRVROLFLWWKHLU
PHPEHUVKLSLQWKHXQLRQ
7KH%RDUGDVNVXVWRLJQRUHRUWRRYHUUXOH&OHYHODQG5HDO
(VWDWH3DUWQHUVEXWRXUILUPIL[HGUXOHLVWKDWRQHSDQHORI
WKHFRXUWFDQQRWRYHUUXOHDSULRUSUHFHGHQWLDOKROGLQJ(J
8QLWHG6WDWHVY6PLWK)G WK&LU
7KH%RDUGKDVIDLOHGWRSURGXFH6XSUHPH&RXUWSUHFHGHQW
WKDW PDQGDWHV VXFK DFWLRQ $V ZH GLG LQ &OHYHODQG 5HDO
(VWDWH3DUWQHUVWKLVFRXUWUHYLHZVWKH%RDUG¶VLQWHUSUHWDWLRQ

-- 4 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
,97+(%2$5'$1'81,21$5*80(17
,QVXPWKH%RDUGDUJXHVLQLWVEULHIWKDW&OHYHODQG5HDO
(VWDWH3DUWQHUV³LVQRORQJHUFRQWUROOLQJDXWKRULW\´:K\"
%HFDXVH&OHYHODQG5HDO(VWDWH3DUWQHUV³DSSOLHGDQLPSURSHU
VWDQGDUGRIUHYLHZ´WKDWLVLWGLGQRWDFFHSWDVFRQWUROOLQJWKH
%RDUG¶VLQWHUSUHWDWLRQRI6XSUHPH&RXUW DQG6L[WK&LUFXLW
SUHFHGHQWRQWKHVRFDOOHG³GLVFULPLQDWLRQH[FHSWLRQ´7KH
%RDUG SURFHHGHG WR GHYRWH PXFK RI LWV EULHI WR LWV
LQWHUSUHWDWLRQ RI 6XSUHPH &RXUW SUHFHGHQW RQ WKH LVVXHV
SDUWLFXODUO\%DEFRFN :LOFR[DQG/HFKPHUHDUJXLQJILUVW
WKDW³>W@KHIDFWWKDWXQLRQUHSUHVHQWDWLYHVDFWLQJRQEHKDOIRI
WKH HPSOR\HHV ZKRVH ZDJHV DQG EHQHILWV ZHUH WKUHDWHQHG
UDWKHU WKDQ WKH HPSOR\HHV WKHPVHOYHV ZHUH VHHNLQJ WR
GLVWULEXWHKDQGELOOVKHUHVKRXOGQRWDIIHFWWKHRXWFRPH´
,Q LWV EULHI DUJXLQJ WKH PHDQLQJ RI MXGLFLDO GHFLVLRQV
GHDOLQJZLWKWKHLVVXHVEHIRUHXVWKH%RDUGFLWHV2¶1HLO¶V
0DUNHWV Y 8QLWHG )RRG &RPPHUFLDO :RUNHUV¶ 8QLRQ
0HDWFXWWHUV/RFDO$)/&,2&/&)G WK&LU
$PRQJRWKHUWKLQJV2¶1HLO¶VKDGPXFKWRVD\DERXW
%DEFRFN :LOFR[DQG/HFKPHUHEXWLWKDGQRWKLQJWRVD\
DERXWWKH³GLVFULPLQDWLRQH[FHSWLRQ´2¶1HLO¶V0DUNHWGLG
QRWHQIRUFHWKH%RDUG¶VRUGHUEXWUHPDQGHGWRSODFHSURSHUO\
WKHEXUGHQRQWKHXQLRQDQGWRGHWHUPLQHWKHH[WHQWRIWKH
YDOLGLW\RIWKHDUHDVWDQGDUGVFODLPDVZHOODVGHILQLQJWKH
HPSOR\HU¶VSURSHUW\ULJKWVWRWKHDUHDLQYROYHG7KH%RDUGLV
VLPSO\PLVWDNHQE\LPSO\LQJLQLWVEULHIWKDW2¶1HLO¶V0DUNHW
KDGDQ\WKLQJWRGRZLWKWKHGLVFULPLQDWLRQH[FHSWLRQ$VWR
DUHD VWDQGDUGV SLFNHWLQJ RU KDQGELOOLQJ 2¶1HLO¶V 0DUNHWV
ILQGVLWSURWHFWHGFRQGXFWXQGHUFHUWDLQFLUFXPVWDQFHVEXW
OLNH 1/5% Y *UHDW 6FRW ,QF )G WK &LU
WKH%RDUGDQGWKHXQLRQFDUU\³WKHEXUGHQRISURRI
UHJDUGLQJWKHYDOLGLW\RIWKHDUHDVWDQGDUGVPHVVDJH´)G
DW
7KH%RDUGDFNQRZOHGJHVLQLWVEULHIPRUHRYHUWKDW*UHDW
6FRW KROGV WKDW QRQHPSOR\HH DUHDVWDQGDUGV SLFNHWLQJ
ZDUUDQWV HYHQ OHVV SURWHFWLRQ WKDQ QRQHPSOR\HH
RUJDQL]DWLRQDODFWLYLW\XQGHU6HFWLRQEHFDXVHLWLV³DULJKW
1RV 6DQGXVN\0DOO&RY1/5%
1/5% Y %DEFRFN :LOFR[ &R 86
/HFKPHUH ,QF Y 1/5% 86
WUHVSDVVRQWKHPDOO¶VSURSHUW\IRUWKHSXUSRVHRIGLVWULEXWLQJ
KDQGELOOVXUJLQJPDOOFXVWRPHUVQRWWRSDWURQL]HQRQXQLRQ
HPSOR\HUV7KLVLVVXHLVDGLIILFXOWRQHEXWLWLVQRWRQHRI
ILUVW LPSUHVVLRQ :H DGGUHVVHG SUHFLVHO\ WKDW LVVXH LQ
&OHYHODQG5HDO(VWDWH3DUWQHUVY1/5%)G WK
&LU 7KHVKDUSGLYLGHDPRQJPHPEHUVRIWKH%RDUGLQ
WKHFDVHEHIRUHXVWRGD\LQGLFDWHVWKH%RDUG¶VGLIILFXOW\ZLWK
WKLVLVVXH
,())(&72)&/(9(/$1'5($/(67$7(
3$571(56
:HDUHQRUPDOO\ERXQGE\WKHSUHFHGHQWHVWDEOLVKHGE\D
GHFLVLRQRQDSDUWLFXODULVVXHE\DSULRUSDQHORIRXUFRXUW
7KH%RDUGPDMRULW\DWEHVWLQIHUHQWLDOO\DFNQRZOHGJHGLWV
EXUGHQWRSHUVXDGHXVWRGHQ\WKHHIILFDF\RI&OHYHODQG5HDO
(VWDWH3DUWQHUVE\VWDWLQJ
:H DUH PLQGIXO WKDW WKH 8QLWHG 6WDWHV &RXUW RI
$SSHDOVIRUWKH6L[WK&LUFXLWLQZKLFKWKLVFDVHDULVHV
KDV UHMHFWHG WKH %RDUG¶V LQWHUSUHWDWLRQ RI
³GLVFULPLQDWLRQ´ DV XVHG LQ %DEFRFN :LOFR[ ,Q
&OHYHODQG5HDO(VWDWH3DUWQHUVWKH%RDUGDGRSWHGWKH
DGPLQLVWUDWLYH ODZ MXGJH¶V ILQGLQJ WKDW WKH HPSOR\HU
GLVFULPLQDWRULO\ SURKLELWHG QRQHPSOR\HH XQLRQ
UHSUHVHQWDWLYHV IURP GLVWULEXWLQJ KDQGELOOV GLUHFWHG DW
VKRSSHUV WR GLVFRXUDJH WKHP IURP SDWURQL]LQJ D
QRQXQLRQ UHWDLOHU LQ WKH PDOO EHFDXVH LW SHUPLWWHG
QRQODERUUHODWHGKDQGELOOLQJDQGVROLFLWDWLRQVE\RWKHUV
LQWKHPDOO7KH6L[WK&LUFXLWGHQLHGHQIRUFHPHQWRIWKH
%RDUG¶V RUGHU KROGLQJ WKDW SRVW/HFKPHUH
³GLVFULPLQDWLRQ´DVXVHGLQ%DEFRFN :LOFR[³PHDQV
IDYRULQJRQHXQLRQRYHUDQRWKHURUDOORZLQJHPSOR\HU
UHODWHGLQIRUPDWLRQZKLOHEDUULQJVLPLODUXQLRQUHODWHG
LQIRUPDWLRQ´:HUHVSHFWIXOO\GLVDJUHHZLWKWKH6L[WK

-- 5 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
&LUFXLW¶V FRQFOXVLRQ DQG DGKHUH WR RXU YLHZ WKDW DQ
HPSOR\HU WKDW GHQLHV D XQLRQ DFFHVV ZKLOH UHJXODUO\
DOORZLQJQRQXQLRQRUJDQL]DWLRQVWRVROLFLWDQGGLVWULEXWH
RQ LWV SURSHUW\ XQODZIXOO\ GLVFULPLQDWHV DJDLQVW XQLRQ
VROLFLWDWLRQ
6DQGXVN\0DOO&R1/5%1R 6HSW
IRRWQRWHVDQGFLWDWLRQVRPLWWHG
7KH GLVFULPLQDWLRQ WR ZKLFK WKH %RDUG UHIHUV LV WKH VR
FDOOHG ³GLVFULPLQDWLRQ H[FHSWLRQ´ WR WKH JHQHUDO UXOH DV
H[SODLQHG E\ WKH 6XSUHPH &RXUW LQ 1/5% Y %DEFRFN
:LOFR[86
>$@Q HPSOR\HU PD\ YDOLGO\ SRVW KLV SURSHUW\ DJDLQVW
QRQHPSOR\HHGLVWULEXWLRQRIXQLRQOLWHUDWXUHLIUHDVRQDEOH
HIIRUWVE\WKHXQLRQWKURXJKRWKHUDYDLODEOHFKDQQHOVRI
FRPPXQLFDWLRQ ZLOO HQDEOH LW WR UHDFK WKH HPSOR\HHV
ZLWKLWVPHVVDJHDQGLIWKHHPSOR\HU¶VQRWLFHRURUGHU
GRHVQRWGLVFULPLQDWHDJDLQVWWKHXQLRQE\DOORZLQJRWKHU
GLVWULEXWLRQ´
,Q&OHYHODQG5HDO(VWDWH3DUWQHUVZHUHMHFWHGWKH%RDUG¶V
FRQWHQWLRQDERXWWKHPHDQLQJRIWKLVH[FHSWLRQVWDWLQJ
7KH %RDUG¶V XQGHUVWDQGLQJ RI %DEFRFN¶V
GLVFULPLQDWLRQ SULQFLSOH LV ZHOOH[HPSOLILHG E\ %H/R
6WRUHV1/5%1R ZKHUHWKH%RDUGKHOG
WKDWWKHRFFDVLRQDOSUHVHQFHRI³0XVOLPVVHOOLQJRLOVDQG
LQFHQVH´ ³DQ μRFFDVLRQDO¶ -HKRYDK¶V :LWQHVV
GLVWULEXW>LQJ@WKH:DWFKWRZHUPDJD]LQH´DQG³RQRQH
RFFDVLRQDORFDO/LRQV&OXEVROLFLW>DWLRQ@´GHPRQVWUDWHG
GLVFULPLQDWRU\HQIRUFHPHQWRIDQRVROLFLWDWLRQUXOHZKHQ
WKH HPSOR\HU GHQLHG DFFHVV WR D XQLRQ $FFRUG 'RZ
-RQHV &R1/5%1R :HWKLQNWKH
%RDUGKDVPLVLQWHUSUHWHG%DEFRFN
%DEFRFNDQGLWVSURJHQ\ZKLFKZHLJKKHDYLO\LQIDYRU
RISULYDWHSURSHUW\ULJKWVLQGLFDWHWKDWWKH&RXUWFRXOG
QRW KDYH PHDQW WR JLYH WKH ZRUG ³GLVFULPLQDWLRQ´ WKH
LPSRUWWKH%RDUGKDVFKRVHQWRJLYHLW7RGLVFULPLQDWH
1RV 6DQGXVN\0DOO&RY1/5%
3HUU\(GXFDWLRQ$VV¶QY3HUU\/RFDO(GXFDWRUV$VV¶Q
86 DQG/OR\G&RUSY7DQQHU86
:HDJUHHDOVRZLWKGLVVHQWHU%UDPH¶V³GLUHFWLRQV´WR
WKH%RDUG
>7@KH%RDUGPXVWDVNZKDWLVWKHQDWXUHRIWKHFRQGXFW
IRUZKLFKDFFHVVLVVRXJKWDQGZKDWHIIHFWZRXOGWKLV
W\SH RI FRQGXFW UHDVRQDEO\ EH H[SHFWHG WR KDYH"
&HUWDLQO\HPSOR\HUVPXVWEHDEOHWRPDNHGLVWLQFWLRQV
EDVHGRQWKHWLPHSODFHDQGPHDQVRIVROLFLWDWLRQWRWKH
H[WHQWWKDWPDOOEXVLQHVVPD\EHQHJDWLYHO\DIIHFWHGE\
RQH DQG QRW DQRWKHU )RU H[DPSOH RXWVLGH VROLFLWRUV
IURPDQRUJDQL]DWLRQVLWWLQJTXLHWO\DWDWDEOHLQDUHPRWH
VHFWLRQ RI WKH PDOO ZRXOG OLNHO\ KDYH D IDU GLIIHUHQW
LPSDFW WKDQ LI WKH\ ZHUH GLVWULEXWLQJ KDQGELOOV ZKLOH
URDPLQJWKHFRPPRQDUHDVRUSLFNHWLQJZLWKLQWKHPDOO
,,,())(&72)+2//<)$506
+ROO\)DUPV&RUSY1/5%86 LQYROYHG
D WHFKQLFDO DQG GHILQLWLRQDO LVVXH DERXW ZKHWKHU D SRXOWU\
FRUSRUDWLRQZDVD³IDUPLQJRSHUDWLRQ´XQGHUWKH1/5$7KH
6XSUHPH&RXUWDIILUPHGWKH)RXUWK&LUFXLW¶VGHIHUHQFHWRWKH
%RDUGXQGHUWKHFLUFXPVWDQFHVRIWKDWFDVHEHFDXVHLWIRXQG
³WKH%RDUG¶VDQVZHU>LQWHUSUHWDWLRQ@UHDVRQDEOH´,GDW
7KH&RXUWDGGHGWKDWXQGHUWKHFLUFXPVWDQFHVWKH%RDUG¶V
FRQVWUXFWLRQ GLG QRW KDYH WR EH ³WKH EHVW ZD\ WR UHDG WKH
VWDWXWH´ ,G DW )RXU GLVVHQWHUV IHOW WKDW WKH %RDUG
VHULRXVO\PLVFRQVWUXHGWKHVWDWXWHDQGWKDWLWVLQWHUSUHWDWLRQ
ZDVXQUHDVRQDEOH&RQWUDU\WRWKHLQWLPDWLRQRIWKH%RDUG
ZHGRQRWUHDG+ROO\)DUPVDVRYHUUXOLQJWKHHVVHQWLDOWHQHWV
RI&OHYHODQG5HDO(VWDWH3DUWQHUV:KDWLVLQYROYHGLQWKH
LQVWDQWFDVHVDQGLQ&OHYHODQG5HDO(VWDWH3DUWQHUVLVQRW
WKHFRQVWUXFWLRQRIDQDPELJXRXVWHUPLQWKH1/5$UDWKHULW
LVWKH%RDUG¶VLQWHUSUHWDWLRQRI6XSUHPH&RXUWSUHFHGHQWRQ
WKHVSHFLILFTXHVWLRQRIXQLRQQRQHPSOR\HHVROLFLWDWLRQLQD
VKRSSLQJPDOOFRQWUDU\WRWKHPDOO¶VHVWDEOLVKHGUXOHVDQG
ZLWKRXWWKHPDOO¶VSHUPLVVLRQ

-- 6 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
DFWLYLW\FRQIOLFWVZLWKWKHEXVLQHVVRIDPDOOWHQDQWDQG
ZKHWKHU WKH DFWLYLW\ FRQFHUQV RU ZRXOG JHQHUDWH
FRQWURYHUV\
8QGHULWVSROLF\WKH5HVSRQGHQWDGPLWWHGO\SHUPLWWHG
D YDULHW\ RI FKDULWDEOH FLYLF DQG HYHQ FRPPHUFLDO
RUJDQL]DWLRQVWRHQWHUWKHPDOOIRUVROLFLWDWLRQGLVSOD\V
DQGSUHVHQWDWLRQV
,Q VXP WKH %RDUG GLVVHQW DOVR VWDWHG LWV LQWHUSUHWDWLRQ RI
UHOHYDQW 6XSUHPH &RXUW SUHFHGHQW RQ WKH LVVXH EHIRUH LW
LQFOXGLQJSDUWLFXODUO\/HFKPHUH
:KLOH DFNQRZOHGJLQJ WKDW QRQHPSOR\HH XQLRQ DJHQWV
QRQHWKHOHVVKDYHVRPHDOEHLWH[WUHPHO\OLPLWHGULJKWVWR
VROLFLWRQSULYDWHSURSHUW\WKH&RXUWIDXOWHGWKH%RDUG
IRU³IDLOLQJWRPDNHWKHFULWLFDOGLVWLQFWLRQEHWZHHQWKH
RUJDQL]LQJDFWLYLWLHVRIHPSOR\HHV WRZKRP6HFWLRQ
JXDUDQWHHV WKH ULJKW RI VHOI RUJDQL]DWLRQ DQG
QRQHPSOR\HHV WR ZKRP 6HFWLRQ DSSOLHV RQO\
GHULYDWLYHO\ ´ 7KH &RXUW WKHQ H[SODLQHG WKDW
SUHVXPSWLYHO\DQHPSOR\HUFDQQRWEHFRPSHOOHGWRDOORZ
GLVWULEXWLRQRIOLWHUDWXUHE\QRQHPSOR\HHRUJDQL]HUVRQ
KLVSURSHUW\ZKLOHQRWLQJWKDWWKHSUHVXPSWLRQPLJKWEH
UHEXWWHGLIFRQVLVWHQWZLWKWKH&RXUW¶VHDUOLHUGHFLVLRQLQ
%DEFRFNDQG:LOFR[VXSUDWKHHPSOR\HHVDUHRWKHUZLVH
LQDFFHVVLEOH 7KH /HFKPHUH &RXUW VWUHVVHG WKDW
³%DEFRFN¶V UXOH LV D QDUURZ RQH ,W GRHV QRW DSSO\
ZKHQHYHUQRQWUHVSDVVRU\DFFHVVWRHPSOR\HHVPD\EH
FXPEHUVRPH RU OHVVWKDQLGHDOO\ HIIHFWLYH ´ ,Q
UHYHUVLQJWKH%RDUG¶VKROGLQJWKH6XSUHPH&RXUWDOVR
UHMHFWHGWKH%RDUG¶VDSSOLFDWLRQRILWVGHFLVLRQLQ-HDQ
&RXQWU\
)RRWQRWHVRPLWWHG )LQDOO\DVGLGWKLVFRXUWLQ&OHYHODQG
5HDO(VWDWH3DUWQHUVGLVVHQWHU%UDPHLQVLVWHGZHEHOLHYH
FRUUHFWO\WKDWDOOHJHG³GLVFULPLQDWRU\´FRQGXFWLQDOORZLQJ
VROLFLWDWLRQRQKDQGELOOLQJUHTXLUHGWKDW³GLVFULPLQDWLRQEH
DPRQJ FRPSDUDEOH JURXSV RU DFWLYLWLHV´ DQG WKDW WKH
DFWLYLWLHV WKHPVHOYHV XQGHU FRQVLGHUDWLRQ PXVW EH
³FRPSDUDEOH´,QVXSSRUWRIKLVRSLQLRQWKLVGLVVHQWHUFLWHG
1RV 6DQGXVN\0DOO&RY1/5%
LQ WKH HQIRUFHPHQW RI D QRVROLFLWDWLRQ SROLF\ FDQQRW
PHDQWKDWDQHPSOR\HUFRPPLWVDQXQIDLUODERUSUDFWLFH
LILWDOORZVWKH*LUO6FRXWVWRVHOOFRRNLHVEXWLVVKLHOGHG
IURPWKHHIIHFWRIWKH$FWLILWSURKLELWVWKHPIURPGRLQJ
VR&I*XDUGLDQ,QGXV&RUSY1/5%)G
WK&LU $OWKRXJKWKH&RXUWKDVQHYHU
FODULILHGWKHPHDQLQJRIWKHWHUPDQGZHKDYHIRXQGQR
SXEOLVKHG FRXUW RI DSSHDOV FDVHV DGGUHVVLQJ WKH
VLJQLILFDQFHRI³GLVFULPLQDWLRQ´LQWKLVFRQWH[WZHKROG
WKDWWKHWHUP³GLVFULPLQDWLRQ´DVXVHGLQ%DEFRFNPHDQV
IDYRULQJRQHXQLRQRYHUDQRWKHURUDOORZLQJHPSOR\HU
UHODWHGLQIRUPDWLRQZKLOHEDUULQJVLPLODUXQLRQUHODWHG
LQIRUPDWLRQ
$OWKRXJK ZH DUH UHVSHFWIXO RI WKH %RDUG¶V
LQWHUSUHWDWLRQZHDUHQRWFRPSHOOHGWRIROORZLWZKHQLW
UHVWVRQHUURQHRXVOHJDOIRXQGDWLRQV6HH/HFKPHUH
86DW6&WDW
&OHYHODQG5HDO(VWDWH3DUWQHUV)GDW
7KH%H/R6WRUHV1/5%GHFLVLRQDERYHUHIHUUHGWRDQG
LQYROYLQJWKLVVDPHLVVXHZDVUHYHUVHGE\WKH)RXUWK&LUFXLW
DW )G WK &LU 7KH %RDUG PDMRULW\
DFNQRZOHGJHGLQQRILWVRSLQLRQLQWKLVFDVHWKDW
>7@KH)RXUWK&LUFXLWIRXQGWKDWWKHIHZVROLFLWDWLRQVWKDW
RFFXUUHGDWWKHHPSOR\HU¶VRYHUVWRUHVLQWKHSDVW\HDU
DQGDKDOIZHUHRQO\³LVRODWHGDQGVSRUDGLF´DQGGLGQRW
HVWDEOLVK GLVSDUDWH HQIRUFHPHQW RI WKH HPSOR\HU¶V QR
VROLFLWDWLRQSROLF\,QGLFWDWKHFRXUWQRWHGLWV³GRXEW´
WKDW SRVW/HFKPHUH WKH %DEFRFN :LOFR[
GLVFULPLQDWLRQ WUHDWPHQW H[FHSWLRQ DSSOLHV WR
QRQHPSOR\HHV ZKR GR QRW SURSRVH WR HQJDJH LQ
RUJDQL]DWLRQDODFWLYLWLHVDQGWKDWDQHPSOR\HU¶VDSSURYDO
RIOLPLWHGFKDULWDEOHRUFLYLFGLVWULEXWLRQZKLOHH[FOXGLQJ
XQLRQGLVWULEXWLRQFRQVWLWXWHVGLVFULPLQDWLRQ
,QDGGLWLRQWR&OHYHODQG5HDO(VWDWH3DUWQHUVDQG%H/RZ
6WRUHVWKH%RDUGPDMRULW\LQWKLVFDVHDFNQRZOHGJHVWKDWLQ
*XDUGLDQ,QGXV&RUSY1/5%)G WK&LU

-- 7 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
>7@KH 6HYHQWK &LUFXLW KHOG WKDW DQ HPSOR\HU KDG QRW
XQODZIXOO\GLVFULPLQDWHGDJDLQVWXQLRQVROLFLWDWLRQZKHUH
WKHHPSOR\HUDOORZHGRQO\³VZDSDQGVKRS´QRWLFHVWREH
SRVWHG RQ LWV EXOOHWLQ ERDUG DQG UHIXVHG WR DOORZ WKH
SRVWLQJRIQRWLFHRIXQLRQPHHWLQJVDVLQFRQVLVWHQWZLWK
LWVSROLF\7KHFRXUWIRXQGWKDWWKH%RDUGKDGIDLOHGWR
HVWDEOLVK LQ ZKDW VHQVH LW PLJKW EH GLVFULPLQDWRU\ WR
GLVWLQJXLVK EHWZHHQ IRUVDOH QRWHV DQG PHHWLQJ
DQQRXQFHPHQWV
7KH IDFWV LQ &OHYHODQG 5HDO (VWDWH 3DUWQHUV DUH YHU\
VLPLODUWRWKRVHLQWKHLQVWDQWFRQWURYHUV\8QLRQKDQGELOOHUV
FDPSDLJQHGLQDSULYDWHPDOODJDLQVWDPDOOVKRSRZQHUIRU
HPSOR\LQJ QRQXQLRQ ZRUNHUV 7KH KDQGELOOHUV ZHUH
LQVWUXFWHGWROHDYHEHFDXVHRIWKHPDOOQRVROLFLWDWLRQUXOH
7KHPDOORZQHUWKUHDWHQHGSROLFHDFWLRQLIWKHQRQHPSOR\HH
XQLRQKDQGELOOHUVGLGQRWGHVLVW7KHXQLRQILOHGXQIDLUODERU
SUDFWLFHFKDUJHVDJDLQVWWKHPDOODQGWKH%RDUGVXVWDLQHGWKH
FKDUJHV :H GHVFULEHG WKH XQGHUO\LQJ 1/5% GHFLVLRQ LQ
&OHYHODQG5HDO(VWDWH3DUWQHUV
7KH1/5%KHOGWKDWWKHKDQGELOOLQJLQWKLVFDVHZDV
³SURWHFWHGDFWLYLW\´XQGHUVHFWLRQRIWKH$FWDQGWKDWE\
H[FOXGLQJWKHKDQGELOOLQJE\XQLRQUHSUHVHQWDWLYHVEXW
SHUPLWWLQJVROLFLWDWLRQDQGKDQGELOOLQJLIYDULRXVNLQGVE\
RWKHUVVXFKDVWKH*LUO6FRXWVWKH.QLJKWVRI&ROXPEXV
SROLWLFDOFDQGLGDWHVDQGVFKRROFKLOGUHQVHOOLQJFDQG\
WKHPDOORZQHUWKURXJKLWVPDQDJLQJDJHQWXQODZIXOO\
GLVFULPLQDWHGDJDLQVWWKHXQLRQZLWKLQWKHPHDQLQJRIWKH
UXOHDQQRXQFHGLQ1/5%Y%DEFRFN86
6&W/(G
)G DW :H KHOG LQ WKH DSSHDO IURP WKH %RDUG¶V
GHFLVLRQWKDW³ZHUHYLHZWKH%RDUG¶VIDFWXDODSSOLFDWLRQDQG
VWDWXWRU\FRQVWUXFWLRQXQGHUDVXEVWDQWLDOHYLGHQFHVWDQGDUG
DGHIHUHQFHWKDWLVZDUUDQWHGLIWKH%RDUG¶VFRQFOXVLRQVDUH
EDVHGXSRQDUHDVRQDEO\GHIHQVLEOHFRQVWUXFWLRQRIWKH$FW´
,G FLWLQJ(PHU\5HDOW\,QFY1/5%)G
WK&LU
1RV 6DQGXVN\0DOO&RY1/5%
LILWLVQRWOHJDOO\VRXQG6HH:HEFRU)GDWQ
GLVWLQJXLVKLQJ EHWZHHQ LQWHUSUHWDWLRQ RI WKH 1/5$ DQG
LQWHUSUHWDWLRQRIGHFLVLRQDOSUHFHGHQWVD\LQJ³>W@KLVLVDOVR
QRW DQ LQVWDQFH LQ ZKLFK WKH %RDUG KDV GHSDUWHG IURP WKH
6XSUHPH &RXUW¶V LQWHUSUHWDWLRQ RI WKH VWDWXWH´ &LWLQJ
0DLVOLQ,QGXVWULHV86,QFY3ULPDU\6WHHO,QF86

:H GHHP WKH YLHZV H[SUHVVHG E\ WKH GLVVHQWHUV WR WKH
%RDUG¶V GHFLVLRQ LQFOXGLQJ UHOLDQFH XSRQ &OHYHODQG 5HDO
(VWDWH3DUWQHUVWREHSHUVXDVLYH:HDJUHHSDUWLFXODUO\ZLWK
WKHIROORZLQJDVVHVVPHQWE\GLVVHQWLQJ%RDUGPHPEHU%UDPH
RIWKH%RDUG¶VLQWHUSUHWDWLRQRIWKH³GLVFULPLQDWLRQH[FHSWLRQ´
WR WKH JHQHUDO UXOH SHUPLWWLQJ D PDOO RZQHU WR H[FOXGH
QRQHPSOR\HHXQLRQKDQGELOOHUV
>7@KHSDUDPHWHUVRIWKH%RDUG¶VDSSOLFDWLRQRIWKHVR
FDOOHG ³GLVFULPLQDWLRQ H[FHSWLRQ´ ILUVW DUWLFXODWHG LQ
1/5%Y%DEFRFN :LOFR[DUHVRYDJXHWKDWWKH%RDUG
WRRPXVWUHVRUWWRVXEMHFWLYH³,NQRZLWZKHQ,VHHLW´
FULWHULD WR GHFLGH ZKHWKHU LWV UHTXLUHPHQWV KDYH EHHQ
PHWWKXVOHDYLQJHPSOR\HUVZLWKRXWIDLUQRWLFHRIZKDW
WKH\PD\ODZIXOO\GR
1/5%1R %UDPHGLVVHQWLQJ IRRWQRWHRPLWWHG
7KLVGLVVHQWHUDOVRQRWHGWKDW6DQGXVN\¶VQRVROLFLWDWLRQUXOH
ZDVLVVXHG³>L@QUHVSRQVHWRWKH6XSUHPH&RXUW¶VGHFLVLRQLQ
/HFKPHUH´,GDWQ7KHGLVVHQWHUDOVRSRLQWHGRXWKRZ
WKLVSROLF\ZDVFDUULHGRXW
8QGHU WKLV SROLF\ WKH 5HVSRQGHQW UHTXLUHV WKDW
RUJDQL]DWLRQV VHHNLQJ DFFHVV WR WKH PDOO REWDLQ
SHUPLVVLRQDQGVLJQDWHPSRUDU\GLVSOD\DJUHHPHQW7KH
5HVSRQGHQWDSSURYHVRUJDQL]DWLRQVZKLFKLQLWVEXVLQHVV
MXGJPHQW HQKDQFH WKH SXEOLF LPDJH RI WKH PDOO DQG
SURYLGH VHUYLFH WR WKH FRPPXQLW\ ,Q FRQVLGHULQJ
DSSOLFDWLRQV IRU DFFHVV WKH 5HVSRQGHQW DOVR ORRNV WR
ZKHWKHUWKH5HVSRQGHQWLVOLNHO\WRUHFHLYHDQHFRQRPLF
EHQHILWVXFKDVUHQW³JRRGZLOO´RULQFUHDVHGFXVWRPHU
WUDIILF ZKHWKHU WKH DFWLYLW\ LV FRQVLVWHQW ZLWK WKH
FRPPHUFLDO UHWDLO SXUSRVH RI WKH PDOO ZKHWKHU WKH

-- 8 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
RIWKHQDUURZ%DEFRFN :LOFR[H[FHSWLRQ6DQGXVN\0DOO
&R1/5%1R 6HSW 7KH%RDUGDUJXHG
WKDWLWVHDUOLHUVHHPLQJO\LQFRQVLVWHQWUXOLQJLQ)DUP)UHVK
,QF1/5%1R UHOLHGXSRQE\WKHGLVVHQWHUV
ZDVGLVWLQJXLVKDEOH7KH%RDUGFRQFHGHGLQQWKDW/OR\G
&RUSY7DQQHU86 VHWWOHGWKHTXHVWLRQ
WKDWDXQLRQKDGQR)LUVW$PHQGPHQWULJKWWRXVHDSULYDWHO\
RZQHGVKRSSLQJFHQWHUSUHPLVHVIRUKDQGELOOLQJ DQGRWKHU
XQLRQSXUSRVHVLQWKHIDFHRIDJHQHUDOQRQVROLFLWDWLRQEDQ
7KH %RDUG¶V GHFLVLRQ FLWHV 5LHVEHFN )RRG 0DUNHWV Y
1/5%1/5% DVVXSSRUWLYHRILWVYLHZWKDW
DQHPSOR\HU¶V³UHYLHZLQJDQGHYDOXDWLQJ´UHTXHVWVWRVROLFLW
RQLWVSURSHUW\E\FKRRVLQJEHWZHHQWKRVHGHHPHGEHQHILFLDO
DQG WKRVH GHWULPHQWDO WR WKH HPSOR\HU¶V EXVLQHVV ZDV
GLVFULPLQDWRU\ FRQGXFW 5LHVEHFN KRZHYHU WKH %RDUG
FRQFHGHGZDVUHYHUVHGE\WKH)RXUWK&LUFXLWDW)G
WK &LU $ %RDUG GLVVHQWHU DFFRUGLQJO\ IRXQG
5LHVEHFNWREHFRQVLVWHQWZLWKKLVSRVLWLRQ
2QWKHTXHVWLRQRIWKHGHIHUHQFHGXHWKH%RDUG¶VGHFLVLRQ
DQG LQWHUSUHWDWLRQ RI WKH VWDWXWH WKH %RDUG FLWHG 1/5% Y
:HEFRU3DFNDJLQJ,QF)G WK&LU :H
QRWHWKDW:HEFRUGRHVQRWLQYROYHWKHEDVLFXQGHUO\LQJLVVXHV
LQWKLVFDVHDQGLQ/HFKPHUHUDWKHULWGHDOWZLWKWKHVWDWXWRU\
GHILQLWLRQRIDODERURUJDQL]DWLRQ:HEFRULQFOXGHVDVHSDUDWH
RSLQLRQ DQG WKH PDMRULW\ VLPSO\ KHOG WKDW WKH ³%RDUG¶V
GHILQLWLRQLVQRWXQUHDVRQDEOH´DQGWKXVLWVGHFLVLRQRQWKDW
TXHVWLRQZDVHQIRUFHDEOH)GDW:HEFRUDOVR
REVHUYHGLQDIRRWQRWHWKDW³WKH6XSUHPH&RXUWKDVUHFHQWO\
UHSHDWHG LWV KROGLQJ WKDW ZH PXVW DFFHSW WKH %RDUG¶V
UHDVRQDEOH FRQVWUXFWLRQ RI DPELJXRXV WHUPV LQ WKH 1/5$
XQGHU&KHYURQ´,GDWQ ZLWKUHIHUHQFHWKHUHLQDOVR
WRWKHYHU\UHFHQWFDVHRI+ROO\)DUPV&RUSY1/5%
86 :HVHHQRWKLQJLQ:HEFRUWKDWOLPLWVWKH
HVVHQWLDOKROGLQJLQ&OHYHODQG5HDO(VWDWH3DUWQHUVLQDQ\
ZD\7KH:HEFRUIRRWQRWHDGGUHVVHGWKHOHYHORIGHIHUHQFH
D UHYLHZLQJ FRXUW PXVW DIIRUG WKH %RDUG LQ FRQVWUXLQJ
DPELJXRXV WHUPV RI WKH 1/5$ :HEFRU VXSSRUWV WKH
SURSRVLWLRQWKDWZHRZHQRGHIHUHQFHWRWKH%RDUG¶VKROGLQJ
1RV 6DQGXVN\0DOO&RY1/5%
/HFKPHUH ,QF Y 1/5% )G VW &LU $PRQJ
RWKHU WKLQJV WKH )LUVW &LUFXLW JDYH ³FRQVLGHUDEOH GHIHUHQFH WR >WKH@ YLHZV´
RI WKH %RDUG ³LQ DGPLQLVWHULQJ WKH $FW´ )G DW VR ORQJ DV WKHVH
YLHZV ZHUH ³IRXQGHG XSRQ VXEVWDQWLDO HYLGHQFH DQG OHJDOO\ VRXQG´ $V
ORQJ DV WKH %RDUG¶V FRQVWUXFWLRQ RI WKH $FW ZDV ³VHQVLEOH´ LQ OLJKW RI
³+LJK &RXUW SUHFHGHQW´ WKH )LUVW &LUFXLW PDMRULW\ DGKHUHG WR WKH %RDUG¶V
GHFLVLRQ ,G DW $ORQJ ZLWK D '& &LUFXLW GHFLVLRQ DQG (PHU\
5HDOW\ )G WK &LU DOVR FRQVWUXHG E\ WKLV FRXUW LQ
&OHYHODQG 5HDO (VWDWH 3DUWQHUV WKH )LUVW &LUFXLW PDMRULW\ FLWHG %DEFRFN
LQ VXSSRUW RI LWV GHFLVLRQ EXW LW GLG QRW UHIHU WR WKH VRFDOOHG
³GLVFULPLQDWLRQ H[FHSWLRQ´ 7KHUH ZDV D YLJRURXV GLVVHQW LQ /HFKPHUH
VWDWLQJ DPRQJ RWKHU WKLQJV WKDW D UHFHQW %RDUG GHFLVLRQ UHOLHG XSRQ E\
WKH PDMRULW\ -HDQ &RXQWU\ 1/5% 1R ZDV MXVW ³DQRWKHU
RI WKH %RDUG¶V SHULRGLF DWWHPSWV WR H[SDQG %DEFRFN :LOFR[ DOO RI
ZKLFK KDYH LQ WKH SDVW UHFHLYHG OLWWOH HQFRXUDJHPHQW IURP WKH FRXUWV´
)G DW
&OHYHODQG5HDO(VWDWH3DUWQHUVUHYHUVHGWKH%RDUGDIWHU
DQDO\]LQJ%DEFRFNDQG/HFKPHUH,QFY1/5%86
ZKLFKDOVRLQYROYHGDFRQWURYHUV\ZLWKUHVSHFWWRDQ
RUJDQL]DWLRQDOFDPSDLJQE\DXQLRQDJDLQVWDUHWDLOVWRUHLQD
VKRSSLQJSOD]DRZQHGE\/HFKPHUH1RQHPSOR\HHXQLRQ
RUJDQL]HUVEHJDQDKDQGELOOLQJFDPSDLJQDQG/HFKPHUHLQ
DFFRUGDQFH ZLWK LWV SROLF\ SURKLELWHG WKLV QRQHPSOR\HH
XQLRQ DFWLYLW\ 7KH %RDUG KHOG /HFKPHUH JXLOW\ RI XQIDLU
ODERUSUDFWLFHYLRODWLRQVXQGHU† D DQGDGLYLGHGSDQHO
RIWKH)LUVW&LUFXLWDIILUPHGWKH%RDUGGHFLVLRQ
&OHYHODQG5HDO(VWDWH3DUWQHUVLQWHUSUHWHG/HFKPHUH³LQ
OLJKWRIWKH6XSUHPH&RXUW¶VHDUOLHUGHFLVLRQLQ%DEFRFN´
$IWHUUHYLHZLQJLWVKROGLQJLQ%DEFRFNWKH6XSUHPH
&RXUWVWDWHG
%DEFRFN¶VWHDFKLQJLVVWUDLJKWIRUZDUG†VLPSO\
GRHV QRW SURWHFW QRQHPSOR\HH XQLRQ RUJDQL]HUV
H[FHSWLQWKHUDUHFDVHZKHUH³WKHLQDFFHVVLELOLW\RI
HPSOR\HHVPDNHVLQHIIHFWLYHWKHUHDVRQDEOHDWWHPSWV
E\ QRQHPSOR\HHV WR FRPPXQLFDWH ZLWK WKHP
WKURXJK WKH XVXDO FKDQQHOV>@´ :KHUH
UHDVRQDEOHDOWHUQDWLYHPHDQVRIDFFHVVH[LVW† V
JXDUDQWHHV GR QRW DXWKRUL]H WUHVSDVVHV E\

-- 9 of 10 --

6DQGXVN\0DOO&RY1/5% 1RV
QRQHPSOR\HH RUJDQL]HUV HYHQ ³XQGHU
UHDVRQDEOHUHJXODWLRQV´HVWDEOLVKHGE\WKH%RDUG
/HFKPHUH86DW6&WDW TXRWLQJ
%DEFRFN86DW6&WDW
)GDW7KH6XSUHPH&RXUWLQ/HFKPHUHUHYHUVHGWKH
)LUVW&LUFXLWDQGGHFOLQHGWRIROORZWKH%RDUGSUHFHGHQWLQ
-HDQ&RXQWU\VWDWLQJWKHJHQHUDOUXOHLQWKLVW\SHRIVKRSSLQJ
FHQWHUKDQGELOOLQJ
³:KLOH %DEFRFN LQGLFDWHV WKDW DQ HPSOR\HU PD\ QRW
DOZD\V EDU QRQHPSOR\HH XQLRQ RUJDQL]HUV IURP KLV
SURSHUW\KLVULJKWWRGRVRUHPDLQVWKHJHQHUDO5XOH7R
JDLQDFFHVVWKHXQLRQKDVWKHEXUGHQRIVKRZLQJWKDWQR
RWKHU UHDVRQDEOH PHDQV RI FRPPXQLFDWLQJ LWV
RUJDQL]DWLRQDOPHVVDJHWRWKHHPSOR\HHVH[LVWVRUWKDW
WKHHPSOR\HU¶VDFFHVVUXOHVGLVFULPLQDWHDJDLQVWXQLRQ
VROLFLWDWLRQ7KDWWKHEXUGHQLPSRVHGRQWKHXQLRQLVD
KHDY\RQHLVHYLGHQFHGE\WKHIDFWWKDWWKHEDODQFHVWUXFN
E\ WKH %RDUG DQG WKH FRXUWV XQGHU WKH %DEFRFN
DFFRPPRGDWLRQ SULQFLSOH KDV UDUHO\ EHHQ LQ IDYRU RI
WUHVSDVVRU\RUJDQL]DWLRQDODFWLYLW\´
/HFKPHUH86DW TXRWLQJ6HDUV5RHEXFN &RY
6DQ 'LHJR &RXQW\ 'LVW &RXQFLO RI &DUSHQWHUV 8 6
HPSKDVLVLQRULJLQDOIRRWQRWHVRPLWWHG
/HFKPHUH FRQFOXGHG WKDW ³ZH MXGJH DQ DJHQF\¶V ODWHU
LQWHUSUHWDWLRQRIWKHVWDWXWHDJDLQVWRXUSULRUGHWHUPLQDWLRQRI
WKH VWDWXWH¶V PHDQLQJ´ 86 DW 7KH /HFKPHUH
FRXUW DOVR QRWHG D ³GLVWLQFWLRQ μRI VXEVWDQFH¶ EHWZHHQ WKH
XQLRQDFWLYLWLHVRIHPSOR\HHVDQGQRQHPSOR\HHV´,G FLWLQJ
%DEFRFN :LOFR[86DW ,QWKHODWWHUVLWXDWLRQ
³WKH %RDUG ZDV QRW SHUPLWWHG WR HQJDJH LQ WKH VDPH
EDODQFLQJ´ EHWZHHQ DQ RZQHU¶V ULJKW WR H[FOXGH IURP D
VKRSSLQJFHQWHUDQGDQHPSOR\HH¶VULJKWWRHQJDJHLQXQLRQ
DFWLYLW\,G,QVXP/HFKPHUHUHHPSKDVL]HG%DEFRFN¶VUXOH
WKDW ³μDQ HPSOR\HU PD\ YDOLGO\ SRVW KLV SURSHUW\ DJDLQVW
1RV 6DQGXVN\0DOO&RY1/5%
/HFKPHUH QRWHG WKDW WKH &RXUW JDXJHV DQG ZHLJKV DQ DJHQF\
GHWHUPLQDWLRQ RI D VWDWXWH DJDLQVW LWV RZQ SULRU LQWHUSUHWDWLRQ ³2QFH ZH
KDYH GHWHUPLQHG D VWDWXWH¶V FOHDU PHDQLQJ ZH DGKHUH WR WKDW
GHWHUPLQDWLRQ XQGHU WKH GRFWULQH RI VWDUH GHFLVLV DQG ZH MXGJH DQ
DJHQF\¶V ODWHU LQWHUSUHWDWLRQ RI WKH VWDWXWH DJDLQVW RXU SULRU GHWHUPLQDWLRQ
RI WKH VWDWXWH¶V PHDQLQJ´ /HFKPHUH 86 DW TXRWLQJ
0DLVOLQ ,QGXVWULHV 86 ,QF Y 3ULPDU\ 6WHHO ,QF 86
LQWHUQDO TXRWDWLRQV RPLWWHG
QRQHPSOR\HHGLVWULEXWLRQRIXQLRQOLWHUDWXUH¶´,GDW
TXRWLQJ%DEFRFN :LOFR[86DW
&OHYHODQG5HDO(VWDWH3DUWQHUVUHO\LQJRQ/HFKPHUHFLWHG
WKHSULQFLSOHVDERYHVHWRXW,WDOVRUHOLHGXSRQ8QLWHG)RRG
&RPPHUFLDO:RUNHUV$)/&,2/RFDO1RY1/5%
)G '& &LU ,W ZDV QRW
³GLVFULPLQDWLRQ´ZLWKWKHPHDQLQJRI%DEFRFN :LOFR[IRU
&OHYHODQG 5HDO (VWDWH 3DUWQHUV WR HQIRUFH LWV JHQHUDO QR
VROLFLWDWLRQUXOHDJDLQVWWKHXQLRQQRQHPSOR\HHVDQGDWWKH
VDPHWLPHRFFDVLRQDOO\WRDOORZOLPLWHGFKDULWDEOHDFWLYLWLHV
LQWKHPDOOGHHPHGEHQHILFLDOWRWKHRZQHUDQGWKHWHQDQWV
$QRZQHURISULYDWHFRPPHUFLDOSURSHUW\ZKRSHUPLWVD
FKDULWDEOH RUJDQL]DWLRQ WR GLVWULEXWH LQIRUPDWLRQ RU
FRQGXFW VROLFLWDWLRQV RQ LWV SURSHUW\ VLPSO\ GRHV QRW
LPSOLFDWHWKHSROLFLHVRIWKH1/5$DQGGRHVQRWZLWKRXW
PRUH UHQGHU DQ HPSOR\HH JXLOW\ RI DQ XQIDLU ODERU
SUDFWLFHZKHQODWHULWFKRRVHVWRIROORZWKHJHQHUDOUXOH
RI³YDOLGO\SRVW>LQJLWV@SURSHUW\DJDLQVWQRQHPSOR\HH
GLVWULEXWLRQRIXQLRQOLWHUDWXUH´%DEFRFN86DW
6&WDW
)GDW
,,7+(%2$5''(&,6,21
&RQIURQWHGZLWKWKHILUPSROLF\RIWKLVFRXUWLQ&OHYHODQG
5HDO (VWDWH 3DUWQHUV VXSSRUWHG E\ RWKHU FLUFXLW FRXUWV DV
ZHOO WKH %RDUG FRQFOXGHG LQ WKH LQVWDQW FDVH WKDW ³WKH
VROLFLWDWLRQ E\ YDULRXV RUJDQL]DWLRQV LV VXIILFLHQW SURRI RI
GLVSDUDWHWUHDWPHQW´RU³GLVFULPLQDWLRQ´ZLWKLQWKHPHDQLQJ

-- 10 of 10 --