01a0118p.06

99-1073; 99-1128Court of Appeals for the Sixth CircuitApr 16, 2001

Full text


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

7+( &,7< 2) '(752,7
3ODLQWLII$SSHOOHH
Y
*(25*( 6,021 -26(3+
6,021 125,1$ 6,021
6+,5/(< 6,021 0$85,&(
7$</25 0$'(/,1( 7$</25
86 *5283 ,1&D0LFKLJDQ
FRUSRUDWLRQ86 (48,30(17
&203$1<D0LFKLJDQ
FRUSRUDWLRQ
'HIHQGDQWV$SSHOODQWV
($721 &25325$7,21DQ
2KLRFRUSRUDWLRQ
'HIHQGDQW

7+( &,7< 2) '(752,7
3ODLQWLII$SSHOODQW
Y
;!

1RV

-- 1 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
*(25*( 6,021 -26(3+
6,021 125,1$ 6,021
6+,5/(< 6,021 ($721
&25325$7,21DQ2KLR
FRUSRUDWLRQ
'HIHQGDQWV$SSHOOHHV
0$85,&( 7$</25
0$'(/,1( 7$</25 86
*5283 ,1&D0LFKLJDQ
FRUSRUDWLRQ86 (48,30(17
&203$1<D0LFKLJDQ
FRUSRUDWLRQ
'HIHQGDQWV

1
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW
1R²$YHUQ&RKQ'LVWULFW-XGJH
$UJXHG1RYHPEHU
'HFLGHGDQG)LOHG$SULO
%HIRUH1(/6216,/(5DQG&/$<&LUFXLW-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8('5REHUW&KDUOHV'DYLV'$9,6/$:*5283
0W &OHPHQV 0LFKLJDQ (ULF - 0DJQXVRQ 5,'(5
%(11(77(*$1 $581'(/0LQQHDSROLV0LQQHVRWD
IRU 'HIHQGDQWV 5XEHQ $FRVWD ),1. =$860(5
.$8)0$1'HWURLW0LFKLJDQIRU3ODLQWLII21%5,()
5REHUW&KDUOHV'DYLV'$9,6/$:*52830W&OHPHQV
0LFKLJDQ3DWULFN)*RUGRQ-DPHV+5XVVHOO:,16721
675$:1 &KLFDJR ,OOOLQRLV +DUU\ 7 4XLFN

-- 2 of 12 --

1RV &LW\RI'HWURLWY6LPRQHWDO
0$57,1'$/(%5=<7:$ 48,&.&OHYHODQG2KLR
IRU 'HIHQGDQWV 5XEHQ $FRVWD ),1. =$860(5
.$8)0$1'HWURLW0LFKLJDQIRU3ODLQWLII
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
'$9,' $ 1(/621 &LUFXLW -XGJH 7KLV LV DQ
HQYLURQPHQWDOSURWHFWLRQFDVHLQZKLFKWKHSODLQWLII WKH&LW\
RI'HWURLW WKRXJKWLWKDGUHDFKHGDVHWWOHPHQWZLWKRQHRIWKH
FRUSRUDWHGHIHQGDQWV (DWRQ&RUSRUDWLRQ GXULQJWKHVHFRQG
GD\RIWULDO:KHQWKHWULDOFRXUWZDVDGYLVHGWKDW(DWRQDQG
WKH FLW\ KDG UHVROYHG WKHLU GLIIHUHQFHV WKH WHUPV RI WKH
VHWWOHPHQWZHUHSODFHGRQWKHUHFRUGLQRSHQFRXUW6RPH
ZHHNV ODWHU KRZHYHU (DWRQ GHQLHG WKDW WKHUH KDG EHHQ D
PHHWLQJ RI WKH PLQGV ZLWK UHVSHFW WR WKH VFRSH RI WKH
³FRQWULEXWLRQ SURWHFWLRQ´ LH LQGHPQLILFDWLRQ DJDLQVW
GHPDQGVIRUFRQWULEXWLRQDPRQJWRUWIHDVRUV WKDW(DWRQZDV
WRUHFHLYHIURPWKHFLW\7KHFLW\¶VSRVLWLRQZDVDQGLVWKDW
WKHUHFRUGFRQWDLQVDFOHDUH[SUHVVLRQRIDJUHHPHQWRQWKH
VFRSHRIVXFKSURWHFWLRQ
3URIHVVLQJ LWVHOI XQDEOH WR GHWHUPLQH SUHFLVHO\ ZKDW WKH
SDUWLHV KDG FRPHWRDJUHHPHQWRQWKHWULDOFRXUWGHQLHGD
PRWLRQE\WKHFLW\IRUHQWU\RIDVHWWOHPHQWMXGJPHQW7KH
FDVHZDVHYHQWXDOO\WULHGWRFRPSOHWLRQDQGDILQDOMXGJPHQW
ZDVHQWHUHGRQDOOFODLPV
8SRQ UHYLHZ ZH FRQFOXGH WKDW WKH WULDO FRXUW HUUHG LQ
GHFOLQLQJWRKROG(DWRQWRWKHVHWWOHPHQWLWKDGVDLGLWZDV
DFFHSWLQJ7KHUHFRUGDVZHUHDGLWVKRZVWKDWWKHFLW\¶V
ODZ\HU DGHTXDWHO\ FODULILHG WKH VFRSH RI WKH DJUHHG
FRQWULEXWLRQ SURWHFWLRQ 7KH UHFRUG IXUWKHU VKRZV WKDW
(DWRQ¶VODZ\HUH[SOLFLWO\DFNQRZOHGJHGWKDWWKHFODULILFDWLRQ
ZDVFRUUHFW,QVRIDUDVWKHGLVWULFWFRXUWVXEVHTXHQWO\IRXQG
WKDWWKHUHFRUGGLGQRWPDQLIHVWDPHHWLQJRIPLQGVZHDUH
VDWLVILHGWKDWWKHFRXUW¶VILQGLQJZDVFOHDUO\HUURQHRXV

-- 3 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
%RWKWKHFLW\DQGWKHUHPDLQLQJGHIHQGDQWVFKDOOHQJHRWKHU
DVSHFWVRIWKHILQDOMXGJPHQWDVZHOO8QSHUVXDGHGZHVKDOO
UHMHFWWKHVHFKDOOHQJHV
,
)RU D SHULRG RI VHYHUDO GHFDGHV HQGLQJ LQ DV ZH
XQGHUVWDQG WKH XQFRQWHVWHG IDFWV VXEVLGLDULHV RU FRUSRUDWH
SUHGHFHVVRUV RI (DWRQ &RUSRUDWLRQ RZQHG DQG RFFXSLHG D
WUDFW RI LQGXVWULDO UHDO HVWDWH ORFDWHG DW WKH LQWHUVHFWLRQ RI
)UHQFK 5RDG DQG *ULQQHOO $YHQXH LQ WKH &LW\ RI 'HWURLW
7KHUHZHUHVHYHUDOEXLOGLQJVRQWKHVLWHLQFOXGLQJDIDFWRU\
D ZDUHKRXVH D JDUDJH D ERLOHU KRXVH DQG VRPH RIILFH
EXLOGLQJV
9DULRXV ILUPV RFFXSLHG WKH SURSHUW\ EHIRUH DQG DIWHU
(DWRQ¶VRFFXSDQF\'LIIHUHQWRFFXSDQWVGLVSRVHGRIGLIIHUHQW
KD]DUGRXV ZDVWHV RQ WKH VLWH 7KH FRQWDPLQDQWV LQFOXGHG
SRO\FKORULQDWHG ELSKHQ\OV ³3&%V´ SHWUROHXP DQG
SHWUROHXPE\SURGXFWVVXFKDVHWK\OEHQ]HQHWROXHQHDQG
[\OHQH
'XULQJ D SHULRG WKDW HQGHG LQ WKH SURSHUW\ ZDV
RFFXSLHGE\GHIHQGDQW86(TXLSPHQW&RDZKROO\RZQHG
VXEVLGLDU\ RI GHIHQGDQW 86 *URXS ,QF 7KH ODWWHU
FRUSRUDWLRQ LV FRQQHFWHG ZLWK GHIHQGDQWV *HRUJH -RVHSK
1RULQDDQG6KLUOH\6LPRQ,WZLOOEHFRQYHQLHQWIRUXVWR
UHIHU WR WKH 6LPRQV 86 (TXLSPHQW DQG 86 *URXS
FROOHFWLYHO\DV³WKH6LPRQJURXS´
7KH &LW\ RI 'HWURLW DFTXLUHG WKH UHDO HVWDWH E\
FRQGHPQDWLRQLQ7KHSXUSRVHRIWKHFLW\¶VDFTXLVLWLRQ
ZDVWRFOHDUIOLJKWSDWKVIRUDPXQLFLSDODLUSRUWORFDWHGRQWKH
IDUVLGHRIDUDLOURDGWUDFNWKDWUXQVQH[WWRWKHSURSHUW\
7KH FLW\ GHPROLVKHG WKH IDFWRU\ DQG RWKHUEXLOGLQJV
FOHDQHG XS WKH 3&%V DQG WKURXJK FRQVXOWDQWV PDGH D
GHWDLOHGVXUYH\RIWKHUHPDLQLQJFRQWDPLQDQWV7KHFLW\WKHQ
EURXJKWWKHLQVWDQWODZVXLWDJDLQVWWKH6LPRQJURXS(DWRQ
*HQHUDO 0RWRUV &RUSRUDWLRQ D VRPHWLPH OHVVHH RI WKH
SURSHUW\ DQG RWKHUV 7KH UHOLHI VRXJKW LQFOXGHG ERWK
1RV &LW\RI'HWURLWY6LPRQHWDO
6LPRQJURXS¶VDUJXPHQWXQGHUWKHFLUFXPVWDQFHVRIWKLVFDVH
ZKHUHWKHDUJXPHQWZDVQHYHUSUHVHQWHGWRWKHGLVWULFWFRXUW
DQG LV RIIHUHG IRU WKH ILUVW WLPH DIWHU QHDUO\ D GHFDGH RI
OLWLJDWLRQ6HH1REOHY&KU\VOHU0RWRUV&RUS-HHS'LY
)G WK&LU
7KHMXGJPHQWHQWHUHGE\WKHGLVWULFWFRXUWLV$)),50('
LQSDUWDQG9$&$7('LQSDUWDQGWKHFDVHLV5(0$1'('
IRUIXUWKHUSURFHHGLQJVQRWLQFRQVLVWHQWZLWKWKLVRSLQLRQ

-- 4 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
:'0LFK UHY¶GRQRWKHUJURXQGV
)G WK&LU
7KH SURSHUW\ DW LVVXH LQ WKLV FDVH KDV D ORQJ KLVWRU\RI
LQGXVWULDO XVH 7R UHTXLUH IRUPHU RFFXSDQWV WR DVVXPH
OLDELOLW\IRUFOHDQXSFRVWVJRLQJEH\RQGWKHOHYHOQHFHVVDU\WR
PDNHWKHSURSHUW\VDIHIRULQGXVWULDOXVHZRXOGEHWRSURYLGH
DQXQZDUUDQWHGZLQGIDOOWRWKHEHQHILFLDU\RIWKHFOHDQXS
&
)LQDOO\ZHFRPHWRWKH6LPRQJURXS¶VDUJXPHQWWKDWWKH
GLVWULFWFRXUWHUUHGLQKROGLQJWKHJURXSOLDEOHIRUWKH3&%
FOHDQXS FRVWV WKH FLW\ KDYLQJ IDLOHG WR FRPSO\ ZLWK WKH
1DWLRQDO&RQWLQJHQF\3ODQEHIRUHLQFXUULQJWKRVHFRVWV7KH
6LPRQJURXSPDLQWDLQVWKDWWKHFLW\IDLOHGWRDOORZGD\V
IRUFRPPHQWDQGIDLOHGWRFRQGXFWDSXEOLFPHHWLQJRQWKH
3&% FOHDQXS SURJUDP DV UHTXLUHG XQGHU &)5
† F
:KDWHYHUWKHPHULWVRIWKLVDUJXPHQWPD\EHWKH6LPRQ
JURXSLJQRUHVWKHIDFWWKDWWKHGLVWULFWFRXUWJUDQWHGVXPPDU\
MXGJPHQWRQWKHFLW\¶V3&%FODLPQRWRQO\XQGHU&(5&/$
WKHIHGHUDOFRVWUHFRYHU\VWDWXWHEXWDOVRXQGHU15(3$WKH
0LFKLJDQ FRVWUHFRYHU\ VWDWXWH 7KH 0LFKLJDQ &RXUW RI
$SSHDOVKDVVTXDUHO\KHOGWKDWVXEVWDQWLDOFRPSOLDQFHZLWK
WKH1&3LVQRWDSUHUHTXLVLWHWRFRVWUHFRYHU\XQGHU15(3$
6HH&LW\RI3RUW+XURQY$PRFR2LO&R1:G
0LFK$SS 0LFK$SS OHDYHWRDSSHDO
GHQLHG 1:G 0LFK :H GHIHU WR WKH
0LFKLJDQFRXUW¶VLQWHUSUHWDWLRQRI0LFKLJDQODZ6HHHJ
&RRSHUY6FURRJ\)GQ WK&LU
,QLWVUHSO\EULHIWKH6LPRQJURXSDUJXHVIRUWKHILUVWWLPH
WKDW UHFRYHU\ IRU 3&% FRQWDPLQDWLRQ XQGHU 15(3$ LV
IRUHFORVHGEHFDXVHWKHVWDWHVWDWXWHLVSUHHPSWHGE\WKH7R[LF
6XEVWDQFHV &RQWURO $FW 86&$ † HW VHT :H
JHQHUDOO\GHFOLQHWRDGGUHVVDUJXPHQWVSUHVHQWHGIRUWKHILUVW
WLPHLQDUHSO\EULHI6HH$HWQD&DV 6XU&RY/HDKH\
&RQVWUXFWLRQ &R )G WK &LU ,W
ZRXOG EH SDUWLFXODUO\ LQDSSURSULDWH IRU XV WR DGGUHVV WKH
1RV &LW\RI'HWURLWY6LPRQHWDO
UHFRYHU\RIWKHHQYLURQPHQWDOFOHDQXSDQGLQYHVWLJDWLRQFRVWV
DOUHDG\ LQFXUUHG E\ WKH FLW\ DQG HQWU\ RI D GHFODUDWRU\
MXGJPHQWZLWKUHVSHFWWRIXWXUHUHPHGLDWLRQFRVWV7KHFLW\¶V
FODLPV ZHUH EDVHG LQ SDUW RQ WKH &RPSUHKHQVLYH
(QYLURQPHQWDO5HVSRQVH&RPSHQVDWLRQDQG/LDELOLW\$FW
86& †† HW VHT ³&(5&/$´ DQG WKH IRUPHU
0LFKLJDQ(QYLURQPHQWDO5HVSRQVH$FW ³0(5$´ 0&/
†† HW VHT QRZ UHFRGLILHG LQ 3DUW RI WKH
0LFKLJDQ1DWXUDO5HVRXUFHVDQG(QYLURQPHQWDO3URWHFWLRQ
$FW0&/††HWVHT ³15(3$´
,QWKHFLW\PRYHGIRUSDUWLDOVXPPDU\MXGJPHQWRQD
FODLPWKDWWKH6LPRQJURXSZDVUHVSRQVLEOHIRUDOORIWKH3&%
FOHDQXS FRVWV 7KH GLVWULFW FRXUW JUDQWHG WKH PRWLRQ
XOWLPDWHO\DZDUGLQJWKHFLW\IRUUHLPEXUVHPHQW
RILWVFRVWVSOXVDWWRUQH\IHHV*HQHUDO0RWRUVZDVGLVPLVVHG
ZLWKWKHDFTXLHVFHQFHRIWKHFLW\
2Q0DUFKWKHFDVHZHQWWRWULDORQWKHUHPDLQLQJ
FODLPVDJDLQVWWKH6LPRQJURXSDQG(DWRQ6KRUWO\EHIRUHWKH
WULDOZDVWRUHVXPHWKHQH[WGD\WKHFRXUWZDVLQIRUPHGWKDW
(DWRQDQGWKHFLW\KDGUHDFKHGDVHWWOHPHQW7KHWHUPVRIWKH
VHWWOHPHQW ZHUH SURPSWO\ PHPRULDOL]HG DW WKH FRXUW¶V
UHTXHVWLQSURFHHGLQJVFRQGXFWHGRQWKHUHFRUG:LWKWKH
UHDGHU¶VLQGXOJHQFHZHVKDOOGHVFULEHWKHVHSURFHHGLQJVLQ
VRPHGHWDLO
$IWHU VWDWLQJ KLV XQGHUVWDQGLQJ WKDW WKHUH KDG EHHQ D
UHVROXWLRQRIWKHGLVSXWHEHWZHHQWKHFLW\DQG(DWRQEXWQR
UHVROXWLRQ RI WKH GLVSXWH EHWZHHQ WKH FLW\ DQG WKH 6LPRQ
*URXSWKHWULDOMXGJHWXUQHGWRWKHFLW\IRUDQDFFRXQWRIZKDW
ZDVEHLQJDJUHHGWR0U'DYLG+)LQNRQHRIWKHODZ\HUV
UHSUHVHQWLQJWKHFLW\UHVSRQGHGDVIROORZV
³7KHWHUPVRIWKHVHWWOHPHQWZLWK(DWRQZLOOEHDIXOO
DQGILQDOVHWWOHPHQWLQWKHGLVSXWHEHWZHHQWKH&LW\RI
'HWURLW DQG WKH (DWRQ &RUSRUDWLRQ ZRXOG EH WKH
IROORZLQJ

-- 5 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
2QHWKHSD\PHQWE\>(@DWRQRIPLOOLRQFDVKWKDW
LVQRWUXVWIXQGVRUDQ\WKLQJ,WZRXOGEHRQHVWUDLJKW
SD\PHQWRIPLOOLRQ
7ZRWKH&LW\RI'HWURLWZRXOGSURYLGHFRQWULEXWLRQ
SURWHFWLRQZLWKUHVSHFWWRDQ\FODLPVEURXJKWLQWKHSDVW
RULQWKHIXWXUHZLWKUHVSHFWWRWKLVVLWHE\WKH&LW\RI
'HWURLW 7KDW RI FRXUVH ZRXOG LQFOXGH WKH SHQGLQJ
FODLPVDJDLQVWWKH6LPRQVEXWZRXOGDOVRLQFOXGHDQ\
RWKHUFODLPWKDWPLJKWEHEURXJKWE\WKH&LW\RI'HWURLW
DJDLQVWDQ\RWKHUSDUWLHV7KH\ZRXOGKDYHFRQWULEXWLRQ
SURWHFWLRQ
7KHUHZRXOGQRWEHDQ\JXDUDQWHHRILQGHPQLILFDWLRQ
DVWRWKLUGSDUW\FODLPV7KH&LW\LVQRWDZDUHRIDQ\
WKLUGSDUW\FODLPVWKDWKDYHEHHQEURXJKWRUWKUHDWHQHGLQ
DQ\ZD\ZLWKUHVSHFWWRWKHVLWHZLWKWKHH[FHSWLRQRI
LVVXHVUHODWHGWR(3$DQG(3$KDVORQJVLQFHJLYHQXS
ZLWK UHVSHFW WR WKH 6LPRQ GHIHQGDQWV´ (PSKDVLV
VXSSOLHG
0U)LQNZHQWRQWRGHVFULEHWZRREOLJDWLRQVWREHDVVXPHG
E\ (DWRQ DQ REOLJDWLRQ WR FRRSHUDWH ZLWK WKH FLW\ RQ D
VWDWXWRU\FODLPQRWGLUHFWO\UHOHYDQWKHUHDQGDQREOLJDWLRQWR
FRRSHUDWHRQWKHFLW\¶VFODLPVDJDLQVWRWKHUSDUWLHV0RUH
VSHFLILFDOO\DVIDUDVWKHODWWHUREOLJDWLRQZDVFRQFHUQHG0U
)LQNH[SODLQHGWKDW(DWRQZDVDJUHHLQJQRWWRREMHFWWRWKH
FLW\¶V ZRUNLQJ ZLWK H[SHUWV LQLWLDOO\ UHWDLQHG E\ (DWRQ LW
EHLQJXQGHUVWRRGWKDW(DWRQZRXOGQRWKDYHWRLQFXUIXUWKHU
FRVWVLQWKLVFRQQHFWLRQ
$WWKLVSRLQWWKHWUDQVFULSWVKRZV0U-DPHV+5XVVHOO
HQYLURQPHQWDO OLWLJDWLRQ FRXQVHO IRU (DWRQ DVNHG IRU
SHUPLVVLRQWRFRQIHUZLWK³FRFRXQVHO´ 0U5XVVHOOPD\
KDYH EHHQ UHIHUULQJ KHUH WR (DWRQ KRXVH FRXQVHO 6KDURQ
2¶)ODKHUW\RUOHDGWULDOFRXQVHO+DUU\ 7 4XLFNRUERWK
$IWHU DQ RIIWKHUHFRUG GLVFXVVLRQ EHWZHHQ FRXQVHO 0U
5XVVHOOZHQWGLUHFWO\WRWKHH[SHUWZLWQHVVSRLQWKHRIIHUHG
QR REMHFWLRQ RU RWKHU FRPPHQW UHJDUGLQJ 0U )LQN¶V
H[SODQDWLRQ RI WKH VFRSH RI WKH SURWHFWLRQ (DWRQ ZRXOG
UHFHLYHDJDLQVWFODLPVIRUFRQWULEXWLRQDPRQJWRUWIHDVRUV
1RV &LW\RI'HWURLWY6LPRQHWDO
ZRXOGEHQHFHVVDU\WRUHDFKWKH³LQGXVWULDO´ FOHDQXSOHYHO
VSHFLILHGLQ0&/†D G 2XUGHFLVLRQZLWK
UHJDUGWRWKHVHWWOHPHQWUHQGHUVWKLVLVVXHPRRWDVWR(DWRQ
EXW WKH LVVXH UHPDLQV DOLYH DV IDU DV WKH 6LPRQ JURXS LV
FRQFHUQHG
7KHFLW\PDLQWDLQVWKDWWKHUHLVQRVWDWXWRU\DXWKRULW\IRU
FDSSLQJ OLDELOLW\ IRU IXWXUH FOHDQXS FRVWV 0RUHRYHU
DFFRUGLQJ WR WKH FLW\ 15(3$ H[SUHVVO\ IRUELGV WKH
LPSRVLWLRQ RI VXFK D FDS E\ SURYLGLQJ WKDW WKH ³FOHDQXS
FDWHJRU\SURSRVHGVKDOOEHWKHRSWLRQRIWKHSHUVRQSURSRVLQJ
WKH UHPHGLDO DFWLRQ VXEMHFW WR GHSDUWPHQW DSSURYDO
FRQVLGHULQJWKHDSSURSULDWHQHVVRIWKHFDWHJRULFDOFULWHULDWR
WKHIDFLOLW\´0&/†D
:HDUHQRWSHUVXDGHG:LWKDIHZH[FHSWLRQVQRWUHOHYDQW
KHUHWKHW\SHVRIUHVSRQVHFRVWVUHFRYHUDEOHXQGHU&(5&/$
DUHOLPLWHGWRWKRVHWKDWDUH³QHFHVVDU\´LQOLJKWRIWKHQDWXUH
DQG W\SH RI SURSHUW\ WR EH FOHDQHG XS 6HH 86&
† D % 6HYHUDOIHGHUDOFRXUWVKDYHUHFRJQL]HGWKDW
UHFRYHU\RIHQYLURQPHQWDOFOHDQXSFRVWVLQFXUUHGWRDFKLHYH
DKLJKHUOHYHOWKDQWKHXVHRIWKHSURSHUW\QHFHVVLWDWHVZRXOG
YLRODWH &(5&/$¶V UHTXLUHPHQW WKDW UHFRYHUDEOH UHVSRQVH
FRVWVEHμQHFHVVDU\¶6HHHJ*-/HDVLQJ&RY8QLRQ
(OHFWULF &R )G WK &LU 6RXWKIXQG
3DUWQHUV,,,Y6HDUV5RHEXFNDQG&R)6XSSG
1'*D 05 9HJD $OWD ,QF Y &DULEH
*HQHUDO (OHFWULF 3URGXFWV ,QF )6XSSG
'3XHUWR5LFR
6LPLODUO\ 15(3$ SURYLGHV WKDW WKH FOHDQXS SURSRVHG
VKRXOGEH³DSSURSULDWH´LQOLJKWRIWKHIDFLOLW\¶VFDWHJRULFDO
FULWHULDVHH0&/†D DQGLWDOVRSURYLGHVWKDW
UHFRYHUDEOH FRVWV PXVW EH ³QHFHVVDU\´ 6HH 0&/
† D E $V 15(3$ IRUPHUO\ 0(5$ ZDV
SDWWHUQHG DIWHU &(5&/$ LW VKRXOG EH FRQVWUXHG LQ
DFFRUGDQFHZLWKWKHIHGHUDOVWDWXWH6HH)UHHSRUW0F0RUDQ
5HVRXUFH3DUWQHUV/WG3DUWQHUVKLSY%%3DLQW&RUS
)6XSSGQ ('0LFK DQG.DODPD]RR
5LYHU 6WXG\ *URXS Y 5RFNZHOO ,QWHUQDWLRQDO )6XSSG

-- 6 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
6IDW 0LFK $SS 1:G
³EHFDXVH GHIHQGDQW ZDV SUHVHQW ZKHQ WKH WHUPV RI WKH
VHWWOHPHQWDJUHHPHQWZHUHUHDGLQRSHQFRXUWDQGKHYRLFHG
QRREMHFWLRQVWKHUHWRZHPXVWFRQFOXGHWKDWLWPHWZLWKKLV
DSSURYDO´
,I (DWRQ¶V ODZ\HUV ZHUH XQGHU WKH LPSUHVVLRQ WKDW DV D
PDWWHURIODZ(DWRQFRXOGQRWEHERXQGE\DQ\WKLQJVDLGLQ
WKH FRXUWURRP EHFDXVH RI WKH IDFW WKDW WKH GHWDLOV RI WKH
DJUHHPHQW ZRXOG EH IOHVKHG RXW LQ ZULWLQJ ODWHU WKHLU
LPSUHVVLRQZDVPLVWDNHQ6HH3HGGHUY.DOLVK0LFK
$SS1:G (DWRQZDVREYLRXVO\QRW
DWOLEHUW\WRGLVDYRZWKHVXEVWDQFHRIWKDWWRZKLFKLWZDV
DJUHHLQJLQRSHQFRXUW-XVWDV(DWRQZDVQRWIUHHWRGHFLGH
WKDWLWZRXOGSD\RQO\DIWHUKDYLQJDJUHHGWRSD\
VRDOVRZDVLWERXQGE\LWVDJUHHPHQWWRDFFHSW
OLPLWHG FRQWULEXWLRQ SURWHFWLRQ LQ OLHX RI WKH EURDG
FRQWULEXWLRQSURWHFWLRQLWKDGDVNHGIRURULJLQDOO\
2XUFRQFOXVLRQLVLQ QRZD\XQGHUPLQHGE\WKHSDUWLHV¶
UHFRJQLWLRQWKDWWKHUHPLJKWEHIXWXUHGLVDJUHHPHQWRYHUKRZ
WKHSULQFLSOHVDJUHHGWRRQ0DUFKVKRXOGEHZRUGHGLQWKH
IRUPDOVHWWOHPHQWDJUHHPHQWWKDWZDVWRIROORZ7KHGLVWULFW
FRXUW¶V³EDVHEDOODUELWUDWLRQ´SURSRVDOUHSUHVHQWHGDVHQVLEOH
ZD\ RI UHVROYLQJ DQ\ VXFK GLVDJUHHPHQW 7KH FRXUW ZDV
REYLRXVO\QRWSURSRVLQJWRDUELWUDWHWKHTXHVWLRQRIZKHWKHU
LIRQHRUWKHRWKHURIWKHSDUWLHVVKRXOGVXEVHTXHQWO\KDYHD
FKDQJH RI KHDUW WKDW ZKLFK KDG DOUHDG\ EHHQ DJUHHG WR LQ
SULQFLSOHFRXOGEHUHSXGLDWHG$QGZKDWVXUIDFHGRQ$SULO
ZKHQ (DWRQ WHQGHUHG LWV IRUPDO VHWWOHPHQW
GRFXPHQWZDVQRWDPHUHGLVDJUHHPHQWRYHUWKHQXDQFHVRI
ODQJXDJHLQWHQGHGWRFDSWXUHDSULQFLSOHRQZKLFKWKHUHZDV
VWLOOPXWXDODJUHHPHQWZKDWVXUIDFHGUDWKHUZDVDQDSSDUHQW
DWWHPSW E\ (DWRQ WR UHSXGLDWH WKH DJUHHPHQW LWVHOI 7KH
GLVWULFWFRXUWFOHDUO\HUUHGLQGHFLGLQJWROHW(DWRQJHWDZD\
ZLWKWKLV
%
7KHFLW\FRQWHQGVWKDWWKHGLVWULFWFRXUWDOVRHUUHGZKHQLW
OLPLWHGWKHGHIHQGDQWV¶WRWDOOLDELOLW\IRUIXWXUHFRVWVWRZKDW
1RV &LW\RI'HWURLWY6LPRQHWDO
:KDW0U5XVVHOOVDLGZDVWKLV
³:HGRQRWH[SHFWDSUREOHPLQWKHRSHUDWLRQRIWKH
ODVW SRLQW WKDW 0U >)@LQN KDV MXVW LGHQWLILHG , GRQ¶W
NQRZWKDWZH¶UHSUHSDUHGWRSXWWKDWLQWRWKHDJUHHPHQW
7KHUHDVRQLVWKDWWKHH[SHUWVWKDW0U)LQNZRXOGZLVK
WR KDYH DUH LQGHSHQGHQW FRQWUDFWRUV WKH\ DUH RXWVLGH
H[SHUWV´
7KH FRXUW WKHQ SURSRVHG D ZD\ RI UHVROYLQJ WKH H[SHUW
ZLWQHVV SUREOHP LI LW ZDV D SUREOHP DQG 0U 5XVVHOO
UHVSRQGHGWRWKHFRXUW¶VSURSRVDOE\VD\LQJ³>Z@HKDYHQR
REMHFWLRQ´
0U)LQNRQEHKDOIRIWKHFLW\WKHQUHWXUQHGWRWKHVXEMHFW
RIFRQWULEXWLRQSURWHFWLRQ
³<RXU+RQRUWKHRQO\LWHPRQWKHOLVWWKDW,VHHWKDW
ZLOOUHTXLUHDQ\μIO>H@VKLQJRXW¶LQWKHDJUHHPHQWLWVHOILV
WKHIRUPRIWKHFRQWULEXWLRQSURWHFWLRQDQG,MXVWZDQWWR
EHFOHDUIURPWKH&LW\¶VS>HU@VSHFWLYHDQGWKDWLVWKDWZH
ZRXOGH[SHFWWKDWDQ\FODLPVEURXJKWDJDLQVW(DWRQWKDW
DULVHIURPDFODLPEURXJKWE\WKH&LW\WKDWWKHGHIHQVH
RIWKDWFODLPZRXOGEHWHQGHUHGWRWKH&LW\RI'HWURLWDQG
WKH &LW\ ZRXOG KDYH WR DIILUP DV LW ZRXOG DV WR WKH
DEVROXWHJXDUDQWHHWRSURYLGHWKDWFRQWULEXWLRQSURWHFWLRQ
EURXJKW E\ WKH &LW\ RI 'HWURLW EXW WKHQ WKDW WKH &LW\
ZRXOG RI FRXUVH KDYLQJ WDNHQ RQ WKDW UHVSRQVLELOLW\
ZRXOG FRQWURO WKH GHIHQVH RI WKH FODLP´ (PSKDVLV
VXSSOLHG
$WWKLVMXQFWXUHWKHFRXUWRIIHUHGDVXJJHVWLRQZLWKUHJDUG
WRWKHILQDOZRUGLQJRIWKHDJUHHPHQWZLWKUHVSHFWWRVXFK
FODLPV
³:HOOOHWPHVXJJHVWWKLV,IWKHUHLVDQ\GLVSXWHWKDWLV
WRVD\DVWRWKHZRUGLQJRIWKLVSRUWLRQRIWKHDJUHHPHQW
\RXZLOOHDFKVXEPLW\RXUUHVSHFWLYHGUDIWWRWKH&RXUW
DQGWKH&RXUWZLOOFKRRVHEHWZHHQWKHWZR´ (PSKDVLV
VXSSOLHG

-- 7 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
$GGLQJWKDWKHHQYLVLRQHGWKHSRVVLELOLW\WKDW³WKHUHPD\EH
D GLVSXWH RYHU WKH SKUDVHRORJ\´ RI WKLV SRUWLRQ RI WKH
DJUHHPHQWWKHMXGJHGHVFULEHGKLVSURSRVDOIRUUHVROYLQJDQ\
VXFKGLVSXWHDV³EDVHEDOODUELWUDWLRQ´0U5XVVHOOVSHDNLQJ
RQEHKDOIRI(DWRQVDLGWKDWWKHFRXUW¶VVXJJHVWLRQZDV³ILQH
ZLWK XV´ 0U )LQN LQGLFDWHG WKDW WKH VXJJHVWLRQ ZDV
DFFHSWDEOHWRWKHFLW\DVZHOO³DVORQJDVWKH&RXUWGLGQRW
ILQGZKDW,VWDWHGRQWKHUHFRUGLVREMHFWLRQDEOH´
7KH MXGJH DVVXUHG 0U )LQN WKDW ³, GRQ¶W ILQG LW
REMHFWLRQDEOH´0U)LQNH[SODLQHGWKDWKHZDQWHG³WRDYRLG
DQ\PLVXQGHUVWDQGLQJRQWKHUHFRUG´,QUHVSRQVHWKHFRXUW
DVNHG 0U 5XVVHOO LI KH DJUHHG LQ SULQFLSOH ZLWK ZKDW 0U
)LQNKDGVDLG0U5XVVHOODQVZHUHGLQWKHDIILUPDWLYH³,Q
SULQFLSOH\HV´0U5XVVHOOWKHQUHSHDWHGWKDW(DWRQKDGQR
SUREOHPZLWKWKHFRXUW¶V³EDVHEDOODUELWUDWLRQ´VXJJHVWLRQ
7KHWUDQVFULSWFRQWLQXHVDVIROORZV
³05),1.<RXU+RQRUH[SHULHQFHVXJJHVWVWRPHLV
WKHEHVWWKLQJDWWKLVSRLQWZRXOGEHWREHFDQGLGZLWKWKH
&RXUWDERXWZKHUHWKHGLVDJUHHPHQWIHOODWRQHSRLQW>LQ
WKHVHWWOHPHQWQHJRWLDWLRQV@WREHVXUHWKDWWKH±
7+(&2857$OOULJKWJRDKHDG
05),1.$WRQHSRLQWLQGLVFXVVLRQVDPRQJ&RXQVHO
WKHUHZDVDVXJJHVWLRQWKDW±E\RSSRVLQJFRXQVHO±WKDW
FRQWULEXWLRQ SURWHFWLRQ PLJKW LQYROYH WKH &LW\
UHLPEXUVLQJ(DWRQIRUWKHFRVWRIGHIHQGLQJFODLPVXQGHU
WKHFLUFXPVWDQFHV±´
7KHWULDOFRXUWXQIRUWXQDWHO\GLGQRWDOORZ0U)LQN WR
ILQLVKKLVVHQWHQFH&XWWLQJ0U)LQNRIIDVKHZDVVWDUWLQJWR
GHVFULEH ZKDW (DWRQ KDG VXJJHVWHG DERXW FRQWULEXWLRQ
SURWHFWLRQWKHFRXUWVDLG³1RWKDW¶VQRWSDUWRIWKLV7KDW¶V
QRWFRQWULEXWLRQSURWHFWLRQ´
7KHFRXUW¶VLQWHUMHFWLRQHYRNHGWKHIROORZLQJUHVSRQVH
1RV &LW\RI'HWURLWY6LPRQHWDO
DJDLQVWRWKHUSDUWLHV´6XFKFRQWULEXWLRQSURWHFWLRQ0U)LQN
PDGH FOHDU ZRXOG QRW H[WHQG WR WKLUGSDUW\ FODLPV QRW
VWHPPLQJIURPGHPDQGVE\WKHFLW\³7KHUHZRXOGQRWEH
DQ\JXDUDQWHHRILQGHPQLW\DVWRWKLUGSDUW\FODLPV´
,I(DWRQZDVXQZLOOLQJWRDFFHSWWKLVOLPLWDWLRQLWKDGDQ
REOLJDWLRQWRVD\VR<HWLWYRLFHGQRREMHFWLRQDWDOO2QWKH
FRQWUDU\ZKHQ0U)LQNUHSHDWHGWKDWWKHFLW\ZDVWDONLQJ
DERXW ³DQ\ FODLPV EURXJKW DJDLQVW (DWRQ WKDW DULVH IURP D
FODLPEURXJKWE\WKHFLW\´0U5XVVHOOH[SOLFLWO\VWDWHGWKDW
WKHFRPSDQ\DJUHHGLQSULQFLSOHZLWKZKDW 0U )LQNKDG
VDLG $QG ZKHQ WR DYRLG HYHQ WKH VOLJKWHVW SRVVLELOLW\ RI
PLVXQGHUVWDQGLQJ 0U )LQN DJDLQ PDGH LW FOHDU WKDW WKH
FRQWULEXWLRQSURWHFWLRQWREHSURYLGHGE\WKHFLW\ZDV³QRW
LQGHPQLILFDWLRQWKURXJKDQ\WKLUGSDUW\´EXWZDVOLPLWHGWR
SURWHFWLRQDJDLQVW³>D@Q\FODLPEURXJKWDJDLQVW(DWRQDULVLQJ
IURPDFODLPEURXJKWE\WKH&LW\RI'HWURLW´(DWRQDJUHHG
DJDLQ³7KDW¶VFRUUHFW´0U5XVVHOOVDLGRQWKHUHFRUG
7KHUHZDVQRWKLQJWKHOHDVWELWDUFDQHDERXWWKLV7KHFLW\¶V
LQWHUSUHWDWLRQRIWKHDJUHHPHQWUHDFKHGRQ0DUFKLV
WKH LQWHUSUHWDWLRQ WR ZKLFK DQ\ REMHFWLYH UHDGLQJ RI WKH
WUDQVFULSWQHFHVVDULO\OHDGV
,I0U5XVVHOO¶VRZQVXEMHFWLYHXQGHUVWDQGLQJRIZKDWZDV
EHLQJ VDLG KDSSHQHG WR EH GHILFLHQW IRU VRPH UHDVRQ WKLV
FRXOG KDUGO\ FKDQJH WKH UHVXOW :KHWKHU WKH PLQGV RI WKH
SDUWLHVDUHWREHGHHPHGWRKDYHPHWRQDQRUDOVHWWOHPHQW
DJUHHPHQWLV³MXGJHGE\DQREMHFWLYHVWDQGDUGORRNLQJWRWKH
H[SUHVVZRUGVRIWKHSDUWLHVDQGWKHLUYLVLEOHDFWV´*URXO[Y
&DUOVRQ0LFK$SS1:G
(PSKDVLVVXSSOLHG
7KH H[SUHVV ZRUGV DQG YLVLEOH DFWV RI WKH SDUWLHV LQ WKH
LQVWDQWFDVHOHDYHXVZLWKWKHILUPFRQYLFWLRQWKDWWKHUHZDV
DPXWXDOPDQLIHVWDWLRQRILQWHQWWRDFFHSWDVHWWOHPHQWRQWKH
WHUPVVWDWHGE\0U)LQN$QGZHDUHVWUHQJWKHQHGLQWKLV
FRQYLFWLRQ E\ WKH IDFW WKDW KRXVHFRXQVHO IRU (DWRQ ZDV
SUHVHQW DW WKH 0DUFK VHVVLRQ DQG QHYHU H[SUHVVHG WKH
VOLJKWHVW UHVHUYDWLRQ DERXW WKH DJUHHPHQW WKDW ZDV EHLQJ
SODFHG RQ WKH UHFRUG 6HH 0LFKLJDQ %HOO 7HOHSKRQH &R Y

-- 8 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
(DWRQ LWVHOI ± WKH GLVWULFW FRXUW KDG ORQJ VLQFH HQWHUHG DQ
RSLQLRQDQGRUGHUKROGLQJWKDW³PXQLFLSDOLWLHVDUHQRWZLWKLQ
WKHVFRSHRIWKHWHUP6WDWH´ (PSKDVLVVXSSOLHG 5(
0HPRUDQGXPDQG2UGHURI-XO\ 7KHUHLVWKXV
QRZD\WKDWWKHFLW\¶VVHWWOHPHQWRILWVHQYLURQPHQWDOFODLPV
DJDLQVW (DWRQ FRXOG KDYH HQWLWOHG (DWRQ WR WKH VWDWXWRU\
FRQWULEXWLRQSURWHFWLRQSUHVFULEHGE\&(5&/$ZKHUHDVWDWH
VHWWOHVLWV&(5&/$FODLPV
7KHOLPLWHGDYDLODELOLW\RIVWDWXWRU\FRQWULEXWLRQSURWHFWLRQ
GRHVQRWPHDQRIFRXUVHWKDW(DWRQFRXOGQRWKDYHDVNHGWKH
FLW\WRSURYLGHH[WUDVWDWXWRU\LQGHPQLILFDWLRQDJDLQVWDQ\DQG
DOOFODLPVIRUFRQWULEXWLRQZKHWKHUVWHPPLQJIURPFODLPV
DVVHUWHGE\WKHFLW\RUQRW(DWRQREYLRXVO\GLGDVNIRUVXFK
LQGHPQLILFDWLRQ7KHDJUHHPHQW(DWRQPD\KDYHZDQWHG
KRZHYHUZDVQRWWKHDJUHHPHQW(DWRQXOWLPDWHO\DFFHSWHG
:KHWKHURUQRWWKHUHKDGEHHQDPHHWLQJRIPLQGVRQWKH
VFRSH RI FRQWULEXWLRQ SURWHFWLRQ SULRU WR WKH SURFHHGLQJV
FRQGXFWHGRQWKHUHFRUGRQWKHPRUQLQJRI0DUFK±
DQG IRU SXUSRVHV RI WKLV RSLQLRQ ZH VKDOO DVVXPH WKDW WKH
PLQGVRIWKHSDUWLHVKDGQRWSUHYLRXVO\PHWRQWKLVLVVXH±WKH
0DUFKWUDQVFULSWFOHDUO\PDQLIHVWVDPHHWLQJRIPLQGVDW
WKDWSRLQW7KHVXPPDU\RIWKHGHDOSODFHGRQWKHUHFRUGE\
0U )LQN LQ RSHQ FRXUW RQ 0DUFK PDNHV LW
DEXQGDQWO\FOHDUWKDWWKHFLW\¶VFRPPLWPHQWWRKROG(DWRQ
KDUPOHVV DJDLQVW FRQWULEXWLRQ FODLPV DGYDQFHG E\ RWKHU
DOOHJHGWRUWIHDVRUVZRXOGEHOLPLWHGWRVLWXDWLRQVZKHUHWKH
RWKHUWRUWIHDVRUVZHUHDVNLQJ(DWRQIRUH[RQHUDWLRQLQUHVSHFW
RIFODLPVDVVHUWHGE\WKHFLW\LWVHOI:KHWKHU(DWRQPLJKW
VWLOO KDYH ZDQWHG LQGHPQLILFDWLRQ EURDGHU WKDQ WKDW LV
LPPDWHULDO ± IRU 0U )LQN UHSHDWHGO\ H[SODLQHG LQ WKH
FOHDUHVWRIWHUPVWKDWEURDGHULQGHPQLILFDWLRQZDVVLPSO\QRW
RQRIIHU
7KH FLW\¶V FRPPLWPHQW DV 0U )LQN H[SODLQHG ZLWKRXW
DPELJXLW\ZRXOGEHWRSURYLGHFRQWULEXWLRQSURWHFWLRQ³ZLWK
UHVSHFWWRDQ\FODLPVEURXJKWE\WKHFLW\RI'HWURLW´±
ERWKWKHSHQGLQJFODLPVDJDLQVWWKH6LPRQJURXSDQG³DQ\
RWKHU FODLP WKDW PLJKW EH EURXJKW E\ WKH FLW\ RI 'HWURLW
1RV &LW\RI'HWURLWY6LPRQHWDO
³05),1.7KH&LW\REYLRXVO\ZRXOGEHRQO\DEOHWR
FRQWURO WKH GHIHQVH LI LW DFFHSWHG OLDELOLW\ DQG LW PXVW
DFFHSWOLDELOLW\LQDQ\NLQGRIFRQWULEXWLRQDFWLRQWKDW
PD\ DULVH IURP &LW\ DFWLRQ 7KHQ ZH GR KDYH DQ
DJUHHPHQW´ (PSKDVLVVXSSOLHG
7XUQLQJ WR 0U 5XVVHOO WKH FRXUW DVNHG LI KH KDG DQ\
SUREOHP ZLWK ZKDW 0U )LQN KDG VDLG 7KH IROORZLQJ
H[FKDQJHHQVXHG
³055866(//,¶PVRUU\,PLVVHGWKHILUVWSDUWRILW
DQG,ZRQGHULIKHZRXOGEHJRRGHQRXJKWRUHSHDWLW"
05),1.&RQWULEXWLRQSURWHFWLRQLVDQ\FODLPEURXJKW
DJDLQVW XV E\ DQ\RQH WKH 6LPRQV RU DQ\RQH HOVH LQ
FRQQHFWLRQ ZLWK WKLV ZRXOG EH WHQGHUHG E\ XV WR WKH
SODLQWLIIXQGHUWKHFRQWULEXWLRQSURWHFWLRQ3ODLQWLIIWKHQ
ZDQWVWKHULJKWWRFRQWUROWKDWOLWLJDWLRQ
7KDW¶VWKHQDWXUHRIFRQWULEXWLRQSURWHFWLRQWKH\ZDQW
WR EH LPPXQL]HG IURP DQ\ DIIHFW RI DQ\ FRQWULEXWLRQ
RWKHUSDUW\´
(DWRQ¶V EULHI RQ DSSHDO FKDUDFWHUL]HV WKLV SDUWLFXODU
VWDWHPHQWDV³XQLQWHUSUHWDEOH´7KHFKDUDFWHUL]DWLRQVWULNHV
XVDVDSW7KHWULDOMXGJHKRZHYHUWKRXJKWKHXQGHUVWRRG
ZKDW0U)LQNZDVWU\LQJWRVD\
³7+(&2857:KDW0U)LQNLVVD\LQJLVWKDWLI\RX
LQFXU DQ\ H[SHQVH DV D FRQVHTXHQFH RI EHLQJ QDPHG
RWKHUWKDQH[SHQVHVUHODWLQJWRDQ\DOOHJHGEUHDFKRIWKH
&LW\¶VREOLJDWLRQWKH\¶UH\RXURZQ
055866(//:HDJUHHZLWKWKDW
7+(&2857,VQ¶WWKDWZKDW\RXVDLG"
05),1.,I,GLGQ¶W,VKRXOGKDYH
055866(//7KDW¶VILQH´

-- 9 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
(YLGHQWO\ ZDQWLQJ WR JHW EDFN WR WKH SRLQW KH KDG EHHQ
DERXWWRPDNHZKHQLQWHUUXSWHGE\WKHFRXUW0U)LQNWKHQ
VSRNHDVIROORZV
³05),1.7KHUHZDVRQHWKLQJWKDWZDVVDLGE\0U
5XVVHOO,GRQ¶WWKLQNLWZDVLQWHQWLRQDOO\H[FOXGHGEXW,
ZDQW WR EH FOHDU +H UHIHUHQFHG μDQ\ FODLP EURXJKW
DJDLQVW(DWRQ¶$Q\FODLPEURXJKWDJDLQVW(DWRQDULVLQJ
IURP D FODLP EURXJKW E\ WKH &LW\ RI 'HWURLW ,W¶V QRW
LQGHPQLILFDWLRQ WKURXJK DQ\ WKLUGSDUW\ WR EH ILOHG´
(PSKDVLVVXSSOLHG
7KHVHZRUGVLWVHHPVWRXVDUHIDUIURPXQLQWHUSUHWDEOH
7KH\DUHHQWLUHO\FRQVLVWHQWZLWKZKDWKDGDOUHDG\EHHQVDLG
VHYHUDOWLPHVDQGWDNHQLQFRQWH[WZHEHOLHYHWKHLUPHDQLQJ
LVFOHDU0U)LQNZDVREYLRXVO\VD\LQJWKDWWKHFLW\ZRXOG
SURWHFW(DWRQDJDLQVWDQ\FODLPIRUFRQWULEXWLRQWKDWDURVH
IURPDFODLPWKHFLW\ZDVDVVHUWLQJDJDLQVWWKHSDUW\VHHNLQJ
FRQWULEXWLRQ0U)LQNZDVDOVRVD\LQJWKDWWKHFLW\ZRXOGQRW
LQGHPQLI\(DWRQDJDLQVWWKLUGSDUW\FODLPVWKDWGLGQRWDULVH
IURPFODLPVDVVHUWHGE\WKHFLW\
0U )LQN¶V FODULW\ RQ WKLV SRLQW LV IXOO\ PDWFKHG E\ WKH
FODULW\RIWKHUHVSRQVHJLYHQE\FRXQVHOIRU(DWRQ
³055866(//7KDW¶VFRUUHFW´ (PSKDVLVVXSSOLHG
³7KDW¶VFRUUHFW´ZHWDNHLWPHDQVZKDWLWVD\V:HGRQRW
LQWHUSUHW 0U 5XVVHOO¶V UHVSRQVH DV PHDQLQJ ³WKDW¶V QRW
FRUUHFW´<HWRQ$SULODOLWWOHRYHUVHYHQZHHNV
DIWHUWHOOLQJWKHFRXUWDQGFRXQVHOWKDW0U)LQNZDVFRUUHFWLQ
KLV GHVFULSWLRQ RI ZKDW WKH SDUWLHV ZHUH DJUHHLQJ WR 0U
5XVVHOOVHQW0U)LQNDOHWWHUDVVHUWLQJWKDW³>W@KHIRUPRI
SURWHFWLRQ (DWRQ ZRXOG UHFHLYH ZDV QHYHU FODULILHG E\ WKH
&LW\´7HQGHUHGZLWKWKH$SULOOHWWHUZDVDSURSRVHG
VHWWOHPHQWDJUHHPHQWFRQWDLQLQJDQLQGHPQLW\SURYLVLRQVR
EURDG DV WR EH LUUHFRQFLODEOH LQ RXU MXGJPHQW ZLWK WKH
DJUHHPHQW LQ SULQFLSOH PHPRULDOL]HG LQ WKH 0DUFK
WUDQVFULSW
1RV &LW\RI'HWURLWY6LPRQHWDO
SURYLVLRQV RI WKH IHGHUDO 1DWLRQDO 2LO DQG +D]DUGRXV
6XEVWDQFHV3ROOXWLRQ&RQWLQJHQF\3ODQ ³1&3´ &)5
3DUW SUHFOXGHG UHFRYHU\ RI WKH 3&% FRVWV :H VKDOO
DGGUHVVWKHVHLVVXHVLQWKHVHTXHQFHLQGLFDWHG
,,
$
$V ZH KDYH VHHQ (DWRQ UHSUHVHQWV WKDW GXULQJ WKH
QHJRWLDWLRQVWKDWSUHFHGHGWKH0DUFKPHPRULDOL]DWLRQRIWKH
VHWWOHPHQW 0U 5XVVHOO XVHG WKH SKUDVH ³FRQWULEXWLRQ
SURWHFWLRQ´ DV UHIHUULQJ WR WKH FRPSOHWH GLVFKDUJH RI
FRQWULEXWLRQOLDELOLW\SUHVFULEHGE\86&† I
0D\EHVREXWWKHSKUDVLQJRIWKHUHSUHVHQWDWLRQVWULNHVXVDV
SHFXOLDU
:HKDYHQRUHDVRQWRGRXEWWKDW(DWRQVRXJKWWKHEURDGHVW
SRVVLEOHSURWHFWLRQDJDLQVWFODLPVIRUFRQWULEXWLRQ(DWRQ¶V
DIILGDYLWV VR LQGLFDWH DQG GXULQJ WKH 0DUFK FRXUWURRP
FROORTX\0U)LQNPHQWLRQHGWKLVDVDQLVVXHRYHUZKLFKWKHUH
KDGEHHQGLVDJUHHPHQW$VZLOOEHREYLRXVIURPH[DPLQDWLRQ
RI WKH WH[W RI † I KRZHYHU VHH QRWH VXSUD
(DWRQ¶V DVVHUWLRQ WKDW ERWK SDUWLHV ZHUH XQGHUVWRRG WR EH
UHIHUULQJWR³VWDWXWRU\FRQWULEXWLRQSURWHFWLRQXQGHU†RI
&(5&/$>86&†@´ZRXOGPHDQLIWUXHWKDWERWK
SDUWLHVZHUHPLVUHDGLQJ&(5&/$:HILQGLWFXULRXVWKDW
VRSKLVWLFDWHGODZ\HUVVXFKDVWKHVHVKRXOGQRWKDYHNQRZQ
ZKDW†RI&(5&/$DFWXDOO\VD\V
:KDW LW VD\V LV WKDW DQ DGPLQLVWUDWLYH VHWWOHPHQW RU D
MXGLFLDOO\ DSSURYHG VHWWOHPHQW RI ³OLDELOLW\ WR WKH 8QLWHG
6WDWHV RU D 6WDWH´ ZLOO SURWHFW WKH VHWWOLQJ SDUW\ DJDLQVW
OLDELOLW\RQFODLPVIRUFRQWULEXWLRQ6WULFWO\VSHDNLQJWKHQ
³VWDWXWRU\FRQWULEXWLRQSURWHFWLRQ´FDQH[LVWRQO\ZKHQWKH
VHWWOHPHQW LV ZLWK WKH IHGHUDO JRYHUQPHQW RU D VWDWH
JRYHUQPHQW
7KHFLW\RI'HWURLWLVFHUWDLQO\QRW³WKH8QLWHG6WDWHV´$QG
(DWRQKDGQRUHDVRQWRVXSSRVHWKDWWKHFLW\FRXOGEHHTXDWHG
ZLWK³D6WDWH´:HNQRZWKLVLVVREHFDXVH±RQPRWLRQRI

-- 10 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV

³)RU WKH UHDVRQV VWDWHG DERYH DQG IRU UHDVRQV RI
MXGLFLDOHFRQRP\DQGSUXGHQFHDVZHOODVWKHLQDELOLW\RI
WKH&RXUWWRGHWHUPLQHSUHFLVHO\ZKDWWKHSDUWLHVFDPHWR
DJUHHPHQWRQRQ0DUFKWKWKLVFDVH>PXVW@JR
WRWULDO´
7KHFDVHGLGJRWRWULDODUHTXHVWIRUFHUWLILFDWLRQRIDQ
LQWHUORFXWRU\DSSHDOKDYLQJEHHQGHQLHGDQGDILQDOMXGJPHQW
ZDVHQWHUHGRQ'HFHPEHU7KDWMXGJPHQWDPRQJ
RWKHUWKLQJV
± IL[HG(DWRQ¶VWRWDOOLDELOLW\DVRI2FWREHU
DW
± IL[HGWKH6LPRQJURXS¶VOLDELOLW\DVRIWKDWGDWHDW
H[FOXVLYH RI OLDELOLW\ IRU WKH FRVWV
DVVRFLDWHGZLWKWKHFOHDQXSRI3&%V
± ILQDOL]HG WKH MXGJPHQW DJDLQVW WKH
6LPRQJURXSIRU3&%FRVWVDQGVHWWKHLQWHUHVWWKDW
KDGDFFUXHGWKHUHRQWKURXJK2FWREHUDW
DQG
± GHFODUHG (DWRQ DQG WKH 6LPRQ JURXS OLDEOH IRU
VSHFLILHG SHUFHQWDJHV RI IXWXUH UHFRYHUDEOH
³5HVSRQVH&RVWV´DQG³5HVSRQVH$FWLYLW\&RVWV´
VXEMHFW WR WKH SURYLVR WKDW WKHUH VKRXOG EH QR
OLDELOLW\IRUFRVWV³>L@QFXUUHGWRDFKLHYHDFOHDQXS
OHYHOLQH[FHVVRIWKHLQGXVWULDOFOHDQXSFDWHJRU\LQ
0LFK&RPS/DZV†D G ´
7KH FLW\ UDLVHV WZR LVVXHV RQ DSSHDO ZKHWKHU WKH
GLVWULFW FRXUW HUUHG LQ UHIXVLQJ WR HQIRUFH WKH VHWWOHPHQW
DJUHHPHQWPHPRULDOL]HGLQWKHSURFHHGLQJVKHOGRQ0DUFK
DQG ZKHWKHUWKHGLVWULFWFRXUWHUUHGLQOLPLWLQJWKH
GHIHQGDQWV¶OLDELOLW\IRUIXWXUHFOHDQXSFRVWVWRWKRVHFRVWV
LQFXUUHGLQDFKLHYLQJDQ³LQGXVWULDOFOHDQXS´DVGHILQHGLQ
15(3$7KH6LPRQJURXSUDLVHVDVLQJOHLVVXHRQDSSHDO
ZKHWKHUDIDLOXUHE\WKHFLW\WRFRPSO\ZLWKFHUWDLQQRWLFH
1RV &LW\RI'HWURLWY6LPRQHWDO
7KHVHWWOHPHQWDJUHHPHQWSURSRVHGE\(DWRQRQ$SULO
ZRXOGKDYHREOLJDWHGWKHFLW\WRLQGHPQLI\(DWRQDJDLQVW³DOO
FODLPV´LQYROYLQJWKHFLW\DQGRU(DWRQDVVHUWHGE\³DQ\RU
DOO´SHUVRQVRUHQWLWLHVJRYHUQPHQWDORUQRQJRYHUQPHQWDOLQ
FRQQHFWLRQZLWKFRQWDPLQDWLRQDWWKH)UHQFK5RDG*ULQQHOO
$YHQXHVLWH7KHUHZDVQRH[FOXVLRQRIWKLUGSDUW\FODLPVQRW
DULVLQJ IURP FODLPV DVVHUWHG E\ WKH FLW\ &RQWUDU\ WR WKH
XQGHUVWDQGLQJUHIOHFWHGLQWKH 0DUFK WUDQVFULSWWKHQHZ
SURSRVDO FDOOHG IRU LQGHPQLILFDWLRQ RI (DWRQ E\ WKH FLW\
DJDLQVWDQ\VXFKFODLPVDVZHOODVDJDLQVWFRQWULEXWLRQFODLPV
DULVLQJIURPFODLPVE\WKHFLW\
7KH FLW\ GLG QRW VLJQ WKH SURIIHUHG DJUHHPHQW VR (DWRQ
PRYHGWRKDYHWKHFDVHUHVHWIRUWULDO$EULHIRSSRVLQJWKLV
PRWLRQZDVILOHGE\WKHFLW\WRJHWKHUZLWKDPRWLRQIRUHQWU\
RI D VHWWOHPHQW MXGJPHQW 7KH FLW\¶V SURSRVHG IRUP RI
MXGJPHQWZRXOGKDYHUHTXLUHGWKHFLW\WR³GHIHQGDQGKROG
(DWRQ KDUPOHVV IURP DQG DJDLQVW DQ\ DQG DOO FODLPV RU
GHPDQGV IRU FRQWULEXWLRQ RU ODZVXLWV RU RWKHU DFWLRQV IRU
FRQWULEXWLRQEURXJKWDJDLQVW(DWRQDVDGLUHFWUHVXOWRIDQ\
FODLPGHPDQGODZVXLWRURWKHUDFWLRQEURXJKWE\WKH&LW\LQ
FRQQHFWLRQ ZLWK HQYLURQPHQWDO FRQWDPLQDWLRQ RI WKH UHDO
SURSHUW\ DQG LPSURYHPHQWV ORFDWHG DW WKH LQWHUVHFWLRQ RI
)UHQFK 5RDG DQG *ULQQHOO $YHQXH ´ (PSKDVLV
VXSSOLHG
(DWRQRSSRVHGWKHFLW\¶VPRWLRQLQDEULHIDFFRPSDQLHGE\
DIILGDYLWV IURP 0HVVUV 5XVVHOO DQG 4XLFN 7KH 5XVVHOO
DIILGDYLWFRQWDLQHGWKHIROORZLQJDYHUPHQWVDPRQJRWKHUV
± WKDWLQWKHHQYLURQPHQWDOOHJDOFRPPXQLW\DV0U
5XVVHOO EHOLHYHG ³FRQWULEXWLRQ SURWHFWLRQ´ ZDV
ZLGHO\XQGHUVWRRGWREHDWHUPRIDUWVLJQLI\LQJWKDW
XSRQ WKH VHWWOHPHQW RI D &(5&/$ FODLP DOO
FRQWULEXWLRQOLDELOLW\RIDQDOOHJHGMRLQWWRUWIHDVRULV
H[WLQJXLVKHG

-- 11 of 12 --

&LW\RI'HWURLWY6LPRQHWDO 1RV
³$ SHUVRQ ZKR KDV UHVROYHG LWV OLDELOLW\ WR WKH 8QLWHG 6WDWHV RU D
6WDWH LQ DQ DGPLQLVWUDWLYH RU MXGLFLDOO\ DSSURYHG VHWWOHPHQW VKDOO QRW EH
OLDEOH IRU FODLPV IRU FRQWULEXWLRQ UHJDUGLQJ PDWWHUV DGGUHVVHG LQ WKH
VHWWOHPHQW 6XFK VHWWOHPHQW GRHV QRW GLVFKDUJH DQ\ RI WKH RWKHU
SRWHQWLDOO\ OLDEOH SHUVRQV XQOHVV LWV WHUPV VR SURYLGH EXW LW UHGXFHV WKH
SRWHQWLDO OLDELOLW\ RI WKH RWKHUV E\ WKH DPRXQW RI WKH VHWWOHPHQW´
86& † I
± WKDWWKLVXVDJHVWHPPHGIURP†RI&(5&/$
86& † ZH TXRWH WKH UHOHYDQW VWDWXWRU\
ODQJXDJHLQWKHPDUJLQ
± WKDW LQ VHWWOHPHQW GLVFXVVLRQV FRQGXFWHG ZLWK WKH
FLW\¶VFRXQVHOSULRUWR0DUFK0U5XVVHOO
KDG PDGH LW FOHDU WKDW (DWRQ ZRXOG UHTXLUH EURDG
DQGILQDOSURWHFWLRQIURPIXWXUHFODLPV
± WKDW 0U 5XVVHOO KDG XVHG WKH WHUP ³FRQWULEXWLRQ
SURWHFWLRQ´LQIRUPXODWLQJ(DWRQ¶VVHWWOHPHQWRIIHUV
DQG LQ VR GRLQJ KH KDG EHHQ UHIHUULQJ ± DV KH
EHOLHYHG0U)LQNKDGEHHQUHIHUULQJ±³WRVWDWXWRU\
FRQWULEXWLRQ SURWHFWLRQ XQGHU † RI &(5&/$
´
± WKDW VHWWOHPHQW GLVFXVVLRQV FRQGXFWHG XQGHU WKH
GLVWULFWFRXUW¶VDXVSLFHVRQWKHPRUQLQJRI0DUFK
KDGIDLOHGDQGWKHSDUWLHVKDGEHHQRUGHUHG
EDFNLQWRWKHFRXUWURRPWRUHFRPPHQFHWULDOWKHQ
VHFRQGVEHIRUHWKHMXGJHUHHQWHUHGWKHFRXUWURRP
0U )LQN DSSURDFKHG (DWRQ¶V WULDO WDEOH DQG VDLG
³:H¶OOWDNHWKH´
± WKDWWKHUHZDVQRGLVFXVVLRQRIDQ\RWKHUFRPSRQHQW
RIWKHVHWWOHPHQWXQWLOWKHFRXUWDVNHG0U)LQNWR
VXPPDUL]HWKHDJUHHPHQWDQG
± WKDW³>V@LQFHLWZDVFOHDUWRERWKFRXQVHOIRU'HWURLW
DQGWKH&RXUWWKDWWKHVHWWOHPHQWEHWZHHQ(DWRQDQG
'HWURLW QHHGHG WR EH UHGXFHG WR ZULWLQJ >0U
5XVVHOO@ GLG QRW UHJDUG WKH FRPPHQWV RI FRXQVHO
1RV &LW\RI'HWURLWY6LPRQHWDO
EHIRUHWKH&RXUWLQRSHQFRXUWWRVHWIRUWKWKHGHWDLOV
RIWKHSDUWLHV¶SURSRVHGVHWWOHPHQW´
$WWRUQH\ 4XLFN¶V DIILGDYLW ZKLFK ZDV PXFK VKRUWHU
DYHUUHGLQHVVHQFHWKDW
± RQFH VHWWOHPHQW GLVFXVVLRQV KDG FRPPHQFHG 0U
4XLFNPDGHLWFOHDUWRWKHFLW\¶VFRXQVHOWKDW(DWRQ
LQWHQGHG WR FRQGLWLRQ VHWWOHPHQW XSRQ WKH FLW\¶V
SURYLGLQJ(DWRQ³FRPSOHWHSURWHFWLRQIURPDQ\
IXWXUH FODLPV E\ WKH 0LFKLJDQ 'HSDUWPHQW RI
1DWXUDO 5HVRXUFHV DGMRLQLQJ ODQGRZQHUV DQGRU
VXEVHTXHQWSXUFKDVHUVRIWKHVXEMHFWSURSHUW\´DQG
± 0U)LQNWROG0U4XLFNWKDWWKHFLW\ZDVSURKLELWHG
E\ODZIURPOHQGLQJLWVFUHGLWVRDVWRSURYLGH(DWRQ
ZLWK LQGHPQLW\ EXW WKDW 0U )LQN NQRZLQJ ZKDW
(DWRQGHVLUHGLQGLFDWHGWKDWHTXLYDOHQWSURWHFWLRQ
FRXOGEHSURYLGHGZLWKUHVSHFWWRVXFKFODLPV
2Q $XJXVW DIWHU KHDULQJ RUDO DUJXPHQW RQ WKH
SHQGLQJPRWLRQVWKHGLVWULFWFRXUWDQQRXQFHGIURPWKHEHQFK
WKDWLWZDVJUDQWLQJ(DWRQ¶VPRWLRQWRVHWWKHFDVHIRUWULDODQG
ZDV GHQ\LQJ WKH FLW\¶V PRWLRQ IRU HQWU\ RI D VHWWOHPHQW
MXGJPHQW,QH[SODLQLQJLWVWKLQNLQJWKHFRXUWPDGHWKHVH
REVHUYDWLRQVDPRQJRWKHUV
³7KHVWDWXWHVLQYROYHGDUHFRPSOH[7KHGLVWLQFWLRQ
WKHSDUWLHVGUDZRQZKDWZDVVDLGRQ0DUFKWK
LQYROYH DUFDQH FRQFHSWV RI ODZ DQG DUH EDVHG RQ D
VSHFLDOL]HGJORVVDU\7KH&LW\PD\ZHOOEHULJKWWKDWWKH
SURWHFWLRQ IRU (DWRQ LW DJUHHG WR ZDV OLPLWHG DQG WKDW
(DWRQ¶VFRQFHUQVDUHDWEHVWVSHFXODWLYHDQGFRQMHFWXUDO
³2Q WKH RWKHU KDQG (DWRQ DJUHHG WR SD\
>@ZLWKLWVD\VWKHH[SHFWDWLRQLWZRXOG
KDYHSHDFHRIPLQGDQGJHWRQZLWKLWVFRUSRUDWHOLIH
)RU WKH &RXUW WR VDQFWLRQ WKH &LW\¶V YLHZ RI WKH
DJUHHPHQW UHDFKHG RQ 0DUFK WK ZRXOG EH
LQDSSURSULDWH

-- 12 of 12 --

Continue your research in ChatGPT or Claude

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