01a0138p.06

00-5053Court of Appeals for the Sixth CircuitApr 27, 2001

Full text

%XFKDQDQY$SIHO 1R
†† E DQG E *LYHQWKHDPRXQWRIWLPH
WKDW%XFKDQDQVSHQWRQWKHFDVHVLQTXHVWLRQKLVDZDUGHG
IHHVZHUHTXLWHORZ LQRQHFDVHDOOHJHGO\DVORZDVSHU
KRXUHYHQDIWHUDVPDOOSRVWVXLWLQFUHDVHE\WKH$/- DQG
%XFKDQDQ¶VFOLHQWVH[SUHVVO\DJUHHGWRIHHVWKDWZHUHPXFK
KLJKHUWKDQWKRVHDZDUGHGE\WKH&RPPLVVLRQHU6RGHVSLWH
RXUODFNRIMXULVGLFWLRQWRSDVVRQWKHUHDVRQDEOHQHVVRIDQ\
IHH DZDUGHG WR %XFKDQDQ DW WKH DGPLQLVWUDWLYH OHYHO VHH
0F&DUWK\Y6HF¶\RI+HDOWK +XPDQ6HUYV)G
WK&LU ZHGRKDYHMXULVGLFWLRQWRFRQVLGHU
ZKHWKHUWKH&RPPLVVLRQHUKDVIDLOHGWRFRPSO\ZLWKKLVRZQ
UHJXODWLRQV:HDFFRUGLQJO\KROGWKDWPDQGDPXVMXULVGLFWLRQ
LVDYDLODEOHIRU%XFKDQDQ¶VFODLP
,,,&21&/86,21
)RU DOO WKH UHDVRQV VHW IRUWK DERYH ZH $)),50 WKH
MXGJPHQW RI WKH GLVWULFW FRXUW ZLWK UHVSHFW WR WKH ODFN RI
IHGHUDOTXHVWLRQ MXULVGLFWLRQ XQGHU 86& † EXW
5(9(56( DQG 5(0$1' WKH FDVH ZLWK UHVSHFW WR
%XFKDQDQ¶V FODLP XQGHU WKH PDQGDPXV VWDWXWH 86&
†2QUHPDQGWKHGLVWULFWFRXUWLVLQVWUXFWHGWRJLYH
%XFKDQDQWKHRSSRUWXQLW\WRHVWDEOLVKWKHPHULWVRIKLVFODLP
ZKLFKWKH&RPPLVVLRQHUFDQWKHQFKDOOHQJHE\DPRWLRQIRU
VXPPDU\MXGJPHQWE\SURFHHGLQJWRWULDORUERWK
7KH +RQRUDEOH $QQ $OGULFK 8QLWHG 6WDWHV 'LVWULFW -XGJH IRU WKH
1RUWKHUQ 'LVWULFW RI 2KLR 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
'$/( %8&+$1$1
3ODLQWLII$SSHOODQW
Y
.(11(7+ 6 $3)(/
&200,66,21(5 2) 62&,$/
6(&85,7<
'HIHQGDQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW&KDWWDQRRJD
1RV²5$OODQ(GJDU
&KLHI'LVWULFW-XGJH
$UJXHG0DUFK
'HFLGHGDQG)LOHG$SULO
%HIRUH&2/(DQG*,/0$1&LUFXLW-XGJHV$/'5,&+
'LVWULFW-XGJH

-- 1 of 6 --

%XFKDQDQY$SIHO 1R
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' (ULF / %XFKDQDQ '$/( %8&+$1$1
$662&,$7(6 &KDWWDQRRJD 7HQQHVVHH IRU $SSHOODQW
&KDUORWWH0&RQQHU\$XMOD2)),&(2)7+(*(1(5$/
&2816(/%DOWLPRUH0DU\ODQGIRU$SSHOOHH21%5,()
(ULF/%XFKDQDQ'$/(%8&+$1$1 $662&,$7(6
&KDWWDQRRJD 7HQQHVVHH IRU $SSHOODQW &KDUORWWH 0
&RQQHU\$XMOD2)),&(2)7+(*(1(5$/&2816(/
%DOWLPRUH0DU\ODQGIRU$SSHOOHH
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
521$/'/((*,/0$1&LUFXLW-XGJH'DOH%XFKDQDQ
UHSUHVHQWHG ILYH LQGLYLGXDOV LQ VXFFHVVIXO FODLPV IRU EDFN
EHQHILWVEHIRUHWKH&RPPLVVLRQHURI6RFLDO6HFXULW\:KHQ
KH VRXJKW DSSURYDO RI WKH DWWRUQH\ IHHV VSHFLILHG LQ WKH
FRQWUDFWV ZLWK KLV FOLHQWV KRZHYHU WKH &RPPLVVLRQHU
GHWHUPLQHG WKDW %XFKDQDQ ZDV OLPLWHG WR UHFHLYLQJ VXPV
HTXDOWRH[DFWO\SHUFHQWRIWKHFODLPDQWV¶EDFNEHQHILWV
UDWKHUWKDQWKHDOWHUQDWHPLQLPXPIHHVDJUHHGXSRQZLWKKLV
FOLHQWV%XFKDQDQFKDOOHQJHGRQVWDWXWRU\DQGFRQVWLWXWLRQDO
JURXQGVWKHPHWKRGXVHGE\WKH&RPPLVVLRQHUWRGHWHUPLQH
WKRVHIHHVDUJXLQJWKDW WKH&RPPLVVLRQHUZDVLPSURSHUO\
SODFLQJDIODWFDSRQIHHDZDUGV7KHGLVWULFWFRXUWFRQFOXGHG
WKDW LW KDG QR VXEMHFWPDWWHU MXULVGLFWLRQ WR UHYLHZ
%XFKDQDQ¶V FODLPV )RU WKH UHDVRQV VHW IRUWK EHORZ ZH
5(9(56(WKHMXGJPHQWRIWKHGLVWULFWFRXUWDQG5(0$1'
WKHFDVHIRUIXUWKHUSURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ
,%$&.*5281'
7KUHHRIWKHILYHFOLHQWVLQTXHVWLRQ &KULVWLQH$QGHUVRQ
6DPXHO+DOODQG:DQGD5RDFK HQWHUHGLQWRFRQWLQJHQF\IHH
FRQWUDFWV ZLWK %XFKDQDQ UHJDUGLQJ WKHLU FODLPV IRU
6XSSOHPHQWDO6HFXULW\,QFRPH 66, DQGGLVDELOLW\LQVXUDQFH
1R %XFKDQDQY$SIHO
PDLQWDLQV WKDW %XFKDQDQ KDV IDLOHG WR VDWLVI\ WKH VHFRQG
UHTXLUHPHQWIRUDVVHUWLQJPDQGDPXVMXULVGLFWLRQEHFDXVHWKH
GHWHUPLQDWLRQRIZKDWFRQVWLWXWHVDUHDVRQDEOHDWWRUQH\¶VIHH
LVZLWKLQWKH&RPPLVVLRQHU¶VVROHGLVFUHWLRQ
%XFKDQDQUHVSRQGVE\DUJXLQJWKDWWKH&RPPLVVLRQHUKDV
QHJOHFWHGKLVFOHDUQRQGLVFUHWLRQDU\GXW\WRIROORZERWKFDVH
ODZ DQG KLV RZQ DGPLQLVWUDWLYH UHJXODWLRQV ,Q SDUWLFXODU
%XFKDQDQDUJXHVWKDW+RUHQVWHLQY6HFUHWDU\RI+HDOWK
+XPDQ 6HUYLFHV )G WK &LU EDUV WKH
&RPPLVVLRQHUIURPUHO\LQJVROHO\XSRQDSHUFHQWFDSRQ
DWWRUQH\IHHVUHVROYHGDWWKHDGPLQLVWUDWLYHOHYHODQGWKDW
&)5 †† E DQG E UHTXLUH WKH
&RPPLVVLRQHUWRFRQVLGHUVHYHUDORWKHUIDFWRUVLQDUULYLQJDW
DUHDVRQDEOHDWWRUQH\¶VIHH
:H ILQG %XFKDQDQ¶V DUJXPHQW SHUVXDVLYH 7KLV FRXUW
H[SUHVVO\KHOGLQ+RUHQVWHLQWKDWWKHVWDWXWHJRYHUQLQJWKH
DZDUGRIDWWRUQH\IHHVLQ6RFLDO6HFXULW\FDVHVUHVROYHGDWWKH
DGPLQLVWUDWLYH OHYHO GLG QRW FDS WKH DPRXQW WKDW FRXOG EH
DZDUGHGDWSHUFHQWRIWKHSDVWGXHEHQHILWVUHFRYHUHGE\
WKHFODLPDQW6HH+RUHQVWHLQ)GDW,QGRLQJVR
WKLVFRXUWVWDWHGWKDW³WKH6HFUHWDU\>RI+HDOWKDQG+XPDQ
6HUYLFHV@LVIUHHWRVHWDUHDVRQDEOHIHHH[FHSWDVRWKHUZLVH
SURYLGHGLQWKHVWDWXWH´,G7KHGHWHUPLQDWLRQRIUHDVRQDEOH
DWWRUQH\IHHVLQWXUQLVJRYHUQHGE\&)5† E
ZLWK UHVSHFW WR 66, DQG E\ &)5 † E ZLWK
UHVSHFW WR GLVDELOLW\LQVXUDQFH EHQHILWV 7KHVH UHJXODWLRQV
UHTXLUHYDULRXVIDFWRUVWREHFRQVLGHUHGLQGHWHUPLQLQJWKH
DPRXQWRIDWWRUQH\IHHVDZDUGHGLQFOXGLQJWKH³DPRXQWRI
WLPH WKH UHSUHVHQWDWLYH VSHQW RQ WKH FDVH´
†† E LY E LY DQGWKH³DPRXQW
RI IHH WKH UHSUHVHQWDWLYH UHTXHVWV IRU KLV RU KHU VHUYLFHV
LQFOXGLQJ DQ\ DPRXQW DXWKRUL]HG RU UHTXHVWHG EHIRUH´
† E YLL E YLL
7KH XVH RI D EODQNHW IHH FDS VXFK DV WKDW DOOHJHG E\
%XFKDQDQZRXOGEHDYLRODWLRQRIWKH&RPPLVVLRQHU¶VGXWLHV
EHFDXVH VXFK D FDS FDQQRW EH UHFRQFLOHG ZLWK WKH IXOO
FRQVLGHUDWLRQ RI WKH IDFWRUV VSHFLILHG LQ &)5

-- 2 of 6 --

%XFKDQDQY$SIHO 1R
6HF¶\RI+HDOWK +XPDQ6HUYV)G WK
&LU 0RUHRYHU WKH FKDOOHQJHG DFWLRQ ² WKH
&RPPLVVLRQHU¶V LPSRVLWLRQ RI D IODW FDS RQ DWWRUQH\IHH
DZDUGV²ZDVQRWVRH[WUHPHDVWRFRQVWLWXWHDQHJUHJLRXV
DEXVH RI SRZHU 6HH 3XVH\ )G DW ILQGLQJ QR
VXEVWDQWLYHGXHSURFHVVYLRODWLRQZKHUHDSURVHFXWRUIDLOHGWR
LQIRUPWKHSODLQWLIIWKDWWKHFKDUJHVDJDLQVWWKHNLOOHURIWKH
SODLQWLII¶V VRQ PLJKW EH UHGXFHG EHFDXVH ³WKH XVH RI WKH
μVKRFNVWKHFRQVFLHQFH¶WHVWLVSUREOHPDWLFLQDUHDVRWKHUWKDQ
H[FHVVLYHIRUFH´ :HWKHUHIRUHFRQFOXGHWKDW%XFKDQDQZDV
QRWGHQLHGVXEVWDQWLYHGXHSURFHVV
& 0DQGDPXVMXULVGLFWLRQ
%XFKDQDQ DUJXHV DV DQ DOWHUQDWLYH WKDW PDQGDPXV
MXULVGLFWLRQH[LVWVXQGHU86&†7KLVFRXUWKDV
SUHYLRXVO\GHFOLQHGWRPDNHDGHWHUPLQDWLRQRQWKHLVVXHRI
ZKHWKHUPDQGDPXVMXULVGLFWLRQLVDYDLODEOHIRUFODLPVDULVLQJ
XQGHUWKH6RFLDO6HFXULW\$FW6HH0LFK$VV¶QRI+RPHV
6HUYVIRUWKH$JLQJ,QFY6KDODOD)G WK
&LU FRQFOXGLQJLQHYDOXDWLQJD6RFLDO6HFXULW\$FW
FODLPWKDW³>L@WLVQRWQHFHVVDU\IRUXVWRUHDFKWKLVTXHVWLRQ
LQ WKH LQVWDQW FDVH´ 7KH 6XSUHPH &RXUW KDV OLNHZLVH
GHFOLQHG WR GHFLGH ZKHWKHU 86& † K EDUV
PDQGDPXVMXULVGLFWLRQRYHUFODLPVDULVLQJXQGHUWKH6RFLDO
6HFXULW\$FW6HH<RXU+RPH9LVLWLQJ1XUVH6HUYV,QFY
6KDODOD86Q VWDWLQJH[SOLFLWO\WKDW
WKH&RXUWKDV³DYRLGHGGHFLGLQJWKLVLVVXHLQWKHSDVWDQG
DJDLQILQG>V@LWXQQHFHVVDU\WRUHDFKLWWRGD\´HYHQWKRXJKWKH
JRYHUQPHQW ³XUJH>G WKH &RXUW@ WR KROG WKDW PDQGDPXV LV
DOWRJHWKHU XQDYDLODEOH WR UHYLHZ FODLPV DULVLQJ XQGHU WKH
0HGLFDUH$FW´ LQWHUQDOFLWDWLRQVRPLWWHG
,Q RUGHU IRU WKH FRXUW WR DFFHSW PDQGDPXV MXULVGLFWLRQ
%XFKDQDQPXVWVKRZWKDW KHKDVH[KDXVWHGDOODYDLODEOH
DGPLQLVWUDWLYHUHPHGLHVDQG WKH&RPPLVVLRQHUYLRODWHGD
³FOHDU QRQGLVFUHWLRQDU\ GXW\´ RZHG WR %XFKDQDQ 6HH
+HFNOHUY5LQJHU86 %RWKSDUWLHV
DFNQRZOHGJH WKDW %XFKDQDQ KDV H[KDXVWHG DOO RI KLV
DGPLQLVWUDWLYH UHPHGLHV 7KH &RPPLVVLRQHU KRZHYHU
1R %XFKDQDQY$SIHO
EHQHILWV 8QGHU WKHVH FRQWUDFWV %XFKDQDQ ZDV WR UHFHLYH
HLWKHUSHUFHQWRIWKHFODLPDQWV¶EDFNEHQHILWVRU
ZKLFKHYHU ZDV JUHDWHU FRQWLQJHQW RQ UHFHLYLQJ IDYRUDEOH
GLVDELOLW\ GHWHUPLQDWLRQV IURP WKH 6RFLDO 6HFXULW\
$GPLQLVWUDWLRQ 66$ +HZDVWRUHFHLYHQRIHHLIWKHFODLPV
ZHUHGHQLHG
$OO WKUHH FDVHV ZHUH VXFFHVVIXO DQG WKH FODLPDQWV ZHUH
DZDUGHGWKHEHQHILWVWKDWWKH\VRXJKWLQFOXGLQJEDFNEHQHILWV
%HFDXVHSHUFHQWRIWKHEDFNEHQHILWVLQHDFKFDVHZDVOHVV
WKDQ%XFKDQDQVXEVHTXHQWO\VXEPLWWHGIHHSHWLWLRQV
WRWKH&RPPLVVLRQHUWRUHTXHVWDSSURYDORIWKHDJUHHGXSRQ
LQ OHJDO IHHV 7KH &RPPLVVLRQHU GHQLHG WKHVH
SHWLWLRQV,QVWHDGWKH&RPPLVVLRQHUUHGXFHGWKHDXWKRUL]HG
IHHV WR VXPV HTXDO WR H[DFWO\ SHUFHQW RI WKH FODLPDQWV¶
EDFNEHQHILWV:KHQ%XFKDQDQDSSHDOHGWKHIHHUHGXFWLRQV
WKH5HJLRQDO&KLHI$GPLQLVWUDWLYH/DZ-XGJH $/- DIILUPHG
WKH&RPPLVVLRQHU¶VGHFLVLRQV
7KH RWKHU WZR FOLHQWV 0DUMRULH &ROOLQV DQG -HDQ 6NHOI
ZHUHDOVRUHSUHVHQWHGE\%XFKDQDQEHIRUHWKH&RPPLVVLRQHU
%RWKFOLHQWVKDGVLJQHGFRQWLQJHQF\IHHFRQWUDFWVVLPLODUWR
WKRVHGHVFULEHGDERYHZLWK&ROOLQVDJUHHLQJWRDPLQLPXP
IHHRIDQG6NHOIWRDPLQLPXPIHHRI7KHVH
WZRFDVHVOLNHWKHRWKHUVZHUHVXFFHVVIXOEXW%XFKDQDQ¶V
IHHVZHUHDJDLQOLPLWHGWRH[DFWO\SHUFHQWRIWKHFODLPDQWV¶
EDFNEHQHILWV
%HIRUHWKHDGPLQLVWUDWLYHDSSHDOVRQWKHIHHDZDUGVIRUWKH
&ROOLQVDQG6NHOIFDVHVZHUHILQDOL]HG%XFKDQDQVXHGWKH
&RPPLVVLRQHULQWKHGLVWULFWFRXUWFRQFHUQLQJDOOILYHDZDUGV
7KH$/-DPHQGHGWKHDWWRUQH\IHHVDZDUGHGIRUWKH&ROOLQV
DQG6NHOIFDVHVDIWHU%XFKDQDQILOHGKLVFRPSODLQW7KHVH
DPHQGHGIHHDZDUGVZHUHVOLJKWO\KLJKHUWKDQWKHLQLWLDO
SHUFHQWILJXUHVEXWVWLOOZHOOEHORZWKHDPRXQWVVSHFLILHGLQ
%XFKDQDQ¶V FRQWUDFWV ,Q IDFW HYHQ DIWHU WKH $/-¶V
DGMXVWPHQWV%XFKDQDQ¶VHIIHFWLYHKRXUO\UDWHLQWKHILYHFDVHV
UDQJHGIURPDORZRISHUKRXUWRDKLJKRISHU
KRXU

-- 3 of 6 --

%XFKDQDQY$SIHO 1R
%XFKDQDQWKHQVRXJKWMXGLFLDOUHYLHZRIWKHDWWRUQH\IHH
GHWHUPLQDWLRQV +H FKDOOHQJHG RQ VWDWXWRU\ DQG
FRQVWLWXWLRQDOJURXQGVWKHPHWKRGXVHGE\WKH&RPPLVVLRQHU
WRGHWHUPLQHWKRVHIHHV7KHFUX[RIKLVFRPSODLQWZDVWKDW
WKH &RPPLVVLRQHU ZDV OLPLWLQJ DOO DWWRUQH\IHH DZDUGV WR
H[DFWO\SHUFHQWRIWKHEDFNSD\DZDUGHGWRWKHFODLPDQWV
DQGWKDWWKLVIODWOLPLWDWLRQFRQVWLWXWHGDGHQLDORIGXHSURFHVV
RIODZDVZHOODVDYLRODWLRQRIWKHDSSOLFDEOHIHGHUDOVWDWXWH
DQG66$UHJXODWLRQV%XFKDQDQSRLQWHGRXWWKDWWKHUHLVQR
IL[HGOLPLWRQWKHIHHWKDWDQDWWRUQH\PD\FKDUJHXQGHU
86& † D DQG WKDW 66$ UHJXODWLRQ &)5
† E DQGGLVDELOLW\LQVXUDQFHUHJXODWLRQ&)5
† E UHTXLUH WKH &RPPLVVLRQHU WR ZHLJK FHUWDLQ
VSHFLILHGIDFWRUVLQFDOFXODWLQJDWWRUQH\IHHDZDUGV7KHVH
IDFWRUVLQFOXGHWKHFRPSOH[LW\RIWKHFDVHWKHDPRXQWRIWLPH
WKH DWWRUQH\ VSHQW RQ WKH FDVH DQG WKH IHH DPRXQW DJUHHG
XSRQ EHWZHHQ WKH DWWRUQH\ DQG WKH FOLHQW %XFKDQDQ DOVR
DGGUHVVHGWKHIHHDZDUGVIRU&ROOLQVDQG6NHOIDUJXLQJWKDW
WKH$/-FKDQJHGWKHIHHDZDUGVLQWKHVHWZRFDVHVE\RQO\D
³WRNHQDPRXQW´LQUHVSRQVHWRKLVLQLWLDOFRPSODLQW
2Q)HEUXDU\WKHPDJLVWUDWHMXGJHLVVXHGD5HSRUW
DQG5HFRPPHQGDWLRQFRQFOXGLQJWKDWDOWKRXJKWKHGLVWULFW
FRXUWKDGQRMXULVGLFWLRQWRUHYLHZWKHUHDVRQDEOHQHVVRIWKH
DWWRUQH\ IHHV LW GLG KDYH MXULVGLFWLRQ WR KHDU %XFKDQDQ¶V
VWDWXWRU\ DQG FRQVWLWXWLRQDO FODLPV FRQFHUQLQJ WKH
&RPPLVVLRQHU¶V PHWKRG RI GHWHUPLQLQJ WKRVH IHHV 7KH
PDJLVWUDWH MXGJH DOVR FRQFOXGHG WKDW WKH GLVWULFW FRXUW KDG
VXEMHFWPDWWHU MXULVGLFWLRQ RYHU WKLV FDVH XQGHU WKH IHGHUDO
PDQGDPXVVWDWXWH
7KHVHFRQFOXVLRQVKRZHYHUZHUHUHMHFWHGE\WKHGLVWULFW
FRXUWZKLFKJUDQWHGWKH&RPPLVVLRQHU¶VPRWLRQWRGLVPLVV
IRUODFNRIVXEMHFWPDWWHUMXULVGLFWLRQ6HH%XFKDQDQY$SIHO
) 6XSS G (' 7HQQ 7KH GLVWULFW FRXUW
VSHFLILFDOO\ KHOG WKDW %XFKDQDQ KDG IDLOHG WR SUHVHQW D
FRQVWLWXWLRQDOFODLPEHFDXVHKHZDVQRWHQWLWOHGWRDQ\WKLQJ
PRUH WKDQ WKH IHHV GHWHUPLQHG WR EH UHDVRQDEOH E\ WKH
&RPPLVVLRQHU $OWHUQDWLYHO\ WKH FRXUW KHOG WKDW HYHQ LI
%XFKDQDQKDGSUHVHQWHGDFRORUDEOHFRQVWLWXWLRQDOFKDOOHQJH
1R %XFKDQDQY$SIHO
KRZHYHURUHYHQDSURSHUW\LQWHUHVWLQUHDVRQDEOHDWWRUQH\
IHHVEHFDXVH%XFKDQDQIDLOVWRIXOILOOWKHVHFRQGUHTXLUHPHQW
IRU D SURFHGXUDO GXHSURFHVV FKDOOHQJH 8QGHU WKLV
UHTXLUHPHQW ZH PXVW H[DPLQH ZKHWKHU ³WKH SURFHGXUHV
DWWHQGDQW XSRQ >WKH@ GHSULYDWLRQ >RI D OLEHUW\ RU SURSHUW\
LQWHUHVW@ZHUHFRQVWLWXWLRQDOO\VXIILFLHQW´3XVH\Y&LW\RI
<RXQJVWRZQ)G +HUHZHILQGWKDWWKH
SURFHGXUHV DSSOLFDEOH WR %XFKDQDQ ZHUH LQGHHG
FRQVWLWXWLRQDOO\VXIILFLHQW%XFKDQDQUHFHLYHGQRWLFHRIKLV
LQLWLDOIHHGHWHUPLQDWLRQDQGZDVDIIRUGHGWKHRSSRUWXQLW\WR
DSSHDOWKHGHWHUPLQDWLRQWKURXJKDGPLQLVWUDWLYHUHYLHZ+H
HYHQ UHFHLYHG D UHYLHZ RI WKH IHH GHWHUPLQDWLRQ E\ WKH
5HJLRQDO &KLHI $/- D UHYLHZ WKDW DZDUGHG %XFKDQDQ
DGGLWLRQDOIHHVLQWZRRIWKHILYHFDVHV2WKHUFLUFXLWVKDYH
DFFHSWHG VXFK SURFHGXUHV LQ 6RFLDO 6HFXULW\ $FW FDVHV DV
FRPSRUWLQJZLWKSURFHGXUDOGXHSURFHVVVHH0R\HU)G
DW FLWLQJ&RSDNHQY6HF¶\RI+HDOWK(GXF :HOIDUH
)G WK&LU DQGVRGRZH
6XEVWDQWLYHGXHSURFHVV
6XEVWDQWLYHGXHSURFHVVFODLPVDUHXVXDOO\GLYLGHGLQWRWZR
PDLQ FDWHJRULHV FODLPV DVVHUWLQJ WKH GHSULYDWLRQ RI D
SDUWLFXODU VWDWXWRU\ RU FRQVWLWXWLRQDO ULJKW SULYLOHJH RU
LPPXQLW\ DQG FODLPV DOOHJLQJ DQ HJUHJLRXV DUELWUDU\
DEXVHRIJRYHUQPHQWSRZHUWKDW³VKRFNVWKHFRQVFLHQFH´6HH
3XVH\ )G DW ,Q ILQGLQJ WKDW %XFKDQDQ¶V
SURSHUW\ULJKWVZHUHQRWLQIULQJHGWKHGLVWULFWFRXUWFRQFOXGHG
WKDW³ZKLOH%XFKDQDQPD\KDYHEHHQGHSULYHGRIDGGLWLRQDO
LQFRPHWRZKLFKKHZDVHQWLWOHGWKLVGHSULYDWLRQGRHVQRW
ULVH WR WKH OHYHO RI D SURWHFWHG SURSHUW\ LQWHUHVW XQGHU WKH
&RQVWLWXWLRQ´%XFKDQDQ)6XSSGDW
:HDJUHHWKDW%XFKDQDQ¶VVXEVWDQWLYHGXHSURFHVVULJKWV
ZHUHQRWYLRODWHGE\WKH&RPPLVVLRQHU¶VDFWLRQV(YHQLI
%XFKDQDQ FRXOG DVVHUW D GHSULYDWLRQ RI KLV SURSHUW\ ULJKWV
EHFDXVH WKH IHHV DZDUGHG WR KLP ZHUH VR ORZ DV WR EH
XQUHDVRQDEOH WKLV FRXUW KDV VSHFLILFDOO\ VWDWHG WKDW WKH
UHDVRQDEOHQHVVRIWKHIHHGHWHUPLQDWLRQDWWKHDGPLQLVWUDWLYH
OHYHOLVEH\RQGWKHUHYLHZRIWKLVFRXUW6HH0F&DUWK\Y

-- 4 of 6 --

%XFKDQDQY$SIHO 1R
GHWHUPLQDWLRQVDVRSSRVHGWRSUHFOXGLQJUHYLHZRIFKDOOHQJHV
WRWKHLQGLYLGXDOIHHGHWHUPLQDWLRQVWKHPVHOYHV$FFRUGLQJO\
ZH DUH RI WKH RSLQLRQ WKDW † K GRHV QRW SUHFOXGH
%XFKDQDQ¶VFODLP
%XFKDQDQ DVVHUWV WKDW WKLV FRXUW KDV IHGHUDOTXHVWLRQ
MXULVGLFWLRQ EHFDXVH KH UDLVHV WZR FRQVWLWXWLRQDO
FKDOOHQJHV²D SURFHGXUDO GXHSURFHVV FKDOOHQJH DQG D
VXEVWDQWLYHGXHSURFHVVFKDOOHQJH(DFKRIWKHVHFKDOOHQJHV
ZLOOEHDGGUHVVHGLQWXUQ
3URFHGXUDOGXHSURFHVV
7KH ILUVW VWHS LQ DQDO\]LQJ %XFKDQDQ¶V SURFHGXUDO GXH
SURFHVVFKDOOHQJHLVWRGHWHUPLQHZKHWKHUKHKDVDSURSHUW\
RU OLEHUW\ LQWHUHVW ZLWK ZKLFK WKH &RPPLVVLRQHU KDV
LQWHUIHUHG6HH.\'HS¶WRI&RUUY7KRPSVRQ86
%XFKDQDQ DUJXHV WKDW KH KDG D SURSHUW\
LQWHUHVWLQUHFHLYLQJWKHDWWRUQH\IHHVWKDWZHUHVSHFLILHGLQ
KLV FRQWUDFWV ZLWK KLV FOLHQWV ² WKH JUHDWHU RI HLWKHU DQ
DJUHHGXSRQIODWVXPRUSHUFHQWRIFROOHFWHGEDFNSD\6HH
0HUWLN Y %ODORFN )G WK &LU
VWDWLQJ WKDW D ³SULYDWH FRQWUDFWXDO ULJKW FDQ FRQVWLWXWH D
SURSHUW\ LQWHUHVW HQWLWOHG WR GXH SURFHVV SURWHFWLRQ IURP
JRYHUQPHQWDOLQWHUIHUHQFHXQGHUIHGHUDOFRQVWLWXWLRQDOODZ´
7KH&RPPLVVLRQHUKRZHYHUSRLQWVRXWWKDW%XFKDQDQ¶V
FOLHQWVDJUHHGWRSD\KLP³QRPRUHWKDQWKHIHH>V@DXWKRUL]HG
E\ WKH 6RFLDO 6HFXULW\ $GPLQLVWUDWLRQ´ 7KLV FRQWUDFWXDO
ODQJXDJHDUJXHVWKH&RPPLVVLRQHUUHPRYHVDQ\SURSHUW\
LQWHUHVW WKDW %XFKDQDQ PLJKW KDYH KDG LQ WKH DFWXDO IHHV
VSHFLILHGLQKLVFRQWUDFWV,QDGGUHVVLQJVLPLODUFDVHVRWKHU
FLUFXLWVKDYHKHOGWKDWDQ³DWWRUQH\ZKRPXVWVHHNUHJXODWRU\
DSSURYDO RI WKH UHDVRQDEOHQHVV RI KLV IHH KDV D SURSHUW\
LQWHUHVWRQO\LQDUHDVRQDEOHIHHQRWWKHDPRXQWVSHFLILHGLQ
D IHH FRQWUDFW´ 0R\HU Y 'LU 2IILFH RI :RUNHU¶V &RPS
3URJUDPV)G WK&LU FLWLQJ
7KRPDVRQY6FKZHLNHU)G WK&LU
:H QHHG QRW UHVROYH ZKHWKHU %XFKDQDQ KDG D SURSHUW\
LQWHUHVW LQ WKH H[DFW IHHV DJUHHG XSRQ LQ KLV FRQWUDFWV
1R %XFKDQDQY$SIHO
WKH DSSOLFDEOH IHGHUDO VWDWXWH SUHFOXGHG MXGLFLDO UHYLHZ RI
DWWRUQH\ IHHV DZDUGHG E\ WKH &RPPLVVLRQHU IRU ZRUN
FRPSOHWHG DW WKH DGPLQLVWUDWLYH OHYHO )LQDOO\ WKH GLVWULFW
FRXUWKHOGWKDWPDQGDPXVMXULVGLFWLRQZDVQRWDYDLODEOHWR
%XFKDQDQ EHFDXVH WKH &RPPLVVLRQHU KDG QR FOHDU
QRQGLVFUHWLRQDU\GXW\WRZHLJKFHUWDLQIDFWRUVEHIRUHDUULYLQJ
DWWKHIHHDZDUGV
%XFKDQDQ¶VPRWLRQWRUHFRQVLGHUDQGDPHQGWKHMXGJPHQW
ILOHG SXUVXDQW WR 5XOH H RI WKH )HGHUDO 5XOHV RI &LYLO
3URFHGXUHZDVGHQLHGRQ1RYHPEHU+HWLPHO\
ILOHG KLV QRWLFH RI DSSHDO FKDOOHQJLQJ WKH GLVWULFW FRXUW¶V
GHWHUPLQDWLRQWKDWLWKDGQRVXEMHFWPDWWHUMXULVGLFWLRQRYHU
KLVFODLP
,,$1$/<6,6
$ 6WDQGDUGRIUHYLHZ
³:HUHYLHZDGLVWULFWFRXUW¶VGHFLVLRQWRJUDQWDPRWLRQWR
GLVPLVV IRU ODFN RI VXEMHFW PDWWHU MXULVGLFWLRQ GH QRYR´
-RHOVRQY8QLWHG6WDWHV)G WK&LU
$ PRWLRQ WR GLVPLVV XQGHU 5XOH E VKRXOG QRW EH
JUDQWHG³XQOHVVLWDSSHDUVEH\RQGGRXEWWKDWWKHSODLQWLIIFDQ
SURYH QR VHW RI IDFWV LQ VXSSRUW RI KLV FODLP ZKLFK ZRXOG
HQWLWOHKLPWRUHOLHI´&RQOH\Y*LEVRQ86
,QFRQVLGHULQJWKHPRWLRQZHPXVWDFFHSWDOOIDFWXDO
DOOHJDWLRQVLQWKHFRPSODLQWDVWUXH6HH*DRY-HQLIHU
)G WK&LU
% )HGHUDOTXHVWLRQMXULVGLFWLRQ
86&† K
7KH &RPPLVVLRQHU DUJXHV WKDW 86& † K
SUHFOXGHV IHGHUDOTXHVWLRQ MXULVGLFWLRQ RYHU %XFKDQDQ¶V
FODLP 6HFWLRQ K JRYHUQV WKH ³>I@LQDOLW\ RI WKH
&RPPLVVLRQHU¶VGHFLVLRQ´RQFODLPVDULVLQJXQGHUWKH6RFLDO
6HFXULW\$FWFKDQQHOLQJWKHPWKURXJKWKHUHYLHZSURFHGXUHV
SURYLGHGLQ† J 6SHFLILFDOO\† K VWDWHV

-- 5 of 6 --

%XFKDQDQY$SIHO 1R
7KHILQGLQJVDQGGHFLVLRQRIWKH&RPPLVVLRQHURI6RFLDO
6HFXULW\ DIWHU D KHDULQJ VKDOO EH ELQGLQJ XSRQ DOO
LQGLYLGXDOV ZKR ZHUH SDUWLHV WR VXFK KHDULQJ 1R
ILQGLQJV RI IDFW RU GHFLVLRQ RI WKH &RPPLVVLRQHU RI
6RFLDO6HFXULW\VKDOOEHUHYLHZHGE\DQ\SHUVRQWULEXQDO
RUJRYHUQPHQWDODJHQF\H[FHSWDVKHUHLQSURYLGHG1R
DFWLRQDJDLQVWWKH8QLWHG6WDWHVWKH&RPPLVVLRQHURI
6RFLDO6HFXULW\RUDQ\RIILFHURUHPSOR\HHWKHUHRIVKDOO
EH EURXJKW XQGHU VHFWLRQ RU RI 7LWOH WR
UHFRYHURQDQ\FODLPDULVLQJXQGHUWKLVVXEFKDSWHU
,Q +HFNOHU Y 5LQJHU 86 WKH
6XSUHPH &RXUW KHOG WKDW WKH ILQDO VHQWHQFH RI † K
SURYLGHV WKDW † J WR WKH H[FOXVLRQ RI WKH IHGHUDO
TXHVWLRQMXULVGLFWLRQVWDWXWHLVWKH³VROHDYHQXHIRUMXGLFLDO
UHYLHZ IRU DOO FODLPV DULVLQJ XQGHU WKH 0HGLFDUH $FW´
5LQJHU86DW KROGLQJWKDWWKHGLVWULFWFRXUWGLGQRW
KDYHVXEMHFWPDWWHUMXULVGLFWLRQXQGHU86&†RYHU
DFODLPDULVLQJXQGHUWKH6RFLDO6HFXULW\$FW 5LQJHUGLGQRW
SXUSRUWWRHQFRPSDVVDOOFDXVHVRIDFWLRQXQGHUWKH$FWEXW
LQVWHDG LQYROYHG VSHFLILF FODLPV ZKHUH DGPLQLVWUDWLYH
³H[KDXVWLRQ>ZD@VLQQRVHQVHIXWLOH´IRUWKHSODLQWLIIV,GDW

7KHLPSRUWDQFHRIWKHDYDLODELOLW\RIMXGLFLDOUHYLHZZDV
ODWHUHPSKDVL]HGLQ%RZHQY0LFKLJDQ$FDGHP\RI)DPLO\
3K\VLFLDQV86 VXSHUFHGHGE\VWDWXWHRQ
RWKHUJURXQGVDVUHFRJQL]HGE\)DUNDVY%OXH&URVV %OXH
6KLHOG RI 0LFK )G WK &LU ZKHUH
YDULRXV GRFWRUV FKDOOHQJHG WKH VWDWXWRU\ DQG FRQVWLWXWLRQDO
YDOLGLW\RIFHUWDLQUHJXODWLRQVSURPXOJDWHGXQGHU3DUW%RIWKH
0HGLFDUH$FW$WLVVXHLQ0LFKLJDQ$FDGHP\ZDVZKHWKHU
86& † K ZKLFK ZDV PDGH DSSOLFDEOH WR WKH
0HGLFDUH$FWE\86&†LL RU86&†II E
D WKHQH[LVWLQJ SURYLVLRQ LQ WKH 0HGLFDUH $FW WKDW ZDV
VLPLODUWR† K SUHFOXGHGIHGHUDOTXHVWLRQMXULVGLFWLRQ
XQGHU86&†7KH&RXUWILUVWVWUHVVHGWKH³VWURQJ
SUHVXPSWLRQ´ WKDW MXGLFLDO UHYLHZ LV DYDLODEOH IRU
DGPLQLVWUDWLYH DFWLRQV ,G DW ,W WKHQ IRXQG DIWHU
DQDO\]LQJWKHILQDOLW\SURYLVLRQVWKDWQRFOHDUDQGFRQYLQFLQJ
1R %XFKDQDQY$SIHO
HYLGHQFHH[LVWHGWRHVWDEOLVKDQ\FRQJUHVVLRQDOLQWHQWWREDU
MXGLFLDO UHYLHZ RI FKDOOHQJHV WR UHJXODWLRQV SURPXOJDWHG
XQGHU 3DUW % RI WKH 0HGLFDUH $FW GHVSLWH WKH H[SUHVV
SUHFOXVLRQ RI MXGLFLDO UHYLHZ RYHU WKH DPRXQW RI EHQHILWV
XQGHU 3DUW%6HHLGDW2QWKLVEDVLVWKH&RXUW
UHMHFWHGWKHJRYHUQPHQW¶VDUJXPHQWWKDWHLWKHU† K RU
†II E SUHFOXGHGIHGHUDOTXHVWLRQMXULVGLFWLRQ
,Q6KDODODY,OOLQRLV&RXQFLORQ/RQJ7HUP&DUH,QF
86 WKH6XSUHPH&RXUWHODERUDWHGRQ0LFKLJDQ
$FDGHP\ UHDGLQJ LW DV ³PRUH SODXVLEO>\@ KROGLQJ WKDW
† LL GRHV QRW DSSO\ † K ZKHUH DSSOLFDWLRQ RI
† K ZRXOG QRW VLPSO\ FKDQQHO UHYLHZ WKURXJK WKH
DJHQF\EXWZRXOGPHDQQRUHYLHZDWDOO´,GDW7KLV
FRXUW KDV FRQVWUXHG 0LFKLJDQ $FDGHP\ DV SURYLGLQJ DQ
H[FHSWLRQWR5LQJHUDOORZLQJMXGLFLDOUHYLHZXQOHVVWKHUHLV
FOHDUDQGFRQYLQFLQJHYLGHQFHWKDW&RQJUHVVLQWHQGHGWRGHQ\
VXFKUHYLHZ6HH2KLR+RVS$VV¶QY6KDODOD)G
WK&LU KROGLQJWKDWDFWLRQV³ZKLFKGRQRWVHHN
SD\PHQWIURPWKHJRYHUQPHQWDQGFRXOGQRWEHEURXJKWXQGHU
VHFWLRQDUHWKHUHIRUHQRWEDUUHGE\VXEVHFWLRQ K ´
7KH0LFKLJDQ$FDGHP\H[FHSWLRQDSSOLHVWR%XFKDQDQ¶V
FKDOOHQJH 6HFWLRQ K E\ LWV YHU\ WHUPV VSHFLILFDOO\
DSSOLHVWRLQGLYLGXDOV³ZKRZHUHSDUWLHVWR´DKHDULQJEHIRUH
WKH &RPPLVVLRQHU 86& † K 7KH ODQJXDJH RI
† K LQGLFDWHV WKDW &RQJUHVV QHYHU FRQWHPSODWHG D
VLWXDWLRQ ZKHUH VRPHRQH RWKHU WKDQ D SDUW\ SXUVXLQJ
HQWLWOHPHQWEHQHILWVZRXOGVHHNUHYLHZRIDFRORUDEOHFODLP
WKDWWKH&RPPLVVLRQHUHQJDJHGLQDVWDWXWRU\RUFRQVWLWXWLRQDO
YLRODWLRQ
,QDGGLWLRQWKHUHLVQRFOHDUDQGFRQYLQFLQJHYLGHQFHWKDW
&RQJUHVVLQWHQGHGWRGHQ\DMXGLFLDOIRUXPIRUVXFKDFODLP
,WLVWUXHDVWKHGLVWULFWFRXUWSRLQWHGRXWWKDW&RQJUHVVZDV
DZDUHRIH[LVWLQJDGPLQLVWUDWLYHUHJXODWLRQVWKDWSURKLELWHG
UHYLHZRIDOOIHHGHWHUPLQDWLRQVPDGHE\WKH&RPPLVVLRQHU
6HH%XFKDQDQ)6XSSGDW%XWVXFKHYLGHQFHLV
DPELJXRXV DV WR ZKHWKHU &RQJUHVV LQWHQGHG WR SUHFOXGH
UHYLHZRIFKDOOHQJHVWRWKHPHWKRGVXVHGLQPDNLQJWKRVHIHH

-- 6 of 6 --

Continue your research in ChatGPT or Claude

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