01a0166p.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
-$< ' 6&277
3HWLWLRQHU$SSHOODQW
Y
%(77< 0,7&+(//
5HVSRQGHQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG
1R².DWKOHHQ0F'RQDOG2¶0DOOH\
'LVWULFW-XGJH
6XEPLWWHG0D\
'HFLGHGDQG)LOHG0D\
%HIRUH%2**66,/(5DQG%$7&+(/'(5&LUFXLW
-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
21%5,()7LPRWK\)6ZHHQH\&OHYHODQG2KLR-RKQ6
3\OH *2/' 527$725, 6&+:$57= *,%%216
&OHYHODQG2KLRIRU$SSHOODQW'DYLG0*RUPOH\2)),&(
2) 7+( $77251(< *(1(5$/ 2) 2+,2 &ROXPEXV
2KLR6WXDUW$&ROH$66,67$17$77251(<*(1(5$/
&ROXPEXV2KLRIRU$SSHOOHH

-- 1 of 4 --

6FRWWY0LWFKHOO 1R
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
$/,&(0%$7&+(/'(5&LUFXLW-XGJH7KLVPDWWHULV
EHIRUHXVRQSHWLWLRQHU-D\'6FRWW¶VPRWLRQIRUDVWD\RIKLV
H[HFXWLRQVFKHGXOHGIRUSPRQWKLVGDWHDQGRQ6FRWW¶V
DSSHDO IURP WKH GLVWULFW FRXUW¶V GHQLDO RI KLV VXSSOHPHQWDO
SHWLWLRQIRUKDEHDVFRUSXV7KHGLVWULFWFRXUWGHQLHG6FRWW¶V
VXSSOHPHQWDOSHWLWLRQEHFDXVHLWFRQFOXGHGWKDWDOWKRXJKWKH
FODLPVUDLVHGWKHUHLQZHUHQRWSURFHGXUDOO\EDUUHGXQGHUWKH
$QWLWHUURULVP DQG (IIHFWLYH 'HDWK 3HQDOW\ $FW RI
$('3$ 86& † WKRVH FODLPV ZHUH ZLWKRXW
PHULW:HFRQFOXGHWKDW6FRWW¶VWKLUGFODLP²WKDWH[HFXWLRQ
RI WKH VHYHUHO\ PHQWDOO\ LOO LV SURKLELWHG E\ WKH (LJKWK
$PHQGPHQW²LVSURFHGXUDOO\EDUUHG:HIXUWKHUFRQFOXGH
WKDWKLVILUVWDQGVHFRQGFODLPV²WKDW2KLR¶VSURFHGXUHVIRU
GHWHUPLQLQJZKHWKHUKHLVFRPSHWHQWWREHH[HFXWHGDQGWKH
2KLRFRXUWV¶DSSOLFDWLRQRIWKRVHSURFHGXUHVWRKLPYLRODWHG
KLVULJKWVXQGHUWKH(LJKWK$PHQGPHQWDQGGHQLHGKLPGXH
SURFHVVDQGWKDWWKH)RUGY:DLQZULJKWWHVWIRUGHWHUPLQLQJ
FRPSHWHQF\ WR EH H[HFXWHG LV LQDGHTXDWH LQ OLJKW RI
FRQWHPSRUDU\VWDQGDUGVRIGHFHQF\²PD\EHFRQVLGHUHGRQ
WKHLUPHULWVEHFDXVHWKH\ZHUHQRWULSHDWWKHWLPH6FRWWILOHG
KLVLQLWLDOKDEHDVSHWLWLRQ)RUWKHUHDVRQVWKDWIROORZZH
FRQFOXGHWKDWQHLWKHURIWKRVHFODLPVLVPHULWRULRXVDQGZH
ZLOO WKHUHIRUH $)),50 WKH MXGJPHQW RI WKH GLVWULFW FRXUW
GHQ\LQJWKHZULW)LQDOO\ZH'(1<WKHPRWLRQIRUVWD\RI
6FRWW¶VH[HFXWLRQ
,3URFHGXUDO%DFNJURXQG
-D\ 6FRWW ZDV FRQYLFWHG E\ DQ 2KLR MXU\ RI DJJUDYDWHG
UREEHU\ DQG DJJUDYDWHG PXUGHU RQ 0DUFK DQG
VHQWHQFHGWRGHDWK+HSXUVXHGDOORIKLVVWDWHFRXUWDYHQXHV
RIGLUHFWDSSHDODQGFROODWHUDOUHYLHZZLWKRXWVXFFHVVDQGWKH
2KLR6XSUHPH&RXUWVFKHGXOHGKLVH[HFXWLRQIRU2FWREHU
6FRWWLPPHGLDWHO\ILOHGLQIHGHUDOGLVWULFWFRXUWDQRWLFH
RIKLVLQWHQWWRILOHDSHWLWLRQIRUKDEHDVFRUSXV7KHSHWLWLRQ
ILOHGRQ)HEUXDU\ZDVXOWLPDWHO\GHQLHGWKH6XSUHPH
1R 6FRWWY0LWFKHOO
VWDWH2KLR¶VVWDWXWHGRHVQRWFRQWHPSODWHEXUGHQVKLIWLQJWR
HVWDEOLVKSUREDEOHFDXVH5DWKHUWKHVWDWXWHGLUHFWVWKHFRXUW
WR H[DPLQH WKH HYLGHQFH DQG WR PDNH D ILQGLQJ UHJDUGLQJ
ZKHWKHU WKHUH LV SUREDEOH FDXVH WR EHOLHYH WKDW D FRQYLFW
PHHWVWKH)RUGVWDQGDUG+HUH'U0RVVPDQWHVWLILHGWKDW
6FRWW VXIIHUV IURP VFKL]RSKUHQLD EXW KH GLG QRW VWDWH WKDW
6FRWWLVXQDEOHWR³XQGHUVWDQGWKHQDWXUHRIWKHGHDWKSHQDOW\
DQG ZK\ LW ZDV LPSRVHG XSRQ´ KLP 7KH WULDO FRXUW ZDV
WKHUHIRUH MXVWLILHG LQ ILQGLQJ WKDW 6FRWW KDG SUHVHQWHG QR
HYLGHQFHRISUREDEOHFDXVHVXIILFLHQWWRZDUUDQWKROGLQJDIXOO
HYLGHQWLDU\ KHDULQJ )RU WKLV UHDVRQ ZH DJUHH ZLWK WKH
GLVWULFW FRXUW WKDW ³>Z@KDWHYHU WKH PHULWV RI 6FRWW¶V 'XH
3URFHVVFRQWHQWLRQVLQWKHDEVWUDFWWKH&RXUWIDLOVWRVHHKRZ
WKH\ DUH PHDQLQJIXO LQ WKLV FDVH´ 6FRWW Y 0LWFKHOO 1R
&92UGHUDW 1'2KLR0D\
,,,&RQFOXVLRQ
)RUWKHIRUHJRLQJUHDVRQVZHDIILUPWKHMXGJPHQWRIWKH
GLVWULFWFRXUWGHQ\LQJWKHSHWLWLRQIRUDZULWRIKDEHDVFRUSXV
DQGZHGHQ\SHWLWLRQHU¶VPRWLRQIRUDVWD\RIKLVH[HFXWLRQ

-- 2 of 4 --

6FRWWY0LWFKHOO 1R
,IDFRQYLFWVHQWHQFHGWRGHDWKDSSHDUVWREHLQVDQH
WKHZDUGHQRUWKHVKHULIIKDYLQJFXVWRG\RIWKHFRQYLFW
WKHFRQYLFW VFRXQVHORUDSV\FKLDWULVW RUSV\FKRORJLVW
ZKRKDVH[DPLQHGWKHFRQYLFWVKDOOJLYHQRWLFHRIWKH
DSSDUHQW LQVDQLW\ WR WKH MXGJH ZKR LPSRVHG WKH
VHQWHQFHXSRQWKHFRQYLFW
8SRQUHFHLYLQJDQRWLFHSXUVXDQWWRGLYLVLRQ % RI
WKLVVHFWLRQDMXGJHVKDOOGHWHUPLQHEDVHGRQWKHQRWLFH
DQG DQ\ VXSSRUWLQJ LQIRUPDWLRQ DQ\ LQIRUPDWLRQ
VXEPLWWHGE\WKHSURVHFXWLQJDWWRUQH\DQGWKHUHFRUGLQ
WKHFDVHLQFOXGLQJSUHYLRXVKHDULQJVDQGRUGHUVZKHWKHU
SUREDEOHFDXVHH[LVWVWREHOLHYHWKDWWKHFRQYLFWLVLQVDQH
,IWKHMXGJHILQGVWKDWSUREDEOHFDXVHH[LVWVWREHOLHYH
WKDWWKHFRQYLFWLVLQVDQHWKHMXGJHVKDOOKROGDKHDULQJ
WRGHWHUPLQHZKHWKHUWKHFRQYLFWLVLQVDQH,IWKHMXGJH
GRHVQRWILQGWKDWSUREDEOHFDXVHRIWKDWQDWXUHH[LVWVWKH
MXGJHPD\GLVPLVVWKHPDWWHUZLWKRXWDKHDULQJ
2+,2 5(9 &2'( $11† % 7KLVVWDWXWHDIIRUGHG
6FRWW WKH EDVLF IDLUQHVV WKDW )RUG UHTXLUHV QDPHO\ WKH
RSSRUWXQLW\ WR EH KHDUG 6FRWW DYDLOHG KLPVHOI RI WKDW
RSSRUWXQLW\ZKHQIRUH[DPSOHKHSUHVHQWHGOLYHWHVWLPRQ\
IURP'U'RXJODV0RVVPDQ:HKDYHDFNQRZOHGJHGWKDW
)RUG DOORZV VWDWHV ³VXEVWDQWLDO OHHZD\ WR GHWHUPLQH ZKDW
SURFHVVEHVWEDODQFHVWKHYDULRXVLQWHUHVWVDWVWDNH´&RH
)GDW TXRWDWLRQRPLWWHG $VWDWHSURFHVVXQGHU)RUG
PD\ HYHQ LQFRUSRUDWH ³VRPH KLJK WKUHVKROG VKRZLQJ RQ
EHKDOI RI WKH SULVRQHU WR FRQWURO WKH QXPEHU RI
QRQPHULWRULRXVRUUHSHWLWLYHFODLPVRILQVDQLW\´86DW
SOXUDOLW\RSLQLRQ $FFRUGLQJO\WKDW2KLRGHQLHG6FRWW
DQ HYLGHQWLDU\ KHDULQJ GRHV QRW YLRODWH GXH SURFHVV DV
HQXQFLDWHGLQ)RUG
&RQFHUQLQJ 6FRWW¶V DUJXPHQW WKDW WKH 2KLR VWDWXWH
LPSHUPLVVLEO\ SODFHG XSRQ KLP WKH EXUGHQ RI SURYLQJ KLV
FRPSHWHQF\ZHGRQRWUHDG)RUGDQG&RH²WKHJRYHUQLQJ
FDVHV KHUH²WR VD\ WKDW SURFHGXUDO GXH SURFHVV UHTXLUHV
2KLR¶V)RUGVWDWXWHWRVHWXSDEXUGHQVKLIWLQJSDUDGLJPRUWR
DVVLJQWKHLQLWLDOEXUGHQRIHVWDEOLVKLQJSUREDEOHFDXVHWRWKH
1R 6FRWWY0LWFKHOO
&RXUW GHQLHG 6FRWW¶V SHWLWLRQ IRU FHUWLRUDUL DQG WKH 2KLR
6XSUHPH&RXUWVHW6FRWW¶VH[HFXWLRQGDWHIRU$SULO
6FRWW WKHQ VRXJKW DQ HYLGHQWLDU\ KHDULQJ LQ WKH VWDWH FRXUW
SXUVXDQWWR2+,2 5(9 &2'( $11†FODLPLQJWKDW
KHKDVEHHQGLDJQRVHGDVVFKL]RSKUHQLFDQGWKDWWKHPHQWDO
GLVHDVHKDVSURJUHVVHGWRWKHSRLQWWKDWKHLVQRWFRPSHWHQWWR
EHH[HFXWHG7KHVWDWHWULDOFRXUWKHOGDKHDULQJDWZKLFK
6FRWW ZDV SHUPLWWHG WR SUHVHQW WKH OLYH WHVWLPRQ\ RI KLV
SV\FKLDWULVWEXWFRQFOXGHGWKDWWKHUHZDVQRSUREDEOHFDXVH
WREHOLHYHWKDW6FRWWPHHWVWKH2KLRVWDWXWH¶VGHILQLWLRQRI
LQVDQLW\IRUSXUSRVHVRIFRPSHWHQFHWREHSXWWRGHDWK7KH
WULDO FRXUW WKHUHIRUH GHQLHG 6FRWW¶V UHTXHVW IRU D IXOO
HYLGHQWLDU\ KHDULQJ 7KH 2KLR 6XSUHPH &RXUW SRVWSRQHG
6FRWW¶VH[HFXWLRQGDWHLQRUGHUWRSHUPLWWKHVWDWHFRXUWRI
DSSHDOVWRFRQVLGHUKLVDSSHDORIWKHWULDOFRXUW¶VMXGJPHQW
WKDWMXGJPHQWXOWLPDWHO\ZDVDIILUPHGE\WKHVWDWHDSSHOODWH
FRXUWDQGWKH2KLR6XSUHPH&RXUWGHQLHG6FRWW¶VUHTXHVWIRU
DIXUWKHUVWD\RIKLVH[HFXWLRQ7KH8QLWHG6WDWHV6XSUHPH
&RXUW GHFOLQHG WR KHDU 6FRWW¶V FKDOOHQJH WR WKH
FRQVWLWXWLRQDOLW\ RI WKH 2KLR 6XSUHPH &RXUW¶V GHFLVLRQ
GHQ\LQJ D IXUWKHU VWD\ RI H[HFXWLRQ 6FRWW WKHQ ILOHG D
³6XSSOHPHQWDO3HWLWLRQIRUD:ULWRI+DEHDV&RUSXV´VHHNLQJ
WRDVVHUWKLVFODLPVWKDWKHLVQRWFRPSHWHQWWREHH[HFXWHG
WKDWWKH2KLRSURFHGXUHVIRUGHWHUPLQLQJKLVFRPSHWHQFHWR
EH H[HFXWHG DUH XQFRQVWLWXWLRQDO DQG WKDW WKH (LJKWK
$PHQGPHQWSURKLELWVWKHH[HFXWLRQRIRQHZKRLVVHYHUHO\
PHQWDOO\LOO7KHGLVWULFWFRXUWGHQLHGWKHSHWLWLRQDQG6FRWW
LV QRZ EHIRUH WKLV FRXUW VHHNLQJ D VWD\ RI KLV VFKHGXOHG
H[HFXWLRQDQGDUHYHUVDORIWKHGLVWULFWFRXUW¶VGHQLDORIKLV
SHWLWLRQIRUDZULWRIKDEHDVFRUSXV
,,$QDO\VLV
6FRWW¶V SHWLWLRQ EHIRUH WKH GLVWULFW FRXUW FODLPV ILUVW WKDW
2KLR¶VVWDWXWRU\SURFHGXUHVIRUGHWHUPLQLQJKLVFRPSHWHQFH
WREHH[HFXWHGDUHXQFRQVWLWXWLRQDODQGWKDWWKH2KLRFRXUWV¶
DSSOLFDWLRQVRIWKRVHSURFHGXUHVWR KLP YLRODWHGKLVULJKWV
XQGHUWKH(LJKWK$PHQGPHQWDQGGHQLHGKLPGXHSURFHVV
+LVSHWLWLRQQH[WFODLPVWKDW)RUGY:DLQZULJKW86
LVREVROHWH)LQDOO\KLVSHWLWLRQDVVHUWVWKDWWKH

-- 3 of 4 --

6FRWWY0LWFKHOO 1R
(LJKWK $PHQGPHQW SURKLELWV WKH H[HFXWLRQ RI RQH ZKR LV
VHYHUHO\PHQWDOO\LOO7KH6WDWHDUJXHVWKDWWKLVSHWLWLRQLVQRW
DVXSSOHPHQWDOSHWLWLRQDQGWKDWXQGHUWKH$('3$LWLVEDUUHG
LQLWVHQWLUHW\XQOHVV6FRWWREWDLQVSHUPLVVLRQIURPWKLVFRXUW
WRILOHDVHFRQGDQGVXFFHVVLYHSHWLWLRQ6FRWWPDLQWDLQVWKDW
QRQHRIWKHVHFODLPVZDVULSHZKHQKHILOHGKLVLQLWLDOSHWLWLRQ
IRUKDEHDVUHOLHILQDQGWKHUHIRUHWKH$('3$EDULVQRW
DSSOLFDEOH
:HDJUHHZLWKWKH6WDWHWKDW6FRWW¶VFODLPWKDWWKH(LJKWK
$PHQGPHQWSURKLELWVWKHH[HFXWLRQRIRQHZKRLVVHYHUHO\
PHQWDOO\LOOLVEDUUHG$OWKRXJK6FRWWZDVQRWVSHFLILFDOO\
GLDJQRVHGDVEHLQJVFKL]RSKUHQLFXQWLOZHOODIWHUKHILOHGKLV
LQLWLDOSHWLWLRQLQKLVRZQSOHDGLQJVPDNHLWFOHDUWKDW
KHKDGVXIIHUHGIURPVHYHUHPHQWDOLOOQHVVIRU\HDUVEHIRUH
WKDW SHWLWLRQ ZDV ILOHG $Q\ FODLP WKDW KLV H[HFXWLRQ ZDV
SURKLELWHGE\WKH(LJKWK$PHQGPHQWEHFDXVHKHZDVVHYHUHO\
PHQWDOO\LOOZDVWKHUHIRUHULSHDWWKHWLPHWKDWKHILOHGWKDW
SHWLWLRQEXWWKHSHWLWLRQPDNHVQRPHQWLRQRIVXFKDFODLP
$FFRUGLQJO\ ZH FRQFOXGH WKDW WKH GLVWULFW FRXUW HUUHG LQ
FRQVLGHULQJWKLVFODLPRQWKHPHULWV
:HGRQRWDJUHHZLWKWKH6WDWHKRZHYHUWKDW6FRWW¶VFODLP
WKDWKHZDVGHQLHGKLV(LJKWK$PHQGPHQWDQGGXHSURFHVV
ULJKWVEHFDXVH2KLR¶VSURFHGXUHVIRUGHWHUPLQLQJFRPSHWHQFH
IRU SXUSRVHV RI H[HFXWLRQ DUH XQFRQVWLWXWLRQDO LV VLPLODUO\
EDUUHG6FRWW¶VILUVWH[HFXWLRQGDWHSUHFHGHGKLVILOLQJRIKLV
LQLWLDO IHGHUDO KDEHDV SHWLWLRQ DQG KH FHUWDLQO\ FRXOG KDYH
UDLVHGKLV)RUGFODLPLQWKDWSHWLWLRQ+RZHYHUWKH6WDWH
GRHV QRW GLVSXWH 6FRWW¶V FODLP WKDW KH LV VFKL]RSKUHQLF
QHLWKHUGRHVLWGLVSXWHKLVFODLPWKDWWKLVPHQWDOGLVHDVHLV
SURJUHVVLYHDQGWKDWLWVYLFWLPVGRQRWLPSURYHEXWRQO\JHW
ZRUVH $FFRUGLQJO\ 6FRWW¶V LPPLQHQW H[HFXWLRQ DQG KLV
FODLP WR D GHFOLQLQJ PHQWDO VWDWH OHDG XV WR FRQFOXGH
FRQVLVWHQWZLWKRXURSLQLRQLQ&RHY%HOO)G
WK&LU WKDWZKLOHWKLVFODLPPLJKWQRWKDYHEHHQ
ULSHVL[\HDUVDJRLWLVFHUWDLQO\ULSHQRZ
:HWKHUHIRUHFRQFOXGHWKDWZHZLOODGGUHVVRQLWVPHULWV
6FRWW¶V FKDOOHQJH WR WKH DGHTXDF\ RI WKH )RUG VWDQGDUG
1R 6FRWWY0LWFKHOO
8QGHUWKHSDUWLFXODUIDFWVRIWKLVFDVH6FRWWKDGQRUHDVRQWR
FKDOOHQJH WKHDGHTXDF\RIWKDWVWDQGDUGXQWLOKHUDLVHGKLV
FODLPWKDWKHLVQRWFRPSHWHQWWREHH[HFXWHG
:HILQGKRZHYHUQRHUURULQ-XGJH2¶0DOOH\¶VFRQFOXVLRQ
WKDW ZH DUH ERXQG E\ )RUG EHFDXVH ³QHLWKHU WKH 6XSUHPH
&RXUWQRUWKH&RXUWRI$SSHDOVLQWKLV&LUFXLWKDVHYHULVVXHG
DQ RSLQLRQ TXHVWLRQLQJ LWV YLWDOLW\´ -XGJH 2¶0DOOH\ LV
HQWLUHO\FRUUHFWDQGVKHLVIXUWKHUFRUUHFWWKDWWKH6XSUHPH
&RXUW¶VJUDQWRIFHUWLRUDULLQ0F&DUYHUY1RUWK&DUROLQD
6 &W GRHV QRW DIIHFW WKLV UHVXOW :H
WKHUHIRUHFRQFOXGHWKDWWKHGHILQLWLRQRILQVDQLW\VHWRXWLQ
2KLR¶V)RUGVWDWXWH2+,2 5(9 &2'( $11† $
SURYLGHV WKH DSSURSULDWH VWDQGDUG IRU GHWHUPLQLQJ ZKHWKHU
6FRWWLVFRPSHWHQWWREHH[HFXWHG7KDWGHILQLWLRQLV³WKDW
WKHFRQYLFWLQTXHVWLRQGRHVQRWKDYHWKHPHQWDOFDSDFLW\WR
XQGHUVWDQGWKHQDWXUH RIWKHGHDWKSHQDOW\DQGZK\LWZDV
LPSRVHGXSRQWKHFRQYLFW´,G
:HDUHOHIWZLWK6FRWW¶VFODLPWKDW2KLR¶VFRXUWVGHQLHG
KLP GXH SURFHVV E\ EXUGHQLQJ KLP ZLWK SURYLQJ KLV
FRPSHWHQF\XQGHU)RUGDQGE\GHQ\LQJKLPDQRSSRUWXQLW\
IRUDQHYLGHQWLDU\KHDULQJRQWKDWTXHVWLRQ:HILQGQRPHULW
WRWKLVFODLP
)RUG SURYLGHV WKDW ³DQ LQVDQH GHIHQGDQW¶V (LJKWK
$PHQGPHQWLQWHUHVWLQIRUHVWDOOLQJKLVH[HFXWLRQXQOHVVRU
XQWLOKHUHFRYHUVKLVVDQLW\FDQQRWEHGHSULYHGZLWKRXWDμIDLU
KHDULQJ¶,QGHHGIXQGDPHQWDOIDLUQHVVLVWKHKDOOPDUNRIWKH
SURWHFWLRQVDIIRUGHGE\WKH'XH3URFHVV&ODXVH´86DW
3RZHOO-FRQFXUULQJ $SSO\LQJWKLVSULQFLSOHZHKDYH
UHFRJQL]HGWKDW³WKHVWDWHLVHQWLWOHGWRH[HUFLVHGLVFUHWLRQLQ
FUHDWLQJ LWV RZQ SURFHGXUHV DV ORQJ DV EDVLF IDLUQHVV LV
REVHUYHG´&RHY%HOO)G WK&LU
LQWHUQDODOWHUDWLRQVDQGFLWDWLRQRPLWWHG FRQFOXGLQJWKDWWKH
SURFHGXUHV IROORZHG E\ WKH 7HQQHVVHH FRXUWV VDWLVILHG WKH
UHTXLUHPHQWV RI GXH SURFHVV DQG GLG QRW FRQVWLWXWH DQ
XQUHDVRQDEOHDSSOLFDWLRQRI)RUG
2KLR¶V)RUGVWDWXWHSURYLGHV

-- 4 of 4 --