01a0290p.06

99-3546Court of Appeals for the Sixth CircuitAug 28, 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
&/(9(/$1' %5$1&+
1$7,21$/ $662&,$7,21 )25
7+( $'9$1&(0(17 2)
&2/25(' 3(23/(DQG
1$7,21$/ $662&,$7,21 )25
7+( $'9$1&(0(17 2)
&2/25(' 3(23/(
3ODLQWLIIV$SSHOODQWV
Y
&,7< 2) 3$50$ 2+,2
'HIHQGDQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG
1R².DWKOHHQ0F'RQDOG2¶0DOOH\'LVWULFW
-XGJH
$UJXHG-DQXDU\
'HFLGHGDQG)LOHG$XJXVW

-- 1 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
7KH +RQRUDEOH $YHUQ &RKQ 6HQLRU 8QLWHG 6WDWHV 'LVWULFW -XGJH
IRU WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ
%HIRUH%2**6DQG0225(&LUFXLW-XGJHV&2+1
6HQLRU'LVWULFW-XGJH
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(''DYLG/5RVH526( 526(:DVKLQJWRQ
'& IRU $SSHOODQWV -RVHSK - 0RUIRUG $57(5
+$''(1 &OHYHODQG 2KLR IRU $SSHOOHH 21 %5,()
'DYLG / 5RVH 526( 526( :DVKLQJWRQ '& IRU
$SSHOODQWV -RVHSK - 0RUIRUG $57(5 +$''(1
&OHYHODQG2KLRIRU$SSHOOHH
0225(-GHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK
&2+1'-MRLQHG%2**6- SS GHOLYHUHGD
VHSDUDWHGLVVHQWLQJRSLQLRQ
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
.$5(11(/6210225(&LUFXLW-XGJH2Q$XJXVW
3ODLQWLIIV$SSHOODQWV WKH &OHYHODQG %UDQFK RI WKH
1DWLRQDO$VVRFLDWLRQIRUWKH$GYDQFHPHQWRI&RORUHG3HRSOH
³1$$&3´ DQGWKH1$$&3 FROOHFWLYHO\UHIHUUHGWRDV³WKH
1$$&3´ ILOHGWKLVDFWLRQDJDLQVWWKH&LW\RI3DUPD2KLR
³3DUPD´ DOOHJLQJWKDW3DUPDGLVFULPLQDWHVRQWKHEDVLVRI
UDFH LQ LWV UHFUXLWPHQW VHOHFWLRQ DQG KLULQJ RI PXQLFLSDO
HPSOR\HHV2Q0DUFKQHDUO\HLJKW\HDUVODWHUDQG
DIWHUWKHODZVXLWKDGEHHQWUDQVIHUUHGWZLFHZLWKLQWKH8QLWHG

-- 2 of 26 --

1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

7KLV FDVH ZDV RULJLQDOO\ DVVLJQHG WR WKH ODWH -XGJH )UDQN
%DWWLVWL $IWHU KLV GHDWK WKH FDVH ZDV WUDQVIHUUHG LQ 1RYHPEHU RI
WR -XGJH 5REHUW .UXSDQVN\ ZKR ZDV WKHQ VLWWLQJ DV D GLVWULFW MXGJH E\
GHVLJQDWLRQ 2Q $SULO -XGJH .DWKOHHQ 2¶0DOOH\ WKH MXGJH WR
ZKRP WKLV FDVH KDG EHHQ WUDQVIHUUHG WKH SUHYLRXV PRQWK HQWHUHG DQ RUGHU
WR ZKLFK WKH SDUWLHV DJUHHG 7KLV RUGHU GHQLHG ZLWKRXW SUHMXGLFH DV PRRW
DOO SHQGLQJ PRWLRQV VRPH RI ZKLFK KDG EHHQ SHQGLQJ IRU PRUH WKDQ IRXU
\HDUV DQG UHTXHVWHG WKDW WKH SDUWLHV VHWWOH RU UHQHZ DQ\ SUHYLRXV PRWLRQV
,Q 3DUPD DQG WKH 1$$&3 ILOHG UHQHZHG PRWLRQV IRU VXPPDU\
MXGJPHQW
6WDWHV'LVWULFW&RXUWIRUWKH1RUWKHUQ'LVWULFWRI2KLRWKH
GLVWULFWFRXUWJUDQWHGVXPPDU\MXGJPHQWLQIDYRURI3DUPD
KROGLQJERWKWKDWWKH1$$&3ODFNHGVWDQGLQJWRDVVHUWLWV
FODLPV DQG WKDW LWV FODLPV ZHUH PRRW 7KH 1$$&3 QRZ
DSSHDOV WKH GLVWULFW FRXUW¶V GHFLVLRQ )RU WKH UHDVRQV WKDW
IROORZZH5(9(56(WKHMXGJPHQWRIWKHGLVWULFWFRXUWDQG
5(0$1' IRU IXUWKHU SURFHHGLQJV FRQVLVWHQW ZLWK WKLV
RSLQLRQ
,%$&.*5281'
$3$50$¶65$&,$/+,6725<
3DUPD LV D VXEXUE RI &OHYHODQG 2KLR ORFDWHG RQ WKH
VRXWKHUQERUGHURI&OHYHODQGQHDUWKHFHQWHURIWKHHDVWZHVW
D[LVRI&X\DKRJD&RXQW\,QDIHGHUDOGLVWULFWFRXUW
MXGJH IRXQG WKDW 3DUPD D SUHGRPLQDQWO\ ZKLWH FLW\ KDG
GLVFULPLQDWHGDJDLQVW%ODFNVLQSURYLGLQJORZDQGPRGHUDWH
LQFRPHKRXVLQJDQGLVVXHGDUHPHGLDORUGHUUHTXLULQJ3DUPD
WR WDNH DIILUPDWLYH VWHSV WR HOLPLQDWH LWV GLVFULPLQDWRU\
KRXVLQJSUDFWLFHVDQGWKHLUHIIHFWV6HH8QLWHG6WDWHVY&LW\
RI3DUPD)6XSS 1'2KLR DII¶G
)G WK&LU FHUWGHQLHG86
VHHDOVR8QLWHG6WDWHVY&LW\RI3DUPD)6XSS
1'2KLR UHPHGLDORUGHU DII¶GLQSDUWDQGUHY¶GLQ
SDUW)G WK&LU FHUWGHQLHG86
'HVSLWHHIIRUWVE\WKHFLW\WRGLYHUVLI\KRZHYHUWKH
PLQRULW\ SRSXODWLRQ RI 3DUPD KDV JURZQ RQO\ VOLJKWO\
6SHFLILFDOO\ 3DUPD¶V EODFN SRSXODWLRQ KDV UHPDLQHG YHU\

-- 3 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
,Q 3DUPD ZDV ZKLWH ZLWK :KLWHV
$VLDQV RU 3DFLILF ,VODQGHUV %ODFNV $PHULFDQ ,QGLDQV (VNLPRV
RU $OHXWV DQG SHUVRQV EHORQJLQJ WR RWKHU UDFHV LQ LWV UHVLGHQW
SRSXODWLRQ ([FOXGLQJ %ODFNV WKH QRQZKLWH SRSXODWLRQ RI 3DUPD
HTXDOHG DSSUR[LPDWHO\ RI 3DUPD¶V UHVLGHQW SRSXODWLRQ
&(1686 *(1(5$/ 3238/$7,21 $1' +286,1* &+$5$&7(5,67,&6
$FFRUGLQJ WR WKH &HQVXV RI 3DUPD¶V UHVLGHQW SRSXODWLRQ LV
ZKLWH 7KH UHPDLQGHU RI WKH SRSXODWLRQ LQ 3DUPD LV DV IROORZV %ODFN RU
$IULFDQ$PHULFDQ $PHULFDQ ,QGLDQ DQG $ODVND 1DWLYH
$VLDQ RWKHU UDFHV DQG WZR RU PRUH UDFHV 86
&(1686 %85($8 &(1686 5(',675,&7,1* '$7$ $ VHSDUDWH
FDOFXODWLRQ UHIOHFWV WKDW RI WKH \HDU SRSXODWLRQ LV +LVSDQLF RU
/DWLQR ,G
3DUPD¶V $IILUPDWLYH $FWLRQ 3ROLF\ SURYLGHV
³$IILUPDWLYH $FWLRQ´ VKDOO FRQQRWH WKH &LW\ RI
3DUPD¶V SRVLWLYH DQG XQHTXLYRFDO FRPPLWPHQW WR VXFK
PHDVXUHV WKDW LW GHHPV QHFHVVDU\ WR HUDGLFDWH DQ\ RU DOO
YHVWLJLXP RI GLVFULPLQDWRU\ HPSOR\PHQW SUDFWLFHV WKDW
PD\ KDYH LQKLELWHG DQG FRQWUDYHQHG DOO PLQRULWLHV
ZRPHQ WKH DJHG DQG GLVDEOHG IURP IXOO DQG HTXDO
SDUWLFLSDWLRQ
,W GRHV UHTXLUH WKDW YLJRURXV DFWLRQ EH WDNHQ
WR ILQG ZD\V WR ORFDWH DQG DWWUDFW TXDOLILHG PLQRULWLHV
ZRPHQ WKH DJHG DQG GLVDEOHG DQG WR LQFOXGH
PLQRULWLHV ZRPHQ WKH DJHG DQG GLVDEOHG LQ WUDLQLQJ
SURJUDPV VR WKDW WKHLU PRYHPHQW ZLOO EH DFFHOHUDWHG
LQWR WKRVH RFFXSDWLRQV DQG OHYOHV>VLF@ LQ ZKLFK WKH\
VPDOO )RU H[DPSOH LQ %ODFNV FRPSULVHG
DSSUR[LPDWHO\RUSHUVRQVRXWRI3DUPD¶V
UHVLGHQWSRSXODWLRQVHH3DUPD)6XSSDWDQG
WZHQW\\HDUVODWHULQ%ODFNVVWLOOFRPSULVHGOHVVRQH
SHUFHQWRI3DUPD¶VUHVLGHQWSRSXODWLRQQDPHO\RQO\RU
SHUVRQVRXWRI3DUPD¶VUHVLGHQWSRSXODWLRQ86
&(1686 %85($8 &(1686 2) 3238/$7,21 $1'
+286,1*
/LNHWKHUHVLGHQWSRSXODWLRQRI3DUPDGDWDVXJJHVWWKDWWKH
UDFLDOFRPSRVLWLRQRI3DUPD¶VPXQLFLSDOZRUNIRUFHDOVRODFNV
GLYHUVLW\)RUH[DPSOHGHVSLWHWKHHQDFWPHQWLQRID
IRUPDODIILUPDWLYHDFWLRQSURJUDPE\3DUPDKDGRQO\
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

,UHDOL]HWKDWWKLVFDVHKDVEHHQOLWLJDWHGIRURYHUWHQ\HDUV
,DOVRUHDOL]HWKDWWKH1$$&3EHOLHYHVWKDWHYHQZLWKWKH
FKDQJHV PDGH E\ WKH &LW\ RI 3DUPD WR LWV PXQLFLSDO
UHFUXLWPHQWDQGKLULQJSUDFWLFHVRYHUWKHVHSDVWWHQ\HDUVWKH
V\VWHPLVVWLOOGLVFULPLQDWRU\+RZHYHUQHLWKHUWKHGHOD\LQ
WKLV OLWLJDWLRQ QRU WKH VHULRXV FODLPV WKDW WKH 1$$&3 LV
EULQJLQJMXVWLI\DGHSDUWXUHIURPWKHIXQGDPHQWDOUHTXLUHPHQW
WKDWDSODLQWLIIPXVWKDYHDFRQWLQXLQJLQWHUHVWLQWKHRQJRLQJ
OLWLJDWLRQ LQ RUGHU IRU WKLV FRXUW WR H[HUFLVH WKH OLPLWHG
MXULVGLFWLRQLWLVJUDQWHGE\WKH&RQVWLWXWLRQ6HH,URQ$UURZ
+RQRU6RF¶\Y+HFNOHU86 ³)HGHUDO
FRXUWVODFNMXULVGLFWLRQWRGHFLGHPRRWFDVHVEHFDXVHWKHLU
FRQVWLWXWLRQDO DXWKRULW\ H[WHQGV RQO\ WR DFWXDO FDVHV DQG
FRQWURYHUVLHV´ 7KLVFDVHLVPRRWEHFDXVH7RPEOLQ±DQG
WKHUHIRUHWKH1$$&3±QRORQJHUKDYHDFRQWLQXLQJLQWHUHVW
LQWKLVOLWLJDWLRQ,WKHUHIRUHUHVSHFWIXOO\GLVVHQW

-- 4 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
1$$&3 PHPEHUV ZRXOG KDYH VWDQGLQJ LI WKH\ KDG EURXJKW VXLW EXW
ILQGLQJ WKDW VWDQGLQJ GHILFLHQFLHV KDG EHHQ FXUHG E\ QHZ FRPSODLQW
EURXJKW E\ 1$$&3
,W VKRXOG DOVR EH QRWHG WKDW WKH 1$$&3 GLG QRW VHHN WR FHUWLI\
D FODVV SXUVXDQW WR )(' 5 &,9 3 ,I LW KDG GRQH VR DQG LI 7RPEOLQ
KDG EHHQ WKH FODVV UHSUHVHQWDWLYH LW LV OLNHO\ WKDW WKH 1$$&3¶V FDVH FRXOG
SURFHHG HYHQ WKRXJK 7RPEOLQ¶V FODLP KDG EHFRPH PRRW 6HH 6RVQD Y
,RZD 86 7KH &RXUW LQ 6RVQD UHFRJQL]HG WKDW
ZKHQ WKH GLVWULFW FRXUW FHUWLILHG WKH FODVV ³WKH FODVV RI XQQDPHG SHUVRQV
GHVFULEHG LQ WKH FHUWLILFDWLRQ DFTXLUHG D OHJDO VWDWXV VHSDUDWH IURP WKH
LQWHUHVW DVVHUWHG E\ >WKH FODVV UHSUHVHQWDWLYH@´ ,G DW 7KH &RXUW KHOG
WKDW
7KHUH PXVW QRW RQO\ EH D QDPHG SODLQWLII ZKR KDV VXFK
D FDVH RU FRQWURYHUV\ DW WKH WLPH WKH FRPSODLQW LV ILOHG
DQG DW WKH WLPH WKH FODVV DFWLRQ LV FHUWLILHG E\ WKH
'LVWULFW &RXUW SXUVXDQW WR 5XOH EXW WKHUH PXVW EH D
OLYH FRQWURYHUV\ DW WKH WLPH WKLV &RXUW UHYLHZV WKH FDVH
7KH FRQWURYHUV\ PD\ H[LVW KRZHYHU EHWZHHQ D
QDPHG GHIHQGDQW DQG D PHPEHU RI WKH FODVV UHSUHVHQWHG
E\ WKH QDPHG SODLQWLII HYHQ WKRXJK WKH FODLP RI WKH
QDPHG SODLQWLII KDV EHFRPH PRRW
,G DW 6LQFH WKH 1$$&3 GLG QRW VHHN WR REWDLQ FODVV FHUWLILFDWLRQ WKH
IDFW WKDW D FRQWURYHUV\ PD\ FRQWLQXH WR H[LVW EHWZHHQ XQQDPHG PHPEHUV
RI WKH 1$$&3 DQG 3DUPD GRHV QRW VDYH WKLV FDVH IURP EHFRPLQJ PRRW
RQFH WKH FODLPV RI WKH 1$$&3¶V QDPHG SODLQWLIIV KDYH EHFRPH PRRW DV
, EHOLHYH WKH\ KDYH
Y-RKQVRQ)G WK&LU ³7KDWRWKHU
SHUVRQVPD\OLWLJDWHDVLPLODUFODLPGRHVQRWVDYHDFDVHIURP
PRRWQHVV´ 1RQHRIWKHSODLQWLIIVWKDWWKH1$$&3UHOLHG
XSRQ WR DFKLHYH VWDQGLQJ LQ WKLV FDVH FRQWLQXH WR KDYH D
³SHUVRQDOVWDNH´LQWKHRXWFRPHRIWKLVOLWLJDWLRQ:DUWK
86DW7KHVLQJOHSODLQWLIIWKDWWKHFRXUWUHOLHVXSRQLQ
RUGHU WR KROG WKDW WKH 1$$&3 KDV VWDQGLQJ 7RPEOLQ QR
ORQJHUKDVDSHUVRQDOVWDNHLQWZRZD\V KHLVQRORQJHUD
PHPEHURIWKH1$$&3DQG KHQRORQJHUDOOHJHVDQLQMXU\
WKDWFDQEHUHGUHVVHGE\DIDYRUDEOHMXGLFLDOGHFLVLRQ
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

DUH VLJQLILFDQWO\ XQGHUUHSUHVHQWHG
-RLQW $SSHQGL[ ³-$´ DW HPSKDVLV DGGHG
)RU WKDW ILVFDO \HDU 3DUPD KLUHG QHZ PXQLFLSDO HPSOR\HHV
QRQH RI ZKRP ZHUH EODFN -$ DW $
7KH &OHYHODQG PHWURSROLWDQ DUHD JHQHUDOO\ FRQVLVWV RI
&X\DKRJD *HDXJD /DNH DQG 0HGLQD FRXQWLHV 7KLV DUHD ³LV FRQVLGHUHG
E\ WKH IHGHUDO JRYHUQPHQW WR EH D UHDOLVWLF FRPPXWLQJ DUHD IRU JHRJUDSKLF
HQWLWLHV ZLWKLQ ZKLFK LW LV ORFDWHG´ -$ DW ([SHUW 5HSRUW RI
+HUEHUW +DPPHUPDQ
RQH EODFN HPSOR\HH RXW RI PRUH WKDQ IXOOWLPH
HPSOR\HHVDQXPEHUHTXLYDOHQWWRDSSUR[LPDWHO\RIWKH
FLW\¶VIXOOWLPHZRUNIRUFH-RLQW$SSHQGL[ ³-$´ DW
([SHUW 5HSRUW RI +HUEHUW +DPPHUPDQ
5LHV'HS 6L[\HDUVODWHULQ3DUPDHPSOR\HGRQO\
WZREODFNIXOOWLPHHPSOR\HHVRXWRIIXOOWLPHHPSOR\HHV
DQG QR EODFN SDUWWLPH HPSOR\HHV RXW RI SDUWWLPH
HPSOR\HHVDQXPEHUZKLFKUHSUHVHQWVDSSUR[LPDWHO\
RIWKHFLW\¶VHQWLUHPXQLFLSDOZRUNIRUFH-$DW$
$SDUW IURP WKHVH WZR EODFN IXOOWLPH HPSOR\HHV RQO\ RQH
RWKHU HPSOR\HH RI 3DUPD ZDV QRQZKLWH LQ WKDW
HPSOR\HHZDVOLVWHGDVDQ$VLDQRU3DFLILF,VODQGHU-$DW
$
3DUPD¶VVWDWLVWLFVUHJDUGLQJWKHHPSOR\PHQWRI%ODFNVLQ
PXQLFLSDOMREVVWDQGLQVWDUNFRQWUDVWWRWKRVHUHJDUGLQJWKH
HPSOR\PHQWRI%ODFNVLQWKHSULYDWHVHFWRURI3DUPDDQGLQ
WKHSULYDWHDQGSXEOLFVHFWRUVRIWKH&OHYHODQGPHWURSROLWDQ
DUHD $FFRUGLQJ WR DQ (TXDO (PSOR\PHQW 2SSRUWXQLW\
³((2´ UHSRUW LQ %ODFNV FRQVWLWXWHG D VLJQLILFDQWO\
KLJKHUSRUWLRQRIWKHSULYDWHZRUNIRUFHLQ3DUPDWKDQLQLWV
PXQLFLSDOZRUNIRUFHPDNLQJXSRURIWKH
ZRUNHUVLQSULYDWHHPSOR\PHQWLQ3DUPD-$DW
([SHUW5HSRUWRI+HUEHUW+DPPHUPDQ 6LPLODUO\D
UHSRUWRIWKHUDFLDOFRPSRVLWLRQRIWKHSULYDWHZRUNIRUFHLQ
WKH &OHYHODQG PHWURSROLWDQ DUHD VKRZHG WKDW %ODFNV
FRPSULVHGRIWKHZRUNHUVLQWKDWDUHD¶VSULYDWHVHFWRU

-- 5 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
-$DW ([SHUW5HSRUWRI+HUEHUW+DPPHUPDQ
0RUHLPSRUWDQWO\VWDWHDQGORFDOJRYHUQPHQWHPSOR\HUVLQ
WKH&OHYHODQGPHWURSROLWDQDUHDHPSOR\HGDZRUNIRUFHWKDW
ZDV EODFN QHDUO\ GRXEOH WKDW RI WKH PHWURSROLWDQ
DUHD¶VSULYDWHVHFWRUPRUHWKDQWULSOHWKDWRI3DUPD¶VSULYDWH
VHFWRUDQGPRUHWKDQWKLUW\WZRWLPHVWKDWRI3DUPD¶VSXEOLF
VHFWRU 6HH -$ DW ([SHUW 5HSRUW RI +HUEHUW
+DPPHUPDQ ,Q WKH RSLQLRQ RI WKH 1$$&3¶V H[SHUW
+HUEHUW +DPPHUPDQ D ODERU PDUNHW HFRQRPLVW WKLV YDVW
GLIIHUHQFHEHWZHHQWKHSHUFHQWDJHRIHPSOR\HHVLQWKHSXEOLF
DQG SULYDWH VHFWRUV RI 3DUPD ZDV XQXVXDO EHFDXVH ³WKH
HPSOR\PHQW RI EODFNV E\ WKH VWDWH DQG ORFDO JRYHUQPHQW
SXEOLFVHFWRULV>JHQHUDOO\@VXEVWDQWLDOO\KLJKHUWKDQSULYDWH
HPSOR\PHQW´-$DW ([SHUW5HSRUWRI+HUEHUW
+DPPHUPDQ $FFRUGLQJWR+DPPHUPDQ³>W@KHUDWLRRIWKH
SHUFHQWDJHRI EODFNVLQSXEOLFVHFWRUMREV>LQ@WRWKH
SHUFHQWDJH RI EODFNV LQ SULYDWH HVWDEOLVKPHQW MREV >ZDV@
´DQG³>D@SSO\LQJ>WKDW@QDWLRQDOUDWLREODFNHPSOR\PHQW
DYDLODEOH WR 3DUPD ZRXOG EH ´ -$ DW
([SHUW5HSRUWRI+HUEHUW+DPPHUPDQ 6HHDOVR1$$&3Y
7RZQRI(DVW+DYHQ)6XSS '&RQQ
QRWLQJWKDW³%ODFNVJHQHUDOO\KDYHDKLJKHUUHSUHVHQWDWLRQLQ
JRYHUQPHQWWKDQSULYDWHLQGXVWU\´
+DPPHUPDQ DOVR H[SODLQHG WKDW 3DUPD¶V SHUFHQWDJH RI
EODFN PXQLFLSDO ZRUNHUV QRW RQO\ DSSHDUHG ORZ ZKHQ
FRPSDUHG WR WKH SHUFHQWDJH RI EODFN ZRUNHUV LQ WKH FLW\¶V
SULYDWH VHFWRU RU WKH SXEOLF DQG SULYDWH VHFWRUV RI WKH
&OHYHODQGPHWURSROLWDQDUHDEXWDOVRZKHQYLHZHGLQOLJKWRI
WKH EODFN ZRUNIRUFH DYDLODEOH WR PXQLFLSDO HPSOR\HUV LQ
3DUPDZKLFK+DPPHUPDQHVWLPDWHGWREHDERXWRI
WKHDYDLODEOHZRUNIRUFH8VLQJWKLVHVWLPDWHLQDQDQDO\VLVRI
WKH UDFLDO FRPSRVLWLRQ RI 3DUPD¶V QHZ PXQLFLSDO KLUHV LQ
+DPPHUPDQFDOFXODWHGEHWZHHQDQGVWDQGDUG
GHYLDWLRQVZKHQKHDQDO\]HGWKHVWDWLVWLFDOSUREDELOLW\WKDW
UDQGRPVHOHFWLRQZDVUHVSRQVLEOHIRUWKHDEVHQFHRI%ODFNV
IURPWKHJURXSRIQHZHPSOR\HHVKLUHGLQILVFDO\HDU
ILJXUHVZKLFKLQGLFDWHG³YHU\OLWWOHSUREDELOLW\WKDWWKHIDLOXUH
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

7KLV FDVH GLIIHUV IURP 0F3KHUVRQ LQ ZKLFK WKLV FRXUW KHOG WKDW
WKH IDFW WKH SODLQWLII KDG JUDGXDWHG IURP KLJK VFKRRO GLG QRW PDNH D FDVH
FKDOOHQJLQJ WKH 0LFKLJDQ +LJK 6FKRRO $WKOHWLF $VVRFLDWLRQ¶V HLJKW
VHPHVWHU HOLJLELOLW\ UXOH PRRW )G DW 7KH FRXUW UXOHG WKDW WKH
FRQWURYHUV\ UHPDLQHG DOLYH EHFDXVH WKH GLVWULFW FRXUW KDG JUDQWHG D
SUHOLPLQDU\ LQMXQFWLRQ DOORZLQJ 0F3KHUVRQ WR SOD\ KLJK VFKRRO EDVNHWEDOO
GHVSLWH KLV LQHOLJLELOLW\ XQGHU WKH UXOH 7KH FRXUW UXOHG WKDW LI WKH
DVVRFLDWLRQ ZDV DEOH WR KDYH WKH LQMXQFWLRQ UHYHUVHG RQ DSSHDO WKH OHJDO
LQWHUHVWV RI ERWK 0F3KHUVRQ DQG WKH DVVRFLDWLRQ ZRXOG EH DIIHFWHG VLQFH
0F3KHUVRQ¶V KLJK VFKRRO ZRXOG KDYH WR IRUIHLW DQ\ YLFWRULHV LQ JDPHV LQ
ZKLFK 0F3KHUVRQ SOD\HG DQG WKH DVVRFLDWLRQ FRXOG YDFDWH RU VWULNH WKH
UHFRUGV RI 0F3KHUVRQ DQG KLV KLJK VFKRRO EDVNHWEDOO WHDP ,G DW
,Q WKLV FDVH KRZHYHU 7RPEOLQ¶V OHJDO LQWHUHVWV ZRXOG QRW EH DIIHFWHG E\
DQ\ DFWLRQ RI WKLV FRXUW VLQFH WKHUH LV QR PRUH UHOLHI WKDW 7RPEOLQ
FRQWLQXHV WR VHHN
7KLV LV QRW WR VD\ WKDW WKH 1$$&3 ZRXOG EH SUHYHQWHG IURP
EULQJLQJ DQRWKHU FRPSODLQW DJDLQVW 3DUPD &I 1$$&3 Y 7RZQ RI
+DUULVRQ ) 6XSS '1- QRWLQJ WKDW 1$$&3¶V LQLWLDO
FRPSODLQW ZDV GLVPLVVHG EHFDXVH WKH 1$$&3 KDG QRW GHPRQVWUDWHG WKDW
7RPEOLQDGPLWVWKDWWKHUHZDVQRWKLQJHOVH3DUPDFRXOGGR
WR UHGUHVV WKH LQMXU\ KH FODLPHG WR KDYH VXIIHUHG ZKHQ KH
EURXJKWVXLWDJDLQVW3DUPD0RUHRYHU7RPEOLQVHHNVRQO\
IXWXUHLQMXQFWLYHUHOLHIQRWGDPDJHVIRUSDVWLQMXULHVKHKDV
VXIIHUHG6LQFHWKHUHLVQRIXWXUHLQMXQFWLYHUHOLHIWKDWWKLV
FRXUWFDQJLYHWR7RPEOLQWRUHGUHVVKLVLQMXULHVKLVFODLPKDV
EHFRPH PRRW $FFRUGLQJ WR WKLV FRXUW ³>W@KH WHVW IRU
PRRWQHVVLVZKHWKHUWKHUHOLHIVRXJKWZRXOGLIJUDQWHGPDNH
D GLIIHUHQFH WR WKH OHJDO LQWHUHVWV RI WKH SDUWLHV ´
0F3KHUVRQ)GDW LQWHUQDOTXRWDWLRQVRPLWWHG
$Q\ IXWXUH LQMXQFWLYH UHOLHI WKDW WKLV FRXUW FRXOG JUDQW
7RPEOLQZRXOGQRWPDNHDGLIIHUHQFHWRKLPVLQFHKHKDV
VWDWHGWKDW3DUPDKDVGRQHDOOLWFRXOGIRUKLP6HH6SHQFHU
86DW ³PRRWQHVVKRZHYHULWPD\KDYHFRPHDERXW
VLPSO\GHSULYHVXVRIRXUSRZHUWRDFWWKHUHLVQRWKLQJIRUXV
WRUHPHG\HYHQLIZHZHUHGLVSRVHGWRGRVR´
7KHIDFWWKDWWKH1$$&3LQJHQHUDOPD\VWLOOEHOLHYHWKDW
3DUPD¶VUHFUXLWPHQWDQGKLULQJSUDFWLFHVDUHGLVFULPLQDWRU\
GRHVQRWSUHYHQWWKLVFDVHIURPEHFRPLQJPRRW6HH6DPSOH

-- 6 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
WUDFHDEOH WR KHU UDFH 6HH 0DM 2S DW Q
ORQJHU UHSUHVHQWLQJ LQWHUHVWV RI DQ\ VSHFLILF PHPEHUV LWV
FODLPV KDYH EHFRPH PRRW &I +RSH ,QF Y &RXQW\ RI
'X3DJH)G WK&LU ³7KH6XSUHPH
&RXUW KDV QRW VHHQ ILW WR H[WHQG UHSUHVHQWDWLRQDO FDSDFLW\
VWDQGLQJ WR HQWLWLHV RWKHU WKDQ DVVRFLDWLRQV ZKLFK DFWXDOO\
UHSUHVHQW LQWHUHVWV RI SDUWLHV ZKRVH DIILOLDWLRQ ZLWK WKH
UHSUHVHQWDWLRQDO OLWLJDQW LV WKDW RI PHPEHUVKLS RU
VXEVWDQWLDOHTXLYDOHQWRIPHPEHUVKLS´
1RWRQO\LV7RPEOLQQRORQJHUDPHPEHURIWKH1$$&3
EXWKHQRORQJHUDOOHJHVDQLQMXU\WKDWFDQEHUHGUHVVHGE\D
IDYRUDEOHMXGLFLDOGHFLVLRQ6HH6SHQFHU86DW,WLV
WUXHWKDW7RPEOLQPDLQWDLQVDQLQWHUHVWLQZRUNLQJIRU3DUPD
EXW KLV GHSRVLWLRQ WHVWLPRQ\ LQGLFDWHV WKDW VLQFH WKH
FRPPHQFHPHQW RI WKLV OLWLJDWLRQ DQ\ LQMXU\ WKDW KH PLJKW
KDYH VXIILFLHQWO\ DOOHJHG IRU VWDQGLQJ SXUSRVHV QR ORQJHU
H[LVWV7RPEOLQDGPLWVWKDWDIWHUKLV0D\OHWWHUWR
3DUPD FRPSODLQLQJ WKDW KH ZDV QRW QRWLILHG RI PXQLFLSDO
SROLFH DQG ILUH H[DPLQDWLRQV KH GLG UHFHLYH D SRVWFDUG
LQIRUPLQJKLPRIWKHH[DP,QDGGLWLRQ7RPEOLQVWDWHGWKDW
DIWHUKHUHFHLYHGWKHSRVWFDUG³,MXVWGLGQRWVLWIRUWKHH[DP´
)LQDOO\7RPEOLQVWDWHGWKDW³WKHUHZDVQRWKLQJHOVH3DUPD
FRXOG GR´ ³>R@WKHU WKDQ WKH IDFW RI LQIRUPLQJ PH RI WKH
H[DPLQDWLRQ OLIWLQJ WKH UHVLGHQF\ UHTXLUHPHQW KDYLQJ D
YDOLGDWHGWHVWSXWWLQJDQRWLILFDWLRQLQWKH3ODLQ'HDOHURU
&DOO 3RVWVD\LQJWKDWRU>GHFODULQJ@WKDWWKH&LW\RI3DUPD
GRHVQRWGLVFULPLQDWHDJDLQVWPLQRULWLHVHVSHFLDOO\EODFNVLQ
WKHVDIHW\IRUFHVRUFLYLOVHUYLFHSRVLWLRQVDQGKLULQJPH
>L@I,VFRUHGKLJKHQRXJKZLWKDYDOLGDWHGWHVW´$OORIWKH
DFWLRQVWKDW7RPEOLQVWDWHGWKDW3DUPDFRXOGGR3DUPDKDG
GRQH HLWKHU E\ WKH WLPH 7RPEOLQ UHFHLYHG WKH SRVWFDUG
QRWLI\LQJ KLP RI WKH QH[W PXQLFLSDO SROLFH DQG ILUH
H[DPLQDWLRQRUVRRQDIWHU7KHRQO\DFWLRQ3DUPDGLGQRWGR
±KLULQJ7RPEOLQ±LVQRWEHFDXVHRIDQ\GLVFULPLQDWLRQRQ
3DUPD¶V SDUW EXW EHFDXVH 7RPEOLQ GLG QRW VLW IRU WKH
H[DPLQDWLRQ
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

8VLQJ WKH PRUH FRQVHUYDWLYH HVWLPDWH RI ZKLFK HTXDOV WKH
SHUFHQWDJH RI EODFN ZRUNHUV LQ 3DUPD¶V SULYDWH ZRUNIRUFH +DPPHUPDQ
FDOFXODWHG D GLVSDULW\ RI VWDQGDUG GHYLDWLRQV EHWZHHQ WKH H[SHFWHG DQG
DFWXDO QXPEHU RI EODFN HPSOR\HHV LQ 3DUPD¶V PXQLFLSDO ZRUNIRUFH -$
DW ([SHUW 5HSRUW RI +HUEHUW +DPPHUPDQ VWDWLQJ WKDW WKLV
³LQGLFDWHV QR PHDQLQJIXO SUREDELOLW\ WKDW WKH HYHQW KDV RFFXUUHG E\
FKDQFH´
7KH &HQVXV VKRZV WKDW WKH SHUFHQWDJH RI %ODFNV LQ
&X\DKRJD &RXQW\ KDG QRW FKDQJHG VLQFH ZLWK %ODFNV FRPSULVLQJ
RU LQGLYLGXDOV RXW RI WKH FRXQW\¶V UHVLGHQW
WRKLUHDQ\EODFNVZDVGXHWRFKDQFH´-$DW
([SHUW5HSRUWRI+HUEHUW+DPPHUPDQ
%3$50$¶6+,5,1*5(48,5(0(176
%HIRUH 3DUPD OLPLWHG HOLJLELOLW\ IRU PXQLFLSDO
HPSOR\PHQW WR ³ERQD ILGH´ UHVLGHQWV RI 3DUPD DQG
HPSOR\HHVRI3DUPDZHUHUHTXLUHGWRUHPDLQUHVLGHQWVGXULQJ
WKHLUHPSOR\PHQWZLWK3DUPD-$DW 2UGLQDQFH
,Q KRZHYHU 3DUPD PRGLILHG LWV UHVLGHQF\
UHTXLUHPHQWWRSHUPLWDQRQUHVLGHQWDSSOLFDQWWRFRPSHWHIRU
D PXQLFLSDO SRVLWLRQ VR ORQJ DV WKDW DSSOLFDQW HVWDEOLVKHG
³SHUPDQHQW´ UHVLGHQFH LQ WKH FLW\ ZLWKLQ HLJKWHHQ PRQWKV
DIWHUVWDUWLQJHPSOR\PHQW7KRVHZKRZHUHHPSOR\HHVRQWKH
HIIHFWLYH GDWH ZHUH UHTXLUHG WR UHPDLQ UHVLGHQWV RI 3DUPD
XQWLO WKH ILIWK DQQLYHUVDU\ RI WKH FRPPHQFHPHQW RI WKHLU
HPSOR\PHQW WKHUHDIWHU HPSOR\HHV FRXOG UHVLGH LQ DQ\
PXQLFLSDOLW\ ERUGHULQJ 3DUPD -$ DW
2UGLQDQFH
,Q3DUPDRQFHDJDLQDPHQGHGLWVUHVLGHQF\RUGLQDQFH
WRDOORZQRQUHVLGHQWDSSOLFDQWVWRREWDLQPXQLFLSDOMREVVR
ORQJDVWKH\PRYHGZLWKLQILIWHHQPLOHVRIWKHRXWHUERXQGDU\
RI3DUPDZLWKLQHLJKWHHQPRQWKVRIEHFRPLQJDPXQLFLSDO
HPSOR\HH-$DW 2UGLQDQFH 7KLVILIWHHQPLOH
ERXQGDU\ LQFRUSRUDWHG YLUWXDOO\ DOO RI &X\DKRJD &RXQW\
ZKLFKKDGDEODFNSRSXODWLRQRIRURIWKH
FRXQW\¶VUHVLGHQWVLQ86&(1686 %85($8

-- 7 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
SRSXODWLRQ 86 &(1686 %85($8 &(1686 5(',675,&7,1* '$7$

&(1686 2) 3238/$7,21 $1' +286,1* 2Q-XQH
3DUPDH[WHQGHGWKHERXQGDU\WRWZHQW\WZRPLOHV
-$DW 2UGLQDQFH
'HVSLWH WKH FKDQJHV WKDW KDYH EHHQ PDGH WR 3DUPD¶V
PXQLFLSDOMREUHTXLUHPHQWVWKHUHFRUGVKRZVWKDW3DUPDVWLOO
FRQWLQXHVWRDVNMREDSSOLFDQWVIRULQIRUPDWLRQUHJDUGLQJWKHLU
UHVLGHQF\EH\RQGWKHLUPDLOLQJDGGUHVV RQLWVHPSOR\PHQW
DSSOLFDWLRQ6SHFLILFDOO\3DUPDDVNVDSSOLFDQWVWRVSHFLI\
KRZPDQ\\HDUVDQGPRQWKVWKH\KDYHOLYHGLQ3DUPDLIWKH\
DUHUHVLGHQWVZKHWKHUWKH\KDYHUHODWLYHVHPSOR\HGE\WKH
FLW\DQGZKDWLVWKHUHVLGHQFHRIDQ\SHUVRQUHFRPPHQGLQJ
WKHPIRUHPSOR\PHQWZLWK3DUPD-$DW (PSOR\PHQW
$SSOLFDWLRQ $OVR LQ 6HSWHPEHU PRUH WKDQ D \HDU
DIWHUUHSHDOLQJLWVRIILFLDOUHVLGHQF\UHTXLUHPHQW3DUPDKLUHG
WKUHHLQGLYLGXDOV*UHJ.RKOHU9LQFHQW6HPDQLNDQG5REHUW
7DUURIURPDQHOLJLELOLW\OLVWWKDWZDVFUHDWHGEHIRUH3DUPD
UHSHDOHG LWV UHVLGHQF\ UHTXLUHPHQW VHH 6XSSOHPHQWDO
³6XSS´ -$DW-$DWDQGDIHZPRQWKV
WKHUHDIWHULQ$SULO3DUPDKLUHGWKUHHPRUHLQGLYLGXDOV
-RVHSK%REDN'DQLHO+HLQ]DQG2UYLOOH+LOGHEUDQGIURPDQ
HOLJLELOLW\ OLVW WKDW ZDV FUHDWHG EHIRUH 3DUPD UHSHDOHG LWV
UHVLGHQF\UHTXLUHPHQWVHH6XSS-$DW-$DW
$GGLWLRQDOO\ EDVHG RQ WKH GDWD SUHVHQWHG WR WKH GLVWULFW
FRXUWWKHYDVWPDMRULW\RIUHFHQWKLUHVIRU3DUPDKDYHEHHQ
UHVLGHQWV RI WKH FLW\ )RU H[DPSOH RI WKH WZHQW\HLJKW
DSSOLFDQWV ZKR VHFXUHG HPSOR\PHQW ZLWK 3DUPD LQ HDUO\
WZHQW\ILYHZHUHUHVLGHQWVRI3DUPDDQGHLJKWRIWKH
WZHQW\HLJKWKDGFORVHUHODWLYHVZKRZHUH3DUPDHPSOR\HHV
-$ DW )XUWKHUPRUH 3DUPD KDV KLUHG D
VXEVWDQWLDOQXPEHURILWVIXOOWLPHPXQLFLSDOHPSOR\HHVIURP
LWVSRRORISURYLVLRQDOSDUWWLPHRUWHPSRUDU\HPSOR\HHV
PDQ\RIZKRPZHUHUHFRPPHQGHGE\FXUUHQWHPSOR\HHVRI
3DUPD-$DW )RUH[DPSOHRXWRI
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

7KH RQO\ SODLQWLII ZKR ZDV D PHPEHU RI WKH 1$$&3 DW WKH WLPH
WKH 1$$&3 ILOHG LWV FRPSODLQW DQG ZKR KDV FRQWLQXHG WR EH D PHPEHU RI
WKH 1$$&3 WKURXJKRXW WKLV OLWLJDWLRQ LV 5KRQGD &UD\WRQ ZKR WKH FRXUW
FRQFHGHV FDQQRW EH UHOLHG XSRQ E\ WKH 1$$&3 WR REWDLQ VWDQGLQJ VLQFH
VKH FDQQRW GHPRQVWUDWH WKDW 3DUPD¶V GHFLVLRQ QRW WR KLUH KHU ZDV IDLUO\
,,
7KHFRXUWFRQFOXGHVWKDWWKH1$$&3KDVVWDQGLQJWRVXHRQ
EHKDOIRIRQO\RQHRILWVVHYHQSODLQWLIIV7RPEOLQEHFDXVHKH
VDWLVILHG DOO WKH QHFHVVDU\ UHTXLUHPHQWV IRU VWDQGLQJ DW WKH
WLPHWKLVOLWLJDWLRQFRPPHQFHG7KHFRXUWIDLOVWRHQJDJHLQ
DPRRWQHVVLQTXLU\KRZHYHU7KHUHDUHWZRZD\VLQZKLFK
7RPEOLQORVWDSHUVRQDOLQWHUHVWLQWKLVOLWLJDWLRQFDXVLQJKLV
FODLP DQG WKHUHIRUH WKH 1$$&3¶V FODLP WR EH UHQGHUHG
PRRW
7KH1$$&3KDVDVVHUWHGWKDWLWKDVDVVRFLDWLRQDOVWDQGLQJ
WR VXH 3DUPD 7KH FRXUW FRQFOXGHV WKDW WKH 1$$&3 KDG
DVVRFLDWLRQDO VWDQGLQJ ZKHQ LW EURXJKW VXLW DJDLQVW 3DUPD
EHFDXVH7RPEOLQZDVDPHPEHURIWKH1$$&3DWWKDWWLPH
6HH +XQW Y :DVKLQJWRQ 6WDWH $SSOH $GYHUWLVLQJ &RPP¶Q
86 ³DQDVVRFLDWLRQKDVVWDQGLQJWR
EULQJVXLWRQEHKDOIRILWVPHPEHUVZKHQLWVPHPEHUV
ZRXOGRWKHUZLVHKDYHVWDQGLQJWRVXHLQWKHLURZQULJKW´
7RPEOLQLVQRORQJHUDPHPEHURIWKH1$$&37RPEOLQ
WHVWLILHG LQ KLV GHSRVLWLRQ WKDW KH ZDV QR ORQJHU D
PHPEHU RI WKH 1$$&3 DQG WKDW KH KDG FHDVHG EHLQJ D
PHPEHULQWKHSDVWIHZ\HDUVSULRUWR+HVWDWHGWKDWKH
VWRSSHGEHLQJDPHPEHURIWKH1$$&3EHFDXVH³,SUREDEO\
MXVWVKLIWHGP\LQWHQWLRQVWRRWKHUWKLQJV´,QRUGHUIRUWKLV
FDVHWREHMXVWLFLDEOH³>W@KHDVVRFLDWLRQPXVWDOOHJHWKDWLWV
PHPEHUV RU DQ\ RQH RI WKHP DUH VXIIHULQJ LPPHGLDWH RU
WKUHDWHQHGLQMXU\DVDUHVXOWRIDFKDOOHQJHGDFWLRQRIWKHVRUW
WKDW ZRXOG PDNH RXW D MXVWLFLDEOH FDVH KDG WKH PHPEHUV
WKHPVHOYHVEURXJKWVXLW´:DUWKY6HOGLQ86
HPSKDVLV DGGHG 7KH 1$$&3 LV XQDEOH WR
GHPRQVWUDWHWKDWDQ\RQHRILWVPHPEHUVFRQWLQXHVWRKDYHD
SHUVRQDOLQWHUHVWLQWKLVOLWLJDWLRQ6LQFHWKH1$$&3LVQR

-- 8 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
DIWHU WKH\ ORVW WKHLU VWDWXV DV SUHVLGLQJ RIILFHUV RI VWDWH
OHJLVODWXUH *ROGHQY=ZLFNOHU86
KROGLQJWKDWSODLQWLIIQRORQJHUKDGDFRQWLQXLQJLQWHUHVWLQ
GHFODUDWRU\MXGJPHQWDFWLRQFKDOOHQJLQJVWDWXWHPDNLQJLWD
FULPH WR GLVWULEXWH DQRQ\PRXV OLWHUDWXUH LQ DQ HOHFWLRQ
FDPSDLJQ VLQFH SODLQWLII¶V FODLP UHODWHG WR D SDUWLFXODU
FRQJUHVVPDQZKRKDGOHIWRIILFHDIWHUWKHFRPPHQFHPHQWRI
OLWLJDWLRQ 5HFHQW6XSUHPH&RXUWFDVHVQDPHO\)ULHQGVRI
WKH (DUWK DQG $UL]RQDQV IRU 2IILFLDO (QJOLVK FRQWLQXH WR
HVSRXVHWKHSULQFLSOHWKDWDSODLQWLIIPXVWKDYHDFRQWLQXLQJ
LQWHUHVWLQRQJRLQJOLWLJDWLRQ
7KH&LW\&RPPXQLFDWLRQVFRXUW¶VXVHRIVWDQGLQJODQJXDJH
WR HQJDJH LQ D PRRWQHVV LQTXLU\ LV XQGHUVWDQGDEOH
³0RRWQHVVSULQFLSOHVPD\LQGHHGEOHQGTXLWHGLUHFWO\ZLWK
VWDQGLQJ 7KH EOHQG PD\ EH UHIOHFWHG VLPSO\ LQ WKH
SKUDVHVRIGHFLVLRQV´:5,*+7 (7 $/VXSUD†DW
&HUWDLQ SULQFLSOHV RI VWDQGLQJ WKHQ PD\ DIIHFW D
PRRWQHVV LQTXLU\ 7KLV ZDV GHPRQVWUDWHG LQ D UHFHQW
6XSUHPH&RXUWFDVHLQZKLFKWKH&RXUWDVVHVVHGZKHWKHUD
KDEHDV FRUSXV SHWLWLRQHU¶V ³VXEVHTXHQW UHOHDVH FDXVHG WKH
SHWLWLRQWREHPRRWEHFDXVHLWQRORQJHUSUHVHQWHGDFDVHRU
FRQWURYHUV\XQGHU$UWLFOH,,,´6SHQFHUY.HPQD86
7KH&RXUWVWDWHGWKDW³>W@KHSDUWLHVPXVWFRQWLQXH
WR KDYH D μSHUVRQDO VWDNH LQ WKH RXWFRPH¶ RI WKH ODZVXLW´
,ELG TXRWLQJ/HZLVY&RQWLQHQWDO%DQN&RUS86
7KH&RXUWPDGHFOHDUWKDW³>W@KLVPHDQV
WKDW WKURXJKRXW WKH OLWLJDWLRQ WKH SODLQWLII μPXVW KDYH
VXIIHUHGRUEHWKUHDWHQHGZLWKDQDFWXDOLQMXU\WUDFHDEOHWR
WKH GHIHQGDQW DQG OLNHO\ WR EH UHGUHVVHG E\ D IDYRUDEOH
MXGLFLDOGHFLVLRQ¶´,ELG TXRWLQJ/HZLV86DW
HPSKDVLVDGGHG ,Q6SHQFHUWKH6XSUHPH&RXUWGLUHFWO\
XVHGHOHPHQWVRIWKHVWDQGLQJLQTXLU\WRGHWHUPLQHWKDWWKH
SHWLWLRQHUQRORQJHUKDGDQLQMXU\LQIDFWDQGWKDWWKHUHIRUH
KLVFODLPKDGEHFDPHPRRW
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

$ XQLRQ FRQWUDFW UHTXLUHG 3DUPD WR FRQVLGHU DSSOLFDWLRQV IURP
HPSOR\HHV ZLWKLQ WKH EDUJDLQLQJ XQLW EHIRUH FRQVLGHULQJ DQ\ RWKHU
DSSOLFDWLRQV -$ DW $
WKLUWHHQ IXOOWLPH SRVLWLRQV SRVWHG IRU QHZ KLUHV EHWZHHQ
1RYHPEHUDQG0DUFKDWOHDVW VL[ ZHUH
ILOOHGE\IRUPHUSDUWWLPHHPSOR\HHVDQGWZRRWKHUVZHUH
ILOOHGE\WUDQVIHURUSURPRWLRQZLWKRXWDQ\LQGLFDWLRQRID
FKDQJHIURPSDUWWLPHWRIXOOWLPH-$DW QRWLQJWKDW
&KHUL 0HDGRZV ZDV D SDUWWLPH HPSOR\HH EHIRUH VKH ZDV
WUDQVIHUUHGWRDIXOOWLPHSRVLWLRQ
$FFRUGLQJWR3DUPDKRZHYHULWKDVPDGHHIIRUWVWRUHFUXLW
%ODFNVWRLWVPXQLFLSDOZRUNIRUFH6SHFLILFDOO\3DUPDFODLPV
WKDW LW KDV DWWHPSWHG WR UHFUXLW %ODFNV E\ GHYHORSLQJ
GLVWULEXWLQJDQGGLVSOD\LQJSRVWHUVDQGEURFKXUHVGLUHFWHGDW
PLQRULWLHV DW DOO WKUHH FDPSXVHV RI &X\DKRJD &RPPXQLW\
&ROOHJH &OHYHODQG 6WDWH 8QLYHUVLW\ /RUDLQ &RPPXQLW\
&ROOHJHDQG/DNHODQG&RPPXQLW\&ROOHJHVHH-$DW
6XSS-$DWOLVWLQJVFKHGXOHGFLYLOVHUYLFH
H[DPLQDWLRQV LQ WKH &OHYHODQG 3ODLQ 'HDOHU WKH
&RPPXQLFDWRUDQGWKH&DOO 3RVWQHZVSDSHUVWDUJHWHGWR
&OHYHODQG¶VEODFNFRPPXQLW\DQGWKH6XQQHZVSDSHUVVHH
-$DW6XSS-$DW
3RQVWLQJOH 'HS DQG ZRUNLQJ ZLWK D
FRQVXOWLQJ FRPSDQ\ WR FUHDWH D QHZ WHVW IRU KLULQJ SROLFH
RIILFHUVDQGILUHILJKWHUVVHH-$DW
&1$$&3¶6$//(*$7,216
7KH1$$&3DUJXHVWKDWWKHORZSHUFHQWDJHRI%ODFNVLQ
3DUPD¶VPXQLFLSDOZRUNIRUFHLVQRWWKHUHVXOWRIFKDQFHEXW
RI GLVFULPLQDWRU\ SUDFWLFHV XVHG E\ 3DUPD LQ LWV KLULQJ
SURFHVV 6SHFLILFDOO\ WKH 1$$&3 PDLQWDLQV WKDW 3DUPD
GLVFULPLQDWHVDJDLQVW%ODFNVLQKLULQJ
D %\IDLOLQJRUUHIXVLQJWRUHFUXLWDQGKLUHEODFNVRQ
WKHVDPHEDVLVDVZKLWHV

-- 9 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
E %\ IROORZLQJ UHFUXLWPHQW SUDFWLFHV ZKLFK DGYLVH
UHVLGHQWV RI 3DUPD DQG IULHQGV DQG UHODWLYHV RI
LQFXPEHQW HPSOR\HHV RI 3DUPD RI HPSOR\PHQW
RSSRUWXQLWLHVLQWKHPXQLFLSDOHPSOR\PHQWRI3DUPD
ZLWKRXWDGYLVLQJEODFNSHUVRQVLQWKHUHOHYDQWODERU
PDUNHWRIVXFKRSSRUWXQLWLHV
F %\IROORZLQJUHFUXLWPHQWSUDFWLFHVZKLFKKDYHWKH
HIIHFWRIGHWHUULQJQRQUHVLGHQWVLQFOXGLQJDOPRVW
DOO EODFNV IURP DSSO\LQJ IRU HPSOR\PHQW
RSSRUWXQLWLHVZLWK3DUPD
G %\ WUDGLWLRQDOO\ UHTXLULQJ WKDW DSSRLQWPHQWV EH
OLPLWHGWRUHVLGHQWVRI3DUPDDQGE\UHTXLULQJWKDW
HPSOR\HHVRIGHIHQGDQWHVWDEOLVKDQGPDLQWDLQWKHLU
UHVLGHQFH LQ 3DUPD IRU IRUW\WZR PRQWKV D
UHTXLUHPHQWWKDWZDVLQWHQGHGWRH[FOXGHDQGGRHV
GLVSURSRUWLRQDWHO\ H[FOXGH EODFNV IURP PXQLFLSDO
HPSOR\PHQW
H %\ IDLOLQJ DQG UHIXVLQJ WR WDNH WKH DSSURSULDWH
UHFUXLWPHQW PHDVXUHV WR FRUUHFW WKH HIIHFWV RI WKH
GHIHQGDQW¶V SDVW GLVFULPLQDWRU\ SROLFLHV DQG
SUDFWLFHV
I %\ OLPLWLQJ KLULQJ XQWLO YHU\ UHFHQWO\ WR OLVWV RI
HOLJLEOH>VLF@ FUHDWHG ZKHQ DSSRLQWPHQWV ZHUH
OLPLWHGWRUHVLGHQWVRI3DUPD
J %\XVLQJXQYDOLGDWHGVHOHFWLRQSURFHGXUHVWKDWKDYH
WKH HIIHFW RI GLVSURSRUWLRQDWHO\ H[FOXGLQJ IURP
HPSOR\PHQWWKRVHEODFNDSSOLFDQWVZKRGRREWDLQ
WLPHO\ LQIRUPDWLRQ UHJDUGLQJ HPSOR\PHQW
RSSRUWXQLWLHV DQG ZKR DUH QRW GHWHUUHG E\ WKH
GLVFULPLQDWRU\SUDFWLFHVRIGHIHQGDQW
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

FRQWUDYHQHVWKDWRI&LW\&RPPXQLFDWLRQVDSSHDUVWRRYHUUXOH
&LW\&RPPXQLFDWLRQV
,Q&LW\&RPPXQLFDWLRQV)GDWQWKHFRXUW
QRWHGWKDWLWVKROGLQJ³PLJKWDSSHDUWREHDWRGGV´ZLWKWKLV
FRXUW¶V SUHYLRXV KROGLQJ LQ 6HQWHU Y *HQHUDO 0RWRUV
&RUSRUDWLRQ)G WK&LU LQZKLFKWKLV
FRXUWVWDWHGWKDW³>V@WDQGLQJLVGHWHUPLQHGDVRIWKHGDWHWKH
VXLWLVILOHG´7KHFRXUWLQWKLVFDVHFKRRVHVWRDSSO\6HQWHU
ZKLOH LJQRULQJ &LW\ &RPPXQLFDWLRQV , EHOLHYH WKDW ERWK
FDVHVELQGXVDQGERWKQHHGWREHDSSOLHGWRWKHIDFWVRIWKLV
FDVH,EHOLHYHWKDWWKHFRXUWGRHVQRWHUULQDSSO\LQJ6HQWHU
EXW , EHOLHYH WKDW LW GRHV HUU LQ QRW DSSO\LQJ WKH OHJDO
SULQFLSOHVXQGHUO\LQJ&LW\&RPPXQLFDWLRQV
7KH FRXUW LQ &LW\ &RPPXQLFDWLRQV XVHV WKH ODQJXDJH RI
VWDQGLQJWRDSSO\DPRRWQHVVDQDO\VLV7KHFRXUW¶VVWDWHPHQW
WKDWDSODLQWLIIPXVWPDLQWDLQVWDQGLQJWKURXJKRXWDOOVWDJHV
RIOLWLJDWLRQLVUHDOO\DUHTXLUHPHQWWKDWWKHSODLQWLIIKDYHD
FRQWLQXLQJ LQWHUHVW LQ WKH OLWLJDWLRQ LQ RUGHU WR SUHYHQW WKH
OLWLJDWLRQIURPEHFRPLQJPRRW,Q&LW\&RPPXQLFDWLRQVWKH
FRXUWZDVGHWHUPLQLQJZKHWKHUWKHSODLQWLIIKDGDFRQWLQXLQJ
LQWHUHVWLQWKHOLWLJDWLRQDIWHUWKHSODLQWLIIKDGEHHQGLVVROYHG
DQGODWHUUHQHZHGDVDFRUSRUDWLRQ)GDW
$V3DUPDDGPLWWHGDWRUDODUJXPHQWWKH6XSUHPH&RXUW
KDVQRWVSHFLILFDOO\KHOGWKDWVWDQGLQJPXVWEHHYDOXDWHGDWWKH
WLPHLWLVFKDOOHQJHG,QVWHDGWKH&RXUWKDVFRQVLVWHQWO\KHOG
WKDWDSODLQWLIIPXVWPDLQWDLQDFRQWLQXLQJLQWHUHVWLQRQJRLQJ
OLWLJDWLRQ ,QGHHG WKH 6XSUHPH &RXUW FDVHV FLWHG LQ &LW\
&RPPXQLFDWLRQVIRUWKHSURSRVLWLRQWKDWVWDQGLQJPXVWEH
HYDOXDWHGDWWKHWLPHLWLVFKDOOHQJHGGRQRWDSSO\WKDWUXOH
EXWUDWKHUHYDOXDWHZKHWKHUDSDUW\KDGDFRQWLQXLQJLQWHUHVW
LQRQJRLQJOLWLJDWLRQ6HH.DUFKHUY0D\86
KROGLQJWKDWIRUPHUVSHDNHURI1HZ-HUVH\*HQHUDO
$VVHPEO\DQGSUHVLGHQWRI1HZ-HUVH\6HQDWHZKRLQWHUYHQHG
DQG SDUWLFLSDWHG LQ ODZVXLW FKDOOHQJLQJ FRQVWLWXWLRQDOLW\ RI
1HZ -HUVH\ VWDWXWH SURYLGLQJ IRU RQH PLQXWH RI VLOHQFH DW
EHJLQQLQJRIVFKRROGD\ORVWFRQWLQXLQJLQWHUHVWLQOLWLJDWLRQ

-- 10 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
FRXUVH RI OLWLJDWLRQ WR WKH PRPHQW RI ILQDO DSSHOODWH
GLVSRVLWLRQ7KHQHHGIRUFRQWLQXLQJYLWDOLW\LVDWWULEXWHG
ERWK WR $UWLFOH ,,, DQG WR PRUH RSHQO\ GLVFUHWLRQDU\
GRFWULQHVRIUHPHGLDOXWLOLW\DQGMXGLFLDODGPLQLVWUDWLRQ
$&+$5/(6 $/$1 :5,*+7 (7 $/)('(5$/ 35$&7,&( $1'
352&('85(†DW GHG HPSKDVLVDGGHG
7KLVFRXUWKDVQRWHGWKDW³>W@KHPRRWQHVVLQTXLU\PXVWEH
PDGHDWHYHU\VWDJHRIDFDVHWKXVLIDFDVHEHFRPHVPRRW
GXULQJDQDSSHDOWKHMXGJPHQWEHORZPXVWEHYDFDWHGDQGWKH
FDVHUHPDQGHGZLWKLQVWUXFWLRQVWRGLVPLVV´0F3KHUVRQY
0LFKLJDQ+LJK6FK$WKOHWLF$VV¶Q)G WK
&LU HPSKDVLVDGGHG )XUWKHUPRUH³>L@QDQDO\]LQJ
LVVXHVRIPRRWQHVVLWLVKHOSIXOWRNHHSLQPLQGWKDWμ>W@KHVH
SUREOHPVRIWHQUHTXLUHDKLJKO\LQGLYLGXDOLVWLFDQGXVXDOO\
LQWXLWLYHDSSUDLVDORIWKHIDFWVRIHDFKFDVH¶´0F3KHUVRQ
)GDW 0RRUH-GLVVHQWLQJ TXRWLQJ:5,*+7 (7
$/VXSUD†DW
7KHFRXUWUHFRJQL]HVWKHUHTXLUHPHQWWKDWDSODLQWLIIPXVW
FRQWLQXHWRKDYHDSHUVRQDOLQWHUHVWLQRQJRLQJOLWLJDWLRQE\
FLWLQJODQJXDJHWRWKDWHIIHFWIURP)ULHQGVRIWKH(DUWKDQG
$UL]RQDQVIRU2IILFLDO(QJOLVK+RZHYHUWKHFRXUWIDLOVWR
DSSO\ WKLV ODQJXDJH DQG XQGHUWDNH WKLV UHTXLUHG DQDO\VLV
VHHPLQJO\ FRQFOXGLQJ WKDW RQFH WKH 1$$&3 PHW WKH
UHTXLUHPHQWVIRUDVVRFLDWLRQDOVWDQGLQJWKURXJK7RPEOLQWKH
1$$&3¶VWDVNLQDYRLGLQJPRRWQHVVZDVRYHU
7KH FRXUW GLVFXVVHV LQ JUHDW GHWDLO WKH SULQFLSOH WKDW
VWDQGLQJPXVWEHGHWHUPLQHGDWWKHWLPHDFRPSODLQWLVILOHG
,DJUHHWKDWWKHLQLWLDOGHWHUPLQDWLRQRIDSDUW\¶VVWDQGLQJWR
EULQJDODZVXLWPXVWEHPDGHDWWKDWSRLQW,QRWHKRZHYHU
WKDWWKHFRXUW¶VEURDGVWDWHPHQW³VWDQGLQJGRHVQRWKDYHWREH
PDLQWDLQHGWKURXJKRXWDOOVWDJHVRIOLWLJDWLRQ´0DM2SDWS
DSSHDUV WR RYHUUXOH SUHYLRXV ELQGLQJ DXWKRULW\ RI WKLV
FRXUW7KLVFRXUWKDVSUHYLRXVO\KHOGWKDW³>D@SODLQWLIIPXVW
PDLQWDLQVWDQGLQJWKURXJKRXWDOOVWDJHVRIKLVOLWLJDWLRQ´&LW\
&RPPXQLFDWLRQV,QFY&LW\RI'HWURLW)G
WK &LU 7KH FRXUW¶V ODQJXDJH ZKLFK GLUHFWO\
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

2Q 6HSWHPEHU 3DUPD PRYHG WR GLVPLVV WKH 1$$&3¶V
FODLPV DUJXLQJ WKDW WKH 1$$&3 ODFNHG VWDQGLQJ WR VXH DQG WKDW WKH
1$$&3¶V FODLPV ZHUH WLPHEDUUHG 2Q 'HFHPEHU WKH GLVWULFW
FRXUW HQWHUHG DQ RUGHU UHTXLULQJ WKH 1$$&3 WR VXEPLW ³μIXUWKHU
SDUWLFXODUL]HG DOOHJDWLRQV RI IDFW¶´ WR VXSSRUW LWV VWDQGLQJ -$ DW
FLWDWLRQ RPLWWHG ,Q UHVSRQVH WKH 1$$&3 ILOHG DQ DPHQGPHQW WR WKH
FRPSODLQW DQG WKHQ PRYHG IRU D VHFRQG DPHQGPHQW 7KLV PRWLRQ IRU
OHDYH WR ILOH D VHFRQG DPHQGHG FRPSODLQW ZDV DPRQJ WKRVH GHQLHG DV
PRRW EXW ZLWKRXW SUHMXGLFH WR LWV UHILOLQJ LQ WKH GLVWULFW FRXUW¶V RUGHU
6HH VXSUD Q (YHQ WKRXJK WKH 1$$&3 ODWHU ILOHG D UHQHZHG PRWLRQ IRU
VXPPDU\ MXGJPHQW LW QHYHU UHQHZHG WKH HDUOLHU PRWLRQ IRU OHDYH WR ILOH
D VHFRQG DPHQGHG FRPSODLQW +RZHYHU EHFDXVH WKH SDUWLHV¶ EULHIV DQG
WKH GLVWULFW FRXUW¶V RUGHU DGGUHVV RQO\ WKH 1$$&3¶V VHFRQG DPHQGHG
FRPSODLQW RXU UHYLHZ RI WKLV FDVH LV JRYHUQHG E\ WKH FODLPV LQ WKH VHFRQG
DPHQGHG FRPSODLQW 6HH HJ *LOOLV Y 8QLWHG 6WDWHV 'HS¶W RI +HDOWK DQG
+XPDQ 6HUYV )G WK &LU
-$DW 6HFRQG$PHQGHG&RPSODLQW
,Q PDNLQJ WKHVH DOOHJDWLRQV WKH 1$$&3 FLWHG WR VHYHQ
GLIIHUHQWDOOHJHGYLFWLPVRI3DUPD¶VGLVFULPLQDWRU\SUDFWLFHV
7KHVH LQGLYLGXDOV LQFOXGH 0DUORQ $OOHQ ZKR ZDV
LQWHUHVWHGLQHPSOR\PHQWDVD3DUPDILUHILJKWHUEXW³GLGQRW
KHDURIDQ\RSSRUWXQLWLHVWRDSSO\IRUWKHH[DPLQDWLRQ´
5RGQH\ %ODQWRQ ZKR DSSOLHG IRU D SROLFH RIILFHU SRVLWLRQ
ZLWK3DUPDEXWZDV³GLVTXDOLILHGIRUμEDFNJURXQG¶UHDVRQV´
:HQG\ &KLOGUHVV ZKR ZDV LQWHUHVWHG LQ ZRUNLQJ IRU
3DUPDDVDILUHILJKWHUEXWQHYHUVDZDQ\DGYHUWLVHPHQWVIRU
PXQLFLSDO MREV LQ 3DUPD DQG ³ZRXOG QRW WDNH D MRE WKDW
UHTXLUHG KHU WR OLYH LQ 3DUPD´ 5KRQGD &UD\WRQ ZKR
ZDQWHGWRREWDLQDMREDVD3DUPDSROLFHRIILFHUEXWIDLOHGWKH
DJLOLW\SRUWLRQRIWKHUHTXLUHGSROLFHH[DPLQDWLRQ 0DXULFH
0F,QWRVKZKRYLVLWHG3DUPD&LW\+DOOLQ)HEUXDU\RI
DQGDWWHPSWHGWRDSSO\IRUDSRVLWLRQZLWKWKHFLW\EXW³ZDV
LQIRUPHGWKDWWKH&LW\DOUHDG\KDGHQRXJKPLQRULWLHVDQGZDV
WROGWKDWKHZRXOGEHQRWLILHGLIDQ\RSHQLQJVLQWKHSRVLWLRQV
KHKDGLGHQWLILHGFDPHXS´ $UWLV7RPEOLQZKRLQTXLUHG
DERXWHPSOR\PHQWRSSRUWXQLWLHVZLWK3DUPDEXWZDVQHYHU
FRQWDFWHGDQG $UWKXU&ROOLQVZKRLQTXLUHGDERXWMREVIRU
3DUPDLQEXW³ZRXOGQRWDFFHSWDMREZLWK3DUPDLIKH

-- 11 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
7KH 1$$&3 UHTXHVWHG LQMXQFWLYH UHOLHI HQMRLQLQJ 3DUPD IURP
FRQWLQXLQJ WKH DOOHJHG GLVFULPLQDWRU\ SUDFWLFHV FRVWV DWWRUQH\V¶ IHHV
H[SHUW ZLWQHVV IHHV DQG ³VXFK DGGLWLRQDO UHOLHI DV PD\ EH DSSURSULDWH LQ
WKH LQWHUHVWV RI MXVWLFH´ -$ DW 6HFRQG $PHQGHG &RPSODLQW
KDG WR PRYH WKHUH´ -$ DW 6HFRQG $PHQGHG
&RPSODLQW
'',675,&7&2857¶6$1$/<6,6
6FRSHRI((2&&KDUJH
,QLWVGHFLVLRQRQWKH1$$&3¶VFODLPVWKHGLVWULFWFRXUW
ILUVWLGHQWLILHGWKHFODLPVLWGHHPHGWREHSURSHUO\EHIRUHWKH
FRXUW 7KHVH FODLPV LQFOXGHG ³WKH 1$$&3¶V FODLPV
UHJDUGLQJ3DUPD¶VUHVLGHQF\UHTXLUHPHQWLQERWKLWV WR
WKHH[WHQWDQGRQO\WRWKHH[WHQWHOLJLELOLW\OLVWVFRQWLQXHGWR
EHFRQVWUXFWHGIURPDSSOLFDQWVZKRVRXJKWHPSOR\PHQWSULRU
WR WKH FKDQJH DQG LQFDUQDWLRQV´ DQG ³WKH
1$$&3¶V FODLPV UHJDUGLQJ 3DUPD¶V UHOLDQFH RQ ZRUGRI
PRXWKDQG&LW\+DOOSRVWLQJVWRUHFUXLWDSSOLFDQWVIRUMREV´
-$DW
7KHGLVWULFWFRXUWWKHQKHOGWKDWWKH1$$&3¶VFKDOOHQJHWR
3DUPD¶VSROLFHILUHILJKWHUDQGRWKHUH[DPLQDWLRQVZHUH³QRW
SURSHUO\EHIRUH>WKH@&RXUW´EHFDXVHVXFK³FODLPZDVQHLWKHU
H[SUHVVO\PDGHLQWKH((2&FKDUJHQRUFRXOGLWIDLUO\EH
VDLGWRKDYHμJURZQRXWRI¶WKDWFKDUJH´-$DW7KH
GLVWULFW FRXUW UHDVRQHG WKDW ³>W@KH ((2& FKDUJH UHDG DV D
ZKROH FOHDUO\ IRFXV>HG@ RQ WKH UHVLGHQF\ UHTXLUHPHQW DQG
RWKHUUHFUXLWPHQWSUDFWLFHV´DQGDVDUHVXOWWKHFKDUJH³GLG
QRWSXWWKH((2&RU3DUPDRQQRWLFHWKDWVXFKDSUDFWLFHZDV
EHLQJFKDOOHQJHGDQGGLGQRWDOORZDPHDQLQJIXORSSRUWXQLW\
IRUWKHDFFRPSOLVKPHQWRI7LWOH9,,¶VPHGLDWLRQJRDOV´-$
DW 7KH GLVWULFW FRXUW IXUWKHU UHDVRQHG WKDW WKH ((2&
FKDUJHZDVQRWHQWLWOHGWRDQ\OHQLHQF\EHFDXVHLWZDVGUDIWHG
E\DUHSUHVHQWDWLYHRIWKH1$$&3DQGEHFDXVHODWHUILOLQJVE\
WKH1$$&3LQFOXGLQJLWVFRPSODLQWDQGDPHQGPHQWVIDLOHG
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

HPSOR\PHQW³PRRWHGWKHFDVHVWDWHGLQKHUFRPSODLQW´ZKHQ
VKHUHVLJQHGIURPVWDWHHPSOR\PHQWWRSXUVXHZRUNLQWKH
SULYDWHVHFWRU,GDW7KH&RXUWQRWHGWKDWWKHSODLQWLII¶V
FODLPVRXJKWRQO\LQMXQFWLYHUHOLHIDQGUHMHFWHGWKHSODLQWLII¶V
DWWHPSWWRUHYLYHWKHFDVHWKURXJKDQLPSOLHGSOHDIRUQRPLQDO
GDPDJHV,GDW
7KHGLVWLQFWLRQEHWZHHQVWDQGLQJDQGPRRWQHVVZDVDJDLQ
GLVFXVVHG LQ )ULHQGV RI WKH (DUWK ,QF Y /DLGODZ (QYWO
6HUYV ,QF 86 7KHUH WKH
6XSUHPH&RXUWVWDWHG
6WDQGLQJ GRFWULQH IXQFWLRQV WR HQVXUH DPRQJ RWKHU
WKLQJVWKDWWKHVFDUFHUHVRXUFHVRIWKHIHGHUDOFRXUWVDUH
GHYRWHG WR WKRVH GLVSXWHV LQ ZKLFK WKH SDUWLHV KDYH D
FRQFUHWHVWDNH,QFRQWUDVWE\WKHWLPHPRRWQHVVLVDQ
LVVXHWKHFDVHKDVEHHQEURXJKWDQGOLWLJDWHGRIWHQ DV
KHUH IRU \HDUV 7R DEDQGRQ WKH FDVH DW DQ DGYDQFHG
VWDJH PD\ SURYH PRUH ZDVWHIXO WKDQ IUXJDO 7KLV
DUJXPHQW IURP VXQN FRVWV GRHV QRW OLFHQVH FRXUWV WR
UHWDLQMXULVGLFWLRQRYHUFDVHVLQZKLFKRQHRUERWKRIWKH
SDUWLHVODFNVDFRQWLQXLQJLQWHUHVW%XWWKHDUJXPHQW
VXUHO\KLJKOLJKWVDQLPSRUWDQWGLIIHUHQFHEHWZHHQWKHWZR
GRFWULQHV
,ELG HPSKDVLVDGGHG 7KH&RXUW¶VGLVFXVVLRQLQGLFDWHVWKDW
DOWKRXJKDSDUW\PD\KDYHVWDQGLQJDWWKHWLPHDFRPSODLQWLV
ILOHGDQGHYHQWKRXJKDFDVHVXFKDVWKLVRQHPD\FRQWLQXH
RQ IRU \HDUV D SDUW\ PD\ ORVH D FRQWLQXLQJ LQWHUHVW LQ WKH
OLWLJDWLRQDQGWKHUHIRUHFDXVHLWVFODLPWREHFRPHPRRW
7KHUHTXLUHPHQWWKDWDSDUW\PXVWKDYHDSHUVRQDOLQWHUHVW
LQ RQJRLQJ OLWLJDWLRQ LQ RUGHU WR DYRLG PRRWQHVV LV ZHOO
UHFRJQL]HGZLWKLQWKHODZ
0RRWQHVVGRFWULQHHQFRPSDVVHVWKHFLUFXPVWDQFHVWKDW
GHVWUR\WKHMXVWLFLDELOLW\RIDVXLWSUHYLRXVO\VXLWDEOHIRU
GHWHUPLQDWLRQ ,W LV QRW HQRXJK WKDW WKH LQLWLDO
UHTXLUHPHQWV RI VWDQGLQJ DQG ULSHQHVV KDYH EHHQ
VDWLVILHG WKH VXLW PXVW UHPDLQ DOLYH WKURXJKRXW WKH

-- 12 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
BBBBBBBBBBBBBBBBB
',66(17
BBBBBBBBBBBBBBBBB
%2**6 &LUFXLW -XGJH GLVVHQWLQJ , ZRXOG DIILUP WKH
GLVWULFWFRXUW¶VGHFLVLRQJUDQWLQJVXPPDU\MXGJPHQWWRWKH
&LW\RI3DUPD
,DJUHHZLWKWKHFRXUWWKDWWKH1$$&3KDGVWDQGLQJWRVXH
3DUPDDWWKHWLPHWKH1$$&3EURXJKWVXLW,DOVRDJUHHZLWK
WKHFRXUWWKDWWKH1$$&3¶VFODLPVKDYHQRWEHFRPHPRRW
VROHO\EHFDXVHRIDFWLRQVWKDW3DUPDKDVWDNHQVXEVHTXHQWWR
WKHLQVWLWXWLRQRIWKLVODZVXLW,EHOLHYHKRZHYHUWKDWWKH
1$$&3¶V FODLPV KDYH EHFRPH PRRW EHFDXVH WKH VROH
1$$&3 PHPEHU WKDW WKH FRXUW UHOLHV XSRQ WR JUDQW WKH
1$$&3VWDQGLQJ$UWLV7RPEOLQKDVORVWDSHUVRQDOLQWHUHVW
LQ WKLV OLWLJDWLRQ 7RPEOLQ LV QR ORQJHU D PHPEHU RI WKH
1$$&3DQGKHQRORQJHUKDVDQLQMXU\WKDWWKLVFRXUWFDQ
UHGUHVV6LQFH7RPEOLQQRORQJHUKDVDSHUVRQDOLQWHUHVWLQ
WKLVOLWLJDWLRQKLVFODLPDQGWKHUHIRUHWKH1$$&3¶VFODLP
KDYH EHFRPH PRRW %HFDXVH WKH FRXUW IDLOV WR DQDO\]H
ZKHWKHU7RPEOLQFRQWLQXHVWRKDYHDSHUVRQDOLQWHUHVWLQWKLV
OLWLJDWLRQ,UHVSHFWIXOO\GLVVHQW
,
%RWKWKHGLVWULFWFRXUW¶VDQGRXUFRXUW¶VRSLQLRQVDSSHDUWR
FRQIODWH VWDQGLQJ DQG PRRWQHVV 7KHUH LV DQ LPSRUWDQW
GLIIHUHQFH³7KHUHTXLVLWHSHUVRQDOLQWHUHVWWKDWPXVWH[LVWDW
WKHFRPPHQFHPHQWRIWKHOLWLJDWLRQ VWDQGLQJ PXVWFRQWLQXH
WKURXJKRXWLWVH[LVWHQFH PRRWQHVV ´$UL]RQDQVIRU2IILFLDO
(QJOLVKY$UL]RQD86Q FLWLQJ8QLWHG
6WDWHV3DUROH&RPP¶QY*HUDJKW\86
TXRWLQJ0RQDJKDQ&RQVWLWXWLRQDO$GMXGLFDWLRQ7KH:KR
DQG :KHQ <$/( /- LQWHUQDO
TXRWDWLRQ RPLWWHG ,Q $UL]RQDQV IRU 2IILFLDO (QJOLVK WKH
&RXUW UXOHG WKDW D SODLQWLII ZKR FKDOOHQJHG WKH 6WDWH RI
$UL]RQD¶VSROLF\GHFODULQJ(QJOLVKWKHRIILFLDOODQJXDJHRIWKH
VWDWH E\ DWWHPSWLQJ WR XVH KHU ELOLQJXDO VNLOOV LQ VWDWH
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

VSHFLILFDOO\WRLGHQWLI\DFKDOOHQJHWR3DUPD¶VFLYLOVHUYLFH
H[DPLQDWLRQV-$DW
0RRWQHVV
$IWHULGHQWLI\LQJWKHFODLPVLQWKHFDVHWKHGLVWULFWFRXUW
WKHQKHOGWKDWWKH\ZHUHPRRWEHFDXVH³3DUPD¶VHOLPLQDWLRQ
RIWKHUHVLGHQF\UHTXLUHPHQW>LQ@DQGLWVDIILUPDWLYH²
DQG DFWLYH ² HIIRUWV WR UHFUXLW LQGLYLGXDOV LQFOXGLQJ
PLQRULWLHVRXWVLGHRI3DUPDKDYHJLYHQWKH1$$&3ZKDW
WKH\VRXJKWWRDFKLHYHE\WKLVDFWLRQ´-$DW7KHGLVWULFW
FRXUW KHOG WKDW WKHUH ZDV ³QR UHDVRQDEOH H[SHFWDWLRQ WKDW
3DUPD>ZRXOG@UHHQDFWWKHFKDOOHQJHGRUGLQDQFHRUSUDFWLFHV
DQG3DUPD¶VUHSHDORIWKHUHVLGHQF\UHTXLUHPHQWDQGRWKHU
DIILUPDWLYH DFWLRQV KDYH HUDGLFDWHG WKH HIIHFWV RI ZKDW
SURSHUO\KDVEHHQFKDOOHQJHGLQWKLVFDVH´-$DW,QVR
KROGLQJWKHGLVWULFWFRXUWQRWHGWKDWPXQLFLSDOHPSOR\HHVRI
3DUPDZHUH³IUHHWROLYHDQ\ZKHUHLQ&X\DKRJD>&@RXQW\DQG
PD\HYHQOLYHLQVXUURXQGLQJFRXQWLHV´DQGWKDW3DUPDKDG
WDNHQ RWKHU VWHSV WR LPSURYH LWV UHFUXLWPHQW HIIRUWV E\
³DGYHUWLV>LQJ@ LQ WKUHH QHZVSDSHUV RQH RI ZKLFK KDV D
SUHGRPLQDWHO\ EODFN UHDGHUVKLS UHJXODUO\ SRVW>LQJ@ MRE
RSHQLQJV DW VHYHUDO ORFDO FROOHJHV ZKLFK KDYH VLJQLILFDQW
EODFNVWXGHQWERGLHV XVLQJEURFKXUHVGLUHFWHGDWUHFUXLWLQJ
EODFNV URXWLQHO\PDLO>LQJ@SRVWFDUGVQRWLI\LQJDQ\RQH
ZKRUHTXHVWVWREHLQIRUPHGDERXWXSFRPLQJFLYLOVHUYLFH
SROLFH RIILFHU DQG ILUH ILJKWHU H[DPLQDWLRQV´ DQG
³YROXQWHHULQJWRXVHZKDWHYHUSROLFHRIILFHUH[DPLQDWLRQWKH
1$$&3ZDQWVDQGUHSUHVHQWLQJWKDWLWZRXOGGRWKHVDPHIRU
WKHILUHILJKWHUH[DPLQDWLRQ´-$DW$FFRUGLQJWRWKH
GLVWULFWFRXUW³>W@KHVWDWXVTXR>LQ3DUPD@LQ>GLG@
QRWPLUURUWKHVWDWXVTXRWZHQW\\HDUVHDUOLHU>EHFDXVH@>L@Q
WKHLQWHUYHQLQJ\HDUVVLQFHWKHODWH¶VDQGHDUO\¶V
3DUPD¶VODZVDQGSUDFWLFHVKDYHFKDQJHGWRVXFKDGHJUHH
WKDWWKH1$$&3LVOHIWFRPSODLQLQJDERXWZKDWZDVZURQJLQ
WKHSDVWUDWKHUWKDQZKDWLVZURQJWRGD\´-$DW

-- 13 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
6WDQGLQJ
)LQDOO\WKHGLVWULFWFRXUWKHOGWKDWHYHQLIWKHFDVHZHUHQRW
PRRW LW ZRXOG VWLOO JUDQW VXPPDU\ MXGJPHQW LQ IDYRU RI
3DUPDEHFDXVHWKH1$$&3ODFNHGVWDQGLQJ6SHFLILFDOO\WKH
GLVWULFWFRXUWKHOGWKDWWKH1$$&3ODFNHGVWDQGLQJEHFDXVH
³QRQH RI WKH LQGLYLGXDOV LGHQWLILHG DV PHPEHUV RI WKH
RUJDQL]DWLRQKDYHVWDQGLQJLQWKHLURZQULJKW´-$DW
,QUHDFKLQJWKLVFRQFOXVLRQWKHGLVWULFWFRXUWILUVWDVVHUWHG
WKDWHDFKLQGLYLGXDOSODLQWLIIKDGWR VKRZ WKDWWKHUHZDVD
VXEVWDQWLDO OLNHOLKRRG WKDW WKH DOOHJHG LQMXULRXV SUDFWLFH RU
SUDFWLFHV ZRXOG EH DSSOLHG WR KLP RU KHU WR HVWDEOLVK DQ
LQMXU\LQIDFWRQHSUHUHTXLVLWHIRUVWDQGLQJ-$DW7KH
GLVWULFWFRXUWIXUWKHUQRWHGWKDWEHFDXVHWKH1$$&3VRXJKW
RQO\SURVSHFWLYHUHOLHIDQGEHFDXVH³WKHRQO\LQMXU\ZKLFK
>WKHGLVWULFWFRXUW@SRVVLEO\FRXOGUHPHG\LQWKLVFDVH>ZDV@D
IXWXUHLQMXU\´DQLQGLYLGXDOSODLQWLIIZRXOGKDYHWRVKRZWKDW
³KHRUVKHVWLOOVHHNVWRZRUNIRU3DUPDDQGKDVWDNHQVRPH
DFWLRQWRZDUGWKDWHQGWKDWVKRZV D SUHVHQWLQWHQW´LQ
RUGHUWRHVWDEOLVKDQLQMXU\LQIDFW-$DW
7KHGLVWULFWFRXUWWKHQDQDO\]HGHDFKLQGLYLGXDOSODLQWLIIWR
GHWHUPLQHLIKHRUVKHKDGVWDQGLQJ,QVRGRLQJWKHGLVWULFW
FRXUW KHOG WKDW &ROOLQV DQG 0F,QWRVK ODFNHG VWDQGLQJ
EHFDXVHWKH\ZHUHQRWPHPEHUVRIWKH1$$&3DWDQ\WLPH
GXULQJ WKH OLWLJDWLRQ VHH -$ DW &UD\WRQ ODFNHG
VWDQGLQJ EHFDXVH VKH KDG ³QRW LQTXLUHG DERXW REWDLQLQJ D
SRVLWLRQZLWKWKH3DUPD3ROLFHRUWDNHQDQ\RWKHUVWHSVZKLFK
ZRXOG LQGLFDWH D VLQFHUH GHVLUH RU JHQXLQH LQWHUHVW LQ
REWDLQLQJVXFKDSRVLWLRQ´VLQFHDQGWKXVIDLOHGWRVKRZ
LPPLQHQW LQMXU\ DQG EHFDXVH ³KHU FODLP >ZDV@ SUHPLVHG
VROHO\ RQ KHU IDLOXUH RI WKH DJLOLW\ SRUWLRQ RI WKH SROLFH
H[DPLQDWLRQ´ZKLFKVKHFRQWHQGV³ZDVDSURGXFWRIJHQGHU
GLVFULPLQDWLRQ´DQGWKXVIDLOHGWRGHPRQVWUDWHFDXVDWLRQDQG
UHGUHVVDELOLW\ VHH -$ DW 7RPEOLQ ODFNHG VWDQGLQJ
EHFDXVH KH KDG VKRZQ RQO\ WKDW KH ZDV ³μJHQHUDOO\
LQWHUHVWHG¶´LQZRUNLQJIRU3DUPDDQGEHFDXVHWKHHOLPLQDWLRQ
RIWKHUHVLGHQF\UHTXLUHPHQW³VHUYHVWRUHGUHVVWKHYHU\LQMXU\
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

WR DGYHUWLVH LQ D PDQQHU WKDW FRXOG HIIHFWLYHO\ DLG WKH
UHFUXLWPHQWRI%ODFNVWRLWVPXQLFLSDOZRUNIRUFH
,,,&21&/86,21
,Q FRQFOXVLRQ ZH KROG WKDW WKH 1$$&3 HVWDEOLVKHG
DVVRFLDWLRQDOVWDQGLQJWKURXJK7RPEOLQWKDWWKH1$$&3¶V
FODLPVDUHQRWPRRWWKDWWKH1$$&3¶VFODLPVDUHULSHWKDW
WKH 1$$&3¶V FKDUJH ZDV VXFK WKDW DQ LQYHVWLJDWLRQ RI
3DUPD¶VWHVWLQJSURFHGXUHVFRXOGUHDVRQDEO\EHH[SHFWHGWR
JURZRXWRILWV((2&FKDUJHDQGWKDWWKH1$$&3WLPHO\
ILOHGLWVFKDUJH)RUWKHIRUHJRLQJUHDVRQVZH5(9(56(
WKHMXGJPHQWRIWKHGLVWULFWFRXUWDQG5(0$1'IRUIXUWKHU
SURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ

-- 14 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
0RUHRYHU WKH IDFW WKDW D UHSUHVHQWDWLYH RI WKH 1$$&3
GUDIWHGWKHFKDUJHLQWKLVFDVHGRHVQRWUHTXLUHXVWRFRQFOXGH
WKDWDFKDOOHQJHWR3DUPD¶VFLYLOVHUYLFHH[DPLQDWLRQVLVQRW
ZLWKLQWKHVFRSHRIWKHFKDUJH:KLOHWKHUHSUHVHQWDWLYHRI
WKH 1$$&3 PD\ KDYH EHHQ PRUH IDPLOLDU ZLWK ³WKH
WHFKQLFDOLWLHV RI WKH ODZ´ DV D UHVXOW RI KHU ZRUN WKHUH LV
QRWKLQJWRVXJJHVWWKDWVXFKUHSUHVHQWDWLYHZDVDODZ\HURU
ZHOOYHUVHG LQ WKH ODZ 6HH $QJ )G DW
)XUWKHUPRUHWKHIDFWWKDWDEURDGHUUHDGLQJRIDFKDUJHLV
UHTXLUHG ZKHUH D SODLQWLII GRHV QRW KDYH DQ DWWRUQH\ VHH
'XJJLQV)GDW QRWLQJWKDWDEURDGHUUHDGLQJLV
FRPSHOOHGZKHUHDSODLQWLIILVXQUHSUHVHQWHGE\DQDWWRUQH\
GRHVQRWPHDQWKDWDEURDGUHDGLQJPD\QRWRUVKRXOGQRWEH
JLYHQLQFDVHVZKHUHDSODLQWLIIKDVFRXQVHO,QVXPZHKROG
WKDWWKH1$$&3¶VFKDOOHQJHWR3DUPD¶VWHVWLQJSURFHGXUHV
ZDVZLWKLQWKHVFRSHRILWV((2&FKDUJHDQGDVDUHVXOWKROG
WKDWWKHGLVWULFWFRXUWHUUHGLQH[FOXGLQJVXFKFKDOOHQJHIURP
WKLVFDVH
(7,0(/,1(662)((2&&+$5*(
3DUPDDOVRDUJXHVWKDWWKH1$$&3IDLOHGWRILOHLWV((2&
FKDUJHZLWKLQGD\VRIWKHDOOHJHGXQODZIXOHPSOR\PHQW
SUDFWLFHDVUHTXLUHGE\86&†H H EHFDXVHQR
((2&FKDUJHZDVILOHGZLWKLQGD\VRIWKHHQDFWPHQWRI
3DUPD¶VRUGLQDQFHUHSHDOLQJWKHUHVLGHQF\UHTXLUHPHQW
:HUHMHFWWKLVDUJXPHQW
7KH 1$$&3 ZDV QRW UHTXLUHG WR ILOH DQ ((2& FKDUJH
ZLWKLQGD\VRIWKHHQDFWPHQWRIWKHRUGLQDQFHDV
WKH1$$&3DUJXHVLQSDUWWKDW3DUPDLVVWLOODFFRUGLQJDQ
XQIDLUSUHIHUHQFHWRLWVUHVLGHQWV)XUWKHUPRUHDVVKRZQE\
WKHDOOHJDWLRQVLQWKH1$$&3¶VFRPSODLQWWKH1$$&3LV
FKDOOHQJLQJ PRUH WKDQ 3DUPD¶V UHVLGHQF\ UHTXLUHPHQW
LQFOXGLQJLWVPRYHLQUHVLGHQF\UHTXLUHPHQWDQGDYDULHW\RI
UHFUXLWPHQW VHOHFWLRQ DQG KLULQJ SUDFWLFHV XVHG E\ 3DUPD
ERWKEHIRUHDQGDIWHUWKHUHSHDORILWVUHVLGHQF\UHTXLUHPHQW
6HH-$DW)RUH[DPSOHWKH1$$&3LVFKDOOHQJLQJ
3DUPD¶VXVHRIZRUGRIPRXWKKLULQJSUDFWLFHVDQGLWVIDLOXUH
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

DERXW ZKLFK 7RPEOLQ FRPSODLQHG´ VHH -$ DW
%ODQWRQODFNHGVWDQGLQJEHFDXVHKHKDGQRIXUWKHULQWHUHVWLQ
ZRUNLQJIRUWKH3DUPDSROLFHGHSDUWPHQWDQGEHFDXVHKHKDG
IDLOHGWRVKRZUHGUHVVDELOLW\EHFDXVHKLVFRPSODLQWGLGQRW
FRQFHUQ 3DUPD¶V UHVLGHQF\ UHTXLUHPHQW RU UHFUXLWPHQW
SUDFWLFHVEXWLWVUHIXVDOWRUHWDLQKLPRQLWVHOLJLELOLW\OLVWVHH
-$DW &KLOGUHVVODFNHGVWDQGLQJEHFDXVHVKH³KDV
QHYHUFRQWDFWHGRUWDNHQHYHQWKHVPDOOHVWVWHSWRGHWHUPLQH
ZKDW VKH ZRXOG KDYH WR GR WR REWDLQ HPSOR\PHQW ZLWK
3DUPD´ DQG ³KDV DEVROXWHO\ QR LQWHUHVW LQ DSSO\LQJ IRU
HPSOR\PHQWZLWK3DUPD´DQGWKXVFDQHVWDEOLVKQRLQMXU\LQ
IDFWVHH-$DWDQG $OOHQODFNHGVWDQGLQJEHFDXVHKH
OLYHG LQ $WODQWD DQG KDG QR LQWHUHVW LQ UHWXUQLQJ WR WKH
&OHYHODQGDUHDVHH-$DW
$IWHUGLVFXVVLQJHDFKLQGLYLGXDOSODLQWLIIWKHGLVWULFWFRXUW
WKHQQRWHGWKDW7RPEOLQ&KLOGUHVVDQG%ODQWRQGLGQRWKDYH
VWDQGLQJIRUDQDGGLWLRQDOUHDVRQWKH\IDLOHGWRPDLQWDLQWKHLU
PHPEHUVKLSWKURXJKRXWWKHHQWLUHOLWLJDWLRQ$FFRUGLQJWRWKH
GLVWULFWFRXUWIRUWKH1$$&3WRFRQWLQXHWKLVODZVXLWEDVHG
XSRQVWDQGLQJWKURXJKDSDUWLFXODUPHPEHURIWKH1$$&3
WKDW PHPEHU KDG WR PDLQWDLQ KLV PHPEHUVKLS XQWLO WKH
FRPSOHWLRQRIOLWLJDWLRQWRHQVXUHWKDWVXFKPHPEHUKDGVRPH
OHYHO RI FRQWURO RYHU WKH RUJDQL]DWLRQ WKURXJKRXW WKH
OLWLJDWLRQ-$DW,QRWKHUZRUGVDFFRUGLQJWRWKH
GLVWULFWFRXUWVWDQGLQJPXVWH[LVWQRWRQO\DWWKHVWDUWRID
FDVHEXWDOVRWKURXJKRXWLWVFRXUVH
,,$1$/<6,6
:H UHYLHZ GH QRYR D GLVWULFW FRXUW¶V JUDQW RI VXPPDU\
MXGJPHQW6HH1JX\HQY&LW\RI&OHYHODQG)G
WK&LU 6XPPDU\MXGJPHQWLVSURSHURQO\ZKHQ
WKHUHLVQRGLVSXWHDVWRDPDWHULDOTXHVWLRQRIIDFWDQGRQH
SDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZ)(' 5
&,9 3 F 9LHZLQJ DOO IDFWV DQG LQIHUHQFHV GUDZQ
WKHUHIURPLQWKHOLJKWPRVWIDYRUDEOHWRWKHQRQPRYDQWZH
WKHQGHWHUPLQHZKHWKHUWKHHYLGHQFHSUHVHQWHGLVVXFKWKDWD
UHDVRQDEOHMXU\FRXOGILQGIRUWKDWSDUW\6HH1JX\HQ

-- 15 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
)G DW FLWLQJ 0DWVXVKLWD (OHF ,QGXV &R Y =HQLWK
5DGLR&RUS86
$67$1',1*
7KH 1$$&3 DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ
GHWHUPLQLQJWKDWWKH1$$&3GLGQRWKDYHVWDQGLQJWRSXUVXH
LWVFODLPV:KHWKHUDSDUW\KDVVWDQGLQJLVDOHJDOTXHVWLRQ
UHYLHZHGGHQRYR2KLR$VV¶QRI,QGHS6FKVY*RII
)G WK&LU FHUWGHQLHG86
7R VDWLVI\ $UWLFOH ,,,¶V VWDQGLQJ UHTXLUHPHQWV D
SODLQWLIIPXVWVKRZ³ LWKDVVXIIHUHGDQμLQMXU\LQIDFW¶
WKDW LV D FRQFUHWH DQG SDUWLFXODUL]HG DQG E DFWXDO RU
LPPLQHQWQRWFRQMHFWXUDORUK\SRWKHWLFDO WKHLQMXU\LV
IDLUO\WUDFHDEOHWRWKHFKDOOHQJHGDFWLRQRIWKHGHIHQGDQWDQG
LW LV OLNHO\ DV RSSRVHG WR PHUHO\ VSHFXODWLYH WKDW WKH
LQMXU\ZLOOEHUHGUHVVHGE\DIDYRUDEOHGHFLVLRQ´)ULHQGVRI
WKH(DUWK,QFY/DLGODZ(QYWO6HUYV86
FLWLQJ/XMDQY'HIHQGHUVRI:LOGOLIH86
$QDVVRFLDWLRQPD\REWDLQ³VWDQGLQJWREULQJ
VXLW RQ EHKDOI RI LWV PHPEHUV ZKHQ LWV PHPEHUV ZRXOG
RWKHUZLVHKDYHVWDQGLQJWRVXHLQWKHLURZQULJKWWKHLQWHUHVWV
DW VWDNH DUH JHUPDQH WR WKH RUJDQL]DWLRQ¶V SXUSRVH DQG
QHLWKHUWKHFODLPDVVHUWHGQRUWKHUHOLHIUHTXHVWHGUHTXLUHVWKH
SDUWLFLSDWLRQRILQGLYLGXDOPHPEHUVLQWKHODZVXLW´,GDW
FLWLQJ+XQWY:DVKLQJWRQ6WDWH$SSOH$GYHU&RPP¶Q
86
$IWHU FDUHIXO UHYLHZ ZH FRQFOXGH WKDW WKH GLVWULFW FRXUW
HUUHGLQGHWHUPLQLQJWKDWWKH1$$&3GLGQRWKDYHVWDQGLQJ
WR EULQJ WKH FDVH ,QVWHDG ZH KROG WKDW WKH 1$$&3 KDG
VWDQGLQJWRVXHRQEHKDOIRI7RPEOLQZKRVDWLVILHGDOOWKH
QHFHVVDU\UHTXLUHPHQWVIRUVWDQGLQJ
:KHQ6WDQGLQJ,V'HWHUPLQHG
%HIRUHZHGLVFXVVKRZWKH1$$&3REWDLQHGDVVRFLDWLRQDO
VWDQGLQJWKURXJK7RPEOLQZHPXVWILUVWDGGUHVVWKHTXHVWLRQ
RIZKHQVWDQGLQJLVWREHGHWHUPLQHG2XUUHYLHZRI6XSUHPH
&RXUWDQG6L[WK&LUFXLWFDVHODZLQIRUPVXVWKDWFRQWUDU\WR
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

-$ DW 6LPLODUO\ LQ 6HSWHPEHU (GZDUG
0F&DIIHU\DQLQGLYLGXDOZKRKDGGHVLJQHGRQHRI3DUPD¶V
SROLFH H[DPLQDWLRQV LQ WKH HDUO\ V HQJDJHG LQ WKH
IROORZLQJFROORTX\GXULQJKLVGHSRVLWLRQ
4 7XUQLQJWR\RXUOHWWHU&DSWDLQLI\RXZRXOG$QG
PDNLQJ UHIHUHQFH WR WKH ZULWWHQ H[DPLQDWLRQ ZLWK
WKH ILYH SDUWV WKDW DUH OLVWHG RQ SDJHV DQG RI
3ODLQWLII¶V ([KLELW 1XPEHU 'R \RX KDYH DQ\
NQRZOHGJHDVWRZKHWKHUZULWWHQH[DPLQDWLRQVRIWKH
NLQGWKDWDUHGHVFULEHGKHUHLQSDUWVDQG
ZKHWKHUZKLWHVDQGEODFNVVFRUHGLIIHUHQWO\RUWKH
VDPHLQWHVWVRIWKLVNLQG"
4 6XUH+DYH\RXVHHQDQ\VWXGLHVRUOLWHUDWXUHDVWR
ZKHWKHU ZULWWHQ H[DPLQDWLRQV RI WKH JHQHUDO NLQG
WKDW \RX KDYH KHUH DV D ZKROH WHQG WR KDYH DQ
DGYHUVHLPSDFWRQEODFNV"
$ 7KDW¶V TXLWH D MXPS ORJLFDOO\ <HV ,¶YH UHDG
PDWHULDO WKDW VWDWHG WKDW ZULWWHQ H[DPLQDWLRQV GLG
KDYHDGYHUVHLPSDFWRQYDULRXVJURXSV
-$DW)XUWKHUPRUH3DUPDNQHZWKDWRQHRIWKH
1$$&3¶VLQGLYLGXDOSODLQWLIIVZDV&UD\WRQZKRKDGIDLOHG
WKHDJLOLW\SRUWLRQRIWKHSROLFHFLYLOVHUYLFHH[DPLQDWLRQDQG
ZDV FKDOOHQJLQJ FHUWDLQ DVSHFWV RI WKDW WHVW DV DSSOLHG WR
%ODFNV-$DW 'HSRI(OL]DEHWK:RROVRQ
6HF¶\RI&LYLO6HUY&RPP¶Q TXHVWLRQLQJ:RROVRQDERXW
WKHSURFHGXUHIRUVFRULQJ&UD\WRQ¶VH[DPLQDWLRQ ,QIDFW
GXULQJWKHFRXUVHRIWKLVOLWLJDWLRQWKH1$$&3SUHVHQWHGD
2FWREHUDIILGDYLWIURPRQHH[SHUW/DQFH6HEHUKDJHQ
UHJDUGLQJ WKH GLVSDUDWH LPSDFW WKDW 3DUPD¶V FLYLO VHUYLFH
H[DPLQDWLRQ DOOHJHGO\ KDG RQ %ODFNV -$ DW ,Q
HVVHQFHLQOLJKWRIWKH1$$&3¶VDFWLRQVGXULQJGLVFRYHU\
3DUPDFDQQRWQRZFODLPLJQRUDQFHRIWKH1$$&3¶VLQWHUHVW
LQFKDOOHQJLQJLWVWHVWLQJSURFHGXUHV

-- 16 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
)XUWKHUPRUHFRQWUDU\WRWKHGLVWULFWFRXUW¶VDVVHUWLRQVZH
EHOLHYH WKDW 3DUPD KDG QRWLFH RI WKH 1$$&3¶V LQWHQW WR
FKDOOHQJH3DUPD¶VFLYLOVHUYLFHWHVWLQJSURFHGXUHVDQGWKDW
3DUPDZDVQRWSUHMXGLFHGE\VWDWHPHQWVPDGHLQSOHDGLQJV
ILOHG E\ WKH 1$$&3 GXULQJ WKLV OLWLJDWLRQ 7KH 1$$&3
H[SOLFLWO\ VWDWHG LQ LWV FRPSODLQW WKDW LW ZDV FKDOOHQJLQJ
3DUPD¶VXVHRI³XQYDOLGDWHGVHOHFWLRQSURFHGXUHVWKDWKDYH
WKHHIIHFWRIGLVSURSRUWLRQDWHO\H[FOXGLQJIURPHPSOR\PHQW
WKRVH EODFN DSSOLFDQWV ZKR GR REWDLQ WLPHO\ LQIRUPDWLRQ
UHJDUGLQJHPSOR\PHQWRSSRUWXQLWLHVDQGZKRDUHQRWGHWHUUHG
E\WKHGLVFULPLQDWRU\SUDFWLFHVRIGHIHQGDQW´-$DW
(DUO\LQWKHFRXUVHRIWKLVOLWLJDWLRQWKH1$$&3TXHVWLRQHG
VHYHUDO RI 3DUPD¶V FLYLO VHUYLFH DGPLQLVWUDWRUV DQG RWKHU
ZLWQHVVHVDERXWWKHYDOLGLW\RI3DUPD¶VH[DPLQDWLRQV-$DW
'HSRI-DPHV0HUOLQR&KDLUPDQRIWKH
3DUPD&LYLO6HUY&RPP¶Q 'HSRI
(GZDUG 0F&DIIHU\ )RU H[DPSOH LQ KLV GHSRVLWLRQ LQ
6HSWHPEHU-DPHV0HUOLQRWKH&KDLUPDQRIWKH&LYLO
6HUYLFH&RPPLVVLRQZDVTXHVWLRQHGDVIROORZV
4 $QGWKDWDOVRIURP\RXUSULRUWHVWLPRQ\WKDWWKHWHVW
WKH\JDYHWKDWOHGWRWKH SROLFHWHVWZDVWKH
ILUVWRQHWKHILUVWWHVWIRUHQWU\OHYHOSROLFHRIILFHU
WKDW0F&DIIHU\GLGIRUWKHFLW\RI3DUPD"
$ <HV
4 'LG 0U RU &DSWDLQ 0F&DIIHU\ RU KLV DVVRFLDWH
SUHVHQW WR \RX DQ\WKLQJ WKDW WKH\ GHVFULEHG DV D
YDOLGLW\VWXG\WRWKHEHVWRI\RXUNQRZOHGJH"
$ )RUWKHSROLFHHQWU\OHYHOH[DPLQDWLRQ"
4 <HV
$ $V,UHFDOOQRWKH\GLGQRWSUHVHQWRQH
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

WKHGLVWULFWFRXUW¶VFRQFOXVLRQVWDQGLQJGRHVQRWKDYHWREH
PDLQWDLQHGWKURXJKRXWDOOVWDJHVRIOLWLJDWLRQ,QVWHDGLWLVWR
EHGHWHUPLQHGDVRIWKHWLPHWKHFRPSODLQWLVILOHG
7KH6XSUHPH&RXUWKDVFRQVLVWHQWO\KHOGWKDW³MXULVGLFWLRQ
LVWHVWHGE\WKHIDFWVDVWKH\H[LVWHGZKHQWKHDFWLRQ>ZDV@
EURXJKW´ DQG ³μWKDW DIWHU YHVWLQJ LW FDQQRW EH RXVWHG E\
VXEVHTXHQWHYHQWV¶´6PLWKY6SHUOLQJ86Q
TXRWLQJ 0ROODQ Y 7RUUDQFH 86
VHH DOVR )UHHSRUW0F0R5DQ ,QF Y . 1 (QHUJ\
,QF86 ,Q)ULHQGVRIWKH(DUWKWKH
6XSUHPH&RXUWDSSOLHGLWV³ORQJVWDQGLQJUXOHWKDWMXULVGLFWLRQ
LVWREHDVVHVVHGXQGHUWKHIDFWVH[LVWLQJZKHQWKHFRPSODLQW
LVILOHG´/XMDQ86DWQZKHQLWFRQFOXGHGWKDW
WKHSODLQWLIIVKDGVWDQGLQJWRVHHNERWKLQMXQFWLYHUHOLHIDQG
FLYLOSHQDOWLHV,QVXSSRUWRILWVKROGLQJWKH6XSUHPH&RXUW
UHSHDWHGO\QRWHGWKDWWKHSODLQWLIIV¶LQMXULHVZHUHRFFXUULQJDV
RIWKHWLPHWKHLUFRPSODLQWZDVILOHG6HHHJ)ULHQGVRIWKH
(DUWK86DW ³+HUHLQFRQWUDVWLWLVXQGLVSXWHG
WKDW>WKH@XQODZIXOFRQGXFWZDVRFFXUULQJDWWKHWLPHWKH
FRPSODLQWZDVILOHG´ ³,WFDQVFDUFHO\EHGRXEWHGWKDW
IRU D SODLQWLII ZKR LV LQMXUHG RU IDFHV WKH WKUHDW RI IXWXUH
LQMXU\GXHWRLOOHJDOFRQGXFWRQJRLQJDWWKHWLPHRIVXLW´
HPSKDVLV DGGHG VHH DOVR %HFNHU Y )HGHUDO (OHFWLRQ
&RPP¶Q)GQ VW&LU QRWLQJWKDW
/XMDQ ³FOHDUO\ LQGLFDW>HV@ WKDW VWDQGLQJ LV WR EH μDVVHVVHG
XQGHUWKHIDFWVH[LVWLQJZKHQWKHFRPSODLQWLVILOHG¶´ :KLWH
Y /HH )G WK &LU ³6WDQGLQJ LV
H[DPLQHGDWμWKHFRPPHQFHPHQWRIWKHOLWLJDWLRQ¶´ 3DUNY
)RUHVW6HUYRIWKH8QLWHG6WDWHV)G WK
&LU ³:HGRQRWWKLQNKRZHYHUWKDWWKHDFWXDOXVHRI
FKHFNSRLQWVLQDQGLVUHOHYDQWRQWKHLVVXH
RI VWDQGLQJ EHFDXVH DOO RI WKHVH HYHQWV RFFXUUHG DIWHU >WKH
SODLQWLII@ILOHGKHURULJLQDOFRPSODLQW´ 3HUU\Y9LOODJHRI
$UOLQJWRQ +HLJKWV )G WK &LU
³%HFDXVHVWDQGLQJJRHVWRWKHMXULVGLFWLRQRIDIHGHUDOFRXUW
WRKHDUDSDUWLFXODUFDVHLWPXVWH[LVWDWWKHFRPPHQFHPHQW
RIWKHVXLW´ &DUUY$OWD9HUGH,QGXV,QF)G
WK&LU ³$VZLWKDOOTXHVWLRQVRIVXEMHFWPDWWHU

-- 17 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
MXULVGLFWLRQH[FHSWPRRWQHVVVWDQGLQJLVGHWHUPLQHGDVRIWKH
GDWHRIWKHILOLQJRIWKHFRPSODLQWDQGVXEVHTXHQWHYHQWVGR
QRWGHSULYHWKHFRXUWRIMXULVGLFWLRQ´ 7KH6XSUHPH&RXUW
WKHQ KHOG WKDW WKH SODLQWLII LQ )ULHQGV RI WKH (DUWK KDG
VWDQGLQJ WR DVVHUW LWV FODLPV EHFDXVH WKH SODLQWLII KDG
VXFFHVVIXOO\ VKRZQ WKDW LWV LQMXU\ RFFXUUHG DW WKH WLPH WKH
FRPSODLQWZDVILOHG,QUHDFKLQJWKLVGHFLVLRQWKH6XSUHPH
&RXUWGLVWLQJXLVKHG)ULHQGVRIWKH(DUWKIURP&LW\RI/RV
$QJHOHVY/\RQV86 LQZKLFKLWKHOGWKDWD
SODLQWLII ODFNHG VWDQGLQJ WR VHHN DQ LQMXQFWLRQ DJDLQVW WKH
HQIRUFHPHQWRIDSROLFHFKRNHKROGSROLF\EHFDXVHKHFRXOG
QRWFUHGLEO\DOOHJHWKDWKHIDFHGDUHDOLVWLFWKUHDWIURPWKDW
SROLF\VWDWLQJ³>K@HUH>LQ)ULHQGVRIWKH(DUWK@LQFRQWUDVWLW
LVXQGLVSXWHGWKDW>WKHGHIHQGDQW¶V@XQODZIXOFRQGXFWZDV
RFFXUULQJDWWKHWLPHWKHFRPSODLQWZDVILOHG´)ULHQGVRIWKH
(DUWK86DW HPSKDVLVDGGHG
7KH 6XSUHPH &RXUW WKHQ SURFHHGHG WR H[SODLQ KRZ
PRRWQHVVLVGLVWLQFWIURPVWDQGLQJQRWLQJWKDWWKH³>V@WDQGLQJ
GRFWULQH IXQFWLRQV WR HQVXUH DPRQJ RWKHU WKLQJV WKDW WKH
VFDUFH UHVRXUFHV RI WKH IHGHUDO FRXUWV DUH GHYRWHG WR WKRVH
GLVSXWHVLQZKLFKSDUWLHVKDYHDFRQFUHWHVWDNH´ZKLOH³E\WKH
WLPH PRRWQHVV LV DQ LVVXH WKH FDVH KDV EHHQ EURXJKW DQG
OLWLJDWHGRIWHQ DVKHUH IRU\HDUV´,GDW,QRWKHUZRUGV
ZKHUHDV VWDQGLQJ UHTXLUHV SURRI ³WKDW LI XQFKHFNHG E\
OLWLJDWLRQWKHGHIHQGDQW¶VDOOHJHGO\ZURQJIXOEHKDYLRUZLOO
OLNHO\RFFXURUFRQWLQXHDQGWKDWWKHμWKUHDWHQHGLQMXU\>LV@
FHUWDLQO\ LPSHQGLQJ¶´ D FODLP RI PRRWQHVV EDVHG RQ
YROXQWDU\ FRPSOLDQFH PDQGDWHV SURRI WKDW ³WKH DOOHJHGO\
ZURQJIXOEHKDYLRU>FDQQRW@UHDVRQDEO\EHH[SHFWHGWRUHFXU´
,GDW TXRWLQJ:KLWPRUHY$UNDQVDV86
DOWHUDWLRQLQRULJLQDO ,QHVVHQFHVWDQGLQJFRQFHUQV
RQO\ZKHWKHUDSODLQWLIIKDVDYLDEOHFODLPWKDWDGHIHQGDQW¶V
XQODZIXOFRQGXFW³ZDVRFFXUULQJDWWKHWLPHWKHFRPSODLQW
ZDVILOHG´LGDWZKLOHPRRWQHVVDGGUHVVHVZKHWKHUWKDW
SODLQWLIIFRQWLQXHVWRKDYHDQLQWHUHVWLQWKHRXWFRPHRIWKH
OLWLJDWLRQ6HHHJ$UL]RQDQVIRU2IILFLDO(QJOLVKY$UL]RQD
86 ³$V D VWDWH HPSOR\HH VXEMHFW WR
$UWLFOH;;9,,,<QLTXH]KDGDYLDEOHFODLPDWWKHRXWVHWRI
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

SODLQWLIIIURPDVVHUWLQJDFODLPWKDWZDVQRWZLWKLQWKHVFRSH
RI KLV ((2& FKDUJH +RZHYHU ³>E@HFDXVH 7LWOH 9,, LV D
UHPHGLDOVWDWXWHPDQ\FRXUWVUHIXVHWRQDUURZO\FRQVWUXHWKH
FKDUJHZKHUHVXFKDFRQVWUXFWLRQZRXOGSUHFOXGHDSODLQWLII
IURPEULQJLQJDFODLP´$QJY3URFWHU *DPEOH&R
)G WK&LU &RQVHTXHQWO\³>F@RXUWVKDYH
H[SDQGHGXSRQWKHFKDUJHILOLQJUHTXLUHPHQWWRSURYLGH
WKDWDSDUW\¶VGLVFULPLQDWLRQFODLPPD\LQFOXGHFODLPV
μOLPLWHGWRWKHVFRSHRIWKH((2&LQYHVWLJDWLRQUHDVRQDEO\
H[SHFWHG WR JURZ RXW RI WKH FKDUJH RI GLVFULPLQDWLRQ¶´
'DYLV)GDW TXRWLQJ((2&Y0F&DOO3ULQWLQJ
&RUS )G WK &LU VHH DOVR
'XJJLQVY6WHDN¶16KDNH,QF)G WK&LU
KROGLQJWKDWWKHGLVWULFWFRXUWHUUHGE\QRWFRQVLGHULQJ
HYLGHQFHRIDOOHJHGUHWDOLDWRU\DFWVZKHUHWKHSODLQWLII³UHODWHG
IDFWV WR WKH ((2& ZKLFK ZRXOG KDYH SURPSWHG DQ
LQYHVWLJDWLRQLQWRUHWDOLDWLRQ´ )DUPHUY$5$6HUYV,QF
)G WK&LU KROGLQJWKDWWKHFKDUJH
RI WKH IHPDOH SODLQWLIIV ZKLFK VSHFLILHG GHQLDO RI IDLU
UHSUHVHQWDWLRQE\WKHLUXQLRQZRXOGKDYHOHGWKH((2&WR
LQYHVWLJDWHWKHSODLQWLIIV¶HTXDOSD\FODLPDQGFKDOOHQJHWR
FHUWDLQFROOHFWLYHEDUJDLQLQJSURYLVLRQV
:HFRQFOXGHWKDWWKHGLVWULFWFRXUWHUUHGLQGHWHUPLQLQJWKDW
WKH1$$&3¶VFKDOOHQJHWR3DUPD¶VSROLFHILUHILJKWHUDQG
RWKHUH[DPLQDWLRQVGLGQRWILWZLWKLQWKHVFRSHRILWV((2&
FKDUJH :KLOH PXFK RI WKH 1$$&3¶V FKDUJH IRFXVHV RQ
3DUPD¶VUHVLGHQF\UHTXLUHPHQWVDQGUHFUXLWLQJSUDFWLFHVLW
DOVRH[SOLFLWO\UHIHUVWR3DUPD¶VKLULQJSUDFWLFHVZLWK³FLYLO
VHUYLFHMREV´DQGQRWHVWKDW³3DUPDGLVFULPLQDWHVLQKLULQJE\
UHIXVLQJWRUHFUXLWFRQVLGHUVHOHFWDQGHPSOR\EODFNVRQWKH
VDPHEDVLVDVZKLWHV´-$DW HPSKDVLVDGGHG ,QOLJKW
RIWKHIDFWWKDWFLYLOVHUYLFHH[DPLQDWLRQVDUHWKHYHU\PHDQV
E\ZKLFK3DUPDFUHDWHVWKHHOLJLELOLW\OLVWVIRULWVFLYLOVHUYLFH
MREV ZH EHOLHYH WKDW LW ZDV HUURU WR FRQFOXGH WKDW DQ
LQYHVWLJDWLRQRIVXFKH[DPLQDWLRQVZRXOGQRWUHDVRQDEO\EH
H[SHFWHG WR JURZ RXW RI WKH 1$$&3¶V FKDUJH RI
GLVFULPLQDWLRQ

-- 18 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
DSSOLHGWRWKHPLQDFRQFUHWHIDVKLRQ´3DUPD¶V%UDW
3DUPD¶VDUJXPHQWLVFRPSOHWHO\ZLWKRXWPHULW
7KLV FDVH LV QRW DQFKRUHG LQ IXWXUH HYHQWV WKDW KDYH QRW
RFFXUUHGEXWLQHYHQWVWKDWKDYHDOUHDG\RFFXUUHG$VDOUHDG\
QRWHGRQH1$$&3PHPEHU7RPEOLQGLGDVVHUWWKDW3DUPD¶V
UHVLGHQF\UHTXLUHPHQWVZHUHDSSOLHGWRKLPLQDFRQFUHWHZD\
6SHFLILFDOO\ 7RPEOLQ DVVHUWHG WKDW KH ZDV GHWHUUHG IURP
VLWWLQJ IRU D FLYLO VHUYLFH H[DPLQDWLRQ LQ 3DUPD LQ
EHFDXVHRIWKHFLW\¶VPRYHLQUHVLGHQF\UHTXLUHPHQW-$DW
)XUWKHUPRUHDVVKRZQE\WKH1$$&3¶VFRPSODLQWWKH
1$$&3LVFKDOOHQJLQJPRUHWKDQWKHDSSOLFDWLRQRI3DUPD¶V
SDVWDQGSUHVHQWUHVLGHQF\UHTXLUHPHQWVLQFOXGLQJ3DUPD¶V
UHIXVDOWRWUHDWEODFNDQGZKLWHDSSOLFDQWVHTXDOO\LWVXVHRI
ZRUGRIPRXWKKLULQJDQG&LW\+DOOSRVWLQJVDQGLWVPLQLPDO
DGYHUWLVLQJ$VHYLGHQFHGE\7RPEOLQ¶V((2&DIILGDYLWDQG
GHSRVLWLRQWHVWLPRQ\FODLPVUHJDUGLQJWKHVHSUDFWLFHVDUHULSH
IRUDGMXGLFDWLRQDVWKH1$$&3KDVFUHDWHGDJHQXLQHLVVXH
RIPDWHULDOIDFWUHJDUGLQJZKHWKHU7RPEOLQDQGRWKHU%ODFNV
ZHUHKDUPHGE\3DUPD¶VDOOHJHGO\GLVFULPLQDWRU\UHFUXLWPHQW
VHOHFWLRQDQGKLULQJSUDFWLFHV
'%5($'7+2)7+(((2&&+$5*(
)LQDOO\WKH1$$&3DUJXHVWKDWWKHGLVWULFWFRXUWHUUHGE\
OLPLWLQJWKH VFRSHRIWKLVDFWLRQWRDFKDOOHQJHWR3DUPD¶V
IRUPHUUHVLGHQF\UHTXLUHPHQWDQGDOOHJHGSUDFWLFHRIOLPLWLQJ
WKH UHFUXLWPHQW RI PXQLFLSDO HPSOR\HHV WR ZRUGRIPRXWK
WKURXJKIULHQGVDQGUHODWLYHVRI3DUPD¶VPXQLFLSDOHPSOR\HHV
DQGE\H[FOXGLQJDQ\FKDOOHQJHVWRWKHWHVWLQJSURFHGXUHVDQG
H[DPLQDWLRQVXVHGE\3DUPD:HDJUHHZLWKWKH1$$&3
7KHSXUSRVHRIILOLQJDFKDUJHRIGLVFULPLQDWLRQLVWRWULJJHU
WKHLQYHVWLJDWRU\DQGFRQFLOLDWRU\SURFHGXUHVRIWKH((2&
$Q((2&FKDUJHQRWLILHVSRWHQWLDOGHIHQGDQWVRIWKHQDWXUH
RIDSODLQWLII¶VFODLPVDQGSURYLGHVWKHRSSRUWXQLW\IRUWKH
SDUWLHVWRVHWWOHFODLPVEHIRUHWKH((2&LQVWHDGRIOLWLJDWH
WKHP'DYLVY6RGH[KR&XPEHUODQG&ROO&DIHWHULD
)G WK&LU 7KHUHIRUHFRXUWVSUHFOXGHD
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

WKHOLWLJDWLRQLQODWH<QLTXH]OHIWKHUVWDWHMRELQ
$SULOWRWDNHXSHPSOR\PHQWLQWKHSULYDWHVHFWRUZKHUH
KHU VSHHFK ZDV QRW JRYHUQHG E\ $UWLFOH ;;9,,, $W WKDW
SRLQWLWEHFDPHSODLQWKDWVKHODFNHGDVWLOOYLWDOFODLPIRU
SURVSHFWLYHUHOLHI>DQGWKDWKHUFODLPZDVPRRW@´ VHHDOVR
)ULHQGVRIWKH(DUWK86DW GHVFULELQJ$UL]RQDQV
IRU2IILFLDO(QJOLVK
$SSO\LQJWKHSULQFLSOHVRI)ULHQGVRIWKH(DUWKZHEHOLHYH
WKDW LW LV FOHDU WKDW WKH 1$$&3 RQO\ QHHGHG WR HVWDEOLVK
VWDQGLQJDWWKHWLPHWKDWLWVFRPSODLQWZDVILOHG,QGHHGLQ
6HQWHUY*HQHUDO0RWRUV&RUS)G WK&LU FHUW
GHQLHG 86 WKLV FRXUW KLJKOLJKWHG WKH
LPSRUWDQFH RI GHWHUPLQLQJ VWDQGLQJ DV RI WKH WLPH RI WKH
FRPSODLQWLQ7LWOH9,,FDVHVVXFKDVWKLVRQH,Q6HQWHUDQ
HPSOR\HUFKDOOHQJHGDQHPSOR\HH¶VVWDQGLQJWREULQJDFODVV
DFWLRQEDVHGXSRQDOOHJHGGLVFULPLQDWLRQLQWKHFRPSDQ\¶V
SURPRWLRQDOSUDFWLFHVDUJXLQJWKDWWKHHPSOR\HHKDGVXIIHUHG
QR LQMXU\ EHFDXVH KH ZDV JLYHQ VHYHUDO RSSRUWXQLWLHV IRU
SURPRWLRQEXWUHMHFWHGWKHP,GDW$IWHUQRWLQJWKDW
WKHUHZDVHYLGHQFHZKLFKVKRZHGWKDWWKHHPSOR\HHKDGLQ
IDFWEHHQGHQLHGSURPRWLRQVDQGWKDWWKHHPSOR\HHKDGQRW
EHHQ RIIHUHG DQ\ SURPRWLRQV XQWLO DIWHU KH KDG ILOHG D
JULHYDQFHZHKHOGWKDW³>V@WDQGLQJLVGHWHUPLQHGDVRIWKH
GDWHWKHVXLWLVILOHG´VHHLGDWDQGWKDWWKH³RIIHURI
SURPRWLRQIROORZLQJFRPSODLQWWRWKH((2&>GLGQRW@DIIHFW>@
>WKHHPSOR\HH¶V@VWDQGLQJWRUDLVHWKHFODVVLVVXH´VHHLGDW
$VWKH6HQWHUFRXUWH[SODLQHGZHUHLWWRKROGRWKHUZLVH
DQ HPSOR\HU FRXOG ³QHJDWH DQ HPSOR\HH¶V VWDQGLQJ WR
FKDOOHQJHGLVFULPLQDWRU\HPSOR\PHQWSUDFWLFHVE\WKHVLPSOH
H[SHGLHQWRIRIIHULQJ>WKHHPSOR\HH@XQLODWHUDOO\WKHUHOLHIKH
VHHNVIRUWKHFODVV´,G+HUHWKHVDPHUHDVRQLQJDSSOLHV,I
IRUH[DPSOHZHZHUHWRUHTXLUHDQHYDOXDWLRQRIVWDQGLQJ
WKURXJKRXWD7LWOH9,,FDVHLQSDUWLFXODUFDVHVZHZRXOGLQ
HIIHFWEHFUHDWLQJDORRSKROHWKURXJKZKLFKHPSOR\HUVFRXOG
DYRLGUHYLHZRIWKHLUKLULQJSUDFWLFHVE\HLWKHURIIHULQJDQ
HPSOR\HHWKHUHOLHIKHVHHNVRUE\GHOD\LQJWKHSURJUHVVRIWKH
FDVHVXFKWKDWWKHHPSOR\HHQRORQJHUPDLQWDLQHGDQLQWHUHVW
LQWKHMRE7KHUHIRUHDVWKH6XSUHPH&RXUWKHOGLQ)ULHQGV

-- 19 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
:H MRLQ WKH )LUVW )LIWK 6HYHQWK (LJKWK DQG 1LQWK &LUFXLWV
ZKLFK KDYH DOO H[SOLFLWO\ KHOG WKDW VWDQGLQJ LV GHWHUPLQHG DV RI WKH WLPH
WKH FRPSODLQW LV ILOHG 6HH %HFNHU Y )HGHUDO (OHFWLRQ &RPP¶Q )G
Q VW &LU :KLWH Y /HH )G WK &LU
3DUN Y )RUHVW 6HUY RI WKH 8QLWHG 6WDWHV )G WK
&LU 3HUU\ Y 9LOODJH RI $UOLQJWRQ +HLJKWV )G WK
&LU &DUU Y $OWD 9HUGH ,QGXV ,QF )G WK &LU
7KHVH FDVHV DUH FLWHG PRUH WKRURXJKO\ DERYH 6HH VXSUD SS

RI WKH (DUWK ZH FRQFOXGH WKDW WKH FRXUW PXVW GHWHUPLQH
ZKHWKHU VWDQGLQJ H[LVWV DW WKH WLPH RI WKH ILOLQJ RI WKH
FRPSODLQWRQO\
$VVRFLDWLRQDO6WDQGLQJ7KURXJK7RPEOLQ
$IWHU UHYLHZLQJ WKH UHFRUG WR GHWHUPLQH LI WKH 1$$&3
HVWDEOLVKHG VWDQGLQJ DV RI WKH ILOLQJ RI LWV FRPSODLQW ZH
FRQFOXGHWKDWWKH1$$&3VXFFHVVIXOO\REWDLQHGDVVRFLDWLRQDO
VWDQGLQJ WKURXJK 7RPEOLQ DQG WKHUHIRUH PD\ SXUVXH WKH
FODLPVLWPDNHV3DUPDGRHVQRWFRQWHVWZKHWKHUWKHLQWHUHVWV
DWVWDNHDUHJHUPDQHWRWKH1$$&3¶VSXUSRVHRUZKHWKHUWKH
FODLP RU UHOLHI UHTXHVWHG UHTXLUHV WKH SDUWLFLSDWLRQ RI
LQGLYLGXDO PHPEHUV LQVWHDG LW FRQWHVWV RQO\ ZKHWKHU WKH
VHYHQ LQGLYLGXDOV OLVWHG LQ WKH 1$$&3¶V FRPSODLQW KDYH
VWDQGLQJWRVXHLQWKHLURZQULJKW2IWKHVHVHYHQLQGLYLGXDOV
7RPEOLQKDVVWDQGLQJWRVXHLQKLVRZQULJKWDVWKH1$$&3
KDVSUHVHQWHGHYLGHQFHGHPRQVWUDWLQJWKDW7RPEOLQVXIIHUHG
DFRQFUHWHDQGDFWXDOLQMXU\WKDWVXFKLQMXU\ZDVWUDFHDEOHWR
FKDOOHQJHG DFWLRQV E\ 3DUPD DQG WKDW VXFK LQMXU\ LV
UHGUHVVDEOHE\DIDYRUDEOHGHFLVLRQ
D,QMXU\
)LUVWWKH1$$&3SUHVHQWHGHYLGHQFHGHPRQVWUDWLQJWKDW
7RPEOLQVXIIHUHGDFRQFUHWHDQGDFWXDOLQMXU\7KH1$$&3
VXEPLWWHG HYLGHQFH WR VKRZ WKDW DW WKH WLPH LW ILOHG WKH
FRPSODLQW 7RPEOLQ KDG EHHQ LQMXUHG E\ HPSOR\PHQW
SUDFWLFHV WKDW FODVVLILHG EODFN DSSOLFDQWV LQ D ZD\ WKDW
GHSULYHGWKHPRIDQRSSRUWXQLW\WRFRPSHWHIRUPXQLFLSDO
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

ZRUNHUVLQ3DUPD¶VPXQLFLSDOZRUNIRUFHKDVVWLOOUHPDLQHG
SUDFWLFDOO\ QRQH[LVWHQW )RU H[DPSOH EHWZHHQ DQG
3DUPDKDGKLUHGRQO\WKUHHEODFNIXOOWLPHHPSOR\HHV
RXWRIPRUHWKDQIXOOWLPHPXQLFLSDOHPSOR\HHVUHVXOWLQJ
LQ%ODFNVFRPSULVLQJRQO\RIWKHFLW\¶VHQWLUHPXQLFLSDO
ZRUNIRUFHLQ$V+DPPHUPDQQRWHGLQKLVDIILGDYLW
WKLVSHUFHQWDJHRIEODFNHPSOR\HHVLQ3DUPD¶VSXEOLFVHFWRU
ZDV H[FHHGLQJO\ ORZ HTXDOLQJ OHVV WKDQ RQHQLQWK RI WKH
SHUFHQWDJHLQLWVSULYDWHVHFWRURQHILIWHHQWKRIWKDWLQWKH
SULYDWHVHFWRURIWKH&OHYHODQGPHWURSROLWDQDUHDDQGRQH
WKLUW\VHFRQG RI WKDW LQ WKH SXEOLF VHFWRU RI WKH &OHYHODQG
PHWURSROLWDQDUHD6HH-$DW ([SHUW5HSRUWRI
+HUEHUW+DPPHUPDQ ,QVXPFRQWUDU\WRWKHGLVWULFWFRXUW¶V
FRQFOXVLRQZHFRQFOXGHWKDW3DUPDIDLOHGWRVKRZWKDWLWV
LQWHULP DFWLRQV FRPSOHWHO\ HUDGLFDWHG WKH HIIHFWV RI LWV
DOOHJHGO\GLVFULPLQDWRU\FRQGXFWLQDSSO\LQJD³UHVLGHQF\´
UHTXLUHPHQWDQGLQIDLOLQJWRDGYHUWLVHLQDPDQQHUHIIHFWLYH
IRUUHDFKLQJ%ODFNVLQWKHJUHDWHU&OHYHODQGFRPPXQLW\
&5,3(1(66
3DUPD DUJXHV WKDW WKH 1$$&3¶V FODLPV DUH QRW ULSH IRU
DGMXGLFDWLRQ³5LSHQHVVUHTXLUHVWKDWWKHμLQMXU\LQIDFWEH
FHUWDLQO\LPSHQGLQJ¶´1DWLRQDO5LIOH$VV¶QRI$PY0DJDZ
)G WK &LU FLWDWLRQ RPLWWHG
³5LSHQHVVEHFRPHVDQLVVXHZKHQDFDVHLVDQFKRUHGLQIXWXUH
HYHQWVWKDWPD\QRWRFFXUDVDQWLFLSDWHGRUDWDOO´0DJDZ
)GDW7KXVULSHQHVVLV³DTXHVWLRQRIWLPLQJ´,G
$ULSHQHVVLQTXLU\UHTXLUHVDQDQDO\VLVRIWZRIDFWRUV
ZKHWKHUWKHLVVXHVDWVWDNHDUHILWIRUMXGLFLDOGHFLVLRQDQG
WKHH[WHQWRIWKHKDUGVKLSWRWKHSDUWLHVRIZLWKKROGLQJFRXUW
FRQVLGHUDWLRQ1DWLRQZLGH0XW,QV&RY&LVQHURV)G
WK &LU FHUW GHQLHG 86

,QWKLVFDVH3DUPDFKDOOHQJHVRQO\WKHILUVWIDFWRURIWKH
ULSHQHVVLQTXLU\DUJXLQJWKDWWKH1$$&3¶VFODLPVDUHQRW
ULSH EHFDXVH ³>Q@R 1$$&3 PHPEHUV DOOHJH WKDW DQ\ RI
3DUPD¶V SDVW RU SUHVHQW UHVLGHQF\ UHTXLUHPHQWV ZHUH HYHU

-- 20 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
%ODQWRQ DQG &KLOGUHVV KRZHYHU GLG WHVWLI\ WKDW WKH\ PD\ KDYH
VHHQ DGYHUWLVHPHQWV IRU D FLYLO VHUYLFH H[DPLQDWLRQ LQ 3DUPD LQ DQG
-$ DW 0F,QWRVK VWDWHG WKDW KH KDG UHFHLYHG QRWLILFDWLRQ
RI D FLYLO VHUYLFH H[DPLQDWLRQ LQ WKH PDLO LQ -$ DW
SROLFH RIILFHU H[DPLQDWLRQ LQ 0D\ 6XFK HYLGHQFH
LQFOXGHG WZR&OHYHODQG3ODLQ'HDOHUDQGWKUHH6XQ3RVW
DGYHUWLVHPHQWV LQ /DNHZRRG DQG %UXQVZLFN 2KLR WZR
VXEXUEVIRUZKLFK3DUPDSURYLGHGQRVWDWLVWLFVFRQFHUQLQJ
WKHLUUDFLDOFRPSRVLWLRQ IRUDQH[DPLQDWLRQRQ-XQH
VHH-$DW6XSS-$DW LQGLYLGXDOOHWWHUV
RUGHULQJDGYHUWLVHPHQWVLQWKH&OHYHODQG3ODLQ'HDOHU6XQ
1HZVSDSHUV 7KH &DOO 3RVW DQG &X\DKRJD &RPPXQLW\
&ROOHJHIRUDQH[DPLQDWLRQRQ0DUFKVHH-$DW
DQG LQGLYLGXDO OHWWHUV RUGHULQJ
DGYHUWLVHPHQWV LQ WKH &OHYHODQG 3ODLQ 'HDOHU 6XQ
1HZVSDSHUVDQG7KH&DOO 3RVWIRUDQH[DPLQDWLRQRQ0D\
VHH-$DW3DUPDDOVRSUHVHQWHG
GHSRVLWLRQWHVWLPRQ\IURP(OL]DEHWK:RROVRQ6HFUHWDU\RI
WKH &LYLO 6HUYLFH &RPPLVVLRQ ZKR WHVWLILHG WR 3DUPD¶V
SODFLQJWZRFOHUNW\SLVWDGYHUWLVHPHQWVLQ)HEUXDU\WZR
SROLFHRIILFHUDGYHUWLVHPHQWVLQ$SULORQHILUHILJKWHU
DGYHUWLVHPHQWLQ)HEUXDU\LQWKH3ODLQ'HDOHUVHH-$
DWRQHILUHILJKWHUDGYHUWLVHPHQWDQG
RQH FOHUN W\SLVW DGYHUWLVHPHQW LQ )HEUXDU\ DQG WZR
SROLFH RIILFHU DGYHUWLVHPHQWV LQ 7KH &DOO 3RVW LQ $SULO
VHH -$ DW RQH FOHUN W\SLVW
DGYHUWLVHPHQWLQ)HEUXDU\DQGWZRSROLFHRIILFHUDQG
ILUHILJKWHU DGYHUWLVHPHQWV LQ WKH 6XQ QHZVSDSHUV LQ $SULO
VHH-$DW
7KHDOOHJHGGHILFLHQF\LQ3DUPD¶VUHFUXLWPHQWHIIRUWVKDV
DUJXDEO\ UHVXOWHG LQ YLUWXDOO\ QR FKDQJH LQ WKH UDFLDO
FRPSRVLWLRQRI3DUPD¶VPXQLFLSDOZRUNIRUFHHYHQIXUWKHU
LQGLFDWLQJ 3DUPD¶V IDLOXUH WR HUDGLFDWH WKH HIIHFWV RI WKH
DOOHJHGO\GLVFULPLQDWRU\DFWLRQVLQWKLVFDVH$VWKHHYLGHQFH
VKRZVGHVSLWHWKHHOLPLQDWLRQRI3DUPD¶VRIILFLDOUHVLGHQF\
UHTXLUHPHQW DQG LWV DOOHJHGO\ LQFUHDVHG UHFUXLWPHQW HIIRUWV
WKURXJKORFDOQHZVSDSHUVDQGVFKRROVWKHSHUFHQWDJHRIEODFN
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

2Q 'HFHPEHU 7RPEOLQ ZDV LQFOXGHG LQ WKH
1$$&3¶V ILUVW DPHQGPHQW WR LWV FRPSODLQW ZKLFK ZDV HQWHUHG SXUVXDQW
WR WKH GLVWULFW FRXUW¶V 'HFHPEHU RUGHU UHTXLULQJ WKH 1$$&3 WR
VXEPLW ³μIXUWKHU SDUWLFXODUL]HG DOOHJDWLRQV RI IDFW¶´ -$ DW
MREVLQ3DUPD6SHFLILFDOO\WKH1$$&3SURYLGHGHYLGHQFH
VKRZLQJ WKDW 7RPEOLQ ZDV LQMXUHG E\ 3DUPD¶V PRYHLQ
UHVLGHQF\ UHTXLUHPHQW E\ 3DUPD¶V XVH RI ZRUGRIPRXWK
KLULQJSUDFWLFHVDQG&LW\+DOOSRVWLQJVE\3DUPD¶VDOOHJHG
IDLOXUHWRDGYHUWLVHPXQLFLSDOMRERSHQLQJVLQDPDQQHUWKDW
PD\KHOSWRUHFUXLW%ODFNVWRLWVZRUNIRUFHDQGE\3DUPD¶V
DOOHJHGIDLOXUHWRDELGHE\LWVSUDFWLFHRIURXWLQHO\PDLOLQJ
QRWLILFDWLRQVRIFLYLOVHUYLFHH[DPLQDWLRQVDQGRSHQLQJVWR
LQWHUHVWHGDSSOLFDQWV
,QSDUWLFXODUWKH1$$&3SUHVHQWHGHYLGHQFHVKRZLQJWKDW
LQ 7RPEOLQ FKRVH QRW WR VLW IRU D FLYLO VHUYLFH
H[DPLQDWLRQLQ3DUPDEHFDXVHRIWKHFLW\¶VPRYHLQUHVLGHQF\
UHTXLUHPHQW -$ DW 'XULQJ KLV GHSRVLWLRQ
7RPEOLQWHVWLILHGWRWKHIROORZLQJ
4 %XW \RX GLGQ¶W DFWXDOO\ VLW IRU DQ\ FLYLO VHUYLFH
H[DPLQDWLRQDWWKDWWLPHLVWKDWFRUUHFW"
$ 1R&HUWDLQO\QRW
4 $QG WKDW¶V EHFDXVH \RX GHFLGHG QRW WR IRU ZKDW
UHDVRQ"
$ 7KH IDFW WKH UHVLGHQF\ UHTXLUHPHQW ZDV UHDOO\ D
SUREOHP NQRZLQJ WKDW WKH &LW\ RI 3DUPD KDV D
UHSXWDWLRQRIGLVFULPLQDWLRQLQKRXVLQJDQGLW¶VZHOO
NQRZQLQWKHEODFNFRPPXQLW\DQGWKURXJKRXWWKH
PLQRULW\FRPPXQLW\WKDWLWLVQRWDSODFHZKHUHZH
DUHZHOFRPHG,GLGQ¶WVHHWKHSRLQWLQWKDW

-- 21 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
:H DVVXPH WKDW 7RPEOLQ LV UHIHUULQJ WR WKH SK\VLFDO SRUWLRQ RI
3DUPD¶V FLYLO VHUYLFH H[DPLQDWLRQ ZKLFK ZDV JLYHQ RQ )HEUXDU\
3DUPD RIIHUHG WKH ZULWWHQ SRUWLRQ RI LWV FLYLO VHUYLFH H[DPLQDWLRQ
RQ 1RYHPEHU DQG WKH SK\VLFDO SRUWLRQ RQ )HEUXDU\
-$ DW
:H GR QRW EHOLHYH WKDW 7RPEOLQ¶V DVVHUWLRQ WKDW KH GLG QRW VLW
IRU D FLYLO VHUYLFH H[DPLQDWLRQ LQ GXH WR 3DUPD¶V PRYHLQ UHVLGHQF\
UHTXLUHPHQW LV LQFRQVLVWHQW ZLWK KLV FODLP WKDW KH ZDV LQMXUHG E\ 3DUPD¶V
IDLOXUH WR QRWLI\ KLP RI LWV -XQH FLYLO VHUYLFH H[DPLQDWLRQ $W D
PLQLPXP 7RPEOLQ ZDV HQWLWOHG WR KDYH WKH RSSRUWXQLW\ WR GHFLGH LI KH
ZLVKHG WR WDNH WKH H[DPLQDWLRQ
-$DW 7RPEOLQ'HS HPSKDVLVDGGHG
7KH1$$&3DOVRSURYLGHGHYLGHQFHGHPRQVWUDWLQJWKDWLQ
)HEUXDU\ RI 7RPEOLQ VXEPLWWHG DQ DSSOLFDWLRQ IRU
HPSOR\PHQWZLWK3DUPDDQGUHTXHVWHGWKDWKHEHQRWLILHGRI
WKHQH[WDYDLODEOHFLYLOVHUYLFHH[DPLQDWLRQVRWKDWKHFRXOG
SXUVXHHPSOR\PHQWZLWKWKH3DUPDSROLFHGHSDUWPHQWEXW
WKDW 3DUPD IDLOHG WR IROORZ LWV DOOHJHG SUDFWLFH RI VHQGLQJ
URXWLQH QRWLILFDWLRQV WKURXJK WKH PDLO DQG WKXV IDLOHG WR
LQIRUP7RPEOLQRIWKHFLW\¶VQH[WFLYLOVHUYLFHH[DPLQDWLRQ
7KH QH[W FLYLO VHUYLFH H[DPLQDWLRQ ZKLFK ZDV RIIHUHG RQ
-XQH DQG -XQH VHUYHG DV WKH EDVLV IRU
FUHDWLQJD-XO\HOLJLELOLW\OLVWIURPZKLFKWZRQHZ
SROLFHRIILFHUVZHUHKLUHGLQ-$DWVHH
DOVR -$ DW $V HYLGHQFH RI 7RPEOLQ¶V LQMXU\ WKH
1$$&3 SUHVHQWHG 7RPEOLQ¶V ((2& DIILGDYLW LQ ZKLFK
7RPEOLQVWDWHG
, DSSOLHG IRU D SRVLWLRQ RI 6DIHW\ )RUFHV RU
$GPLQLVWUDWLYH&OHUNLQ)HEUXDU\$WWKDWWLPH,
ZDVLQIRUPHGWKDWP\DSSOLFDWLRQZRXOGEHNHSWDQG,
ZRXOGEHQRWLILHGRIDQ\&LYLO6HUYLFHVWHVWJLYHQ
,DPDZDUHWKDWDWHVWLVJLYHQDWOHDVW\HDUO\IRUSROLFH
DQGILUHILJKWHU>V@,KDYHQHYHUEHHQQRWLILHGRIDQ\WHVW
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

/LNHZLVH GXULQJ KLV GHSRVLWLRQ LQ 'HFHPEHU -DFN .ULVH
WKH FDVK PDQDJHU IRU 3DUPD WHVWLILHG WKDW MXVW DERXW HYHU\ SHUVRQ KH KLUHG
LQ 3DUPD¶V WD[ GLYLVLRQ ZDV D SDUWWLPH HPSOR\HH RU KDG EHHQ
UHFRPPHQGHG E\ D FXUUHQW HPSOR\HH RI 3DUPD
$ ,Q MXVW DERXW HYHU\ FDVH LW¶V EHHQ VRPHERG\
ZKR NQRZV VRPHERG\ WR UHFRPPHQG
8VXDOO\ , ZLOO LQGLFDWH WR WKH RIILFH WKURXJK ²
QRWKLQJ IRUPDO , GRQ¶W VD\ KH\ , QHHG WR KLUH
VRPHERG\ EXW VRPHERG\ ZLOO KHDU LI \RX
QHHG DQ\ERG\ DQG \RX NQRZ RXU ILOLQJ LV
EDFNLQJ XS DQG ZH FDQ VXUH XVH D SHUVRQ ,
KDYH VRPHERG\ , FDQ UHFRPPHQG DQG WKDW¶V
JHQHUDOO\ KRZ LW¶V EHHQ
-$ DW .ULVH 'HS
DFKDQJHIURPSDUWWLPHWRIXOOWLPH-$DW
:KLOH 3DUPD SURGXFHG HYLGHQFH RI LWV DWWHPSWV WR
UHFUXLW%ODFNVWKURXJKORFDOVFKRROVDQGORFDOQHZVSDSHUV
LQFOXGLQJWKRVHZLWKSUHGRPLQDQWO\EODFNUHDGHUVKLSVVXFK
HYLGHQFHZDVVSDUVH6HHLQIUD3DUW,, % ,QVXP3DUPD
IDLOHG WR VKRZ WKDW WKH UHFUXLWPHQW VHOHFWLRQ DQG KLULQJ
SUDFWLFHVFKDOOHQJHGLQWKLVODZVXLWDUHQRWOLNHO\WRUHFXULQ
WKHIXWXUH
,QWHULP5HOLHI2U(YHQWV(UDGLFDWLQJ(IIHFWV
6HFRQG3DUPDIDLOHGWRSURYHWKDWLQWHULPUHOLHIRUHYHQWV
KDG LUUHYRFDEO\ HUDGLFDWHG WKH HIIHFWV RI WKH DOOHJHGO\
GLVFULPLQDWRU\ FRQGXFW $OWKRXJK 3DUPD FODLPHG WKDW LW
HUDGLFDWHGWKHHIIHFWVRILWVDOOHJHGO\GLVFULPLQDWRU\FRQGXFW
WKURXJK H[SDQGLQJ LWV PHWKRGV RI DGYHUWLVLQJ WR UHFUXLW
PLQRULWLHVWKURXJKGHYHORSLQJDQGGLVWULEXWLQJEURFKXUHVDW
ORFDOFROOHJHVDQGPDOOVDQGOLVWLQJVFKHGXOHGFLYLOVHUYLFH
H[DPLQDWLRQVLQYDULRXV&OHYHODQGQHZVSDSHUVLWVSURRIRI
WKHVHQHZDGYHUWLVLQJVFKHPHVZDVVFDUFH6HHHJ-$DW
3DUPDSUHVHQWHGHYLGHQFHRIQHZVSDSHUDGYHUWLVHPHQWV
FRYHULQJRQO\IRXUFLYLOVHUYLFHH[DPLQDWLRQVRYHUWKHFRXUVH
RIDWHQ\HDUSHULRG DSROLFHRIILFHUH[DPLQDWLRQLQ-XQH
DFOHUNW\SLVWH[DPLQDWLRQLQ)HEUXDU\RU0DUFK
DILUHILJKWHUH[DPLQDWLRQLQ0DUFKDQG D

-- 22 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
0RUHRYHUWKHHYLGHQFHLQWKHUHFRUGVXJJHVWVWKDW3DUPD
PD\KDYHD³GHIDFWR´UHVLGHQF\UHTXLUHPHQWUHYHDOLQJWKDW
GHVSLWHWKHRIILFLDOHOLPLQDWLRQRILWVUHVLGHQF\UHTXLUHPHQWLQ
3DUPDVWLOOVDVNVDPXQLFLSDOMREDSSOLFDQWDYDULHW\RI
TXHVWLRQVUHJDUGLQJKLVFRQQHFWLRQWRWKHFLW\LQFOXGLQJWKH
QXPEHURI\HDUVDQGPRQWKVWKDWWKHDSSOLFDQWKDVUHVLGHGLQ
3DUPDZKHWKHUWKHDSSOLFDQWKDVDQ\UHODWLYHVHPSOR\HGE\
WKH3DUPDZKRUHFRPPHQGHGWKHDSSOLFDQWIRUHPSOR\PHQW
ZLWK3DUPDDQGZKHUHWKHUHFRPPHQGHU V OLYHG-$DW
$GGLWLRQDOO\ WKH HYLGHQFH VKRZV WKDW GHVSLWH WKH
UHSHDO RI WKH UHVLGHQF\ UHTXLUHPHQW LQ 3DUPD WKH
RYHUZKHOPLQJ PDMRULW\ RI QHZ KLUHV IRU 3DUPD DUH 3DUPD
UHVLGHQWV )RU H[DPSOH LQ WZHQW\ILYH RXW RI WKH
WZHQW\HLJKWDSSOLFDQWVZKRVHFXUHGHPSOR\PHQWZLWK3DUPD
ZHUHDOUHDG\UHVLGHQWVRI3DUPDDQGHLJKWRIWKRVHWZHQW\
HLJKW DSSOLFDQWV KDG FORVH UHODWLYHV ZKR ZHUH 3DUPD
HPSOR\HHV-$DW
,QDGGLWLRQWRIDLOLQJWRSURYHWKDWLWZDVQRWVWLOOHQIRUFLQJ
DUHVLGHQF\UHTXLUHPHQWIRUPXQLFLSDOMREV3DUPDDOVRIDLOHG
WRVKRZWKDWLWKDGVWRSSHGLWVDOOHJHGGLVFULPLQDWRU\SUDFWLFHV
ZLWKUHJDUGWRDGYHUWLVLQJMREVWRUHFUXLWEODFNZRUNHUVDQG
ZLWKUHJDUGWRWKHDFWXDOUHFUXLWPHQWRIEODFNZRUNHUVWRLWV
PXQLFLSDO ZRUNIRUFH )RU H[DPSOH 3DUPD IDLOHG WR UHEXW
FRPSOHWHO\WKH1$$&3¶VHYLGHQFHWKDW3DUPDKLUHVPDQ\RI
LWVPXQLFLSDOHPSOR\HHVIURP&LW\+DOOSRVWLQJVDQGWKURXJK
ZRUGRIPRXWKIURPLWVPXQLFLSDOHPSOR\HHVWZRPHWKRGV
ZKLFK DUH FODLPHG WR KDYH D GLVSURSRUWLRQDWH LPSDFW RQ
%ODFNV$VWKHHYLGHQFHLQWKHUHFRUGUHYHDOVLQDQG
3DUPD KLUHG D VXEVWDQWLDO QXPEHU RI LWV IXOOWLPH
PXQLFLSDOHPSOR\HHVIURPLWVSRRORISURYLVLRQDOSDUWWLPH
RUWHPSRUDU\HPSOR\HHVPDQ\RIZKRPZHUHUHFRPPHQGHG
E\FXUUHQWHPSOR\HHVRI3DUPD-$DW
2XW RI WKLUWHHQ IXOOWLPH SRVLWLRQV SRVWHG IRU QHZ KLUHV
EHWZHHQ1RYHPEHUDQG0DUFKDWOHDVWVL[
ZHUHILOOHGE\IRUPHUSDUWWLPHHPSOR\HHVDQGWZRRWKHUV
ZHUHILOOHGE\WUDQVIHURUSURPRWLRQZLWKRXWDQ\LQGLFDWLRQRI
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

3DUPD SUHVHQWHG HYLGHQFH RI MRE DGYHUWLVHPHQWV LQ VHYHUDO
&OHYHODQG QHZVSDSHUV LQFOXGLQJ WKRVH ZLWK EODFN UHDGHUVKLSV DQG RI LWV
HIIRUWV WR UHFUXLW PLQRULWLHV LQ &OHYHODQG¶V ORFDO FROOHJHV 0RVW RI WKLV
HYLGHQFH KRZHYHU FRQFHUQV RQO\ SUDFWLFHV ZKLFK ZHUH XQGHUWDNHQ LQ
DQG WKHUHDIWHU 6HH LQIUD 3DUW ,, %
-$DWVHHDOVR-$DW )LUVW$PHQGPHQW7R7KH
&RPSODLQW $GGLWLRQDOO\WKH1$$&3SUHVHQWHGD-DQXDU\
OHWWHULQZKLFK*HULDQQH9DQHN3DUPD¶VSHUVRQQHO
GLUHFWRUQRWHGWKDW7RPEOLQKDGVXEPLWWHGDQDSSOLFDWLRQDQG
VLJQHGXSIRU3DUPD¶VPDLOLQJOLVWLQ)HEUXDU\-$DW

,QDGGLWLRQWRSURYLGLQJHYLGHQFHRI7RPEOLQ¶VLQMXU\GXH
WR3DUPD¶VIDLOXUHWRQRWLI\7RPEOLQRIDYDLODEOHFLYLOVHUYLFH
H[DPLQDWLRQVWKH1$$&3SUHVHQWHGHYLGHQFHGHPRQVWUDWLQJ
WKDWDW WKHWLPHLWILOHGWKHFRPSODLQW7RPEOLQVXIIHUHGD
VLPLODULQMXU\GXHWR3DUPD¶VXVHRIZRUGRIPRXWKKLULQJ
SUDFWLFHV DQG &LW\ +DOO SRVWLQJV DQG E\ 3DUPD¶V DOOHJHG
IDLOXUH WR DGYHUWLVH LWV PXQLFLSDO SRVLWLRQV LQ PDQQHU WKDW
FRXOG PRUH HDVLO\ UHDFK %ODFNV LQ WKH JUHDWHU &OHYHODQG
FRPPXQLW\&I7KRPDVY:DVKLQJWRQ&RXQW\6FK%G
)G WK&LU QRWLQJWKDW³ZRUGRIPRXWK
KLULQJ LQ WKH FRQWH[W RI D SUHGRPLQDQWO\ ZKLWH ZRUN
IRUFHVHUYH>V@WRIUHH]HWKHHIIHFWVRISDVWGLVFULPLQDWLRQ´
$FFRUGLQJ WR WKH 1$$&3 EHFDXVH RI 3DUPD¶V DOOHJHGO\
GHILFLHQWDGYHUWLVLQJ7RPEOLQ DQGRWKHU%ODFNV GLGQRW
OHDUQRIWKHGDWHVIRU3DUPD¶VFLYLOVHUYLFHH[DPLQDWLRQVRURI
DQ\RI3DUPD¶VPXQLFLSDOMRERSHQLQJV
0RUH LPSRUWDQWO\ WKH 1$$&3 GHPRQVWUDWHG WKDW
7RPEOLQ¶VLQMXU\ZDVVXFKWKDWLWZDUUDQWHGLQMXQFWLYHUHOLHI
7KH6XSUHPH&RXUWKDVFRQVLVWHQWO\QRWHGWKDWXQOHVVDSDVW
LQMXU\ LV DFFRPSDQLHG E\ ³FRQWLQXLQJ SUHVHQW DGYHUVH
HIIHFWV´ LW ³GRHV QRW LQ LWVHOI VKRZ D SUHVHQW FDVH RU
FRQWURYHUV\UHJDUGLQJLQMXQFWLYHUHOLHI´/\RQV86DW
TXRWLQJ 2¶6KHD Y /LWWOHWRQ 86
7KH6XSUHPH&RXUWKDVIXUWKHUVSHFLILHGWKDW³μVRPH
GD\¶LQWHQWLRQV²ZLWKRXWDQ\GHVFULSWLRQRIFRQFUHWHSODQV

-- 23 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
RULQGHHGHYHQDQ\VSHFLILFDWLRQRIZKHQWKHVRPHGD\ZLOO
EH´DUHLQVXIILFLHQWWRVXSSRUWDILQGLQJRIWKHNLQGRILQMXU\
UHTXLUHGWRZDUUDQWLQMXQFWLYHUHOLHI/XMDQ86DW
VHHDOVR$GDUDQG&RQVWUXFWRUV,QFY3HQD86
,QWKLVFDVHDWWKH WLPHWKH1$$&3ILOHGLWV
FRPSODLQW7RPEOLQKDGPRUHWKDQ³VRPHGD\LQWHQWLRQV´RI
VHHNLQJDQGREWDLQLQJHPSOR\PHQWZLWK3DUPD,QIDFWDV
VKRZQE\7RPEOLQ¶VFRUUHVSRQGHQFHZLWKWKHFLW\KHZDV
VWLOODWWHPSWLQJWRREWDLQHPSOR\PHQWZLWK3DUPDDVODWHDV
0D\$VRI0D\7RPEOLQKDGZULWWHQ3DUPD
WKH IROORZLQJ OHWWHU WR H[SUHVV KLV LQWHUHVW LQ REWDLQLQJ
HPSOR\PHQWZLWK3DUPDDVDSROLFHRIILFHURUILUHILJKWHU
,¶PGLVVWUHVVHG>VLF@RYHUWKHIDFWWKDW\RXVWDWHGWKDW,
ZRXOGEHQRWLILHGRIDOOXSFRPLQJ3ROLFHDQG)LUHH[DPV
,ZDVQRWQRWLILHGRIDQ\H[DPVSDVWRUSUHVHQW,GRQ¶W
EHOLHYH WKDW \RX UHDOL]H WKH LPSRUWDQFH LQ PH>VLF@
UHFHLYLQJ QRWLILFDWLRQ RI XSFRPLQJ 3ROLFH DQG )LUH
H[DPV
1RWEHLQJQRWLILHGRISDVWH[DPVOLPLWVP\RSSRUWXQLW\
WREHFRPHD3ROLFH2IILFHUIRUWKH&LW\RI3DUPDGXHWR
WKHIDFWWKDWVXFKRSHQLQJVDUHKLJKO\VRXJKWDIWHUDQG
WKHUH LV KLVWRULFDOO\ YHU\ OLWWOH HPSOR\PHQW WXUQRYHU
ZLWKLQ 3DUPD¶V VDIHW\ IRUFHV , ZRXOG DSSUHFLDWH D
UHVSRQVHWRZK\,ZDVQRWSURSHUO\QRWLILHGSUHVXPHGO\
OLNHRWKHUSURVSHFWLYH&LYLO6HUYLFHDSSOLFDQWV
-$DW,QVXPZHFRQFOXGHWKDWDWWKHWLPHWKH1$$&3
ILOHGLWVFRPSODLQW7RPEOLQKDGVDWLVILHGWKHILUVWUHTXLUHPHQW
QHFHVVDU\IRU$UWLFOH,,,VWDQGLQJSURRIRILQMXU\
E&DXVDWLRQ
6HFRQG WKH 1$$&3 SURYLGHG HYLGHQFH VKRZLQJ WKDW
7RPEOLQ¶V LQMXULHV ZHUH IDLUO\ WUDFHDEOH WR WKH FKDOOHQJHG
DFWLRQV RI 3DUPD 7R EHJLQ WKH 1$$&3 VXEPLWWHG
7RPEOLQ¶VGHSRVLWLRQWHVWLPRQ\LQZKLFK7RPEOLQDVVHUWHG
WKDWKHGHFLGHGQRWWRVLWIRUDFLYLOVHUYLFHH[DPLQDWLRQLQ
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

/LNHO\7R5HFXU
)LUVW3DUPDIDLOHGWRSURYHWKDWLWVDOOHJHGGLVFULPLQDWRU\
UHFUXLWPHQWVHOHFWLRQDQGKLULQJSUDFWLFHVLQFOXGLQJWKHXVH
RIDUHVLGHQF\UHTXLUHPHQWFRXOGQRWUHDVRQDEO\EHH[SHFWHG
WR UHFXU ,QGHHG 3DUPD IDLOHG WR VKRZ WKDW LWV DOOHJHG
GLVFULPLQDWRU\SUDFWLFHVKDGFHDVHGDWDOO6HH1RUWKHDVWHUQ
)OD&KDSWHURIWKH$VVRFLDWHG*HQ&RQWUDFWRUVRI$PY
&LW\RI-DFNVRQYLOOH86 ³7KHUHLVQR
PHUHULVNWKDW-DFNVRQYLOOHZLOOUHSHDWLWVDOOHJHGO\ZURQJIXO
FRQGXFWLWKDVDOUHDG\GRQHVR´ $VDQLQLWLDOPDWWHU3DUPD
IDLOHG WR UHEXW WKH 1$$&3¶V SURRI RI D JHQXLQH LVVXH RI
PDWHULDOIDFWUHJDUGLQJZKHWKHU3DUPDZDVVWLOOHQIRUFLQJD
UHVLGHQF\ UHTXLUHPHQW HYHQ DIWHU LW KDG RIILFLDOO\ UHSHDOHG
VXFKUHTXLUHPHQWLQ/HVVWKDQWZR\HDUVDIWHUUHSHDOLQJ
LWV UHVLGHQF\ UHTXLUHPHQW 3DUPD KDG KLUHG D WRWDO RI VL[
LQGLYLGXDOV *UHJ .RKOHU 9LQFHQW 6HPDQLN 5REHUW 7DUUR
-RVHSK%REDN'DQLHO+HLQ]DQG2UYLOOH+LOGHEUDQGIURPDQ
HOLJLELOLW\ OLVW WKDW ZDV FUHDWHG EHIRUH 3DUPD UHSHDOHG LWV
UHVLGHQF\UHTXLUHPHQW6HH6XSS-$DW-$DW
$GGLWLRQDOO\DVWKHHYLGHQFHSUHVHQWHGE\WKH
1$$&3 UHYHDOHG DOPRVW ILYH \HDUV DIWHU 3DUPD KDG
³RIILFLDOO\´ UHSHDOHG LWV UHVLGHQF\ UHTXLUHPHQW 3DUPD¶V
SHUVRQQHO GLUHFWRU LQIRUPHG D EODFN DSSOLFDQW VSHFLILFDOO\
7RPEOLQWKDW³>W@KHUHVLGHQF\UHTXLUHPHQWVWLOODSSOLHVLQWKH
&LW\ RI 3DUPD´ -$ DW 2Q -DQXDU\ WKH
SHUVRQQHO GLUHFWRU ZURWH LQ UHVSRQVH WR DQ LQTXLU\ IURP
7RPEOLQ
7KH3HUVRQQHO'HSDUWPHQWLVLQUHFHLSWRI\RXULQTXLU\
UHJDUGLQJHPSOR\PHQWZLWKWKH&LW\RI3DUPD
<RXUUHVXPHDQGFRYHUOHWWHUUHPDLQDFWLYHLQRXUILOHEXW
ZHDUHSURYLGLQJ\RXDQRWKHUDSSOLFDWLRQGXHWRWKHIDFW
\RXUDSSOLFDWLRQGDWHVEDFNWR)HEUXDU\RI
7KH UHVLGHQF\ UHTXLUHPHQW VWLOO DSSOLHV LQ WKH &LW\ RI
3DUPD
-$DW HPSKDVLVDGGHG

-- 24 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
FRPSODLQW ZDV ILOHG WKH 1$$&3 FRXOG QRW REWDLQ DVVRFLDWLRQDO VWDQGLQJ
WKURXJK $OOHQ EHFDXVH KH QHYHU VXEPLWWHG DQ DSSOLFDWLRQ WR 3DUPD QHYHU
LQTXLUHG DERXW MREV LQ 3DUPD RU HYHQ DVVHUWHG WKDW KH ZRXOG KDYH DSSOLHG
KDG KH VHHQ RU KHDUG DQ\ DGYHUWLVHPHQWV DQG WKHUHIRUH VXIIHUHG QR DFWXDO
LQMXU\ -$ DW )LQDOO\ DOWKRXJK &UD\WRQ ZDV D PHPEHU RI WKH
1$$&3 DW WKH WLPH WKH FRPSODLQW ZDV ILOHG WKH 1$$&3 FRXOG QRW REWDLQ
DVVRFLDWLRQDO VWDQGLQJ WKURXJK KHU EHFDXVH &UD\WRQ FRXOG QRW VKRZ WKDW
3DUPD¶V GHFLVLRQ QRW WR KLUH KHU ZDV IDLUO\ WUDFHDEOH WR KHU UDFH -$ DW

$V QRWHG HDUOLHU 3DUPD GRHV QRW GLVSXWH WKDW WKH LQWHUHVWV DW
VWDNH DUH JHUPDQH WR WKH 1$$&3¶V SXUSRVH RU WKDW WKH 1$$&3¶V FODLPV
GR QRW UHTXLUH WKH SDUWLFLSDWLRQ RI LQGLYLGXDO PHPEHUV
%02271(66
7KH 1$$&3 DOVR DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ
JUDQWLQJ VXPPDU\ MXGJPHQW RQ PRRWQHVV JURXQGV :H
UHYLHZGHQRYRDGLVWULFWFRXUW¶VGHFLVLRQUHJDUGLQJPRRWQHVV
&UDIWY8QLWHG6WDWHV)G WK&LU
$IHGHUDOFRXUWKDVQRDXWKRULW\WRUHQGHUDGHFLVLRQXSRQ
PRRWTXHVWLRQVRUWRGHFODUHUXOHVRIODZWKDWFDQQRWDIIHFWWKH
PDWWHUDWLVVXH&KXUFKRI6FLHQWRORJ\Y8QLWHG6WDWHV
86 $FDVHEHFRPHVPRRW³μZKHQWKHLVVXHV
SUHVHQWHG DUH QR ORQJHU μOLYH¶ RU SDUWLHV ODFN D OHJDOO\
FRJQL]DEOHLQWHUHVWLQWKHRXWFRPH¶´&RXQW\RI/RV$QJHOHV
Y 'DYLV 86 TXRWLQJ 3RZHOO Y
0F&RUPDFN86 ,QRWKHUZRUGVD
FDVH EHFRPHV PRRW RQO\ ZKHQ VXEVHTXHQW HYHQWV PDNH LW
DEVROXWHO\FOHDUWKDWWKHDOOHJHGO\ZURQJIXOEHKDYLRUFDQQRW
UHDVRQDEO\EHH[SHFWHGWRUHFXUDQG³LQWHULPUHOLHIRUHYHQWV
KDYHFRPSOHWHO\DQGLUUHYRFDEO\HUDGLFDWHGWKHHIIHFWVRIWKH
DOOHJHGYLRODWLRQ´,G7KHKHDY\EXUGHQRIGHPRQVWUDWLQJ
PRRWQHVVUHVWVRQWKHSDUW\FODLPLQJPRRWQHVV,G
,Q WKLV FDVH ZH FRQFOXGH WKDW WKH GLVWULFW FRXUW HUUHG LQ
GHWHUPLQLQJ WKDW WKH 1$$&3¶V FODLPV UHJDUGLQJ 3DUPD¶V
DOOHJHG GLVFULPLQDWRU\ UHFUXLWPHQW VHOHFWLRQ DQG KLULQJ
SUDFWLFHVKDGEHFRPHPRRW:HEHOLHYHWKDW3DUPDIDLOHGWR
PHHWLWVEXUGHQRISURYLQJPRRWQHVV
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

7KH RQO\ RWKHU SUH HYLGHQFH FRQFHUQV IRXU
DGYHUWLVHPHQWV UXQ LQ 0D\ RI IRU FLYLO VHUYLFH H[DPLQDWLRQV KHOG LQ
-XQH WKH ILUVW H[DPLQDWLRQ IRU ZKLFK 7RPEOLQ FODLPV KH ZDV QRW
QRWLILHG 6XSS -$ DW -$ DW
EHFDXVH RI 3DUPD¶V PRYHLQ UHVLGHQF\ UHTXLUHPHQW
-$DW
7KHQ WKURXJK 7RPEOLQ¶V WHVWLPRQ\ DQG FRUUHVSRQGHQFH
EHWZHHQ 7RPEOLQ DQG 3DUPD WKH 1$$&3 VKRZHG WKDW
7RPEOLQ¶VLQMXU\IURPIDLOLQJWRKHDUDERXWDYDLODEOHFLYLO
VHUYLFHH[DPLQDWLRQVRUMRERSSRUWXQLWLHVLQ3DUPDZDVIDLUO\
WUDFHDEOHWR3DUPD¶VDOOHJHGIDLOXUHWRIROORZLWVSUDFWLFHRI
URXWLQHO\ PDLOLQJ QRWLILFDWLRQV RI MREV DQG H[DPLQDWLRQV
/LNHZLVHWKH1$$&3SUHVHQWHGHYLGHQFHWKDWVKRZHGWKDW
7RPEOLQ¶V LQMXULHV ZHUH IDLUO\ WUDFHDEOH WR 3DUPD¶V XVH RI
ZRUGRIPRXWKKLULQJSUDFWLFHVDQG&LW\+DOOSRVWLQJVDVZHOO
DV WR 3DUPD¶V IDLOXUH GXULQJ WKH UHOHYDQW WLPH IUDPH WR
DGYHUWLVHLQDPDQQHUWKDWZDVPRUHOLNHO\WRUHDFK%ODFNVLQ
WKHJUHDWHU&OHYHODQGFRPPXQLW\DVVXFKSUDFWLFHVDUJXDEO\
SUHYHQWHG 7RPEOLQ D EODFN QRQUHVLGHQW RI 3DUPD IURP
OHDUQLQJDERXWDYDLODEOHPXQLFLSDOSRVLWLRQVDQGFLYLOVHUYLFH
H[DPLQDWLRQV $V PDQ\ FRXUWV KDYH UHFRJQL]HG LQ WKH
FRQWH[WRIDYLUWXDOO\DOOZKLWHZRUNIRUFHDQGDYLUWXDOO\DOO
ZKLWHFLW\ DV3DUPDFHUWDLQO\ZDVEHWZHHQDQG
ZKHQ 7RPEOLQ ZDV DFWLYHO\ VHHNLQJ D MRE ZLWK WKH FLW\
ZRUGRIPRXWK KLULQJ DQG VLPLODU W\SHV RI UHFUXLWLQJ
SUDFWLFHV VXFK DV SRVWLQJ MRE RSHQLQJV LQ WKH PXQLFLSDO
EXLOGLQJVRIDQRQGLYHUVHFLW\KDYHD³WHQGHQF\WRSHUSHWXDWH
WKH DOOZKLWH FRPSRVLWLRQ RI D ZRUN IRUFH´ 7KRPDV
)GDW FLWDWLRQRPLWWHG VHHDOVR%DUQHWWY:7*UDQW
&R)G WK&LU :KLOH3DUPDKDV
VXEPLWWHGHYLGHQFHRILWVHIIRUWVWRUHFUXLWPLQRULWLHVWRLWV
ZRUNIRUFHWKURXJKDGYHUWLVHPHQWVLQQHZVSDSHUVLWVHYLGHQFH
SULPDULO\FRQFHUQVDGYHUWLVHPHQWVUXQLQVHH-$DW
DQG RQO\ IRXU
DGYHUWLVHPHQWV DOOIRUWKHVDPHH[DPLQDWLRQ PDGHEHWZHHQ
DQGZKHQ7RPEOLQZDVDFWLYHO\VHHNLQJDMRE
ZLWK 3DUPD ,Q VXP ZH FRQFOXGH WKDW DW WKH WLPH WKH

-- 25 of 26 --

1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR
1R
1$$&3ILOHGLWVFRPSODLQW7RPEOLQKDGVDWLVILHGWKHVHFRQG
UHTXLUHPHQW QHFHVVDU\ IRU $UWLFOH ,,, VWDQGLQJ WKDW KLV
LQMXULHVZHUHIDLUO\WUDFHDEOHWRWKHFKDOOHQJHGDFWLRQV
F5HGUHVVDELOLW\
7KLUGWKH1$$&3SUHVHQWHGHYLGHQFHGHPRQVWUDWLQJWKDW
7RPEOLQ¶VLQMXULHVDUHUHGUHVVDEOHE\DIDYRUDEOHGHFLVLRQDV
7RPEOLQZRXOGEHQHILWIURPDQLQMXQFWLRQSURKLELWLQJ3DUPD
IURPXVLQJLWVDOOHJHGO\GLVFULPLQDWRU\UHFUXLWPHQWVHOHFWLRQ
DQGKLULQJSUDFWLFHV,QGHHG7RPEOLQH[SUHVVO\VWDWHGWKDWKH
ZDV ³FXUUHQWO\ LQWHUHVWHG LQ ZRUNLQJ IRU WKH 3DUPD )LUH
'HSDUWPHQW´DQGWKDWKHZRXOGVHULRXVO\FRQVLGHUDMRELQ
3DUPD LI WKH ³SROLFH GHSDUWPHQW FLW\ FRXQFLO DQG FLW\
JRYHUQPHQW´ DEROLVKHG WKHLU SDVW GLVFULPLQDWRU\ ZD\V DQG
DWWLWXGHV-$DW
7KHIDFWWKDW7RPEOLQGRHVQRWH[SUHVVDSUHVHQWFRQFUHWH
LQWHUHVWLQREWDLQLQJHPSOR\PHQWLQ3DUPDGRHVQRWGLYHVW
KLP DQG FRQVHTXHQWO\ WKH 1$$&3 RI VWDQGLQJ $V WKH
6XSUHPH&RXUWKDVSUHYLRXVO\UHFRJQL]HG7LWOH9,,OLWLJDWLRQ
RIWHQ LQYROYHV OHQJWK\ GHOD\V DQG ³>W@KH H[WHQGHG WLPH LW
IUHTXHQWO\WDNHVWRREWDLQVDWLVIDFWLRQLQWKHFRXUWVPD\IRUFH
D GLVFULPLQDWLRQ FODLPDQW WR VXIIHU WKURXJK \HDUV RI
XQGHUHPSOR\PHQWRUXQHPSOR\PHQW´EHIRUHDQ\UHVROXWLRQ
RFFXUV)RUG0RWRU&RY((2&86
7R DOORZ HPSOR\HUV WR QHJDWH D SODLQWLII¶V VWDQGLQJ E\
VWUDWHJLFDOO\ GHOD\LQJ UHVROXWLRQ RI DQ HPSOR\PHQW
GLVFULPLQDWLRQFDVHXQWLOWKHSODLQWLIILVQRORQJHULQWHUHVWHG
LQREWDLQLQJWKHSRVLWLRQZRXOGSODFHDQ\SODLQWLIILQFOXGLQJ
WKRVH VHHNLQJ RQO\ LQMXQFWLYH UHOLHI LQ DQ LPSRVVLEOH
GLOHPPD,QPRVWFDVHVDSODLQWLII³FDQQRWDIIRUGWRVWDQG
DVLGH ZKLOH WKH ZKHHOV RI MXVWLFH JULQG VORZO\ WRZDUG WKH
XOWLPDWHUHVROXWLRQRIWKHODZVXLW$MRELVQHHGHG²
QRZ´ ,G 7KHUHIRUH UHTXLULQJ D SODLQWLII WR PDLQWDLQ D
FRQFUHWHLQWHUHVWLQWKHVRXJKWDIWHUHPSOR\PHQWWKURXJKRXW
DOOVWDJHVRIWKHOLWLJDWLRQZRXOGHIIHFWLYHO\IRUFHWKDWSODLQWLII
WR FKRRVH EHWZHHQ ILQGLQJ QHZ HPSOR\PHQW WR IHHG DQG
VKHOWHU KLPVHOI DQG KLV IDPLO\ DQG IRUHJRLQJ RWKHU
1R 1$$&3&OHYHODQGHWDOY
&LW\RI3DUPD2KLR

,Q FDVHV ZKHUH WKH SODLQWLII LV DOVR VHHNLQJ PRQHWDU\ UHOLHI
VXFK DV EDFNSD\ VXFK D UHTXLUHPHQW ZRXOG IRUFH D SODLQWLII WR IDLO LQ KLV
GXW\ WR PLWLJDWH GDPDJHV E\ VHHNLQJ VXEVWDQWLDOO\ FRPSDUDEOH ZRUN VR
WKDW KH FRXOG PDLQWDLQ VWDQGLQJ ZKLFK ZRXOG LQ WXUQ VWULS WKH SODLQWLII
RI DQ\ FODLP WR EDFNSD\ 6HH 6XJJV Y 6HUYLFHPDVWHU (GXF )RRG 0JPW
)G WK &LU ³$ SODLQWLII LQ DQ DFWLRQ XQGHU 7LWOH
9,, KDV D GXW\ WR PLWLJDWH GDPDJHV VKH PD\ QRW UHPDLQ XQHPSOR\HG DQG
FROOHFW D ZLQGIDOO´
0RUHRYHU DV WKLV FRXUW QRWHG LQ *LOOLV ³RQFH DQ RUJDQL]DWLRQ
KDV DOOHJHG DFWXDO LQMXU\ WR μLWV PHPEHUV RU DQ\ RQH RI WKHP LW PD\
WKHQ DUJXH RQ EHKDOI RI WKH μSXEOLF LQWHUHVW¶ %\ MRLQLQJ DQ
RUJDQL]DWLRQ GHGLFDWHG WR D SDUWLFXODU JRDO LQ WKH SXEOLF LQWHUHVW PHPEHUV
LQGLFDWH D ZLOOLQJQHVV WR PDNH FHUWDLQ VDFULILFHV SURGXFWLYH RI WKDW JRDO¶´
*LOOLV )G DW TXRWDWLRQV RPLWWHG
%HFDXVH 7RPEOLQ ZDV D PHPEHU RI WKH 1$$&3 DW WKH WLPH WKH
1$$&3 ILOHG LWV FRPSODLQW DQG WKH 1$$&3 KDV SUHVHQWHG HYLGHQFH WR
GHPRQVWUDWH WKDW 7RPEOLQ KDG VWDQGLQJ WR VXH LQ KLV RZQ ULJKW DW WKH WLPH
LW ILOHG LWV FRPSODLQW ZH QHHG QRW DGGUHVV ZKHWKHU &ROOLQV &KLOGUHVV
%ODQWRQ RU 0F,QWRVK GLG QRW KDYH VWDQGLQJ WR VXH LQ WKHLU RZQ ULJKW
EHFDXVH WKH\ ZHUH QRW PHPEHUV RI WKH 1$$&3 DW WKH WLPH WKH FRPSODLQW
ZDV ILOHG $OWKRXJK $OOHQ ZDV D PHPEHU RI WKH 1$$&3 DW WKH WLPH WKH
HPSOR\PHQWWRPDLQWDLQKLVVWDQGLQJWRVXH$GGLWLRQDOO\
VXFKDUHTXLUHPHQWZRXOGXQMXVWO\FRPSHODSODLQWLIIZKR
ZDVVHHNLQJLQMXQFWLYHUHOLHIDQGZKRZDVIRUWXQDWHHQRXJK
WRILQGVDWLVIDFWRU\HPSOR\PHQWHOVHZKHUHWRDVVHUWDSUHVHQW
FRQFUHWHLQWHUHVWLQDSRVLWLRQWKDWKHKDGDSSOLHGIRULQWKH
GLVWDQW SDVW HYHQ WKRXJK D GHOD\HG PRYH WR WKDW SRVLWLRQ
FRXOGUHTXLUHWKHSODLQWLIIWRORVHYDOXHGVHQLRULW\EHQHILWV
DQG VWDWXV KH KDG DFFUXHG DW KLV FXUUHQW MRE GXULQJ WKH
SHQGHQF\RIRIWHQOHQJWK\OLWLJDWLRQ&I6HQWHU)G
DW ³,WZRXOGEHDQRPDORXVWRKROGWKDWDQHPSOR\HHLQ
WKH SURFHVV RI H[KDXVWLQJ DGPLQLVWUDWLYH UHPHGLHV VKRXOG
ORVH VWDQGLQJ WR FRQWHVW WKH YHU\ SUDFWLFHV RI ZKLFK KH
FRPSODLQHGLQKLVFKDUJHWRWKH((2&PHUHO\EHFDXVHKLV
HPSOR\HULQWKHLQWHULPRIIHUVKLPDSURPRWLRQZKLFKKH
UHMHFWV´ ,QVXPWKH1$$&3KDVSUHVHQWHGHYLGHQFHWR
VKRZWKDW7RPEOLQVDWLVILHVWKHUHGUHVVDELOLW\UHTXLUHPHQW
DQGWKXVKDVVKRZQWKDWLWKDVVWDQGLQJWREULQJWKLVODZVXLW

-- 26 of 26 --

Continue your research in ChatGPT or Claude

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