03a0035p.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
:,//,$0 ' :,&./,1(
3HWLWLRQHU$SSHOODQW
Y
%(77< 0,7&+(//:DUGHQ
5HVSRQGHQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&ROXPEXV
1R²-DPHV/*UDKDP'LVWULFW-XGJH
$UJXHG6HSWHPEHU
'HFLGHGDQG)LOHG-DQXDU\
%HIRUH0$57,1&KLHI&LUFXLW-XGJH6,/(5DQG
'$8*+75(<&LUFXLW-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DYLG & 6WHEELQV &ROXPEXV 2KLR IRU
$SSHOODQW 1RUPDQ ( 3ODWH $77251(< *(1(5$/¶6
2)),&( 2) 2+,2 &$3,7$/ &5,0(6 6(&7,21
&ROXPEXV 2KLR IRU $SSHOOHH 21 %5,() 'DYLG &
6WHEELQV&ROXPEXV2KLR%HQVRQ$:ROPDQ:2/0$1
*(16+$)7 *(//0$1&ROXPEXV2KLRIRU$SSHOODQW
1RUPDQ(3ODWH$77251(<*(1(5$/¶62)),&(2)

-- 1 of 8 --

:LFNOLQHY0LWFKHOO 1R
2+,2&$3,7$/&5,0(66(&7,21&ROXPEXV2KLRIRU
$SSHOOHH
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
6,/(5&LUFXLW-XGJH3HWLWLRQHU:LOOLDP':LFNOLQHDQ
2KLRGHDWKURZLQPDWHDSSHDOVWKHGHQLDORIKLV5XOH H
PRWLRQ WR DOWHU RU DPHQG WKH GLVWULFW FRXUW¶V MXGJPHQW
GLVPLVVLQJKLVSHWLWLRQIRUDZULWRIKDEHDVFRUSXV)RUWKH
IROORZLQJUHDVRQVZH$)),50
,%$&.*5281'
:LFNOLQH ZDV FRQYLFWHG E\ D WKUHHMXGJH FRXUW RI WZR
FRXQWVRIDJJUDYDWHGPXUGHUIRUWKHGHDWKVRI&KULVWRSKHU
DQG 3HJJ\ /HUFK 7KH SDQHO VHQWHQFHG :LFNOLQH WR OLIH
LPSULVRQPHQWRQRQHFRXQWDQGWRGHDWKRQWKHRWKHU$IWHU
XQVXFFHVVIXO GLUHFW DSSHDOV DQG VWDWH SRVWFRQYLFWLRQ
SURFHHGLQJV:LFNOLQH ILOHGDSHWLWLRQIRUDZULWRIKDEHDV
FRUSXVSXUVXDQWWR86&†)LQGLQJWKDW:LFNOLQH¶V
IRUW\WZRFODLPVZHUHHLWKHUSURFHGXUDOO\GHIDXOWHGRUODFNHG
VXIILFLHQWPHULWWRZDUUDQWJUDQWLQJWKHZULWWKHGLVWULFWFRXUW
GLVPLVVHGKLVSHWLWLRQ%RWK:LFNOLQHDQGUHVSRQGHQW WKH
³6WDWH´ ILOHG PRWLRQV WR DOWHU RU DPHQG WKH MXGJPHQW
SXUVXDQWWR)HG5&LY3 H 7KHGLVWULFWFRXUWJUDQWHG
WKH6WDWH¶VPRWLRQDQGDPHQGHGWKHMXGJPHQWWRKROGWKDWWKH
$QWLWHUURULVPDQG(IIHFWLYH'HDWK3HQDOW\$FWRI3XE
/ 1R 6WDW ³$('3$´ LV
DSSOLFDEOH WR :LFNOLQH¶V SHWLWLRQ :LFNOLQH¶V 5XOH H
PRWLRQZDVGHQLHG
,,67$1'$5'2)5(9,(:
$ $('3$
,QDKDEHDVSURFHHGLQJWKLVFRXUWUHYLHZVDGLVWULFWFRXUW¶V
OHJDOFRQFOXVLRQVGHQRYRDQGLWVIDFWXDOILQGLQJVIRUFOHDU
HUURU/XFDVY2¶'HD)G WK&LU
1R :LFNOLQHY0LWFKHOO
ZHLJK WKH DJJUDYDWLQJ FLUFXPVWDQFHV ,Q DGGLWLRQ WKH
VXSUHPH FRXUW PHUJHG WKH GXSOLFDWLYH DJJUDYDWLQJ
FLUFXPVWDQFHV DQG LQGHSHQGHQWO\ ZHLJKHG WKH PHUJHG
DJJUDYDWLQJ FLUFXPVWDQFH DJDLQVW WKH PLWLJDWLQJ IDFWRUV
$FFRUGLQJO\ QR FRQVWLWXWLRQDO YLRODWLRQ LV VWDWHG )R[ Y
&R\OH)G WK&LU FHUWGHQLHG
86/: 86 2FW 1R
:LFNOLQH¶VFODLPWKDWWKH2KLR6XSUHPH&RXUWIDLOHGWRJUDQW
KLPPHDQLQJIXOSURSRUWLRQDOLW\UHYLHZRIKLVGHDWKVHQWHQFH
DOVRIDLOV%HFDXVH³SURSRUWLRQDOLW\UHYLHZLVQRWUHTXLUHGE\
WKH&RQVWLWXWLRQVWDWHVKDYHJUHDWODWLWXGHLQGHILQLQJWKHSRRO
RIFDVHVXVHGIRUFRPSDULVRQ´%XHOO)GDW,Q
OLPLWLQJSURSRUWLRQDOLW\UHYLHZWRSUHYLRXVFDVHVLQZKLFKWKH
GHDWKSHQDOW\KDVEHHQLPSRVHGWKH2KLR6XSUHPH&RXUWKDV
DFWHGZLWKLQWKHZLGHODWLWXGHDOORZHG6HHLG7KHUHIRUHWKH
2KLR 6XSUHPH &RXUW GLG QRW HUU LQ IDLOLQJ WR FRPSDUH
:LFNOLQH¶VVHQWHQFHWRRWKHUFDVHVLQZKLFKWKHGHDWKSHQDOW\
ZDVQRWLPSRVHG
$)),50('

-- 2 of 8 --

:LFNOLQHY0LWFKHOO 1R
&RXUWUHMHFWHG:LFNOLQH¶V%UDG\FODLPVDVGLGWKHGLVWULFW
FRXUW%RWKWKHGLVWULFWFRXUWDQGWKLVFRXUWGHFOLQHGWRJUDQW
D FHUWLILFDWH RI DSSHDODELOLW\ DV WR WKH %UDG\ FODLPV
GHPRQVWUDWLQJWKDW:LFNOLQHKDVIDLOHGWRPDNH³DVXEVWDQWLDO
VKRZLQJRIWKHGHQLDORIDFRQVWLWXWLRQDOULJKW´86&
† F $Q\ FRQVWLWXWLRQDO HUURUV FRQVLGHUHG
FXPXODWLYHO\ZHUHQRWVRJUHDWDVWRUHQGHU:LFNOLQH¶VWULDO
IXQGDPHQWDOO\ XQIDLU RU KLV VHQWHQFH DQG FRQYLFWLRQ
XQUHOLDEOH
:LFNOLQH¶VYDULRXVDUJXPHQWVWKDWWKH2KLRGHDWKSHQDOW\
VFKHPHLVXQFRQVWLWXWLRQDOOLNHZLVHIDLO+LVDVVHUWLRQVWKDW
WKHVWDWXWHFUHDWHVDPDQGDWRU\GHDWKSHQDOW\DQGDOORZVWULDO
FRXUWVWRDSSO\WKHGHDWKSHQDOW\LQDQDUELWUDU\FDSULFLRXV
DQGGLVFULPLQDWRU\PDQQHUZHUHUHMHFWHGLQ%XHOOY0LWFKHOO
)G WK &LU :LWK UHJDUG WR
:LFNOLQH¶VDUJXPHQWWKDWWKHVWDWXWHJUDQWVSURVHFXWRUVEURDG
GLVFUHWLRQDVWRZKHWKHUWRVHHNFDSLWDOLQGLFWPHQWVWKHUHE\
DOORZLQJDUELWUDU\FKDUJLQJGHFLVLRQVWKH6XSUHPH&RXUWKHOG
LQ*UHJJY*HRUJLD86 WKDWWKHVH
³GLVFUHWLRQDU\ VWDJHV´ GR QRW LPSOLFDWH WKH FRQFHUQV
H[SUHVVHG LQ )XUPDQ Y *HRUJLD 86
:LFNOLQH¶V FRQWHQWLRQ WKDW 2KLR¶V GHDWK SHQDOW\ VFKHPH
HQFRXUDJHVFDSLWDOO\FKDUJHGGHIHQGDQWVWRZDLYHWKHLUULJKW
WRDMXU\WULDODQGWRSOHDGJXLOW\LVSURFHGXUDOO\GHIDXOWHG
DQG LQ WKH DOWHUQDWLYH IDLOV EHFDXVH :LFNOLQH GLG QRW
SOHDGJXLOW\DQG WKH6XSUHPH&RXUWKDVIRXQGWKDWSOHDV
DUHQRWLQYDOLGVLPSO\EHFDXVHRIWKHSRVVLELOLW\RIWKHGHDWK
SHQDOW\ 6HH %UDG\ Y 8QLWHG 6WDWHV 86

:LFNOLQH¶V DUJXPHQWV WKDW WKH WULDO FRXUW LPSURSHUO\
FRQVLGHUHG GXSOLFDWLYH DJJUDYDWLQJ FLUFXPVWDQFHV DQG WKDW
2KLR¶VDSSHOODWHUHYLHZGLGQRWFXUHDQ\HUURUDUHXQDYDLOLQJ
%RWK 6XSUHPH &RXUW SUHFHGHQW DQG 2KLR ODZ DOORZ
UHZHLJKLQJE\WKHDSSHOODWHFRXUWVZKHQWKH VHQWHQFHUKDV
FRQVLGHUHGDQLQYDOLGDJJUDYDWLQJFLUFXPVWDQFH+HUHWKH
2KLR6XSUHPH&RXUWDVVXPHGWKDWWKHWKUHHMXGJHSDQHOGLG
QRW ³DUWLILFLDOO\ LQIODWH´ WKH DJJUDYDWLQJ FLUFXPVWDQFHV
LPSOLFLWO\FRQFOXGLQJWKDWWKHWULDOFRXUWGLGQRWLPSURSHUO\
1R :LFNOLQHY0LWFKHOO
:LFNOLQH¶V ILUVW LVVXH RQ DSSHDO LV ZKHWKHU WKH GLVWULFW FRXUW HUUHG LQ
DSSO\LQJ $('3$ WR KLV KDEHDV SHWLWLRQ +H DUJXHV WKDW EHFDXVH KH ILOHG
D QRWLFH RI LQWHQW DQG D PRWLRQ IRU DSSRLQWPHQW RI FRXQVHO SULRU WR
$SULO $('3$¶V HIIHFWLYH GDWH KLV SHWLWLRQ ZDV SHQGLQJ RQ WKDW
GDWH 7KH 6L[WK &LUFXLW UHMHFWHG WKLV DUJXPHQW LQ :LOOLDPV Y &R\OH
)G WK &LU :LFNOLQH¶V DUJXPHQW WKDW WKH 6L[WK &LUFXLW¶V
UHDVRQLQJ LQ :LOOLDPV KDV EHHQ RYHUUXOHG E\ D VXEVHTXHQW 6XSUHPH &RXUW
FDVH 6ODFN Y 0F'DQLHO 86 ZDV UHMHFWHG LQ D UHFHQW
6L[WK &LUFXLW GHDWK SHQDOW\ FDVH &RRH\ Y &R\OH )G WK &LU
SHWLWLRQ IRU FHUW ILOHG 86 6HSW 1R
$FFRUGLQJO\ WKLV FRXUW ZLOO IROORZ :LOOLDPV DQG DSSO\ $('3$ WR
:LFNOLQH¶V KDEHDV FRUSXV SHWLWLRQ 6HH DOVR 0DUWLQ Y 0LWFKHOO )G
WK &LU FHUW GHQLHG 1R :/
86 1RY KROGLQJ $('3$ DSSOLFDEOH ZKHQ SHWLWLRQ
ZDV ILOHG LQ -XQH EXW PRWLRQ WR VWD\ H[HFXWLRQ ZDV ILOHG LQ
1RYHPEHU
%HFDXVH:LFNOLQHILOHGKLVKDEHDVSHWLWLRQRQ0D\
DIWHU WKH HIIHFWLYH GDWH RI $('3$ WKLV FRXUW UHYLHZV WKH
SHWLWLRQXQGHUWKHVWDQGDUGVVHWIRUWKLQ$('3$6HH/LQGK
Y0XUSK\86 :LOOLDPVY&R\OH
)G WK&LU ³>$@IHGHUDOKDEHDVFRUSXV
FDVH LV ILOHG RU SHQGLQJ IRU WKH SXUSRVHV RI /LQGK DQG WKH
$('3$RQO\ZKHQWKHSHWLWLRQIRUWKHZULWLVILOHG´ $V
DPHQGHG86&† G SURYLGHVDVIROORZV
$QDSSOLFDWLRQIRUDZULWRIKDEHDVFRUSXVRQEHKDOIRID
SHUVRQLQFXVWRG\SXUVXDQWWRWKHMXGJPHQWRID6WDWH
FRXUWVKDOOQRWEHJUDQWHGZLWKUHVSHFWWRDQ\FODLPWKDW
ZDVDGMXGLFDWHGRQWKHPHULWVLQ6WDWHFRXUWSURFHHGLQJV
XQOHVVWKHDGMXGLFDWLRQRIWKHFODLP±
UHVXOWHG LQ D GHFLVLRQ WKDW ZDV FRQWUDU\ WR RU
LQYROYHG DQ XQUHDVRQDEOH DSSOLFDWLRQ RI FOHDUO\
HVWDEOLVKHG)HGHUDOODZDVGHWHUPLQHGE\WKH6XSUHPH
&RXUWRIWKH8QLWHG6WDWHVRU
UHVXOWHG LQ D GHFLVLRQ WKDW ZDV EDVHG RQ DQ
XQUHDVRQDEOHGHWHUPLQDWLRQRIWKHIDFWVLQOLJKWRIWKH
HYLGHQFHSUHVHQWHGLQWKH6WDWHFRXUWSURFHHGLQJ

-- 3 of 8 --

:LFNOLQHY0LWFKHOO 1R
)LUVW WKH FRXUW PXVW GHWHUPLQH ZKHWKHU WKHUH LV D VWDWH SURFHGXUDO
UXOH WKDW LV DSSOLFDEOH WR WKH SHWLWLRQHU¶V FODLP DQG ZLWK ZKLFK WKH
SHWLWLRQHU IDLOHG WR FRPSO\ ,G DW ³6HFRQG WKH FRXUW PXVW GHFLGH
ZKHWKHU WKH VWDWH FRXUWV DFWXDOO\ HQIRUFHG WKH VWDWH SURFHGXUDO VDQFWLRQ´
,G 7KLUG WKH FRXUW PXVW GHWHUPLQH ZKHWKHU WKH VWDWH SURFHGXUDO UXOH ³LV
DQ DGHTXDWH DQG LQGHSHQGHQW VWDWH JURXQG RQ ZKLFK WKH VWDWH FDQ UHO\ WR
IRUHFORVH UHYLHZ RI D IHGHUDO FRQVWLWXWLRQDO FODLP´ ,G LQWHUQDO TXRWDWLRQ
PDUNV RPLWWHG ³$ SURFHGXUDO UXOH LV DGHTXDWH RQO\ ZKHQ LW LV ILUPO\
HVWDEOLVKHG DQG UHJXODUO\ IROORZHG DW WKH WLPH LW ZDV DSSOLHG >DQG LV@
DQ LQGHSHQGHQW EDVLV IRU GLVSRVLWLRQ RI D FDVH LI WKH VWDWH FRXUWV DFWXDOO\
UHOLHG RQ WKH SURFHGXUDO EDU´ :LOOLDPV Y &R\OH )G WK
&LU )LQDOO\ LI WKH FRXUW DQVZHUV WKH ILUVW WKUHH TXHVWLRQV LQ WKH
DIILUPDWLYH LW ZLOO QRW UHYLHZ WKH SURFHGXUDOO\ GHIDXOWHG FODLP XQOHVV WKH
SHWLWLRQHU FDQ VKRZ FDXVH IRU QRW IROORZLQJ WKH SURFHGXUDO UXOH DQG DFWXDO
SUHMXGLFH UHVXOWLQJ IURP WKH DOOHJHG FRQVWLWXWLRQDO YLRODWLRQ 0DXSLQ
86&† G ³7KHWKUHVKROGTXHVWLRQXQGHU$('3$
LVZKHWKHU>WKHSHWLWLRQHU@VHHNVWRDSSO\DUXOHRIODZWKDW
ZDVFOHDUO\HVWDEOLVKHGDWWKHWLPHKLVVWDWHFRXUWFRQYLFWLRQ
EHFDPHILQDO´:LOOLDPVY7D\ORU86
7KHSKUDVH³FOHDUO\HVWDEOLVKHG)HGHUDOODZDVGHWHUPLQHGE\
WKH 6XSUHPH &RXUW RI WKH 8QLWHG 6WDWHV´ UHIHUV WR ³WKH
KROGLQJVDVRSSRVHGWRWKHGLFWD´RIWKH6XSUHPH&RXUW,G
DW
% 3URFHGXUDO'HIDXOW
7KHGLVWULFWFRXUWFRQFOXGHGWKDWPDQ\RI:LFNOLQH¶VFODLPV
DUH SURFHGXUDOO\ GHIDXOWHG IRU IDLOXUH WR UDLVH WKHP DW WKH
HDUOLHVW RSSRUWXQLW\ :KHQ D SHWLWLRQHU GHIDXOWV RQ KLV
³IHGHUDOFODLPVLQVWDWHFRXUWSXUVXDQWWRDQLQGHSHQGHQWDQG
DGHTXDWHVWDWHSURFHGXUDOUXOHIHGHUDOKDEHDVUHYLHZRIWKH
FODLPVLVEDUUHGXQOHVVWKHSULVRQHUFDQGHPRQVWUDWHFDXVHIRU
WKH GHIDXOW DQG DFWXDO SUHMXGLFH RU GHPRQVWUDWH WKDW
IDLOXUH WR FRQVLGHU WKH FODLPV ZLOO UHVXOW LQ D IXQGDPHQWDO
PLVFDUULDJHRIMXVWLFH´&ROHPDQY7KRPSVRQ86

,Q0DXSLQY6PLWK)G WK&LU WKLVFRXUW
VHW IRUWK D IRXUVWHS DQDO\VLV IRU GHWHUPLQLQJ ZKHWKHU D
SHWLWLRQHU¶V IHGHUDO FRQVWLWXWLRQDO FODLPV DUH EDUUHG E\ WKH
SHWLWLRQHU¶V IDLOXUH WR IROORZ D VWDWH SURFHGXUDO UXOH
1R :LFNOLQHY0LWFKHOO
2KLR¶V FRQWHPSRUDQHRXV REMHFWLRQ UXOH UHTXLUHG :LFNOLQH WR REMHFW
WR WKH SURVHFXWRU¶V VWDWHPHQWV DW WULDO ZKLFK KH IDLOHG WR GR 7KH 2KLR
6XSUHPH &RXUW¶V UHYLHZ IRU SODLQ HUURU FRQVWLWXWHV HQIRUFHPHQW RI WKLV
SURFHGXUDO UXOH ZKLFK WKLV FRXUW KDV UHFRJQL]HG DV DQ DGHTXDWH DQG
LQGHSHQGHQW VWDWH JURXQG EDUULQJ IHGHUDO KDEHDV UHYLHZ +LQNOH Y
5DQGOH )G WK &LU :LFNOLQH KDV IDLOHG WR
GHPRQVWUDWH WKDW WKHUH LV D ³UHDVRQDEOH SUREDELOLW\´ WKDW EXW IRU KLV
FRXQVHO¶V IDLOXUH WR REMHFW WR WKH SURVHFXWRU¶V FRPPHQWV WKH UHVXOW RI WKH
VHQWHQFLQJ SURFHHGLQJ ZRXOG KDYH EHHQ GLIIHUHQW 6HH 6WULFNODQG
86 DW 7KHUHIRUH :LFNOLQH KDV QRW VKRZQ FRQVWLWXWLRQDOO\
LQHIIHFWLYH DVVLVWDQFH H[FXVLQJ KLV IDLOXUH WR FRPSO\ ZLWK WKH
FRQWHPSRUDQHRXV REMHFWLRQ UXOH
)LQDOO\:LFNOLQHUDLVHVDKRVWRIRWKHUFODLPVRQDSSHDODOO
RI ZKLFK DUH XQDYDLOLQJ +LV FODLPV RI SURVHFXWRULDO
PLVFRQGXFWDUHSURFHGXUDOO\GHIDXOWHGDQGLQWKHDOWHUQDWLYH
IDLORQWKHPHULWV6SHFLILFDOO\:LFNOLQHDVVHUWVWKDWGXULQJ
WKHSHQDOW\SKDVHWKHSURVHFXWRU LQIODPHGWKHSDVVLRQV
DQG SUHMXGLFHV RI WKH WKUHHMXGJH SDQHO FUHDWHG
QRQVWDWXWRU\DJJUDYDWLQJFLUFXPVWDQFHVDQG LPSURSHUO\
FRPPHQWHGRQKLVULJKWWRUHPDLQVLOHQW7KHILUVWDUJXPHQW
IDLOVEHFDXVHWKHSURVHFXWRU¶VVWDWHPHQWVDUHQRWOLNHO\WRKDYH
PLVOHGWKHWKUHHMXGJHSDQHORUSUHMXGLFHG:LFNOLQH:LWK
UHJDUG WR WKH VHFRQG DVVHUWLRQ HYHQ DVVXPLQJ WKDW WKH
SURVHFXWRU¶VDUJXPHQWVZHUHLPSURSHUWKHSDQHOGLGQRWOLVW
:LFNOLQH¶V H[WHQVLYH FULPLQDO KLVWRU\ WKH DEVHQFH RI
PLWLJDWLQJ IDFWRUV RU EHKDYLRU LQ SULVRQ DV DJJUDYDWLQJ
FLUFXPVWDQFHV:LFNOLQH¶VWKLUGDVVHUWLRQIDLOVEHFDXVHWKH
SURVHFXWRU¶VUHIHUHQFHWRWKHXQVZRUQQDWXUHRIKLVWHVWLPRQ\
ZDVLVRODWHGLVQRWOLNHO\WRKDYHPLVOHGWKHWKUHHMXGJHSDQHO
RU SUHMXGLFHG KLP DQG GLG QRW UHQGHU WKH HQWLUH WULDO DQG
VHQWHQFLQJIXQGDPHQWDOO\XQIDLU)XUWKHUWKHSURVHFXWRU¶V
LVRODWHGFRPPHQWUHJDUGLQJDQDEVHQFHRIUHPRUVHZDVQRW
PDQLIHVWO\LQWHQGHGWRUHIOHFWRQ:LFNOLQH¶VIDLOXUHWRWHVWLI\
QRUZRXOGWKHSDQHOKDYHXQGHUVWRRGWKHVWDWHPHQWDVVXFK
:LFNOLQHFODLPVWKDWHYHQLIQRVLQJOHHUURULVVXIILFLHQWWR
PHULW JUDQWLQJWKHZULWWKHFXPXODWLYHHIIHFWRIWKHHUURUV
UHQGHUHG KLV WULDO IXQGDPHQWDOO\ XQIDLU $FFRUGLQJ WR
:LFNOLQHWKHFXPXODWLYHHIIHFWLVPRVWSHUYDVLYHZLWKUHVSHFW
WRWKHGLVFRYHU\DQG%UDG\YLRODWLRQV7KH2KLR6XSUHPH

-- 4 of 8 --

:LFNOLQHY0LWFKHOO 1R
REWDLQH[SHUWDQGLQYHVWLJDWLYHDVVLVWDQFHIRUWKHWULDOSKDVH
LVDOVRSURFHGXUDOO\GHIDXOWHGEHFDXVHKHQHYHUSUHVHQWHGWKH
FODLPRQGLUHFWDSSHDOUDLVLQJLWIRUWKHILUVWWLPHLQKLVVWDWH
SRVWFRQYLFWLRQ SURFHHGLQJV (YHQ LI WKLV FODLP ZDV QRW
SURFHGXUDOO\GHIDXOWHGWKH2KLR&RXUWRI$SSHDOV¶DOWHUQDWLYH
UXOLQJWKDWWKHFODLPIDLOVRQWKHPHULWVLVQRWFRQWUDU\WRRU
DQ XQUHDVRQDEOH DSSOLFDWLRQ RI WKH SUHMXGLFH SURQJ RI
6WULFNODQG
:LFNOLQH IXUWKHU DVVHUWV WKDW KH UHFHLYHG LQHIIHFWLYH
DVVLVWDQFHRIDSSHOODWHFRXQVHO ³,$$&´ +LVFODLPVLQWKLV
UHJDUGDUHSURFHGXUDOO\GHIDXOWHGGXHWRKLVIDLOXUHWRFRPSO\
ZLWKWKHUXOHVHWIRUWKLQ6WDWHY0XUQDKDQ1(G
2KLR DQG FRGLILHG LQ 2KLR 5 $SS 3 % ,Q
0XUQDKDQWKH2KLR6XSUHPH&RXUWKHOGWKDW,$$&FODLPV
DUHQRWFRJQL]DEOHLQSRVWFRQYLFWLRQSURFHHGLQJVSXUVXDQWWR
2KLR5HY&RGH†EXWPXVWEHUDLVHGLQDPRWLRQIRU
UHRSHQLQJEHIRUHWKHFRXUWRIDSSHDOVZLWKLQQLQHW\GD\VIURP
MRXUQDOL]DWLRQRIWKHDSSHOODWHMXGJPHQWSXUVXDQWWR2KLR5
$SS3 % :LFNOLQHIDLOHGWRFRPSO\ZLWK5XOH %
VLQFHKHILOHGKLVPRWLRQWRUHRSHQRQ1RYHPEHU
VL[\HDUVDIWHUKLVDSSHOODWHMXGJPHQWZDVMRXUQDOL]HGWZR
\HDUVDIWHU0XUQDKDQZDVGHFLGHGDQGVL[WHHQPRQWKVDIWHU
5XOH % EHFDPHHIIHFWLYHDQGIDLOHGWRGHPRQVWUDWHJRRG
FDXVHIRUWKDWGHOD\(YHQLI:LFNOLQH¶V,$$&FODLPVZHUH
QRW SURFHGXUDOO\ GHIDXOWHG KLV FODLPV IDLO RQ WKH PHULWV
:LFNOLQH FRQWHQGV WKDW KLV DSSHOODWH FRXQVHO ZDV
FRQVWLWXWLRQDOO\LQHIIHFWLYHIRUIDLOLQJWRUDLVHWKHIROORZLQJ
LVVXHV RQ GLUHFW DSSHDO WKH WKUHHMXGJH SDQHO¶V
NQRZOHGJH RI LQDGPLVVLEOH SUHMXGLFLDO LQIRUPDWLRQ
H[WHQVLYHSUHMXGLFLDOPHGLDFRYHUDJHDQGWKHIDLOXUHWR
UHTXHVW D FKDQJH RI YHQXH DUELWUDU\ DQG FDSULFLRXV
DSSOLFDWLRQRIWKHGHDWKSHQDOW\ IDLOXUHWRUHTXHVWGHIHQVH
H[SHUWV 2KLR 6XSUHPH &RXUW¶V DSSOLFDWLRQ RI D OHVVHU
VWDQGDUGRISURRIIRUKDUPOHVVHUURUDQG IDLOXUHWRSUHVHQW
PLWLJDWLQJHYLGHQFH(DFKRIWKHVL[DOOHJHGO\RPLWWHGLVVXHV
HLWKHUODFNVPHULWRUZDVUDLVHGE\DSSHOODWHFRXQVHORQGLUHFW
DSSHDO$VVXFK:LFNOLQHKDVIDLOHGWRVKRZWKDWKHZDV
GHQLHGHIIHFWLYHDVVLVWDQFHRIFRXQVHORQDSSHDO
1R :LFNOLQHY0LWFKHOO
)G DW
³:KHWKHUDVWDWHFRXUWUHVWHGLWVKROGLQJRQSURFHGXUDOGHIDXOW
VR DV WR EDU IHGHUDO KDEHDV UHYLHZ LV D TXHVWLRQ RI ODZ´
UHYLHZHGGHQRYR&RPEVY&R\OH)G WK
&LU 7KLVFRXUWORRNVWRWKHODVWH[SODLQHGVWDWHFRXUW
MXGJPHQWZKHQDQVZHULQJWKDWTXHVWLRQ,G
,,,',6&866,21
$ ,QHIIHFWLYH$VVLVWDQFHRI&RXQVHO
:KLOH:LFNOLQHDVVHUWVDQXPEHURIJURXQGVIRUUHOLHILQKLV
SHWLWLRQ WKH SDUWLHV IRFXVHG SULPDULO\ RQ RQH LVVXH DW RUDO
DUJXPHQW±DOOHJHGLQHIIHFWLYHDVVLVWDQFHRIWULDOFRXQVHO:H
ZLOOWKHUHIRUHDGGUHVVWKDWLVVXHILUVW:LFNOLQHFODLPVWKDW
KLVWULDOFRXQVHOZDVLQHIIHFWLYHLQVHYHUDODUHDVPRVWQRWDEO\
LQ WKH DOOHJHG IDLOXUH WR LQYHVWLJDWH RU SUHVHQW PLWLJDWLQJ
HYLGHQFH 8QGHU 6WULFNODQG Y :DVKLQJWRQ 86
D YLRODWLRQ RI WKH ULJKW WR HIIHFWLYH DVVLVWDQFH RI
FRXQVHOKDVWZRFRPSRQHQWV
)LUVW WKH GHIHQGDQW PXVW VKRZ WKDW FRXQVHO¶V
SHUIRUPDQFHZDVGHILFLHQW7KLVUHTXLUHVVKRZLQJWKDW
FRXQVHO PDGH HUURUV VR VHULRXV WKDW FRXQVHO ZDV QRW
IXQFWLRQLQJDVWKH³FRXQVHO´JXDUDQWHHGWKHGHIHQGDQWE\
WKH6L[WK$PHQGPHQW6HFRQGWKHGHIHQGDQWPXVWVKRZ
WKDW WKH GHILFLHQW SHUIRUPDQFH SUHMXGLFHG WKH GHIHQVH
7KLV UHTXLUHV VKRZLQJ WKDW FRXQVHO¶V HUURUV ZHUH VR
VHULRXVDVWRGHSULYHWKHGHIHQGDQWRIDIDLUWULDODWULDO
ZKRVHUHVXOWLVUHOLDEOH
,G DW 5HYLHZ RI FRXQVHO¶V SHUIRUPDQFH LV KLJKO\
GHIHUHQWLDO DQG UHTXLUHV WKDW FRXUWV ³LQGXOJH D VWURQJ
SUHVXPSWLRQ WKDW FRXQVHO¶V FRQGXFW IDOOV ZLWKLQ WKH ZLGH
UDQJHRIUHDVRQDEOHSURIHVVLRQDODVVLVWDQFH´,GDW7R
GHPRQVWUDWH WKDW FRXQVHO¶V SHUIRUPDQFH ZDV GHILFLHQW D
³GHIHQGDQWPXVWVKRZWKDWFRXQVHO¶VUHSUHVHQWDWLRQIHOOEHORZ
DQ REMHFWLYH VWDQGDUG RI UHDVRQDEOHQHVV´ ,G DW 7R
HVWDEOLVKSUHMXGLFHKH³PXVWVKRZWKDWWKHUHLVDUHDVRQDEOH

-- 5 of 8 --

:LFNOLQHY0LWFKHOO 1R
SUREDELOLW\WKDWEXWIRUFRXQVHO¶VXQSURIHVVLRQDOHUURUVWKH
UHVXOW RI WKH SURFHHGLQJ ZRXOG KDYH EHHQ GLIIHUHQW $
UHDVRQDEOHSUREDELOLW\LVDSUREDELOLW\VXIILFLHQWWRXQGHUPLQH
FRQILGHQFHLQWKHRXWFRPH´,GDW7KHUHLVQRTXHVWLRQ
WKDW 6WULFNODQG TXDOLILHV DV FOHDUO\ HVWDEOLVKHG IHGHUDO ODZ
XQGHU$('3$:LOOLDPVY7D\ORU86DW
:LFNOLQHDUJXHVWKDWKLVWULDOFRXQVHOZDVLQHIIHFWLYHIRU
IDLOLQJWRLQYHVWLJDWHDQGSUHVHQWPLWLJDWLQJHYLGHQFHDWWKH
SHQDOW\SKDVH$FFRUGLQJWR:LFNOLQHKLVFRXQVHOVKRXOG
KDYH LQYHVWLJDWHG KLV PHQWDO KHDOWK KLVWRU\ DQG SUHVHQWHG
H[SHUWWHVWLPRQ\RQKLVSV\FKRORJLFDOFRQGLWLRQ:LFNOLQH
DOVR DVVHUWV WKDW FRXQVHO VKRXOG KDYH LQYHVWLJDWHG DQG
SUHVHQWHGHYLGHQFHRIKLVKLVWRU\FKDUDFWHUDQGEDFNJURXQG
DVPLWLJDWLQJHYLGHQFH7KH2KLR6XSUHPH&RXUWUHMHFWHG
:LFNOLQH¶V DUJXPHQW QRWLQJ WKDW XQOLNH PRVW FDVHV WKH
UHFRUGFRQWDLQHGDVWDWHPHQWRIFRXQVHO¶VVWUDWHJ\ZKLFKOHG
WKHFRXUWWRFRQFOXGHWKDW³WKHPDQQHULQZKLFKDSSHOODQWZDV
UHSUHVHQWHG DW WKH PLWLJDWLRQ SKDVH ZDV WKH UHVXOW RI DQ
LQIRUPHGDQGWDFWLFDOVWUDWHJ\´6WDWHY:LFNOLQH1(G
2KLR 7KH FRXUW GLG QRW ILQG WKDW WKH
VHQWHQFLQJ GHFLVLRQ ZRXOG KDYH GLIIHUHG HYHQ DVVXPLQJ
FRXQVHO¶VSHUIRUPDQFHZDVGHILFLHQW
8QGHUWKH2KLRGHDWKSHQDOW\VFKHPH
DFDSLWDOGHIHQGDQWIRXQGJXLOW\RIDGHDWKVSHFLILFDWLRQ
KDVWRSUHVHQWVRPHPLWLJDWLQJHYLGHQFHLQRUGHUWRDYRLG
WKHGHDWKSHQDOW\,IDMXU\KDVQRWKLQJWRZHLJKDJDLQVW
WKHDJJUDYDWLQJFLUFXPVWDQFHLWDOPRVWFHUWDLQO\ PXVW
ILQG WKDW WKH DJJUDYDWLQJ FLUFXPVWDQFH RXWZHLJKV WKH
QRQH[LVWHQW PLWLJDWLQJFLUFXPVWDQFHVDQGUHFRPPHQG
GHDWK
0DSHVY&R\OH)G WK&LU HPSKDVLV
LQRULJLQDO ³>:@KHQDFOLHQWIDFHVWKHSURVSHFWRIEHLQJSXW
WR GHDWK XQOHVV FRXQVHO REWDLQV DQG SUHVHQWV VRPHWKLQJ LQ
PLWLJDWLRQPLQLPDOVWDQGDUGVUHTXLUHVRPHLQYHVWLJDWLRQ´
,G HPSKDVLVLQRULJLQDO &RQVHTXHQWO\WKLVFRXUWKDVKHOG
WKDW IDLOXUH WR LQYHVWLJDWH SRVVLEOH PLWLJDWLQJ IDFWRUV DQG
IDLOXUH WR SUHVHQW PLWLJDWLQJ HYLGHQFH DW VHQWHQFLQJ FDQ
1R :LFNOLQHY0LWFKHOO
JLYHQ WKH RSSRUWXQLW\ WR GHYHORS D IDFWXDO UHFRUG LQ WKH VWDWH FRXUWV
:LFNOLQH LV QRW HQWLWOHG WR DQ HYLGHQWLDU\ KHDULQJ LQ IHGHUDO FRXUW
:LFNOLQH¶V FODLPV SXUVXDQW WR %UDG\ Y 0DU\ODQG 86
DUH QRW EHIRUH WKLV FRXUW 7KH 2KLR 6XSUHPH &RXUW UHMHFWHG WKRVH
FODLPV DQG WKH GLVWULFW FRXUW DJUHHG WKDW :LFNOLQH ZDV QRW SUHMXGLFHG E\
WKH DOOHJHG GLVFRYHU\ YLRODWLRQV %RWK WKH GLVWULFW FRXUW DQG WKLV FRXUW
GHFOLQHG WR JUDQW D FHUWLILFDWH RI DSSHDODELOLW\ ZLWK UHVSHFW WR WKH %UDG\
FODLPV
% 2WKHU$UJXPHQWV
:LFNOLQH¶VDOOHJDWLRQVWKDWKLVWULDOFRXQVHOZDVLQHIIHFWLYH
LQRWKHUDUHDVDUHOLNHZLVHZLWKRXWPHULW+HFRQWHQGVWKDW
KLV FRXQVHO ZDV XQDEOH WR SUHSDUH IRU WULDO RU WR SURSHUO\
DGYLVH KLP RQ WKH LVVXH RI MXU\ ZDLYHU GXH WR WKH VWDWH¶V
GLVFRYHU\YLRODWLRQV7KH2KLR6XSUHPH&RXUWUHMHFWHGWKLV
DUJXPHQWILQGLQJWKDW:LFNOLQHZDVQRWSUHMXGLFHGE\WKH
DOOHJHG GLVFRYHU\ YLRODWLRQV DQG WKHUHIRUH KH ZDV QRW
SUHMXGLFHGE\DQ\LQHIIHFWLYHQHVVRIFRXQVHOUHVXOWLQJIURP
WKRVHDOOHJHGGLVFRYHU\YLRODWLRQV7KLVLPSOLHGFRQFOXVLRQ
ZDV QRW FRQWUDU\ WR RU DQ XQUHDVRQDEOH DSSOLFDWLRQ RI
6WULFNODQG :LFNOLQH DOVR DVVHUWV WKDW WKHUH ZHUH PDQ\
GHILFLHQFLHV LQ WKH WULDO SKDVH FDXVHG E\ KLV FRXQVHO¶V
DOOHJHGO\VXEVWDQGDUGSHUIRUPDQFH7KLVDVVHUWLRQLVZLWKRXW
PHULWLQWKDW WKHUHFRUGGHPRQVWUDWHVWKDWWULDOFRXQVHOGLG
QRW FRQFHGH WKH HOHPHQW RI SULRU FDOFXODWLRQ DQG GHVLJQ
:LFNOLQHKDVIDLOHGWRSUHVHQWDQ\HYLGHQFHWRRYHUFRPH
WKH SUHVXPSWLRQ WKDW WKH WKUHHMXGJH SDQHO LJQRUHG DQ\
LPSURSHUHYLGHQFHFRXQVHOIDLOHGWRUHGDFWIURPKLV%UDG\
PRWLRQDQG :LFNOLQHKDVQRWVKRZQWKDWKLVFRXQVHO¶V
FRQGXFW IHOO EHORZ D VWDQGDUG RI REMHFWLYH UHDVRQDEOHQHVV
UHJDUGLQJ KLV GHFLVLRQ WR FDOO -D\ 0F&DUW\ DV D ZLWQHVV
:LFNOLQH¶VDUJXPHQWWKDWKLVWULDOFRXQVHOZDVLQHIIHFWLYHLQ
IDLOLQJWRUHTXHVWDFKDQJHRIYHQXHLVSURFHGXUDOO\GHIDXOWHG
HYHQLILWZHUHQRWKRZHYHUWKLVFODLPIDLOVEHFDXVH:LFNOLQH
ZDVWULHGE\DWKUHHMXGJHSDQHOUDWKHUWKDQDMXU\DQGKHKDV
IDLOHGWRSUHVHQWDQ\HYLGHQFHWKDWWKHSDQHOZDVSUHMXGLFHG
E\SUHWULDOSXEOLFLW\/LNHZLVHWKHDUJXPHQWWKDW:LFNOLQH
ZDVGHQLHGHIIHFWLYHDVVLVWDQFHRIFRXQVHOLQWKHIDLOXUHWR

-- 6 of 8 --

:LFNOLQHY0LWFKHOO 1R
$W RUDO DUJXPHQW WKH SDUWLHV GLVSXWHG ZKHWKHU :LFNOLQH KDG
UHTXHVWHG DQ HYLGHQWLDU\ KHDULQJ LQ GLVWULFW FRXUW RQ KLV LQHIIHFWLYH
DVVLVWDQFH RI FRXQVHO FODLP ,Q D GRFXPHQW VXEPLWWHG DIWHU RUDO DUJXPHQW
:LFNOLQH FRQWHQGV WKDW KLV UHTXHVW RI DQ HYLGHQWLDU\ KHDULQJ LV LQGLFDWHG
E\ WKH GLVWULFW FRXUW¶V RUGHU RI 6HSWHPEHU ZKLFK VSHFLILFDOO\
DGGUHVVHG :LFNOLQH¶V DUJXPHQW LQ KLV PRWLRQ WR DOWHU RU DPHQG WKDW WKH
GLVWULFW FRXUW VKRXOG QRW KDYH GHQLHG KLV KDEHDV SHWLWLRQ ZLWKRXW KROGLQJ
DQ HYLGHQWLDU\ KHDULQJ RQ D QXPEHU RI LVVXHV LQFOXGLQJ KLV LQHIIHFWLYH
DVVLVWDQFH RI FRXQVHO FODLP 7KH GLVWULFW FRXUW KHOG WKDW :LFNOLQH KDG QRW
VKRZQ WKDW WKLV FODLP ZDV QRW IDLUO\ FRQVLGHUHG E\ WKH VWDWH FRXUWV QRU
WKDW DGGLWLRQDO HYLGHQFH GHPRQVWUDWLQJ LQHIIHFWLYH DVVLVWDQFH RI FRXQVHO
ZRXOG EH SURGXFHG LQ DQ\ HYLGHQWLDU\ KHDULQJ EHIRUH LW $V VWDWHG DERYH
DQ HYLGHQWLDU\ KHDULQJ ZDV FRQGXFWHG LQ WKH WULDO FRXUW RQ :LFNOLQH¶V
PRWLRQ IRU D QHZ WULDO DW ZKLFK KLV FRXQVHO WHVWLILHG 'HVSLWH WKLV IDFW
WKHUH KDV QHYHU EHHQ DQ\ SURIIHU RI HYLGHQFH QRU DQ\ DIILGDYLW UHJDUGLQJ
DQ\ DGGLWLRQDO PLWLJDWLQJ IDFWV LQ :LFNOLQH¶V KLVWRU\ %HFDXVH KH ZDV
)LQDOO\:LFNOLQHFODLPVWKDWKLVWULDOFRXQVHOHUUHGLQQRW
SUHVHQWLQJ DQ\ HYLGHQFH UHJDUGLQJ KLV DOOHJHGO\ WURXEOHG
XSEULQJLQJ+HYDJXHO\VWDWHVWKDWKLVUHODWLRQVKLSZLWKKLV
IDWKHU ³ZDV FUXFLDO WR KLV GHYHORSPHQW DQG WKH ZD\ KH
KDQGOHGIUXVWUDWLRQDQGUDJH´:LFNOLQHDOVRDVVHUWVWKDWWKH
GHDWKRIKLVPRWKHU³GHYDVWDWHGKLP´7KH6WDWHFRQWHQGV
WKDW :LFNOLQH¶V IDPLO\ H[SHULHQFHV GR QRW SURYLGH D
MXVWLILFDWLRQ RU H[SODQDWLRQ IRU WKLV FULPH 6HH 6WDWH Y
'LFNHUVRQ1(G 2KLR ³:KLOHWKHVH
H[SHULHQFHVDUHXQIRUWXQDWHWKH\DUHQRWXQFRPPRQ,WWDNHV
QRFLWDWLRQRIDXWKRULW\WRVWDWHWKDWPDQ\RWKHUSHRSOHKDYH
HQGXUHGVLPLODUH[SHULHQFHVZLWKRXWUHVRUWWRODZOHVVQHVV´
:LFNOLQH KDV IDLOHG WR GHPRQVWUDWH WKDW WKHUH LV D
³UHDVRQDEOHSUREDELOLW\´WKDWEXWIRUKLVWULDOFRXQVHO¶VIDLOXUH
WRSUHVHQWWKLVHYLGHQFHWKHUHVXOWRIWKHSHQDOW\SKDVHZRXOG
KDYHEHHQGLIIHUHQW7KHUHIRUHKLVFODLPWKDWKLVFRXQVHOZDV
LQHIIHFWLYHIRUIDLOLQJWRLQYHVWLJDWHDQGSUHVHQWPLWLJDWLQJ
HYLGHQFH IDLOV 6WULFNODQG¶V SUHMXGLFH SURQJ 7KH 2KLR
6XSUHPH&RXUW¶VGHWHUPLQDWLRQWKDW:LFNOLQH¶VFRXQVHOZDV
QRWGHILFLHQWDWWKHSHQDOW\SKDVHDQGWKDWHYHQLILWZHUHWKH
VHQWHQFLQJ GHFLVLRQ ZRXOG QRW KDYH EHHQ GLIIHUHQW LV QRW
FRQWUDU\ WR RU DQ XQUHDVRQDEOH DSSOLFDWLRQ RI 6WULFNODQG
$FFRUGLQJO\ :LFNOLQH LV QRW HQWLWOHG WR DQ\ UHOLHI RQ WKLV
JURXQG
1R :LFNOLQHY0LWFKHOO
FRQVWLWXWHLQHIIHFWLYHDVVLVWDQFHRIFRXQVHO6HH&ROHPDQY
0LWFKHOO &ROHPDQ,, )G WK&LU
FHUWGHQLHG6&W 6NDJJVY3DUNHU
)G WK&LU FHUWGHQLHG6&W
&DUWHUY%HOO)G WK&LU
$IWHU EHLQJ FRQYLFWHG DQG VHQWHQFHG WR GHDWK :LFNOLQH
PRYHGIRUDQHZWULDOEDVHGLQSDUWRQKLVFRXQVHO¶VIDLOXUHWR
LQYHVWLJDWHPHQWDOKHDOWKHYLGHQFH$WDKHDULQJEHIRUHWKH
RULJLQDOWKUHHMXGJHSDQHO'DQ+XQWRQHRI:LFNOLQH¶VWULDO
DWWRUQH\VWHVWLILHGUHJDUGLQJKLVVWUDWHJ\DWWKHSHQDOW\SKDVH
%HIRUHWULDOFRXQVHOKLUHGDSULYDWHLQYHVWLJDWRUZKRKDGEHHQ
DKRPLFLGHGHWHFWLYHZLWKWKH&ROXPEXV3ROLFH'HSDUWPHQW
IRU WZHQW\ \HDUV $FFRUGLQJ WR +XQW WKLV LQYHVWLJDWRU
LQWHUYLHZHG³MXVWDERXWHYHU\ERG\´:LFNOLQH¶VWULDOFRXQVHO
SHUVRQDOO\LQWHUYLHZHGNH\ZLWQHVVHVLQFOXGLQJ:LFNOLQH¶V
EURWKHUDQGKLVFRPPRQODZZLIH+XQW¶VFRFRXQVHO-RKQ
:ROHU\ZKRKDGUHSUHVHQWHG:LFNOLQHIRUPDQ\\HDUVNQHZ
:LFNOLQH¶V IULHQGV DQG WDONHG ZLWK KLV IDWKHU $OWKRXJK
FRXQVHOGLGQRWSHUIRUPDVHSDUDWHPLWLJDWLRQLQYHVWLJDWLRQ
FRXQVHO WHVWLILHG WKDW WKHLU SUHWULDO LQYHVWLJDWLRQ ZDV
FRQGXFWHGIRUERWKJXLOWSKDVHDQGPLWLJDWLRQSKDVHSXUSRVHV
DQGWKDWKHFRXOGQRWVHSDUDWHWKHWZR
$IWHU WKH WKUHHMXGJH SDQHO UHWXUQHG D JXLOW\ YHUGLFW
:LFNOLQH¶VFRXQVHOWXUQHGWRWKHPLWLJDWLRQVWDWXWHDQGWKH
VHFWLRQRIWKH2KLR3XEOLF'HIHQGHU¶VPDQXDOGHDOLQJZLWK
WKHPLWLJDWLRQKHDULQJ&RXQVHOZHQWWKURXJKHDFKPLWLJDWLQJ
IDFWRUZLWK:LFNOLQH&RXQVHODGYLVHG:LFNOLQHWKDWKHFRXOG
KDYHDSV\FKLDWULFUHSRUWEXWFRXQVHOFKRVHQRWWRKDYHRQH
IRUWZRUHDVRQV)LUVW:LFNOLQH³ZDQWHGQRWKLQJWRGRZLWK
SV\FKLDWULVWVRUSV\FKRORJLVWV´6HFRQGFRXQVHOIHOWWKDWD
SV\FKLDWULF UHSRUW ZRXOG UHIOHFW QHJDWLYHO\ RQ :LFNOLQH
&RXQVHO DOVR DGYLVHG :LFNOLQH WKDW D SUHVHQWHQFH UHSRUW
GHOYLQJ LQWR KLV EDFNJURXQG FRXOG EH SUHSDUHG $JDLQ
:LFNOLQH³ZDQWHGQRWKLQJWRGRZLWKWKHSUREDWLRQRIILFHU´
&RXQVHO UHTXHVWHG WR VSHDN ZLWK :LFNOLQH¶V IDPLO\
$FFRUGLQJWR+XQW:LFNOLQH³ZDVYHU\VWURQJRQWKLVKHGLG
QRWZDQWWRGUDJKLVIDPLO\LQWRWKLVWKLQJDQGEDVLFDOO\WROG
XVQRDVIDUDVKLVIDPLO\ZDVLQYROYHG´&RXQVHOZDVDOVR

-- 7 of 8 --

:LFNOLQHY0LWFKHOO 1R
FRQFHUQHGWKDWLIWKH\SXWZLWQHVVHVRQWKHVWDQGWHVWLI\LQJWR
:LFNOLQH¶V JRRG FKDUDFWHU LW ZRXOG RSHQ WKH GRRU IRU WKH
SURVHFXWLRQWREULQJLQHYLGHQFHRIEDGDFWVFRPPLWWHGE\
KLP DQG WKDW VXFK HYLGHQFH ZRXOG JUHDWO\ GDPDJH DQ\
PLWLJDWLQJ IDFWRUV WKH\ SUHVHQWHG &RXQVHO UHYLHZHG
:LFNOLQH¶VSULVRQILOHVEXWFKRVHQRWWRSUHVHQWWKHPWRDYRLG
KLJKOLJKWLQJKLVQXPHURXVLQFDUFHUDWLRQV
$IWHU WZR RU WKUHH PHHWLQJV WR GLVFXVV WKHLU VWUDWHJ\
:LFNOLQHDQGKLVFRXQVHOGHFLGHGWRDUJXHWKDW&KULVWRSKHU
DQG3HJJ\/HUFKIDFLOLWDWHGWKHPXUGHUVE\DWWHPSWLQJDGUXJ
ULSRII 7KH WKUHHMXGJH SDQHO KDG DOUHDG\ UHMHFWHG
:LFNOLQH¶V SULPDU\ GHIHQVH ± WKDW QR PXUGHUV KDG WDNHQ
SODFH&RXQVHOIHOWWKDWLWZRXOGEHEHVWWRIRFXVRQWKHLU
VWURQJHVWPLWLJDWLQJIDFWRUDYRLGWKHGDQJHURIRSHQLQJWKH
GRRUWRKDUPIXOLQIRUPDWLRQDQGQRW³FORXGLWXSZLWKVWXII
ZHFRXOGQ¶WSURYH´+XQWWHVWLILHGWKDW:LFNOLQHPDGHWKH
ILQDOGHFLVLRQWRSURFHHGDVWKH\GLG
,Q 6WULFNODQG WKH 6XSUHPH &RXUW QRWHG WKDW ³>W@KH
UHDVRQDEOHQHVV RI FRXQVHO¶V DFWLRQV PD\ EH GHWHUPLQHG RU
VXEVWDQWLDOO\LQIOXHQFHGE\WKHGHIHQGDQW¶VRZQVWDWHPHQWVRU
DFWLRQV&RXQVHO¶VDFWLRQVDUHXVXDOO\EDVHGTXLWHSURSHUO\
RQLQIRUPHGVWUDWHJLFFKRLFHVPDGHE\WKHGHIHQGDQWDQGRQ
LQIRUPDWLRQVXSSOLHGE\WKHGHIHQGDQW´6WULFNODQG86
DW)XUWKHUPRUH³>D@QDWWRUQH\¶VFRQGXFWLVQRWGHILFLHQW
VLPSO\IRUIROORZLQJKLVFOLHQW¶VLQVWUXFWLRQV´&ROHPDQY
0LWFKHOO &ROHPDQ , )G WK &LU FHUW
GHQLHG6&W DQG FHUWGHQLHG6&W

+HUH:LFNOLQH¶VFRXQVHOLQYHVWLJDWHGSULRUWRWULDOKLULQJ
DSULYDWHLQYHVWLJDWRUWRLQWHUYLHZSHUVRQVZLWKNQRZOHGJH
DERXW WKH FDVH DQG SHUVRQDOO\ LQWHUYLHZLQJ NH\ ZLWQHVVHV
7KLVLQYHVWLJDWLRQZDVSHUIRUPHGIRUWKHSXUSRVHVRIERWKWKH
JXLOWSKDVHDQGWKHSHQDOW\SKDVH$IWHUWKHSDQHOUHWXUQHGD
JXLOW\ YHUGLFW FRXQVHO GLVFXVVHG PLWLJDWLRQ VWUDWHJ\ ZLWK
:LFNOLQHWZRRUWKUHHWLPHV:LFNOLQHGLGQRWZDQWWRVSHDN
ZLWKDSV\FKLDWULVWRUDSUREDWLRQRIILFHURULQYROYHKLVIDPLO\
&RQVHTXHQWO\:LFNOLQHDQGKLVFRXQVHOUHDFKHGWKHGHFLVLRQ
1R :LFNOLQHY0LWFKHOO
WRIRFXVRQWKHLUVWURQJHVWPLWLJDWLQJIDFWRUWKDWWKH/HUFKHV
IDFLOLWDWHGWKHPXUGHUVE\SDUWLFLSDWLQJLQGUXJGHDOLQJDQG
DWWHPSWLQJDGUXJULSRII:LFNOLQHPDGHWKHILQDOGHFLVLRQ
WRSURFHHGZLWKWKLVVWUDWHJ\%DVHGRQWKHUHFRUGHYLGHQFH
RI:LFNOLQH¶VVWUDWHJLFFKRLFHVFRXQVHO¶VLQYHVWLJDWLRQDQG
SUHVHQWDWLRQ RI PLWLJDWLQJ HYLGHQFH GLG QRW IDOO EHORZ DQ
REMHFWLYHVWDQGDUGRIUHDVRQDEOHQHVV6HH&ROHPDQ,
)GDW KROGLQJWKDWSHWLWLRQHUZDVQRWGHSULYHGRIWKH
ULJKWWRHIIHFWLYHDVVLVWDQFHRIFRXQVHODWVHQWHQFLQJZKHUH
SHWLWLRQHU GLG QRW FRRSHUDWH ZLWK FRXQVHO UHJDUGLQJ WKH
LQYHVWLJDWLRQ DQG LGHQWLILFDWLRQ RI PLWLJDWLQJ HYLGHQFH
LPSRVHGUHVWULFWLRQVXSRQFRXQVHODQGUHIXVHGWRVXEPLWWR
IXUWKHUSV\FKRORJLFDORUSV\FKLDWULFWHVWLQJ %XWVHH&ROHPDQ
,, )G DW ILQGLQJ WKDW ³FRXQVHO¶V SHUIRUPDQFH
JLYHQWKHFRPELQDWLRQRI3HWLWLRQHU¶VXQLQYHVWLJDWHGSHUVRQDO
KLVWRU\DQGWKHFRQVHTXHQWO\GHILFLHQWSHQDOW\SKDVHFORVLQJ
DUJXPHQWWREHREMHFWLYHO\XQUHDVRQDEOH´
(YHQ LI FRXQVHO ZHUH GHILFLHQW LQ LQYHVWLJDWLQJ DQG
SUHVHQWLQJPLWLJDWLQJHYLGHQFH:LFNOLQHIDLOVWRVDWLVI\WKH
SUHMXGLFHSURQJRI6WULFNODQG:LFNOLQHDUJXHVWKDWKLVWULDO
FRXQVHOFRXOGKDYHSUHVHQWHGPHQWDOKHDOWKHYLGHQFH7KH
PHQWDOKHDOWKHYLGHQFHVXEPLWWHGZLWKKLVSHWLWLRQIRUSRVW
FRQYLFWLRQUHOLHILQGLFDWHVWKDW:LFNOLQHGLGQRWVXIIHUIURP
DQ\PHQWDOFRQGLWLRQUHOHYDQWWRWKHPXUGHUVRIWKH/HUFKHV
7KHUHFRUGVVWDWHWKDW³>W@KHUHLV QR HYLGHQFHRIDWKRXJKW
GLVRUGHURUSV\FKRWLFUHDFWLRQ´WKDW³>S@V\FKRORJLFDOWHVWLQJ
UHYHDOVWKDWKHLVIXQFWLRQLQJLQWKHVXSHULRUUDQJHRIJHQHUDO
LQWHOOLJHQFH´DQGWKDWKHKDVDQ,4RI7KHPHQWDOKHDOWK
HYLGHQFHLQGLFDWHVWKDW:LFNOLQHVXIIHUHGIURPGHSUHVVLRQ
KRZHYHUWKHUHLVQRHYLGHQFHWKDWKLVGHSUHVVLRQDIIHFWHGKLV
FRQGXFWKHUH6HH6WDWHY:KLWH1(G 2KLR
³,Q FRQWUDVW GHIHQGDQW¶V PLOG GHSUHVVLRQ ZDV
XQGLVSXWHGEXWLWLVXQFOHDUZKDWUROH LIDQ\ LWSOD\HGLQ
WKHVH FULPHV 7KLV LV DW EHVW D ZHDN PLWLJDWLQJ IDFWRU´
:LFNOLQH DOVR DUJXHV WKDW KLV WULDO FRXQVHO VKRXOG KDYH
LQWURGXFHG HYLGHQFH RI KLV JRRG EHKDYLRU GXULQJ SULRU
LQFDUFHUDWLRQV&RXQVHOUHYLHZHG:LFNOLQH¶VSULVRQUHFRUGV
DQGGHFLGHGQRWWRSUHVHQWWKHPEHFDXVHWKH\ZRXOGKLJKOLJKW
:LFNOLQH¶VH[WHQVLYHFULPLQDOKLVWRU\

-- 8 of 8 --