03a0175p.06

01-5893Court of Appeals for the Sixth CircuitJun 4, 2003

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
6$1'5$ 0255,6
3ODLQWLII$SSHOODQW
Y
:$/0$57 6725(6 ,1&
'HIHQGDQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV
1R²'LDQH.9HVFRYR0DJLVWUDWH-XGJH
$UJXHG1RYHPEHU
'HFLGHGDQG)LOHG-XQH
%HIRUH.(,7+.583$16.<DQG&/$<&LUFXLW
-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' -DPHV 0 $OOHQ ),/'(50$1 $//(1
0HPSKLV 7HQQHVVHH IRU $SSHOODQW : 2 /XFNHWW -U
5266,(/8&.(773$5.(5 /$8*+/,10HPSKLV
7HQQHVVHH IRU $SSHOOHH 21 %5,() -DPHV 0 $OOHQ
),/'(50$1 $//(1 0HPSKLV 7HQQHVVHH IRU
$SSHOODQW:2/XFNHWW-U/RUULH.5LGGHU'DYLG$
0RUULVY:DO0DUW6WRUHV,QF 1R
%LOOLRQV 5266,( /8&.(77 3$5.(5 /$8*+/,1
0HPSKLV7HQQHVVHHIRU$SSHOOHH
&/$< - GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK
.(,7+-MRLQHG.583$16.<- SS GHOLYHUHG
DVHSDUDWHGLVVHQWLQJRSLQLRQ
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
&/$< &LUFXLW -XGJH 3ODLQWLII 6DQGUD 0RUULV DSSHDOV
IURP WKH GLVWULFW FRXUW¶V MXGJPHQW JUDQWLQJ WKH PRWLRQ IRU
MXGJPHQWDVDPDWWHURIODZLQIDYRURI'HIHQGDQW:DO0DUW
6WRUHV ,QF DW WKH FORVH RI 3ODLQWLII¶V FDVHLQFKLHI LQ WKLV
QHJOLJHQFH DFWLRQ ZKHUHLQ 3ODLQWLII VHHNV GDPDJHV IURP
'HIHQGDQWIRUWKHLQMXULHVWKDWVKHDOOHJHGO\VXVWDLQHGDVD
UHVXOWRIDVOLSDQGIDOORQ'HIHQGDQW¶VSUHPLVHV%HFDXVHZH
EHOLHYHWKDWZKHQYLHZLQJWKHHYLGHQFHDQGDOOSHUPLVVLEOH
LQIHUHQFHV PRVW IDYRUDEO\ IRU 3ODLQWLII WKHUH LV PDWHULDO
HYLGHQFHWRVXSSRUWDYHUGLFWIRU3ODLQWLIIZH5(9(56(WKH
GLVWULFWFRXUW¶VRUGHUDQG5(0$1'WKHFDVHIRUWULDO
%$&.*5281'
2Q6HSWHPEHU3ODLQWLIIDQGKHUKXVEDQG0LFKDHO
0RUULV ³0RUULV´ ZHUH VKRSSLQJ DW 'HIHQGDQW¶V ³6DP¶V
&OXE´ VWRUH ORFDWHG LQ 0HPSKLV 7HQQHVVHH 0RUULV ZDV
SXVKLQJWKHVKRSSLQJFDUWDQG3ODLQWLIIZDVVOLJKWO\EHKLQG
0RUULVRQKLVOHIWKDQGVLGH7KHWZRZHUHZDONLQJWKURXJK
WKHIUHH]HUVHFWLRQRIWKHVWRUHZKHQDIWHUURXQGLQJDFRUQHU
3ODLQWLIIVOLSSHGRQDZHWVXEVWDQFHWKRXJKWWREHZDWHUDQG
IHOOQH[WWRDVPDOOSRUWDEOHIUHH]HUNQRZQDVD³VSRWER[´
$WWKHWLPHRIKHUIDOO3ODLQWLIIZDVEHWZHHQ0RUULVDQGWKH
VSRWER[0RUULVQRWLFHG3ODLQWLII¶V³IHHWJRXS´DVVKHIHOO
ZKLOHKLWWLQJWKHVSRWER[DQGWKHFDUWWKDW0RUULVKDGEHHQ
SXVKLQJ $FFRUGLQJ WR 0RUULV LQ WKH FRXUVH RI WKH IDOO
3ODLQWLIIVWUXFNKHUOHJVRQWKHVSRWER[DQGVKRSSLQJFDUW
ODQGHG RQ KHU ORZHU EDFN DQG EXWWRFNV DQG WKHQ OD\
FRPSOHWHO\IODW3ODLQWLIIDWWHPSWHGWRSXOOKHUVHOIXSXVLQJ

-- 1 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
WKHFDUWWKDW0RUULVZDVKROGLQJEXWVOLSSHGKDOIZD\XSDQG
IHOODVHFRQGWLPH3ODLQWLIIZDVDOOHJHGO\VFUHDPLQJDVWKHVH
HYHQWVRFFXUUHGDQGGHVFULEHGWKHIDOODV³YLROHQW´ -$DW

6RPHRI'HIHQGDQW¶VHPSOR\HHVDSSURDFKHGWKHVFHQHWR
OHQGDVVLVWDQFH2QFH3ODLQWLIIZDVILQDOO\VWDQGLQJXSVKH
QRWLFHGWKDWKHUFORWKHVZHUH³VRDNHG´LQFOXGLQJKHUVKRHV
3ODLQWLIIWHVWLILHGWKDWVKHEHOLHYHGWKDWWKHOLTXLGLQZKLFKVKH
IHOOZDVZDWHUIURPWKHVSRWER[IUHH]HU3ODLQWLIIFODLPHG
WKDW WKH ZDWHU IHOW FROG EXW ZDV XQVXUH ZKHWKHU WKH FROG
IHHOLQJZDVDWWULEXWDEOHWRWKHZDWHUWHPSHUDWXUHLWVHOIRUWR
WKHVXUURXQGLQJVLQDVPXFKDVVKHZDVLQWKHIUHH]HUVHFWLRQ
RIWKHVWRUH2QHRIWKHHPSOR\HHVFDOOHGIRUVWRUHPDQDJHU
.HQQHWK.DQL]DUZKRDUULYHGRQWKHVFHQHVKRUWO\WKHUHDIWHU
.DQL]DURUGHUHGDQHPSOR\HHWRJHWDPRSDQGFOHDQXSWKH
OLTXLG'HIHQGDQW¶VHPSOR\HH%HWW\%DLUGWHVWLILHGWKDWVKH
ZDVWKHLQGLYLGXDOZKRFOHDQHGXSWKHZDWHUDIWHU3ODLQWLII
IHOO%DLUGVWDWHGWKDWVKHXVHGVRPHSDSHUWRZHOVWRFOHDQXS
WKH ZDWHU ZKLFK E\ WKDW WLPH ZDV DERXW WHQ LQFKHV LQ
GLDPHWHUDQG³>U@LJKWWKHUHXQGHUWKHGUDLQRIWKHIUHH]HU´
-$DW
.DQL]DUWRRNDVWDWHPHQWIURP3ODLQWLIIZKLFKZDVZULWWHQ
E\0RUULVDQGVLJQHGE\3ODLQWLII7KHVWDWHPHQWSURYLGHGE\
3ODLQWLIIDWWKHWLPHRIWKHIDOOZDVUHDGLQWRHYLGHQFHDWWULDO
DQGSURYLGHG³7XUQHGFRUQHULQIUR]HQIRRGDUHDDQGIDOO
>VLF@LQZDWHUOHDNLQJIURPGLVSOD\FRROHUIUHH]HU,QMXUHG
ERWKNQHHVWRHVEDFNKLSULJKWKLSDQGVZHOOLQJLQERWK
OHJV´ -$DW
3ODLQWLIIWHVWLILHGWKDW.DQL]DUFRPPXQLFDWHGWRWKHPWKDW
LWZDVKLVEHOLHIWKDWWKHOLTXLGVXEVWDQFHSUHVHQWRQWKHIORRU
ZDVZDWHUWKDWKDGOHDNHGIURPWKHVSRWER[IUHH]HU.DQL]DU
³SRLQWHG RXW´ WR 3ODLQWLII DQG 0RUULV WKDW WKH SOXJ RQ WKH
ERWWRPRIWKHVSRWER[IUHH]HUZDVRXW -$DW .DQL]DU
IXUWKHUFRPPXQLFDWHGWR3ODLQWLIIDQG0RUULVWKDWWKHVSRW
ER[IUHH]HUZDVQHZDQGWKDWKHZDVDIUDLGWKDWLWPD\QRWEH
IXQFWLRQLQJSURSHUO\VRKHZDQWHGLWLPPHGLDWHO\UHPRYHG
0RUULVY:DO0DUW6WRUHV,QF 1R
IURPWKHIORRUSDUWLFXODUO\VLQFHLWKDGQRWEHHQ³RXWEXWD
YHU\VKRUWSHULRGRIWLPH´ -$DW
0RUULVHVFRUWHG3ODLQWLIIRXWRIWKHVWRUHLQDZKHHOFKDLU
SURYLGHGE\'HIHQGDQWDQGWRRNKHUWRDKRVSLWDOHPHUJHQF\
URRP3ODLQWLIIZDVGLVFKDUJHGIURPWKHKRVSLWDODIWHU[UD\V
ZHUHWDNHQDQGPHGLFDWLRQZDVSUHVFULEHGIRUWKHSDLQ7KH
IROORZLQJGD\3ODLQWLIIZDVVHYHUHO\EUXLVHGDQG³FRXOGEDUHO\
ZDON´ -$DW 6KHVDZKHUGRFWRUZKRDGYLVHG3ODLQWLII
WR VWD\ LQ EHG DQG RII RI KHU IHHW IRU D ZHHN 3ODLQWLII
FRPSOLHGZLWKKHUGRFWRU¶VDGYLFH
3ODLQWLIIILOHGWKLVQHJOLJHQFHDFWLRQDJDLQVW'HIHQGDQWLQ
WKH FLUFXLWFRXUWRI6KHOE\&RXQW\7HQQHVVHHRQ-XQH
DQG'HIHQGDQWUHPRYHGWKHPDWWHUWRWKH8QLWHG6WDWHV
'LVWULFW &RXUW IRU WKH :HVWHUQ 'LVWULFW RI 7HQQHVVHH RQ
$XJXVW RQ WKH EDVLV RI GLYHUVLW\ RI FLWL]HQVKLS
MXULVGLFWLRQXQGHU86&† D 7KHUHDIWHUWKHSDUWLHV
FRQVHQWHGWRWKHFDVHEHLQJWULHGE\D8QLWHG6WDWHVPDJLVWUDWH
MXGJH SXUVXDQW WR 86& † E DQG WKH FDVH
SURFHHGHG WR WULDO )ROORZLQJ 3ODLQWLII¶V FDVHLQFKLHI
'HIHQGDQWPRYHGIRUMXGJPHQWDVDPDWWHURIODZFODLPLQJ
WKDW3ODLQWLIIIDLOHGWRSURIIHUHYLGHQFHWRVKRZWKDW'HIHQGDQW
KDG QRWLFH DFWXDO RU FRQVWUXFWLYH RI WKH ZDWHU DQG WKDW
3ODLQWLIIFRXOGQRWUHO\XSRQWKHGRFWULQHRIUHVLSVDORTXLWXU
LQDVPXFKDV3ODLQWLIIIDLOHGWRGHPRQVWUDWHWKDW'HIHQGDQW
ZDVLQ H[FOXVLYHFRQWURORIWKHVSRWER[IUHH]HU3ODLQWLII
DUJXHGWKDWVKHZDVQRWDWWHPSWLQJWRVKRZQRWLFHDQGLQIDFW
DGPLWWHGWKDWVKHFRXOGQRWSURYHQRWLFH5DWKHU3ODLQWLII
FODLPHGWKDWVKHSURIIHUHGHYLGHQFHWRVKRZWKDW'HIHQGDQW
FUHDWHGWKHGDQJHURXVFRQGLWLRQE\SODFLQJWKHQHZVSRWER[
RXWZLWKRXWDSOXJLQLWDQGDOVRDUJXHGWKDWWKHGRFWULQHRI
UHVLSVDORTXLWXUDSSOLHG7KHGLVWULFWFRXUWWRRN'HIHQGDQW¶V
PRWLRQXQGHUDGYLVHPHQW
7KHQH[WGD\WKHGLVWULFWFRXUWJUDQWHG'HIHQGDQW¶VPRWLRQ
RQWKHUHFRUGILQGLQJWKDW3ODLQWLIIIDLOHGWRSUHVHQWVXIILFLHQW
HYLGHQFH IRU D UHDVRQDEOH MXU\ WR FRQFOXGH WKDW 'HIHQGDQW
FUHDWHGWKHGDQJHURXVFRQGLWLRQDQGWKDWZKLOHWKHHYLGHQFH
GLGLQGLFDWHWKDWWKHVSRWER[IUHH]HUKDGEHHQLQ'HIHQGDQW¶V

-- 2 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
FRQWUROWKHHYLGHQFHGLGQRWGHPRQVWUDWHWKDWWKHVSRWER[
KDG EHHQ LQ 'HIHQGDQW¶V H[FOXVLYH FRQWURO IRU SXUSRVHV RI
LQYRNLQJ WKH GRFWULQH RI UHV LSVD ORTXLWXU -XGJPHQW ZDV
HQWHUHGLQIDYRURI'HIHQGDQWDQGLWLVIURPWKLVMXGJPHQW
GLVPLVVLQJ 3ODLQWLII¶V FDVH XSRQ 'HIHQGDQW¶V PRWLRQ IRU
MXGJPHQWDVDPDWWHURIODZWKDW3ODLQWLIIQRZDSSHDOV
',6&866,21
,QDGLYHUVLW\FDVHZKHQD5XOHPRWLRQIRUMXGJPHQWDV
DPDWWHURIODZLVEDVHGRQDFKDOOHQJHWRWKHVXIILFLHQF\RI
WKHHYLGHQFHZHDSSO\WKHVWDQGDUGRIUHYLHZXVHGE\WKH
FRXUWVRIWKHVWDWHZKRVHVXEVWDQWLYHODZJRYHUQVWKHPDWWHU
0RUDOHVY$P+RQGD0RWRU&R)G WK&LU
+HUH 7HQQHVVHH ODZ JRYHUQV WKH VXEVWDQFH RI WKH
PDWWHUDQGXQGHU7HQQHVVHHODZZKHQFRQVLGHULQJDPRWLRQ
IRU D GLUHFWHG YHUGLFW LQ D MXU\ FDVH WKH WULDO FRXUW ³PXVW
FRQVLGHUWKHHYLGHQFHPRVWIDYRUDEO\IRUWKHSODLQWLIIDOORZ
DOOUHDVRQDEOHLQIHUHQFHVLQSODLQWLII¶VIDYRUDQGGLVUHJDUGDOO
FRXQWHUDFWLQJ HYLGHQFH DQG VR FRQVLGHUHG LI WKHUH LV DQ\
PDWHULDOHYLGHQFHWRVXSSRUWDYHUGLFWIRUSODLQWLII>WKHFRXUW@
PXVWGHQ\WKHPRWLRQ´&LW\RI&ROXPELDY&):&RQVW
&R6:G 7HQQ
³7RHVWDEOLVKQHJOLJHQFHRQHPXVWSURYH DGXW\RI
FDUHRZHGE\GHIHQGDQWWRSODLQWLII FRQGXFWIDOOLQJEHORZ
WKHDSSOLFDEOHVWDQGDUGRIFDUHWKDWDPRXQWVWRDEUHDFKRI
WKDW GXW\ DQ LQMXU\ RU ORVV FDXVH LQ IDFW DQG
SUR[LPDWHRUOHJDOFDXVH´0F&OXQJY'HOWD6TXDUH/WG
3¶VKLS6:G 7HQQ FLWLQJ0F&DOOY
:LOGHU6:G 7HQQ ,QWKHFRQWH[WRI
DSUHPLVHVOLDELOLW\FDVHWKH7HQQHVVHHFRXUWVKDYHVWDWHGWKDW
D EXVLQHVV RZQHU EUHDFKHV WKH GXW\ RI FDUH RZHG WR LWV
FXVWRPHUVZKHQLWDOORZVDGDQJHURXVFRQGLWLRQRUGHIHFWWR
H[LVWRQWKHSUHPLVHVLIWKDWFRQGLWLRQRUGHIHFWZDVFUHDWHG
E\ WKH RZQHU RSHUDWRU RU KLV DJHQW RU LI WKH FRQGLWLRQ LV
FUHDWHGE\VRPHRQHHOVHZKHQWKHEXVLQHVVRZQHUKDGDFWXDO
RUFRQVWUXFWLYHQRWLFHWKDWWKHGDQJHURXVFRQGLWLRQRUGHIHFW
H[LVWHGSULRUWRWKHLQMXU\6HH+DUGHVW\Y6HUY0HUFK&R
,QF6:G 7HQQ&W$SS &KDPEOLVV
0RUULVY:DO0DUW6WRUHV,QF 1R
Y6KRQH\¶V,QF6:G 7HQQ&W$SS
%HQVRQY+*+LOO6WRUHV,QF6:G 7HQQ
&W$SS -RQHVY=D\UH,QF6:G
7HQQ&W$SS 3DUDGLVRY.URJHU&R6:G
7HQQ&W$SS
,QWKHPDWWHUDWKDQG3ODLQWLII¶VFRXQVHODUJXHGLQUHVSRQVH
WR'HIHQGDQW¶VPRWLRQIRUMXGJPHQWDVDPDWWHURIODZWKDW
3ODLQWLIIKDGSUHVHQWHGVXIILFLHQWHYLGHQFHIRUDUHDVRQDEOH
MXU\WRLQIHUWKDW'HIHQGDQWKDGEUHDFKHGLWVGXW\WR3ODLQWLII
E\FUHDWLQJWKHGDQJHURXVFRQGLWLRQ
E\SXWWLQJRXWWKHLU>VLF@QHZVSRWER[±WKDWLVLQWKH
UHFRUG ± ZLWKRXW D SOXJ LQ LW ± WKDW LV LQ WKH UHFRUG ±
XQGHUZKLFKGLUHFWO\WKHUHZDVDQLVVXHRIZDWHU7KDWLV
LQWKHUHFRUG0\FOLHQWGLGQ¶WSXWLWRXWWKHUH:HGRQ¶W
NQRZZKRSXWLWRXWWKHUH,WKLQNWKHMXU\FDQGUDZDQ
LQIHUHQFHIURPWKHWHVWLPRQ\WKDWLWZDVQHZWKDWLV>VLF@
ZDVSXWRXWWKHUHZLWKRXWVRPHERG\FKHFNLQJWKHSOXJ
ZKLFKLVH[DFWO\ZKDW,WKLQNWKH\>WKHMXU\@ZRXOGKDYH
GUDZQ
-$DW &RXQVHOIRU3ODLQWLIIZHQWRQWRH[SODLQWKDW
WKLVLVDUHVLSVDFDVH,WLVDER[LQWKHH[FOXVLYHFRQWURO
RIWKHGHIHQGDQWZKLFKKDGLWEHHQSXWRXWWKHUHZLWKWKH
VWDQGDUG RI FDUH UHTXLUHG ZRXOG QRW KDYH EHHQ
GDQJHURXV ,Q RWKHU ZRUGV LW FDXVHG EXW IRU WKH
QHJOLJHQFH RI WKH GHIHQGDQW WKLV XQGDQJHURXV ± QRW
QRUPDOO\ GDQJHURXV SURGXFW EHFDPH D GDQJHURXV
SURGXFW$QGWKDWLVWKHUHVLSVDLQVWUXFWLRQ,ZRXOG
VXEPLWWKDWLWLVDUHVLSVDFDVH
-$DW 6LPSO\VWDWHGWKURXJKWKHGRFWULQHRIUHVLSVD
ORTXLWXU3ODLQWLIIVRXJKWWRSURYHWKDW'HIHQGDQWEUHDFKHGWKH
GXW\RIFDUHRZHGWRKHUE\FUHDWLQJWKHGDQJHURXVFRQGLWLRQ
WKHZDWHURQWKHIORRULQIURQWRIWKHRSHQIUHH]HUSOXJZKLFK
WKHUHE\FDXVHGKHULQMXULHV
7KH GRFWULQH RI UHV LSVD ORTXLWXU LV ZHOO VWHHSHG LQ
7HQQHVVHHODZ6HH&DVHQEXUJY/HZLV6:G

-- 3 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
7HQQ 7KHGRFWULQHLVDUXOHRIHYLGHQFHQRWDUXOHRI
ODZ4XLQOH\Y&RFNH6:G 7HQQ
RYHUUXOHGRQRWKHUJURXQGV6HDYHUVY0HWKRGLVW0HG&WU
RI 2DN 5LGJH 6:G 7HQQ 7KDW LV WKH
GRFWULQHRIUHVLSVDORTXLWXULVLQWHQGHGWRDVVLVWDSODLQWLII
ZKR KDV QR GLUHFW HYLGHQFH RI D GHIHQGDQW¶V QHJOLJHQFH
3URYLGHQW/LIH $FFLGHQW,QV&RY3URI¶O&OHDQLQJ6HUY
,QF 6:G 7HQQ E\ SURYLGLQJ D
VSHFLDOL]HGYHKLFOHIRUFRQVLGHULQJFLUFXPVWDQWLDOHYLGHQFHLQ
QHJOLJHQFHFDVHV3RRU6LVWHUVRI6W)UDQFLVY/RQJ
6:G 7HQQ RYHUUXOHGRQRWKHUJURXQGV
6HDYHUV6:G7KHGRFWULQHDOORZVIRU³DQLQIHUHQFH
RIQHJOLJHQFHZKHUHWKHMXU\KDVDFRPPRQNQRZOHGJHRU
XQGHUVWDQGLQJ WKDW HYHQWV ZKLFK UHVXOWHG LQ WKH SODLQWLII¶V
LQMXU\GRQRWRUGLQDULO\RFFXUXQOHVVVRPHRQHZDVQHJOLJHQW´
6HDYHUV6:GDW FLWDWLRQVRPLWWHG ³7KHZHLJKWRI
DQ\ LQIHUHQFH WR EH GUDZQ IURP WKH HYLGHQFH LV IRU WKH
GHWHUPLQDWLRQRIWKHMXU\´6HDYHUV6:GDW FLWLQJ
)UDQNOLQY&ROOLQV&KDSHO&RQQHFWLRQDO+RVS6:G
7HQQ&W$SS
,Q6HDYHUVY0HWKRGLVW0HGLFDO&HQWHURI2DN5LGJHWKH
7HQQHVVHH6XSUHPH&RXUWVWDWHGWKDWLQRUGHUWRLQYRNHWKH
GRFWULQHRIUHVLSVDORTXLWXU³WKHSODLQWLIIPXVWGHPRQVWUDWH
WKDW KH RU VKH ZDV LQMXUHG E\ DQ LQVWUXPHQWDOLW\ WKDW ZDV
ZLWKLQWKHGHIHQGDQW¶VH[FOXVLYHFRQWURODQGWKDWWKHLQMXU\
ZRXOG QRW RUGLQDULO\ KDYH RFFXUUHG LQ WKH DEVHQFH RI
QHJOLJHQFH´ 6:G DW FLWLQJ 3URYLGHQW /LIH
$FFLGHQW ,QV &R 6:G DW 6XOOLYDQ Y
&UDEWUHH 6:G 7HQQ &W $SS
+RZHYHURYHUWKLUW\\HDUVEHIRUH6HDYHUVZDVGHFLGHGWKH
7HQQHVVHH6XSUHPH&RXUWVWURQJO\TXHVWLRQHGWKH³H[FOXVLYH
FRQWURO´HOHPHQWRIWKHDSSOLFDWLRQRIUHVLSVDORTXLWXU7KDW
LVLQ3URYLGHQW/LIH $FFLGHQW,QV6:GDW
KHUHLQDIWHU3URYLGHQW WKHFDVHXSRQZKLFK6HDYHUVUHOLHG
WKH 7HQQHVVHH 6XSUHPH &RXUW GLG LQGHHG SURYLGH WKH
GHILQLWLRQ RI UHV LSVD ORTXLWXU DV UHTXLULQJ WKDW WKH
LQVWUXPHQWDOLW\EHLQWKHH[FOXVLYHFRQWURORIWKHGHIHQGDQW
KRZHYHUWKLVGHILQLWLRQZDVMX[WDSRVHGDJDLQVWDGHILQLWLRQ
RI UHV LSVD ORTXLWXU ZKHUHLQ H[FOXVLYH FRQWURO ZDV QRW
0RUULVY:DO0DUW6WRUHV,QF 1R
UHTXLUHGLQRUGHUIRUWKHGRFWULQHWRDSSO\6HH6:GDW
6SHFLILFDOO\ WKH 3URYLGHQW FRXUW FRPSDUHG WKH
GHILQLWLRQVRIUHVLSVDORTXLWXUDVIROORZV
7KHUXOHRIUHVLSVDORTXLWXUKDVEHHQGHILQHGLQRXU
FDVHVLQWZRJHQHUDOZD\V,Q1RUWK0HPSKLV6DYLQJV
%DQNY8QLRQ%ULGJH &RQVWUXFWLRQ&R7HQQ
6: LWZDVGHILQHGWKXVO\
:KHUHWKHHYLGHQFHVKRZVDQLQMXU\LQIOLFWHGDQG
DOVRWKHSK\VLFDOWKLQJLQIOLFWLQJLWDQGWKDWWKLQJ
GRHVQRWXVXDOO\RULQWKHRUGLQDU\FRXUVHSURGXFH
VXFKDUHVXOWZKHUHGXHFDUHLVH[HUFLVHGE\WKRVHLQ
FKDUJH RI LW LW PD\ EH LQIHUUHG WKDW WKRVH VR LQ
FKDUJH RI WKH WKLQJ LQIOLFWLQJ WKH LQMXU\ IDLOHG WR
H[HUFLVHVXFKGXHFDUHWKDWLVWKDWWKH\ZHUHJXLOW\
RIQHJOLJHQFH
7KH VHFRQG JHQHUDO GHILQLWLRQ LV IRXQG LQ WKH FDVH RI
6XOOLYDQ Y &UDEWUHH 7HQQ $SS
6:G
μ>:@KHUHWKHWKLQJ>FDXVLQJWKHKDUP@LVVKRZQWREH
XQGHUWKHPDQDJHPHQWRIGHIHQGDQWRUKLVVHUYDQWV
DQGWKHDFFLGHQWLVVXFKDVLQWKHRUGLQDU\FRXUVHRI
WKLQJV GRHV QRW KDSSHQ LI WKRVH ZKR KDYH WKH
PDQDJHPHQWXVHSURSHUFDUHLWDIIRUGVUHDVRQDEOH
HYLGHQFH LQ WKH DEVHQFH RI H[SODQDWLRQ E\ WKH
GHIHQGDQWV WKDW WKH DFFLGHQW DURVH IURP ZDQW RI
FDUH¶
3URYLGHQW6:GDW DOWHUDWLRQVLQ3URYLGHQW
6LJQLILFDQWO\ DIWHU SURYLGLQJ WKHVH WZR GHILQLWLRQV WKH
3URYLGHQWFRXUWZHQWRQWRQRWHWKDW³PDQ\DFDGHPLFLDQV´
VXFK DV 3URVVHU IRXQG IDXOW ZLWK WKH ZRUG ³FRQWURO´ ZKHQ
GHILQLQJ UHV LSVD ORTXLWXU DQG VSHFLILFDOO\ ORRNHG WR WKH
5HVWDWHPHQW 6HFRQG RQ7RUWVLQILQGLQJ³FRUURERUDWLRQRI
3URVVHU¶VLGHDWKDWFRQWUROLQWKHGHIHQGDQWLVQRWDQHFHVVDU\
HOHPHQWRIWKHGHILQLWLRQ>RIUHVLSVDORTXLWXU@´3URYLGHQW

-- 4 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
6:G DW %RUURZLQJ IURP WKH 5HVWDWHPHQW
6HFRQG WKH3URYLGHQWFRXUWRSLQHG
,W LV QRW KRZHYHU QHFHVVDU\ WR WKH LQIHUHQFH >RI
QHJOLJHQFH@ WKDW WKH GHIHQGDQW KDYH VXFK H[FOXVLYH
FRQWURO DQG H[FOXVLYH FRQWURO LV PHUHO\ RQH ZD\ RI
SURYLQJKLVUHVSRQVLELOLW\+HPD\EHUHVSRQVLEOHDQG
WKHLQIHUHQFHPD\EHGUDZQDJDLQVWKLPZKHUHKHVKDUHV
FRQWUROZLWKDQRWKHUZKHUHKHLVXQGHUDGXW\WRWKH
SODLQWLIIZKLFKKHFDQQRWGHOHJDWHWRDQRWKHU>DQG@
ZKHUHKHLVXQGHUDGXW\WRFRQWUROWKHFRQGXFWRIDWKLUG
SHUVRQ,WPD\EHHQRXJKWKDWWKHGHIHQGDQWZDV
IRUPDOO\LQFRQWURO([FOXVLYHFRQWUROLVPHUHO\RQH
IDFWZKLFKHVWDEOLVKHVWKHUHVSRQVLELOLW\RIWKHGHIHQGDQW
DQGLILWFDQEHHVWDEOLVKHGRWKHUZLVHH[FOXVLYHFRQWURO
LVQRWHVVHQWLDOWRDUHVLSVDORTXLWXUFDVH7KHHVVHQWLDO
TXHVWLRQEHFRPHVRQHRIZKHWKHUWKHSUREDEOHFDXVHLV
RQHZKLFKWKHGHIHQGDQWZDVXQGHUDGXW\WRWKHSODLQWLII
WRDQWLFLSDWHRUJXDUGDJDLQVW
6:GDW TXRWLQJ5HVWDWHPHQW 6HFRQG 7RUWV
†G +DYLQJUHFRJQL]HGWKHWZRGHILQLWLRQVRIUHV
LSVDORTXLWXUDQGVSHFLILFDOO\WKHGLVWLQFWLRQEHWZHHQWKHWZR
GHILQLWLRQV²WKH GHIHQGDQW¶V H[FOXVLYH FRQWURO RYHU WKH
LQVWUXPHQWDOLW\WKH3URYLGHQWFRXUWHPEUDFHGWKHIROORZLQJ
³JHQHUDOUXOH´
7KH JHQHUDO UXOH IRU DOO FDVHV RI FLUFXPVWDQWLDO
HYLGHQFH±ERWK RUGLQDU\ FDVHV DQG UHV LSVD ORTXLWXU
FDVHV±LVWKDWWRPDNHRXWKLVFDVHSODLQWLIIGRHVQRWKDYH
WRHOLPLQDWHDOORWKHUSRVVLEOHFDXVHVRULQIHUHQFHVWKDQ
WKDW RI GHIHQGDQW¶V QHJOLJHQFH EXW LW LV HQRXJK LI WKH
HYLGHQFHIRUKLPPDNHVVXFKQHJOLJHQFHPRUHSUREDEOH
WKDQDQ\RWKHUFDXVH
6:GDW FLWDWLRQVRPLWWHG
7KXVDOWKRXJKLQ6HDYHUVWKH7HQQHVVHH6XSUHPH&RXUW
GHFLGHGWRFLWHDVFRQWUROOLQJODZRQHRIWKHGHILQLWLRQVRIUHV
LSVD ORTXLWXU SURYLGHG LQ 3URYLGHQW²WKH GHILQLWLRQ
LQFRUSRUDWLQJ WKH UHTXLUHPHQW RI ³H[FOXVLYH FRQWURO´ LW LV
0RUULVY:DO0DUW6WRUHV,QF 1R
FOHDUWKDWWKH³H[FOXVLYHFRQWURO´UHTXLUHPHQWZDVFULWLFL]HG
E\ WKH 3URYLGHQW FRXUW 6HH 6HDYHUV 6:G DW
3URYLGHQW 6:G DW ,QGHHG VLQFH 6HDYHUV
ZKLOH³H[FOXVLYHFRQWURO´KDVEHHQUHFRJQL]HGDVDIDFWRULQ
WKHDSSOLFDWLRQRIWKHUHVLSVDORTXLWXUGRFWULQHLWKDVDOVR
EHHQQRWHGWKDW
>W@KH ³H[FOXVLYH FRQWURO´ HOHPHQW RI WKH UHV LSVD
ORTXLWXUGRFWULQHLIUHDGWRROLWHUDOO\LVRYHUO\UHVWULFWLYH
5HV LSVD ORTXLWXU FDQQRW EH DSSOLHG XQOHVV WKH
FLUFXPVWDQFHV VXUURXQGLQJ WKH LQMXU\ LQGLFDWH WKDW WKH
FDXVDOQHJOLJHQFHZDVSUREDEO\WKHGHIHQGDQW¶VQRWWKDW
RIDQRWKHUSHUVRQ(YLGHQFHWKDWWKHSODLQWLIIZDVLQMXUHG
E\ DQ LQVWUXPHQWDOLW\ WKDW ZDV ZLWKLQ WKH GHIHQGDQW¶V
H[FOXVLYHFRQWURODWWKHWLPHLVVXIILFLHQWIRUWKLVSXUSRVH
+RZHYHUSURYLQJDGHIHQGDQW¶VH[FOXVLYHFRQWURORIDQ
LQVWUXPHQWDOLW\ZKHQDQLQMXU\RFFXUVLVQRWWKHRQO\ZD\
WR GHPRQVWUDWH WKH GHIHQGDQW¶V UHVSRQVLELOLW\ IRU WKH
QHJOLJHQFH 7HQQHVVHH¶V FRXUWV GR QRW YLHZ
³H[FOXVLYHFRQWURO´DVLQGLVSHQVDEOHWRWKHDSSOLFDWLRQRI
WKHUHVLSVDORTXLWXUGRFWULQH
%XUWRQY:DUUHQ)DUPHUV&RRS:/DW
7HQQ&W$SS6HSW FLWDWLRQVRPLWWHG
7KH %XUWRQ FRXUW DOVR UHFRJQL]HG WKDW ³>W@KH UHV LSVD
ORTXLWXUGRFWULQHLVSULPDULO\XVHIXOLQMXU\WULDOV´LQDVPXFK
DV LW ³SURYLGHV D WULDO FRXUW ZLWK WKH IUDPHZRUN IRU
GHWHUPLQLQJZKHWKHUWKHSODLQWLII¶VHYLGHQFHHQWLWOHVKLPRU
KHUWRJHWWRWKHMXU\´,G FLWDWLRQVRPLWWHG ,QWKLVUHJDUG
WKHFRXUWRSLQHG
7KHUROHRIWKHWULDOFRXUWLVWRGHWHUPLQHZKHWKHUWKH
SODLQWLII¶VHYLGHQFHLVVXIILFLHQWWRSHUPLWDUHDVRQDEOH
SHUVRQWRLQIHUIURPWKHFLUFXPVWDQFHVWKDWQHJOLJHQFH
DWWULEXWDEOHWRWKHGHIHQGDQWFDXVHGWKHSODLQWLII¶VLQMXU\
,IWKHDQVZHULVQRWKHWULDOFRXUWPD\GLUHFWDYHUGLFWIRU
WKHGHIHQGDQW,IWKHDQVZHULV\HVWKHQWKHSODLQWLIIFDQ
ZHDWKHUDPRWLRQIRUGLUHFWHGYHUGLFWDQGWKHFDVHZLOO
EH VXEPLWWHG WR WKH MXU\ IRU LW WR GHFLGH ZKHWKHU WR

-- 5 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
FKRRVHWKHLQIHUHQFHRIWKHGHIHQGDQW¶VFDXVDOQHJOLJHQFH
RUVRPHRWKHUSHUPLVVLEOHRUUHDVRQDEOHLQIHUHQFH
,G FLWDWLRQVDQGIRRWQRWHVRPLWWHG 7KHFRXUWIXUWKHURSLQHG
LQWKLVUHJDUGWKDWDWULDOFRXUWPD\GHFOLQHWRVXEPLWDFODLP
EDVHGRQUHVLSVDORTXLWXUWKHRU\WRWKHMXU\³ LIWKHUHLV
VLPSO\QRWHQRXJKH[SHULHQFHWRMXVWLI\DQLQIHUHQFHWKDWWKH
GHIHQGDQW¶VQHJOLJHQFHPRUHSUREDEO\WKDQQRWFDXVHGWKH
SODLQWLII¶VLQMXU\RU LILQWKHFRXUW¶VH[SHULHQFHLWZDVQRW
PRUH SUREDEOH WKDW WKH SODLQWLII¶V LQMXU\ ZDV FDXVHG E\
QHJOLJHQFH´,GDWQ FLWLQJ'DQ%'REEV7KH/DZRI
7RUWV†DW
$JDLQVWWKLVEDFNGURSRI7HQQHVVHHODZZHFRQFOXGHWKDW
WKH GLVWULFW FRXUW HUUHG LQ JUDQWLQJ 'HIHQGDQW¶V PRWLRQ IRU
MXGJPHQWDVPDWWHURIODZDWWKHFORVHRI3ODLQWLII¶VFDVHLQ
FKLHI:KHQFRQVWUXLQJWKHHYLGHQFH³PRVWIDYRUDEO\´IRU
3ODLQWLIIPDWHULDOHYLGHQFHZDVSUHVHQWHGWRVXSSRUWDYHUGLFW
IRU3ODLQWLIIDQGMXGJPHQWDVDPDWWHURIODZWKHUHIRUHVKRXOG
QRWKDYHEHHQHQWHUHGDJDLQVWKHU6HH&LW\RI&ROXPELD
6:GDW
$V3ODLQWLIIDUJXHGEHIRUHWKHGLVWULFWFRXUWEDVHGXSRQWKH
WHVWLPRQ\SUHVHQWHGDWWULDODUHDVRQDEOHMXU\FRXOGFRQFOXGH
WKDW'HIHQGDQWSODFHGWKHQHZVSRWER[IUHH]HULQWKHDLVOH
ZLWKRXWWKHSOXJSURSHUO\VHFXUHGWKHUHE\DOORZLQJZDWHUWR
OHDN IURP WKH IUHH]HU DQG WKXV FUHDWLQJ WKH GDQJHURXV
FRQGLWLRQ ZKLFK OHDG WR 3ODLQWLII¶V IDOO DQG LQMXU\ )RU
H[DPSOH 3ODLQWLII WHVWLILHG WKDW WKH VXEVWDQFH OLNHO\ ZDV
ZDWHUWKDWLWZDVGLUHFWO\LQIURQWRIWKHIUHH]HUSOXJDQGWKDW
LWIHOWFROGWRWKHWRXFK7HVWLPRQ\ZDVDOVRSUHVHQWHGWKDW
PDQDJHU.DQL]DUFRPPXQLFDWHGWR3ODLQWLIIDQG0RUULVWKDW
WKHVXEVWDQFHRQWKHIORRUOLNHO\ZDVZDWHUDQGWKDWLWKDG
OHDNHG IURP WKH VSRW ER[ IUHH]HU 7KH ZULWWHQ VWDWHPHQW
SURYLGHGE\3ODLQWLIIDQG0RUULVDWWKHVFHQHDOVRVXSSRUWHG
WKHFODLPWKDWWKHZDWHUXSRQZKLFK3ODLQWLIIVOLSSHGDQGIHOO
KDGEHHQOHDNLQJIURPWKHVSRWER[IUHH]HU.DQL]DUIXUWKHU
FRPPXQLFDWHG WR 3ODLQWLII DQG 0RUULV WKDW WKH VSRW ER[
IUHH]HUZDVQHZWKDWKHIHDUHGWKDWLWPD\QRWEHIXQFWLRQLQJ
SURSHUO\ DQG WKDW KH ZDV WKHUHIRUH JRLQJ WR LPPHGLDWHO\
0RUULVY:DO0DUW6WRUHV,QF 1R
UHPRYH WKH ER[ IURP WKH IORRU )LQDOO\ 'HIHQGDQW¶V
HPSOR\HH%DLUGZKRZLSHGXSWKHUHPDLQLQJZDWHUVWDWHG
WKDWWKHSXGGOHRIZDWHUZDVDERXWWHQLQFKHVLQGLDPHWHUDQG
³>U@LJKWWKHUHXQGHUWKHGUDLQRIWKHIUHH]HU´ -$DW
7KHGLVWULFWFRXUWIDLOHGWRYLHZWKLVHYLGHQFHDQGDOORILWV
SHUPLVVLEOHLQIHUHQFHV³PRVWIDYRUDEO\´IRU3ODLQWLIIZKHQLW
JUDQWHG'HIHQGDQW¶VPRWLRQIRUMXGJPHQWDVDPDWWHURIODZ
)RU H[DPSOH LQ FRQFOXGLQJ WKDW 3ODLQWLII¶V FDVH IDLOHG
LQDVPXFK DV 3ODLQWLII IDLOHG WR GHPRQVWUDWH WKDW WKH VSRW
IUHH]HU KDG EHHQ LQ 'HIHQGDQW¶V H[FOXVLYH FRQWURO IRU
SXUSRVHV RI LQYRNLQJ WKH GRFWULQH RI UHV LSVD ORTXLWXU WKH
GLVWULFWFRXUWORRNHGWRWKHXQLYHUVHRISRVVLELOLWLHVDVWRKRZ
WKHVSRWIUHH]HUPD\KDYHEHHQOHIWXQSOXJJHGDQGDOORZHGWR
OHDN7KHGLVWULFWFRXUWHUUHGLQWKLVUHJDUGLQDVPXFKDVWKH
3URYLGHQWFRXUWFOHDUO\LQVWUXFWVWKDW
>W@KH JHQHUDO UXOH IRU DOO FDVHV RI FLUFXPVWDQWLDO
HYLGHQFH±ERWK RUGLQDU\ FDVHV DQG UHV LSVD ORTXLWXU
FDVHV±LVWKDWWRPDNHRXWKLVFDVHSODLQWLIIGRHVQRWKDYH
WRHOLPLQDWHDOORWKHUSRVVLEOHFDXVHVRULQIHUHQFHVWKDQ
WKDW RI GHIHQGDQW¶V QHJOLJHQFH EXW LW LV HQRXJK LI WKH
HYLGHQFHIRUKLPPDNHVVXFKQHJOLJHQFHPRUHSUREDEOH
WKDQDQ\RWKHUFDXVH
6:G DW FLWDWLRQV RPLWWHG HPSKDVLV DGGHG
$QGDVWKH%XUWRQFRXUWLQVWUXFWVDWULDOFRXUWPD\QRWJUDQW
DGHIHQGDQW¶VPRWLRQIRUGLUHFWHGYHUGLFWLQDUHVLSVDORTXLWXU
FDVH LI ³WKH SODLQWLII¶V HYLGHQFH LV VXIILFLHQW WR SHUPLW D
UHDVRQDEOH SHUVRQ WR LQIHU IURP WKH FLUFXPVWDQFHV WKDW
QHJOLJHQFHDWWULEXWDEOHWRWKHGHIHQGDQWFDXVHGWKHSODLQWLII¶V
LQMXU\´ :/ DW FLWLQJ 5HVWDWHPHQW
6HFRQG RI7RUWV†'
$V QRWHG DERYH ZH ILQG WKDW 3ODLQWLII¶V HYLGHQFH
SDUWLFXODUO\ZKHQYLHZHGPRVWIDYRUDEO\IRU3ODLQWLIIZDV
VXIILFLHQW DOORZ D UHDVRQDEOH WULHU RI IDFW WR LQIHU WKDW
'HIHQGDQW¶VQHJOLJHQFHLQSODFLQJWKHQHZVSRWER[IUHH]HU
ZLWKRXWWKHSOXJSURSHUO\LQVHUWHGWKXVDOORZLQJZDWHUWROHDN
WKHUHIURPFUHDWHGWKHFRQGLWLRQZKLFKFDXVHG3ODLQWLIIWRIDOO
DQG EH LQMXUHG 6LPSO\ VWDWHG WKH GLVWULFW FRXUW WRRN DQ

-- 6 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
³RYHUO\UHVWULFWLYH´DSSURDFKZKHQGHFLGLQJWKDWWKHVSRWER[
ZDV LQ WKH ³H[FOXVLYH FRQWURO´ RI 'HIHQGDQW DQG IDLOHG WR
YLHZWKHHYLGHQFHLQJHQHUDOPRVWIDYRUDEO\IRU3ODLQWLII6HH
LG 2I FRXUVH 'HIHQGDQW LV IUHH WR UHQHZ LWV PRWLRQ IRU
MXGJPHQWDVDPDWWHURIODZDWWKHFORVHRILWVSURRIVDQGLQ
OLJKWRIHYLGHQFHSUHVHQWHGE\'HIHQGDQWLWPD\EHSURSHUIRU
WKHGLVWULFWFRXUWWRJUDQWWKHPRWLRQDWWKDWWLPH6HHLGDW
Q+RZHYHUDWWKLVSRLQWRIWKHWULDOSURFHHGLQJVZHKROG
WKDWWKHGLVWULFWFRXUWHUUHGLQJUDQWLQJ'HIHQGDQW¶VPRWLRQIRU
MXGJPHQWDVDPDWWHURIODZ
7KH QHJOLJHQFH FDVHV FLWHG DW OHQJWK E\ WKH GLVVHQW DUH
OHJDOO\DQGIDFWXDOO\GLVWLQJXLVKDEOHIURPWKHFDVHEHIRUHXV
DQG WKXV GR QRWKLQJ WR FRPPDQG D GLIIHUHQW RXWFRPH
6SHFLILFDOO\WKH7HQQHVVHHFDVHVFLWHGE\WKHGLVVHQWVXSSRUW
WKHSURSRVLWLRQWKDWH[FOXVLYHFRQWURORYHUDQLQVWUXPHQWDOLW\
LV UHTXLUHG LQ RUGHU WR VDWLVI\ UHV LSVD ORTXLWXU +RZHYHU
ZKHUHWKHFRUUHFWQHVVRIJUDQWLQJDPRWLRQIRUMXGJPHQWDVD
PDWWHURIODZLVDWLVVXHLWLVLQDSSURSULDWHWRFRQFOXGHWKDW
UHVLSVDORTXLWXUGRHVQRWDSSO\ZKHQIDFWXDOGLVSXWHVUHPDLQ
DV WR KRZ WKH DFFLGHQW RFFXUUHG DQG ZKHWKHU WKH
LQVWUXPHQWDOLW\ZDVLQWKHGHIHQGDQW¶VFRQWURO%HFDXVHVXFK
IDFWXDOGLVSXWHVUHPDLQLQWKLVFDVHWKHDSSOLFDWLRQRIUHVLSVD
ORTXLWXULVDTXHVWLRQIRUWKHMXU\WRGHFLGH
&21&/86,21
)RUWKHDERYHVWDWHGUHDVRQVZH5(9(56(WKHGLVWULFW
FRXUW¶VMXGJPHQWJUDQWLQJ'HIHQGDQW¶VPRWLRQIRUMXGJPHQW
DVDPDWWHURIODZDQG5(0$1'WKHPDWWHUIRUWULDO
0RUULVY:DO0DUW6WRUHV,QF 1R
BBBBBBBBBBBBBBBBB
',66(17
BBBBBBBBBBBBBBBBB
.583$16.<&LUFXLW-XGJHGLVVHQWLQJ,QWKLVVOLSDQG
IDOO FDVH WKH SDQHO PDMRULW\ KDV GHWHUPLQHG WKDW 6DQGUD
0RUULVKDVSURYHGQHJOLJHQFHSXUVXDQWWRWKHGRFWULQHRIUHV
LSVDORTXLWXUWRUHYHUVHWKHGLVWULFWFRXUW¶VDZDUGRIMXGJPHQW
DVDPDWWHURIODZWRVWRUHRZQHU:DO0DUW8QIRUWXQDWHO\
WKHPDMRULW\¶VFRQFOXVLRQGLVUHJDUGVWKHFRQWUROOLQJZHLJKW
RIH[LVWLQJ7HQQHVVHHODZDSSO\LQJWKHGRFWULQHRIUHVLSVD
ORTXLWXU WR FLUFXPVWDQFHV ZKHUH WKH LQVWUXPHQWDOLW\ WKDW
FDXVHGLQMXU\ZDVSXUSRUWHGO\XQGHUWKHH[FOXVLYHFRQWURODQG
PDQDJHPHQWRIWKHGHIHQGDQWDQGZKHUHWKHLQMXU\ZRXOGQRW
KDYH RFFXUUHG LQ WKH RUGLQDU\ FRXUVH RI HYHQWV LI WKH
GHIHQGDQWKDGXVHGUHDVRQDEOHFDUHDQGZKHUHWKHGHIHQGDQW
IDLOHGWRRIIHUDQH[SODQDWLRQRUSURRIWKDWWKHLQMXU\ZDVQRW
FDXVHG E\ WKH GHIHQGDQW¶V H[HUFLVH RI GXH FDUH RYHU DQ
LQVWUXPHQWDOLW\ LW SXUSRUWHGO\ H[FOXVLYHO\ FRQWUROOHG
$FFRUGLQJO\,UHVSHFWIXOO\GLVVHQW
0UV0RUULVDYHUUHGWKDWZKLOHVKRSSLQJZLWKKHUKXVEDQG
LQWKHIUR]HQIRRGVHFWLRQRID6DP¶V&OXEVWRUHVKHVOLSSHG
DQGIHOOLQZDWHUSXGGOHGQHDUWKHRSHQGUDLQSOXJRIDGLVSOD\
FRROHU7KHGLVWULFWFRXUWUHMHFWHGDVKLJKO\VSHFXODWLYHWKH
SODLQWLII¶VDVVHUWLRQWKDWWKHFRROHUKHUHLQLVVXHZKLFKZDV
ORFDWHG LQ D KLJKWUDIILF SXEOLF DUHD ZLWKLQ D VHOIVHUYLFH
FRPPHUFLDOVSDFHZDVH[FOXVLYHO\FRQWUROOHGE\GHIHQGDQW
FRQFOXGLQJWKDWVXFKFDXVDOXQFHUWDLQW\FRXOGQRWEULQJWKH
FODLP ZLWKLQ WKH RUELW RI UHV LSVD ORTXLWXU 6SHFLILFDOO\
SODLQWLII¶V LQDELOLW\ WR SURYH WKDW :DO0DUW H[HUFLVHG
H[FOXVLYHFRQWURORIWKHFRROHUZDVIDWDOWRKHUSULPDIDFLH
FDVHGLVDOORZLQJWKHDSSOLFDWLRQRIWKHUHGXFHGHYLGHQWLDU\
EXUGHQDIIRUGHGE\WKHGRFWULQHRIUHVLSVDORTXLWXU
5HO\LQJRQ3URYLGHQW/LIH $FF,QV&RY3URIHVVLRQDO
&OHDQLQJ6HUYLFH,QF6:G 7HQQ WKH
PDMRULW\KDVDUJXHGWKDWLWLVHQRXJKIRUWKHDSSOLFDWLRQRIUHV
LSVD ORTXLWXU WKDW :DO0DUW PRUH SUREDEO\ WKDQ QRW
FRQWUROOHGWKHLQVWUXPHQWDOLW\WKDWFDXVHG0UV0RUULV¶LQMXU\

-- 7 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
&RQWUDU\ WR WKH PDMRULW\¶V VXJJHVWLRQ RI D WUHQG DZD\ IURP WKH
UHTXLUHPHQW RI H[FOXVLYH FRQWURO LQ UHV LSVD FODLPV WKH VWDWH RI 7HQQHVVHH
KDV FRGLILHG UHV LSVD ORTXLWXU IRU PDOSUDFWLFH DFWLRQV LQ 7&$ †
F
,Q D PDOSUDFWLFH DFWLRQ DV GHVFULEHG LQ VXEVHFWLRQ D RI WKLV
VHFWLRQ WKHUH VKDOO EH QR SUHVXPSWLRQ RI QHJOLJHQFH RQ WKH SDUW
RI WKH GHIHQGDQW 3URYLGHG KRZHYHU WKHUH VKDOO EH D UHEXWWDEOH
7KH PDMRULW\ UHDFKHV WKDW FRQFOXVLRQ ZLWKRXW FRQVLGHULQJ
VHYHUDO GHFLVLRQV RI WKH 7HQQHVVHH FRXUWV PDQGDWLQJ D
VWULQJHQWSURRIUHTXLUHPHQWRIH[FOXVLYHFRQWURODVDVKLHOG
DJDLQVWXQUHDVRQDEOHMXU\VSHFXODWLRQLQFDVHVVXFKDVWKH
RQH EHIRUH WKLV DSSHOODWH SDQHO SUHGLFDWHG RQ VFDQW
FLUFXPVWDQWLDO HYLGHQFH RI FDXVDO LQMXU\ LQ D EXV\ SXEOLF
DUHQD 3URYLGHQW /LIH LV LQDSSRVLWH WR WKH LQVWDQW FDVH
LQYROYLQJDVLWGLGWKHTXHVWLRQRIZKHWKHUDFOHDQLQJVHUYLFH
WKHVROHRFFXSDQWVRIDFORVHGRIILFHEXLOGLQJDWSP
KDGQHJOLJHQWO\VWDUWHGDILUHLQDQHOHYDWRUWUDVKFDQZKLOH
SHUIRUPLQJ LWV FOHDQLQJ GXWLHV &RQWUDU\ WR WKH SUHVHQW
GLVSXWHWKHFRQFOXVLRQWKDWWKHFOHDQLQJVHUYLFHLQ3URYLGHQW
/LIH KDG H[FOXVLYH FRQWURO RI WKH WUDVKFDQV LQYROYHG QR
VSHFXODWLRQ &RQVHTXHQWO\ WKH PDMRULW\¶V DSSOLFDWLRQ RI
3URYLGHQW/LIHWRWKHLQVWDQWFDVHKDVLPSUXGHQWO\UHOHDVHG
0RUULVIURPWKHQHFHVVDU\EXUGHQRISURYLQJDFDXVDOQH[XV
EHWZHHQ WKH RIIHQGLQJ FRROHU DQG GHIHQGDQW¶V DOOHJHG
QHJOLJHQFH
5HV LSVD ORTXLWXU LV D IRUP RI FLUFXPVWDQWLDO HYLGHQFH
DOORZLQJDSODLQWLIIXSRQSURRIRIDSULPDIDFLHFDVHWRLQIHU
WKHGHIHQGDQW¶VQHJOLJHQFHIURPWKHRFFXUUHQFHRIDQLQMXU\
4XLQOH\Y&RFNH6:G 7HQQ FRQVLGHULQJ
WKH UHV LSVD μGRFWULQH¶ DV RQH RI HYLGHQFH DQG QRW RI
VXEVWDQWLYH ODZ 6HDYHUV Y 0HWKRGLVW 0HG &WU RI 2DN
5LGJH 6: G 7HQQ +RZHYHU D MXU\
FDQQRWSUHVXPHDGHIHQGDQW¶VQHJOLJHQFHIURPWKHIDFWRIDQ
LQMXU\ DORQH ,G $SSOLFDWLRQ RI WKH GRFWULQH UHTXLUHV WKH
LQMXU\ WRKDYHEHHQFDXVHGE\VRPH³WKLQJ´ XQGHUWKH
H[FOXVLYH FRQWURO RI WKH GHIHQGDQW DQG ZKLFK E\ LWV
QDWXUH GRHV QRW RUGLQDULO\ UHVXOW LQ LQMXU\ ZKHQ PDQDJHG
FDUHIXOO\$UPHVY+XOHWW6:G 7HQQ&W
0RUULVY:DO0DUW6WRUHV,QF 1R
SUHVXPSWLRQ WKDW WKH GHIHQGDQW ZDV QHJOLJHQW ZKHUH LW LV VKRZQ
E\ WKH SURRI WKDW WKH LQVWUXPHQWDOLW\ FDXVLQJ LQMXU\ ZDV LQ WKH
GHIHQGDQW¶V RU GHIHQGDQWV¶ H[FOXVLYH FRQWURO DQG WKDW WKH
DFFLGHQW RU LQMXU\ ZDV RQH ZKLFK RUGLQDULO\ GRHVQ¶W RFFXU LQ WKH
DEVHQFH RI QHJOLJHQFH
HPSKDVLV DGGHG
$SS DIILUPLQJVXPPDU\MXGJPHQWIRUGHIHQGDQWDQG
ILQGLQJUHVLSVDORTXLWXULQDSSOLFDEOHZKHUHWKHGHIHFWLYHSLSH
ZDV QRW XQGHU WKH PDQDJHPHQW RU FRQWURO RI GHIHQGDQW
SOXPEHU ,I WKH SODLQWLII¶V LQMXU\ FRXOG UHDVRQDEO\ KDYH
RFFXUUHGHYHQZLWKRXWWKHGHIHQGDQW¶VQHJOLJHQFHWKHQWKH
GRFWULQHLVLQDSSOLFDEOH&RFNUXPY6WDWH6:G
7HQQ &W $SS %URZQ Y 8QLYHUVLW\ 1XUVLQJ
+RPH,QF6:G 7HQQ&W$SS
$VDPHDQVRIDYRLGLQJMXU\VSHFXODWLRQ7HQQHVVHHFRXUWV
KDYHDGKHUHGWRWKHUXOHWKDWVROHFRQWUROE\WKHGHIHQGDQWRI
WKH DOOHJHGO\ RIIHQGLQJ LQVWUXPHQWDOLW\ LV DQ ³HVVHQWLDO
HOHPHQWRIWKHUHVLSVDORTXLWXUGRFWULQH´7RZOHY3KLOOLSV
6:G 7HQQ VXVWDLQLQJGHIHQGDQW¶V
PRWLRQIRUDGLUHFWHGYHUGLFWLQDQDLUSODQHDFFLGHQWLQZKLFK
WKHSODQHSURYLGHGGXDOFRQWUROVWKXVEDUULQJWKHDSSOLFDWLRQ
RIUHVLSVDORTXLWXU :LWKLQWKHFRQWH[WRIUHVLSVDORTXLWXU
LWLVQRWQHFHVVDU\WKDWWKHGHIHQGDQWKDYHFRQWURORIWKH
>REMHFW@DWWKHWLPHRIWKHLQMXU\EXWLWLVVXIILFLHQWLIKH
KDGH[FOXVLYHFRQWUROZKHQWKHDFWVDSSDUHQWO\FDXVLQJ
WKHLQMXU\RFFXUUHGSURYLGHGWKHSODLQWLIIVKRZWKDWWKH
FRQGLWLRQ RI WKH >REMHFW@ RU LWV FRQWHQWV KDG QRW EHHQ
FKDQJHGDIWHULWOHIWWKHGHIHQGDQW¶VSRVVHVVLRQ
%R\NLQY&KDVH%RWWOLQJ:RUNV6:G 7HQQ
&W $SS GHFOLQLQJ WR ILQG H[FOXVLYH FRQWURO RYHU D
ERWWOH WKDW H[SORGHG ZKHQ UHPRYHG IURP DQ LFH ER[ LQ
GHIHQGDQW¶V UHVWDXUDQW DV FXVWRPHUV UHJXODUO\ VHUYHG
WKHPVHOYHVIURPWKHLFHER[DQGWKLUGSDUWLHVKDGDFFHVVWRWKH
LFHER[DQGLWVFRQWHQWV ,QWKHLQVWDQWFDVH0RUULVSURYLGHG
QR HYLGHQFH WKDW :DO0DUW KDG H[FOXVLYH FRQWURO RYHU WKH
FRROHU

-- 8 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
7HQQHVVHH FRXUWV KDYH UHFRJQL]HG WKH GRFWULQH RI UHV LSVD ORTXLWXU
³FDQQRW VHUYH DV D VXEVWLWXWH IRU SURRIEHFDXVH WKH SODLQWLII PXVW SODFH
WKH LQVWUXPHQWDOLW\ FDXVLQJ WKH KDUP XQGHU WKH H[FOXVLYH FRQWURO DQG
PDQDJHPHQW RI GHIHQGDQWV EHIRUH UHV LSVD ORTXLWXU DSSOLHV DW DOO´ *UHHU
Y /DZKRQ 6: G 7HQQ &W $SS TXRWLQJ
-RKQVRQ Y (O\ 6: G 7HQQ &W $SS $V WKH SODLQWLII
LQ WKH LQVWDQW FDVH KDV IDLOHG WR PHHW WKLV VWDQGDUG VKH FDQQRW XVH WKH UHV
LSVD GRFWULQH WR HVWDEOLVK SURRI WKDW LV DEVHQW $OORZLQJ RWKHUZLVH DV WKH
PDMRULW\ HQDEOHV UHPRYHV WKH QHFHVVLW\ RI GHPRQVWUDWLQJ IDXOW IURP WRUW
OLDELOLW\ DQG GRHV QRW FRPSRUW ZLWK WKH UXOH ODLG GRZQ E\ WKH 7HQQHVVHH
FRXUWV
$VLQ%R\NLQ:DO0DUW¶VFXVWRPHUVLQWKHFDVHVXEMXGLFH
KDGIXOODFFHVVWRWKHFRROHUDQGLWVFRQWHQWV0RUULVDYHUUHG
QR SURRI WKDW H[FOXGHG WKH SRVVLELOLW\ RI WKLUG SDUW\
LQWHUIHUHQFHLQGLVORGJLQJWKHFRROHU¶VGUDLQSOXJ0RUULVKDG
WKHEXUGHQRISURYLQJWKDWHLWKHUKHUDFWLRQVRUWKRVHRIDWKLUG
SDUW\ GLG QRW FRQWULEXWH WR RU FDXVH WKH DOOHJHG LQFLGHQW
$SSHOODQW GLG QRW PHHW WKLV EXUGHQ DQG FRQVHTXHQWO\ WKH
GLVWULFWFRXUWGLGQRWHUULQUHIXVLQJWRDSSO\WKHGRFWULQHRI
UHVLSVDORTXLWXU2¶%ULHQY6RXWKHUQ%HOO7HO 7HO&R
6:G 7HQQ&W$SS QRWLQJWKDWUHV
LSVDLVQRWDSSOLFDEOHWRDVOLSDQGIDOOFDVHDQGGLUHFWLQJD
YHUGLFWIRUWKHGHIHQGDQW
)URP WKH SODLQWLII¶V SURIIHUHG HYLGHQFH D MXU\ FRXOG QRW
UHDVRQDEO\ LQIHU WKDW :DO0DUW DFWHG QHJOLJHQWO\ <HW
ERRWVWUDSSLQJVXFKDQLQIHUHQFHDVWKHPDMRULW\KDVGRQHE\
ORZHULQJWKHVWDQGDUGRISURRIQHFHVVDU\IRUUHVLSVDORTXLWXU
³XQGHUPLQHV >WKH 6WDWH¶V@ V\VWHP RI WRUW OLDELOLW\ EDVHG RQ
IDXOW´ /DPE Y 6WDWH 1R 0&2$5&9
:/ 7HQQ&W$SS2FW $VWKH
GLVWULFWFRXUWQRWHGLQRUDOKHDULQJ0U0RUULV¶WHVWLPRQ\WKDW
KHREVHUYHGWKHSOXJWRWKHFRROHUQRWFRPSOHWHO\FORVHGIDOOV
VKRUWRIWKHQHFHVVDU\SURRIRIH[FOXVLYHFRQWURO
>K@HUH WKH MXU\ ZRXOG KDYH WR VSHFXODWH DV WR ZKHWKHU
6DP¶V&OXERULWVHPSOR\HHVUHPRYHGWKHSOXJRUIDLOHG
WRLQVHUWLWSURSHUO\,WLVMXVWDVUHDVRQDEOHDFRQFOXVLRQ
WKDWDFXVWRPHUFRXOGKDYHUHPRYHGLW7KLVVSRWIUHH]HU
ZDVDFFHVVLEOHWRFXVWRPHUVWKHSOXJZDVQHDUWKHEDVH
0RUULVY:DO0DUW6WRUHV,QF 1R
,Q 0HDGRZV Y 3DWWHUVRQ 6: G 7HQQ &W $SS
WKH SODLQWLII¶V H\H ZDV LQMXUHG LQ WKH FRXUVH RI VXUJHU\ 7KH FRXUW
GHWHUPLQHG WKDW WKH SODLQWLII IDLOHG WR HVWDEOLVK WKH QHFHVVDU\ SUHUHTXLVLWH
RI H[FOXVLYH FRQWURO E\ WKH RSHUDWLQJ SK\VLFLDQ WR DOORZ IRU WKH
DSSOLFDWLRQ RI WKH GRFWULQH RI UHV LSVD ORTXLWXU QRWLQJ WKDW EULQJLQJ WKH
FDVH EHIRUH D MXU\ ³ZRXOG KDYH SHUPLWWHG WKH MXU\ WR VSHFXODWH DV WR
ZKHWKHU WKH LQMXU\ RFFXUUHG LQ WKH RSHUDWLQJ URRP ZKHUH DV ZH KDYH VHHQ
SODLQWLII ZDV XQGHU WKH FRQWURO RI GHIHQGDQW ZKHWKHU LW RFFXUUHG LQ WUDQVLW
IURP WKH RSHUDWLQJ URRP WR SODLQWLII¶V SULYDWH URRP RU RFFXUUHG DIWHU KH
ZDV OHIW LQ WKH FXVWRG\ RI WKH QXUVH´
RIWKHIUHH]HU,WZDVORZWRWKHJURXQG,WZDVLQWKH
UHDFKRIFKLOGUHQFKLOGUHQFRXOGKDYHUHPRYHGLW)RUDOO
,NQRZLWFRXOGKDYHHDVLO\EHHQEXPSHGE\DVKRSSLQJ
FDUW ZKHQ D FXVWRPHU WXUQHG WKH DLVOH DQG EHFDPH
GLVORGJHGLQWKLVPDQQHU
7HQQHVVHHFRXUWVKDYHORQJPDLQWDLQHGDFRQVLVWHQWUXOH
DJDLQVWMXU\VSHFXODWLRQLQWKHLUUHVLSVDORTXLWXUGHFLVLRQV
:KLOHMXULHVPD\GUDZLQIHUHQFHV7HQQHVVHHKDVUHFRJQL]HG
³DQLQIHUHQFHFDQEHGUDZQRQO\IURPWKHIDFWVLQHYLGHQFH
DQGFDQQRWEHEDVHGRQVXUPLVHVSHFXODWLRQFRQMHFWXUHRU
JXHVV´ %HQWRQ Y 6Q\GHU 6: G 7HQQ
³>1@RULVDMXU\SHUPLWWHGWRVSHFXODWHRUJXHVVDVWR
WKHSUR[LPDWHFDXVHRILQMXU\´0RRQY-RKQVWRQ6:
G 7HQQ $SS 9DOLG DQG UHDVRQDEOH
LQIHUHQFHVPXVWPDNH³WKHH[LVWHQFHRIWKHIDFWWREHLQIHUUHG
PRUHSUREDEOHWKDQWKHQRQH[LVWHQFHRIWKHIDFW´8QGHUZRRG
Y+&$+HDOWK6HUYVRI7HQQ,QF6:G
7HQQ&W$SS :KHQWZRHTXDOO\SRVVLEOHLQIHUHQFHV
H[LVWDMXU\FDQQRWHPSOR\DVWKHPDMRULW\RSLQLRQDOORZV
JXHVVZRUN VSHFXODWLRQ RU FRQMHFWXUH WR GHFLGH D FDVH
6WULQJHU Y&RRSHU6:G 7HQQ&W$SS
7KHSODLQWLIIEHDUVWKHEXUGHQRISURYLQJKHUFDVHDQG
ZKHQ WZR SUREDELOLWLHV DUH DW PRVW ³HYHQO\ EDODQFHG´ WKH
FRXUW PXVW GLUHFW D YHUGLFW IRU WKH GHIHQGDQW $V WKH
7HQQHVVHH6XSUHPH&RXUWREVHUYHGLQ/LQGVH\Y0LDPL'HY
&RUS6:G 7HQQ
7KHSODLQWLII PXVWLQWURGXFHHYLGHQFHZKLFKDIIRUGVD
UHDVRQDEOHEDVLVIRUWKHFRQFOXVLRQWKDWLWLVPRUHOLNHO\

-- 9 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
WKDQQRWWKDWWKHFRQGXFWRIWKHGHIHQGDQWZDVDFDXVHLQ
IDFWRIWKHUHVXOW$PHUHSRVVLELOLW\RIVXFKFDXVDWLRQLV
QRWHQRXJKDQGZKHQWKHPDWWHUUHPDLQVRQHRISXUH
VSHFXODWLRQRUFRQMHFWXUHRUWKHSUREDELOLWLHVDUHDWEHVW
HYHQO\ EDODQFHG LW EHFRPHV WKH GXW\ RI WKH FRXUW WR
GLUHFWDYHUGLFWIRUWKHGHIHQGDQW
TXRWLQJ 3URVVHU DQG .HHWRQ 7RUWV † DW WK HG
)XUWKHUPRUH³>F@RXUWVQHHGQRWVXEPLWWRWKHMXU\
QHJOLJHQFH FDVHV FRQWDLQLQJ RQO\ D VSDUN RU JOLPPHU RI
HYLGHQFH WKDW UHTXLUHV WKH ILQGHURIIDFW WR PDNH D OHDS RI
IDLWKWRILQGWKHGHIHQGDQWOLDEOHIRUWKHSODLQWLII¶VLQMXU\´
3VLOODV Y +RPH 'HSRW 86$ ,QF 6:G
7HQQ &W $SS JUDQWLQJ GHIHQGDQW¶V PRWLRQ IRU
VXPPDU\MXGJPHQWZKHUHWKHSODLQWLIIVIDLOHGWRGHPRQVWUDWH
WKDWWKHLUVRQZRXOGQRWKDYHEHHQLQMXUHGKDGLWQRWEHHQIRU
+RPH'HSRW¶VQHJOLJHQFHQRWLQJWKHSXEOLFFKDUDFWHURIWKH
SUHPLVHVDQGFRQILUPLQJWKHDYDLODELOLW\RIUHVLSVDLQIHUHQFH
RQO\ ZKHQ WKH LQVWUXPHQWDOLW\ WKDW FDXVHG WKH KDUP ZDV
ZLWKLQWKHGHIHQGDQW¶VH[FOXVLYHFRQWURO
7KHUHFRUGEHIRUHWKLVFRXUWLQGLFDWHGQRWKLQJPRUHWKDQ
WKHSRVVLELOLW\WKDWWKHGHIHQGDQWPLJKWKDYHKDGFRQWURORI
WKHFRROHU7KHSODLQWLIILQWURGXFHGQRHYLGHQFHWRDOOD\WKH
GLVWULFW FRXUW¶V UHDVRQDEOH FRQFHUQ IRU WKH HTXLYDOHQW
SRVVLELOLW\RIDOWHUQDWLYHFDXVHVIRUWKHSXGGOHRIZDWHUWKDW
SUHFLSLWDWHG SODLQWLII¶V LQMXU\ :LWKRXW DGGUHVVLQJ WKH
SRVVLEOH FRQWULEXWLRQ RI FXVWRPHU FRQGXFW LQ WKH VWRUH WKH
DSSHOODQW FRXOG QRW GHYHORS WKH QHFHVVDU\ SURRI RI
GHIHQGDQW¶VFRQWURORYHUWKHFRROHUDQGWKHGLVWULFWFRXUW¶V
GHWHUPLQDWLRQ PHUHO\ DFNQRZOHGJHG WKLV OHJDO LQDGHTXDF\
&RQWUDU\WRWKHPDMRULW\RSLQLRQ7HQQHVVHHFRXUWVUHFRJQL]H
WKDW LQ LQVWDQFHV VXFK DV WKH FDVH VXE MXGLFH SURRI RI
FDXVDWLRQHTXDWLQJWRDSRVVLELOLW\LVQRWVXIILFLHQWDVDPDWWHU
RIODZWRHVWDEOLVKWKHUHTXLUHGQH[XVEHWZHHQWKHSODLQWLII¶V
LQMXU\DQGWKHGHIHQGDQW¶VSUHVXPHGWRUWLRXVFRQGXFWE\D
SUHSRQGHUDQFHRIWKHHYLGHQFH/LQGVH\6:GDW
6HHDOVR:KLWHY0HWKRGLVW+RVS6RXWK6:G
7HQQ&W$SS &DXVDWLRQLQIDFWLVDPDWWHU
RISUREDELOLW\DQGDVWKHFRXUWLQ/LQGVH\DIILUPHGDPHUH
0RUULVY:DO0DUW6WRUHV,QF 1R
SRVVLELOLW\LVQRWDQDIILUPDWLYHEDVLVIRUDILQGLQJRIIDFW³,Q
WKH ODQJXDJH RI WKH ODZ RI HYLGHQFH WKDW ZKLFK LV PHUHO\
SRVVLEOH VWDQGLQJ DORQH DQG QRW RIIHUHG DV DX[LOLDU\ RU
UHEXWWDOWHVWLPRQ\LVLPPDWHULDOWRWKHDVFHUWDLQPHQWRIWKH
IDFWDQGVRLVLQDGPLVVLEOHDVHYLGHQFHRIWKDWIDFW´,G
,QWKHLQVWDQWFDVHWKHDSSHOODQWGLGQRWFDOODQ\:DO0DUW
DVVRFLDWHVWRWHVWLI\WKDWWKHSOXJZDVQRWSURSHUO\LQVHUWHG
QRU GLG VKH LQWURGXFH DQ\ H[SHUW WHVWLPRQ\ LQ DQ HIIRUW WR
SURYH WKDW :DO0DUW IDLOHG WR LQVXUH WKDW WKH GUDLQ ZDV
SURSHUO\SOXJJHG0RUHRYHUWKHDSSHOODQWGLGQRWSURYLGH
HYLGHQFHRIWKHOHQJWKRIWLPHWKHKD]DUGZDVSUHVHQWRQWKH
VWRUHIORRURURISULRURUFRQVWUXFWLYHNQRZOHGJHDPRQJ:DO
0DUWSHUVRQQHO)LQDOO\0RUULVSURGXFHGQRHYLGHQFHWKDWD
FXVWRPHU FRXOG QRW KDYH GLVORGJHG WKH SOXJ SULRU WR WKH
LQFLGHQW$VDUHVXOWWKHGLVWULFWFRXUWSURSHUO\FRQFOXGHG
WKDWDUHDVRQDEOHMXU\FRXOGQRWEHSHUPLWWHGWRVSHFXODWHWKDW
:DO0DUW¶VQHJOLJHQFHFUHDWHGWKHKD]DUG
7KHVDOLHQWIDFWVRIWKHFDVHVXEMXGLFHDUHDQDORJRXVWR
8QGHUZRRGY+&$+HDOWK6HUYLFHVRI7HQQHVVHH6:
G 7HQQ &W $SS 8QGHUZRRG EURXJKW D
QHJOLJHQFH DFWLRQ DJDLQVW WKH GHIHQGDQW FDIHWHULD DOOHJLQJ
LQMXU\ZKHQDQLFHGLVSHQVHUFRYHUVWUXFNKHU,GDW7KH
FRXUW DIILUPHG 8QGHUZRRG¶V GLUHFWHG YHUGLFW EHFDXVH WKH
SODLQWLII IDLOHG WR LQWURGXFH DQ\ SURRI WKDW WKH GHIHQGDQW¶V
HPSOR\HHV UDWKHU WKDQ WKH FXVWRPHUV DFFHVVLQJ WKH LFH
GLVSHQVHU FDXVHG WKH SDQHO WR EHFRPH GLVORGJHG ,Q D
VWDWHPHQWHFKRHGE\WKHGLVWULFWFRXUWLQWKHFDVHVXEMXGLFH
WKH8QGHUZRRGFRXUWQRWHGWKDW
,QRUGHUWRGHWHUPLQHWKDWWKHKRVSLWDOZDVQHJOLJHQWWKH
IDFWILQGHUZRXOGEHUHTXLUHGWRVSHFXODWHZKHWKHUWKH
KRVSLWDOHPSOR\HHVFUHDWHGWKHFRQGLWLRQRUZKHWKHULW
ZDVFDXVHGE\FDIHWHULDFXVWRPHUV,IWKHFRQGLWLRQZDV
FDXVHGE\FXVWRPHUVWKHIDFWILQGHUZRXOGEHUHTXLUHGWR
VSHFXODWHZKHWKHUWKHFRQGLWLRQKDGH[LVWHGORQJHQRXJK
WRKDYHEHHQGLVFRYHUHGDQGFRUUHFWHGKDGWKHKRVSLWDO
EHHQPDLQWDLQLQJWKHGLVSHQVHUSURSHUO\

-- 10 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
$V WKH PDMRULW\ KDV LQWHUSUHWHG 3URVVHU DQG .HHWRQ DV HQGRUVLQJ WKH
HIIRUW WR JHQHUDOO\ GLVSRVH RI WKH SODLQWLII¶V QHHG WR SURYH μH[FOXVLYH
FRQWURO¶ LW LV LQVWUXFWLYH WR UHPHPEHU WKHLU μKRUQERRN¶ FRQYH\V D PRUH
VREHU YLHZ RI WKH GLVSRVLWLRQ RI FDVHV VXFK DV WKH RQH DW KDQG $V 3URVVHU
DQG .HHWRQ H[SODLQ
WKHUH DUH PDQ\ DFFLGHQWV ZKLFK DV D PDWWHU RI FRPPRQ
NQRZOHGJH RFFXU IUHTXHQWO\ HQRXJK ZLWKRXW DQ\RQH¶V
IDXOW>$@Q RUGLQDU\ VOLS DQG IDOOZLOO QRW LQ >LWVHOI@ MXVWLI\ WKH
FRQFOXVLRQ WKDW QHJOLJHQFH LV WKH PRVW OLNHO\ H[SODQDWLRQ DQG WR
VXFK HYHQWV UHV LSVD ORTXLWXU GRHV QRW DSSO\´ 3URVVHU .HHWRQ
7RUWV WK HG † S
$ PRUH UHFHQW WUHDWLVH HFKRHV WKH XQVXLWDELOLW\ RI DSSO\LQJ UHV LSVD WR VOLS
DQG IDOO FDVHV VXFK DV WKH LQVWDQW GLVSXWH XQDEOH WR PXVWHU HYLGHQFH WR
DUULYH DW WKH FRQFOXVLRQ WKDW QHJOLJHQFH H[SODLQV WKH FDXVH
³>6@RPH IDFW SDWWHUQV VHHP WR EH JHQHUDOO\ LQDSSURSULDWH IRU UHV
LSVD &RXUWV XVXDOO\ WKLQN WKDW WKH GHIHQGDQW¶V QHJOLJHQFH LV QRW
D VXIILFLHQWO\ OLNHO\ H[SODQDWLRQ RI HYHQWV ZKHQ WKH SODLQWLII DV
DQ LQYLWHH LQ WKH GHIHQGDQW¶V SODFH RI EXVLQHVV IDOOV RQ D VOLSSHU\
VXEVWDQFH :LWKRXW PRUH HYLGHQFH WKH SRVVLELOLWLHV DUH WRR
VWURQJ WKDW WKH GHIHQGDQW ZDV QRW UHVSRQVLEOH IRU SODFLQJ WKH
VXEVWDQFH WKHUH DQG WKDW KH GLG QRW KDYH WLPH WR GLVFRYHU LW DQG
PDNH LW VDIH VR VSHFLILF HYLGHQFH RQ WKHVHV SRLQWV LV XVXDOO\
UHTXLUHG
'DQ % 'REEV 7KH /DZ RI 7RUWV † :KHUH WKH HYLGHQFH
LQGLFDWHG DV LW GLG KHUH WKDW GHIHQGDQW¶V KDG RQO\ UHFHQWO\ SODFHG WKH
FRROHU LQ WKH IUR]HQ IRRG VHFWLRQ RI WKH VWRUH WKH SRVVLELOLWLHV DUH HYHQ
,GDW7KHGLVWULFWFRXUWLQWKHLQVWDQWFDVHSURSHUO\
QRWHGWKDWUHVLSVDORTXLWXUVKRXOGQRWDSSO\LQWKHDEVHQFHRI
HYLGHQFHZKLFKZRXOGSUHYHQWDMXU\IURPKDYLQJWRVSHFXODWH
RYHUZKHWKHUWKHFRROHU¶VGUDLQSOXJKDGEHFRPHGLVORGJHGE\
DSSHOOHHDFXVWRPHUDFKLOGRUDVKRSSLQJFDUW
7KHPDMRULW\RSLQLRQLVFHUWDLQO\FRUUHFWLQLWVREVHUYDWLRQ
WKDW ³WKH GRFWULQH RI UHV LSVD ORTXLWXU LV ZHOO VWHHSHG LQ
7HQQHVVHH ODZ´ <HW FRQWUDU\ WR WKH PDMRULW\¶V SRVLWLRQ
7HQQHVVHHODZVXSSRUWVWKHJHQHUDOUXOHWKDWDSODLQWLIIPXVW
SURYH GHIHQGDQW KDG H[FOXVLYH FRQWURO RYHU WKH
LQVWUXPHQWDOLW\FDXVLQJKDUP,QGHHGVWUHWFKLQJEDFNPRUH
WKDQDKDOIFHQWXU\WKH7HQQHVVHHFRXUWVKDYHUHFRJQL]HGDV
SDUWLFXODUO\ LQDSSURSULDWH WKH DSSOLFDWLRQ RI UHV LSVD WR
FODLPVLQYROYLQJDUHDVRIμKLJKWUDIILF¶SXEOLFDFFHVVZLWKLWV
DWWHQGDQWFDXVDOXQFHUWDLQW\6HH6XVPDQY0LG6RXWK)DLU
0RUULVY:DO0DUW6WRUHV,QF 1R
VWURQJHU WKDW WKH GHIHQGDQW GLG QRW KDYH WLPH WR GLVFRYHU WKH OHDN
6:G 7HQQ JUDQWLQJPRWLRQIRUGLUHFWHG
YHUGLFW LQ FODLP RI LQMXU\ DW SXEOLF DPXVHPHQW SDUN DQG
REVHUYLQJWKDWWKHDSSOLFDWLRQRIUHVLSVDUHTXLUHGWKHUHEHQR
UHDVRQDEOHLQIHUHQFHEXWWKDWWKHLQMXU\FRPSODLQHGRIZDV
GXH WR GHIHQGDQW¶V QHJOLJHQFH DQG SURRI WKDW WKH
LQVWUXPHQWDOLW\FDXVLQJLQMXU\ZDVXQGHUWKHH[FOXVLYHFRQWURO
RIWKHGHIHQGDQW 2OLYHU*LOOY.URKQ1R,
:/DW 7HQQ&W$SS0DUFK DIILUPLQJ
MXU\ YHUGLFW IRU WKH GHIHQGDQW EXLOGHU LQ QHJOLJHQFH VXLW
EURXJKWE\KRPHRZQHUZKRVHGULYHZD\ZDVVXEVLGLQJDQG
ILQGLQJ QR EDVLV IRU D UHV LSVD LQIHUHQFH WKDW FDXVH RI
VXEVLGHQFHZDVZLWKLQGHIHQGDQW¶VH[FOXVLYHFRQWUROJLYHQWKH
QXPEHURIRWKHUFRQWUDFWRUVKDQGOLQJWKHVRLOZRUN -RQHVY
0HWUR(OHYDWRU&R1R:&2$5&9
:/ 7HQQ &W $SS 'HF DIILUPLQJ
LQDSSOLFDELOLW\ RI FKDUJH RI UHV LSVD ORTXLWXU IRU LQMXU\
DOOHJHGO\VXVWDLQHGE\SODLQWLIIZKLOHULGLQJHOHYDWRULQWKH
SXEOLF DUHD RI D EXLOGLQJ ZKHUH ODQGORUG GLG QRW KDYH
H[FOXVLYHFRQWURORYHUWKHHOHYDWRUVLQWKHEXLOGLQJDQGKDGQR
DFWXDORUFRQVWUXFWLYHNQRZOHGJHRI DQ\ GDQJHUDVVRFLDWHG
ZLWKWKHHOHYDWRU 6PLWKY&DVWQHU.QRWW'U\*RRGV&R
:/ 7HQQ &W $SS $SULO
DIILUPLQJVXPPDU\MXGJPHQWIRUGHIHQGDQWGHSDUWPHQWVWRUH
ILQGLQJ UHV LSVD ORTXLWXU LQDSSOLFDEOH IRU LQMXU\ VXVWDLQHG
ZKHQDPLUURUHGWLOHIHOODQGVWUXFNSODLQWLIIZKLOHVKRSSLQJ
FRQFOXGLQJWKDWHYLGHQFHIDLOHGWRLQGLFDWHGHIHQGDQW¶VFRQWURO
RYHU WKH REMHFW ZKHUH WKH WLOH FRXOG KDYH EHHQ GHIHFWLYHO\
PDQXIDFWXUHGRULPSURSHUO\LQVWDOOHG 0HDUVY+-+HLQ]
&R1R$&9:/ 7HQQ&W$SS
-DQ DIILUPLQJ GHIHQGDQW¶V DZDUG RI VXPPDU\
MXGJPHQWZKHUHWKHGHIHQGDQWDOOHJHGO\VXVWDLQHGDQLQMXU\
IURPHDWLQJGHIHQGDQW¶VVRXSLQDSXEOLFFDIHWHULDEHFDXVHWKH
GHIHQGDQW GLG QRW KDYH H[FOXVLYH FRQWURO RYHU WKH
LQVWUXPHQWDOLW\SUHSDUHGDQGNHSWRQWKHVWHDPWDEOHKRXUV
EHIRUHOXQFKDQGVHUYHGLQDFDIHWHULDFDWHULQJWRDWOHDVW
HPSOR\HHV +DZNLQVY2SU\ODQG86$,QF1R$
&9:/ 7HQQ&W$SS-XO\

-- 11 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
DIILUPLQJGHIHQGDQWSXEOLFWKHPHSDUN¶VPRWLRQIRU
VXPPDU\MXGJPHQWLQSODLQWLII¶VIDOOIURPDEURNHQFRQFUHWH
VWHSQRWLQJWKHGRFWULQHRIUHVLSVDGLGQRWDSSO\WRDSXEOLF
SODFHZKHQWKHDJHQF\FDXVLQJWKHLQMXU\ZDVQRWXQGHUWKH
GHIHQGDQW¶V H[FOXVLYH FRQWURO )HUJXVRQ Y 0HWURSROLWDQ
*RY¶WRI1DVKYLOOH:/ 7HQQ&W$SS$SULO
ILQGLQJUHVLSVDLQIHUHQFHLQDSSOLFDEOHZKHUHFKLOG
VOLSSHGDQGIHOORQWKHVWDLUVDWDSXEOLFVFKRROEHFDXVHWKH
LQVWUXPHQWDOLW\ ZDV QRW XQGHU WKH GHIHQGDQW¶V ³H[FOXVLYH
FRQWURO´ :LOVRQ Y 7DUJHW 6WRUHV ,QF :/
7HQQ&W$SS)HE UHIXVLQJ WR DSSO\UHVLSVD
ORTXLWXU ZKHUH SODLQWLII ZDV LQMXUHG LQ D VHOIVHUYLFH VWRUH
EHFDXVHWKHGHIHQGDQWGLGQRWKDYHH[FOXVLYHFRQWURORYHUWKH
GLVSOD\ LWHPV FDXVLQJ WKH LQMXU\ *UDYHV Y &RFD &ROD
&RPSDQ\:/ 7HQQ&W$SS DIILUPLQJ
DGLUHFWHGYHUGLFWIRUGHIHQGDQWZKHUHSODLQWLII¶VLQMXU\IURP
IDOOLQJ GLVSOD\ LQ D ³KLJK WUDIILF DUHD´ RI D GUXJ VWRUH ZDV
DFFHVVLEOH WR FXVWRPHUV DQG HPSOR\HHV DQG WKHUHIRUH QRW
XQGHU WKH H[FOXVLYH PDQDJHPHQW DQG FRQWURO RI WKH
GHIHQGDQW %R\DWWY<DQFH\6:G 7HQQ
&W$SS FRQFOXGLQJWKDWLWZDVHUURUIRUWKHWULDOFRXUW
QRWWRGLUHFWDYHUGLFWLQIDYRURIWKHGHIHQGDQWEHFDXVHUHV
LSVD ORTXLWXU ZDV XQDYDLODEOH WR FXVWRPHU LQMXUHG DW D JDV
SXPSXVHGUHJXODUO\E\RWKHUFXVWRPHUVDVWKHSXPSZDVQRW
XQGHU WKH H[FOXVLYH PDQDJHPHQW DQG FRQWURO RI WKH
GHIHQGDQW 6WLQQHWWY:ULJKW6:G 7HQQ&W
$SS DIILUPLQJDGLUHFWHGYHUGLFWIRUWKHGHIHQGDQWLQ
KROGLQJ WKH GRFWULQH RI UHV LSVD ORTXLWXU LQDSSOLFDEOH WR D
PDOIXQFWLRQLQJZDVKLQJPDFKLQHLQDSXEOLFODXQGU\QRWLQJ
WKDW SXEOLF DFFHVV WR WKH LQVWUXPHQWDOLW\ PDGH UHV LSVD
LQIHUHQFHXQVXLWDEOH
$V WKLV OLWDQ\ RI FDVHV VXJJHVW 7HQQHVVHH ODZ KDV ORQJ
GHPDQGHG WKDW SODLQWLIIV PXVW SURYH H[FOXVLYH FRQWURO WR
ZDUUDQWWKHLQYRFDWLRQRIUHVLSVDORTXLWXU&RQWUDU\WRWKH
PDMRULW\¶VFRQWHQWLRQUHJDUGLQJWKHGLVSRVLWLRQRIDGLUHFWHG
YHUGLFW6XVPDQ*UDYHV%R\DWWDQG6WLQQHWWHDFKLQGLFDWH
WKDWDGLUHFWHGYHUGLFWZDVOHJDOO\DSSURSULDWHZKHUHDVLQWKH
LQVWDQWFDVHWKHIDFWVVXSSRUWHGWKHFRQWHQWLRQWKDWWKHYHQGRU
RIDSXEOLFO\DFFHVVLEOHDQGIUHTXHQWO\WUDIILFNHGFRPPHUFLDO
0RUULVY:DO0DUW6WRUHV,QF 1R
8QGHU 7HQQHVVHH ODZ WR VXSSRUW D QHJOLJHQFH FODLP WKH SODLQWLII
PXVW SURYH WKH IROORZLQJ HOHPHQWV D GXW\ RI FDUH RZHG E\ WKH
GHIHQGDQW WR WKH SODLQWLII FRQGXFW IDOOLQJ EHORZ WKH VWDQGDUG RI FDUH
WKDW DPRXQWV WR D EUHDFK RI WKDW GXW\ DQ LQMXU\ RU ORVV FDXVH LQ
IDFW DQG SUR[LPDWH FDXVH 0F&OXQJ Y 'HOWD 6TXDUH /WG 3DUWQHUVKLS
HW DO 6: G 7HQQ
DUHQDGLGQRWSRVVHVVWKHH[FOXVLYHFRQWUROUHTXLUHGWRSURYH
UHVLSVDORTXLWXU
$GGLWLRQDOO\UHVLSVDORTXLWXUSHUWDLQVWRRQO\WZRRIWKH
ILYHHOHPHQWVRIDFRPPRQODZQHJOLJHQFHFODLP/DPEY
6WDWH :/ DW 7KH SODLQWLII PXVW VWLOO
SURYHWKDW GHIHQGDQWRZHGDGXW\DQGWKHFDXVHRIKHU
LQMXU\OD\ZLWKLQWKHDPELWRIWKDWGXW\ VKHVXIIHUHGDQ
LQMXU\DQG WKDWGHIHQGDQW¶VFRQGXFWZDVWKHOHJDOFDXVHRI
KHULQMXU\%XUWRQY:DUUHQ)DUPHUV&RRS1R0
&2$5&9 :/ DW 7HQQ &W
$SS6HSW 7HQQHVVHHFRXUWVKDYHGHILQHGWKHWHUP
³GXW\´DVWKHOHJDOREOLJDWLRQDGHIHQGDQWRZHVWRDSODLQWLII
WRFRQIRUPWRWKHUHDVRQDEOHSHUVRQVWDQGDUGRIFDUHLQRUGHU
WR SURWHFW DJDLQVW XQUHDVRQDEOH ULVNV RI KDUP 0F&DOO Y
:LOGHU6:G 7HQQ
,QWKHFRQWH[WRISUHPLVHVOLDELOLW\WKHSHUVRQLQFRQWURORI
WKHSUHPLVHVKDVWKHGXW\WRH[HUFLVHUHDVRQDEOHRUGLQDU\FDUH
E\ PDLQWDLQLQJ WKH VLWH LQ D UHDVRQDEO\ VDIH FRQGLWLRQ
UHPRYLQJRUZDUQLQJRIDQ\ODWHQWGDQJHURXVFRQGLWLRQVWKDW
WKHRZQHULVDZDUHRIRUVKRXOGKDYHEHHQDZDUHRIWKURXJK
UHDVRQDEOHGLOLJHQFH+XGVRQY*DLWDQ6:G
7HQQ VHHDOVR%ODLUY&DPSEHOO6:G
7HQQ $GHIHQGDQWEUHDFKHVWKDWGXW\ZKHUH
LW KDV FUHDWHG WKH GDQJHURXV FRQGLWLRQ RU KDG DFWXDO RU
FRQVWUXFWLYHNQRZOHGJHRIWKHFRQGLWLRQSULRUWRWKHDFFLGHQW
-RQHVY=D\UH,QF6:G 7HQQ&W$SS
3URYLQJ FRQVWUXFWLYH NQRZOHGJH UHTXLUHV HYLGHQFH
WKDWWKHGDQJHURXVFRQGLWLRQH[LVWHGIRUVXFKDOHQJWKRIWLPH
WKDWWKHGHIHQGDQWNQHZRULQWKHH[HUFLVHRIUHDVRQDEOHFDUH
VKRXOG KDYH NQRZQ RI LWV H[LVWHQFH SULRU WR WKH LQMXU\
SURGXFLQJ LQFLGHQW +DUGHVW\ Y 6HUYLFH 0HUFKDQGLVH

-- 12 of 13 --

1R 0RUULVY:DO0DUW6WRUHV,QF
&RPSDQ\,QF6:G 7HQQ&W$SS
UHIHUULQJWR6HOIY:DO0DUW6WRUHV,QF)G
WK&LU
3XUVXDQWWRFRQWUROOLQJ7HQQHVVHHSUHFHGHQW:DO0DUWGLG
QRWEUHDFKLWVGXW\WR0RUULVZKHUHWKHSODLQWLII¶VHYLGHQFH
IDLOHGWRGHPRQVWUDWHDQLQIHUHQFHRIGHIHQGDQW¶VDFWXDORU
FRQVWUXFWLYHQRWLFHRIWKHGDQJHURXVFRQGLWLRQ7KHDSSHOODQW
IDLOHGWRLQWURGXFHDQ\HYLGHQFHSURYLQJDFDXVDOFRQQHFWLRQ
EHWZHHQ :DO0DUW¶V DFWLRQV DQG WKH SXGGOH RQ WKH IORRU
0UV0RUULVDGPLWWHGWKDWVKHGLGQRWNQRZKRZWKHOLTXLG
JRW RQ WKH IORRU KRZ ORQJ LW ZDV WKHUH RQ WKH GDWH RI KHU
LQMXU\DQGGLGQRWSURYLGHDQ\HYLGHQFHWKDW:DO0DUWKDG
WDPSHUHGZLWKWKHSOXJRUWKDWDSSHOOHHKDGIDLOHGWRLQVHUWRU
FORVHWKHSOXJ0RUHRYHUSODLQWLII¶VLQVLVWHQFHWKDWWKHFRROHU
KDG EHHQ RQ WKH IORRU EXW D VKRUW ZKLOH IXUWKHU PLWLJDWHG
DJDLQVWILQGLQJDQ\DFWXDORUFRQVWUXFWLYHQRWLFHRIWKHGHIHFW
6HH3DUDGLVRY.URJHU&R6:G 7HQQ&W
$SS QRWLQJLQVOLSDQGIDOOFDVHWKDWWKHOHQJWKRIWLPH
D GDQJHURXV FRQGLWLRQ H[LVWHG LV RQO\ RQH IDFWRU LQ
GHWHUPLQLQJFRQVWUXFWLYHQRWLFHDORQJZLWKWKHQDWXUHRIWKH
EXVLQHVV LWVVL]HWKHQXPEHURISDWURQVWKHQDWXUHRIWKH
GDQJHULWVORFDWLRQDORQJZLWKWKHIRUHVHHDEOHFRQVHTXHQFHV
&RQVHTXHQWO\,UHVSHFWIXOO\GLVVHQWDQGZRXOGDIILUPWKH
GHFLVLRQRIWKHGLVWULFWFRXUW

-- 13 of 13 --

Continue your research in ChatGPT or Claude

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