02a0130p.06

5(&200(1'(' )25 3$57,$/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
5,&+$5' &22(<
3HWLWLRQHU$SSHOODQW
Y
5$/3+ &2</(:DUGHQ
5HVSRQGHQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ
1R²6DP+%HOO'LVWULFW-XGJH
$UJXHG-DQXDU\
'HFLGHGDQG)LOHG$SULO
%HIRUH68+5+(,15,&+6,/(5DQG*,/0$1&LUFXLW
-XGJHV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8('0DUJHU\0DONLQ.RRVHG6RXWK(XFOLG2KLRIRU
$SSHOODQW 0LFKDHO / &ROO\HU 2)),&( 2) 7+(
$77251(< *(1(5$/ 2) 2+,2 &$3,7$/ &5,0(6
6(&7,21 &OHYHODQG 2KLR IRU $SSHOOHH 21 %5,()
0DUJHU\0DONLQ.RRVHG6RXWK(XFOLG2KLR1DWKDQ$5D\
$NURQ2KLRIRU$SSHOODQW0LFKDHO/&ROO\HU2)),&(2)

-- 1 of 12 --

&RRH\Y&R\OH 1R
7+( $77251(< *(1(5$/ 2) 2+,2 &$3,7$/
&5,0(66(&7,21&OHYHODQG2KLRIRU$SSHOOHH
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
68+5+(,15,&+&LUFXLW-XGJH7KLVLVDQDSSHDOIURP
DMXGJPHQWGHQ\LQJ3HWLWLRQHU5LFKDUG&RRH\¶VSHWLWLRQIRU
ZULWRIKDEHDVFRUSXVXQGHU86&†:HGHWHUPLQH
WKDW&RRH\LVHQWLWOHGWRDFHUWLILFDWHRIDSSHDODELOLW\RQRQO\
WZRRIKLVFODLPV:HDOVRGHFLGHRQWKHPHULWVWKDW&RRH\
LVQRWHQWLWOHGWRUHOLHIDVWRHLWKHULVVXH
,%DFNJURXQG
$)DFWV
2QWKHQLJKWRI$XJXVW$SSHOODQW5LFKDUG:DGH
&RRH\ ,, RQ OHDYH IURP WKH DUP\ DQG WZR RI KLV IULHQGV
&OLQW'LFNHQVDQG.HQQHWK+RURQHW]WKUHZDODUJHFKXQNRI
FRQFUHWHRYHUWKHVLGHRIDEULGJHMXVWDV:HQG\2IIUHGRDQG
'DZQ0F&UHHU\ZHUHSDVVLQJEHORZDORQJ,QWHUVWDWHLQ
$NURQ2KLR7KHFRQFUHWHKLW:HQG\¶VFDUIRUFLQJKHUWR
SXOO RYHU 7KH PHQ ZHQW GRZQ DQG RIIHUHG D ULGH VR WKH
ZRPHQFRXOGFDOOIRUKHOS$IWHUGULYLQJWKHPWRDQHDUE\
PDOOWRXVHDWHOHSKRQHWKHPHQWRRNWKHZRPHQWRDILHOG
ZKHUHWKH\ZHUHUDSHGEHDWHQDQGPXUGHUHGE\&RRH\DQG
'LFNHQV7KHPHQDOVRVWROH:HQG\¶VMHZHOU\
7KH ERGLHV ZHUH IRXQG RQ 6HSWHPEHU 7KH 6XPPLW
&RXQW\&RURQHUFRQFOXGHGWKDW:HQG\DQG'DZQKDGGLHGRI
PXOWLSOH EORZV WR WKH KHDG:HQG\ UHFHLYHG DW OHDVW WKUHH
EORZV DQG 'DZQ DW OHDVW HOHYHQZLWK VWUDQJXODWLRQ DOVR
FRQWULEXWLQJWR:HQG\¶VGHDWK+HDOVRFRQFOXGHGWKDWERWK
ZRPHQKDGRUDODQGYDJLQDOLQWHUFRXUVHEHIRUHGHDWK

-- 2 of 12 --

1R &RRH\Y&R\OH
%3URFHGXUDO+LVWRU\
&RRH\ZDVLQGLFWHGRQ6HSWHPEHUZLWKWZRFRXQWV
RI DJJUDYDWHG PXUGHU LQ YLRODWLRQ RI 2KLR 5HY &RGH
†† $ DQG % LQFOXGLQJWKUHHVSHFLILFDWLRQV
RIDJJUDYDWLQJFLUFXPVWDQFHVLQYLRODWLRQRI2KLR5HY&RGH
†† $ $ DQG $ &RRH\
ZDV DOVR FKDUJHG ZLWK WZR FRXQWV RI NLGQDSSLQJ ZLWK WKH
SXUSRVH RI HQJDJLQJ LQ QRQFRQVHQVXDO VH[XDO DFWLYLW\ LQ
YLRODWLRQRI2KLR5HYLVHG&RGH† $ DQGWZRFRXQWV
RI DJJUDYDWHG UREEHU\ LQ YLRODWLRQ RI 2KLR 5HY &RGH
†† $ DQG $ /DVWO\KHZDVFKDUJHG
ZLWKRQHFRXQWRIIHORQLRXVDVVDXOWLQYLRODWLRQRI2KLR5HY
&RGH† $ IRUGURSSLQJWKHFKXQNRIFRQFUHWHRQ
:HQG\¶VFDU
&RRH\HQWHUHGDQRWJXLOW\SOHD&RRH\ZDLYHGKLVULJKWWR
WULDOE\MXU\DQGZDVWULHGE\DWKUHHMXGJHSDQHODFFRUGLQJWR
2KLR5HY&RGH††DQG7KHSDQHOIRXQG
&RRH\JXLOW\RIDOOFRXQWVDQGVSHFLILFDWLRQV
2Q'HFHPEHUWKHSDQHOFRQGXFWHGDPLWLJDWLRQ
KHDULQJSXUVXDQWWR2KLR5HY&RGH† & E 7KH
SDQHO UHWXUQHG D XQDQLPRXV YHUGLFW ILQGLQJ EH\RQG D
UHDVRQDEOH GRXEW WKDW WKH DJJUDYDWLQJ FLUFXPVWDQFHV
RXWZHLJKHG WKH PLWLJDWLQJ IDFWRUV DQG UHFRPPHQGHG WKH
GHDWK SHQDOW\ 7KH WZR DJJUDYDWHG PXUGHUV XQGHU
† $ ZHUHPHUJHGLQWRWKHWZRFRQYLFWLRQVXQGHU
2KLR5HY&RGH† % &RRH\ZDVVHQWHQFHGWRGHDWK
IRU HDFK PXUGHU DQG WR LPSULVRQPHQW IRU WKH VHYHQ RWKHU
IHORQLHV
&RRH\WLPHO\DSSHDOHGVHWWLQJIRUWKWKLUWHHQDVVLJQPHQWV
RI HUURU 7KH 2KLR &RXUW RI $SSHDOV XSKHOG &RRH\¶V
FRQYLFWLRQDQGVHQWHQFHRQ'HFHPEHU6HH6WDWHY
&RRH\ :/ 2KLR &W $SS 'HF
&RRH\DSSHDOHGWRWKH2KLR6XSUHPH&RXUWUDLVLQJWKLUW\
WKUHHLVVXHV2Q2FWREHUWKH2KLR6XSUHPH&RXUW
DIILUPHG&RRH\¶VFRQYLFWLRQDQGGHDWKVHQWHQFH6HH6WDWHY
&RRH\ 1(G 2KLR 7KH 8QLWHG 6WDWHV
6XSUHPH&RXUWGHQLHGFHUWLRUDULRQ$SULO

-- 3 of 12 --

&RRH\Y&R\OH 1R
&RRH\WKHQVRXJKWVWDWHSRVWFRQYLFWLRQUHOLHI+HILOHGD
SHWLWLWLRQWRYDFDWHRUVHWDVLGHKLVVHQWHQFHSXUVXDQWWR2KLR
5HY &RGH † LQ WKH &RXUW RI &RPPRQ 3OHDV RI
6XPPLW&RXQW\2KLRUDLVLQJVL[W\ILYHFODLPVIRUUHOLHI2Q
-XO\ WKH 6XPPLW &RXQW\ &RPPRQ 3OHDV &RXUW
GHQLHG &RRH\¶V SHWLWLRQ 6HH 6WDWH Y &RRH\ 1R
$ &RP 3O 6XPPLW &W\ -XO\ &RRH\
DSSHDOHGUDLVLQJHLJKWDVVLJQPHQWVRIHUURU6WDWHY&RRH\
1RV :/ 2KLR &W $SS
0D\ 7KH2KLR&RXUWRI$SSHDOVIRXQGWKDWPRVW
RI&RRH\¶VFODLPVZHUHEDUUHGE\UHVMXGLFDWD,G,WGLG
KRZHYHUDGGUHVV&RRH\¶VFODLPVRILQHIIHFWLYHDVVLVWDQFHRI
FRXQVHORQWKHPHULWV&RRH\DSSHDOHGWRWKH2KLR6XSUHPH
&RXUWEXWWKDWFRXUWGHFOLQHGWRWDNHMXULVGLFWLRQRI&RRH\¶V
SRVWFRQYLFWLRQDSSHDO
2Q1RYHPEHU&RRH\ILOHGDQDSSOLFDWLRQWRUHRSHQ
KLVGLUHFWDSSHDO&RRH\FODLPHGWKDWKLVDSSHOODWHFRXQVHO
ZDVLQHIIHFWLYHDQGDVVHUWHGILIW\HLJKWFODLPVWKDWDSSHOODWH
FRXQVHOIDLOHGWRUDLVH2Q-DQXDU\WKH2KLR&RXUW
RI $SSHDOV GHQLHG KLV UHTXHVW WR UHRSHQ KLV GLUHFW DSSHDO
ILQGLQJWKDW&RRH\KDGSURFHGXUDOO\GHIDXOWHGWKHVHFODLPV
EHFDXVHKHKDGIDLOHGWRHVWDEOLVKJRRGFDXVHIRUQRWILOLQJWKH
DSSOLFDWLRQWRUHRSHQZLWKLQQLQHW\GD\VIURPWKHHIIHFWLYH
GDWHRI2KLR$SS5 % -XO\7KH2KLR6XSUHPH
&RXUWDIILUPHGWKHMXGJPHQWRIWKH2KLR&RXUWRI$SSHDOV
6HH6WDWHY&RRH\1(G 2KLR &RRH\¶V
PRWLRQIRUUHFRQVLGHUDWLRQZDVDOVRGHQLHG
&RRH\ ILOHG WKLV SHWLWLRQ IRU ZULW RI KDEHDV FRUSXV LQ
2FWREHU $PRQJ RWKHU JURXQGV IRU UHOLHI &RRH\
FODLPHGWKDWKHZDVGHQLHGWKHHIIHFWLYHDVVLVWDQFHRIERWK
WULDO DQG DSSHOODWH FRXQVHO DQG WKDW KH ZDV GHQLHG D
PHDQLQJIXORSSRUWXQLW\WROLWLJDWHKLVIHGHUDOFODLPVLQWKH
VWDWHFRXUWV
2Q6HSWHPEHUWKHGLVWULFWFRXUWGHQLHGWKHZULW
6HH&RRH\Y$QGHUVRQ)6XSS 1'2KLR
8QGHU WKH SURFHGXUH WKDW SUHGDWHG WKH $QWLWHUURULVP DQG
(IIHFWLYH'HDWK3HQDOW\$FWRI $('3$ WKHGLVWULFW
1R &RRH\Y&R\OH
HLWKHU SKDVH RI KLV WULDO E\ KLV WULDO ODZ\HUV¶ DOOHJHG
IDLOXUH
,GDW $JDLQ&RRH\KDVQRWVKRZQWKDWWKH2KLR&RXUW
RI$SSHDOVXQUHDVRQDEO\DSSOLHG6WULFNODQG
G)DLOXUHWR2EMHFWWR3URVHFXWRULDO0LVFRQGXFW
7KH2KLR&RXUWRI$SSHDOVUXOHGDVIROORZV
7KHSURSHUO\DGPLWWHGHYLGHQFHDJDLQVWGHIHQGDQWZDVVR
RYHUZKHOPLQJWKDWWRWKHH[WHQWGHIHQGDQW¶VWULDOODZ\HUV
IDLOHG WR REMHFW WR LUUHOHYDQW HYLGHQFH RU SURVHFXWRULDO
PLVFRQGXFWWKHUHZDVQRWD³UHDVRQDEOHSUREDELOLW\´WKDW
GHIHQGDQWZDVSUHMXGLFHGE\WKDWIDLOXUH
,G DW &RRH\ KDV VLPSO\ QRW GHPRQVWUDWHG KRZ WKLV
UXOLQJLVDQXQUHDVRQDEOHDSSOLFDWLRQRI6WULFNODQG
,9&RQFOXVLRQ
)RUDOORIWKHIRUHJRLQJUHDVRQVDUWLFXODWHGLQWKLVRSLQLRQ
DQGDFFRPSDQ\LQJXQSXEOLVKHGDSSHQGL[ZHFRQFOXGHWKDW
&RRH\LVQRWHQWLWOHGWRKDEHDVUHOLHI6225'(5('

-- 4 of 12 --

&RRH\Y&R\OH 1R
VXIIHUHGDFWXDOSUHMXGLFH,QVKRUW&RRH\KDVQRWVKRZQD
YLRODWLRQRI6WULFNODQG
&RRH\ DVVHUWV WKDW FRXQVHO VKRXOG KDYH FRQWDFWHG VRFLDO
ZRUNHUVWRDVVLVWLQSUHVHQWLQJPLWLJDWLQJHYLGHQFHHVSHFLDOO\
VLQFHWKHVWURQJHVWIDFWRUVLQIDYRURIPLWLJDWLRQZHUH&RRH\¶V
\RXWKDQGVXEVWDQFHDEXVH7KH2KLR&RXUWRI$SSHDOVKHOG
WKDW &RRH\ ³IDLOHG WR SURIIHU DQ\ H[FXOSDWRU\ HYLGHQFH LQ
VXSSRUWRIKLVSHWLWLRQWKDWZDVQRWSUHVHQWHGDWGHIHQGDQW¶V
WULDO DQG DUJXDEO\ ZRXOG KDYH EHHQ LI WKH WULDO FRXUW KDG
DSSRLQWHGDVRFLDOZRUNHUWRDVVLVWGHIHQGDQW$FFRUGLQJO\
KHGLGQRWGHPRQVWUDWHDμUHDVRQDEOHSUREDELOLW\¶WKDWKHZDV
SUHMXGLFHGE\KLVWULDOODZ\HUV¶IDLOXUHWRUHTXHVWDVVLVWDQFHRI
DVRFLDOZRUNHU´,GDW
&RRH\ KDV QRW VKRZQ WKDW WKH 2KLR &RXUW RI $SSHDOV¶V
UXOLQJ LV FRQWUDU\ WR RU DQ XQUHDVRQDEOH DSSOLFDWLRQ RI
6WULFNODQG
7KLUG&RRH\FRQWHQGVWKDWWULDOFRXQVHOIDLOHGWRREWDLQD
SKDUPDFRORJLVWDQGRUWR[LFRORJLVWWRDVVLVWWKHPLQSUHSDULQJ
&RRH\¶VFDVHSXUVXDQWWR2KLR5HY&RGH†7KH
2KLR&RXUWRI$SSHDOVUXOHGDVIROORZV
7ULDO FRXQVHO IDLOHG WR UHTXHVW WKH DSSRLQWPHQW RI D
SKDUPDFRORJLVWDQGRUWR[LFRORJLVWWRJLYHRSLQLRQVDVWR
WKH HIIHFW RI FKHPLFDOV LQ GHIHQGDQW¶V V\VWHP 7KH
6XSUHPH &RXUW UXOHG RQ GLUHFW UHYLHZ WKDW H[SHUW
WHVWLPRQ\DERXWGHIHQGDQW¶VDOOHJHGGLPLQLVKHGFDSDFLW\
ZDVSURSHUO\H[FOXGHGIURPWKHJXLOWLQQRFHQFHSKDVHRI
KLV WULDO &RRH\ ,, DW $OWKRXJK WKH SV\FKRORJLVW
ZKRVHDIILGDYLWZDVDWWDFKHGWRGHIHQGDQW¶VSHWLWLRQWR
YDFDWHRUVHWDVLGHVHQWHQFHRSLQHGWKDWDSKDUPDFRORJLVW
DQGRUWR[LFRORJLVWFRXOGKDYHSUHVHQWHGWKHWKUHHMXGJH
SDQHO³DPRUHGHWDLOHGDQGFRPSOHWHXQGHUVWDQGLQJRIWKH
LPSDFW´RIGUXJVRQGHIHQGDQW¶VFRJQLWLYHDQGHPRWLRQDO
IXQFWLRQLQJ´ QHLWKHU WKH SV\FKRORJLVW QRU GHIHQGDQW¶V
FRXQVHO KDV H[SODLQHG KRZ WKDW ³PRUH GHWDLOHG DQG
FRPSOHWHXQGHUVWDQGLQJ´ZRXOGKDYHEHHQH[FXOSDWRU\
$FFRUGLQJO\ GHIHQGDQW GLG QRW GHPRQVWUDWH D
³UHDVRQDEOHSUREDELOLW\´WKDWKHZDVSUHMXGLFHGGXULQJ
1R &RRH\Y&R\OH
FRXUWWKHQLVVXHGDFHUWLILFDWHRISUREDEOHFDXVHIRUDSSHDO
3HWLWLRQHUWKHQILOHGDQRWLFHRIDSSHDO
2Q2FWREHUWKLV&RXUWHQWHUHGDQRUGHUUXOLQJWKDW
WKH$('3$DSSOLHVWRWKLVFDVHDQGWKDWWKHGLVWULFWFRXUW¶V
LVVXDQFH RI D FHUWLILFDWH RI SUREDEOH FDXVH XQGHU WKH SUH
$('3$YHUVLRQRI86&† F ZDVLQHIIHFWLYH:H
HOHFWHGWRWUHDW&RRH\¶VEULHIDVDQDSSOLFDWLRQIRUDFHUWLILFDWH
RI DSSHDODELOLW\ $IWHU H[SUHVVLQJ RXU WHQWDWLYH YLHZ WKDW
&RRH\KDGQRWPDGHD³VXEVWDQWLDOVKRZLQJRIWKHGHQLDORI
DFRQVWLWXWLRQDOULJKW´DVUHTXLUHGE\86&† F
ZLWKUHVSHFWWRDQ\RIWKHLVVXHVUDLVHGZHGLUHFWHG
&RRH\WRVKRZFDXVHZK\ZHVKRXOGQRWGHQ\WKHDSSOLFDWLRQ
IRU D FHUWLILFDWH $WWDFKHG WR RXU RUGHU ZDV DQ DSSHQGL[
VXPPDUL]LQJRXUWHQWDWLYHYLHZDVWRHDFKLVVXH
7KHSDUWLHVILOHGWKHLUUHVSHFWLYHEULHIVUHVSRQGLQJWRWKH
VKRZFDXVHRUGHUDQGWKHPDWWHUZDVDUJXHGRQ-DQXDU\

,,$SSOLFDWLRQIRU&HUWLILFDWHRI$SSHDODELOLW\
8QGHUWKH$('3$DQDSSHDOIURPWKHGHQLDORIDZULWRI
KDEHDV FRUSXV PD\ QRW EH WDNHQ XQOHVV D FLUFXLW MXVWLFH RU
MXGJH LVVXHV D FHUWLILFDWH RI DSSHDODELOLW\ $ FHUWLILFDWH RI
DSSHDODELOLW\PD\QRWLVVXHXQOHVV³WKHDSSOLFDQWKDVPDGHD
VXEVWDQWLDOVKRZLQJRIWKHGHQLDORIDFRQVWLWXWLRQDOULJKW´
86&† F :HPD\DOVR UHMHFWDQLVVXHIRU
DSSHDOLIWKHSURFHGXUDOGHIDXOWGRFWULQHDSSOLHV6HH6ODFNY
0F'DQLHO 86 +RZHYHU WKLV
GHWHUPLQDWLRQ KDV WZR FRPSRQHQWV ³RQH GLUHFWHG DW WKH
XQGHUO\LQJ FRQVWLWXWLRQDO FODLPV DQG RQH GLUHFWHG DW WKH
GLVWULFWFRXUW¶VSURFHGXUDOKROGLQJ´,GDW:KHQWKH
GLVWULFWFRXUWGHQLHVDKDEHDVSHWLWLRQRQSURFHGXUDOJURXQGV
DORQHWKHFHUWLILFDWHRIDSSHDODELOLW\VKRXOGLVVXHZKHQWKH
DSSOLFDQW³VKRZVDWOHDVWWKDWMXULVWVRIUHDVRQZRXOGILQGLW
GHEDWDEOH ZKHWKHU WKH GLVWULFW FRXUW ZDV FRUUHFW LQ LWV
SURFHGXUDOUXOLQJ´,GDW

-- 5 of 12 --

&RRH\Y&R\OH 1R
&RRH\UDLVHVWKHIROORZLQJLVVXHVLQKLVEULHIDVEURDGO\
VWDWHGLQVHYHQFDWHJRULHVZLWKQXPHURXVVXELVVXHVDQGDVNV
XVWRJUDQWDFHUWLILFDWHRIDSSHDODELOLW\DVWRWKHIROORZLQJ
, 7+( 67$1'$5'6 &5($7(' %< 7+(
81,7(' 67$7(6 6835(0( &2857 $1'
7+(6,;7+&,5&8,7&28572)$33($/6
0$1'$7(' $1 (9,'(17,$5< +($5,1*
,105&22(<¶6&$6(
,, 7+( ,03523(5 :(,*+,1* 2) ,19$/,'
&,5&8067$1&(6 $1' ,1$'(48$7(
&216,'(5$7,21 2) 0,7,*$7,1*
)$&7256 5(48,5( 7+$7 05 &22(<¶6
'($7+6(17(1&(%(9$&$7('
,,, 7+( ,03523(5 &216,'(5$7,21 2)
,1$'0,66,%/( $1' 35(-8',&,$/
0$7(5,$/ %< 7+( 75,$/ &2857
5(48,5(6 7+$7 05 &22(<¶6 '($7+
6(17(1&(%(9$&$7('
,9 7+( ',675,&7 &2857 (55(' :+(1 ,7
)281' 7+$7 7+( (55256 :+,&+
2&&855('$77+(75,$/3+$6(','127
'(1<>05&22(<@+,65,*+772$)$,5
75,$/
9 7+( ',675,&7 &2857 (55(' ,1
'(7(50,1,1*7+$73(7,7,21(5&22(<
+$'352&('85$//<'()$8/7('21+,6
&/$,06
9, 05&22(<:$6'(1,('7+(())(&7,9(
$66,67$1&( 2) &2816(/ :+(1
&2816(/ )$,/(' 72 35(9(17 7+(
,03(50,66,%/( &808/$7,21 2)
,19$/,' $**5$9$7,1* )$&7256 $1'
27+(535(-8',&,$/,1)/8(1&(6217+(
75,$/$1'6(17(1&,1*'(&,6,216$1'
1R &RRH\Y&R\OH
LQGLFDWHG E\ WKH GDWH VWDPS IRU WKH MRXUQDO RI D FRXUW RI
UHFRUGLPSRUWVDEVROXWHYHULW\DEVHQWFOHDUDQGFRQYLQFLQJ
HYLGHQFHWRWKHFRQWUDU\´,GDW7KHQWKH2KLR
&RXUWRI$SSHDOVIRXQGWKDW
7KH2KLR6XSUHPH&RXUWKHOGWKDWWKHUHZDVDVLJQHG
LQGLFWPHQWILOHGLQWKHWULDOFRXUWLQWKLVFDVH&RRH\,,
DW $FFRUGLQJO\ WKHUH ZDV QRW D ³UHDVRQDEOH
SUREDELOLW\´ WKDW GHIHQGDQW ZDV KDUPHG E\ KLV WULDO
ODZ\HUV¶IDLOXUHWRUDLVHWKLVFODLP
6WDWH Y &RRH\ :/ DW $V DQ LQLWLDO
PDWWHUWKH2KLR6XSUHPH&RXUW¶VIDFWILQGLQJLVHQWLWOHGWR
GHIHUHQFH)XUWKHUPRUH&RRH\KDVQRWGHPRQVWUDWHGKRZWKH
2KLR&RXUWRI$SSHDOV¶UXOLQJLVDQXQUHDVRQDEOHDSSOLFDWLRQ
RI6WULFNODQG¶VSUHMXGLFHFRPSRQHQW
E3UHVHQWHQFH5HSRUW
&RRH\ FRPSODLQV WKDW KLV WULDO ODZ\HUV ZHUH LQHIIHFWLYH
EHFDXVHWKH\UHTXHVWHGDSUHVHQWHQFHUHSRUW$FFRUGLQJWR
&RRH\WKHUHTXHVWZDVSUREOHPDWLFEHFDXVHWKHSUHVHQWHQFH
UHSRUW FRQWDLQHG WKH SROLFH FDSWDLQ¶V VHQWHQFH
UHFRPPHQGDWLRQ DV ZHOO DV SULRU XQFKDUJHG FULPLQDO
PLVFRQGXFW7KH2KLR&RXUWRI$SSHDOVUXOHGWRWKHFRQWUDU\
,GDW
7KH 2KLR FRXUW UHDVRQDEO\ DSSOLHG 6WULFNODQG ,QGHHG
&RRH\ GRHV QRW HYHQ PDNH D VWDE DW VKRZLQJ KRZ WKLV
GHFLVLRQLVFRQWUDU\WRIHGHUDOODZ
F3UHSDUDWLRQIRU0LWLJDWLRQ
&RRH\PDLQWDLQVWKDWFRXQVHOZHUHLQHIIHFWLYHLQIDLOLQJWR
SUHSDUHIRUPLWLJDWLRQ0RUHSUHFLVHO\&RRH\FRPSODLQVWKDW
FRXQVHOUHTXHVWHGDSUHVHQWHQFHUHSRUWDPHUHWHQGD\VSULRU
WRWKHPLWLJDWLRQKHDULQJ7KLVFODLPZDVQRWUDLVHGLQWKH
VWDWHFRXUWVDQGLVWKHUHIRUHGHIDXOWHG(YHQLIZHUHYLHZHG
WKH FODLP DQG HYHQ LI WKLV DOOHJHG GHILFLHQF\ FRQVWLWXWHG
LQHIIHFWLYH DVVLVWDQFH &RRH\ KDV QRW H[SODLQHG KRZ KH

-- 6 of 12 --

&RRH\Y&R\OH 1R
6WDWHY&RRH\:/DW $JDLQWKHVWDWH
DSSHOODWH FRXUW¶V ILQGLQJ WKDW &RRH\ KDG QRW GHPRQVWUDWHG
SUHMXGLFHXQGHU6WULFNODQG¶VVHFRQGSURQJZDVUHDVRQDEOH
7KLVFODLPLVXWWHUO\ZLWKRXWPHULW
LLL*UXHVRPH6OLGHV
7KH2KLR&RXUWRI$SSHDOVKHOGWKDW
7KH 2KLR 6XSUHPH &RXUW UXOHG WKDW DOWKRXJK WKH
SKRWRJUDSKVZHUHJUXHVRPHWKH\ZHUHKLJKO\SUREDWLYH
&RRH\,,DW7KH6XSUHPH&RXUWIXUWKHUUXOHGWKDWWKH
WULDOFRXUWFRPPLWWHGKDUPOHVVHUURULQDGPLWWLQJIRXURI
WKHSKRWRJUDSKVWKDWZHUHGXSOLFDWLYH,G7KHUHLVQR
³UHDVRQDEOHSUREDELOLW\´WKDWGHIHQGDQWZDVSUHMXGLFHG
E\KLVWULDOODZ\HUV¶IDLOXUHWRREMHFWWRWKHDGPLVVLELOLW\
RIWKHSKRWRJUDSKVDWLVVXH
,GDW
$JDLQ &RRH\ KDV QRW VKRZQ KRZ WKH 2KLR &RXUW RI
$SSHDOV¶ GHFLVLRQ LV DQ XQUHDVRQDEOH DSSOLFDWLRQ RI
6WULFNODQG¶VSUHMXGLFHSURQJ0RUHIXQGDPHQWDOO\WKLVIDLOV
WRVWDWHDFRQVWLWXWLRQDOFODLPVHH*HUODXJKY6WHZDUW
)G WK&LU KROGLQJWKDWWKHFODLPWKDW
DJUXHVRPHSKRWRRIGHFHGHQWZDVHUURQHRXVO\DGPLWWHGGLG
QRW UDLVH ³WKH VSHFWUH RI IXQGDPHQWDO IDLUQHVV VXFK DV WR
YLRODWH IHGHUDO GXH SURFHVV RI ODZ´ DQG WKHUHIRUH LV QRW
FRJQL]DEOHRQKDEHDV
LY8QVLJQHG,QGLFWPHQW
)LQDOO\&RRH\DUJXHVWKDWWULDOFRXQVHOIDLOHGWRREMHFWWR
WKHXVHRIDQXQVLJQHGLQGLFWPHQWDJDLQVWKLP$FFRUGLQJWR
&RRH\WKHLQGLFWPHQWZDVLQYDOLGEHFDXVHLWZDVQRWVLJQHG
E\WKHIRUHPDQRIWKHMXU\)LUVWRIDOOWKH2KLR6XSUHPH
&RXUWIRXQGWKDWDOWKRXJKLWZDVQRWRULJLQDOO\SDUWRIWKH
DSSHOODWHUHFRUGWKHVLJQHGLQGLFWPHQWZDVVXEVHTXHQWO\VHQW
WR WKH KLJK FRXUW E\ WKH WULDO FRXUW 6WDWH Y &RRH\
1(GDW7KXV³WKDWLWZDVMRXUQDOL]HGDWDOOUHTXLUHV
XVWRDFFHSWLWDVJHQXLQHDQGDVKDYLQJEHHQILOHGDWWKHWLPH
1R &RRH\Y&R\OH
)$,/(' 72 5($621$%/< ,19(67,*$7(
0,7,*$7,1*)$&7256
9,, 2+,2¶6 '($7+ 3(1$/7< /$: ,6
81&2167,787,21$/
3HWLWLRQHU¶V%UDWVHHDOVRLGDWLLL[
:HKDYHUHYLHZHGWKHSDUWLHV¶PRVWUHFHQWURXQGRIEULHIV
DQGKHDUGWKHLUDUJXPHQWVDQGFRQFOXGHWKDWDFHUWLILFDWHRI
DSSHDODELOLW\VKRXOGLVVXHDVWRRQO\WKHWZRIROORZLQJLVVXHV
, :KHWKHUWKH2KLR6XSUHPH&RXUWIDLOHGRQGLUHFW
DSSHDOWRFRUUHFWWKHWULDOFRXUW¶VHUURUVLQZHLJKLQJ
WKHDJJUDYDWLQJDQGPLWLJDWLQJIDFWRUVDQG
,, :KHWKHU&RRH\¶VWULDOFRXQVHOSURYLGHGLQHIIHFWLYH
DVVLVWDQFH
$VIRUWKHUHPDLQLQJLVVXHVUDLVHGZHKROGWKDWQRQHPHHWV
WKHVWDQGDUGVIRUJUDQWLQJDFHUWLILFDWHRIDSSHDODELOLW\IRUWKH
UHDVRQV RULJLQDOO\ DUWLFXODWHG LQ WKH DSSHQGL[ WR RXU RUGHU
GDWHG2FWREHUZKLFKZHUHLQFRUSRUDWHDQGDWWDFKDV
DQXQSXEOLVKHGDSSHQGL[WRWKLVRSLQLRQ
,,,3HWLWLRQ
7KLV&RXUWUHYLHZVDGLVWULFWFRXUW¶VGHFLVLRQLQDKDEHDV
SURFHHGLQJGHQRYR6WDOH\Y-RQHV)G WK
&LU
8QGHUWKH$('3$DIHGHUDOFRXUWPD\QRWJUDQWDZULWRI
KDEHDVFRUSXVWRDVWDWHSULVRQHUZLWKUHVSHFWWRDQ\FODLP
DGMXGLFDWHGRQWKHPHULWVXQOHVV WKHVWDWHFRXUW¶VGHFLVLRQ
³ZDVFRQWUDU\WRRULQYROYHGDQXQUHDVRQDEOHDSSOLFDWLRQRI
FOHDUO\HVWDEOLVKHG)HGHUDOODZDVGHWHUPLQHGE\WKH6XSUHPH
&RXUW´86&† G 6XSS9,, RU WKH
VWDWH FRXUW¶V GHFLVLRQ ³ZDV EDVHG RQ DQ XQUHDVRQDEOH
GHWHUPLQDWLRQRIWKHIDFWVLQOLJKWRIWKHHYLGHQFHSUHVHQWHGLQ
WKH 6WDWH FRXUW SURFHHGLQJV´ ,G † G $ VWDWH
FRXUW¶V OHJDO GHFLVLRQ LV ³FRQWUDU\ WR´ FOHDUO\ HVWDEOLVKHG

-- 7 of 12 --

&RRH\Y&R\OH 1R
8QGHU 2KLR 5HY &RGH † $ WKH 2KLR DSSHOODWH FRXUWV DUH
UHTXLUHG WR ³LQGHSHQGHQWO\ ZHLJK´ WKH DJJUDYDWLQJ FLUFXPVWDQFHV DJDLQVW
WKH PLWLJDWLQJ IDFWRUV
7KH FRXUW RI DSSHDOV DQG WKH VXSUHPH FRXUW VKDOO UHYLHZ WKH
MXGJPHQW LQ WKH FDVH DQG WKH VHQWHQFH RI GHDWK LPSRVHG E\ WKH
FRXUW RU SDQHO RI WKUHH MXGJHV LQ WKH VDPH PDQQHU WKDW WKH\
UHYLHZ RWKHU FULPLQDO FDVHV H[FHSW WKDW WKH\ VKDOO UHYLHZ DQG
LQGHSHQGHQWO\ ZHLJK DOO RI WKH IDFWV DQG RWKHU HYLGHQFH GLVFORVHG
LQ WKH UHFRUG LQ WKH FDVH DQG FRQVLGHU WKH RIIHQVH DQG WKH
RIIHQGHU WR GHWHUPLQH ZKHWKHU WKH DJJUDYDWLQJ FLUFXPVWDQFHV WKH
RIIHQGHU ZDV IRXQG JXLOW\ RI FRPPLWWLQJ RXWZHLJK WKH PLWLJDWLQJ
IDFWRUV LQ WKH FDVH DQG ZKHWKHU WKH VHQWHQFH RI GHDWK LV
DSSURSULDWH
2KLR 5HY &RGH † $ HPSKDVLV DGGHG
IHGHUDO ODZ XQGHU † G ³LI WKH FRXUW DUULYHV DW D
FRQFOXVLRQRSSRVLWHWRWKDWUHDFKHGE\>WKH6XSUHPH@&RXUW
RQ D TXHVWLRQ RI ODZ RU LI WKH VWDWH FRXUW GHFLGHV D FDVH
GLIIHUHQWO\WKDQ>WKH6XSUHPH@&RXUWRQDVHWRIPDWHULDOO\
LQGLVWLQJXLVKDEOHIDFWV´:LOOLDPVY7D\ORU86
$Q³XQUHDVRQDEOHDSSOLFDWLRQ´RFFXUVZKHQ
³WKHVWDWHFRXUWLGHQWLILHGWKHFRUUHFWOHJDOSULQFLSOHIURP>WKH
6XSUHPH@ &RXUW¶V GHFLVLRQV EXW XQUHDVRQDEO\ DSSOLHV WKDW
SULQFLSOHWRWKHIDFWVRIWKHSULVRQHU¶VFDVH´,G8QGHUWKLV
VWDQGDUGDVWDWHGHFLVLRQLVQRWXQUHDVRQDEOHVLPSO\EHFDXVH
WKHIHGHUDOFRXUWFRQFOXGHVWKDWWKHVWDWHGHFLVLRQLVHUURQHRXV
RU LQFRUUHFW ,G DW 5DWKHU WKH IHGHUDO FRXUW PXVW
GHWHUPLQH WKDW WKH VWDWH FRXUW GHFLVLRQ LV DQ REMHFWLYHO\
XQUHDVRQDEOH DSSOLFDWLRQ RI IHGHUDO ODZ ,G DW
)DFWXDO ILQGLQJV E\ VWDWH FRXUWV DUH SUHVXPHG FRUUHFW
86&† H
$5HZHLJKLQJ
&RRH\DUJXHVWKDWWKH2KLR6XSUHPH&RXUW¶VUHZHLJKLQJRI
WKHDJJUDYDWLQJFLUFXPVWDQFHVDQGPLWLJDWLQJIDFWRUVOHDGLQJ
WRKLVGHDWKVHQWHQFHZDVHUURQHRXV
,Q &OHPRQV Y 0LVVLVVLSSL 86 WKH
6XSUHPH&RXUWFRQILUPHGWKDWWKHIHGHUDO&RQVWLWXWLRQGRHV
QRW SURKLELW UHZHLJKLQJ RU KDUPOHVV DQDO\VLV DV D FXUH IRU
ZHLJKLQJ HUURUV $OWKRXJK QRW UHTXLUHG WR GR VR RQFH LW
1R &RRH\Y&R\OH
D)DLOXUHWR2EMHFWWR&RQVWLWXWLRQDOO\,QILUP
3URFHGXUHV
&RRH\FODLPVWKDWFRXQVHOZHUHLQHIIHFWLYHUHJDUGLQJMXU\
ZDLYHU VHOHFWLRQ RI WKH WKUHHMXGJH SDQHO LQWURGXFWLRQ RI
JUXHVRPHVOLGHVDQGWKHLQGLFWPHQW
L-XU\:DLYHU
&RRH\FODLPVWKDWKLVWULDOFRXQVHOIDLOHGWRLQVXUHWKDWKH
NQHZWKDWKHZDVZDLYLQJKLVIXQGDPHQWDOULJKWWRDMXU\WULDO
+RZHYHUDVWKH2KLR&RXUWRI$SSHDOVIRXQG&RRH\IDLOHG
WR SUHVHQW DQ\ HYLGHQFH VXSSRUWLQJ KLV DVVHUWLRQ 6WDWH Y
&RRH\ :/ DW 6HH DOVR 6WDWH Y
.DSSHU1(G 2KLR ,QRWKHUZRUGV
WKHFRXUWKHOGLPSOLFLWO\WKDW&RRH\GHIDXOWHGWKLVFODLPLQWKH
VWDWHSRVWFRQYLFWLRQWULDOSURFHHGLQJ%\IDLOLQJWRVXEPLW
HYLGHQFH&RRH\EDUUHGKLPVHOIIURPGHYHORSLQJWKHFODLP
IXUWKHUDQGLVQRWQRZHQWLWOHGWRDQHYLGHQWLDU\KHDULQJ6HH
86&† H $ LL
7KHFRXUWDOVRKHOGWKDW&RRH\³IDLOHGWRVKRZWKDWKLVWULDO
ODZ\HUV¶ SHUIRUPDQFH IHOO EHORZ DQ REMHFWLYH VWDQGDUG RI
UHDVRQDEOHUHSUHVHQWDWLRQ´6WDWHY&RRH\:/
DW &RRH\PDNHVQRDWWHPSWWRVKRZKRZWKLVUXOLQJLV
FRQWUDU\WRRUDQXQUHDVRQDEOHDSSOLFDWLRQRI6XSUHPH&RXUW
SUHFHGHQW,WLVPHULWOHVV
LL7KUHH-XGJH3DQHO
&RRH\FRPSODLQVWKDWWULDOFRXQVHOVKRXOGKDYHREMHFWHGWR
WKHPHWKRGRIHPSDQHOLQJWKHWKUHHMXGJHV7KH2KLR&RXUW
RI$SSHDOVKHOG
'HIHQGDQWKDVIDLOHGWRLQGLFDWHKRZWKHPDNHXSRIWKH
WKUHH MXGJH SDQHO KDG DQ DGYHUVH LPSDFW RQ KLP
$FFRUGLQJO\ GHIHQGDQW GLG QRW GHPRQVWUDWH D
³UHDVRQDEOHSUREDELOLW\´WKDWKHZDVSUHMXGLFHGE\KLV
WULDOODZ\HUV¶DOOHJHGIDLOXUH

-- 8 of 12 --

&RRH\Y&R\OH 1R
&RRH\¶VDVVLJQHGHUURURILQHIIHFWLYHDVVLVWDQFHRIFRXQVHO
EDVHG RQ FRXQVHO¶V IDLOXUH WR REMHFW WKH 2KLR &RXUW RI
$SSHDOVKHOG
7KH2KLR6XSUHPH&RXUWUHYLHZHGWKLVFODLPDQGIRXQG
WKDWWKHIDLOXUHRIWKHWULDOFRXUWWRPHUJHWKHDJJUDYDWLQJ
FLUFXPVWDQFHVDWLVVXHZDVQRWSODLQHUURU7KLV&RXUW
FRQFOXGHV WKDW WKHUH DOVR ZDV QRW D μUHDVRQDEOH
SUREDELOLW\¶ WKDW GHIHQGDQW ZDV SUHMXGLFHG E\ KLV WULDO
ODZ\HUV¶IDLOXUHLQUHJDUGWRWKHPHUJHURIDJJUDYDWLQJ
FLUFXPVWDQFHV
6WDWHY&RRH\:/DW
$V WKH GLVWULFW FRXUW KHOG ³WKH HYLGHQFH FRQILUPLQJ WKH
DJJUDYDWLQJ FLUFXPVWDQFHV RI &RRH\¶V RIIHQVHV LV
RYHUZKHOPLQJ´&RRH\Y$QGHUVRQ)6XSSDW
0RUHLPSRUWDQWO\WKH2KLR6XSUHPH&RXUWFRUUHFWHGWKHWULDO
FRXUW¶V HUURU LQ IDLOLQJ WR PHUJH WKH DJJUDYDWLQJ
FLUFXPVWDQFHV DQG XSRQ LQGHSHQGHQW UHZHLJKLQJ VWLOO
FRQFOXGHG WKDW ³WKH SURSHUO\ DGPLWWHG HYLGHQFH
RYHUZKHOPLQJO\SURYHVWKDWWKHDJJUDYDWLQJFLUFXPVWDQFHV
RXWZHLJKEH\RQGDUHDVRQDEOHGRXEWWKHPLWLJDWLQJIDFWRUV´
6WDWHY&RRH\1(GDW
7KH 2KLR &RXUW RI $SSHDOV UXOHG RQ &RRH\¶V
SRVWFRQYLFWLRQ SHWLWLRQ E\ KROGLQJ WKDW WKHUH ZDV QRW D
³UHDVRQDEOH SUREDELOLW\´ WKDW &RRH\ ZDV SUHMXGLFHG E\ KLV
WULDO ODZ\HUV¶ IDLOXUH WR DUJXH WKDW WKH DJJUDYDWLQJ
FLUFXPVWDQFHVVKRXOGQRWKDYHEHHQPHUJHG&RRH\KDVQRW
FRQWHQGHG DQG FDQQRW HVWDEOLVK KRZ WKLV FRQFOXVLRQ LV DW
RGGVZLWK6WULFNODQG6HH86&† G
2WKHU)DLOXUHV
&RRH\ DOVR DOOHJHV WKDW WULDO FRXQVHO ZHUH GHILFLHQW IRU
VHYHUDORWKHUUHDVRQVZKLFKZHDGGUHVVLQRUGHU
1R &RRH\Y&R\OH
HOHFWVWRUHZHLJKWKHVWDWHDSSHOODWHFRXUWPXVW³JLYHHDFK
GHIHQGDQW DQ LQGLYLGXDOL]HG DQG UHOLDEOH VHQWHQFLQJ
GHWHUPLQDWLRQ EDVHG RQ WKH GHIHQGDQW¶V FLUFXPVWDQFHV KLV
EDFNJURXQGDQGFULPH´,GDW
7KHWKUHHMXGJHSDQHOFRQYLFWHG&RRH\RIIRXUDJJUDYDWHG
PXUGHUFRXQWVWZRFRXQWVUHODWLQJWRYLFWLP:HQG\2IIUHGR
DQGWZRUHODWLQJWRYLFWLP'DZQ0F&UHHU\(DFKFRQWDLQHG
WKUHH FDSLWDO VSHFLILFDWLRQV )RU HDFK YLFWLP &RRH\ ZDV
FKDUJHGZLWKSXUSRVHO\NLOOLQJKHUZLWKSULRUFDOFXODWLRQDQG
GHVLJQ 2KLR5HY&RGH† $ DQGZLWKSXUSRVHO\
NLOOLQJ KHU LQ WKH FRXUVH RI DQ HQXPHUDWHG IHORQ\ EHLQJ
NLGQDSSLQJUDSHDQGDJJUDYDWHGUREEHU\ 2KLR5HY&RGH
† % 7KHVDPHWKUHHFDSLWDOVSHFLILFDWLRQVZHUH
DWWDFKHGWRHDFKFRXQW
WKHPXUGHUZDVFRPPLWWHGWRHVFDSHGHWHFWLRQIRU
RWKHUFULPHV 2KLR5HY&RGH† $
WKH PXUGHU ZDV SDUW RI D FRXUVH RI FRQGXFW WKDW
LQYROYHG WKH SXUSRVHIXO NLOOLQJ RI WZR RU PRUH
SHUVRQV 2KLR5HY&RGH† $ DQG
WKH PXUGHU ZDV FRPPLWWHG ZKLOH FRPPLWWLQJ RU
DWWHPSWLQJWRFRPPLWRUIOHHLQJLPPHGLDWHO\DIWHU
FRPPLWWLQJ RU DWWHPSWLQJ WR FRPPLW UDSH DQGRU
NLGQDSSLQJ DQGRU DJJUDYDWHG UREEHU\ DQG &RRH\
ZDVDSULQFLSDORIIHQGHULQWKHFRPPLVVLRQRIWKH
DJJUDYDWHG PXUGHU DQGRU WKH DJJUDYDWHG PXUGHU
ZDV FRPPLWWHG ZLWK SULRU FDOFXODWLRQ DQG GHVLJQ
2KLR5HY&RGH† $
7KHWKUHHMXGJHSDQHOIRXQG&RRH\JXLOW\RIDOOFRXQWVDQG
DOO VSHFLILFDWLRQV +RZHYHU EHIRUH VHQWHQFLQJ WKH FRXUW
PDGHWKH6WDWHHOHFWZKLFKFRXQWIRUHDFKYLFWLPWKHFRXUW
ZRXOGVHQWHQFHXSRQ7KH6WDWHHOHFWHGWKHIHORQ\PXUGHU
FRXQWIRUHDFKYLFWLP7KHWKUHHMXGJHSDQHODOVRIRXQGWKDW
WKH ³FRXUVH RI FRQGXFW´ VSHFLILFDWLRQ IRU HDFK FRXQW ZDV
GXSOLFDWLYHVRLWFRQVLGHUHGRQO\RQHVXFKVSHFLILFDWLRQ

-- 9 of 12 --

&RRH\Y&R\OH 1R
,QLWVUHYLHZWKH2KLR6XSUHPH&RXUWLQLWLDOO\GHWHUPLQHG
WKDW WKH WULDO FRXUW KDG HUUHG LQ VHYHUDO UHVSHFWV LQ LWV
ZHLJKLQJ)LUVWWKH2KLR6XSUHPH&RXUWFRQFOXGHGWKDWWKH
WULDOFRXUWHUUHGLQFRPELQLQJDQGFROOHFWLYHO\FRQVLGHULQJWKH
DJJUDYDWLQJFLUFXPVWDQFHVRIERWKPXUGHUV
&RRH\DUJXHVWKDWWKHWULDOFRXUWHUUHGLQFRPELQLQJWKH
DJJUDYDWLQJFLUFXPVWDQFHVUHODWHGWRERWKPXUGHUVDQG
ZHLJKLQJDOORIWKHPFROOHFWLYHO\DJDLQVWWKHPLWLJDWLQJ
IDFWRUV:HDJUHH$V&RRH\VWDWHVHDFKPXUGHUZDV
D VHSDUDWH RIIHQVH VXEMHFW WR D VHSDUDWH SHQDOW\ %\
DGGLQJWRJHWKHUWKHDJJUDYDWLQJFLUFXPVWDQFHVRIERWK
PXUGHUV LQ WKH SHQDOW\ SKDVH WKH WULDO FRXUW GHQLHG
&RRH\WKDW³FRQVLGHUDWLRQRIWKHFLUFXPVWDQFHVRIWKH
SDUWLFXODU RIIHQVH ´ WKDW LV ³D FRQVWLWXWLRQDOO\
LQGLVSHQVDEOHSDUWRIWKHSURFHVVRILQIOLFWLQJWKHSHQDOW\
RI GHDWK´ (PSKDVLV DGGHG :RRGVRQ Y 1RUWK
&DUROLQD 866&W
/(GG SOXUDOLW\RSLQLRQ
7KHUHIRUH ZKHQ D FDSLWDO GHIHQGDQW LV FRQYLFWHG RI
PRUHWKDQRQHFRXQWRIDJJUDYDWHGPXUGHUWKHSHQDOW\
IRUHDFKLQGLYLGXDOFRXQWPXVWEHDVVHVVHGVHSDUDWHO\
2QO\ WKH DJJUDYDWLQJ FLUFXPVWDQFHV UHODWHG WR D JLYHQ
FRXQWPD\EHFRQVLGHUHGLQDVVHVVLQJWKHSHQDOW\IRUWKDW
FRXQW

:HGRQRWWKLQNLWLVFOHDUWKDWWKHWULDOFRXUW¶VHUURU
GHWHUPLQHG WKH UHVXOW ,QGHHG ZH FRQFOXGH WKDW WKH
DJJUDYDWLQJ FLUFXPVWDQFHV RI HDFK PXUGHU ZHLJKHG
VHSDUDWHO\ RXWZHLJK WKH PLWLJDWLQJ IDFWRUV 7KXV
DOWKRXJKWKHWULDOFRXUWHUUHGLWVHUURUZDVQRWSODLQHUURU
DQG WKHUHIRUH QRW UHYHUVLEOH HUURU LQ OLJKW RI &RRH\¶V
IDLOXUHWRUDLVHLWLQWKHFRXUWRIDSSHDOV
6WDWHY&RRH\1(GDW
7KH 2KLR 6XSUHPH &RXUW DOVR GHWHUPLQHG WKDW FHUWDLQ
VSHFLILFDWLRQVVKRXOGKDYHEHHQPHUJHG
1R &RRH\Y&R\OH
%,QHIIHFWLYH$VVLVWDQFHRI7ULDO&RXQVHO
&RRH\DOVRDUJXHVWKDWKLVWULDOFRXQVHOZHUHLQHIIHFWLYHIRU
YDULRXVUHDVRQV7RVKRZWKDWFRXQVHOZDVFRQVWLWXWLRQDOO\
LQHIIHFWLYH D SHWLWLRQHU PXVW GHPRQVWUDWH WKDW FRXQVHO¶V
SHUIRUPDQFHZDVGHILFLHQWLQWKDWLWIHOOEHORZDQREMHFWLYH
VWDQGDUG RI UHDVRQDEOHQHVV DQG DOVR WKDW FRXQVHO¶V
GHILFLHQFLHV SUHMXGLFHG KLV GHIHQVH 6WULFNODQG Y
:DVKLQJWRQ86 ,QRWKHUZRUGVWKH
GHIHQGDQWPXVWVKRZ³WKDWWKHUHLVDUHDVRQDEOHSUREDELOLW\
WKDWEXWIRUFRXQVHO¶VXQSURIHVVLRQDOHUURUVWKHUHVXOWRIWKH
SURFHHGLQJ ZRXOG KDYH EHHQ GLIIHUHQW $ UHDVRQDEOH
SUREDELOLW\LVDSUREDELOLW\VXIILFLHQWWRXQGHUPLQHFRQILGHQFH
LQWKHRXWFRPH´,GDW
,Q/RFNKDUWY)UHWZHOO86 WKH6XSUHPH
&RXUW H[SODLQHG WKDW ³>W@KH SUHMXGLFH FRPSRQHQW RI WKH
6WULFNODQGWHVWIRFXVHVRQWKHTXHVWLRQZKHWKHUFRXQVHO¶V
GHILFLHQWSHUIRUPDQFHUHQGHUVWKHUHVXOWRIWKHWULDOXQUHOLDEOH
RU WKH SURFHHGLQJ IXQGDPHQWDOO\ XQIDLU´ ,G DW 7KH
&RXUWIXUWKHUH[SODLQHGWKDW³XQUHOLDELOLW\RUXQIDLUQHVVGRHV
QRWUHVXOWLIWKHLQHIIHFWLYHQHVVRIFRXQVHOGRHVQRWGHSULYH
WKHGHIHQGDQWRIDQ\VXEVWDQWLYHRUSURFHGXUDOULJKWWRZKLFK
WKHODZHQWLWOHVKLP´,G
,PSHUPLVVLEOH&XPXODWLRQRI$JJUDYDWLQJ)DFWRUV
)LUVW&RRH\FODLPVWKDWKLVWULDOFRXQVHOIDLOHGWRSUHYHQW
RU UHGUHVV WKH LPSHUPLVVLEOH FXPXODWLRQ RI DJJUDYDWLQJ
IDFWRUVDWWKHVHQWHQFLQJSKDVH6SHFLILFDOO\&RRH\DVVHUWV
WKDWWULDOFRXQVHOZHUHFRQVWLWXWLRQDOO\LQHIIHFWLYHIRUIDLOLQJ
WRREMHFWWRWKHWULDOFRXUW¶VVHSDUDWHZHLJKLQJRIGXSOLFDWLYH
DJJUDYDWLQJIDFWRUVLQFRQWUDYHQWLRQRIWKHFOHDUPDQGDWHRI
WKH2KLR6XSUHPH&RXUWLQ6WDWHY-HQNLQV1(G
2KLR V\OODEXVˆ
7KH 2KLR 6XSUHPH &RXUW DFNQRZOHGJHG WKH XQGHUO\LQJ
ZHLJKLQJHUURUEXWFRQFOXGHGWKDW³&RRH\GLGQRWUDLVHWKLV
HUURULQWKHFRXUWRIDSSHDOVDQGZHILQGLWIDUIURPFOHDUWKDW
LWDIIHFWHGWKHSDQHO¶VYHUGLFW:HWKHUHIRUHFDQQRWKROGLW
SODLQ HUURU´ 6WDWH Y &RRH\ 1(G DW $V WR

-- 10 of 12 --

&RRH\Y&R\OH 1R
HUURQHRXVO\LQFOXGHGLQLWVDQDO\VLV,GDW
1(G6HFRQGLWGLGQRWUHDFKLWVGHFLVLRQPHUHO\
RQWKHH[LVWHQFHRIDVLQJOHDJJUDYDWLQJFLUFXPVWDQFH
,QVWHDGLWQRWHGWKHVSHFLILFQDWXUHRIWKHFULPHVDWLVVXH
WKH XVH RI GHFHLW LQ FRPPLWWLQJ WKRVH FULPHV DQG WKH
DPRXQWRIIRUFHHPSOR\HGE\WKHSHUSHWUDWRU,G ³>7KH
PLWLJDWLQJ IDFWRUV@ DUH RXWZHLJKHG EH\RQG DQ\
UHDVRQDEOH GRXEW E\ WKH DJJUDYDWLQJ FLUFXPVWDQFHV RI
UDSHDQGNLGQDSLQJ&RRH\XVHGGHFHLWWROXUH:HQG\
DQG'DZQLQWRKLVFDUGURYHWKHPWRDGHVHUWHGDUHD
WKHQWRRNZKDWKHZDQWHGIURPWKHPE\IRUFH+HEHDW
WKHPUHSHDWHGO\ZLWKDQLJKWVWLFNWKHQWULHGWRPDNHVXUH
:HQG\ZDVGHDGE\VWUDQJOLQJKHU´ )LQDOO\WKH&RXUW
SURYLGHG D WKRURXJK GLVFXVVLRQ RI DQG JDYH FDUHIXO
FRQVLGHUDWLRQWRDOOPLWLJDWLQJIDFWRUVUHOHYDQWWR&RRH\¶V
VHQWHQFH ,Q VXP WKH 2KLR 6XSUHPH &RXUW DFWHG
SURSHUO\ ZKHQ SXUVXDQW WR † LW HOHFWHG WR
UHZHLJK WKH DJJUDYDWLQJ FLUFXPVWDQFHV DQG PLWLJDWLQJ
IDFWRUVRIWKLVFDVH
&RRH\ Y $QGHUVRQ ) 6XSS DW IRRWQRWH
RPLWWHG 7KXVLWLVVLPSO\EDVHOHVVWRVXJJHVWDV&RRH\
GRHV LQ KLV EULHI DW WKDW WKH 2KLR 6XSUHPH &RXUW¶V
UHZHLJKLQJ ZDV PHUHO\ FRQFOXVRU\ DQG LQVXIILFLHQW XQGHU
FRQVWLWXWLRQDOVWDQGDUGV7KH2KLR6XSUHPH&RXUW¶VGHFLVLRQ
ZDVQRW³FRQWUDU\WR´QRUGLGLWLQYROYH>@DQXQUHDVRQDEOH
DSSOLFDWLRQRIFOHDUO\HVWDEOLVKHG)HGHUDOODZ´7KH2KLR
6XSUHPH &RXUW ZDV SURSHUO\ DOORZHG WR UHZHLJK XQGHU
&OHPRQVDQGFRQVLGHUHGDOOWKHIDFWRUV&OHPRQVVHWRXWDV
SDUWRIWKHUHZHLJKLQJDQDO\VLV$QGHYHQLIZHWKRXJKWWKDW
WKH 2KLR 6XSUHPH &RXUW¶V DSSOLFDWLRQ RI &OHPRQV ZDV
LQFRUUHFW ZKLFK ZH GR QRW LW ZDV FHUWDLQO\ QRW DQ
XQUHDVRQDEOHDSSOLFDWLRQRI&OHPRQV1RUFDQLWEHVDLGWKDW
WKH 2KLR 6XSUHPH &RXUW¶V KROGLQJ ZDV EDVHG RQ DQ
XQUHDVRQDEOH GHWHUPLQDWLRQ RI WKH IDFWV LQ OLJKW RI WKH
HYLGHQFHSUHVHQWHGLQWKHVWDWHSURFHHGLQJV6HH86&
† G ,QVKRUWWKH³UHZHLJKLQJLVVXH´SURYLGHV
QREDVLVXSRQZKLFKWRJUDQWWKHZULW
1R &RRH\Y&R\OH
>&RRH\@DOVRDUJXHVWKDWXQGHUWKHIDFWVLQWKLVFDVHWKH
VSHFLILFDWLRQV VKRXOG KDYH EHHQ PHUJHG EHFDXVH WKH\
DURVHIURPWKHVDPHDFWVDQGZHUHFRPPLWWHGZLWKWKH
VDPH DQLPXV 6HH -HQNLQV VXSUD V\OODEXV :H
DJUHH7KHVSHFLILFDWLRQVIRUZKLFK&RRH\ZDVWU\LQJWR
HVFDSHDFFRXQWDELOLW\ZKHQKHNLOOHG:HQG\DQG'DZQ
5&>$@>@ DUHWKHVDPHDVWKRVHWKDWVXSSRUW
KLVFRQYLFWLRQVRIWKHIHORQ\PXUGHUVSHFLILFDWLRQV 5&
>$@>@ 7KXV WKH ³HVFDSLQJ DFFRXQWDELOLW\´
VSHFLILFDWLRQV ODFN ³D VLJQLILFDQFH LQGHSHQGHQW RI WKH
RWKHU´VSHFLILFDWLRQV/RJDQVXSUD
&RRH\GLGQRWUDLVHWKLVHUURULQWKHFRXUWRIDSSHDOV
DQGZHILQGLWIDUIURPFOHDUWKDWLWDIIHFWHGWKHSDQHO¶V
YHUGLFW:HWKHUHIRUHFDQQRWKROGLWSODLQHUURU
6WDWHY&RRH\1(GDW7KH2KLR6XSUHPH&RXUW
DOVR IRXQG WKDW WKH SDQHO VKRXOG QRW KDYH FRQVLGHUHG
PLWLJDWLQJIDFWRUVQRWUDLVHGE\&RRH\
&RRH\ FRUUHFWO\ DVVHUWV WKDW WKH WULDO FRXUW HUUHG E\
FRQVLGHULQJDOORIWKHPLWLJDWLQJIDFWRUVVHWIRUWKLQ5&
% HYHQ WKRXJK &RRH\ GLG QRW UDLVH VRPH RI
WKHP6HH6WDWHY'H3HZ+RZHYHUWKHVHQWHQFLQJ
RSLQLRQ OLVWV ZKDW WKH FRXUW XQGHUVWRRG WR EH WKH
DJJUDYDWLQJFLUFXPVWDQFHVDQGWKHDEVHQFHRIPLWLJDWLQJ
IDFWRUVLVQRWDPRQJWKHP&I6WDWHY%URRPVXSUD
:HFRQFOXGHWKDWWKHDEVHQFHRIPLWLJDWLQJIDFWRUVZDV
QRW LPSHUPLVVLEO\ WUDQVIRUPHG LQWR DQ DJJUDYDWLQJ
FLUFXPVWDQFH
,G7KH2KLR6XSUHPH&RXUWIXUWKHUKHOGWKDWWKHWULDOFRXUW
KDGPLVFRQVWUXHGWKHVWDQGDUGIRUOHJDOLQVDQLW\XQGHU2KLR
5HY&RGH† %
&RRH\ DUJXHV WKDW WKH WULDO FRXUW DQG WKH FRXUW RI
DSSHDOVPLVDSSOLHGWKHVWDQGDUGIRUOHJDOLQVDQLW\WRWKH
PLWLJDWLQJ IDFWRU FUHDWHG E\ 5& % :H
DJUHH 7KH PLWLJDWLQJ IDFWRU H[LVWHG LI &RRH\ ³
ODFNHGVXEVWDQWLDOFDSDFLW\WRDSSUHFLDWHWKHFULPLQDOLW\
RI KLV FRQGXFW RU WR FRQIRUP KLV FRQGXFW WR WKH

-- 11 of 12 --

&RRH\Y&R\OH 1R
UHTXLUHPHQWVRIWKHODZ´7KHTXHVWLRQZDVQRWDV
WKHWULDOFRXUWWKRXJKWZKHWKHU&RRH\FRPSOHWHO\ODFNHG
FDSDFLW\WRGRVR&I/DZUHQFHVXSUD
2I FRXUVH XQGHU HLWKHU VWDQGDUG LW PXVW EH
GHPRQVWUDWHGWKDWVXFKODFNRIFDSDFLW\UHVXOWHGIURPD
PHQWDOGLVHDVHRUGHIHFW6LQFHWKHWULDOFRXUWIRXQG
WKDW&RRH\GLGQRWKDYHDPHQWDOGLVHDVHRUGHIHFWWKLV
PLWLJDWLQJIDFWRUZRXOGQRWKDYHDSSOLHGHYHQXQGHUWKH
FRUUHFWVWDQGDUG
,GDW
7KH2KLR6XSUHPH &RXUWWKHQWXUQHGWRWKHTXHVWLRQRI
ZKHWKHU WKH DJJUDYDWLQJ FLUFXPVWDQFHV RXWZHLJKHG WKH
PLWLJDWLQJ IDFWRUV ³DV SDUW RI RXU VWDWXWRULO\ PDQGDWHG
UHYLHZ´6SHFLILFDOO\WKH2KLR6XSUHPH&RXUWFRQVLGHUHG
HYLGHQFH UHODWLQJ WR &RRH\¶V SK\VLFDO DQG PHQWDO KLVWRU\
)LUVW LW QRWHG WKH WHVWLPRQ\ RI 'U -DPHV : 6LGGDOO D
FOLQLFDO SV\FKRORJLVW ZKR KDG LQWHUYLHZHG &RRH\ DQG
SHUIRUPHGDVWDQGDUGEDWWHU\RISV\FKRORJLFDOWHVWVRQKLP
'U 6LGGDOO GHWHUPLQHG WKDW &RRH\ H[KLELWHG D ³PHQWDO
GLVRUGHU´FRQVLVWLQJRID³FRQGXFWGLVRUGHU´DQGDSDWWHUQRI
VXEVWDQFHDEXVH,GDW7KH2KLR6XSUHPH&RXUWQRWHG
WKDW 6LGGDOO ³WHVWLILHG WKDW D μPHQWDO GLVRUGHU¶ LV QRW
QHFHVVDULO\ D μPHQWDO LOOQHVV¶ EXW WKDW LW SUREDEO\ μZRXOG
DIIHFW MXGJPHQW DV ZHOO DV EHKDYLRUDO FRQWURO¶´ ,G 7KH
&RXUWDOVRREVHUYHGWKDW6LGGDOOWHVWLILHGWKDW&RRH\¶VKLVWRU\
RIFKLOGDEXVHZDVVLJQLILFDQWDIDFWZKLFK&RRH\¶VPRWKHU
IXUWKHUDWWHVWHGWR,G7KH&RXUWXOWLPDWHO\FRQFOXGHGWKDW
&RRH\¶VPHQWDOGLVRUGHUZDVHQWLWOHGWR³OLWWOHOHJDOZHLJKW´
EHFDXVH KLV PHQWDO GLVRUGHU ³FRQVLVWHG RI WKH LQJHVWLRQ RI
GUXJVLQFRPELQDWLRQZLWKKLVμFRQGXFWGLVRUGHU¶´DQG'U
6LGGDOO¶V ³GHILQLWLRQ RI μFRQGXFW GLVRUGHU¶ DV D SDWWHUQ RI
YLRODWLQJRWKHUSHRSOH¶VULJKWVFRXOGDSSO\WRYLUWXDOO\HYHU\
FULPLQDO´,G
7KH2KLR6XSUHPH&RXUWDOVRWRRNLQWRDFFRXQW&RRH\¶V
\RXWKVXEMHFWWRKLVPLOLWDU\VWDWXVDQGKLVODFNRISUHYLRXV
FULPLQDOFRQYLFWLRQV
1R &RRH\Y&R\OH
&RRH\¶V \RXWK LV HQWLWOHG WR VRPH ZHLJKW EXW KLV
PLOLWDU\ VWDWXV PDNHV LW UHDVRQDEOH WR H[SHFW PRUH
PDWXULW\IURPKLPWKDQRQHPLJKWRWKHUZLVHH[SHFWRID
QLQHWHHQ\HDUROG+LVKLVWRU\DVDVHYHUHO\DEXVHGFKLOG
LVFHUWDLQO\UHOHYDQWIRUZKDWHYHULWPD\KDYHFRQWULEXWHG
WRKLVPHQWDOSUREOHPV
$OWKRXJKWKHUHFRUGVKRZVWKDW&RRH\KDVKDGFRQWDFW
ZLWKMXYHQLOHDXWKRULWLHVWKHUHFRUGGRHVQRWGHPRQVWUDWH
DQ\ SUHYLRXV FULPLQDO FRQYLFWLRQV RU GHOLQTXHQF\
DGMXGLFDWLRQV7KLVIDFWRULVHQWLWOHGWRVRPHZHLJKWLQ
PLWLJDWLRQ
,G 1HYHUWKHOHVV WKH 2KLR 6XSUHPH &RXUW XOWLPDWHO\
FRQFOXGHGDVIROORZV
7KHVH IDFWRUV WHQG WR VXJJHVW WKDW &RRH\ PD\ KDYH
EHHQOHVVUHVSRQVLEOHIRUKLVDFWVWKDQZHUHPRVWSHRSOH
+RZHYHU WKH\ DUH RXWZHLJKHG EH\RQG DQ\ UHDVRQDEOH
GRXEW E\ WKH DJJUDYDWLQJ FLUFXPVWDQFHV RI UDSH DQG
NLGQDSSLQJ&RRH\XVHGGHFHLWWROXUH:HQG\DQG'DZQ
LQWR KLV FDU GURYH WKHP WR D GHVHUWHG DUHD WKHQ WRRN
ZKDW KH ZDQWHG IURP WKHP E\ IRUFH +H EHDW WKHP
UHSHDWHGO\ ZLWK D QLJKWVWLFN WKHQ WULHG WR PDNH VXUH
:HQG\ZDVGHDGE\VWUDQJOLQJKHU
:H FRQFOXGH WKDW WKH SURSHUO\ DGPLWWHG HYLGHQFH
RYHUZKHOPLQJO\ SURYHV WKDW WKH DJJUDYDWLQJ
FLUFXPVWDQFHVRXWZHLJKEH\RQGDUHDVRQDEOHGRXEWWKH
PLWLJDWLQJIDFWRUV
,G
$V WKH IRUHJRLQJ LOOXVWUDWHV WKH 2KLR 6XSUHPH &RXUW
IROORZHGWKHGLFWDWHVRI&OHPRQVLQWKDWLWJDYHLQGLYLGXDOL]HG
FRQVLGHUDWLRQWR&RRH\¶VFLUFXPVWDQFHVKLVEDFNJURXQGDQG
WKHFULPH$VWKHGLVWULFWFRXUWUXOHG
,QWKLVFDVHWKH6XSUHPH&RXUWRI2KLRFRPPLWWHGQR
VXFK HUURU )LUVW LQ LWV GHFLVLRQ WKH &RXUW JDYH QR
FRQVLGHUDWLRQWRWKRVHIDFWRUVZKLFKWKHWULDOFRXUWKDG

-- 12 of 12 --