Court Opinion

ID: 3184897
Source: CourtListenerOpinion
Date Created: 2016-03-11 18:07:23.706861+00
Date Added: 2024-06-11T14:27:22.856888
License: Public Domain

81,7(' 67$7(6 ',675,&7 &2857
                       )25 7+( ',675,&7 2) &2/80%,$
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
                                     
-2(/ %$57/(77                       
                                     
                  3ODLQWLII         
                                     
      Y                               &LYLO $FWLRQ 1R  $%-
                                     
*25'21 29(56/$8*+ et al.           
                                     
                  'HIHQGDQWV        
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

                           0(025$1'80 23,1,21 	 25'(5

       :KHQ SODLQWLII -RHO %DUWOHWW DQG GHIHQGDQW *RUGRQ 2YHUVODXJK ZHUH VWLOO HQMR\LQJ D FORVH

SHUVRQDO UHODWLRQVKLS WKH\ VKDUHG D KRPH DQG WKH\ VKDUHG DQ HTXDO RZQHUVKLS LQ WKHLU EXVLQHVV

$P &RPSO >'NW  @    %XW QRZ WKDW WKHLU SURIHVVLRQDO DQG SHUVRQDO UHODWLRQVKLS KDV

GHWHULRUDWHG WKH\ KDYH WXUQHG WR WKH FRXUWV HDFK FODLPLQJ WKDW WKH RWKHU YLRODWHG ILGXFLDU\ GXWLHV

WR 6XLWH 6HUYLFHV ,QF ³6XLWH 6HUYLFHV´ RU ³66,´ WKH :DVKLQJWRQ '& FRUSRUDWLRQ LQ ZKLFK

HDFK UHWDLQV D ILIW\SHUFHQW VWDNH Id.  ± ± ,Q  %DUWOHWW VXHG 2YHUVODXJK LQ WKH

6RXWKHUQ 'LVWULFW RI )ORULGD DOOHJLQJ WKDW 2YHUVODXJK KDG EUHDFKHG ILGXFLDU\ GXWLHV WR 66, E\

FRQYHUWLQJ FRUSRUDWH IXQGV IRU KLV SHUVRQDO XVH See generally &RPSO >'NW  @ $IWHU WKH FDVH

ZDV WUDQVIHUUHG WR WKLV &RXUW %DUWOHWW DPHQGHG KLV FRPSODLQW WR DGG D UHTXHVW IRU D GHFODUDWRU\

MXGJPHQW DQG WR DGG WKH FRPSDQ\ DV D GHIHQGDQW $P &RPSO 66, LQ LWV DQVZHU WR %DUWOHWW¶V

DPHQGHG FRPSODLQW DVVHUWHG D FRXQWHUFODLP DJDLQVW %DUWOHWW ± 66, FODLPV WKDW %DUWOHWW EUHDFKHG

KLV ILGXFLDU\ GXWLHV WR 66, DQG WKDW KH DOVR FRQYHUWHG 66,¶V FRUSRUDWH DVVHWV IRU KLV SHUVRQDO XVH

&RXQWHUFO >'NW  @

       %DUWOHWW KDV PRYHG WR GLVPLVV 66,¶V FRXQWHUFODLP XQGHU 5XOHV E DQG E RI WKH

)HGHUDO 5XOHV RI &LYLO 3URFHGXUH 3O 7KRPDV 0 %DUWOHWW¶V 0RW WR 'LVPLVV 'HI 66,¶V &RXQWHUFOV

                                                 
>'NW  @ ³3O¶V 0RW´ 3O 7KRPDV 0 %DUWOHWW¶V 0HP RI 3 	 $ LQ 6XSS RI 3O¶V 0RW >'NW

 @ ³3O¶V 0HP´ %HFDXVH WKH &RXUW ILQGV WKDW 66,¶V FODLPV DUH EDUUHG E\ WKH VWDWXWH RI

OLPLWDWLRQV DQG EHFDXVH 66, OLNHO\ ODFNV OHJDO DXWKRULW\ WR VXH %DUWOHWW ZLWKRXW %DUWOHWW¶V FRQVHQW

LW ZLOO JUDQW %DUWOHWW¶V PRWLRQ WR GLVPLVV 66,¶V FRXQWHUFODLP

                                        %$&.*5281'

        %DUWOHWW IRXQGHG 6XLWH 6HUYLFHV LQ  $P &RPSO   7KH FRPSDQ\ SURYLGHV

³MDQLWRULDO FOHDQLQJ VHUYLFHV WR FRQGRPLQLXPV RIILFH VSDFHV WRZHUV DQG RWKHU SURSHUWLHV´ Id.

  ,Q  SXUVXDQW WR D VWRFN DVVLJQPHQW %DUWOHWW DQG 2YHUVODXJK EHFDPH HTXDO VKDUHKROGHUV

HDFK RZQLQJ D  VKDUH LQ WKH EXVLQHVV Id.   see also ([ % WR $P &RPSO VWRFN

DVVLJQPHQW ,Q  ³>G@XH WR D VWURQJ DQG LUUHSDUDEOH ULIW LQ WKH SHUVRQDO UHODWLRQVKLS´ RI WKH

SDUWLHV LW EHFDPH LPSRVVLEOH IRU WKH FRXSOH WR EH LQ WKH VDPH SODFH DW WKH VDPH WLPH Id.  

%DUWOHWW DOOHJHV WKDW KH DQG 2YHUVODXJK WKHQ DJUHHG WKDW %DUWOHWW ZRXOG PRYH DZD\ WR )ORULGD

2YHUVODXJK ZRXOG PDQDJH WKH EXVLQHVV DQG %DUWOHWW ZRXOG PDLQWDLQ KLV VDODU\ DQG EHQHILWV Id.

 ± 7KH FRPSODLQW DOOHJHV WKDW WKH SDUWLHV DELGHG E\ WKDW DUUDQJHPHQW IURP  WR 

Id.  

        %DUWOHWW DOOHJHV WKDW RYHU WLPH 2YHUVODXJK EHJDQ WR QHJOHFW WKH EXVLQHVV +H DOOHJHV WKDW

WKH FRPSDQ\ IDLOHG WR SD\ VWDWH RU IHGHUDO WD[HV IURP  XQWLO  ZKLFK XOWLPDWHO\ FDXVHG D

 WD[ OLDELOLW\ IRU WKH FRPSDQ\ DQG WKDW 2YHUVODXJK XVHG 66, IXQGV WR PDNH SHUVRQDO UHQW

SD\PHQWV $P &RPSO    %DUWOHWW DOOHJHV WKDW LQ  2YHUVODXJK EHJDQ WR IUHH]H KLP

RXW RI WKH EXVLQHVV E\ HOLPLQDWLQJ KLV DFFHVV WR FRUSRUDWH FKHFNLQJ DQG FUHGLW FDUG DFFRXQWV Id.

   +H DOOHJHV WKDW LQ  2YHUVODXJK WHUPLQDWHG %DUWOHWW¶V HPSOR\PHQW ZLWK 66, DQG

FRQYHUWHG KLP IURP DQ HPSOR\HH WR DQ LQGHSHQGHQW FRQWUDFWRU Id.   $QG LQ  2YHUVODXJK

                                                 
DOOHJHGO\ DJDLQ FKDQJHG %DUWOHWW¶V HPSOR\PHQW VWDWXV DQG FDWHJRUL]HG SD\PHQWV WR %DUWOHWW DV

³VKDUHKROGHU GLVWULEXWLRQV´ QRW VDODU\ Id.  

         %DUWOHWW ILOHG VXLW DJDLQVW 2YHUVODXJK RQ )HEUXDU\   LQ IHGHUDO FRXUW LQ )ORULGD

DOOHJLQJ WKDW 2YHUVODXJK EUHDFKHG KLV ILGXFLDU\ GXWLHV WR KLV IRUPHU SDUWQHU &RPSO  ±

7KDW VXLW ZDV WUDQVIHUUHG WR WKLV &RXUW 2UGHU $XJ   >'NW  @ 2Q $SULO  

%DUWOHWW DPHQGHG KLV FRPSODLQW WR DGG 6XLWH 6HUYLFHV DV D GHIHQGDQW $P &RPSO %DUWOHWW¶V

$PHQGHG &RPSODLQW UHTXHVWV D GHFODUDWRU\ MXGJPHQW DOOHJHV WKDW 2YHUVODXJK EUHDFKHG KLV

ILGXFLDU\ GXWLHV UHTXHVWV WKDW WKH &RXUW SHUPDQHQWO\ HQMRLQ 2YHUVODXJK IURP ³FRQWLQXLQJ WR

H[HUFLVH VROH FRQWURO RI 66,´ DQG IURP ³ZLWKKROG>LQJ@ VDODU\ LQFRPH GLVWULEXWLRQV DQG EHQHILWV´

IURP %DUWOHWW DQG GHPDQGV D SDUWLWLRQ RI WKH SDUWLHV¶ MRLQWO\RZQHG UHDO SURSHUW\ LQ :DVKLQJWRQ

'& Id.  ±

         'HVSLWH WKUHH UHIHUUDOV WR PHGLDWLRQ Vee 2UGHU 5HIHUULQJ &DVH WR 0HGLDWLRQ 1RY  

>'NW  @ 2UGHU 5HIHUULQJ &DVH WR 0DJ - )DFFLROD IRU 0HGLDWLRQ $SU   >'NW  @

2UGHU 5H5HIHUULQJ &DVH WR 0DJ - )DFFLROD IRU 0HGLDWLRQ -DQ   >'NW  @ DQG

QXPHURXV H[WHQVLRQV RI WKH SDUWLHV¶ PHGLDWLRQ GHDGOLQHV see 0LQ 2UGHU 6HSW   0LQ

2UGHU 1RY   0LQ 2UGHU -DQ   0LQ 2UGHU )HE   0LQ 2UGHU 0D\

  0LQ 2UGHU -XO\   WKH FDVH KDV QRW FRPH WR D QHJRWLDWHG UHVROXWLRQ $OWKRXJK

WKH PHGLDWLRQ IDLOHG LW GLG UHVXOW LQ DQ DJUHHPHQW WR IXQG DQ LQGHSHQGHQW DFFRXQWLQJ RI WKH

FRPSDQ\¶V DVVHWV See 6WDWXV 5HSRUW $SU   >'NW  @

         )DFHG ZLWK D FRPSDQ\ WKDW ZDV RZQHG LQ HTXDO VKDUHV E\ LQGLYLGXDOV ZLWK LUUHFRQFLODEOH

GLIIHUHQFHV RQ 2FWREHU   WKH &RXUW KHOG D VWDWXV FRQIHUHQFH DQG LQTXLUHG ZKHWKHU

GLVVROXWLRQ ZRXOG EH WKH DSSURSULDWH UHPHG\ See 0LQ (QWU\ 2FW   0LQ 2UGHU 6HSW 

                                                 
       2Q 2FWREHU   2YHUVODXJK ILOHG LQ '& 6XSHULRU &RXUW D VKDUHKROGHU GHULYDWLYH

DFWLRQ WR GLVVROYH 6XLWH 6HUYLFHV SXUVXDQW WR '& &RGH  D DQG PRYHG WR VWD\ WKH

IHGHUDO FRXUW DFWLRQ Overslaugh v. Bartlett &$% '& 6XSHU &W 2FW   see

([ & WR 'HI¶V 0RW WR 6WD\ 3URFHHGLQJV >'NW  @ 6XSHULRU &RXUW &RPSODLQW ,Q DGGLWLRQ

2YHUVODXJK¶V 6XSHULRU &RXUW SHWLWLRQ DOOHJHG WKDW %DUWOHWW EUHDFKHG KLV ILGXFLDU\ GXW\ ZDVWHG

FRUSRUDWH DVVHWV DQG KDG EHHQ XQMXVWO\ HQULFKHG Id.  ± :KLOH WKLV &RXUW QRWHG WKDW

³GLVVROXWLRQ PD\ ZHOO WXUQ RXW WR EH WKH DSSURSULDWH UHPHG\ IRU WKH LPSDVVH WKDW KDV EHHQ UHDFKHG

LQ WKLV FDVH´ LW GHQLHG ZLWKRXW SUHMXGLFH 2YHUVODXJK¶V 0RWLRQ WR 6WD\ DQG RUGHUHG WKH SDUWLHV WR

ILOH URXWLQH VWDWXV UHSRUWV WR XSGDWH WKH &RXUW RQ WKH SURFHHGLQJV LQ 6XSHULRU &RXUW 2UGHU -DQ

  >'NW  @ DW ± ,Q OLJKW RI WKH 6XSHULRU &RXUW DFWLRQ DQG ZLWK SODLQWLII¶V DJUHHPHQW

WKH &RXUW DOVR GLVPLVVHG DV PRRW &RXQWV ,,, DQG ,9 RI SODLQWLII¶V $PHQGHG &RPSODLQW ZKLFK

UHTXHVWHG WKDW WKH &RXUW HQMRLQ 2YHUVODXJK IURP OLPLWLQJ %DUWOHWW¶V DFFHVV WR WKH FRUSRUDWLRQ¶V

IXQGV 0LQ 2UGHU $SU  

       2Q 0D\   GHIHQGDQW 66, DQVZHUHG SODLQWLII¶V $PHQGHG &RPSODLQW DQG

FRXQWHUFODLPHG DJDLQVW SODLQWLII %DUWOHWW $QVZHU 	 &RXQWHUFO >'NW  @ 7KH FRXQWHUFODLP

DOOHJHV WKDW LW ZDV %DUWOHWW ± QRW 2YHUVODXJK ± ZKR EUHDFKHG KLV ILGXFLDU\ GXW\ DQG FRQYHUWHG

FRUSRUDWH DVVHWV &RXQWHUFO  ± 66, DOOHJHV WKDW XQWLO  %DUWOHWW DQG 2YHUVODXJK

RSHUDWHG WKH EXVLQHVV WRJHWKHU EXW IURP  WR  %DUWOHWW EHJDQ WR ZLWKGUDZ IURP WKH

PDQDJHULDO DQG GD\WRGD\ RSHUDWLRQV RI 66, DQG 2YHUVODXJK ZDV OHIW ZLWK WKH ³OLRQ¶V VKDUH´ RI

      7KH 6XSHULRU &RXUW PD\ GLVVROYH D FRUSRUDWLRQ ZKHUH ³$ 7KH GLUHFWRUV DUH GHDGORFNHG
LQ WKH PDQDJHPHQW RI WKH FRUSRUDWH DIIDLUV    % 7KH GLUHFWRUV RU WKRVH LQ FRQWURO RI WKH
FRUSRUDWLRQ KDYH DFWHG    LQ D PDQQHU WKDW LV LOOHJDO RSSUHVVLYH RU IUDXGXOHQW & 7KH
VKDUHKROGHUV DUH GHDGORFNHG LQ YRWLQJ SRZHU    RU ' 7KH FRUSRUDWH DVVHWV DUH EHLQJ PLVDSSOLHG
RU ZDVWHG´ '& &RGH  D
                                                 
WKRVH UROHV Id.  ± 66, DOVR DOOHJHV WKDW %DUWOHWW EHJDQ WR ZLWKGUDZ IURP WKH EXVLQHVV EHFDXVH

KH ³EHJDQ DEXVLQJ GUXJV DQG DOFRKRO´ Id.  

       $FFRUGLQJ WR 66, VLQFH %DUWOHWW¶V  PRYH WR )ORULGD KH KDV QRW ³SDUWLFLSDWHG LQ 66,¶V

EXVLQHVV LQ DQ\ PDQQHU ZKDWVRHYHU´ DQG LW ZDV 2YHUVODXJK ZKR PDQDJHG WKH EXVLQHVV Id.  ±

 66, GLVSXWHV WKH QRWLRQ WKDW %DUWOHWW KDG DQ\ DXWKRULW\ WR UHFHLYH IXQGV IURP WKH FRPSDQ\ DIWHU

KH UHORFDWHG DQG LW DOOHJHV WKDW %DUWOHWW LPSURSHUO\ XVHG 66, FRUSRUDWH EDQN DFFRXQWV DQG FUHGLW

FDUGV IRU KLV RZQ SHUVRQDO XVH Id.   66, FODLPV WKDW EHWZHHQ  DQG  %DUWOHWW XVHG KLV

FRUSRUDWH FUHGLW FDUG DQG FRPSDQ\ FKHFNV WR ZLWKGUDZ DSSUR[LPDWHO\  IURP 66,¶V

FRUSRUDWH DFFRXQWV Id.  ± ,Q DGGLWLRQ 66, DOOHJHV WKDW EHWZHHQ  DQG  %DUWOHWW

ZLWKGUHZ DSSUR[LPDWHO\  IURP KLV 66, FDSLWDO DFFRXQW ZKLFK FDXVHG WKH EDODQFH RI KLV

FDSLWDO DFFRXQW WR IDOO WR QHJDWLYH  Id.  ±

       66, DOOHJHV WKDW LQ OLJKW RI WKRVH GHYHORSPHQWV 2YHUVODXJK UHPRYHG %DUWOHWW¶V QDPH IURP

WKH VLJQDWXUH FDUGV RI 66,¶V EDQN DFFRXQWV LQ  &RXQWHUFO   %XW EHFDXVH %DUWOHWW

FRQWLQXHG WR KDYH DFFHVV WR FRPSDQ\ FUHGLW FDUGV 66, FRQWHQGV WKDW KH FRQWLQXHG WR FKDUJH

SHUVRQDO H[SHQVHV WR 66, Id 66, DOOHJHV WKDW %DUWOHWW WUDYHOOHG WR :DVKLQJWRQ '& RQ $XJXVW

  DWWHPSWHG WR ZLWKGUDZ FRUSRUDWH IXQGV IURP 66,¶V EDQN DFFRXQW DQG ZDV XQVXFFHVVIXO

Id.   7KH FRXQWHUFODLP DVVHUWV WKUHH FRXQWV EUHDFK RI ILGXFLDU\ GXWLHV &RXQW , FRQYHUVLRQ

&RXQW ,, DQG D FODLP IRU D GHFODUDWRU\ MXGJPHQW WKDW DGMXGLFDWHV ZKHWKHU %DUWOHWW EUHDFKHG KLV

ILGXFLDU\ GXWLHV &RXQW ,,, Id.  ±

       2Q $XJXVW   %DUWOHWW PRYHG WR GLVPLVV WKH FRXQWHUFODLP XQGHU 5XOHV E DQG

E 3O¶V 0RW 3O¶V 0HP %DUWOHWW DVVHUWV WKDW 66, ODFNV OHJDO DXWKRULW\ WR VXH %DUWOHWW

ZLWKRXW WKH DXWKRUL]DWLRQ RI 66,¶V %RDUG RI 'LUHFWRUV 3O¶V 0RW DW ± %DUWOHWW IXUWKHU DUJXHV

WKDW &RXQWV , DQG ,, RI WKH FRXQWHUFODLP ± EUHDFK RI ILGXFLDU\ GXW\ DQG FRQYHUVLRQ ± DUH EDUUHG E\

                                                 
WKH WKUHH\HDU VWDWXWH RI OLPLWDWLRQV Id. DW  )LQDOO\ %DUWOHWW PDLQWDLQV WKDW 66, LV QRW HQWLWOHG WR

D GHFODUDWRU\ MXGJPHQW 66, LQ LWV FRXQWHUFODLP FDQQRW DVN WKH &RXUW WR GHWHUPLQH ³WKH RZQHUVKLS

ULJKWV DQG UHVSRQVLELOLWLHV RI %DUWOHWW DQG 2YHUVODXJK´ EHFDXVH 2YHUVODXJK LV QRW D SDUW\ WR WKH

FRXQWHUFODLP Id. 66, UHVSRQGHG WR WKH PRWLRQ &RXQWHUFO 3O 66,¶V 2SS WR 0RW WR 'LVPLVV >'NW

 @ ³66,¶V 2SS´ DQG %DUWOHWW UHSOLHG 'HI 7KRPDV 0 %DUWOHWW¶V 5HSO\ 0HP WR 3O 66,

2SS WR 0RW WR 'LVPLVV >'NW  @ ³3O¶V 5HSO\´

       2Q 6HSWHPEHU   WKH 6XSHULRU &RXUW GLVPLVVHG ZLWKRXW SUHMXGLFH 2YHUVODXJK¶V

SHWLWLRQ WR GLVVROYH 6XLWH 6HUYLFHV 2UGHU *UDQWLQJ -RLQW 0RW WR 'LVPLVV 3HW IRU 'LVVROXWLRQ RI

6XLWH 6HUYV ,QF >'NW  @ DW  7KH FRXUW GHWHUPLQHG ± DSSDUHQWO\ DW WKH MRLQW UHTXHVW RI

2YHUVODXJK DQG 6XLWH 6HUYLFHV ± WKDW WKH SHQGHQF\ RI WKLV PDWWHU FRXQVHOHG LQ IDYRU RI GLVPLVVLQJ

WKH SHWLWLRQ Id. DW  7KH &RXUW H[SODLQHG WKDW ³SRWHQWLDO LQHTXLWDEOH FRQVHTXHQFHV´ PD\ UHVXOW

IURP WKH GLVVROXWLRQ ZKLOH WKLV SURFHHGLQJ ZDV RQJRLQJ

               7KH HTXLWDEOH FRQVLGHUDWLRQV UDLVHG E\ >2YHUVODXJK DQG 66,@ LQFOXGHG 
               6XLWH 6HUYLFHV¶ LQDELOLW\ WR SURVHFXWH WKH FODLPV LW KDV DVVHUWHG DJDLQVW
               'HIHQGDQW %DUWOHWW LQ WKLV IHGHUDO PDWWHU VKRXOG 'HIHQGDQW %DUWOHWW JDLQ
               FRQWURO RI WKH FRUSRUDWLRQ DQG WHUPLQDWH WKH FRUSRUDWLRQ¶V FRXQVHO RI UHFRUG
                WKH VXEVWDQWLDO LPSDFW RQ WKH YDOXH RI WKH FRUSRUDWLRQ DV ZHOO DV WKH WHUPV
               DQG FRQGLWLRQV RI WKH VDOH RI VKDUHV LQ WKH HYHQW WKDW 3ODLQWLII 2YHUVODXJK
               RU 'HIHQGDQW %DUWOHWW ZHUH RUGHUHG WR UHWXUQ RU GLVJRUJH IXQGV EHORQJLQJ WR
               WKH FRUSRUDWLRQ DQG  6XLWH 6HUYLFHV¶ UHFHQW DFFHSWDQFH LQWR WKH 'LVWULFW
               RI &ROXPELD¶V YROXQWDU\ GLVFORVXUH SURJUDP IRU WKH SXUSRVH RI QHJRWLDWLQJ
               WKH SD\PHQW RI SDVWGXH VDOHV WD[HV

Id. ,Q RWKHU ZRUGV ³>Z@HUH 'HIHQGDQW %DUWOHWW SHUPLWWHG WR SXUFKDVH 3ODLQWLII 2YHUVODXJK¶V VKDUHV

SULRU WR WKH UHVROXWLRQ RI WKLV IHGHUDO FRXUW SURFHHGLQJ LW LV DOO EXW FHUWDLQ WKDW 'HIHQGDQW %DUWOHWW

ZRXOG WHUPLQDWH 6XLWH 6HUYLFHV¶ FRXQVHO RI UHFRUG DQG GLVPLVV WKH FRUSRUDWLRQ¶V FRXQWHUFODLPV

DVVHUWHG DJDLQVW KLP LQ WKDW SURFHHGLQJ WKHUHE\ OHDYLQJ WKH FRUSRUDWLRQ XQDEOH WR SURVHFXWH ZKDW

                                                   
PD\ EH PHULWRULRXV FODLPV´ Id. DW  7KH FRXUW WKHUHIRUH GLVPLVVHG WKH SHWLWLRQ IRU GLVVROXWLRQ

ZLWKRXW SUHMXGLFH

                                    67$1'$5' 2) 5(9,(:

        ³7R VXUYLYH D >5XOH E@ PRWLRQ WR GLVPLVV D FRPSODLQW PXVW FRQWDLQ VXIILFLHQW IDFWXDO

PDWWHU DFFHSWHG DV WUXH WR µVWDWH D FODLP WR UHOLHI WKDW LV SODXVLEOH RQ LWV IDFH¶´ Ashcroft v. Iqbal

 86    TXRWLQJ Bell Atl. Corp. v. Twombly  86    ,Q Iqbal

WKH 6XSUHPH &RXUW UHLWHUDWHG WKH WZR SULQFLSOHV XQGHUO\LQJ LWV GHFLVLRQ LQ Twombly ³)LUVW WKH

WHQHW WKDW D FRXUW PXVW DFFHSW DV WUXH DOO RI WKH DOOHJDWLRQV FRQWDLQHG LQ D FRPSODLQW LV LQDSSOLFDEOH

WR OHJDO FRQFOXVLRQV´ DQG ³>V@HFRQG RQO\ D FRPSODLQW WKDW VWDWHV D SODXVLEOH FODLP IRU UHOLHI

VXUYLYHV D PRWLRQ WR GLVPLVV´ Id. DW ±

        $ FODLP LV IDFLDOO\ SODXVLEOH ZKHQ WKH SOHDGHG IDFWXDO FRQWHQW ³DOORZV WKH FRXUW WR GUDZ WKH

UHDVRQDEOH LQIHUHQFH WKDW WKH GHIHQGDQW LV OLDEOH IRU WKH PLVFRQGXFW DOOHJHG´ Id. DW  FLWLQJ

Twombly  86 DW  ³7KH SODXVLELOLW\ VWDQGDUG LV QRW DNLQ WR D µSUREDELOLW\ UHTXLUHPHQW¶

EXW LW DVNV IRU PRUH WKDQ D VKHHU SRVVLELOLW\ WKDW D GHIHQGDQW KDV DFWHG XQODZIXOO\´ Id. TXRWLQJ

Twombly  86 DW  $ SOHDGLQJ PXVW RIIHU PRUH WKDQ ³ODEHOV DQG FRQFOXVLRQV´ RU D

³IRUPXODLF UHFLWDWLRQ RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ´ id. TXRWLQJ Twombly  86 DW 

DQG ³>W@KUHDGEDUH UHFLWDOV RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ VXSSRUWHG E\ PHUH FRQFOXVRU\

VWDWHPHQWV GR QRW VXIILFH´ Id. FLWLQJ Twombly  86 DW 

        :KHQ FRQVLGHULQJ D PRWLRQ WR GLVPLVV XQGHU 5XOH E WKH FRPSODLQW LV FRQVWUXHG

OLEHUDOO\ LQ WKH SODLQWLII¶V IDYRU DQG WKH &RXUW VKRXOG JUDQW WKH SODLQWLII ³WKH EHQHILW RI DOO

LQIHUHQFHV WKDW FDQ EH GHULYHG IURP WKH IDFWV DOOHJHG´ Kowal v. MCI Commc’ns Corp.  )G

       ,Q OLJKW RI WKLV 0HPRUDQGXP 2SLQLRQ DQG 2UGHU JUDQWLQJ SODLQWLII¶V PRWLRQ WR GLVPLVV WKH
FRXQWHUFODLPV DQG DOWHULQJ WKH HTXLWDEOH ODQGVFDSH WKH SDUWLHV PD\ ZLVK WR UHWXUQ WR 6XSHULRU &RXUW
WR GHWHUPLQH WKH GLVVROXWLRQ FODLP
                                                   
  '& &LU  1HYHUWKHOHVV WKH &RXUW QHHG QRW DFFHSW LQIHUHQFHV GUDZQ E\ WKH

SODLQWLII LI WKRVH LQIHUHQFHV DUH XQVXSSRUWHG E\ IDFWV DOOHJHG LQ WKH FRPSODLQW QRU PXVW WKH &RXUW

DFFHSW SODLQWLII¶V OHJDO FRQFOXVLRQV See id. see also Browning v. Clinton  )G   '&

&LU  ,Q UXOLQJ XSRQ D PRWLRQ WR GLVPLVV IRU IDLOXUH WR VWDWH D FODLP D FRXUW PD\ RUGLQDULO\

FRQVLGHU RQO\ ³WKH IDFWV DOOHJHG LQ WKH FRPSODLQW GRFXPHQWV DWWDFKHG DV H[KLELWV RU LQFRUSRUDWHG

E\ UHIHUHQFH LQ WKH FRPSODLQW DQG PDWWHUV DERXW ZKLFK WKH &RXUW PD\ WDNH MXGLFLDO QRWLFH´

Gustave-Schmidt v. Chao  ) 6XSS G   ''&  FLWLQJ EEOC v. St. Francis

Xavier Parochial Sch.  )G  ± '& &LU 

                                            $1$/<6,6

,     66,¶V FODLPV DUH WLPH EDUUHG
       %DUWOHWW DUJXHV WKDW 66,¶V FODLPV RI EUHDFK RI ILGXFLDU\ GXW\ DQG FRQYHUVLRQ DUH EDUUHG E\

D WKUHH\HDU VWDWXWH RI OLPLWDWLRQV 3O¶V 0RW DW  see '& &RGH   $ PRWLRQ WR

GLVPLVV PD\ EH JUDQWHG RQ VWDWXWH RI OLPLWDWLRQV JURXQGV RQO\ LI ³WKH IDFWV JLYLQJ ULVH WR WKH GHIHQVH

DUH DSSDUHQW RQ WKH IDFH RI WKH FRPSODLQW´ Nat’l R.R. Passenger Corp. v. Lexington Ins. Co. 

) 6XSS G   ''&  $V WKH '& &LUFXLW KDV FDXWLRQHG ³EHFDXVH VWDWXWH RI

OLPLWDWLRQV LVVXHV RIWHQ GHSHQG RQ FRQWHVWHG TXHVWLRQV RI IDFW GLVPLVVDO LV DSSURSULDWH RQO\ LI WKH

FRPSODLQW RQ LWV IDFH LV FRQFOXVLYHO\ WLPHEDUUHG´ Firestone v. Firestone  )G  

'& &LU 

       66, VHHPV WR FRQFHGH WKDW LW ILOHG LWV FRXQWHUFODLP RXWVLGH RI WKH WKUHH\HDU VWDWXWH RI

OLPLWDWLRQV 66,¶V 2SS DW  +RZHYHU LW DUJXHV WKDW WKH VWDWXWH RI OLPLWDWLRQV VKRXOG EH HTXLWDEO\

WROOHG IRU WZR UHDVRQV ILUVW EHFDXVH %DUWOHWW WRRN DIILUPDWLYH VWHSV WR SUHYHQW 66, IURP VXLQJ LQ

WLPH E\ WU\LQJ WR OLPLW LWV DFFHVV WR FRXQVHO id. DW  DQG VHFRQG RQ WKH JURXQGV WKDW WKH WRUWV RI

EUHDFK RI ILGXFLDU\ GXW\ DQG FRQYHUVLRQ DUH FRQWLQXLQJ WRUWV ZKLFK WROO WKH VWDWXWH RI OLPLWDWLRQV

XQWLO WKH\ DUH FRPSOHWHG Id. DW  %HFDXVH WKH &RXUW ILQGV ± RQ WKH IDFH RI WKH FRXQWHUFODLP ±

                                                  
WKDW %DUWOHWW¶V DOOHJHG LQWHUIHUHQFH ZLWK 66,¶V DFFHVV WR FRXQVHO RFFXUUHG DIWHU WKH VWDWXWH RI

OLPLWDWLRQV KDG DOUHDG\ H[SLUHG DQG QHLWKHU FDXVH RI DFWLRQ ZDV FRQWLQXLQJ LQ QDWXUH LW ZLOO JUDQW

%DUWOHWW¶V PRWLRQ WR GLVPLVV WKRVH FODLPV

          $     $OO RI WKH DOOHJHG ZURQJGRLQJ WRRN SODFH PRUH WKDQ WKUHH \HDUV EHIRUH WKH
                 FRPSODLQW ZDV ILOHG
          8QGHU '& ODZ FODLPV RI EUHDFK RI ILGXFLDU\ GXW\ DQG FRQYHUVLRQ DUH VXEMHFW WR WKH FDWFK

DOO WKUHH\HDU OLPLWDWLRQ SHULRG IRXQG LQ '& &RGH   1HLWKHU SDUW\ FRQWHVWV WKH

DSSOLFDELOLW\ RI WKH VWDWXWH RI OLPLWDWLRQV 3O¶V 0HP DW  see 66,¶V 2SS DW  QRW DGGUHVVLQJ

ZKHWKHU LW FRPSOLHG ZLWK WKH OLPLWDWLRQV SHULRG DQG DUJXLQJ WKDW ³>W@KH VWDWXWH RI OLPLWDWLRQV VKRXOG

EH HTXLWDEO\ WROOHG´ 66, ILOHG LWV FRXQWHUFODLP RQ 0D\   &RXQWHUFO 7KHUHIRUH LI WKH

EUHDFKHV RI ILGXFLDU\ GXWLHV DQG DOOHJHG FRQYHUVLRQV WRRN SODFH EHIRUH 0D\   WKH\ DUH WLPH

EDUUHG

          66, GRHV QRW DOOHJH DQ\ EUHDFKHV RI ILGXFLDU\ GXW\ RU FRQYHUVLRQ GXULQJ  RU ODWHU LW

DOOHJHV RQO\ GLVFUHWH ZURQJIXO DFWV LQ  DQG  DQG GXULQJ WKH SHULRG EHWZHHQ  DQG

 &RXQWHUFO  ± ± 6SHFLILFDOO\ WKH FRXQWHUFODLP DOOHJHV WKDW LQ -DQXDU\ 

%DUWOHWW LVVXHG FKHFNV IURP 66, DQG XVHG 66,¶V FUHGLW FDUGV WR SD\ IRU SHUVRQDO H[SHQVHV WRWDOLQJ

DSSUR[LPDWHO\  Id.  ± 66, FODLPV WKDW ODWHU LQ  %DUWOHWW DJDLQ LVVXHG

FRPSDQ\ FKHFNV WRWDOLQJ DSSUR[LPDWHO\  WR FRYHU KLV RZQ SHUVRQDO QRQEXVLQHVV

H[SHQVHV Id.   ,Q  %DUWOHWW DOOHJHGO\ ZLWKGUHZ DSSUR[LPDWHO\  IURP 66,¶V

EDQN DFFRXQW Id.   66, DOOHJHV WKDW VLPLODU GLVFUHWH DFWV RI PDOIHDVDQFH WRRN SODFH XQWLO

2YHUVODXJK VWRSSHG %DUWOHWW IURP EHLQJ DEOH WR DFFHVV FRUSRUDWH IXQGV LQ $XJXVW RI  Id.

 ± 66, ZDV WKHUHIRUH RQ QRWLFH RI LWV FDXVH RI DFWLRQ IRU EUHDFK RI ILGXFLDU\ GXW\ DQG

FRQYHUVLRQ DV HDUO\ DV  DQG WKH VWDWXWH RI OLPLWDWLRQV EHJDQ WR UXQ DW WKDW WLPH See Jung v.

                                                   
Mundy, Holt & Mance, P.C.  )G   '& &LU  ³7KH VWDWXWH RI OLPLWDWLRQV

   EHJLQV WR UXQ RQFH D SODLQWLII KDV LQTXLU\ QRWLFH RI D SRWHQWLDO FDXVH RI DFWLRQ´

        ,W LV WUXH WKDW WKH FRXQWHUFODLP DOOHJHV PRUH ZURQJGRLQJ LQ VXFFHVVLYH \HDUV %XW EHFDXVH

QRQH RI WKH DOOHJDWLRQV LQ WKH FRXQWHUFODLP GHVFULEH D EUHDFK RI ILGXFLDU\ GXW\ RU FRQYHUVLRQ RI

66,¶V IXQGV DIWHU 0D\   DOO RI WKH FODLPV DUH EDUUHG E\ WKH WKUHH\HDU VWDWXWH RI OLPLWDWLRQV

        %      3ODLQWLII¶V DOOHJHG LQWHUIHUHQFH ZLWK 66,¶V UHWHQWLRQ RI FRXQVHO GLG QRW WROO WKH
                VWDWXWH RI OLPLWDWLRQV
        $V 66, SRLQWV RXW WKH VWDWXWH RI OLPLWDWLRQV PD\ EH WROOHG LQ FHUWDLQ FLUFXPVWDQFHV 8QGHU

WKH HTXLWDEOH HVWRSSHO GRFWULQH WKH OLPLWDWLRQV SHULRG FDQ EH WROOHG ZKHQ D GHIHQGDQW KDV WDNHQ

DFWLYH VWHSV WR SUHYHQW D FODLPDQW IURP OLWLJDWLQJ LWV FODLPV LQ WLPH Chung v. U.S. Dep't of Justice

 )G   '& &LU  FLWLQJ Currier v. Radio Free Europe  )G  

'& &LU  ³(TXLWDEOH HVWRSSHO SUHFOXGHV D GHIHQGDQW EHFDXVH RI KLV RZQ LQHTXLWDEOH

FRQGXFW ± VXFK DV SURPLVLQJ QRW WR UDLVH WKH VWDWXWH RI OLPLWDWLRQV GHIHQVH ± IURP LQYRNLQJ WKH

VWDWXWH RI OLPLWDWLRQV´ Id. $OWKRXJK D SODLQWLII QHHG QRW SOHDG HTXLWDEOH HVWRSSHO LQ WKH FRPSODLQW

EHFDXVH LW LV DQ ³DIILUPDWLYH GHIHQVH WKDW >WKH@ GHIHQGDQW PXVW SURYH´ WKH SODLQWLII PXVW VHW IRUWK

VXIILFLHQW IDFWV WR MXVWLI\ WKH DSSOLFDWLRQ RI WKH HTXLWDEOH HVWRSSHO GRFWULQH LI D ³GHIHQGDQW UDLVHV

WKH VWDWXWH RI OLPLWDWLRQV DV D GHIHQVH´ Firestone  )G DW 

        ,Q RUGHU WR SURYH LWV HQWLWOHPHQW WR HTXLWDEOH HVWRSSHO 66, PXVW PDNH D VXEVWDQWLDO

VKRZLQJ $V WKH '& &LUFXLW KDV H[SODLQHG ³>W@KH FRXUW¶V HTXLWDEOH SRZHU WR WROO WKH VWDWXWH RI

OLPLWDWLRQV ZLOO EH H[HUFLVHG RQO\ LQ H[WUDRUGLQDU\ DQG FDUHIXOO\ FLUFXPVFULEHG LQVWDQFHV´ Mondy

v. Sec’y of the Army  )G   '& &LU  ³)HGHUDO FRXUWV KDYH W\SLFDOO\

H[WHQGHG HTXLWDEOH UHOLHI    VSDULQJO\´ DQG KDYH EHHQ UHOXFWDQW WR H[WHQG LW ZKHUH ³WKH FODLPDQW

IDLOHG WR H[HUFLVH GXH GLOLJHQFH LQ SUHVHUYLQJ KLV OHJDO ULJKWV´ Irwin v. Dep’t of Veterans Affairs

 86    FLWLQJ Baldwin Cnty. Welcome Ctr. v. Brown  86   

                                                   
       66, DUJXHV WKDW LW LV HQWLWOHG WR HTXLWDEOH HVWRSSHO RI WKH OLPLWDWLRQV SHULRG EHFDXVH %DUWOHWW

LQWHUIHUHG ZLWK LWV DELOLW\ WR UHWDLQ FRXQVHO DQG DGYDQFH LWV FODLPV DJDLQVW %DUWOHWW RQ D WLPHO\ EDVLV

66,¶V 2SS DW  66, SRLQWV WR DQ HPDLO H[FKDQJH IURP $XJXVW  VHYHUDO PRUH H[FKDQJHV

IURP  DQG D WUDQVFULSW RI D VWDWXV FRQIHUHQFH KHOG LQ SULRU SURFHHGLQJV LQ WKLV DFWLRQ IURP

$XJXVW  See ([ ± WR 66,¶V 2SS >'NW      @ %XW WKH

HYLGHQFH IURP  GRHV QRW VXSSRUW 66,¶V FRQWHQWLRQ DQG WKH RWKHU HYHQWV WRRN SODFH DIWHU WKH

OLPLWDWLRQV SHULRG KDG DOUHDG\ H[SLUHG

       7KH $XJXVW  HPDLOV UHODWH WR HIIRUWV PDGH E\ FRXQVHO IRU %DUWOHWW WR VHUYH WKH DPHQGHG

FRPSODLQW WKDW DGGHG 66, DV D GHIHQGDQW See ([  WR 66,¶V 2SS +H ZURWH WR 2YHUVODXJK¶V

DWWRUQH\ WR DVN LI 2YHUVODXJK ZRXOG DFFHSW VHUYLFH RQ EHKDOI RI WKH FRPSDQ\

               >$@V \RX NQRZ D GHIHQGDQW PXVW EH VHUYHG ZLWKLQ  GD\V RI ILOLQJ D
               ODZVXLW , GRQ¶W NQRZ ZKR ZLOO UHSUHVHQW 66, ± RQO\ 0U 2YHUVODXJK KDV
               FRQWURO RYHU UHWHQWLRQ RI DQ DWWRUQH\ DV GH IDFWR OHDGHU RI 66, +RZHYHU
               WKDW GRHV QRW DOWHU WKH IDFW WKDW 66, PXVW EH VHUYHG

               1RUPDOO\ D UHJLVWHUHG DJHQW DFFHSWV SURFHVV ,Q RXU FDVH 7KRPDV %DUWOHWW
               LV WKH UHJLVWHUHG DJHQW DFFRUGLQJ WR 66, ILOLQJ UHFRUGV    +RZHYHU GXH WR
               WKLV XQXVXDO FLUFXPVWDQFH , WKLQN WKH PRUH SUXGHQW FRXUVH RI DFWLRQ LV WR
               KDYH 0U 2YHUVODXJK RU DQRWKHU DXWKRUL]HG FRUSRUDWH RIILFHU YROXQWDULO\
               DFFHSW VHUYLFH RQ EHKDOI RI 66,

Id. DW ± 7KLV UHIHUHQFH WR WKH IDFW WKDW LW ZDV 2YHUVODXJK ZKR KDG GH IDFWR FRQWURO RYHU 66,¶V

DFFHVV WR FRXQVHO FDQQRW EH FKDUDFWHUL]HG DV DQ DWWHPSW E\ %DUWOHWW WR REVWUXFW 66,¶V DELOLW\ WR

SURVHFXWH LWV FODLPV

       ,W LV WUXH WKDW DIWHU 66, VHFXUHG FRXQVHO %DUWOHWW REMHFWHG WR WKH VHOHFWLRQ RI DQ DWWRUQH\

ZLWKRXW KLV FRQVHQW DQG KH WRRN VWHSV WR WHUPLQDWH WKH UHSUHVHQWDWLRQ See ([V ± WR 66,¶V 2SS

%XW WKRVH HIIRUWV WRRN SODFH ORQJ DIWHU WKH OLPLWDWLRQV SHULRG KDG DOUHDG\ H[SLUHG 66, FDQQRW QRZ

FODLP WKDW %DUWOHWW VKRXOG EH HTXLWDEO\ HVWRSSHG IURP LQYRNLQJ D VWDWXWH RI OLPLWDWLRQV WKDW H[SLUHG

LQ  EHFDXVH RI KLV DFWLRQV LQ 

                                                  
       &      66,¶V FRQWLQXLQJ WRUW GHIHQVH WR WKH VWDWXWH RI OLPLWDWLRQV IDLOV

       66, QH[W DVVHUWV WKDW LW VKRXOG EH H[FXVHG IURP WKH VWDWXWH RI OLPLWDWLRQV EHFDXVH LWV FODLPV

RI EUHDFK RI ILGXFLDU\ GXW\ DQG FRQYHUVLRQ FRQVWLWXWH FRQWLQXLQJ WRUWV WKDW WROO WKH VWDWXWH RI

OLPLWDWLRQV )RU D FODLP WR FRQVWLWXWH D FRQWLQXLQJ WRUW LW PXVW EH ³RQH WKDW FRXOG QRW UHDVRQDEO\

KDYH EHHQ H[SHFWHG WR EH PDGH WKH VXEMHFW RI D ODZVXLW ZKHQ LW ILUVW RFFXUUHG EHFDXVH LWV FKDUDFWHU

DV D YLRODWLRQ GLG QRW EHFRPH FOHDU XQWLO LW ZDV UHSHDWHG GXULQJ WKH OLPLWDWLRQV SHULRG W\SLFDOO\

EHFDXVH LW LV RQO\ LWV FXPXODWLYH LPSDFW    WKDW UHYHDOV LWV LOOHJDOLW\´ Keohane v. United States

 )G   '& &LU  TXRWLQJ Taylor v. FDIC  )G   '& &LU 

$ FRQWLQXLQJ WRUW PXVW EH ³D FRQWLQXRXV DQG UHSHWLWLRXV ZURQJ    ZLWK GDPDJHV IORZLQJ IURP WKH

DFW DV D ZKROH´ UDWKHU WKDQ D VHULHV RI GLVFUHWH ZURQJV Chalabi v. Hashemite Kingdom of Jordan

 )G   '& &LU  TXRWLQJ Beard v. Edmondson & Gallagher  $G 

 '& 

       $ UHYLHZ RI WKH FRXQWHUFODLP PDNHV FOHDU WKDW 66,¶V FODLPV IRU EUHDFK RI ILGXFLDU\ GXW\

DQG FRQYHUVLRQ ZHUH QRW FRQWLQXRXV LQ QDWXUH 66, KDV DOOHJHG PRUH WKDQ RQH LQFLGHQW LQYROYLQJ D

GLVWLQFW EUHDFK RI ILGXFLDU\ GXW\ RU WKH FRQYHUVLRQ RI FRUSRUDWH DVVHWV WKDW WRRN SODFH RYHU D SHULRG

RI \HDUV $V WKH (LJKWK &LUFXLW KDV UHDVRQHG D EUHDFK RI D ILGXFLDU\ GXW\ RU FRQYHUVLRQ DULVLQJ

IURP VHSDUDWH WUDQVDFWLRQV RU ILQDQFLDO GLVWULEXWLRQV DUH QRW FRQWLQXRXV WRUWV EHFDXVH WKRVH DFWV

³DUH µVHSDUDWH GLVWLQFW DQG FRXOG KDYH EHHQ FKDOOHQJHG E\ D SODLQWLII¶ ZKHQ WKH\ RFFXUUHG´

Roemmich v. Eagle Eye Dev., LLC  )G   WK &LU  TXRWLQJ Hope v. Klabal

 )G   WK &LU  see also Limestone Dev. Corp. v. Village of Lemont, Ill. 

)G   WK &LU  ³/LNH WRR PDQ\ OHJDO GRFWULQHV WKH µFRQWLQXLQJ YLRODWLRQ¶ GRFWULQH

LV PLVQDPHG 6XSSRVH WKDW \HDU DIWHU \HDU IRU WHQ \HDUV \RXU HPSOR\HU SD\V \RX OHVV WKDQ WKH

PLQLPXP ZDJH 7KDW LV D FRQWLQXLQJ YLRODWLRQ %XW LW GRHV QRW HQWLWOH \RX WR ZDLW XQWLO \HDU 

                                                 
DVVXPLQJ IRU WKH VDNH RI LOOXVWUDWLRQ WKDW WKH VWDWXWH RI OLPLWDWLRQV LV ILYH \HDUV DQG WKHQ VXH QRW

RQO\ IRU WKH ZDJHV \RX VKRXOG KDYH UHFHLYHG LQ \HDU  EXW DOVR IRU WKH ZDJHV \RX VKRXOG KDYH

UHFHLYHG LQ \HDUV  WKURXJK  7KH VWDWXWH RI OLPLWDWLRQV EHJLQV WR UXQ XSRQ LQMXU\   ,W LV WKXV D

GRFWULQH QRW DERXW D FRQWLQXLQJ EXW DERXW D FXPXODWLYH YLRODWLRQ´

          66, FRXOG KDYH EURXJKW FODLPV IRU EUHDFK RI ILGXFLDU\ GXW\ RU FRQYHUVLRQ DIWHU %DUWOHWW

DOOHJHGO\ XQODZIXOO\ GLSSHG LQWR WKH FRUSRUDWH FRIIHUV RQ DQ\ RI WKH RFFDVLRQV EHWZHHQ  DQG

 GHVFULEHG LQ WKH FRXQWHUFODLP (DFK LQVWDQFH FRQVWLWXWHG D ³GLVFUHWH DFW´ IRU ZKLFK %DUWOHWW

FRXOG KDYH EHHQ KHOG OLDEOH DQG IURP ZKLFK GDPDJHV DOOHJHGO\ IORZHG See Roemmich  )G

DW 

          7KHUHIRUH FRXQWV , DQG ,, RI LWV FRXQWHUFODLP DUH EDUUHG E\ WKH VWDWXWH RI OLPLWDWLRQV DQG

ZLOO EH GLVPLVVHG

,,       (YHQ LI 66, FRXOG DYRLG WKH VWDWXWH RI OLPLWDWLRQV SUREOHP LW OLNHO\ ODFNV OHJDO
          DXWKRULW\ WR VXH %DUWOHWW
          %DUWOHWW DOVR PDLQWDLQV WKDW 66, ODFNV WKH OHJDO DXWKRULW\ WR EULQJ FODLPV DJDLQVW KLP

EHFDXVH DV D ILIW\SHUFHQW VKDUHKROGHU RI 66, %DUWOHWW ZRXOG KDYH KDG WR DXWKRUL]H WKH FRUSRUDWLRQ

WR VXH DQG KHUH KH REYLRXVO\ GLG QRW GR VR 3O¶V 0HP DW ± 8QGHU WKH '& &RGH ³>D@OO

FRUSRUDWH SRZHUV VKDOO EH H[HUFLVHG E\ RU XQGHU WKH DXWKRULW\ RI WKH ERDUG RI GLUHFWRUV RI WKH

FRUSRUDWLRQ DQG WKH DFWLYLWLHV DQG DIIDLUV RI WKH FRUSRUDWLRQ VKDOO EH PDQDJHG E\ RU XQGHU WKH

GLUHFWLRQ DQG VXEMHFW WR WKH RYHUVLJKW RI LWV ERDUG RI GLUHFWRUV    ´ '& &RGH  ± 3DUW

RI WKLV PDQDJHPHQW DXWKRULW\ LQFOXGHV ³GHFLVLRQV WR OLWLJDWH RQ EHKDOI RI WKH FRUSRUDWLRQ´

Behradrezaee v. Dashtara  $G   '&  +RZHYHU ³WR HQIRUFH D FRUSRUDWH

FDXVH RI DFWLRQ DJDLQVW RIILFHUV GLUHFWRUV DQG WKLUG SDUWLHV´ D VKDUHKROGHU PXVW EULQJ D GHULYDWLYH

FODLP Kamen v. Kemper Fin. Servs., Inc.  86    $V WKH 6XSUHPH &RXUW

H[SODLQHG ³WKH SXUSRVH RI WKH GHULYDWLYH DFWLRQ ZDV WR SODFH LQ WKH KDQGV RI WKH LQGLYLGXDO

                                                  
VKDUHKROGHU   D PHDQV WR SURWHFW WKH LQWHUHVWV RI WKH FRUSRUDWLRQ IURP WKH PLVIHDVDQFH DQG

PDOIHDVDQFH RI IDLWKOHVV GLUHFWRUV DQG PDQDJHUV´ Id. FLWLQJ Cohen v. Beneficial Loan Corp. 

86   

       Behradrezaee DQG Kamen GR QRW UHVROYH WKH NH\ TXHVWLRQ LQ WKLV FDVH ZKLFK LV ZKHWKHU D

ILIW\SHUFHQW VKDUHKROGHU PD\ DXWKRUL]H WKH FRUSRUDWLRQ WR VXH WKH RWKHU ILIW\SHUFHQW VKDUHKROGHU

$V DQRWKHU IHGHUDO GLVWULFW FRXUW KDV REVHUYHG ³>W@KHUH LV QR FOHDU UXOH DERXW ZKHQ D FRUSRUDWLRQ

FDQ LQLWLDWH OLWLJDWLRQ ZLWKRXW WKH DXWKRUL]DWLRQ RI LWV ERDUG RI GLUHFWRUV´ Advanced Optics Elecs.,

Inc. v. Robins  ) 6XSS G   '10  $QG QHLWKHU WKH SDUWLHV QRU WKH &RXUW

KDV LGHQWLILHG DQ\ DXWKRULW\ IURP WKLV MXULVGLFWLRQ WR VXSSRUW WKH SURSRVLWLRQ WKDW 66, FRXOG VXH

%DUWOHWW ZLWKRXW KLV FRQVHQW DV DQ HTXDO VKDUHKROGHU

       %DUWOHWW KDV GLUHFWHG WKH &RXUW WR DXWKRULW\ IURP WKH VWDWH FRXUWV RI 1HZ W@KH ERDUG RI GLUHFWRUV VKDOO FRQVLVW RI RQH RU PRUH PHPEHUV´ 1< %XV &RUS /DZ

 D 7KH FRXUW LQ COR Marketing UHDVRQHG WKDW EHFDXVH ³WKH /HJLVODWXUH KDV LPSOLFLWO\

       3ODLQWLII FLWHV ³Grimes v. McDonald  $G   '& ´ IRU WKH SURSRVLWLRQ
WKDW D FRUSRUDWLRQ WKURXJK LWV ERDUG RI GLUHFWRUV PXVW PDNH WKH GHFLVLRQ WR DVVHUW D FODLP RQ EHKDOI
RI WKDW FRUSRUDWLRQ 3O¶V 0HP DW  %XW DV 66, FRUUHFWO\ SRLQWV RXW ± WKH FDVH WKDW SODLQWLII FLWHV
LV QHLWKHU FDSWLRQHG ³*ULPHV Y 0F'RQDOG´ QRU LV LW IURP WKH '& &RXUW RI $SSHDOV See Grimes
v. Donald  $G   'HO  overruled on other grounds Brehm v. Eisner 
$G  'HO  See 66,¶V 2SS DW  ,Q DQ\ HYHQW Grimes ZDV D VKDUHKROGHU GHULYDWLYH
FODLP LQ ZKLFK D VKDUHKROGHU IDLOHG WR GHPDQG WKDW WKH %RDUG LQVWHDG RI WKH VKDUHKROGHU EULQJ D
SDUWLFXODU FODLP DQG WKH FRXUW UHLWHUDWHG WKH LPSRUWDQFH RI WKH GHPDQG UHTXLUHPHQW Grimes 
$G DW  7KXV HYHQ LI LW ZHUH IURP WKLV MXULVGLFWLRQ LW LV GLVWLQJXLVKDEOH
                                                 
UHFRJQL]HG WKH GHVLUH IRU HTXDO FRQWURO LQ VRPH FORVHO\ KHOG FRUSRUDWLRQV´ LW ZRXOG ³GLVUHJDUG>@

IXQGDPHQWDO UXOHV RI DJHQF\ ODZ´ LI D FRUSRUDWLRQ ZDV DOORZHG WR UHPHG\ D GHDGORFN ³E\ DQ

H[HUFLVH RI SUHVLGHQWLDO SRZHU´ COR Mktg.  ) 6XSS DW  LQWHUQDO FLWDWLRQV DQG TXRWDWLRQV

RPLWWHG 7KH 1HZ W@KH ERDUG RI GLUHFWRUV VKDOO FRQVLVW RI RQH RU PRUH PHPEHUV´ 1< %XV

&RUS /DZ  D 7KH '& &RGH VLPLODUO\ SURYLGHV WKDW ³>D@ ERDUG RI GLUHFWRUV VKDOO FRQVLVW RI

RQH RU PRUH LQGLYLGXDOV´ '& &RGH  

       1HZ @ %DUWOHWW EUHDFKHG KLV ILGXFLDU\ GXWLHV RZHG WR 66,  WKDW
                %DUWOHWW¶V DFFHVV WR DQG UHPRYDO RI IXQGV IURP 66, DQG RWKHUZLVH LQFXUULQJ
                >RI@ GHEWV RQ EHKDOI RI 66, WKDW ZHUH XQUHODWHG WR 66,¶V EXVLQHVV ZHUH
                LPSURSHU >@  WKDW %DUWOHWW PXVW DFFRXQW IRU DQG UHSD\ DOO IXQGV KH
                H[WUDFWHG IURP 66, WKDW ZHUH QRW UHODWHG WR 66,¶V EXVLQHVV DQG 
                >D@IIRUGLQJ DQ\ DQG DOO RWKHU DQG IXUWKHU UHOLHI WR 66, DV MXVWLFH DQG LWV FDXVH
                UHTXLUH

&RXQWHUFO DW ±

        ,Q JHQHUDO D FRXQW IRU D GHFODUDWRU\ MXGJPHQW ³LV QRW FRJQL]DEOH DV D VHSDUDWH FDXVH RI

DFWLRQ EXW LV PRUH SURSHUO\ LQFOXGHG LQ WKH>@ SUD\HU IRU UHOLHI´ Bridges v. Blue Cross & Blue

Shield Ass’n  ) 6XSS   ''&  0RUH LPSRUWDQWO\ ³WKH 'HFODUDWRU\ -XGJPHQW

$FW µLV QRW DQ LQGHSHQGHQW VRXUFH RI IHGHUDO MXULVGLFWLRQ¶´ EXW RQO\ ³SUHVXSSRVHV WKH H[LVWHQFH RI

D MXGLFLDOO\ UHPHGLDEOH ULJKW´ C&E Servs., Inc. v. D.C. Water & Sewer Auth.  )G  

'& &LU  TXRWLQJ Schilling v. Rogers  86    ³$FFRUGLQJO\ FRXUWV

       7KH 'HFODUDWRU\ -XGJPHQW $FW VWDWHV WKDW ³>L@Q D FDVH RI DFWXDO FRQWURYHUV\ ZLWKLQ LWV
MXULVGLFWLRQ    DQ\ FRXUW RI WKH 8QLWHG 6WDWHV    PD\ GHFODUH WKH ULJKWV DQG RWKHU OHJDO UHODWLRQV
RI DQ\ LQWHUHVWHG SDUW\ VHHNLQJ VXFK GHFODUDWLRQ ZKHWKHU RU QRW IXUWKHU UHOLHI LV RU FRXOG EH
VRXJKW´  86&  D
                                                   
KDYH EURDG GLVFUHWLRQ WR GHFOLQH WR HQWHU GHFODUDWRU\ MXGJPHQWV´ Boone v. MountainMade Found.

 ) 6XSS G   ''& 

         $ FRXUW PD\ GLVPLVV DV PRRW D FODLP IRU GHFODUDWRU\ UHOLHI ZKHUH WKH FODLP GXSOLFDWHV RU LV

ZKROO\ VXEVXPHG E\ DQRWKHU FODLP WKDW KDV EHHQ GLVPLVVHG Id. +HUH 66,¶V FODLP IRU D GHFODUDWRU\

MXGJPHQW LV ZKROO\ VXEVXPHG E\ LWV FODLP IRU EUHDFK RI ILGXFLDU\ GXW\ DQG FRQYHUVLRQ 7KHUHIRUH

&RXQW ,,, RI WKH FRXQWHUFODLP ZLOO EH GLVPLVVHG DV PRRW

                                          &21&/86,21

         3XUVXDQW WR )HGHUDO 5XOH RI &LYLO 3URFHGXUH E DQG IRU WKH IRUHJRLQJ UHDVRQV LW LV

KHUHE\

         25'(5(' WKDW SODLQWLII %DUWOHWW¶V 0RWLRQ WR 'LVPLVV GHIHQGDQW 6XLWH 6HUYLFHV ,QF¶V

&RXQWHUFODLP >'NW  @ LV *5$17(' DQG LW LV

         )857+(5 25'(5(' WKDW GHIHQGDQW 6XLWH 6HUYLFHV ,QF¶V &RXQWHUFODLP LV

',60,66('

           62 25'(5('

                                                      $0< %(50$1 -$&.621
                                                      8QLWHG 6WDWHV 'LVWULFW -XGJH

'$7( 0DUFK