Court Opinion

ID: 2969575
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:52:10.630961+00
Date Added: 2024-06-11T11:43:25.271726
License: Public Domain

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 DS

81,7('67$7(6&28572)$33($/6
               )257+(6,;7+&,5&8,7
                 BBBBBBBBBBBBBBBBB

 81,7(' 67$7(6 2) $0(5,&$        ;
           3ODLQWLII$SSHOOHH     
                                   
                                     1RV
           Y                      
                                    !
                                   
 75$9,6 &2//,16          
 :,//,$0 s :$5' 
       'HIHQGDQWV$SSHOODQWV 
                                   
                                  1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
     IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL
   1Rn6DQGUD6%HFNZLWK'LVWULFWsXGJH
                $UJXHGsDQXDU\
           'HFLGHGDQG)LOHG$XJXVW
  %HIRUHs21(61255,6DQG6,/(5&LUFXLWsXGJHV
                   BBBBBBBBBBBBBBBBB
                        &2816(/
$5*8('  :LOOLDP s 5DSS &LQFLQQDWL 2KLR : .HOO\
sRKQVRQ 2)),&( 2) 7+( )('(5$/ 38%/,&
'()(1'(56287+(51',675,&72)2+,2&LQFLQQDWL
2KLR IRU $SSHOODQWV  &KULVWRSKHU . %DUQHV 81,7('
67$7(6 $77251(< &LQFLQQDWL 2KLR IRU $SSHOOHH
21%5,():LOOLDPs5DSS&LQFLQQDWL2KLR:.HOO\

                             
     8QLWHG6WDWHVY&ROOLQVHWDO         1RV

sRKQVRQ 2)),&( 2) 7+( )('(5$/ 38%/,&
'()(1'(56287+(51',675,&72)2+,2&LQFLQQDWL
2KLRIRU$SSHOODQWV&KULVWRSKHU.%DUQHV7HUU\/HKPDQQ
7LPRWK\ ' 2DNOH\ 81,7(' 67$7(6 $77251(<6
&LQFLQQDWL2KLRIRU$SSHOOHH
  1255,6sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK
6,/(5 s MRLQHG  s21(6 s SS  GHOLYHUHG D
VHSDUDWHFRQFXUULQJRSLQLRQ
                      BBBBBBBBBBBBBBBBB
                          23,1,21
                      BBBBBBBBBBBBBBBBB
   $/$1 ( 1255,6 &LUFXLW sXGJH  'HIHQGDQWV 7UDYLV
&ROOLQVDQG:LOOLDP:DUGZHUHFKDUJHGZLWKFRQVSLUDF\WR
FRPPLW EDQN UREEHU\ EDQN UREEHU\ DQG XVH RI D ILUHDUP
GXULQJDFULPHRIYLROHQFHLQYLRODWLRQRI86&
FDQGDG:DUGZDVDOVRFKDUJHGZLWK
EHLQJ D IHORQ LQ SRVVHVVLRQ RI D ILUHDUP LQ YLRODWLRQ RI 
86&JDQGD'HIHQGDQWVZHUHFRQYLFWHG
IROORZLQJ D MXU\ WULDO  7KH\ DUJXH WKDW WKH FRXUW HUUHG LQ
DOORZLQJMXURUVWRDVNTXHVWLRQVDQGGHQ\LQJWKHLUPRWLRQVIRU
DQHZWULDOEDVHGRQQHZO\GLVFRYHUHGHYLGHQFH:DUGDOVR
DVVHUWVWKDWWKHFRXUWHUUHGLQSHUPLWWLQJSUHMXGLFLDOWHVWLPRQ\
E\ D JRYHUQPHQW ZLWQHVV DOORZLQJ WKH JRYHUQPHQW WR DVN
:DUGjVDOLELZLWQHVVDERXW FHUWDLQDFWLRQVDQGUHIXVLQJWR
JLYH D GHIHQVH WKHRU\ MXU\ LQVWUXFWLRQ  )LQDOO\ GHIHQGDQWV
PDLQWDLQWKDWWKHFRXUWLPSURSHUO\FDOFXODWHGWKHLUVHQWHQFHV
  %HFDXVHUHVROXWLRQRIGHIHQGDQWVjLVVXHVFRQFHUQLQJMXURUVj
TXHVWLRQLQJ RI ZLWQHVVHV DQG &ROOLQVj FKDOOHQJH WR KLV
VHQWHQFHXQGHUWKHVHFRQGDSSOLFDWLRQQRWHWR866HQWHQFLQJ
*XLGHOLQHV 0DQXDO  . PD\ KDYH SUHFHGHQWLDO YDOXH
WKRVHLVVXHVZLOOEHDGGUHVVHGEHORZ7KHUHPDLQLQJLVVXHV
UDLVHG E\ GHIHQGDQWV DUH DGGUHVVHG LQ DQ XQSXEOLVKHG
DSSHQGL[WRWKLVRSLQLRQ
1RV         8QLWHG6WDWHVY&ROOLQVHWDO         

                                ,
  2Q1RYHPEHU:DUGZHQWLQWRDEDQNSRLQWHGD
VDZHGRIIVKRWJXQDWWHOOHU0HORG\'HPDUHVWDQGGHPDQGHG
PRQH\%HIRUH'HPDUHVWFRXOGUHVSRQGWKHVKRWJXQZHQW
RII FDXVLQJ KHU H[WHQVLYH LQMXULHV  :DUG IOHG WKH EDQN
ZLWKRXWDQ\PRQH\DQGHVFDSHGLQDFDUGULYHQE\&ROOLQV
7HVWLPRQ\DWWULDOLQGLFDWHGWKDWWKHVKRWJXQXVHGLQWKHEDQN
UREEHU\ KDG EHHQ REWDLQHG WKURXJK WKH EXUJODU\ RI 3DXO
'LVTXHjVKRPH
  $WWULDOWKHMXGJHDOORZHGMXURUVWRSURSRVHTXHVWLRQVWREH
DVNHG RI ZLWQHVVHV  7KH UHFRUG GRHV QRW UHYHDO ZKHWKHU
FRXQVHONQHZSULRUWRWKHWULDOWKDWWKHMXGJHLQWHQGHGWRDOORZ
MXURUTXHVWLRQLQJ7KHFRXUWLQIRUPHGWKHMXU\WKDW
     7KLV&RXUWGRHVQRWKDYHDUXOHDJDLQVWWKHDVNLQJRI
  TXHVWLRQVE\MXURUV7KH&RXUWGRHVKRZHYHULPSRVH
  VRPH JXLGHOLQHV WKDW JRYHUQ WKH DVNLQJ RI TXHVWLRQV
  3OHDVHZLWKKROGDQ\TXHVWLRQVXQWLODIWHUDZLWQHVVKDV
  FRPSOHWHG KLV RU KHU WHVWLPRQ\  'R QRW LQWHUUXSW WKH
  H[DPLQDWLRQ RI D ZLWQHVV LQ RUGHU WR DVN D TXHVWLRQ
  :KHQDZLWQHVVKDVILQLVKHGKLVRUKHUWHVWLPRQ\WKHQLI
  WKHUHLVVRPHVXEVWDQWLDOTXHVWLRQLQ\RXUPLQG\RXPD\
  DGGUHVVDQLQTXLU\WRWKHZLWQHVVE\ZULWLQJWKHTXHVWLRQ
  RQ D SLHFH RI SDSHU DQG SDVVLQJ LW WR WKH FRXUWURRP
  GHSXW\,I\RXUTXHVWLRQLVDQDSSURSULDWHRQH,ZLOODVN
  LWRIWKHZLWQHVVDQG,ZLOOWKHQSHUPLWFRXQVHOIRUWKH
  SDUWLHVWRDVNDQ\DSSURSULDWHIROORZXSTXHVWLRQV
'XULQJWKHWULDOWKHFRXUWDSSHDUVWRKDYHDVNHGWKHMXURUVLI
WKH\KDGTXHVWLRQVIRUHDFKZLWQHVVDERXWWROHDYHWKHVWDQG
$Q H[DPSOH RI ZKDW WKH FRXUW DVNHG LV  m/DGLHV DQG
JHQWOHPHQRIWKHMXU\LVWKHUHDQ\RQHZKRKDVDVXEVWDQWLDO
TXHVWLRQLQKLVRUKHUPLQGWKDW\RXZRXOGOLNHSXWWR>WKH
ZLWQHVV@ EHIRUH KH OHDYHV WKH ZLWQHVV VWDQG"l  2Q VRPH
RFFDVLRQVWKHFRXUWLQGLFDWHGWKDWLWZRXOGQRWDVNDTXHVWLRQ
EHFDXVHLWZDVLQDSSURSULDWHRIWHQH[SODLQLQJWKDWDTXHVWLRQ
ZDV QRW DSSURSULDWH IRU mWHFKQLFDOOHJDO UHDVRQVl  7KH
SUHOLPLQDU\ DQG ILQDO MXU\ LQVWUXFWLRQV DOVR LQIRUPHG WKH
MXURUV WKDW ZKHQ WKH MXGJH VXVWDLQHG DQ REMHFWLRQ WR D
      8QLWHG6WDWHVY&ROOLQVHWDO       1RV       1RV       8QLWHG6WDWHVY&ROOLQVHWDO   

TXHVWLRQWKHMXURUVKDGWRLJQRUHWKHTXHVWLRQDQGQRWJXHVV         GHPRQVWUDWHGDYLRODWLRQRIWKHLUGXHSURFHVVULJKWWRDIDLU
DWWKHDQVZHU                                                        WULDO
  &ROOLQV ZDV VHQWHQFHG LQ $SULO   ,Q FDOFXODWLQJ KLV     2XWVLGHRIWKHDERYHDUHDVRIGLVDJUHHPHQW,FRQFXULQDOO
VHQWHQFH WKH FRXUW JURXSHG WRJHWKHU WKH EDQN UREEHU\ DQG     DVSHFWVRIWKHPDMRULW\RSLQLRQ
FRQVSLUDF\FRXQWVDQGEHJDQZLWKDEDVHRIIHQVHOHYHORI
XQGHU WKH UREEHU\ JXLGHOLQH  6HH 86 6(17(1&,1*
*8,'(/,1(6 0$18$/%D7KHFRXUWDGMXVWHG
WKHEDVHRIIHQVHOHYHOLQFUHDVLQJLWE\WZROHYHOVEHFDXVHWKH
RIIHQVHLQYROYHGWKHSURSHUW\RIDEDQNDQGVL[OHYHOVEHFDXVH
'HPDUHVWVXVWDLQHGSHUPDQHQWDQGOLIHWKUHDWHQLQJLQMXULHV
6HHLGDW%EE&$WWKDWSRLQW&ROOLQVj
DGMXVWHGEDVHRIIHQVHOHYHOZDV
  1H[W WKH FRXUW ORRNHG WR JXLGHOLQH  . ZKLFK
DGGUHVVHV WKH SHQDOW\ IRU D GHIHQGDQW FRQYLFWHG XQGHU 
86&F$SSOLFDWLRQQRWHWRWKDWJXLGHOLQHVWDWHV
    :KHUH D VHQWHQFH XQGHU WKLV VHFWLRQ LV LPSRVHG LQ
    FRQMXQFWLRQZLWKDVHQWHQFHIRUDQXQGHUO\LQJRIIHQVH
    DQ\VSHFLILFRIIHQVHFKDUDFWHULVWLFIRUWKHSRVVHVVLRQXVH
    RU GLVFKDUJH RI DQ H[SORVLYH RU ILUHDUP HJ
    %E$)5REEHU\LVQRWWREHDSSOLHGLQ
    UHVSHFWWRWKHJXLGHOLQHIRUWKHXQGHUO\LQJRIIHQVH
    ,Q D IHZ FDVHV WKH RIIHQVH OHYHO IRU WKH XQGHUO\LQJ
    RIIHQVHGHWHUPLQHGXQGHUWKHSUHFHGLQJSDUDJUDSKPD\
    UHVXOWLQDJXLGHOLQHUDQJHWKDWZKHQFRPELQHGZLWKWKH
    PDQGDWRU\ FRQVHFXWLYH VHQWHQFH XQGHU  86&
     K  F RU  D SURGXFHV D WRWDO
    PD[LPXPSHQDOW\WKDWLVOHVVWKDQWKHPD[LPXPRIWKH
    JXLGHOLQHUDQJHWKDWZRXOGKDYHUHVXOWHGKDGWKHUHQRW
    EHHQ D FRXQW RI FRQYLFWLRQ XQGHU  86&  K
    FRUDLHWKHJXLGHOLQHUDQJHWKDWZRXOG
    KDYHUHVXOWHGLIWKHHQKDQFHPHQWVIRUSRVVHVVLRQXVHRU
    GLVFKDUJHRIDILUHDUPKDGEHHQDSSOLHG,QVXFKDFDVH
    DQ XSZDUG GHSDUWXUH PD\ EH ZDUUDQWHG VR WKDW WKH
    FRQYLFWLRQ XQGHU  86&  K  F RU
     D GRHV QRW UHVXOW LQ D GHFUHDVH LQ WKH WRWDO
    SXQLVKPHQW$QXSZDUGGHSDUWXUHXQGHUWKLVSDUDJUDSK
    VKDOOQRWH[FHHGWKHPD[LPXPRIWKHJXLGHOLQHUDQJHWKDW
    8QLWHG6WDWHVY&ROOLQVHWDO           1RV          1RV         8QLWHG6WDWHVY&ROOLQVHWDO     

VSHFLILFDOO\DVNHGWKHMXU\ZKHWKHULWKDGDQ\TXHVWLRQVIRUWKH              ZRXOG KDYH UHVXOWHG KDG WKHUH QRW EHHQ D FRXQW RI
UHVSHFWLYHZLWQHVV2QWKRVHXQXVXDORFFDVLRQVZKHQMXURU                    FRQYLFWLRQ XQGHU  86&  K  F RU
TXHVWLRQLQJLVDSSURSULDWHGLVWULFWFRXUWVVKRXOGUHIUDLQIURP               D
LQYLWLQJ RU HQFRXUDJLQJ MXURUV WR DVN TXHVWLRQV  6XFK
VROLFLWDWLRQRIMXURUTXHVWLRQVLVDSWWRSURPRWHTXHVWLRQLQJ               7KHFRXUWGHWHUPLQHGWKDWLI&ROOLQVKDGQRWEHHQFRQYLFWHG
EH\RQGOHJDOO\DSSURSULDWHERXQGVDQGWRWKHUHE\FRPSURPLVH                 XQGHU  86&  F KLV EDVH RIIHQVH OHYHO XQGHU
WKH GHIHQGDQWjV ULJKW WR GXH SURFHVV  6HH 8QLWHG 6WDWHV Y       JXLGHOLQH%ZRXOGKDYHEHHQ$QRIIHQVHOHYHORI
'RXJODV)GDWG&LUm>,QYLWLQJMXURU               DQGDFULPLQDOKLVWRU\FDWHJRU\RI,,,ZRXOGKDYHUHVXOWHG
TXHVWLRQV@ ULVNV DQ XQGXH H[WHQW RI TXHVWLRQLQJ DQG PLJKW           LQDVHQWHQFLQJUDQJHRIWRPRQWKV7KHFRXUWWKHQ
HYHQFDXVHVRPHMXURUVWRIHHOWKDWWKH\DUHQRWIXOILOOLQJWKHLU           ORRNHG DW &ROOLQVj VHQWHQFLQJ UDQJH ZLWK WKH  86&
UHVSRQVLELOLWLHVXQOHVVWKH\DVNTXHVWLRQVl$MPDO)G               FFRQYLFWLRQZKLFKZLWKDQRIIHQVHOHYHORIDQGD
DWUHMHFWLQJWKHSUDFWLFHRIHVWDEOLVKLQJDWWKHRXWVHWRI           FULPLQDOKLVWRU\FDWHJRU\RI,,,UHVXOWHGLQDVHQWHQFLQJUDQJH
WULDOWKDWMXURUTXHVWLRQVZRXOGEHDOORZHGDQGWKHSUDFWLFHRI             RI  WR  PRQWKV  $GGLQJ WKH PDQGDWRU\  PRQWKVj
LQYLWLQJMXURUVWRDVNTXHVWLRQVDWWKHHQGRIHDFKZLWQHVVjV               FRQVHFXWLYH VHQWHQFH RI  86&  F WKH UHVXOWLQJ
WHVWLPRQ\ )XUWKHUZKLOHWKHFRXUWGLGLQVWUXFWWKHMXU\WKDW             VHQWHQFLQJUDQJHZDVWRPRQWKV$IWHUFRPSDULQJ
LW VKRXOG LJQRUH TXHVWLRQV DVNHG E\ ODZ\HUV IRU ZKLFK               WKH UDQJHV ZLWK DQG ZLWKRXW WKH  86&  F
REMHFWLRQV ZHUH VXVWDLQHG VHH s$ DW  LW GLG QRW             FRQYLFWLRQWKHFRXUWGHWHUPLQHGWKDWDQXSZDUGGHSDUWXUHRI
VSHFLILFDOO\HPSKDVL]HWKDWLPSOLFDWLRQVVKRXOGQRWEHGUDZQ                WZROHYHOVZDVZDUUDQWHGLQRUGHUWREULQJ&ROOLQVjVHQWHQFH
IURP XQDVNHG MXURU TXHVWLRQV  ,Q WKHVH YDULRXV ZD\V WKH          XSWRWKHOHYHOFRQWHPSODWHGE\WKHJXLGHOLQHVLQWKHDEVHQFH
GLVWULFWFRXUWIDLOHGWRXVHVXIILFLHQWO\ULJRURXVSURSK\ODFWLF             RIDFRQYLFWLRQXQGHU86&F
PHDVXUHV WR SURWHFW WKH GXH SURFHVV LQWHUHVWV RI WKH
GHIHQGDQWV+RZHYHU,XQGHUVFRUHWKDWWKHDOORZDQFHRIMXURU                 )LQDOO\ WKH FRXUW GHSDUWHG XSZDUG WZR OHYHOV XQGHU
TXHVWLRQLQJLQWKHILUVWLQVWDQFHZDVQRWOHJDOO\DSSURSULDWH             JXLGHOLQH.EDVHGXSRQWKHEXUJODU\RI'LVTXHjVKRPH
LQWKLVFDVH                                                               7KHUHIRUH &ROOLQVj WRWDO RIIHQVH OHYHO ZDV   +H ZDV
                                                                            VHQWHQFHGWRPRQWKVIRUWKHFRQVSLUDF\FRXQWPRQWKV
  'HVSLWHWKHGLVWULFWFRXUWjVLPSURYLGHQWDOORZDQFHRIMXURU               IRU WKH EDQN UREEHU\ FRXQW WR UXQ FRQFXUUHQWO\ ZLWK WKH
TXHVWLRQLQJ WKH GHIHQGDQWVj LQDELOLW\ WR GHPRQVWUDWH                  FRQVSLUDF\ VHQWHQFH DQG  PRQWKV IRU WKH  86&
SUHMXGLFHUHTXLUHVWKDWZHDIILUPWKHLUFRQYLFWLRQV$YDULHW\              F FRXQW WR UXQ FRQVHFXWLYHO\ WR WKH EDQN UREEHU\
RIZLWQHVVHVLQFOXGLQJ:XUVWHU5HLGPLOOHU+HPEUHHDQG                   FRXQW
6FKZHLQ]JHUDWWHVWHGWR:DUGjVDQG&ROOLQVjLQYROYHPHQWLQ
WKHUREEHU\5HLGPLOOHUDQG6FKZHLQ]JHUWHVWLILHGWKDW:DUG                                               ,,
FRQIHVVHG WKDWKHKDGUREEHGWKH&DUGLQDO6WDWHEDQNDQG
RWKHUZLWQHVVHVDWWHVWHGWR:DUGjVDQG&ROOLQVjDFWLYLWLHVLQ               $ 4XHVWLRQVE\sXURUV
SUHSDUDWLRQ IRU WKH UREEHU\  ,Q VKRUW QRWZLWKVWDQGLQJ WKH
GLVWULFWFRXUWjVHUURQHRXVSHUPLVVLRQRIMXURUTXHVWLRQLQJWKH                'HIHQGDQWVDOOHJHHUURULQWKHGLVWULFWFRXUWjVGHFLVLRQWR
GHIHQGDQWVKDYHQRWGHPRQVWUDWHGWKDWWKLVHUURUFKDQJHGWKH                DOORZMXURUVWRTXHVWLRQZLWQHVVHVGXULQJWKHWULDO:KLOHWKLV
RXWFRPHRIWKHLUWULDO6HH5RJHUV)GDW3UHVVHU              FRXUWKDVQRWSUHYLRXVO\DGGUHVVHGWKLVLVVXHZHDJUHHZLWK
 )G DW   ,W LV RQ WKLV EDVLV WKDW , FRQFXU LQ WKH   RWKHU8QLWHG6WDWHV&RXUWVRI$SSHDOVWKDWZKLOHDOORZLQJ
PDMRULW\jV MXGJPHQW WKDW WKH GHIHQGDQWV KDYH QRW                      MXURUVWRDVNTXHVWLRQVGXULQJFULPLQDOWULDOVLVSHUPLVVLEOH
                                                                            DQGEHVWOHIWWRWKHGLVFUHWLRQRIWKHWULDOMXGJHWKHURXWLQH
     8QLWHG6WDWHVY&ROOLQVHWDO        1RV        1RV              8QLWHG6WDWHVY&ROOLQVHWDO          

SUDFWLFH RI MXURU TXHVWLRQLQJ VKRXOG EH GLVFRXUDJHG             WKHSDUWLHVWKHGLVWULFWFRXUWDQQRXQFHGRQWKHRSHQLQJGD\RI
1RQHWKHOHVVZHGLVFHUQQRDEXVHRIGLVFUHWLRQLQWKLVFDVH           WULDOWKDWMXURUTXHVWLRQLQJZRXOGEHDOORZHG1HLWKHULQWKLV
                                                                       LQLWLDODQQRXQFHPHQWQRUDWDQ\RWKHUSRLQWLQWKHWULDOGLG
   7KHUHDUHDQXPEHURIGDQJHUVLQKHUHQWLQDOORZLQJMXURU            WKHGLVWULFWFRXUWVSHFLILFDOO\VWDWHWKHUHDVRQVWKDWMXVWLILHG
TXHVWLRQV MXURUV FDQ ILQG WKHPVHOYHV UHPRYHG IURP WKHLU        MXURUTXHVWLRQLQJ7KHIDFWVLQYROYHGKHUHDUHDQ\WKLQJEXW
DSSURSULDWH UROH DV QHXWUDO IDFWILQGHUV MXURUV PD\             FRPSOH[  7KH JRYHUQPHQWjV FDVH FRQVLVWHG HQWLUHO\ RI
SUHPDWXUHO\ HYDOXDWH WKH HYLGHQFH DQG DGRSW D SDUWLFXODU        ZLWQHVV WHVWLPRQ\ DQG VLPSOH IRUHQVLFV HYLGHQFH DQG WKH
SRVLWLRQDVWRWKHZHLJKWRIWKDWHYLGHQFHEHIRUHFRQVLGHULQJ          GHIHQGDQWVjDOLELVZHUHVLPSO\WKDWWKH\ZHUHVRPHZKHUHHOVH
DOOWKHIDFWVWKHSDFHRIWULDOPD\EHGHOD\HGWKHUHLVDFHUWDLQ    DWWKHWLPHRIWKHFULPH3HUKDSVLPSOLFLWO\FRQFHGLQJWKH
DZNZDUGQHVVIRUODZ\HUVZLVKLQJWRREMHFWWRMXURULQVSLUHG            SRLQW WKH JRYHUQPHQW GRHV QRW HYHQ DOOHJH D FRPSHOOLQJ
TXHVWLRQV DQG WKHUH LV D ULVN RI XQGHUPLQLQJ OLWLJDWLRQ       UHDVRQIRUMXURUTXHVWLRQLQJUDWKHULWDUJXHVWKDWWKHGLVWULFW
VWUDWHJLHV6HH8QLWHG6WDWHVY$MPDO)GG&LU       FRXUWHPSOR\HGVXIILFLHQWVDIHJXDUGVWRSURWHFWWKHGHIHQGDQWV
FLWLQJFDVHV,QOLJKWRIMXURUVjODFNRINQRZOHGJHRI        IURP SUHMXGLFH   DQG WKDW WKH DFWXDO TXHVWLRQV DVNHG ZHUH
WKHUXOHVRIHYLGHQFHDMXURUTXHVWLRQPD\EHLPSURSHURU             LQQRFXRXV  6HH 86 %U DW   +RZHYHU WKLV DSSURDFK
SUHMXGLFLDO  6HH 'H%HQHGHWWR Y *RRG\HDU 7LUH 	 5XEEHU        REVFXUHV WKH QHFHVVLW\ RI D SUHGLFDWH MXVWLILFDWLRQ IRU WKH
&R)GWK&LUGLVFXVVLQJDFDVHLQ           SUDFWLFHWRUHQGHULWFRQVWLWXWLRQDOO\SHUPLVVLEOH6HH8QLWHG
ZKLFKMXURUTXHVWLRQVZHUHSRVHGZLWKLQWKHKHDULQJRIRWKHU           6WDWHVY$MPDO)GG&LUm5HJDUGOHVVRI
MXURUV  :KHQ D FRXUW GHFOLQHV WR DVN D TXHVWLRQ WKH       WKH SURFHGXUHV DGRSWHG E\ WKH GLVWULFW FRXUW WR YHW MXURU
TXHVWLRQLQJMXURUPD\IHHOWKDWKHUSXUVXLWRIWUXWKKDVEHHQ          TXHVWLRQVWKHUHPXVWEHDPSOHMXVWLILFDWLRQIRUDGRSWLQJWKH
WKZDUWHGE\UXOHVVKHGRHVQRWXQGHUVWDQG6HHLG&RQFHUQ           GLVIDYRUHGSUDFWLFHLQWKHILUVWLQVWDQFH7RKROGRWKHUZLVH
KDV DOVR EHHQ H[SUHVVHG RYHU D ULVN WKDW D VHQVH RI          ZRXOG VDQFWLRQ MXURU TXHVWLRQLQJ RI ZLWQHVVHV LQ DQ\
FDPDUDGHULH DPRQJ MXURUV PD\ OHDG WKHP WR DWWDFK PRUH          FLUFXPVWDQFHVRORQJDVDSSURSULDWHSURSK\ODFWLFPHDVXUHV
VLJQLILFDQFHWRTXHVWLRQVSURSRXQGHGE\IHOORZMXURUVWKDQ             DUHDGRSWHGl7KDWWKHSUDFWLFHPD\ILQGIDYRUZLWKMXURUV
WKRVHSRVHGE\FRXQVHO6HHLGDW                          LVDQLQVXIILFLHQWMXVWLILFDWLRQIRUDOORZLQJLW
   2QWKHRWKHUKDQGWKHUHDUHEHQHILWVWRDOORZLQJTXHVWLRQV           ,Q DGGLWLRQ WR IDLOLQJ WR DUWLFXODWH RQ WKH UHFRUG D
E\MXURUVQRWRQO\PD\VXFKTXHVWLRQVUHVXOWLQPRUHDWWHQWLYH        VXIILFLHQWO\ FRPSHOOLQJ UDWLRQDOH IRU DOORZLQJ MXURU
MXURUVEXWMXURUTXHVWLRQVPD\DGYDQFHWKHVHDUFKIRUWUXWKE\        TXHVWLRQLQJWKHGLVWULFWFRXUWjVSURSK\ODFWLFPHDVXUHVGLGQRW
DOOHYLDWLQJ XQFHUWDLQWLHV LQ WKH MXURUVj PLQGV FOHDULQJ XS     DGHTXDWHO\SURWHFWWKHLQWHJULW\RIWKHIDFWILQGLQJSURFHVV$W
FRQIXVLRQ RU DOHUWLQJ DWWRUQH\V WR SRLQWV WKDW EHDU IXUWKHU   WKH FORVH RI HDFK ZLWQHVVj WHVWLPRQ\ WKH GLVWULFW FRXUW
HODERUDWLRQ6HH8QLWHG6WDWHVY6XWWRQ)G
QVW&LU
                                                                           
   'HIHQGDQWVPDLQWDLQWKDWWKHFRXUWDEXVHGLWVGLVFUHWLRQE\
                                                                             7KH JRYHUQPHQW OLNH     WKH   PDMRULW\ DOVR DWWHPSWV WR PDNH WKH
                                                                       XQDYDLOLQJ FRPSDULVRQ WKDW WKH GLVWULFW FRXUW LWVHOI KDV ZLGH GLVFUHWLRQ WR
DOORZLQJMXURUTXHVWLRQVEHFDXVHWKHIDFWVRIWKLVFDVHZHUH           TXHVWLRQ ZLWQHVVHV     $00 86 %U DW  +RZHYHU RQH VXUHO\ FDQQRW
QRWVXIILFLHQWO\FRPSOH[WRZDUUDQWMXU\TXHVWLRQLQJDQGHYHQ         FRPSDUH TXHVWLRQLQJ E\ D FRXUW RIILFHU XQLTXHO\ HPSRZHUHG WR GLVFHUQ
LIVXFKTXHVWLRQLQJZDVDSSURSULDWHWKHFRXUWGLGQRWSURSHUO\        DQG GHFODUH WKH ODZ ZLWK TXHVWLRQLQJ E\ D MXU\ RI OD\SHUVRQV 6HH

LPSOHPHQW SURSK\ODFWLF PHDVXUHV  :H ZLOO DGGUHVV HDFK          'H%HQHGHWWR  )G DW  m2QH VLPSO\ FDQQRW FRPSDUH WKH
                                                                       TXHVWLRQLQJ E\ WKH WULDO MXGJH o ZKR LV WUDLQHG LQ WKH ODZ DQG LQVWUXFWHG WR
DUJXPHQWLQWXUQ                                                      µVHH WKDW MXVWLFH LV GRQHj o ZLWK WKH TXHVWLRQLQJ E\ PHPEHUV RI WKH MXU\ o
                                                                       ZKR DUH XQWXWRUHG LQ WKH ODZ DQG LQVWUXFWHG WR VLW DV D QHXWUDO IDFWILQGLQJ
                                                                       ERG\l
    8QLWHG6WDWHVY&ROOLQVHWDO        1RV        1RV           8QLWHG6WDWHVY&ROOLQVHWDO       

                  BBBBBBBBBBBBBBBBBBBBBB                                    &RPSOH[LW\RI&DVH
                     &21&855(1&(                                         'HIHQGDQWVILUVWFRQWHQGWKDWMXURUTXHVWLRQLQJVKRXOGEH
                  BBBBBBBBBBBBBBBBBBBBBB                               UHVHUYHGIRUFRPSOH[FDVHVDQGPDLQWDLQWKDWWKHLUFDVHZDV
                                                                       QRWVXIILFLHQWO\FRPSOH[7KH8QLWHG6WDWHV&RXUWRI$SSHDOV
   1$7+$1,(/5s21(6&LUFXLWsXGJHFRQFXUULQJ:KLOH               IRU WKH 6HFRQG &LUFXLW KDV KHOG WKDW D FDVH VKRXOG SUHVHQW
, FRQFXU JHQHUDOO\ LQ WKH &RXUWjV ZHOOUHDVRQHG DQDO\VLV ,    VXIILFLHQWO\ H[WUDRUGLQDU\ RU FRPSHOOLQJ FLUFXPVWDQFHV WR
WKRXJKWLWQHFHVVDU\WRXQGHUVFRUHWKDWMXURUTXHVWLRQLQJLV           MXVWLI\TXHVWLRQLQJRIZLWQHVVHV6HH$MPDO)GDW
SHUPLVVLEOH RQO\ LQ WKH PRVW UDUH DQG FRPSHOOLQJ RI            VHH DOVR 6XWWRQ  )G DW  UHO\LQJ RQ IDFWXDO
FLUFXPVWDQFHV  0RUHRYHU HYHQ RQ WKRVH H[WUDRUGLQDU\            FRPSOH[LW\RIFDVHDVIDFWRULQFRQFOXVLRQWKDWWULDOFRXUWGLG
RFFDVLRQVZKHQWKHSUDFWLFHLVDOORZDEOHLWPXVWEHQDUURZO\          QRWHUULQDOORZLQJMXURUTXHVWLRQLQJ$MPDOIRXQGDQDEXVH
WDLORUHGWRDFKLHYHOHJLWLPDWHMXULGLFDOREMHFWLYHVLQDZD\WKDW      RI GLVFUHWLRQ LQ D GLVWULFW FRXUWjV GHFLVLRQ WR LQYLWH MXURU
GRHVQRWSUHMXGLFHWKHGHIHQGDQWjVULJKWWRDIDLUWULDO6HH         TXHVWLRQLQJZKHQVXFKTXHVWLRQLQJZDVmQRWQHFHVVLWDWHGE\
8QLWHG 6WDWHV Y %XVK  )G   G &LU        WKHIDFWXDOLQWULFDFLHVRIWK>H@EDQDOGUXJFRQVSLUDF\lDQGZDV
SURYLGLQJ WKDW MXURU TXHVWLRQLQJ VKRXOG EH mVWURQJO\            QRWSURPSWHGE\WKHXUJLQJRIWKHMXURUVWKHPVHOYHV,GDW
GLVFRXUDJH>G@l8QLWHG6WDWHVY&DVVLHUH)G          7KHFRXUWZDVQRWVZD\HGE\WKHIDFWWKDWWKHGLVWULFW
VW&LUm>sXURUTXHVWLRQLQJ@VKRXOGEHUHVHUYHGIRU           FRXUWIROORZHGSURFHGXUHVSUHYLRXVO\VHWRXWE\WKH6HFRQG
H[FHSWLRQDO VLWXDWLRQV DQG VKRXOG QRW EHFRPH WKH URXWLQH      &LUFXLWIRUMXURUTXHVWLRQLQJEHFDXVHmVXFKPHDVXUHVDORQH
HYHQLQFRPSOH[FDVHVl8QLWHG6WDWHVY/HZLQ)G            FDQQRW SXUJH WKH KDUP FDXVHG E\ WKH H[WHQVLYH MXURU
WK&LUm>7KHFRXUW@GRHVQRWFRQGRQHWKH            TXHVWLRQLQJ LQ WKH FDVH DW KDQGl  ,G DW  m7R KROG
SUDFWLFH RI LQYLWLQJ MXURU TXHVWLRQVl 'H%HQHGHWWR E\          RWKHUZLVHZRXOGVDQFWLRQMXURUTXHVWLRQLQJRIZLWQHVVHVLQ
'H%HQHGHWWRY*RRG\HDU7LUH	5XEEHU&R)G               DQ\ FLUFXPVWDQFH VR ORQJ DV DSSURSULDWH SURSK\ODFWLF
 WK &LU  KROGLQJ WKDW EHFDXVH mWKH SUDFWLFH RI    PHDVXUHV DUH DGRSWHG  :H FDQQRW DFFHSW VXFK D
MXURU TXHVWLRQLQJ LV IUDXJKW ZLWK GDQJHUV ZKLFK FDQ             SURSRVLWLRQl'HIHQGDQWVLQWKHSUHVHQWFDVHSRLQWRXWWKDW
XQGHUPLQHWKHRUGHUO\SURJUHVVRIWKHWULDOlLWVKRXOGEHXVHG        WKH JRYHUQPHQWjV HYLGHQFH LQYROYHG RQO\ H\HZLWQHVV
RQO\ LQ mFRPSHOOLQJ FLUFXPVWDQFHVl  (YHQ LI D GHIHQGDQW      UHFROOHFWLRQ WHVWLPRQ\ FRQFHUQLQJ FRQYHUVDWLRQV ZLWK
VKRZV WKDW D GLVWULFW FRXUW LPSURSHUO\ DOORZHG MXURU            GHIHQGDQWVDQGVLPSOHIRUHQVLFUHSRUWVGHIHQGDQWVVLPSO\
TXHVWLRQLQJKRZHYHUWKHGHIHQGDQWPXVWDOVRVKRZWKDWWKH            SUHVHQWHGDQDOLELGHIHQVH
SUDFWLFHSUHMXGLFHGKLVULJKWWRDIDLUWULDO6HH'H%HQHGHWWR
)GDW,QWKHFRQWH[WRIGXHSURFHVVFKDOOHQJHVWR            7KHJRYHUQPHQWKDVQRWVXJJHVWHGWKHFDVHZDVFRPSOH[
WKHIDLUQHVVRIDWULDOSUHMXGLFHDQDO\VLVJHQHUDOO\UHTXLUHVD       ,QVWHDGWKHJRYHUQPHQWDSSHDUVWRDUJXHWKDWWKHLPSRUWDQW
GHIHQGDQW WR GHPRQVWUDWH WKDW WKH SXUSRUWHG FRQVWLWXWLRQDO       TXHVWLRQLVZKHWKHUWKHTXHVWLRQLQJSUHMXGLFHGDSDUW\LQD
YLRODWLRQDIIHFWHGWKHWULDOjVRXWFRPH6HH8QLWHG6WDWHVY          ZD\WKDWDIIHFWHGWKHRXWFRPHRIWKHOLWLJDWLRQ6HH8QLWHG
5RJHUV)GWK&LU8QLWHG6WDWHVY            6WDWHVY*UD\)GWK&LUVHHDOVR
3UHVVHU)GWK&LU                          8QLWHG6WDWHVY%DVFRSH=XULWD)GWK&LU
                                                                       IRFXVLQJRQDEVHQFHRIDUJXPHQWE\GHIHQGDQWWKDWKH
   :KLOHWKHGHIHQGDQWVLQWKLVFDVHKDYHQRWGHPRQVWUDWHG             ZDV SUHMXGLFHG E\ TXHVWLRQLQJ QRW UDLVLQJ RU DGGUHVVLQJ
WKDWWKHDOORZDQFHRIMXURUTXHVWLRQLQJSUHMXGLFHGWKHLUULJKW         TXHVWLRQRIFRPSOH[LW\RIFDVHLQYROYLQJFRFDLQHFRQVSLUDF\
WRDIDLUWULDOLWQHYHUWKHOHVVLVDSSDUHQWWKDWWKHGLVWULFWFRXUW
HUUHGLQSHUPLWWLQJWKHSUDFWLFHDWDOO:LWKRXWIRUHZDUQLQJ
       8QLWHG6WDWHVY&ROOLQVHWDO          1RV          1RV           8QLWHG6WDWHVY&ROOLQVHWDO        

   $OWKRXJKWKLVFRXUWKDVQRWDGGUHVVHGWKHSURSULHW\RIMXURU              PD\ EH ZDUUDQWHG VR WKDW D  86&  F FRQYLFWLRQ
TXHVWLRQLQJZHKDYHHYDOXDWHGWKHSUDFWLFHRITXHVWLRQLQJE\                GRHV QRW UHVXOW LQ D GHFUHDVH LQ WRWDO SXQLVKPHQW RI D
MXGJHV,QWKDWFRQWH[WZHKDYHLQGLFDWHGWKDWDWULDOMXGJH               GHIHQGDQW+RZHYHUVXFKDGHSDUWXUHmVKDOOQRWH[FHHGWKH
PD\ EH ZDUUDQWHG LQ DVNLQJ TXHVWLRQV LQ D WULDO IRU WKUHH          PD[LPXPRIWKHJXLGHOLQHUDQJHWKDWZRXOGKDYHUHVXOWHGKDG
UHDVRQV  IRU FODULILFDWLRQ LQ D OHQJWK\ FRPSOH[ WULDO          WKHUH QRW EHHQ D FRXQW RI FRQYLFWLRQ XQGHUl  86&
 IRU FODULILFDWLRQ LI WKH DWWRUQH\V DUH XQSUHSDUHG RU             F86 6(17(1&,1* *8,'(/,1(6 0$18$/.
REVWUHSHURXV RU LI WKH IDFWV DUH EHFRPLQJ PXGGOHG DQG               FRPPHQW Q  &ROOLQV VXJJHVWV WKDW WKH QRWH PXVW EH
QHLWKHUVLGHLVVXFFHHGLQJDWDWWHPSWVWRFOHDUWKHPXSDQG                 LQWHUSUHWHGWRPHDQWKDWDFRXUWFDQQRWGHSDUWWRDOHYHOWKDW
 LI D ZLWQHVV LV GLIILFXOW LI D ZLWQHVVj WHVWLPRQ\ LV          ZRXOG LQFOXGH DQ\ PRQWKV RYHU WKH PD[LPXP SHUPLVVLEOH
XQEHOLHYDEOHDQGFRXQVHOIDLOVWRDGHTXDWHO\SUREHRULIWKH                UDQJH
ZLWQHVVEHFRPHVLQDGYHUWHQWO\FRQIXVHG6HH8QLWHG6WDWHV
Y6ORQH)GWK&LU:KLOHWKHUHDUH                  :HWKLQNDEHWWHULQWHUSUHWDWLRQRIWKHQRWHLQOLJKWRILWV
ULVNV LQ WKH MXURUVj SHUFHSWLRQ RI MXGJHLQLWLDWHG TXHVWLRQV         FRQWH[WDQGLQWHQWLVWKDWWKHDFWXDOVHQWHQFHJLYHQFDQQRW
VXFKTXHVWLRQVPD\EHDSSURSULDWHWRJHWWRWKHWUXWKRIWKH                 H[FHHGWKHPD[LPXPUDQJH&I8QLWHG6WDWHVY2OLYHU
PDWWHU&RPSOH[LW\LVRQO\RQHUHDVRQZK\DMXGJHPLJKW                     )G   WK &LU  KROGLQJ WKDW FRXUW HUUHG LQ
UHDVRQDEO\SRVHTXHVWLRQVWRDZLWQHVV7KHUDWLRQDOHEHKLQG                LQFUHDVLQJ VHQWHQFHV WR  PRQWKV ZKHQ WKH PD[LPXP
DOORZLQJTXHVWLRQVE\MXGJHVDOVRRSHUDWHVLQWKHFRQWH[WRI                 JXLGHOLQHUDQJHZDVOLPLWHGWRPRQWKV8QLWHG6WDWHVY
TXHVWLRQVE\MXURUVDOEHLWZLWKJUHDWHUSRVVLEOHULVNV                  %LDV1RV:/

WK
                                                                             &LU2FWXQSXEOLVKHGKROGLQJWKDWWRWDOVHQWHQFH
  :KLOHMXURUTXHVWLRQLQJVKRXOGEHDUDUHSUDFWLFHWKHUHZLOO              RI  PRQWKV ZDV QRW IDFLDOO\ H[FHVVLYH EHFDXVH LW ZDV
EH RFFDVLRQV ZKHQ D GLVWULFW FRXUW PD\ GHWHUPLQH WKDW WKH           ZLWKLQWKHUDQJHDOORZHGXQGHUQRWHUHPDQGLQJEHFDXVH
SRWHQWLDOEHQHILWVWRDOORZLQJVXFKTXHVWLRQVZLOORXWZHLJK                  GLVWULFW FRXUW IDLOHG WR DUWLFXODWH IDFWXDO RU OHJDO EDVLV IRU
WKHULVNV(YHQFDVHVWKDWFRXOGQRWEHGHVFULEHGDVFRPSOH[                VHQWHQFH 8QLWHG 6WDWHV Y (GPRQG 1RV 
PD\RFFDVLRQDOO\ZDUUDQWTXHVWLRQVE\MXURUVDOWKRXJKZH                    :/

WK
WKLQNWKDWWKHEDODQFHRIULVNVWREHQHILWVLVPRUHOLNHO\WR                &LU$XJXQSXEOLVKHGFHUWGHQLHG6&W
ZHLJKLQIDYRURIMXURUTXHVWLRQVLQFRPSOH[FDVHV                        IRFXVLQJRQWKHQXPEHURIPRQWKVLQH[FHVVRI
                                                                             WKHPD[LPXPWRZKLFKGHIHQGDQWVZHUHVHQWHQFHGLQGLFDWLQJ
  :LWKUHVSHFWWRFRPSOH[LW\GHIHQGDQWVKDYHDUJXHGRQO\                    WKDWFRXUWFRXOGKDYHGHSDUWHGXSZDUGRQO\DFHUWDLQQXPEHU
WKDWMXURUTXHVWLRQVVKRXOGEHUHVHUYHGIRUFRPSOH[FDVHV$V               RIPRQWKVIRUHDFKGHIHQGDQW&ROOLQVGRHVQRWDUJXHWKDWKLV
WKHDERYHGLVFXVVLRQUHYHDOVZKLOHWKHFRPSOH[LW\RIDFDVH                 DFWXDOVHQWHQFHH[FHHGHGWKHPD[LPXPUDQJHQRUGRZHVHH
                                                                             DQ\ LQGLFDWLRQ LQ WKH UHFRUG WKDW ZRXOG VXSSRUW VXFK DQ
                                                                             DVVHUWLRQ7KHUHIRUHZHILQGWKDWWKHGLVWULFWFRXUWGLGQRWHUU
                                                                             LQ GHSDUWLQJ XSZDUG WZR OHYHOV XQGHU QRWH  RI JXLGHOLQH
    
      2QH FRXUW KDV LQGLFDWHG WKDW MXURU TXHVWLRQV DUH QHLWKHU DQDORJRXV     .
QRU FRPSDUDEOH WR TXHVWLRQLQJ RI ZLWQHVVHV E\ D MXGJH 6HH 'H%HQHGHWWR
 )G DW  ,Q 'H%HQHGHWWR WKH FRXUW VWDWHG WKDW m>R@QH VLPSO\                                          ,,,
FDQQRW FRPSDUH WKH TXHVWLRQLQJ E\ WKH WULDO MXGJH o ZKR LV WUDLQHG LQ WKH
ODZ DQG LQVWUXFWHG WR µVHH WKDW MXVWLFH LV GRQHj o ZLWK WKH TXHVWLRQLQJ E\
PHPEHUV RI WKH MXU\ o ZKR DUH XQWXWRUHG LQ WKH ODZ DQG LQVWUXFWHG WR VLW
                                                                               )RUWKHIRUHJRLQJUHDVRQVWKHUXOLQJVRIWKHGLVWULFWFRXUW
DV D QHXWUDO IDFWILQGLQJ ERG\l ,G :H EHOLHYH WKDW WKLV FRQFHUQ FDQ EH
                                                                             ZLWKUHVSHFWWRDOORZLQJTXHVWLRQVIURPMXURUVDQGFDOFXODWLQJ
DGGUHVVHG E\ LQVWUXFWLRQV WR WKH MXU\ UHJDUGLQJ WKHLU UROH LQ WKH FDVH DQG   &ROOLQVjVHQWHQFHDUH$)),50('
E\ WKH VFUHHQLQJ SURFHGXUHV GHVFULEHG LQ WKLV RSLQLRQ
    8QLWHG6WDWHVY&ROOLQVHWDO        1RV        1RV              8QLWHG6WDWHVY&ROOLQVHWDO           

'H%HQHGHWWR)GDWQQRWLQJWKDWFRXQVHOZHUH             VKRXOGEHRQHFRQVLGHUDWLRQDQDEVHQFHRIFRPSOH[LW\VKRXOG
JLYHQ WKH RSSRUWXQLW\ WR UHTXHVWLRQ HDFK ZLWQHVV DIWHU DOO    QRWUHQGHUMXURUTXHVWLRQLQJSHUVHUHYHUVLEOHHUURU
LQTXLULHV IURP WKH MXU\ ZHUH UHVROYHG  7KH SUXGHQFH RI
DOORZLQJ VXFK UHTXHVWLRQLQJ ZLOO GHSHQG RQ WKH                         3URSK\ODFWLF0HDVXUHV
FLUFXPVWDQFHV RI HDFK FDVH  )XUWKHUPRUH ZKLOH MXURUV
JHQHUDOO\VKRXOGQRWEHDOORZHGWRVXEPLWTXHVWLRQVXQWLOWKH             'HIHQGDQWV QH[W DUJXH WKDW WKH FRXUW GLG QRW LPSOHPHQW
HQG RI D ZLWQHVVj WHVWLPRQ\ D FRXUW PD\ RFFDVLRQDOO\          DGHTXDWH VDIHJXDUGV WR DGGUHVV WKH ULVNV LQKHUHQW LQ MXURU
GHWHUPLQHWKDWTXHVWLRQVSURSHUO\FRXOGEHSRVHGLQWKHPLGVW          TXHVWLRQLQJ  ([DPSOHV RI SURSK\ODFWLF PHDVXUHV FDQ EH
RIWHVWLPRQ\VXFKDVZKHQDZLWQHVVWHVWLILHVDWJUHDWOHQJWK         IRXQGLQ6XWWRQ)GDWZKLFKVXJJHVWVWKDW
RQDQXPEHURIWRSLFVRUZKHQDZLWQHVVLVWHVWLI\LQJDVWRD         FRXQVHOVKRXOGEHDOHUWHGWRWKHFRXUWjVLQWHQWLRQWRDOORZ
WHFKQLFDOO\FRPSOH[PDWWHU)LQDOO\DFRXUWVKRXOGFRQVLGHU          MXURUTXHVWLRQLQJDWWKHHDUOLHVWSUDFWLFDEOHWLPHDQGJLYHQDQ
ZKHWKHU ILQDO LQVWUXFWLRQV VKRXOG VSHFLILFDOO\ DGGUHVV MXURU     RSSRUWXQLW\WREHKHDUGLQRSSRVLWLRQWRWKHSUDFWLFHWKH
TXHVWLRQV                                                             MXU\VKRXOGEHLQVWUXFWHGWKDWTXHVWLRQVDUHWREHUHVHUYHGIRU
                                                                       LPSRUWDQWSRLQWVWKDWWKHUXOHVRIHYLGHQFHPD\IUHTXHQWO\
  $FFRUGLQJO\XQGHUWKHFLUFXPVWDQFHVRIWKLVFDVHLWFDQQRW         UHTXLUH WKH FRXUW WR HVFKHZ FHUWDLQ TXHVWLRQV DQG WKDW QR
EHVDLGWKDWWKHGLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQLQDOORZLQJ      LPSOLFDWLRQ VKRXOG EH GUDZQ LI D MXURULQVSLUHG TXHVWLRQ
MXURUTXHVWLRQLQJ1RUGRZHILQGDQDEXVHRIGLVFUHWLRQLQ           ZLWKHUV RQ WKH YLQH  WKH FRXUW VKRXOG LQFOXGH D
WKH FRXUWjV LPSOHPHQWDWLRQ RI PHDVXUHV WR PLQLPL]H WKH          SURSK\ODFWLF LQVWUXFWLRQ LQ LWV ILQDO FKDUJH WR WKH MXU\ DQG
SRWHQWLDOULVNVRIDOORZLQJVXFKTXHVWLRQV:HKDYHUHYLHZHG           D VFUHHQLQJ PHFKDQLVP VKRXOG EH VHW LQ SODFH VXFK DV
WKH MXURU TXHVWLRQV FLWHG E\ GHIHQGDQWV DQG ILQG QRWKLQJ       KDYLQJWKHMXURUVZULWHGRZQWKHLUTXHVWLRQVDQGSDVVWKHPWR
LPSURSHULQWKHTXHVWLRQVWKDWZHUHSRVHGE\WKHFRXUWQRUGR         DMXGJHIROORZHGE\DVLGHEDUDWZKLFKWKHMXGJHZRXOGUXOH
ZH ILQG UHDVRQ IRU FRQFHUQ LQ WKH TXHVWLRQV WKDW ZHUH         RQDWWRUQH\VjREMHFWLRQV
SURSRVHGEXWQRWDVNHG
                                                                         'HIHQGDQWVPDLQWDLQWKDWEHFDXVHWKHUHFRUGGRHVQRWUHYHDO
% 6HQWHQFHXQGHU*XLGHOLQH.                                    WKDWFRXQVHOOHDUQHGRIWKHFRXUWjVLQWHQWLRQWRDOORZMXURUVWR
                                                                       DVNTXHVWLRQVXQWLOWKHILUVWGD\RIWULDOGHIHQVHFRXQVHOKDG
  &ROOLQVDUJXHVWKDWWKHXSZDUGGHSDUWXUHWKHGLVWULFWFRXUW          QR WLPH WR REMHFW WR WKH FRXUWjV DQWLFLSDWHG XVH RI MXURU
LPSRVHGLQUHOLDQFHXSRQWKHVHFRQGSDUDJUDSKRIQRWHWR             TXHVWLRQV RU FRQWHPSODWH FKDQJHV WR WULDO VWUDWHJLHV
JXLGHOLQH  . LV H[FHVVLYH  +H PDLQWDLQV WKDW WKH        'HIHQGDQWVKDYHIDLOHGWRH[SODLQKRZHYHUZK\WKH\FRXOG
PD[LPXPUDQJHXSWRZKLFKWKHFRXUWFRXOGGHSDUWZDV               QRWREMHFWWRMXURUTXHVWLRQVRQWKHILUVWGD\RIWULDORUKRZWKH
WRPRQWKV%\DGGLQJWZROHYHOVWREULQJKLPXSWRD              MXURUTXHVWLRQVPD\KDYHXQGHUPLQHGWKHLUWULDOVWUDWHJ\6HH
OHYHODQGWKHQDGGLQJWKHPRQWKVIRUWKH86&              6XWWRQ)GDW,QJHQHUDOKRZHYHUZHWKLQNWKDW
FFRQYLFWLRQWKHFRXUWSODFHG&ROOLQVLQDUDQJHRI        DFRXUWVKRXOGDWWHPSWWREDODQFHWKHULVNVDQGEHQHILWVRI
WR  PRQWKV  +H SRLQWV RXW WKDW WKLV UDQJH H[WHQGV RQH   MXURUTXHVWLRQVEHIRUHWULDODQGZKHQWKHEDODQFHZHLJKVLQ
PRQWKKLJKHUWKDQWKHPD[LPXPDOORZHGE\QRWH)RUWKLV             IDYRURIVXFKTXHVWLRQVLQIRUPFRXQVHODVVRRQDVSRVVLEOH
UHDVRQKHDUJXHVWKDWWKHFRXUWFRXOGGHSDUWXSZDUGRQO\RQH
OHYHO
                                                                           
  ,Q HVVHQFH &ROOLQVj DUJXPHQW IRFXVHV RQ ZKDW LV PHDQW              $OWKRXJK D FRXUW PD\ RFFDVLRQDOO\ GHWHUPLQH RQO\ DIWHU D WULDO KDV

ZKHQ WKH DSSOLFDWLRQ QRWH UHIHUV WR WKH mPD[LPXP RI WKH
                                                                       EHJXQ WKDW MXURU TXHVWLRQV VKRXOG EH DOORZHG ZH EHOLHYH WKDW LW ZRXOG EH
                                                                       LPSUXGHQW WR EHJLQ HYHU\ WULDO LQ DQWLFLSDWLRQ RI VXFK D SRVVLELOLW\ ZLWK DQ
JXLGHOLQHUDQJHl7KHQRWHLQGLFDWHVWKDWDQXSZDUGGHSDUWXUH         DVVHUWLRQ WKDW WKH FRXUW GRHV QRW KDYH D SROLF\ SURKLELWLQJ TXHVWLRQV E\
        8QLWHG6WDWHVY&ROOLQVHWDO    1RV         1RV           8QLWHG6WDWHVY&ROOLQVHWDO      

   'HIHQGDQWVDOVRDUJXHWKDWWKHFRXUWGLGQRWSURSHUO\LQIRUP           :HQRWHWKDWWKHFRXUWGLGLPSOHPHQWDVFUHHQLQJSURFHVV
WKHMXURUVRIWKHSXUSRVHRIWKHLUTXHVWLRQLQJRUH[SODLQWKDW          E\KDYLQJMXURUVZULWHGRZQWKHLUTXHVWLRQVZKLFKZHUHWKHQ
WKH\VKRXOGOLPLWWKHLUTXHVWLRQVWRLPSRUWDQWSRLQWVQRWGUDZ         GLVFXVVHGDQGUXOHGXSRQDWVLGHEDU,QDGGLWLRQWRNHHSLQJ
DQ\ LQIHUHQFHV IURP XQDVNHG TXHVWLRQV DQG RQO\ DVN              WKHMXURUVIURPOHDUQLQJRIDQGWKLQNLQJDERXWTXHVWLRQVWKDW
TXHVWLRQV VHHNLQJ FODULILFDWLRQ UDWKHU WKDQ DWWHPSWLQJ WR         ZHUHQRWDVNHGVXFKDSURFHVVOHVVHQHGDQ\ULVNRIDOLHQDWLRQ
LQYHVWLJDWHDPDWWHUIXUWKHU7KHMXGJHLQWKHSUHVHQWFDVH            EHFDXVHWKHMXURUVZKRVHTXHVWLRQVZHUHQRWDVNHGGLGQRW
LQVWUXFWHGMXURUVWKDWWKH\FRXOGDVNDTXHVWLRQLIDZLWQHVV           NQRZZKRDVVHUWHGWKDWWKHTXHVWLRQZDVLPSURSHU
ILQLVKHG WHVWLI\LQJ DQG WKH MXURUV KDG mVRPH VXEVWDQWLDO
TXHVWLRQl LQ WKHLU PLQGV  6KH DOVR DGYLVHG MXURUV WKDW VKH      7KHDERYHGLVFXVVLRQUHYHDOVWKHVWDQGDUGVZHWKLQNDFRXUW
ZRXOGSRVHWRZLWQHVVHVRQO\mDSSURSULDWHlTXHVWLRQVIURP               VKRXOGIROORZZKHQFRQVLGHULQJMXURUTXHVWLRQLQJ$OORZLQJ
MXURUVDQGWKDWTXHVWLRQVVKHGLGQRWSRVHFRXOGQRWEHDVNHG          MXURU TXHVWLRQV VKRXOG QRW EHFRPH D URXWLQH SUDFWLFH EXW
IRUmWHFKQLFDOOHJDOUHDVRQVl,QWKHFRXUWjVSUHOLPLQDU\DQG          VKRXOGRFFXURQO\UDUHO\DIWHUWKHGLVWULFWFRXUWKDVGHWHUPLQHG
ILQDO LQVWUXFWLRQV MXURUV ZHUH DGPRQLVKHG WKDW ZKHQ WKH        WKDW VXFK TXHVWLRQV DUH ZDUUDQWHG  ,Q H[HUFLVLQJ WKHLU
FRXUWVXVWDLQHGDQREMHFWLRQWRDTXHVWLRQWKH\ZHUHWRLJQRUH         GLVFUHWLRQWULDOMXGJHVPXVWZHLJKWKHSRWHQWLDOEHQHILWVRI
WKHTXHVWLRQDQGQRWJXHVVDWLWVDQVZHU7KHUHIRUHWKHFRXUW         MXURUTXHVWLRQLQJDJDLQVWWKHSRVVLEOHULVNVDQGLIWKHEDODQFH
GLGVXEVWDQWLDOO\DGGUHVVWKHFRQFHUQVUDLVHGE\GHIHQGDQWV            IDYRUV MXURU TXHVWLRQV HPSOR\ PHDVXUHV WR PLQLPL]H WKH
                                                                        ULVNV:KHQDFRXUWGHFLGHVWRDOORZMXURUTXHVWLRQVFRXQVHO
   $FFRUGLQJWRGHIHQGDQWVWKHFRXUWGLGQRWPHQWLRQMXURU             VKRXOGEHSURPSWO\LQIRUPHG$WWKHEHJLQQLQJRIWKHWULDO
TXHVWLRQVLQILQDOMXU\LQVWUXFWLRQV<HWWKHUHLVQRLQGLFDWLRQ       MXURUVVKRXOGEHLQVWUXFWHGWKDWWKH\ZLOOEHDOORZHGWRVXEPLW
LQWKHUHFRUGWKDWGHIHQGDQWVUHTXHVWHGVXFKDQLQVWUXFWLRQ,Q        TXHVWLRQVOLPLWHGWRLPSRUWDQWSRLQWVDQGLQIRUPHGRIWKH
OLJKWRIWKHFRXUWjVILQDOLQVWUXFWLRQVWKDWMXURUVZHUHWRLJQRUH      PDQQHUE\ZKLFKWKH\PD\GRVR7KHFRXUWVKRXOGH[SODLQ
TXHVWLRQVIRUZKLFKREMHFWLRQVKDGEHHQVXVWDLQHGDQGWKDW              WKDW LI WKH MXURUV GR VXEPLW TXHVWLRQV VRPH SURSRVHG
HYLGHQFH FRQVLVWV RQO\ RI VZRUQ WHVWLPRQ\ H[KLELWV DQG         TXHVWLRQVPD\QRWEHDVNHGEHFDXVHWKH\DUHSURKLELWHGE\WKH
VWLSXODWLRQVZHDUHXQDEOHWRVD\DQ\ODFNRIDQLQVWUXFWLRQ           UXOHVRIHYLGHQFHRUPD\EHUHSKUDVHGWRFRPSO\ZLWKWKH
VSHFLILFDOO\ DGGUHVVLQJ MXURU TXHVWLRQV DPRXQWHG WR SODLQ         UXOHV7KHMXURUVVKRXOGEHLQIRUPHGWKDWDTXHVWLRQLQJMXURU
HUURU                                                                  VKRXOGQRWGUDZDQ\FRQFOXVLRQVIURPWKHUHSKUDVLQJRIRU
                                                                        IDLOXUHWRDVNDSURSRVHGTXHVWLRQsXURUVVKRXOGVXEPLWWKHLU
  )LQDOO\ GHIHQGDQWV PDLQWDLQ WKDW WKH FRXUW LPSURSHUO\          TXHVWLRQVLQZULWLQJZLWKRXWGLVFORVLQJWKHFRQWHQWWRRWKHU
VROLFLWHG TXHVWLRQV IURP MXURUV E\ DVNLQJ LI WKH MXURUV KDG    MXURUV7KHFRXUWDQGWKHDWWRUQH\VVKRXOGWKHQUHYLHZWKH
TXHVWLRQVIRUHDFKDQGHYHU\ZLWQHVVDERXWWROHDYHWKHVWDQG          TXHVWLRQVDZD\IURPWKHMXURUVjKHDULQJDWZKLFKWLPHWKH
:KLOHWKHFRXUWjVFRQGXFWLQWKLVUHJDUGGLGQRWDPRXQWWR              DWWRUQH\V VKRXOG EH DOORZHG DQ RSSRUWXQLW\ WR SUHVHQW DQ\
UHYHUVLEOHHUURULQWKLVFDVHURXWLQHVROLFLWLQJRITXHVWLRQV          REMHFWLRQV7KHFRXUWPD\PRGLI\DTXHVWLRQLIQHFHVVDU\
FRXOG ULVN UHYHUVDO XQGHU RWKHU FLUFXPVWDQFHV  &I 8QLWHG      :KHQWKHFRXUWGHWHUPLQHVWKDWDMXURUTXHVWLRQVKRXOGEH
6WDWHV Y 7KRPSVRQ  )G   G &LU             DVNHG LW LV WKH MXGJH ZKR VKRXOG SRVH WKH TXHVWLRQ WR WKH
GLVDSSURYLQJRIWKHFRXUWjVLQYLWLQJMXURUTXHVWLRQVDVHDFK           ZLWQHVV
ZLWQHVVZDVDERXWWROHDYHWKHVWDQG
                                                                          :H DOVR WKLQN LW ZRXOG EH ZLVH IRU D GLVWULFW FRXUW WR
                                                                        FRQVLGHUVHYHUDODGGLWLRQDOLVVXHV7KHFRXUWVKRXOGFRQVLGHU
                                                                        ZKHWKHU LW ZLVKHV WR DOORZ FRXQVHO DQ RSSRUWXQLW\ WR UH
                                                                        TXHVWLRQDZLWQHVVDIWHUDMXURUTXHVWLRQKDVEHHQSRVHG6HH
MXURUV