Court Opinion

ID: 2969695
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:55:12.707184+00
Date Added: 2024-06-11T11:40:48.657080
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
                3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

        (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                    )LOH 1DPH DS

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

 +%5$1'21 /(( )/$*1(5            ;
          3ODLQWLII$SSHOOHH      
                                   
                                     1R
           Y                      
                                    !
                                   
 5(*,1$/' :,/.,1621HWDO       
       'HIHQGDQWV$SSHOODQWV 
                                  1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
     IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL
     1Rn6XVDQs'ORWW'LVWULFWsXGJH
                    $UJXHG2FWREHU
             'HFLGHGDQG)LOHG)HEUXDU\
        %HIRUH1(/621DQG0225(&LUFXLWsXGJHV
                  :,/+2,7'LVWULFWsXGJH
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('7RGG50DUWL2)),&(2)7+($77251(<
*(1(5$/ &255(&7,216 /,7,*$7,21 6(&7,21
&ROXPEXV 2KLR IRU $SSHOODQWV  0LFKDHO s 2j+DUD

    
     7KH +RQRUDEOH +HQU\ 5 :LOKRLW sU &KLHI 8QLWHG 6WDWHV 'LVWULFW
sXGJH IRU WKH (DVWHUQ 'LVWULFW RI .HQWXFN\ VLWWLQJ E\ GHVLJQDWLRQ

                                   
     )ODJQHUY:LONLQVRQHWDO                   1R       1R                       )ODJQHUY:LONLQVRQHWDO          

2j+$5$ 58%(5* 7$</25 6/2$1 	 6(5*(17                          VWUHQJWKHQHG E\ WKH ODWWHU SDUW RI WKH 6PLWK RSLQLRQjV
&RYLQJWRQ.HQWXFN\IRU$SSHOOHH21%5,()7RGG5                 SHQXOWLPDWHSDUDJUDSKZKHUHWKH&RXUWUHMHFWHGWKHLGHDWKDW
0DUWL 2)),&( 2) 7+( $77251(< *(1(5$/                            D UHOLJLRXVSUDFWLFH H[FHSWLRQ WR WKH JHQHUDO UXOH ZDV
&255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR                        PDQGDWHGE\WKH)LUVW$PHQGPHQW
IRU $SSHOODQWV  0LFKDHO s 2j+DUD 2j+$5$ 58%(5*
7$</256/2$1	6(5*(17&RYLQJWRQ.HQWXFN\IRU                        m%XWWRVD\WKDWDQRQGLVFULPLQDWRU\UHOLJLRXVSUDFWLFH
$SSHOOHH                                                                H[HPSWLRQLVSHUPLWWHGRUHYHQWKDWLWLVGHVLUDEOHLVQRW
                                                                         WR VD\ WKDW LW LV FRQVWLWXWLRQDOO\ UHTXLUHG DQG WKDW WKH
   0225(sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK               DSSURSULDWHRFFDVLRQVIRULWVFUHDWLRQFDQEHGLVFHUQHGE\
:,/+2,7'sMRLQHG1(/621sSSGHOLYHUHG               WKH FRXUWV  ,W PD\ IDLUO\ EH VDLG WKDW OHDYLQJ
DVHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJLQSDUW            DFFRPPRGDWLRQWRWKHSROLWLFDOSURFHVVZLOOSODFHDWD
                                                                         UHODWLYH GLVDGYDQWDJH WKRVH UHOLJLRXV SUDFWLFHV WKDW DUH
                     BBBBBBBBBBBBBBBBB                                   QRWZLGHO\HQJDJHGLQEXWWKDWXQDYRLGDEOHFRQVHTXHQFH
                                                                         RIGHPRFUDWLFJRYHUQPHQWPXVWEHSUHIHUUHGWRDV\VWHP
                         23,1,21                                         LQZKLFKHDFKFRQVFLHQFHLVDODZXQWRLWVHOIRULQZKLFK
                     BBBBBBBBBBBBBBBBB                                   MXGJHVZHLJKWKHVRFLDOLPSRUWDQFHRIDOOODZVDJDLQVWWKH
                                                                         FHQWUDOLW\ RI DOO UHOLJLRXV EHOLHIVl  6PLWK  86 DW
   .$5(11(/6210225(&LUFXLWsXGJH7KHSODLQWLII                    
+EUDQGRQ /HH )ODJQHU ILOHG D  86&   DFWLRQ
DOOHJLQJWKDWDQ2KLRSULVRQJURRPLQJUHJXODWLRQYLRODWHGKLV             ,QVRIDUDVP\FROOHDJXHVRQWKHSDQHOKDYHFRQFOXGHGWKDW
FRQVWLWXWLRQDOULJKWWRSUDFWLFHKLVUHOLJLRQ7KHGHIHQGDQWV         WKHFRXUWVFDQDQGVKRXOGGLVFHUQDSSURSULDWHRFFDVLRQVIRU
DVNWKLVFRXUWWRUHYHUVHWKHGLVWULFWFRXUWjVRUGHUGHQ\LQJWKH       ZDLYLQJ2KLRjVSULVRQKDLUUHJXODWLRQRQDFDVHE\FDVHEDVLV
GHIHQGDQWVj VXPPDU\ MXGJPHQW PRWLRQ EDVHG RQ TXDOLILHG           ,UHVSHFWIXOO\GLVVHQW
LPPXQLW\ DUJXLQJ WKDW )ODJQHU KDV QRW DOOHJHG D
FRQVWLWXWLRQDO YLRODWLRQ DQG WKDW WKH UHJXODWLRQ KDV D YDOLG
SHQRORJLFDO EDVLV  %DVHG RQ RXU SUHFHGHQW LQ 3ROORFN Y
0DUVKDOO)GWK&LUFHUWGHQLHG           %:7307  86 DW    +DG VXFK D VKRZLQJ EHHQ PDGH D FRXUW FRXOG

86ZH5(9(56(WKHGLVWULFWFRXUWjVGHQLDORI             KDYH FRQVLGHUHG LW mDV HYLGHQFH WKDW WKH UHJXODWLRQ GRHV QRW VDWLVI\ WKH

WKH GHIHQGDQWVj PRWLRQ IRU VXPPDU\ MXGJPHQW EDVHG RQ            UHDVRQDEOH UHODWLRQVKLS VWDQGDUG    l   ,G DW    %XW RXU FRXUW KDV
                                                                       DOUHDG\ KHOG LQ D )UHH ([HUFLVH &ODXVH FRQWH[W TXLWH VLPLODU WR WKH FRQWH[W
TXDOLILHGLPPXQLW\:HDOVRFRQFOXGHWKDW)ODJQHUPD\EULQJ           LQ ZKLFK WKH SUHVHQW DSSHDO DULVHV WKDW 7XUQHU FDQQRW MXVWLI\ D UHPDQG IRU
DQ DVDSSOLHG FKDOOHQJH WR WKH 2KLR SULVRQ JURRPLQJ             IDFWILQGLQJ RI WKH VRUW FRQWHPSODWHG E\ P\ FROOHDJXHV RQ WKH SDQHO 6HH

UHJXODWLRQDQGWKDWWKHUHLVDIDFWXDOGLVSXWHRQWKHLVVXHRI         6SLHV Y 9RLQRYLFK  )G DW     6XFK D UHPDQG DV 6SLHV GHFODUHG

ZKHWKHU WKH GHIHQGDQWV KDYH D YDOLG SHQRORJLFDO LQWHUHVW       mZRXOG EH WKH W\SH RI µXQQHFHVVDU\ LQWUXVLRQ RI WKH MXGLFLDU\j LQWR

$FFRUGLQJO\ ZH 5(0$1' WR WKH GLVWULFW FRXUW VR WKDW           µSUREOHPV RI SULVRQ DGPLQLVWUDWLRQj WKDW 2j/RQH ZDUQHG DJDLQVWl      ,G

)ODJQHUjV FODLPV IRU GHFODUDWRU\ DQG LQMXQFWLYH UHOLHI PD\          , FDQ UHDGLO\ XQGHUVWDQG ZK\ P\ FROOHDJXHV PLJKW ZLVK WKDW WKH MXGJH
SURFHHG                                                               ZKR XUJHG D UHPDQG LQ 6SLHV KDG EHHQ ZULWLQJ WKH PDMRULW\ RSLQLRQ UDWKHU
                                                                       WKDQ WKH GLVVHQW MXVW DV , FDQ UHDGLO\ XQGHUVWDQG ZK\ WKH\ PLJKW ZLVK WKDW
                                                                       WKH YLHZV RI WKH 6XSUHPH &RXUW MXVWLFHV ZKR XUJHG D UHPDQG LQ 2j/RQH
                                                                       KDG SUHYDLOHG %XW JLYHQ WKH PDMRULW\ KROGLQJV LQ 6SLHV DQG 2j/RQH DQG
                                                                       JLYHQ WKH SRVW$EERWW KROGLQJ LQ (PSOR\PHQW 'LYLVLRQ Y 6PLWK , KDYH
                                                                       JUHDWHU GLIILFXOW\ XQGHUVWDQGLQJ KRZ LW FDQ EH WKRXJKW WKDW ZH DUH IUHH WR
                                                                       RUGHU D UHPDQG KHUH
       )ODJQHUY:LONLQVRQHWDO                       1R        1R                       )ODJQHUY:LONLQVRQHWDO             

REMHFWLVQRWWRSURKLELWRUEXUGHQWKHH[HUFLVHRIUHOLJLRQDQG                                      ,%$&.*5281'
DQ\ EXUGHQ LPSRVHG E\ WKH VWDWH LV mPHUHO\ WKH LQFLGHQWDO
HIIHFWRIDJHQHUDOO\DSSOLFDEOHDQGRWKHUZLVHYDOLGSURYLVLRQ                   )ODJQHUKDVEHHQLQFDUFHUDWHGZLWKWKH2KLR'HSDUWPHQWRI
WKH )LUVW $PHQGPHQW KDV QRW EHHQ RIIHQGHGl  6PLWK                5HKDELOLWDWLRQDQG&RUUHFWLRQ2'5&VLQFH)ODJQHU
86DW                                                                   LVDSUDFWLFLQJ2UWKRGR[+DVLGLFsHZZKREURXJKWD
                                                                               VXLWDJDLQVWSULVRQRIILFLDOVFKDOOHQJLQJWKHHQIRUFHPHQWRI
   8QOLNH2j/RQHY(VWDWHRI6KDED]]86                     2KLR $GPLQLVWUDWLYH &RGH   ' DQG ) D
oDFDVHZKHUHDVWKH6PLWK&RXUWQRWHG86DW                   SULVRQJURRPLQJUHJXODWLRQZKLFKUHTXLUHV)ODJQHUWRFXWKLV
D SULVRQjV UHIXVDO WR H[FXVH LQPDWHV IURP ZRUN WR DWWHQG              EHDUG DQG VLGHORFNV DOVR UHIHUUHG WR DV mSHRVl        LQ
ZRUVKLS VHUYLFHV ZDV VXVWDLQHG ZLWKRXW PHQWLRQ RI D                     FRQWUDYHQWLRQ RI WKH WHQHWV RI KLV UHOLJLRXV IDLWK  7KH
mEDODQFLQJlWHVWo6PLWKGLGQRWLQYROYHDSULVRQUHJXODWLRQ
2UHJRQjV SURKLELWLRQ DJDLQVW WKH SD\PHQW RI EHQHILWV WR
MREOHVVXVHUVRILOOHJDOGUXJVZDVDSSOLFDEOHWRWKHFLWL]HQU\RI                  
                                                                                     2KLR $GPLQLVWUDWLYH &RGH  ' SURYLGHV WKH IROORZLQJ
WKHVWDWHDVDZKROH$QGLIWKHVWDWHjVEODQNHWSURKLELWLRQ                       +DLUFXWV VKDOO EH SURYLGHG DV QHHGHG +DLU DQG KDLUVW\OHV VKDOO
DJDLQVW WKH SD\PHQW RI EHQHILWV WR VXFK SHRSOH ZDV                          EH FOHDQ QHDWO\ WULPPHG DQG VKDOO QRW H[WHQG RYHU WH HDUV RU WKH
VXVWDLQDEOH QRWZLWKVWDQGLQJ LWV LQFLGHQWDO HIIHFW RQ WKH                                  +DLU DQG KDLUVW\OH VKDOO QRW SURWUXGH PRUH WKDQ
                                                                                    VKLUW FROODU
UHOLJLRXV SUDFWLFHV RI DGKHUHQWV RI WKH 1DWLYH $PHULFDQ                     WKUHH LQFKHV IURP WKH VFDOS      %UDLGV DQG SODLWV PD\ EH ZRUQ
&KXUFKLWZRXOGVHHPWRIROORZDIRUWLRULJLYHQWKHQHHGIRU                      VXEMHFW WR WKH OLPLWDWLRQV RI WKLV UXOH 7KH IROORZLQJ KDLUVW\OHV

MXGLFLDOUHVWUDLQWLQWKHSULVRQFRQWH[WWKDWDUHJXODWLRQVXFK                    RU IDFLDO KDLU DUH QRW SHUPLWWHG ,QLWLDOV V\PEROV G\HV PXOWLSOH
                                                                                    SDUWV KDLU GLVSURSRUWLRQDWHO\ ORQJHU LQ RQH DUHD WKDQ DQRWKHU
DVWKHRQHDWLVVXHKHUHVKRXOGEHVXVWDLQDEOHQRWZLWKVWDQGLQJ                      H[FOXGLQJ QDWXUDO EDOGQHVV ZHDYHV ZLJV GUHDGORFNV DQG
WKHLQFLGHQWDOEXUGHQLWPD\SODFHRQWKHUHOLJLRXVWHQHWVRI                       VKDYHG KHDGV 2WKHU KDLUVW\OHV QRW VSHFLILFDOO\ OLVWHG KHUHLQ PD\
VRPHSULVRQHUV                                                                     EH SURKLELWHG LI WKH\ DUH GHWHUPLQHG WR EH HLWKHU D WKUHDW WR
                                                                                    VHFXULW\ RU FRQWUDU\ WR RWKHU OHJLWLPDWH SHQRORJLFDO FRQFHUQV
  7KH 6PLWK &RXUW ZDV REYLRXVO\ FRQWHQW WR IROORZ D                    2+,2 '0,1 2'(
                                                                                     $       &       '  HPSKDVLV DGGHG 6XEVHFWLRQ

FDWHJRULFDODSSURDFKLQGHWHUPLQLQJWKHFRQVWLWXWLRQDOLW\RI                   ) SURYLGHV m>V@LGHEXUQV EHDUGV DQG PRXVWDFKHV PXVW EH QHDWO\
                                                                               WULPPHG )DFLDO KDLU PXVW QRW SURWUXGH PRUH WKDQ RQHKDOI LQFK IURP WKH
WKH2UHJRQODZ7KH&RXUWVHHPHGWRWDNHLWIRUJUDQWHGWKDW                  VNLQl 2+,2 '0,1 2'(
                                                                                             $       &       )  HPSKDVLV DGGHG
EHFDXVHWKHODZZDVFRQVWLWXWLRQDODVJHQHUDOO\DSSOLHGWKH
SODLQWLIIVKDGQRYLDEOHIUHHH[HUFLVHFODLP7KLVUHDGLQJLV                    
                                                                                    7KH &RGH RI sHZLVK /DZ &KDSWHU  HQWLWOHG m7KH 3URKLELWLRQ
                                                                               $JDLQVW 6KDYLQJ WKH &RUQHUV RI 2QHjV +HDG DQG %HDUGl SURYLGHV WKH
                                                                               IROORZLQJ

                                                                                        >/HYLWLFXV  VWDWHV m'R QRW FXW RII >WKH KDLUV RI@ WKH
     ,W LV WUXH DV P\ FROOHDJXHV RQ WKH SDQHO SRLQW RXW LQ QRWH  RI WKH          FRUQHUV RI \RXU KHDGV DQG GR QRW GHVWUR\ WKH FRUQHUV RI \RXU
PDMRULW\ RSLQLRQ WKDW D )HGHUDO %XUHDX RI 3ULVRQV UHJXODWLRQ EDQQLQJ WKH          EHDUGVl   2XU 6DJHV H[SODLQ WKDW@ WKHUH DUH WZR mFRUQHUV RI WKH
GHOLYHU\ WR SULVRQHUV RI SHULRGLFDO SXEOLFDWLRQV IRXQG mGHWULPHQWDO WR             KHDGl WKH SODFH DW ZKLFK WKH VNXOO LV DWWDFKHG WR WKH MDZERQH
LQVWLWXWLRQDO VHFXULW\l o D UHJXODWLRQ KHOG WR EH YDOLG RQ LWV IDFH o FRXOG        QHDU WKH HDU DW ERWK WKH ULJKW DQG OHIW VLGHV RI WKH KHDG >6KDYLQJ
EH IRXQG LQYDOLG DV DSSOLHG WR D SDUWLFXODU SXEOLFDWLRQ 6HH 7KRUQEXUJK            WKH KDLU RII WKH mFRUQHUVl LV IRUELGGHQ@
Y $EERWW  86   %XW , GR QRW UHDG   7KRUQEXUJK Y $EERWW                7KHUH DUH FHUWDLQ RSLQLRQV WKDW IRUELG FXWWLQJ RII WKH KDLU
DV MXVWLI\LQJ D UHPDQG LQ WKH FDVH DW EDU                                         ZLWK VFLVVRUV LI LW LV GRQH DV HIIHFWLYHO\ DV LI LW ZHUH GRQH ZLWK D
                                                                                   UD]RU n LH UHPRYLQJ DOO WKH KDLU HYHQ WKDW ZKLFK LV FORVHVW WR
     +HUH DV LQ 7XUQHU Y 6DIOH\ WKH SODLQWLIIV ZRXOG KDYH EHHQ IUHH KDG        WKH IOHVK 7KHUHIRUH LI RQH LV UHTXLUHG WR UHPRYH RQHjV KDLU IRU
WKLV EHHQ D FDVH RI ILUVW LPSUHVVLRQ WR DWWHPSW WR VKRZ WKDW WKH FKDOOHQJHG       PHGLFDO UHDVRQV RQH VKRXOG EH FDUHIXO QRW WR UHPRYH WKH KDLU
UHJXODWLRQ UHSUHVHQWHG DQ mH[DJJHUDWHG UHVSRQVHl WR SULVRQ FRQFHUQV               FORVHVW WR WKH IOHVK
JLYHQ WKH DOOHJHG H[LVWHQFH RI mREYLRXV HDV\ DOWHUQDWLYHV    l 6HH                 7KH DUHD WKDW LV IRUELGGHQ WR EH VKDYHG H[WHQGV IURP WKH
     )ODJQHUY:LONLQVRQHWDO                       1R     1R                   )ODJQHUY:LONLQVRQHWDO      

GHIHQGDQWV DUH 2'5& HPSOR\HHV ZKR ZRUN DW HLWKHU WKH             DXWKRULWLHV KDSSHQ WR KDYH ROG SKRWRJUDSKV DQG VNHWFKHV
/HEDQRQ &RUUHFWLRQDO ,QVWLWXWLRQ /H&, RU WKH 0DGLVRQ             GHSLFWLQJKLPZLWKRXWVXFKKDLUDQGWKDW0U)ODJQHUjVEHDUG
&RUUHFWLRQDO,QVWLWXWLRQ0D&,)ODJQHUZDVLPSULVRQHGDW              DQGVLGHORFNVKDYHQHYHUFRQWULEXWHGWRWKHFORJJLQJRIGUDLQV
/H&, IURP sXO\   WR 1RYHPEHU   DQG                LQWKHSULVRQjVSOXPELQJV\VWHP,IDOOWKLVZHUHVKRZQWREH
WUDQVIHUUHGVKRUWO\WKHUHDIWHUWR0D&,3ULRUWRKLVWUDQVIHUWR        WUXHLIZHZHUHZULWLQJRQDFOHDQVODWHDQGLI0U)ODJQHU
/H&, )ODJQHU UHVLGHG DW WKH 0DQVILHOG &RUUHFWLRQDO                ZHUH2KLRjVRQO\SULVRQLQPDWH,PLJKWZHOODJUHHZLWKP\
,QVWLWXWLRQ+HLVFXUUHQWO\LQFDUFHUDWHGDW5RVV&RUUHFWLRQDO          FROOHDJXHVWKDWWKHUHJXODWLRQVKRXOGQRWEHDOORZHGWREXUGHQ
,QVWLWXWLRQ                                                             0U)ODJQHUjVULJKWWRSXWLQWRSUDFWLFHKLVUHOLJLRXVEHOLHIV
                                                                         FRQFHUQLQJIDFLDOKDLU
   ,Q  )ODJQHU EHJDQ VWXG\LQJ sXGDLVP DQG IRUPDOO\
FRQYHUWHGWR2UWKRGR[sXGDLVPLQZKLOHLQFDUFHUDWHGDW                %XWZHDUHQRWZULWLQJRQDFOHDQVODWHDQG0U)ODJQHU
WKH 0DQVILHOG &RUUHFWLRQDO ,QVWLWXWLRQ  +LV UHOLJLRXV             XQIRUWXQDWHO\ LV QRW 2KLRjV RQO\ SULVRQ LQPDWH  $V RI
DIILOLDWLRQKDVEHHQUHFRJQL]HGE\WKHGHIHQGDQWVDQGLVQRWLQ          sDQXDU\  DFFRUGLQJ WR DQ 2KLR 'HSDUWPHQW RI
GLVSXWHLQWKLVFDVH)ODJQHUWHVWLILHGGXULQJWKHSUHOLPLQDU\          5HKDELOLWDWLRQDQG&RUUHFWLRQm)DFW6KHHWlDYDLODEOHRQWKH
LQMXQFWLRQHYLGHQWLDU\KHDULQJKHOGRQ'HFHPEHUWKDW            LQWHUQHW DW ZZZGUFVWDWHRKXV 2KLRjV SULVRQ LQPDWH
EHWZHHQZKHQKHFRQYHUWHGWRsXGDLVPDQGSULRUWRKLV               SRSXODWLRQZDV,IWKUHHSHUFHQWRIWKHVWDWHjVPDOH
WUDQVIHUWR/H&,LQ0DQVILHOGSULVRQRIILFLDOVGLGQRW             SULVRQ SRSXODWLRQ ZHUH WR DFFHSW WKH PDMRULW\ RSLQLRQjV
PDNHDQ\HIIRUWIRUFLEO\WRFXWKLVEHDUGRUVLGHORFNV,QIDFW        LPSOLHG LQYLWDWLRQ WR FKDOOHQJH WKH UHJXODWLRQ RQ JURXQGV
D SHULRG RI ILYH \HDUV SDVVHG EHWZHHQ WKH WLPH )ODJQHU          FRPSDUDEOHWRWKRVH0U)ODJQHULVEHLQJDOORZHGWRLQYRNH
FRQYHUWHGWR2UWKRGR[sXGDLVPLQXQWLOKLVILUVWIRUFHG             KHUHWKH7XUQHUIDFWRUVZRXOGKDYHWREHVHSDUDWHO\ZHLJKHG
FXWWLQJLQ                                                         E\WKHFRXUWVLQVRPHWKLQJOLNHFDVHV$QGWKDWLVMXVW
                                                                         LQ2KLR
  2QsDQXDU\)ODJQHUZDVJLYHQDGLUHFWRUGHUE\
'HIHQGDQW %REE\ &RXFK RI /H&, WR FRPSO\ ZLWK WKH                   6XFKDQRXWFRPHLQP\YLHZZRXOGEHXQGHVLUDEOH,W
JURRPLQJUHJXODWLRQEXW)ODJQHUUHIXVHGVWDWLQJKLVUHOLJLRXV          ZRXOGDOVREHGLIILFXOWWRUHFRQFLOHZLWKWKHSURSRVLWLRQo
                                                                         H[SOLFLWO\DOOXGHGWRLQ7XUQHUoWKDWmMXGJPHQWVUHJDUGLQJ
                                                                         SULVRQ VHFXULW\ µDUH SHFXOLDUO\ ZLWKLQ WKH SURYLQFH DQG
    KDLU RQ RQHjV WHPSOHV WR EHORZ WKH HDU WKH SODFH IURP ZKLFK WKH
                                                                         SURIHVVLRQDOH[SHUWLVHRIFRUUHFWLRQVRIILFLDOVjl86
    ORZHU MDZ SURWUXGHV                                                 DWTXRWLQJ3HOOY3URFXQLHU86
          7KH 7RUDK IRUEDGH mGHVWUR\LQJl WKH FRUQHUV RI WKH EHDUG
    RQO\ ZLWK D UD]RU >2XU 6DJHV VSRNH RI@ ILYH FRUQHUV >WKHLU           7KHFRQFOXVLRQWKDW0U)ODJQHUjVFODLPLVZLWKRXWOHJDO
    GHILQLWLRQ KRZHYHU LV D PDWWHU RI TXHVWLRQ@ DQG WKHUH DUH PDQ\     PHULW ILQGV VXSSRUW , EHOLHYH LQ (PSOR\PHQW 'LYLVLRQ
    RSLQLRQV LQ WKLV UHJDUG 7KHUHIRUH D *RGIHDULQJ SHUVRQ VKRXOG
    QRW SDVV D UD]RU RYHU KLV EHDUG DW DOO >7KLV LQFOXGHV@ DOVR KLV
                                                                         'HSDUWPHQW RI +XPDQ 5HVRXUFHV RI 2UHJRQ Y 6PLWK 
    PXVWDFKH DQG WKH KDLU EHORZ WKH FKLQ
                                                                         86DGHFLVLRQKDQGHGGRZQWKUHH\HDUVDIWHUWKH
         7KHUH LV QR GLIIHUHQFH EHWZHHQ D UD]RU DQG D VKDUS VWRQH        GHFLVLRQLQ7XUQHU7KHTXHVWLRQLQ6PLWKZDVZKHWKHUWKH
    WKDW FXWV KDLU HJ SXPLFH VWRQH :KHQ XVLQJ D VDOYH WR UHPRYH     6WDWHRI2UHJRQFRXOGGHQ\XQHPSOR\PHQWEHQHILWVWRSHRSOH
    RQHjV EHDUG n HJ D PL[WXUH FRQWDLQLQJ OLPH n RQH VKRXOG EH        ZKRKDGEHHQILUHGIURPWKHLUMREVIRULQJHVWLQJDSURKLELWHG
    FDUHIXO QRW WR VFUDSH RII WKH VXEVWDQFH ZLWK D NQLIH OHVW RQH FXW
    RII VRPH KDLU ,QVWHDG RQH VKRXOG VFUDSH LW RII ZLWK D VOLYHU RI
                                                                         KDOOXFLQRJHQ SH\RWH LQ FRQQHFWLRQ ZLWK VDFUDPHQWDO
    ZRRG RU WKH OLNH
                                                                         DFWLYLWLHVDWD1DWLYH$PHULFDQFKXUFK7KH6XSUHPH&RXUW
sRLQW $SSHQGL[ ms$l DW  3OjV ([  0HP IURP $OHSK ,QVW       DQVZHUHGLQWKHDIILUPDWLYHUHDVRQLQJWKDWZKHUHWKHVWDWHjV
UHJDUGLQJ sHZLVK /DZ HPSKDVLV DGGHG
    )ODJQHUY:LONLQVRQHWDO                  1R       1R                   )ODJQHUY:LONLQVRQHWDO       

DQDO\VLVWDLORUHGWRWKHSODLQWLIIjVLQGLYLGXDOFLUFXPVWDQFHV        WHQHWVSUHYHQWHGFRPSOLDQFH2Q)HEUXDU\WKH5XOH
,QDSXEOLVKHGRSLQLRQE\ZKLFK,VKRXOGKDYHWKRXJKWWKLV            ,QIUDFWLRQV%RDUGIRXQG)ODJQHUJXLOW\RIGLVREH\LQJWKHRUGHU
SDQHO ERXQG RXU FLUFXLW KDV IODWO\ UHMHFWHG WKH LGHD WKDW   DQGVHQWHQFHGKLPWRWLPHLQDGLVFLSOLQDU\LVRODWLRQXQLW2Q
SULVRQHUVDUHHQWLWOHGWRWKLVVRUWRILQGLYLGXDOILWWLQJ          sXQH   )ODJQHU UHFHLYHG DQRWKHU GLUHFW RUGHU IURP
                                                                      'HIHQGDQW&RXFKWRFRPSO\ZLWKWKHJURRPLQJUHJXODWLRQ
  m%\FUHDWLQJWKH7XUQHUWHVWWKH6XSUHPH&RXUWVXUHO\              )ODJQHUWKHQILOHGDJULHYDQFHRQsXQHZKLFKZDV
  GLGQRWLQWHQGWRSURYLGHDPHFKDQLVPWKURXJKZKLFK                 UHYLHZHG E\ 'HIHQGDQW 'DYLG *DUGQHU ,QVSHFWRU RI
  SULVRQHUV FRXOG PRXQW UHSHDWHG FKDOOHQJHV WR SULVRQ           ,QVWLWXWLRQDO6HUYLFHVRQsXO\,QKLVGLVSRVLWLRQ
  UHJXODWLRQVDQGUHTXLUHFRXUWVWRDQDO\]HLQGHWDLOWKH           'HIHQGDQW *DUGQHU VWDWHG WKDW )ODJQHU ZDV LQ YLRODWLRQ RI
  LPSDFW VXFK UHJXODWLRQV ZRXOG KDYH LQ DQ\ SDUWLFXODU          ' DQG ZDV UHTXLUHG WR FRPSO\ ZLWK WKH
  IDFWXDOVHWWLQJHYHQLISULRUFRXUWSUHFHGHQWZRXOGVHHP           UHJXODWLRQ  )DLOXUH WR FRPSO\ ZRXOG VXEMHFW )ODJQHU WR
  WRGLFWDWHWKHYDOLGLW\RIWKHUHJXODWLRQV2QWKHFRQWUDU\       mDSSURSULDWH GLVFLSOLQDU\ DFWLRQ >@ >Z@KLFK PD\ LQFOXGH
  WKH6XSUHPH&RXUW
VFUHDWLRQRIWKH7XUQHUVWDQGDUGZDV             UHTXLULQJ>)ODJQHUjV@KDLUWREHFXWRUWULP>PHG@DJDLQVW>KLV@
  PRWLYDWHG E\ D GHVLUH WR µHQVXUH>@ WKH DELOLW\ RI           ZLOOl  sRLQW $SSHQGL[ ms$l DW  'LVSRVLWLRQ RI
  FRUUHFWLRQVRIILFLDOVWRDQWLFLSDWHVHFXULW\SUREOHPVDQG           *ULHYDQFH)RUP)ODJQHUFRQWLQXHGWRUHIXVHWRFRPSO\ZLWK
  WRDGRSWLQQRYDWLYHVROXWLRQVWRWKHLQWUDFWDEOHSUREOHPV           WKH UHJXODWLRQ  2Q sXO\   DQG LQ $SULO  WKH
  RI SULVRQ DGPLQLVWUDWLRQ DQG DYRLG>@ XQQHFHVVDU\              GHIHQGDQWV IRUFLEO\ FXW )ODJQHUjV EHDUG DQG VLGHORFNV
  LQWUXVLRQRIWKHMXGLFLDU\LQWRSUREOHPVSDUWLFXODUO\LOO           %HWZHHQWKHWLPHRI)ODJQHUjVIRUFHGFXWWLQJVLQsXO\
  VXLWHGWRUHVROXWLRQE\GHFUHHj2j/RQH86DW           DQG$SULOWKHGHIHQGDQWVH[HPSWHGKLPDQGIRXU1DWLYH
  TXRWDWLRQPDUNVRPLWWHG3HQDODXWKRULWLHVPD\QHHGD            $PHULFDQLQPDWHVIURPWKHJURRPLQJUHJXODWLRQ
  FOHDUUXOHIRUGHDOLQJZLWKFHUWDLQFRQWLQXLQJRUUHFXUULQJ
  VLWXDWLRQVHYHQZKHQWKDWUXOHFRXOGEHEHWWHUWDLORUHGWR            'HIHQGDQW&XUWLV:LQJDUGWKHZDUGHQRI0D&,WHVWLILHGLQ
  WKH ULJKWV RI LQGLYLGXDO SULVRQHUV WKURXJK D FRXUW
V         KLV GHSRVLWLRQ WKDW H[HPSWLQJ )ODJQHU IURP WKH JURRPLQJ
  IOH[LEOHFDVHE\FDVHDQDO\VLVl6SLHVY9RLQRYLFK          UHJXODWLRQGLGQRWSRVHDGGLWLRQDOVHFXULW\SUREOHPVDW0D&,
  )GWK&LU                                QRDGGLWLRQDOVHFXULW\SUHFDXWLRQVZHUHWDNHQZLWK)ODJQHULQ
                                                                      H[FHVV RI WKH VHFXULW\ PHDVXUHV WDNHQ ZLWK LQPDWHV ZKR
   ,WPD\EHWUXH,VXSSRVHWKDWLI0U)ODJQHUZHUHWKHRQO\       FRPSOLHGZLWKWKHJURRPLQJUHJXODWLRQ'HIHQGDQW:LQJDUG
LQPDWHLQWKH2KLRSULVRQV\VWHPKHFRXOGVKRZWKDWWKHKDLU          DOVRWHVWLILHGWKDW0D&,KDVQHLWKHUEHHQUHTXLUHGWRSURYLGH
UHJXODWLRQ LV QRW UHDVRQDEO\ UHODWHG WR OHJLWLPDWH VHFXULW\    DGGLWLRQDO VHFXULW\ QRU WR DSSURYH DGGLWLRQDO RYHUWLPH WR
LQWHUHVWVSHFXOLDUWRKLP,WPD\EHWUXHLQRWKHUZRUGVWKDW      SURYLGHVHFXULW\IRU)ODJQHUDQGWKHIRXU1DWLYH$PHULFDQV
0U)ODJQHUKLPVHOIKDVQHYHUFRQFHDOHGFRQWUDEDQGLQKLV             ZKR ZHUH H[HPSWHG IURP WKH JURRPLQJ UHJXODWLRQ  7KH
EHDUGRUVLGHORFNVWKDWSULVRQRIILFLDOVFRXOGHDVLO\DQGVDIHO\     GHIHQGDQWVKDYHRQO\VHDUFKHG)ODJQHUjVEHDUGRQOHVVWKDQ
DVVXUHWKHPVHOYHVRI0U)ODJQHUjVFRQWLQXLQJJRRGEHKDYLRU           ILYHRFFDVLRQV7KHVHVHDUFKHVKDYHW\SLFDOO\LQYROYHGWKH
E\KDYLQJKLPUXQKLVRZQILQJHUVWKURXJKKLVKDLUWKDWQR           GHIHQGDQW UXQQLQJ KLV RZQ ILQJHUV WKURXJK KLV EHDUG DQG
VHFXULW\SUREOHPVRIDQ\NLQGKDYHHYHUEHHQDVVRFLDWHGZLWK          VLGHORFNVWKLVSURFHVVJHQHUDOO\WRRNWZRWRWKUHHVHFRQGVWR
0U)ODJQHUjVIDFLDOKDLUWKDWKLVEHDUGDQGVLGHORFNVKDYH          FRPSOHWH DQG FRQWUDEDQG KDV QHYHU EHHQ UHFRYHUHG IURP
QHYHUEHHQPLVWDNHQIRUDmJDQJLGHQWLILHUlWKDWKHKDVQHYHU        )ODJQHUjVEHDUG
DWWHPSWHGWRHVFDSHIURPSULVRQWKDWLIKHZHUHWRHVFDSHDQG
VKDYHRIIKLVIDFLDOKDLULQDQHIIRUWWRPDNHKLPVHOIKDUGHUWR
UHFRJQL]H WKH HIIRUW ZRXOG EH XQVXFFHVVIXO EHFDXVH WKH
       )ODJQHUY:LONLQVRQHWDO                    1R        1R                    )ODJQHUY:LONLQVRQHWDO       

               ,,352&('85$/+,6725<                                     )GWK&LUDQG.LPEURXJKY&DOLIRUQLD
                                                                           1R86$SS/(;,6WK&LU
   2Q6HSWHPEHU)ODJQHUILOHGDSURVHDFWLRQ              :LWKLQ WKLV FLUFXLW 2KLRjV SULVRQ KDLU UHJXODWLRQ KDV
DJDLQVWWKH'LUHFWRURI2'5&DQGWKHZDUGHQRI/H&,ZKHUH                  UHSHDWHGO\ EHHQ XSKHOG DJDLQVW FKDOOHQJHV XQGHU WKH )UHH
KHZDVWKHQLQFDUFHUDWHGDOOHJLQJYLRODWLRQVRIKLVUHOLJLRXV             ([HUFLVH&ODXVHRIWKH)LUVW $PHQGPHQW6HH:LOOLDPVY
ULJKWV  2Q sDQXDU\   )ODJQHU ILOHG DQ DPHQGHG             :LONLQVRQ1R86$SS/(;,6WK
FRPSODLQWWRLQFOXGHDOOHJDWLRQVDJDLQVWWKHZDUGHQDW0D&,               &LU%URZQY:LONHUVRQ1RWK&LU
7KHPDJLVWUDWHMXGJHKHOGDQHYLGHQWLDU\KHDULQJRQsDQXDU\                3ROORFNY0DUVKDOO)GWK&LU6HHDOVR
  UHJDUGLQJ )ODJQHUjV PRWLRQ IRU D SUHOLPLQDU\                0D\VY:LONLQVRQ1R86$SS/(;,6
LQMXQFWLRQWRSUHYHQWWKHGHIHQGDQWVIURPIRUFLEO\FXWWLQJKLV             WK&LUXQSXEOLVKHGRUGHUDIILUPLQJGLVPLVVDOIRU
EHDUG DQG VLGHORFNV  2Q sDQXDU\   WKH PDJLVWUDWH         IDLOXUH WR VWDWH D FODLP ZKHUH 2KLR KDLU UHJXODWLRQ ZDV
MXGJH UHFRPPHQGHG JUDQWLQJ )ODJQHUjV PRWLRQ IRU                       FKDOOHQJHGXQGHUFRQVWLWXWLRQDOSURYLVLRQVRWKHUWKDQWKH)UHH
SUHOLPLQDU\ LQMXQFWLRQ  7KH GLVWULFW FRXUW UHYHUVHG WKH            ([HUFLVH&ODXVH
PDJLVWUDWHMXGJHjV5HSRUWDQG5HFRPPHQGDWLRQDQGGHQLHG
)ODJQHUjVPRWLRQLQDQRUGHUILOHGRQ$XJXVW7KH                     , GR QRW UHDG 7XUQHU Y 6DIOH\  86   DV
GHIHQGDQWVPRYHGIRUVXPPDU\MXGJPHQWRQ0DUFK                   VXJJHVWLQJ WKDW DQ mDV DSSOLHGl DSSURDFK FDQ URXWLQHO\ EH
DQG )ODJQHU ILOHG D FURVV PRWLRQ IRU SDUWLDO VXPPDU\               XVHGWRFLUFXPYHQWDZHOOHVWDEOLVKHGERG\RIODZVXFKDVWKDW
MXGJPHQW RQ sXQH    2Q )HEUXDU\   WKH              XSKROGLQJ WKH 2KLR UHJXODWLRQ  6SHDNLQJ WKURXJK sXVWLFH
PDJLVWUDWH MXGJH HQWHUHG D 5HSRUW DQG 5HFRPPHQGDWLRQ                 2j&RQQRUWKH7XUQHU&RXUWQRWHGWKDWm>U@XQQLQJDSULVRQLV
GHQ\LQJERWKWKHGHIHQGDQWjVPRWLRQIRUVXPPDU\MXGJPHQW                   DQLQRUGLQDWHO\GLIILFXOWXQGHUWDNLQJWKDWUHTXLUHVH[SHUWLVH
DQG)ODJQHUjVFURVVPRWLRQIRUVXPPDU\MXGJPHQWZKLFKWKH                    SHFXOLDUO\ ZLWKLQ WKH SURYLQFH RI WKH OHJLVODWLYH DQG
GLVWULFWFRXUWDGRSWHGLQDQRUGHUGDWHG0DUFK                   H[HFXWLYHEUDQFKHVRIJRYHUQPHQWl,GDW0RUHRYHU
                                                                           WKH&RXUWFRQWLQXHGm>S@ULVRQDGPLQLVWUDWLRQLVDWDVNWKDW
   2Q0D\WKHGHIHQGDQWVILOHGDVHFRQGPRWLRQIRU               KDVEHHQFRPPLWWHGWRWKHUHVSRQVLELOLW\RIWKRVHEUDQFKHV
VXPPDU\MXGJPHQWEDVHGRQTXDOLILHGLPPXQLW\ZKLFKLVDW                   DQGVHSDUDWLRQRISRZHUVFRQFHUQVFRXQVHODSROLF\RIMXGLFLDO
LVVXHLQWKHSUHVHQWFDVH2Q$XJXVWWKHGLVWULFW               UHVWUDLQWl,GDW$JDLQVWWKLVEDFNJURXQGDQGDIWHUDQ
FRXUW HQWHUHG DQ RUGHU GHQ\LQJ WKH GHIHQGDQWjV PRWLRQ               DQDO\VLVRIWKHIDFLDOYDOLGLW\RIFKDOOHQJHG0LVVRXULSULVRQ
EHFDXVHm>D@UHDVRQDEOHSULVRQRIILFLDOZRXOGKDYHNQRZQLQ                UHJXODWLRQVXQGHUWKHIRXUmIDFWRUVlGLVFXVVHGLQWKHPDMRULW\
WKDWKHFRXOGQRWFXW)ODJQHUjVEHDUGDQGVLGHORFNVLQ                RSLQLRQKHUHWKH7XUQHU&RXUWXSKHOGWKHYDOLGLW\RIWKHILUVW
FRQWUDYHQWLRQ RI KLV VLQFHUHO\ KHOG UHOLJLRXV EHOLHIV LQ WKH       RI WKH UHJXODWLRQV D SURKLELWLRQ DJDLQVW FRUUHVSRQGHQFH
DEVHQFH RI OHJLWLPDWH SHQRORJLFDO LQWHUHVWV  UHODWLQJ WR WKH        EHWZHHQLQPDWHVDWGLIIHUHQWVWDWHSULVRQVRQWKHJURXQGWKDW
HQIRUFHPHQWRIWKHKDLUOHQJWKUHJXODWLRQls$DW               DVDPDWWHURIODZLWZDVmUHDVRQDEO\UHODWHGWROHJLWLPDWH
'&W2UGHURI7KHGHIHQGDQWVWLPHO\ILOHGWKHLU              VHFXULW\LQWHUHVWVl,GDW7KHVDPHVRUWRIFDWHJRULFDO
1RWLFHRI$SSHDORQ6HSWHPEHU                                    DQDO\VLV OHG WKH 7XUQHU &RXUW WR LQYDOLGDWH WKH RWKHU
                                                                           FKDOOHQJHGUHJXODWLRQDEDQRQLQPDWHPDUULDJHV
                                                                            7KH 7XUQHU RSLQLRQ GRHV QRW LPSO\ WKDW DQ LQPDWH ZKR
     7KH GLVWULFW FRXUW DOVR LQFRUSRUDWHG E\ UHIHUHQFH WKH IDFWV DQG
DQDO\VLV RI WKH %:7307 IDFWRUV FRQWDLQHG LQ WKH 5HSRUW DQG
                                                                           VHHNVWRFKDOOHQJHDSULVRQUHJXODWLRQWKHFRQVWLWXWLRQDOLW\RI
5HFRPPHQGDWLRQ ILOHG RQ )HEUXDU\   s$ DW  DQG WKH          ZKLFK KDV DOUHDG\ EHHQ HVWDEOLVKHG LV HQWLWOHG WR KDYH WKH
0DUFK   GLVWULFW FRXUW 2UGHU DGRSWLQJ LW $00 s$ DW  ' &W   UHJXODWLRQ VXEMHFWHG WR IUHVK VFUXWLQ\ XQGHU D IRXUIDFWRU
2UGHU RI 
    )ODJQHUY:LONLQVRQHWDO                     1R      1R                     )ODJQHUY:LONLQVRQHWDO         

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                                                   ,,,$1$/<6,6
  &21&855,1*,13$57',66(17,1*,13$57                                $sXULVGLFWLRQ
 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
                                                                           7KLVFRXUWKDVMXULVGLFWLRQRYHUWKHDSSHDOIURPWKHGLVWULFW
   '$9,'$1(/621&LUFXLWsXGJHFRQFXUULQJLQSDUWDQG               FRXUWjVRUGHUEHFDXVHGHQLDORIVXPPDU\MXGJPHQWEDVHGRQ
GLVVHQWLQJ LQ SDUW  , FRQFXU LQ WKH FRQFOXVLRQ WKDW WKH      TXDOLILHGLPPXQLW\LVDQLPPHGLDWHO\DSSHDODEOHFROODWHUDO
TXDOLILHG LPPXQLW\ GRFWULQH EDUV SODLQWLII )ODJQHU IURP           RUGHU6HH0DWWR[Y&LW\RI)RUHVW3DUN)G
DWWHPSWLQJWRPXOFWWKHGHIHQGDQWVLQGDPDJHVIRUUHTXLULQJ             WK&LUFLWLQJ0LWFKHOOY)RUV\WK86
KLPWRFRPSO\ZLWK2KLRjVSULVRQUHJXODWLRQUHJDUGLQJIDFLDO            ZKLFKFDWHJRUL]HGWKHGHQLDORITXDOLILHGLPPXQLW\DV
KDLU%XWEHFDXVH,EHOLHYHWKDWWKHGHIHQGDQWVDUHHQWLWOHGWR        D FROODWHUDO RUGHU XQGHU &RKHQ Y %HQHILFLDO ,QGXV /RDQ
SUHYDLODWWKHILUVWVWDJHRIWKHTXDOLILHGLPPXQLW\DQDO\VLVo        &RUS  86    ,Q sRKQVRQ Y sRQHV D
LHEHFDXVH,EHOLHYHWKDWWKHDSSOLFDWLRQRIWKHUHJXODWLRQWR       XQDQLPRXV6XSUHPH&RXUWKHOGWKDWmDGHIHQGDQWHQWLWOHGWR
0U)ODJQHULVSHUPLVVLEOHXQGHUWKH&RQVWLWXWLRQDVDPDWWHU           LQYRNHDTXDOLILHGLPPXQLW\GHIHQVHPD\QRWDSSHDODGLVWULFW
RI ODZ o  , ZRXOG QRW OHW WKH FODLPV IRU GHFODUDWRU\ DQG    FRXUWjV VXPPDU\ MXGJPHQW RUGHU LQVRIDU DV WKDW RUGHU
LQMXQFWLYHUHOLHIJRIRUZDUG                                           GHWHUPLQHV ZKHWKHU RU QRW WKH SUHWULDO UHFRUG VHWV IRUWK D
                                                                        µJHQXLQHjLVVXHRIIDFWIRUWULDOlsRKQVRQYsRQHV86
  7KHGLVWULFWFRXUWjVILUVWVWDJHUDWLRQDOHZDVDVIROORZV            
  m>0@DWHULDO LVVXHV RI IDFW H[LVW DV WR WKH OHJLWLPDF\ RI     %'HQLDORI4XDOLILHG,PPXQLW\
  GHIHQGDQWVjSURIIHUHGMXVWLILFDWLRQVIRUHQIRUFLQJWKHKDLU
  UHJXODWLRQ DJDLQVW SODLQWLII  
 
 
  3ODLQWLII KDV FRPH       7KHGHWHUPLQDWLRQRIZKHWKHUTXDOLILHGLPPXQLW\DSSOLHV
  IRUZDUGZLWKHYLGHQFHIURPZKLFKDWULHURIIDFWFRXOG                WRDQRIILFLDOjVDFWLRQVLVDOHJDOGHWHUPLQDWLRQWKDWZHUHYLHZ
  UHDVRQDEO\FRQFOXGHWKDWGHIHQGDQWVjHQIRUFHPHQWRIWKH               GHQRYR6HH'LFNHUVRQY0F&OHOODQ)G
  JURRPLQJUHJXODWLRQDJDLQVWSODLQWLIIZDVDQH[DJJHUDWHG              WK &LU   $ PRWLRQ IRU VXPPDU\ MXGJPHQW ZLOO EH
  UHVSRQVH WR RU QRW GRQH IRU WKH DVVHUWHG VHFXULW\             JUDQWHGLIWKHHYLGHQFHSUHVHQWHGWRWKHFRXUWGHPRQVWUDWHV
  FRQFHUQVl                                                            WKDW WKHUH LV QR JHQXLQH LVVXH RI PDWHULDO IDFW DQG WKDW WKH
                                                                        PRYDQWLVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZ6HH)('
   0\ FROOHDJXHV RQ WKH SDQHO DJUHH ZLWK WKLV UDWLRQDOH  ,   5 &,9 3 &HORWH[&RUSY&DWUHWW86
UHVSHFWIXOO\GLVDJUHH,DPDZDUHRIQREDVLVRQZKLFKWKH             $QGHUVRQY/LEHUW\/REE\,QF86
UHJXODWLRQFRXOGSURSHUO\EHKHOGLQYDOLGRQLWVIDFHDQGLW           :HPXVWQRWZHLJKWKHHYLGHQFHEXWUDWKHUZH
VHHPVWRPHWKDWWKHYHU\H[LVWHQFHRIWKHUHJXODWLRQMXVWLILHV         PXVWRQO\GHWHUPLQHZKHWKHUWKHUHLVDIDFWXDOGLVSXWHWKDW
LWVHQIRUFHPHQWDJDLQVW0U)ODJQHU                                   SUHFOXGHVVXPPDU\MXGJPHQW6HH/LEHUW\/REE\86
                                                                        DW
  (YHQXQGHUWKHUHVWULFWLYHVWDWXWRU\VWDQGDUGUHMHFWHGE\WKH
6XSUHPH &RXUW LQ &LW\ RI %RHUQH Y )ORUHV  86          ,Q +DUORZ Y )LW]JHUDOG WKH 6XSUHPH &RXUW KHOG WKDW
WKHFRQVWLWXWLRQDOLW\RIUHJXODWLRQVVXFKDV2KLRjVZDV         mJRYHUQPHQW RIILFLDOV SHUIRUPLQJ GLVFUHWLRQDU\ IXQFWLRQV
URXWLQHO\XSKHOG6HHIRUH[DPSOH+DUULVY&KDSPDQ              JHQHUDOO\DUHVKLHOGHGIURPOLDELOLW\IRUFLYLOGDPDJHVLQVRIDU
)GWK&LUDQG+DPLOWRQY6FKULUR             DVWKHLUFRQGXFWGRHVQRWYLRODWHFOHDUO\HVWDEOLVKHGVWDWXWRU\
)GWK&LU3RVW%RHUQHGHFLVLRQVRIFRXUVH           RUFRQVWLWXWLRQDOULJKWVRIZKLFKDUHDVRQDEOHSHUVRQZRXOG
KDYHUHDFKHGWKHVDPHUHVXOW6HHHJ*UHHQY3ROXQVN\            KDYH NQRZQl  +DUORZ Y )LW]JHUDOG  86  
     )ODJQHUY:LONLQVRQHWDO                    1R       1R                 )ODJQHUY:LONLQVRQHWDO     

4XDOLILHGLPPXQLW\SURWHFWVSXEOLFRIILFHUVmIURP              WRsXO\RQO\IXUWKHUVXJJHVWVWKDWWKHGHIHQGDQWVPD\EH
XQGXH LQWHUIHUHQFH ZLWK WKHLU GXWLHV DQG IURP SRWHQWLDOO\        H[DJJHUDWLQJWKHLUUHVSRQVHWRWKHSRWHQWLDOVHFXULW\WKUHDWV
GLVDEOLQJ WKUHDWV RI OLDELOLW\l ,G DW   ,Q %XW] Y      SRVHGE\SHUPLWWLQJ)ODJQHUWRJURZKLVEHDUGDQGVLGHORFNV
(FRQRPRXWKH6XSUHPH&RXUWH[SODLQHGWKDWmGDPDJHVVXLWV               LQDPDQQHUWKDWLVFRQVLVWHQWZLWKKLVUHOLJLRXVEHOLHIV
FRQFHUQLQJFRQVWLWXWLRQDOYLRODWLRQVQHHGQRWSURFHHGWRWULDO
EXW FDQ EH WHUPLQDWHG RQ D SURSHUO\ VXSSRUWHG PRWLRQ IRU         2XU UHYHUVDO RI WKH GLVWULFW FRXUWjV GHQLDO RI VXPPDU\
VXPPDU\ MXGJPHQW EDVHG RQ WKH GHIHQVH RI >TXDOLILHG@             MXGJPHQW EDVHG RQ TXDOLILHG LPPXQLW\ GRHV QRW SUHFOXGH
LPPXQLW\l%XW]Y(FRQRPRX86                 )ODJQHUjVDVDSSOLHGFKDOOHQJHWRWKH2KLRSULVRQJURRPLQJ
                                                                        UHJXODWLRQIURPSURFHHGLQJ$FFRUGLQJO\ZH5(0$1'WR
   $VZHH[SODLQHGLQ'LFNHUVRQWKHILUVWVWHSLQGHWHUPLQLQJ          WKHGLVWULFWFRXUWIRUIXUWKHUFRQVLGHUDWLRQRI)ODJQHUjVFODLPV
LI WKH GHIHQGDQWV DUH HQWLWOHG WR TXDOLILHG LPPXQLW\ LV WR     IRUGHFODUDWRU\DQGLQMXQFWLYHUHOLHI
H[DPLQH mZKHWKHU EDVHG RQ WKH DSSOLFDEOH ODZ D
FRQVWLWXWLRQDO YLRODWLRQ RFFXUUHGl  'LFNHUVRQ  )G DW                          ,9&21&/86,21
,IDFRQVWLWXWLRQDOYLRODWLRQLVIRXQGZHQH[WFRQVLGHU
ZKHWKHU WKH YLRODWLRQ LQYROYHG mFOHDUO\ HVWDEOLVKHG                   %DVHGXSRQWKHIRUHJRLQJWKHGLVWULFWFRXUWjVRUGHUGHQ\LQJ
FRQVWLWXWLRQDOULJKWVRIZKLFKDUHDVRQDEOHSHUVRQZRXOGKDYH           WKH GHIHQGDQWVj PRWLRQ IRU VXPPDU\ MXGJPHQW EDVHG RQ
NQRZQl,GDWTXRWLQJ&KULVWRSKHOY.XNXOLQVN\             TXDOLILHGLPPXQLW\LV5(9(56('LQVRIDUDV)ODJQHUVHHNV
)G   WK &LU   7R GHWHUPLQH ZKHWKHU D       GDPDJHV)ODJQHUPD\KRZHYHUFRQWLQXHZLWKKLVDFWLRQ
FRQVWLWXWLRQDOULJKWLVmFOHDUO\HVWDEOLVKHGlZHmµORRNILUVWWR       VHHNLQJ GHFODUDWRU\ DQG LQMXQFWLYH UHOLHI DJDLQVW WKH
WKHGHFLVLRQVRIWKH6XSUHPH&RXUWWKHQWRGHFLVLRQVRIWKLV           DSSOLFDWLRQRIWKH2KLRSULVRQJURRPLQJUHJXODWLRQKDYLQJ
&RXUW DQG RWKHU FRXUWV ZLWKLQ RXU FLUFXLW DQG ILQDOO\ WR      SUHVHQWHG D JHQXLQH LVVXH RI PDWHULDO IDFW UHJDUGLQJ WKH
GHFLVLRQVRIRWKHUFLUFXLWVjl,GTXRWLQJ%XFNQHUY.LOJRUH        YDOLGLW\RIWKHGHIHQGDQWVjSHQRORJLFDOMXVWLILFDWLRQVIRUWKH
)GWK&LUFLWDWLRQRPLWWHG8QGHU            UHJXODWLRQ:HWKHUHIRUH5(0$1'WRWKHGLVWULFWFRXUWWR
WKLV IUDPHZRUN WR SOHDG D SURSHU FODLP XQGHU  86&        DOORZ)ODJQHUjVDVDSSOLHGFKDOOHQJHVHHNLQJGHFODUDWRU\DQG
mDSODLQWLIIPXVWLGHQWLI\DULJKWVHFXUHGE\WKH8QLWHG        LQMXQFWLYHUHOLHIWRSURFHHG
6WDWHV &RQVWLWXWLRQ DQG WKH GHSULYDWLRQ RI WKDW ULJKW E\ D
SHUVRQ DFWLQJ XQGHU FRORU RI VWDWH ODZl 5XVVR Y &LW\ RI
&LQFLQQDWL)GWK&LUVXFKWKDW
m>W@KH FRQWRXUV RI WKH ULJKW >DUH@ VXIILFLHQWO\ FOHDU WKDW D
UHDVRQDEOHRIILFLDOZRXOGXQGHUVWDQGWKDWZKDWKHLVGRLQJ
YLRODWHVWKDWULJKWl,GTXRWLQJ$QGHUVRQY&UHLJKWRQ
86
   $IWHU GHWHUPLQLQJ WKDW D FRQVWLWXWLRQDO ULJKW LV FOHDUO\
HVWDEOLVKHGWKHILQDOVWHSLQRXUTXDOLILHGLPPXQLW\DQDO\VLV
LVWRLQTXLUHmZKHWKHUWKHSODLQWLIIKDVDOOHJHGVXIILFLHQWIDFWV
VXSSRUWHGE\VXIILFLHQWHYLGHQFHWRLQGLFDWHZKDW>WKHRIILFLDO@
DOOHJHGO\GLGZDVREMHFWLYHO\XQUHDVRQDEOHLQOLJKWRI>WKH@
FOHDUO\HVWDEOLVKHGFRQVWLWXWLRQDOULJKWVl'LFNHUVRQ)G
DWTXRWLQJ$GDPVY0HWLYD)GWK&LU
    )ODJQHUY:LONLQVRQHWDO                    1R       1R                   )ODJQHUY:LONLQVRQHWDO        

ZH QRWHG HDUOLHU FRXUWV JHQHUDOO\ GHIHU WR WKH H[SHUWLVH RI   m6XPPDU\MXGJPHQWLVQRWDSSURSULDWHLIWKHUHLVD
SULVRQRIILFLDOVmLQWKHDGRSWLRQDQGH[HFXWLRQRISROLFHVDQG          JHQXLQH IDFWXDO GLVSXWH UHODWLQJ WR ZKHWKHU WKH GHIHQGDQWV
SUDFWLFHVWKDWLQWKHLUMXGJPHQWDUHQHHGHGWRSUHVHUYHLQWHUQDO        FRPPLWWHG DFWV WKDW DOOHJHGO\ YLRODWHG FOHDUO\ HVWDEOLVKHG
RUGHUDQGGLVFLSOLQHDQGWRPDLQWDLQLQVWLWXWLRQDOVHFXULW\l           ULJKWVl,G
:ROILVK86DW,Q%URZQYsRKQVRQZHFRQFOXGHG
WKDW m>D@V ORQJ DV SULVRQ DXWKRULWLHV SUHVHQW HYLGHQFH WR          7XUQLQJ WR WKH ILUVW SURQJ RI RXU TXDOLILHG LPPXQLW\
VXSSRUW WKHLU MXGJPHQW WKDW SULVRQ VHFXULW\ ZLOO EH              DQDO\VLV ZH PXVW DVN ZKHWKHU D FRQVWLWXWLRQDO YLRODWLRQ
XQGHUPLQHGLQWKHDEVHQFHRIDFKDOOHQJHGUHJXODWLRQZHZLOO           RFFXUUHG7KH6XSUHPH&RXUWKDVUHFRJQL]HGWKDWmFRQYLFWHG
QRWVXEVWLWXWHRXUMXGJPHQWIRUWKHLUVl%URZQYsRKQVRQ             SULVRQHUVGRQRWIRUIHLWDOOFRQVWLWXWLRQDOSURWHFWLRQVE\UHDVRQ
)GWK&LUFHUWGHQLHGVXEQRP             RI WKHLU FRQYLFWLRQ DQG FRQILQHPHQW LQ SULVRQl %HOO Y
,QRVHQFLRYsRKQVRQ86+RZHYHUZH                :ROILVK866SHFLILFDOO\WKH6XSUHPH
DIIRUGQRGHIHUHQFHWRWKHSROLFLHVDQGMXGJPHQWVRISULVRQ             &RXUWKDVKHOGWKDWLQPDWHVUHWDLQ)LUVW$PHQGPHQWULJKWV
RIILFLDOV LI WKHUH LV mVXEVWDQWLDO HYLGHQFH LQ WKH UHFRUG WR   VHH3HOOY3URFXQLHU86LQFOXGLQJWKH
LQGLFDWHWKDWWKHRIILFLDOVKDYHH[DJJHUDWHGWKHLUUHVSRQVHl           ULJKWWRIUHHH[HUFLVHRIUHOLJLRQ6HH&UX]Y%HWR86
3HOO86DW                                                    Q  FRQFOXGLQJ WKDW mUHDVRQDEOH
                                                                        RSSRUWXQLWLHVPXVWEHDIIRUGHGWRDOOSULVRQHUVWRH[HUFLVHWKH
   &RQVLVWHQWZLWKWKHVHSULQFLSOHVLQ:KLWQH\Y%URZQZH             UHOLJLRXV IUHHGRP JXDUDQWHHG E\ WKH )LUVW DQG )RXUWHHQWK
KHOGWKDWDSULVRQSROLF\ZKLFKSURKLELWHGWKHLQWHUFRPSOH[             $PHQGPHQWZLWKRXWIHDURISHQDOW\l$SULVRQHUDOOHJLQJ
WUDYHORIVL[sHZLVKLQPDWHVIRU6DEEDWKVHUYLFHVDQGDQQXDO            WKDWWKHDFWLRQVRISULVRQRIILFLDOVYLRODWHKLVUHOLJLRXVEHOLHIV
3DVVRYHU6HGHUVZDVmDQH[DJJHUDWHGUHVSRQVHWRVSHFXODWLYH             PXVWVKRZWKDWmWKHEHOLHIRUSUDFWLFHDVVHUWHGLVUHOLJLRXVLQ
VHFXULW\REMHFWLYHVDQGWKHUHIRUHLW>ZD@VLQYDOLGl:KLWQH\        WKHSHUVRQjVRZQVFKHPHRIWKLQJVlDQGLVmVLQFHUHO\KHOGl
 )G DW   ,Q :KLWQH\ ZH UHMHFWHG D FRQFOXVRU\       .HQWYsRKQVRQ)GWK&LU
DSSURDFKZKHUHmDQ\WKLQJSULVRQRIILFLDOVFDQMXVWLI\LVYDOLG
EHFDXVHWKH\KDYHVRPHKRZMXVWLILHGLWl,GDW/LNH               ,QWKLVFDVHWKHVLQFHULW\RI)ODJQHUjVUHOLJLRXVEHOLHIVLVQRW
WKH GHIHQGDQWV LQ :KLWQH\ WKH GHIHQGDQWV KHUH KDYH              LQ GLVSXWH  )ODJQHU DOOHJHV WKDW DSSOLFDWLRQ RI  
DUWLFXODWHGDOLVWRIJHQHUDOL]HGFRQFHUQVUHJDUGLQJWKHLPSDFW         ' DQG ) YLRODWHG KLV )LUVW $PHQGPHQW IUHH H[HUFLVH
RIH[HPSWLQJ)ODJQHUIURPWKHJURRPLQJUHJXODWLRQ)ODJQHU            ULJKWV+HDVVHUWVWKDWGHVSLWHKLVHIIRUWVWRSUHYHQWSULVRQ
KRZHYHUKDVGHPRQVWUDWHGWKHDEVHQFHRIDIDFWXDOEDVLVIRU            RIILFLDOVIURPYLRODWLQJWKHWHQHWVRIKLVUHOLJLRXVIDLWKWKH
WKHVH SHQRORJLFDO FRQFHUQV DQG KDV WKHUHE\ FDOOHG LQWR           GHIHQGDQWVIRUFLEO\FXWKLVEHDUGDQGVLGHORFNVLQDQG
TXHVWLRQ WKH FUHGLELOLW\ RI WKRVH DVVHUWLRQV  5HVROXWLRQ RI    
WKHVHFUHGLELOLW\LVVXHVFDQEHEHVWDFKLHYHGE\WKHWULDOMXGJH
GXULQJ IXUWKHU SURFHHGLQJV UHJDUGLQJ )ODJQHUjV DVDSSOLHG             7KH6XSUHPH&RXUWKDVKHOGWKDWLQPRVWFLUFXPVWDQFHV
FKDOOHQJHWRWKHJURRPLQJUHJXODWLRQ                                   SULVRQRIILFLDOVmVKRXOGEHDFFRUGHGZLGHUDQJLQJGHIHUHQFH
                                                                        LQWKHDGRSWLRQDQGH[HFXWLRQRISROLFLHVDQGSUDFWLFHVWKDWLQ
  )ODJQHU LV WKH RQO\ 2UWKRGR[ sHZ DW 0D&, ZKLFK KDV D       WKHLU MXGJPHQW DUH QHHGHG WR SUHVHUYH LQWHUQDO RUGHU DQG
SRSXODWLRQ H[FHHGLQJ  LQPDWHV ZKR LV UHTXHVWLQJ DQ         GLVFLSOLQH DQG WR PDLQWDLQ LQVWLWXWLRQDO VHFXULW\l :ROILVK
H[HPSWLRQIURPWKH2KLRSULVRQJURRPLQJUHJXODWLRQEDVHG                86DWm7RHQVXUHWKDWFRXUWVDIIRUGDSSURSULDWH
RQUHOLJLRXVUHDVRQVs$DW:LQJDUG'HS7KH              GHIHUHQFH WR SULVRQ RIILFLDOVl WKH 6XSUHPH &RXUW KDV
IDFW WKDW WKH GHIHQGDQWV PDQDJHG WR ZDLW ILYH \HDUV EHIRUH     mGHWHUPLQHG WKDW SULVRQ UHJXODWLRQV DOOHJHG WR LQIULQJH
IRUFLEO\FXWWLQJ)ODJQHUjVEHDUGDQGVLGHORFNVIURPsXQH           FRQVWLWXWLRQDOULJKWVDUHMXGJHGXQGHUDµUHDVRQDEOHQHVVjWHVW
       )ODJQHUY:LONLQVRQHWDO                1R       1R                     )ODJQHUY:LONLQVRQHWDO        

OHVV UHVWULFWLYH WKDQ WKDW RUGLQDULO\ DSSOLHG WR DOOHJHG          %:7307)DFWRUV7ZR7KUHHDQG)RXU
LQIULQJHPHQWVRIIXQGDPHQWDOFRQVWLWXWLRQDOULJKWVl2j/RQH
Y(VWDWHRI6KDED]]86,Q7XUQHUY             /RRNLQJ WR WKH VHFRQG 7XUQHU IDFWRU WKHUH DUH QR
6DIOH\WKH6XSUHPH&RXUWDUWLFXODWHGWKHSURSHUVWDQGDUGDV           DOWHUQDWLYHVWKDWUHPDLQRSHQWR)ODJQHULQWKHH[HUFLVHRIKLV
IROORZV  mZKHQ D SULVRQ UHJXODWLRQ LPSLQJHV RQ LQPDWHVj       UHOLJLRQVKRXOGWKHJURRPLQJUHJXODWLRQEHXSKHOG1RQHRI
FRQVWLWXWLRQDOULJKWVWKHUHJXODWLRQLVYDOLGLILWLVUHDVRQDEO\     WKHRWKHUDVSHFWVRI)ODJQHUjVUHOLJLRQFRXOGHYHUFRPSHQVDWH
UHODWHGWROHJLWLPDWHSHQRORJLFDOLQWHUHVWVl7XUQHUY6DIOH\       IRU WKH IDFW WKDW DQ HVVHQWLDO WHQHW RI KLV UHOLJLRXV EHOLHIV
86                                                SUHYHQWV KLP IURP FXWWLQJ KLV EHDUG RU VLGHORFNV DQG WKDW
                                                                       HQIRUFHPHQW RI WKH JURRPLQJ UHJXODWLRQ ZRXOG UHTXLUH WKH
   :HDJUHHZLWKWKHGLVWULFWFRXUWjVFRQFOXVLRQLQLWV0DUFK          SODLQWLIIWRYLRODWHWKLVYHU\WHQHW
2UGHUDGRSWLQJWKHPDJLVWUDWHMXGJHjV5HSRUWDQG
5HFRPPHQGDWLRQWKDWWKHSURSHUVWDQGDUGWRDSSO\LQSULVRQHU              $VWRWKHWKLUG7XUQHUIDFWRUWKH HYLGHQFHLQWKHUHFRUG
FDVHVFKDOOHQJLQJUHVWULFWLRQVRQWKHIUHHH[HUFLVHRIUHOLJLRQ        VKRZV WKDW QR SULVRQ UHVRXUFHV ZHUH HYHU GLYHUWHG WR
LVVXSSOLHGE\WKH6XSUHPH&RXUWjVGHFLVLRQLQ7XUQHUQRWE\          DFFRPPRGDWH WKH SODLQWLII DQG WKH WKHQH[HPSWHG 1DWLYH
(PSOR\PHQW'LYLVLRQ'HSDUWPHQWRI+XPDQ5HVRXUFHVRI                  $PHULFDQ LQPDWHV  s$ DW  :LQJDUG 'HS  7KH
2UHJRQ Y 6PLWK  86    ,Q 6PLWK WKH        GHIHQGDQWVDOVRDGPLWWHGWKDWQRH[WUDJXDUGVZHUHHYHUKLUHG
6XSUHPH&RXUWFRQFOXGHGmWKDWJHQHUDOO\DSSOLFDEOHUHOLJLRQ          RURYHUWLPHDXWKRUL]HGWRUHVSRQGWRDGGLWLRQDOVHFXULW\ULVNV
QHXWUDO ODZV WKDW KDYH WKH HIIHFW RI EXUGHQLQJ D SDUWLFXODU   E\)ODJQHUDQGWKHRWKHUWKHQH[HPSWHGLQPDWHVs$DW
UHOLJLRXV SUDFWLFH QHHG QRW EH MXVWLILHG E\ D FRPSHOOLQJ       :LQJDUG'HS7KHUHLVDOVRQRHYLGHQFHLQWKHUHFRUG
JRYHUQPHQWDOLQWHUHVWl,GDWQ)ROORZLQJWKH6PLWK          WKDWRWKHULQPDWHVUHVHQWHG)ODJQHUEHFDXVHKHZDVDOORZHG
GHFLVLRQ &RQJUHVV HQDFWHG WKH 5HOLJLRXV )UHHGRP                  DWRQHWLPHWRJURZRXWKLVEHDUGDQGVLGHORFNV
5HVWRUDWLRQ $FW 5)5$ ZKLFK ZDV ODWHU KHOG
XQFRQVWLWXWLRQDOE\WKH6XSUHPH&RXUWLQ&LW\RI%RHUQHY                7KHODFNRIDQXQGXHLPSDFWmRQJXDUGVDQGRWKHULQPDWHV
)ORUHV86$VWKHGLVWULFWFRXUWDQG           DQGRQWKHDOORFDWLRQRISULVRQUHVRXUFHVJHQHUDOO\l7XUQHU
PDJLVWUDWH MXGJH FRUUHFWO\ UHFRJQL]HG DIWHU WKH %RHUQH          86DWDOVRVSHDNVWRWKHILQDOIDFWRUZKLFKLVWKDW
GHFLVLRQRXU&LUFXLWKDVFRQVLVWHQWO\DSSOLHGWKHSUH5)5$            KDYLQJ)ODJQHUVHDUFKKLVRZQEHDUGLVDQmDOWHUQDWLYHWKDW
VWDQGDUG VHW IRUWK LQ 7XUQHU WR HYDOXDWH FKDOOHQJHV E\         IXOO\DFFRPPRGDWHVWKHSODLQWLIIDWGHPLQLPLVFRVWWRYDOLG
SULVRQHUVWRUHVWULFWLRQVRQWKHIUHHH[HUFLVHRIUHOLJLRQ6HH      SHQRORJLFDOLQWHUHVWVl,GDW7KHGHIHQGDQWVKDYHDOUHDG\
HJ6SLHVY9RLQRYLFK)GWK&LU            DGPLWWHG WKDW WKH DFFRPPRGDWLRQ RI )ODJQHU DQG WKH IRXU
DSSO\LQJWKH7XUQHUVWDQGDUGWRHYDOXDWH)LUVW$PHQGPHQW              1DWLYH $PHULFDQ LQPDWHV GLG QRW FDXVH WKH LQVWLWXWLRQ DQ\
IUHHH[HUFLVHFKDOOHQJHVWRSULVRQUHJXODWLRQV                       ILQDQFLDOKDUGVKLSs$DW:LQJDUG'HS

  $V ZH H[SODLQ LQ 3DUW & ZH EHOLHYH WKDW )ODJQHU KDV          2Q EDODQFH WKH VHFRQG WKLUG DQG IRXUWK7XUQHU IDFWRUV
SUHVHQWHGVXIILFLHQWHYLGHQFHWKDWDSSOLFDWLRQRIWKHJURRPLQJ         DOVR ZHLJK KHDYLO\ LQ IDYRU RI )ODJQHU EHFDXVH WKH\
UHJXODWLRQZRXOGYLRODWHKLVFRQVWLWXWLRQDOULJKWV:HDJUHH          GHPRQVWUDWH D ODFN RI YLDEOH DOWHUQDWLYHV IRU )ODJQHU WR
ZLWKWKHGLVWULFWFRXUWWKDWmPDWHULDOLVVXHVRIIDFWH[LVWDVWR      H[HUFLVHKLVUHOLJLRQVKRXOGWKHUHJXODWLRQEHXSKHOGDVZHOO
                                                                       DV WKH DEVHQFH RI DQ XQGXH QHJDWLYH LPSDFW RQ WKH SULVRQ
                                                                       FRPPXQLW\DQGLWVUHVRXUFHV7KXVORRNLQJDWWKHWRWDOLW\RI
                                                                      DOO IRXU 7XUQHU IDFWRUV )ODJQHU KDV SUHVHQWHG VXIILFLHQW
                                                                       HYLGHQFH ZKLFK UDLVHV VHULRXV TXHVWLRQV FRQFHUQLQJ WKH
     7KLV 2UGHU GDWHG 0DUFK   ZDV OLVWHG LQ WKH GHIHQGDQWVj
1RWLFH RI $SSHDO EXW ZDV QRW LQFOXGHG E\ WKH SDUWLHV LQ WKH sRLQW
$SSHQGL[                                                              YDOLGLW\RIWKHGHIHQGDQWVjDVVHUWHGSHQRORJLFDOLQWHUHVWV$V
    )ODJQHUY:LONLQVRQHWDO                     1R       1R                     )ODJQHUY:LONLQVRQHWDO        

XSRQ HVFDSH E\ FKDQJLQJ KLV KDLU DQG EHDUG OHQJWK DQGRU        WKH OHJLWLPDF\ RI GHIHQGDQWVj SURIIHUHG MXVWLILFDWLRQV IRU
VW\OHls$DW:LQJDUG$II7KHGHIHQGDQWVDUJXH          HQIRUFLQJWKHKDLUUHJXODWLRQDJDLQVWSODLQWLII3ODLQWLIIKDV
WKDWLWLVDGPLQLVWUDWLYHO\EXUGHQVRPHWRXSGDWHFRQWLQXDOO\             FRPHIRUZDUGZLWKHYLGHQFHIURPZKLFKDWULHURIIDFWFRXOG
WKHLUUHFRUGRILQPDWHSKRWRJUDSKVLILQPDWHVZHUHDOORZHGWR            UHDVRQDEO\ FRQFOXGH WKDW GHIHQGDQWVj HQIRUFHPHQW RI WKH
DOWHU WKHLU DSSHDUDQFH E\ JURZLQJ ORQJ KDLU RU WKLFN IDFLDO     JURRPLQJ UHJXODWLRQ DJDLQVW SODLQWLII ZDV DQ H[DJJHUDWHG
KDLU7KHGHIHQGDQWVIXUWKHUFRQWHQGWKDWmLWLVHVVHQWLDOWR           UHVSRQVHWRRUQRWGRQHIRUWKHDVVHUWHGVHFXULW\FRQFHUQVl
GLVWULEXWH DQ DFFXUDWH SLFWXUH RI DQ HVFDSHH DV TXLFNO\ DV      s$DW'&W2UGHURI8QGHUWKH6XSUHPH
SRVVLEOH DIWHU DQ HVFDSH DQG KDYLQJ WR GLVWULEXWH PXOWLSOH       &RXUWjVGHFLVLRQLQsRKQVRQZHZRXOGQRWEHDEOHWRH[HUFLVH
SLFWXUHVLVPRUHGLIILFXOWls$DW:LQJDUG$II           DSSHOODWH MXULVGLFWLRQ EHFDXVH WKH &RXUW KDV KHOG WKDW mD
                                                                         GHIHQGDQWHQWLWOHGWRLQYRNHDTXDOLILHGLPPXQLW\GHIHQVH
   7KH JURRPLQJ UHJXODWLRQ KRZHYHU GRHV QRW FRPSOHWHO\           PD\ QRW DSSHDO D GLVWULFW FRXUWjV VXPPDU\ MXGJPHQW RUGHU
SUHYHQWWKHULVNRIDQHVFDSHHDOWHULQJKLVRZQDSSHDUDQFH               LQVRIDUDVWKDWRUGHUGHWHUPLQHVZKHWKHURUQRWWKHSUHWULDO
DIWHU HVFDSLQJ IURP SULVRQ  :LWK UHVSHFW WR )ODJQHU             UHFRUGVHWVIRUWKDµJHQXLQHjLVVXHRIIDFWIRUWULDOlsRKQVRQ
VSHFLILFDOO\WKHUHLVQRHYLGHQFHLQWKHUHFRUGWKDWKHKDVHYHU         86 DW   ,Q WKLV FDVH ZLWK UHVSHFW WR WKH ILUVW
DWWHPSWHGWRHVFDSHIURPSULVRQ,QDGGLWLRQWRDSKRWRJUDSK            SURQJRIWKHTXDOLILHGLPPXQLW\DQDO\VLVWKHUHDUHJHQXLQH
RI )ODJQHU WKH GHIHQGDQWV DOVR KDYH RQ ILOH IRXU                LVVXHVRIPDWHULDOIDFWDVWRZKHWKHUDFRQVWLWXWLRQDOYLRODWLRQ
SURIHVVLRQDOO\PDGHVNHWFKHVRIKLPEHDULQJYDULRXVEHDUG                RFFXUUHG
DQGVLGHORFNOHQJWKVDQGRQHVNHWFKRI)ODJQHUZLWKQRIDFLDO
KDLUDWDOO,QWKHHYHQWWKDW)ODJQHUHYHUHVFDSHGIURPSULVRQ           2XU TXDOLILHG LPPXQLW\ DQDO\VLV KRZHYHU GRHV QRW HQG
WKHVHVNHWFKHVZRXOGKHOSWRLGHQWLI\KLPEHFDXVHWKH\VKRZ              KHUH  :H PXVW QRZ FRQVLGHU WKH GLVWULFW FRXUWjV OHJDO
DUDQJHRIKLVSRVVLEOHDSSHDUDQFHV                                     FRQFOXVLRQ WKDW m>D@W WKH WLPH RI SODLQWLIIjV LQLWLDO IRUFHG
                                                                         KDLUFXWLQWKHODZZDVFOHDUO\HVWDEOLVKHGWKDWSULVRQHUV
   )LQDOO\WKHGHIHQGDQWVDUJXHWKDWm>O@RQJKDLUFDQOHDGWR           UHWDLQWKHULJKWWRUHOLJLRXVIUHHGRPDQGWKDWSULVRQRIILFLDOV
LQFUHDVHGSOXPELQJSUREOHPVE\PDNLQJFORJJHGGUDLQVPRUH                PD\QRWGHQ\LQPDWHVDUHDVRQDEOHRSSRUWXQLW\RISXUVXLQJ
IUHTXHQWls$DW:LQJDUG$II(YHQLIZHZHUH            >WKHLU@ IDLWK FRPSDUDEOH WR WKH RSSRUWXQLW\ DIIRUGHG IHOORZ
WR DVVXPH WKLV WR EH WUXH DV D JHQHUDO PDWWHU WKHUH LV QR   SULVRQHUV ZKR DGKHUH WR FRQYHQWLRQDO UHOLJLRXV SUHFHSWVl
HYLGHQFH LQ WKH UHFRUG WKDW DQ\ FORJJHG GUDLQV ZHUH HYHU        s$ DW  ' &W 2UGHU RI  TXRWDWLRQ RPLWWHG
DWWULEXWHGWR)ODJQHUjVEHDUGRUVLGHORFNV                              HPSKDVLVDGGHG,QOLJKWRIRXUGHFLVLRQLQ3ROORFNZHKROG
                                                                         WKDWWKHGLVWULFWFRXUWHUUHGLQ FRQFOXGLQJWKDWWKHODZZDV
  %DVHGRQWKHGHIHQGDQWVjDVVHUWHGMXVWLILFDWLRQVIROORZHG             FOHDUO\HVWDEOLVKHG
E\)ODJQHUjVGHPRQVWUDWLRQRIWKHODFNRIDIDFWXDOEDVLVIRU
WKRVH MXVWLILFDWLRQV DV DSSOLHG WR KLPVHOI WKH ILUVW 7XUQHU        )ODJQHU EHDUV WKH EXUGHQ mWR DOOHJH DQG SURYH WKDW WKH
IDFWRUZHLJKVKHDYLO\LQIDYRURI)ODJQHU7KHGHIHQGDQWV               GHIHQGDQWRIILFLDOYLRODWHGDFOHDUO\HVWDEOLVKHGFRQVWLWXWLRQDO
KDYHQRWKDGDQ\VHFXULW\SUREOHPVZLWK)ODJQHUQRUKDYH                ULJKWl%XFNQHU)GDW,Q3ROORFNY0DUVKDOOZH
WKH\VSHQWDGGLWLRQDOUHVRXUFHVWRSURYLGHH[WUDVHFXULW\WR             XSKHOGWKHDSSOLFDWLRQRIDQHDUOLHUYHUVLRQRIWKHFKDOOHQJHG
SHUIRUPVHDUFKHVRIKLVEHDUGDQGVLGHORFNV7KHGHIHQGDQWV             2KLR SULVRQ JURRPLQJ UHJXODWLRQ LQ DQ DFWLRQ LQYROYLQJ D
KDYHPXOWLSOHVNHWFKHVRI)ODJQHUIRUUHDG\GLVWULEXWLRQLIKH           /DNRWD$PHULFDQ,QGLDQZKRVRXJKWWRHQMRLQSULVRQRIILFLDOV
HYHU HVFDSHG  )LQDOO\ QRWKLQJ LQ WKH UHFRUG VXJJHVWV WKDW     IURPFXWWLQJKLVKDLULQYLRODWLRQRIKLVUHOLJLRXVEHOLHIV6HH
)ODJQHUjVEHDUGDQGVLGHORFNVKDYHHYHUFORJJHGWKHVLQNVRU             3ROORFNY0DUVKDOO)GWK&LUFHUW
VKRZHUVRIWKHSULVRQ                                                   GHQLHG86:HKHOGWKDWm>D@IWHUEDODQFLQJ
    )ODJQHUY:LONLQVRQHWDO                  1R      1R                    )ODJQHUY:LONLQVRQHWDO       

WKH GHIHQGDQWjV LQWHUHVW LQ NHHSLQJ SULVRQHUVj KDLU VKRUW     SULVRQVE\UHGXFLQJWKHGDQJHURILQMXU\WRVWDIIPHPEHUVDQG
DJDLQVWWKHULJKWRIWKHSODLQWLIIWRH[HUFLVHWKHUHOLJLRQRIWKH   WKHWHQVLRQWKDWZRXOGRWKHUZLVHIROORZIURPWKHLQFUHDVHG
/DNRWD,QGLDQVWKHUHJXODWLRQUHVWULFWLQJKDLUOHQJWKDV     FORVHDQGRUSK\VLFDOFRQWDFWUHVXOWLQJIURPWKHPRUHIUHTXHQW
DSSOLHG WR WKH SODLQWLII LV QRW XQFRQVWLWXWLRQDOl  ,G     DQGPRUHLQYDVLYHVHDUFKHVWKDWZRXOGEHQHFHVVDU\WRGHDO
HPSKDVLVDGGHG7KHGHIHQGDQWVLQ3ROORFNUDLVHGVHYHUDO          ZLWKFRQWUDEDQGLQLQPDWHVjKDLUls$DW:LQJDUG$II
OHJLWLPDWH SHQRORJLFDO FRQFHUQV VXFK DV m>T@XLFN               7KLVUDWLRQDOHKRZHYHULVFRPSOHWHO\XQGHUPLQHGE\
LGHQWLILFDWLRQUHPRYDORIDSODFHWRKLGHVPDOOFRQWUDEDQG         WKHIDFWWKDWWKHVHFXUVRU\VHDUFKHVUHTXLUHGPLQLPDOLIDQ\
SUHYHQWLRQ RI VDQLWDWLRQ SUREOHPVl DQG LQFUHDVHG ULVN RI     SK\VLFDO FRQWDFW EHWZHHQ WKH SULVRQ VWDII DQG )ODJQHU DQG
VH[XDODWWDFNVRQLQPDWHVZLWKORQJHUKDLUEHFDXVHm>O@RQJHU         LQYROYHG)ODJQHUUXQQLQJKLVRZQILQJHUVWKURXJKKLVEHDUG
KDLU LQFUHDVHV WKH DWWUDFWLYHQHVV RI DQ LQPDWH WR RWKHU      DQGVLGHORFNVZKLFKWRRNDSSUR[LPDWHO\WZRWRWKUHHVHFRQGV
LQPDWHVl,GDW                                               WRSHUIRUP)XUWKHUPRUHWKHGHIHQGDQWVKDYHRQO\VHDUFKHG
                                                                     )ODJQHUjVEHDUGDQGVLGHORFNVRQDIHZRFFDVLRQV$VVXPLQJ
  $OWKRXJK 3ROORFN LQYROYHG D FKDOOHQJH E\ D /DNRWD           WKDW m>W@KH SRWHQWLDO IRU LQMXU\ WR VWDII LQFUHDVHV LQ GLUHFW
$PHULFDQ,QGLDQWRDQHDUOLHUYHUVLRQRI)DQG          SURSRUWLRQWRWKHH[WHQWRIWKHLUSK\VLFDOFRQWDFWDQGSK\VLFDO
LQ WKLV FDVH )ODJQHU DQ +DVLGLF 2UWKRGR[ sHZ EULQJV D    SUR[LPLW\WRLQPDWHVls$DW:LQJDUG$IIJLYHQ
FKDOOHQJHWRWKHFXUUHQW'DQG)mLWQHHGQRW       WKHPLQLPDOFRQWDFWEHWZHHQWKHVWDIIDQG)ODJQHU DQGWKH
EHWKHFDVHWKDWµWKHYHU\DFWLRQLQTXHVWLRQKDVSUHYLRXVO\         LQIUHTXHQF\ RI VHDUFKHV ZKLFK KH HVVHQWLDOO\ SHUIRUPV RQ
EHHQKHOGXQODZIXOl'LFNHUVRQ)GDWTXRWLQJ           KLPVHOIWKHULVNRILQFUHDVHGLQMXU\WRWKHGHIHQGDQWVFDXVHG
$QGHUVRQ  86 DW   7R GHQ\ TXDOLILHG LPPXQLW\     E\ H[HPSWLQJ )ODJQHU IURP WKH UHJXODWLRQ DSSHDUV WR EH
SURWHFWLRQWRWKHGHIHQGDQWVWKHODZUHTXLUHVWKDWmLQWKHOLJKW    QRPLQDO
RISUHH[LVWLQJODZWKHXQODZIXOQHVVPXVWEHDSSDUHQWl,G
TXRWLQJ$QGHUVRQ86DW                                    1H[WWKHGHIHQGDQWVSURIIHUWKDWWKHJURRPLQJUHJXODWLRQ
                                                                     LVMXVWLILHGEHFDXVHLWUHGXFHVJDQJDFWLYLW\ E\VXSSUHVVLQJ
   %DVHG RQ RXU GHFLVLRQ LQ 3ROORFN ZKLFK XSKHOG DQ          mJDQJ LGHQWLILHUVl  s$ DW  :LQJDUG $II  
DSSOLFDWLRQRIWKHFKDOOHQJHGSULVRQUHJXODWLRQZHFRQFOXGH         $FFRUGLQJ WR 'HIHQGDQW :LQJDUG WKH UHJXODWLRQ SURPRWHV
WKDW )ODJQHUjV ULJKW WR JURZ KLV EHDUG DQG VLGHORFNV LQ     XQLIRUPDSSHDUDQFHmWKDWDOORZVFRUUHFWLRQVRIILFLDOVWRPRUH
FRQWUDYHQWLRQRIWKH2KLRSULVRQJURRPLQJUHJXODWLRQDWWKH          UHDGLO\ GHWHFW WKH XVH RI KDLU DV DQ LGHQWLILHUl PRUHRYHU
WLPHRIKLVIRUFHGFXWWLQJZDVQRWmVXIILFLHQWO\FOHDUWKDWD        mOLPLWDWLRQV RQ WKH TXDQWLW\ RI KDLU RQ DQ LQPDWH>@jV KHDG
UHDVRQDEOHRIILFLDOZRXOGXQGHUVWDQGWKDWZKDWKHLVGRLQJ           OLPLWV WKH QXPEHU RI ZD\V LQ ZKLFK WKH KDLU VW\OH FDQ EH
YLRODWHV WKDW ULJKWl  5XVVR  )G DW  TXRWLQJ     PRGLILHGIRUXVHDVDQLGHQWLILHUls$DW:LQJDUG$II
$QGHUVRQ  86 DW   :H DOVR UHFRJQL]H WKDW RXU    $OWKRXJKLWPD\EHWUXHWKDWWKHFKDOOHQJHGJURRPLQJ
GHFLVLRQLQ3ROORFNKDVEHHQIROORZHGLQVHYHUDOXQSXEOLVKHG         UHJXODWLRQ DV D JHQHUDO PDWWHU KHOSV DOOHYLDWH WKH
RSLQLRQV XSKROGLQJ WKH DSSOLFDWLRQ RI WKH 2KLR SULVRQ         SUROLIHUDWLRQRImJDQJLGHQWLILHUVlWKHUHLVQRHYLGHQFHLQWKH
JURRPLQJUHJXODWLRQDWLVVXHLQWKLVFDVH%HFDXVH)ODJQHU          UHFRUG WKDW )ODJQHUjV EHDUG DQG VLGHORFNV KDYH HYHU EHHQ
KDVQRWVDWLVILHGKLVEXUGHQWRHVWDEOLVKWKDWWKHmGHIHQGDQW        PLVWDNHQIRUDmJDQJLGHQWLILHUl
RIILFLDO>V@YLRODWHGDFOHDUO\HVWDEOLVKHGFRQVWLWXWLRQDOULJKWl
%XFNQHU  )G DW  WKH GHIHQGDQWV DUH HQWLWOHG WR       1H[WWKHGHIHQGDQWVDVVHUWWKDWWKHJURRPLQJUHJXODWLRQLV
TXDOLILHG LPPXQLW\VROHO\ZLWKUHVSHFWWR)ODJQHUjVPRQH\           QHHGHGWRSURPRWHUHDG\LGHQWLILFDWLRQRIHVFDSHGLQPDWHV
GDPDJHVFODLPV,WLVWKXVXQQHFHVVDU\IRUXVWRFRQVLGHUWKH       $OORZLQJDQLQPDWHWRJURZmORQJKDLURUDWKLFNIXOOEHDUG
ILQDOSURQJRIWKHTXDOLILHGLPPXQLW\DQDO\VLV$FFRUGLQJO\        FDQ>SHUPLWWKHLQPDWHWR@GUDPDWLFDOO\DOWHUKLVDSSHDUDQFH
    )ODJQHUY:LONLQVRQHWDO                   1R       1R                    )ODJQHUY:LONLQVRQHWDO       

IRUZDUG WR MXVWLI\ LWl  7XUQHU  86 DW  TXRWDWLRQ   ZH 5(9(56( WKH GLVWULFW FRXUWjV GHQLDO RI VXPPDU\
RPLWWHG'HIHQGDQW:LQJDUGVWDWHGWKDWWKHSULVRQJURRPLQJ           MXGJPHQWWRWKHGHIHQGDQWVEDVHGRQTXDOLILHGLPPXQLW\
UHJXODWLRQLVQHFHVVDU\EHFDXVHm>O@RQJKDLUDQGWKLFNIXOO
EHDUGV DQG VLGHEXUQV SURYLGH JRRG KLGLQJ SODFHV IRU VXFK       &'HFODUDWRU\DQG,QMXQFWLYH5HOLHI
FRQWUDEDQGDVGUXJVDQGZHDSRQVls$DW:LQJDUG$II
   ,Q WKH SDVW 'HIHQGDQW :LQJDUG KDV UHFRYHUHG LWHPV      7KHGHIHQVHRITXDOLILHGLPPXQLW\SURWHFWVRIILFLDOVIURP
VXFKDVWREDFFRPDULMXDQDDQGDUD]RUEODGHIURPWKHKDLURI         LQGLYLGXDO OLDELOLW\ IRU PRQH\ GDPDJHV EXW QRW IURP
2KLRLQPDWHVs$DW:LQJDUG$II+RZHYHUZLWK          GHFODUDWRU\RULQMXQFWLYHUHOLHI6HH&ROO\HUY'DUOLQJ
UHVSHFWWR)ODJQHUVSHFLILFDOO\QRFRQWUDEDQGKDVHYHUEHHQ           )GQWK&LUFHUWGHQLHG 86
UHFRYHUHGE\SULVRQVWDIIGXULQJDQ\VHDUFKRIKLVEHDUGDQG           &DJOHY*LOOH\)GWK&LU
VLGHORFNV                                                               7KXV RXU UHYHUVDO RI WKH GLVWULFW FRXUWjV GHQLDO RI
                                                                       VXPPDU\ MXGJPHQW EDVHG RQ TXDOLILHG LPPXQLW\ GRHV QRW
   7KHGHIHQGDQWVQH[WDVVHUWWKDWWKHJURRPLQJUHJXODWLRQLV          SUHFOXGH )ODJQHU IURP JRLQJ IRUZDUG ZLWK KLV DVDSSOLHG
QHFHVVDU\ WR SURPRWH WKHLU mFRPSHOOLQJ LQWHUHVW LQ               FKDOOHQJHWRWKH2KLRSULVRQJURRPLQJUHJXODWLRQLQVRIDUDV
PDLQWDLQLQJVHFXULW\ZLWKLQ2KLRjVSULVRQVE\IUHHLQJVWDII            KHVHHNVGHFODUDWRU\DQGLQMXQFWLYHUHOLHIm,QFRQVLGHULQJD
PHPEHUV IURP WKH LQFUHDVHG GHPDQGV RQ WKHLU WLPH WKDW          FKDOOHQJHWRDSULVRQSROLF\DVDSSOLHGWKHSURSHULQTXLU\LV
ZRXOGRWKHUZLVHUHVXOWIURPWKHPRUHIUHTXHQWZLGHUDQJLQJ            ZKHWKHU WKH DFWLRQV RI WKH SULVRQ RIILFLDOV DUH UHDVRQDEO\
DQGOHQJWKLHUVHDUFKHVWKDWZRXOGEHQHFHVVDU\WRDWWHPSWWR           UHODWHGWROHJLWLPDWHSHQRORJLFDOLQWHUHVWVl6NHOWRQY3UL
FRQWURO FRQWUDEDQGl  s$ DW  :LQJDUG $II           &RU,QF)GWK&LUFHUWGHQLHG
'HIHQGDQW:LQJDUGFRQWLQXHGmDGGLWLRQDOVWDIIDUHVLPSO\              86FLWLQJ7KRUQEXUJKY$EERWW86
QRW DYDLODEOH WR FRQGXFW WKH PRUH IUHTXHQW DQG WLPH            
FRQVXPLQJ VHDUFKHV WKDW ZRXOG EH QHFHVVDU\ LI WKH +DLU
/HQJWK5HJXODWLRQVZHUHQRWFRQVLVWHQWO\HQIRUFHGls$DW             )ODJQHUVHHNVGHFODUDWRU\DQGLQMXQFWLYHUHOLHIWRSUHYHQW
 :LQJDUG $II    'HVSLWH WKLV IDFLDOO\ DSSHDOLQJ      WKHGHIHQGDQWVIURPIRUFLEO\FXWWLQJKLVEHDUGDQGVLGHORFNV
MXVWLILFDWLRQ'HIHQGDQW:LQJDUGFRQFHGHGWKDWQRDGGLWLRQDO           LQWKHIXWXUH$OWKRXJKZHUHOLHGRQRXUGHFLVLRQLQ3ROORFN
VWDII PHPEHUV ZHUH HYHU KLUHG DQG QR RYHUWLPH ZDV HYHU        WRFRQFOXGHKHUHWKDWWKHGHIHQGDQWVDUHHQWLWOHGWRTXDOLILHG
DXWKRUL]HG WR DFFRPPRGDWH LQFUHDVHG VHFXULW\ GHPDQGV              LPPXQLW\ ZLWK UHVSHFW WR )ODJQHUjV GDPDJHV FODLPV RXU
FDXVHG E\ )ODJQHU DQG WKH IRXU 1DWLYH $PHULFDQ LQPDWHV         KROGLQJLQ3ROORFNGRHVQRWQHFHVVDULO\UHVROYHWKHTXHVWLRQ
ZKHQWKH\ZHUHH[HPSWHGIURPWKHUHJXODWLRQs$DW             RIZKHWKHUWKHGHIHQGDQWVPD\LQWKHIXWXUHFRQWLQXHIRUFLEO\
:LQJDUG'HS0RUHRYHUWKHGHIHQGDQWVDUHXQDZDUH              WRFXW)ODJQHUjVEHDUGDQGVLGHORFNV
RIDQ\DGGLWLRQDOVHFXULW\SUHFDXWLRQVWKDWZHUHHYHUWDNHQRQ
DFFRXQW RI )ODJQHU WKDW H[FHHGHG WKH VHFXULW\ SUHFDXWLRQV          ,QPDWHVUHWDLQULJKWVWRIUHHH[HUFLVHRIUHOLJLRQ3ULVRQ
WDNHQ IRU LQPDWHV ZKR FRPSOLHG ZLWK WKH KDLU OHQJWK            RIILFLDOVPD\LPSLQJHRQWKHVHFRQVWLWXWLRQDOULJKWVRQO\LIWKH
UHJXODWLRQs$DW:LQJDUG'HS'HIHQGDQW:LQJDUG            UHJXODWLRQ mLV UHDVRQDEO\ UHODWHG WR OHJLWLPDWH SHQRORJLFDO
ZDV DOVR XQDZDUH RI DQ\ VHFXULW\ SUREOHPV VSHFLILFDOO\          LQWHUHVWVl  7XUQHU  86 DW   :KLOH FRXUWV VKRXOG
DWWULEXWHGE\SULVRQVWDIIWR)ODJQHUjVEHDUGDQGVLGHORFNV           JHQHUDOO\GHIHUWRWKHH[SHUWLVHRISULVRQRIILFLDOVLQPDWWHUV
s$DW:LQJDUG'HS                                            LQYROYLQJ SULVRQ DGPLQLVWUDWLRQ WKLV GHIHUHQFH LV RQO\
                                                                       DIIRUGHGmLQWKHDEVHQFHRIVXEVWDQWLDOHYLGHQFHLQWKHUHFRUG
  7KHGHIHQGDQWVDOVRFRQWHQGWKDWWKHUHJXODWLRQmIXUWKHU>V@          WRLQGLFDWHWKDWWKHRIILFLDOVKDYHH[DJJHUDWHGWKHLUUHVSRQVHl
WKH FRPSHOOLQJ LQWHUHVW LQ PDLQWDLQLQJ VHFXULW\ LQ 2KLRjV       :ROILVK  86 DW   7KH SODLQWLII KHUH XQOLNH WKH
                                                                       SODLQWLII LQ 3ROORFN ZKR GLG QRW FKDOOHQJH WKH IDFWXDO
       )ODJQHUY:LONLQVRQHWDO                       1R        1R                     )ODJQHUY:LONLQVRQHWDO         

XQGHUSLQQLQJV RI WKH SULVRQ RIILFLDOVj MXVWLILFDWLRQV KDV               )GWK&LU8QGHUWKHILUVWIDFWRU
SUHVHQWHG VXIILFLHQW HYLGHQFH WR UDLVH TXHVWLRQV DERXW WKH              WKH FRXUW PXVW FRQVLGHU ZKHWKHU WKHUH LV mD YDOLG UDWLRQDO
YDOLGLW\RIWKHGHIHQGDQWVjDVVHUWHGSHQRORJLFDOLQWHUHVWV                    FRQQHFWLRQEHWZHHQWKHSULVRQUHJXODWLRQDQGWKHOHJLWLPDWH
                                                                               JRYHUQPHQWDOLQWHUHVWSXWIRUZDUGWRMXVWLI\LWl7XUQHU
   $VWKH6XSUHPH&RXUWGLUHFWHGLQ7XUQHUY6DIOH\FRXUWV                   86 DW  TXRWDWLRQ RPLWWHG  m>$@ UHJXODWLRQ FDQQRW EH
HPSOR\DIRXUIDFWRUDQDO\VLVWRGHWHUPLQHZKHWKHUDSULVRQ                    VXVWDLQHGZKHUHWKHORJLFDOFRQQHFWLRQEHWZHHQWKHUHJXODWLRQ
UHJXODWLRQ  LV UHDVRQDEO\ UHODWHG WR OHJLWLPDWH SHQRORJLFDO              DQG WKH DVVHUWHG JRDO LV VR UHPRWH DV WR UHQGHU WKH SROLF\
LQWHUHVWV6HH6SLHV)GDWFLWLQJ7XUQHU86               DUELWUDU\RULUUDWLRQDOl,GDW
DW7KHVHIDFWRUVDUHQRWQHFHVVDULO\ZHLJKHGHYHQO\VHH
LGDWEXWUDWKHUWKH\DUHJXLGHOLQHVIRUWKHFRXUWWR                    7KHILQDOWKUHH7XUQHUIDFWRUVVKRXOGEHEDODQFHGWRJHWKHU
DVVHVV ZKHWKHU WKH SULVRQ RIILFLDOVj DFWLRQV DUH UHDVRQDEO\             7KHVHFRQG7XUQHUIDFWRUWRFRQVLGHULVmZKHWKHUWKHUHDUH
UHODWHGWRDYDOLGSHQRORJLFDOEDVLV6HH:KLWQH\Y%URZQ                   DOWHUQDWLYHPHDQVRIH[HUFLVLQJWKHULJKWWKDWUHPDLQRSHQWR
                                                                               SULVRQLQPDWHVl7XUQHU86DW7KHWKLUG7XUQHU
                                                                               IDFWRU ZH FRQVLGHU mLV WKH LPSDFW DFFRPPRGDWLRQ RI WKH
                                                                              DVVHUWHG FRQVWLWXWLRQDO ULJKW ZLOO KDYH RQ JXDUGV DQG RWKHU
      sXGJH 1HOVRQjV UHOLDQFH RQ 6SLHV Y 9RLQRYLFK  )G  
 WK &LU  IRU WKH SURSRVLWLRQ WKDW XQGHU 7XUQHU FRXUWV DUH QRW
                                                                               LQPDWHVDQGRQWKHDOORFDWLRQRISULVRQUHVRXUFHVJHQHUDOO\l
WR VXEMHFW FKDOOHQJHG SULVRQ UHJXODWLRQV WR mD IRXUIDFWRU DQDO\VLV WDLORUHG   ,Gm:KHQDFFRPPRGDWLRQRIDQDVVHUWHGULJKWZLOOKDYHD
WR WKH SODLQWLIIjV LQGLYLGXDO FLUFXPVWDQFHVl LJQRUHV FRQWUROOLQJ 6XSUHPH       VLJQLILFDQWµULSSOHHIIHFWjRQIHOORZLQPDWHVRURQSULVRQVWDII
&RXUW SUHFHGHQW ,Q 7KRUQEXUJK Y $EERWW WKH 6XSUHPH &RXUW FRQVLGHUHG         FRXUWV VKRXOG EH SDUWLFXODUO\ GHIHUHQWLDO WR WKH LQIRUPHG
ERWK D IDFLDO DQG DQ DVDSSOLHG FKDOOHQJH WR D IHGHUDO SULVRQ UHJXODWLRQ       GLVFUHWLRQRIFRUUHFWLRQVRIILFLDOVl,G:LWKUHVSHFWWRWKH
FRQFHUQLQJ WKH UHFHLSW RI VXEVFULSWLRQ SXEOLFDWLRQV E\ LQPDWHV 6HH
7KRUQEXUJK Y $EERWW  86    $SSO\LQJ WKH 7XUQHU
                                                                               IRXUWK 7XUQHU IDFWRU mWKH DEVHQFH RI UHDG\ DOWHUQDWLYHV LV
DQDO\VLV WKH &RXUW FRQFOXGHG WKDW WKH SULVRQ UHJXODWLRQ DW LVVXH ZDV
                                                                               HYLGHQFHRIWKHUHDVRQDEOHQHVVRIDSULVRQUHJXODWLRQl,G
IDFLDOO\ YDOLG KRZHYHU WKH &RXUW UHPDQGHG WR WKH GLVWULFW FRXUW IRU          /LNHZLVHmWKHH[LVWHQFHRIREYLRXVHDV\DOWHUQDWLYHVPD\EH
IXUWKHU H[DPLQDWLRQ RI WKH SODLQWLIIVj DVDSSOLHG FKDOOHQJHV FRQFHUQLQJ      HYLGHQFH WKDW WKH UHJXODWLRQ LV QRW UHDVRQDEOH EXW LV DQ
SXEOLFDWLRQV LQWURGXFHG DW WULDO ,G DW  8QGHU sXGJH 1HOVRQjV             µH[DJJHUDWHGUHVSRQVHjWRSULVRQFRQFHUQVl,Gm7KLVLVQRW
LQWHUSUHWDWLRQ RI 7XUQHU DVDSSOLHG FKDOOHQJHV WR SULVRQ UHJXODWLRQV
                                                                               D µOHDVW UHVWULFWLYH DOWHUQDWLYHj WHVW  SULVRQ RIILFLDOV GR QRW
ZRXOG EH YLUWXDOO\ LPSRVVLEOH 7KH 6XSUHPH &RXUWjV GHFLVLRQ LQ $EERWW
KRZHYHU GHPRQVWUDWHV WKDW XQGHU 7XUQHU SODLQWLIIV PD\ SXUVXH DV
                                                                               KDYH WR VHW XS DQG WKHQ VKRRW GRZQ HYHU\ FRQFHLYDEOH
DSSOLHG FKDOOHQJHV WR IDFLDOO\ YDOLG SULVRQ UHJXODWLRQV                       DOWHUQDWLYH PHWKRG RI DFFRPPRGDWLQJ WKH FODLPDQWjV
     0RUHRYHU LQ 6SLHV ZH XSKHOG WKH FRQVWLWXWLRQDOLW\ RI D SULVRQ           FRQVWLWXWLRQDO FRPSODLQWl  ,G DW   +RZHYHU mLI DQ
UHJXODWLRQ SURKLELWLQJ LQPDWHOHG JURXSV FRQFOXGLQJ WKDW 7XUQHU IDFWRUV       LQPDWH FODLPDQW FDQ SRLQW WR DQ DOWHUQDWLYH WKDW IXOO\
WKUHH DQG IRXU mGR QRW FXW LQ IDYRU RI 6SLHV IRU KH KDV DOVR QRW              DFFRPPRGDWHVWKHSULVRQHUjVULJKWVDWGHPLQLPLVFRVWWRYDOLG
GHPRQVWUDWHG WKDW WKH VDIHW\ FRQFHUQV RI SULVRQ RIILFLDOV UHODWHG WR
DFFRPPRGDWLQJ KLV UHTXHVWV DUH H[DJJHUDWHG DQG GRHV QRW RIIHU DQ\
                                                                               SHQRORJLFDOLQWHUHVWVDFRXUWPD\FRQVLGHUWKDWDVHYLGHQFH
µDOWHUQDWLYH PHDQVj E\ ZKLFK SULVRQ RIILFLDOV FDQ PROOLI\ WKHLU VHFXULW\       WKDWWKHUHJXODWLRQGRHVQRWVDWLVI\WKHUHDVRQDEOHUHODWLRQVKLS
FRQFHUQVl 6SLHV  )G DW  7KXV RXU RZQ DQDO\VLV LQ 6SLHV             VWDQGDUGl,GDW
GHPRQVWUDWHV WKDW mWKH SODLQWLIIjV LQGLYLGXDO FLUFXPVWDQFHVl DUH LQGHHG
UHOHYDQW LQ DSSO\LQJ WKH 7XUQHU DQDO\VLV 8QOLNH WKH LQPDWH LQ 6SLHV            %:7307)DFWRU2QH
)ODJQHU KDV SUHVHQWHG VXIILFLHQW HYLGHQFH WKDW WKH SULVRQ RIILFLDOVj
UHVSRQVH WR D VXSSRVHG VHFXULW\ FRQFHUQ ZDV H[DJJHUDWHG 6HH GLVFXVVLRQ
LQIUD 3DUW ,,,& )ODJQHU KDV DOVR RIIHUHG DQ DOWHUQDWLYH PHDQV ZKLFK
                                                                                 ,Q FRQVLGHUDWLRQ RI WKH ILUVW 7XUQHU IDFWRU ZH QRZ DVN
ZRXOG DFFRPPRGDWH KLV UHOLJLRXV EHOLHIV mDW GH PLQLPLV FRVW WR YDOLG
                                                                               ZKHWKHU WKHUH LV D mYDOLG UDWLRQDO FRQQHFWLRQ EHWZHHQ WKH
SHQRORJLFDO LQWHUHVWVl 7XUQHU  86 DW  VHH DOVR GLVFXVVLRQ LQIUD      SULVRQUHJXODWLRQDQGWKHOHJLWLPDWHJRYHUQPHQWDOLQWHUHVWSXW
3DUW ,,,&