Court Opinion

ID: 2969968
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:01:30.893933+00
Date Added: 2024-06-11T11:39:37.470429
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 0$57,1 75(3(/              ;
          3ODLQWLII$SSHOODQW    
                                  
                                    1R
          Y                      
                                   !
                                  
 52$':$< (;35(66 ,1&           
         'HIHQGDQW$SSHOOHH 
                                1
     $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
      IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ
    1Rn'DQ$3ROVWHU'LVWULFWsXGJH
                $UJXHGsDQXDU\
         'HFLGHGDQG)LOHG6HSWHPEHU
  %HIRUHs21(6%$7&+(/'(5DQG&/$<&LUFXLW
                      sXGJHV
                   BBBBBBBBBBBBBBBBB
                        &2816(/
$5*8('  3 'DYLG 3DOPLHUH 0F&211(// 	
3$/0,(5( %ORRPILHOG +LOOV 0LFKLJDQ IRU $SSHOODQW
'HERUDK/+DPLOWRQs21(6'$<5($9,6	32*8(
&OHYHODQG 2KLR IRU $SSHOOHH  21 %5,()  3 'DYLG
3DOPLHUH0F&211(//	3$/0,(5(%ORRPILHOG+LOOV
0LFKLJDQIRU$SSHOODQW'HERUDK/+DPLOWRQ6WHYHQ(

                             
     7UHSHOY5RDGZD\([SUHVV                      1R       1R                    7UHSHOY5RDGZD\([SUHVV           

6LJDORZ s21(6 '$< 5($9,6 	 32*8( &OHYHODQG                    )XUWKHUWKHLGHDWKDWDZRUNRIDUWVOLGHVIURPWKHVSHFLILF
2KLRIRU$SSHOOHH                                                   FODVVLILFDWLRQRIVXEVHFWLRQ&WRWKHEURDGHUFODVVLILFDWLRQRI
                                                                       mSHUVRQDO HIIHFWl XQGHU VXEVHFWLRQ $ PHUHO\ EHFDXVH WKH
   s21(6 s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK    RZQHULQWHQGVWRSODFHLWLQDKRPHGHIHDWVWKHSXUSRVHRIWKH
&/$<sMRLQHG%$7&+(/'(5sSSGHOLYHUHG               RULJLQDO FDWHJRUL]DWLRQ  +DG FRQJUHVV LQWHQGHG WR DOORZ
DVHSDUDWHGLVVHQWLQJRSLQLRQ                                         REMHFWV WR RFFXS\ PRUH WKDQ RQH FDWHJRU\ LW FRXOG KDYH
                                                                       H[SUHVVO\ VDLG VR LQ WKH VWDWXWH  ,QVWHDG LW FUHDWHG WKUHH
                     BBBBBBBBBBBBBBBBB                                 VXEVHFWLRQVDQGUHTXLUHGDOWHUQDWLYHGLVSXWHUHVROXWLRQDQG
                                                                       UHFRYHU\RIDWWRUQH\jVIHHVIRURQO\RQHRIWKHVHVXEVHFWLRQV
                         23,1,21                                       ,ZRXOGKROGWKDWWKH%DJDVHUSHQWLVDmZRUNRIDUWlWKDWILWV
                     BBBBBBBBBBBBBBBBB                                 H[FOXVLYHO\ ZLWKLQ WKH FODVV RI JRRGV OLVWHG LQ WKH WKLUG
                                                                       SURYLVR  $FFRUGLQJO\ , ZRXOG KROG WKDW WKH IHHVKLIWLQJ
   1$7+$1,(/ 5 s21(6 &LUFXLW sXGJH  3ODLQWLII 'U           ODQJXDJH LV LQDSSOLFDEOH WR D VXLW EURXJKW IRU GDPDJH RI D
0DUWLQ 7UHSHO m7UHSHOl VXHG 5RDGZD\ ([SUHVV ,QF             WKLUGSURYLVRLWHP
m5RDGZD\([SUHVVRU5RDGZD\lDFRPPRQFDUULHULQWKH
8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH1RUWKHUQ'LVWULFWRI2KLR           6HFRQG , GR QRW EHOLHYH WKH GLVWULFW FRXUW DEXVHG LWV
IRUGDPDJHVWRDQDUWLFOHRI$IULFDQWULEDODUW$IWHUUHFHLYLQJ      GLVFUHWLRQ LQ OLPLWLQJ WUDYHO H[SHQVHV WD[HG DV FRVWV  $Q
DMXU\YHUGLFWLQKLVIDYRU7UHSHOPRYHGIRUDWWRUQH\jVIHHVLQ       DEXVH RI GLVFUHWLRQ LV GHILQHG DV D mGHILQLWH DQG ILUP
WKHDPRXQWRIDQGmWD[HGFRVWVlLQWKHDPRXQW              FRQYLFWLRQ WKDW WKH WULDO FRXUW FRPPLWWHG D FOHDU HUURU RI
RI   7KHVH PDWWHUV ZHUH UHIHUUHG WR 0DJLVWUDWH      MXGJPHQWl8QLWHG6WDWHVY0DFN)GWK
sXGJH sDPHV 6 *DOODV  0DJLVWUDWH sXGJH *DOODV LVVXHG D      &LU   TXRWLQJ/RJDQ Y 'D\WRQ +XGVRQ &RUS 
5HSRUWDQG5HFRPPHQGDWLRQLQZKLFKKHUHFRPPHQGHGWKDW                 )GWK&LU,DPVLPSO\XQFRQYLQFHGWKDW
WKHSODLQWLIIjVPRWLRQIRUDWWRUQH\jVIHHVEHGHQLHGDQGIRXQG         HQIRUFLQJWKHmPLOHUXOHlDQGGLVDOORZLQJFHUWDLQWUDYHO
WKDWRQO\RI7UHSHOjVFRVWVZHUHSURSHUO\WD[DEOH          H[SHQVHVULVHVWRVXFKDOHYHO,QGHHGLQP\YLHZDSSURYLQJ
7KHGLVWULFWFRXUWDGRSWHGWKH5HSRUWDQG5HFRPPHQGDWLRQ              WKHVHH[SHQVHVZRXOGKDYHEHHQDQDEXVHRIGLVFUHWLRQ
LQWRWR7UHSHOQRZDSSHDOVWKHGHFLVLRQRIWKHGLVWULFWFRXUW
)RU WKH UHDVRQV VWDWHG EHORZ ZH 9$&$7( WKH GLVWULFW
FRXUWjVGHFLVLRQUHJDUGLQJDWWRUQH\jVIHHVDQG9$&$7(WKH
GLVWULFW FRXUWjV GHFLVLRQV UHJDUGLQJ WKH WD[DWLRQ RI ZLWQHVV
WUDYHOH[SHQVHVDQGWKHWD[DWLRQRIH[SHUWZLWQHVVGHSRVLWLRQ
IHHV
                             ,)DFWV
  ,Q  SODLQWLII SXUFKDVHG DQ $IULFDQ WULEDO FDUYLQJ
NQRZQDVWKHm%DJDVHUSHQWlLQ1HZ<RUN&LW\IRU
6KRUWO\ WKHUHDIWHU 7UHSHO DUUDQJHG WR KDYH WKH GHIHQGDQW
5RDGZD\([SUHVVWUDQVSRUWWKHREMHFWWR3KRHQL[$UL]RQD
ZKHUH LW ZRXOG EHFRPH SDUW RI WKH GHFRU RI WKH SODLQWLIIjV
KRPH'XULQJWUDQVSRUWWKHVHUSHQWZDVEURNHQLQWRWKUHH
PDMRUSLHFHVDQGVHYHUDOPLQRUSLHFHV3ODLQWLIIILOHGDFODLP
    7UHSHOY5RDGZD\([SUHVV                        1R        1R                   7UHSHOY5RDGZD\([SUHVV          

YDOXHDQGHDVLO\UHSODFHDEOH7KLVLVWKHFDWHJRU\RIJRRGVWR          ZLWK WKH GHIHQGDQW IRU WKH GDPDJHV WR WKH %DJD VHUSHQW
ZKLFKWKHIHHVKLIWLQJSURYLVLRQVSHFLILFDOO\DSSOLHV6HH            'HIHQGDQWGLGQRWFRQWDFW7UHSHODERXWDQ\DOWHUQDWLYHGLVSXWH
86&GUHSHDOHG6HFRQGSURYLVR                 UHVROXWLRQ IRUXP RU LQLWLDWH SURFHHGLQJV LQ VXFK D IRUXP
JRRGVOLVWHGLQVXEVHFWLRQ%DUHVLPLODULQFKDUDFWHUWRILUVW         3ODLQWLIIILOHGVXLWLQIHGHUDOFRXUW
SURYLVRJRRGVEXWDUHHPSOR\HGLQDEXVLQHVVRULQVWLWXWLRQDO
VHWWLQJ  7KLUG SURYLVR JRRGV DUH VSHFLDOW\ LWHPV VXFK DV         $W WKH MXU\ WULDO LQ  SODLQWLII FDOOHG D QXPEHU RI
REMHFWVRIDUWmZKLFKEHFDXVHRIWKHLUXQXVXDOQDWXUHRUYDOXH           ZLWQHVVHV PDQ\ RI ZKRP FDPH IURP RXWVLGH WKH 6WDWH RI
UHTXLUHWKHVSHFLDOL]HGKDQGOLQJDQGHTXLSPHQWHPSOR\HGLQ                2KLR7KHSODLQWLIIjVZLWQHVVHVLQFOXGHG'U)UHGULFN/DPS
PRYLQJKRXVHKROGJRRGVl86&&                 &XUDWRU RI $IULFDQ $PHULFDQ DQG 2FHDQLF $UW IRU WKH
UHSHDOHG                                                   %DOWLPRUH0XVHXPRI$UW'U5REHUWs.RHVWOHUDUHVHDUFK
                                                                          VFLHQWLVW DQG LQVWUXFWRU LQ ELRGHWHULRUDWLRQ DW WKH 1<8
   ,QYRNLQJ WKH SODLQWLIIjV H[SODQDWLRQ RI WKH UHDVRQV              ,QVWLWXWHRI)LQH$UWV'U'HQQLV6WHYHQVRQ'LUHFWRURIWKH
XQGHUO\LQJWKHSDVVDJHRIWKHIHHVKLIWLQJODQJXDJHWKHUHLVD           +DUGLQJ/DERUDWRU\DWWKH1HZ<RUN%RWDQLFDO*DUGHQV0U
FOHDUORJLFWRUHTXLULQJWKDWWKHFDWHJRULHVEHUHDGDVH[FOXVLYH         /HRQDUG.DKDQRZQHURIDQ$IULFDQDUWJDOOHU\LQ1HZ<RUN
RIRQHDQRWKHU%HFDXVHRIWKHUHODWLYHO\ORZFRVWDQGHDV\              0LFKDHO&KLVROPDWHDFKHUVFKRODUDQGDSSUDLVHURI$IULFDQ
UHSODFHDELOLW\RIILUVWSURYLVRJRRGVDFXVWRPHUSD\LQJKLV              DUW DQG sR$QQ +DKQ D UHVLGHQW RI 3KRHQL[ $UL]RQD ZKR
RZQ DWWRUQH\jV IHHV LV XQOLNHO\ WR UHVRUW WR OLWLJDWLRQ IRU      ZHQWWRWKH5RDGZD\([SUHVVWHUPLQDOWRWDNHGHOLYHU\RIWKH
UHGUHVV  7KHUHIRUH WKH DYDLODELOLW\ RI DOWHUQDWLYH GLVSXWH       %DJDVHUSHQWIRU7UHSHO
UHVROXWLRQDQGWKHSURYLVLRQIRUUHFRYHU\RIOHJDOIHHVLVYLWDO
WR WKH FRQJUHVVLRQDO LQWHQW RI SURWHFWLQJ FRQVXPHUV IURP             3ODLQWLII DOVR FDOOHG WKUHH UHEXWWDO ZLWQHVVHV 0LFKDHO
FDUHOHVV PRYHUV ZKR PLJKW KLGH EHKLQG WKH KLJK ZDOO RI           2OLYHUDQ$IULFDQDUWGHDOHU%ULDQ'RXJODV1HZWRQIRUPHU
OLWLJDWLRQFRVWV$OWKRXJKVHFRQGSURYLVRJRRGVDUHVLPLODU              &KDLUPDQRIWKH'HSDUWPHQWRI$UWRI$IULFD2FHDQLDDQG
LQ FKDUDFWHU WR WKHLU ILUVW SURYLVR EUHWKUHQ WKH RZQHUV RI      WKH $PHULFDV DW WKH 0HWURSROLWDQ 0XVHXP RI $UW DQG
VHFRQG SURYLVR JRRGV EXVLQHVVHV DQG LQVWLWXWLRQV KROG             )UDQFLQH1GLD\HIRUPHU&XUDWRURI$IULFDQ$UWDWWKH0XVHH
VLJQLILFDQWO\PRUHEDUJDLQLQJSRZHUDQGUHVRXUFHVWKDQGRHV               GH Oj+RPPH LQ 3DULV  0U .DKDQ HVWLPDWHG WKDW WKH IDLU
DKRPHRZQHUZKRPLJKWHPSOR\FRPPRQFDUULHUVRQRQO\D                    PDUNHWYDOXHRIWKHXQGDPDJHG%DJDVHUSHQWZDVPLOOLRQ
IHZRFFDVLRQVLQKLVOLIHWLPH%XVLQHVVHVDQGLQVWLWXWLRQVDUH           GROODUV0U&KLVKROPVWDWHGWKDWWKHIDLUPDUNHWYDOXHZDV
PRUH OLNHO\ WR XVH FRPPRQ FDUULHUV IUHTXHQWO\ DQG ZRXOG          PLOOLRQGROODUV
RIWHQ EH DEOH WR EULQJ HFRQRPLF SUHVVXUH WR EHDU E\
WKUHDWHQLQJWRZLWKKROGIXWXUHEXVLQHVVDQGZRXOGEHPRUH                  7KHMXU\IRXQGIRUWKHSODLQWLIIDQGVHWGDPDJHVDW
DEOH WR VKRXOGHU WKH FRVWV RI OLWLJDWLRQ LI QHFHVVDU\  7KLUG   sXGJHPHQWLQWKLVDPRXQWZDVHQWHUHGRQsXO\2Q
SURYLVRJRRGVDUHRIVXFKVLJQLILFDQWYDOXHDQGXQLTXHQDWXUH             6HSWHPEHUSODLQWLIIPRYHGIRUDWWRUQH\jVIHHVXQGHU
WKDWWKHSRWHQWLDOGDPDJHVIRUORVVRULQMXU\WRWKHPZRXOG               6HFWLRQ  RI WKH +RXVHKROG *RRGV 7UDQVSRUWDWLRQ $FW 
RXWZHLJKWKHFRVWVRIOLWLJDWLRQPDNLQJVXLWDPHDQLQJIXODQG            86&  G  UHSHDOHG  ZKLFK ZDV LQ
HIIHFWLYHUHPHG\DQGGHWHUUHQW)XUWKHUWKHXQLTXHQHVVRI               HIIHFW ZKHQ WKH %DJD VHUSHQW ZDV VKLSSHG LQ   2Q
WKLUG SURYLVR JRRGV LV OLNHO\ WR UHTXLUH H[SHUW RSLQLRQ WR       6HSWHPEHUSODLQWLIIILOHGDELOORIFRVWV3ODLQWLIIjV
HVWDEOLVK WKHLU YDOXH PDNLQJ VRPH IRUPV RI DOWHUQDWLYH            ELOO RI FRVWVVRXJKWWRWD[WKHWUDYHOFRVWVRIKLVZLWQHVVHV
GLVSXWHUHVROXWLRQXQDSSHDOLQJ                                           IURP1HZ<RUN'U.RHVWOHU'U6WHYHQVRQ0U.DKDQ0U
                                                                          &KLVKROP0U1HZWRQ0U2OLYHU%DOWLPRUH'U/DPS
                                                                          3DULV0V1GLD\HDQG3KRHQL[0V+DKQ7UHSHOFODLPHG
       7UHSHOY5RDGZD\([SUHVV                           1R        1R                    7UHSHOY5RDGZD\([SUHVV          

WKDWWKHWRWDODPRXQWRIWKHVHWUDYHOFRVWVZDV+H                                       BBBBBBBBBBBBBBB
DOVRUHTXHVWHGDQRUGHUFRPSHOOLQJGHIHQGDQWWRUHLPEXUVH
KLP IRU  LQ H[SHUW ZLWQHVV IHHV WKDW KH SDLG 'U                                      ',66(17
/DPS 'U 6WHYHQVRQ 'U .HRVWOHU 'U 5RVHQEXUJ 0U                                          BBBBBBBBBBBBBBB
.DKDQDQG0U&KLVKROPWRDSSHDUDWGHSRVLWLRQVWDNHQE\
WKH GHIHQGDQW 7KH GLVWULFW FRXUW UHIHUUHG WKH PRWLRQ IRU                $/,&(0%$7&+(/'(5&LUFXLWsXGJHGLVVHQWLQJ,
DWWRUQH\jVIHHVDQGWKHPRWLRQIRUFRVWVWR0DJLVWUDWHsXGJH                   UHVSHFWIXOO\GLVVHQW
*DOODV
                                                                                  )LUVW , WKLQN WKH PDMRULW\ PLVFRQVWUXHV WKH VWDWXWH
   7KHPDJLVWUDWHMXGJHLVVXHGD5HSRUWDQG5HFRPPHQGDWLRQ                     DXWKRUL]LQJ DWWRUQH\jV IHHV E\ ILQGLQJ WKDW LWHPV PD\ EH
LQZKLFKKHUHFRPPHQGHGGHQ\LQJSODLQWLIIDWWRUQH\jVIHHVRQ                   FODVVLILHGLQPXOWLSOHFDWHJRULHV,WKLQNWKDWLIZHDFFHSWWKH
WKHJURXQGWKDWSODLQWLIIZDVQRWHQWLWOHGWRUHFRYHUDWWRUQH\jV               PDMRULW\jVUHDGLQJWKDWWKHSURYLVRVVHWRXWLQWKHVWDWXWHDUH
IHHVEHFDXVHWKHLWHPLQYROYHG LVDQmREMHFWRIDUWlWKDWLV                  QRWPXWXDOO\H[FOXVLYHZHURE86&I
H[HPSW IURP WKH IHHVKLIWLQJ SURYLVLRQ RI  86&                     UHSHDOHGRIDQ\SXUSRVHDQGUHQGHUWKHGLVWLQFWLRQV
G5HJDUGLQJWKHZLWQHVVHVjWUDYHOH[SHQVHVWKH                     GUDZQE\&RQJUHVVPHDQLQJOHVV
PDJLVWUDWHMXGJHSURSRVHGWKDWWKHSODLQWLIIRQO\EHDOORZHG
WR UHFRXS WUDYHO FRVWV IRU WUDYHO ZLWKLQ  PLOHV RI WKH               ,QKLVEULHIWKHSODLQWLIIDGYDQFHVWKHDUJXPHQWWKDWmWKH
FRXUWKRXVH  PLOHV WRWDO IRU HDFK ZLWQHVV DQG                       IHHVKLIWLQJ SURYLVLRQV RI WKH $FW ZHUH DLPHG DW FXULQJ D
UHFRPPHQGHG WKDW WKHVH WUDQVSRUWDWLRQ FRVWV EH OLPLWHG WR               VRFLDO LOO DULVLQJ LQ WKH LQWHUVWDWH VKLSSLQJ LQGXVWU\l  +H
SHUPLOH%DVHGRQWKHGLVWDQFHDQGUDWHOLPLWDWLRQVWKH               HODERUDWHV RQ WKH SUREOHP RI VXLQJ IRU GDPDJH GRQH WR
PDJLVWUDWHMXGJHUHFRPPHQGHGJUDQWLQJWKHSODLQWLII                     KRXVHKROGJRRGVQRWLQJm(YHU\GD\H[SHULHQFHWHDFKHVWKDW
LQ WUDYHO FRVWV IRU HDFK RI KLV QLQH ZLWQHVVHV  )LQDOO\ WKH       PRVWKRXVHKROGSURSHUW\VKLSSHGE\FRPPRQFDUULHUKDVOHVV
PDJLVWUDWHMXGJHSURSRVHGWKDWSODLQWLIIjVUHTXHVWIRUH[SHUW                 YDOXH WKDQ WKH FRVW RI DQ\ OLWLJDWLRQ WR UHFRYHU IRU LWV
UHODWHGGHSRVLWLRQH[SHQVHVEHGHQLHGRQWKHJURXQGVWKDWLW                   EUHDNDJH7KXVLQPRVWVHWWLQJVWKHFDUULHUFRXOGVLPSO\KLGH
ZDV QRW DXWKRUL]HG E\ VWDWXWH  7KH PDJLVWUDWH         MXGJHjV         EHKLQGWKHH[SHQVHVRIOLWLJDWLRQVHFXUHLQWKHNQRZOHGJHWKDW
ILQGLQJVZHUHDGRSWHGE\WKHGLVWULFWFRXUWLQWRWR                          WKHLQMXUHGFXVWRPHULVQRWJRLQJWRVWDUWDQH[SHQVLYHODZVXLW
                                                                               WRSD\IRUDFRPSDUDWLYHO\OHVVH[SHQVLYHSLHFHRISURSHUW\l
                                                                               ,G7KLVSRLQWLVZHOOWDNHQ+RZHYHULWVHHPVWRPHWKDWWKH
                                                                               REYLRXVH[FHSWLRQWRDFDUULHUjVEHLQJDEOHWRmKLGHEHKLQGWKH
                                                                               H[SHQVH RI OLWLJDWLRQl LV ZKHQ WKH SURSHUW\ GDPDJHG LV RI
                                                                               VLJQLILFDQWYDOXHRUUDULW\7KH%DJDVHUSHQWLVMXVWVXFKDQ
                                                                               LWHP
    
       ,Q WKH PHDQWLPH 7UHSHO ZKR ZDV GLVVDWLVILHG ZLWK WKH  MXU\        7KH WULSDUWLWH SURYLVR VFKHPH VHW IRUWK E\ &RQJUHVV
YHUGLFW DSSHDOHG WKH WULDO FRXUWjV GDPDJHV MXGJPHQW RQ VHYHUDO JURXQGV       VXSSRUWVWKHLGHDWKDWRQO\LWHPVRIUHODWLYHO\ORZYDOXHLQ
LQFOXGLQJ WKH DUJXPHQW WKDW WKH WULDO FRXUW DEXVHG LWV GLVFUHWLRQ E\ QRW       UHODWLRQ WR WKH FRVWV RI OLWLJDWLRQ DUH FRYHUHG E\ WKH IHH
DOORZLQJ H[SHUWV WR WHVWLI\ UHJDUGLQJ WKH EDVHV IRU WKHLU RSLQLRQV DV WR WKH   VKLIWLQJSURYLVLRQ7KHW\SHRIJRRGVOLVWHGLQVXEVHFWLRQ$
YDOXH RI WKH FDUYLQJ 7KLV FRXUW DJUHHG WKDW WKH H[SHUWV VKRXOG KDYH EHHQ      W\SLFDOO\ UHIHUUHG WR DV mILUVW SURYLVRl JRRGV HQFRPSDVVHV
DOORZHG WR WHVWLI\ DERXW WKH EDVLV IRU WKHLU RSLQLRQV 2Q 2FWREHU  
WKH MXU\jV DZDUG RI GDPDJHV ZDV YDFDWHG DQG WKH FDVH UHPDQGHG WR WKH           VWDQGDUGKRXVHKROGLWHPVVXFKDVIXUQLWXUHIL[WXUHVNQLFN
WULDO FRXUW IRU D QHZ WULDO RQ WKH GDPDJHV LVVXH RQO\ 3O 5HSO\ %U DW     NQDFNVDQGRWKHUJRRGVWKDWDUHRIUHODWLYHO\ORZPRQHWDU\

    7UHSHOY5RDGZD\([SUHVV                       1R       1R                      7UHSHOY5RDGZD\([SUHVV              

H[SHUWZLWQHVVGHSRVLWLRQFRVWVXQGHUSUHFOXGHGKLP                                           ,,'LVFXVVLRQ
IURPUHFRYHULQJWKHPXQGHU)HGHUDO5XOHRI&LYLO3URFHGXUH
 ZKLFK JRYHUQV GLVFRYHU\ H[SHQVHV  7KH GLVWULFW FRXUW       $ $WWRUQH\jV)HHV
LPSOLFLWO\ DGRSWHG WKLV VXJJHVWLRQ ZKHQ LW DGRSWHG WKH
PDJLVWUDWHMXGJHjV5HSRUWDQG5HFRPPHQGDWLRQLQWRWR                $VQRWHGDERYHWKHGLVWULFWFRXUWDGRSWLQJWKHPDJLVWUDWH
                                                                        MXGJHjV5HSRUWDQG5HFRPPHQGDWLRQGHQLHG7UHSHOjVPRWLRQ
   $OWKRXJKLWLVFOHDUWKDW7UHSHOLVQRWHQWLWOHGWRGHSRVLWLRQ       IRUDWWRUQH\jVIHHVRQWKHJURXQGWKDWWKHUHZDVQRVWDWXWRU\
FRVWV XQGHU 5XOH  WKLV IDFW GRHV QRW SUHFOXGH KLP IURP     EDVLVIRUVXFKDQDZDUG2QDSSHDO7UHSHOFRQWHQGVWKDWWKH
REWDLQLQJSRVWMXGJPHQWUHLPEXUVHPHQWIRUWKHVHFRVWV$V              GLVWULFWFRXUWHUUHGEHFDXVHKHLVHQWLWOHGWRDWWRUQH\jVIHHV
WKHPDJLVWUDWHMXGJHQRWHGWKH6XSUHPH&RXUWjV&UDZIRUG                XQGHUWKH+RXVHKROG*RRGV7UDQVSRUWDWLRQ$FW86&
GHFLVLRQRQO\SUHFOXGHVUHFRYHU\XQGHU5XOHZKHQWKHUHLV            GUHSHDOHG7KHGHQLDORIDWWRUQH\jV
QRH[SOLFLWVWDWXWRU\DXWKRULW\,QWKLVFDVHVWDWXWRU\DXWKRULW\     IHHV LV JHQHUDOO\ UHYLHZHG IRU DEXVH RI GLVFUHWLRQ  6HH
LVSURYLGHGE\5XOH6HH/RXLVLDQD3RZHU	/LJKW&RY             &UDPEOLW Y )LNVH  )G   WK &LU 
.HOOVWURP)GWK&LU5XOHE&           +RZHYHUZKHQWKHGHQLDORIDWWRUQH\jVIHHVLVEDVHGRQWKH
SURYLGHVDQLQGHSHQGHQWEDVLVIRUUHFRYHU\RIH[SHUWIHHVDV            FRQVWUXFWLRQRIDVWDWXWHZHH[HUFLVHGHQRYRUHYLHZ6HH
SDUWRIGLVFRYHU\&KDPEHUVY,QJUDP)G              &ROXPELD*DV6\VWHP,QFY8QLWHG6WDWHV)G
WK&LUOLWLJDQWjVSRVWMXGJPHQWUHTXHVWIRUFRVWV          )HG&LU
XQGHU 5XOH E& ZDV WLPHO\ HYHQ WKRXJK KH QHYHU
UHTXHVWHGVXFKFRVWVDWWKHWLPHRIGHSRVLWLRQ/DQFDVWHUY                 %DFNJURXQG
/RUG1R&LY:/DW

6'1<
0DUVDPH7KHUHIRUHZHUHPDQGWKLVFDVHWRWKH             ,Q  &RQJUHVV HQDFWHG WKH +RXVHKROG *RRGV
GLVWULFW FRXUW WR GHWHUPLQH ZKDW GHSRVLWLRQ FRVWV 7UHSHO LV     7UDQVSRUWDWLRQ $FW  86&  HW VHT WR UHPHG\
HQWLWOHGWRXQGHU5XOH                                              SUREOHPV LQ WKH LQWHUVWDWH VKLSSLQJ LQGXVWU\  2QH RI WKH
                                                                        SUREOHPVDSSDUHQWO\IDFHGE\VKLSSHUVRIKRXVHKROGJRRGV
                        ,,,&RQFOXVLRQ                                ZDVWKDWFRPPRQFDUULHUVUHIXVHGWRUHFRJQL]HWKHLUFODLPV
                                                                        EHFDXVHWKHFDUULHUVNQHZWKDWIHZKRXVHKROGJRRGVVKLSSHUV
   )RU WKH UHDVRQV VWDWHG DERYH ZH 9$&$7( WKH GLVWULFW         ZRXOGHQJDJHLQDQH[SHQVLYHODZVXLWWRUHFRYHUIRUGDPDJH
FRXUWjVKROGLQJWKDWSODLQWLIILVQRWHQWLWOHGWRDWWRUQH\jVIHHV       WR FRPPRQ KRXVHKROG LWHPV RI UHODWLYHO\ OLWWOH YDOXH  ,Q
XQGHU  86&  G DQG 5(0$1' IRU D
GHWHUPLQDWLRQ DV WR ZKHWKHU 7UHSHO ZDLYHG KLV ULJKW WR
DWWRUQH\jVIHHVDQGDFDOFXODWLRQRIWKRVHIHHVLIQHFHVVDU\             
                                                                              ,W LV ZHOO HVWDEOLVKHG WKDW D SUHYDLOLQJ SDUW\ PXVW KDYH D VWDWXWRU\
:HDOVR9$&$7(WKHGLVWULFWFRXUWjVGHWHUPLQDWLRQRIWUDYHO            EDVLV LQ RUGHU WR UHFRXS DWWRUQH\jV IHHV 6HH $O\HVND 3LSHOLQH 6HUY &R
H[SHQVHVDQG5(0$1'WRDOORZWKHGLVWULFWFRXUWWRH[SODLQ              Y :LOGHUQHVV 6RFj\    86    &RRSHU     Y :LOOLDPVRQ

LWV GHFLVLRQ WR OLPLW ZLWQHVV WUDYHO H[SHQVHV WR D  PLOH   &RXQW\ %G RI (GXF    )G   WK &LU 
UDGLXVDQGWRGHWHUPLQHWUDYHOH[SHQVHVDFFRUGLQJO\)LQDOO\             
ZH 9$&$7( WKH GLVWULFW FRXUWjV UHIXVDO WR JUDQW H[SHUW               +RXVH 5HSRUW 1R  VWDWHV WKDW m7KH KRXVHKROG JRRGV
ZLWQHVVGHSRVLWLRQFRVWVDQG5(0$1'WRWKHGLVWULFWFRXUW               PRYLQJ LQGXVWU\ LV WKH VLQJOH PRVW IUHTXHQW VXEMHFW RI FRQVXPHU

IRU D GHWHUPLQDWLRQ RI ZKDW H[SHUW ZLWQHVV IHHV 7UHSHO LV      FRPSODLQWV WR WKH ,QWHUVWDWH &RPPHUFH &RPPLVVLRQ 'XULQJ  WKH
                                                                        &RPPLVVLRQ UHFHLYHG  FRQVXPHU FRPSODLQWV DQ DYHUDJH RI 
HQWLWOHGWRUHFRYHUXQGHU)HGHUDO5XOHRI&LYLO3URFHGXUH           FRPSODLQWV SHU  VKLSPHQWV WUDQVSRUWHG     SHUFHQW >RI WKHVH
                                                                        FRPSODLQWV@ ZHUH UHODWHG WR WKH ORVV RU GDPDJH RI JRRGV DQG WKH KDQGOLQJ
                                                                        RI FRPSODLQWV DULVLQJ IURP VXFK ORVV RU GDPDJH   l +5 5! 1  
      7UHSHOY5RDGZD\([SUHVV                            1R         1R                      7UHSHOY5RDGZD\([SUHVV            

RUGHU WR UHFWLI\ WKLV SUREOHP WKH +RXVHKROG *RRGV                       &RY05)/WG,QF)GWK&LUTXRWLQJ
7UDQVSRUWDWLRQ$FWSURSRVHGWKDWVKLSSHUVSURYLGHDUELWUDWLRQ                   :HVW:LQG$IULFD/LQHY&RUSXV&KULVWL0DULQH6HUYLFHV&R
DQG GLVSXWH UHVROXWLRQ SURJUDPV VR WKDW FXVWRPHUV FRXOG                   )G   WK &LU   *LYHQ WKDW WKH
UHFRYHUGDPDJHVZLWKRXWJRLQJWRFRXUW6HH+55! 1                       PDJLVWUDWHMXGJHDQGWKHGLVWULFWFRXUWGLGQRWGLVFXVVDQ\RI
DWUHSULQWHGLQ86&&$1                     WKHVHIDFWRUVRUDQ\RWKHUIDFWRUVLQDQ\GHSWKZHUHPDQG
m7KHQHZVHFWLRQHVWDEOLVKHVPLQLPXPUHTXLUHPHQWV                         WKLVFDVHWRWKHGLVWULFWFRXUWVRWKDWLWPD\VSHFLI\WKHUHDVRQV
IRULQIRUPDOGLVSXWHVHWWOHPHQWSURJUDPVWREHHVWDEOLVKHGE\                   ZK\LWH[HUFLVHGLWVGLVFUHWLRQWRGHQ\WUDYHOH[SHQVHVRXWVLGH
KRXVHKROGJRRGVFDUULHUVIRUWKHSXUSRVHRIUHVROYLQJVKLSSHU                   RIWKHPLOHUDGLXVIRUDOOQLQHRI7UHSHOjVZLWQHVVHV
GLVSXWHVLQDIDLUH[SHGLWLRXVDQGLQH[SHQVLYHPDQQHUl
                                                                                & 'HSRVLWLRQ)HHV
   ,QRUGHUWRmHQFRXUDJHlFDUULHUVWRPDNHGLVSXWHVHWWOHPHQW
SURJUDPVDYDLODEOHWKH+RXVHKROG*RRGV7UDQVSRUWDWLRQ$FW                         $V QRWHG DERYH WKH PDJLVWUDWH MXGJH DOVR SURSRVHG
VWLSXODWHGWKDWFRPPRQFDUULHUVZKRGLGQRWPDNHDGLVSXWH                      UHMHFWLQJ7UHSHOjVUHTXHVWIRUDQRUGHUFRPSHOOLQJGHIHQGDQW
UHVROXWLRQSURJUDPDYDLODEOHZRXOGEHOLDEOHIRUDWWRUQH\jV                     WRUHLPEXUVHKLPIRULQH[SHUWZLWQHVVIHHVWKDWKH
IHHVLIDFXVWRPHUSUHYDLOHGRQKLVFODLP6HHLG86&                  SDLG'U/DPS'U6WHYHQVRQ'U.HRVWOHU'U5RVHQEXUJ
 G mWKH VKLSSHU VKDOO EH DZDUGHG UHDVRQDEOH                     0U.DKDQDQG0U&KLVKROPWRDSSHDUDWGHSRVLWLRQVWDNHQ
DWWRUQH\jVIHHVLIQRGLVSXWHVHWWOHPHQWSURJUDPDSSURYHG                E\WKHGHIHQGDQW$FFRUGLQJWRWKHPDJLVWUDWHMXGJH)HGHUDO
XQGHU WKLV VHFWLRQ ZDV DYDLODEOH IRU XVH E\ WKH VKLSSHU WR            5XOHRI&LYLO3URFHGXUHOLPLWVWKHW\SHVRIH[SHQVHVWKDW
UHVROYH WKLV GLVSXWHl  +RZHYHU WKH $FW GLG QRW PDNH                D FRXUW PD\ WD[ WR WKRVH VHW RXW LQ  86&  DQG
DWWRUQH\jVIHHVDYDLODEOHWRDOOVXFFHVVIXOOLWLJDQWV$FFRUGLQJ               IXUWKHU H[SODLQHG  LQ  DEVHQW FRQWUDFW RU H[SOLFLW
WR  I WKH DWWRUQH\jV IHHVKLIWLQJ SURYLVLRQ RQO\                VWDWXWRU\ DXWKRULW\ WR WKH FRQWUDU\  s$ DW  $ FLWLQJ
DSSOLHGmLQWKHFDVHRIFROOHFWRQGHOLYHU\WUDQVSRUWDWLRQRI                   &UDZIRUG)LWWLQJ&RYs7*LEERQV,QF86
WKRVH W\SHV RI KRXVHKROG JRRGV GHVFULEHG LQ VHFWLRQ                        86&  QRZ HPERGLHV WKH NLQGV RI
$ RI WKLV WLWOHl   86&  I               H[SHQVHVWKDWDIHGHUDOFRXUWPD\WD[DVFRVWVDJDLQVWDORVLQJ
UHSHDOHG                                                                SDUW\$IWHUUHYLHZLQJWKHHYLGHQFHWKHPDJLVWUDWHMXGJH
                                                                                KHOGWKDWVLQFH7UHSHOZDVQRWHQWLWOHGWRH[SHUWZLWQHVVIHHV
   86&   SURYLGHG WKH GHILQLWLRQ RI                       XQGHURUKHZDVEDUUHGIURPUHFRYHULQJDQ\
mKRXVHKROGJRRGVl7KLVSURYLVLRQGHVFULEHGWKUHHFDWHJRULHV                    VXFKIHHVXQGHU5XOH7KHPDJLVWUDWHMXGJHDOVRVHHPHG
RIKRXVHKROGJRRGV                                                            WRVXJJHVWWKDWWKHIDFWWKDW7UHSHOZDVQRWHQWLWOHGWRUHFRYHU
    $SHUVRQDOHIIHFWVDQGSURSHUW\XVHGRUWREHXVHGLQD
    GZHOOLQJZKHQDSDUWRIWKHHTXLSPHQWRUVXSSO\RIVXFK                         
                                                                                       ,Q /LQQHPDQ &RQVWU ,QF Y 0RQWDQD'DNRWD 8WLO &R ,QF WKH
                                                                                (LJKWK &LUFXLW KHOG WKDW WUDYHO H[SHQVHV IRU DGGLWLRQDO PLOHDJH mPD\ EH
                                                                                MXVWLILHG ZKHQ WKH ZLWQHVV LV D QHFHVVDU\ DQG PDWHULDO ZLWQHVV LQ WKH
                                                                                SURFHHGLQJV DQG GRHV QRW JLYH PHUHO\ UHGXQGDQW RU FXPXODWLYH
 DW   UHSULQWHG LQ  86&&$1   m>7@KH            WHVWLPRQ\l  )G   Q WK &LU  ,Q WKLV FDVH 7UHSHO
&RPPLWWHH UHFRJQL]HV WKDW PDQ\ XVHUV RI KRXVHKROG JRRGV FDUULHUV DUH            DUJXHV WKDW WKH GLIILFXOW\ RI DVVHVVLQJ WKH YDOXH RI $IULFDQ DUW UHTXLUHG
RUGLQDU\ FRQVXPHUV XQIDPLOLDU ZLWK KRZ WKH LQGXVWU\ ZRUNV DQG ZLWKRXW           KLP WR EULQJ LQ QXPHURXV H[SHUWV IURP RXWVLGH RI 2KLR $OWKRXJK LW PD\
WKH HFRQRPLF OHYHUDJH RI FRPPHUFLDO VKLSSHUV 7KHVH SHUVRQV WHQG WR EH          QRW KDYH EHHQ QHFHVVDU\ IRU 7UHSHO WR KDYH QLQH ZLWQHVVHV WHVWLI\
PRUH YXOQHUDEOH WKDQ RWKHU VKLSSHUV DQG KHQFH LQ QHHG RI SURWHFWLRQV          FRQFHUQLQJ WKH YDOXH RI WKH %DJD VHUSHQW LW VHHPV SUREDEOH WKDW DW OHDVW
WKDW DUH QRW QHFHVVDU\ IRU RWKHU PRWRU FDUULHU VKLSSHUVl ,G DW  UHSULQWHG   VRPH RI WKHVH RXWRIVWDWH ZLWQHVVHV ZHUH QHFHVVDU\ JLYHQ WKH
LQ  86&&$1                                                  FLUFXPVWDQFHV RI WKLV FDVH
       7UHSHOY5RDGZD\([SUHVV                      1R        1R                   7UHSHOY5RDGZD\([SUHVV           

   )XUWKHUPRUHZHGRQRWEHOLHYHWKDWWKHPDJLVWUDWHMXGJHjV                GZHOOLQJ>EXWQRW@SURSHUW\PRYLQJIURPDIDFWRU\RU
VXJJHVWLRQWKDWWKHSODLQWLIILVVHHNLQJWRELOOWKHGHIHQGDQWIRU           VWRUH H[FHSW VXFK SURSHUW\ DV WKH KRXVHKROGHU KDV
RYHUO\JHQHURXVWUDQVSRUWDWLRQVHUYLFHVLVVXSSRUWHGE\WKH                  SXUFKDVHGZLWKLQWHQWWRXVHLQKLVGZHOOLQJDQGZKLFKLV
UHFRUG$FFRUGLQJWRWKHSODLQWLIIjVVXEPLVVLRQVVHYHQRIWKH              WUDQVSRUWHG DW WKH UHTXHVW RI DQG WKH WUDQVSRUWDWLRQ
QLQH ZLWQHVVHV LQ TXHVWLRQ IOHZ FRDFK FODVV WR &OHYHODQG            FKDUJHVSDLGWRWKHFDUULHUE\WKHKRXVHKROGHU
s$DW$OWKRXJKLWLVWUXHWKDWWZRZLWQHVVHVIOHZILUVW
FODVVWKHSODLQWLIIGLGQRWUHTXHVWIXOOFRPSHQVDWLRQIRUWKH               % IXUQLWXUH IL[WXUHV HTXLSPHQW DQG WKH SURSHUW\ RI
ILUVWFODVVWLFNHWVEXWUDWKHUVXEPLWWHGH[SHQVHVEDVHGRQWKH              VWRUHVRIILFHVPXVHXPVLQVWLWXWLRQVKRVSLWDOVRURWKHU
UHOHYDQW FRDFK IDUH  s$ DW    ,Q DGGLWLRQ WKH         HVWDEOLVKPHQWVH[FHSWWKHVWRFNLQWUDGHRIDQ\
SODLQWLIIjVELOOIRUFDEIDUHZDVEDVHGRQDSHUWULSIHHIRU            HVWDEOLVKPHQW ZKHWKHU FRQVLJQRU RU FRQVLJQHH RWKHU
QLQHURXQGWULSWULSVIURPWKH&OHYHODQG$LUSRUWWRWKH)HGHUDO              WKDQ XVHG IXUQLWXUH DQG XVHG IL[WXUHV H[FHSW ZKHQ
&RXUWKRXVH LQ $NURQ 2KLR  $FFRUGLQJ WR 7UHSHOjV                     WUDQVSRUWHGDVLQFLGHQWDOWRPRYLQJRIWKHHVWDEOLVKPHQW
VXEPLVVLRQVWKHSULFHIRUHDFKWULSIURP&OHYHODQGWR$NURQ                 RUDSRUWLRQWKHUHRIIURPRQHORFDWLRQWRDQRWKHUDQG
ZDVFKHDSHUWKDQWKHFRPPRQWD[LIDUH7KLVDVVHUWLRQLV
SHUIHFWO\SODXVLEOHJLYHQWKDWWKHGLVWDQFHIURPWKH&OHYHODQG               & DUWLFOHV LQFOXGLQJ REMHFWV RI DUW GLVSOD\V DQG
$LUSRUWWRWKH)HGHUDO&RXUWKRXVHLQ$NURQLVDSSUR[LPDWHO\                  H[KLELWVZKLFKEHFDXVHRIWKHLUXQXVXDOQDWXUHRUYDOXH
PLOHV6LQFHWKHGHIHQGDQWGLGQRWVXSSO\DQ\HYLGHQFH                   UHTXLUH VSHFLDOL]HG KDQGOLQJ DQG HTXLSPHQW XVXDOO\
WKDWORZHUDLUIDUHVRUFDEIDUHVFRXOGUHDVRQDEO\KDYHEHHQ                  HPSOR\HGLQPRYLQJKRXVHKROGJRRGVH[FHSWWKDW
REWDLQHGZHUHYHUVHWKHGLVWULFWFRXUWjVGHFLVLRQWROLPLWWKH              WKLVVXESDUDJUDSKVKDOOQRWEHFRQVWUXHGWRLQFOXGHDQ\
SODLQWLIIjVH[SHQVHVWRSHUPLOH                                      DUWLFOH ZKHWKHU FUDWHG RU XQFUDWHG ZKLFK GRHV QRW
                                                                             EHFDXVH RI LWV XQXVXDO QDWXUH RU YDOXH UHTXLUH WKH
     E 'LVWDQFH5HVWULFWLRQ                                                VSHFLDOL]HGKDQGOLQJDQGHTXLSPHQWXVXDOO\HPSOR\HGLQ
                                                                             PRYLQJKRXVHKROGJRRGVl
  :H ILQG RXUVHOYHV XQDEOH WR UHYLHZ WKH GLVWULFW FRXUWjV
GHFLVLRQWROLPLWWKHSODLQWLIIjVWUDYHOH[SHQVHVWRDPLOH             86&    UHSHDOHG   $V QRWHG
UDGLXVEHFDXVHQHLWKHUWKHPDJLVWUDWHMXGJHQRUWKHGLVWULFW               DERYH WKH DWWRUQH\IHH VKLIWLQJ SURYLVLRQV RQO\ DSSOLHG WR
FRXUWSURYLGHGDQDGHTXDWHH[SODQDWLRQRILWVUHDVRQVIRUWKLV             mSHUVRQDO HIIHFWV DQG SURSHUW\ XVHG RU WR EH XVHG LQ D
OLPLWDWLRQ  6HH 6XEVFULSWLRQ 7HOHYLVLRQ ,QF Y 6RXWKHUQ          GZHOOLQJlGHVFULEHGLQSDUW$
&DOLIRUQLD7KHDWUH2ZQHUV$VVjQ)GWK&LU
m>7@KHWULDOFRXUWPXVWVWDWHLWVUHDVRQVIRUWKHGHQLDO                 $QDO\VLV
RIFRVWVVRWKDWWKHDSSHOODWHFRXUWZLOOEHDEOHWRGHWHUPLQH
ZKHWKHURUQRWWKHWULDOFRXUWDEXVHGLWVGLVFUHWLRQl                     2QDSSHDO7UHSHODUJXHVWKDWKHLVHQWLWOHGWRDWWRUQH\jV
                                                                           IHHVEHFDXVHWKH%DJDVHUSHQWWKDWKHVKLSSHGLVDmSHUVRQDO
  m,QFRQVLGHULQJZKHWKHUWRDOORZH[SHQVHVIRUWUDYHOOLQJLQ              HIIHFW    WR EH XVHG LQ D GZHOOLQJl XQGHU  86&
H[FHVVRIPLOHVWKHFRXUWVKRXOGFRQVLGHUWKHOHQJWKRI               $,QUHVSRQVHGHIHQGDQW5RDGZD\([SUHVV
WKHMRXUQH\WKHQHFHVVLW\RIWKHWHVWLPRQ\DQGWKHSRVVLELOLW\           VHWV IRUWK WZR GLIIHUHQW DUJXPHQWV DV WR ZK\ 7UHSHO LV QRW
RIDYHUWLQJWKHWUDYHOH[SHQVHl6REHUD\0DFKLQH	(TXLS                 HQWLWOHGWRDWWRUQH\jVIHHVXQGHUWKLVVWDWXWH

     
     $FFRUGLQJ WR WKH SODLQWLII WKH FRPPRQ WD[L IDUH IURP WKH &OHYHODQG
$LUSRUW WR $NURQ LV DSSUR[LPDWHO\  s$ DW 
     7UHSHOY5RDGZD\([SUHVV                        1R       1R                    7UHSHOY5RDGZD\([SUHVV           

     D 6KLSSHUV&RYHUHG                                                WKH SODLQWLII VKRXOG EH OLPLWHG WR WKH  PLOH UDGLXVl DQG
                                                                         QRWHGWKDWWKHZHDNQHVVRIWKHGRFXPHQWDWLRQZDVmDQRWKHU
   )LUVW 5RDGZD\ DUJXHV WKDW LW LV QRW UHTXLUHG WR SD\         UHDVRQIRUOLPLWLQJWKHZLWQHVVWRWKHPLOHURXQG
DWWRUQH\jVIHHVXQGHUGEHFDXVHLWLVQRWDPHPEHU              WULSls$DW$
RI WKH KRXVHKROG PRYLQJ LQGXVWU\  ,Q VXSSRUW RI WKLV
DUJXPHQW 5RDGZD\ SRLQWV WR OHJLVODWLYH KLVWRU\ ZKLFK LW            %DVHG RQ WKHVH OLPLWDWLRQV WKH PDJLVWUDWH MXGJH
DUJXHVLQGLFDWHVWKDWWKH+RXVHKROG*RRGV7UDQVSRUWDWLRQ$FW             UHFRPPHQGHGJUDQWLQJWKHSODLQWLIILQWUDYHOFRVWVIRU
ZDV LQWHQGHG WR DSSO\ WR WKH mKRXVHKROG JRRGV PRYLQJ             HDFK RI KLV QLQH ZLWQHVVHV  7KH GLVWULFW FRXUW DGRSWHG WKH
LQGXVWU\DSDUWIURPWKHUHVWRIWKHWUXFNLQJLQGXVWU\l+5             PDJLVWUDWHMXGJHjVUHFRPPHQGDWLRQLQWRWR:HUHYLHZWKH
5HS1RDWUHSULQWHGLQ86&&$1DW                GLVWULFW FRXUWjV DZDUG RI WD[DWLRQ RI FRVWV IRU DQ DEXVH RI
  5RDGZD\ DUJXHV WKDW LW LV FOHDUO\ QRW SDUW RI WKH      GLVFUHWLRQ6HHsRQHVY&RQWLQHQWDO&RUS)G
KRXVHKROGJRRGVPRYLQJLQGXVWU\EHFDXVHLWLVQRWFHUWLILHG              WK&LU
WR FDUU\ KRXVHKROG JRRGV LW GRHV QRW JR WR DQ\ VKLSSHUjV
KRPHDQGWUDQVSRUWKLVRUKHUKRXVHKROGFRQWHQWVWRDQHZ                     D 5DWH5HVWULFWLRQ
UHVLGHQWLDOORFDWLRQLWGRHVQRWKDYHVSHFLDOL]HGHTXLSPHQW
DQG WUDLQHG SHUVRQQHO DQG LW GRHV QRW KROG LWVHOI RXW DV D     :HDJUHHZLWKWKHGLVWULFWFRXUWWKDWLWZRXOGKDYHEHHQ
PRYHURIKRXVHKROGJRRGV$FFRUGLQJO\5RDGZD\FRQFOXGHV                SUHIHUDEOHIRUWKHSODLQWLIIWRVXSSO\DFWXDOZLWQHVVUHFHLSWV
LW LV QRW VXEMHFW WR WKH IHHVKLIWLQJ SURYLVLRQV RI WKH         IRUWUDYHOH[SHQVHVKRZHYHUZHEHOLHYHWKDWWKHGLVWULFWFRXUW
+RXVHKROG *RRGV 7UDQVSRUWDWLRQ $FW DQG WKHUHIRUH LV QRW          DEXVHG LWV GLVFUHWLRQ ZKHQ LW OLPLWHG ZLWQHVV H[SHQVHV WR
UHTXLUHGWRSD\7UHSHOjVDWWRUQH\jVIHHV:HGLVDJUHH                  SHUPLOH

  )LUVWWKHOHJLVODWLYHKLVWRU\GRHVQRWFOHDUO\LQGLFDWHWKDW             $FWXDOUHFHLSWVDUHQRWUHTXLUHGE\VWDWXWHRUFDVHODZ
&RQJUHVV LQWHQGHG WKH IHHVKLIWLQJ SURYLVLRQ RI VHFWLRQ            86&  F ZKLFK GLVFXVVHV WKH SD\PHQW RI D
G WR DSSO\ VROHO\ WR WKH KRXVHKROG JRRGV PRYLQJ           ZLWQHVVjH[SHQVHVIRUWUDYHORQDFRPPRQFDUULHUVSHFLILFDOO\
LQGXVWU\5DWKHUWKH+RXVH5HSRUWRQO\VXJJHVWVWKDWYDULRXV           VWDWHVWKDWm>D@UHFHLSWRURWKHUHYLGHQFHRIDFWXDOFRVWVKDOOEH
IDFWRUV SURPSWHG WKH &RPPLWWHH RQ 3XEOLF :RUNV DQG                IXUQLVKHGl86&FHPSKDVLVDGGHG
7UDQVSRUWDWLRQWRmFRQVLGHU>@WKHKRXVHKROGJRRGVPRYLQJ           $FFRUGLQJO\ IHGHUDO FRXUWV KDYH QRW UHTXLUHG SUHYDLOLQJ
LQGXVWU\DSDUWIURPWKHUHVWRIWKHWUXFNLQJLQGXVWU\l,GDW       SDUWLHVWRSUHVHQWDFWXDOUHFHLSWVDQGKDYHDOORZHGWKHPWR
UHSULQWHGLQ86&&$1DW7KLVODQJXDJHGRHV             LQFOXGHDIILGDYLWVLQVWHDG6HH+ROPHVY&HVVQD$LUFUDIW&R
QRWWDNHDQ\SRVLWLRQRQWKHXOWLPDWHVFRSHRIWKH+RXVHKROG             )GWK&LU
*RRGV7UDQVSRUWDWLRQ$FW
                                                                            ,QWKLVFDVHSODLQWLIIVXEPLWWHGDOLVWRIWKHWUDYHOH[SHQVHV
  0RUHRYHUVHFWLRQGH[SOLFLWO\VWDWHVWKDWWKHIHH             LQFXUUHGE\KLVZLWQHVVHV7KLVOLVWZDVDFFRPSDQLHGE\DQ
VKLIWLQJ SURYLVLRQ DSSOLHV WR DQ\ mPRWRU FRPPRQ FDUULHU           DIILGDYLW LQ ZKLFK KLV DWWRUQH\ VZRUH WKDW WKH WD[HG ELOO RI
SURYLGLQJ WUDQVSRUWDWLRQ VXEMHFW WR WKH MXULVGLFWLRQ RI WKH       FRVWVZDVFRUUHFWDQGWKDWmWKHVHUYLFHVIRUZKLFKIHHVKDYH
&RPPLVVLRQXQGHUVXEFKDSWHU,,RIFKDSWHURIWKLVWLWOH              EHHQFKDUJHGZHUHDFWXDOO\DQGQHFHVVDULO\SHUIRUPHGls$
                                                                         DW*LYHQWKDWWKHGHIHQGDQWGLGQRWVXSSO\DQ\HYLGHQFH
                                                                         WKDWWKHVHFRVWVZHUHQRWDFWXDOO\LQFXUUHGZHILQGWKDWWKH
                                                                         PDJLVWUDWH MXGJHjV VNHSWLFLVP RI WKH ZLWQHVVj FRVWV LV
                                                                         XQIRXQGHG
     7UHSHOY5RDGZD\([SUHVV                     1R       1R                       7UHSHOY5RDGZD\([SUHVV                

PDJLVWUDWHMXGJHGHQLHG7UHSHO$WWRUQH\jVIHHVRQWKHJURXQGV          l86&GUHSHDOHG6LQFH
WKDWSODLQWLIIZDVQRWHQWLWOHGWRWKHPXQGHUWKH+RXVHKROG           5RDGZD\XQGLVSXWHGO\IDOOVZLWKLQWKLVGHVFULSWLRQWKHSODLQ
*RRGV7UDQVSRUWDWLRQ$FWKHQHYHUUHDFKHGWKHTXHVWLRQRI             ODQJXDJH RI WKH VWDWXWH LQGLFDWHV WKDW WKH IHHVKLIWLQJ
ZKHWKHU7UHSHOKDGZDLYHGKLVULJKWWRDWWRUQH\jVIHHV*LYHQ         SURYLVLRQV DSSO\ WR 5RDGZD\ ([SUHVV  *LYHQ WKDW WKH
WKDWWKHGLVWULFWFRXUWDGRSWHGWKHPDJLVWUDWHMXGJHjVUHSRUWLQ       VWDWXWRU\ ODQJXDJH LV XQDPELJXRXV DQG WKHUH LV QR FOHDUO\
WRWRLWGLGQRWUHDFKWKHZDLYHULVVXHHLWKHU,QOLJKWRIRXU       H[SUHVVHGOHJLVODWLYHLQWHQWWRWKHFRQWUDU\ZHILQGWKDWWKH
KROGLQJ WKDW 7UHSHO LV HQWLWOHG WR DWWRUQH\jV IHHV XQGHU       ODQJXDJHRIWKHVWDWXWHLVFRQFOXVLYH6HH%UDGOH\Y$XVWLQ
 G ZH UHPDQG WKLV FDVH WR WKH GLVWULFW FRXUW WR      )G   WK &LU  m,I ZH ILQG WKDW WKH
GHWHUPLQHZKHWKHU7UHSHOZDLYHGKLVULJKWWRDWWRUQH\jVIHHV          VWDWXWRU\ ODQJXDJH LV XQDPELJXRXV WKHQ WKDW ODQJXDJH LV
                                                                       UHJDUGHG DV FRQFOXVLYH XQOHVV WKHUH LV FOHDUO\ H[SUHVVHG
% 7D[HG&RVWV                                                         OHJLVODWLYH LQWHQW WR WKH FRQWUDU\l FLWLQJ 8QLWHG 6WDWHV Y
                                                                       3UHPLVHV .QRZQ DV  2OG %URZQVYLOOH 5RDG 6KHOE\
      7UDYHO([SHQVHV                                                &RXQW\7HQQHVVHH)GWK&LU
  2Q 6HSWHPEHU   SODLQWLII ILOHG D ELOO RI FRVWV          E +RXVHKROG*RRGV&RYHUHG
3ODLQWLIIjVELOORIFRVWVVRXJKWWRWD[WKHWUDYHOFRVWVRIKLV
ZLWQHVVHVIURP1HZ<RUN'U.RHVWOHU'U6WHYHQVRQ0U                 5RDGZD\ ([SUHVV DOVR DUJXHV WKDW WKLV VWDWXWH GRHV QRW
.DKDQ0U&KLVKROP0U1HZWRQ0U2OLYHU%DOWLPRUH               DSSO\WRWKH%DJDVHUSHQWEHFDXVHLWLVDQmREMHFWRIDUWl$V
'U /DPS 3DULV 0V 1GLD\H DQG 3KRHQL[ 0V +DKQ        QRWHGDERYHVHFWLRQGHVFULEHVWKUHHFDWHJRULHVRI
7UHSHOFODLPHGWKDWWKHWRWDODPRXQWRIWKHVHWUDYHOFRVWVZDV         KRXVHKROGJRRGV$mSHUVRQDOHIIHFWVDQGSURSHUW\XVHGRU
                                                            WREHXVHGLQDGZHOOLQJl%mIXUQLWXUHIL[WXUHVHTXLSPHQW
                                                                       DQG WKH SURSHUW\ RI VWRUHV RIILFHV PXVHXPV >HWF@l DQG
  $IWHUUHYLHZLQJWKHSODLQWLIIVELOORIFRVWVWKHPDJLVWUDWH         & mREMHFWV RI DUW GLVSOD\V DQG H[KLELWVl   86&
MXGJH UHFRPPHQGHG OLPLWLQJ 7UHSHOjV ZLWQHVVHV WUDYHO                 UHSHDOHG   +RZHYHU WKH IHH
H[SHQVHVWRSHUPLOH7KHPDJLVWUDWHMXGJHVWDWHGWKDW          VKLIWLQJ SURYLVLRQV RI VHFWLRQ G RQO\ DSSO\ WR
WKLV OLPLW ZDV MXVWLILHG EHFDXVH 7UHSHO RQO\ VXEPLWWHG          mSHUVRQDO HIIHFWV DQG SURSHUW\l GHVFULEHG LQ VHFWLRQ
GHPDQGVIRUSD\PHQWIURPKLVZLWQHVVHVDQGGLGQRWVXSSO\             $  $FFRUGLQJ WR 5RDGZD\ ([SUHVV WKH WKUHH
WKHZLWQHVVHVjDFWXDOUHFHLSWV+HLQGLFDWHGWKDWm>J@LYHQWKH        VXEVHFWLRQV RI   DUH PXWXDOO\ H[FOXVLYH  7KH
ZHDNQHVV RI WKH VXSSRUWLQJ GRFXPHQWDWLRQl WKH
UHDVRQDEOHQHVVRIWKHSODLQWLIIjVGHPDQGVIRUSD\PHQWZKLFK
LQFOXGHG RYHU  IRU FDE IDUH ZDV mVHULRXVO\ LQ               
TXHVWLRQl                                                                   ,Q  VXEFKDSWHU ,, RI FKDSWHU  SURYLGHG mWKH ,QWHUVWDWH
                                                                       &RPPHUFH &RPPLVVLRQ KDV MXULVGLFWLRQ RYHU WUDQVSRUWDWLRQ E\ PRWRU
   &LWLQJWKH6XSUHPH&RXUWjVGHFLVLRQLQ)DUPHUY$UDELDQ            FRPPRQ FDUULHU    WR WKH H[WHQW WKDW SDVVHQJHUV SURSHUW\ RU ERWK DUH
                                                                       WUDQVSRUWHG E\ PRWRU FDUULHU    l  86&    UHSHDOHG
$P2LO&R86WKHPDJLVWUDWHMXGJHDOVR             3XUVXDQW WR  86&   WKH WHUP mPRWRU FDUULHUl
SURSRVHGWKDWVLQFH7UHSHOKDGQRWREWDLQHGWKHWULDOFRXUWjV         LQFOXGHV mPRWRU FRPPRQ FDUULHUVl ZKLFK DUH GHILQHG DV SHUVRQV mKROGLQJ
DSSURYDOWREULQJRXWRIVWDWHZLWQHVVHVWRWHVWLI\KHVKRXOG         >WKHPVHOYHV@ RXW WR WKH JHQHUDO SXEOLF WR SURYLGH PRWRU YHKLFOH
QRWEHDZDUGHGFRVWVIRUDQ\WUDYHOWKDWZDVQRWZLWKLQ            WUDQVSRUWDWLRQ IRU FRPSHQVDWLRQ RYHU UHJXODU RU LUUHJXODU URXWHV RU ERWKl
PLOHV RI WKH &RXUWKRXVH  7KH PDJLVWUDWH MXGJH GLG QRW         86&    UHSHDOHG  $FFRUGLQJO\ JLYHQ WKDW
                                                                       5RDGZD\ ([SUHVV GRHV QRW GLVSXWH WKDW LW ZDV D mPRWRU FRPPRQ FDUULHUl
VSHFLILFDOO\ GLVFXVV WKH UHDVRQV IRU WKLV OLPLW  +H PHUHO\   LW FDQQRW GLVSXWH WKDW LW ZDV DOVR D mPRWRU FDUULHUl DQG WKDW LW ZDV VXEMHFW
VWDWHGWKDWmWKH0DJLVWUDWHsXGJHILQGVLQKLVGLVFUHWLRQWKDW         WR WKH MXULVGLFWLRQ RI WKH ,&& XQGHU VXEFKDSWHU ,, RI VHFWLRQ 
       7UHSHOY5RDGZD\([SUHVV                       1R        1R                    7UHSHOY5RDGZD\([SUHVV           

GHIHQGDQWFRQWHQGVWKDWVLQFHWKDWWKH%DJDVHUSHQWLVFOHDUO\                 )XUWKHUPRUH ZH GR QRW EHOLHYH WKDW WKH PD[LP WKDW WKH
DQmREMHFWRIDUWlDVGHVFULEHGLQ&LWFDQQRWEH             VSHFLILFSURYLVLRQVKRXOGJRYHUQWKHJHQHUDORQHLVDSSOLFDEOH
DmSHUVRQDOHIIHFWlRUmSURSHUW\lXQGHU$DQG                 LQWKLVFDVH7KHUXOHWKDWDVSHFLILFSURYLVLRQVKRXOGJRYHUQ
LVWKHUHIRUHQRWFRYHUHGE\WKHIHHVKLIWLQJSURYLVLRQV                    DPRUHJHQHUDORQHLVDKHOSIXOUXOHRIWKXPEWRDSSO\ZKHQ
                                                                            LW LV QHFHVVDU\ WR UHFRQFLOH WZR FRQIOLFWLQJ VWDWXWRU\
   ,Q VXSSRUW RI WKLV LQWHUSUHWDWLRQ 5RDGZD\ DVVHUWV WKDW           SURYLVLRQV+RZHYHUZHVHHQRUHDVRQWRDSSO\WKLVUXOHLQ
&RQJUHVVLQWHQGHGWKLVVWDWXWHWRJLYHVKLSSHUVUHGUHVVZKHQ                WKHLQVWDQWFDVHVLQFHWKHUHLVQRLQKHUHQWFRQIOLFWEHWZHHQ
WKH FRVW RI WKH LWHP GDPDJHG ZDV WRR VPDOO WR MXVWLI\ WKH        SURYLVLRQVDQGWKHUHLVQRWKLQJWRUHFRQFLOH6HH*DOOHQVWHLQ
H[SHQVHRIOLWLJDWLRQ%DVHGRQWKLVLQWHQWLWDUJXHVWKDWWKH            Y 8QLWHG 6WDWHV  )G   WK &LU  7KH
IHHVKLIWLQJSURYLVLRQVZHUHQRWPHDQWWRFRYHUmREMHFWVRI                 JHQHUDOUXOHWKDWWKHVSHFLILFJRYHUQVWKHJHQHUDOmGRHVQRW
DUWl EHFDXVH WKH RZQHUV RI WKHVH H[SHQVLYH REMHFWV ZRXOG            DSSO\ZKHQWKHSODLQODQJXDJHRIWKHWZRVXEVHFWLRQVFDQEH
DOUHDG\ KDYH D VXIILFLHQW LQFHQWLYH WR VXH  $OWHUQDWLYHO\         UHFRQFLOHG ZLWKRXW QHHG IRU WKH DSSOLFDWLRQ RI D JHQHUDO
5RDGZD\ ([SUHVV DUJXHV WKDW 7UHSHOjV VHUSHQW VKRXOG IDOO             UXOHl
H[FOXVLYHO\ ZLWKLQ VXEVHFWLRQ & EHFDXVH WKH UXOHV RI
VWDWXWRU\ LQWHUSUHWDWLRQ GLFWDWH WKDW WKH VSHFLILF SURYLVLRQ             )LQDOO\ DQG PRVW LPSRUWDQWO\ ZH ILQG WKDW 5RDGZD\jV
JRYHUQVRYHUWKHJHQHUDORQH6HH0RUDOHVY7UDQV:RUOG                   DUJXPHQWLVQRWVXSSRUWHGE\WKHSODLQODQJXDJHRIWKHVWDWXWH
$LUOLQHV,QF86                                  6HFWLRQ I VLPSO\ VWDWHV WKDW WKH DWWRUQH\jV IHHV
                                                                            SURYLVLRQVRIWKHVWDWXWHDSSO\RQO\WRWKHW\SHVRIKRXVHKROG
   :H DUH QRW SHUVXDGHG E\ HLWKHU RI WKHVH DUJXPHQWV               JRRGV GHVFULEHG LQ  $  7KDW VHFWLRQ LQ WXUQ
5RDGZD\jV DUJXPHQW WKDW &RQJUHVV LQWHQGHG WR SUHFOXGH                 UHIHUV WR mSHUVRQDO HIIHFWV DQG SURSHUW\l WR EH XVHG LQ D
FXVWRPHUVZKRVKLSSHGmREMHFWVRIDUWlIURPXVLQJWKHIHH                  GZHOOLQJ7KH%DJDVHUSHQWSODLQO\IDOOVZLWKLQWKLVVHFWLRQ
VKLIWLQJSURYLVLRQVEHFDXVHWKH\KDYHVXIILFLHQWLQFHQWLYHWR               EHFDXVHLWLVDSHUVRQDOHIIHFWWKDW7UHSHOSODQQHGWRXVHLQKLV
VXHLVQRWFRQYLQFLQJEHFDXVHLWRYHUORRNVWKHIDFWWKDWPDQ\               GZHOOLQJLQ$UL]RQD:KLOHLWLVWUXHWKDWWKHVHUSHQWLVDQ
mREMHFWVRIDUWlWKDWSHRSOHVKLSDUHRIOLWWOHPRQHWDU\YDOXH             mREMHFW RI DUWl DQG DOVR IDOOV XQGHU VXEVHFWLRQ & WKHUH LV
5RDGZD\jVLQWHUSUHWDWLRQZRXOGKDYHWKHULGLFXORXVHIIHFWRI                QRWKLQJLQWKHSODLQODQJXDJHRIWKHVWDWXWHWRLQGLFDWHWKDWWKLV
SUHFOXGLQJRZQHUVRILQH[SHQVLYHDUWIURPPDNLQJXVHRIWKLV                IDFW SUHFOXGHV LW IURP DOVR EHLQJ SDUW RI VXEVHFWLRQ $
VWDWXWHMXVWEHFDXVHWKHLWHPLVDQmREMHFWRIDUWlDQGQRWVRPH            $FFRUGLQJO\ ZH ILQG WKDW WKH GLVWULFW FRXUW HUUHG ZKHQ LW
RWKHUKRXVHKROGSURSHUW\:HGRQRWEHOLHYHWKDW&RQJUHVV                DGRSWHGWKHPDJLVWUDWHMXGJHjV5HSRUWDQG5HFRPPHQGDWLRQ
LQWHQGHG VXFK D VFKHPH  ,I &RQJUHVV ZDQWHG WR H[FOXGH             DQG KHOG WKDW WKH %DJD VHUSHQW LV QRW FRYHUHG E\ WKH IHH
H[SHQVLYHREMHFWVIURPFRYHUDJHXQGHU$LWFRXOG                  VKLIWLQJ SURYLVLRQ RI  G  6HH $XVWLQ  )G DW
KDYHHDVLO\GRQHVRE\LPSOHPHQWLQJDGROODUFDS+RZHYHU                 m,QGHWHUPLQLQJWKHPHDQLQJRIOHJLVODWLRQZHPXVW
LWGLGQRW                                                                ILUVWORRNWRWKHSODLQODQJXDJHRIWKHVWDWXWHLWVHOIl
                                                                                 F :DLYHU
                                                                              %HIRUHWKHPDJLVWUDWHMXGJH5RDGZD\DUJXHGWKDWHYHQLI
                                                                           7UHSHO LV HQWLWOHG WR DWWRUQH\jV IHHV XQGHU  G KH
     $V QRWHG DERYH  & LQFOXGHV mREMHFWV RI DUW    ZKLFK
EHFDXVH RI WKHLU XQXVXDO QDWXUH 47 YDOXH UHTXLUH WKH VSHFLDOL]HG KDQGOLQJ
                                                                            ZDLYHGKLVULJKWWRDWWRUQH\jVIHHVE\IDLOLQJWRFODLPWKHPLQ
DQG HTXLSPHQW XVXDOO\ HPSOR\HG LQ PRYLQJ KRXVHKROG JRRGVl  86&
                                                                            KLVFRPSODLQWDQGE\IDLOLQJWRILOHDPRWLRQIRUDWWRUQH\jV
 & HPSKDVLV DGGHG  UHSHDOHG  7KXV DQ LWHP       IHHV ZLWKLQ  GD\V RI WKH HQWU\ RI MXGJPHQW  6LQFH WKH
QHHG QRW EH YDOXDEOH WR EH FRYHUHG E\ VXEVHFWLRQ &