Court Opinion

ID: 2970110
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:04:38.629932+00
Date Added: 2024-06-11T11:43:27.859541
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

 81,7(' 67$7(6 2) $0(5,&$        ;
           3ODLQWLII$SSHOOHH     
                                   
                                      1R
            Y                     
                                    !
                                   
 s$&. %($5'(1                     
          'HIHQGDQW$SSHOODQW 
                                  1
       $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
    IRUWKH(DVWHUQ'LVWULFWRI.HQWXFN\DW&RYLQJWRQ
   1RnsHQQLIHU%&RIIPDQ'LVWULFWsXGJH
                     $UJXHG$XJXVW
             'HFLGHGDQG)LOHG'HFHPEHU
   %HIRUH0225(DQG&2/(&LUFXLWsXGJHV526(1
                   'LVWULFWsXGJH
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('  *DU\ s 6HUJHQW 2j+$5$ 58%(5*
7$</256/2$1	6(5*(17&RYLQJWRQ.HQWXFN\IRU
$SSHOODQW&KDUOHV3:LVGRPsU$66,67$1781,7('

    
     7KH +RQRUDEOH *HUDOG ( 5RVHQ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
(DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ

                                   
     8QLWHG6WDWHVY%HDUGHQ                     1R

67$7(6$77251(</H[LQJWRQ.HQWXFN\IRU$SSHOOHH
21 %5,()  *DU\ s 6HUJHQW 2j+$5$ 58%(5*
7$</256/2$1	6(5*(17&RYLQJWRQ.HQWXFN\IRU
$SSHOODQW&KDUOHV3:LVGRPsU$66,67$1781,7('
67$7(6 $77251(< /H[LQJWRQ .HQWXFN\ :HQGH &
0RUULV $66,67$17 81,7(' 67$7(6 $77251(<
&RYLQJWRQ.HQWXFN\IRU$SSHOOHH
  0225(sGHOLYHUHGWKHRSLQLRQRIWKHFRXUW526(1
'sSGHOLYHUHGDVHSDUDWHFRQFXUULQJRSLQLRQ
                    BBBBBBBBBBBBBBBBB
                        23,1,21
                    BBBBBBBBBBBBBBBBB
   .$5(11(/6210225(&LUFXLWsXGJH'HIHQGDQW
$SSHOODQWsDFN%HDUGHQDSSHDOVKLVFRQYLFWLRQDQGVHQWHQFH
RQ RQH FRXQW RI NQRZLQJO\ WUDQVSRUWLQJ LQ LQWHUVWDWH
FRPPHUFH VWROHQ JRRGV ,%0 ODSWRS FRPSXWHUV KDYLQJ D
YDOXHRIRUPRUH,QWKLVDSSHDO%HDUGHQUDLVHVILYH
LVVXHVWKHGLVWULFWFRXUWjVUHIXVDOWRDFFHSWKLVSOHDRIQROR
FRQWHQGHUH WKH GLVWULFW FRXUWjV UHIXVDO WR JUDQW GRZQZDUG
GHSDUWXUHVEHFDXVHRI%HDUGHQjVDJHDQGSRRUKHDOWKDQGIRU
DFFHSWDQFH RI UHVSRQVLELOLW\ WKH H[LVWHQFH RI D YDULDQFH
EHWZHHQ WKH LQGLFWPHQW DQG SURRI SUHVHQWHG DW WULDO WKH
FUHGLELOLW\RIDJRYHUQPHQWZLWQHVVDQGWKHSURSULHW\RIWKH
GLVWULFWFRXUWjVUHVWLWXWLRQRUGHU)RUWKHIROORZLQJUHDVRQV
ZH$)),50%HDUGHQjVFRQYLFWLRQDQGVHQWHQFH
                     ,%$&.*5281'
  )URPODWHWKURXJK0D\RIsDFN%HDUGHQDFWHG
DV D PLGGOHPDQ VHOOLQJ ODSWRS FRPSXWHUV VWROHQ IURP WKH
ZDUHKRXVH RI 3RPHUR\ &RPSXWHU 5HVRXUFHV m3RPHUR\l
ORFDWHGLQ+HEURQ.HQWXFN\WREX\HUVORFDWHGSULPDULO\LQ
WKH&LQFLQQDWL2KLRDUHDsDPHV)LQNHQVWHDGDQHPSOR\HH
RI3RPHUR\VROGVL[W\HLJKWRIWKHVWROHQODSWRSFRPSXWHUVWR
7LPRWK\0DFNH0DFNHWKHQWUDQVIHUUHGIRUW\HLJKWRIWKHVH
FRPSXWHUVWRsDFN%HDUGHQjVVRQ7HUU\%HDUGHQm7HUU\l
ZKRDJUHHGWRGLYLGHWKHSURFHHGVRIWKHFRPSXWHUVjVDOHZLWK
    8QLWHG6WDWHVY%HDUGHQ                        1R       1R                     8QLWHG6WDWHVY%HDUGHQ         

                   BBBBBBBBBBBBBBBBBBBBB                                0DFNH  7HUU\ WKHQ DSSURDFKHG KLV IDWKHU DERXW WKH
                                                                        FRPSXWHUV%HDUGHQDJUHHGWRVHOOWKHFRPSXWHUVDQGGLYLGH
                      &21&855(1&(                                       KLVSURFHHGVZLWK7HUU\%HDUGHQVROGIRUW\VL[VWROHQODSWRS
                   BBBBBBBBBBBBBBBBBBBBB                                FRPSXWHUVGXULQJWKHFRXUVHRIWKLVVFKHPH%HDUGHQVROGWKH
                                                                        FRPSXWHUVIRUDSSUR[LPDWHO\WRHDFKDOWKRXJK
  526(1'LVWULFWsXGJHFRQFXUULQJ,IXOO\FRQFXULQWKH             PRVWRIWKHFRPSXWHUVZHUHYDOXHGDWDSSUR[LPDWHO\
PDMRULW\jVRSLQLRQLQDOOUHVSHFWVEXWZULWHVHSDUDWHO\RQO\WR        HDFK,QWXUQPRVWRIWKHFRPSXWHUV%HDUGHQVROGZHUHWKHQ
XUJHWKDWZLWKUHVSHFWWRWKHLVVXHRIWKHVFRSHRIWKH'LVWULFW        UHVROGRYHUWKH,QWHUQHWE\&LQFLQQDWLDUHDSK\VLFLDQV
&RXUWjVGLVFUHWLRQWRUHMHFWQRORFRQWHQGHUHSOHDVXQGHU)HG
5&ULP3EZHVKRXOGMRLQWKRVH&LUFXLWVZKLFKKROG               $IWHUDQLQYHQWRU\RIWKH3RPHUR\ZDUHKRXVHLQGLFDWHGWKDW
WKDWLWLVZLWKLQDMXGJHjVGLVFUHWLRQWRDGRSWDJHQHUDOSROLF\        FRPSXWHUVZHUHPLVVLQJDMRLQWFRXQW\SROLFHGHSDUWPHQW
DJDLQVWQRORSOHDV6HHHJ8QLWHG6WDWHVY*UDWWRQ           )%,LQYHVWLJDWLRQHYHQWXDOO\OHGWR%HDUGHQDQGWKHRWKHUV$
)GWK&LU8QLWHG6WDWHVY'RUPDQ               IHGHUDO JUDQG MXU\ LQ &RYLQJWRQ .HQWXFN\ UHWXUQHG DQ
)GWK&LU$OWKRXJK,GRQRWKDYH              LQGLFWPHQW RQ )HEUXDU\   FKDUJLQJ %HDUGHQ ZLWK
VXFKDEODQNHWSROLF\LWVHHPVWRPHWKDWWKHPDQ\VRXQG               LQWHUVWDWH WUDQVSRUWDWLRQ RI VWROHQ JRRGV  %HDUGHQ ZDV
UHDVRQVLQIDYRURIRQHnUDQJLQJIURPDMXGJHjVEHOLHIWKDW            VXEVHTXHQWO\ DUUHVWHG KH SOHDGHG QRW JXLOW\ EHIRUH D
VRPHRQHZKRLVXQZLOOLQJWRIXOO\FRQIHVVJXLOWVKRXOGQRWEH           PDJLVWUDWH MXGJH  :KHQ KH ZDV UHDUUDLJQHG EHIRUH WKH
SHUPLWWHGWRSOHDGJXLOW\WRWKHYLHZWKDWE\DFFHSWLQJDQROR        PDJLVWUDWH MXGJH %HDUGHQ VRXJKW WR HQWHU D SOHD RI QROR
SOHDWKHFRXUWLVSODFLQJLWVLPSULPDWXUXSRQDILFWLRQLQRUGHU       FRQWHQGHUHWRWKHFKDUJH7KHPDJLVWUDWHMXGJHUHFRPPHQGHG
WR DVVLVW D FULPLQDO GHIHQGDQW LQ DYRLGLQJ FLYLO OLDELOLW\ n   WKDWWKHGLVWULFWMXGJHDFFHSWWKHSOHDRIQRORFRQWHQGHUH2Q
OHDG WR WKH FRQFOXVLRQ WKDW WKH DGRSWLRQ RI VXFK D JHQHUDO    $XJXVW%HDUGHQDSSHDUHGEHIRUHWKHGLVWULFWMXGJH
SROLF\LVLWVHOIZLWKLQDFRXUWjVEURDGGLVFUHWLRQXQGHU5XOH           IRUVHQWHQFLQJ7KHGLVWULFWMXGJHUHIXVHGWRDFFHSW%HDUGHQjV
E  7KHVH MXVWLILFDWLRQV UHPDLQ YDOLG n DQG KHQFH D      QRORSOHDKRZHYHUVWDWLQJm,ZLOOQRWWDNHDQRORSOHD<RX
FRXUWjV GLVFUHWLRQDU\ DXWKRULW\ LV XQGLPLQLVKHG n HYHQ LQ        PD\ SOHDG JXLOW\ DQG , ZLOO VHQWHQFH  <RX PD\ SOHDG QRW
WKRVHFDVHVLQZKLFKWKHJRYHUQPHQWGRHVQRWREMHFWWRDQROR           JXLOW\DQGZHjOOJRWRWULDO%XW,MXVWGRQjWWDNHQRORSOHDVl
SOHD                                                                   sRLQW $SSHQGL[ s$ DW   %HDUGHQ WKHQ SOHDGHG QRW
                                                                        JXLOW\DQGWKHFDVHZDVVFKHGXOHGIRUWULDO
                                                                           %HIRUH %HDUGHQ ZDV WULHG RQ WKLV FRXQW KRZHYHU WKH
                                                                        IHGHUDO JUDQG MXU\ UHWXUQHG D WZRFRXQW VXSHUVHGLQJ
                                                                        LQGLFWPHQW FKDUJLQJ %HDUGHQ DQG )LQNHQVWHDG ZLWK
                                                                        FRQVSLUDF\WRWUDQVSRUWVWROHQSURSHUW\DQGFKDUJLQJ%HDUGHQ
                                                                        DORQHZLWKWUDQVSRUWDWLRQRIVWROHQSURSHUW\7KHFRQVSLUDF\
                                                                        FRXQWDJDLQVWERWKGHIHQGDQWVZDVHYHQWXDOO\GLVPLVVHGEXW
                                                                        RQO\DIWHUDPLVWULDOZDVGHFODUHGLQDWULDOKHOGLQ2FWREHU
                                                                          %HDUGHQ ZDV WKHQ WULHG E\ KLPVHOI RQ WKH
                                                                        WUDQVSRUWDWLRQFRXQWRULJLQDOO\FRXQWWZRRIWKHVXSHUVHGLQJ
                                                                        LQGLFWPHQW DIWHU D WZRGD\ WULDO WKH MXU\ IRXQG %HDUGHQ
                                                                        JXLOW\RQ1RYHPEHU
     8QLWHG6WDWHVY%HDUGHQ                     1R      1R                          8QLWHG6WDWHVY%HDUGHQ           

  7KHVHQWHQFLQJKHDULQJZDVKHOGEHIRUHWKHGLVWULFWMXGJH         MXU\ EH\RQG D UHDVRQDEOH GRXEW  %HDUGHQ LV QRW FOHDU
RQsDQXDU\%HDUGHQPRYHGIRUGRZQZDUGGHSDUWXUHV          KRZHYHU ZKLFK mVWDWXWRU\ PD[LPXPl KH FRQWHQGV ZDV
IRUERWKKLVDJHDQGSRRUKHDOWKSXUVXDQWWR866HQWHQFLQJ       H[FHHGHGE\WKHUHVWLWXWLRQRUGHU6HFWLRQ$E%RI
*XLGHOLQHV 0DQXDO 866*  +  DQG KLV         7LWOHDXWKRUL]HVWKHGLVWULFWFRXUWWRLPSRVHDUHVWLWXWLRQ
SD\PHQW RI UHVWLWXWLRQ LQ WKH DPRXQW RI  WR        RUGHUIRUmDQDPRXQWHTXDOWRWKHJUHDWHURIWKHYDOXHRIWKH
3RPHUR\jVLQVXUDQFHFRPSDQ\&1$SXUVXDQWWR866*              SURSHUW\ RQ WKH GDWH RI    ORVV    RU WKH YDOXH RI WKH
.7KHGLVWULFWMXGJHUHMHFWHGWKHGRZQZDUGGHSDUWXUH        SURSHUW\ RQ WKH GDWH RI VHQWHQFLQJl  6HH DOVR  86&
IRU%HDUGHQjVSRRUKHDOWKUHDVRQLQJWKDWVXFKDGHSDUWXUHLV       I$m,QHDFKRUGHURIUHVWLWXWLRQWKHFRXUWVKDOO
mGLVIDYRUHGl DQG WKDW %HDUGHQjV KHDOWK SUREOHPV FRXOG EH     RUGHU UHVWLWXWLRQ WR HDFK YLFWLP LQ WKH IXOO DPRXQW RI HDFK
DGHTXDWHO\KDQGOHGE\WKH%XUHDXRI3ULVRQVs$DW       YLFWLPjVORVVHVDVGHWHUPLQHGE\WKHFRXUWlHPSKDVLV
%HDUGHQLVLQKLVODWHVL[WLHVDQGVXIIHUVIURPDQXPEHURI         DGGHG%HDUGHQZDVRUGHUHGWRSD\UHVWLWXWLRQLQDQDPRXQW
KHDOWKSUREOHPVLQFOXGLQJDKHDUWFRQGLWLRQDQGDIURQWDOOREH     HTXDO WR WKH YDOXH RI WKH VWROHQ ODSWRS FRPSXWHUV DV
LPSDLUPHQW                                                         FDOFXODWHG E\ WKH GLVWULFW FRXUW  7KLV ILJXUH WKXV GRHV QRW
                                                                    H[FHHG WKH mVWDWXWRU\ PD[LPXPl IRXQG LQ WKH UHVWLWXWLRQ
   7KHEDVLVRIWKHGRZQZDUG GHSDUWXUHXQGHU.IRU           VWDWXWHV$FFRUG8QLWHG6WDWHVY%HKUPDQ)G
SD\PHQWRISDUWLDOUHVWLWXWLRQZDVGLVFXVVHGDWVRPHOHQJWKLQ      WK&LUKROGLQJWKDW$mLVLQWKLVUHVSHFW
WKH VHQWHQFLQJ KHDULQJ  %HDUGHQjV FRXQVHO DUJXHG WKDW       OLNHDVWDWXWHWKDWSHUPLWVWKHMXGJHWRLPSRVHDQ\WHUPRI
%HDUGHQ VKRXOG UHFHLYH D GRZQZDUG GHSDUWXUH EHFDXVH           \HDUV XS WR OLIH LQ SULVRQl DQG WKXV LV QRW JRYHUQHG E\
%HDUGHQKDGSDLGLQUHVWLWXWLRQWR&1$3RPHUR\jV           $SSUHQGL0RUHRYHU%HDUGHQZDVSRWHQWLDOO\VXEMHFWWRILQH
LQVXUHU  $V D UHVXOW RI WKLV SD\PHQW &1$ KDG UHOHDVHG   RIXSWRSXUVXDQWWR86&+LVDFWXDO
%HDUGHQIURPDOOIXUWKHUFODLPVDQGOLDELOLW\IRU3RPHUR\jV         ILQHZDVVHWDW6HHs$DWsXGJPHQW7KXVHYHQ
ORVVHVRQsDQXDU\%HDUGHQjVFRXQVHODUJXHGWKDW          LIWKHUHVWLWXWLRQRUGHUZHUHWREHFRQVLGHUHGDVDILQHIRUWKH
WKLVSD\PHQWVKRXOGEHFRQVLGHUHGXQGHU866*.DV         VSHFLILF RIIHQVH RI ZKLFK %HDUGHQ ZDV FRQYLFWHG WKH
D PLWLJDWLQJ FLUFXPVWDQFH QRW DGHTXDWHO\ WDNHQ LQWR           UHVWLWXWLRQ LPSRVHG GLG QRW H[FHHG WKH UHOHYDQW VWDWXWRU\
FRQVLGHUDWLRQ E\ WKH 6HQWHQFLQJ *XLGHOLQHV  7KH GLVWULFW    PD[LPXP
FRXUWUHMHFWHG%HDUGHQjVUHTXHVWIRUDGRZQZDUGGHSDUWXUH
EDVHG RQ WKLV SURYLVLRQ KRZHYHU DV WKH SD\PHQW RI                                 ,,,&21&/86,21
UHVWLWXWLRQLVDGHTXDWHO\WDNHQLQWRDFFRXQWLQWKHDGMXVWPHQW
IRU DFFHSWDQFH RI UHVSRQVLELOLW\ 866*  (  7KH      )RU WKH IRUHJRLQJ UHDVRQV %HDUGHQjV FRQYLFWLRQ DQG
GLVWULFWFRXUWGHWHUPLQHGWKDW%HDUGHQVKRXOGQRWUHFHLYHWKH       VHQWHQFHDUH$)),50('
EHQHILWRIDGHSDUWXUHIRUDFFHSWDQFHRIUHVSRQVLELOLW\EHFDXVH
KHKDGSXWWKHJRYHUQPHQWWRLWVSURRILQWU\LQJKLPDQGKDG
RQO\ UHDFKHG WKLV VHWWOHPHQW ZLWK &1$ DIWHU KLV WULDO
0RUHRYHU %HDUGHQ KDG mQHYHU DGPLWWHG >WR@ NQRZLQJ WKDW
>WKHFRPSXWHUV@ZHUHVWROHQRUHYHQVXVSHFWLQJWKDWWKH\ZHUH
VWROHQls$DW                                                  
                                                                         &RLQFLGHQWDOO\ WKH 6HYHQWK &LUFXLW UHFHQWO\ UHMHFWHG D VLPLODU
                                                                    DUJXPHQW E\ KROGLQJ WKDW UHVWLWXWLRQ LV QRW LQ IDFW D mSHQDOW\ IRU D FULPHl
   7KH GLVWULFW MXGJH VHQWHQFHG %HDUGHQ WR WZHQW\IRXU        EXW UDWKHU D FLYLO UHPHG\ LPSRVHG VLPXOWDQHRXVO\ ZLWK WKH FULPLQDO
PRQWKVjLPSULVRQPHQWWKUHH\HDUVRIVXSHUYLVHGUHOHDVHDQG        SHQDOW\ 6HH 8QLWHG 6WDWHV Y %HKUPDQ  )G   WK &LU
D ILQH RI  DQG RUGHUHG KLP WR SD\  LQ        6XFK UHDVRQLQJ LV FOHDUO\ DW RGGV ZLWK WKH FDVH ODZ LQ RWKHU
                                                                    FLUFXLWV WKDW KROGV WKDW UHVWLWXWLRQ LV DW OHDVW LQ SDUW SXQLVKPHQW
    8QLWHG6WDWHVY%HDUGHQ                        1R     1R                       8QLWHG6WDWHVY%HDUGHQ           

QRWKRZHYHUH[FHVVLYHJLYHQWKHIDFWVEHIRUHWKHVHQWHQFLQJ         UHVWLWXWLRQ%HDUGHQZDVKRZHYHUWREHJLYHQFUHGLWIRUWKH
FRXUW,QVWHDGWKHGLVWULFWFRXUWLQWKHSUHVHQWFDVHIROORZHG       DOUHDG\ SDLG LQ UHVWLWXWLRQ DQG WKXV RZHV &1$
WKHSURFHGXUHVRI86&HUHVROYLQJWKHGLVSXWH          LQUHVWLWXWLRQ%HDUGHQKDVILOHGDWLPHO\DSSHDORI
RYHUWKHDPRXQWRIUHVWLWXWLRQE\WKHSUHSRQGHUDQFHRIWKH            KLVFRQYLFWLRQDQGVHQWHQFH6HH86&86&
HYLGHQFH'XULQJWKHVHQWHQFLQJKHDULQJWKHGLVWULFWFRXUW          
ODLGRXWLWVUHDVRQLQJ
                                                                                               ,,$1$/<6,6
    3DUDJUDSK  >RI WKH SUHVHQWHQFH UHSRUW@ OLVWV WKH
  DPRXQWRI7KDWLVEDVHGRQFRPSXWHUV              $ 7KH 'LVWULFW &RXUW :DV :LWKLQ ,WV 'LVFUHWLRQ LQ
  RI ZKLFK ZHUH YDOXHG DW  QLQH RI ZKLFK ZHUH            5HIXVLQJWR$FFHSW%HDUGHQjV1ROR3OHD
  YDOXHGDW,KDYHQRFRQWUDU\SURRI$QGWKDWLV
  ZKDW,ZRXOGDFFHSW,DFFHSWWKDWEHFDXVHDFFRUGLQJWR              7KHILUVWTXHVWLRQUDLVHGRQDSSHDOE\%HDUGHQLVZKHWKHU
  WKHWHVWLPRQ\ZKLFK,KHDUG>@'RFWRU%XNKDULVROGRI            WKHGLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQLQUHIXVLQJWRDFFHSWKLV
  WKHFRPSXWHUVnERXJKW'RFWRU%DUUHUHRQH'RFWRU               QROR FRQWHQGHUH SOHD  7KH H[WHQW RI D GLVWULFW FRXUWjV
  /RUHQFWZR0U&UDZIRUGILYHRUVL[DQG0U3DUODWR                GLVFUHWLRQLQFRQVLGHULQJZKHWKHUWRDFFHSWDSURIIHUHGSOHDRI
  RQH                                                         QRORFRQWHQGHUHXQGHU)HG5&ULP3ELVDQLVVXHRI
    7KDWLV D WRWDORIRU,ZLOOWDNHWKHORZHURI          ILUVWLPSUHVVLRQLQWKLVFLUFXLW5XOHEFOHDUO\LQGLFDWHV
  WKRVHQXPEHUV7KDWYHULILHVWKH                               WKDWDFULPLQDOGHIHQGDQWKDVQRDEVROXWHULJKWWRSOHDGQROR
    7KH GHIHQGDQW KDV QRW GLVSXWHG WKH PDWK WKH               FRQWHQGHUHEXWLQVWHDGmPD\SOHDGQRORFRQWHQGHUHRQO\ZLWK
  PXOWLSOLFDWLRQ DW OHDVW  7KDW FRPHV XS WR WKH              WKHFRQVHQWRIWKHFRXUWl7KHFLUFXLWVWKDWKDYHFRQVLGHUHG
       $QG WKDW LV WKH DPRXQW IRU ZKLFK WKH   WKLVLVVXHKDYHJHQHUDOO\KHOGWKDWDGLVWULFWFRXUWSRVVHVVHV
  GHIHQGDQWZLOOEHKHOGUHVSRQVLEOH                           ZLGHGLVFUHWLRQZKHWKHUWRDFFHSWDSOHDRIQRORFRQWHQGHUH
                                                                      6HHHJ8QLWHG6WDWHVY&HSHGD3HQHV)G
s$DW%HDUGHQKDVQRWPDGHDQ\VSHFLILFDUJXPHQWV          VW&LUm>$@FFHSWDQFHRIDQRORSOHDLVVROHO\DPDWWHU
FDOOLQJLQWRTXHVWLRQWKLVDPRXQWDQGWKXVWKHEDVLVRIKLV          RI JUDFH    l8QLWHG 6WDWHV Y *UDWWRQ  )G 
FODLPRIH[FHVVLYHQHVVLVQRWFOHDU:LWKRXWPRUHZHFDQQRW         WK&LUm>,@WVHHPVDWOHDVWDUJXDEOHWKDWWKH
FRQFOXGHWKDWWKHGLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQLQVHWWLQJ     DFFHSWDQFHRIDQRORSOHDLVVREURDGO\DPDWWHURIGLVFUHWLRQ
WKLVDPRXQW                                                          WKDWDMXGJHjVDGRSWLRQRIDSROLF\DJDLQVWVXFKDSOHDLVLWVHOI
                                                                      ZLWKLQ>WKHMXGJHjV@GLVFUHWLRQl8QLWHG6WDWHVY'RUPDQ
   6HFRQG%HDUGHQDSSDUHQWO\WDNHVLVVXHZLWKWKHH           )G   WK &LU  ILQGLQJ mQR DEXVH RI
SUHSRQGHUDQFHRIWKHHYLGHQFHVWDQGDUGLWVHOI%HDUGHQQRZ           GLVFUHWLRQlLQWKHGLVWULFWMXGJHjVJHQHUDOSROLF\DJDLQVWQROR
DUJXHVWKDWWKHGLVWULFWFRXUWjVUHVWLWXWLRQRUGHUFRQIOLFWVZLWK     SOHDV H[FHSW LQ WD[ HYDVLRQ FDVHV 6HH DOVR &KDUOHV $ODQ
$SSUHQGLY1HZsHUVH\86EHFDXVH             :ULJKW$)HGHUDO3UDFWLFH	3URFHGXUHDWG
LWHIIHFWLYHO\mLQFUHDVHVWKHSHQDOW\IRUDFULPHEH\RQGWKH          HGm>,@W LVZKROO\XQOLNHO\WKDWUHIXVDOWRDFFHSW>D
SUHVFULEHGVWDWXWRU\PD[LPXPlZLWKRXWWKHIDFWRUVXVHGWR             QROR FRQWHQGHUH@ SOHD ZRXOG EH UHJDUGHG DV HUURU RQ
FDOFXODWHWKHDPRXQWRIUHVWLWXWLRQKDYLQJEHHQIRXQGE\D            DSSHDOl
                                                                        %HDUGHQDUJXHVKRZHYHUWKDWWKHGLVWULFWFRXUWDEXVHGLWV
                                                                      GLVFUHWLRQE\UHMHFWLQJKLVQRORSOHDEDVHGRQDJHQHUDOSROLF\
                                                                      DJDLQVW DFFHSWLQJ VXFK SOHDV  +H DUJXHV WKDW 5XOH E
                                                                      UHTXLUHV DQ LQGLYLGXDOL]HG DVVHVVPHQW RI WKH PHULWV RI D
     8QLWHG6WDWHVY%HDUGHQ                         1R       1R                      8QLWHG6WDWHVY%HDUGHQ        

SDUWLFXODU GHIHQGDQWjV SURIIHUHG QROR SOHD EHIRUH D GLVWULFW      UDWKHU WKDQ FRPSHQVDWRU\ LQ QDWXUH  m$OWKRXJK UHVWLWXWLRQ
FRXUW FDQ UHMHFW LW  7KH FRQWUDU\ SRVLWLRQ KRZHYHU LV        GRHVUHVHPEOHDMXGJPHQWµIRUWKHEHQHILWRIjWKHYLFWLPWKH
VXJJHVWHGE\WKHOLWHUDOODQJXDJHRI5XOHEZKLFKVWDWHV           FRQWH[WLQZKLFKLWLVLPSRVHGXQGHUPLQHVWKDWFRQFOXVLRQ
LQUHOHYDQWSDUWm>V@XFKDSOHDVKDOOEHDFFHSWHGE\WKHFRXUW          7KH YLFWLP KDV QR FRQWURO RYHU WKH DPRXQW RI UHVWLWXWLRQ
RQO\DIWHUGXHFRQVLGHUDWLRQRIWKHYLHZVRIWKHSDUWLHVDQGWKH         DZDUGHGRURYHUWKHGHFLVLRQWRDZDUGUHVWLWXWLRQl,GDW
LQWHUHVWRIWKHSXEOLFLQWKHHIIHFWLYHDGPLQLVWUDWLRQRIMXVWLFHl       6HH DOVR HJ 6KHLQEDXP  )G DW   7KXV SULYDWH
HPSKDVHVDGGHG5HDGOLWHUDOO\WKHQWKHUXOHZRXOGDSSHDU           LQGLYLGXDOVVKRXOGQRWEHDOORZHGWRWKZDUWWKHSHQDOJRDOVRI
WRJUDQWGLVWULFWFRXUWVDQDEVROXWHnHYHQDUELWUDU\nULJKW            WKH FULPLQDO MXVWLFH V\VWHP E\ HQWHULQJ LQWR UHOHDVHV RU
WR UHMHFW QROR SOHDV EXW RQO\ D OLPLWHG GLVFUHWLRQ WR DFFHSW   VHWWOHPHQWVZLWKZURQJGRHUVm3ULYDWHSDUWLHVFDQQRWVLPSO\
WKHP                                                                    DJUHHWRZDLYHWKHDSSOLFDWLRQRIDFULPLQDOVWDWXWH>7@KH
                                                                         ODZZLOOQRWWROHUDWHSULYDWHO\QHJRWLDWHGHQGUXQVDURXQGWKH
   :HUHMHFWWKLVLQWHUSUHWDWLRQRI5XOHEEHFDXVHZHDUH            FULPLQDOMXVWLFHV\VWHPl6DYRLH)GDWFLWDWLRQV
UHOXFWDQW WR FRQFOXGH WKDW WKHUH LV QR SRVVLEOH VHW RI          RPLWWHG
FLUFXPVWDQFHV LQ ZKLFK D GLVWULFW FRXUW ZRXOG DEXVH LWV
GLVFUHWLRQLQUHIXVLQJWRDFFHSWDQRORSOHDEDVHGRQDJHQHUDO            :HQRZDGRSWWKHUXOHWKDWDSULYDWHVHWWOHPHQWEHWZHHQD
SROLF\:HFRQFOXGHKRZHYHUWKDWWKHSUHVHQWFDVHGRHVQRW            FULPLQDOZURQJGRHUDQGKLVYLFWLPUHOHDVLQJWKHZURQJGRHU
SUHVHQWVXFKDVHWRIFLUFXPVWDQFHV%HDUGHQKDVQRWRIIHUHG            IURPIXUWKHUOLDELOLW\GRHVQRWSUHFOXGHDGLVWULFWFRXUWIURP
DFRPSHOOLQJUHDVRQ IRUKLVRIIHUWRSOHDGQRORFRQWHQGHUH              LPSRVLQJDUHVWLWXWLRQRUGHUIRUWKHVDPHXQGHUO\LQJZURQJ
UDWKHUWKDQJXLOW\RWKHUWKDQKLVLPSODXVLEOHFODLPWKDWKHGLG         ,Q WKLV FDVH %HDUGHQ ZRXOG KDYH KLV SD\PHQW RI 
QRWNQRZWKDWWKHODSWRSFRPSXWHUVDWLVVXHLQWKHFDVHZHUH             HUDVHWKHUHVWRIWKHUHVWLWXWLRQ LPSRVHG$VWKH
VWROHQ$GLIIHUHQWFRQFOXVLRQPLJKWEHUHTXLUHGZKHUHWKH              6XSUHPH&RXUWLQGLFDWHGLQ.HOO\WKHSXUSRVHVRIFULPLQDO
GHIHQGDQWFRXOGVKRZDPRUHFRPSHOOLQJUHDVRQIRUSOHDGLQJ               UHVWLWXWLRQ LQFOXGH SXQLVKPHQW  ,W ZRXOG EH LPSURSHU WR
QRORFRQWHQGHUHEXWZHOHDYHWKDWSRVVLELOLW\IRUDQRWKHUGD\          SHUPLW SULYDWH SDUWLHV WR UHOHDVH FULPLQDO ZURQJGRHUV IURP
0RUHRYHUWKHJRYHUQPHQWREMHFWHGWRWKHSURIIHUHGQRORSOHD             SXQLVKPHQW  7KXV XQGHU RXU KROGLQJ WRGD\ %HDUGHQ VWLOO
LQWKHSUHVHQWFDVHDQGWKHGLVWULFWFRXUWZRXOGKDYHEHHQ              RZHV&1$LQUHVWLWXWLRQ
ZLWKLQLWVGLVFUHWLRQKDGLWUHMHFWHG%HDUGHQjVQRORSOHDRQ
WKDWEDVLV6HH8QLWHG6WDWHVY'DYLG(7KRPSVRQ,QF             0RUHRYHU WR SHUPLW FULPLQDO ZURQJGRHUV WR VHHN
)G   VW &LU  m:H NQRZ RI QR FDVH LQ       VHWWOHPHQWV ZLWK WKHLU YLFWLPV ZRXOG XQIDLUO\ DGYDQWDJH
ZKLFKDQDSSHDOVFRXUWUHYHUVHGDGLVWULFWFRXUWjVUHIXVDOWR            ZURQJGRHUVZLWKPHDQVRYHUWKHLUOHVVDIIOXHQWFRXQWHUSDUWV
DFFHSWDSOHDRIQRORQRWVXSSRUWHGE\WKHSURVHFXWLRQl,Q           ,Q WKLV FDVH IRU H[DPSOH %HDUGHQ ZDV DEOH WR UDLVH WKH
WKHVH FLUFXPVWDQFHV WKH GLVWULFW FRXUW GLG QRW DEXVH LWV         WKDW KH SDLG LQ VHWWOHPHQW WR &1$ WKURXJK D ORDQ
GLVFUHWLRQLQUHIXVLQJWRDFFHSW%HDUGHQjVSURIIHUHGQRORSOHD          VHFXUHGE\KLVKRXVH7KURXJKUDLVLQJWKHVHIXQGV%HDUGHQ
                                                                         SURSRVHV WR HVFDSH SD\LQJ WKH UHPDLQGHU RI WKH UHVWLWXWLRQ
  %HDUGHQ KDV DOVR UDLVHG D GRXEOH MHRSDUG\ LVVXH ZLWK           DPRXQWDQLPSRUWDQWDVSHFWRIKLVVHQWHQFH$OHVVDIIOXHQW
UHVSHFWWRKLVUHMHFWHG QRORFRQWHQGHUHSOHD$VGHVFULEHG             ZURQJGRHURQWKHRWKHUKDQGZRXOGVXIIHUWKHIXOOEUXQWRI
VXSUD WKH GLVWULFW FRXUW LQ WKLV FDVH GHOHJDWHG WKH             FRXUWRUGHUHGUHVWLWXWLRQ
UHVSRQVLELOLW\ IRU LQLWLDOO\ WDNLQJ %HDUGHQjV SOHD WR WKH
PDJLVWUDWHMXGJHXQGHU86&E7KHPDJLVWUDWH              ,QSDVVLQJ%HDUGHQUDLVHVWZRRWKHULVVXHVUHJDUGLQJWKH
MXGJH DFFHSWHG %HDUGHQjV QROR FRQWHQGHUH SOHD GXULQJ WKH          UHVWLWXWLRQRUGHU)LUVW%HDUGHQDVVHUWVWKDWWKHUHVWLWXWLRQ
VHFRQG DUUDLJQPHQW DQG DV D UHVXOW %HDUGHQ DUJXHV WKDW        RUGHUZDVH[FHVVLYH7KHGLVWULFWFRXUWjVUHVWLWXWLRQRUGHUZDV
     8QLWHG6WDWHVY%HDUGHQ                            1R        1R                       8QLWHG6WDWHVY%HDUGHQ          

E\&1$SUHFOXGHGWKHGLVWULFWFRXUWIURPRUGHULQJFULPLQDO                    MHRSDUG\ DWWDFKHG DW WKDW SRLQW  7KXV KH DUJXHV WKH
UHVWLWXWLRQ  :H KDYH QRW SUHYLRXVO\ GHFLGHG ZKHWKHU D                JRYHUQPHQWZDVSUHFOXGHGIURPODWHUWU\LQJKLPRQWKHVDPH
VHWWOHPHQW RU UHOHDVH H[HFXWHG E\ WKH YLFWLP RI D FULPH              FKDUJH
SUHYHQWVDVHQWHQFLQJFRXUWIURPRUGHULQJUHVWLWXWLRQ7KH
RWKHUFLUFXLWVKRZHYHUKDYHJHQHUDOO\KHOGWKDWmDUHOHDVHE\                  7KLV DUJXPHQW LV EDVHG RQ WKH SURSRVLWLRQ WKDW MHRSDUG\
WKHYLFWLPGRHVQRWSUHFOXGHRUFDSUHVWLWXWLRQRIORVVHVDV                  JHQHUDOO\ DWWDFKHV ZKHQ WKH GLVWULFW FRXUW DFFHSWV D JXLOW\
SDUWRIFULPLQDOVHQWHQFLQJLQDFDVHZKHUHWKHUHLVQRGRXEOH                SOHD6HH8QLWHG6WDWHVY8UVHU\)GWK&LU
UHFRYHU\l8QLWHG6WDWHVY3DUVRQV)GVW                  m>s@HRSDUG\DWWDFKHVWRDJXLOW\SOHDSXUVXDQWWRDSOHD
&LUFLWLQJ8QLWHG6WDWHVY6DYRLH)G                 DJUHHPHQW XSRQ WKH FRXUWjV DFFHSWDQFH RI WKH SOHD
VW&LUVHHDOVR8QLWHG6WDWHVY6KHLQEDXP                    DJUHHPHQWlUHYjGRQRWKHUJURXQGV86
)GWK&LUFRQFOXGLQJmWKDWGLVWULFWFRXUWV               VHH DOVR 8QLWHG 6WDWHV Y $OLRWWD  )G   G &LU
SRVVHVVWKHGLVFUHWLRQWRLPSRVHUHVWLWXWLRQRUGHUVLQVSLWHRI               m$VDJHQHUDOUXOHMHRSDUG\DWWDFKHVLQDFULPLQDOFDVH
FLYLO VHWWOHPHQWVl EHFDXVH RI mWKH UHKDELOLWDWLYH DQG                   DW WKHWLPHWKHGLVWULFWFRXUWDFFHSWVWKHGHIHQGDQWjVJXLOW\
UHWULEXWLYHIXQFWLRQVlRIUHVWLWXWLRQFHUWGHQLHG86                SOHDl,QWKLVFDVH%HDUGHQZRXOGKDYHWKHPDJLVWUDWHMXGJH
8QLWHG6WDWHVY9HWWHU)GWK                  VWHSLQWRWKHVKRHVRIWKHGLVWULFWFRXUWIRUMHRSDUG\SXUSRVHV
&LUKROGLQJWKDWDGLVWULFWFRXUWPD\RUGHUUHVWLWXWLRQ               %HDUGHQDUJXHVLQHIIHFWWKDWWKHGLVWULFWFRXUWGLGQRWKDYHWKH
GHVSLWHDVHWWOHPHQWDJUHHPHQW8QLWHG6WDWHVY+DLUVWRQ                   SRZHU WR UHMHFW KLV QROR SOHD DIWHU WKH PDJLVWUDWH MXGJH
 )G   WK &LU  KROGLQJ WKDW WKH               DFFHSWHG LW  7KXV WKH LVVXH LV ZKHWKHU WKH GLVWULFW FRXUW
GLVPLVVDORIDFLYLODFWLRQLQVWDWHFRXUWGRHVQRWSUHFOXGHD                UHWDLQHG WKH SRZHU WR UHYLHZ GH QRYR %HDUGHQjV QROR SOHD
UHVWLWXWLRQRUGHURQWKHVDPHFODLP8QLWHG6WDWHVY&ORXG                 DIWHUWKHPDJLVWUDWHMXGJHDFFHSWHGLW%HFDXVHZHFRQFOXGH
 )G   WK &LU m>'@HVSLWH WKH H[LVWHQFH RI            WKDWWKHGLVWULFWFRXUWUHWDLQHGWKLVXOWLPDWHSRZHURIUHYLHZ
VHWWOHPHQW DJUHHPHQWV DPRQJ WKH SDUWLHV WKH GLVWULFW FRXUW            ZHKROGWKDWMHRSDUG\FRXOGQRWDWWDFKXQWLOWKHGLVWULFWFRXUW
ZDVDXWKRUL]HGWRRUGHU&ORXGWRSD\UHVWLWXWLRQWRWKH                 DFFHSWHGWKHSOHD
LQVXUDQFHFRPSDQ\LQWKLVFDVHlFHUWGHQLHG86
                                                                          ,QPDNLQJWKLVGRXEOHMHRSDUG\DUJXPHQW%HDUGHQUHOLHVRQ
                                                                              8QLWHG6WDWHVY:LOOLDPV)GG&LUFHUWGHQLHG
  7KHFRXUWVWKDWKDYHUHDFKHGWKLVFRQFOXVLRQFLWH.HOO\Y                  86EXW:LOOLDPVDFWXDOO\FXWVDJDLQVWKLV
5RELQVRQ86IRUWKHJHQHUDOSURSRVLWLRQWKDW                SRVLWLRQ  ,Q :LOOLDPV WKH 6HFRQG &LUFXLW FRQVLGHUHG WKH
UHVWLWXWLRQRUGHUHGDVSDUWRIDFULPLQDOVHQWHQFHLVSXQLWLYH                VWDWXWRU\DQGFRQVWLWXWLRQDOLVVXHVSUHVHQWHGE\WKHGHOHJDWLRQ
                                                                              RI SOHD KHDULQJV WR PDJLVWUDWH MXGJHV  7KH :LOOLDPV FRXUW
                                                                              FRQFOXGHG WKDW D SOHD KHDULQJ PD\ EH GHOHJDWHG WR D
                                                                              PDJLVWUDWH MXGJH ZLWKRXW VWDWXWRU\ RU FRQVWLWXWLRQDO
  DQG $ 866*  (D ,W LV QRW FOHDU ZKHWKHU WKH
GLVWULFW FRXUW UHOLHG XSRQ   RU  $ LQ LPSRVLQJ UHVWLWXWLRQ EXW
                                                                              GLIILFXOWLHV DV ORQJ DV WKH GHIHQGDQW FRQVHQWV WR WKH
ZH QRWH LQ SDVVLQJ WKDW UHVWLWXWLRQ ZDV SURSHUO\ RUGHUHG LQ WKH IXOO         GHOHJDWLRQ,QWKLVFRQWH[WZHQRWHWKDW%HDUGHQFRQVHQWHG
DPRXQW RI WKH ORVV SXUVXDQW WR WKH ODWWHU SURYLVLRQ 7KH FRQGXFW DW LVVXH    WR WKH GHOHJDWLRQ LQ WKH SUHVHQW FDVH  7KH :LOOLDPV FRXUW
LQ WKLV FDVH WRRN SODFH DIWHU WKH HIIHFWLYH GDWH RI WKH 0DQGDWRU\ 9LFWLPV     UHDVRQHG WKDW GHOHJDWLRQ RI WKLV UHVSRQVLELOLW\ GLG QRW
5HVWLWXWLRQ $FW m095$l RI  3XE / 1R                 LPSOLFDWH $UWLFOH ,,, FRQFHUQV m>E@HFDXVH WKH GLVWULFW FRXUW
6WDW   $SULO   DQG WKXV PDQGDWRU\ UHVWLWXWLRQ ZDV
UHTXLUHG IRU WKLV mRIIHQVH DJDLQVW SURSHUW\l $00  $F$LL
                                                                              UHPDLQV LQ FRQWURO RI WKH SURFHHGLQJ DQG WKH PDWWHU LV
800 DOVR 9DQGHEHUJ  )G DW  QRWLQJ WKDW GHIHQGDQW FRQYLFWHG RI      UHSRUWHGWRWKDWFRXUWIRULWVDSSURYDOl,GDW6HHDOVR
LQWHUVWDWH WUDQVSRUWDWLRQ RI VWROHQ JRRGV ZDV SURSHUO\ VHQWHQFHG XQGHU WKH   8QLWHG 6WDWHV Y 'HHV  )G   WK &LU 
095$
       8QLWHG6WDWHVY%HDUGHQ                           1R        1R                          8QLWHG6WDWHVY%HDUGHQ           

m7KHWDNLQJRIDSOHDE\DPDJLVWUDWHMXGJHGRHVQRWELQGWKH                JRYHUQPHQW QHYHU RIIHUHG DQ\ ODSWRS FRPSXWHUV LQWR
GLVWULFWFRXUWWRDFFHSWWKDWSOHD5DWKHUWKH GLVWULFWFRXUW              HYLGHQFH
UHWDLQVXOWLPDWHFRQWURORYHUWKHSOHDSURFHHGLQJVZKLFKDUH
VXEPLWWHG WR WKH FRXUW IRU LWV DSSURYDO  0RUHRYHU GLVWULFW           %HDUGHQjV LQVXIILFLHQF\ RI WKH HYLGHQFH DUJXPHQW LV
FRXUWV UHYLHZ SOHD SURFHHGLQJV RQ DGH QRYR EDVLV   l        ZLWKRXWPHULW:KHQWKHHYLGHQFHLVYLHZHGLQWKHOLJKWPRVW
FLWDWLRQRPLWWHGFHUWGHQLHG86                       IDYRUDEOHWRWKHSURVHFXWLRQDQGDOOLQIHUHQFHVDUHGUDZQLQ
                                                                              WKH JRYHUQPHQWjV IDYRU D UDWLRQDO WULHU RI IDFW FRXOG KDYH
  %HDUGHQ DUJXHV KRZHYHU WKDW WKH OLPLWDWLRQ RQ WKH                  IRXQG WKH HOHPHQWV RI WKH FKDUJHG RIIHQVH EH\RQG D
GHIHQGDQWjV DELOLW\ WR ZLWKGUDZ KLV JXLOW\ SOHD DIWHU                 UHDVRQDEOHGRXEW6HH8QLWHG6WDWHVY0DOLV]HZVNL)G
DFFHSWDQFHRIWKHSOHDE\DPDJLVWUDWHMXGJHLQGLFDWHVWKDW                  WK&LUFHUWGHQLHG86
MHRSDUG\LQIDFWDWWDFKHVZKHQWKHPDJLVWUDWHMXGJHDFFHSWV                   DQG  86    7KXV ZKHWKHU WKLV FODLP LV
WKHSOHD,Q:LOOLDPVIRUH[DPSOHWKHGHIHQGDQWVRXJKWWR                  YLHZHGDVDYDULDQFHEHWZHHQWKHLQGLFWPHQWDQGSURRIRUDV
ZLWKGUDZ KLV SOHD RI JXLOW\ ZKLFK KDG SUHYLRXVO\ EHHQ                DQLQVXIILFLHQWHYLGHQFHFODLPZHDIILUPWKHGLVWULFWFRXUW
DFFHSWHG E\ WKH PDJLVWUDWH MXGJH EHIRUH WKH GLVWULFW MXGJH
DFFHSWHGWKHSOHDDWWKHGHIHQGDQWjVVHQWHQFLQJKHDULQJ7KH                 ( 7KH'LVWULFW&RXUWjV5HVWLWXWLRQ2UGHU:DV3URSHU
GLVWULFWFRXUWUHIXVHGWRDOORZWKHGHIHQGDQWWRZLWKGUDZWKH                    1RW ([FHVVLYH DQG 'RHV 1RW 3UHVHQW DQ $SSUHQGL
SOHD,QFRQVLGHULQJWKLVLVVXHRQDSSHDOWKH6HFRQG&LUFXLW                   3UREOHP
UHDVRQHGWKDWm>D@GHIHQGDQWKDVQRDEVROXWHULJKWWRZLWKGUDZ
KLVSOHDRIJXLOW\l:LOOLDPV)GDW,QVWHDGUHO\LQJ                &1$ 3RPHUR\jV LQVXUHU UHDFKHG D VHWWOHPHQW ZLWK
RQ)HG5&ULP3HWKH6HFRQG&LUFXLWVWDWHGWKDWD                   %HDUGHQSULRUWRVHQWHQFLQJZKLFKUHOHDVHG%HDUGHQIURPDOO
GHIHQGDQW PXVW VKRZ D mIDLU DQG MXVW UHDVRQl IRU WKH                 IXUWKHU OLDELOLW\ WR &1$ XSRQ KLV SD\PHQW RI  WR
ZLWKGUDZDO  7KH UHDVRQ RIIHUHG ZDV WKDW :LOOLDPV KDG                 &1$%DVHGRQWKLVUHOHDVH%HDUGHQQRZDUJXHVWKDWWKH
GLVFRYHUHG DIWHU SOHDGLQJ JXLOW\ WKDW KH KDG D SRVVLEOH             GLVWULFWFRXUWHUUHGLQRUGHULQJKLPWRSD\IXUWKHUUHVWLWXWLRQ
HQWUDSPHQWGHIHQVH7KHGLVWULFWFRXUWUHIXVHGWRDFFHSWWKDW                WR&1$:HUHYLHZWKHSURSULHW\RIRUGHULQJUHVWLWXWLRQGH
DVJURXQGVIRUSHUPLWWLQJDVDPDWWHURILWVGLVFUHWLRQWKH                 QRYR DQG WKH DPRXQW RI UHVWLWXWLRQ RUGHUHG IRU DEXVH RI
ZLWKGUDZDORIWKHJXLOW\SOHDEHFDXVHWKHHQWUDSPHQWGHIHQVH                  GLVFUHWLRQ8QLWHG6WDWHVY9DQGHEHUJ)G
ZDV IRUHFORVHG E\ WKH IDFWV RI WKH FDVH  ,G DW   7KH       WK&LU
6HFRQG&LUFXLWDIILUPHGKROGLQJWKDWWKHGLVWULFWFRXUWKDG
QRWDEXVHGLWVGLVFUHWLRQLQGHQ\LQJWKHGHIHQGDQWjVPRWLRQWR                  %HDUGHQjVDUJXPHQWLVQRWH[DFWO\WKDWWKHGLVWULFWFRXUWjV
ZLWKGUDZKLVJXLOW\SOHD,G$FFRUG8QLWHG6WDWHVY0DGHU                UHVWLWXWLRQZDVXQODZIXOEXWUDWKHUWKDWWKHUHOHDVHH[HFXWHG
)GWK&LUKROGLQJWKDWDFULPLQDO
GHIHQGDQW mPXVW SURYLGH D IDLU DQG MXVW UHDVRQ WR VXSSRUW                
                                                                                     86&  M VWDWHV LQ SDUW WKDW m>L@I D YLFWLP KDV UHFHLYHG
                                                                              FRPSHQVDWLRQ IURP LQVXUDQFH RU DQ\ RWKHU VRXUFH ZLWK UHVSHFW WR D ORVV
                                                                              WKH FRXUW VKDOO RUGHU WKDW UHVWLWXWLRQ EH SDLG WR WKH SHUVRQ ZKR SURYLGHG
                                                                             RU ZKR LV REOLJDWHG WR SURYLGH WKH FRPSHQVDWLRQl
      $FFRUG 3HUHW] Y 8QLWHG 6WDWHV  86    KROGLQJ
WKDW YRLU GLUH RI MXU\ PD\ EH GHOHJDWHG WR PDJLVWUDWH MXGJH ZKHUH
                                                                                  
GHIHQGDQW FRQVHQWV WR WKH GHOHJDWLRQ EHFDXVH WKH GLVWULFW FRXUW UHWDLQV WKH         5HVWLWXWLRQ ZDV SURSHU LQ WKLV FDVH SXUVXDQW WR  86&  $
XOWLPDWH GHFLVLRQ RQ HPSDQHOLQJ WKH MXU\ *RPH] Y 8QLWHG 6WDWHV         DQG 866*  ( 7KLV SDUWLFXODU SURYLVLRQ RI WKH 6HQWHQFLQJ
86    KROGLQJ WKDW GLVWULFW FRXUWjV GHOHJDWLRQ RI YRLU     *XLGHOLQHV VWDWHV WKDW m>L@Q WKH FDVH RI DQ LGHQWLILDEOH YLFWLP WKH FRXUW
GLUH WR PDJLVWUDWH MXGJH LV LQFRQVLVWHQW ZLWK  86&  E ZKHUH     VKDOO HQWHU D UHVWLWXWLRQ RUGHU IRU WKH IXOO DPRXQW RI WKH YLFWLPjV ORVV LI
GHIHQGDQW GRHV QRW FRQVHQW                                                  VXFK RUGHU LV DXWKRUL]HG XQGHUl D QXPEHU RI VWDWXWHV LQFOXGLQJ  86&
    8QLWHG6WDWHVY%HDUGHQ                       1R       1R                     8QLWHG6WDWHVY%HDUGHQ         

' 7KHUH:DV1R9DULDQFH%HWZHHQWKH,QGLFWPHQWDQG                    ZLWKGUDZDORIKLVJXLOW\SOHDHYHQZKHQWKDWSOHDKDVQRW\HW
   WKH*RYHUQPHQWjV3URRIDW7ULDO                                    EHHQDFFHSWHGE\WKHGLVWULFWFRXUWl
   %HDUGHQDOVRDUJXHVWKDWWKHUHZDVDIDWDOYDULDQFHEHWZHHQ            1HLWKHU :LOOLDPV QRU RXU UHFHQW KROGLQJ LQ 0DGHU
WKH WHUPV RI KLV LQGLFWPHQW DQG WKH JRYHUQPHQWjV SURRI DW     KRZHYHUDGGUHVVHGZKHQMHRSDUG\DWWDFKHVLQWKHFDVHRID
WULDO  :H UHYLHZ GH QRYR ZKHWKHU WKHUH ZDV D YDULDQFH       JXLOW\RUQRORFRQWHQGHUHSOHDWKDWKDVEHHQRIIHUHGEXWQRW
EHWZHHQ WKH LQGLFWPHQW DQG WKH SURRI RIIHUHG DW WULDO 6HH   \HW DFFHSWHG E\ WKH GLVWULFW FRXUW :H KROG WKDW MHRSDUG\
8QLWHG6WDWHVY)ORZDO)GWK&LU            DWWDFKHVRQO\ZKHQWKHGLVWULFWFRXUWDFFHSWVWKHGHIHQGDQWjV
FHUWGHQLHG86m$YDULDQFHRFFXUVZKHQ           JXLOW\ RU QROR FRQWHQGHUH SOHD  ,Q WKH SUHVHQW FDVH IRU
WKHFKDUJLQJWHUPV>RIWKHLQGLFWPHQW@DUHXQFKDQJHGEXWWKH          H[DPSOHWKHPDJLVWUDWHMXGJHFRXOGQRWDGMXGLFDWH%HDUGHQjV
HYLGHQFHDWWULDOSURYHVIDFWVPDWHULDOO\GLIIHUHQWIURPWKRVH         JXLOWRUILQDOO\DFFHSWKLVSOHDRQO\WKHGLVWULFWFRXUWFRXOGGR
DOOHJHGLQWKHLQGLFWPHQWl8QLWHG6WDWHVY%DUURZ)G         WKDW  7R KROG WKDW MHRSDUG\ DWWDFKHG ZKHQ WKH PDJLVWUDWH
  WK &LU  FLWDWLRQ DQG LQWHUQDO TXRWDWLRQ      MXGJHDFFHSWHG%HDUGHQjVSOHDRQWKHRWKHUKDQGZRXOGOHDG
PDUNVRPLWWHGDOWHUDWLRQLQ%DUURZ                                 WRWKHFRQFOXVLRQWKDWWKHGLVWULFWFRXUWGRHVQRWLQIDFWUHWDLQ
                                                                       WKHXOWLPDWHGHFLVLRQPDNLQJUHVSRQVLELOLW\UHJDUGLQJSOHDV
   7KHLQGLFWPHQWLQWKLVFDVHFKDUJHG%HDUGHQZLWKYLRODWLRQ          DFRQFOXVLRQWKDWZRXOGUDLVH$UWLFOH,,,FRQFHUQV6HH'HHV
RI  86&   NQRZLQJO\ WUDQVSRUWLQJ LQ LQWHUVWDWH      )GDWKROGLQJWKDWGLVWULFWMXGJHjVSRZHUWRUHYLHZ
FRPPHUFHVWROHQJRRGVODSWRSFRPSXWHUVLQWKLVFDVHZLWK            PDJLVWUDWH MXGJHjV DFWLRQV SUHYHQWV $UWLFOH ,,, IURP EHLQJ
DYDOXHRIRUPRUH7KHSURRIRIIHUHGDWWULDOLQFOXGHG        XQGHUPLQHGE\VXFKGHOHJDWLRQV:LOOLDPV)GDW
HYLGHQFHWKDW%HDUGHQNQHZWKDWWKHFRPSXWHUVLQTXHVWLRQ              VDPH
ZHUH VWROHQ WKDW %HDUGHQ WUDQVSRUWHG IRUW\VL[ ODSWRS
FRPSXWHUV IURP .HQWXFN\ WR 2KLR DQG WKDW KH UHVROG WKH         ,QVRKROGLQJZHJLYHGXHZHLJKWWRERWKWKHFRQVWLWXWLRQDO
FRPSXWHUVWRRWKHUV7KXVWKHUHGRHVQRWDSSHDUWREHDQ\            SURWHFWLRQV DIIRUGHG FULPLQDO GHIHQGDQWV LQ RXU V\VWHP
YDULDQFHDWDOOEHWZHHQWKHWHUPVRIWKHLQGLFWPHQWDQGWKH            LQFOXGLQJWKH'RXEOHsHRSDUG\&ODXVHDQGMXGLFLDOHFRQRP\
SURRIRIIHUHGDWWULDO%HDUGHQZDVFRQYLFWHGEDVHGRQWKH            7KH6XSUHPH&RXUWKDVVWDWHGWKDWm>W@KH'RXEOHsHRSDUG\
WHVWLPRQ\RIWKHLQGLYLGXDOVIURPZKRPKHERXJKWWKHVWROHQ            &ODXVHDIIRUGVDGHIHQGDQWWKUHHEDVLFSURWHFWLRQVl2KLR
FRPSXWHUVDQGWRZKRPKHVROGWKHP                                    YsRKQVRQ862XUKROGLQJWRGD\
                                                                       SUHVHUYHV WKHVH WKUHH EDVLF SURWHFWLRQV LQWDFW  )LUVW WKH
   +RZHYHU %HDUGHQ FODLPV WKDW EHFDXVH WKH JRYHUQPHQW          'RXEOH sHRSDUG\ &ODXVH mSURWHFWV DJDLQVW D VHFRQG
mIDLOHGWRSUHVHQWDVLQJOHFRPSXWHUE\LQWURGXFWLRQLQWR        SURVHFXWLRQIRUWKHVDPHRIIHQVHDIWHUDFTXLWWDOl,GDW
HYLGHQFHlm>W@KHUHZDVDIDWDOYDULDQFHEHWZHHQWKHSURRI       TXRWDWLRQRPLWWHG%HDUGHQFDQQRWFODLPWKDWKHZDVGHQLHG
DQGWKHRIIHQVHFKDUJHGLQWKHLQGLFWPHQWl$SSHOODQWjV%U           WKLVSURWHFWLRQEHFDXVHKHZDVQHYHUDFTXLWWHGRIWKHFKDUJHG
DW%HDUGHQDVVHUWVWKDWWKHJRYHUQPHQWjVUHOLDQFHRQmWKH         RIIHQVH7KHGLVPLVVDORIWKHILUVWLQGLFWPHQWLQIDYRURIWKH
WHVWLPRQ\ RI UHSUHVHQWDWLYHV RI 3RPHUR\    DQG WKH         VXSHUVHGLQJLQGLFWPHQWZDVQRWWKHHTXLYDOHQWRIDQDFTXLWWDO
SKRWRJUDSKLF UHSUHVHQWDWLRQ RI RQH H[HPSODU FRPSXWHUl             6HFRQG WKH 'RXEOH sHRSDUG\ &ODXVH mSURWHFWV DJDLQVW D
FUHDWHGWKHYDULDQFHDWLVVXH,WWKXVDSSHDUVWKDW%HDUGHQLV        VHFRQGSURVHFXWLRQIRUWKHVDPHRIIHQVHDIWHUFRQYLFWLRQl,G
UHDOO\FODLPLQJWKDWWKHHYLGHQFHLQWKLVFDVHZDVLQVXIILFLHQW        TXRWDWLRQ RPLWWHG  %HDUGHQ FDQQRW DUJXH WKDW KH ZDV
WRFRQYLFWKLP7KHDUJXPHQWDSSHDUVWREHWKDWDUDWLRQDO            SURVHFXWHG D VHFRQG WLPH IRU WKH VDPH RIIHQVH DIWHU
WULHURIIDFWFRXOGQRWFRQFOXGHWKDW%HDUGHQZDV JXLOW\RI           FRQYLFWLRQ7KHJRYHUQPHQWGLGmQRWPDNHUHSHDWHGDWWHPSWV
WUDQVSRUWLQJ VWROHQ ODSWRSV LQ LQWHUVWDWH FRPPHUFH LI WKH       WR FRQYLFWl %HDUGHQ mWKHUHE\ H[SRVLQJ KLP WR FRQWLQXHG
    8QLWHG6WDWHVY%HDUGHQ                       1R       1R                      8QLWHG6WDWHVY%HDUGHQ         

HPEDUUDVVPHQW DQ[LHW\ DQG H[SHQVHl  ,G DW            & %HDUGHQjV &KDOOHQJH WR WKH &UHGLELOLW\ RI :LWQHVV
,QVWHDG%HDUGHQZDVLQMHRSDUG\RQO\RQFHLQRQHRQJRLQJ                0DFNH,V1RW5HYLHZDEOH
SURVHFXWLRQWKDWHQGHGZKHQKHZDVFRQYLFWHG6HH3ULFHY
*HRUJLD  86    GLVFXVVLQJ WKH              ,Q KLV PRWLRQ IRU DFTXLWWDO %HDUGHQ DUJXHG WKDW WKH
mFRQWLQXLQJMHRSDUG\SULQFLSOHl7KLUGWKH'RXEOHsHRSDUG\          WHVWLPRQ\RI0DFNHZDVSHUMXUHGEDVHGRQLQFRQVLVWHQFLHV
&ODXVHmSURWHFWVDJDLQVWPXOWLSOHSXQLVKPHQWVIRUWKHVDPH             EHWZHHQ SULRU VWDWHPHQWV XQGHU RDWK DQG 0DFNHjV WULDO
RIIHQVHl  sRKQVRQ  86 DW  TXRWDWLRQ RPLWWHG       WHVWLPRQ\7KHWULDOFRXUWGHQLHGWKLVPRWLRQ2QDSSHDO
%HDUGHQKRZHYHUKDVEHHQSXQLVKHGRQO\RQFH                         %HDUGHQ DUJXHV WKDW 0DFNHjV WHVWLPRQ\ HLWKHU ODFNHG
                                                                       FUHGLELOLW\RUZDVSHUMXUHG
   :HWKXVFRQFOXGHWKDW%HDUGHQjVGRXEOHMHRSDUG\DUJXPHQW
LVZLWKRXWPHULWEHFDXVHLQWKHILQDODQDO\VLVm>W@KHUHVLPSO\          :HUHYLHZWKHIDFWXDOILQGLQJVRIWKHGLVWULFWFRXUWIRUFOHDU
KDVEHHQQRQHRIWKHJRYHUQPHQWDORYHUUHDFKLQJWKDWGRXEOH             HUURU  8QLWHG 6WDWHV Y *HVVD  )G   WK &LU
MHRSDUG\LVVXSSRVHGWRSUHYHQW2QWKHRWKHUKDQGHQGLQJ             FHUW GHQLHG  86    +RZHYHU LQ
SURVHFXWLRQQRZZRXOGGHQ\WKH>JRYHUQPHQW@LWVULJKWWRRQH           UHYLHZLQJ WKH GHQLDO RI D FULPLQDO GHIHQGDQWjV PRWLRQ IRU
IXOODQGIDLURSSRUWXQLW\WRFRQYLFWWKRVHZKRKDYHYLRODWHG           DFTXLWWDOZHDUHSUHFOXGHGIURPLQGHSHQGHQWO\DVVHVVLQJWKH
LWVODZVl,GDW                                                FUHGLELOLW\ RI ZLWQHVVHV  6HH LG m7KH DSSHOODWH FRXUWV
                                                                       JHQHUDOO\ GR QRW UHYLHZ WKH GLVWULFW FRXUWjV GHWHUPLQDWLRQV
% 7KH'LVWULFW&RXUWjV'HQLDORI%HDUGHQjV0RWLRQIRU                 UHJDUGLQJZLWQHVVFUHGLELOLW\l8QLWHG6WDWHVY$GDPR
   'RZQZDUG'HSDUWXUHV,V1RW5HYLHZDEOHRQ$SSHDO                    )GWK&LUFHUWGHQLHGVXEQRP)UHHPDQ
                                                                       Y 8QLWHG 6WDWHV  86    7R GR RWKHUZLVH
   %HDUGHQFKDOOHQJHVWKHGLVWULFWFRXUWjVGHQLDORIKLVPRWLRQ        ZRXOGmLQYDGHWKHSURYLQFHRIWKHMXU\DVWKHVROHILQGHURI
IRUGRZQZDUGGHSDUWXUHVEDVHGRQKLVKHDOWKDQGSD\PHQWRI             IDFWLQDMXU\WULDOl$GDPR)GDW
UHVWLWXWLRQ7KHUHFRUGLQWKLVFDVHKRZHYHUFOHDUO\LQGLFDWHV
WKDWWKHGLVWULFWFRXUWZDVDZDUHRILWVGLVFUHWLRQWRPDNHWKHVH         %HDUGHQjVFODLPWKDW0DFNHjVWHVWLPRQ\ODFNHGFUHGLELOLW\
GHSDUWXUHVm:HKDYHFRQVLVWHQWO\KHOGWKDWWKHGHFLVLRQE\           LVWKXVQRWUHYLHZDEOH%HDUGHQjVFRXQVHOFURVVH[DPLQHG
DGLVWULFWFRXUWQRWWRGHSDUWGRZQZDUGVIURPWKH*XLGHOLQHV           0DFNHDQGUDLVHGWKHLVVXHRIKLVSOHDDUUDQJHPHQWZLWKWKH
LVQRWUHYLHZDEOHRQDSSHDOXQOHVVWKHUHFRUGUHIOHFWVWKDWWKH        JRYHUQPHQW%HDUGHQWKXVDWWDFNHGWKHFUHGLELOLW\RI0DFNH
GLVWULFW FRXUW ZDV QRW DZDUH RI RU GLG QRW XQGHUVWDQG LWV    EXWWKHMXU\QRQHWKHOHVVFUHGLWHG0DFNHjVWHVWLPRQ\:HPD\
GLVFUHWLRQWRPDNHVXFKDGHSDUWXUHl8QLWHG6WDWHVY%XWOHU        QRW UHYLVLW WKDW ILQGLQJ  0RUHRYHU %HDUGHQ RIIHUV QR UHDO
)GWK&LU$W%HDUGHQjVVHQWHQFLQJ            HYLGHQFH IRU KLV FODLP WKDW 0DFNH FRPPLWWHG SHUMXU\
KHDULQJWKHGLVWULFWFRXUWFRQVLGHUHGWKHPHULWVRIJUDQWLQJ          %HDUGHQVWDWHVVRPHZKDWFU\SWLFDOO\WKDWm>D@WWKHYHU\OHDVW
%HDUGHQGRZQZDUGGHSDUWXUHVRQDFFRXQWRIKLVKHDOWKDQG               WKH GLVPLVVDO RI FKDUJHV DJDLQVW WKH SXUSRUWHG WKLHI
KLVDFFHSWDQFHRIUHVSRQVLELOLW\DQGGHQLHGWKHPRWLRQ7KXV         )LQNHQVWHDG E\ WKH JRYHUQPHQW UDLVHG D SUHVXPSWLRQ WKDW
m>L@WVHHPVFOHDUWKDWWKHGLVWULFWFRXUWUHFRJQL]HGLWVSRZHUWR      0DFNHZDVQRWEHLQJWUXWKIXORUPLQLPL]LQJKLVRZQUROHLQ
GHSDUWGRZQZDUGVEXWPHUHO\H[HUFLVHGLWVGLVFUHWLRQQRWWR            WKHWKHIWVl$SSHOODQWjV%UDW:LWKRXWPRUHWRVXJJHVW
GR VRl  ,G DW   7KHUHIRUH %HDUGHQjV FODLP WKDW WKH   SHUMXUHG WHVWLPRQ\ %HDUGHQ KDV VLPSO\ IDLOHG WR UDLVH D
GLVWULFWFRXUWHUUHGLQQRWJUDQWLQJKLVPRWLRQIRUGRZQZDUG           UHYLHZDEOHLVVXH
GHSDUWXUHVLVQRWUHYLHZDEOHRQWKLVDSSHDO