Court Opinion

ID: 2970546
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:15:58.524972+00
Date Added: 2024-06-11T15:01:54.269540
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
   8QLWHG6WDWHVY5D\ERUQ                     1R                      3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

                                                                           (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU

   ,QP\RSLQLRQWKHUHLVRQO\RQHIDFWRUWKDWFDXVHVWKLVFDVH                       )LOH 1DPH DS

WRIDOOZLWKLQWKHmXVHGLQFRPPHUFHRULQDQDFWLYLW\DIIHFWLQJ
FRPPHUFHlSDUWRIWKHsRQHVWHVWsRQHV86DW
7KDWIDFWRULVWKHXVHRIWKHFKXUFKEXLOGLQJWRUHFRUGVHUPRQV    81,7('67$7(6&28572)$33($/6
IRU WKH H[SUHVV SXUSRVH RI EURDGFDVWLQJ WKH VHUPRQV RQ                        )257+(6,;7+&,5&8,7
FRPPHUFLDOUDGLRVWDWLRQVLQFOXGLQJDUDGLRVWDWLRQORFDWHGLQ                         BBBBBBBBBBBBBBBBB
WKH VWDWH RI 0LVVLVVLSSL  5DGLR EURDGFDVWV VSHFLILFDOO\
WDUJHWHGWRUHDFKSHRSOHLQRWKHUVWDWHVUHSUHVHQWWRP\PLQG
FODVVLFDFWLYLWLHVDIIHFWLQJLQWHUVWDWHFRPPHUFH$VDUHVXOW
,EHOLHYHWKDWWKHOHDGRSLQLRQLVFRUUHFWLQFRQFOXGLQJWKDWD     81,7(' 67$7(6 2) $0(5,&$       ;
UDWLRQDOMXU\FRXOGILQGWKDWWKHFKXUFKEXLOGLQJZDVXVHGLQ                3ODLQWLII$SSHOODQW    
DFWLYLWLHVDIIHFWLQJLQWHUVWDWHFRPPHUFH%XWIRUWKLVIDFWRU                                      
KRZHYHU,ZRXOGKDYHEHHQLQFOLQHGWRDIILUPWKHMXGJPHQW                                             1R
RIWKHGLVWULFWFRXUW                                                        Y                     
                                                                                                      !
                                                                                                     
                                                                    *(5$/' 5$<%251                  
                                                                             'HIHQGDQW$SSHOOHH 
                                                                                                    1
                                                                         $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
                                                                      IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV
                                                                      1Rn%HUQLFH%'RQDOG'LVWULFWsXGJH
                                                                                       $UJXHG2FWREHU
                                                                                'HFLGHGDQG)LOHG'HFHPEHU
                                                                           %HIRUH0(55,77DQG*,/0$1&LUFXLWsXGJHV
                                                                                     7$512:'LVWULFWsXGJH
                                                                                          BBBBBBBBBBBBBBBBB
                                                                                                &2816(/
                                                                   $5*8('  /LQGD ) 7KRPH 81,7(' 67$7(6
                                                                   '(3$570(17 2) s867,&( :DVKLQJWRQ '& IRU
                                                                   $SSHOODQW$&:KDUWRQsU:+$5721	:+$5721

                                                                       
                                                                        7KH +RQRUDEOH $UWKXU s 7DUQRZ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
                                                                   WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ

                                                                                                       
     8QLWHG6WDWHVY5D\ERUQ                      1R       1R                       8QLWHG6WDWHVY5D\ERUQ        

	 $662&,$7(6 0HPSKLV 7HQQHVVHH IRU $SSHOOHH                                     BBBBBBBBBBBBBBBBBBBBB
21 %5,()  /LQGD ) 7KRPH 81,7(' 67$7(6
'(3$570(17 2) s867,&( :DVKLQJWRQ '& IRU                                           &21&855(1&(
$SSHOODQW$&:KDUWRQsU:+$5721	:+$5721                                        BBBBBBBBBBBBBBBBBBBBB
	$662&,$7(60HPSKLV7HQQHVVHHsDPHV':LOVRQ
sDPHV5*DUWVsU+$55,66+(/721'81/$3&2%%                       521$/' /(( *,/0$1 &LUFXLW sXGJH FRQFXUULQJ  ,
	5<'(50HPSKLV7HQQHVVHHIRU$SSHOOHH                            DJUHH ZLWK WKH OHDG RSLQLRQ WKDW WKLV LV D FDVH WKDW IDOOV
                                                                      VRPHZKHUHEHWZHHQWKHIDFWVRIFDVHVOLNH8QLWHG6WDWHVY
   0(55,77sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK          7HUU\  )G  WK &LU KROGLQJ WKDW WKH FKXUFKjV
7$512:'sMRLQHG*,/0$1sSSGHOLYHUHG             RSHUDWLRQ RI D GD\FDUH FHQWHU ZDV D VXIILFLHQW DFWLYLW\
DVHSDUDWHFRQFXUULQJRSLQLRQ                                        DIIHFWLQJ LQWHUVWDWH FRPPHUFH WR VDWLVI\ WKH MXULVGLFWLRQDO
                                                                      HOHPHQWRI86&LFHUWGHQLHG6&W
                     BBBBBBBBBBBBBBBBB                                DQGRIFDVHVOLNH8QLWHG6WDWHV Y2GRP)G
                                                                      WK&LUKROGLQJWKDWGRQDWLRQVIURPWZRRXW
                         23,1,21                                      RIVWDWHUHVLGHQWVSXUFKDVHVRI%LEOHVDQGSUD\HUERRNVIURP
                     BBBBBBBBBBBBBBBBB                                DQRXWRIVWDWHVRXUFHDQGLQGLUHFWFRQWULEXWLRQVWRDQRXWRI
                                                                      VWDWHFKXUFKRUJDQL]DWLRQZHUHLQVXIILFLHQWWRHVWDEOLVKWKDW
   0(55,77&LUFXLWsXGJH,QWKLVFDVHWKH8QLWHG6WDWHV           WKH FKXUFKjV DFWLYLWLHV DIIHFWHG LQWHUVWDWH FRPPHUFH FHUW
DSSHDOV WKH RUGHU GLVPLVVLQJ 'HIHQGDQW *HUDOG 5D\ERUQjV         GHQLHG6&W
LQGLFWPHQWIRUDUVRQXQGHU86&L7KHGLVWULFW
FRXUWIRXQGWKDWLWODFNHGVXEMHFWPDWWHUMXULVGLFWLRQRYHUWKH         $OWKRXJK,FRQFXULQWKHUHVXOWUHDFKHG,ZULWHVHSDUDWHO\
PDWWHU EHFDXVH LW FRQFOXGHG WKDW DV DSSOLHG WR WKH           EHFDXVH,EHOLHYHWKDWWKHOHDGRSLQLRQRYHUVWDWHVWKHIDFWRUV
FLUFXPVWDQFHV RI WKH FDVH  L FRQVWLWXWHV DQ             WKDWFDXVHWKLVFDVHWRIDOOZLWKLQWKHDPELWRIL,Q
XQFRQVWLWXWLRQDOH[WHQVLRQRI&RQJUHVVjVFRPPHUFHSRZHU              SDUWLFXODU WKH OHDG RSLQLRQ UHOLHV RQ IDFWRUV VXFK DV WKH
7KH FRXUW EHOLHYHG LWV GHFLVLRQ ZDV FRPSHOOHG E\ WKH          FKXUFKKDYLQJRXWRIVWDWHPHPEHUVVHUYLQJDVWKHVLWHIRU
GHFLVLRQVRIWKH6XSUHPH&RXUWLQ8QLWHG6WDWHVY0RUULVRQ          JRVSHOFRQFHUWVWKDWRFFDVLRQDOO\IHDWXUHRXWRIVWDWHWDOHQW
86DQGsRQHVY8QLWHG6WDWHV86             HPSOR\LQJWZRSHUVRQVFROOHFWLQJGRQDWLRQVGXULQJ6XQGD\
                                                           VHUYLFHVSXUFKDVLQJIRRGDQGIORZHUVIRUIXQHUDOVSXUFKDVLQJ
                                                                      JURFHULHV IRU FKXUFK EUHDNIDVWV DQG SLFQLFV DQG RZQLQJ
   7RWKHH[WHQWWKHGLVWULFWFRXUWGLVPLVVHGWKHDUVRQFRXQW         VHYHUDO YHKLFOHV  /HDG 2S DW   7KHVH DUH WKH NLQGV RI
IRU ODFN RI VXEMHFW PDWWHU MXULVGLFWLRQ LWV FRQFOXVLRQ ZDV   mSDVVLYH>RU@SDVVLQJlDFWLYLWLHVWKDWERWKWKH6XSUHPH&RXUW
HUURQHRXV7KHGLVWULFWFRXUWPLVFRQVWUXHGODQJXDJHIURPWKH         DQGRWKHUFLUFXLWVKDYHKHOGDUHLQVXIILFLHQWWREULQJDQDUVRQ
RSLQLRQRIWKLVFRXUWLQ8QLWHG6WDWHVY6KHUOLQ)G      FDVHXQGHULsRQHVY8QLWHG6WDWHV86
WK&LU,QWKDWFDVHWKLVFRXUWFRQWUDVWHG         VHH HJ 2GRP  )G DW  m7KHVH
LZLWKWKH*XQ)UHH6FKRRO=RQHV$FWRIWKH              FRQQHFWLRQV WR LQWHUVWDWH FRPPHUFH DUH WRR SDVVLYH WRR
VWDWXWHDWLVVXHLQ8QLWHG6WDWHVY/RSH]86       PLQLPDO DQG WRR LQGLUHFW WR VXEVWDQWLDOO\ DIIHFW LQWHUVWDWH
QRWLQJWKDWm>X@QOLNHWKHXQFRQVWLWXWLRQDOVWDWXWHLQ/RSH]       FRPPHUFHl LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG  ,I VXFK
86&LGRHVFRQWDLQDMXULVGLFWLRQDOHOHPHQWZKLFK          DFWLYLWLHV DUH GHHPHG VXIILFLHQW WR VDWLVI\ WKH MXULVGLFWLRQDO
HQVXUHV WKURXJK SURSHU LQTXLU\ WKDW WKH DUVRQ LQ TXHVWLRQ   HOHPHQW RI  L WKHQ YLUWXDOO\ HYHU\ FKXUFK DUVRQ LQ
DIIHFWVLQWHUVWDWHFRPPHUFHl,G                                    $PHULFDZLOOEHFRPHDIHGHUDORIIHQVH
    8QLWHG6WDWHVY5D\ERUQ                          1R       1R                         8QLWHG6WDWHVY5D\ERUQ             

LQWURGXFHGHYLGHQFHRIWKHFKXUFKEXLOGLQJjVGLUHFWUHJXODU                $OWKRXJKWKHLQWHUVWDWHFRPPHUFHUHTXLUHPHQWLVIUHTXHQWO\
DQGVXEVWDQWLDOXVHLQDFWLYLWLHVDIIHFWLQJLQWHUVWDWHFRPPHUFH          FDOOHG WKH mMXULVGLFWLRQDO HOHPHQWl LW LV VLPSO\ RQH RI WKH
:HFDQQRWVD\WKDWWKHHYLGHQFHSURGXFHGE\WKHJRYHUQPHQW                HVVHQWLDOHOHPHQWVRIL,WLVQRWMXULVGLFWLRQDOLQWKH
LV QRW VXIILFLHQW WR SHUPLW D UDWLRQDO MXU\ WR ILQG WKDW WKH   VHQVHWKDWLWDIIHFWVDFRXUWjVVXEMHFWPDWWHUMXULVGLFWLRQLH
FKXUFK ZDV DFWLYHO\ HPSOR\HG LQ FRPPHUFLDO DFWLYLWLHV               DFRXUW
VFRQVWLWXWLRQDORUVWDWXWRU\SRZHUWRDGMXGLFDWHDFDVH
DIIHFWLQJLQWHUVWDWHFRPPHUFH,QGHHGZKLOHZHEHOLHYHWKH             6HH8QLWHG6WDWHVY0DUWLQ)GWK&LU
SDUWLHVKDYHVWLSXODWHGWRIDFWVWKDWFRXOGOHDGDWULHURIIDFWWR        FLWDWLRQV RPLWWHG 8QLWHG 6WDWHV Y 5HD  )G
FRQFOXGHWKHFKXUFKZDVXVHGLQDFWLYLWLHVDIIHFWLQJLQWHUVWDWH           WK&LUYDFDWHGDQGUHPDQGHGRQRWKHU
FRPPHUFH WKH JRYHUQPHQW KDV LQGLFDWHG WKDW LW LQWHQGV WR         JURXQGV  )G  WK &LU  m6HFWLRQ LjV
GHYHORSWKHUHFRUGIXUWKHURQWKLVSRLQW7KHGLVWULFWFRXUWjV           µLQWHUVWDWH FRPPHUFHj UHTXLUHPHQW ZKLOH MXULVGLFWLRQDO LQ
RUGHUGLVPLVVLQJWKHGHIHQGDQWjVLQGLFWPHQWIRUDUVRQXQGHU               QDWXUHLVPHUHO\DQHOHPHQWRIWKHRIIHQVHQRWDSUHUHTXLVLWH
86&LLV5(9(56('                                           WRVXEMHFWPDWWHUMXULVGLFWLRQl8QLWHG6WDWHVY&DUU
                                                                          )GWK&LU.
                                                                             $OWKRXJK WKLV FRXUW W\SLFDOO\ YDFDWHV D GLVPLVVDO RUGHU
                                                                          ZKHQLWGHWHUPLQHVWKDWDGLVWULFWFRXUWKDVHUUHGLQGLVPLVVLQJ
                                                                          DFDVHIRUODFNRIVXEMHFWPDWWHUMXULVGLFWLRQWKHGLVWULFWFRXUW
                                                                          LQ WKLV FDVH XQGHUWRRN DQ HYDOXDWLRQ RI WKH PHULWV RI WKH
                                                                          LQWHUVWDWH FRPPHUFH TXHVWLRQ XQGHU WKH JXLVH RI VXEMHFW
                                                                          PDWWHU MXULVGLFWLRQ  )XUWKHUPRUH WKH IDFWV DUH EHIRUH WKH
                                                                          FRXUWYLDVWLSXODWLRQDQGWKHHYLGHQWLDU\KHDULQJLQWKHFRXUW
                                                                          EHORZ:HWKHUHIRUHZLOOXQGHUWDNHDIXUWKHUFRQVLGHUDWLRQRI
                                                                          WKHLQWHUVWDWHFRPPHUFHUHTXLUHPHQW
                                                                            'HIHQGDQW *HUDOG 5D\ERUQ LV WKH SDVWRU RI 1HZ 0RXQW
                                                                          6LQDL0LVVLRQDU\%DSWLVW&KXUFKLQ0HPSKLV7HQQHVVHH2Q
                                                                          $XJXVWWKHFKXUFKEXLOGLQJZDVGHVWUR\HGE\ILUH
                                                                          2Q'HFHPEHU5D\ERUQZDVLQGLFWHGLQFRQQHFWLRQ
                                                                          ZLWKWKHDUVRQ&RXQWRIWKHLQGLFWPHQWFKDUJHGDYLRODWLRQ
                                                                          RI86&L&RXQWVDQGFKDUJHGYLRODWLRQVRI
                                                                          86&PDLOIUDXG7KHLQGLFWPHQWDOOHJHGWKDW
                                                                          5D\ERUQ KDG VHW ILUH WR WKH FKXUFK EXLOGLQJ DV SDUW RI D
                                                                          VFKHPH WR GHIUDXG WKH LQVXUDQFH FRPSDQ\ WKDW KHOG WKH
                                                                          FDVXDOW\SROLF\RQWKHFKXUFKEXLOGLQJ

                                                                              
                                                                               6HFWLRQ    L SURYLGHV FULPLQDO SHQDOWLHV IRU m>Z@KRHYHU
                                                                          PDOLFLRXVO\ GDPDJHV RU GHVWUR\V RU DWWHPSWV WR GDPDJH RU GHVWUR\ E\
                                                                          PHDQV RI ILUH RU DQ H[SORVLYH DQ\ EXLOGLQJ YHKLFOH RU RWKHU UHDO RU
                                                                          SHUVRQDO SURSHUW\ XVHG LQ LQWHUVWDWH RU IRUHLJQ FRPPHUFH RU LQ DQ\ DFWLYLW\
                                                                          DIIHFWLQJ LQWHUVWDWH RU IRUHLJQ FRPPHUFHl
     8QLWHG6WDWHVY5D\ERUQ                        1R       1R                      8QLWHG6WDWHVY5D\ERUQ         

   ,Q KLV PRWLRQ WR GLVPLVV WKH  L FRXQW RI WKH         DFODLPRIPRUHWKDQWRWKHFKXUFK)G
LQGLFWPHQW 5D\ERUQ DUJXHG  WKDW WKH LQGLFWPHQW ZDV           WK&LU
GHIHFWLYH EHFDXVH WKH FKXUFK EXLOGLQJ ZDV QRW XVHG LQ
LQWHUVWDWH FRPPHUFH RU LQ DQ DFWLYLW\ DIIHFWLQJ LQWHUVWDWH          ,QDGGLWLRQLQ8QLWHG6WDWHVY2GRP)GWK
FRPPHUFHDQGWKDW&RQJUHVVKDGH[FHHGHGLWVDXWKRULW\LQ            &LUWKHRQO\HYLGHQFHLQWURGXFHGWRGHPRQVWUDWHXVH
HQDFWLQJ VHFWLRQ L  8SRQ UHFRPPHQGDWLRQ RI WKH             LQ LQWHUVWDWH FRPPHUFH LQFOXGHG  WKH FKXUFK UHFHLYHG
PDJLVWUDWHMXGJHWKHGLVWULFWFRXUWLQLWLDOO\GHQLHGWKHPRWLRQ       GRQDWLRQV IURP WZR RXWRIVWDWH GRQRUV UHODWLYHV RI WKH
ILQGLQJWKDWZKHWKHUWKHHYLGHQFHZDVVXIILFLHQWWRHVWDEOLVK           SDVWRU  XVH RI mD KDQGIXOl RI %LEOHV DQG SUD\HU ERRNV
WKHLQWHUVWDWHFRPPHUFHHOHPHQWRIWKHRIIHQVHZDVDPDWWHU             SXUFKDVHG IURP DQ RXWRIVWDWH VRXUFH DQG  LQGLUHFW
WREHGHWHUPLQHGDIWHUWKHSUHVHQWDWLRQRIHYLGHQFHDWWULDO           FRQWULEXWLRQVWRDQRXWRIVWDWHFKXUFKRUJDQL]DWLRQWKURXJK
7KH GHIHQGDQW ILOHG D PRWLRQ WR UHFRQVLGHU DQG XSRQ            LWVPHPEHUVKLSLQWKHLQVWDWHFKXUFKRUJDQL]DWLRQ6HHLGDW
UHFRQVLGHUDWLRQWKHGLVWULFWFRXUWGLVPLVVHGWKHLFRXQW        2QWKRVHIDFWVWKH(OHYHQWK&LUFXLWFRQFOXGHGWKDW
RQWKHMXULVGLFWLRQDOJURXQGGLVFXVVHGDERYH                           WKHJRYHUQPHQWIDLOHGWRGHPRQVWUDWHWKDWWKHFKXUFKEXLOGLQJ
                                                                        ZDVXVHGLQRUDIIHFWHGLQWHUVWDWHFRPPHUFH6HHLGDW
  1H[WWKH*RYHUQPHQWILOHGDPRWLRQWRUHFRQVLGHUDQGD
PRWLRQIRUDQHYLGHQWLDU\KHDULQJWRHVWDEOLVKWKHUHTXLVLWH              )LQDOO\WKH)RXUWK&LUFXLWLQ8QLWHG6WDWHVY7HUU\
FRQQHFWLRQ WR LQWHUVWDWH FRPPHUFH  7KH FRXUW JUDQWHG WKH       )GWK&LUFRQVLGHUHGZKHWKHUWKHIROORZLQJ
PRWLRQ IRU DQ HYLGHQWLDU\ KHDULQJ ZKLFK ZDV KHOG RQ            IDFWVFRQVWLWXWHGVXIILFLHQWHYLGHQFHRIDFKXUFKEXLOGLQJjV
)HEUXDU\2Q$SULOWKHGLVWULFWFRXUWGHQLHG         XVHLQRUHIIHFWRQFRPPHUFHRXWRIVWDWHPHPEHUVFKXUFK
WKH JRYHUQPHQWjV PRWLRQ IRU UHFRQVLGHUDWLRQ DQG WKH               HPSOR\HHVZKRUHFHLYHZDJHVIRUWKHLUHIIRUWVWKHFKXUFKjV
JRYHUQPHQWDSSHDOVIURPWKDWRUGHU                                   DIILOLDWLRQZLWKWKH&RRSHUDWLYH%DSWLVW)HOORZVKLSZKLFKZDV
                                                                        EDVHG LQ DQRWKHU VWDWH WKH FKXUFKjV VSRQVRUVKLS RI
  'HIHQGDQW5D\ERUQXUJHVXVWRDIILUPWKHGLVPLVVDORIWKH             LQWHUQDWLRQDO PLVVLRQV WKH FKXUFKjV SXUFKDVH RI 6XQGD\
DUVRQFRXQWIURPKLVLQGLFWPHQW+HFRQWHQGVWKDWEHFDXVH              6FKRRO PDWHULDOV IURP DQ RXWRIVWDWH VXSSOLHU DQG WKH
WKH FKXUFK ZDV QRW DFWLYHO\ HPSOR\HG IRU D FRPPHUFLDO           FKXUFKjV UHIXUELVKPHQW RI KRPHV IURP ZKLFK LW FRXOG
SXUSRVH  L GRHV QRW DSSO\ WR WKH SUHVHQW FDVH          UHDVRQDEO\ EH LQIHUUHG WKDW WKH FKXUFK SXUFKDVHG EXLOGLQJ
'HIHQGDQW GRHV QRW DUJXH WKDW FKXUFKHV VKRXOG QHYHU EH          PDWHULDOVWKDWLPSDFWHGWKHQDWLRQDOPDUNHWIRUVXFKJRRGV
SHUPLWWHGWRIDOOZLWKLQWKHVWDWXWHjVDPELW,QVWHDG5D\ERUQ         DQG VHUYLFHV  7KH )RXUWK &LUFXLW IRXQG LW XQQHFHVVDU\ WR
DUJXHV WKDW WR ILQG WKDW WKLV FKXUFKjV DFWLYLWLHV LQYRNH WKH   UHDFK WKDW LVVXH EHFDXVH LW FRQFOXGHG WKDW WKH FKXUFKjV
SURYLVLRQV RI WKH VWDWXWH ZRXOG LPSHUPLVVLEO\ H[WHQG WKH         RSHUDWLRQRIDIXOOGD\FDUHFHQWHUQHFHVVLWDWHGDILQGLQJWKDW
VFRSHRIL                                                      WKHLQWHUVWDWHFRPPHUFHUHTXLUHPHQWZDVPHW6HHLGDW
   ,Q sRQHV Y 8QLWHG 6WDWHV WKH 6XSUHPH &RXUW KHOG WKDW        $IWHUUHYLHZLQJWKHIRUHJRLQJFDVHODZZHDUHFRQYLQFHG
LGLGQRWUHDFKWKHDUVRQRIDQRZQHURFFXSLHGSULYDWH           WKDW WKH IDFWV VR IDU GHYHORSHG LQ WKH FDVH DW EDU IDOO
UHVLGHQFH867KH&RXUWVWDWHGWKDW            VRPHZKHUHEHWZHHQWKHIDFWVSUHVHQWHGWRWKH)LIWK&LUFXLWLQ
WKHTXDOLI\LQJZRUGVmXVHGLQlVLJQDOHG&RQJUHVVjVLQWHQWQRW           sRKQVRQDQGWKH(OHYHQWK&LUFXLWLQ2GRPRQWKHRQHKDQG
mWRLQYRNHLWVIXOODXWKRULW\XQGHUWKH&RPPHUFH&ODXVHl,G          DQGWKH)RXUWK&LUFXLWLQ7HUU\RQWKHRWKHUKDQG:KLOHWKH
DW7KHSUHVHQFHRIDMXULVGLFWLRQDOHOHPHQWLQL           FRXUWV LQ sRKQVRQ DQG 2GRP ZHUH SUHVHQWHG ZLWK IDFWV
HQDEOHG WKH &RXUW LQ sRQHV WR DYRLG WKH FRQVWLWXWLRQDO          LQGLFDWLQJmPHUHO\DSDVVLYHSDVVLQJRUSDVWFRQQHFWLRQWR
                                                                        FRPPHUFHlsRQHV86DWKHUHWKHJRYHUQPHQWKDV
     8QLWHG6WDWHVY5D\ERUQ                          1R       1R                     8QLWHG6WDWHVY5D\ERUQ         

SXEOLFZDVLQYLWHG,WVHUYHGDVWKHVLWHRIJRVSHOFRQFHUWV            &RPPHUFH&ODXVHDQDO\VLVPDQGDWHGE\/RSH]6HHLGDW
LQFOXGLQJ VRPH IHDWXULQJ RXWRIVWDWH WDOHQW IRU ZKLFK WKH        
FKXUFKUHTXHVWHGGRQDWLRQVRIWR
                                                                             sRQHVHVWDEOLVKHGDWZRSDUWLQTXLU\WRGHWHUPLQHZKHWKHU
  )XUWKHUPRUHXQOLNHWKHSULYDWHKRPHLQsRQHVWKHFKXUFK               DEXLOGLQJILWVZLWKLQWKHVWULFWXUHVRIL)LUVWFRXUWV
EXLOGLQJZDVRZQHGE\DWD[H[HPSWQRQSURILWRUJDQL]DWLRQ               PXVWLQTXLUHmLQWRWKHIXQFWLRQRIWKHEXLOGLQJLWVHOIl,GDW
ZLWKD%RDUGRI7UXVWHHV,QDGGLWLRQWKHFKXUFKHPSOR\HG               6HFRQGFRXUWVVKRXOGGHWHUPLQHZKHWKHUWKDWIXQFWLRQ
WZRSHUVRQVDQGFROOHFWHGVXEVWDQWLDOVXPVRQDZHHNO\EDVLV             mDIIHFWVLQWHUVWDWHFRPPHUFHl,G%HFDXVHLGRHVQRW
DSSUR[LPDWHO\WR7KHVHIXQGVZHUHUHFHLYHG               LQYRNH&RQJUHVVjVIXOODXWKRULW\XQGHUWKH&RPPHUFH&ODXVH
IURPUHVLGHQWVRI7HQQHVVHH0LVVLVVLSSLDQG$UNDQVDVDV                WKH &RXUW H[SODLQHG WKDW WKH TXDOLILFDWLRQ mµXVHGj LQ DQ
ZHOODVRWKHUVWDWHV                                                    DFWLYLW\DIIHFWLQJFRPPHUFHlLVmPRVWVHQVLEO\UHDGWRPHDQ
                                                                          DFWLYHHPSOR\PHQWIRUFRPPHUFLDOSXUSRVHVDQGQRWPHUHO\
   7KHFKXUFKDOVRHQJDJHGLQVXEVWDQWLDODFWLYLWLHVLQWKHORFDO         DSDVVLYHSDVVLQJRUSDVWFRQQHFWLRQWRFRPPHUFHl,GDW
PDUNHWIRUJRRGV)RUH[DPSOHWKHFKXUFKVSHQWRQ                $VDUHVXOWWKH&RXUWFRQFOXGHGWKDWWKHIDFWVDVVHUWHG
IRRGDQGIORZHUVIRUIXQHUDOVLQDVZHOODVIRU              E\WKHJRYHUQPHQWoXVHRIWKHGZHOOLQJDVFROODWHUDOIRUD
JURFHULHV WR EH XVHG WR KRVW LWV SLFQLFV DQG EUHDNIDVWV  ,Q   PRUWJDJHIURPDQRXWRIVWDWHOHQGHUWKHXVHRIWKHGZHOOLQJ
DGGLWLRQWKHFKXUFKRZQHGVHYHUDOYHKLFOHVLQFOXGLQJDFDU             WRREWDLQDQRXWRIVWDWHLQVXUDQFHSROLF\DQGWKHXVHRIWKH
DWUXFNDQGDUHFUHDWLRQDOYHKLFOH                                      GZHOOLQJWRUHFHLYHQDWXUDOJDVIURPVRXUFHVRXWVLGHWKHVWDWH
                                                                          o ZRXOG QRW EULQJ WKH SULYDWH KRPH ZLWKLQ WKH WHUPV RI
   :KHQWKHVHIDFWVDUHWDNHQWRJHWKHUZHFRQFOXGHWKDWWKH              L6HHLG
JRYHUQPHQW KDV SURYLGHG VXIILFLHQW HYLGHQFH WR SHUPLW D
UDWLRQDOMXU\WRILQGWKDWWKHFKXUFKZDVDFWLYHO\HPSOR\HGLQ              ,Q sRQHV WKH &RXUW DOVR UHFRJQL]HG WKDW WKH OHJLVODWLRQ
FRPPHUFLDODFWLYLWLHVZLWKDQHIIHFWRQLQWHUVWDWHFRPPHUFH              XOWLPDWHO\ HQDFWHG DV  L LQLWLDOO\ UHTXLUHG WKDW WKH
:KLOHVHYHUDOFLUFXLWVKDYHGHWHUPLQHGWKDWXVHRIDEXLOGLQJ             EXLOGLQJ EH XVHGmIRUEXVLQHVVSXUSRVHVlEXWWKHTXDOLILHU
DV D FKXUFK DORQH GRHV QRW TXDOLI\ LW DV EHLQJ mXVHG LQl       ZDVGHOHWHGLQUHVSRQVHWRPHPEHUVZKREHOLHYHGWKHVWDWXWH
LQWHUVWDWH FRPPHUFH ZH GR QRW EHOLHYH WKDW ILQGLQJ WKDW          VKRXOG SURWHFW mVFKRROV SROLFH VWDWLRQV DQG SODFHV RI
LQWHUVWDWH FRPPHUFH LV PHW RQ WKHVH IDFWV ZRXOG FUHDWH D         ZRUVKLSl,GDWQFLWLQJ5XVVHOOY8QLWHG6WDWHV
FLUFXLW VSOLW DV WKH GHIHQGDQW DVVHUWV  7KH FDVHV FLWHG E\    86:KLOHLH[FOXGHVQR
5D\ERUQ LQYROYHG IDFWXDO FLUFXPVWDQFHV IDU GLIIHUHQW IURP           SDUWLFXODU W\SH RI EXLOGLQJ WKH SURSHUW\ PXVW EH mDFWLYHO\
WKRVH EHIRUH WKLV FRXUW  )RU LQVWDQFH LQ 8QLWHG 6WDWHV Y     HPSOR\>HG@IRUFRPPHUFLDOSXUSRVHVl,G
sRKQVRQWKH)LIWK&LUFXLWFRQFOXGHGWKDWDFKXUFKZDVQRWD
EXLOGLQJXVHGLQRUDIIHFWLQJLQWHUVWDWHFRPPHUFHZKHQWKH                   )RU SXUSRVHV RI WKH IXQFWLRQ DQDO\VLV WKH EXLOGLQJjV
JRYHUQPHQWDVVHUWHGWKHIROORZLQJIRXUIDFWVWKHFKXUFKjV            IXQFWLRQLVQRWOLPLWHGWRLWVSULPDU\XVH1XPHURXVFRXUW
PHPEHUVKLSLQWKH7H[DV$QQXDO&RQIHUHQFHVWDWH0HWKRGLVW                GHFLVLRQVVXSSRUWWKHLGHDWKDWDEXLOGLQJFDQKDYHPRUHWKDQ
RUJDQL]DWLRQWKH&RQIHUHQFHjVIRUZDUGLQJRIWKRVHIXQGV             RQH IXQFWLRQ  )RU H[DPSOH LQ sRQHV WKH 6XSUHPH &RXUW
WRWKH8QLWHG0HWKRGLVW&KXUFKjVQDWLRQDORIILFHLQ,OOLQRLV             QRWHGWZLFHWKDWWKHSULYDWHKRPHDWLVVXHLQWKDWFDVHZDV
WKHQDWLRQDORUJDQL]DWLRQjVGLVWULEXWLRQRIWKRVHIXQGVWR            XVHGRQO\DVDUHVLGHQFHDQGQRWDOVRDVDKRPHRIILFHRULQ
YDULRXVPLVVLRQDU\DFWLYLWLHVVHPLQDULHVDQGLQVWLWXWLRQVRI            VRPH RWKHU FRPPHUFLDO HQWHUSULVH  6HH LG DW   2WKHU
KLJKHUHGXFDWLRQDQGDQRXWRIVWDWHLQVXUHUjVSD\PHQWRI            FLUFXLWV KDYH DQDO\]HG SULPDU\ DQG VHFRQGDU\ IXQFWLRQV RI
     8QLWHG6WDWHVY5D\ERUQ                        1R       1R                          8QLWHG6WDWHVY5D\ERUQ             

FKXUFKEXLOGLQJV6HHHJ8QLWHG6WDWHVY7HUU\)G         QRQHWKHOHVVZHUHFRPPHUFLDOLQQDWXUH$FFRUG8QLWHG6WDWHV
WK&LU                                               Y*UDVVLH)GWK&LUUHFRJQL]LQJ
                                                                        WKDW D FKXUFKjV DFWLYLWLHV PD\ EH ERWK UHOLJLRXV DQG
  ,Q WKLV FDVH KRZHYHU WKH IXQFWLRQ DQDO\VLV FRPSHOV D        FRPPHUFLDODWWKHVDPHWLPH2GRP)G
FRQFOXVLRQWKDWWKHEXLOGLQJIXQFWLRQHGDVDFKXUFK:KLOH             VDPH
WKHUH ZHUH RWKHU DFWLYLWLHV LQ WKH EXLOGLQJ o VXFK DV UDGLR
EURDGFDVWVJRVSHOFRQFHUWVDQGIUHHEXIIHWEUHDNIDVWVoQRQH             ,QSDUWLFXODUWKHFKXUFKXVHGUHJXODUUDGLREURDGFDVWVDV
RIWKHVHZRXOGVXSSRUWDILQGLQJWKDWWKHEXLOGLQJDOVRVHUYHG          SDUW RI LWV HYDQJHOLVP WKH GHVLUHG HIIHFW ZDV WR LQFUHDVH
DVIRUH[DPSOHDUDGLRVWDWLRQFRQFHUWKDOORUUHVWDXUDQW          PHPEHUVKLSDQGDWWHQGDQFHDWWKHFKXUFKjVZRUVKLSVHUYLFHV
                                                                        DQG RWKHU SURJUDPV  %HFDXVH WKH EURDGFDVW DUHD LQFOXGHG
   7KHFRQFOXVLRQWKDWWKHIXQFWLRQRIWKHEXLOGLQJZDVLWVXVH         0LVVLVVLSSLDQG$UNDQVDVDVZHOODV7HQQHVVHHWKHORJLFDO
DVDFKXUFKGRHVQRWHQGWKHLQTXLU\,QVWHDGWKHFRXUWVKRXOG         FRQVHTXHQFH RI LQFUHDVHG DWWHQGDQFH ZRXOG EH LQFUHDVHG
WXUQ WR ZKHWKHU WKH FKXUFKjV DFWLYLWLHV DIIHFW LQWHUVWDWH        WUDYHO LQWR 7HQQHVVHH IURP QHLJKERULQJ VWDWHV  &DXVLQJ
FRPPHUFH,Q&DPSV1HZIRXQG2ZDWRQQD,QFY7RZQRI                LQWHUVWDWHWUDYHOIRUWKHSXUSRVHRIUHFHLYLQJPRQH\IURPWKH
+DUULVRQ86WKH6XSUHPH&RXUWPDGH              WUDYHOHUVDIIHFWVWKHIORZRIPRQH\LQFRPPHUFHHYHQLIWKH
FOHDU WKDW FKDULWDEOH DQG QRQSURILW HQWLWLHV DUH PDMRU          PRQH\LVDJLIW6HH&DPSV86DWVWDWLQJWKDW
SDUWLFLSDQWVLQWKHLQWHUVWDWHPDUNHWIRUJRRGVDQGVHUYLFHV           mWKHWUDQVSRUWDWLRQRISHUVRQVDFURVVVWDWHOLQHVKDVORQJEHHQ
XVLQJLQWHUVWDWHFRPPXQLFDWLRQVDQGWUDQVSRUWDWLRQUDLVLQJ             UHFRJQL]HGDVDIRUPRIFRPPHUFHlLQDFDVHZKHUHWKHFRXUW
DQG GLVWULEXWLQJ UHYHQXHV LQFOXGLQJ YROXQWDULO\ SDLG              IRXQGWKDWDQRQSURILWFKXUFKDIILOLDWHGVXPPHUFDPSZDV
UHYHQXHV LQWHUVWDWH  ,QGHHG mZKLOH FKXUFKHV DUH QRW           HQJDJHG LQ FRPPHUFH LQ SDUW EHFDXVH LWV RXWRIVWDWH
FRPPRQO\FRQVLGHUHGDEXVLQHVVHQWHUSULVHFKXUFKHVFDQDQG             DGYHUWLVLQJSURPSWHG WKH WUDQVSRUWDWLRQ RI FDPSHUV DFURVV
GRHQJDJHLQFRPPHUFH7KHµEXVLQHVVjRUµFRPPHUFHjRID               VWDWH OLQHV   )XUWKHUPRUH WKH XVH RI WKH UDGLR EURDGFDVWV
FKXUFKLQYROYHVWKHVROLFLWDWLRQDQGUHFHLSWRIGRQDWLRQVDQG          FOHDUO\ HQFRPSDVVHV DFWLYH HPSOR\PHQW RI FRPPHUFLDO
WKH SURYLVLRQ RI VSLULWXDO VRFLDO FRPPXQLW\ HGXFDWLRQDO        HQWLWLHVLQFOXGLQJWKUHHUDGLRVWDWLRQVLQ7HQQHVVHHDQGRQH
UHOLJLRXV RU QRQUHOLJLRXV DQG RWKHU FKDULWDEOH VHUYLFHVl      LQ0LVVLVVLSSL$OWRJHWKHUWKHFKXUFKSDLGLQ
8QLWHG 6WDWHV Y 2GRP  )G   WK &LU          WRWKHYDULRXVUDGLRVWDWLRQVIRULWVEURDGFDVWV
,QWKH(OHYHQWK&LUFXLWjVYLHZWKHHYLGHQFHSURYLQJ
WKDW D FKXUFK EXLOGLQJ LV XVHG LQ RU DIIHFWV LQWHUVWDWH           2WKHUIDFWVVXSSRUWDFRQFOXVLRQWKDWWKHEXLOGLQJZDVXVHG
FRPPHUFH PXVW UHODWH WR WKHVH DFWLYLWLHV o LH ZKHUHE\ LW    LQLQWHUVWDWHFRPPHUFH%HFDXVHRILWVORFDWLRQZKLFKLVOHVV
HQJDJHVLQDFWLYLWLHVUHODWLQJWRLWVµEXVLQHVVjDVDFKXUFKl,G     WKDQILYHPLOHVWR7HQQHVVHHjVERUGHUZLWK0LVVLVVLSSLDQGQR
                                                                        PRUH WKDQ ILIWHHQ PLOHV WR WKH ERUGHU ZLWK $UNDQVDV WKH
  7XUQLQJ WKHQ WR DQ HYDOXDWLRQ RI WKH FKXUFKjV HIIHFWV RQ     FKXUFK GUHZ PHPEHUV IURP 7HQQHVVHH $UNDQVDV DQG
LQWHUVWDWH FRPPHUFH ZH QRWH DW WKH RXWVHW WKDW XQOLNH WKH     0LVVLVVLSSL7KHFKXUFKDOVRKRVWHGIUHHHYHQWVWRZKLFKWKH
SULYDWH UHVLGHQFH LQ sRQHV WKLV LV QRW D FDVH ZKHUH WKH
JRYHUQPHQW UHOLHV RQO\ RQ SDVVLYH DFWLYLWLHV VXFK DV WKH
SXUFKDVHRIXWLOLW\VHUYLFHVRULQVXUDQFHIURPDQRXWRIVWDWH              
SURYLGHUWRGHPRQVWUDWHWKHEXLOGLQJjVXVHLQDQGHIIHFWRQ                   2XU FRQFXUULQJ FROOHDJXH WDNHV LVVXH ZLWK RXU YLHZ WKDW WKH

LQWHUVWDWH FRPPHUFH  7KH FKXUFKjV LQWHUVWDWH FRQQHFWLRQV         LQWHUVWDWH HOHPHQW RI WKH FULPH LV VDWLVILHG E\ FDXVLQJ RWKHUV WR WUDYHO
                                                                        DFURVV VWDWH OLQHV WR FDUU\ RQ DQ DFWLYLW\ LQ ZKLFK PRQH\ FKDQJHV KDQGV
ZHUH GLUHFW UHJXODU DQG VXEVWDQWLDO  :KLOH WKH FKXUFKjV      ,I WKLV ZHUH JRRG FRQVWLWXWLRQDO ODZ LW ZRXOG XQGHUPLQH WKH YDOLGLW\ RI WKH
DFWLYLWLHVZHUHXQGHUWDNHQSULPDULO\WRIDFLOLWDWHZRUVKLSWKH\        7UDYHO $FW WKH 0DQQ $FW DQG PDQ\ RWKHU IHGHUDO ODZV LQFOXGLQJ WKH
                                                                        SXEOLF DFFRPPRGDWLRQV SURYLVLRQV RI WKH &LYLO 5LJKWV $FW RI 