Court Opinion

ID: 4108937
Source: CourtListenerOpinion
Date Created: 2016-12-20 16:01:41.309009+00
Date Added: 2024-06-11T14:50:11.864607
License: Public Domain

81,7(' 67$7(6 ',675,&7 &2857
                            )25 7+( ',675,&7 2) &2/80%,$
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
                                    
6(&85,7,(6 $1' (;&+$1*(             
&200,66,21                         
                                    
                  3ODLQWLII        
                                    
      Y                                             &LYLO $FWLRQ 1R  $%-
                                    
530 ,17(51$7,21$/ ,1& et al.    
                                    
                  'HIHQGDQWV       
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

                          0(025$1'80 23,1,21 $1' 25'(5

       3ODLQWLII 6HFXULWLHV DQG ([FKDQJH &RPPLVVLRQ ³6(&´ KDV EURXJKW WKLV DFWLRQ IRU

VHFXULWLHV YLRODWLRQV XQGHU WKH 6HFXULWLHV $FW RI  ³6HFXULWLHV $FW´ WKH 6HFXULWLHV ([FKDQJH

$FW RI  ³([FKDQJH $FW´ DQG ([FKDQJH $FW 5XOHV DJDLQVW GHIHQGDQWV 530 ,QWHUQDWLRQDO

,QF ³530´ DQG 530¶V *HQHUDO &RXQVHO DQG &KLHI &RPSOLDQFH 2IILFHU (GZDUG : 0RRUH

³0RRUH´ &RPSO >'NW @    ± ± 3ODLQWLII DOOHJHV WKDW GHIHQGDQWV IUDXGXOHQWO\

IDLOHG WR GLVFORVH ORVV FRQWLQJHQFLHV RQ FHUWDLQ 6(& ILOLQJV DIWHU WKH 'HSDUWPHQW RI -XVWLFH ³'2-´

FRQGXFWHG DQ LQYHVWLJDWLRQ LQWR D FRPSODLQW DJDLQVW 530 XQGHU WKH )DOVH &ODLPV $FW Id.  ±

'HIHQGDQWV PRYHG WR WUDQVIHU WKLV FDVH WR WKH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH 1RUWKHUQ 'LVWULFW

RI 2KLR XQGHU  86&  D RQ WKH JURXQGV WKDW SULYDWH DQG SXEOLF LQWHUHVWV IDYRU WUDQVIHU

$IWHU FRQVLGHUDWLRQ RI DOO RI WKH IDFWV WKH &RXUW ZLOO GHQ\ WKH PRWLRQ

                                        %$&.*5281'

       530 LV D 'HODZDUH FRUSRUDWLRQ KHDGTXDUWHUHG LQ 0HGLQD 2KLR WKDW ³PDQXIDFWXUHV DQG

VHOOV YDULRXV FKHPLFDO SURGXFW OLQHV LQFOXGLQJ SDLQWV SURWHFWLYH FRDWLQJV URRILQJ V\VWHPV

VHDODQWV DQG DGKHVLYHV´ &RPSO   %HJLQQLQJ LQ  0RRUH VHUYHG DV 530¶V *HQHUDO
&RXQVHO DQG &RUSRUDWH 6HFUHWDU\ DQG LQ  KH DVVXPHG KLV FXUUHQW SRVLWLRQ RI &KLHI

&RPSOLDQFH 2IILFHU Id.  

       7KH LQVWDQW DFWLRQ VWHPV IURP D SUHYLRXV ODZVXLW DJDLQVW 530 DQG RQH RI LWV ZKROO\RZQHG

VXEVLGLDULHV 7UHPFR ,QF ³7UHPFR´ D FRPSDQ\ WKDW ³SURYLGHV URRILQJ PDWHULDOV DQG VHUYLFHV´

&RPSO  ±  ,Q -XO\  D IRUPHU 7UHPFR HPSOR\HH ILOHG D FRPSODLQW XQGHU WKH )DOVH

&ODLPV $FW  86&   et seq. DOOHJLQJ WKDW 7UHPFR RYHUFKDUJHG WKH 8QLWHG 6WDWHV XQGHU

FHUWDLQ JRYHUQPHQW FRQWUDFWV E\ IDLOLQJ WR SURYLGH UHTXLUHG SULFH GLVFRXQWV &RPSO    7KH

'2- LQLWLDWHG DQ LQYHVWLJDWLRQ GXULQJ ZKLFK 0RRUH RYHUVDZ WKH UHVSRQVHV RI ERWK 530 DQG

7UHPFR DQG NHSW 530 DQG DXGLWRUV LQIRUPHG Id.   ± 530 DQG WKH '2- HYHQWXDOO\

VHWWOHG WKH )DOVH &ODLPV DOOHJDWLRQV IRU DSSUR[LPDWHO\  PLOOLRQ Id.   

       $FFRUGLQJ WR SODLQWLII WKH RQJRLQJ '2- LQYHVWLJDWLRQ GHVFULEHG DERYH DPRXQWHG WR D ³ORVV

FRQWLQJHQF\´ ZKLFK LV GHILQHG DV ³DQ H[LVWLQJ FRQGLWLRQ VLWXDWLRQ RU VHW RI FLUFXPVWDQFHV

LQYROYLQJ XQFHUWDLQW\ DV WR D SRVVLEOH ORVV WKDW ZLOO EH UHVROYHG ZKHQ RQH RU PRUH IXWXUH HYHQWV

RFFXUV RU IDLOV WR RFFXU´ LQFOXGLQJ ³DFWXDO RU SRVVLEOH FODLPV DQG >@ SHQGLQJ RU WKUHDWHQHG

OLWLJDWLRQ´ &RPSO   ,I D PDWHULDO ORVV ZDV UHDVRQDEO\ SRVVLEOH SODLQWLII DOOHJHV WKDW 530

KDG WR GLVFORVH WKLV ORVV FRQWLQJHQF\ DQG UHFRUG LW DV D FKDUJH DJDLQVW LQFRPH LQ RUGHU WR FRPSO\

ZLWK LWV UHSRUWLQJ REOLJDWLRQV XQGHU WKH VHFXULWLHV ODZV Id.

       3ODLQWLII FODLPV WKDW GHIHQGDQWV GLG QRW SXEOLFO\ GLVFORVH WKLV ORVV FRQWLQJHQF\ XQWLO WKH

³ILVFDO WKLUG TXDUWHU HQG>LQJ@ )HEUXDU\  ´ &RPSO  ± HYHQ WKRXJK GHIHQGDQWV ZHUH

DOOHJHGO\ UHTXLUHG WR DFFRXQW IRU WKH ORVV FRQWLQJHQF\ EHJLQQLQJ LQ 0DUFK  Id.   $V D

UHVXOW SODLQWLII DOOHJHV WKDW GHIHQGDQWV ³VXEPLWWHG PXOWLSOH PDWHULDOO\ IDOVH DQG PLVOHDGLQJ ILOLQJV

WR WKH 6(&´ EHWZHHQ 2FWREHU  DQG 'HFHPEHU  EHFDXVH WKH ILOLQJV GLG QRW DFFRXQW IRU D

                                                 
ORVV FRQWLQJHQF\ DQG FRQWLQXHG WR EH PLVOHDGLQJ HYHQ DIWHU WKH FRPSDQ\ GLVFORVHG WKH '2-

LQYHVWLJDWLRQ DQG UHFRUGHG DQ DFFUXDO Id.  ±

       2Q 6HSWHPEHU   WKH 6(& EURXJKW WKLV VHFXULWLHV DFWLRQ DJDLQVW 530 DQG 0RRUH LQ

WKH 'LVWULFW &RXUW IRU WKH 'LVWULFW RI &ROXPELD See &RPSO 'HIHQGDQWV ILOHG D PRWLRQ WR WUDQVIHU

WKLV DFWLRQ WR WKH 'LVWULFW &RXUW IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR RQ 2FWREHU   See 1RWLFH

RI 'HIV¶ 0RW WR 7UDQVIHU 7KLV &DVH WR WKH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH 1RUWKHUQ 'LVWULFW

RI 2KLR >'NW  @ ³'HIV¶ 0RW´ 0HP RI 3 	 $ LQ 6XSS RI 'HIV¶ 0RW >'NW  @ ³'HIV¶

0HP´ DW ± 'HIHQGDQWV DUJXH WKDW SULYDWH DQG SXEOLF LQWHUHVW IDFWRUV IDYRU WUDQVIHU EHFDXVH

WKH PRVW LPSRUWDQW HYHQWV WRRN SODFH LQ WKH 1RUWKHUQ 'LVWULFW RI 2KLR WKH 1RUWKHUQ 'LVWULFW RI

2KLR LV WKH PRVW FRQYHQLHQW IRUXP IRU WKH SDUWLHV DQG ZLWQHVVHV WKH UHOHYDQW HYLGHQFH LV ORFDWHG

DW 530¶V KHDGTXDUWHUV WKH 'LVWULFW &RXUW IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR KDV D VKRUWHU WLPH WR

WULDO WKDQ WKH 'LVWULFW &RXUW IRU WKH 'LVWULFW RI &ROXPELD DQG 2KLR KDV WKH VWURQJHU ORFDO LQWHUHVW

LQ VHHLQJ WKH FDVH UHVROYHG 'HIV¶ 0HP DW ± 3ODLQWLII RSSRVHG GHIHQGDQWV¶ PRWLRQ 3O¶V

2SS WR 'HIV¶ 0RW >'NW  @ ³3O¶V 2SS´ ,W FRQWHQGV WKDW GHIHQGDQWV KDYH QRW PHW WKHLU

EXUGHQ WR MXVWLI\ WKH WUDQVIHU EHFDXVH SODLQWLII¶V FKRLFH RI IRUXP LV ³HQWLWOHG WR GHIHUHQFH´

VLJQLILFDQW HYHQWV WRRN SODFH LQ WKH 'LVWULFW RI &ROXPELD DQG LW ZLOO WDNH OHVV WLPH WR WU\ WKH FDVH

KHUH See id. DW ± ± 2Q 1RYHPEHU   GHIHQGDQWV ILOHG D UHSO\ LQ VXSSRUW RI WKHLU

PRWLRQ See 5HSO\ 0HP RI 3 	 $ LQ 6XSS RI 'HIV¶ 0RW >'NW  @ ³'HIV¶ 5HSO\´

                                   67$1'$5' 2) 5(9,(:

       ³)RU WKH FRQYHQLHQFH RI SDUWLHV DQG ZLWQHVVHV LQ WKH LQWHUHVW RI MXVWLFH D GLVWULFW FRXUW PD\

WUDQVIHU DQ\ FLYLO DFWLRQ WR DQ\ RWKHU GLVWULFW RU GLYLVLRQ ZKHUH LW PLJKW KDYH EHHQ EURXJKW    ´

 86&  D 7KH GHIHQGDQW DV WKH PRYLQJ SDUW\ EHDUV WKH EXUGHQ RI HVWDEOLVKLQJ WKDW

WUDQVIHU LV SURSHU Greater Yellowstone Coal. v. Bosworth  ) 6XSS G   ''&

                                                 
 7KH &RXUW KDV EURDG GLVFUHWLRQ LQ GHFLGLQJ ZKHWKHU WUDQVIHU IURP RQH MXULVGLFWLRQ WR DQRWKHU

LV DSSURSULDWH See Norwood v. Kirkpatrick  86    Sec. & Exch. Comm’n v.

Savoy Indus., Inc  )G   '& &LU  7KH GHFLVLRQ WR WUDQVIHU UHTXLUHV DQ

³LQGLYLGXDOL]HG FDVHE\FDVH FRQVLGHUDWLRQ RI FRQYHQLHQFH DQG IDLUQHVV´ Van Dusen v. Barrack

 86   

       7KH WKUHVKROG TXHVWLRQ XQGHU VHFWLRQ D LV ZKHWKHU WKH DFWLRQ ³PLJKW KDYH EHHQ

EURXJKW´ LQ WKH WUDQVIHUHH GLVWULFW  86&  D see also Lentz v. Eli Lilly & Co.  )

6XSS G   ''&  $Q DFWLRQ PD\ EH EURXJKW LQ DQ\ MXGLFLDO GLVWULFW LQ ZKLFK ³DQ\

GHIHQGDQW UHVLGHV LI DOO GHIHQGDQWV DUH UHVLGHQWV RI WKH 6WDWH LQ ZKLFK WKH GLVWULFW LV ORFDWHG´ RU LQ

D GLVWULFW ZKHUH ³D VXEVWDQWLDO SDUW RI WKH HYHQWV RU RPLVVLRQV JLYLQJ ULVH WR WKH FODLP RFFXUUHG´

 86&  E± 7KH YHQXH SURYLVLRQV RI WKH 6HFXULWLHV $FW DQG WKH ([FKDQJH $FW

DOVR SURYLGH WKDW YHQXH LV SURSHU ZKHUH ³WKH GHIHQGDQW LV IRXQG RU LV DQ LQKDELWDQW RU WUDQVDFWV

EXVLQHVV´  86&  YD DD

       $IWHU HVWDEOLVKLQJ WKDW WKH WKUHVKROG UHTXLUHPHQW KDV EHHQ PHW WKH &RXUW ³PXVW EDODQFH

FDVHVSHFLILF IDFWRUV ZKLFK LQFOXGH WKH SULYDWH LQWHUHVWV RI WKH SDUWLHV DV ZHOO DV SXEOLF LQWHUHVWV

VXFK DV HIILFLHQF\ DQG IDLUQHVV´ See Wilderness Soc’y v. Babbitt  ) 6XSS G   ''&

 7KH SULYDWH LQWHUHVW FRQVLGHUDWLRQV LQFOXGH

        WKH SODLQWLII¶V FKRLFH RI IRUXP XQOHVV WKH EDODQFH RI FRQYHQLHQFH LV VWURQJO\ LQ
       IDYRU RI WKH GHIHQGDQWV  WKH GHIHQGDQWV¶ FKRLFH RI IRUXP  ZKHWKHU WKH FODLP
       DURVH HOVHZKHUH  WKH FRQYHQLHQFH RI WKH SDUWLHV  WKH FRQYHQLHQFH RI WKH
       ZLWQHVVHV RI WKH SODLQWLII DQG GHIHQGDQW EXW RQO\ WR WKH H[WHQW WKDW WKH ZLWQHVVHV
       PD\ DFWXDOO\ EH XQDYDLODEOH IRU WULDO LQ RQH RI WKH IRUD DQG  WKH HDVH RI DFFHVV WR
       VRXUFHV RI SURRI

Trout Unlimited v. U.S. Dep’t of Agric  ) 6XSS   ''&  LQWHUQDO FLWDWLRQV

RPLWWHG   3XEOLF LQWHUHVW FRQVLGHUDWLRQV LQFOXGH ³ WKH WUDQVIHUHH¶V IDPLOLDULW\ ZLWK WKH

                                                  
JRYHUQLQJ ODZV  WKH UHODWLYH FRQJHVWLRQ RI WKH FDOHQGDUV RI WKH SRWHQWLDO WUDQVIHUHH DQG

WUDQVIHURU FRXUWV DQG  WKH ORFDO LQWHUHVW LQ GHFLGLQJ ORFDO FRQWURYHUVLHV DW KRPH´ Id

                                            $1$/<6,6

        ,W LV XQGLVSXWHG WKDW WKLV DFWLRQ FRXOG KDYH EHHQ EURXJKW LQ WKH 1RUWKHUQ 'LVWULFW RI 2KLR

'HIV¶ 0HP DW  3O¶V 0HP DW  see also  86&  E  86&  YD DD

7KHUHIRUH WKH &RXUW QHHG RQO\ H[DPLQH DQG EDODQFH WKH SULYDWH DQG SXEOLF LQWHUHVW IDFWRUV See

Lentz  ) 6XSS G DW  GHWHUPLQLQJ RQ D PRWLRQ WR WUDQVIHU WKDW RQO\ WKH VHFRQG LQTXLU\

UHTXLUHV H[DPLQDWLRQ ZKHUH LW ZDV XQGLVSXWHG WKDW WKH DFWLRQ FRXOG KDYH EHHQ EURXJKW LQ WKH

WUDQVIHUHH GLVWULFW

,      7KH 3ULYDWH ,QWHUHVW )DFWRUV 'R 1RW )DYRU 7UDQVIHU

        $ 3ODLQWLII¶V &KRLFH RI )RUXP

        7KH '& &LUFXLW KDV KHOG WKDW ³D SODLQWLII¶V FKRLFH RI IRUXP ZLOO UDUHO\ EH GLVWXUEHG   

XQOHVV WKH EDODQFH RI FRQYHQLHQFH LV VWURQJO\ LQ IDYRU RI WKH GHIHQGDQW´ Gross v. Owen  )G

  '& &LU  7KH SODLQWLII¶V FKRLFH RI IRUXP LV RIWHQ DFFRUGHG GHIHUHQFH ³ZKHUH WKH

SODLQWLIIV KDYH FKRVHQ WKHLU KRPH IRUXP DQG PDQ\ RI WKH UHOHYDQW HYHQWV RFFXUUHG WKHUH´ New

Hope Power Co. v. U.S. Army Corps of Eng’rs  ) 6XSS G   ''&  FLWLQJ Great

Socialist People’s Libyan Arab Jamahiriya v. Miski  ) 6XSS G  ± ''& 

%XW DQ ³LQVXEVWDQWLDO IDFWXDO QH[XV EHWZHHQ WKH FDVH DQG WKH SODLQWLII¶V FKRVHQ IRUXP´ ZLOO ZHDNHQ

WKH GHIHUHQFH JLYHQ WR SODLQWLII¶V IRUXP Id.

        +HUH SODLQWLII¶V FKRLFH RI IRUXP LV HQWLWOHG WR GHIHUHQFH 7KH 6(& LV ORFDWHG LQ WKH 'LVWULFW

RI &ROXPELD DQG WKH 'LVWULFW RI &ROXPELD KDV PHDQLQJIXO WLHV WR WKH DOOHJHG YLRODWLRQV RI WKH

                                                  
VHFXULWLHV ODZV RXWOLQHG LQ WKH FRPSODLQW $OWKRXJK WKH 6(& ILOLQJV WKHPVHOYHV DUH DW WKH FHQWHU

RI SODLQWLII¶V FRPSODLQW WKDW LV QRW WKH RQO\ IDFW WKDW FRQQHFWV WKLV ODZVXLW WR WKH 'LVWULFW RI

&ROXPELD Cf. Sec. & Exch. Comm’n v. Ernst & Young  ) 6XSS   ''& 

WUDQVIHUULQJ FDVH IURP 'LVWULFW RI &ROXPELD WR 1RUWKHUQ 'LVWULFW RI 7H[DV ZKHUH DOO WKH XQGHUO\LQJ

IDFWV DURVH LQ 7H[DV RWKHU WKDQ WKH 6(& ILOLQJV WKHPVHOYHV 0DQ\ RI WKH XQGHUO\LQJ HYHQWV OHDGLQJ

WR WKH DOOHJHGO\ IDOVH 6(& ILOLQJV ± VXFK DV WKH '2- LQYHVWLJDWLRQ DQG PHHWLQJV DQG FRUUHVSRQGHQFH

EHWZHHQ 530 DQG WKH '2- ± DOVR WRRN SODFH LQ WKH 'LVWULFW RI &ROXPELD &RPSO    

     3O¶V 2SS DW  ±

       %HFDXVH D IDFWXDO QH[XV EHWZHHQ WKH FDVH DQG SODLQWLII¶V FKRVHQ IRUXP H[LVWV SODLQWLII¶V

FKRLFH RI IRUXP LV HQWLWOHG WR GHIHUHQFH DQG WKH ILUVW IDFWRU GRHV QRW IDYRU WUDQVIHU

       % 'HIHQGDQWV¶ &KRLFH RI )RUXP

       'HIHQGDQWV¶ FKRLFH RI IRUXP LV QRW RUGLQDULO\ HQWLWOHG WR GHIHUHQFH VR GHIHQGDQWV PXVW

³HVWDEOLVK WKDW WKH DGGHG FRQYHQLHQFH DQG MXVWLFH RI OLWLJDWLQJ LQ LWV FKRVHQ IRUXP RYHUFRPHV WKH

GHIHUHQFH RUGLQDULO\ JLYHQ WR WKH SODLQWLII¶V FKRLFH´ Sheffer v. Novartis Pharms. Corp.  )

6XSS G   ''&  'HIHQGDQWV DUJXH WKDW WUDQVIHU LV ZDUUDQWHG EHFDXVH WKH

       'HIHQGDQWV DUJXH LQ WKHLU UHSO\ WKDW SODLQWLII KDV QRW VKRZQ WKDW WKH 'LVWULFW &RXUW IRU WKH
'LVWULFW RI &ROXPELD LV D SURSHU YHQXH See 'HIV¶ 5HSO\ DW ± +RZHYHU WKH VWDQGDUG WR EH
DSSOLHG XQGHU D PRWLRQ WR WUDQVIHU XQGHU VHFWLRQ D LV QRW ZKHWKHU SODLQWLII KDV VKRZQ WKDW LWV
FKRVHQ YHQXH LV SURSHU EXW ZKHWKHU GHIHQGDQWV KDYH VKRZQ WKDW WKH WUDQVIHUHH YHQXH LV SURSHU
See  86&  D ³>$@ GLVWULFW FRXUW PD\ WUDQVIHU DQ\ FLYLO DFWLRQ WR DQ\ RWKHU GLVWULFW RU
GLYLVLRQ ZKHUH LW might have been brought´ HPSKDVLV DGGHG

       'HIHQGDQWV SRLQW RXW WKDW ³LW LV WKH 6(&¶V VWDQGDUG SUDFWLFH WR EULQJ HQIRUFHPHQW DFWLRQV
LQ WKH IRUXP LQ ZKLFK WKH GHIHQGDQW UHVLGHV RU ZKHUH PDWHULDO HYHQWV RFFXUUHG´ DQG WKH\ SURIIHU
HYLGHQFH VKRZLQJ WKDW RQO\  RXW RI PRUH WKDQ  HQIRUFHPHQW DFWLRQV KDYH HYHQ EHHQ EURXJKW
LQ WKH 'LVWULFW RI &ROXPELD VLQFH -DQXDU\  'HIV¶ 0HP DW  $FFRUGLQJ WR GHIHQGDQWV ³RQH
FDQ GLVFHUQ QR OHJLWLPDWH H[SODQDWLRQ IRU ZK\ WKH 6(& FKHUU\SLFNHG WKLV FDVH WR OLWLJDWH LQ WKLV
'LVWULFW´ RWKHU WKDQ ³LPSURSHU IRUXP VKRSSLQJ´ Id. %XW WKH FKRLFH LV DOVR H[SODLQHG E\ WKH IDFW
WKDW D VHULHV RI PDWHULDO HYHQWV RFFXUUHG LQ WKH 'LVWULFW RI &ROXPELD
                                                  
FRUSRUDWH DQG LQGLYLGXDO GHIHQGDQWV DQG SRWHQWLDO ZLWQHVVHV DUH ORFDWHG LQ WKH 1RUWKHUQ 'LVWULFW

RI 2KLR 'HIV¶ 0HP DW ± %XW FRXUWV KDYH UHMHFWHG WKLV DUJXPHQW ZKHQ D GHIHQGDQW LV D

PXOWLQDWLRQDO FRUSRUDWLRQ ³UHDGLO\ DEOH WR GHIHQG >D@ ODZVXLW LQ HLWKHU GLVWULFW´ See Sheffer 

) 6XSS G DW  ³>$@ PXOWLQDWLRQDO FRUSRUDWLRQ    KDV QR UHDO VWDNH LQ KDYLQJ WKH FDVH KHDUG

LQ HLWKHU IRUXP´ $QG ZKLOH WKLV FDVH PD\ KDYH VRPH FRQQHFWLRQ WR WKH 1RUWKHUQ 'LVWULFW RI

2KLR WKH H[LVWHQFH RI VXFK D FRQQHFWLRQ WR D WUDQVIHUHH GLVWULFW DORQH LV QRW HQRXJK WR ZDUUDQW

WUDQVIHU See Malveaux v. Christian Bros. Servs.  ) 6XSS G  ± ''& 

GHQ\LQJ PRWLRQ WR WUDQVIHU HYHQ ZKHUH FRXUW FRQFOXGHG WKDW GHIHQGDQW¶V FKRLFH RI IRUXP ZDV

³UHDVRQDEOH´ EHFDXVH LW ZDV KHDGTXDUWHUHG LQ WKH WUDQVIHUHH GLVWULFW DQG ZLWQHVVHV DQG HYLGHQFH

UHODWLQJ WR WKH FODLP ZHUH ORFDWHG WKHUH

       $ GHIHQGDQW¶V FKRLFH RI IRUXP ZLOO EH DFFRUGHG ZHLJKW ZKHQ WKHUH DUH SDUDOOHO SURFHHGLQJV

LQ WKH SURSRVHG GLVWULFW see Fed. Hous. Fin. Agency v. First Tenn. Bank Nat’l Ass’n  ) 6XSS

G   ''&  RU ZKHQ D GHIHQGDQW VHHNV WUDQVIHU WR WKH SODLQWLII¶V KRPH IRUXP See

Bederson v. United States  ) 6XSS G   ''&  %XW QR VXFK IDFWV H[LVW KHUH

DQG GHIHQGDQWV KDYH QRW VKRZQ WKDW WKH ³DGGHG FRQYHQLHQFH DQG MXVWLFH´ RI OLWLJDWLQJ LQ WKH

1RUWKHUQ 'LVWULFW RI 2KLR RYHUFRPHV WKH GHIHUHQFH JLYHQ WR SODLQWLII¶V FKRLFH RI IRUXP Sheffer

 ) 6XSS G DW  $FFRUGLQJO\ WKLV IDFWRU GRHV QRW IDYRU WUDQVIHU

       & :KHWKHU WKH &ODLP $URVH (OVHZKHUH

       7UDQVIHU LV IDYRUHG ZKHQ ³WKH PDWHULDO HYHQWV WKDW IRUP WKH IDFWXDO SUHGLFDWH RI WKH

SODLQWLII¶V FODLP GLG QRW RFFXU LQ WKH SODLQWLII¶V FKRVHQ IRUXP´ Id. FLWLQJ Intrepid Potash-N.M.,

LLC v. U.S. Dep’t of Interior  ) 6XSS G   ''&  'HIHQGDQWV LQVLVW WKDW WKH

PDWHULDO HYHQWV XQGHUO\LQJ WKLV DFWLRQ DUH WKH FRUSRUDWH GHFLVLRQV XQGHUO\LQJ WKH 6(& ILOLQJV

ZKLFK ZHUH PDGH DW 530¶V KHDGTXDUWHUV LQ 2KLR see 'HIV¶ 0HP DW  DQG SODLQWLII PDLQWDLQV

                                                
WKDW WKH 6(& ILOLQJV WKHPVHOYHV DUH DPRQJ WKH PDWHULDO HYHQWV WKDW VKRXOG EH YLHZHG DV KDYLQJ

WDNHQ SODFH LQ WKH 'LVWULFW RI &ROXPELD See 3O¶V 2SS DW 

       7KHUH DSSHDUV WR EH VXSSRUW IRU ERWK SRVLWLRQV See Berenson v. Nat’l Fin. Servs., LLC

 ) 6XSS G   ''&  FRQFOXGLQJ WKDW D FODLP DURVH ZKHUH WKH FRUSRUDWH GHFLVLRQV

ZHUH PDGH DQG Savoy Indus., Inc.  )G DW  KROGLQJ WKDW VRPH RSHUDWLYH IDFWV GLG RFFXU

LQ WKH 'LVWULFW RI &ROXPELD ZKHUH QRQILOLQJ RU PLVILOLQJV ZLWK WKH 6(& RFFXUUHG 0RUHRYHU DV

GLVFXVVHG DERYH HYHQWV RWKHU WKDQ WKH 6(& ILOLQJV WRRN SODFH LQ WKLV GLVWULFW

       6LQFH PDWHULDO HYHQWV JLYLQJ ULVH WR SODLQWLII¶V FODLP RFFXUUHG LQ ERWK SODLQWLII¶V DQG

GHIHQGDQWV¶ FKRVHQ IRUXPV WKLV IDFWRU LV QHXWUDO

       ' &RQYHQLHQFH RI WKH 3DUWLHV

       'HIHQGDQWV FRQWHQG WKDW EHFDXVH ³0U 0RRUH DQG DOO RI 530¶V UHSUHVHQWDWLYHV UHVLGH LQ

WKH 1RUWKHU 'LVWULFW RI 2KLR´ LW ZRXOG ³SRVH D VLJQLILFDQW LQFRQYHQLHQFH IRU WKHP´ WR KDYH WR

UHJXODUO\ WUDYHO DQG VSHQG OHQJWK\ SHULRGV RI WLPH LQ WKH 'LVWULFW RI &ROXPELD 'HIV¶ 0HP DW 

%XW IRU WKH FRQYHQLHQFH RI WKH SDUWLHV IDFWRU WR ZHLJK LQ IDYRU RI WUDQVIHU ³OLWLJDWLQJ LQ WKH

WUDQVIHUHH GLVWULFW PXVW QRW PHUHO\ VKLIW LQFRQYHQLHQFH WR WKH QRQPRYLQJ SDUW\´ Mazzarino v.

Prudential Ins. Co. of Am.  ) 6XSS G   ''&  3ODLQWLII VXEPLWV WKDW WUDQVIHU

ZRXOG EH LQFRQYHQLHQW EHFDXVH ³DOO 6(& HPSOR\HHV LQYROYHG ZLWK WKLV FDVH DUH EDVHG DW WKH

DJHQF\¶V KHDGTXDUWHUV LQ :DVKLQJWRQ '& DQG WKH 6(& GRHV QRW KDYH DQ RIILFH LQ 2KLR´ 3O¶V

0HP DW  'HIHQGDQWV FKDUDFWHUL]H WKLV DV D ³PLQRU OLWLJDWLRQDO LQFRQYHQLHQFH>@´ ZKLFK VHHPV

WR ³UHODWH IDU PRUH WR WKH FRQYHQLHQFH RI 6(& DWWRUQH\V WKDQ WR WKH 6(& LWVHOI´ 'HIV¶ 0HP DW

 TXRWLQJ Ernst & Young  ) 6XSS DW 

       7KH Ernst & Young FDVH LV GLVWLQJXLVKDEOH WKRXJK VLQFH LQ WKDW FDVH WKH 6(& KDG D ILHOG

RIILFH LQ WKH WUDQVIHUHH GLVWULFW See  ) 6XSS DW  6LQFH 530 LV DQ LQWHUQDWLRQDO FRUSRUDWLRQ

                                                 
WKDW LV ZHOO DEOH WR OLWLJDWH LQ WKH 'LVWULFW RI &ROXPELD D WUDQVIHU ZRXOG RSHUDWH WR VKLIW

LQFRQYHQLHQFH WR WKH 6(& See Mazzarino  ) 6XSS G DW  7KHUHIRUH WKLV IDFWRU GRHV QRW

IDYRU WUDQVIHU

       ( &RQYHQLHQFH RI WKH :LWQHVVHV

       ³7KH FRQYHQLHQFH RI WKH ZLWQHVVHV KDV EHHQ GHVFULEHG DV µWKH PRVW FULWLFDO IDFWRU¶´ RQ D

PRWLRQ WR WUDQVIHU Sheffer  ) 6XSS G DW  TXRWLQJ Pyrocap Int’l Corp. v. Ford Motor

Co.  ) 6XSS G   ''&  %XW WKH FRQYHQLHQFH RI WKH ZLWQHVVHV LV RQO\

FRQVLGHUHG ³WR WKH H[WHQW WKDW WKH ZLWQHVVHV PD\ DFWXDOO\ EH XQDYDLODEOH IRU WULDO LQ RQH RI WKH IRUD´

Bederson  ) 6XSS G DW  TXRWLQJ Mohammadi v. Scharfen  ) 6XSS G   ''&

 ³:LWKRXW HYLGHQFH WR WKH FRQWUDU\ FRXUWV DVVXPH WKDW ZLWQHVVHV ZLOO YROXQWDULO\ DSSHDU´

Id. TXRWLQJ Mahoney v. Eli Lilly & Co.  ) 6XSS G   ''& 

       7R IDYRU WUDQVIHU WKH PRYLQJ SDUW\ PXVW VSHFLI\ ³ZKDW D QRQUHVLGHQW ZLWQHVV ZLOO WHVWLI\

WR WKH LPSRUWDQFH RI WKH WHVWLPRQ\ WR WKH LVVXHV LQ WKH FDVH DQG ZKHWKHU WKDW ZLWQHVV LV ZLOOLQJ WR

WUDYHO WR D IRUHLJQ MXULVGLFWLRQ´ Sheffer  ) 6XSS G DW  TXRWLQJ Thayer/Patricof Educ.

Funding, L.L.C. v. Pryor Res., Inc.  ) 6XSS G   ''&  'HIHQGDQWV KDYH PDGH

QR VKRZLQJ WKDW DQ\ RI WKHLU ZLWQHVVHV ZRXOG EH XQDYDLODEOH IRU WULDO DQG WKH\ DUJXH VLPSO\ WKDW

LW ZRXOG EH LQFRQYHQLHQW IRU WKHLU ZLWQHVVHV WR ³WUDYHO KXQGUHGV RI PLOHV´ 'HIV¶ 0HP DW ±

%XW ³PHUH LQFRQYHQLHQFH WR WKH ZLWQHVVHV DORQH LV QRW HQRXJK WR ZDUUDQW WUDQVIHU´ FC Inv. Grp.

LC v. Lichtenstein  ) 6XSS G   ''&  FLWLQJ Thayer/Patricof  ) 6XSS G

DW  DQG WKHUHIRUH WKLV IDFWRU GRHV QRW IDYRU WUDQVIHU

       ) (DVH RI $FFHVV WR WKH 6RXUFHV RI 3URRI

       :KLOH DFFHVV WR SURRI LV VWLOO UHOHYDQW LQ D PRWLRQ WR WUDQVIHU LQTXLU\ PRGHUQ WHFKQRORJ\

KDV PDGH ³WKH ORFDWLRQ RI GRFXPHQWV >@ PXFK OHVV LPSRUWDQW´ WR D GHWHUPLQDWLRQ RI FRQYHQLHQFH

                                                   
WKDQ LW RQFH ZDV Sheffer  ) 6XSS G DW  7KLV IDFWRU LV IXUWKHU GLPLQLVKHG LI WKHUH KDV

DOUHDG\ EHHQ H[WHQVLYH GLVFRYHU\ IURP SULRU OLWLJDWLRQ Id. +HUH WKH 6(& ³JDWKHUHG QXPHURXV

UHFRUGV´ IURP GHIHQGDQWV GXULQJ WKH SULRU )DOVH &ODLPV $FW LQYHVWLJDWLRQ 3O¶V 2SS DW  6R

WKLV IDFWRU LV GLPLQLVKHG DW OHDVW VOLJKWO\ ,I WKH SDUWLHV HQJDJH LQ GLVFRYHU\ GHIHQGDQWV FRQWHQG

WKDW ³>P@RVW RI WKH UHOHYDQW HYLGHQFH    ZLOO EH IRXQG LQ QRUWKHUQ 2KLR´ 'HIV¶ 0HP DW  EXW

GR QRW GLVSXWH WKDW WKH\ ³ZLOO VHHN GRFXPHQWV IURP WKH 6(&´ ZKLFK LV ORFDWHG LQ WKH 'LVWULFW RI

&ROXPELD 'HIV¶ 5HSO\ DW  3O¶V 2SS DW  7R WKH OLPLWHG H[WHQW WKDW WKLV IDFWRU LV UHOHYDQW

LW LV QHXWUDO

        7DNHQ DV D ZKROH WKH SULYDWH LQWHUHVW IDFWRUV GR QRW IDYRU WUDQVIHU

,,     7KH 3XEOLF ,QWHUHVW )DFWRUV 'R 1RW )DYRU 7UDQVIHU

        %HFDXVH WKH &RXUW KDV FRQFOXGHG WKDW WKH SULYDWH LQWHUHVW IDFWRUV GR QRW VXSSRUW WKH WUDQVIHU

RI WKLV DFWLRQ LW LV QRW UHTXLUHG WR ZHLJK WKH SXEOLF LQWHUHVW IDFWRUV´ Ingram v. Eli Lilly & Co.

 ) 6XSS G   ''&  +RZHYHU WKH &RXUW ZLOO EULHIO\ UHYLHZ WKH SXEOLF LQWHUHVW

FRQVLGHUDWLRQV UHJDUGLQJ WUDQVIHU DQG ILQGV WKDW WKH\ WRR GR QRW IDYRU WUDQVIHU

        $ 7UDQVIHUHH¶V )DPLOLDULW\ ZLWK WKH *RYHUQLQJ /DZV

        ³$OO IHGHUDO FRXUWV DUH SUHVXPHG WR EH HTXDOO\ IDPLOLDU ZLWK WKH ODZ JRYHUQLQJ IHGHUDO

VWDWXWRU\ FODLPV´ OLNH WKH FODLPV DW LVVXH KHUH Fed. Hous. Fin. Agency  ) 6XSS G DW 

TXRWLQJ Miller v. Insulation Contractors, Inc.  ) 6XSS G   ''&  ³>1@HLWKHU

YHQXH LV IDYRUHG´ id. DQG QHLWKHU SDUW\ GLVSXWHV WKLV See 'HIV¶ 0HP DW  3O¶V 2SS DW  6R

WKLV IDFWRU LV QHXWUDO

        % 5HODWLYH &RQJHVWLRQ RI WKH &RXUWV

        :KHQ FRQVLGHULQJ WKH FRQJHVWLRQ RI WKH FRXUWV WKH &RXUW FRPSDUHV ³WKH GLVWULFWV¶ PHGLDQ

WLPHV IURP ILOLQJ WR GLVSRVLWLRQ RU WULDO´ Sheffer  ) 6XSS G DW  FLWLQJ Pueblo v. Nat’l

                                                 
Indian Gaming Comm’n  ) 6XSS G   Q ''&  'HIHQGDQWV FODLP WKDW WKH

1RUWKHUQ 'LVWULFW RI 2KLR KDV D VKRUWHU PHGLDQ WLPH WR WULDO see 'HIV¶ 0HP DW  DQG SODLQWLII

QRWHV WKDW WKH 'LVWULFW RI &ROXPELD KDV D VKRUWHU PHGLDQ WLPH WR GLVSRVLWLRQ See 3O¶V 2SS DW 

%HFDXVH WKHVH VWDWLVWLFV HVVHQWLDOO\ FDQFHO RQH DQRWKHU RXW WKLV IDFWRU LV QHXWUDO See Sheffer 

) 6XSS G DW ± ILQGLQJ WKDW ZKHQ RQH FRXUW KDV D TXLFNHU WLPH WR WULDO DQG WKH RWKHU FRXUW

KDV D TXLFNHU WLPH WR GLVSRVLWLRQ WKH FRQJHVWLRQ RI WKH FRXUWV ³IDFWRU LV LQ HTXLSRLVH´ DQG LV ³QRW

YHU\ KHOSIXO´

       & /RFDO ,QWHUHVWV LQ 'HFLGLQJ /RFDO &RQWURYHUVLHV

       7KH WKLUG DQG ILQDO SXEOLF LQWHUHVW IDFWRU LV WKH ORFDO LQWHUHVW LQ GHFLGLQJ ORFDO FRQWURYHUVLHV

DW KRPH ,W LV WUXH WKDW 2KLR KDV D ORFDO LQWHUHVW LQ DGMXGLFDWLQJ WKLV FRQWURYHUV\ EHFDXVH GHIHQGDQWV

DUH KHDGTXDUWHG LQ 2KLR DQG VRPH RI WKH XQGHUO\LQJ HYHQWV WRRN SODFH WKHUH See 'HIV¶ 0HP DW

± %XW WKH &RXUW LV QRW SHUVXDGHG WKDW WKHVH IDFWV ZDUUDQW WUDQVIHU EHFDXVH DW OHDVW VRPH RI

WKH HYHQWV JLYLQJ ULVH WR SODLQWLII¶V FODLPV DURVH LQ WKH 'LVWULFW RI &ROXPELD DQG WKHUH LV D QDWLRQDO

LQWHUHVW LQ WKH HQIRUFHPHQW RI IHGHUDO VHFXULWLHV ODZV Sheffer  ) 6XSS G DW  ³>:@KHQ

QDWLRQDO VLJQLILFDQFH DWWDFKHV WR D FRQWURYHUV\ ORFDO LQWHUHVW FDQ VRPHWLPHV EH GLPLQLVKHG´ see

also Babbitt  ) 6XSS G DW ± GHQ\LQJ PRWLRQ WR WUDQVIHU DIWHU GHWHUPLQLQJ WKDW WKH

GHFLVLRQV VXUURXQGLQJ RLO DQG JDV OHDVLQJ LQ $ODVND ZHUH RI ³QDWLRQDO VLJQLILFDQFH´ DQG QRW RI ORFDO

LQWHUHVW %HFDXVH WKH DOOHJHG YLRODWLRQ RI IHGHUDO VHFXULWLHV ODZV ³LV QRW D ORFDO GLVSXWH DIIHFWLQJ

RQO\ WKH ORFDO UHVLGHQWV RI >2KLR@´ Babbitt  ) 6XSS G DW  WKH &RXUW ILQGV WKDW WKLV IDFWRU

LV QRW VWURQJ HQRXJK WR VXSSRUW WUDQVIHU

       $FFRUGLQJO\ WKH &RXUW FRQFOXGHV WKDW WKH SXEOLF LQWHUHVW IDFWRUV DOVR GR QRW IDYRU WUDQVIHU

                                                  
                                         &21&/86,21

       ,Q FRQVLGHULQJ WKH SULYDWH DQG SXEOLF LQWHUHVW IDFWRUV WKH &RXUW ILQGV WKDW PXOWLSOH IDFWRUV

DUH HLWKHU QHXWUDO RU GR QRW ZHLJK LQ IDYRU RI WUDQVIHU %HFDXVH GHIHQGDQWV KDYH QRW PHW WKHLU

EXUGHQ WR GHPRQVWUDWH WKDW WKH IDFWV ZDUUDQW D WUDQVIHU WKH &RXUW FRQFOXGHV WKDW WKHUH LV QR

GHFLVLYH UHDVRQ IRU XSVHWWLQJ SODLQWLII¶V FKRLFH RI IRUXP $FFRUGLQJO\ GHIHQGDQWV¶ PRWLRQ WR

WUDQVIHU LV '(1,('

       62 25'(5('

                                              $0< %(50$1 -$&.621
                                              8QLWHG 6WDWHV 'LVWULFW -XGJH

'$7( 'HFHPEHU