Kovacevich v. Kent State Univ

U.S. Court of Appeals for the Sixth Circuit

Kovacevich v. Kent State Univ

Opinion

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 DS

81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB

'2527+< .29$&(9,&+ ; 3ODLQWLII$SSHOODQW    1R  Y  !  .(17 67$7( 81,9(56,7<  'HIHQGDQW$SSHOOHH  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG 1R n'RQDOG&1XJHQW'LVWULFWsXGJH $UJXHG 'HFHPEHU   'HFLGHGDQG)LOHG $XJXVW %HIRUH s21(6&2/(DQG*,/0$1&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('   'HQQLV 5 7KRPSVRQ 7+203621 /$: 2)),&($NURQ2KLRIRU$SSHOODQW(GZDUG&.DPLQVNL $0(5&811,1*+$0%5(11$1&2$NURQ2KLRIRU $SSHOOHH21%5,() 'HQQLV57KRPSVRQ7+203621 /$:2)),&($NURQ2KLR%ULDQs:LOOLDPV%5,$1s :,//,$06&2$NURQ2KLRIRU$SSHOODQW  (GZDUG& .DPLQVNL 5LFKDUG 7 &XQQLQJKDP 0LFKDHO 6 8UEDQ $0(5&811,1*+$0%5(11$1&2$NURQ2KLRIRU

  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

$SSHOOHH  .DWKDOHHQ % 6FKXOWH 63$7(5 *,77(6 ,QVKRUW,EHOLHYHWKDWLIDQDSSHOODWHFRXUWLVSHUVXDGHGWKDW 6&+8/7( .2/0$1&ROXPEXV2KLRIRU$PLFL&XULDH WKHSODLQWLIILQD7LWOH9,,FDVHSURGXFHGVXIILFLHQWHYLGHQFH DWWULDOIRUDUHDVRQDEOHMXU\WRKDYHIRXQGLQWKHSODLQWLIIjV s21(6 s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK IDYRUDQGWKDWDVDFRQVHTXHQFHWKHGLVWULFWFRXUWjVSRVWWULDO &2/( s MRLQHG  *,/0$1 s SS   GHOLYHUHG D JUDQWRIMXGJPHQWDVDPDWWHURIODZIRUWKHGHIHQGDQWZDV VHSDUDWHFRQFXUULQJRSLQLRQ HUURQHRXVWKHDSSHOODWHFRXUWVKRXOGVLPSO\VD\VR:KHQ WKDWKDSSHQV WKH GLVWULFWFRXUWjVHUURULVWKDWLWLPSURSHUO\ BBBBBBBBBBBBBBBBB VXEVWLWXWHG LWV MXGJPHQW IRU WKDW RI WKH MXU\ QRW WKDW WKH GLVWULFW FRXUW VRPHKRZ FRQWUDGLFWHG QRZELQGLQJ LPSOLHG 23,1,21 ILQGLQJVWKDWLWVXSSRVHGO\PDGHVLPSO\E\OHWWLQJWKHFDVHJR BBBBBBBBBBBBBBBBB WRWULDO 1$7+$1,(/ 5 s21(6 &LUFXLW sXGJH  7KLV DSSHDO 9 IROORZVDOHQJWK\HPSOR\PHQWGLVFULPLQDWLRQWULDOSLWWLQJD ORQJWLPHSURIHVVRUDW.HQW6WDWH8QLYHUVLW\ m.68l DJDLQVW ,I$YHU\'HQQLVRQjVSURKLELWLRQDJDLQVWUHYLVLWLQJWKHSULPD WKH8QLYHUVLW\$IWHUDWULDODQGMXU\YHUGLFWLQWKHSODLQWLIIjV IDFLH FDVH LV WDNHQ OLWHUDOO\ PHDQLQJ WKDW WKH GLVWULFW FRXUW IDYRURQVH[DQGDJHGLVFULPLQDWLRQFODLPVWKHGLVWULFWFRXUW FDQQRWTXHVWLRQWKHSURRIFRQVWLWXWLQJWKHSODLQWLIIjVSULPD JUDQWHG.68jVPRWLRQ IRUMXGJPHQWDVDPDWWHURIODZRQ IDFLHFDVHRQFHWKHDFWLRQLVDOORZHGWRSURFHHGWRWULDOWKHQ WKHVHFODLPV7KHSODLQWLIIDSSHDOVWKLVGHFLVLRQDVZHOODV WKHGHFLVLRQLVHUURQHRXVIRUDOORIWKHUHDVRQVVHWIRUWKDERYH RWKHUGLVWULFWFRXUWUXOLQJVLQ.68jVIDYRU:H$)),50LQ ,DOVREHOLHYHWKDWWKLVOLWHUDOLQWHUSUHWDWLRQZRXOGSODFH$YHU\ SDUWDQG5(9(56(LQSDUW 'HQQLVRQ LQ FRQIOLFW ZLWK WKLV FRXUWjV SULRU GHFLVLRQ LQ *DIIRUG Y *HQHUDO (OHFWULF &R  )G  WK &LU ,   IRUWKHUHDVRQVZHOOVWDWHGE\ERWKWKHGLVVHQWLQ$YHU\ 'HQQLVRQ DQG E\ WKH GLVWULFW FRXUW EHORZ  ,I RQ WKH RWKHU $ KDQGWKHWKUXVWRI$YHU\'HQQLVRQLVRQO\LQWHQGHGWRUHTXLUH $IWHUUHFHLYLQJKHUGRFWRUDWHIURP.683ODLQWLII$SSHOODQW WKH GLVWULFW FRXUW WR IRFXV RQ WKH XOWLPDWH LVVXH RI 'RURWK\ .RYDFHYLFK EHJDQ WHDFKLQJ DW .68jV &ROOHJH RI GLVFULPLQDWLRQRQFHDOOWKHSURRILVLQnDIRFXVWKDWLQFOXGHV (GXFDWLRQLQ DVDQRQWHQXUHWUDFNRQH\HDU,QVWUXFWRU FRQVLGHUDWLRQRIZKHWKHUWKHSODLQWLIIKDVSURGXFHGVXIILFLHQW ,Q DWWKHDJHRIVKHZDVKLUHGLQWRDWHQXUHWUDFN HYLGHQFHWRVXSSRUWDOORIWKHHOHPHQWVWKDWFRQVWLWXWHDSULPD SRVLWLRQZRUNLQJDVDQDVVLVWDQWSURIHVVRULQWKH&ROOHJHRI IDFLHFDVHnWKHQ$YHU\'HQQLVRQLVVLPSO\DWUDSIRUXQZDU\ (GXFDWLRQjV6SHFLDO(GXFDWLRQGHSDUWPHQW.68RIIHUHGKHU GLVWULFWFRXUWMXGJHVZKRXVHWKHZURQJWHUPLQRORJ\ DDFDGHPLF\HDUVDODU\DQGVKHDFFHSWHG+HUGXWLHV (LWKHU ZD\ LW DSSHDUV WKDW $YHU\ 'HQQLVRQ KDV FDXVHG LQFOXGHG WHDFKLQJ DQG FRRUGLQDWLQJ WKH ILHOG H[SHULHQFH RI XQQHFHVVDU\ FRQIXVLRQ ZLWKLQ WKH FLUFXLW DV HYLGHQFHG E\ 6SHFLDO(GXFDWLRQVWXGHQWWHDFKHUV,Q .RYDFHYLFKZDV sXGJH 5\DQjV GLVVHQW LQ $YHU\ 'HQQLVRQ LWVHOI DQG E\ WKH JUDQWHGWHQXUH+HUIRUWXQHVDW.68RYHUWKHHQVXLQJILIWHHQ RSLQLRQV RI WKH GLVWULFW FRXUW EHORZ LQ ERWK WKLV DQG RWKHU \HDUVnDQGLQSDUWLFXODUKHUKLVWRU\RISURPRWLRQDQGVDODU\ FDVHV,WKXVMRLQLQWKHMXGJPHQWRIWKHFRXUWEXWGLVDJUHH LQFUHDVHVRYHUWKRVH\HDUVnDUHWKHVXEMHFWRIWKLVOLWLJDWLRQ ZLWKLWVGHIHQVHRI$YHU\'HQQLVRQZKLFKLQP\RSLQLRQ RQO\SHUSHWXDWHVWKHFRQIXVLRQ  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

3OXPELQJ 3URGV ,QF  6 &W       'LVFULPLQDWLRQLQ3URPRWLRQ UHDVRQLQJWKDWEHFDXVHmGLVFULPLQDWLRQPD\ZHOOEHWKHPRVW OLNHO\ DOWHUQDWLYH H[SODQDWLRQl RQFH WKH WULHU RI IDFW LV .RYDFHYLFKILUVWFRQWHQGVWKDW.68GLVFULPLQDWHGDJDLQVW SHUVXDGHGWKDWWKHHPSOR\HUjVOHJLWLPDWHQRQGLVFULPLQDWRU\ KHU E\ SURPRWLQJ KHU DW D VQDLOjV SDFH GXH WR KHU JHQGHU H[SODQDWLRQLVIDOVHmDSODLQWLIIjVSULPDIDFLHFDVHFRPELQHG %HIRUHFRQVLGHULQJKHUVLWXDWLRQLQSDUWLFXODUZHZLOOUHYLHZ ZLWKVXIILFLHQWHYLGHQFHWRILQGWKDWWKHHPSOR\HUjVDVVHUWHG .68jVJHQHUDOSURFHGXUHVIRUJUDQWLQJSURPRWLRQV MXVWLILFDWLRQLVIDOVHPD\SHUPLWWKHWULHURIIDFWWRFRQFOXGH WKDWWKHHPSOR\HUXQODZIXOO\GLVFULPLQDWHGl )XUQFR&RQVWU .68 LV RUJDQL]HG LQWR VL[ DFDGHPLF FROOHJHV ZKLFK DUH &RUS Y :DWHUV  86      m>:@KHQ DOO GLYLGHGLQWRVHSDUDWHGHSDUWPHQWV7KHUHDUHWKUHHUDQNVRI OHJLWLPDWH UHDVRQV IRU UHMHFWLQJ DQ DSSOLFDQW KDYH EHHQ WHQXUHWUDFNSURIHVVRUSRVLWLRQVDW.68 DVVLVWDQWDVVRFLDWH HOLPLQDWHGDVSRVVLEOHUHDVRQVIRUWKHHPSOR\HUjVDFWLRQVLW DQG IXOO SURIHVVRU  $ VHULHV RI FROOHFWLYH EDUJDLQLQJ LV PRUH OLNHO\ WKDQ QRW WKDW WKH HPSOR\HU    EDVHG KLV DJUHHPHQWV JRYHUQV WKH SURFHVV DQG FULWHULD XVHG WR JUDQW GHFLVLRQRQDQLPSHUPLVVLEOHFRQVLGHUDWLRQl  SURPRWLRQV3URPRWLRQDSSOLFDWLRQVSURFHHGWKURXJKDOD\HU RI UHYLHZV E\ .68 IDFXOW\ DQG DGPLQLVWUDWRUV  7KH ILUVW 5HFHQWO\WKH6XSUHPH&RXUWKDVVXJJHVWHGWKDWWKHUHPD\ UHYLHZLQJ FRPPLWWHH LV WKH )DFXOW\ $GYLVRU\ &RPPLWWHH EHFDVHVLQZKLFKmDOWKRXJKWKHSODLQWLIIKDVHVWDEOLVKHGD )$& FRPSULVLQJIDFXOW\PHPEHUVRIDQDSSOLFDQWjVRZQ SULPDIDFLHIDFHDQGVHWIRUWKVXIILFLHQWHYLGHQFHWRUHMHFWWKH GHSDUWPHQWZKRDUHHOHFWHGIRUVHYHUDO\HDUWHUPV7KH)$& GHIHQGDQWjV H[SODQDWLRQ QR UDWLRQDO ILQGHU FRXOG FRQFOXGH LVVXHV D UHFRPPHQGDWLRQ WR WKH FKDLUSHUVRQ RI WKH WKDW WKH DFWLRQ ZDV GLVFULPLQDWRU\l 5HHYHV  6 &W DW GHSDUWPHQW ZKR PDNHV KHU RZQ UHFRPPHQGDWLRQ DIWHU   SDUWLDOO\GLVDSSURYLQJ.OLQHY79$)G WK LQGHSHQGHQWO\ UHYLHZLQJ WKH DSSOLFDWLRQ  7KH &ROOHJH &LU  %XWRQHFDQRQO\DVVXPHWKDWVXFKFDVHVZLOOEH $GYLVRU\ &RPPLWWHH &$&  FRPSULVLQJ IDFXOW\ PHPEHUV UDWKHU XQXVXDO  6W 0DU\jV +RQRU &HQWHU KRZHYHU ZDV IURPWKHHQWLUHFROOHJHSHUIRUPVWKHQH[WUHYLHZ7KH&$& HYLGHQWO\RQHRIWKRVHFDVHV WKHGLVWULFWFRXUWWKHWULHURIIDFW PDNHVDUHFRPPHQGDWLRQWRWKHGHDQRIWKHFROOHJHLQZKLFK LQWKDWFDVHGLVEHOLHYHGWKHGHIHQGDQWVjSURIIHUHGH[SODQDWLRQ WKH GHSDUWPHQW EHORQJV DQG WKH GHDQ PDNHV DQRWKHU DQGIRXQGWKDWWKHUHZDVmDFUXVDGHWRWHUPLQDWHlWKHSODLQWLII LQGHSHQGHQW UHYLHZ DQG UHFRPPHQGDWLRQ  1H[W WKH EXWGHFOLQHGWRLQIHUWKDWWKHFUXVDGHZDVUDFLDOO\PRWLYDWHG 8QLYHUVLW\ $GYLVRU\ %RDUG 8$%  PDGH XS RI SURIHVVRUV 6W0DU\jV+RQRU&WU 86DW  IURPDFURVVWKHXQLYHUVLW\UHYLHZVWKHDSSOLFDWLRQDQGPDNHV D UHFRPPHQGDWLRQ WR WKH .68 SURYRVW  7KH SURYRVW WKHQ %XWOHWXVEHUHDOLVWLF7KHPRVWUHDVRQDEOHLQIHUHQFHIRU PDNHV D UHFRPPHQGDWLRQ WR WKH SUHVLGHQW ZKR PDNHV D MXURUVWRGUDZRQFHWKH\GLVEHOLHYHWKHGHIHQGDQWjVSURIIHUHG UHFRPPHQGDWLRQWRWKH.68%RDUGRI7UXVWHHVEDVHGRQDQ H[SODQDWLRQ IRU LWV DFWLRQV ZLOO RUGLQDULO\ EH WKDW WKH UHDO DVVHVVPHQW RI WKH FRPSOHWH DSSOLFDWLRQ LQFOXGLQJ DOO WKH UHDVRQWKHGHIHQGDQWDFWHGDVLWGLGZDVLOOHJDOGLVFULPLQDWLRQ UHFRPPHQGDWLRQV$WDQ\OHYHODIDYRUDEOHUHFRPPHQGDWLRQ 6HH6DQGHUVRQ6&WDW VHHDOVR)LVKHU PRYHV WKH DSSOLFDWLRQ WR WKH QH[W OHYHO  $Q\ XQIDYRUDEOH )G DW  1HZPDQ &s GLVVHQWLQJ  m7KRXJK , UHFRPPHQGDWLRQ HQGV WKH SURFHVV EDUULQJ D VXFFHVVIXO DJUHHWKDWµDILQGLQJRISUHWH[WWRJHWKHUZLWKHYLGHQFH mDSSHDOlDWWKHQH[WOHYHO,QVXPWKHOHYHOVRIUHYLHZDUHDV FRPSULVLQJ D SULPD IDFLH FDVH LV QRW DOZD\V VXIILFLHQW WR IROORZV VXVWDLQDQXOWLPDWHILQGLQJRILQWHQWLRQDOGLVFULPLQDWLRQjLW ZLOOEHDUDUHFDVHZKHUHWKLVLVQRWVRl  FLWDWLRQRPLWWHG   7KH SURYRVWjV UHFRPPHQGDWLRQ LV FRQVLGHUHG D mQHDUO\ ILQDO GHFLVLRQl s$ DW   .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

 )DFXOW\$GYLVRU\&RPPLWWHH )$& ZDV QR ZD\ IRU DQ\ UHDVRQDEOH WULHU RI IDFW WR ILQG LQ WKH  'HSDUWPHQW&KDLUSHUVRQ ( ( 2 & jV  I D Y R U  R Q  m W K H  X O W L P D W H  L V V X H  R I  &ROOHJH$GYLVRU\&RPPLWWHH &$& GLVFULPLQDWLRQlnXQOHVVRIFRXUVHWKHGLVWULFWFRXUWjVILQGLQJ  'HDQRIWKH&ROOHJH RI QR FDXVDO UHODWLRQVKLS ZDV FOHDUO\ HUURQHRXV  ,I WKDW  8QLYHUVLW\$GYLVRU\%RDUG 8$% ILQGLQJ KDG EHHQ FOHDUO\ HUURQHRXV WKHQ MXGJPHQW IRU WKH  8QLYHUVLW\3URYRVW ((2& PLJKW ORJLFDOO\ KDYH EHHQ UHTXLUHG  %XW $YHU\  8QLYHUVLW\3UHVLGHQW 'HQQLVRQGLGQRWFRQFOXGHWKDWWKHGLVWULFWFRXUWj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mSODLQWLIILVUHTXLUHGWRRYHUFRPH FKDLUSHUVRQ WKH &$& DQG WKH GHDQ RI WKH &ROOHJH RI WKH DGGLWLRQDO REVWDFOH RI WKH GHIHQGDQWjV UHEXWWDO DQG (GXFDWLRQ \HW WKH 8$% DQG WKH SURYRVW GHQLHG KHU FRQYLQFLQJO\GHPRQVWUDWHWKHH[LVWHQFHRIGLVFULPLQDWLRQl DSSOLFDWLRQ FLWLQJ D ODFN RI VXIILFLHQW VFKRODUVKLS DQGWKDWm6W0DU\jVY+LFNVSODFHVWKHDGGLWLRQDOEXUGHQRQ .RYDFHYLFK DSSHDOHG WKDW GHQLDO WR WKHQ3UHVLGHQW %UDJH 3ODLQWLIIVWKDWWKH\PXVWSURYHQRWRQO\WKDWWKHGHIHQGDQWjV *ROGLQJZKRDJUHHGZLWKWKHGHQLDO6KHGLGQRWDSSHDOWKH UHDVRQ ZDV D SUHWH[W EXW WKDW WKH UHDO UHDVRQ ZDV GHFLVLRQIXUWKHU GLVFULPLQDWLRQl$YHU\'HQQLVRQ)GDW ,Q .RYDFHYLFKRQFHDJDLQDSSOLHGIRUSURPRWLRQWR 7KLVVHHPVWRPHWREHDPLVUHDGLQJRI6W0DU\jV+RQRU DVVRFLDWH SURIHVVRU  6KH DFNQRZOHGJHG DW WULDO WKDW KHU &HQWHU7REHVXUHWKHSODLQWLIILQD7LWOH9,,FDVHLQRUGHU GRFXPHQWDWLRQZDVmDPHVVls$DW$IWHUUHFHLYLQJ WRVXFFHHGPXVWSHUVXDGHWKHWULHURIIDFWWKDWWKHUHDOUHDVRQ WKHUHFRPPHQGDWLRQRIWKH)$&DQGGHSDUWPHQWFKDLUSHUVRQ IRUWKHGHIHQGDQWjVDFWLRQV ZDV GLVFULPLQDWLRQ%XWLQWKH RUGLQDU\FRXUVHWKHWULHURIIDFWPD\UHDVRQDEO\LQIHUWKDWWKH UHDO UHDVRQ IRU WKH GHIHQGDQWjV DFWLRQV ZDV LOOHJDO  GLVFULPLQDWLRQVLPSO\E\YLUWXHRIEHLQJSHUVXDGHG  RIWKH $V VKH ZDV XQGHUJRLQJ WKLV SURPRWLRQ DSSOLFDWLRQ SURFHVV IDFWV RI WKH SODLQWLIIjV SULPD IDFLH FDVH DQG   WKDW WKH .RYDFHYLFK VXIIHUHG IURP D VHYHUH KHDUW DWWDFN DQG WRRN DQ H[WHQGHG OHDYH RI DEVHQFH WR UHFXSHUDWH 6KH GLG QRW ZRUN WKH UHPDLQGHU RI WKH GHIHQGDQWjV SURIIHUHG OHJLWLPDWH QRQGLVFULPLQDWRU\   DFDGHPLF \HDU 6KH UHWXUQHG WR ZRUN LQ   DOWKRXJK VKH ZDV H[SODQDWLRQ LV SUHWH[WXDO  6HH HJ 5HHYHV Y 6DQGHUVRQ QRW DEOH WR SHUIRUP DOO KHU GXWLHV XQWLO    .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

ORFDWLRQVmQRUHDVRQDEOHMXU\FRXOGILQGWKDW'REEVjVIDLOXUH WKH&$&UHFRPPHQGHGDJDLQVWSURPRWLRQDVGLGWKHGHDQRI WRWUDQVIHU>WKHSODLQWLII@ZDVUHWDOLDWRU\l,GDW WKH&ROOHJH7KHDSSHDOVERDUGWKHSURYRVWDQGWKHSUHVLGHQW DOOGHQLHGKHUDSSHDOV2QFHDJDLQWKH\H[SODLQHGWKDWKHU 7KH6HFRQG&LUFXLWLQ&RIIH\H[SUHVVO\VWDWHGWKDWLWZDV UHVHDUFKDQGVFKRODUVKLSZHUHZHDN H[DPLQLQJmWKHXOWLPDWHTXHVWLRQRIGLVFULPLQDWLRQYHOQRQl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jVJUDQWLQJRIKHUPHULWDZDUGV RU FRQFOXGHV WKDW WKH SODLQWLII IDLOHG WR SURGXFH VXIILFLHQW HYLGHQFH WR SHUPLW D UHDVRQDEOH WULHU RI IDFW WR ILQG LQ KLV 0HULW DZDUGV DUH RQO\ DYDLODEOH LQ WKRVH \HDUV ZKHQ IDYRURQWKHmXOWLPDWHLVVXHRIGLVFULPLQDWLRQlnEHFDXVHKH VXIILFLHQWIXQGVDUHDYDLODEOH7KH\DUHDQDORJRXVWRDERQXV SURGXFHG LQVXIILFLHQW HYLGHQFH WR VXSSRUW RQH RI WKH IDFWV LQ WKDW WKH\ UHZDUG IDFXOW\ PHPEHUV IRU DFKLHYHPHQW LQ FRQVWLWXWLQJ WKH SULPD IDFLH FDVH WHFKQLFDOO\ WKH FRUUHFW WHDFKLQJRUVFKRODUVKLS8QOLNHDERQXVKRZHYHUDPHULW LQTXLU\   %HFDXVH WKH GLIIHUHQFH LV HVVHQWLDOO\ RQH RI DZDUGEHFRPHVDSHUPDQHQWDGGLWLRQWRDSURIHVVRUjVEDVH VHPDQWLFVLWLVGLIILFXOWWRXQGHUVWDQGZK\$YHU\'HQQLVRQ VDODU\ IRU IXWXUH \HDUV  ,Q \HDUV WKDW PHULW DZDUGV DUH UHYHUVHG WKH MXGJPHQW RI WKH GLVWULFW FRXUW UDWKHU WKDQ DYDLODEOH LQWHUHVWHG IDFXOW\ PHPEHUV PXVW VXEPLW DQ DIILUPLQJ RQ GLIIHUHQW JURXQGV DIWHU FRUUHFWLQJ WKH GLVWULFW DSSOLFDWLRQGRFXPHQWLQJWKHLUDFKLHYHPHQWVIURPWKDW\HDU FRXUWjVWHUPLQRORJ\ ,Q WKH &ROOHJH RI (GXFDWLRQ WKH )$& UHYLHZV WKDW DSSOLFDWLRQ ZLWK HDFK )$& PHPEHU UDWLQJ WKH DSSOLFDQWjV ,QYLHZRIWKHIDFWXDOILQGLQJRIWKHGLVWULFWFRXUWLQ$YHU\ WHDFKLQJ DQG UHVHDUFKVFKRODUVKLS  )DFXOW\ PHPEHUV PD\ 'HQQLVRQ WKDW WKH HPSOR\HUjV DFWLRQV ZHUH QRW FDXVDOO\ HDUQ PHULW LQ RQH RU ERWK FDWHJRULHV  %DVHG RQ WKH UDQN UHODWHGWR:LOOLVjVSDUWLFLSDWLRQLQSURWHFWHGDFWLYLWLHVWKHUH RUGHULQJVRIWKHFRPSLOHG)$&HYDOXDWLRQVWKHGHSDUWPHQW FKDLUSHUVRQ ZKRGRHVQRWNQRZWKHQDPHVRIWKHDSSOLFDQWV  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

UDQNVWKHYDULRXVDSSOLFDWLRQVDQGGHWHUPLQHVDQDPRXQWWREH )RUH[DPSOH%DUERXUY%URZQHU)G '& DZDUGHGWRHDFKDSSOLFDQW7KHFKDLUSHUVRQWKHQVXEPLWVWKH &LU FLWHGE\WKHFRXUWLQWKHSUHVHQWFDVHVHH2SDW OLVW WR WKH GHDQ RI WKH FROOHJH ZKR PDNHV WKH ILQDO QZDVD7LWOH9,,FDVHWKDWZDVWULHGWRDMXU\7KHMXU\ GHWHUPLQDWLRQRIDZDUGDPRXQWV IRXQG IRU WKH SODLQWLII DQG WKH GLVWULFW FRXUW GHQLHG WKH GHIHQGDQWj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jVGHSDUWPHQWFKDLUSHUVRQKDGUHFRPPHQGHGVKH GLVFULPLQDWLRQ6HH%DUERXU)GDW UHFHLYH  2Q DQRWKHU RFFDVLRQ WKH GHDQ GLVDOORZHG D UHFRPPHQGHG DZDUG  7KH IROORZLQJ FKDUW VKRZV %DUERXUGXO\QRWHGWKDWEHFDXVHWKHFDVHKDGEHHQIXOO\ .RYDFHYLFKjVPHULWDZDUGKLVWRU\  WULHGmWKHTXHVWLRQZKHWKHU>WKHSODLQWLII@HVWDEOLVKHGDSULPD IDFLHFDVHLVLUUHOHYDQWl,GDW FLWLQJ$LNHQV %XWWKHQ    %DUERXUFRQFOXGHGWKDWm>W@KLVGRHVQRWPHDQKRZHYHUWKDW    LQRXUDQDO\VLVRIµWKHXOWLPDWHTXHVWLRQRIGLVFULPLQDWLRQYHO     DSSOLHG QRQj ZH DUH REOLJHG WR SUHWHQG WKDW WKHUH LV HYLGHQFH    VXSSRUWLQJDSULPDIDFLHFDVHZKHQLQIDFWWKHUHLVQRWl,G   QRQHDYDLODEOH FLWDWLRQ RPLWWHG   , EHOLHYH WKDW WKH 'LVWULFW RI &ROXPELD   QRQHDYDLODEOH &LUFXLWj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jV SRVW 0HULWDZDUGVZHUHQRWDYDLODEOHDIWHU   YHUGLFWPRWLRQIRUMXGJPHQWDVDPDWWHURIODZ6HH&RIIH\ )GDW&RIIH\FLWHV$LNHQVIRUWKHSURSRVLWLRQWKDW s$DW  m>E@HFDXVH WKLV FDVH KDV EHHQ IXOO\ WULHG RQ WKH PHULWV ZH QHHGQRWGHWHUPLQHZKHWKHU>WKHSODLQWLII@HVWDEOLVKHGDSULPD ,Q    .RYDFHYLFK IRUPDOO\ UHTXHVWHG D VDODU\ IDFLH FDVHl  6HH LG DW   7KHQ &RIIH\ FRQFOXGHV WKDW DGMXVWPHQW  7KH FROOHJH GHDQ DSSRLQWHG D FRPPLWWHH WR EHFDXVHWKHSODLQWLIIIDLOHGWRSUHVHQWDQ\HYLGHQFHVXJJHVWLQJ FRQVLGHUWKHUHTXHVWDQGWKHFRPPLWWHHXOWLPDWHO\FRQFOXGHG WKDWVKHZDVWUHDWHGGLIIHUHQWO\WKDQ RWKHULQGLYLGXDOVZKR ZHUHQRWUHWDLQHGZKHQ'REEVWKHHPSOR\HUVROGLWV$OEDQ\ 1HZ<RUNRSHUDWLRQVWRDQHZFRPSDQ\DQGEHFDXVHVKHKDG  ,W LV QRW FOHDU IURP WKH UHFRUG ZKHWKHU .RYDFHYLFK DSSOLHG IRU PHULW QHYHU UHTXHVWHG WKDW 'REEV WUDQVIHU KHU WR RQH RI LWV RWKHU IRU WKH   \HDU s$ DW   .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

VLWXDWHG WR RWKHUV ZKR ZHUH WUHDWHG PRUH IDYRUDEO\ WKH WKDW.RYDFHYLFKjVUHFRUGRISHUIRUPDQFHGLGQRWZDUUDQWWKH GHIHQGDQWLVHQWLWOHGWRMXGJPHQWDVDPDWWHURIODZ UHTXHVWHGDGMXVWPHQW.RYDFHYLFKVXEPLWWHGDVHFRQGVDODU\ DGMXVWPHQW UHTXHVW LQ   VHHNLQJ DQ DQQXDO LQFUHDVH RI ,Q$YHU\'HQQLVRQWKHGLVWULFWFRXUWjVXVHRIQRPHQFODWXUH   2Q WKLV RFFDVLRQ D &$& FRPPLWWHH IRXQG ZDV SHUKDSVLPSUHFLVH5DWKHUWKDQKROGWKDWWKHSODLQWLII FRPSHOOLQJ UHDVRQV WR FRQVLGHU DQ DGMXVWPHQW ZKHQ PHULW IDLOHGWRHVWDEOLVKDSULPDIDFLHFDVHWKHGLVWULFWFRXUWVKRXOG IXQGV ZHUH DYDLODEOH  %HFDXVH PHULW IXQGV ZHUH QRW KDYHKHOGWKDWWKH((2&KDGQRWSHUVXDGHGWKHFRXUWWKDWWKH DYDLODEOH .RYDFHYLFK DQG WKH $PHULFDQ $VVRFLDWLRQ RI IDFWVFRQVWLWXWLQJDSULPDIDFLHFDVHKDGEHHQSURYHG$VD 8QLYHUVLW\3URIHVVRUV m$$83l ILOHGDJULHYDQFHWRJDLQWKH SUDFWLFDOPDWWHUWKLVZRXOGKDYHUHTXLUHGDILQGLQJDJDLQVW DGMXVWPHQWIURPDQRWKHUIXQGLQJVRXUFH&RQFOXGLQJWKDWKHU WKH ((2& RQ mWKH XOWLPDWH LVVXH RI GLVFULPLQDWLRQl DQG VDODU\ZDVDSSURSULDWHEDVHGRQKHUZRUNUHFRUGWKH.68 MXGJPHQWLQIDYRURI$YHU\'HQQLVRQ7KHRSLQLRQRIWKH SURYRVW GHQLHG WKH JULHYDQFH LQ 0DUFK    .RYDFHYLFK FRXUWLQWKHSUHVHQWFDVHLQIDFWDFFHSWVWKDWmHYLGHQFHWKDW QHYHUUHFHLYHGKHUUHTXHVWHGDGMXVWPHQWDQGILOHGKHU((2 EHDUVXSRQHOHPHQWVRIWKHSULPDIDFLHFDVHFDQDOVRFRPH FKDUJHRIGLVFULPLQDWLRQRQsDQXDU\  LQWRSOD\LQDVVHVVLQJWKHXOWLPDWHTXHVWLRQRIGLVFULPLQDWLRQl 2SDWHYHQDVLWFDVWLJDWHVWKHGLVWULFWFRXUWIRULWVHUURULQ  &RPSDUDWRUV mUHIRFXV>LQJ@ RQ WKH TXHVWLRQ RI ZKHWKHU D SODLQWLII HVWDEOLVKHGKHUSULPDIDFLHFDVHlUDWKHUWKDQmORRN>LQJ@WRWKH ,Q ERWK RI KHU FODLPV .RYDFHYLFK DUJXHV WKDW RWKHU XOWLPDWHTXHVWLRQRIGLVFULPLQDWLRQl2SDW VLPLODUO\ VLWXDWHG IDFXOW\ PHPEHUV ZHUH WUHDWHG PRUH IDYRUDEO\ 7KLVGLVWLQFWLRQDSSHDUVWRPHPRUHDPDWWHURIVHPDQWLFV WKDQRIVXEVWDQFH,IEDVHGRQWKHHYLGHQFHSUHVHQWHGDWWULDO D 'U=XFNHUPDQ DUHDVRQDEOHMXU\FRXOGQRWILQGWKDWWKHIDFWVFRQVWLWXWLQJD SULPD IDFLH FDVH ZHUH SURYHG E\ D SUHSRQGHUDQFH RI WKH ,Q VXSSRUW RI KHU FODLPV RI JHQGHUEDVHG ZDJH HYLGHQFHWKHQWKHGHIHQGDQWZLOOEHHQWLWOHGWRMXGJPHQWDV GLVFULPLQDWLRQ .RYDFHYLFK SUHVHQWHG HYLGHQFH WKDW 'U DPDWWHURIODZ&RQWUDU\WRWKHFRXUWjVRSLQLRQ$LNHQVGRHV 5REHUW=XFNHUPDQZDVDVLPLODUO\VLWXDWHGFRPSDUDWRUZKR QRWmLQVWUXFW>@XVRWKHUZLVHl2SDWDQG$LNHQVFHUWDLQO\ ZDVWUHDWHGPRUHIDYRUDEO\.68KLUHG=XFNHUPDQLQ  mGRHVQRWVWDQGIRUWKHSURSRVLWLRQWKDWDGLVWULFWFRXUWLVIODWO\ DVDQDVVLVWDQWSURIHVVRULQWKH6SHFLDO(GXFDWLRQGHSDUWPHQW SURKLELWHGIURPFRQVLGHULQJWKHDGHTXDF\RIWKHSULPDIDFLH +H EHJDQ WHDFKLQJ DW DQ DFDGHPLF \HDU VDODU\ RI  FDVH DIWHU WKH FDVH DV D ZKROH KDV SURFHHGHG WR WULDO HYHQ /LNH .RYDFHYLFK =XFNHUPDQ DSSOLHG IRU SURPRWLRQ DV DQ ZKHQ WKH GHIHQGDQW KDV QHYHU DVNHG WKH GLVWULFW FRXUW WR DVVLVWDQWSURIHVVRULQ DQGWKDWDSSOLFDWLRQZDVGHQLHG FRQVLGHU WKH TXHVWLRQl  $YHU\ 'HQQLVRQ  )G DW  ,Q =XFNHUPDQUHDSSOLHGIRUSURPRWLRQ:LWKRXWWKH 5\DQsGLVVHQWLQJ  XQDQLPRXVUHFRPPHQGDWLRQRIHLWKHUWKH)$&RU&$&DQG GHVSLWH D QHJDWLYH UHFRPPHQGDWLRQ IURP WKH 8$% WKH 7REHVXUHSDUWVRI$LNHQVDUHUDWKHUFU\SWLF1HYHUWKHOHVV 3UHVLGHQWSURPRWHG=XFNHUPDQRQKLVDSSHDO ,FDQQRWDJUHHZLWKWKHFRXUWjVVWDWHPHQWLQWKHSUHVHQWFDVH WKDWmDQLPSUHVVLYHQXPEHURIDSSHOODWHFRXUWVKDYHDSSOLHG =XFNHUPDQ DSSOLHG IRU PHULW SD\ LQ WKH \HDUV WKDW >$LNHQVjV@KROGLQJLQWKHVDPHZD\WKDW$YHU\'HQQLVRQGLGl .RYDFHYLFK GLG QRWn  DQG  nDQG UHFHLYHG ODUJH 2SDW,DPLQIDFWQRWDZDUHRIDQ\RWKHUDSSHOODWHFRXUW PHULWDZDUGVLQWKRVH\HDUV,Q ZKHQVKHUHFHLYHGRQO\ WKDW KDV DSSOLHG $LNHQV LQ TXLWH WKH VDPH ZD\ WKDW $YHU\ LQPHULW=XFNHUPDQUHFHLYHG 'HQQLVRQGLG  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

E 'U%DUERXU GLVFULPLQDWLRQ7KXVUHMHFWLRQRIWKHGHIHQGDQWjVSURIIHUHG UHDVRQVZLOOSHUPLWWKHWULHURIIDFWWRLQIHUWKHXOWLPDWHIDFW 5HJDUGLQJ KHU FODLP IRU DJH GLVFULPLQDWLRQ .RYDFHYLFK RILQWHQWLRQDOGLVFULPLQDWLRQl  HPSKDVLVDGGHG  DUJXHV WKDW .68 WUHDWHG 'U 1DQF\ %DUERXU D \RXQJHU SURIHVVRULQWKH&ROOHJHRI(GXFDWLRQPRUHIDYRUDEO\EHFDXVH $WWULDOWKHSODLQWLIIPXVWVWLOOSHUVXDGHWKHWULHURIIDFWWKDW RI KHU DJH  $URXQG WKH WLPH WKDW .RYDFHYLFK PDGH KHU DmSUHSRQGHUDQFHRIWKHHYLGHQFHHVWDEOLVKHVWKHIDFWVRID DGMXVWPHQW UHTXHVW %DUERXU DOVR UHTXHVWHG D VDODU\ SULPDIDFLHFDVHl,GDW ,IWKHWULHURIIDFWLVQRW DGMXVWPHQWDOOHJLQJWKDWJHQGHUGLVFULPLQDWLRQDFFRXQWHGIRU SHUVXDGHG WKH SODLQWLII ORVHVnHYHQ LI WKH GHIHQGDQW KDV KHU ORZHU VDODU\ UHODWLYH WR D PDOH SURIHVVRU GRLQJ HTXDO FRPSOHWHO\IDLOHGWRFRPHIRUZDUGZLWKHYLGHQFHLQVXSSRUW ZRUN  $V LQ .RYDFHYLFKjV FDVH WKH GHDQ VWDWHG WKDW VKH RI DQ\ OHJLWLPDWH QRQGLVFULPLQDWRU\ H[SODQDWLRQ IRU LWV ZRXOGJUDQWDQDGMXVWPHQWRQFHPHULWIXQGVZHUHDYDLODEOH DFWLRQV6HHLGDW  Q,QGHHGWKLVLVDSSDUHQWO\ ,QUHVSRQVHUDWKHUWKDQILOLQJDJULHYDQFHWKURXJKWKH$$83 WKHRQO\ZD\WKHSODLQWLIIFDQORVHLIWKHGHIHQGDQWKDVIDLOHG DV.RYDFHYLFKGLG %DUERXUILOHGDFRPSODLQWZLWK.68jV WRVXVWDLQLWVEXUGHQRISURGXFLQJHYLGHQFHWKDWZRXOGSHUPLW 2IILFHRI$IILUPDWLYH$FWLRQ$IWHUQHJRWLDWLRQV.68VHWWOHG DILQGLQJWKDWLOOHJDOGLVFULPLQDWLRQZDVQRWWKHUHDOUHDVRQIRU %DUERXUjV FODLP RI VH[ GLVFULPLQDWLRQ LQ 0DUFK   DQG LWVDFWLRQ,IWKHSODLQWLIIKDVSHUVXDGHGWKHIDFWILQGHURIWKH JUDQWHG KHU D OXPS VXP SD\PHQW RI  DV ZHOO DV IDFWVFRQVWLWXWLQJDSULPDIDFLHFDVHDQGWKHGHIHQGDQWKDV VXEVWDQWLDOLQFUHDVHVLQKHUVDODU\RYHUWZR\HDUV QRW VXVWDLQHG LWV EXUGHQ RI SURGXFWLRQ MXGJPHQW IRU WKH SODLQWLIILVUHTXLUHG6HHLG%XWFI)LVKHUY9DVVDU&ROOHJH %  )G    G &LU    HQ EDQF  :LQWHU s GLVVHQWLQJ  H[SODLQLQJZK\m>L@QUHDOLW\WKHUHLVQRVXFK 2Q0DUFK .RYDFHYLFKILOHGDFRPSODLQWDJDLQVW WKLQJ DV D VLOHQW GHIHQGDQWl  FHUW GHQLHG  86  .68DOOHJLQJVH[DQGDJHGLVFULPLQDWLRQLQYLRODWLRQRIWKH    (TXDO3D\$FW 86&† G  m(3$l 7LWOH9,,RIWKH &LYLO5LJKWV$FWRI 86&†HHWVHT DQGWKH $YHU\ 'HQQLVRQ KHOG WKDW WKH GLVWULFW FRXUW VKRXOG KDYH $JH 'LVFULPLQDWLRQ LQ (PSOR\PHQW $FW   86& †  EHHQ FRQFHUQHG RQO\ ZLWK mWKH XOWLPDWH LVVXH RI m$'($l   7KH SDUWLHV FRQGXFWHG GLVFRYHU\ XQWLO $XJXVW GLVFULPLQDWLRQl$YHU\'HQQLVRQ)GDW%XWZKHQ    ,Q 6HSWHPEHU   .RYDFHYLFK DPHQGHG KHU WKH SODLQWLII LQ D 7LWOH 9,, UHWDOLDWLRQ FDVH KDV IDLOHG WR FRPSODLQWWRDGGDFODLPRIGLVSDUDWHLPSDFWXQGHU7LWOH9,, SHUVXDGH WKH MXGJH DW D EHQFK WULDO WKDW WKH GHIHQGDQWjV $W WKDW WLPH ERWK SDUWLHV ILOHG PRWLRQV IRU VXPPDU\ DGYHUVHDFWLRQZDVFDXVDOO\UHODWHGWRWKHSODLQWLIIjVHQJDJLQJ MXGJPHQW2QsXQH WKHGLVWULFWFRXUWGHQLHGERWK LQ SURWHFWHG DFWLYLWLHV WKHUH FDQ EH RQO\ RQH UDWLRQDO PRWLRQV$WWKHILQDOVWDWXVFRQIHUHQFHSULRUWRWULDOWKHFRXUW FRQFOXVLRQRQmWKHXOWLPDWHLVVXHRIGLVFULPLQDWLRQlLHWKDW JUDQWHG .68jV PRWLRQ WR ELIXUFDWH WKH 7LWOH 9,, GLVSDUDWH WKHSODLQWLIIKDVVLPSO\QRWSURYHQKLVFDVH7KHSODLQWLIIjV LPSDFW FODLP DQG JUDQWHG .68jV PRWLRQ LQ OLPLQH WR   SUREOHPLVQRWWKDWKHIDLOHGWRPDNHDVKRZLQJVXIILFLHQWWR SUHFOXGHWKHWHVWLPRQ\RI.RYDFHYLFKj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sXO\    ODVWLQJ WZHOYH  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY

Q G&LU   m7KHIDFWWKDW>WKHGLVWULFWFRXUW@KHOGSULRU GD\VRYHUDWKUHHZHHNSHULRG$WWKHHQGRI.RYDFHYLFKjV WRWULDOWKDWJHQXLQHLVVXHVRIPDWHULDOIDFWSUHFOXGHGVXPPDU\ FDVHRQsXO\  .68PRYHGIRUMXGJPHQWDVDPDWWHU MXGJPHQWDVWR>WKHGHIHQGDQWjV@OLDELOLW\GRHVQRWQHFHVVDULO\ RI ODZ XQGHU )HG 5 &LY 3  D  EXW WKH FRXUW GHIHUUHG PHDQWKDWDYHUGLFWDVDPDWWHURIODZDIWHUWKHWULDOZRXOGEH UXOLQJRQWKHPRWLRQ$WWKHFORVHRILWVFDVHRQsXO\.68 XQZDUUDQWHG7KHZD\WKHHYLGHQFHSOD\VRXWDWWULDOPD\ UHQHZHG LWV PRWLRQ IRU MXGJPHQW DV D PDWWHU RI ODZ DQG VXIILFLHQWO\DOWHUWKHFRQWRXUVRIWKHOLDELOLW\LVVXHVXFKWKDWD .RYDFHYLFKDOVRPRYHGIRUMXGJPHQWDVDPDWWHURIODZ2Q UHDVRQDEOH MXU\ FRXOG UHDFK RQO\ RQH FRQFOXVLRQl  $XJXVW  WKH GLVWULFW FRXUW JUDQWHG .68jV PRWLRQ IRU 6RPHWLPHVLWLVVLPSO\HDVLHUWRGHWHUPLQHZKDWLQIHUHQFHV MXGJPHQW DV D PDWWHU RI ODZ RQ .RYDFHYLFKjV 7LWOH 9,, FDQ UHDVRQDEO\ EH GUDZQ RQFH RQH KDV DFWXDOO\ KHDUG WKH GLVSDUDWHWUHDWPHQWFODLPVFRQFOXGLQJWKDWWKHFODLPVZHUH WHVWLPRQ\LQTXHVWLRQUDWKHUWKDQWRPDNHWKHGHWHUPLQDWLRQ EDUUHGE\WKHVWDWXWHRIOLPLWDWLRQVDQGWKDW.RYDFHYLFKKDG IURPDSDSHUSUHYLHZRIWKDWWHVWLPRQ\ IDLOHG WR PDNH RXW D SULPD IDFLH FDVH  7KH FRXUW GHQLHG .RYDFHYLFKjV PRWLRQ DV ZHOO DV KHU UHTXHVW WR DPHQG KHU ,,, FRPSODLQW WR DGG D UHWDOLDWLRQ FODLP DQG DJDLQ UHVHUYHG MXGJPHQWRQ.68jVPRWLRQUHJDUGLQJWKHRWKHUFODLPV 7KHUDWLRQDOHRI$YHU\'HQQLVRQLVURRWHGLQWKH6XSUHPH &RXUWjVREVHUYDWLRQLQ8QLWHG6WDWHV3RVWDO6HUYLFH%RDUGRI 2Q$XJXVW WKHMXU\UHWXUQHGDYHUGLFWLQIDYRURI *RYHUQRUV Y $LNHQV  86     WKDW IROORZLQJ .RYDFHYLFK RQ ERWK WKH $'($ DQG (3$ FODLPV  :KLOH ILQDOMXGJPHQWIRUWKHGHIHQGDQWLQD7LWOH9,,FDVHDIWHUD JUDQWLQJKHULQGDPDJHVIRUWKH$'($FODLPWKH EHQFKWULDOLWZDVmVXUSULVLQJWRILQGWKHSDUWLHVDQGWKH&RXUW MXU\DZDUGHGQRGDPDJHVXQGHUWKH(3$EHFDXVHLWIRXQGWKDW RI$SSHDOVVWLOODGGUHVVLQJWKHTXHVWLRQZKHWKHU>WKH@SODLQWLII .68jVDFWLRQVZHUHQRWZLOOIXO$IWHU.RYDFHYLFKFKDOOHQJHG PDGHRXWDSULPDIDFLHFDVHl,GDW%HFDXVHWKHFDVH WKH(3$YHUGLFWDVLQFRQVLVWHQWWKHMXU\UHGHOLEHUDWHGXQGHU KDGEHHQWULHGRQWKHPHULWVWKH6XSUHPH&RXUWFRQFOXGHG FRXUWLQVWUXFWLRQDQGDZDUGHGGDPDJHVRI7KHFRXUW WKDWmE\IUDPLQJWKHLVVXHLQWKHVHWHUPVlWKHSDUWLHVDQGWKH WKHQH[FXVHGWKHMXU\ &RXUW RI $SSHDOV KDG mXQQHFHVVDULO\ HYDGHG WKH XOWLPDWH TXHVWLRQ RI GLVFULPLQDWLRQ YHO QRQl  $IWHU DOO WKH &RXUW 7KHSDUWLHVILOHGVHYHUDOSRVWYHUGLFWPRWLRQV.68PRYHG UHDVRQHGLImWKHGHIHQGDQWKDVGRQHHYHU\WKLQJWKDWZRXOGEH DJDLQ IRU D MXGJPHQW DV D PDWWHU RI ODZ RQ WKH (3$ DQG UHTXLUHGRIKLPLIWKHSODLQWLIIKDGSURSHUO\PDGHRXWDSULPD $'($FODLPVDQGILOHGDQHZPRWLRQIRUVXPPDU\MXGJPHQW IDFLH FDVH ZKHWKHU WKH SODLQWLII UHDOO\ GLG VR LV QR ORQJHU RQWKH7LWOH9,,GLVSDUDWHLPSDFWFODLP.RYDFHYLFKLQWXUQ UHOHYDQWl,GDW PRYHGIRUUHFRQVLGHUDWLRQRIWKHGLUHFWHGYHUGLFWRQKHU7LWOH 9,,GLVSDUDWHWUHDWPHQWFODLPILOHGDPRWLRQWRVWULNH.68jV %XWZKDWLIWKHUHLVDGLVSXWHDERXWZKHWKHUWKHGHIHQGDQW QHZVXPPDU\MXGJPHQWPRWLRQDQGUHTXHVWHGDVWD\RQWKH mKDV GRQH HYHU\WKLQJ WKDW ZRXOG EH UHTXLUHG RI KLP LI WKH GLVSDUDWHLPSDFWSURFHHGLQJVXQWLOVKHFRXOGGHSRVH.68jV SODLQWLIIKDGSURSHUO\PDGHRXWDSULPDIDFLHFDVH"l(YHQLI VWDWLVWLFDOH[SHUW2Q0D\ WKHGLVWULFWFRXUWJUDQWHG WKH GLVWULFW FRXUW KDV GHQLHG VXPPDU\ MXGJPHQW WR WKH .68jVPRWLRQIRUMXGJPHQWDVDPDWWHURIODZRQWKH(3$ GHIHQGDQWWKHSODLQWLIIVWLOOKDVWRSURYHKLVFDVHDWWULDO6HH DQG$'($FODLPVSXUVXDQWWR)HG5&LY3 E GHQLHG HJ 6W 0DU\jV +RQRU &WU Y +LFNV   86   .RYDFHYLFKjVPRWLRQIRUUHFRQVLGHUDWLRQDQGJUDQWHG.68jV    m7KHIDFWILQGHUjVGLVEHOLHIRIWKHUHDVRQVSXWIRUZDUG VHFRQGPRWLRQIRUVXPPDU\MXGJPHQWRQWKHGLVSDUDWHLPSDFW E\WKHGHIHQGDQW SDUWLFXODUO\LIGLVEHOLHILVDFFRPSDQLHGE\ FODLP.RYDFHYLFKILOHGWKLVDSSHDORQsXQH  DVXVSLFLRQRIPHQGDFLW\ PD\WRJHWKHUZLWKWKHHOHPHQWVRI WKH SULPD IDFLH FDVH VXIILFH WR VKRZ LQWHQWLRQDO  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

,, 'LVWULFWFRXUWVPD\LQWKHLUGLVFUHWLRQSHUPLWUHQHZHGRU VXFFHVVLYHPRWLRQVIRUVXPPDU\MXGJPHQWSDUWLFXODUO\ZKHQ $V D SUHOLPLQDU\ PDWWHU ZH DGGUHVV ZKHWKHU DVSHFWV RI WKHPRYLQJSDUW\KDVH[SDQGHGWKHIDFWXDOUHFRUGRQZKLFK .RYDFHYLFKjVVXLWDJDLQVW.68DUHEDUUHGE\WKH(OHYHQWK VXPPDU\MXGJPHQWLVVRXJKW6HHHJ:KLWIRUGY%RJOLQR $PHQGPHQW)LUVWZHUHFRJQL]HWKDW.68GLGQRWUDLVHDQ )G WK&LU   m>7@KHGHQLDORIVXPPDU\ (OHYHQWK$PHQGPHQWGHIHQVHDWWKHGLVWULFWFRXUWOHYHODQG MXGJPHQW KDV QR UHV MXGLFDWD HIIHFW DQG WKH GLVWULFW FRXUW WKDWWKHGLVWULFWFRXUWGLGQRWDGGUHVVWKLVTXHVWLRQ:HDOVR PD\ LQ LWV GLVFUHWLRQ DOORZ D SDUW\ WR UHQHZ D SUHYLRXVO\ ILQGWKDWWKLV&RXUWjVFRQFOXVLRQLQ:LOVRQsRQHVY&DYLQHVV GHQLHGVXPPDU\MXGJPHQWPRWLRQRUILOHVXFFHVVLYHPRWLRQV  )G   WK &LU   nWKDW mVWDWH LPPXQLW\ LV SDUWLFXODUO\LIJRRGUHDVRQVH[LVWl ,IWKHGHQLDORIDPRWLRQ MXULVGLFWLRQDO LQ WKH VDPH VHQVH DV WKH FRPSOHWH GLYHUVLW\ IRU VXPPDU\ MXGJPHQW ZHUH HQWLWOHG WR SUHFOXVLYH HIIHFW UHTXLUHPHQWl DQG WKDW mQHLWKHU WKH OLWLJDQWVj FRQVHQW QRU GLVWULFWFRXUWVSUHVXPDEO\ZRXOGQRWEHDOORZHGWRHQWHUWDLQ RYHUVLJKWQRUFRQYHQLHQFHFDQMXVWLI\DFRXUWjVH[HUFLVHRI UHQHZHGRUVXFFHVVLYHVXPPDU\MXGJPHQWPRWLRQV LOOHJDOSRZHUlnLVQRORQJHUJRRGODZ,Q:LVFRQVLQ'HSjWRI &RUUHFWLRQVY6FKDFKW86    FRXQWHUWR ,Q DGGLWLRQ $YHU\ 'HQQLVRQ IDLOV WR DFNQRZOHGJH WKH RXUKROGLQJLQ&DYLQHVVWKH6XSUHPH&RXUWVWDWHGWKDWWKH GLIIHUHQFHEHWZHHQDVXPPDU\MXGJPHQWUHFRUGDQGDWULDO (OHYHQWK$PHQGPHQWLVQRWMXULVGLFWLRQDODQGLVQRWDNLQWR UHFRUG  0RWLRQV IRU VXPPDU\ MXGJPHQW DUH GHFLGHG WKHFRPSOHWHGLYHUVLW\UHTXLUHPHQWm7KH6WDWHFDQZDLYHWKH mH[FOXVLYHO\RQWKHEDVLVRIDµSDSHUjUHFRUGl6KLHOGVY GHIHQVH1RUQHHGDFRXUWUDLVHWKHGHIHFWRQLWVRZQ (OL /LOO\  &R   )G   '& &LU    8QOHVVWKH6WDWHUDLVHVWKHPDWWHUDFRXUWFDQLJQRUHLWl,G 'HSRVLWLRQWUDQVFULSWVDQGDIILGDYLWVDUHXVHGDVVWDQGLQVIRU VHHDOVR+LJJLQVY0LVVLVVLSSL:/  WK&LU WKHOLYHZLWQHVVWHVWLPRQ\WKDWZRXOGEHSUHVHQWHGDWWULDO sXQH DW  VWDWLQJWKDW6FKDFKWZDVFRQWUDU\WRWKH 7KHWULDOUHFRUGRQWKHRWKHUKDQGFRQVLVWVSULQFLSDOO\RIWKH KROGLQJLQ&DYLQHVV  ZLWQHVV WHVWLPRQ\ IRU ZKLFK WKH GHSRVLWLRQ WUDQVFULSWV DQG DIILGDYLWVZHUHVXUURJDWHV DVVXPLQJWKDWWKHSDUWLHVKDYHQRW 1RQHWKHOHVV XQOLNH RWKHU DIILUPDWLYH GHIHQVHV mµWKH DJUHHGWRDWULDORQVWLSXODWHGIDFWV  (OHYHQWK $PHQGPHQW GHIHQVH VXIILFLHQWO\ SDUWDNHV RI WKH QDWXUHRIDMXULVGLFWLRQDOEDUjWKDWLWPD\EHUDLVHGDWDQ\SRLQW $ SDUW\ PLJKW QRW DOZD\V LQWURGXFH DW WULDO DOO RI WKH RIWKHSURFHHGLQJVlLQFOXGLQJRQDSSHDO)ORULGD'HSjWRI HYLGHQFHLWSXWLQWRWKHVXPPDU\MXGJPHQWUHFRUGnZKHWKHU 6WDWH Y 7UHDVXUH 6DOYRUV ,QF  86   Q IRU WDFWLFDO SXUSRVHV ODFN RI ZLWQHVV DYDLODELOLW\ RU RWKHU   SOXUDOLW\ RSLQLRQ TXRWLQJ (GHOPDQ Y sRUGDQ  UHDVRQV  2U UDWKHU WKDQ SUHVHQWLQJ WRR OLWWOH HYLGHQFH LW 86      VHH DOVR 6FKDFKW  86 DW   PLJKWSUHVHQWWRRPXFKDQGZUHFNLWVFDVHLQWKHSURFHVV,I VWDWLQJWKDWSUHFHGHQWDOORZVWKH(OHYHQWK$PHQGPHQWWREH WKHHYLGHQFHLQWKHWULDOUHFRUGLVQRWWKHVDPHDVWKHHYLGHQFH ILUVW DVVHUWHG RQ DSSHDO .HQQHG\ s FRQFXUULQJ  )RUG LQWKHVXPPDU\MXGJPHQWUHFRUGLWZRXOGPDNHOLWWOHVHQVHWR 0RWRU&RY'HSDUWPHQWRI7UHDVXU\RI,QG86  VD\WKDWDGLVWULFWFRXUWjVGHFLVLRQWRGHQ\VXPPDU\MXGJPHQW    FRQVLGHULQJDQ(OHYHQWK$PHQGPHQWGHIHQVHWKDW IRUHFORVHVLWIURPJUDQWLQJMXGJPHQWDVDPDWWHURIODZRQWKH ZDV UDLVHG IRU WKH ILUVW WLPH EHIRUH WKH 6XSUHPH &RXUW  VDPHLVVXHDIWHUDMXU\WULDO %HFDXVHLQLWVVXSSOHPHQWDOEULHILQJEHIRUHWKLV&RXUW.68 KDVDUJXHGWKDWWKH(OHYHQWK$PHQGPHQWEDUV.RYDFHYLFKjV %XWHYHQLIWKHFRQWHQWVRIWKHWULDOUHFRUGDSSHDUWRPDWFK $'($DQG(3$FODLPVZHZLOOFRQVLGHUWKHGHIHQVH XSZLWKWKHFRQWHQWVRIWKHVXPPDU\MXGJPHQWUHFRUGOLYH ZLWQHVV WHVWLPRQ\ mSOD\Vl GLIIHUHQWO\ WKDQ DIILGDYLWV DQG GHSRVLWLRQIUDJPHQWV6HH'H&DUORY)U\)G  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

,, $ $SULQFLSDOSUREOHPZLWK$YHU\'HQQLVRQLVLWVVXJJHVWLRQ )LUVW.LPHOY)ORULGD%GRI5HJHQWV6&W  WKDW WKH GLVWULFW FRXUW E\ DOORZLQJ WKH FDVH WR JR WR WULDO SODLQO\KROGVWKDWVWDWHVFDQQRWEHVXHGIRUPRQH\GDPDJHV mWDFLW>O\@ DFNQRZOHGJHG    3ODLQWLIIVj SULPD IDFLH FDVHl XQGHU WKH $'($ EHFDXVH &RQJUHVVjV DEURJDWLRQ RI VWDWHVj $YHU\'HQQLVRQ)GDW$FWXDOO\E\GHQ\LQJWKH LPPXQLW\ZDVQRWYDOLGXQGHU&LW\RI%RHUQHY)ORUHV SODLQWLIIVjPRWLRQVIRUVXPPDU\MXGJPHQWWKHRQO\WKLQJWKH 86   6HH.LPHO6&WDW &RJHUY GLVWULFWFRXUWGHFLGHGZDVWKDWRQWKHEDVLVRIWKHVXPPDU\ %RDUGRI5HJHQWV )G WK&LU  VWDWLQJWKDW MXGJPHQW UHFRUG D UHDVRQDEOH WULHU RI IDFW ZRXOG QRW EH .LPHO FRQFOXGHG WKDW WKH $'($jV DEURJDWLRQ RI (OHYHQWK FRPSHOOHG WR ILQG LQ WKHLU IDYRU  6SHFLILFDOO\ WKH GLVWULFW $PHQGPHQWLPPXQLW\mH[FHHGHG&RQJUHVVjDXWKRULW\XQGHU FRXUWFRQFOXGHGWKDWDUHDVRQDEOHWULHURIIDFWZRXOGQRWEH 6HFWLRQRIWKH)RXUWHHQWK$PHQGPHQWl YDFDWLQJ)G FRPSHOOHGWRILQGWKDW:LOOLVjVEDGMREUHIHUHQFHZDVFDXVDOO\   WK&LU  8QGHU2KLRODZ.68LVDQmDUPRIWKH UHODWHGWRKLVHQJDJLQJLQSURWHFWHGDFWLYLWLHV7KDWLVQRWWKH VWDWHlHQWLWOHGWR(OHYHQWK$PHQGPHQWLPPXQLW\6HH+DOO VDPHDVFRQFOXGLQJWKDWDUHDVRQDEOHWULHURIIDFWFRXOGILQG Y0HGLFDO&ROOHJHRI2KLRDW7ROHGR)G  WKDW WKH MRE UHIHUHQFH ZDV FDXVDOO\ UHODWHG WR :LOOLVjV WK&LU  .68LVWKXVLPPXQHIURP VXLWXQGHUWKH HQJDJLQJLQSURWHFWHGDFWLYLWLHV $JDLQ$YHU\'HQQLVRQKDG $'($DQGZHDIILUPWKHGLVWULFWFRXUWjVMXGJPHQWIRU.68 QRWPRYHGIRUVXPPDU\MXGJPHQW  RQWKDWFODLP $QRWKHUSUREOHPZLWK$YHU\'HQQLVRQLVLWVDVVXPSWLRQ % WKDWDGLVWULFWFRXUWjVGHQLDORIVXPPDU\MXGJPHQWLVHQWLWOHG WRSUHFOXVLYHHIIHFWDVLILWEHFRPHVmWKHODZRIWKHFDVHl,W &RQYHUVHO\ZHILQGWKDW.LPHOGRHVQRWDOWHUWKLV&LUFXLWjV GRHVQRW6HHHJ3HUH]5XL]Y&UHVSR*XLOOHQ)G FRQFOXVLRQWKDWWKH(3$FRQVWLWXWHGDSURSHUDEURJDWLRQRI  VW &LU    QRWLQJ WKDW LQWHUORFXWRU\ RUGHUV GR QRW (OHYHQWK$PHQGPHQWLPPXQLW\6HH7LPPHUY0LFKLJDQ EHFRPHmWKHODZRIWKHFDVHlDQGmUHPDLQRSHQWRWULDOFRXUW 'HSjWRI&RPPHUFH)G WK&LU   UHFRQVLGHUDWLRQl 'HVVDUY%DQNRI$P1DWjO7UXVW 6DY $VVjQ)G WK&LU   REVHUYLQJWKDWWKH  GHQLDORIDPRWLRQIRUVXPPDU\MXGJPHQWmPHUHO\SRVWSRQHV GHFLVLRQRIDQ\TXHVWLRQ LWGHFLGHVQRQHlDQGWKDWm>W@RJLYH 7KH(OHYHQWK$PHQGPHQWSURYLGHVWKDW LWDQ\RWKHUHIIHFWZRXOGEHHQWLUHO\FRQWUDU\WRWKHSXUSRVHRI WKH VXPPDU\ MXGJPHQW SURFHGXUH  7KH FRXUW GLG QRWKLQJ 7KH sXGLFLDO SRZHU RI WKH 8QLWHG 6WDWHV VKDOO QRW EH PRUH WKDQ LW SXUSRUWHG WR GR WKDW LV UHIXVH WR JUDQW WKH FRQVWUXHG WR H[WHQG WR DQ\ VXLW LQ ODZ RU HTXLW\ PRWLRQl 'LFWRSKRQH3URGV&RY6RQRWRQH&RUS)G FRPPHQFHG RU SURVHFXWHG DJDLQVW RQH RI WKH 8QLWHG   G &LU    / +DQG s  m1R RQH ZLOO 6WDWHV E\ &LWL]HQV RI DQRWKHU 6WDWH RU E\ &LWL]HQV RU VXJJHVWWKDWWKH>WULDOMXGJH@PD\QRWFKDQJHKLVPLQGDQG 6XEMHFWVRIDQ\)RUHLJQ6WDWH RYHUUXOHKLVRZQRUGHUµ,QWKHDEVHQFHRIVWDWXWHWKH 86&RQVWDPHQG;,&RXUWVKDYHORQJUHDGWKLVODQJXDJH SKUDVHmODZRIWKHFDVHlDVDSSOLHGWRWKHHIIHFWRISUHYLRXV WR PHDQmWKDWDQXQFRQVHQWLQJ6WDWHLVLPPXQHIURPVXLWV RUGHUVPHUHO\H[SUHVVHVWKHSUDFWLFHRIFRXUWVJHQHUDOO\WR EURXJKWLQIHGHUDOFRXUWVE\KHURZQFLWL]HQVDVZHOODVE\ UHIXVHWRUHRSHQZKDWKDVEHHQGHFLGHGQRWDOLPLWRQWKHLU FLWL]HQVRIDQRWKHU6WDWHl(GHOPDQYsRUGDQ86 SRZHUjl  TXRWLQJ0HVVLQJHUY$QGHUVRQ86    1HYHUWKHOHVVZHKDYHUHFRJQL]HGWKDWWKHUHLV    +ROPHVs  QR(OHYHQWK$PHQGPHQWEDULQWKUHHLQVWDQFHV   ZKHQWKH  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

VWDWH KDV FRQVHQWHG WR VXLW    ZKHQ WKH ([ 3DUWH <RXQJ GHQLDO RI WKH ((2&jV DQG :LOOLVjV PRWLRQV IRU VXPPDU\ H[FHSWLRQ DSSOLHV  DQG   ZKHQ &RQJUHVV KDV SURSHUO\ MXGJPHQWPHDQWWKDWWKHGLVWULFWFRXUWmEHOLHYHGWKDWJHQXLQH DEURJDWHGVWDWHVjLPPXQLW\6HH1HOVRQY0LOOHU)G LVVXHVH[LVWHGZLWKUHVSHFWWRWKHSULPDIDFLHFDVHlLGDW  WK&LU :KHWKHUWKH(OHYHQWK$PHQGPHQW LQFOXGLQJ ZKHWKHU RU QRW :LOOLVjV EDG MRE UHIHUHQFH ZDV EDUVVXLWVDJDLQVWVWDWHVXQGHUWKH(3$LQYROYHVDQDQDO\VLVRI FDXVDOO\ UHODWHG WR KLV HQJDJLQJ LQ SURWHFWHG DFWLYLWLHV WKLVWKLUGH[FHSWLRQ $FFRUGLQJWRWKHPDMRULW\m>W@KHIDFWWKDWWKH>GLVWULFW@FRXUW ZDVIDFHGZLWKWKHSULPDIDFLHFDVHTXHVWLRQDWWKHVXPPDU\ $IWHU6HPLQROH7ULEHRI)ORULGDY)ORULGD86 MXGJPHQWVWDJHDQGWKHQDOORZHGWKHFDVHWRJRWRWULDOFRXOG    &RQJUHVV FDQ DEURJDWH (OHYHQWK $PHQGPHQW EH FRQVWUXHG DV D WDFLW DFNQRZOHGJPHQW RI >WKH ((2&jV@ LPPXQLW\ RQO\ XQGHU LWV 6HFWLRQ  SRZHU WR HQIRUFH WKH SULPDIDFLHFDVHl,GDW:KDWWKHGLVWULFWFRXUWVKRXOG )RXUWHHQWK $PHQGPHQW  6HPLQROH 7ULEH HUHFWHG  D WZR KDYHGRQHWKHPDMRULW\FRQFOXGHGZDVmGUDZ>@DSSURSULDWH SURQJHGWHVWWRGHWHUPLQHWKHYDOLGLW\RI6HFWLRQDEURJDWLRQ UHDVRQDEOHLQIHUHQFHVDQGUXOH>@RQZKHWKHURUQRWDSULPD )LUVWZHPXVWGHWHUPLQHZKHWKHU&RQJUHVVmXQHTXLYRFDOO\ IDFLHFDVHKDGEHHQPDGHUHVHUYLQJIRUWULDORQO\WKHXOWLPDWH H[SUHVVH>G@LWVLQWHQWWRDEURJDWHWKHLPPXQLW\l,GDW LVVXHRIGLVFULPLQDWLRQl,GDW 6HFRQGZHPXVWGHWHUPLQHZKHWKHU&RQJUHVVDFWHGSXUVXDQW WRDYDOLGH[HUFLVHRI6HFWLRQSRZHU6HHLG$VWKH&RXUW 5HDVRQLQJWKDWDmILQGLQJWKDW>WKH@SODLQWLIIKDVSURYHQD H[SODLQHG LQ .DW]HQEDFK Y 0RUJDQ  86   SULPD IDFLH FDVH IRUFHV WKH GHIHQGDQW WR SURFHHG ZLWK LWV    6HFWLRQ  mLV D SRVLWLYH JUDQW RI OHJLVODWLYH SRZHU FDVHl LG DW  WKH PDMRULW\ ZHQW RQ WR KROG WKDW m>L@W DXWKRUL]LQJ&RQJUHVVWRH[HUFLVHLWVGLVFUHWLRQLQGHWHUPLQLQJ QHFHVVDULO\IROORZVWKHQWKDWWKHGHIHQGDQWLVQRWHQWLWOHGWR ZKHWKHU DQG ZKDW OHJLVODWLRQ LV QHHGHG WR VHFXUH WKH MXGJPHQW DV D PDWWHU RI ODZ RU VXPPDU\ MXGJPHQW LI D JXDUDQWHHVRIWKH)RXUWHHQWK$PHQGPHQWl.DW]HQEDFKZHQW SODLQWLIIKDVSURYHQLWVSULPDIDFLHFDVHlEHFDXVHm>W@KLVLVD RQWRGHILQHDSSURSULDWH6HFWLRQOHJLVODWLRQDVOHJLVODWLRQ SUHOLPLQDU\PDWWHUZKLFKFDQQRWEHUHYLVLWHGDWDODWHUWLPHl WKDW  PD\EHUHJDUGHGDVDQHQDFWPHQWWRHQIRUFHWKHHTXDO ,GDW 3XWWLQJDVLGHDOORWKHULVVXHVIRUWKHPRPHQWLW SURWHFWLRQFODXVH  LVSODLQO\DGDSWHGWRWKDWHQG DQG LV DSSHDUVWKDWWKHPDMRULW\RYHUORRNHGWKHIDFWWKDWDGLVWULFW QRWSURKLELWHGE\EXWLVFRQVLVWHQWZLWKWKHOHWWHUDQGVSLULWRI FRXUWjV HQWU\ RI MXGJPHQW IROORZLQJ D EHQFK WULDO LV QRW WKH&RQVWLWXWLRQ6HHLG mMXGJPHQWDVDPDWWHURIODZRUVXPPDU\MXGJPHQWl %DVHG RQWKHDERYHDQDO\VLVWKLVFRXUWUHYHUVHGWKHGLVWULFWFRXUWjV 7KH 6XSUHPH &RXUW IXUWKHU FODULILHG WKH H[WHQW RI HQWU\RIMXGJPHQWIRU$YHU\'HQQLVRQDQGUHPDQGHGWKHFDVH &RQJUHVVjV6HFWLRQSRZHULQ&LW\RI%RHUQHY)ORUHV WRWKHGLVWULFWFRXUWIRUmDGHWHUPLQDWLRQRQWKHXOWLPDWHLVVXH 86     VWULNLQJ GRZQ WKH 5HOLJLRXV )UHHGRP RIGLVFULPLQDWLRQl,GDW 5HVWRUDWLRQ$FW m5)5$l EHFDXVHLWH[FHHGHGWKDWSRZHU 7KH &RXUW FRQFOXGHG WKDW &RQJUHVV KDV WKH DXWKRULW\ WR 2QUHPDQGWKHGLVWULFWFRXUWUHHQWHUHGMXGJPHQWIRU$YHU\ UHPHG\DQGSUHYHQWFRQVWLWXWLRQDOYLRODWLRQVmHYHQLILQWKH 'HQQLVRQWKLVWLPHILQGLQJWKDWWKH((2&KDGIDLOHGWRSURYH SURFHVV LW SURKLELWV FRQGXFW ZKLFK LV QRW LWVHOI WKDW $YHU\ 'HQQLVRQjV OHJLWLPDWH QRQGLVFULPLQDWRU\ XQFRQVWLWXWLRQDO DQG LQWUXGHV LQWR µOHJLVODWLYH VSKHUHV RI H[SODQDWLRQ IRU LWV FRQGXFW ZDV SUHWH[WXDO  7KLV FRXUW DXWRQRP\ SUHYLRXVO\ UHVHUYHG WR WKH 6WDWHVjl  ,G DW  DIILUPHG WKH MXGJPHQW RI WKH GLVWULFW FRXUW LQ D VKRUW FLWDWLRQRPLWWHG 1RQHWKHOHVV&RQJUHVVFDQQRWHQIRUFHD XQSXEOLVKHGRSLQLRQ6HH((2&Y$YHU\'HQQLVRQ&RUS FRQVWLWXWLRQDOULJKWE\FKDQJLQJWKHVXEVWDQFHRIWKDWULJKW 1R   :/ WK&LU1RY  m,WKDVEHHQJLYHQWKHSRZHUµWRHQIRUFHjQRWWKHSRZHUWR GHWHUPLQHZKDWFRQVWLWXWHVDFRQVWLWXWLRQDOYLRODWLRQl,GDW  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

mEHFDXVH RI DQ DUELWUDWLRQ FDVH WKDW DZDUGHG KLP D FDVK   FLWDWLRQ RPLWWHG   7KH &RXUW DFNQRZOHGJHG WKDW WKLV VHWWOHPHQWRQWKHFRQGLWLRQWKDWKHWHUPLQDWHKLVHPSOR\PHQWl GLFKRWRP\ EHWZHHQ ULJKWVHQIRUFHPHQW DQG ULJKWVFUHDWLRQ ZLWK$YHU\'HQQLVRQ,GDW 1RWVXUSULVLQJO\:LOOLVGLG SUHVHQWVDGLIILFXOWDQDO\VLVm>7@KHOLQHEHWZHHQPHDVXUHV QRWJHWWKHMRE WKDWUHPHG\RUSUHYHQWXQFRQVWLWXWLRQDODFWLRQVDQGPHDVXUHV WKDWPDNHDVXEVWDQWLYHFKDQJHLQWKHJRYHUQLQJODZLVQRW :LOOLV WKHQ ILOHG D FKDUJH ZLWK WKH (TXDO (PSOR\PHQW HDV\ WR GLVFHUQ DQG &RQJUHVV PXVW KDYH ZLGH ODWLWXGH LQ 2SSRUWXQLW\&RPPLVVLRQFODLPLQJWKDWWKHEDGHPSOR\PHQW GHWHUPLQLQJZKHUHLWOLHVl,GDW 7RDVVHVVRQ UHIHUHQFHZDVLQUHWDOLDWLRQIRUKLVSDUWLFLSDWLRQLQSURWHFWHG ZKDWVLGHRIWKDWOLQHDJLYHQODZIDOOVWKH&RXUWUHTXLUHGWKDW DFWLYLWLHVLHSURWHVWLQJDOOHJHGO\GLVFULPLQDWRU\FRPSDQ\ WKHUH EH mD FRQJUXHQFH DQG SURSRUWLRQDOLW\ EHWZHHQ WKH SROLFLHV DQG 7LWOH 9,, YLRODWLRQV ILOLQJ ((2& FODLPV DQG LQMXU\WREHSUHYHQWHGRUUHPHGLHGDQGWKHPHDQVDGRSWHGWR SURVHFXWLQJ7LWOH9,,ODZVXLWV7KH((2&ILOHGDFRPSODLQW WKDWHQGl,GDW HPSKDVLVDGGHG 7KH6XSUHPH&RXUW LQWKH8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH1RUWKHUQ'LVWULFWRI LQ)ORULGD3UHSDLG3RVWVHFRQGDU\(GXFDWLRQ([SHQVH%RDUG 2KLRRQ:LOOLVjVEHKDOIDOOHJLQJUHWDOLDWLRQLQYLRODWLRQRI Y&ROOHJH6DYLQJV%DQNIXUWKHUVWDWHGWKDWmIRU&RQJUHVVWR 7LWOH9,,:LOOLVZDVSHUPLWWHGWRLQWHUYHQH LQYRNH †  LW PXVW LGHQWLI\ FRQGXFW WUDQVJUHVVLQJ WKH )RXUWHHQWK$PHQGPHQWjVVXEVWDQWLYHSURYLVLRQVDQGPXVW 7KH((2&DQG:LOOLVILOHGPRWLRQVIRUVXPPDU\MXGJPHQW WDLORULWVOHJLVODWLYHVFKHPHWRUHPHG\LQJRUSUHYHQWLQJVXFK $OWKRXJKWKHPDMRULW\RSLQLRQLQ$YHU\'HQQLVRQGHVFULEHV FRQGXFWl 6&W    WKHPRWLRQVDVmFURVVPRWLRQVl$YHU\'HQQLVRQ)GDW LWLQIDFWDSSHDUVWKDW$YHU\'HQQLVRQKDG QRW FURVV 8QGHULWVFRQJUXHQFHDQGSURSRUWLRQDOLW\WHVWWKH&LW\RI PRYHGIRUVXPPDU\MXGJPHQWDQGWKDWWKHRQO\PRWLRQVIRU %RHUQH &RXUW VWUXFN GRZQ 5)5$ IRU WUDQVJUHVVLQJ VXPPDU\MXGJPHQWVEHIRUHWKHGLVWULFWFRXUWZHUHWKHRQHV &RQJUHVVjV 6HFWLRQ  SRZHU  ,W GLG VR IRU WKUHH SULPDU\ ILOHGE\WKH((2&DQG:LOOLV 7KHGLVWULFWFRXUWGHQLHGWKH UHDVRQV)LUVWWKH&RXUWIRXQGWKHOHJLVODWLYHUHFRUGEDUUHQ PRWLRQVFRQFOXGLQJWKDWEDVHGRQWKHVXPPDU\MXGJPHQW RI H[DPSOHV RI PRGHUQ ODZV H[KLELWLQJ UHOLJLRXV ELJRWU\ UHFRUG D UHDVRQDEOH IDFWILQGHU ZRXOG QRW EH FRPSHOOHG WR JLYLQJLWOLWWOHEDVLVE\ZKLFKWRZHLJKWKHmHYLOSUHVHQWHGl FRQFOXGHWKDWWKHEDGMREUHIHUHQFHZDVFDXVDOO\UHODWHGWR DORQJVLGHWKHUHPHGLDOPHDVXUHVHQDFWHG86DW :LOOLVjVHQJDJLQJLQSURWHFWHGDFWLYLWLHV VHH)ORULGD3UHSDLG 6&WDW H[SODLQLQJWKDWLQ &LW\RI%RHUQHWKH&RXUWKHOGWKDWm5)5$IDLOHGWRPHHWWKLV %HFDXVHQRSDUW\KDGUHTXHVWHGDMXU\WULDOWKHGLVWULFWFRXUW WHVW EHFDXVH WKHUH ZDV OLWWOH VXSSRUW LQ WKH UHFRUG IRU WKH WKHQFRQGXFWHGDEHQFKWULDODIWHUZKLFKLWLVVXHGILQGLQJVRI FRQFHUQVWKDWVXSSRVHGO\DQLPDWHGWKHODZl 6HFRQGWKH IDFW DQG FRQFOXVLRQV RI ODZ DV UHTXLUHG E\ 5XOH  RI WKH &RXUW IRXQG 5)5$ mµVR RXW RI SURSRUWLRQ WR D VXSSRVHG )HGHUDO5XOHVRI&LYLO3URFHGXUH$PRQJWKHGLVWULFWFRXUWjV UHPHGLDORUSUHYHQWLYHREMHFWjWKDWLWFRXOGQRWEHXQGHUVWRRG ILQGLQJVRIIDFWZDVWKHNH\SRLQWWKDWWKH((2&KDGIDLOHGWR µDV UHVSRQVLYH WR RU GHVLJQHG WR SUHYHQW XQFRQVWLWXWLRQDO HVWDEOLVKE\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKDWWKHDGYHUVH EHKDYLRUjl,G TXRWLQJ&LW\RI%RHUQH86DW  HPSOR\PHQWDFWLRQZDVFDXVDOO\UHODWHGWR:LOOLVjVHQJDJLQJ 7KLUGWKH&RXUWIRFXVHGRQWKHIDFWWKDW5)5$UHLQVWLWXWHG LQ SURWHFWHG DFWLYLWLHV  $FFRUGLQJO\ WKH GLVWULFW FRXUW D FRPSHOOLQJ LQWHUHVW VWDQGDUG IRU DVVHVVLQJ WKH YDOLGLW\ RI FRQFOXGHG WKDW WKH ((2& KDG QRW SURYHG LWV FDVH E\ D EXUGHQVRQWKHIUHHH[HUFLVHRIUHOLJLRQnDVWDQGDUGWKDWKDG SUHSRQGHUDQFHRIWKHHYLGHQFHDQGHQWHUHGMXGJPHQWLQIDYRU EHHQUHMHFWHGLQ(PSOR\HUjV'LYLVLRQY6PLWK 86 RI$YHU\'HQQLVRQ7KH((2&DQG:LOOLVDSSHDOHG   nWR XQGHUVFRUH WKDW &RQJUHVV ZDV LQWHQGLQJ D mVXEVWDQWLYH DOWHUDWLRQ RI >WKH 6PLWK@ KROGLQJl  &LW\ RI $GLYLGHGSDQHORIWKLV FRXUWUHYHUVHGZLWKsXGJH5\DQ %RHUQH86DW)RUDOORIWKHVHUHDVRQVWKH&RXUW GLVVHQWLQJ7KHPDMRULW\FRQFOXGHGWKDWWKHGLVWULFWFRXUWjV  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

KHOG WKDW 5)5$ mFRQWUDGLFWV YLWDO SULQFLSOHV QHFHVVDU\ WR BBBBBBBBBBBBBBBBBBBB PDLQWDLQVHSDUDWLRQRISRZHUVDQGWKHIHGHUDOEDODQFHl,G DW &21&855(1&( BBBBBBBBBBBBBBBBBBBB $SSO\LQJWKHFRQJUXHQFHDQGSURSRUWLRQDOLW\WHVWIURP&LW\ RI%RHUQHWKH6XSUHPH&RXUWLQ.LPHOKHOGWKDWWKH$'($ 521$/'/((*,/0$1&LUFXLWsXGJHFRQFXUULQJLQSDUW ZDVDOVRDQLQDSSURSULDWHH[HUFLVHRI†SRZHU,Q.LPHOWKH DQGFRQFXUULQJLQWKHMXGJPHQW &RXUW HVVHQWLDOO\ WRRN WZR VWHSV  )LUVW LW IRXQG WKDW WKH mVXEVWDQWLYHUHTXLUHPHQWVWKH$'($LPSRVHVRQVWDWHDQG ,FRQFXULQWKHMXGJPHQWRIWKHFRXUWDQGLQPXFKRILWV ORFDO JRYHUQPHQWV DUH GLVSURSRUWLRQDWH WR DQ\ UHDVRQLQJ WKRXJK , EHOLHYH WKDW WKH MXU\ FRXOG DW OHDVW DV XQFRQVWLWXWLRQDOFRQGXFWWKDWFRQFHLYDEO\FRXOGEHWDUJHWHG HDVLO\ KDYH IRXQG WKDW .RYDFHYLFKjV ODJJLQJ SD\ ZDV WKH E\ WKH $FWl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jVIDYRUEDVHG WKDQZRXOGEHLOOHJDOXQGHUWKH)RXUWHHQWK$PHQGPHQW6HH RQWKHHYLGHQFHSUHVHQWHGDQG,DJUHHZLWKWKHFRXUWWKDWLW LG DW   6HFRQG WKH &RXUW IRXQG WKDW WKH OHJLVODWLYH KDV IDLOHG WR GR VR  7KH IDFW WKDW RQH RU PRUH UHYLHZLQJ UHFRUG GLG QRW VXSSRUW WKH FRQFOXVLRQ WKDW WKH $'($ MXGJHVPLJKWKDYHZHLJKHGWKHHYLGHQFHGLIIHUHQWO\SURYLGHV FRQVWLWXWHG UHDVRQDEOH SURSK\ODFWLF OHJLVODWLRQ URRWLQJ RXW QR EDVLV WR RYHUWXUQ WKH MXU\jV YHUGLFW  6HH :LOOLDPV Y WKRVHLQVWDQFHVRIDJHGLVFULPLQDWLRQWKDWZHUHVXIILFLHQWO\ 1DVKYLOOH1HWZRUN)G WK&LU  DUELWUDU\WRYLRODWHHTXDOSURWHFWLRQ7KH&RXUWSDUVHGWKH 6FRWWY&RXQW\RI5DPVH\)G   WK&LU OHJLVODWLYHUHFRUGILQGLQJLWYRLGRIDQ\FRQFUHWHVKRZLQJWKDW  ,ZULWHVHSDUDWHO\KRZHYHUEHFDXVH,TXHVWLRQWKH VWDWHV DQG ORFDO JRYHUQPHQWV KDG EHHQ XQFRQVWLWXWLRQDOO\ VRXQGQHVVRIWKHGHFLVLRQLQ((2&Y$YHU\'HQQLVRQ&RUS GLVFULPLQDWLQJDJDLQVWWKHHOGHUO\%DVHGRQZKDWLWGHHPHG )G WK&LU  DQGWKHFRXUWjVGHIHQVHRIWKDW LQVXEVWDQWLDOILQGLQJVWKH&RXUWFRQFOXGHG RSLQLRQ

&RQJUHVVKDGYLUWXDOO\QRUHDVRQWREHOLHYHWKDWVWDWHDQG , ORFDOJRYHUQPHQWVZHUHXQFRQVWLWXWLRQDOO\GLVFULPLQDWLQJ DJDLQVW WKHLU HPSOR\HHV RQ WKH EDVLV RI DJH    ,Q((2&Y$YHU\'HQQLVRQ&RUS)G WK&LU &RQJUHVVjIDLOXUHWRXQFRYHUDQ\VLJQLILFDQWSDWWHUQRI    5RQDOG :LOOLV WKH FKDUJLQJ SDUW\ VHWWOHG D UDFH XQFRQVWLWXWLRQDO GLVFULPLQDWLRQ KHUH FRQILUPV WKDW GLVFULPLQDWLRQ VXLW DJDLQVW $YHU\ 'HQQLVRQ &RUSRUDWLRQ &RQJUHVV KDG QR UHDVRQ WR EHOLHYH WKDW EURDG ZKLFKZDVWKHQ:LOOLVjVHPSOR\HU$YHU\'HQQLVRQDJUHHG SURSK\ODFWLFOHJLVODWLRQZDVQHFHVVDU\LQWKLVILHOG WRDFDVKVHWWOHPHQWRIWKHFODLPDQGWRSURYLGH:LOOLVZLWKD OHWWHURIUHIHUHQFH,QH[FKDQJH:LOOLVDJUHHGWRUHVLJQKLV SRVLWLRQ DW $YHU\ 'HQQLVRQ DQG ORRN IRU ZRUN HOVHZKHUH $IWHU :LOOLV LQWHUYLHZHG IRU DQRWKHU MRE KLV SURVSHFWLYH HPSOR\HU FRQWDFWHG $YHU\ 'HQQLVRQ VHHNLQJ LQIRUPDWLRQ  DERXW:LOOLVjVHPSOR\PHQW7KH$YHU\'HQQLVRQHPSOR\HH 7KH &RXUW UHMHFWHG .LPHOjV DUJXPHQW WKDW WKH %)24 H[FHSWLRQ WR WKH $'($ UDLVHG WKH WKUHVKROG RI DQ $'($ YLRODWLRQ WR WKH OHYHO QHHGHG ZKRUHVSRQGHGWRWKHUHTXHVWIRULQIRUPDWLRQUHSRUWHGWKDW WR VDWLVI\ DQ HTXDO SURWHFWLRQ FODLP 6HH LG DW  :LOOLV KDG EHHQ IUHTXHQWO\ DEVHQW IURP ZRUN DQG KDG OHIW  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

:KHQUHYLHZLQJDGLVWULFWFRXUWjVIDFWXDOILQGLQJVDVSDUWRI ,G DW    ,Q OLJKW RI WKH mLQGLVFULPLQDWH VFRSH RI WKH D GHFLVLRQ QRW WR GLVTXDOLI\ ZH DSSO\ D FOHDUO\ HUURQHRXV $FWjVVXEVWDQWLYHUHTXLUHPHQWVDQGWKHODFNRIHYLGHQFHRI VWDQGDUG6HH'DQD&RUSY%OXH&URVV %OXH6KLHOG0XW ZLGHVSUHDG DQG XQFRQVWLWXWLRQDO DJH GLVFULPLQDWLRQ E\ WKH RI12KLR )G  WK&LU  :HDJUHHZLWK 6WDWHVlWKH&RXUWKHOGWKDWWKH$'($ZDVDQLQYDOLGH[HUFLVH WKHGLVWULFWFRXUWWKDWWKHUHLVQRFDVHIRUGLVTXDOLILFDWLRQKHUH RI&RQJUHVVjV†SRZHU,GDW ,QDGGLWLRQWRWKHUHDVRQVRIIHUHGE\.68nSULPDULO\WKDW WKHUHZDVQRHYLGHQFHWKDW&XQQLQJKDPZDVLQYROYHGLQDQ\  RIWKHDOOHJHGGLVFULPLQDWRU\DFWVDQGWKDW&XQQLQJKDPGLG QRWDSSHDUDVDZLWQHVVDWWKHWULDOnLWDSSHDUVWKDWWKHRQO\ 7KUHH\HDUVDJRWKLV&RXUWKHOGLQ7LPPHUWKDWWKH(3$ SDUW\ ZKR FRXOG KDYH EHHQ FRQFHLYDEO\ KDUPHG E\ WKH ZDVDSURSHUH[HUFLVHRI&RQJUHVVjV6HFWLRQSRZHUDQGWKDW SRWHQWLDOFRQIOLFWZDV.68LWVHOI6HHJHQHUDOO\0HODPHGY &RQJUHVVjV DEURJDWLRQ RI VWDWHVj LPPXQLW\ ZDV WKHUHIRUH ,77&RQWLQHQWDO%DQNLQJ&R )G    WK&LU SURSHU  6HH  )G DW   7KH 7LPPHU &RXUW     .RYDFHYLFK PDNHV QR DWWHPSW WR H[SODLQ KRZ WKH FRQFOXGHGWKDW&RQJUHVVERWKH[KLELWHGDQLQWHQWWRDEURJDWH DOOHJHGFRQIOLFWRILQWHUHVWKDUPHGKHU LPPXQLW\DQGSRVVHVVHGWKHUHTXLVLWHSRZHUWRDEURJDWH6HH LG  7KLV GHFLVLRQ LV FRQWUROOLQJ DXWKRULW\ mXQOHVV DQ ,9 LQFRQVLVWHQW GHFLVLRQ RI WKH 8QLWHG 6WDWHV 6XSUHPH &RXUW UHTXLUHVPRGLILFDWLRQRIWKHGHFLVLRQRUWKLV&RXUWVLWWLQJHQ )RU WKHVH UHDVRQV ZH 5(9(56( WKH GLVWULFW FRXUWjV EDQF RYHUUXOHV WKH SULRU GHFLVLRQl  6DOPL Y 6HFUHWDU\ RI MXGJPHQW ZLWK UHVSHFW WR WKH (3$ FODLP DQG WKH 7LWOH 9,, +HDOWK DQG +XPDQ 6HUYLFHV  )G    WK &LU FODLPV IRU ZDJH GLVFULPLQDWLRQ DQG 5(0$1' IRU     :H PXVW WKHUHIRUH GHWHUPLQH LI .LPHO UHTXLUHV SURFHHGLQJVQRWLQFRQVLVWHQWZLWKWKLVRSLQLRQ:H$)),50 PRGLILFDWLRQRIWKH7LPPHUGHFLVLRQ WKH GLVWULFW FRXUWjV MXGJPHQW ZLWK UHVSHFW WR WKH UHPDLQLQJ 7LWOH9,,FODLPVDQGWKH$'($FODLPDVZHOODVLWVRUGHUV :HILQGWKDW7LPPHUFRQWLQXHVWREHFRQWUROOLQJDXWKRULW\ H[FOXGLQJWKHXQLYHUVLW\ZLGHGDWDSUHFOXGLQJ.RYDFHYLFK ZLWKUHVSHFWWRWKHILUVWSURQJXQGHU)ORULGD6HPLQROH7KH IURPDGGLQJDUHWDOLDWLRQFODLPDQGGHQ\LQJKHUPRWLRQWR 7LPPHU&RXUWKHOGWKDW&RQJUHVVFOHDUO\H[SUHVVHGLWVLQWHQW GLVTXDOLI\.68jVFRXQVHO WRDEURJDWHVWDWHVRYHUHLJQLPPXQLW\XQGHUWKH(3$6HH )GDW1HLWKHU.LPHOQRUDQ\RWKHU6XSUHPH&RXUW GHFLVLRQVLQFH7LPPHUKDVFDVWGRXEWRQWKLVFRQFOXVLRQVR ZHDUHERXQGE\WKDWFRQFOXVLRQ 2QWKHRWKHUKDQGZHILQGWKDW.LPHOGRHVUHTXLUHXVWR UHFRQVLGHU7LPPHUjVFRQFOXVLRQWKDWWKH(3$FRQVWLWXWHGD SURSHUDEURJDWLRQRIVWDWHVjLPPXQLW\$IWHULWVGHFLVLRQLQ .LPHO WKH 6XSUHPH &RXUW JUDQWHG D ZULW RI FHUWLRUDUL DQG YDFDWHG D 6HYHQWK &LUFXLW GHFLVLRQ FRQFOXGLQJ DV 7LPPHU GLGWKDWWKH(3$FRPSULVHGDSURSHUDEURJDWLRQRIVWDWHVj LPPXQLW\6HH,OOLQRLV6WDWH8QLYY9DUQHU6&W  sDQ YDFDWLQJ9DUQHUY,OOLQRLV6WDWH8QLY )G WK&LU  7KH&RXUWUHPDQGHGWKHFDVHIRU IXUWKHU FRQVLGHUDWLRQ LQ OLJKW RI .LPHO VHH LG VR ZH ZLOO OLNHZLVHUHFRQVLGHU7LPPHULQOLJKWRI.LPHO,QGRLQJVRZH  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

FRQFOXGHWKDW.LPHORQO\EROVWHUVWKHFRQFOXVLRQLQ7LPPHU FRXUWGLGQRWDOORZZDVEDVHGRQWKHHQWLUHSRSXODWLRQRIWKH WKDW &RQJUHVV SURSHUO\ DEURJDWHG (OHYHQWK $PHQGPHQW XQLYHUVLW\IDFXOW\LQFOXGLQJDOOGHSDUWPHQWVDQG.68jVVHYHQ LPPXQLW\LQH[SDQGLQJWKH(3$WRWKHVWDWHV UHJLRQDO FDPSXVHV  s$ DW   $V LQ WKH FDVHV FLWHG VXSUD KRZHYHU WKH GLVWULEXWLRQ RI PHULW DZDUGV LV 7KH .LPHO &RXUW VXJJHVWHG LQ GLFWD WKDW ZKHWKHU †  GHWHUPLQHGE\HDFKVHSDUDWHFROOHJHnQRWWKHXQLYHUVLW\DVD OHJLVODWLRQDGGUHVVHVGLVFULPLQDWLRQDJDLQVWDSURWHFWHGFODVV ZKROHs$DW7KXVWKHVWXG\jVGHVFULSWLRQVRIZDJH VXFK DV JHQGHU RU UDFH VKDSHV WKH mFRQJUXHQFH DQG GLIIHUHQWLDOV IRU WKH HQWLUH XQLYHUVLW\ EHDU OLWWOH RQ WKH SURSRUWLRQDOLW\lDQDO\VLVRI&LW\RI%RHUQHLQLPSRUWDQWZD\V RSHUDWLRQ RI WKH PHULW V\VWHP ZLWKLQ WKH &ROOHJH RI ,Q ILQGLQJ WKDW WKH VXEVWDQWLYH UHTXLUHPHQWV RI WKH $'($ (GXFDWLRQ DQG KRZ WKDW V\VWHP PD\ KDYH VSHFLILFDOO\ ZHUH GLVSURSRUWLRQDWH WR WKH FRQFHLYDEOH XQFRQVWLWXWLRQDO LPSDFWHGRQ.RYDFHYLFKjVZDJHRYHUWLPH$FFRUGLQJO\WKH FRQGXFWWDUJHWHGE\WKH$FWWKH.LPHO&RXUWFRQWUDVWHGDJH FRXUWjVGHFLVLRQWRH[FOXGHWKDWHYLGHQFHZDVQRWDQDEXVHRI FODVVLILFDWLRQVWRWKRVHEDVHGXSRQJHQGHU GLVFUHWLRQ  /LNHZLVH LW ZDV QRW DQ DEXVH RI GLVFUHWLRQ WR H[FOXGH WKH VKRZFDXVH RUGHU LVVXHG E\ WKH 8QLWHG 6WDWHV $JHFODVVLILFDWLRQVXQOLNHJRYHUQPHQWDOFRQGXFWEDVHG 'HSDUWPHQWRI/DERU2IILFHRI)HGHUDO&RQWUDFW&RPSOLDQFH RQUDFHRUJHQGHUFDQQRWEHFKDUDFWHUL]HGDVµVRVHOGRP ZKLFKZDVEDVHGRQWKHXQLYHUVLW\ZLGHVWXG\ UHOHYDQW WR WKH DFKLHYHPHQW RI DQ\ OHJLWLPDWH VWDWH LQWHUHVW WKDW ODZV JURXQGHG LQ VXFK FRQVLGHUDWLRQV DUH * GHHPHGWRUHIOHFWSUHMXGLFHDQGDQWLSDWK\j&OHEXUQHY &OHEXUQH /LYLQJ &WU ,QF  86      )LQDOO\ .RYDFHYLFK DUJXHV WKDW WKH GLVWULFW FRXUW VKRXOG 2OGHU SHUVRQV DJDLQ XQOLNH WKRVH ZKR VXIIHU KDYHGLVTXDOLILHG.68jVFRXQVHOIURPWU\LQJWKLVFDVH6KH GLVFULPLQDWLRQRQWKHEDVLVRIUDFHRUJHQGHUKDYHQRW DUJXHV WKDW WULDO FRXQVHO 5LFKDUG &XQQLQJKDP VSHFLDO EHHQ VXEMHFWHG WR D µKLVWRU\ RI SXUSRVHIXO XQHTXDO FRXQVHODSSRLQWHGE\WKHDWWRUQH\JHQHUDO KDGEHHQDORQJ WUHDWPHQWj WLPHPHPEHURI.68jVERDUGRIWUXVWHHVLQFOXGLQJGXULQJWKH WLPHZKHQWKHHYHQWVLQTXHVWLRQZHUHXQIROGLQJ)URP  6&WDW FLWDWLRQRPLWWHG  HPSKDVLVDGGHG )XUWKHU WR   KH VHUYHG RQ WKH ERDUG RI GLUHFWRUV RI WKH .68 WKH&RXUWHPSKDVL]HGZKHQDVWDWHGLVFULPLQDWHVRQWKHEDVLV )RXQGDWLRQ IURP ZKLFK KH UHVLJQHG WR UHSUHVHQW WKH RI JHQGHU FRXUWV UHTXLUH mD WLJKWHU ILWl EHWZHHQ WKH 8QLYHUVLW\ LQ WKLV FDVH  .RYDFHYLFK QRZ DUJXHV WKDW WKH GLVFULPLQDWRU\PHDQVDQGWKHOHJLWLPDWHHQGVWKH\VHUYH6HH GLVWULFWFRXUWHUUHGE\QRWJUDQWLQJKHUPRWLRQWRGLVTXDOLI\ LGDW FLWLQJ0LVVLVVLSSL8QLYIRU:RPHQY+RJDQ VLQFH &XQQLQJKDPjV UROH DV WUXVWHH LQ WKRVH \HDUV JDYH DQ 86    DSSHDUDQFH RI LPSURSULHW\ DQG VKRZHG D OLNHO\ FRQIOLFW RI LQWHUHVW 7DNLQJWKHVHZRUGVIURP.LPHOVHULRXVO\ZHFRQFOXGHWKDW WKH UHPHGLDO VFKHPH LQWURGXFHG E\ WKH (3$ LV LQGHHG FRQJUXHQW DQG SURSRUWLRQDO WR &RQJUHVVjV †  HQIRUFHPHQW  7KH VWXG\ LQ TXHVWLRQ ZDV XQGHUWDNHQ E\ .RYDFHYLFK DV SDUW RI KHU SRZHU)LUVWXQOLNHWKH$'($DQG5)5$ZHILQGWKDWWKH ZRUN ZLWK WKH &RPPLWWHH RQ :RPHQ DQG 0LQRULWLHV m&RPPLWWHH :l RI (3$jVVXEVWDQWLYHUHTXLUHPHQWVDUHQRWGLVSURSRUWLRQDWHWR WKH .68 FKDSWHU RI WKH $$83 s$ DW  7KH VWXG\ ORRNHG DW WKHXQFRQVWLWXWLRQDOFRQGXFWWDUJHWHGE\WKH$FW,QIDFWERWK VDODULHV DQG SURPRWLRQV DFURVV .68 FRQFOXGLQJ WKDW mIHPDOH IDFXOW\ WKH6XSUHPH&RXUWDQGWKLV&RXUWKDYHFRQVLVWHQWO\KHOGWKDW PHPEHUV DW >.68@ DUH SDLG OHVV DQG DUH SURPRWHG ODWHU DQG DW D ORZHU

WKH (3$jV WDUJHW LV LQWHQWLRQDO JHQGHUEDVHG ZDJH UDWH WKDQ VLPLODUO\ VLWXDWHG PDOH IDFXOW\ PHPEHUVl s$ DW  ,W DWWULEXWHG WKH GLVFULPLQDWLRQ WR WZR FDXVHV mGLVFULPLQDWRU\ PDUNHW GLVFULPLQDWLRQ7KH\KDYHDUWLFXODWHGDQXPEHURIUHDVRQVIRU IDFWRUVl DQG mLQVWLWXWLRQDO GLVFULPLQDWLRQ WKDW OHDGV WR ELDV LQ SURPRWLRQl WKLVFRQFOXVLRQ ,G  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

KDYH mDQ\ WHQGHQF\ WR PDNH WKH H[LVWHQFH RI DQ\ IDFW    )LUVW WKH ODQJXDJH RI WKH VWDWXWH WDUJHWV LQWHQWLRQDO PRUHSUREDEOHRUOHVVSUREDEOHWKDQLWZRXOGEHZLWKRXWWKH GLVFULPLQDWLRQVWDWLQJWKDWQRHPSOR\HUmVKDOOGLVFULPLQDWH HYLGHQFHl)HG5(YLG)HGHUDO5XOHRI(YLGHQFH EHWZHHQHPSOR\HHVRQWKHEDVLVRIVH[E\SD\LQJZDJHV SURKLELWVWKHDGPLVVLRQRIHYLGHQFHLIWKHUHLVDGDQJHUWKDWLWV WRHPSOR\HHVDWDUDWHOHVVWKDQWKHUDWHDWZKLFKKHSD\V SUREDWLYH YDOXH ZLOO EH VXEVWDQWLDOO\ RXWZHLJKHG E\ XQIDLU ZDJHV WR HPSOR\HHV RI WKH RSSRVLWH VH[l    86& SUHMXGLFH6HH5RELQVRQ )GDW 8QLWHG6WDWHV † G  $VWKH6XSUHPH&RXUWVWDWHGLQORRNLQJDWWKH Y%RQGV)G WK&LU  m8QIDLUSUHMXGLFH VWDWXWHDQGLWVKLVWRU\WKHFHQWUDOSXUSRVHRIWKH$FWZDVWR GRHVQRWPHDQWKHGDPDJHWRDGHIHQGDQWjVFDVHWKDWUHVXOWV UHPHG\ WKH mHQGHPLF SUREOHPl WKDW ZDJH VWUXFWXUHV KDYH IURPWKHOHJLWLPDWHSUREDWLYHIRUFHRIWKHHYLGHQFH UDWKHULW EHHQEDVHGmRQDQDQFLHQWEXWRXWPRGHGEHOLHIWKDWDPDQ UHIHUVWRHYLGHQFHZKLFKWHQGVWRVXJJHVWDGHFLVLRQRQDQ EHFDXVH RI KLV UROH LQ VRFLHW\ VKRXOG EH SDLG PRUH WKDQ D LPSURSHU EDVLVl  5RELQVRQ   ) DW  FLWDWLRQ ZRPDQHYHQWKRXJKKLVGXWLHVDUHWKHVDPHl&RUQLQJ*ODVV RPLWWHG  :RUNVY%UHQQDQ86    /RRNLQJDW ERWKWKLVDIILUPDWLYHSURKLELWLRQLQWKHVWDWXWHDVZHOODVWKH ([FOXGLQJ WKLV VWXG\ ZDV QRW DQ DEXVH RI GLVFUHWLRQ  ,Q VWUXFWXUHRIDQ(3$GHIHQVHVHHLQIUDWKLV&LUFXLWHTXDWHV GLVSDUDWHWUHDWPHQWFKDOOHQJHVWRXQLYHUVLW\ZDJHDQGWHQXUH (3$OLDELOLW\IRUGLVFULPLQDWLRQmRQWKHEDVLVRIVH[lZLWK GHFLVLRQVFRXUWVGLVDSSURYHRIVWXGLHVDQGRWKHUHYLGHQFHWKDW OLDELOLW\ XQGHU 7LWOH 9,, IRU LQWHQWLRQDO VH[ GLVFULPLQDWLRQ GHVFULEH WUHQGV RI DQ HQWLUH XQLYHUVLW\ DV RSSRVHG WR WKH 6HH%XQWLQY%UHDWKLWW&RXQW\%GRI(GXF)G  SDUWLFXODU GHSDUWPHQW LQ TXHVWLRQ  6HH HJ (YDQV Y  WK&LU  .RUWHY'LHPHU  )G    WK &OHYHODQG6WDWH8QLY%GRI7UXVWHHV1R   :/ &LU    DW  WK&LU   XQSXEOLVKHGRSLQLRQ  UHMHFWLQJ WKH FRPSDULVRQ RI SURIHVVRUV LQ GLIIHUHQW XQLYHUVLW\ 0RUHRYHUWKH(3$jVUHPHGLDOVFKHPHLVSURSRUWLRQDOWRLWV GHSDUWPHQWV  'XJDQ Y %DOO 6WDWH 8QLY  )G  DQWLGLVFULPLQDWRU\ DLPV  $ VWDWH WKDW LQWHQWLRQDOO\  WK&LU   ILQGLQJSODLQWLIIjVVWDWLVWLFDOVKRZLQJ GLVFULPLQDWHVRQWKHEDVLVRIJHQGHUYLRODWHVWKH)RXUWHHQWK RI GLVFULPLQDWLRQ XQSHUVXDVLYH EHFDXVH LW ZDV mIRU WKH $PHQGPHQW XQOHVV WKH JHQGHUEDVHG FODVVLILFDWLRQ VHUYHV XQLYHUVLW\ DW ODUJHl UDWKHU WKDQ IRU WKH GHSDUWPHQW LQ LPSRUWDQW JRYHUQPHQWDO REMHFWLYHV DQG WKH GLVFULPLQDWRU\ TXHVWLRQ 0ROWKDQY7HPSOH8QLY)G   G PHDQVHPSOR\HGmDUHVXEVWDQWLDOO\UHODWHGWRWKHDFKLHYHPHQW &LU   FRQFOXGLQJWKDWmVWDWLVWLFDOHYLGHQFHRIDJHQHUDO RIWKRVHREMHFWLYHVl.LPHO6&WDW TXRWLQJ+RJDQ XQGHUUHSUHVHQWDWLRQRIZRPHQLQWKHSRVLWLRQRIIXOOSURIHVVRU  86 DW    7KLV VKRZLQJ UHTXLUHV DQ mH[FHHGLQJO\ DGGVOLWWOHWRDGLVSDUDWHLPSDFWFODLPl =DKRULNY&RUQHOO SHUVXDVLYHMXVWLILFDWLRQlIRUJHQGHUGLVFULPLQDWLRQ8QLWHG 8QLY )G  G&LU   FRQFOXGLQJWKDWJURVV 6WDWHVY9LUJLQLD86   ,QFRQWUDVWWR VWDWLVWLFV DUH mPHDQLQJOHVV DEVHQW D GHSDUWPHQWDO WKH$'($ZKLFK.LPHOKHOGmSURKLELW>HG@YHU\OLWWOHFRQGXFW EUHDNGRZQl 7KHVHFRXUWVKDYHFRQFOXGHGWKDWZKHQERWK OLNHO\ WR EH KHOG XQFRQVWLWXWLRQDOl  6&W DW  WKH ZDJHDQGSURPRWLRQGHFLVLRQVDUHODUJHO\PDGHE\LQGLYLGXDO VWDQGDUGIRUOLDELOLW\XQGHUWKH(3$FORVHO\DSSUR[LPDWHVWKH GHSDUWPHQWVUDWKHUWKDQWKHEURDGHUXQLYHUVLW\DGPLQLVWUDWLRQ HTXDO SURWHFWLRQ DQDO\VLV IRU VWDWHVSRQVRUHG JHQGHU DVWKH\DUHLQWKLVFDVHmWKHPRVWLPSRUWDQWGDWDZRXOGEH GDWDUHJDUGLQJWKHLQGLYLGXDOGHSDUWPHQWl'XJDQ)G DW  :KLOH WKH RULJLQDO (3$ RQO\ WDUJHWHG VXFK GLVFULPLQDWLRQ LQ SULYDWH LQGXVWU\ LW H[SDQGHG WKH (3$ DJDLQVW WKH VWDWHV LQ   6HH 0DUVKDOO Y :KLOH .RYDFHYLFK ZDV SHUPLWWHG WR SUHVHQW KHU 2ZHQVERUR'DYLHV &RXQW\ +RVS  )G  WK &LU    %XW WKH GHSDUWPHQWEDVHGGDWDRQZDJHVWRWKHMXU\WKHVWXG\WKDWWKH W\SH RI GLVFULPLQDWLRQ &RQJUHVV ZDV DWWHPSWLQJ WR URRW RXW ZDV WKH VDPH LQWHQWLRQDO GLVFULPLQDWLRQ  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

GLVFULPLQDWLRQ&RQJUHVVGHVLJQHGWKH(3$WRWDUJHWZDJH 6WULFNOHUY3ILVWHU$VVRFLDWHG*URZHUV,QF )G GLIIHUHQWLDOV GXH WR XQH[SODLQDEOH JHQGHUEDVHG   WK&LU   GLVFULPLQDWLRQSURYLGLQJDKDQGIXORIGHIHQVHVWKDWDFFRXQW IRUOHJLWLPDWHFDXVHVRIZDJHGLIIHUHQWLDOV6HH 86&† :KHQLVVXHVQRWRULJLQDOO\UDLVHGE\WKHSOHDGLQJmDUHWULHG  G   SURYLGLQJHPSOR\HUZLWKGHIHQVHVWKDWGLIIHUHQWLDO E\ H[SUHVV RU LPSOLHG FRQVHQW RI WKH SDUWLHVl 5XOH  E SD\PHQWLVGXHWRDVHQLRULW\V\VWHPDPHULWV\VWHPDV\VWHP DXWKRUL]HVDGLVWULFWMXGJHWRSHUPLWWKHILOLQJRIDQDPHQGHG ZKLFKPHDVXUHVHDUQLQJVE\TXDQWLW\RUTXDOLW\RISURGXFWLRQ SOHDGLQJWRWKHH[WHQWQHFHVVDU\mWRFRQIRUPWRWKHHYLGHQFHl RUDGLIIHUHQWLDOmEDVHGRQDQ\RWKHUIDFWRURWKHUWKDQVH[l  SUHVHQWHGDWWULDO)HG5&LY3 E VHH+DVVHOEULQY 7KHVHGHIHQVHVDUHGHVLJQHGmWRFRQILQHWKHDSSOLFDWLRQRIWKH 6SHHOPDQ)G  WK&LU  m,PSOLHGFRQVHQWl $FWWRZDJHGLIIHUHQWLDOVDWWULEXWDEOHWRVH[GLVFULPLQDWLRQl UHTXLUHVFRQVLGHUDEOHOLWLJDWLRQRIDPDWWHUnm>L@WPXVWDSSHDU &RXQW\RI:DVKLQJWRQY*XQWKHU86    WKDWWKHSDUWLHVXQGHUVWRRGWKHHYLGHQFHWREHDLPHGDWWKH :KLOHZHGRQRWEHOLHYHWKDWWKHOLDELOLW\VWDQGDUGVXQGHUWKH XQSOHDGHGLVVXHl<HOORZ)UHLJKW6\V,QFY0DUWLQ  (TXDO3URWHFWLRQ&ODXVHDQGWKH(3$DUHLGHQWLFDOWKH\DUH )G WK&LU  7KHUXOHGRHVQRWH[LVWVLPSO\ VXIILFLHQWO\VLPLODUVXFKWKDWPRVWFDVHVRIVWDWHVSRQVRUHG mWRDOORZSDUWLHVWKHFKDQJHWKHRULHVPLGVWUHDPl'RQDOGY ZDJHGLVFULPLQDWLRQWKDWKDYHQRH[SODQDWLRQmRWKHUWKDQVH[l :LOVRQ)G   WK&LU  7KHGLVWULFW DOVR FRQVWLWXWH HTXDO SURWHFWLRQ YLRODWLRQV XQGHU WKH FRXUWGLGQRWDEXVHLWVGLVFUHWLRQE\GHQ\LQJ.RYDFHYLFKjV &RQVWLWXWLRQ$OWKRXJKWKH(3$PD\EULQJZLWKLQLWVVZHHS PRWLRQWRDPHQG:HGRQRWILQGWKHHYLGHQFHLQWURGXFHGDW VRPH FRQVWLWXWLRQDO FRQGXFW WKLV VOLJKW RYHUUHDFKLQJ IDOOV WULDOWRHVWDEOLVKDFDVHRI7LWOH9,,UHWDOLDWLRQ ZHOO ZLWKLQ &RQJUHVVjV SRZHU WR HQDFW mUHDVRQDEO\ SURSK\ODFWLFOHJLVODWLRQl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jVGHFLVLRQWRH[FOXGHHYLGHQFH H[LVWHQWFRQVWLWXWLRQDOULJKWV6HH+XQGHUWPDUNY6WDWHRI XQGHU)HG5(YLGIRUDEXVHRIGLVFUHWLRQYLHZLQJWKH )OD'HSjWRI7UDQVSRUW)G WK&LU H[FOXGHGHYLGHQFHLQDOLJKWPRVWIDYRUDEOHWRWKHSURSRQHQW  &RQJUHVVjVDEURJDWLRQRIVWDWHLPPXQLW\SXUVXDQWWR 6HH5RELQVRQY5XQ\RQ )G WK&LU   $QDEXVHRIGLVFUHWLRQH[LVWV ZKHUHWKHUHYLHZLQJFRXUWLV ILUPO\FRQYLQFHGWKDWDPLVWDNHKDVEHHQPDGH6HHLG(YHQ LI D FRXUW DEXVHG LWV GLVFUHWLRQ LQ H[FOXGLQJ HYLGHQFH D GHFLVLRQZLOOQRWEHGLVWXUEHGLIVXEVWDQWLDOLQMXVWLFHGLGQRW UHVXOW6HH0F*RZDQY&RRSHU,QGXV,QF)G  WK&LU   7KHGLVWULFWFRXUWH[FOXGHGWKHVWDWLVWLFDOVWXG\DVLUUHOHYDQW XQGHU)HG5(YLGDQGXQIDLUO\SUHMXGLFLDOXQGHU)HG5 (YLG8QGHUWKHIHGHUDOUXOHVDMXGJHVKRXOGQRWDGPLW HYLGHQFH WKDW LV LUUHOHYDQWnWKDW LV HYLGHQFH WKDW GRHV QRW  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

HQGVZLWKDOHVVGLVFULPLQDWRU\LPSDFW6HH6FDOHV )G WKH(3$LVWKHUHIRUHSURSHUDQG.68jVDOOHJHGYLRODWLRQRI DW $VVWDWHGVXSUDYLHZHGLQDOLJKWPRVWIDYRUDEOHWR WKH(3$LVQRWVKLHOGHGE\WKH(OHYHQWK$PHQGPHQW KHU.RYDFHYLFKSUHVHQWHGVXIILFLHQWHYLGHQFHDWWULDOWRFUHDWH DPDWHULDOLVVXHDVWRZKHWKHUWKHPHULWV\VWHPZDVDSUHWH[W ,,, IRUGLVFULPLQDWLRQ0RUHRYHUZHFDQQRWGLVFHUQIURPWKH FRXUWjV RSLQLRQ RU WKH MRLQW DSSHQGL[ ZKHWKHU .RYDFHYLFK $ PDGH D GLUHFW DUJXPHQW WKDW WKHUH LV DQ DOWHUQDWLYH HPSOR\PHQWSUDFWLFHZKLFKFRXOGDFKLHYHWKHVDPHHQGVZLWK :HQH[WDGGUHVV.RYDFHYLFKjVDUJXPHQWWKDWWKHGLVWULFW D OHVV GLVFULPLQDWRU\ LPSDFWnDQ DOWHUQDWLYH VKRZLQJ FRXUWHUUHGE\JUDQWLQJ.68MXGJPHQWDVDPDWWHURIODZRQ DYDLODEOHWRKHUHYHQKDGVKHIDLOHGWRVKRZSUHWH[W:HWKXV VHYHUDOFODLPVEHFDXVHVKHKDGQRWPDGHRXWDSULPDIDFLH GRQRWEHOLHYHWKDWWKHFRXUWjVPHUHVWDWHPHQWWKDWWKHPHULW FDVH)LUVWWKHFRXUWLVVXHGDMXGJPHQWDVDPDWWHURIODZRQ V\VWHP ZDV DGRSWHG IRU OHJLWLPDWH EXVLQHVV UHDVRQV LV .RYDFHYLFKjVGLVSDUDWHWUHDWPHQWFODLPDWWKHFRQFOXVLRQRI VXIILFLHQW WR MXVWLI\ VXPPDU\ MXGJPHQW  ,Q OLJKW RI WKLV .68jV FDVH LQ SDUW EHFDXVH VKH KDG IDLOHG WR PDNH RXW D FRQFOXVLRQZHUHPDQGIRUWKHGLVWULFWFRXUWWRFRQGXFWDPRUH SULPDIDFLHFDVH6HFRQGLWUHQGHUHGDSRVWYHUGLFWMXGJPHQW FRPSOHWH DQDO\VLV RI ZKHWKHU WULDO LV UHTXLUHG IRU DVDPDWWHURIODZRQ.RYDFHYLFKjV$'($FODLPEHFDXVHVKH .RYDFHYLFKjVGLVSDUDWHLPSDFWFODLP%HFDXVHWKHFDVHKDV \HWWREHWULHGWKHFRXUWPD\DGGUHVVZKHWKHU.RYDFHYLFKjV VWDWLVWLFDOHYLGHQFHZDVVXIILFLHQWWRPDNHRXWDSULPDIDFLH FDVHLQWKHILUVWSODFH7KHUHFRUGEHIRUHXVLVQRWVXIILFLHQWO\ FOHDUIRUXVWRPDNHVXFKDGHWHUPLQDWLRQ :H DJUHH ZLWK WKH GLVWULFW FRXUW WKDW WKH VWDWXWH RI  :H DUH XQWURXEOHG E\ WKH IDFW WKDW &RQJUHVV GLG QRW PDNH H[WHQVLYH OLPLWDWLRQV EDUV .RYDFHYLFKjV GLVSDUDWH LPSDFW FODLP OHJLVODWLYH ILQGLQJV RQ VWDWHVj GLVFULPLQDWRU\ SUDFWLFHV ZKHQ LW H[SDQGHG UHJDUGLQJ SURPRWLRQ  *LYHQ WKDW VKH ZDV ODVW GHQLHG D WKH (3$ WR WKH VWDWHV LQ   /DFN RI OHJLVODWLYH ILQGLQJV LV QRW

SURPRWLRQLQ DQGZDVJUDQWHGSURPRWLRQZKHQVKHODVW GHWHUPLQDWLYH RI WKH †  LQTXLU\ $00 .LPHO  6&W DW  )ORULGD

DSSOLHGLQ WKHGD\VWDWXWHRIOLPLWDWLRQVXQGHU7LWOH 3UHSDLG  6&W DW   ,Q .LPHO WKH &RXUW RQO\ FRQVLGHUHG

9,,FOHDUO\KDVSDVVHG OHJLVODWLYH ILQGLQJV DIWHU GHWHUPLQLQJ WKDW RQ LWV SURKLELWHG VXEVWDQWLDOO\ PRUH VWDWH HPSOR\PHQW GHFLVLRQV DQG SUDFWLFHV IDFH WKH $'($

WKDQ ZRXOG OLNHO\ EH KHOG XQFRQVWLWXWLRQDO XQGHU WKH )RXUWHHQWK ( $PHQGPHQW 6HH  6&W DW  7KH &RXUW UHDVRQHG WKDW WKH OHJLVODWLYH ILQGLQJV ZRXOG DVVLVW WKH &RXUW LQ GHWHUPLQLQJ LI WKLV RYHU

$W WKH HQG RI WULDO .RYDFHYLFK PRYHG WR DPHQG KHU UHDFKLQJ ZDV D UHTXLUHG SURSK\ODFWLF GXH WR D &RQJUHVVLRQDO FRQFOXVLRQ

FRPSODLQWWRDGGDUHWDOLDWLRQFODLP6KHLQWHQGHGWRVKRZ WKDW WKHUH ZDV D SDWWHUQ RI XQFRQVWLWXWLRQDO DJH GLVFULPLQDWLRQ E\ WKH

WKDW .68 UHWDOLDWHG IRU ZRUN VKH XQGHUWRRN RQ KHU   VWDWHV VXEVWDQWLDO HQRXJK WR MXVWLI\ WKH ODZ 6HH LG DW   %HFDXVH

VDEEDWLFDOH[DPLQLQJJHQGHUEDVHGZDJHGLVSDULWLHVLQKLJKHU WKH FRPELQDWLRQ RI WKH ODQJXDJH RI WKH (3$ WKH GHIHQVHV LW SURYLGHV DQG WKH LQWHUPHGLDWH VFUXWLQ\ DSSOLHG WR JHQGHU GLVFULPLQDWLRQ OHDGV XV WR HGXFDWLRQ7KHFRXUWGHQLHGKHUPRWLRQ6KHDSSHDOVWKLV FRQFOXGH WKDW WKH (3$ GRHV QRW VXEVWDQWLDOO\ RYHUUHDFK LQWR ODUJHO\

GHFLVLRQDUJXLQJWKDWEHFDXVH.68KDGLWVHOIGLVFXVVHGWKH FRQVWLWXWLRQDO DFWLYLW\ LQ WKH ILUVW SODFH WKHUH LV QR QHHG WR VHDUFK WKH

VDEEDWLFDOLQSUHVHQWLQJLWVFDVHWKHPRWLRQWRDPHQGVKRXOG OHJLVODWLYH UHFRUG DV LQ .LPHO :H DUH VDWLVILHG E\ &RQJUHVVjV PRUH

KDYHEHHQJUDQWHG:HUHYLHZDGHFLVLRQWRSHUPLWRUGHQ\D JHQHUDO ILQGLQJ LQ HQDFWLQJ WKH RULJLQDO (3$ WKDW ZDJH GLIIHUHQWLDOV DUH

5XOH  E  PRWLRQ WR DPHQG IRU DEXVH RI GLVFUHWLRQ  6HH GXH WR RXWPRGHG EHOLHIV DERXW WKH UHODWLYH YDOXH RI PHQjV DQG ZRPHQjV ZRUN VHH &RUQLQJ *ODVV :RUNV  86 DW   FRPELQHG ZLWK WKH IDFW WKDW ZRPHQ KDYH EHHQ VXEMHFWHG WR D KLVWRU\ RI SXUSRVHIXO XQHTXDO WUHDWPHQW PRUH JHQHUDOO\ 6HH .LPHO  6&W DW   .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

IDLOHGWRPDNHRXWDSULPDIDFLHFDVH.RYDFHYLFKDUJXHV SUDFWLFH DQG WKHQ VKRZ DQ mDGYHUVH HIIHFWl E\ RIIHULQJ WKDWWKHGLVWULFWFRXUWjVDSSURDFKLQHDFKLQVWDQFHFRQWUDYHQHG VWDWLVWLFDOHYLGHQFHmRIDNLQGRUGHJUHHVXIILFLHQWWRVKRZ FLUFXLWFDVHODZ:HDJUHH WKDWWKHSUDFWLFHLQTXHVWLRQKDVFDXVHGWKHlDGYHUVHHIIHFWLQ TXHVWLRQ6FDOHV )GDW  FLWDWLRQRPLWWHG :KHQ $VWKHGLVWULFWFRXUWUHFRJQL]HGWKLV&RXUWjVGHFLVLRQLQ D SULPD IDFLH FDVH LV HVWDEOLVKHG WKH GHIHQGDQWV PXVW ((2&Y$YHU\'HQQLVRQ&RUSRUDWLRQ)G  DUWLFXODWH D OHJLWLPDWH EXVLQHVV UHDVRQ IRU WKH HPSOR\PHQW WK&LU  FOHDUO\HVWDEOLVKHVWKDWDIWHUDWULDORQWKH SUDFWLFH  6HH LG  2QFH D GHIHQGDQW KDV DUWLFXODWHG WKDW PHULWVDUHYLHZLQJFRXUWVKRXOGQRWIRFXVRQWKHHOHPHQWVRI OHJLWLPDWH EXVLQHVV UHDVRQ WKH EXUGHQ VKLIWV EDFN WR WKH WKHSULPDIDFLHFDVHEXWVKRXOGDVVHVVWKHXOWLPDWHTXHVWLRQRI SODLQWLIIWRVKRZHLWKHUWKDWWKHHPSOR\HUjVUHDVRQLVDSUHWH[W GLVFULPLQDWLRQ  5HO\LQJ KHDYLO\ RQ 8QLWHG 6WDWHV 3RVWDO IRU GLVFULPLQDWLRQ RU WKDW WKHUH H[LVWV DQ DOWHUQDWLYH 6HUYLFH%RDUGY$LNHQV86   WKH$YHU\ HPSOR\PHQWSUDFWLFHWKDWZRXOGDFKLHYHWKHVDPHEXVLQHVV 'HQQLVRQ&RXUWVWDWHG  HQGVZLWKDOHVVGLVFULPLQDWRU\LPSDFW6HHLG,QDZDJH GLVFULPLQDWLRQ FDVH WKH %HQQHWW $PHQGPHQW DOORZV D >$@SULPDIDFLHFDVHLVGHILQHGDVµVXIILFLHQWHYLGHQFHLQ GHIHQGDQWWRRIIHURQHRIWKHDIILUPDWLYHGHIHQVHVVSHOOHGRXW WKHW\SHRIFDVHWRJHWSODLQWLIISDVWDPRWLRQIRUGLUHFWHG LQWKH(3$VRORQJDVLWLVDOHJLWLPDWHEXVLQHVVUHDVRQ6HH YHUGLFWLQDMXU\FDVHRUPRWLRQWRGLVPLVVLQDQRQMXU\ ((2&Ys&3HQQH\&R)G    WK&LU FDVH LWLVWKHHYLGHQFHQHFHVVDU\WRUHTXLUHGHIHQGDQWWR    SURFHHGZLWKKLVFDVHj%ODFNjV/DZ'LFWLRQDU\  WKHG  7KHILQGLQJWKDWSODLQWLIIKDVSURYHQD :H GR QRW ILQG WKH GLVWULFW FRXUWj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j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s$DW :KLOHWKHFRXUWLVFHUWDLQO\IUHHWRORRNEH\RQGWKH OLWWOHORJLFDOVHQVH7KHGLVWULFWFRXUWVWDWHGWKDWLW SULPDIDFLHVWDWLVWLFDODVVHVVPHQWDQGSURFHHGGLUHFWO\WRDQ DVVHVVPHQWRI.68jVGHIHQVHFIs&3HQQH\&R)G DW  LQ GRLQJ VR LW PXVW DOVR FRQVLGHU ZKHWKHU  .RYDFHYLFKVKRZHGHLWKHUWKDWWKHHPSOR\HUjVUHDVRQZDVD DIRXO 5HFRJQL]LQJ WKDW LWV WUHDWPHQW RI WKH SULPD IDFLH FDVH SRVVLEO\ UDQ RI FLUFXLW SUHFHGHQW WKH GLVWULFW FRXUW PDGH DQ DOWHUQDWLYH SUHWH[WIRUGLVFULPLQDWLRQRUWKDWWKHUHH[LVWVDQDOWHUQDWLYH GHWHUPLQDWLRQ WKDW QR UHDVRQDEOH WULHU RI IDFW FRXOG KDYH IRXQG IRU HPSOR\PHQWSUDFWLFHWKDWZRXOGDFKLHYHWKHVDPHEXVLQHVV .RYDFHYLFK RQ WKH XOWLPDWH TXHVWLRQ RI GLVFULPLQDWLRQ s$ DW   .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

GLVSDUDWHWHDFKLQJZRUNORDGVWKDWDUJXPHQWLVQRWVXSSRUWHG UHFRJQL]H>G@ WKH H[LVWHQFH RI 6L[WK &LUFXLW DXWKRULW\ E\WKHUHFRUG VXJJHVWLQJWKDWDWULDOFRXUWFDQQRWUHYLVLWWKHSULPDIDFLH FDVH DIWHU WKH RQVHW RI WULDO  >FLWLQJ $YHU\ 'HQQLVRQ@ 2XWVLGHRIKHUFODLPIRUZDJHGLVFULPLQDWLRQWKHHYLGHQFH +RZHYHULQDQRWKHU6L[WK&LUFXLWFDVHWKH6L[WK&LUFXLW LQWKHUHFRUGGLGQRWPHHWWKHVWDQGDUGVUHTXLUHGWRVKRZD &RXUWRI$SSHDOVH[SODLQHGWKDWDmSODLQWLIILQDGLVSDUDWH mFRQWLQXLQJYLRODWLRQl.RYDFHYLFKjVQRQZDJHFODLPVXQGHU WUHDWPHQW FDVH PXVW SURYH WR WKH IDFWILQGHU E\ D 7LWOH9,,DUHWKXVEDUUHGE\WKHVWDWXWHRIOLPLWDWLRQV SUHSRQGHUDQFHRIWKHHYLGHQFHWKDWHDFKFRPSRQHQWRI >WKH@ SULPD IDFLH FDVH KDV EHHQ VDWLVILHGl *DIIRUG Y ' *HQHUDO(OHF&R )G WK&LU   7KHVHGHFLVLRQVVHHPZKROO\LQFRQVLVWHQWEHFDXVHLID $IWHUWKHWULDOWKHGLVWULFWFRXUWJUDQWHGVXPPDU\MXGJPHQW MXU\QHHGVWRPDNHDGHWHUPLQDWLRQDVWRZKHWKHURUQRW RQ WKH ELIXUFDWHG GLVSDUDWH LPSDFW SKDVH RI WKH 7LWOH 9,, D SODLQWLII KDV SURYHQ D SULPD IDFLH FDVH E\ D FODLP  7KH FRXUW UHDFKHG WZR FRQFOXVLRQV LQ PDNLQJ WKDW SUHSRQGHUDQFHRIWKHHYLGHQFHVXUHO\DWULDOFRXUWVKRXOG GHFLVLRQ)LUVWLWIRXQGWKDWWKHHYLGHQFHVXSSRUWHG.68jV EHDEOHWRPDNHDOHJDOGHWHUPLQDWLRQWKDWQRUHDVRQDEOH DIILUPDWLYHGHIHQVHWKDWWKHPHULWV\VWHPZDVDmOHJLWLPDWH MXU\FRXOGFRQFOXGHWKDWDSODLQWLIIKDVSURYHQKHUSULPD EXVLQHVV QHFHVVLW\l  6HFRQG LW KHOG WKDW RQFH DJDLQ WKH IDFLHFDVHE\DSUHSRQGHUDQFHRIWKHHYLGHQFH VWDWXWHRIOLPLWDWLRQVEDUUHG.RYDFHYLFKjVGLVSDUDWHLPSDFW FODLP UHJDUGLQJ SURPRWLRQV  :H GLVDJUHH ZLWK LWV ILUVW s$ DW   3UHVXPDEO\ E\ SRLQWLQJ RXW WKLV FRQIOLFW WKH FRQFOXVLRQDOWKRXJKZHDJUHHZLWKWKHVHFRQG FRXUWLVFDOOLQJRQXVWRKHHGLWVUHDGLQJRI*DIIRUGDQGQRW $YHU\'HQQLVRQVLQFHZHPXVWGHIHUWRDSULRUFDVHZKHQWZR 7LWOH9,,SURVFULEHVmQRWRQO\RYHUWGLVFULPLQDWLRQEXWDOVR SDQHOGHFLVLRQVFRQIOLFW6HHJHQHUDOO\6DOPL)GDW SUDFWLFHV WKDW DUH IDLU LQ IRUP EXW GLVFULPLQDWRU\ LQ  8QGHUWKLVORJLFWKHFRXUWIRXQG.RYDFHYLFKWRKDYH RSHUDWLRQl*ULJJVY'XNH3RZHU&R86 IDLOHGWRPDNHRXWDSULPDIDFLHFDVHRQERWKKHU7LWOH9,,DQG     7KXV ZKHQ EULQJLQJ D GLVSDUDWH LPSDFW FODLP $'($FODLPV SODLQWLIIV QHHG QRW VKRZ WKDW D GHIHQGDQW LQWHQGHG WR GLVFULPLQDWH EXW PXVW LQVWHDG SURYH WKDW D SDUWLFXODU HPSOR\PHQW SUDFWLFH DOWKRXJK QHXWUDO RQ LWV IDFH KDV SURGXFHGDVLJQLILFDQWDGYHUVHHIIHFWRQDSURWHFWHGJURXSWR  7KH GLVWULFW FRXUW FRXFKHG WKLV UHDVRQLQJ ZKHQ LW JUDQWHG MXGJPHQW ZKLFKWKHSODLQWLIIEHORQJV6HH$OH[DQGHU)GDW RQ .RYDFHYLFKjV $'($ FODLP QRW KHU (3$ FODLPnDOWKRXJK LWV ORJLF

6FDOHVYs&%UDGIRUG &R )G   WK&LU DSSOLHV WR ERWK GHFLVLRQV .68 PDNHV WKH DUJXPHQW PRUH JHQHUDOO\ LQ LWV

  $EERWWY)HGHUDO)RUJH,QF )G WK EULHIV

&LU  7KHSODLQWLIIPXVWILUVWHVWDEOLVKDSULPDIDFLH FDVHE\LGHQWLI\LQJDQGFKDOOHQJLQJDVSHFLILFHPSOR\PHQW :H QRWH WKDW WKLV LV EXW RQH VHYHUDO FDVHV ZKHUH WKH GLVWULFW FRXUW KDV FULWLFL]HG WKH $YHU\ 'HQQLVRQ GHFLVLRQ ,Q 3HWURQH Y &OHYHODQG 6WDWH 8QLY  )6XSS  1' 2KLR    WKH GLVWULFW FRXUW GHFULHG $YHU\ 'HQQLVRQ DV SODFLQJ mWKH GLVWULFW FRXUW LQ DQ XQWHQDEOH VLWXDWLRQ ZKHQ D GHIHQGDQW PRYHV IRU VXPPDU\ MXGJPHQWl ,G DW  7KH  .RYDFHYLFK FLWHV 3URIHVVRU 5RELQVRQjV WHVWLPRQ\ WR VXSSRUW WKLV GHFLVLRQ WKH FRXUW DUJXHV HPDQDWHV IURP D mPLVLQWHUSUHWDWLRQl RI WKH FODLP EXW 5RELQVRQ DFWXDOO\ VXJJHVWHG WKDW ZRPHQ DSSHDUHG YROXQWDULO\ 6XSUHPH &RXUWjV GHFLVLRQ LQ $LNHQV LG FLWLQJ $YHU\ 'HQQLVRQ  )G WR XQGHUWDNH PRUH mVFXW ZRUNl WKDQ WKHLU PDOH FRXQWHUSDUWV m,Q P\ DW  5\DQ s GLVVHQWLQJ  DQG DOVR mVHHPV WR EH LQ FRQIOLFWl ZLWK H[SHULHQFH FRQVLVWHQWO\ ZRPHQ IDFXOW\ ZHUH PRUH LQFOLQHG WR WUHDW WKDW WKH *DIIRUG GHFLVLRQ ,G DW  6HH DOVR &ROHPDQ Y 7R\V µ5j 8V ,QF DV DQ LPSRUWDQW DVSHFW RI ZKDW LW WDNHV WR UXQ D JRRG SURJUDP WKDQ VRPH  )6XSS   1' 2KLR   VWDWLQJ WKDW $YHU\ 'HQQLVRQ RI WKH PDOH IDFXOWLHVl s$ DW  PLVLQWHUSHWV $LNHQV DQG WKDW LWV KROGLQJ mLV ZKROO\ LQFRQVLVWHQWl ZLWK  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

1RWZLWKVWDQGLQJWKHGLVWULFWFRXUWjVGRXEWVZHILQGWKDWWKH FLWDWLRQRPLWWHG  HPSKDVLVLQRULJLQDO 7KHVHFRQGW\SHRI UXOHIURP$YHU\'HQQLVRQUHVWVRQILUPOHJDOJURXQGDQGZH FRQWLQXLQJYLRODWLRQH[LVWVZKHQDSODLQWLIIKDVGHPRQVWUDWHG GRQRWKHVLWDWHWRDSSO\LWVZHOOHVWDEOLVKHGUXOHLQWKLVFDVH DORQJVWDQGLQJDQGRYHUDUFKLQJSROLF\RIGLVFULPLQDWLRQ6HH )LUVW WKH GLVWULFW FRXUW LQFRUUHFWO\ FKDUDFWHUL]HV $YHU\ LG  7KLV UHTXLUHV D VKRZLQJ E\ D SUHSRQGHUDQFH RI WKH 'HQQLVRQDVDQLVRODWHGGHFLVLRQZLWKLQWKHFLUFXLW,QIDFWLW HYLGHQFH mWKDW VRPH IRUP RI LQWHQWLRQDO GLVFULPLQDWLRQ HPHUJHV IURP D VHULHV RI &LUFXLW FDVHV ZLWK DQDORJRXV DJDLQVW WKH FODVV RI ZKLFK SODLQWLII ZDV D PHPEHU ZDV WKH DQDO\VHVRIWKHSULPDIDFLHFDVHKROGLQJWKDWRQFHWKHUHKDV FRPSDQ\jVµVWDQGLQJRSHUDWLQJSURFHGXUHjl((2&Y3HQWRQ EHHQDWULDORQWKHPHULWVDQDSSHOODWHFRXUWFDQQRWUHYLVLW ,QGXV3XEOjJ&R)G WK&LU   FLWDWLRQ ZKHWKHUWKHSODLQWLIIHVWDEOLVKHGKHUSULPDIDFLHFDVH6HH RPLWWHG  HJ 6XJJV Y 6HUYLFHPDVWHU (GXF )RRG 0JPW  )G  WK&LU   m6LQFHWKLVFDVHSURFHHGHGWRWULDO 5HJDUGLQJ WKH ILUVW FDWHJRU\ RI FRQWLQXLQJ YLRODWLRQ RQ WKH PHULWV RQ UHYLHZ WKLV &RXUW GRHV QRW UHYLVLW WKH .RYDFHYLFK KDV QRW DOOHJHG DQ DSSURSULDWH HYHQW WKDW IDOOV 0F'RQQHOO 'RXJODV DQDO\VLV RI ZKHWKHU WKH SODLQWLII ZLWKLQWKHGD\SHULRGIRUILOLQJDQ((2&FKDUJH6KH HVWDEOLVKHGDSULPDIDFLHFDVHRIGLVFULPLQDWLRQ5DWKHUZH FODLPVWKDWWKHSURYRVWjVGHQLDORIKHUJULHYDQFHZDVVXFKDQ SURFHHG GLUHFWO\ WR WKH XOWLPDWH TXHVWLRQ RI ZKHWKHU WKH HYHQW EXW WKLV DUJXPHQW LV XQSHUVXDVLYH LQ OLJKW RI FLUFXLW SODLQWLII FDUULHG KHU EXUGHQ RI SURRI RI GLVFULPLQDWRU\ SUHFHGHQW WKDW WKH GHQLDO RI D UHTXHVW IRU UHOLHI IURP GLVFKDUJHl  :LOVRQ Y )LUHVWRQH 7LUH  5XEEHU &R  GLVFULPLQDWLRQGRHVQRWLWVHOIFRQVWLWXWHDGLVFULPLQDWRU\DFW )G WK&LU   KROGLQJWKDWWKHSULPDIDFLH WKDWWROOVWKHVWDWXWHRIOLPLWDWLRQV6HHsDQLNRZVNLY%HQGL[ TXHVWLRQ LV QRW UHYLHZHG mVLQFH WKH PDWWHU SURFHHGHG WR &RUS)G   WK&LU  .RYDFHYLFKFDQ WULDOl )LHOGVY%ROJHU)G  WK&LU  WKXVQRWFODLPDFDWHJRU\RQHmFRQWLQXLQJYLRODWLRQl UHYLHZLQJWKHmXOWLPDWHLVVXHlUDWKHU WKDQWKHSULPDIDFLH VKRZLQJ   )XUWKHU VLQFH $YHU\ 'HQQLVRQ WKLV &LUFXLW KDV ,Q WKH DOWHUQDWLYH .RYDFHYLFK PXVW VKRZ E\ D UHOLHGRQWKHRSLQLRQDQGWKHFHQWUDOSURSRVLWLRQIRUZKLFKLW SUHSRQGHUDQFHRIWKHHYLGHQFHWKDW.68KDVDQRYHUDUFKLQJ VWDQGV6HH%URFNOHKXUVWY33*,QGXV,QF)G  SROLF\nDmVWDQGLQJRSHUDWLQJSURFHGXUHlnRIGLVFULPLQDWLRQ  Q WK &LU    m%HFDXVHWKLVFDVHKDVEHHQIXOO\ LQSURPRWLRQRURWKHUDVSHFWVRIHPSOR\PHQW3HQWRQ WULHGRQWKHPHULWVZHPD\QRWTXHVWLRQZKHWKHU%URFNOHKXUVW )GDW7KLVPHDQVVKHPXVWVKRZmVRPHWKLQJPRUH HVWDEOLVKHGDSULPDIDFLHFDVHl  FLWLQJ$YHU\'HQQLVRQ WKDQWKHH[LVWHQFHRIGLVFULPLQDWRU\WUHDWPHQWLQ>KHU@FDVHl )GDW  +DLWKFRFN )GDW :HFRQFOXGHWKDWVKHKDVQRW PHW WKLV KLJK WKUHVKROG  5HJDUGLQJ WKH GHQLDO RI KHU RZQ 7KHORJLFDQFKRULQJWKH6XJJV:LOVRQ)LHOGVOLQHRIFDVHV SURPRWLRQV VKH GLG QRW HVWDEOLVK DQ\ HYLGHQFH RI LVWKHVDPHDVWKDWLQ$YHU\'HQQLVRQ0RUHRYHUDOORIWKHVH GLVFULPLQDWLRQDJDLQVWKHUDFNQRZOHGJLQJKHUVHOIWKDWVKHKDG FDVHV DGKHUH WR WKH $LNHQV &RXUWjV GLVFXVVLRQ RI WKH UROH QRWH[SHFWHGWRUHFHLYHDSURPRWLRQLQ DQG DQG SOD\HG E\ WKH SULPD IDFLH FDVH  $LNHQV LQYROYHG D EODFN WKDWKHUGRFXPHQWDWLRQLQVXSSRUWRIWKHODWWHUDSSOLFDWLRQZDV SRVWDOZRUNHUZKREURXJKWD7LWOH9,,VXLWDJDLQVWWKH86 D mPHVVl  :KHQ VKH QH[W DSSOLHG IRU SURPRWLRQ LQ   3RVWDO6HUYLFH$IWHUDEHQFKWULDOWKHGLVWULFWFRXUWHQWHUHG .68JUDQWHGWKHSURPRWLRQ6KHDOVRIDLOHGWRVKRZWKDWWKH MXGJPHQWLQIDYRURIWKH3RVWDO6HUYLFHILQGLQJWKDW$LNHQV UHDVRQFRQVLVWHQWO\JLYHQIRUKHUIDLOXUHWREHSURPRWHGnKHU KDGQRWPHWKLVSULPDIDFLHFDVH$IWHUDQDSSHOODWHFRXUW ODFNRIVFKRODUVKLSnZDVVRPHKRZSUHWH[WXDO$OWKRXJKVKH FRQWHQGV WKDW .68 UHJXODUO\ DVVLJQHG ZRPHQ IDFXOW\

*DIIRUG   .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

.68jV GHIHQVHV D JHQXLQH LVVXH UHPDLQHG DV WR ZKHWKHU UHYHUVDO WKH 6XSUHPH &RXUW DGGUHVVHG WKH GLVWULFW FRXUWjV .RYDFHYLFKjVORZHUVDODU\UHODWLYHWR=LPPHUPDQUHVXOWHG GHFLVLRQnDQG WKH SDUWLHVj DUJXPHQWVn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mVHQVLEOHRUGHUO\ZD\WR HYDOXDWHWKHHYLGHQFHlDQGEULQJWKHFDVHWRWKHFHQWUDOIDFWXDO 7KH GLVWULFW FRXUW DOVR GHQLHG UHLQVWDWHPHQW RI LQTXLU\nmZKHWKHUWKHGHIHQGDQWLQWHQWLRQDOO\GLVFULPLQDWHG .RYDFHYLFKjVRWKHU7LWOH9,,GLVSDUDWHWUHDWPHQWFODLPVnIRU DJDLQVW WKH SODLQWLIIl  ,G DW  TXRWLQJ 7H[DV 'HSjW RI GHQLDORISURPRWLRQGLVSDUDWHZRUNORDGVDQGGHQLDORIVDODU\ &RPPXQLW\$IIDLUVY%XUGLQH86    DGMXVWPHQWnEHFDXVHLWIRXQGWKHPWREHEDUUHGE\WKHVWDWXWH 7KXV RI OLPLWDWLRQV  ,Q GRLQJ VR LW UHMHFWHG .RYDFHYLFKjV mFRQWLQXLQJYLRODWLRQlDUJXPHQW:HDJUHHZLWKWKHGLVWULFW >Z@KHUHWKHGHIHQGDQWKDVGRQHHYHU\WKLQJWKDWZRXOGEH FRXUWjVFRQFOXVLRQ UHTXLUHGRIKLPLIWKHSODLQWLIIKDGSURSHUO\PDGHRXWD SULPDIDFLHFDVHZKHWKHUWKHSODLQWLIIUHDOO\GLGVRLVQR 7KH mFRQWLQXLQJ YLRODWLRQl GRFWULQH SURYLGHV WKDW ZKHQ ORQJHUUHOHYDQW7KHGLVWULFWFRXUWKDVEHIRUHLWDOOWKH mWKHUHLVDQRQJRLQJFRQWLQXRXVVHULHVRIGLVFULPLQDWRU\DFWV HYLGHQFH LW QHHGV WR GHFLGH ZKHWKHU µWKH GHIHQGDQW WKH\ PD\ EH FKDOOHQJHG LQ WKHLU HQWLUHW\ DV ORQJ DV RQH RI LQWHQWLRQDOO\GLVFULPLQDWHGDJDLQVWWKHSODLQWLIIj WKRVHGLVFULPLQDWRU\DFWVIDOOVZLWKLQWKHOLPLWDWLRQVSHULRGl +DLWKFRFNY)UDQN )G WK&LU  ,Q ,G TXRWLQJ %XUGLQH  86 DW   HPSKDVLV DGGHG  RWKHU ZRUGV ZKHQ D FRQWLQXLQJ YLRODWLRQ LV VKRZQ mD %HFDXVHWKHUHFRUGLQFOXGHGGHIHQGDQWjVmSURGXFWLRQlDQGD SODLQWLII LV HQWLWOHG WR KDYH D FRXUW FRQVLGHU DOO UHOHYDQW GLVSXWHRYHUWKHHYLGHQFHRILQWHQWLRQDOGLVFULPLQDWLRQmWKH DFWLRQV DOOHJHGO\ WDNHQ SXUVXDQW WR WKH HPSOR\HUjV 'LVWULFW &RXUW LQ WKLV FDVH VKRXOG KDYH SURFHHGHG WR WKLV GLVFULPLQDWRU\SROLF\RUSUDFWLFHLQFOXGLQJWKRVHWKDWZRXOG VSHFLILFTXHVWLRQ>RILQWHQWLRQDOGLVFULPLQDWLRQ@GLUHFWO\l,G RWKHUZLVHEHWLPHEDUUHGl$OH[DQGHUY/RFDO /DERUHUVj 7KHDSSHOODWHFRXUWVKRXOGKDYHGRQHWKHVDPH6HHLGDW ,QWjO8QLRQRI1$P)G  WK&LU VHH %\IUDPLQJWKHLVVXHLQWHUPVRIWKHSULPDIDFLHFDVH DOVR+HOGY*XOI2LO&R)G WK&LU   WKH FRXUWV DQG SDUWLHV mXQQHFHVVDULO\ HYDGHG WKH XOWLPDWH 7KLV&RXUWKDVKHOGWKDWFRQWLQXLQJYLRODWLRQVPD\EHVKRZQ TXHVWLRQRIGLVFULPLQDWLRQYHOQRQl,GDW LQ RQH RI WZR ZD\V  7KH ILUVW LV mZKHUH WKHUH LV VRPH HYLGHQFHRISUHVHQWGLVFULPLQDWRU\DFWLYLW\JLYLQJULVHWRD %RWKLWVKROGLQJDQGODQJXDJHGHPRQVWUDWHWKDW$LNHQVLV FODLP RI D FRQWLQXLQJ YLRODWLRQl DQG mDW OHDVW RQH RI WKH QRWDQDUURZFDVHDVWKHGLVWULFWFRXUWDVVXPHVZKHQLWDUJXHV IRUELGGHQ GLVFULPLQDWRU\ DFWV >KDV@ RFFXUUHG ZLWKLQ WKH WKDW$YHU\'HQQLVRQmPLVLQWHUSUHWHGl$LNHQV)LUVW$LNHQV UHOHYDQW OLPLWDWLRQV SHULRGl  +DLWKFRFN  )G DW  ZDVQRWOLPLWHGWREHQFKWULDOVIROORZLQJDMXGJHjVUHMHFWLRQ RI D GLUHFWHG YHUGLFW PRWLRQ DV WKH GLVWULFW FRXUW KDV  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

VXJJHVWHG HOVHZKHUH  6HH 3HWURQH  ) 6XSS DW  & VWDWLQJWKDW$YHU\'HQQLVRQPLVDSSOLHG$LNHQVEHFDXVHLQ $LNHQVWKH6XSUHPH&RXUWmFRQFOXGHGWKDWWKHGLVWULFWFRXUW 3ULRUWRWKHMXU\YHUGLFWWKHGLVWULFWFRXUWJUDQWHGMXGJPHQW FRXOGQRWUHYLVLWZKHWKHURUQRWWKHSODLQWLIIVKDGSURYHQD DVDPDWWHURIODZIRU.68RQWKHGLVSDUDWHWUHDWPHQWDVSHFW SULPDIDFLHFDVHLQDEHQFKWULDODIWHUSUHYLRXVO\FRQFOXGLQJ RI .RYDFHYLFKjV 7LWOH 9,, FODLP ZKLFK HQFRPSDVVHG D DWWKHFORVHRIWKHSODLQWLIIVjFDVHLQFKLHIWKDWWKHSULPDIDFLH QXPEHURIVHSDUDWHDOOHJDWLRQVRIGLVFULPLQDWLRQ$IWHUWKH FDVHKDGEHHQPDGHl VHHDOVR$YHU\'HQQLVRQ)GDW WULDO WKH FRXUW GHQLHG .RYDFHYLFKjV 5XOH   PRWLRQ WR  5\DQ s GLVVHQWLQJ  GLVWLQJXLVKLQJ $LNHQV LQ WKH UHFRQVLGHU WKDW GHFLVLRQ DQG .RYDFHYLFK QRZ DSSHDOV WKH VDPHPDQQHU $OWKRXJK$LNHQVLQYROYHGDEHQFKWULDODV GHQLDORIWKDWPRWLRQ ZHOODVDGHFLVLRQWKDWIROORZHGWKHGLVWULFWFRXUWjVUHIXVDOWR GLVPLVVWKHSODLQWLIIjVFDVHDIWHUWKHGHIHQGDQWPRYHGIRUD  GLUHFWHGYHUGLFWVHH$LNHQV86DWQWKH&RXUW PDGH QR HIIRUW WR QDUURZ LWV GLVFXVVLRQ WR WKDW SURFHGXUDO :HFRQFOXGHWKDW.RYDFHYLFKLVHQWLWOHGWRMXGJPHQWLQKHU FLUFXPVWDQFH,QGHHGZKHQGLVFXVVLQJWKHUROHRIWKHSULPD IDYRU RQ WKH ZDJH GLVFULPLQDWLRQ HOHPHQW RI KHU 7LWOH 9,, IDFLH FDVH WKH $LNHQV &RXUW VSRNH EURDGO\ VWDWLQJ FODLP7LWOH9,,GHHPVLWDQXQODZIXOHPSOR\PHQWSUDFWLFH XQFRQGLWLRQDOO\WKDWGLVWULFWMXGJHVVKRXOGQRWUHYLVLWDSULPD mWR GLVFULPLQDWH DJDLQVW DQ\ LQGLYLGXDO ZLWK UHVSHFW WR KLV IDFLH FDVH RQFH D GHIHQGDQW KDV SUHVHQWHG HYLGHQFH RI LWV FRPSHQVDWLRQEHFDXVHRIVXFKLQGLYLGXDOjVVH[l QRQGLVFULPLQDWRU\UHDVRQDQGWKHFDVHKDVEHHQWULHGRQWKH 86&†H D *HQHUDOO\D7LWOH9,,FODLPRIZDJH PHULWV6HH86DW7KH&RXUWQHLWKHUH[SOLFLWO\QRU GLVFULPLQDWLRQ SDUDOOHOV WKDW RI DQ (3$ YLRODWLRQ  6HH LPSOLFLWO\OLPLWHGWKLVVWDWHPHQWWREHQFKILQGLQJVRIIDFWDV JHQHUDOO\%XQWLQ)GDW .RUWH  )GDW   RSSRVHG WR WKRVH RI D MXU\ DV WKH GLVWULFW FRXUW FRQWHQGV 1HYHUWKHOHVV GXH WR WKH PRUH GHPDQGLQJ WKUHVKROG RI )XUWKHUPRUHWKH&RXUWSODFHGOLWWOHHPSKDVLVRQWKHIDFWWKDW VKRZLQJDFRPSDUDWRULQWKH(3$FRQWH[WmFODLPVIRUVH[ WKH3RVWDO6HUYLFHKDGILOHGDGLUHFWHGYHUGLFWPRWLRQLQWKH EDVHG ZDJH GLVFULPLQDWLRQ FDQ EH EURXJKW XQGHU 7LWOH 9,, FDVHPHQWLRQLQJWKDWIDFWRQO\LQSDVVLQJ6HHLGDWQ HYHQWKRXJKQRPHPEHURIWKHRSSRVLWHVH[KROGVDQHTXDO m,WDSSHDUVWKDWDWRQHSRLQWLQWKHWULDOWKH'LVWULFW&RXUW EXWKLJKHUSD\LQJMREl+HQU\Y/HQQR[,QGXV,QF GHFLGHG WKDW $LNHQV KDG PDGH RXW D SULPD IDFLH FDVHl )G WK&LU   TXRWLQJ*XQWKHU86DW HPSKDVLV DGGHG   3HUFHLYLQJ WKH EUHDGWK RI $LNHQV DQ  $WWKHVDPHWLPHWKH%HQQHWW$PHQGPHQWWR7LWOH9,, LPSUHVVLYH QXPEHU RI DSSHOODWH FRXUWV KDYH DSSOLHG LWV LQFRUSRUDWHVWKH(3$jVDIILUPDWLYHGHIHQVHVLQWR7LWOH9,,jV KROGLQJLQWKHVDPHZD\WKDW$YHU\'HQQLVRQGLGnUHJDUGOHVV SURKLELWLRQ RI JHQGHUEDVHG ZDJH GLVFULPLQDWLRQ  6HH RIZKHWKHUWKHSURFHHGLQJEHORZZDVDEHQFKRUMXU\WULDO *XQWKHU86DW LQWHUSUHWLQJ86&†H DQG UHJDUGOHVV RI ZKHWKHU WKH WULDO FRXUW  KDG SUHYLRXVO\  K  DGGUHVVHGDPRWLRQIRUMXGJPHQWRQWKHODZ 7KH GLVWULFW FRXUW HUUHG DV D PDWWHU RI ODZ ZKHQ LW FRQFOXGHGDIWHU.68jVSURRIWKDW.RYDFHYLFKKDGIDLOHGWR PDNH RXW KHU SULPD IDFLH FDVH XQGHU 7LWOH 9,,  $IWHU WKH  6HH HJ 6DQFKH] Y 3XHUWR 5LFR 2LO &R    )G   VW GHIHQGDQWKDVSUHVHQWHGLWVFDVHWKHGLVWULFWFRXUWFDQRQO\ &LU   EHQFK WULDO &RIIH\ Y 'REEV ,QWjO 6HUYLFHV ,QF   )G UHYLHZZKHWKHUWKHUHLVDJHQXLQHLVVXHZLWKUHVSHFWWRWKH   G &LU  MXU\ WULDO RQ WKH PHULWV ZKHUH QR GLUHFWHG YHUGLFW XOWLPDWHTXHVWLRQRIGLVFULPLQDWLRQ6HHVXSUD0RUHRYHU PRWLRQ ZDV PDGH %HUQGW Y .DLVHU $OXPLQXP &KHP 6DOHV ,QF   WKHGLVWULFWFRXUWHUUHGZKHQLWGHQLHG.RYDFHYLFKjVPRWLRQ )G   G &LU   MXU\ WULDO ZLWK GLUHFWHG YHUGLFW PRWLRQ ILOHG 'RFNLQV Y %HQFKPDUN &RPPXQLFDWLRQV   )G   WK IRU UHFRQVLGHUDWLRQ DIWHU WKH YHUGLFW E\ SRLQWLQJ WR .68jV &LU  EHQFK WULDO %DUQHV Y <HOORZ )UHLJKW 6\V ,QF   )G GHIHQVHVXQGHUWKH(3$)RUUHDVRQVVWDWHGDERYHGHVSLWH  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

RWKHUFULWHULD WRUHFRPPHQGDFWXDOGROODUPHULWDZDUGV 1RUZDV$LNHQVOLPLWHGWRDSSHOODWHFRXUWUHYLHZDVWKH &KDLUVj UHFRPPHQGDWLRQV DUH WKHQ IRUZDUGHG WR WKH GLVWULFWFRXUWVXJJHVWHGZKHQLWVWDWHGWKDW$YHU\'HQQLVRQLV 'HDQZKRPD\VXSSRUWGHFUHDVHRULQFUHDVHWKH&KDLUVj XQWHQDEOH IRU GLVWULFW FRXUWV  $LNHQV PDGH IXQGDPHQWDO UHFRPPHQGDWLRQV  0RUHRYHU QRW LQFRQVHTXHQWLDO REVHUYDWLRQV DERXW WKH SXUSRVH DQG VWUXFWXUH RI WKH LQFUHDVHVRYHUDQGDERYHGHSDUWPHQWDOUHFRPPHQGDWLRQV 0F'RQQHOO'RXJODVWHVWDQGWKHVWHSVERWKWULDODQGDSSHOODWH PD\EHDZDUGHGWRVRPHIDFXOW\PHPEHUVE\WKH'HDQ FRXUWV PXVW WDNH WR DGKHUH WR WKDW EURDGHU SXUSRVH  7KXV VLQFHDVXEVWDQWLDOSRUWLRQRIWKHFROOHJHjVPHULWSRRO HYHQ WKRXJK WKH RSLQLRQ LV RIWHQ FLWHG LQ WKH FRQWH[W RI LVUHVHUYHGLQWKH'HDQjVGLVFUHWLRQDU\IXQGVSHFLILFDOO\ DSSHOODWHUHYLHZVHHHJ%URFNOHKXUVW)GDW Q IRU WKLV SXUSRVH  6LQFH WKH PHULW V\VWHP LQ HVVHQFH $LNHQV DQG ORZHU FRXUW GHFLVLRQV LQWHUSUHWLQJ $LNHQV KDYH HVWDEOLVKHVDKLDWXVEHWZHHQSHHUHYDOXDWLRQVDQGDFWXDO DSSOLHGLWVORJLFWRERWKGLVWULFWFRXUWUHYLHZRIYHUGLFWVDV GROODUVDZDUGHGIDFXOW\LQIOXHQFHRQWKHVL]HRIPHULW ZHOO DV DSSHOODWH UHYLHZ  6HH $LNHQV  86 DW  DZDUGVLVPLQLPL]HG7KLVFRQGLWLRQVRPHWLPHVPDNHVLW H[SUHVVLQJmVXUSULV>H@lWKDWWKH&RXUWRI$SSHDOVIRFXVHGRQ H[WUHPHO\ GLIILFXOW WR GHPRQVWUDWH WKH FRQQHFWLRQ WKHSULPDIDFLHFDVH LGDW VWDWLQJWKDWWKHGLVWULFWFRXUW EHWZHHQ SHHUVj SURIHVVLRQDO MXGJPHQWV RI PHULWRULRXV mHUURQHRXVO\ IRFXVHG RQ WKH TXHVWLRQ RI SULPD IDFLH FDVH SHUIRUPDQFHDQGWKHVL]HRIPHULWDZDUGV UDWKHUWKDQGLUHFWO\RQWKHTXHVWLRQRIGLVFULPLQDWLRQl VHH DOVRHJ%DUQHV)GDW FULWLFL]LQJWKHGLVWULFW s$DW  HPSKDVLVDGGHG $QLQWHUQDOPHPRUDQGXP FRXUWIRUIRFXVLQJRQWKHSULPDIDFLHFDVHDIWHUDEHQFKWULDO IRU .68 DGPLQLVWUDWRUV DOVR GHVFULEHG WKH FROOHJH GHDQjV RQ WKH PHULWV  +D\PDQ  )G DW  m%HFDXVH FRQWURORYHUDSRUWLRQRIWKHPHULWDZDUGIXQGV7KHUHFRUG $SSHOODQWjV FODLP ZDV IXOO\ WULHG RQ WKH PHULWV EHORZ WKH DOVRVKRZHGWKDWXQGHUWKLVV\VWHPWKHFROOHJHGHDQRQWKUHH GLVWULFWFRXUWKDGQRUHDVRQWREDVHLWVMXGJPHQWRQVXSSRVHG RFFDVLRQVHLWKHUUHGXFHGRUGLVDOORZHGHQWLUHO\DPHULWDZDUG GHILFLHQFLHV LQ $SSHOODQWjV SULPD IDFLH FDVHl   7KH  UXOH WKDW.RYDFHYLFKjVGHSDUWPHQWFKDLUKDGUHFRPPHQGHGRQKHU IURP$LNHQVWKXVDSSOLHVWRDSSHOODWHFRXUWVDQGGLVWULFWFRXUWV EHKDOI7KHIDFXOW\FRPPLWWHHUHSRUWHGWKDWLQIRUPDWLRQRQ DOLNH WKH UHDVRQV IRU WKHVH UHGXFWLRQV ZDV mXQDYDLODEOHl MXVW DV mUHFRUGVRIDQ\NLQGUHODWLQJWRPHULWVGHFLVLRQVDUHYLUWXDOO\ )LQDOO\WKHGLVWULFWFRXUWjVFRQWHQWLRQWKDW$YHU\'HQQLVRQ QRQH[LVWHQWls$DW )LQDOO\.RYDFHYLFKGLVFXVVHGDW FRQWUDGLFWV WKLV &RXUWjV KROGLQJ LQ *DIIRUG PLVUHDGV ERWK OHQJWKWKHUHVXOWVRIKHURZQUHVHDUFKRQWKHGLVSDULW\LQPHULW RSLQLRQV  7KH FRXUW IRFXVHV RQ WKH SRUWLRQ RI *DIIRUG DZDUGHGWRKHUGHSDUWPHQWjVPDOHDQGIHPDOHSURIHVVRUV6KH UHMHFWLQJWKHSODLQWLIIj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

ZH EHOLHYH WKDW .RYDFHYLFK FUHDWHG D JHQXLQH LVVXH DV WR MXU\ WULDO ((2& Y 8QLYHUVLW\ RI 2NODKRPD  )G  

ZKHWKHUWKHGLIIHUHQFHLQKHUSD\DQG=XFNHUPDQjVZDVGXH WK &LU   MXU\ WULDO IROORZLQJ MXGJPHQW QRWZLWKVWDQGLQJ WKH YHUGLFW 6HWK s FRQFXUULQJ *UHHQ Y 6FKRRO %G  )G   WRVH[RUGXHWRDIDFWRURWKHUWKDQVH[6HH%XQWLQ)G WK &LU   EHQFK WULDO %DUERXU Y %URZQHU  )G   DW)RUWKDWUHDVRQZHILQGWKHGLVWULFWFRXUWjVRUGHURI '& &LU  MXU\ YHUGLFW RYHUWXUQHG DV PDWWHU RI ODZ +D\PDQ Y MXGJPHQWDVDPDWWHURIODZIRU.68ZDVLQHUURU 1DWLRQDO $FDGHP\ RI 6FLHQFHV  )G   '& &LU   MXU\ YHUGLFW IROORZLQJ MXGJPHQW QRWZLWKVWDQGLQJ WKH YHUGLFW  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

FDVHKDGEHHQHVWDEOLVKHG6HH )GDW6WDWLQJWKDW ZHGLVDJUHHZLWKWKHGLVWULFWFRXUWWKDW.68ZDVHQWLWOHGWR WKHILQGHURIIDFWPXVWILQGWKHSULPDIDFLHFDVHVDWLVILHGLQD SUHYDLODVDPDWWHURIODZ GLVSDUDWHWUHDWPHQWFDVHVHHLGDW FLWLQJ%XUGLQH 86DW WKH*DIIRUG&RXUWUHDVRQHGWKDWZKHWKHUD )LUVWORRNLQJDWWKHHYLGHQFHLQDOLJKWPRVWIDYRUDEOHWR SULPDIDFLHFDVHKDVEHHQHVWDEOLVKHGLVDPDWWHURIERWKIDFW .RYDFHYLFKDUHDVRQDEOHMXURUFRXOGILQGWKDW.RYDFHYLFK DQGODZ7KXVmLWZDVQRWHUURUSHUVHIRUWKHGLVWULFWFRXUW DQG=LPPHUPDQZHUHWUHDWHGGLIIHUHQWO\IRUFRPSDUDEOHZRUN WR KDYH VXEPLWWHG WKH TXHVWLRQ >@ WR WKH MXU\l  ,G DW   ZKLOHDW.687KHFKURQRORJ\RIWKHLUWLPHDW.68LVTXLWH &RQWUDU\WRWKHGLVWULFWFRXUWjVDQDO\VLV$YHU\'HQQLVRQGRHV VLPLODU KDYLQJEHHQKLUHGZLWKLQRQH\HDURIRQHDQRWKHU QRW FRQWUDGLFW WKLV FRQFOXVLRQ LQ *DIIRUG DQ\ PRUH WKDQ ZLWKVLPLODUSULRUH[SHULHQFH XQGHUWDNLQJWKHVDPHZRUNORDG $LNHQV FRQWUDGLFWV %XUGLQH  :KLOH DV *DIIRUG VWDWHV WKH UHTXLUHPHQWV ZKLOH WKHUH  ZRUNLQJ ZLWKLQ WKH VDPH HOHPHQWVRIWKHSULPDIDFLHFDVHFDQLQGHHGJREHIRUHDMXU\ GHSDUWPHQW  DQG KDYLQJ EHHQ HYDOXDWHG XQGHU WKH VDPH $LNHQVDQG$YHU\'HQQLVRQVLPSO\VWDWHWKDWLQUHYLHZLQJD FULWHULDE\WKHVDPH)$&LQWKHVDPH\HDUV'HVSLWHVRPH WULDOWKDWSURFHHGVEH\RQGWKHSULPDIDFLHVWDJHQHLWKHUWKH GLIIHUHQFHVLQWKHLUH[SHULHQFHVSRLQWHGRXWE\.68ORRNLQJ GLVWULFW FRXUW QRU DSSHOODWH FRXUW VKRXOG UHIRFXV RQ WKH DW WKHVH FLUFXPVWDQFHV LQ D OLJKW PRVW IDYRUDEOH WR TXHVWLRQ RI ZKHWKHU D SODLQWLII HVWDEOLVKHG KHU SULPD IDFLH .RYDFHYLFK ZH FRQFOXGH WKDW WKHUH LV VXSSRUW IRU KHU FDVH7KH\VKRXOGLQVWHDGORRNWRWKHXOWLPDWHTXHVWLRQRI DUJXPHQWWKDWWKHWZRSURIHVVRUVZHUHURXJKO\FRPSDUDEOH GLVFULPLQDWLRQ  6HH $LNHQV  86 DW   7KH GLVWULFW SURIHVVLRQDOO\7KHUHLVDOVRQRTXHVWLRQWKDWWKH\UHFHLYHG FRXUWLVVLPSO\LJQRULQJRUPLVUHDGLQJ$LNHQVZKHQLWVWDWHV GLIIHUHQWVDODULHVnE\WKHWLPHRI.RYDFHYLFKjVUHWLUHPHQWLQ WKDWLIXQGHU*DIIRUGDMXU\FDQGHWHUPLQHZKHWKHUDSULPD  KHUSD\ZDV OHVVWKDQ=XFNHUPDQjV IDFLHFDVHKDVEHHQSURYHGmVXUHO\DWULDOFRXUWVKRXOGEHDEOH WRPDNHDOHJDOGHWHUPLQDWLRQWKDWQRUHDVRQDEOHMXU\FRXOG $OWKRXJK.68KDVDUJXHGWKDW.RYDFHYLFKjVORZHUVDODU\ FRQFOXGHWKDWDSODLQWLIIKDVSURYHQKHUSULPDIDFLHFDVHE\D ZDVGXHWRWKHVFKRROjVPHULWV\VWHPDQG DFURVVWKHERDUG SUHSRQGHUDQFHRIWKHHYLGHQFHls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j WKHUHLVQREDVLVIRU.68WRGLVWLQJXLVK$YHU\'HQQLVRQDVD DVVHVVPHQWRIDSSOLFDQWVjSHUIRUPDQFHVDQGUHZDUGHGPHQ 7LWOH9,,FDVHmQRWDQ(3$RU$'($FODLPl.68jV%UDW GLVSURSRUWLRQDWHO\ WR ZRPHQ  )RU LQVWDQFH WKH UHSRUW %RWK$LNHQVDQG$YHU\'HQQLVRQVSHDNEURDGO\RIWKH SUHSDUHGE\DVSHFLDOIDFXOW\FRPPLWWHHDSSRLQWHGWRUHVSRQG SXUSRVH RI SULPD IDFLH FDVHV LQ GLVFULPLQDWLRQ VXLWV DQG WR .RYDFHYLFKjV FKDUJHV RI GLVFULPLQDWLRQ QRWHG WKDW mWKH QHLWKHUWKRVHRSLQLRQVWKHPVHOYHVQRUODWHUFLUFXLWFDVHODZ QDWXUH RI FXUUHQW PHULW SURFHGXUHV VXJJHVWV WKDW GHDQV DQG DSSO\LQJ$LNHQVLVOLPLWHGWRWKH7LWOH9,,FRQWH[W6HHHJ FKDLUVTXDVLLQGHSHQGHQWO\FRQWUROWKHVL]HRIPHULWDZDUGV l 3KHOSVY<DOH6HFXULW\,QF )G WK &LU   DSSO\LQJ$LNHQVLQDQ$'($FDVH 6RWRY$GDPV >7KHIDFXOW\UDQNLQJRISHHUV@LVGRQHLQGHSHQGHQWO\RI (OHYDWRU (TXLS &R  )G   WK &LU   DQGHVVHQWLDOO\ZLWKRXWNQRZOHGJHRIWKHGROODUDPRXQW XWLOL]LQJWKH$LNHQVUXOHIRUDQ(3$FODLPDQGSRLQWLQJWRDQ LI DQ\  WR EH DWWDFKHG WR D SDUWLFXODU UDQNLQJ $'($FDVHZKHUHLWZDVDOVRXVHG :HWKHUHIRUHUHMHFWWKH 'HSDUWPHQW FKDLUV WKHQ XVH WKHVH UDQNLQJV DV ZHOO DV  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

HYLGHQFHWKDWWKHZDJHGLIIHUHQWLDOLVMXVWLILHGXQGHURQHRI GLVWULFWFRXUWjVDVVHUWLRQWKDW$YHU\'HQQLVRQFRQIOLFWVZLWK WKHIRXUDIILUPDWLYHGHIHQVHVVHWIRUWKLQWKH(TXDO3D\$FW SULRUFDVHODZDQGRXJKWQRWEHDSSOLHGLQWKLVLQVWDQFH7R  DVHQLRULW\V\VWHP   DPHULWV\VWHP   DV\VWHPZKLFK WKH H[WHQW WKDW WKH GLVWULFW FRXUW JUDQWHG MXGJPHQW RQ WKH PHDVXUHVHDUQLQJVE\TXDQWLW\RUTXDOLW\RISURGXFWLRQ RU  $'($ DQG 7LWOH 9,, FODLPV EHFDXVH .RYDFHYLFK IDLOHG WR DQ\RWKHUIDFWRURWKHUWKDQVH[6HH 86&† G  PDNHRXWKHUSULPDIDFLHFDVHLWHUUHGDVDPDWWHURIODZ &RUQLQJ*ODVV:RUNV86DW   %XQWLQ)G DW 7LPPHU)GDW7KHEXUGHQIRUSURYLQJWKDW )LQDOO\ ZH IHHO FRPSHOOHG WR UHVSRQG EULHIO\ WR sXGJH DIDFWRURWKHUWKDQVH[LVWKHEDVLVIRUDZDJHGLIIHUHQWLDOLVD *LOPDQjV FULWLFLVP RI $YHU\ 'HQQLVRQ  )LUVW RYHUUHDGLQJ KHDY\RQH6HH%XQWLQ)GDW  VRPHRI$YHU\'HQQLVRQjVGLFWDWKHFRQFXUUHQFHPLVVWDWHV WKDWGHFLVLRQjVKROGLQJ:HGRQRWUHDGWKHGHFLVLRQWRKDYH %HFDXVHWKHUHZDVDWULDORQWKHPHULWV$LNHQVGLFWDWHVWKDW KHOG WKDW mWKH GLVWULFW FRXUW FDQQRW TXHVWLRQ WKH SURRI WKH GLVWULFW FRXUWjV DQG WKLV &RXUWjV GXW\ LQ UHYLHZLQJ WKDW FRQVWLWXWLQJWKHSODLQWLIIjVSULPDIDFLHFDVHRQFHWKHDFWLRQLV YHUGLFW LV mQRW >@ WR GHWHUPLQH ZKHWKHU >.RYDFHYLFK@ DOORZHGWRSURFHHGWRWULDOl3RVWDW/LNHRXUGHFLVLRQLQ HVWDEOLVKHGHDFKHOHPHQWRIKHUSULPDIDFLHFDVHRUZKHWKHU WKLV FDVH DQG OLNH $LNHQV $YHU\ 'HQQLVRQ VWDQGV IRU WKH >.68@ SUHVHQWHG VXIILFLHQW HYLGHQFH RI DQ DIILUPDWLYH VLPSOH SURSRVLWLRQ WKDW LQ UHYLHZLQJ WKH IDFWV RI D GHIHQVHl  6RWR  )G DW    5DWKHU ORRNLQJ DW WKH GLVFULPLQDWLRQFODLPDIWHUWKHUHKDVEHHQDIXOOWULDORQWKH HYLGHQFHLQDOLJKWPRVWIDYRUDEOHWR.RYDFHYLFKZHPXVW PHULWVDGLVWULFWFRXUWRUDQDSSHOODWHFRXUWPXVWIRFXVRQWKH GHFLGHZKHWKHUWKHMXU\UHDVRQDEO\FRXOGKDYHEHOLHYHGWKDW XOWLPDWHTXHVWLRQRIGLVFULPLQDWLRQUDWKHUWKDQRQZKHWKHUD .68 YLRODWHG WKH (3$ E\ SD\LQJ .RYDFHYLFK OHVV WKDQ SODLQWLIIPDGHRXWKHUSULPDIDFLHFDVH2IFRXUVHWKHUHLV =XFNHUPDQEHFDXVHRIKHUJHQGHU6HHLG VHHDOVR$LNHQV QRWKLQJWRSUHYHQWWKHFRXUWIURPFRQVLGHULQJHYLGHQFHWKDW  86 DW  VWDWLQJ WKDW WKH GLVWULFW DQG DSSHOODWH DOVREHDUVRQWKDWSULPDIDFLHFDVHDVORQJDVLWGRHVVRLQ FRXUWV PXVW FRQVLGHU WKH XOWLPDWH TXHVWLRQ RI ZKHWKHU RUGHU WR DGGUHVV WKH XOWLPDWH TXHVWLRQ RI GLVFULPLQDWLRQ LQWHQWLRQDO GLVFULPLQDWLRQ RFFXUUHG   7KHUH PXVW EH QR ,QGHHGWKDWLVZKDWZHGREHORZ6HHLQIUD7KDWLVDOVR JHQXLQHLVVXHDVWRZKHWKHUWKHGLIIHUHQFHLQSD\LVGXHWRD ZKDWWKH'&&LUFXLWDQG)LUVW&LUFXLWGLGLQ&RIIH\)G IDFWRURWKHUWKDQVH[6HH%XQWLQ)GDW2IFRXUVH DW  DQG %DUERXU  )G DW  HYLGHQFHWKDWEHDUVXSRQHOHPHQWVRIWKHSULPDIDFLHFDVHFDQ UHVSHFWLYHO\nGHFLVLRQVWKDWGHVSLWHsXGJH*LOPDQjVYLHZWR DOVR FRPH LQWR SOD\ LQ DVVHVVLQJ WKH XOWLPDWH TXHVWLRQ RI WKHFRQWUDU\ZHILQGWREHIXOO\FRQVLVWHQWZLWKRXUDSSURDFK GLVFULPLQDWLRQ6HH5HHYHVY6DQGHUVRQ3OXPELQJ3URGXFWV WRGD\ ,QF  6&W     WDNLQJ LQWR DFFRXQW WKH HYLGHQFHVXSSRUWLQJWKHSODLQWLIIjVSULPDIDFLHFDVHDVSDUWRI sXGJH*LOPDQjVGLVFRPIRUWZLWK$YHU\'HQQLVRQDSSHDUVWR LWV FRQVLGHUDWLRQ RI WKH mXOWLPDWH TXHVWLRQl RI LQWHQWLRQDO EH WKDW LW DOOHJHGO\ UHSUHVHQWV WKH WULXPSK RI mVHPDQWLFVl GLVFULPLQDWLRQ %DUERXU)GDW *UHHQ)G mWHUPLQRORJ\lDQGmQRPHQFODWXUHlRYHUVXEVWDQFH%XWLQ DW  WKLVWKHFRQFXUUHQFHRYHUORRNVDFHQWUDOSRLQWRI$LNHQVDQG LQGHHGDIXQGDPHQWDOHOHPHQWRIDSSHOODWHUHYLHZ6LPLODU  WR$YHU\'HQQLVRQLQ$LNHQVWKH6XSUHPH&RXUWUHYHUVHGDQG UHPDQGHG D EHQFKWULDO GHFLVLRQ SUHFLVHO\ EHFDXVH WKH /RRNLQJDWWKHWRWDOLW\RIHYLGHQFHLQWKHUHFRUGZHILQG GHFLGLQJFRXUWDVZHOODVWKHDSSHOODWHFRXUWDQGWKHSDUWLHV WKDW .RYDFHYLFK LQWURGXFHG VXIILFLHQW HYLGHQFH IRU D KDGFRQWLQXRXVO\mIUDPH>G@WKHLVVXHLQ>@WHUPVlRI$LNHQVjV UHDVRQDEOHMXURUWRILQGWKDWKHUORZHUVDODU\ZDVDUHVXOWRI SULPDIDFLHFDVHHYHQDIWHUWKHFDVHZDVWULHGRQWKHPHULWV JHQGHUGLVFULPLQDWLRQ'HVSLWH.68jVVWURQJIDFWXDOGHIHQVH 86DW HPSKDVLVDGGHG :KLOHWKHFRQFXUUHQFH  .RYDFHYLFKY.HQW6WDWH8QLY 1R  1R  .RYDFHYLFKY.HQW6WDWH8QLY 

ZRXOGPLQLPL]HWKHmWHUPVlE\ZKLFKFRXUWVmIUDPHlWKHLU QXPHURXVGHFLVLRQVLQWKLVFLUFXLWDQGRWKHUVKDYHXQGHUVWRRG UHYLHZDVPHUHmVHPDQWLFVlWKH$LNHQVGHFLVLRQKLQJHGRQ H[SODLQHGDQGDSSOLHGWKHFHQWUDOORJLFRI$LNHQVDQG$YHU\ WKH IDFW WKDW WKH GLVWULFW FRXUWjV HUUDQW mWHUPVl XQGHUPLQHG 'HQQLVRQLQDYDULHW\RIFLUFXPVWDQFHVDVZHGRKHUH6HHQ FRQILGHQFH LQ WKH GHFLVLRQ LW KDG UHQGHUHG  $V WKH &RXUW VXSUD3HUKDSVWKHFRQFXUUHQFHjVSX]]OHPHQWVWHPVIURP H[SODLQHG JLYHQ WKH LQDSSURSULDWH FKDUDFWHUL]DWLRQ RI WKH WKH IDFW WKDW LW ILQGV SDUWV RI $LNHQV LWVHOI WR EH mUDWKHU DSSOLFDEOH UHYLHZ mZH FDQQRW EH FHUWDLQ WKDWl WKH ORZHU FU\SWLFlDVHQWLPHQWZHKDYHQRWIRXQGRWKHUFRXUWVWRKDYH FRXUWjVILQGLQJVZHUHQRWLQIOXHQFHGE\LWVmPLVWDNHQYLHZRI H[SUHVVHGDERXWWKHFRQFLVHVL[SDJHRSLQLRQWKDWHQMR\HGDQ WKHODZl,GDW ,QRWKHUZRUGVWRDUHYLHZLQJFRXUWWKH HLJKWsXVWLFHPDMRULW\ ZLWKWKHQLQWKFRQFXUULQJLQWKHUHVXOW  ZULWWHQ ODQJXDJH D ORZHU FRXUW XVHV WR IUDPH LWV OHJDO DQG 1RQHWKHOHVVLIWKHUHLVDQ\ODWHQWFRQIXVLRQZHKRSHWKDWRXU IDFWXDOGHFLVLRQVLVLQGLVSHQVDEOHWRDVVHVVLQJWKHUDWLRQDOH WUHDWPHQWWRGD\IXUWKHUFODULILHVWKHPHDQLQJRIERWKFDVHV EHKLQGDQGFRUUHFWQHVVRIWKRVHRXWFRPHV*LYHQWKLVDVSHFW $VIRUsXGJH*LOPDQjVFRQFHUQWKDWWKLVGHFLVLRQDQG$YHU\ RI$LNHQVLIsXGJH*LOPDQZLVKHVWREDWWOHZKDWKHVHHVDV 'HQQLVRQSRVHDmWUDSIRUXQZDU\GLVWULFWFRXUWMXGJHVlZH WKHWULXPSKRImVHPDQWLFVlRYHUVXEVWDQFHKHZLOOKDYHWR DUHFRQILGHQWWKDWWKLV&LUFXLWjVGLVWULFWFRXUWVDUHVXIILFLHQWO\ ZDJHWKDWEDWWOHDWDKLJKHUOHYHO ZDU\ WR WDNH QRWH RI ELQGLQJ FLUFXLW DQG 6XSUHPH &RXUW FDVHODZDQGDSSO\LWDFFRUGLQJO\ :HRIFRXUVHDJUHHZLWKsXGJH*LOPDQWKDWHYHQDIWHUD GLVWULFWFRXUWXVHVDIDXOW\IUDPHZRUNDUHYLHZLQJFRXUWFDQ % LWVHOIORRNDWDFRPSOHWHUHFRUGWRGHFLGHWKHFDVHXVLQJWKH SURSHUPRGHRIUHYLHZ7KDWLVZKDWZHGRLQWKLVFDVH%XW .RYDFHYLFK QH[W DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ WKDW LV QHLWKHU UHTXLUHG QRU SRVVLEOH LQ HYHU\ FDVH DV WKH JUDQWLQJ .68 D MXGJPHQW DV D PDWWHU RI ODZ RQ KHU (3$ FRQFXUUHQFH VHHPV WR VXJJHVW  6HH 3RVW DW  FULWLFL]LQJ FODLP:HDJUHH $YHU\ 'HQQLVRQ IRU UHYHUVLQJ DQG UHPDQGLQJ UDWKHU WKDQ mDIILUPLQJRQGLIIHUHQWJURXQGVDIWHUFRUUHFWLQJWKHGLVWULFW  FRXUWjV WHUPLQRORJ\l   ,Q FDVHV ZKHUH WKH UHFRUG LV QRW VXIILFLHQWWRDOORZWKHUHYLHZLQJFRXUWWRDGGUHVVWKHXOWLPDWH 7KH (3$ SURYLGHV WKDW QR FRYHUHG HPSOR\HU VKDOO TXHVWLRQ RI GLVFULPLQDWLRQ UHPDQG LV DSSURSULDWH  7KLV LV GLVFULPLQDWHmEHWZHHQHPSOR\HHVRQWKHEDVLVRIVH[IRU SUHFLVHO\ZKDWWKH6XSUHPH&RXUWGLGLQ$LNHQVVHH86 HTXDOZRUNRQMREVWKHSHUIRUPDQFHRIZKLFKUHTXLUHVHTXDO DW UHPDQGLQJIRUWKHGLVWULFWFRXUWWRUHFRQVLGHUZKHWKHU VNLOO HIIRUW DQG UHVSRQVLELOLW\ DQG ZKLFK DUH SHUIRUPHG WKH 3RVWDO 6HUYLFH GLVFULPLQDWHG DJDLQVW $LNHQV XVLQJ WKH XQGHUVLPLODUZRUNLQJFRQGLWLRQVl7LPPHU)GDW SURSHUUHYLHZ DQGFRQVLVWHQWZLWK$LNHQVZKDWWKLV&RXUW TXRWLQJ 86&† G  7RHVWDEOLVKDSULPDIDFLH GLGLQ$YHU\'HQQLVRQ6HH)GDW H[SODLQLQJWKDW FDVHIRUDQ(3$FODLPDSODLQWLIIPXVWVKRZWKDWDQHPSOR\HU DUHPDQGZDVQHFHVVDU\EHFDXVHWKHUHFRUGZDVLQFRPSOHWH SDLGGLIIHUHQWZDJHVWRDQHPSOR\HHRIWKHRSSRVLWHVH[IRU DQG WKH FRXUW ZDV XQDEOH WR PDNH D GHWHUPLQDWLRQ RQ WKH VXEVWDQWLDOO\ HTXDO ZRUN 6HH LG  mµ(TXDO ZRUNj GRHV QRW XOWLPDWHLVVXHRIGLVFULPLQDWLRQ  UHTXLUH WKDW WKH MREV EH LGHQWLFDO EXW RQO\ WKDW WKHUH H[LVW µVXEVWDQWLDO HTXDOLW\ RI VNLOO HIIRUW UHVSRQVLELOLW\ DQG )LQDOO\ZHGRQRWSHUFHLYHWKHmFRQIXVLRQLQWKHFLUFXLWl ZRUNLQJ FRQGLWLRQVjl  %XQWLQ  )G DW   TXRWLQJ GHWHFWHG E\ sXGJH *LOPDQ  :H FHUWDLQO\ GR QRW ILQG 2GRPHVY1XFDUH,QF)G WK&LU   FRQIXVLRQGHPRQVWUDWHGE\WKHIDFWWKDWsXGJH5\DQGLVVHQWHG 7R GHWHUPLQH LI ZRUN LV VXEVWDQWLDOO\ HTXDO D FRXUW PXVW LQ $YHU\ 'HQQLVRQ LWVHOI RU WKDW D ORQH GLVWULFW FRXUW KDV PDNHmDQRYHUDOOFRPSDULVRQRIWKHZRUNQRWLWVLQGLYLGXDO UHSHDWHGO\ UHIXVHG WR DSSO\ WKDW KROGLQJ  7R WKH FRQWUDU\ VHJPHQWVl,G2QFHWKHSODLQWLIIHVWDEOLVKHVDSULPDIDFLH FDVH WKH GHIHQGDQW PXVW SURYH E\ D SUHSRQGHUDQFH RI WKH

Reference

Status
Published