U.S. Court of Appeals for the Sixth Circuit, 2001

Blackard v. Memphis Area Med Ctr

Blackard v. Memphis Area Med Ctr
U.S. Court of Appeals for the Sixth Circuit · Decided August 24, 2001

Blackard v. Memphis Area Med Ctr

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

0,&+$(/ %/$&.$5'DQG ; 6+$521 %/$&.$5'ERWK  LQGLYLGXDOO\DQGDVSDUHQWV   1R OHJDOJXDUGLDQVDQGQH[W  IULHQGVIRU$6+/(< !  %/$&.$5'DPLQRU  3ODLQWLIIV$SSHOODQWV   Y    0(03+,6 $5($ 0(',&$/  &(17(5 )25 :20(1 ,1&  )$=(/ 0$1(s:$/$ 0'  'HIHQGDQWV$SSHOOHHV   $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV 1R  nsRQ3KLSSV0F&DOOD'LVWULFWsXGJH $UJXHG sXQH 'HFLGHGDQG)LOHG $XJXVW %HIRUH .(11('<6,/(5DQG&/$<&LUFXLWsXGJHV

  %ODFNDUGHWDOY0HPSKLV$UHD 1R 1R %ODFNDUGHWDOY0HPSKLV$UHD  0HG&WUIRU:RPHQHWDO 0HG&WUIRU:RPHQHWDO BBBBBBBBBBBBBBBBB GXULQJWKHWLPHWKDWWKHLQMXQFWLRQZDVLQHIIHFW8QWLO VXFKWLPHDVWKHMXGLFLDOE\SDVVSURFHGXUHZDVDFWXDOO\ &2816(/ LPSOHPHQWHG 7HQQHVVHH FRXOG QRW FRQVWLWXWLRQDOO\ UHTXLUHPLQRUVWRREWDLQSDUHQWDOFRQVHQWWRDQDERUWLRQ $5*8('   5REHUW / +XWWRQ */$1./(5 %52:1 DQGFRXOGQRWLPSRVHFLYLOOLDELOLW\XSRQSHUVRQVZKR 0HPSKLV 7HQQHVVHH IRU $SSHOODQWV  sDPHV / .LUE\ IDLOHGWRFRPSO\ZLWKWKH&RQVHQW$FW +$55,6 6+(/721 '81/$3 &2%%  5<'(5 0HPSKLV 7HQQHVVHH 9LFNLH + sRQHV %/$&. s$DW :HWKHUHIRUHUHMHFW3ODLQWLIIVjFRQWHQWLRQ 0F/$5(1 0HPSKLV 7HQQHVVHH IRU $SSHOOHHV  sXOLH ( WKDW 'HIHQGDQWV IDLOHG WR REWDLQ WKH FRQVHQW RI $VKOH\ 6WHUQEHUJ $0(5,&$1 &,9,/ /,%(57,(6 81,21 %ODFNDUGjVSDUHQWVDWWKHLURZQSHULO )281'$7,211HZ<RUN1HZ<RUNIRU$PLFL&XULDH 21 %5,()   5REHUW / +XWWRQ */$1./(5 %52:1 &21&/86,21 0HPSKLV 7HQQHVVHH IRU $SSHOODQWV  sDPHV / .LUE\ +$55,6 6+(/721 '81/$3 &2%%  5<'(5 :H FRQFOXGH WKDW WKH GLVWULFW FRXUW SURSHUO\ JUDQWHG 0HPSKLV7HQQHVVHH9LFNLH+sRQHV0LFKDHO*0F/DUHQ 'HIHQGDQWVjPRWLRQIRUUHOLHIIURPDSULRURUGHU7KHGLVWULFW %/$&. 0F/$5(10HPSKLV7HQQHVVHHIRU$SSHOOHHV FRXUW GLG QRW FRPPLW FOHDU HUURU LQ GHWHUPLQLQJ WKDW WKH sHQQLIHU 'DOYHQ /RXLVH 0HOOLQJ $0(5,&$1 &,9,/ 7HQQHVVHH MXYHQLOH FRXUWV ZHUH LQ DFWLYH FRQFHUW DQG /,%(57,(681,21)281'$7,211HZ<RUN1HZ<RUN SDUWLFLSDWLRQ ZLWK WKH $'& D QDPHG 'HIHQGDQW LQ WKH IRU$PLFL&XULDH 0HPSKLV 3ODQQHG 3DUHQWKRRG FDVH DQG ZHUH WKHUHIRUH HQMRLQHG IURP HQIRUFLQJ WKH 3DUHQWDO &RQVHQW $FW DQG LWV BBBBBBBBBBBBBBBBB MXGLFLDO E\SDVV SURFHGXUH  7KH UHFRUG DOVR VXSSRUWV WKH GLVWULFW FRXUWjV GHWHUPLQDWLRQ WKDW QR MXGLFLDO E\SDVV 23,1,21 SURFHGXUH LQ IDFW H[LVWHG DW WKH WLPH RI $VKOH\ %ODFNDUGjV BBBBBBBBBBBBBBBBB DERUWLRQ7KHGLVWULFWFRXUWWKHUHIRUHFRXOGQRWFRQVLVWHQW ZLWK %HOORWWL DQG LWV SURJHQ\ KROG 'HIHQGDQWV OLDEOH IRU &/$< &LUFXLW sXGJH  3ODLQWLIIV 0LFKDHO 6KDURQ DQG IDLOLQJ WR REWDLQ WKH FRQVHQW RI $VKOH\ %ODFNDUGjV SDUHQWV $VKOH\%ODFNDUGILOHGWKHLQVWDQWDFWLRQLQWKH8QLWHG6WDWHV SULRUWRKHUDERUWLRQDVUHTXLUHGE\WKH3DUHQWDO&RQVHQW$FW 'LVWULFW&RXUWIRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDOOHJLQJ $FFRUGLQJO\ZH$)),50WKHGLVWULFWFRXUWjVRUGHUJUDQWLQJ WKDW'HIHQGDQWV0HPSKLV$UHD0HGLFDO&HQWHUIRU:RPHQ 'HIHQGDQWVjPRWLRQIRUUHOLHIIURPDSULRURUGHUDQGWKXVWKH ,QF m0&:l  DQG )D]HO 0DQHMZDOD 0' YLRODWHG WKH ILQDOMXGJPHQWLQWKLVFDVH 7HQQHVVHH3DUHQWDO&RQVHQWIRU$ERUWLRQE\0LQRUV$FW WKH m$FWl RU WKH m3DUHQWDO &RQVHQW $FWl  7HQQHVVHH &RGH $QQRWDWHG††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j PRWLRQ IRU UHOLHI IURP D SULRU RUGHU ULJKWWRDQDERUWLRQ GHQ\LQJ WKHLU UHVSHFWLYH PRWLRQV WR GLVPLVV mPRWLRQ IRU $VHFRQGUHDVRQWKDWWKH(GJDUFDVHLVQRWDQDORJRXV UHOLHIIURPDSULRURUGHUl 7KHGLVWULFWFRXUWjV1RYHPEHU  LVWKDWUHOLDQFHXSRQDGHFODUDWRU\MXGJPHQWDFWLRQLVQRW  RUGHUKHOGWKDW3ODLQWLIIVFRXOGQRWUHO\RQWKH3DUHQWDO FRQVWLWXWLRQDOO\ VXIILFLHQW UHFRXUVH LQ WKH FRQWH[W RI &RQVHQW $FW DV D EDVLV IRU WKHLU FODLPV EHFDXVH LWV DERUWLRQ  7KH ULJKW WR DQ DERUWLRQ LV FRQVWLWXWLRQDOO\ HQIRUFHPHQWZDVHQMRLQHGDWWKHWLPHWKDW$VKOH\%ODFNDUG SURWHFWHG  6HH 3ODQQHG 3DUHQWKRRG RI 6RXWKHDVWHUQ REWDLQHGKHUDERUWLRQ$OWKRXJK$VKOH\%ODFNDUGjVFRPPRQ 3HQQV\OYDQLDY&DVH\86    6WDWHV ODZEDWWHU\FODLPZDVSHUPLWWHGWRJRIRUZDUG0LFKDHODQG PD\ LPSRVH FHUWDLQ UHVWULFWLRQV XSRQ WKH ULJKW WR DQ 6KDURQ %ODFNDUGjV FODLPV ZHUH GLVPLVVHG  3ODLQWLIIV QRZ DERUWLRQ EXW WKRVH UHVWULFWLRQV PD\ QRW LPSRVH DQ DSSHDOIURPWKHILQDOMXGJPHQWDUJXLQJWKDWWKHGLVWULFWFRXUWjV mXQGXH EXUGHQl RQ D ZRPDQjV ULJKW WR UHFHLYH DQ RUGHU JUDQWLQJ 'HIHQGDQWVj PRWLRQ IRU UHOLHI IURP D SULRU DERUWLRQ,GDW6WDWHVPD\FRQVWLWXWLRQDOO\UHTXLUH RUGHU ZDV HUURQHRXV  )RU WKH UHDVRQV WKDW IROORZ ZH PLQRUVWRREWDLQDSDUHQWjVFRQVHQWWRDQDERUWLRQEXW $)),50WKHGLVWULFWFRXUWjV1RYHPEHU  RUGHUDQG RQO\LIWKHVWDWHDOVRSURYLGHVDMXGLFLDOE\SDVVSURFHGXUH WKXVWKHILQDOMXGJPHQW E\ ZKLFK WKH PLQRU PD\ REWDLQ MXGLFLDO FRQVHQW WR DQ DERUWLRQ  6HH %HOORWWL Y %DLUG  86   %$&.*5281'   7REHFRQVWLWXWLRQDOVXFKDE\SDVVSURFHGXUH PXVW mEH FRPSOHWHG ZLWK DQRQ\PLW\ DQG VXIILFLHQW 2Q0DUFK $VKOH\%ODFNDUGZKRZDVVHYHQWHHQ H[SHGLWLRQ WR SURYLGH DQ HIIHFWLYH RSSRUWXQLW\ IRU DQ \HDUVROGDWWKHWLPHWUDYHOHGZLWKKHUER\IULHQGWR0&:WR DERUWLRQWREHREWDLQHGl%HOORWWL86DW,W REWDLQ DQ DERUWLRQ ZKLFK ZDV SHUIRUPHG E\ 'HIHQGDQW FDQQRWEHUHDVRQDEO\GLVSXWHGWKDWUHTXLULQJDPLQRUWR 0DQHMZDOD  $VKOH\ %ODFNDUG FRQVHQWHG WR WKH DERUWLRQ ILOH D GHFODUDWRU\ MXGJPHQW DFWLRQ LQ IHGHUDO FRXUW LQ SURFHGXUH EXW QHLWKHU VKH 'HIHQGDQW 0DQHMZDOD QRU RUGHU WR REWDLQ DQ DERUWLRQ ZRXOG QRW PHHW WKH 'HIHQGDQW 0&: REWDLQHG FRQVHQW IRU WKH DERUWLRQ IURP FRQVWLWXWLRQDO UHTXLUHPHQWV RI H[SHGLHQF\ RU $VKOH\jV SDUHQWV 0LFKDHO DQG 6KDURQ %ODFNDUG  ,Q IDFW FRQILGHQWLDOLW\  6HH HJ 3ODQQHG 3DUHQWKRRG RI 3ODLQWLIIV0LFKDHODQG6KDURQ%ODFNDUGZHUHXQDZDUHWKDW 6RXWKHUQ$UL]RQDY/DZDOO)G WK WKHLU GDXJKWHU ZDV SUHJQDQW  :KHQ WKH\ OHDUQHG RI WKHLU &LU  KROGLQJWKDWDE\SDVVVFKHPHZKLFKGLGQRW GDXJKWHUjV DERUWLRQ DSSUR[LPDWHO\ VL[ PRQWKV ODWHU DIWHU FRQWDLQVSHFLILFGHDGOLQHVZLWKLQZKLFKWKHFRXUWPXVW $VKOH\%ODFNDUGEHFDPHSUHJQDQWDJDLQDQGGURSSHGRXWRI UXOHRQWKHFRQVHQWUHTXHVWLVDQmXQGXHEXUGHQlRQWKH ULJKWWRDQDERUWLRQ  8QGHU %HOORWWL WKH FRQVWLWXWLRQDOLW\ RI 7HQQHVVHHjV SDUHQWDO FRQVHQW UHTXLUHPHQW KLQJHG XSRQ WKH DFWXDO LPSOHPHQWDWLRQRIDMXGLFLDOE\SDVVSURFHGXUH7KHPHUH WKHRUHWLFDOSURYLVLRQRIE\SDVVSURFHGXUHLQDQHQMRLQHG VWDWXWH LV QRW VXIILFLHQW  (YHQ WKRXJK sXGJH 1L[RQj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jVEHKDOI IRVWHULQJDQXQFRQVWLWXWLRQDOUHJLPH ,QWKHLUGLYHUVLW\DFWLRQ3ODLQWLIIVDOOHJHGWKDW'HIHQGDQWV 7RVXSSRUWWKHLUFRQWHQWLRQ3ODLQWLIIVFLWHsXVWLFH6WHYHQVj YLRODWHGWKH3DUHQWDO&RQVHQW$FWZKHQ'HIHQGDQW0DQHMZDOD FRQFXUULQJRSLQLRQLQ(GJDUY0LWH&RUS86 SHUIRUPHG DQ DERUWLRQ RQ $VKOH\ %ODFNDUG ZLWKRXW KHU   +RZHYHUWKH(GJDUFDVHLVGLVWLQJXLVKDEOHIURPWKH SDUHQWVjFRQVHQW3ODLQWLIIVDOOHJHGWKDWDYLRODWLRQRIWKH$FW FDVHDWEDU,Q(GJDU0LWHEURXJKWDVXLWVHHNLQJWRHQMRLQDQ SURYLGHG0LFKDHODQG6KDURQ%ODFNDUGZLWKDFDXVHRIDFWLRQ ,OOLQRLV ODZ DIWHU LW KDG DOUHDG\ YLRODWHG WKH ODZ WR DYRLG IRUWRUWLRXVLQWHUIHUHQFHZLWKIDPLO\UHODWLRQV3ODLQWLIIVDOVR SURVHFXWLRQ E\ WKH VWDWH RI ,OOLQRLV  ,Q WKLV FDVH KRZHYHU FODLPHGWKDW'HIHQGDQWVFRPPLWWHGFRPPRQODZEDWWHU\DQG 'HIHQGDQWVj UHOLHG RQ D SUHYLRXVO\ LVVXHG DQG HQIRUFHDEOH WKDWDYLRODWLRQRIWKH$FWFRQVWLWXWHGSULPDIDFLHHYLGHQFHRI LQMXQFWLRQ  ,Q DGGLWLRQ ZKHUHDV (GJDU LQYROYHV EXVLQHVV WKHEDWWHU\ ULJKWVWKLVFDVHLQYROYHVWKHIXQGDPHQWDOULJKWRIDIHPDOH PLQRU WR KDYH DQ DERUWLRQ  7KH GLVWULFW FRXUW HIIHFWLYHO\ 7KH 3DUHQWDO &RQVHQW $FW XSRQ ZKLFK 3ODLQWLIIV UHO\ DGGUHVVHG WKLV DUJXPHQW LQ LWV RUGHU GHQ\LQJ 3ODLQWLIIVj UHTXLUHV WKDW DQ DERUWLRQ IDFLOLW\ RU SK\VLFLDQ REWDLQ WKH PRWLRQIRUDQHZWULDO ZULWWHQ FRQVHQW RI WKH SDUHQW RU OHJDO JXDUGLDQ RI D PLQRU SULRUWRSHUIRUPLQJDQDERUWLRQRQWKDWPLQRU7HQQ&RGH $SDUW IURP WKH IDFW WKDW sXVWLFH 6WHYHQV >VLF@ YLHZV $QQ† D 7KH$FWSURYLGHGWKDWLQFDVHVZKHUH ZHUH QRW HQGRUVHG E\ D PDMRULW\ RI WKH &RXUW KLV WKHPLQRUGLGQRWZLVKWRVHHNWKHFRQVHQWRIWKHSDUHQWRU UHDVRQLQJ LQ (GJDU LV QRW FRQWUROOLQJ IRU WZR UHDVRQV OHJDOJXDUGLDQWKHPLQRUFRXOGSHWLWLRQWKHMXYHQLOHFRXUWIRU 7KHILUVWUHDVRQV>VLF@LVWKDWWKH,OOLQRLVVWDWXWHPDGHWKH ZDLYHURIWKHFRQVHQWUHTXLUHPHQW7HQQ&RGH$QQ† XQGHUO\LQJ DFWLYLW\ HQJDJLQJ LQ FRUSRUDWH WDNHRYHUV  E $YLRODWLRQRIWKH$FWLVDPLVGHPHDQRUDQGSULPD PRUH GLIILFXOW EXW QRW LPSRVVLEOH WR SHUIRUP ZLWKRXW IDFLHHYLGHQFHRIIDLOXUHWRREWDLQLQIRUPHGFRQVHQWDQGRI YLRODWLQJWKHVWDWXWH:KLOHWKHSUHOLPLQDU\LQMXQFWLRQ LQWHUIHUHQFHZLWKIDPLO\UHODWLRQVLQDSSURSULDWHFLYLODFWLRQV ZDVLQHIIHFWLQGLYLGXDOVZKRGHVLUHGWRWHQGHUDWDNH 7HQQ&RGH$QQ††WR RYHURIIHUZLWKRXWULVNLQJYLRODWLRQRIWKHVWDWXWHQHHGHG RQO\ WR FRPSO\ ZLWK WKH VWDWXWHjV UHTXLUHPHQWV E\ $W WKH WLPH WKDW $VKOH\ %ODFNDUG REWDLQHG KHU DERUWLRQ UHJLVWHULQJZLWKWKHDSSURSULDWHVWDWHHQWLWLHVJLYLQJWKH KRZHYHU WKHUH ZDV DQ LQMXQFWLRQ LQ SODFH HQMRLQLQJ WKH UHTXLUHGQRWLFHHWF HQIRUFHPHQW RI WKH 3DUHQWDO &RQVHQW $FW SDUWLFXODUO\ WKH ,Q WKH FDVH VXE MXGLFH KRZHYHU sXGJH 1L[RQjV MXGLFLDOE\SDVVSURFHGXUH7KHLQMXQFWLRQUHVXOWHGIURPDQ SUHOLPLQDU\ LQMXQFWLRQ PDGH LW QRW MXVW GLIILFXOW EXW DFWLRQILOHGLQWKH8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH0LGGOH LPSRVVLEOHIRUVRPHPLQRUV LQFOXGLQJ$VKOH\%ODFNDUG 'LVWULFWRI7HQQHVVHHWKH+RQRUDEOHsRKQ1L[RQFDSWLRQHG WRUHFHLYHDERUWLRQVZLWKRXWYLRODWLQJWKHVWDWXWH$VWKLV 0HPSKLV3ODQQHG3DUHQWKRRG,QFY6XQGTXLVW)6XSS &RXUW SUHYLRXVO\ IRXQG WKH HIIHFW RI sXGJH 1L[RQjV G  0' 7HQQ     7KLV DFWLRQ LQYROYHG D VXLW 2UGHU ZDV WR SUHYHQW WKH LPSOHPHQWDWLRQ RI WKH 7HQQHVVHHMXGLFLDOE\SDVVSURFHGXUH<HWWKH&RQVHQW $FWUHTXLUHGPLQRUVZLWKXQFRQVHQWLQJSDUHQWVWRREWDLQ  MXGLFLDO FRQVHQW SULRU WR REWDLQLQJ DQ DERUWLRQ  7KLV :KHQ $VKOH\ %ODFNDUG REWDLQHG WKH DJH RI PDMRULW\ VKH ZDV DGGHG DV D SODLQWLII LQ KHU RZQ ULJKW ,Q DGGLWLRQ 3ODLQWLIIV DPHQGHG WKH FRQVHQW ZDV VLPSO\ LPSRVVLEOH WR REWDLQ GXH WR WKH FRPSODLQW WR DGG 'HIHQGDQW 0DQHMZDOD ZKRVH LGHQWLW\ 3ODLQWLIIV ZHUH DEVHQFHRIDE\SDVVSURFHGXUH,QVXFKFLUFXPVWDQFHV QRW DZDUH RI ZKHQ WKH VXLW ZDV LQLWLDOO\ ILOHG DV D QDPHG GHIHQGDQW  %ODFNDUGHWDOY0HPSKLV$UHD 1R 1R %ODFNDUGHWDOY0HPSKLV$UHD  0HG&WUIRU:RPHQHWDO 0HG&WUIRU:RPHQHWDO MXULVGLFWLRQ RI WKH IHGHUDO FRXUWV WR LVVXH LQMXQFWLRQV DQG DJDLQVWWKH*RYHUQRURI7HQQHVVHH'RQ6XQGTXLVW$WWRUQH\ HQWHUWDLQIHGHUDOTXHVWLRQVLQFOXGLQJFRQVWLWXWLRQDOTXHVWLRQV *HQHUDOsRKQ.QR[:DONXSDQGWKH$GPLQLVWUDWLYH'LUHFWRU 6HH'RXGY+RGJH86    m7KLV&RXUW RI WKH &RXUWV m$'&l  &KDUOHV )HUUHOO FKDOOHQJLQJ WKH KDVQHYHUKHOGWKDWDGLVWULFWFRXUWLVZLWKRXWMXULVGLFWLRQWR FRQVWLWXWLRQDOLW\RIWKH3DUHQWDO&RQVHQW$FW,G HQWHUWDLQ D SUD\HU IRU DQ LQMXQFWLRQ UHVWUDLQLQJ WKH HQIRUFHPHQW RI D VWDWH VWDWXWH RQ JURXQGV RI DOOHJHG ,Q0HPSKLV3ODQQHG3DUHQWKRRGWKHSODLQWLIIDUJXHGWKDW UHSXJQDQF\WRWKH)HGHUDO&RQVWLWXWLRQ:HKROGWKDWWKH WKH3DUHQWDO &RQVHQW$FWZDVXQFRQVWLWXWLRQDOEHFDXVHWKH 'LVWULFW&RXUWKDVMXULVGLFWLRQRIWKLVFDXVHl  MXGLFLDO E\SDVV SURFHGXUH ZDV IODZHG LQDVPXFK DV LW SUHVHQWHG VXEVWDQWLDO LVVXHV RI WKH PLQRUjV ULJKW RI 7KH SUHPLVH XQGHUO\LQJ 3ODLQWLIIVj DUJXPHQW LV DOVR FRQILGHQWLDOLW\DQGDQH[SHGLWLRXVGLVSRVLWLRQRIKHUFDVH HUURQHRXV7KHUHTXLUHPHQWWKDWWKHUHEHVWDWHDFWLRQLQWKH )6XSSGDW7KHSODLQWLIILQWKDWFDVHILOHGDPRWLRQ FRQWH[W RI FRQVWLWXWLRQDO YLRODWLRQV UHIHUV WR JRYHUQPHQW IRUDSUHOLPLQDU\LQMXQFWLRQZKLFKZDVJUDQWHGE\WKHGLVWULFW DFWLRQVWDWHRUIHGHUDODVRSSRVHGWRSULYDWHDFWLRQ'RE\QV FRXUW  ,G DW    7KH SUHOLPLQDU\ LQMXQFWLRQ HQMRLQHG Y(6\VWHPV,QF)G Q WK&LU  HQIRUFHPHQWRIWKH3DUHQWDO&RQVHQW$FWLQWRWRILQGLQJWKDW %ODFNjV /DZ 'LFWLRQDU\  WK HG    VWDWH DFWLRQ VHYHUDELOLW\ ZDV QRW DQ RSWLRQ  ,G  7KH SUHOLPLQDU\ UHIHUV WR mWHUP XVHG LQ FRQQHFWLRQ ZLWK FODLPV XQGHU GXH LQMXQFWLRQ ZKLFK ZDV HIIHFWLYH QXQF SUR WXQF $XJXVW  SURFHVV FODXVH DQG &LYLO 5LJKWV $FW IRU ZKLFK D SULYDWH  IXUWKHUSURYLGHG FLWL]HQ LV VHHNLQJ GDPDJHV RU UHGUHVV EHFDXVH RI LPSURSHU JRYHUQPHQWDOLQWUXVLRQLQWRKLVOLIHl :HWKHUHIRUHUHMHFW ,WLV)857+(525'(5('WKDWSHQGLQJIXUWKHURUGHU 3ODLQWLIIVjVHFRQGFRQWHQWLRQ RIWKLV&RXUWWKHGHIHQGDQWVWKHLUUHVSHFWLYH RIILFHUV DJHQWVVHUYDQWVHPSOR\HHVDQGDWWRUQH\VDQGDOORWKHU /DVWO\3ODLQWLIIVjDUJXPHQWWKDWHYHQLIWKHLQMXQFWLRQZDV SHUVRQVLQDFWLYHFRQFHUWRUSDUWLFLSDWLRQZLWKWKHPDUH ELQGLQJRQWKHFRXUWVRI7HQQHVVHHDQGWKHE\SDVVSURFHGXUH KHUHE\ UHVWUDLQHG DQG HQMRLQHG IURP HQIRUFLQJ 7HQQ GLG QRW H[LVW DW WKH WLPH RI $VKOH\ %ODFNDUGjV DERUWLRQ &RGH$QQ††WKURXJKWKH3DUHQWDO 'HIHQGDQWVYLRODWHGWKHVWDWXWHDWWKHLURZQSHULODQGFDQQRW &RQVHQWIRU$ERUWLRQVE\0LQRUV$FW QRZ FODLP EODQNHW LPPXQLW\ IURP VXLW LV ZLWKRXW PHULW 3ODLQWLIIVDUJXHWKDWmWKHLVVXDQFHRIsXGJH1L[RQjVLQMXQFWLRQ s$DW DWEHVWDFWHGDVDWHPSRUDU\EDUWRSODLQWLIIVEULQJLQJDFDXVH RIDFWLRQEXWGLGQRWDEVROYHWKHGHIHQGDQWVRIOLDELOLW\XQGHU 7KHGHIHQGDQWVDSSHDOHGWRWKLV&RXUWZKLFKUHYHUVHGWKH WKH $FWl  $SSHOODQWjV %U DW  HPSKDVLV LQ RULJLQDO  JUDQWRIWKHSUHOLPLQDU\LQMXQFWLRQRQ0D\ 0HPSKLV (VVHQWLDOO\ 3ODLQWLIIV DUH DUJXLQJ WKDW WKH SDUHQWDO FRQVHQW 3ODQQHG3DUHQWKRRG,QFY6XQGTXLVW)G WK&LU SURYLVLRQRIWKH$FWVKRXOGEHHQIRUFHGDJDLQVW'HIHQGDQWV  $IWHUDSHWLWLRQIRUUHKHDULQJHQEDQFZDVGHQLHGWKH GHVSLWHWKHIDFWWKDW$VKOH\%ODFNDUGFRXOGQRWVHHNDMXGLFLDO PDQGDWHRIWKH&RXUWUHYHUVLQJWKHJUDQWRIWKHSUHOLPLQDU\ ZDLYHU RI WKDW SURYLVLRQ  6XFK D UHVXOW KRZHYHU  ZRXOG LQMXQFWLRQZDVLVVXHGRQ$XJXVW  XQGXO\EXUGHQDPLQRUj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j FRPSODLQW IURPVXLW7RWKHH[WHQWWKDWWKHVHDUJXPHQWVDUHFUHGLEOH 'HIHQGDQWV DOOHJHG WKDW WKH 3DUHQWDO &RQVHQW $FW ZDV DQG ZH H[SUHVV QR FRQILGHQFH LQ WKHLU FUHGLELOLW\ WKH\ DUH LQDSSOLFDEOH WR WKHLU FDVH EHFDXVH WKH 0HPSKLV 3ODQQHG PLVSODFHG DQG FOHDUO\ GHPRQVWUDWH WKDW 3ODLQWLIIV 3DUHQWKRRGLQMXQFWLRQSUHYHQWHGWKHHQIRUFHPHQWRIWKH$FW PLVXQGHUVWDQGWKHUDWLRQDOHRIWKHGLVWULFWFRXUWjVGHFLVLRQ DWWKHWLPHWKDW$VKOH\%ODFNDUGREWDLQHGKHUDERUWLRQ7KH GLVWULFWFRXUWKRZHYHUJUDQWHGDPRWLRQE\3ODLQWLIIVWRVWULNH 3ODLQWLIIV ILUVW FRQWHQG WKDW EHFDXVH QHLWKHU WKH\ QRU 'HIHQGDQWVj GHIHQVH LQVRIDU DV LW UHOLHG RQ WKH 0HPSKLV 'HIHQGDQWVZHUHSDUWLHVWRWKH0HPSKLV3ODQQHG3DUHQWKRRG 3ODQQHG3DUHQWKRRGLQMXQFWLRQ'HIHQGDQWVWKHUHDIWHUILOHG VXLWWKH\FRXOGQRWEHERXQGE\WKHLQMXQFWLRQLVVXHGLQWKDW D MRLQW PRWLRQ WR UHFRQVLGHU FRQWHQGLQJ WKDW WKH 3DUHQWDO FDVH7KLVDUJXPHQWFOHDUO\PLVVHVWKHSRLQW7KHGLVWULFW &RQVHQW$FWFRXOGQRWEHDSSOLHGFRQVWLWXWLRQDOO\WRDERUWLRQ FRXUWjVUXOLQJGLGQRWKROGWKDW3ODLQWLIIVRU'HIHQGDQWVZHUH SURFHGXUHV GXULQJ WKH SHQGHQF\ RI WKH 0HPSKLV 3ODQQHG HQMRLQHG E\  WKH LQMXQFWLRQ  :H DJUHH ZLWK 3ODLQWLIIVj 3DUHQWKRRG FDVH EHFDXVH WKH LQMXQFWLRQ KDOWHG WKH DUJXPHQWWKDWVXFKDUXOLQJZRXOGOLNHO\RIIHQGWKHSULQFLSOHV LPSOHPHQWDWLRQRIWKHMXGLFLDOE\SDVVSURFHGXUH7KHGLVWULFW RIGXHSURFHVV6HH8QLWHG6WDWHV6WHHO&RUSY8QLWHG0LQH FRXUWGHQLHG'HIHQGDQWVj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jVUXOLQJWKDW VXSSOHPHQWDOEULHILQJ'HIHQGDQWVVXEPLWWHGDIILGDYLWVIURP WKH$FWFRXOGQRWEHHQIRUFHGLQWKHDEVHQFHRIWKHMXGLFLDO $QGUHZ 6KRRNKRII D MXYHQLOH FRXUW MXGJH DW WKH WLPH RI E\SDVV SURFHGXUH UHVXOWHG LQ WKH GLVPLVVDO RI 3ODLQWLIIV $VKOH\ %ODFNDUGjV DERUWLRQ ZKR VWDWHG WKDW LW ZDV KLV 0LFKDHO DQG 6KDURQ %ODFNDUGjV FODLP WKH FRXUW GLG QRW XQGHUVWDQGLQJ WKDW MXYHQLOH FRXUW MXGJHV GLG QRW KDYH WKH FRQFOXGHWKDW3ODLQWLIIVWKHPVHOYHVZHUHVSHFLILFDOO\HQMRLQHG SRZHUWRKHDUMXGLFLDOE\SDVVFDVHVZKLOHWKHLQMXQFWLRQZDV 3ODLQWLIIVjDUJXPHQWLVWKHUHIRUHPLVSODFHG LQSODFH,QDGGLWLRQ'HIHQGDQWVVXEPLWWHGDQDIILGDYLWIURP WKH &OHUN RI WKH sXYHQLOH &RXUW RI 0HPSKLV DQG 6KHOE\ 3ODLQWLIIV QH[W DUJXH WKDW WKH GLVWULFW FRXUWjV LQMXQFWLRQ &RXQW\&5m%REl0DUWLQZKRVWDWHGWKDWZKLOHWKHFRXUW FRXOGQRWUHQGHUWKH3DUHQWDO&RQVHQW$FWXQFRQVWLWXWLRQDO ZRXOGKDYHDFFHSWHGIRUILOLQJSHWLWLRQVIRUDMXGLFLDOE\SDVV EHFDXVH sXGJH 1L[RQ WKH GLVWULFW FRXUW MXGJH LQ 0HPSKLV WKHFRXUWZRXOGQRWKDYHDFWHGXSRQWKRVHSHWLWLRQVXQWLODIWHU 3ODQQHG3DUHQWKRRGZDVQRWDVWDWHDFWRU7KLVDUJXPHQWLV WKHLQMXQFWLRQZDVOLIWHG3ODLQWLIIVDOVRVXEPLWWHGDIILGDYLWV DV HTXDOO\ IODZHG DV WKH ILUVW LQDVPXFK DV LW UHSUHVHQWV D LQFOXGLQJDQDIILGDYLWIURPWKHFXUUHQW$'&DQGDMXYHQLOH IXQGDPHQWDO PLVXQGHUVWDQGLQJ RI WKLV FDVH  3ODLQWLIIVj FRXUWMXGJH3ODLQWLIIVj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jPRWLRQIRUUHOLHIIURPDSULRURUGHU,QJUDQWLQJ VXSSOHPHQWDOEULHILQJRUGHUVSHFLILFDOO\UHTXHVWHGEULHILQJRQ 'HIHQGDQWVjPRWLRQIRUUHOLHIIURPDSULRURUGHUWKHGLVWULFW WKHmLQDFWLYHFRQFHUWl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jVDERUWLRQ$FFRUGLQJO\WKHGLVWULFWFRXUW WKDWWKHE\SDVVSURFHGXUHZRXOGQRWKDYHEHHQDYDLODEOHWR FRQFOXGHG WKH $FW FRXOG QRW FRQVWLWXWLRQDOO\ EH HQIRUFHG KHU XQGHU%HOORWWLY%DLUG86   $YLRODWLRQRI WKH$FWWKHUHIRUHFRXOGQRWEHDEDVLVIRU3ODLQWLIIVjFODLPV 7KH HYLGHQFH RQ WKH UHFRUG LV VXIILFLHQW WR VXSSRUW WKH GLVWULFW FRXUWjV ILQGLQJ WKDW WKHUH ZDV QR MXGLFLDO E\SDVV 7KH GLVWULFW FRXUWjV RUGHU KDG WKH HIIHFW RI GLVPLVVLQJ SURFHGXUHLQSODFHDWWKHWLPHWKDW$VKOH\%ODFNDUGREWDLQHG 3ODLQWLIIV0LFKDHODQG6KDURQ%ODFNDUGIURPWKHVXLWEHFDXVH KHUDERUWLRQ$OWKRXJKWKHMXGLFLDOE\SDVVSURFHGXUHH[LVWHG WKHLUFODLPVZHUHEDVHGVROHO\RQWKH3DUHQWDO&RQVHQW$FW RQSDSHUDQGLQWKHRU\WKHUHZDVQRZRUNLQJPHFKDQLVPE\ 3ODLQWLII $VKOH\ %ODFNDUGjV FRPPRQ ODZ EDWWHU\ FODLP ZKLFK$VKOH\%ODFNDUGRUDQ\RWKHUPLQRUIRUWKDWPDWWHU KRZHYHUUHPDLQHGYLDEOH2QWKLVFODLPWKHFDVHZHQWWR FRXOGKDYHREWDLQHGDZDLYHURIWKHFRQVHQWSURYLVLRQGXULQJ WULDO  $ MXU\ IRXQG WKDW 3ODLQWLII $VKOH\ %ODFNDUG ZDV D WKH UHOHYDQW WLPH SHULRG  %HFDXVH WKHUH ZDV QR MXGLFLDO mPDWXUH PLQRUl XQGHU WKH ODZV RI 7HQQHVVHH DQG WKDW KHU E\SDVV SURFHGXUH WKH FRQVHQW SURYLVLRQ RI WKH 3DUHQWDO FRQVHQW WR WKH DERUWLRQ SURFHGXUH ZDV WKHUHIRUH YDOLG &RQVHQW $FW FDQQRW FRQVWLWXWLRQDOO\ EH HQIRUFHG DJDLQVW 3ODLQWLIIVILOHGDPRWLRQIRUDQHZWULDOZKLFKZDVGHQLHG 'HIHQGDQWV  6HH &DVH\  86 DW    7KHUHIRUH WKH sXGJPHQWZDVWKHUHDIWHUHQWHUHGLQ'HIHQGDQWVjIDYRU GLVWULFWFRXUWSURSHUO\FRQFOXGHGWKDW'HIHQGDQWVFRXOGQRWEH KHOGOLDEOHXQGHUWKHVWDWXWHIRUIDLOLQJWRREWDLQFRQVHQWIURP 3ODLQWLIIV QRZ DSSHDO WKDW MXGJPHQW  3ODLQWLIIV GR QRW $VKOH\%ODFNDUGjVSDUHQWVSULRUWRSHUIRUPLQJKHUDERUWLRQ FKDOOHQJHWKHMXU\ILQGLQJWKDW$VKOH\%ODFNDUGZDVDPDWXUH PLQRU XQGHU WKH ODZV RI WKH VWDWH RI 7HQQHVVHH  3ODLQWLIIV 'HVSLWH RXU EHOLHI WKDW WKH ODZ LV FOHDU UHJDUGLQJ WKH LQVWHDGDUJXHRQDSSHDOWKDWWKHGLVWULFWFRXUWHUUHGLQJUDQWLQJ RXWFRPH RI WKLV FDVH ZH PXVW QHYHUWKHOHVV DGGUHVV WKH 'HIHQGDQWVj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jVRUGHUJUDQWLQJD5XOH E FROODWHUDOO\ HVWRSSHG IURP EULQJLQJ WKHLU FODLPV    WKH PRWLRQIRUUHOLHIIURPDSULRURUGHURUMXGJPHQWIRUDEXVHRI GLVWULFWFRXUWLVQRWDVWDWHDFWRUDQGWKHUHIRUHFDQQRWGHFODUH GLVFUHWLRQ&RQWHY*HQ+RXVHZDUHV&RUS)G   WK &LU   0IUVj ,QGXV 5HODWLRQV $VVjQ Y (DVW  %ODFNDUGHWDOY0HPSKLV$UHD 1R 1R %ODFNDUGHWDOY0HPSKLV$UHD  0HG&WUIRU:RPHQHWDO 0HG&WUIRU:RPHQHWDO $NURQ &DVWLQJ &R  )G   WK &LU     $V 7KHUH ZDV DOVR DGGLWLRQDO HYLGHQFH ZKLFK VXSSRUWHG WKH DOZD\VKRZHYHUZHUHYLHZTXHVWLRQVRIODZGH QRYRDQG GLVWULFWFRXUWjVFRQFOXVLRQWKDWWKHMXGLFLDOE\SDVVSURFHGXUH TXHVWLRQVRIIDFWIRUFOHDUHUURU8QLWHG6WDWHVY0XUSK\ GLGQRWLQIDFWH[LVWDWWKHWLPHRI$VKOH\%ODFNDUGjVDERUWLRQ )G   WK &LU    7KH GLVWULFW FRXUWjV $IWHUWKLV&RXUWUHYHUVHGsXGJH1L[RQjVRUGHUJUDQWLQJWKH GHWHUPLQDWLRQ WKDW WKH 7HQQHVVHH MXYHQLOH FRXUWV ZHUH LQ LQMXQFWLRQ LQ WKH 0HPSKLV 3ODQQHG 3DUHQWKRRG FDVH RQ DFWLYHFRQFHUWZLWKWKH$'&LVDILQGLQJRIIDFWZKLFKZHZLOO UHPDQGWKHSDUWLHVHQWHUHGLQWRDMRLQWWHPSRUDU\UHVWUDLQLQJ RQO\UHYHUVHLILWLVFOHDUO\HUURQHRXV6HH5HOLDQFH,QV&R RUGHU WKHmMRLQW752l 7KHMRLQW752FRQWLQXHGWRHQMRLQ Y0DVW&RQVWU&R )G  WK&LU  WKHHQIRUFHPHQWRIWKH3DUHQWDO&RQVHQW$FWXQWLOVXFKWLPH )',&Y)DXONQHU )G WK&LU   DVWKHGHIHQGDQWVHQVXUHGWKHFRXUWWKDWWKHMXGLFLDOE\SDVV SURFHGXUHZRXOGEHLQFRPSOLDQFHZLWKWKHUHTXLUHPHQWVRI $QDO\VLV WKH3DUHQWDO&RQVHQW$FWWKHGHFLVLRQRIWKLV&RXUWDQGWKH &RQVWLWXWLRQ7KHMRLQW752IXUWKHUSURYLGHGWKDWFRXQVHOIRU ,Q %HOORWWL Y %DLUG  86     WKH 6XSUHPH WKH GHIHQGDQWV ZRXOG LQIRUP WKH MXGJHV WKDW WKH 3DUHQWDO &RXUWKHOGWKDWZKLOHVWDWHVFDQUHTXLUHPLQRUVWRREWDLQWKH &RQVHQW$FWZRXOGQRWEHFRPHHIIHFWLYHXQWLO'HFHPEHU FRQVHQW RI WKHLU SDUHQWV SULRU WR REWDLQLQJ DQ DERUWLRQ WKH    $IILGDYLWV VXEPLWWHG LQ VXSSRUW RI WKH MRLQW 752 VWDWHPXVWDOVRSURYLGHDQDOWHUQDWLYHE\ZKLFKDPLQRUFDQ SURYLGHGWKDWFRPPXQLFDWLRQZLWKYDULRXVHQWLWLHVFKDUJHG JR GLUHFWO\ WR WKH FRXUWV WR REWDLQ DXWKRUL]DWLRQ IRU WKH ZLWK LPSOHPHQWLQJ WKH $FW LQFOXGLQJ WKH MXYHQLOH FRXUW DERUWLRQZLWKRXWQRWLI\LQJKHUSDUHQWV6WDWXWHVZKLFKGRQRW V\VWHPDQGWKH7HQQHVVHH'HSDUWPHQWRI&KLOGUHQ6HUYLFHV FRQWDLQ DQ DOWHUQDWLYH RU D MXGLFLDO E\SDVV SURFHGXUH RU LQGLFDWHG WKDW WKH 6WDWH RI 7HQQHVVHH ZDV QRW SUHSDUHG WR VWDWXWHV ZKLFK FRQWDLQ D MXGLFLDO E\SDVV SURFHGXUH ZKLFK LPSOHPHQWWKHMXGLFLDOE\SDVVSURFHGXUHUHTXLUHGXQGHUWKH XQGXO\EXUGHQVWKHULJKWRIDPLQRUWRREWDLQDQDERUWLRQDUH $FWDVRI$XJXVWRI 7KHDIILGDYLWVVKRZHGWKDWVRPH XQFRQVWLWXWLRQDO%HOORWWL86DW  FRXQW\ MXYHQLOH FRXUWV ZHUH HLWKHU XQDZDUH RI WKH MXGLFLDO E\SDVV SURFHGXUH RU GLG QRW FXUUHQWO\ KDYH WKH PHDQV E\ 7KH GLVWULFWFRXUWJUDQWHG'HIHQGDQWVj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sXGJH 1L[RQjV LQMXQFWLRQ HIIHFWLYHO\ EORFNHG sXYHQLOH&RXUWKDYHDFWHGRQWKHSHWLWLRQ HQIRUFHPHQW RI WKH MXGLFLDO E\SDVV SURFHGXUH FRQWHPSODWHG E\ WKH &RQVHQW $FW DQG WKDW QR VXFK s$DW  DIILGDYLWRI&5m%REl0DUWLQ&RXUW&OHUN MXGLFLDOE\SDVVSURFHGXUHH[LVWHGDWWKHWLPHRI$VKOH\ RI WKH sXYHQLOH &RXUW RI 0HPSKLV DQG 6KHOE\ &RXQW\ %ODFNDUGjV DERUWLRQ  )RU WKLV UHDVRQ WKH 'HIHQGDQWV 7HQQHVVHH ,QDGGLWLRQ'HIHQGDQWVVXEPLWWHGWKHDIILGDYLW FDQQRWEHFKDUJHGZLWKYLRODWLQJ†IRUIDLOLQJ RIDIRUPHUMXYHQLOHFRXUWMXGJHZKRZDVDQDFWLYHMXGJHDW WR FRPSO\ ZLWK 7HQQHVVHHjV DERUWLRQ MXGLFLDO E\SDVV WKHWLPHRI$VKOH\%ODFNDUGjVDERUWLRQ WKLVDIILGDYLWSURYLGHG SURFHGXUH WKDW s$DW   $PRQJ P\ UHVSRQVLELOLWLHV GXULQJ P\ WHQXUH DV D MXGJH ZDV SUHVLGLQJ RYHU SHWLWLRQV ILOHG E\ PLQRUV 3ODLQWLIIVFRQWHQGWKDWWKHGLVWULFWFRXUWHUUHGLQJUDQWLQJ VHHNLQJ ZDLYHU RI WKH UHTXLUHPHQW WKDW WKH\ REWDLQ D 'HIHQGDQWVj PRWLRQ IRU UHOLHI IURP D SULRU RUGHU  :H SDUHQWjV FRQVHQW IRU WHUPLQDWLRQ RI SUHJQDQF\  7KH GLVDJUHH  7KH GLVWULFW FRXUW GLG QRW DEXVH LWV GLVFUHWLRQ LQ UHTXLUHPHQWWKDWWKHPLQRUREWDLQSDUHQWDOFRQVHQWDQG JUDQWLQJ 'HIHQGDQWVj PRWLRQ IRU UHOLHI IURP D SULRU RUGHU WKDWVKHEHDEOHWRSHWLWLRQWKHMXYHQLOHFRXUWIRUDZDLYHU 7KHGLVWULFWFRXUWjVILQGLQJWKDWWKH7HQQHVVHHMXYHQLOHFRXUWV RI WKH FRQVHQW UHTXLUHPHQW ZDV HVWDEOLVKHG E\ WKH ZHUH LQ DFWLYH FRQFHUW ZLWK WKH $'& ZDV QRW FOHDUO\ 3DUHQWDO &RQVHQW IRU $ERUWLRQV E\ 0LQRUV $FW 7HQQ HUURQHRXV7KHGLVWULFWFRXUWSURSHUO\IRXQGWKDWWKHMXYHQLOH &RGH$QQ††WR,QSDUWLFXODUWKH$FW FRXUWV ZHUH ERXQG E\ WKH 0HPSKLV 3ODQQHG 3DUHQWKRRG FRQIHUUHGXSRQPLQRUVZKRHOHFWHGQRWWRVHHNFRQVHQW LQMXQFWLRQ7KHGLVWULFWFRXUWDOVRSURSHUO\IRXQGWKDWWKHUH RI D SDUHQW WKH ULJKW WR SHWLWLRQ WKH MXYHQLOH FRXUW IRU ZDV QR MXGLFLDO E\SDVV SURFHGXUH LQ SODFH DW WKH WLPH WKDW UHOLHI:KLOHRQWKHEHQFK,SUHVLGHGRYHUDQXPEHURI $VKOH\ %ODFNDUG UHFHLYHG KHU DERUWLRQ  7KXV WKH GLVWULFW E\SDVVKHDULQJVSXUVXDQWWRWKLVODZGXULQJWKRVHSHULRGV FRXUWjVFRQFOXVLRQWKDW'HIHQGDQWVFRXOGQRWEHOLDEOHXQGHU ZKHQWKH$FWZDVQRWHQMRLQHG WKH3DUHQWDO&RQVHQW$FWLQWKHDEVHQFHRIDMXGLFLDOE\SDVV 'XULQJP\WLPHRQWKHEHQFK,FRPSOLHGZLWKWKH SURFHGXUHZDVSURSHU$EVHQWWKHMXGLFLDOE\SDVVSURFHGXUH UHTXLUHPHQWVRIWKHODZUHJDUGLQJWKH3DUHQWDO&RQVHQW WKH3DUHQWDO&RQVHQW$FWFRXOGQRWRSHUDWHWRUHTXLUHHLWKHU IRU $ERUWLRQV E\ 0LQRUV $FW  2Q PRUH WKDQ RQH 'HIHQGDQWV RU $VKOH\ %ODFNDUG WR REWDLQ SDUHQWDO FRQVHQW RFFDVLRQ GXULQJ P\ WHQXUH WKH $FW ZDV HQMRLQHG E\ SULRUWR$VKOH\%ODFNDUGjVDERUWLRQ6HH%HOORWWL86DW sXGJH1L[RQRIWKH8QLWHG6WDWHV'LVWULFW&RXUW:KHQ  WKHVHLQMXQFWLRQVZHUHLQHIIHFWDJDLQVWWKH$FWLWZDVP\ XQGHUVWDQGLQJ WKDW WKH MXYHQLOH FRXUW GLG QRW KDYH WKH 7KHVWDWXVRIWKHMXGLFLDOE\SDVVSURFHGXUHLHZKHWKHULW OHJDO DXWKRULW\ WR KHDU D PLQRUjV SHWLWLRQV IRU MXGLFLDO ZDVHQIRUFHDEOHDWWKHWLPHRI$VKOH\%ODFNDUGjVDERUWLRQ ZDLYHURIWKHSDUHQWDOFRQVHQWUHTXLUHPHQW WXUQV RQ WKH VFRSH RI WKH 0HPSKLV 3ODQQHG 3DUHQWKRRG LQMXQFWLRQ&RQWUDU\WRZKDW3ODLQWLIIVZRXOGKDYHWKLV&RXUW s$ DW   DIILGDYLW RI +RQRUDEOH $QGUHZ s FRQFOXGH LI WKH 7HQQHVVHH MXYHQLOH FRXUWV ZHUH ZLWKLQ WKH 6KRRNKRII  VFRSHRIWKHLQMXQFWLRQWKHMXYHQLOHFRXUWVFRXOGQRWLJQRUH WKH LQMXQFWLRQ DQG HQIRUFH WKH 3DUHQWDO &RQVHQW $FW RU LWV MXGLFLDOE\SDVVSURFHGXUH:ROII6KRH&RY8QLWHG6WDWHV  %ODFNDUGHWDOY0HPSKLV$UHD 1R 1R %ODFNDUGHWDOY0HPSKLV$UHD  0HG&WUIRU:RPHQHWDO 0HG&WUIRU:RPHQHWDO )G )HG&LU   mµ>3@HUVRQVVXEMHFWWR FDVHV HVWDEOLVK DQG ZH UHDIILUP WRGD\ WKDW D 6WDWH PD\ DQ LQMXQFWLYH RUGHU LVVXHG E\ D FRXUW ZLWK MXULVGLFWLRQ DUH UHTXLUHDPLQRUVHHNLQJDQDERUWLRQWRREWDLQWKHFRQVHQWRI H[SHFWHGWRREH\WKDWGHFUHHXQWLOLWLVPRGLILHGRUUHYHUVHG D SDUHQW RU JXDUGLDQ SURYLGHG WKDW WKHUH LV DQ DGHTXDWH HYHQLIWKH\KDYHSURSHU JURXQGVWRREMHFWWRWKHRUGHUjl MXGLFLDO E\SDVV SURFHGXUHl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jV LV ELQGLQJ RQO\ XSRQ WKH SDUWLHV WR WKH DFWLRQ WKHLU DERUWLRQ'HIHQGDQWVVXEPLWWHGDQDIILGDYLWIURPWKHFOHUNRI RIILFHUVDJHQWVVHUYDQWVHPSOR\HHVDQGDWWRUQH\VDQG WKHMXYHQLOHFRXUWZKRVWDWHGWKDW XSRQ WKRVH SHUVRQV LQ DFWLYH FRQFHUW RU SDUWLFLSDWLRQ ZLWK WKHP ZKR UHFHLYH DFWXDO QRWLFH RI WKH RUGHU E\    >G@XULQJ WKH WLPH WKDW >WKH 0HPSKLV 3ODQQHG SHUVRQDOVHUYLFHRURWKHUZLVH 3DUHQWKRRG@LQMXQFWLRQZDVLQIRUFHDQGHIIHFWDQGLQ FRPSOLDQFHZLWKWKLVLQMXQFWLRQWKHsXYHQLOH&RXUW )HG 5 &LY 3  G   5XOH  G  mLV GHULYHG IURP WKH RI 0HPSKLV DQG 6KHOE\ &RXQW\ 7HQQHVVHH GLG QRW FRPPRQ ODZ GRFWULQH WKDW D GHFUHH RI LQMXQFWLRQ QRW RQO\ LPSOHPHQW RU RSHUDWH WKH MXGLFLDO E\SDVV SURFHGXUH ELQGVWKHSDUWLHVGHIHQGDQWEXWDOVRWKRVHLGHQWLILHGZLWKWKHP SURYLGHG E\ WKH 7HQQHVVHH 3DUHQWDO &RQVHQW IRU LQ LQWHUHVW LQ µSULYLW\j ZLWK WKHP UHSUHVHQWHG E\ WKHP RU $ERUWLRQVE\0LQRUV$FW VXEMHFWWRWKHLUFRQWUROl5HJDO.QLWZHDU&RY1/5% 7RP\NQRZOHGJHWKHsXYHQLOH&RXUWRI0HPSKLV 86    7RGHWHUPLQHZKHWKHUDSHUVRQLVRQHZKR DQG6KHOE\&RXQW\7HQQHVVHHKDVQRWKHDUGDQ\MXGLFLDO DFWVLQFRQFHUWRULVLGHQWLILHGLQLQWHUHVWZLWKWKHHQMRLQHG E\SDVVSHWLWLRQVVLQFH  SDUW\WKHFRXUWPXVWORRNWRWKHDFWXDOUHODWLRQVKLSEHWZHHQ   $V WKH &OHUN RI WKH s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†JRYHUQVWKHSRZHUV , ZRXOG KDYH REH\HG WKH DERYH UHIHUHQFHG LQMXQFWLYH 2UGHURIWKH8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH0LGGOH  %ODFNDUGHWDOY0HPSKLV$UHD 1R 1R %ODFNDUGHWDOY0HPSKLV$UHD  0HG&WUIRU:RPHQHWDO 0HG&WUIRU:RPHQHWDO PHDQLQJOHVVZKHUHWKHSXUSRVHRIWKHLQMXQFWLRQLVWRSUHYHQW DQG GXWLHV RI WKH $'&  6HFWLRQ  SURYLGHV LQ WKHHQIRUFHPHQWRIDSRWHQWLDOO\XQFRQVWLWXWLRQDOVWDWXWH SHUWLQHQWSDUW  3ODLQWLIIVDUJXHWKDWWKHGLVWULFWFRXUWj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†DQGVKDOODWWHQGWRVXFK GLGQRWKDYHVXSHUYLVRU\DXWKRULW\RUFRQWURORYHUMXYHQLOH RWKHUGXWLHVDVPD\EHDVVLJQHGE\WKHVXSUHPHFRXUWRU FRXUW MXGJHV  $V WKH GLVWULFW FRXUW FRQFOXGHG 3ODLQWLIIVj FKLHIMXVWLFHWKHUHRI$VVHFUHWDU\WRWKHMXGLFLDOFRXQFLO GHILQLWLRQ RI mLQ DFWLYH FRQFHUW RU SDUWLFLSDWLRQl LV RYHUO\ WKH DGPLQLVWUDWLYH GLUHFWRU RI WKH FRXUWV VKDOO SURYLGH QDUURZDQGGRHVQRWFRPSRUWZLWKWKHODZ,WLVQRWQHFHVVDU\ VWDII DQG VHFUHWDULDO VXSSRUW IRU DOO IXQFWLRQV RI WKH WKDWWKHHQMRLQHGSDUW\FRQWUROWKHWKLUGSDUW\LQRUGHUIRUWKH MXGLFLDOFRXQFLO WKLUGSDUW\WREHERXQGE\WKHLQMXQFWLRQ7KHWKLUGSDUW\LV   ERXQG E\ DQ LQMXQFWLRQ LI WKDW SDUW\ LV LGHQWLILHG ZLWK WKH G 7KHDGPLQLVWUDWLYHGLUHFWRURIWKHFRXUWVVKDOOZLWKLQ QDPHG HQMRLQHG SDUW\ LQ LQWHUHVW LQ µSULYLW\j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j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jVDERUWLRQHYHQLILWH[LVWHGWKHRUHWLFDOO\ DQGDSSHOODWHFRXUWVRIUHFRUGRIWKLVVWDWH RURQSDSHU7KH%HOORWWLSULQFLSOHWKDWDVWDWHPD\QRWUHTXLUH   SDUHQWDOFRQVHQWEHIRUHDPLQRUPD\REWDLQDQDERUWLRQLQWKH J  7KH DGPLQLVWUDWLYH GLUHFWRU RI WKH FRXUWV VKDOO DEVHQFHRIDQDGHTXDWHMXGLFLDOE\SDVVSURFHGXUHKDVEHHQ FRQWLQXRXVO\VXUYH\DQGVWXG\WKHRSHUDWLRQRIWKHVWDWH UHDIILUPHG WLPH DQG WLPH DJDLQ  3ODQQHG 3DUHQWKRRG RI FRXUWV\VWHPWKHYROXPHDQGFRQGLWLRQRIEXVLQHVVLQWKH 6RXWKHDVWHUQ3DY&DVH\86     m2XU FRXUWV RI WKH VWDWH ZKHWKHU RI UHFRUG RU QRW WKH  %ODFNDUGHWDOY0HPSKLV$UHD 1R 1R %ODFNDUGHWDOY0HPSKLV$UHD  0HG&WUIRU:RPHQHWDO 0HG&WUIRU:RPHQHWDO SURFHGXUHVHPSOR\HGE\WKRVHFRXUWVDQGWKHTXDOLW\DQG WKH$GPLQLVWUDWLYH'LUHFWRURIWKH&RXUWVRI7HQQHVVHH UHVSRQVLYHQHVV RI DOO RI WKH FRXUWV ZLWK UHJDUG WR WKH DFWVµLQDFWLYHFRQFHUWRUSDUWLFLSDWLRQZLWKjWKHFRXUWVRI QHHGV RI FLYLO OLWLJDQWV DQG WKH QHHGV RI WKH FULPLQDO WKH6WDWHRI7HQQHVVHHLQFOXGLQJWKHMXYHQLOHMXGJHVZKR MXVWLFHV\VWHPWKURXJKRXWWKHVWDWH7KHDGPLQLVWUDWLYH ZHUH UHVSRQVLEOH IRU LPSOHPHQWLQJ WKH MXGLFLDO E\SDVV GLUHFWRURIWKHFRXUWVVKDOODOVRSURYLGHOLDLVRQDQGVWDII SURFHGXUHXQGHUWKH&RQVHQW$FW)URPWKLVUHYLHZ VXSSRUW WR WKH MXGLFLDO FRXQFLO ZLWK UHJDUG WR WKH RIWKH$GPLQLVWUDWLYH'LUHFWRUjVGXWLHVLWLVFOHDUWRWKH UHVSRQVLELOLWLHVRIWKHMXGLFLDOFRXQFLOLQWKHDERYHDUHDV &RXUW WKDW WKH $GPLQLVWUDWLYH 'LUHFWRU LV LQ D SULYLW\ K  7KH DGPLQLVWUDWLYH GLUHFWRU RI WKH FRXUWV VKDOO UHODWLRQVKLSZLWKWKHFRXUWVRIWKH6WDWHRI7HQQHVVHH HVWDEOLVKFULWHULDGHYHORSSURFHGXUHVDQGLPSOHPHQWD 7HQQHVVHHFRXUWLQIRUPDWLRQV\VWHP 7Q&,6 7KHV\VWHP s$DW  VKDOO SURYLGH DQ LQWHJUDWHG FDVH PDQDJHPHQW DQG DFFRXQWLQJ VRIWZDUH V\VWHP DGGUHVVLQJ WKH VWDWXWRU\ :H GR QRW EHOLHYH WKH GLVWULFW FRXUWj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mFKLHI XQLIRUPPHDVXUHVGHILQLWLRQVDQGFULWHULDIRUFROOHFWLQJ DGPLQLVWUDWLYHRIILFHURIWKHVWDWHFRXUWV\VWHPl7HQQ&RGH VWDWLVWLFV SHUWDLQLQJ WR WKH VWDWH FRXUW V\VWHP 7KHVH $QQ†%DVHGRQWKHGXWLHVRIWKH$'&LWZDVQRW VWDQGDUGVDQGUHSRUWLQJUHTXLUHPHQWVVKDOOEHXVHGIRU FOHDUO\HUURQHRXVIRUWKHGLVWULFWFRXUWWRFRQFOXGHWKDWWKH XQLIRUP VWDWLVWLFDO GDWD FROOHFWLRQ LQ DOO RI WKH FRXUWV $'&DQGWKHVWDWHFRXUWVLQFOXGLQJWKHMXYHQLOHFRXUWVZHUH WKURXJKRXW WKH VWDWH DV HVWDEOLVKHG E\ WKH UXOHV RI WKH LQ DFWLYH FRQFHUW DQG SDUWLFLSDWLRQ  ,Q RWKHU ZRUGV WKH VXSUHPHFRXUW UHODWLRQVKLS EHWZHHQ WKH $'& DQG WKH VWDWH FRXUWV GHPRQVWUDWHVWKDWWKHUHZDVDQLGHQWLW\RILQWHUHVWVRUSULYLW\ 7HQQ&RGH$QQ† EHWZHHQWKHWZR:HFRQVLGHUDFRQWUDU\FRQFOXVLRQWREH PLVJXLGHGLQDVPXFKDVWKHMXGJHVRIWKHFRXUWV\VWHPKDYH $IWHUDUHYLHZRIWKHUHFRUGLQFOXGLQJDIILGDYLWVIURPERWK WKHDFWXDOSRZHUWRHQIRUFHDVWDWXWHQRWWKH$'&GHVSLWH SDUWLHVUHJDUGLQJWKHLQMXQFWLRQWKHGXWLHVRIWKH$'&DQG WKDWKHRUVKHLVWKHmFKLHIDGPLQLVWUDWLYHRIILFHURIWKHVWDWH WKHVWDWXWRU\UHODWLRQVKLSEHWZHHQWKH$'&DQGWKH7HQQHVVHH FRXUW V\VWHPl  7R HQMRLQ WKH $'& ZLWKRXW KDYLQJ WKDW FRXUWVLQFOXGLQJWKHMXYHQLOHFRXUWVWKHGLVWULFWFRXUWKHOG LQMXQFWLRQUHDFKWKHMXGJHVRIWKH YDULRXVFRXUWVZRXOGEH WKDW

Case-law data current through December 31, 2025. Source: CourtListener bulk data.