Sharp v. Lindsey

U.S. Court of Appeals for the Sixth Circuit

Sharp v. Lindsey

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

s(55< + 6+$53 ; 3ODLQWLII$SSHOODQW    1R Y  !  &+$5/(6 4 /,1'6(<  6XSHULQWHQGHQWRI.QR[  &RXQW\6FKRROVLQKLV  LQGLYLGXDODQGRIILFLDO  FDSDFLWLHVDQG.12;   &2817< %2$5' 2)  ('8&$7,21  'HIHQGDQWV$SSHOOHHV   1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW.QR[YLOOH 1R n&XUWLV/&ROOLHU'LVWULFWsXGJH 6XEPLWWHG 1RYHPEHU 'HFLGHGDQG)LOHG 0DUFK %HIRUH s21(61(/621DQG'$8*+75(<&LUFXLW sXGJHV

  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

BBBBBBBBBBBBBBBBB IURPSURFHHGLQJLQD† DFWLRQ+RZHYHU,VWLOOEHOLHYH WKHUHVXOWLQWKLVFDVHLVERWKWURXEOLQJDQGDQRPDORXV &2816(/ *UDQWHG0U6KDUSFDQREWDLQDQDOWHUQDWLYHUHPHG\LQD 21 %5,()   (GZDUG / 6XPPHUV +$<1(6 0((. VWDWHEUHDFKRIFRQWUDFWDFWLRQ+RZHYHUWKLVUHPHG\GHQLHV 6800(56.QR[YLOOH7HQQHVVHHIRU$SSHOODQW0DU\$5 0U6KDUSWKHULJKWWRVHHNDIHGHUDOUHPHG\ZKHUHDIHGHDO 6WDFNKRXVH.QR[YLOOH7HQQHVVHHsRKQ&'XII\:$7621 GHSULYDWLRQ RI SURSHUW\ KDV RFFXUUHG  $OWKRXJK QRW DOO +2//2:  5((9(6 .QR[YLOOH 7HQQHVVHH sRKQ ( SURSHUW\ GHSULYDWLRQV VKRXOG EH VXEMHFWHG WR FRQVWLWXWLRQDO 2ZLQJV .12; &2817< /$: ',5(&725j6 2)),&( VFUXWLQ\WKHVWDWXWRU\SXUSRVHRI† DQGWKHSULQFLSOHVRI .QR[YLOOH7HQQHVVHHIRU$SSHOOHHV MXVWLFH UHTXLUH WKDW FRQVWLWXWLRQDO YLRODWRUV EH UHTXLUHG WR SURYLGH UHGUHVV WR WKRVH LQMXUHG  ,QGHHG QRW DOO SURSHUW\ 1(/621sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK GHSULYDWLRQVULVHWRWKHOHYHORIWKDWZKLFK† SURKLELWV '$8*+75(<sMRLQHGs21(6s SS GHOLYHUHG EXWWKRVHZKLFKGRUHTXLUHPHDQLQJIXOFRQVWLWXWLRQDODQDO\VLV DVHSDUDWHRSLQLRQFRQFXUULQJLQWKHMXGJPHQW +HUHKRZHYHU0U/LQGVD\LVIUHHIURPDQ\FRQVWLWXWLRQDO VFUXWLQ\ BBBBBBBBBBBBBBBBB $FFRUGLQJO\E\GHFOLQLQJWRILQGWKDWD† GXHSURFHVV 23,1,21 YLRODWLRQLVDWLVVXHWKHRXWFRPHLQWKLVFDVHFRQWUDYHQHVWKH BBBBBBBBBBBBBBBBB LPSRUWDQW SURWHFWLYH SXUSRVHV RI †    1HYHUWKHOHVV EHFDXVH , EHOLHYH WKDW VWDWH EUHDFK RI FRQWUDFW DFWLRQV '$9,' $ 1(/621 &LUFXLW sXGJH  7KH SODLQWLII DSSURSULDWHO\UHGUHVVFRQVWLWXWLRQDOLQMXULHVVXFKDVWKHRQHDW HPSOR\HGE\WKHGHIHQGDQWVDVDKLJKVFKRROSULQFLSDOXQWLOKH LVVXH,MRLQLQWKLVFRXUWjVFRQFOXVLRQGHVSLWHDUDWKHUSLQFKHG ZDV UHDVVLJQHG WR D WHDFKLQJ SRVLWLRQ FODLPV WKDW KLV YLHZRIWKHVWDWXWHDQG&21&85LQWKHFRXUWjVRSLQLRQ SULQFLSDOVKLSZDVWDNHQDZD\IURPKLPLQYLRODWLRQRIIUHH VSHHFKDQGGXHSURFHVVULJKWVSURWHFWHGE\WKH8QLWHG6WDWHV &RQVWLWXWLRQ)LQGLQJQRYLRODWLRQRIWKHVHULJKWVWKHGLVWULFW FRXUWHQWHUHGVXPPDU\MXGJPHQWLQIDYRURIWKHGHIHQGDQWV )RUWKHUHDVRQVWKDWIROORZZHVKDOODIILUPWKHMXGJPHQW , 7KHSODLQWLIIsHUU\+6KDUSZDV3ULQFLSDORI*LEEV+LJK 6FKRRO LQ .QR[ &RXQW\ 7HQQHVVHH IRU  \HDUV  +H KDG SUHYLRXVO\ ZRUNHG IRU  \HDUV DV D WHDFKHU LQ WKH .QR[ &RXQW\VFKRROV\VWHPDQGKHUHWDLQHGKLVVWDWXVDVDWHQXUHG WHDFKHUDIWHUKLVSURPRWLRQ 7KHFKDLQRIHYHQWVWKDWOHGWRWKLVODZVXLWEHJDQLQ0D\ RI   ZKHQ WKH .QR[ &RXQW\ %RDUG RI (GXFDWLRQ XQGHUWRRNFRQVLGHUDWLRQRIDV\VWHPZLGHVWXGHQWGUHVVFRGH 7KHERDUGXOWLPDWHO\GHFLGHGWKDWIRUWKHWLPHEHLQJDWOHDVW  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

VWDWH EUHDFK RI FRQWUDFW DFWLRQ PD\ DOVR SURYLGH DQ LWZRXOGOHDYHUHVSRQVLELOLW\IRUWKHFRQWHQWRIGUHVVFRGHV DGHTXDWHUHPHG\IRUVRPHGHSULYDWLRQVRIDFRQWUDFWXDOO\ ZLWKWKHLQGLYLGXDOVFKRROV FUHDWHG SURSHUW\ LQWHUHVW 7KHUHIRUH WKH UHDVRQLQJ RI WKRVHFDVHVVKRXOGDOVREDUDVHFWLRQ DFWLRQZKHQ *LEEV +LJK 6FKRRO FUHDWHG D FRPPLWWHH WR FRQVLGHU WKHGHSULYDWLRQLVDVLPSOHEUHDFKRIFRQWUDFWDQGWKHUH UHYLVLQJWKHVFKRROj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s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j  ZLWKRXW GXH SURFHVV RI ODZ D †   DFWLRQ ZDV mDQ VWXGHQW KDQGERRN WR UHPDLQ LQ HIIHFW IRU WKH   LQDSSURSULDWHYHKLFOHWRUHGUHVVZKDWLVPHUHO\DEUHDFKRI VFKRRO\HDU FRQWUDFWFODLPE\5DPVH\DJDLQVWWKH%RDUGl,GDW 2QsXO\ 'U/LQGVH\VHQWDPHPRUDQGXPWRDOORI %DVHG XSRQ WKLV UDWLRQDOH WKH PDMRULW\ FRQFOXGHV WKDW D WKHSULQFLSDOVDQGDVVLVWDQWSULQFLSDOVLQWKHVFKRROV\VWHP EUHDFKRIFRQWUDFWDFWLRQZRXOGDGHTXDWHO\FRPSHQVDWH0U H[SODLQLQJKLVGHFLVLRQ7KHQH[WGD\KHVHQWDOHWWHUWRWKH 6KDUSIRUWKHGHSULYDWLRQRIKLVILQLWHLQWHUHVWLQKLVSRVLWLRQ PHPEHUVRIWKH*LEEVGUHVVFRGHFRPPLWWHHDSSULVLQJWKHP DV SULQFLSDO RI *LEEV +LJK 6FKRRO  'HVSLWH WKH LQWHQW RI RI WKH GHFLVLRQ DQG WKDQNLQJ WKHP IRU WKHLU HIIRUWV  2Q † WRUHPHG\WKHGHSULYDWLRQRIFRQVWLWXWLRQDOO\SURWHFWHG sXO\    KH KDG D WHOHSKRQH FRQIHUHQFH FDOO ZLWK SURSHUW\ LQWHUHVWV 0U /LQGVH\ D YLRODWRU RI 0U 6KDUSjV 3ULQFLSDO 6KDUS DQG RWKHU DGPLQLVWUDWRUV DW *LEEV +LJK FRQVWLWXWLRQDO ULJKWV KDV EHHQ DOORZHG WR HVFDSH 6FKRRODWZKLFKWLPHWKHGUHVVFRGHZDVDWRSLFRIIXUWKHU FRQVWLWXWLRQDOVFUXWLQ\RQWKHJURXQGVWKDWWKHGHSULYDWLRQDW GLVFXVVLRQ LVVXHFDQEHmFRPSHQVDWHGDGHTXDWHO\E\RUGLQDU\EUHDFKRI FRQWUDFWDFWLRQl0\FROOHDJXHFRUUHFWO\FRQFOXGHVWKDWWKH (IIHFWLYHWKHVDPHGD\sXO\ 'U/LQGVH\DQG0U H[LVWHQFHRIDQHIIHFWLYHVWDWHUHPHG\SUHFOXGHV0U6KDUS 6KDUS HQWHUHG LQWR D mSULQFLSDO HPSOR\PHQW FRQWUDFWl  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

SXUVXDQWWR 7(11 &2'( $11† 7KHFRQWUDFWo BBBBBBBBBBBBBBBBBBBBBB ZKLFK ZDV VXEMHFW WR XQLODWHUDO WHUPLQDWLRQ E\ WKH VXSHULQWHQGHQWIRUmLQDGHTXDWHSHUIRUPDQFHlDPRQJRWKHU &21&855(1&( WKLQJVoVSHFLILHGWKDWWKHWHUPRI0U6KDUSjVHPSOR\PHQWDV BBBBBBBBBBBBBBBBBBBBBB SULQFLSDOZRXOGEHJLQRQsXO\ DQGHQGRQsXQH RUXSRQWKHHDUOLHUWHUPLQDWLRQRIWKHVXSHULQWHQGHQWjV 1$7+$1,(/5s21(6&LUFXLWsXGJHFRQFXUULQJ:KLOH RZQHPSOR\PHQWFRQWUDFWZLWKWKHERDUGRIHGXFDWLRQ , FRQFXU LQ WKH MXGJPHQW UHDFKHG E\ sXGJH 1HOVRQjV ZHOO UHDVRQHG RSLQLRQ , ZULWH VHSDUDWHO\ WR HPSKDVL]H WKH 2Q $XJXVW    ZLWKRXW SULRU QRWLFH WR WKH LPSRUWDQFHRIGXHSURFHVVSURWHFWLRQ0\FROOHDJXHFRUUHFWO\ VXSHULQWHQGHQW 3ULQFLSDO 6KDUS VHQW WKH PHPEHUV RI WKH FRQFOXGHV WKDW 0U 6KDUSjV WUDQVIHU GHSULYHG KLP RI D *LEEVGUHVVFRGHFRPPLWWHHDOHWWHUWKHERG\RIZKLFKUHDGDV FRQWUDFWXDOO\FUHDWHGDQGFRQVWLWXWLRQDOO\SURWHFWHGSURSHUW\ IROORZV LQWHUHVW  +RZHYHU LW LV LPSRUWDQW WR DGGUHVV WKH LQWHQGHG UHPHGLDOSXUSRVHRIIHGHUDOFRQVWLWXWLRQDODFWLRQV m, ZDQW WR H[SUHVV P\ DSSUHFLDWLRQ IRU \RXU HIIRUWV LQ UHYLVLQJWKH*LEEV+LJKGUHVVFRGH,KRSHWKDW\RXGR 2QHHVVHQWLDOHOHPHQWRIDQDFWLRQXQGHU86&†  QRWIHHOWKDW\RXUHIIRUWVZHUHLQYDLQ$IWHU,PHWZLWK LV WKH H[LVWHQFH RI D FRQVWLWXWLRQDOO\ SURWHFWHG OLEHUW\ RU \RXU JURXS , PDGH D FRXSOH RI PLQRU FKDQJHV LQ SURSHUW\ LQWHUHVW  6HFWLRQ   FUHDWHV D IHGHUDO FDXVH RI ZRUGLQJDQGDGGHGDVWDWHPHQWIURPRXUFXUUHQWFRGH DFWLRQIRUWKHGHSULYDWLRQRIOLEHUW\DQGSURSHUW\LQWHUHVWV FRQFHUQLQJZRUGVDQGSLFWXUHVRISRRUWDVWH7KLVFRGH SURWHFWHGE\WKH8QLWHG6WDWHV&RQVWLWXWLRQRUODZV6HH%G ZDVVXEPLWWHGWRLQWHULPVXSHULQWHQGHQW5R\0XOOLQVLQ RI5HJHQWVY5RWK86  6&W/ PLGsXQH$WWKDWWLPH,DVNHG0U0XOOLQVWROHWPH (G G      $FFRUG 6DQ %HUQDUGLQR 3K\VLFLDQVj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jV@0U+XQOH\ZDVTXRWHGRQWKUHH 5DPVH\FRXUWFLWHGFHUWDLQ6XSUHPH&RXUWGHFLVLRQVKROGLQJ RFFDVLRQVDVVD\LQJWKDWWKHSROLF\ZDVµXQUHDVRQDEOHj WKDWD† DFWLRQLVLQDSSURSULDWHZKHUHDVWDWHWRUWDFWLRQ 'U/LQGVH\FDOOHGLWLOOHJDO7KHs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

KDGQRGXHSURFHVVULJKWWRQRWLFHDQGDKHDULQJEHIRUHKLV , KDYH DOZD\V DFFHSWHG WKH GHFLVLRQ RI D GLYHUVH UHDVVLJQPHQWoDWQRORVVRISD\oWRDWHDFKLQJSRVLWLRQ7KH FRPPLWWHHZKHQFKDUJHGZLWKVXFKDUHVSRQVLELOLW\, UHDVVLJQPHQWPD\KDYHEUHDFKHGWKHFRQWUDFWEXW7HQQHVVHH VWLOOVXSSRUW\RXUGHFLVLRQ SURYLGHV D SHUIHFWO\ DGHTXDWH SURFHGXUH IRU GHWHUPLQLQJ ZKHWKHUDEUHDFKKDVRFFXUUHGDQGIRUJUDQWLQJUHGUHVVLILW , GR UHJUHW WKH QHJDWLYH SXEOLFLW\ IRU WKH VFKRRO DQG GLG7RUHTXLUH0U6KDUSWRDYDLOKLPVHOIRIWKDWSURFHGXUH FRPPXQLW\l E\UHSDLULQJWRWKHFRXUWVRI7HQQHVVHHoDVDJJULHYHGWHDFKHU DLGHV GLG IRU H[DPSOH LQ &DQWUHOO Y .QR[ &RXQW\ %G RI 2QH ZKR UHDGV WKLV OHWWHU FORVHO\ PLJKW EH SDUGRQHG IRU (GXF6:G  7HQQ oGRHVQRYLROHQFHWRWKH ZRQGHULQJ ZKHWKHU WKH SULQFLSDO REMHFWLYH ZDVQjW WR PDNH FRQFHSW RI GXH SURFHVV RI ODZ  6HH /XMDQ Y *  * )LUH 0U6KDUSORRNJRRGDWWKHH[SHQVHRI'U/LQGVH\DQG0U 6SULQNOHUV,QF86      +XQOH\'U/LQGVH\ZDVGHFLGHGO\XQKDSS\DERXWWKHOHWWHU LQDQ\HYHQWDQGKHVHQW0U6KDUSDPHPRUDQGXPDFFXVLQJ 7KHMXGJPHQWLQIDYRURIWKHGHIHQGDQWVLV$)),50(' KLP RI mVHYHUDO LQDFFXUDFLHVl DQG VWDWLQJ WKDW D PHHWLQJ ZRXOGEHVFKHGXOHGWRGLVFXVVWKHPDWWHUIXUWKHU$WQRWLPH SULRUWRWKHPHHWLQJZKLFKZDVKHOGRQ$XJXVW  ZDV 0U 6KDUS DGYLVHG WKDW 'U /LQGVH\ SURSRVHG WR WDNH DQ\ DGYHUVHDFWLRQDJDLQVWKLP 6RPHWLPHDIWHUWKHsXO\WKFRQIHUHQFHFDOO0U6KDUS SUHVHQWHG D PRQRORJXH WKH SDUWLHV FDOO LW D mVNLWl  DW D JDWKHULQJRIWHDFKHUVKHOGRQWKHLUILUVWGD\RIVHUYLFHLQWKH QHZVFKRRO\HDU$IWHULQYLWLQJWKHDXGLHQFHWRmORRNDKHDG WRWKH\HDUlWKHVNLWVDLGDPRQJRWKHUWKLQJVWKDWWKH RQO\VXSHULQWHQGHQWWKHVFKRROERDUGKDGEHHQDEOHWRHOHFW 'U&KDUOHV/LQGVH\KDGEHHQmVZHSWRXWRIRIILFHLQWKH\HDU GXHWRDFRQWURYHUV\RYHUDV\VWHPZLGHGUHVVFRGH l WKDW5R\0XOOLQVKDGRQFHDJDLQDJUHHGWRVHUYHDVLQWHULP VXSHULQWHQGHQW  WKDW DJHG DVVLVWDQW SULQFLSDO $OYLQ 7D\ORU mDGGUHVVHG WKH ERDUG IRU WKH WK FRQVHFXWLYH WLPH FRQFHUQLQJ D GUHVV FRGH IRU *LEEV l WKDW m0U 7D\ORU ZDV QHDUO\LQWHDUVDV>VFKRROERDUGFKDLUPDQ@+XQOH\FDOOHGWKLV FXUUHQWDWWHPSWWRVDWLVI\WKHERDUGµXQUHDVRQDEOH jlDQGWKDW m*LEEVSHUVRQQHOFRXOGVHHWKDWRQFHDJDLQWKHVFKRROZRXOG EHIORXQGHULQJZLWKQRGUHVVFRGHDQGQRGLUHFWLRQl 1RW VXUSULVLQJO\ SHUKDSV 'U /LQGVH\ IRXQG WKH VNLW RIIHQVLYH$VKHWHVWLILHGDWKLVGHSRVLWLRQKHWKRXJKWWKDW 6KDUSKDGH[KLELWHGmH[WUHPHO\SRRUMXGJPHQWlLQSUHVHQWLQJ LW  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

3ULRU WR WKH $XJXVW  WK PHHWLQJ DFFRUGLQJ WR WKH FLWLQJ0DWKHZV86DW $QGDWOHDVWZKHQDVDODU\ GHSRVLWLRQWHVWLPRQ\'U/LQGVH\KDGQRWGHFLGHGZKDWWRGR LV DW VWDNH WKH HFRQRPLF LPSRUWDQFH WR D JRYHUQPHQW ZLWK0U6KDUS/LQGVH\VDLGWKDWKHRQO\ZDQWHGWRWDONWR HPSOR\HHRIQRWORVLQJDFRQVWLWXWLRQDOO\SURWHFWHGSURSHUW\ 6KDUS DERXW WKH $XJXVW  OHWWHU DQG XQGHUVWDQG ZK\ WKH LQWHUHVW LQ KLV MRE ORRPV VR ODUJH WKDW WKH HPSOR\HH LV SULQFLSDOKDGVHQWLW+HIHOWWKDW6KDUSZDVPLVUHSUHVHQWLQJ JHQHUDOO\HQWLWOHGWRVRPHNLQGRIQRWLFHDQGKHDULQJSULRUWR KLP SDUWLFXODUO\ LQ VWDWLQJ WKDW /LQGVH\ KDG RIIHUHG QR EHLQJGLVFKDUJHG6HHLG VXSSRUWIRUWKHQHZGUHVVFRGH/LQGVH\WRRNLWLOOPRUHRYHU WKDW 0U 6KDUS KDG FLUFXODWHG WKH OHWWHU ZLWKRXW HYHQ $VVWDWHGLQ5DPVH\Y%GRI(GXF)G DWWHPSWLQJWRGLVFXVVKLVJULHYDQFHVZLWKWKHVXSHULQWHQGHQW WK&LU  KRZHYHUmHYHQZKHQDSHUVRQjVPHDQVRI ILUVW  /LQGVH\ VDLG KH FRQVLGHUHG 6KDUSjV EHKDYLRU OLYHOLKRRGLVFRQQHFWHGWRWKHGHSULYDWLRQFODLPGXHSURFHVV SUREOHPDWLF EHFDXVH RI WKH FORVH ZRUNLQJ UHODWLRQVKLS DQG GRHVQRWDOZD\VUHTXLUHDSUHGHSULYDWLRQKHDULQJRUVXSSRUWD FRRSHUDWLRQUHTXLUHGEHWZHHQVXSHULQWHQGHQWDQGSULQFLSDO VHFWLRQ   DFWLRQ ZKHQ DQ\ LQWHUHVW LQ HPSOR\PHQW LV DIIHFWHGl5DPVH\ZHQWRQWRKROGWKDWm>Z@KHQDSHUVRQLV $WWKHHQGRIWKH$XJXVW WKPHHWLQJ'U/LQGVH\SODFHG KLUHG IRU D IL[HG SHULRG RI WLPH    DQG WKDW SHUVRQ LV 0U 6KDUS RQ DGPLQLVWUDWLYH OHDYH ZLWK SD\  $IWHU WDNLQJ GLVPLVVHGSUHPDWXUHO\QRIHGHUDOFDXVHRIDFWLRQOLHVXQGHU FRXQVHOIURPWKHFRXQW\ODZGHSDUWPHQWDERXWKLVRSWLRQV VHFWLRQ   WR UHGUHVV ZKDW LV EHVW FKDUDFWHUL]HG DV DQ /LQGVH\XOWLPDWHO\GHFLGHGWRUHPRYH6KDUSDVSULQFLSDORI RUGLQDU\EUHDFKRIFRQWUDFWl,G7KHUHDVRQLVWKLV *LEEV+LJK6FKRRODQGUHDVVLJQKLPWRDSRVLWLRQDVPDWK WXWRUDWWKHVDPHUDWHRISD\0U6KDUSZDVLQIRUPHGRIWKLV m>$@ QRQWHQXUHG HPSOR\HHjV SURSHUW\ LQWHUHVW LQ GHFLVLRQDWDPHHWLQJRQ$XJXVW  FRQWLQXHG HPSOR\PHQW LV FUHDWHG DQG GHILQHG E\ WKH HPSOR\HHjV FRQWUDFW  7KH HPSOR\HH KDV D SURSHUW\ 2Q6HSWHPEHU 0U6KDUSZDVLQVWUXFWHGWRUHSRUW LQWHUHVW LQ HPSOR\PHQW IRU WKH GXUDWLRQ RI WKH IRUWHDFKLQJGXW\DW+DOOV+LJK6FKRRO,QVWHDGRIGRLQJVR HPSOR\PHQWFRQWUDFWEXWWKHGHSULYDWLRQRIWKDWILQLWH KHWRRND\HDUjVPHGLFDOOHDYHRIDEVHQFH0U6KDUSLVD LQWHUHVWFDQEHFRPSHQVDWHGDGHTXDWHO\E\DQRUGLQDU\ SDUDSOHJLF DQG GLDEHWLF DQG KLV SK\VLFLDQ EHOLHYHG WKDW D EUHDFKRIFRQWUDFWDFWLRQl,GDW FODVVURRPHQYLURQPHQWZRXOGEHGLIILFXOWIRUKLP :KHUH DV KHUH WKH HPSOR\HHjV OLYHOLKRRG KDV QRW EHHQ $ZHHNDIWHUWKHUHDVVLJQPHQWWR+DOOV+LJK0U6KDUS MHRSDUGL]HG E\ KLV DOOHJHGO\ SUHPDWXUH GLVPLVVDO IURP D EURXJKWVXLWDJDLQVW'U/LQGVH\DQGWKH.QR[&RXQW\%RDUG IL[HGWHUPSRVLWLRQLWLVHYHQFOHDUHUWKDQLWPLJKWRWKHUZLVH RI(GXFDWLRQXQGHU86&† 7KHFRPSODLQWZKLFK EH WKDW WKH GHSULYDWLRQ RI WKH HPSOR\HHjV ILQLWH LQWHUHVW LV ZDVILOHGLQIHGHUDOFRXUWDOOHJHGYLRODWLRQVRI6KDUSjVIUHH VRPHWKLQJ WKDW mFDQ EH FRPSHQVDWHG DGHTXDWHO\ E\ DQ VSHHFK DQG GXH SURFHVV ULJKWV  7KH GHIHQGDQWV HYHQWXDOO\ RUGLQDU\EUHDFKRIFRQWUDFWDFWLRQl:HVHHQRMXVWLILFDWLRQ PRYHG IRU VXPPDU\ MXGJPHQW DQG WKHLU PRWLRQV ZHUH IRUWXUQLQJ0U6KDUSjVRUGLQDU\EUHDFKRIFRQWUDFWDFWLRQLQWR JUDQWHG0U6KDUSKDVWDNHQDWLPHO\DSSHDO DIHGHUDOFRQVWLWXWLRQDOFDVH ,, 3DUDJUDSKRIWKHFRPSODLQWILOHGE\0U6KDUSFRQILUPV WKDWKLVFODLPVRXQGVLQFRQWUDFW m3ODLQWLIIDYHUVWKDWKHKDV $ 6WDQGDUGRI5HYLHZ DFRQWUDFWXDOULJKWWRVHUYHDVSULQFLSDORI*LEEV+LJK6FKRRO SXUVXDQW WR WKH FRQWUDFW DWWDFKHG DV ([KLELW , DQG WKDW 6XPPDU\ MXGJPHQWV DUH UHYLHZHG LQ WKLV FRXUW GH QRYR 'HIHQGDQWV KDYH EUHDFKHG WKDW FRQWUDFWl  *LYHQ WKH IL[HG 6HH8QLWHG1DW,QV&RY667)LWQHVV&RUS)G WHUPRIWKHFRQWUDFWLWLVSODLQXQGHU5DPVH\WKDW0U6KDUS  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

/LQGVH\jVUHWDLQLQJKLVRZQMREIRUWKDWSHULRGWKHFRQWUDFW   WK&LU 7KH)HGHUDO5XOHVRI&LYLO3URFHGXUH HVWDEOLVKHVDWHUPRIDOPRVWZHHNVIRUWKHSULQFLSDOVKLS SURYLGH WKDW D PRWLRQ IRU VXPPDU\ MXGJPHQW mVKDOOl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m$SULQFLSDOZLWKWHQXUH SDUW\6HH0DWVXVKLWD(OHF,QGXV&R/WGY=HQLWK5DGLR ZKRVH FRQWUDFW LV WHUPLQDWHG XQGHU WKLV VHFWLRQ VKDOO EH &RUS86    WUDQVIHUUHGWRDQRWKHUSURIHVVLRQDOSRVLWLRQIRUZKLFKKHLV OLFHQVHGDQGTXDOLILHGl (PSKDVLVVXSSOLHG  ,WLVWUXHWKDW % )UHH6SHHFK&ODLP †RIWKHFRQWUDFWDOORZVWKHVXSHULQWHQGHQWWRDPHQGWKH SULQFLSDOjVJRDOVDQGREMHFWLYHVDQQXDOO\mRUXSRQWUDQVIHURI  0DWWHURI3XEOLF&RQFHUQ WKHSULQFLSDOWRDQRWKHUSRVLWLRQlEXWWKLVSURYLVLRQPXVWEH UHDGLQFRQMXQFWLRQZLWK†:KHQ†VSHDNVRIDWUDQVIHU 0U6KDUSFRQWHQGVWKDWWKHGHIHQGDQWVUHWDOLDWHGDJDLQVW LWDVVXPHVWKDWWKHSULQFLSDOHPSOR\PHQWFRQWUDFWKDVDOUHDG\ KLPIRUH[HUFLVLQJKLVULJKWRIIUHHVSHHFK)RUDSODLQWLIIWR EHHQ WRTXRWH† E mWHUPLQDWHGXQGHUWKLVVHFWLRQl VXFFHHGRQVXFKDFODLPLWPXVWEHHVWDEOLVKHGWKDWm  WKH :H GR QRW LQWHUSUHW †  DV DXWKRUL]LQJ D PLGFRQWUDFW SODLQWLIIHQJDJHGLQFRQVWLWXWLRQDOO\SURWHFWHGVSHHFK   WKH WUDQVIHUZKHQWKHVXSHULQWHQGHQWGRHVQRWKDYHMXVWFDXVHIRU SODLQWLIIZDVVXEMHFWHGWRDQDGYHUVHDFWLRQRUZDVGHSULYHG WHUPLQDWLQJ WKH FRQWUDFW  ,Q WKH DEVHQFH RI FDXVH IRU RI VRPH EHQHILW DQG   WKH SURWHFWHG VSHHFK ZDV D WHUPLQDWLRQLQRWKHUZRUGVZHEHOLHYHWKDWVXFKDWUDQVIHU µVXEVWDQWLDOjRUDµPRWLYDWLQJIDFWRUjLQWKHDGYHUVHDFWLRQl ZRXOGGHSULYHWKHSULQFLSDORIDFRQWUDFWXDOO\FUHDWHGSURSHUW\ %UDQGHQEXUJY+RXVLQJ$XWKRULW\RI,UYLQH)G  LQWHUHVWWKDWLVSURWHFWHGXQGHUWKH&RQVWLWXWLRQ   WK&LU  FLWLQJ0W+HDOWK\6FKRRO'LVW%GRI (GXFY'R\OH 86   2QO\WKHILUVWRI  'XH3URFHVV WKHVHHOHPHQWVLVVHULRXVO\FRQWHVWHGKHUH

m'XHSURFHVVlLVDIOH[LEOHFRQFHSWWKDWYDULHVDFFRUGLQJWR $SXEOLFHPSOR\HHZKRVHHNVWRSURYHWKDWKHKDVHQJDJHG WKHVLWXDWLRQ=LQHUPRQY%XUFK 86    LQFRQVWLWXWLRQDOO\SURWHFWHGVSHHFKPXVWGHPRQVWUDWHWKDWKLV 7KH DGHTXDF\ RI WKH SURFHGXUHV HPSOR\HG LQ D JLYHQ FDVH VSHHFK WRXFKHG RQ PDWWHUV RI mSROLWLFDO VRFLDO RU RWKHU GHSHQGVRQDQHYDOXDWLRQRIWKUHHIDFWRUV   WKHQDWXUHRI FRQFHUQWRWKHFRPPXQLW\l&RQQLFNY0\HUV86 WKHSULYDWHLQWHUHVW  WKHHIILFDF\RIDGGLWLRQDOSURFHGXUHV    7KHGHIHQGDQWVDUJXHWKDWWKHSODLQWLIIjVVNLWDQG DQG  WKHJRYHUQPHQWjVLQWHUHVWV0DWKHZVY(OGULGJH KLV $XJXVW  OHWWHU WR WKH PHPEHUV RI WKH GUHVV FRGH 86     FRPPLWWHHPHUHO\YHQWHGDQHPSOR\HHJULHYDQFHDQGGLGQRW DGGUHVVDPDWWHU RI SXEOLFFRQFHUQ$VWKH6XSUHPH&RXUW ,QHPSOR\PHQWWHUPLQDWLRQFDVHVWKLVPHDQVWKDWZHPXVW H[SODLQHGLQ&RQQLFN EDODQFHmWKHSULYDWHLQWHUHVWVLQUHWDLQLQJHPSOR\PHQWWKH JRYHUQPHQWDO LQWHUHVW LQ WKH H[SHGLWLRXV UHPRYDO RI mZKHQDSXEOLFHPSOR\HHVSHDNVQRWDVDFLWL]HQXSRQ XQVDWLVIDFWRU\HPSOR\HHVDQGWKHDYRLGDQFHRIDGPLQLVWUDWLYH PDWWHUV RI SXEOLF FRQFHUQ EXW LQVWHDG DV DQ HPSOR\HH EXUGHQVDQGWKHULVNRIDQHUURQHRXVWHUPLQDWLRQl&OHYHODQG XSRQPDWWHUVRQO\RISHUVRQDOLQWHUHVWDEVHQWWKHPRVW %G RI (GXF Y /RXGHUPLOO  86     XQXVXDO FLUFXPVWDQFHV D IHGHUDO FRXUW LV QRW WKH DSSURSULDWHIRUXPLQZKLFKWRUHYLHZWKHZLVGRPRID  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

SHUVRQQHOGHFLVLRQWDNHQE\DSXEOLFDJHQF\DOOHJHGO\LQ FRQWRXUVRIWKDWLQWHUHVWGHSHQGRIFRXUVHRQWKHWHUPVRIWKH UHDFWLRQWRWKHHPSOR\HHjVEHKDYLRUl,GDW FRQWUDFW ,Q WKH FDVH DW EDU WKH GLVWULFW FRXUW FRQFOXGHG TXRWLQJ 7KHLQWURGXFWRU\VHQWHQFHRI0U6KDUSjVFRQWUDFWUHDGVDV *DUYLHYsDFNVRQ)G WK&LU  WKDW IROORZV   m7KLV FRQWUDFW LV LQWHQGHG WR FRPSO\ ZLWK WKH 6KDUSjV VSHHFK mPRUH FORVHO\ UHVHPEOHG DQ HPSOR\HHjV SURYLVLRQVRI7HQQHVVHH&RGHDQQRWDWHG† ZKLFK FRPSODLQWV UHJDUGLQJ KLV VXSHULRUjV DFWLRQV DQG KLV RZQ UHTXLUHV WKH VXSHULQWHQGHQW RI VFKRROV WR HPSOR\ VFKRRO UHVSRQVLELOLWLHVWKDQDFLWL]HQjVVSHDNLQJRXWRQDPDWWHU SULQFLSDOV XQGHU LQGLYLGXDO ZULWWHQ FRQWUDFWVl  6HFWLRQ  RISXEOLFGHFLVLRQPDNLQJl$VIDUDVWKH$XJXVWOHWWHUZDV FDSWLRQHGm7HUPRI&RQWUDFWlSURYLGHVWKDWm>W@KLVFRQWUDFW FRQFHUQHG WKH GLVWULFW FRXUW RIIHUHG WKH IROORZLQJ VKDOOEHJLQRQsXO\ DQGVKDOOHQGRQsXQHRU REVHUYDWLRQVDPRQJRWKHUV  WKHGDWHWKHVXSHULQWHQGHQWjVHPSOR\PHQWFRQWUDFWZLWKWKH ERDUGRIHGXFDWLRQHQGVZKLFKHYHULVHDUOLHUl7KHIRXUWK m7KH$XJXVWOHWWHUZDVDGGUHVVHGRQO\WRWKHPHPEHUV VHFWLRQRIWKHFRQWUDFWGHDOVZLWKWHUPLQDWLRQ6HFWLRQ E RI WKH GUHVV FRGH FRPPLWWHH  6KDUS XVHG VFKRRO UHDGVWKXV  VWDWLRQHU\DQGZURWHWKHOHWWHULQKLVFDSDFLW\DVSULQFLSDO 7KH OHWWHU FULWLFL]HG KLV GLUHFW VXSHUYLVRU DQG m7KLV FRQWUDFW PD\ EH XQLODWHUDOO\ WHUPLQDWHG E\ WKH FKDUDFWHUL]HG/LQGVH\jVDQGWKH6FKRRO%RDUGjVDFWLRQV VXSHULQWHQGHQWIRUWKHLQDGHTXDWHSHUIRUPDQFHRUIRUDQ\ ZLWK SRWHQWLDOO\ PLVOHDGLQJ JHQHUDOLW\  $V IRU WKH RIWKHFDXVHVOLVWHGLQ7HQQHVVHH&RGH$QQRWDWHG7LWOH FRQWHQW 6KDUSjV OHWWHU GLG QRW VHHN WR EULQJ WR OLJKW   3DUW   $ SULQFLSDO ZLWK WHQXUH ZKRVH FRQWUDFW LV ZURQJGRLQJRUDEUHDFKRIWKHSXEOLFjVWUXVW6KDUSKDV WHUPLQDWHG XQGHU WKLV VHFWLRQ VKDOO EH WUDQVIHUUHG WR DGPLWWHGKLVSULPDU\SXUSRVHLQZULWLQJWKHOHWWHUZDVWR DQRWKHUSURIHVVLRQDOSRVLWLRQIRUZKLFKKHLVOLFHQVHGDQG WKDQN WKH GUHVV FRGH FRPPLWWHH IRU WKHLU VHUYLFHV DQG TXDOLILHG1RWKLQJLQWKLVFRQWUDFWVKDOOEHFRQVWUXHGWR GLVPLVVWKHP7KHOHWWHUGRHVQRWFRPPHQWRQWKHGUHVV SUHYHQWWKHERDUGIURPWHUPLQDWLQJDWHQXUHGSULQFLSDO FRGH GHEDWH VR PXFK DV LW FRPPHQWV XSRQ 6KDUSjV IURPHPSOR\PHQWIRUFDXVHl UHODWLRQVKLSZLWK WKHERDUGPHPEHUVDQGKLVVXSHULRU :KHQ YLHZHG LQ FRQWH[W WKH OHWWHU UHVHPEOHV DQ 6HFWLRQ  RI WKH FRQWUDFW ZKLFK GHDOV ZLWK SHUIRUPDQFH HPSOR\HHjVFRPSODLQWVDERXWKLVVXSHULRUVjDFWLRQVDQG VWDQGDUGVJRDOVDQGREMHFWLYHVSURYLGHVLQLWVODVWVHQWHQFH 6KDUSjV RZQ UHVSRQVLELOLWLHV PRUH WKDQ D FLWL]HQjV WKDW m>W@KHVH JRDOV DQG REMHFWLYHV PD\ EH XQLODWHUDOO\ DWWHPSWVWRDGGWRWKHSXEOLFGHEDWHRYHUWKHGUHVVFRGH DPHQGHGE\WKHVXSHULQWHQGHQWDVQHHGHGRQDQDQQXDOEDVLV FRQWURYHUV\l RUXSRQWUDQVIHURIWKHSULQFLSDOWRDQRWKHUSRVLWLRQl $VWRWKHVNLWWKHFRXUWKDGWKLVWRVD\ 7KHGHIHQGDQWVFRQWHQGDQGWKHGLVWULFWFRXUWDJUHHGWKDW 0U 6KDUSjV SULQFLSDO HPSOR\PHQW FRQWUDFW ZDV PHUHO\ m>7@KHVNLWZDVPHDQWIRUSHUIRUPDQFHDWDFORVHGIDFXOW\ PRGLILHG QRW WHUPLQDWHG ZKHQ 6KDUS ZDV UHDVVLJQHG DV D PHHWLQJ7KHVNLWOLNHWKHOHWWHUZDVQRWDGGUHVVHGWR PDWKWXWRUDW+DOOV+LJK6FKRRO:HDUHQRWSHUVXDGHGWKDW WKH SXEOLF DQG IRFXVHG RQ LQWHUGHSDUWPHQWDO WKH ODQJXDJH RI WKH FRQWUDFW VXSSRUWV WKH GHIHQGDQWVj UHODWLRQVKLSVWKDWZHUHPDLQO\DPDWWHURISHUVRQDO RU FRQWHQWLRQ SHUVRQQHO DVRSSRVHGWRSXEOLFFRQFHUQµ7RSUHVXPH WKDW DOO PDWWHUV ZKLFK WUDQVSLUH ZLWKLQ D JRYHUQPHQW 5HDGLQWKHOLJKWRI7(11 &2'( $11† ZLWK RIILFHDUHRISXEOLFFRQFHUQZRXOGPHDQWKDWYLUWXDOO\ ZKLFKLWZDVLQWHQGHGWRFRPSO\WKHFRQWUDFWHPSOR\V0U HYHU\UHPDUNoDQGFHUWDLQO\HYHU\FULWLFLVPGLUHFWHGDW 6KDUS DV D SULQFLSDO o  QRW DV D WHDFKHU  6XEMHFW WR 'U  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO

SXEOLF HPSOR\HH FDQ SRLQW WR D VWDWXWH DV JLYLQJ KLP D D SXEOLF RIILFLDO o  ZRXOG SODQW WKH VHHG RI D SURWHFWHGSURSHUW\LQWHUHVWLQWKHMREKHKROGV7KDWLVQRWWKH FRQVWLWXWLRQDO FDVHj  &RQQLFN  86 DW    7KH FDVH DV IDU DV 0U 6KDUSjV SULQFLSDOVKLS LV FRQFHUQHG OHWWHUDQGWKHVNLWµLIUHOHDVHGWRWKHSXEOLFZRXOGFRQYH\ 7HQQHVVHHjV7HDFKHU7HQXUH$FWLQFOXGHVVFKRROSULQFLSDOVLQ QR LQIRUPDWLRQ DW DOO RWKHU WKDQ WKH IDFW WKDW D VLQJOH WKH GHILQLWLRQ RI mWHDFKHUl VHH 7(11 &2'( $11 †   HPSOR\HHLVXSVHWZLWKWKHVWDWXVTXRj,GDWl    DQG SURYLGHV WKDW DGPLQLVWUDWLYH DQG VXSHUYLVRU\ SHUVRQQHOVXFKDVSULQFLSDOVmVKDOOKDYHWHQXUHDVWHDFKHUV 0U6KDUSDUJXHVLQUHVSRQVHWKDWWKHGUHVVFRGHZDVD DQGQRWQHFHVVDULO\WHQXUHLQWKHVSHFLILFW\SHRISRVLWLRQLQ PDWWHU RI LQWHQVH SXEOLF FRQFHUQ DV ZDV HYLGHQFHG E\ WKH ZKLFKWKH\PD\EHHPSOR\HGl 7(11 &2'( $11†  SDUHQWDOFRPSODLQWVDQGSUHVVFRPPHQWDU\LWJHQHUDWHG WKDW   $  HPSKDVLVVXSSOLHG 7KH7HQQHVVHHOHJLVODWXUH ZKHWKHU'U/LQGVH\EDFNHGXSWKHSULQFLSDODQGWKH*LEEV GLG QRW LQWHQG WKDW D SULQFLSDO VKRXOG KDYH D VWDWXWRU\ GUHVVFRGHFRPPLWWHHZDVLWVHOIDPDWWHURISXEOLFLQWHUHVW HQWLWOHPHQWWRKLVSULQFLSDOVKLS6HH&RHY%RJDUW )G DQG WKDW 6KDUSjV FULWLFLVP RI WKH ZD\ WKH PDWWHU KDG EHHQ  WK&LU   FLWLQJ6WDWHY<RDNXP7HQQ KDQGOHGGLGQRWUHODWHSULPDULO\WRDSULYDWHSHUVRQQHOLVVXHRU  6:G    MREUHODWHGJULHYDQFH 7KHVFKRROSULQFLSDOZKRZDVWKHSODLQWLIILQ&RHY%RJDUW ,Q SUDFWLFH DV WKLV GHEDWH LOOXVWUDWHV DSSOLFDWLRQ RI WKH ZDVQRWDSDUW\WRDmSULQFLSDOHPSOR\PHQWFRQWUDFWl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mDWHDFKHUZKRDOVRLVHPSOR\HGDVDQDWKOHWLFFRDFKE\ D VFKRRO ERDUG KDV WZR VHWV RI ULJKWV HJ   KLV 2QFHZHJHWSDVWWKH&RQQLFNLVVXHZHPXVWHQJDJHLQD SRVLWLRQDVDWHDFKHULVSURWHFWHGE\WHQXUHDVVXPLQJWKDW mEDODQFLQJlH[HUFLVHPDQGDWHGE\3LFNHULQJY%GRI(GXF KHKDVDFTXLUHGWHQXUHVWDWXVDQG  KLVSRVLWLRQDVD   86      3LFNHULQJ GLUHFWV XV WR ZHLJK WKH FRDFKLVSURWHFWHGE\ZKDWHYHUFRQWUDFWKHKDVZLWKWKH LQWHUHVWRIWKHSXEOLFHPSOR\HHLQFRPPHQWLQJDVDFLWL]HQ ERDUGWRSHUIRUPFRDFKLQJGXWLHVEXWQRWE\WHQXUHl XSRQ PDWWHUV RI SXEOLF FRQFHUQ DJDLQVW WKH JRYHUQPHQWjV LQWHUHVWLQWKHHIILFLHQWSURYLVLRQRISXEOLFVHUYLFHV,GDW 6HHDOVR)XONVY:DWVRQ:/  7HQQ&W  $SS  ,Q VWULNLQJ WKH EDODQFH ZH PXVW mFRQVLGHU ZKHWKHU DQ $SSO\LQJ :KLWHDQG.HQGDOOKHUHZHFRQFOXGHWKDW0U HPSOR\HHjV FRPPHQWV PHDQLQJIXOO\ LQWHUIHUH ZLWK WKH 6KDUS KDG D SURWHFWHG SURSHUW\ LQWHUHVW LQ KLV SRVLWLRQ DV SHUIRUPDQFHRI>KLV@GXWLHVXQGHUPLQHDOHJLWLPDWHJRDORU SULQFLSDOE\UHDVRQRIKLVSULQFLSDOHPSOR\PHQWFRQWUDFW7KH PLVVLRQ RI WKH HPSOR\HU FUHDWH GLVKDUPRQ\ DPRQJ FR ZRUNHUV LPSDLU GLVFLSOLQH E\ VXSHULRUV RU GHVWUR\ WKH  6KDUSY/LQGVH\HWDO 1R 1R 6KDUSY/LQGVH\HWDO 

UHODWLRQVKLS RI OR\DOW\ DQG WUXVW UHTXLUHG RI FRQILGHQWLDO 7(11 &2'( $11†   m>$@QGWKHVXSHULQWHQGHQW HPSOR\HHVl:LOOLDPVY.HQWXFN\)G WK PXVWQHFHVVDULO\EHDFFRUGHGFRQVLGHUDEOHGLVFUHWLRQLQWKH &LU      $QG ZH PXVW UHFRJQL]H WKDW DOWKRXJK WKH HPSOR\PHQWDQGUHWHQWLRQRIVXFKSHUVRQQHOl)OHPLQJ JRYHUQPHQW EHDUV WKH EXUGHQ RI MXVWLI\LQJ WKH DGYHUVH 6:GDW &I&RQQLFN86DW m:KHQ HPSOR\PHQWDFWLRQVHH5DQNLQY0F3KHUVRQ86 FORVHZRUNLQJUHODWLRQVKLSVDUHHVVHQWLDOWRIXOILOOLQJSXEOLF    WKHJRYHUQPHQWLVHQWLWOHGWRJUHDWHUGHIHUHQFH UHVSRQVLELOLWLHVDZLGHGHJUHHRIGHIHUHQFHWRWKHHPSOR\HUjV ZKHQUHJXODWLQJVSHHFKDVDQHPSOR\HUWKDQZKHQLWDWWHPSWV MXGJPHQWLVDSSURSULDWHl  WRUHJXODWHWKHVSHHFKRIWKHSXEOLFDWODUJH6HH:DWHUVY &KXUFKLOO86    7KHIRVWHULQJRIDJRRGZRUNLQJUHODWLRQVKLSEHWZHHQWKH SULQFLSDODQGKLVQHZO\DSSRLQWHGERVVZDVKDUGO\KHOSHGDV m7KH JRYHUQPHQWjV LQWHUHVW LQ DFKLHYLQJ LWV JRDOV DV 'U /LQGVH\ SRLQWHG RXW LQ KLV GHSRVLWLRQ E\ 0U 6KDUSjV HIIHFWLYHO\DQGHIILFLHQWO\DVSRVVLEOHLVHOHYDWHGIURPD IDLOXUHWRVSHDNZLWKKLPSULYDWHO\EHIRUHWU\LQJWRSXWWKH UHODWLYHO\VXERUGLQDWHLQWHUHVWZKHQLWDFWVDVVRYHUHLJQ VXSHULQWHQGHQWLQDEDGOLJKWEHIRUHWKHGUHVVFRGHFRPPLWWHH WR D VLJQLILFDQW RQH ZKHQ LW DFWV DV HPSOR\HU  7KH DQGWKHWHDFKLQJVWDII$GLIIHUHQWVXSHULQWHQGHQWPLJKWQRW JRYHUQPHQW FDQQRW UHVWULFW WKH VSHHFK RI WKH SXEOLF DW KDYHFRQVLGHUHG0U6KDUSjVFRQGXFWLQVXERUGLQDWHEXW'U ODUJH MXVW LQ WKH QDPH RI HIILFLHQF\  %XW ZKHUH WKH /LQGVH\REYLRXVO\GLGoDQGZHFDQQRWVD\WKDWKHDEXVHGKLV JRYHUQPHQWLVHPSOR\LQJVRPHRQHIRUWKHYHU\SXUSRVH GLVFUHWLRQ LQ FRQFOXGLQJ WKDW WKH LQWHUHVW RI D VPRRWKO\ RIHIIHFWLYHO\DFKLHYLQJLWVJRDOVVXFKUHVWULFWLRQVPD\ IXQFWLRQLQJDGPLQLVWUDWLYHWHDPZRXOGEHVWEHVHUYHGE\WKH ZHOOEHDSSURSULDWHl,GDW UHDVVLJQPHQWRI0U6KDUS,QRXUMXGJPHQWWKHLQWHUHVWVRI D WHQVLRQIUHH VXSHULQWHQGHQWSULQFLSDO UHODWLRQVKLS 0U6KDUSjVLQWHUHVWLQFDVWLQJDVSHUVLRQVRQKLVVXSHULRUV RXWZHLJKHG 0U 6KDUSj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jDUJXPHQWWKDW6KDUSjVVSHHFKGLVUXSWHGWKHFORVH SURSHUW\ZLWKRXWWKHSURFHVVGXHKLPXQGHUWKH&RQVWLWXWLRQ ZRUNLQJUHODWLRQVKLSEHWZHHQVXSHULQWHQGHQWDQGSULQFLSDOo 7KHGHIHQGDQWVUHVSRQGWKDWXQGHU7HQQHVVHHODZWKHSODLQWLII DUHODWLRQVKLSRQZKLFKWKHHIIHFWLYHIXQFWLRQLQJRIWKHVFKRRO KDG QR SURWHFWHG SURSHUW\ LQWHUHVW LQ KLV SULQFLSDOjV SRVW V\VWHPGHSHQGV$VVXSHULQWHQGHQW'U/LQGVH\ZDVHQWLWOHG (YHQ LI KH KDG VXFK DQ LQWHUHVW WKH\ JR RQ WR DUJXH WKH XQGHU7HQQHVVHHODZWRH[SHFWWKHFRRSHUDWLRQDQGVXSSRUWRI SURFHVVDFFRUGHGKLPZDVQRWFRQVWLWXWLRQDOO\GHIHFWLYH WKHSULQFLSDO6HH)OHPLQJY:DGH6:G  7HQQ  7KHUHODWLRQVKLSLVDKLJKO\SHUVRQDORQHoVR 3URSHUW\LQWHUHVWVSURWHFWHGE\WKH&RQVWLWXWLRQVWHPIURP SHUVRQDOLQGHHGWKDWWKHVXSHULQWHQGHQWHPSOR\VSULQFLSDOV DQLQGHSHQGHQWVRXUFHVXFKDVVWDWHODZDQGDUHQRWFUHDWHG LQKLVRZQQDPHXQGHUDQHPSOR\PHQWFRQWUDFWWKDWPD\QRW E\ WKH &RQVWLWXWLRQ LWVHOI &OHYHODQG %G RI (GXF Y H[FHHGWKHFRQWUDFWWHUPRIWKHVXSHULQWHQGHQWKLPVHOI6HH /RXGHUPLOO  86      FLWLQJ %RDUG RI 5HJHQWV Y 5RWK  86       )UHTXHQWO\ D

Reference

Status
Published