Verizon North Inc v. Strand

U.S. Court of Appeals for the Sixth Circuit

Verizon North Inc v. Strand

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

9(5,=21 1257+ ,1& ; 3ODLQWLII$SSHOOHH    1R Y  !  s2+1 * 675$1'&KDLUPDQ  s2+1 & 6+($  &RPPLVVLRQHU DQG'$9,' $  69$1'$&RPPLVVLRQHU  'HIHQGDQWV$SSHOODQWV   1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW/DQVLQJ 1R n5REHUW+ROPHV%HOO&KLHI'LVWULFWsXGJH $UJXHG sXQH 'HFLGHGDQG)LOHG 1RYHPEHU %HIRUH %2**61255,6DQG%$7&+(/'(5&LUFXLW sXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('   'DYLG $ 9RJHV $66,67$17 $77251(< *(1(5$/ 38%/,& 6(59,&( ',9,6,21 /DQVLQJ 0LFKLJDQIRU$SSHOODQW*HUDOG0DVRXGL.,5./$1'

  9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R

(//,6 :DVKLQJWRQ '& IRU $SSHOOHH  %ULDQ s /HVNH :25/'&20,1&:DVKLQJWRQ'&IRU$PLFL&XULDH 21 %5,()   'DYLG $ 9RJHV +HQU\ s %R\QWRQ $66,67$17$77251(<6*(1(5$/38%/,&6(59,&( ',9,6,21 /DQVLQJ 0LFKLJDQ IRU $SSHOODQW  3DWULFN ) 3KLOELQ .,5./$1'  (//,6 :DVKLQJWRQ '& IRU $SSHOOHH%ULDQs/HVNH:25/'&20,1&:DVKLQJWRQ '&'DUU\O0%UDGIRUG6RQD5HZDULs(11(5 %/2&. &KLFDJR ,OOLQRLV 'DYLG / /DZVRQ sHQQLIHU 0 5XELQ 6,'/(<$867,1%52:1 :22':DVKLQJWRQ'& /HODQG 5 5RVLHU &/$5. +,// 2NHPRV 0LFKLJDQ  IRU $PLFL&XULDH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB %2**6&LUFXLWsXGJH&RPPLVVLRQHUVsRKQ*6WUDQG sRKQ&6KHDDQG'DYLG$6YDQGDRIWKH0LFKLJDQ3XEOLF 6HUYLFH&RPPLVVLRQ WKHm036&l DSSHDOIURPWKHGLVWULFW FRXUWjVJUDQWRIDGHFODUDWRU\MXGJPHQWLQIDYRURI9HUL]RQ 1RUWK ,QF m9HUL]RQl  LQ 9HUL]RQjV VXLW FKDOOHQJLQJ D )HEUXDU\    RUGHU RI WKH 036& WKH m)HEUXDU\  RUGHUl RU WKH mRUGHUl   9HUL]RQ DQ LQFXPEHQW ORFDO WHOHFRPPXQLFDWLRQVFDUULHULQ0LFKLJDQDOOHJHGWKDWWKHRUGHU FRQIOLFWHG ZLWK DQG ZDV SUHHPSWHG E\ WKH IHGHUDO 7HOHFRPPXQLFDWLRQV$FWRI  WKHm)7$lRUWKHm$FWl  3XE/1R6WDW    FRGLILHGLQYDULRXV VHFWLRQV RI  86&  WR WKH H[WHQW WKDW LW UHTXLUHG LQFXPEHQWV WR RIIHU QHWZRUN HOHPHQWV DQG VHUYLFHV WR FRPSHWLWRUV WKURXJK SXEOLVKHG WDULIIV DQG WR FRPELQH XQEXQGOHG QHWZRUN HOHPHQWV IRU FRPSHWLWRUV  7KH GLVWULFW FRXUWDJUHHGDQGJUDQWHGLQMXQFWLYHUHOLHIIURPERWKDVSHFWV RIWKHRUGHU)RUWKHUHDVRQVVHWIRUWKEHORZZHDIILUPWKH GLVWULFW FRXUWjV MXGJPHQW ZLWK UHVSHFW WR WKH WDULII

 7KH FDVH ZDV LQVWLWXWHG E\ *7( 1RUWK ,QF ZKLFK LQ  EHFDPH 9HUL]RQ 1RUWK ,QF 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO 

UHTXLUHPHQW EXW YDFDWH WKH MXGJPHQW ZLWK UHVSHFW WR WKH EXQGOLQJUHTXLUHPHQW , 7KLVLVWKHVHFRQGWLPHWKDWWKLVFDVHKDVUHDFKHGWKLVFRXUW ,QRXUILUVWGHFLVLRQLVVXHGRQ$SULOZHH[SODLQHG WKHKLVWRU\DQGVXEVWDQFHRIWKHDFWLRQEURXJKWE\9HUL]RQ ZKLFKDWWKHWLPHZDVVWLOO*7(  >,Q'HFHPEHU @WKH036&LQLWLDWHGVWDWHODZ SURFHHGLQJV DJDLQVW *7( DQG RWKHU LQFXPEHQW >/RFDO ([FKDQJH &DUULHUV RU m/(&Vl@ LQ RUGHU WR HVWDEOLVK WHUPV RI LQWHUFRQQHFWLRQ WR 0LFKLJDQ ORFDO H[FKDQJH QHWZRUNVJHQHUDOO\,QFRQQHFWLRQZLWKWKHVHJHQHUDO LQWHUFRQQHFWLRQ SURFHHGLQJV WKH 036& UHTXLUHG *7( DQG $PHULWHFK DV 0LFKLJDQ /(&V WR ILOH ZLWK WKH &RPPLVVLRQm7RWDO6HUYLFH/RQJ5XQ,QFUHPHQWDO&RVWl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jV0RWLRQIRU 8SRQUHFHLYLQJWKHRUGHU*7(VXHGWKH036&LQWKH 6XPPDU\s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jV KROGLQJ ZLWK SXEOLVKWDULIIVRIIHULQJWRVHOOHOHPHQWVRILWVQHWZRUNDW UHVSHFW WR WKLV FODLP DQG UHPDQG WKH FDVH IRU IXUWKHU UDWHVSUHGHWHUPLQHGE\WKH&RPPLVVLRQ FRQVLGHUDWLRQ

*7(1RUWK,QFY6WUDQG )G    WK&LU ,,,   m9HUL]RQ,l  )RU WKH IRUHJRLQJ UHDVRQV ZH $)),50 LQ SDUW DQG ,QWKDWILUVWGHFLVLRQWKLVFRXUWUHYLHZHGWKHGLVWULFWFRXUWjV 9$&$7(LQSDUWWKHGLVWULFWFRXUWjVGHFLVLRQ GLVPLVVDORIWKHFDVHIRUODFNRIVXEMHFWPDWWHUMXULVGLFWLRQ 7KHGLVWULFWFRXUWKDGKHOGWKDWLWODFNHGMXULVGLFWLRQLQWKH FDVHEHFDXVH† H  RIWKH$FW 86&† H  JLYHVIHGHUDOFRXUWVMXULVGLFWLRQWRUHYLHZVWDWHFRPPLVVLRQ RUGHUVDSSURYLQJRUUHMHFWLQJILQDOLQWHUFRQQHFWLRQDJUHHPHQWV DQGWKH)HEUXDU\RUGHUZDVQRWVXFKDQRUGHU7KLVFRXUW GHWHUPLQHGWKDWWKHOLPLWDWLRQRQIHGHUDOUHYLHZVHWIRUWKLQ †  H   GLG QRW DSSO\ DQG KHOG WKDW VLQFH WKH DFWLRQ SUHVHQWVDSRWHQWLDOLQVWDQFHRIIHGHUDOSUHHPSWLRQWKHGLVWULFW FRXUWKDGMXULVGLFWLRQWRUHYLHZWKHRUGHUXQGHULWVJHQHUDO IHGHUDOTXHVWLRQMXULVGLFWLRQ 86&† 6HH9HUL]RQ , )GDW )XUWKHUWKLVFRXUWKHOGWKDW9HUL]RQjV VXLW DJDLQVW WKH LQGLYLGXDO FRPPLVVLRQHUV LQ WKHLU RIILFLDO FDSDFLW\ ZKLFK VHHNV RQO\ SURVSHFWLYH LQMXQFWLYH UHOLHI LV DSSURSULDWHXQGHU([SDUWH<RXQJ 86   6HH

 ,Q LWV SUHVHQW DSSHDO WKH 036& DJDLQ FKDOOHQJHV WKLV FRXUWjV MXULVGLFWLRQDO DQG ([ SDUWH <RXQJ KROGLQJV +RZHYHU DIWHU WKH SDUWLHVj EULHIV ZHUH ILOHG WKH 6XSUHPH &RXUW GHFLVLYHO\ DQVZHUHG WKH TXHVWLRQV UDLVHG E\ WKH 036& ,Q 9HUL]RQ Y 3XEOLF 6HUYLFH &RPPLVVLRQ RI 0DU\ODQG  6 &W    WKH &RXUW KHOG WKDW †  H  GRHV  9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO 

'XULQJ WKH SHQGHQF\ RI WKLV DSSHDO WKH 6XSUHPH &RXUW 9HUL]RQ, )GDW $FFRUGLQJO\WKLVFRXUWUHPDQGHG LVVXHGDQRSLQLRQRYHUWXUQLQJWKH(LJKWK&LUFXLWRQWKLVLVVXH WKHFDVHWRWKHGLVWULFWFRXUWIRUFRQVLGHUDWLRQRIWKHPHULWV $V PHQWLRQHG DERYH LQ )&&  6 &W DW  WKH &RXUWKHOGWKDWWKH)&&UXOHUHTXLULQJLQFXPEHQWVWRFRPELQH 2QUHPDQGWKHGLVWULFWFRXUWJUDQWHG9HUL]RQjVPRWLRQIRU HOHPHQWV DW FRPSHWLWRUVj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†RIWKH$FW9HUL]RQ1RUWK,QFY WKDWFRXOGEHFRPELQHG7KH$FWKRZHYHUSURFHHGVRQ 6WUDQG  ) 6XSS G    :' 0LFK   WKH XQGHUVWDQGLQJ WKDW LQFXPEHQW PRQRSROLVWV DQG 6HFRQGWKHFRXUWKHOGWKDWUHTXLULQJLQFXPEHQWVWRFRPELQH FRQWHQGLQJ FRPSHWLWRUV DUH XQHTXDO DQG ZLWKLQ WKH SUHYLRXVO\ XQEXQGOHG QHWZRUN HOHPHQWV DW FRPSHWLWRUVj DFWXDO VWDWXWRU\ FRQILQHV LW LV QRW VHOIHYLGHQW WKDW LQ UHTXHVWYLRODWHGWKHSODLQODQJXDJHRIWKH$FWZKLFKUHTXLUHV REOLJDWLQJ LQFXPEHQWV WR IXUQLVK &RQJUHVV QHJDWHG D LQFXPEHQWV WR SURYLGH FRPSHWLWRUV DFFHVV WR QHWZRUN GXW\ WR FRPELQH WKDW LV QRW LQFRQVLVWHQW ZLWK WKH HOHPHQWV mLQ D PDQQHU WKDW DOORZV UHTXHVWLQJ FDUULHUV WR REOLJDWLRQWRIXUQLVKEXWQRWH[SUHVVO\PHQWLRQHG7KXV FRPELQHVXFKHOHPHQWVl9HUL]RQ1RUWK,QF)6XSS LWWDNHVDVWUHWFKWRJHWIURPSHUPLVVLYHVWDWXWRU\VLOHQFH GDW TXRWLQJ86&† F   HPSKDVLVDGGHG  WRDVWDWXWRU\ULJKWRQWKHSDUWRIWKHLQFXPEHQWVWRUHIXVH 7KH036&ILOHGDWLPHO\DSSHDOIURPERWKKROGLQJV WRFRPELQHIRUDUHTXHVWLQJFDUULHUVD\WKDWLVXQDEOHWR PDNHWKHFRPELQDWLRQRUPD\HYHQEHXQDZDUHWKDWLW ,, QHHGV WR FRPELQH FHUWDLQ HOHPHQWV WR SURYLGH D WHOHFRPPXQLFDWLRQVVHUYLFH 7KH7DULII5HTXLUHPHQW

,GDW FLWDWLRQVRPLWWHG 7KH6XSUHPH&RXUWKDYLQJ &RQJUHVV SDVVHG WKH )7$ LQ RUGHU WR HQG ORFDO IRUHFORVHGWKHUHDVRQLQJXSRQZKLFKWKHGLVWULFWFRXUWEDVHG WHOHFRPPXQLFDWLRQVPRQRSROLHVDQGHQJHQGHUFRPSHWLWLRQLQ LWV LQYDOLGDWLRQ RI WKH 036&jV EXQGOLQJ UHTXLUHPHQW ZH ORFDOWHOHFRPPXQLFDWLRQVPDUNHWV7RDWWDLQWKHVHJRDOVWKH ZRXOGRUGLQDULO\UHYHUVHWKHGLVWULFWFRXUWjVKROGLQJ $FW LPSRVHV YDULRXV UHTXLUHPHQWV RQ LQFXPEHQW WHOHFRPPXQLFDWLRQVSURYLGHUV7KHUHTXLUHPHQWVLQFOXGHWKH +RZHYHU9HUL]RQDUJXHVWKDWWKHUHLVDQDOWHUQDWLYHJURXQG GXW\ WR     SHUPLW FRPSHWLWRUV ZKR KDYH EXLOW WKHLU RZQ XSRQ ZKLFK WKLV FRXUW VKRXOG XSKROG WKH GLVWULFW FRXUWjV WHOHFRPPXQLFDWLRQV QHWZRUNV WR LQWHUFRQQHFW ZLWK WKH LQYDOLGDWLRQRIWKH036&EXQGOLQJUXOH9HUL]RQSRLQWVWR LQFXPEHQWjVQHWZRUNmIRUWKHWUDQVPLVVLRQDQGURXWLQJlRI WKHIDFWWKDWLQ)&&WKH6XSUHPH&RXUWVSHFLILFDOO\QRWHG WUDIILF EHWZHHQ WKH QHWZRUNV  86& †  F  WKDW XQGHU WKH )&& EXQGOLQJ UHTXLUHPHQW FRPSHWLWRUV  SHUPLWFRPSHWLWRUVWROHDVHHOHPHQWVRIWKHLQFXPEHQWjV UHTXHVWLQJEXQGOLQJPXVWSD\mµDUHDVRQDEOHFRVWEDVHGIHHj QHWZRUNLQRUGHUWRDOORZWKHFRPSHWLWRUVWRSURYLGHUHWDLO IRU ZKDWHYHU WKH LQFXPEHQW GRHVl WR FRPELQH HOHPHQWV )&&6&WDW TXRWLQJ%ULHIIRU3HWLWLRQHU)HGHUDO 3DUWLHVLQ1RVHWFDW 9HUL]RQDOOHJHVWKDWWKH QRW 036&UXOHDWLVVXHLQWKHSUHVHQWFDVHSURYLGHVIRUQRVXFK GLYHVW IHGHUDO FRXUWV RI IHGHUDO TXHVWLRQ MXULVGLFWLRQ XQGHU  86& †  LG DW  DQG WKDW D VXLW VHHNLQJ LQMXQFWLYH UHOLHI IURP FRPSHQVDWLRQDQGLVWKHUHIRUHGLVWLQJXLVKDEOHIURPWKH)&& LQGLYLGXDO VWDWH FRPPLVVLRQHUV LV SURSHU XQGHU ([ SDUWH <RXQJ ,G DW   9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO 

VHUYLFHV WKURXJK VXFK D QHWZRUN LG DW †  F   DQG DJUHHPHQW DOWRJHWKHU DQG >DOORZHG FRPSHWLWRUV@ WR RUGHU   SHUPLW FRPSHWLWRUV WR SXUFKDVH WHOHFRPPXQLFDWLRQV VHUYLFHVµRIIWKHUDFNjZLWKRXWDQLQWHUFRQQHFWLRQDJUHHPHQWl VHUYLFHVDWZKROHVDOHSULFHVLQRUGHUWRDOORZWKHFRPSHWLWRUV ,ELG  7KH 2UHJRQ GLVWULFW FRXUW KHOG WKDW GHVLJQLQJ DQ WRUHVHOOWKRVHVHUYLFHVWRUHWDLOFXVWRPHUVLGDW† F   DOWHUQDWLYH V\VWHP XQGHU ZKLFK FRPSHWLWRUV PLJKW DFTXLUH VHUYLFHV DQG QHWZRUN HOHPHQWV IURP LQFXPEHQWV ZLWKRXW ,Q RUGHU WR IDFLOLWDWH WKLV LQWHUFRQQHFWLRQ OHDVLQJ DQG HQJDJLQJLQWKH†SURFHVVZDVLPSHUPLVVLEOHXQGHUWKH ZKROHVDOLQJ &RQJUHVV GHVLJQHG D FRPSUHKHQVLYH V\VWHP )7$ XQGHUZKLFKUHTXHVWLQJFRPSHWLWRUVDQGLQFXPEHQWSURYLGHUV DUHWRHQWHULQWRLQWHUFRQQHFWLRQDJUHHPHQWVVHWWLQJIRUWKWKH :H DJUHH  7KH )7$ SHUPLWV D JUHDW GHDO RI VWDWH WHUPV DQG FRQGLWLRQV RI WKHLU EXVLQHVV UHODWLRQVKLS  ,G DW FRPPLVVLRQLQYROYHPHQWLQWKHQHZUHJLPHLWVHWVXSIRUWKH ††  F     )LUVW WKH $FW H[SODLQV WKDW m>X@SRQ RSHUDWLRQRIORFDOWHOHFRPPXQLFDWLRQVPDUNHWVLQ$PHULFD UHFHLYLQJDUHTXHVWIRULQWHUFRQQHFWLRQVHUYLFHVRUQHWZRUN ,QGHHGWKH$FWPDNHVFOHDUWKDWVWDWHFRPPLVVLRQUHJXODWLRQV HOHPHQWV    DQ LQFXPEHQW ORFDO H[FKDQJH FDUULHU PD\ DUH QRW SUHHPSWHG DV ORQJ DV mVXFK UHJXODWLRQV DUH QRW QHJRWLDWH DQG HQWHU LQWR D ELQGLQJ DJUHHPHQW ZLWK WKH LQFRQVLVWHQWZLWKWKHSURYLVLRQVRI>WKH)7$@l86& UHTXHVWLQJ WHOHFRPPXQLFDWLRQV FDUULHU    l  ,G DW †  E   +RZHYHU WKH 036& WDULII UHTXLUHPHQW LV † D  ,QWKLVUHJDUGWKH)7$SODFHVRQLQFXPEHQWVWKH mLQFRQVLVWHQWZLWKWKHSURYLVLRQVRI>WKH)7$@lDQGWKHUHIRUH GXW\WRmQHJRWLDWHLQJRRGIDLWKWKHWHUPVDQGFRQGLWLRQVRI LQYDOLG EHFDXVH LW FRPSOHWHO\ LJQRUHV DQG E\SDVVHV WKH VXFKDJUHHPHQWVl,GDW† F  +RZHYHUHLWKHUSDUW\ GHWDLOHGSURFHVVIRULQWHUFRQQHFWLRQVHWRXWE\&RQJUHVVLQWKH WRWKHQHJRWLDWLRQPD\DVNWKHUHOHYDQWVWDWHFRPPLVVLRQWR )7$ PHGLDWH DQ\ XQUHVROYHG LVVXHV  ,G DW †  D    ,I QHJRWLDWLRQEHWZHHQWKHLQFXPEHQWDQGWKHFRPSHWLWRUGRHV 7KH%XQGOLQJ5HTXLUHPHQW QRWSURGXFHDQDJUHHPHQWWKH)7$SURYLGHVWKDWHLWKHUSDUW\ FDQGXULQJDVSHFLILFWLPHSHULRGDVNWKHVWDWHFRPPLVVLRQ 7KHVHFRQGSDUWRIWKH036&RUGHUDWLVVXHLQWKLVFDVH WRXQGHUWDNHELQGLQJDUELWUDWLRQRIDQ\RSHQLVVXHVDQGWKH UHTXLUHV 9HUL]RQ WR RIIHU mXQEXQGOHG QHWZRUN HOHPHQWV DV )7$SURYLGHVVSHFLILFJXLGHOLQHVIRUVXFKDUELWUDWLRQ,GDW FRPELQDWLRQVRUSODWIRUPVlDWFRPSHWLWRUVjUHTXHVW036& † E  G  )HE 2UGHUDWs$DW,QLQYDOLGDWLQJWKDW UXOHWKHGLVWULFWFRXUWDJUHHGZLWK9HUL]RQjVFRQWHQWLRQWKDW 2QFH DQ LQWHUFRQQHFWLRQ DJUHHPHQW LV UHDFKHG HLWKHU UHTXLULQJ LQFXPEHQWV WR FRPELQH QHWZRUN HOHPHQWV IRU WKURXJK QHJRWLDWLRQ RU DUELWUDWLRQ WKH )7$ UHTXLUHV WKH UHTXHVWLQJFRPSHWLWRUVLVLQFRQVLVWHQWZLWKWKHSODLQODQJXDJH UHOHYDQWVWDWHFRPPLVVLRQWRDSSURYHRUUHMHFWWKHDJUHHPHQW RIWKH$FWZKLFKUHTXLUHVLQFXPEHQWVWRSURYLGHFRPSHWLWRUV DQGLWSURYLGHVVSHFLILFJXLGHOLQHVIRUWKHDSSURYDOSURFHVV DFFHVV WR QHWZRUN HOHPHQWV mLQ D PDQQHU WKDW DOORZV ,GDW† H ,IWKHVWDWHFRPPLVVLRQGRHVQRWDFWZLWKLQD UHTXHVWLQJFDUULHUVWRFRPELQHVXFKHOHPHQWVl86& SUHVFULEHG WLPH SHULRG WKH )7$ SURYLGHV IRU WKH )HGHUDO † F   HPSKDVLVDGGHG ,QVRKROGLQJWKHGLVWULFWFRXUW &RPPXQLFDWLRQV&RPPLVVLRQ )&& WRGHFLGHZKLFKDFWLRQ IROORZHG WKH (LJKWK &LUFXLWjV UHDVRQLQJ LQ ,RZD 8WLOLWLHV SUHHPSWVWKHVWDWHFRPPLVVLRQ,GDW† H  ,IWKH %RDUGY)&& )G WK&LU ,QWKDWFDVHWKH VWDWH FRPPLVVLRQ PDNHV D GHWHUPLQDWLRQ RQ WKH SURSRVHG (LJKWK&LUFXLWKHOGWKDWDVLPLODUUXOHDGRSWHGE\WKH)&& LQWHUFRQQHFWLRQDJUHHPHQWZLWKLQWKHUHTXLUHGWLPHWKH)7$ YLRODWHGWKHSODLQODQJXDJHRI† F  RIWKH$FWZKLFK SURYLGHV WKDW D SDUW\ DJJULHYHG E\ WKH FRPPLVVLRQjV mXQDPELJXRXVO\ LQGLFDWHV WKDW UHTXHVWLQJ FDUULHUV ZLOO GHWHUPLQDWLRQ PD\ EULQJ DQ DFWLRQ IRU UHYLHZ LQ IHGHUDO FRPELQH WKH XQEXQGOHG HOHPHQWV WKHPVHOYHVl  6HH ,RZD GLVWULFWFRXUW,GDW† H   8WLOLWLHV%G )GDW   9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO 

VWDWH FRPPLVVLRQ GHFLVLRQV LQWHUSUHWLQJ DQG HQIRUFLQJ 7KH036&RUGHUDWLVVXHKHUHHVWDEOLVKHVDGLIIHUHQWURXWH SUHYLRXVO\DSSURYHG LQWHUFRQQHFWLRQ DJUHHPHQWVl  ,ELG IRUFRPSHWLWRUVWRREWDLQVHUYLFHVDQGQHWZRUNHOHPHQWVIURP 7KHUHIRUHWKHIDFWWKDWDQLQWHUFRQQHFWLRQDJUHHPHQWDOUHDG\ LQFXPEHQWV7KHRUGHUUHTXLUHV9HUL]RQWRILOHWDULIIVZLWKWKH H[LVWHGEHWZHHQWKHSDUWLHVZDVLPSRUWDQWWRWKHYDOLGLW\RI VWDWHmVHW>WLQJ@IRUWKWKHUDWHVWHUPVDQGFRQGLWLRQVlXQGHU WKHVWDWHFRPPLVVLRQjVSODQ ZKLFK FRPSHWLWRUV PLJKW DFTXLUH QHWZRUN HOHPHQWV DQG VHUYLFHV036&)HE 2UGHUDW s$DW 7KHRQO\RWKHUFRXUWWKDWDSSHDUVWRKDYHFRQVLGHUHGWKH $VWKHGLVWULFWFRXUWLQWKLVFDVHH[SODLQHGWKHRUGHUUHTXLUHV VSHFLILFTXHVWLRQSUHVHQWHGE\WKLVFDVHDOVRUHFRJQL]HGWKH LQFXPEHQWVmWRILOHWDULIIVRIIHULQJLWVQHWZRUNHOHPHQWVDQG FHQWUDOLW\RIWKH†SURFHVV$Q2UHJRQGLVWULFWFRXUWKHOG VHUYLFHV IRU VDOH RQ IL[HG WHUPV WR DOO SRWHQWLDO HQWUDQWV WKDWDVWDWHFRPPLVVLRQjVWDULIIUHTXLUHPHQWFRQIOLFWHGZLWK ZLWKRXW WKH QHFHVVLW\ RI QHJRWLDWLQJ DQ LQWHUFRQQHFWLRQ WKH)7$EHFDXVHLWZRXOGUHTXLUHLQFXPEHQWVWRRIIHUWKHLU DJUHHPHQWl  9HUL]RQ 1RUWK ,QF  ) 6XSS G DW  VHUYLFHVWRFRPSHWLWRUVmYLDDSURFHGXUHWKDWE\SDVVHVWKH$FW HPSKDVLV DGGHG   ,Q WKLV ZD\ WKH 036& RUGHU SHUPLWV HQWLUHO\ DQG LJQRUHV WKH SURFHGXUHV DQG VWDQGDUGV WKDW FRPSHWLWRUVWRSXUFKDVHWKHVHUYLFHVDQGHOHPHQWVGLUHFWO\RII &RQJUHVVKDVHVWDEOLVKHGl0&,7HOHFRPPV&RUSY*7( RIWKHWDULIIPHQXREYLDWLQJWKHQHHGWRQHJRWLDWHRUDUELWUDWH 1RUWKZHVW,QF)6XSSG '2U  DQLQWHUFRQQHFWLRQDJUHHPHQW ,QVRKROGLQJWKDWFRXUWSRLQWHGRXWWKDWWKHVWDWHFRPPLVVLRQ KDG QRW m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ˆˆ     ZKHUHLQ WKH )&& XSKHOG D 7H[DV WKLV FRXUWjV DWWHQWLRQ WR  

LV D SXEOLF UXOH RI JHQHUDO DSSOLFDWLRQ %\ UHTXLULQJ FRPPLVVLRQjV UXOH SHUPLWWLQJ FHUWDLQ FRPSHWLWRUV WR SXUFKDVH VHUYLFHV DW )&&5

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

VHW PHQX ZLWKRXW HYHU HQWHULQJ LQWR WKH SURFHVV WR HQWLWOHG WR VXEVWDQWLDO GHIHUHQFH SXUVXDQW WR QHJRWLDWHDQGDUELWUDWHDQLQWHUFRQQHFWLRQDJUHHPHQW,W   86     +RZHYHU &KHYURQ 86$ ,QF Y

ZKLOH WKH )&&jV GLVFXVVLRQ RI WKH 7H[DV UXOH PD\ EH UHDG WR VXJJHVW WKDW WKXVHYDGHVWKHH[FOXVLYHSURFHVVUHTXLUHGE\WKH  1DWXUDO 5HVRXUFHV 'HIHQVH &RXQFLO

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jV SRVLWLRQ RQ WKH UHOHYDQW ,Q UH 3XEOLF 8WLOLW\ 9HUL]RQ1RUWK,QF)6XSSGDW LVVXH LQ WKH SUHVHQW FDVH &RPPLVVLRQ RI 7H[DV  9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO 

:HDJUHHZLWKWKHGLVWULFWFRXUW7KHFHQWUDOTXHVWLRQLQ PROGLQJWKHEXVLQHVVUHODWLRQVKLSEHWZHHQWKHLQFXPEHQWDQG SUHHPSWLRQDQDO\VLV LVDOZD\VmZKHWKHU&RQJUHVVLQWHQGHG LWVFRPSHWLWRUVEXWUDWKHUWKDWWKH036&RUGHUSURYLGHVDQ WKDWIHGHUDOUHJXODWLRQVXSHUVHGHVWDWHODZl/RXLVLDQD3XE DOWHUQDWLYH URXWH DURXQG WKH HQWLUH LQWHUFRQQHFWLRQ SURFHVV 6HUY &RPPjQ Y )&&  86        %\ LWV ZLWKLWVDWWHQGDQWQHJRWLDWLRQDUELWUDWLRQVWDWHFRPPLVVLRQ WHUPVWKH)7$GRHVQRWSUHHPSWVWDWHFRPPLVVLRQUXOHVmLI DSSURYDO )&& RYHUVLJKW DQG IHGHUDO FRXUW UHYLHZ VXFKUHJXODWLRQVDUHQRWLQFRQVLVWHQWZLWKWKHSURYLVLRQVRI SURFHGXUHV 7KH7HQWK&LUFXLWDSSHDUVWRKDYHUHFRJQL]HG >WKH )7$@l86&† E 6HHDOVRLGDW† F WKLV LQ D UHFHQW GHFLVLRQ XSKROGLQJ D SURYLVLRQ LQ DQ SHUPLWWLQJVWDWHFRPPLVVLRQVWRLPSRVHFHUWDLQDGGLWLRQDO LQWHUFRQQHFWLRQDJUHHPHQWXQGHUZKLFKDFRPSHWLWRUFRXOG UHTXLUHPHQWVRQWHOHFRPPXQLFDWLRQVFDUULHUVmDVORQJDVWKH SXUFKDVH VHUYLFHV DW WKH UDWHV DQG WHUPV VHW IRUWK LQ VWDWH 6WDWHjVUHTXLUHPHQWVDUHQRWLQFRQVLVWHQWZLWK>WKH)7$@l  WDULIIVILOHGE\WKHLQFXPEHQWLQDGGLWLRQWRSXUFKDVLQJWKHP 7KHUHIRUH&RQJUHVVKDVFOHDUO\VWDWHGLWVLQWHQWWRVXSHUVHGH SXUVXDQWWRWKHUDWHVDQGWHUPVVHWIRUWKLQLWVLQWHUFRQQHFWLRQ VWDWH ODZV WKDW DUH LQFRQVLVWHQW ZLWK WKH SURYLVLRQV RI WKH DJUHHPHQW ZLWK WKH LQFXPEHQW  6HH 86 :HVW )7$6HH9HUL]RQ, )GDW  mLWLVSUHFLVHO\EHFDXVH &RPPXQLFDWLRQV ,QF Y 6SULQW &RPPXQLFDWLRQV &R  VWDWH XWLOLW\ FRPPLVVLRQV SOD\ VXFK D FULWLFDO UROH LQ )G WK&LU 7KHGLVWULFWFRXUWLQWKDWFDVHKDG DGPLQLVWHULQJWKH)7$jVUHJXODWRU\IUDPHZRUNWKDWWKH\PXVW LQYDOLGDWHGWKHSURYLVLRQDVYLRODWLYHRIWKH$FWEHFDXVHWKH RSHUDWHVWULFWO\ZLWKLQWKHFRQILQHVRIWKHVWDWXWHl VHHDOVR FRPSHWLWRU JDLQHG WKH WHUPV DQG FRQGLWLRQV RXWVLGH RI WKH 0&,7HOHFRPPV&RUSY,OO%HOO7HO&R)G QHJRWLDWLRQDUELWUDWLRQSURFHVVVHWIRUWKLQ†6HHLGDW WK&LU  m&RQJUHVVH[HUFLVLQJLWVDXWKRULW\WRUHJXODWH  7KHFRXUWRIDSSHDOVGLVWLQJXLVKLQJWKHFDVHEHIRUH FRPPHUFH KDV SUHFOXGHG DOO RWKHU UHJXODWLRQ H[FHSW RQ LWV LWIURPWKHGLVWULFWFRXUWGHFLVLRQLQWKHSUHVHQWFDVHZURWH WHUPVl )XUWKHUDVWKHGLVWULFWFRXUWLQWKLVFDVHSRLQWHGRXW WKDW VWDWHODZSURYLVLRQVFDQEHLQFRQVLVWHQWZLWKDQGWKHUHIRUH SUHHPSWHGE\IHGHUDOODZHYHQLIWKHIHGHUDODQGVWDWHODZV WKH FKDOOHQJHG SURYLVLRQ GRHV QRW HOLPLQDWH VKDUHDFRPPRQJRDO6HH9HUL]RQ1RUWK,QF)6XSS LQWHUFRQQHFWLRQDJUHHPHQWVEXWUDWKHULVDSDUWRIRQH$ GDW (YHQLQWKHFDVHRIDVKDUHGJRDOWKHVWDWHODZLV GHFLVLRQE\>WKHFRPSHWLWRU@WRSXUFKDVHVHUYLFHVDWWKH SUHHPSWHG mLI LW LQWHUIHUHV ZLWK WKH PHWKRGV E\ ZKLFK WKH UDWHV DQG WHUPV VHW IRUWK LQ RQH RU PRUH RI >WKH IHGHUDO VWDWXWH ZDV GHVLJQHG WR UHDFK >LWV@ JRDOl  *DGH Y LQFXPEHQWjV@WDULIIVGRHVQRWUHVXOWLQDEDQGRQPHQWRI 1DWjO 6ROLG :DVWHV 0JPW $VVjQ  86     WKH LQWHUFRQQHFWLRQ DJUHHPHQW EHWZHHQ LWVHOI DQG >WKH TXRWLQJ ,QWjO 3DSHU &R Y 2XHOOHWWH   86    LQFXPEHQW@ ,W VLPSO\ PHDQV WKDW WKH LQWHUFRQQHFWLRQ    DJUHHPHQW LV DPHQGHG WR LQFOXGH WKH WHUPV RI WKH SDUWLFXODU WDULII V  7KH SDUWLHV UHPDLQ ERXQG E\ WKH LQWHUFRQQHFWLRQDJUHHPHQWDWDOOWLPHVDVDQWLFLSDWHGE\ WKH$FW  $PLFL FRQWHQG WKDW WKH GLVWULFW FRXUW HUUHG LQ UHO\LQJ RQ *DGH DV *DGH LQYROYHG SUHHPSWLRQ XQGHU WKH 2FFXSDWLRQDO 6DIHW\ DQG +HDOWK $FW ,GDW)XUWKHUWKH7HQWK&LUFXLWZHQWRQWRDOOD\WKH m26+ $FWl  ZKLFK GRHV QRW SHUPLW VXSSOHPHQWDO VWDWH UHJXODWLRQ ,Q FRQFHUQ H[SUHVVHG E\ WKH GLVWULFW FRXUW LQ WKDW FDVH WKDW FRQWUDVW DPLFL H[SODLQ WKH )7$ H[SUHVVO\ SHUPLWV VXSSOHPHQWDO VWDWH LQFRUSRUDWLRQRIDWDULIISURYLVLRQZRXOGQRWSURYLGHDEDVLV UHJXODWLRQ +RZHYHU LW LV LUUHOHYDQW WKDW WKH )7$ SHUPLWV VWDWH UHJXODWLRQ IRU IHGHUDO FRXUW UHYLHZ E\ QRWLQJ WKDW XQGHU WKDW FRXUWjV ZKHUHDV WKH 26+ $FW GRHV QRW EHFDXVH WKH )7$ RQO\ SHUPLWV VWDWH UHJXODWLRQ WKDW LV mQRW LQFRQVLVWHQW ZLWK >LWV@ SURYLVLRQVl  86& MXULVSUXGHQFHmVWDWHFRPPLVVLRQVKDYHLQKHUHQWDXWKRULW\WR †  E  7KLV LV H[DFWO\ WKH TXHVWLRQ IDFLQJ WKLV FRXUW ZKHWKHU DQ LQWHUSUHW DQG HQIRUFH SUHYLRXVO\DSSURYHG LQWHUFRQQHFWLRQ DOWHUQDWLYH URXWH WR LQWHUFRQQHFWLRQ E\SDVVLQJ WKH QHJRWLDWLRQDUELWUDWLRQ DJUHHPHQWVDQGIHGHUDOFRXUWVKDYHMXULVGLFWLRQWRUHYLHZ RI DQ LQWHUFRQQHFWLRQ DJUHHPHQW LV VR LQFRQVLVWHQW  9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO

† H  SURYLGHVIRUIHGHUDOGLVWULFWFRXUWUHYLHZRIWKH ,QWKHSUHVHQWFDVHWKH036&RUGHUFRPSOHWHO\E\SDVVHV VWDWHFRPPLVVLRQjVGHWHUPLQDWLRQ DQGLJQRUHVWKHGHWDLOHGSURFHVVIRULQWHUFRQQHFWLRQVHWRXWE\ &RQJUHVV LQ WKH )7$ XQGHU ZKLFK FRPSHWLQJ $FFRUGLQJ WR WKH 036& FRPSHWLWRUV RI %HOO FRPSDQLHV WHOHFRPPXQLFDWLRQVSURYLGHUVFDQJDLQDFFHVVWRLQFXPEHQWVj WKDW KDYH ILOHG VXFK VWDWHPHQWV PD\ FKRRVH WR SXUFKDVH VHUYLFHV DQG QHWZRUN HOHPHQWV E\ HQWHULQJ LQWR SULYDWH VHUYLFHVGLUHFWO\IURPWKHVHVWDWHPHQWVZLWKRXWILUVWHQWHULQJ QHJRWLDWLRQDQGDUELWUDWLRQDLPHGDWFUHDWLQJLQWHUFRQQHFWLRQ LQWRDQLQWHUFRQQHFWLRQDJUHHPHQWZLWKWKHLQFXPEHQW WKH DJUHHPHQWV WKDW DUH WKHQ VXEMHFW WR VWDWH FRPPLVVLRQ 036& FRQWHQGV WKDW WKLV SURYHV WKDW WKH LQWHUFRQQHFWLRQ DSSURYDO)&&RYHUVLJKWDQGIHGHUDOMXGLFLDOUHYLHZ7KLVLV DJUHHPHQWSURFHVVLVQRWFHQWUDOWRWKH)7$9HUL]RQGLVSXWHV mLQFRQVLVWHQWZLWKWKHSURYLVLRQVRI>WKH)7$@lDQGWKHUHIRUH WKLVFKDUDFWHUL]DWLRQDQGFRQWHQGVWKDWFRPSHWLWRUVVWLOOPXVW SUHHPSWHG HQWHULQWRDQLQWHUFRQQHFWLRQDJUHHPHQWLQRUGHUWRDFTXLUHWKH VHUYLFHV WKHFRPSHWLWRUZLOOVLPSO\EHDEOHWRUHIHU WR WKH 7KHEHVWDUJXPHQWWRWKHFRQWUDU\VHWRXWE\WKH036&DQG † I VWDWHPHQWLQVHHNLQJDQDJUHHPHQW DPLFLLVWKDWZKLOHWKHLQWHUFRQQHFWLRQDJUHHPHQWSURFHVVVHW RXWLQ†SUHVHQWVFRPSHWLWRUVRQHRSWLRQIRUDFKLHYLQJ $VDQLQLWLDOPDWWHUQRWKLQJLQWKHODQJXDJHRI †  I LQWHUFRQQHFWLRQ LW LV QRW QHFHVVDULO\ WKH RQO\ SHUPLVVLEOH VXJJHVWV WKDW LW SURYLGHV DQ DOWHUQDWLYH URXWH DURXQG WKH SURFHVV  8QGHU WKLV WKHRU\ &RQJUHVV VHW RXW WKH LQWHUFRQQHFWLRQ DJUHHPHQW SURFHVV IRU FRPSHWLWRUV RI %HOO QHJRWLDWLRQDUELWUDWLRQDSSURYDOIHGHUDOUHYLHZSURFHVVQRWDV FRPSDQLHV WKDW KDYH ILOHG †  I  VWDWHPHQWV  0RUH WKH FHQWUDO PHWKRG IRU PDUNHW HQWU\ EXW DV RQH PHWKRG LPSRUWDQWO\KRZHYHU† I LVQRWDWLVVXHLQWKHSUHVHQW 7KHUHIRUHVWDWHFRPPLVVLRQVDUPHGZLWKWKHSRZHUJUDQWHG FDVH EHFDXVH 9HUL]RQ LV QRW D %HOO RSHUDWLQJ FRPSDQ\ WKHP E\  86& † G    WR mHVWDEOLVK DFFHVV DQG 7KHUHIRUH ZKHWKHU &RQJUHVV LQWHQGHG WKH LQWHUFRQQHFWLRQ LQWHUFRQQHFWLRQREOLJDWLRQVRIORFDOH[FKDQJHFDUULHUVlDQGE\ DJUHHPHQWSURFHVVWREHWKHVROHPHWKRGRILQWHUFRQQHFWLRQ  86& †  F  WR LPSRVH mUHTXLUHPHQWV RQ D IRU FRPSHWLWRUV RI %HOO FRPSDQLHV WKDW KDYH ILOHG †  I WHOHFRPPXQLFDWLRQV FDUULHU IRU LQWUDVWDWH VHUYLFHV WKDW DUH VWDWHPHQWVLVVLPSO\LUUHOHYDQWWRWKLVFDVH QHFHVVDU\WRIXUWKHUFRPSHWLWLRQlDVORQJDVVXFKREOLJDWLRQV DQGUHTXLUHPHQWVDUHFRQVLVWHQWZLWKWKH$FWZRXOGEHIUHH 0RUHRYHUFRQWUDU\WRWKH036&jVFRQWHQWLRQDUHYLHZRI WRGHYLVHDOWHUQDWLYHPHWKRGVXQGHUZKLFKFRPSHWLWRUVFRXOG † I DFWXDOO\LOOXVWUDWHVZK\0LFKLJDQjVWDULIISURFHGXUH DFTXLUHVHUYLFHVDQGQHWZRUNHOHPHQWVIURPLQFXPEHQWV LVLQFRQVLVWHQWZLWKDQGWKHUHIRUHSUHHPSWHGE\WKH$FW$V PHQWLRQHGDERYHWKHVDPHVXEVHFWLRQVRI†SURYLGHWKH ,QVXSSRUWRIWKLVUHDGLQJWKH036&SRLQWVRXWWKDW WKH VDPH FDUHIXOO\GHVLJQHG UHYLHZ SURFHVV IRU D †  I )7$ GRHV QRW H[SUHVVO\ VWDWH WKDW WKH QHJRWLDWLRQ DQG VWDWHPHQWDVWKH\GRIRUDQLQWHUFRQQHFWLRQDJUHHPHQWoWKH DUELWUDWLRQRILQWHUFRQQHFWLRQDJUHHPHQWVLVWKHVROHPHWKRG VWDWHPHQWLVWREHSUHVHQWHGWRWKHUHOHYDQWVWDWHFRPPLVVLRQ IRU FRPSHWLWRUV WR JDLQ DFFHVV WR LQFXPEHQWVj QHWZRUN IRUDSSURYDOWKH)&&FDQVWHSLQWRDSSURYHWKHVWDWHPHQWLI HOHPHQWVDQGVHUYLFHV,QWKLVZD\DFFRUGLQJWRWKH036& WKHVWDWHFRPPLVVLRQGRHVQRWDFWDQGWKHVWDWHFRPPLVVLRQjV WKHSUHVHQWFDVHLVOLNHWKHVLWXDWLRQ IDFHGE\WKH6XSUHPH DFWLRQV DUH VXEMHFW WR IHGHUDO FRXUW UHYLHZ  $V GLVFXVVHG &RXUWLQ9HUL]RQ&RPPXQLFDWLRQV,QFY)&&6 &W DERYH 0LFKLJDQjV WDULII SURFHGXUH E\SDVVHV DOO RI WKLV    m)&&l ZKHUHLQWKH&RXUWKHOGWKDWWKH$FWjV SURFHGXUH UHTXLUHPHQWWKDWLQFXPEHQWVSURYLGHQHWZRUNHOHPHQWVWKDW PD\EHEXQGOHGE\FRPSHWLWRUVGLGQRWIRUHFORVHDQ)&&UXOH 7KHSURSHUIRFXVIRUWKHSUHHPSWLRQDQDO\VLVLQWKLVFDVHLV UHTXLULQJ LQFXPEHQWV WR DOVR FRPELQH HOHPHQWV DW WKH RQWKH†SURFHVVDVDZKROH7KHLPSRUWDQWSRLQWLVQRW FRPSHWLWRUVjUHTXHVW,QVRKROGLQJWKH&RXUWZURWHWKDWmLW WKHQDUURZLVVXHRIQHJRWLDWLRQDUELWUDWLRQDVWKHPHDQVIRU  9HUL]RQ1RUWK,QFY6WUDQGHWDO 1R 1R 9HUL]RQ1RUWK,QFY6WUDQGHWDO 

WDNHVDVWUHWFKWRJHWIURPSHUPLVVLYHVWDWXWRU\VLOHQFHWRD H[DPSOH RI D VLWXDWLRQ LQ ZKLFK FRPSHWLWRUV FDQ DFTXLUH VWDWXWRU\ULJKWlIRUWKHLQFXPEHQWVDQGWKH&RXUWUHIXVHGWR VHUYLFHV IURP LQFXPEHQWV ZLWKRXW HQJDJLQJ LQ WKH UHDGWKH$FWjVVLOHQFHRQDQ\REOLJDWLRQRUODFNWKHUHRIRQWKH LQWHUFRQQHFWLRQDJUHHPHQWSURFHVV+RZHYHUWKH036&jV SDUW RI LQFXPEHQWV WR EXQGOH HOHPHQWV DV DQ DIILUPDWLYH UHOLDQFHRQWKLVVHFWLRQLVPLVSODFHG VWDWHPHQWWKDWWKHLPSRVLWLRQRIDQ\VXFKREOLJDWLRQZRXOGEH LQFRQVLVWHQWZLWK WKH$FW,GDW7KH036&ZRXOG %HOORSHUDWLQJFRPSDQLHVKDYHORQJEHHQSURKLELWHGIURP KDYH WKLV FRXUW KROG VLPLODUO\ ZLWK UHVSHFW WR WKH RIIHULQJORQJGLVWDQFHWHOHSKRQHVHUYLFH KRZHYHU†RI LQWHUFRQQHFWLRQDJUHHPHQWSURFHVVFRQWDLQHGLQ†RIWKH WKH)7$SHUPLWVWKHVHFRPSDQLHVWRHQWHUWKHORQJGLVWDQFH $FWoWKDW&RQJUHVVjVDIILUPDWLYHVWDWHPHQWRIWKDWPHWKRG PDUNHWLIWKH\FDQGHPRQVWUDWHWKDWWKH\KDYHRSHQHGWKHLU ZDV QRW LQWHQGHG WR IRUHFORVH DQ\ DOWHUQDWLYH PHWKRGV ORFDO H[FKDQJHV WR FRPSHWLWLRQ  7KH %HOO FRPSDQLHV FDQ GHVLJQHGE\VWDWHFRPPLVVLRQV GHPRQVWUDWHWKDWWKH\KDYHGRQHVRLQRQHRIWZRZD\V7KH\ FDQ HQWHU LQWR D TXDOLI\LQJ LQWHUFRQQHFWLRQ DJUHHPHQW  7KHGLIIHUHQFHEHWZHHQWKHEXQGOLQJREOLJDWLRQLQ)&&DQG 86& †  F  $  F  %  RU LQ WKH HYHQW WKDW QR WKHLQWHUFRQQHFWLRQDJUHHPHQWSURFHVVLQWKHSUHVHQWFDVHLV PDUNHWFRPSHWLWRUVUHTXHVWVXFKDQDJUHHPHQWWKH\FDQILOH WKDWWKHGHWDLOHGSURFHGXUDOVFKHPHoLQFOXGLQJQHJRWLDWLRQ DTXDOLI\LQJmVWDWHPHQWRIWKHWHUPVDQGFRQGLWLRQVWKDWWKH DUELWUDWLRQVWDWHFRPPLVVLRQDSSURYDO)&&RYHUVLJKWDQG FRPSDQ\JHQHUDOO\RIIHUVWRSURYLGHlZLWKWKHUHOHYDQWVWDWH IHGHUDOMXGLFLDOUHYLHZoVHWRXWLQ†LVFHQWUDOWRWKH)7$ FRPPLVVLRQ  ,G DW †   6HFWLRQ  I  SURYLGHV WKH LQDZD\WKDWDEXQGOLQJUHTXLUHPHQWLVQRW2QHVWURQJVLJQ SURFHGXUHXQGHUZKLFKWKH%HOOFRPSDQLHVPD\ILOHDQGWKH WKDWWKHLQWHUFRQQHFWLRQDJUHHPHQWSURFHVVLVFHQWUDOWRWKH VWDWHFRPPLVVLRQVPD\UHYLHZWKHVHVWDWHPHQWV$VZLWKWKH $FWDQGLVWKHUHIRUHQRWWREHHYDGHGE\VWDWHUXOHPDNLQJLV LQWHUFRQQHFWLRQDJUHHPHQWSURFHVV† H  UHTXLUHVWKH WKHUHTXLUHPHQWRIIHGHUDOMXGLFLDOUHYLHZRIVWDWHFRPPLVVLRQ )&&WRUHYLHZWKHVWDWHPHQWLIWKHVWDWHFRPPLVVLRQIDLOVWR GHWHUPLQDWLRQV$VH[SODLQHGDERYH† H  RIWKH$FW GR VR  $OVR DJDLQ DV ZLWK WKH LQWHUFRQQHFWLRQ SURFHVV SURYLGHV WKDW DOO LQWHUFRQQHFWLRQ DJUHHPHQWV PXVW EH UHYLHZHG DQG DSSURYHG RU UHMHFWHG E\ WKH UHOHYDQW VWDWH FRPPLVVLRQ$IWHUWKLVUHYLHZ† H  SURYLGHVWKDWDQ\ SDUW\DJJULHYHGE\WKHVWDWHFRPPLVVLRQjVGHWHUPLQDWLRQPD\  7KH 036& FRPHV FORVHU ZLWK LWV UHOLDQFH XSRQ 0LFKLJDQ %HOO DSSHDO WKDW GHWHUPLQDWLRQ LQ WKH IHGHUDO GLVWULFW FRXUWV 7HOHSKRQH Y 6WUDQG  ) 6XSS G   :' 0LFK    WR (PSKDVL]LQJ WKH LPSRUWDQFH WR &RQJUHVV RI WKLV IHGHUDO VXSSRUW WKH VDPH SURSRVLWLRQ ,Q UHMHFWLQJ DQ LQFXPEHQWjV FKDOOHQJH WR DQ UHYLHZ †  H   VWDWHV WKDW m>Q@R VWDWH FRXUW VKDOO KDYH 036& RUGHU WKDW DOWHUHG H[LVWLQJ LQWHUFRQQHFWLRQ DJUHHPHQWV WKH GLVWULFW MXULVGLFWLRQ WR UHYLHZ WKH DFWLRQ RI D 6WDWH FRPPLVVLRQ LQ FRXUW LQ WKDW FDVH KHOG WKDW WKH FRPPLVVLRQjV DFWLRQV LQ DPHQGLQJ WKH DSSURYLQJRUUHMHFWLQJDQDJUHHPHQWXQGHUWKLVVHFWLRQl H[LVWLQJ DJUHHPHQWV ZHUH SHUPLVVLEOH EHFDXVH DPRQJ RWKHU UHDVRQV mWKH 6HFWLRQ  QHJRWLDWLRQ SURFHGXUH LV QRW WKH VROH PHDQV IRU WKH 036& 86& †  H    +RZHYHU WKHUH LV QR SURYLVLRQ IRU XQGHU WKH IHGHUDO VWDWXWHV WR RUGHU DQG UHJXODWH WHOHFRPPXQLFDWLRQVl ,G IHGHUDOFRXUWUHYLHZRIVWDWHWDULIIRUGHUV7KHUHIRUHDVLGH DW  7KH 036& DUJXHV WKDW WKLV ODQJXDJH SURYLGHV VXSSRUW IRU WKH IURPEULQJLQJDIHGHUDOODZSUHHPSWLRQDFWLRQSXUVXDQWWR SURSRVLWLRQ WKDW WKH ††  DQG  SURFHVV LV QRW WKH VROH SURFHVV E\ 86&†WRFKDOOHQJHHDFKWDULIIRUGHUDQLQFXPEHQW ZKLFK FRPSHWLWRUV FDQ DFTXLUH VHUYLFHV DQG QHWZRUN HOHPHQWV IURP DJJULHYHGE\DVWDWHFRPPLVVLRQWDULIIGHFLVLRQPLJKWQRWEH LQFXPEHQWV +RZHYHU DV WKH GLVWULFW FRXUW LQ WKH SUHVHQW FDVH SRLQWHG RXW

DEOHWRVHHNIHGHUDOUHYLHZ WKH WDULII LQ 0LFKLJDQ %HOO 7HOHSKRQH Y 6WUDQG PHUHO\ VHUYHG WR DPHQG DQ H[LVWLQJ LQWHUFRQQHFWLRQ DJUHHPHQW 6HH 9HUL]RQ 1RUWK ,QF  ) 6XSS G DW   7KH RUGHU DW LVVXH LQ WKDW FDVH GLG QRW FRPSOHWHO\ ,QDVVHUWLQJWKDWWKHLQWHUFRQQHFWLRQDJUHHPHQWSURFHVVLV GLVSODFH WKH H[LVWLQJ LQWHUFRQQHFWLRQ DJUHHPHQW EHWZHHQ WKH SDUWLHV RU DV QRW FHQWUDO WR WKH $FW WKH 036& SURIIHUV †  I  DV DQ WKH 036& RUGHU LQ WKH SUHVHQW FDVH GRHV PDNH XQQHFHVVDU\ IXWXUH LQWHUFRQQHFWLRQ DJUHHPHQWV EHWZHHQ RWKHU SDUWLHV

Reference

Status
Published