Davis v. Mitchell

U.S. Court of Appeals for the Sixth Circuit

Davis v. Mitchell

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 D S

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

:,/(< '$9,6 s5 ; 3HWLWLRQHU$SSHOODQW    1R  Y  !  %(77< 0,7&+(//:DUGHQ  5HVSRQGHQW$SSHOOHH 1

$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ 1R  nsDPHV*ZLQ'LVWULFWsXGJH $UJXHG 2FWREHU 'HFLGHGDQG)LOHG )HEUXDU\ %HIRUH 0(55,77%2**6DQG0225(&LUFXLW sXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('   /DXUHQFH ( .RPS %DOGZLQ 0LVVRXUL IRU $SSHOODQW  &KDUOHV / :LOOH $77251(< *(1(5$/j6 2)),&( 2) 2+,2 &$3,7$/ &5,0(6 6(&7,21 &ROXPEXV2KLRIRU$SSHOOHH21%5,() /DXUHQFH( .RPS%DOGZLQ0LVVRXULsRKQ3DWULFN3DUNHU&OHYHODQG 2KLR IRU $SSHOODQW  &KDUOHV / :LOOH $77251(<

  'DYLVY0LWFKHOO 1R 

*(1(5$/j6 2)),&( 2) 2+,2 &$3,7$/ &5,0(6 6(&7,21&ROXPEXV2KLRIRU$SSHOOHH 0(55,77sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK 0225( s MRLQHG  %2**6 s SS   GHOLYHUHG D VHSDUDWHGLVVHQWLQJRSLQLRQ BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB 0(55,77&LUFXLWsXGJH,PPHGLDWHO\IROORZLQJWKHWULDO FRXUWjV LQVWUXFWLRQ UHJDUGLQJ PLWLJDWLQJ FLUFXPVWDQFHV WKH WULDOMXGJHLQWKLVGHDWKSHQDOW\FDVHIURP2KLRJDYHWKHMXU\ DXQDQLPLW\LQVWUXFWLRQVWDWLQJm1RZDV\RXNQRZVLQFH WKLVLVDFULPLQDOFDVHWKHODZUHTXLUHVWKDWLQRUGHUIRU\RXWR UHDFKDGHFLVLRQDOORI\RXPXVWEHLQDJUHHPHQWl,Q DGGLWLRQ WR WKLV H[SUHVV XQDQLPLW\ LQVWUXFWLRQ LQ FORVH SUR[LPLW\WRWKHLQVWUXFWLRQRQPLWLJDWLQJFLUFXPVWDQFHVWKH WULDO MXGJH JDYH WKH MXU\ D VRFDOOHG mDFTXLWWDOILUVWl LQVWUXFWLRQ VWDWLQJ WKDW LW PXVW ILUVW DQDO\]H ZKHWKHU WKH HOHPHQWVDOORZLQJWKHGHDWKSHQDOW\ZHUHSUHVHQWDQGRQO\LI

 sXVW EHIRUH WKLV XQDQLPLW\ LQVWUXFWLRQ WKH MXGJH WROG WKH MXU\ DERXW WKH YHUGLFW IRUPV ZKLFK WKH MXU\ ZRXOG KDYH EHIRUH LW 2Q HDFK IRUP WKH MXU\ ZDV WROG WKDW WKHUH ZRXOG EH  mEDUVl IRU HDFK RI WKH  MXURUV WR VLJQ WR FDUU\ RXW WKH XQDQLPLW\ UHTXLUHPHQW ,PPHGLDWHO\ EHIRUH WKH XQDQLPLW\ LQVWUXFWLRQ TXRWHG DERYH WKH WULDO MXGJH JDYH WKH MXU\ WKH IROORZLQJ LQVWUXFWLRQ ZLWK UHJDUG WR WKH YHUGLFW IRUP RQ D ILQGLQJ WKDW WKH PLWLJDWLQJ IDFWRUV RXWZHLJKHG WKH DJJUDYDWLQJ IDFWRUV DV IROORZV

:H WKH MXU\ LQ WKLV FDVH EHLQJ GXO\ LPSDQHOHG DQG VZRUQ GR ILQG WKDW WKH $JJUDYDWLQJ &LUFXPVWDQFHV ZKLFK WKH GHIHQGDQW :LOH\ 'DYLV sU ZDV IRXQG JXLOW\ RI FRPPLWWLQJ DUH QRW VXIILFLHQW WR RXWZHLJK WKH 0LWLJDWLQJ )DFWRUV SUHVHQW LQ WKLV FDVH EH\RQG D UHDVRQDEOH GRXEWl DQG m:H WKH MXU\ UHFRPPHQG WKDW WKH GHIHQGDQW :LOH\ 'DYLV sU EH VHQWHQFHG WR OLIH LPSULVRQPHQW ZLWK SDUROH HOLJLELOLW\ DIWHU VHUYLQJ n DQG WKHQ GRZQ KHUH WKHUH LV DQ DVWHULVN WKDW VD\V µ,QVHUW LQ LQN HLWKHU  RU  IXOO \HDUV RI LPSULVRQPHQWl DQG DJDLQ  VLJQDWXUH EDUVjl s$ DW   'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

7KH FRXUWj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sUZDVIRXQGJXLOW\RIFRPPLWWLQJ RXWZHLJK WKH PLWLJDWLQJ IDFWRUV LI DQ\ WKHQ \RX PXVW UHWXUQVXFKILQGLQJWRWKH&RXUW ,LQVWUXFW\RXDVDPDWWHURIODZWKDWLI\RXPDNHVXFK ILQGLQJWKHQ\RXKDYHQRFKRLFHDQGPXVWUHFRPPHQGWR WKH&RXUWWKDWWKHVHQWHQFHRIGHDWKEHLPSRVHGXSRQWKH GHIHQGDQW:LOH\'DYLVsU 2Q WKH RWKHU KDQG LI DIWHU FRQVLGHULQJ DOO RI WKH UHOHYDQW HYLGHQFH UDLVHG DW WULDO WKH WHVWLPRQ\ RWKHU HYLGHQFHWKHXQVZRUQVWDWHPHQWRI:LOH\'DYLVsUDQG WKHDUJXPHQWVRIFRXQVHO\RXILQGWKDWWKH6WDWHRI2KLR IDLOHG WR SURYH EH\RQG D UHDVRQDEOH GRXEW WKDW WKH DJJUDYDWLQJFLUFXPVWDQFHVZKLFKWKHGHIHQGDQW:LOH\ 'DYLVsUZDVIRXQGJXLOW\RIFRPPLWWLQJRXWZHLJKWKH PLWLJDWLQJ IDFWRUV WKHQ \RX ZLOO UHWXUQ \RXU YHUGLFW UHIOHFWLQJ\RXUGHFLVLRQ WKDWLV\RXPXVWILQGWKDWWKH 6WDWHKDVIDLOHGWRSURYHEH\RQGDUHDVRQDEOHGRXEWWKDW WKHDJJUDYDWLQJFLUFXPVWDQFHVZKLFKWKHGHIHQGDQWZDV IRXQG JXLOW\ RI FRPPLWWLQJ RXWZHLJK WKH PLWLJDWLQJ IDFWRUV ,QWKLVHYHQW\RXZLOOWKHQSURFHHGWRGHWHUPLQHZKLFK RI WKH WZR SRVVLEOH OLIH LPSULVRQPHQW VHQWHQFHV WR UHFRPPHQGWRWKH&RXUW 7KHKDEHDVSHWLWLRQHUDUJXHVWKDWWKHVHWZRLQWHUFRQQHFWHG LQVWUXFWLRQVoWKHXQDQLPLW\LQVWUXFWLRQDQGWKHDFTXLWWDOILUVW  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

LQVWUXFWLRQoFRQVWLWXWHFRQVWLWXWLRQDOHUURUXQGHUWKH(LJKWK 7KH WULDO FRXUW WKHQ H[SODLQHG WKH YHUGLFW IRUPV $PHQGPHQWEHFDXVHWKHUHZDVDUHDVRQDEOHOLNHOLKRRGWKDW UHFRPPHQGLQJ OLIH LPSULVRQPHQW  $JDLQ WKH WULDO FRXUW MXURUV ZRXOG XQGHUVWDQG WKH LQVWUXFWLRQ WR PHDQ WKDW MXURU WUXWKIXOO\WROGWKHMXU\WKDWVXFKDYHUGLFWUHTXLUHGHDFKMXURU XQDQLPLW\ ZDV UHTXLUHG WR PLWLJDWH WKH SXQLVKPHQW IURP WRDJUHHWRLW,WZRXOGKDYHEHHQDIDOVHKRRGIRUWKHMXGJHWR GHDWKWROLIH,QXSKROGLQJWKHGHDWKSHQDOW\LQWKLVFDVHRQ WHOOWKHMXU\WKDWLWFRXOGUHWXUQDYHUGLFWUHFRPPHQGLQJOLIH GLUHFWDSSHDOWKH2KLR6XSUHPH&RXUWREVHUYHGWKDWWKHVH ZLWK SDUROH LQ  \HDUV RU OLIH ZLWK SDUROH LQ  \HDUV LQVWUXFWLRQV mODFNHG FODULW\l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mWRUHDFKDGHFLVLRQDOOWZHOYHRI\RXPXVWEHLQDJUHHPHQWl KDEHDVFRUSXVPXVWLVVXHVHWWLQJDVLGHWKHGHDWKVHQWHQFH ZDV  OLQHV DQG D UHFHVV DZD\ IURP WKH LQVWUXFWLRQ RQ ILQGLQJDQGZHLJKLQJPLWLJDWLQJIDFWRUVDVRSSRVHGWRWKH )DFWVDQG3URFHGXUDO+LVWRU\ ZRUGGLVWDQFHWKDWWKH7KLUG&LUFXLWIRXQGDFFHSWDEOHDQG ZLOGO\GLIIHUHQWIURPWKHZRUGGLVWDQFHWKDWWKHFRXUWIRXQG 2QsXQH WKH&X\DKRJD&RXQW\&RXUWRI&RPPRQ XQFRQVWLWXWLRQDOLQ)UH\ DOEHLWEHIRUH$('3$DQGWKXVQRW 3OHDV DGRSWHG WKH MXU\jV UHFRPPHQGDWLRQ DQG VHQWHQFHG XQGHUWKHPRUHVWULQJHQWVWDQGDUGHVWDEOLVKHGE\WKDWODZ  :LOH\'DYLVWRGHDWKIRUWKHEUXWDONLGQDSLQJDQGPXUGHURI $P\3HUNLQV'DYLVDSSHDOHGKLVFRQYLFWLRQWRWKH&X\DKRJD $VQHDUO\DV,FDQJDWKHUWKHFRXUWjVFRPSODLQWLVWKDWWKH &RXQW\&RXUWRI$SSHDOVZKLFKDIILUPHG'DYLVjVFRQYLFWLRQ MXGJHGLGQRWLQVWUXFWWKHMXU\WRWKHHIIHFWWKDWmDQ\RQHRI EXWVHWDVLGHWKDWSRUWLRQRIKLVVHQWHQFHWKDWFDOOHGIRUKLV \RXFDQSUHYHQWWKHLPSRVLWLRQRIWKHGHDWKSHQDOW\RQWKLV SODFHPHQW LQ VROLWDU\ FRQILQHPHQW HDFK \HDU RQ WKH GHIHQGDQWVLPSO\E\UHIXVLQJWRVLJQWKHGHDWKYHUGLFW<RX DQQLYHUVDU\ RI $P\ 3HUNLQVjV GHDWK  ,Q   WKH 2KLR FDQGRVRIRUDQ\UHDVRQRUIRUQRUHDVRQl:KLOHWKDWLVD 6XSUHPH &RXUW DIILUPHG ERWK WKH PXUGHU FRQYLFWLRQ DQG FRUUHFWVWDWHPHQWRIH[LVWHQWLDOWUXWKQRFDVHDQGFHUWDLQO\QR VHQWHQFHRIGHDWK7KHVWDWHFRXUWGHQLHG'DYLVjVSHWLWLRQIRU 6XSUHPH&RXUWFDVHKDVFRPHFORVHWRUHTXLULQJWKDWVXFKDQ SRVWFRQYLFWLRQ UHOLHI DQG LQ   WKH &X\DKRJD &RXQW\ LQVWUXFWLRQEHJLYHQ &RXUWRI$SSHDOVDIILUPHGWKHWULDOFRXUWjVGHFLVLRQGHQ\LQJ SRVWFRQYLFWLRQ UHOLHI  ,Q   WKH 2KLR 6XSUHPH &RXUW GHFOLQHGWRH[HUFLVHMXULVGLFWLRQRYHU'DYLVjVDSSHDORIWKDW GHFLVLRQDVRQHQRWLQYROYLQJDQ\VLJQLILFDQWFRQVWLWXWLRQDO  FODLP $V LV REYLRXV IURP KLV ILQDO UHVSRQVH SDJHV   sXGJH 0HUULWW DQG , VKDUH D GLIIHUHQFH RI RSLQLRQ DV WR ZKDW LV mWKH 2KLR WULDO FRXUWjV

2Q$XJXVWWKH'LVWULFW&RXUWIRUWKH1RUWKHUQ XQDQLPLW\ LQVWUXFWLRQ UHJDUGLQJ PLWLJDWLQJ IDFWRUVl $V , FDUHIXOO\ H[SODLQ DERYH WKH LQVWUXFWLRQV DUH JLYHQ DW SDJHV   DQG   7KH 'LVWULFWRI2KLRGHQLHG'DYLVjVSHWLWLRQIRUDZULWRIKDEHDV DFFXUDWH UHFLWDWLRQ RI WKH YHUGLFW IRUPV RFFXUV DW WUDQVFULSW SDJHV    FRUSXV  :LWK UHVSHFW WR 'DYLVjV FRQWHQWLRQ WKDW WKH WULDO $ FRUUHFW UHDGLQJ RI D FRQVWLWXWLRQDOO\ XQH[FHSWLRQDEOH YHUGLFW IRUP LV QRW mDQ LQVWUXFWLRQl  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

FLUFXPVWDQFHV  $JDLQ WKLV FRXUW KDV KHOG UHSHDWHGO\ WKDW FRXUWjV LQVWUXFWLRQ IDLOHG WR QRWLI\ HDFK MXURU RI KLV RU KHU UHTXLULQJXQDQLPLW\DVWRWKHUHVXOWVRIWKHZHLJKLQJSURFHVV ULJKWWRXQLODWHUDOO\SUHYHQWDGHDWKSHQDOW\UHFRPPHQGDWLRQ GRHVQRWRIIHQGGXHSURFHVV5RH:/DW  WKH GLVWULFW FRXUW KHOG WKDW LW ZDV UHDVRQDEOH IRU WKH 2KLR &RH)GDW 6XSUHPH&RXUWWRFRQFOXGHWKDWWKHWULDOFRXUWjVLQVWUXFWLRQV mZKHQUHDGDVDZKROHDGHTXDWHO\LQIRUPHGWKHMXU\RIWKH ,WLVGLIILFXOWWRVD\ZKDWWKHFRXUWjVDUJXPHQWLVDWDOO,WV SURSHU PDQQHU WR GHOLEHUDWH DQG FKRRVH D GHDWK SHQDOW\ FRQFOXVLRQLVWKDWWKHUHLVDQmLQHVFDSDEOHOLNHOLKRRGlWKDWWKH UHFRPPHQGDWLRQl6HH'DYLVY0LWFKHOO)6XSSG MXU\ LQ WKLV FDVH mXQGHUVWRRG WKH LQVWUXFWLRQV WR UHTXLUH   1' 2KLR    7KLV  &RXUW KDV JUDQWHG D XQDQLPLW\LQERWKLWVXOWLPDWHDQGLQWHULPFRQFOXVLRQVl FHUWLILFDWHRIDSSHDODELOLW\RQIRXURI'DYLVjVFODLPVRQHRI 3DJH   +RZHYHU WKHUH DUH RQO\ WZR SODFHV ZKHUH D ZKLFKLVKLVFODLPWKDWWKHWULDOFRXUWjVLQVWUXFWLRQSUHYHQWHG XQDQLPLW\UHTXLUHPHQWKDVEHHQKHOGWREHXQFRQVWLWXWLRQDO MXURUVIURPJLYLQJHIIHFWWRPLWLJDWLRQ  WRUHMHFWWKHGHDWKSHQDOW\DQG  DVWRWKHSUHVHQFHRID PLWLJDWLQJIDFWRU5HYLHZLQJWKHLQVWUXFWLRQVLQWRWDOWKHUHLV $QDO\VLV QRWDZRUGWKDWZRXOGOHDGDQ\UHDVRQDEOHMXURUWRXQGHUVWDQG WKDWXQDQLPLW\ZDVUHTXLUHGLQWKHVHWZRLQVWDQFHV7KHFRXUW 7KHGHYHORSLQJODZUHJDUGLQJWKHEDODQFLQJRIPLWLJDWLQJ ZRXOGUHTXLUHWKDWWULDOFRXUWVVSHOOWKLVRXW,QGHHG2KLR IDFWRUVDJDLQVWDJJUDYDWLQJIDFWRUVLQGHDWKSHQDOW\FDVHVLVRI QRZUHTXLUHVLWVWULDOFRXUWVWRLQVWUXFWMXULHVWKDWRQHMXURUKDV UHODWLYHO\ UHFHQW YLQWDJH DQG PDQ\ TXHVWLRQV DERXW LWV WKH DELOLW\ WR EORFN WKH GHDWK SHQDOW\  +RZHYHU WKDW LV D DSSOLFDWLRQ UHPDLQ XQDQVZHUHG  7KLUWHHQ \HDUV EHIRUH WKH PDWWHURIVWDWHODZQRWIHGHUDOODZ,QIDFWERWKWKLVFRXUW 6XSUHPH &RXUW GHFLGHG)XUPDQ Y *HRUJLD  86  DQGWKH6XSUHPH&RXUWm>KDYH@FKDVWLVHGVXFKLQVWUXFWLRQVDV    KROGLQJGHDWKVHQWHQFHVLPSRVHGXQGHUVWDWXWHVWKDW HQFRXUDJLQJ GHDGORFN DQG XQGHUPLQLQJ WKH VWURQJ OHIWMXULHVZLWKXQWUDPPHOHGGLVFUHWLRQWRLPSRVHRUZLWKKROG JRYHUQPHQWDOLQWHUHVWLQXQDQLPRXVYHUGLFWVl5RH:/ WKH GHDWK SHQDOW\ YLRODWLYH RI WKH (LJKWK DQG )RXUWHHQWK DW  TXRWLQJ6FRWW )GDW 6FRWW $PHQGPHQWV WKHGUDIWHUVRIWKH$PHULFDQ/DZ,QVWLWXWHjV )GDW FLWLQJsRQHVY8QLWHG6WDWHV86  0RGHO3HQDO&RGHSURSRVHGWKHEDODQFLQJRIVWDWXWRULO\    VSHFLILHG DJJUDYDWLQJ DQG PLWLJDWLQJ FLUFXPVWDQFHV DV D PHWKRG WR UHVWUDLQ XQJXLGHG GLVFUHWLRQ LQ WKH FDSLWDO 7KHWULDOFRXUWFRUUHFWO\LQVWUXFWHGWKHMXU\RQPLWLJDWLQJ VHQWHQFLQJSURFHVV6HH$PHULFDQ/DZ,QVWLWXWH0RGHO3HQDO DQGDJJUDYDWLQJIDFWRUVLQDFFRUGDQFHZLWK2KLRODZDWWKH &RGH† 7HQW'UDIW1R    HYHQWXDOO\DGRSWHG WLPHDQGZLWKRXUFRXUWjVFDVHVERWKEHIRUHDQGVLQFH7KHVH DV †  RI WKH   0RGHO 3HQDO &RGH   $OWKRXJK WKH LQVWUXFWLRQV RFFXSLHG SDJHV   DQG   RI WKH GUDIWHUV GLG QRW HODERUDWH RQ DQ\ SDUWLFXODU PHWKRG IRU WUDQVFULSW ZHLJKLQJWKHWZRVHWVRIFLUFXPVWDQFHVWKH\VRXJKWWRJXLGH WKHGLVFUHWLRQRIMXURUVE\UHTXLULQJWKHPWRILQGWKDWLQOLJKW 7KH WULDO FRXUW WKHQ EHJDQ WR H[SODLQ WKH DFWXDO YHUGLFW RIWKHVWDWXWRULO\GHILQHGPLWLJDWLQJFLUFXPVWDQFHVDQGDQ\ IRUPV  $V LV UHTXLUHG E\ ODZ LW QRWHG WKDW D YHUGLFW RWKHU IDFWV GHHPHG UHOHYDQW mWKHUH DUH QR PLWLJDWLQJ UHFRPPHQGLQJGHDWKUHTXLUHGXQDQLPLW\DVWRWKHH[LVWHQFH FLUFXPVWDQFHV VXIILFLHQWO\ VXEVWDQWLDO WR FDOO IRU OHQLHQF\l RIDJJUDYDWLQJIDFWRUVXQDQLPRXVO\IRXQGE\WKHMXU\ ZKLFK 0RGHO 3HQDO &RGH †        1RU ZDV LW FOHDU LQ LWKDGDOUHDG\GRQHLQLWVSHQDOW\SKDVHGHWHUPLQDWLRQV WKDW WKHVH SURSRVDOV ZKHQ XQDQLPLW\ DPRQJ MXURUV VKRXOG EH LQ WKH RSLQLRQ RI HDFK MXURU RXWZHLJKHG WKH PLWLJDWLQJ UHTXLUHGDWDQ\ JLYHQVWDJHRIWKHSURFHHGLQJVH[FHSWWKDW IDFWRUV7KHWULDOFRXUWKDGSUHYLRXVO\LQVWUXFWHGWKHMXU\RQ XQDQLPLW\ZRXOGEHUHTXLUHGIRUWKHLPSRVLWLRQRIWKHGHDWK ILQGLQJPLWLJDWLQJIDFWRUVZLWKQRXQDQLPLW\PHQWLRQHG VHQWHQFH  6HH 0RGHO 3HQDO &RGH †    DOWHUQDWLYH  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

IRUPXODWLRQ DW FRPPHQWDU\DW  7HQW'UDIW1R 7KLVFRXUWKDVKHOGWKDWDWULDOFRXUWPD\LQVWUXFWWKHMXU\   0RGHO3HQDO&RGH†     $IWHU)XUPDQ WKDWLWPXVWEHXQDQLPRXVLQILQGLQJDQDJJUDYDWLQJIDFWRU ZDVGHFLGHGLQ PDQ\VWDWHVLQFRUSRUDWHGDVSHFWVRIWKH DQGPD\EHVLOHQWDVWRWKHODFNRIDXQDQLPLW\UHTXLUHPHQWLQ 0RGHO 3HQDO &RGH LQ WKHLU VWDWXWHV UHLQVWDWLQJ WKH GHDWK ILQGLQJPLWLJDWLQJFLUFXPVWDQFHV.RUGHQEURFNY6FURJJ\ SHQDOW\  7KHVH VWDWHV DGRSWHG ZLWK YDU\LQJ GHJUHHV RI   )G    WK &LU    HQ EDQF  sXGJH PRGLILFDWLRQWKH&RGHjVDJJUDYDWRUPLWLJDWRUGXDOVWDQGDUG .HQQHG\DQQRXQFLQJWKHKROGLQJRIWKHFRXUWZLWKUHVSHFWWR ,Q*UHJJWKH6XSUHPH&RXUWDSSURYHGWKH&RGHjVEDODQFLQJ WKH MXU\ LQVWUXFWLRQV RQ XQDQLPLW\   7KH FRXUW LQ VWDQGDUG DV D JHQHUDO VROXWLRQ WR WKH (LJKWK $PHQGPHQW .RUGHQEURFN VWDWHG WKDW VLQFH WKH WULDO FRXUW DQQRXQFHG D SUREOHPRIXQFHUWDLQVWDQGDUGOHVVVWDWHODZVIRXQGLQYDOLGLQ XQDQLPLW\ UHTXLUHPHQW DV WR DJJUDYDWLQJ IDFWRUV EXW ZDV )XUPDQ6HH*UHJJY*HRUJLD86   VLOHQW DV WR PLWLJDWLQJ IDFWRUV mLW FDQQRW EH UHDVRQDEO\ QQ    LQIHUUHGWKDWVLOHQFHDVWRILQGLQJDPLWLJDWLQJIDFWRUZRXOG OLNHO\ FDXVH WKH MXU\ WR DVVXPH WKDW XQDQLPLW\ ZDV DOVR D ,Q &RQJUHVVHQDFWHGWKH)HGHUDO'HDWK3HQDOW\$FW UHTXLUHPHQW  ,QGHHG LW ZRXOG LQGLFDWH WKH RSSRVLWHl   XVLQJWKLVGXDOVWDQGDUG7KDW$FWVWDWHVWKDWmWKHILQGHURI )G DW   sXGJH 0HUULWW ZURWH FRQWUD WR WKH PDMRULW\ IDFW VKDOO FRQVLGHU DQ\ PLWLJDWLQJ IDFWRUl UDLVHG E\ WKH KROGLQJRQWKLVLVVXHWKDWmWKHYHUGLFWRIGHDWKPD\QRWKDYH GHIHQGDQWLQGHFLGLQJZKHWKHUWRLPSRVHWKHGHDWKSHQDOW\ EHHQLPSRVHGKDGWKH\XQGHUVWRRGWKDWRQHMXURUFRXOGEORFN DQGWKDWVXFK WKHGHDWKVHQWHQFHLIKHRUVKHEHOLHYHGWKHUHZHUHVXIILFLHQW PLWLJDWLQJFLUFXPVWDQFHVl,GDW7KLVLVHVVHQWLDOO\WKH >D@ ILQGLQJ ZLWK UHVSHFW WR D PLWLJDWLQJ IDFWRU PD\ EH VDPHSRVLWLRQKHWDNHVLQWKHLQVWDQWFDVH+RZHYHUDVWKH PDGHE\RUPRUHPHPEHUVRIWKHMXU\DQGDQ\PHPEHU FRXUWKHOGLQ.RUGHQEURFNLWLVQRWFRQVWLWXWLRQDOO\UHTXLUHG RIWKHMXU\ZKRILQGVWKHH[LVWHQFHRIDPLWLJDWLQJIDFWRU WKDWWKHMXU\EHVRLQVWUXFWHG PD\FRQVLGHUVXFKIDFWRUHVWDEOLVKHGIRUSXUSRVHVRIWKLV VHFWLRQUHJDUGOHVVRIWKHQXPEHURIMXURUVZKRFRQFXU 7KHFRXUWVWDWHVWKDWWKHLQVWUXFWLRQm\RXPXVWILQGWKDWWKH WKDWWKHIDFWRUKDVEHHQHVWDEOLVKHG 6WDWHKDVIDLOHGWRSURYHEH\RQGDUHDVRQDEOHGRXEWWKDWWKH DJJUDYDWLQJ FLUFXPVWDQFHV ZKLFK WKH GHIHQGDQW ZDV IRXQG 86&†  G 7KXVXQGHUWKH)HGHUDO'HDWK3HQDOW\ JXLOW\ RI FRPPLWWLQJ RXWZHLJK WKH PLWLJDWLQJ IDFWRUVl ZDV $FW IROORZHGm>L@PPHGLDWHO\WKHUHDIWHUlE\WKHLQVWUXFWLRQmVLQFH WKLVLVDFULPLQDOFDVHWKHODZUHTXLUHVWKDWLQRUGHUIRU\RXWR >Q@RW RQO\ LV WKH EXUGHQ RI SHUVXDVLRQ GLIIHUHQW IRU UHDFK D GHFLVLRQ DOO WZHOYH RI \RX PXVW EH LQ DJUHHPHQWl DJJUDYDWLQJ DQG PLWLJDWLQJ IDFWRUV WKH XQDQLPLW\ 3DJH,QIDFWWKHVHWZRLQVWUXFWLRQVDUHVHSDUDWHGE\DERXW UHTXLUHPHQWWKDWH[LVWVIRUDJJUDYDWLQJIDFWRUVGRHVQRW OLQHVRIWKHWUDQVFULSWDQGDGGLWLRQDOO\E\DUHFHVVWDNHQ H[LVWZLWKUHVSHFWWRPLWLJDWLQJIDFWRUV$Q\RQHRUPRUH E\ WKH FRXUW EHFDXVH WKH YHUGLFW IRUPV ZHUH QRW LQ RUGHU MXURUVPD\ILQGWKHH[LVWHQFHRIDPLWLJDWLQJIDFWRUDQG &RPSDUH7UDQVFULSWS OLQHZLWK7UDQVFULSWS  PD\WKHQFRQVLGHUWKDWIDFWRULQZHLJKLQJWKHDJJUDYDWLQJ OLQH DQGPLWLJDWLQJIDFWRUVHYHQWKRXJKRWKHUMXURUVPD\QRW DJUHH WKDW WKH SDUWLFXODU PLWLJDWLQJ IDFWRU KDV EHHQ &,QVWUXFWLRQRQXQDQLPRXVYHUGLFW HVWDEOLVKHG7KLVZHLJKLQJGHFLVLRQPXVWEHPDGHE\ HDFK MXURU JLYLQJ LQGLYLGXDO FRQVLGHUDWLRQ WR WKH 7KHFRXUWDOVRILQGVLWREMHFWLRQDEOHWKDWWKHYHUGLFWIRUPV DJJUDYDWLQJ IDFWRUV XQDQLPRXVO\ IRXQG E\ DOO RI WKH UHIOHFWHG D XQDQLPLW\ UHTXLUHPHQW LQ ILQGLQJ WKDW WKH DJJUDYDWLQJ FLUFXPVWDQFHV GR QRW RXWZHLJK WKH PLWLJDWLQJ  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

XQDQLPLW\ ZDV UHTXLUHG  $Q\ UHDVRQDEOH MXURU ZRXOG MXURUVDQGVXFKPLWLJDWLQJIDFWRUVDVPD\EHIRXQGE\ XQGHUVWDQGWKDWZKHUHXQDQLPLW\LVQRWVSHFLILFDOO\LQVWUXFWHG HDFKMXURU WKRVHGHFLVLRQVVKRXOGEHPDGHLQGHSHQGHQWO\ 7KLVSURYLVLRQRIWKH$FWZDVILUVWDGRSWHGRQWKH6HQDWH 7KH VWDWH FRXUWV QHYHU UHDFKHG WKH LVVXH RI DQ\ DOOHJHG IORRUE\DQDPHQGPHQWRIIHUHGE\ 6HQDWRU'j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j$PDWRRQWKH6HQDWHIORRU ZKHQKHRULJLQDOO\RIIHUHGWKHDPHQGPHQWLQ  7KHFRXUWOLNHQVWKLVFDVHWR)UH\Y)XOFRPHU)G  G &LU     7KH FRXUW LQ )UH\ IRXQG SDUWLFXODUO\ 0U 3UHVLGHQW WKLV DPHQGPHQW EULQJV XV LQWR REMHFWLRQDEOHDSRUWLRQRIDVHQWHQFHLQWKHMXU\LQVWUXFWLRQV FRQIRUPLW\ZLWKWKH7XHVGD\6XSUHPH&RXUWGHFLVLRQLQ WKDW UHDG mLI WKH MXU\ XQDQLPRXVO\ ILQGV DW OHDVW RQH 0DU\ODQGYHUVXV0LOOV%DVLFDOO\LWVD\VWKDW\RXPXVW DJJUDYDWLQJ FLUFXPVWDQFH DQG QR PLWLJDWLQJ FLUFXPVWDQFH KDYHDXQDQLPRXVGHFLVLRQE\DMXU\DVLWUHODWHVWRWKH    l  ,G DW   ,W ZDV WKH SURSLQTXLW\ LQ WKH VDPH LPSRVLWLRQRIWKHGHDWKSHQDOW\(YHQLIRQHMXURUVD\V VHQWHQFH ZLWKLQ VHYHQ ZRUGV RI mXQDQLPRXVO\l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mXQDQLPLW\LQWKHXOWLPDWHFRQFOXVLRQDQGQRWLQWKH 'j$PDWRUHJDUGLQJ$PHQGPHQWWR6  LQWHULPILQGLQJVOHDGLQJWRWKDWFRQFOXVLRQl)UH\)G DW   7KH VHSDUDWLRQ EHWZHHQ mXQDQLPRXVO\l DQG WKH :HDJUHHWKDWWKLVWUHDWPHQWRIPLWLJDWLQJIDFWRUVVHWRXWE\ PLWLJDWLQJFLUFXPVWDQFHVFODXVHLQ=HWWOHPR\HUZDVVHYHQWHHQ &RQJUHVV LQ †   RI WKH )HGHUDO 'HDWK 3HQDOW\ $FW LV ZRUGVHYHQWKRXJKLWZDVVWLOOLQWKHVDPHVHQWHQFH,ELG UHTXLUHGE\WKH(LJKWK$PHQGPHQW,Q0LOOVY0DU\ODQG +HUH WKH FRXUW DOVR FRQWHQGV WKDW WKH DEVHQFH RI DQ LQVWUXFWLRQQRWLI\LQJWKHMXU\WKDWDXQDQLPRXVILQGLQJLVQRW UHTXLUHGDVWRPLWLJDWLQJFLUFXPVWDQFHVPDNHVWKLVFDVHOLNH  8QLWHG 6WDWHV Y 0F9HLJK &5   :/   DW  ' )UH\,QIDFWWKHFRXUWLQ)UH\VSHFLILFDOO\VWDWHGWKDWmWKH &ROR sXQH    RIILFLDO WUDQVFULSW RI WULDO FRXUWjV LQVWUXFWLRQV WR WKH DEVHQFHRIVXFKDQH[SUHVVVWDWHPHQWLVQRWGLVSRVLWLYHlDQG MXU\ LQ IHGHUDO GHDWK SHQDOW\ FDVH VHH DOVR 8QLWHG 6WDWHV Y sRQHV  VWDWHGWKDWVXFKDQLQVWUXFWLRQLVRQO\RQHPHDQVWKDWDWULDO 86    Q  mµ$ ILQGLQJ ZLWK UHVSHFW WR D PLWLJDWLQJ IDFWRU FRXUWFRXOGXVHWRFODULI\LWVLQVWUXFWLRQVWRWKHMXU\,GDW PD\ EH PDGH E\ DQ\ RQH RU PRUH RI WKH PHPEHUV RI WKH MXU\ DQG DQ\ PHPEHU ZKR ILQGV E\ D SUHSRQGHUDQFH RI WKH HYLGHQFH WKH H[LVWHQFH RI D Q PLWLJDWLQJ IDFWRU PD\ FRQVLGHU VXFK IDFWRU HVWDEOLVKHG IRU KLV RU KHU ZHLJKLQJ RI DJJUDYDWLQJ DQG PLWLJDWLQJ IDFWRUV UHJDUGOHVV RI WKH QXPEHU RI RWKHU MXURUV ZKR DJUHH WKDW VXFK PLWLJDWLQJ IDFWRU KDV EHHQ HVWDEOLVKHGjl TXRWLQJ WKH WULDO FRXUWjV LQVWUXFWLRQV   'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

86   DQG0F.R\Y1RUWK&DUROLQD 86 MXGJHWKHQLQVWUXFWHGWKHMXU\WKDWLIWKHVWDWHIDLOHGWRSURYH     WKH 6XSUHPH &RXUW KHOG XQFRQVWLWXWLRQDO DQ\ EH\RQGDUHDVRQDEOHGRXEWWKDWWKHDJJUDYDWLQJFLUFXPVWDQFHV UHTXLUHPHQW WKDW mSUHYHQWV WKH MXU\ IURP FRQVLGHULQJ LQ RXWZHLJKHGWKHPLWLJDWLQJIDFWRUVWKHQWKH\ZHUHWRUHWXUQD GHFLGLQJZKHWKHUWRLPSRVHWKHGHDWKSHQDOW\DQ\PLWLJDWLQJ YHUGLFWUHIOHFWLQJWKLVILQGLQJ7UDQVFULSWS  IDFWRUWKDWWKHMXU\GRHVQRWXQDQLPRXVO\ILQGl0F.R\  86DW 1RZKHUH LQ WKH LQVWUXFWLRQV GLG WKH MXGJH VWDWH RU HYHQ LPSO\WKDWMXURUVZHUHUHVWULFWHGWRFRQVLGHULQJ PLWLJDWLQJ 5DWKHU 0LOOV UHTXLUHV WKDW HDFK MXURU EH SHUPLWWHG WR IDFWRUVWKDWDOOWKHMXURUVKDGDJUHHGZHUHSUHVHQW6XFKDQ FRQVLGHU DQG JLYH HIIHFW WR PLWLJDWLQJ HYLGHQFH ZKHQ LQVWUXFWLRQZRXOGYLRODWH0F.R\Y1RUWK&DUROLQDLQZKLFK GHFLGLQJ WKH XOWLPDWH TXHVWLRQ ZKHWKHU WR YRWH IRU D WKH6XSUHPH&RXUWIRXQGXQFRQVWLWXWLRQDODQ\UHTXLUHPHQW VHQWHQFHRIGHDWK7KLVUHTXLUHPHQWPHDQVWKDWLQ1RUWK WKDWmSUHYHQWVWKHMXU\IURPFRQVLGHULQJLQGHFLGLQJZKHWKHU &DUROLQDjV V\VWHP HDFK MXURU PXVW EH DOORZHG WR WRLPSRVHWKHGHDWKSHQDOW\DQ\PLWLJDWLQJIDFWRUWKDWWKHMXU\ FRQVLGHUDOOPLWLJDWLQJHYLGHQFHZKHWKHUDJJUDYDWLQJ GRHVQRWXQDQLPRXVO\ILQGl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j IDLOXUH WR ILQG D XQREMHFWLRQDEOHLQ&RHDQG5RH,Q&RHWKHFRXUWIRXQGWKDW PLWLJDWLQJFLUFXPVWDQFH QRWKLQJLQWKHLQVWUXFWLRQVFRXOGUHDVRQDEO\OHDGDMXURUWR EHOLHYHWKDWXQDQLPLW\ZDVUHTXLUHGDVWRWKHSUHVHQFHRID ,GDW PLWLJDWLQJ IDFWRU  7KH FRXUW VWDWHG WKDW WKH LQVWUXFWLRQV mUHTXLUH>G@XQDQLPLW\DVWRWKHUHVXOWVRIWKHZHLJKLQJEXW 7KH UHDVRQ WKDW DJJUDYDWLQJ IDFWRUV PXVW EH IRXQG WKLVLVDIDUGLIIHUHQWPDWWHUWKDQUHTXLULQJXQDQLPLW\DVWRWKH XQDQLPRXVO\ LV WKDW WKH\ DUH WKH HOHPHQWV RI WKH PXUGHU SUHVHQFHRIDPLWLJDWLQJIDFWRUl)GDW$VLQWKH RIIHQVHWKDWPDNHWKHGHIHQGDQWGHDWKHOLJLEOH6HH5LQJY LQVWUXFWLRQVKHUHLWZDVFOHDUWKDWWKHXQDQLPLW\UHTXLUHPHQW $UL]RQD6&W   KROGLQJWKDWEHFDXVH DSSOLHV WR WKH ZHLJKLQJ SURFHVV DQG QRW WKH SUHVHQFH RI D $UL]RQDjV HQXPHUDWHG DJJUDYDWLQJ IDFWRUV RSHUDWH DV WKH PLWLJDWLQJIDFWRU IXQFWLRQDO HTXLYDOHQW RI HOHPHQWV RI WKH RIIHQVH WKH 6L[WK $PHQGPHQWUHTXLUHVWKDWWKH\EHIRXQGE\DMXU\ $OORIWKH 7KHWULDOFRXUWKHUHLQVWUXFWHGWKHMXU\WKDWm>L@WLVQRWRQO\ HOHPHQWV RI D FULPLQDO RIIHQVH PXVW EH IRXQG E\ D MXU\ WKH TXDQWLW\ RI WKH DJJUDYDWLQJ FLUFXPVWDQFHV YHUVXV WKH XQDQLPRXVO\DVDPDWWHURIFRQVWLWXWLRQDOFULPLQDOSURFHGXUH TXDQWLW\RIPLWLJDWLQJIDFWRUVZKLFKLVWREHWKHEDVLVRI\RXU VHH 5LFKDUGVRQ Y 8QLWHG 6WDWHV   6 &W   GHFLVLRQ  ,W LV WKH TXDOLW\ RU LPSRUWDQFH RI WKH PLWLJDWLQJ  SDUWLFXODUO\DOOHOHPHQWVWKDWPDNHDGHIHQGDQWGHDWK IDFWRUV DQG WKH DJJUDYDWLQJ FLUFXPVWDQFHV ZKLFK PXVW EH HOLJLEOHVHH5LQJ6&WDW FRQVLGHUHGl7UDQVFULSWS7KLVVWURQJO\LPSOLHVWKDW HDFKMXURUZDVWRPDNHKLVRUKHURZQLQGHSHQGHQWMXGJPHQW 0LWLJDWLQJ IDFWRUV RQ WKH RWKHU KDQG DUH QRW YLHZHG DV UHJDUGLQJHDFKIDFWRU:KLOHWKHMXU\ZDVLQVWUXFWHGRQWKH HOHPHQWV RI WKH FULPH EXW UDWKHU DV HYLGHQFH UHOHYDQW WR D XQDQLPLW\UHTXLUHPHQWLQILQGLQJDJJUDYDWLQJIDFWRUVWKHUH GHIHQGDQWjVFKDUDFWHURUUHFRUGRURWKHUFLUFXPVWDQFHVRIWKH ZDVQRSDUDOOHOLQVWUXFWLRQUHJDUGLQJPLWLJDWLQJIDFWRUV7KH RIIHQVHWKDWPLJKWOHDGDVHQWHQFHUWRGHFOLQHWRLPSRVHWKH MXU\ZDVVSHFLILFDOO\LQVWUXFWHGDVWRWKRVHGHFLVLRQVLQZKLFK GHDWKVHQWHQFH6HH0F&OHVNH\Y.HPS86   'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO

7KH 2KLR 6XSUHPH &RXUWjV GHFLVLRQ ZDV QRW DQ   $FFRUGLQJO\DVWDWHPD\QRWUHTXLUHXQDQLPLW\LQ XQUHDVRQDEOH DSSOLFDWLRQ RI 0LOOV RU 0F.R\  7KH FRXUWjV ILQGLQJ PLWLJDWLQJ IDFWRUV  6XFK D UHTXLUHPHQW FRQFOXVLRQWRWKHFRQWUDU\VTXDUHO\FRQWUDGLFWVELQGLQJ6L[WK mLPSHUPLVVLEO\ OLPLWV MXURUVj FRQVLGHUDWLRQ RI PLWLJDWLQJ &LUFXLWSUHFHGHQW HYLGHQFHl0F.R\ 86DW,QIDFWDV0LOOVDQG 0F.R\KROGDQ\UHTXLUHPHQWWKDWPLWLJDWLQJIDFWRUVPXVWEH % /DFN RI XQDQLPLW\ UHTXLUHG IRU PLWLJDWLQJ IRXQGXQDQLPRXVO\LVLQFRKHUHQW6HH0LOOV86DW FLUFXPVWDQFHV 0F.R\   86 DW   $ XQDQLPLW\ UHTXLUHPHQW RQ PLWLJDWLQJ IDFWRUV ZRXOG PHDQ WKDW LI DJJUDYDWLQJ IDFWRUV 7KHFRXUWLVDOVRWURXEOHGEHFDXVHmWKHMXU\ZDVQHYHUWROG KDYHEHHQIRXQGE\WKHMXU\RQHRUPRUHMXURUVZKRnLQ HLWKHU H[SUHVVO\ RU LPSOLHGO\ WKDW LQGLYLGXDO MXURUV PD\ GLVDJUHHPHQWZLWKRWKHUMXURUVnILQGQRPLWLJDWLQJIDFWRURU FRQVLGHU PLWLJDWLQJ FLUFXPVWDQFHV LQ WKH ZHLJKLQJ SURFHVV ILQGGLIIHUHQWPLWLJDWLQJIDFWRUVRUILQGWKDWWKHDJJUDYDWLQJ UHJDUGOHVVRIWKHODFNRIDJUHHPHQWZLWKRWKHUMXURUVDVWRWKH IDFWRUVGRQRWRXWZHLJKPLWLJDWLQJIDFWRUVIRXQGE\VRPH EXW SUHVHQFHRIWKDWIDFWRUl3DJHV7KLVDOVRSXUSRUWHGO\ QRW DOO  RI WKH MXURUV RU ILQG WKDW QR PLWLJDWLQJ IDFWRU YLRODWHVWKHGLFWDWHVRI0LOOV RXWZHLJKV DJJUDYDWLQJ IDFWRUV FRXOG VWLOO SURGXFH D GHDWK YHUGLFWRUDKXQJMXU\GHSHQGLQJRQKRZVWDWHODZWUHDWVWKH 7KH6XSUHPH&RXUWLQ0LOOVYDFDWHGWKHSHWLWLRQHUjVGHDWK GLVDJUHHPHQW7KXVLQRUGHUIRU(LJKWK$PHQGPHQWODZRQ VHQWHQFH DQG UHPDQGHG WKH FDVH WR WKH 0DU\ODQG &RXUW RI PLWLJDWLQJ IDFWRUV WR EH FRKHUHQW DQG FDSDEOH RI MXGLFLDO $SSHDOV IRU UHVHQWHQFLQJ  7KH &RXUW WRRN LVVXH ZLWK WKH DGPLQLVWUDWLRQZLWKRXWVHULRXVFRQIXVLRQDFDSLWDOMXU\PXVW VWUXFWXUHRIWKH0DU\ODQGVHQWHQFLQJVFKHPH,QWKDWVFKHPH XQGHUVWDQGWKDWLQWKHZRUGVRIWKH)HGHUDO'HDWK3HQDOW\ WKHYHUGLFWIRUPVSURYLGHGWRWKHMXU\OLVWHGHDFKDJJUDYDWLQJ $FW mD ILQGLQJ ZLWK UHVSHFW WR D PLWLJDWLQJ IDFWRU PD\ EH FLUFXPVWDQFHWKHSURVHFXWLRQZDVDWWHPSWLQJWRSURYH7KH PDGHE\RQHRUPRUHPHPEHUVRIWKHMXU\l MXURUVWKHQFROOHFWLYHO\KDGWRZULWHm\HVlRUmQRlQH[WWRHDFK IDFWRULQGLFDWLQJZKHWKHUWKH\XQDQLPRXVO\EHOLHYHGWKDWWKH :LWK WKDW EDFNJURXQG DERXW WKH GHYHORSPHQW RI (LJKWK SURVHFXWLRQ KDG SURYHG HDFK DJJUDYDWLQJ IDFWRU EH\RQG D $PHQGPHQWODZUHJDUGLQJPLWLJDWLQJIDFWRUVZHDUHQRZLQ UHDVRQDEOHGRXEW$VLPLODUIRUPZDVSUHVHQWHGWRWKHMXU\ SRVLWLRQWRDSSO\WKHVHSULQFLSOHVWRWKHIDFWVRIWKHLQVWDQW IRUPLWLJDWLQJIDFWRUV$IWHUILOOLQJRXWWKHIRUPVWKHMXURUV FDVH2XULQTXLU\LVmZKHWKHUWKHUHLVDUHDVRQDEOHOLNHOLKRRG ZRXOG SURFHHG WR WKH ZHLJKLQJ VWDJH DW ZKLFK WLPH WKH\ WKDWWKHMXU\KDVDSSOLHGWKHFKDOOHQJHGLQVWUXFWLRQLQDZD\ ZRXOGGHFLGHXQDQLPRXVO\ZKHWKHUWKHDJJUDYDWLQJIDFWRUV WKDWYLRODWHVWKH&RQVWLWXWLRQlsRQHVY8QLWHG6WDWHV RXWZHLJKHG WKH PLWLJDWLQJ IDFWRUV  7KH 6XSUHPH &RXUW 86   VHHDOVR%R\GHY&DOLIRUQLD 86 FRQFOXGHGWKDWWKHULVNZDVWRRJUHDWWKDWLQ0DU\ODQGDMXURU     ZRXOG EHOLHYH WKDW LQ RUGHU IRU D PLWLJDWLQJ IDFWRU WR EH FRQVLGHUHGLQWKHZHLJKLQJSURFHVVWKDWLWZRXOGKDYHWREH 2KLRj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mDQ\PLWLJDWLQJIDFWRURUIDFWRUV\RX ILQGWKDWDUHSUHVHQWLQWKLVFDVHl7UDQVFULSWS7KH  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

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jVFRQVLGHUDWLRQRIIXUWKHULQVWUXFWLRQVJLYHQ UHMHFWWKHGHDWKSHQDOW\EHIRUHLWFDQFRQVLGHUDOLIHVHQWHQFH WRWKHMXU\LQWKLVFDVH7KHGLVVHQWQRWHVWKDWDIWHUWKHMXGJH OLNHZLVHSUHFOXGHVWKHLQGLYLGXDOMXURUIURPJLYLQJHIIHFWWR LQVWUXFWHG WKH MXU\ UHJDUGLQJ WKH GHDWK SHQDOW\ DQG WKH OLIH PLWLJDWLQJHYLGHQFHDQGUXQVDIRXORI0LOOV VHQWHQFHVWKHMXGJHZHQWRQWRFDXWLRQWKHMXURUV  7KH2KLR6XSUHPH&RXUWKDVUHFRJQL]HGWKDWXQGHU2KLRjV 1RZ\RXULQLWLDOFRQGXFWXSRQHQWHULQJWKHMXU\URRP GHDWK SHQDOW\ VWDWXWH D VROH MXURU FDQ SUHYHQW WKH GHDWK DJDLQ LV D PDWWHU RI LPSRUWDQFH  <RX VKRXOG FRQVXOW SHQDOW\ LI KH RU VKH LQGLYLGXDOO\ ILQGV WKDW PLWLJDWLQJ ZLWK HDFK RWKHU  FRQVLGHU HDFK RWKHUj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sGLVVHQWLQJ  FLWLQJ'DYLV1(GDW GRXEW WKDW WKH DJJUDYDWLQJ FLUFXPVWDQFHV WKH RIIHQGHU ZDV IRXQG JXLOW\ RI FRPPLWWLQJ RXWZHLJK WKH PLWLJDWLQJ IDFWRUV WKH   DGGHG HPSKDVLV RPLWWHG   7KHVH LQVWUXFWLRQV WUDFN WULDO MXU\ VKDOO UHFRPPHQG WR WKH FRXUW WKDW WKH VHQWHQFH RI GHDWK DOPRVWH[DFWO\WKH 2KLRSDWWHUQMXU\LQVWUXFWLRQVUHJDUGLQJ EH LPSRVHG RQ WKH RIIHQGHU $EVHQW VXFK D ILQGLQJ WKH MXU\ VKDOO m&RQGXFW ZKLOH GHOLEHUDWLQJl  2KLR sXU\ ,QVWUXFWLRQV UHFRPPHQG WKDW WKH RIIHQGHU EH VHQWHQFHG WR >OLIH LPSULVRQPHQW †   7KH GLVVHQW LQ +HQGHUVRQ QRWHG WKDW WKH 2KLR ZLWKRXW SDUROH OLIH LPSULVRQPHQW ZLWK SDUROH HOLJLELOLW\ DIWHU 6XSUHPH&RXUWUHYLHZHGDOOWKHLQVWUXFWLRQVDQGFRQFOXGHG VHUYLQJ WZHQW\ILYH IXOO \HDUV RI LPSULVRQPHQW RU OLIH LPSULVRQPHQW ZLWK SDUROH HOLJLELOLW\ DIWHU VHUYLQJ WKLUW\ IXOO \HDUV WKDWHDFKMXURUZDVDZDUHRIKLVRUKHUDELOLW\WRSUHYHQWD RI LPSULVRQPHQW@ GHDWKSHQDOW\UHFRPPHQGDWLRQ,ELG &OD\sGLVVHQWLQJ   'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

FDVHl3DJH+RZHYHUWKLVFLUFXLWKDVKHOGWKDWWKHUHLV 2KLR  7KHUHVXOWLQJQRQXQDQLPRXVMXU\ DVWRWKH QRFRQVWLWXWLRQDOUHTXLUHPHQWWKDWDMXGJHLQIRUPWKHMXU\DV GHDWKSHQDOW\ PXVWQHYHUWKHOHVVUHWXUQDXQDQLPRXVYHUGLFW WRWKHHIIHFWRIDIDLOXUHWREHXQDQLPRXVLQUHDFKLQJDYHUGLFW DV WR ZKLFK RI WKH VHQWHQFHV RI LPSULVRQPHQW VKRXOG EH 6HH&RH)GDW ,QsRQHVY8QLWHG6WDWHV LPSRVHG 86  WKH6XSUHPH&RXUWKHOGWKHVDPHWKLQJLQ WKH FRQWH[W RI WKH )HGHUDO 'HDWK 3HQDOW\ $FW  ,Q 6WDWH Y *LYHQWKHUHTXLUHPHQWRIXQDQLPLW\DVWRWKHMXU\jVXOWLPDWH %URRNV  1(G  2KLR    WKH 2KLR 6XSUHPH UHFRPPHQGDWLRQRIHLWKHUGHDWKRUOLIHXQGHU2KLRODZLWLV &RXUWKHOGWKDW2KLRVWDWHFRXUWVPXVWLQVWUXFWWKHMXU\WKDWD QRW VXUSULVLQJ WKDW WKH XQDUWLFXODWHG EXW FRQVWLWXWLRQDOO\ VROLWDU\MXURUPD\SUHYHQWLPSRVLWLRQRIWKHGHDWKSHQDOW\,G UHTXLUHG QRQXQDQLPRXV PHFKDQLVP WKDW ZLOO SUHYHQW D DW7KLVUXOH LVSURVSHFWLYHDQGZDVQRWLQIRUFH UHFRPPHQGDWLRQRIGHDWKLVREVFXUHGWRVXFKDQH[WHQWWKDWLW ZKHQ'DYLVZDVVHQWHQFHGWRGHDWK5HJDUGOHVVmWKHIDFWWKDW FDQQRWHYHQEHVDLGWREHLPSOLHGE\WKHLQVWUXFWLRQVLQWKLV >DQ@LQVWUXFWLRQZDVDOOHJHGO\LQFRUUHFWXQGHUVWDWHODZLVQRW FDVH  ,QVWHDG RI LQVWUXFWLQJ WKH MXU\ WKDW LW QHHG QRW EH DEDVLVIRUKDEHDVUHOLHIl(VWHOOHY0F*XLUH86 XQDQLPRXVLQUHMHFWLQJWKHGHDWKSHQDOW\WKHWULDOMXGJHLQ    7KHFRXUWDSSHDUVWRLPSRVHWKLVUXOHRQ2KLR WKLVFDVHWROGWKHMXU\WKDWLQRUGHUWRUHWXUQDYHUGLFWIRUOLIH FRXUWVUHWURDFWLYHO\DQGLQVWLWXWHDUHTXLUHPHQWWKDWMXURUVEH LPSULVRQPHQW m\RX PXVW ILQG WKDW WKH 6WDWH KDV IDLOHG WR DSSULVHGRIWKHHIIHFWRIWKHLULQGLYLGXDOSRZHUWRGHDGORFN SURYH EH\RQG D UHDVRQDEOH GRXEW WKDW WKH DJJUDYDWLQJ WKHMXU\ FLUFXPVWDQFHV ZKLFK WKH GHIHQGDQW ZDV IRXQG JXLOW\ RI FRPPLWWLQJRXWZHLJKWKHPLWLJDWLQJIDFWRUVl,PPHGLDWHO\ 7KHFRQWUDVWEHWZHHQWKHLQVWUXFWLRQVDWLVVXHKHUHDQGWKH WKHUHDIWHUWKH&RXUWLQVWUXFWHGWKDWmVLQFHWKLVLVDFULPLQDO LQVWUXFWLRQVLQ%URRNVLVLOOXPLQDWLQJ,Q%URRNVWKHMXGJH FDVHWKHODZUHTXLUHVWKDWLQRUGHUIRU\RXWRUHDFKDGHFLVLRQ VWDWHG WR WKH MXU\ DV IROORZV  m<RX DUH QRZ UHTXLUHG WR DOO  RI \RX PXVW EH LQ DJUHHPHQWl  7KH YHUGLFW IRUP GHWHUPLQHXQDQLPRXVO\WKDWWKHGHDWKSHQDOW\LVLQDSSURSULDWH OLNHZLVHUHIOHFWHGDXQDQLPLW\UHTXLUHPHQWLQILQGLQJWKDWWKH EHIRUH\RXFDQFRQVLGHUDOLIHVHQWHQFHl,GDW6XFKDQ DJJUDYDWLQJ FLUFXPVWDQFHV GR QRW RXWZHLJK WKH PLWLJDWLQJ LQVWUXFWLRQLVWKRXJKW WRYLRODWH0LOOVDQG0F.R\Y1RUWK FLUFXPVWDQFHV VHWWLQJ RXW WZHOYH VLJQDWXUH OLQHV XQGHU WKH &DUROLQD 86   EHFDXVHLWPD\OHDGDMXURUWR VWDWHPHQW m:H WKH MXU\    GR ILQG WKDW WKH $JJUDYDWLQJ EHOLHYH WKDW WKH VXIILFLHQF\ RI PLWLJDWLQJ IDFWRUV KDV WR EH &LUFXPVWDQFHVZKLFKWKHGHIHQGDQW:LOH\'DYLVsUZDV IRXQGXQDQLPRXVO\ DQGDOVRPD\OHDGDMXURUWREHOLHYHWKDW IRXQGJXLOW\RIFRPPLWWLQJDUHQRWVXIILFLHQWWRRXWZHLJKWKH XQOHVVDOOMXURUVDUHGLVSRVHGWRJUDQWPHUF\WKDWDGHIHQGDQW 0LWLJDWLQJIDFWRUVSUHVHQWLQWKLVFDVHEH\RQGDUHDVRQDEOH PXVWEHVHQWHQFHGWRGHDWK GRXEWl  7KLV LQVWUXFWLRQ FRPELQHG ZLWK WKH MXU\ YHUGLFW IRUPQRWRQO\mFRXOGlEXWE\LWVSODLQODQJXDJHmZRXOGlOHDG 7KH YHU\ VDPH FRXUW WKDW GHFLGHG %URRNV VWDWHG WKDW WKH DUHDVRQDEOHMXURUWRFRQFOXGHWKDWWKHRQO\ZD\WRJHWDOLIH LQVWUXFWLRQVLQ'DYLVj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mODFN>HG@WKHFODULW\RIWKHPRGHOLQVWUXFWLRQ DGGLQJ WR WKH FRQIXVLRQ WKH MXU\ ZDV QHYHU WROG HLWKHU FRQWHPSODWHG LQ %URRNVl  ,ELG  +RZHYHU WKHUH LV QR H[SUHVVO\RULPSOLHGO\WKDWLQGLYLGXDOMXURUVPD\FRQVLGHU FRQVWLWXWLRQDO UHTXLUHPHQW mWR EH D PRGHO RI FODULW\l PLWLJDWLQJFLUFXPVWDQFHVLQWKHZHLJKLQJSURFHVVUHJDUGOHVV PRUHRYHU WKH ODFN RI FODULW\ GLG QRW SUHFOXGH WKH 2KLR RIWKHODFNRIDJUHHPHQWZLWKRWKHUMXURUVDVWRWKHSUHVHQFH  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

RIWKDWIDFWRU,QVXPWKHVLOHQFHLQWKHVHLQVWUXFWLRQVRQWKH D VLQJOH MXURU WR SUHYHQW D GHDWK VHQWHQFH E\ FUHDWLQJ D ODFNRIXQDQLPLW\UHTXLUHGIRUPLWLJDWLQJFLUFXPVWDQFHVWKH GHDGORFN+RZHYHUWKH&RQVWLWXWLRQGRHVQRWIRUELGDMXU\ LPSURSHU mDFTXLWWDOILUVWl LQVWUXFWLRQ DQG WKH XQTXDOLILHG IURPFRQVLGHULQJDGHDWKVHQWHQFHEHIRUHFRQVLGHULQJDOLIH LQVWUXFWLRQm1RZDV\RXNQRZWKHODZUHTXLUHVWKDWLQ VHQWHQFH7KLVLVVXHZDVVTXDUHO\DGGUHVVHGE\WKLVFRXUWLQ RUGHU IRU \RX WR UHDFK D GHFLVLRQ DOO  RI \RX PXVW EH LQ &RHY%HOO)G    6HHDOVR5RHY DJUHHPHQWlnZRXOGKDYHOHGDUHDVRQDEOHMXU\WRDSSO\DQ %DNHU:/   WK&LU2FW XQFRQVWLWXWLRQDO VWDQGDUG RI XQDQLPLW\ DW DOO VWDJHV LQ WKH +HQGHUVRQY&ROOLQV)G WK&LU GHOLEHUDWLYHSURFHVV GLVFXVVLQJ LQVWUXFWLRQ LQ FRQVLGHULQJ FRQVWLWXWLRQDOLW\ RI VXEVHTXHQW$OOHQFKDUJH 6FRWWY0LWFKHOO )G 7KHHUURULQWKHSUHVHQWFDVHLVDSSUR[LPDWHO\WKHVDPHDV  WK&LU  WKHHUURUGHVFULEHGE\sXGJH%HFNHULQ)UH\Y)XOFRPHU )G  G&LU  ,QWKDWFDVHWKH&RXUWRI$SSHDOV 7KHUHOHYDQW2KLRVWDWXWHSURYLGHV  IRU WKH 7KLUG &LUFXLW YDFDWHG D GHDWK VHQWHQFH DV YLRODWLQJ 0LOOV ZKHUH mWKH UHOHYDQW SRUWLRQ RI WKH MXU\ FKDUJH ,I WKH WULDO MXU\ XQDQLPRXVO\ ILQGV E\ SURRI EH\RQG D HPSKDVL]>HG@WKHLPSRUWDQFHRIDXQDQLPRXVILQGLQJXVLQJ UHDVRQDEOHGRXEWWKDWWKHDJJUDYDWLQJFLUFXPVWDQFHVWKH WKHSKUDVHIUHTXHQWO\DQGLQFORVHSUR[LPLW\ZLWKLQVHYHQ RIIHQGHUZDVIRXQGJXLOW\RIFRPPLWWLQJRXWZHLJKWKH ZRUGV RI  WKH PLWLJDWLQJ FLUFXPVWDQFHV FODXVHl ZLWKRXW PLWLJDWLQJIDFWRUVWKHWULDOMXU\VKDOOUHFRPPHQGWRWKH H[SODLQLQJWKDWXQDQLPLW\LVQRWUHTXLUHGLQFRQVLGHUDWLRQRI FRXUW WKDW WKH VHQWHQFH RI GHDWK EH LPSRVHG RQ WKH PLWLJDWLQJ HYLGHQFH  ,G DW   +HUH DV WKHUH WKH WULDO RIIHQGHU  $EVHQW VXFK D ILQGLQJ WKH MXU\ VKDOO FRXUWjV LQVWUXFWLRQV DUH VLOHQW DV WR WKH GLIIHUHQW XQDQLPLW\ UHFRPPHQG WKDW WKH RIIHQGHU EH VHQWHQFHG WR OLIH UHTXLUHPHQWVIRUDJJUDYDWLQJDQGPLWLJDWLQJFLUFXPVWDQFHV LPSULVRQPHQWZLWKSDUROHHOLJLELOLW\DIWHUVHUYLQJWZHQW\ PDNLQJQRPHQWLRQRIWKHLQGLYLGXDOMXURUjVSRZHUWRSUHYHQW IXOO\HDUVRILPSULVRQPHQWRUWROLIHLPSULVRQPHQWZLWK WKHGHDWKSHQDOW\E\JLYLQJHIIHFWWRPLWLJDWLQJFLUFXPVWDQFHV SDUROH HOLJLELOLW\ DIWHU VHUYLQJ WKLUW\ IXOO \HDUV RI DEVHQW WKH DJUHHPHQW RI WKH RWKHU MXURUV UHJDUGLQJ WKH LPSULVRQPHQW SUHVHQFH RI WKRVH PLWLJDWLQJ FLUFXPVWDQFHV  1RU GR WKH\ PDNHFOHDUWKDWWKHMXU\QHHGQRWEHXQDQLPRXVLQUHMHFWLQJ 2KLR 5HY &RGH $QQ †    '       7KH YHU\ GHDWKLQRUGHUWRUHQGHUDYHUGLFWIRUOLIHLPSULVRQPHQW7KH VWUXFWXUHRIWKHVWDWXWHLPSOLHVWKDWMXURUVPD\ILUVWFRQVLGHU LQHVFDSDEOHOLNHOLKRRGLQWKLVFDVHWKDWWKHMXU\XQGHUVWRRGWKH WKH GHDWK SHQDOW\  ,W LV FOHDU WKDW D XQDQLPRXV ILQGLQJ LV LQVWUXFWLRQV WR UHTXLUH XQDQLPLW\ LQ ERWK LWV XOWLPDWH DQG UHTXLUHGLQRUGHUWRUHFRPPHQGGHDWK KRZHYHUWKHODQJXDJH LQWHULPFRQFOXVLRQVYLRODWHV0LOOV m>D@EVHQWVXFKDILQGLQJlLPSOLHVWKDWDXQDQLPRXVILQGLQJLV QRW UHTXLUHG LQ RUGHU WR UHMHFW WKH GHDWK SHQDOW\  <HW 2XUGLVVHQWLQJFROOHDJXHKDVIDLOHGWRGHVFULEHWKHUHFRUG XQDQLPLW\DPRQJWKHMXURUVLVUHTXLUHGLQRUGHUWRLPSRVHRQH FRUUHFWO\ ZLWK UHVSHFW WR WKH 2KLR WULDO FRXUWjV XQDQLPLW\ RIWKHOLIHVHQWHQFHV6WDWHYsHQNLQV1(G LQVWUXFWLRQ UHJDUGLQJ PLWLJDWLQJ IDFWRUV  ,Q KLV GLVVHQWLQJ 2KLR   mZHFRQFOXGHLQUHWXUQLQJD VHQWHQFHRIOLIH RSLQLRQLPPHGLDWHO\IROORZLQJWKLVRSLQLRQKHVD\VWKDWWKH LPSULVRQPHQWXQGHU5&   '  WKHMXU\jVYHUGLFW 2KLR WULDO FRXUWjV XQDQLPLW\ LQVWUXFWLRQ n mVLQFH WKLV LV D PXVWEHXQDQLPRXVl  FULPLQDOFDVHWKHODZUHTXLUHVWKDWLQRUGHUIRU\RXWRUHDFK DGHFLVLRQDOORI\RXPXVWEHLQDJUHHPHQWlnLVmVHYHQW\ 7KHFRXUWFODLPVWKDWWKHmXQDUWLFXODWHGEXWFRQVWLWXWLRQDOO\ OLQHVDQGDUHFHVVDZD\lIURPWKHLQVWUXFWLRQRQmZHLJKLQJ UHTXLUHG QRQXQDQLPRXV PHFKDQLVP WKDW ZLOO SUHYHQW D UHFRPPHQGDWLRQRIGHDWKLVREVFXUHGWRVXFKDQH[WHQWWKDWLW FDQQRWHYHQEHVDLGWREHLPSOLHGE\WKHLQVWUXFWLRQVLQWKLV  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

7KHFRXUWDOVRVWDWHVWKDWm>W@KHKDEHDVSHWLWLRQHUDUJXHV PLWLJDWLQJ IDFWRUVl DQG LV XQUHODWHG WR PLWLJDWLQJ IDFWRUV WKDW WKHVH WZR LQWHUFRQQHFWHG LQVWUXFWLRQV o WKH XQDQLPLW\ 7KLVLVVLPSO\ZURQJDVWKHUHFRUGLWVHOIGHPRQVWUDWHV LQVWUXFWLRQ DQG WKH DFTXLWWDOILUVW LQVWUXFWLRQ o FRQVWLWXWH FRQVWLWXWLRQDO HUURU XQGHU WKH (LJKWK $PHQGPHQW EHFDXVH $V WR DJJUDYDWLQJ DQG PLWLJDWLQJ IDFWRUV WKH WULDO MXGJH WKHUH ZDV D UHDVRQDEOH OLNHOLKRRG WKDW MXURUV ZRXOG LQVWUXFWHGWKHMXU\WKDWWKH\PXVWFRQVLGHUDQGVLJQRQHRIWZR XQGHUVWDQGWKHLQVWUXFWLRQWRPHDQWKDWMXURUXQDQLPLW\ZDV YHUGLFWIRUPV7KHILUVWIRUPKHUHDGWRWKHPZDVWKHYHUGLFW UHTXLUHG WR PLWLJDWH WKH SXQLVKPHQW IURP GHDWK WR OLIHl IRUP IRU LPSRVLQJ WKH GHDWK SHQDOW\  +H WKHQ VDLG 3DJHV LPPHGLDWHO\ 7KHFRXUWGRHVQRWFLWHWKHSODFHZKHUH'DYLVPDNHVVXFK $QGWKHUHDUHWZHOYHVLJQDWXUHEDUVZKHUH\RXZRXOG DQ DUJXPHQW DQG , FDQ ILQG QRQH  7KH FRXUW LQVWHDG KDV VLJQWKDW>YHUGLFWIRUP@LIWKDWZDV\RXUYHUGLFW FRQIODWHGVHYHUDODUJXPHQWVLQRUGHUWRDYRLGSUHFHGHQWIURP WKLVFLUFXLWWKDWZRXOGGHIHDWDQ\RQHRIWKHPDORQH 7KHVHFRQGYHUGLFW>IRUP@DVWR&RXQW2QH>DFTXLWWDORI WKHGHDWKSHQDOW\@VD\V $m$FTXLWWDOILUVWlLQVWUXFWLRQ m:HWKHsXU\LQWKLVFDVHEHLQJGXO\LPSDQHOHG 7KH2KLR6XSUHPH&RXUWUHMHFWHG'DYLVjVDUJXPHQWWKDW DQG VZRUQ GR ILQG WKDW WKH $JJUDYDWLQJ WKHLQVWUXFWLRQJLYHQE\WKHMXGJHGXULQJKLVVHQWHQFLQJSKDVH &LUFXPVWDQFHVZKLFKWKHGHIHQGDQW:LOH\'DYLV ZDV DQ LPSURSHU mDFTXLWWDOILUVWl LQVWUXFWLRQ WKDW ZRXOG sUZDVIRXQGJXLOW\RIFRPPLWWLQJDUHQRWVXIILFLHQW ZDUUDQWUHYHUVDORIKLVFDSLWDOVHQWHQFLQJ6WDWHY'DYLV WR RXWZHLJKWKH0LWLJDWLQJ)DFWRUVSUHVHQWLQWKLV 1(G   2KLR     $IWHU UHYLHZLQJ DOO RI WKH FDVHEH\RQGDUHDVRQDEOHGRXEWlDQGm:HWKHsXU\ LQVWUXFWLRQVJLYHQLQWKHFDVHWKHFRXUWFRQFOXGHGWKDWmLWLV UHFRPPHQGWKDWWKHGHIHQGDQW:LOH\'DYLVsUEH FOHDUWKDWWKHMXU\ ZDVDGHTXDWHO\LQIRUPHGWKDWXQDQLPLW\ VHQWHQFHG WR OLIH LPSULVRQPHQW ZLWK SDUROH ZDVUHTXLUHGWRUHWXUQDGHDWKSHQDOW\UHFRPPHQGDWLRQ(DFK HOLJLELOLW\DIWHUVHUYLQJlnDQGWKHQGRZQKHUHWKHUH MXURUZDVPDGHDZDUHWKDWKHRUVKHFRXOGSUHYHQWDGHDWK LVDQDVWHULVNWKDWVD\Vm,QVHUWLQLQNHLWKHUWZHQW\ SHQDOW\ UHFRPPHQGDWLRQ E\ ILQGLQJ WKDW WKH DJJUDYDWLQJ  RUWKLUW\  IXOO\HDUVRILPSULVRQPHQWlDQG FLUFXPVWDQFHV LQ WKH FDVH GR QRW RXWZHLJK WKH PLWLJDWLQJ DJDLQ WZHOYH VLJQDWXUH EDUV >IRU HDFK RI \RX WR IDFWRUVl,GDW 7KHTXHVWLRQEHIRUHWKLVFRXUWLV VLJQ@ (PSKDVLVDGGHG ZKHWKHUWKH2KLR6XSUHPH&RXUWXQUHDVRQDEO\DSSOLHGWKH FRUUHFW JRYHUQLQJ OHJDO SULQFLSOH HVWDEOLVKHG LQ 0LOOV Y ,PPHGLDWHO\IROORZLQJWKLVLQVWUXFWLRQUHJDUGLQJWKHLUILQGLQJ 0DU\ODQG86   WKDWmWKHVHQWHQFHUPD\QRW WKDW WKH DJJUDYDWLQJ FLUFXPVWDQFHV mDUH QRW VXIILFLHQW WR UHIXVH WR FRQVLGHU RU EH SUHFOXGHG IURP FRQVLGHULQJ DQ\ RXWZHLJKWKHPLWLJDWLQJIDFWRUVlWKHFRXUWVD\V UHOHYDQW PLWLJDWLQJ HYLGHQFH    l  ,G DW  FLWLQJ 6NLSSHU Y 6RXWK &DUROLQD  86      TXRWLQJ 1RZDV\RXNQRZVLQFHWKLVLVDFULPLQDOFDVHWKHODZ (GGLQJVY2NODKRPD86    LQWHUQDO UHTXLUHV WKDW LQ RUGHU IRU \RX WR UHDFK D GHFLVLRQ DOO TXRWHVDQGDGGHGHPSKDVLVRPLWWHG  WZHOYHRI\RXPXVWEHLQDJUHHPHQW

7KHREMHFWLRQWRmDFTXLWWDOILUVWlLQVWUXFWLRQVLVQRWWRWKH ,W LV KDUG WR FRQFHLYH KRZ WKLV LQVWUXFWLRQ FRQFHUQLQJ RUGHURIFRQVLGHUDWLRQEXWWRWKHSRVVLELOLW\WKDWDMXURUPD\ XQDQLPLW\ DQG WKH QHHG IRU HDFK MXURU WR VLJQ RQH RI WKH EHOHGWREHOLHYHWKDWWKHMXU\PXVWILUVWXQDQLPRXVO\UHMHFW WZHOYH EDUV FRXOG EH DQ\PRUH SODLQ WKDW WKH MXU\ PXVW EH GHDWKEHIRUHFRQVLGHULQJDOLIHVHQWHQFHUDWKHUWKDQDOORZLQJ XQDQLPRXV LI LW ILQGV WKDW RQH RU PRUH PLWLJDWLQJ IDFWRUV  'DYLVY0LWFKHOO 1R  1R  'DYLVY0LWFKHOO 

RXWZHLJKVWKHDJJUDYDWLQJFLUFXPVWDQFHV7KLVLQVWUXFWLRQn BBBBBBBBBBBBBB LQWKHZRUGVRI:LOOLDPVY7D\ORU 86  nLVFOHDUO\mRSSRVLWHWRWKDWUHDFKHGE\>WKH6XSUHPH@&RXUW ',66(17 RQDTXHVWLRQRIODZlLQWKH0LOOVDQG0F.R\FDVHVGLVFXVVHG BBBBBBBBBBBBBB DERYH  2XU GLVVHQWLQJ FROOHDJXH LV VLPSO\ XQDEOH WR JHW DURXQGWKHFODULW\RIWKHHUURQHRXVLQVWUXFWLRQVWKDWWKHMXU\ %2**6 &LUFXLW sXGJH GLVVHQWLQJ  3HWLWLRQHU 'DYLVjV PXVWEHXQDQLPRXVDVWRPLWLJDWRUVDQGWKDWHDFKMXURUPXVW FODLPIRUKDEHDVUHOLHILVUHYLHZHGE\WKLVFRXUWSXUVXDQWWR VR DWWHVW E\ VLJQLQJ D IRUP GHPRQVWUDWLQJ XQDQLPLW\  7KH WKHGLFWDWHVRIWKH$QWL7HUURULVPDQG(IIHFWLYH'HDWK3HQDOW\ mDFTXLWWDO ILUVWl LQVWUXFWLRQ DQG DEVHQFH RI DQ\ RWKHU $FW m$('3$l 86&† G $V'DYLVGRHVQRW LQVWUXFWLRQZKLFKFRQIOLFWVZLWKWKHUHTXLUHPHQWRIXQDQLPLW\ FKDOOHQJHDQ\RIWKHVWDWHFRXUWjVIDFWXDOILQGLQJVWKLVFRXUW RQ PLWLJDWRUV ZRXOG VLPSO\ UHLQIRUFH LQ WKH PLQG RI HDFK PD\ JUDQW WKH ZULW RQO\ mLI WKH VWDWH FRXUW DUULYH>G@ DW D MXURUWKDWXQDQLPLW\ZDVUHTXLUHGIRUERWKDJJUDYDWRUVDQG FRQFOXVLRQRSSRVLWHWRWKDWUHDFKHGE\>WKH6XSUHPH@&RXUW PLWLJDWRUV RQ D TXHVWLRQ RI ODZ RU LI WKH VWDWH FRXUW GHFLGH>G@ D FDVH GLIIHUHQWO\WKDQ>WKH6XSUHPH@&RXUWKDVRQDVHWRIPDWHULDOO\ $FFRUGLQJO\WKHMXGJPHQWRIWKHGLVWULFWFRXUWLVUHYHUVHG LQGLVWLQJXLVKDEOHIDFWVlRUmLIWKHVWDWHFRXUWLGHQWLILH>G@ DQGWKHFDVHUHPDQGHGZLWKLQVWUXFWLRQVWRLVVXHWKHZULWRI WKH FRUUHFW JRYHUQLQJ OHJDO SULQFLSOH IURP >WKH 6XSUHPH@ KDEHDV FRUSXV XQOHVV WKH 6WDWH RI 2KLR FRQGXFWV D QHZ &RXUWjVGHFLVLRQVEXWXQUHDVRQDEO\DSSOLH>G@WKDWSULQFLSOHWR SHQDOW\SURFHHGLQJZLWKLQGD\VDIWHUUHPDQG$OORWKHU WKHIDFWVRIWKHSULVRQHUjVFDVHl:LOOLDPVY7D\ORU 86 LVVXHVLQWKHFDVHUDLVHFODLPVRIHUURULQWKHVHQWHQFLQJSKDVH    RI WKH FDVH DQG DV VXFK DUH SUHWHUPLWWHG LQ OLJKW RI RXU GHFLVLRQWRLVVXHWKHZULWDVWRWKLVSKDVHRIWKHFDVH 7KH FRXUW VWDWHV WKDW m>L@Q VXP WKH VLOHQFH LQ WKHVH LQVWUXFWLRQVRQWKHODFNRIXQDQLPLW\UHTXLUHGIRUPLWLJDWLQJ FLUFXPVWDQFHVWKHLPSURSHUµDFTXLWWDOILUVWjLQVWUXFWLRQDQG WKHXQTXDOLILHGLQVWUXFWLRQµ1RZDV\RXNQRZWKHODZ UHTXLUHVWKDWLQRUGHUIRU\RXWRUHDFKDGHFLVLRQDOORI\RX PXVWEHLQDJUHHPHQWjoZRXOGKDYHOHGDUHDVRQDEOHMXU\WR DSSO\DQXQFRQVWLWXWLRQDOVWDQGDUGRIXQDQLPLW\DWDOOVWDJHV LQWKHGHOLEHUDWLYHSURFHVVl3DJH7KHFRXUWWKXVDWWDFNV WKUHH SDUWV RI WKH LQVWUXFWLRQ SURFHVV     ZKDW LW FDOOV DQ mDFTXLWWDOILUVWl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

Reference

Status
Published