United States v. Commonwealth of KY

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 81,7(' 67$7(6 2) $0(5,&$ ; 3ODLQWLII$SSHOOHH    1R Y  !  &20021:($/7+ 2)  .(178&.< .(178&.<  1$785$/ 5(6285&(6  (19,5210(17$/  3527(&7,21 &$%,1(7   6(&5(7$5<  'HIHQGDQWV$SSHOODQWV  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI.HQWXFN\DW3DGXFDK 1Rn7KRPDV%5XVVHOO'LVWULFWsXGJH $UJXHG0D\ 'HFLGHGDQG)LOHGsXQH %HIRUH1255,6DQG&2/(&LUFXLWsXGJHV67((+ 'LVWULFWsXGJH 7KH +RQRUDEOH *HRUJH &DUDP 6WHHK 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ   8QLWHG6WDWHVY&RPPRQZHDOWK 1R RI.<HWDO BBBBBBBBBBBBBBBBB &2816(/ $5*8('5DQGDOO0F'RZHOO1$785$/5(6285&(6 $1' (19,5210(17$/ 3527(&7,21 &$%,1(7 )UDQNIRUW .HQWXFN\ IRU $SSHOODQWV  7RGG 6 $DJDDUG 81,7(' 67$7(6 '(3$570(17 2) s867,&( (19,5210(17 ',9,6,21 $33(//$7( 6(&7,21 :DVKLQJWRQ '& IRU $SSHOOHH  21 %5,()  0DUN $ 3RVQDQVN\ 2)),&( 2) /(*$/ 6(59,&(6 )UDQNIRUW .HQWXFN\ IRU $SSHOODQWV  7RGG 6 $DJDDUG 81,7(' 67$7(6'(3$570(172)s867,&((19,5210(17 ',9,6,21$33(//$7(6(&7,21:DVKLQJWRQ'&sRKQ $ %U\VRQ 81,7(' 67$7(6 '(3$570(17 2) s867,&(/$1' 1$785$/5(6285&(6',9,6,21 :DVKLQJWRQ'&IRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB 5*8<&2/(s5&LUFXLWsXGJH7KH&RPPRQZHDOWKRI .HQWXFN\ DFWLQJ WKURXJK WKH 6HFUHWDU\ RI WKH .HQWXFN\ 1DWXUDO 5HVRXUFHV DQG (QYLURQPHQWDO 3URWHFWLRQ &DELQHW m&DELQHWl  DSSHDOV IURP WKH GLVWULFW FRXUWjV UXOLQJ WKDW IHGHUDO ODZ SUHHPSWV SHUPLW FRQGLWLRQV LPSRVHG E\ WKH &DELQHW UHODWLQJ WR WKH GLVSRVDO RI UDGLRDFWLYH ZDVWH LQ D ODQGILOORSHUDWHGE\WKH8QLWHG6WDWHV'HSDUWPHQWRI(QHUJ\ m'2(l   )RU WKH IROORZLQJ UHDVRQV ZH $)),50 WKH MXGJPHQWRIWKHGLVWULFWFRXUW ,%$&.*5281' 7KH3DGXFDK*DVHRXV'LIIXVLRQ3ODQW WKHm3ODQWl LVDQ DFWLYH XUDQLXP HQULFKPHQW IDFLOLW\ RZQHG E\ WKH '2( ORFDWHG LQ 0F&UDFNHQ &RXQW\ .HQWXFN\  7KH &DELQHW UHJXODWHV GLVSRVDO RI VROLG ZDVWH DW WKH 3ODQW WKURXJK WKH LVVXDQFH RI SHUPLWV  ,Q  '2( VXEPLWWHG D SHUPLW 1R 8QLWHG6WDWHVY&RPPRQZHDOWK  RI.<HWDO DSSOLFDWLRQWRWKH&DELQHWIRUWKHFRQVWUXFWLRQDQGRSHUDWLRQ RIDFRQWDLQHGVROLGZDVWHODQGILOODWWKH3ODQW,Q)HEUXDU\  WKH &DELQHW LVVXHG D SHUPLW WR '2( DXWKRUL]LQJ WKH FRQVWUXFWLRQRIWKHODQGILOO $IWHU YHULI\LQJ WKDW '2( KDG FRPSOHWHG FRQVWUXFWLRQ LQ DFFRUGDQFH ZLWK WKH DSSURYHG SODQV WKH &DELQHW LVVXHG DQRWKHU SHUPLW WR '2( RQ 1RYHPEHU   DXWKRUL]LQJ RSHUDWLRQ RI WKH ODQGILOO  7KLV RSHUDWLQJ SHUPLW FRQWDLQHG FRQGLWLRQVUHODWLQJWRWKHGLVSRVDORIUDGLRDFWLYHPDWHULDOVLQ WKHODQGILOO6SHFLILFDOO\&RQGLWLRQSURKLELWHG'2(IURP SODFLQJLQWKHODQGILOOm>V@ROLGZDVWHWKDWH[KLELWVUDGLRDFWLYLW\ DERYH GH PLQLPLV OHYHOVl  &RQGLWLRQ  SURKLELWHG '2( IURP SODFLQJ LQ WKH ODQGILOO mVROLG ZDVWH WKDW FRQWDLQV UDGLRQXFOLGHV    XQWLO D :DVWH &KDUDFWHUL]DWLRQ 3ODQ IRU UDGLRQXFOLGHVKDVEHHQVXEPLWWHGWRWKH'LYLVLRQRI:DVWH 0DQDJHPHQWIRUUHYLHZDQGDSSURYDOl '2(DSSHDOHGWKHLPSRVLWLRQRIWKHVHSHUPLWFRQGLWLRQV WKURXJK.HQWXFN\jVDGPLQLVWUDWLYHSURFHVV2QsDQXDU\ DVWDWH+HDULQJ2IILFHULVVXHGDUHSRUWUHFRPPHQGLQJ WKDW WKH 6HFUHWDU\ DIILUP WKH &DELQHWjV LPSRVLWLRQ RI WKH FKDOOHQJHGSHUPLWFRQGLWLRQV'2(ILOHGREMHFWLRQVDQGWKH &DELQHW UHVSRQGHG  2Q )HEUXDU\   WKH 6HFUHWDU\ HQWHUHG D ILQDO RUGHU DIILUPLQJ DQG DGRSWLQJ WKH +HDULQJ 2IILFHUjV UHSRUW DQG UHFRPPHQGDWLRQ  7KH 6HFUHWDU\ DFFRUGLQJO\GLVPLVVHG'2(jVDGPLQLVWUDWLYHDSSHDO '2( WKHQ ILOHG D SHWLWLRQ IRU MXGLFLDO UHYLHZ RI WKH &DELQHWjVILQDODFWLRQLQ.HQWXFN\VWDWHFRXUWRQ0DUFK   8QGHU .HQWXFN\ ODZ '2( ZDV UHTXLUHG WR ILOH LWV SHWLWLRQIRUVWDWHFRXUWUHYLHZRIWKH&DELQHWjVDFWLRQZLWKLQ WKLUW\GD\VRIWKH&DELQHWjVILQDORUGHU6HH.< 5(9 67$7 †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jV DGMXGLFDWLRQ RI '2(jV DFWLRQ GRHV QRW   WKH $WRPLF (QHUJ\ $FW RI   86& ††  VWDQG WR GLVUXSW .HQWXFN\jV HIIRUWV WR HVWDEOLVK D FRKHUHQW JSUHHPSWVVWDWHUHJXODWLRQVUHODWLQJWRWKHGLVSRVDORI SROLF\ZLWKUHVSHFWWRVROLGZDVWHPDQDJHPHQWH[FHSWWRWKH UDGLRDFWLYHPDWHULDOV  WKHFRQGLWLRQVYLRODWHWKHIHGHUDO H[WHQW VXFK SROLF\ RYHUVWHSV .HQWXFN\jV DXWKRULW\ E\ JRYHUQPHQWjVVRYHUHLJQLPPXQLW\IURPVWDWHUHJXODWLRQDQG UHJXODWLQJUDGLRDFWLYHPDWHULDOVm>7@KHUHLVQRGRFWULQH  WKH&RPPRQZHDOWKIDLOHGWRFRPSO\ZLWKLWVRZQVWDWXWHV UHTXLULQJDEVWHQWLRQPHUHO\EHFDXVHUHVROXWLRQRIDIHGHUDO DQG UHJXODWLRQV LQ LPSRVLQJ WKH FRQGLWLRQV  2Q $SULO  TXHVWLRQPD\UHVXOWLQWKHRYHUWXUQLQJRIDVWDWHSROLF\l,G WKH&DELQHWILOHGDPRWLRQWRGLVPLVV'2(jVFRPSODLQW DW TXRWLQJ=DEORFNLY5HGKDLO86Q DUJXLQJWKDW  WKHGLVWULFWFRXUWVKRXOGGHFOLQHMXULVGLFWLRQ  &I&RDOLWLRQIRU+HDOWK&RQFHUQY/:',QF RYHU '2(jV DFWLRQ EDVHG XSRQ WKH GLVFUHWLRQ DFFRUGHG LW )G   WK &LU   GLVWLQJXLVKLQJ 1HZ XQGHUWKH'HFODUDWRU\sXGJPHQW$FW86&†DQG 2UOHDQV3XEOLF6HUYLFH,QFRQWKHJURXQGVWKDWSODLQWLIIVj XQGHUWKH%XUIRUGDEVWHQWLRQGRFWULQHVHH%XUIRUGY6XQ2LO IHGHUDOFRXUWFODLPVLQ/:' FRXOGQRWEHGHFLGHGZLWKRXW &R  86      '2(jV SUHHPSWLRQ DQG LQWHUIHULQJZLWK.HQWXFN\jVSROLFLHVJRYHUQLQJWKHLVVXDQFH VRYHUHLJQ LPPXQLW\ FODLPV IDLO WR VWDWH D FODLP IRU ZKLFK RIKD]DUGRXVZDVWHLQFLQHUDWLRQSHUPLWV UHOLHIFDQEHJUDQWHGDQG  WKHFKDOOHQJHGSHUPLWFRQGLWLRQV FRPSRUWZLWK.HQWXFN\ODZ $FFRUGLQJO\ZHILQGWKDWWKHGLVWULFWFRXUWGLGQRWHUULQ UHIXVLQJ WR DEVWDLQ LQ WKLV FDVH QRWZLWKVWDQGLQJ WKH 7KHGLVWULFWFRXUWGHQLHGWKH&DELQHWjVPRWLRQWRGLVPLVVRQ FRQFXUUHQW SHQGLQJ OLWLJDWLRQ EHWZHHQ WKH VDPH SDUWLHV LQ 1RYHPEHU7KHFRXUWIRXQGWKDWLWZDVQRWUHTXLUHG .HQWXFN\VWDWHFRXUW WRGHFOLQHMXULVGLFWLRQRYHUWKHFDVHLQDVPXFKDV'2(KDG SUHVHQWHGDIDFLDOO\FRQFOXVLYHFODLPRIIHGHUDOSUHHPSWLRQ ,,,&21&/86,21 WKHUHVROXWLRQRIZKLFKGLGQRWUHTXLUHWKHFRXUWWRLQWHUSUHW VWDWHODZRUPDNHIDFWXDOILQGLQJV7KHFRXUWIXUWKHUIRXQG )RUWKHIRUHJRLQJUHDVRQVZH$)),50WKHGHFLVLRQRIWKH WKDWIHGHUDOODZSUHHPSWVWKH&DELQHWjVDWWHPSWWRUHJXODWH GLVWULFWFRXUWLQLWVHQWLUHW\ '2(jVGLVSRVDORIUDGLRDFWLYHZDVWHLQWKHODQGILOO7KHFRXUW DFFRUGLQJO\ HQWHUHG MXGJPHQW IRU '2( DQG GLVPLVVHG WKH FDVH 2QDSSHDOWKH&DELQHWDUJXHVWKDW  WKHGLVWULFWFRXUW HUUHGLQFRQFOXGLQJWKDWWKHFKDOOHQJHGSHUPLWFRQGLWLRQVDUH SUHHPSWHGE\IHGHUDOODZDQG  WKHGLVWULFWFRXUWVKRXOG KDYH DEVWDLQHG IURP KHDULQJ WKLV FDVH EDVHG XSRQ WKH GLVFUHWLRQDFFRUGHG LWXQGHUWKH'HFODUDWRU\sXGJPHQW$FW DQGWKH%XUIRUGDEVWHQWLRQGRFWULQH  8QLWHG6WDWHVY&RPPRQZHDOWK 1R 1R 8QLWHG6WDWHVY&RPPRQZHDOWK  RI.<HWDO RI.<HWDO ZRXOGDYRLGSLHFHPHDOOLWLJDWLRQ  ZKLFKFRXUWREWDLQHG ,,',6&866,21 MXULVGLFWLRQ ILUVW DQG   ZKHWKHU IHGHUDO ODZ RU VWDWH ODZ SURYLGHVWKHEDVLVIRUWKHGHFLVLRQRQWKHPHULWV6HH0RVHV $6WDWXWRU\DQG5HJXODWRU\2YHUYLHZ +&RQH0HPjO+RVSY0HUFXU\&RQVWUXFWLRQ&RUS 86   &RQJUHVVHQDFWHGWKH$WRPLF(QHUJ\$FW m$($l LQ WRSURPRWHWKHGHYHORSPHQWRIDWRPLFHQHUJ\IRUSHDFHIXO 2QEDODQFHWKHVHIDFWRUVZHLJKVWURQJO\DJDLQVWDEVWHQWLRQ SXUSRVHVXQGHUDSURJUDPRIIHGHUDOUHJXODWLRQDQGOLFHQVLQJ LQWKLVFDVH:KLOHQHLWKHUWKHIHGHUDOFRXUWQRUWKH.HQWXFN\ 6HH3DF*DV (OHF&RY6WDWH(QHUJ\5HV&RQVHUYDWLRQ VWDWHFRXUWKDVDVVXPHGMXULVGLFWLRQRYHUSURSHUW\LQWKLVFDVH 'HY&RPPjQ86  &RQJUHVVKDV DQGQHLWKHUSDUW\KDVDOOHJHGWKDWRQHFRXUWLVVLJQLILFDQWO\ VXEVHTXHQWO\DPHQGHGWKH$($WRFUHDWHDGXDOUHJXODWRU\ PRUHFRQYHQLHQWWKDQWKHRWKHUWKHUHPDLQLQJIDFWRUVIDYRU VWUXFWXUH ZKHUHE\ WKH IHGHUDO JRYHUQPHQW UHJXODWHV WKH IHGHUDOFRXUWUHVROXWLRQRIWKLVGLVSXWH7KHIHGHUDOFDVHZLOO mUDGLRORJLFDOVDIHW\DVSHFWVLQYROYHGLQWKHFRQVWUXFWLRQDQG UHVROYHWKHHQWLUHGLVSXWHEHWZHHQ'2(DQGWKH&DELQHWVXFK RSHUDWLRQ RI D QXFOHDU SODQWl DQG WKH VWDWHV mUHWDLQ WKHLU WKDWDEVWHQWLRQLVQRWUHTXLUHGWRDYRLGSLHFHPHDOOLWLJDWLRQ WUDGLWLRQDOUHVSRQVLELOLW\LQWKHILHOGRIUHJXODWLQJHOHFWULFDO $OWKRXJK'2(LQVWLWXWHGWKH.HQWXFN\VWDWHFRXUWDFWLRQMXVW XWLOLWLHVIRUGHWHUPLQLQJTXHVWLRQVRIQHHGUHOLDELOLW\FRVWV SULRUWRILOLQJVXLWLQIHGHUDOFRXUWWKHIHGHUDOFDVHKDVEHHQ DQGRWKHUUHODWHGVWDWHFRQFHUQVl,GDW IXOO\OLWLJDWHGZKHUHDVQRDFWLRQKDVEHHQWDNHQE\WKHSDUWLHV LQWKHVWDWHFDVH)LQDOO\IHGHUDOODZSURYLGHVWKHEDVLVIRU 7KH $($ UHJXODWHV WKUHH GLIIHUHQW FODVVHV RI UDGLRDFWLYH WKH GHFLVLRQ RQ WKH PHULWV  7KXV WKH &DELQHWjV DUJXPHQW PDWHULDO  VRXUFH PDWHULDO VSHFLDO QXFOHDU PDWHULDO DQG XQGHU WKH &RORUDGR 5LYHU DEVWHQWLRQ GRFWULQH LV QRW ZHOO E\SURGXFW PDWHULDO  6HH  86& †  H  ]  DD  WDNHQ 6RXUFH PDWHULDO LQFOXGHV XUDQLXP WKRULXP DQG RWKHU PDWHULDOV WKDW '2( GHHPV QHFHVVDU\ IRU WKH SURGXFWLRQ RI )LQDOO\ WKH &DELQHWjV DUJXPHQW IRU DEVWHQWLRQ XQGHU VSHFLDO QXFOHDU PDWHULDO   86& ††  ]   %XUIRUGDOVRPXVWIDLO%XUIRUGDEVWHQWLRQDSSOLHV  LID 6SHFLDO QXFOHDU PDWHULDO LQFOXGHV SOXWRQLXP HQULFKHG FDVH SUHVHQWV mGLIILFXOW TXHVWLRQV RI VWDWH ODZ EHDULQJ RQ XUDQLXPDQGRWKHUPDWHULDOFDSDEOHRIUHOHDVLQJVXEVWDQWLDO SROLF\ SUREOHPV RI VXEVWDQWLDO SXEOLF LPSRUW ZKRVH TXDQWLWLHVRIDWRPLFHQHUJ\86&†† DD  LPSRUWDQFHWUDQVFHQGVWKHUHVXOWLQWKHFDVHWKHQDWEDUlRU %\SURGXFW PDWHULDO LQFOXGHV m   DQ\ UDGLRDFWLYH PDWHULDO  LIWKHmH[HUFLVHRIIHGHUDOUHYLHZRIWKHTXHVWLRQLQDFDVH H[FHSW VSHFLDO QXFOHDU PDWHULDO  \LHOGHG LQ RU PDGH DQGLQVLPLODUFDVHVZRXOGEHGLVUXSWLYHRIVWDWHHIIRUWVWR UDGLRDFWLYH E\ H[SRVXUH WR WKH UDGLDWLRQ LQFLGHQW WR WKH HVWDEOLVK D FRKHUHQW SROLF\ ZLWK UHVSHFW WR D PDWWHU RI SURFHVVRISURGXFLQJRUXWLOL]LQJVSHFLDOQXFOHDUPDWHULDODQG VXEVWDQWLDOSXEOLFFRQFHUQl&RORUDGR5LYHU86DW   WKH WDLOLQJV RU ZDVWHV SURGXFHG E\ WKH H[WUDFWLRQ RU FRQFHQWUDWLRQRIXUDQLXPRUWKRULXPIURPDQ\RUHSURFHVVHG 1HLWKHURIWKHVHWZRFLUFXPVWDQFHVLVSUHVHQWHGKHUH$V SULPDULO\ IRU LWV VRXUFH PDWHULDO FRQWHQWl   86& SUHYLRXVO\QRWHGWKLVFDVHLQYROYHVDTXHVWLRQRISUHHPSWLRQ † H  XQGHU IHGHUDO ODZ QRW D TXHVWLRQ RI VWDWH ODZ  7KXV WKH &DELQHWFDQQRWVDWLVI\WKHILUVWJURXQGIRU%XUIRUGDEVWHQWLRQ 7KH $($ JUDQWV '2( DQG WKH 1XFOHDU 5HJXODWRU\ 6HH 1HZ 2UOHDQV 3XE 6HUY ,QF  86 DW  &RPPLVVLRQH[FOXVLYHUHVSRQVLELOLW\IRUUHJXODWLQJVRXUFH KROGLQJ WKDW %XUIRUG DEVWHQWLRQ LV QRW MXVWLILHG ZKHUH QR VSHFLDO QXFOHDU DQG E\SURGXFW PDWHULDO  6HH  86& GLIILFXOW TXHVWLRQ RI VWDWH ODZ LV SUHVHQWHG   1RU FDQ WKH †  E  L    3XUVXDQW WR WKLV DXWKRULW\ '2( KDV  8QLWHG6WDWHVY&RPPRQZHDOWK 1R 1R 8QLWHG6WDWHVY&RPPRQZHDOWK  RI.<HWDO RI.<HWDO GHYHORSHGDQGLPSOHPHQWHGDQH[WHQVLYHUHJXODWRU\UHJLPH MXULVGLFWLRQLQDGHFODUDWRU\MXGJPHQWDFWLRQmZKHUHDQRWKHU IRUPDQDJLQJUDGLRDFWLYHPDWHULDOVDQGOLPLWLQJWKHUHOHDVHRI VXLWLVSHQGLQJLQDVWDWHFRXUWSUHVHQWLQJWKHVDPHLVVXHVQRW UDGLRDFWLYLW\6HHHJ*HQHUDO(QYLURQPHQWDO3URWHFWLRQ JRYHUQHGE\IHGHUDOODZEHWZHHQWKHVDPHSDUWLHVl86 3URJUDP'2(2UGHU  5DGLDWLRQ3URWHFWLRQRI DW  HPSKDVLV DGGHG   +HUH WKH HVVHQFH RI '2(jV WKH3XEOLFDQGWKH(QYLURQPHQW'2(2UGHU   FRPSODLQWLVWKDWWKH$($SUHHPSWVWKHFRQGLWLRQVLPSRVHG 5DGLRDFWLYH:DVWH0DQDJHPHQW'2(2UGHU  E\WKH&DELQHWLQWKHODQGILOOSHUPLW6XFKDFODLPSUHVHQWVDQ HVWDEOLVKLQJUHTXLUHPHQWVIRUPDQDJLQJORZOHYHOUDGLRDFWLYH LVVXHRIIHGHUDOODZ6HH0XVVRQ7KHDWULFDO,QF)GDW ZDVWH LQFOXGLQJ ZDVWH FKDUDFWHUL]DWLRQ ZDVWH WUHDWPHQW   7KXV WKH UHDVRQLQJ RI %ULOOKDUW ZKLFK H[SUHVVO\ GLVSRVDODQGHQYLURQPHQWDOPRQLWRULQJ 7KHVHUHJXODWRU\ DSSOLHVRQO\WRGHFODUDWRU\MXGJPHQWDFWLRQVmQRWJRYHUQHGE\ VWDQGDUGVDUHGHVLJQHGWRDVVXUHWKDWWKHSXEOLFZRUNHUVDQG IHGHUDOODZl86DWGRHVQRWVXSSRUWDEVWHQWLRQLQ WKHHQYLURQPHQWDUHQRWH[SRVHGWRXQVDIHOHYHOVRIUDGLDWLRQ WKLVFDVH 6HH'2(2UGHU† 1HLWKHU GRHV WKH 6XSUHPH &RXUWjV GHFLVLRQ LQ &RORUDGR ,Q&RQJUHVVSDVVHGWKH5HVRXUFH&RQVHUYDWLRQDQG 5LYHU:DWHU&RQVHUYDWLRQ'LVWULFWY8QLWHG6WDWHV86 5HFRYHU\$FW m5&5$l ZKLFKDPHQGHGWKH6ROLG:DVWH    IDYRU DEVWHQWLRQ  ,Q &RORUDGR 5LYHU WKH 'LVSRVDO$FWRI86&††N&RQJUHVV 6XSUHPH &RXUW KHOG WKDW LQ UDUH FLUFXPVWDQFHV D IHGHUDO HQDFWHGWKH5&5$WRHQGWKHHQYLURQPHQWDODQGSXEOLFKHDOWK GLVWULFWFRXUWPD\SURSHUO\DEVWDLQIURPH[HUFLVLQJLWVVXEMHFW ULVNVDVVRFLDWHGZLWKWKHPLVPDQDJHPHQWRIKD]DUGRXVZDVWH PDWWHUMXULVGLFWLRQEDVHGRQFRQVLGHUDWLRQVRIm>Z@LVHMXGLFLDO 6HH 6LHUUD &OXE Y 8QLWHG 6WDWHV 'HSjW RI (QHUJ\  ) DGPLQLVWUDWLRQ JLYLQJ UHJDUG WR FRQVHUYDWLRQ RI MXGLFLDO 6XSS   ' &ROR    *HQHUDOO\ WKH 5&5$ UHVRXUFHVDQGFRPSUHKHQVLYHGLVSRVLWLRQRIOLWLJDWLRQl,GDW SURKLELWV WKH WUHDWPHQW VWRUDJH RU GLVSRVDO RI KD]DUGRXV  LQWHUQDOTXRWDWLRQPDUNVDQGFLWDWLRQRPLWWHG )DFWRUV ZDVWHDWSULYDWHRUJRYHUQPHQWDOIDFLOLWLHVZLWKRXWDSHUPLW UHOHYDQWWRDFRXUWjVGHFLVLRQWRDEVWDLQXQGHU&RORUDGR5LYHU LVVXHGE\HLWKHUWKH8QLWHG6WDWHV(QYLURQPHQWDO3URWHFWLRQ LQFOXGH  ZKHWKHUWKHVWDWHFRXUWRUWKHIHGHUDOFRXUWKDV $JHQF\ m(3$l RUDQDXWKRUL]HGVWDWH6HHLG86& DVVXPHGMXULVGLFWLRQRYHUWKHUHVRUSURSHUW\  ZKLFKIRUXP †† D 7KH5&5$H[SUHVVO\FRQWHPSODWHVWKDW LV PRUH FRQYHQLHQW WR WKH SDUWLHV   ZKHWKHU DEVWHQWLRQ VWDWH DQG ORFDO JRYHUQPHQWV ZLOO SOD\ D OHDG UROH LQ VROLG ZDVWHUHJXODWLRQ6HH86&† D    8QGHU WKH 5&5$ KD]DUGRXV ZDVWH LV GHILQHG DV mVROLG ,Q VXSSRUW RI LWV DEVWHQWLRQ DUJXPHQW XQGHU %ULOOKDUW WKH &DELQHW ZDVWH RU >D@ FRPELQDWLRQ RI VROLG ZDVWHV>@l WKDW IRU UHOLHV RQ ,QWHUQDWLRQDO $VVRFLDWLRQ RI (QWUHSUHQHXUV Y $QJRII  )G  WK &LU   7KH FRXUW LQ $QJRII DIILUPHG WKH GLVWULFW FRXUWjV HQXPHUDWHGUHDVRQVFUHDWHVSXEOLFKHDOWKDQGHQYLURQPHQWDO GHFLVLRQ WR DEVWDLQ EHFDXVH LW IRXQG WKH SODLQWLIIjV IHGHUDO VXLW WR EH DQ GDQJHUV86&†  m6ROLGZDVWHlKRZHYHUGRHV mDWWHPSW WR FLUFXPYHQW WKH UHPRYDO VWDWXWHjV GHDGOLQH E\ XVLQJ WKH QRWLQFOXGHmVRXUFHVSHFLDOQXFOHDURUE\SURGXFWPDWHULDODV 'HFODUDWRU\ sXGJPHQW $FW DV D FRQYHQLHQW DQG WHPSRUDOO\ XQOLPLWHG EDFN GHILQHG E\ WKH $WRPLF (QHUJ\ $FW RI l   86& GRRU WR IHGHUDO FRXUWl ,G DW  +HUH '2(jV GHFODUDWRU\ MXGJPHQW †  ,QGHHGWKH5&5$H[SUHVVO\SURYLGHV DFWLRQ LV QRW DQ DWWHPSW WR DYRLG GHIHQGLQJ DJDLQVW D VWDWH FRXUW DFWLRQ 5DWKHU '2( KDV D FRPSHOOLQJ LQWHUHVW LQ FKRRVLQJ D IHGHUDO IRUXP WR VHHN D GHFODUDWLRQ RI LWV IHGHUDO VWDWXWRU\ LPPXQLW\ IURP VWDWH UHJXODWLRQ 6HH 1RWKLQJLQWKLVFKDSWHUVKDOOEHFRQVWUXHGWRDSSO\WR RU 8QLWHG 6WDWHV Y 3HQQV\OYDQLD  )G  G &LU  KROGLQJ WKDW WR DXWKRUL]H DQ\ 6WDWH LQWHUVWDWH RU ORFDO DXWKRULW\ WR GLVWULFW FRXUW VKRXOG QRW KDYH DEVWDLQHG LQ OLJKW RI IHGHUDO JRYHUQPHQWjV UHJXODWH DQ\DFWLYLW\RUVXEVWDQFHZKLFKLVVXEMHFWWR ULJKW WR VHHN GHFODUDWLRQ RI LPPXQLW\ XQGHU IHGHUDO VWDWXWH LQ WKH IHGHUDO IRUXP RI LWV FKRLFH  7KXV WKH &DELQHWjV UHOLDQFH RQ $QJRII LV PLVSODFHG  8QLWHG6WDWHVY&RPPRQZHDOWK 1R 1R 8QLWHG6WDWHVY&RPPRQZHDOWK  RI.<HWDO RI.<HWDO WKH SUHHPSWLRQ LVVXHV  >+@RZHYHU    LI WKH LVVXHV WKH$WRPLF(QHUJ\$FWRIH[FHSWWRWKHH[WHQWWKDW SUHVHQWIDFLDOO\FRQFOXVLYHFODLPVRIIHGHUDOSUHHPSWLRQ VXFKDSSOLFDWLRQ RUUHJXODWLRQ LVQRWLQFRQVLVWHQWZLWK ZH ZLOO QRW DEVWDLQ EXW LQVWHDG ZLOO GHFLGH WKH WKHUHTXLUHPHQWVRIVXFK$FW>@ SUHHPSWLRQTXHVWLRQ 86&† D  *7(0RELOQHW)GDW6HHDOVR1HZ2UOHDQV3XEOLF 6HUY ,QF Y &RXQFLO RI 1HZ 2UOHDQV  86   %3UHHPSWLRQ   QRWLQJWKDWZKHUHGHWHUPLQDWLRQRISUHHPSWLRQFODLP ZRXOG QRW GLVUXSW VWDWHjV DWWHPSW WR HQVXUH XQLIRUPLW\ LQ 8QGHUWKH&RQVWLWXWLRQjV6XSUHPDF\&ODXVH86 & $% WUHDWPHQWRIDQHVVHQWLDOO\ORFDOSUREOHPDEVWHQWLRQLVQRW DUW9,†&RQJUHVVPD\SUHHPSWVWDWHODZVRORQJDVLWDFWV UHTXLUHG %XQQLQJY&RPPRQZHDOWKRI.HQWXFN\)G ZLWKLQLWVFRQVWLWXWLRQDOO\GHOLPLWHGSRZHUV6HH0j&XOORFK  WK&LU  FRQFOXGLQJWKDWmDEVWHQWLRQLVQRW Y 0DU\ODQG  86     m,W LV RI WKH YHU\ UHTXLUHG LQ D FDVH SUHVHQWLQJ IDFLDOO\ FRQFOXVLYH FODLPV RI HVVHQFHRIVXSUHPDF\WRUHPRYHDOOREVWDFOHVWRLWVDFWLRQ IHGHUDOSUHHPSWLRQZKHUHUHVROXWLRQRIWKHGLVSXWHGRHVQRW ZLWKLQLWVRZQVSKHUHDQGVRWRPRGLI\HYHU\SRZHUYHVWHG UHTXLUH WKH FRXUW WR LQWHUSUHW VWDWH ODZ RU PDNH IDFWXDO LQVXERUGLQDWHJRYHUQPHQWVDVWRH[HPSWLWVRZQRSHUDWLRQV ILQGLQJVl 1RUIRON :5\&RY3XE8WLOLWLHV&RPPjQ IURP WKHLU RZQ LQIOXHQFHl   7KH 6XSUHPH &RXUW KDV  )G   WK &LU   m>$@EVWHQWLRQ LV QRW HVWDEOLVKHG D JHQHUDO IUDPHZRUN E\ ZKLFK SUHHPSWLRQ UHTXLUHG ZKHQ WKH QDNHG TXHVWLRQ XQFRPSOLFDWHG E\ TXHVWLRQVDUHDQDO\]HG DPELJXRXVODQJXDJHLVZKHWKHUWKHVWDWHODZRQLWVIDFHLV SUHHPSWHGl >6@WDWH ODZ FDQ EH SUHHPSWHG LQ HLWKHU RI WZR JHQHUDO ZD\V,I&RQJUHVVHYLGHQFHVDQLQWHQWWRRFFXS\DJLYHQ ,QOLJKWRIWKHIRUHJRLQJSULQFLSOHVWKHGLVWULFWFRXUWLQWKLV ILHOGDQ\VWDWHODZIDOOLQJZLWKLQWKDWILHOGLVSUHHPSWHG FDVH FRUUHFWO\ IRXQG WKDW DEVWHQWLRQ ZDV LQDSSURSULDWH ,I &RQJUHVV KDV QRW HQWLUHO\ GLVSODFHG VWDWH UHJXODWLRQ '2(jVDFWLRQIRUGHFODUDWRU\DQGLQMXQFWLYHUHOLHISUHVHQWHG RYHUWKHPDWWHULQTXHVWLRQVWDWHODZLVVWLOOSUHHPSWHGWR DIDFLDOO\FRQFOXVLYHFODLPRIIHGHUDOSUHHPSWLRQLQDVPXFK WKHH[WHQWLWDFWXDOO\FRQIOLFWVZLWKIHGHUDOODZWKDWLV DVDGHWHUPLQDWLRQRIWKHSUHHPSWLRQTXHVWLRQGLGQRWUHTXLUH ZKHQ LW LV LPSRVVLEOH WR FRPSO\ ZLWK ERWK VWDWH DQG DmGHWDLOHGDQDO\VLVRIVWDWHODZl*7(0RELOQHW)GDW IHGHUDOODZRUZKHUHWKHVWDWHODZVWDQGVDVDQREVWDFOH RUWKHmPDNLQJRIILQGLQJVRQGLVSXWHGIDFWVl1RUIRON WRWKHDFFRPSOLVKPHQWRIWKHIXOOSXUSRVHVDQGREMHFWLYHV :5\&R)GDW,QGHHGWKHGLVWULFWFRXUWZDVQRW RI&RQJUHVV UHTXLUHG WR LQTXLUH mEH\RQG WKH IRXU FRUQHUVl RI WKH FKDOOHQJHGVWDWHRUGHULQUHVROYLQJWKHSUHHPSWLRQTXHVWLRQ 6LONZRRGY.HUU0F*HH&RUS86   1HZ2UOHDQV3XE6HUY,QF86DW%HFDXVH'2( :KHWKHU D IHGHUDO VWDWXWH SUHHPSWV VWDWH RU ORFDO ODZ LV D SUHVHQWHGDIDFLDOSUHHPSWLRQFODLPWKHGLVWULFWFRXUWSURSHUO\ TXHVWLRQRIIHGHUDOODZVHH0XVVRQ7KHDWULFDO,QFY)HG IRXQGWKDWLWVKRXOGQRWDEVWDLQLQGHIHUHQFHWRWKHVWDWHFRXUW ([SUHVV&RUS)G WK&LU ZKLFKZH SURFHHGLQJ UHYLHZGHQRYRVHH*7(0RELOQHWYs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j FRQVWUXFWLRQ RI WKH $($ DQG 5&5$ IRU $VLGHIURPLWVSUHHPSWLRQDUJXPHQWWKH&DELQHWFRQWHQGV LQWHUSUHWDWLYHJXLGDQFH6HH&KHYURQ86$,QFY1DWXUDO WKDWWKHGLVWULFWFRXUWVKRXOGKDYHDEVWDLQHGIURPKHDULQJWKLV 5HV 'HIHQVH &RXQFLO ,QF  86    FDVH EDVHG XSRQ WKH GLVFUHWLRQ DFFRUGHG LW XQGHU WKH UHTXLULQJ FRXUWV WR JLYH FRQVLGHUDEOH ZHLJKW WR H[HFXWLYH 'HFODUDWRU\ sXGJPHQW $FW DQG WKH %XUIRUG DEVWHQWLRQ GHSDUWPHQWjVFRQVWUXFWLRQRIDVWDWXWRU\VFKHPHLWDGPLQLVWHUV GRFWULQH:KLOHZHQRUPDOO\UHYLHZGHQRYRDGLVWULFWFRXUWjV DQGGHIHUHQFHWRLWVDGPLQLVWUDWLYHLQWHUSUHWDWLRQV 7KHFRXUW GHFLVLRQWRDEVWDLQVHH)HG([SUHVV&RUSY7HQQHVVHH3XE IRXQGWKDWDFFRUGLQJWR'2(DQG(3$UXOLQJVSHUWDLQLQJWR 6HUY&RPPjQ)G WK&LU ZHKDYHDW PL[WXUHV RI UDGLRDFWLYH DQG KD]DUGRXV ZDVWH WKH $($ OHDVWRQRQHRFFDVLRQUHYLHZHGVXFKDGHFLVLRQIRUDEXVHRI JRYHUQVWKHUDGLRDFWLYHSRUWLRQRIWKHZDVWHPL[WXUHDQGWKH GLVFUHWLRQVHH5RPLQHY&RPSXVHUYH&RUS)G 5&5$ JRYHUQV WKH KD]DUGRXV SRUWLRQ  6HH (3$ 1RWLFH  WK&LU $VWKH6HFRQG&LUFXLWKDVQRWHG 6WDWH$XWKRUL]DWLRQWR5HJXODWH+D]DUGRXV&RPSRQHQWVRI KRZHYHUmWKHUHLVOLWWOHSUDFWLFDOGLVWLQFWLRQEHWZHHQUHYLHZ 5DGLRDFWLYH:DVWHV8QGHUWKH5HVRXUFH&RQVHUYDWLRQDQG IRU DEXVH RI GLVFUHWLRQ DQG UHYLHZ GH QRYRl LQ DEVWHQWLRQ 5HFRYHU\$FW)HG5HJ sXO\ '2()LQDO FDVHVLQDVPXFKDVWKHGLVWULFWFRXUWjVGLVFUHWLRQWRDEVWDLQmLV 5XOH5DGLRDFWLYH:DVWH%\SURGXFW0DWHULDO)HG5HJ QDUURZHG E\ D IHGHUDO FRXUWjV REOLJDWLRQ WR H[HUFLVH LWV  0D\    (3$ &ODULILFDWLRQ 1RWLFH MXULVGLFWLRQ LQ DOO EXW WKH PRVW H[WUDRUGLQDU\ FDVHVl &ODULILFDWLRQRI,QWHULP6WDWXV4XDOLILFDWLRQ5HTXLUHPHQWVIRU +DFKDPRYLWFKY'H%XRQR)G G&LU  WKH+D]DUGRXV&RPSRQHQWVRI5DGLRDFWLYH0L[HG:DVWH )HG5HJ 6HSW 8QGHUWKLVGXDOUHJXODWRU\ 7KH &DELQHWjV DEVWHQWLRQ DUJXPHQW LV WZRIROG  )LUVW LW VFKHPH '2( KDV H[FOXVLYH DXWKRULW\ WR UHJXODWH WKH FRQWHQGV WKDW WKH GLVWULFW FRXUW VKRXOG KDYH GHFOLQHG UDGLRDFWLYHFRPSRQHQWRIZDVWHPL[WXUHVZKHUHDV(3$RU MXULVGLFWLRQRYHU'2(jVFRPSODLQWEDVHGXSRQWKHGLVFUHWLRQ VWDWHV DXWKRUL]HG E\ (3$ XQGHU WKH 5&5$  UHWDLQ WKH DFFRUGHGLWXQGHUWKH'HFODUDWRU\sXGJPHQW$FW86& DXWKRULW\ WR UHJXODWH WKH KD]DUGRXV SRUWLRQ  6HH ,Q UH †6HH%ULOOKDUWY([FHVV,QV&RRI$PHULFD86 :HVWLQJKRXVH0DWHULDOV&RRI2KLR1R5&5$9:5    RUGHULQJIHGHUDOGLVWULFWFRXUWWRGLVPLVV† :/ (3$'HF  DSSO\LQJGXDO DFWLRQ LQ IDYRU RI SHQGLQJ VWDWH FRXUW SURFHHGLQJ   7KH UHJXODWRU\VFKHPHWRGLVSRVDORIZDVWHPL[WXUHV %DVHGRQ &DELQHWIXUWKHUDVVHUWVWKDWWKHMXGLFLDOO\FUHDWHGGRFWULQHRI WKHDJHQFLHVjLQWHUSUHWDWLRQRIWKH$($DQGWKH5&5$WKH DEVWHQWLRQVHWRXWLQ%XUIRUGY6XQ2LO&R86 GLVWULFWFRXUWFRQFOXGHGWKDWWKH&DELQHWjVDWWHPSWWRLPSRVH  DQGLWVSURJHQ\UHTXLUHGWKHGLVWULFWFRXUWWRGHFOLQH FRQGLWLRQVRQ'2(jVGLVSRVDORIUDGLRDFWLYHPDWHULDOVLQWKH MXULVGLFWLRQ RYHU WKLV FDVH  1HLWKHU RI WKH &DELQHWjV ODQGILOOZDVSUHHPSWHGE\IHGHUDOODZ DEVWHQWLRQDUJXPHQWVKDVPHULW ,QDFDVHSURFHGXUDOO\VLPLODUWRWKLVRQHZHDGGUHVVHGWKH mLQWHUSOD\ EHWZHHQ SUHHPSWLRQ DQG DEVWHQWLRQl SUHVHQWHG KHUH  '2( DFNQRZOHGJHV WKDW WKH VROLG ZDVWH LW LQWHQGV WR SODFH LQ WKH ODQGILOO FRQWDLQV ERWK D UDGLRDFWLYH FRPSRQHQW LHmVRXUFH VSHFLDO >:@KHQ VWDWH DQG IHGHUDO FRXUWV KDYH FRQFXUUHQW QXFOHDU DQG E\SURGXFW PDWHULDOl DQG D QRQUDGLRDFWLYH EXW VWLOO MXULVGLFWLRQ WR GHFLGH SUHHPSWLRQ TXHVWLRQV D IHGHUDO KD]DUGRXV FRPSRQHQW $V VXFK D PL[WXUH RI KD]DUGRXV ZDVWH DQG FRXUWVKRXOGDEVWDLQWRDOORZWKHVWDWHFRXUWWRFRQVLGHU UDGLRDFWLYH ZDVWH FRPSULVHV WKH ZDVWH LQ TXHVWLRQ LQ WKLV FDVH  8QLWHG6WDWHVY&RPPRQZHDOWK 1R 1R 8QLWHG6WDWHVY&RPPRQZHDOWK  RI.<HWDO RI.<HWDO IDFWXDOILQGLQJVUHJDUGLQJWKHFRQIOLFWEHWZHHQWKHIHGHUDODQG 2Q DSSHDO WKH &DELQHW REMHFWV WR WKH GLVWULFW FRXUWjV VWDWHUHTXLUHPHQWVZDVWKHUHIRUHQRWLQHUURU FRQFOXVLRQRQVHYHUDOJURXQGV7KH&DELQHWILUVWDVVHUWVWKDW WKH FKDOOHQJHG SHUPLW FRQGLWLRQV DUH QRW SUHHPSWHG E\ WKH &)HGHUDO6RYHUHLJQ,PPXQLW\ $($EHFDXVHWKH&DELQHWKDVWKHVWDWXWRU\DXWKRULW\XQGHU .HQWXFN\ ODZ WR UHJXODWH VROLG ZDVWH GLVSRVDO  7KXV WKH '2( DOVR DUJXHV WKDW WKH &DELQHWjV FKDOOHQJHG SHUPLW &DELQHWFRQWHQGVWKDWWKHFKDOOHQJHGSHUPLWFRQGLWLRQVGRQRW FRQGLWLRQV DUH LQYDOLG EHFDXVH WKH 8QLWHG 6WDWHV KDV QRW FRQVWLWXWH UHJXODWLRQ RI UDGLRDFWLYH PDWHULDOV EXW UDWKHU ZDLYHGLWVIHGHUDOVRYHUHLJQLPPXQLW\WRVWDWHUHJXODWLRQRI PHUHO\ DGGUHVV WKH IDFW WKDW '2(jV VROLG ZDVWH PD\ EH UDGLRDFWLYHPDWHULDOVDWIHGHUDOIDFLOLWLHV FRQWDPLQDWHGZLWKUDGLRQXFOLGHV7KH&DELQHWIXUWKHUDUJXHV WKDW WKH GLVWULFW FRXUW IDLOHG WR VXSSRUW LWV FRQFOXVLRQ ZLWK 7KHIHGHUDOJRYHUQPHQWLVLPPXQHIURPVWDWHUHJXODWLRQ VSHFLILF IDFWXDO ILQGLQJV DV WR KRZ WKH SHUPLW FRQGLWLRQV H[FHSWWRWKHH[WHQWZDLYHG6HH8QLWHG6WDWHVY0LWFKHOO FRQIOLFWZLWKWKHUHTXLUHPHQWVRIWKH$($%HFDXVHWKH$($ 86  7KH6XSUHPH&RXUWKDVKHOGWKDW GRHV QRW H[SUHVVO\ DGGUHVV WKH GLVSRVDO RI VROLG ZDVWH ZDLYHUVRIIHGHUDOLPPXQLW\PXVWEHXQHTXLYRFDOLGDW FRQWDPLQDWHGZLWKUDGLRQXFOLGHVWKH&DELQHWDUJXHVLWZDV DQGDUHWREHVWULFWO\FRQVWUXHGLQIDYRURIWKH8QLWHG6WDWHV HUURU WR FRQFOXGH WKDW WKH $($ SUHHPSWV WKH SHUPLW 8QLWHG6WDWHVY1RUGLF9LOODJH,QF86   FRQGLWLRQVZLWKRXWILQGLQJDFWXDOFRQIOLFWVEHWZHHQWKHVWDWH  7KH LVVXH RI ZKHWKHU WKH 8QLWHG 6WDWHV KDV ZDLYHG LWV DQGIHGHUDOUHTXLUHPHQWV VRYHUHLJQLPPXQLW\LVDTXHVWLRQRIODZVXEMHFWWRGHQRYR UHYLHZ6HH8QLWHG6WDWHVYLQ86&XUUHQF\ 7KH &DELQHWjV DUJXPHQWV DUH QRW ZHOOWDNHQ  $V WKH )G WK&LU  6XSUHPH &RXUW XQHTXLYRFDOO\ VWDWHG LQ 3DFLILF *DV (OHFWULFmWKHIHGHUDOJRYHUQPHQWKDVRFFXSLHGWKHHQWLUHILHOG :KLOHWKHGLVWULFWFRXUWGLGQRWDGGUHVV'2(jVVRYHUHLJQ RI QXFOHDU VDIHW\ FRQFHUQV H[FHSW WKH OLPLWHG SRZHUV LPPXQLW\DUJXPHQWLQOLJKWRILWVKROGLQJWKDWWKH&DELQHWjV H[SUHVVO\FHGHGWRWKHVWDWHVl86DW$FFRUGLQJO\ UHJXODWLRQVDUHSUHHPSWHGE\IHGHUDOODZ'2(FRXOGKDYH WKH $($ SUHHPSWV DQ\ VWDWH DWWHPSW WR UHJXODWH PDWHULDOV SUHYDLOHGRQWKLVDOWHUQDWHWKHRU\DVZHOO1HLWKHUWKH$($ FRYHUHGE\WKH$FWIRUVDIHW\SXUSRVHV6HHLG +HUHWKH QRU DQ\ RWKHU IHGHUDO ODZ ZDLYHV IHGHUDO LPPXQLW\ IURP FKDOOHQJHGSHUPLWFRQGLWLRQVVSHFLILFDOO\OLPLWWKHDPRXQWRI UHJXODWLRQRI'2(IDFLOLWLHVE\VWDWHVZLWKUHVSHFWWRPDWHULDOV mUDGLRDFWLYLW\lDQGmUDGLRQXFOLGHVlWKDW'2(PD\SODFHLQLWV FRYHUHGE\WKH$($:KLOHWKH&DELQHWLVFRUUHFWWRSRLQW ODQGILOO  7KH VRXUFHV RI VXFK mUDGLRDFWLYLW\l DQG RXW WKDW WKH 5&5$ ZDLYHV IHGHUDO LPPXQLW\ WR VWDWH mUDGLRQXFOLGHVl DUH PDWHULDOV FRYHUHG E\ WKH $($ LH UHJXODWLRQRIIHGHUDOIDFLOLWLHVZLWKUHVSHFWWRVROLGZDVWHVHH VRXUFHVSHFLDOQXFOHDUDQGE\SURGXFWPDWHULDOV7KH&DELQHW 86&† D WKH5&5$jVGHILQLWLRQRImVROLGZDVWHl VHHNVWRLPSRVHWKHVHFRQGLWLRQVWRSURWHFWKXPDQKHDOWKDQG H[SUHVVO\ H[FOXGHV PDWHULDOV FRYHUHG E\ WKH $($ VHH  WKHHQYLURQPHQW7KHSHUPLWFRQGLWLRQVWKHUHIRUHUHSUHVHQW 86&†  $VGLVFXVVHGSUHYLRXVO\WKH&DELQHWjV DQDWWHPSWE\WKH&DELQHWWRUHJXODWHPDWHULDOVFRYHUHGE\WKH SHUPLWFRQGLWLRQVFRQVWLWXWHVWDWHUHJXODWLRQRIVRXUFHVSHFLDO $($EDVHGRQWKH&DELQHWjVVDIHW\DQGKHDOWKFRQFHUQVDQG QXFOHDU RU E\SURGXFW PDWHULDO DV GHILQHG E\ WKH $($ DUHWKXVSUHHPSWHG $FFRUGLQJO\WKH8QLWHG6WDWHVKDVQRWZDLYHGLWVLPPXQLW\ IURPWKHSHUPLWFRQGLWLRQVDWLVVXH:HWKHUHIRUHDIILUPWKH 7KHIDFWWKDWWKH&DELQHWLVDXWKRUL]HGXQGHUVWDWHODZWR GLVWULFWFRXUWjVMXGJPHQWRQWKLVDOWHUQDWHJURXQG UHJXODWHVROLGZDVWHGLVSRVDOLVLUUHOHYDQWWRRXUSUHHPSWLRQ DQDO\VLV  7KXV WKH &DELQHWjV UHIHUHQFH WR LWV VWDWH ODZ  8QLWHG6WDWHVY&RPPRQZHDOWK 1R 1R 8QLWHG6WDWHVY&RPPRQZHDOWK  RI.<HWDO RI.<HWDO DXWKRULW\ WR HQVXUH WKDW RQO\ VROLG ZDVWH LV SODFHG LQ WKH 7KH&DELQHWUHOLHVRQWKH7HQWK&LUFXLWjVGHFLVLRQLQ8QLWHG ODQGILOOPLVVHVWKHSRLQW 7KHGLVSRVDOOLPLWVLPSRVHGE\WKH 6WDWHVY1HZ0H[LFR)G WK&LU WRUHEXW FKDOOHQJHG FRQGLWLRQV FRQVWLWXWH UHJXODWLRQ RI PDWHULDOV WKLVFRQFOXVLRQ,Q1HZ0H[LFRWKH8QLWHG6WDWHVFKDOOHQJHG FRYHUHG E\ WKH $($  7KH\ DUH WKHUHIRUH SUHHPSWHG SHUPLW FRQGLWLRQV LPSRVHG E\ WKH VWDWH DGGUHVVLQJ WKH 6LPLODUO\WKH&DELQHWjVDVVHUWLRQWKDWLWKDVWKHmULJKWXQGHU SUHVHQFH RI UDGLRQXFOLGHV LQ WKH LQFLQHUDWLRQ RI KD]DUGRXV VWDWHODZlWRSURKLELWDQ\UDGLRDFWLYHPDWHULDOVIURPEHLQJ ZDVWHDWD'2(IDFLOLW\,GDW7KHFDVHSUHVHQWHGWKH SODFHG LQ WKH ODQGILOO LV LQFRUUHFW  7KH 6XSUHPH &RXUW TXHVWLRQ RI ZKHWKHU WKH SHUPLW FRQGLWLRQV ZHUH ZLWKLQ WKH UHMHFWHGDVLPLODUDUJXPHQWLQ3DFLILF*DV (OHFWULF VFRSHRIWKH5&5$jVZDLYHURIIHGHUDOVRYHUHLJQLPPXQLW\ ,G DW   7KH FRXUW KHOG WKDW FRQGLWLRQV LPSRVHG E\ WKH 5HVSRQGHQWVDUJXHWKDWDOWKRXJKVDIHW\UHJXODWLRQ VWDWH RQ '2(jV KD]DUGRXV ZDVWH LQFLQHUDWRU ZHUH RI QXFOHDU SODQWV E\ VWDWHV LV IRUELGGHQ D VWDWH PD\ mUHTXLUHPHQWVl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mUHTXLUHPHQWVl ILHOGRIQXFOHDUVDIHW\FRQFHUQV XQGHUWKH5&5$jVZDLYHUSURYLVLRQ,GDWQ7KXV 1HZ0H[LFRGLGQRWDGGUHVVWKHVDPHLVVXHSUHVHQWHGLQWKLV 86DW FDVH LH ZKHWKHU VWDWH UHJXODWLRQ RI WKH UDGLRDFWLYH FRPSRQHQW RI VROLG ZDVWH LV SUHHPSWHG E\ WKH $($  7KH :KLOHIHGHUDOODZGRHVQRWSUHHPSWVWDWHUHJXODWLRQRIVROLG &DELQHWjV UHOLDQFH RQ 1HZ 0H[LFR LQ VXSSRUW RI LWV ZDVWHVHH&LW\RI3KLODGHOSKLDY1HZsHUVH\86 SUHHPSWLRQDUJXPHQWLVPLVSODFHG  Q   VWDWHV PD\ QRW UHJXODWH WKH UDGLRDFWLYH FRPSRQHQW RI VROLG ZDVWH  $V WKH GLVWULFW FRXUW FRUUHFWO\ 7KH &DELQHWj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m:KHQ WKH IHGHUDO  DSSO\LQJGXDOUHJXODWRU\VFKHPHWRGLVSRVDORIZDVWH JRYHUQPHQW FRPSOHWHO\ RFFXSLHV D JLYHQ ILHOG RU DQ PL[WXUHV %HFDXVHWKHFKDOOHQJHGSHUPLWFRQGLWLRQVUHJXODWH LGHQWLILDEOH SRUWLRQ RI LW DV LW KDV GRQH KHUH WKH WHVW RI PDWHULDOVFRYHUHGE\WKH$($WKH\DUHWKHUHIRUHSUHHPSWHG SUHHPSWLRQLVZKHWKHUµWKHPDWWHURQZKLFKWKHVWDWHDVVHUWV WKH ULJKW WR DFW LV LQ DQ\ ZD\ UHJXODWHG E\ WKH IHGHUDO JRYHUQPHQWjl,GDW TXRWLQJ5LFHY6DQWD)H(OHYDWRU &RUS  86      8QGHU VXFK WHVW '2(  '2( DUJXHV WKDW WKH &DELQHW LQFRUUHFWO\ FKDUDFWHUL]HV .HQWXFN\ ODZ QHHG QRW LGHQWLI\ VSHFLILF FRQIOLFWV EHWZHHQ WKH &DELQHWjV DV DXWKRUL]LQJ LW WR HQVXUH WKDW RQO\ VROLG ZDVWH LV SODFHG LQ WKH ODQGILOO SHUPLW FRQGLWLRQV DQG IHGHUDO ODZ LQ RUGHU WR HVWDEOLVK %HFDXVH WKH H[WHQW RI WKH &DELQHWjV VWDWH ODZ DXWKRULW\ WR UHJXODWH VROLG SUHHPSWLRQ  7KH GLVWULFW FRXUWjV IDLOXUH WR PDNH VSHFLILF ZDVWH LV LUUHOHYDQW WR RXU SUHHPSWLRQ DQDO\VLV KRZHYHU ZH QHHG QRW DGGUHVV '2(jV DUJXPHQW EDVHG RQ .HQWXFN\ ODZ