N Amer Natural v. Strand

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 1257+ $0(5,&$1 1$785$/ ; 5(6285&(6 ,1& 0,'/$1'  &2*(1(5$7,21 9(1785(   1R /,0,7(' 3$571(56+,3  0,&+,*$1 32:(5 /,0,7(' !  3$571(56+,3 &(175$/  :$<1( (1(5*< 5(&29(5<  /,0,7(' 3$571(56+,3HWDO  3ODLQWLIIV$SSHOOHHV    Y   s2+1 * 675$1'&KDLUPDQ  s2+1 & 6+($DQG'$9,' $  69$1'$&RPPLVVLRQHUVRI  WKH0LFKLJDQ3XEOLF6HUYLFH   &RPPLVVLRQ  'HIHQGDQWV$SSHOODQWV   1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW/DQVLQJ 1RV n*RUGRQs4XLVW'LVWULFWsXGJH $UJXHG2FWREHU   1RUWK$PHULFDQ1DWXUDO5HVRXUFHV 1R 1R 1RUWK$PHULFDQ1DWXUDO5HVRXUFHV  ,QFHWDOY6WUDQGHWDO ,QFHWDOY6WUDQGHWDO 'HFLGHGDQG)LOHGsXQH DFFRUGLQJWRWKHFRQWUDFW(DFKRIWKHVHFDVHVGHDOWZLWKD VLWXDWLRQ LQ ZKLFK WKH UHJXODWRU KDG WDNHQ DQ DFWLRQ WKDW %HIRUH.583$16.<%$7&+(/'(5DQG*,/0$1 LPPHGLDWHO\ DIIHFWHG WKH 4)Vj FRQWUDFW ULJKWV  ,Q WKH FDVH &LUFXLWsXGJHV EHIRUHXVWKHUHJXODWRUKDVUHSHDWHGO\GLVDYRZHGDQ\LQWHQW WR DIIHFW WKH 4)Vj FRQWUDFW ULJKWV  (YHQ LI WKDW ZHUH WKH BBBBBBBBBBBBBBBBB mVHFUHWLQWHQWlRIWKH036& DQGWKHUHLVQRHYLGHQFHLQWKH UHFRUGWRVXSSRUWWKLVK\SRWKHVLV WKH036&ZRXOGKDYHWR &2816(/ LVVXHDQRWKHURUGHUEHIRUHWREULQJLWVSODQWRIUXLWLRQ $5*8('3DWULFLD6%DURQH0,&+,*$1$77251(< &21&/86,21 *(1(5$//DQVLQJ0LFKLJDQIRU$SSHOODQWV7KRPDVs :DWHUV )5$6(5 75(%,/&2&.  )267(5 /DQVLQJ )RUWKHIRUHJRLQJUHDVRQVZHKROGWKDWWKHGLVWULFWFRXUW 0LFKLJDQ5REHUW)6KDSLUR&+$'%2851( 3$5.( HUUHG LQ GHQ\LQJ WKH 'HIHQGDQWjV PRWLRQ WR GLVPLVV  :H :DVKLQJWRQ'&IRU$SSHOOHHV21%5,()3DWULFLD6 9$&$7(WKHRUGHURIWKHGLVWULFWFRXUWDQG5(0$1'WKLV %DURQH 0,&+,*$1 $77251(< *(1(5$/ /DQVLQJ PDWWHUZLWKLQVWUXFWLRQVWKDWLWEH',60,66(' 0LFKLJDQ'DYLG$9RJHV+HQU\s%R\QWRQ2)),&(2) 7+( $77251(< *(1(5$/ 38%/,& 6(59,&( ',9,6,21 /DQVLQJ 0LFKLJDQ IRU $SSHOODQWV  5REHUW ) 6KDSLUR &+$'%2851(  3$5.( :DVKLQJWRQ '& 'DYLG ( 0DUYLQ 7KRPDV s :DWHUV )5$6(5 75(%,/&2&. )267(5/DQVLQJ0LFKLJDQ6WHSKHQ2 6FKXOW])267(56:,)7&2//,16 60,7+/DQVLQJ 0LFKLJDQIRU$SSHOOHHV BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB $/,&( 0 %$7&+(/'(5 &LUFXLW sXGJH  $SSHOODQWV UHSUHVHQWLQJ WKH 0LFKLJDQ 3XEOLF 6HUYLFH &RPPLVVLRQ m036&l DVWDWHUHJXODWRU\ERG\VHHNUHYLHZRIWKHGLVWULFW FRXUWjVRUGHUVWDWLQJWKDWFHUWDLQUHJXODWRU\RUGHUVLVVXHGE\ WKH036&YLRODWHWKH3XEOLF8WLOLWLHV5HJXODWRU\3ROLFLHV$FW RI m3853$l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mUHJXODWRU\RXWFODXVHVlDUHHQIRUFHDEOH,GDW , 'HVSLWHLWVIDFWXDOVLPLODULW\WRWKHFDVHDWKDQG$JULOHFWULF 7KLV PDWWHU DULVHV IURP WKH 0LFKLJDQ 3XEOLF 6HUYLFHV GHDOVZLWKDQDFWXDOULSHFDVHRUFRQWURYHUV\,QWKDWFDVHWKH &RPPLVVLRQjV m036&l  DSSHDO RI WKH GLVWULFW FRXUWjV GHIHQGDQW KDG DFWXDOO\ XVHG WKH mUHJXODWRU\ RXWl FODXVH WR GHFLVLRQLQWHUSUHWLQJDVHULHVRI036&RUGHUV,QLQ DYRLGSHUIRUPDQFHXQGHUWKHFRQWUDFW+HUHHYHQLQWKH4)Vj SUHSDUDWLRQ IRU GHUHJXODWLRQ RI WKH HOHFWULF LQGXVWU\ WKH ZRUVW FDVH VFHQDULR VXFK DQ DFWLRQ FRXOG QRW RFFXU XQWLO 036&LVVXHGDVHULHVRIRUGHUVGHDOLQJZLWKWKHUHFRYHU\RI  mVWUDQGHGFRVWVl7KHSODLQWLIIVDJURXSRIHOHFWULFSRZHU JHQHUDWRUV UHTXHVWHG FODULILFDWLRQ RI FHUWDLQ 036& RUGHUV 7KH 3ODLQWLIIV FODLP WKDW WKH )(5& UHJXODWLRQV DQG WKH ZLWKUHJDUGWRKRZWKHRUGHUVZRXOGDIIHFWWKHLUULJKWVXQGHU KROGLQJVLQ)UHHKROG:HVW3HQQ3RZHU,QGHSHQGHQW(QHUJ\ FRQWUDFWVWKH\KDGHQWHUHGLQWRSXUVXDQWWRDIHGHUDOVWDWXWH 3URGXFHUVY&DOLIRUQLD3XE8WLO&RPPjQ)G WK 7KH 036& WKHQ LVVXHG DGGLWLRQDO RUGHUV VWDWLQJ WKDW WKH &LU DQG6PLWK&RJHQHUDWLRQ0DQDJHPHQW,QFY&RUS SUHYLRXVRUGHUVGLGQRWDQGZHUHQRWLQWHQGHGWRDIIHFWWKH &RPPjQ  3G  2NOD   mPDNH FOHDU WKDW ULJKWVRIDQ\SDUWLHVXQGHUWKHSRZHUSXUFKDVHDJUHHPHQWV DYRLGHGFRVWUDWHVDQGSDVVWKURXJKRIDYRLGHGFRVWSD\PHQWV 7KHSODLQWLIIVEURXJKWVXLWLQIHGHUDOGLVWULFWFRXUWVHHNLQJD WR UHWDLO FXVWRPHUV DUH QRW WR EH GLVWXUEHG DV D UHVXOW RI GHFODUDWRU\MXGJPHQWWRGHWHUPLQHWKHHIIHFWWKDWWKH036& FKDQJHGFLUFXPVWDQFHVLQWKHPDUNHWSODFHl7KLVFODLPGRHV RUGHUVKDGRQWKHLUFRQWUDFWULJKWV7KHGLVWULFWFRXUWGHQLHG QRWWDNHLQWRDFFRXQWWKHFOHDUO\GLIIHUHQWIDFWVRIWKRVHFDVHV WKH 036&jV PRWLRQ WR GLVPLVV IRU ODFN RI D FDVH RU FRQWURYHUV\ DQG JUDQWHG VXPPDU\ MXGJPHQW IRU WKH SRZHU $VQRWHGDERYH)UHHKROGLQYROYHGDQRUGHUWRUHQHJRWLDWH SURGXFHUVKROGLQJWKDWmWRWKHH[WHQWWKDWlWKH036&RUGHUV WKHORQJVWDQGLQJ33$V:HVW3HQQ3RZHULQYROYHGDVLPLODU LQIULQJHGXSRQWKHLUFRQWUDFWULJKWVWKHRUGHUVZHUHYRLG7KH VLWXDWLRQZKHUHWKHUHJXODWRUDWWHPSWHGWRUHZULWHFRQWUDFW 036&ILOHGDWLPHO\DSSHDOWRWKLVFRXUW WHUPV  ,QGHSHQGHQW (QHUJ\ 3URGXFHUV DURVH IURP DOPRVW LGHQWLFDO FLUFXPVWDQFHV ZKHUH WKH &DOLIRUQLD UHJXODWRUV 7KH 3XEOLF 8WLOLWLHV 5HJXODWRU\ 3ROLFLHV $FW RI  SDVVHGDUXOHDOORZLQJVXVSHQVLRQRIDYRLGHGFRVWSD\PHQWV m3853$l ZDVHQDFWHGDVSDUWRIWKH1DWLRQDO(QHUJ\$FW DQGUHYRNHGWKH4)VWDWXVRIVHYHUDO&DOLIRUQLD4)V,Q6PLWK LQUHVSRQVHWRWKHHQHUJ\FULVLVRIWKHV&RQJUHVVVRXJKW &RJHQHUDWLRQDQ2NODKRPDGLVWULFWFRXUWKHOGWKDWWKHVWDWH WROHVVHQWKHGHSHQGHQFHRIHOHFWULFXWLOLWLHVRQIRVVLOIXHOVE\ UHJXODWRUFRXOGQRWUHYLHZDYRLGHGFRVWVRQFHWKH\ZHUHVHW HQFRXUDJLQJWKHGHYHORSPHQWRIDOWHUQDWLYHSRZHUVRXUFHVLQ WKH IRUP RI mFRJHQHUDWLRQ IDFLOLWLHVl ZKLFK FUHDWH VHYHUDO IRUPVRIHQHUJ\IRUH[DPSOHHOHFWULFLW\DQGmVWHDPRURWKHU  IRUPV RI XVHIXO HQHUJ\ ZKLFK DUH XVHIXO IRU LQGXVWULDO )RU SODLQWLIIV KHUH WR UHO\ RQ WKLV DUJXPHQW LV VRPHZKDW FLUFXODU EHFDXVH WKH $JULOHFWULF FRXUW FLWHV WKH GLVWULFW FRXUWjV RSLQLRQ LQ WKH FRPPHUFLDOKHDWLQJRUFRROLQJSXUSRVHVlDQGVPDOOSRZHU LQVWDQW FDVH IRU WKH LPSOLFLW SURSRVLWLRQ WKDW UHJXODWRU\ RXW FODXVHV DUH SURGXFWLRQIDFLOLWLHV86&†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m4)Vl DQGUHTXLULQJWKHVHWWLQJRIUDWHV FRQWURYHUV\ WKH 4)V UHO\ KHDYLO\ RQ WKH 7KLUG &LUFXLWjV WKDWDUHMXVWDQGUHDVRQDEOHWRUDWHSD\HUV7KHSULFHSDLGE\ RSLQLRQLQ)UHHKROG&RJHQHUDWLRQ$VVRF/3Y%RDUGRI WKHXWLOLW\IRUWKLVSRZHULVQRWWRH[FHHGWKHFRVWnFDOOHGLQ 5HJXODWRU\&RPPLVVLRQHUVRI1HZsHUVH\)G UG WKH VWDWXWH WKH mLQFUHPHQWDO FRVW RI DOWHUQDWLYH HOHFWULF &LU FHUWGHQLHGVXEQRPsHUVH\&HQWUDO3RZHU HQHUJ\lnWKHXWLOLW\ZRXOGLQFXULQJHQHUDWLQJWKHHOHFWULFLW\ /LJKW&RY)UHHKROG&RJHQHUDWLRQ$VVRF/386 LWVHOIRULQSXUFKDVLQJLWIURPDQRQ4)JHQHUDWRU6HH   7KLVUHOLDQFHLVPLVSODFHGDVWKHFDVHVDUHHDVLO\ 86&†D E ,QWKHUHJXODWLRQVSURPXOJDWHGXQGHUWKH GLVWLQJXLVKDEOH,Q)UHHKROGWKHVWDWHXWLOLWLHVFRPPLVVLRQ VWDWXWHWKLVFRVWLVFDOOHGWKHmDYRLGHGFRVWl RUGHUHGWKDWWKH4)VDQGWKHXWLOLWLHVUHQHJRWLDWHWKHLU33$V LQWKHZDNHRIGHUHJXODWLRQ7KLVRUGHUHVVHQWLDOO\YRLGHGWKH 7UDQVDFWLRQVXQGHU3853$DUHVWUXFWXUHGDVIROORZV7KH H[LVWLQJ FRQWUDFWV DQG FOHDUO\ FUHDWHG DQ LPPHGLDWH WUDQVPLWWLQJXWLOLW\FRQWUDFWVWRSXUFKDVHSRZHUIURPD4)DW FRQWURYHUV\7KH7KLUG&LUFXLWKHOGWKDWWKHmUHJXODWRU\RXWl D FRVW QRW WR H[FHHG WKH FRVW WKH XWLOLW\ ZRXOG LQFXU WR FODXVHV LQ WKRVH FRQWUDFWV YLRODWHG 3853$ DQG ZHUH WKXV JHQHUDWH RU SXUFKDVH WKH SRZHU IURP D QRQ4) JHQHUDWRU XQHQIRUFHDEOH,QWKHLQVWDQWFDVHWKH036&KDVGLVDYRZHG 7KDW mDYRLGHG FRVWl ZKLFK WKH WUDQVPLWWLQJ XWLOLW\ ZRXOG DQ\ LQWHQW WR LQWHUIHUH LQ WKH FRQWUDFWXDO UHODWLRQVKLSV KDYH LQFXUUHG LQ JHQHUDWLQJ WKH SRZHU LWVHOI LV EXLOW LQWR HVWDEOLVKHGXQGHU3853$ FXVWRPHUVj UDWHV ZLWK WKH DSSURYDO RI WKH UHOHYDQW VWDWH UHJXODWRU LQWKLVFDVHWKH036& 7KXVWKH4)LVJXDUDQWHHG $VZHKDYHDOUHDG\QRWHGLQLWVRUGHURI2FWREHU D FHUWDLQ OHYHO RI VDOHV WKH XWLOLW\ HVVHQWLDOO\ EX\V WKH 4) WKH036&VDLG SRZHUIRUZKDWLWZRXOGKDYHFRVWWKHXWLOLW\WRJHQHUDWHWKH SRZHULWVHOIDQGWKHUDWHWKDWWKHSXEOLFSD\VIRUWKHSRZHU 7KHTXDOLI\LQJIDFLOLWLHVKDYHFRQIXVHGWKHUHFRYHU\RI LQFOXGHVWKHmDYRLGHGFRVWl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mXWLOLW\l DV XVHG LQ WKLV RSLQLRQ PHDQV XWLOLWLHVWRUHFRYHUVWUDQGHGFRVWVQRUDSSURYDORIDWUXH D ODUJH JHQHUDWRUWUDQVPLWWHU RI SRZHU ZKLFK VHUYHV DV WKH SRLQW RI XSPHFKDQLVPFKDQJHVWKHULJKWVRITXDOLI\LQJIDFLOLWLHV VDOHWUDQVPLVVLRQ WR FRQVXPHUV $ m4)l LV RQH RI WKH VPDOOHU HFR 7KH &RPPLVVLRQ WKHUHIRUH FRQFOXGHV WKDW LW QHHG QRW IULHQGO\ HOHFWULF JHQHUDWRUV VHOHFWHG IRU VSHFLDO WUHDWPHQW XQGHU 3853$ DGGUHVVFRQFHUQVDERXWUHFRYHU\RIFRVWVEH\RQG  m$YRLGHG FRVWVl DUH GHILQHG DV WKH LQFUHPHQWDO FRVWV WR DQ HOHFWULFDO 036& &DVH 1R 8 2SLQLRQ DQG 2UGHU SS  XWLOLW\ RI HQHUJ\ RU FDSDFLW\ WKDW EXW IRU WKH SXUFKDVH IURP WKH TXDOLI\LQJ IDFLOLW\ RU IDFLOLWLHV VXFK XWLOLW\ ZRXOG JHQHUDWH LWVHOI RU SXUFKDVH IURP 2FWREHU  DQRWKHU VRXUFH  &)5 †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mIDLUDQGUHDVRQDEOHl7KH036&LV FKDUJHGXQGHU3853$ZLWKLPSOHPHQWLQJDQGXSKROGLQJWKH 7R IXUWKHU HQFRXUDJH WKHVH DOWHUQDWLYH SRZHU VRXUFHV 33$V7KH036&KDVWDNHQQRDFWLRQFRQWUDU\DQ\RIWKH 3853$ DOVR UHGXFHG WKH UHJXODWRU\ EXUGHQ RQ 4)V  6HH 4)Vj LQWHUHVWV DQG LQ IDFW LW KDV DWWHPSWHG RQ VHYHUDO )(5&Y0LVVLVVLSSL86  3853$UHTXLUHV RFFDVLRQVWRUHDVVXUHWKH4)VWKDWWKHRUGHUVGRQRWSURKLELW WKH )(5& WR SURPXOJDWH UHJXODWLRQV H[HPSWLQJ 4)V IURP WKH 4)V IURP H[HUFLVLQJ WKHLU ULJKWV WR HQIRUFH WKRVH PRVW IHGHUDO UHJXODWLRQV DQG mVWDWH ODZV DQG UHJXODWLRQV FRQWUDFWV UHVSHFWLQJ WKH UDWHV    RI HOHFWULFDO XWLOLWLHVl   86& †D H   7KH4)VEDVHWKHLUFODLPQRWRQZKDWWKH036&KDVGRQH EXWUDWKHURQZKDWLWKDVQRWGRQH7KH036&KDVGHFOLQHG 7KLVUHJXODWRU\ODQGVFDSHFKDQJHGZKHQ&RQJUHVVHQDFWHG WR DGGUHVV WKH TXHVWLRQ RI ZKHWKHU DIWHU  WKH 4)V FDQ WKH(QHUJ\3ROLF\$FWRI6HH86&††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mIXOO DYRLGHG FRVWl  6HH :HVW 3HQQ 3RZHU &R Y &RPPLVVLRQRUGHUFOHDUO\SURYLGHVPRUHVHFXULW\WKDQDPHUH 3HQQV\OYDQLD 3XEOLF 8WLOLW\ &RPPLVVLRQ  $G  FRQWUDFWZLWKDXWLOLW\RSHUDWLQJLQDIUHHPDUNHW$OVRVRPH     +RZHYHU WKLV PRYH WRZDUGV FRPSHWLWLRQ XWLOLWLHV DUH EHWWHU SRVLWLRQHG IRU GHUHJXODWLRQ WKDQ RWKHUV FUHDWHG WKH QHZ LVVXH RI mVWUDQGHG FRVWVl  m6WUDQGHG 6RPHXWLOLWLHVPD\QRWVXUYLYHWKHWUDQVLWLRQRUPD\HPHUJH LQYHVWPHQW UHSUHVHQWV WKDW SRUWLRQ RI FDSDFLW\ ZKLFK KDV DV VLJQLILFDQWO\ VFDOHG GRZQ RSHUDWLRQV  %\ LQVLVWLQJ RQ FDSLWDOFRVWVDQGRSHUDWLQJFRVWVVRJUHDWWKDWWKHSRZHULV UHFHLYLQJJXDUDQWHHGSD\PHQWVIURPWKHUDWHSD\HUVWKH4)V SURGXFHGDWDFRVWWKDWZLOOQRWEHFRPSHWLWLYHLQWKHFRPLQJ DUHDWWHPSWLQJWRSRXQGDVTXDUHSHJRI WKHROGPRQRSRO\ FRPSHWLWLYHPDUNHWSODFHl,G6WUDQGHGFRVWVDUHWKH V\VWHPLQWRWKHURXQGKROHRIWKHHPHUJLQJIUHHPDUNHW SRUWLRQRIWKDWVWUDQGHGLQYHVWPHQWWKDWPD\EHSDVVHGRQWR UDWHSD\HUVWRFRPSHQVDWHWKHXWLOLW\IRUVWUDQGHGLQYHVWPHQW XQGHUWDNHQEHFDXVHRIUHJXODWRU\UHTXLUHPHQWV7KHTXHVWLRQ LQFXUUHG DQ\ LPPHGLDWH KDUP IURP WKH 036& RUGHUV 5DWKHU WKH SDUWLHV OHIWIRUVWDWHVWRDQVZHULVWRZKDWH[WHQWmDYRLGHGFRVWVlDUH VLPSO\ GLVDJUHH DERXW ZKDW SULFH RXJKW WR EH DVVLJQHG WR WKH YDOXH RI WKH UHFRYHUDEOHDVmVWUDQGHGFRVWVl FRQWUDFWV LQ D FKDQJLQJ DQG LQKHUHQWO\ XQFHUWDLQ IXWXUH PDUNHWSODFH 7KH VFDQW HYLGHQFH UHJDUGLQJ VDOH RI FRQWUDFWV LQGLFDWHV WKDW DQ\ QHJRWLDWLRQV WKDW RFFXUUHG ZHUH PHUHO\ SUHOLPLQDU\ DQG QR SDUWLHV KDG H[HFXWHG DQ\ DJUHHPHQWV WKDW PLJKW KDYH VXEMHFWHG WKHP WR DQ LPPHGLDWH ORVV )XUWKHU WKHUH LV QR mVSHFLILF UHOLHIl WKDW WKLV FRXUW FRXOG RIIHU &RPPRQZHDOWK WR UHPHG\ &RQVXPHUV XQZLOOLQJQHVV WR EX\ RXW WKH DYRLGHG FRVW ,Q WKDW FLUFXPVWDQFH WKH 4) ZRXOG PDNH D SURILW WKH XWLOLW\ FRQWUDFWV DW &RPPRQZHDOWKjV SUHIHUUHG SULFH (YHQ LI ZH JUDQWHG WKH ZRXOG SD\ QR PRUH WKDQ ZKDW LW ZRXOG KDYH FRVW WKH XWLOLW\ WR SURGXFH WKH GHFODUDWRU\ MXGJPHQW WKH SODLQWLIIV VHHN &RQVXPHUV PLJKW EDON DW WKH SRZHU LWVHOI RU WR SXUFKDVH LW IURP D QRQ4)  EXW WKH FRQVXPHU ZRXOG SULFH UHTXHVWHG RU VLPSO\ FKRRVH QRW WR SXUFKDVH WKH SRZHU DJUHHPHQWV REWDLQ QR EHQHILW IURP WKH ORZHU DFWXDO FRVW  1RUWK$PHULFDQ1DWXUDO5HVRXUFHV 1R 1R 1RUWK$PHULFDQ1DWXUDO5HVRXUFHV  ,QFHWDOY6WUDQGHWDO ,QFHWDOY6WUDQGHWDO %HJLQQLQJLQsDQXDU\RIWKH036&EHJDQWRLVVXH 7KHTXDOLILFDWLRQmWRWKHH[WHQWWKDWlGHPRQVWUDWHVDODFNRI RUGHUV WR FUHDWH D IUDPHZRUN IRU WKH UHVWUXFWXULQJ RI WKH FRQFOXVLYHQHVV$Q\SRWHQWLDOYLRODWLRQRI3853$GRHVQRW HOHFWULFXWLOLW\LQGXVWU\LQ0LFKLJDQ7KH&RPPLVVLRQKHOG DFWXDOO\RFFXUXQOHVVRUXQWLODXWLOLW\EUHDFKHVD33$ SXEOLFPHHWLQJVDQGDFFHSWHGSXEOLFFRPPHQWVWKURXJKRXW WKH SURFHVV  2Q sXQH   WKH 036& LVVXHG DQ RUGHU 7KHGLVWULFWFRXUWRSLQLRQPHUHO\H[SUHVVHVDWUXLVPWKDWLV GHWDLOLQJ LWV SODQ IRU GHUHJXODWLQJ WKH LQGXVWU\  7KH SODQ XQGLVSXWHGE\WKHSDUWLHV7KH036&DFNQRZOHGJHVWKDWDQ SKDVHVLQFXVWRPHUFKRLFHRIHOHFWULFLW\SURYLGHUVDOORZLQJ DWWHPSWWRDYRLGWKH33$VWKURXJKWKHmUHJXODWRU\RXWlFODXVH FKRLFHIRUDOOFXVWRPHUVE\7KHRUGHUSHUPLWVXWLOLWLHV ZRXOGIDLO,QLWV5HSO\%ULHIWKH036&VWDWHV WRFROOHFWmVWUDQGHGFRVWVlWKURXJKWKH\HDU5HFRYHU\ RIVWUDQGHGFRVWVLVHVVHQWLDOO\UHPXQHUDWLRQIRULQYHVWPHQW >3ODLQWLIIVj@EULHIVDUJXHWKDWEHFDXVHWKHFRQWUDFWVZLWK XQGHUWDNHQSXUVXDQWWRUHJXODWRU\UHTXLUHPHQWV8QGHUWKH WKH XWLOLWLHV FRQWDLQ mUHJXODWRU\ RXW FODXVHVl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mDYRLGHGFRVWVl IURPWKHSXUFKDVLQJGLVWULEXWRUXWLOLW\WR FROOHFWLRQ RI VWUDQGHG FRVWV VWDWLQJ WKDW m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l036&&DVH1R8 HYLGHQFHWRLQGLFDWHWKDWWKH036&KDVWKUHDWHQHGRULVOLNHO\ 2SLQLRQDQG2UGHUS 2FWREHU 7KHRUGHUDOVR WRWDNHVXFKDFWLRQ VWDWHG WKDW WKH 036& ZRXOG LPSOHPHQW D mWUXHXS PHFKDQLVPlWRSUHYHQWRYHUFROOHFWLRQRUXQGHUFROOHFWLRQRI VWUDQGHGFRVWVDVWKHQHZPDUNHWIRUPV,G  7KH RQO\ HYLGHQFH WKDW KLQWV DW WKH H[LVWHQFH RI D FXUUHQW MXVWLFLDEOH FDVH RU FRQWURYHUV\ LV WKH DIILGDYLW SUHVHQWHG E\ 3ODLQWLII &RPPRQZHDOWK 'XULQJ WKH SXEOLF FRPPHQW SHULRG RQH RI WKH 4)V 3RZHU 7KH DIILGDYLW LQGLFDWHV WKDW XWLOLW\ &RQVXPHUV (QHUJ\ &RPSDQ\ 0LGODQG &RJHQHUDWLRQ 9HQWXUH D SODLQWLII LQ WKLV FDVH KDG PDGH LQTXLULHV WR &RPPRQZHDOWK UHJDUGLQJ &RPPRQZHDOWKjV LQWHUHVW LQ VHOOLQJ RU UHVWUXFWXULQJ LWV H[LVWLQJ SRZHU SXUFKDVH DJUHHPHQWV 7KH DUJXHGWKDWWKHmWUXHXSPHFKDQLVPlPXVWSURYLGHIRUIXOO DIILGDYLW DOVR VKRZV WKDW &RQVXPHUV ZDV DSSDUHQWO\ XQZLOOLQJ WR SD\ WKH UHFRYHU\RIWKH4)Vj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sHUVH\)G  UG&LU FHUWGHQLHGVXEQRPsHUVH\&HQWUDO 7KHTXDOLI\LQJIDFLOLWLHVKDYHFRQIXVHGWKHUHFRYHU\RI 3RZHU /LJKW&RY)UHHKROG&RJHQHUDWLRQ$VVRF/3 VWUDQGHGFRVWVDQGWKHHQIRUFHPHQWRISRZHUSXUFKDVH  86    EXW VHH $JULOHFWULF 3RZHU 3DUWQHUV DJUHHPHQWV7KHUHLVQRWKLQJLQWKHWUXHXSPHFKDQLVP /WGY(QWHUJ\*XOI6WDWHV,QF)G WK&LU WKDW DIIHFWV WKH ULJKWV RI WKH 0&9 RU DQ\ TXDOLI\LQJ FLWLQJWKHGLVWULFWFRXUWjVRSLQLRQLQWKHLQVWDQWFDVHIRUWKH IDFLOLW\  7R WKH H[WHQW WKH TXDOLI\LQJ IDFLOLWLHV KDYH SURSRVLWLRQWKDWWKHmUHJXODWRU\RXWFODXVHVlDUHHQIRUFHDEOH  HQIRUFHDEOH FRQWUDFWV WKH XWLOLWLHV UHPDLQ REOLJDWHG WR KRQRUWKHFRQWUDFWVDQGUHPDLQIUHHWRVHHNUHFRYHU\RI $VVXPLQJ DOO WKHVH VWDUV DOLJQ WKH 4)V PD\ ZHOO IDFH D WKRVH FRVWV IURP UDWHSD\HUV  1HLWKHU DSSURYDO IRU WKH MXVWLFLDEOHFRQWURYHUV\DIWHUWKH\HDU%XWDWWKLVWLPH XWLOLWLHVWRUHFRYHUVWUDQGHGFRVWVQRUDSSURYDORIDWUXH DQ\FRQWURYHUV\LVK\SRWKHWLFDO,WLVWHOOLQJWKDWWKHSODLQWLIIjV XS PHFKDQLVP FKDQJHV WKH ULJKWV RI WKH TXDOLI\LQJ FRPSODLQWLVSKUDVHGODUJHO\LQWKHVXEMXQFWLYHHJm>L@IWKH IDFLOLWLHV7KH&RPPLVVLRQWKHUHIRUHFRQFOXGHVWKDWLW 036&RUGHUVjVXEMHFWWKH3ODLQWLIIVWRUDWHUHJXODWLRQWKHQ QHHG QRW DGGUHVV FRQFHUQV DERXW UHFRYHU\ RI FRVWV WKHRUGHUVYLRODWH3853$ls$DW HPSKDVLVDGGHG  EH\RQG036&&DVH1R82SLQLRQDQG 2UGHUSS 2FWREHU  6HFRQGLWLVQRWFOHDUZKDWW\SHRIFRQFOXVLYHMXGJPHQWZH FRXOGUHQGHULQWKLVSRWHQWLDOGLVSXWH7KHGLVWULFWFRXUWRUGHU &RQFHUQHGRYHUWKHXWLOLWLHVjDELOLW\WRFROOHFWWKHmDYRLGHG RIIHUVQRVSHFLILFUHOLHIPLUURULQJWKHWHQWDWLYHODQJXDJHRI FRVWVlWKURXJKWKHVWUDQGHGFRVWPHFKDQLVPDQGVXEVHTXHQWO\ WKHFRPSODLQW7KHGLVWULFWFRXUWKHOG PDNHJRRGRQWKHSRZHUSXUFKDVHDJUHHPHQWV 33$V WKH 4)VUHTXHVWHGDUHKHDULQJRIWKH2FWREHURUGHUV 7KH0LFKLJDQ3XEOLF6HUYLFH&RPPLVVLRQjV m036&l $IWHU UHKHDULQJ WKH &RPPLVVLRQ LVVXHG DQ RUGHU RQ RUGHUVRIsXQH2FWREHUsDQXDU\ sDQXDU\UHLWHUDWLQJLWVSUHYLRXVFRQFOXVLRQV7KH  DQG )HEUXDU\   FROOHFWLYHO\ WKH 4)VWKHQDVNHGIRUFODULILFDWLRQUHJDUGLQJKRZWKHVWUDQGHG m5HVWUXFWXULQJ2UGHUVl DUHSUHHPSWHGE\3853$DQG FRVWFROOHFWLRQDQGWKHWUXHXSSURYLVLRQVZRXOGDIIHFWWKHLU WKH6XSUHPDF\&ODXVHRIWKH8QLWHG6WDWHV&RQVWLWXWLRQ 33$FRQWUDFWV7KH036&UHVSRQGHGRQ)HEUXDU\ WRWKHH[WHQWWKDWWKH\SURKLELWDQ\XWLOLW\IURPUHFRYHU\ VWDWLQJmWKH&RPPLVVLRQGLGQRWQRUGLGLWLQWHQGWRPRGLI\ IURP LWV FXVWRPHUV DQ\ FKDUJH IRU DYRLGHG FRVWV RU FKDUJHV LQ SRZHU SXUFKDVH DJUHHPHQWVl DQG UHLWHUDWHG mVWUDQGHG FRVWVl  WR EH SDLG WR 3ODLQWLIIV DV TXDOLI\LQJ VWDWHPHQWVIURPLWVSULRURUGHUV7KH036&DOVRQRWHGWKDW IDFLOLWLHV XQGHU 3853$ SXUVXDQW WR SRZHU SXUFKDVH mWKHFRQFHUQVUDLVHG>E\SODLQWLIIV@DUHVSHFXODWLYHEHFDXVH DJUHHPHQWV m33$l  EHWZHHQ VXFK XWLOLWLHV DQG WKH\ DUH EDVHG HQWLUHO\ XSRQ WKH FRQMHFWXUH WKDW WKHLU 3ODLQWLIIVl)6XSSG :'0LFK  FRQWUDFWXDOSULFHVZLOOH[FHHGWKHPDUNHWSULFHIRUSRZHULQ :/DW  :'0LFK  HPSKDVLVDGGHG  DQGEH\RQGl6WLOOVNHSWLFDOWKH4)VILOHGDSSHDOVWKDW DUHFXUUHQWO\SHQGLQJLQWKH0LFKLJDQ&RXUWRI$SSHDOVDQG LQIHGHUDOGLVWULFWFRXUW  *HQHUDOO\ D mUHJXODWRU\ RXW FODXVHl LV D SURYLVLRQ FRQWDLQHG LQ D SRZHU SXUFKDVH DJUHHPHQW WKDW SHUPLWV D XWLOLW\ WR PRGLI\ WKH FRQWUDFWXDO 7KHGLVWULFWFRXUWIRXQGWKDWDFDVHRUFRQWURYHUV\H[LVWHG UDWHV LI FKDQJHV LQ WKH UHJXODWRU\ HQYLURQPHQW LPSDLU WKH DELOLW\ RI WKH KROGLQJ XWLOLW\ IXOO\ WR UHFRYHU SD\PHQW IURP FRQVXPHUV LQ D WLPHO\ PDQQHU  1RUWK$PHULFDQ1DWXUDO5HVRXUFHV 1R 1R 1RUWK$PHULFDQ1DWXUDO5HVRXUFHV  ,QFHWDOY6WUDQGHWDO ,QFHWDOY6WUDQGHWDO m,IVXFKDQLQWHUSUHWDWLRQ>LHSODLQWLIIVjLQWHUSUHWDWLRQ@LV KDYLQJ DGYHUVH OHJDO LQWHUHVWV D GLVSXWH GHILQLWH DQG FRUUHFW3ODLQWLIIVZLOOIDFHWKHSURVSHFWRIORVLQJODUJH FRQFUHWHQRWK\SRWKHWLFDORUDEVWUDFWl VXPVRIWKHLUDYRLGHGFRVWUDWHVVHWIRUWKLQWKHLU33$V ,QWKLV&RXUWjVMXGJPHQWPHUHO\IDFLQJVXFKORVVHVLVD %DEELWWY)DUP:RUNHUV1DWLRQDO8QLRQ86 FXUUHQWLQMXU\EHFDXVHDVXUHWKLQJKDVPRUHYDOXHWRDQ    LQWHUQDOFLWDWLRQVRPLWWHG LQYHVWRUDQGSRWHQWLDOLQYHVWRUWKDQDQXQFHUWDLQWKLQJ )XUWKHUPRUH DOWKRXJK WKH WKUHDWHQHG LQMXU\ PD\ QRW ,Q LQWHUSUHWLQJ WKH 'HFODUDWRU\ sXGJPHQW $FW WKH &RXUW RFFXUIRUVHYHUDO\HDUVWKHXQFHUWDLQW\LVDFXUUHQWLQMXU\ VWDWHG WR3ODLQWLIIVjYDOXH $ µFRQWURYHUV\j LQ WKLV VHQVH PXVW EH RQH WKDW LV )6XSSG DSSURSULDWH IRU MXGLFLDO GHWHUPLQDWLRQ  $ MXVWLFLDEOH FRQWURYHUV\ LV WKXV GLVWLQJXLVKHG IURP D GLIIHUHQFH RU 7KH GLVWULFW FRXUW DOVR KHOG WKDW WKH 036& RUGHUV DUH GLVSXWHRIDK\SRWKHWLFDORUDEVWUDFWFKDUDFWHUIURPRQH mSUHHPSWHG E\ 3853$ DQG WKH 6XSUHPDF\ &ODXVH RI WKH WKDW LV DFDGHPLF RU PRRW  7KH FRQWURYHUV\ PXVW EH 8QLWHG6WDWHV&RQVWLWXWLRQWRWKHH[WHQWWKDWWKH\SURKLELWDQ\ GHILQLWH DQG FRQFUHWH WRXFKLQJ WKH OHJDO UHODWLRQV RI XWLOLW\ IURP UHFRYHULQJ IURP LWV FXVWRPHUV DQ\ FKDUJH IRU SDUWLHVKDYLQJDGYHUVHOHJDOLQWHUHVWV,WPXVWEHDUHDO DYRLGHGFRVWV RUmVWUDQGHGFRVWVl WREHSDLGWR3ODLQWLIIVDV DQGVXEVWDQWLDOFRQWURYHUV\DGPLWWLQJRIVSHFLILFUHOLHI TXDOLI\LQJIDFLOLWLHVXQGHU3853$l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j GLVSXWH LV  $HWQD/LIH,QV&RRI+DUWIRUG&RQQY+DZRUWK K\SRWKHWLFDODWWKLVSRLQWLQWLPH7KHSODLQWLIIVj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j FRQWUDFW SULFHV(YHQWKHQLWLVQRWFOHDUZKHWKHUmUHJXODWRU\ RXWl 7KHGLIIHUHQFHEHWZHHQDQDEVWUDFWTXHVWLRQDQGDmFDVH FODXVHV LQ WKHVH FRQWUDFWV ZRXOG RSHUDWH WR YRLG WKH RUFRQWURYHUV\lLVRQHRIGHJUHHRIFRXUVHDQGLVQRW GLVFHUQLEOH E\ DQ\ SUHFLVH WHVW  7KH EDVLF LQTXLU\ LV ZKHWKHUWKHmFRQIOLFWLQJFRQWHQWLRQVRIWKHSDUWLHV SUHVHQWDUHDOVXEVWDQWLDOFRQWURYHUV\EHWZHHQWKHSDUWLHV