In re: Swallen's Inc v. Southern District of Ohio at Cincinnati

(/(&7521,&&,7$7,21)('$SS3WK&LU
)LOH1DPHES

%$1.5837&<$33(//$7(3$1(/2)7+(6,;7+&,5&8,7


,15(6:$//(1
6,1&  
 
'HEWRU 
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

67$7(2)2+,2'(3$570(172)
7$;$7,21DQG2+,2%85($82)
:25.(56&203(16$7,21 

$SSHOODQWV 
 126
Y 

6:$//(1
6,1& 

$SSHOOHH 
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

$SSHDOIURPWKH8QLWHG6WDWHV%DQNUXSWF\&RXUW
IRUWKH6RXWKHUQ'LVWULFWRI2KLR:HVWHUQ'LYLVLRQDW&LQFLQQDWL
1R

6XEPLWWHG2FWREHU

'HFLGHGDQG)LOHG1RYHPEHU

%HIRUH%52:1&22.DQG025*(167(51&/$55(1
%DQNUXSWF\$SSHOODWH3DQHOsXGJHV
BBBBBBBBBBBBBBBBBB

&2816(/

21%5,()7KRPDVs6WUDXV$66,67$17$77251(<*(1(5$/&LQFLQQDWL2KLR
6XVDQ.&OLIIHO$66,67$17$77251(<*(1(5$/&ROXPEXV2KLR:LOOLDP3
&ROH\,,/$:2)),&(2):,//,$0&2/(<,,&LQFLQQDWL2KLRIRU$SSHOODQWV
7KRPDV:&RIIH\5HXHO'$VK&256 %$66(77//&&LQFLQQDWL2KLRIRU
$SSHOOHH


 BBBBBBBBBBBBBBB

23,1,21
BBBBBBBBBBBBBBB

s2+1 & &22. %DQNUXSWF\ $SSHOODWH 3DQHO sXGJH  7KH 2KLR 'HSDUWPHQW RI
7D[DWLRQDQGWKH2KLR%XUHDXRI:RUNHUV&RPSHQVDWLRQEULQJWKLVDSSHDOIURPDGHFLVLRQ
RIWKHEDQNUXSWF\FRXUWJUDQWLQJDPRWLRQE\WKH'HEWRU6ZDOOHQjV,QFWRGLVWULEXWHWKH
IXQGVUHPDLQLQJLQLWVSRVVHVVLRQDFFRUGLQJWRWKHGLVWULEXWLRQVFKHGXOHLQ86&†
DQGWRGLVPLVVLWVYROXQWDU\&KDSWHUFDVH)RUWKHUHDVRQVWKDWIROORZZHUHYHUVHWKH
GHFLVLRQDQGUHPDQGWKHFDVHWRWKHEDQNUXSWF\FRXUWIRUIXUWKHUSURFHHGLQJV

,,668(621$33($/
7KH SULQFLSDO LVVXHV LQ WKLV FDVH DUH  ZKHWKHU WKH EDQNUXSWF\ FRXUW KDG WKH
DXWKRULW\RYHUWKHREMHFWLRQVRIFUHGLWRUVWRRUGHUGLVWULEXWLRQRIWKHDVVHWVRIWKHHVWDWH
DFFRUGLQJ WR  86& †  LQ RUGHU WR WHUPLQDWH D &KDSWHU  FDVH LQ ZKLFK QR
GLVFORVXUHVWDWHPHQWZDVDSSURYHGDQGQRSODQZDVHYHUILOHGZKHWKHUWKHDSSHDOLV
PRRWEHFDXVHVRPHGLVWULEXWLRQSXUVXDQWWRWKHFRXUWjVRUGHUKDVDOUHDG\RFFXUUHGDQG
ZKHWKHUDGHTXDWHQRWLFHRIDSHQGLQJPRWLRQWRGLVPLVVWKHFDVHZDVJLYHQWRWKH
FUHGLWRUVXQGHU)HG5%DQNU3D

,,s85,6',&7,21$1'67$1'$5'2)5(9,(:
7KH%DQNUXSWF\$SSHOODWH3DQHORIWKH6L[WK&LUFXLWKDVMXULVGLFWLRQWRGHFLGHWKLV
DSSHDO  :H KDYH MXULVGLFWLRQ EHFDXVH D mILQDO RUGHU RI WKH EDQNUXSWF\ FRXUW PD\ EH
DSSHDOHGE\ULJKWXQGHU86&†DDQGEHFDXVHWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH6RXWKHUQ'LVWULFWRI2KLRKDVDXWKRUL]HGDSSHDOVWRWKH%$37KHLVVXHVRQDSSHDO
LQWKLVFDVHSUHVHQWTXHVWLRQVRIODZZKLFKWKLVFRXUWUHYLHZVGHQRYR%RRKHU(QWHUVY
(DVWRZQ$XWR&R,QUH(DVWRZQ$XWR&R%5%$3WK&LU


 ,,,)$&76
7KHSHUWLQHQWIDFWVLQWKLVFDVHDUHSURFHGXUDODQGDUHQRWGLVSXWHG6ZDOOHQjV,QF
DPDMRU&LQFLQQDWLUHWDLOHUILOHGLWVSHWLWLRQIRUUHOLHIXQGHU&KDSWHURIWKH%DQNUXSWF\
&RGHRQ2FWREHU6KRUWO\WKHUHDIWHULQ'HFHPEHUWKH'HEWRUFHDVHGRSHUDWLRQV
DQGFORVHGLWVVWRUHV5DWKHUWKDQFRQYHUWLQJWKHFDVHWRDFDVHXQGHU&KDSWHUWKH
'HEWRUSXUVXHGOLTXLGDWLRQRILWVDVVHWVXQGHU&KDSWHU2Q'HFHPEHULWILOHG
DGLVFORVXUHVWDWHPHQWHVWLPDWLQJWKDWLQH[FHVVRIPLOOLRQZRXOGEHDYDLODEOHWRSD\
FUHGLWRUV7KHEDQNUXSWF\FRXUWKDVQHYHUDSSURYHGWKLVGLVFORVXUHVWDWHPHQWQRUKDVDQ\
SODQEHHQILOHGDQGQRZDIWHUVL[\HDUVLQ&KDSWHULWDSSHDUVWKDWWKH'HEWRUKDVRQO\
DERXWDYDLODEOHWRGLVWULEXWHWRFUHGLWRUV7KHVKRUWIDOOUHVXOWVLQSDUWIURPWKH
IDFW WKDW FHUWDLQ DVVHWV VROG E\ WKH 'HEWRU EURXJKW PXFK OHVV LQWR WKH HVWDWH WKDQ
DQWLFLSDWHG7KHUHVXOWLVWKDWWKH$SSHOODQWVjSULRULW\WD[FODLPVFDQQRWEHSDLGLQIXOO
,QsDQXDU\WKH2KLR'HSDUWPHQWRI7D[DWLRQILOHGDPRWLRQWRGLVPLVVWKH
FDVHFRQYHUWLWWRD&KDSWHURUDSSRLQWD&KDSWHUWUXVWHH$IWHUDKHDULQJRQWKLV
PRWLRQ WKH EDQNUXSWF\ FRXUW RUGHUHG WKH 'HEWRU WR ILOH D PRWLRQ WR GLVWULEXWH IXQGV RU
FRQYHUWWKHFDVHWRRQHXQGHU&KDSWHU7KH'HEWRUWKHUHDIWHUILOHGDPRWLRQWRGLVPLVV
WKHFDVHDQGWRGLVWULEXWHWKHUHPDLQLQJIXQGVDFFRUGLQJWRWKHSULRULWLHVHVWDEOLVKHGE\
86&†WKHJHQHUDOSULRULW\VFKHGXOHRIWKH%DQNUXSWF\&RGH,WJDYHQRWLFHRIWKLV
PRWLRQWRFRXQVHOIRUWKH&RPPLWWHHRI8QVHFXUHG&UHGLWRUVWKHVHFXUHGFUHGLWRUVWKH
8QLWHG6WDWHV7UXVWHHDQGFHUWDLQRWKHUFUHGLWRUVZKRKDGUHTXHVWHGVHUYLFHLQFOXGLQJWKH
$SSHOODQWV7KHEDQNUXSWF\FRXUWJUDQWHG'HEWRUjVPRWLRQRYHU$SSHOODQWVjREMHFWLRQVDQG
RUGHUHGGLVWULEXWLRQRIWKHUHPDLQLQJIXQGVDFFRUGLQJWR†DIWHUZKLFKLWRUGHUHGWKH
FDVHGLVPLVVHGXQGHUWKHSURYLVLRQVRI86&††DDQGE7KHUHVXOWZDV
WKDWWKH$SSHOODQWVZHUHHQWLWOHGRQO\WRDSURUDWHGGLVWULEXWLRQXQGHU86&†D
7KH2KLR'HSDUWPHQWRI7D[DWLRQXQVXFFHVVIXOO\VRXJKWDVWD\SHQGLQJDSSHDOLQWKH
EDQNUXSWF\FRXUWDQGWKLVWLPHO\DSSHDOHQVXHG

,9',6&866,21
7KHEDQNUXSWF\FRXUWjVILQDORUGHUGLGWZRWKLQJV)LUVWLWRUGHUHGWKH'HEWRUWR


GLVWULEXWHLWVUHPDLQLQJDVVHWVDFFRUGLQJWRWKHSULRULWLHVVHWRXWLQ86&†HYHQ
WKRXJK QR GLVFORVXUH VWDWHPHQW KDG EHHQ DSSURYHG DQG QR SODQ KDG EHHQ ILOHG RU
FRQILUPHG6HFRQGLWRUGHUHGWKHFDVHWREHGLVPLVVHGRQFHWKHIRUHJRLQJGLVWULEXWLRQ
ZDVFRPSOHWHG:HFRQFOXGHWKDWWKHEDQNUXSWF\FRXUWHUUHGLQRUGHULQJWKHGLVWULEXWLRQ
RIIXQGVRYHUWKHREMHFWLRQRIWKH$SSHOODQWV
,QFRQVLGHULQJWKHSURSULHW\RIWKHRUGHUWRGLVWULEXWHWKHUHPDLQLQJDVVHWVRIWKH
HVWDWHLWPXVWEHERUQHLQPLQGWKDWWKLVFDVHZDVSURFHHGLQJDVD&KDSWHU1RWUXVWHH
KDGEHHQDSSRLQWHGDQGWKH'HEWRUZDVLQFRQWURORILWVDIIDLUV(YHQWKRXJKWKLVFDVH
ZDV D OLTXLGDWLQJ &KDSWHU  LW FRXOG QRW EH WUHDWHG DV D &KDSWHU  IRU GLVWULEXWLRQ
SXUSRVHVEHFDXVHLQD&KDSWHUFDVHLWLVm>W@KHJHQHUDOUXOHWKDWGLVWULEXWLRQVKRXOG
QRW RFFXU H[FHSW SXUVXDQW WR D FRQILUPHG SODQ RI UHRUJDQL]DWLRQ DEVHQW H[WUDRUGLQDU\
FLUFXPVWDQFHVl,QUH&RQURH)RUJH 0IJ&RUS%5%DQNU:'3D
2WKHUZLVH
>L@IGLVWULEXWLRQLVPDGHWRFUHGLWRUVLQDOLTXLGDWLQJ&KDSWHU
EHIRUHFRQILUPDWLRQRIDSODQWKHUHZLOOEHOLWWOHLQFHQWLYHIRU
SDUWLHV LQ LQWHUHVW WR SURVHFXWH WKH FDVH LQ DQ H[SHGLWLRXV
PDQQHUPXFKOHVVWRSHUIRUPWKHZRUNUHTXLUHGWRLVVXHDQG
REWDLQDSSURYDORIDGLVFORVXUHVWDWHPHQWDQGSODQ
,GDWFLWDWLRQVRPLWWHG
,QGHHG)HGHUDO5XOHRI%DQNUXSWF\3URFHGXUHDVVXPHVWKDWGLVWULEXWLRQZLOO
RFFXURQO\DIWHUDSODQLVFRQILUPHGm>$@IWHUDSODQLVFRQILUPHGGLVWULEXWLRQVKDOOEHPDGH
WRFUHGLWRUVZKRVHFODLPVKDYHEHHQDOORZHGl$OWKRXJK5XOHGHDOVHVVHQWLDOO\
ZLWKRWKHUPDWWHUVLWDVVXPHVWKDWFRQILUPDWLRQRIDSODQZLOOSUHFHGHWKHGLVWULEXWLRQWR
FUHGLWRUVEHFDXVHLWLVWKHFRQILUPHGSODQWKDWVSHFLILHVZKDWZLOOEHJLYHQWRZKRP7KHUH
LVQRSUHRUGDLQHGGLVWULEXWLRQVFKHPHEHFDXVHWKHSODQLVIRUWKHPRVWSDUWDFRQVHQVXDO
GLVWULEXWLRQVFKHPHGHYLVHGE\WKHGHEWRUDQGLWVFUHGLWRUV2UGHULQJDIXOOGLVWULEXWLRQLQ
D &KDSWHU  ZLWKRXW ILUVW KDYLQJ D FRQILUPHG SODQ WKHUHIRUH YLRODWHV WKH FRQFHSWXDO
SUHGLFDWHRI&KDSWHU
$OWKRXJKZHDUHDZDUHRIQRFRXUWWKDWKDVGHFLGHGDFDVHH[DFWO\OLNHWKLVRQH
VHYHUDO FRXUWV KDYH FRPPHQWHG RQ WKH LPSURSULHW\ RI GLVWULEXWLRQV WR FUHGLWRUV LQ WKH
DEVHQFHRIDFRQILUPHGSODQ7KHLVVXHKDVXVXDOO\DULVHQZKHQDVDOHRIHVWDWHDVVHWV


KDV EHHQ PDGH XQGHU  86& † E DQG LW LV SURSRVHG WKDW WKH SURFHHGV EH
GLVWULEXWHGWRDSDUWLFXODUFUHGLWRUEHIRUHDSODQKDVEHHQFRQILUPHG,Q5RVHQEHUJ5HDO
(VWDWH(TXLW\)XQG,,,Y$LU%HGV,QF,QUH$LU%HGV,QF%5%$3WK&LU
WKHEDQNUXSWF\FRXUWKDGDOORZHGWKHGHEWRUWRSD\DVDGLVWULEXWLRQWRWKH
,QWHUQDO 5HYHQXH 6HUYLFH EHIRUH FRQILUPDWLRQ RI D SODQ  5HYHUVLQJ WKH %DQNUXSWF\
$SSHOODWH3DQHORIWKH1LQWK&LUFXLWVWDWHG
,WLVQRWWKHSURSULHW\RIWKHVDOHEXWWKHGLVSRVLWLRQRIWKHVDOH
SURFHHGVZKLFKLVDWLVVXHLQWKLVFDVH:HFRQFOXGHWKDWWKH
EDQNUXSWF\ FRXUW DEXVHG LWV GLVFUHWLRQ EHFDXVH WKH RUGHU
DOORZLQJWKHGLVWULEXWLRQRIWKHVDOHSURFHHGVDOORZVWKHGHEWRU
WRFLUFXPYHQWWKHSURYLVLRQVRIWKH%DQNUXSWF\&RGHIRUWKH
DGPLQLVWUDWLRQRIDFDVHXQGHU&KDSWHU
,GDW
7KH)LIWK&LUFXLW&RXUWRI$SSHDOVKDVQRWHGWKDWm>W@KHGHEWRUDQGWKH%DQNUXSWF\
&RXUWVKRXOGQRWEHDEOHWRVKRUWFLUFXLWWKHUHTXLUHPHQWVRI&KDSWHUIRUFRQILUPDWLRQ
RIDUHRUJDQL]DWLRQSODQE\HVWDEOLVKLQJWKHWHUPVRIWKHSODQVXEURVDLQFRQQHFWLRQZLWK
DVDOHRIDVVHWVl3HQVLRQ%HQHILW*XDUDQW\&RUSY%UDQLII$LUZD\V,QF,QUH%UDQLII
$LUZD\V,QF)GWK&LU,Q%UDQLIIWKHEDQNUXSWF\FRXUWKDG
DSSURYHGWKHGHEWRUjVWUDQVIHURIFDVKDLUSODQHVHTXLSPHQWDQGRWKHUDVVHWVLQVXFKD
ZD\DQGWRVXFKDJUHDWH[WHQWWKDWWKHWUDQVIHUVmKDGWKHSUDFWLFDOHIIHFWRIGLFWDWLQJVRPH
RIWKHWHUPVRIDQ\IXWXUHUHRUJDQL]DWLRQSODQl,G7KHFRXUWFRQFOXGHG
:HUHWKLVWUDQVDFWLRQDSSURYHGDQGFRQVLGHULQJWKHSURSHUWLHV
SURSRVHGWREHWUDQVIHUUHGOLWWOHZRXOGUHPDLQVDYHIL[HGEDVH
HTXLSPHQWDQGOLWWOHSURVSHFWRURFFDVLRQIRUIXUWKHUUHRUJDQL
]DWLRQ7KHVHFRQVLGHUDWLRQVUHLQIRUFHRXUYLHZWKDWWKLVLVLQ
IDFWDUHRUJDQL]DWLRQ
,G$WOHDVWZKHQDSDUW\LQLQWHUHVWREMHFWVDEDQNUXSWF\FRXUWFDQQRWLVVXHRUGHUVWKDW
E\SDVV WKH UHTXLUHPHQWV RI &KDSWHU  VXFK DV GLVFORVXUH VWDWHPHQWV YRWLQJ DQG D
FRQILUPHGSODQDQGSURFHHGWRDGLUHFWUHRUJDQL]DWLRQRQWKHWHUPVWKHFRXUWWKLQNVEHVW
QRPDWWHUKRZH[SHGLHQWWKDWPLJKWEH


,Q WKLV FDVH WZR LQWHUHVWHG SDUWLHV REMHFWHG WR WKH GLVWULEXWLRQ DW LVVXH :KHWKHU DOO LQWHUHVWHG SDUWLHV
LQ D FDVH PD\ ZDLYH WKH IRUPDOLW\ RI D FRQILUPHG SODQ DQG DJUHH WR D GLVWULEXWLRQ RUGHU LV QRW WKH LVVXH EHIRUH
XV LQ WKLV FDVH


 )LQDOO\WKH)RXUWK&LUFXLWUHYHUVHGDFDVHLQZKLFKWKHEDQNUXSWF\FRXUWSXUSRUWHGO\
H[HUFLVLQJLWVHTXLWDEOHSRZHUVXQGHU86&†DVHWXSDVSHFLDOIXQGWKDWZDV
WRSD\FHUWDLQXQVHFXUHGFODLPVEHIRUHDQ\SODQKDGEHHQFRQILUPHG5HMHFWLQJDOOVXFK
GLVWULEXWLRQVWKHFRXUWRIDSSHDOVVWDWHG
7KH%DQNUXSWF\&RGHGRHVQRWSHUPLWDGLVWULEXWLRQWRXQVH
FXUHGFUHGLWRUVLQD&KDSWHUSURFHHGLQJH[FHSWXQGHUDQG
SXUVXDQW WR D SODQ RI UHRUJDQL]DWLRQ WKDW KDV EHHQ SURSHUO\
SUHVHQWHGDQGDSSURYHG86&†SURYLGHVIRUWKH
ILOLQJRIDSODQRIUHRUJDQL]DWLRQ6HFWLRQVVHWIRUWK
WKHUHTXLUHGFRQWHQWVRIDSODQWKHFODVVLILFDWLRQRIFODLPVWKH
UHTXLUHPHQWV RI GLVFORVXUH RI WKH FRQWHQWV RI WKH SODQ WKH
PHWKRGIRUDFFHSWLQJWKHSODQDQ\PRGLILFDWLRQWKHUHRIWKH
KHDULQJUHTXLUHGRQFRQILUPDWLRQRIWKHSODQDQGWKHUHTXLUH
PHQWVIRUFRQILUPDWLRQ7KHFOHDUODQJXDJHRIWKHVHVWDWXWHV
DVZHOODVWKH%DQNUXSWF\5XOHVDSSOLFDEOHWKHUHWRGRHVQRW
DXWKRUL]H WKH SD\PHQW LQ SDUW RU LQ IXOO RU WKH DGYDQFH RI
PRQLHVWRRUIRUWKHEHQHILWRIXQVHFXUHGFODLPDQWVSULRUWRWKH
DSSURYDO RI WKH SODQ RI UHRUJDQL]DWLRQ  7KH FUHDWLRQ RI WKH
(PHUJHQF\7UHDWPHQW3URJUDPKDVQRDXWKRULW\WRVXSSRUWLW
LQWKH%DQNUXSWF\&RGHDQGYLRODWHVWKHFOHDUSROLF\RI&KDSWHU
 UHRUJDQL]DWLRQV E\ DOORZLQJ SLHFHPHDO SUHFRQILUPDWLRQ
SD\PHQWV WR FHUWDLQ XQVHFXUHG FUHGLWRUV  6XFK DFWLRQ DOVR
YLRODWHV %DQNUXSWF\ 5XOH  ZKLFK DOORZV GLVWULEXWLRQ WR
FUHGLWRUVRQO\DIWHUWKHDOORZDQFHRIFODLPVDQGWKHFRQILUPD
WLRQRIDSODQ
2IILFLDO&RPPRI(TXLW\6HFXULW\+ROGHUVY0DEH\)GWK&LU,Q
UHDFKLQJWKLVFRQFOXVLRQWKHFRXUWUHMHFWHGWKHDUJXPHQWWKDW86&†DJDYHWKH
EDQNUXSWF\FRXUWWKHSRZHUQHFHVVDU\WRFUHDWHVXFKDVSHFLDOIXQG
:KLOHWKHHTXLWDEOHSRZHUVHPDQDWLQJIURP†DDUHTXLWH
LPSRUWDQWLQWKHJHQHUDOEDQNUXSWF\VFKHPHDQGZKLOHVXFK
SRZHUV PD\ HQFRXUDJH FRXUWV WR EH LQQRYDWLYH DQG HYHQ
RULJLQDOWKHVHHTXLWDEOHSRZHUVDUHQRWDOLFHQVHIRUDFRXUWWR
GLVUHJDUGWKHFOHDUODQJXDJHDQGPHDQLQJRIWKHEDQNUXSWF\
VWDWXWHVDQGUXOHV

,GDFFRUG,QUH/XINLQ%5%DQNU('7HQQm&RXUWVVKRXOGQRW
HPSOR\†DVDWRROWREURDGO\OHJLVODWHQHZUHPHGLHVLQWRWKH%DQNUXSWF\&RGHl,Q
RUGHULQJWKHGLVWULEXWLRQLWGLGLQWKLVFDVHWKHEDQNUXSWF\FRXUWH[FHHGHGLWVSRZHUVXQGHU
†DE\FUHDWLQJDK\EULGFUHDWXUHQRWUHFRJQL]HGE\WKH%DQNUXSWF\&RGHD&KDSWHU


 ZLWKRXW WKH SURWHFWLRQV RI D WUXVWHH RU D &KDSWHU  ZLWKRXW WKH SURWHFWLRQV RI D
FRQILUPHGSODQ:HVLPSO\FDQQRWILQGDEDVLVLQWKH%DQNUXSWF\&RGHIRUSHUPLWWLQJRYHU
REMHFWLRQVE\LQWHUHVWHGSDUWLHVDGLVWULEXWLRQWRFUHGLWRUVRIDOOWKHDVVHWVLQD&KDSWHU
FDVHDEVHQWDFRQILUPHG&KDSWHUSODQ
$OWKRXJKZHILQGWKDWWKHEDQNUXSWF\FRXUWHUUHGLQRUGHULQJWKHGLVWULEXWLRQRIDVVHWV
LQWKLVFDVHWKH'HEWRUDUJXHVWKDWWKHLVVXHVUDLVHGRQDSSHDODUHQRZPRRWEHFDXVH
SXUVXDQWWRWKHEDQNUXSWF\FRXUWjVRUGHUSHUPLWWLQJGLVWULEXWLRQDQGGLVPLVVDOWKH'HEWRU
KDVDOUHDG\SDLGRXWDERXWRQHKDOIRIWKHIXQGVLQLWVSRVVHVVLRQ0RRWQHVVRFFXUVmZKHQ
WKH SODLQWLII UHFHLYHV WKH UHOLHI VRXJKW RU ZKHQ LW LV IDFWXDOO\ QRW OHJDOO\ LPSRVVLEOH WR
UHFHLYHVXFKUHOLHIl/LEHUOHVY&RXQW\RI&RRN)GWK&LU7KH
EXUGHQRIGHPRQVWUDWLQJPRRWQHVVRQDSSHDOLVRQWKHSDUW\DVVHUWLQJLWDQGPHHWLQJWKH
EXUGHQ UHTXLUHV D VKRZLQJ mWKDW WKH RXWFRPH RI WKLV DSSHDO FRXOG QRW DIIHFW WKH OHJDO
LQWHUHVWVRIWKHSDUWLHVl2KLRY0DGHOLQH0DULH1XUVLQJ+RPHV1RVDQG)G
WK&LUHPSKDVLVDGGHG$VDQRWKHUFRXUWKDVSXWLWm,QGHFLGLQJD
PRRWQHVV LVVXH
WKH TXHVWLRQ LV QRW ZKHWKHU WKH SUHFLVH UHOLHI VRXJKW DW WKH WLPH WKH
DSSOLFDWLRQIRUDQLQMXQFWLRQZDVILOHGLVVWLOODYDLODEOH7KHTXHVWLRQLVZKHWKHUWKHUHFDQ
EH DQ\ HIIHFWLYH UHOLHIjl  &DQWUHOO Y &LW\ RI /RQJ %HDFK  )G   WK &LU
TXRWLQJ*DUFLDY/DZQ)GWK&LUTXRWLQJ1RUWKZHVW
(QYWO'HI&WUY*RUGRQ)GWK&LU
5HOLHI IRU WKH $SSHOODQWV LQ WKLV FDVH LV VWLOO DW OHDVW SDUWO\ DYDLODEOH EHFDXVH
$SSHOODQWVFRXOGFRQFHLYDEO\LPSURYHWKHLUSRVLWLRQVLIWKHDSSHDOLVGHFLGHGLQWKHLUIDYRU
2QUHPDQGWKHEDQNUXSWF\FRXUWZRXOGKDYHDWOHDVWWKUHHFKRLFHVIRUSURFHHGLQJWKH
FDVH FRXOG EH FRQYHUWHG WR RQH XQGHU &KDSWHU  ZLWK WKH DWWHQGDQW DSSRLQWPHQW RI D
WUXVWHHWKHFDVHFRXOGEHGLVPLVVHGRULWFRXOGEHPDLQWDLQHGLQLWVFXUUHQWPRGH
DVD&KDSWHUZLWKRUZLWKRXWWKHDSSRLQWPHQWRIDWUXVWHH$WUXVWHHLIDSSRLQWHG
PLJKWGLVFRYHUDGGLWLRQDODVVHWVSHUKDSVLQWKHIRUPRIDYRLGDEOHWUDQVIHUVRUWKHWUXVWHH
PLJKW VHHN GLVJRUJHPHQW SDUWLFXODUO\ IURP SURIHVVLRQDOV RI GLVEXUVHPHQWV WKDW KDYH


DOUHDG\ EHHQ PDGH  ,I WKH FDVH LV FRQWLQXHG DV D &KDSWHU  ZLWK WKH 'HEWRU LQ
SRVVHVVLRQWKH$SSHOODQWVZRXOGEHHQWLWOHGDWWKHYHU\OHDVWWRDGLVFORVXUHVWDWHPHQW
DSSURYHGE\WKHFRXUWDQGWRWKHLUYRWLQJULJKWV
,WLVQRWQHFHVVDU\WRRXUMXULVGLFWLRQWKDWZHEHDEOHWRUHWXUQ$SSHOODQWVWRWKHLU
RULJLQDOSRVLWLRQVQRUPXVWZHJXHVVSUHFLVHO\ZKDWUHOLHIWKH$SSHOODQWVPLJKWUHFHLYHLQ
RUGHUWRGHWHUPLQHWKDWWKLVDSSHDOLVQRWPRRW$VWKH7HQWK&LUFXLWKDVVDLG
>:@HFDQQRWVD\WKDWDGHFLVLRQ>RQDSSHDO@WKDWWKHSODQZDV
HUURQHRXVO\ FRQILUPHG FRXOG QRW KDYH VRPH HIIHFW RQ WKH
SURFHHGLQJVEHORZHYHQLILWFRXOGQRWXQGRDOOWKDWKDVWDNHQ
SODFH

.LQJ5HVRXUFHV6WRFNKROGHUVj3URWHFWLYH&RPPY%DHU,QUH.LQJ5HVRXUFHV&R
)G   WK &LU  IRRWQRWH RPLWWHG DFFRUG 2KLR Y 0DGHOLQH 0DULH
1XUVLQJ+RPHV1RVDQG)GDW
 7KH6XSUHPH&RXUWKDVDOVRUHFRJQL]HGWKDWWKHSRVVLELOLW\RIDIXOOUHWXUQWRWKH
VWDWXV TXR DQWH LV QRW QHFHVVDU\ WR GHIHDW D FODLP RI PRRWQHVV  :KHUH WKH ,QWHUQDO
5HYHQXH6HUYLFHREWDLQHGWDSHUHFRUGLQJVSXUVXDQWWRDQXQODZIXOVXPPRQVWKH&RXUW
KHOGWKDWWKHSRVVLELOLW\RIRUGHULQJWKHLUUHWXUQRUGHVWUXFWLRQZDVVXIILFLHQWWRGHIHDWWKH
,56jVFODLPWKDWDQDSSHDORIWKHVXPPRQVHQIRUFHPHQWRUGHUZDVPRRW
(YHQWKRXJKLWLVQRZWRRODWHWRSUHYHQWRUWRSURYLGHDIXOO\
VDWLVIDFWRU\UHPHG\IRUWKHLQYDVLRQRISULYDF\WKDWRFFXUUHG
ZKHQWKH,56REWDLQHGWKHLQIRUPDWLRQRQWKHWDSHVDFRXUW
GRHVKDYHSRZHUWRHIIHFWXDWHDSDUWLDOUHPHG\E\RUGHULQJWKH
*RYHUQPHQWWRGHVWUR\RUUHWXUQDQ\DQGDOOFRSLHVLWPD\KDYH
LQLWVSRVVHVVLRQ7KHDYDLODELOLW\RIWKLVSRVVLEOHUHPHG\LV
VXIILFLHQWWRSUHYHQWWKLVFDVHIURPEHLQJPRRW
&KXUFKRI6FLHQWRORJ\RI&DOLIRUQLDY8QLWHG6WDWHV866&W
IRRWQRWHRPLWWHG7KXVLWLVHQRXJKWRILQGWKDWRXUGHFLVLRQFRXOGKDYHVRPH


7KH $SSHOODQWV DUH SDUWLFXODUO\ LQWHUHVWHG LQ REWDLQLQJ D WUXVWHH WR LQYHVWLJDWH YDULRXV DFWLRQV RI WKH

'HEWRU XQGHUWDNHQ GXULQJ WKH FRXUVH RI WKH &KDSWHU  FDVH 7KH $SSHOODQWV SRLQW RXW WKDW EHFDXVH WKH

'HEWRU ZLOO EH XQDEOH WR SD\ WKH SULRULW\ WD[HV LQ IXOO LQ DFFRUGDQFH ZLWK  86& † D& WKH 'HEWRU

ZLOO EH XQDEOH WR REWDLQ D FRQILUPHG SODQ RYHU REMHFWLRQV E\ WKH $SSHOODQWV +HQFH LW LV $SSHOODQWV
SRVLWLRQ

WKDW WKH FDVH VKRXOG EH FRQYHUWHG WR D &KDSWHU  FDVH ZLWK WKH DWWHQGDQW DSSRLQWPHQW RI D &KDSWHU 

WUXVWHH


HIIHFWLIWKHFDVHLVUHYHUVHGDQGUHPDQGHG6LQFHLWLVFRQFHLYDEOHWKDWWKH$SSHOODQWV
FRXOGLPSURYHWKHLUSRVLWLRQVLIUHPDQGVKRXOGRFFXUWKHFDVHLVQRWPRRW
$IWHU RUGHULQJ ZKDW DPRXQWV WR D &KDSWHU  GLVWULEXWLRQ WKH EDQNUXSWF\ FRXUW
GLVPLVVHGWKHFDVH7KH$SSHOODQWVFRQWHQGWKHGLVPLVVDOZDVLPSURSHUEHFDXVHWKH
EDQNUXSWF\FRXUWIDLOHGWRJLYHQRWLFHWRDOOFUHGLWRUVRIWKHKHDULQJRQWKHGLVPLVVDORIWKH
FDVH)HGHUDO5XOHRI%DQNUXSWF\3URFHGXUHDVWDWHVWKDWmDOOFUHGLWRUVlPXVW
UHFHLYHQRWLFHRIWKHKHDULQJRQWKHGLVPLVVDORIDFDVHXQGHU&KDSWHU7KHSDUWLHV
DJUHHWKDWWKHPRWLRQWRGLVPLVVZDVQRWVHUYHGRQDOOFUHGLWRUVEXWRQO\RQFRXQVHOIRUWKH
&RPPLWWHHRI8QVHFXUHG&UHGLWRUVWKHVHFXUHGFUHGLWRUVWKH8QLWHG6WDWHV7UXVWHHDQG
FHUWDLQRWKHUFUHGLWRUVZKRKDGUHTXHVWHGVHUYLFH7KH$SSHOODQWVKRZHYHUZHUHDPRQJ
WKHFUHGLWRUVZKRUHFHLYHGQRWLFHRIWKHPRWLRQWRGLVPLVV7KXVWKH\ODFNVWDQGLQJWR
UDLVHWKHQRWLFHLVVXHRQEHKDOIRIRWKHUFUHGLWRUV/XMDQY'HIHQGHUVRI:LOGOLIH86
6&WKROGLQJWKDWDSUHUHTXLVLWHWRVWDQGLQJLVDFRQFUHWH
DQGSDUWLFXODUL]HGLQMXU\WKDWKDVDIIHFWHGWKHSODLQWLIILQDSHUVRQDODQGLQGLYLGXDOZD\
0DVFRORY0HUULOO/\QFK3LHUFH)HQQHU 6PLWK,QF,QUH6FLHQWLILF&RQWURO&RUS
)5'   6'1< KROGLQJ WKDW SHUVRQ ZKR UHFHLYHG FODVV QRWLFH ODFNV
VWDQGLQJ WR FRPSODLQ WKDW RWKHUV GLG QRW  1HYHUWKHOHVV WKH GLVPLVVDO RUGHU PXVW EH
UHYHUVHG VR WKDW WKH EDQNUXSWF\ FRXUW FDQ FRQGXFW IXUWKHU SURFHHGLQJV LQ OLJKW RI WKH
UHYHUVDORILWVGLVWULEXWLRQRUGHU

9&21&/86,21
%HFDXVHZHEHOLHYHWKHEDQNUXSWF\FRXUWHUUHGLQRUGHULQJDGLVWULEXWLRQRIDVVHWV
EHIRUHDQ\SODQKDGEHHQSURSRVHGRUFRQILUPHGZH5(9(56(DQG5(0$1'WKHFDVH
WRWKHEDQNUXSWF\FRXUWIRUIXUWKHUSURFHHGLQJVQRWLQFRQVLVWHQWZLWKWKLVRSLQLRQ



5XOH D SURYLGHV m([FHSW DV SURYLGHG LQ VXEGLYLVLRQV K L DQG O RI WKLV UXOH WKH FOHUN RU

VRPH RWKHU SHUVRQ DV WKH FRXUW PD\ GLUHFW VKDOO JLYH WKH GHEWRU WKH WUXVWHH DOO FUHGLWRUV DQG LQGHQWXUH

WUXVWHHV DW OHDVW  GD\Vj QRWLFH E\ PDLO RI     LQ D FKDSWHU  OLTXLGDWLRQ D FKDSWHU  UHRUJDQL]DWLRQ

FDVH RU D FKDSWHU  IDPLO\ IDUPHU GHEW DGMXVWPHQW FDVH WKH KHDULQJ RQ WKH GLVPLVVDO RI WKH FDVH    l