United States v. Marlow

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  !  7+20$6 / 0$5/2:  'HIHQGDQW$SSHOODQW  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW.QR[YLOOH 1RnsDPHV+sDUYLV'LVWULFWsXGJH $UJXHGsXO\ 'HFLGHGDQG)LOHGsDQXDU\ %HIRUH6,/(5DQG*,/0$1&LUFXLWsXGJHV*,%%216 'LVWULFWsXGJH BBBBBBBBBBBBBBBBB &2816(/ $5*8('  1LNNL & 3LHUFH )('(5$/ '()(1'(5 6(59,&(6*UHHQHYLOOH7HQQHVVHHIRU$SSHOODQW0LFKDHO ( :LQFN $66,67$17 81,7(' 67$7(6 $77251(< 7KH +RQRUDEOH sXOLD 6 *LEERQV 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH :HVWHUQ 'LVWULFW RI 7HQQHVVHH VLWWLQJ E\ GHVLJQDWLRQ   8QLWHG6WDWHVY0DUORZ 1R .QR[YLOOH7HQQHVVHHIRU$SSHOOHH21%5,()1LNNL& 3LHUFH )('(5$/ '()(1'(5 6(59,&(6 *UHHQHYLOOH 7HQQHVVHH IRU $SSHOODQW  0LFKDHO ( :LQFN 3DLJH $XHU :LQFN $66,67$17 81,7(' 67$7(6 $77251(<6 .QR[YLOOH7HQQHVVHHIRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB *,%%216'LVWULFWsXGJH'HIHQGDQW7KRPDV/0DUORZ SOHG JXLOW\ WR PDQXIDFWXULQJ PDULMXDQD LQ YLRODWLRQ RI  86&†† D  DQG E  % DQGZDVVHQWHQFHGRQ $XJXVW   WR VHYHQW\HLJKW PRQWKV LQ SULVRQ WR EH IROORZHGE\IRXU\HDUVRIVXSHUYLVHGUHOHDVH0DUORZEHJDQ KLV VXSHUYLVHG UHOHDVH WHUP RQ sDQXDU\   DQG VXEVHTXHQWO\ YLRODWHG LWV FRQGLWLRQV  &RQVHTXHQWO\ WKH GLVWULFW FRXUW UHYRNHG KLV UHOHDVH RQ 0DUFK   DQG RUGHUHGKLPWRVHUYHWZHQW\PRQWKVLQSULVRQWREHIROORZHG E\ D QHZ IRXU\HDU WHUP RI VXSHUYLVHG UHOHDVH  0DUORZ DSSHDOVWKHGLVWULFWFRXUWjVLPSRVLWLRQRIWKHDGGLWLRQDOIRXU \HDUVXSHUYLVHGUHOHDVHWHUPDUJXLQJWKDWXQGHU86& † H  WKHGXUDWLRQRIWKHSRVWUHYRFDWLRQLQFDUFHUDWLRQ SOXVWKHQHZWHUPRIVXSHUYLVHGUHOHDVHFDQQRWH[FHHGWKH GXUDWLRQRIWKHRULJLQDOWHUPRIVXSHUYLVHGUHOHDVH:KLOHZH DJUHH WKDW VXEVHFWLRQ H   GRHV QRW DXWKRUL]H WKH QHZ VHQWHQFHWRH[FHHGWKHRULJLQDOWHUPRIVXSHUYLVHGUHOHDVHZH FRQFOXGHWKDWWKHGLVWULFWFRXUWZDVDXWKRUL]HGE\LWVJHQHUDO VHQWHQFLQJDXWKRULW\XQGHU86&† D WRLPSRVHDQ DGGLWLRQDO WHUP RI VXSHUYLVHG UHOHDVH DIWHU SRVWUHYRFDWLRQ LQFDUFHUDWLRQ7KXVZHDIILUP0DUORZjVVHQWHQFHIRUUHDVRQV GLIIHUHQWIURPWKRVHVWDWHGE\WKHGLVWULFWFRXUW  0DUORZ DOVR SOHG JXLOW\ WR XVLQJ D ILUHDUP GXULQJ DQG LQ UHODWLRQ WR D GUXJ WUDIILFNLQJ FULPH IRU ZKLFK KH UHFHLYHG WKH PDQGDWRU\ VL[W\PRQWK VHQWHQFH )ROORZLQJ WKH 6XSUHPH &RXUW GHFLVLRQ LQ 8QLWHG 6WDWHV Y %DLOH\  86    WKH GLVWULFW FRXUW HQWHUHG DQ RUGHU YDFDWLQJ WKH ILUHDUP FRQYLFWLRQ DQG UHGXFLQJ WKH GHIHQGDQWjV VHQWHQFH DFFRUGLQJO\ 1R 8QLWHG6WDWHVY0DUORZ  %HIRUHWKHGLVWULFWFRXUW0DUORZDUJXHGWKDW† H  GLG QRW DOORZ IRU WKH UHLPSRVLWLRQ RI D IRXU\HDU WHUP RI VXSHUYLVHG UHOHDVH LQ DGGLWLRQ WR D WHUP RI LQFDUFHUDWLRQ 5DWKHUKHFODLPHGRQO\WZHQW\HLJKWPRQWKVRIWKHRULJLQDO WHUPRIVXSHUYLVHGUHOHDVHFRXOGEHLPSRVHGDIWHUWKHWZHQW\ PRQWKSULVRQVHQWHQFHSXUVXDQWWRWKDWVWDWXWH7KHGLVWULFW FRXUWUHMHFWHG0DUORZjVDUJXPHQWVWDWLQJ :HjOOOHWjVNHHSLWDWIRXU\HDUV,IWKH6XSUHPH&RXUW >LQ sRKQVRQ Y 8QLWHG 6WDWHV@ FKDQJHV WKH ODZ ZHjOO YROXQWDULO\UHGXFHLW  ,WXVHGWREH,FRXOGQjWLPSRVHDQ\PRUHRQFH,SXWKLP EDFNLQMDLO,FRXOGQjWGRWKDW  ,IWKH6XSUHPH&RXUWFRPHVGRZQRQ\RXUVLGHQRPRUH VXSHUYLVHG UHOHDVH  ,I LW FRPHV GRZQ RQ WKH JRYHUQPHQWjV VLGH \RX KDYH IRXU \HDUV VXSHUYLVHG UHOHDVH 0DUORZQRZDSSHDOVIURPWKHGLVWULFWFRXUWjVLPSRVLWLRQRI WKHDGGLWLRQDOIRXU\HDUVRIVXSHUYLVHGUHOHDVHDUJXLQJWKDW WKH6XSUHPH&RXUWjVGHFLVLRQLQsRKQVRQY8QLWHG6WDWHV  $W WKH WLPH RI WKH UHYRFDWLRQ KHDULQJ  86& †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† H  GLVWULFW FRXUWjV DXWKRULW\  $FFRUGLQJO\ ZH $)),50 GRHVQRWDXWKRUL]HDSRVWUHYRFDWLRQVHQWHQFHWKDWH[FHHGVWKH 0DUORZjVVHQWHQFH GXUDWLRQRIWKHRULJLQDOWHUPRIVXSHUYLVHGUHOHDVH+HDVNV WKLVFRXUWWRGLUHFWWKHGLVWULFWFRXUWWRUHGXFHKLVVXSHUYLVHG UHOHDVHWRWZHQW\HLJKWPRQWKV 7KH LVVXH KHUH LQYROYHV WKH FRUUHFWQHVV RI WKH GLVWULFW FRXUWjVDSSOLFDWLRQRIWKHVXSHUYLVHGUHOHDVHVWDWXWHVZKLFK ZHUHYLHZGHQRYR8QLWHG6WDWHVY'DYLV)G WK&LU VHHDOVR8QLWHG6WDWHVY&DGH)G  WK&LU  ,QsRKQVRQWKHGLVWULFWFRXUWKDGUHYRNHGWKHGHIHQGDQWjV WKUHH\HDUWHUPRIVXSHUYLVHGUHOHDVHDQGLPSRVHGDSULVRQ WHUPRIHLJKWHHQPRQWKVWREHIROORZHGE\DWZHOYHPRQWK WHUP RI VXSHUYLVHG UHOHDVH  sRKQVRQ  86 DW  1RWDEO\WKHGXUDWLRQRIWKHQHZVHQWHQFHRILPSULVRQPHQW SOXVWKHVXSHUYLVHGUHOHDVHZDVWKLUW\PRQWKVVL[PRQWKVOHVV WKDQWKHRULJLQDOWHUPRIVXSHUYLVHGUHOHDVH1HYHUWKHOHVVWKH GHIHQGDQW DUJXHG WKDW †  H   JDYH QR SRZHU WR WKH GLVWULFW FRXUW WR RUGHU VXSHUYLVHG UHOHDVH DIWHU WKH RULJLQDO WHUPKDGEHHQUHYRNHG ,G7KH6XSUHPH&RXUWUHMHFWHGWKH GHIHQGDQWjVDUJXPHQWDQGKHOGWKDW DGLVWULFWFRXUWKDVWKH SRZHU XQGHU †  H   WR LPSRVH D WHUP RI VXSHUYLVHG UHOHDVH WR EH VHUYHG DIWHU D SRVWUHYRFDWLRQ WHUP RI LPSULVRQPHQW,GDW ,QUHDFKLQJLWVXOWLPDWHFRQFOXVLRQWKH&RXUWGHWHUPLQHG WKDWmUHYRNHlLQWKHFRQWH[WRIVXEVHFWLRQ H  PHDQVmWR FDOORUVXPPRQEDFNlUDWKHUWKDQmWRWHUPLQDWHlWKHWHUPRI VXSHUYLVHGUHOHDVH,GDW7KH&RXUWUHDVRQHG  7KH GHIHQGDQW DOVR DUJXHG WKDW DSSO\LQJ †  K  ZKLFK ZHQW LQWR HIIHFW DIWHU WKH GDWH RI WKH FRPPLVVLRQ RI WKH XQGHUO\LQJ RIIHQVH YLRODWHG WKH ([ 3RVW )DFWR &ODXVH RI WKH &RQVWLWXWLRQ DUW , †  ,G 7KH &RXUW GHWHUPLQHG WKDW †  K GLG QRW DSSO\ DQG WKDW WKHUHIRUH WKH H[ SRVW IDFWR TXHVWLRQ GLG QRW DULVH ,G DW  7KH &RXUW UHDVRQHG WKDW m>W@KH FDVH WXUQV LQVWHDG VLPSO\ RQ ZKHWKHU †  H  SHUPLWWHG LPSRVLWLRQ RI VXSHUYLVHG UHOHDVH IROORZLQJ D UHFRPPLWWPHQWl ,G DW   8QLWHG6WDWHVY0DUORZ 1R 1R 8QLWHG6WDWHVY0DUORZ  DSSHDUV WKDW VXEVHFWLRQ D  LV YDOLG DXWKRULW\ RQ ZKLFK WKH 6R IDU DV WKH WH[W LV FRQFHUQHG LW LV QRW D mWHUP RI GLVWULFWFRXUWFRXOGKDYHUHOLHGLQRUGHULQJ0DUORZWRVHUYHDQ LPSULVRQPHQWlWKDWLVWREHVHUYHGEXWDOORUSDUWRImWKH DGGLWLRQDO IRXU \HDUV RI VXSHUYLVHG UHOHDVH DIWHU KLV SULVRQ WHUP RI VXSHUYLVHG UHOHDVHl  %XW LI mWKH WHUP RI VHQWHQFH VXSHUYLVHGUHOHDVHlLVEHLQJVHUYHGLQZKROHRUSDUWLQ SULVRQ WKHQ VRPHWKLQJ DERXW WKH WHUP RI VXSHUYLVHG 0DUORZ DUJXHV IXUWKHU WKDW KLV VHQWHQFH FDQ H[WHQG QR UHOHDVHVXUYLYHVWKHSUHFHGLQJRUGHURIUHYRFDWLRQ IXUWKHUWKDQWKHVWDWXWRU\PD[LPXPWHUPRIVXSHUYLVHGUHOHDVH >8@QOLNHDmWHUPLQDWHGlRUGHURIVXSHUYLVHGUHOHDVHRQH IRUWKHRIIHQVHRIFRQYLFWLRQZKLFKKHFODLPVLVILYH\HDUV WKDWLVmUHYRNHGlFRQWLQXHVWRKDYH VRPHHIIHFW$QG 7KHVWDWXWRU\PD[LPXPIRUVXSHUYLVHGUHOHDVHIRUFRQYLFWLRQV VLQFH LW FRQWLQXHV LQ VRPH VHQVH DIWHU UHYRFDWLRQ HYHQ XQGHU86&†KRZHYHULVXQOLPLWHG6HH8QLWHG ZKHQSDUWRILWLVVHUYHGLQSULVRQZK\FDQWKHEDODQFH 6WDWHV Y $EELQJWRQ  )G   WK &LU   RILWQRWUHPDLQHIIHFWLYHDVDWHUPRIVXSHUYLVHGUHOHDVH DFFRUG8QLWHG6WDWHVY*HUURZ)G WK&LU ZKHQWKHUHLQFDUFHUDWLRQLVRYHU"  7KXV0DUORZjVDUJXPHQWLVZLWKRXWPHULW ,GDW HPSKDVLVDGGHG 7KH&RXUWUHFRJQL]HGWKDWLW )LQDOO\ ZH QRWH WKDW RXU GHFLVLRQ ZLOO KDYH D OLPLWHG KDG DWWULEXWHG WKH XQFRQYHQWLRQDO PHDQLQJ WR WKH WHUP LPSDFWEHFDXVH† K LVHIIHFWLYHLQDOOFDVHVZKHUHWKH mUHYRNHlEXWLWIRXQGWKDWWKHXQFRQYHQWLRQDOPHDQLQJZDV LQLWLDO RIIHQVH RFFXUUHG DIWHU WKH GDWH RI LWV HQDFWPHQW PRUHFRQVLVWHQWZLWKWKHVWDWXWRU\VFKHPHDQGWKHLQWHQWRI 6HSWHPEHU    7KDW VXEVHFWLRQ JLYHV VSHFLILF &RQJUHVV  ,G DW   Q  7KRXJK WKH &RXUW KHOG JXLGHOLQHVWRDGLVWULFWFRXUWUHJDUGLQJVHQWHQFLQJDGHIHQGDQW VSHFLILFDOO\WKDW† H  SURYLGHVDXWKRULW\IRUDGLVWULFW WRDGGLWLRQDOVXSHUYLVHGUHOHDVHDIWHUWKHLQLWLDOWHUPKDVEHHQ FRXUW WR LPSRVH D WHUP RI VXSHUYLVHG UHOHDVH DIWHU UHYRNHG UHLQFDUFHUDWLRQLWGLGQRWDGGUHVVWKHSHUPLVVLEOHOHQJWKRI VXFKDWHUP ,QVXPPDU\ZHILQGWKDW† H  GRHVQRWDXWKRUL]H WKH GLVWULFW FRXUW WR DZDUG D SRVWUHYRFDWLRQ VHQWHQFH WKDW ,QWKHLQVWDQWFDVH0DUORZDUJXHVWKDWWKHODQJXDJHXVHGLQ HQGXUHVORQJHUWKDQWKHRULJLQDOWHUPRIVXSHUYLVHGUHOHDVH sRKQVRQLQGLFDWHVWKDW† H  DXWKRUL]HVDGLVWULFWFRXUW +RZHYHU ZH ILQG WKDW WKH GLVWULFW FRXUW PD\ LPSRVH DQ WR LPSRVH RQO\ WKH mEDODQFHl RI WKH RULJLQDO WHUP RI DGGLWLRQDO WHUP RI VXSHUYLVHG UHOHDVH XQGHU LWV JHQHUDO VXSHUYLVHG UHOHDVH IROORZLQJ D SRVWUHYRFDWLRQ SHULRG RI VHQWHQFLQJ DXWKRULW\ SXUVXDQW WR †  D   7KXV WKH LQFDUFHUDWLRQ  +H UHOLHV RQ WKH DERYHTXRWHG SDVVDJH LQ SRVWUHYRFDWLRQVXSHUYLVHGUHOHDVHWHUPKHUHZDVZLWKLQWKH DUJXLQJWKDWRQO\WKHSRUWLRQRIWKHRULJLQDOVXSHUYLVHGUHOHDVH WKDW mVXUYLYHV WKH SUHFHGLQJ RUGHU RI UHYRFDWLRQl PD\ EH LPSRVHG  +H FODLPV WKDW ZKHQ WKH UHYRNHG SHULRG RI VXSHUYLVHGUHOHDVHLVVHUYHGLQSULVRQRQO\mWKHEDODQFHRILW GLFWD DOPRVW DV ILUPO\ DV E\ WKH &RXUWjV RXWULJKW KROGLQJV  l  UHPDLQ>V@HIIHFWLYHDVDWHUPRIVXSHUYLVHGUHOHDVHZKHQ  WKHUHLQFDUFHUDWLRQLVRYHUl,GDW0DUORZDUJXHV 7KH JRYHUQPHQW DOVR DUJXHG WKDW WKH GLVWULFW FRXUW FRXOG KDYH WKDW LQ LPSRVLQJ D VHQWHQFH WKDW HQGXUHV ORQJHU WKDQ WKH H[WHQGHG 0DUORZjV WHUP RI VXSHUYLVHG UHOHDVH SXUVXDQW WR †  H  EHIRUH UHYRNLQJ KLV VXSHUYLVHG UHOHDVH 6HH sRKQVRQ  86 DW  RULJLQDO WHUP RI VXSHUYLVHG UHOHDVH D GLVWULFW FRXUW LV :H QHHG QRW FRQVLGHU WKLV DUJXPHQW KRZHYHU EHFDXVH WKH GLVWULFW FRXUW HVVHQWLDOO\HQJDJLQJLQDUHHQDFWPHQWRIWKHLQLWLDOVHQWHQFLQJ LQ WKLV FDVH GLG QRW LQ IDFW VHHN ILUVW WR H[WHQG 0DUORZjV RULJLQDO WHUP RI ZKLFKWKHsRKQVRQ&RXUWIRXQGWREHLPSURSHU6HHLGDW VXSHUYLVHG UHOHDVH EHIRUH UHYRNLQJ LW QRWLQJWKDWm>W@KHSURFHHGLQJWKDWIROORZVDYLRODWLRQRIWKH  6HH VXSUD QRWH   8QLWHG6WDWHVY0DUORZ 1R 1R 8QLWHG6WDWHVY0DUORZ  FRQGLWLRQVRIVXSHUYLVHGUHOHDVHLVQRWWREHVXUHDSUHFLVH VHQWHQFHjlDSHULRGRIVXSHUYLVHGUHOHDVHHYHQWKRXJKQRQH UHHQDFWPHQWRIWKHLQLWLDOVHQWHQFLQJl  KDG EHHQ RUGHUHG LQ WKH RULJLQDO VHQWHQFH  ,G DW  FLWLQJ86&† D DFFRUG8QLWHG6WDWHVY+REEV ,Q IXUWKHU VXSSRUW RI KLV SRVLWLRQ 0DUORZ FLWHV D SUH )G WK&LU  KROGLQJWKDWDIWHUUHYRFDWLRQ sRKQVRQFDVH8QLWHG6WDWHVY2j1HLO)G VW&LU RISUREDWLRQGLVWULFWFRXUWKDGWKHDXWKRULW\WRVHQWHQFHWKH  ZKLFKZDVFLWHGZLWKDSSURYDOE\sXVWLFH.HQQHG\LQ GHIHQGDQWWRDWHUPRILPSULVRQPHQWSOXVDWHUPRIVXSHUYLVHG KLVFRQFXUULQJRSLQLRQLQsRKQVRQ,GDW .HQQHG\s UHOHDVHSXUVXDQWWR† D  FRQFXUULQJ ,Q2j1HLOWKHGHIHQGDQWKDGEHHQVHQWHQFHGWR WZHQW\RQHPRQWKVLQSULVRQWREHIROORZHGE\DWKUHH\HDU ,QUHVSRQVHWRWKHJRYHUQPHQWjVDUJXPHQW0DUORZPHUHO\ SHULRGRIVXSHUYLVHGUHOHDVH2j1HLO)GDW6RRQ VWDWHV WKDW WKH FRXUW FDQQRW UHO\ RQ †  D  EHFDXVH DIWHUWKHFRPPHQFHPHQWRIKLVVXSHUYLVHGUHOHDVHKHYLRODWHG VXEVHFWLRQ H   LV WKH PRUH VSHFLILF VWDWXWH DQG SURKLELWV WKH FRQGLWLRQV WKHUHRI DQG WKH GLVWULFW FRXUW UHYRNHG KLV VXFK DQ DFWLRQ  0DUORZ FLWHV QR DXWKRULW\ IRU WKDW UHOHDVH,G7KHFRXUWVHQWHQFHGKLPWRWZR\HDUVLQSULVRQ SURSRVLWLRQ3HUKDSVWKHPRVWSHUVXDVLYHDUJXPHQWDJDLQVW WREHIROORZHGE\DQHZWKUHH\HDUWHUPRIVXSHUYLVHGUHOHDVH FRQVWUXLQJ VXEVHFWLRQ D  LQ WKH PDQQHU DUJXHG E\ WKH ,G7KHFRXUWDGGUHVVHGWKHLVVXHSRVHGLQsRKQVRQZKHWKHU JRYHUQPHQW FDQ EH IRXQG LQ sXVWLFH .HQQHG\jV FRQFXUULQJ †  H   DXWKRUL]HG SRVWUHYRFDWLRQ LPSRVLWLRQ RI RSLQLRQ LQ sRKQVRQ  sXVWLFH .HQQHG\ VWDWHG WKDW WKH VXSHUYLVHGUHOHDVHDQGUHDFKHGWKHVDPHFRQFOXVLRQ8QOLNH LQYRFDWLRQ RI VXEVHFWLRQ D  mUDLVHV PRUH LVVXHV WKDQ LW WKH IDFWV LQ sRKQVRQ KRZHYHU WKH GXUDWLRQ RI WKH QHZ UHVROYHV QRW WKH OHDVW RI ZKLFK LV WKH GHVFULSWLRQ RI WKH VHQWHQFHKDGSODLQO\H[FHHGHGWKDWRIWKHRULJLQDOVXSHUYLVHG GLVWULFWFRXUWjVDFWLRQDVµLPSRVLQJDVHQWHQFHjlsRKQVRQ UHOHDVH  7KH )LUVW &LUFXLW KHOG WKDW WKH SRVWUHYRFDWLRQ 86DW .HQQHG\sFRQFXUULQJ sXVWLFH.HQQHG\ VHQWHQFHZDVXQODZIXOVWDWLQJVSHFLILFDOO\WKDW† H  LV RI WKH YLHZ WKDW VXEVHFWLRQ D  LV LQDSSOLFDEOH WR mSHUPLWV D GLVWULFW FRXUW XSRQ UHYRFDWLRQ RI D WHUP RI SRVWUHYRFDWLRQ VHQWHQFLQJ EHFDXVH RUGHULQJ D WHUP RI VXSHUYLVHGUHOHDVHWRLPSRVHDSULVRQVHQWHQFHRUDVHQWHQFH LPSULVRQPHQWDIWHUUHYRFDWLRQLVQRWmLPSRVLQJDVHQWHQFHl FRPELQLQJ LQFDUFHUDWLRQ ZLWK D IXUWKHU WHUP RI VXSHUYLVHG ZLWKLQWKHPHDQLQJRIWKDWVXEVHFWLRQ UHOHDVHVRORQJDVWKHFRPELQHGOHQJWKRIWKHQHZSULVRQ VHQWHQFHFXPVXSHUYLVLRQWHUPGRHVQRWH[FHHGWKHGXUDWLRQ 'HVSLWHWKHUHVHUYDWLRQVRIsXVWLFH.HQQHG\DQGWZRRWKHU RIWKHRULJLQDOWHUPRIVXSHUYLVHGUHOHDVHl,GDW MXVWLFHV VL[ RI WKH MXVWLFHV IRXQG †  D  WR EH YDOLG DXWKRULW\RQZKLFKDGLVWULFWFRXUWFRXOGUHO\LQLPSRVLQJD 7KHJRYHUQPHQWDUJXHV WKDW0DUORZPLVUHDGVsRKQVRQ WHUP RI VXSHUYLVHG UHOHDVH IROORZLQJ D SRVWUHYRFDWLRQ 6SHFLILFDOO\WKHJRYHUQPHQWHPSKDVL]HVWKDWWKHSUHFLVHLVVXH LQFDUFHUDWLRQ7KXVLQOLJKWRIWKHGLFWDLQsRKQVRQDQGLQWKH KHUH ZDV QRW HYHQ DGGUHVVHG LQ sRKQVRQ EHFDXVH WKH DEVHQFH RI DQ\ FRPSHOOLQJ DXWKRULW\ WR WKH FRQWUDU\ LW SRVWUHYRFDWLRQ VHQWHQFH LQ WKDW FDVH GLG QRW H[FHHG WKH RULJLQDO SHULRG RI VXSHUYLVHG UHOHDVH  7KH JRYHUQPHQW LQWHUSUHWVWKHVDPHODQJXDJHLQsRKQVRQWRUHDFKWKHRSSRVLWH  $SSHOODWH FRXUWV KDYH QRWHG WKDW WKH\ DUH REOLJDWHG WR IROORZ FRQFOXVLRQIURPWKDWDGYRFDWHGE\0DUORZ6SHFLILFDOO\WKH 6XSUHPH &RXUW GLFWD SDUWLFXODUO\ ZKHQ WKHUH LV QR VXEVWDQWLDO UHDVRQ IRU JRYHUQPHQWFLWHVWKH&RXUWjVVWDWHPHQWWKDWmLIµWKHWHUPRI GLVUHJDUGLQJ LW VXFK DV DJH RU VXEVHTXHQW VWDWHPHQWV XQGHUPLQLQJ LWV VXSHUYLVHG UHOHDVHj LV EHLQJ VHUYHG LQ ZKROH RU SDUW LQ UDWLRQDOH 6HH HJ *D\ORU Y 8QLWHG 6WDWHV  )G   WK &LU  mWKLV FRXUW FRQVLGHUV LWVHOI ERXQG E\ 6XSUHPH &RXUW GLFWD DOPRVW SULVRQWKHQVRPHWKLQJDERXWWKHWHUPRIVXSHUYLVHGUHOHDVH DV ILUPO\ DV E\ WKH &RXUWjV RXWULJKW KROGLQJV SDUWLFXODUO\ ZKHQ WKH GLFWD VXUYLYHVWKHSUHFHGLQJRUGHURIUHYRFDWLRQlsRKQVRQ LV UHFHQW DQG QRW HQIHHEOHG E\ ODWHU VWDWHPHQWVl  0F&R\ Y 0DVV ,QVW RI 86DW7KHJRYHUQPHQWJOHDQVIURPWKLVFRPPHQWWKDW 7HFK  )G   VW &LU   FHUW GHQLHG  86   mIHGHUDO DSSHOODWH FRXUWV DUH ERXQG E\ WKH 6XSUHPH &RXUWjV FRQVLGHUHG  8QLWHG6WDWHVY0DUORZ 1R 1R 8QLWHG6WDWHVY0DUORZ  VXSSRUW IRU LWV GHFLVLRQ  sXVWLFH .HQQHG\ VWDWHG WKDW WKH HYHQLIDGHIHQGDQWLVUHLQFDUFHUDWHGIRUWKHmZKROHlWHUPRI UHIHUHQFHWR† D mUDLVHVPRUHLVVXHVWKDQLWUHVROYHVl WKHLQLWLDOVXSHUYLVHGUHOHDVHWKHQmVRPHWKLQJDERXWWKHWHUPl ,GDW .HQQHG\sFRQFXUULQJ ,QKLVGLVVHQWsXVWLFH RI VXSHUYLVHG UHOHDVH VWLOO UHPDLQV  ,I WKDW LV VR WKHQ WKH 6FDOLDRSLQHG GLVWULFW FRXUW PXVW KDYH WKH SRZHU WR RUGHU D WHUP RI VXSHUYLVHGUHOHDVHWKDWZRXOGZKHQFRPELQHGZLWKWKHWHUP 7KH &RXUWjV FRQIXVLQJ GLVFXVVLRQ RI KRZ †  D RI UHLPSULVRQPHQW H[FHHG WKH RULJLQDO WHUP RI VXSHUYLVHG ZRXOGSURGXFHFRQVHTXHQFHVVLPLODUWRWKRVHLWVRSLQLRQ UHOHDVH7KHJRYHUQPHQWDUJXHVWKDWWKHsRKQVRQRSLQLRQ DFKLHYHVLVHQWLUHO\LUUHOHYDQW7KH&RXUWFDUHIXOO\ ZKHQ UHDG DV D ZKROH VXSSRUWV WKLV H[SDQVLYH YLHZ RI GRHVQRWPDLQWDLQoDQGLWFRXOGQRWIRUUHDVRQV,QHHG VXEVHFWLRQ H  PXFKPRUHWKDQWKHUHVWULFWLYHYLHZ QRWGHVFULEHoWKDWVXEVHFWLRQ D MXVWLILHVLPSRVLWLRQRI SRVWUHYRFDWLRQVXSHUYLVRU\UHOHDVHJLYHQWKHDFWXDOWH[W :HDUHSHUVXDGHGWKDW0DUORZjVLQWHUSUHWDWLRQRIsRKQVRQ RIVXEVHFWLRQ H  DQGQRWKLQJPRUHLVSHUWLQHQWKHUH LVFRUUHFWDQGLWLVFRQVLVWHQWZLWKWKHPHDQLQJRIWKHVWDWXWH 2XU DQDO\VLV EHJLQV ZLWK D UHYLHZ RI WKH ODQJXDJH RI ,GDW 6FDOLDsGLVVHQWLQJ  HPSKDVLVLQRULJLQDO  †  H   ZKLFK DOORZV D FRXUW WR mUHYRNH D WHUP RI :LWKUHVSHFWWRVXEVHFWLRQ H  sXVWLFH.HQQHG\VWDWHGWKDW VXSHUYLVHG UHOHDVH DQG UHTXLUH WKH GHIHQGDQW WR VHUYH LQ m>W@KHVXESDUWVRI† H DUHSKUDVHGLQWKHGLVMXQFWLYH SULVRQDOORUSDUWRIWKHWHUPRIVXSHUYLVHGUHOHDVHZLWKRXW DQG† H  PXVWVWDQGRQLWVRZQl,GDWsXVWLFH FUHGLWIRUWLPHSUHYLRXVO\VHUYHGRQSRVWUHOHDVHVXSHUYLVLRQl 7KRPDV VLPSO\ VWDWHG WKDW WKH &RXUWjV GLVFXVVLRQV RI † H  8QIRUWXQDWHO\WKDWVXEVHFWLRQLVGHYRLGRIDQ\ VXEVHFWLRQV D DQG H  ZHUHmXQQHFHVVDU\WRWKHUHVXOWl ODQJXDJH UHODWLQJ WR WKH SHUPLVVLEOH GXUDWLRQ RI DQ\ ,GDW 7KRPDVsFRQFXUULQJ  SRVWUHYRFDWLRQ RUGHU RI VXSHUYLVHG UHOHDVH  7KRXJK † K ZDVODWHUSURPXOJDWHGWRILOOWKDWYRLGWKLVFRXUW 7KRXJKWKH&RXUWjVGLVFXVVLRQRIWKLVLVVXHZDVGLFWDVL[ PXVW GHWHUPLQH WKH LQWHQW RI &RQJUHVV ZLWK UHVSHFW WR MXVWLFHVDJUHHGWKDWm>W@KHUHLVQRUHDVRQWRWKLQNWKDWXQGHU VXEVHFWLRQ H  ZLWKRXWWKHEHQHILWRIVXEVHFWLRQ K  WKDWUHJLPH>LIVXEVHFWLRQ H  GLGQRWDXWKRUL]HDFRXUWWR RUGHUDSRVWUHYRFDWLRQWHUPRIVXSHUYLVHGUHOHDVH@WKHFRXUW 7KHODQJXDJHLQsRKQVRQVXSSRUWV0DUORZjVSRVLWLRQWKDW ZRXOG ODFN WKH SRZHU WR LPSRVH D VXEVHTXHQW WHUP RI VXEVHFWLRQ H  DXWKRUL]HVDGLVWULFWFRXUWWRUHYRNHDWHUP VXSHUYLVHGUHOHDVHLQDFFRUGDQFHZLWKLWVJHQHUDOVHQWHQFLQJ RI VXSHUYLVHG UHOHDVH WKHQ RUGHU D GHIHQGDQW mWR VHUYH LQ DXWKRULW\ XQGHU  86& †  D l  ,G DW   ,Q WKLV SULVRQ DOO RU SDUW RI WKH WHUP RI VXSHUYLVHG UHOHDVHl LG UHJDUGWKH&RXUWFLWHG8QLWHG6WDWHVY:HVOH\)G  WK &LU   ZKHUH WKH GHIHQGDQW KDG EHHQ VHQWHQFHGWRWKUHH\HDUVRISUREDWLRQDIWHUSOHDGLQJJXLOW\WR  HPEH]]OHPHQWIURPWKH9HWHUDQVj$GPLQLVWUDWLRQs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mµLPSRVLQJ D VHQWHQFHjl LW KDG WKH JHQHUDO WKDW UHVXOWHG LQ WKH RULJLQDO WHUP RI VXSHUYLVHG UHOHDVH OHVV DQ\ VHQWHQFLQJDXWKRULW\LQ† D WRLQFOXGHmµDVDSDUWRIWKH WHUP RI LPSULVRQPHQW WKDW ZDV LPSRVHG XSRQ UHYRFDWLRQ RI VXSHUYLVHG UHOHDVH  8QLWHG6WDWHVY0DUORZ 1R 1R 8QLWHG6WDWHVY0DUORZ  † H DQGRUGHUDQ\mEDODQFHlWRmUHPDLQHIIHFWLYHDVD mFRQYLQFLQJDQDO\VLVlLQ2j1HLORQZKLFK0DUORZUHOLHVDV WHUPRIVXSHUYLVHGUHOHDVHZKHQWKHUHLQFDUFHUDWLRQLVRYHUl VXSSRUWIRUKLVFRQFOXVLRQ,G sRKQVRQ86DW7KH&RXUWUHLWHUDWHGWKLVFRQFHSW RImEDODQFHlZKHQLWH[SODLQHGWKDWmUHYRNHlLQWKHFRQWH[W :HDJUHHZLWK0DUORZUHJDUGLQJWKHLPSDFWRIsRKQVRQRQ RIVXEVHFWLRQ H  PHDQVmWRFDOORUVXPPRQEDFNlWKHWHUP WKLVLVVXH$FFRUGLQJO\ZHKROGWKDW† H  GRHVQRW RI VXSHUYLVHG UHOHDVH mDOORZLQJ D µUHYRNHGj WHUP RI DXWKRUL]H WKH GLVWULFW FRXUW WR LPSRVH D SRVWUHYRFDWLRQ VXSHUYLVHGUHOHDVHWRUHWDLQYLWDOLW\DIWHUUHYRFDWLRQl,GDW VHQWHQFH WKDW HQGXUHV ORQJHU WKDQ WKH RULJLQDO WHUP RI   8VLQJ WKDW GHILQLWLRQ DOORZV IRU D SRVWUHYRFDWLRQ VXSHUYLVHGUHOHDVH WHUPRIVXSHUYLVHGUHOHDVHEXWRQO\DVDFRQWLQXHGH[LVWHQFH RIWKHRULJLQDOWHUP7KH&RXUWVWDWHGWKDWmDQ\EDODQFHQRW :KHWKHUDQ\RWKHUVWDWXWRU\SURYLVLRQDXWKRUL]HVWKHGLVWULFW VHUYHGLQSULVRQPD\VXUYLYHWREHVHUYHGRXWDVVXSHUYLVHG FRXUWWRLPSRVHDGGLWLRQDOVXSHUYLVHGUHOHDVHSRVWUHYRFDWLRQ UHOHDVHl,GDW LVDGLIIHUHQWLVVXH7KH&RXUWLQsRKQVRQVWDWHGLQGLFWDWKDW HYHQLIVXEVHFWLRQ H  GLGQRWDXWKRUL]HWKHFRXUWWRLPSRVH 7KRXJKWKHmEDODQFHlRIDWHUPRIVXSHUYLVHGUHOHDVHPD\ DWHUPRIVXSHUYLVHGUHOHDVHIROORZLQJDSRVWUHYRFDWLRQWHUP FRQWLQXHLWVYLWDOLW\EH\RQGWKHSRVWUHYRFDWLRQLQFDUFHUDWLRQ RILPSULVRQPHQWm>W@KHUHLVQRUHDVRQWRWKLQNWKDWWKH WKHUHLVQRODQJXDJHLQVXEVHFWLRQ H  DXWKRUL]LQJDFRXUW FRXUWZRXOGODFNWKHSRZHUWRLPSRVHDVXEVHTXHQWWHUPRI WRRUGHUDSRVWUHYRFDWLRQWHUPRIVXSHUYLVHGUHOHDVHEH\RQG VXSHUYLVHGUHOHDVHLQDFFRUGDQFHZLWKLWVJHQHUDOVHQWHQFLQJ WKH GXUDWLRQ RI WKH LQLWLDO VXSHUYLVHG WHUP HYHQ ZKHQ D DXWKRULW\ XQGHU  86& †  D l  ,G DW   ,Q GLVWULFWFRXUWUHLQFDUFHUDWHVWKHGHIHQGDQWIRUWKHIXOOWHUP DGGLWLRQWKH&RXUWPHQWLRQHGWKDWVXEVHFWLRQ H  OLPLWHG :HGRQRWILQGWKDWWKHODQJXDJHLQsRKQVRQZKHQUHDGLQLWV WKH SRVWUHYRFDWLRQ SULVRQ VHQWHQFH WR WKH GXUDWLRQ RI WKH WRWDOLW\VXSSRUWVWKHJRYHUQPHQWjVDUJXPHQWWKDWVXEVHFWLRQ RULJLQDO SHULRG RI VXSHUYLVHG UHOHDVH EXW QRWHG LQ D H   JLYHV D GLVWULFW FRXUW DXWKRULW\ WR RUGHU D WHUP RI SDUHQWKHWLFDO WKDW m>L@I OHVV WKDQ WKH PD[LPXP KDV EHHQ VXSHUYLVHGUHOHDVHEH\RQGWKDWFRQWHPSODWHGLQWKHRULJLQDO LPSRVHGDFRXUWSUHVXPDEO\PD\EHIRUHUHYRNLQJWKHWHUP RUGHURIVXSHUYLVHGUHOHDVH H[WHQGLWSXUVXDQWWR† H  WKLVZRXOGDOORZWKHWHUP RI LPSULVRQPHQW WR HTXDO WKH WHUP RI VXSHUYLVHG UHOHDVH sXVWLFH.HQQHG\jVFRQFXUUHQFHIXUWKHUVXSSRUWV0DUORZjV DXWKRUL]HGIRUWKHLQLWLDORIIHQVHl,GDW SRVLWLRQ+HVWDWHGWKDWVXEVHFWLRQ H  LQGLFDWHVWKDWDIWHU DGLVWULFWFRXUWUHYRNHVDWHUPRIVXSHUYLVHGUHOHDVHmWKHUHLV ,Q VHSDUDWH FRQFXUULQJ RSLQLRQV sXVWLFHV .HQQHG\ DQG \HW DQ XQH[SLUHG WHUP RI VXSHUYLVHG UHOHDVH WKDW FDQ EH 7KRPDVDJUHHGWKDW† H  DXWKRUL]HGWKHGLVWULFWFRXUW DOORFDWHG LQ WKH FRXUWjV GLVFUHWLRQ LQ ZKROH RU LQ SDUW WR WRRUGHUSRVWUHYRFDWLRQVXSHUYLVHGUHOHDVHEXWWKH\UHMHFWHG FRQILQHPHQWDQGWRUHOHDVHRQVXFKWHUPVDQGFRQGLWLRQVDV WKH&RXUWjVUHOLDQFHRQVXEVHFWLRQV D DQG H  DVDGGLWLRQDO WKH FRXUW VSHFLILHV   l  ,G DW  .HQQHG\ s FRQFXUULQJ   +H WKHQ VWDWHG VSHFLILFDOO\ WKDW mWKH WHUP RI LPSULVRQPHQW SOXV DQ\ IXUWKHU WHUP RI VXSHUYLVHG UHOHDVH  7KH PDMRULW\ FLWHG 2j1HLO LQ LWV GLVFXVVLRQ UHJDUGLQJ WKH GHILQLWLRQ LPSRVHGXQGHU† H  PD\QRWH[FHHGWKHRULJLQDOWHUP RI mUHYRNHl EXW LW GLG QRW UHO\ GLUHFWO\ RQ WKDW FDVH LQ UHDFKLQJ LWV XOWLPDWH RI VXSHUYLVHG UHOHDVH WKDW KDG EHHQ LPSRVHG DQG WKHQ FRQFOXVLRQ sRKQVRQ  86 DW  YLRODWHGl  ,G DW   sXVWLFH .HQQHG\ HPEUDFHG WKH  7LWOH  86& †  D SURYLGHV LQ SHUWLQHQW SDUW WKDW m>W@KH FRXUW LQ LPSRVLQJ D VHQWHQFH WR D WHUP RI LPSULVRQPHQW IRU D IHORQ\ RU D PLVGHPHDQRU PD\ LQFOXGH DV D SDUW RI WKH VHQWHQFH D UHTXLUHPHQW WKDW WKH GHIHQGDQW EH SODFHG RQ D WHUP RI VXSHUYLVHG UHOHDVH DIWHU LPSULVRQPHQWl