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 +($7+(5 &+$1'/(5 ; 3ODLQWLII$SSHOODQW &URVV$SSHOOHH 1RV Y ! 63(&,$/7< 7,5(6 2) $0(5,&$ 7(11(66(( ,1& 'HIHQGDQW$SSHOOHH &URVV$SSHOODQW 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW*UHHQHYLOOH 1Rn7KRPDV*+XOO'LVWULFWsXGJH $UJXHGsDQXDU\ 'HFLGHGDQG)LOHG0DUFK %HIRUHs21(6DQG&2/(&LUFXLWsXGJHV*:,1'LVWULFW sXGJH 7KH +RQRUDEOH sDPHV 6 *ZLQ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ &KDQGOHUY6SHFLDOW\ 1RV 7LUHVRI$P BBBBBBBBBBBBBBBBB &2816(/ $5*8(''%UXFH6KLQH'RQDOG)0DVRQsU6+,1( 0$621 .LQJVSRUW 7HQQHVVHH IRU $SSHOODQW sHIIUH\ & 7D\ORU :,0%(5/< /$:621 6($/( :5,*+7 '$9(60RUULVWRZQ7HQQHVVHHIRU$SSHOOHH21%5,() '%UXFH6KLQH'RQDOG)0DVRQsU6+,1( 0$621 .LQJVSRUW 7HQQHVVHH IRU $SSHOODQW 6WHYHQ + 7UHQW %$.(5 '21(/621 %($50$1 &$/':(// sRKQVRQ&LW\7HQQHVVHHIRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB 5*8<&2/(s5&LUFXLWsXGJH7KLVLVDQDSSHDODQG FURVVDSSHDOLQDZURQJIXOGLVFKDUJHFDVHDULVLQJXQGHUWKH )DPLO\DQG0HGLFDO/HDYH$FWRIm)0/$l86& HW VHT DQG WKH 7HQQHVVHH +DQGLFDS $FW m7+$l 7HQQ&RGH$QQ3ODLQWLII+HDWKHU&KDQGOHU m&KDQGOHUl RU m3ODLQWLIIl DSSHDOV WKH GLVWULFW FRXUWjV GLVPLVVDO RI KHU 7+$ DFWLRQ RQ VXPPDU\ MXGJPHQW 'HIHQGDQW 6SHFLDOW\ 7LUHV RI $PHULFD 7HQQHVVHH ,QF m6SHFLDOW\lRUm'HIHQGDQWl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j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jKRPH&KDQGOHUOHIWKHUGDXJKWHUZLWKKHUSDUHQWV UHGXFHWKHOLTXLGDWHGGDPDJHDZDUG FURVVHGWKHVWUHHWWRKHURZQUHVLGHQFHDQGWRRNDQRYHUGRVH RISLOOV ,,,&21&/86,21 $WQLQHRjFORFNWKDWHYHQLQJ&KDQGOHUjVSDUHQWVHQWHUHG )RU WKH IRUHJRLQJ UHDVRQV ZH 5(9(56( WKH GLVWULFW KHUXQORFNHGKRXVHDQGIRXQGKHUO\LQJVHPLFRQVFLRXVRQ FRXUWjV JUDQW RI VXPPDU\ MXGJPHQW IRU 'HIHQGDQW DQG WKHEHG7KH\UXVKHGKHUWRWKHHPHUJHQF\URRPZKHUHVKH 5(0$1' WKH 7+$ FODLP WR WKH GLVWULFW FRXUW IRU ZDV SODFHG LQ LQWHQVLYH FDUH 7KH QH[W GD\ VKH ZDV SURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ:H$)),50WKH WUDQVIHUUHGWR:RRGULGJH+RVSLWDOZKHUHVKHZDVWUHDWHGE\ GLVWULFWFRXUWjVMXGJPHQWLQDOORWKHUUHVSHFWV 'U/HH(OOHQ1DUDPRUHDSV\FKLDWULVW'XULQJWKHZHHNVKH ZDVDW:RRGULGJH&KDQGOHUNHSWLQFORVHFRQWDFWZLWKWKH SODQW PDQDJHU sRH 0F1HHU 6KH WROG 0F1HHU ZKDW KDG KDSSHQHGDQGWKDWVKHQHHGHGWLPHRIIIRUPHGLFDOWUHDWPHQW 0F1HHU DJUHHG WR SODFH KHU RQ SDLG OHDYH 1RERG\ DW 6SHFLDOW\LQGLFDWHGWR&KDQGOHUWKDWKHUMREZDVLQMHRSDUG\ %\WKHHQGRIWKHZHHNVKHIHOWEHWWHUDQGZDVSODQQLQJWR UHWXUQWRZRUNWKHIROORZLQJ7XHVGD\ 5REHUW %HFN SHUVRQQHO PDQDJHU IRU 6SHFLDOW\ DQG &KDQGOHUjV LPPHGLDWH VXSHUYLVRU OHDUQHG RI &KDQGOHUjV LQWHQWLRQDO RYHUGRVH RQ 7XHVGD\ 0D\ %HOLHYLQJ WKDW VXFK EHKDYLRU GHPRQVWUDWHG D ODFN RI UHVSRQVLELOLW\ %HFN FRQFOXGHGWKDWKHFRXOGQRORQJHUWUXVW&KDQGOHUWRKDQGOHWKH GXWLHV RI KHU SRVLWLRQ DQG GHFLGHG WR WHUPLQDWH KHU HPSOR\PHQW%HFNWHVWLILHGWKDWKHKDGQRNQRZOHGJHRIDQ\ GLDJQRVLVRILOOQHVVEXWEDVHGKLVGHFLVLRQHQWLUHO\RQZKDWKH FKDUDFWHUL]HG DV &KDQGOHUjV LUUHVSRQVLEOH DFW RI WDNLQJ DQ RYHUGRVHRISLOOV+HGLGDGPLWKRZHYHUWRNQRZLQJWKDWVKH KDGEHHQJUDQWHGPHGLFDOOHDYH &KDQGOHUY6SHFLDOW\ 1RV 1RV &KDQGOHUY6SHFLDOW\ 7LUHVRI$P 7LUHVRI$P %HFN GUDIWHG D WHUPLQDWLRQ OHWWHU RQ 0D\ FRXUWMXGJHZKRILUHGKLVEDLOLIIIRUWDNLQJOHDYHIRUFRFDLQH &KDQGOHUjVH[KXVEDQGsRKQQ\3HWHUVRQUHFHLYHGWKHOHWWHU DGGLFWLRQKDGILUHGKLPIRULOOHJDOFRQGXFWDQGQRWIRUWDNLQJ IURP0F1HHURQ0D\EXWGLGQRWGHOLYHULWWRKHUXQWLOWKH OHDYH7KDWFDVHZHQWXQUHSRUWHGLQWKH1LQWK&LUFXLWDQGLV WK 2Q 0D\ &KDQGOHU ZHQW WR WKH RIILFH WR JHW KHU DFFRUGHGHYHQOHVVZHLJKWLQRXURZQFLUFXLW SRVVHVVLRQVZKLOHWKHUHVKHKDGDWHQVHFRQYHUVDWLRQZLWK %HFN&KDQGOHUUHTXHVWHGWKDWVKHEHUHWXUQHGWRKHUIRUPHU )RU WKH DERYH UHDVRQV ZH DIILUP WKH MXGJPHQW GHQ\LQJ SRVLWLRQRUJLYHQDVLPLODUSRVLWLRQEXW%HFNUHIXVHG 'HIHQGDQWjV5XOHDQG5XOHPRWLRQV &KDQGOHUILOHGVXLWLQWKH(DVWHUQ'LVWULFWRI7HQQHVVHHRQ &/LTXLGDWHG'DPDJHV 'HFHPEHUDOOHJLQJZURQJIXOWHUPLQDWLRQXQGHUWKH )0/$DQGWKH7+$2Q$XJXVW6SHFLDOW\ILOHGD %HFDXVHZHKDYHKHOGWKDWWKHUHPHGLDOSURYLVLRQVRIWKH PRWLRQWRGLVPLVVXQGHU)HG5&LY3ERULQWKH )0/$ PLUURU WKRVH RI WKH )DLU /DERU 6WDQGDUGV $FW DOWHUQDWLYHIRUSDUWLDOVXPPDU\MXGJPHQWXQGHU)HG5&LY m)/6$l86&HWVHTVHH)UL]]HOOY6RXWKZHVW 36SHFLDOW\DUJXHGWKDWWKH7+$E\LWVRZQWHUPVVSRNH 0RWRU)UHLJKW)GWK&LUZHDGRSW RQO\ RI GLVFULPLQDWLRQ DJDLQVW mDSSOLFDQWVl %HFDXVH WKHFRUUHVSRQGLQJVWDQGDUGRIUHYLHZIRUDZDUGRIOLTXLGDWHG &KDQGOHUFODLPHGVKHKDGEHHQGLVFULPLQDWHGDJDLQVWZKLOHDQ GDPDJHV&I3H]]LOORY*HQ7HO (OHFV,QIR6\V HPSOR\HHDQGQRWZKLOHDQDSSOLFDQWVKHFRXOGQRWVWDWHD )GWK&LUSHUFXULDPDSSO\LQJDEXVH FODLPXQGHUWKH7+$,QWKHDOWHUQDWLYH'HIHQGDQWDUJXHG RIGLVFUHWLRQVWDQGDUGWRDZDUGRIOLTXLGDWHGGDPDJHVXQGHU WKDW&KDQGOHUKDGQRWDOOHJHGVXIILFLHQWIDFWVWRGHPRQVWUDWH WKH )/6$ :H WKHUHIRUH UHYLHZ DQ DZDUG RI OLTXLGDWHG WKDWVKHZDVmKDQGLFDSSHGlDVWKDWWHUPLVXVHGZLWKLQWKH GDPDJHVXQGHUWKH)0/$IRUDEXVHRIGLVFUHWLRQ$FFRUG VWDWXWRU\VHFWLRQDQGWKXV'HIHQGDQWZDVHQWLWOHGWRSDUWLDO 7KRUVRQY*HPLQL,QF)GWK&LU VXPPDU\MXGJPHQW7KHGLVWULFWFRXUWDJUHHGZLWK'HIHQGDQW WKDW WKH 7+$ RQO\ SURKLELWV GLVFULPLQDWLRQ DJDLQVW 6HFWLRQD$LLLRIWKH)0/$SURYLGHVWKDWLQ mDSSOLFDQWVl DQG JUDQWHG 6SHFLDOW\jV PRWLRQ IRU VXPPDU\ DGGLWLRQ WR FRPSHQVDWRU\ GDPDJHV VSHFLILHG LQ MXGJPHQWLQDPHPRUDQGXPRSLQLRQGDWHGsDQXDU\ D$L LLDQHPSOR\HUVKDOOEHOLDEOHIRUDQ DPRXQWRIOLTXLGDWHGGDPDJHVHTXDOWRWKHDPRXQWRIZDJHV &KDQGOHUjVUHPDLQLQJFODLPXQGHUWKH)0/$SURFHHGHGWR VDODU\HPSOR\PHQWEHQHILWVRURWKHUFRPSHQVDWLRQGHQLHGRU WULDO EHIRUH D MXU\ RQ )HEUXDU\ $W FORVH RI ORVWWRDQHPSOR\HHSOXVLQWHUHVWE\UHDVRQRIWKHHPSOR\HUjV HYLGHQFH6SHFLDOW\PRYHGIRUMXGJPHQWDVDPDWWHURIODZ YLRODWLRQRIRIWKHVWDWXWH+RZHYHUWKHGLVWULFWFRXUW 6HH)HG5&LY37KHMXU\UHWXUQHGDYHUGLFWLQIDYRU PD\UHGXFHWKDWDZDUGWRRQO\FRPSHQVDWRU\GDPDJHVLIWKH RI 3ODLQWLII WKH QH[W GD\ 7HQ GD\V ODWHU RQ )HEUXDU\ HPSOR\HUmSURYHVWRWKHVDWLVIDFWLRQRIWKHFRXUWWKDWWKHDFW RURPLVVLRQZKLFKYLRODWHGVHFWLRQRIWKLVWLWOHZDVLQ JRRGIDLWKDQGWKDWWKHHPSOR\HUKDGUHDVRQDEOHJURXQGVIRU EHOLHYLQJ WKDW WKH DFW RU RPLVVLRQ ZDV QRW D YLRODWLRQ RI 3ULRU WR WKH MXU\ WULDO 6SHFLDOW\ ILOHG PRWLRQV LQ OLPLQH LQ RSSRVLWLRQ VHFWLRQl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jVSURIIHUHGUHDVRQIRUWHUPLQDWLRQWKHGHPHDQRU 7KH GLVWULFW FRXUW GHQLHG WKH PRWLRQV DQG DZDUGHG RIZLWQHVVHVRQWKHVWDQGDQGWKHHYLGHQFHRI3ODLQWLIIj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jVUHOLDQFHRQ0DGGR[Y8QLYRI7HQQ)G WK&LU%URKPYs+3URSV,QF)G $7KH7+$$FWLRQ WK&LUDQG'RHY.LQJ&RXQW\1R :/WK&LUsDQLVPLVSODFHG,Q0DGGR[ %HFDXVHWKHGLVWULFWFRXUWFRQVLGHUHGHYLGHQFHRXWVLGHWKH DQDVVLVWDQWFRDFKZDVILUHGIRURXWUDJHRXVSXEOLFEHKDYLRU SOHDGLQJVLQLWVGLVPLVVDOZHUHYLHZWKH7+$FODLPXQGHUWKH ZKLOHLQWR[LFDWHG7KHSODLQWLIIDVVHUWHGWKDWKHZDVILUHGIRU VXPPDU\MXGJPHQWVWDQGDUG)HG5&LY3E0D\VY KLVDOFRKROLVPLQYLRODWLRQRIWKH$'$7KLV&RXUWXSKHOG %XFNH\H5XUDO(OHF&RRS,QF)GWK&LU VXPPDU\MXGJPHQWDJDLQVWWKHSODLQWLIIILQGLQJWKDWLWZDVKLV :H UHYLHZ D GLVWULFW FRXUWjV GHFLVLRQ WR JUDQW EHKDYLRU DQG QRW KLV DOFRKROLVP WKDW SUHFLSLWDWHG WKH VXPPDU\MXGJPHQWGHQRYR,G7KHGLVWULFWFRXUWVKRXOG WHUPLQDWLRQ)GDW0DGGR[FDQEHGLVWLQJXLVKHG JUDQW VXPPDU\ MXGJPHQW mLI WKH SOHDGLQJV GHSRVLWLRQV )LUVW DV 'HIHQGDQW FRQVLVWHQWO\ SRLQWV RXW WKH FDVH DW EDU DQVZHUVWRLQWHUURJDWRULHVDQGDGPLVVLRQVRQILOHWRJHWKHU DULVHVXQGHUWKH)0/$DQGQRWWKH$'$KHQFH0DGGR[FDQ ZLWKWKHDIILGDYLWVLIDQ\VKRZWKDWWKHUHLVQRJHQXLQHLVVXH RQO\EHFLWHGDVDQDORJRXVDXWKRULW\6HFRQG&KDQGOHUjVFDVH DVWRDQ\PDWHULDOIDFWDQGWKDWWKHPRYLQJSDUW\LVHQWLWOHGWR FRPHV WR XV DIWHU D IXOO MXU\ WULDO DQG QRW DIWHU VXPPDU\ DMXGJPHQWDVDPDWWHURIODZl)HG5&LY3F MXGJPHQW'HIHQGDQWKDGDPSOHRSSRUWXQLW\WRVXSSRUWLWV SRVLWLRQWKDW&KDQGOHUZDVILUHGIRUWDNLQJDGUXJRYHUGRVH 7KH7+$FRGLILHGDW7HQQ&RGH$QQVWDWHV DQGQRWIRUWDNLQJOHDYH7KHMXU\FRQFOXGHGRWKHUZLVH:H 7KHUHVKDOOEHQRGLVFULPLQDWLRQLQWKHKLULQJILULQJ VHH QRWKLQJ LQ WKH UHFRUG WKDW ZRXOG SHUPLW XV VLPSO\ WR DQG RWKHU WHUPV DQG FRQGLWLRQV RI HPSOR\PHQW RI WKH DVVXPH WKH MXU\ PDGH D OHJDOO\ LQILUP IDFWXDO LQIHUHQFH VWDWHRI7HQQHVVHHRUDQ\GHSDUWPHQWDJHQF\LQVWLWXWLRQ 7KHUHIRUHZHGHFOLQHWRILQG0DGGR[SHUVXDVLYH,Q%URKP RU SROLWLFDO VXEGLYLVLRQ RI WKH VWDWH RU RI DQ\ SULYDWH WKHSODLQWLIIVXIIHUHGIURPVOHHSDSQHDDQGZDVILUHGIURPKLV HPSOR\HUDJDLQVWDQ\DSSOLFDQWIRUHPSOR\PHQWEDVHG SRVLWLRQDVDQDQHVWKHVLRORJLVWIRUVOHHSLQJRQWKHMRE8QOLNH VROHO\XSRQDQ\SK\VLFDOPHQWDORUYLVXDOKDQGLFDSRI WKH SUHVHQW FDVH WKH SODLQWLII LQ %URKP QHYHU UHTXHVWHG WKH DSSOLFDQW XQOHVV VXFK KDQGLFDS WR VRPH GHJUHH )0/$TXDOLI\LQJPHGLFDOOHDYHDQGLWZDVRQWKDWEDVLVWKDW SUHYHQWV WKH DSSOLFDQW IURP SHUIRUPLQJ WKH GXWLHV VXPPDU\MXGJPHQWZDVHQWHUHGIRUWKHGHIHQGDQW)G UHTXLUHG E\ WKH HPSOR\PHQW VRXJKW RU LPSDLUV WKH DW)LQDOO\ZHUHIXVHWRDFFRUGDQ\SHUVXDVLYHYDOXHWR SHUIRUPDQFHRIWKHZRUNLQYROYHG 'RH 6HH :/ DW KROGLQJ WKDW D VXSHULRU &KDQGOHUY6SHFLDOW\ 1RV 1RV &KDQGOHUY6SHFLDOW\ 7LUHVRI$P 7LUHVRI$P ,GD QRWLQJWKDWm>W@KH$'$DQGWKH)0/$KDYHGLYHUJHQWDLPV RSHUDWHLQGLIIHUHQWZD\VDQGRIIHUGLVSDUDWHUHOLHIl 6SHFLDOW\DUJXHGWKDW&KDQGOHUjVFDVHVKRXOGEHGLVPLVVHG EHFDXVH WKH VWDWXWH RQO\ DSSOLHV WR mDSSOLFDQWVl DQG LW LV ,WLVDSSDUHQWWKDWKRVSLWDOL]DWLRQIRUVHYHUHGHSUHVVLRQLV XQGLVSXWHGWKDW&KDQGOHUZDVQRWDQDSSOLFDQWDWWKHWLPHRI FRYHUHG E\ WKH VWDWXWH 6HH 86& $ KHU GLVFKDUJH 7KH GLVWULFW FRXUW DJUHHG VWDWLQJ LQ LWV 0RUHRYHU6SHFLDOW\VWLSXODWHGWKDW3ODLQWLIIZDVHQWLWOHGWR PHPRUDQGXPRSLQLRQ WDNHOHDYH'HIHQGDQWRQO\DUJXHVWKDWmDQHPSOR\HULVIUHH WRWHUPLQDWHDQHPSOR\HHZKLOHRQ)0/$OHDYHVRORQJDVWKH 7KH SODLQ ODQJXDJH RI WKH VWDWXWH LQGLFDWHV WKDW LW ZDV WHUPLQDWLRQLVQRWEHFDXVHWKHHPSOR\HHH[HUFLVHGKHUULJKWV GHVLJQHGWRSURWHFWMREDSSOLFDQWVIURPGLVFULPLQDWLRQE\ XQGHUWKH)0/$l'HIjV%ULHIDW7KHFHQWUDOTXHVWLRQ ERWK SXEOLF DQG SULYDWH HPSOR\HUV EDVHG XSRQ DQ\ LVZKHWKHUWKHMXU\FRXOGKDYHUHDVRQDEO\IRXQGWKDW%HFN SK\VLFDO PHQWDO RU YLVXDO KDQGLFDS ,W DOVR FOHDUO\ ILUHG&KDQGOHUIRUWDNLQJOHDYHUDWKHUWKDQIRULQJHVWLQJDQ SURKLELWV KDQGLFDS GLVFULPLQDWLRQ LQ KLULQJ ILULQJ DQG RYHUGRVHRIGUXJVRUHYHQIRUKDYLQJEHHQGLDJQRVHGZLWK RWKHUWHUPVRIHPSOR\PHQWE\VWDWHDJHQFLHV,WGRHVQRW GHSUHVVLRQ DSSHDUWRSURWHFWHPSOR\HHVLQSULYDWHHPSOR\PHQWIURP KDQGLFDSGLVFULPLQDWLRQRQFHWKH\KDYHEHHQKLUHG1R :HILQGWKDWWKHUHZDVVXIILFLHQWHYLGHQFHWRVXSSRUWWKH 7HQQHVVHHFRXUWVKDYHDGGUHVVHGWKLVTXHVWLRQDOWKRXJK MXU\YHUGLFW:HDUHPLQGIXOWKDWWKHWULDO FRXUW LVDOZD\V RQHXQSXEOLVKHGRSLQLRQIURPWKH7HQQHVVHH&RXUWRI EHWWHUDEOHWRMXGJHZLWQHVVFUHGLELOLW\WKDQLVWKHDSSHOODWH $SSHDOV DVVXPHV ZLWKRXW GLVFXVVLRQ WKDW WKH $FW FRXUW %HFN LQVLVWV WKDW KH WRRN QR DFFRXQW RI ZKHWKHU DSSOLHV WR D GLVFKDUJH VLWXDWLRQ LQYROYLQJ D SULYDWH &KDQGOHUZDVRQOHDYHLQKLVGHFLVLRQWRWHUPLQDWHKHU7KH HPSOR\HU MXU\GLGQRWEHOLHYHKLP7KHUHZDVQRVSHFLDOYHUGLFWVRZH $IWHUFDUHIXOFRQVLGHUDWLRQRIWKLVLQWHUHVWLQJTXHVWLRQ FDQQRW GHWHUPLQH ZKDW VSHFLILF IDFWV WKH MXU\ IRXQG WKH &RXUW KDV GHFLGHG QRW WR IROORZ WKH OHDG RI WKLV FRPSHOOLQJ+RZHYHUWKHVHIDFWVZHUHNQRZQWRWKHMXU\ LVRODWHGRSLQLRQEXWWRDGKHUHWRWKHDFWXDOZRUGLQJRI %HFNNQHZWKDW&KDQGOHUZDVRQPHGLFDOOHDYH+HNQHZ WKHVWDWXWH WKDW VKH KDG EHHQ KRVSLWDOL]HG IRU D VXLFLGH DWWHPSW +H GHFLGHGWRWHUPLQDWHKHUHPSOR\PHQWVKRUWO\DIWHUILQGLQJRXW s$DWIRRWQRWHRPLWWHG VKH ZDV KRVSLWDOL]HG 7KH WLPLQJ RI KHU WHUPLQDWLRQ FRLQFLGHGZLWKWKHHQGRIKHUSHULRGRIOHDYH +HGLGQRW 2Q DSSHDO 6SHFLDOW\ UHVWDWHV DQG UHILQHV LWV DUJXPHQW WKLQNWKDWVKHZDVTXDOLILHGIRUOHDYHXQGHUWKH)0/$,Q (YHQ LI WKH 7+$ SURKLELWV mGLVFULPLQDWLRQ LQ WKH KLULQJ DGGLWLRQ %HFN DGPLWWHG WKDW SULRU WR KHU WHUPLQDWLRQ ILULQJ DQG RWKHU WHUPV DQG FRQGLWLRQVl RI HPSOR\HHV LW &KDQGOHU KDG EHHQ DQ H[FHOOHQW HPSOR\HH KHU SHULRGLF DUJXHVWKHVWDWXWHRQO\FRYHUVGLVFULPLQDWLRQDJDLQVWSXEOLF UHYLHZVDGPLWWHGLQWRHYLGHQFHZHUHH[HPSODU\ HPSOR\HHV EHFDXVH WKH GLVMXQFWLYH mRU RI DQ\ SULYDWH HPSOR\HU DJDLQVW DQ\ DSSOLFDQWl GHPRQVWUDWHV OHJLVODWLYH 7KHGLVWULFWMXGJHFOHDUO\LQVWUXFWHGWKHMXU\WKDWWKH\FRXOG LQWHQWWRFRYHURQO\DSSOLFDQWVLQWKHSULYDWHVHFWRU'HIjV QRW ILQG 'HIHQGDQW OLDEOH XQOHVV WKH\ IRXQG D FDXVDO %ULHIDW FRQQHFWLRQ EHWZHHQ &KDQGOHUjV OHDYH DQG KHU WHUPLQDWLRQ 3UR[LPLW\LQWLPHFDQUDLVHDSULPDIDFLHFDVHRIUHWDOLDWRU\ &KDQGOHU DUJXHV WKDW WKH 7HQQHVVHH 6XSUHPH &RXUWjV GLVFKDUJH6HH6NUMDQF)GDW%XWSUR[LPLW\DORQH GHFLVLRQLQ%DUQHVY*RRG\HDU7LUH 5XEEHU&R6: PD\QRWVXUYLYHVXPPDU\MXGJPHQWVHHLGDWQRUGRHV &KDQGOHUY6SHFLDOW\ 1RV 1RV &KDQGOHUY6SHFLDOW\ 7LUHVRI$P 7LUHVRI$P KDYHEHHQHQWLWOHGKDGWKHHPSOR\HHQRWWDNHQWKHOHDYHl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jV FODLP WK&LU LQVWHDGLWFKDOOHQJHGWKHVXIILFLHQF\RIWKHHYLGHQFH6HHLG DW7KH7HQQHVVHH6XSUHPH&RXUWDVVXPHGWKHVWDWXWH 6SHFLDOW\DUJXHVWKDW&KDQGOHUKDVSURYLGHGQRHYLGHQFH ZDV DSSOLFDEOH DQG ZHQW RQ WR FODULI\ WKH DSSURSULDWH WKDWVKHZDVGLVFKDUJHGIRUH[HUFLVLQJKHUULJKWVXQGHUWKH IUDPHZRUNIRUDQDO\]LQJKDQGLFDSGLVFULPLQDWLRQXQGHUWKH )0/$$FFRUGLQJWR'HIHQGDQW%HFNQHYHUFRQVLGHUHGWKH 7+$+RZHYHULWGLGVWDWHLQLWVGHFLVLRQWKDWmWKH7+$ FDXVHRI&KDQGOHUjVVXLFLGHDWWHPSWRUWKHIDFWWKDWLWPLJKW SURKLELWV DQ HPSOR\HU IURP WHUPLQDWLQJ DQ HPSOR\HH IRU D UHVXOWLQDQDEVHQFHIURPZRUNLQVWHDGKHFRQVLGHUHGmRQO\ SHUFHLYHG GLVDELOLW\ RU KDQGLFDS 6HH JHQHUDOO\ 6XWWRQ >Y WKHDFWRIRYHUGRVLQJLWVHOIl'HIjV%ULHIDW%HFDXVHWKH 8QLWHG$LU/LQHV,QF86@lDQG DFW RI LQWHQWLRQDOO\ RYHUGRVLQJ RQ GUXJV LV QRW SURWHFWHG WKDW m>W@KH UHFRUG VXSSRUWV D ILQGLQJ WKDW WKH EDVLV IRU WKH DFWLYLW\XQGHUWKH)0/$'HIHQGDQWDUJXHVWKHMXU\KDGQR OD\RIIZDVDQLPSDLUPHQWl%DUQHV6:GDW OHJDOEDVLVWRVXSSRUWWKHYHUGLFW m$IHGHUDOFRXUWH[HUFLVLQJVXSSOHPHQWDOMXULVGLFWLRQRYHU &KDQGOHUFRXQWHUVWKDWWKLVGLVWLQFWLRQEHWZHHQWKHDFWRI VWDWHODZFODLPVLVERXQGWRDSSO\WKHODZRIWKHIRUXPVWDWH RYHUGRVLQJ DQG WKH XQGHUO\LQJ PHGLFDO WUHDWPHQW IRU WR WKH VDPH H[WHQW DV LI LW ZHUH H[HUFLVLQJ LWV GLYHUVLW\ GHSUHVVLRQ LV D IDOVH RQH 6KH QRWHV WKDW 6SHFLDOW\ MXULVGLFWLRQl6XSHU6XON\,QFY867URWWLQJ$VV Q DFNQRZOHGJHG WKDW VKH UHTXHVWHG PHGLFDO OHDYH ZKLOH )GWK&LUm0RUHRYHUZHPXVWJLYHDQ KRVSLWDOL]HG RQ 0D\ 6KH ZDV RQ OHDYH IRU RQH LQWHUYHQLQJVWDWHGHFLVLRQLWVIXOOIRUFHDQGHIIHFWGHVSLWHWKH ZHHNDQGVKHZDVQRWRIIHUHGKHUSRVLWLRQRUDVLPLODURQH IDFWWKDWWKHGHFLVLRQZDVXQDYDLODEOHWRWKHGLVWULFWFRXUWDW XSRQKHUUHWXUQLQVWHDGVKHZDVILUHG WKHWLPHLWUHQGHUHGLWVGHFLVLRQl=LHJOHUY,3%+RJ0NW ,QF)GWK&LU ,QDQDO\]LQJWKLVFDVHLWLVLPSRUWDQWWRQRWHZKDWWKLVFDVH LVQRW7KLVLVQRWDQDFWLRQDULVLQJXQGHUWKH$PHULFDQVZLWK 6SHFLDOW\FDQQRWSRLQWWRDQ\VWDWHDXWKRULW\WKDWVXSSRUWV 'LVDELOLWLHV $FW m$'$l 86& HW VHT LWVLQWHUSUHWDWLRQRIWKHVWDWXWH,QVWHDGLWDUJXHVWKDW%DUQHV 1HLWKHU GRHV WKLV SRUWLRQ RI WKH FDVH DGGUHVV WKH PHULWV RI GLG QRW GLUHFWO\ DGGUHVV WKH DSSOLFDELOLW\ RI WKH VWDWXWH WR 3ODLQWLIIj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mDOOUHOHYDQWGDWDlLQFOXGLQJ &KDQGOHUY6SHFLDOW\ 1RV 1RV &KDQGOHUY6SHFLDOW\ 7LUHVRI$P 7LUHVRI$P VXFKGLFWD*DUGHQ&LW\2VWHRSDWKLF+RVSY+%(&RUS $GLVWULFWFRXUWjVGLVSRVLWLRQRID5XOHPRWLRQIRUDQHZ )GWK&LU&RPELQHGZLWKWKHIDFWWKDW WULDO LV UHYLHZHG IRU DEXVH RI GLVFUHWLRQ :RUNPDQ Y DORZHUDSSHOODWHFRXUWLQ7HQQHVVHHKDVDVVXPHGWKH7+$WR )ULWR/D\ ,QF )G Q WK &LU DSSO\ WR SULYDWH HPSOR\HUV VHH +DOOXPV Y &RFD&ROD +ROPHVY&LW\RI0DVVLOORQ)GWK&LU %RWWOLQJ&R6:G7HQQ&W$SSZH 7KLV &RXUW KDV SUHYLRXVO\ GHILQHG DQ DEXVH RI KDYH OLWWOH GLIILFXOW\ FRQFOXGLQJ WKDW WKH 7+$ DSSOLHV WR GLVFUHWLRQ DV D mµGHILQLWH DQG ILUP FRQYLFWLRQ WKDW WKH WULDO GLVFULPLQDWRU\GLVFKDUJHE\SULYDWHHPSOR\HUV FRXUWFRPPLWWHGDFOHDUHUURURIMXGJPHQWjl&LQFLQQDWL,QV &RY%\HUV)GWK&LUTXRWLQJ )XUWKHUPRUH ZH ILQG WKDW WKHUH LV D JHQXLQH LVVXH RI /RJDQY'D\WRQ+XGVRQ&RUS)GWK&LU PDWHULDO IDFW ZKHWKHU %HFN ILUHG &KDQGOHU EHFDXVH KH 7KHMXU\jVYHUGLFWVKRXOGQRWEHGLVWXUEHGDVORQJDV UHJDUGHGKHUDVGLVDEOHG6HH%DUQHV6:GDW7KH LW LV EDVHG XSRQ VXIILFLHQW HYLGHQFH DQG mZDV UHDVRQDEO\ XQGLVSXWHGHYLGHQFHLQWKHUHFRUGLVWKDW%HFNORVWFRQILGHQFH UHDFKHGl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jV WZHOYHZHHNVRIOHDYHGXULQJDQ\WZHOYHPRQWKSHULRGLIWKH HYLGHQFH7KHUHIRUHWKHFDVHVKDOOEHUHPDQGHGWRWKHGLVWULFW HPSOR\HH KDV D mVHULRXV KHDOWK FRQGLWLRQ WKDW PDNHV WKH FRXUWIRUWULDORQWKH7+$FODLP HPSOR\HHXQDEOHWRSHUIRUPWKHIXQFWLRQVRIWKHSRVLWLRQRI VXFK HPSOR\HHl 86& D' $ mVHULRXV %sXGJPHQWDVD0DWWHURI/DZRU1HZ7ULDO KHDOWKFRQGLWLRQlLVGHILQHGDVmDQLOOQHVVLQMXU\LPSDLUPHQW RUSK\VLFDORUPHQWDOFRQGLWLRQWKDWLQYROYHV$LQSDWLHQW :HUHYLHZGHQRYRWKHGLVWULFWFRXUWjVGHQLDORID5XOH FDUHLQDKRVSLWDOKRVSLFHRUUHVLGHQWLDOPHGLFDOFDUHIDFLOLW\ PRWLRQ IRU MXGJPHQW DV D PDWWHU RI ODZ 6HH 0RQGD\ Y RU%FRQWLQXLQJWUHDWPHQWE\DKHDOWKFDUHSURYLGHUl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jVGHFLVLRQRQO\LIUHDVRQDEOHPLQGVFRXOGQRWFRPHWR SRVLWLRQ XSRQ UHWXUQ IURP OHDYH 86& D DFRQFOXVLRQRWKHUWKDQRQHLQIDYRURIWKHPRYDQW:HKUY +RZHYHUWKHVWDWXWHHPSKDVL]HVWKDWm>Q@RWKLQJLQ>VHFWLRQ 5\DQjV)DPLO\6WHDN+RXVHV,QF)GWK @VKDOOEHFRQVWUXHGWRHQWLWOHDQ\UHVWRUHGHPSOR\HHWR &LU DQ\ULJKWEHQHILWRUSRVLWLRQRIHPSOR\PHQWRWKHUWKDQ DQ\ULJKWEHQHILWRUSRVLWLRQWRZKLFKWKHHPSOR\HHZRXOG