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 ! :,//,$0 /8.( &$51(6 'HIHQGDQW$SSHOODQW 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW 1R ²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¶VWKHQJLUOIULHQG$IWHUDUUHVWLQJ&DUQHVWKHRIILFHUV FRQGXFWHGDZDUUDQWOHVVVHDUFKRIWKHUHVLGHQFHVXVSHFWLQJ WKDWKHZDVYLRODWLQJWKHWHUPVRIKLVSDUROHE\OLYLQJLQD ORFDWLRQRWKHUWKDQWKDWVSHFLILHGLQKLVFRQGLWLRQVRISDUROH DQG SRVVLEO\ FRPPLWWLQJ DGGLWLRQDO FULPHV 'XULQJ WKH VHDUFKWKHRIILFHUVGLVFRYHUHGFDVVHWWHWDSHVDKDQGJXQDQG DPPXQLWLRQ 7KH WDSHV ODWHU SURYHG WR EH UHFRUGLQJV RI WHOHSKRQHFRQYHUVDWLRQVREWDLQHGWKURXJKDZLUHWDSLOOHJDOO\ SODFHGRQ.HOOXP¶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¶VRSLQLRQZLWK UHVSHFWWR3DUW9,,,ZHUHYHUVH&DUQHV¶VFRQYLFWLRQIRULOOHJDO LQWHUFHSWLRQRIDZLUHFRPPXQLFDWLRQDQGUHPDQGWKDWFRXQW IRUDQHZWULDO+RZHYHUIRUWKHUHDVRQVH[SODLQHGLQ3DUWV ,9,,ZHDIILUPWKHRWKHUFRQYLFWLRQVILQGLQJDQ\HUURUDVWR WKRVHKDUPOHVV , &RQVWLWXWLRQDOLW\ RI WKH )HGHUDO )HORQLQ3RVVHVVLRQ DQG :LUHWDSSLQJ3URYLVLRQV &DUQHV¶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¶V SRZHU WR UHJXODWH LQWHUVWDWH FRPPHUFH 6FDUERURXJK Y 8QLWHG6WDWHV86 7KH7KLUG(LJKWKDQG 7HQWK&LUFXLWVUHFHQWO\KDYHDGGUHVVHGWKHHIIHFWRI0RUULVRQ RQ J DQGFRQFOXGHGWKDWWKHDUJXPHQWLGHQWLFDOWR 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV WKHRQHDGYDQFHGE\&DUQHVLVZLWKRXWPHULW8QLWHG6WDWHV SURWHFWLRQV DFFRUGHG WR SDUROHHV , DJUHH ZLWK WKH GLVWULFW Y6KHSKHUG:/ WK&LU 8QLWHG6WDWHV FRXUW¶VXOWLPDWHFRQFOXVLRQWKDWERWKVHL]LQJDQGOLVWHQLQJWR Y6LQJOHWDU\)G UG&LU 8QLWHG6WDWHVY WKH WDSHV ZHUH UHDVRQDEOH LQ OLJKW RI WKH WRWDOLW\ RI WKH 'RUULV)G WK&LU )RUWKHUHDVRQVVHW FLUFXPVWDQFHV IRUWK LQ WKRVH RSLQLRQV ZH ILQG &DUQHV¶V SRVLWLRQ XQSHUVXDVLYH'RUULVSRLQWVRXWWKDW³6HFWLRQ J E\LWV ODQJXDJH RQO\ UHJXODWHV WKRVH ZHDSRQV DIIHFWLQJ LQWHUVWDWH FRPPHUFH E\ EHLQJ WKH VXEMHFW RI LQWHUVWDWH WUDGH ,W DGGUHVVHVLWHPVVHQWLQLQWHUVWDWHFRPPHUFHDQGWKHFKDQQHOV RIFRPPHUFHWKHPVHOYHVRUGHULQJWKDWWKH\EHNHSWFOHDURI ILUHDUPV7KXVQRDQDO\VLVRIWKHVW\OHRI0RUULVRQLV DSSURSULDWH´ )G DW 7KH IHORQLQSRVVHVVLRQ VWDWXWHVXUYLYHV0RUULVRQ &DUQHVIUDPHVKLVDUJXPHQWDVDIDFLDOFKDOOHQJHEXWDQDV DSSOLHGFKDOOHQJHZRXOGEHHTXDOO\XQSHUVXDVLYHVLQFHWKH ZHDSRQ DQG DPPXQLWLRQ LQ TXHVWLRQ ZHUH PDQXIDFWXUHG RXWVLGHRIWKHVWDWHRI0LFKLJDQ 6LPLODUO\ 0RUULVRQ GRHV QRW DIIHFW WKH YDOLGLW\ RI WKH ZLUHWDSSLQJVWDWXWH7KHZLUHWDSSLQJVWDWXWHDVWKHGLVWULFW FRXUWSRLQWHGRXWKDVDVXEVWDQWLDOUHODWLRQVKLSWRLQWHUVWDWH FRPPHUFHVLQFH³WHOHFRPPXQLFDWLRQVDUHERWKFKDQQHOVDQG LQVWUXPHQWDOLWLHVRILQWHUVWDWHFRPPHUFH´8QLWHG6WDWHVY &DUQHV )6XSSG DW FLWLQJ 6SHWDOLHUL Y .DYDQDXJK)6XSSG 1'1< ,, 6HQWHQFLQJDVDQ$UPHG&DUHHU&ULPLQDO &DUQHV QH[W DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG E\ VHQWHQFLQJ KLP XQGHU WKH $UPHG &DUHHU &ULPLQDO $FW 86& H ³$&&$´ ZKLFK WULJJHUHG D \HDU PDQGDWRU\PLQLPXPVHQWHQFH6HFWLRQ H LPSRVHVD ILIWHHQ\HDU PLQLPXP IRU IHORQV LQ SRVVHVVLRQ RI ILUHDUPV ZKRKDYH³WKUHHSUHYLRXVFRQYLFWLRQVE\DQ\FRXUWIRUD YLROHQWIHORQ\RUDVHULRXVGUXJRIIHQVH FRPPLWWHGRQ RFFDVLRQVGLIIHUHQWIURPRQHDQRWKHU´&DUQHVZDVSUHYLRXVO\ FRQYLFWHG IRU EUHDNLQJ DQG HQWHULQJ LQ FRQQHFWLRQ ZLWK DQ LQFLGHQWLQ DQGIRUEXUJODUL]LQJWZRDGMDFHQWKRPHVLQ 7UR\0LFKLJDQLQ 3URVHFXWRUVFKDUJHGWZRVHSDUDWH RIIHQVHVLQFRQQHFWLRQZLWKWKH EXUJODULHVDQG&DUQHV 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV SDUROH FRQGLWLRQV´ WKHQ VHL]LQJ WKRVH FDVVHWWHV ZLWKRXW D SOHG JXLOW\ WR ERWK ,Q WKLV DSSHDO DV LQ WKH FRXUW EHORZ ZDUUDQW ZRXOGEHDSSURSULDWH &DUQHVDUJXHVWKDWWKHVHWZREXUJODULHVZHUHQRW³FRPPLWWHG RQRFFDVLRQVGLIIHUHQWIURPRQHDQRWKHU´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³VRPHWLPHDIWHU´SHUKDSVVHYHUDOPRQWKVDIWHU ³RFFDVLRQ´,Q8QLWHG6WDWHVY%UDG\ )G WK&LU WKHLU VHL]XUH RQ -DQXDU\ 7KH OLVWHQHU ZDV WKH GHIHQGDQW%UDG\FRPPLWWHGRQHDUPHGUREEHU\DWD $VVLVWDQW 8QLWHG 6WDWHV $WWRUQH\ SURVHFXWLQJ WKH ZHDSRQV EHDXW\VKRSDQGWKHQOHVVWKDQDQKRXUODWHUFRPPLWWHGD FKDUJHVQRWDSDUROHRIILFHU7KHUHDUHQRREMHFWLYHLQGLFLD VHFRQGUREEHU\ DW D QHDUE\EDU:HKHOGHQEDQFWKDWWZR WKDWWKHWDSHVZHUHOLVWHQHGWRIRUWKHSXUSRVHRIHVWDEOLVKLQJ SULRU UREEHU\ FRQYLFWLRQV FRXQWHG DV VHSDUDWH FULPLQDO D YLRODWLRQ RI WKH UHVLGHQF\ FRQGLWLRQ RI &DUQHV¶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³FRXOG KDYH KDOWHG KLV FULPLQDO UDPSDJH DW DQ\ WLPH´ EXW WLPH DIWHU &DUQHV KDG DOUHDG\ EHHQ FRQYLFWHG RI YLRODWLQJ WKH KLV SDUROH LQVWHDG ³FKRVH WR FRQWLQXH VHOHFWLQJ GLIIHUHQW YLFWLPV LQ FRQGLWLRQV 7KH WDSHV ZHUH LQ WKH FXVWRG\ RI IHGHUDO DJHQWV SURVHFXWLQJ VHSDUDWH SODFHV´ ,G :H IRXQG %UDG\ FRQWUROOLQJ DQG &DUQHV IRU IHORQLQSRVVHVVLRQ FULPHV DQG QRW SDUROH YLRODWLRQV FRQVLGHUHGWKHRIIHQVHVWREHGLVWLQFWIRU$&&$SXUSRVHV 1RQHWKHOHVV WKH VHDUFK IHOO ZLWKLQ WKH VFRSH RI VHDUFKHV DXWKRUL]HG :H KDYH UHDFKHG VHHPLQJO\ LQFRQVLVWHQW UHVXOWV LQ RWKHU E\ &DUQHV¶V SDUROH FRQGLWLRQV VLQFH WKH H[SUHVV WHUPV RI KLV SDUROH FDVHV ,Q 8QLWHG 6WDWHV Y *UDYHV )G WK &LU LQVWUXFWHG KLP QRW WR ³RZQ RU SRVVHVV D ZHDSRQ RI DQ\ W\SH RU DPPXQLWLRQ´ DQG QRW WR ³HQJDJH LQ EHKDYLRU WKDW FRQVWLWXWHV D YLRODWLRQ DGHIHQGDQWFRPPLWWHGDEXUJODU\DQGWKHQDVVDXOWHG RI DQ\ FULPLQDO ODZ RI DQ\ XQLW RI JRYHUQPHQW´ DSROLFHRIILFHU:HIRXQGWKDWEHFDXVHWKHGHIHQGDQW³KDG 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV QRW\HWOHIWWKHORFDWLRQRIWKHEXUJODU\´ZKHQKHFRPPLWWHG KHUH :KHQ DQ RIILFHU KDV UHDVRQDEOH VXVSLFLRQ WKDW D WKH DVVDXOW WKH DVVDXOW DQG WKH EXUJODU\ VKRXOG QRW EH SUREDWLRQHU VXEMHFW WR D VHDUFK FRQGLWLRQ LV HQJDJHG LQ FRQVLGHUHGWRKDYHRFFXUUHGRQVHSDUDWHRFFDVLRQV,Q8QLWHG FULPLQDO DFWLYLW\ WKHUH LV HQRXJK OLNHOLKRRG WKDW FULPLQDO 6WDWHVY0XUSK\)G WK&LU DGHIHQGDQW FRQGXFW LV RFFXUULQJ WKDW DQ LQWUXVLRQ RQ WKH SUREDWLRQHU¶V FRPPLWWHGDQDUPHGUREEHU\LQRQHUHVLGHQFHRIDGXSOH[ VLJQLILFDQWO\GLPLQLVKHGSULYDF\LQWHUHVWVLVUHDVRQDEOH´,G DQGVWD\HGEHKLQGWRSUHYHQWWKDWXQLW¶VRFFXSDQWIURPFDOOLQJ DW WKHSROLFHZKLOHWKHGHIHQGDQW¶VDFFRPSOLFHVUREEHGWKHRWKHU XQLWRIWKHGXSOH[%HFDXVHWKHGHIHQGDQWKDGQRWOHIWWKH $V LQ WKH .QLJKWV FDVH &DUQHV ZDV VXEMHFW WR D VHDUFK ILUVWUHVLGHQFHDQGZDVRQO\JXLOW\RIDLGLQJDQGDEHWWLQJDVWR FRQGLWLRQ0LFKLJDQODZSURYLGHVLQUHOHYDQWSDUWWKDWD WKHUREEHU\RIWKHVHFRQGUHVLGHQFHZHFRQFOXGHGWKDWKHKDG SDUROHDJHQWPD\FRQGXFWDZDUUDQWOHVVVHDUFKRIDSDUROHH¶V QRWVXFFHVVIXOO\FRPSOHWHGWKHILUVWUREEHU\DQGWKDWWKHUH SHUVRQ DQG SURSHUW\ LQ FRQMXQFWLRQ ZLWK D ODZIXO DUUHVW RU ZDVQR³GHILQDEOHHQGSRLQW´WRWKHILUVWHYHQW)GDW ZKHQWKHUHLV³UHDVRQDEOHFDXVHWREHOLHYHWKDWDYLRODWLRQRI 7KHQLQ8QLWHG6WDWHVY7KRPDV)G WK SDUROHH[LVWV´0LFK$GPLQ&RGH5 ,DJUHH &LU ZHIRXQGWKDWDGHIHQGDQW¶VUDSHVRIWZRZRPHQ ZLWKWKHGLVWULFWMXGJHWKDWVXFKFRQGLWLRQVH[LVWHGGXULQJWKH ZKLFKRFFXUUHGGXULQJDSHULRGLQZKLFKGHIHQGDQWDQGKLV DUUHVWRI&DUQHVDQGWKHVHDUFKRIKLVEHORQJLQJVEHFDXVHWKH DFFRPSOLFH PDLQWDLQHG FRQWURO RYHU ERWK ZRPHQ GLG QRW WDSHV ZHUH VHL]HG LQ D EULHIFDVH FRQWDLQLQJ SDSHUV WKDW FRQVWLWXWH GLVWLQFW RIIHQVHV EHFDXVH RI WKH ³DEVHQFH RI D SURYLGHGHYLGHQFHWKDW&DUQHVZDVQRWOLYLQJLQWKHORFDWLRQ FRPSOHWLRQRUGHILQDEOHHQGSRLQW´,GDW,Q7KRPDVZH VSHFLILHGE\WKHFRQGLWLRQV RIKLVSDUROH7KHWDSHVFRXOG UHDFKHGWKDWFRQFOXVLRQLQVSLWHRIWKHIDFWWKDWWKHUDSHVRI KDYHKDGKLVYRLFHRQWKHPDQGLIVRZRXOGKDYHWLHGKLPWR WKHWZRZRPHQRFFXUUHGLQVHSDUDWHORFDWLRQV WKHGHIHQGDQW WKHORFDWLRQIURPZKLFKWKH\ZHUHVHL]HG7KHGLVWULFWFRXUW IRUFHGWKHZRPHQWRGULYHKLPIURPRQHORFDWLRQWRWKHRWKHU KHOGWKDWZKHUHDSDUROHRIILFHUFRXOGUHDVRQDEO\VXVSHFWWKDW EHWZHHQUDSHV FDVVHWWHVIRXQGGXULQJDVHDUFK³PLJKWFRQVWLWXWHHYLGHQFH WKDW'HIHQGDQWZDVOLYLQJDWDQDGGUHVV LQ YLRODWLRQRIKLV &DUQHVDUJXHVWKDWLQUHJDUGVWRKLVSULRUFRQYLFWLRQVLW ZRXOGEHGLIILFXOWWRGLVWLQJXLVKEHWZHHQWKHHQGRIWKHILUVW EXUJODU\DQGWKHEHJLQQLQJRIWKHVHFRQG7KHREYLRXVZD\ WRGLVWLQJXLVKEHWZHHQWKHVHWZRUREEHULHVLVWKDW&DUQHVKDG 8QOLNH WKH PDMRULW\ , GR QRW WKLQN WKH 6XSUHPH &RXUW¶V DUWLFXODWLRQ WR OHDYH RQH UHVLGHQFH LQ RUGHU WR EXUJODUL]H WKH VHFRQG RI D ³OHVV WKDQ SUREDEOH FDXVH VWDQGDUG´ LV OLPLWHG WR WKH VSHFLILF IDFWV RI ,QGHHGKHZDVRQO\FDXJKWEHFDXVHWKHUHVLGHQWRIWKHILUVW .QLJKWV¶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¶V OLEHUW\ DQG DIILUPWKHGLVWULFWFRXUW¶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¶VPDMRULW\RSLQLRQRQWKLVLVVXH EH\RQGDUHDVRQDEOHGRXEW6HH8QLWHG6WDWHVY*DWHZRRG WKDW&DUQHVKDVVWDQGLQJWRFKDOOHQJHWKHVHDUFKRIWKHWDSHV )G WK&LU 8QLWHG6WDWHVY.LQJ VHL]HGLQKLVEULHIFDVHGXULQJWKHZDUUDQWOHVVVHDUFK,DOVR )G Q WK &LU &DUQHV XUJHV XV WR DJUHH WKDW WKH DXWKRULWLHV QHHGHG )RXUWK $PHQGPHQW UHFRJQL]HWKDW$OPHQGDUH]7RUUHVY8QLWHG6WDWHV86 MXVWLILFDWLRQERWKWRVHL]HDQGWROLVWHQWRWKHWDSHVIRXQGDW ZKLFKKHOGWKDWSULRUFRQYLFWLRQVDUHVHQWHQFLQJ /LVD .HOOXP¶V UHVLGHQFH +RZHYHU , ZRXOG KROG WKDW IDFWRUV ³ZLOO EH VKRUW OLYHG´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¶ FRXQWLVUHYLHZHGRQO\IRUD³PDQLIHVWPLVFDUULDJHRIMXVWLFH´ UHVLGHQFHV DQG SURSHUW\ PD\ EH VHDUFKHG ZLWKRXW ZDUUDQWV EHFDXVH RI KLV IDLOXUH WR PDNH D PRWLRQ IRU MXGJPHQW ZKHQ XQGHU WKH WRWDOLW\ RI WKH FLUFXPVWDQFHV JRYHUQPHQW QRWZLWKVWDQGLQJWKHYHUGLFWSXUVXDQWWR)HG5&ULP3UR DJHQWV SRVVHVV UHDVRQDEOH VXVSLFLRQ WKDW WKH SDUROHH LV LQ 6HH8QLWHG6WDWHVY$EGXOODK)G WK&LU YLRODWLRQRIDFRQGLWLRQRIKLVSDUROH*ULIILQY:LVFRQVLQ 8QGHUWKLVVWDQGDUGZHRQO\UHYHUVHDFRQYLFWLRQLI 86 7KH6XSUHPH&RXUW¶VUHFHQWGHFLVLRQ WKHUHFRUGLV³GHYRLGRIHYLGHQFHSRLQWLQJWRJXLOW´,G LQ8QLWHG6WDWHVY.QLJKWV6&W DXJPHQWHG *ULIILQ E\ HVWDEOLVKLQJ WKDW ZDUUDQWOHVV VHDUFKHV RI /LVD.HOOXP&DUQHV¶VWKHQJLUOIULHQGWHVWLILHGWKDW&DUQHV SUREDWLRQHUV¶UHVLGHQFHVDQGSURSHUW\DUHSHUPLVVLEOHZKHQ HQFRXUDJHG KHU WR OLH E\ VWDWLQJ WKDW WKH JXQ IRXQG LQ WKH VXSSRUWHG E\ UHDVRQDEOH VXVSLFLRQ DQG DXWKRUL]HG E\ D FRXUVHRI&DUQHV¶VDUUHVWEHORQJHGWRKHU.HOOXPWROGDQ FRQGLWLRQRISUREDWLRQHYHQZKHQWKHREMHFWRIWKHVHDUFKLV LQYHVWLJDWRUWKHJXQZDVKHUVDQGVLJQHGDZULWWHQVWDWHPHQW LQYHVWLJDWRU\UDWKHUWKDQSUREDWLRQDU\7KH&RXUWQRWHGWKDW WRWKDWHIIHFWEXWODWHUUHFDQWHG DUHGXFWLRQLQFHUWDLQOLEHUWLHVLV³LQKHUHQWLQWKHYHU\QDWXUH RI´ SUREDWLRQ DQG SDUROH DQG WKH VWDWH KDV DQ LPSRUWDQW &DUQHVDUJXHVWKDWWKHUHLVQRHYLGHQFHWKDWKH³NQRZLQJO\ LQWHUHVWLQIRFXVLQJRQSUREDWLRQHUVDQGSDUROHHVEHFDXVHRI XVH>G@LQWLPLGDWLRQRUSK\VLFDOIRUFHWKUHDWHQ>HG@RUFRUUXSWO\ WKHKLJKSUREDELOLW\RIUHFLGLYLVPDVDFODVV,GDW SHUVXDGH>G@ DQRWKHU SHUVRQ´ IRU WKH VDNH RI LQIOXHQFLQJ $VDFRQVHTXHQFH³WKHEDODQFHRIJRYHUQPHQWDODQGSULYDWH WHVWLPRQ\LQDQRIILFLDOSURFHHGLQJDVUHTXLUHGIRUFRQYLFWLRQ LQWHUHVWVZDUUDQWDOHVVHUWKDQSUREDEOHFDXVHVWDQGDUG XQGHU86& E &DUQHVVXJJHVWVWKDWDWZRUVW WKHUHFRUGHVWDEOLVKHGKH³HQFRXUDJH>G@´DOLH 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV ,WLVWUXHWKDW.HOOXPGLGQRWWHVWLI\WKDW&DUQHVDWWHPSWHG * WR WKUHDWHQ RU LQWLPLGDWH KHU LQ WKH VSHFLILF FRQWH[W RI KLV UHTXHVWWKDWVKHOLHDERXWWKHJXQ7KHSURVHFXWRUSOD\HGWKH 7KH VL[ DXGLR WDSHV IRXQG DW +DUPRQ 6WUHHW RQ LOOHJDOO\ LQWHUFHSWHG WDSHV RI .HOOXP¶V SKRQH OLQH ZKLFK -DQXDU\ ZHUHVHL]HGDQGWKUHHPRQWKVODWHUOLVWHQHG SURYLGHG HYLGHQFH WKDW RQ D QXPEHU RI RFFDVLRQV SULRU WR WR E\ SROLFH LQ YLRODWLRQ RI WKH )RXUWK $PHQGPHQW¶V &DUQHV¶V DVNLQJ KHU WR OLH &DUQHV WKUHDWHQHG .HOOXP ,Q SURKLELWLRQ RI XQUHDVRQDEOH VHDUFKHV DQG VHL]XUHV 7KH RWKHU FDVHV FLWHG E\ WKH JRYHUQPHQW FRXUWV KDYH XSKHOG GLVWULFWFRXUWHUUHGLQGHQ\LQJ&DUQHV¶VPRWLRQWRVXSSUHVVWKH FRQYLFWLRQV IRU ZLWQHVV WDPSHULQJ HYHQ LQ WKH DEVHQFH RI WDSHVDQGWKLVHUURUUHVXOWHGLQ&DUQHV¶VFRQYLFWLRQIRULOOHJDO GLUHFWO\ WKUHDWHQLQJ ODQJXDJH ZKHQ WKH FRXUW IRXQG WKH LQWHUFHSWLRQ RI D ZLUH FRPPXQLFDWLRQ $FFRUGLQJO\ ZH HYLGHQFHFRXOGKDYHEHHQLQWHUSUHWHGDVWKUHDWHQLQJLQ³QDWXUH 5(9(56(WKHFRQYLFWLRQIRULOOHJDOLQWHUFHSWLRQRIDZLUH RULQWHQW´8QLWHG6WDWHVY(OZHOO )G FRPPXQLFDWLRQDQG5(0$1'WKDWFRXQWIRUDQHZWULDO VW &LU 7KH WDSHV LQWURGXFHG DV HYLGHQFH DW WULDO GHPRQVWUDWH WKDW &DUQHV KDG D ORQJVWDQGLQJ SDWWHUQ RI WKUHDWHQLQJDQGDEXVLYHEHKDYLRUWRZDUG.HOOXP/LNHWKH OHVVWKDQGLUHFWODQJXDJHIRXQGWREHWKUHDWHQLQJLQ(OZHOO RWKHUZLVH ³HQFRXUDJLQJ´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³PRGLILHG´ DEXVH RI GLVFUHWLRQ VWDQGDUG 8QLWHG 6WDWHV Y +RZDUG )G WK &LU $ GLVWULFWFRXUW¶VGHWHUPLQDWLRQZLOOQRWEH³OLJKWO\GLVWXUEHG´ 8QLWHG6WDWHVY3LHUFH)G WK&LU 7R GHPRQVWUDWH WKDW KH ZDV SUHMXGLFHG E\ WKH GHOD\ &DUQHV SRLQWVWRWKHGHDWKRIDZRPDQKHKDGOLVWHGDVD³SRWHQWLDO ZLWQHVV´DQGWKHIDFWWKDWKHKDV³ORVWFRQWDFW´ZLWKDVHFRQG ZLWQHVV 7KHGLVWULFWFRXUWFDUHIXOO\UHYLHZHGWKHIDFWRUVWKHVWDWXWH PDQGDWHVLWFRQVLGHU WKHVHULRXVQHVVRIWKHRIIHQVHWKHIDFWV 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV IRXQGZKLFKLQWXUQZRXOGWLH&DUQHVWRRZQHUVKLSRIWKHVH DQGFLUFXPVWDQFHVRIWKHFDVHZKLFKOHGWRWKHGLVPLVVDODQG LWHPV+RZHYHUWKHUHZHUHIDUPRUHGLUHFWOLQNVW\LQJ&DUQHV WKH LPSDFW RI UHSURVHFXWLRQ RQ WKH DGPLQLVWUDWLRQ RI WKH WRWKHUHVLGHQFHWKHJXQDQGWKHDPPXQLWLRQ±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¶VKRPH6HFRQGWKHUHZDV.HOOXP¶VWHVWLPRQ\DVWR UHSURVHFXWLRQ RQ WKH DGPLQLVWUDWLRQ RI MXVWLFH WKH GLVWULFW &DUQHV¶V UHSHDWHG WKUHDWV LQFOXGLQJ DQ LQFLGHQW ZKHQ VKH FRXUWQRWHVWKDW&DUQHVRIIHUHGQRHYLGHQFHWKDW5XWK%DNHU YLVLWHGKLPLQMDLODQG&DUQHVGUHZDSLFWXUHRIDJXQLQDQ GLHGGXULQJWKHSHULRGRIWKHHLJKWGD\GHOD\RUWKDWFRQWDFW DWWHPSWWRFRQYLQFHKHUWRFODLPRZQHUVKLSRIWKHJXQ7KLV ZLWK&DUUZDVORVWGXULQJWKDWHLJKWGD\SHULRG0RUHRYHU DOOHJDWLRQZDVFRUURERUDWHGE\DSROLFHVHDUFKRI&DUQHV¶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¶VKRXVH7KHSURVHFXWRUH[SODLQHGKLV 9, 'HQLDORI0RWLRQIRU6HYHUDQFH WKHRU\WRWKHMXU\GXULQJFORVLQJ &DUQHVPRYHGWRVHYHUFRXQWVWKUHH LQWHUFHSWLRQRIZLUH 7KHUH¶VUHDOO\RQO\WZRGRWVWRFRQQHFWWRSURYHWKDW FRPPXQLFDWLRQV DQG IRXU ZLWQHVV WDPSHULQJ IURP WKH WKHGHIHQGDQWLOOHJDOO\WDSHVKHUFDOOV2QHLVWKDWWKH ILUHDUPDQGDPPXQLWLRQFKDUJHV7KHGLVWULFWFRXUWGHQLHG WDSHV DUH IURP FDOOV LQ KHU KRXVH>@ WKH UHFRUGHU ZDV WKHPRWLRQ:HUHYLHZWKHGHQLDORIDPRWLRQIRUVHYHUDQFH XQGHUKHUWUDLOHU XQGHUDQDEXVHRIGLVFUHWLRQVWDQGDUG8QLWHG6WDWHVY5R[ )G WK&LU 7KHVHFRQGLVWKDWWKRVHWDSHVRIKHUSHUVRQDOFDOOV HQGHGXSLQKLVEULHIFDVHLQKLVURRP &DUQHVDUJXHVWKDWWKHGLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQLQ FRQFOXGLQJWKDWWKHVHRIIHQVHVZHUHIDFWXDOO\UHODWHG8QGHU 7ULDO7UDQVFULSW-XO\ DW :LWKRXWWKHWDSHVIURP )HG 5 &ULP 3UR D GLVWULFW FRXUWV DUH HQFRXUDJHG WR +DUPRQWKHUHZDVQRHYLGHQFHWR³FRQQHFWWKHGRWV´ SHUPLW MRLQGHU LI WZR RIIHQVHV DUH ³RI WKH VDPH RU VLPLODU :H WKHUHIRUH ILQG WKDW DV WR WKH FRQYLFWLRQ IRU LOOHJDO FKDUDFWHURUDUHEDVHGRQWKHVDPHDFWRUWUDQVDFWLRQRURQWZR LQWHUFHSWLRQ RI D ZLUH FRPPXQLFDWLRQ WKH HUURU ZDV QRW RUPRUHDFWVRUWUDQVDFWLRQV´-RLQGHULVSURSHUZKHUHWZR KDUPOHVV FULPHVDQG WKHLU SURRIDUH LQWHUWZLQHG 8QLWHG 6WDWHV Y -DFREV)G WK&LU 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV :HKDYHQRGRXEWWKDWWKHZLWQHVVWDPSHULQJFRXQWEDVHG VLJQLILFDQWLQWUXVLRQLQWRKLVOLIHRXWVLGHWKHSDUROHFRQWH[W RQ&DUQHV¶VDWWHPSWWRJHW/LVD.HOOXPWRFODLPRZQHUVKLSRI Michigan Administrative Code § R 791.7735 only speaks to WKHJXQWKDWFRQVWLWXWHGWKHEDVLVIRUWKHIHORQLQSRVVHVVLRQ warrantless searches for evidence of a parole violation, or of FKDUJHLVLQWHUWZLQHGZLWKFRXQWVRQHDQGWZR WKHZHDSRQ facially incriminating evidence in plain view. Carnes could DQGDPPXQLWLRQSRVVHVVLRQFKDUJHV not reasonably expect significant governmental intrusion into his life outside of the parole context from a regulation +RZHYHU FRXQW WKUHH ZLUHWDSSLQJ LV QRW EDVHG RQ D pertaining solely to investigations of parole violations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¶V PRWLRQ WR FRQQHFWLRQ WR EH EDVHG XSRQ WKH IDFW WKDW HYLGHQFH RI VXSSUHVVWKHVHWDSHV PXOWLSOH XQUHODWHG FULPHV ZDV REWDLQHG GXULQJ WKH VDPH VHDUFKZRXOGGRDZD\ZLWKWKHUHTXLUHPHQWWKDWWKHDFWVEHRI ) ³VLPLODUFKDUDFWHU´7KDWDOORIWKHFULPHVVRPHKRZLQYROYH DFRQQHFWLRQEHWZHHQWKHGHIHQGDQWDQG.HOOXP WKHJXQDQG 7KHILQDOLVVXHLVWKHHIIHFWRIWKLVYLRODWLRQ1RWDOO)RXUWK DPPXQLWLRQZHUHIRXQGLQDUHVLGHQFHVKHRZQHG LVDJDLQ $PHQGPHQW YLRODWLRQV UHTXLUH UHYHUVDO 6HH &KDSPDQ Y WRRJHQHURXVDVWDQGDUG&DUQHVZLUHWDSSHG.HOOXP¶VSKRQH &DOLIRUQLD86 7KHJRYHUQPHQWEHDUVWKH SULRUWRNQRZLQJKHZDVJRLQJWREHFKDUJHGDVDIHORQLQ EXUGHQ RI SURYLQJ WKDW VXFK D FRQVWLWXWLRQDO HUURU ZDV SRVVHVVLRQ VR WKH ZLUHWDS FDQQRW EH FRQVLGHUHG SDUW RI D KDUPOHVVEH\RQGDUHDVRQDEOHGRXEW,GDW,IWKHUHLV FRPPRQ SODQ WR LQWLPLGDWH D ZLWQHVV QRW WR WHVWLI\ ZLWK D UHDVRQDEOH SUREDELOLW\ WKDW WKH HYLGHQFH FRPSODLQHG RI UHVSHFWWRWKDWFKDUJH FRQWULEXWHG WR WKH FRQYLFWLRQ WKHQ WKH HUURU FDQQRW EH FRQVLGHUHGKDUPOHVV,G³7RGHWHUPLQHZKHWKHUWKHHUURU :KLOHZHFRQFOXGHWKHGLVWULFWFRXUWHUUHGLQQRWVHYHULQJ ZDVKDUPOHVVXQGHU&KDSPDQWKHTXHVWLRQWKLVFRXUWPXVWDVN WKHFRXQWVWKDWHUURUZDVKDUPOHVV8QLWHG6WDWHVY/DQH LVZKHWKHUDEVHQWWKHLPSURSHUO\DGPLWWHG>HYLGHQFH@LWLV 86 7KHHYLGHQFHDJDLQVW&DUQHVRQ FOHDU EH\RQG D UHDVRQDEOH GRXEW WKDW WKH MXU\ ZRXOG KDYH WKHZLUHWDSSLQJFRXQWZDVXQDPELJXRXVDQGRYHUZKHOPLQJ UHWXUQHGDYHUGLFWRIJXLOW\´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those in Knights, it is clear that Carnes did not bargain away WKH WULDO ZDV VHW IRU 0DUFK &DUQHV¶V FRXQVHO the scope of rights that Knights did. VWLSXODWHGWKDW³&DUQHVDJUHHVWKDWDOOWLPHDWWULEXWDEOHWRWKLV PRWLRQLQFOXGLQJDOOGHOD\IURPWKHILOLQJRIWKHPRWLRQWR ,Q .QLJKWV WKH SUREDWLRQ VHDUFK FRQGLWLRQ VWDWHGWKDW GDWHRIWULDOVKDOOEHGHHPHGH[FOXGDEOHIURPWKH6SHHG\7ULDO .QLJKWVZRXOG³>V@XEPLWKLVSHUVRQSURSHUW\SODFHRI $FW´ UHVLGHQFHYHKLFOHSHUVRQDOHIIHFWVWRVHDUFKDWDQ\WLPHZLWK RUZLWKRXWDVHDUFKZDUUDQWZDUUDQWRIDUUHVWRUUHDVRQDEOH ,Q D FKDOOHQJH WR D GHQLDO RI D PRWLRQ WR GLVPLVV IRU FDXVHE\DQ\SUREDWLRQRIILFHURUODZHQIRUFHPHQWRIILFHU´ YLRODWLRQV RI WKH 6SHHG\ 7ULDO $FW ZH UHYLHZ WKH GLVWULFW .QLJKWV 6 &W DW HPSKDVLV DGGHG 7KXV WKH FRXUW¶VOHJDOFRQFOXVLRQVGHQRYRDQGLWVIDFWXDOILQGLQJVIRU DJUHHPHQW FOHDUO\ GLVSHQVHG ZLWK DQ\ UHTXLUHPHQW RI FOHDUHUURU8QLWHG6WDWHVY5RELQVRQ)G WK UHDVRQDEOH FDXVH RU VXVSLFLRQ SULRU WR DQ LQYHVWLJDWLRQ RU &LU VHDUFK ,W LV GLIILFXOW WR LPDJLQH D VHDUFK FRQGLWLRQ PRUH LQWUXVLYH RQ D SHUVRQ¶V )RXUWK $PHQGPHQW ULJKWV 7KH ,QJUDQWLQJWKH)HEUXDU\PRWLRQWKHGLVWULFWFRXUWPDGH 6XSUHPH &RXUW DV H[SODLQHG LQ IRRWQRWH RI WKH .QLJKWV DILQGLQJRIIDFWWKDW³&DUQHVVSHFLILFDOO\LQGLFDWHGWR>KLV RSLQLRQRQO\WUHDWHGWKHVHDUFKDVEHLQJFRQGXFWHGSXUVXDQW WKHQFRXQVHO@0U$QQHQEHUJWKDWKHGHVLUHVWRZDLYHKLV WR UHDVRQDEOH VXVSLFLRQ WR DYRLG RWKHU FRQVWLWXWLRQDO VSHHG\ WULDO ULJKWV DV WKH\ SHUWDLQ WR WKH JUDQWLQJ RI WKLV TXHVWLRQV6HHLGDW Q7KH&RXUWGLGQRWKRZHYHU PRWLRQ´&DUQHVKDVSURGXFHGQRHYLGHQFHWRLQGLFDWHWKDW UHZULWHWKHDJUHHPHQWLWVHOIWRLQFOXGHDUHDVRQDEOHVXVSLFLRQ WKLVIDFWXDOILQGLQJZDVFOHDUHUURU$VDUHVXOWZHILQGWKDW UHTXLUHPHQW$OWKRXJKWKHTXHVWLRQRIZKHWKHU.QLJKWVFRXOG WKHGLVWULFWFRXUWSURSHUO\UXOHGWKDWKHKDGZDLYHGKLV6SHHG\ ZDLYHKLV)RXUWK$PHQGPHQWULJKWVFRPSOHWHO\ZDVUHVHUYHG 7ULDO$FWULJKWVDQGWKDWQRGLVPLVVDOZDVUHTXLUHG WKHDJUHHPHQWWKDW.QLJKWVVXEPLWWHGWRHYLQFHGWKDWKHZDV H[SHFWLQJWRIRUJRSUDFWLFDOO\DOORIKLV)RXUWK$PHQGPHQW ,QKLVUHSO\EULHI&DUQHVFODLPVWKDWHYHQLIKLVFRXQVHO¶V ULJKWV6HHLGDW VWLSXODWLRQZDLYHGD6SHHG\7ULDO$FWFODLPWKDWVWLSXODWLRQ ZDVPDGHZLWKRXWKLVDSSURYDODQGVKRXOGSURYLGHDEDVLVIRU &DUQHV¶V SDUROH DJUHHPHQW LV ZKROO\ GLIIHUHQW IURP DILQGLQJRILQHIIHFWLYHDVVLVWDQFHRIFRXQVHO%HFDXVHZHVHH .QLJKWV¶VSUREDWLRQVHDUFKFRQGLWLRQ:KLOH&DUQHVDJUHHG QR HYLGHQFH WR FRQWUDGLFW WKH IDFWXDO ILQGLQJ WKDW &DUQHV WR WDNH RQ FHUWDLQ REOLJDWLRQV VXFK DV WKH UHVLGHQF\ FRQVHQWHGWRWKHGHOD\ZHGRQRWILQGDQ\LQHIIHFWLYHQHVVRI UHTXLUHPHQWWKHDJUHHPHQWLWVHOIQHYHUVKRZHGWKDWKHZDV FRXQVHO ZLOOLQJWRIRUHJRKLVSULYDF\ULJKWVE\H[SUHVVO\DOORZLQJWKH SROLFHJUHDWHUDXWKRULW\WRVHDUFKKLPDQGKLVUHVLGHQFH$V )RU WKHVH UHDVRQV ZH DIILUP &DUQHV¶V FRQYLFWLRQV IRU WRKLPWKHSDUROHDJUHHPHQWRQO\DOORZHGJRYHUQPHQWDJHQWV SRVVHVVLRQRIDILUHDUPE\DIHORQSRVVHVVLRQRIDPPXQLWLRQ WRVHDUFKKLPIRUDJUHDWHUQXPEHURIWKLQJV IRUH[DPSOHDQ E\DIHORQDQGZLWQHVVWDPSHULQJ7KHFDVHLVUHPDQGHGIRU RUGLQDU\FLWL]HQFRXOGQRWEHVHDUFKHGRQVXVSLFLRQWKDWKH UHVHQWHQFLQJIROORZLQJILQDOGLVSRVLWLRQRIFRXQWWKUHHRIWKH ZDVQRWOLYLQJZLWKKLVVLVWHU8QOLNH.QLJKWV¶VDJUHHPHQW VXSHUFHGLQJLQGLFWPHQW QRWKLQJLQ&DUQHV¶VDJUHHPHQWVKRZVWKDWKHZRXOGH[SHFW WKHSROLFHWREHDEOHWRVHDUFKKLPZLWKRXWSUREDEOHFDXVHRU DZDUUDQW 1HLWKHU GRHV WKH 0LFKLJDQ 5HJXODWLRQ JRYHUQLQJ VXSHUYLVLRQ RI SDUROH LQGLFDWH WKDW &DUQHV FRXOG H[SHFW 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV BBBBBBBBBBBBBB SULYDF\³DVVHVVLQJRQWKHRQHKDQGWKHGHJUHHWRZKLFK>D VHDUFK@ LQWUXGHV XSRQ DQ LQGLYLGXDO¶V SULYDF\ DQG RQ WKH 23,1,21 RWKHUWKHGHJUHHWRZKLFKLWLVQHHGHGIRUWKHSURPRWLRQRI BBBBBBBBBBBBBB OHJLWLPDWHJRYHUQPHQWDOLQWHUHVWV´.QLJKWV6&WDW TXRWLQJ2KLRY5RELQHWWH 86 .(,7+&LUFXLW-XGJH Carnes’s status as a parolee informs both sides of the 9,,,0RWLRQWR6XSSUHVVWKH$XGLR7DSHV balance. Parolees do not enjoy the full panoply of rights afforded the average citizen. See Morrissey, 408 U.S. at 494. &DUQHVDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQGHQ\LQJKLV They have previously been found guilty of a crime, which PRWLRQWRVXSSUHVVDXGLRWDSHVVHL]HGDQGOLVWHQHGWRZLWKRXW allows the state to impose "extensive restrictions" on their DVHDUFKZDUUDQW:HKROGWKDWWKHJRYHUQPHQW¶VDFWLRQVZLWK liberty. Id. at 483. Similarly, they know that at any time, UHVSHFWWRVL[RIWKHWDSHVYLRODWHGWKH)RXUWK$PHQGPHQW¶V they may be sent back to jail for conduct that would be SURKLELWLRQ RI XQUHDVRQDEOH VHDUFKHV DQG VHL]XUHV 7KH perfectly lawful for the average citizen. GLVWULFW FRXUW VKRXOG KDYH JUDQWHG &DUQHV¶ PRWLRQ LQ SDUW VXSSUHVVLQJ WKH ILUVW VL[ WDSHV IRXQG DW +DUPRQ RQ In assessing the governmental interests side, many of the -DQXDU\ 7KH GLVWULFW FRXUW KRZHYHU SURSHUO\ concerns articulated in Knights with regard to probationers GHQLHG &DUQHV¶V PRWLRQ ZLWK UHVSHFW WR WKH VHYHQWK WDSH are applicable. However, a brief account of statistics specific IRXQG PRQWKV ODWHU XQGHU .HOOXP¶V KRXVH 7KHUHIRUH ZH to parolees is warranted. Parolees, like probationers, are far 5(9(56(WKHFRQYLFWLRQIRULOOHJDOLQWHUFHSWLRQRIDZLUH more likely than the average citizen to commit a crime. In FRPPXQLFDWLRQ 1998, of 6,134,200 total persons under community supervision, jail, or prison, 696,385 were on parole. U.S. $ Department of Justice, Bureau of Statistics, Probation and Parole in the United States, 2001 NCJ 188208 (Washington 6L[DXGLRWDSHVZHUHVHL]HGDW+DUPRQ6WUHHWGXULQJ D.C.: U.S. Department of Justice, 2001), p. 3. In 1998, 42% WKH VHDUFK LPPHGLDWHO\ IROORZLQJ &DUQHV¶V DUUHVW RQ -DQXDU\ 7KHSROLFHDQGSDUROHRIILFHUVHQWHUHGWKH of parolees were returned to jail or prison and 9% absconded. +DUPRQ6WUHHWUHVLGHQFHZLWKZDUUDQWVWRDUUHVW&DUQHVIRU U.S. Department of Justice, Bureau of Statistics, Probation LOOHJDO HQWU\ DVVDXOW DQG EDWWHU\ DQG EHLQJ D SDUROH and Parole in the United States, 1998 NCJ 178234 DEVFRQGHU 6HYHUDO PRQWKV ODWHU LQ WKH VSULQJ RI (Washington D.C.: U.S. Department of Justice, 1999), p. 7. DQRWKHU JRYHUQPHQW DJHQW IRXQG D FDVVHWWH UHFRUGHU XQGHU In 1999, 14.4% of all Federal Parolees had their parole .HOOXP¶V WUDLOHUKRPH .HOOXP KDG QR NQRZOHGJH RI WKH terminated because of a new crime, 13.0% because of drug UHFRUGHU¶VSUHVHQFH,QVLGHWKHUHFRUGHUZDVRQHDGGLWLRQDO use, and 4.3% because of their fugitive status. U.S. WDSH ³WKHVHYHQWKWDSH´ Department of Justice, Bureau of Statistics, Compendium of Federal Justice Statistics, 1999 NCJ 186179 (Washington, 7KHVL[WDSHVVHL]HGRQ-DQXDU\ ZHUHILUVWOLVWHQHG D.C.: U.S. Department of Justice, 2001), p. 97. WR WKUHH PRQWKV ODWHU DIWHU WKH KHDULQJ FRQFHUQLQJ WKH VXVSHFWHG SDUROH YLRODWLRQV 7KH\ FRQWDLQHG SKRQH Assessing Carnes’s privacy interests, we look to Carnes’s FRQYHUVDWLRQV WDSHG IURP .HOOXP¶V KRPH 6RPH RI WKH expectations when negotiating his parole agreement, FRQYHUVDWLRQV ZHUH WKUHDWHQLQJ SKRQH FDOOV IURP &DUQHV including Michigan Regulations applicable to him once he 2WKHUVZHUHRUGLQDU\SKRQHFDOOVWR.HOOXPIURPUHODWLYHV accepted the terms of his parole. Comparing these facts with 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV government cites United States v. Knights, 112 S. Ct. 587, DQGIULHQGV&DUQHVILOHGDPRWLRQWRVXSSUHVVWKHVHWDSHV 593 (2001). DUJXLQJWKDWWKH\ZHUHVHL]HGDQGOLVWHQHGWRLQYLRODWLRQRI KLV)RXUWK$PHQGPHQWULJKWV7KHGLVWULFWFRXUWGHQLHGWKH ,Q.QLJKWVWKH6XSUHPH&RXUWVWDWHGWKDWWKH1LQWK&LUFXLW PRWLRQILQGLQJWKDWWKHVSHFLDOQHHGVRIWKH0LFKLJDQSDUROH XVHG ³GXELRXV ORJLF´ ZKHQ LW DIILUPHG WKH VXSSUHVVLRQ RI V\VWHPMXVWLILHGWKHZDUUDQWOHVVVHL]XUHDQGXVHRIWKHWDSHV HYLGHQFH VHL]HG DW SUREDWLRQHU .QLJKWV¶V DSDUWPHQW EDVHG VROHO\RQWKHVSHFLDOQHHGVDQDO\VLVIURP*ULIILQ,GDW % 7KH .QLJKWV &RXUW KLJKOLJKWHG *ULIILQ¶V H[SUHVV VWDWHPHQWWKDWLWVVSHFLDOQHHGVKROGLQJPDGHLWXQQHFHVVDU\ 2QDSSHDO&DUQHVDUJXHVWKDWWKHDXWKRULWLHVKDGQHLWKHU WR GHWHUPLQH ZKHWKHU ZDUUDQWOHVV VHDUFKHV RI SUREDWLRQHUV WKH ULJKW WR VHL]H WKH WDSHV QRU WKH ULJKW WR OLVWHQ WR WKHP ZHUHRWKHUZLVHUHDVRQDEOHZLWKLQWKHPHDQLQJRIWKH)RXUWK EHFDXVH WKH\GLGQRWIDFLDOO\LQGLFDWHDQ\UHODWLRQVKLSWRD $PHQGPHQW ,G 1H[W WKH 6XSUHPH &RXUW YDOLGDWHG WKH SDUROHYLRODWLRQRUFULPLQDODFW7KHJRYHUQPHQWFRQFHGHV ZDUUDQWOHVV VHDUFK DW LVVXH XQGHU WKH ³JHQHUDO )RXUWK WKDWWKH\GLGQRWSRVVHVVDVHDUFKZDUUDQWWRVHL]HWKHWDSHVRU $PHQGPHQW DSSURDFK RI µH[DPLQLQJ WKH WRWDOLW\ RI WKH WROLVWHQWRWKHP7KHJRYHUQPHQWDUJXHVWKDWWKHLUDFWLRQV FLUFXPVWDQFHV¶ ´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¶V SUREDWLRQ DJUHHPHQW LQFOXGLQJ D ODZHQIRUFHPHQWDOORZHGWKHJRYHUQPHQWWRVHL]HDQGXVHWKH ³SUREDWLRQVHDUFKFRQGLWLRQ´6HHLGDW WDSHV ZLWKRXW D ZDUUDQW RU SUREDEOH FDXVH 7KLUG WKH JRYHUQPHQW FRQWHQGV WKDW XQGHU WKH WRWDOLW\ RI WKH Paying particular attention to the facts of Knights’s case, FLUFXPVWDQFHV &DUQHV KDG D GLPLQLVKHG H[SHFWDWLRQ RI the Court rejected the proposition that the government can SULYDF\VXFKWKDWWKHXVXDO)RXUWK$PHQGPHQWUHTXLUHPHQWV search all probationers and parolees without a warrant and ZHUHQRWDSSOLFDEOH probable cause. Rather, the Court described Knights’s own probation search condition as a "salient circumstance" & affecting the "EDODQFH RI >WKH@ FRQVLGHUDWLRQV >ZKLFK@ UHTXLUH>G@ QR PRUH WKDQ UHDVRQDEOH VXVSLFLRQ WR FRQGXFW D )LUVW WKH JRYHUQPHQW¶V DUJXPHQW WKDW &DUQHV ODFNHG DQ VHDUFKRIWKLVSUREDWLRQHU¶VKRXVH´,GDW HPSKDVLV H[SHFWDWLRQRISULYDF\DVWRWKHWDSHVEHFDXVHWKHLUFRQWHQW DGGHG VHH DOVR 0RUULVVH\ Y %UHZHU 86 ZDV LOOHJDOO\ REWDLQHG LV QRW FRQYLQFLQJ 7KH DQDORJ\ ³WKH OLEHUW\ RI D SDUROHH DOWKRXJK LQGHWHUPLQDWH EHWZHHQDFDUWKLHI¶VULJKWWRSULYDF\LQDVWROHQYHKLFOHDQG LQFOXGHV PDQ\ RI WKH FRUH YDOXHV RI XQTXDOLILHG OLEHUW\´ &DUQHV¶VULJKWZLWKUHVSHFWWRWKHWDSHVDWLVVXHLVVWUDLQHG $GGLWLRQDOO\VXFKDFDWHJRULFDOUXOHSHUPLWWLQJDQ\VHDUFKRI 7KHWDSHVWKHPVHOYHVZHUHQRWVWROHQQRUZDVWKHEULHIFDVH D SUREDWLRQHU RU SDUROHH ZLWK RU ZLWKRXW D ZDUUDQW RU LQ ZKLFK WKH\ ZHUH IRXQG 0RUHRYHU LOOHJDOO\ REWDLQHG SUREDEOHFDXVHZRXOGKDYHPDGHWKHVSHFLDOQHHGVDQDO\VLV REMHFWVVXFKDVFRQWUDEDQGDUHRIWHQVXSSUHVVHG6HHHJ RI*ULIILQFRPSOHWHO\XQQHFHVVDU\ 8QLWHG6WDWHVY6PLWK, 263 F.3d 571 (6th Cir. 2001). The legality of a person’s possession cannot be the lynchpin of 7KHUHIRUH ZH ORRN WR WKH IDFWV VSHFLILF WR WKLV FDVH LQ their Fourth Amendment standing. Carnes thus had some GHWHUPLQLQJZKHWKHU&DUQHVKDGDGLPLQLVKHGH[SHFWDWLRQRI expectation of privacy in the six tapes seized at 1731 Harmon. 8QLWHG6WDWHVY&DUQHV 1R 1R 8QLWHG6WDWHVY&DUQHV However, with respect to the seventh tape, the one found SXUVXDQWWRDUHDVRQDEOHUHJXODWRU\RUDGPLQLVWUDWLYHVFKHPH under Kellum’s home, Carnes had no expectation of privacy. DXWKRUL]LQJ VXFK DFWLRQ WKH SROLFH FRXOG VHDUFK D SUREDWLRQHU¶V UHVLGHQFH ZLWKRXW D ZDUUDQW LI WKH\ KDG Since the decision in Katz v. United States, 389 U.S. 347 UHDVRQDEOH FDXVH WR EHOLHYH WKDW D YLRODWLRQ RI D SUREDWLRQ (1967), it has been the law that "capacity to claim the FRQGLWLRQZDVWDNLQJSODFH6HHLG protection of the Fourth Amendment depends . . . upon whether the person who claims the protection of the At the suppression hearing, the government argued that the Amendment has a legitimate expectation of privacy in tapes were seized to help establish a violation of the residency the invaded place." Rakas v. Illinois, 439 U.S. 128, 143 requirement of Carnes’s parole agreement. See United States (1978). A subjective expectation of privacy is legitimate v. Carnes, 51 F.Supp.2d 829 (E.D. Mich. 1999). The fact that if it is " ‘one that society is prepared to recognize as the tapes were not listened to until well after the parole "reasonable," ’ " id., at 143-144, n.12, quoting Katz, hearing shows that they were not originally seized, nor supra, at 361 (Harlan, J., concurring). subsequently listened to, pursuant to the special authority granted the government for supervising parolees. Through all Minnesota v. Olson, 495 U.S. 91, 95 (1990). Carnes never stages of this case, the government has never offered a reason lived at this house and certainly was not present in it or in why it did not listen to the tapes immediately after, or even possession of the recorder or the tape when Kellum turned shortly after, they were seized. To the extent the government them over to the police. It would be unreasonable for him to now offers reasons why the tapes were originally seized, we claim an expectation of privacy with respect to something that cannot entertain them. Where the government claims that he had no control or dominion over. Therefore, we hold that "special needs" of law enforcement justify an otherwise the district court properly admitted the seventh tape into illegal search and seizure, a court must look to the "actual evidence. motivations of individual officers". See United States v. Knights, 112 S. Ct. 587, 593 (2001); see also Griffin, 483 D. U.S. at 875 (suggesting that special needs searches must be confined in scope). Here, there is no evidence that the The government’s argument, relied upon by the district officers who seized the six tapes on January 14, 1997, were court, that the special needs of law enforcement allowed the motivated by a desire to establish a violation of the residency government to seize and listen to the six tapes seized at 1731 requirement of Carnes’s parole agreement. Rather, the Harmon, is unavailing. ,Q*ULIILQY:LVFRQVLQ483 U.S. 868 government’s failure to listen to the tapes until well after the (1987), the Supreme Court IRXQG WKDW WKH XQLTXH parole hearing suggests some other motivation. FLUFXPVWDQFHVRISUREDWLRQFUHDWHG³VSHFLDOQHHGVEH\RQGWKH QRUPDOQHHGIRUODZHQIRUFHPHQW´,GDW7KHUHIRUH E. Finally, the government argues that under the totality of the circumstances, Carnes had a diminished expectation of $GGLWLRQDOO\ WKH JUDQW RI SDUROH LV XVXDOO\ QRW WKH UHVXOW RI D MXGLFLDO ILQGLQJ EXW RI DQ DGPLQLVWUDWLYH RU OHJLVODWLYH SURFHVV 6HH 0RUULVVH\ privacy such that the usual Fourth Amendment protections 86 DW SDUROH ³LV QRW GLUHFWHG E\ WKH FRXUW EXW E\ DQ were not applicable to him. For this proposition, the DGPLQLVWUDWLYH DJHQF\´ %/$&.6 /$: ',&7,21$5< WK HG ³7KH JUDQWLQJ GHQ\LQJ UHYRFDWLRQ DQG VXSHUYLVLRQ RI SDUROH IRU IHGHUDO SULVRQHUV UHVWV LQ WKH 86 3DUROH &RPPLVVLRQ´ DQG ³µSDUROH¶ UHODWHV WR H[HFXWLYH DFWLRQ´ FLWDWLRQV RPLWWHG 7KHUHIRUH ZKHQ LQYHVWLJDWLQJ SDUROH YLRODWLRQV MXGLFLDO LQWHUIHUHQFH LV OHVV ZDUUDQWHG