81,7(' 67$7(6 ',675,&7 &2857 )25 7+( ',675,&7 2) &2/80%,$ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB $11 025721 <281* +$%/,6721 et al. 3ODLQWLIIV Y &LYLO $FWLRQ 1R $%- ),15$ ',6387( 5(62/87,21 ,1& 'HIHQGDQW BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 0(025$1'80 23,1,21 3XUVXDQW WR )HGHUDO 5XOH RI &LYLO 3URFHGXUH H SODLQWLIIV KDYH PRYHG IRU UHFRQVLGHUDWLRQ RI WKH &RXUW¶V RUGHU GLVPLVVLQJ WKLV FDVH ZLWK SUHMXGLFH 3OV¶ 0RW WR $PHQG RU $OWHU )LQDO - >'NW @ ³3OV¶ 0RW´ DQG SODLQWLIIV KDYH DOVR PRYHG IRU OHDYH WR ILOH D VXEVWLWXWH DPHQGHG FRPSODLQW XQGHU )HGHUDO 5XOH RI &LYLO 3URFHGXUH D 3OV¶ 0RW 0HP RI $XWKRULWLHV IRU /HDYH WR )LOH )LUVW 6XEVWLWXWH $P &RPSO >'NW @ ³3OV¶ 0RW $P &RPSO´ %HFDXVH SODLQWLIIV KDYH QRW LGHQWLILHG DQ\ SURSHU EDVLV IRU WKH &RXUW WR DOWHU RU VHW DVLGH LWV MXGJPHQW DQG EHFDXVH DQ\ DPHQGPHQW WR WKH FRPSODLQW ZRXOG EH IXWLOH WKH &RXUW ZLOO GHQ\ WKH PRWLRQV %$&.*5281' 3ODLQWLIIV DUH LQYROYHG LQ DQ DUELWUDWLRQ DJDLQVW :HOOV )DUJR $GYLVRUV //& FRQFHUQLQJ WKHLU GHFHDVHG SDUHQWV¶ EURNHUDJH DFFRXQWV DQG WKH\ EURXJKW WKLV DFWLRQ DJDLQVW GHIHQGDQW ),15$ 5HJXODWLRQ ,QF ³),15$ 5HJXODWLRQ´ ZKLOH WKH SURFHHGLQJV ZHUH RQJRLQJ See 6XEVWLWXWH $P &RPSO >'NW @ ³&RPSO´ 2Q -XO\ GHIHQGDQW PRYHG WR GLVPLVV WKH FRPSODLQW RQ D QXPEHU RI JURXQGV LQFOXGLQJ )HGHUDO 5XOHV RI &LYLO 3URFHGXUH E E E DQG K 0RW WR 'LVPLVV &RPSO >'NW @ ³'HI¶V 0RW´ 7KH\ DUJXHG WKDW SODLQWLIIV¶ FODLPV DUH QRW ULSH IRU UHYLHZ GHIHQGDQW LV LPPXQH IURP VXLW XQGHU WKH GRFWULQHV RI DUELWUDO DQG UHJXODWRU\ LPPXQLW\ SODLQWLIIV IDLOHG WR QDPH LQGLVSHQVDEOH SDUWLHV GHIHQGDQW LV QRW D VWDWH DFWRU WKH 6HFXULWLHV DQG ([FKDQJH $FW GRHV QRW FUHDWH D SULYDWH ULJKW RI DFWLRQ IRU DOOHJHG YLRODWLRQV RI UXOHV HQDFWHG XQGHU WKH $FW DQG SODLQWLIIV¶ UHTXHVW WKDW WKH &RXUW DSSRLQW QHZ DUELWUDWRUV LV PRRW EHFDXVH UHSODFHPHQW DUELWUDWRUV KDYH DOUHDG\ EHHQ DSSRLQWHG 0HP RI /DZ LQ 6XSS RI 'HI¶V 0RW >'NW @ ³'HI¶V 0HP´ DW ± 3ODLQWLIIV RSSRVHG WKH PRWLRQ EXW WKH\ RQO\ EULHIHG WKH LVVXHV RI DUELWUDO LPPXQLW\ ZKHWKHU ),15$ 5HJXODWLRQ LV D VWDWH DFWRU DQG ZKHWKHU WKHLU FODLPV ZHUH ULSH IRU UHYLHZ 3OV¶ 0HP LQ 2SS WR 'HI¶V 0RW >'NW @ ³3OV¶ 2SS´ DW ± ± 3ODLQWLIIV IDLOHG WR UHVSRQG WR DQ\ RI GHIHQGDQW¶V RWKHU FRQWHQWLRQV 2Q -DQXDU\ WKH &RXUW JUDQWHG GHIHQGDQW¶V PRWLRQ WR GLVPLVV See Habliston v. FINRA Regulation, Inc. 1R :/ ''& -DQ ,Q JUDQWLQJ WKH PRWLRQ WR GLVPLVV WKH &RXUW IRXQG WKDW WKH IRXU DUJXPHQWV SODLQWLIIV IDLOHG WR DGGUHVV KDG EHHQ FRQFHGHG Id. DW %XW WKH GLVPLVVDO RI WKH FDVH ZDV XOWLPDWHO\ SUHGLFDWHG XSRQ ODFN RI VXEMHFW PDWWHU MXULVGLFWLRQ DQG IDLOXUH WR VWDWH D FODLP XQGHU )HGHUDO 5XOHV RI &LYLO 3URFHGXUH E DQG E Id. DW 7KH &RXUW FRQFOXGHG WKDW SODLQWLIIV¶ FODLPV WKDW WKHLU FRQVWLWXWLRQDO ULJKWV KDG EHHQ YLRODWHG LQ DQ DOOHJHGO\ XQIDLU DUELWUDWLRQ SURFHVV ZHUH QRW ULSH IRU UHYLHZ DQG VKRXOG EH GLVPLVVHG IRU ODFN RI VXEMHFW PDWWHU MXULVGLFWLRQ XQGHU )HGHUDO 5XOH RI &LYLO 3URFHGXUH E Id. DW $QG WKH &RXUW KHOG WKDW DOO RI SODLQWLIIV¶ FODLPV VKRXOG EH GLVPLVVHG SXUVXDQW WR )HGHUDO 5XOH RI &LYLO 3URFHGXUH E EHFDXVH ),15$ 5HJXODWLRQ LV LPPXQH IURP VXLW XQGHU WKH GRFWULQH RI DUELWUDO LPPXQLW\ Id. DW ± 2Q )HEUXDU\ SODLQWLIIV ILOHG D PRWLRQ WR DPHQG RU DOWHU WKH ILQDO MXGJPHQW XQGHU 5XOH H DUJXLQJ WKDW LW ZDV DQ DEXVH RI GLVFUHWLRQ IRU WKH &RXUW WR GHHP LVVXHV QRW RSSRVHG DV FRQFHGHG DQG DVNLQJ WKH &RXUW WR GLVPLVV DOO FRXQWV ZLWKRXW SUHMXGLFH 3OV¶ 0RW DW 3OV¶ 0HP RI 3 $ WR $OWHU RU $PHQG )LQDO - >'NW @ ³3OV¶ 0HP´ DW 3ODLQWLIIV DOVR VWDWHG WKDW WKH\ LQWHQGHG WR ILOH D PRWLRQ IRU OHDYH WR ILOH DQ DPHQGHG FRPSODLQW WKDW ZRXOG EH OLPLWHG WR WKH WRSLFV RI ³DGKHVLRQ XQFRQVFLRQDELOLW\ DQG PDWHULDO EUHDFK RI FRQWUDFW WR KDYH WKH DUELWUDWLRQ DJUHHPHQWV GHFODUHG XQHQIRUFHDEOH XQGHU 86& DQG >WR@ DGG QHZ IDFWV WR DSSRLQW QHZ DUELWUDWRUV XQGHU 86& ´ 3OV¶ 0HP DW 'HIHQGDQW RSSRVHG WKH PRWLRQ RQ 0DUFK DUJXLQJ WKDW SODLQWLIIV KDG IDLOHG ³WR PHHW WKH VWULQJHQW VWDQGDUGV HVWDEOLVKHG E\ 5XOH H ´ DQG WKDW WKH\ VKRXOG KDYH ILOHG D 5XOH PRWLRQ DFFRPSDQLHG E\ WKHLU SURSRVHG DPHQGHG FRPSODLQW WRJHWKHU ZLWK WKHLU 5XOH H PRWLRQ LI WKH\ LQWHQGHG WR VHHN OHDYH WR DPHQG 2SS WR 3OV¶ 0RW >'NW @ ³'HI¶V 2SS´ DW ± Q 'HIHQGDQW DOVR WRRN WKH SRVLWLRQ WKDW DQ\ DPHQGPHQW ZRXOG EH IXWLOH Id. DW 3ODLQWLIIV UHSOLHG LQ VXSSRUW RI WKHLU PRWLRQ RQ 0DUFK 3OV¶ 5HSO\ LQ 6XSS RI 3OV¶ 0RW >'NW @ ³3OV¶ 5HSO\´ 2Q 0DUFK WKH &RXUW GLUHFWHG SODLQWLIIV WR ILOH DQ\ PRWLRQ IRU OHDYH WR ILOH DQ DPHQGHG FRPSODLQW E\ 0DUFK VWDWLQJ WKDW LW ZRXOG EH ³LQ D EHWWHU SRVLWLRQ WR FRQVLGHU VXFK LVVXHV DV WKH IXWLOLW\ RI DQ\ DPHQGPHQW RQFH WKH SURSRVHG DPHQGHG FRPSODLQW >ZDV@ EHIRUH WKH &RXUW´ 0LQ 2UGHU 0DU 3ODLQWLIIV ILOHG WKHLU PRWLRQ RQ $SULO DWWDFKLQJ D FRS\ RI WKH DPHQGHG FRPSODLQW See 3OV¶ 0RW $P &RPSO ([ )LUVW 6XEVWLWXWH $P &RPSO >'NW @ ³$P &RPSO´ 2Q $SULO ),15$ 5HJXODWLRQ RSSRVHG WKH PRWLRQ DUJXLQJ WKDW WKH PRWLRQ VKRXOG EH GHQLHG EHFDXVH SODLQWLIIV KDYH IDLOHG WR VDWLVI\ WKHLU EXUGHQ XQGHU 5XOH H DQG WKH PRWLRQ IRU OHDYH WR ILOH DQ DPHQGHG FRPSODLQW ZDV IXWLOH EHFDXVH SODLQWLIIV¶ VXEVWLWXWH DPHQGHG FRPSODLQW ZRXOG QRW VXUYLYH D PRWLRQ WR GLVPLVV 2SS WR 3OV¶ 0RW $P &RPSO >'NW @ ³'HI¶V 2SS WR 3OV¶ 0RW $P &RPSO´ DW 3ODLQWLIIV UHSOLHG RQ $SULO 3OV¶ 5HSO\ LQ 6XSS RI 3OV¶ 0RW $P &RPSO >'NW @ 67$1'$5' 2) 5(9,(: 8QGHU RUGLQDU\ FLUFXPVWDQFHV ZKHQ D SDUW\ VHHNV WR DPHQG LWV SOHDGLQJ DIWHU D UHVSRQVLYH SOHDGLQJ KDV EHHQ VHUYHG WKH &RXUW VKRXOG ³IUHHO\ JLYH OHDYH >WR DPHQG@ ZKHQ MXVWLFH VR UHTXLUHV´ )HG 5 &LY 3 D Firestone v. Firestone )G '& &LU SHU FXULDP :KHQ HYDOXDWLQJ ZKHWKHU WR JUDQW OHDYH WR DPHQG KRZHYHU WKH &RXUW PXVW FRQVLGHU WKHVH IDFWRUV XQGXH GHOD\ SUHMXGLFH WR WKH RSSRVLQJ SDUW\ IXWLOLW\ RI WKH DPHQGPHQW EDG IDLWK DQG ZKHWKHU WKH SODLQWLII KDV SUHYLRXVO\ DPHQGHG WKH FRPSODLQW Atchinson v. District of Columbia )G '& &LU TXRWLQJ Foman v. Davis 86 7KH &RXUW PD\ GHQ\ OHDYH WR DPHQG EDVHG RQ IXWLOLW\ LI WKH SURSRVHG FODLPV ZRXOG QRW VXUYLYH D PRWLRQ WR GLVPLVV Rumber v. District of Columbia ) 6XSS G ''& FLWLQJ James Madison Ltd. v. Ludwig )G '& &LU +RZHYHU D SODLQWLII PD\ DPHQG KLV RU KHU FRPSODLQW DIWHU MXGJPHQW KDV EHHQ HQWHUHG ³RQO\ E\ ILOLQJ D H PRWLRQ WR DOWHU RU DPHQG D MXGJPHQW FRPELQHG ZLWK D 5XOH D PRWLRQ UHTXHVWLQJ OHDYH RI FRXUW WR DPHQG WKH>@ FRPSODLQW´ Firestone )G DW ³5XOH D ¶V OLEHUDO VWDQGDUG IRU JUDQWLQJ OHDYH WR DPHQG JRYHUQV RQFH WKH FRXUW KDV YDFDWHG WKH MXGJPHQW %XW WR YDFDWH WKH MXGJPHQW >D SODLQWLII@ PXVW ILUVW VDWLVI\ 5XOH H ¶V PRUH VWULQJHQW VWDQGDUG´ Id. ³$ 5XOH H PRWLRQ LV GLVFUHWLRQDU\ DQG QHHG QRW EH JUDQWHG XQOHVV WKH GLVWULFW FRXUW ILQGV WKDW WKHUH LV DQ LQWHUYHQLQJ FKDQJH RI FRQWUROOLQJ ODZ WKH DYDLODELOLW\ RI QHZ HYLGHQFH RU WKH QHHG WR FRUUHFW D FOHDU HUURU WR SUHYHQW PDQLIHVW LQMXVWLFH´ Firestone )G DW LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG $ PRWLRQ WR UHFRQVLGHU XQGHU 5XOH H ³LV >QHLWKHU@ DQ RSSRUWXQLW\ WR UHDUJXH IDFWV DQG WKHRULHV XSRQ ZKLFK D FRXUW KDV DOUHDG\ UXOHG QRU D YHKLFOH IRU SUHVHQWLQJ WKHRULHV RU DUJXPHQWV WKDW FRXOG KDYH EHHQ DGYDQFHG HDUOLHU´ SEC v. Bilzerian ) 6XSS G ''& LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG TXRWLQJ New York v. United States ) 6XSS ''& DQG Kattan by Thomas v. District of Columbia ) G '& &LU $1$/<6,6 , 3ODLQWLIIV¶ 0RWLRQ IRU 5HFRQVLGHUDWLRQ 8QGHU 5XOH H $ 3ODLQWLIIV KDYH QRW LGHQWLILHG DQ ³LQWHUYHQLQJ FKDQJH LQ FRQWUROOLQJ ODZ´ ,Q LWV PHPRUDQGXP RSLQLRQ WKH &RXUW GHWHUPLQHG WKDW SODLQWLII KDG FRQFHGHG VHYHUDO DUJXPHQWV DGYDQFHG LQ WKH PRWLRQ WR GLVPLVV E\ IDLOLQJ WR UHVSRQG WR WKHP See Habliston :/ DW 3ODLQWLIIV QRZ PRYH WKH &RXUW WR ³YDFDWH LVVXHV GHHPHG FRQFHGHG DQG GLVPLVV DOO >F@RXQWV without prejudice VR >S@ODLQWLIIV PD\ ILOH DQ DPHQGHG FRPSODLQW´ 3OV¶ 0RW DW 7KH\ DVVHUW WKDW ³>U@HFHQW FKDQJHV LQ FRQWUROOLQJ ODZ KROG LW DQ DEXVH RI GLVFUHWLRQ WR GHHP LVVXHV QRW RSSRVHG DV FRQFHGHG XQGHU /&Y5 E ´ Id. FLWLQJ Cohen v. Bd. of Trs. of Univ. of D.C. )G '& &LU DQG Winston & Strawn v. McLean )G '& &LU 3OV¶ 0HP DW ± 7KHVH FLUFXPVWDQFHV GR QRW ZDUUDQW UHFRQVLGHUDWLRQ )LUVW WKH ³LQWHUYHQLQJ FKDQJH WR FRQWUROOLQJ ODZ´ WKDW SODLQWLIIV LGHQWLI\ LV ³QHLWKHU D FKDQJH QRU FRQWUROOLQJ´ Walsh v. Hagee )5' ''& KROGLQJ WKDW SODLQWLII¶V UHOLDQFH RQ ³ZHOOHVWDEOLVKHG SULQFLSOHV´ GLG QRW FRQVWLWXWH DQ ³LQWHUYHQLQJ FKDQJH RI FRQWUROOLQJ ODZ´ 5DWKHU WKH WZR &RXUW RI $SSHDOV GHFLVLRQV FLWHG E\ SODLQWLIIV SUHGDWH WKLV &RXUW¶V RSLQLRQ DQG QHLWKHU SUHYHQWV D FRXUW IURP JUDQWLQJ D PRWLRQ WR GLVPLVV RQ WKH JURXQGV WKDW LVVXHV ZHUH FRQFHGHG ,Q Winston & Strawn WKH FRXUW KHOG WKDW GLVWULFW FRXUWV FDQQRW LQYRNH WKH ORFDO UXOH WR JUDQW D motion for summary judgment DV FRQFHGHG ZLWKRXW FRQVLGHULQJ WKH LVVXHV RQ WKH PHULWV )G DW ± see also id. DW QRWLQJ WKDW ³QRWKLQJ LQ WKLV RSLQLRQ LV PHDQW WR DGGUHVV WKH DSSOLFDELOLW\ RI /RFDO 5XOH E WR PRWLRQV RWKHU WKDQ PRWLRQV IRU VXPPDU\ MXGJPHQW´ $QG LQ Cohen WKH '& &LUFXLW DIILUPHG WKH GLVWULFW FRXUW¶V GHFLVLRQ WR JUDQW D PRWLRQ WR GLVPLVV DV FRQFHGHG XQGHU WKH ORFDO UXOH )G DW ± ,W LV WUXH WKDW WKH &RXUW RI $SSHDOV FRQFOXGHG LQ Cohen WKDW LW ZDV DQ DEXVH RI GLVFUHWLRQ WR GLVPLVV WKH FDVH ZLWK SUHMXGLFH EXW WKDW FDVH LQYROYHG D SODLQWLII ZKR IDLOHG WR ILOH DQ RSSRVLWLRQ WR D PRWLRQ WR GLVPLVV EXW WKHQ VRXJKW WR UHPHG\ WKDW VLWXDWLRQ E\ ILOLQJ LW ODWH )G DW 7KH &RXUW REVHUYHG WKDW LW ZDV DQ ³RQHURXV EDU WR SUHFOXGH >WKH SODLQWLII@ IURP HYHU KDYLQJ KLV FODLPV KHDUG EHFDXVH RI DQ LQDGYHUWHQW FRQFHVVLRQ ± RQH WKDW KH QHYHU PDGH LQ IDFW WKDW ZDV FUHDWHG WKURXJK WKH VXVSHFW DSSOLFDWLRQ RI D ORFDO UXOH DQG WKDW KH SURPSWO\ VRXJKW WR UHPHG\´ Id. see also Rudder v. Williams )G '& &LU ILQGLQJ WKDW WKH GLVWULFW FRXUW ZDV ³RQ VROLG JURXQG´ LQ GLVPLVVLQJ FRQFHGHG FODLPV EXW WKDW LW ZDV DQ DEXVH RI GLVFUHWLRQ WR GLVPLVV ZLWK SUHMXGLFH EHFDXVH SODLQWLIIV KDG PDGH D ³EHODWHG DWWHPSW´ WR UHWUDFW WKH FRQFHVVLRQ WKDW GURYH WKH GLVPLVVDO :KDW SODLQWLIIV IDLO WR DSSUHFLDWH LV WKDW KHUH WKH &RXUW GLG QRW JUDQW GHIHQGDQW¶V PRWLRQ WR GLVPLVV VROHO\ RQ WKH EDVLV RI SODLQWLIIV¶ FRQFHVVLRQV See Habliston :/ DW ± ,QVWHDG WKH &RXUW IRXQG WKDW LW ODFNHG MXULVGLFWLRQ WR KHDU SODLQWLIIV¶ FODLPV IRU FRQVWLWXWLRQDO YLRODWLRQV DQG WKDW ³DOO RI SODLQWLIIV¶ FODLPV DJDLQVW ),15$ 5HJXODWLRQ DUH EDUUHG E\ WKH GRFWULQH RI DUELWUDO LPPXQLW\´ Id. 7KH LVVXHV RI ULSHQHVV DQG DUELWUDO LPPXQLW\ ZHUH EULHIHG E\ ERWK SDUWLHV DQG WKH &RXUW DQDO\]HG WKH LVVXHV RQ WKH PHULWV DQG GLG QRW GHHP WKHP WR EH FRQFHGHG See id. DW % 3ODLQWLIIV KDYH QRW LGHQWLILHG QHZ HYLGHQFH WKDW ZRXOG ZDUUDQW UHFRQVLGHUDWLRQ 3ODLQWLIIV¶ PRWLRQ IRU UHFRQVLGHUDWLRQ VLPSO\ UHSHDWV WKH DUJXPHQWV SODLQWLIIV PDGH LQ WKHLU RSSRVLWLRQ WR WKH PRWLRQ WR GLVPLVV UHJDUGLQJ WKH XQHQIRUFHDELOLW\ RI WKH DUELWUDWLRQ DJUHHPHQWV LQ WKH EURNHUDJH FRQWUDFWV WKH &RXUW¶V DELOLW\ WR DSSRLQW QHZ DUELWUDWRUV DQG WKH DOOHJHGO\ XQIDLU DUELWUDWLRQ IRUXP Compare 3OV¶ 0HP DW ± ± with 3OV¶ 2SS DW ± 3ODLQWLIIV DVVHUW WKDW WKH\ ³KDYH YDOLG FODLPV IRU DGKHVLRQ DQG XQFRQVFLRQDELOLW\´ EDVHG RQ ³DOOHJHG IDFWV´ 3OV¶ 0RW DW WKDW WKH FRXQW VHHNLQJ WR KDYH WKH &RXUW DSSRLQW QHZ DUELWUDWRUV ³VKRXOG QRW KDYH EHHQ GLVPLVVHG ZLWK SUHMXGLFH´ EHFDXVH GHIHQGDQW¶V DUJXPHQWV ³DUH UHIXWHG E\ DOOHJDWLRQV LQ WKH FRPSODLQW´ id. DW DQG WKDW ³>R@WKHU IDFWV GHPRQVWUDWH´ WKDW GHIHQGDQW KDV DFWHG ³LQ EDG IDLWK´ WR ³PDWHULDOO\ SUHMXGLFH >S@ODLQWLIIV¶ ULJKWV´ 3OV¶ 0HP DW +RZHYHU PRWLRQV IRU UHFRQVLGHUDWLRQ PD\ QRW EH XVHG WR ³UHOLWLJDWH ROG PDWWHUV RU WR UDLVH DUJXPHQWV RU SUHVHQW HYLGHQFH WKDW FRXOG KDYH EHHQ UDLVHG SULRU WR WKH HQWU\ RI MXGJPHQW´ Exxon Shipping Co. v. Baker 86 Q 3ODLQWLIIV FRQWHQG WKDW ³QHZ IDFWV´ ZLOO GHPRQVWUDWH GHIHQGDQW ILOOHG WKH DUELWUDWRU YDFDQFLHV LQ IXUWKHU YLRODWLRQ RI ),15$ UXOHV ³E\ DSSRLQWLQJ DUELWUDWRUV ZLWK DZDUG KLVWRULHV WKDW GHPRQVWUDWH FOHDU µSDUWLDOLW\ DQG ELDV¶ WKDW SUHYHQW WKHP IURP µUHQGHULQJ DQ REMHFWLYH DQG LPSDUWLDO GHWHUPLQDWLRQ¶´ 3OV¶ 0HP DW $QG SODLQWLIIV DOVR SRVLW WKDW WKH\ ³DUH DEOH WR SOHG >VLF@ DGGLWLRQDO IDFWV´ WR GHPRQVWUDWH WKDW WKH EURNHUDJH FRQWUDFWV HQWHUHG LQWR E\ SODLQWLIIV¶ SDUHQWV ZHUH SURFHGXUDOO\ DQG VXEVWDQWLYHO\ XQFRQVFLRQDEOH Id. DW ± %XW 5XOH H RQO\ SHUPLWV DPHQGLQJ RU DOWHULQJ D MXGJPHQW ZKHUH D SDUW\ SUHVHQWV HYLGHQFH WKDW ZDV XQDYDLODEOH ³SULRU WR WKH HQWU\ RI MXGJPHQW´ Exxon Shipping 86 DW Q $QG SODLQWLIIV KDYH QRW HYHQ DWWHPSWHG WR DUJXH WKDW WKH\ GLG QRW KDYH DFFHVV WR WKHVH ³IDFWV´ EHIRUH WKH &RXUW HQWHUHG LWV MXGJPHQW RQ -DQXDU\ 5DWKHU SODLQWLIIV VHHN ³OHDYH WR ILOH WKH DFFRPSDQ\LQJ DPHQGHG FRPSODLQW WR DGG QHZ IDFWV WKDW occurred after filing [p]laintiffs’ Substitute Amended Complaint >RQ -XQH @ DQG >WR@ DGG additional facts to cure any deficiencies LQ VXSSRUW RI >S@ODLQWLIIV¶ UHTXHVW WR KDYH DOO DJUHHPHQWV WR DUELWUDWH GHFODUHG XQHQIRUFHDEOH´ 3OV¶ 0RW $P &RPSO DW HPSKDVLV DGGHG 0RUHRYHU WKH VRFDOOHG ³QHZ IDFWV´ GR QRWKLQJ WR FKDQJH HLWKHU WKH &RXUW¶V REVHUYDWLRQ WKDW SODLQWLIIV DUH FKDOOHQJLQJ EURNHUDJH FRQWUDFWV WR ZKLFK GHIHQGDQW ),15$ 5HJXODWLRQ LV QRW D SDUW\ RU WKH &RXUW¶V FRQFOXVLRQ WKDW ),15$ 5HJXODWLRQ LV SURWHFWHG E\ DUELWUDO LPPXQLW\ Habliston :/ DW ± $QG WKH QHZ IDFWV GR QRW UHPHG\ WKH ULSHQHVV SUREOHP & 3ODLQWLIIV KDYH QRW LGHQWLILHG D QHHG WR FRUUHFW FOHDU HUURU RU SUHYHQW PDQLIHVW LQMXVWLFH 3ODLQWLIIV FRQWHQG WKDW LW ZDV ³FOHDU HUURU RI ODZ WR GLVUHJDUG &RQJUHVVLRQDO LQWHQW E\ DOORZLQJ >G@HIHQGDQW¶V DUJXPHQWV RI UHJXODWRU\ DQGRU DUELWUDO >LPPXQLW\@ WR EDU >S@ODLQWLIIV¶ ULJKW WR UHOLHI XQGHU 86& ´ 3OV¶ 0HP DW $IWHU PDNLQJ WKLV VWDWHPHQW SODLQWLIIV RQO\ JR RQ WR FKDOOHQJH WKH DSSOLFDWLRQ RI UHJXODWRU\ LPPXQLW\ WR &RXQW ,9 DUJXLQJ WKDW ³UHJXODWRU\ LPPXQLW\ RQO\ DSSOLHV ZKHQ >G@HIHQGDQW LV DFWLQJ LQ LWV UHJXODWRU\ FDSDFLW\ DQG WKDW FRQGXFWLQJ FXVWRPHU DUELWUDWLRQV DUH QRW DPRQJ WKRVH VWDWXWRU\ GXWLHV´ Id. %XW SODLQWLIIV IDLO WR VKRZ WKDW WKH &RXUW LQ IDFW FRPPLWWHG DQ HUURU RI ODZ RU MXGJPHQW RU WKDW PDQLIHVW LQMXVWLFH ZLOO UHVXOW IURP WKH &RXUW¶V RUGHU 5DWKHU SODLQWLIIV ³DSSHDU>@ PHUHO\ WR GLVDJUHH ZLWK WKH >&RXUW¶V@ DQDO\VLV RI WKH FDVHV ZKLFK LV LQVXIILFLHQW WR WULJJHU UHFRQVLGHUDWLRQ´ United States v. Nelson ) 6XSS G ''& 0RUHRYHU WKH &RXUW UHOLHG RQ WKH GRFWULQH RI DUELWUDO LPPXQLW\ QRW UHJXODWRU\ LPPXQLW\ LQ GLVPLVVLQJ DOO RI SODLQWLIIV¶ FODLPV See Habliston :/ DW ± )XUWKHU ³>S@ODLQWLIIV PRYH WKH &RXUW XQGHU )HG 5 &LY 3 WR DPHQG WKH ILQDO >R@UGHU WR without prejudice VR >S@ODLQWLIIV PD\ QDPH WKH >DUELWUDWLRQ@ >U@HVSRQGHQWV LQ DQ DPHQGHG FRPSODLQW´ FRQWHQGLQJ WKDW WKH\ ZHUH EDUUHG IURP QDPLQJ WKH ³UHDO SDUWLHV LQ LQWHUHVW´ SUHYLRXVO\ EHFDXVH RI ),15$ 5XOH 3OV¶ 0HP DW HPSKDVLV LQ RULJLQDO 7R WKH H[WHQW WKDW SODLQWLIIV DWWHPSW WR DUJXH WKDW WKH &RXUW¶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¶ 0HP DW ± %XW 5XOH LV LQDSSOLFDEOH EHFDXVH WKH SKUDVH ³UHDO SDUW\ LQ LQWHUHVW´ UHIHUV WR WKH SODLQWLII LQ DQ DFWLRQ QRW D GHIHQGDQW $QG HYHQ LI SODLQWLIIV DJUHH WKDW WKH DUELWUDWLRQ UHVSRQGHQWV VKRXOG EH MRLQHG DQG QRZ DVN WKH &RXUW WR GR VR SXUVXDQW WR D 5XOH D RUGHU 3OV¶ 0HP DW ± WKH\ GR QRW SURYLGH WKH &RXUW ZLWK DQ\ UHDVRQ ZK\ WKH\ IDLOHG WR DGGUHVV WKLV LVVXH ZKHQ GHIHQGDQW VRXJKW WR GLVPLVV WKH DFWLRQ RQ WKH JURXQG WKDW SODLQWLIIV IDLOHG WR QDPH LQGLVSHQVDEOH SDUWLHV ± QDPHO\ :HOOV )DUJR DQG )XOFUXP See 'HI¶V 0HP DW ± 3OV¶ 2SS Habliston :/ DW 7KHUH LV QR PDQLIHVW LQMXVWLFH ZKHUH SODLQWLIIV DOUHDG\ KDG WKH RSSRUWXQLW\ WR DGGUHVV WKLV LVVXH DQG VHHN MRLQGHU EXW WKH\ GLG QRW GR VR See Ciralsky v. CIA )G '& &LU ILQGLQJ QR DEXVH RI GLVFUHWLRQ ZKHUH D GLVWULFW FRXUW FRQFOXGHG WKDW ³PDQLIHVW LQMXVWLFH GRHV QRW H[LVW ZKHUH DV KHUH D SDUW\ FRXOG KDYH HDVLO\ DYRLGHG WKH RXWFRPH EXW LQVWHDG HOHFWHG QRW WR DFW XQWLO DIWHU D ILQDO RUGHU KDG EHHQ HQWHUHG´ 3ODLQWLIIV DGPLW LQ WKHLU UHSO\ WKDW WKH ³µUHDO SDUW\ LQ LQWHUHVW¶ WHVW LQ )HG 5 &LY 3 D E\ LWV RZQ WHUPV DSSOLHV RQO\ WR SODLQWLIIV´ DQG WKH\ ³ZLWKGUDZ WKDW SRUWLRQ´ RI WKHLU DUJXPHQW DVVHUWLQJ WKDW ³5XOH D UHTXLUHV WKH &RXUW WR JUDQW OHDYH WR DGG GHIHQGDQWV´ 3OV¶ 5HSO\ DW 7KHUHIRUH WKH &RXUW FRQFOXGHV WKDW SODLQWLIIV KDYH QRW PHW WKH VWULQJHQW VWDQGDUGV RI 5XOH H WR DOWHU DPHQG RU YDFDWH WKH MXGJPHQW VR WKH &RXUW ZLOO GHQ\ SODLQWLIIV¶ PRWLRQ IRU UHFRQVLGHUDWLRQ ,, 3ODLQWLIIV¶ 0RWLRQ IRU /HDYH WR )LOH DQ $PHQGHG &RPSODLQW 8QGHU 5XOH D ³>2@QFH D ILQDO MXGJPHQW KDV EHHQ HQWHUHG D FRXUW FDQQRW SHUPLW DQ DPHQGPHQW XQOHVV WKH SODLQWLII µILUVW VDWLVILHV 5XOH H ¶V PRUH VWULQJHQW VWDQGDUG¶ IRU VHWWLQJ DVLGH WKDW MXGJPHQW´ Ciralsky )G DW TXRWLQJ Firestone )G DW 6LQFH SODLQWLIIV KDYH IDLOHG WR PHHW 5XOH H ¶V PRUH VWULQJHQW VWDQGDUG WKHLU PRWLRQ IRU OHDYH WR ILOH DQ DPHQGHG FRPSODLQW PXVW EH GHQLHG RQ WKDW EDVLV DORQH See id. $QG HYHQ LI WKH &RXUW ZHUH WR HYDOXDWH SODLQWLIIV¶ PRWLRQ XQGHU 5XOH WKH PRWLRQ ZRXOG VWLOO EH GHQLHG IRU WZR UHDVRQV WKH &RXUW GRHV QRW KDYH VXEMHFW PDWWHU MXULVGLFWLRQ RYHU SODLQWLIIV¶ SURSRVHG DPHQGHG FRPSODLQW DQG SODLQWLIIV¶ FODLPV DUH VWLOO EDUUHG E\ WKH GRFWULQH RI DUELWUDO LPPXQLW\ $ 7KH &RXUW GRHV QRW KDYH MXULVGLFWLRQ RYHU SODLQWLIIV¶ FRPSODLQW VR SODLQWLIIV¶ SURSRVHG DPHQGPHQW ZRXOG EH IXWLOH ,Q WKHLU SURSRVHG DPHQGHG FRPSODLQW SODLQWLIIV DVVHUW WKDW WKH &RXUW KDV MXULVGLFWLRQ RYHU WKLV DFWLRQ SXUVXDQW WR 86& $P &RPSO 7KLV VWDWXWH JUDQWV GLVWULFW FRXUWV ³RULJLQDO MXULVGLFWLRQ RI DOO FLYLO DFWLRQV DULVLQJ XQGHU WKH &RQVWLWXWLRQ ODZV RU WUHDWLHV RI WKH 8QLWHG 6WDWHV´ 86& +RZHYHU SODLQWLIIV¶ SURSRVHG DPHQGHG FRPSODLQW QR ORQJHU LQFOXGHV SODLQWLIIV¶ RULJLQDO FODLPV DJDLQVW ),15$ 5HJXODWLRQ XQGHU 86& see 6XEVWLWXWH $P &RPSO >'NW @ UDWKHU SODLQWLIIV¶ SURSRVHG DPHQGHG FRPSODLQW RQO\ LQFOXGHV 3ODLQWLIIV FRQFHGH WKDW WKH SURSRVHG DPHQGHG FRPSODLQW ³UHPRYHV IRUPHU FODLPV DJDLQVW >G@HIHQGDQW IRU YLRODWLQJ 86& ´ 3OV¶ 5HSO\ LQ 6XSS RI 3OV¶ 0RW $P &RPSO DW IRXU FRXQWV XQGHU VHFWLRQV DQG RI WKH )HGHUDO $UELWUDWLRQ $FW ³)$$´ See generally $P &RPSO 7KH SUREOHP IRU SODLQWLIIV LV WKDW ³WKH )$$ LV QRW MXULVGLFWLRQDO´ Hall St. Assocs., L.L.C. v. Mattel, Inc. 86 ± Q ³>7@KH $FW GRHV QRWKLQJ EHLQJ µVRPHWKLQJ RI DQ DQRPDO\ LQ WKH ILHOG RI IHGHUDOFRXUW MXULVGLFWLRQ¶ LQ EHVWRZLQJ QR IHGHUDO MXULVGLFWLRQ EXW UDWKHU UHTXLULQJ DQ LQGHSHQGHQW MXULVGLFWLRQDO EDVLV´ Id. DW ± TXRWLQJ Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp. 86 Q Karsner v. Lothian )G '& &LU ³$OWKRXJK WKH )HGHUDO $UELWUDWLRQ $FW )$$ FRQVWLWXWHV IHGHUDO ODZ µWKH 6XSUHPH &RXUW KDV LQWHUSUHWHG WKH VWDWXWH DV QRW LWVHOI EHVWRZLQJ MXULVGLFWLRQ RQ WKH IHGHUDO GLVWULFW FRXUWV¶´ TXRWLQJ Kasap v. Folger Nolan Fleming & Douglas, Inc. )G ± '& &LU ,Q WKHLU UHSO\ SODLQWLIIV DUJXH WKDW WKH &RXUW KDV IHGHUDO TXHVWLRQ MXULVGLFWLRQ RYHU SODLQWLIIV¶ SURSRVHG DPHQGHG FRPSODLQW EDVHG RQ WKH ³ORRN WKURXJK´ GRFWULQH DV DUWLFXODWHG E\ WKH 6XSUHPH &RXUW LQ Vaden v. Discover Bank 86 3OV¶ 5HSO\ LQ 6XSS RI 3OV¶ 0RW $P &RPSO DW ,Q Vaden 'LVFRYHU %DQN VXHG D FUHGLW FDUG KROGHU LQ VWDWH FRXUW WR UHFRYHU SDVW GXH FKDUJHV DQG WKH FDUG KROGHU ILOHG D FRXQWHUFODLP 86 DW 'LVFRYHU %DQN DVVHUWHG WKDW WKH FRXQWHUFODLP ZDV SUHHPSWHG E\ IHGHUDO EDQNLQJ ODZV DQG ILOHG DQ DFWLRQ LQ IHGHUDO FRXUW WR FRPSHO DUELWUDWLRQ RI WKH FRXQWHUFODLP XQGHU VHFWLRQ RI WKH )$$ Id. 7KH 6XSUHPH &RXUW KHOG WKDW WR GHWHUPLQH LI D GLVWULFW FRXUW KDV MXULVGLFWLRQ WKH FRXUW FDQ ³µORRN WKURXJK¶ D SHWLWLRQ WR GHWHUPLQH ZKHWKHU LW LV SUHGLFDWHG RQ DQ DFWLRQ WKDW µDULVHV XQGHU¶ IHGHUDO ODZ´ Id. DW $QG WKH &RXUW GHWHUPLQHG WKDW WKH GLVWULFW FRXUW ODFNHG MXULVGLFWLRQ EHFDXVH WKH IHGHUDO LVVXH DURVH ZLWKLQ WKH FRQWH[W RI D VWDWH FRXUW FRXQWHUFODLP DQG FRXUWV FDQQRW FRQVLGHU FRXQWHUFODLPV ZKHQ DVVHVVLQJ IHGHUDO TXHVWLRQ MXULVGLFWLRQ Id. DW ± +HUH SODLQWLIIV FRQWHQG WKDW VLQFH WKH\ DVVHUWHG LQ WKHLU FRPSODLQW WKDW ³>G@HIHQGDQW YLRODWHG 86& X E\ NQRZLQJO\ DQG UHSHDWHGO\ DOORZLQJ :DFKRYLD:HOOV )DUJR WR YLRODWH IHGHUDO VHFXULWLHV DQG EDQNLQJ ODZV´ WKH &RXUW VKRXOG ORRN ³DW WKH VXEVWDQFH RI >S@ODLQWLIIV¶ XQGHUO\LQJ FODLPV WR ILQG IHGHUDO MXULVGLFWLRQ´ 3OV¶ 5HSO\ LQ 6XSS RI 3OV¶ 0RW $P &RPSO DW +RZHYHU WKH UXOH DQQRXQFHG LQ Vaden DSSOLHV WR ODZVXLWV XQGHU VHFWLRQ RI WKH )$$ ZKHUH D SDUW\ LV VHHNLQJ WR FRPSHO DUELWUDWLRQ ZKLFK LV QRW WKH LVVXH LQ WKLV FDVH 0RUHRYHU WKH XQGHUO\LQJ FRQWURYHUV\ EHWZHHQ SODLQWLIIV DQG ),15$ 5HJXODWLRQ LV EDVHG RQ ),15$ 5HJXODWLRQ¶V UROH LQ FRQGXFWLQJ WKH DUELWUDWLRQ EHWZHHQ SODLQWLIIV DQG :HOOV )DUJR DQG )XOFUXP DQG ³>L@W GRHV QRW VXIILFH WR VKRZ WKDW D IHGHUDO TXHVWLRQ OXUNV VRPHZKHUH LQVLGH WKH SDUWLHV¶ FRQWURYHUV\´ Vaden 86 DW 7KHUHIRUH WKHUH LV QR PHULW LQ SODLQWLIIV¶ SRVLWLRQ WKDW FKDOOHQJLQJ WKH HQIRUFHPHQW RI WKH DUELWUDWLRQ DJUHHPHQWV RU VHHNLQJ WR DSSRLQW QHZ DUELWUDWRUV SXUVXDQW WR SURYLVLRQV RI WKH )$$ ZRXOG FUHDWH IHGHUDO MXULVGLFWLRQ See Hall St. Assocs. 86 ± Q %HFDXVH SODLQWLIIV GR QRW DVVHUW DQ\ RWKHU JURXQGV IRU IHGHUDO MXULVGLFWLRQ WKH &RXUW GRHV QRW KDYH MXULVGLFWLRQ RYHU SODLQWLIIV¶ SURSRVHG DPHQGHG FRPSODLQW VR WKH DPHQGPHQW WR SODLQWLIIV¶ FRPSODLQW ZRXOG EH IXWLOH % $Q\ DPHQGPHQW WR SODLQWLIIV¶ FRPSODLQW ZRXOG EH IXWLOH EHFDXVH SODLQWLIIV¶ FODLPV DJDLQVW ),15$ 5HJXODWLRQ DUH EDUUHG E\ WKH GRFWULQH RI DUELWUDO LPPXQLW\ ,Q DGGLWLRQ WKH &RXUW PD\ GHQ\ OHDYH WR DPHQG EDVHG RQ IXWLOLW\ ³LI WKH SURSRVHG FODLP ZRXOG QRW VXUYLYH D PRWLRQ WR GLVPLVV´ Rumber ) 6XSS G DW FLWLQJ Ludwig )G DW +HUH QRWZLWKVWDQGLQJ WKH IHZ LVRODWHG UHIHUHQFHV WR RWKHU SDUWLHV WKH SURSRVHG DPHQGHG FRPSODLQW FRQVLVWV RI UHSDFNDJHG OHJDO FODLPV DJDLQVW ),15$ 5HJXODWLRQ ZKLFK WKH &RXUW SUHYLRXVO\ KHOG ZHUH EDUUHG E\ WKH GRFWULQH RI DUELWUDO LPPXQLW\ See Habliston :/ DW ± 7KHUH LV QR PDQQHU LQ ZKLFK SODLQWLIIV FRXOG DPHQG WKH FRPSODLQW WR FXUH WKLV GHILFLHQF\ GHIHQGDQW LV QRW D VXDEOH HQWLW\ See Firestone )G DW 6R DQ\ DPHQGPHQW WR SODLQWLIIV¶ FRPSODLQW DJDLQVW ),15$ 5HJXODWLRQ LV IXWLOH EHFDXVH LW ZRXOG QRW VXUYLYH D PRWLRQ WR GLVPLVV XQGHU )HGHUDO 5XOH RI &LYLO 3URFHGXUH E &21&/86,21 $FFRUGLQJO\ WKH &RXUW ZLOO GHQ\ SODLQWLIIV¶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¶ ULJKWV $P &RPSO ± &RXQW ,, FRQWDLQV WKH EDUHVW DOOHJDWLRQV WKDW SODLQWLIIV¶ SDUHQWV ZHUH XQDZDUH RI ZKDW WKH\ ZHUH GRLQJ ZKHQ WKH\ VLJQHG WKH DUELWUDWLRQ DJUHHPHQWV DQG WKDW LI WKH\ KDG NQRZQ WKDW ),15$ 5HJXODWLRQ ZRXOG HQG XS YLRODWLQJ SODLQWLIIV¶ ULJKWV WKH\ ZRXOG QRW KDYH VLJQHG WKH DJUHHPHQWV WKHUHIRUH PDNLQJ WKH DUELWUDWLRQ DJUHHPHQWV XQFRQVFLRQDEOH Id. ± ,W DOVR UHSHDWV DOOHJDWLRQV WKDW ),15$ 5HJXODWLRQ KDV D FRQIOLFW RI LQWHUHVW DQG LV FRQGXFWLQJ WKH DUELWUDWLRQ XQIDLUO\ Id. ± ,Q &RXQW ,,, SODLQWLIIV DJDLQ FODLP WKDW ),15$ 5HJXODWLRQ LV DFWLQJ LPSURSHUO\ DQG YLRODWLQJ LWV RZQ UXOHV DQG WKDW WKLV LV D UHDVRQ WR GHFODUH WKH DUELWUDWLRQ SURYLVLRQV XQHQIRUFHDEOH Id. ± $QG &RXQW ,9 LV D UHLWHUDWLRQ RI SODLQWLIIV¶ RULJLQDO UHTXHVW WKDW WKH &RXUW DSSRLQW QHZ DUELWUDWRUV Id. ±