Filed: Jan. 11, 2002
Latest Update: Mar. 02, 2020
Summary: 5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU SUHVHQWDFDVHRUFRQWURYHUV\VXIILFLHQWWRFRQIHUVWDQGLQJ )LOH 1DPH DS 3ODLQWLIIVKDYHIDLOHGWRGHPRQVWUDWHWKDWWKH\FRQWLQXHRULWLV KLJKO\OLNHO\WKDWWKH\ZLOOFRQWLQXHWRVWUXFWXUHWKHLUEDQNLQJ WUDQVDFWLRQVRUWKDWWKHJRYHUQPHQWZRXOGEULQJDFULPLQDO 81,7('67$7(6&28572)$33($/6 DFWLRQDJDL
Summary: 5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU SUHVHQWDFDVHRUFRQWURYHUV\VXIILFLHQWWRFRQIHUVWDQGLQJ )LOH 1DPH DS 3ODLQWLIIVKDYHIDLOHGWRGHPRQVWUDWHWKDWWKH\FRQWLQXHRULWLV KLJKO\OLNHO\WKDWWKH\ZLOOFRQWLQXHWRVWUXFWXUHWKHLUEDQNLQJ WUDQVDFWLRQVRUWKDWWKHJRYHUQPHQWZRXOGEULQJDFULPLQDO 81,7('67$7(6&28572)$33($/6 DFWLRQDJDLQ..
More
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j PRWLRQ IRU OHDYH WR ILOH D VHFRQG DPHQGHG s2+1 .(,7+ %/$.(/ D@V WKH VDQFWLRQV :HUHYLHZDGLVWULFWFRXUWjVGHWHUPLQDWLRQDVWRZKHWKHULW LPSRVHG E\ WKH 2KLR 6XSUHPH &RXUW KDYH DOUHDG\ EHHQ KDGVXSSOHPHQWDOMXULVGLFWLRQRYHUVWDWHODZFODLPVGHQRYR SHUIHFWHG WKLV SDVW LQMXU\ KDV QR FRQWLQXLQJ SUHVHQW /RQJY%DQGR0IJRI$P,QF)GWK&LU DGYHUVHHIIHFWVDQGFDQQRWHVWDEOLVKVWDQGLQJIRUGHFODUDWRU\ $GLVWULFWFRXUWjVGHFLVLRQWRH[HUFLVHVXSSOHPHQWDO DQGLQMXQFWLYHUHOLHIl,G MXULVGLFWLRQRYHUVWDWHODZFODLPVLVUHYLHZHGIRUDQDEXVHRI GLVFUHWLRQ&DPSDQHOODY&RPPHUFH([FK%DQN)G 7KLV&RXUWDOVRQRWHGWKDWZKLOHSDVWLOOHJDOFRQGXFWPLJKW WK&LU FRQVWLWXWHHYLGHQFHUHOHYDQWUHJDUGLQJZKHWKHUWKHUHLVDUHDO DQGLPPHGLDWHWKUHDWRIUHSHDWHGLQMXU\mZKHUHWKHWKUHDWRI 2QDSSHDO3ODLQWLIIVDUJXHWKDWWKHGLVWULFWFRXUWHUUHGLQ UHSHDWHGLQMXU\LVVSHFXODWLYHRUWHQXRXVWKHUHLVQRVWDQGLQJ H[HUFLVLQJVXSSOHPHQWDOMXULVGLFWLRQRYHULWVVWDWHODZFODLP WRVHHNLQMXQFWLYHUHOLHIl,GDW%DVHGRQWKLVSULQFLSOH IRU IUDXG DJDLQVW 'HIHQGDQW 2[IRUG %DQN ,Q WKHLU UHSO\ WKH&RXUWIXUWKHUFRQFOXGHGWKDWWKHWKUHDWRIWKHSODLQWLIIjV EULHI 3ODLQWLIIV DUJXH WKDW WKH WUDQVDFWLRQ WKDW JDYH ULVH WR IXWXUH LQMXU\ E\ WKH DOOHJHG LOOHJDO FRQGXFW ZDV mKLJKO\ WKHLUFODLPVDJDLQVWWKHIHGHUDO'HIHQGDQWVZDVWKHIRUIHLWXUH FRQMHFWXUDOUHVWLQJRQDVWULQJRIDFWLRQVWKHRFFXUUHQFHRI SURFHHGLQJVDQGDQmHUURQHRXVWD[DVVHVVPHQWlLPSRVHGRQ ZKLFK LV PHUHO\ VSHFXODWLYHl ,G VHH DOVR 6PLWK 3ODLQWLIIV E\ WKH ,56 DQG WKDW 2[IRUG ZDV QRW GLUHFWO\ )6XSSDW LQYROYHG LQ WKRVH FODLPV 7KH\ DUJXH WKDW WKH IDOVH PLVUHSUHVHQWDWLRQVPDGHE\EDQNHPSOR\HHVUHVXOWHGLQWKH 3ODLQWLIIV KDYH IDLOHG WR VKRZ DQ LQMXU\ LQ IDFW WR VHHN LQMXQFWLYHUHOLHILQWKLVFDVH7KHVKRZLQJRISDVWLQMXU\LQ WKH LQVWDQW FDVH LV LQVXIILFLHQW 7KH VHL]XUH RI 3ODLQWLIIVj :H QRWH DW WKH RXWVHW WKDW 3ODLQWLIIVj LQLWLDO EULHI EDUHO\ DGGUHVVHV WKH DVVHWVKDVDOUHDG\EHHQSHUIHFWHGWKHUHIRUHWKLVSDVWLQMXU\ LVVXH RI ZKHWKHU WKH GLVWULFW FRXUW SURSHUO\ H[HUFLVHG VXSSOHPHQWDO KDVQRFRQWLQXLQJSUHVHQWDGYHUVHHIIHFWV)XUWKHUPRUHDQ\ MXULVGLFWLRQ RYHU WKHLU FODLPV 3ODLQWLIIVj RQO\ VXEVWDQWLYH VWDWHPHQW WKUHDW WKDW LQMXU\ WR 3ODLQWLIIV ZLOO EH UHSHDWHG LV RQO\ UHJDUGLQJ WKH GLVWULFW FRXUWjV H[HUFLVH RI MXULVGLFWLRQ LV WKDW WKH GLVWULFW VSHFXODWLYHDWWKLVSRLQW3ODLQWLIIVKDYHIDLOHGWRGHPRQVWUDWH FRXUW WKDWWKH\FRQWLQXHRULWLVKLJKO\OLNHO\WKDWWKH\ZLOOFRQWLQXH WRVWUXFWXUHWKHLUEDQNLQJWUDQVDFWLRQVWKDWWKHJRYHUQPHQW HUURQHRXVO\ GHQLHG SODLQWLIIVj PRWLRQ WR VHYHU WKHVH FODLPV DQG UHPDQG WKHP EDFN WR VWDWH FRXUW VD\LQJ WKDW WKH\ ZHUH SDUW RI WKH ZRXOGEULQJFLYLOIRUIHLWXUHSURFHHGLQJVWRHIIHFWDIRUIHLWXUH mVDPH FDVH RU FRQWURYHUV\l DV WKH IRUIHLWXUH LWVHOI DQG WKDW RI3ODLQWLIIVjDVVHWVXQGHUDDQGWKDWWKHJRYHUQPHQW VXEMHFW PDWWHU MXULVGLFWLRQ ZDV SUHVHQW XQGHU 86& ZRXOG LQ IDFW HIIHFW D IRUIHLWXUH RI 3ODLQWLIIVj SURSHUW\ LQ D HYHQ WKRXJK WKH EDQN HPSOR\HHVj DOOHJHG DFWLRQV KDG YLRODWLRQ RI 3ODLQWLIIVj GXH SURFHVV ULJKWV RU WKHLU ULJKWV RFFXUUHG PRQWKV SUHYLRXVO\ DQG KDG PLQLPDO IDFWXDO QH[XV ZLWK WKH FRQVHQW MXGJPHQW RI IRUIHLWXUH DJDLQVWH[FHVVLYHILQHV$FFRUGLQJO\3ODLQWLIIVODFNVWDQGLQJ WREULQJDQDFWLRQIRULQMXQFWLYHUHOLHIDQGWKHLUFODLPZDV 6HH 3ODLQWLIIVj %U DW ,W LV RQO\ LQ WKHLU UHSO\ EULHI WKDW 3ODLQWLIIV VHW SURSHUO\GLVPLVVHG6HH*UHQGHOO)GDW IRUWK D GHYHORSHG DUJXPHQW DQG FLWDWLRQV WR VXSSRUW WKHLU FODLP 8QLWHG 6WDWHV Y &UR]LHU BB )G BB :/ DW WK &LU $XJ & 'LVWULFW&RXUWjV'HQLDORI3ODLQWLIIVj0RWLRQWR)LOHD KROGLQJ WKDW GHIHQGDQW FRXOG QRW DGGUHVV PHULWV RI FODLP RI HUURU 6HFRQG$PHQGHG&RPSODLQW IRU ILUVW WLPH LQ UHSO\ EULHI HYHQ WKRXJK GHIHQGDQW FLWHG WR VWDWXWH JRYHUQLQJ LVVXH LQ LQLWLDO EULHI FODLP RI HUURU GHHPHG ZDLYHG RQ DSSHDO 1HYHUWKHOHVV DV GLVFXVVHG LQ WKH PDLQ WH[W ZH ILQG WKDW WKH GLVWULFW FRXUW 7KHGLVWULFWFRXUWGHQLHG3ODLQWLIIVjPRWLRQWRILOHDVHFRQG GLG QRW DEXVH LWV GLVFUHWLRQ LQ HQWHUWDLQLQJ 3ODLQWLIIVj VWDWH ODZ IUDXG FODLP DPHQGHGFRPSODLQWRQWKHJURXQGVWKDWLWZRXOGEHIXWLOH DJDLQVW 2[IRUG %DQN %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO ,56 LQYHVWLJDWLRQ DQG WKH mXQODZIXO IRUIHLWXUHl 7KH\ &RXQW9, 3ODLQWLIIjV&ODLPIRU,QMXQFWLYH FRQWHQGWKHVHFODLPVDUHVHSDUDWHIURPWKHFODLPVDGYDQFHG 5HOLHI%DUULQJWKH8QLWHG6WDWHVDQG DJDLQVW WKH IHGHUDO 'HIHQGDQWV :H ILQG WKHVH DUJXPHQWV $Q\ RI ,WV $JHQWV IURP (QIRUFLQJ XQDYDLOLQJ D m>7@KHGLVWULFWFRXUWVVKDOOKDYHVXSSOHPHQWDOMXULVGLFWLRQ $VWKHLUVL[WKFDXVHRIDFWLRQ3ODLQWLIIVVRXJKWWRHQMRLQ RYHUDOORWKHUFODLPVWKDWDUHVRUHODWHGWRFODLPVLQWKHDFWLRQ HQIRUFHPHQW RI D HLWKHU LQ WRWR RU DV DSSOLHG WR ZLWKLQ VXFK RULJLQDO MXULVGLFWLRQ WKDW WKH\ IRUP SDUW RI WKH FXUUHQF\VWUXFWXULQJRIIHQVHVRQWKHEDVLVWKDWWKHVWDWXWHLV VDPHFDVHRUFRQWURYHUV\XQGHU$UWLFOH,,,RIWKH8QLWHG6WDWHV XQFRQVWLWXWLRQDO3ODLQWLIIVPRYHGIRUVXPPDU\MXGJPHQWRQ &RQVWLWXWLRQl86&Dm,QRWKHUZRUGVLIWKHUH WKLV FODLP DV ZHOO 7KH GLVWULFW FRXUW GLVPLVVHG 3ODLQWLIIVj LVVRPHEDVLVIRURULJLQDOMXULVGLFWLRQWKHGHIDXOWDVVXPSWLRQ FODLP IRU LQMXQFWLYH UHOLHI FRQFOXGLQJ WKDW LW ZDV XQOLNHO\ LVWKDWWKHFRXUWZLOOH[HUFLVHVXSSOHPHQWDOMXULVGLFWLRQRYHU 3ODLQWLIIV ZRXOG VXFFHHG RQ WKH PHULWV RI WKHLU XQGHUO\LQJ DOOUHODWHGFODLPVl&DPSDQHOOD)GDW&ODLPV FODLPVXIIHULUUHSDUDEOHKDUPDEVHQWDQLQMXQFWLRQRUWKDWWKH IRUPSDUWRIWKHVDPHFDVHRUFRQWURYHUV\ZKHQWKH\mGHULYH SXEOLF LQWHUHVW ZRXOG EH VHUYHG E\ WKH LVVXDQFH RI DQ IURP D FRPPRQ QXFOHXV RI RSHUDWLYH IDFWVl $KHDUQ Y LQMXQFWLRQ :H FRQFOXGH WKDW WKH GLVWULFW FRXUW SURSHUO\ &KDUWHU7RZQVKLSRI%ORRPILHOG)GWK GLVPLVVHG 3ODLQWLIIVj FODLPV LQDVPXFK DV 3ODLQWLIIV GR QRW &LUDFFRUG:KLWHY&RXQW\RI1HZEHUU\6& KDYHVWDQGLQJWREULQJWKLVFDXVHRIDFWLRQ6HH*UHQGHOOY )GWK&LUUHFRJQL]LQJWKDWFODLPVIRUP 2KLR 6XSUHPH &RXUW )G WK &LU SDUWRIVDPHFDVHRUFRQWURYHUV\LIWKH\mUHYROYHDURXQGD H[SODLQLQJ WKDW VWDQGLQJ LV D WKUHVKROG TXHVWLRQ LQ HYHU\ FHQWUDOIDFWSDWWHUQl IHGHUDO FDVH VHH DOVR &LW\ 0JPW &RUS Y 8QLWHG 6WDWHV &KHP&R,QF)GWK&LUH[SODLQLQJ ,QWKHLQVWDQWFDVH3ODLQWLIIVjIUDXGFODLPDJDLQVW2[IRUG WKDWWKLV&RXUWPD\DIILUPWKHGLVWULFWFRXUWRQDQ\JURXQGV %DQNLVSDUWRIWKHVDPHFDVHRUFRQWURYHUV\DVLWVIUDXGFODLP VXSSRUWHGE\WKHUHFRUG DQGDOORWKHUFODLPVDJDLQVWWKHIHGHUDO'HIHQGDQWV,QWKHLU ILUVW DPHQGHG FRPSODLQW 3ODLQWLIIV DOOHJH WKDW 'HIHQGDQW :KHQ VHHNLQJ LQMXQFWLYH UHOLHI D SODLQWLII mPXVW VKRZ 2[IRUG%DQNDFWHGLQFRQFHUWZLWKWKHIHGHUDO'HIHQGDQWVLQ DFWXDOSUHVHQWKDUPRUDVLJQLILFDQWSRVVLELOLW\RIIXWXUHKDUP GHIUDXGLQJWKHPZKLFKUHVXOWHGLQWKHIRUIHLWXUHRIFHUWDLQRI LQRUGHUWRGHPRQVWUDWHWKHQHHGIRUSUHHQIRUFHPHQWUHYLHZl WKHLU DVVHWV 3ODLQWLIIV DOOHJH WKDW WKH mEDQN GHIHQGDQWV *UHQGHOO)GDW,Q*UHQGHOOWKLV&RXUWKHOGWKDW IDFLOLWDWHGWKHZURQJIXOWDNLQJRISHWLWLRQHUVjDVVHWV>LHWKH WKHSODLQWLIIGLGQRWKDYHVWDQGLQJWRVXHIRULQMXQFWLYHUHOLHI IRUIHLWXUH RI 3ODLQWLIIVj SURSHUW\ WR WKH JRYHUQPHQW@l E\ SUHYHQWLQJHQIRUFHPHQWRIDVWDWHFRXUWVDQFWLRQVUXOHRQWKH IDLOLQJ WR QRWLI\ 3ODLQWLIIV RI WKH ODZV DJDLQVW VWUXFWXULQJ JURXQGWKDWWKHUXOHZDVIDFLDOO\XQFRQVWLWXWLRQDO,GDW EDQNLQJWUDQVDFWLRQVWRDYRLGIHGHUDOUHSRUWLQJUHTXLUHPHQWV 7KH&RXUWUHMHFWHGWKHSODLQWLIIjVDUJXPHQWWKDWEHFDXVHKH s$DW3ODLQWLIIVIXUWKHUDOOHJHWKDWWKHEDQNGHIHQGDQWV ZDVSUHYLRXVO\VDQFWLRQHGDOOHJHGO\ZLWKRXWGXHSURFHVVDQG SUHVXPDEO\WKLVLQFOXGHV'HIHQGDQW2[IRUG%DQNmUHSRUWHG KHZDVVXEMHFWHGWRFRQWLQXLQJDGYHUVHHIIHFWVRIWKHVDQFWLRQ WKH VWUXFWXUHG GHSRVLWV WR SHUWLQHQW DJHQFLHV LQ WKH 8QLWHG KHKDGHVWDEOLVKHGVWDQGLQJ7KH&RXUWQRWHGmWKHPHUHIDFW 6WDWHV 'HSDUWPHQW RI 7UHDVXU\ $OO EDQN GHIHQGDQWV WKDW>WKHSODLQWLII@ZDVSUHYLRXVO\VDQFWLRQHGLVQRWDQ FRRSHUDWHGZLWKWKH8QLWHG6WDWHV$WWRUQH\LQFRQVXPPDWLQJ DGHTXDWHLQMXU\LQIDFWWRFRQIHUVWDQGLQJIRUGHFODUDWRU\DQG WKH LOOHJDO IRUIHLWXUHl s$ DW 7KH\ DOOHJH m>E@\ LQMXQFWLYHUHOLHIl,GDW7KH&RXUWFRQWLQXHGmµSDVW FRQWLQXRXVO\UHSUHVHQWLQJWKDWSHWLWLRQHUVj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l s$ DW )XUWKHU3ODLQWLIIVKDYHIDLOHGWRDOOHJHWKDWWKH\DUHIHDUIXO 3ODLQWLIIVFRQWLQXHGm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ls$DW $VGLVFXVVHG VHHNMXGLFLDOUHOLHILQVWULNLQJGRZQWKHVWDWXWH+RZHYHUWKDW ODWHU 3ODLQWLIIVj RWKHU FODLPV LQFOXGLQJ WKHLU FRQVWLWXWLRQDO 3ODLQWLIIVKDYHDOUHDG\IRUIHLWHGSURSHUW\XQGHUDLV FODLPV DQG FODLPV IRU GHFODUDWRU\ DQG LQMXQFWLYH UHOLHI DOO LUUHOHYDQWZKHUH3ODLQWLIIVKDYHIDLOHGWRDOOHJHZLWKFUHGLEOH UHYROYH DURXQG WKH FLYLO IRUIHLWXUH RI WKHLU DVVHWV 7KXV IDFWVWKDWWKH\ZLOOEHVXEMHFWHGWRIRUIHLWXUHRIWKHLUDVVHWV 3ODLQWLIIVjIUDXGFODLPDJDLQVW2[IRUGLVLQWHUWZLQHGZLWKDOO XQGHUDLQWKHLPPHGLDWHIXWXUH6HHHJ9HUVDUJHY 3ODLQWLIIVjFODLPVDJDLQVWWKHIHGHUDO'HIHQGDQWV 7RZQVKLSRI&OLQWRQ1s)GG&LU KROGLQJWKDWILUHILJKWHUZKRZDVH[SHOOHGIURPYROXQWHHUILUH 3ODLQWLIIVj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j FODLPV UHYROYH DURXQG WKH SXUSRUWHG WKDW IRUPHU GHWDLQHH ZKR DOOHJHG WKDW VKH KDG EHHQ VWULS LOOHJDOLW\RIWKHFRQVHQWMXGJPHQWZKLFK3ODLQWLIIVHQWHUHG VHDUFKHGZLWKRXWSUREDEOHFDXVHEHIRUHEHLQJLQFDUFHUDWHGEXW LQWRDVDUHVXOWRIWKHVWUXFWXULQJYLRODWLRQVDVVHUWHGDJDLQVW ZKRFRXOGQRWFUHGLEO\DOOHJHWKDWVKHZRXOGDJDLQEHDUUHVWHG WKHP7KXVWKHWHVWLPRQ\XQGHUO\LQJ3ODLQWLIIVjFODLPVLQ DQG VWULSVHDUFKHG ZLWKRXW SUREDEOH FDXVH GLG QRW KDYH FRXQW , DJDLQVW 2[IRUG ZLOO XQGRXEWHGO\ LQYROYH IDFWXDO VWDQGLQJ WR VHHN GHFODUDWRU\ UHOLHI ZLWK UHVSHFW WR RYHUODSDQGPDQ\RIWKHVDPHZLWQHVVHVDV3ODLQWLIIVjFODLPV FRQVWLWXWLRQDOLW\ RI WKH VWULS VHDUFK 7KH GLVWULFW FRXUW DJDLQVWWKHIHGHUDO'HIHQGDQWV7KHUHIRUH3ODLQWLIIVjFODLPV SURSHUO\FRQFOXGHGWKDWGHFODUDWRU\UHOLHIZDVLQDSSURSULDWH DJDLQVW2[IRUGDQGWKHIHGHUDO'HIHQGDQWVIRUPSDUWRIWKH XQGHUWKHFLUFXPVWDQFHVRIWKLVFDVH VDPH FDVH RU FRQWURYHUV\ 6HH %DHU Y )LUVW 2SWLRQV RI &KLFDJR,QF)GWK&LUQRWLQJWKDW IRUFODLPVWRIRUPSDUWRIWKHVDPHFDVHRUFRQWURYHUV\RQO\ DORRVHIDFWXDOFRQQHFWLRQLVQHFHVVDU\7KXVWKHGLVWULFW FRXUW KDG VXSSOHPHQWDO MXULVGLFWLRQ RYHU 3ODLQWLIIVj IUDXG FODLPDJDLQVW'HIHQGDQW2[IRUG%DQN %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO 0RUHRYHUWKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQ FODXVHDQGWKH(LJKWK$PHQGPHQWjVH[FHVVLYHILQHVFODXVH FKRRVLQJWRH[HUFLVHLWVVXSSOHPHQWDOMXULVGLFWLRQ 7KH\ IXUWKHU PRYHG IRU VXPPDU\ MXGJPHQW RQ WKLV FODLP 7KHGLVWULFWFRXUWGLVPLVVHG3ODLQWLIIVjGHFODUDWRU\UHOLHIFODLP 7KHGLVWULFWFRXUWVPD\GHFOLQHWRH[HUFLVHVXSSOHPHQWDO EHFDXVHLWFRQFOXGHGWKDWWKHDFWLRQZDVQRWDSSURSULDWHIRU MXULVGLFWLRQRYHUDFODLPXQGHUVXEVHFWLRQDLIo GHFODUDWRU\UHOLHIXQGHUWKH'HFODUDWRU\sXGJPHQW$FW:H WKH FODLP UDLVHV D QRYHO RU FRPSOH[ LVVXH RI 6WDWH DJUHH ODZ WKHFODLPVXEVWDQWLDOO\SUHGRPLQDWHVRYHUWKHFODLP 3ODLQWLIIV DUJXH WKDW WKH (LJKWK $PHQGPHQWjV H[FHVVLYH RU FODLPV RYHU ZKLFK WKH GLVWULFW FRXUW KDV RULJLQDO ILQHVFODXVHSURKLELWVLPSRVLQJIRUIHLWXUHVRUILQHVWKDWDUH MXULVGLFWLRQ mJURVVO\ GLVSURSRUWLRQDWH WR WKH JUDYLW\ RI WKH RIIHQVH RQ WKHGLVWULFWFRXUWKDVGLVPLVVHGDOOFODLPVRYHUZKLFK ZKLFK WKH\ DUH EDVHGl 3ODLQWLIIV FRQWHQG WKDW LI WKH\ FDQ LWKDGRULJLQDOMXULVGLFWLRQRU SURYHWKDWWKHDPRXQWRIWKHLUIRUIHLWHGDVVHWVLQWKHLQVWDQW LQ H[FHSWLRQDO FLUFXPVWDQFHV WKHUH DUH RWKHU DFWLRQLVGLVSURSRUWLRQDWHWRmWKHLUFRQFHGHGO\QRQFULPLQDO FRPSHOOLQJUHDVRQVIRUGHFOLQLQJMXULVGLFWLRQ RIIHQVHlWKH\ZLOOKDYHVKRZQWKDWUHWHQWLRQRIWKHLUSURSHUW\ YLRODWHVWKHH[FHVVLYHILQHVFODXVH7KH\IXUWKHUDUJXHWKDW 86&F DVKRXOGEHVWUXFNGRZQEHFDXVHRQLWVIDFHLWDOORZV WKHJRYHUQPHQWWRLQIOLFWJURVVO\GLVSURSRUWLRQDOSXQLVKPHQW 3ODLQWLIIVDUJXHWKDWWKLVFDVHUDLVHVFRPSOH[RUQRYHOVWDWH ODZLVVXHVEHFDXVHmLWUHTXLUHVWKHFRXUWWRGHWHUPLQHZKDW %HIRUH D FRXUW FDQ JUDQW UHOLHI XQGHU WKH 'HFODUDWRU\ GHJUHH RI FDXVDWLRQ LV UHTXLUHG XQGHU 0LFKLJDQjV FRPPRQ sXGJPHQW$FW86&WKHFRXUWPXVWGHWHUPLQH ODZRIPLVUHSUHVHQWDWLRQDQGWRFRPSDUHWKRVHZLWKWKHDFWXDO mZKHWKHUWKHIDFWVDOOHJHGXQGHUDOOWKHFLUFXPVWDQFHVVKRZ FDXVDO UROH RI 2[IRUGjV PLVUHSUHVHQWDWLRQVl :H GLVDJUHH WKDWWKHUHLVDVXEVWDQWLDOFRQWURYHUV\EHWZHHQSDUWLHVKDYLQJ 7KLVFDVHGRHVQRWSUHVHQWFRPSOH[RUQRYHOLVVXHVRIVWDWH DGYHUVHOHJDOLQWHUHVWVRIVXIILFLHQWLPPHGLDF\>DQG@UHDOLW\ ODZ,WLQYROYHVDIUDXGFODLP$OOIUDXGFODLPVUHTXLUHWKDW WRZDUUDQWWKHLVVXDQFHRIDGHFODUDWRU\MXGJPHQWl*ROGHQ D SODLQWLII VKRZ WKH LQMXU\ KH VXIIHUHG ZDV FDXVHG E\ WKH Y=ZLFNOHU86FLWDWLRQVDQGLQWHUQDO GHIHQGDQWjVUHSUHVHQWDWLRQ6HH+RUGY(QYWO5HVHDUFK,QVW TXRWDWLRQPDUNVRPLWWHGVHHDOVR&XQQLQJKDP%URV,QFY RI0LFK1:G0LFK&W$SS7KXV %DLO)GWK&LUH[SODLQLQJWKDW WKLV FDVH DV LQ DOO RWKHUV ZLOO LQYROYH DQ LQTXLU\ LQWR WKH mSULPDU\ SXUSRVH RI WKH >'HFODUDWRU\ sXGJPHQW@ $FW LV WR DOOHJHG PLVUHSUHVHQWDWLRQV 'HIHQGDQW PDGH DQG ZKHWKHU DYRLGDFFUXDORIDYRLGDEOHGDPDJHVWRRQHQRWFHUWDLQRIKLV XQGHU 0LFKLJDQ ODZ VXFK PLVUHSUHVHQDWLRQV FDXVHG ULJKWVDQGWRDIIRUGKLPDQHDUO\DGMXGLFDWLRQZLWKRXWZDLWLQJ 3ODLQWLIIVjLQMXULHV,G XQWLOKLVDGYHUVDU\VKRXOGVHHILWWREHJLQVXLWDIWHUGDPDJH KDGDFFUXHGlFLWDWLRQDQGLQWHUQDOTXRWDWLRQPDUNVRPLWWHG )XUWKHU3ODLQWLIIVjIUDXGFODLPGRHVQRWSUHGRPLQDWHRYHU $FRQVWLWXWLRQDOFKDOOHQJHWRDQ\VWDWXWHVHHNLQJGHFODUDWRU\ WKH FODLPV RYHU ZKLFK WKH GLVWULFW FRXUW KDG RULJLQDO UHOLHIVWULNLQJGRZQWKDWVWDWXWHmPXVWEHSUHVHQWHGLQWKH MXULVGLFWLRQ3ODLQWLIIVjSULPDU\FODLPVDUHDJDLQVWWKHIHGHUDO FRQWH[WRIDVSHFLILFOLYHJULHYDQFHl*ROGHQ86DW 'HIHQGDQWV /LNHZLVH WKLV FDVH GRHV QRW SUHVHQW QRU GR 3ODLQWLIIVDUJXHWKDWWKHUHDUHRWKHUFRPSHOOLQJUHDVRQVIRU GHFOLQLQJMXULVGLFWLRQ +HUH 3ODLQWLIIV KDYH IDLOHG WR DOOHJH VXIILFLHQW IDFWV WR VXSSRUW D FRQFOXVLRQ WKDW DQ DFWXDO FRQWURYHUV\ H[LVWV )LQDOO\DOWKRXJK3ODLQWLIIVDUHFRUUHFWWKDWZKHQDGLVWULFW 3ODLQWLIIVjILUVWDPHQGHGFRPSODLQWDOOHJHVWKDWDLV FRXUWGLVPLVVHVFODLPVRYHUZKLFKLWKDGRULJLQDOMXULVGLFWLRQ %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO 3ODLQWLIIVDUJXHLQWKHLQVWDQWFDVHWKDW*UHHQDQG5HQRjV LWJHQHUDOO\VKRXOGUHPDQGVWDWHODZFODLPVWRVWDWHFRXUWWKDW FRQGXFWZDVQRWFRYHUHGE\DEVROXWHLPPXQLW\EHFDXVHWKH\ UXOH LV QRW DEVROXWH 6HH 0XVVRQ 7KHDWULFDO ,QF Y )HG DFWHGDVPHUHFXVWRGLDQVRISURSHUW\DQGZHUHWKXVHQJDJHG ([SUHVV &RUS )G WK &LU LQ DGPLQLVWUDWLYH FRQGXFW UDWKHU WKDQ DGYRFDF\ 7KLV m>7@KHUHLVQRFDWHJRULFDOUXOHWKDWWKHSUHWULDOGLVPLVVDORI DUJXPHQW LV XQDYDLOLQJ 7KH SURVHFXWRUjV GHFLVLRQ QRW WR DIHGHUDOFODLPEDUVDFRXUWIURPGHFLGLQJUHPDLQLQJVWDWHODZ DJUHHWRYDFDWHDFLYLOIRUIHLWXUHMXGJPHQWMXVWDVKLVGHFLVLRQ FODLPVl0RUHRYHU86&FLWVHOIPDNHVFOHDU WRLQVWLWXWHWKHIRUIHLWXUHSURFHHGLQJVLQWKHILUVWLQVWDQFHLV WKDW D GLVWULFW FRXUW PD\ QRW PXVW GHFOLQH WR H[HUFLVH LQWKHQDWXUHRIDGYRFDF\UDWKHUWKDQDGPLQLVWUDWLYHFRQGXFW VXSSOHPHQWDO MXULVGLFWLRQ LQ VXFK LQVWDQFHV 7KH GLVWULFW DQG LV FRYHUHG E\ WKH DEVROXWH LPPXQLW\ GRFWULQH 6HH FRXUWjVGHFLVLRQWRH[HUFLVHVXSSOHPHQWDOMXULVGLFWLRQDWWKLV &RRSHU)GDW SRLQWGHSHQGVRQmMXGLFLDOHFRQRP\FRQYHQLHQFHIDLUQHVV DQGFRPLW\l0XVVRQ)GDWFLWDWLRQDQGLQWHUQDO ,Q DQ\ HYHQW *UHHQ DQG 5HQR DUH HQWLWOHG WR TXDOLILHG TXRWDWLRQPDUNVRPLWWHG LPPXQLW\ 8QGHU WKH GRFWULQH RI TXDOLILHG LPPXQLW\ mJRYHUQPHQW RIILFLDOV SHUIRUPLQJ GLVFUHWLRQDU\ IXQFWLRQV +HUH WKH GLVWULFW FRXUW KDG EHIRUH LW PRWLRQV WR GLVPLVV JHQHUDOO\DUHVKLHOGHGIURPOLDELOLW\IRUFLYLOGDPDJHVLQVRIDU IURP ERWK WKH IHGHUDO 'HIHQGDQWV DQG 'HIHQGDQW 2[IRUG DVWKHLUFRQGXFWGRHVQRWYLRODWHFOHDUO\HVWDEOLVKHGVWDWXWRU\ %DQN7KHGLVWULFWFRXUWKHDUGRUDODUJXPHQWRQDOOPRWLRQV RUFRQVWLWXWLRQDOULJKWVRIZKLFKDUHDVRQDEOHSHUVRQZRXOG LQFOXGLQJWKH'HIHQGDQW2[IRUG%DQNjVPRWLRQWRGLVPLVV KDYH NQRZQl +DUORZ Y )LW]JHUDOG 86 7KHGLVWULFWFRXUWWKHUHDIWHUGHWHUPLQHGWKDW3ODLQWLIIVjVWDWH ,QWKHLQVWDQWFDVH*UHHQDQG5HQRjVFRQGXFWGLGQRW ODZIUDXGFODLPFRXOGQRWVXUYLYHDVDPDWWHURIODZ7KH YLRODWHFOHDUO\HVWDEOLVKHGODZ3ODLQWLIIVFRPSODLQRI*UHHQ SDUWLHV KDG DOUHDG\ DUJXHG WKH PHULWV RI WKH FODLPV WR WKH DQG 5HQRjV IDLOXUH WR DJUHH WR YDFDWH WKHLU FLYLO IRUIHLWXUH GLVWULFWFRXUW,WZRXOGPDNHOLWWOHVHQVHWRUHTXLUH'HIHQGDQW MXGJPHQWV3ODLQWLIIVKRZHYHUKDYHIDLOHGWRGHPRQVWUDWH 2[IRUG%DQNWRH[SHQGDGGLWLRQDOUHVRXUFHVPDNLQJWKHVDPH WKDWFOHDUO\HVWDEOLVKHGODZH[LVWHGWKDWZRXOGVXSSRUWVHWWLQJ DUJXPHQWV LQ VWDWH FRXUW 8QGHU WKHVH FLUFXPVWDQFHV WKH DVLGHWKHFLYLOIRUIHLWXUH3ODLQWLIIVFDQQRWUHO\XSRQ5DW]ODI LQWHUHVWV RI MXGLFLDO HFRQRP\ RYHUFDPH WKH SUHVXPSWLRQ EHFDXVH WKH 6XSUHPH &RXUW QRWHG WKDW LWV GHFLVLRQ ZKLFK DJDLQVWUHWHQWLRQRISHQGHQWVWDWHODZFODLPV6HH%UD]LQVNL UHVXOWHGLQYDFDWLRQRI3ODLQWLIIVjFULPLQDOFRQYLFWLRQGLGQRW Y$PRFR3HWUROHXP$GGLWLYHV&R)GWK DSSO\ WR FLYLO IRUIHLWXUHV XQGHU D 6HH 5DW]ODI &LUQRWLQJWKDWmLIWKHFRUUHFWGLVSRVLWLRQRIDSHQGHQW 86DWQ7KH5DW]ODIGHFLVLRQDFWXDOO\VXSSRUWVWKH FODLPRUDFWLRQZDVVRFOHDUDVDPDWWHURIVWDWHODZWKDWLW FRQFOXVLRQ WKDW 3ODLQWLIIVj DOOHJHG ULJKWV ZHUH QRW FOHDUO\ FRXOG EH GHWHUPLQHG ZLWKRXW IXUWKHU WULDO SURFHHGLQJV DQG HVWDEOLVKHG3ODLQWLIIVSURYLGHQRRWKHUEDVLVWRFRQFOXGHWKDW ZLWKRXWHQWDQJOHPHQWZLWKDQ\GLIILFXOWLVVXHVRIVWDWHODZ 'HIHQGDQWV 5HQR DQG *UHHQ YLRODWHG 3ODLQWLIIVj FOHDUO\ FRQVLGHUDWLRQVRIMXGLFLDOHFRQRP\ZDUUDQWHGUHWHQWLRQDQG HVWDEOLVKHGFRQVWLWXWLRQDOULJKWVVRDVWRYLWLDWH'HIHQGDQWVj GHFLVLRQUDWKHUWKDQUHOLQTXLVKPHQWRIWKHFDVHWRWKHVWDWH TXDOLILHGLPPXQLW\ FRXUWl.DYLWY$/6WDPP &R)GQ G &LU H[SODLQLQJ WKDW H[FHSWLRQDO FLUFXPVWDQFHV &RXQW9 'HFODUDWRU\5HOLHIVWULNLQJGRZQWKH H[LVWWRRYHUFRPHSUHVXPSWLRQDJDLQVWUHWDLQLQJVXSSOHPHQWDO &LYLO )RUIHLWXUH 6WDWXWH 86& MXULVGLFWLRQRISHQGHQWVWDWHODZFODLPVDIWHU5XOHE DDV8QFRQVWLWXWLRQDO GLVPLVVDOmZKHQGLVPLVVDORIWKHSHQGHQWFODLPVZRXOG VKDUSO\FODVKZLWKVHUY>LQJ@WKHHQGVRIMXGLFLDOHFRQRP\ 3ODLQWLIIV DOOHJHG LQ &RXQW 9 RI WKHLU FRPSODLQW WKDW FRQYHQLHQFHRUIDLUQHVVWROLWLJDQWVlFLWDWLRQVDQGLQWHUQDO DZDVYLRODWLYHRIWKH)LIWK$PHQGPHQWjVGXHSURFHVV TXRWDWLRQPDUNVRPLWWHG7KHUHIRUHWKHGLVWULFWFRXUWGLGQRW %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO DEXVHLWVGLVFUHWLRQLQH[HUFLVLQJVXSSOHPHQWDOMXULVGLFWLRQ 7KXVWKHGLVWULFWFRXUWSURSHUO\GLVPLVVHGFRXQWV,,DQG,,, RYHU3ODLQWLIIVjVWDWHODZIUDXGFODLP RI3ODLQWLIIVjILUVWDPHQGHGFRPSODLQWIRUYLRODWLRQVRIWKHGXH SURFHVVFODXVHDQGWKHH[FHVVLYHILQHVFODXVHUHVSHFWLYHO\ % 'LVPLVVDORI3ODLQWLIIVj)LUVW$PHQGHG&RPSODLQW EHFDXVH WKH\ ZHUH EDUUHG E\ WKH GRFWULQHV RI VRYHUHLJQ LPPXQLW\DQGFODLPSUHFOXVLRQ :H UHYLHZ GH QRYR WKH GLVWULFW FRXUWjV GLVPLVVDO RI DQ DFWLRQ IRU IDLOXUH WR VWDWH D FODLP XQGHU 5XOH E &RXQW,9 &ODLPVIRU9LRODWLRQVRI3ODLQWLIIVj 3HQVLRQ%HQHILW*XDU&RUSY('D\WRQ7RRO 'LH&R &RQVWLWXWLRQDO 5LJKWV DJDLQVW )GWK&LU7KH&RXUWPXVWmFRQVWUXH 'HIHQGDQWV 5HQR DQG *UHHQ LQ WKHFRPSODLQWLQWKHOLJKWPRVWIDYRUDEOHWRWKHSODLQWLIIDQG 7KHLU,QGLYLGXDO&DSDFLWLHV GHWHUPLQHZKHWKHUWKHSODLQWLIIXQGRXEWHGO\FDQSURYHQRVHW RI IDFWV LQ VXSSRUW RI WKH FODLPV WKDW ZRXOG HQWLWOH KLP WR 3ODLQWLIIVDOOHJHGLQWKHLUIRXUWKFODLPWKDW'HIHQGDQWV5HQR UHOLHIl*UHJRU\Y6KHOE\&RXQW\7HQQ)G DQG*UHHQYLRODWHG3ODLQWLIIVjGXHSURFHVVULJKWVXQGHUWKH WK&LU+RZHYHUWKH&RXUWmQHHGQRWDFFHSWDVWUXH )LIWK $PHQGPHQW DQG WKHLU ULJKWV DJDLQVW H[FHVVLYH ILQHV OHJDOFRQFOXVLRQVRUXQZDUUDQWHGIDFWXDOLQIHUHQFHVl,G,Q XQGHUWKH(LJKWK$PHQGPHQWDULVLQJRXWRIWKHIRUIHLWXUHRI DGGLWLRQZHUHYLHZGHQRYRWKHGLVWULFWFRXUWjVGLVPLVVDORI DQG UHIXVDO WR UHWXUQ 3ODLQWLIIVj DVVHWV 7KHVH FODLPV ZHUH D FODLP IRU ODFN RI VXEMHFW PDWWHU MXULVGLFWLRQ SXUVXDQW WR SURSHUO\ GLVPLVVHG XQGHU WKH GRFWULQHV RI DEVROXWH 5XOH E +DLR Y ,16 )G WK &LU SURVHFXWRULDODQGTXDOLILHGLPPXQLW\ %HORZZHDGGUHVVHDFKRIWKHVL[FODLPV3ODLQWLIIV DOOHJHGLQWKHLUILUVWDPHQGHGFRPSODLQW $EVROXWH SURVHFXWRULDO LPPXQLW\ DSSOLHV ZKHUH D SURVHFXWRUjV DFWLYLWLHV DUH mLQWLPDWHO\ DVVRFLDWHG ZLWK WKH &RXQW,3ODLQWLIIVj)UDXG&ODLP MXGLFLDO SKDVH RI WKH FULPLQDO SURFHVV l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jV UROH DV DGYRFDWH IRU WKH JRYHUQPHQW ,G ,I 7KH GLVWULFW FRXUW SURSHUO\ GLVPLVVHG 3ODLQWLIIVj FODLP KRZHYHUWKHSURVHFXWRULVRQO\VHUYLQJLQDQLQYHVWLJDWRU\ DJDLQVWWKHJRYHUQPHQWXQGHU5XOHVEDQGE FDSDFLW\LHDFWLYLWLHVmQRUPDOO\SHUIRUPHGE\DGHWHFWLYHRU SROLFH RIILFHU VXFK DV VHDUFKLQJ IRU WKH FOXHV DQG FRUURERUDWLRQ WKDW PLJKW JLYH KLP SUREDEOH FDXVH WR UHFRPPHQGWKDWDVXVSHFWEHDUUHVWHG>KH@LVHQWLWOHGRQO\DW 7KH JRYHUQPHQW ZDV DFWXDOO\ VXEVWLWXWHG DV WKH VROH IHGHUDO GHIHQGDQW UHODWLYH WR WKLV FODLP EHFDXVH LW FHUWLILHG WKDW DOO LQGLYLGXDO PRVW WR TXDOLILHG LPPXQLW\l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m)7&$l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j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jFDVHZDV D/XQGVWUXP)GDWm$SUHUHTXLVLWHWR DFKLHYHGE\DFRQVHQWMXGJPHQWLQMXGLFLDOSURFHHGLQJVWKH VXLWXQGHUWKH)7&$LVWKHH[KDXVWLRQE\WKHSODLQWLIIRI FLYLO IRUIHLWXUH GLG QRW LQYROYH DJHQF\ DFWLRQ %\ LWV RZQ DGPLQLVWUDWLYHUHPHGLHVl6HFWLRQDSURYLGHVWKDWDQ WHUPV RQO\ DSSOLHV ZKHUH WKH SDUW\ VHHNV MXGLFLDO mDFWLRQVKDOOQRWEHLQVWLWXWHGXSRQDFODLPDJDLQVWWKH8QLWHG UHYLHZRIDJHQF\DFWLRQ%HFDXVHWKHLQVWDQWIRUIHLWXUHWRRN 6WDWHVIRUPRQH\GDPDJHVXQOHVVWKHFODLPDQWVKDOOKDYH SODFHLQWKHFRQWH[WRIDFLYLOMXGLFLDOSURFHHGLQJWKHUHLVQR ILUVWSUHVHQWHGWKHFODLPWRWKHDSSURSULDWH)HGHUDODJHQF\DQG DJHQF\DFWLRQIRUWKHGLVWULFWFRXUWRUWKLV&RXUWWRUHYLHZ KLV FODLP VKDOO KDYH EHHQ ILQDOO\ GHQLHG E\ WKH DJHQF\ LQ 6HH&RPPRI%OLQG9HQGRUVRI'&Y'LVWULFWRI&ROXPELD ZULWLQJDQGVHQWE\FHUWLILHGRUUHJLVWHUHGPDLOl86& )G'&&LUKROGLQJ$3$86& D$FODLPVXEPLWWHGWRWKHSURSHUDGPLQLVWUDWLYH mLQDSSOLFDEOHEHFDXVHQRDJHQF\SURFHHGLQJWRRNSODFH DJHQF\ LV FRQVLGHUHG VXIILFLHQW WR VDWLVI\ WKH H[KDXVWLRQ IRUWKHFRXUWWRUHYLHZl7KH$3$WKHUHIRUHFDQQRWEHWKH UHTXLUHPHQW LI LW LV D mZULWWHQ QRWLILFDWLRQ RI DQ LQFLGHQW EDVLVIRUDZDLYHURIVRYHUHLJQLPPXQLW\LQWKHFDVHDWEDU DFFRPSDQLHGE\DFODLPIRUPRQH\GDPDJHVLQDVXPFHUWDLQ IRULQMXU\WRRUORVVRISURSHUW\SHUVRQDOLQMXU\RUGHDWKl /XQGVWUXP)GDW 3ODLQWLIIV DUJXH WKDW WKH\ LQ IDFW ILOHG DQ DGPLQLVWUDWLYH :H ODWHU GLVFXVV WKH GLVWULFW FRXUWjV GHFLVLRQ WR GHQ\ 3ODLQWLIIVj PRWLRQ WR ILOH D VHFRQG DPHQGPHQW FRPSODLQW FODLPZLWKWKH'HSDUWPHQWRIsXVWLFHRQ'HFHPEHU ZKHQWKH\ILOHGDSHWLWLRQIRUUHPLVVLRQRIWKHDVVHWVIRUIHLWHG :H QRWH WKDW WKH FDVHV FLWHG E\ 3ODLQWLIIV LQ VXSSRUW RI WKHLU SURSRVLWLRQ LQYROYH DGPLQLVWUDWLYH UDWKHU WKDQ MXGLFLDO IRUIHLWXUHV 800 3ODLQWLIIjV %U DW DQG DUH FRQVHTXHQWO\ RI QR PRPHQW WR 3ODLQWLIIVj FDVH %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO XQGHU WKH FRQVHQW MXGJPHQW 7KH GLVWULFW FRXUW UHMHFWHG MXGJPHQW IRU FLYLO IRUIHLWXUH RI WKHLU SURSHUWLHV $V ZH 3ODLQWLIIVjDUJXPHQWWKDWWKHSHWLWLRQIRUUHPLVVLRQFRQVWLWXWHG H[SODLQHGDERYHWKHOHWWHULQGLFDWHVWKDW3ODLQWLIIVZHUHDZDUH DQDGPLQLVWUDWLYHFODLPEHFDXVHLWFRQFOXGHGWKDWWKHSHWLWLRQ RU KDG UHDVRQ WR NQRZ WKDW WKHLU SURSHUW\ ZDV DOOHJHGO\ GLGQRWUHTXHVWGDPDJHVDQGLWGLGQRWFRQWDLQDVXPFHUWDLQ IUDXGXOHQWO\ WDNHQ DV RI WKDW GDWH LH $XJXVW :HDJUHH +RZHYHUHYHQLI3ODLQWLIIVjFDXVHRIDFWLRQZDVWLPHO\XQGHU WKH 0LFKLJDQ VWDWXWH RI OLPLWDWLRQV LW IDLOV IRU WKH RWKHU m>7@KH FLUFXPVWDQFHV RI >WKH ZDLYHU RI VRYHUHLJQ UHDVRQVFLWHGDQGWKHGLVWULFWFRXUWSURSHUO\GLVPLVVHGWKHLU LPPXQLW\@PXVWEHVFUXSXORXVO\REVHUYHGDQGQRWH[SDQGHG FODLP E\WKHFRXUWVl.RNRWLVY8QLWHG 6WDWHV 3RVWDO6HUY )G WK &LU )XUWKHU DQ DGPLQLVWUDWLYH &RXQWV,,DQG,,, &ODLPVRI)LIWK$PHQGPHQW FODLPXQGHUWKH)7&$PXVWEHLQFDUHIXOFRPSOLDQFHZLWKLWV 'XH 3URFHVV DQG (LJKWK WHUPV,G,QRUGHUIRUDFODLPWREHFRPSOHWHLWPXVWLQFOXGH $PHQGPHQW ([FHVVLYH )LQHV D FODLP IRU GDPDJHV LQ D VXP FHUWDLQ *ODUQHU Y 8QLWHG 9LRODWLRQV 6WDWHV'HSjWRI9HWHUDQV$GPLQ)GWK&LU H[SODLQLQJWKDWLQWKLVFLUFXLWUHTXHVWLQJDVXPFHUWDLQ 7KHGLVWULFWFRXUWGLVPLVVHG3ODLQWLIIVjFRQVWLWXWLRQDOFODLPV LVDQHFHVVDU\SUHUHTXLVLWHWRILOLQJD)7&$FODLP.RNRWLV IRUYLRODWLRQVRIWKH)LIWK$PHQGPHQWjVGXHSURFHVVFODXVH )GDWm5HTXHVWLQJ DVXPFHUWDLQLVDQHFHVVDU\ DQGWKH(LJKWK$PHQGPHQWjVH[FHVVLYHILQHVFODXVHDJDLQVW HOHPHQW RI DQ\ )7&$ DGPLQLVWUDWLYH FODLPl &)5 WKH 8QLWHG 6WDWHV DQG WKH LQGLYLGXDO IHGHUDO 'HIHQGDQWV LQ DOLVWLQJUHTXLUHPHQWVIRUDSURSHUO\SUHVHQWHG WKHLURIILFLDOFDSDFLWLHVEHFDXVHLWFRQFOXGHGWKDWWKHFODLPV FODLP WR D IHGHUDO DJHQF\ $ UHTXHVW IRU WKH UHWXUQ RI IRUPRQH\GDPDJHVZHUHEDUUHGE\VRYHUHLJQLPPXQLW\:H SURSHUW\ WKH JRYHUQPHQW KDV VHL]HG LV QRW WDQWDPRXQW WR DJUHH0RUHRYHUDVZHKDYHDOUHDG\GLVFXVVHG3ODLQWLIIVj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mDOO IRUIHLWHG SURFHHGV RU 7KH GRFWULQH RI VRYHUHLJQ LPPXQLW\ QRW RQO\ EDUV WKHLU PRQHWDU\ HTXLYDOHQWl ,Q DGGLWLRQ 3ODLQWLIIV GLG QRW VXLWV DJDLQVW WKH 8QLWHG 6WDWHV ZKHQ WKH SODLQWLII VHHNV UHTXHVW D mVXP FHUWDLQl EHFDXVH WKH\ UHTXHVWHG ILUVW DQG PRQHWDU\ GDPDJHV EXW DOVR H[WHQGV WR VXLWV IRU PRQH\ IRUHPRVWUHWXUQRIWKHIRUIHLWHGDVVHWVWKHPVHOYHV GDPDJHVDJDLQVWRIILFHUVDQGDJHQWVRIWKH8QLWHG6WDWHVLQ WKHLURIILFLDOFDSDFLWLHV,G(FFOHVLDVWLFDO2UGHURIWKH,VPRI 7KHGLVWULFWFRXUWSURSHUO\GHWHUPLQHGWKDWLQDQ\HYHQW $P,QFY&KDVLQ)GWK&LUSHU 3ODLQWLIIVj SHWLWLRQ IRU UHPLVVLRQ IHOO RXWVLGH WKH WZR\HDU FXULDP %HFDXVH 3ODLQWLIIVj FODLPV FOHDUO\ VHHN PRQH\ GDPDJHVIRUWKHSURSHUW\WKH\FODLPZDVIRUIHLWHGLQYLRODWLRQ RIWKHFRQVWLWXWLRQWKHLUFODLPVDUHEDUUHG ,Q WKHLU EULHI 3ODLQWLIIV UHIHU WR WKLV FRUUHVSRQGHQFH DV WKH 'HFHPEHU DGPLQLVWUDWLYH FODLP KRZHYHU WKH GRFXPHQW DV 3ODLQWLIIV DOVR DUJXH RQ DSSHDO WKDW WKH $GPLQLVWUDWLYH SURYLGHG LQ WKH sRLQW $SSHQGL[ LV GDWHG 'HFHPEHU s$ DW 3URFHGXUH$FWm$3$lZDLYHVVRYHUHLJQLPPXQLW\IRUVXLWV IRU UHWXUQ RI IRUIHLWHG DVVHWV RU WKHLU PRQHWDU\ HTXLYDOHQW %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO 3ODLQWLIIVj UHOLDQFH RQ /RSH] LV FOHDUO\ PLVSODFHG 7KH OLPLWDWLRQVSHULRGIRUILOLQJDQDGPLQLVWUDWLYHFODLPXQGHUWKH /RSH]&RXUWGHWHUPLQHGWKDWUHOHDVHRIILQDQFLDOUHFRUGVDIWHU )7&$ DQG WKXV FRXOG QRW VHUYH DV D YDOLG DGPLQLVWUDWLYH DYHUEDOUHTXHVWUDWKHUWKDQDZULWWHQUHTXHVWDQGUHOHDVHRI FODLP 8QGHU WKH )7&$ D GLVWULFW FRXUW GRHV QRW KDYH LQIRUPDWLRQ RWKHU WKDQ WKH DFFRXQW KROGHUj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j RUXQOHVVDFWLRQLVEHJXQZLWKLQVL[PRQWKVDIWHUWKHGDWH IUDXGFODLPEDVHGRQ'HIHQGDQWjVLPPXQLW\IURPVXLWXQGHU RIPDLOLQJE\FHUWLILHGRUUHJLVWHUHGPDLORIQRWLFHRI F ILQDOGHQLDORIWKHFODLPE\WKHDJHQF\WRZKLFKLWZDV SUHVHQWHG 7KHGLVWULFWFRXUWDOVRGLVPLVVHG3ODLQWLIIVjIUDXGFODLPRQ WKHJURXQGWKDW3ODLQWLIIVILOHGWKHLUDFWLRQRXWVLGH0LFKLJDQj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j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j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j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s$DW7KHUHIRUH DWWKHODWHVW3ODLQWLIIVZHUHDZDUHRUKDGUHDVRQWRNQRZWKDW 1RWKLQJ LQ WKLV FKDSWHU VKDOO SUHFOXGH DQ\ ILQDQFLDO WKHLUSURSHUW\ZDVDOOHJHGO\IUDXGXOHQWO\WDNHQLQ$XJXVWRI LQVWLWXWLRQ RU DQ\ RIILFHU HPSOR\HH RU DJHQW RI D 3ODLQWLIIVj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sD\DUDPDQ1R HPSOR\HH RU DJHQW WKHUHRI PDNLQJ D GLVFORVXUH RI :/DW WK&LU'HF LQIRUPDWLRQ SXUVXDQW WR WKLV VXEVHFWLRQ VKDOO QRW EH )7&$FODLPVSURSHUO\GLVPLVVHGDVm>D@SODLQWLIIPD\QRW OLDEOHWRWKHFXVWRPHUXQGHUDQ\ODZRUUHJXODWLRQRIWKH EULQJDVXLWIRUPRQHWDU\GDPDJHVXQGHUIHGHUDOODZXQWLO 8QLWHG6WDWHVRUDQ\FRQVWLWXWLRQODZRUUHJXODWLRQRI KLVFRQYLFWLRQKDVEHHQUHYHUVHGl DQ\ 6WDWH RU SROLWLFDO VXEGLYLVLRQ WKHUHRI IRU VXFK GLVFORVXUH RU IRU DQ\ IDLOXUH WR QRWLI\ WKH FXVWRPHU RI +RZHYHU 3ODLQWLIIVj UHOLDQFH RQ +HFN LV PLVSODFHG VXFKGLVFORVXUH 3ODLQWLIIVjFXUUHQWFODLPLVQRWEDVHGRQDQLPSURSHURULOOHJDO FRQYLFWLRQ 7KH SUHVHQW FODLP LV EDVHG RQ DQ DOOHJHGO\ 86&F3ODLQWLIIVGRQRWGLVSXWHWKDWWKHDOOHJHG LPSURSHUFLYLOIRUIHLWXUH7KHIRUIHLWXUHDQGWKHFRQYLFWLRQ GLVFORVXUHVE\'HIHQGDQW2[IRUG%DQNZKLFKVHUYHDVWKH DUHWZRVHSDUDWHSURFHHGLQJVWKDWUHTXLUHGLIIHUHQWOHYHOVRI EDVLVIRUWKHIUDXGFODLPZHUHPDGHSXUVXDQWWRF SURRIDQGWKHYDFDWLRQRI3ODLQWLIIVjFULPLQDOFRQYLFWLRQGRHV 3ODLQWLIIVQHYHUWKHOHVVDUJXHWKDWFGRHVQRWSURWHFW QRW UHTXLUH D FRQFOXVLRQ WKDW WKH FLYLO IRUIHLWXUH ZDV DOVR 'HIHQGDQW 2[IRUG %DQN UHO\LQJ RQ /RSH] Y )LUVW 8QLRQ LPSURSHU 6HH 5DW]ODI 86 DW Q QRWLQJ WKDW 1DWjO%DQNRI)ORULGD)GWK&LU IDLOXUHWRVKRZZLOOIXOQHVVLQVWUXFWXULQJFDVKWUDQVDFWLRQV ZKLFKZDVWKHEDVLVIRURYHUWXUQLQJ3ODLQWLIIVjFRQYLFWLRQV +RZHYHUFRQLWVIDFHDSSOLHVLQWKHLQVWDQWFDVH VXFKWKDW'HIHQGDQW2[IRUG%DQNLVLPPXQHIURPVXLW6HH :D\QHY&RPPRQZHDOWK%DQN)6XSS:' WK &LU ILQGLQJ WKDW RQ DSSHDO mZH UHYLHZ WKH FDVH 3DKROGLQJWKDWEDUUHGSODLQWLIIjVQHJOLJHQFH SUHVHQWHG WR WKH GLVWULFW FRXUW UDWKHU WKDQ D EHWWHU FDVH IDVKLRQHG DIWHU WKH DQG EDG IDLWK FODLPV DJDLQVW EDQN IRU UHSRUWLQJ WR IHGHUDO GLVWULFW FRXUW V RUGHUl FLWDWLRQ RPLWWHG FI ,Q UH %OD]R &RUS Y DXWKRULWLHV WKDW SODLQWLIIV ZHUH LQYROYHG LQ D FKHFN NLWLQJ &DUPDQ 1R :/ DW WK &LU 'HF VFKHPHZKLFKWKH\FODLPZDVXQWUXHEDQNKDGQRILGXFLDU\ FLWLQJ 6NRWDN Y 7HQQHHFR 5HVLQV ,QF )G Q WK &LU XQSXEOLVKHG H[SODLQLQJ WKDW RQ VXPPDU\ MXGJPHQW DOWKRXJK GXW\mWRUHIUDLQIURPUHSRUWLQJVXVSHFWHGLOOHJDODFWLYLW\RQ UHFRUG LV UHYLHZHG GH QRYR DSSHOODWH FRXUW ZLOO QRW FRQVLGHU HYLGHQFH RU WKHSDUWRIWKHLUFXVWRPHUVl DUJXPHQWV QRW SUHVHQWHG WR WKH GLVWULFW FRXUW IRU LWV FRQVLGHUDWLRQ RQ WKH PRWLRQ %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO mSHUWLQHQW DJHQFLHV LQ WKH 8QLWHG 6WDWHV 'HSDUWPHQW RI GRHVQRWSUHYHQWDFLYLOIRUIHLWXUHRIVWUXFWXUHGDVVHWVXQGHU 7UHDVXU\l s$ DW 3ODLQWLIIV DOOHJH WKDW WKH EDQNV 86&D7KHUHIRUHXQOLNHFODLPVEDVHGRQLOOHJDO mIDFLOLWDWHG WKH ZURQJIXO WDNLQJ RI SHWLWLRQHUVj DVVHWVl E\ FRQYLFWLRQV 3ODLQWLIIV GLG QRW KDYH WR KDYH WKHLU FULPLQDO FRQFHDOLQJIURPWKHPmWKHIDFWWKDWWKHLUWHOOHUVZHUHLQGXFLQJ FRQYLFWLRQVYDFDWHGEHIRUHOD\LQJFODLPWRDVVHWVWDNHQLQWKH WKHP WR PDNH FDVK GHSRVLWV LQ ZD\V WKDW FRXOG OHDG WR VHSDUDWHFLYLOIRUIHLWXUHSURFHHGLQJ JRYHUQPHQWFRQILVFDWLRQRIDOOPRQLHVGHSRVLWHGls$DW 7KHFUX[RI3ODLQWLIIVjFODLPDJDLQVW2[IRUGLVWKDWZKLOH 0RUHRYHUWKHGLVWULFWFRXUWSURSHUO\GLVPLVVHG3ODLQWLIIVj WKH\ ZHUH LQIRUPHG WKDW EDQNV PXVW UHSRUW WUDQVDFWLRQV WR FODLPVE\FRQFOXGLQJWKDWWKHFRQVHQWMXGJPHQWLQWKHSULRU DXWKRULWLHV LQYROYLQJ DPRXQWV LQ H[FHVV RI WKH\ FLYLOIRUIHLWXUHDFWLRQSUHFOXGHG3ODLQWLIIVIURPDUJXLQJWKDW mZHUHQRWLQIRUPHGRIODZVDJDLQVWFXUUHQF\VWUXFWXULQJRURI WKHDVVHWVZHUHLPSURSHUO\WDNHQXQGHUWKHGRFWULQHRIUHV DQ\ULVNRIIRUIHLWXUHUHODWHGWRLWls$DW MXGLFDWDRUFODLPSUHFOXVLRQm&ODLPSUHFOXVLRQUHIHUVWRWKH HIIHFWRIDMXGJPHQWLQIRUHFORVLQJOLWLJDWLRQRIDPDWWHUWKDW 7KHGLVWULFWFRXUWGLVPLVVHG3ODLQWLIIVjIUDXGFODLPDJDLQVW QHYHUKDVEHHQOLWLJDWHGEHFDXVHRIDGHWHUPLQDWLRQWKDWLW 'HIHQGDQW2[IRUG%DQNRQDQXPEHURIJURXQGVLQFOXGLQJ VKRXOG KDYH EHHQ DGYDQFHG LQ DQ HDUOLHU VXLWl +H\OLJHU Y IDLOXUH WR SOHDG IUDXG ZLWK SDUWLFXODULW\ DV UHTXLUHG E\ 6WDWH8QLYRI&PW\&ROO6\VRI7HQQ)G )HG 5 &LY 3 E WKDW 'HIHQGDQW 2[IRUG %DQNjV WK&LU$FODLPLVSUHFOXGHGLIWKHUHLVDILQDO FRQGXFWZDVQRWWKHSUR[LPDWHFDXVHRI3ODLQWLIIVjLQMXU\ MXGJPHQW RQ WKH PHULWV LQ DQ HDUOLHU DFWLRQ WKHUH LV D 3ODLQWLIIVj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jVXLW ,Q WKH LQVWDQW FDVH WKH SDUWLHV IXOO\ QHJRWLDWHG WKH IHOORXWVLGHWKHVL[\HDUVWDWXWHRIOLPLWDWLRQVXQGHU0LFKLJDQ XQGHUO\LQJFRQVHQWMXGJPHQW)XUWKHU3ODLQWLIIVjDWWHPSWVWR ODZ3ODLQWLIIVKDYHWKHUHIRUHZDLYHGUHYLHZRIWKHGLVWULFW KDYH WKH FRQVHQW MXGJPHQW YDFDWHG KDYH WKXV IDU IDLOHG FRXUWjV GHFLVLRQ ZLWK UHVSHFW WR DOO RWKHU JURXQGV IRU 3ODLQWLIIVILOHGD5XOHEPRWLRQEHIRUHWKHGLVWULFWFRXUWRQ GLVPLVVDO6HH8QLWHG6WDWHVY/D\QH)GWK 2FWREHU7KHFRXUWGHQLHG3ODLQWLIIVj5XOHE &LUQRWLQJWKDWmLVVXHVDGYHUWHGWRLQDSHUIXQFWRU\ PRWLRQ FRQFOXGLQJ WKDW 5DW]ODI GLG QRW UHTXLUH WKDW WKH PDQQHU XQDFFRPSDQLHG E\ VRPH HIIRUW DW GHYHORSHG FRQVHQWMXGJPHQWEHVHWDVLGHRUYDFDWHG7KHGLVWULFWFRXUW DUJXPHQWDWLRQ DUH GHHPHG ZDLYHGl FLWDWLRQ DQG LQWHUQDO IXUWKHUFRQFOXGHG TXRWDWLRQPDUNVRPLWWHG mFRXUWVKDYHKHOGWKDWDVHWWOHPHQWLQDFLYLOIRUIHLWXUH +RZHYHURIWKHWZRLVVXHVSUHVHUYHGIRUWKLVDSSHDOWKH SURFHHGLQJHYHQLISURPSWHGE\DFULPLQDOFRQYLFWLRQLV GLVWULFWFRXUWSURSHUO\FRQFOXGHGWKDW'HIHQGDQW2[IRUG%DQN EDVHG RQ DQ DJUHHPHQW RI WKH SDUWLHV DQG QRW RQ DQ ZDVLPPXQHIURPVXLWXQGHUFDOWKRXJKZHEHOLHYH XQGHUO\LQJFULPLQDOFRQYLFWLRQ$FFRUGLQJO\DFRQVHQW WKHVWDWXWHRIOLPLWDWLRQVLVVXHLVDFORVHUTXHVWLRQ MXGJPHQWRIIRUIHLWXUHPD\QRWEHVHWDVLGHSXUVXDQWWR %ODNHO\HWDOY8QLWHG6WDWHVHWDO 1R 1R %ODNHO\HWDOY8QLWHG6WDWHVHWDO 5XOHEVLPSO\EHFDXVHWKHFULPLQDOFRQYLFWLRQLV 3URFHGXUH Il ,G DW 7KH GHIHQGDQW DUJXHG WKDW ODWHURYHUWXUQHGl m>D@EVHQWVXFKDILQGLQJHYHQKLVFRQFHVVLRQWRIRUIHLWXUH LQWKHSOHDDJUHHPHQWFDQQRWDXWKRUL]HIRUIHLWXUHl,G7KH 6HH%ODNHO\)6XSSGDWGLVFXVVLQJSURFHHGLQJVLQ &RXUWKHOGWKDWWKHUXOHLPSRVHVQRREOLJDWLRQRQWKHGLVWULFW WKH 5XOH E DFWLRQ 3ODLQWLIIV LQLWLDOO\ DSSHDOHG WKDW FRXUW mWR LQTXLUH LQWR WKH IDFWXDO EDVLV IRU D VWLSXODWHG GHFLVLRQWRWKLV&RXUWEXWWKH\ODWHUYROXQWDULO\GLVPLVVHGWKH IRUIHLWXUHRIDVVHWVHPERGLHGLQDSOHDDJUHHPHQWl,GDW DSSHDO DV PHPRULDOL]HG E\ RUGHU RI WKLV &RXUW GDWHG )XUWKHUIRUSXUSRVHVRIWKHLQVWDQWDFWLRQ/LEUHWWL 6HSWHPEHU6HH8QLWHG6WDWHVY5HDO3URS GRHVQRWKROGWKDWDYDOLGFLYLOFRQVHQWMXGJPHQWHQWHUHGLQWR %UDQG\ZLQH 'ULYH +ROO\ *URYHODQG 7RZQVKLS 2DNODQG E\DGHIHQGDQWEHFRPHVYRLGIRUSXUSRVHVRIFODLPSUHFOXVLRQ &RXQW\0LFK1RWK&LU6HSWRUGHU EHFDXVH WKH GHIHQGDQWjV FULPLQDO FRQYLFWLRQ LV ODWHU JUDQWLQJDSSHOODQWVjPRWLRQWRGLVPLVV3ODLQWLIIVKDYHKDG RYHUWXUQHG D IXOO DQG IDLU RSSRUWXQLW\ WR OLWLJDWH DQ\ LVVXHV WKDW FRXOG KDYHEHHQEURXJKWLQWKHFLYLOIRUIHLWXUHSURFHHGLQJHLWKHU ,QGHHGDFRQVHQWMXGJPHQWDOWKRXJKDMXGLFLDOGHFUHHLV SULRUWRWKHFRQVHQWMXGJPHQWRUGXULQJWKHSURFHHGLQJVLQ HVVHQWLDOO\DQDJUHHPHQWEHWZHHQWKHSDUWLHVDQGVKRXOGEH FRQQHFWLRQZLWKLWV5XOHEPRWLRQWRYDFDWH7KHUHIRUH FRQVWUXHG DV D FRQWUDFW 6HH 6HFV ([FK &RPPjQ Y ZHFRQFOXGHWKDWWKHFRQVHQWMXGJPHQWLVDILQDOMXGJPHQWIRU /HYLQH )G G &LU m>&@RQVHQW SXUSRVHVRIFODLPSUHFOXVLRQ MXGJPHQWVVKRXOGEHLQWHUSUHWHGLQDZD\WKDWJLYHVHIIHFWWR ZKDWWKHSDUWLHVKDYHDJUHHGWRDVUHIOHFWHGLQWKHMXGJPHQW )XUWKHUWKHSDUWLHVLQLQWHUHVWLQERWKWKLVSURFHHGLQJDQG LWVHOIRULQGRFXPHQWVLQFRUSRUDWHGLQLWE\UHIHUHQFHl WKHFLYLOIRUIHLWXUHSURFHHGLQJDUHWKHVDPHWKHJRYHUQPHQW ,G%\HQWHULQJLQWRDFRQVHQWGHFUHHWKHmSDUWLHVZDLYHWKHLU DQG3ODLQWLIIV,QDGGLWLRQWKHIDFWVXQGHUO\LQJWKHLQVWDQW ULJKWWROLWLJDWHWKHLVVXHVLQYROYHGLQWKHFDVHl8QLWHG FDVHDUHWKHVDPHIDFWVXQGHUO\LQJWKHFLYLOIRUIHLWXUHDFWLRQ 6WDWHVY$UPRXU &R86)XUWKHU 3ODLQWLIIV DUH WKHUHIRUH EDUUHG E\ FODLP SUHFOXVLRQ IURP FRQVHQWGHFUHHVVKRXOGEHFRQVWUXHGmZLWKRXWUHIHUHQFHWRWKH OLWLJDWLQJ PDWWHUV UHJDUGLQJ WKH OHJLWLPDF\ RI WKH FRQVHQW OHJLVODWLRQWKH*RYHUQPHQWRULJLQDOO\VRXJKWWRHQIRUFHEXW MXGJPHQW LQ WKH FLYLO IRUIHLWXUH SURFHHGLQJ 6HH 2UWL] QHYHUSURYHGDSSOLFDEOHWKURXJKOLWLJDWLRQl8QLWHG6WDWHVY &DPHURQ)GDW ,77&RQWj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mWR HVWDEOLVK D µIDFWXDO EDVLVj IRU WKH IRUIHLWHG SURSHUW\ FRYHUHG XQGHU )HGHUDO 5XOH RI &ULPLQDO )HG 5 &ULP 3 I SURYLGHV m>Q@RWZLWKVWDQGLQJ WKH DFFHSWDQFH RI D SOHD RI JXLOW\ WKH FRXUW VKRXOG QRW HQWHU D MXGJPHQW XSRQ VXFK D SOHD ZLWKRXW PDNLQJ VXFK LQTXLU\ DV VKDOO VDWLVI\ LW WKDW WKHUH LV D IDFWXDO EDVLV IRU WKH SOHDl