B.F. Goodrich v. U S Filter Corp
Opinion
5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 %)*RRGULFKY8QLWHG 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH
6WDWHV)LOWHU&RUS (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH DS
*RRGULFK GLG QRW SD\ WD[HV RQ $UURZKHDGjV DFFRXQWV UHFHLYDEOH 7KLV LVVXH LV SUHVHUYHG IRU WULDO 7KH FDVH LV 81,7('67$7(6&28572)$33($/6 5(0$1'('IRUIXUWKHUSURFHHGLQJVQRWLQFRQVLVWHQWZLWK WKLVRSLQLRQ )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB
%) *22'5,&+ &203$1< ; 3ODLQWLII$SSHOODQW 1R Y ! 81,7(' 67$7(6 ),/7(5 &25325$7,21 'HIHQGDQW$SSHOOHH 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ 1Rn'DQ$3ROVWHU'LVWULFWsXGJH $UJXHG1RYHPEHU 'HFLGHGDQG)LOHG0DUFK %HIRUH.(,7+%2**6DQG&2/(&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('6WHYHQ&%HQQHWWs21(6'$<5($9,6 32*8(1HZ %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS 9RGROD/(%2(8)/$0%*5((1( 0DF5$(+DUWIRUG :HUHIHURQFHDJDLQWR6HFWLRQJZKLFKVWDWHV &RQQHFWLFXWIRU$SSHOOHH %X\HU FRYHQDQWV WR FRPSHQVDWH 6HOOHU IRU DQ\ ,QFRPH BBBBBBBBBBBBBBBBB 7D[SDLGE\6HOOHUZLWKUHVSHFWWRLQFRPHDFFUXHGDQG LQFOXGHGLQ6HOOHUjVWD[DEOHLQFRPHEXWQRWSDLGWR6HOOHU 23,1,21 SULRUWR&ORVLQJ BBBBBBBBBBBBBBBBB ,Q DGGLWLRQ ZH QRWH WKDW LQ 6HFWLRQ LQFRPH WD[ LV %2**6 &LUFXLW sXGJH 3ODLQWLII %) *RRGULFK &R FRQWHPSODWHGDVDWD[RQDQ\mQHWLQFRPHl5HDGLQJ6HFWLRQ m*RRGULFKl DSSHDOV WKH GLVWULFW FRXUWjV GHFLVLRQ JUDQWLQJ JE\LWVHOIDQGLQOLJKWRI6HFWLRQDQGWKHUHPDLQGHU VXPPDU\MXGJPHQWLQIDYRURIGHIHQGDQW8QLWHG6WDWHV)LOWHU RIWKH$JUHHPHQWZHFRQFOXGHWKDWWKHFRQWUDFWLVDPELJXRXV &RUSm)LOWHUlXSRQFURVVPRWLRQVIRUVXPPDU\MXGJPHQWLQ DV WR ZKHWKHU WKH GHWHUPLQDWLRQ RI LQFRPH WD[HV SDLG RQ DGLYHUVLW\DFWLRQIRUEUHDFKRIDVWRFNSXUFKDVHDJUHHPHQW $UURZKHDGjV DFFRXQWV UHFHLYDEOH VKRXOG EH EDVHG RQ JRYHUQHGE\1HZ
Free access — add to your briefcase to read the full text and ask questions with AI
5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 %)*RRGULFKY8QLWHG 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH
6WDWHV)LOWHU&RUS (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH DS
*RRGULFK GLG QRW SD\ WD[HV RQ $UURZKHDGjV DFFRXQWV UHFHLYDEOH 7KLV LVVXH LV SUHVHUYHG IRU WULDO 7KH FDVH LV 81,7('67$7(6&28572)$33($/6 5(0$1'('IRUIXUWKHUSURFHHGLQJVQRWLQFRQVLVWHQWZLWK WKLVRSLQLRQ )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB
%) *22'5,&+ &203$1< ; 3ODLQWLII$SSHOODQW 1R Y ! 81,7(' 67$7(6 ),/7(5 &25325$7,21 'HIHQGDQW$SSHOOHH 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ 1Rn'DQ$3ROVWHU'LVWULFWsXGJH $UJXHG1RYHPEHU 'HFLGHGDQG)LOHG0DUFK %HIRUH.(,7+%2**6DQG&2/(&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('6WHYHQ&%HQQHWWs21(6'$<5($9,6 32*8(1HZ %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS 9RGROD/(%2(8)/$0%*5((1( 0DF5$(+DUWIRUG :HUHIHURQFHDJDLQWR6HFWLRQJZKLFKVWDWHV &RQQHFWLFXWIRU$SSHOOHH %X\HU FRYHQDQWV WR FRPSHQVDWH 6HOOHU IRU DQ\ ,QFRPH BBBBBBBBBBBBBBBBB 7D[SDLGE\6HOOHUZLWKUHVSHFWWRLQFRPHDFFUXHGDQG LQFOXGHGLQ6HOOHUjVWD[DEOHLQFRPHEXWQRWSDLGWR6HOOHU 23,1,21 SULRUWR&ORVLQJ BBBBBBBBBBBBBBBBB ,Q DGGLWLRQ ZH QRWH WKDW LQ 6HFWLRQ LQFRPH WD[ LV %2**6 &LUFXLW sXGJH 3ODLQWLII %) *RRGULFK &R FRQWHPSODWHGDVDWD[RQDQ\mQHWLQFRPHl5HDGLQJ6HFWLRQ m*RRGULFKl DSSHDOV WKH GLVWULFW FRXUWjV GHFLVLRQ JUDQWLQJ JE\LWVHOIDQGLQOLJKWRI6HFWLRQDQGWKHUHPDLQGHU VXPPDU\MXGJPHQWLQIDYRURIGHIHQGDQW8QLWHG6WDWHV)LOWHU RIWKH$JUHHPHQWZHFRQFOXGHWKDWWKHFRQWUDFWLVDPELJXRXV &RUSm)LOWHUlXSRQFURVVPRWLRQVIRUVXPPDU\MXGJPHQWLQ DV WR ZKHWKHU WKH GHWHUPLQDWLRQ RI LQFRPH WD[HV SDLG RQ DGLYHUVLW\DFWLRQIRUEUHDFKRIDVWRFNSXUFKDVHDJUHHPHQW $UURZKHDGjV DFFRXQWV UHFHLYDEOH VKRXOG EH EDVHG RQ JRYHUQHGE\1HZ )HGHUDO 7D[HV VWDWLQJ WKDW $UURZKHDG KDG QR QHW WD[DEOH $IWHU WKH FORVLQJ *RRGULFK GHPDQGHG UHLPEXUVHPHQW RI LQFRPH IRU RU WKH ILUVW TXDUWHU RI ,Q DGGLWLRQ FHUWDLQWD[SD\PHQWVIURP)LOWHUSXUVXDQWWR6HFWLRQRI )LOWHU UHOLHV XSRQ WKH WHVWLPRQ\ RI *RRGULFKjV WD[ DGYLVRU WKH$JUHHPHQWDQG)LOWHUUHIXVHG7KLVVLPSOHGHVFULSWLRQ ZKRVWDWHGWKDW$UURZKHDGRSHUDWHGDWDORVV)LOWHUDUJXHV KRZHYHUEHOLHVDPXFKPRUHFRPSOH[FKDLQRIHYHQWV WKDW *RRGULFK RQO\ RIIHUHG SURRI WKDW LW SDLG WD[HV RQ *RRGULFKjV RZQ FRUSRUDWHZLGH QHW LQFRPH QRW WKDW %RWK *RRGULFK DQG )LOWHU KDG H[SHULHQFH LQ QHJRWLDWLQJ *RRGULFKSDLGWD[HVRQ$UURZKHDGDFFRXQWVUHFHLYDEOH VLPLODU WUDQVDFWLRQV ZKHQ WKH\ HQWHUHG LQWR QHJRWLDWLRQV UHJDUGLQJWKH$JUHHPHQW*RRGULFKGUDIWHG6HFWLRQJRI % WKH $JUHHPHQW $OWKRXJK IRXU YHUVLRQV RI WKH $JUHHPHQW ZHUH GUDIWHG )LOWHUjV UHSUHVHQWDWLYHV QHYHU GLVFXVVHG RU 7KHUHVROXWLRQRIWKLV LVVXH GHSHQGVRQZKHWKHU6HFWLRQ SURSRVHGDQ\PRGLILFDWLRQWR6HFWLRQJDQGLWUHPDLQHG J VKRXOG EH LQWHUSUHWHG DV UHIHUULQJ WR QHW LQFRPH RI XQFKDQJHG WKURXJKRXW WKH FRXUVH RI QHJRWLDWLRQV RYHU WKH *RRGULFK DV D ZKROH ZKLFK ZRXOG LQFOXGH $UURZKHDGjV $JUHHPHQW DFFRXQWV UHFHLYDEOH DV *RRGULFK DUJXHV RU QHW LQFRPH RI $UURZKHDGE\LWVHOIDV)LOWHUDUJXHV$FFRUGLQJWR)LOWHUjV %RWK*RRGULFKjVSULQFLSDOQHJRWLDWRU6WHYHQ(VDNRYDQG LQWHUSUHWDWLRQVLQFH$UURZKHDGRSHUDWHGDWDORVVLWGLGQRW LWV SULQFLSDO WD[ DGYLVRU *HRUJH 6KHUZRRG WHVWLILHG WKDW KDYH QHW LQFRPH EXW LQVWHDG JHQHUDWHG D WD[ FUHGLW IRU 6HFWLRQJZDVLQWHQGHGWRGHDOZLWKWKHSUREOHPRIWD[HV *RRGULFK$VDUHVXOW)LOWHUDUJXHVWKDW*RRGULFKGLGQRW RQ DFFUXHG EXW XQSDLG LQFRPH VXFK DV UHFHLYDEOHV 7KH DFWXDOO\ SD\ LQFRPH WD[HV RQ $UURZKHDGjV DFFRXQWV $JUHHPHQWFDOOHGIRUWKHEX\HUWRDFTXLUH$UURZKHDGRQD UHFHLYDEOH JRLQJIRUZDUGEDVLV7KXVDQ\FDVKUHFHLYHGE\$UURZKHDG DIWHUWKHFORVLQJZRXOGEHORQJWRWKHEX\HU)LOWHU%RWK *RRGULFKDVVHUWVWKDWLWLVXQIDLUIRU)LOWHUWRJHWWKHEHQHILW $UURZKHDG DQG *RRGULFK ZHUH FRQVROLGDWHG DFFUXDO RIWKHLQFRPHIURP$UURZKHDGjVDFFRXQWVUHFHLYDEOHZKLOH *RRGULFKSD\VWKHWD[HVRQLW)LOWHUDUJXHVWKDWLWLVXQIDLUIRU )LOWHU WR SD\ *RRGULFK IRU WD[HV RQ $UURZKHDGjV DFFRXQWV UHFHLYDEOHZKHQ*RRGULFKDOVRJHWVWKHEHQHILWRIDWD[FUHGLW LQ L DV D UHVXOW RI EHLQJ D PHPEHU RI DQ DIILOLDWHG FRQVROLGDWHG FRPELQHG RU XQLWDU\ JURXS RU DV D UHVXOW RI DQ\ REOLJDWLRQV XQGHU DV D UHVXOW RI $UURZKHDGjV RWKHU H[SHQVHV *RRGULFK DQ\ DUUDQJHPHQWV RU DJUHHPHQWV ZLWK UHVSHFW WR DQ\ DPRXQWV RI UHVSRQGV WKDW LI LQFRPH IURP $UURZKHDGjV DFFRXQWV WKH W\SH GHVFULEHG LQ FODXVH L UHFHLYDEOH KDG QRW EHHQ UHFRJQL]HG *RRGULFK ZRXOG KDYH UHFRUGHGOHVVLQFRPHRQLWVFRQVROLGDWHGWD[UHWXUQDQGZRXOG 6HFWLRQ GHVFULEHV ,QGHPQLILFDWLRQ 6HFWLRQ E SURYLGHV IRU KDYH SDLG OHVV WD[HV ,Q RWKHU ZRUGV DV WKH VXEVLGLDU\jV 7D[ ,QGHPQLILFDWLRQ E\ 6HOOHU DQG VXEVHFWLRQ L VWDWHV LQFRPHIURPDFFRXQWVUHFHLYDEOHLQFUHDVHVWKHVXEVLGLDU\jV 6HOOHU KHUHE\ DJUHHV WR LQGHPQLI\ GHIHQG DQG KROG %X\HU QHWORVVHVGHFUHDVHWKHSDUHQWVjVWD[FUHGLWGHFUHDVHVDQGWKH KDUPOHVV DJDLQVW DQG DJUHHV WR KROG LW KDUPOHVV IURP DQ\ DQG DOO SDUHQWjVLQFRPHLQFUHDVHVLQFUHDVLQJWKHSDUHQWjVWD[OLDELOLW\ ,QFRPH 7D[HV RI $,: IRU DQ\ 3UH&ORVLQJ 7D[ 3HULRGV 7KHUHIRUH LI $UURZKHDG GLG QRW KDYH DQ\ LQFRPH IURP DFFRXQWVUHFHLYDEOH$UURZKHDGjVQHWORVVHVZRXOGKDYHEHHQ 6HFWLRQ LGHQWLILHV WKH 6HOOHUjV 5HWDLQHG /LDELOLWLHV DQG VXEVHFWLRQ D SURYLGHV WKDW *RRGULFK VKDOO UHWDLQ OLDELOLW\ IRU HYHQ JUHDWHU JHQHUDWLQJ DQ HYHQ JUHDWHU WD[ FUHGLW IRU *RRGULFK DQG UHGXFLQJ *RRGULFKjV QHW LQFRPH DQG ,QFRPH 7D[HV DV GHILQHG LQ 6HFWLRQ KHUHRI UHVXOWLQJ IURP FRUUHVSRQGLQJWD[HV WKH VDOH RI WKH &RPPRQ 6WRFN DQG WKH WUHDWPHQW RI WKH WUDQVDFWLRQ FRQWHPSODWHG LQ 6HFWLRQ KHUHXQGHU %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS WD[SD\HUV DW WKH WLPH RI WKH VDOH KRZHYHU $V D UHVXOW WKDW 6HFWLRQ J UHIHUV WR DFFUXHG LQFRPH mLQFOXGHG LQ *RRGULFKLQFOXGHGDQ\LQFRPHDFFUXHGE\$UURZKHDGSULRU 6HOOHUjVWD[DEOHLQFRPHl,QDGGLWLRQ*RRGULFKQRWHVWKDW WRFORVLQJLQ*RRGULFKjVFRQVROLGDWHGWD[UHWXUQVHYHQWKRXJK 6HFWLRQGHILQHVm,QFRPH7D[lWRLQFOXGHWD[OLDELOLW\RI *RRGULFK ZRXOG QHYHU UHFHLYH WKH FDVK SHUWDLQLQJ WR WKDW $UURZKHDGRU*RRGULFKmDVDUHVXOWRIEHLQJDPHPEHURIDQ DFFUXHG LQFRPH VLQFH LW ZRXOG EH UHFHLYHG E\ $UURZKHDG DIILOLDWHG FRQVROLGDWHG FRPELQHG RU XQLWDU\ JURXSl DIWHU)LOWHUjVSXUFKDVHRI$UURZKHDG7KHUHIRUH*RRGULFK 7KHUHIRUH *RRGULFK DUJXHV WKDW VLQFH $UURZKHDG DQG FODLPVLWLQFOXGHG6HFWLRQJLQWKH$JUHHPHQWEHFDXVH *RRGULFKILOHGDFRQVROLGDWHGLQFRPHWD[UHWXUQDQGVLQFHWKH DFFRUGLQJWR6KHUZRRGLWZDVmIDLUlWRDVN)LOWHUWRmSD\WKH UHIHUHQFHLQ6HFWLRQJZDVWRWKHDPRXQWWKDW*RRGULFK WD[HV WKDW FDPH DV D UHVXOW RI LQFRPH WKDW *RRGULFK KDG SDLGWKHUHOHYDQWQHWLQFRPHZDVQRWWKDWRI$UURZKHDGEXW DFFUXHGDVSDUWRILWVFRQVROLGDWHGWD[UHWXUQVEXWIRUZKLFK WKDWRI*RRGULFKDVDZKROH*RRGULFKQRWHGWKDWLWSUHVHQWHG LWKDGQRWUHFHLYHGFDVKl*RRGULFKLQFOXGHGWKHVHFWLRQLQ HYLGHQFHWKDWLWKDGQHWLQFRPHLQDQGSDLGWD[RQWKDW WKH$JUHHPHQWDIWHUVXFKDSURYLVLRQKDGEHHQSURSRVHGE\ LQFRPH WKHVHOOHULQDQRWKHUDJUHHPHQWLQZKLFK*RRGULFKZDVWKH EX\HU*RRGULFKDVVXPHGWKDW)LOWHUXQGHUVWRRG*RRGULFKjV *RRGULFK DOVR FRQWHQGV WKDW LW SUHVHQWHG HYLGHQFH WKDW LQWHUSUHWDWLRQ RI 6HFWLRQ J DQG DQWLFLSDWHG VRPH 6HFWLRQJRIWKH$JUHHPHQWZDVLQWHQWLRQDOO\GUDIWHGWR GLVFXVVLRQ RI WKH VHFWLRQ GXULQJ QHJRWLDWLRQV RU TXHVWLRQV FRYHU mLQFRPH DFFUXHGl UDWKHU WKDQ mLQFRPH OHVV DQ\ IURP)LOWHULI)LOWHUGLGQRWXQGHUVWDQGWKHSURYLVLRQ PDWFKLQJH[SHQVHVl*RRGULFKVWDWHVWKDWZKLOHLWZRXOGKDYH WR UHSRUW WKH LQFRPH UHODWLQJ WR $UURZKHDGjV DFFRXQWV 7KHWUDQVDFWLRQFORVHGRQ$SULO$IWHUFORVLQJDQ UHFHLYDEOH WKDW ZDV XQSDLG DV RI FORVLQJ $UURZKHDGj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jVWD[ ,QPLG*RRGULFKZDVLQWKHSURFHVVRIILQDOL]LQJLWV DGYLVRU WHVWLILHG WKDW LW ZDV LPSRVVLEOH WR mPDWFKl WD[UHWXUQVIRULQFOXGLQJWD[UHWXUQVIRU$UURZKHDGD $UURZKHDGjV DFFUXHG LQFRPH DJDLQVW DQ\ FRQFHLYDEO\ PHPEHURILWVFRQVROLGDWHGJURXSIRUWKHILUVWSDUWRI DVVRFLDWHGH[SHQVHVDQGWKDW)LOWHUZDVDZDUHRIWKHGLIILFXOW\ 2QsXO\6KHUZRRG*RRGULFKjV9LFH3UHVLGHQWRI RIPDWFKLQJ 7D[ $GPLQLVWUDWLRQ LQIRUPHG .HYLQ 6SHQFH )LOWHUjV 9LFH 3UHVLGHQWDQG&KLHI)LQDQFLDO2IILFHUWKDWLQDFFRUGDQFHZLWK )LOWHUQRWHVWKDW*RRGULFKjVSULQFLSDOQHJRWLDWRUWHVWLILHG 6HFWLRQ J RI WKH $JUHHPHQW )LOWHU ZDV mUHTXLUHG WR WKDW KH GLG QRW NQRZ LI *RRGULFK SDLG WD[ RQ $UURZKHDG FRPSHQVDWHl*RRGULFKIRUmDQ\,QFRPH7D[SDLGE\6HOOHU LQFRPH,QDGGLWLRQ)LOWHUDUJXHVWKDW*RRGULFKjVWD[UHFRUGV ZLWK UHVSHFW WR LQFRPH DFFUXHG DQG LQFOXGHG LQ 6HOOHUjV IDLOHGWRUHYHDODQ\HQWU\IRULQFRPHWD[SDLGRQ$UURZKHDG WD[DEOHLQFRPHEXWQRWSDLGWR6HOOHUSULRUWR&ORVLQJl7KH DFFRXQWVUHFHLYDEOH,QVWHDG)LOWHUDVVHUWVWKDW*RRGULFKjV OHWWHU HVWLPDWHG WKDW )LOWHU RZHG *RRGULFK PLOOLRQ RQ LQWHUQDOWD[UHFRUGVLQGLFDWHWKDWWKHUHZDVQRWD[DEOHLQFRPH DFFRXQWRIWD[RQmDFFUXHGEXWXQFROOHFWHGLQFRPHDW$SULO IURP$UURZKHDGEXWUDWKHUWKDW$UURZKHDGRSHUDWHGDWDORVV WKHDFFRXQWVUHFHLYDEOHl DQGJHQHUDWHGDWD[FUHGLWIRU*RRGULFK)LOWHUSRLQWVWRD VWDWHPHQW IURP *RRGULFKjV 'LUHFWRU RI ,QWHUQDWLRQDO DQG %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS 9 2Q 2FWREHU 6KHUZRRG VHQW D VHFRQG OHWWHU WR 6SHQFH7KLVWLPH*RRGULFKLQFOXGHGDQLQYRLFHUHSUHVHQWLQJ 7KH VHFRQG EDVLV XSRQ ZKLFK WKH GLVWULFW FRXUW JUDQWHG mWKH ELOOLQJ IRU WKH IHGHUDO DQG VWDWH LQFRPH WD[ SDLGl E\ )LOWHUjV PRWLRQ IRU VXPPDU\ MXGJPHQW ZDV WKDW *RRGULFK *RRGULFK *RRGULFK FODLPHG WKDW VXFK mLQFRPH DFFUXHGl SURGXFHGmQRHYLGHQFHlWKDWLWSDLGWKHFODLPHGPLOOLRQ DPRXQWHG WR URXJKO\ PLOOLRQ GROODUV LQ $UURZKHDG LQWD[HVRQ$UURZKHDGjVDFFRXQWVUHFHLYDEOHGXULQJWKHILUVW DFFRXQWV UHFHLYDEOH WKDW *RRGULFK LQFOXGHG LQ LWV JURVV TXDUWHU RI 5HYLHZLQJ WKH HYLGHQFH SUHVHQWHG ZH LQFRPH IURP UHVXOWLQJ LQ SD\PHQW RI LQ FRQFOXGH WKDW *RRGULFK GLG SUHVHQW VXIILFLHQW HYLGHQFH WR LQFRPHWD[ FUHDWHDJHQXLQHLVVXHRIPDWHULDOIDFWDVWRZKHWKHULWSDLGWKH FODLPHG PLOOLRQ LQ WD[HV RQ $UURZKHDGjV DFFRXQWV )LOWHU UHWXUQHG FRUUHVSRQGHQFH GHQ\LQJ WKDW LW RZHG DQ\ UHFHLYDEOH %HIRUH GLVFXVVLQJ RXU FRQFOXVLRQ LW LV ILUVW PRQH\ WR *RRGULFK SXUVXDQW WR 6HFWLRQ J RI WKH QHFHVVDU\IRUXVWRUHYLHZWKHGLVWULFWFRXUWjVILQGLQJVDQGWKH $JUHHPHQW)LOWHULQWHUSUHWV6HFWLRQJDVSHUWDLQLQJQRW HYLGHQFHSUHVHQWHGE\*RRGULFKDQG)LOWHUDVWRWKLVLVVXH WRDFFRXQWVUHFHLYDEOHEXWWRPRQH\WKDW$UURZKHDGRZHG *RRGULFKIRULQWHUFRPSDQ\VHUYLFHVUHQGHUHGSULRUWRFORVLQJ $ RIWKHVDOH7KHILUVWWLPH)LOWHURIIHUHGWKLVLQWHUSUHWDWLRQRI 6HFWLRQJZDVGXULQJ6SHQFHjVGHSRVLWLRQLQWKLVFDVH 7KHGLVWULFWFRXUWQRWHGWKDW*RRGULFKFODLPHGDQLQFRPH 7KHLQWHUSUHWDWLRQZDVQRWUDLVHGLQ)LOWHUjVOHWWHUVUHVSRQGLQJ WD[FUHGLWIRU$UURZKHDGjVORVVHVGXULQJWKHILUVWTXDUWHURI WR *RRGULFKjV FRUUHVSRQGHQFH RU LQ )LOWHUjV $QVZHU WR WKH 7KHFRXUWFRQFOXGHGIURPWKLVWKDW*RRGULFKGLGQRW &RPSODLQW DOO RI ZKLFK VWDWHG RWKHU UHDVRQV IRU )LOWHUjV SD\WD[HVRQ$UURZKHDGjVDFFRXQWVUHFHLYDEOH7KHGLVWULFW UHIXVDOWRSD\ FRXUWVWUHVVHGWKDWGXULQJWKHILUVWTXDUWHURI$UURZKHDG RSHUDWHG DW D ORVV RI RYHU PLOOLRQ DQG WKDW WKHUHIRUH 7KHWHUPmDFFRXQWVUHFHLYDEOHlLVQRWLQFOXGHGLQ6HFWLRQ $UURZKHDGKDGQRWD[DEOHRUQHWLQFRPHIRUWKHSUHFORVLQJ J DQG ZDV QHYHU XVHG E\ *RRGULFK DV D WHUP LQ WKH SHULRG GUDIWLQJRI6HFWLRQJ,QDGGLWLRQ6HFWLRQJGRHV QRWPHQWLRQ$UURZKHDG2WKHUVHFWLRQVRIWKH$JUHHPHQW *RRGULFK DUJXHV WKDW LW SUHVHQWHG H[WHQVLYH HYLGHQFH WR SODFHG WD[ REOLJDWLRQV RQ *RRGULFK LQ SDUWLFXODU 6HFWLRQ VXSSRUWLWVFODLPWKDWLWSDLGWD[HVRQ$UURZKHDGjVDFFRXQWV DDQG6HFWLRQE L*RRGULFKjV6KHUZRRGDVVHUWHG UHFHLYDEOH *RRGULFK QRWHV WKDW LW SUHVHQWHG DQ LQYRLFH WR WKDW 6HFWLRQ J ZDV D mFDUYH RXWl IURP *RRGULFKjV )LOWHUGHWDLOLQJWKHEDVLVIRULWVFODLPDQGWKDW*RRGULFKjVWD[ UHWHQWLRQRIDOOWD[OLDELOLWLHVEXW)LOWHUQRWHVWKDWQRmFDUYH DGYLVRU SUHVHQWHG WHVWLPRQ\ WKDW WKH LQYRLFH ZDV mHQWLUHO\ RXWlODQJXDJHZDVXVHGLQ6HFWLRQJRULQDQ\RIWKH DFFXUDWHl )XUWKHUPRUH *RRGULFK DUJXHV WKDW )LOWHUjV RWKHUUHOHYDQWVHFWLRQVFRQFHUQLQJWD[OLDELOLWLHV UHVSRQVHWRWKHLQYRLFHZDVQRWWRTXHVWLRQWKHDPRXQWRZHG EXW WR FRQWHVW ZKHWKHU 6HFWLRQ J DSSOLHG WR DFFRXQWV )LOWHUPDLQWDLQVWKDW*RRGULFKjVRZQUHFRUGVVKRZHGWKDW UHFHLYDEOH,QDGGLWLRQ*RRGULFKDUJXHVWKDW)LOWHUVXEPLWWHG $UURZKHDGKDGRSHUDWHGDWDORVVDQGJHQHUDWHGQRWD[DEOH QR HYLGHQFH FRQWUDGLFWLQJ *RRGULFKjV FDOFXODWLRQ RQ LWV LQFRPH EXW QHYHUWKHOHVV *RRGULFK GHPDQGHG DQ DPRXQW PRWLRQIRUVXPPDU\MXGJPHQW HTXDOWRURXJKO\RQHILIWKRI*RRGULFKjVHQWLUHFRUSRUDWHWD[ SD\PHQWFODLPLQJWKDWLWSDLGWKLVDPRXQWDVLQFRPHWD[HV 1H[W*RRGULFKDVVHUWVWKDWWKHGLVWULFWFRXUWjVFRQFOXVLRQ VROHO\RQWKHDFFRXQWVUHFHLYDEOHLQFRPHIURP$UURZKHDG WKDW$UURZKHDGKDGQRmQHWLQFRPHlLQWKHILUVWTXDUWHURI GRHVQRWDIIHFW*RRGULFKjVDUJXPHQW*RRGULFKQRWHV %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS ,, SD\ WKH WD[HV RQ WKLV LQFRPH 7KLV VHHPLQJ LQFRQJUXLW\ VXSSRUWV*RRGULFKjVDUJXPHQWWKDWWKHLQWHQWRIWKHSDUWLHV *RRGULFK ILOHG LWV FRPSODLQW RQ 'HFHPEHU 2Q ZDVWRSODFHWKHWD[OLDELOLW\RQWKHSDUW\UHFHLYLQJWKHLQFRPH )HEUXDU\ D &DVH 0DQDJHPHQW 3ODQ ZDV HQWHUHG IURPWKHDFFRXQWVUHFHLYDEOH,QDGGLWLRQ *RRGULFKQRWHV SODFLQJWKHFDVHRQDQH[SHGLWHGWUDFNZLWKGLVFRYHU\WREH WKDW ZKHQ LW ZDV IDFHG ZLWK D VLPLODU SURYLVLRQ LQ DQRWKHU FRPSOHWHGE\0D\&RXQVHOZHUHGLUHFWHGWRFRQIHU WUDQVDFWLRQLWVWD[DGYLVRUVLPPHGLDWHO\UHFRJQL]HGWKDWWKH DQGSUHSDUHmZULWWHQVWLSXODWLRQVlDVWRmXQFRQWHVWHGIDFWVlWR SURYLVLRQDGGUHVVHGWD[HVRQUHFHLYDEOHV)LQDOO\*RRGULFK EHFRQVLGHUHGRQFURVVPRWLRQVIRUVXPPDU\MXGJPHQW,IWKH QRWHVWKDW)LOWHULVDODUJHDQGVRSKLVWLFDWHGFRUSRUDWLRQZLWK FDVH FRXOG QRW EH EURXJKW WR D mSURPSW FRQFOXVLRQl RQ H[SHULHQFHLQVLPLODUWUDQVDFWLRQVWKDWLWFRQGXFWHGH[WHQVLYH VXPPDU\MXGJPHQWDWULDOZDVWREHFRQGXFWHG GXHGLOLJHQFHRQWKLVWUDQVDFWLRQLQFOXGLQJGXHGLOLJHQFHRQ WKH WD[ DQG UHFHLYDEOHV LVVXHV DQG WKDW LW ZDV DFWLYHO\ 7KHSDUWLHVVXEPLWWHGDVL[W\ILYHSDJHmsRLQW6WDWHPHQWRI LQYROYHGLQWKHGUDIWLQJSURFHVV 8QGLVSXWHG 0DWHULDO )DFWVl WKH msRLQW 6WDWHPHQWl 7KH sRLQW6WDWHPHQWZDVGLYLGHGLQWRWZRSDUWVRQHKLJKOLJKWLQJ $WWKHVDPHWLPHKRZHYHU)LOWHUjVHYLGHQFHLQGLFDWHVWKDW IDFWV LQ )LOWHUjV IDYRU DQG WKH RWKHU KLJKOLJKWLQJ IDFWV LQ 6HFWLRQJZDVQHYHUGLVFXVVHGEHWZHHQWKHSDUWLHVGXULQJ *RRGULFKjVIDYRU7KHSDUWLHVVWDWHGWKDWWKH\KDGmGLIIHUHQW QHJRWLDWLRQRIWKH$JUHHPHQWRULWVVXEVHTXHQWDPHQGPHQWV YLHZVDVWRZKLFKXQGLVSXWHGIDFWVDUHPDWHULDOl,QDGGLWLRQ 7KHUHLVQRHYLGHQFHRI)LOWHUjVLQWHQWDVWRWKHPHDQLQJRI WKHSDUWLHVSODQQHGIRUWKHSRVVLELOLW\WKDWVXPPDU\MXGJPHQW 6HFWLRQ J GXULQJ WKH FRXUVH RI QHJRWLDWLRQV )LOWHU PLJKW EH GHQLHG QRWLQJ WKDW VXSSOHPHQWDWLRQ RI WKH sRLQW SUHVHQWV HYLGHQFH WKDW LW KDG D GLIIHUHQW LQWHUSUHWDWLRQ RI 6WDWHPHQWPLJKWEHUHTXLUHGmIRUSXUSRVHVRIWULDOl2QWKH 6HFWLRQ J WKDQ WKDW RIIHUHG E\ *RRGULFK 7KLV EDVLVRIWKH sRLQW6WDWHPHQWERWKSDUWLHVILOHGPRWLRQVIRU LQWHUSUHWDWLRQZDVQHYHUUDLVHGWR*RRGULFKGXULQJWKHFRXUVH VXPPDU\MXGJPHQW2QsDQXDU\WKHGLVWULFWFRXUW RI QHJRWLDWLRQV KRZHYHU EXW RQO\ UDLVHG DIWHU *RRGULFK SHUPLWWHGERWKSDUWLHVWRVXSSOHPHQWWKHUHFRUG2Q$SULO UHTXHVWHGUHLPEXUVHPHQWIRUSD\PHQWRILQFRPHWD[HVUHODWHG WKH SDUWLHV FRQGXFWHG WKH GHSRVLWLRQ RI *HRUJH . WR$UURZKHDGjVDFFRXQWVUHFHLYDEOH 6KHUZRRG*RRGULFKjV9LFH3UHVLGHQWRI7D[$GPLQLVWUDWLRQ DQGILOHGVXSSOHPHQWDOPHPRUDQGDLQVXSSRUWRIWKHLUFURVV 1HLWKHUSDUW\SUHVHQWVVXIILFLHQWH[WULQVLFHYLGHQFHRILQWHQW PRWLRQVIRUVXPPDU\MXGJPHQW2Q6HSWHPEHUWKH WR VXSSRUW WKH SURSRVLWLRQ WKDW LWV LQWHUSUHWDWLRQ RI WKH GLVWULFWFRXUWJUDQWHG)LOWHUjVPRWLRQIRUVXPPDU\MXGJPHQW $JUHHPHQWVKRXOGEHDGRSWHGDVDPDWWHURIODZDWVXPPDU\ DQGGHQLHG*RRGULFKjVFURVVPRWLRQ MXGJPHQW%RWKSDUWLHVSUHVHQWVXIILFLHQWHYLGHQFHWRFUHDWH JHQXLQH LVVXHV RI PDWHULDO IDFW UHJDUGLQJ WKH SDUWLHVj ,QJUDQWLQJ)LOWHUjVVXPPDU\MXGJPHQWPRWLRQWKHGLVWULFW LQWHUSUHWDWLRQRI6HFWLRQJDQGWKHLULQWHQWLQLQFOXGLQJ FRXUWUHOLHGRQWZRLQGHSHQGHQWEDVHVIRULWVGHFLVLRQ)LUVW 6HFWLRQJLQWKH$JUHHPHQW WKH FRXUW IRXQG WKDW DV D PDWWHU RI FRQWUDFW LQWHUSUHWDWLRQ 6HFWLRQJFRXOGQRWKDYHWKHPHDQLQJXUJHGE\*RRGULFK 7KLVLVRQHRIWKRVHUDUHFDVHVZKHUHHYHQLQOLJKWRIFURVV ZKHQFRQVLGHUHGLQWKHFRQWH[WRIWKHFRQWUDFWDVDZKROH PRWLRQV IRU VXPPDU\ MXGJPHQW DQG D sRLQW 6WDWHPHQW RI 6SHFLILFDOO\ WKH FRXUW QRWHG WKDW *RRGULFK UHWDLQV DOO SUH 8QGLVSXWHG 0DWHULDO )DFWV JHQXLQH LVVXHV RI PDWHULDO IDFW FORVLQJWD[OLDELOLW\XQGHU6HFWLRQERIWKH$JUHHPHQW UHPDLQ ERWK PRWLRQV IRU VXPPDU\ MXGJPHQW VKRXOG EH DQGWKDW6HFWLRQJGRHVQRWUHIHUWRDFFRXQWVUHFHLYDEOH GHQLHGDQGWKHFDVHVKRXOGSURFHHGWRWULDO6HH7DIW%URDG DQGGRHVQRWXVHmFDUYHRXWlODQJXDJH7KHFRXUWDOVRQRWHG &R)GDW %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS & WKDWmFDUYHRXWlODQJXDJHZDVXVHGLQRWKHUSRUWLRQVRIWKH $JUHHPHQW6HFRQGWKHFRXUWIRXQGWKDW*RRGULFKGLGQRW 6LQFHWKHODQJXDJHRI6HFWLRQJLVDPELJXRXVZKHQ RIIHUSURRIWKDWLWDFWXDOO\SDLGLQFRPHWD[HVRQ$UURZKHDGjV FRQVLGHUHGE\LWVHOIDQGLQWHUPVRIWKH$JUHHPHQWDVDZKROH DFFRXQWVUHFHLYDEOH7KHGLVWULFWFRXUWIRXQGWKDW$UURZKHDG ZH PXVW H[DPLQH UHOHYDQW H[WULQVLF HYLGHQFH LQ RUGHU WR RSHUDWHGDWDORVVGXULQJWKHILUVWTXDUWHURIWKDWLWKDG DVFHUWDLQWKHSDUWLHVjLQWHQW6HH6SDFH,PDJLQJ)6XSS QRWD[DEOHRUQHWLQFRPHGXULQJWKHSUHFORVLQJSHULRGDQG GDW2QDVXPPDU\MXGJPHQWPRWLRQDFRXUWLVWRGUDZ WKDW$UURZKHDGjVORVVUHVXOWHGLQDWD[FUHGLWIRU*RRGULFK DOOUHDVRQDEOHLQIHUHQFHVRQIDFWXDOLVVXHVLQIDYRURIWKHQRQ PRYDQW 6HH 1DWLRQDO (QWHUSULVHV )G DW ,,, $OWKRXJK WKH SDUWLHV ILOHG FURVVPRWLRQV IRU VXPPDU\ MXGJPHQW RQ DSSHDO ZH DUH H[DPLQLQJ RQO\ WKH GLVWULFW $ FRXUWjV GHFLVLRQ JUDQWLQJ )LOWHUjV PRWLRQ IRU VXPPDU\ MXGJPHQW7KHUHIRUHZHPXVWGUDZDOOUHDVRQDEOHLQIHUHQFHV 7KLV FRXUW UHYLHZV D GLVWULFW FRXUWj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mWKH SOHDGLQJV GHSRVLWLRQV DQVZHUV WR LQWHUURJDWRULHV DQG ,Q WKH IDFH RI FURVVPRWLRQV IRU VXPPDU\ MXGJPHQW WKH DGPLVVLRQVRQILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\VKRZ H[WULQVLF HYLGHQFH LQ WKLV FDVH FUHDWHV JHQXLQH LVVXHV RI WKDWWKHUHLVQRJHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQGWKDW PDWHULDO IDFW DQG GRHV QRW SHUPLW LQWHUSUHWDWLRQ RI WKH WKHPRYLQJSDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZl DJUHHPHQWDV D PDWWHURIODZ%RWKSDUWLHVKDYHSURYLGHG )(' 5 &,9 3 F ,Q GHFLGLQJ D PRWLRQ IRU VXPPDU\ H[WULQVLFHYLGHQFHVXSSRUWLQJWKHLULQWHUSUHWDWLRQRI6HFWLRQ MXGJPHQWWKLVFRXUWYLHZVWKHIDFWXDOHYLGHQFHDQGGUDZVDOO J*RRGULFKRIIHUVDQDUUD\RIHYLGHQFHWRVXSSRUWLWV UHDVRQDEOHLQIHUHQFHVLQIDYRURIWKHQRQPRYLQJSDUW\6HH FRQWHQWLRQ WKDW )LOWHU NQHZ RU VKRXOG KDYH NQRZQ RI 1DWLRQDO(QWHUSULVHV)GDW7RSUHYDLOWKHQRQ *RRGULFKjVLQWHUSUHWDWLRQRI6HFWLRQJRIWKH$JUHHPHQW PRYDQW PXVW VKRZ VXIILFLHQW HYLGHQFH WR FUHDWH D JHQXLQH *RRGULFKjVFKLHIQHJRWLDWRUDQGFKLHIWD[DGYLVRUWHVWLILHGWKDW LVVXHRIPDWHULDOIDFW6HH.OHSSHUY)LUVW$P%DQN 6HFWLRQJZDVLQWHQGHGWRGHDOSULQFLSDOO\ZLWKDFFUXHG )G WK &LU FLWLQJ &HORWH[ &RUS Y EXWXQSDLGUHFHLYDEOHV*RRGULFKDOVRSUHVHQWHGHYLGHQFH &DWUHWW 86 $ PHUH VFLQWLOOD RI WKDW$UURZKHDGjVUHFHLYDEOHVZHUHDQLPSRUWDQWSDUWRIWKH HYLGHQFHLVLQVXIILFLHQWmWKHUHPXVWEHHYLGHQFHRQZKLFKWKH $JUHHPHQW 7KH 2IIHULQJ 0HPRUDQGXP IRU WKH VDOH MXU\FRXOGUHDVRQDEO\ILQGIRUWKH>QRQPRYDQW@l,GDW GLVFORVHG WKDW $UURZKHDG KDG PLOOLRQ LQ UHFHLYDEOHV TXRWLQJ$QGHUVRQY/LEHUW\/REE\,QF86 RXWVWDQGLQJDWWKHWLPHRIQHJRWLDWLRQV,I6HFWLRQJZDV QRW LQWHQGHG WR GHDO ZLWK WKHVH DFFRXQWV UHFHLYDEOH WKHQ $UURZKHDGZRXOGSURYLGHJRRGVRUVHUYLFHVZKLOHRZQHGE\ % *RRGULFK)LOWHUZRXOGUHFHLYHWKHLQFRPHIRUWKHVHJRRGVRU VHUYLFHVDIWHUDFTXLULQJ$UURZKHDGDQG*RRGULFKZRXOGVWLOO 7KH VWDQGDUG RI UHYLHZ SRVHV XQLTXH LVVXHV LQ WKLV FDVH EHFDXVH WKH SDUWLHV ILOHG FURVVPRWLRQV IRU VXPPDU\ %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS MXGJPHQW*RRGULFKDUJXHVWKDWWKHGLVWULFWFRXUWPLVDSSOLHG 6HFWLRQJLVQRWDVXIILFLHQWEDVLVIRUUXOLQJLQIDYRURI WKHVXPPDU\MXGJPHQWVWDQGDUGLQJUDQWLQJ)LOWHUjVPRWLRQ )LOWHU 7KH ODFN RI VXFK ODQJXDJH RQO\ VXSSRUWV WKH IRUVXPPDU\MXGJPHQW%HIRUHDGGUHVVLQJWKHPHULWVRIWKH FRQFOXVLRQWKDW6HFWLRQJLVDPELJXRXV FDVH ZH ZLOO GLVFXVV WKH LVVXHV SUHVHQWHG E\ *RRGULFK UHJDUGLQJ WKH GLVWULFW FRXUWjV DSSOLFDWLRQ RI WKH VXPPDU\ )LQDOO\ WKH GLVWULFW FRXUW UHOLHG RQ WKH GRFWULQH RI MXGJPHQW VWDQGDUG 7KHVH LVVXHV VKHG OLJKW RQ WKH SURSHU FRQWUDFWXDO LQWHUSUHWDWLRQ WKDW ZKHQ FKRRVLQJ EHWZHHQ WZR DQDO\VLVDFRXUWVKRXOGDSSO\ZKHQIDFHGZLWKFURVVPRWLRQV SODXVLEOH LQWHUSUHWDWLRQV RI D FRQWUDFW LW LV SUHIHUDEOH WR IRUVXPPDU\MXGJPHQWLQDFDVHUHODWLQJWRDFRQWUDFWGLVSXWH FKRRVH WKH PHDQLQJ WKDW mRSHUDWHV DJDLQVW WKH SDUW\ ZKR VXSSOLHV WKH ZRUGVl 5(67$7(0(17 6(&21' 2) 2QDSSHDO*RRGULFKVXEPLWVRQO\WKDWLWZDVLPSURSHUIRU &2175$&767KHFRXUWVWDWHGWKDW*RRGULFKDV WKHGLVWULFWFRXUWWRJUDQW)LOWHUjVPRWLRQQRWWKDWWKHGLVWULFW GUDIWHURIWKHVHFWLRQFRXOGKDYHDYRLGHGDQ\SUREOHPVLQ FRXUW VKRXOG KDYH JUDQWHG *RRGULFKjV FURVVPRWLRQ LQWHUSUHWLQJWKHFRQWUDFWE\LQVHUWLQJVSHFLILFODQJXDJHWRJLYH *RRGULFKDUJXHVWKDWWKHGLVWULFWFRXUWjVGHFLVLRQVKRXOGEH JUHDWHUFODULW\WRWKHVHFWLRQ7KH5(67$7(0(17 6(&21' UHYHUVHGDQGWKDWWKHGLVSXWHVKRXOGEHVXEPLWWHGWRDMXU\RQ 2) &2175$&76VWDWHVKRZHYHUWKDWWKHFRQWUDSURIHUHQWHP WKHEDVLVWKDWWKHUHDUHJHQXLQHLVVXHVRIPDWHULDOIDFW UXOHVKRXOGEHDSSOLHGRQO\mVRORQJDVRWKHUIDFWRUVlUHOHYDQW WRLQWHUSUHWDWLRQDUHmQRWGHFLVLYH>@lFPWD :H KDYH KHOG WKDW m>W@KH IDFW WKDW ERWK SDUWLHV PDNH 8QGHU1HZ JHQHUDOSURYLVLRQDQGDVSHFLILFSURYLVLRQRIDFRQWUDFWWKH *RRGULFKDUJXHVWKDWWKHGLVWULFWFRXUWLPSURSHUO\ZHLJKHG VSHFLILFSURYLVLRQFRQWUROVl WKHLQWHUSUHWDWLRQVRIWKH$JUHHPHQWRIIHUHGE\*RRGULFKDQG )LOWHUDQGFKRVHRQHRYHUWKHRWKHUUDWKHUWKDQDSSO\LQJWKH 6HFRQGWKHGLVWULFWFRXUWVWDWHGWKDWm>D@OWKRXJK*RRGULFKjV VXPPDU\ MXGJPHQW VWDQGDUG WR HDFK LQWHUSUHWDWLRQ WR LQWHUSUHWDWLRQRI6HFWLRQJLVSODXVLEOHWKHFODXVHLWVHOI GHWHUPLQHLIXQGHUHLWKHULQWHUSUHWDWLRQQRJHQXLQHLVVXHVRI LV YDJXH DQG XQFOHDUl 7KH FRXUW QRWHG WKDW WKH PDWHULDOIDFWH[LVWHG6SHFLILFDOO\*RRGULFKWDNHVLVVXHZLWK $JUHHPHQWGRHVQRWGHILQHmLQFRPHDFFUXHGlQRWKLQJLQ WKHGLVWULFWFRXUWjVVWDWHPHQWVWKDWm*RRGULFKDQG)LOWHUDJUHH WKH $JUHHPHQW ZRXOG KDYH QRWLILHG )LOWHU WKDW mLQFRPH WKDWVXPPDU\MXGJPHQWLVDSSURSULDWHlDQGm*RRGULFKKDVQjW DFFUXHGLQFOXGHGDFFRXQWVUHFHLYDEOHlDQG6HFWLRQJ FDUULHG LWV EXUGHQ RI SURYLQJ WKHLU LQWHUSUHWDWLRQl RI WKH PDNHV QR UHIHUHQFH WR DFFRXQWV UHFHLYDEOH RI $UURZKHDG $JUHHPHQW:HZLOODGGUHVV*RRGULFKjVDUJXPHQWVUHJDUGLQJ 7KHVH DUJXPHQWV RQO\ VXSSRUW WKH FRQFOXVLRQ WKDW 6HFWLRQ HDFKRIWKHVHVWDWHPHQWVLQWXUQ J LV DPELJXRXV DQG PD\ OHQG LWVHOI WR RQH RU PRUH PHDQLQJIRUZKLFKH[WHUQDOHYLGHQFHDVWRWKHSDUWLHVjLQWHQW PD\ DSSURSULDWHO\ EH FRQVLGHUHG 7KH DUJXPHQWV GR QRW VXSSRUWWKHSURSRVLWLRQWKDW)LOWHUVKRXOGSUHYDLODVDPDWWHU :LWK UHJDUG WR WKH ILUVW LVVXH *RRGULFK FRQWHQGV WKDW RIODZ$OOLQIHUHQFHVPXVWEHGUDZQLQ*RRGULFKjVIDYRU FRQWUDU\WRWKHGLVWULFWFRXUWjVVWDWHPHQWLWGLGQRWDJUHHWKDW ZKHQFRQVLGHULQJ)LOWHUjVVXPPDU\MXGJPHQWPRWLRQ7KH VXPPDU\MXGJPHQWZDVQHFHVVDULO\mDSSURSULDWHl*RRGULFK IDFW WKDW *RRGULFKjV LQWHUSUHWDWLRQ RI 6HFWLRQ J LV QRWHVWKDWWKHsRLQW6WDWHPHQWRI8QGLVSXWHG0DWHULDO)DFWV SODXVLEOHVXSSRUWV*RRGULFKjVDUJXPHQWWKDWWKHFODXVHUHODWHV UHFRJQL]HGWKDWWKHSDUWLHVGLVDJUHHGDVWRZKDWXQGLVSXWHG WR )LOWHU UHLPEXUVLQJ *RRGULFK IRU *RRGULFKjV WD[ OLDELOLW\ IDFWVZHUHPDWHULDODQGLQGLFDWHGWKDWDWULDOPLJKWEHUHTXLUHG UHODWLQJ WR $UURZKHDGjV DFFRXQWV UHFHLYDEOH :KHQ DOO WRUHVROYHWKHFDVH)LOWHUSRLQWVRXWKRZHYHUWKDWWKHUHZHUH LQIHUHQFHV DUH GUDZQ LQ *RRGULFKjV IDYRU WKH IDFWV UHOLHG QRmIDFWVlLQGLVSXWHDQGWKDWDOOWKHIDFWVZHUHmXQGLVSXWHGl XSRQE\WKHGLVWULFWFRXUWZHUHQRWVXIILFLHQWIRUWKHGLVWULFW E\VWLSXODWLRQ)LOWHUDUJXHVWKDWJHQXLQHLVVXHVRIPDWHULDO FRXUWWRKDYHIRXQGLQIDYRURI)LOWHUDWVXPPDU\MXGJPHQW IDFWFDQQRWEHFUHDWHGVLPSO\RQWKHEDVLVWKDWWKHSDUWLHVPD\ GLVDJUHHDVWRZKLFKXQGLVSXWHGIDFWVDUHPDWHULDO 7KLUGWKHGLVWULFWFRXUWVWDWHGWKDWWKHSDUWLHVFRXOGKDYH LQFOXGHGmFDUYHRXWlODQJXDJHWKDWLVXVHGLQRWKHUSRUWLRQV *RRGULFKjV DUJXPHQWV DUH PRUH SHUVXDVLYH ,W ZDV QRW RIWKH$JUHHPHQW*RRGULFKDUJXHVKRZHYHUWKDW6HFWLRQV QHFHVVDU\IRUWKHGLVWULFWFRXUWWRUHVROYHWKHFDVHDWVXPPDU\ JDQGEDUHSK\VLFDOO\DQGORJLFDOO\VHSDUDWHGVR MXGJPHQWVROHO\EHFDXVHWKHSDUWLHVILOHGFURVVPRWLRQVIRU WKHUHZDVQRQHHGWRLQFOXGHODQJXDJHFDUYLQJRXW6HFWLRQ VXPPDU\ MXGJPHQW DQG SUHVHQWHG D sRLQW 6WDWHPHQW RI JIURP6HFWLRQE)LOWHUFLWHVRWKHUVHFWLRQVWKDW 8QGLVSXWHG0DWHULDO)DFWV:KHQSDUWLHVILOHFURVVPRWLRQV XVHFDUYHRXWODQJXDJHVXJJHVWLQJWKDW*RRGULFKVKRXOGKDYH IRU VXPPDU\ MXGJPHQW mWKH PDNLQJ RI VXFK LQKHUHQWO\ XVHGVXFKODQJXDJHLQ6HFWLRQJ*RRGULFKUHVSRQGVWKDW FRQWUDGLFWRU\FODLPVGRHVQRWFRQVWLWXWHDQDJUHHPHQWWKDWLI WKHVHFWLRQVFLWHGE\)LOWHUDUHOLQNHGE\SUR[LPLW\DQGWRSLF RQH LV UHMHFWHG WKH RWKHU LV QHFHVVDULO\ MXVWLILHG RU WKDW WKH WRRWKHUVHFWLRQVPDNLQJFDUYHRXWODQJXDJHDSSURSULDWHLQ ORVLQJSDUW\ZDLYHVMXGLFLDOFRQVLGHUDWLRQDQGGHWHUPLQDWLRQ WKRVHFDVHV,QDGGLWLRQ*RRGULFKQRWHVWKDWWKHUHDUHRWKHU ZKHWKHUJHQXLQHLVVXHVRIPDWHULDOIDFWH[LVWl$&+$5/(6 SRUWLRQV RI WKH $JUHHPHQW LQ ZKLFK WKH SDUWLHV GR QRW XVH $/$1 :5,*+7 (7 $/)('(5$/ 35$&7,&( $1' 352&('85( FDUYHRXWODQJXDJHZKHQWKH\FRQFHLYDEO\FRXOGRUVKRXOG G HG $ WULDO FRXUW PD\ FRQFOXGH ZKHQ KDYHXVHGVXFKODQJXDJH7KHODFNRIFDUYHRXWODQJXDJHLQ UHYLHZLQJWKHXQGLVSXWHGPDWHULDOIDFWVDJUHHGXSRQE\WKH %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS SDUWLHVDQGGUDZLQJDOOLQIHUHQFHVLQWXUQIRUWKHQRQPRYLQJ UHLPEXUVH*RRGULFKIRU*RRGULFKjVSUHFORVLQJWD[OLDELOLW\ SDUW\WKDWDJHQXLQHLVVXHH[LVWVDVWRWKRVHPDWHULDOIDFWVLQ RQDFFUXHGLQFRPHVXFKDVDFFRXQWVUHFHLYDEOHWKDWZRXOG ZKLFKFDVHWKHFRXUWLVQRWSHUPLWWHGWRUHVROYHWKHPDWWHUEXW QRWEHUHFHLYHGE\$UURZKHDGXQWLODIWHUFORVLQJ7KHFRXUW UDWKHU PXVW DOORZ WKH FDVH WR SURFHHG WR WULDO 6HH ,7&2 GHWHUPLQHGWKDWZKLOH6HFWLRQJPD\EHDPELJXRXVZKHQ &RUSY0LFKHOLQ7LUH&RUS&RPPHUFLDO'LY)G FRQVLGHUHGRQLWVRZQLWLVQRWDPELJXRXVZKHQFRQVLGHUHG QWK&LU7KHGLVWULFWFRXUWLQWKLVFDVHFRXOG LQOLJKWRIWKHHQWLUHDJUHHPHQW7KHGLVWULFWFRXUWjVUHDVRQLQJ KDYHUXOHGDVLWGLGWKDWRQHSDUW\VXIILFLHQWO\GHPRQVWUDWHG LVIDXOW\RQDQXPEHURIJURXQGV WKDWQRJHQXLQHLVVXHRIPDWHULDOIDFWH[LVWHG7KHFRXUWDOVR FRXOGKDYHUXOHGKRZHYHUWKDWQHLWKHUSDUW\PHWLWVEXUGHQ )LUVW WKH GLVWULFW FRXUW QRWHG WKDW XQGHU 1HZ RI FRQWUDFWXDO LQWHUSUHWDWLRQ 7KLUG ZH ZLOO H[DPLQH WKH HYLGHQFHSUHVHQWHGE\WKHSDUWLHVDVWRFRQWUDFWXDOLQWHQW *RRGULFKjVVHFRQGDUJXPHQWLVEDVHGRQWKHGLVWULFWFRXUWjV $ VWDWHPHQWWKDWm*RRGULFKKDVQjWFDUULHGLWVEXUGHQRISURYLQJ WKHLULQWHUSUHWDWLRQRIWKHVWDWHPHQWl*RRGULFKFKDUDFWHUL]HV ,Q6SDFH,PDJLQJ(XURSH/WGY6SDFH,PDJLQJ/3 WKLVFDVHDVUHODWLQJWRDGLVSXWHUHJDUGLQJFRQWUDFWXDOLQWHQW ) 6XSS G 6'1< WKH FRXUW RXWOLQHG WKH 7KH GLVWULFW FRXUWjV VWDWHPHQW DQG )LOWHUjV DUJXPHQWV RQ SURSHUDQDO\VLVIRUDFRQWUDFWGLVSXWHXQGHU1HZ % LV QRW D GLVSRVLWLRQ E\ VXPPDU\ MXGJPHQWl ,ELG 7KH WULDO FRXUW LQ WKLV FDVH GLG QRW VWDWH WKDW LW ZDV DFWLQJ LQ VXFK D PDQQHU QRU ZRXOG LW KDYH 7KH GLVWULFW FRXUW JUDQWHG )LOWHUjV PRWLRQ IRU VXPPDU\ EHHQ DSSURSULDWH VLQFH LW ZDV FOHDU WKDW WKH SDUWLHV EHOLHYHG WKDW FRXOG KDYH PRUH WR RIIHU VLQFH WKH\ H[SUHVVO\ VWDWHG LQ WKHLU sRLQW 6WDWHPHQW RI MXGJPHQW RQ WKH EDVLV WKDW *RRGULFK FRXOG QRW VXSSRUW LWV 8QGLVSXWHG 0DWHULDO )DFWV WKDW WKH\ ZHUH SUHSDUHG WR VXSSOHPHQW WKH LQWHUSUHWDWLRQ RI 6HFWLRQ J DV UHTXLULQJ )LOWHU WR sRLQW 6WDWHPHQW LI QHFHVVDU\ LI WKH FDVH SURFHHGHG WR WULDO %)*RRGULFKY8QLWHG 1R 1R %)*RRGULFKY8QLWHG 6WDWHV)LOWHU&RUS 6WDWHV)LOWHU&RUS HYLGHQFHZDVSUHVHQWHGGHPRQVWUDWLQJWKHGLIIHUHQFHLQWKH FRUUHFWO\ SRLQWV RXW WKDW GLVSXWHG LVVXHV RI FRQWUDFWXDO FRQWUDFWXDO LQWHQW RI WKH SDUWLHV 7KLV FRXUW KDV KHOG WKDW LQWHUSUHWDWLRQFDQEHUHVROYHGDWVXPPDU\MXGJPHQWRQWKH ZKHQ WKH mSUREDWLYH ZHLJKW DQG HIIHFWl RI WHVWLPRQ\ DQG EDVLVWKDWWKH\DUHTXHVWLRQVRIODZ:HPXVWGHWHUPLQHWKHQ GRFXPHQWDU\HYLGHQFHFRQFHUQLQJWKHLQWHQWRIWKHSDUWLHVLV DVZHFRQVLGHUWKHPHULWVRIWKLVFDVHZKHWKHUWKHSDUWLHVj DW LVVXH WKH FDVH LV mXQVXLWDEOH IRU VXPPDU\ MXGJPHQWl GLVSXWHRYHU6HFWLRQJRIWKH$JUHHPHQWLVDQLVVXHRI 7HUU\ %DUU 6DOHV )G DW *RRGULFK DUJXHV WKDW FRQWUDFWXDOLQWHQWRUDQLVVXHRIFRQWUDFWXDOLQWHUSUHWDWLRQ LQVWHDGRIGHFODULQJWKHFDVHXQVXLWHGIRUVXPPDU\MXGJPHQW WKHGLVWULFWFRXUWLPSURSHUO\ZHLJKHGWKHHYLGHQFHDQGPDGH ,9 FUHGLELOLW\ GHWHUPLQDWLRQV E\ UXOLQJ WKDW *RRGULFK GLG QRW mFDUU>\@ LWV EXUGHQl DQG WKDW *RRGULFKjV LQWHUSUHWDWLRQ RI 7KH ILUVW EDVLV XSRQ ZKLFK WKH GLVWULFW FRXUW UHVWHG LWV 6HFWLRQ J ZDV mVWUDLQHG DQG WHQXRXVl 6HH ,QJUDP Y MXGJPHQWIRU)LOWHUZDVWKHSDUWLHVjLQWHUSUHWDWLRQRI6HFWLRQ &LW\ RI &ROXPEXV )G WK &LU J RI WKH $JUHHPHQW $OWKRXJK WKH FRXUW VWDWHG WKDW UHYHUVLQJVXPPDU\MXGJPHQWRUGHULQIDYRURIGHIHQGDQWVLQ 6HFWLRQJLVmXQFOHDUDQGDPELJXRXVlWKHGLVWULFWFRXUW VXLWDQGKROGLQJWKDWZKHUHWKHUHLVHYLGHQFHIDYRULQJ UXOHG WKDW WKH LVVXH ZDV RQH RI FRQWUDFWXDO LQWHUSUHWDWLRQ ERWKVLGHVmQHLWKHUWKHGLVWULFWFRXUWQRUWKLV&RXUWPD\PDNH LQVWHDG RI LQWHQW DQG WKDW )LOWHU VKRXOG SUHYDLO EHFDXVH FUHGLELOLW\GHWHUPLQDWLRQVRUZHLJKWKHHYLGHQFHl7DOOH\Y *RRGULFKFRXOGQRWVXSSRUWLWVLQWHUSUHWDWLRQRI6HFWLRQJ %UDYR3LWLQR5HVWDXUDQW/WG)GWK&LU DVDPDWWHURIODZ7KHFRXUWVWDWHGWKDWZKLOH*RRGULFKjV UHYHUVLQJ VXPPDU\ MXGJPHQW RUGHU LQ IDYRU RI LQWHUSUHWDWLRQRI6HFWLRQJLVmSODXVLEOHlWKHFODXVHLWVHOI HPSOR\HULQHPSOR\PHQWGLVFULPLQDWLRQDFWLRQDQGVWDWLQJ LV mYDJXH DQG XQFOHDUl 7KH FRXUW GHWHUPLQHG WKDW ZKLOH m7KHUROHRIWKHMXGJHDWWKHVXPPDU\MXGJPHQWVWDJHLVQRW 6HFWLRQJPD\EHDPELJXRXVZKHQUHDGRQLWVRZQLWLV WRZHLJKWKHHYLGHQFH>@l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jDUJXPHQWVDVWRWKHLQWHUSUHWDWLRQRI & 6$FTXLVLWLRQ&RUS1R&LY$s386 6HFWLRQ J 7KHUHIRUH WKH WULDO FRXUW VKRXOG KDYH 'LVW/(;,6DW 6'1<)HEDVVHUWLRQ FRQVLGHUHG WKH LQWHQW RI WKH SDUWLHV ORRNLQJ WR H[WULQVLF E\RQH SDUW\WKDWLWLQWHUSUHWVFRQWUDFWODQJXDJHGLIIHUHQWO\ HYLGHQFHDVDPHDQVRIDVVLVWLQJLWLQGHWHUPLQLQJWKHSDUWLHVj GRHVQRWFUHDWHWULDEOHLVVXHRIIDFW LQWHQW2XUUHYLHZRIWKHHYLGHQFHSUHVHQWHGLQGLFDWHVWKDW WKHUHLVDJHQXLQHLVVXHRIPDWHULDOIDFWDVWRZKDWWKHSDUWLHV 7KHDUJXPHQWVSUHVHQWHGE\*RRGULFKDQG)LOWHUDUHERWK LQWHQGHGE\LQFOXGLQJ6HFWLRQJLQWKH$JUHHPHQW FRUUHFWDQGIUDPHRXUWDVNLQDQDO\]LQJWKLVFDVHRQDSSHDO :KLOH *RRGULFK FRUUHFWO\ QRWHV WKDW GLVSXWHG LVVXHV RI )LUVW ZH ZLOO GLVFXVV WKH DSSOLFDEOH 1HZ
B.F. Goodrich v. U S Filter Corp (B.F. Goodrich v. U S Filter Corp) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.