Brannam v. Huntington Mortgage

Opinion

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

6&277 %5$11$0DQGs$1(7 ; %5$11$0RQEHKDOIRI  WKHPVHOYHVDQGDOORWKHUV   1R VLPLODUO\VLWXDWHG  3ODLQWLIIV$SSHOODQWV !   Y   +817,1*721 0257*$*(  &203$1<DQ2KLR   &RUSRUDWLRQ  'HIHQGDQW$SSHOOHH  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV 1Rn'DYLG:0F.HDJXH'LVWULFWsXGJH $UJXHG0DUFK 'HFLGHGDQG)LOHG$SULO %HIRUH.(11('<%2**6DQG'$8*+75(<&LUFXLW sXGJHV

  %UDQQDPHWDOY+XQWLQJWRQ 1R 0RUWJDJH&R

BBBBBBBBBBBBBBBBB &2816(/ $5*8('&KULVWRSKHU*+DVWLQJV'5(:&223(5 $1',1**UDQG5DSLGV0LFKLJDQIRU$SSHOODQWV*HRUJH *.HPVOH\%2'0$1/21*/(< '$+/,1*'HWURLW 0LFKLJDQ IRU $SSHOOHH  21 %5,()  &KULVWRSKHU * +DVWLQJVsRKQ($QGLQJ'5(:&223(5 $1',1* *UDQG 5DSLGV 0LFKLJDQ IRU $SSHOODQWV  *HRUJH * .HPVOH\ %2'0$1 /21*/(<  '$+/,1* 'HWURLW 0LFKLJDQIRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB .(11('< &LUFXLW sXGJH  3ODLQWLIIV 6FRWW DQG sDQHW %UDQQDP EURXJKW WKLV SXUSRUWHG FODVV DFWLRQ VXLW DJDLQVW GHIHQGDQW +XQWLQJWRQ 0RUWJDJH &RPSDQ\ FKDOOHQJLQJ D GRFXPHQWSUHSDUDWLRQIHHURXWLQHO\FKDUJHGE\+XQWLQJWRQ EXW QRW GLVFORVHG DV SDUW RI WKH ILQDQFH FKDUJH  3ODLQWLIIV FRQWHQG WKDW +XQWLQJWRQjV DFWLRQV YLRODWH WKH 7UXWK ,Q /HQGLQJ$FWm7,/$lDVZHOODVVWDWHODZ7KHGLVWULFWFRXUW JUDQWHG VXPPDU\ MXGJPHQW LQ IDYRU RI +XQWLQJWRQ DQG SODLQWLIIVQRZDSSHDO)RUWKHUHDVRQVVHWIRUWKEHORZZH DIILUPWKHMXGJPHQWRIWKHGLVWULFWFRXUW , 7KLV FDVH LQYROYHV WKH DVVHVVPHQW RI D GRFXPHQW SUHSDUDWLRQ IHH LQ FRQQHFWLRQ ZLWK PRUWJDJH ORDQV +XQWLQJWRQURXWLQHO\FKDUJHVDGRFXPHQWSUHSDUDWLRQIHHRI IRUPRUWJDJHORDQVDOWKRXJKLQUDUHFDVHVWKDWIHHPD\ EHZDLYHGRUUHGXFHG3ODLQWLIIVDOOHJHWKDWFKDUJLQJWKLVIHH ZLWKRXW GLVFORVLQJ LW DV D ILQDQFH FKDUJH YLRODWHV 7,/$ 86&†H5HJXODWLRQ=SURPXOJDWHGXQGHU7,/$ SHUPLWVOHQGHUVWRH[FOXGHIURPILQDQFHFKDUJHGLVFORVXUHV DQ\ IHHV IRU WKH SUHSDUDWLRQ RI FHUWDLQ mORDQUHODWHG  %UDQQDPHWDOY+XQWLQJWRQ 1R 1R %UDQQDPHWDOY+XQWLQJWRQ  0RUWJDJH&R 0RUWJDJH&R

LI WKH VHUYLFHV IRU ZKLFK WKH IHHV DUH LPSRVHG DUH GRFXPHQWVl VR ORQJ DV VXFK IHHV DUH mERQD ILGH DQG SHUIRUPHGE\HPSOR\HHVRIWKHFUHGLWRUUDWKHUWKDQE\D UHDVRQDEOHLQDPRXQWl&)5†F 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m5(63$l86&†HWVHTDQGDQ DFFRPSDQ\LQJUHJXODWLRQ&)5†HWVHTNQRZQDV %5('3D%DQNUYDFDWHGRQRWKHU 5HJXODWLRQ ;  6HFRQG WKH\ DJUHHG WKDW +XQWLQJWRQjV JURXQGVE\%5('3DTRXWLQJ55RKQHU GRFXPHQWSUHSDUDWLRQIHHZDVQRWmERQDILGHDQGUHDVRQDEOHl 7KH/DZRI7UXWKLQ/HQGLQJ†>@>D@DWWR EHFDXVH LW FRYHUV ORDQ RULJLQDWLRQ FRVWV DQG EHFDXVH   GRFXPHQWSUHSDUDWLRQVHUYLFHVDUHDYDLODEOHRQWKH,QWHUQHW IRUVXEVWDQWLDOO\OHVVWKDQ %HFDXVHGHIHQGDQWKDVSURGXFHGHYLGHQFHVXJJHVWLQJWKDW LVDUHDVRQDEOHIHHIRUGRFXPHQWSUHSDUDWLRQLQ:HVWHUQ 2Q0DUFKWKHGLVWULFWFRXUWKHDUGRUDODUJXPHQWRQ 0LFKLJDQDQGSODLQWLIIVKDYHQRWSURGXFHGDQ\HYLGHQFHWR +XQWLQJWRQjV PRWLRQ IRU SDUWLDO VXPPDU\ MXGJPHQW  7KH WKHFRQWUDU\ZHDJUHHZLWKWKHGLVWULFWFRXUWWKDWWKHUHLVQR FRXUWLVVXHGDQRSLQLRQIURPWKHEHQFK,WUHMHFWHGSODLQWLIIVj JHQXLQH LVVXH RI PDWHULDO IDFW DV WR ZKHWKHU WKH IHH ZDV DUJXPHQW EDVHG RQ 5HJXODWLRQ ; ILQGLQJ QR VXSSRUW IRU mUHDVRQDEOHlDVUHTXLUHGE\5HJXODWLRQ=7KDWGRFXPHQW SODLQWLIIVj DWWHPSW WR UHDG WKH WHUPV RI WKDW UHJXODWLRQ LQWR SUHSDUDWLRQ VHUYLFHV DUH RIIHUHG RQ WKH ,QWHUQHW IRU 5HJXODWLRQ = RU WKH 7,/$  7KH FRXUW IRXQG mQR EDVLV VXEVWDQWLDOO\ OHVV GRHV QRW FUHDWH DQ LVVXH RI IDFW DV WR ZKDWVRHYHUIRUWKHSODLQWLIIVjDUJXPHQWWKDWEHFDXVHWKH UHDVRQDEOHQHVV  7KH UHOHYDQW LQTXLU\ LV QRW ZKHWKHU IHH LQ WKLV FDVH ZDV FKDUJHG IRU WKLQJV RWKHU WKDQ WLWOH +XQWLQJWRQKDVXVHGWKHFKHDSHVWWKLUGSDUW\VHUYLFHDYDLODEOH WUDQVIHUULQJGRFXPHQWVWKDWWKHVHIHHVKHUHGRQRWIDOOZLWKLQ WRLWDQ\ZKHUHEXWZKHWKHUWKHIHHLVUHDVRQDEOHJLYHQWKH WKHH[HPSWLRQRUH[FOXVLRQIRUWKHGHILQLWLRQRIWKHILQDQFH SUHYDLOLQJSUDFWLFHVLQWKHUHOHYDQWPDUNHW,ISODLQWLIIVKDG FKDUJHIHHVXQGHU>WKH7,/$@l7KHFRXUWFRQFOXGHGWKDWWKH SURGXFHG DQ\ HYLGHQFH WKDW +XQWLQJWRQjV UDWH ZDV XQLIRUP IHHV FKDUJHG E\ +XQWLQJWRQ ZHUH ERQD ILGH EXW XQUHDVRQDEOHLQWKDWFRQWH[WRUWKDWWKH PDUNHWUDWHVZHUH UHVHUYHG MXGJPHQW RQ WKH TXHVWLRQ ZKHWKHU WKH\ ZHUH WDLQWHGE\FROOXVLRQWKHQVXPPDU\MXGJPHQWZRXOGQRWEH UHDVRQDEOHREVHUYLQJWKDWDIDFWXDOGLVSXWHUHPDLQHGDVWR DSSURSULDWH%XWSODLQWLIIVRIIHUHGWKHGLVWULFWFRXUWQRVXFK WKDW TXHVWLRQ  7KH FRXUW KRZHYHU VSHFLILFDOO\ UHMHFWHG HYLGHQFH SODLQWLIIVj FRQWHQWLRQ WKDW UHDVRQDEOHQHVV VKRXOG EH GHWHUPLQHGE\FRPSDULQJWKHIHHFKDUJHGE\+XQWLQJWRQWRD ,,, IHHIRUGRFXPHQWSUHSDUDWLRQFKDUJHGE\DWKLUGSDUW\VHUYLFH DYDLODEOHRQWKH,QWHUQHW7KHFRXUWGHFODUHGWKDWWKHSURSHU )RUWKHIRUHJRLQJUHDVRQVZHDIILUPWKHMXGJPHQWRIWKH PHDVXUH RI UHDVRQDEOHQHVV UHTXLUHV D FRPSDULVRQ WR IHHV GLVWULFWFRXUW FKDUJHG E\ RWKHU OHQGHUV LQ WKH UHOHYDQW PDUNHWSODFH  2Q 0DUFKWKHFRXUWHQWHUHGDZULWWHQRUGHUJUDQWLQJLQ SDUW DQG GHQ\LQJ LQ SDUW +XQWLQJWRQjV PRWLRQ IRU SDUWLDO VXPPDU\ MXGJPHQW KROGLQJ WKDW mD XQLIRUP GRFXPHQW  %UDQQDPHWDOY+XQWLQJWRQ 1R 1R %UDQQDPHWDOY+XQWLQJWRQ  0RUWJDJH&R 0RUWJDJH&R

VHUYLFHVIHHLVERQDILGHDQGSURSHUO\H[FOXGDEOH IURPWKH DIWHU WKH DFTXLVLWLRQ +XQWLQJWRQ HPSOR\HHV LQ &ROXPEXV FRPSXWDWLRQRIWKHILQDQFHFKDUJHLQWKLVFDVHSURYLGHGVXFK UHYLHZHGWKHIHHVWKDWZHUHEHLQJFKDUJHGDOWKRXJKKHFRXOG IHHLVUHDVRQDEOHl QRW VD\ WKDW WKH GRFXPHQW SUHSDUDWLRQ IHH LWVHOI ZDV VSHFLILFDOO\ FRQVLGHUHG EHFDXVH KH GLG QRW KDYH VXFK 3ODLQWLIIVODWHUPRYHGIRUUHOLHIIURPWKLVRUGHUDUJXLQJWKDW NQRZOHGJH  )XUWKHU KLV WHVWLPRQ\ DERYH VXJJHVWV WKDW QHZO\GLVFRYHUHGHYLGHQFHZRXOGFKDQJHWKHFRXUWjVDQDO\VLV GLVFXVVLRQVDERXWWKHDSSURSULDWHGRFXPHQWSUHSDUDWLRQIHH RI WKH 5HJXODWLRQ ; LVVXH  7KH GHIHQGDQW PRYHG IRU ZHUHKHOGEXWWKDWKHVLPSO\FRXOGQRWUHPHPEHUDQ\VSHFLILF VXPPDU\MXGJPHQWRQWKHUHPDLQLQJLVVXHRIUHDVRQDEOHQHVV UHSRUWV  3ODLQWLIIV GR QRW KDYH DQ\ HYLGHQFH WKDW FRQQHFWV $IWHUKHDULQJDUJXPHQWVWKHFRXUWGHQLHGSODLQWLIIVjPRWLRQ +XQWLQJWRQWRWKHGRFXPHQWSUHSDUDWLRQIHHSUDFWLFHVHQJDJHG UHLWHUDWLQJWKDWHYHQLI+XQWLQJWRQKDGYLRODWHG5HJXODWLRQ; LQE\)0%%HFDXVHSODLQWLIIVjPRUWJDJHORDQZDVH[WHQGHG SODLQWLIIVZRXOGQRWKDYHDSULYDWHULJKWRIDFWLRQWKHUHXQGHU E\+XQWLQJWRQDIWHUWKHDFTXLVLWLRQWKH\KDYHQRHYLGHQFH 7KH FRXUW UHIXVHG WR SHUPLW SODLQWLIIV WR ERRWVWUDS WKH WKDWWKHIHHFRYHUHGDQ\ORDQRULJLQDWLRQFRVWV+HQFHWKHUH 5HJXODWLRQ;GHILQLWLRQVLQWRD7,/$YLRODWLRQ7KHFRXUW LV QR HYLGHQFH WKDW WKH IHH ZDV QRW mERQD ILGHl XQGHU DOVRJUDQWHGVXPPDU\MXGJPHQWWRGHIHQGDQWRQWKHTXHVWLRQ 5HJXODWLRQ= RI ZKHWKHU WKH IHH FKDUJHG E\ +XQWLQJWRQ ZDV UHDVRQDEOH EDVHG RQ HYLGHQFH RI WKH PDUNHW UDWH IRU GRFXPHQW )LQDOO\ SODLQWLIIV FRQWHQG WKDW WKH IHH FKDUJHG E\ SUHSDUDWLRQIHHVVXEPLWWHGE\+XQWLQJWRQ+DYLQJUHVROYHG +XQWLQJWRQ LV QRW mUHDVRQDEOH LQ DPRXQWl DV UHTXLUHG E\ DOOLVVXHVQHFHVVDU\IRUWKHGLVSRVLWLRQRIWKH7,/$FODLPWKH 5HJXODWLRQ=7KH\FRQWHQGWKDWQRPHDQLQJIXOPDUNHWSODFH FRXUWJUDQWHGVXPPDU\MXGJPHQWLQIDYRURIGHIHQGDQWRQWKDW FRPSDULVRQFDQEHFRQGXFWHGZKHUHWKHIHHVFKDUJHGE\RWKHU FODLPDQGGHFOLQHGWRH[HUFLVHVXSSOHPHQWDOMXULVGLFWLRQRYHU OHQGHUVDUHIRUGLIIHUHQWFRVWVRUVHUYLFHVVRPHWLPHVHYHQIRU WKHSODLQWLIIVjUHPDLQLQJVWDWHODZFODLPV3ODLQWLIIVDSSHDO LWHPVWKDWDUHQRWH[FOXGDEOHXQGHU5HJXODWLRQ=(VVHQWLDOO\ SODLQWLIIVDVVHUWWKDWPRUWJDJHOHQGHUVPD\RQO\FKDUJHDVD ,, GRFXPHQWSUHSDUDWLRQIHHWKHDPRXQWRIWKHOHQGHUjVDFWXDO FRVWVIRUSUHSDULQJORDQUHODWHGGRFXPHQWV+HUH+XQWLQJWRQ :H UHYLHZ D GLVWULFW FRXUW RUGHU JUDQWLQJ VXPPDU\ KDGLWVRZQHPSOR\HHVSUHSDUHWKHUHOHYDQWGRFXPHQWVUDWKHU MXGJPHQW XQGHU D GH QRYR VWDQGDUG RI UHYLHZ ZLWKRXW WKDQ XVLQJ D WKLUGSDUW\ VHUYLFH  +HQFH LW LV GLIILFXOW WR GHIHUHQFH WR WKH GHFLVLRQ RI WKH ORZHU FRXUW  7D\ORU Y GHWHUPLQH WKH DFWXDO GRFXPHQW SUHSDUDWLRQ FRVWV RI HDFK 0LFKLJDQ'HSWRI&RUUHFWLRQV)GWK&LU LQGLYLGXDOORDQ /DNHY0HWURSROLWDQ/LIH,QV&R)GWK &LU6XPPDU\MXGJPHQWLVSURSHUmLIWKHSOHDGLQJV 7KH VFDQW FDVHODZ RQ WKLV VXEMHFW WHQGV WR VXSSRUW GHSRVLWLRQV DQVZHUV WR LQWHUURJDWRULHV DQG DGPLVVLRQV RQ +XQWLQJWRQjV FRQWHQWLRQ WKDW WKH IHH VKRXOG EH FRQVLGHUHG ILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\VKRZWKDWWKHUHLVQR UHDVRQDEOH LI LW ZDV IRU D VHUYLFH DFWXDOO\ SHUIRUPHG DQG JHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQGWKDWWKHPRYLQJSDUW\ UHDVRQDEOHLQFRPSDULVRQWRWKHSUHYDLOLQJSUDFWLFHVRIWKH LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZl)HG5&LY LQGXVWU\LQWKHUHOHYDQWPDUNHW,Q,QUH*ULJVE\WKHFRXUW 3URF VWDWHG 7,/$ZDVHQDFWHGmWRDVVXUHDPHDQLQJIXOGLVFORVXUHRI 7REHH[FOXGHGIURPWKHILQDQFHFKDUJHWKHIHHVPXVW FUHGLW WHUPV VR WKDW WKH FRQVXPHU ZLOO EH DEOH WR FRPSDUH QRWRQO\EHWKHULJKWW\SHVEXWWKH\PXVWDOVREHmERQD PRUHUHDGLO\WKHYDULRXVFUHGLWWHUPVDYDLODEOHWRKLPl ILGHDQGUHDVRQDEOHLQDPRXQWl7KH\DUHERQDILGHHYHQ  %UDQQDPHWDOY+XQWLQJWRQ 1R 1R %UDQQDPHWDOY+XQWLQJWRQ  0RUWJDJH&R 0RUWJDJH&R

WKLVWHVWLPRQ\WRDUJXHWKDW+XQWLQJWRQQHYHUFRQGXFWHGDQ\ 86&†D8QGHU7,/$DOHQGHUPXVWGLVFORVHWKH PDUNHW DQDO\VHV RI GRFXPHQW SUHSDUDWLRQ IHHV EXW VLPSO\ mILQDQFH FKDUJHl DV GHILQHG E\ WKH VWDWXWH  7KH VWDWXWH H[WHQGHG WKH IHH FKDUJHG E\ )0% ZKLFK ZDV EDVHG RQ H[HPSWVIURPWKHFRPSXWDWLRQRIWKHILQDQFHFKDUJHm>I@HHV 6Q\GHUjV LPSURSHU FDOFXODWLRQ  %XW WKDW LV PLVOHDGLQJ IRU SUHSDUDWLRQ RI ORDQUHODWHG GRFXPHQWVl   86& %XUPHLVWHUWHVWLILHGDVIROORZV † H   5HJXODWLRQ = HODERUDWHV RQ WKLV H[HPSWLRQ SURYLGLQJWKDWm>I@HHVIRUSUHSDULQJORDQUHODWHGGRFXPHQWV 4+DYH\RXHYHUVHHQDUHSRUWRQZKLFKVRPHERG\HOVH VXFK DV GHHGV PRUWJDJHV DQG UHFRQYH\DQFH RU VHWWOHPHQW FROOHFWHGWKHLQIRUPDWLRQVSHFLILFDOO\ZLWKUHJDUGWRWKH GRFXPHQWVl DUH H[FOXGDEOH mLI WKH IHHV DUH ERQD ILGH DQG GRFXPHQW SUHSDUDWLRQ IHH FKDUJHG E\ RWKHU PRUWJDJH UHDVRQDEOHLQDPRXQWl&)5†F 3ODLQWLIIV OHQGHUVLQWKH:HVW0LFKLJDQDUHD" DGYDQFH HVVHQWLDOO\ WKH VDPH DUJXPHQWV RQ DSSHDO DV WKH\ SXUVXHGEHIRUHWKHGLVWULFWFRXUWDOWKRXJKWKH\FKDUDFWHUL]H $,ZRXOGKDYHVHHQo,ZRXOGKDYHKDGDGLVFXVVLRQD WKHPVRPHZKDWGLIIHUHQWO\ UHYLHZRIZKDW RWKHUFRPSHWLWRUVZRXOGKDYHFKDUJHG ZLWKLQWKHPDUNHWSODFHWKDWZHZHUHLQIDFWFRPSHWLQJLQ )LUVWSODLQWLIIVDUJXHWKDWWKHIHHFKDUJHGE\+XQWLQJWRQLV QRWERQDILGHEHFDXVHLWLVQRWmH[DFWO\ZKDWLWSXUSRUWVWR 4

DUJXDEO\OHDYHVURRPIRUIHHVIRUWKHSUHSDUDWLRQRIVHWWOHPHQW +DYLQJ IXOO\ UHYLHZHG %XUPHLVWHUjV WHVWLPRQ\ DQG GRFXPHQWVRWKHUWKDQWLWOHWUDQVIHUULQJGRFXPHQWV%XWHYHQ FRQVLGHULQJ WKH WHVLPRQ\ FLWHG E\ SODLQWLIIV LQ LWV SURSHU DVVXPLQJDUJXHQGRWKDWWKH/LQHGHILQLWLRQLVOLPLWHGWR FRQWH[W WKLV FRXUW DJUHHV ZLWK +XQWLQJWRQ DQG WKH GLVWULFW RQO\ WLWOHWUDQVIHUULQJ GRFXPHQWV LW GRHV QRW HVWDEOLVK D FRXUW%XUPHLVWHUWHVWLILHGWKDWHDFKRIWKH)0%DIILOLDWHVKDG YLRODWLRQ RI 5HJXODWLRQ = ZKLFK FRQWDLQV D GLIIHUHQW GLIIHUHQW SURFHGXUHV UHODWLYH WR GRFXPHQW SUHSDUDWLRQ IHHV GHILQLWLRQ  /LNH WKH GLVWULFW FRXUW ZH UHMHFW SODLQWLIIVj +H WHVWLILHG WKDW DW )0%=HHODQG WKH DIILOLDWH EDQN LQ VWUDLQHGFRQVWUXFWLRQRIWKHDSSOLFDEOHUHJXODWLRQV =HHODQG0LFKLJDQWKHGRFXPHQWSUHSDUDWLRQIHHZDV SULRUWR+XQWLQJWRQjVDFTXLVLWLRQRI)0%+HIXUWKHUWHVWLILHG 1H[WSODLQWLIIVDUJXHWKDWWKHGRFXPHQWSUHSDUDWLRQIHHLV WKDW DIWHU WKH DFTXLVLWLRQ +XQWLQJWRQ FKDUJHG D  QRWERQDILGHEHFDXVH+XQWLQJWRQjVRZQUHJLRQDOPDQDJHU GRFXPHQWSUHSDUDWLRQIHHZKLFKZDVODWHUUDLVHGWR+H sRKQ %XUPHLVWHU DGPLWWHG WKDW WKH IHH ZDV IRU ORDQ WHVWLILHGWKDWKHGLGQRWUHFDOOWKHUHDVRQIRUWKHLQFUHDVH+H RULJLQDWLRQFRVWV,QFRQVLGHULQJWKLVDUJXPHQWLWLVFUXFLDOWR WHVWLILHGWKDWWKHXOWLPDWHGHFLVLRQDVWRWKHIHHZRXOGKDYH VHSDUDWH+XQWLQJWRQ0RUWJDJH&RPSDQ\IURPLWVSUHGHFHVVRU EHHQPDGHDWWKHKRPHRIILFHLQ&ROXPEXV2KLREXWZRXOG )LUVW0LFKLJDQ%DQNm)0%l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mZKDWZHQWRQ 1DWLRQDO %DQN IND )0%)LUVW 0LFKLJDQ %DQN *UDQG LQ &ROXPEXVl  +H DOVR WHVWLILHG WKDW KH ZDV DZDUH RI D 5DSLGV SUHVHQWDWLRQPDGHE\)0%&RPSOLDQFH2IILFHU7RP6Q\GHU EHIRUH WKH DFTXLVLWLRQ  ,Q WKH SUHVHQWDWLRQ 0U 6Q\GHU 3ODLQWLIIV FRQWHQG WKDW %XUPHLVWHU DGPLWWHG WKDW LQGLFDWHG WKDW WKH GRFXPHQW SUHSDUDWLRQ IHH KDG EHHQ +XQWLQJWRQj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DQGWKDWWKH\KDYHQRWVLQFHFKDQJHG+XQWLQJWRQDUJXHV %H\RQGWKH6Q\GHUUHSRUW%XUPHLVWHUWHVWLILHGWKDWKHGLGQRW DQG WKH GLVWULFW FRXUW DJUHHG WKDW SODLQWLIIV DUH SHUVRQDOO\FUHDWHQRUZDVKHDZDUHRIDQ\VSHFLILFUHSRUWV PLVUHSUHVHQWLQJ%XUPHLVWHUjVWHVWLPRQ\WKDW%XUPHLVWHUZDV UHJDUGLQJ GRFXPHQW SUHSDUDWLRQ IHHV  3ODLQWLIIV ODWFK RQWR GHVFULELQJ KRZ IHHV ZHUH VHW DW )0% DQG WKDW KH DOVR WHVWLILHGWKDW+XQWLQJWRQKDGSHUIRUPHGVRPHPDUNHWDQDO\VHV LQ RUGHU WR VHW WKH IHHV DSSURSULDWHO\ UDWKHU WKDQ E\  FRQVLGHULQJORDQRULJLQDWLRQFRVWV 0U 6Q\GHUjV VSHFLILF FRQFOXVLRQ ZDV WKDW D V\VWHPZLGH PD[LPXP GRFXPHQW SUHSDUDWLRQ IHH RI  ZDV DSSURSULDWH DQG H[FOXGDEOH XQGHU 5HJXODWLRQ =