Cox v. Cty of Memphis

Opinion

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  &R[HWDOY&LW\RI0HPSKLVHWDO 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

(/(&7521,& &,7$7,21  )(' $SS 3 WK &LU

BBBBBBBBBBBBBBBBBBBBBBB )LOH 1DPH DS

&21&855(1&( BBBBBBBBBBBBBBBBBBBBBBB 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 .$5(11(/6210225(&LUFXLWsXGJHFRQFXUULQJ, BBBBBBBBBBBBBBBBB FRQFXU EHFDXVH XQGHU RXU SUHFHGHQWV DQG WKRVH RI WKH 6XSUHPH &RXUW LW LV FOHDU WKDW SODLQWLIIV SUHVHQW FODLPV RI FRQWLQXLQJHIIHFWVRISDVWGLVFULPLQDWRU\DFWVDQGGRQRWFODLP GLVFULPLQDWRU\ DFWV ZLWKLQ WKH VWDWXWRU\ WLPH SHULRG 6+$521 : &2;HWDO ; 3ODLQWLIIVjFRPSODLQWFRQVLVWVRIFODLPVEDVHGHQWLUHO\RQWKH 3ODLQWLIIV$SSHOODQWV  WHVWLQJSURFHVVXWLOL]HGE\WKH0HPSKLV3ROLFH'HSDUWPHQWWR  FRPSLOHDQHOLJLELOLW\OLVWIRUSURPRWLRQWRPDMRU7KDWWHVWLQJ  1R SURFHVVZDVFRPSOHWHDQGWKHHOLJLELOLW\OLVWLVVXHGRQ0D\ Y  OLVWLQJHOLJLEOHFDQGLGDWHVLQRUGHURIUDQNEDVHGRQ !  WKHWHVWDQGDVVHVVPHQWSURFHVV$IWHUWKDWSRLQWSODLQWLIIVGR &,7< 2) 0(03+,6HWDO  QRWFODLPWKDWDQ\IXUWKHUGLVFULPLQDWRU\DFWVRFFXUUHGDSDUW 'HIHQGDQWV$SSHOOHHV  IURP WKH 0HPSKLV 3ROLFH 'HSDUWPHQWjV XWLOL]DWLRQ RI WKH 1 HOLJLELOLW\OLVWWRSURPRWHFDQGLGDWHVLQWKHLUUDQNRUGHUIURP WKHOLVW3ODLQWLIIVGRQRWFODLPWKDWWKHSURPRWLRQVIURPWKH $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW HOLJLELOLW\OLVWZHUHGLVFULPLQDWRU\LQDQ\ZD\DSDUWIURPWKH IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV UHOLDQFHRQWKHLQLWLDODOOHJHGO\GLVFULPLQDWRU\WHVWLQJSURFHVV 1RnsHURPH7XUQHU'LVWULFWsXGJH *LYHQ WKHVH FLUFXPVWDQFHV RXU SUHFHGHQWV LQ $QGHUVRQ Y &LW\ RI %ULVWRO  )G  WK &LU  DQG 'L[RQ Y $UJXHG6HSWHPEHU $QGHUVRQ  )G  WK &LU  DV ZHOO DV WKH 6XSUHPH&RXUWjVGHFLVLRQVGLVFXVVHGLQWKHPDMRULW\RSLQLRQ 'HFLGHGDQG)LOHG2FWREHU OHDG LQHYLWDEO\ WR WKH FRQFOXVLRQ WKDW SODLQWLIIV KDYH QRW VDWLVILHG WKH UHTXLUHPHQWV WR VKRZ DSSOLFDELOLW\ RI WKH %HIRUH*8<DQG0225(&LUFXLWsXGJHV'2:' FRQWLQXLQJYLRODWLRQVH[FHSWLRQ 'LVWULFWsXGJH BBBBBBBBBBBBBBBBB &2816(/ $5*8('  (YHUHWW *LEVRQ %$7(0$1 *,%621 &+,/'(560HPSKLV7HQQHVVHHIRU$SSHOODQWV/RXLV3 %ULWW ,,, )25'  +$55,621 0HPSKLV 7HQQHVVHH IRU

7KH +RQRUDEOH 'DYLG ' 'RZG sU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ

  &R[HWDOY&LW\RI0HPSKLVHWDO 1R 1R &R[HWDOY&LW\RI0HPSKLVHWDO 

$SSHOOHHV  21 %5,()  (YHUHWW *LEVRQ %$7(0$1 SURPRWHGGHVSLWHWKHDOOHJHGGLVFULPLQDWLRQ,QFRQWUDVWWKH *,%621  &+,/'(56 0HPSKLV 7HQQHVVHH IRU SODLQWLIIVLQ5LFNV(YDQVDQG%URQ]H6KLHOGVQHYHUPDGHLW $SSHOODQWV/RXLV3%ULWW,,,&DUULH/\QQ&ODUN)25' RQWRWKHHOLJLELOLW\OLVWDQGVRFRXOGQRWKDYHH[SHFWHGWKDW +$55,6210HPSKLV7HQQHVVHHIRU$SSHOOHHV WKH\ZRXOGEHKLUHG '2:''sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK 7KH&RXUWEHOLHYHVKRZHYHUWKDWWKHPHUHSRVVLELOLW\WKDW *8<sMRLQHG0225(sSGHOLYHUHGDVHSDUDWH RQH ZLOO EH KLUHG RU SURPRWHG GHVSLWH DQ DOOHJHGO\ FRQFXUULQJRSLQLRQ GLVFULPLQDWRU\ UDQNLQJ GRHV QRW PHDQ WKDW WKH IDLOXUH WR SURPRWH RU KLUH VKRXOG EH WUHDWHG DV D GLVFULPLQDWRU\ DFW BBBBBBBBBBBBBBBBB VHSDUDWHIURPWKHRULJLQDODFWRIGLVFULPLQDWLRQ$UXOHWKDW ZRXOGDOORZHPSOR\HHVWRmVLWRQWKHLUULJKWVlLQWKHKRSHV 23,1,21 WKDWSURPRWLRQZRXOGRFFXUGHVSLWHDOOHJHGGLVFULPLQDWLRQLQ BBBBBBBBBBBBBBBBB DQ HOLJLELOLW\ URVWHU ZRXOG FRQWUDGLFW WKH FRQVLGHUDWLRQV RXWOLQHGDERYH1DPHO\DQHPSOR\HUjVVWDIILQJDQGKLULQJ '2:''LVWULFWsXGJH GHFLVLRQVZRXOGHVVHQWLDOO\UHPDLQWHQWDWLYHGXULQJWKHHQWLUH SHULRGLQZKLFKDURVWHUZDVXWLOL]HGDQGIRUDVXEVWDQWLDO , SHULRGWKHUHDIWHULIOLWLJDWLRQHQVXHV7KLVLVDQXQUHDVRQDEOH 7KLVLVDQDSSHDOIURPWKHGLVWULFWFRXUWjVGLVPLVVDORIWKH GHPDQG WR PDNH XSRQ HPSOR\HUV ZKHQ SRWHQWLDO SODLQWLIIV SODLQWLIIVDSSHOODQWVj&RPSODLQWDJDLQVWGHIHQGDQWVDSSHOOHHV NQRZRIDOOHJHGGLVFULPLQDWLRQLQUDQNLQJPDQ\PRQWKVRU WKH &LW\ RI 0HPSKLV DQG :DOWHU :LQIUH\ 'LUHFWRU RI WKH \HDUVEHIRUHDIDLOXUHWRSURPRWH+HQFHWKHDVVLJQPHQWRI 0HPSKLV 3ROLFH 'HSDUWPHQW m03'l  7KH &RPSODLQW DQ DOOHJHGO\ GLVFULPLQDWRU\ UDQNLQJ LV WKH UHOHYDQW DOOHJHG WKDW WKH &LW\ RI 0HPSKLV KDG HQJDJHG LQ UDFLDO GLVFULPLQDWRU\ DFW HYHQ ZKHUH WKH ORZ UDQNLQJ LV QRW D GLVFULPLQDWLRQ ZLWK UHVSHFW WR FHUWDLQ RIILFHUV VHHNLQJ mFHUWDLQSUHOXGHlWRDQDGYHUVHHPSOR\PHQWDFWLRQ+XHOV SURPRWLRQ LQ WKH 03'  (DFK SODLQWLII LV D ZKLWH IHPDOH  )G DW  FI .HQQHG\ Y &KHPLFDO :DVWH KROGLQJWKHUDQNRIOLHXWHQDQWLQWKH03'2Q1RYHPEHU 0DQDJHPHQW,QF)GWK&LU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jV2UGHU GLVPLVVLQJWKHSODLQWLIIVjFRPSODLQWLV$)),50(' 7KH %XOOHWLQ VWDWHG WKDW WKH SURPRWLRQDO OLVW ZRXOG EH HIIHFWLYHIRUWZR\HDUV7KHILUVWFDQGLGDWHVLQUDQNRUGHU LQFOXGLQJ ILYH RI WKH VL[ EODFN IHPDOHV ZHUH SURPRWHG WR PDMRURQ0D\0RUHWKDQWZR\HDUVODWHURQsXQH   WKH 03' PDGH LWV VHFRQG DQG ODVW URXQG RI  &R[HWDOY&LW\RI0HPSKLVHWDO 1R 1R &R[HWDOY&LW\RI0HPSKLVHWDO 

ZKLFKQRWHGWKDWmSODLQWLIIVGRQRWDOOHJHWKDW1HZDUNZRXOG SURPRWLRQVIURPWKHHOLJLELOLW\OLVW1RQHRIWKHSODLQWLIIV KDYH IROORZHG DQ\WKLQJ EXW D QHXWUDO QRQGLVFULPLQDWRU\ ZHUHVHOHFWHGLQHLWKHUWKHILUVWRUVHFRQGURXQG SURFHGXUHLQKLULQJIURPWKHOLVWl)GDW6HHDOVR +XHOVY([[RQ&RDO86$,QF)GWK&LU 7KHUHDIWHUSODLQWLIIV6KDURQ:&R[3DWULFLD$/RYHWW :RRGVRQY,QWjO%URWKHUKRRGRI(OHFWULFDO:RUNHUV %UHQGD30DSOHVDQG3DWULFLD&3HQGOHWRQILOHGFKDUJHVZLWK /RFDO   )6XSS   ' 0LQQ  WKH (TXDO (PSOR\PHQW 2SSRUWXQLW\ &RPPLVVLRQ RQ FRQWLQXLQJ DFWV GRFWULQH GRHV QRW DSSO\ EHFDXVH XVH RI 1RYHPEHU3ODLQWLII&DQGDFH$+DOHILOHGIRXUGD\V IDFLDOO\ QHXWUDO SROLF\ LV PHUHO\ FXUUHQW HIIHFW RI SDVW ODWHU  2Q 1RYHPEHU   WKH ((2& GLVPLVVHG WKH GLVFULPLQDWRU\DFWV SODLQWLIIVjFKDUJHVnDOORIZKLFKKDGEHHQILOHGPRUHWKDQ PRQWKVDIWHUSURPXOJDWLRQRIWKHHOLJLELOLW\OLVWnIRUmIDLOXUH 0RUHRYHUWKHUHDUHLPSRUWDQWSROLF\FRQVLGHUDWLRQV WKDW WR ILOH WKH FKDUJH ZLWKLQ WKH WLPH VSHFLILHG E\ ODZl  7KH FRXQVHODJDLQVWWUHDWLQJSURPRWLRQVIURPDTXHVWLRQDEOHOLVW SODLQWLIIV UHFHLYHG D QRWLFH RI ULJKW WR VXH DQG WLPHO\ ILOHG DVDFRQWLQXLQJDFW)RULQVWDQFHFRXUWVPXVWWDNHFDUHQRWWR WKHLU&RPSODLQWLQIHGHUDOFRXUWRQ)HEUXDU\ mH[SRVH HPSOR\HUV WR D YLUWXDOO\ RSHQHQGHG SHULRG RI OLDELOLW\l$EUDPVY%D\ORU&ROOHJHRI0HGLFLQH)G $FFRUGLQJWRWKH&RPSODLQWPRVWRIWKHH[HFXWLYHRIILFHUV WK&LU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mWRDQXOOLW\l+HUHIRU WKHPDQVZHUVWRTXHVWLRQVWKDWWKHPDQDJHPHQWNQHZWREH LQVWDQFH WKH SODLQWLIIV ZHUH SODFHG RQ DQ DOOHJHGO\ RQ WKH WHVW DQG E\ JLYLQJ WKHP WHVW TXHVWLRQV IRU VWXG\ GLVFULPLQDWRU\OLVWLQ0D\EXWWKH\GLGQRWILOH((2& SXUSRVHV FKDUJHVXQWLO1RYHPEHU+HQFHSODLQWLIIVjVXLWFRXOG KDYHEHHQEURXJKWDWDPXFKHDUOLHUWLPHDQGDVDUHVXOWRI 3ODLQWLIIV ILOHG WKLV FLYLO DFWLRQ DOOHJLQJ UDFLDO WKH GHOD\ WKH SRWHQWLDO OLWLJDWLRQ ZRXOG KDYH FDOOHG LQWR GLVFULPLQDWLRQ XQGHU  86& † HI  86& TXHVWLRQDQRUJDQL]DWLRQDOVWUXFWXUHWKDWKDGEHHQLQSODFHIRU †DQG7HQQHVVHH&RGH†D2Q0DUFK WZR\HDUV GHIHQGDQWVILOHGDPRWLRQWRGLVPLVVSUHGLFDWHGHQWLUHO\ RQVWDWXWHRIOLPLWDWLRQVJURXQGV3ODLQWLIIVUHVSRQGHGDQG ,9 ILOHGDPRWLRQWRDPHQGWKHLU&RPSODLQWLQRUGHUWRFODULI\ WKHLUFRQWHQWLRQWKDWHDFKSURPRWLRQIURPWKHHOLJLELOLW\OLVW $OWKRXJKDWILUVWEOXVKWKLVFDVHIDOOVVTXDUHO\ZLWKLQSULRU FRQVWLWXWHGDVHSDUDWHDFWRIGLVFULPLQDWLRQ7KHGLVWULFWFRXUW FDVHODZDGLVWLQFWLRQWKDWFDQEHPDGHLVWKDWWKHDOOHJHG JUDQWHGERWKPRWLRQVRQ0D\ILQGLQJWKDWSODLQWLIIV GLVFULPLQDWLRQLQWKHSUHVHQWFDVHGLGQRWUHVXOWLQSODLQWLIIVj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

WKHUHIRUH FRXOG QRW SURFHHG  7KH GLVWULFW FRXUW HQWHUHG NQRZQKHZDVQRWJRLQJWREHSURPRWHGl9DQ=DQWY MXGJPHQWRQ0D\DQGSODLQWLIIVWLPHO\ILOHGD1RWLFH ./05R\DO'XWFK$LUOLQHV)GG&LU RI$SSHDORQsXQH VWDWLQJ LQ GLFWD WKDW WKH FRQWLQXLQJ YLRODWLRQ H[FHSWLRQ DSSOLHVZKHQWKHUHLVHYLGHQFHRIDQRQJRLQJGLVFULPLQDWRU\ ,, SUDFWLFHmVXFKDVWKHXVHRIGLVFULPLQDWRU\VHQLRULW\OLVWVRU HPSOR\PHQWWHVWVl ,QRUGHUWRUHFRYHUIRUDGLVFULPLQDWRU\DFWXQGHU7LWOH9,, RIWKH&LYLO5LJKWV$FWRI86&††HHWVHT 7KLV &RXUW EHOLHYHV WKH EHWWHU YLHZ LV WKDW SURPRWLRQ RU D SODLQWLII PXVW WLPHO\ ILOH D FKDUJH ZLWK WKH ((2&  6HH KLULQJ IURP DQ DOOHJHGO\ WDLQWHG SURPRWLRQV URVWHU LV QRW D ((2&Y)RUG0RWRU&UHGLW&R )GWK&LU mFRQWLQXLQJ DFWl EXW LV PHUHO\ WKH HIIHFW RI SUHYLRXV   $ FKDUJH RI GLVFULPLQDWLRQ PXVW EH ILOHG ZLWK WKH GLVFULPLQDWLRQ,WLVDWWKHSRLQWRISURPXOJDWLRQRIWKHURVWHU ((2&ZLWKLQGD\VDIWHUWKHDOOHJHGXQODZIXOHPSOR\PHQW WKDWDSRWHQWLDOSODLQWLIILVDZDUHWKDWDOOHJHGGLVFULPLQDWLRQ SUDFWLFHRFFXUUHG86&†HH 7KHXVXDO LV OLNHO\ WR SOD\ D SLYRWDO UROH LQ KHU IXWXUH DGYDQFHPHQW UXOH LQ GLVFULPLQDWLRQ FDVHV LV WKDW WKLV WLPH IRU ILOLQJ LV +HQFHWKHSURPXOJDWLRQRIDQDOOHJHGO\WDLQWHGURVWHULVDQ mWULJJHUHG DW WKH WLPH WKH DOOHJHG GLVFULPLQDWRU\ DFW HYHQW WKDW mµVKRXOG    DOHUW> @ WKH DYHUDJH OD\ SHUVRQ WR RFFXUUHGl'L[RQY$QGHUVRQ)GWK&LU SURWHFWKLVULJKWVjl&RQOLQY%ODQFKDUG)G TXRWLQJ3HQWRQ,QGXV3XE&R)G WK &LU  FLWDWLRQ RPLWWHG  )XUWKHU WKH DOOHJHGO\ WK &LU    7KH SDUWLHV VHHP WR DJUHH WKDW WKH WDLQWHGURVWHULQWKLVFDVHZDVWREHXVHGLQWKHSURPRWLRQV mGLVFULPLQDWRU\ DFWl LQ WKLV FDVH RFFXUUHG ZLWK WKH SURFHVVIRUWZR\HDUVDIWHULWVSURPXOJDWLRQ,WWKHUHIRUHmKDG SURPXOJDWLRQRIWKHHOLJLELOLW\OLVWRQ0D\7KH µWKHGHJUHHRISHUPDQHQFHWKDWVKRXOGWULJJHUDQHPSOR\HHjV SDUWLHV GLIIHU KRZHYHU RQ ZKHWKHU WKH GRFWULQH RI DZDUHQHVVRIDGXW\WRDVVHUWKLVRUKHUULJKWVjl$QGHUVRQ mFRQWLQXLQJDFWVlZKLFKFUHDWHVDQDUURZH[FHSWLRQWRWKH )GDWFLWDWLRQRPLWWHG XVXDO UXOH EULQJV WKH SODLQWLIIVj &RPSODLQW ZLWKLQ WKH OLPLWDWLRQVSHULRG ,Q DGGLWLRQ WKH IDFW WKDW WKH 03'jV HOLJLELOLW\ OLVW ZDV QHXWUDORQLWVIDFHDQGWKDWWKHKLULQJSURFHGXUHRSHUDWHGLQ DQHXWUDOPDQQHUDIWHUWKHOLVWZDVFRPSLOHGEULQJVWKLVFDVH XQGHUWKH UXOHVDUWLFXODWHGLQ(YDQVDQG/RUDQFH$VWKH SODLQWLIIVFRQFHGHWKHSURPRWLRQVZHUHPDGHQHXWUDOO\LH LQUDQNRUGHUIURPWKHHOLJLELOLW\OLVWDQGDQ\GLVFULPLQDWLRQ  RFFXUUHGLQWKHFRPSLODWLRQRIWKHOLVW6XFKIDFLDOQHXWUDOLW\ ,I D FKDUJH LV SXUVXHG ZLWK WKH HTXLYDOHQW VWDWH DJHQF\ D SODLQWLII KDV  GD\V LQ ZKLFK WR EULQJ D FKDUJH ZLWK WKH ((2&  86& SOD\HGDUROHLQ'L[RQY$QGHUVRQ)GWK&LU † HH  7KLV H[WHQGHG ILOLQJ SURYLVLRQ GRHV QRW DIIHFW WKH ZKHUHWKHSODLQWLIIVDOOHJHGWKDWWKHLUQRQPHPEHUVKLS SUHVHQW FDVH H[FHSW WKDW FHUWDLQ SUHFHGHQWV GLVFXVV D  GD\ UXOH LQDUHWLUHPHQWV\VWHPZDVWKHUHVXOWRIGLVFULPLQDWLRQDQG  FODLPHGWKDWWKHXVHRIWKHV\VWHPFRQVWLWXWHGDFRQWLQXLQJ $OWKRXJK WKH mGLVFULPLQDWRU\ DFWl LQ WKLV FDVH PD\ EH WKH FRDFKLQJ YLRODWLRQ  7KH FRXUW VWDWHG WKDW m>R@QFH WKH GLYLVLRQ LQWR RI SUHIHUUHG HPSOR\HHV WKH SDUWLHV DQG PRVW RI WKH FDVH ODZ DSSDUHQWO\ ILQG LW PRUH FRQYHQLHQW WR LGHQWLI\ WKH SURPXOJDWLRQ RI DQ HOLJLELOLW\ URVWHU PHPEHUVDQGQRQPHPEHUVKDVEHHQPDGHWKHV\VWHP DV WKH LQLWLDO GLVFULPLQDWRU\ DFW RSHUDWHGQHXWUDOO\lDQGWKDWmSODLQWLIIVjFDXVHRIDFWLRQZDV WULJJHUHG ZKHQ WKH\ OHDUQHG RI WKHLU FODVVLILFDWLRQ DV QRQ  PHPEHUVl  ,G DW    7KH IDFLDO QHXWUDOLW\ RI DQ $SSHOODQWV DSSDUHQWO\ FRQFHGH WKDW D UXOLQJ RQ mFRQWLQXLQJ DFWVl XQGHU † HH  LV GLVSRVLWLYH RQ ZKHWKHU SODLQWLIIV ILOHG WLPHO\ HOLJLELOLW\ OLVW DOVR LQIOXHQFHG WKH FRXUW LQ %URQ]H 6KLHOGV XQGHU  86& †  DQG 7HQQHVVHH &RGH † D  &R[HWDOY&LW\RI0HPSKLVHWDO 1R 1R &R[HWDOY&LW\RI0HPSKLVHWDO 

SURPRWLRQVWRWKHSODLQWLIIVZDVQRWDFRQWLQXLQJYLRODWLRQ 7KHUHDUHWZRFDWHJRULHVRImFRQWLQXLQJDFWVlDQGRQO\WKH EHFDXVH WKH GHQLDO RI SURPRWLRQV ZDV D VHSDUDWH DQG ILUVW LV JHUPDQH WR WKLV DSSHDO  7KH ILUVW FDWHJRU\ RI LQHYLWDEOHFRQVHTXHQFHRIWKHIDFWWKDWSODLQWLIIVZHUHQRWRQ FRQWLQXLQJDFWVDULVHVZKHQWKHUHLVDQRQJRLQJFRQWLQXRXV WKH KLULQJ OLVW  ,G DW   7KH 7KLUG &LUFXLW DSSOLHG VHULHVRIGLVFULPLQDWRU\DFWV6HH+DLWKFRFNY)UDQN %URQ]H6KLHOGVLQ+RRGY1HZsHUVH\'HSWRI&LYLO6HUYLFH )GWK&LU,QVXFKDFDVHWKHVHULHVRI )GG&LUZKHUH1HZsHUVH\ILUHILJKWHUV DFWVPD\EHFKDOOHQJHGLQWKHLUHQWLUHW\DVORQJDVRQHRIWKRVH FKDOOHQJHGWKHYDOLGLW\RIDFLYLOVHUYLFHH[DPLQDWLRQWKDWZDV GLVFULPLQDWRU\ DFWV IDOOV ZLWKLQ WKH OLPLWDWLRQV SHULRG  ,G XVHG WR HVWDEOLVK WKH UDQNLQJ RUGHU RI D SURPRWLRQV URVWHU +RZHYHUDFULWLFDOGLVWLQFWLRQLQWKHFRQWLQXLQJDFWVGRFWULQH 7KHFRXUWDJDLQKHOGWKDWWKHVWDWXWHRIOLPLWDWLRQVEHJDQWR LV WKDW WKH OLPLWDWLRQV SHULRG EHJLQV WR UXQ LQ UHVSRQVH WR UXQRQWKHGD\WKHURVWHUZDVSURPXOJDWHGDWOHDVWDVWRWKRVH GLVFULPLQDWRU\DFWVWKHPVHOYHVUDWKHUWKDQLQUHVSRQVHWRWKH SODLQWLIIVZKRKDGQRWPDGHWKHOLVW,GDW FRQWLQXLQJ HIIHFWV RI SDVW GLVFULPLQDWRU\ DFWV 'L[RQ  )GDWFLWLQJ'HODZDUH6WDWH&ROOHJHY5LFNV86 ,QFRQWUDVWWRWKH7KLUG&LUFXLWWKH6HFRQG&LUFXLWWUHDWV DQG8QLWHG$LUOLQHVY(YDQV86 KLULQJ IURP DQ DOOHJHGO\ WDLQWHG URVWHU DV DQ DFW RI   GLVFULPLQDWLRQ GLVWLQFW IURP WKH RULJLQDO DFWV RI GLVFULPLQDWLRQ,Q*XDUGLDQV$VVjQRI1HZ

  $V WR WKH SODLQWLIIV ZKR KDG SDVVHG WKH H[DPLQDWLRQ DQG PDGH WKH 7KH DSSHOODQWV DOVR DSSHDU WR FRQFHGH WKDW WKH VHFRQG FDWHJRU\ RI OLVW WKH FRXUW GLVPLVVHG WKHLU FKDUJHV EHFDXVH WKH FRPSODLQW KDG EHHQ FRQWLQXLQJ DFWV ZKLFK DULVHV ZKHQ WKHUH LV D ORQJVWDQGLQJ DQG ILOHG RYHU RQH DQG D KDOI \HDUV DIWHU H[SLUDWLRQ RI WKH OLVW  )G DW GHPRQVWUDEOH SROLF\ RI GLVFULPLQDWLRQ VHH 'L[RQ   )G DW  GRHV  QRW DSSO\ WR WKLV FDVH  &R[HWDOY&LW\RI0HPSKLVHWDO 1R 1R &R[HWDOY&LW\RI0HPSKLVHWDO 

'HODZDUH6WDWH&ROOHJHY5LFNV86WKH 7KH&RXUWUHMHFWHGWKDWDUJXPHQWVWDWLQJWKDWDOWKRXJKWKH SODLQWLIIZDVD/LEHULDQSURIHVVRUZKRFODLPHGGLVFULPLQDWLRQ VHQLRULW\V\VWHPKDVDFRQWLQXLQJLPSDFWRQWKHSODLQWLIIjVSD\ RQWKHEDVLVRIKLVQDWLRQDORULJLQ5LFNVZDVQRWLILHGDWWKH DQG IULQJH EHQHILWV mWKH FULWLFDO TXHVWLRQ LV ZKHWKHU DQ\ EHJLQQLQJRIWKHVFKRRO\HDUWKDWKHZRXOGQRWUHFHLYHWHQXUH SUHVHQWYLRODWLRQH[LVWVl,GDW)LQGLQJWKDWWKHUHZDV $V LV XVXDOO\ WKH SUDFWLFH WKH XQLYHUVLW\ RIIHUHG KLP D QRSUHVHQWYLRODWLRQWKH&RXUWHPSKDVL]HGWKDWmWKHV\VWHP mWHUPLQDO FRQWUDFWl WKDW DOORZHG KLP WR WHDFK IRU RQH \HDU LVQHXWUDOLQLWVRSHUDWLRQlEHFDXVHWKHUHZDVQRLQGLFDWLRQ EHIRUHKHZDVUHOHDVHG,GDW5LFNVDUJXHGWKDWWKH WKDWLWGLVFULPLQDWHVDJDLQVWIRUPHUIHPDOHHPSOR\HHVRUWKDW WLPHIRUILOLQJKLV((2&FKDUJHFRPPHQFHGZKHQKHZDV LW WUHDWV IRUPHU HPSOR\HHV GLVFKDUJHG IRU D GLVFULPLQDWRU\ WHUPLQDWHGDQGQRWZKHQKHZDVGHQLHGWHQXUH UHDVRQGLIIHUHQWO\IURPWKRVHZKRZHUHQRW,G 7KH &RXUW GLVDJUHHG ILQGLQJ WKDW mWHUPLQDWLRQ RI $QRWKHUUHOHYDQW6XSUHPH&RXUWFDVHLV/RUDQFHY$7 7 HPSOR\PHQWDW'HODZDUH6WDWHLVDGHOD\HGEXWLQHYLWDEOH 7HFKQRORJLHV,QF86LQZKLFKWKH&RXUW FRQVHTXHQFH RI WKH GHQLDO RI WHQXUHl  ,G DW   7KH KHOGWKDWDFODLPRIGLVFULPLQDWLRQEDVHGRQDIDFLDOO\QHXWUDO &RXUW QRWHG WKDW WKH SURSHU IRFXV LV XSRQ WKH WLPH RI WKH VHQLRULW\V\VWHPEHJLQVWRUXQDWWKHWLPHRIDGRSWLRQRIWKH GLVFULPLQDWRU\ DFWV QRW XSRQ WKH WLPH DW ZKLFK WKH VHQLRULW\V\VWHP/RUDQFHVWDQGVIRUWKHSURSRVLWLRQWKDW FRQVHTXHQFHVRIWKHDFWVEHFDPHPRVWSDLQIXO,GDW 7KH&RXUWDGGHGWKDWm>W@KHHPSKDVLVLVQRWXSRQWKHHIIHFWV WKH GLVWLQFWLRQ GRHV QRW WXUQ RQ WKH W\SH RI RIHDUOLHUHPSOR\PHQWGHFLVLRQVUDWKHULWLVXSRQZKHWKHU GLVFULPLQDWLRQ EXW RQ ZKHWKHU WKH SUDFWLFH DW LVVXH LV DQ\SUHVHQWYLRODWLRQH[LVWVl,GFLWLQJ(YDQV86DW SDUWRIRUDUHSHWLWLRQRIDSDVWGLVFULPLQDWRU\DFWLQ  ZKLFKFDVHWKHUHLVDFRQWLQXLQJYLRODWLRQRUZKHWKHULW LV IDFLDOO\ QHXWUDO VLPSO\ JLYLQJ HIIHFW WR SULRU $QRWKHUSHUWLQHQW6XSUHPH&RXUWFDVHLV8QLWHG$LUOLQHVY GLVFULPLQDWLRQ LQ ZKLFK FDVH WKHUH LV QR FRQWLQXLQJ (YDQV86LQZKLFKDIOLJKWDWWHQGDQWZDV YLRODWLRQ IRUFHGWRUHVLJQLQEHFDXVHVKHYLRODWHGWKHFRPSDQ\jV SROLF\DJDLQVWHPSOR\LQJPDUULHGIOLJKWDWWHQGDQWV$FRXUW $QGHUVRQY&LW\RI%ULVWRO)GWK&LU ODWHU IRXQG WKH PDUULDJH SROLF\ WR EH LOOHJDO DQG 8QLWHG FLWDWLRQRPLWWHG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sHUVH\'HSWRI&LYLO6HUYLFH)GG&LU WKDWWKHIDLOXUHWRUHLQVWDWHZDVDmFRQWLQXLQJDFWlEHFDXVH SODLQWLIIVKDGIDLOHGDFLYLOVHUYLFHH[DPLQDWLRQXVHG mWKHVHQLRULW\V\VWHPJLYHVSUHVHQWHIIHFWWRWKHSDVWLOOHJDODFW E\ WKH &LW\ RI 1HZDUN WR GHWHUPLQH HOLJLELOLW\ IRU KLULQJ DQG WKHUHIRUH SHUSHWXDWHV WKH FRQVHTXHQFHV RI IRUELGGHQ SROLFHRIILFHUV7KHFRXUWKHOGWKDWXVHRIWKHOLVWLQGHQ\LQJ GLVFULPLQDWLRQl,GDW  7KH VSHFLILF KROGLQJ LQ /RUDQFH ZDV VXSHUVHGHG E\ VWDWXWH LQ  6HH  86& † HH