First Natl Bank v. Curry

• Court: Court of Appeals for the Sixth Circuit
• Decided: August 21, 2002
• Docket: 00-6046
• Status: Published

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

),567 1$7,21$/ %$1. 2) ; 38/$6.,  3ODLQWLII   1R  Y !   s2+1 7 &855<HWDO  'HIHQGDQWV&RXQWHU  DQG7KLUG3DUW\  3ODLQWLIIV$SSHOOHHV    +(15< +(15< 63((5  3&HWDO  'HIHQGDQWV7KLUG3DUW\  'HIHQGDQWV$SSHOODQWV    :,//,$0 5 +251(HWDO  7KLUG3DUW\'HIHQGDQWV  BBBBBBBBBBBBBBBBBBBBBBBB   s2+11,( 0 &855<  3ODLQWLII$SSHOOHH    Y    

  )LUVW1DWjO%DQNRI 1R 3XODVNLY&XUU\HWDO

),567 1$7,21$/ %$1. 2)  38/$6.,HWDO  'HIHQGDQWV    +(15< +(15< 63((5  3&HWDO  'HIHQGDQWV$SSHOODQWV  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH0LGGOH'LVWULFWRI7HQQHVVHHDW&ROXPELD 1RVn:LOOLDPs+D\QHVsU 'LVWULFWsXGJH $UJXHGsDQXDU\ 'HFLGHGDQG)LOHG$XJXVW %HIRUH0(55,77%2**6DQG0225(&LUFXLW sXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('  :LQVWRQ 6 (YDQV (9$16 s21(6 5(<12/'61DVKYLOOH7HQQHVVHHIRU$SSHOODQWV&KDUOHV : +ROW sU %26721 +2/7  62&.:(// /DZUHQFHEXUJ 7HQQHVVHH IRU $SSHOOHHV  21 %5,() :LQVWRQ 6 (YDQV :LOOLDP %XUJLQ +DZNLQV ,,, (9$16 s21(6  5(<12/'6 1DVKYLOOH 7HQQHVVHH IRU $SSHOODQWV  *HRUJH % %RVWRQ %26721 +2/7 62&.:(///DZUHQFHEXUJ7HQQHVVHHIRU$SSHOOHHV 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO

BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB .$5(1 1(/621 0225( &LUFXLW sXGJH  7KH $SSHOODQWVLQWKLVDSSHDOFKDOOHQJHWKHUHPDQGWRVWDWHFRXUW RI WZR FDVHV FRQVROLGDWHG E\ WKH GLVWULFW FRXUW mWKH FRQVROLGDWHGFDVHl7KHILUVWFDVHmWKHUHPRYHGFDVHlZDV LQLWLDWHGLQVWDWHFRXUWE\WKH)LUVW1DWLRQDO%DQNRI3XODVNL mWKH%DQNlDJDLQVWYDULRXVPHPEHUVRIWKH&XUU\IDPLO\DV ZHOO DV WZR &XUU\RZQHG SDUWQHUVKLSV $SSHOOHHV sRKQ 7 &XUU\&DUUROO0&XUU\&DWK\&XUU\&RQQLH*&XUU\& 7 3DUWQHUVKLS DQG & & 3DUWQHUVKLS KHUHLQDIWHU mWKH &XUU\ )DPLO\ GHIHQGDQWVl  7KH &XUU\ )DPLO\ GHIHQGDQWV WKHQ FRXQWHUFODLPHGDQGLPSOHDGHGWKH%DQNjVSUHVLGHQW:LOOLDP 5+RUQHm+RUQHlDVDWKLUGSDUW\GHIHQGDQWDQG+RUQH UHPRYHG WKH FDVH WR IHGHUDO FRXUW  7KH VHFRQG FDVH mWKH IHGHUDOFDVHlZDVILOHGLQIHGHUDOFRXUWE\$SSHOOHHsRKQQLH 0&XUU\msRKQQLH&XUU\lWKHPRWKHURUPRWKHULQODZRI sRKQ7&XUU\&DUUROO0&XUU\&DWK\&XUU\DQG&RQQLH* &XUU\$SSHOODQWV+HQU\+HQU\ 6SHHU3&5REHUW& +HQU\DQGsRH:+HQU\sUmWKH+HQU\VlZHUHQDPHGDV GHIHQGDQWVLQWKHVHFRQGIHGHUDOLQLWLDWHGDFWLRQDQGDGGHGDV WKLUGSDUW\GHIHQGDQWVLQWKHILUVWVWDWHLQLWLDWHGDFWLRQDOORI WKH FODLPV DJDLQVW WKH +HQU\V KRZHYHU ZHUH VWDWHODZ FODLPV$IWHUWKHGLVPLVVDORIDOORWKHUGHIHQGDQWVLQFOXGLQJ +RUQHDQGDOOIHGHUDOFODLPVWKHGLVWULFWFRXUWUHPDQGHGWKH VWDWHODZ FODLPV WKDW UHPDLQHG DJDLQVW WKH +HQU\V LQ WKH FRQVROLGDWHG FDVH WR VWDWH FRXUW  7KH +HQU\V QRZ DSSHDO DUJXLQJWKDWWKHGLVWULFWFRXUWVKRXOGKDYHGLVPLVVHGZLWKRXW SUHMXGLFHWKH&XUU\)DPLO\GHIHQGDQWVjDQGsRKQQLH&XUU\jV FODLPVUDWKHUWKDQUHPDQGWKHPWRVWDWHFRXUW %HFDXVHZHFRQFOXGHWKDWWKLUGSDUW\GHIHQGDQWVPD\QRW UHPRYHDQDFWLRQWRIHGHUDOFRXUWDQGWKXVWKDWWKHUHPRYHG FDVHZDVUHPRYHGLPSURSHUO\WRIHGHUDOFRXUWZH$)),50 WKH GLVWULFW FRXUWjV UHPDQG RI WKH FDVH RQ WKHVH JURXQGV +RZHYHUZH5(9(56(WKHGLVWULFWFRXUWjVUHPDQGRIWKH  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

UHPDLQLQJFODLPVLQWKHIHGHUDOFDVHEHFDXVHDFDVHLQLWLDWHG FODLPV DUH GLVPLVVHG EHIRUH WULDO WKH EDODQFH RI LQIHGHUDOFRXUWFDQQRWEHUHPDQGHGWRVWDWHFRXUW)RUWKLV FRQVLGHUDWLRQVXVXDOO\ZLOOSRLQWWRGLVPLVVLQJWKHVWDWHODZ UHDVRQ ZH 5(0$1' WR WKH GLVWULFW FRXUW IRU IXUWKHU FODLPVRUUHPDQGLQJWKHPWRVWDWHFRXUWLIWKHDFWLRQZDV SURFHHGLQJVLQWKHIHGHUDOFDVH UHPRYHGlHPSKDVLVDGGHG ,%$&.*5281' 7KXVWKHGLVWULFWFRXUWHUUHGLQUHPDQGLQJsRKQQLH&XUU\jV FODLPVWRVWDWH FRXUW2QWKLVSRLQWZHYDFDWHWKHGLVWULFW 5REHUW0&XUU\KHUHLQDIWHUm0LNH&XUU\lZDVIRUPHUO\ FRXUWjV UHPDQG RUGHU DQG UHPDQG IRU WKH GLVWULFW FRXUW WR FKLHIH[HFXWLYHRIILFHURIWKH%DQN7KLVSRVLWLRQHQDEOHG GHWHUPLQH ZKHWKHU WR GLVPLVV sRKQQLH &XUU\jV VWDWHODZ KLPWRRSHUDWHDFKHFNNLWLQJVFKHPHLQYROYLQJDQXPEHURI FODLPV RU WR FRQVLGHU KHU FODLPV RQ WKH PHULWV SXUVXDQW WR FKHFNLQJDFFRXQWVWKDWKHDQGRWKHUPHPEHUVRIWKH&XUU\ †F  )DPLO\ FRQWUROOHG  $V SDUW RI WKLV VFKHPH 0LNH &XUU\ DOOHJHGO\H[HFXWHGDQXPEHURISURPLVVRU\QRWHVLQWKHQDPHV ,,,&21&/86,21 RI RWKHU IDPLO\ PHPEHUV DV ZHOO DV RI IDPLO\RZQHG EXVLQHVVHV$IWHUVRPHGHWDLOVRI0LNH&XUU\j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jVIHGHUDOTXHVWLRQ MXULVGLFWLRQRQ0D\6HHsRLQW$SSHQGL[ms$lDW 1HLWKHUWKHSDUWLHVQRUWKHGLVWULFWFRXUWHYHUTXHVWLRQHG WKHSURSULHW\RIUHPRYDOE\+RUQH 7KH GLVWULFW FRXUW VXEVHTXHQWO\ GLVPLVVHG IRXU RI WKH %DQNjVILYHFDVHVDJDLQVWWKH&XUU\)DPLO\GHIHQGDQWVDQG JDYHOHDYHIRUWKH%DQNWRILOHDQDPHQGHGFRPSODLQWLQWKH UHPRYHGFDVHWKDWZRXOGLQFOXGHDOORILWVFODLPVDJDLQVWWKH GHIHQGDQWV6HHs$DW7KLVDPHQGHGFRPSODLQW ZDVILOHGLQ6HSWHPEHU  ,Q $XJXVWWKH&XUU\

 7KH %DQNjV DPHQGHG FRPSODLQW LQFOXGHG sRKQQLH 0 &XUU\ DV D GHIHQGDQW VHH s$ DW  LQ DGGLWLRQ WR WKH &XUU\ )DPLO\ GHIHQGDQWV  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

&7KH3URSULHW\RI5HPDQGLQJWKH)HGHUDO&DVH )DPLO\GHIHQGDQWVPRYHGWKHIHGHUDOGLVWULFWFRXUWWRSHUPLW WKHPWRDPHQGWKHLUFRXQWHUFODLPLQWKHUHPRYHGFDVHWRDGG 7KHGLVWULFWFRXUWUHPDQGHGWKHUHPDLQLQJVWDWHODZFODLPV WKH +HQU\V DV WKLUGSDUW\ GHIHQGDQWV DOOHJLQJ OHJDO DJDLQVW WKH +HQU\V LQ WKH IHGHUDO FDVH WR VWDWH FRXUW HYHQ PDOSUDFWLFH JURVV QHJOLJHQFH UHFNOHVVQHVV DQG GXUHVV WKRXJKWKDWFDVHZDVLQLWLDWHGLQIHGHUDOFRXUW2QDSSHDOWKH DJDLQVWWKH+HQU\V7KHGLVWULFWFRXUWJUDQWHGWKLVPRWLRQLQ +HQU\V HPSKDWLFDOO\ DUJXH WKDW m>D@ GLVWULFW FRXUW FDQQRW )HEUXDU\6HHs$DW UHPDQGDFDVHWRDVWDWHFRXUWZKHUHWKDWFDVHZDVRULJLQDOO\ ILOHGLQIHGHUDOFRXUWl$SSHOODQWjV%UDWHPSKDVLVLQ 0HDQZKLOHSDUDOOHOOLWLJDWLRQLQYROYLQJPDQ\RIWKHVDPH RULJLQDO  7KH &XUU\ )DPLO\ GHIHQGDQWV FRXQWHU WKDW WKH SDUWLHVZDVLQLWLDWHGLQWKH0LGGOH'LVWULFWRI7HQQHVVHHLQ GLVWULFWFRXUWGLGQRWHUULQUHPDQGLQJsRKQQLH&XUU\jVFODLPV $XJXVWZKHQ$SSHOOHHsRKQQLH&XUU\VXHGWKH%DQNWKH LQWKHIHGHUDOFDVHWRVWDWHFRXUWHYHQWKRXJKWKRVHFODLPV +HQU\V DQG RWKHU GHIHQGDQWV RQ D QXPEHU RI WKHRULHV ZHUHILOHGRULJLQDOO\LQIHGHUDOFRXUWEHFDXVHWKHGLVWULFWFRXUW LQFOXGLQJWKHYLRODWLRQRIIHGHUDOEDQNLQJODZVDQGDJDLQVW KDGFRQVROLGDWHGWKHWZRFDVHV WKH+HQU\VOHJDOPDOSUDFWLFH 7KH+HQU\VKDYHWKHEHWWHURIWKLVDUJXPHQWsRKQVRQY 7KXVWKH+HQU\V$SSHOODQWVLQWKHSUHVHQWFDVHDQGRWKHU 0DQKDWWDQ5\&R86KHOGWKDW SDUWLHVZHUHEHLQJVXHGE\ERWKsRKQQLH&XUU\DQGWKH&XUU\ mFRQVROLGDWLRQLVSHUPLWWHGDVDPDWWHURIFRQYHQLHQFHDQG )DPLO\ GHIHQGDQWV $SSHOOHHV LQ WKH SUHVHQW FDVH LQ WZR HFRQRP\LQDGPLQLVWUDWLRQEXWGRHVQRWPHUJHWKHVXLWVLQWR VHSDUDWHFDVHVLQWKH0LGGOH'LVWULFWRI7HQQHVVHH7KHVH DVLQJOHFDXVHRUFKDQJHWKHULJKWVRIWKHSDUWLHVl'HVSLWH FDVHVZHUHFRQVROLGDWHGE\FRXUWRUGHURQ)HEUXDU\ WKHFRQVROLGDWLRQRIWKHWZRDFWLRQVLQWKHSUHVHQWFDVHWKHQ 6HHs$DW7KH%DQNWKH&XUU\)DPLO\GHIHQGDQWVDQG WKHDFWLRQVGLGmQRWPHUJHLQWRDVLQJOHFDXVHl7KH7KLUG sRKQQLH&XUU\DVZHOODVRWKHUSDUWLHVVXEVHTXHQWO\VHWWOHG &LUFXLW DGGUHVVHG D VRPHZKDW VLPLODU IDFWXDO VLWXDWLRQ LQ PRVWRIWKHLUFODLPV7KHGLVWULFWFRXUWGLVPLVVHGWKHVHWWOHG %UDGJDWH$VVRFLDWHVDQGKHOGWKDW FODLPVLQRUGHUVLVVXHGLQ$SULODQG0D\$VDUHVXOW WKHRQO\UHPDLQLQJFODLPVLQWKHFRQVROLGDWHGFDVHZHUHWKH ZKHQDUHPRYHGVWDWHFRXUWFDVHKDVEHHQFRQVROLGDWHG VWDWHODZ FODLPV RI WKH $SSHOOHHV WKH &XUU\ )DPLO\ ZLWK D FDVH RULJLQDOO\ ILOHG LQ IHGHUDO FRXUW DQG WKH GHIHQGDQWV DQG sRKQQLH &XUU\ DJDLQVW WKH $SSHOODQWV WKH GLVWULFW FRXUW GHWHUPLQHV WKDW LW ODFNV VXEMHFW PDWWHU +HQU\V MXULVGLFWLRQRYHUERWKWKHIHGHUDODQGVWDWHFRPSRQHQWVRI WKH FDVH WKH FRXUW PXVW DSSO\ WKH UXOHV SHUWDLQLQJ WR 7KH+HQU\VVXEVHTXHQWO\ILOHGDPRWLRQWRGLVPLVVIRUODFN GLVPLVVDODQGUHPDQGDVLIWKHFDVHVKDGUHWDLQHGWKHLU RIVXEMHFWPDWWHUMXULVGLFWLRQRQ0D\6HHs$DW VHSDUDWHLGHQWLWLHVDQGKDGQHYHUEHHQFRQVROLGDWHG 7KH+HQU\VDUJXHGWKDWEHFDXVHWKHIHGHUDOFODLPV DJDLQVW WKH %DQN DQG LWV RIILFHUV KDG EHHQ GLVPLVVHG WKH  )G DW   7KXV ZKLOH D GLVWULFW FRXUW KDV WKH GLVFUHWLRQWRUHPDQGDFDVHUHPRYHGIURPVWDWHFRXUWLWPD\ QRWUHPDQGDFDVHWKDWZDVQHYHUUHPRYHGIURPVWDWHFRXUW  HYHQ WKRXJK WKH WZR FDVHV KDYH EHHQ FRQVROLGDWHG IRU sRKQQLH &XUU\ ZDV QRW D SDUW\ WR WKH &XUU\ )DPLO\ GHIHQGDQWVj

SXUSRVHVRIFRQYHQLHQFHDQGDGPLQLVWUDWLRQ6HHLGDW VHFRQG DPHQGHG FRXQWHUFRPSODLQW DQG WKLUGSDUW\ FRPSODLQW ILOHG 0DUFK   ZKLFK DGGHG WKH +HQU\V DV WKLUGSDUW\ GHIHQGDQWV LQ WKH 6HHDOVR0XVVRQ7KHDWULFDO,QFY)HG([SUHVV&RUS UHPRYHG DFWLRQ 6HH s$ DW  $W WKH WLPH sRKQQLH &XUU\ ZDV DOUHDG\  )G   WK &LU  m:KHQ DOO IHGHUDO VXLQJ WKH +HQU\V DV WKH SODLQWLII LQ WKH IHGHUDO LH QRQUHPRYHG DFWLRQ DV GLVFXVVHG LQIUD  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

IHGHUDO GLVWULFW FRXUW mQR ORQJHU >KDG@ VXEMHFW PDWWHU WRUWIHDVRUV UHVSRQVLEOH IRU WKH SODLQWLIIjV LQMXU\ DUH QRW MXULVGLFWLRQl RYHU WKH &XUU\ )DPLO\ GHIHQGDQWVj UHPDLQLQJ VHSDUDWH DQG LQGHSHQGHQW  6HH LG DW   7KH )LIWK FODLPVs$DW0RUHSUHFLVHO\WKH+HQU\VDUJXHGWKDW &LUFXLW H[SOLFLWO\ DGRSWHG WKLV GLVWLQFWLRQ LQ ,Q UH :LOVRQ DOWKRXJKWKHGLVWULFWFRXUWUHWDLQHGVXSSOHPHQWDOMXULVGLFWLRQ ,QGXVWULHV,QF)GWK&LU RYHUWKH&XUU\)DPLO\GHIHQGDQWVjVWDWHODZFODLPVmWKHUH >ZD@V QR UHDVRQ ZK\ >WKH GLVWULFW FRXUW@ VKRXOG H[HUFLVH 7KH0DUVK,QYHVWPHQWGLVWLQFWLRQKRZHYHUZDVEDVHGRQ VXSSOHPHQWDOMXULVGLFWLRQRYHUlWKRVHFODLPVs$DW WKHSUHYHUVLRQRI†FZKLFKSHUPLWWHGUHPRYDO RIDVHSDUDWHDQGLQGHSHQGHQWFODLPRQWKHEDVLVRIGLYHUVLW\ 7KHGLVWULFWFRXUWmJUDQWHGlWKH+HQU\VjPRWLRQLQDQRUGHU 6HH0DUVK,QY)6XSSDWm>7@KHUHVSHFWLYHFRXUWV LVVXHG RQ sXQH   ZKLFK ERWK GLVPLVVHG ZLWKRXW KHOGWKDWGLYHUVLW\LQWKHLQGHPQLW\FODLPPDGHWKHHQWLUHFDVH SUHMXGLFH WKH &XUU\ 'HIHQGDQWVj SHQGLQJ FODLPV DQG UHPRYDEOH XQGHU VHFWLRQ Fl VHH DOVR &DUO +HFN UHPDQGHG WKRVH FODLPV WR VWDWH FRXUW  ,Q H[SODLQLQJ LWV (QJjUV  )G DW  QRWLQJ GLYHUVLW\ RI FLWL]HQVKLS GHFLVLRQWKHGLVWULFWFRXUWDOWHUQDWHGEHWZHHQVWDWLQJWKDWLW EHWZHHQWKLUGSDUW\GHIHQGDQWLQVXUHUDQGWKLUGSDUW\SODLQWLII mODFN>HG@ MXULVGLFWLRQ WR DGMXGLFDWH WKH UHPDLQLQJ VWDWH LQVXUHG  :KLOH LQVXUHUV ZLOO RIWHQ EH GLYHUVH IURP WKRVH FODLPVl DQG VWDWLQJ LQ WKH QH[W VHQWHQFH WKDW mWKH &RXUW ZKRP WKH\ LQVXUH VXFK LQVXUDQFHEDVHG LQGHPQLW\ FODLPV GHFOLQHV WR H[HUFLVH SHQGHQW MXULVGLFWLRQ RQ WKH VWDWH ODZ ZLOO UDUHO\ LI HYHU EH UHPRYDEOH RQ WKH EDVLV RI D IHGHUDO FODLPVls$DW7KHGLVWULFWFRXUWWKHQVWDWHGWKDWm>W@KH TXHVWLRQ7KXVLWLVQRWFOHDUZKDWUHPDLQVRIWKHUHDVRQLQJ GLVFUHWLRQWRUHPDQGWRVWDWHFRXUWlZDVZLWKLQLWVDXWKRULW\ RI&DUO+HFNDIWHUWKHDPHQGPHQWWR†F6HH s$DWFLWLQJ/RQJY%DQGR0IJRI$P,QF)G $XWR 7UDQVSRUWHV *DFHOD 6$ GH &9 Y %RUGHU )UHLJKW  WK &LU    7KH GLVWULFW FRXUW H[HUFLVHG WKLV 'LVWULE :DUHKRXVH,QF)6XSS6' GLVFUHWLRQ LQ UHPDQGLQJ WKH &XUU\ )DPLO\ GHIHQGDQWVj 7H[m>6HFWLRQF@KDVEHHQUHFHQWO\DPHQGHG UHPDLQLQJVWDWHODZFODLPVGHVSLWHLWVDVVHUWHGGLVPLVVDORI DQG WKH DPHQGPHQW UHPRYHV WKH XQGHUSLQQLQJV RI >&DUO WKRVHVDPHFODLPVLQWKHVDPHRUGHU7KHGLVSRVLWLRQPDGH +HFN@l  ,W LV FOHDU KRZHYHU WKDW D WKLUGSDUW\ FODLP RI QRUHIHUHQFHWRsRKQQLH&XUU\jVFODLPVDJDLQVWWKH+HQU\V LQGHPQLILFDWLRQEDVHGVROHO\RQWKHGLYHUVLW\RIFLWL]HQVKLS RIDQLQVXUHUDQGDQLQVXUHGVXFKDVWKDWLQYROYHGLQ&DUO 7KH+HQU\VWKHQPRYHGWKHGLVWULFWFRXUWWRDOWHURUDPHQG +HFNLVQRWSUHVHQWO\UHPRYDEOHSXUVXDQWWR†F LWVUHPDQGRUGHUDUJXLQJWKDWWKHGLVWULFWFRXUWKDGIDLOHGWR GLVPLVVsRKQQLH&XUU\jVFODLPVDJDLQVWWKHPLQLWVSUHYLRXV )RUWKHVHUHDVRQVZHFRQFOXGHWKDWWKHUHPRYHGFDVHZDV RUGHUDQGWKDWDVWKHFRXUWKDGGLVPLVVHGWKH&XUU\)DPLO\ LPSURSHUO\ UHPRYHG WR IHGHUDO FRXUW E\ 7KLUG3DUW\ GHIHQGDQWVjFODLPVWKHUHZDVQRWKLQJOHIWWRUHPDQGWRVWDWH 'HIHQGDQW+RUQHDQGWKDWDVDUHVXOWWKHGLVWULFWFRXUWQHYHU FRXUW6HHs$DW7KH+HQU\VWKXVUHTXHVWHGWKDWWKH KDGVXEMHFWPDWWHUMXULVGLFWLRQRYHUWKHUHPRYHGFDVH&I GLVWULFW FRXUW DPHQG WKH RUGHU WR GLVPLVV sRKQQLH &XUU\jV 0LFK$IILOLDWHG+HDOWKFDUH6\V,QFY&&6\V&RUS FODLPV DJDLQVW WKHP DQG WR VWDWH WKDW QRQH RI WKH FODLPV )GWK&LUKROGLQJWKDWGLVWULFWFRXUWGLG DJDLQVWWKHPKDGEHHQUHPDQGHGWRVWDWHFRXUW6HHs$DW QRWKDYHVXEMHFWPDWWHUMXULVGLFWLRQRYHULPSURSHUO\UHPRYHG   7KH GLVWULFW FRXUW UHVSRQGHG WR WKLV PRWLRQ E\ FDVH7KHGLVWULFWFRXUWjVUHPDQGWRWKHVWDWHFRXUWRIWKH UHLQVWDWLQJDOORIWKH&XUU\)DPLO\GHIHQGDQWVjFODLPVDJDLQVW UHPRYHGFDVHZDVWKHUHIRUHSURSHUDQGZHDIILUPWKDWSDUWRI WKH +HQU\V QRWLQJ DJDLQ WKDW LW ODFNHG VXEMHFW PDWWHU WKHGLVWULFWFRXUWjVRUGHURQWKHVHJURXQGV:HDGGUHVVWKH MXULVGLFWLRQRYHUWKRVHFODLPVGLVPLVVLQJWKRVHFODLPVDQG UHPDQGRIWKHIHGHUDOFDVHLQWKHQH[WVHFWLRQ WKHQ UHPDQGLQJ mDOO UHPDLQLQJ FODLPV DJDLQVW WKH +HQU\  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

SDUW\ SODLQWLII IRU DOO RU SDUW RI WKH SODLQWLIIjV FODLP GHIHQGDQWVWRWKH&KDQFHU\&RXUWRI*LOHV&RXQW\ls$DW DJDLQVWWKHWKLUGSDUW\SODLQWLII  7HQQ 5 &LY 3   7KXV XQGHU 7HQQHVVHH VWDWH 7KLVDSSHDOIROORZHG7KH+HQU\VDUJXHRQDSSHDOWKDWWKH SURFHGXUDOUXOHV7KLUG3DUW\'HIHQGDQW+RUQHFRXOGRQO\EH GLVWULFWFRXUWODFNHGWKHDXWKRULW\WRUHPDQGWKHUHPDLQLQJ LPSOHDGHG E\ WKH &XUU\ )DPLO\ GHIHQGDQWV EDVHG RQ KLV VWDWHODZFODLPVDJDLQVWWKHPWRVWDWHFRXUWDQGWKXVWKDWWKH DOOHJHGOLDELOLW\WRWKH&XUU\)DPLO\GHIHQGDQWVEDVHGRQWKH GLVWULFWFRXUWVKRXOGKDYHGLVPLVVHGZLWKRXWSUHMXGLFHWKH 3ODLQWLII %DQNjV DFWLRQ DJDLQVW WKHP  8QGHU WKHVH UHPDLQLQJFODLPVDJDLQVWWKHP FLUFXPVWDQFHV WKH &XUU\ )DPLO\ GHIHQGDQWVj WKLUGSDUW\ FODLPV DJDLQVW +RUQH mDURVH IURP DQ LQWHUORFNHG VHULHV RI ,,$1$/<6,6 WUDQVDFWLRQVl DQG WKXV XQGHU )LQQ WKRVH FODLPV GLG QRW DPRXQWWRDVHSDUDWHDQGLQGHSHQGHQWFDXVHRIDFWLRQXQGHU $$SSHOODWHsXULVGLFWLRQ †F,QGHHGXQGHU7HQQHVVHHjVUXOHVRILPSOHDGHUZH GRQRWWKLQNWKDWWKLUGSDUW\FODLPVFDQVDWLVI\WKHVHSDUDWH $SSHOODWHUHYLHZRIUHPDQGRUGHUVLVOLPLWHGE\86& DQG LQGHSHQGHQW FDXVH RI DFWLRQ UHTXLUHPHQW IRXQG LQ †G7KDWSURYLVLRQVWDWHVLQUHOHYDQWSDUWm$QRUGHU †F UHPDQGLQJ D FDVH WR WKH 6WDWH FRXUW IURP ZKLFK LW ZDV UHPRYHGLVQRWUHYLHZDEOHRQDSSHDORURWKHUZLVHl:H 7KHGHFLVLRQVWRWKHFRQWUDU\KDYHUHDVRQHGPLVWDNHQO\LQ KDYHKHOGKRZHYHUWKDW†GPHDQVRQO\WKDWDUHPDQG RXU YLHZ WKDW DQ LQGHPQLW\ FODLP PD\ EH FRQVLGHUHG D RUGHULVXQUHYLHZDEOHRQDSSHDOZKHQWKHFDVHZDVUHPDQGHG mVHSDUDWH DQG LQGHSHQGHQWl FODLP XQGHU † F  6HH EDVHGRQWKHGLVWULFWFRXUWjVFRQFOXVLRQWKDWLWODFNHGVXEMHFW HVSHFLDOO\ &DUO +HFN (QJjUV  )G DW   7KH &DUN PDWWHU MXULVGLFWLRQ RYHU WKH UHPRYHG FDVH DW WKH WLPH RI +HFNFRXUWFRQFOXGHGWKDWLQGHPQLW\DFWLRQVDUHVHSDUDWHDQG UHPRYDO7KXVDUHPDQGRUGHULVUHYLHZDEOHRQDSSHDOZKHQ LQGHSHQGHQW EHFDXVH m>V@XFK DFWLRQV FDQ EH DQG RIWHQ DUH WKH GLVWULFW FRXUW FRQFOXGHV WKDW WKH DFWLRQ ZDV SURSHUO\ EURXJKW LQ D VHSDUDWH VXLW IURP WKDW ILOHG E\ WKH RULJLQDO UHPRYHGEXWWKDWWKHFRXUWORVWVXEMHFWPDWWHUMXULVGLFWLRQDW SODLQWLIILQWKHPDLQFODLPl,G,QUHDFKLQJWKLVFRQFOXVLRQ VRPHSRLQWSRVWUHPRYDO6HH/RQJY%DQGR0IJRI$P KRZHYHU WKH &DUO +HFN FRXUW IDLOHG WR DSSO\ )LQQ LQ ,QF  )G   WK &LU  KROGLQJ WKDW GHWHUPLQLQJ ZKHWKHU D FDXVH RI DFWLRQ LV VHSDUDWH DQG DSSHOODWHMXULVGLFWLRQWRFRQVLGHUUHPDQGRUGHUH[LVWHGZKHUH LQGHSHQGHQWIURPWKHSODLQWLIIjVXQGHUO\LQJFODLPV,QWKH GLVWULFW FRXUW UHPDQGHG UHPDLQLQJ VWDWHODZ FODLPV DIWHU LPPHGLDWHZDNHRI&DUO+HFNDGLVWULFWFRXUWLQWKH(DVWHUQ GLVPLVVDORISODLQWLIIjVIHGHUDOODZFODLPVLQIHGHUDOTXHVWLRQ 'LVWULFWRI/RXLVLDQDIRUPXODWHGDPRUHHODERUDWHWKHRU\IRU FDVHVHHDOVR9DQ0HWHUY6WDWH)DUP)LUH &DV&R H[SODLQLQJ ZKHQ DQ LQGHPQLW\ FODLP LV VHSDUDWH DQG )GWK&LUm>,@IDGLVWULFWFRXUWGHWHUPLQHV LQGHSHQGHQWXQGHU)LQQ6HH0DUVK,QY&RUSY/DQJIRUG VXEMHFW PDWWHU MXULVGLFWLRQ WR KDYH H[LVWHG DW WKH WLPH RI )6XSS('/DDIIjG)GWK UHPRYDO \HW UHPDQGV IRU DOOHJHG ODFN RI VXEMHFW PDWWHU &LU8QLW$SHUFXULDP7KH0DUVK,QYHVWPHQWFRXUW MXULVGLFWLRQEDVHGRQVRPHSRVWUHPRYDOHYHQWVWKHUHPDQG H[DPLQHG WKH SUHFHGHQWV DQG GHWHUPLQHG WKDW LQGHPQLW\ RUGHULVUHYLHZDEOHl%DOGULGJHY.\2KLR7UDQVS FODLPV EURXJKW E\ GHIHQGDQWV DJDLQVW WKHLU LQVXUDQFH ,QF)GWK&LUVDPH SURYLGHUVVXFKDVLQ&DUO+HFNDUHVHSDUDWHDQGLQGHSHQGHQW IURPWKHSODLQWLIIjVXQGHUO\LQJFODLPVXQGHU)LQQEXWWKDW ,Q WKH SUHVHQW FDVH WKH GLVWULFW FRXUW FRQFOXGHG WKDW LW FODLPVEURXJKWDJDLQVWWKLUGSDUW\GHIHQGDQWVDOOHJHGWREH UHWDLQHG VXSSOHPHQWDO MXULVGLFWLRQ SXUVXDQW WR  86& †DWRFRQVLGHUWKHUHPDLQLQJVWDWHODZFODLPVDJDLQVW  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

WKH+HQU\VGHVSLWHWKHGLVPLVVDORIDOOIHGHUDOFODLPVLQWKH LQWHUSUHWHG DV JHQHUDOO\ DXWKRUL]LQJ UHPRYDO LQ WKHVH FRQVROLGDWHGFDVH7KHGLVWULFWFRXUWGHFOLQHGKRZHYHUWR FRQWH[WVl7KXVHYHQLQWKHFRXUWVKROGLQJWKDW†F H[HUFLVHLWVVXSSOHPHQWDOMXULVGLFWLRQDQGLQVWHDGUHPDQGHG SHUPLWVWKLUGSDUW\GHIHQGDQWVWRUHPRYHWRIHGHUDOFRXUWDV WKRVHFODLPVWRVWDWHFRXUW7KHGLVWULFWFRXUWFRXOGQRWKDYH DJHQHUDOSURSRVLWLRQWKRVHFRXUWVKDYHRIWHQKHOGWKDWWKH FRQFOXGHGWKDWLWUHWDLQHGVXSSOHPHQWDOMXULVGLFWLRQRYHUWKRVH WKLUGSDUW\FODLPVDWLVVXHGLGQRWVDWLVI\WKHmVHSDUDWHDQG VWDWHODZFODLPVKDGLWGHWHUPLQHGWKDWLWQHYHUKDGVXEMHFW LQGHSHQGHQWl UHTXLUHPHQW RI † F  6HH HJ 1HZ PDWWHUMXULVGLFWLRQRYHUWKHUHPRYHGFDVH8QGHUWKHVHIDFWV 9HQWXUH *HDU ,QF Y )RQHKRXVH  ) 6XSS   ZH KDYH MXULVGLFWLRQ WR UHYLHZ WKH GLVWULFW FRXUWjV RUGHU 1'1<KROGLQJWKDWmDWKLUGSDUW\FODLPFDQQRWEH UHPDQGLQJWKH&XUU\)DPLO\GHIHQGDQWVjDQGsRKQQLH&XUU\jV µVHSDUDWHDQGLQGHSHQGHQWjLILWLVVXEVWDQWLDOO\GHULYHGIURP VWDWHODZFODLPVDJDLQVWWKH+HQU\VWRVWDWHFRXUW&I/RQJ WKHVDPHVHWRIIDFWVRULILWLVFRQWLQJHQWLQVRPHZD\RQWKH  )G DW  VHH DOVR LG DW  KROGLQJ WKDW XQGHU SODLQWLIIjVQRQUHPRYDEOHFODLPlTXRWDWLRQRPLWWHG6RSHU †  GLVWULFW FRXUWV KDYH WKH GLVFUHWLRQ WR UHPDQG Y.DKQ)6XSS'0GKROGLQJWKDW UHPDLQLQJUHPRYHGVWDWHODZFODLPVWRVWDWHFRXUWDVZHOODV WKLUGSDUW\ FODLP IRU LQGHPQLW\ XQGHU VWDWH ODZ ZDV QRW WRGLVPLVVVXFKFODLPV mVHSDUDWHDQGLQGHSHQGHQWlXQGHU†F &ROHPDQY$ '0DFK&R)6XSS Q('&DO ,Q OLJKW RI WKH SUHFHGLQJ GLVFXVVLRQ KRZHYHU WKLV FDVH KROGLQJWKDWUHPRYDOZDVLPSURSHUEHFDXVHWKHWKLUGSDUW\ SUHVHQWV D UDWKHU XQXVXDO VLWXDWLRQ  :H ZRXOG EH ZLWKRXW FODLP ZDV QRW VHSDUDWH DQG LQGHSHQGHQW DQG QRWLQJ WKH MXULVGLFWLRQWRUHYLHZWKLVUHPDQGRUGHUDWOHDVWZLWKUHVSHFW SRWHQWLDOLQFRQVLVWHQF\RIWKDWSRVLWLRQ WRWKHUHPRYHGFDVHLIWKHGLVWULFWFRXUWKDGGHWHUPLQHGWKDW WKDWFDVHKDGEHHQLPSURSHUO\UHPRYHGDQGWKXVWKDWLWODFNHG 7KH WHVW IRU GHWHUPLQLQJ WKH H[LVWHQFH RI D VHSDUDWH DQG VXEMHFWPDWWHUMXULVGLFWLRQRYHUWKHFDVHIURPWKHVWDUW:LWK LQGHSHQGHQW FODLP RU FDXVH RI DFWLRQ XQGHU † F ZDV UHVSHFWWRWKHUHPRYHGFDVHKRZHYHUZHFRQFOXGHLQIUDWKDW HVWDEOLVKHG E\ WKH 6XSUHPH &RXUW LQ $PHULFDQ )LUH WKDWFDVHZDVLPSURSHUO\UHPRYHGIURPVWDWHFRXUWnEHFDXVH &DVXDOW\&RY)LQQ86m>:@KHUHWKHUH WKLUGSDUW\GHIHQGDQWVFDQQRWUHPRYHFDVHVWRIHGHUDOFRXUWn LV D VLQJOH ZURQJ WR SODLQWLII IRU ZKLFK UHOLHI LV VRXJKW DQG WKXV WKDW LQ IDFW WKH GLVWULFW FRXUW QHYHU KDG VXEMHFW DULVLQJIURPDQLQWHUORFNHGVHULHVRIWUDQVDFWLRQVWKHUHLVQR PDWWHUMXULVGLFWLRQRYHUWKHUHPRYHGFDVH VHSDUDWH DQG LQGHSHQGHQW FODLP RU FDXVH RI DFWLRQ XQGHU † Fl  /LNH )HGHUDO 5XOH RI &LYLO 3URFHGXUH  ,QRWKHUZRUGVRXUMXULVGLFWLRQRYHUWKDWSDUWRIWKHGLVWULFW KRZHYHUVWDWHSURFHGXUDOUXOHVUHJDUGLQJWKLUGSDUW\SUDFWLFH FRXUWjVUHPDQGRUGHULVEDVHGRQWKHGLVWULFWFRXUWjVIDLOXUHWR RIWHQUHTXLUHWKDWLPSOHDGHGWKLUGSDUW\GHIHQGDQWVEHOLDEOH QRWHLWVODFNRIVXEMHFWPDWWHUMXULVGLFWLRQIURPWKHVWDUW+DG WRWKHWKLUGSDUW\SODLQWLIIGHIHQGDQWEDVHGRQWKHSODLQWLIIjV WKHGLVWULFWFRXUWQRWHGVXDVSRQWHLWVODFNRIVXEMHFWPDWWHU XQGHUO\LQJFODLPV7KHUHPRYHGFDVHZDVILOHGRULJLQDOO\ MXULVGLFWLRQRUKDGWKHSDUWLHVEURXJKWWKLVLVVXHWRWKHGLVWULFW LQ 7HQQHVVHH VWDWH FRXUW  7HQQHVVHHjV YHUVLRQ RI 5XOH  FRXUWjV DWWHQWLRQ ZH ZRXOG QRW KDYH DSSHOODWH MXULVGLFWLRQ ZKLFKLVLGHQWLFDOWRIHGHUDO5XOHVWDWHVLQUHOHYDQWSDUW RYHU WKLV DVSHFW RI WKH SUHVHQW DSSHDO  %HFDXVH RI WKLV XQXVXDO VHW RI FLUFXPVWDQFHV WKLV DSSHDO SUHVHQWV D UDUH $W DQ\ WLPH DIWHU FRPPHQFHPHQW RI WKH DFWLRQ D RFFDVLRQ IRU DQ DSSHOODWH GHFLVLRQ RQ WKLUGSDUW\ UHPRYDO GHIHQGLQJSDUW\DVDWKLUGSDUW\SODLQWLIIPD\FDXVHD XQGHU86&†2QO\WKH)LIWK6HYHQWKDQG(LJKWK VXPPRQVDQGFRPSODLQWWREHVHUYHGXSRQDSHUVRQQRW &LUFXLWVKDYH\HWDGGUHVVHGWKLVLVVXH$VGLVWULFWFRXUWVKDYH DSDUW\WRWKHDFWLRQZKRLVRUPD\EHOLDEOHWRWKHWKLUG QRWHG IURP WLPH WR WLPH m>P@RVW RI WKH FDVH ODZ RQ WKLV  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

DGGLWLRQDODFWLRQVWDNHQE\WKHVDPHSDUW\,QFRQWUDVWWKH VXEMHFWLVIURPGLVWULFWFRXUWVEHFDXVHRIWKHOLPLWHGULJKWRI )HGHUDO5XOHVXVHYHU\GLIIHUHQWODQJXDJHZKHQUHIHUULQJWR DSSHDO RI UHPDQG GHFLVLRQV DV SURYLGHG IRU LQ  86& WKLUGSDUW\FODLPVZKLFKWKH5XOHVFRQVLVWHQWO\GHVFULEHDV †l%URRNRYHU)LQ6HUYV,QFY%HFNOH\)6XSS EHLQJmDVVHUW>HG@lUDWKHUWKDQMRLQHG6HHHJ)HG5&LY G:'.\ 3   $FFRUGLQJO\ ZKHQ † F DOORZV UHPRYDO RI FHUWDLQ FODLPV WKDW DUH mMRLQHGl WKH VWDWXWH LV PRVW OLNHO\ 2XU MXULVGLFWLRQ ZLWK UHVSHFW WR WKH UHPDQG RUGHU LQ WKH UHIHUULQJQRWWRRWKHUFODLPVEURXJKWE\RWKHUSDUWLHVEXWWR IHGHUDOFDVHLVRQDVRPHZKDWGLIIHUHQWIRRWLQJ7KHGLVWULFW PXOWLSOHFODLPVEURXJKWE\WKHVDPHSDUW\ FRXUWjVVXEMHFWPDWWHUMXULVGLFWLRQLQWKDWFDVHSXUVXDQWWR 86&†LVDEXQGDQWO\FOHDU6HHs$DW *LYHQWKHODQJXDJHRIWKHVWDWXWHDQGWKHUXOHWKDWUHPRYDO &RPSOˆˆDOOHJLQJYLRODWLRQRIIHGHUDOEDQNLQJ VWDWXWHVDUHWREHFRQVWUXHGQDUURZO\ZHUHMHFWWKHYLHZWKDW ODZV%HFDXVHPRUHRYHUWKDWFDVHZDVQHYHUUHPRYHGIURP mMRLQHGlDVXVHGLQ†FVKRXOGEHLQWHUSUHWHGEURDGO\ VWDWHFRXUWWKHGLVWULFWFRXUWFRXOGQRWKDYHFRQFOXGHGWKDWLW DQGFRQFOXGHLQVWHDGWKDWLWVKRXOGEHLQWHUSUHWHGQDUURZO\WR ODFNHGMXULVGLFWLRQDWWKHWLPHRIUHPRYDO7KXVWKHGLVWULFW DSSO\RQO\WRFODLPVMRLQHGE\WKHSODLQWLIILQWKHRULJLQDOVWDWH FRXUWjVUHPDQGRUGHULVUHYLHZDEOHRQDSSHDO6HH%UDGJDWH FRXUWDFWLRQ $VVRFV,QFY)HOORZV5HDG $VVRFV,QF)G  G &LU  KROGLQJ UHPDQG RUGHU UHYLHZDEOH $OWKRXJK RXU FRQFOXVLRQ RQ WKLV LVVXH LV EDVHG RQ RXU XQGHUVLPLODUFLUFXPVWDQFHV FRQVWUXFWLRQRIWKHVWDWXWHLWVHOIZHQRWHWKDWLQPRVWLIQRW DOOFDVHVWKLUGSDUW\FODLPVZLOOQRWVDWLVI\WKHmVHSDUDWHDQG % 7KH 3URSULHW\ RI 7KLUG3DUW\ 5HPRYDO 8QGHU  LQGHSHQGHQWlUHTXLUHPHQWRI†F$VWKH7KRPDVFRXUW 86&†† REVHUYHG ,Q KLV QRWLFH RI UHPRYDO 7KLUG3DUW\ 'HIHQGDQW +RUQH $ WKLUGSDUW\ FRPSODLQW LV XVXDOO\ FRQGLWLRQDO RQ WKH DVVHUWHGWZREDVHVIRUUHPRYDO86&††EDQGF VXFFHVVRIWKHPDLQFODLP7KHPRVWFRPPRQWKLUGSDUW\ DOWKRXJK KH FOHDUO\ LQWHQGHG † D ZLWK UHVSHFW WR WKH FODLPLVDFODLPIRULQGHPQLW\WKDWLVDFODLPWKDWVKRXOG IRUPHU EDVLV  $V QRWHGVXSUD QHLWKHU WKH SDUWLHV QRU WKH WKHGHIHQGDQWWKLUGSDUW\SODLQWLIIEHKHOGOLDEOHWRWKH GLVWULFWFRXUWUDLVHGWKHSURSULHW\RIUHPRYDOE\DWKLUGSDUW\ SODLQWLII WKH WKLUGSDUW\ GHIHQGDQW PXVW UHLPEXUVH WKH GHIHQGDQW:HKDYHKRZHYHUDQLQGHSHQGHQWREOLJDWLRQWR GHIHQGDQW IRU WKH FRVW RI VDWLVI\LQJ WKH SODLQWLIIjV FRQVLGHUERWKWKHGLVWULFWFRXUWjVDQGRXURZQVXEMHFWPDWWHU MXGJPHQW MXULVGLFWLRQ6HHHJ%DLUGY1RUWRQ)G WK&LU+DYLQJFDUHIXOO\FRQVLGHUHGWKHLVVXHZH )GDW6HHDOVRHJ+ROORZD\Y*DPEOH6NRJPR FRQFOXGHWKDWQHLWKHU†DQRU†FSURYLGHVWKLUG ,QF)6XSS1',OOm>,@WLVGLIILFXOW SDUW\GHIHQGDQWVZLWKWKHULJKWWRUHPRYHDFDVHWRIHGHUDO WRLPDJLQHDWKLUGSDUW\FRPSODLQWZKLFKLVQRWµGHSHQGHQWj FRXUW RQWKHPDLQFDXVHRIDFWLRQVLQFHXQGHUHYHQWKHPRVWOLEHUDO VWDWHWKLUGSDUW\SUDFWLFHDFORVHUHODWLRQEHWZHHQWKHWKLUG SDUW\FODLPDQGWKHFDVHLQFKLHILVDPLQLPDOUHTXLUHPHQWl  & &KDUOHV $ODQ :ULJKW $UWKXU 5 0LOOHU  (GZDUG + 6HFWLRQ E SODFHV DQ LPSRUWDQW OLPLWDWLRQ RQ WKH ULJKW RI UHPRYDO FUHDWHG LQ † D LQ FDVHV LQ ZKLFK GLYHUVLW\ LV DVVHUWHG EXW &RRSHU)HGHUDO3UDFWLFHDQG3URFHGXUH†DWGHG LW GRHV QRW HVWDEOLVK DQ LQGHSHQGHQW ULJKW WR UHPRYDO 7KXV WKH FDVHV HQGRUVLQJWKHYLHZWKDWm6HFWLRQFVKRXOGQRWEH FRQVLGHULQJ WKH SURSULHW\ RI WKLUGSDUW\ UHPRYDO KDYH GLVFXVVHG †† D DQG F DV WKH UHOHYDQW VWDWXWRU\ SURYLVLRQV  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

6HFWLRQD FODLPVEURXJKWE\WKHRULJLQDOSODLQWLIILVDVPXFKµMRLQHGjWR WKRVHFODLPVDVDQ\RWKHUW\SHRIFODLPl8QGHUWKLV 6HFWLRQVWDWHVLQUHOHYDQWSDUW LQWHUSUHWDWLRQWKHSODLQWLIIjVFODLPVDJDLQVWWKHGHIHQGDQWRU WKH GHIHQGDQWV DUH mMRLQHGl ZLWK WKH GHIHQGDQWVj D([FHSWDVRWKHUZLVHH[SUHVVO\SURYLGHGE\$FWRI FRXQWHUFODLPVDJDLQVWWKHSODLQWLIIVZLWKWKLUGSDUW\FODLPV &RQJUHVV DQ\ FLYLO DFWLRQ EURXJKW LQ D 6WDWH FRXUW RI DVVHUWHGE\WKHGHIHQGDQWVWKLUGSDUW\SODLQWLIIVDJDLQVWWKLUG ZKLFK WKH GLVWULFW FRXUWV RI WKH 8QLWHG 6WDWHV KDYH SDUW\ GHIHQGDQWV ZLWK FURVVFODLPV DVVHUWHG E\ GHIHQGDQWV RULJLQDOMXULVGLFWLRQPD\EHUHPRYHGE\WKHGHIHQGDQWRU DJDLQVWRQHDQRWKHUDQGVRRQ2WKHUFRXUWVKDYHUHDFKHGWKH WKHGHIHQGDQWVWRWKHGLVWULFWFRXUWRIWKH8QLWHG6WDWHV RSSRVLWHFRQFOXVLRQDQGKHOGWKDW†FRQO\DSSOLHVWR IRUWKHGLVWULFWDQGGLYLVLRQHPEUDFLQJWKHSODFHZKHUH FODLPV MRLQHG E\ WKH RULJLQDO SODLQWLIIV LQ WKH XQGHUO\LQJ VXFKDFWLRQLVSHQGLQJ DFWLRQ6HHHJ(ONKDUW&RRS(TXLW\([FKY'D\) 6XSS   ' .DQ  m>5@HPRYDO XQGHU $VWKHVWDWXWRU\ODQJXDJHPDNHVSODLQRQO\mWKHGHIHQGDQWRU †FLVDYDLODEOHRQO\ZKHQDUHPRYDEOHFODLPµLVMRLQHG WKHGHIHQGDQWVlPD\UHPRYHXQGHU†D7KHTXHVWLRQ ZLWKj D QRQUHPRYDEOH FODLP  6WULFWO\ FRQVWUXHG WKLV WKHQLVZKHWKHUDWKLUGSDUW\GHIHQGDQWLVDmGHIHQGDQWlDV SURYLVLRQ RQO\ SHUPLWV UHPRYDO RI FODLPV MRLQHG LQ WKH WKDW WHUP LV XVHG LQ † D  7KH PDMRULW\ YLHZ LV WKDW SODLQWLIIjVFRPSODLQWl6KDYHUY$UN%HVW)UHLJKW6\V,QF WKLUGSDUW\GHIHQGDQWVDUHQRWmGHIHQGDQWVlIRUSXUSRVHVRI  ) 6XSS   :' $UN  m>7@KH UHPRYDO †D6HHHJsRKQVWRQY6W3DXO)LUH 0DULQH,QV VWDWXWH OLPLWV UHPRYDO    WR D VLWXDWLRQ ZKHUH WKHUH LV D &R  ) 6XSS G   (' 0LFK  m>7@KH MRLQGHU RI FODLPV E\ WKH SODLQWLII DQG GRHV QRW DXWKRUL]H PDMRULW\YLHZ>LV@WKDWWKLUGSDUW\GHIHQGDQWVPD\QRWUHPRYH UHPRYDOE\DWKLUGSDUW\GHIHQGDQWl XQGHU†Dl*DOHQ0HG,QFY2ZHQV)6XSSG :'9DVDPH6FKPLGWY$VVjQRI$SW :H EHOLHYH WKDW WKH QDUURZHU UHDGLQJ RI mMRLQHGl LV WKH 2ZQHUV  ) 6XSS   ' +DZ  m7KH FRUUHFWRQH$OWKRXJKWKHXVHRIWKHWHUPmMRLQHGlGRHVQRW PDMRULW\YLHZLVWKDWWKHGHWHUPLQDWLRQRIZKRLVDGHIHQGDQW RQLWVRZQIRUHFORVHDQDOWHUQDWLYHLQWHUSUHWDWLRQWKH)HGHUDO LVGHWHUPLQHGE\WKHRULJLQDOFRPSODLQWQRWVXEVHTXHQWWKLUG 5XOHVRI&LYLO3URFHGXUHFRQVLVWHQWO\XVHWKHWHUPWRUHIHUWR RUIRXUWKSDUW\FRPSODLQWVl7KLVLVDOVRWKHSRVLWLRQWDNHQ FODLPVRUSOHDGLQJVWKDWRQHSDUW\DGGVWRFODLPVRUSOHDGLQJV E\ WZR RI WKH OHDGLQJ WUHDWLVHV RQ FLYLO SURFHGXUH  6HH WKDWWKHSDUW\KDVDOUHDG\PDGH5XOHRIIHUVWKHFOHDUHVW 0RRUHjV )HGHUDO 3UDFWLFH † >@>E@>LY@ DW  H[DPSOHVWDWLQJWKDWDSDUW\ZKRDVVHUWVDFODLPmPD\MRLQ 0DWWKHZ%HQGHUGHGm>7@KLUGSDUW\GHIHQGDQWVDUH DVPDQ\FODLPVDVWKHSDUW\KDVDJDLQVWDQRSSRVLQJ QRW GHIHQGDQWV ZLWKLQ WKH PHDQLQJ RI WKH UHPRYDO VWDWXWH SDUW\l5XOHEVWDWHVWKDWDSDUW\PD\mMRLQ>@lPXOWLSOH    l & &KDUOHV $ODQ :ULJKW $UWKXU 5 0LOOHU GHIHQVHVRUREMHFWLRQVLQWKHVDPHSOHDGLQJRUPRWLRQDQG (GZDUG+&RRSHU)HGHUDO3UDFWLFHDQG3URFHGXUH† 5XOHJDOORZVDSDUW\PDNLQJDPRWLRQXQGHU5XOHWR GHGm1RUFDQWKLUGSDUW\GHIHQGDQWVEURXJKWLQWR mMRLQ ZLWK LW DQ\ RWKHU PRWLRQVl DOORZHG  5XOH D  WKHVWDWHDFWLRQE\WKHRULJLQDOGHIHQGDQWH[HUFLVHWKHULJKWRI ZKLFKJRYHUQVVXESRHQDVVWDWHVWKDWDFRPPDQGWRSURGXFH UHPRYDOWRWKHIHGHUDOFRXUWl6LPLODUO\WKH$PHULFDQ HYLGHQFH PD\ EH mMRLQHGl ZLWK D FRPPDQG WR DSSHDU /DZ ,QVWLWXWH FRQVLGHUV WKLV WKH EHWWHU YLHZ DV LW KDV )LQDOO\5XOHEDOORZVSDUWLHVHLWKHUWRILOHDVLQJOHPRWLRQ UHFRPPHQGHGWKDW&RQJUHVVDPHQG†WRmPDNH>@FOHDU IRUMXGJPHQWDVDPDWWHURIODZRUIRUDQHZWULDORUWRmMRLQl ZKDWWKHSUHVHQWODZPHUHO\LPSOLHVWKHULJKWRIUHPRYDO WKHWZRDVVHSDUDWHPRWLRQVILOHGDWWKHVDPHWLPH7KHXVH DSSOLHV RQO\ WR WKH DFWLRQ DV IUDPHG E\ WKH SOHDGLQJ WKDW RImMRLQlLQWKHVHUXOHVPDNHVVHQVHRQO\LILWLVUHIHUULQJWR  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

$QXPEHURIFRXUWVKDYHFRQFOXGHGWKDW†FGRHVQRW FRPPHQFHV WKH DFWLRQ  &RXQWHUFODLPV FURVVFODLPV DQG DXWKRUL]H WKLUGSDUW\ GHIHQGDQWV WR UHPRYH EHFDXVH WKLUGSDUW\ FODLPV FDQQRW EH WKH EDVLV IRU UHPRYDOl XQGHU m>U@HPRYDORQVXFKEDVLVLVWRRPXFKDNLQWRWKHWDLOZDJJLQJ † D  $/, )HGHUDO sXGLFLDO &RGH 5HYLVLRQ 3URMHFW WKHGRJl(J/HZLV)GDWTXRWDWLRQRPLWWHG †FPWDW7HQW'UDIW1R$SULO $VRQHGLVWULFWFRXUWREVHUYHGPDQ\\HDUVDJRm>$@OORZLQJ UHPRYDOE\DWKLUGSDUW\GHIHQGDQWEULQJVLQWRDIHGHUDOFRXUW :HKROGWKDWWKLUGSDUW\GHIHQGDQWVDUHQRWmGHIHQGDQWVl DVXLWEHWZHHQWKHRULJLQDOSDUWLHVZKLFKKDVQRLQGHSHQGHQW IRU SXUSRVHV RI † D  $V ZH KDYH RIWHQ QRWHG WKH EDVLV IRU IHGHUDO MXULVGLFWLRQ  7KLV LV DQ XQZDUUDQWHG UHPRYDO VWDWXWHV DUH WR EH QDUURZO\ FRQVWUXHG  6HH HJ H[WHQVLRQ RI WKH IHGHUDO MXGLFLDO SRZHUl  %XUOLQJKDP /RQJ)GDWm>%@HFDXVHWKH\LPSOLFDWHIHGHUDOLVP 8QGHUZRRG%DUURQ:ULJKW :KLWHY/XFNHQEDFK66&R FRQFHUQVUHPRYDOVWDWXWHVDUHWREHQDUURZO\FRQVWUXHGl  ) 6XSS   6'1<   ,Q DGRSWLQJ WKLV %ULHUO\Y$OXVXLVVH)OH[LEOH3DFNDJLQJ,QF)G YLHZFRXUWVRIWHQHPSKDVL]HWKDWWKHUHPRYDOVWDWXWHVPXVW WK&LUm,QLQWHUSUHWLQJWKHVWDWXWRU\ODQJXDJH EH QDUURZO\ FRQVWUXHG DQG WKDW † F ZDV DGRSWHG LQ ZH DUH PLQGIXO WKDW WKH VWDWXWHV FRQIHUULQJ UHPRYDO RUGHU mWR UHVWULFW UDWKHU WKDQ H[SDQG WKH VFRSH RI UHPRYDO MXULVGLFWLRQ DUH WR EH FRQVWUXHG VWULFWO\ EHFDXVH UHPRYDO IURPWKHVWDWHFRXUWVl$QGUHZVY(OHF0RWRU6\V,QF MXULVGLFWLRQHQFURDFKHVRQDVWDWHFRXUWjVMXULVGLFWLRQlFHUW )G6'2KLRFLWLQJ$PHULFDQ)LUH &DV GHQLHG  86    ,Q FRQVWUXLQJ WKH IHGHUDO &RY)LQQ86 6HHDOVRHJ)OHHW%DQN UHPRYDOVWDWXWHVVWULFWO\ZHKDYHUHOLHGXSRQ6KDPURFN2LO 1+ Y (QJHOHLWHU  ) 6XSS   '1+  *DV&RUSY6KHHWV86,QWKDWFDVHWKH KROGLQJWKDW&RQJUHVVLQWHQGHGRQO\WKDWRULJLQDOGHIHQGDQWV 6XSUHPH&RXUWKHOGWKDWDVWDWHFRXUWSODLQWLIIDJDLQVWZKRP EHDEOHWRUHPRYHSXUVXDQWWR†F 6HTXR\DK)HHG WKHGHIHQGDQWKDGILOHGDFRXQWHUFODLPFRXOGQRWUHPRYHWR 6XSSO\&RY5RELQVRQ)6XSS:'$UN IHGHUDO FRXUW XQGHU WKH VWDWXWRU\ SUHGHFHVVRU WR † D KROGLQJWKDWXQGHUDmVWULFWFRQVWUXFWLRQlRI†F 7KH6KDPURFN2LO&RXUWQRWHGWKDWEHWZHHQDQG WKLUGSDUW\GHIHQGDQWVPD\QRWUHPRYHWRIHGHUDOFRXUW WKHUHPRYDOVWDWXWHJDYHWKHULJKWRIUHPRYDOWRmHLWKHUSDUW\l VHHLGDWEXWWKDW&RQJUHVVKDGDPHQGHGWKHSURYLVLRQ 7KLVYLHZRI†FLVFRQVLVWHQWZLWKRXUFRQFOXVLRQ LQ  WR DOORZ UHPRYDO mRQO\ µE\ WKH GHIHQGDQW RU WKDW WKLUGSDUW\ GHIHQGDQWV PD\ QRW UHPRYH SXUVXDQW WR GHIHQGDQWVWKHUHLQjl,GDW  TXRWLQJ†D 7KH †D7KHGLIIHUHQFHEHWZHHQWKHWZRSURYLVLRQVLQWKLV &RXUW FRQFOXGHG WKDW &RQJUHVV LQWHQGHG mWR QDUURZ WKH UHVSHFWLVWKDW†FXQOLNH†DGRHVQRWLQFOXGH IHGHUDOMXULVGLFWLRQRQUHPRYDOlLQDPHQGLQJWKHVWDWXWHLQ WKHSKUDVHmWKHGHIHQGDQWRUWKHGHIHQGDQWVlZKLFKZHKHOG WKLVZD\LGDWDQGWKXVWKDWFRQJUHVVLRQDOLQWHQWERXQG VXSUDPXVWEHFRQVWUXHGQDUURZO\7KXVLWLVSRVVLEOHWKDW WKH&RXUWWRGHQ\SODLQWLIIVWKHULJKWWRUHPRYHHYHQLIWKH †FHYHQLIFRQVWUXHGQDUURZO\PD\SHUPLWWKLUGSDUW\ SODLQWLIIVZHUHVXEMHFWHGWRDFRXQWHUFODLPE\WKHGHIHQGDQW GHIHQGDQWVWRUHPRYHWRIHGHUDOFRXUW7KHUHVWRI†F ,Q UHDFKLQJ WKLV FRQFOXVLRQ WKH &RXUW DOVR UXOHG WKDW WKH PXVWDOVREHFRQVWUXHGQDUURZO\KRZHYHULQFOXGLQJWKHWHUP VWDWHVjLPSRUWDQWLQWHUHVWLQWKHLQGHSHQGHQFHRIWKHLUFRXUWV mMRLQHGl6RPHFRXUWVKDYHLQWHUSUHWHGmMRLQHGlDVXVHGLQ UHTXLUHGmVWULFWFRQVWUXFWLRQlRIWKHUHPRYDOVWDWXWHV,GDW †FEURDGO\WRHQFRPSDVVDOOFODLPVEURXJKWWRJHWKHU 6HHDOVR$KHDUQY&KDUWHU7ZSRI%ORRPILHOG LQWKHOLWLJDWLRQLQTXHVWLRQ6HHHJ)RUG0RWRU&UHGLW&R )G   WK &LU  m'XH UHJDUG IRU VWDWH Y $DURQ/LQFROQ 0HUFXU\ ,QF  ) 6XSS   JRYHUQPHQWVjULJKWIXOLQGHSHQGHQFHUHTXLUHVIHGHUDOFRXUWV 1',OOm$VHSDUDWHDQGLQGHSHQGHQWFODLPDJDLQVW VFUXSXORXVO\ WR FRQILQH WKHLU RZQ MXULVGLFWLRQ WR SUHFLVH DWKLUGSDUW\GHIHQGDQWSODFHGLQWRDVLQJOHODZVXLWZLWKWKH VWDWXWRU\OLPLWVl  )LUVW1DWjO%DQNRI 1R 1R )LUVW1DWjO%DQNRI  3XODVNLY&XUU\HWDO 3XODVNLY&XUU\HWDO

$OWKRXJK 6KDPURFN 2LO LV QRW GLVSRVLWLYH RI WKH SUHFLVH 6HFWLRQF LVVXHEHIRUHXVLWGRHVGLFWDWHWKDWWKHSKUDVHmWKHGHIHQGDQW RU WKH GHIHQGDQWVl DV XVHG LQ † D EH LQWHUSUHWHG 7KLUG3DUW\ 'HIHQGDQW +RUQH DOVR DVVHUWHG  86& QDUURZO\ WR UHIHU WR GHIHQGDQWV LQ WKH WUDGLWLRQDO VHQVH RI †FDVDEDVLVIRUUHPRYDOLQWKHSUHVHQWFDVH7KDW SDUWLHV DJDLQVW ZKRP WKH SODLQWLII DVVHUWV FODLPV  7KLV SURYLVLRQVWDWHV LQWHUSUHWDWLRQ RI mWKH GHIHQGDQW RU WKH GHIHQGDQWVl LV EROVWHUHGE\WKHXVHRIPRUHH[SDQVLYHWHUPVLQRWKHUUHPRYDO :KHQHYHUDVHSDUDWHDQGLQGHSHQGHQWFODLPRUFDXVHRI VWDWXWHV7LWOHJUDQWVUHPRYDOSRZHULQEDQNUXSWF\FDVHV DFWLRQZLWKLQWKHMXULVGLFWLRQFRQIHUUHGE\VHFWLRQ WRDQ\mSDUW\lVHH86&†DDEURDGHUJUDQWRI RIWKLVWLWOHLVMRLQHGZLWKRQHRUPRUHRWKHUZLVHQRQ SRZHU WKDW FRXUWV KDYH LQWHUSUHWHG WR H[WHQG WR WKLUGSDUW\ UHPRYDEOHFODLPVRUFDXVHVRIDFWLRQWKHHQWLUHFDVHPD\ GHIHQGDQWV6HH7KRPDV%%HQQHWW5HPRYDO5HPDQGDQG EH UHPRYHG DQG WKH GLVWULFW FRXUW PD\ GHWHUPLQH DOO $EVWHQWLRQ5HODWHGWR%DQNUXSWFLHVDPRQJWKHDXWKRULWLHV@UHJDUGLQJ 86& G DQG FRXUWV KDYH LQWHUSUHWHG WKDW JUDQW WR ZKHWKHU WKLUGSDUW\ DFWLRQV DQG FURVVFODLPV FDQ EH LQFOXGH IRUHLJQ VWDWHV WKDW DUH WKLUGSDUW\ GHIHQGDQWV  6HH FRQVLGHUHG XQGHU † F DV IXOILOOLQJ WKH µVHSDUDWH DQG sRQDWKDQ5HP\1DVK3HQGHQW3DUW\sXULVGLFWLRQ8QGHUWKH LQGHSHQGHQW FODLPj UHTXLUHPHQW RI WKDW VHFWLRQl :KLWH Y )RUHLJQ6RYHUHLJQ,PPXQLWLHV$FW%8,QWjO/s +XJKHV)6XSS:'7HQQ2IWKH  Q  VXPPDUL]LQJ FDVHV  %\ FRQWUDVW FLUFXLWVWRKDYHFRQVLGHUHGWKLVTXHVWLRQWKH(LJKWK&LUFXLW †DjVJUDQWRIUHPRYDOSRZHULVPXFKPRUHOLPLWHG KDVKHOGWKDW†FGRHVQRWSHUPLWWKLUGSDUW\GHIHQGDQWV LQVWLOOLQJ D ULJKW RI UHPRYDO RQO\ LQ WKH GHIHQGDQW RU WKH WRUHPRYHVHH/HZLVY:LQGVRU'RRU&R)G GHIHQGDQWV6HHHJsRKQVWRQ)6XSSDWQRWLQJ WK &LU  m:H GR QRW    EHOLHYH † F ZDV WKDW WKH WHUPV mGHIHQGDQWl DQG mWKLUGSDUW\ GHIHQGDQWl LQWHQGHG WR HIIHFW UHPRYDO RI D VXLW QRW RWKHUZLVH ZLWKLQ mW\SLFDOO\ DUH XQGHUVWRRG DV UHIHUULQJ WR GLVWLQFW SDUWLHVl IHGHUDO MXULVGLFWLRQ EHFDXVH RI WKH LQWURGXFWLRQ RI D WKLUG .QLJKW Y +HOOHQLF /LQHV /WG  ) 6XSS   SDUW\FODLPlTXRWDWLRQRPLWWHG WKH6HYHQWK &LUFXLWKDV ('1<FRQFOXGLQJWKDWWKLUGSDUW\GHIHQGDQWLVQRW KHOGmWKDWLQWKHEURDGUXQRIWKLUGSDUW\FDVHVWKHWKLUG DmGHIHQGDQWlDVWKDWWHUPLVXVHGLQ†D )ULGGOHY SDUW\GHIHQGDQWFDQQRWUHPRYHXQGHUVHFWLRQFlEXWKDV +DUGHHjV)RRG6\V,QF)6XSS:'$UN QRW DGRSWHG mD XQLYHUVDO DQG DEVROXWH UXOH WR WKDW HIIHFWl m:HKROGWKDWDOLPLWVWKHULJKWWRUHPRYHWR 7KRPDVY6KHOWRQ)GWK&LUDQGWKH GHIHQGDQWVDQGGRHVQRWJLYHDULJKWRIUHPRYDOWRWKLUGSDUW\ )LIWK&LUFXLWKDVKHOGWKDWWKLUGSDUW\GHIHQGDQWVPD\UHPRYH GHIHQGDQWVl7KXVFRQVWUXLQJWKHUHPRYDOVWDWXWHQDUURZO\ XQGHU†FZKHQHYHUWKHUHTXLUHPHQWVRIWKDWSURYLVLRQ ZH FRQFOXGH WKDW WKLUGSDUW\ GHIHQGDQWV GR QRW KDYH D DUH RWKHUZLVH VDWLVILHG &DUO +HFN (QJLQHHUV ,QF Y VWDWXWRU\ULJKWRIUHPRYDOSXUVXDQWWR†D /DIRXUFKH3DULVK3ROLFHsXU\)GWK&LU  DGRSWLQJ DV mWKH PRUH UDWLRQDO YLHZl WKH YLHZ mSHUPLWW>LQJ@ UHPRYDO RQ WKH EDVLV RI D WKLUG SDUW\ FODLP ZKHUHDVHSDUDWHDQGLQGHSHQGHQWFRQWURYHUV\LVVWDWHGl