Habliston v. Finra Regulation, Inc.

• Court: District Court, District of Columbia
• Decided: January 27, 2017
• Docket: Civil Action No. 2015-2225
• Status: Published

Opinion

81,7(' 67$7(6 ',675,&7 &2857 )25 7+( ',675,&7 2) &2/80%,$ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

$11 025721 <281* +$%/,6721 et al.

3ODLQWLIIV

Y &LYLO $FWLRQ 1R  $%-

),15$ 5(*8/$7,21 ,1&

'HIHQGDQW BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

0(025$1'80 23,1,21

3ODLQWLIIV $QQD 0RUWRQ

DUELWUDWLRQ DJDLQVW :HOOV )DUJR $GYLVRUV //& FRQFHUQLQJ WKHLU GHFHDVHG SDUHQWV¶ EURNHUDJH

DFFRXQWV $SSDUHQWO\ WKH\ DUH H[WUHPHO\ GLVVDWLVILHG ZLWK KRZ LW LV JRLQJ VR IDU DQG WKH\ KDYH

EURXJKW WKLV DFWLRQ DJDLQVW GHIHQGDQW ),15$ 5HJXODWLRQ ,QF ³),15$ 5HJXODWLRQ´ 6XEVWLWXWH

$P &RPSO >'NW  @ ³&RPSO´

 3ODLQWLIIV RULJLQDOO\ EURXJKW WKLV ODZVXLW RQ 'HFHPEHU   DJDLQVW ),15$ 'LVSXWH 5HVROXWLRQ ,QF &RPSO >'NW  @ EXW WKH\ ILOHG DQ DPHQGHG FRPSODLQW RQ 0D\   DJDLQVW ),15$ 5HJXODWLRQ ,QF $P &RPSO >'NW  @ 3ODLQWLIIV WKHQ ILOHG D VXEVWLWXWH DPHQGHG FRPSODLQW RQ -XQH   6XEVWLWXWH $P &RPSO >'NW  @ 3ODLQWLIIV DOOHJH WKDW ),15$ 5HJXODWLRQ KDV IDLOHG WR SURYLGH D IDLU DUELWUDWLRQ IRUXP

EHFDXVH WKH DUELWUDWRUV DUH ELDVHG DQG WKHLU SURFHGXUDO UXOLQJV WR GDWH KDYH EHHQ XQIDLU WKDW

),15$ 5HJXODWLRQ KDV IDLOHG WR FDUU\ RXW LWV UHJXODWRU\ GXWLHV SURSHUO\ DQG WKDW WKH ELQGLQJ

DUELWUDWLRQ SURYLVLRQV FRQWDLQHG LQ WKH EURNHUDJH FRQWUDFWV DUH YRLG RU XQHQIRUFHDEOH 3ODLQWLIIV

DOVR VHHN GDPDJHV XQGHU  86& †  &RPSO ˆ  DQG WKH\ DVN WKH &RXUW WR DSSRLQW QHZ

DUELWUDWRUV WR KHDU WKH SHQGLQJ DUELWUDWLRQ Id. ˆ 

2Q -XO\   GHIHQGDQW PRYHG WR GLVPLVV WKH FRPSODLQW SXUVXDQW WR )HGHUDO 5XOHV RI

&LYLO 3URFHGXUH E  E  E  DQG K  RQ PXOWLSOH JURXQGV ,W DUJXHV WKDW

SODLQWLIIV¶ FODLPV DUH QRW ULSH IRU UHYLHZ VLQFH WKH DUELWUDWLRQ LV RQJRLQJ GHIHQGDQW LV LPPXQH IURP

VXLW XQGHU WKH GRFWULQHV RI DUELWUDO DQG UHJXODWRU\ LPPXQLW\ SODLQWLIIV KDYH IDLOHG WR QDPH

LQGLVSHQVDEOH SDUWLHV GHIHQGDQW LV QRW D VWDWH DFWRU IRU SXUSRVHV RI VHFWLRQ  WKH 6HFXULWLHV DQG

 See, e.g. &RPSO ˆˆ   ±  DOOHJLQJ ),15$ YLRODWHG LWV RZQ UXOHV LQ FRQGXFWLQJ GLVFRYHU\ DQG SRVWSRQLQJ KHDULQJV id. ˆˆ ±   ± DOOHJLQJ ),15$ DUELWUDWRUV DUH LQGXVWU\ELDVHG DQG KDYH GLVTXDOLI\LQJ UHODWLRQVKLSV id. ˆˆ   ±  DOOHJLQJ ),15$ DFWHG ZLWK NQRZQ FRQIOLFWV RI LQWHUHVW id. ˆˆ % . DOOHJLQJ ),15$ KDV QR PHDQLQJIXO PHWKRG RI RYHUVLJKW EHFDXVH DUELWUDWLRQV DUH KHOG LQ SULYDWH DQG KDYH LQDGHTXDWH DSSHDO PHFKDQLVPV id. ˆˆ  ±      DOOHJLQJ WKH DUELWUDWLRQ LV QRW DQ LPSDUWLDO KHDULQJ EHIRUH XQELDVHG DUELWUDWRUV id. ˆˆ ±      DOOHJLQJ SODLQWLIIV¶ GLVFRYHU\ UHTXHVWV ZHUH XQIDLUO\ GHQLHG RU UHMHFWHG id. ˆˆ      DOOHJLQJ SODLQWLIIV ZHUH XQIDLUO\ GHQLHG SRVWSRQHPHQW RI D KHDULQJ GDWH IRU H[WUDRUGLQDU\ FLUFXPVWDQFHV id. ˆ  DOOHJLQJ UHSODFHPHQW DUELWUDWRUV ZLOO EH ELDVHG

 See, e.g. &RPSO ˆ  DOOHJLQJ IDLOXUH WR HQWHU DQ HQIRUFHPHQW DFWLRQ DJDLQVW :HOOV )DUJR IRU YLRODWLRQV RI ),15$ UXOHV id. ˆˆ $ $  DOOHJLQJ ),15$ DQG ),15$ 5HJXODWLRQ DOORZHG YRWLQJ ),15$ PHPEHUV WR UHPDLQ OLFHQVHG ZLWK LQDGHTXDWH VXSHUYLVRU\ SURFHGXUHV id. ˆ  DOOHJLQJ YLRODWLRQV RI IHGHUDO DQG VWDWH VHFXULWLHV ODZV DV ZHOO DV ),15$ 5XOHV id. ˆ  DOOHJLQJ ),15$ FRQFHDOHG FULPLQDO PLVFRQGXFW DQG GHFHSWLYH VDOHV SUDFWLFHV E\ :HOOV )DUJR

 See, e.g. &RPSO ˆˆ   ± DOOHJLQJ WKH SURYLVLRQV VKRXOG EH GHFODUHG YRLG DJDLQVW SODLQWLIIV EHFDXVH GHIHQGDQW YLRODWHG SODLQWLIIV¶ FRQVWLWXWLRQDO ULJKWV ˆ  DOOHJLQJ WKH\ VKRXOG EH YRLG RU YDFDWHG EHFDXVH ³WKH\ ZHUH REWDLQHG DJDLQVW WKH >S@ODLQWLIIV¶ ZLOO´ ˆ  DVNLQJ WKH &RXUW ³WR GHFODUH ),15$ SUH GLVSXWH ELQGLQJ DUELWUDWLRQ SURYLVLRQV    YRLG RU QRW HQIRUFHDEOH´ EHFDXVH ),15$ 5HJXODWLRQ ³PDWHULDOO\ EUHDFKHG ),15$ $UELWUDWLRQ 5XOHV´  ([FKDQJH $FW GRHV QRW FUHDWH D SULYDWH ULJKW RI DFWLRQ IRU DOOHJHG YLRODWLRQV RI UXOHV HQDFWHG XQGHU

WKH $FW DQG SODLQWLIIV¶ UHTXHVW WKDW WKH &RXUW DSSRLQW QHZ DUELWUDWRUV LV PRRW EHFDXVH UHSODFHPHQW

DUELWUDWRUV KDYH DOUHDG\ EHHQ DSSRLQWHG 0RW WR 'LVPLVV WKH &RPSO >'NW  @ ³'HI¶V 0RW´

DW  0HP RI /DZ LQ 6XSS RI 'HI¶V 0RW >'NW  @ ³'HI¶V 0HP´ DW ±

3ODLQWLIIV IDLOHG WR RSSRVH PDQ\ RI WKHVH DUJXPHQWV VR WKH PRWLRQ KDV EHHQ ODUJHO\

FRQFHGHG :LWK UHVSHFW WR WKH RSHQ LVVXHV WKH &RXUW FRQFOXGHV WKDW SODLQWLIIV¶ FODLPV DUH QRW ULSH

IRU UHYLHZ DQG WKDW GHIHQGDQW LV HQWLWOHG WR DUELWUDO LPPXQLW\ 7KHUHIRUH WKH PRWLRQ WR GLVPLVV

ZLOO EH JUDQWHG

%$&.*5281'

3ODLQWLIIV¶ SDUHQWV ZKR DUH QRZ GHFHDVHG PDLQWDLQHG LQYHVWPHQW DFFRXQWV ZLWK :DFKRYLD

6HFXULWLHV ,QF QRZ :HOOV )DUJR $GYLVRUV //& ³:HOOV )DUJR´ DQG WKH\ ZHUH WKH XQIRUWXQDWH

YLFWLPV RI FULPLQDO PLVFRQGXFW &RPSO ˆˆ   $ :HOOV )DUJR EURNHU &KULVWRSKHU

&XQQLQJKDP ZDV FRQYLFWHG RI WDNLQJ RYHU  PLOOLRQ IURP SODLQWLIIV¶ SDUHQWV DQG RWKHU FXVWRPHUV

Id. ˆ  7KHUHDIWHU SODLQWLIIV DFWLQJ LQ WKHLU SDUHQWV¶ VWHDG EURXJKW VXLW DJDLQVW :HOOV )DUJR DQG

)XOFUXP 6HUYLFHV ,QF ³)XOFUXP´ DOOHJLQJ WKDW WKH\ NQRZLQJO\ DQG UHFNOHVVO\ DOORZHG WKH WKHIW

WR RFFXU OHDGLQJ WR D ORVV RI RYHU  PLOOLRQ Id. ˆ 

8QGHU WKH WHUPV RI WKH DFFRXQW DJUHHPHQWV ZLWK :HOOV )DUJR DQG )XOFUXP SODLQWLIIV ZHUH

UHTXLUHG WR VXEPLW WKHLU FODLPV WR D ELQGLQJ DUELWUDWLRQ SURFHHGLQJ DGPLQLVWHUHG E\ WKH )LQDQFLDO

,QGXVWU\ 5HJXODWRU\ $XWKRULW\ ,QF ³),15$´ See &RPSO ˆ  ),15$ LV D SULYDWH QRWIRU

SURILW 'HODZDUH FRUSRUDWLRQ id. ˆ  DQG DFFRUGLQJ WR GHIHQGDQW LV D VHOIUHJXODWRU\ RUJDQL]DWLRQ

³652´ UHJLVWHUHG ZLWK WKH 6HFXULWLHV DQG ([FKDQJH &RPPLVVLRQ ³6(&´ DV D QDWLRQDO

 $ VHOIUHJXODWRU\ RUJDQL]DWLRQ LV GHILQHG DV ³DQ\ QDWLRQDO VHFXULWLHV H[FKDQJH UHJLVWHUHG VHFXULWLHV DVVRFLDWLRQ RU UHJLVWHUHG FOHDULQJ DJHQF\´  86& † FD 

 VHFXULWLHV DVVRFLDWLRQ 'HI¶V 0HP DW  ,WV ZKROO\ RZQHG VXEVLGLDU\ ),15$ 5HJXODWLRQ

RSHUDWHV D GLVSXWH UHVROXWLRQ IRUXP WKDW DGPLQLVWHUV ),15$ DUELWUDWLRQV &RPSO ˆ  $FFRUGLQJ

WR GHIHQGDQW ),15$ 5HJXODWLRQ¶V 2IILFH RI 'LVSXWH 5HVROXWLRQ DSSRLQWV DUELWUDWRUV PDLQWDLQV WKH

DUELWUDWLRQ ILOHV SURFHVVHV SOHDGLQJV DQG PRWLRQV GUDIWV RUGHUV ZLWK DUELWUDWRU GLUHFWLRQ DQG

WUDQVPLWV GRFXPHQWV EHWZHHQ WKH SDUWLHV 'HI¶V 0HP DW 

3ODLQWLIIV¶ IRUW\IRXU SDJH VXEVWLWXWHG DPHQGHG FRPSODLQW LV KDUGO\ D ³VKRUW DQG SODLQ´

VWDWHPHQW RI WKH FODLPV )HG 5 &LY 3 D EXW LW ERLOV GRZQ WR IRXU FRXQWV See &RPSO ,Q

&RXQW , SODLQWLIIV DOOHJH WKDW WKH FRQWUDFWXDO ³),15$ SUHGLVSXWH ELQGLQJ DUELWUDWLRQ SURYLVLRQV

VKRXOG EH YDFDWHG RU GHFODUHG YRLG´ EHFDXVH WKH\ YLRODWH SODLQWLIIV¶ FRQVWLWXWLRQDO ULJKWV Id. ˆˆ 

 ± ,Q &RXQW ,, WKH\ DOOHJH WKDW WKH DUELWUDWLRQ SURYLVLRQV VKRXOG EH GHFODUHG YRLG EHFDXVH

),15$ 5HJXODWLRQ KDV PDWHULDOO\ EUHDFKHG ),15$ DUELWUDWLRQ UXOHV Id. ˆ  ,Q &RXQW ,,,

SODLQWLIIV EULQJ D FODLP IRU GDPDJHV XQGHU  86& ††  DQG  DOOHJLQJ WKDW ),15$

5HJXODWLRQ DFWHG ³XQGHU FRORU RI ODZ´ WR GHQ\ SODLQWLIIV WKHLU FRQVWLWXWLRQDO ULJKWV XQGHU WKH GXH

SURFHVV DQG HTXDO SURWHFWLRQ FODXVHV Id. ˆ  6SHFLILFDOO\ SODLQWLIIV FODLP WKDW ),15$

5HJXODWLRQ ³NQRZLQJO\ YLRODWHG LWV GXW\ WR DFW REMHFWLYHO\ DQG LPSDUWLDOO\´ DQG DFWHG ZLWK WKH

 ),15$ LV D UHJLVWHUHG QDWLRQDO VHFXULWLHV DVVRFLDWLRQ SXUVXDQW WR WKH 6HFXULWLHV ([FKDQJH $FW RI   86& † D et seq. ³([FKDQJH $FW´ 'HI¶V 0HP DW 

 7KH 6(& DXWKRUL]HG ),15$ WR LQFOXGH SUHGLVSXWH ELQGLQJ DUELWUDWLRQ SURYLVLRQV LQ WKHLU FXVWRPHU DFFRXQW DJUHHPHQWV 2UGHU *UDQWLQJ $FFHOHUDWHG $SSURYDO 5HJDUGLQJ 5XOH *RYHUQLQJ 3UHGLVSXWH $UELWUDWLRQ $JUHHPHQWV ZLWK &XVWRPHUV  )HG 5HJ  'HF   $GGLWLRQDOO\ WKH 6(& DXWKRUL]HG ),15$ WR GHOHJDWH LWV DGPLQLVWUDWLRQ RI DUELWUDWLRQV WR ),15$ 5HJXODWLRQ DQG ),15$ KDV GRQH VR See 2UGHU $SSURYLQJ 3URSRVHG 5XOH &KDQJH WR 0HUJH ),15$ 'LVSXWH 5HVROXWLRQ ,QF LQWR DQG ZLWK ),15$ 5HJXODWLRQ ,QF  )HG 5HJ  'HF   see also ),15$ 5XOH  'HOHJDWLRQ $XWKRULW\ DQG $FFHVV  KWWSILQUDFRPSOLQHWFRPHQGLVSOD\GLVSOD\BPDLQKWPO"UELG  HOHPHQWBLG  +RZHYHU ),15$ PDLQWDLQV XOWLPDWH UHVSRQVLELOLW\ IRU WKH ZRUN RI ),15$ 5HJXODWLRQ See ),15$ ),15$¶V 3ODQ RI $OORFDWLRQ DQG 'HOHJDWLRQ RI )XQFWLRQV E\ ),15$ WR ),15$ 5HJXODWLRQ ,QF  http://finra.complinet.com/en/display/display_viewall.html?rbid=2403& element_id=4594&record_id=16680&filtered_tag=  ³LQWHQW WR SUHMXGLFH´ SODLQWLIIV E\ LQIOXHQFLQJ ³WKH REMHFWLYLW\ DQG LPSDUWLDOLW\´ RI ),15$

5HJXODWLRQ¶V DUELWUDWRUV Id. ˆ  )LQDOO\ LQ &RXQW ,9 SODLQWLIIV UHTXHVW WKDW WKH &RXUW DSSRLQW

UHSODFHPHQW DUELWUDWRUV XQGHU  86& †  EHFDXVH WKH\ ³ZLOO EH LPPLQHQWO\ DQG LUUHSDUDEO\

KDUPHG´ LI WKH &RXUW GRHV QRW LQWHUYHQH WR SUHYHQW ),15$ 5HJXODWLRQ ³IURP YLRODWLQJ LWV DUELWUDWRU

VHOHFWLRQ UXOHV´ Id. ˆˆ ±

2Q 6HSWHPEHU   SODLQWLIIV ILOHG DQ RSSRVLWLRQ WR GHIHQGDQW¶V PRWLRQ WR GLVPLVV

See 3OV¶ 0HP LQ 2SS WR 'HI¶V 0RW >'NW  @ ³3OV¶ 2SS´ %XW SODLQWLIIV IDLOHG WR DGGUHVV

DQG WKHUHE\ FRQFHGHG D QXPEHU RI GHIHQGDQW¶V DUJXPHQWV 3ODLQWLIIV EULHIHG WKH LVVXHV RI DUELWUDO

LPPXQLW\ DQG ZKHWKHU ),15$ 5HJXODWLRQ LV D VWDWH DFWRU IRU SXUSRVHV RI WKHLU VHFWLRQ  FODLP

DQG WKH\ WRXFKHG XSRQ GHIHQGDQW¶V ULSHQHVV DUJXPHQW id. DW ± ± EXW WKH\ PDGH QR

DWWHPSW WR DGGUHVV DQ\ RWKHU LVVXHV ,QVWHDG SODLQWLIIV GHYRWHG DSSUR[LPDWHO\ VL[ SDJHV WR

DWWDFNLQJ WKH YDOLGLW\ RI WKH DUELWUDWLRQ FODXVHV LQ WKH EURNHUDJH FRQWUDFWV WR ZKLFK GHIHQGDQW

),15$ 5HJXODWLRQ ZDV QRW D SDUW\ See id. DW ± 'HIHQGDQW ILOHG D UHSO\ WR SODLQWLIIV¶

RSSRVLWLRQ RQ 6HSWHPEHU   5HSO\ LQ 6XSS RI 'HI¶V 0RW >'NW  @ ³'HI¶V 5HSO\´

67$1'$5' 2) 5(9,(:

, 6XEMHFW 0DWWHU -XULVGLFWLRQ

8QGHU 5XOH E  WKH SODLQWLII EHDUV WKH EXUGHQ RI HVWDEOLVKLQJ MXULVGLFWLRQ E\ D

SUHSRQGHUDQFH RI WKH HYLGHQFH See Lujan v. Defs. of Wildlife  86    Shekoyan

v. Sibley Int’l Corp.  ) 6XSS G   ''&  )HGHUDO FRXUWV DUH FRXUWV RI OLPLWHG

MXULVGLFWLRQ DQG WKH ODZ SUHVXPHV WKDW ³D FDXVH OLHV RXWVLGH WKLV OLPLWHG MXULVGLFWLRQ´ Kokkonen v.

Guardian Life Ins. Co. of Am.  86    see also Gen. Motors Corp. v. EPA 

)G   '& &LU  ³$V D FRXUW RI OLPLWHG MXULVGLFWLRQ ZH EHJLQ DQG HQG ZLWK DQ

H[DPLQDWLRQ RI RXU MXULVGLFWLRQ´ ³>%@HFDXVH VXEMHFWPDWWHU MXULVGLFWLRQ LV µDQ $UW>LFOH@ ,,, DV

 ZHOO DV D VWDWXWRU\ UHTXLUHPHQW    QR DFWLRQ RI WKH SDUWLHV FDQ FRQIHU VXEMHFWPDWWHU MXULVGLFWLRQ

XSRQ D IHGHUDO FRXUW¶´ Akinseye v. District of Columbia  )G   '& &LU 

TXRWLQJ Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee  86   

:KHQ FRQVLGHULQJ D PRWLRQ WR GLVPLVV IRU ODFN RI MXULVGLFWLRQ XQOLNH ZKHQ GHFLGLQJ D

PRWLRQ WR GLVPLVV XQGHU 5XOH E  WKH FRXUW ³LV QRW OLPLWHG WR WKH DOOHJDWLRQV RI WKH FRPSODLQW´

Hohri v. United States  )G   '& &LU  vacated on other grounds  86

  5DWKHU ³D FRXUW PD\ FRQVLGHU VXFK PDWHULDOV RXWVLGH WKH SOHDGLQJV DV LW GHHPV

DSSURSULDWH WR UHVROYH WKH TXHVWLRQ >RI@ ZKHWKHU LW KDV MXULVGLFWLRQ WR KHDU WKH FDVH´ Scolaro v.

D.C. Bd. of Elections & Ethics  ) 6XSS G   ''&  FLWLQJ Herbert v. Nat’l

Acad. of Scis.  )G   '& &LU  see also Jerome Stevens Pharm. Inc. v. FDA

 )G   '& &LU 

,, )DLOXUH WR 6WDWH D &ODLP

³7R VXUYLYH D >5XOH E @ PRWLRQ WR GLVPLVV D FRPSODLQW PXVW FRQWDLQ VXIILFLHQW IDFWXDO

PDWWHU DFFHSWHG DV WUXH WR VWDWH D FODLP WR UHOLHI WKDW LV SODXVLEOH RQ LWV IDFH´ Ashcroft v. Iqbal

 86    LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG accord Bell Atl. Corp. v. Twombly

 86    ,Q Iqbal WKH 6XSUHPH &RXUW UHLWHUDWHG WKH WZR SULQFLSOHV XQGHUO\LQJ LWV

GHFLVLRQ LQ Twombly ³)LUVW WKH WHQHW WKDW D FRXUW PXVW DFFHSW DV WUXH DOO RI WKH DOOHJDWLRQV

FRQWDLQHG LQ D FRPSODLQW LV LQDSSOLFDEOH WR OHJDO FRQFOXVLRQV´  86 DW  $QG ³>V@HFRQG

RQO\ D FRPSODLQW WKDW VWDWHV D SODXVLEOH FODLP IRU UHOLHI VXUYLYHV D PRWLRQ WR GLVPLVV´ Id DW 

$ FODLP LV IDFLDOO\ SODXVLEOH ZKHQ WKH SOHDGHG IDFWXDO FRQWHQW ³DOORZV WKH FRXUW WR GUDZ WKH

UHDVRQDEOH LQIHUHQFH WKDW WKH GHIHQGDQW LV OLDEOH IRU WKH PLVFRQGXFW DOOHJHG´ Id DW  ³7KH

SODXVLELOLW\ VWDQGDUG LV QRW DNLQ WR D µSUREDELOLW\ UHTXLUHPHQW¶ EXW LW DVNV IRU PRUH WKDQ D VKHHU

SRVVLELOLW\ WKDW D GHIHQGDQW KDV DFWHG XQODZIXOO\´ Id $ SOHDGLQJ PXVW RIIHU PRUH WKDQ ³ODEHOV

 DQG FRQFOXVLRQV´ RU D ³IRUPXODLF UHFLWDWLRQ RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ´ id TXRWLQJ

Twombly  86 DW  DQG ³>W@KUHDGEDUH UHFLWDOV RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ VXSSRUWHG

E\ PHUH FRQFOXVRU\ VWDWHPHQWV GR QRW VXIILFH´ Id

:KHQ FRQVLGHULQJ D PRWLRQ WR GLVPLVV XQGHU 5XOH E  WKH &RXUW LV ERXQG WR FRQVWUXH

D FRPSODLQW OLEHUDOO\ LQ WKH SODLQWLII¶V IDYRU DQG LW VKRXOG JUDQW WKH SODLQWLII ³WKH EHQHILW RI DOO

LQIHUHQFHV WKDW FDQ EH GHULYHG IURP WKH IDFWV DOOHJHG´ Kowal v. MCI Commc’ns Corp.  )G

  '& &LU  1HYHUWKHOHVV WKH &RXUW QHHG QRW DFFHSW LQIHUHQFHV GUDZQ E\ WKH

SODLQWLII LI WKRVH LQIHUHQFHV DUH XQVXSSRUWHG E\ IDFWV DOOHJHG LQ WKH FRPSODLQW QRU PXVW WKH &RXUW

DFFHSW SODLQWLII¶V OHJDO FRQFOXVLRQV See id. Browning v. Clinton  )G   '& &LU

 ,Q UXOLQJ XSRQ D PRWLRQ WR GLVPLVV IRU IDLOXUH WR VWDWH D FODLP D FRXUW PD\ RUGLQDULO\

FRQVLGHU RQO\ ³WKH IDFWV DOOHJHG LQ WKH FRPSODLQW GRFXPHQWV DWWDFKHG DV H[KLELWV RU LQFRUSRUDWHG

E\ UHIHUHQFH LQ WKH FRPSODLQW DQG PDWWHUV DERXW ZKLFK WKH &RXUW PD\ WDNH MXGLFLDO QRWLFH´

Gustave-Schmidt v. Chao  ) 6XSS G   ''&  FLWDWLRQV RPLWWHG

$1$/<6,6

, 3ODLQWLIIV FRQFHGHG WKH DUJXPHQWV WKDW WKH\ IDLOHG WR DGGUHVV LQ WKHLU RSSRVLWLRQ WR GHIHQGDQW¶V PRWLRQ WR GLVPLVV

3ODLQWLIIV IDLOHG WR DGGUHVV IRXU RI WKH VHYHQ DUJXPHQWV WKDW GHIHQGDQW UDLVHG LQ LWV PRWLRQ

WR GLVPLVV See 3OV¶ 2SS :KHQ D SODLQWLII IDLOV WR DGGUHVV DUJXPHQWV PDGH LQ D GHIHQGDQW¶V

PRWLRQ WR GLVPLVV WKH &RXUW PD\ WUHDW WKRVH DUJXPHQWV DV FRQFHGHG See /&Y5 E ³,W LV ZHOO

XQGHUVWRRG LQ WKLV &LUFXLW WKDW ZKHQ D SODLQWLII ILOHV DQ RSSRVLWLRQ WR D PRWLRQ WR GLVPLVV DGGUHVVLQJ

RQO\ FHUWDLQ DUJXPHQWV UDLVHG E\ WKH GHIHQGDQW D FRXUW PD\ WUHDW WKRVH DUJXPHQWV WKDW WKH SODLQWLII

IDLOHG WR DGGUHVV DV FRQFHGHG´ Hopkins v. Women’s Div., Gen. Bd. of Global Ministries  )

6XSS G   ''&  FLWLQJ FDIC v. Bender  )G  ± '& &LU 

7KH GLVFUHWLRQ WR HQIRUFH WKLV UXOH OLHV ZKROO\ ZLWK WKH GLVWULFW FRXUW Id.

 %HFDXVH SODLQWLIIV KDYH QRW DGGUHVVHG GHIHQGDQW¶V DUJXPHQWV WKDW GHIHQGDQW LV HQWLWOHG WR

UHJXODWRU\ LPPXQLW\ WKH FRPSODLQW IDLOV WR QDPH LQGLVSHQVDEOH SDUWLHV WKH ([FKDQJH $FW GRHV QRW

FUHDWH D SULYDWH ULJKW RI DFWLRQ DQG WKH UHTXHVW IRU WKH &RXUW WR DSSRLQW QHZ DUELWUDWRUV LV PRRW WKH

&RXUW ZLOO WUHDW WKH PRWLRQ WR GLVPLVV RQ WKRVH JURXQGV DV FRQFHGHG

'HIHQGDQW FRQWHQGV WKDW LW LV QRW D SURSHU SDUW\ WR WKLV ODZVXLW DQG WKDW &RXQWV , DQG ,,

VKRXOG EH GLVPLVVHG EHFDXVH SODLQWLIIV IDLOHG WR QDPH WKH UHDO SDUWLHV LQ LQWHUHVW ± :HOOV )DUJR DQG

)XOFUXP 'HI¶V 0HP DW ± %HFDXVH SODLQWLIIV GLG QRW UHVSRQG WR GHIHQGDQW¶V DUJXPHQW WKLV

DUJXPHQW LV FRQFHGHG DQG WKH &RXUW ZLOO GLVPLVV &RXQWV , DQG ,, See Hopkins  ) 6XSS G

DW 

3ODLQWLIIV IDLOHG WR RSSRVH GHIHQGDQW¶V DUJXPHQW WKDW &RXQW ,9 LV PRRW EHFDXVH WKH

DUELWUDWRU YDFDQFLHV KDYH DOUHDG\ EHHQ ILOOHG See 'HI¶V 0HP DW  6R &RXQW ,9 ZLOO EH

GLVPLVVHG DV ZHOO See Hopkins  ) 6XSS G DW 

$OO WKDW UHPDLQV WKHQ LV &RXQW ,,, WKH VHFWLRQ  FODLP $OWKRXJK SODLQWLIIV GLG UHVSRQG

WR GHIHQGDQW¶V DUJXPHQW WKDW LW LV QRW D VWDWH DFWRU 3OV¶ 2SS DW ± SODLQWLIIV GLG QRW DGGUHVV

GHIHQGDQW¶V DUJXPHQW WKDW LW LV LPPXQH IURP VXLW XQGHU WKH GRFWULQH RI UHJXODWRU\ LPPXQLW\ See

'HI¶V 0HP DW ± 6R WKH &RXUW FRXOG GLVPLVV SODLQWLIIV¶ FODLPV RQ WKDW EDVLV DORQH

0RUHRYHU WKH &RXUW KDV JURXQGV WR JUDQW GHIHQGDQW¶V PRWLRQ WR GLVPLVV EHFDXVH SODLQWLIIV¶

FODLPV DUH QRW ULSH IRU UHYLHZ DQG GHIHQGDQW LV HQWLWOHG WR DUELWUDO LPPXQLW\ 7KHUHIRUH WKH FDVH

ZLOO EH GLVPLVVHG LQ LWV HQWLUHW\

 %HFDXVH WKHVH JURXQGV DUH DGHTXDWH WR GLVPLVV WKH FRPSODLQW LQ LWV HQWLUHW\ WKH &RXUW QHHG QRW DGGUHVV GHIHQGDQW¶V DGGLWLRQDO DUJXPHQWV  ,, 3ODLQWLIIV¶ FODLPV LQ &RXQW ,,, WKDW WKHLU FRQVWLWXWLRQDO ULJKWV ZHUH YLRODWHG GXH WR DQ DOOHJHGO\ XQIDLU DUELWUDWLRQ SURFHVV DUH QRW ULSH IRU UHYLHZ

³7KH ULSHQHVV GRFWULQH JHQHUDOO\ GHDOV ZLWK ZKHQ D IHGHUDO FRXUW FDQ RU VKRXOG GHFLGH D

FDVH 3DUW RI WKH GRFWULQH LV VXEVXPHG LQWR WKH $UWLFOH ,,, UHTXLUHPHQW RI VWDQGLQJ ZKLFK UHTXLUHV

D SHWLWLRQHU WR DOOHJH inter alia DQ LQMXU\LQIDFW WKDW LV µLPPLQHQW¶ RU µFHUWDLQO\ LPSHQGLQJ¶´ Am.

Petrol. Inst. v. Envtl. Prot. Agency  )G   '& &LU  see also Lujan  86

DW  KROGLQJ LQMXU\LQIDFW PXVW EH ³DFWXDO´ RU ³LPPLQHQW´ $QG ³>H@YHQ LI D FDVH LV

µFRQVWLWXWLRQDOO\ ULSH¶    WKHUH PD\ DOVR EH µSUXGHQWLDO UHDVRQV IRU UHIXVLQJ WR H[HUFLVH

MXULVGLFWLRQ¶´ Am. Petrol. Inst.  )G DW  TXRWLQJ Nat’l Park Hospitality Ass’n v. Dep’t of

Interior  86    $V WKH '& &LUFXLW KDV H[SODLQHG

7KH IXQGDPHQWDO SXUSRVH RI WKH ULSHQHVV GRFWULQH LV ³WR SUHYHQW WKH FRXUWV WKURXJK DYRLGDQFH RI SUHPDWXUH DGMXGLFDWLRQ IURP HQWDQJOLQJ WKHPVHOYHV LQ DEVWUDFW GLVDJUHHPHQWV RYHU DGPLQLVWUDWLYH SROLFLHV DQG DOVR WR SURWHFW WKH DJHQFLHV IURP MXGLFLDO LQWHUIHUHQFH XQWLO DQ DGPLQLVWUDWLYH GHFLVLRQ KDV EHHQ IRUPDOL]HG DQG LWV HIIHFWV IHOW LQ D FRQFUHWH ZD\ E\ WKH FKDOOHQJLQJ SDUWLHV´

Sprint Corp. v. Fed. Commc’ns Comm’n  )G   '& &LU  TXRWLQJ Nat’l Park

Hospitality  86 DW ±

:KLOH WKH FRQVWLWXWLRQDO DVSHFW RI ULSHQHVV PD\ LQYROYH WKH VDPH LPSHQGLQJ LQMXU\LQIDFW

UHTXLUHPHQW WKDW LV QHFHVVDU\ IRU VWDQGLQJ WKH SUXGHQWLDO DVSHFW RI ULSHQHVV UHTXLUHV PRUH D FRXUW

PXVW ³EDODQFH>@ µWKH ILWQHVV RI WKH LVVXHV IRU MXGLFLDO GHFLVLRQ DQG WKH KDUGVKLS WR WKH SDUWLHV RI

ZLWKKROGLQJ FRXUW FRQVLGHUDWLRQ¶´ Nat’l Treasury Emps. Union v. United States  )G 

± '& &LU  TXRWLQJ Abbott Labs. v. Gardner  86    7KH ILWQHVV

RI DQ LVVXH IRU MXGLFLDO GHFLVLRQ GHSHQGV RQ ZKHWKHU WKHUH DUH ³FRQWLQJHQW IXWXUH HYHQWV WKDW PD\

QRW RFFXU DV DQWLFLSDWHG RU LQGHHG PD\ QRW RFFXU DW DOO´ Thomas v. Union Carbide Agric. Prods.

Co.  86  ±  TXRWLQJ $ & :ULJKW $ 0LOOHU ( &RRSHU )HGHUDO

3UDFWLFH DQG 3URFHGXUH †    6LQFH WKH DUELWUDWLRQ LV VWLOO RQJRLQJ SODLQWLIIV¶ FKDOOHQJH WR WKH SURFHHGLQJ LV QRW ULSH IRU

UHYLHZ )RU $UWLFOH ,,, SXUSRVHV SODLQWLIIV FDQQRW GHPRQVWUDWH WKDW WKH\ KDYH VXIIHUHG DQ DFWXDO

LQMXU\ RU WKDW DQ\ KDUP LV ³LPPLQHQW RU FHUWDLQO\ LPSHQGLQJ´ Chlorine Inst., Inc. v. Fed. R.R.

Admin.  )G   '& &LU  GLVPLVVLQJ SODLQWLII¶V SHWLWLRQ IRU UHYLHZ RI DJHQF\¶V

ILQDO UXOH IRU ODFN RI MXULVGLFWLRQ ZKHUH UXOH KDG QRW \HW EHHQ LPSOHPHQWHG VR LQMXU\ KDG QRW

HPHUJHG DQG WKHUHIRUH FDVH ZDV QRW ULSH IRU UHYLHZ $QG SUXGHQWLDO FRQVLGHUDWLRQV IDYRU

GLVPLVVDO DV ZHOO :KLOH SODLQWLIIV H[SUHVV IHDU WKDW WKH\ ZLOO QRW UHFHLYH DQ REMHFWLYH KHDULQJ

&RPSO ˆˆ    DQG WKH\ WDNH LVVXH ZLWK FHUWDLQ LQWHUORFXWRU\ SURFHGXUDO UXOLQJV VXFK DV WKH

GHQLDO RI WKH UHTXHVWHG GLVFRYHU\ DQG WKH SRVWSRQHPHQW RI KHDULQJ GDWHV id. ˆˆ     

WKH DUELWUDWLRQ KDV QRW \HW FRQFOXGHG DQG WKH RXWFRPH ± ZKLFK FRXOG EH LQ SODLQWLIIV¶ IDYRU ± LV

XQNQRZQ 6R DQ\ DOOHJHG ELDV RQ WKH SDUW RI ),15$ 5HJXODWLRQ¶V DUELWUDWRUV KDV QRW \HW SURGXFHG

DQ\ DGYHUVH FRQVHTXHQFHV DQG WKH UHFRUG XSRQ ZKLFK RQH ZRXOG GHWHUPLQH ZKHWKHU SODLQWLIIV¶

 FRQVWLWXWLRQDO ULJKWV KDYH EHHQ YLRODWHG KDV QRW \HW EHHQ GHYHORSHG 7KXV SODLQWLIIV¶ FODLPV XQGHU

&RXQW ,,, DUH QRW ULSH IRU UHYLHZ DQG WKH\ ZLOO EH GLVPLVVHG

,,, 3ODLQWLIIV¶ UHPDLQLQJ FODLPV PXVW EH GLVPLVVHG EHFDXVH GHIHQGDQW LV HQWLWOHG WR DUELWUDO LPPXQLW\

7KH 6XSUHPH &RXUW KDV H[SODLQHG WKDW ³MXGJHV DGYRFDWHV DQG ZLWQHVVHV´ HQMR\ ³DEVROXWH

LPPXQLW\    EHFDXVH RI WKH VSHFLDO QDWXUH RI WKHLU UHVSRQVLELOLWLHV´ Butz v. Economou  86

   ³7KH ORVHU LQ RQH IRUXP ZLOO IUHTXHQWO\ VHHN DQRWKHU FKDUJLQJ WKH SDUWLFLSDQWV

LQ WKH ILUVW ZLWK XQFRQVWLWXWLRQDO DQLPXV $EVROXWH LPPXQLW\ LV WKXV QHFHVVDU\ WR DVVXUH WKDW

MXGJHV DGYRFDWHV DQG ZLWQHVVHV FDQ SHUIRUP WKHLU UHVSHFWLYH IXQFWLRQV ZLWKRXW KDUDVVPHQW RU

LQWLPLGDWLRQ´ Id. DW  LQWHUQDO FLWDWLRQV RPLWWHG &RXUWV KDYH H[WHQGHG WKH GRFWULQH RI DEVROXWH

LPPXQLW\ WR D ZLGH UDQJH RI SHUVRQV ZKR SOD\ D UROH LQ WKH DGMXGLFDWLYH SURFHVV See, e.g. id. DW

± ³:H WKLQN WKDW DGMXGLFDWLRQ ZLWKLQ D IHGHUDO DGPLQLVWUDWLYH DJHQF\ VKDUHV HQRXJK RI WKH

 %HFDXVH SODLQWLIIV¶ FRQVWLWXWLRQDO FODLPV DUH QRW ULSH IRU UHYLHZ WKH &RXUW GRHV QRW QHHG WR GHWHUPLQH ZKHWKHU GHIHQGDQW LV D ³VWDWH DFWRU´ IRU SXUSRVHV RI SODLQWLIIV¶ VHFWLRQ  FODLP EXW WKH FODLP IDLOV RQ WKDW EDVLV DV ZHOO ,Q RUGHU WR VWDWH D FODLP XQGHU VHFWLRQ  D SODLQWLII ³PXVW DOOHJH WKDW VRPH SHUVRQ KDV GHSULYHG KLP RI D IHGHUDO ULJKW´ DQG ³WKDW WKH SHUVRQ ZKR KDV GHSULYHG KLP RI WKDW ULJKW DFWHG XQGHU FRORU RI VWDWH RU WHUULWRULDO ODZ´ Gomez v. Toledo  86    see also Ranger v. Tenet  ) 6XSS G   ''&  KROGLQJ WKDW SODLQWLII IDLOHG WR VWDWH D FODLP XQGHU VHFWLRQ  ZKHUH SODLQWLII DOOHJHG WKH &,$ D JRYHUQPHQW DJHQF\ DFWHG ³XQGHU FRORU RI IHGHUDO VWDWXWHV DQG DJHQF\ SURFHGXUHV ZKHQ LW DOOHJHGO\ YLRODWHG >SODLQWLII¶V@ )LIWK DQG )RXUWHHQWK $PHQGPHQW ULJKWV´ 3ODLQWLIIV KDYH IDLOHG WR VWDWH D FODLP XQGHU VHFWLRQ  EHFDXVH WKH\ GR QRW DOOHJH WKDW GHIHQGDQW DFWHG XQGHU VWDWH ODZ UDWKHU WKH\ DOOHJH WKDW GHIHQGDQW DFWHG ³XQGHU IHGHUDO ODZV´ DQG LQ YLRODWLRQ RI ³),15$ 5XOHV´ &RPSO ˆˆ ± &RXUWV LQ WKLV MXULVGLFWLRQ KDYH DOUHDG\ GHWHUPLQHG WKDW ),15$ DQG ),15$ 5HJXODWLRQ RU WKHLU SUHGHFHVVRUV 1$6' DQG 1$6' 5HJXODWLRQ DUH QRW ³VWDWH DFWRUV´ IRU SXUSRVHV RI D VHFWLRQ  FODLP See Marchiano v. Nat’l Ass’n of Secs. Dealers, Inc.  ) 6XSS G   ''&  ³7KH FRXUW LV DZDUH RI QR FDVH    LQ ZKLFK 1$6' >G@HIHQGDQWV ZHUH IRXQG WR EH VWDWH DFWRUV´ Graman v. Nat’l Ass’n of Secs. Dealers, Inc. 1R   :/  DW ± ''& $SULO   ³(YHU\ FRXUW WKDW KDV FRQVLGHUHG WKH TXHVWLRQ KDV FRQFOXGHG WKDW 1$6' LV QRW D JRYHUQPHQW DFWRU´ $QG RWKHU FRXUWV KDYH UHDFKHG WKH VDPH FRQFOXVLRQ See, e.g. Epstein v. Secs. & Exch. Comm’n  ) $SS¶[   G &LU  Perpetual Secs., Inc. v. Tang  )G   G &LU  ³,W LV FOHDU WKDW 1$6' LV QRW D VWDWH DFWRU DQG LWV UHTXLUHPHQW RI PDQGDWRU\ DUELWUDWLRQ LV QRW VWDWH DFWLRQ´ Shrader v. Nat’l Ass’n of Secs. Dealers, Inc.  ) 6XSS   ('1&  aff’d  )G  WK &LU   FKDUDFWHULVWLFV RI WKH MXGLFLDO SURFHVV WKDW WKRVH ZKR SDUWLFLSDWH LQ VXFK DGMXGLFDWLRQ VKRXOG DOVR

EH LPPXQH IURP VXLWV IRU GDPDJHV´ Wagshal v. Foster  )G   '& &LU 

H[WHQGLQJ LPPXQLW\ WR PHGLDWRUV 'HIHQGDQW FRQWHQGV WKDW LW LV LPPXQH IURP VXLW LQ LWV

SRVLWLRQ DV DQ DUELWUDWLRQ IRUXP DQG WKDW SODLQWLIIV ³DUH XQDEOH WR DGYDQFH DQ\ VHW RI IDFWV WKDW

ZRXOG VWDWH D FODLP DJDLQVW´ ),15$ 5HJXODWLRQ 'HI¶V 0HP DW ± 7KH &RXUW DJUHHV

7KH PDMRULW\ RI FLUFXLW FRXUWV KDYH H[WHQGHG DUELWUDO LPPXQLW\ WR FRYHU QRW RQO\ WKH

LQGLYLGXDO DUELWUDWRU EXW WKH DUELWUDWLRQ IRUXP DV ZHOO See e.g. Pfannenstiel v. Merrill Lynch

 )G   WK &LU  ³>&@RXUWV XQLIRUPO\ KROG WKDW DUELWUDWLRQ IRUXPV DQG

VSRQVRUV OLNH FRXUWV RI ODZ DUH LPPXQH IURP OLDELOLW\ IRU DFWLRQV WDNHQ LQ FRQQHFWLRQ ZLWK

DGPLQLVWHULQJ DUELWUDWLRQ´ Int’l Med. Grp., Inc. v. Am. Arbitration Ass’n., Inc.  )G 

 WK &LU  ILQGLQJ DUELWUDWLRQ IRUXP LPPXQH IURP VXLW New England Cleaning Servs.,

Inc. v. Am. Arbitration Ass’n  )G   VW &LU  ³>2@UJDQL]DWLRQV WKDW VSRQVRU

DUELWUDWLRQV DV ZHOO DV DUELWUDWRUV WKHPVHOYHV HQMR\ WKLV LPPXQLW\ IURP FLYLO OLDELOLW\´ Hawkins

v. Nat’l Ass’n of Sec. Dealers Inc.  )G   WK &LU  ³7KH 1$6' HQMR\V DUELWUDO

LPPXQLW\ IURP FLYLO OLDELOLW\ IRU WKH DFWV RI LWV DUELWUDWRUV LQ WKH FRXUVH RI FRQGXFWLQJ FRQWUDFWXDOO\

DJUHHGXSRQ DUELWUDWLRQ SURFHHGLQJV´ abrogated on other grounds by Merrill Lynch, Pierce,

Fenner & Smith v. Manning  6 &W   Olson v. Nat’l Ass’n of Sec. Dealers  )G

  WK &LU  ³$UELWUDO LPPXQLW\ SURWHFWV DOO DFWV ZLWKLQ WKH VFRSH RI WKH DUELWUDO

SURFHVV´ LQFOXGLQJ WKRVH E\ ³VSRQVRULQJ RUJDQL]DWLRQV´ Austern v. Chi. Bd. Options Exch., Inc.

 )G   G &LU  KROGLQJ WKDW WKH ³FRPPHUFLDO VSRQVRULQJ RUJDQL]DWLRQ´ LV

³HQWLWOHG WR LPPXQLW\ IRU DOO IXQFWLRQV WKDW DUH LQWHJUDOO\ UHODWHG WR WKH DUELWUDO SURFHVV´ Corey v.

 7KH 'LVWULFW RI &ROXPELD KDV FRGLILHG DUELWUDO LPPXQLW\ DQG JUDQWHG DQ DUELWUDWRU DEVROXWH LPPXQLW\ IURP OLDELOLW\ ³WR WKH VDPH H[WHQW DV D MXGJH RI D FRXUW RI WKH 'LVWULFW RI &ROXPELD DFWLQJ LQ D MXGLFLDO FDSDFLW\´ '& &RGH †   N.Y. Stock Exch.  )G   WK &LU  ³([WHQVLRQ RI DUELWUDO LPPXQLW\ WR

HQFRPSDVV ERDUGV ZKLFK VSRQVRU DUELWUDWLRQ LV D QDWXUDO DQG QHFHVVDU\ SURGXFW RI WKH SROLFLHV

XQGHUO\LQJ DUELWUDO LPPXQLW\´ :KLOH WKH '& &LUFXLW KDV \HW WR WDNH XS WKH LVVXH WKH &RXUW

ILQGV WKH UHDVRQLQJ RI RWKHU FLUFXLWV SHUVXDVLYH

7KH GRFWULQH RI DUELWUDO LPPXQLW\ ³UHVWV RQ WKH QRWLRQ WKDW DUELWUDWRUV DFWLQJ ZLWKLQ WKHLU

TXDVLMXGLFLDO GXWLHV DUH WKH IXQFWLRQDO HTXLYDOHQW RI MXGJHV DQG DV VXFK VKRXOG EH DIIRUGHG

VLPLODU SURWHFWLRQ´ Pfannenstiel  )G DW  $V WKH 6L[WK &LUFXLW QRWHG LQ Corey IDLOLQJ

WR H[WHQG LPPXQLW\ WR WKH ERDUGV VSRQVRULQJ WKH DUELWUDWRUV ZRXOG UHQGHU WKH LPPXQLW\

³LOOXVLRQDU\´ EHFDXVH ³>L@W ZRXOG EH RI OLWWOH YDOXH WR WKH ZKROH DUELWUDO SURFHGXUH WR PHUHO\ VKLIW

WKH OLDELOLW\ WR WKH VSRQVRULQJ DVVRFLDWLRQ´  )G DW  see also Olson  )G DW 

³:LWKRXW WKLV H[WHQVLRQ DUELWUDO LPPXQLW\ ZRXOG EH DOPRVW PHDQLQJOHVV EHFDXVH OLDELOLW\ ZRXOG

VLPSO\ EH VKLIWHG IURP LQGLYLGXDO DUELWUDWRUV WR WKH VSRQVRULQJ RUJDQL]DWLRQ´ &RQVLVWHQW ZLWK

WKH SXUSRVHV RI DUELWUDO LPPXQLW\ WKH &RXUW ZLOO H[WHQG WKH LPPXQLW\ WR ),15$ 5HJXODWLRQ KHUH

3ODLQWLIIV¶ DUJXPHQW WKDW GHIHQGDQW LV QRW HQWLWOHG WR LPPXQLW\ EHFDXVH LW KDV ³XQFOHDQ

KDQGV´ LV XQDYDLOLQJ 3ODLQWLIIV SRVLW WKDW GHIHQGDQW ³LV QRZ VHHNLQJ LPPXQLW\ IRU YLRODWLQJ LWV

GXWLHV DV DQ DUELWUDWLRQ VSRQVRU WR SUHYHQW GLVFRYHU\ RI LWV RZQ PLVFRQGXFW´ WKDW LV WKH DOOHJHG

IDLOXUH WR DGKHUH WR LWV RZQ UXOHV 3OV¶ 2SS DW ± %XW SODLQWLIIV¶ SURSRVHG H[FHSWLRQ ZRXOG

VZDOORZ WKH UXOH DQG WKH FDVH ODZ VXSSRUWV DSSO\LQJ DUELWUDO LPPXQLW\ HYHQ LQ WKH IDFH RI VLPLODU

FODLPV See e.g. Olson  )G DW  ³$ VSRQVRULQJ RUJDQL]DWLRQ LV LPPXQH IURP FLYLO OLDELOLW\

IRU LPSURSHUO\ VHOHFWLQJ DQ DUELWUDWLRQ SDQHO HYHQ ZKHQ WKH VHOHFWLRQ YLRODWHV WKH RUJDQL]DWLRQ¶V

RZQ UXOHV´ Austern  )G DW ± Corey  )G DW ± %HFDXVH DOO RI SODLQWLIIV¶

 FODLPV DJDLQVW ),15$ 5HJXODWLRQ DUH EDUUHG E\ WKH GRFWULQH RI DUELWUDO LPPXQLW\ WKH DFWLRQ ZLOO

EH GLVPLVVHG

&21&/86,21

3ODLQWLIIV IDLOHG WR RSSRVH PXOWLSOH DUJXPHQWV DV WR ZK\ WKHLU FODLPV VKRXOG QRW EH

GLVPLVVHG DQG WKH &RXUW WUHDWV WKRVH DUJXPHQWV DV FRQFHGHG 7KRVH FRQFHGHG DUJXPHQWV DORQH

SURYLGH D VXIILFLHQW EDVLV IRU WKH &RXUW WR GLVPLVV DOO RI SODLQWLIIV¶ FODLPV DJDLQVW ),15$

5HJXODWLRQ 0RUHRYHU SODLQWLIIV¶ FRQVWLWXWLRQDO FODLPV LQ &RXQW ,,, UHJDUGLQJ XQIDLU WUHDWPHQW

GXULQJ WKH DUELWUDWLRQ PXVW EH GLVPLVVHG XQGHU )HGHUDO 5XOH RI &LYLO 3URFHGXUH E  EHFDXVH

WKH\ DUH QRW ULSH IRU UHYLHZ 3ODLQWLIIV¶ FODLPV DJDLQVW GHIHQGDQW DUH EDUUHG E\ WKH GRFWULQH RI

DUELWUDO LPPXQLW\ VR SODLQWLIIV KDYH DOVR IDLOHG WR VWDWH D FODLP DJDLQVW GHIHQGDQW XQGHU )HGHUDO

5XOH RI &LYLO 3URFHGXUH E  7KHUHIRUH WKH &RXUW ZLOO JUDQW GHIHQGDQW¶V PRWLRQ DQG WKLV

FDVH ZLOO EH GLVPLVVHG

$ VHSDUDWH RUGHU ZLOO LVVXH

$0< %(50$1 -$&.621 8QLWHG 6WDWHV 'LVWULFW -XGJH

'$7( -DQXDU\  

 7KHUH LV DOVR VXSSRUW IRU WKH SURSRVLWLRQ WKDW WKH GRFWULQH RI UHJXODWRU\ LPPXQLW\ SURYLGHV DQ DOWHUQDWLYH EDVLV WR GLVPLVV WKH DFWLRQ See In re Series 7 Broker Qualification Exam Scoring Litig.  )G   '& &LU  KROGLQJ WKDW ZKHQ DQ 652 VXFK DV ),15$ ³DFWV XQGHU WKH DHJLV RI WKH ([FKDQJH $FW¶V GHOHJDWHG DXWKRULW\ LW LV DEVROXWHO\ LPPXQH IURP VXLW IRU WKH LPSURSHU SHUIRUPDQFH RI UHJXODWRU\ DGMXGLFDWRU\ RU SURVHFXWRULDO GXWLHV GHOHJDWHG E\ WKH 6(&´ see also DL Capital Grp. v. NASDAQ Stock Mkt., Inc.  )G   G &LU  +RZHYHU WKH &RXUW QHHG QRW UHDFK WKLV LVVXH EHFDXVH SODLQWLIIV KDYH FRQFHGHG LW