Northwestern OH Adm v. Walcher & Fox Inc
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 D S
81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB
1R ; 1257+:(67(51 2+,2 $'0,1,675$7256 ,1& 1RV 3ODLQWLII ! Y :$/&+(5 )2; ,1& 'HIHQGDQW$SSHOOHH 7KLUG3DUW\3ODLQWLII ,17(51$7,21$/ $662&,$7,21 2) %5,'*( 6758&785$/ $1' 251$0(17$/ ,521 :25.(56 /2&$/ 81,21 12 9$/ +(//'2%/(5 'HIHQGDQWV$SSHOODQWV 7KLUG3DUW\'HIHQGDQWV 1R 1257+:(67(51 2+,2 $'0,1,675$7256 ,1& 3ODLQWLII$SSHOOHH Y
1RUWKZHVWHUQ2KLR$GPY 1RV :DOFKHU )R[HWDO
:$/&+(5 )2; ,1& 'HIHQGDQW$SSHOODQW 7KLUG3DUW\3ODLQWLII 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW7ROHGR 1R n'DYLG$.DW]'LVWULFWsXGJH $UJXHG $XJXVW 'HFLGHGDQG)LOHG 1RYHPEHU %HIRUH .(,7+1255,6DQG%$7&+(/'(5&LUFXLW sXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8(' sRKQ05RFD*$//21 7$.$&67ROHGR 2KLR$ODQ*5RVV5266%5,77$,1 6&+21%(5* &OHYHODQG 2KLR IRU 'HIHQGDQWV 5REHUW $ .RHQLJ 6+80$.(5 /223 .(1'5,&. 7ROHGR 2KLR IRU 3ODLQWLII21%5,() sRKQ05RFDsRVHSK0'j$QJHOR *$//21 7$.$&67ROHGR2KLR$ODQ*5RVV)UHG1 6HOHPDQ5266%5,77$,1 6&+21%(5*&OHYHODQG 2KLR IRU 'HIHQGDQWV 5REHUW $ .RHQLJ sDPHV + 2j'RKHUW\ 6+80$.(5 /223 .(1'5,&. 7ROHGR 2KLRIRU3ODLQWLII BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB $/,&( 0 %$7&+(/'(5 &LUFXLW sXGJH 7KHVH WZR LQWHUORFXWRU\DSSHDOVDULVHRXWRIDVLQJOHFDVHDQGZHKDYH WKHUHIRUH FRQVROLGDWHG WKHP IRU SXUSRVHV RI WKLV DSSHDO 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
SDUWRIWKHFROOHFWLYHEDUJDLQLQJSURFHVVDQGZDVWKHUHIRUH 3ODLQWLII$SSHOOHH1RUWKZHVWHUQ2KLR$GPLQLVWUDWRUV,QF LPPXQHIURPVXLWIRUPDOSUDFWLFHE\WKHXQLRQPHPEHU7KH m12$l DQRQSURILWFRUSRUDWLRQWKDWDGPLQLVWHUVHPSOR\HH IDFWVRIWKHVHWZRFDVHVDUHHDVLO\GLVWLQJXLVKHGIURPWKRVHLQ EHQHILW SODQV XQGHU WKH (PSOR\PHQW 5HWLUHPHQW ,QFRPH WKHLQVWDQWFDVHDQGZKHWKHUWKHDWWRUQH\ZDVDFWLQJRQEHKDOI 6HFXULW\$FW m(5,6$l DQGWKH/DERU0DQDJHPHQW5HODWLRQV RIWKHXQLRQZDVQRWDWLVVXHLQHLWKHURIWKHP $FW m/05$l VXHG'HIHQGDQW$SSHOODQW:DOFKHU )R[ ,QF m: )l DQ 2KLR FRUSRUDWLRQ HQJDJHG LQ WKH 7KH LVVXH RI ZKHWKHU +HOOGREOHU ZDV DFWXDOO\ DFWLQJ RQ FRQVWUXFWLRQEXVLQHVVFODLPLQJWKDW: )RZHGIULQJHEHQHILW EHKDOIRIWKH8QLRQZKHQKHFRPPLWWHGKLVDOOHJHGIUDXGLV DQG SHQVLRQ IXQG FRQWULEXWLRQV IRU DOO RI LWV HPSOR\HHV VWLOORSHQ0RUHLPSRUWDQWO\WKHLPPXQLW\HVWDEOLVKHGE\WKH SXUVXDQWWRSURMHFWDJUHHPHQWVHQWHUHGLQWRE\: )DQGWKH 6XSUHPH&RXUWLQ$WNLQVRQDQGH[SDQGHGLQ&RPSOHWH$XWR ,QWHUQDWLRQDO $VVRFLDWLRQ RI %ULGJH 6WUXFWXUDO DQG 7UDQVLW,QFY5HLV86 KROGLQJmWKDW 2UQDPHQWDO,URQZRUNHUV/RFDO8QLRQ1R mWKH8QLRQl D GRHVQRWVDQFWLRQGDPDJHVDFWLRQVDJDLQVWLQGLYLGXDO 12$PRYHGIRUSDUWLDOVXPPDU\MXGJPHQWDQGWKHGLVWULFW HPSOR\HHV IRU YLRODWLQJ WKH QRVWULNH SURYLVLRQ RI WKH FRXUWGHQLHGWKHPRWLRQKROGLQJWKDWWKHSURMHFWDJUHHPHQWV FROOHFWLYHEDUJDLQLQJDJUHHPHQWZKHWKHURUQRWWKHLUXQLRQ ZHUHDPELJXRXVEHFDXVHKDQGZULWWHQQRWDWLRQVRQVRPHRI SDUWLFLSDWHGLQRUDXWKRUL]HGWKHVWULNHl LVLPPXQLW\IURP WKRVHDJUHHPHQWVLQGLFDWHGWKDWWKHSDUWLHVPD\KDYHLQWHQGHG DFWLRQVEURXJKWXQGHUVHFWLRQIRUmYLRODWLRQRIFRQWUDFWV WKHDJUHHPHQWVWRFRYHURQO\WKHIHZXQLRQPHPEHUVKLUHGE\ EHWZHHQ DQ HPSOR\HU DQG D ODERU RUJDQL]DWLRQl /DERU : ) DW WKH EHKHVW RI WKH 8QLRQjV UHSUHVHQWDWLYH 9DO 0DQDJHPHQW 5HODWLRQV $FW RI D 86& +HOOGREOHU : ) LPSOHDGHG WKH 8QLRQ DQG +HOOGREOHU D :H MRLQ WKH 7KLUG &LUFXLW LQ FRQFOXGLQJ DOOHJLQJWKDWWKH\KDGIUDXGXOHQWO\PLVUHSUHVHQWHGWKHVFRSH mWKDWDVWDWHODZFODLPEURXJKWDJDLQVWDXQLRQRIILFHUWKDW RIWKHSURMHFWDJUHHPHQWVDQGWKDWWKH\ZHUHWKHUHIRUHOLDEOH GRHVQRWLPSOLFDWHDFROOHFWLYHEDUJDLQLQJDJUHHPHQWFRYHUHG IRUFRQWULEXWLRQDQGLQGHPQLILFDWLRQIRUDQ\PRQLHVRZHGE\ E\ VHFWLRQ D GRHV QRW JLYH ULVH WR VHFWLRQ E : )WR12$7KH8QLRQDQG+HOOGREOHUPRYHGWRGLVPLVV LPPXQLW\:KHQVHFWLRQ D LVLQDSSOLFDEOHWKHLPPXQLW\ : )jVWKLUGSDUW\FRPSODLQW SURYLGHGE\VHFWLRQ E LVDOVRLQDSSOLFDEOHl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jVFODLPVDJDLQVW+HOOGREOHU$FFRUGLQJO\ZHKROGWKDW QRWDWLRQVRQWKRVHDJUHHPHQWVZHUHQRWVXIILFLHQWWRSXW12$ +HOOGREOHULVQRWHQWLWOHGWRFODLPLPPXQLW\IURPVXLWRQWKLV RQ QRWLFH RI WKH mPRGLILFDWLRQl HQYLVLRQHG E\ WKH SDUWLHV FRXQWHUFODLP $FFRUGLQJO\ WKH FRXUW KHOG 12$ ZDV HQWLWOHG WR FROOHFW FRQWULEXWLRQV IRU DOO RI WKH &RPSDQ\jV HPSOR\HHV ZKR &RQFOXVLRQ ZRUNHGXQGHUWKHSURMHFWDJUHHPHQWVUHJDUGOHVVRIZKHWKHU WKHSDUWLHVLQWHQGHGWROLPLWWKHEHQHILWVDYDLODEOHXQGHUWKH )RUWKHIRUHJRLQJUHDVRQVWKHMXGJPHQWRIWKHGLVWULFWFRXUW SURMHFWDJUHHPHQWVWRDKDQGIXORI8QLRQHPSOR\HHV7KH LV$)),50(' FRXUWFHUWLILHGWKHLVVXHIRULQWHUORFXWRU\DSSHDO 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
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 3XUVXDQW WR 6L[WK &LUFXLW 5XOH
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH D S
81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB
1R ; 1257+:(67(51 2+,2 $'0,1,675$7256 ,1& 1RV 3ODLQWLII ! Y :$/&+(5 )2; ,1& 'HIHQGDQW$SSHOOHH 7KLUG3DUW\3ODLQWLII ,17(51$7,21$/ $662&,$7,21 2) %5,'*( 6758&785$/ $1' 251$0(17$/ ,521 :25.(56 /2&$/ 81,21 12 9$/ +(//'2%/(5 'HIHQGDQWV$SSHOODQWV 7KLUG3DUW\'HIHQGDQWV 1R 1257+:(67(51 2+,2 $'0,1,675$7256 ,1& 3ODLQWLII$SSHOOHH Y
1RUWKZHVWHUQ2KLR$GPY 1RV :DOFKHU )R[HWDO
:$/&+(5 )2; ,1& 'HIHQGDQW$SSHOODQW 7KLUG3DUW\3ODLQWLII 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW7ROHGR 1R n'DYLG$.DW]'LVWULFWsXGJH $UJXHG $XJXVW 'HFLGHGDQG)LOHG 1RYHPEHU %HIRUH .(,7+1255,6DQG%$7&+(/'(5&LUFXLW sXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8(' sRKQ05RFD*$//21 7$.$&67ROHGR 2KLR$ODQ*5RVV5266%5,77$,1 6&+21%(5* &OHYHODQG 2KLR IRU 'HIHQGDQWV 5REHUW $ .RHQLJ 6+80$.(5 /223 .(1'5,&. 7ROHGR 2KLR IRU 3ODLQWLII21%5,() sRKQ05RFDsRVHSK0'j$QJHOR *$//21 7$.$&67ROHGR2KLR$ODQ*5RVV)UHG1 6HOHPDQ5266%5,77$,1 6&+21%(5*&OHYHODQG 2KLR IRU 'HIHQGDQWV 5REHUW $ .RHQLJ sDPHV + 2j'RKHUW\ 6+80$.(5 /223 .(1'5,&. 7ROHGR 2KLRIRU3ODLQWLII BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB $/,&( 0 %$7&+(/'(5 &LUFXLW sXGJH 7KHVH WZR LQWHUORFXWRU\DSSHDOVDULVHRXWRIDVLQJOHFDVHDQGZHKDYH WKHUHIRUH FRQVROLGDWHG WKHP IRU SXUSRVHV RI WKLV DSSHDO 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
SDUWRIWKHFROOHFWLYHEDUJDLQLQJSURFHVVDQGZDVWKHUHIRUH 3ODLQWLII$SSHOOHH1RUWKZHVWHUQ2KLR$GPLQLVWUDWRUV,QF LPPXQHIURPVXLWIRUPDOSUDFWLFHE\WKHXQLRQPHPEHU7KH m12$l DQRQSURILWFRUSRUDWLRQWKDWDGPLQLVWHUVHPSOR\HH IDFWVRIWKHVHWZRFDVHVDUHHDVLO\GLVWLQJXLVKHGIURPWKRVHLQ EHQHILW SODQV XQGHU WKH (PSOR\PHQW 5HWLUHPHQW ,QFRPH WKHLQVWDQWFDVHDQGZKHWKHUWKHDWWRUQH\ZDVDFWLQJRQEHKDOI 6HFXULW\$FW m(5,6$l DQGWKH/DERU0DQDJHPHQW5HODWLRQV RIWKHXQLRQZDVQRWDWLVVXHLQHLWKHURIWKHP $FW m/05$l VXHG'HIHQGDQW$SSHOODQW:DOFKHU )R[ ,QF m: )l DQ 2KLR FRUSRUDWLRQ HQJDJHG LQ WKH 7KH LVVXH RI ZKHWKHU +HOOGREOHU ZDV DFWXDOO\ DFWLQJ RQ FRQVWUXFWLRQEXVLQHVVFODLPLQJWKDW: )RZHGIULQJHEHQHILW EHKDOIRIWKH8QLRQZKHQKHFRPPLWWHGKLVDOOHJHGIUDXGLV DQG SHQVLRQ IXQG FRQWULEXWLRQV IRU DOO RI LWV HPSOR\HHV VWLOORSHQ0RUHLPSRUWDQWO\WKHLPPXQLW\HVWDEOLVKHGE\WKH SXUVXDQWWRSURMHFWDJUHHPHQWVHQWHUHGLQWRE\: )DQGWKH 6XSUHPH&RXUWLQ$WNLQVRQDQGH[SDQGHGLQ&RPSOHWH$XWR ,QWHUQDWLRQDO $VVRFLDWLRQ RI %ULGJH 6WUXFWXUDO DQG 7UDQVLW,QFY5HLV86 KROGLQJmWKDW 2UQDPHQWDO,URQZRUNHUV/RFDO8QLRQ1R mWKH8QLRQl D GRHVQRWVDQFWLRQGDPDJHVDFWLRQVDJDLQVWLQGLYLGXDO 12$PRYHGIRUSDUWLDOVXPPDU\MXGJPHQWDQGWKHGLVWULFW HPSOR\HHV IRU YLRODWLQJ WKH QRVWULNH SURYLVLRQ RI WKH FRXUWGHQLHGWKHPRWLRQKROGLQJWKDWWKHSURMHFWDJUHHPHQWV FROOHFWLYHEDUJDLQLQJDJUHHPHQWZKHWKHURUQRWWKHLUXQLRQ ZHUHDPELJXRXVEHFDXVHKDQGZULWWHQQRWDWLRQVRQVRPHRI SDUWLFLSDWHGLQRUDXWKRUL]HGWKHVWULNHl LVLPPXQLW\IURP WKRVHDJUHHPHQWVLQGLFDWHGWKDWWKHSDUWLHVPD\KDYHLQWHQGHG DFWLRQVEURXJKWXQGHUVHFWLRQIRUmYLRODWLRQRIFRQWUDFWV WKHDJUHHPHQWVWRFRYHURQO\WKHIHZXQLRQPHPEHUVKLUHGE\ EHWZHHQ DQ HPSOR\HU DQG D ODERU RUJDQL]DWLRQl /DERU : ) DW WKH EHKHVW RI WKH 8QLRQjV UHSUHVHQWDWLYH 9DO 0DQDJHPHQW 5HODWLRQV $FW RI D 86& +HOOGREOHU : ) LPSOHDGHG WKH 8QLRQ DQG +HOOGREOHU D :H MRLQ WKH 7KLUG &LUFXLW LQ FRQFOXGLQJ DOOHJLQJWKDWWKH\KDGIUDXGXOHQWO\PLVUHSUHVHQWHGWKHVFRSH mWKDWDVWDWHODZFODLPEURXJKWDJDLQVWDXQLRQRIILFHUWKDW RIWKHSURMHFWDJUHHPHQWVDQGWKDWWKH\ZHUHWKHUHIRUHOLDEOH GRHVQRWLPSOLFDWHDFROOHFWLYHEDUJDLQLQJDJUHHPHQWFRYHUHG IRUFRQWULEXWLRQDQGLQGHPQLILFDWLRQIRUDQ\PRQLHVRZHGE\ E\ VHFWLRQ D GRHV QRW JLYH ULVH WR VHFWLRQ E : )WR12$7KH8QLRQDQG+HOOGREOHUPRYHGWRGLVPLVV LPPXQLW\:KHQVHFWLRQ D LVLQDSSOLFDEOHWKHLPPXQLW\ : )jVWKLUGSDUW\FRPSODLQW SURYLGHGE\VHFWLRQ E LVDOVRLQDSSOLFDEOHl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jVFODLPVDJDLQVW+HOOGREOHU$FFRUGLQJO\ZHKROGWKDW QRWDWLRQVRQWKRVHDJUHHPHQWVZHUHQRWVXIILFLHQWWRSXW12$ +HOOGREOHULVQRWHQWLWOHGWRFODLPLPPXQLW\IURPVXLWRQWKLV RQ QRWLFH RI WKH mPRGLILFDWLRQl HQYLVLRQHG E\ WKH SDUWLHV FRXQWHUFODLP $FFRUGLQJO\ WKH FRXUW KHOG 12$ ZDV HQWLWOHG WR FROOHFW FRQWULEXWLRQV IRU DOO RI WKH &RPSDQ\jV HPSOR\HHV ZKR &RQFOXVLRQ ZRUNHGXQGHUWKHSURMHFWDJUHHPHQWVUHJDUGOHVVRIZKHWKHU WKHSDUWLHVLQWHQGHGWROLPLWWKHEHQHILWVDYDLODEOHXQGHUWKH )RUWKHIRUHJRLQJUHDVRQVWKHMXGJPHQWRIWKHGLVWULFWFRXUW SURMHFWDJUHHPHQWVWRDKDQGIXORI8QLRQHPSOR\HHV7KH LV$)),50(' FRXUWFHUWLILHGWKHLVVXHIRULQWHUORFXWRU\DSSHDO 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
,Q WKHLU PRWLRQ WR GLVPLVV WKH WKLUGSDUW\ FRPSODLQW H[HFXWHG QRW DQ\ WHUP RI WKH $JUHHPHQWV WKHPVHOYHV SXUVXDQWWR)HGHUDO5XOHVRI&LYLO3URFHGXUH E DQG 6HFWLRQWKHUHIRUHGRHVQRWSUHHPSWWKHWKLUGSDUW\VWDWH +HOOGREOHUDQGWKH8QLRQFODLPHGWKDWWKHIHGHUDOFRXUWGLG ODZFODLP QRWKDYHVXEMHFWPDWWHUMXULVGLFWLRQRYHUWKHDFWLRQDQGWKDW WKH FODLPV ZHUH SUHHPSWHG 7KH GLVWULFW FRXUW GHQLHG WKH )LQDOO\DOORZLQJWKHGLVWULFWFRXUWWRUXOHRQWKHIUDXGFODLP PRWLRQ WR GLVPLVV DQG FHUWLILHG WKH LVVXH IRU LQWHUORFXWRU\ SUHVHQWVQRWKUHDWWRIHGHUDOODERUODZ%HFDXVHUXOLQJRQWKH UHYLHZ IUDXGFODLPGRHVQRWLQYROYHWKHLQWHUSUHWDWLRQRIDFROOHFWLYH EDUJDLQLQJ DJUHHPHQW UXOLQJ RQ WKDW FODLP SUHVHQWV QR :HDFFHSWHGERWKLQWHUORFXWRU\DSSHDOVDQGZH$)),50 FKDOOHQJH WR WKH XQLIRUPLW\ RI IHGHUDO ODZ JRYHUQLQJ ODERU ERWKRIWKHGLVWULFWFRXUWjVRUGHUV FRQWUDFWV,QVKRUWVHFWLRQGRHVQRWSUHHPSW:DOFKHU )R[jVFODLPRIIUDXGLQWKHLQGXFHPHQW ,)DFWXDO%DFNJURXQG ',QGLYLGXDOLPPXQLW\XQGHU$WNLQVRQ 7KLV FDVH DULVHV RXW RI DQ RQJRLQJ HPSOR\PHQW GLVSXWH EHWZHHQ WKH 8QLRQ DQG : ) : ) LV D FRQVWUXFWLRQ /DVWO\+HOOGREOHUFODLPVWKDW$WNLQVRQY6LQFODLU5HILQLQJ VXEFRQWUDFWRU SULPDULO\ HQJDJHG LQ WKH HUHFWLRQ RI SUH &R86 RYHUUXOHGRQRWKHUJURXQGVE\%R\V HQJLQHHUHGVWHHOEXLOGLQJV LWFRQWUDFWVZLWKHPSOR\HHVRQD 0DUNHWV,QFY5HWDLO&OHUNjV8QLRQ/RFDO 86 SURMHFWE\SURMHFWEDVLV)RUPRVWRILWVH[LVWHQFH: )XVHG SURYLGHV KLP LPPXQLW\ IURP VXLW +HOOGREOHU H[FOXVLYHO\QRQXQLRQODERU9DO+HOOGREOHUDQRUJDQL]HUIRU PLVUHDGV $WNLQVRQ $WNLQVRQ DGGUHVVHG WKH TXHVWLRQ RI WKH8QLRQDSSURDFKHGWKHRZQHUVRI: )LQ6HSWHPEHURI ZKHWKHULQGLYLGXDOXQLRQPHPEHUVFRXOGEHKHOGOLDEOHIRU UHTXHVWLQJ WKDW : ) XQLRQL]H LWV ZRUNIRUFH 7KH WKHXQLRQjVYLRODWLRQRIDQRVWULNHFODXVHLQWKHLUFRQWUDFW RZQHUVGHFOLQHGFODLPLQJWKDW: )FRXOGQRWDIIRUGWRSD\ 7KH6XSUHPH&RXUWKHOGWKDWWKH\FRXOGQRW,GDW 8QLRQZDJHVDQGEHQHILWVWRDOOLWVHPSOR\HHV+HOOGREOHU $WNLQVRQ GRHV QRW VWDQG IRU WKH PRUH UDGLFDO SURSRVLWLRQ VXJJHVWHGWKDW: )HDVHLQWRXQLRQL]DWLRQE\KLULQJRQHRU DGYDQFHGKHUHE\+HOOGREOHUWKDWXQLRQPHPEHUVDUHLPPXQH WZRXQLRQZRUNHUVSHUMRE,WZDV+HOOGREOHUjVKRSHWKDWWKLV IURPVXLWIRUWKHLULQGLYLGXDODFWVVLPSO\E\YLUWXHRIXQLRQ LQFUHPHQWDO DSSURDFK ZRXOG GHPRQVWUDWH WR : ) WKH PHPEHUVKLS6HH)HOLFHY6HYHU )G G mDGYDQWDJHVRID8QLRQZRUNIRUFHl &LU m>7KHGHIHQGDQWV@YLHZWKHLPPXQLW\H[WHQGHGE\ VHFWLRQ E DVFRYHULQJDOOµFRQGXFWUHODWHGWRWKHLUDFWLRQV : ) DQG WKH 8QLRQ QHJRWLDWHG D FRPSURPLVH DQG DV8QLRQRIILFHUVj>7@KHOHJDOSULQFLSOHDVHQXQFLDWHGE\ +HOOGREOHUPDGHKDQGZULWWHQQRWDWLRQVRQWZRRIWKHSULQWHG >WKHGHIHQGDQWV@LVWRREURDGl 3URMHFW$JUHHPHQWIRUPV2QHRIWKRVH$JUHHPHQWVEHDUVWKH QRWDWLRQmPHQ$UNDP6WHHOMRERQO\ lWKHRWKHUEHDUVWKH +HOOGREOHUDOVRFLWHVWZR2KLRFDVHV6HOOHUVY'RH KDQGZULWWHQ QRWH m sRXUQH\PDQ $SSUHQWLFH WK PDQ 1(G 2KLR$SS DQG&ROOLQVY/HINRZLW] ZHHNO\ EHQHILW SD\l 7KHVH PDUNLQJV DSSHDU QHDU WKH 1(G 2KLR $SS LQ VXSSRUW RI KLV FODLP RI VLJQDWXUH OLQH RI WKH DJUHHPHQWV DQG QR UHIHUHQFH WR WKHP LPPXQLW\(DFKRIWKHVHFDVHVLQYROYHGDQDWWRUQH\KLUHGE\ DSSHDUVDQ\ZKHUHLQWKHERG\RIWKHDJUHHPHQW7KHWKUHH WKHXQLRQWRSHUIRUPVHUYLFHVRQEHKDOIRIDXQLRQPHPEHULQ UHPDLQLQJ DJUHHPHQWV WKDW DUH WKH VXEMHFW RI WKLV DFWLRQ FRQQHFWLRQ ZLWK WKH HPSOR\HUjV GLVFLSOLQDU\ DFWLRQ DJDLQVW FRQWDLQQRVXFKQRWDWLRQVEXW: )DOOHJHVWKDWWKH\ZHUH WKDWXQLRQPHPEHU,QHDFKRIWKRVHFDVHVWKHFRXUWKHOGWKDW HQWHUHG LQWR RQ VLPLODU WHUPV +HOOGREOHU GHQLHV WKDW WKH WKHDWWRUQH\ZDVDQDJHQWRIWKHXQLRQSHUIRUPLQJVHUYLFHVDV 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
)G WK&LU m6HFWLRQSUHHPSWV SDUWLHVDJUHHGWROLPLWXQLRQSDUWLFLSDWLRQRQDQ\SURMHFWDQG RQO\ VWDWH ODZ FODLPV WKDW DUH µVXEVWDQWLDOO\ GHSHQGHQW RQ VWDWHVWKDWWKHKDQGZULWWHQQRWDWLRQVLQGLFDWHDIORRUIRUXQLRQ DQDO\VLVRIDFROOHFWLYHEDUJDLQLQJDJUHHPHQWjQRWFODLPV SDUWLFLSDWLRQUDWKHUWKDQDFHLOLQJ WKDWRQO\µWDQJHQWLDOO\jLQYROYH&%$SURYLVLRQVl,GDW LQWHUQDOFLWDWLRQVRPLWWHG (DFK RI WKH 3URMHFW $JUHHPHQWVnHQWLWOHG m(PSOR\HU 3DUWLFLSDWLRQ$JUHHPHQWVlnDWLVVXHLQWKLVFDVHLQFRUSRUDWHV 7KH1LQWK&LUFXLWFDVH2SHUDWLQJ(QJjUV3HQVLRQ7UXVWY WKH WHUPV DQG FRQGLWLRQV RI WKH &ROOHFWLYH %DUJDLQLQJ :LOVRQ )G WK&LU LQYROYHGIDFWVVLPLODU $JUHHPHQW m&%$l HQWHUHG LQWR E\ WKH /DERU 5HODWLRQV WRWKRVHLQWKHFDVHDWKDQG7KHUHWKHFRXUWUXOHGWKDWDVWDWH 'LYLVLRQRIWKH$VVRFLDWHG*HQHUDO&RQWUDFWRUVRI1RUWKZHVW ODZ FODLP RI IUDXGXOHQW LQGXFHPHQW GLG QRW UHTXLUH 2KLR DQG WKH 8QLRQ 7KRVH (PSOR\HU 3DUWLFLSDWLRQ LQWHUSUHWDWLRQRIWKHFROOHFWLYHEDUJDLQLQJDJUHHPHQW,GDW $JUHHPHQWVSURYLGH 7KH DJUHHPHQW DW LVVXH ZDV DQ RZQHURSHUDWRU DJUHHPHQWWKDWWKHXQLRQSUHVHQWHGWRWKHHPSOR\HUFODLPLQJ 7KH&RPSDQ\ KHUHE\UHFRJQL]HVWKH8QLRQDVWKH > @
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nWKDWWKH8QLRQIUDXGXOHQWO\ LWV HPSOR\HHV SHUIRUPLQJ WKH ZRUN VSHFLILHG LQ WKH LQGXFHG LW WR VLJQ WKH (PSOR\HU 3DUWLFLSDWLRQ %DUJDLQLQJ$JUHHPHQW $JUHHPHQWVnOLNH WKH FODLP LQ :LOVRQ GRHV QRW UHTXLUH LQWHUSUHWDWLRQRIDFROOHFWLYHEDUJDLQLQJDJUHHPHQWRUHYHQ 7KH&%$SURYLGHVWKDWHDFK3DUWLFLSDWLQJ(PSOR\HUVKDOO RI WKH (PSOR\HU 3DUWLFLSDWLRQ $JUHHPHQWV WKHPVHOYHV ,QVWHDGWKHULJKWVDQGGXWLHVDWLVVXHDULVHIURPWKH8QLRQj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
$OWKRXJK WKH (PSOR\HU 3DUWLFLSDWLRQ $JUHHPHQWV LQFRUSRUDWH WKH WHUPV RI D FROOHFWLYH EDUJDLQLQJ DJUHHPHQW DV ZH KDYH SUHYLRXVO\ QRWHG : ) ZDV QRW D SDUW\ WR WKH FROOHFWLYH EDUJDLQLQJ DJUHHPHQW DQG WKH (DFK DJUHHPHQW H[SUHVVO\ SURYLGHV WKDW :DOFKHU )R[ LV m7KH 8QLRQ ZDV QRW DXWKRUL]HG WR EDUJDLQ RQ EHKDOI RI : )jV HPSOR\HHV &RPSDQ\l 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
: ) SUHVHQWHG WHVWLPRQ\ WKDW WKH DJUHHPHQWV ZHUH WKDW ULJKWV DQG GXWLHV DUH FOHDUO\ XQGHUVWRRG DQG WR OHVVHQ LQWHQGHG WR FRYHU WKH 8QLRQ ZRUNHUV RQO\ DQG QRW DOO LQGXVWULDO VWULIH RFFDVLRQHG E\ FRQIOLFW RYHU GLIIHULQJ HPSOR\HHV%HWZHHQ6HSWHPEHU DQG6HSWHPEHU LQWHUSUHWDWLRQVRIFROOHFWLYHEDUJDLQLQJDJUHHPHQWV,QWj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mLQH[WULFDEO\ DSSDUHQW ODFN RI LQWHUHVW RQ WKH SDUW RI : )jV QRQXQLRQ LQWHUWZLQHGlZLWKDGHWHUPLQDWLRQRIWKHPHDQLQJRIWKHWHUPV HPSOR\HHV +HOOGREOHU GHPDQGHG WKDW : ) HPSOR\ RQO\ RIDQDJUHHPHQWLVSUHHPSWHGE\VHFWLRQ$OOLV&KDOPHUV 8QLRQ ZRUNHUV IRU WZR SURMHFWV LQ WKH 7ROHGR 2KLR DUHD &RUSY/XHFN86 7KXVLIDVWDWHWRUW : ) UHIXVHG WR DFFHSW +HOOGREOHUj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jVHPSOR\HHV EHFDXVHWKHmVWDWHODZULJKWVDQGREOLJDWLRQV>GLG@QRWH[LVW LQGHSHQGHQWO\RIl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mVXEVWDQWLDOO\ GHSHQGHQWl XSRQ DQ LQWHUSUHWDWLRQ RI WKH DJUHHPHQW WKH FDXVH RI DFWLRQ LV %HFDXVH WKLV LV DQ LQWHUORFXWRU\ DSSHDO ZH KDYH QR LQGHSHQGHQWDQGFDQJRIRUZDUG,GDWQ,QVXPDQ\ DXWKRULW\WRUHYLHZWKHGLVWULFWFRXUWjVILQGLQJVRIIDFWEXW WLPHDVWDWHFDXVHRIDFWLRQUHTXLUHVWKHLQWHUSUHWDWLRQRID PXVWFRQILQHRXUUHYLHZWRSXUHTXHVWLRQVRIODZ6HH)RVWHU FROOHFWLYHEDUJDLQLQJDJUHHPHQWRULQYRNHVULJKWVWKDWDUHQRW :KHHOHU(QHUJ\&RUSY0HWUR.QRZ6ROLG:DVWH$XWK,QF LQGHSHQGHQW RI WKH DJUHHPHQW VHFWLRQ SUHHPSWV WKH )G WK&LU :HUHYLHZWKHGLVWULFW FODLP FRXUWjVFRQFOXVLRQVRIODZGHQRYR%DUQHVY:LQFKHOO )G WK&LU $OWKRXJK VHFWLRQ KDV EURDG SUHHPSWLYH HIIHFW WKLV FRXUWKDVKHOGWKDWm>W@KHSUHHPSWLYHUHDFKRIVHFWLRQ LVE\QRPHDQVERXQGOHVVl)R[Y3DUNHU+DQQLILQ&RUS 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
+HQFHWKH8QLRQKDVIDLOHGWRVKRZWKDWWKHDFWLYLW\: ) ,,,12$jVULJKWWRFROOHFWFRQWULEXWLRQV FRPSODLQV RI ZDV mDUJXDEO\l FRYHUHG E\ VHFWLRQ RI WKH 1/5$ : )FODLPVWKDWWKHGLVWULFWFRXUWjVGHWHUPLQDWLRQRQWKH PRWLRQ IRU SDUWLDO VXPPDU\ MXGJPHQW LQ ZKLFK WKH FRXUW 7KHSROLFLHVXQGHUO\LQJWKHUDQJHDQGH[WHQWRI*DUPRQ IRXQG WKH KDQGZULWWHQ QRWDWLRQV RQ WKH $JUHHPHQWV SUHHPSWLRQ DOVR FRXQVHO D ILQGLQJ RI QR SUHHPSWLRQ 7KH DPELJXRXVFRQWUDGLFWVWKHFRXUWjVODWHUFRQFOXVLRQWKDW: ) FRQGXFW FRPSODLQHG RI KHUH FDQ EH GLVWLQJXLVKHG IURP LVUHTXLUHGWRUHPLWWR12$FRQWULEXWLRQVIRUDOORI: )j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jVPRWLRQIRUSDUWLDOVXPPDU\ SUHVHQWVQRWKUHDWWRWKHXQLIRUPLW\RIIHGHUDOODERUODZDQG MXGJPHQWWKHGLVWULFWFRXUWIRXQGWKDWEHFDXVHRIDPELJXLW\ WKH %RDUGj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jO +HDOWK %HQHILWV DQG FRXUWPXVWGHWHUPLQHDUHmLQH[WULFDEO\LQWHUWZLQHGZLWKWKH 3HQVLRQ)XQGVY1HZ%DNHU\&RRI2KLR)G WHUPVRIWKHODERUFRQWUDFWl WK&LU WKHFRXUWKHOGWKDWWKHDFWXDOLQWHQWLRQVRIWKH FRQWUDFWLQJ SDUWLHV DQG KHQFH WKH IDFWXDO GLVSXWH EHWZHHQ 6HFWLRQ JUDQWV WR WKH FRXUWV RI WKH 8QLWHG 6WDWHV +HOOGREOHUDQG: )DUHLPPDWHULDOWRWKLVLVVXH MXULVGLFWLRQ RYHU LVVXHV SHUWDLQLQJ WR FROOHFWLYH EDUJDLQLQJ DJUHHPHQWV7KH6XSUHPH&RXUWKDVFRQVWUXHGVHFWLRQDV $VZHKDYHDOUHDG\SRLQWHGRXWWKLVPDWWHULVEHIRUHXVRQ D JUDQW IURP &RQJUHVV WR FUHDWH D IHGHUDO FRPPRQ ODZ RI DQ LQWHUORFXWRU\ DSSHDO DQG ZH DUH ZLWKRXW DXWKRULW\ WR ODERUFRQWUDFWV7H[WLOH:RUNHUV8QLRQY/LQFROQ0LOOV LQTXLUHLQWRWKHFRUUHFWQHVVRIWKHGLVWULFWFRXUWjVILQGLQJVRI 86 7KHJUDQWLVQHFHVVDU\WRHQVXUHXQLIRUP IDFWZLWKUHJDUGWRWKHLQWHQWLRQVRIWKHSDUWLHVDQGZKHWKHU QDWLRQDOLQWHUSUHWDWLRQRIODERUDJUHHPHQWVDQGWKXVWRHQVXUH 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
WKHQRWDWLRQVRQWKH$JUHHPHQWVUHIOHFWHGWKRVHLQWHQWLRQV &DVHV LQ ZKLFK WKH 6XSUHPH &RXUW IRXQG WKDW VWDWH ODZ 5DWKHU ZH PXVW GHFLGH ZKHWKHU WKH GLVWULFW FRXUW HUUHG LQ FODLPV ZHUH QRW SUHHPSWHG DUH DSSOLFDEOH WR WKH KROGLQJ WKDW DV D PDWWHU RI ODZ WKH LQWHQWLRQV RI WKH FLUFXPVWDQFHVKHUHSUHVHQWHG,Q,QWjO/RQJVKRUHPHQjV$VVjQ FRQWUDFWLQJ SDUWLHV DUH LPPDWHULDO WR WKH GHWHUPLQDWLRQ RI Y'DYLV86 IRUH[DPSOHWKHVWDWHODZ : )j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jV ULJKW WR HPSOR\HHIRUSURWHFWHGXQLRQDFWLYLWLHV,G7KH&RXUWVSRNH FROOHFW FRQWULEXWLRQV IORZV IURP WKH &%$ DQG WKHUHIRUH VSHFLILFDOO\WRWKH8QLRQjVEXUGHQLQDUJXLQJSUHHPSWLRQ FDQQRWEHVXSHULRUWRWKHULJKWVRIWKHSULPDU\SDUWLHV)RU WKLV SURSRVLWLRQ LW FLWHV D GLVWULFW FRXUW RSLQLRQ &HQWUDO 7KHSUHFRQGLWLRQIRUSUHHPSWLRQWKDWWKHFRQGXFWEH 6WDWHV 6RXWKHDVW DQG 6RXWKZHVW $UHDV 3HQVLRQ )XQG Y mDUJXDEO\l SURWHFWHG RU SURKLELWHG LV QRW ZLWKRXW .URJHU&R1R & 'LVW/(;,6 1',OO VXEVWDQFH,WLVQRWVDWLVILHGE\DFRQFOXVRU\DVVHUWLRQRI 0DUFK ,QWKDWFDVHWKHGLVWULFWFRXUWGHQLHGWKH SUHHPSWLRQDQGZRXOGWKHUHIRUHQRWEHVDWLVILHGLQWKLV SODLQWLIIjVPRWLRQIRUVXPPDU\MXGJPHQWEHFDXVHWKHSODLQWLII FDVH E\ D FODLP ZLWKRXW PRUH WKDW 'DYLV ZDV DQ VRXJKWWRUHO\RQSDVWSUDFWLFHVDQGRUDOXQGHUVWDQGLQJVRIWKH HPSOR\HH UDWKHU WKDQ D VXSHUYLVRU ,I WKH ZRUG FRQWUDFWQRWUHGXFHGWRZULWLQJ$OWKRXJKLWPDNHVFOHDUWKDW mDUJXDEO\l LV WR PHDQ DQ\WKLQJ LW PXVW PHDQ WKDW WKH DSHQVLRQIXQGjVULJKWVWRFROOHFWDUHERXQGHGE\WKHZULWWHQ SDUW\ FODLPLQJ SUHHPSWLRQ LV UHTXLUHG WR GHPRQVWUDWH &%$.URJHUGRHVQRWDGGUHVVWKHVLWXDWLRQEHIRUHXVKHUHLQ WKDWKLVFDVHLVRQHWKDWWKH%RDUGFRXOGOHJDOO\GHFLGHLQ ZKLFK WKH SDUWLHV PHPRULDOL]HG WKHLU PRGLILFDWLRQV RQ WKH KLVIDYRU IDFHRIDFRQWUDFWDOEHLWDPELJXRXVO\,QIDFW.URJHUSODLQO\ VSHOOVRXWWKH(5,6$SROLF\WKDWmSHQVLRQIXQGVDUHHQWLWOHG ,GDW %HFDXVHWKHXQLRQKDGIDLOHGWRSURYLGHDQ\ WRUHO\RQWKHZULWLQJVWKDWHVWDEOLVKWKHHPSOR\HUjVREOLJDWLRQ HYLGHQFHWKDWWKHHPSOR\HHZDVmDUJXDEO\lQRWDVXSHUYLVRU WR WKHPl LG DW FRQFOXGLQJ WKDW DQ RUDO DJUHHPHQW WKH &RXUW KHOG WKDW WKH XQLRQ KDG IDLOHG WR VKRZ WKDW WKH EHWZHHQWKHHPSOR\HUDQGWKHXQLRQWRGLVUHJDUGWKHWH[WDQG HPSOR\HUjVDFWLRQRIILULQJWKHHPSOR\HHZDVmDUJXDEO\lDQ FRXUVHRISHUIRUPDQFHFDQQRWSUHYHQWWKHZULWWHQDJUHHPHQW XQIDLUODERUSUDFWLFH,G IURPEHLQJHQIRUFHGDW WKHLQVLVWHQFHRIWKHSHQVLRQIXQGV EHFDXVHm>D@Q\OHVVSURWHFWLRQµPD\ZHOOVDGGOHWKHSODQVZLWK 7KHFDVHEHIRUHWKLVFRXUWLVVLPLODUWR'DYLVLQWKDWWKH XQIXQGHGREOLJDWLRQVjl,GDW FLWDWLRQVRPLWWHG 7KLUG3DUW\'HIHQGDQWVKDYHIDLOHGWRRIIHUDQ\HYLGHQFHWKDW WKLVmFDVHLVRQHWKDWWKH%RDUGFRXOGOHJDOO\GHFLGHLQ>WKH : )DOVRFLWHVWKHXQUHSRUWHG&UDLJY6HYHULQR,QF1R 8QLRQjV@IDYRUl,GDW +HUHWKH8QLRQDSSHDUVWRFODLP 86 $SS /(;,6 WK &LU sXQH WKDW LWV DOOHJHGO\ IUDXGXOHQW FRQGXFW RFFXUUHG GXULQJ WKH : )jV UHOLDQFH RQ 6HYHULQR LV PLVSODFHG ,Q FROOHFWLYHEDUJDLQLQJSURFHVVDQGLPSOLFDWHVWKHGXW\RIJRRG 6HYHULQR WKH SDUWLHV VLJQHG D GXSOLFDWH RI D FROOHFWLYH IDLWKUHTXLUHGGXULQJWKDWSURFHVV,WLVLQGLVSXWDEOHKRZHYHU EDUJDLQLQJDJUHHPHQWEXWVSHFLILHGLQZULWLQJRQWKHFRQWUDFW WKDW WKH 8QLRQ ZDV QRW WKH UHSUHVHQWDWLYH RI : )jV WKDWLWZDVOLPLWHGLQVFRSHWRMXVWRQHMRE7KHFRXUWIRXQG HPSOR\HHVDQGZDVWKXVQRWHQJDJHGLQFROOHFWLYHEDUJDLQLQJ 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
IRUWKHHPSOR\PHQWRIDGLVFUHWHQXPEHURIXQLRQHPSOR\HHV WKDW WKH SDUWLHV KDG H[HFXWHG D QHZ DJUHHPHQW ZLWK WKH RQSDUWLFXODUMREVDWSDUWLFXODUMREVLWHV OLPLWDWLRQLQFOXGHG,QWKHFDVHDWEDUWKHUHLVQRTXHVWLRQ WKDW WKH 8QLRQ DQG : ) VRXJKW WR DPHQG WKH 3URMHFW 7KH1LQWK&LUFXLWIDFHGDYHU\VLPLODUVLWXDWLRQLQZKLFK $JUHHPHQWVLQVRPHZD\7KHTXHVWLRQLVZKHWKHUWKH\SXW WKHHPSOR\HUILOHGDWKLUGSDUW\FRPSODLQWDJDLQVWDXQLRQIRU 12$RQQRWLFHRIWKHLQWHQGHGDPHQGPHQWVE\PDNLQJZKDW IUDXGXOHQWLQGXFHPHQW2SHUDWLQJ(QJjUV3HQVLRQ7UXVWY WKHGLVWULFWFRXUWGHVFULEHGDVmFU\SWLFlQRWDWLRQVRQWKHSUH :LOVRQ )G WK &LU 7KH 1LQWK &LUFXLW SULQWHG DJUHHPHQW ,Q 6HYHULQR WKH OLPLWDWLRQ ZDV FOHDUO\ UXOHGWKDWWKHXQLRQjVDFWLRQVZHUHQRWmDUJXDEO\l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jEHKDOIRQWKHWHUPV WRFDOODWWHQWLRQWRWKHPRGLILFDWLRQ DQG FRQGLWLRQV RI HPSOR\PHQW 7KH 8QLRQ KDV RIIHUHG QRWKLQJWRVXSSRUWLWVDVVHUWLRQWKDWWKHFRQGXFWDWLVVXHLQ (YHQLIWKHQRWDWLRQVRQWKH3URMHFW$JUHHPHQWVSHUKDSV : )j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sRQHV /DXJKOLQ6WHHO&R ZKDWGHIHQVHVPD\EHDYDLODEOH XQGHU WKHFRPPRQODZRI )G WK&LU WKLVFRXUWUXOHGWKDWDVWDWHFODLP FRQWUDFWV 6HH 1HZ %DNHU\ &R RI 2KLR )G DW RI IUDXG EDVHG RQ DQ HPSOR\HUjV IUDXGXOHQW m7KH IXQG VWDQGV PXFK OLNH D KROGHU LQ GXH FRXUVH LQ PLVUHSUHVHQWDWLRQV FRQFHUQLQJ D FROOHFWLYH EDUJDLQLQJ FRPPHUFLDO ODZ ZKR LV HQWLWOHG WR HQIRUFH WKH ZULWLQJ DJUHHPHQW ZDV SUHHPSWHG EHFDXVH WKH HPSOR\HU DOVR µZLWKRXWUHJDUGWRXQGHUVWDQGLQJVRUGHIHQVHVDSSOLFDEOHWR EUHDFKHGLWVGXW\RIJRRGIDLWKIRXQGLQVHFWLRQ8QOLNHWKH WKHRULJLQDOSDUWLHVjl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nZKLFKDUHDEVHQWKHUHnWKDWFDXVHGWKH *HUEHUSRVLWLRQ6HH1HZ%DNHU\&RRI2KLR)GDW SUHHPSWLRQRIWKHVWDWHODZFODLPLQ6HUUDQR m%HFDXVHXQGHUVHFWLRQPXOWLHPSOR\HUSODQVDUH HQWLWOHGWRUHO\RQWKHOLWHUDOWHUPVRIZULWWHQFRPPLWPHQWV 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
EHWZHHQ WKH SODQ WKH HPSOR\HU DQG WKH XQLRQ WKH DFWXDO SHUPLVVLEO\UHJXODWHWKHXQLRQjVSLFNHWLQJRQWKHHPSOR\HUjV LQWHQWRIDQGXQGHUVWDQGLQJVEHWZHHQWKHFRQWUDFWLQJSDUWLHV SURSHUW\,GDW DUHLPPDWHULDOl /DWHU GHFLVLRQV KDYH IXUWKHU H[SDQGHG WKH UDWLRQDOH RI :KHWKHUDFRQWUDFWWHUPLVDPELJXRXVLVDTXHVWLRQRIODZ *DUPRQDQGKDYHDOVRGLVSOD\HGWKHH[WHQWRIWKHH[FHSWLRQV IRUWKHFRXUWWRGHWHUPLQH7HQQHVVHH&RQVRO&RDO&RY WR*DUPRQ,Q%HONQDS,QFY+DOH86 8QLWHG0LQH:RUNHUVRI$P)G WK&LU WKH&RXUWUHMHFWHGDFODLPRI*DUPRQSUHHPSWLRQEDVHGRQ 7KH GLVWULFW FRXUW FRQFOXGHG WKDW WKH KDQGZULWWHQ VWDWHODZ PLVUHSUHVHQWDWLRQ DQG EUHDFK RI FRQWUDFW FODLPV QRWDWLRQVLQWKHWZR$JUHHPHQWVZHUHDPELJXRXV:HDJUHH EURXJKW E\ UHSODFHPHQW ZRUNHUV DJDLQVW WKHLU IRUPHU 7KHODZRIWKLVFLUFXLWGRHVQRWUHTXLUHIXQGDGPLQLVWUDWRUVWR HPSOR\HU7KHUHWKHHPSOR\HUKDGSURPLVHGWKHUHSODFHPHQW UHDGWKHPLQGVRIFRQWUDFWLQJSDUWLHV UDWKHUDGPLQLVWUDWRUV ZRUNHUV WKDW WKH\ ZRXOG UHWDLQ WKHLU MREV HYHQ DIWHU WKH PD\UHO\RQWKHXQDPELJXRXVWHUPVRIWKHZULWLQJ6HH1HZ VHWWOHPHQWRIWKHODERUGLVSXWHZLWKWKHXQLRQ,GDW %DNHU\&RRI2KLR)GDW +HUHWKHFXUVRU\DQG +RZHYHUDVDUHVXOWRIXQIDLUODERUSUDFWLFHFKDUJHV%HONQDS QRQVSHFLILF QRWHV RQ WZR RI WKH ILYH 3URMHFW $JUHHPHQWV DJUHHGWROD\RIILWVmSHUPDQHQWlUHSODFHPHQWZRUNHUVDQG ZHUHWKHRQO\SLHFHVRILQIRUPDWLRQ12$KDGWKDWWKHSDUWLHV UHKLUHWKHVWULNHUV,GDW 7KH6XSUHPH&RXUWKHOGWKDW PLJKWKDYHLQWHQGHGDQ\PRGLILFDWLRQ:LWKRXWPRUHWKHVH WKHUHSODFHPHQWZRUNHUVjVWDWHVXLWDJDLQVW%HONQDSIRUIUDXG QRWDWLRQV GR QRW LQGLFDWH DQ LQWHQW WR VXSHUFHGH WKH LQUHODWLRQWR%HONQDSjVSURPLVHWRWKHUHSODFHPHQWVZDVQRW XQDPELJXRXVW\SHGSURYLVLRQV SUHHPSWHGEHFDXVHWKHVWDWHFODLPIRUIUDXGZDVQRWLGHQWLFDO WR WKH XQIDLU ODERU SUDFWLFH FODLP EURXJKW E\ WKH VWULNLQJ : )DOVRFODLPVWKDWWKHHQWLUHFRQWUDFWLVYRLGEHFDXVHWKH ZRUNHUV,GDW6LQFHWKH%RDUGZDVQRWFRQFHUQHG GLVWULFW FRXUW UXOHG WKDW mWKH DWWHPSWHG DPHQGPHQWV LI ZLWK%HONQDSjVUHSUHVHQWDWLRQVWRWKHUHSODFHPHQWZRUNHUV HIIHFWLYHZRXOGKDYHSURGXFHGDQLOOHJDOFRQWUDFWl%XWWKH DQG WKH UHSODFHPHQW ZRUNHUVj VXLW KDG QR LPSDFW RQ WKH GLVWULFWFRXUWGLGQRWKROGWKDWWKRVHDWWHPSWHGPRGLILFDWLRQV VWULNHUVjXQIDLUODERUFODLPVWKHVWDWHUHJXODWLRQZRXOGQRW ZHUH LQ IDFW HIIHFWLYH UDWKHU WKH FRXUW RSLQHG WKDW WKH LQWHUIHUH ZLWK QDWLRQDO ODERU SROLF\ DV HOXFLGDWHG E\ WKH KDQGZULWWHQQRWDWLRQVLILQWHUSUHWHGDVPRGLI\LQJWKHFRQWUDFW %RDUG,G)LQDOO\WKH&RXUWIRXQGWKDWWKHVWDWHjVLQWHUHVWLQ LQWKHZD\LQZKLFK: )FODLPVZRXOGPDNHWKHFRQWUDFW SURWHFWLQJ LWV FLWL]HQV IURP PLVUHSUHVHQWDWLRQV ZDV D LOOHJDO DQG WKDW 12$ KDG QR UHDVRQ WR VXSSRVH WKDW WKRVH mVXEVWDQWLDOLQWHUHVWl,G KDQGZULWWHQQRWDWLRQVZHUHLQWHQGHGWRPRGLI\WKHFRQWUDFWVR DVWRUHQGHULWLOOHJDO7KHGLVWULFWFRXUWjVREVHUYDWLRQRQWKLV %HIRUH ZH DGGUHVV WKH *DUPRQ IDFWRUV ZH PXVW ILUVW LVVXHKDVQRWKLQJWRGRZLWKZKHWKHU12$ZDVRQQRWLFHWKDW DGGUHVV WKH WKUHVKROG TXHVWLRQ RI ZKHWKHU WKH 8QLRQjV DVLGHDJUHHPHQWKDGEHHQUHDFKHG FRQGXFW DW LVVXH KHUH LV DUJXDEO\ SURKLELWHG E\ VHFWLRQ 7KHVWDWHODZFRXQWHUFODLPEURXJKWE\: )LVIRUIUDXGLQ $FFRUGLQJO\ZH$)),50WKHGLVWULFWFRXUWj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
FRQJUHVVLRQDOGLUHFWLRQZHFRXOGQRWLQIHUWKDW&RQJUHVVKDG : ) FODLPV WKDW WKH 8QLRQ DQG +HOOGREOHU IUDXGXOHQWO\ GHSULYHGWKH6WDWHVRIWKHSRZHUWRDFWlWKH&RXUWZRXOGQRW LQGXFHG : ) WR HQWHU LQWR WKH 3URMHFW $JUHHPHQWV ILQG 1/5$ SUHHPSWLRQ ,G DW /LNHZLVH ZKHUH WKH IUDXGXOHQWO\H[HFXWHGWKH3URMHFW$JUHHPHQWVDQGQHJOLJHQWO\ UHJXODWHG DFWLYLW\ LV mPHUHO\ SHULSKHUDOl WR WKH FHQWUDO PLVUHSUHVHQWHG WKH VFRSH RI WKRVH $JUHHPHQWV : ) FRQFHUQVRIWKH1/5$WKHVWDWHVPD\UHJXODWHWKHDFWLYLW\ GHPDQGVDGHFODUDWRU\MXGJPHQWWKDWEHFDXVHRIWKH7KLUG ,GDW 3DUW\'HIHQGDQWVjIUDXGWKH3URMHFW$JUHHPHQWVDUHHLWKHU YRLGRUYRLGDEOHDQGIXUWKHUVHHNVDMXGJPHQWDJDLQVWWKHP 7KH H[WHQW RI WKH 1/5$jV SUHHPSWLRQ ZDV HOXFLGDWHG IRULQGHPQLILFDWLRQFRPSHQVDWRU\DQGSXQLWLYHGDPDJHVDQG IXUWKHULQ6HDUV5RHEXFNDQG&RY6DQ'LHJR&RXQW\'LVW DWWRUQH\jV IHHV 7KH 8QLRQ DQG +HOOGREOHU FODLP WKDW WKH &RXQFLO RI &DUSHQWHUV 86 ,Q WKDW FDVH GLVWULFW FRXUW HUUHG LQ UHIXVLQJ WR GLVPLVV WKH WKLUGSDUW\ 6HDUV EURXJKW D WUHVSDVV DFWLRQ LQ VWDWH FRXUW WR HQMRLQ WKH FRPSODLQW DJDLQVW WKHP SXUVXDQW WR )HGHUDO 5XOHV RI &LYLO XQLRQ IURP SLFNHWLQJ RQ LWV SURSHUW\ ,G DW 7KH 3URFHGXUH E DQG 6SHFLILFDOO\WKH\FODLP WKDW 6XSUHPH &RXUW UXOHG WKDW WKH 1/5$ GLG QRW SUHHPSW WKH WKHWKLUGSDUW\FRPSODLQWLVVXEMHFWWRGLVPLVVDOXQGHUWKH HPSOR\HUjV VWDWH WUHVSDVV DFWLRQ ,G DW 7KH &RXUW UXOH RI7H[WURQ/\FRPLQJ5HFLSURFDWLQJ(QJLQH'LY$YFR UHIXVHG WR DSSO\ *DUPRQ SUHHPSWLRQ PHFKDQLVWLFDOO\ DQG &RUSY8$:86 WKHFRPSODLQWLV LQVWHDGRSWHGIRUDIOH[LEOHEDODQFLQJRIWKHIHGHUDOQHHGIRU SUHHPSWHGE\WKHUXOHRI6DQ'LHJR%OGJ7UDGHV&RXQFLOY XQLIRUPLW\ WKH VWDWHjV LQWHUHVW LQ UHJXODWLQJ WKH FRQGXFW DW *DUPDQ 86 WKHFRPSODLQWLVSUHHPSWHG LVVXHDQGWKHSRWHQWLDOIRUWKHVWDWHjVUHJXODWLRQWRWKUHDWHQ E\ VHFWLRQ DQG WKHUHIRUH VXEMHFW WR GLVPLVVDO DQG XQGXO\ WKH IHGHUDO UHJXODWRU\ VFKHPH ,G DW 7KH +HOOGREOHULVLPPXQHIURPVXLWDVDQLQGLYLGXDOSXUVXDQWWR &RXUW H[SODLQHG WKDW ZKHQ WKH FRQGXFW LV mDUJXDEO\l VHFWLRQ E DQGWKHUXOHLQ$WNLQVRQY6LQFODLU5HILQLQJ SURKLELWHGWZRIDFWRUVZHLJKLQGHWHUPLQLQJZKHWKHUVWDWH &R86 UHJXODWLRQ LV SUHHPSWHG ZKHWKHU WKHUH H[LVWV D mVLJQLILFDQWlVWDWHLQWHUHVWLQSURWHFWLQJLWVFLWL]HQVIURPWKH :HILQGWKHVHFODLPVWREHZLWKRXWPHULWDQG$)),50WKH FRQGXFW DQG ZKHWKHUVWDWHMXULVGLFWLRQRYHUWKHDUJXDEOH GLVWULFWFRXUWjVGHQLDORIWKHPRWLRQWRGLVPLVV ODERUYLRODWLRQZRXOGHQWDLOmOLWWOHULVNlRILQWHUIHULQJZLWKWKH XQLIRUP QDWLRQDO ODERU SROLF\ ,G DW 7KH VHFRQG RI $6XSSOHPHQWDOsXULVGLFWLRQ WKHVHIDFWRUVLVHTXLYDOHQWWRWKHTXHVWLRQRIZKHWKHUWKHVWDWH FDXVHRIDFWLRQLVmLGHQWLFDOlWRDFODLPWKDWFRXOGKDYHEHHQ +HOOGREOHUDQGWKH8QLRQILUVWFODLPWKDWWKHIHGHUDOFRXUW PDGH WR WKH %RDUG ,G ,I WKH VWDWHEDVHG FODLP DQG D ODFNHGMXULVGLFWLRQRYHUWKHWKLUGSDUW\FRPSODLQWEHFDXVHRI SRWHQWLDOFODLPWRWKH%RDUGDUHLGHQWLFDOWKHQWKH%RDUGKDV WKHOLPLWDWLRQVVHWRXWE\WKH6XSUHPH&RXUWLQ7H[WURQ,Q H[FOXVLYHMXULVGLFWLRQEHFDXVHWKHVWDWHUHJXODWLRQLPSLQJHV WKDW FDVH WKH &RXUW FRQFOXGHG WKDW VHFWLRQ D RI WKH GLUHFWO\RQWKH%RDUGjVSUHURJDWLYHWRIDVKLRQDXQLIRUPODERU /05$mFRQIHUVIHGHUDOVXEMHFWPDWWHUMXULVGLFWLRQRQO\RYHU SROLF\,G,Q6HDUVWKH&RXUWUXOHGWKDWWKHVWDWHWUHVSDVV µ>V@XLWVIRUYLRODWLRQRIFRQWUDFWVjl7H[WURQ86DW ODZUHJXODWHGWKHORFDWLRQRIWKHSLFNHWLQJZKLOHDFODLPWR DQGWKDWmµ>V@XLWVIRUYLRODWLRQRIFRQWUDFWVjXQGHUDUH WKH %RDUG ZRXOG KDYH ORRNHG DW WKH PRWLYH EHKLQG WKH QRWVXLWVWKDWFODLPDFRQWUDFWLVLQYDOLGEXWVXLWVWKDWFODLP SLFNHWLQJWRGLVFHUQZKHWKHUWKHSLFNHWLQJZDVDQXQIDLUODERU DFRQWUDFWKDVEHHQYLRODWHGl,GDW%HFDXVH: )GRHV SUDFWLFH ,G DW %HFDXVH WKH WZR FODLPV ZHUH QRW QRW FODLP LQ LWV WKLUGSDUW\ FRPSODLQW WKDW WKH 8QLRQ DQG LGHQWLFDO DQG EHFDXVH WKH VWDWH KDV D VWURQJ LQWHUHVW LQ +HOOGREOHUYLRODWHGWKH&%$EXWLQVWHDGFODLPVWKDWWKHWKLUG SURWHFWLQJWKHLQWHJULW\RILWVFLWL]HQVjSURSHUW\WKHVWDWHFRXOG SDUW\jV DFWLRQV UHQGHU WKH 3URMHFW $JUHHPHQWV YRLG WKH 1RUWKZHVWHUQ2KLR$GPY 1RV 1RV 1RUWKZHVWHUQ2KLR$GPY :DOFKHU )R[HWDO :DOFKHU )R[HWDO
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nOLDELOLW\WKDW LPPDWHULDO : ) FODLPV DURVH RQO\ EHFDXVH RI WKH 7KLUG3DUW\ 'HIHQGDQWVj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m1/5$l ,QWjO/RQJVKRUHPHQjV$VVjQY'DYLV86 FLYLO DFWLRQ RI ZKLFK WKH GLVWULFW FRXUWV KDYH RULJLQDO MXULVGLFWLRQWKHGLVWULFWFRXUWVVKDOOKDYHVXSSOHPHQWDO MXULVGLFWLRQRYHUDOORWKHUFODLPVWKDWDUHVRUHODWHGWR ,Q*DUPRQWKH6XSUHPH&RXUWV\QWKHVL]HGLWVSULRU1/5$ FODLPVLQWKHDFWLRQZLWKLQVXFKRULJLQDOMXULVGLFWLRQWKDW SUHHPSWLRQFDVHV m:KHQDQDFWLYLW\LVDUJXDEO\VXEMHFWWR WKH\ IRUP SDUW RI WKH VDPH FDVH RU FRQWURYHUV\ XQGHU RURIWKH$FWWKH6WDWHVDVZHOODVWKHIHGHUDOFRXUWV $UWLFOH ,,, RI WKH 8QLWHG 6WDWHV &RQVWLWXWLRQ 6XFK PXVWGHIHUWRWKHH[FOXVLYHFRPSHWHQFHRIWKH1DWLRQDO/DERU VXSSOHPHQWDO MXULVGLFWLRQ VKDOO LQFOXGH FODLPV WKDW 5HODWLRQV %RDUG LI WKH GDQJHU RI VWDWH LQWHUIHUHQFH ZLWK LQYROYHWKHMRLQGHURULQWHUYHQWLRQRIDGGLWLRQDOSDUWLHV QDWLRQDOSROLF\LVWREHDYHUWHGl*DUPRQ 86DW 7KH 6XSUHPH &RXUW ZDV PRWLYDWHG E\ WKH H[SUHVVHG 1HLWKHUVXEVHFWLRQ E QRU F LVDSSOLFDEOHKHUH7KHUHIRUH FRQJUHVVLRQDO GHVLUH IRU XQLIRUPLW\ LQ WKH QDWLRQjV ODERU XQOHVVWKHGLVWULFWFRXUWODFNHGVXEMHFWPDWWHUMXULVGLFWLRQIRU SROLF\,GDW7RDOORZWKH%RDUGWRFUHDWHXQLIRUPODERU VRPHUHDVRQRWKHUWKDQWKH7H[WURQUXOHZKLFKLVLQDSSRVLWH UHJXODWLRQVIRUWKHQDWLRQjVZRUNHUVDQGHPSOR\HUVDQGWR KHUH WKHVH FODLPV DUH SURSHUO\ ZLWKLQ WKH VXSSOHPHQWDO PDNH XVH RI WKH %RDUGjV H[SHUWLVH LQ WKH DUHD RI ODERU MXULVGLFWLRQRIWKHFRXUWDULVLQJDVWKH\GRRXWRIH[DFWO\WKH UHODWLRQV WKH &RXUW VRXJKW WR H[FOXGH WKH VWDWHV IURP WKH VDPHIDFWVWKDWJDYHULVHWR12$j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mWRXFKHGLQWHUHVWVVRGHHSO\URRWHGLQORFDO PDNH :KDW LV DW LVVXH LQ WKLV WKLUGSDUW\ FRPSODLQW LV IHHOLQJDQGUHVSRQVLELOLW\WKDWLQWKHDEVHQFHRIFRPSHOOLQJ
Northwestern OH Adm v. Walcher & Fox Inc (Northwestern OH Adm v. Walcher & Fox Inc) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.