Rannals v. Casino

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

'$:1 5$11$/6 ; 3ODLQWLII$SSHOODQW    1R Y  !  ',$021' s2 &$6,12  'HIHQGDQW$SSHOOHH  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW7ROHGR 1Rn'DYLG$.DW]'LVWULFWsXGJH $UJXHGsDQXDU\ 'HFLGHGDQG)LOHG6HSWHPEHU %HIRUH%2**6DQG0225(&LUFXLWsXGJHV%(// &KLHI'LVWULFWsXGJH BBBBBBBBBBBBBBBBB &2816(/ $5*8('  'HQQLV 0 2j%U\DQ 2j%5<$1 %$81 &2+(1%LUPLQJKDP0LFKLJDQIRU$SSHOODQW.LPEOH\$ .HDUQH\ &/$86(1 0,//(5 3& &KLFDJR ,OOLQRLV IRU

7KH +RQRUDEOH 5REHUW +ROPHV %HOO &KLHI 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH :HVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ

  5DQQDOVY&DVLQR 1R

$SSHOOHH  21 %5,()  'HQQLV 0 2j%U\DQ .LUN .DUDPDQLDQ2j%5<$1%$81 &2+(1%LUPLQJKDP 0LFKLJDQIRU$SSHOODQW.LPEOH\$.HDUQH\0HOLVVD$ 0XUSK\3HWURV&/$86(10,//(53&&KLFDJR,OOLQRLV IRU$SSHOOHH 0225(sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK %(// ' s MRLQHG  %2**6 s SS  GHOLYHUHG D VHSDUDWHGLVVHQWLQJRSLQLRQ BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB .$5(1 1(/621 0225( &LUFXLW sXGJH  3ODLQWLII $SSHOODQW 'DZQ 5DQQDOV m5DQQDOVl ILOHG WKLV ODZVXLW DJDLQVW KHU HPSOR\HU 'HIHQGDQW$SSHOOHH 'LDPRQG sR &DVLQR m'LDPRQG sRl DVVHUWLQJ D FODLP XQGHU WKH sRQHV $FW86&†EDVHGXSRQDQLQMXU\VKHVXIIHUHGZKLOH DWWHQGLQJDILUHILJKWLQJWUDLQLQJSURJUDPLQ7ROHGR2KLR 7KH GLVWULFW FRXUW JUDQWHG VXPPDU\ MXGJPHQW LQ IDYRU RI 'LDPRQG sR RQ 5DQQDOVjV sRQHV $FW FODLP KROGLQJ WKDW 5DQQDOVKDGIDLOHGWRFUHDWHDJHQXLQHLVVXHRIPDWHULDOIDFW UHJDUGLQJ ZKHWKHU KHU LQMXULHV ZHUH FDXVHG E\ DQ XQUHDVRQDEO\ GDQJHURXV FRQGLWLRQ LQ KHU ZRUNSODFH DERXW ZKLFK'LDPRQGsRRULWVDJHQWVNQHZRUVKRXOGKDYHNQRZQ 5DQQDOVQRZDSSHDOVWKHGLVWULFWFRXUWjVGHFLVLRQ)RUWKH UHDVRQV WKDW IROORZ ZH 5(9(56( WKH MXGJPHQW RI WKH GLVWULFW FRXUW DQG 5(0$1' IRU IXUWKHU SURFHHGLQJV FRQVLVWHQWZLWKWKLVRSLQLRQ

 5DQQDOV DOVR DOOHJHG OLDELOLW\ IRU XQVHDZRUWKLQHVV PDLQWHQDQFH FXUH DQG ZDJHV XQGHU JHQHUDO PDULWLPH ODZ 5DQQDOV ODWHU DEDQGRQHG KHU XQVHDZRUWKLQHVV FODLP KRZHYHU DQG VKH DQG 'LDPRQG sR DJUHHG WR UHVROYH DQ\ RXWVWDQGLQJ PDLQWHQDQFH DQG FXUH LVVXHV EHWZHHQ WKHP 1R 5DQQDOVY&DVLQR 

,)$&76 5DQQDOVZRUNVDVDGHFNKDQGIRU'LDPRQGsRDULYHUERDW FDVLQRRSHUDWLQJLQ'XEXTXH,RZD2QsDQXDU\ 5DQQDOVDQGWKUHHRWKHUHPSOR\HHVRI'LDPRQGsRGURYHWR 7ROHGR2KLRLQDUHQWDOFDUSURYLGHGE\'LDPRQGsRVRWKDW WKH\ FRXOG DWWHQG D WUDLQLQJ SURJUDP IRU ILUHILJKWLQJ IURP sDQXDU\   DW WKH *UHDW /DNHV 5HJLRQ 7UDLQLQJ &HQWHUmWKHWUDLQLQJFHQWHUlZKLFKLVRSHUDWHGE\WKH8QLWHG 6WDWHV'HSDUWPHQWRI7UDQVSRUWDWLRQ6LQFH'LDPRQG sRKDGDOORZHGLWVHPSOR\HHVWRVLJQXSIRUWKLVZHHNORQJ WUDLQLQJSURJUDPDQGZRXOGSD\LWVHPSOR\HHVWKHLUUHJXODU UDWH RI SD\ IRU WKH GXUDWLRQ RI WKH SURJUDP  $GGLWLRQDOO\ 'LDPRQGsRSDLGLWVHPSOR\HHVjWXLWLRQFRVWVIRUWKHSURJUDP DQGDOOUHDVRQDEOHH[SHQVHVIRUWUDQVSRUWDWLRQORGJLQJDQG IRRG 'LDPRQG sR GLG QRW UHTXLUH 5DQQDOV RU DQ\ RWKHU HPSOR\HHV WR DWWHQG WKLV WUDLQLQJ SURJUDP KRZHYHU LW GLG UHTXLUH FRPSOHWLRQ RI WKH SURJUDP IRU SURPRWLRQV WR VXSHUYLVRU\SRVLWLRQVVXFKDVWKHOHDGGHFNKDQGSRVLWLRQV $IWHUDWWHQGLQJVHYHUDOGD\VRIFODVVHVDWWKHWUDLQLQJFHQWHU 5DQQDOVDQGKHUFRHPSOR\HHVOHIWWKHLUKRWHOWRGULYHWRWKH WUDLQLQJFHQWHURQWKHPRUQLQJRI7KXUVGD\sDQXDU\ ,QKHUGHSRVLWLRQ5DQQDOVWHVWLILHGWKDWEHIRUHVKHDQGKHU FRZRUNHUVGURYHRIIWKDWPRUQLQJVRPHRIKHUFRZRUNHUV KDGWRVFUDSHLFHRIIWKHLUUHQWDOFDUjVZLQGRZV5DQQDOVDOVR VWDWHGWKDWLWZDVFROGDQGGUL]]OLQJRQWKHPRUQLQJRIsDQXDU\ DQGWKDWEHFDXVHRIVOLSSHU\DQGLF\URDGFRQGLWLRQV VKHDQGKHUFRZRUNHUVPRUHFDXWLRXVO\GURYHWRWKHWUDLQLQJ FHQWHU$FFRUGLQJWR5DQQDOVZKHQVKHDQGKHUFRZRUNHUV DUULYHGDWWKHWUDLQLQJFHQWHUDWDSSUR[LPDWHO\DPLW ZDVmNLQGRILF\RQWKHGULYHZD\lRIWKHWUDLQLQJFHQWHUDQG WKHVXUURXQGLQJJUDVV\DUHDVs$DW

 ,I DQ HPSOR\HH GLG QRW SDVV WKH WUDLQLQJ FRXUVH UHVLJQHG RU ZDV WHUPLQDWHG IURP 'LDPRQG sR OHVV WKDQ RQH \HDU DIWHU FRPSOHWLQJ WKH WUDLQLQJ SURJUDP KRZHYHU WKDW HPSOR\HH KDG WR UHLPEXUVH 'LDPRQG sR IRU DOO WXLWLRQ FRVWV DQG H[SHQVHV IRU WUDQVSRUWDWLRQ ORGJLQJ DQG IRRG s$ DW   5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

'DWDSUHSDUHGE\WKH1DWLRQDO2FHDQLFDQG$WPRVSKHULF $VVXPLQJWKDWXQGHU(PSH\DQGIDYRUDEO\FRQVWUXLQJWKH $GPLQLVWUDWLRQUHJDUGLQJWKHZHDWKHUFRQGLWLRQVLQ7ROHGR IDFWV5DQQDOVFRXOGEHIRXQGWREHDFWLQJZLWKLQWKHVFRSHRI 2KLR RQ sDQXDU\   FRUURERUDWHG 5DQQDOVjV KHU HPSOR\PHQW WKLV RQO\ DGGV WR WKH LURQ\ RI WKH FRXUWjV REVHUYDWLRQV FRQILUPLQJ WKDW IUHH]LQJ UDLQ DQG WUDFH FRQFOXVLRQ  $SSDUHQWO\ LI 'LDPRQG sR KDG JLYHQ 'DZQ SUHFLSLWDWLRQIHOOEHWZHHQWKHKRXUVRIDPDQGDP 5DQQDOVQRZDJHVGXULQJKHUZHHNLQ7ROHGRDQGUHIXVHGWR RQsDQXDU\DQGDWQRRWKHUWLPHGXULQJWKDWGD\DQG SD\KHUWXLWLRQRUWUDYHOH[SHQVHVWKHFRXUWZRXOGQRWKROG WKDWLWZDVPLVW\EHWZHHQWKHKRXUVRIDPDQGSP 'LDPRQG sR OLDEOH IRU WKLV DFFLGHQW  7KH FRXUW SXQLVKHV RQsDQXDU\7KHGDWDDOVRVKRZHGWKDWLWZDVEHORZ 'LDPRQGsRLQWKHQDPHRIVDIHW\IRUVXEVLGL]LQJWKHVDIHW\ WKLUW\ GHJUHHV )DKUHQKHLW RQ sDQXDU\    sRLQW WUDLQLQJRILWVHPSOR\HHVDQGIRULWVLQYHVWPHQWLQWKHJUHDWHU $SSHQGL[ms$lDW VDIHW\RIWKHYHVVHODQGWKHHPSOR\HHjVIHOORZVHDPHQ

2QFH FODVVHV HQGHG DW DSSUR[LPDWHO\  SP RQ %HFDXVHWKHUHLVQRQHJOLJHQFHE\'LDPRQGsRDQGEHFDXVH sDQXDU\   5DQQDOV DQG KHU FRZRUNHUV ZDONHG RXW '27ZDVQRWWKHVKLSjVDJHQWXQGHU6LQNOHU'LDPRQGsRFDQ RQWR D JUDVV\ DUHD ERUGHULQJ RQH RI WKH GULYHZD\V RI WKH RQO\EHOLDEOHIRUIDLOXUHWRSURYLGHDmVDIHZRUNSODFHl,WLV WUDLQLQJ FHQWHU WR PDNH SODQV IRU WKH HYHQLQJ ZLWK RWKHU XQUHDVRQDEOH WR FRQVWUXH WKH VFKRRO DV D mZRUNSODFHl DQG SURJUDPDWWHQGHHV5DQQDOVWHVWLILHGWKDWWKHFRQGLWLRQVRQ HYHQLILWZHUHVRFRQVWUXHGZKHWKHULWLVmVDIHlVKRXOGQRWEH WKHWUDLQLQJFHQWHUjVSURSHUW\DWWKDWWLPHZHUHmJHQHUDOO\WKH DVVHVVHGXQGHUWKHsRQHV$FWUXOHVEXWUDWKHUE\WKHVWDQGDUG VDPH DV ZKHQ >VKH DQG KHU FRZRUNHUV@ KDG DUULYHG DW WKH RIFDUHRIZKLFKWKHWKLUGSDUW\ZDVDZDUH7KHFRXUWjVUXOH VFKRROWKDWPRUQLQJls$DW$IWHU5DQQDOVILQLVKHG DOORZVUHFRYHU\ZKHUHQRSDUW\KDVEHHQQHJOLJHQWXQGHUWKH GLVFXVVLQJHYHQLQJSODQVZLWKWKHRWKHUSURJUDPDWWHQGHHV ODZDVLWFRXOGEHNQRZQWRWKHP'LDPRQGsRLVDZDUHRI VKH WXUQHG DURXQG WR ZDON WRZDUG KHU JURXSjV UHQWDO FDU WKH sRQHV $FW UXOHV RQ QHJOLJHQFH DQG LW DELGHG E\ WKHP $FFRUGLQJWR5DQQDOVDV5DQQDOVVWHSSHGRIIWKHJUDVVDQG '27ZDVDZDUHRI2KLRjVUXOHVRIQHJOLJHQFHDQGLWDELGHG RQWRWKHWUDLQLQJFHQWHUjVGULYHZD\VKHVOLSSHGRQDSDWFKRI E\WKHP+DG'27DFWXDOO\DFFHSWHGWKHUROHRIDQDJHQWRI LFHIHOODQGIUDFWXUHGKHUDQNOH5DQQDOVWHVWLILHGWKDWDIWHU DsRQHV$FWHPSOR\HULWVKRXOGEHGHHPHGWREHJRYHUQHGE\ VKHVOLSSHGVKHUHPHPEHUHGVHHLQJmDWKLQOD\HU>RILFH@ )(/$UXOHVEXWRWKHUZLVHLWVKRXOGQRWORVHWKHGHIHQVHVRQ ZKHUH>VKH@IHOOls$DW3ULRUWR5DQQDOVjVDFFLGHQWQR ZKLFK LW UHDVRQDEO\ UHOLHG DQG ZKLFK 'LDPRQG sR KDG QR HPSOR\HHDW'LDPRQGsRLQFOXGLQJ5DQQDOVKDGFRPSODLQHG QRWLFHZHUHLQDSSOLFDEOH,UHVSHFWIXOO\GLVVHQW WR'LDPRQGsRDERXWXQVDIHFRQGLWLRQVDWWKHWUDLQLQJFHQWHU QRUKDGDQ\VXSHUYLVRUIURP'LDPRQGsRREVHUYHGDQ\XQVDIH FRQGLWLRQVDWWKHFHQWHU ,,$1$/<6,6 5DQQDOV DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ JUDQWLQJ VXPPDU\MXGJPHQWEHFDXVHLWHUURQHRXVO\DSSOLHGWKHGHIHQVH RIQDWXUDODFFXPXODWLRQDFRPPRQODZGHIHQVHXQGHU2KLR

 5DQQDOV DOVR VWDWHG WKDW VXFK FRQGLWLRQV KDG QRW FKDQJHG E\ OXQFKWLPH DVVHUWLQJ m, WKLQN LW ZDV SUHWW\ PXFK DV LW ZDV WKDW PRUQLQJ , GR QRW WKLQN DQ\WKLQJ UHDOO\ FKDQJHGl s$ DW  IHGHUDO VWDQGDUGV RI FDUH LQ GHURJDWLRQ RI WKH ODZV RI WKH VHYHUDO VWDWHV  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

DSSDUHQWO\FKRRVHVWRJRZRXOGDOVRFUHDWHOLDELOLW\IRUWKH ODZ WR KHU IHGHUDO sRQHV $FW QHJOLJHQFH FODLP  5DQQDOV HPSOR\HU FRQWHQGVWKDWDVDUHVXOWRIDSSO\LQJWKHGHIHQVHRIQDWXUDO DFFXPXODWLRQWKHGLVWULFWFRXUWHUUHGLQFRQFOXGLQJWKDWVKH (YHQLIZHVKRXOGFRQVLGHUWKHSDUNLQJORWRIWKHVFKRROWR KDGIDLOHGWRFUHDWHDJHQXLQHLVVXHRIPDWHULDOIDFWUHJDUGLQJ EHDZRUNSODFHRXUSUHFHGHQWVZRXOGQRWUHTXLUHDEURJDWLRQ ZKHWKHU'LDPRQGsRRULWVDJHQWVZHUHQHJOLJHQWLQIDLOLQJWR RIDOOFRPPRQODZGHIHQVHVRIWKHWKLUGSDUW\WRQHJOLJHQFH UHPRYH DOOHJHG GDQJHURXV FRQGLWLRQV FDXVHG E\ LFH LQ WKH XQGHUWKH6KHQNHU(PSH\ZRUNSODFHGRFWULQH7KHFLWDWLRQRI WUDLQLQJFHQWHUjVGULYHZD\V WKH&KHVDSHDNHFDVHVXSUDDWUHJDUGVGLUHFWOLDELOLW\RI WKH HPSOR\HU  7KHUH DUH WZR ZD\V WKDW WKH HPSOR\HU FDQ :H UHYLHZ GH QRYR D GLVWULFW FRXUWjV RUGHU JUDQWLQJ EUHDFKKLVGXW\WRSURYLGHDVDIHZRUNSODFHRQWKHSUHPLVHV VXPPDU\MXGJPHQW6HH5LFKDUGVRQY7RZQVKLSRI%UDG\ RIRWKHUV+HFDQEHRQQRWLFHRIDQXQVDIHFRQGLWLRQDQGIDLO )GWK&LU2QUHYLHZRIDGLVWULFW WRWDNHUHDVRQDEOHFDUH+HLVVWULSSHGRIKLVFRPPRQODZ FRXUWjVJUDQWRIVXPPDU\MXGJPHQWZHDQDO\]HWKHHYLGHQFH GHIHQVHLIKHEUHDFKHVWKLVGXW\+RZHYHUWKHFRXUWDJUHHV DQGGUDZDOOUHDVRQDEOHLQIHUHQFHVWKHUHIURPLQIDYRURIWKH WKLV VLWXDWLRQ GRHV QRW SHUWDLQ PDNLQJ &KHVDSHDNH RQO\ QRQPRYLQJSDUW\6HH0DWVXVKLWD(OHF,QGXV&RY=HQLWK LQGLUHFWO\UHOHYDQW,ILQVWHDGWKHEUHDFKRIWKHGXW\RFFXUV 5DGLR&RUS86,QSDUWLFXODUZKHQ WKURXJKLPSXWDWLRQLWLVOHVVFOHDUWKDWFRPPRQODZGHIHQVHV ZH UHYLHZ D JUDQW RI VXPPDU\ MXGJPHQW LQYROYLQJ FODLPV DUHLUUHOHYDQW&RPELQLQJWKHWZRGRFWULQHVIRUZKLFKWKH XQGHU WKH sRQHV $FW ZH DUH PLQGIXO RI WKH mµSROLF\ RI FRXUW KDV QR REYLRXV SUHFHGHQW LV XQZDUUDQWHG DQG SURYLGLQJDQH[SDQVLYHUHPHG\IRUVHDPHQjlZKRDUHLQMXUHG SHUQLFLRXV   ,I WKH WKLUG SDUW\ LV LQ FRPSOLDQFH ZLWK LWV ZKLOHDFWLQJLQWKHFRXUVHRIWKHLUHPSOR\PHQWDQGUHFRJQL]H MXULVGLFWLRQjVFRPPRQODZQHJOLJHQFHUXOHVWKHVKLSZLOOEH WKDWWKHmµVXEPLVVLRQRIsRQHV$FWFODLPVWRDMXU\UHTXLUHVD XQDEOH WR PDLQWDLQ D VXEVHTXHQW DFWLRQ DJDLQVW WKDW WKLUG YHU\ ORZ HYLGHQWLDU\ WKUHVKROGjl  'DXJKHQEDXJK Y SDUW\$Q\DWWHPSWE\HLWKHUWKHWKLUGSDUW\ RU WKH VKLSWR %HWKOHKHP6WHHO&RUS*UHDW/DNHV6WHDPVKLS'LY)G PRQLWRUWKHWKLUGSDUW\oZKHUHRSHUDWLRQDODFWLYLWLHVDUHQRW   WK &LU  TXRWDWLRQ RPLWWHG VHH DOVR LPSOLFDWHGoZRXOGEHSURKLELWLYHO\FXPEHUVRPHSDUWLFXODUO\ 3HUNLQVY$PHULFDQ(OHF3RZHU)XHO6XSSO\,QF)G JLYHQ WKH UHTXLUHPHQW WKDW WKH VKLSRZQHU EH DZDUH RI WKH   WK &LU   :H DIILUP D JUDQW RI VXPPDU\ GLIIHULQJ VWDQGDUGV RI FDUH SUHYDLOLQJ ZKHUHYHU LW GRHV MXGJPHQW RQO\ mLI WKH SOHDGLQJV GHSRVLWLRQV DQVZHUV WR EXVLQHVV LQWHUURJDWRULHV DQG DGPLVVLRQV RQ ILOH WRJHWKHU ZLWK WKH DIILGDYLWVLIDQ\VKRZWKDWWKHUHLVQRJHQXLQHLVVXHDVWRDQ\  PDWHULDO IDFW DQG WKDW WKH PRYLQJ SDUW\ LV HQWLWOHG WR D (YHQ VXSSRVLQJ WKDW WKHUH ZHUH WKH QHHG WR FUHDWH D K\EULG UXOH RI MXGJPHQWDVDPDWWHURIODZl)(' 5 &,9 3 F LPSXWHG OLDELOLW\ LQ RUGHU WR DVVLVW sRQHV $FW SODLQWLIIV WKH FRXUWj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sRRULWVDJHQWVjIDLOXUH LW HYHQWXDOO\ VKLIWV WKH FRVW WR WKH UHVSRQVLEOH SDUW\ UDWKHU WKDQ OHDYLQJ WKH WRFXUHRUHOLPLQDWHDQXQUHDVRQDEO\GDQJHURXVFRQGLWLRQLQ HPSOR\HU mKROGLQJ WKH EDJl DV DEVROXWH LQVXUHU )XUWKHU LW EHWWHU EDODQFHV KHUZRUNSODFHDERXWZKLFK'LDPRQGsRRULWVDJHQWVNQHZRU VWDWH DQG IHGHUDO LQWHUHVWV LQYROYHG LQ D FKRLFH RI ODZ 6HH 6WHHOPHW ,QF Y&DULEH 7RZLQJ   )G   WK &LU  VWDWLQJ WKDW LI VKRXOGKDYHNQRZQ7KHsRQHV$FWSURYLGHVDFDXVHRIDFWLRQ mWKHUH LV DQ DGPLUDOW\VWDWH FRQIOLFW FRPSDUDWLYH LQWHUHVW PXVW EH LQQHJOLJHQFHIRU m>D@Q\VHDPDQlLQMXUHGmLQWKHFRXUVHRI FRQVLGHUHGl 7KH FRXUWjV UXOH SURYLGHV DQ LQFHQWLYH IRU VKLSRZQHUV WR >KHU@ HPSOR\PHQWl   86& $SS † D VHH DOVR DWWHPSW WR FRPSHO DOO WKRVH ZLWK ZKRP WKH\ GR EXVLQHVV WR DGKHUH WR  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

&KDQGULV,QFY/DWVLV86:RUNHUV OLDELOLW\LQ(PSH\DSSHDUVWRUHFRJQL]HWZREDVHVIRUVXFK ZKR VDWLVI\ WKH GHILQLWLRQ RI VHDPDQ XQGHU WKH sRQHV $FW OLDELOLW\l2QWKHRQHKDQGWKHUHDUH6LQNOHUDJHQF\FDVHVRQ mPD\UHFRYHUXQGHUWKHsRQHV$FWZKHQHYHUWKH\DUHLQMXUHG WKH RWKHU KDQG WKHUH LV WKH HPSOR\HUjV RZQ QRQGHOHJDEOH LQ WKH VHUYLFH RI D YHVVHO UHJDUGOHVV RI ZKHWKHU WKH LQMXU\ GXW\ WR SURYLGH D VDIH ZRUNSODFH  7KH  FRXUWjV RSLQLRQ RFFXUVRQRURIIWKHVKLSl&KDQGULV86DWVHHDOVR GLVFXVVHVERWKWKHRULHVEXWZLWKRXWVKRZLQJWKDW5DQQDOVKDV 'DXJKHQEDXJK)GDWm3URRIRIQHJOLJHQFHGXW\ VWDWHGDFODLPXQGHUHLWKHU6HHHJVXSUDDWLQZKLFK DQGEUHDFKLVHVVHQWLDOWRUHFRYHU\XQGHUWKHsRQHV$FWlDQG WKH FRXUW VWDWHV WKDW 'LDPRQG sR LV UHVSRQVLEOH IRU mWKH DQHPSOR\HUjVFRQGXFWLQDsRQHV$FWFDVHLVUHYLHZHGmXQGHU QHJOLJHQFHRILWVDJHQWLQWKLVFDVHWKHWUDLQLQJFHQWHU>@lEXW WKH µRUGLQDU\ SUXGHQFHj VWDQGDUG QRUPDOO\ DSSOLFDEOH LQ WKHQ LPPHGLDWHO\ WXUQV WR D GLVFXVVLRQ RI 'LDPRQG sRjV QHJOLJHQFH FDVHVl  3HUNLQV  )G DW  FLWLQJ DOOHJHGEUHDFKRILWVRZQGXW\WRSURYLGHDVDIHZRUNSODFH *DXWUHDX[Y6FXUORFN0DULQH,QF)GWK &LU    2QFH D SODLQWLII SURYHV DQ HPSOR\HUjV 7KH 'HSDUWPHQW RI 7UDQVSRUWDWLRQ LV QRW WKH DJHQW RI QHJOLJHQFH KRZHYHU VKH QHHG RQO\ VKRZ WKDW KHU 'LDPRQGsR&DVLQRm7KHODZRIDJHQF\LVIXOO\DSSOLFDEOH mHPSOR\HUjVQHJOLJHQFHLVWKHFDXVHLQZKROHRUSDUWRI>KHU@ LQDGPLUDOW\l$'0,5$/7<†DW$VWKHFRXUWLV LQMXULHVl,G,QRWKHUZRUGVRQFHQHJOLJHQFHLVHVWDEOLVKHG IXOO\DZDUHWKHPHUHIDFWWKDWDFRQWUDFWH[LVWVEHWZHHQWZR WKHSODLQWLIIQHHGRQO\VKRZWKDWKHUHPSOR\HUjVQHJOLJHQFH SDUWLHV GRHV QRW PDNH RQH WKH DJHQW RI WKH RWKHU  $QG mSOD\HGDQ\SDUWHYHQWKHVOLJKWHVWLQSURGXFLQJWKHLQMXU\RU DOWKRXJKDQHPSOR\HUPD\EHOLDEOHIRUWKHQHJOLJHQFHRILWV GHDWKIRUZKLFK GDPDJHVDUHVRXJKWl5RJHUVY0LVVRXUL LQGHSHQGHQWFRQWUDFWRUXQGHUWKHsRQHV$FWLWKDVQHYHUEHHQ 3DF55&R86VHHDOVR3HUNLQV VXJJHVWHGWKDWWKHPHUHH[LVWHQFHRIDFRQWUDFWXDOUHODWLRQVKLS )GDW ZLWK WKH HPSOR\HU PDQGDWHV LQGLUHFW OLDELOLW\  7KH '27 SURYLGHG D VHUYLFH WR 5DQQDOV VXEVLGL]HG LQ KHU FDVH E\ )XUWKHUPRUH DV WKH 6XSUHPH &RXUW QRWHG LQ 6RFRQ\ 'LDPRQGsREXWGLGQRWWKHUHE\EHFRPH'LDPRQGsRjVDJHQW 9DFXXP2LO&RY6PLWK86WKHsRQHV$FW RU WKDW RI DQ\ RI WKH RWKHU VLPLODUO\ VLWXDWHG VKLSRZQHUV ZDVLQWHQGHGWRH[SDQGoQRWOLPLWoSURWHFWLRQVIRUVHDPHQ EHFDXVHLWZDVQRWSHUIRUPLQJDQ\GXWLHVRURSHUDWLRQVRIWKH DQGXVXDOO\GLVDOORZVmWKHDSSOLFDWLRQRIUXOHVRIWKHFRPPRQ YHVVHO6LQNOHUDQGLWVSURJHQ\GRQRWDOORZDQDJHQF\WREH ODZZKLFKZRXOGDIIHFW>VHDPHQ@KDUVKO\l,GDWVHH FUHDWHGZKHUHQHLWKHUSDUW\KDGWKHLQWHQWWRFUHDWHRQH DOVR'DXJKHQEDXJK)GDWKROGLQJWKDWWKHsRQHV $FWmµLVHQWLWOHGWRDOLEHUDOFRQVWUXFWLRQWRDFFRPSOLVKLWV $OWKRXJKWKHFRXUWFRQWLQXDOO\FDOOVWKH'27'LDPRQGsRjV EHQHILFHQWSXUSRVHVjlTXRWDWLRQRPLWWHG,QRWKHUZRUGV DJHQW LW IXQGDPHQWDOO\ DSSHDUV WR UHO\ RQ WKH GXW\ RI D LQsRQHV$FWFDVHVDQmHPSOR\HULV>JHQHUDOO\@VWULSSHGRI )(/$sRQHV $FW HPSOR\HU WR SURYLGH D VDIH mZRUNSODFHl >LWV@ FRPPRQODZ GHIHQVHVl 5RJHUV  86 DW  7KLVUHTXLUHVVKRZLQJWKDWQRWRQO\ZDV5DQQDOVmZRUNLQJl )RUH[DPSOHZKLOHWKHGRFWULQHRIFRPSDUDWLYHQHJOLJHQFHLV EXWWKDWVKHZDVDWDmZRUNSODFHlZKLFKDUHQRWWKHVDPH DSSOLFDEOHWRFODLPVXQGHUWKHsRQHV$FWWKHDVVXPSWLRQRI WKLQJ$VVHDPDQ6DODPRQZDVZDONLQJDORQJWKHGRFNRQH ULVNGRFWULQHPD\QRWEHXVHGDVDGHIHQVHWRVXFKFODLPV FRXOGDUJXHKHZDVVWLOODWKLVmZRUNSODFHl)6XSSDW &KHVDSHDNH 2KLR5\&RY1HZPDQ)G  EXW WKH 6DODPRQ FRXUW GLG QRW VXJJHVW WKDW WKH VWRUH WK&LUVHHDOVR6RFRQ\9DFXXP2LO&R86DW ZKHUHKHZDVJRLQJZDVHTXDOO\KLVZRUNSODFH,Q(PSH\  ZKHUH WKH KRWHO ZDV DQ LQWHJUDO SDUW RI WKH GHIHQGDQWjV RSHUDWLRQE\SURYLGLQJKRXVLQJLWZDVSODXVLEOHWRLQFOXGHLW 0RUHRYHUWKHsRQHV$FWmLQFRUSRUDWHVWKHVWDQGDUGVRIWKH DVSDUWRIWKHZRUNSODFH%\FRQWUDVWLISD\PHQWRIWXLWLRQ )HGHUDO(PSOR\HUVj/LDELOLW\$FW>m)(/$l@ZKLFKUHQGHUV FDQHVWDEOLVKWKHLQGLYLGXDOLVZRUNLQJDWDZRUNSODFHWKHQD FROOHJHRUPDULWLPHDFDGHP\ZKHUHWKHHPSOR\HHLVVHQWRU  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

1RW RQH RI WKH FRQGLWLRQV GHHPHG UHOHYDQW LQ 6DODPRQ DQHPSOR\HUOLDEOHIRUWKHLQMXULHVQHJOLJHQWO\LQIOLFWHGRQLWV SHUWDLQV LQ WKLV FDVH  5DQQDOV ZDV QRW IXOILOOLQJ D HPSOR\HHVE\LWVRIILFHUVDJHQWVRUHPSOR\HHVl+RSVRQY mUHVSRQVLELOLW\l WKH VKLS KDG QR SRVVLEOH QRWLFH RI WKH 7H[DFR,QF86LQWHUQDOTXRWDWLRQV FRQGLWLRQVDQG5DQQDOVZDVVHYHUDOWKRXVDQGWLPHVIXUWKHU RPLWWHG3HUNLQV)GDW'DXJKHQEDXJK)G DZD\IURPKHUVKLSWKDQ6DODPRQZDVIURPKLV:HVKRXOG DWVHHDOVR(SOLQJY07(SOLQJ&R)G QRWLPSRVHDQmXQUHDVRQDEOHl GXW\QRWRQO\WRLQVSHFWWKH WK&LUFHUWGHQLHGVXEQRP)DKULJYKLV HPSOR\HUjV@ $V WKHUH LV QR HYLGHQFH RI GLUHFW QHJOLJHQFH SODLQWLIIjV EXVLQHVV ZKLOH UHWXUQLQJ IURP VKRUH OHDYH EHFDXVH VKRUH FODLP PXVW SURFHHG XQGHU D WKHRU\ RI LPSXWDWLRQ  7ZR OHDYH IRU WKH FUHZ LV EHQHILFLDO DQG QHFHVVDU\ WR >WKH SRVVLEOHEDVHVIRULPSXWLQJOLDELOLW\LQWKHVHFLUFXPVWDQFHV HPSOR\HUjV@FRQWLQXHGRSHUDWLRQlVHHDOVR%UDHQY3IHLIHU ZHUHGLVFXVVHGLQ(PSH\6HH&RQVROLGDWHG55&RUSY 2LO 7UDQVS &R  86    KROGLQJ WKDW )RUG0RWRU&R)6XSS('0LFK HPSOR\HU PD\ EH OLDEOH IRU VHDPDQjV LQMXULHV ZKHUH WKDW QRWLQJ WKDW WKH m6L[WK &LUFXLWjV GLVFXVVLRQ RI  LPSXWHG  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

VHDPDQKDVEHHQVHQWRIIVKLSWRSHUIRUPGXWLHVLQIXUWKHUDQFH :LWKUHJDUGWRWUDLQLQJDWWKH'27IDFLOLW\KRZHYHUWKH RIWKHHPSOR\HUjVEXVLQHVV,QIDFWDV5DQQDOVDVVHUWHGLQ VLWXDWLRQLVPXFKGLIIHUHQWDQGERWKODZDQGSROLF\FRXQVHO KHUGHSRVLWLRQGHFNKDQGVDW'LDPRQGsRFRXOGQRWDGYDQFH DGLIIHUHQWUHVXOW'LDPRQGsRZDVVLPSO\WDNLQJDGYDQWDJH LQWR VXSHUYLVRU\ SRVLWLRQV VXFK DV WKH OHDG GHFNKDQG RID'27SURJUDPSURYLGHGWRVKLSRZQHUVJHQHUDOO\oLWZDV SRVLWLRQV ZLWKRXW VXFK WUDLQLQJ  $GGLWLRQDOO\ DV 5DQQDOV QRWXVLQJWKH'27WRFDUU\RXWLWVRSHUDWLRQDODFWLYLWLHVQRU DVVHUWHGWKHGHFNKDQGVDW'LDPRQGsRZHUHHQFRXUDJHGWR GLG LW KDYH D GXW\ WR SURYLGH WKLV WUDLQLQJ WR ORZOHYHO DWWHQG VXFK WUDLQLQJ E\ FXUUHQW PDWHV ZKR KDG SUHYLRXVO\ HPSOR\HHVDGXW\WKDWFDUULHVZLWKLWWKHFRQFRPLWDQWGXW\RI DWWHQGHGWKHSURJUDP$VWKLVFLUFXLWKDVUHFRJQL]HGm>L@W QRQQHJOLJHQW SURYLVLRQ  6LPLODUO\ WKH DFWLYLWLHV RI 0V ZRXOGYLRODWHWKHQRWLRQVRIIDLUSOD\IRU>DQHPSOR\HU@WR 5DQQDOVRUWKHRWKHUWUDLQHHVZHUHQRWmRSHUDWLRQDOlEHFDXVH HQFRXUDJHLWVHPSOR\HHVWR>SHUIRUPDSDUWLFXODUDFWLYLW\DZD\ WKH\ZHUHQRWLPSRVHGDVGXWLHVRIHPSOR\PHQWLQGHHGWKH IURP LWV SUHPLVHV@ DQG WKHQ HVFDSH OLDELOLW\ IRU LQMXULHV DFFLGHQW GLG QRW HYHQ RFFXU LQ WKH FRXUVH RI WKH WUDLQLQJ VXIIHUHGE\LWVZRUNHUVDVDUHVXOWRIWKHSRRUTXDOLW\RIWKH LWVHOI7KHHPSOR\HUGLGQRWUHTXLUHWKHILUHVDIHW\WUDLQLQJ IDFLOLWLHVLWHQFRXUDJHGWKHPWRXVHl(PSH\Y*UDQG7UXQN DQ\ PRUH WKDQ LW PLJKW KDYH mUHTXLUHGl DWWHQGDQFH DW WKH :55&R)G WK&LUTXRWDWLRQ PHUFKDQW PDULQH DFDGHP\ RU D 0DVWHUjV OLFHQVH IRU HYHQ RPLWWHG KLJKHUSRVLWLRQVRQWKHVKLSWKDQWKHRQHVRXJKWE\5DQQDOV

)XUWKHUPRUHWKH UHFRUGLQGLFDWHVWKDW'LDPRQGsRLWVHOI (YHQZKHQDQHPSOR\HHLVDFWLQJZLWKLQWKHVFRSHRIKLV EHOLHYHG LW KDG DQ LQWHUHVW LQ DQG EHQHILWWHG IURP LWV HPSOR\PHQWKHLVQRWQHFHVVDULO\DWKLVmZRUNSODFHl$QG HPSOR\HHVj SDUWLFLSDWLRQ LQ WKH WUDLQLQJ SURJUDP  )RU ZKLOHDsRQHV$FWHPSOR\HUKDVH[WHQVLYHOLDELOLW\LWLVQRWDQ LQVWDQFH WKH HYLGHQFH VKRZV WKDW 'LDPRQG sR SDLG LWV DEVROXWH LQVXUHU IRU HYHU\WKLQJ WKDW PD\ KDSSHQ WR DQ HPSOR\HHV WKHLU UHJXODU ZDJHV ZKLOH WKH\ DWWHQGHG WKH HPSOR\HH RII RI WKH HPSOR\HUjV SUHPLVHV   :KHQ WKH SURJUDP 6HH6KHQNHUY%DOWLPRUH 2KLR55&R HPSOR\HH LV QRW HQJDJHG LQ mRSHUDWLRQDO DFWLYLWLHVl WKH 86    KROGLQJ WKDW D VHDPDQ ZDV DFWLQJ LQ WKH HPSOR\HUjVGXW\WRSURYLGHDUHDVRQDEO\VDIHSODFHWRZRUN FRXUVH RI KLV HPSOR\PHQW DOWKRXJK KH ZDV SHUIRUPLQJ GRHV QRW UHDFK IXUWKHU WKDQ WKH VKLS WKH HPSOR\HHjV XVXDO VHUYLFHVIRUDQRWKHUFRPSDQ\EHFDXVHVXFKVHDPDQmZDVDWDOO ORFDWLRQRIZRUNDQGWKHPHDQVRIHJUHVVDQGLQJUHVVWRWKRVH WLPHVSDLGE\>KLVHPSOR\HU@DQGXQGHU>KLVHPSOR\HUjV@VROH ORFDWLRQV$'0,5$/7<†DW$OWKRXJK,KDYH VXSHUYLVLRQl7KHHYLGHQFHDOVRUHYHDOVWKDW'LDPRQGsR EHHQXQDEOHWRLGHQWLI\DFDVHWKDWH[WHQGVHPSOR\HUOLDELOLW\ SDLGWKHFRVWVIRUDWWHQGLQJWKHWUDLQLQJSURJUDPDQGWKDWDQ DVIDUDVWKHFRXUWKDVGRQHKHUHDVRPHZKDWVLPLODUVLWXDWLRQ HPSOR\HHZKROHIW'LDPRQGsRZLWKLQRQH\HDURIDWWHQGLQJ ZDVSUHVHQWHGE\6DODPRQY093ROLQJ%URV1R,QF WKHWUDLQLQJSURJUDPZRXOGKDYHWRUHLPEXUVH'LDPRQGsRIRU )6XSS('1<6DODPRQZDVWKHVKLSjV DOOWXLWLRQFRVWVDQGH[SHQVHVIRUWUDQVSRUWDWLRQORGJLQJDQG FRRNDQGOHIWWKHYHVVHOWRREWDLQJURFHULHVLQRUGHUWRSUHSDUH IRRG  /DVWO\ WKH HYLGHQFH VXJJHVWV WKDW 'LDPRQG sR WKHHYHQLQJPHVV+HWUDYHOHGGRZQWKHGRFNVRPHIHHW FRQVLGHUHGLWVHPSOR\HHVWREHXQGHULWVVXSHUYLVLRQZKLOHDW WRWKHVWDLUZKHUHKHVOLSSHGDQGIHOO,GDW6DODPRQjV WKHWUDLQLQJFHQWHUDVVKRZQE\WKHIDFWWKDW5DQQDOVFDOOHG sRQHV$FWQHJOLJHQFHFODLPVXUYLYHGDPRWLRQIRUVXPPDU\ 'LDPRQG sR DW WKH HQG RI HDFK GD\jV VHVVLRQ GXULQJ WKH MXGJPHQWEXWRQO\EHFDXVHWKHFRRNKDGWRXVHWKDWH[LWWR WUDLQLQJSURJUDPWRUHSRUWWKHHYHQWVDWWKHWUDLQLQJFHQWHUWR IXOILOO KLV UHVSRQVLELOLWLHV WKH RIILFHUV RI WKH VKLS ZHUH 'LDPRQG sR  ,Q VXP LQ OLJKW RI 'LDPRQG sRjV DFWLRQV LQ IDPLOLDUZLWKGDUNVWDLUZD\DQGLWZDVmRQO\VRPHIHHW SD\LQJ LWV HPSOR\HHV WKHLU ZDJHV GXULQJ WKH SURJUDP DZD\l7KHFRXUWPDGHFOHDUWKDWmLWZRXOGEHXQUHDVRQDEOH DEVRUELQJ WKH DWWHQGDQFH FRVWV IRU WKH SURJUDP UHTXLULQJ WRLPSRVHDGXW\RQ3ROLQJWRLQVSHFWSODLQWLIIjVURXWHDOOWKH FRPSOHWLRQRIWKHSURJUDPDVDVWHSSLQJVWRQHWRVXSHUYLVRU\ ZD\WRWKHJURFHU\VWRUHDQGEDFNDQGWRWDNHSUHFDXWLRQVRYHU WKHHQWLUHZD\l,GDW  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

BBBBBBBBBBBBBBB SRVLWLRQVDQGOLVWHQLQJWRUHSRUWVRIWKHHYHQWVDWWKHFHQWHU ZH FRQFOXGH WKDW 5DQQDOV HVWDEOLVKHG D JHQXLQH LVVXH RI ',66(17 PDWHULDOIDFWUHJDUGLQJZKHWKHUVKHZDVDFWLQJLQWKHFRXUVH BBBBBBBBBBBBBBB RIKHUHPSOR\PHQWDWWKHWLPHRIKHULQMXU\ %2**6&LUFXLWsXGJHGLVVHQWLQJ,UHVSHFWIXOO\GLVVHQW %1HJOLJHQFH,PSXWDWLRQRI1HJOLJHQFH IURP WKH FRXUWjV RSLQLRQ LQ WKLV FDVH EHFDXVH WKH '27 WUDLQLQJ SURJUDP ZDV QRW LQ DQ\ UHOHYDQW VHQVH 'LDPRQG :HFRQFOXGHWKDWWKHGLVWULFWFRXUWHUUHGLQGHWHUPLQLQJWKDW sRjVDJHQWLQSURYLGLQJWKHIDFLOLWLHVDQGSDUNLQJORWLQZKLFK 5DQQDOV IDLOHG WR FUHDWH D JHQXLQH LVVXH RI PDWHULDO IDFW 0V5DQQDOVjVDFFLGHQWRFFXUUHG7KHFRXUWDFNQRZOHGJHV UHJDUGLQJZKHWKHUKHULQMXULHVZHUHFDXVHGLQZKROHRUSDUW WKDW'LDPRQGsRZDVQRWGLUHFWO\QHJOLJHQWLQDQ\ZD\LQ E\'LDPRQGsRRULWVDJHQWVjIDLOXUHWRFXUHRUHOLPLQDWHDQ FKRRVLQJ WKH 8QLWHG 6WDWHV '27 WUDLQLQJ SURJUDP RU LQ XQUHDVRQDEO\GDQJHURXVFRQGLWLRQDERXWZKLFK'LDPRQGsR VXEVLGL]LQJ5DQQDOVjVDWWHQGDQFH8QGHUWKHODZWKDWDSSOLHG RULWVDJHQWVNQHZRUVKRXOGKDYHNQRZQ6SHFLILFDOO\ZH WR LW WKH ODZ RI 2KLR '27 DOVR ZDV QRW QHJOLJHQW LQ FRQFOXGH WKDW WKH GLVWULFW FRXUW HUUHG E\ KROGLQJ WKDW DQ\ SURYLGLQJWKHSDUNLQJORWDQGLQQRWSUHYHQWLQJWKHQDWXUDO QHJOLJHQFH RQ WKH SDUW RI WKH WUDLQLQJ FHQWHU FRXOG QRW EH DFFXPXODWLRQ RI VQRZ DQG LFH  7KXV DOO RI WKH UHOHYDQW LPSXWHGWR'LDPRQGsRDQGE\DSSO\LQJWKHGHIHQVHRIQDWXUDO SDUWLHVoRPLWWLQJDQ\PHQWLRQRISODLQWLII5DQQDOVoZHUH DFFXPXODWLRQWRGHIHDW5DQQDOVjVFODLP DFWLQJ QRQQHJOLJHQWO\ XQGHU DQ\ ODZ RI ZKLFK WKH\ KDG QRWLFH 8QGHU DGPLUDOW\ ODZ DV ZHOO DV RUGLQDU\ WRUW 8QGHUWKH)(/$DQGWKHsRQHV$FWDQHPSOR\HUKDVDGXW\ SULQFLSOHVQROLDELOLW\VKRXOGDWWDFKWRWKH09'LDPRQGsR WRSURYLGHDVDIHZRUNSODFHIRULWVHPSOR\HHV7RUHFRYHUIRU LQMXULHV FDXVHG E\ WKH DOOHJHG QHJOLJHQFH RI DQ HPSOR\HU 7KH FDVHV SULPDULO\ UHOLHG RQ E\ WKH FRXUW DUH IXOO\ XQGHUWKHsRQHV$FWDSODLQWLIIPXVWVKRZWKDWKHUHPSOR\HU GLVWLQJXLVKDEOHEHFDXVHWKH\LQYROYHWKLUGSDUWLHVSHUIRUPLQJ IDLOHGWRSURYLGHDVDIHZRUNSODFHE\QHJOHFWLQJWRFXUHRU WKHmRSHUDWLRQDODFWLYLWLHVlRIWKHVKLSDWHUPRIDUWXQGHU HOLPLQDWHREYLRXVGDQJHUVRIZKLFKWKHHPSOR\HURULWVDJHQWV )(/$DQGWKHsRQHV$FW6HH7+20$6 s 6&+2(1%$80  NQHZRUVKRXOGKDYHNQRZQDQGWKDWVXFKIDLOXUHFDXVHGWKH $'0,5$/7< $1' 0$5,7,0( /$: †  G HG  SODLQWLIIjVLQMXULHVDQGGDPDJHV3HUNLQV)GDWm,W 6KLSRZQHUV DUH XQGHU D GXW\ WR SURYLGH PHGLFDO FDUH WR LV D IXQGDPHQWDO SULQFLSOH WKDW XQGHU WKH sRQHV $FW DQ VHDPHQDQGLIWKH\KLUHVRPHRQHWRSHUIRUPWKHLURZQGXWLHV HPSOR\HUµPXVWKDYHQRWLFHDQGWKHRSSRUWXQLW\WRFRUUHFWDQ LWLVUHDVRQDEOHWRLPSXWHDQ\QHJOLJHQFHWRWKHPVRWKDWWKH\ XQVDIH FRQGLWLRQ EHIRUH OLDELOLW\ ZLOO DWWDFKjl TXRWLQJ FDQQRW DYRLG WKHLU OLDELOLWLHV E\ RXWVRXUFLQJ SURYLVLRQ RI +DYHQVY)73RODU0LVW)GWK&LU  PDQGDWRU\VHUYLFHV)RUWKHVDPHUHDVRQVXFKDJHQWVVKRXOG VHHDOVR6LQFODLUY/RQJ,VODQG55)GG&LU EH KHOG WR WKH VDPH VWDQGDUG RI FDUH  (PSH\ LV HTXDOO\   ,Q VR GRLQJ WKH SODLQWLII PXVW VKRZ mDFWXDO RU GLVWLQJXLVKDEOH RQ WKLV JURXQG EHFDXVH WKH UDLOURDG ZDV FRQVWUXFWLYHQRWLFHWRWKHHPSOR\HURIWKHGHIHFWLYHFRQGLWLRQ UHTXLUHG E\ VWDWXWH WR SURYLGH KRXVLQJ IRU LWV RIIGXW\ WKDW FDXVHG WKH LQMXU\l  6LQFODLU  )G DW  VHH DOVR HPSOR\HHV6HH(PSH\Y*UDQG7UXQN:HVWHUQ55&R 3HUNLQV)GDW )GWK&LU)RUVLPLODUUHDVRQVWKHODZ GRHVQRWDOORZHYDVLRQRI&RQJUHVVLRQDOSURWHFWLRQE\KDYLQJ :HEHOLHYHWKDW5DQQDOVKDVVXEPLWWHGHYLGHQFHVXIILFLHQW HPSOR\HHV FDUU\ RXW WKH mRSHUDWLRQDO DFWLYLWLHVl RI WKH WRFUHDWHDJHQXLQHLVVXHRIPDWHULDOIDFWUHJDUGLQJZKHWKHU HPSOR\HU RQ WKH SUHPLVHV RI DQRWKHU  6LQNOHU Y 0LVVRXUL 'LDPRQGsRZDVQHJOLJHQWLQIDLOLQJWRFXUHWKHFRQGLWLRQV 3DFLILF5&R86 WKDWFDXVHGKHULQMXULHV$WWKHRXWVHWZHQRWHWKDW5DQQDOV KDV VXFFHVVIXOO\ FUHDWHG D JHQXLQH LVVXH RI PDWHULDO IDFW  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

UHJDUGLQJZKHWKHUDQ\QHJOLJHQFH E\WKHWUDLQLQJFHQWHULQ ,,,&21&/86,21 IDLOLQJWRFXUHWKHFRQGLWLRQVWKDWFDXVHG5DQQDOVjVLQMXULHV PD\EHLPSXWHGWR'LDPRQGsR$VWKH6XSUHPH&RXUWDQG ,QFRQFOXVLRQZHKROGWKDW5DQQDOVFUHDWHGDJHQXLQHLVVXH WKLV FLUFXLW KDYH UHFRJQL]HG D WKLUG SDUW\jV QHJOLJHQFH LQ RIPDWHULDOIDFWUHJDUGLQJZKHWKHUVKHZDVDFWLQJZLWKLQWKH SURYLGLQJDVDIHZRUNSODFHIRUDQHPSOR\HUjVZRUNHUVPD\EH FRXUVHRIKHUHPSOR\PHQWDWWKHWLPHRIKHULQMXU\RQsDQXDU\ LPSXWHG WR WKH HPSOR\HU ZKHUH WKDW WKLUG SDUW\ KDV D ZKHWKHU'LDPRQGsRRULWVDJHQWVVSHFLILFDOO\WKH FRQWUDFWXDOUHODWLRQVKLSZLWKWKHHPSOR\HUDQGWKHHPSOR\HH WUDLQLQJFHQWHUEUHDFKHGDGXW\WRSURYLGHDVDIHZRUNSODFH LVDFWLQJLQWKHFRXUVHRIKHUHPSOR\PHQWRQWKHWKLUGSDUW\jV IRU 'LDPRQG sRjV HPSOR\HHV E\ IDLOLQJ WR FXUH LF\ URDG SUHPLVHV+RSVRQ86DW6LQNOHUY0LVVRXUL3DF FRQGLWLRQV RQ WKH WUDLQLQJ FHQWHUjV GULYHZD\ ZKHWKHU 55&R86(SOLQJ)GDW 'LDPRQG sR DQG WKH WUDLQLQJ FHQWHU KDG HQWHUHG LQWR D 3D\QH)GDW FRQWUDFWXDOUHODWLRQVKLSDVDUHVXOWRI'LDPRQGsRjVSD\PHQW RI LWV HPSOR\HHVj WXLWLRQ FRVWV DQG VXFK HPSOR\HHVj ,QWKLVFDVHZHEHOLHYHWKDW'LDPRQGsRKDGDFRQWUDFWXDO SDUWLFLSDWLRQLQWKHWUDLQLQJSURJUDPDQGZKHWKHUWKHWUDLQLQJ UHODWLRQVKLSZLWKWKHWUDLQLQJFHQWHUZKLFKUHVXOWHGLQPDNLQJ FHQWHUjVQHJOLJHQFHLIIRXQGPD\EHLPSXWHGWR'LDPRQGsR WKH WUDLQLQJ FHQWHU DQ DJHQW RI 'LDPRQG sR DQG LQ WXUQ DVDUHVXOWRIWKHLUFRQWUDFWXDOUHODWLRQVKLS)RUWKHIRUHJRLQJ H[SRVHG'LDPRQGsRWROLDELOLW\XQGHUWKHsRQHV$FWIRUDQ\ UHDVRQVZH5(9(56(WKHMXGJPHQWRIWKHGLVWULFWFRXUWDQG SRWHQWLDO QHJOLJHQFH E\ WKH WUDLQLQJ FHQWHU LQ IDLOLQJ WR 5(0$1' IRU IXUWKHU SURFHHGLQJV FRQVLVWHQW ZLWK WKLV SURYLGHDVDIHZRUNSODFHIRU'LDPRQGsRjVHPSOR\HHV6HH RSLQLRQ HJ+RSVRQ86DWKROGLQJWKDWDQHPSOR\HUZDV OLDEOHIRUWKHQHJOLJHQFHRIDWD[LVHUYLFHLWKLUHGWRWUDQVSRUW WZRLOOVHDPHQ,QIDFWZHEHOLHYHWKDW5DQQDOVjVFDVHLV DQDORJRXVWRWKRVHQHJOLJHQFHODZVXLWVEURXJKWE\VHDPHQ ZKR KDYH VXIIHUHG LQMXULHV DV D UHVXOW RI WKH DOOHJHG QHJOLJHQFH RI PHGLFDO SURYLGHUV ZKR ZHUH VHOHFWHG E\ WKH VHDPHQjVHPSOR\HUV,QWKRVHFDVHVIHGHUDOFRXUWVLQFOXGLQJ WKLVFLUFXLWKDYHFRQVLVWHQWO\UHFRJQL]HGWKHSULQFLSOHWKDWD mVKLSRZQHU LV OLDEOH IRU WKH QHJOLJHQFH RI DQ RQVKRUH SK\VLFLDQ WKDW LW KLUHV WR WUHDW D FUHZPDQl  2OVHQ Y $PHULFDQ 66 &R  )G   WK &LU  HPSKDVLVDGGHGVHHDOVR'H&HQWHQRY*XOI)OHHW&UHZV ,QF)GWK&LU)LW]JHUDOGY$/ %XUEDQN &R)GG&LU0DULWLPH 2YHUVHDV&RUSY8QLWHG6WDWHV)6XSS 1'&DODIIjGLQSDUWDQGUHYjGLQSDUW)G  WK &LU   &I 6HD5LYHU 0DULWLPH ,QF Y ,QGXVWULDO 0HG 6HUYV ,QF  ) 6XSS   1' &DO   ,Q VR GRLQJ WKHVH IHGHUDO FRXUWV KDYH WUHDWHG DJUHHPHQWV EHWZHHQ VKLSRZQHUV DQG GRFWRUV DV FRQWUDFWV XQGHU ZKLFK WKH GRFWRUV ZHUH DJHQWV RI WKH VKLSRZQHUV DQG WKH VKLSRZQHUV ZHUH H[SRVHG WR SRVVLEOH  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

GHIHQVHRIQDWXUDODFFXPXODWLRQFDQEDUDVHDPDQjVsRQHV$FW OLDELOLW\IRUWKHDFWLRQVRIVXFKDJHQWV6HHHJ)LW]JHUDOG FODLP,QGHHGZHEHOLHYHWKDW5DQQDOVjVFDVHLVH[WUHPHO\ )GDW VLPLODUWR&KHVDSHDNH 2KLR5\&RLQZKLFKWKLVFRXUW KHOGWKDWWKHTXHVWLRQRIZKHWKHUDQHPSOR\HUZDVQHJOLJHQW ,Q RXU RSLQLRQ PXFK OLNH WKH HPSOR\HUV LQ WKH PHGLFDO LQIDLOLQJWRLOOXPLQDWHDQGVDOWDSDWKZD\WRLWVVKLSWKDWZDV SURYLGHUVFDVHVWKHUHLVHYLGHQFHWKDW'LDPRQGsRHQWHUHG RIWHQVQRZ\DQGLF\GXULQJWKHZLQWHUZDVDSURSHUTXHVWLRQ LQWRDFRQWUDFWXDOUHODWLRQVKLSZLWKWKHWUDLQLQJFHQWHUZKHQ IRUWKHMXU\&KHVDSHDNH 2KLR5\&R)GDW LWFKRVHWKHWUDLQLQJFHQWHUWRWHDFKLWVHPSOR\HHVILUHILJKWLQJ ,QVRGRLQJWKLVFRXUWLQ&KHVDSHDNH 2KLR5\&RUHMHFWHG VNLOOVPDGHWKHDUUDQJHPHQWVIRULWVHPSOR\HHVWRDWWHQGWKH DQDUJXPHQWE\WKHHPSOR\HUWKDWLVDQDORJRXVWRWKHQDWXUDO WUDLQLQJ SURJUDP DQG SDLG WKH WUDLQLQJ FHQWHU IRU VXFK DFFXPXODWLRQGRFWULQHVWDWLQJm>Z@HILQGZLWKRXWPHULWWKH VHUYLFHV  DQG WKH WUDLQLQJ FHQWHU DFFHSWHG VXFK ZRUN E\ FRQWHQWLRQRIWKHHPSOR\HUWKDWWKHHPSOR\HURZHGQR DFFHSWLQJ 'LDPRQG sRjV HPSOR\HHV LQWR LWV VHPLQDU DQG GXW\ WR NHHS WKH HQWLUH QLQHW\ DFUHV IUHH RI VQRZ DQG LFH DOORZLQJWKHPWRDWWHQGLWVFRXUVHV,QGHHGZHEHOLHYHWKDW EHFDXVH LW ZRXOG EH LPSRVVLEOH WR GR WKDWl  ,G DW  EDVHG XSRQ SDVW GHDOLQJV ZKHQ 'LDPRQG sR VHQW WZHOYH 0RUHRYHUDVWKH6XSUHPH&RXUWKDVORQJDFNQRZOHGJHGGXH HPSOR\HHVWRDWWHQGWKHVDPHILUHILJKWLQJVHPLQDULQ7ROHGR WRWKHUHPHGLDOSXUSRVHRIWKHsRQHV$FWDQGLWVH[SDQVLYH LQERWKDQG'LDPRQGsRDQGWKHWUDLQLQJFHQWHU EUHDGWKRISURWHFWLRQVHPSOR\HUVDUHJHQHUDOO\VWULSSHG RI KDGGHYHORSHGDQXQGHUVWDQGLQJWKDW'LDPRQGsRZRXOGVHQG WKHLUFRPPRQODZGHIHQVHVLQsRQHV$FWFDVHV5RJHUV LWV HPSOR\HHV WR OHDUQ YDOXDEOH ILUHILJKWLQJ VNLOOV DW WKH 86DWm7KHHPSOR\HULVVWULSSHGRIKLVFRPPRQODZ VHPLQDU DQG WKDW WKH WUDLQLQJ FHQWHU ZRXOG WUDLQ DQG WHDFK GHIHQVHVlDQGXVXDOO\WKHUHLVDRQO\mVLQJOHTXHVWLRQZKHWKHU VXFKHPSOR\HHVLQDVDIHZRUNHQYLURQPHQW6HH6HD5LYHU QHJOLJHQFHRIWKHHPSOR\HUSOD\HGDQ\SDUWKRZHYHUVPDOO )6XSSDW$OWKRXJKZHUHFRJQL]HWKHGLIILFXOW\ LQWKHLQMXU\l:HILQGQRUHDVRQWRPDNHDQH[FHSWLRQIRU WKDW 'LDPRQG sR D ULYHUERDW FDVLQR EXVLQHVV RSHUDWLQJ LQ WKHGHIHQVHRIQDWXUDODFFXPXODWLRQXQGHU2KLRODZDQGWKXV ,RZDIDFHVLQPRQLWRULQJWKHVDIHW\RILWVHPSOR\HHVZKRDUH EDU5DQQDOVjVQHJOLJHQFHFODLP,QVXPZHEHOLHYHWKDWWKH DWWHQGLQJDVHPLQDURXWRIVWDWHLQ2KLRZHGRQRWEHOLHYH GLVWULFW FRXUW HUUHG LQ JUDQWLQJ VXPPDU\ MXGJPHQW RQ WKDWVXFKGLIILFXOWLHVH[HPSW'LDPRQGsRIURPOLDELOLW\IRUWKH 5DQQDOVjVQHJOLJHQFHFODLPXQGHUWKHsRQHV$FW DFWLRQVRILWVDJHQWV5DQQDOVDQGKHUFRZRUNHUVZHUHDFWLQJ LQWKHFRXUVHRIWKHLUHPSOR\PHQWZKLOHDWWHQGLQJWKHWUDLQLQJ SURJUDPDQGWKXVZHUHHQWLWOHGWRKDYH'LDPRQGsRSURYLGH  :H UHFRJQL]H WKDW D GLUHFW QHJOLJHQFH FODLP DJDLQVW WKH PDQDJHUV RU VXSHUYLVRUV DW WKH WUDLQLQJ FHQWHU ZKR IDLOHG WR FXUH RU HOLPLQDWH WKH  5DQQDOV DVVHUWHG GXULQJ KHU GHSRVLWLRQ DOOHJHGO\ GDQJHURXV LF\ FRQGLWLRQV ZRXOG EH JRYHUQHG E\ WKH )HGHUDO 4 $QG ZKR PDGH WKH DUUDQJHPHQWV IRU \RX WR DWWHQG WKH VFKRRO" 7RUW &ODLPV $FW  86& † E ZKLFK UHTXLUHV WKH DSSOLFDWLRQ RI $ 7KH ERDW .HYLQ 6WLHU RU WKH FDSWDLQV VWDWH ODZ WR WRUW FODLPV EURXJKW DJDLQVW WKH 8QLWHG 6WDWHV *RYHUQPHQW LQ s$ DW  WKLV FDVH 2KLR ODZ EHFDXVH WKH WUDLQLQJ FHQWHU ZDV PDQDJHG DQG UXQ E\ WKH 8QLWHG 6WDWHV 'HSDUWPHQW RI 7UDQVSRUWDWLRQ 6HH )HGHUDO ([SUHVV  &RUS Y 8QLWHG 6WDWHV 3RVWDO 6HUY  )G   WK &LU  5DQQDOV DVVHUWHG GXULQJ KHU GHSRVLWLRQ 7KLV GRHV QRW KRZHYHU PHDQ WKDW 2KLR ODZ DSSOLHV LQ WKH DQDO\VLV RI 4 $QG ZDV WKHUH D IHH IRU JRLQJ WR WKH VFKRRO" ZKHWKHU 'LDPRQG sR ZRXOG EH OLDEOH IRU WKH QHJOLJHQFH RI LWV DJHQW WKH $ 1R RWKHU WKDQ RXU WLPH WUDLQLQJ FHQWHU LI VR IRXQG XQGHU WKH sRQHV $FW 7R UHTXLUH WKH 4 2ND\ 6R \RX GLG QRW KDYH WR SD\ WKH VFKRRO DQ\WKLQJ o DSSOLFDWLRQ RI 2KLR ODZ LQ VXFK GHWHUPLQDWLRQ ZRXOG HIIHFWLYHO\ UHQGHU $ 1R QRW RXW RI P\ SRFNHW WKH sRQHV $FW PHDQLQJOHVV DQG ZRXOG DOORZ HPSOR\HUV WR FLUFXPYHQW 4 o WR JR WKHUH" &RQJUHVVjV LQWHQWLRQ WR SURYLGH DQ H[SDQVLYH UHPHG\ WR VHDPHQ XQGHU WKH $ 1R sRQHV $FW s$ DW  HPSKDVLV DGGHG  5DQQDOVY&DVLQR 1R 1R 5DQQDOVY&DVLQR 

D VDIH ZRUNSODFH LQ ZKLFK WKH\ FRXOG SHUIRUP WKHLU MREV DUHDVDQGWKHLF\FRQGLWLRQVDWWKHFHQWHUUHPDLQHGWKHVDPH LQFOXGLQJ D VDIH SODFH LQ ZKLFK WR DUULYH DW DQG H[LW IURP WKURXJKRXW WKH GD\ XQWLO DURXQG  SP  s$ DW  ZRUN  $V ZH SUHYLRXVO\ QRWHG LQ 3D\QH LI DQ HPSOR\HU )XUWKHUPRUH FOLPDWRORJLFDO UHFRUGV IRU sDQXDU\   mGHOHJDWH>V@DQGUHOLHVXSRQWKHVHUYLFHVRILWVDJHQWWRFDUU\ VKRZHGWKDWWKHUHZDVQRIUHH]LQJUDLQRUWUDFHSUHFLSLWDWLRQ RXWLWVRZQGXW\LWPD\QRWVKLIWLWVOLDELOLW\IURPLWVHOIWRVDLG DIWHUDPJLYLQJWKHWUDLQLQJFHQWHUPRUHWKDQVHYHQ DJHQW ZKHQ DQ HPSOR\HH VHHNV WR KROG LW GLUHFWO\ OLDEOHl KRXUVWRFXUHRUHOLPLQDWHWKHGDQJHURXVFRQGLWLRQVZLWKRXW 3D\QH)GDW7KDWLWZDVWKHWUDLQLQJFHQWHUDQG GLVUXSWLRQ/DVWO\5DQQDOVWHVWLILHGWKDWZKHQFODVVHQGHGDW QRW'LDPRQGsRGLUHFWO\WKDWZDVQHJOLJHQWLQIDLOLQJWRFXUH DSSUR[LPDWHO\SPRQsDQXDU\m>L@WZDVFKLOO\ GDQJHURXV LF\ FRQGLWLRQV DW WKH SURJUDP GRHV QRW UHPRYH DQGDOLWWOHLF\RXWVLGH\HWls$DW:HEHOLHYHWKDWDOO OLDELOLW\IURP'LDPRQGsR'LDPRQGsRLVVWLOOUHVSRQVLEOHIRU RI WKLV HYLGHQFH LV VXIILFLHQW WR FUHDWH D JHQXLQH LVVXH RI WKHQHJOLJHQFHRILWVDJHQWLQWKLVFDVHWKHWUDLQLQJFHQWHU PDWHULDOIDFWDVWRZKHWKHUWKHWUDLQLQJFHQWHUKDGFRQVWUXFWLYH 7KHGXW\WRSURYLGHDVDIHZRUNSODFHLVQRQGHOHJDEOHDQG QRWLFHRIWKHGDQJHURXVLF\FRQGLWLRQVDQGVKRXOGKDYHFXUHG H[LVWV mGHVSLWH WKH IDFW WKDW >WKH HPSOR\HU@ PD\ QRW RZQ RU HOLPLQDWHG VXFK FRQGLWLRQV WR UHGXFH WKH SRVVLELOLW\ RI FRQWURO RU EH XQGHU D SULPDU\ REOLJDWLRQ WR PDLQWDLQ WKH KDUPWRSURJUDPDWWHQGHHVRQVLWH SUHPLVHVRQZKLFK>WKH@HPSOR\HHLVLQMXUHGl,GVHHDOVR 5LELW]NLY&DQPDU5HDGLQJ %DWHV/WG3DUWQHUVKLS 7KLUGZHEHOLHYHWKDW5DQQDOVKDVFUHDWHGDJHQXLQHLVVXH )G   WK &LU  7KH GXW\ WR SURYLGH D VDIH RI PDWHULDO IDFW UHJDUGLQJ ZKHWKHU WKH WUDLQLQJ FHQWHUjV ZRUNSODFHmH[WHQGVWRSURYLGLQJDVDIHSODFHWRZRUNRQWKH DOOHJHGQHJOLJHQFHFDXVHGKHULQMXULHVDQGGDPDJHV'XULQJ VKLSRIDWKLUGSDUW\RYHUZKRPWKHHPSOR\HUKDVQRFRQWURO KHUGHSRVLWLRQ5DQQDOVWHVWLILHGWKDWVKHUHPHPEHUHGVHHLQJ LIWKDWLVZKHUHWKHVHDPDQjVHPSOR\HUVHQGVKLPWRZRUNl mD WKLQ OD\HU >RI LFH@    ZKHUH >VKH@ IHOOl  s$ DW  7KHUHIRUH ZH FRQFOXGH WKDW 5DQQDOV KDV VXFFHVVIXOO\ $GGLWLRQDOO\ZKHQDVNHGLImLW>ZDV@IDLUWRVD\WKDWWKH HVWDEOLVKHG D JHQXLQH LVVXH RI PDWHULDO IDFW ZKHWKHU WKH RQO\ UHDVRQ >VKH@ IHOO >ZDV@ EHFDXVH >VKH@ VOLSSHG RQ LFHl WUDLQLQJ FHQWHUjV QHJOLJHQFH LI IRXQG PD\ EH LPSXWHG WR 5DQQDOV DQVZHUHG mLWV@SUHPLVHV 5DQQDOVZKHQVKHDQGKHUFRZRUNHUVDUULYHGDWWKHWUDLQLQJ RIWKHLQKHUHQWGDQJHUVSUHVHQWHGE\QDWXUDODFFXPXODWLRQVRI FHQWHUDWDSSUR[LPDWHO\DPLWZDVmNLQGRILF\RQWKH LFHDQGVQRZl%ULQNPDQY5RVV1(G GULYHZD\lRIWKHWUDLQLQJFHQWHUDQGWKHVXUURXQGLQJJUDVV\ 2KLR:HGRQRWEHOLHYHWKDWWKH2KLRFRPPRQODZ