Rogers v. Wal-Mart Stores Inc

Opinion

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  5RJHUVY:DO0DUW6WRUHV 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

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

SD\PHQW RI DWWRUQH\ IHHV 5XOH G DOVR RXJKW WR SHUPLW )LOH 1DPH DS

DWWRUQH\IHHV7KHUHDVRQLQJLVWKDWEHFDXVHERWKUXOHVDUH LQWHQGHGWRSUHYHQWYH[DWLRXVOLWLJDWLRQDQGIRUXPVKRSSLQJ mLW ZRXOG EH LQFRQVLVWHQW WR FRQFOXGH WKDW D FRXUW KDV 81,7('67$7(6&28572)$33($/6 GLVFUHWLRQ WR FRQGLWLRQ 5XOH D  YROXQWDU\ GLVPLVVDO )257+(6,;7+&,5&8,7 ZLWKRXWSUHMXGLFHRQSD\PHQWRIDWWRUQH\IHHVEXWWKDWDFRXUW BBBBBBBBBBBBBBBBB GRHVQRWKDYHGLVFUHWLRQWRH[DFWWKHVDPHSD\PHQWIURPD SODLQWLII ZKR KDV QRWLFHG D 5XOH D  GLVPLVVDO LQ D SUHYLRXVFDVHl(VTXLYDO)6XSSDW 6+,5/(< . 52*(56 ; 2QH FRPPHQWDWRU DFFRXQWV IRU WKLV mDQRPDO\l E\ 3ODLQWLII$SSHOODQW  VXJJHVWLQJ WKDW 5XOH D  FRQWHPSODWHV D QHJRWLDWLRQ  EHWZHHQWKHFRXUWDQGWKHOLWLJDQWEXW5XOHGGRHVQRW  1R +HQFHWKHVHWZRUXOHVDUHPHDQWWRmRSHUDWHGLIIHUHQWO\l6HH Y  (GZDUG;&OLQWRQsU'RHV5XOHG$XWKRUL]HDQ$ZDUG !  RI$WWRUQH\jV)HHV"6WsRKQjV/5HY:H :$/0$57 6725(6 ,1&  GRQRWKDQJRXUKDWRQWKLVUDWLRQDOHEXWZHQRWHLWDVIXUWKHU 'HIHQGDQW$SSHOOHH  HYLGHQFH WKDW WKH VWUXFWXUH RI WKH )HGHUDO 5XOHV RI &LYLO 1 3URFHGXUHLVQRWVRFOHDURQWKLVLVVXHWKDWLWRYHUFRPHVWKH DEVHQFH RI DQ H[SUHVV SURYLVLRQ IRU DWWRUQH\ IHHV LQ 5XOH $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW G,QVKRUWZHDUHSHUVXDGHGE\WKHIDFWWKDW&RQJUHVV IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV GLGQRWH[SOLFLWO\SURYLGHIRUDWWRUQH\IHHVLQ5XOHG:H 1RnsRQ3KLSSV0F&DOOD'LVWULFWsXGJH GR QRW ILQG WKDW WKH VWUXFWXUH RI WKH &LYLO 5XOHV LV VR XQDPELJXRXVWKDWZHFDQGLYLQHDFRQWUDU\LQWHQWRQWKHSDUW $UJXHG6HSWHPEHU RI&RQJUHVV$QGZHWKLQNLWLPSURSHUWRHVVHQWLDOO\UHGUDIW WKHUXOHRXUVHOYHVE\UHDGLQJLQWRLWODQJXDJHWKDWLVQRWWKHUH 'HFLGHGDQG)LOHG2FWREHU %HIRUH*8<DQG0225(&LUFXLWsXGJHV'2:' )RUWKHVHUHDVRQVWKDWSRUWLRQRIWKHGLVWULFWFRXUWjVRUGHU 'LVWULFWsXGJH ZKLFKDZDUGHG:DO0DUWLQDWWRUQH\IHHVFDQQRW VWDQG BBBBBBBBBBBBBBBBB

,9&RQFOXVLRQ &2816(/

:H$)),50 WKHGLVWULFWFRXUWjVGHQLDORIWKHPRWLRQWR $5*8('7HG6$QJHODNLV6.287(5,6/$:),50 UHPDQGDQGZH9$&$7(WKHGLVWULFWFRXUWjVDZDUGRIFRVWV 0HPSKLV 7HQQHVVHH IRU $SSHOODQW  &DPHURQ & sHKO LQVRIDUDVLWDZDUGHGDWWRUQH\IHHV)XUWKHUZH5(0$1' 5266,( /8&.(77 3$5.(5  5,''(5 0HPSKLV ZLWKLQVWUXFWLRQVIRUWKHGLVWULFWFRXUWWRHQWHUDQRUGHUWKDW XSRQSD\PHQWRIFRVWVLQWKHVXPRIZLWKLQWKLUW\ GD\VRIWKHGDWHRIWKHGLVWULFWFRXUWjVRUGHUSODLQWLIIjVFDVH 7KH +RQRUDEOH 'DYLG ' 'RZG sU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU ZLOOEHUHLQVWDWHGRQWKHGLVWULFWFRXUWGRFNHW WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ

  5RJHUVY:DO0DUW6WRUHV 1R 1R 5RJHUVY:DO0DUW6WRUHV 

7HQQHVVHHIRU$SSHOOHH21%5,()7HG6$QJHODNLV :H UHDOL]H WKDW DQ DZDUG RI DWWRUQH\ IHHV PD\ EH 6.287(5,6/$:),500HPSKLV7HQQHVVHH'DQLHO)% DXWKRUL]HGHYHQLIQRWH[SUHVVO\SURYLGHGIRUmLIWKHVWDWXWH 3HHO 3((/  :(,5,&+ 0HPSKLV 7HQQHVVHH IRU RWKHUZLVHHYLQFHVDQLQWHQWWRSURYLGHIRUVXFKIHHVl.H\ $SSHOODQW&DPHURQ&sHKO/RUULH.5LGGHU:LOOLDP2 7URQLF &RUS Y 8QLWHG 6WDWHV  86    /XFNHWW sU 5266,( /8&.(77 3$5.(5  5,''(5 +RZHYHU WKH VWUXFWXUH RI WKH )HGHUDO 5XOHV RI &LYLO 0HPSKLV7HQQHVVHHIRU$SSHOOHH 3URFHGXUHLVDPELJXRXVDWEHVWRQWKHTXHVWLRQRIDWWRUQH\ IHHV)RULQVWDQFHZKHUHDV5XOHGRQO\VSHDNVRImFRVWVl BBBBBBBBBBBBBBBBB DQGGRHVQRWPHQWLRQDWWRUQH\IHHVVHYHUDORWKHUSURYLVLRQV LQ WKH )HGHUDO 5XOHV H[SOLFLWO\ SURYLGH IRU UHFRYHU\ RI 23,1,21 DWWRUQH\IHHV6HH6LPHRQHY)LUVW%DQN1DWjO$VVjQ BBBBBBBBBBBBBBBBB )5'   ' 0LQQ  OLVWLQJ )HG5&LY3 J D FG J ,QDGGLWLRQ7LWOH '2:''LVWULFWsXGJH 86&†OLVWVWKHLWHPVDFRXUWPD\WD[DVmFRVWVlWRD SUHYDLOLQJ SDUW\ XQGHU 5XOH G EXW GRHV QRW LQFOXGH ,,QWURGXFWLRQ DWWRUQH\IHHV,GVHHDOVR$QGHUVY)3$&RUS)5' 7KLV FDVH DULVHV RXW RI LQMXULHV VXIIHUHG E\ 6KLUOH\ . '1sGHQ\LQJDWWRUQH\IHHVLQSDUWEHFDXVH 5RJHUVZKHQVKHWULSSHGDQGIHOORQDZRRGHQSDOOHWORFDWHG RI ODFN RI H[SUHVV DXWKRUL]DWLRQ  7KH QRQLQFOXVLRQ RI LQ WKH DLVOH RI D :DO0DUW VWRUH LQ 0HPSKLV 7HQQHVVHH DWWRUQH\ IHHV XQGHU †  LQGLFDWHV WKDW DW OHDVW LQ VRPH 5RJHUV FRQWHQGV WKDW HPSOR\HHV RI :DO0DUW DFWHG FRQWH[WV&RQJUHVVGRHVQRWFRQVLGHUDWWRUQH\IHHVWREHSDUW QHJOLJHQWO\LQOHDYLQJWKHSDOOHWLQDVKRSSLQJDUHD RIDQDZDUGRImFRVWVl

2Q 2FWREHU   5RJHUV ILOHG D FRPSODLQW LQ 2IFRXUVHPDQ\FRXUWVKDYHSHUPLWWHGDQDZDUGRIDWWRUQH\ 7HQQHVVHH VWDWH FRXUW DVVHUWLQJ KHU QHJOLJHQFH FODLPV DQG IHHVXQGHU5XOHG7KH\RIWHQUHO\RQZKDWWKH\FRQVLGHU VHHNLQJDSSUR[LPDWHO\LQGDPDJHV2Q1RYHPEHU WREHWKHSROLF\ EHKLQGWKHUXOHDQGLQRXUYLHZJLYHWRR   :DO0DUW DQVZHUHG DQG UHPRYHG WR WKH 8QLWHG OLWWOH ZHLJKW WR LWV SODLQ ODQJXDJH  6HH HJ %HKUOH Y 6WDWHV'LVWULFW&RXUWIRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHRQ 2OVKDQVN\ )5':'$UN,Q WKHJURXQGVRIFRPSOHWHGLYHUVLW\DPRQJWKHSDUWLHVDQGDQ DGGLWLRQVRPHFRXUWVILQGDWWRUQH\IHHVDYDLODEOHXQGHU5XOH DPRXQW LQ FRQWURYHUV\ H[FHHGLQJ   2Q 2FWREHU  G EHFDXVH LQ WKHLU YLHZ WKHUH RXJKW WR EH D FHUWDLQ WKHSDUWLHVVWLSXODWHGWRGLVPLVVDODQGRQ2FWREHU SDUDOOHOLVPEHWZHHQ5XOHGDQG5XOHD ZKLFKDOVR WKHGLVWULFWFRXUWHQWHUHGDQRUGHUGLVPLVVLQJWKHFDVH GRHV QRW H[SOLFLWO\ PHQWLRQ DWWRUQH\ IHHV  ,Q (VTXLYDO Y ZLWKRXWSUHMXGLFH $UDX)6XSS&'&DOIRULQVWDQFH WKHFRXUWUHDVRQHGWKDWEHFDXVH5XOHD SHUPLWVDFRXUW 2Q )HEUXDU\   5RJHUV ILOHG D QHZ FRPSODLQW LQ WR FRQGLWLRQ YROXQWDU\ GLVPLVVDO ZLWKRXW SUHMXGLFH RQ 7HQQHVVHHVWDWHFRXUW7KHVHFRQGFRPSODLQWDULVLQJRXWRI WKHVDPHRFFXUUHQFHVSHFLILHGWKDW5RJHUVVRXJKWWRUHFRYHU DQDPRXQWmQRWH[FHHGLQJl:DO0DUWILOHGDQRWKHU ZKLFK WKHQ KDV URXJKO\ VHYHQ PRQWKV WR H[HUFLVH D YHWR ,Q WKH QRWLFHRIUHPRYDOEDVHGRQDQVZHUVWRLQWHUURJDWRULHVLQWKH DEVHQFH RI D YHWR WKH SURSRVHG UXOH JRHV LQWR HIIHFW

ILUVWFDVHLQZKLFK5RJHUVHVWLPDWHGKHUGDPDJHVDW 5RJHUVILOHGDPRWLRQWRUHPDQGRQ0D\DVVHUWLQJ 5REHUW * %RQH 7KH 3URFHVV RI 0DNLQJ 3URFHVV &RXUW 5XOHPDNLQJ

WKDW WKH DPRXQWLQFRQWURYHUV\ UHTXLUHPHQW IRU GLYHUVLW\ 'HPRFUDWLF /HJLWLPDF\ DQG 3URFHGXUDO (IILFDF\  IRRWQRWHV RPLWWHG  *HR/s    5RJHUVY:DO0DUW6WRUHV 1R 1R 5RJHUVY:DO0DUW6WRUHV 

5XOHG7KHUHLVDVSOLWRIDXWKRULW\DVWRZKHWKHU5XOH MXULVGLFWLRQ KDG QRW EHHQ PHW  $ORQJ ZLWK KHU PRWLRQ WR GDXWKRUL]HVDWWRUQH\IHHVDVSDUWRIDQDZDUGRImFRVWVl UHPDQG5RJHUVVXEPLWWHGDQDIILGDYLWVWDWLQJWKDWVKHmKDG EXWLWVHHPVWKDWWKHPDMRULW\RIFRXUWVILQGWKDWDWWRUQH\IHHV QRLQWHQWLRQRIVHHNLQJDGGLWLRQDOGDPDJHVDJDLQVW:DO0DUW DUHDYDLODEOHXQGHU5XOHG7KH6L[WK&LUFXLWKDVUHFHQWO\ 6WRUHV ,QFl DQG WKDW VKH KDG mLQVWUXFWHG >KHU@ DWWRUQH\ WR UHFRJQL]HGWKHVSOLWEXWGHFOLQHGWRPDNHDUXOLQJmDOWKRXJK VWLSXODWH WKDW >KHU@ GHPDQG IRU GDPDJHV ZLOO QRW H[FHHG    PRVW FRXUWV KDYH FRQFOXGHG WKDW DWWRUQH\ IHHV PD\ EH DWDQ\WLPHLQWKHIXWXUHl5RJHUVDOVRDWWDFKHGD DZDUGHGXQGHU5XOHGWKHPDWWHULVIDUIURPVHWWOHGLQ VWLSXODWLRQDGPLWWLQJWKDWKHUWRWDOGDPDJHVGLGQRWH[FHHG WKLVFLUFXLWRULQPRVWRWKHUVl'XII\Y)RUG0RWRU&R DQGVWDWLQJWKDWVKHZRXOGQRWVHHNOHDYHRIFRXUWWR )GDW DPHQGKHUFRPSODLQWIRUDGGLWLRQDOGDPDJHV0HDQZKLOH :DO0DUWPRYHGWKHGLVWULFWFRXUWSXUVXDQWWR)HG5&LY3 :HQRZKROGWKDWDWWRUQH\IHHVDUHQRWDYDLODEOHXQGHU5XOH GWRDZDUGFRVWVDQGIHHVIRUWKHSUHYLRXVO\GLVPLVVHG G  7KH UHDVRQ LV VLPSOHnWKH UXOH GRHV QRW H[SOLFLWO\ DFWLRQ SURYLGHIRUWKHP:KHUH&RQJUHVVKDVLQWHQGHGWRSURYLGH IRUDQDZDUGRIDWWRUQH\IHHVLWKDVXVXDOO\VWDWHGDVPXFK 7KHGLVWULFWFRXUWGHQLHG5RJHUVjPRWLRQWRUHPDQGRQsXQH DQGQRWOHIWWKHFRXUWVJXHVVLQJ)XUWKHUWKHODZJHQHUDOO\ 2QWKHVDPHGD\WKHGLVWULFWFRXUWJUDQWHG:DO UHFRJQL]HV D GLIIHUHQFH EHWZHHQ WKH WHUPV mFRVWVl DQG 0DUWjV5XOHGPRWLRQDQGRUGHUHG5RJHUVWRSD\FRVWV mDWWRUQH\ IHHVl DQG ZH KDYH QR GHVLUH WR FRQIODWH WKH WZR DQGDWWRUQH\IHHVIURPWKHRULJLQDODFWLRQUHSUHVHQWLQJZRUN WHUPV5DWKHUZHPXVWDVVXPHWKDW&RQJUHVVZDVDZDUHRI WKDWZRXOGQRWEHQHILW:DO0DUWLQWKHVHFRQGDFWLRQ7KH WKH GLVWLQFWLRQ DQG ZDV FDUHIXO ZLWK LWV ZRUGV ZKHQ LW GLVWULFW FRXUW DOVR VWD\HG WKH SURFHHGLQJV DQG JDYH 5RJHUV DSSURYHG5XOHG IRXUWHHQ GD\V WR SD\ :DO0DUW WKH FRVWV DQG IHHV  2Q 6HSWHPEHU   WKH GLVWULFW FRXUW GLVPLVVHG WKH FDVH ZLWKRXWSUHMXGLFHGXHWR5RJHUVjQRQSD\PHQWRI:DO0DUWjV  FRVWVDQGIHHVIURPWKHILUVWDFWLRQ 2I FRXUVH ZH UHDOL]H WKDW &RQJUHVV LWVHOI GLG QRW FKRRVH WKH ZRUGV FRQWDLQHG LQ WKH UXOH 7KH ODQJXDJH DFWXDOO\ UHVXOWHG RQFH &RQJUHVV GHFOLQHG WR H[HUFLVH LWV YHWR SRZHU IROORZLQJ WKH XVXDO UXOHPDNLQJ 5RJHUV KDV DSSHDOHG WKH GLVWULFW FRXUWjV sXQH   SURFHVV 2QH FRPPHQWDWRU KDV GHVFULEHG WKLV SURFHVV VXFFLQFWO\ 2UGHUGHQ\LQJKHUPRWLRQWRUHPDQGLWV2UGHURIsXQH    7KH 6XSUHPH &RXUW KDV WKH SRZHU WR mSUHVFULEH JHQHUDO UXOHV JUDQWLQJFRVWVXQGHU)HG5&LY3GDQGLWV2UGHU RI SUDFWLFH DQG SURFHGXUHl IRU WKH IHGHUDO FRXUWV DQG WKH sXGLFLDO DQGsXGJPHQWHQWHUHGRQ6HSWHPEHUGLVPLVVLQJWKH &RQIHUHQFH RI WKH 8QLWHG 6WDWHV KDV WKH DXWKRULW\ WR UHFRPPHQG FDVHZLWKRXWSUHMXGLFHZLWKFRVWVWD[HGWRWKHSODLQWLII UXOH FKDQJHV WR WKH 6XSUHPH &RXUW 7KH sXGLFLDO &RQIHUHQFH LQ WXUQ RYHUVHHV D FRPPLWWHH VWUXFWXUH WKDW LQFOXGHV D 6WDQGLQJ ,,5HPRYDO &RPPLWWHH RQ 5XOHV RI 3UDFWLFH DQG 3URFHGXUH DSSRLQWHG E\ WKH &KLHI sXVWLFH RI WKH 6XSUHPH &RXUW DQG YDULRXV DGYLVRU\ :H UHYLHZ GH QRYR WKH H[LVWHQFH RI VXEMHFW PDWWHU FRPPLWWHHV DFFRXQWDEOH WR WKH 6WDQGLQJ &RPPLWWHH 7KH $GYLVRU\ &RPPLWWHH RQ &LYLO 5XOHV ZKLFK FRQVLVWV RI MXGJHV MXULVGLFWLRQ DV D TXHVWLRQ RI ODZ IDFWXDO GHWHUPLQDWLRQV ODZ\HUV DQG OHJDO DFDGHPLFV LV UHVSRQVLEOH IRU WKH )HGHUDO UHJDUGLQJMXULVGLFWLRQDOLVVXHVDUHUHYLHZHGIRUFOHDUHUURU 5XOHV RI &LYLO 3URFHGXUH 6HH*DIIRUGY*HQHUDO(OHF&R)GWK&LU 7KHUH DUH VHYHUDO VWDJHV LQ WKH UXOHPDNLQJ SURFHVV $   :H DOVR UHYLHZ GH QRYR WKH GHQLDO RI D PRWLRQ WR SURSRVHG UXOH LV ILUVW FRQVLGHUHG E\ WKH $GYLVRU\ &RPPLWWHH ,I UHPDQG6HH$KHDUQY&KDUWHU7ZSRI%ORRPILHOG)G WKH $GYLVRU\ &RPPLWWHH DSSURYHV WKH SURSRVDO LW LV WKHQ UHYLHZHG E\ WKH 6WDQGLQJ &RPPLWWHH DQG ILQDOO\ E\ WKH sXGLFLDO WK&LU &RQIHUHQFH EHIRUH EHLQJ IRUZDUGHG WR WKH 6XSUHPH &RXUW ,I WKH 6XSUHPH &RXUW FRQFXUV WKH SURSRVDO LV WUDQVPLWWHG WR &RQJUHVV  5RJHUVY:DO0DUW6WRUHV 1R 1R 5RJHUVY:DO0DUW6WRUHV 

*HQHUDOO\ D FLYLO FDVH EURXJKW LQ D VWDWH FRXUW PD\ EH WKHVDPHFODLPDJDLQVWWKHVDPHGHIHQGDQWWKHFRXUW UHPRYHGE\DGHIHQGDQWWRIHGHUDOFRXUWLILWFRXOGKDYHEHHQ PD\PDNHVXFKRUGHUIRUWKHSD\PHQWRIFRVWVRIWKH EURXJKW WKHUH RULJLQDOO\   86& † D  $ IHGHUDO DFWLRQSUHYLRXVO\GLVPLVVHGDVLWPD\GHHPSURSHUDQG GLVWULFWFRXUWKDVRULJLQDOmGLYHUVLW\lMXULVGLFWLRQZKHUHWKH PD\ VWD\ WKH SURFHHGLQJV LQ WKH DFWLRQ XQWLO WKH VXLWLVEHWZHHQFLWL]HQVRIGLIIHUHQWVWDWHVDQGWKHDPRXQWLQ SODLQWLIIKDVFRPSOLHGZLWKWKHRUGHU FRQWURYHUV\H[FHHGVH[FOXVLYHRIFRVWVDQGLQWHUHVW  86& D  $ GHIHQGDQW UHPRYLQJ D FDVH KDV WKH $GLVWULFWFRXUWjVJUDQWRID5XOHGPRWLRQDQGUHODWHG EXUGHQRISURYLQJWKHGLYHUVLW\MXULVGLFWLRQUHTXLUHPHQWV6HH RUGHURIGLVPLVVDODUHUHYLHZHGIRUDEXVHRIGLVFUHWLRQ6HH :LOVRQY5HSXEOLF,URQ 6WHHO&R86 'XII\Y)RUG0RWRU&R)GWK&LU $ SUREOHP DULVHV ZKHUH DV KHUH D SODLQWLII DOOHJHV DQ 5RJHUV GHFODUHV WKDW VKH mPHUHO\ ZLVKHG WR OLWLJDWH KHU DPRXQW LQ FRQWURYHUV\ EHORZ WKH MXULVGLFWLRQDO DPRXQW FODLPVLQVWDWHFRXUWlDQGUHOLHVRQDFRXSOHRIFDVHVLQZKLFK *HQHUDOO\EHFDXVHWKHSODLQWLII LVmPDVWHURIWKHFODLPlD DFRXUWUHIXVHGWRDZDUGFRVWVXQGHU5XOHGEHFDXVHWKH FODLP VSHFLILFDOO\ OHVV WKDQ WKH IHGHUDO UHTXLUHPHQW VKRXOG FRXUWIRXQGQRHYLGHQFHRIYH[DWLRXVLQWHQW6HH:DKOY&LW\ SUHFOXGH UHPRYDO  6HH *DIIRUG Y *HQHUDO (OHF &R  RI:LFKLWD)6XSS'.DQ6HZHOOY )G   WK &LU   6WDWH FRXQWHUSDUWV WR :DO0DUW 6WRUHV ,QF  )5'  ' .DQ  )HG5&LY3FPLJKWHQDEOHDSODLQWLIIWR FODLPLQKHU 5RJHUVjFODLPRISXUHPRWLYHGRHVQRWZLQWKHGD\EHFDXVH FRPSODLQW DQ DPRXQW ORZHU WKDQ WKH IHGHUDO DPRXQW LQ mQRWKLQJLQWKHODQJXDJHRI5XOHGVXJJHVWVWKDWD FRQWURYHUV\ EXW QHYHUWKHOHVV VHHN DQG UHFRYHU GDPDJHV GHIHQGDQWPXVWVKRZµEDGIDLWKjEHIRUHDGLVWULFWFRXUWFDQ H[FHHGLQJWKHDPRXQWSUD\HGIRU,G7HQQHVVHHKDVRQHVXFK RUGHU SD\PHQW RI FRVWV LQFXUUHG LQ D YROXQWDULO\ GLVPLVVHG UXOH,WV&LYLO3URFHGXUH5XOHSURYLGHVWKDWH[FHSWLQ SUHYLRXVDFWLRQl(VTXLYDOY$UDX)6XSS WKHFDVHRIGHIDXOWmHYHU\ILQDOMXGJPHQWVKDOOJUDQWUHOLHIWR &'&DO,QDGGLWLRQ5RJHUVIDLOVWRPHQWLRQWKDW ZKLFKWKHSDUW\LQZKRVHIDYRULWLVUHQGHUHGLVHQWLWOHGHYHQ 5XOHGLVPHDQWQRWRQO\WRSUHYHQWYH[DWLRXVOLWLJDWLRQ LI WKH SDUW\ KDV QRW GHPDQGHG VXFK UHOLHI LQ WKH SDUW\jV EXWDOVRWRSUHYHQWIRUXPVKRSSLQJmHVSHFLDOO\E\SODLQWLIIV SOHDGLQJVl,QVXFKVLWXDWLRQVWKHUHPRYLQJGHIHQGDQWPXVW ZKRKDYHVXIIHUHGVHWEDFNVLQRQHFRXUWDQGGLVPLVVWRWU\ VKRZ WKDW LW LV mPRUH OLNHO\ WKDQ QRWl WKDW WKH SODLQWLIIjV WKHLUOXFNVRPHZKHUHHOVHl6HH5RELQVRQY1HOVRQ1R FODLPVPHHWWKHDPRXQWLQFRQWURYHUV\UHTXLUHPHQW*DIIRUG 0/:  :/  DW  ' 0DVV )HE  )GDW +HQFH5XOHGLVDOVRLQWHQGHGWRSUHYHQWDWWHPSWV WR mJDLQ DQ\ WDFWLFDO DGYDQWDJH E\ GLVPLVVLQJ DQG UHILOLQJ 7RPHHWLWVEXUGHQIRUUHPRYDOWKHGHIHQGDQWLQWKLVFDVH WK>H@VXLWl6HZHOOY:DO0DUW6WRUHV,QF)5'DW UHOLHGRQWKHIDFWWKDWSODLQWLIIjVILUVWDFWLRQVRXJKWQHDUO\ PLOOLRQDQGWKDWSODLQWLIIPDGHVZRUQUHVSRQVHVWRGLVFRYHU\ $V:DO0DUWSRLQWVRXW5RJHUVGLGQRWVHHNWRGLVPLVVWKH UHTXHVWV VWDWLQJ WKDW KHU DPRXQW RI GDPDJHV H[FHHGHG LQLWLDODFWLRQXQWLODIWHUVKHKDGPLVVHGWKHFRXUWjVGHDGOLQH 7KHGLVWULFWFRXUWFLWHGWKHVHIDFWVLQILQGLQJWKDW IRUGLVFORVLQJKHUH[SHUWZLWQHVVHV7KLVHYLGHQFHVDWOHDVW LWZDVPRUHOLNHO\WKDQQRWWKDWWKHDPRXQWLQFRQWURYHUV\ VRPHDWWHPSWWRZLSHWKHVODWHFOHDQDIWHUDQLQLWLDOVHWEDFNLQ H[FHHGHG5RJHUVKRZHYHUDUJXHVWKDWWKHGLVWULFW IHGHUDOFRXUWDQGJDLQDWDFWLFDODGYDQWDJHE\UHILOLQJLQVWDWH FRXUWVKRXOGKDYHJUDQWHGKHUPRWLRQWRUHPDQGEHFDXVHVKH FRXUW+HQFHWKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQLQ ILOHGDFRPSODLQWLQWKHVHFRQGDFWLRQVHHNLQJGDPDJHV DZDUGLQJFRVWVRIWR:DO0DUW XQGHUWKHMXULVGLFWLRQDODPRXQWDQGVWLSXODWHGWKDWKHU 5RJHUV DOVR VSHFLILFDOO\ FRQWHVWV WKH GLVWULFW FRXUWjV LQFOXVLRQRIDWWRUQH\IHHVDVSDUWRILWVDZDUGRImFRVWVlXQGHU  5RJHUVY:DO0DUW6WRUHV 1R 1R 5RJHUVY:DO0DUW6WRUHV 

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+HQFHLQ VWLSXODWLRQVWKDWDUHELQGLQJ UHYLHZLQJWKHGHQLDORIDPRWLRQWRUHPDQGDFRXUWORRNVWR mZKHWKHUWKHDFWLRQZDVSURSHUO\UHPRYHGLQWKHILUVWSODFHl %HFDXVHVWDWHODZZRXOGKDYHDOORZHGSODLQWLIIWRUHFRYHU ,GFLWLQJ)DNRXULY3L]]D+XWRI$P,QF)G GDPDJHVLQH[FHVVRIZKDWVKHSUD\HGIRULWZDVmPRUHOLNHO\  WK &LU    ,I RQH GRHV QRW WDNH LQWR DFFRXQW WKDQQRWlWKDWKHUGDPDJHVZRXOGH[FHHGJLYHQKHU SODLQWLIIjVSRVWUHPRYDOVWLSXODWLRQWKHQWKHUHLVQRTXHVWLRQ SUHYLRXV GHPDQGV DQG UHSUHVHQWDWLRQV  3ODLQWLIIjV SRVW WKDW WKH GLVWULFW FRXUW ZDV FRUUHFW WR GHQ\ WKH PRWLRQ WR UHPRYDO VWLSXODWLRQ KDV QR HIIHFW EHFDXVH MXULVGLFWLRQ LV UHPDQG EHFDXVH GHIHQGDQW VKRZHG WKDW DW WKH WLPH RI GHFLGHGDVRIWKHWLPHRIUHPRYDO7KHGLVWULFWFRXUWGLGQRW UHPRYDOWKHDPRXQWLQFRQWURYHUV\ZDVmPRUHOLNHO\WKDQ HUULQGHQ\LQJSODLQWLIIjVPRWLRQWRUHPDQG QRWlDERYHWKHSOHDGHGLQSODLQWLIIjVFRPSODLQW ,,,7KH$ZDUGRI&RVWV,QFOXGLQJ$WWRUQH\)HHV 7KHUHIRUH WKH PDLQ LVVXH KHUH LV WKH HIIHFW LI DQ\ RI SODLQWLIIjVVWLSXODWLRQ7KH6HYHQWK&LUFXLWKDVKHOGWKDWD 7KH GLVWULFW FRXUW WKRURXJKO\ H[DPLQHG :DO0DUWjV SRVWUHPRYDOVWLSXODWLRQUHGXFLQJWKHDPRXQWLQFRQWURYHUV\ LWHPL]HG DFFRXQWLQJ RI WKH FRVWV DQG IHHV LW LQFXUUHG LQ WREHORZWKHUHTXLUHGMXULVGLFWLRQDODPRXQWLVLQHIIHFWLYHWR GHIHQGLQJDJDLQVW5RJHUVjHDUOLHUVXLW7KHFRXUWDZDUGHGWKH GHSULYHDGLVWULFWFRXUWRIMXULVGLFWLRQ6HH,QUH6KHOO2LO&R IXOO  LQ FRVWV EXW UHGXFHG WKH  RI UHTXHVWHG  )G   WK &LU   7KH FRXUW EDVHG LWV DWWRUQH\ IHHV E\  WR DFFRXQW IRU WKRVH IHHV ZKLFK GHFLVLRQRQ6W3DXO0HUFXU\,QGHP&RY5HG&DE&R mUHPDLQ>HG@RIEHQHILWLQWKLVPDWWHU>@l7KHFRXUWRUGHUHG 86   LQ ZKLFK WKH 6XSUHPH &RXUW FRQVLGHUHG 5RJHUVWRSD\:DO0DUW5RJHUVKDVFRQWHVWHGWKLV ZKHWKHU D SRVWUHPRYDO DPHQGPHQW RI D FRPSODLQW FRXOG DZDUGRImFRVWVlDQGWKHVXEVHTXHQWGLVPLVVDORIKHUFDVH GHVWUR\GLYHUVLW\MXULVGLFWLRQ,QUXOLQJWKDWLWFRXOGQRWWKH 6W3DXO&RXUWVWDWHGWKDWm>H@YHQWVRFFXUULQJVXEVHTXHQWWR )HG5&LY3GSURYLGHV WKHLQVWLWXWLRQRIVXLWZKLFKUHGXFHWKHDPRXQWUHFRYHUDEOH EHORZWKHVWDWXWRU\OLPLWGRQRWRXVWMXULVGLFWLRQl,GDW ,IDSODLQWLIIZKRKDVRQFHGLVPLVVHGDQDFWLRQLQDQ\ 2QWKHVWUHQJWKRIWKLVUXOHWKH6KHOO2LOFRXUWUHDVRQHGWKDW FRXUWFRPPHQFHVDQDFWLRQEDVHGXSRQRULQFOXGLQJ mEHFDXVH MXULVGLFWLRQ LV GHWHUPLQHG DV RI WKH LQVWDQW RI

 7KH GHIHQGDQW KDV DUJXHG WKDW LWV ODFN RI DSSURYDO PHDQV WKH  VWLSXODWLRQ LV QRW ELQGLQJ 2WKHU FRXUWV KDYH WUHDWHG VXFK VWLSXODWLRQV DV 3ODLQWLII DUJXHV WKDW LI WKH DPRXQW SUD\HG IRU LQ D FRPSODLQW PD\ EH ELQGLQJ QRQHWKHOHVV 6HH HJ $VRFLDFLRQ 1DFLRQDO GH 3HVFDGRUHV D GLVUHJDUGHG LQ GHWHUPLQLQJ WKH DPRXQW LQ FRQWURYHUV\ LW ZRXOG mRSHQ WKH 3HTXHQD (VFDOD 2 $UWHVDQDOHV GH &RORPELD Y 'RZ 4XLPLFD GH IORRGJDWHVl WR IHGHUDO MXULVGLFWLRQ RYHU DQ\ FDVHV ILOHG LQ VWDWH FRXUW 7KLV &RORPELD 6$ )G   WK &LU  FHUW GHQLHG  86 DUJXPHQW KDV ORQJ VLQFH EHHQ VHWWOHG E\ FDVHV OLNH *DIIRUG  ZKLFK   $GNLQV Y *LEVRQ  )6XSS   6' :9  HVWDEOLVK WHVWV IRU GHWHUPLQLQJ ZKHQ D FRXUW FDQ ILQG MXULVGLFWLRQ GHVSLWH :H ILQG GHIHQGDQWjV DUJXPHQW XQFRQYLQFLQJ DQG GR QRW UHO\ RQ LW D SOHDGLQJ WKDW VWDWHV DQ DPRXQW EHORZ WKH UHTXLUHG OHYHO  5RJHUVY:DO0DUW6WRUHV 1R 1R 5RJHUVY:DO0DUW6WRUHV 

UHPRYDODSRVWUHPRYDODIILGDYLWRUVWLSXODWLRQLVQRPRUH 6HYHUDOGLVWULFWFRXUWVKDYHJLYHQHIIHFWWRELQGLQJSRVW HIIHFWLYHWKDQDSRVWUHPRYDODPHQGPHQWRIWKHFRPSODLQWl UHPRYDOVWLSXODWLRQVKRZHYHUZHGRQRWVHHPHULWLQWKHLU )GDWVHHDOVR&KDVHY6KRS 16DYH:DUHKRXVH UHDVRQLQJ,Q0RVVY9R\DJHU,QV&RV)6XSSG )RRGV,QF)GWK&LUmEHFDXVHWKH 0' $OD  WKH FRXUW GLVWLQJXLVKHG FDVHV IURP WKH VWLSXODWLRQFDPHRQHPRQWKSRVWUHPRYDO>LWZDV@WRRODWHIRU )LIWK 6L[WK DQG 6HYHQWK &LUFXLWV RQ WKH JURXQG WKDW WKH WKHFRXUWWRFRQVLGHUl VWLSXODWLRQVLQWKRVHFDVHVKDGmIDLOHGWRVSHFLILFDOO\ELQGWKH SODLQWLIIV WR DFFHSW QR PRUH LQ GDPDJHV WKDQ WKH UHTXLVLWH $OWKRXJKQRSXEOLVKHGRSLQLRQRIWKLVFLUFXLWKDVGLUHFWO\ MXULVGLFWLRQDO DPRXQWl  ,G DW  VHH DOVR $GNLQV Y DGGUHVVHGWKHHIIHFWRIDSRVWUHPRYDOVWLSXODWLRQRQGLYHUVLW\ *LEVRQ)6XSS6':9D5HDFKLQJWKH MXULVGLFWLRQLQ6DQIRUGY*DUGHQRXU1R:/ VDPHUHVXOWZLWKGLIIHUHQWUHDVRQLQJWKHFRXUWVLQ%DLOH\Y WK&LUsXO\WKHFRXUWIRXQGWKHUHZDV :DO0DUW6WRUHV,QF)6XSS1'$OD MXULVGLFWLRQ HYHQ WKRXJK WKH SODLQWLIIV KDG VWLSXODWHG DIWHU DQG *RRGPDQ Y :DO0DUW 6WRUHV ,QF  )6XSS  UHPRYDOWKDWmWKHDPRXQW WKH\ZHUHVHHNLQJZDVOHVVWKDQ 0' 7HQQ  UXOHG WKDW WKH  DPHQGPHQWV WR  l  ,G DW   7KH SODLQWLIIV KDG PDGH 5XOH  86& † F VXSHUVHGHG WKH 6W 3DXO UXOH WKDW SRVW GLVFORVXUHVWKDWWKHDPRXQWRIGDPDJHVZDVDERXW UHPRYDO DFWLRQV E\ WKH SODLQWLII FDQQRW GHSULYH D FRXUW RI ,QDGGLWLRQWKHSODLQWLIIVjVWLSXODWLRQKDGQRWEHHQELQGLQJnD GLYHUVLW\ MXULVGLFWLRQ  7KRVH FRXUWV UHDVRQHG WKDW LQ IDFWWKHFRXUWXVHGWRGLVWLQJXLVKLWVFDVHIURPVHYHUDOGLVWULFW FKDQJLQJ † F &RQJUHVV ZDV UHVSRQGLQJ WR6W 3DXO FRXUWFDVHVWKDWKDGJLYHQHIIHFWWRDELQGLQJSRVWUHPRYDO )XUWKHUWKH\LQWHUSUHWHGWKHZRUGmVKDOOlLQWKHQHZHUYHUVLRQ VWLSXODWLRQ,GDW $OVRLQ0LWFKHOOY:KLWH&DVWOH6\V WR PDQGDWH UHPDQGHYHQ ZKHUH WKH SODLQWLII UHGXFHV KLV ,QF1R:/WK&LU0D\ GHPDQG WKUHH GD\V EHIRUH WULDO RU PHUHO\ DPHQGV KLV DOWKRXJKQRWLQJWKDWWKHSODLQWLIIKDGRIIHUHGWRILOHDSRVW FRPSODLQW UDWKHU WKDQ VXEPLWV D VWLSXODWLRQ  %DLOH\  UHPRYDOVWLSXODWLRQWKHFRXUWLQWHUSUHWHG6W3DXODVKROGLQJ )6XSS DW  *RRGPDQ  )6XSS DW  VHH DOVR WKDW mD SRVWUHPRYDO VWLSXODWLRQ KDV QR HIIHFW RQ IHGHUDO 2GHU Y %XFNH\H 6WDWH 0XW ,QV  )6XSS   MXULVGLFWLRQRYHUWKHRULJLQDOFRPSODLQWl,GDW

Q 6',QG :HFRQFOXGHWKDWSRVWUHPRYDOVWLSXODWLRQVGRQRWFUHDWHDQ $OWKRXJK WKHVH FDVHV DUH LQWHUHVWLQJ IRU WKHLU UHVXOW WKLV H[FHSWLRQ WR WKH UXOH DUWLFXODWHG LQ 6W 3DXO  %HFDXVH FLUFXLW KDV DOUHDG\ UHMHFWHG WKH QRWLRQ WKDW WKH  MXULVGLFWLRQLVGHWHUPLQHGDVRIWKHWLPHRIUHPRYDOHYHQWV DPHQGPHQWWR†FGLUHFWVGLVWULFWFRXUWVWRORRNEH\RQG RFFXUULQJDIWHUUHPRYDOWKDWUHGXFHWKHDPRXQWLQFRQWURYHUV\ WKH WLPH RI UHPRYDO LQ GHFLGLQJ UHPDQG PRWLRQV EDVHG RQ GRQRWRXVWMXULVGLFWLRQ7KHUHIRUHFRQVLVWHQWZLWK6W3DXO ODFN RI MXULVGLFWLRQ  %DOGULGJH Y .HQWXFN\2KLR 7UDQVS DQGSUHYLRXVXQSXEOLVKHG6L[WK&LUFXLWRSLQLRQVZHKROGWKDW ,QF)G QWK&LUVHHDOVR DSRVWUHPRYDOVWLSXODWLRQUHGXFLQJWKHDPRXQWLQFRQWURYHUV\ )XOOHUY([[RQ&RUS)6XSSGQ6' WREHORZWKHMXULVGLFWLRQDOOLPLWGRHVQRWUHTXLUHUHPDQGWR $OD  GLVFXVVLQJ FDVHV DQG FRQFOXGLQJ WKDW WKH  VWDWHFRXUW7KLVUXOHLVJURXQGHGQRWRQO\LQSUHFHGHQWEXW DPHQGPHQWVGRQRWVXSHUVHGH6W3DXO,QDGGLWLRQWKHIDFW DOVR LQ VRXQG SROLF\  ,I SODLQWLIIV ZHUH DEOH WR GHIHDW MXULVGLFWLRQE\ZD\RIDSRVWUHPRYDOVWLSXODWLRQWKH\FRXOG XQIDLUO\PDQLSXODWHSURFHHGLQJVPHUHO\EHFDXVHWKHLUIHGHUDO  7KH ROGHU YHUVLRQ RI † F FDOOHG IRU UHPDQG ZKHQHYHU WKH FDVHEHJLQVWRORRNXQIDYRUDEOH0RUHRYHUWKHLQWHUHVWVRI MXGJH UHDOL]HG mWKDW WKH FDVH ZDV UHPRYHG LPSURYLGHQWO\ DQG ZLWKRXW VLPSOLFLW\ DQG XQLIRUPLW\ GLFWDWH WKDW SRVWUHPRYDO MXULVGLFWLRQl 7KLV VXEVHFWLRQ ZDV FKDQJHG WR UHDG m,I DW DQ\ WLPH EHIRUH VWLSXODWLRQVEHWUHDWHGMXVWOLNHDQ\RWKHUSRVWUHPRYDOHYHQW ILQDO MXGJPHQW LW DSSHDUV WKDW WKH GLVWULFW FRXUW ODFNV VXEMHFW PDWWHU MXULVGLFWLRQ WKH FDVH VKDOO EH UHPDQGHGl