100-7 Ex. G Jpmc's Reply To Jpmc's MTD

You might also like

Download as pdf or txt
Download as pdf or txt
You are on page 1of 28

Case 1:15-cv-00293-LTS-JCF Document 100-7 Filed 06/13/16 Page 1 of 28

Exhibit G
Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
1 of2 27
of 28

 
81,7('67$7(6',675,&7&2857
)257+(',675,&72)&2/80%,$

 
      
81,7('67$7(62)$0(5,&$HWDO 
H[UHO/$85(1&(6&+1(,'(5    &DVH1RFY50&
        
    3ODLQWLIIV   -XGJH5RVHPDU\0&ROO\HU
        
  Y      
      
-3025*$1&+$6(%$1.1$ 
HWDO      
      
    'HIHQGDQWV 
 

'()(1'$176¶5(3/<725(/$725¶623326,7,2172'()(1'$176¶
027,2172',60,665(/$725¶66(&21'$0(1'('&203/$,17



Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
2 of3 27
of 28

7$%/(2)&217(176
3DJH V 

7$%/(2)$87+25,7,(6LLL

$5*80(17

, 6&+1(,'(5¶6106&/$,06)$,/21352&('85$/*5281'6

$ 7KH106¶V,QIRUPDO'LVSXWH5HVROXWLRQ3URYLVLRQV%DU7KLV$FWLRQ

% 6FKQHLGHU¶V106&ODLPV$UH$Q,PSURSHU&ROODWHUDO$WWDFN2Q7KH
0RQLWRU¶V'HWHUPLQDWLRQV7KDW&KDVH&RPSOLHG:LWK7KH106

,, 6&+1(,'(5¶6106&/$,06)$,/217+(0(5,76

$ 6FKQHLGHU¶V&RQVXPHU5HOLHI&ODLPV6KRXOG%H'LVPLVVHG

 7KH106GRHVQRWUHTXLUHFRPSOLDQFHZLWKWKHVHUYLFLQJVWDQGDUGV
DVDFRQGLWLRQIRUHDUQLQJFRQVXPHUUHOLHIFUHGLW

 7KH106GRHVQRWUHTXLUHDQ³DSSOLFDWLRQSURFHVV´IRUFRQVXPHU
UHOLHI

 6FKQHLGHU¶VFRQFOXVRU\VSHFXODWLRQWKDW&KDVHPD\KDYHYLRODWHG
WKHUHTXLUHPHQWVRI([KLELW'GRHVQRWVDOYDJHKLVFODLPV

% 6FKQHLGHU¶V6HUYLFLQJ6WDQGDUGV&ODLPV6KRXOG%H'LVPLVVHG

 7KH106¶V³FXUH´SURYLVLRQVSUHFOXGH6FKQHLGHU¶VVHUYLFLQJ
VWDQGDUGVFODLPV

 7KHSURVSHFWRIDFLYLOSHQDOWLHVDZDUGLVWRRFRQWLQJHQWDQG
XQFHUWDLQWRFRQVWLWXWHDQ³REOLJDWLRQ´XQGHUWKH)&$

& 6FKQHLGHU¶V5HPDLQLQJ106$OOHJDWLRQV)DLO7R6WDWH$Q)&$&ODLP

' 6FKQHLGHU¶V6WDWH/DZ&ODLPV6KRXOG%H'LVPLVVHG

,,, 6&+1(,'(5¶6+$03&/$,066+28/'%(',60,66('

$ 6FKQHLGHU+DV1RW$OOHJHG7KDW&KDVH0DGH$)DOVH&ODLP

% 6FKQHLGHU+DV1RW$OOHJHG7KDW&KDVH³.QRZLQJO\´0DGHD)DOVH&ODLP

,9 7+(&28576+28/''(1<6&+1(,'(5/($9(72$0(1'+,6
&203/$,17$7+,5'7,0(

&21&/86,21

LL
Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
3 of4 27
of 28

7$%/(2)$87+25,7,(6

 3DJH V 

&DVHV

$UELWUDMH&DVDGH&DPELR6$GH&9Y863RVWDO6HUY
)6XSSG ''& 

$VKFURIWY,TEDO
86  

8QLWHG6WDWHVH[UHO%RLVHY&HSKDORQ,QF
1R:/ ('3D-XO\ 

8QLWHG6WDWHVH[UHO%RRNHUY3IL]HU,QF
)6XSSG '0DVV 

&RQIHGHUDWH0HP¶O$VV¶Q,QFY+LQHV
)G '&&LU 

)LUHVWRQHY)LUHVWRQH
)G '&&LU 

+LQWRQY&RUU&RUSRI$P
)6XSSG ''& 

+R\WHY$P1DW¶O5HG&URVV
)6XSSG ''& 

8QLWHG6WDWHVH[UHO/DQGLVY7DLOZLQG6SRUWV&RUS
)6XSSG ''& 

0RUULVY&DUWHU*ORE/HH,QF
)6XSSG ''& 

6LY/DRJDL5HVHDUFK)RXQG
)6XSSG ''& 

8QLWHG6WDWHVY%DQNRI$P&RUS
1R ''&$SU 

8QLWHG6WDWHVY%DQNRI$P
)6XSSG ''& 

8QLWHG6WDWHVY2NR\H
)G VW&LU 

LLL
Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
4 of5 27
of 28

8QLWHG6WDWHVY3KLOLS0RUULV86$,QF
)G '&&LU 

8QLWHG6WDWHVY6FL$SSOLFDWLRQV,QW¶O&RUS
)G '&&LU 

:DUGY'&'HS¶WRI<RXWK5HKDE6HUYV
)6XSSG ''& 

8QLWHG6WDWHVH[UHO:LOOLDPVY0DUWLQ%DNHU$LUFUDIW&R/WG
)G '&&LU 

6WDWXWHV

86&†

2WKHU$XWKRULWLHV

&RQJ5HF6 GDLO\HG$SU 

)HG5&LY3 D 

)HG5&LY3 E 

2IILFHRI0RUWJDJH6HWWOHPHQW2YHUVLJKW6HUYLFLQJ3HUIRUPDQFH'DWDDYDLODEOH
DWKWWSVZZZMDVPLWKPRQLWRULQJFRPRPVRZS
FRQWHQWXSORDGVVLWHV)LQDO5HSRUW7HPSODWH6HUYLFLQJ
3HUIRUPDQFH[OV[

65HS1RDW  

LY
Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
5 of6 27
of 28


$5*80(17

&KDVH¶VRSHQLQJEULHIVKRZHGWKDW  6FKQHLGHU¶VFODLPVEDVHGRQDOOHJHGYLRODWLRQVRI

WKH1DWLRQDO0RUWJDJH6HWWOHPHQWIDLORQERWKSURFHGXUDODQGVXEVWDQWLYHJURXQGVDQG  KLV

FODLPVEDVHGRQDOOHJHGYLRODWLRQVRI+$03UHTXLUHPHQWVIDLOIRUPXOWLSOHUHDVRQV6FKQHLGHU¶V

RSSRVLWLRQGRHVQRWUHKDELOLWDWHHLWKHUVHWRIFODLPV

, 6&+1(,'(5¶6106&/$,06)$,/21352&('85$/*5281'6

$ 7KH106¶V,QIRUPDO'LVSXWH5HVROXWLRQ3URYLVLRQV%DU7KLV$FWLRQ

$V&KDVHGHPRQVWUDWHGLQLWVRSHQLQJEULHIEHIRUHDSDUW\PD\ILOHDQDFWLRQWRHQIRUFH

WKH106LWPXVW L HQJDJHLQDQLQIRUPDOGLVSXWHUHVROXWLRQSURFHVVWRDWWHPSWWRUHVROYHWKH

GLVSXWH LL QRWLI\WKH0RQLWRULQJ&RPPLWWHHRILWVLQWHQWWRILOHDQHQIRUFHPHQWDFWLRQDQG

LLL ZDLWDWOHDVWGD\VWRJLYHWKH0RQLWRULQJ&RPPLWWHHDQRSSRUWXQLW\WRFRQVLGHUWKHLVVXHV

UDLVHGLQWKHQRWLFH'HIV¶0HPLQ6XSSRI0RWWR'LVPLVV ³&KDVH0HP´ 6FKQHLGHU

GRHVQRWGLVSXWHWKDWWKRVHUHTXLUHPHQWVKDYHQRWEHHQVDWLVILHGKHUH1RULVWKHUHDQ\URRPIRU

GLVSXWHWKDWWKHFRPSODLQWLQWKLVDFWLRQVHHNVWRHQIRUFHWKH1066FKQHLGHUUHOLHGRQWKHIDFW

WKDWWKLVLVDQ106HQIRUFHPHQWDFWLRQDVWKHEDVLVIRUWUDQVIHUULQJWKHDFWLRQWRWKLV&RXUW6HH

LG6FKQHLGHU¶V106FODLPVDUHWKHUHIRUHEDUUHGE\KLVYLRODWLRQRIWKH106¶VSUHVXLW

LQIRUPDOGLVSXWHUHVROXWLRQSURYLVLRQV,G

6FKQHLGHU¶VSULPDU\UHVSRQVHFRQVLVWVRIDSX]]OLQJDUJXPHQWWKDWWKHLQIRUPDOGLVSXWH

UHVROXWLRQSURYLVLRQVQHHGQRWEHIROORZHGKHUHEHFDXVH  WKH106¶VFRQVXPHUUHOLHI

UHTXLUHPHQWVDUH³VXEMHFWWR´DQGHIIHFWLYHO\LQFRUSRUDWHWKH6HUYLFHU3DUWLFLSDWLRQ$JUHHPHQW

³63$´ WKDW&KDVHHQWHUHGLQWRLQFRQQHFWLRQZLWKLWVSDUWLFLSDWLRQLQWKH7UHDVXU\

'HSDUWPHQW¶V+$03SURJUDP  WKH63$UHIHUHQFHVWKHSRVVLELOLW\WKDWDIDOVHFHUWLILFDWLRQ

XQGHUWKH63$PLJKWYLRODWHWKH)DOVH&ODLPV$FWDQGWKHUHIRUH  WKH63$VRPHKRZRYHUULGHV


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
6 of7 27
of 28

DQ\REOLJDWLRQWRFRPSO\ZLWKWKHLQIRUPDOGLVSXWHUHVROXWLRQUHTXLUHPHQWVRIWKH1066HH

2SS

7KLVDUJXPHQWUHVWVRQDIXQGDPHQWDOPLVXQGHUVWDQGLQJRIWKH106$OWKRXJK

6FKQHLGHUSRLQWVWRODQJXDJHLQWKH106VWDWLQJWKDWWKH106¶VFRQVXPHUUHOLHIUHTXLUHPHQWV

DUH³VXEMHFWWR´&KDVH¶VREOLJDWLRQVXQGHUWKH63$WKHFLWHGODQJXDJHPHUHO\PHDQVWKDWWKH

106ZDVQRWLQWHQGHGWRUHTXLUH&KDVHWRYLRODWHWKH63$RUDQ\RWKHUDSSOLFDEOHVHUYLFLQJ

DJUHHPHQW7KHODQJXDJHLQTXHVWLRQVWDWHV

$SSOLFDEOH5HTXLUHPHQWV

7KH SURYLVLRQ RI FRQVXPHU UHOLHI E\ WKH 6HUYLFHU LQ DFFRUGDQFH ZLWK WKLV
$JUHHPHQWLQFRQQHFWLRQZLWKDQ\UHVLGHQWLDOPRUWJDJHORDQLVH[SUHVVO\VXEMHFW
WR DQG VKDOO EH LQWHUSUHWHG LQ DFFRUGDQFH ZLWK DV DSSOLFDEOH WKH WHUPV DQG
SURYLVLRQV RI WKH 6HUYLFHU 3DUWLFLSDWLRQ $JUHHPHQW ZLWK WKH 86 'HSDUWPHQW RI
7UHDVXU\ DQ\ VHUYLFLQJ DJUHHPHQW VXEVHUYLFLQJ DJUHHPHQW XQGHU ZKLFK WKH
6HUYLFHU VHUYLFHV IRU RWKHUV VSHFLDO VHUYLFLQJ DJUHHPHQW PRUWJDJH RU ERQG
LQVXUDQFH SROLF\ RU UHODWHG DJUHHPHQW RU UHTXLUHPHQWV WR ZKLFK 6HUYLFHU LV D
SDUW\ DQG E\ ZKLFK LW RU LWV VHUYLFLQJ DIILOLDWHV DUH ERXQG SHUWDLQLQJ WR WKH
VHUYLFLQJ RU RZQHUVKLS RI WKH PRUWJDJH ORDQV LQFOXGLQJ ZLWKRXW OLPLWDWLRQ WKH
UHTXLUHPHQWVELQGLQJGLUHFWLRQVRULQYHVWRUJXLGHOLQHVRIWKHDSSOLFDEOHLQYHVWRU
VXFK DV )DQQLH 0DH RU )UHGGLH 0DF  PRUWJDJH RU ERQG LQVXUHU RU FUHGLW
HQKDQFHUSURYLGHGKRZHYHUWKDWWKHLQDELOLW\RID6HUYLFHUWRRIIHUDW\SHIRUP
RU IHDWXUH RI WKH FRQVXPHU UHOLHI SD\PHQWV E\ YLUWXH RI DQ $SSOLFDEOH
5HTXLUHPHQW VKDOO QRW UHOLHYH WKH 6HUYLFHU RI LWV DJJUHJDWH FRQVXPHU UHOLHI
REOLJDWLRQV LPSRVHG E\ WKLV $JUHHPHQW LH WKH 6HUYLFHU PXVW VDWLVI\ VXFK
REOLJDWLRQVWKURXJKWKHRIIHURIRWKHUW\SHVIRUPVRUIHDWXUHVRIFRQVXPHUUHOLHI
SD\PHQWVWKDWDUHQRWOLPLWHGE\VXFK$SSOLFDEOH5HTXLUHPHQW

&-(['† HPSKDVLVDGGHG 

 7KLVODQJXDJHLQQRZD\H[FXVHV6FKQHLGHU¶VIDLOXUHWRFRPSO\ZLWKWKH106¶VLQIRUPDO

GLVSXWHUHVROXWLRQUHTXLUHPHQWV,WVSODLQPHDQLQJLVWKDWWKH106¶VFRQVXPHUUHOLHI

UHTXLUHPHQWVVKRXOGQRWEHFRQVWUXHGWRUHTXLUH&KDVHWREUHDFKWKH63$RUDQ\RWKHUDSSOLFDEOH



³&-´UHIHUVWR&RQVHQW-XGJPHQW>(&)@8QLWHG6WDWHVY%DQNRI$P&RUS1R
''&$SU 


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
7 of8 27
of 28

VHUYLFLQJDJUHHPHQW³WRZKLFK>&KDVH@LVDSDUW\´,G7KXVLISURYLGLQJDSDUWLFXODUIRUPRI

106FRQVXPHUUHOLHIZRXOGUHTXLUH&KDVHWRYLRODWHDFRPPLWPHQWXQGHUWKH63$RUDQ\RWKHU

VHUYLFLQJDJUHHPHQW&KDVHQHHGQRWSURYLGHWKDWW\SHRIUHOLHISURYLGHGWKDW&KDVHVWLOOPXVW

PHHWLWV³DJJUHJDWHFRQVXPHUUHOLHIREOLJDWLRQV´LQVRPHRWKHUZD\6HHLG+HUHFRPSOLDQFH

ZLWKWKHLQIRUPDOGLVSXWHUHVROXWLRQUHTXLUHPHQWVRIWKH106ZRXOGQRWSXW&KDVHLQEUHDFKRI

LWVREOLJDWLRQVXQGHUWKH63$RUDQ\RWKHUVHUYLFLQJDJUHHPHQW7KH³$SSOLFDEOH5HTXLUHPHQWV´

SURYLVLRQWKHUHIRUHSURYLGHVQREDVLVIRU6FKQHLGHU¶VDWWHPSWWRHYDGHWKH106¶VGLVSXWH

UHVROXWLRQSURFHGXUHV

,WPDNHVQRGLIIHUHQFHWRWKLVFRQFOXVLRQWKDWWKH63$SURYLGHVWKDWDIDOVHFHUWLILFDWLRQ

XQGHUWKH63$³PD\´JLYHULVHWRDYLRODWLRQRIWKH)DOVH&ODLPV$FW6HH2SS([DW%

7KDWLVPHUHO\DVWDWHPHQWRIWKHREYLRXVLIDIDOVHFHUWLILFDWLRQSXUVXDQWWRWKH63$PHHWVHDFK

RIWKHHOHPHQWVRIDQ)&$FODLPDQ)&$FODLPPD\OLH,WGRHVQRWIROORZIURPWKLVWUXLVP

KRZHYHUWKDWWKHGLVSXWHUHVROXWLRQSURFHGXUHVVHWIRUWKLQWKH106PD\EHLJQRUHG6FKQHLGHU

GRHVQRWGHQ\²DQGLVMXGLFLDOO\HVWRSSHGIURPGHQ\LQJ²WKDWWKLVDFWLRQLVDQDFWLRQWRHQIRUFH

WKH106&RQVHQW-XGJPHQW6HH&KDVH0HP8QGHUWKHSODLQODQJXDJHRIWKH&RQVHQW

-XGJPHQWQRVXFKDFWLRQPD\EHEURXJKWXQWLOWKH106¶VLQIRUPDOGLVSXWHUHVROXWLRQ

SURFHGXUHVKDYHEHHQIROORZHG

6FKQHLGHUIDUHVQREHWWHUZLWKKLVDUJXPHQWWKDWWKHLQIRUPDOGLVSXWHUHVROXWLRQ

SURYLVLRQVDSSO\RQO\WR106YLRODWLRQVRIZKLFKWKH0RQLWRULVDZDUH6HH2SS%\WKHLU

WHUPVWKRVHSURYLVLRQVDSSO\WR³DQ\GLVSXWHFRQFHUQLQJDQ\LVVXHDULVLQJXQGHUWK>H@&RQVHQW

-XGJPHQW´&-([(†* HPSKDVLVDGGHG $FFRUGLQJO\WRWKHH[WHQWWKDWWKH0RQLWRUDQG

WKH0RQLWRULQJ&RPPLWWHHDUHXQDZDUHRIDQDOOHJHGYLRODWLRQRIWKH106WKH\PXVWEHQRWLILHG

RIWKHDOOHJHGYLRODWLRQSULRUWRWKHILOLQJRIDODZVXLW6HHLG([(††*-  %HFDXVHWKH


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
8 of9 27
of 28

86JRYHUQPHQWFRXOGQRWKDYHILOHGWKLVDFWLRQZLWKRXWFRPSO\LQJZLWKWKH106¶VGLVSXWH

UHVROXWLRQSURFHGXUHV6FKQHLGHUFDQQRWGRVRHLWKHU6HH&KDVH0HP

% 6FKQHLGHU¶V106&ODLPV$UH$Q,PSURSHU&ROODWHUDO$WWDFN2Q7KH
0RQLWRU¶V'HWHUPLQDWLRQV7KDW&KDVH&RPSOLHG:LWK7KH106

7KH0RQLWRU¶VILQGLQJVWKDW&KDVHFRPSOLHGZLWKWKH106SUHVHQWDQDGGLWLRQDOEDUWR

6FKQHLGHU¶VFODLPV$V&KDVHKDVGHPRQVWUDWHGWKH106PDNHVWKH0RQLWRUWKHDUELWHURI

ZKHWKHU&KDVHFRPSOLHGZLWKWKH&RQVHQW-XGJPHQW&KDVH0HP7KH0RQLWRU

PRUHRYHUGHWHUPLQHGWKDW&KDVHFRPSOLHGZLWKLWVREOLJDWLRQVXQGHUERWKWKH106¶VVHUYLFLQJ

VWDQGDUGVDQGLWVFRQVXPHUUHOLHISURYLVLRQV,GDW7KRVHGHWHUPLQDWLRQVDUHFRQWUROOLQJ

XQOHVVDQGXQWLODSDUW\WRWKH106SHWLWLRQVWKLV&RXUWWRVHWWKHPDVLGHDQGWKH&RXUWDJUHHVWR

GRVR,GDW1HLWKHUHYHQWKDVRFFXUUHGKHUH$FFRUGLQJO\XQGHUWKHFRQWUROOLQJ

GHWHUPLQDWLRQVRIWKH0RQLWRU&KDVHKDVFRPSOLHGZLWKWKH106$OOFODLPVSUHPLVHGRQWKH

DOOHJDWLRQWKDW&KDVHYLRODWHGWKH106WKHUHIRUHIDLODVDPDWWHURIODZ

$OWKRXJK6FKQHLGHUFRXQWHUVWKDW&KDVHLVPDNLQJD³SULPDU\MXULVGLFWLRQ´DUJXPHQWDQG

WKDWWKHSULPDU\MXULVGLFWLRQGRFWULQHGRHVQRWDSSO\WR)&$FODLPV2SSWKDWLVLQFRUUHFW

7KHSULPDU\MXULVGLFWLRQGRFWULQHDOORZVDFRXUWWR³VXVSHQGWKHMXGLFLDOSURFHVV´SHQGLQJWKH

RXWFRPHRIDQDGPLQLVWUDWLYHSURFHHGLQJZKHQ³DGMXGLFDWLQJDFODLPZRXOGUHTXLUH>@WKH

UHVROXWLRQRILVVXHVZKLFKXQGHUDUHJXODWRU\VFKHPHKDYHEHHQSODFHGZLWKLQWKHVSHFLDO

FRPSHWHQFHRI>WKH@DGPLQLVWUDWLYHERG\´8QLWHG6WDWHVY3KLOLS0RUULV86$,QF)G

 '&&LU  LQWHUQDOTXRWDWLRQVRPLWWHG +HUH&KDVHLVQRWDVNLQJWKH&RXUWWR

VXVSHQGWKHMXGLFLDOSURFHVVSHQGLQJWKHRXWFRPHRIDQDGPLQLVWUDWLYHSURFHHGLQJUDWKHULWLV

DVNLQJWKH&RXUWWRJLYHHIIHFWWRWKHFRQWUDFWXDOWHUPVRIWKH106WKDWDXWKRUL]HWKH0RQLWRUWR

³GHWHUPLQH´ZKHWKHU&KDVHFRPSOLHGZLWKLWV106REOLJDWLRQV6HH&-([(†&  &KDVH


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document 112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
9 of
1027
of 28

0HP6FKQHLGHURIIHUVQRYDOLGUHDVRQZK\WKH&RXUWVKRXOGLJQRUHWKRVHFRQWUDFWXDO

WHUPV+LV106FODLPVWKHUHIRUHVKRXOGEHGLVPLVVHGDVDQLPSURSHUFROODWHUDODWWDFNRQWKH

ILQGLQJVRIWKH0RQLWRU

,, 6&+1(,'(5¶6106&/$,06)$,/217+(0(5,76

6FKQHLGHU¶V106FODLPVDOVRIDLOIRUVXEVWDQWLYHUHDVRQVKLVFRQVXPHUUHOLHIFODLPVUHVW

RQDQHUURQHRXVLQWHUSUHWDWLRQRIWKH106DQGKLVVHUYLFLQJVWDQGDUGVDOOHJDWLRQVHYHQLIWUXH

ZRXOGQRWJLYHULVHWRDQ³REOLJDWLRQ´WRSD\PRQH\WRWKHJRYHUQPHQWZLWKLQWKHPHDQLQJRIWKH

)&$$VVKRZQEHORZ6FKQHLGHU¶VFRQWUDU\DUJXPHQWVDUHXQDYDLOLQJ

$ 6FKQHLGHU¶V&RQVXPHU5HOLHI&ODLPV6KRXOG%H'LVPLVVHG

6FKQHLGHU¶VRSSRVLWLRQFRQILUPVWKDWKLV106FRQVXPHUUHOLHIFODLPVGHSHQGRQWZR

FRUHFRQWHQWLRQV  WKDWFRQVXPHUUHOLHIFUHGLWPD\EHHDUQHGRQO\LQFRQQHFWLRQZLWKORDQV

WKDWZHUHVHUYLFHGLQFRQIRUPLW\ZLWK106VHUYLFLQJVWDQGDUGVDQG  WKDW&KDVHZDVUHTXLUHG

WRFUHDWHDQ³DSSOLFDWLRQSURFHVV´WRGHWHUPLQHZKLFKERUURZHUVZRXOGUHFHLYHFRQVXPHUUHOLHI

6HH2SS%RWKRIWKRVHNH\FRQWHQWLRQVDUHEHOLHGE\WKHSODLQWHUPVRIWKH106

 7KH106GRHVQRWUHTXLUHFRPSOLDQFHZLWKWKHVHUYLFLQJVWDQGDUGVDV
DFRQGLWLRQIRUHDUQLQJFRQVXPHUUHOLHIFUHGLW

$V&KDVHH[SODLQHGLQLWVRSHQLQJEULHIWKHVROHFULWHULDIRUHDUQLQJFRQVXPHUUHOLHI

FUHGLWDUHWKRVHVHWIRUWKLQ([KLELW'WRWKH1066HH&KDVH0HP0RUHRYHUDOWKRXJK

([KLELW'VHWVIRUWKGHWDLOHGUHTXLUHPHQWVJRYHUQLQJDZDUGVRIFRQVXPHUUHOLHIQRWKLQJLQ

([KLELW'VWDWHVRULPSOLHVWKDWFRQVXPHUUHOLHIFUHGLWPD\EHDZDUGHGRQO\LQFRQQHFWLRQZLWK

ORDQVWKDWZHUHVHUYLFHGLQFRQIRUPLW\ZLWKWKHVHUYLFLQJVWDQGDUGVVHWIRUWKLQ([KLELW$WRWKH


&RQWUDU\WR6FKQHLGHU¶VDVVHUWLRQ&KDVHKDVQRWDVVHUWHGWKDWDYLRODWLRQRIWKH106FRXOG
QHYHUJLYHULVHWRD)DOVH&ODLPV$FWDFWLRQ&KDVHDUJXHVRQO\WKDWEHFDXVHWKH106DSSRLQWV
WKH0RQLWRUWRGHWHUPLQHLWVFRPSOLDQFHZLWKWKH106WKH0RQLWRU¶VGHWHUPLQDWLRQVDUH
FRQWUROOLQJXQOHVVDQGXQWLODSDUW\SHUVXDGHVWKLV&RXUWWRRYHUWXUQWKHP7RGDWHKRZHYHU
QRQHRIWKHSDUWLHVWRWKH&RQVHQW-XGJPHQWKDYHDVNHGWKLV&RXUWWRGRVR


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
10 11
of 27
of 28

1066HHLG$FFRUGLQJO\XQGHUWKHSODLQWH[WRI([KLELW'DQGWKHH[SUHVVLRXQLXVFDQRQRI

FRQVWUXFWLRQFRPSOLDQFHZLWKWKHVHUYLFLQJVWDQGDUGVLVQRWDUHTXLUHPHQWIRUHDUQLQJFRQVXPHU

UHOLHIFUHGLW6HHHJ8QLWHG6WDWHVY2NR\H)G VW&LU  H[SUHVVLRXQLXV

FDQRQ³LQVWUXFWVWKDWZKHQFHUWDLQPDWWHUVDUHPHQWLRQHGLQDFRQWUDFWRWKHUVLPLODUPDWWHUVQRW

PHQWLRQHGZHUHLQWHQGHGWREHH[FOXGHG´ LQWHUQDOTXRWDWLRQPDUNVRPLWWHG ,QGHHGDQ\RWKHU

FRQFOXVLRQZRXOGKDYHWKHEL]DUUHHIIHFWRIGHQ\LQJFRQVXPHUUHOLHIWRWKHYHU\FRQVXPHUVZKR

DUHPRVWGHVHUYLQJRIVXFKUHOLHI²WKRVHZKRVHORDQVZHUHSRRUO\VHUYLFHG&KDVH0HP

6FKQHLGHUUHVSRQGVZLWKDWRUWXUHGWKUHHVWHSDUJXPHQWWKDW&KDVHPXVWFRPSO\ZLWKWKH

VHUYLFLQJUHTXLUHPHQWVRILWV63$DJUHHPHQWZLWKWKH7UHDVXU\'HSDUWPHQWLQRUGHUWRHDUQ

FRQVXPHUUHOLHIFUHGLWXQGHUWKH1066HH2SS6SHFLILFDOO\KHDUJXHVWKDW  WKH

106¶VFRQVXPHUUHOLHISURYLVLRQVDUH³VXEMHFWWR´WKH³WHUPVDQGSURYLVLRQV´RIWKH63$

 &KDVHDJUHHGLQWKH63$WREHERXQGE\WKHUHTXLUHPHQWVRI7UHDVXU\¶V0DNLQJ+RPH

$IIRUGDEOH ³0+$´ SURJUDPVDQGWKHUHIRUH  FRQVXPHUUHOLHIFUHGLWXQGHU([KLELW'LV

DYDLODEOHRQO\IRUORDQVWKDWZHUHVHUYLFHGLQDFFRUGDQFHZLWK0+$UHTXLUHPHQWV6HHLG

TXRWLQJ&-(['ˆ 

7KLVDUJXPHQWUHVWVRQDIXQGDPHQWDOPLVXQGHUVWDQGLQJRIWKH1066FKQHLGHURQFH

DJDLQUHOLHVRQWKH³$SSOLFDEOH5HTXLUHPHQWV´SURYLVLRQRI([KLELW'WRWKH1067KDW

SURYLVLRQKRZHYHUGRHVQRWLQFRUSRUDWHWKHWHUPVRIWKH63$LQWRWKH106¶VFRQVXPHUUHOLHI

UHTXLUHPHQWV,QVWHDGLWPHUHO\SURYLGHVWKDWWKHFRQVXPHUUHOLHIUHTXLUHPHQWVDUHVXERUGLQDWH

WRWKH63$DQGVKRXOGQRWEHUHDGWRUHTXLUH&KDVHWRHQJDJHLQFRQGXFWWKDWZRXOGEUHDFKWKH

WHUPVRIWKH63$RUDQ\RWKHUDSSOLFDEOHVHUYLFLQJDJUHHPHQW6HHVXSUD$FFRUGLQJO\

6FKQHLGHULVZURQJWRDVVHUWWKDWWKH³$SSOLFDEOH5HTXLUHPHQWV´SURYLVLRQRI([KLELW'UHTXLUHV


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
11 12
of 27
of 28

ORDQVWREHVHUYLFHGLQDFFRUGDQFHZLWK0+$JXLGHOLQHVLQRUGHUWREHHOLJLEOHIRUFRQVXPHU

UHOLHIFUHGLW

6FKQHLGHUDOVRQRWHVWKDW([KLELW$WRWKH106OLNH([KLELW'FRQWDLQVDQ³$SSOLFDEOH

5HTXLUHPHQWV´SURYLVLRQVWDWLQJWKDW&KDVH¶VREOLJDWLRQVXQGHU([KLELW$DUH³VXEMHFWWR´LWV

REOLJDWLRQVXQGHUWKH63$DQGRWKHUDSSOLFDEOHVHUYLFLQJDJUHHPHQWV6HH2SSDW2Q

WKDWVOHQGHUEDVLV6FKQHLGHUGUDZVWKHFRQFOXVLRQWKDWWKHFRQVXPHUUHOLHISURYLVLRQVRI

([KLELW'DUH³GHSHQGHQW´RQWKHVHUYLFLQJUHTXLUHPHQWVVHWIRUWKLQ([KLELW$VHHLGEXWWKDW

FRQFOXVLRQVLPSO\GRHVQRWIROORZ7KHPHUHIDFWWKDW([KLELW$DQG([KLELW'ERWKFRQWDLQ

VLPLODU³$SSOLFDEOH5HTXLUHPHQWV´SURYLVLRQVGRHVQRWKLQJWRVKRZWKDW([KLELW'LQFRUSRUDWHV

WKHVHSDUDWHVHWRIVHUYLFLQJVWDQGDUGVVHWIRUWKHOVHZKHUHLQ([KLELW$1RUGRHVLWRYHUFRPH

WKHFOHDUODQJXDJHLQ([KLELW'LQGLFDWLQJWKDW([KLELW'VHWVIRUWKWKHH[FOXVLYHFULWHULDIRU

HDUQLQJFRQVXPHUUHOLHIFUHGLW6HH&KDVH0HP

7KHLQWURGXFWRU\ODQJXDJHLQ([KLELW'OLNHZLVHIDLOVWRVXSSRUW6FKQHLGHU¶VDUJXPHQW

WKDW([KLELW'¶VFRQVXPHUUHOLHISURYLVLRQVDUH³GHSHQGHQW´RQFRPSOLDQFHZLWKWKHVHUYLFLQJ

VWDQGDUGVVHWIRUWKLQ([KLELW$6HH2SS7KHODQJXDJHLQTXHVWLRQVWDWHV

)RUWKHDYRLGDQFHRIGRXEWVXEMHFWWRWKH&RQVXPHU5HOLHI5HTXLUHPHQWV
GHVFULEHGEHORZ6HUYLFHUVKDOOUHFHLYHFUHGLWIRUFRQVXPHUUHOLHIDFWLYLWLHV
ZLWK UHVSHFW WR ORDQV LQVXUHG RU JXDUDQWHHG E\ WKH 86 'HSDUWPHQW RI
+RXVLQJ DQG 8UEDQ 'HYHORSPHQW 86 'HSDUWPHQW RI 9HWHUDQV $IIDLUV
RU WKH 86 'HSDUWPHQW RI $JULFXOWXUH LQ DFFRUGDQFH ZLWK WKH WHUPV DQG
FRQGLWLRQVKHUHLQSURYLGHGWKDWQRWKLQJKHUHLQVKDOOEHGHHPHGWRLQDQ\
ZD\UHOLHYH6HUYLFHURIWKHREOLJDWLRQWRFRPSO\ZLWKWKHUHTXLUHPHQWVRI
WKH 86 'HSDUWPHQW RI +RXVLQJ DQG 8UEDQ 'HYHORSPHQW 86
'HSDUWPHQW RI 9HWHUDQV $IIDLUV DQG WKH 86 'HSDUWPHQW RI $JULFXOWXUH
ZLWKUHVSHFWWRWKHVHUYLFLQJRIVXFKORDQV

&-(['DW'7KLVODQJXDJHVLPSO\FODULILHV³>I@RUWKHDYRLGDQFHRIGRXEW´WKDW  VHUYLFHUV

PD\UHFHLYHFRQVXPHUUHOLHIFUHGLWLQFRQQHFWLRQZLWKORDQVLQVXUHGRUJXDUDQWHHGE\

JRYHUQPHQWDJHQFLHVDQG  QRWKLQJLQWKH106VKDOOEHGHHPHGWRUHOLHYHVHUYLFHUVRIDQ\


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
12 13
of 27
of 28

LQGHSHQGHQWREOLJDWLRQVWKDWWKH\PD\KDYHWRWKRVHJRYHUQPHQWDJHQFLHV,G1RWKLQJLQWKLV

ODQJXDJHHYHQUHPRWHO\VXJJHVWVWKDWWKRVHLQGHSHQGHQWREOLJDWLRQV²ZKLFKDSSO\RQO\WRWKH

VPDOOPLQRULW\RI&KDVH¶VORDQVWKDWDUHLQVXUHGRUJXDUDQWHHGE\WKHJRYHUQPHQW²DUHD

FRQGLWLRQIRUUHFHLYLQJFRQVXPHUUHOLHIFUHGLWXQGHUWKH106

 7KH106GRHVQRWUHTXLUHDQ³DSSOLFDWLRQSURFHVV´IRUFRQVXPHU
UHOLHI

6FKQHLGHU¶VFRQWHQWLRQWKDW&KDVHZDVUHTXLUHGWRXVHDQDSSOLFDWLRQSURFHVVWRVHOHFW

ERUURZHUVIRUFRQVXPHUUHOLHIOLNHZLVHIDLOVDVDPDWWHURIODZ

6FKQHLGHU¶VRSSRVLWLRQFRQFHGHVWKDW&KDVHKDGWKH³GLVFUHWLRQWRVHOHFWWKHERUURZHUV

ZKR>ZRXOG@UHFHLYHFRQVXPHUUHOLHI´2SS+HQHYHUWKHOHVVFRQWLQXHVWRDUJXHWKDW&KDVH

ZDVUHTXLUHGWRXVHDQ³DSSOLFDWLRQSURFHVV´WRGHWHUPLQHZKLFKORDQVZRXOGEHVHOHFWHGIRUWKH

UHFHLSWRIFRQVXPHUUHOLHI6FKQHLGHUGRHVQRWDUJXH²QRUFRXOGKH²WKDWWKHWH[WRI([KLELW'

LWVHOILPSRVHVDQ\VXFKUHTXLUHPHQW,QVWHDGKHDUJXHVWKDW([KLELW'UHTXLUHVXVHRIDQ

DSSOLFDWLRQSURFHVVEHFDXVHLWLV³JRYHUQHGE\´WKH63$ZKLFKLQWXUQLQFRUSRUDWHVUXOHV

UHTXLULQJWKHXVHRIDVSHFLILFDSSOLFDWLRQSURFHVVLQFRQQHFWLRQZLWK+$03ORDQPRGLILFDWLRQV

6HH2SS FLWLQJWKH³$SSOLFDEOH5HTXLUHPHQWV´SURYLVLRQRI([KLELW' $V&KDVHH[SODLQHG

DERYHKRZHYHUWKLVDUJXPHQWIDLOVEHFDXVH([KLELW'GRHVQRW³LQFRUSRUDWH´WKHWHUPVRIWKH

63$PXFKOHVVWKHDSSOLFDWLRQSURFHVVXVHGIRU+$03PRGLILFDWLRQV6HHVXSUD

6FKQHLGHUDOVRDVVHUWVWKDW&KDVHRQO\KDGGLVFUHWLRQWRVHOHFWIURPDPRQJORDQVWKDW

ZHUHHOLJLEOHIRUFRQVXPHUUHOLHIXQGHU([KLELW'6HH2SS%XW&KDVHKDVQHYHUGLVSXWHG

WKDWREYLRXVSRLQW7KHPHUHIDFWWKDW&KDVHFRXOGRQO\UHFHLYHFUHGLWIRUHOLJLEOHORDQV

KRZHYHUGRHVQRWKLQJWRHVWDEOLVKWKDWDQDSSOLFDWLRQSURFHVV RUDQ\RWKHUSDUWLFXODUIRUPRI

RXWUHDFKWRERUURZHUV ZDVUHTXLUHGXQGHUWKHWHUPVRI([KLELW'


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
13 14
of 27
of 28

 6FKQHLGHU¶VFRQFOXVRU\VSHFXODWLRQWKDW&KDVHPD\KDYHYLRODWHGWKH
UHTXLUHPHQWVRI([KLELW'GRHVQRWVDOYDJHKLVFODLPV

)LQDOO\6FKQHLGHUDVVHUWVLQSDVVLQJWKDW&KDVHFODLPHGFUHGLWIRUFRQVXPHUUHOLHILQ

FRQQHFWLRQZLWKORDQVWKDWGLGQRWPHHWWKHHOLJLELOLW\FULWHULDVSHFLILHGLQ([KLELW'WRWKH106

6HH2SS,QSDUWLFXODUFLWLQJIRXUVWUD\SDUDJUDSKVRIWKHFRPSODLQWKHVXJJHVWVWKDW&KDVH

PD\KDYHIRUJLYHQVHFRQGOLHQORDQVWKDWZHUHLQHOLJLEOHIRUFRQVXPHUUHOLHIFUHGLWEHFDXVHWKH

SURSHUW\ZDVXQRFFXSLHGWKHOLHQVKDGEHHQH[WLQJXLVKHGE\IRUHFORVXUHRQWKHILUVWOLHQRUWKH

ILUVWOLHQVZHUHFXUUHQW6HHLG FLWLQJ6$&ˆˆ 7KHVHXQGHYHORSHGDOOHJDWLRQV

IDLOWRVDWLVI\HYHQWKHEDVLFSOHDGLQJUHTXLUHPHQWVRI5XOH D OHWDORQHWKHPRUHGHPDQGLQJ

UHTXLUHPHQWVWKDWFRQFHGHGO\DSSO\KHUHXQGHU5XOH E 6HH2SS DFNQRZOHGJLQJWKDW

6FKQHLGHU¶V)&$FODLPVDUHJRYHUQHGE\5XOH E 

1RZKHUHLQWKHFRPSODLQWGRHV6FKQHLGHULGHQWLI\DVLQJOHVSHFLILFH[DPSOHRIDORDQIRU

ZKLFK&KDVHFODLPHGFRQVXPHUUHOLHIFUHGLWWRZKLFKLWZDVQRWHQWLWOHG1RUGRHVKHDOOHJHWKDW

DQ\LPSURSHUFUHGLWHYHQLIVRXJKWZRXOGKDYHH[FHHGHGWKHPLOOLRQPDUJLQE\ZKLFK

&KDVHVXUSDVVHGLWVFRQVXPHUUHOLHIREOLJDWLRQVXQGHUWKH1066HH&KDVH0HP QRWLQJ

0RQLWRU¶VILQGLQJWKDW&KDVHSURYLGHGDSSUR[LPDWHO\PLOOLRQPRUHLQFRQVXPHUUHOLHIWKDQ

ZDVUHTXLUHG 6FKQHLGHU¶VDOOHJDWLRQVWKHUHIRUHZKROO\IDLOWRVDWLVI\WKH5XOH E UHTXLUHPHQW

WKDWKH³VWDWHZLWKSDUWLFXODULW\´WKHUHDVRQVZK\&KDVH¶VFRQVXPHUUHOLHIVXEPLVVLRQVDOOHJHGO\

ZHUHIDOVH6HH)HG5&LY3 E 8QLWHG6WDWHVH[UHO:LOOLDPVY0DUWLQ%DNHU$LUFUDIW&R

/WG)G '&&LU 

6FKQHLGHU¶VDUJXPHQWDOVRLJQRUHVWKHPXOWLVWHSSURFHVVWKDWJRYHUQHGWKHDZDUGRI

FRQVXPHUUHOLHIFUHGLWXQGHUWKH1068QGHUWKDWSURFHVVHYHQLI&KDVHKDGLQLWLDOO\LGHQWLILHG

VRPHLQHOLJLEOHORDQVIRUFRQVXPHUUHOLHIXQGHUWKH106LWZRXOGQRWKDYHDFWXDOO\VRXJKWRU

UHFHLYHGFUHGLWIRUWKRVHORDQVXQOHVVDQGXQWLOLWVDWLVILHGWKHDJUHHGXSRQYHWWLQJDQGWHVWLQJ


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
14 15
of 27
of 28

SURWRFROVDSSOLHGE\ERWK&KDVH¶V,QWHUQDO5HYLHZ*URXSDQGWKH0RQLWRU¶VLQGHSHQGHQW

SURIHVVLRQDOILUPV6HH&KDVH0HP$VDUHVXOW6FKQHLGHU¶VDOOHJDWLRQWKDW&KDVHLQLWLDOO\

VHQWDKDQGIXORIGHEWIRUJLYHQHVVOHWWHUVWRLQHOLJLEOHERUURZHUVLVQRVXEVWLWXWHIRUZHOOSOHDGHG

DOOHJDWLRQVWKDW&KDVHDFWXDOO\VRXJKWRUUHFHLYHGLPSURSHUFUHGLWIRUVXFKORDQVDWWKH

FRQFOXVLRQRIDOOYHWWLQJDQGWHVWLQJSURWRFROV1RVXFKDOOHJDWLRQVDSSHDULQWKHFRPSODLQW

% 6FKQHLGHU¶V6HUYLFLQJ6WDQGDUGV&ODLPV6KRXOG%H'LVPLVVHG

6FKQHLGHU¶VVHUYLFLQJVWDQGDUGVFODLPVIDLODVDPDWWHURIODZEHFDXVHKHGRHVQRWDOOHJH

DQHVVHQWLDOHOHPHQWRIWKHVHFODLPVWKHH[LVWHQFHRIDQ³REOLJDWLRQ´WRSD\PRQH\WRWKH

JRYHUQPHQW

 7KH106¶V³FXUH´SURYLVLRQVSUHFOXGH6FKQHLGHU¶VVHUYLFLQJ
VWDQGDUGVFODLPV

6FKQHLGHUKDVQRWDGHTXDWHO\DOOHJHGWKDW&KDVHKDGDQREOLJDWLRQWRSD\PRQH\WRWKH

JRYHUQPHQWEHFDXVHKHKDVQRWDOOHJHGWKDWWKH0RQLWRUHYHUIRXQGD3RWHQWLDO9LRODWLRQRID

VHUYLFLQJPHWULFWKDWZHQWXQFXUHGE\&KDVH6HH&KDVH0HP:KLOH6FKQHLGHUFDOOVWKLV

DUJXPHQW³DEVXUG´KLVRSSRVLWLRQPDNHVQRHIIRUWWRUHVSRQGWRLWRQWKHPHULWV2SS

8QGHUWKLV&RXUW¶VUXOLQJLQ8QLWHG6WDWHVY%DQNRI$PHULFD)6XSSG

''& DVHUYLFHUPD\EHOLDEOHIRUDPRQHWDU\SHQDOW\XQGHUWKH106RQO\DIWHU  WKH

0RQLWRUGHWHUPLQHVWKDWWKHVHUYLFHUKDVFRPPLWWHGD3RWHQWLDO9LRODWLRQRIDPHWULFDQG  WKH

VHUYLFHUIDLOVWRFXUHWKH3RWHQWLDO9LRODWLRQ6HHLGDW6FKQHLGHUGRHVQRWGHQ\WKDWWKH

0RQLWRUQHYHUIRXQGD3RWHQWLDO9LRODWLRQWKDW&KDVHIDLOHGWRFXUH&KDVHWKHUHIRUHKDGQR

³REOLJDWLRQ´WRSD\PRQH\WRWKHJRYHUQPHQW²DQHFHVVDU\HOHPHQWRI6FKQHLGHU¶VVHUYLFLQJ

VWDQGDUGVFODLPV&KDVH0HP6LY/DRJDL5HVHDUFK)RXQG)6XSSG

''&  UHYHUVHIDOVHFODLPVFDXVHRIDFWLRQIDLOVZKHUHUHODWRUIDLOVWRDOOHJHH[LVWHQFHRI


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
15 16
of 27
of 28

³REOLJDWLRQ´ +R\WHY$P1DW¶O5HG&URVV)6XSSG ''&  VDPH 

DII¶G)G '&&LU 6FKQHLGHU¶VVHUYLFLQJFODLPVIDLOIRUWKLVWKUHVKROGUHDVRQ

 7KHSURVSHFWRIDFLYLOSHQDOWLHVDZDUGLVWRRFRQWLQJHQWDQGXQFHUWDLQ
WRFRQVWLWXWHDQ³REOLJDWLRQ´XQGHUWKH)&$

6FKQHLGHU¶VVHUYLFLQJFODLPVDOVRVKRXOGEHGLVPLVVHGEHFDXVH²HYHQLIWKH0RQLWRU

GHWHUPLQHGWKDW&KDVHFRPPLWWHGD3RWHQWLDO9LRODWLRQDQG&KDVHIDLOHGWRFXUHWKDWYLRODWLRQ²

DQ\VHUYLFLQJUHODWHGSHQDOWLHVWKDWWKHRUHWLFDOO\PLJKWEHDVVHVVHGDJDLQVW&KDVHDUHWRR

XQFHUWDLQDQGFRQWLQJHQWWRFRQVWLWXWHDQ³REOLJDWLRQ´WRSD\PRQH\WRWKHJRYHUQPHQWZLWKLQWKH

PHDQLQJRIWKH)&$$V&KDVHH[SODLQHGLQLWVRSHQLQJEULHIQXPHURXVVWHSVPXVWWDNHSODFH

EHIRUHDQ\SHQDOW\PD\EHDZDUGHGLQFRQQHFWLRQZLWKDQDOOHJHGYLRODWLRQRIDVHUYLFLQJ

VWDQGDUG6HH&KDVH0HP%HFDXVHLWLVXQGLVSXWHGWKDWWKRVHVWHSVKDYHQRWRFFXUUHGKHUH

DQ\SRWHQWLDOOLDELOLW\IRUFLYLOSHQDOWLHVLVWRRUHPRWHWRJLYHULVHWRDQ³REOLJDWLRQ´WKDWFRXOG

VXVWDLQDQ)&$FDXVHRIDFWLRQ6HHLGDW+R\WH)6XSSGDW

6FKQHLGHUGRHVQRWGHQ\WKDWXQGHU+R\WHDQGVLPLODUGHFLVLRQVKLVVHUYLFLQJVWDQGDUGV

FODLPVIDLODVDPDWWHURIODZ6HH2SS,QVWHDGUHO\LQJRQD6HQDWHFRPPLWWHHUHSRUWKH

DUJXHVWKDWWKHDPHQGPHQWVWRWKH)&$DEURJDWHGWKLVOLQHRIFDVHVDQGEURXJKWFRQWLQJHQW

OLDELOLWLHVZLWKLQWKHVFRSHRIWKHVWDWXWH:KHQSURSHUO\UHDGKRZHYHUWKHOHJLVODWLYHKLVWRU\

VTXDUHO\UHMHFWV6FKQHLGHU¶VDUJXPHQW

7KH6HQDWHUHSRUWLQYRNHGE\6FKQHLGHUZDVLVVXHGRQ0DUFKDQGDGGUHVVHGDQ

XQHQDFWHGYHUVLRQRIWKHOHJLVODWLRQWKDWH[SUHVVO\H[WHQGHG)&$OLDELOLW\WR³FRQWLQJHQW´

REOLJDWLRQV6HH65HS1RDW   QRWLQJWKDWGHILQLWLRQRI³REOLJDWLRQ´

GLVFXVVHGLQUHSRUWLQFOXGHG³DFRQWLQJHQWGXW\´ 2QHPRQWKODWHUWKHUHIHUHQFHWR³FRQWLQJHQW´

GXWLHVZDVUHPRYHGIURPWKHGUDIWOHJLVODWLRQE\DPHQGPHQW6HH&RQJ5HF66

GDLO\HG$SU  VWDWHPHQWVRI6HQ.\O 7KHDPHQGPHQWSURYLGHGWKHILQDOGHILQLWLRQ


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
16 17
of 27
of 28

RIDQ³REOLJDWLRQ´WKDWLVQRZFRGLILHGDW6HFWLRQ E  &RPSDUH86&† E  

ZLWK&RQJ5HF6 VWDWHPHQWRIWH[WRIDPHQGPHQW $VWKHDPHQGPHQW¶VVSRQVRU

6HQDWRU.\OH[SODLQHGWKHSXUSRVHRIWKHDPHQGPHQWZDV³WRH[FOXGHFRQWLQJHQWREOLJDWLRQV

WKXVSUHFOXGLQJWKHSRVVLELOLW\WKDWFRQGXFWWKDWPDNHVDGHIHQGDQWOLDEOHIRUDSHQDOW\RUDILQH

FRXOGEHFRPHDFWLRQDEOHXQGHUWKLVODZEHIRUHWKDWILQHDFWXDOO\LVHVWDEOLVKHGRUDVVHVVHG´,G

DW6 HPSKDVLVDGGHG 

7KHWZRGLVWULFWFRXUWFDVHVFLWHGE\6FKQHLGHU8QLWHG6WDWHVH[UHO/DQGLVY7DLOZLQG

6SRUWV&RUS)6XSSG ''& DQG8QLWHG6WDWHVH[UHO%RLVHY&HSKDORQ,QF

1R:/ ('3D-XO\ OLNHZLVHIDLOWRVXSSRUWKLVSRVLWLRQ,Q

HDFKRIWKHVHFDVHVWKHFRXUWVFRQFOXGHGWKDWWKHGHIHQGDQWV¶EUHDFKHVRIFRQWUDFWVZLWKWKH

JRYHUQPHQW²ZLWKRXWPRUH²JDYHULVHWRDQREOLJDWLRQWRSD\WKHJRYHUQPHQW6HHHJ

/DQGLV)6XSSGDW EUHDFKHQWLWOHGJRYHUQPHQWWRUHSD\PHQWRIVSRQVRUVKLSIHHV 

,Q%RLVHPRUHRYHUWKHFRXUW¶VKROGLQJZDVSUHGLFDWHGRQWKHH[LVWHQFHRIDVSHFLILFFRQWUDFWXDO

SURYLVLRQH[SUHVVO\UHTXLULQJSD\PHQWRIVWLSXODWHGSHQDOWLHVLQWKHHYHQWRIDEUHDFK6HH

:/DW 

(YHQXQGHUVXFKFLUFXPVWDQFHVFRXUWVDUHVSOLWDVWRZKHWKHUDQ³REOLJDWLRQ´WRSD\

PRQH\H[LVWVIRUSXUSRVHVRIWKH)&$,Q8QLWHG6WDWHVH[UHO%RRNHUY3IL]HU,QF)6XSS

G '0DVV ZKLFKUHSUHVHQWVWKHEHWWHUUHDVRQHGDSSURDFKWKHFRXUWKHOGWKDWQR

³REOLJDWLRQ´ZRXOGDULVHXQOHVVDQGXQWLOWKHJRYHUQPHQWDFWXDOO\HOHFWHGWRVHHN³VWLSXODWHG

SHQDOWLHV´VLPLODUWRWKRVHDWLVVXHLQ%RLVH6HH)6XSSGDW/LNHZLVHLQ+R\WH

-XGJH)ULHGPDQIRXQGWKDWWKHGHIHQGDQWZRXOGKDYHQRREOLJDWLRQWRSD\PRQH\WRWKH


/DQGLVDOVRLVGLVWLQJXLVKDEOHEHFDXVH²XQOLNHWKLVFDVH²LWLQYROYHGWKH³UHWHQWLRQRI>DQ@
RYHUSD\PHQW´ZKLFKLVRQHRIWKHFLUFXPVWDQFHVH[SUHVVO\OLVWHGLQ† E  DVJLYLQJULVH
WRDQ³REOLJDWLRQ´6HH86&† E  /DQGLV)6XSSGDW


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
17 18
of 27
of 28

JRYHUQPHQWXQOHVVDQGXQWLOWKH)'$H[HUFLVHGLWVGLVFUHWLRQWRVHHN³PRQHWDU\VDQFWLRQV´XQGHU

LWVFRQVHQWGHFUHHZLWKWKHGHIHQGDQW6HH)6XSSGDW$VWKHVHFRXUWVKDYH

H[SODLQHGZKHUHPRQHWDU\SHQDOWLHVDUHQRW³DXWRPDWLFDOO\LPSRVHG´QRREOLJDWLRQ³FRPH>V@

LQWREHLQJ´XQWLOWKHJRYHUQPHQWGHFLGHVWRVHHNSD\PHQW6HHLG%RRNHU)6XSSGDW

³7KHREOLJDWLRQWRSD\ZRXOGRQO\DULVHXSRQ>WKHJRYHUQPHQW¶V@GHFLVLRQWRDVVHVVWKH

VWLSXODWHGSHQDOWLHV´ 

,QDQ\HYHQWDQ\SRWHQWLDOREOLJDWLRQLQWKLVFDVHLVIDUPRUHFRQWLQJHQWWKDQLQ/DQGLV

DQG%RLVH+HUHWKHJRYHUQPHQWFDQQRWHYHQEHJLQWKHSURFHVVRIVHHNLQJFLYLOSHQDOWLHVXQWLO

&KDVH  LVSURYLGHGZLWKQRWLFHRID3RWHQWLDO9LRODWLRQ  UHFHLYHVDQRSSRUWXQLW\WRFXUH

DQG  IDLOVWRFXUHWKH3RWHQWLDO9LRODWLRQ&KDVH0HP(YHQDWWKDWSRLQWQRFLYLO

SHQDOWLHVZRXOGEHRZHGXQOHVVWKHJRYHUQPHQWHOHFWHGWRVHHNVXFKSHQDOWLHVDQGWKH&RXUW

H[HUFLVHGLWVGLVFUHWLRQWRDZDUGWKHP,GDW8QGHUWKHVHFLUFXPVWDQFHVDQ\SRWHQWLDO

OLDELOLW\WRWKHJRYHUQPHQWLVIDUWRRUHPRWHWRJLYHULVHWRDQ³REOLJDWLRQ´XQGHUWKH)&$6HH

&KDVH0HP

& 6FKQHLGHU¶V5HPDLQLQJ106$OOHJDWLRQV)DLO7R6WDWH$Q)&$&ODLP

6FKQHLGHU¶VRQO\UHPDLQLQJ106DUJXPHQWVDUHWKDWKHKDVVWDWHGDQ)&$FODLPE\

DOOHJLQJWKDW&KDVH  SXUSRUWHGWRIRUJLYHFHUWDLQORDQVWKDWSUHYLRXVO\KDGEHHQVROGWR

FRPSDQLHVFRQWUROOHGE\6FKQHLGHUDQG  YLRODWHGWKH106¶VDQWLEOLJKWUHTXLUHPHQWVE\

UHOHDVLQJOLHQVZLWKRXWSURYLGLQJVXIILFLHQWQRWLFHWRERUURZHUV6HH2SS1HLWKHURI

WKHVHDOOHJDWLRQVVWDWHVDFODLPIRUUHOLHI

:LWKUHVSHFWWRWKHORDQVSXUFKDVHGE\6FKQHLGHU¶VFRPSDQLHV6FKQHLGHUQRZKHUH

DOOHJHVWKDW&KDVHDFWXDOO\VRXJKWFRQVXPHUUHOLHIFUHGLWLQFRQQHFWLRQZLWKWKRVHORDQV

6FKQHLGHUWKHUHIRUHKDVQRWDOOHJHGDQ\EUHDFKRIWKH106OHWDORQHDQREOLJDWLRQWRSD\FLYLO

SHQDOWLHVWRWKHJRYHUQPHQW6HH6L)6XSSGDW UHYHUVHIDOVHFODLPVFDXVHRIDFWLRQ


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
18 19
of 27
of 28

IDLOVZKHUHUHODWRUIDLOVWRDOOHJHH[LVWHQFHRI³REOLJDWLRQ´ +R\WH)6XSSGDW

VDPH VHHDOVRVXSUD

:LWKUHVSHFWWRWKHDQWLEOLJKWDOOHJDWLRQV6FKQHLGHUKDVQRWDVVHUWHG²QRUFRXOGKH²

WKDWWKH106DXWKRUL]HVPRQHWDU\SHQDOWLHVIRUWKHVHYLRODWLRQV$WPRVWWKHDOOHJHGFRQGXFW

ZRXOGFRQVWLWXWHDYLRODWLRQRIVHUYLFLQJVWDQGDUGVWKDWDUHQRWFRYHUHGE\PHWULFV$VWKLV&RXUW

KDVUHFRJQL]HGFLYLOSHQDOWLHVDUHQRWDYDLODEOHXQGHUWKH106IRUVHUYLFLQJYLRODWLRQVWKDWDUH

QRWWHVWHGE\PHWULFV6HH%DQNRI$P)6XSSGDW%HFDXVHQRREOLJDWLRQWRWKH

JRYHUQPHQWFRXOGDULVHDEVHQWWKHSRVVLELOLW\RIDFLYLOSHQDOW\6FKQHLGHU¶VDQWLEOLJKW

DOOHJDWLRQVGRQRWJLYHULVHWRDFODLPXQGHUWKH)&$6HH6L)6XSSGDW+R\WH

)6XSSGDW VDPH 

)LQDOO\DOWKRXJK6FKQHLGHUFRQFHGHVWKDW&KDVHGLVFORVHGWKHH[LVWHQFHRIWKH5HFRYHU\

2QHV\VWHP ³5&9´ WRWKH1060RQLWRUVHH6$&ˆKHDUJXHVWKDW&KDVHXQGHUUHSRUWHG

WKHQXPEHURIORDQVLQ5&9VHH2SS,QVXSSRUWRIWKLVDUJXPHQW6FKQHLGHUFLWHV

SDUDJUDSKVDQGRIWKHFRPSODLQWZKLFKLQWXUQUHO\RQDGRFXPHQWDYDLODEOHRQWKH

0RQLWRU¶VZHEVLWH7KLVGRFXPHQWVKRZVVWDWLVWLFVUHODWHGWRFHUWDLQDVSHFWVRIWKHSHUIRUPDQFH

RI&KDVHDQGRWKHU106VHUYLFHUVXQGHUWKH106VHUYLFLQJVWDQGDUGV&RQWUDU\WR6FKQHLGHU¶V

DUJXPHQWWKHGRFXPHQWVD\VQRWKLQJDERXW5&9DQGLQQRZD\VXJJHVWVWKDWLWFRQVWLWXWHVD

UHSUHVHQWDWLRQUHJDUGLQJWKHWRWDOQXPEHURIORDQVRQ5&96FKQHLGHU¶VDOOHJDWLRQRI

XQGHUUHSRUWLQJWRWKH0RQLWRULVWKHUHIRUHJURXQGOHVV



6HH2IILFHRI0RUWJDJH6HWWOHPHQW2YHUVLJKW6HUYLFLQJ3HUIRUPDQFH'DWDDYDLODEOHDW
KWWSVZZZMDVPLWKPRQLWRULQJFRPRPVRZSFRQWHQWXSORDGVVLWHV)LQDO5HSRUW
7HPSODWH6HUYLFLQJ3HUIRUPDQFH[OV[ FLWHGDW6$&ˆ 2SSQ 

6HHLG


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
19 20
of 27
of 28

' 6FKQHLGHU¶V6WDWH/DZ&ODLPV6KRXOG%H'LVPLVVHG

,WLVXQGLVSXWHGWKDW6FKQHLGHU¶VVWDWHODZFODLPVDOORIZKLFKUHODWHWRWKH106ULVHRU

IDOOZLWKKLVIHGHUDOFODLPV%HFDXVHWKHIHGHUDOFODLPVVKRXOGEHGLVPLVVHGWKHVWDWHODZFODLPV

VKRXOGEHGLVPLVVHGDVZHOO

,,, 6&+1(,'(5¶6+$03&/$,066+28/'%(',60,66('

6FKQHLGHU¶VVHSDUDWHFODLPWKDW&KDVHYLRODWHGWKH)&$LQFRQQHFWLRQZLWKWKH+$03

SURJUDPIDLOIRUWZRIXQGDPHQWDOUHDVRQVKHKDVQRWDGHTXDWHO\DOOHJHGWKDW&KDVH¶V

FHUWLILFDWLRQRIPDWHULDOFRPSOLDQFHZLWK+$03ZDVIDOVHRUWKDW&KDVHNQRZLQJO\VXEPLWWHGD

IDOVHVWDWHPHQW

$ 6FKQHLGHU+DV1RW$OOHJHG7KDW&KDVH0DGH$)DOVH&ODLP

6FKQHLGHUKDVQRWDGHTXDWHO\DOOHJHGDQHVVHQWLDOHOHPHQWRIKLV+$03FODLPVWKDW

&KDVH¶VDQQXDO+$03FHUWLILFDWLRQVZHUHIDOVH+LVRSSRVLWLRQFRQFHGHVWKDW&KDVHFHUWLILHG

RQO\PDWHULDOFRPSOLDQFH²QRWSHUIHFWFRPSOLDQFH²ZLWK+$03SURJUDPUHTXLUHPHQWV6HH

2SS)XUWKHUPRUHWKHRSSRVLWLRQIDLOVWRRYHUFRPH&KDVH¶VVKRZLQJWKDWWKHFRPSODLQWGRHV

QRWDOOHJHDQ\PDWHULDOQRQFRPSOLDQFHZLWK+$03¶VUHTXLUHPHQWV6HH&KDVH0HP

6LQFHPDWHULDOQRQFRPSOLDQFHLVDQHFHVVDU\HOHPHQWRI6FKQHLGHU¶VFODLPVWKDW&KDVHPDGH

IDOVHVWDWHPHQWVLQLWVDQQXDOFHUWLILFDWLRQVWKRVHFODLPVVKRXOGEHGLVPLVVHG,G

$OWKRXJK6FKQHLGHUDUJXHVWKDWKHKDVDGHTXDWHO\DOOHJHGPDWHULDOLW\XQGHUWKH)&$

2SSWKDWLVDUHGKHUULQJ&KDVH¶VDUJXPHQWLVQRWWKDW6FKQHLGHUKDVIDLOHGWRDOOHJHD

³PDWHULDO´)&$YLRODWLRQZLWKLQWKHPHDQLQJRI86&† E  5DWKHU&KDVHDUJXHV

WKDW6FKQHLGHUKDVIDLOHGWRSOHDGD³IDOVHRUIUDXGXOHQW´VWDWHPHQWE\&KDVHVHH86&



7KH)&$GHILQHVWKHWHUP³PDWHULDO´DV³KDYLQJDQDWXUDOWHQGHQF\WRLQIOXHQFHRUEHFDSDEOH
RILQIOXHQFLQJWKHSD\PHQWRUUHFHLSWRIPRQH\RUSURSHUW\´86&† E  7KDW
GHILQLWLRQKRZHYHUDSSOLHVRQO\WRWKHWHUP³PDWHULDO´DVLWLVXVHGLQWKH)&$


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
20 21
of 27
of 28

† D  EHFDXVHKHKDVQRWDGHTXDWHO\DOOHJHGWKDW&KDVH¶V+$03YLRODWLRQVZHUH

³PDWHULDO´DVWKDWWHUPZDVXVHGLQ&KDVH¶VDQQXDO+$03FHUWLILFDWLRQV6HH&KDVH0HP

%HFDXVHWKH)&$¶VGHILQLWLRQRIPDWHULDOLW\LVLUUHOHYDQWWRWKHTXHVWLRQZKHWKHU&KDVH¶V

DQQXDOFHUWLILFDWLRQVRIPDWHULDOFRPSOLDQFHZHUHIDOVHRUIUDXGXOHQW6FKQHLGHU¶VGLVFXVVLRQRI

WKDWGHILQLWLRQLVLQDSSRVLWH

8QGHUWKH0+$+DQGERRNUHIHUHQFHGLQWKHFRPSODLQWDVHUYLFHU¶V+$03FHUWLILFDWLRQV

PXVWGLVFORVH³LQVWDQFHVRIQRQFRPSOLDQFHWKDW>WKHVHUYLFHU@EHOLHYHVKDYHDPDWHULDOHIIHFWRQ

LWVDELOLW\WRFRPSO\ZLWK0+$SURJUDPUHTXLUHPHQWV´DVZHOODV³WKHIDFWRUV>WKHVHUYLFHU@

FRQVLGHUHGLQGHWHUPLQLQJPDWHULDOLW\´0+$+DQGERRNDW HPSKDVLVDGGHG VHHDOVR6$&

ˆˆ6FKQHLGHUGRHVQRWGLVSXWHWKDWWKHIDFWRUV&KDVHFRQVLGHUHGLQGHWHUPLQLQJ

PDWHULDOLW\IRUSXUSRVHVRILWVDQQXDOFHUWLILFDWLRQVLQFOXGHGZKHWKHUDQ\QRQFRPSOLDQFH

³UHVXOWHGLQVXEVWDQWLDOLQMXU\WRDVLJQLILFDQWQXPEHURIERUURZHUV´RU³VXEVWDQWLDOO\LQWHUIHUH>G@

ZLWKWKHJRDOVDQGREMHFWLYHVRIWKHRYHUDOOSURJUDP´6HH.DUZKLWH'HFO([DW&KDVH

0HP,QVWHDGKHDUJXHVWKDWWKH&RXUWVKRXOGLJQRUHWKHVHIDFWRUVEHFDXVH6FKQHLGHUGLG

QRWH[SUHVVO\LGHQWLI\WKHPZLWKLQWKHIRXUFRUQHUVRIWKHFRPSODLQW6HH2SS6FKQHLGHU

GLGKRZHYHUUHO\RQ&KDVH¶VDQQXDO+$03FHUWLILFDWLRQVLQKLVFRPSODLQWHJ6$&ˆˆ

DQGDVDUHVXOWWKLV&RXUWPD\FRQVLGHUWKRVHFHUWLILFDWLRQVDQGWKHGHILQLWLRQRI

³PDWHULDOLW\´WKDWWKH\LQFRUSRUDWH6HH:DUGY'&'HS¶WRI<RXWK5HKDE6HUYV)6XSS

G Q ''& 3XWGLIIHUHQWO\6FKQHLGHUFDQQRWDUWIXOO\SOHDGWKDW&KDVH¶V

FHUWLILFDWLRQVRIPDWHULDO+$03FRPSOLDQFHZHUHIDOVHZKLOHLJQRULQJWKHGHILQLWLRQRI

PDWHULDOLW\WKDW&KDVHDQGWKHJRYHUQPHQWUHOLHGRQIRUSXUSRVHVRIWKRVHFHUWLILFDWLRQV6HHLG

FRXUWPD\UHO\RQ³GRFXPHQWVµXSRQZKLFKWKHSODLQWLII¶VFRPSODLQWQHFHVVDULO\UHOLHV¶HYHQLI

WKHGRFXPHQWLVSURGXFHGQRWE\WKHSODLQWLIILQWKHFRPSODLQWEXWE\WKHGHIHQGDQWLQDPRWLRQ


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
21 22
of 27
of 28

WRGLVPLVV´ +LQWRQY&RUU&RUSRI$P)6XSSG ''&  VLPLODU 

$FFRUGLQJO\6FKQHLGHU¶VIDLOXUHWRSOHDGWKDW&KDVH¶VFHUWLILFDWLRQVRIPDWHULDOFRPSOLDQFHZHUH

IDOVHXQGHUWKHPDWHULDOLW\FULWHULDUHOLHGRQLQWKRVHFHUWLILFDWLRQVLVIDWDOWRKLV+$03FODLPV

,QDQ\HYHQWHYHQLIWKH&RXUWZHUHWRGLVUHJDUGWKHVSHFLILFPDWHULDOLW\IDFWRUVWKDWZHUH

XVHGLQ&KDVH¶V+$03FHUWLILFDWLRQVLWVWLOOZRXOGEHFOHDUWKDW6FKQHLGHUKDVQRWSOHDGHGWKDW

&KDVH¶VDQQXDOFHUWLILFDWLRQVZHUHIDOVHRUIUDXGXOHQW,QGHHGIRUWKUHHIXQGDPHQWDOUHDVRQV

6FKQHLGHU¶V+$03DOOHJDWLRQVIDLOWRVDWLVI\WKHSOHDGLQJUHTXLUHPHQWVRI5XOH D OHWDORQH

WKHKHLJKWHQHGUHTXLUHPHQWVWKDWDSSO\KHUHXQGHU5XOH E 

)LUVW6FKQHLGHUKDVQRWDOOHJHGWKDW&KDVH¶VSXUSRUWHGIDLOXUHWRVROLFLW5&9ERUURZHUV

WRDSSO\IRU+$03ORDQPRGLILFDWLRQVUHVXOWHGLQDQ\KDUPWRWKHDIIHFWHGERUURZHUV6HH

&KDVH0HP$OWKRXJK6FKQHLGHUDFNQRZOHGJHVWKDWWKHSXUSRVHRI+$03ZDV³WRKHOS

KRPHRZQHUVDYRLGIRUHFORVXUH´2SSKHHVVHQWLDOO\FRQFHGHVWKDW&KDVHGRHVQRWIRUHFORVH

RQ5&9ERUURZHUVVHH&KDVH0HP1RUGRHVWKHFRPSODLQWDOOHJHWKDW5&9

ERUURZHUV²ZKRIDFHQRWKUHDWRIIRUHFORVXUHDQGLQFXUQRLQWHUHVWRQWKHLUORDQVGHVSLWHWKHLU

IDLOXUHWRPDNHORDQSD\PHQWV²ZRXOGKDYHZDQWHG+$03ORDQPRGLILFDWLRQVHYHQLIWKH\

FRXOGKDYHTXDOLILHGIRUWKHP6HHLG

6FKQHLGHUPRUHRYHUDGPLWVWKDW³+$03GRHVQRWDSSO\WRFKDUJHGRIIORDQVLIWKH

VHUYLFHUKDVUHOHDVHGWKHERUURZHUIURPOLDELOLW\IRUWKHGHEW´DQGWKDW&KDVHKDGD³SUDFWLFHRI

UHOHDVLQJ>5&9@OLHQV´2SS%HFDXVHDQXQFRQGLWLRQDOOLHQUHOHDVHHOLPLQDWHVDOOULVNRI

IRUHFORVXUHZLWKRXWUHTXLULQJDQ\FRQVLGHUDWLRQDWDOOIURPWKHERUURZHU6FKQHLGHUFDQQRW

FUHGLEO\DOOHJHWKDWWKHDIIHFWHGERUURZHUVZHUHKDUPHG6FKQHLGHUFRXQWHUVWKDW&KDVHRQO\

EHJDQLWVSUDFWLFHRIUHOHDVLQJOLHQVLQEXWHYHQLIWKDWZHUHWUXHLWZRXOGQRWPDWWHUVLQFH

5&9ERUURZHUVZHUHQRWVXEMHFWWRIRUHFORVXUHDQGWKHLUOLHQVZHUHXOWLPDWHO\UHOHDVHG


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
22 23
of 27
of 28

&KDVH¶VDOOHJHGIDLOXUHWRVROLFLWWKRVHERUURZHUVWRDSSO\IRUORDQPRGLILFDWLRQVFRXOGQRWKDYH

FDXVHGWKHPKDUP

6HFRQG6FKQHLGHUKDVQRWDGHTXDWHO\DOOHJHGWKDWWKHSXUSRUWHG+$03YLRODWLRQV

DIIHFWHGDVXEVWDQWLDOQXPEHURIERUURZHUV6HH&KDVH0HP$OWKRXJK6FKQHLGHUQRWHVWKDW

KHDOOHJHG³RQLQIRUPDWLRQDQGEHOLHI´WKDWWKHWRWDOQXPEHURI5&9ORDQVH[FHHGHG

VHH6$&ˆ FLWHGDW2SS WKHWRWDOQXPEHURI5&9ORDQVLVLUUHOHYDQWEHFDXVHWKHYDVW

PDMRULW\RIWKRVHORDQV²VXFKDVVHFRQGOLHQORDQVSRVWIRUHFORVXUHGHILFLHQFLHVDQGORDQV

VXEMHFWWREDQNUXSWF\SURFHHGLQJV²ZHUHLQGLVSXWDEO\LQHOLJLEOHIRU+$03PRGLILFDWLRQV6HH

&KDVH0HP

6FKQHLGHUEHODWHGO\WULHVWRRYHUFRPHWKLVSUREOHPE\DUJXLQJWKDWZKLOHVHFRQGOLHQ

ORDQVFDQQRWTXDOLI\IRU+$03PRGLILFDWLRQVWKH\FDQTXDOLI\IRUPRGLILFDWLRQVXQGHUD

VHSDUDWH7UHDVXU\'HSDUWPHQWSURJUDPNQRZQDVWKH6HFRQG/LHQ0RGLILFDWLRQ3URJUDPRU

³03´6HH2SS7KLVDUJXPHQWIDLOVEHFDXVHWKHFRPSODLQWQHYHUDOOHJHVWKDW&KDVH

YLRODWHGWKHUHTXLUHPHQWVRIWKH03SURJUDPDQGLWLV³D[LRPDWLFWKDWDFRPSODLQWPD\QRWEH

DPHQGHGE\WKHEULHIVLQRSSRVLWLRQWRDPRWLRQWRGLVPLVV´(J$UELWUDMH&DVDGH&DPELR

6$GH&9Y863RVWDO6HUY)6XSSG ''&  &ROO\HU-  LQWHUQDO

TXRWDWLRQPDUNVRPLWWHG DFFRUG0RUULVY&DUWHU*ORE/HH,QF)6XSSG

''&  FROOHFWLQJFDVHV 

(YHQLIWKH&RXUWZHUHWRFRQVLGHUWKHEHODWHG03DVVHUWLRQVPDGHLQ6FKQHLGHU¶V

RSSRVLWLRQWKRVHDVVHUWLRQVZRXOGQRWVDOYDJHKLVFODLP8QGHU03VHUYLFHUVDUHUHTXLUHGWR

VROLFLWVHFRQGOLHQERUURZHUVIRUORDQPRGLILFDWLRQRQO\LI  WKHVHUYLFHUUHFHLYHVQRWLFHWKDWWKH

ERUURZHU¶VILUVWOLHQKDVEHHQPRGLILHGXQGHU+$03 RUDVLPLODUSURJUDP DQG  WKHVHUYLFHU

GRHVQRWHOHFWWRH[WLQJXLVKWKHVHFRQGOLHQHQWLUHO\6HH0+$+DQGERRNDW+HUH


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
23 24
of 27
of 28

6FKQHLGHUGRHVQRWVTXDUHO\DOOHJHWKDW&KDVHIDLOHGWRVROLFLWVHFRQGOLHQORDQVIRUPRGLILFDWLRQ

LIDQGZKHQLWUHFHLYHGQRWLILFDWLRQWKDWWKHFRUUHVSRQGLQJILUVWOLHQKDGEHHQPRGLILHG²QRU

FRXOGKH6FKQHLGHUPRUHRYHUDIILUPDWLYHO\DVVHUWVWKDW&KDVHGLGH[WLQJXLVKWHQVRIWKRXVDQGV

RI5&9VHFRQGOLHQVWKHUHE\REYLDWLQJWKHQHHGIRUVROLFLWDWLRQXQGHUWKHWHUPVRIWKHSURJUDP

6HHHJ6$&ˆ$FFRUGLQJO\6FKQHLGHUKDVIDLOHGWRDOOHJHDQ\PDWHULDOYLRODWLRQRI03

7KLUGDQGILQDOO\6FKQHLGHUGRHVQRWGHQ\WKDWWKHJRYHUQPHQWZDVDZDUHRI5&9DQG

RIWKHIDFWWKDW&KDVHIRUDWLPHGLGQRWVROLFLW5&9ORDQVIRUPRGLILFDWLRQ6HH2SS

$OWKRXJK6FKQHLGHUFODLPVWKDWWKHJRYHUQPHQW¶VNQRZOHGJHLVLUUHOHYDQWWKDWLVLQFRUUHFW,Q

WKLV&LUFXLWDQDOOHJHGO\IDOVHFHUWLILFDWLRQLVDFWLRQDEOHXQGHUWKH)&$RQO\LILWOHGWKH

JRYHUQPHQWWRPDNHDSD\PHQWWKDWLWZRXOGQRWRWKHUZLVHKDYHPDGH6HH8QLWHG6WDWHVY6FL

$SSOLFDWLRQV,QW¶O&RUS)G '&&LU %HFDXVHWKHJRYHUQPHQW

NQHZWKDW&KDVHZDVQRWVROLFLWLQJ5&9ORDQVIRUPRGLILFDWLRQVZKHQLWPDGHLQFHQWLYH

SD\PHQWVWR&KDVHDQ\DOOHJHGIDOVLW\LQ&KDVH¶V+$03FHUWLILFDWLRQVZDVLPPDWHULDODVD

PDWWHURIODZ6HH&KDVH0HP

% 6FKQHLGHU+DV1RW$OOHJHG7KDW&KDVH³.QRZLQJO\´0DGHD)DOVH&ODLP

,QLWVRSHQLQJEULHI&KDVHVKRZHGWKDW6FKQHLGHU¶V+$03FODLPVDOVRIDLOEHFDXVHKH

KDVQRWDGHTXDWHO\DOOHJHGWKDW&KDVHNQRZLQJO\PDGHDIDOVHVWDWHPHQWWRWKHJRYHUQPHQW6HH

&KDVH0HP6FKQHLGHUUHVSRQGVWRWKLVVKRZLQJZLWKDOHQJWK\QRQVHTXLWXUUHJDUGLQJ

KLVVHSDUDWH106UHODWHGFODLPV6HH2SS GLVFXVVLQJ&KDVH¶VFRPPXQLFDWLRQVZLWKWKH



6FKQHLGHUDOVRSRLQWVWRSXUSRUWHGVHUYLFLQJYLRODWLRQVLGHQWLILHGE\WKH2IILFHRIWKH
&RPSWUROOHURIWKH&XUUHQF\ ³2&&´ DQGWKH8QLWHG6WDWHV7UXVWHH3URJUDP ³8673´ DUJXLQJ
WKDWWKHVHYLRODWLRQVGHPRQVWUDWH&KDVH¶VPDWHULDOQRQFRPSOLDQFHZLWK+$03SURJUDP
UHTXLUHPHQWV2SS1HLWKHUWKH2&&QRUWKH8673KRZHYHUGHWHUPLQHGWKDW&KDVH
YLRODWHG+$03²LQGHHGQHLWKHUHQWLW\HYHQFRQVLGHUHGWKDWTXHVWLRQ$FFRUGLQJO\6FKQHLGHU¶V
DOOHJDWLRQVUHJDUGLQJWKHVHILQGLQJVGRQRWKLQJWRHVWDEOLVKWKDW&KDVH¶VDQQXDO+$03
FHUWLILFDWLRQVZHUHIDOVHRUIUDXGXOHQW


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
24 25
of 27
of 28

1060RQLWRU 7KLVQRQUHVSRQVHGRHVQRWKLQJWRUHVXVFLWDWH6FKQHLGHU¶VVHSDUDWHFODLPV

UHJDUGLQJ&KDVH¶VDQQXDO+$03FHUWLILFDWLRQV

,QHDUOLHULWHUDWLRQVRIKLVFRPSODLQW6FKQHLGHUDOOHJHGWKDW&KDVHFRQFHDOHGIURPWKH

JRYHUQPHQW¶V+$03FRPSOLDQFHDJHQW0+$&ERWKWKHH[LVWHQFHRI5&9DQG³WKHZD\

WKRVH>5&9@ORDQVZHUHWUHDWHGIRUSXUSRVHVRI+$03VROLFLWDWLRQV´6$&ˆQ7HOOLQJO\

KRZHYHUQRVXFKDOOHJDWLRQVFDQEHIRXQGLQWKHRSHUDWLYH6HFRQG$PHQGHG&RPSODLQW

6FKQHLGHUPRUHRYHUGRHVQRWGHQ\WKDWWKHJRYHUQPHQWZDVIXOO\DZDUHRI&KDVH¶VSUDFWLFHV

ZLWKUHVSHFWWRVROLFLWLQJ5&9ORDQVIRU+$03PRGLILFDWLRQV$VQXPHURXVFRXUWVKDYH

REVHUYHGLWPDNHVQRVHQVHWRFRQFOXGHWKDWDSDUW\NQRZLQJO\PDGHIDOVHVWDWHPHQWVWRWKH

JRYHUQPHQWLIWKHSDUW\KDGDOUHDG\GLVFORVHGWKHUHOHYDQWLQIRUPDWLRQWRWKHJRYHUQPHQW6HH

&KDVH0HP FROOHFWLQJFDVHV 

6FKQHLGHUFRXQWHUVWKDWKHLVQRWUHTXLUHGWRSOHDGVFLHQWHUZLWKSDUWLFXODULW\XQGHU5XOH

 E VHH2SSEXWWKDWDVVHUWLRQPLVVHVWKHPDUN6FKQHLGHU¶VRQO\DOOHJDWLRQVRIVFLHQWHUDUH

HQWLUHO\FRQFOXVRU\DQGWKXVIDLOWRVDWLVI\HYHQWKHEDVLFUHTXLUHPHQWVRI5XOH D 6HH

$VKFURIWY,TEDO86   ³$SOHDGLQJWKDWRIIHUVODEHOVDQGFRQFOXVLRQVRUD

IRUPXODLFUHFLWDWLRQRIWKHHOHPHQWVRIDFDXVHRIDFWLRQZLOOQRWGR1RUGRHVDFRPSODLQW

VXIILFHLILWWHQGHUVQDNHGDVVHUWLRQVGHYRLGRIIXUWKHUIDFWXDOHQKDQFHPHQW´ LQWHUQDOTXRWDWLRQ

PDUNVRPLWWHG )RUWKLVDGGLWLRQDOUHDVRQ6FKQHLGHU¶V+$03FODLPVVKRXOGEHGLVPLVVHG

,9 7+(&28576+28/''(1<6&+1(,'(5/($9(72$0(1'+,6
&203/$,17$7+,5'7,0(

6FKQHLGHUKDVDOUHDG\DPHQGHGKLVFRPSODLQWWZLFHDQGKDVZKROO\IDLOHGWRMXVWLI\KLV

UHTXHVWIRU\HWDQRWKHUELWHDWWKHDSSOH+LVUHTXHVWIRUOHDYHWRILOHD7KLUG$PHQGHG

&RPSODLQWVKRXOGWKHUHIRUHEHGHQLHG


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
25 26
of 27
of 28

,QRUGHUWRREWDLQOHDYHWRDPHQGDSDUW\PXVWSURYLGH³VSHFLILFV´UHJDUGLQJKRZWKH

SURSRVHGDPHQGPHQWZRXOGFXUHWKHGHILFLHQFLHVLQWKHFRPSODLQW:LOOLDPV)GDW

$FFRUGLQJO\GLVPLVVDOZLWKSUHMXGLFHLVDSSURSULDWHZKHUHDSDUW\PDNHVRQO\³DEDUHUHTXHVWLQ

DQRSSRVLWLRQWRDPRWLRQWRGLVPLVV´ZLWKRXWSURYLGLQJ³DQ\LQGLFDWLRQRIWKHSDUWLFXODU

JURXQGVRQZKLFKDPHQGPHQWLVVRXJKW´,G DIILUPLQJGLVPLVVDOZLWKSUHMXGLFHRI)&$FODLP 

+HUH6FKQHLGHUKDVIDLOHGWRSURYLGHDQ\VSHFLILFVUHJDUGLQJKRZKHLQWHQGVWRFXUHWKH

GHILFLHQFLHVLQKLVFRPSODLQW1RULVWKHUHDQ\UHDVRQWREHOLHYHWKDW6FKQHLGHUFRXOGSRVVLEO\GR

VR7KLVDFWLRQKDVDOUHDG\EHHQSHQGLQJIRUPRUHWKDQWZRDQGDKDOI\HDUV'XULQJWKDWWLPH

WKHIHGHUDOJRYHUQPHQWQXPHURXVVWDWHVDQGWKH1060RQLWRUKDYHDOOGHFOLQHGWRLQWHUYHQHLQ

VXSSRUWRI6FKQHLGHU¶VFDVH6FKQHLGHUDOVRKDVDOUHDG\KDGWKHRSSRUWXQLW\WRDPHQGKLV

FRPSODLQWWZLFH3HUPLWWLQJDWKLUGDPHQGPHQWZRXOGWKHUHIRUHEHIXWLOH6HHHJ)LUHVWRQHY

)LUHVWRQH)G '&&LU  ³UHSHDWHGIDLOXUHWRFXUHGHILFLHQFLHVE\

>SUHYLRXV@DPHQGPHQWV´LVDEDVLVWRGHQ\OHDYHWRDPHQG LQWHUQDOTXRWDWLRQPDUNVRPLWWHG 

&RQIHGHUDWH0HP¶O$VV¶Q,QFY+LQHV)G '&&LU  GHFOLQLQJOHDYHWR

DPHQGZKHUHSODLQWLII³KDGPXOWLSOHELWHVDWWKHDSSOHDOUHDG\´ 

&21&/86,21

)RUWKHUHDVRQVVHWIRUWKLQ&KDVH¶VRSHQLQJEULHIDQGDERYH&KDVH¶VPRWLRQWRGLVPLVV

VKRXOGEHJUDQWHG


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
26 27
of 27
of 28

 5HVSHFWIXOO\VXEPLWWHG
 
-DQXDU\ 
5REHUW':LFN '&%DU1R 
&KULVWLDQ-3LVWLOOL '&%DU1R 
0LFKDHO00D\D '&%DU1R 
&29,1*721 %85/,1*//3
2QH&LW\&HQWHU
7HQWK6WUHHW1:
:DVKLQJWRQ'&
7HO  
)D[  

$WWRUQH\VIRU'HIHQGDQWV



 


Case
Case
1:15-cv-00293-LTS-JCF
1:14-cv-01047-RMC Document
Document112
100-7Filed
Filed
01/15/16
06/13/16Page
Page
27 28
of 27
of 28


&(57,),&$7(2)6(59,&(

 ,KHUHE\FHUWLI\WKDWRQ-DQXDU\DWUXHDQGFRUUHFWFRS\RIWKHIRUHJRLQJ

GRFXPHQWZDVHOHFWURQLFDOO\VHUYHGRQDOOUHJLVWHUHGFRXQVHORIUHFRUGYLD(&)DQGVHQWYLDH

PDLORUFHUWLILHGPDLOWRDOOFRXQVHORIUHFRUG

       V5REHUW':LFN
5REHUW':LFN
&29,1*721 %85/,1*//3
2QH&LW\&HQWHU
7HQWK6WUHHW1:
:DVKLQJWRQ'&
7HO  
)D[  
(PDLOUZLFN#FRYFRP
$WWRUQH\IRU'HIHQGDQWV

You might also like