                             81,7(' 67$7(6 ',675,&7 &2857
                             )25 7+( ',675,&7 2) &2/80%,$
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
                                    
%$1180 ,1&                       
                                    
                  3ODLQWLII        
                                    
      Y                                              &LYLO $FWLRQ 1R  $%-
                                    
&+$5/(6 ( 6$08(/6 -5 et al.    
                                    
                  'HIHQGDQWV       
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

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

        3ODLQWLII %DQQXP ,QF KDV EURXJKW WKLV DFWLRQ DJDLQVW GHIHQGDQWV VHYHQ FXUUHQW RU IRUPHU

HPSOR\HHV RI WKH )HGHUDO %XUHDX RI 3ULVRQV ³%23´ DOOHJLQJ WKDW ³>G@HIHQGDQWV KDYH HQJDJHG LQ

D SDWWHUQ RI FRQGXFW RYHU WKH SDVW VHYHUDO \HDUV WKDW KDV KDG WKH HIIHFW RI GHEDUULQJ %DQQXP IURP

UHFHLYLQJ DQ\ QHZ FRQWUDFWV IURP WKH %23 %DQQXP¶V VROH FXVWRPHU´ $P &RPSO >'NW  @

  ± 3ODLQWLII SUHGLFDWHV LWV FODLPV RQ WKLV DOOHJHG ³GH IDFWR GHEDUPHQW´ DQG LQWHUIHUHQFH

ZLWK FRQWUDFWXDO UHODWLRQV DQG LW VHHNV D GHFODUDWRU\ MXGJPHQW LQMXQFWLYH UHOLHI DQG PRQHWDU\

GDPDJHV LQ H[FHVV RI WHQ PLOOLRQ GROODUV Id.  ± ± 2Q EHKDOI RI WKH LQGLYLGXDOO\

QDPHG GHIHQGDQWV WKH 8QLWHG 6WDWHV PRYHG WR GLVPLVV WKH DPHQGHG FRPSODLQW SXUVXDQW WR )HGHUDO

5XOHV RI &LYLO 3URFHGXUH E DQG E 'HI¶V 0RW WR 'LVPLVV $P &RPSO >'NW  @

³'HI¶V 0RW´ ,W DUJXHV WKDW WKH RQO\ SURSHU GHIHQGDQW LQ WKLV DFWLRQ LV WKH 8QLWHG 6WDWHV WKDW

WKH JRYHUQPHQW KDV QRW ZDLYHG LWV VRYHUHLJQ LPPXQLW\ LQ WKLV LQVWDQFH WKDW SODLQWLII KDV IDLOHG WR

H[KDXVW LWV DGPLQLVWUDWLYH UHPHGLHV DQG WKDW SODLQWLII KDV IDLOHG WR VWDWH D SODXVLEOH FODLP IRU UHOLHI

LQ DQ\ HYHQW 0HP LQ 6XSS RI 'HI¶V 0RW >'NW  @ ³'HI¶V 0HP´ DW ±

       7KH GHIHQGDQWV DUH FRUUHFW WKDW WKH RQO\ SURSHU GHIHQGDQW LQ WKLV DFWLRQ LV WKH 8QLWHG 6WDWHV

DQG VR WKH JRYHUQPHQW ZLOO EH VXEVWLWXWHG DV WKH VROH GHIHQGDQW SXUVXDQW WR WKH :HVWIDOO $FW 
86&   7KH &RXUW DOVR ILQGV WKDW LW ODFNV VXEMHFW PDWWHU MXULVGLFWLRQ RYHU SODLQWLII¶V WRUW

FODLPV EHFDXVH WKH JRYHUQPHQW KDV QRW ZDLYHG LWV VRYHUHLJQ LPPXQLW\ SODLQWLII¶V WRUW FODLPV DUH

EDUUHG XQGHU WKH )7&$ DQG SODLQWLII KDV QRW H[KDXVWHG LWV DGPLQLVWUDWLYH UHPHGLHV )XUWKHU WR

WKH H[WHQW SODLQWLII DWWHPSWV WR UDLVH D FODLP XQGHU WKH 'XH 3URFHVV &ODXVH RI WKH )LIWK $PHQGPHQW

LW KDV IDLOHG WR DOOHJH VXIILFLHQW IDFWV WR VWDWH D FODLP 7KHUHIRUH IRU WKH UHDVRQV VHW IRUWK LQ PRUH

GHWDLO EHORZ WKH &RXUW ZLOO JUDQW GHIHQGDQWV¶ PRWLRQ DQG GLVPLVV WKLV FDVH LQ LWV HQWLUHW\

                                         %$&.*5281'

       3ODLQWLII LV D .HQWXFN\ FRUSRUDWLRQ ZLWK LWV SULQFLSDO SODFH RI EXVLQHVV LQ 2GHVVD )ORULGD

$P &RPSO   7KH VHYHQ LQGLYLGXDO GHIHQGDQWV DUH &KDUOHV ( 6DPXHOV -U WKH 'LUHFWRU RI WKH

%23 &DWKHULQH 6FRWW &KLHI RI WKH %23 1DWLRQDO $FTXLVLWLRQV DQG 6\VWHPV 6HFWLRQ 7LPRWK\ 5

%DUQHWW D %23 5HVLGHQWLDO 5HHQWU\ 0DQDJHU &KHU\O 'HQQLQJV D &RPPXQLW\ &RUUHFWLRQV

$GPLQLVWUDWRU IRU %23 /ROD /HH%URZQ D %23 &RQWUDFWLQJ 2IILFHU 2VRULD 7RVWRQ D IRUPHU

&RQWUDFW 2YHUVLJKW 6SHFLDOLVW IRU %23 DQG $QGUHD -RKQVRQ D IRUPHU &RPPXQLW\ &RUUHFWLRQV

5HJLRQDO &RRUGLQDWRU IRU %23 Id.  ±

       3ODLQWLII RSHUDWHV 5HVLGHQWLDO 5HHQWU\ &HQWHUV ³55&V´ IRU IHGHUDO RIIHQGHUV WKURXJKRXW

WKH 8QLWHG 6WDWHV SXUVXDQW WR FRQWUDFWV ZLWK WKH %23 $P &RPSO   $OWKRXJK SODLQWLII DOOHJHV

WKDW LW FXUUHQWO\ RSHUDWHV VL[ 55&V LW FODLPV WKDW ³DW RQH SRLQW >LW@ KDG DV PDQ\ DV VHYHQWHHQ

GLIIHUHQW 55&V´ DQG WKDW WKLV ZDV ³SULRU WR WKH >G@HIHQGDQWV¶ DWWHPSWV WR HOLPLQDWH %DQQXP IURP

%23 FRQWUDFWLQJ.” Id. 3ODLQWLII VWDWHV WKDW LW ZDV XQGHU FRQWUDFW ZLWK %23 IRU HOHYHQ 55&V DV

UHFHQWO\ DV  EXW WKDW LWV ELGV IRU QHZ 55& FRQWUDFWV VLQFH  KDYH EHHQ XQVXFFHVVIXO

Id.  ± 3ODLQWLII FRQFHGHV KRZHYHU WKDW GXULQJ WKH VDPH WLPH SHULRG WKH %23 KDV H[HUFLVHG

RSWLRQV DQG H[WHQGHG VRPH RI LWV H[LVWLQJ FRQWUDFWV ZLWK SODLQWLII Id.   




                                                  
       3ODLQWLII¶V DOOHJDWLRQV LQ WKH FRPSODLQW DUH ORQJ DQG GHWDLOHG EXW HVVHQWLDOO\ LW PDLQWDLQV

WKDW WKH LQGLYLGXDO GHIHQGDQWV ³JDYH %DQQXP D YHU\ GLIILFXOW WLPH´ LQ WKH FRQWUDFW VROLFLWDWLRQ

SURFHVV HQJDJHG LQ D ³VFKHPH    WR SXW %DQQXP RXW RI EXVLQHVV DQG HQVXUH WKDW LW GRHV QRW UHFHLYH

DQ\ QHZ JRYHUQPHQW FRQWUDFWV´ ³WUHDW>HG@ %DQQXP GLIIHUHQWO\ WKDQ RWKHU FRQWUDFWRUV´ DQG

FRQVSLUHG WR GHSULYH %DQQXP RI FRQWUDFWV ZKHQ RWKHU FRPSHWLWRUV ZHUH LQYROYHG LQ WKH ELGGLQJ

SURFHVV $P &RPSO     

       )RU H[DPSOH SODLQWLII FODLPV WKH %23 ³UDLGHG´ %DQQXP 3ODFH RI 7XSHOR RQH RI SODLQWLII¶V

55&V ³GXULQJ WKH ELGGLQJ HYDOXDWLRQ SHULRG IRU WKH IROORZXS FRQWUDFW´ RQ WKDW FHQWHU DQG DV D

UHVXOW ³%DQQXP¶V FXUUHQW FRQWUDFW ILOHV ZHUH FRQILVFDWHG E\ WKH %23´ DQG ³WKH IDFLOLW\ ZDV

GDPDJHG´ $P &RPSO   ± )XUWKHU 3ODLQWLII FODLPV WKDW LW ZDV IRUFHG E\ GHIHQGDQWV WR

VXVSHQG RU LPSURSHUO\ WHUPLQDWH LWV HPSOR\HHV DW YDULRXV 55&V DQG WKDW WKH VXEVHTXHQW FRQWUDFWV

IRU WKRVH 55&V ZHUH DZDUGHG WR SODLQWLII¶V FRPSHWLWRU Id.      H 3ODLQWLII

DOVR DVVHUWV WKDW GHIHQGDQWV ³ZRXOG LVVXH XQLODWHUDO PRGLILFDWLRQV >WR LWV FRQWUDFWV@ WKHUHE\

LQFUHDVLQJ WKH DPRXQW RI ZDJHV WKDW %DQQXP ZDV UHTXLUHG WR SD\ LWV HPSOR\HHV´ DQG WKDW WKH %23

³UHIXVH>G@ WR WLPHO\ UHLPEXUVH %DQQXP´ IRU WKHVH H[SHQVHV Id   

       3ODLQWLII LQLWLDWHG WKLV DFWLRQ RQ -XO\   &RPSO >'NW  @ DQG LW ILOHG LWV DPHQGHG

FRPSODLQW RQ 0DUFK   $P &RPSO ,Q &RXQW , SODLQWLII DOOHJHV WKDW GHIHQGDQWV VXEMHFWHG

LW WR D ³GH IDFWR GHEDUPHQW´ E\ ³HQJDJ>LQJ@ LQ D FDPSDLJQ WR VDERWDJH >SODLQWLII¶V@ RSHUDWLRQV

KDUP LWV DELOLW\ WR DFW DV D FRQWUDFWRU GHIDPH LWV FRQWUDFW SHUIRUPDQFH KLVWRU\ DQG GDPDJH >LWV@

DELOLW\ WR REWDLQ QHZ EXVLQHVV´ Id.    3ODLQWLII LQVLVWV WKDW ZKDW LW FKDUDFWHUL]HV DV D

GHEDUPHQW ³LPSOLFDWH>V@ WKH GXH SURFHVV FODXVH RI WKH WK $PHQGPHQW WR WKH 8QLWHG 6WDWHV

&RQVWLWXWLRQ DQG UHTXLUHV DW PLQLPXP SURSHU QRWLFH WR %DQQXP RI WKH FKDUJHV RQ ZKLFK WKH

GHEDUPHQW LV EDVHG DQG WKDW %DQQXP EH DIIRUGHG DQ RSSRUWXQLW\ WR UHIXWH WKRVH FKDUJHV´



                                                 
Id.   ,Q &RXQW ,, SODLQWLII EULQJV D FODLP IRU ³LQWHUIHUHQFH ZLWK FRQWUDFWXDO UHODWLRQV

SURVSHFWLYH FRQWUDFWXDO UHODWLRQV DQG SURVSHFWLYH DGYDQWDJHRXV HFRQRPLF UHODWLRQVKLS´ FODLPLQJ

WKDW GHIHQGDQWV ³KDYH XVHG DQG PLVXVHG WKHLU SRVLWLRQV DQG DXWKRULW\ DV HPSOR\HHV RI WKH %23 WR

LQWHUIHUH ZLWK DQG GLVUXSW WKH H[LVWLQJ DQG SURVSHFWLYH EXVLQHVV UHODWLRQVKLSV RI 3ODLQWLII %DQQXP

,QF WR WKH SRLQW RI GHVWUR\LQJ WKRVH UHODWLRQVKLSV DQG HOLPLQDWLQJ 3ODLQWLII %DQQXP ,QF DV D

FRQWUDFWRU´ Id.   $FFRUGLQJ WR SODLQWLII GHIHQGDQWV FDUULHG RXW WKLV DWWDFN LQ D QXPEHU RI

ZD\V LQFOXGLQJ E\ PDNLQJ IDOVH DQG GHIDPDWRU\ VWDWHPHQWV DERXW %DQQXP SXUVXLQJ XQZDUUDQWHG

LQYHVWLJDWLRQV LQWR DOOHJHG ZURQJGRLQJ E\ WKH FRQWUDFWRU DQG IRUFLQJ WKH FRPSDQ\ WR ILUH

SDUWLFXODU HPSOR\HHV Id.  D±I

       2Q $SULO   GHIHQGDQWV PRYHG WR GLVPLVV WKLV FDVH LQ LWV HQWLUHW\ 'HI¶V 0RW DQG

SODLQWLII ILOHG LWV RSSRVLWLRQ WR WKDW PRWLRQ RQ -XQH   3O¶V 0HP LQ 2SS WR 'HI¶V 0RW

>'NW  @ ³3O¶V 2SS´ 'HIHQGDQWV ILOHG D UHSO\ RQ -XO\   5HSO\ LQ 6XSS RI 'HI¶V

0RW >'NW  @ ³'HI¶V 5HSO\´

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

       ,Q HYDOXDWLQJ D PRWLRQ WR GLVPLVV XQGHU HLWKHU 5XOH E RU E WKH &RXUW PXVW

³WUHDW WKH FRPSODLQW¶V IDFWXDO DOOHJDWLRQV DV WUXH    DQG PXVW JUDQW SODLQWLII µWKH EHQHILW RI DOO

LQIHUHQFHV WKDW FDQ EH GHULYHG IURP WKH IDFWV DOOHJHG¶´ Sparrow v. United Air Lines, Inc. 

)G   '& &LU  LQWHUQDO FLWDWLRQV RPLWWHG TXRWLQJ Schuler v. United States

 )G   '& &LU  see also Am. Nat’l Ins. Co. v. FDIC  )G  

'& &LU  1HYHUWKHOHVV WKH &RXUW QHHG QRW DFFHSW LQIHUHQFHV GUDZQ E\ WKH SODLQWLII LI WKRVH

LQIHUHQFHV DUH XQVXSSRUWHG E\ IDFWV DOOHJHG LQ WKH FRPSODLQW QRU PXVW WKH &RXUW DFFHSW SODLQWLII¶V

OHJDO FRQFOXVLRQV Browning v. Clinton  )G   '& &LU 




                                                 
6XEMHFW 0DWWHU -XULVGLFWLRQ

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

SUHSRQGHUDQFH RI WKH HYLGHQFH See Lujan v. Defs. of Wildlife  86    Shekoyan

v. Sibley Int’l Corp.  ) 6XSS G   ''&  )HGHUDO FRXUWV DUH FRXUWV RI OLPLWHG

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

Guardian Life Ins. Co. of Am.  86    see also Gen. Motors Corp. v. EPA 

)G   '& &LU  ³$V D FRXUW RI OLPLWHG MXULVGLFWLRQ ZH EHJLQ DQG HQG ZLWK DQ

H[DPLQDWLRQ RI RXU MXULVGLFWLRQ´ ³>%@HFDXVH VXEMHFWPDWWHU MXULVGLFWLRQ LV µDQ $UW>LFOH@ ,,, DV

ZHOO DV D VWDWXWRU\ UHTXLUHPHQW    QR DFWLRQ RI WKH SDUWLHV FDQ FRQIHU VXEMHFWPDWWHU MXULVGLFWLRQ

XSRQ D IHGHUDO FRXUW¶´ Akinseye v. District of Columbia  )G   '& &LU 

TXRWLQJ Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee  86   

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

PRWLRQ WR GLVPLVV XQGHU 5XOH E WKH FRXUW ³LV QRW OLPLWHG WR WKH DOOHJDWLRQV RI WKH FRPSODLQW´

Hohri v. United States  )G   '& &LU  vacated on other grounds  86

  5DWKHU ³D FRXUW PD\ FRQVLGHU VXFK PDWHULDOV RXWVLGH WKH SOHDGLQJV DV LW GHHPV

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

D.C. Bd. of Elections & Ethics  ) 6XSS G   ''&  FLWLQJ Herbert v. Nat’l

Acad. of Scis.  )G   '& &LU  see also Jerome Stevens Pharm. Inc. v. FDA

 )G   '& &LU 

)DLOXUH WR 6WDWH D &ODLP

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

PDWWHU DFFHSWHG DV WUXH WR µVWDWH D FODLP WR UHOLHI WKDW LV SODXVLEOH RQ LWV IDFH¶´ Ashcroft v. Iqbal

 86    TXRWLQJ Bell Atl. Corp. v. Twombly  86    $ FODLP



                                                   
LV IDFLDOO\ SODXVLEOH ZKHQ WKH SOHDGHG IDFWXDO FRQWHQW ³DOORZV WKH FRXUW WR GUDZ WKH UHDVRQDEOH

LQIHUHQFH WKDW WKH GHIHQGDQW LV OLDEOH IRU WKH PLVFRQGXFW DOOHJHG´ Id. DW  FLWLQJ Twombly 

86 DW  ³7KH SODXVLELOLW\ VWDQGDUG LV QRW DNLQ WR D µSUREDELOLW\ UHTXLUHPHQW¶ EXW LW DVNV IRU

PRUH WKDQ D VKHHU SRVVLELOLW\ WKDW D GHIHQGDQW KDV DFWHG XQODZIXOO\´ Id. TXRWLQJ Twombly 

86 DW  $ SOHDGLQJ PXVW RIIHU PRUH WKDQ ³ODEHOV DQG FRQFOXVLRQV´ RU D ³IRUPXODLF UHFLWDWLRQ

RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ´ id. TXRWLQJ Twombly  86 DW  DQG ³>W@KUHDGEDUH

UHFLWDOV RI WKH HOHPHQWV RI D FDXVH RI DFWLRQ VXSSRUWHG E\ PHUH FRQFOXVRU\ VWDWHPHQWV GR QRW

VXIILFH´ Id. FLWLQJ Twombly  86 DW 

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

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

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

  '& &LU  1HYHUWKHOHVV WKH &RXUW QHHG QRW DFFHSW LQIHUHQFHV GUDZQ E\ WKH

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

DFFHSW SODLQWLII¶V OHJDO FRQFOXVLRQV See id. see also Browning  )G DW  ,Q UXOLQJ XSRQ D

PRWLRQ WR GLVPLVV IRU IDLOXUH WR VWDWH D FODLP D FRXUW PD\ RUGLQDULO\ FRQVLGHU RQO\ ³WKH IDFWV DOOHJHG

LQ WKH FRPSODLQW GRFXPHQWV DWWDFKHG DV H[KLELWV RU LQFRUSRUDWHG E\ UHIHUHQFH LQ WKH FRPSODLQW

DQG PDWWHUV DERXW ZKLFK WKH &RXUW PD\ WDNH MXGLFLDO QRWLFH´ Gustave-Schmidt v. Chao  )

6XSS G   ''&  FLWLQJ EEOC v. St. Francis Xavier Parochial Sch.  )G

 ± '& &LU 

                                            $1$/<6,6

,     7KH 8QLWHG 6WDWHV ZLOO EH VXEVWLWXWHG DV WKH GHIHQGDQW SXUVXDQW WR WKH :HVWIDOO $FW

       7KH )HGHUDO (PSOR\HHV /LDELOLW\ 5HIRUP DQG 7RUW &RPSHQVDWLRQ $FW RI   86&

  FRPPRQO\ UHIHUUHG WR DV WKH :HVWIDOO $FW ³DFFRUGV IHGHUDO HPSOR\HHV DEVROXWH LPPXQLW\



                                                  
IURP FRPPRQODZ WRUW FODLPV DULVLQJ RXW RI DFWV WKH\ XQGHUWDNH LQ WKH FRXUVH RI WKHLU RIILFLDO

GXWLHV´ Osborn v. Haley  86    7KH LPPXQLW\ LV WULJJHUHG LI WKH $WWRUQH\

*HQHUDO RU KLV GHOHJDWH FHUWLILHV WKDW ³WKH GHIHQGDQW HPSOR\HH ZDV DFWLQJ ZLWKLQ WKH VFRSH RI KLV

RIILFH RU HPSOR\PHQW DW WKH WLPH RI WKH LQFLGHQW RXW RI ZKLFK WKH FODLP DURVH´ Jacobs v. Vrobel

 )G  ± '& &LU  TXRWLQJ  86&  G ³8SRQ FHUWLILFDWLRQ WKH

HPSOR\HH LV GLVPLVVHG IURP WKH DFWLRQ >DQG@ WKH 8QLWHG 6WDWHV LV VXEVWLWXWHG DV WKH GHIHQGDQW´ Id.

DW  FLWLQJ  86&  G± 7KH 6XSUHPH &RXUW KDV PDGH FOHDU WKDW ³>L@PPXQLW\

UHODWHG LVVXHV    VKRXOG EH GHFLGHG DW WKH HDUOLHVW RSSRUWXQLW\´ Osborn  86 DW 

       %XW D GLVWULFW FRXUW VKRXOG QRW WUHDW D :HVWIDOO $FW FHUWLILFDWLRQ DV XQLPSHDFKDEOH DQG D

³SODLQWLII PD\ FRQWHVW WKH $WWRUQH\ *HQHUDO¶V VFRSHRIHPSOR\PHQW FHUWLILFDWLRQ´ Wuterich v.

Murtha  )G   '& &LU  FLWLQJ Gutierrez de Martinez v. Lamagno  86

   ,I D SODLQWLII PRXQWV WKDW FKDOOHQJH ³WKH FHUWLILFDWLRQ µFRQVWLWXWH>V@ prima facie

HYLGHQFH WKDW WKH HPSOR\HH ZDV DFWLQJ ZLWKLQ WKH VFRSH RI KLV HPSOR\PHQW¶´ id. TXRWLQJ Council

on Am. Islamic Relations v. Ballenger  )G   '& &LU  SHU FXULDP DQG WKH

SODLQWLII PXVW UHEXW WKDW SUHVXPSWLRQ E\ DOOHJLQJ ³VXIILFLHQW IDFWV WKDW WDNHQ DV WUXH ZRXOG

HVWDEOLVK WKDW WKH GHIHQGDQW>¶V@ DFWLRQV H[FHHGHG WKH VFRSH RI >KLV@ HPSOR\PHQW´ Id. DOWHUDWLRQV

LQ RULJLQDO TXRWLQJ Stokes v. Cross  )G   '& &LU  7KH FRXUW VKRXOG

DGKHUH WR WKH WHDFKLQJV RI Iqbal DQG Twombly LQ GHWHUPLQLQJ ZKHWKHU WKH SODLQWLII KDV PHW KLV RU

KHU EXUGHQ WR UHEXW WKH SUHVXPSWLRQ Jacobs  )G DW  2QO\ LI WKH SODLQWLII VDWLVILHV WKDW

EXUGHQ ZLOO KH RU VKH ³LI QHFHVVDU\ DWWDLQ µOLPLWHG GLVFRYHU\¶ WR UHVROYH DQ\ IDFWXDO GLVSXWHV RYHU

MXULVGLFWLRQ´ Id. DW ± TXRWLQJ Wuterich  )G DW 

       +HUH GHIHQGDQWV KDYH ILOHG D :HVWIDOO $FW FHUWLILFDWLRQ IURP WKH &KLHI RI WKH &LYLO 'LYLVLRQ

RI WKH 2IILFH RI WKH 8QLWHG 6WDWHV $WWRUQH\ IRU WKH 'LVWULFW RI &ROXPELD ZKLFK DYHUV WKDW HDFK RI



                                                 
WKH LQGLYLGXDO %23 GHIHQGDQWV ³ZDV DQ HPSOR\HH RI WKH 8QLWHG 6WDWHV DW WKH WLPH RI WKH DOOHJHG

LQFLGHQWV RXW RI ZKLFK SODLQWLII¶V FODLPV DURVH >DQG@ WKHLU DFWV RU RPLVVLRQV LI DQ\ LQ UHVSHFW RI

WKRVH DOOHJHG LQFLGHQWV ZHUH WDNHQ RU RPLWWHG ZLWKLQ WKH VFRSH RI WKHLU HPSOR\PHQW DV HPSOR\HHV

RI WKH 8QLWHG 6WDWHV´ &HUWLILFDWLRQ ([ $ WR 'HI¶V 0RW >'NW  @ %DVHG RQ WKDW FHUWLILFDWLRQ

GHIHQGDQWV KDYH PRYHG WR VXEVWLWXWH WKH 8QLWHG 6WDWHV DV WKH RQO\ SURSHU GHIHQGDQW LQ WKLV PDWWHU

'HI¶V 0HP DW ±

       3ODLQWLII FKDOOHQJHV WKH FHUWLILFDWLRQ E\ LQVLVWLQJ WKDW LW ³KDV DOOHJHG VXIILFLHQW IDFWV DW D

PLQLPXP WR UDLVH D GLVSXWHG LVVXH DV WR ZKHWKHU WKH LQGLYLGXDO >G@HIHQGDQWV KDYH DFWHG EH\RQG

WKH VFRSH RI WKHLU HPSOR\PHQW´ DQG VR LW PDLQWDLQV WKDW LW ³LV HQWLWOHG WR MXULVGLFWLRQDO GLVFRYHU\

DV WR WKH VFRSH RI HPSOR\PHQW RI HDFK RI WKH LQGLYLGXDO >G@HIHQGDQWV´ 3O¶V 2SS DW ± 7KH

&RXUW GLVDJUHHV 3ODLQWLII KDV IDLOHG WR UHEXW WKH SUHVXPSWLRQ FUHDWHG E\ WKH FHUWLILFDWLRQ WKDW WKH

GHIHQGDQWV ZHUH DFWLQJ ZLWKLQ WKH VFRSH RI WKHLU HPSOR\PHQW EHFDXVH LW KDV DOOHJHG QR IDFWV WR

VXSSRUW VXFK D FRQFOXVLRQ 7KHUHIRUH SODLQWLII LV QRW HQWLWOHG WR GLVFRYHU\ RQ WKLV LVVXH

       ³,Q GHWHUPLQLQJ ZKHWKHU DQ HPSOR\HH DFWHG ZLWKLQ WKH VFRSH RI KLV HPSOR\PHQW >D FRXUW

PXVW@ FRQVLGHU WKH VXEVWDQWLYH ODZ RI WKH MXULVGLFWLRQ ZKHUH WKH HPSOR\PHQW UHODWLRQVKLS H[LVWV ±

KHUH WKH ODZ RI WKH 'LVWULFW RI &ROXPELD´ Jacobs  )G DW  FLWLQJ Majano v. United States

 )G   '& &LU  &RXUWV LQ WKLV &LUFXLW DQDO\]H WKLV LVVXH E\ FRQVLGHULQJ

ZKHWKHU WKH HPSOR\HH¶V FRQGXFW ³D >@ LV RI WKH NLQG KH LV HPSOR\HG WR SHUIRUP E >@ RFFXUV

VXEVWDQWLDOO\ ZLWKLQ WKH DXWKRUL]HG WLPH DQG VSDFH OLPLWV >DQG@ F >@ LV DFWXDWHG DW OHDVW LQ SDUW

E\ D SXUSRVH WR VHUYH WKH PDVWHU´ Id. FLWLQJ 5HVWDWHPHQW 6HFRQG RI $JHQF\   ³7KH WHVW LV

µREMHFWLYH¶ DQG LV µEDVHG RQ DOO WKH IDFWV DQG FLUFXPVWDQFHV¶´ id. TXRWLQJ Weinberg v. Johnson

 $G   '&  DQG LW KDV EHHQ ³EURDGO\ LQWHUSUHWHG´ Id. $FFRUGLQJO\ XQGHU

'LVWULFW RI &ROXPELD ODZ ³>W@KH VFRSHRIHPSOR\PHQW WHVW RIWHQ LV DNLQ WR DVNLQJ ZKHWKHU WKH



                                                  
GHIHQGDQW PHUHO\ ZDV RQ GXW\ RU RQ WKH MRE ZKHQ FRPPLWWLQJ WKH DOOHJHG WRUW´ Id. TXRWLQJ

Harbury v. Hayden  )G   Q '& &LU 

       +HUH WKH FHUWLILFDWLRQ LWVHOI FRQVWLWXWHV prima facie HYLGHQFH WKDW WKH LQGLYLGXDO %23

GHIHQGDQWV ZHUH ³RQ GXW\ RU RQ WKH MRE´ ZKHQ HQJDJLQJ LQ WKH DOOHJHG PLVFRQGXFW See id.

7R UHEXW WKH SUHVXPSWLRQ SODLQWLII DVVHUWV WKDW GHIHQGDQWV ZHUH QRW DFWLQJ ZLWKLQ WKH VFRSH RI WKHLU

HPSOR\PHQW EHFDXVH WKH\ DFWHG ZLWK PDOLFH WRZDUG SODLQWLII ± LW DOOHJHV WKDW WKH\ HQJDJHG LQ D

³FRQFHUWHG HIIRUW    WR VWULS %DQQXP RI FRQWUDFWV´ DQG DZDUG WKHP WR D FRPSHWLWRU ZURQJIXOO\

LQYHVWLJDWHG LWV HPSOR\HHV DQG HQJDJHG LQ ³QXPHURXV H[DPSOHV RI VDERWDJH´ 3O¶V 2SS DW 

³:KLOH WKH %23 PD\ DOOHJH WKDW WKHVH HIIRUWV DUH LQFLGHQWDO RU UHODWHG WR WKHLU HPSOR\PHQW´

SODLQWLII DUJXHV WKDW WKHVH DFWV FDQQRW EH ZLWKLQ WKH VFRSH RI GHIHQGDQWV¶ HPSOR\PHQW EHFDXVH ³WKH

XQGHUO\LQJ FRQGXFW VWLOO LQYROYHG WKH V\VWHPDWLF VWULSSLQJ RI %DQQXP¶V FRQWUDFWV ZLWKRXW GXH

SURFHVV´ Id. (VVHQWLDOO\ SODLQWLII DUJXHV WKDW WKH way LQ ZKLFK WKH LQGLYLGXDO GHIHQGDQWV FDUULHG

RXW WKHLU GXWLHV PRYHV WKHLU DFWLRQV RXWVLGH WKH VFRSH RI WKHLU HPSOR\PHQW



       0RUHRYHU SODLQWLII¶V DOOHJDWLRQV LQ WKH DPHQGHG FRPSODLQW VXSSRUW WKH FRQFOXVLRQ WKDW
GHIHQGDQWV ZHUH DFWLQJ ZLWKLQ WKH VFRSH RI WKHLU HPSOR\PHQW 3ODLQWLII¶V FODLPV FRQFHUQ
GHIHQGDQWV¶ GXWLHV UHODWHG WR WKH DGPLQLVWUDWLRQ RI FRQWUDFWV ZKLFK IDOO ZLWKLQ WKH SXUYLHZ RI WKH
UHVSRQVLELOLWLHV RI IHGHUDO FRQWUDFWLQJ SHUVRQQHO See  &)5   GHILQLQJ YDULRXV SRVLWLRQV
KHOG E\ GHIHQGDQWV VXFK DV ³FRQWUDFWLQJ RIILFHU´ DQG ³FRQWUDFWLQJ RIILFHU¶V UHSUHVHQWDWLYH´ )RU
H[DPSOH SODLQWLII FODLPV WKDW GHIHQGDQWV PDGH LW GLIILFXOW WR ZLQ QHZ FRQWUDFWV FRQGXFWHG
LQYHVWLJDWLRQV DW IRXU IDFLOLWLHV PRGLILHG RQJRLQJ FRQWUDFWV LW KDG ZLWK WKH %23 UHIXVHG WR WLPHO\
UHLPEXUVH LW DQG PLVXVHG WKH &RQWUDFWRU 3HUIRUPDQFH $VVHVVPHQW 5HSRUWV 3URFHVV $P &RPSO
 ± ± ±  ±    7KLV DOOHJHG PLVFRQGXFW LV GLUHFWO\ UHODWHG WR
GHIHQGDQWV¶ HPSOR\PHQW UHVSRQVLELOLWLHV GHPRQVWUDWLQJ WKDW GHIHQGDQWV¶ FRQGXFW LV ³RI WKH NLQG
>WKH\ DUH@ HPSOR\HG WR SHUIRUP´ Jacobs  )G DW  TXRWLQJ 5HVWDWHPHQW 6HFRQG RI
$JHQF\  D (YHQ IXUWKHU WKH MRE WLWOHV RI WKH QDPHG GHIHQGDQWV LQGLFDWH WKDW WKH DFWV RU
RPLVVLRQV SODLQWLII FKDOOHQJHV IDOO ZLWKLQ WKH VFRSH RI GHIHQGDQWV¶ HPSOR\PHQW DV FRQWUDFWLQJ
SHUVRQQHO See $P &RPSO  ± &KDUOHV ( 6DPXHOV -U WKH 'LUHFWRU RI WKH %23 &DWKHULQH
6FRWW &KLHI RI WKH %23 1DWLRQDO $FTXLVLWLRQV DQG 6\VWHPV 6HFWLRQ 7LPRWK\ 5 %DUQHWW D %23
5HVLGHQWLDO 5HHQWU\ 0DQDJHU &KHU\O 'HQQLQJV D &RPPXQLW\ &RUUHFWLRQV $GPLQLVWUDWRU IRU
%23 /ROD /HH%URZQ D %23 &RQWUDFWLQJ 2IILFHU 2VRULD 7RWVRQ D IRUPHU &RQWUDFW 2YHUVLJKW
6SHFLDOLVW IRU %23 DQG $QGUHD -RKQVRQ D IRUPHU &RPPXQLW\ &RUUHFWLRQV 5HJLRQDO &RRUGLQDWRU
IRU %23
                                                 
          %XW SODLQWLII PLVVHV WKH SRLQW ³>W@KH SURSHU >VFRSHRIHPSOR\PHQW@ LQTXLU\    µIRFXVHV

RQ WKH XQGHUO\LQJ GLVSXWH RU FRQWURYHUV\ QRW RQ WKH QDWXUH RI WKH WRUW DQG LV EURDG HQRXJK WR

HPEUDFH DQ\ LQWHQWLRQDO WRUW DULVLQJ RXW RI D GLVSXWH WKDW ZDV RULJLQDOO\ XQGHUWDNHQ RQ WKH

HPSOR\HU¶V EHKDOI¶´ Ballenger  )G DW  TXRWLQJ Weinberg  $G DW  )RU

H[DPSOH LQ Ballenger WKH FRXUW XSKHOG WKH GLVWULFW FRXUW¶V VXEVWLWXWLRQ RI WKH 8QLWHG 6WDWHV DV D

GHIHQGDQW IRU D FRQJUHVVPDQ ZKHUH WKH SODLQWLII EURXJKW DQ DFWLRQ IRU GHIDPDWLRQ DQG VODQGHU

DJDLQVW WKH FRQJUHVVPDQ IRU FHUWDLQ VWDWHPHQWV KH PDGH RQ WKH WHOHSKRQH WR D UHSRUWHU  )G

DW      7KH FRXUW UHDVRQHG WKDW ³>W@KH DSSURSULDWH TXHVWLRQ    LV ZKHWKHU WK>H@ WHOHSKRQH

FRQYHUVDWLRQ´ LQ ZKLFK WKH GHIHQGDQW DOOHJHGO\ PDGH D GHIDPDWRU\ VWDWHPHQW DERXW WKH SODLQWLII

³ZDV WKH NLQG RI FRQGXFW >WKH SODLQWLII@ ZDV HPSOR\HG WR SHUIRUP´ ± DQG QRW ZKHWKHU WKH DOOHJHGO\

GHIDPDWRU\ VHQWHQFH LWVHOI ZDV ZLWKLQ WKH VFRSH RI WKH SODLQWLII¶V HPSOR\PHQW Id. DW  7KH

FRXUW FRQFOXGHG WKDW WKH FRQJUHVVPDQ¶V WHOHSKRQLF LQWHUDFWLRQ ZLWK WKH SUHVV IHOO ZLWKLQ WKH VFRSH

RI KLV GXWLHV ZKLFK UHTXLUH KLP WR KDYH D UHODWLRQVKLS ZLWK WKH SXEOLF Id. DW ± Fompare

Majano  )G DW  ILQGLQJ D TXHVWLRQ RI IDFW DV WR ZKHWKHU WKH GHIHQGDQW¶V SK\VLFDO DVVDXOW

RI DQRWKHU HPSOR\HH ZDV LQGHSHQGHQW RI KHU GXW\ WR UHSRUW WR ZRUN RU ZLWKLQ KHU VFRSH RI

HPSOR\PHQW with Jacobs  )G DW ± ILQGLQJ D VXSHUYLVRU¶V DOOHJHG LQWHUIHUHQFH ZLWK

SODLQWLII¶V DWWHPSWV WR VHFXUH DOWHUQDWLYH HPSOR\PHQW RSSRUWXQLWLHV ZDV ZLWKLQ WKH VFRSH RI KLV

HPSOR\PHQW EHFDXVH WKH W\SH RI DFW WKDW WKH VXSHUYLVRU DOOHJHGO\ WRRN ZDV WKH NLQG RI FRQGXFW KH

ZDV HPSOR\HG WR SHUIRUP DQG ZDV LQWHQGHG WR EHQHILW KLV HPSOR\HU

          ,Q RWKHU ZRUGV WKH UHOHYDQW TXHVWLRQ KHUH LV ZKHWKHU WKH LQGLYLGXDO GHIHQGDQWV ZHUH DFWLQJ

ZLWKLQ WKH VFRSH RI WKHLU HPSOR\PHQW ZKHQ WKH\ ZHUH LQYROYHG LQ WKH DZDUG DQG DGPLQLVWUDWLRQ RI

WKH FRQWUDFWV DW LVVXH      3ODLQWLII¶V DOOHJDWLRQV WKDW WKH GHIHQGDQWV ³PDOLFLRXVO\´ FRQGXFWHG

LQYHVWLJDWLRQV DQG RWKHU ³SUHMXGLFLDO DQG LPSURSHU´ DFWLRQV FKDOOHQJH WKH manner LQ ZKLFK



                                                  
GHIHQGDQWV SHUIRUPHG WKHLU ZRUNUHODWHG GXWLHV QRW WKH nature RI WKH GXWLHV WKHPVHOYHV $P

&RPSO   F $V LQ Ballenger WKH EDVLF FKDUDFWHULVWLFV RI WKH DFWLRQV QRW WKH DOOHJHGO\

WRUWLRXV FKDUDFWHU RI WKH DFWLRQV FRQWURO  )G DW  7KHUHIRUH WKH &RXUW ILQGV WKDW SODLQWLII

KDV QRW DOOHJHG VXIILFLHQW IDFWV WR DOORZ IRU MXULVGLFWLRQDO GLVFRYHU\ DV WR WKH VFRSH RI HPSOR\PHQW

RI HDFK RI WKH LQGLYLGXDO GHIHQGDQWV See Wuterich  )G DW  ILQGLQJ ³WKHUH LV QR ULJKW WR

HYHQ OLPLWHG GLVFRYHU\ LQ D :HVWIDOO $FW FDVH XQOHVV DQG XQWLO D SODLQWLII DOOHJHV VXIILFLHQW IDFWV WR

UHEXW WKH JRYHUQPHQW¶V FHUWLILFDWLRQ´

       %HFDXVH SODLQWLII KDV QRW DOOHJHG VXIILFLHQW IDFWV WR UHEXW WKH SUHVXPSWLRQ FUHDWHG E\ WKH

JRYHUQPHQW¶V FHUWLILFDWLRQ DQG EHFDXVH WKH XQGHUO\LQJ QDWXUH RI WKH LQGLYLGXDO GHIHQGDQWV¶ DFWLRQV

KHUH ZDV WLHG WR GHIHQGDQWV¶ UROHV ZLWK WKH %23 LQ VXSHUYLVLQJ JRYHUQPHQW FRQWUDFWV WKH &RXUW

ILQGV WKDW WKH QDPHG GHIHQGDQWV ZHUH DFWLQJ ZLWKLQ WKH VFRSH RI WKHLU HPSOR\PHQW 6R SXUVXDQW

WR WKH :HVWIDOO $FW WKH &RXUW ZLOO VXEVWLWXWH WKH 8QLWHG 6WDWHV DV WKH VROH GHIHQGDQW See Jacobs

 )G DW ±  $OO FODLPV DJDLQVW &KDUOHV ( 6DPXHOV -U &DWKHULQH 6FRWW 7LPRWK\ 5

%DUQHWW &KHU\O 'HQQLQJV /ROD /HH%URZQ 2VRULD 7RVWRQ DQG $QGUHD -RKQVRQ LQ WKHLU LQGLYLGXDO

FDSDFLWLHV DUH GLVPLVVHG

,,    7KH &RXUW ODFNV VXEMHFW PDWWHU MXULVGLFWLRQ RYHU SODLQWLII¶V WRUW FODLPV EHFDXVH WKH
       8QLWHG 6WDWHV KDV QRW ZDLYHG LWV VRYHUHLJQ LPPXQLW\ XQGHU WKH )HGHUDO 7RUWV &ODLPV
       $FW DQG SODLQWLII KDV QRW H[KDXVWHG LWV DGPLQLVWUDWLYH UHPHGLHV

       $IWHU D :HVWIDOO $FW VXEVWLWXWLRQ LQ D WRUW VXLW ³WKH VXLW LV JRYHUQHG E\ WKH )HGHUDO 7RUW

&ODLPV $FW µ)7&$¶ DQG LV VXEMHFW WR DOO RI WKH )7&$¶V H[FHSWLRQV IRU DFWLRQV LQ ZKLFK WKH

>J@RYHUQPHQW KDV QRW ZDLYHG VRYHUHLJQ LPPXQLW\´ Wuterich  )G DW  FLWLQJ Osborn

 86 DW  7KH )7&$ EDUV SODLQWLIIV IURP EULQJLQJ FHUWDLQ FODLPV DJDLQVW WKH JRYHUQPHQW

see  86&   DQG VHWV UHTXLUHPHQWV IRU DGPLQLVWUDWLYH H[KDXVWLRQ RI FODLPV DQG WLPHO\

ILOLQJ RI DGPLQLVWUDWLYH FODLPV  86&  E +HUH WKH JRYHUQPHQW KDV QRW ZDLYHG LWV



                                                 
VRYHUHLJQ LPPXQLW\ SODLQWLII¶V WRUW FODLPV DUH VSHFLILFDOO\ H[FOXGHG XQGHU WKH )7&$ DQG SODLQWLII

KDV IDLOHG WR H[KDXVW LWV DGPLQLVWUDWLYH UHPHGLHV 7KHUHIRUH WKH &RXUW ODFNV VXEMHFW PDWWHU

MXULVGLFWLRQ RYHU SODLQWLII¶V WRUW FODLPV

        $ 3ODLQWLII¶V WRUW FODLPV DJDLQVW WKH %23 DUH EDUUHG XQGHU WKH )7&$

        3ODLQWLII DWWHPSWV WR DYRLG WKH UHTXLUHPHQWV RI WKH :HVWIDOO $FW DQG WKH )7&$ E\ DUJXLQJ

WKDW WKLV LV D VLWXDWLRQ LQ ZKLFK WKH 8QLWHG 6WDWHV KDV ZDLYHG LWV VRYHUHLJQ LPPXQLW\ DQG LW SRLQWV

WR WKH $GPLQLVWUDWLYH 3URFHGXUH $FW ³$3$´ 3ODLQWLII FRUUHFWO\ QRWHV WKDW WKH $3$ ³ZDLYHV WKH

>J@RYHUQPHQW¶V LPPXQLW\ IURP DFWLRQV VHHNLQJ UHOLHI RWKHU WKDQ PRQH\ GDPDJHV´ 3O¶V 2SS DW

 Vee  86&   DSSO\LQJ ZDLYHU WR VXLWV VHHNLQJ HTXLWDEOH UHOLHI %XW WKLV ODZVXLW LV

SODLQO\ DQ DFWLRQ IRU PRQHWDU\ UHOLHI 7KH FRPSODLQW EHJLQV ZLWK WKH DQQRXQFHPHQW WKDW LW VHHNV

³GHFODUDWRU\ UHOLHI SHUPDQHQW LQMXQFWLRQ DQG PRQHWDU\ DQG RWKHU UHOLHI EDVHG RQ WKH GH IDFWR

GHEDUPHQW RI 3ODLQWLII %DQQXP ,QF´ $P &RPSO   $QG WKH SUD\HU IRU UHOLHI DVNV WKH &RXUW

WR ³>D@ZDUG GDPDJHV LQ H[FHVV RI ´ Id DW S  6R SODLQWLII¶V FRPSODLQW FOHDUO\

DVVHUWV FODLPV IRU PRQHWDU\ GDPDJHV FODLPV WR ZKLFK WKH 8QLWHG 6WDWHV KDV QRW ZDLYHG LWV

VRYHUHLJQ LPPXQLW\

        %HFDXVH WKH JRYHUQPHQW KDV QRW ZDLYHG LWV VRYHUHLJQ LPPXQLW\ WKH :HVWIDOO $FW

FHUWLILFDWLRQ ³FRQYHUWV WKH WRUW VXLW LQWR D )7&$ DFWLRQ RYHU ZKLFK WKH IHGHUDO FRXUW ODFNV VXEMHFW

PDWWHU MXULVGLFWLRQ DQG KDV WKH HIIHFW RI DOWRJHWKHU EDUULQJ SODLQWLII¶V FDVH´ LI RQH RI WKH )7&$¶V

H[FHSWLRQV DSSOLHV Wuterich,  )G DW  $QG KHUH GHIHQGDQWV SRLQW WR WKH H[FHSWLRQ IRU

³>D@Q\ FODLP DULVLQJ RXW RI    OLEHO VODQGHU    RU LQWHUIHUHQFH ZLWK FRQWUDFW ULJKWV´  86&

 K

        7R GHWHUPLQH ZKHWKHU D FODLP LV VXEMHFW WR RQH RI WKH )7&$ H[FHSWLRQV LW LV WKH XQGHUO\LQJ

FKDUDFWHU RI WKH FODLP WKDW LV GHWHUPLQDWLYH QRW WKH ODEHO XWLOL]HG E\ WKH SODLQWLII Edmonds v.



                                                  
United States  ) 6XSS G   ''&  TXRWLQJ Johnson v. United States  )G

  '& &LU  LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG ³>$@ OLWLJDQW FDQQRW FLUFXPYHQW WKH

>)7&$@ E\ WKH VLPSOH H[SHGLHQW RI GUDIWLQJ LQ WHUPV RI QHJOLJHQFH D FRPSODLQW WKDW LQ UHDOLW\ LV D

FODLP DV WR ZKLFK WKH 8QLWHG 6WDWHV UHPDLQV LPPXQL]HG´ Art Metal-U.S.A., Inc. v. United States,

 )G   '& &LU  TXRWLQJ  86 & K LQWHUQDO TXRWDWLRQV RPLWWHG

FRQFOXGLQJ WKDW FODLPV IRU LQMXULRXV IDOVHKRRGV GLVSDUDJHPHQW RI SURSHUW\ VODQGHU RI JRRGV RU

WUDGH OLEHO DUH FODLPV DULVLQJ RXW RI OLEHO RU VODQGHU XQGHU WKH )7&$

       +HUH SODLQWLII¶V DPHQGHG FRPSODLQW LV FHQWHUHG HQWLUHO\ XSRQ DOOHJHG LQWHUIHUHQFH ZLWK

H[LVWLQJ DQG SURVSHFWLYH FRQWUDFW ULJKWV FODLPV ZKLFK DUH VSHFLILFDOO\ EDUUHG XQGHU WKH )7&$ 

86 & K 7KH DOOHJDWLRQV LQ &RXQW ,, HQWLWOHG ³,QWHUIHUHQFH :LWK &RQWUDFWXDO 5HODWLRQV

3URVSHFWLYH &RQWUDFWXDO 5HODWLRQV DQG 3URVSHFWLYH $GYDQWDJHRXV (FRQRPLF 5HODWLRQVKLS´ $P

&RPSO DW S  GLUHFWO\ DOOHJH WKDW GHIHQGDQWV XVHG WKHLU SRVLWLRQV WR ³LQWHUIHUH ZLWK DQG GLVUXSW

WKH H[LVWLQJ DQG SURVSHFWLYH EXVLQHVV UHODWLRQVKLSV RI 3ODLQWLII %DQQXP´ Id   3ODLQWLII¶V

FODLPV VWHP IURP WKH DOOHJHG GXW\ QRW WR LQWHUIHUH ZLWK D FXUUHQW RU SURVSHFWLYH HFRQRPLF

DGYDQWDJH Art Metal-U.S.A. Inc.  )G DW  DQG WKHUHIRUH WKLV W\SH RI FODLP LV EDUUHG

XQGHU WKH )7&$ See  86 & K

       &RXQW , DOOHJHV WKDW ³>G@HIHQGDQWV KDYH HQJDJHG LQ D FDPSDLJQ WR VDERWDJH %DQQXP
V

RSHUDWLRQV KDUP LWV DELOLW\ WR DFW DV D FRQWUDFWRU GHIDPH LWV FRQWUDFW SHUIRUPDQFH KLVWRU\ DQG

GDPDJH %DQQXP
V DELOLW\ WR REWDLQ QHZ EXVLQHVV´ $P &RPSO   :KLOH SODLQWLII FDVWV WKHVH

FLUFXPVWDQFHV DV ³GH IDFWR GHEDUPHQW´ id DW S  WKHVH DOOHJDWLRQV IDOO ZLWKLQ WKH VFRSH RI WKH

)7&$ H[FHSWLRQ EHFDXVH WKH VXEVWDQFH RI WKLV FRXQW UHODWHV GLUHFWO\ WR WKH DZDUGLQJ RI FRQWUDFWV

See Edmonds  ) 6XSS G DW  3ODLQWLII¶V DOOHJDWLRQ WKDW GHIHQGDQWV KDYH ³GDPDJH>G@




                                                
%DQQXP¶V DELOLW\ WR REWDLQ QHZ EXVLQHVV´ LV WKH W\SH RI WRUWLRXV LQWHUIHUHQFH ZLWK FRQWUDFW FODLP

EDUUHG XQGHU WKH )7&$ $P &RPSO    86 & K

       7R WKH H[WHQW WKDW &RXQW , DOVR HQFRPSDVVHV D FODLP IRU OLEHO RU VODQGHU VXFK FODLPV DUH

DOVR VSHFLILFDOO\ EDUUHG XQGHU VHFWLRQ K RI WKH )7&$ 3ODLQWLII¶V DOOHJDWLRQV FRQFHUQLQJ

GHIHQGDQWV¶ DOOHJHG ³FDPSDLJQ WR VDERWDJH´ DQG ³GHIDPH LWV FRQWUDFW SHUIRUPDQFH KLVWRU\´ $P

&RPSO   VHHN UHOLHI IRU WKH VDPH W\SH RI UHSXWDWLRQDO KDUP WKDW WKH '& &LUFXLW FRQFOXGHG LV

EDUUHG XQGHU WKDW SURYLVLRQ See Art Metal-U.S.A., Inc.  )G DW  ILQGLQJ FODLPV WKDW WKH

*HQHUDO 6HUYLFHV $GPLQLVWUDWLRQ SURYLGHG IDOVH LQIRUPDWLRQ FRQFHUQLQJ WKH SODLQWLII¶V SURGXFWV

WKDW GDPDJHG LWV VWDQGLQJ UHSXWDWLRQ DQG SUHVWLJH IHOO ZLWKLQ WKH )7&$ H[FHSWLRQ

       +HUH SODLQWLII¶V FODLP WKDW ³>W@KH UXPRUV VWDWHPHQWV DQG DFWLRQV E\ >G@HIHQGDQWV FRQVWLWXWH

DQ LOOHJDO de facto GHEDUPHQW RI >S@ODLQWLII IURP UHFHLYLQJ FRQWUDFWV IURP WKH %23´ $P &RPSO

  LV VLPLODUO\ VXEMHFW WR GLVPLVVDO  86& K

       7KHUHIRUH WKH &RXUW ODFNV VXEMHFW PDWWHU MXULVGLFWLRQ RYHU SODLQWLII¶V FODLPV DOOHJLQJ GH

IDFWR GHEDUPHQW DQG WRUWLRXV LQWHUIHUHQFH ZLWK FRQWUDFW ULJKWV LQFOXGLQJ WKRVH DOOHJLQJ GHIDPDWLRQ

DQG WKH FRPSODLQW PXVW EH GLVPLVVHG RQ WKDW JURXQG DORQH

       % 3ODLQWLII¶V WRUW FODLPV DOVR IDLO EHFDXVH SODLQWLII KDV QRW H[KDXVWHG DOO DYDLODEOH
          DGPLQLVWUDWLYH UHPHGLHV EHIRUH EULQJLQJ WKLV VXLW

       %HFDXVH D VXLW LV ³JRYHUQHG E\ WKH )7&$´ IROORZLQJ D :HVWIDOO $FW VXEVWLWXWLRQ WKH

)7&$¶V UHTXLUHPHQWV RI DGPLQLVWUDWLYH H[KDXVWLRQ DQG WLPHOLQHVV LQ EULQJLQJ FODLPV DSSO\

Wuterich  )G DW  7KH )7&$ PDNHV FOHDU WKDW ³>D@Q DFWLRQ VKDOO QRW EH LQVWLWXWHG XSRQ D

FODLP DJDLQVW WKH 8QLWHG 6WDWHV IRU PRQH\ GDPDJHV IRU LQMXU\ RU ORVV    FDXVHG E\ WKH QHJOLJHQW

RU ZURQJIXO DFW RU RPLVVLRQ RI DQ\ HPSOR\HH RI WKH >J@RYHUQPHQW ZKLOH DFWLQJ ZLWKLQ WKH VFRSH RI

KLV RIILFH RU HPSOR\PHQW XQOHVV WKH FODLPDQW VKDOO KDYH ILUVW SUHVHQWHG WKH FODLP WR WKH DSSURSULDWH

)HGHUDO DJHQF\ DQG KLV FODLP VKDOO KDYH EHHQ ILQDOO\ GHQLHG E\ WKH DJHQF\´  86&  D

                                                 
:KHUH D SODLQWLII GRHV QRW H[KDXVW KLV DGPLQLVWUDWLYH UHPHGLHV WKH )7&$ EDUV KLV WRUW FODLPV

McNeil v. United States  86    DIILUPLQJ GLVPLVVDO RI SODLQWLII¶V )7&$ FODLP

IRU ODFN RI VXEMHFW PDWWHU MXULVGLFWLRQ EHFDXVH ³>W@KH )7&$ EDUV FODLPDQWV IURP EULQJLQJ VXLW LQ

IHGHUDO FRXUW XQWLO WKH\ KDYH H[KDXVWHG WKHLU DGPLQLVWUDWLYH UHPHGLHV´ 7KH RQO\ UHFRJQL]HG

H[FHSWLRQV WR WKH H[KDXVWLRQ UHTXLUHPHQW DUH ZKHUH DGPLQLVWUDWLYH UHPHGLHV DUH LQDGHTXDWH RU

ZKHUH LUUHSDUDEOH LQMXU\ ZRXOG UHVXOW DEVHQW LPPHGLDWH MXGLFLDO UHYLHZ Randolph-Sheppard

Vendors of Am. v. Weinberger  )G   '& &LU 

       +HUH SODLQWLII¶V FODLPV DUH EDUUHG EHFDXVH LW KDV IDLOHG WR H[KDXVW LWV DGPLQLVWUDWLYH DSSHDOV

RSWLRQV ZLWKLQ WKH %23 3ODLQWLII KDV QRW DOOHJHG WKDW LW KDV H[KDXVWHG LWV DGPLQLVWUDWLYH UHPHGLHV

LQ LWV FRPSODLQW DQG WKH %23 KDV QRW UHFHLYHG DQ\ DGPLQLVWUDWLYH FODLPV IURP SODLQWLII UHJDUGLQJ

WKH WRUW FODLPV SUHVHQWHG LQ WKLV DFWLRQ See $P &RPSO 'HFO RI 5HQHH %ULQNHU )RUQVKLOO ([ 

WR 'HI¶V 0RW >'NW  @ ³)RUQVKLOO 'HFO´ 6LPLODUO\ SODLQWLII KDV PDGH QR DOOHJDWLRQ WKDW

WKH %23¶V SURFHGXUHV IRU KDQGOLQJ DGPLQLVWUDWLYH DSSHDOV DUH LQDGHTXDWH RU WKDW LW ZRXOG VXIIHU

³LUUHSDUDEOH LQMXU\´ DEVHQW LPPHGLDWH MXGLFLDO UHYLHZ Randolph-Sheppard Vendors of Am. 

)G DW  7KHUHIRUH SODLQWLII¶V WRUW FODLPV IDLO EHFDXVH SODLQWLII KDV QRW ³ILUVW SUHVHQWHG WKH

FODLP WR WKH DSSURSULDWH )HGHUDO DJHQF\´  86&  D

,,,   7R WKH H[WHQW SODLQWLII DWWHPSWV WR UDLVH D FODLP XQGHU WKH 'XH 3URFHVV &ODXVH LW KDV
       IDLOHG WR DOOHJH VXIILFLHQW IDFWV QHFHVVDU\ WR VWDWH D FODLP

       &RXQW , DOVR VHHPV WR EH EDVHG LQ SDUW RQ WKH 'XH 3URFHVV &ODXVH RI WKH )LIWK $PHQGPHQW

DQG WKH FRQVWLWXWLRQDO DOOHJDWLRQV XQGHUOLH SODLQWLII¶V UHTXHVWV IRU HTXLWDEOH RU LQMXQFWLYH UHOLHI

See, e.g. $P &RPSO   ³6XFK D GHEDUPHQW WLQJHG ZLWK DOOHJDWLRQV RI D ODFN RI LQWHJULW\ RQ

WKH SDUW RI %DQQXP LPSOLFDWH WKH GXH SURFHVV FODXVH RI WKH WK $PHQGPHQW WR WKH 8QLWHG 6WDWHV

&RQVWLWXWLRQ DQG UHTXLUHV DW PLQLPXP SURSHU QRWLFH WR %DQQXP RI WKH FKDUJHV RQ ZKLFK WKH

GHEDUPHQW LV EDVHG DQG WKDW %DQQXP EH DIIRUGHG DQ RSSRUWXQLW\ WR UHIXWH WKRVH FKDUJHV´ :KLOH

                                                 
D IRUPDO VXVSHQVLRQ RU GHEDUPHQW LQYROYHV D VHULHV RI SURFHGXUDO VWHSV WKDW ZRXOG DIIRUG WKH

FRQWUDFWRU GXH SURFHVV see )$5  SODLQWLII PDNHV FOHDU WKDW WKH %23 KDV QRW LQLWLDWHG DQ\

IRUPDO GHEDUPHQW SURFHGXUHV SXUVXDQW WR 3DUW  RI WKH )HGHUDO $FTXLVLWLRQ 5HJXODWLRQV See 3O¶V

2SS DW  5DWKHU SODLQWLII DOOHJHV WKDW LW KDV EHHQ GHEDUUHG LQ IDFW

       7KH '& &LUFXLW KDV DFNQRZOHGJHG WKDW WKHUH DUH FLUFXPVWDQFHV ZKHQ WKH JRYHUQPHQW

FRXOG HIIHFWLYHO\ EDU D FRQWUDFWRU IURP UHFHLYLQJ JRYHUQPHQW EXVLQHVV ZLWKRXW LQYRNLQJ IRUPDO

GHEDUPHQW SURFHHGLQJV DQG LW KDV KHOG WKDW GH IDFWR GHEDUPHQW ³JRYHUQPHQW VWLJPDWL]DWLRQ WKDW

EURDGO\ SUHFOXGHV LQGLYLGXDOV RU FRUSRUDWLRQV IURP D FKRVHQ WUDGH RU EXVLQHVV>@ « GHSULYHV WKHP

RI OLEHUW\ LQ YLRODWLRQ RI WKH 'XH 3URFHVV &ODXVH´ Trifax Corp. v. District of Columbia  )G

  '& &LU  %XW WKLV VRUW RI JRYHUQPHQW DFWLRQ ZRXOG RQO\ LPSOLFDWH WKH FRQVWLWXWLRQ

LI D FRQWUDFWRU LV HIIHFWLYHO\ EDUUHG IURP ³YLUWXDOO\ DOO >J@RYHUQPHQW ZRUN´ Old Dominion Dairy

Prods., Inc. v. Sec’y of Def.  )G   '& &LU  see also Taylor v. Resolution

Trust Corp.  )G   '& &LU  TXRWLQJ Greene v. McElroy  86  

 ILQGLQJ SODLQWLII PXVW VKRZ WKDW WKH JRYHUQPHQW ³KDV VHULRXVO\ DIIHFWHG LI QRW GHVWUR\HG

KLV DELOLW\ WR REWDLQ HPSOR\PHQW LQ >KLV@ ILHOG´ WR VKRZ EURDG SUHFOXVLRQ 0HUHO\ VKRZLQJ WKDW

WKH SODLQWLII ³ZRQ VRPH DQG ORVW VRPH LQ UHWDLQLQJ DQG ELGGLQJ RQ JRYHUQPHQW FRQWUDFWV´

LV LQVXIILFLHQW See Trifax Corp.  )G DW 

       +HUH SODLQWLII KDV QRW DOOHJHG VXIILFLHQW IDFWV WR VKRZ LW KDV EHHQ VR FRPSOHWHO\ SUHFOXGHG

IURP UHFHLYLQJ FRQWUDFWV WKDW LW KDV JURXQGV WR UDLVH D GXH SURFHVV FODLP $FFRUGLQJ WR SODLQWLII¶V

RZQ FRPSODLQW SODLQWLII PDLQWDLQV FRQWUDFWV ZLWK WKH %23 DW VL[ IDFLOLWLHV DQG WKH %23 KDV

H[HUFLVHG RSWLRQV WR FRQWLQXH FHUWDLQ H[LVWLQJ FRQWUDFWV ZLWK SODLQWLII VLQFH  $P &RPSO 



      :KLOH WKH &RXUW PXVW SUHGLFDWH LWV UXOLQJ RQ WKH IDFWV VHW IRUWK LQ WKH DPHQGHG FRPSODLQW
GHIHQGDQWV GLVSXWH WKLV FKDUDFWHUL]DWLRQ RI SODLQWLII¶V VWDQGLQJ DQG WKH\ SRLQW WR D VHULHV RI FRQWUDFW
DZDUGV WKDW EHOLH SODLQWLII¶V FODLP 'HI¶V 0HP DW ±
                                                  
±  :KLOH SODLQWLII KDV ORVW VRPH QHZ ELGV IRU DGGLWLRQDO ZRUN IURP WKH %23 WKH IDFW WKDW

LW KDV ZRQ VRPH DQG ORVW VRPH LV LQVXIILFLHQW WR UDLVH D FODLP XQGHU WKH GXH SURFHVV FODXVH EHFDXVH

LW GRHV QRW VKRZ D VXIILFLHQWO\ EURDG H[FOXVLRQ IURP REWDLQLQJ ZRUN Trifax Corp.  )G DW

± 7KHUHIRUH WR WKH H[WHQW SODLQWLII DWWHPSWV WR UDLVH GXH SURFHVV FODXVH FODLPV LQ LWV

DPHQGHG FRPSODLQW VXFK FODLPV DUH GLVPLVVHG

                                              &21&/86,21

       3XUVXDQW WR WKH :HVWIDOO $FW WKH 8QLWHG 6WDWHV JRYHUQPHQW ZLOO EH VXEVWLWXWHG DV WKH VROH

GHIHQGDQW LQ WKLV DFWLRQ %HFDXVH WKH JRYHUQPHQW KDV QRW ZDLYHG LWV VRYHUHLJQ LPPXQLW\ DV WR DQ\

WRUW FODLPV SODLQWLII DVVHUWV WKH )7&$ DSSOLHV $V D UHVXOW WKLV &RXUW ODFNV VXEMHFW PDWWHU

MXULVGLFWLRQ RYHU SODLQWLII¶V WRUW FODLPV QRW RQO\ EHFDXVH WKH\ DUH EDUUHG XQGHU WKH )7&$ EXW

EHFDXVH SODLQWLII KDV IDLOHG WR H[KDXVW LWV DGPLQLVWUDWLYH UHPHGLHV )XUWKHUPRUH SODLQWLII KDV IDLOHG

WR DOOHJH VXIILFLHQW IDFWV WR VWDWH D FODLP XQGHU WKH 'XH 3URFHVV &ODXVH RI WKH )LIWK $PHQGPHQW

7KHUHIRUH WKH &RXUW ZLOO JUDQW WKH JRYHUQPHQW¶V PRWLRQ DQG GLVPLVV WKLV FDVH LQ LWV HQWLUHW\

       $ VHSDUDWH RUGHU ZLOO LVVXH




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

'$7( 2FWREHU  




                                                 
