Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 1 of 101
1 HON. THOMAS S. ZILLY
2
3
4
5
6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 RYAN DIAZ, JARED THOMPSON, ARIEL NO. 2:19-cv-01116-TSZ 9 ENRIQUEZ, PAUL BARR, JOHN RIOS, DAVID GUY, LISANDRO LIZARDO, CHRIS PLAINTIFFS’ FIRST AMENDED 10 LUEBCKE, ROBERT FOUCHA, NICHOLAS CLASS ACTION COMPLAINT YOCHHEIM, ALEC COLLINS, ZACKERY 11 REED, GRANT HOELSCHER, MICHAEL JURY TRIAL DEMANDED OREN, NATHAN AIMSWORTH, JASON 12 COFFEY-WOLFGANG, ERIC WILSON, LYDIA DELOACH, 13 Plaintiffs, v. 14 NINTENDO OF AMERICA, INC., 15 Defendant. 16 TOUSLEY BRAIN STEPHENS PLLC CHIMICLES SCHWARTZ KRINER 17 Kim D. Stephens, WSBA #11984 & DONALDSON-SMITH LLP Jason T. Dennett, WSBA #30686 Benjamin F. Johns (pro hac vice) 18 Kaleigh N.B. Powell, WSBA #52684 Andrew W. Ferich (pro hac vice) 1700 Seventh Avenue, Suite 2200 Alex M. Kashurba (pro hac vice) 19 Seattle, Washington 98101 361 West Lancaster Avenue Telephone: 206-682-5600 Haverford, PA 19041 20 Fax: 206-682-2992 Telephone: 610-642-8500 [email protected] Fax: 610-649-3633 21 [email protected] [email protected] [email protected] [email protected] 22 [email protected]
23 Interim Co-Lead Counsel for Plaintiffs
TOUSLEY BRAIN STEPHENS PLLC 1700 Seventh Avenue, Suite 2200 FIRST AMENDED CLASS ACTION COMPLAINT Seattle, Washington 98101 TEL. 206.682.5600 FAX 206.682.2992 Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 2 of 101
7$%/(2)&217(176 ,1752'8&7,21 -85,6',&7,21$1'9(18( 7+(3$57,(6 3ODLQWLIIV 5\DQ'LD] -DUHG7KRPSVRQ $ULHO(QULTXH] 3DXO%DUU -RKQ5LRV 'DYLG*X\ /LVDQGUR/L]DUGR &KULV/XHEFNH 5REHUW)RXFKD 1LFKRODV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17L 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 3 of 101 $GHTXDF\ 6XSHULRULW\ &/$,06)255(/,() &2817, %5($&+2)(;35(66:$55$17< 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV &2817,, %5($&+2)7+(,03/,(':$55$17<2)0(5&+$17$%,/,7< 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV &2817,,, 9,2/$7,2162)7+(&$/,)251,$ &21680(5/(*$/5(0(',(6$&7 &$/&,9&2'(HWVHT ³&/5$´ 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV &2817,9 9,2/$7,2162)7+(&$/,)251,$81)$,5&203(7,7,21/$: &$/%86 352)&2'(HWVHT ³8&/´ 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 8QODZIXO 8QIDLU )UDXGE\2PLVVLRQ &28179 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7 )25%5($&+2)(;35(66:$55$17< &$/&,9&2'( G 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV &28179, 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7 )25%5($&+2),03/,(':$55$17< &$/&,9&2'( HWVHT 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV &28179,, 9,2/$7,2162))/25,'$¶6'(&(37,9($1'81)$,5 75$'(35$&7,&(6$&7 )/$67$7HWVHT ³)'873$´ 2Q%HKDOIRI3ODLQWLII7KRPSVRQDQGWKH)ORULGD6XEFODVV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17LL 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 4 of 101 &28179,,, 9,2/$7,2162)7+(1(:-(56(<&21680(5)5$8'$&7 1-67$7$11 (76(4 ³1-&)$´ 2Q%HKDOIRI3ODLQWLIIV5LRVDQG*X\DQGWKH1HZ-HUVH\6XEFODVV &2817,; 9,2/$7,2162)7+(1257+&$52/,1$ 81)$,5$1''(&(37,9(75$'(35$&7,&(6$&7 1&*(167$7HWVHT ³1&8'73$´ 2Q%HKDOIRI3ODLQWLII)RXFKDDQGWKH1RUWK&DUROLQD6XEFODVV &2817; 9,2/$7,212)7+(,//,12,6&21680(5)5$8' $1''(&(37,9(%86,1(6635$&7,&(6$&7 ,//&20367$7HWVHT ³,&)$´ 2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV &2817;, 9,2/$7,2162)7+(,//,12,681,)250 '(&(37,9(75$'(35$&7,&(6$&7 ,//&20367$7HWVHT ³,OOLQRLV'73$´ 2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV &2817;,, 9LRODWLRQVRIWKH:DVKLQJWRQ&RQVXPHU3URWHFWLRQ$FW :$6+5(9&2'( HWVHT ³:&3$´ 2Q%HKDOIRI3ODLQWLII'H/RDFKDQGWKH:DVKLQJWRQ6XEFODVV &2817;,,, 9LRODWLRQRIWKH$UL]RQD&RQVXPHU)UDXG$FW $5,=5(967$7HWVHT ³$&)$´ 2Q%HKDOIRI3ODLQWLII(QULTXH]DQGWKH$UL]RQD6XEFODVV &2817;,9 9,2/$7,212)7+(,'$+2&21680(53527(&7,21$&7 ,'$+2&2'(HWVHT ³,'&3$´ 2Q%HKDOIRI3ODLQWLII5HHGDQGWKH,GDKR6XEFODVV &2817;9 9,2/$7,212)7+(2./$+20$ &21680(53527(&7,21$&7 2./$67$7WLWHWVHT ³2&3$´ 2Q%HKDOIRI3ODLQWLII+RHOVFKHUDQGWKH2NODKRPD6XEFODVV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17LLL 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 5 of 101 &2817;9, 9,2/$7,2162)7+(0,&+,*$1&21680(53527(&7,21$&7 0,&+&203/$:6 HWVHT ³0&3$´ 2Q%HKDOIRI3ODLQWLII$LQVZRUWKDQGWKH0LFKLJDQ6XEFODVV &2817;9,, 9,2/$7,2162)7+(25(*2181/$:)8/75$'(35$&7,&(6$&7 255(967$7HWVHT ³2873$´ 2Q%HKDOIRI3ODLQWLII&RIIH\:ROIJDQJDQGWKH2UHJRQ6XEFODVV &2817;9,,, 9,2/$7,212)1<*(1%86/$: 2Q%HKDOIRI3ODLQWLII/L]DUGRDQGWKH1HZ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17LY 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 6 of 101 1 FIRST AMENDED CLASS ACTION COMPLAINT 2 Plaintiffs Ryan Diaz, Jared Thompson, Ariel Enriquez, Paul Barr, John Rios, David Guy, 3 Lisandro Lizardo, Chris Luebcke, Robert Foucha, Nicholas Yochheim, Alec Collins, Zackery 4 Reed, Grant Hoelscher, Michael Oren, Nathan Aimsworth, Jason Coffey-Wolfgang, Eric Wilson, 5 Lydia DeLoach, individually, and on behalf of all others similarly situated, by and through 6 counsel, bring this action against Defendant Nintendo of America, Inc. (“Nintendo”). Plaintiffs’ 7 allegations herein are based upon personal knowledge and belief as to their own acts and upon 8 the investigation of their counsel and information and belief as to all other matters. 9 INTRODUCTION 10 1. This is a class action lawsuit brought against Nintendo by Plaintiffs on behalf of 11 themselves and similarly situated consumers who purchased Nintendo Switch game systems, 12 including the original Nintendo Switch and the new Nintendo Switch Lite, as well as the 13 standalone Joy-Con controllers (collectively referred to herein as “Switch”). 14 2. The Switch is manufactured, marketed, and sold by Nintendo. The initial Switch 15 was first made available for purchase in the United States on March 3, 2017. Prior to that date, on 16 January 13, 2017, Nintendo hosted a Launch Event, the video of which is widely available on 17 YouTube (the “Launch Event”).1 Several Nintendo executives touted the durability and features 18 of the Joy-Con controllers at the Launch Event. For example, Reggie Fils-Amie, the President and 19 COO of Nintendo of America, described them as “amazing controllers [that] combine all the 20 gameplay innovations that Nintendo invented, and adds to it.”2 Yoshiaki Koizumi, the Nintendo 21 22 23 1 https://www.youtube.com/watch?v=JsiRY521Nis (last visited Sept. 26, 2019). 2 Id. at 59:40. TOUSLEY BRAIN STEPHENS PLLC 1700 Seventh Avenue, Suite 2200 FIRST AMENDED CLASS ACTION COMPLAINT - 1 Seattle, Washington 98101 TEL. 206.682.5600 FAX 206.682.2992 Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 7 of 101 6ZLWFK *HQHUDO 3URGXFHU UHPDUNHG WKDW ³HDFK MR\FRQ FDQ EH XVHG DV D IXOO\IXQFWLRQLQJ LQGLYLGXDOFRQWUROOHU´ &RQWUDU\WRWKHVHFODLPVKRZHYHUWKH6ZLWFKLVGHIHFWLYH6SHFLILFDOO\WKH-R\ &RQ MR\VWLFN FRQWUROOHUV WKDW DUH XVHG WR RSHUDWH WKH 6ZLWFK FRQWDLQ D GHIHFW WKDW UHVXOWV LQ FKDUDFWHUVRUJDPHSOD\PRYLQJRQWKHVFUHHQZLWKRXWXVHUFRPPDQGRUPDQXDORSHUDWLRQRIWKH MR\VWLFN ³'ULIWLQJ´RUWKH³'ULIW'HIHFW´ 7KLVGHIHFWVLJQLILFDQWO\LQWHUIHUHVZLWKJDPHSOD\ DQGWKXVFRPSURPLVHVWKH6ZLWFKDQG-R\&RQFRQWUROOHU¶VFRUHIXQFWLRQDOLW\ %DVHGRQDQDO\VLVFRQGXFWHGE\3ODLQWLIIV¶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±WKH6ZLWFK/LWH±ZKLFKKDVQRQUHPRYDEOHMR\VWLFNVDQGFRQWUROOHUVWKDW Id. DW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 8 of 101 DOVRDSSHDUWRLQFOXGHWKHVDPHMR\VWLFNKDUGZDUHDVWKHUHJXODU6ZLWFK7KH6ZLWFK/LWHDOVRLV UHSRUWHGO\ SODJXHG E\ GULIWLQJ SHU D JURZLQJ QXPEHU RI RQOLQH FRPSODLQWV 1LQWHQGR NQHZ DERXWWKH'ULIWLQJ'HIHFWDQGWKHLVVXHVZLWKLWVFRQWUROOHUDQGMR\VWLFNKDUGZDUH\HWGHFLGHGWR LQFRUSRUDWHWKHPLQWRWKH6ZLWFK/LWHZLWKRXWILUVWIL[LQJWKHLVVXH $VDUHVXOWRI1LQWHQGR¶VXQIDLUGHFHSWLYHDQGRUIUDXGXOHQWEXVLQHVVSUDFWLFHV RZQHUVRI6ZLWFKHVDQG-R\&RQFRQWUROOHUVLQFOXGLQJ3ODLQWLIIVKDYHVXIIHUHGDQDVFHUWDLQDEOH ORVVLQMXU\LQIDFWDQGRWKHUZLVHKDYHEHHQKDUPHGE\1LQWHQGR¶VFRQGXFW $FFRUGLQJO\ 3ODLQWLIIV EULQJ WKLV DFWLRQ WR UHGUHVV 1LQWHQGR¶V YLRODWLRQV RI QXPHURXV VWDWH FRQVXPHU IUDXG VWDWXWHV EUHDFK RI H[SUHVV DQG LPSOLHG ZDUUDQW\ XQMXVW HQULFKPHQWDQGIRUYLRODWLRQVRI&DOLIRUQLD¶V6RQJ%HYHUO\&RQVXPHU:DUUDQW\$FW3ODLQWLIIV VHHN PRQHWDU\ UHOLHI IRU GDPDJHV VXIIHUHG GHFODUDWRU\ UHOLHI DV WR WKH SDUWLHV¶ ULJKWV XQGHU 1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 9 of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³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 2Q RU DURXQG -XO\ 0U 'LD] VHQW WKH GHIHFWLYH -R\&RQ FRQWUROOHU WR 1LQWHQGRIRUUHSDLUXQGHUWKHRQH\HDUZDUUDQW\7KUHHPRQWKVDIWHUUHFHLYLQJKLVUHIXUELVKHG -R\&RQFRQWUROOHUEDFN0U'LD]¶VFRQWUROOHUEHJDQWRH[KLELWWKHVDPH³GULIWLQJ´LVVXHDJDLQ 7KH OHIW MR\VWLFN RQ 0U 'LD]¶V H[WUD VHW RI -R\&RQ FRQWUROOHUV DOVR EHJDQ WR H[KLELW WKH ³GULIWLQJ´LVVXHDIWHUDERXWPRQWKVRIXVHEXWLWZDVQRORQJHUXQGHUZDUUDQW\VR0U'LD] GLGQRWVHQGLWLQIRUDQRXWRISRFNHWUHSDLU %RWKRI0U'LD]¶VVHWVRI-R\&RQFRQWUROOHUVKDYHEHHQUHQGHUHGXQXVDEOHIRU JDPHSOD\DVDUHVXOWRIWKH'ULIW'HIHFW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 10 of 101 $V D UHVXOW RI WKH GHIHFW RQ ERWK RI KLV -R\&RQ FRQWUROOHUV 0U 'LD] KDG WR SXUFKDVH WZR DGGLWLRQDO OHIWKDQG -R\&RQ FRQWUROOHUV IRU DSSUR[LPDWHO\ HDFK IURP $PD]RQRQ$SULO $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U'LD]GLGQRWNQRZDERXW WKH 'ULIW 'HIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOG QRW KDYH SXUFKDVHG KLV 6ZLWFK RU DGGLWLRQDO -R\&RQ FRQWUROOHUV RU ZRXOG KDYH SDLG VXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG -DUHG7KRPSVRQ 3ODLQWLII-DUHG7KRPSVRQLVDFLWL]HQRIWKHVWDWHRI)ORULGD 3ULRU WR SXUFKDVLQJ D 6ZLWFK 0U 7KRPSVRQ ZDWFKHG WKH /DXQFK (YHQW 0U 7KRPSVRQKHDUGDQGUHOLHGXSRQ1LQWHQGR¶VUHSUHVHQWDWLRQVUHJDUGLQJWKHIXQFWLRQDOLW\RIWKH -R\&RQVLQGHFLGLQJWRSXUFKDVHKLV6ZLWFK,QSDUWLFXODU1LQWHQGR¶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³GULIWLQJ´LVVXHVDJDLQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 11 of 101 ,QWRWDO0U7KRPSVRQHQGHGXSKDYLQJWKHVDPHSDLURISXUSRUWHGO\IL[HG-R\ &RQFRQWUROOHUVUHSDLUHGWKUHHWLPHV 2QO\ DIWHU VHQGLQJ WKH FRQWUROOHU EDFN IRU UHSDLU D IRXUWK WLPH GLG 1LQWHQGR ILQDOO\GHFLGHWRSURYLGH0U7KRPSVRQZLWKDQHZ-R\&RQFRQWUROOHUVHW $VDUHVXOWRIWKHGHIHFWRQKLVFRQWUROOHU1LQWHQGR¶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¶V UHSUHVHQWDWLRQV UHJDUGLQJ WKH IXQFWLRQDOLW\ RI WKH -R\&RQV LQ GHFLGLQJ WR SXUFKDVH KLV 6ZLWFK 7KH IXQFWLRQDOLW\ DQG UHPRYDELOLW\ RI WKH-R\&RQVZDVSDUWLFXODUO\ HQWLFLQJWR0U(QULTXH]DQGLQIOXHQFHGKLVSXUFKDVLQJGHFLVLRQ 2Q0DUFK3ODLQWLIISXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHDQGDQH[WUD SDLU RI -R\&RQ FRQWUROOHUV IRU DSSUR[LPDWHO\ IURP %HVW %X\ IRU SHUVRQDO IDPLO\ RU KRXVHKROGXVH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 12 of 101 :LWKLQDSSUR[LPDWHO\DPRQWKRIXVHWKHOHIWMR\VWLFNRQWKH-R\&RQFRQWUROOHUV WKDWFDPHZLWKWKHFRQVROHEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ %HJLQQLQJRQRUDURXQG$SULO0U(QULTXH]UHDFKHGRXWWR1LQWHQGR GLUHFWO\DERXWWKH³GULIW´LVVXHKLVFRQWUROOHUVZHUHH[KLELWLQJ1LQWHQGRHQGHGXSUHSODFLQJ RU UHSDLULQJ WKH ILUVW VHW RI -R\&RQ FRQWUROOHUV KH VHQW WR LW IRU ZDUUDQW\ VHUYLFH 7KH LVVXH UHVXUIDFHG RQ DOO WKHVH FRQWUROOHUV DIWHU VHYHUDO PRQWKV RI XVH XSRQ EHLQJ UHWXUQHG WR 0U (QULTXH] 0U(QULTXH]DOVRSXUFKDVHGDGGLWLRQDOFRQWUROOHUVGXHWRWKHUHFXUUHQWQDWXUHRI WKH³GULIW´LVVXH,QRUDURXQG2FWREHUKHERXJKWDVHWRIWKHQHRQ\HOORZ$UPVWKHPHG -R\&RQ FRQWUROOHUV IURP *DPH6WRS DQG D VHW RI WKH JUHHQ DQG SLQN 6SODWRRQ WKHPHG FRQWUROOHUVIRUDSSUR[LPDWHO\WRWDOHDFKFRQWUROOHUFRVWLQJDSSUR[LPDWHO\LQGLYLGXDOO\ +H DOVR SXUFKDVHG DQRWKHU JUH\ VHW RI -R\&RQ FRQWUROOHUV IRU DSSUR[LPDWHO\ IURP *DPH6WRSLQRUDURXQG2FWREHU$OORIWKHVHSDLUVHQGHGXSKDYLQJ³GULIW´LVVXHV $OOVL[VHWVRI0U(QULTXH]¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 13 of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³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ ,QRUDURXQG0DUFK0U%DUUFRQWDFWHG1LQWHQGRVXSSRUWDERXWWKHLVVXH DQG WKH 1LQWHQGR UHSUHVHQWDWLYH VWDWHG WKDW WKH ³GULIW´ LVVXH ZDV FDXVHG E\ H[WHQVLYH XVH WKHUHIRUH LW ZDV QRW FRYHUHG XQGHU ZDUUDQW\ 7KH UHSUHVHQWDWLYH UHFRPPHQGHG KDYLQJ WKH FRQWUROOHUVUHSDLUHGE\1LQWHQGRRUDORFDOUHSDLUVKRSDWKLVRZQH[SHQVH 0U %DUU GHFLGHG WR EX\ D QHZ VHW RI -R\&RQ FRQWUROOHUV IRU IURP *DPH6WRSLQ0LGGOHWRZQ5KRGH,VODQGKDYLQJUHDGRQYDULRXVIRUXPVWKDWWKHUHSDLUSURFHVV FDQWDNHDORQJWLPH$IWHUVHYHUDOPRQWKVRIXVHKLVUHSODFHPHQWSDLUKDVDOVREHJXQH[KLELWLQJ WKH³GULIW´LVVXH0U%DUUVWLOOUHWDLQVWKHXQXVDEOH-R\&RQFRQWUROOHUV $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U%DUUGLGQRWNQRZDERXWWKHGHIHFWDQG 1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYH SXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHP WKDQKHGLG 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 14 of 101 0U %DUU SURYLGHG 1LQWHQGR ZLWK D SUHVXLW GHPDQG DQG QRWLFH XQGHU WKH 0DVVDFKXVHWWVFRQVXPHUIUDXGVWDWXH -RKQ5LRV 3ODLQWLII-RKQ5LRVLVDFLWL]HQRIWKHVWDWHRI1HZ-HUVH\ 2Q0DUFK0U5LRVSXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHIRU IURP$PD]RQIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH%HIRUHSXUFKDVLQJWKH6ZLWFK0U5LRV YLHZHGWKH/DXQFK(YHQW :LWKLQDSSUR[LPDWHO\IRXUPRQWKVRIXVHWKHOHIWDQGULJKWMR\VWLFNRQWKH-R\ &RQFRQWUROOHUVWKDWFDPHZLWKWKHFRQVROHEHJDQH[SHULHQFLQJ³GULIWLQJ´7KLVUHVXOWHGLQWKH -R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ ,QRUDURXQG-XO\0U5LRVFRQWDFWHG1LQWHQGRVXSSRUWDERXWWKHLVVXHDQG WKH 1LQWHQGR UHSUHVHQWDWLYH VXJJHVWHG WKDW KH ZDLW ORQJHU DV D VRIWZDUH XSGDWH WKDW ZRXOG SXUSRUWHGO\IL[WKHLVVXHZDVLQWKHSLSHOLQH7RGDWHLWDSSHDUVWKDWQRVXFKXSGDWHKDVEHHQ UHOHDVHG 6LQFH KLV RULJLQDO SDLU KDV KDG LVVXHV 0U 5LRV KDV SXUFKDVHG ILYH DGGLWLRQDO SDLUVRI-R\&RQFRQWUROOHUVIRUDWRWDOSULFHRIDSSUR[LPDWHO\$OORIKLVFRQWUROOHUSDLUV KDYHKDG³GULIW´LVVXHV+HUHWDLQVDOOILYHSDLUVRIXQXVDEOH-R\&RQFRQWUROOHUV $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U5LRVGLGQRWNQRZDERXWWKHGHIHFWDQG 1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYH SXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRUWKHP WKDQKHGLG 'DYLG*X\ 3ODLQWLII'DYLG*X\LVDUHVLGHQWRIWKH&RPPRQZHDOWKRI9LUJLQLD 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 15 of 101 3ULRU WR SXUFKDVLQJ D 6ZLWFK 0U *X\ ZDWFKHG WKH /DXQFK (YHQW DQG VXEVHTXHQWO\ZDWFKHGSRUWLRQVRIWKHYLGHRDJDLQ0U*X\KHDUGDQGUHOLHGXSRQ1LQWHQGR¶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³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ ,QRUDURXQG-XQH0U*X\VHQWKLVHQWLUHFRQVROHWR1LQWHQGRDORQJZLWK KLV-R\&RQFRQWUROOHUVWRKDYHLWGLDJQRVHGDQGUHSDLUHG1LQWHQGRHQGHGXSUHSODFLQJWKHOHIW FRQWUROOHU 0U *X\ GHFLGHG WR EX\ D QHZ VHW RI -R\&RQ FRQWUROOHUV IURP *DPH6WRS IRU DSSUR[LPDWHO\$IWHUVHYHUDOPRQWKVRIXVHKLVUHSODFHPHQWSDLUKDVDOVREHJXQH[KLELWLQJ WKH³GULIW´LVVXH3ODLQWLIIVWLOOUHWDLQVWKHXQXVDEOH-R\&RQFRQWUROOHUV+HKDVVLQFHSXUFKDVHGD VSHFLDODGDSWHUIRUDSSUR[LPDWHO\WKDWDOORZVKLPWRXVHKLV3OD\6WDWLRQFRQWUROOHULQSODFH RIWKH-R\&RQFRQWUROOHU $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK3ODLQWLIIGLGQRWNQRZDERXWWKHGHIHFWDQG 1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOGQRWKDYH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 16 of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³GULIWLQJ´ 7KLV UHVXOWHG LQ WKH -R\&RQ EHLQJ XQXVDEOH IRU JHQHUDO JDPHSOD\ ,QRUDURXQG0DUFK 0U/L]DUGRVHQWKLV-R\&RQFRQWUROOHUVWRKDYHWKH ³GULIW´ LVVXH GLDJQRVHG DQG KRSHIXOO\ UHSDLUHG 7KH WKLUGSDUW\ UHSDLU VHUYLFH FRQWUDFWHG E\ 1LQWHQGRWRSURYLGHJDPLQJFRQVROHUHSDLUVLQIRUPHGKLPVHYHUDOZHHNVODWHUWKDWWKHFRVWRI UHSDLUVIRUWKH³GULIW´LVVXHZRXOGEHDSSUR[LPDWHO\ 0U/L]DUGRGHFOLQHGWRSD\WKHUHSDLUFRVWDQGLQVWHDGKDGKLVFRQWUROOHUUHSDLUHG DWDORFDOUHSDLUVKRSIRU 6LQFHWKHUHSDLUKLVRWKHUFRQWUROOHUDVZHOODVWKH-R\&RQFRQWUROOHUVIRUKLV VRQ¶V6ZLWFKFRQVROHKDYHEHJXQH[SHULHQFLQJWKH³GULIW´LVVXH+HVWLOOUHWDLQVDOOWKHXQXVDEOH -R\&RQFRQWUROOHUV $W WKH WLPH KH SXUFKDVHG KLV WZR 6ZLWFK FRQVROHV 0U /L]DUGR GLG QRW NQRZ DERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 17 of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³GULIWLQJ´ 7KLV UHVXOWHG LQ WKH -R\&RQ FRQWUROOHUVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ ,Q RU DURXQG $SULO 0U /XHEFNH VHQW WKH OHIW FRQWUROOHUV LQ IRU ERWK FRQVROHVWRKDYHWKHPUHSDLUHGXQGHUZDUUDQW\$ERXWDPRQWKODWHUERWKULJKWFRQWUROOHUVZHUH WKHQVHQWLQWREHUHSDLUHGXQGHUZDUUDQW\$IWHUVHYHUDOPRQWKVRIXVHDOOIRXURIWKHVHUHSDLUHG FRQWUROOHUVHQGHGXSKDYLQJWKH³GULIW¶LVVXHDJDLQ 7R GDWH 0U /XHEFNH KDV KDG WR SXUFKDVH VL[ DGGLWLRQDO SDLUV RI -R\&RQ FRQWUROOHUVIRUDWRWDORIDSSUR[LPDWHO\ZKLFKKDYHDOOH[SHULHQFHGWKH³GULIW´LVVXH $WWKHWLPHKHSXUFKDVHGKLVWKUHH6ZLWFKFRQVROHV0U/XHEFNHGLGQRWNQRZ DERXWWKHGHIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFW KHZRXOGQRWKDYHSXUFKDVHGWKHWKUHH6ZLWFKFRQVROHVRUDGGLWLRQDOFRQWUROOHUVRUZRXOGKDYH SDLGVXEVWDQWLDOO\OHVVIRUWKHPWKDQKHGLG 5REHUW)RXFKD 3ODLQWLII5REHUW)RXFKDLVDFLWL]HQRIWKHVWDWHRI1RUWK&DUROLQD 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 18 of 101 ,Q RU DURXQG -XO\ 0U )RXFKD SXUFKDVHG D 1LQWHQGR 6ZLWFK FRQVROH IRU SHUVRQDOIDPLO\RUKRXVHKROGXVHIURPD*DPH6WRSLQ(OL]DEHWK&LW\1RUWK&DUROLQD :LWKLQ DSSUR[LPDWHO\ WKUHH PRQWKV RI XVH WKH OHIW MR\VWLFN RQ WKH -R\&RQ FRQWUROOHUV WKDW FDPH ZLWK WKH FRQVROH EHJDQ UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ ,Q RU DURXQG 2FWREHU 0U )RXFKD FRQWDFWHG 1LQWHQGR VXSSRUW ZKLFK LQVWUXFWHGKLPWRVHQGKLVFRQWUROOHULQIRUDGLDJQRVWLFVLQFHLWZDVXQGHUZDUUDQW\$IWHUWKH FRQWUROOHUZDVGLDJQRVHG1LQWHQGRIROORZHGXSZLWKKLPDQGUHTXHVWHGWKDWKHSD\IRU WKHUHSDLU0U)RXFKDHQGHGXSSD\LQJWKLVEDODQFHLQRUGHUWRKDYHWKHGHIHFWLYHFRQWUROOHU UHSDLUHG 6LQFH EHLQJ UHSDLUHG WKH -R\&RQ FRQWUROOHUV KDYH RQFH DJDLQ H[KLELWHG WKH ³GULIW´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³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 19 of 101 2Q$XJXVW 0U QHZVWKDW1LQWHQGRZDVQRZRIIHULQJIUHHUHSDLUVIRUWKRVHZLWK-R\&RQFRQWUROOHUVKDYLQJWKH ³GULIW´ LVVXH +H VHQW ERWK FRQWUROOHUV LQWR 1LQWHQGR IRU D UHSDLU +H UHFHLYHG KLV UHSDLUHG FRQWUROOHUVEDFNRQ$XJXVW $OPRVWLPPHGLDWHO\WKHUHDIWHU0U WKHUHSDLUHGVHWRI-R\&RQFRQWUROOHUV+HRQFHDJDLQIROORZHGXSZLWK1LQWHQGRVXSSRUWRQ 6HSWHPEHUDQG1LQWHQGRVKLSSHGKLPDQHZVHWRI-R\&RQFRQWUROOHUV 2Q 6HSWHPEHU 0U ZKLFKEHJDQWRKDYHWKH³GULIW´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³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 0U&ROOLQVWKRXJKWVRPHWKLQJZDVZURQJZLWKWKH-R\&RQFRQWUROOHUVWKDWFDPH ZLWKWKHFRQVROH,QRUDURXQG)HEUXDU\RI 0U&ROOLQVSXUFKDVHGDUHSODFHPHQW-R\&RQ FRQWUROOHUIURP$PD]RQIRUDSSUR[LPDWHO\7KHQHZFRQWUROOHUFDPHZLWKDGLJLWDOEXQGOH RIJDPH6XSHU0DULR3DUW\ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 20 of 101 %\0D\ ERWKWKHOHIWDQGULJKWMR\VWLFNVRQ0U&ROOLQV¶UHSODFHPHQW-R\ &RQFRQWUROOHUVKDGEHJXQWR³GULIW´ 0U&ROOLQVFDOOHG1LQWHQGRLQ0D\ 7KH1LQWHQGRUHSUHVHQWDWLYHWROG0U &ROOLQVWKDWWKHLVVXHZDVDXVHUHUURUQRWDGHVLJQGHIHFW7KH1LQWHQGRUHSUHVHQWDWLYHWROG0U &ROOLQVWRVHQGERWKRIKLV-R\&RQVLQIRUUHSDLUDQGWKDWKHZRXOGEHFKDUJHGIRUWKHUHSDLURI ERWK-R\&RQVHYHQWKRXJK0U&ROOLQV¶FRQVROHZDVVWLOOZLWKLQZDUUDQW\0U&ROOLQVGLGQRW ZDQWWRSD\DQGKDYHWRZDLWIRUUHSDLUV0U&ROOLQVLQVWHDGERXJKWWKUHH3URFRQWUROOHUVIRU DSSUR[LPDWHO\HDFKIURP*DPH6WRSWRUHSODFHWKH-R\&RQFRQWUROOHUV %RWKRI0U&ROOLQV¶VHWVRI-R\&RQFRQWUROOHUVZHUHUHQGHUHGXQXVDEOH+HVWLOO UHWDLQVERWKXQXVDEOH-R\&RQFRQWUROOHUV $WWKHWLPHKHSXUFKDVHGKLV6ZLWFK0U&ROOLQVGLGQRWNQRZDERXWWKH'ULIW 'HIHFWDQG1LQWHQGRGLGQRWGLVFORVHLWWRKLP+DGKHNQRZQDERXWWKH'ULIW'HIHFWKHZRXOG QRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRUZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRU WKHPWKDQKHGLG =DFNHU\5HHG 3ODLQWLII=DFNHU\5HHGLVDFLWL]HQRIWKHVWDWHRI,GDKR 0U5HHGSXUFKDVHGD1LQWHQGR6ZLWFKFRQVROHIRUDSSUR[LPDWHO\ IURP :DOPDUWLQ0D\IRUSHUVRQDOIDPLO\RUKRXVHKROGXVH 0U5HHGSXUFKDVHGDVHFRQGSDLURI-R\&RQFRQWUROOHUVIRUDSSUR[LPDWHO\ IURP*DPH6WRSDSSUR[LPDWHO\RQHZHHNDIWHUSXUFKDVLQJWKHFRQVROHLQRUDURXQG0D\ $SSUR[LPDWHO\WKUHHPRQWKVDIWHUSXUFKDVHWKHOHIWMR\VWLFNLQERWKSDLUVRI0U 5HHG¶V-R\&RQFRQWUROOHUVEHJDQUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU ³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 21 of 101 ,QRUDURXQG$XJXVW0U5HHGFRQWDFWHG:DOPDUWDQG*DPH6WRSDERXWWKH ³GULIW´LVVXH5HSUHVHQWDWLYHVIURPERWKVWRUHVGLUHFWHG0U5HHGWRFRQWDFW1LQWHQGR0U5HHG FDOOHG 1LQWHQGR DQG VSRNH ZLWK D 1LQWHQGR UHSUHVHQWDWLYH LQ RU DURXQG $XJXVW 7KH 1LQWHQGRUHSUHVHQWDWLYHGLGQRWRIIHU0U5HHGDQ\UHFRXUVH7KHUHSUHVHQWDWLYHGLGQRWRIIHUWR WDNH WKH FRQWUROOHUV LQ IRU UHSDLU WKH\ RQO\ LPSOLHG WKDW 0U 5HHG VKRXOG SXUFKDVH QHZ FRQWUROOHUV %RWKVHWVRI0U5HHG¶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¶V -R\&RQFRQWUROOHUVEHJDQWRUHJLVWHUPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIW´ 7KLVUHVXOWHGLQWKH-R\&RQVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 0U+RHOVFKHUFDOOHG1LQWHQGRDERXWWKHGULIWLVVXHRQWKHOHIW-R\&RQWKDWFDPH ZLWK WKH FRQVROH RQ $XJXVW 7KH 1LQWHQGR UHSUHVHQWDWLYH GLUHFWHG KLP WR DQ RQOLQH KHOSDUWLFOHZLWKLQVWUXFWLRQVRQKRZWRFOHDUREVWUXFWLRQVUHERRWWKHV\VWHPDQGUHFRQILJXUH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 22 of 101 WKH FRQWUROOHUV 0U +RHOVFKHU DWWHPSWHG WKH VXJJHVWHG IL[HV EXW WKH GULIWLQJ SHUVLVWHG 0U +RHOVFKHUFDOOHG1LQWHQGREDFN7KH1LQWHQGRUHSUHVHQWDWLYHVDLG0U+RHOVFKHUFRXOGVHQGKLV -R\&RQLQIRUDQRXWRIZDUUDQW\UHSDLU7KHUHSUHVHQWDWLYHDVNHGIRU0U+RHOVFKHU¶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¶V UHSUHVHQWDWLRQVUHJDUGLQJWKHIXQFWLRQDOLW\RIWKH-R\&RQVLQGHFLGLQJWRSXUFKDVHKLV6ZLWFK ,Q SDUWLFXODU 1LQWHQGR¶V VWDWHPHQWV UHJDUGLQJ WKH YHUVDWLOLW\ RI WKH -R\&RQV LQIOXHQFHG KLV SXUFKDVLQJGHFLVLRQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 23 of 101 :LWKLQPRQWKVRIHDFKSXUFKDVHWKHMR\VWLFNRQERWKRI0U2UHQ¶V-R\&RQV EHJDQWRUHJLVWHUPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIW´ ,Q $SULO RI 0U 2UHQ VHQW WKH -R\&RQ WKDW FDPH ZLWK WKH FRQVROH LQ WR 1LQWHQGRIRUDQRXWRIZDUUDQW\UHSDLU+HKDGWRSD\IRUWKHUHSDLULQFOXVLYHRIVKLSSLQJ EHFDXVH WKH -R\&RQ ZDV GHHPHG RXWVLGH WKH PRQWK ZDUUDQW\ RQ DFFHVVRULHV 7ZR PRQWKV DIWHUUHFHLYLQJWKHUHSDLUHG-R\&RQEDFNWKHMR\VWLFNEHJDQWRH[KLELWWKHVDPHGULIWLQJLVVXH DJDLQ %HFDXVH 0U 2UHQ¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 24 of 101 $URXQG $XJXVW RU 6HSWHPEHU WKH MR\VWLFN RQ ERWK -R\&RQV VWDUWHG UHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\ &RQVEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 2Q1RYHPEHU 0U$LQVZRUWKFDOOHG1LQWHQGRUHJDUGLQJWKH-R\&RQ WKDWFDPHZLWKWKHFRQVROHZKLFKZDVVWLOOXQGHUZDUUDQW\DWWKHWLPH0U$LQVZRUWKVHQWWKH FRQWUROOHULQIRUUHSDLU7KHUHSDLUSURFHVVWRRNZHHNV$IHZ ZHHNV DIWHU UHFHLYLQJ WKH UHSDLUHG-R\&RQEDFNWKHGULIWLQJVWDUWHGDJDLQ0U$LQVZRUWKGLGQRWVHQGKLVVHFRQG-R\ &RQ LQ IRU UHSDLU EHFDXVH LW ZDV RXWVLGH WKH ZDUUDQW\ %RWK RI 0U $LQVZRUWK¶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¶V FRQVROH VWDUWHG UHJLVWHULQJ PRYHPHQW ZLWKRXW EHLQJ PDQXDOO\ FRQWUROOHGRU³GULIWLQJ´7KLVUHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 25 of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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 26 of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³GULIWLQJ´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 27 of 101 /\GLD'H/RDFK /\GLD'H/RDFKLVDFLWL]HQRIWKHVWDWHRI:DVKLQJWRQ 2Q 0DUFK 0V 'H/RDFK RUGHUHG D 1LQWHQGR 6ZLWFK FRQVROH IRU IRUSHUVRQDOIDPLO\RUKRXVHKROGXVHDVZHOODVDWZR\HDUVHUYLFHSODQIRU IURP )LQJHUKXW 7KH FRQVROH VKLSSHG RQ 0DUFK 0V 'H/RDFK SDLG IRU VKLSSLQJ3ULRUWRSXUFKDVLQJWKH6ZLWFK0V'H/RDFKYLHZHGWKH/DXQFK(YHQW :LWKLQ ZHHNV RI SXUFKDVLQJ WKH FRQVROH WKH OHIW MR\VWLFN RQ WKH -R\&RQ FRQWUROOHUVWDUWHGUHJLVWHULQJPRYHPHQWZLWKRXWEHLQJPDQXDOO\FRQWUROOHGRU³GULIWLQJ´7KLV UHVXOWHGLQWKH-R\&RQEHLQJXQXVDEOHIRUJHQHUDOJDPHSOD\ 2QRUDURXQG1RYHPEHU0V'H/RDFKFRQWDFWHG1LQWHQGRVXSSRUWDERXW WKH³GULIW´LVVXH7KH\RIIHUHGWRUHSDLUWKH-R\&RQFRQWUROOHUEXWVDLGWKHSURFHVVFRXOGWDNH IRXUZHHNV 6LQFHWKDWFRQWUROOHUSDLUZDVWKHRQO\RQH0V'H/RDFKRZQHGVKHHQGHGXS SXUFKDVLQJRQHDGGLWLRQDOSDLURI-R\&RQFRQWUROOHUVIRUDSSUR[LPDWHO\DORQJZLWKWZR3UR FRQWUROOHUV DQG WZR RWKHU QRQEUDQG ZLUHOHVV FRQWUROOHUV FRPSDWLEOH ZLWK WKH 6ZLWFK $GGLWLRQDOO\VKHSXUFKDVHGDVHFRQG6ZLWFKIURPDQDFTXDLQWDQFHIRUDSSUR[LPDWHO\WKDW FDPHZLWKDSDLURI-R\&RQFRQWUROOHUV(YHQWXDOO\DOOWKUHHRIKHU-R\&RQFRQWUROOHUVEHJDQ H[SHULHQFLQJWKH³GULIW´LVVXH 0V'H/RDFKFXUUHQWO\UHWDLQVWKUHHVHWVRIXQXVDEOH-R\&RQFRQWUROOHUV $WWKHWLPH0V'H/RDFKSXUFKDVHGKHU1LQWHQGR6ZLWFKFRQVROHVKH GLG QRW NQRZ DERXW WKH GHIHFW DQG 1LQWHQGR GLG QRW GLVFORVH WKH GHIHFWWRKHU+DG0V'H/RDFK NQRZQDERXWWKHGHIHFWVKHZRXOGQRWKDYHSXUFKDVHGKLV6ZLWFKRUDGGLWLRQDOFRQWUROOHUVRU VKHZRXOGKDYHSDLGVXEVWDQWLDOO\OHVVIRULW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 28 of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±JDPHUVXVHDULJKWDOHIW-R\&RQZKLFK FDQ HLWKHU EH FRQQHFWHG WR WKH 6ZLWFK VFUHHQ IRU SRUWDEOH KDQGKHOG SOD\ FRQQHFWHG WR D WUDGLWLRQDO JDPLQJ FRQWUROOHU DFFHVVRU\ RU XVHG DV WZR VHSDUDWH FRQWUROOHUV IRU WZR SOD\HU JDPHSOD\ 7KH -R\&RQ FRQWUROOHUV DQG WKH GLIIHUHQW ZD\V WKH\ FDQ EH XVHG DUH GHSLFWHG LQ WKHVHLPDJHV KWWSV ZZZQLQWHQGRFRPVZLWFKV\VWHP ODVWYLVLWHG-XO\ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 29 of 101 7KHMR\VWLFNVDUHPDUNHGZLWKDUURZV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 30 of 101 7KH-R\&RQVHDFKFRQWDLQDMR\VWLFNDQGVHYHUDOEXWWRQVWKDWDUHXVHGWRFRQWURO JDPHSOD\ 1LQWHQGR KHDYLO\ DGYHUWLVHG WKH YHUVDWLOLW\ DQG TXDOLW\ RI WKH -R\&RQV IRU JDPHSOD\DVDPDLQVHOOLQJSRLQWRIWKH6ZLWFKV\VWHP)RUH[DPSOHDWWKHOLYHVWUHDPHGODXQFK HYHQW ZKLFK PDQ\ RI WKH 3ODLQWLIIV ZDWFKHG 1LQWHQGR PDGH WKH IROORZLQJ UHSUHVHQWDWLRQV DERXWWKH-R\&RQV 1LQWHQGR 6ZLWFK KDV LQKHULWHG '1$ IURP WKH PDQ\ 1LQWHQGR¶V HQWHUWDLQPHQW V\VWHPV1LQWHQGRKDVUHOHDVHGWRGDWH ³1LQWHQGR6ZLWFKKDVEHHQGHVLJQHGDVDKRPHHQWHUWDLQPHQWJDPLQJFRQVROHWKDW JLYHV\RXWKHIUHHGRPWRFKDQJH\RXUSOD\VW\OH´ ³+DQGLQJDMR\FRQWRDIULHQGRUIDPLO\PHPEHUVKDULQJWKHMR\ULJKWWKHQDQG WKHUH ³(DFKMR\FRQKDVDQDQDORJVWLFNDQGHDFKVWLFNFDQEHSUHVVHGOLNHDEXWWRQ´ ³(DFKMR\FRQFDQEHXVHGDVDIXOO\IXQFWLRQLQJLQGHSHQGHQWFRQWUROOHU´ ³ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 31 of 101 ³:KHQ\RXSOD\ZLWKWKHVH-R\&RQWKH\ILWULJKWLQWKHSDOPRI\RXUKDQGMXVW ULJKWIHHOYHU\QDWXUDO´ ³7KRVH DPD]LQJ FRQWUROOHUV WKH MR\FRQ FRPELQH DOO JDPHSOD\ LQQRYDWLRQV WKDW 1LQWHQGRLQYHQWHGDQGDGGVWRLW´ $ QHZ 6ZLWFK UHWDLOV IRU DSSUR[LPDWHO\ DQG LQFOXGHV RQH -R\&RQ FRQWUROOHUVHW OHIWDQGULJKWDVGHSLFWHGDERYH $GGLWLRQDO -R\&RQV FDQ EH SXUFKDVHG IRU DSSUR[LPDWHO\ IRU D SDLU RU DSSUR[LPDWHO\ IRUDQLQGLYLGXDOOHIWRUULJKWFRQWUROOHU 7KH -R\&RQ FRQWUROOHUV DUH GHIHFWLYH 6SHFLILFDOO\ WKH MR\VWLFNV RQ WKH -R\ &RQVVXIIHUIURPDGHIHFWWKDWUHVXOWVLQLW³GULIWLQJ´RQLWVRZQ7KLVDIIHFWVJDPHSOD\VXFKWKDW WKHFKDUDFWHUVRUDFWLRQRQWKHVFUHHQPRYHDVLIWKHUHKDVEHHQVRPHPRYHPHQWRIWKHMR\VWLFN E\DJDPHUHYHQWKRXJKWKHUHKDVQRW 'ULIWLQJ VLJQLILFDQWO\ LQWHUIHUHV ZLWK JDPHSOD\ 6LQFH WKH HQWLUH SXUSRVH RI WKH 6ZLWFK LV WR SOD\ YLGHR JDPHV DQG WKH SXUSRVH RI WKH -R\&RQ VSHFLILFDOO\ LV WR FRQWURO WKH JDPHSOD\LQWKRVHYLGHRJDPHVWKH'ULIW'HIHFWJRHVWRWKHGHYLFH¶VFHQWUDOIXQFWLRQDOLW\ 2Q 6HSWHPEHU 1LQWHQGR LQWURGXFHG WKH 6ZLWFK /LWH ZKLFK LV 1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 32 of 101 7KLVLVSDUWLFXODUO\SUREOHPDWLFIRUSXUFKDVHUVRIWKH6ZLWFK/LWHEHFDXVHXQOLNH ZLWKWKHUHJXODU6ZLWFKWKHUHLVQRDELOLW\WRVLPSO\UHPRYHWKH-R\&RQVIURPWKH6ZLWFK/LWH FRQVROH²WKHFRQWUROOHUVDUHEXLOWLQWRWKHJDPLQJV\VWHP:KHQWKH6ZLWFK/LWH¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 33 of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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 34 of 101 VLJQDOV LH WKH PRWLRQ RI WKH EUXVKHV WR WKH PRWKHUERDUG DERXW WKH SK\VLFDO ORFDWLRQ DQG PRYHPHQWRIWKHMR\VWLFN7KHEUXVKHVWUDYHORYHUWKHSDGZKLFKWUDQVODWHVWRFKDQJHVLQWKH HOHFWULFDOVLJQDOVWKDWFRQWUROPRYHPHQWRQWKHSOD\LQJVFUHHQ7KHIOH[LEOHFLUFXLWFRQWDFWSDGV DQGEUXVKHVDUHGHSLFWHGEHORZ %DVHG RQ DQDO\VLV FRQGXFWHG E\ 3ODLQWLIIV¶ FRXQVHO DQG WKHLU H[SHUW WR GDWH LW DSSHDUVWKDWDSULQFLSDOFDXVHRIWKHGULIWLQJIDLOXUHLVH[WHQVLYHZHDURQWKHSDGVXUIDFH$VWKH VWHHOEUXVKHVPRYHEDFNDQGIRUWKWKH\UXEDZD\WKHVRIWFDUERQPDWHULDOWKDWPDNHVXSWKHSDG 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 35 of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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 36 of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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 37 of 101 & &XVWRPHU&RPSODLQWV 3ODLQWLIIV¶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³, PFXUUHQWO\KDYLQJSUREOHPVZLWKWKHOHIWMR\FRQDQDORJVWLFN:KHQHYHU,SRZHU RQP\OHIWMR\FRQWKHFRQWUROOHUVWDUWVPRYLQJXSHYHQZKHQ, PQRWWRXFKLQJ WKHDQDORJVWLFN´ .LQJWDWD5HGGLW ³>0@\ RULJLQDO SDLU RI -R\&RQV VWDUWHG GULIWLQJ DERXW D \HDU DIWHU EX\LQJ LW DW ODXQFK,KDYH\HDUZDUUDQW\VR,ZHQWDQGUHSODFHGWKHPPRQWKVODWHUDQGLW VWDUWHGKDSSHQLQJDJDLQ´ 7KHIROORZLQJFRPSODLQWVDUHUHSURGXFHGDVWKH\DSSHDURQOLQH$Q\W\SRJUDSKLFDOHUURUVDUH DWWULEXWDEOHWRWKHRULJLQDODXWKRU KWWSV HQDPHULFDVVXSSRUWQLQWHQGRFRPDSSVRFLDOTXHVWLRQVGHWDLOTLG aOHIWMR\FRQ DQDORJVWLFNGULIWLQJXSZDUGV ODVWYLVLWHG6HSW KWWSV ZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVTESOHIWBMR\FRQBDQDORJBVWLFNBGULIWLQ J ODVWYLVLWHG6HSW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 38 of 101 &DQ\RQ:UQ5HGGLW ³,KDYHEHHQRQHRIWKHXQOXFN\LQGLYLGXDOVZKRKDVH[SHULHQFHGH[FHVVLYHORQJ WHUPGULIWLVVXHVZLWKDOORIP\SDLUVRIMR\FRQV,RZQWKUHHSDLUVEHWZHHQWZR FRQVROHV,KDYHKDGWRVHQGMR\FRQVLQIRUUHSDLUGXHWRGULIWLQJeightWLPHV² VRPHWLPHVREYLRXVO\PXOWLSOHWLPHVSHUMR\FRQ´ 6WHOWHU*DPH)$4V0HVVDJH%RDUG ³>,@KDYHWZROHIWMR\FRQVDQGWKHDQDORJVWLFNGULIWVRQERWKRIWKHP2QHGULIWV OHIWDQGWKHRWKHUGULIWVXS%DVLFDOO\LQSXWUHJLVWHUVZLWKRXWPHWRXFKLQJWKHVWLFN 7KLV KDSSHQV DWWDFKHG DQG XQDWWDFKHG,¶P QRW VXUH LI LW¶V P\ 6ZLWFK RU WKH MR\FRQV´ WUXWKIXOO\FRUQFRE5HGGLW ³>,@ KDYH WZR VHWV WKDW DUH D \HDU DQG D KDOI ROG DQG DUH ERWK VWDUWLQJ WR GULIW EDG´ -RVK6WDFN([FKDQJH ³$ERXWZHHNVDJR,QRWLFHGWKDWWKHOHIWDQDORJVWLFNRQP\1LQWHQGR6ZLWFK -R\&RQV VWDUWHG GULIWLQJ WKDW LV ZLWKRXW WRXFKLQJ WKH VWLFN ZKHQ LW ZDV FHQWHUHG LW ZRXOG UHJLVWHU DV RIIFHQWHU FDXVLQJ FKDUDFWHUV LQ JDPHV WR VWDUW UDQGRPO\ ZDONLQJ LQ YDULRXV GLUHFWLRQV IUHTXHQWO\ GRZQZDUG 7KLV REYLRXVO\ PDNHVSOD\LQJJDPHVUDWKHUGLIILFXOW´ &\EHU6DL,*1%RDUGV ³0\OHIWMR\FRQKDVDGULIWLQJFRQWUROVWLFNWKDWFRQVWDQWO\PDNHVP\FKDUDFWHU PRYHLQDQ\JDPHZKHQ, PWU\LQJWRVWDQGVWLOORUZKHQ,WU\WR PRYH LQ DQRWKHUGLUHFWLRQLWIHHOVOLNHDVWUXJJOH2EYLRXVO\WKLVLVPDNLQJSOD\LQJDORWRI JDPHVXQSOD\DEOHDQG,GRQ WIHHOOLNHEX\LQJDOOQHZMR\FRQVIRU+RZGR\RX UHSDLULWRQ\RXURZQZLWKRXWVHQGLQJLWLQWR1LQWHQGR"´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 39 of 101 /L]XND1LQWHQGR/LIH ³%RWKRIPLQHKDYHEHHQGULIWLQJIRUDORRRRQJWLPHQRZ7KHULJKWRQO\VOLJKWO\ VR IRU WKH ORQJHVW WLPH ZKLOH WKH OHIW JRW IODW RXW XQXVDEOH WKHQ , ERXJKW D UHSODFHPHQWDQGQRZWKHULJKWLVUDSLGO\JHWWLQJMXVWDVEDG´ &KHIB%UDK5HGGLW ³(YHU\IULHQGRIPLQHDQGPHKDYHKDGGULIWLVVXHZLWKMR\FRQV,MXVWXVHSUR FRQWUROOHUQRZ´ GUHZF5HGGLW ³>,@ERXJKWP\6ZLWFKDERXWPRQWKVDJR>,@QRWLFHGERWKVHWVRIP\MR\ FRQV EHJLQ JLYLQJ PH SUREOHPV ZLWK GULIW RQ WKH OHIW FRQWUROOHUDFRXSOH PRQWKVDJRDQGVR,VWDUWHGWRSD\DWWHQWLRQWRDOOWKHFRPSODLQWV,W¶VDODUPLQJ WKDWWKLVLVDNQRZQLVVXHRQDQFRQWUROOHUDQG\HW1LQWHQGRKDVQ¶WVDLGERR DERXWLW>$@UHZHH[SHFWHGWRWKURZDZD\H[SHQVLYHFRQWUROOHUVDQGMXVWEX\ QHZRQHVRUSD\1LQWHQGRWRIL[WKHLUPLVWDNHV"´ ³+RZ KDYH WKHVH FRQWUROOHUV QRW EHHQ UHFDOOHG" ,W¶V REYLRXVO\ D GHVLJQ IODZ VR ZK\QRWIL[LW",DPJRLQJWRWU\DQGIL[WKHPP\VHOIZKLFK,¶YHVHHQZRUNEXWWKH IDFWWKDWZHKDYHWRWU\WRGRWKDWLVULGLFXORXV>,@FDQ¶WSXVKGRZQDQ\PRUH DQGWKDWWKHGULIWKDVJRWWHQVREDGWKDWHYHQLQWKHPHQXHYHU\WKLQJMXVWJRHV VWUDLJKWWRWKHWRS´ /XFN\*DPH)$4V ³>7@KH VZLWFK ZLOO EH P\ ODVW QLQWHQGR FRQVROH WKDQNV WR MR\FRQGULIWQHYHU KDYH>,@VHHQVXFKSRRUO\GHVLJQHGFRQWUROOHUV>,@ZLOOKDYHWREX\P\WK SDLURIMR\FRQVVRRQ>@>7@KRVHZLOOHQGXSGULIWLQJWRR>@WKH\DOZD\VGR´ LNRQLQR5HGGLW ³0\ULJKWMR\FRQLVGULIWLQJKDUGDQGLWVDQLJKWPDUHDQ\WLSVIRUIL[LQJLW"´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 40 of 101 5D]]\1LQWHQGR/LIH ³)RXURIP\ILYH MR\FRQV GHYHORSHG GULIWLQJ SUREOHPV RQH RQO\ D PRQWK DIWHU SXUFKDVH´ LPRFWRSXVPDQ5HGGLW ³,KDYHMR\FRQVDQGRQO\OHIWRQHVGRQ¶WGULIW,W¶VULGLFXORXV+DGWREX\D SURFRQWUROOHUEHFDXVHRILW´ &RPSODLQWVDERXWWKH6ZLWFK/LWH )URP%RNX1R%HDUGRQ ³#6SDZQ:DYH0HGLD VR , WKLQN , PD\ KDYH WKH ILUVW FDVH RI MR\FRQ GULIW LQ D 6ZLWFK/LWHDQGDOO, YHGRQHLVPDUDWKRQHG/LQN V$ZDNHQLQJ,ORYHWKLVFRQVROH VRPXFKEXWWKLVLVEXPPLQJPHRXW,VWKLVKRZMR\FRQGULIWPDQLIHVWV"2ULVWKLV DQRWKHU OHVVZRUU\LQJ LVRODWHGGHIHFW"´ )URP$OH[LV-DYLHURQ ³GD\VDIWHUEX\LQJWKHVZLWFKOLWHWKHDQDORJVWLFNDUHDOUHDG\GULIWLQJVOLJKWZKHQ LPRYHP\MR\VWLFNWRWKHOHIW´ )URP6DYY\RQ ³#1LQWHQGR$PHULFDMXVWJRWVZLWFKOLWHDQGLWKDVMR\FRQGULIWDIWHUGD\V,GRQ¶W ZDQWWRH[FKDQJHDQGVHWXSDZKROHQHZRQHDJDLQWRGLVFRYHUWKHVDPHSUREOHP 6R IUXVWUDWLQJ$QG , NQRZ PDQ\ SHRSOH KDYHQ¶W H[SHULHQFHG LW EXW LW H[LVWV HYHU\ZKHUH´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 41 of 101 )URP+HOOR&HOOR RQ ³,EHDW/LQN¶V$ZDNHQLQJRYHUWKHZHHNHQGRQP\RULJLQDO6ZLWFK/LWHV\VWHP, KDG RQO\ SXW OLNH VRPHWKLQJ KRXUV RQ LW DQG LW VWDUWHG WR VKRZ MR\FRQ GULIW :K\ LV WKLV KDSSHQLQJ HDUOLHU RQ WKDQ ZLWK WKH HDUOLHU 6ZLWFK" $Q\RQH NQRZ" 7KDQNIXOO\P\ROGJDPHVWRSPDQDJHUKRRNHGPHXSZLWKDQHZRQH´ )URP+LJK)LYHRQ6HSWHPEHU ³, FDQ¶W EHOLHYH LW P\ 1LQWHQGR 6ZLWFK /LWH LV DOUHDG\ GULIWLQJ , ZDV SOD\LQJ %27:DQGWKHFDPHUDNHSWPRYLQJZLWKRXWWRXFKLQJWKHDQDORJXHVWLFN,WULHGWR FDOLEUDWHDQGXSGDWHWKHFRQWUROOHUVEXWLWZDVVWLOOWKHVDPH/XFNLO\,DOUHDG\KDYH DQ 2* 6ZLWFK WR IDOO EDFN RQ EXW ,¶P VR JXWWHG DQG XSVHW ,¶P JRLQJWR JHW P\ PRQH\EDFNILUVWWKLQJWRPRUURZDQGZDLWXQWLO&KULVWPDVWRVHHLI1LQWHQGRIL[HV WKHLVVXHV´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 42 of 101 &OHDUO\ 1LQWHQGR ZRXOG QRW EH VHOOLQJ D SURGXFW ZLWK VXFK YROXPH ZLWKRXW ILUVW FRQGXFWLQJ H[WHQVLYH SUHVDOH WHVWV VXFK DV IDLOXUH DQDO\VLV VWUHVV WHVWV SUHVVXUH WHVWV DQG IULFWLRQ WHVWV EHIRUHEULQJWKH6ZLWFKWRPDUNHW $V DOUHDG\ QRWHG 1LQWHQGR WRXWHG WKH -R\&RQ¶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³1RWKLQJDQQR\VPHPRUHWKDQJHWWLQJWKHYDQGP\ILUVWVHWRIMR\FRQVJHWWKH GULIWLQJLVVXH´ See KWWSV ZZZ\RXWXEHFRPZDWFK"Y SHSY4.K2 ODVWYLVLWHG6HSWHPEHU KWWSV ZZZLIL[LWFRP1HZVZHWRUHGRZQWKHQHZQLQWHQGRVZLWFKZKDWVGLIIHUHQW ODVW YLVLWHG6HSWHPEHU KWWSV ZZZIDFHERRNFRPJURXSVWKHQLQWHQGRVZLWFKSHUPDOLQN ODVW YLVLWHG6HSWHPEHU 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 43 of 101 )URP7KRPDV%RXUQHDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU ³WKHFKDVQRWIL[HGMR\FRQGULIWLWKDSSHQVWRPH´ UHIHUULQJWRWKHPRGHOQXPEHU RIWKHQHZHU-R\&RQV )URP$LU:UHFNHGDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU ³,¶YH ERXJKW WKH VZLWFK Y DERXW ZHHNV DJR DQG WKH MR\ FRQV KDYH WKH QHZ XSGDWHGFODEHOLQJRQWKHPDQGWKHULJKWRQHVWDUWHGGULIWLQJRQO\ZHHNVLQWRLW´ )URP'DUN'LDPRQGDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU ³,KDYHGULIWRQWKHROGDQGFPRGHO%XW,IL[HGLWRQDYLGHRRQP\FKDQQHO$QG WKH\VWLOOZRUN´7LPH/DJ*DPLQJUHSOLHG ³2KZHOOWKDW¶VJRRG7RREDGWRKHDU WKDWHYHQWKHQHZHURQHVGULIWWKRXJK´ )URP-RVKXD0DUNDSSUR[LPDWHO\$XJXVWRU6HSWHPEHU ³6DGO\,KDYHD&QHRQSLQNMR\FRQWKDWKDVVWDUWHGGULIWLQJ,DPDQQR\HGDV, JRWWKHQHRQVHWWRUHSODFHP\RULJLQDOMR\FRQVDIWHURQHRIWKHPVWDUWHGGULIWLQJ WKDW ZDV D & MR\FRQ 6R \HDK LW ORRNV OLNH WKH\ KDYHQ W IL[HGLW,DPDOVR VXUSULVHGDWKRZOLWWOHWLPHLWWRRNWREHJLQGULIWLQJWKRXJKDV,KDYHRQO\KDGWKRVH MR\FRQVIRUPD\EHPRQWKVPD\EHORQJHU,DPJXHVVLQJWKDWLWLVMXVWGXHWR PHDQGP\EURWKHUXVLQJWKHVZLWFKUHJXODUO\´ 1LQWHQGRFRXOGHDVLO\GLVFORVHWKHGHIHFWWRSRWHQWLDOFRQVXPHUVLQDQ\QXPEHU RIZD\VLQFOXGLQJRQWKHSURGXFW¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 44 of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³,JRWP\MR\FRQEDFNIURPUHSDLUWRGD\DQGJXHVVZKDWLWVWDUWHGWRGULIWრVRVHH \RXLQFRXUW1 QWHQGR´ )URPHSRGVSRVWHG ³,VHQWP\EURNHQ-R\&RQEDFNWR1LQWHQGRDQGWKH\VHQWPHEDFNDQHZSDLU $IWHUIRXUKRXUVRIOLJKWO\SOD\LQJKLGGHQJHP&HOHVWHP\QHZ-R\&RQDUHQRZ GULIWLQJDJDLQ,FDQQRWEHOLHYHLW´ KWWSV ZZZYLFHFRPHQBXVDUWLFOH[]]YDLQWHUQDOQLQWHQGRPHPRLQVWUXFWVFXVWRPHU VHUYLFHWRIL[MR\FRQGULIWIRUIUHH ODVWYLVLWHG$XJ KWWSV WZLWWHUFRP3LQN0RRVWDFKHVWDWXV ODVWYLVLWHG$XJXVW KWWSV ZZZUHGGLWFRPUWRPRUURZFRPPHQWVFODNOFDQBFRQILUPBMR\FRQBDUHBVWLOOBGULIWLQJ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 45 of 101 )URP&KULV%XWOHUSRVWHG ³#1LQWHQGR$PHULFDLVWKLVZKDW\RXFDOOD³IL[HG´MR\FRQ",UHFHLYHGWKHUHSDLU \HVWHUGD\DQGWKLVLVWKHUHVXOW,¶YHKDGWKHVZLWFKOHVVWKDQD\HDUDQG,¶YHKDG UHSDLUVGXULQJWKDWWLPHMR\FRQVDQGFKDUJHSRUW1RWWRPHQWLRQKDGWREX\D UHSODFHPHQWFKDUJH%HEHWWHU´ )URP/XQGLQVWURPSRVWHG ³, PVRJODGP\OHIW-R\FRQKDVGULIWDJDLQDERXWDPRQWKDIWHUVHQGLQJLWLQ6XFK IXQ6RIXQWREHSOD\LQJ6PDVKDQ\WKLQJDQGJHWSXOOHGWRWKHOHIWQRQVWRS, PVR WLUHGRI1LQWHQGR$VLQJOH-R\FRQLV´ )URP.H\EODGHGDUNRQ ³6HQWLQP\OHIWMR\FRQIRUGULIWUHSDLU*RWLWEDFN³IL[HG´ 7RXJK WR VHH LQ WKH FRPPHQW DERYH EXW D YLGHR LV SRVWHG ZLWK WKLV 7ZHHW WKDW VKRZVRIIWKHMR\FRQGULIWRFFXUULQJRQWKHVXSSRVHGO\IL[HGFRQWUROOHU )URP&KHOOHGRJRRQ ³,VHQWRXWWZROHIWMR\FRQVWR1LQWHQGRWRJHWWKHPUHSDLUHGIRUGULIWDQGUHFHQWO\ JRWWKHPEDFN+RZHYHUWKHOHIWFRQWUROVWLFNLVVWLOOGULIWLQJGRZQZDUG,VWKHUH VRPHWKLQJZURQJZLWKP\V\VWHP"7KHRGGWKLQJLV,UHDOO\RQO\VHHLWGRLQJWKLV RQWKHPDLQPHQXDQGLWNLQGRIGRHVLWRQDQGRII´ )URP6RQQL%RLRQ ³)RUDQ\RQHZKRLVH[SHULHQFLQJGULIWZLWK\RXU-R\FRQIRU\RXU6ZLWFKDQG DUHSODQQLQJWRVHQGLWIRUDUHSDLUMXVWDQ)<, ,VHQWPLQHLQDQGJRWLWEDFNODVW :HGQHVGD\ 7KH\ JDYH PH EUDQG QHZ -R\FRQV 7ZR GD\V ODWHU LW ZDV GULIWLQJ DJDLQ+RSH#1LQWHQGR$PHULFDLVDZDUH´ KWWSV WZLWWHUFRP0DGULGLVWD&KULVVWDWXV ODVWYLVLWHG$XJXVW KWWSV WZLWWHUFRP/XQGLQVWURPVWDWXV ODVWYLVLWHG$XJXVW KWWSV WZLWWHUFRPNH\EODGHGDUNVWDWXV ODVWYLVLWHG$XJXVW KWWSV ZZZUHGGLWFRPU1LQWHQGR6ZLWFKFRPPHQWVFXM OHIWBMR\BFRQBVWLOOBGULIWLQJBDIWHUBF RPLQJBEDFN ODVWYLVLWHG$XJXVW KWWSV WZLWWHUFRP6RQRI6R+VWDWXV ODVWYLVLWHG6HSWHPEHU 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 46 of 101 )URP.HYLQ0F1HLORQ ³LVHQWP\MR\FRQLQWRQLQWHQGRWRJHWIL[HGLJRWLWEDFNDQGLWVWLOOKDVWKHVDPH SUREOHPDQGWKH\GLGQWUHWXUQP\]HOGDDQDORJVWLFNFRYHUDQ\RQHHOVHGHDOZLWK WKDW"ZKDWGLG\RXGR"´ 6RPH XVHUV DOVR UHSRUW EHLQJ FKDUJHG IRU WKH UHSDLU 2WKHUXVHUVUHSRUW KDYLQJ WR ZDLW VHYHUDO ZHHNV ZLWKRXW WKHLU FRQWUROOHUV ZLWK QR XSGDWH IURP 1LQWHQGR DIWHU VHQGLQJWKHPLQIRUUHSDLU %HFDXVHRI1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 47 of 101 3ODLQWLIIVVHHNVFHUWLILFDWLRQRID&ODVVGHILQHGDVIROORZV ³1DWLRQZLGH&ODVV´ 1DWLRQZLGH&ODVV $OO SHUVRQV LQ WKH 8QLWHG 6WDWHV ZKR ERXJKW D 1LQWHQGR 6ZLWFK VWDQGDORQH -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH $QGRU ,QWKHDOWHUQDWLYH3ODLQWLIIVVHHNFHUWLILFDWLRQRIWKHIROORZLQJVXEFODVVHV ³6WDWH 6XEFODVVHV´ &DOLIRUQLD6XEFODVV $OOSHUVRQVLQWKHVWDWHRI&DOLIRUQLDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH )ORULGD6XEFODVV $OOSHUVRQVLQWKHVWDWHRI)ORULGDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH 1HZ-HUVH\6XEFODVV $OOSHUVRQVLQWKHVWDWHRI1HZ-HUVH\ZKRERXJKWD1LQWHQGR6ZLWFKVWDQG DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH 1RUWK&DUROLQD6XEFODVV $OO SHUVRQV LQ WKH VWDWH RI 1RUWK &DUROLQD ZKR ERXJKW D 1LQWHQGR 6ZLWFK RU VWDQGDORQH-R\&RQFRQWUROOHUV ,OOLQRLV6XEFODVV $OOSHUVRQVLQWKHVWDWHRI,OOLQRLVZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH :DVKLQJWRQ6XEFODVV $OOSHUVRQVLQWKHVWDWHRI:DVKLQJWRQZKRERXJKWD1LQWHQGR6ZLWFKVWDQG DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH 0DVVDFKXVHWWV6XEFODVV $OOSHUVRQVLQWKHVWDWHRI0DVVDFKXVHWWVZKRERXJKWD1LQWHQGR6ZLWFKVWDQG DORQH-R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH $UL]RQD6XEFODVV $OOSHUVRQVLQWKHVWDWHRI$UL]RQDZKRERXJKWD1LQWHQGR6ZLWFKVWDQGDORQH -R\&RQFRQWUROOHUVRUD1LQWHQGR6ZLWFK/LWH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 48 of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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 49 of 101 XQNQRZQDWWKLVWLPHVXFKLQIRUPDWLRQEHLQJLQWKHVROHSRVVHVVLRQRI1LQWHQGRDQGREWDLQDEOH E\3ODLQWLIIVRQO\WKURXJKWKHGLVFRYHU\SURFHVV3ODLQWLIIVEHOLHYHDQGRQWKDWEDVLVDOOHJHWKDW DWOHDVWKXQGUHGVRIWKRXVDQGVRI6ZLWFKHVDQG-R\&RQFRQWUROOHUVKDYHEHHQVROGQDWLRQZLGH 1LQWHQGRKDVUHFHQWO\VWDWHGLQDQRWKHUPDWWHUWKDWLWKDVVROGRYHUPLOOLRQ6ZLWFKXQLWV³LQ WKH$PHULFDV´VLQFHLWZDVODXQFKHGLQ0DUFKRISee Vergara v. Nintendo of Am. Inc., No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¶VFRQGXFWDOOHJHGKHUHLQYLRODWHVFRQVXPHUSURWHFWLRQ VWDWXWHVIDOVHDGYHUWLVLQJODZVZDUUDQW\ODZVDQGRWKHUODZVDVDVVHUWHGKHUHLQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 50 of 101 K ZKHWKHU3ODLQWLIIVDQG&ODVV0HPEHUVRYHUSDLGIRUWKHLU6ZLWFKHVDQGRU -R\&RQFRQWUROOHUVLQOLJKWRIWKHGHIHFW L ZKHWKHU 3ODLQWLIIV DQG &ODVV 0HPEHUV KDYH VXIIHUHG DQ DVFHUWDLQDEOH ORVVDVDUHVXOWRIWKHORVVRIWKHLU6ZLWFK¶VIXQFWLRQDOLW\ M ZKHWKHU3ODLQWLIIVDQG&ODVV0HPEHUVDUHHQWLWOHGWRGDPDJHVLQFOXGLQJ SXQLWLYHGDPDJHVDVDUHVXOWRI1LQWHQGR¶VFRQGXFWDOOHJHGKHUHLQDQGLIVRWKHDPRXQWRU SURSHUPHDVXUHRIWKRVHGDPDJHV DQG N ZKHWKHU 3ODLQWLIIV DQG &ODVV 0HPEHUV DUH HQWLWOHG WR HTXLWDEOH UHOLHI LQFOXGLQJEXWQRWOLPLWHGWRUHVWLWXWLRQDQGRULQMXQFWLYHUHOLHILQFOXGLQJSXEOLFLQMXQFWLYHUHOLHI DVSURYLGHGIRUXQGHU&DOLIRUQLDODZDQGRWKHUVWDWHODZVDVVHUWHGKHUHLQ 7\SLFDOLW\ 3ODLQWLIIV¶FODLPVDUHW\SLFDORIWKHFODLPVRIWKH&ODVVVLQFH 3ODLQWLIIV SXUFKDVHG D 6ZLWFK DQGRU -R\&RQ FRQWUROOHUV DV GLG HDFK PHPEHU RI WKH &ODVV 3ODLQWLIIVDQG&ODVVPHPEHUVZHUHLQMXUHGLQWKHVDPHPDQQHUE\1LQWHQGR¶VXQLIRUPFRXUVHRI FRQGXFWDOOHJHGKHUHLQ3ODLQWLIIVDQGDOO&ODVVPHPEHUVKDYHWKHVDPHFODLPVDJDLQVW1LQWHQGR UHODWLQJWRWKHFRQGXFWDOOHJHGKHUHLQDQGWKHVDPHHYHQWVJLYLQJULVHWR3ODLQWLIIV¶FODLPVIRU UHOLHIDUHLGHQWLFDOWRWKRVHJLYLQJULVHWRWKHFODLPVRIDOO&ODVV0HPEHUV3ODLQWLIIVDQGDOO &ODVV PHPEHUV VXVWDLQHG PRQHWDU\ DQG HFRQRPLF LQMXULHV LQFOXGLQJ EXW QRW OLPLWHG WR DVFHUWDLQDEOHORVVHVDULVLQJRXWRI1LQWHQGR¶VZURQJIXOFRQGXFWLQVHOOLQJDQGIDLOLQJWRUHPHG\ GHIHFWLYH -R\&RQ FRQWUROOHUV 3ODLQWLIIV DUH DGYDQFLQJ WKH VDPH FODLPV DQG OHJDO WKHRULHV RQ EHKDOIRIKLPVHOIDQGDOODEVHQW&ODVV0HPEHUV $GHTXDF\ 3ODLQWLIIVDUHDGHTXDWHUHSUHVHQWDWLYHVIRUWKH&ODVVEHFDXVH KLV LQWHUHVWVGRQRWFRQIOLFWZLWKWKHLQWHUHVWVRIWKH&ODVVWKDWKHVHHNVWRUHSUHVHQW3ODLQWLIIVKDYH UHWDLQHGFRXQVHOFRPSHWHQWDQGKLJKO\H[SHULHQFHGLQFRPSOH[FODVVDFWLRQOLWLJDWLRQ²LQFOXGLQJ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 51 of 101 FRQVXPHU IUDXG FODVV DFWLRQ FDVHV²DQG WKH\ LQWHQG WR SURVHFXWH WKLV DFWLRQ YLJRURXVO\ 7KH LQWHUHVWVRIWKH&ODVVZLOOEHIDLUO\DQGDGHTXDWHO\SURWHFWHGE\3ODLQWLIIVDQGWKHLUFRXQVHO 6XSHULRULW\ $FODVVDFWLRQLVVXSHULRUWRDOORWKHUDYDLODEOHPHDQVRIIDLUDQG HIILFLHQWDGMXGLFDWLRQRIWKHFODLPVRI3ODLQWLIIVDQGPHPEHUVRIWKH&ODVV7KHLQMXU\VXIIHUHG E\HDFKLQGLYLGXDO&ODVVPHPEHULVUHODWLYHO\VPDOOLQFRPSDULVRQWRWKHEXUGHQDQGH[SHQVHRI LQGLYLGXDO SURVHFXWLRQ RI WKH FRPSOH[ DQG H[WHQVLYH OLWLJDWLRQ QHFHVVLWDWHG E\ 1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 52 of 101 1LQWHQGR LV D ³PHUFKDQW´ DV GHILQHG XQGHU WKH 8QLIRUP &RPPHUFLDO &RGH ³8&&´ 7KH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDUH³JRRGV´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¶V DFWLRQV 3ODLQWLIIV DQG &ODVV PHPEHUV KDYH VXIIHUHG HFRQRPLFDQGRWKHUUHODWHGGDPDJHV 3ODLQWLIIV DQG WKH &ODVV PHPEHUV KDYH FRPSOLHG ZLWK DOO REOLJDWLRQVXQGHUWKH ZDUUDQW\RURWKHUZLVHKDYHEHHQH[FXVHGIURPSHUIRUPDQFHRIVDLGREOLJDWLRQVDVDUHVXOWRI 1LQWHQGR¶VFRQGXFWGHVFULEHGKHUHLQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 53 of 101 &2817,, %5($&+2)7+(,03/,(':$55$17<2)0(5&+$17$%,/,7< 2QEHKDOIRIWKH1DWLRQZLGHFODVVRUDOWHUQDWLYHO\HDFKRIWKH6WDWH6XEFODVVHV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 1LQWHQGRLVD³PHUFKDQW´DVGHILQHGXQGHUWKH8&& 7KH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDUH³JRRGV´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¶VLPSOLHG 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 54 of 101 ZDUUDQWLHV7KHGHDOHUVZHUHQRWLQWHQGHGWREHWKHXOWLPDWHFRQVXPHUVRIWKHGHYLFHVDQGKDYH QR ULJKWV XQGHU WKH ZDUUDQW\ DJUHHPHQWV WKH ZDUUDQW\ DJUHHPHQWV ZHUH GHVLJQHG IRU DQG LQWHQGHGWREHQHILWWKHFRQVXPHUVRQO\ $VDGLUHFWDQGSUR[LPDWHUHVXOWRIWKHEUHDFKRIVDLGZDUUDQWLHV3ODLQWLIIVDQG &ODVVPHPEHUVZHUHLQMXUHGDQGDUHHQWLWOHGWRGDPDJHV &2817,,, 9,2/$7,2162)7+(&$/,)251,$ &21680(5/(*$/5(0(',(6$&7 &$/&,9&2'(et seq ³&/5$´ 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 1LQWHQGRLVD³SHUVRQ´DVWKDWWHUPLVGHILQHGLQ&$/&,9&2'( F 3ODLQWLIIV 'LD] DQG /XHEFNH DQG PHPEHUV RI WKH &DOLIRUQLD 6XEFODVV DUH ³FRQVXPHUV´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 55 of 101 D $GYHUWLVLQJJRRGVDQGVHUYLFHVZLWKWKHLQWHQWQRWWRVHOO WKHPDVDGYHUWLVHG 1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 56 of 101 SULFH+DG3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVVNQRZQDERXWWKHGHIHFWLYH QDWXUHRIWKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVWKH\ZRXOGQRWKDYHSXUFKDVHGWKHPRUZRXOG KDYHSDLGOHVVIRUWKHPWKHQWKH\GLG $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V FRQGXFW 3ODLQWLIIV 'LD] DQG /XHEFNHDQG&DOLIRUQLD6XEFODVV0HPEHUVKDYHEHHQKDUPHG ,QMXQFWLYHUHOLHIE\DQGODUJHZRXOGEHQHILWWKHJHQHUDOSXEOLFKHUH,QMXQFWLYH UHOLHIEHQHILWV3ODLQWLIIRQO\LQFLGHQWDOO\DVPHPEHUVRIWKHJHQHUDOSXEOLFEHFDXVH3ODLQWLIIKDV DOUHDG\EHHQLQMXUHGE\DQGLVWKHUHIRUHDZDUHRIWKHDOOHJHGPLVFRQGXFWRI1LQWHQGR &2817,9 9,2/$7,2162)7+(&$/,)251,$81)$,5&203(7,7,21/$: &$/%86 352)&2'(et seq. ³8&/´ 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH 7KH8&/SURVFULEHVDFWVRIXQIDLUFRPSHWLWLRQLQFOXGLQJ³DQ\XQODZIXOXQIDLU RUIUDXGXOHQWEXVLQHVVDFWRUSUDFWLFHDQGXQIDLUGHFHSWLYHXQWUXHRUPLVOHDGLQJDGYHUWLVLQJ´ &$/%86 352)&2'($VVHWIRUWKEHORZ1LQWHQGRKDVYLRODWHGDOOWKUHHSURQJVRI WKHVWDWXWH 8QODZIXO 1LQWHQGR¶V FRQGXFW LV XQODZIXO LQ YLRODWLRQ RI WKH 8&/ EHFDXVH LWV FRQGXFW FRQWUDYHQHV WKH OHJLVODWLYHO\ GHFODUHG SROLF\ DJDLQVW XQIDLU PHWKRGV RI EXVLQHVV FRPSHWLWLRQ $GGLWLRQDOO\ 1LQWHQGR¶V FRQGXFW LV XQODZIXO EHFDXVH DV VHW IRUWK KHUHLQ LW YLRODWHV WKH &DOLIRUQLD&RQVXPHU/HJDO5HPHGLHV$FWWKH6RQJ%HYHUO\:DUUDQW\$FWYDULRXVRWKHUVWDWH VWDWXWHVDVVHUWHGKHUHLQDQGFRQVWLWXWHVEUHDFKRIH[SUHVVDQGLPSOLHGZDUUDQWLHVDQGIUDXGXOHQW FRQFHDOPHQW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 57 of 101 8QIDLU 1LQWHQGR¶V FRQGXFW LV XQIDLU LQ YLRODWLRQ RI WKH 8&/ EHFDXVH LW YLRODWHV &DOLIRUQLD SXEOLF SROLF\ OHJLVODWLYHO\ GHFODUHG LQ WKH 6RQJ%HYHUO\ &RQVXPHU :DUUDQW\ $FW UHTXLULQJ D PDQXIDFWXUHU²GHILQHG DV D SHUVRQ RU HQWLW\ WKDW ³PDQXIDFWXUHV DVVHPEOHV RU SURGXFHV FRQVXPHU JRRGV´²WR HQVXUH WKDW JRRGV LW SODFHV RQ WKH PDUNHW DUH ILW IRU WKHLU RUGLQDU\DQGLQWHQGHGSXUSRVHV 1LQWHQGRDFWHGLQDQXQHWKLFDOXQVFUXSXORXVRXWUDJHRXVRSSUHVVLYHDQG VXEVWDQWLDOO\LQMXULRXVPDQQHULQFOXGLQJDVIROORZV x 1LQWHQGRSURPRWHGDQGVROG6ZLWFKHV-R\&RQVDQG6ZLWFK/LWHVWKDWLWNQHZ ZHUHGHIHFWLYHSRVVHVVWKHGULIWLQJLVVXHDQGIDLOSUHPDWXUHO\ x 1LQWHQGR IDLOHG WR GLVFORVH WKDW WKH 6ZLWFKHV -R\&RQV DQG 6ZLWFK /LWHV DUH GHIHFWLYH DQG UHSUHVHQWHG WKURXJK DGYHUWLVLQJ SURGXFW SDFNDJLQJ SUHVV UHOHDVHV DQG RWKHU VRXUFHV WKDW WKH\ SRVVHVVHG SDUWLFXODU TXDOLWLHV WKDW ZHUH LQFRQVLVWHQWZLWKLWVLQWHUQDONQRZOHGJH x 1LQWHQGRPDGHUHSDLUVRUJDYHUHSODFHPHQWVWKDWZHUHLQHIIHFWLYHWRUHPRYHWKH 'ULIWLQJ 'HIHFW H[SRVLQJ FRQVXPHUV WR UHSHDWHG LQVWDQFHV RI IDLOXUH DQG UHQGHULQJLWVZDUUDQW\XVHOHVV x 1LQWHQGRIDLOHGWRH[HUFLVHDGHTXDWHTXDOLW\FRQWURODQGGXHGLOLJHQFHRYHUWKH 6ZLWFKHV-R\&RQVDQG6ZLWFK/LWHVEHIRUHODXQFK DQG x 1LQWHQGRPLQLPL]HGWKHVFRSHDQGVHYHULW\RIWKHSUREOHPVZLWKWKH6ZLWFKHV -R\&RQV DQG 6ZLWFK /LWHV UHIXVLQJ WR DFNQRZOHGJH WKDW WKHLU NH\ERDUGV DUH GHIHFWLYH ZKLOH DW WKH VDPH WLPH FODQGHVWLQHO\ ZDLYLQJ WKH WHPSRUDO &$/&,9&2'( M 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 58 of 101 OLPLWDWLRQV LQ LWV ZDUUDQW\ IRU LQGLYLGXDOV ZKR H[SHULHQFH GULIWLQJ IDLOLQJ WR SURYLGHDGHTXDWHUHOLHIWRFRQVXPHUV 7KH JUDYLW\ RI KDUP UHVXOWLQJ IURP 1LQWHQGR¶V XQIDLU FRQGXFW RXWZHLJKV DQ\ SRWHQWLDOXWLOLW\7KHSUDFWLFHRIVHOOLQJGHIHFWLYH6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVZLWKRXW SURYLGLQJDQDGHTXDWHUHPHG\WRFXUHWKHGHIHFW²DQGFRQWLQXLQJWRVHOOWKHPZLWKRXWIXOODQG IDLUGLVFORVXUHRIWKHGHIHFW²KDUPVWKHSXEOLFDWODUJHDQGLVSDUWRIDFRPPRQDQGXQLIRUP FRXUVHRIZURQJIXOFRQGXFW 7KHKDUPIURP1LQWHQGR¶VFRQGXFWZDVQRWUHDVRQDEO\DYRLGDEOHE\FRQVXPHUV EHFDXVHWKH6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVVXIIHUIURPDGHIHFWDQG1LQWHQGRGLGQRW GLVFORVHWKHGHIHFWHYHQDIWHUUHFHLYLQJDODUJHYROXPHRIFRQVXPHUFRPSODLQWV3ODLQWLIIVGLG QRWNQRZRIDQGKDGQRUHDVRQDEOHPHDQVRIGLVFRYHULQJ6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQV DUHGHIHFWLYH 7KHUH ZHUH UHDVRQDEO\ DYDLODEOH DOWHUQDWLYHV WKDW ZRXOG IXUWKHU 1LQWHQGR¶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¶VFRQGXFWLVIUDXGXOHQWLQYLRODWLRQRIWKH8&/EHFDXVHLWLVOLNHO\WR GHFHLYHDUHDVRQDEOHFRQVXPHU 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 59 of 101 x 1LQWHQGR NQRZLQJO\ DQG LQWHQWLRQDOO\ FRQFHDOHG IURP FRQVXPHUV WKDW WKH 6ZLWFKHV6ZLWFK/LWHVDQG-R\&RQVFRQWDLQDODWHQWGHIHFWWKDWUHQGHUVWKHP SURQHWRGULIWLQJDQGIDLOXUH x 1LQWHQGRYROXQWHHUHGLQIRUPDWLRQWRFRQVXPHUVWKURXJKDGYHUWLVLQJDQGWKURXJK RWKHU PHDQV WKDW WKH 6ZLWFKHV 6ZLWFK /LWHV DQG -R\&RQV ZHUH IXQFWLRQDO SUHPLXP JDPLQJ GHYLFHV ZLWKRXW GLVFORVLQJ LQIRUPDWLRQ WKDW ZRXOG KDYH PDWHULDOO\TXDOLILHGWKHVHSDUWLDOUHSUHVHQWDWLRQV x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¶V XQODZIXO XQIDLU DQG IUDXGXOHQW DFWV $EVHQW 1LQWHQGR¶V XQODZIXO XQIDLU DQG 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 60 of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¶IHHVDQGFRVWVXQGHUDSSOLFDEOHODZ LQFOXGLQJXQGHU&DOLIRUQLD&RGHRI&LYLO3URFHGXUHVHFWLRQ &28179 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7 )25%5($&+2)(;35(66:$55$17< &$/&,9&2'( G 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 3ODLQWLIIV 'LD] DQG /XHEFNH DQG WKH RWKHU &ODVV PHPEHUV ZKR SXUFKDVHG WKH GHYLFHVLQ&DOLIRUQLDDUH³EX\HUV´ZLWKLQWKHPHDQLQJRI&$/&,9&2'( E 7KH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDUH³FRQVXPHUJRRGV´ZLWKLQWKHPHDQLQJ RI&$/&,9&2'( D 1LQWHQGRLVD³PDQXIDFWXUHU´ZLWKLQWKHPHDQLQJRI&$/&,9&2'( M 1LQWHQGRPDGHH[SUHVVZDUUDQWLHVWR3ODLQWLIIV'LD]DQG/XHEFNHDQGWKHRWKHU &DOLIRUQLD &ODVV PHPEHUV ZLWKLQ WKH PHDQLQJ RI &$/ &,9 &2'( DQG DV GHVFULEHGDERYH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 61 of 101 1LQWHQGR EUHDFKHG WKHVH ZDUUDQWLHV E\ VHOOLQJ WKH 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV ZLWK WKH GHIHFW UHTXLULQJ UHSDLU RU UHSODFHPHQW ZLWKLQ WKH DSSOLFDEOH ZDUUDQW\ SHULRGVDQGUHIXVLQJWRKRQRUWKHZDUUDQWLHVE\SURYLGLQJIUHHUHSDLUVRUUHSODFHPHQWVGXULQJ WKHDSSOLFDEOHZDUUDQW\SHULRGV $V DOOHJHG DERYH WKH WHUPV RI 1LQWHQGR¶V H[SUHVV ZDUUDQW\ DUH ERWK VXEVWDQWLYHO\DQGSURFHGXUDOO\XQFRQVFLRQDEOH1LQWHQGR¶VDWWHPSWWRGLVFODLPRUOLPLWWKHVH H[SUHVV ZDUUDQWLHV LV XQFRQVFLRQDEOH DQG XQHQIRUFHDEOH XQGHU WKH FLUFXPVWDQFHV KHUH 6SHFLILFDOO\LWVZDUUDQW\OLPLWDWLRQLVXQHQIRUFHDEOHEHFDXVHLWNQRZLQJO\VROGDGHIHFWSURGXFW ZLWKRXWLQIRUPLQJFRQVXPHUVDERXWWKHGHIHFW 7KHWLPHOLPLWVFRQWDLQHGLQ1LQWHQGR¶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¶VEUHDFKRILWVH[SUHVVZDUUDQWLHV 3ODLQWLII DQG WKH RWKHU &DOLIRUQLD 6XEFODVV PHPEHUV UHFHLYHG JRRGV ZKRVH FRQGLWLRQ VXEVWDQWLDOO\LPSDLUVWKHLUYDOXH3ODLQWLIIV'LD]DQG/XHEFNHDQGWKHRWKHU&DOLIRUQLD6XEFODVV PHPEHUV KDYH EHHQ GDPDJHG DV D UHVXOW RI inter alia, WKH GLPLQLVKHG YDOXH RI 1LQWHQGR¶V 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 62 of 101 SURGXFWV WKH SURGXFWV¶ PDOIXQFWLRQLQJ DQG DFWXDO DQG SRWHQWLDO LQFUHDVHG PDLQWHQDQFH DQG UHSDLUFRVWV 3XUVXDQWWR&$/&,9&2'( 3ODLQWLIIVDQGWKHRWKHU&DOLIRUQLD 6XEFODVVPHPEHUVDUHHQWLWOHGWRGDPDJHVDQGRWKHUOHJDODQGHTXLWDEOHUHOLHILQFOXGLQJDWWKHLU HOHFWLRQ WKH SXUFKDVH SULFH RI WKHLU 6ZLWFKHV RU -R\&RQ FRQWUROOHUV RU WKH RYHUSD\PHQW RU GLPLQXWLRQLQYDOXHRIWKHVHGHYLFHV 3XUVXDQWWR&$/ &,9 &2'( 3ODLQWLIIV'LD]DQG/XHEFNHDQGWKHRWKHU &DOLIRUQLD6XEFODVVPHPEHUVDUHHQWLWOHGWRFRVWVDQGDWWRUQH\V¶IHHV &28179, 9,2/$7,2162)7+(621*%(9(5/<&21680(5:$55$17<$&7 )25%5($&+2),03/,(':$55$17< &$/&,9&2'( et seq. 2QEHKDOIRI3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 7KH6ZLWFKHVRU-R\&RQFRQWUROOHUVDUH³FRQVXPHUJRRGV´ZLWKLQWKHPHDQLQJ RI&$/&,9&2'( D 1LQWHQGRLVD³PDQXIDFWXUHU´ZLWKLQWKHPHDQLQJRI&$/&,9&2'( M 1LQWHQGRLPSOLHGO\ZDUUDQWHGWR3ODLQWLIIV'LD]DQG/XHEFNHDQGWKH&DOLIRUQLD 6XEFODVV WKDW WKH GHYLFHV ZHUH ³PHUFKDQWDEOH´ ZLWKLQ WKH PHDQLQJ RI &$/ &,9 &2'( D &$/ &,9 &2'( D VWDWHV ³,PSOLHG ZDUUDQW\ RI PHUFKDQWDELOLW\´ RU ³LPSOLHGZDUUDQW\WKDWJRRGVDUHPHUFKDQWDEOH´PHDQVWKDWWKHFRQVXPHUJRRGVPHHWHDFKRI WKHIROORZLQJ 3DVVZLWKRXWREMHFWLRQLQWKHWUDGHXQGHUWKHFRQWUDFWGHVFULSWLRQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 63 of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¶V EUHDFK RI LWV GXWLHV &DOLIRUQLD 6XEFODVVPHPEHUVUHFHLYHGJRRGVZKRVHFRQGLWLRQVXEVWDQWLDOO\LPSDLUVWKHLUYDOXH3ODLQWLIIV 'LD]DQG/XHEFNHDQGWKHSURSRVHG&DOLIRUQLD6XEFODVVKDYHEHHQGDPDJHGE\WKHGLPLQLVKHG YDOXH RI WKH 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV WKH GHYLFHV¶ PDOIXQFWLRQLQJ DQG DFWXDO DQG SRWHQWLDOLQFUHDVHGPDLQWHQDQFHDQGUHSDLURUUHSODFHPHQWFRVWV 8QGHU&$/&,9&2'( G 3ODLQWLIIVDQG&DOLIRUQLD6XEFODVV PHPEHUVDUHHQWLWOHGWRGDPDJHVDQGRWKHUOHJDODQGHTXLWDEOHUHOLHILQFOXGLQJDWWKHLUHOHFWLRQ WKHSXUFKDVHSULFHRIWKHLU6ZLWFKHVRU-R\&RQFRQWUROOHUVRUWKHRYHUSD\PHQWRUGLPLQXWLRQLQ YDOXHRIWKHLUGHYLFHVDQGDUHDOVRHQWLWOHGWRWKHLUDWWRUQH\IHHVDQGFRVWV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 64 of 101 &28179,, 9,2/$7,2162))/25,'$¶6'(&(37,9($1'81)$,5 75$'(35$&7,&(6$&7 )/$67$7et seq ³)'873$´ 2Q%HKDOIRI3ODLQWLII7KRPSVRQDQGWKH)ORULGD6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 3ODLQWLII7KRPSVRQEULQJVWKLVFODLPRQEHKDOIRIWKH)ORULGD6XEFODVV 3ODLQWLII 7KRPSVRQ DQG )ORULGD 6XEFODVV PHPEHUV DUH ³FRQVXPHUV´ ZLWKLQ WKH PHDQLQJRI)/$67$7 1LQWHQGRHQJDJHGLQ³WUDGHRUFRPPHUFH´ZLWKLQWKHPHDQLQJRI)/$ 67$7 7KH)'873$SURKLELWV³>X@QIDLUPHWKRGVRIFRPSHWLWLRQXQFRQVFLRQDEOHDFWVRU SUDFWLFHVDQGXQIDLURUGHFHSWLYHDFWVRUSUDFWLFHVLQWKHFRQGXFWRIDQ\WUDGHRUFRPPHUFH´ )/$67$7 1LQWHQGR¶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¶VDFWXDONQRZOHGJHRIWKHSURGXFW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 65 of 101 F PDGHUHSDLUVDQGSURYLGHGUHSODFHPHQWVWKDWFDXVHG3ODLQWLIIDQGFODVV PHPEHUV WR H[SHULHQFH UHSHDWHG LQVWDQFHV RI IDLOXUH UHQGHULQJ WKH ZDUUDQW\XVHOHVV DQG G PLQLPL]HG WKH VFRSH DQG VHYHULW\ RI WKH SUREOHPV ZLWK WKH -R\&RQ FRQWUROOHUVUHIXVLQJWRDFNQRZOHGJHWKDWWKH\DUHGHIHFWLYHDQGIDLOLQJ WRSURYLGHDGHTXDWHUHOLHIWRFRQVXPHUV 7KH JUDYLW\ RI KDUP UHVXOWLQJ IURP 1LQWHQGR¶V XQIDLU FRQGXFW RXWZHLJKV DQ\ SRWHQWLDO XWLOLW\ 7KH SUDFWLFH RI PDUNHWLQJ DQG VHOOLQJ GHIHFWLYH -R\&RQ FRQWUROOHUV ZLWKRXW SURYLGLQJ DQ DGHTXDWH UHPHG\ WR FXUH WKH GHIHFW KDUPV WKH SXEOLF DW ODUJH DQG LV SDUW RI D FRPPRQDQGXQLIRUPFRXUVHRIZURQJIXOFRQGXFW 7KHKDUPIURP1LQWHQGR¶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¶V UHSUHVHQWDWLRQV DQG RPLVVLRQV ZKHQ GHFLGLQJ ZKHWKHU WR SXUFKDVH D 1LQWHQGR 6ZLWFK RU DGGLWLRQDO-R\&RQFRQWUROOHUV 3ODLQWLIIDQG&ODVVPHPEHUVVXIIHUHGDVFHUWDLQDEOHORVVDVDGLUHFWDQGSUR[LPDWH UHVXOW RI 1LQWHQGR¶V XQIDLU DQG GHFHSWLYH DFWV RU SUDFWLFHV +DG 3ODLQWLII 7KRPSVRQ DQG WKH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 66 of 101 )ORULGD6XEFODVVPHPEHUVNQRZQWKDWWKH-R\&RQFRQWUROOHUVZHUHVXVFHSWLEOHWRWKH'ULIWLQJ 'HIHFW WKH\ ZRXOG QRW KDYH SXUFKDVHG 1LQWHQGR 6ZLWFKHV DQGRU DGGLWLRQDO -R\&RQ FRQWUROOHUVRUZRXOGKDYHSDLGVLJQLILFDQWO\OHVVIRUWKHP$PRQJRWKHULQMXULHVWKH\RYHUSDLG IRUWKHLU1LQWHQGR6ZLWFKHVDQGRUDGGLWLRQDO-R\&RQFRQWUROOHUVDQGWKHVHLWHPV VXIIHUHGD GLPLQXWLRQLQYDOXH 3ODLQWLII 7KRPSVRQ DQG WKH )ORULGD 6XEFODVV PHPEHUV DUH HQWLWOHG WR UHFRYHU WKHLUDFWXDOGDPDJHVXQGHU)/$67$7 DQGUHDVRQDEOHDWWRUQH\V¶IHHVXQGHU)/$ 67$7 3ODLQWLII7KRPSVRQDOVRVHHNVDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQIDLUDQGGHFHSWLYH DFWVRUSUDFWLFHVSXUVXDQWWR)/$67$7DQGDQ\RWKHUMXVWDQGSURSHUUHOLHIDYDLODEOH XQGHUWKH)'873$ &28179,,, 9,2/$7,2162)7+(1(:-(56(<&21680(5)5$8'$&7 1-67$7$11 (76(4 ³1-&)$´ 2Q%HKDOIRI3ODLQWLIIV5LRVDQG*X\DQGWKH1HZ-HUVH\6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 7KLV FODLP LV EURXJKW E\ 3ODLQWLIIV 5LRV DQG *X\ RQ EHKDOI RI WKH1HZ-HUVH\ 6XEFODVV 7KH 1-&)$ SURWHFWV FRQVXPHUV DJDLQVW ³DQ\ XQFRQVFLRQDEOH FRPPHUFLDO SUDFWLFH GHFHSWLRQ IUDXG IDOVH SUHWHQVH IDOVH SURPLVH PLVUHSUHVHQWDWLRQ RU WKH NQRZLQJ FRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQWWKDWRWKHUVUHO\XSRQVXFK FRQFHDOPHQW VXSSUHVVLRQ RU RPLVVLRQ LQ FRQQHFWLRQ ZLWK WKH VDOH RU DGYHUWLVHPHQW RI DQ\ PHUFKDQGLVH´1-67$7$11 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 67 of 101 3ODLQWLIIV5LRVDQG*X\DQG1HZ-HUVH\6XEFODVVPHPEHUVDUHFRQVXPHUVZKR SXUFKDVHG1LQWHQGR6ZLWFKHVDQG-R\&RQFRQWUROOHUVIRUSHUVRQDOIDPLO\RUKRXVHKROGXVH ,Q WKH FRXUVH RI 1LQWHQGR¶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¶VDFWVDQG SUDFWLFHVGHVFULEHGKHUHLQRIIHQGHVWDEOLVKHGSXEOLFSROLF\EHFDXVHRIWKHKDUPWKH\FDXVHWR FRQVXPHUV RXWZHLJKV DQ\ EHQHILW DVVRFLDWHG ZLWK VXFK SUDFWLFHV DQG EHFDXVH 1LQWHQGR IUDXGXOHQWO\FRQFHDOHGWKHGHIHFWLYHQDWXUHRIWKH-R\&RQFRQWUROOHUVIURPFRQVXPHUV 1LQWHQGR¶V DFWLRQV DV VHW IRUWK DERYH RFFXUUHG LQ WKH FRQGXFW RI WUDGH RU FRPPHUFH 1LQWHQGR¶V FRQGXFW FDXVHG 3ODLQWLIIV 5LRV DQG *X\ DQG 1HZ -HUVH\ 6XEFODVV PHPEHUV WR VXIIHU DQ DVFHUWDLQDEOH ORVV 3ODLQWLIIV DQG WKH RWKHU &ODVV PHPEHUV ERXJKW 6ZLWFKHV DQGRU DGGLWLRQDO -R\&RQ FRQWUROOHUV WKH\ RWKHUZLVH ZRXOG QRW KDYH ERXJKW YLGHR 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 68 of 101 JDPHVWRSOD\RQWKHLU6ZLWFKHVRYHUSDLGIRUWKHVHSURGXFWVGLGQRWUHFHLYHWKHEHQHILWRIWKHLU EDUJDLQDQGWKHLU6ZLWFKHVDQG-R\&RQFRQWUROOHUVVXIIHUHGDGLPLQXWLRQLQYDOXH 3ODLQWLIIVDQGRWKHUFODVVPHPEHUV¶GDPDJHVDUHWKHGLUHFWDQGIRUHVHHDEOHUHVXOW RI1LQWHQGR¶VXQODZIXOFRQGXFW+DGWKH'ULIWLQJ'HIHFWEHHQGLVFORVHGFRQVXPHUVZRXOGQRW KDYHSXUFKDVHGRUZRXOGKDYHSDLGOHVVIRUWKH6ZLWFKHVDQG-R\&RQFRQWUROOHUVDQGZRXOG KDYHEHHQVSDUHGWKHVXEVHTXHQWH[SHQVHVDQGLQFRQYHQLHQFH 3ODLQWLIIV 5LRV DQG *X\ DQG &ODVV DUH HQWLWOHG WR UHFRYHU WUHEOH GDPDJHV DWWRUQH\V¶IHHVILOLQJIHHVDQGUHDVRQDEOHFRVWV1-67$7$11 3ODLQWLIIVDOVRVHHNDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQODZIXODFWVRUSUDFWLFHVDQG DQ\RWKHUMXVWDQGSURSHUUHOLHIDYDLODEOHXQGHUWKH1-&)$ 3XUVXDQW WR 1- 67$7 $11 3ODLQWLIIV ZLOO VHUYH WKH 1HZ -HUVH\ $WWRUQH\*HQHUDOZLWKDFRS\RIWKLV)LUVW$PHQGHG&ODVV$FWLRQ&RPSODLQW &2817,; 9,2/$7,2162)7+(1257+&$52/,1$ 81)$,5$1''(&(37,9(75$'(35$&7,&(6$&7 1&*(167$7et seq. ³1&8'73$´ 2Q%HKDOIRI3ODLQWLII)RXFKDDQGWKH1RUWK&DUROLQD6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 3ODLQWLII)RXFKDEULQJVWKLVFODLPRQEHKDOIRIWKH1RUWK&DUROLQD6XEFODVV 7KH 1&8'73$ SURKLELWV D SHUVRQ IURP HQJDJLQJ LQ ³>X@QIDLU PHWKRGV RI FRPSHWLWLRQLQRUDIIHFWLQJFRPPHUFHDQGXQIDLURUGHFHSWLYHDFWVRUSUDFWLFHVLQRUDIIHFWLQJ FRPPHUFH>@´ 7KH 1&8'73$ SURYLGHV D SULYDWH ULJKW RI DFWLRQ IRU DQ\ SHUVRQ LQMXUHG ³E\ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 69 of 101 UHDVRQRIDQ\DFWRUWKLQJGRQHE\DQ\RWKHUSHUVRQILUPRUFRUSRUDWLRQLQYLRODWLRQRI´WKH 1&8'73$1&*(167$7 1LQWHQGR¶VDFWVDQGSUDFWLFHVFRPSODLQHGRIKHUHLQZHUHSHUIRUPHGLQWKHFRXUVH RI1LQWHQGR¶VWUDGHRUEXVLQHVVDQGWKXVRFFXUUHGLQRUDIIHFWHG³FRPPHUFH´DVGHILQHGLQ1& *(167$7 E 1LQWHQGR¶V DFWV DQG SUDFWLFHV DUH XQIDLU LQ DW OHDVW WKH IROORZLQJ UHVSHFWV 1LQWHQGR NQRZLQJO\ VROG 3ODLQWLII )RXFKD DQG 1RUWK &DUROLQD 6XEFODVV PHPEHUV -R\&RQ FRQWUROOHUVZLWKWKH'ULIWLQJ'HIHFWUHIXVHGWRFRPSO\ZLWKZDUUDQWLHVUHTXLUHGFRQVXPHUVWR ZDLW VHYHUDO ZHHNV WR VHYHUDO PRQWKV RQ ZDUUDQW\ FODLPV DQG UHSODFHG GHIHFWLYH FRQWUROOHUV ZLWKRWKHUGHIHFWLYHFRQWUROOHUV 1LQWHQGR¶VDFWVDQGSUDFWLFHVDUHFRQWUDU\WR1RUWK&DUROLQDODZDQGSROLF\DQG FRQVWLWXWH LPPRUDO XQHWKLFDO RSSUHVVLYH DQG XQVFUXSXORXV EXVLQHVV SUDFWLFHV WKDW FDXVHG VXEVWDQWLDOLQMXU\WR3ODLQWLIIDQG1RUWK&DUROLQD6XEFODVVPHPEHUV7KHJUDYLW\RIWKHKDUP UHVXOWLQJ IURP 1LQWHQGR¶V XQIDLU FRQGXFW RXWZHLJKV DQ\ SRWHQWLDO XWLOLW\ RI WKH FRQGXFW 7KH SUDFWLFHRIVHOOLQJGHIHFWLYH-R\&RQFRQWUROOHUVZLWKRXWSURYLGLQJDQDGHTXDWHUHPHG\WRFXUH WKHGHIHFWKDUPVWKHSXEOLFDWODUJHDQGLVSDUWRIDFRPPRQDQGXQLIRUPFRXUVHRIZURQJIXO FRQGXFW 7KHUH DUH UHDVRQDEO\ DYDLODEOH DOWHUQDWLYHV WKDW ZRXOG IXUWKHU 1LQWHQGR¶V EXVLQHVV LQWHUHVWVRILQFUHDVLQJVDOHVDQGSUHYHQWLQJIDOVHZDUUDQW\FODLPV7KHKDUPIURP1LQWHQGR¶V XQIDLUFRQGXFWZDVQRWUHDVRQDEO\DYRLGDEOHE\FRQVXPHUV 1LQWHQGR¶VDFWVDQGSUDFWLFHVDUHGHFHSWLYHEHFDXVH1LQWHQGRZLOOIXOO\IDLOHGWR GLVFORVH DQG DFWLYHO\ FRQFHDOHG WKH 'ULIWLQJ 'HIHFW UHSUHVHQWHG WKDW WKH -R\&RQ FRQWUROOHUV KDYHFKDUDFWHULVWLFVXVHVEHQHILWVDQGTXDOLWLHVZKLFKWKH\GRQRWKDYH UHSUHVHQWHGWKDW-R\ &RQFRQWUROOHUVDUHRIDSDUWLFXODUVWDQGDUGDQGTXDOLW\ZKHQWKH\DUHQRW DGYHUWLVHG1LQWHQGR 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 70 of 101 6ZLWFKHVDQG-R\&RQFRQWUROOHUVZLWKWKHLQWHQWQRWWRVHOOWKHPDVDGYHUWLVHG DQGRWKHUZLVH HQJDJLQJLQFRQGXFWOLNHO\WRGHFHLYH 1LQWHQGR¶VFRQGXFWSUR[LPDWHO\FDXVHGLQMXULHVWR3ODLQWLIIDQG1RUWK&DUROLQD 6XEFODVVPHPEHUV 1LQWHQGR DFWHG ZLWK ZLOOIXO DQG FRQVFLRXV GLVUHJDUG RI WKH ULJKWV RI RWKHUV VXEMHFWLQJ3ODLQWLIIDQG1RUWK&DUROLQD6XEFODVVPHPEHUVWRXQMXVWKDUGVKLSDVDUHVXOWVXFK WKDWDQDZDUGRISXQLWLYHGDPDJHVLVDSSURSULDWH 3ODLQWLII DQG 1RUWK &DUROLQD 6XEFODVV PHPEHUV ZHUH LQMXUHG DV D UHVXOW RI 1LQWHQGR¶VFRQGXFWLQWKDWWKH\RYHUSDLGIRUWKHLU6ZLWFKHVDQGH[WUD-R\&RQFRQWUROOHUVDQG GLGQRWUHFHLYHWKHEHQHILWRIWKHLUEDUJDLQDQGWKHLU&ODVV6ZLWFKHVDQG-R\&RQFRQWUROOHUV KDYHVXIIHUHGDGLPLQXWLRQLQYDOXH7KHVHLQMXULHVDUHWKHGLUHFWDQGQDWXUDOFRQVHTXHQFHRI 1LQWHQGR¶VYLRODWLRQVDOOHJHGKHUHLQ 3ODLQWLII )RXFKD LQGLYLGXDOO\ DQG RQ EHKDOI RI 1RUWK &DUROLQD 6XEFODVV VHHNV WUHEOHGDPDJHVSXUVXDQWWR1&*(167$7DQGDQDZDUGRIUHDVRQDEOHDWWRUQH\V¶IHHV SXUVXDQWWR1&*(167$7 &2817; 9,2/$7,212)7+(,//,12,6&21680(5)5$8' $1''(&(37,9(%86,1(6635$&7,&(6$&7 ,//&20367$7et seq. ³,&)$´ 2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 3ODLQWLII2UHQEULQJVWKLVFODLPRQEHKDOIRIWKH,OOLQRLV6XEFODVV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 71 of 101 3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUVDUH³FRQVXPHUV´ZLWKLQWKHPHDQLQJ RI,//&20367$7 H 3ODLQWLIIWKH&ODVVDQG1LQWHQGRDUH³SHUVRQV´ZLWKLQWKH PHDQLQJRI,//&20367$7 F 1LQWHQGRLVHQJDJHGLQ³WUDGH´RU³FRPPHUFH´ZLWKLQWKHPHDQLQJRI,// &20367$7 I 1LQWHQGRHQJDJHVLQWKH³VDOH´RI³PHUFKDQGLVH´DVWKRVHWHUPVDUHGHILQHGE\ ,//&20367$7 E DQG G 7KH ,&)$ SURKLELWV ³XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV LQFOXGLQJ EXW QRW OLPLWHG WR WKH XVH RU HPSOR\PHQW RI DQ\ GHFHSWLRQ IUDXG IDOVH SUHWHQVH IDOVH SURPLVH PLVUHSUHVHQWDWLRQRUWKHFRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQW WKDWRWKHUVUHO\XSRQWKHFRQFHDOPHQWVXSSUHVVLRQRURPLVVLRQRIVXFKPDWHULDOIDFW´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 72 of 101 %\IDLOLQJWRGLVFORVHWKH'ULIWLQJ'HIHFWDQGDGYHUWLVLQJWKH6ZLWFKDQG-R\&RQ FRQWUROOHUVDVUHOLDEOHDQGDVEHLQJRIKLJKTXDOLW\DQGE\SUHVHQWLQJLWVHOIDVDUHSXWDEOHYLGHR JDPHFRQVROHPDQXIDFWXUHU1LQWHQGRHQJDJHGLQGHFHSWLYHEXVLQHVVSUDFWLFHVLQYLRODWLRQRI WKH,&)$ 1LQWHQGR¶V XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV ZHUH OLNHO\ WR DQG GLG LQ IDFW GHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLII2UHQDQGWKHRWKHUFODVVPHPEHUVDERXWWKH WUXHSHUIRUPDQFHRIWKH-R\&RQFRQWUROOHUVWKHTXDOLW\RIWKH1LQWHQGR¶VEUDQGWKHWUXHYDOXH RIWKH6ZLWFKFRQVROHVDQG-R\&RQFRQWUROOHUV 1LQWHQGRLQWHQWLRQDOO\DQGNQRZLQJO\FRQFHDOHGPDWHULDOIDFWVUHJDUGLQJWKH-R\ &RQFRQWUROOHUVZLWKLQWHQWWRPLVOHDG3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUV 1LQWHQGRSRVVHVVHGH[FOXVLYHNQRZOHGJHWKDWLWZDVPDQXIDFWXULQJVHOOLQJDQG GLVWULEXWLQJ -R\&RQ FRQWUROOHUV WKDW DUH SODJXHG ZLWK WKH 'ULIWLQJ 'HIHFW DQG WKDW GR QRW SHUIRUPDVDGYHUWLVHGDQGLWLQWHQWLRQDOO\FRQFHDOHGWKHIRUHJRLQJPDWHULDOIDFWVIURP3ODLQWLII 2UHQDQGPHPEHUVRIWKHFODVVZKRGLGQRWKDYHDFFHVVWRWKLVLQIRUPDWLRQ %HFDXVH1LQWHQGRIUDXGXOHQWO\FRQFHDOHGWKHGHIHFWDQGWKHWUXHSHUIRUPDQFHRI WKH-R\&RQFRQWUROOHUVWKHYDOXHRIWKH-R\&RQVDQG6ZLWFKV\VWHPVKDVJUHDWO\GLPLQLVKHG 7KH\DUHQRZZRUWKVLJQLILFDQWO\OHVVWKDQWKH\RWKHUZLVHZRXOGEH 7KHH[LVWHQFHRIWKHGHIHFWZDVPDWHULDOWR3ODLQWLIIDQG,OOLQRLVFODVVPHPEHUV $VDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VYLRODWLRQVRIWKH,&)$3ODLQWLII DQGWKHFODVVPHPEHUVLQ,OOLQRLVKDYHVXIIHUHGLQMXU\LQIDFWDQGRUDFWXDOGDPDJH 3ODLQWLII2UHQDQGVLPLODUO\VLWXDWHGFRQVXPHUVLQ,OOLQRLVVXIIHUHGDVFHUWDLQDEOH ORVV FDXVHG E\ 1LQWHQGR¶V FRQFHDOPHQW RI DQG IDLOXUH WR GLVFORVH PDWHULDO LQIRUPDWLRQ &ODVV PHPEHUVZKRSXUFKDVHG6ZLWFKHVDQGH[WUD-R\&RQFRQWUROOHUVHLWKHUZRXOGKDYHSDLGOHVVIRU 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 73 of 101 WKHPRUZRXOGQRWKDYHSXUFKDVHGWKHPDWDOO'XHWR1LQWHQGR¶VGHFHSWLYHRUXQIDLUFRQGXFW 3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUVRYHUSDLGIRUWKHLU6ZLWFKHVDQGDGGLWLRQDO-R\&RQ FRQWUROOHUVDQGGLGQRWUHFHLYHWKHEHQHILWRIWKHLUEDUJDLQ 3ODLQWLII 2UHQ DQG RZQHUV RI 6ZLWFKHV DQG -R\&RQ FRQWUROOHUV DOVR VXIIHUHG DVFHUWDLQDEOHORVVLQWKHIRUPRIWKHGLPLQLVKHGYDOXHRIWKHLU6ZLWFKHVDQG-R\&RQFRQWUROOHUV DV D UHVXOW RI 1LQWHQGR¶V GHFHSWLYH DQG XQIDLU DFWV DQG SUDFWLFHV PDGH LQ WKH FRXUVH RI 1LQWHQGR¶VEXVLQHVV 3XUVXDQW WR ,// &203 67$7 D D 3ODLQWLII 2UHQ DQG WKH ,OOLQRLV FODVVVHHNDFWXDOGDPDJHVFRPSHQVDWRU\SXQLWLYHGDPDJHV SXUVXDQWWR,//&20367$7 D F LQMXQFWLYH UHOLHI DQG FRXUW FRVWV DQG DWWRUQH\V¶ IHHV DV D UHVXOW RI 1LQWHQGR¶V YLRODWLRQVRIWKH,&)$ &2817;, 9,2/$7,2162)7+(,//,12,681,)250 '(&(37,9(75$'(35$&7,&(6$&7 ,//&20367$7et seq ³,OOLQRLV'73$´ 2Q%HKDOIRI3ODLQWLII2UHQDQGWKH,OOLQRLV6XEFODVV 3ODLQWLIIVLQFRUSRUDWHE\UHIHUHQFHHDFKSUHFHGLQJDQGVXFFHHGLQJSDUDJUDSKDV WKRXJKIXOO\VHWIRUWKDWOHQJWKKHUHLQ 3ODLQWLII2UHQEULQJVWKLVFODLPRQEHKDOIRIWKH,OOLQRLV6XEFODVV 3ODLQWLII2UHQWKH,OOLQRLVFODVVPHPEHUVDQG1LQWHQGRDUH³SHUVRQV´DVGHILQHG LQ,//&20367$7 7KH ,OOLQRLV '73$ EURDGO\ SURKLELWV GHFHSWLYH WUDGH SUDFWLFHV $VVHWIRUWK KHUHLQ 1LQWHQGR FRPPLWWHG XQIDLU DQG GHFHSWLYH WUDGH SUDFWLFHV E\ PLVUHSUHVHQWLQJ WKH FDSDELOLWLHVTXDOLWLHVDQGSHUIRUPDQFHRIWKH6ZLWFKDQG-R\&RQFRQWUROOHUVDQGFRQFHDOLQJD 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 74 of 101 NQRZQGHIHFW$FFRUGLQJO\1LQWHQGRKDVHQJDJHGLQGHFHSWLYHWUDGHSUDFWLFHVDVGHILQHGLQ ,//&20367$7 1LQWHQGR¶V DFWLRQV DV VHW IRUWK DERYH RFFXUUHG LQ WKH FRQGXFW RI WUDGH RU FRPPHUFH 1LQWHQGRNQHZRUVKRXOGKDYHNQRZQWKDWLWVFRQGXFWYLRODWHGWKH,OOLQRLV'73$ 1LQWHQGR¶VFRQGXFWZDVPDWHULDOWR3ODLQWLII2UHQDQGWKH,OOLQRLVFODVVPHPEHUV $VVHWIRUWKKHUHLQ3ODLQWLIIDQGWKH,OOLQRLVFODVVPHPEHUVVXIIHUHGDVFHUWDLQDEOH ORVVFDXVHGE\1LQWHQGR¶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¶V GHFHSWLYH WUDGH SUDFWLFHV DQG EHFDXVH1LQWHQGR¶VFRQGXFWZDVZLOOIXODQDZDUGRIUHDVRQDEOHDWWRUQH\V¶IHHV &2817;,, 9LRODWLRQVRIWKH:DVKLQJWRQ&RQVXPHU3URWHFWLRQ$FW :$6+5(9&2'( et seq. ³:&3$´ 2Q%HKDOIRI3ODLQWLII'H/RDFKDQGWKH:DVKLQJWRQ6XEFODVV 3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH 3ODLQWLII 'H/RDFK DVVHUWV WKLV FODLP RQ EHKDOI RI KHUVHOI DQG WKH :DVKLQJWRQ 6XEFODVV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 75 of 101 1LQWHQGR3ODLQWLII'H/RDFKDQG:DVKLQJWRQ6XEFODVVPHPEHUVDUH³SHUVRQV´ XQGHU:$6+5(9&2'( 1LQWHQGR¶V DFWV RU SUDFWLFHV DV VHW IRUWK DERYH RFFXUUHG LQ WKH FRQGXFW RI ³WUDGH´RU³FRPPHUFH´ZLWKLQWKHPHDQLQJRI:$6+5(9&2'( :DVKLQJWRQ ODZ SURKLELWV ³>X@QIDLU PHWKRGV RI FRPSHWLWLRQ DQG XQIDLU RU GHFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ WUDGH RU SUDFWLFHV´ :$6+ 5(9 &2'( 1LQWHQGR¶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¶V UHSUHVHQWDWLRQVDQGRURPLVVLRQVZKHQGHFLGLQJZKHWKHUWRSXUFKDVHD6ZLWFKDQGRUDGGLWLRQDO -R\&RQV 3ODLQWLII 'H/RDFK DQG :DVKLQJWRQ 6XEFODVV PHPEHUV VXIIHUHG DVFHUWDLQDEOH ORVVDVDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VXQIDLUDQGGHFHSWLYHDFWVRUSUDFWLFHV+DG 3ODLQWLII'H/RDFKDQG:DVKLQJWRQ6XEFODVVPHPEHUVNQRZQWKDWWKH-R\&RQVZHUHGHIHFWLYH WKH\ZRXOGQRWKDYHSXUFKDVHGD6ZLWFKFRQVROHRUVHSDUDWHVHWVRI-R\&RQVRUZRXOGKDYH SDLG VLJQLILFDQWO\ OHVV IRU WKHP $PRQJ RWKHU LQMXULHV 3ODLQWLII 'H/RDFK DQG :DVKLQJWRQ 6XEFODVV PHPEHUV RYHUSDLG IRU WKHLU 6ZLWFK DQG -R\&RQV ZKLFK VXIIHUHG D GLPLQXWLRQ LQ YDOXH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 76 of 101 1LQWHQGR¶V YLRODWLRQV RI WKH :&3$ SUHVHQW D FRQWLQXLQJ ULVN WR 3ODLQWLII 'H/RDFK DQG :DVKLQJWRQ 6XEFODVV PHPEHUV DV ZHOO DV WR WKH JHQHUDO SXEOLF 1LQWHQGR¶V XQODZIXODFWVDQGSUDFWLFHVDGYHUVHO\DIIHFWWKHSXEOLFLQWHUHVW 8QGHU :$6+ 5(9 &2'( 3ODLQWLII 'H/RDFK DQG WKH :DVKLQJWRQ 6XEFODVVVHHNDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQIDLUDQGGHFHSWLYHDFWVRUSUDFWLFHVSURYLGLQJ IRUDSSURSULDWHPRQHWDU\UHOLHILQFOXGLQJWUHEOHGGDPDJHVDQGDZDUGLQJUHDVRQDEOHDWWRUQH\V¶ IHHVDQGFRVWV ,Q DFFRUGDQFH ZLWK :$6+ 5(9 &2'( D FRS\ RI WKLV $PHQGHG &RPSODLQWLVEHLQJVHUYHGRQWKH$WWRUQH\*HQHUDORI:DVKLQJWRQ &2817;,,, 9LRODWLRQRIWKH$UL]RQD&RQVXPHU)UDXG$FW $5,=5(967$7et seq. ³$&)$´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 77 of 101 3ODLQWLII(QULTXH]DQGPHPEHUVRIWKH&ODVVDUHSHUVRQVDVGHILQHGE\$5,= 5(967$7 1LQWHQGRLVHQJDJHGLQWKH³VDOH´RI³PHUFKDQGLVH´DVGHILQHGE\ $5,=5(967$7 1LQWHQGRHQJDJHGLQGHFHSWLYHDQGXQIDLUDFWVDQGSUDFWLFHVPLVUHSUHVHQWDWLRQ DQGWKHFRQFHDOPHQWVXSSUHVVLRQDQGRPLVVLRQRIPDWHULDOIDFWVLQFRQQHFWLRQZLWKWKHVDOH DQGDGYHUWLVHPHQWRI³PHUFKDQGLVH´ DVGHILQHGLQWKH$&)$ LQYLRODWLRQRIWKH$&)$E\ PLVUHSUHVHQWLQJWKHTXDOLW\DQGSHUIRUPDQFHRIWKH6ZLWFKDQG-R\&RQVGHVSLWHNQRZLQJRI WKH'ULIW'HIHFWDQGRUE\FRQFHDOLQJDQGRPLWWLQJGLVFORVXUHRIWKH'ULIW'HIHFWWR3ODLQWLII DQGWKH$UL]RQD6XEFODVVPHPEHUV 1LQWHQGR V IDLOXUH WR GLVFORVH 'ULIW 'HIHFW FRQVWLWXWHV GHFHSWLYH DQGRU XQIDLU DFWV RU SUDFWLFHV EHFDXVH LW NQHZ WKH GHIHFW ZRXOG D EH XQNQRZQ WR DQG QRW HDVLO\ GLVFRYHUDEOHE\3ODLQWLII(QULTXH]DQGWKH$UL]RQD6XEFODVV DQG E GHIHDW3ODLQWLII(QULTXH]¶V DQG FODVV PHPEHUV¶ RUGLQDU\ IRUHVHHDEOH DQG UHDVRQDEOH H[SHFWDWLRQV FRQFHUQLQJ WKH SHUIRUPDQFHDQGRSHUDELOLW\RIWKH6ZLWFKDQG-R\&RQV 1LQWHQGR LQWHQGHG WKDW 3ODLQWLII DQG FODVV PHPEHUV UHO\ RQ LWV GHFHSWLYH DQG XQIDLUDFWVDQGSUDFWLFHVPLVUHSUHVHQWDWLRQVDQGWKHFRQFHDOPHQWVXSSUHVVLRQDQGRPLVVLRQ RIPDWHULDOIDFWVLQFRQQHFWLRQZLWKRIIHULQJWKH6ZLWFKDQG-R\&RQVIRUVDOHLQYLRODWLRQRI WKH$)&$ 1LQWHQGR¶VZURQJIXOSUDFWLFHVRFFXUUHGLQWKHFRXUVHRIWUDGHRUFRPPHUFH 1LQWHQGR¶V ZURQJIXO SUDFWLFHV ZHUH DQG DUH LQMXULRXV WR WKH SXEOLF LQWHUHVW EHFDXVHWKRVHSUDFWLFHVZHUHSDUWRIDJHQHUDOL]HGFRXUVHRIFRQGXFWRQWKHSDUWRI1LQWHQGR WKDWDSSOLHGWRDOOFODVVPHPEHUVDQGZHUHUHSHDWHGFRQWLQXRXVO\$OOFODVVPHPEHUVKDYHEHHQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 78 of 101 DGYHUVHO\DIIHFWHGE\1LQWHQGR¶VFRQGXFWDQGWKHSXEOLFZDVDQGUHPDLQVDWULVNDVDUHVXOW WKHUHRI $V D UHVXOW RI 1LQWHQGR¶V ZURQJIXO FRQGXFW 3ODLQWLII DQG $UL]RQD 6XEFODVV PHPEHUV ZHUH LQMXUHG 3ODLQWLII (QULTXH] DQG $UL]RQD 6XEFODVV PHPEHUV VXIIHUHG DVFHUWDLQDEOHORVVDVDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶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¶V YLRODWLRQVRIWKH$)&$ &2817;,9 9,2/$7,212)7+(,'$+2&21680(53527(&7,21$&7 ,'$+2&2'(et seq. ³,'&3$´ 2Q%HKDOIRI3ODLQWLII5HHGDQGWKH,GDKR6XEFODVV 3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ 7KLVFODLPLVEURXJKWE\3ODLQWLII5HHGRQEHKDOIRIWKH,GDKR6XEFODVV 1LQWHQGRLVD³SHUVRQ´XQGHUWKH,'&3$,'$+2&2'( 1LQWHQGR¶VDFWVRUSUDFWLFHVDVVHWIRUWKDERYHRFFXUUHGLQWKHFRQGXFWRI³WUDGH´ RU³FRPPHUFH´XQGHU,'$+2&2'( 1LQWHQGR SDUWLFLSDWHG RU HQJDJHG LQ PLVOHDGLQJ IDOVH RU GHFHSWLYH DFWV WKDW YLRODWHGWKH,'&3$%\ZLOOIXOO\IDLOLQJWRGLVFORVHDQGDFWLYHO\FRQFHDOLQJWKH'ULIW'HIHFW 1LQWHQGR HQJDJHG LQ GHFHSWLYH EXVLQHVV SUDFWLFHV SURKLELWHG E\ WKH ,'&3$ LQFOXGLQJ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 79 of 101 UHSUHVHQWLQJWKDWWKH6ZLWFKHVDQG-R\&RQVKDYHFKDUDFWHULVWLFVXVHVDQGEHQHILWVZKLFKWKH\ GR QRW KDYH UHSUHVHQWLQJ WKDW WKH 6ZLWFKHV DQG -R\&RQV DUHRIDSDUWLFXODUVWDQGDUG TXDOLW\DQGJUDGHZKHQWKH\DUHQRW DGYHUWLVLQJWKH6ZLWFKHVDQG-R\&RQVZLWKWKHLQWHQW QRWWRVHOOWKHPDVDGYHUWLVHG HQJDJLQJLQDFWVRUSUDFWLFHVZKLFKDUHRWKHUZLVHPLVOHDGLQJ IDOVH RU GHFHSWLYH WR FRQVXPHUV DQG HQJDJLQJ LQ DQ\ XQFRQVFLRQDEOH PHWKRG DFW RU SUDFWLFHLQWKHFRQGXFWRIWUDGHRUFRPPHUFHSee,'$+2&2'( ,Q WKH FRXUVH RI LWV EXVLQHVV 1LQWHQGR ZLOOIXOO\ IDLOHG WR GLVFORVH DQG DFWLYHO\ FRQFHDOHG WKH 'ULIW 'HIHFW DV GLVFXVVHG KHUHLQ DQG RWKHUZLVH HQJDJHG LQ DFWLYLWLHV ZLWK D WHQGHQF\ RU FDSDFLW\ WR GHFHLYH 1LQWHQGR DOVR HQJDJHG LQ XQODZIXO WUDGH SUDFWLFHV E\ HPSOR\LQJ GHFHSWLRQ GHFHSWLYH DFWV RU SUDFWLFHV IUDXG RU FRQFHDOPHQW VXSSUHVVLRQ RU RPLVVLRQRIDQ\PDWHULDOIDFWZLWKLQWHQWWKDWRWKHUVUHO\XSRQVXFKFRQFHDOPHQWVXSSUHVVLRQRU RPLVVLRQLQFRQQHFWLRQZLWKWKHVDOHRI6ZLWFKHVDQG-R\&RQV 1LQWHQGR¶VXQIDLURUGHFHSWLYHDFWVRUSUDFWLFHVZHUHOLNHO\WRDQGGLGLQIDFW GHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLII5HHGDQGWKHRWKHU,GDKR6XEFODVVPHPEHUV DERXWWKHWUXHSHUIRUPDQFHRI6ZLWFKHVDQG-R\&RQVWKHTXDOLW\RIWKH1LQWHQGREUDQGDQGWKH WUXHYDOXHRIWKH6ZLWFKHVDQG-R\&RQV 1LQWHQGRNQHZRUVKRXOGKDYHNQRZQWKDWLWVFRQGXFWYLRODWHGWKH,'&3$ 1LQWHQGR RZHG 3ODLQWLII 5HHG D GXW\ WR GLVFORVH WKH 'ULIW 'HIHFW EHFDXVH 1LQWHQGR D 3RVVHVVHG H[FOXVLYH NQRZOHGJH WKDW WKH -R\&RQV DUH SODJXHG ZLWK WKH 'ULIW'HIHFWDQGGLGQRWSHUIRUPDVDGYHUWLVHG E ,QWHQWLRQDOO\FRQFHDOHGWKHIRUHJRLQJIURP3ODLQWLII5HHGDQGWKHFODVV DQGRU 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 80 of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¶VIUDXGXOHQWRPLVVLRQVUHODWLQJWRWKH6ZLWFKHVDQG-R\&RQVWKH'ULIW 'HIHFWDQGWKHWUXHSHUIRUPDQFHRI6ZLWFKHVDQG-R\&RQVZHUHPDWHULDOWR3ODLQWLII5HHGDQG WKH,GDKRFODVVPHPEHUV3ODLQWLII5HHGDQGWKH,GDKR&ODVVVXIIHUHGDVFHUWDLQDEOHORVVFDXVHG E\1LQWHQGR¶VFRQFHDOPHQWRIDQGIDLOXUHWRGLVFORVHPDWHULDOLQIRUPDWLRQ&ODVVPHPEHUVZKR SXUFKDVHGWKH6ZLWFKHVDQG-R\&RQVHLWKHUZRXOGKDYHSDLGOHVVIRUWKHPRUZRXOGQRWKDYH SXUFKDVHGWKHPDWDOOEXWIRU1LQWHQGR¶VYLRODWLRQVRIWKH,'&3$ 1LQWHQGRKDGDQRQJRLQJGXW\WRDOO1LQWHQGRFXVWRPHUVWRUHIUDLQIURPXQIDLU DQG GHFHSWLYH SUDFWLFHV XQGHU WKH ,'&3$ $OO RZQHUV RI 6ZLWFKHV DQG -R\&RQV VXIIHUHG DVFHUWDLQDEOHORVVLQWKHIRUPRIWKHGLPLQLVKHGYDOXHDVDUHVXOWRI1LQWHQGR¶VGHFHSWLYHDQG XQIDLUDFWVDQGSUDFWLFHVPDGHLQWKHFRXUVHRI1LQWHQGR¶VEXVLQHVV 1LQWHQGR¶VYLRODWLRQVSUHVHQWDFRQWLQXLQJULVNWR3ODLQWLII5HHGDVZHOODVWRWKH JHQHUDOSXEOLF1LQWHQGR¶VXQODZIXODFWVDQGSUDFWLFHVFRPSODLQHG RI KHUHLQDIIHFW WKH SXEOLF LQWHUHVW $VDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VYLRODWLRQVRIWKH,'&3$3ODLQWLII 5HHGDQGWKH,GDKR6XEFODVVKDYHVXIIHUHGLQMXU\LQIDFWDQGRUDFWXDOGDPDJH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 81 of 101 3XUVXDQWWR,'$+2&2'(3ODLQWLII5HHGLQGLYLGXDOO\DQGRQEHKDOIRI WKH,GDKR6XEFODVVVHHNVPRQHWDU\UHOLHIDJDLQVW1LQWHQGRPHDVXUHGDVWKHJUHDWHURI D DFWXDO GDPDJHV LQ DQ DPRXQW WR EH GHWHUPLQHG DW WULDO DQG E VWDWXWRU\ GDPDJHV LQ WKH DPRXQW RI IRU3ODLQWLII5HHGDQGHDFK,GDKR6XEFODVVPHPEHU 3ODLQWLII5HHGDOVRVHHNVDQRUGHUHQMRLQLQJ1LQWHQGR¶VXQIDLUXQODZIXODQGRU GHFHSWLYHSUDFWLFHVDWWRUQH\V¶IHHV SXUVXDQWWR,'$+2 &2'( DQGDQ\RWKHUMXVW DQGSURSHUUHOLHIDYDLODEOHXQGHUWKH,'&3$. 3ODLQWLII5HHGDOVRVHHNVSXQLWLYHGDPDJHVDJDLQVW1LQWHQGREHFDXVH1LQWHQGR¶V FRQGXFW HYLGHQFHV DQ H[WUHPH GHYLDWLRQ IURP UHDVRQDEOH VWDQGDUGV DQG LWV FRQGXFW 1LQWHQGR UHSHDWHGO\IODJUDQWO\PDOLFLRXVO\DQGIUDXGXOHQWO\RPLWWHGWKHWUXWKDERXWWKHSHUIRUPDQFHRI WKH6ZLWFKHVDQG-R\&RQVDVZHOODVWKH'ULIW'HIHFWDQGLWFRQFHDOHGPDWHULDOIDFWVWKDWRQO\ WKH\NQHZ1LQWHQGR¶VXQODZIXOFRQGXFWFRQVWLWXWHVPDOLFHRSSUHVVLRQDQGIUDXGZDUUDQWLQJ SXQLWLYHGDPDJHVSXUVXDQWWR,'$+2&2'( )XUWKHUPRUH LQ DGGLWLRQ WR WKH UHPHGLHV DYDLODEOH XQGHU ,'$+2 &2'( HDFKHOGHUO\DQGGLVDEOHGSHUVRQFRPSULVLQJWKH,GDKR6XEFODVVZKRZDVYLFWLPL]HGE\ 1LQWHQGR¶VFRQGXFWDOOHJHGKHUHLQLVHQWLWOHGWRDQHQKDQFHGSHQDOW\RIWKHJUHDWHURIRU WUHEOHGGDPDJHV,'$+2&2'( &2817;9 9,2/$7,212)7+(2./$+20$ &21680(53527(&7,21$&7 2./$67$7WLWet seq. ³2&3$´ 2Q%HKDOIRI3ODLQWLII+RHOVFKHUDQGWKH2NODKRPD6XEFODVV 3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ 7KLVFODLPLVEURXJKWE\3ODLQWLII+RHOVFKHURQEHKDOIRIWKH2NODKRPD6XEFODVV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 82 of 101 3ODLQWLII+RHOVFKHUDQGPHPEHUVRIWKH2NODKRPDFODVVDUHSHUVRQVZLWKLQWKH PHDQLQJRIWKH2&3$ 1LQWHQGRLVD³SHUVRQ´ZLWKLQWKHPHDQLQJRIWKH2&3$IRUDOOSXUSRVHVWKHUHLQ DQGWKH6ZLWFKHVDQG-R\&RQVDUH³JRRGV´XQGHUWKH2&3$ 3ODLQWLII +RHOVFKHU DQG &ODVV PHPEHUV DUH ³SHUVRQV´ HQWLWOHG WR EULQJ D FODLP SXUVXDQWWRWKH2&3$ 7KHDGYHUWLVLQJRIIHULQJIRUVDOHDQGVDOHRI6ZLWFKHVDQG-R\&RQVFRQVWLWXWHV WUDGHRUFRPPHUFHXQGHUWKH2&3$ ,Q DGYHUWLVLQJ DQG VHOOLQJ 6ZLWFKHV DQG -R\&RQV FRQWDLQLQJ WKH'ULIW'HIHFW 1LQWHQGR YLRODWHG DQG FRQWLQXHV WR YLRODWH WKH 2&3$ E\ HQJDJLQJ LQ WKH IROORZLQJ XQFRQVFLRQDEOHIDOVHPLVOHDGLQJRUGHFHSWLYHDFW V RUSUDFWLFH V ZKLFKZHUHIDOVHRUKDGWKH FDSDFLW\WRGHFHLYH D 0DNLQJDIDOVHUHSUHVHQWDWLRQRURPLVVLRQVNQRZLQJO\RUZLWKUHDVRQWR NQRZDVWRWKHFKDUDFWHULVWLFVLQJUHGLHQWVXVHVEHQHILWVDOWHUDWLRQVRU TXDQWLWLHVRIWKHVXEMHFWRIDFRQVXPHUWUDQVDFWLRQ E 5HSUHVHQWLQJ NQRZLQJO\ RU ZLWK UHDVRQ WR NQRZ WKDW WKH VXEMHFW RI D FRQVXPHUWUDQVDFWLRQLVRIDSDUWLFXODUVWDQGDUGVW\OHRUPRGHOLILWLVRI DQRWKHURURPLWWLQJLQIRUPDWLRQDERXWWKHVDPH DQG F $GYHUWLVLQJ NQRZLQJO\ RU ZLWK UHDVRQ WR NQRZ WKH VXEMHFW RI D FRQVXPHUWUDQVDFWLRQZLWKLQWHQWQRWWRVHOOLWDVDGYHUWLVHG 1LQWHQGR KDV YLRODWHG WKH 2&3$ E\ FRPPLWWLQJ XQIDLU RU GHFHSWLYH WUDGH SUDFWLFHVDVGHILQHGLQ2./$67$7WLWDQGHQXPHUDWHGXQGHU2./$67$7WLW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 83 of 101 %\ HQJDJLQJ LQ WKH IRUHJRLQJ FRQGXFW 1LQWHQGR WRRN DGYDQWDJH RI 3ODLQWLII +RHOVFKHUDQGFODVVPHPEHUV¶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¶V VDOH RI GHIHFWLYH 6ZLWFKHV DQG -R\&RQV FRXSOHG ZLWK 1LQWHQGR¶V XQFRQVFLRQDEOH DQG GHFHSWLYH DFWV DQG SUDFWLFHV LQ FRQQHFWLRQ WKHUHZLWK²QDPHO\ RPLWWLQJ PDWHULDOLQIRUPDWLRQUHJDUGLQJWKH'ULIW'HIHFW²ZDVDQGLVUHFNOHVVVKRZVVSLWHRULOOZLOORU GHPRQVWUDWHVDUHFNOHVVLQGLIIHUHQFHWRWKHLQWHUHVWVRIFRQVXPHUV 3ODLQWLII+RHOVFKHUGHPDQGVMXGJPHQWDJDLQVW1LQWHQGRIRUDFWXDOGDPDJHVSOXV FRVWVDQGDWWRUQH\¶VIHHVLQFXUUHGLQEULQJLQJWKLVDFWLRQDVSURYLGHGIRULQ2./$67$7WLW $ ,Q DGGLWLRQ 3ODLQWLII +RHOVFKHU SUD\V IRU DQ DZDUG RI D FLYLO SHQDOW\ DJDLQVW 1LQWHQGRLQWKHDPRXQWRISHUYLRODWLRQSXUVXDQWWR2./$67$7WLW% GXHWR1LQWHQGR¶VNQRZLQJDQGZLOOIXOXQFRQVFLRQDEOHFRQGXFW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 84 of 101 &2817;9, 9,2/$7,2162)7+(0,&+,*$1&21680(53527(&7,21$&7 0,&+&203/$:6 et seq. ³0&3$´ 2Q%HKDOIRI3ODLQWLII$LQVZRUWKDQGWKH0LFKLJDQ6XEFODVV 3ODLQWLIIVLQFRUSRUDWHWKHDERYHDOOHJDWLRQVE\UHIHUHQFH 3ODLQWLII $LQVZRUWK EULQJV WKLV FODLP RQ EHKDOI RI KLPVHOI DQG WKH 0LFKLJDQ 6XEFODVV 3ODLQWLII $LQVZRUWK 0LFKLJDQ 6XEFODVV PHPEHUV DQG 1LQWHQGR DUH ³SHUVRQV´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 85 of 101 DFWLYHO\ FRQFHDOLQJ WKH -R\&RQV¶ GHIHFWLYH QDWXUH 1LQWHQGR HQJDJHG LQ GHFHSWLYH SUDFWLFHV WKDWYLRODWH0LFKLJDQODZ 1LQWHQGRHQJDJHGLQWKHVHGHFHSWLYHSUDFWLFHVZLWKWKHLQWHQWWKDWFRQVXPHUVOLNH 3ODLQWLII $LQVZRUWK ZRXOG UHO\ RQ 1LQWHQGR¶V UHSUHVHQWDWLRQV DQG RPLVVLRQV ZKHQ GHFLGLQJ ZKHWKHUWRSXUFKDVHWKHLU6ZLWFKHVDQG-R\&RQV 3ODLQWLII$LQVZRUWKDQG0LFKLJDQ6XEFODVVPHPEHUVVXIIHUHGDVFHUWDLQDEOHORVV DV D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V GHFHSWLYH DFWV RU SUDFWLFHV +DG 3ODLQWLII $LQVZRUWKDQG0LFKLJDQ6XEFODVVPHPEHUVNQRZQWKDWWKH6ZLWFKHVDQG-R\&RQVFRQWDLQD ODWHQW GHIHFW WKH\ ZRXOG QRW KDYH SXUFKDVHG WKHP RU ZRXOG KDYH SDLG VLJQLILFDQWO\ OHVV IRU WKHP$PRQJRWKHULQMXULHV3ODLQWLII$LQVZRUWKDQG0LFKLJDQ6XEFODVVPHPEHUVRYHUSDLGIRU WKHLU6ZLWFKHVDQG-R\&RQVDQGWKHLU6ZLWFKHVDQG-R\&RQVVXIIHUHGDGLPLQXWLRQLQYDOXH $FFRUGLQJO\ 3ODLQWLII $LQVZRUWK DQG 0LFKLJDQ 6XEFODVV PHPEHUV VHHN DFWXDO GDPDJHVSXQLWLYHGDPDJHVUHDVRQDEOHDWWRUQH\V¶IHHVDQGFRVWVDQGDOORWKHUUHOLHISHUPLWWHG XQGHUWKH0&3$ &2817;9,, 9,2/$7,2162)7+(25(*2181/$:)8/75$'(35$&7,&(6$&7 255(967$7et seq. ³2873$´ 2Q%HKDOIRI3ODLQWLII&RIIH\:ROIJDQJDQGWKH2UHJRQ6XEFODVV 3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ 7KLVFODLPLVEURXJKWE\WKH3ODLQWLII&RIIH\:ROIJDQJRQEHKDOIRIWKH2UHJRQ 6XEFODVV 1LQWHQGR LV HQJDJHG LQ D ³WUDGH´ DQG ³FRPPHUFH´ ZLWKLQ WKH PHDQLQJ RI 25 5(967$7 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 86 of 101 1LQWHQGR LV D ³SHUVRQ´ ZLWKLQ WKH PHDQLQJ RI 25 5(9 67$7 DQG 3ODLQWLII¶V DQG HDFK DQG HYHU\ FODVV PHPEHUV¶ SXUFKDVH RI 6ZLWFKHV DQG -R\ &RQVFRQVWLWXWHD³VDOH´ZLWKLQWKHPHDQLQJRI255(967$7 1LQWHQGRKDVDGYHUWLVHGZLWKLQWKHPHDQLQJRI255(967$7 7KHDFWVDQGSUDFWLFHVRI1LQWHQGRDVGHVFULEHGKHUHLQZHUHLQWHQGHGWRUHVXOWLQ WKHVDOHRI6ZLWFKHVDQG-R\&RQVWR3ODLQWLIIDQGFODVVPHPEHUV 1LQWHQGR KDV HQJDJHG LQ XQFRQVFLRQDEOH WDFWLFV IDOVH DGYHUWLVLQJ GHFHSWLYH SUDFWLFHV XQODZIXO PHWKRGV RI FRPSHWLWLRQ DQGRU XQIDLU DFWV DV GHILQHG LQ WKH 2873$ LQFOXGLQJ WKH RPLVVLRQ RI WKH 'ULIW 'HIHFW WR WKH GHWULPHQW RI 3ODLQWLII DQG FODVV PHPEHUV 1LQWHQGR¶VXQFRQVFLRQDEOHWDFWLFVDQGGHFHSWLYHSUDFWLFHVKDYHEHHQLQWHQWLRQDOO\NQRZLQJO\ DQGXQODZIXOO\SHUSHWUDWHGXSRQ3ODLQWLIIDQGFODVVPHPEHUV 6SHFLILFDOO\ XQGHU 6HFWLRQ 1LQWHQGR KDV YLRODWHG WKH IROORZLQJ SURYLVLRQVRIWKH2873$ x H 5HSUHVHQWV WKDW UHDO HVWDWH JRRGV RU VHUYLFHV KDYH VSRQVRUVKLS DSSURYDO FKDUDFWHULVWLFV LQJUHGLHQWV XVHV EHQHILWV TXDQWLWLHV RU TXDOLWLHV WKDW WKH UHDO HVWDWH JRRGV RU VHUYLFHV GR QRW KDYH RU WKDW D SHUVRQ KDV D VSRQVRUVKLS DSSURYDO VWDWXV TXDOLILFDWLRQ DIILOLDWLRQ RU FRQQHFWLRQ WKDW WKHSHUVRQGRHVQRWKDYH x J 5HSUHVHQWV WKDW UHDO HVWDWH JRRGV RU VHUYLFHV DUH RI D SDUWLFXODU VWDQGDUG TXDOLW\ RU JUDGH RU WKDW UHDO HVWDWH RU JRRGV DUH RI D SDUWLFXODU VW\OHRUPRGHOLIWKHUHDOHVWDWHJRRGVRUVHUYLFHVDUHRIDQRWKHU 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 87 of 101 x L $GYHUWLVHVUHDOHVWDWHJRRGVRUVHUYLFHVZLWKLQWHQWQRWWRSURYLGHWKH UHDOHVWDWHJRRGVRUVHUYLFHVDVDGYHUWLVHG DQG x X (QJDJHV LQ DQ\ RWKHU XQIDLU RU GHFHSWLYH FRQGXFW LQ WUDGH RU FRPPHUFH255(967$7 1LQWHQGR¶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¶V GHFHSWLYH DQG XQIDLU DFWLRQV DOOHJHG KHUHLQ ZHUH UHFNOHVV DQG XQGHUWDNHQE\1LQWHQGRNQRZLQJO\ $VDUHVXOWRI1LQWHQGR¶DFWLRQV3ODLQWLII&RIIH\:ROIJDQJDQGFODVVPHPEHUV KDYHLQFXUUHGHFRQRPLFGDPDJHVLQFOXGLQJEXWQRWOLPLWHGWRFRVWVIRUUHSDLUVDQGRWKHURXW RISRFNHWORVVHVORVVXVHIXWXUHUHSDLUVDQGGLPLQLVKHGYDOXHRIWKHLU6ZLWFKHVDQG-R\&RQV +DG 3ODLQWLII NQRZQ DERXW WKH 'ULIW 'HIHFW 3ODLQWLII &RIIH\:ROIJDQJ ZRXOG QRWKDYHSDLGDVPXFKIRUWKH6ZLWFKDQG-R\&RQVRUZRXOGQRWKDYHSXUFKDVHGWKHPDWDOO 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 88 of 101 3ODLQWLII IXUWKHU VHHNV UHFRYHU\ RI DWWRUQH\V¶ IHHV FRVWV RI OLWLJDWLRQ SXQLWLYH GDPDJHVDQGRWKHUHTXLWDEOHUHOLHIDVGHWHUPLQHGE\WKHFRXUWSXUVXDQWWR25 5(9 67$7 &2817;9,,, 9,2/$7,212)1<*(1%86/$: 2Q%HKDOIRI3ODLQWLII/L]DUGRDQGWKH1HZ VHWIRUWKKHUHLQ 3ODLQWLII /L]DUGR EULQJV WKLV &RXQW RQ EHKDOI RI KLPVHOI DQG RQ EHKDOI RI WKH 1HZ 3ODLQWLII /L]DUGR DQG FODVV PHPEHUV DUH ³SHUVRQV´ ZLWKLQ WKH PHDQLQJ RI WKH 1HZ 1LQWHQGR LV D ³SHUVRQ ILUP FRUSRUDWLRQ RU DVVRFLDWLRQ RU DJHQW RU HPSOR\HH WKHUHRI´ZLWKLQWKHPHDQLQJRIWKH*%/1<*(1%86/$: E 8QGHU *%/ 6HFWLRQ ³>G@HFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ EXVLQHVVWUDGHRUFRPPHUFHRULQWKHIXUQLVKLQJRIDQ\VHUYLFHLQWKLVVWDWHDUHGHFODUHG XQODZIXO´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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 89 of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¶V GHFHSWLYH DFWV DQG FRQGXFW ZDV GLUHFWHG DW 3ODLQWLII /L]DUGR DQG RWKHUFRQVXPHUV1LQWHQGR¶VGHFHSWLYHDFWVDQGSUDFWLFHVZHUHFRQVXPHURULHQWHGEHFDXVHWKH\ KDGDEURDGLPSDFWRQFRQVXPHUVDWODUJHDIIHFWLQJDOOSXUFKDVHUVRI6ZLWFKHVDQG-R\&RQV 1LQWHQGR¶VGHFHSWLYHDFWVRUSUDFWLFHVZHUHPDWHULDOO\PLVOHDGLQJ1LQWHQGR¶V FRQGXFWZDVOLNHO\WRDQGGLGLQIDFWGHFHLYHUHDVRQDEOHFRQVXPHUVLQFOXGLQJ3ODLQWLII/L]DUGR DQG WKH RWKHU FODVV PHPEHUV DERXW WKH WUXH SHUIRUPDQFH RI WKH6ZLWFKHV DQG -R\&RQV WKH TXDOLW\RIWKH1LQWHQGREUDQGWKHWUXHYDOXHRIWKH6ZLWFKHVDQG-R\&RQV 7KHH[LVWHQFHRIWKHGHIHFWZDVPDWHULDOWR3ODLQWLII/L]DUGRDQGFODVVPHPEHUV 1LQWHQGR LQWHQWLRQDOO\ DQG NQRZLQJO\ FRQFHDOHG PDWHULDO IDFWV UHJDUGLQJ WKH 6ZLWFKHV DQG -R\&RQV ZLWK DQ LQWHQW WR PLVOHDG 3ODLQWLII /L]DUGR DQG WKH 1HZ PHPEHUV 1LQWHQGRSRVVHVVHGH[FOXVLYHNQRZOHGJHWKDWLWZDVPDQXIDFWXULQJVHOOLQJDQG GLVWULEXWLQJ 6ZLWFKHV DQG -R\&RQV WKDW DUH SODJXHG ZLWK WKH 'ULIW 'HIHFW DQG WKDW GR QRW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 90 of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¶V FRQFHDOPHQW RI DQG IDLOXUH WR GLVFORVH PDWHULDO LQIRUPDWLRQ3ODLQWLII/L]DUGRDQGFODVVPHPEHUVZKRSXUFKDVHGWKH 6ZLWFKHVDQG -R\&RQV HLWKHU ZRXOG KDYH SDLG OHVV IRU WKHP RU ZRXOG QRW KDYH SXUFKDVHG WKHP DW DOO 'XH WR 1LQWHQGR¶V GHFHSWLYH RU XQIDLU FRQGXFW 3ODLQWLII /L]DUGR DQG WKH 1HZ RYHUSDLGIRUWKHLU6ZLWFKHVDQG-R\&RQVDQGGLGQRWUHFHLYHWKHEHQHILWRIWKHLUEDUJDLQ $VDGLUHFWDQGSUR[LPDWHUHVXOWRI1LQWHQGR¶VYLRODWLRQVRIWKH*%/6HFWLRQ 3ODLQWLIIDQGWKHFODVVPHPEHUVLQ1HZ UHFRYHU\RIGDPDJHVDQGDQRUGHUHQMRLQLQJ1LQWHQGR¶VZURQJIXOFRQGXFW 1LQWHQGR¶VDFWVDQGSUDFWLFHVZHUHZLOOIXODQGNQRZLQJDQG3ODLQWLII/L]DUGR DQG1HZ GDPDJHV RU ILIW\ GROODUV SHU YLRODWLRQ WUHEOH GDPDJHV XS WR RQH WKRXVDQG GROODUV DQG UHDVRQDEOHFRVWVDQGDWWRUQH\V¶IHHVSee 1<*(1%86/$: K 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 91 of 101 &2817;,; 9,2/$7,212)7+($/$%$0$'(&(37,9( 75$'(35$&7,&(6$&7 $/$&2'( et seq ³$'73$´ 2Q%HKDOIRI3ODLQWLII&ROOLQVDQGWKH$ODEDPD6XEFODVV 3ODLQWLIIVUHSHDWDQGUHDOOHJHWKHDOOHJDWLRQVDERYHDVLIIXOO\VHWIRUWKKHUHLQ 7KLV FODLP LV EURXJKW E\ WKH 3ODLQWLII &ROOLQV RQ EHKDOI RI WKH $ODEDPD 6XEFODVV 1LQWHQGR¶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¶V PLVUHSUHVHQWDWLRQV DQG RPLVVLRQV ZHUH PDWHULDO WR 3ODLQWLII DQG FODVV PHPEHUV VXFK WKDW D UHDVRQDEOH SHUVRQ ZRXOG FRQVLGHU WKHP LPSRUWDQW LQ GHFLGLQJ ZKHWKHUWRSXUFKDVH6ZLWFKHVDQGRU-R\&RQVDQGKDG3ODLQWLIIDQGFODVVPHPEHUVNQRZQWKH WUXWKWKH\ZRXOGQRWKDYHSDLGDVPXFKIRUWKHP KDGWKH\ERXJKWWKHPDWDOO $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V YLRODWLRQ RI WKH $'73$ 3ODLQWLIIDQGFODVVPHPEHUVVXIIHUHGHFRQRPLFGDPDJHVLQFOXGLQJEXWQRWOLPLWHGWRSD\PHQW IRU DGGLWLRQDO -R\&RQV SD\PHQW IRU UHSDLU RI -R\&RQV ORVV RI XVH DQG GHYDOXDWLRQ RI 6ZLWFKHVDQG-R\&RQVGXHWRWKH'ULIW'HIHFW 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 92 of 101 3XUVXDQWWR$/$&2'( 3ODLQWLIIDQGFODVVPHPEHUVDUHHQWLWOHGWRXS WRWKUHHWLPHVDFWXDOGDPDJHVDWWKHFRXUW¶VGLVFUHWLRQLQMXQFWLYHUHOLHIDQGFRVWVRIDFWLRQDQG DWWRUQH\V¶IHHV &2817;; 9LRODWLRQVRIWKH2KLR&RQVXPHU6DOHV3UDFWLFHV$FW 2+,25(9&2'($11et seq ³2&63$´ 2Q%HKDOIRI3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVV 3ODLQWLIIV UHSHDW UHDOOHJH DQG LQFRUSRUDWH E\ UHIHUHQFH HDFK RI WKH IRUHJRLQJ IDFWXDODOOHJDWLRQVDVWKRXJKIXOO\VHWIRUWKKHUHLQ 3ODLQWLII:LOVRQEULQJVWKLVFODLPRQEHKDOIRIKLPVHOIDQGWKH2KLR6XEFODVV 7KH2&63$LVEURDGO\GUDIWHGDSSO\LQJWRWKHVDOHRIFRQVXPHUJRRGV³WRDQ LQGLYLGXDO IRU SXUSRVHV WKDWDUH SULPDULO\ SHUVRQDO IDPLO\ RU KRXVHKROG >XVHV@´ 2+,2 5(9 &2'($11 $ $FFRUGLQJO\WKHFRQGXFWDWLVVXHLQWKLVFDVHFOHDUO\IDOOVZLWKLQWKH VFRSHRIWKH2&36$ 7KH 2&63$ SURKLELWV XQIDLU GHFHSWLYH DQG XQFRQVFLRQDEOH SUDFWLFHV LQ FRQVXPHUVDOHVWUDQVDFWLRQVLQFOXGLQJWKHVDOHRIJRRGVId. $ 7KH2&63$IXUWKHUSURYLGHVWKDW³DFRQVXPHU´KDVDSULYDWHFDXVHRIDFWLRQIRU YLRODWLRQVRIWKHVWDWXWHDQGH[SUHVVO\DOORZVIRUFODVVDFWLRQVId 1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 93 of 101 UHDVRQDEOHEDVLVLQIDFWSee 2+,2$'0,1&2'( $ see also Nessle v. Whirlpool Corp.1R 86'LVW/(;,6 DW 1'2KLR-XO\ $V D GLUHFW DQG SUR[LPDWH UHVXOW RI 1LQWHQGR¶V YLRODWLRQV RI WKH 2&63$ 3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVVKDYHEHHQLQMXUHG 3ODLQWLII:LOVRQDQGWKH2KLR6XEFODVVKDYHVXIIHUHGLQMXULHVLQIDFWDQGDFWXDO GDPDJHV LQFOXGLQJ ILQDQFLDO ORVVHV IURP WKH GHYDOXDWLRQ RI WKHLU 6ZLWFKHV DQG -R\&RQV UHVXOWLQJIURP1LQWHQGR¶VFRQGXFWDQGSUDFWLFHVLQYLRODWLRQRIWKH2&63$7KHVHLQMXULHVDUH RIWKHW\SHWKDWWKH2&63$ZDVGHVLJQHGWRSUHYHQWDQGDUHWKHGLUHFWDQGSUR[LPDWHUHVXOWRI 1LQWHQGR¶VXQODZIXOFRQGXFW &2817;;, 9,2/$7,212)7+(1(%5$6.$&21680(53527(&7,21$&7 1(%5(967$7 et seq ³1&3$´ 2Q%HKDOIRI3ODLQWLII VHWIRUWKKHUHLQ 7KLV FODLP LV SOHDGHG RQ EHKDOI RI 3ODLQWLII 6XEFODVV 1LQWHQGR¶VFRQGXFWDOOHJHGKHUHLQFRQVWLWXWHVDQXQIDLUPHWKRGRIFRPSHWLWLRQ DQGDQXQIDLUDQGGHFHSWLYHDFWLQYLRODWLRQRIWKH1&3$ 7KH1&3$SURKLELWV³>X@QIDLUPHWKRGVRIFRPSHWLWLRQDQGXQIDLURUGHFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ WUDGH RU FRPPHUFH´ 1(% 5(9 67$7 1LQWHQGR¶VPLVUHSUHVHQWDWLRQV DQGRU RPLVVLRQVUHJDUGLQJ WKH 6ZLWFK 6ZLWFK -R\&RQV DQG WKH 'ULIW 'HIHFW HQWDLOHG GHFHSWLRQ DQG PLVUHSUHVHQWDWLRQ $V VXFK 1LQWHQGR¶V SUDFWLFHV YLRODWHWKH1&3$ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 94 of 101 $VDGLUHFWSUR[LPDWHDQGIRUHVHHDEOHUHVXOWRI1LQWHQGR¶VZURQJIXOFRQGXFW DQGYLRODWLRQVRIODZDOOHJHGDERYH1LQWHQGR¶VEXVLQHVVDFWVRUSUDFWLFHVKDYHFDXVHGLQMXU\WR 3ODLQWLII ZRXOGQRWKDYHSXUFKDVHG RUZRXOGKDYHSDLGOHVVIRU WKHLU6ZLWFKDQG-R\&RQVKDGWKH\ NQRZQRIWKH'ULIW'HIHFWZKLFKZDVPDWHULDOWRWKHLUSXUFKDVLQJGHFLVLRQ 3ODLQWLII IXOOUHVWLWXWLRQRIDOOPRQHWDU\VXPVXQODZIXOO\REWDLQHGE\1LQWHQGR 3ODLQWLII DOOHJHGKHUHLQWRJHWKHUZLWKWUHEOHGDPDJHVSXQLWLYHGDPDJHVLQWHUHVWFRVWVDWWRUQH\¶VIHHV DQGVXFKRWKHUUHOLHIDVWKH&RXUWGHHPVDSSURSULDWH &2817;;,, 9,2/$7,212)7+(1(%5$6.$81,)250 '(&(37,9(75$'(35$&7,&(6$&7 1(%5(967$7et seq ³18'73$´ 2Q%HKDOIRI3ODLQWLII VHWIRUWKKHUHLQ 7KLV FODLP LV SOHDGHG RQ EHKDOI RI 3ODLQWLII 6XEFODVV 1LQWHQGR¶V FRQGXFW DOOHJHG KHUHLQ LV D GHFHSWLYH SUDFWLFH LQ YLRODWLRQ RI WKH 18'73$ 7KH18'73$SURKLELWVinter alia D UHSUHVHQWLQJ WKDW WKDW JRRGV RU VHUYLFHV KDYH VSRQVRUVKLS DSSURYDO FKDUDFWHULVWLFVLQJUHGLHQWVXVHVEHQHILWVRUTXDQWLWLHVWKDWWKH\GRQRWKDYH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 95 of 101 RUWKDWDSHUVRQKDVDVSRQVRUVKLSDSSURYDOVWDWXVDIILOLDWLRQRUFRQQHFWLRQ WKDWKHRUVKHGRHVQRWKDYH DQG E DGYHUWLVLQJ JRRGV RU VHUYLFHV ZLWK LQWHQW QRW WR VHOO WKHP DV DGYHUWLVHG RU DGYHUWLVLQJWKH SULFHLQ DQ\ PDQQHU FDOFXODWHGRU WHQGLQJWR PLVOHDG RU LQ DQ\ZD\GHFHLYHDSHUVRQ 1LQWHQGR¶V 6ZLWFKHV DQG -R\&RQV DUH VROG WKURXJK GHFHSWLRQ DQG PLVUHSUHVHQWDWLRQDVVHWIRUWKKHUHLQDQGLQYLRODWLRQRIWKH18'73$ $VDGLUHFWSUR[LPDWHDQGIRUHVHHDEOHUHVXOWRI1LQWHQGR¶VZURQJIXOFRQGXFW DQGYLRODWLRQVRIODZDOOHJHGDERYH1LQWHQGR¶VEXVLQHVVDFWVRUSUDFWLFHVKDYHFDXVHGLQMXU\WR 3ODLQWLII ZRXOGQRWKDYHSXUFKDVHG RUZRXOGKDYHSDLGOHVVIRU WKHLU6ZLWFKDQG-R\&RQVKDGWKH\ NQRZQRIWKH'ULIW'HIHFWZKLFKZDVPDWHULDOWRWKHLUSXUFKDVLQJGHFLVLRQ 3ODLQWLII IXOOUHVWLWXWLRQRIDOOPRQHWDU\VXPVXQODZIXOO\REWDLQHGE\1LQWHQGRWKURXJKLWVYLRODWLRQVRI WKH18'73$ 3ODLQWLII DOOHJHGKHUHLQWRJHWKHUZLWKWUHEOHGDPDJHVSXQLWLYHGDPDJHVLQWHUHVWFRVWVDWWRUQH\¶VIHHV DQGVXFKRWKHUUHOLHIDVWKH&RXUWGHHPVDSSURSULDWH 3ODLQWLII KHUHLQ 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 96 of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¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 97 of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¶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¶VZDUUDQWLHV 1LQWHQGR¶VZDUUDQWLHVH[SOLFLWO\ZDUUDQWPDWHULDOVDQGZRUNPDQVKLSDQGGRQRW GLVFODLPRUH[FOXGHWKHGHIHFWRUWKHW\SHRIGDPDJHVXIIHUHGDVDUHVXOWRIWKHGHIHFWLQWKH -R\&RQV 3ODLQWLIIV VHHN D GHFODUDWLRQ RI WKH SDUWLHV¶ UHVSHFWLYH ULJKWV GXWLHV DQG REOLJDWLRQV XQGHU 1LQWHQGR¶V ZDUUDQW\ DQG RWKHU SURPLVHV PDGH E\ 1LQWHQGR UHODWHG WR WKH 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 98 of 101 TXDOLW\DQGZRUNPDQVKLSRIWKH6ZLWFKHVDQG-R\&RQVDQGVSHFLILFDOO\WKDW3ODLQWLIIVDQGWKH &ODVV PHPEHUV DUH HQWLWOHG WR UHFRYHU WKHLU RXWRISRFNHW H[SHQVHV UHODWHG WR UHSDLUV DQGRU UHSODFHPHQWRIWKHLUGHIHFWLYHDQGXQZRUNPDQOLNH6ZLWFKHVDQG-R\&RQV XQGHU 1LQWHQGR¶V ZDUUDQW\ 6SHFLILFDOO\ 3ODLQWLIIV VHHN D GHFODUDWRU\ MXGJPHQW WKDW 1LQWHQGR¶V ZDUUDQW\ SURYLGHVFRYHUDJHIRUDQGLVWREHUHDGWRLQFOXGHFRYHUDJHIRUUHSDLURUUHSODFHPHQWRI-R\ &RQV WKDWH[SHULHQFH WKH GHIHFW 3ODLQWLIIV DOVR VHHN D GHFODUDWRU\ MXGJPHQW WKDW QRWKLQJLQ 1LQWHQGR¶VZDUUDQW\GLVFODLPVRUH[FOXGHVZDUUDQW\FRYHUDJHIRUWKHGHIHFWGHVFULEHGKHUHLQ $MXGLFLDOGHFODUDWLRQLVQHFHVVDU\LQRUGHUWKDW3ODLQWLIIVDQGWKH&ODVVPHPEHUV PD\DVFHUWDLQWKHLUULJKWVDQGGXWLHVXQGHU1LQWHQGR¶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x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 99 of 101 & ,QMXQFWLYHUHOLHILQWKHIRUPRIDUHFDOORUIUHHUHSODFHPHQWSURJUDPDQGQRWLFH RIVDPHWRDOOFODVVPHPEHUV ' (TXLWDEOHUHOLHILQWKHIRUPRIEX\EDFNRIWKHGHYLFHV ( &RVWV UHVWLWXWLRQ GDPDJHV LQFOXGLQJ SXQLWLYH GDPDJHV WUHEOH GDPDJHV SHQDOWLHVDQGGLVJRUJHPHQWLQDQDPRXQWWREHGHWHUPLQHGDWWULDO ) $Q2UGHUUHTXLULQJ1LQWHQGRWRSD\ERWKSUHDQGSRVWMXGJPHQWLQWHUHVWRQDQ\ DPRXQWVDZDUGHG * $QDZDUGRIFRVWVDQGDWWRUQH\V¶IHHV DQG + 6XFKRWKHURUIXUWKHUUHOLHIDVPD\EHDSSURSULDWH -85<'(0$1' 3ODLQWLIIVKHUHE\GHPDQGDWULDOE\MXU\IRUDOOFODLPVVRWULDEOH '$7('WKLVWKGD\RI6HSWHPEHU 7286/(<%5$,167(3+(163//& %\ s/ Kim D. Stephens .LP'6WHSKHQV:6%$ %\ s/ Jason T. Dennett -DVRQ7'HQQHWW:6%$ %\ s/Kaleigh N.B. Powell .DOHLJK1%3RZHOO:6%$ 6HYHQWK$YHQXH6XLWH 6HDWWOH:DVKLQJWRQ 7HOHSKRQH )D[ (PDLO NVWHSKHQV#WRXVOH\FRP MGHQQHWW#WRXVOH\FRP NSRZHOO#WRXVOH\FRP 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 100 of 101 %HQMDPLQ)-RKQV pro hac vice $QGUHZ:)HULFK pro hac vice $OH[0.DVKXUED pro hac vice &+,0,&/(66&+:$57=.5,1(5 '21$/'62160,7+//3 :/DQFDVWHU$YHQXH +DYHUIRUG3HQQV\OYDQLD 7HOHSKRQH (PDLO EIM#FKLPLFOHVFRP DZI#FKLPLFOHVFRP DPN#FKLPLFOHVFRP Interim Co-Lead Counsel for Plaintiffs and the Putative Class 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 6HDWWOH:DVKLQJWRQ 7(/x)$; Case 2:19-cv-01116-TSZ Document 21 Filed 09/27/19 Page 101 of 101 &(57,),&$7(2)6(59,&( ,KHUHE\FHUWLI\WKDWRQ6HSWHPEHU ,HOHFWURQLFDOO\ILOHGWKHIRUHJRLQJZLWKWKH &OHUNRIWKH&RXUWXVLQJWKH&0(&)V\VWHPZKLFKZLOOVHQGQRWLILFDWLRQRIVXFKILOLQJWRDOO SDUWLHVUHJLVWHUHGRQWKH&0(&)V\VWHP$OORWKHUSDUWLHV LIDQ\ VKDOOEHVHUYHGLQ DFFRUGDQFHZLWKWKH)HGHUDO5XOHVRI&LYLO3URFHGXUH '$7('DW6HDWWOH:DVKLQJWRQWKLVWKGD\RI6HSWHPEHU s/ Kim D. Stephens .LP'6WHSKHQV 7286/(<%5$,167(3+(163//& 6HYHQWK$YHQXH6XLWH ),567$0(1'('&/$66$&7,21&203/$,17 - 96 6HDWWOH:DVKLQJWRQ 7(/x )$;