I Could Have Done It, But I Didn't. Is That Malpractice?

Christine Simmons in the New York Law Journal reports today on Stock v Schnader Harrison Segal & Lewis LLP  2014 NY Slip Op 33171(U)  December 5, 2014  Supreme Court, New York County  Docket Number: 651250/13  Judge: Melvin L. Schweitzer.  The case raises a "novel" question of intra-law office attorney privilege, and whether the client is able to pierce communications which become "at issue."  The answer from Supreme Court is "Yes."

"The Court has reviewed letters from counsel for the parties regarding defendants' withholding of 24 documents listed on defendants' privilege log as attorney-client communications, and as to one document, attorney work product. Plaintiff argues that the documents are not privileged as to him because defendants were representing him at the time, the subject of the communications was that very representation, the participants did not consider the communications to be confidential as to plaintiff, and they were aware that the continued representation would be conflicted. Defendants oppose, arguing that the communications are protected by the in-house attorney-client privilege. The court finds that the attorney-client and work product privileges do not protect any of the documents. Stock is suing law firm Schnader Harrison Segal & Lewis LLP. (Schnader), and partner Christine Carty (Carty) for malpractice and breach of fiduciary duty. The lawsuit arises from
defendants' representation of Stock in connection with his departure from employment with
MasterCard International Incorporated (MasterCard) in 2008. Stock alleges that defendants
failed to advise him that his departure would accelerate the expiration date for his stock options
worth $5 Million from ten years to between ninety and one hundred and twenty days. "

"According to Stock, after his options expired, defendants advised him to assert claims against MasterCard and its options plan administrator Morgan Stanley Smith Barney (MSSB). during the ensuing arbitration, at which Schnader attorneys other than Carty represented Stock, MSSB's counsel notified Schnader that it planned to call Carty as a fact witness concerning whether Schnader's failures in its representation of Stock contributed to the monetary losses he was seeking from MSSB. Carty consulted with Schnader partner and General Counsel Wilbur Kipnes regarding her anticipated testimony, and possible ethical issues. She was prepared for the arbitration by Schnader attorney Cynthia Murray (Murray). Murray and Schnader attorney
Thomas Hecht (Hecht) were assigned to simultaneously represent Stock in the arbitration.
The deposition transcript excerpts, attorney notes, and additional exhibits submitted by
plaintiff show that when Carty, Kipnes, Hecht and Murray were communicating about Carty's
upcoming testimony, they did not expect their communications to be confidential as to their
current client, Stock. Carty testified at her deposition that: she understood that anything she
stated to Murray would be disclosed to Stock; and she had no expectation one way or the other
that Hecht would keep her forwarded e-mail with Kipnes confidential as to Stock."

"Finally, the documents fall under the "at issue" waiver, and defendants cannot selectively disclose self-serving documents regarding the same subject matter. The "at issue" waiver of the privilege occurs where a party affirmatively places the subject matter of its own privileged communication at issue in litigation, so that invasion of the privilege is required to determine the validity of a claim or defense of the party asserting the privilege, and application of the privilege 3 [* 3]would deprive the adversary of vital information. Credit Suisse First Boston v Utrecht-America Fin. Co., 27 AD3d 253, 254 (1st Dept 2006). "

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I Could Have Done It, But I Didn't. Is That Malpractice?

Christine Simmons in the New York Law Journal reports today on Stock v Schnader Harrison Segal & Lewis LLP  2014 NY Slip Op 33171(U)  December 5, 2014  Supreme Court, New York County  Docket Number: 651250/13  Judge: Melvin L. Schweitzer.  The case raises a "novel" question of intra-law office attorney privilege, and whether the client is able to pierce communications which become "at issue."  The answer from Supreme Court is "Yes."

"The Court has reviewed letters from counsel for the parties regarding defendants' withholding of 24 documents listed on defendants' privilege log as attorney-client communications, and as to one document, attorney work product. Plaintiff argues that the documents are not privileged as to him because defendants were representing him at the time, the subject of the communications was that very representation, the participants did not consider the communications to be confidential as to plaintiff, and they were aware that the continued representation would be conflicted. Defendants oppose, arguing that the communications are protected by the in-house attorney-client privilege. The court finds that the attorney-client and work product privileges do not protect any of the documents. Stock is suing law firm Schnader Harrison Segal & Lewis LLP. (Schnader), and partner Christine Carty (Carty) for malpractice and breach of fiduciary duty. The lawsuit arises from
defendants' representation of Stock in connection with his departure from employment with
MasterCard International Incorporated (MasterCard) in 2008. Stock alleges that defendants
failed to advise him that his departure would accelerate the expiration date for his stock options
worth $5 Million from ten years to between ninety and one hundred and twenty days. "

"According to Stock, after his options expired, defendants advised him to assert claims against MasterCard and its options plan administrator Morgan Stanley Smith Barney (MSSB). during the ensuing arbitration, at which Schnader attorneys other than Carty represented Stock, MSSB's counsel notified Schnader that it planned to call Carty as a fact witness concerning whether Schnader's failures in its representation of Stock contributed to the monetary losses he was seeking from MSSB. Carty consulted with Schnader partner and General Counsel Wilbur Kipnes regarding her anticipated testimony, and possible ethical issues. She was prepared for the arbitration by Schnader attorney Cynthia Murray (Murray). Murray and Schnader attorney
Thomas Hecht (Hecht) were assigned to simultaneously represent Stock in the arbitration.
The deposition transcript excerpts, attorney notes, and additional exhibits submitted by
plaintiff show that when Carty, Kipnes, Hecht and Murray were communicating about Carty's
upcoming testimony, they did not expect their communications to be confidential as to their
current client, Stock. Carty testified at her deposition that: she understood that anything she
stated to Murray would be disclosed to Stock; and she had no expectation one way or the other
that Hecht would keep her forwarded e-mail with Kipnes confidential as to Stock."

"Finally, the documents fall under the "at issue" waiver, and defendants cannot selectively disclose self-serving documents regarding the same subject matter. The "at issue" waiver of the privilege occurs where a party affirmatively places the subject matter of its own privileged communication at issue in litigation, so that invasion of the privilege is required to determine the validity of a claim or defense of the party asserting the privilege, and application of the privilege 3 [* 3]would deprive the adversary of vital information. Credit Suisse First Boston v Utrecht-America Fin. Co., 27 AD3d 253, 254 (1st Dept 2006). "

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Relatives and Legal Malpractice

This case illustrates the potential mess a law firm can get itself into when it allows employees and their families to do business with them.  This particular case, Rodolico v Rubin & Licatesi, P.C.
2014 NY Slip Op 01308 [114 AD3d 923]  February 26, 2014  Appellate Division, Second Department led to legal malpractice litigation, commercial litigation, and most likely, a change of employees at the law firm.

"The plaintiff's sister worked for the defendant law firm, in which the individual defendants are partners. During his sister's employment, the plaintiff came to learn of an investment opportunity being organized by the defendants, which involved providing high interest, short-term loans for the development of real estate. The plaintiff and his wife decided to participate. Two bank checks, one of which was purchased by the plaintiff's wife and bore only her name, were forwarded to the defendants for the purpose of making two loans. When these two loans were not repaid in full, the plaintiff commenced this action seeking to recover from the defendants the money that he was owed, claiming that the defendants effectively borrowed the money from him (first and second causes of action). In the alternative, the plaintiff sought damages for legal malpractice (third cause of action). "

"The Supreme Court also properly denied that branch of the defendants' cross motion which was to dismiss the complaint pursuant to CPLR 3211 (a) (1). A motion pursuant to CPLR 3211 (a) (1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]; see Parkoff v Stavsky, 109 AD3d 646 [2013]; Benson v Deutsche Bank Natl. Trust, Inc., 109 AD3d 495 [2013]). Further, the evidence submitted in support of a motion pursuant to CPLR 3211 (a) (1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "must be documentary or the motion must be denied" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714 [2012], quoting Fontanetta v John Doe 1, 73 AD3d 78, 84 [2010] [internal quotation marks omitted]; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610). " '[N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211 (a) (1)' " (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d 996, 997 [2010]; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610; Suchmacher v Manana Grocery, 73 AD3d 1017 [2010]; Fontanetta v John Doe 1, 73 AD3d at 86)."

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Relatives and Legal Malpractice

This case illustrates the potential mess a law firm can get itself into when it allows employees and their families to do business with them.  This particular case, Rodolico v Rubin & Licatesi, P.C.
2014 NY Slip Op 01308 [114 AD3d 923]  February 26, 2014  Appellate Division, Second Department led to legal malpractice litigation, commercial litigation, and most likely, a change of employees at the law firm.

"The plaintiff's sister worked for the defendant law firm, in which the individual defendants are partners. During his sister's employment, the plaintiff came to learn of an investment opportunity being organized by the defendants, which involved providing high interest, short-term loans for the development of real estate. The plaintiff and his wife decided to participate. Two bank checks, one of which was purchased by the plaintiff's wife and bore only her name, were forwarded to the defendants for the purpose of making two loans. When these two loans were not repaid in full, the plaintiff commenced this action seeking to recover from the defendants the money that he was owed, claiming that the defendants effectively borrowed the money from him (first and second causes of action). In the alternative, the plaintiff sought damages for legal malpractice (third cause of action). "

"The Supreme Court also properly denied that branch of the defendants' cross motion which was to dismiss the complaint pursuant to CPLR 3211 (a) (1). A motion pursuant to CPLR 3211 (a) (1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]; see Parkoff v Stavsky, 109 AD3d 646 [2013]; Benson v Deutsche Bank Natl. Trust, Inc., 109 AD3d 495 [2013]). Further, the evidence submitted in support of a motion pursuant to CPLR 3211 (a) (1) to dismiss a complaint on the ground that a defense is founded on documentary evidence "must be documentary or the motion must be denied" (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714 [2012], quoting Fontanetta v John Doe 1, 73 AD3d 78, 84 [2010] [internal quotation marks omitted]; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610). " '[N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211 (a) (1)' " (Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714, quoting Granada Condominium III Assn. v Palomino, 78 AD3d 996, 997 [2010]; see Rodolico v Rubin & Licatesi, P.C., 112 AD3d at 610; Suchmacher v Manana Grocery, 73 AD3d 1017 [2010]; Fontanetta v John Doe 1, 73 AD3d at 86)."

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Judiciary Law 487 Claim Survives Dismissal Motion

Many Judiciary Law 487 claims are challenged by motion before an answer is filed.  A high percentage of the motions are granted.  Mazel 315 W. 35th LLC v 315 W. 35th Assoc. LLC
2014 NY Slip Op 06252 [120 AD3d 1106]  September 23, 2014  Appellate Division, First   Department is one case in which the motion was denied.

"Defendant failed to demonstrate that the Judiciary Law § 487 cause of action has no merit. Plaintiff's evidence showing that defendant presented false assignment documents for recordation in the City Register and sent a letter to the justice stating falsely that his client was the true owner of the notes and mortgages establishes an egregious act of intentional deceit of the court sufficient to support the cause of action (see Kurman v Schnapp, 73 AD3d 435, 435 [1st Dept 2010]). Defendant denies that he was involved in the recordation of the false documents and asserts that he did not intend to deceive the court. These assertions are insufficient to warrant judgment as a matter of law in defendant's favor; they merely raise issues of fact. Moreover, the parties dispute many of the underlying facts of this matter, and no discovery has been conducted. Since defendant has not established that he had no intent to deceive, his contention that he is immune from liability because he was merely engaged in zealous advocacy is unavailing (see Lazich v Vittoria & Parker, 189 AD2d 753 [2d Dept 1993], appeal dismissed [*2]81 NY2d 1006 [1993]; Alliance Network, LLC v Sidley Austin LLP, 43 Misc 3d 848, 859-860 [Sup Ct, NY County 2014])."

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Suing Your Wife's Attorney is Very Difficult

In a textbook example of the reason for social policy. Tenore v Kantrowitz, Goldhamer & Graifman, P.C.  2014 NYSlipOp 06811 October 8, 2014 Appellate Division, Second Department shows why privity is an essential part of the legal malpractice world.  Were litigants able to sue their opponent's attorney, there would be a legal malpractice case after every regular case.

Courts are very conservative with Judiciary Law 487 claims for the same reason.  Were a 487 claim to depend merely upon a bad outcome, and a claim that the opponent's attorney was deceitful, there would be a separate docket of JL 487 cases in every county.  Hence, the short decision.

"The plaintiff commenced this action against the defendant law firm, which represented his former wife in a matrimonial action against him, alleging a violation of Judiciary Law § 487, fraud, and abuse of process. The plaintiff alleged, inter alia, that the defendant included in the underlying matrimonial action a cause of action to recover damages for assault that was without any factual basis, in an attempt to extract additional money from him in the course of that litigation. The defendant moved for summary judgment dismissing the complaint in the instant action, and the plaintiff cross-moved for leave to amend that complaint to add causes of action to recover damages for a violation of General Business Law § 349, prima facie tort, and malicious prosecution. The Supreme Court granted the defendant's motion and denied the plaintiff's cross motion.

The Supreme Court properly granted that branch of the defendant's motion which was for summary judgment dismissing the cause of action alleging a violation of Judiciary Law § 487. The defendant demonstrated its prima facie entitlement to judgment as a matter of law by establishing its lack of intent to deceive (see Dupree v Voorhees, 102 AD3d 912, 913 [2013]). In opposition, the plaintiff failed to raise a triable issue of fact."

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What is the Statute of Limitations for Judiciary Law 487?

There is now a formal split between the First and Second Departments on the appropriate statute of limitations for Judiciary Law 487.  The second department recently determined that if the JL 487 claim is made in a case with a legal malpractice claim, then the statute of limitaitons is 3 years pursuant to CPLR 214(6).  The First Department, citing Melcher v. Greenberg Traurig LLP, holds that it is 6 years, as did the Court of Appeals.  In McDonald v Edelman & Edelman, P.C.  2014 NY Slip Op 04560 [118 AD3d 562]  June 19, 2014  Appellate Division, First Department it wrote:

"The fourth cause of action, which alleges a violation of Judiciary Law § 487, is timely because it was asserted within six years of plaintiff's receipt of defendants' June 2008 letter (see CPLR 214 [2]; Melcher v Greenberg Traurig, LLP, 102 AD3d 497 [1st Dept 2013]). However, the complaint nevertheless fails to state a cause of action under the statute, since it does not allege that plaintiff suffered any injury proximately caused by any deceit or collusion on counsel's part, and no such injury can reasonably be inferred from the allegations (see Bohn v 176 W. 87th St. Owners Corp., 106 AD3d 598, 600 [1st Dept 2013], lv dismissed in part, denied in part 22 NY3d 909 [2013])."

So, which is it?

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If There Is Another Explanation, Then No Judiciary Law Violation

Police officer is out sick.  Police Department rule is that you must stay in your home, and they go to great lengths to check up on those officers.  In Pannone v Silberstein  2014 NY Slip Op 03944 [118 AD3d 413]  June 3, 2014  Appellate Division, First Department  the officer was subject to a disciplinary hearing and he was fired.  His remedy was an Article 78 challenging whether the decision was arbitrary and capricious.  That article 78 was lost because the attorney did not timely perfect.  Legal malpractice?  Violation of Judiciary Law 487?

No to both.  "To recover damages for legal malpractice, a [*2]plaintiff must demonstrate that the attorney defendant " 'failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession' and that the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages" (Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]). "To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer's negligence" (id.). The court below granted defendants' motions for summary judgment, finding the "but for" element lacking because plaintiff would not have prevailed in the underlying article 78 proceeding. We agree.

The giving of false statements in the course of an official investigation has been upheld as a ground for dismissal from municipal employment (see Matter of Duncan v Kelly, 9 Misc 3d 1115[A], 2005 NY Slip Op 51558[U] [Sup Ct, NY County 2005] [also involved a GO-15 interview], affd 43 AD3d 297 [1st Dept 2007], affd 9 NY3d 1024 [2008]; see also Matter of Loscuito v Scoppetta, 50 AD3d 905 [2d Dept 2008], lv denied 13 NY3d 716 [2010]). There is no merit to plaintiff's argument that the state of the law in 2000, when the article 78 proceeding was brought, would have dictated a different result (see e.g. Matter of Swinton v Safir, 93 NY2d 758, 763 [1999] [dishonest statements to police department investigators constituted an independent basis for dismissal]).

The cause of action based on Judiciary Law § 487 was properly dismissed inasmuch as the record does not establish a "chronic and extreme pattern of legal delinquency" (Kinberg v Opinsky, 51 AD3d 548, 549 [1st Dept 2008] [internal quotation marks omitted]). The breach of contract cause of action, which is based on defendants' alleged failure to represent plaintiff in a professional manner, was also properly dismissed. A breach of contract claim premised on an attorney's failure to exercise due care or to abide by general professional standards is nothing more than a malpractice claim (Sage Realty Corp. v Proskauer Rose, 251 AD2d 35, 38-39 [1st Dept 1998]).

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Judiciary Law 487 is Truly Disliked and Disfavored

Courts are loathe to apply Judiciary Law 487, and when they do, the Appellate Division often reverses.  Here,Lifeline Funding, LLC v Ripka  2014 NY Slip Op 01106 [114 AD3d 507]
February 18, 2014  Appellate Division, First Department serves as an example.  Plaintiff succeeded in obtaining a misdemeanor conviction for the common law violation of Judiciary Law 487 along with treble damages.  This is an unheard of accomplishment. Unheard of! 

So, the Appellate Division reverses.  "This Court finds, however, that the motion court erred in finding that defendant violated Judiciary Law § 487. Defendant did not engage in the "extreme pattern of legal delinquency" [*2]required to violate the statute (Gonzalez v Gordon, 233 AD2d 191, 191 [1st Dept 1996], lv denied 90 NY2d 802 [1997] [internal quotation marks omitted] [defendant attorney's disbursement of $39,000 in escrow funds without plaintiff's authority did not support an award of treble damages]; Wiggin v Gordon, 115 Misc 2d 1071, 1077 [Civil Ct, Queens County 1982] [defendant attorney who repeatedly told plaintiff he would pay taxes on the estate, never did so and then defaulted on the Judiciary Law § 487 proceedings brought against him engaged in "chronic, extreme pattern of legal delinquency"]). Although we do not condone defendant's actions, his conduct does not constitute "an extreme case" of attorney misconduct (Wiggin, 115 Misc 2d at 1071)."

 

 

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Judiciary Law 487 in a Commercial Setting

Judiciary Law 487 is a powerful common law tool for use in legal malpractice and attorney deceit settings.  However, it can be overused.  Overuse dilutes its power, and causes judges to, in effect, roll their eyes at the mere mention. AQ Asset Mgt., LLC v Levine  2014 NY Slip Op 05244 [119  AD3d 457]  July 10, 2014  Appellate Division, First Department  is an example.

"By an amended stock purchase agreement (SPA) effective December 9, 2005, defendants Habsburg and Patrizzi (together the sellers) agreed to sell half of the shares in a group of companies (the Antiquorum entities) to Artist House Holdings, Inc. (Artist House), predecessor to plaintiff AQ Asset Management, LLC (AQ). [FN1]The Antiquorum entities included plaintiffs Antiquorum, S.A. (ASA) and Antiquorum USA, Inc. Defendant Michael Levine, an attorney, provided legal counsel to the sellers, drafted the SPA and other transaction documents, and served as the escrow agent for the deal. Plaintiff Evan Zimmermann, also an attorney, helped broker the  transaction and is alleged by the sellers to have been their legal counsel throughout.
The SPA provided that the sellers would receive $30 million in cash, as well as proceeds from the sale of certain inventory held by the Antiquorum entities. In order to pay the book value of the inventory, the SPA provided that ASA was to execute a promissory note obligating it to pay, to an unspecified third party, the sum of 16 million Swiss Francs (CHF) within six months of the SPA's execution date. The SPA further provided that, "[a]lternatively, Patrizzi may become personally responsible [for payment of the CHF 16 million] to any Stockholder which is entitled thereto."
The parties agreed that the CHF 16 million was to be paid from the sale of inventory on hand and owned by the Antiquorum entities as of the date of the SPA. The SPA also required Patrizzi to put the inventory up for sale before the due date of the promissory note, and provided that any funds received in excess of the CHF 16 million would belong to Patrizzi or his designees. According to the sellers, Habsburg was entitled to the first CHF 16 million in inventory sale proceeds and Patrizzi was entitled to the remainder. It is undisputed that ASA never executed a promissory note, and the sellers contend that they received no proceeds from the sale of inventory .

The motion court correctly dismissed the ninth and tenth causes of action in the fourth-party complaint alleging legal malpractice against Levine, and the seventeenth counterclaim alleging legal malpractice against Zimmermann, as barred by the three-year statute of limitations (see CPLR 214 [6]; Champlin v Pellegrin, 111 AD3d 411 [1st Dept 2013]). These claims accrued no later than August 2007, when the sellers became aware of Levine's and Zimmermann's alleged betrayal and any attorney-client relationship had come to an end. Since the claims were not brought until, at the earliest, December 2010, when this action was commenced, they are untimely.

Contrary to the sellers' contention, the statute of limitations was not tolled by alleged fraudulent concealment (see Simcuski v Saeli, 44 NY2d 442, 448-449 [1978]). Any improper collaboration between Levine and Zimmermann would have come to light no later than August 2007 and thus, there could be no tolling after that date. Nor was the limitations period tolled by continuous representation (see Matter of Merker, 18 AD3d 332, 332-333 [1st Dept 2005]). Communications dated after August 2007 do not demonstrate that Levine and Zimmermann continued to represent the sellers. In light of the dismissal of the malpractice claims against Levine, the motion court properly dismissed the eleventh cause of action in the fourth-party complaint seeking forfeiture of Levine's legal fees.

The sixth interpleader counterclaim and seventh cause of action in the fourth-party complaint, which allege that Levine violated Judiciary Law § 487 by bringing his interpleader claims without informing the court of his purported business relationship with Zimmermann, were properly dismissed. The absence of such information in Levine's interpleader pleading does not rise to the level of "withholding of crucial information from a court" or "conceal[ing] from a court . . . a fact . . . required by law to [be] disclose[d]" (see Melcher v Greenberg Traurig, LLP, 102 AD3d 497, 500 [1st Dept 2013], revd on other grounds 23 NY3d 10 [2014])."

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