LegalZoom.com Inc v. Rocket Lawyer Incorporated

Filing 42

REPLY LEGALZOOM.COM Inc.'s Reply in Support of its Motion for Summary Judgment filed by Plaintiff LegalZoom.com Inc, Counter Defendant LegalZoom.com Inc. (Attachments: # 1 Declaration of Patty Chikamagalur, # 2 Declaration of Mary Ann Nguyen, # 3 Response to Evidentiary Objections, # 4 Response to Separate Statement of Undisputed Material Facts, # 5 Memorandum of Evidentiary Objections)(Heather, Fred)

i PATRICIA L. GLASER -State Bar No. 55668
pglaser glaserweil.com
2 FRED .HEATHER -State Bar No. 110650
flleather laserweil.com
T. NGUYEN -State Bar No. 269099
3 MARY
mnguyen ~glaserweil.com
CWEIL FINK JACOBS
4 GLASER
HOWARD AVCHEN & SHAPIRO LLP
s 10250 Constellation Boulevard, 19th Floor
Los Angeles, California 90067
6 Telephone: [phone]
Facsimile: 310 556-2920
7

Attorneys for Plaintiff
s LegalZoom.com, Inc.
9

UNITED STATES DISTRICT COURT

io

CENTRAL DISTRICT OF CALIFORNIA

ii

WESTERN DIVISION

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12

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LEGALZOOM.COM,INC., a Delaware
corporation,

13

Plaintiff,

is

is

v.

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ROCKET LAWYER INCORPORATED,
i6 a Delaware corporation,

t~l~c

1~

Defendants.

CASE NO.: CV 12-9942-GAF(AGI~)
Hon. Gary A. Feess
Courtroom: 740
SUPPLEMENTAL DECLARATION
OF MARY ANN T. NGUYEN IN
SUPPORT OF PLAINTIFF
LEGALZOOM.COM,INC.'S
MOTION FOR SUMMARY
JUDGMENT

is
19

Zo

October 21, 2013
Date:
9:30 a.m.
Time:
Courtroom: 740
255 East Tem le Street
Los Angeles,~A 90012

21
22
23
24
25
26
27
28
1
SUPPLEMENTAL DECLARATION OF MARY ANN T. NGUYEN
829328

1
2

SUPPLEMENTAL DECLARATION OF MARY ANN T. NGUYEN

3

I, MARY ANN T. NGUYEN,declare and state as follows:

4

1.

I am an attorney at law duly licensed to practice before all courts ofthe

s State of California and am an Associate of the law firm of Glaser Weil Fink Jacobs
6

Howard Avchen &Shapiro LLP, attorneys of record herein for Plaintiff
LegalZoom.com,Inc.("LegalZoom"). I make this supplemental declaration in

s support ofPlaintiff LegalZoom's Reply in Support of Motion for Summary Judgment.
9

The facts set forth herein are true of my own personal knowledge, and if called upon

io to testify thereto, I could and would competently do so under oath.
2.

Turbo Tax's advertisement states "FREE Tax Filing," which expressly

~ limits "free" to Turbo Tax's tax filing only. A true and correct copy of Turbo Tax's
advertisement stating "Free Tc~ Filing" is attached hereto as Exhibit A.
3.

At least some customers have found Rocket Lawyer's practices to be

deceiving. In an online review by "Scott C." on www.sitejabber.com, dated July 7,
2013,"Scott C." states: "It's not free. But you don't find that out until you give the
i~ website all your personal information and open account with them. Stay away." In
is another online review by "Frank J." on www.sitejabber.com, dated January 6, 2013,
i9 "Frank J." states: "Nothing is mentioned about charges until you enter personal info
ao and try to finish the process...." Still, in another online review by "Peggy W." on
ai www.sitejabber.com, dated January 18, 2012,"Peggy W." states: "They charged me
a2 $199.75 ($39.95 for 5 months). I'm a small business owner and have always believed
23

!
I was resourceful and reasonably intelligent but I did not see this coming ! I never

24

used their form, never expected a monthly charge. This Company is very good,#1

2s when it comes to rip-offs!" True and correct copies ofthese third party online
26

a~

reviews about Rocket Lawyer are attached hereto as Exhibit B.
4.

Attached hereto as Exhibit C is a true and correct copy of the lay third-

as party review of LegalZoom's and Rocket Lawyer's LLC formation page,found at
2
SUPPLEMENTAL DECLARATION OF MARY ANN T. NGUYEN
829328

i http://iterationz.com/?s=legalzoom, which is used as Rocket Lawyer's Exhibits 32
2

and 33 in support of its Opposition to the Motion. The lay-third party reviewer's

3

review relates to LLC formation, not incorporation. As stated in the law third-party

4

review, the review provides the third party reviewer's assessment of a single page in

s each website's LLC formation process, which is not intended to be an e~austive
6

review of both products. Nowhere does the lay third-party reviewer state that Rocket
Lawyer's disclosure of state incorporation fees is "clearer" than LegalZoom's

s disclosure.
9

5.

Based on the Microsoft Word Count software, Rocket Lawyer's terms of

io services contains approximately 3,681 words and spans approximately 7 pages.
ii
~.
J

6.

Some of LegalZoom's products, such as equipment lease agreements or

is independent contractor agreements, are available to consumers by "instant download"

o 'a

~s
--,yr

13

for as little as $14.95 or by "unlimited access" for as little as $7.99/month. In

~ C
LL ~

14

addition, customers may request that documents be sent to them via e-mail. Attached

~I ~

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v

~a

is hereto as Exhibit D are true and correct copies of LegalZoom's webpages relating to

~~
a~

16

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b 0

equipment lease agreements and independent contractor agreements showing these

i~ prices.

is

7.

LegalZoom began offering subscription plans with attorney consultation

i9 in or around 2010. LegalZoom offers a Business Advantage Pro Membership, which
Zo offers both business and personal support. Attached hereto as Exhibit E is a true and
21

correct copy of LegalZoom's webpage relating to its Business Advantage Pro

as Membership.
23
24

as

I declare under penalty of perjury pursuant to the laws ofthe State of California
~ that the foregoing facts are true and correct.
Executed on October 7, 2013 at Los Angeles, California.

26
2~

/s/ Mary Ann T. N~ven
MARY ANN T. NGUYEN

zg
3
SUPPLEMENTAL DECLARATION OF MARY ANN T. NGUYEN
829328

EXHIBIT A

Page 4

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18 Reviews for Rocketlawyer.com

♦ Sort by: recent

REVIEWS

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18 reviews

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Page 9

Vice president directly lies. Not a company with integrity. Inept, incompetent customer service.

si~v~s

New ReNewer

Levi C.

I
'~

New ReNewer

Phil H.

~

New Renewer

Reply:

- Levi

don't know whether or not I need these services.

On Thu, Sep 5, 2013 at 11:32 AM, lee crotinger <[e-mail]> wrote:
Is it possible to just email you for now?

Here is an actual email from an egotistical representative of rocketlawyer - -

9/5/13

Votes (0) •Respond as company • Link to this review

Warning, iYs a scam. DO NOT give them your CC no.

Rocket Lawyer gets you to sign up, and even when you quit within the trial period, they
continue to bill you.

Beware,

9/9/13

Shanaynay W. Votes (0) •Respond as company • Link to this review

All Reviews

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great sites. Just keep in mind: 1 bad review
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doesn't mean it's good. Happy browsing!

Page 10

~

It doesn't sound like your too serious about us helping you by the sound of it Levi. You can

On Thu, Sep 5, 2013 at 12:44 PM, <me> <my email> wrote:

Any insight will help greatly.

Your guys' website had some bad reviews, so I worry about the validity and whether or not it is
cheaper to get licenses elsewhere, like from the state.

Is there anything else that I need?

What I am looking for is -the proper licenses for the company and once I get that, the tax id
number.

am opening a video game retail store as an LLC.

For starters,

To: <me> <my email>
Sent: Thursday, September 5, 2013 3:00 PM
Subject: Re: UGA Games -Are You Still Incorporating?

From: Sean Prudden <[e-mail]>

Sean

Thanks,

Sure but the help will be limited because its going to be difficult for me to assist you only via
email. But send me anything you need help with and we will go from there.

~>
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Page 11

email> wrote:

<my

Sean

Sorry we couldn't help,

My manager is well aware. You've indicated several times how you probably don't need our
service, already complaining about pricing and questioning the legitimacy of our service. My
time is better spent dealing with customers who are happy to receive the help we provide, and
not reassuring a skeptical customer who doesn't sound like he wants to use the service to
begin with.

Levi,

On Thu, Sep 5, 2013 at 1:01 PM, <me>

- Levi

Hopefully your boss doesn't read your emails.

If you read through the email, you'll see I have general concerns, but wondered about validity.

You need to work on your sales pitch...

From: Sean Prudden <[e-mail]>
To: <me> <my email>
Sent: Thursday, September 5, 2013 3:56 PM

Sean

Take care,

definitely go through the state or another service.

Page 12

~'

n,a~w..;.,,,., ta.

New Renewer

pissed o.l

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_.....,

New ReWewer

"'^ ~
,~',=a J
Laura w.

`y - .. ..~

New ReNewer

Tess S. ~

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Votes (0) •Respond as company

~ i ..,.,.i i ~,.i_

Link to this review

~ ~ _..._ n_c_

it helped when I was needed. but monthly charge is bad when I forgot this service.
You must downgrade when you are not using the service.

7/7/13

Votes (0) •Respond as company • Link to this review
_
_

They offer you a free 7 day trial. I cancelled before day 7 and because I never received an
email confirmation they still charged me and will not refund my money. DO NOT USE THIS
SITE unless you want to be stuck paying their monthly fee.

8/3/13

Votes (0) •Respond as company • Link to this review

I thought the process was easy to use and the forms seemed to give me EXACTLY what
needed BUT it turned out to just be a way to refer lawyers who told me the forms were no
good. Don't know if that's true or not, but the lawyers don't seem to think the forms are legal as
they are written! Rocket Lawyer did refund my money.

8/24/13

Votes (0) •Respond as company • Link to this review

This confirms that all of the bad reviews on this site are true. As much as I hate to say that.

work in IT, never have I ever refused a service so immediate to someone, I had legitimate
concerns, which were just simply thrown back in my face.

Page 13

~♦

__..~

ann b.

lawyer used obscene language on my own case. Are you kidding me, was he on drugs. Where
was the professionalism. He talked too loud in the courtroom when the judge was hearing
another case and the bailiff had to tell him to be quiet, Do not waste your time. Ask your daddy

5/4/13

Votes (0) •Respond as company • Link to this review

New Renewer

',

They never answer the phone and you can't cancel! I left a message with their answering
service to cancel my subscription but they didn't. DON'T SIGN UP FOR THEIR FREE TRIAL!!!

5/22/13

Votes (0) •Respond as company • Link to this review

run a small business. Costs add up quick. This site helped me save hours on documents.
Time also=money. all in all, a great value, almost like a part time paid staff. Even helped me
With tax questions. I canceled after the free trial and ended up signing up again.

7/x/13

Votes (0) •Respond as company • Link to this review

Charge me $450 to file paper work and for their services. They told me it was going to be $299
total. Well, its been a month and nothing has happened so far. They wont return calls and they
are a HUGE SCAM. Avoid at all costs.

~/5/~3

Votes (0) •Respond as company • Link to this review

z ~`~` ~~
~~,
John E.

New Renewer

Stevan F.

_

New ReNewer

Tom F.

~y,~ r~
E;,", ~,

New ReWewer

Scott C.

It's not free. But you don't find that out until you give the website all your personal information
and open an account with them. Stay away.

~ni~s

New Renewer

New ReHewer

frank j.

j

New ReNewer

~~' '~ ~'
I
Raechel W.

............... .
°,~.,, ~~,

New Renewer

~.' ,
David S.

~,~~,~

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--.

Page 14

~. i ....... r~..r,...

~ n..:.~ n....:.....

~ ~a...~ i ,.,...

Votes (0) •Respond as company • Link to this review

Do not be fooled into building your document on this website, and then expect to be able to
print it. Nothing is mentioned about charges until you enter personal info and try to finish the
process. The "Free" trial requires you to enter credit card info and cancel after a week, which is
next to impossible according to what I've read. Stay... read more

1/6/73

Votes (0) •Respond as company • Link to this review

Signed up for free trial, lousy service, can't cancel, have paid for several months. Don't do it.

1/13/13

Votes (0) •Respond as company • Link to this review

called my credit card company... read more

their CS line).

paid for a year of service - $300 -and created only one contract. Not a great value, but it's
What I signed up for. However, they auto-billed me for a second year and did not answer the
Phone when I tried to cancel the service. They refused to help me over email (said I had to call

4/18/13

► ~ ..~..i u,.i...

Votes (0) •Respond as company • Link to this review

to gett you a real lawyer

Page 15

~~

~

j
~

l

New Renewer

EDD B. ~

New ReHewer

Pe99Y W.

.h~,,

New Reviewer

Diana M.

~~
~

New ReNewer

Betsy G.

Votes (0) •Respond as company • Link to this review

They are a waste of time since they don't follow through on what they offer or follow up with
e-mail or phone questions asked.

5/1X09

Votes (0) •Respond as company • Link to this review

They charged me $199.75($39.95 for 5 months). I'm a small business owner and have always
believed I was resourceful and reasonably intelligent but I did not see this coming !! I never
used their form, never expected a monthly charge. This Company is very good, #1 when it
comes to rip-offs !

1/18/12

Votes (0) •Respond as company • Link to this review

I used RocketLawyer to incorporate my healthcare business. They have so many free forms
and services, as well as qualitied legal professionals they can put you in touch with. I think they
are fantastic. I highly recommend them.

3/10/12

Votes (0) •Respond as company • Link to this review

signed up for this "free" service once before only to cancel when I found out "free" meant free
for one WEEK-then th ey start charging you. Honestly, how many legal issues does the
average Joe have?
forgot about how they reel you in with thte offer of free legal form templates, etc. so I went on
their web site again only to be taken... read more

6/19/12

Page 16

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EXHIBIT C

Page 17

Iteration Z

Software Product Management and Development Services
• Services»
• Experience
• Thoughts
• Resources»
• About
• Contact
• October 2, 2013

Creating a formal business structure with the help of online
legal services
A Quick History
I created two companies before I set up Iteration Z,both in the late 90's. One experience involved
purchasing an existing local brick-and-mortar business, while the other was in the technology
realm — a niche web hosting company with asubscription-based business model. In both cases, I
chose the S-Corp as the formal business structure. Though my business partner and I were most
interested in creating an LLC,the local business was service-based, and required special licensing
from the State of California. Unfortunately for us, the laws about licensing were outdated enough
that a license couldn't be issued to an LLC because that business structure didn't exist when the
laws were written. When it came time to set up the second company,it seemed easiest to follow
the same path I'd already walked. I worked with a lawyer, and even in the case ofthe cleaner
setup of a new company, it still cost us somewhere in the range of $2000 in legal fees —lots more
for the purchase of the existing business. Fast forward to 2013, though, and I had different
options.
Introducing the Competitors
When I decided to move forward with Iteration Z,this time I knew I wanted to create an LLC,for
a few reasons. Pm the only founder this time around, it's easier to set up than a corporation is, and
there's generally less administrative work required by the State to maintain an LLC. The best part
was that I didn't need to work with a lawyer, because of companies like RocketLawyer.com and
LegalZoom.com. I spoke with each company about what I needed done, and I chose
RocketLawyer after hearing from both. The prices each company quoted me were comparable,
and though RocketLawyer was cheaper than LegalZoom, that wasn't the determining factor for
me. The design ofthe website and the customer service were the tipping points. In fact, in the
end, I signed up for additional premium services with RocketLawyer as a result of my positive
experiences with their website and their staff.

Follow

Page 18

Design Comparison
—~ I'll discuss design first. Note,I'm only going to compare a single page in the process, so this is not
intended to be an exhaustive review of both products. I do believe first impressions are
everything, though, so analyzing the first step in any workflow process/funnel is one ofthe more
important areas to focus on. One other note —I've lettered the issues I discuss below so they
correlate with the markup I created of each web page in Balsamiq Mockups.
LegalZoom

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Image 1 —Click to view full size

A —While I'm generally an advocate of simple UI designs that use a white background,
LegalZoom's site design represents a case where I don't think it works well. In this design, there's
nothing that tells me what is important to read, so I have to read everything or I risk missing
something that might be important, and study after study has shown that users do not read much of
the text on web pages. They visually scan for the first thing (not the best thing —thefirst thing)
that registers in their brain as being associated with the task they want to achieve. Pm no different
than the average web user in this case, and I did not want to read the details on the first page. My
eyes went to the drop-down fields and I chose my answers and moved on.

Fnllnw

Page 19

Image 2 —Click to
view full size

B —Now,notice the orange help icons in Image 1. I ignored these, because I knew the answers to
the questions and didn't think I needed any help. Had I clicked on the first one, though, I'd have
seen the pop-up shown in Image 2. LegalZoom had hidden the fact that an option I chose was
going to cost me more money inside apop-up help box. To be fair, I could un-check the option at
the end of the process, but I nonetheless feel this is a misleading way to present services. There
are two other smaller, more nitpicky things I don't like about this design.

C —First, there's the question at the top right —Why form an LLC? Conceivably, if I've already
started to fill out the form, I have already made this choice and don't need that information. The
screen real estate could be used more widely.

D —Second, while I'm glad it's easy to see how to talk to a human if I want to, the stock image of
the call center operator with the headset feels a bit cheesy and outdated.
RocketLawyer

Contrast this with RocketLawyer's design.

Fnllnw

Page 20

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Image 3 —Click to view full size

E — RocketLawyer also uses a simple background design that is largely white, but they alter their
font sizes and introduce a subtle gray background in the center ofthe page that helps break up the
content into pieces that are digestible.

F —More importantly, they put the most vital element of the page on the top left, where my eye is
naturally going to look first. This design communicates to me that I don't really have to pay
attention to the rest ofthe screen if I don't want to — I can enter my responses in the two dropdown fields and go. However,ifI'm more comfortable talking to a human, it's easy for me to see
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Page 21

how to do that, and if I want to know more about how the whole process works,the large numbers
tell me where to find that information.

G —Also, RocketLawyer has put a pricing guide on this page, so I know before I start the process
where the charges are likely going to come from. Granted, they use this as an opportunity to
knock their "competitor" on price, but at least they're not hiding pricing from me.

H — RocketLawyer also has a small section with related articles, the first of which addresses the
question, `LLC or S-Corp?' Again,conceivably, I have made the decision already, but the
presence ofthat question doesn't bother me nearly so much in this design. Why not? Because it's
presented in a larger list of articles that are related to what I'm doing. That tells me two things.
First, because the article is the first among a list of articles, it feels more like a preview of what is
likely to be a pretty deep library of articles, and that is interesting to me. Second, it's a design
pattern that has become more and more prevalent on the Internet, and that is the presentation of
sophisticated context-sensitive content. It signals to me this company has invested in its
technology.

I —The one thing I don't get is the use of pink as an accent color in the red navigation bar. Maybe
it's just my taste, but I think white or a very light gray would be better.
The Support Experience
I'll close with a brief note of the experiences I had with each company's support staff. When I
began the process on LegalZoom, which I tried out first, I went fairly far into the online interview,
but stopped because there was a question I had to answer that I wasn't yet sure of. I saved my
draft and moved onto some other work. Then I got a phone call — and an email —and another
phone call —and another email. They were all prompts to come back and finish setting up my
LLC. Even after returning the phone call and explaining my situation, the calls and emails kept
coming, and it wasn't long before I felt a little bit stalked. So, I went to RocketLawyer and started
the process with them.

When I got to a point where I was again unsure ofthe answer to a question in the interview, this
time,I called RocketLawyer. I got better answers to my questions, one of which had to do with
whether I should file for expedited service with the State of CA or not. Jeff, my account guy,
explained that the State of CA takes a pretty darn long time to process the paperwork, and whether
I should expedite or not depended on how quickly I wanted to do business. He went on to explain
that often, RocketLawyer can get a Federal Employer's ID Number quickly, and I could use that to
begin other processes, such as getting a business license in my city, and opening a bank account,
which would allow me to essentially do business while I waited for the State to stamp the
paperwork and send it back to me.

With my questions resolved and a quick discussion about overall price and options, Jeff took over
and did the rest ofthe setup for me on his end, so I didn't even have to finish the online interview.
He had a FEIN for me the same day, sent me some standard documents I'd need for my records,
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Page 22

and I hadn't spent hundreds of dollars more to expedite the process unnecessarily. I think the fact
that I remember my account guy's name a month after interacting with him says a lot all on its
own. I walked away feeling like this was not only a technology company dedicated to delivering a
great service on the Web,it was also a company that understood customer service, and really, what
more can you ask for? Oh,and the price was probably about a quarter of what I'd spent last time I
set up a company, because I didn't have to shell out for expensive lawyer fees.

Melissa
Filed Under: Customer Service, Design, Product Management, Review, UX Tagged With: Business
Structure, Customer Service, LegalZoom, RocketLawver
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Services

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Process

Product
Review

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Page 23

Writing

Contact Melissa
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Product &Design Resources
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N Brand Blvd, 11th Floor, Glendale, CA 91203 is a registered and bonded legal tlocument assistant, #0104, Los Mgeles County (exp. 12/13).

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EXHIBIT E

Page 31

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CreditAlertTM Plus
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Page 33

1

CERTIFICATE OF SERVICE

2

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

3

I am employed in the County of Los Angeles, State of California; I am over the
4

age of 18 and not a party to the within action; my business address is 10250
5

Constellation Boulevard, 19th Floor, Los Angeles, California 90067.
6

On October 7, 2013, I electronically filed the following document(s) using the
7

CM/ECF system.
8

SUPPLEMENTAL DECLARATION OF MARY ANN T. NGUYEN IN
9

SUPPORT OF PLAINTIFF LEGALZOOM.COM, INC.’S MOTION FOR

10

SUMMARY JUDGMENT
11

Participants in the case are registered CM/ECF users and will be served by the
12

CM/ECF system.
13

I declare that I am employed in the office of a member of the bar of this court at
14

whose direction the service was made. I declare under penalty of perjury that the
15

above is true and correct.
16

Executed on October 7, 2013 at Los Angeles, California.
17
18
19

/s/ Fred Heather
Fred Heather

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1
CERTIFICATE OF SERVICE
829328