Century Surety Company v. Mo Foods, LLC et al
Filing
62
ORDER signed by Judge Garland E. Burrell, Jr. on 2/21/2014 denying defendants' 38 48 Motions to Stay. (Marciel, M)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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CENTURY SURETY COMPANY, an
Ohio Corporation,
Plaintiff,
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2:13-cv-01387-GEB-EFB
ORDER DENYING STAY MOTIONS
v.
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No.
MO FOODS, LLC, a limited
liability company; MANISH
PATEL, an individual; TMPM,
LLC, a limited liability
company; PRADIP PATEL, an
individual, NEHA PATEL, an
individual; SEAN CANILOA, an
individual; RUBEN MORALES; an
individual; WAYNE PERARANDA;
an individual; DEBORAH
PENARANDA; an individual; and
PATRICK PENARANDA; an
individual,
Defendants.
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Defendants Wayne, Deborah, and Patrick Penaranda (“the
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Penaranda Defendants”) and Defendants Mo Foods, LLC and Manish
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Patel move for an order staying this declaratory judgment action
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based on a lawsuit pending in “the Superior Court of the State of
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California, County of El Dorado, entitled Wayne Pernaranda, et
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al.,
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SC20130043.” (Mot. to Stay 20:3-4, 3:8-9, ECF No. 48.) Defendants
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argue
Plaintiffs
the
v.
state-court
Mo’s
Place,
lawsuit
Inc.,
should
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be
et
al.,
resolved
Case
before
No.
this
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federal action proceeds to judgment. Plaintiff Century Surety
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Company (“Century Surety”) opposes the motion.
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I.
BACKGROUND
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The factual context concerning the motion follows. The
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Penaranda Defendants allege in their state-court lawsuit that on
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the evening of May 19, 2012, an altercation occurred at a bar
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operated by Mo Foods, LLC during which brothers Patrick and Derek
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Penaranda suffered injuries. (Pl.’s Opp’n, Decl. of H. Douglas
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Galt Ex. 1, First Amend. Compl. (“FAC”) ¶¶ 4, 28-43, ECF No. 57-
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1.) The Penaranda Defendants allege Derek Penaranda died five
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months later as a result of the injuries he sustained. (Id. ¶
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49.)
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against Mo Foods and other defendants claims of assault, battery,
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negligence,
negligent
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intentional
infliction
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hiring/supervision, and wrongful death.
The
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Penaranda
When
insured
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infliction
of
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Century
in
their
state
lawsuit
of
emotional
distress,
emotional
distress,
negligent
Surety
occurred,
general
Mo
Foods,
excludes from coverage any
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a
allege
altercation
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under
the
Defendants
liability
LLC
policy
‘bodily injury’ . . . or ‘personal . . .
injury’ arising out of or resulting from:
(a) any
actual,
threatened
or
alleged
assault or battery;
(b) the failure of any insured or anyone
else for whom an insured is or could be
held legally liable to prevent or
suppress any assault or battery;
. . .
(e) the negligent:
(i)
employment;
(ii) investigation;
(iii) supervision;
(iv) training;
(v)
retention;
of a person for whom any insured is or
ever was legally responsible and whose
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was
that
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(f)
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conduct would be excluded by [](a), (b),
. . . or (e) above.
any other cause of action or claim
arising out of or as a result of [](a),
(b), or . . . (e) above.
(Compl. ¶ 19.1 (emphasis added).)
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Century Surety “assumed [Mo Foods’] defense
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state lawsuit] while reserving the right to dispute coverage.”
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(Id. ¶
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reimbursement
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declaratory relief that Century Surety “has no obligation . . .
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to defend” and “no obligation . . . to pay any judgment that
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might
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[l]iability [a]ction.” (Id. 6:27-28, 7:2-3.)
20.)
be
In
of
entered
this
federal
hitherto
in
the
II.
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action
incurred
[Penaranda
Century
[in the
Surety
defense
seeks
expenses
Defendants’
and
state-court]
DISCUSSION
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a. Brillhart Stay Request
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The Penaranda Defendants seek a stay of this federal
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lawsuit under Brillhart v. Excess Insurance Co. of America, 316
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U.S.
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requires
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product
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their state-court liability lawsuit. Century Surety counters that
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California law is clear on the enforceability of assault and
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battery exclusions in the applicable liability insurance policy,
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and its “duty to defend does not depend on adjudicated facts but,
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instead on the Penaranda[] [Defendants’] allegations” pled in
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their state lawsuit complaint. (Pl.’s Opp’n 8:12-13, 7:24-25.)
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(1942),
needless
of
forum
arguing
this
determination
shopping,
and
declaratory
of
state-law
shares
factual
judgment
issues,
action
is
questions
the
with
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The Federal Declaratory Judgment Act authorizes federal
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courts to “declare the rights and other legal relations of any
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interested party seeking such declaration.” 28 U.S.C. § 2201(a).
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“Based on the permissive nature of the Declaratory Judgment Act,
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in Brillhart[], the Supreme Court held that a district court has
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discretion to dismiss a federal declaratory judgment action when
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‘the questions in controversy . . . can better be settled in a
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pending state court proceeding.’” R.R. St. & Co. v. Transp. Ins.
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Co., 656 F.3d 966, 975 (9th Cir. 2011) (alteration in original)
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(quoting Brillhart, 316 U.S. at 495). “The Court reaffirmed this
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principle in Wilton, holding that a district court may decline to
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entertain a federal declaratory judgment action when state court
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proceedings
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same state law issues.’” Id. (quoting Wilton v. Seven Falls Co.,
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515 U.S. 277, 289-90 (1995)).
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‘present[]
opportunit[ies]
for
ventilation
of
the
“In Brillhart, the Court articulated three factors that
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courts
should
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entertaining a declaratory judgment action: avoiding ‘needless
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determination
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shopping’; and avoiding ‘duplicative litigation.’” Id. (citing
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Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1224 (9th Cir.
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1998)
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exhaustive,” they ”remain the philosophical touchstone for the
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district court.” Dizol, 133 F.3d at 1225 n.5, 1225.
(en
of
banc)).
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state
when
examining
law
Although
issues’;
the
the
propriety
discouraging
Brillhart
factors
of
‘forum
“are
not
1. Avoiding Needless Determinations of State Law
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consider
Issues
The
Penaranda
Defendants
argue
resolution
of
this
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federal action will require needless determination of state law
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issues since “[t]here is absolutely no federal law involved.”
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(Mot. to Stay 8:12.) Century Surety counters: “[T]here is no
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pending state court action in which [its] coverage obligations
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will be adjudicated.” (Pl.’s Opp’n 8:10-12.)
“[I]nsurance
law
[is]
an
area
that
Congress
has
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expressly left to the states through the McCarran-Ferguson Act.
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15 U.S.C. §§ 1011-12.” Cont’l Cas. Co. v. Robsac Indus., 947 F.2d
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1369, 1371 (9th Cir. 1991), overruled in part on other grounds,
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Dizol, 133 F.3d at 1226. Nevertheless, “[t]here is no presumption
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in favor of abstention . . . in insurance coverage cases.” Dizol,
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133 F.3d at 1225. However, abstention is favored when “[t]he
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precise state law issues at stake in [a federal lawsuit] are the
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subject of a parallel proceeding in state court.” Robsac, 947
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F.2d at 1371.
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Consideration
of
the
operative
complaints
in
the
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respective federal and state lawsuits evinces different state law
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issues are litigated. The state-court complaint seeks damages for
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alleged tortious conduct, whereas the complaint in this federal
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lawsuit seeks a declaration that a liability insurance policy
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excludes certain torts from coverage. Therefore, this factor does
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not favor staying the action.
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2. Avoiding Forum Shopping
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The Penaranda Defendants argue Plaintiff “could have
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chosen to bring a declaratory judgment action in El Dorado County
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Superior Court,” where its state lawsuit is pending, but chose to
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“file[] the present suit in federal court because it perceived a
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tactical advantage in litigating in the federal forum.” (Mot. to
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Stay 15:2-3, 15:7-8.)
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The forum-shopping factor is aimed at “discouraging an
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insurer from . . . filing a federal court declaratory action to
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see if it might fare better in federal court at the same time the
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insurer is engaged in a state court action.” Am. Cas. Co. of
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Reading, Pa. v. Krieger, 181 F.3d 1113, 1119 (9th Cir. 1999).
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However, Century Surety is not engaged in a state-court action
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within the evident ambit of this factor. Therefore, this factor
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does not weigh in favor of a stay.
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3. Avoiding Duplicative Litigation
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The
Penaranda
Defendants
argue
this
federal
action
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“turns on factual questions that are the same or overlap with
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those
at
issue
in
the
underlying
state
action”—specifically,
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“the nature of the alleged claims.” (Mot. to Stay 8:26-7, 10:1.)
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Century Surety counters that its “duty to defend does not depend
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on adjudicated facts but, instead, on the [Penaranda Defendants’]
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allegations” pled in the state lawsuit. (Pl.’s Opp’n 7:24-25.)
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The duplicative litigation factor favors a stay when
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“the federal declaratory suit is virtually the mirror image of
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the state suit.” Robsac, 947 F.2d at 1373. This factor involves
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consideration
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lawsuit] . . . overlap with those at issue in the underlying
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state court litigation.” Emps. Reins. Copr. v. Karussos, 65 F.3d
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796, 800 (9th Cir. 1995), overruled in part on other grounds,
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Dizol, 133 F.3d at 1226.
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The
of
whether
issue
questions
this
federal
policy’s
assault
[in
action
is
federal
whether
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applies
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state-court
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factual issues in the state-court liability lawsuit. Accordingly,
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this factor does not weigh in favor of a stay.
the
allegations
complaint.
This
pled
issue
in
the
does
battery
the
liability
to
and
this
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insurance
in
“factual
Penaranda
not
exclusion
Defendants’
overlap
with
the
Since the three Brillhart factors weigh in favor of
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allowing the federal action to proceed, the request for a stay
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under Brillhart is DENIED.
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b. Remaining Stay Argument
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The
remaining
stay
arguments
are
unpersuasive
since
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they are based on the erroneous conclusion that resolution of the
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federal action depends on resolving factual issues in the state
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action.
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4.
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CONCLUSION
For the stated reasons, the stay motions are DENIED.
Dated:
February 21, 2014
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