Llano Funding Group, LLC v. Cassidy
Filing
26
ORDER granting in part and denying in part 15 Motion to Dismiss for Failure to State a Claim. Plaintiff shall file a Second Amended Complaint on or before August 15, 2015. Signed by Judge Beth Bloom on 8/5/2015. (ra)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 14-CIV-62863-BLOOM/Valle
LLANO FUNDING GROUP, LLC,
Plaintiff,
v.
PAUL R. CASSIDY
Defendant,
________________________________________/
ORDER ON MOTION TO DISMISS
THIS CAUSE is before the Court upon Defendant, Paul R. Cassidy’s Motion to Dismiss,
ECF No. [15] (“Motion”). The Court has reviewed the Motion, all supporting and opposing
filings, the record and this case, and is otherwise fully advised. For the reasons that follow, the
Motion is granted in part and denied in part.
I. BACKGROUND & FACTS
Plaintiff Llano Funding Group, LLC (hereinafter, “Plaintiff”), brings claims of
professional negligence and negligent misrepresentation against Defendant Paul R. Cassidy
(hereinafter, “Defendant”) for the improper, incorrect, and overvalued property appraisal he
conducted.
Amended Complaint, ECF No. [11] at ¶¶ 7-19.
Defendant moves to dismiss
Plaintiff’s Amended Complaint and request for attorney’s fees pursuant to Fed. R. Civ. P.
12(b)(6). Motion, ECF No. [15].
At some unknown point in time, Defendant prepared an appraisal (the “Appraisal”) for
real property located at 3360 NE 13th Avenue, Pompano Beach, Florida (the “Subject
Property”). Am. Compl., ECF No. [11] at ¶ 7. O’Brien Financial Group, Inc., (“O’Brien”), the
mortgage lender for Subject Property, relied on the Appraisal to approve a mortgage for
$285,000. Id. at ¶¶ 8-9. Plaintiff alleges that, in reality, the property was worth substantially less
than the value set forth in the Appraisal and that Defendant had actual knowledge of the gross
inaccuracy. Id. at ¶ 10-11. According to Plaintiff, if Defendant had accurately valued the
property, O’Brien “would not have approved and funded said loan.” Id. at ¶ 12. The Subject
Property was foreclosed upon on November 14, 2012. Id. at ¶ 14. Due to the inaccurate
Appraisal and overvalued property, O’Brien “received no funds from the foreclosure and the
balance of the loan remains due and owing.” Id. at ¶ 15.
Plaintiff contends that, in preparing the inaccurate Appraisal, Defendant violated the
Uniform Standards of Professional Appraisal Practice (“USPAP”) by “select[ing] and us[ing]
comparable sales that are not locationally, physically, and functionally the most similar to the
subject property and the comparable sales,” and “used inordinate adjustments for differences
between the subject property and comparable sales that do not reflect the market’s reaction to
such differences, or fail[ed] to make proper adjustments when clearly necessary.” Id. at ¶ 23.
Thus, Plaintiff contends that Defendant “was most likely intentionally and knowingly trying to
support an inflated value, but at a minimum [was] gross[ly] incompeten[t].” Id. at ¶ 24.
According to the Amended Complaint, Plaintiff is the current owner and holder of the
balance of the loan and is the “successor in interest of both the equitable and legal interest of the
underlying obligation and the appraisal upon which this action is based,” and did not discover the
errors in the Appraisal until February 25, 2014 when it conducted an “initial quality control
review.” Id. at ¶ 16-18.
Based on these facts, Plaintiff commenced this action on December 17, 2014, asserting
claims for professional negligence (Count I) and negligent misrepresentation (Count II). See id.
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at ¶¶ 26-35.
Both Counts contain the same allegations, stating that Defendant committed
professional negligence and negligent misrepresentation by: (i) failing to provide appraisals and
appraisal services that were prepared by appraisers with the experience and competence
necessary to provide a competent and accurate appraisal, (ii) failing to provide appraisals and
appraisal services that complied with USPAP and other applicable state and federal statutes and
regulations, and (iii) failing to provide appraisals and appraisal services that complied with
standards applicable to the appraisal and appraisal industry. Id. at ¶¶ 28, 33. Consequently,
Plaintiff alleges actual damages of $230,020.83, as well as actual and punitive damages for
Defendant’s actions in failing to comply with industry standards, as well as state and federal
statutes constituting negligence. Id. at ¶¶ 29-30, 34-35. On May 26, 2015, Defendant filed the
instant Motion seeking dismissal. Motion, ECF No. [15].
II. LEGAL STANDARD1
Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss lies for “failure to
state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A pleading in a civil
action must contain “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). To satisfy the Rule 8 pleading requirements, a complaint must
provide the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it
rests. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002). While the complaint “does not
need detailed factual allegations,” Rule 8 requires “more than labels and conclusions” and “a
formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (explaining
that the Rule 8(a)(2) pleading standard “demands more than an unadorned, the-defendant
1
Plaintiff’s recitation of the law on Rule 12(b)(6) requires updating. See Resp., ECF No. [20] at
4 (citing a variety of cases which predate Iqbal and Twombly by decades).
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unlawfully-harmed-me accusation”). Nor can a complaint rest on “naked assertion[s] devoid of
‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557
(alteration in original)). The Supreme Court has emphasized that “[t]o survive a motion to
dismiss a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570); see also Am. Dental
Assoc. v. Cigna Corp., 605 F.3d 1283, 1288-90 (11th Cir. 2010).
When reviewing a motion to dismiss, a court, as a general rule, must accept the plaintiff’s
allegations as true and evaluate all plausible inferences derived from those facts in favor of the
plaintiff. See Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012); Iqbal, 556 U.S.
at 678. “At a minimum, notice pleading requires that a complaint contain inferential allegations
from which [the court] can identify each of the material elements necessary to sustain a recovery
under some viable legal theory.” Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949, 960 (11th Cir.
2009) (quoting Snow v. DirecTV, Inc., 450 F.3d 1314, 1320 (11th Cir. 2006)).
III. DISCUSSION
Defendant moves to dismiss Plaintiff’s Amended Complaint for the following reasons:
(1) Plaintiff fails to state a claim for professional negligence, (2) Plaintiff fails to state a claim for
negligent misrepresentation, (3) Plaintiff’s negligent misrepresentation claim fails to satisfy the
heightened pleading requirement of Rule 9(b), and (4) Plaintiff’s claims are barred by the twoyear state of limitations. Motion, ECF No. [15] at ¶¶ 1-4. Defendant also moves for dismissal of
Plaintiff’s request for attorney’s fees. Id. at 10-11. The Court addresses these arguments in turn.
A. Plaintiff States a Claim for Professional Negligence.
To state a claim for professional negligence, Plaintiff must allege: (1) existence of a legal
duty, (2) breach of the duty, (3) proximate causation, and (4) actual loss. Curd v. Mosaic
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Fertilizer, 39 So. 3d 1216, 1227 (Fla. 2010); Trinidad & Tobago Unit Trust Corp. v. CB Richard
Ellis, Inc., 280 F.R.D. 676, 678 (S.D. Fla. 2012) (citation omitted). The duty of care in a
professional negligence claim generally exists between parties who are in privity of contract with
one another. See, e.g., Baskerville-Donovan Engineers, Inc. v. Pensacola Executive House
Condo. Ass’n, Inc., 581 So. 2d 1301, 1303 (Fla. 1991) (citing Angel, Cohen & Rogovin v.
Oberon Inv., N.V., 512 So. 2d 192 (Fla. 1987)) (“Clearly, privity between the parties may create
a duty of care providing the basis for recovery in negligence.”). However, if a duty of care is
established through other avenues, then lack of privity does not foreclose liability.
See
Baskerville-Donovan, 581 So. 2d at 1303 (citing First Florida Bank, N.A. v. Max Mitchell & Co.,
558 So. 2d 9 (Fla. 1990)).
Defendant contends that there is no proof of the assignment or Plaintiff’s interest in the
alleged loan and, therefore, “there are no alleged facts to support the element of any ‘duty’ owed
by the Defendant to the Plaintiff.” Mot., ECF No. [15] at 5. With regard to the assignment and
duty, Plaintiff only states that it is a successor in interest to the original lender, is the current
owner and holder of the balance of the loan, and is the “successor in interest of both the equitable
and legal interest of the underlying obligation and the appraisal upon which this action is based.”
Am. Compl., ECF No. [11] at ¶ 16-17. In order to survive dismissal pursuant to Fed. R. Civ. P.
12(b)(6), Plaintiff must plead sufficient facts to demonstrate a duty. Here, the duty Plaintiff
relies on is Defendant’s obligations regarding the Appraisal. Thus, any purported duty to
Plaintiff necessarily stems from an assignment of O’Brien’s interest. Plaintiff fails to indicate
the nature of the assignment.
Defendant’s argument in this respect is, in essence, one of standing, questioning whether
Plaintiff has the authority to bring this action as the real party in interest. Nevertheless, this
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Court cannot create a duty where a plausible allegation of one is lacking. “The validity of an
assignment is important for the purpose of determining ‘whether an action should be
dismissed.’” Univ. Creek Associates, II, Ltd. v. Boston Am. Fin. Grp., Inc., 100 F. Supp. 2d
1337, 1339 (S.D. Fla. 1998) (citing 6A Charles A. Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure § 1545 (2d ed. 1990)). “[T]he court must determine (1) exactly
what has been assigned to make certain that the plaintiff-assignee is the real party in interest, and
(2) that a valid assignment has been made.” Id. Specifically, “[w]here a question is raised as to
the validity of an assignment, ‘the party that relies on the assignment has the burden of proving
its existence and validity.’” Lady of Am. Franchise Corp. v. Nusom, No. 10-60994-CIV, 2011
WL 2457749, at *2 (S.D. Fla. June 16, 2011) (citing Simon v. Shearson Lehman Bros., Inc., 895
F.2d 1304, 1321 (11th Cir. 1990)) (dismissing a counterclaim for lack of proof regarding the
validity of assignment to the plaintiff). Further, “when the opposing party, by general challenge
or specific attack, denies the assignment’s existence or validity,” the validity or existence of
assignment must be proven by the assigner. Id.
In the Amended Complaint, Plaintiff merely notes that it “is a secondary market
participant and is successor in interest of [the] original lender,” and that it is “owner and holder
of the underlying obligation.” Amend. Compl., ECF No. [11] at ¶ 16. This is insufficient for the
Court to ascertain the nature of the assignment.
Plaintiff relies on Lehman Bros. Holdings v. Fearer in contending that proof of validity
of the assignment is unnecessary and irrelevant. See Lehman Bros. Holdings v. Fearer, No. 1260434-CIV, 2012 WL 6214438, at *2 (S.D. Fla. Dec. 13, 2012) (“The identities of the persons or
entities that hired Fearer to perform the appraisals or from whom Lehman Brothers purchased the
loans are not essential elements of a negligence claim.”). In Lehman Brothers, the plaintiff
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brought an action for negligence based on an appraiser’s overestimation of the value of three
properties. Id. at *1. The plaintiff was not the original lender but, rather, had obtained the
residential mortgage loans on the secondary mortgage market. Id. When the mortgages went
into default, the plaintiff suffered substantial losses because the loans were for more than the
actual value of the properties. Id. The defendant sought dismissal for several reasons, most
notably, on the basis that the complaint failed to allege “when and how [the plaintiff] came to
own the residential mortgage loans secured by the subject properties.” Id. at *2. The Court
denied dismissal on this basis, noting that plaintiff had alleged facts supporting its contention
that the defendant “owed a duty to conduct the appraisals with reasonable care.” Id.
Although Lehman Brothers is distinguishable in several respects it, nonetheless, remains
instructive. First, although not germane to the Court’s discussion therein, the plaintiff in Lehman
Brothers had explicitly stated that it acquired its interest in the mortgages by funding and
purchasing the loans on the secondary mortgage market. Id.; see also Lehman Bros. Holdings v.
Fearer, No. 12-60434-CIV, ECF No. [1] (Complaint at ¶¶ 5-10), (S.D. Fla. Mar. 8, 2012).
Accordingly, the complaint in Lehman Brothers contained allegations indicating the nature of the
plaintiff’s interest and how that interest gave rise to a duty. See Lehman Bros., No. 12-60434CIV, Complaint at ¶¶ 5-10 (“Plaintiff purchased the Loans [from the secondary market] in
reasonable reliance upon the truthfulness and accuracy of the Appraisals.”). Second, the timing
of Plaintiff’s acquisition of its interest is different than that of the plaintiff in Lehman Brothers.
The plaintiff in Lehman Brothers purchased its interest in the mortgages at issue prior to the
loans’ default. See Lehman Bros., No. 12-60434-CIV, Complaint at ¶ 12. On the other hand,
here, Plaintiff claims to have purchased its interest in the Subject Property subsequent to default.
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See Amend. Compl., ECF No. [11] at ¶¶ 15-17. These differences leave the Defendant and the
Court wondering what interest Plaintiff possesses.
Nevertheless, while questions may exist as to the precise nature of Plaintiff’s interest,
Plaintiff has pled facts which give rise to an inference of duty. See Lehman Bros., 2012 WL
6214438, at *2. Specifically, Plaintiff alleges that it has “acquired all right, title and interest” of
its predecessor and is a secondary market participant. Although the Court expresses concern
regarding the propriety of the assignment as it relates to this cause of action, these facts, taken as
true, are sufficient to survive a motion to dismiss.
“[A] [] complaint may proceed even if it
strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very
remote and unlikely.’” Twombly, 550 U.S. at 556. For these same reasons, the Court declines to
dismiss Count I of the Amended Complaint on any supposed deficiencies as to breach and
proximate cause. Count II, however, does not pass muster.
B. Plaintiff Fails to Meet the Heightened Pleading Standard for Count II
Defendant argues that Plaintiff fails to state a claim for negligent misrepresentation and
that the misrepresentation claim fails to satisfy the heightened pleading requirement of Fed. R.
Civ. P. 9(b). The Court agrees.
To state a claim for negligent misrepresentation in Florida, a plaintiff must allege: (1) a
misrepresentation of a material fact; (2) that the defendant made the representation without
knowledge as to its truth or falsity, or under circumstances in which he ought to have known of
its falsity; (3) that the defendant intended that the misrepresentation induce another to act on it;
(4) injury must result to the party acting in justifiable reliance on the misrepresentation. Souran
v. Travelers Ins. Co., 982 F.2d 1497, 1503 (11th Cir. 1993).
Because negligent
misrepresentation sounds in fraud, “Rule 9(b)’s heightened pleading standard applies.” Lamm v.
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State St. Bank & Trust, 749 F.3d 938, 951 (11th Cir. 2014) (citing Souran, 982 F.2d at 1511
(holding negligent misrepresentation sounds in fraud under Florida law)).
“In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.” Fed. R. Civ. P. 9(b). A plaintiff’s complaint must “offer more
than mere conjecture,” U.S. ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301,
1313 (11th Cir. 2002), and Rule 9 “requires that a complaint plead facts giving rise to an
inference of fraud,” W. Coast Roofing & Waterproofing, Inc. v. Johns Manville, Inc., 287 F.
App’x 81, 86 (11th Cir. 2008). Generally, Rule 9(b) is satisfied when “the complaint sets forth
(1) precisely what statements were made in what documents or oral representations or what
omissions were made, and (2) the time and place of each such statement and the person
responsible for making (or, in the case of omissions, not making) same, and (3) the content of
such statements and the manner in which they misled the plaintiff, and (4) what the defendants
obtained as a consequence of the fraud.” Clausen, 290 F.3d at 1310 (quoting Ziemba v. Cascade
Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001)). Rule 9(b) was enacted to “alert defendants to
the precise misconduct with which they are accused and to protect defendants from contrived
charges of fraudulent behavior.” Coquina Investments v. Rothstein, No. 10-60786-CIV, 2011
WL 197241, at *7 n.2 (S.D. Fla. 2011). Rule 9(b) is satisfied if the complaint “‘provide[s] a
reasonable delineation of the underlying acts and transactions allegedly constituting the fraud’
such that the defendants have ‘fair notice of the nature of plaintiff's claim and the grounds upon
which it is based.’” U.S. ex rel. Heater v. Holy Cross Hosp., Inc., 510 F. Supp. 2d 1027, 1033
(S.D. Fla. 2007) (quoting Mobil Oil Corp. v. Dade Cty. Esoil Mgmt., 982 F. Supp. 873, 878 (S.D.
Fla. 1997) (internal citations and quotations omitted)).
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Plaintiff pleads that Defendant knowingly misrepresented the value of the house in the
appraisal and that Defendant did so incompetently, inaccurately, and with disregard for USPAP
and other applicable standards. Am. Compl. ¶¶ 10, 11, 23, 24, 33, 34. These allegations
regarding the misrepresentations made by Defendant are insufficient under the heightened
pleading standard of Rule 9(b). Specifically, Plaintiff does not allege what statements in the
Appraisal report were misrepresented, when they were made, and how the misrepresentations
induced Plaintiff into acting on them. In essence, Plaintiff merely states that the Appraisal was
inaccurate. Accordingly, Plaintiff’s negligent misrepresentation claim is deficient and requires
additional specificity to survive Rule 9(b).
C. Statute of Limitations
Defendant moves for dismissal stating the two-year statute of limitations under Fla. Stat.
§ 95.11(4)(a) bars Plaintiff’s claims. Mot., ECF No. [15] at 9-10. “A statute of limitations bar is
an affirmative defense, and plaintiffs are not required to negate an affirmative defense in their
complaint.” La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004) (internal
quotations and citations omitted). “[D]ismissal on statute of limitations grounds is appropriate
only if it is apparent from the face of the complaint that the claim is time-barred.” Id. (internal
quotations omitted). “A cause of action accrues when the last element constituting the cause of
action occurs.”
Fla. Stat. § 95.031(1).
“The last element of a cause of action based on
negligence is actual loss or damage.” Lehman Bros. Holdings Inc. v. Phillips, 569 F. App’x 814,
817 (11th Cir. 2014).
Based on the face of the Complaint, Plaintiff’s claims accrued on the date of the
foreclosure, November 14, 2012. Am. Compl., ECF No. [11] at ¶ 14. The salient inquiry is
whether the applicable statute of limitations is two years under § 95.11(4)(a), or four years under
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§ 95.11(3)(a). Plaintiff contends the four-year statute of limitations for claims founded on
negligence under Fla. Stat. § 95.11(3)(a) applies because “Plaintiff did not allege that the
mortgagee and Defendant were in privity of contract so as to subject Plaintiff’s claims to section
95.11 4(a) [sic] two-year limitations period. Rather, [t]he lender did not personally contract for
the appraisal.
The mortgage, [sic] in whose shoes [] Plaintiff stands, was a third-party
beneficiary to that agreement.” Plaintiff’s Opposition to Defendant’s Motion, ECF No. [20] at 8.
In its pertinent part, § 95.11 states:
(4) WITHIN TWO YEARS.(a) An action for professional malpractice, other than medical malpractice,
whether founded on contract or tort; provided that the period of limitations shall
run from the time the cause of action is discovered or should have been
discovered with the exercise of due diligence. However, the limitation of actions
herein for professional malpractice shall be limited to persons in privity with the
professional.
Fla. Stat. § 95.11(4)(a) (emphasis added). According to Defendant, the nature of the assignment
dictates the applicable statute of limitations: “the assignment would establish privity to the extent
privity existed with the original lender.” Reply Brief, ECF No. [22] at 11 (citing Paul v. Kanter,
172 So. 2d 26, 27 (Fla. 3d DCA 1965) (“[A]n assignee of the lease . . . was in privity of estate
with the lessors.”)); see also Marion Mortgage Co. v. Grennan, 143 So. 761, 764 (finding privity
between the successive occupants and assignees of the property); Axiom Worldwide, Inc. v.
Excite Med. Corp., 591 F. App’x 767, 772 (11th Cir. 2014) (“These ‘relationships include, but
are not limited to, preceding and succeeding owners of property, bailee and bailor, and assignee
and assignor,’ and are sometimes described as ‘privity.’”) (emphasis in original) (quoting Taylor
v. Sturgell, 553 U.S. 880, 894 n.8 (2008)). It is extremely curious that Plaintiff seeks to be
considered an assignee for purposes determining duty, breach, and causation, but denies being
“in privity” for purposes of the statute of limitations. Based on Plaintiff’s allegations that it is
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successor in interest and “stands in the shoes of the mortgagee,” see Resp., ECF No. [20] at 2, it
is likely that Plaintiff is in privity, in which case the two-year statute of limitations would apply.
Yet, given the questions remaining concerning the nature of the assignment and Plaintiff’s status
as assignee, it is not apparent on the face of the Amended Complaint that the claims are timebarred. Accordingly, the Court cannot dismiss on this basis.
D. The Claim for Attorney’s Fees is Properly Pled.
Defendant moves for dismissal for failure to allege a substantive basis for Plaintiff’s
request for attorney’s fees. Motion, ECF No. [15] at 10-11. Defendant states that Plaintiff
insufficiently requests attorney’s fees because Plaintiff does not “set forth any statutory or
contractual basis for such a claim.” Id. Defendant mischaracterizes the Florida Supreme Court’s
decision in Stockman v. Downs claiming that the statutory or contractual basis for the claim must
be pled, when the Court truly meant that the claim for attorney’s fees, not its basis, must be pled.
See Stockman v. Downs, 573 So. 2d 835 (Fla. 1991). The Florida Supreme Court has since
clarified this, stating “[s]pecific statutory or contractual basis for claim for attorney fees need not
be specifically pled, and failure to plead specific basis of such claim does not result in waiver of
claim.” Caufield v. Cantele, 837 So. 2d 371, 377 (Fla. 2002). Accordingly, Defendant’s request
that Plaintiff’s claim attorney’s fees be dismissed is denied.
IV. CONCLUSION
For the foregoing reasons, it is hereby ORDERED AND ADJUDGED that the Motion,
ECF No. [15], is GRANTED in part and DENIED in part. The Motion is GRANTED with
regard to Count II (Negligent Misrepresentation), but DENIED in all other respects. Plaintiff
shall file a Second Amended Complaint on or before August 15, 2015. Failure to file a Second
Amended Complaint by the aforementioned date will result in abandonment of Count II.
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DONE AND ORDERED in Fort Lauderdale, Florida, this 5th day of August, 2015.
__________________________________________
BETH BLOOM
UNITED STATES DISTRICT JUDGE
Copies to:
Counsel of Record
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