DEABAY et al v. PHILADELPHIA INDEMNITY INSURANCE COMPANY
Filing
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ORDER denying 8 Motion to Dismiss for Failure to State a Claim; denying 8 Motion to Dismiss; granting 12 Motion to Amend. By JUDGE NANCY TORRESEN. (rmb)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
CHAD DEABAY and DEABAY
OUTDOORS, INC. d/b/a OXBOW
LODGE,
Plaintiffs,
v.
PHILADELPHIA INDEMNITY
INSURANCE COMPANY,
Defendant.
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) Docket No. 1:15-cv-35-NT
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ORDER ON DEFENDANT’S MOTIONS TO DISMISS PLAINTIFFS’
COMPLAINT AND TO AMEND REPLY
This case arises out of a dispute between an insured party and an insurance
company following the total fire loss of a hunting lodge. The Plaintiffs Chad Deabay
and Deabay Outdoors, Inc. d/b/a Oxbow Lodge brought suit in this court alleging
various claims based on Defendant Philadelphia Indemnity Insurance Company’s
failure to make payments expeditiously pursuant to its insurance contract with the
Plaintiffs. The Defendant in turn has moved to dismiss this suit based on the fact
that there is a separate action, involving the same set of facts, pending in Aroostook
County Superior Court.1
The Defendant has asked this court to dismiss the Plaintiffs’ suit based on principles of
abstention. However, dismissal on abstention grounds is not permissible for suits seeking damages.
See DeMauro v. DeMauro, 115 F.3d 94, 98 (1st Cir. 1997) (citing Quackenbush v. Allstate Ins. Co., 517
U.S. 706 (1996)) (“[I]n a damages action, the district court may only order a stay pending resolution of
state proceedings; it cannot invoke abstention to dismiss the suit altogether.”). In light of the fact that
abstention is a prudential issue that this court may consider sua sponte, see Ford Motor Co. v. Meredith
Motor Co., 257 F.3d 67, 71 n. 3 (1st Cir. 2001), I consider the Defendant’s motion as a motion to stay
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The Defendant has also moved to supplement its reply memorandum to include
an April 28, 2015 order from the Superior Court. I GRANT the Defendant’s motion
to supplement and therefore consider the order (though consideration of this order
does not change my ruling on the motion to dismiss).
As explained below, there are no factors present in this case that overcome the
strong presumption in favor of the exercise of federal jurisdiction.2 For this reason, I
DENY the Defendant’s motion to dismiss.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Chad Deabay is the sole shareholder of Deabay Outdoors, Inc., a Maine
corporation that owns and operates a guided hunting business and sporting camp in
Oxbow, Aroostook County, which includes the Oxbow Lodge.
Pls.’ Compl. (“Fed.
Compl.”) ¶¶ 2, 3, 9 (ECF No. 1); Def.’s Mot. to Dismiss (“Def.’s Mot.”) 3 (ECF. No.
8). On or about December 14, 2013, a fire destroyed the Oxbow Lodge’s main building,
including the guest quarters. Pls.’ Compl. (“Fed. Compl.”) ¶¶ 2, 3, 9 (ECF No. 1);
Def.’s Mot. to Dismiss (“Def.’s Mot.”) 3 (ECF. No. 8). At the time of the fire, Deabay
Outdoors was insured under a policy through Philadelphia Indemnity Insurance
Company (“Philadelphia Insurance”), however, the parties disputed what
expenses were covered under the policy provision for recouping “Extra Expenses”
the Plaintiffs’ suit pending resolution of the state proceedings, and address the Defendant’s arguments
regarding abstention accordingly.
The parties do not dispute that this court has jurisdiction over all claims in the suit under 28
U.S.C. § 1332 (diversity jurisdiction).
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following a loss. Fed. Compl. ¶ 14; Pls.’ Compl. for Declaratory J. (“State Compl.”)
4-5 (ECF No. 8-1); Def.’s Mot. 3.
On August 14, 2014, Deabay Outdoors filed a declaratory judgment action in
Aroostook County Superior Court seeking a determination of what is covered under
the “Extra Expenses” provision. State Compl. 4-5. Philadelphia Insurance filed a
counterclaim seeking a determination of whether Deabay Outdoors had complied
with its obligations under the insurance agreement on the grounds that Deabay
Outdoors has failed to assist in the insurance company’s investigation of the fire. See
Def.’s Answer and Countercl. (ECF No. 8-4). In late 2014, Deabay Outdoors asked
the state court to narrow the scope of discovery, a request which was subsequently
denied. Def.’s Mot. at 5-6; Pls.’ Resp. in Opp’n (“Pls. Resp.”) (ECF No. 10) at 3-4. On
January 23, 2015, Chad Deabay and Deabay Outdoors filed suit in this court,
asserting that Philadelphia Insurance had failed to make payments on Deabay
Outdoors’ insurance claims arising from the fire and thereby: (1) breached the
insurance contract with the Plaintiffs (Count I); (2) violated the Unfair Claim
Settlement Practices Act, 24-A M.R.S.A. §§ 2436, 2436-A (Count II); and (3) breached
the covenant of good faith and fair dealing (Count III). Philadelphia Insurance has
moved to dismiss all three claims.3
On April 28, 2015, the Superior Court denied Deabay Outdoors’ motion to stay the state case
until this court rules on the Defendant’s motion to dismiss. See Ex. 1 to Def.’s Mot. to Support its
Reply Mem. (ECF No. 12-1).
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STANDARD OF REVIEW
I consider the Defendant’s motion in light of this court’s “inherent power to
stay proceedings for prudential reasons.” Microfinancial, Inc. v. Premier Holidays
Int’l, Inc., 385 F.3d 72, 77 (1st Cir. 2004); see Curtis v. Citibank, N.A., 226 F.3d 133,
138 (2d Cir. 2000) (explaining that, in context of potential claim splitting, “[a]s part
of its general power to administer its docket, a district court may stay or dismiss a
suit that is duplicative of another federal court suit.”). In doing so, I am not limited
by the pleading or burden requirements of Rules 12(b)(1) or 12(b)(6). See Kilroy v.
Mayhew, 841 F. Supp. 2d 414, 416-17 (D. Me. 2012); see also Christian Action Network
v. Maine, 679 F. Supp. 2d 140, 143 n. 2 (D. Me. 2010). I also consider the whole record
(including the parties’ pleadings and the attached documents the authenticity of
which are not in dispute) to determine whether it is appropriate to stay this case
during the pendency of the state court proceedings. Kilroy, 841 F. Supp. 2d 416-17.4
DISCUSSION
The Defendant makes two arguments: (1) that dismissal is warranted because,
by filing this case while a state action is pending on the same matter, the Plaintiffs
are engaging in impermissible “claim splitting”; and (2) that this court should abstain
from exercising jurisdiction as a prudential matter in light of the pending state court
In any case, I may take judicial notice of the proceedings in state court that underlie the
Defendant’s “claim splitting” and abstention arguments. See Kowalski v. Gagne, 914 F.2d 299, 305
(1st Cir. 1990) (“It is well-accepted that federal courts may take judicial notice of proceedings in other
courts if those proceedings have relevance to the matters at hand.”).
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action. For the following reasons, neither argument carries the day.
I.
Claim Splitting
The Defendant’s allegations of impermissible “claim splitting” are inapposite
to the facts at hand. “Claim splitting” is impermissible in situations “in which the
plaintiff seeks ‘to maintain two actions on the same subject in the same court, against
the same defendant at the same time.’” Clayton v. District of Columbia, 36 F. Supp.
3d 91, 94 (D.D.C. 2014) (quoting Katz v. Gerardi, 655 F.3d 1212, 1217 (10th Cir.
2011)) (emphasis added). Dismissal may be appropriate when the plaintiff is trying
to maintain two actions in federal court, because “[a]s between federal district courts
. . . the general principle is to avoid duplicative litigation.” Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). By contrast, it is well
established that “as between state and federal courts, the rule is that the pendency of
an action in the state court is no bar to proceedings concerning the same matter in
the Federal court having jurisdiction.”
omitted) (emphasis added).
Id. (internal quotation marks and citations
The “difference in general approach between state-
federal concurrent jurisdiction and wholly federal concurrent jurisdiction stems from
the virtually unflagging obligation of the federal courts to exercise the jurisdiction
given them.” Id.
The Defendant’s reliance on the Tenth Circuit case Katz v. Gerardi is mistaken.
See Kanciper v. Suffolk Cnty. Soc. for the Prevention of Cruelty to Animals, Inc., 722
F.3d 88, 92 (2d Cir. 2013) (“The District Court’s reliance on Katz (and, indeed, on
claim splitting generally) was erroneous, however, because the previously filed case
in this litigation was not filed in the same [federal] district court but in a different
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state court.”) (internal quotation marks and citations omitted); Klane ex rel. Klane v.
Mayhew, Civil No. 1:12-cv-203-NT, 2013 WL 1245677, at *5 (D. Me. Mar. 26, 2013)
(stating, in reviewing defendant’s argument that plaintiff was impermissibly
splitting his claims in situation involving state-federal concurrent proceedings, that
“[t]he cases cited by the Defendant are not persuasive because they involve claims
that were split within the same court.”). Because the present case involves statefederal concurrent proceedings, the Defendant’s “claim splitting” argument is
unavailing.
II.
Abstention
The Defendant also argues that this court should abstain from exercising
jurisdiction under the doctrine of Colorado River abstention. Federal courts “have a
virtually unflagging obligation to exercise the jurisdiction given them.” Chico Serv.
Station, Inc. v. Sol P.R. Ltd., 633 F.3d 20, 29 (1st Cir. 2011) (internal quotation marks
and citations omitted). In Colorado River, the Supreme Court held that federal courts
may abstain from exercising jurisdiction because of a concurrent, “parallel” state
proceeding.5
Abstention is appropriate, however, only in rare circumstances. “The crux of
the Colorado River doctrine is the presence of ‘exceptional’ circumstances displaying
‘the clearest of justifications’ for federal deference to the local forum in the interest of
I accept, for the purposes of deciding this motion, that the state and federal suits are “parallel”
proceedings, as all of the Plaintiffs’ claims in both suits arise from the fire and involve interpretation
of the insurance documents. See Britton v. Britton, 223 F. Supp. 2d 276, 283 (D. Me. 2002) (For
purposes of Colorado River abstention, “[s]uits are parallel where substantially the same parties
litigate substantially the same issues in the state and federal forums.”). The fact that Chad Deabay
is a plaintiff in the federal suit and a party-in-interest in the state suit does not change the analysis.
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‘wise judicial administration, giving regard to conservation of judicial resources and
comprehensive disposition of litigation.’ ” Nazario-Lugo v. Caribevisión Holdings,
Inc., 670 F.3d 109, 115 (1st Cir. 2012) (quoting Colorado River, 424 U.S. at 817-19).
Mere “[d]uplication and inefficiency are not enough to support a federal court’s
decision to bow out of a case over which it has jurisdiction.” Villa Marina Yacht Sales,
Inc. v. Hatteras Yachts, 915 F.2d 7, 13 (1st Cir. 1990). Instead, to determine whether
“exceptional circumstances” are present, courts in this circuit consider a nonexclusive list of factors, including:
(1) Whether either court has assumed jurisdiction over a res; (2) the
[geographical] inconvenience of the federal forum; (3) the desirability of
avoiding piecemeal litigation; (4) the order in which the forums obtained
jurisdiction; (5) whether state or federal law controls; (6) the adequacy
of the state forum to protect the parties’ interests; (7) the vexatious or
contrived nature of the federal claim; and (8) respect for the principles
underlying removal jurisdiction.
Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397 F.3d 56, 71-72 (1st Cir. 2005)
(quoting KPS & Associates, Inc. v. Designs by FMC, Inc., 318 F.3d 1, 10 (1st Cir.
2003)).
In considering these factors, I must keep in mind the “heavy presumption
favoring the exercise of jurisdiction.” Villa Marina Yacht Sales, 915 F.2d at 13; see
also Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 16 (1983)
(consideration of factors must be “heavily weighted in favor of the exercise of
jurisdiction”); KPS & Associates, 318 F.3d at 10 (same). The abstention analysis is
not a mechanical exercise, Moses H. Cone, 460 U.S. at 16, and the “weight to be given
any given factor depends on the circumstances at hand.” Nazario-Lugo, 670 F.3d at
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115. Considering the factors in this case, I conclude that abstention is not warranted.6
A.
Factor (3) -- Avoiding Piecemeal Litigation
The Defendant’s argument that “litigating these claims in two different forums
creates a surefire risk of piecemeal litigation,” Def.’s Mot. 14, makes some intuitive
sense. However, it is well established that district courts “must look beyond the
routine inefficiency that is the inevitable result of parallel proceedings to determine
whether there is some exceptional basis for requiring the case to proceed entirely” in
state court. Villa Marina Yacht Sales, 915 F.2d at 16; see also Rojas-Hernandez, 925
F.2d at 496 (“[S]uch inefficiency as results merely from a duplication of effort will not,
by itself, justify the surrender of federal jurisdiction. Rather, the narrow exception
exists only where piecemeal adjudication gives rise to special complications.”).
Accordingly, courts have noted whether “special complications” beyond mere
inefficiency are present when analyzing the piecemeal litigation factor. See, e.g.,
Rojas-Hernandez, 925 F.2d at 496-97 (noting absence of severe prejudice to one of the
I pass quickly over factor 1 because there is no res at stake, and factor 2 because the
inconvenience of Caribou (state court) versus Bangor (federal court) is negligible considering that the
Defendant is a corporation headquartered in Pennsylvania with counsel based in Portland, Maine. See
Burns v. Watler, 931 F.2d 140, 147 (1st Cir. 1991) (“We are of the opinion … that a two-hour drive does
not denote a degree of inconvenience that should significantly influence the question of whether the
proceedings in the federal court should be stayed.”); see also Britton v. Britton, 223 F. Supp. 2d at 284
(“Defendant argues that the Federal Court sitting in Bangor, Maine is inconvenient, as both parties
reside in Houlton, Maine. The Court notes that [the] two forums are separated by approximately 120
miles along Interstate 95 and does not consider this direct commute so inconvenient as to warrant
weighing any resulting travel difficulties in Defendant's favor.”). Factor 6 also has no great bearing
in this case because I am denying the motion to dismiss. This factor has its greatest importance when
determining whether abstention would prejudice either party because of the inadequacy of the state
forum. See Rojas-Hernandez v. Puerto Rico Elec. Power Auth., 925 F.2d 492, 496 (1st Cir. 1991) (“[T]he
adequacy of the state forum [ ] operates against the surrender of jurisdiction only where the state
forum may not be adequate to adjudicate the claims.”); see also Currie v. Grp. Ins. Comm’n, 290 F.3d
1, 12 (1st Cir. 2002) (noting that abstention under Colorado River “is appropriate only where the
parties may obtain complete relief in the state court proceedings”).
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parties from concurrent proceedings); Burns, 931 F.2d at 146 (noting only slim
possibility of “harsh, contradictory or unfair consequences”); Colorado River, 424 U.S.
at 819 (noting presence of legislation evincing a “clear federal policy” of “avoidance of
piecemeal adjudication of water rights”); Jiménez v. Rodríguez-Pagán, 597 F.3d 18,
29-30 (1st Cir. 2010) (noting that absence of non-diverse parties from federal
litigation raised potential for “fragmented adjudication, to be distinguished from
merely duplicative adjudication,” that would not provide the comprehensive
disposition already underway in state court); Rivera-Feliciano v. Acevedo-Vilá, 438
F.3d 50, 62 (1st Cir. 2006) (noting presence of underlying, unresolved, and controlling
issues of Puerto Rico law that could render federal court opinion merely advisory);
Liberty Mut. Ins. Co. v. Foremost-McKesson, Inc., 751 F.2d 475, 477 (1st Cir. 1985)
(noting that possibility of inconsistent interpretations of insurance contract would
severely prejudice the rights of one of the parties).
This case raises none of these exceptional bases for abstention.
While
concurrent proceedings in this matter may well be inefficient, these inefficiencies
raise no serious concerns of prejudice. And normal principles of res judicata will
apply to reconcile any possible inconsistencies that may emerge from the concurrent
proceedings. See, e.g., Huffmire v. Boothbay, 35 F. Supp. 2d 122, 128 (D. Me. 1999)
(“Generally, inconsistent rulings by state and federal courts will not present unfair
contradictions in the same case because a decision issued in one court will bind the
other court under the doctrine of res judicata.”). For these reasons, this factor does
not suggest that abstention is appropriate.
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B.
Factor (4) -- Order in Which Forums Obtained Jurisdiction
This factor “should not be measured exclusively by which complaint was filed
first, but rather in terms of how much progress has been made in the two actions.”
Moses H. Cone, 460 U.S. at 21. With this in mind, I note that the state case has
already moved into the discovery phase, while the case in this Court is just out of the
starting gate (the Defendant filed the motion to dismiss before even filing an answer).
See Colorado River, 424 U.S. at 820 (considering “the apparent absence of any
proceedings in the District Court, other than the filing of the complaint, prior to the
motion to dismiss.”). Because the state court’s “head start into the merits lessens
[this court’s] need to exercise jurisdiction,” Rodríguez-Pagán, 597 F.3d at 31, this
factor weighs in favor of abstention. However, I am disinclined to give this factor
much weight considering that the discovery process in state court is not far advanced
and the federal case could conceivably catch up to, or overtake, the state proceeding.
C.
Factor (5) -- Whether State or Federal Law Controls
All of the Plaintiffs’ claims turn on state law (there is no federal question). But
that is not enough to weigh in favor of abstention. See Villa Marina Yacht Sales, 915
F.2d at 15 (“Both the federal and Commonwealth cases involve only Commonwealth
law, but this factor does not necessarily counsel in favor of dismissal.”). Rather, the
First Circuit has held that “[i]t is only in rare instances that the presence of statelaw issues creates any momentum toward deferring to pending local litigation under
the Colorado River doctrine.” Nazario-Lugo, 670 F.3d at 118 (quotation marks
omitted). Those rare instances involve complex or unsettled issues of state law;
instances where it will be easier to answer federal law questions once state law
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questions are settled; or instances where important state policy interests are
implicated. See Currie, 290 F.3d at 11.
By contrast, on the present record, the current dispute involves relatively
straightforward questions of state law and does not implicate broader state policy.
Considering that “there is nothing extraordinary about federal courts being called
upon to analyze the law of different jurisdictions,” Nazario-Lugo, 670 F.3d at 118, I
do not see this “garden variety” diversity suit as presenting the types of issues that
would warrant abstention. See id. (“[T]he district court did not suggest that this
simple contract case involving settled local law constituted [a rare instance], and the
appellee has not persuaded us.”); see also KPS & Associates, 318 F.3d at 11 (“[T]his
dispute between a vendor and its sales representative over sales commissions
presents a straightforward application of state … laws, and is of primary importance
only to the immediate parties.”) (internal quotation and citation omitted); see also
Rojas-Hernandez, 925 F.2d at 496 (“Although the case involves only issues of
commonwealth law, the same would be true of any case in which federal jurisdiction
is based on diversity . . . . The suit involves a relatively straightforward claim for
damages under Puerto Rico tort law—the issue is neither unsettled nor complex.”).
For this reason, this factor does not suggest that abstention is appropriate.
D.
Factor (7) -- The Vexatious or Contrived Nature of the Federal
Claim
A plaintiff’s motivation for bringing a concurrent lawsuit in federal court is an
appropriate consideration under Colorado River. See Villa Marina Yacht Sales, 915
F.2d at 15. If the plaintiff “went to federal court solely in reaction to its failure in the
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[state] court, that fact should be held against it in the Colorado River balance.” Id.;
see also Rio Grande Cmty. Health Ctr., 397 F.3d at 72 (“[W]e note that the federal
action was not filed or pursued as a reaction to an adverse state court action, which
would be a factor that weighs heavily in favor of abstention.”). “Reactive” lawsuits
are a concern because they raise the “discomforting specter of forum-shopping.”
Bacardí Intern. Ltd. v. V. Suárez & Co., Inc., 719 F.3d 1, 15 (1st Cir. 2013) (internal
citation omitted).
In this case, the Defendant argues that the federal lawsuit was filed in reaction
to the Plaintiffs’ lack of success at limiting the scope of discovery in the state case.
Indeed, the Plaintiffs seem to admit to a reactive motivation when they state that
“[g]iven the prospect of facing eight months of discovery on counterclaims for
declaratory judgment, neither of which would be dispositive of the overall insurance
claim, Plaintiff[s] decided to sue for breach of contract [in the district court].” Pls.’
Resp. at 4. But it is hard to discern forum-shopping in the Plaintiffs’ actions. They
will likely be subject to the same scope of discovery in a federal case (indeed, their
federal claims are broader than their declaratory judgment request in the state suit).
And, absent a protective order, materials produced in one case could be used in the
other.
Nor, on the present record, are the Plaintiffs’ actions clearly “vexatious”
(beyond the ordinary vexatiousness of any lawsuit). Because I decline to speculate
about the Plaintiffs’ motivations in the absence of any clear indication of forum-
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shopping or abuse of process, this factor does not suggest that abstention is
appropriate.7
E.
Factor (8) -- Respect for the Principles Underlying Removal
Jurisdiction
Finally, courts in this circuit have considered whether a plaintiff’s filing of a
concurrent lawsuit in federal court violates removal principles by working a de facto
removal, even though the right to remove a state court case to federal court is limited
to defendants under 28 U.S.C. § 1441. See Huffmire, 35 F. Supp. 2d at 130; Villa
Marina Yacht Sales, 915 F.2d at 14. However, this concern applies with less force
where the plaintiff’s claims in both courts are not identical. See Villa Marina Yacht
Sales, 915 F.2d at 14 (suggesting that this factor is less weighty where plaintiff’s
claims in federal court “do[ ] not duplicate the claims that it filed in [state] court.”)
(emphasis omitted). Given that the state court suit seeks a declaratory judgment,
and the federal suit seeks damages based on broader claims, at best this factor weighs
only slightly in favor of abstention.
I also decline to find that the Plaintiffs’ claims are “contrived” because they could have been
brought in state court. The case law suggests that “forum-shopping” based on an adverse state court
decision is the main concern, not the plaintiff’s choice to file in both state and federal court. See, e.g.,
Huffmire, 35 F. Supp. 2d 130 (“Here, the state and federal suits are identical and were filed on the
same day. This is, thus, not a clear example of reactive litigation such as where a plaintiff responds
with a federal filing in response to an adverse ruling in state court . . . . Accordingly, this factor . . .
weighs in favor of deciding not to abstain.”).
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F.
Summary of Factors
After considering all the factors outlined above, I conclude that there are no
“exceptional circumstances” in this case that overcome the presumption in favor of
exercising jurisdiction. Therefore, abstention is inappropriate.
CONCLUSION
For the foregoing reasons, I GRANT the Defendant’s motion to supplement its
reply, and DENY the Defendant’s motion to dismiss the Plaintiffs’ complaint.
SO ORDERED.
/s/ Nancy Torresen
United States Chief District Judge
Dated this 1st day of July, 2015.
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