Heng Ren Investments LP v. Sinovac Biotech Ltd., et al.
Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: For the foregoing reasons, the motion of defendant Sinovac Biotech Ltd. to dismiss the complaint (Docket No. 28 ) is DENIED without prejudice. So ordered. (Vieira, Leonardo)
United States District Court
District of Massachusetts
Heng Ren Investments LP,
Sinovac Biotech Ltd., et al.,
Civil Action No.
MEMORANDUM & ORDER
This action arises out of a public investment in private
equity transaction (“the PIPE transaction”) in which nearly 12
million new shares of Sinovac Biotech Ltd. (“Sinovac” or
“defendant”) stock allegedly were issued and sold to two private
investors affiliated with Sinovac’s founder and Chief Executive
Officer (“CEO”), Weidong Yin (“Yin”), at below-market price.
Sinovac contends that proper service has not been made with
respect to Yin and that counsel for the company does not
currently appear on his behalf.
Plaintiff Heng Ren Investments LP (“Heng Ren” or
“plaintiff”) submits that the PIPE transaction was intended to
dilute the shares of minority shareholders and divest them of
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Accordingly, in May, 2019, it filed this action
in Massachusetts Superior Court for breach of fiduciary duty and
wrongful equity dilution.
In July, 2019, defendant Sinovac removed the action to this
Court based on diversity jurisdiction and designated it as
related to another lawsuit that it had initiated in this Court:
Sinovac Biotech Ltd. v. 1Globe Capital LLC et al. (“1Globe”),
No. 18-cv-10421-NMG (D. Mass., filed Mar. 5, 2018).
before the Court is Sinovac’s motion to dismiss for lack of
personal jurisdiction, failure to state a claim and forum non
For the reasons that follow, that motion will be
A. The Parties
Heng Ren is a Boston-based Massachusetts limited
partnership and a minority shareholder of Sinovac.
Sinovac is a
NASDAQ-listed, publicly-traded biopharmaceutical company that is
incorporated in Antigua, West Indies and has its principal place
of business in Beijing, China. 1
The company researches,
develops, manufactures and commercializes vaccines for a variety
Due to other litigation challenging the legality of the PIPE
transaction in 2019, NASDAQ has halted all trading in Sinovac
stock for more than two years.
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of diseases, including polio, mumps and COVID-19.
allegedly founded by Yin, who currently serves as Sinovac’s
Chairman, President and CEO.
B. The Facts
Plaintiff contends that, since at least 2016, Yin and a
group of allied investors (“the Yin Group”) have “colluded” to
“take complete control of Sinovac on the cheap”.
asserts that, in January, 2016, the Yin Group submitted to the
board of directors a bid to acquire all of Sinovac’s shares at
below market value in a “going private” transaction.
was later rescinded, however, because other Sinovac investors,
together with Sinobioway Group Co. Ltd. (“Sinobioway”), a large,
publicly-traded Chinese company, had engineered a counter-offer
at a higher price per share.
In March, 2017, Yin purportedly caused Sinovac’s board of
directors to adopt a “Rights Agreement” which Heng Ren maintains
was designed to ensure Yin’s control over the company.
Specifically, Heng Ren claims that the Agreement included a
“poison pill” provision whereby, if any group of stockholders
holding 15% or more of Sinovac’s stock entered into an agreement
to vote their shares in unison, the board would “massively
dilute all such stockholders”.
Plaintiff asserts that the
provision was used as a shield to prevent other investors from
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effectively mounting another competing bid against the Yin
In June, 2017, Sinovac announced that it had entered into a
definitive agreement with the Yin Group whereby the latter would
acquire the company by purchasing all of Sinovac’s shares
(purportedly at below market value).
Two days later, Sinobioway
submitted a revised counter-proposal to acquire all of the
shares of Sinovac at a 14.9% premium over the purchase price
offered by the Yin Group.
In response, Sinovac once again
retracted the agreement and apparently Yin rejected Sinobioway’s
Heng Ren further alleges that, in or about April, 2018, Yin
and Sinovac received positive clinical trial results with
respect to a new polio vaccine which they concealed from the
public in order to deflate the company’s stock price.
same time, the company had apprised two private investors, Vivo
Capital, LLC (“Vivo”) and Advantech Capital Partners, Ltd.
(“Advantech”), of the vaccine’s success.
In July, 2018, Sinovac
announced that it had issued nearly 12 million shares of its
stock in a PIPE transaction with Vivo and Advantech.
contends that the investors were members of the Yin Group who
purchased the shares at a discounted price in a further attempt
by Yin to gain control of the corporate defendant at below
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market value and to dilute the voting interest of minority
Plaintiff avers that, since then: 1) a multitude of
domestic and international litigation has caused NASDAQ to halt
the trading of Sinovac’s shares, 2) as a consequence, there is a
“staggering amount of value locked up in Sinovac’s illiquid
shares” and 3) Heng Ren has been unable to access its investment
in the company, thereby causing the partnership to sustain
losses and suffer direct damages.
C. The “Related” Action
In March, 2018, Sinovac filed in this Court a complaint
against the Chiang Li family and 1Globe Capital LLC (“1Globe”),
a company controlled by that family and one of Sinovac’s largest
Sinovac seeks to enjoin 1Globe from electing a
new board of directors, acquiring additional Sinovac shares and
voting its existing Sinovac shares.
In response, 1Globe filed counter-claims for securities
fraud and abuse of process in May, 2018.
It alleges, just as
does Heng Ren, that, beginning in 2016, Yin and other members of
the then-board of directors (“the Old Board”) have caused
Sinovac to undertake a series of acts to maintain its control
over the company.
In addition to the failed attempts by Yin to
acquire all of Sinovac’s shares at below market value, 1Globe
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asserts that the Old Board refused to relinquish management and
control of the corporation, although it had been voted out of
office by a majority of the shareholders (including 1Globe) at
an annual meeting held in February, 2018 (“the February
Moreover, 1Globe maintains that Sinovac brought the
underlying complaint for the ulterior purpose of entrenching the
Old Board and furthering Yin’s illicit attempt to acquire
control of the company.
In August, 2018, one month after the PIPE transaction,
1Globe amended its counter-claims and also moved for a
preliminary injunction to enjoin the Old Board from “illegally”
issuing the stock it intended to issue to the private investors
pursuant to the PIPE transaction.
In support of that motion,
1Globe argues that the transaction violates federal securities
law because it was done without the authorization of the
legitimate board of directors (i.e., the new board that was
elected in February, 2018) and was part of a fraudulent scheme
to “prop up” the Old Board.
In October, 2018, this Court denied 1Globe’s motion for a
preliminary injunction for lack of standing and failure to
demonstrate irreparable harm.
That case is currently stayed due
to the interminably unresolved appeal of yet another related
case in the Eastern Caribbean Supreme Court in the High Court of
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Justice, Antigua and Barbuda (“the Antiguan Court”), 1Globe
Capital, LLC, and Sinovac Biotech Ltd. (Claim No. ANUHCV
Motion to Dismiss
Lack of Personal Jurisdiction
Defendant Sinovac asserts that it is not subject to
personal jurisdiction in Massachusetts because it has no
meaningful contacts with the Commonwealth and none of its
business is conducted there.
It adds that this action is
“wholly distinct” from 1Globe because this case arises from the
PIPE transaction which took place nearly four months after
Sinovac initiated the lawsuit against 1Globe.
Plaintiff responds that regardless of Sinovac’s prior
contacts with Massachusetts, if any, defendant has waived its
personal jurisdiction defense by initiating a related lawsuit in
Plaintiff submits that Sinovac marked the instant
action as related to 1Globe when it filed its notice of removal
in this case.
It also asserts that both actions
involve attempts by investors to stop the PIPE Transaction,
a dilutive, self-serving sale of Sinovac shares at an
unfairly low price [and] allege a long-running scheme by
Defendants to depress the value of Sinovac’s shares in
order to buy shares on the cheap and tighten Yin’s control
of the Company – allowing a future windfall.
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For those reasons, Heng Ren suggests that the two cases share a
common nucleus of operative facts.
1. Legal Standard
On a motion to dismiss for lack of personal jurisdiction
pursuant to Fed. R. Civ. P. 12(b)(2), the plaintiff bears the
burden of showing that the Court has authority to exercise
jurisdiction over defendants. Cossart v. United Excel Corp., 804
F.3d 13, 18 (1st Cir. 2015).
Where, as here, the Court will
decide a motion to dismiss for lack of personal jurisdiction
without first holding an evidentiary hearing, the Court applies
the “prima facie” standard of review and takes the plaintiff’s
properly documented evidentiary proffers as true and
construe[s] them in the light most favorable to
[plaintiff’s] jurisdictional claim.
A Corp. v. All Am. Plumbing, Inc., 812 F.3d 54, 58 (1st Cir.
A plaintiff cannot, however, rely on “unsupported
allegations” and “must put forward evidence of specific facts to
demonstrate jurisdiction exists.” Id. (internal citations
omitted); see also Philips v. Prairie Eye Center, 530 F.3d 22,
26 (1st Cir. 2008) (explaining that, in order for a plaintiff to
make a prima facie showing of jurisdiction, it “ordinarily
cannot rest upon the pleadings but is obliged to adduce evidence
of specific facts.”).
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In a diversity suit, this Court acts as “the functional
equivalent of a state court sitting in the forum state.” See
Astro–Med, Inc. v. Nihon Kohden America, Inc., 591 F.3d 1, 8
(1st Cir. 2009).
As such, to make a prima facie showing of
personal jurisdiction in diversity cases, the plaintiff must
typically demonstrate that the exercise of jurisdiction 1) is
statutorily permitted and 2) coheres with the Due Process Clause
of the Fourteenth Amendment of the United States Constitution.
Those requirements, however, “may be obviated by the
defendant’s consent to the court’s jurisdiction”. Marron v.
Whitney Group, 662 F. Supp. 2d 198, 200 (D. Mass. 2009).
where “the defendant has voluntarily submitted [it]self to the
jurisdiction of the forum state”, a court may bypass the typical
jurisdictional analysis. Id.
A defendant manifests such consent
by, inter alia,
failing to raise a jurisdictional defense in a timely
manner, by expressing acquiescence to the forum, or by
impliedly submitting to the jurisdiction through conduct.
Id. (citing Gen. Contracting & Trading Co. v. Interpole, 940
F.2d 20, 22 (1st Cir. 1991)).
A defendant who initiates another
lawsuit in the forum state impliedly submits to that forum’s
jurisdiction with respect to all actions “arising from the same
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nucleus of operative facts, or sharing the same transactional
This Court concludes that Sinovac has submitted to the
jurisdiction of this Court because it filed a case in this
district which arises from the same nucleus of operative facts
as the instant action.
is obligated to construe the facts in a light most
favorable to the [ ] Plaintiff[’s] jurisdictional claim,
whether or not [ ] Defendant disputes those facts.
Marron, 662 F. Supp. 2d at 201.
So construing the facts alleged
herein, this Court infers that Sinovac’s lawsuit to enjoin
1Globe from electing a new board of directors is part of Yin’s
continued effort to maintain control of Sinovac through alleged
improper means which is the same conduct out of which this
action arises. See id.
Furthermore, although the subject PIPE transaction took
place nearly four months after Sinovac sued 1Globe, that
transaction has been subsequently challenged in 1Globe.
Furthermore, the legitimacy of that transaction turns, in part,
on the validity of the preceding vote by 1Globe and other
shareholders to remove the Old Board which is contested in
In any event, defendant has apparently conceded the
connection between the two lawsuits because it designated them
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as related when it filed its notice of removal in this case. See
LR, D. Mass 40.1(g)(1) (defining “related” civil cases as those
where at least some of the parties are the same and which either
involve the same or substantially similar issues of fact and/or
arise out of the same transaction or occurrence).
Accordingly, the Court is satisfied that, under the prima
facie standard, 1Globe shares a common transactional core with
this case and finds that, by initiating 1Globe in this Court,
Sinovac has waived its jurisdictional defense here. See Marron,
662 F. Supp. 2d at 201 (“[O]ne who enjoys the full benefits of
access to a forum’s courts as plaintiff may not simultaneously
claim immunity from that forum’s authority as defendant.”).
Court will, therefore, deny Sinovac’s motion to dismiss for lack
of personal jurisdiction.
Failure to State a Claim
To survive a motion under Fed. R. Civ. P. 12(b)(6), the
subject pleading must contain sufficient factual matter to state
a claim for relief that is actionable as a matter of law and
“plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
A claim is facially plausible if, after accepting as
true all non-conclusory factual allegations, the court can draw
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the reasonable inference that the defendant is liable for the
misconduct alleged. Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d
1, 12 (1st Cir. 2011).
When rendering that determination, a court may not look
beyond the facts alleged in the complaint, documents
incorporated by reference therein and facts susceptible to
judicial notice. Haley v. City of Boston, 657 F.3d 39, 46 (1st
A court also may not disregard properly pled
factual allegations even if actual proof of those facts is
improbable. Ocasio-Hernandez, 640 F.3d at 12.
relevant inquiry focuses on the reasonableness of the inference
of liability that the plaintiff is asking the court to draw. Id.
The parties disagree as to whether the substantive law of
Massachusetts or Antigua and Barbuda governs this diversity
Sinovac contends that Antiguan law applies and that, for
that reason, Heng Ren has failed to state a claim.
specifically, that the Antiguan International Business
Corporations Act (“the IBCA”) sets forth the possible causes of
action that Heng Ren, as a stockholder, can assert against
Sinovac adds that the IBCA reserves for the Antiguan
Court exclusive jurisdiction over claims arising under it.
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When a district court’s jurisdiction is based upon
diversity of citizenship, the court must apply the choice-of-law
rules of the forum state. Klaxon v. Stentor Elec. Mfg., 313 U.S.
487, 496 (1941).
For disputes regarding the internal affairs of
a corporation, Massachusetts courts typically apply the law of
the state of incorporation because “only one State should have
the authority to regulate [those] affairs”. See Mariasch v.
Gillette Co., 521 F.3d 68, 71–72 (1st Cir. 2008) (internal
quotation marks and citation omitted).
Sinovac is incorporated in Antigua and thus Antiguan law
governs matters of Sinovac’s corporate governance and internal
Those affairs include matters particular to
“the relationships among or between [Sinovac] and its current
officers, directors, and shareholders”, such as the fiduciary
duty owed to its minority shareholders. Id. at 72; see also
Natale v. Espy Corp., 2 F. Supp. 3d 93, 102–03 (D. Mass. 2014).
Even assuming, arguendo, that the internal affairs doctrine
dictates that Antiguan law governs this dispute, however, the
Court finds that dismissal thereunder would be premature.
Defendant has offered only a cursory review of the IBCA and
proffered no compelling argument to define its content. 2
Although this Session concluded in 1Globe that the IBCA imposes
a requirement that a shareholder apply to the Antiguan Court
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the Court declines to conclude, at this time, that Heng Ren’s
claims are barred by that foreign statute.
Federal courts have discretion when determining the
contours of foreign law pursuant to Fed. R. Civ. P. 44.1.
court “may consider any relevant material or source” and is
permitted, but not required, to conduct its own research. Fed.
R. Civ. P. 44.1; Mackley v. Sullivan & Liapakis, P.C., No. 98cv-8460, 2001 U.S. Dist. LEXIS 21723, at *10–11 (S.D.N.Y. Dec.
It can also direct the parties to brief a particular
question with respect to the relevant foreign law and/or demand
a more “complete presentation [of that law] by counsel”. See
Mackley, 2001 U.S. Dist. LEXIS 21723, at *11; see also Fed. R.
Civ. P. 44.1 advisory committee’s note to 1966 amendments
(“[T]he court is free to insist on a complete presentation [of
the relevant foreign law] by counsel.”); Pfizer Inc. v. Elan
Pharm. Research Corp., 812 F. Supp. 1352, 1361 (D. Del. 1993)
(“Nothing in Rule 44.1 requires a court to engage in private
before he, she, it can file a derivative suit on behalf of a
corporation, that determination is not controlling here because
in 1Globe 1) the question was whether to enter a preliminary
injunction rather than dismiss the complaint and 2) the
discussion addressed the IBCA only to the extent it applies to
derivative rather than direct shareholder claims. See No. 18-cv10421-NMG, Dkt No. 73 (D. Mass. Oct. 15, 2018).
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research; the rule preserves the court’s right to insist upon a
complete presentation by counsel on the foreign-law issue.”).
Furthermore, although the First Circuit Court of Appeals
has yet to render an opinion on the matter, several other
circuits have held that whichever party is seeking the
application of foreign law has the burden of proving the
relevant legal principles thereof. See, e.g., McGee v. Arkel
Int'l, LLC, 671 F.3d 539, 546 (5th Cir. 2012) (referencing the
plaintiff's “burden of proving foreign law” and requiring that
litigants “present to the district court clear proof of the
relevant legal principles” (internal quotations and citations
omitted)); Baker v. Booz Allen Hamilton, Inc., 358 F. App'x 476,
481 (4th Cir. 2009) (indicating that the “party claiming foreign
law applies carries . . . the burden of proving foreign
law[.]”); Ferrostaal, Inc. v. M/V Sea Phoenix, 447 F.3d 212, 216
(3d Cir. 2006) (explaining that, because courts have no duty
under Fed. R. Civ. P. 44.1 to conduct independent research into
foreign law, the parties “carry the burden of proving [it]”);
Mut. Serv. Ins. Co. v. Frit Indus., Inc., 358 F.3d 1312, 1321
(11th Cir. 2004) (noting that a district court is not required
to conduct research into foreign law if the party urging its
application declines to do so); Esso Standard Oil S.A. v. S.S.
Gasbras Sul, 387 F.2d 573, 581 (2d Cir. 1967) (holding that,
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under the “new Rule 44.1”, the party seeking to invoke foreign
law “still has the task of persuasion”).
Here, Sinovac is the party seeking to invoke Antiguan
corporate law but it has provided little advocacy to help this
Court define its contours. Koshani v. Barton, 374 F. Supp. 3d
365, 710 (E.D. Tenn. 2019) (noting that, when the parties have
provided little to no guidance to the court with respect to
foreign law, Fed. R. Civ. P. 44.1 imposes no duty on the court
to research the law independently).
It has submitted only a
superficial summary of the IBCA and has failed to address
whether Heng Ren has stated plausibly, for instance, a claim for
aiding and abetting breaches of fiduciary duty under the common
law of Antigua and Barbuda. See COMMON LAW (DECLARATION
ACT, CHAPTER 92
BARBUDA (extending the
application of English common law to Antiguan courts); see also
In re PHC, Inc. Shareholder Litig., 894 F.3d 419, 433 (1st Cir.
2018) (“[I]t is a familiar tenet that when a statute addresses
issues previously governed by common law, an inquiring court
should presume that—except where explicit changes are made—the
legislature intended to retain the substance of preexisting
Accordingly, this Court will deny without prejudice
defendant Sinovac’s motion to dismiss for failure to state a
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claim under Antiguan law.
If Sinovac continues to invoke
Antiguan law, it shall provide this Court with a more complete
presentation thereof, addressing more fully, inter alia, whether
1) Heng Ren’s claims are direct or derivative under Antiguan
law, 2) those claims are governed by the IBCA or common law and
3) there is any prerequisite to initiating a lawsuit under the
Forum Non Conveniens
Finally, defendant Sinovac argues that this action is most
conveniently litigated in Antigua and Barbuda because it deals
with the internal affairs of an Antiguan corporation, relates to
conduct which occurred outside of Massachusetts and is governed
by Antiguan law.
Plaintiff retorts that 1) there is a strong
presumption in favor of plaintiff’s choice of forum and 2) the
public interest favors access to a U.S. court here because this
dispute relates to the use (or abuse) of an American securities
The doctrine of forum non conveniens provides courts with
the discretionary power
to dismiss a case because the chosen forum . . . is so
inconvenient that it would be unfair to conduct the
litigation in that place.
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Howe v. Goldcorp Investments, Ltd., 946 F.2d 944, 947 (1st Cir.
That power is limited “by the overarching principle that
a plaintiff’s choice of forum should rarely be disturbed.”
Adelson v. Hananel, 510 F.3d 43, 53 (1st Cir. 2007) (internal
quotation marks omitted) (quoting Piper Aircraft Co. v. Reyno,
454 U.S. 235, 241 (1981)).
Thus, as explained by the First
Circuit, the moving party bears
[a] heavy burden of establishing that an adequate
alternative forum exists and that considerations of
convenience and judicial efficiency strongly favor
litigating the claim in the second forum.
Id. (emphasis in original) (internal quotation marks omitted).
That is especially so when, as here, plaintiff brings suit in
its home forum. See Koster v. Lumbermens Mut. Cas. Co., 330 U.S.
518, 524 (1947).
It is apparently undisputed that the Antiguan Court
provides an adequate alternative forum in which to litigate this
Defendant Sinovac has failed, however, to meet its
burden to establish that a consideration of convenience and
judicial efficiency strongly favors litigating this dispute
Although Antiguan law may govern Heng Ren’s claims,
that, without more, fails to rebut the presumption in favor of
plaintiff’s choice of forum. See Mercier v. Sheraton Intern.,
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Inc., 981 F.2d 1345, 1357 (1st Cir. 1992) (noting that the
application of foreign law should be neither dispositive nor
“ascribed undue importance”).
The Court finds that both considerations of convenience and
judicial efficiency weigh in favor of the current forum.
respect to convenience, Massachusetts is Heng Ren’s domicile and
also the state in which Sinovac chose to initiate 1Globe, the
By filing 1Globe in this Court, Sinovac has
demonstrated its ability (and willingness) to litigate in this
forum, thereby defeating any argument that proceeding in
Massachusetts would be “so inconvenient that transfer is needed
to avoid serious unfairness [to Sinovac]”. Howe, 946 F.2d 944
(internal quotation marks omitted).
As for judicial efficiency,
this Session is already tasked with deciding 1Globe and it would
be efficient to resolve simultaneously the two cases which share
a common nucleus of operative facts.
In any event, as Heng Ren submits, there is a strong public
interest in making U.S. courts available to resolve disputes
such as this, which allegedly involve the improper issuance and
sale of shares of a company traded on the NASDAQ stock exchange,
an American securities market. See Piper Aircraft Co., 454 U.S.
at 241 n.6 (finding relevant to the forum non conveniens
analysis the “local interest in having localized controversies
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decided at home”); see also DiRienzo v. Philip Serv. Corp., 294
F.3d 21, 28 (2d Cir. 2002) (explaining that the United States
has an interest in having U.S. courts enforce U.S. securities
Accordingly, dismissal on forum non conveniens grounds
For the foregoing reasons, the motion of defendant Sinovac
Biotech Ltd. to dismiss the complaint (Docket No. 28) is DENIED
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated June 3, 2021
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