Indemnity Insurance Company of North America v. Deere & Company
Filing
23
MEMORANDUM OPINION re 22 Order on Motion to Dismiss for Failure to State a Claim, Order on Motion for Summary Judgment. Signed by Glen H. Davidson on 9/24/12. (tab)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA,
a Pennsylvania corporation, as subrogee of Omega Plantations Partnership
PLAINTIFF
CIVIL ACTION NO. 2:11-CV-00260-GHD-1MV
v.
DEERE & COMPANY, a Delaware corporation
DEFENDANT
MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO DISMISS FOR FAlLURE TO STATE A CLAIM,
OR IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT
Presently before the Court is Defendant Deere & Company's motion to dismiss for
failure to state a claim, or in the alternative, for summary judgment [8] brought pursuant to Rules
12(b)(6) and 56 of the Federal Rules of Civil Procedure. Upon due consideration, the Court finds
the motion should be granted in part and denied in part for the reasons set forth herein.
A. Factual and Procedural Background
Plaintiff Indemnity Insurance Company of North America ("Plaintiff') files this diversity
action against Defendant Deere & Company ("DefendanC). Mississippi law governs. Plaintiff
alleges the following facts:
Omega Plantations Partnership ("Omega") is a Mississippi
partnership with agricultural operations in several locations, including Clarksdale, Mississippi.
Plaintiff insured Omega's business property and agricultural equipment, including three cotton
pickers manufactured by the Defendant and bearing the serial numbers N09996X020427,
N09996X020485, and N09996X020428. In the fall of 2009, the three cotton pickers at issue
ignited and were destroyed completely by fire: N09996X020427 on October 22, 2009;
N09996X020485 on November 2,2009; and N09996X020428 on November 4, 2009. During
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this time, another cotton picker also caught fire, but that fire was extinguished without significant
damage to the cotton picker. Prior to the fires, the cotton pickers were used in an appropriate,
natural, and foreseeable manner and were maintained and cleaned properly according to
Defendant's recommendations. All the fires originated in the same area of each cotton picker: an
obscured region between the lower rear of the engine and an adjacent frame cross member. The
areas in which the fires originated were not easily accessible for cleaning, as some disassembly
of components was required in order to expose the area in which the fires originated. The
exhaust of the cotton picker can reach temperatures as high as 900 degrees Fahrenheit and thus is
a competent ignition source for cotton lint and debris, which easily become trapped in the
obscure region.
Omega filed a claim with Plaintiff, its insurer, to obtain indemnity for the loss of the three
destroyed cotton pickers. Plaintiff paid Omega the total sum of $514,000.00 for losses resulting
from
the
fires:
specifically,
$169,000.00
for
N09996X020427;
N09996X020485; and $169,000.00 for N09996X020428.
$176,000.00
for
Plaintiff then filed this suit, as
subrogee, to recover from Defendant the amount paid to Omega. Plaintiff asserts that the suit is
properly brought in its own name, as Omega assigned its rights of recovery against third parties
to Plaintiff.
Plaintiff alleges that based on Defendant's earlier models of the cotton picker, as well as
other competitors' cotton pickers designs, it was commercially feasible and practicable to design
the engine compartment of the cotton pickers to reduce the intake of cotton and/or debris.
Plaintiff avers that the fires that destroyed the subject cotton pickers were directly and
proximately caused by the design defects in the engine compartment of the cotton pickers and/or
by Defendant's failure to provide adequate warnings and instructions regarding cleaning.
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Plaintiff seeks damages for alleged breaches of the implied warranties of merchantability and
fitness for a particular purpose.
In lieu of filing an answer to Plaintiff s complaint, Defendant filed a motion to dismiss
Plaintiff's claims for failure to state a claim, or in the alternative, for summary judgment [8].
Plaintiff has submitted a response, and Defendant has submitted a reply. The matter is now ripe
for review.
B. Legal Standards
Motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure "are
viewed with disfavor and are rarely granted." Kocurek v. Cuna Mut. Ins. Soc'y, 459 F. App'x
371, 373 (5th CiT. 2012) (citing Gregson v. Zurich Am. Ins. Co., 322 F.3d 883, 885 (5th Cir.
2003». In reviewing a Rule 12(b)(6) motion to dismiss, the "court accepts all well-pleaded facts
as true, viewing them in the light most favorable to the plaintiff." In re Katrina Canal Breaches
Litig., 495 F.3d 191,205 (5th CiT. 2007) (internal quotation marks and citations omitted). Of
course, the complaint must allege "enough facts to state a claim to relief that is plausible on its
face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).
The court must not evaluate the likelihood of the claim's success, but instead ascertain whether
the plaintiff has stated a legally cognizable claim that is plausible. Ashcroft v. Iqbal, 556 U.S.
662,129 S. Ct. 1937,1949,173 L. Ed. 2d 868 (2009).
"If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented
to and not excluded by the court, the motion must be treated as one for summary judgment under
Rule 56." FED. R. CIV. P. 12(d). Because in considering the Defendant's motion the Court has
reviewed the parties' attached matters outside the pleadings which the Court shall not exclude,
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the motion shall be considered a motion for summary judgment brought pursuant to Rule 56 of
the Federal Rules of Civil Procedure.
Summary judgment "should be rendered if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine dispute as to any material fact
and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a); Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Weaver v.
CCA Indus., Inc., 529 F.3d 335, 339 (5th Cir. 2008). The rule "mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a party who fails to make a
sufficient showing to establish the existence of an element essential to that party's case, and on
which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322, 106 S.
Ct. 2548. The party moving for summary judgment bears the initial responsibility of informing
the district court of the basis for its motion and identifying those portions of the record it believes
demonstrate the absence of a genuine issue of material fact. Id at 323, 106 S. Ct. 2548. Under
Rule 56(a) of the Federal Rules of Civil Procedure, the burden then shifts to the non-movant to
"go beyond the pleadings and by ... affidavits, or by the 'depositions, answers to interrogatories,
and admissions on file,' designate' specific facts showing that there is a genuine issue for trial.' "
Id at 324, 106 S. Ct. 2548; Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir.
2001); Willis v. Roche Biomedical Labs., Inc., 61 F.3d 313,315 (5th Cir. 1995).
C. Discussion
Plaintiff alleges that Defendant breached the implied warranties of merchantability and
fitness for a particular purpose. I For goods to be merchantable, they must, among other things,
I The Court notes that the Mississippi Products Liability Act does not bar breach of implied warranty
claims. See McKee v. Bowers Window & Door Co., 64 So. 3d 926, 940 (Miss. 2011) (citing Bennett v. Madakasira,
821 So. 2d 794,808 (Miss. 2002), citing MISS. CODE ANN. §§ 11-H53 [ (Rev. 2002) ], 75-2-715 [(Rev. 2002) ] ),
abrogated on other grounds by Hutzel v. City ofJackson, 33 So. 3d 1116 (Miss. 2010)).
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"[p lass without objection in the trade under the contract description" and be "fit for the ordinary
purposes for which such goods are used." MISS. CODE ANN. § 75-2-314(a) & (c). Mississippi
law defines "goods" as "all things (including specially manufactured goods) which are movable
at the time of identification to the contract for sale." MISS CODE. ANN. § 75-2-105. Privity is
not required on a cause of action for damages brought on account of breach of warranty. Hargett
V.
Midas Int'l Corp., 508 So. 2d 663, 665 (Miss. 1987) (citing MISS. CODE
ANN.
§ 11-7-20).
Defendant argues that Plaintiff's implied warranty claims must be dismissed for the following
reasons: (1) any implied warranties were properly disclaimed; (2) Defendant, while a
manufacturer of cotton pickers and other agricultural equipment, was not a "merchant" with
respect to the cotton pickers at issue; (3) all implied warranties had been satisfied by the end of
the fourth harvest season; (4) Defendant was not given an opportunity to cure the alleged defects;
and (5) the subject cotton pickers were used for their ordinary purpose, and thus the claim for
breach of implied warranty of fitness for a particular purpose fails.
1. Disclaimer ofImplied Warranties
Defendant contends that it properly disclaimed any implied warranties in its customer
purchase order form for the John Deere cotton pickers. Defendant maintains that the disclaimer
language was boldface and in all capital letters, and the form itself was executed by an Omega
representative. Plaintiff argues that Defendant could not disclaim the implied warranties under
Mississippi law at that time. Defendant has failed to challenge this argument in its reply. The
Court finds that Plaintiff's argument is correct as a matter of law. The current version of the
relevant Code section provides:
Except as otherwise provided in Sections 75-2-314, 75-2-315, 75
2-315.1 and 75-2-719, there shall be no limitation of remedies or
disclaimer of liability as to any implied warranty of
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merchantability or fitness for a particular purpose in a sale
consumer, as defined in Section 75-1-201(b)(II), of consumer
goods, as defined in Section 75-9-102(a)(23). The provisions of
this section may not be waived or varied by agreement.
MISS. CODE ANN. § 11-7-18 (emphasis added). However, at the time of the sale of the subject
cotton pickers in 2006, Mississippi law prohibited any limitation of remedies or disclaimer of
liability as to any implied warranty of merchantability or fitness for a particular purpose. See
Fedders Corp. v. Boatright, 493 So. 2d 301 (Miss. 1986). Any attempt by Defendant to disclaim
implied warranties was not valid under Mississippi law at the time of sale. Thus, Defendant's
motion is denied on this ground.
2. Breach 0/ Implied Warranty 0/ Merchantability Claim
Plaintiffs first theory of recovery is breach of the implied warranty of merchantability.
"[A] warranty that the goods shall be merchantable is implied in a contract for their sale if the
seller is a merchant with respect to goods of that kind." MISS. CODE ANN. § 75-2-314(1). "The
implied warranty of merchantability is not intended to guarantee that the goods be the best or of
the highest quality-the standard is measured by the generally acceptable quality under the
description in the contract." Beck Enters., Inc. v. Hester, 512 So. 2d 672, 676 (Miss. 1987)
(internal citation omitted). Where a product conforms to the quality of other similar products in
the market, it will normally be merchantable. A plaintiff must prove five elements to recover
under § 75-2-314: "(1) That a 'merchant' sold 'goods,' and he was a merchant with respect to
'goods of the kind' involved in the transaction, (2) which were not merchantable at the time of
the sale, and (3) injuries and damages to the plaintiff or his property, (4) caused proximately and
in fact by the defective nature of the goods, and (5) notice to the seller of the injury." Vince v.
Broome, 443 So. 2d 23, 26 (Miss. 1983); see also CEF Enters., Inc. v. Betts, 838 So. 2d 999,
1003
1 15
(Miss. Ct. App. 2003) ("To recover for breach of an implied warranty, the plaintiff
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must establish: (1) the defendant was a merchant which sold goods of the kind involved in the
transaction, (2) that the defect was present when the product left the defendant1s control, and (3)
the injuries to the plaintiff were caused proximately by the defective nature ofthe goods.").
Plaintiff alleges that the cotton pickers at issue ignited and were completely destroyed by
fire, thus causing damage to Omega's property. Plaintiff further alleges that Defendant's breach
of this warranty directly and proximately caused the destruction of the three cotton pickers and
directly and proximately caused Plaintiff to incur damages in the amount of $514,000.00 for
which Defendant is liable to Plaintiff. Defendant contends that Plaintiff s claim for breach of the
implied warranty of merchantability fails because (1) Defendant was not a merchant with respect
to the sale of the cotton pickers, (2) the cotton pickers were merchantable at the time of sale, and
(3) no notice of the alleged defect or opportunity to cure was given to Defendant.
(1) Whether Defendant Was a Merchant With Respect to the Cotton Pickers
To sustain a claim for breach of the implied warranty of merchantability, first, Plaintiff
must establish that Defendant was a merchant with respect to the cotton pickers at issue.
"Merchant" means a person who deals in goods of the kind or
otherwise by his occupation holds himself out as having
knowledge or skill peculiar to the practices or goods involved in
the transaction or to whom such knowledge or skill may be
attributed by his employment of an agent or broker or other
intermediary who by his occupation holds himself out as having
such knowledge or skill.
MISS. CODE ANN. § 75-2-104(1). Under Mississippi law, "a warranty that the goods shall be
merchantable is implied in a contract for their sale if the seller is a merchant with respect to
goods of that kind." MISS. CODE A'N'N. § 75-2-314(1); see Woods v. Ramsey, 199 F.3d 437, at
*7 (5th Cir. 1999) (citing Hargett, 508 So. 2d at 664); Vince, 443 So. 2d at 27. Courts make this
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detennination based on the facts of the particular case, and the ultimate question is a mixed
question of law and fact. Vince, 443 So. 2d at 28.
Defendant argues it was not a merchant, but was instead a manufacturer of the subject
cotton pickers. However, manufacturers can be merchants under Mississippi law. In Fedders
Corp. v. Boatright, the Mississippi Supreme Court held that a heat pump manufacturer was liable
for breach of an implied warranty of merchantability, when a consumer purchased the subject
heat pump from the manufacturer's authorized dealer. 493 So. 2d at 307; see also Cooper
Indus., Inc. v. Tarmac Roofing Sys., Inc., 276 F.3d 704, 708 (5th Cir. 2002) (discussing Fedders).
In a case decided approximately one year after Fedders, the Mississippi Supreme Court held that
the buyer of a used motor home could bring a breach of implied warranty of merchantability
claim against the manufacturer of the motor home, which sold or contracted to sell motor homes,
thus fitting the definition of "seller" in the Mississippi Code. See Hargett, 508 So. 2d at 665.
The court based its ruling in part on the following reasoning of the Texas Supreme Court:
[A] manufacturer may also be a seller. The [Texas] Code does not
limit its definition of seller to the immediate seller of a product.
Instead, the Code defines a seller as "a person who sells or
contracts to sell goods."
Id (quoting Nobility Homes of Tex., Inc. v. Shivers, 557 S.W.2d 77, 80 (Tex. 1977) (internal
citation omitted)).
The Mississippi Supreme Court has also explained with respect to
automobiles:
[T]he retailers sales contract accompanied by the manufacturer's
warranty, are so closely linked in both time of delivery and subject
matter, that they blend[ ] into a single unit at the time of sale. We
are fortified in this statement by the general observance that sales
are usually made, not only upon the make and model of the
automobile, but also upon the assurance of the manufacturer,
through its warranty, that the vehicle will confonn to the standards
of merchantability.
8
Volkswagen
0/ Am.,
Inc. v. Novak, 418 So. 2d 801, 804 (Miss. 1982). In a case similar to this, a
plaintiff in the business of dirt moving, leveling, and building catfish ponds sued, inter alios,
Deere & Company (the same Defendant in the case sub judice) for breach of the implied
warranties of merchantability and fitness for a particular purpose when the tractors he had
purchased began experiencing problems. See Duett Land/arming, Inc. v. Belzoni Tractor Co., 34
So. 3d 603,605 ,-r,-r 1-4 (Miss. Ct. App. 2010). The Mississippi Court of Appeals held that Deere
& Company was a merchant who sold tractors. See id. at 611 ,-r 21.
The Court finds that based upon the foregoing, Defendant Deere & Company was both a
manufacturer and a merchant with respect to the cotton pickers at issue. Thus, Defendant's
motion is denied on this ground.
(2) Whether the Cotton Pickers Were Not Merchantable at Time of Sale
Plaintiff must next establish that the cotton pickers at issue were not merchantable at the
time of sale. Plaintiff alleges that the changes in design, resulting defects, and failure to provide
warnings or adequate instruction rendered the cotton pickers unmerchantable.
Specifically,
Plaintiff alleges that the design of the cotton pickers materially increased the risk of intake and
accumulation of combustible lint and debris in the engine compartment, as well as the resulting
risk of fire. Defendant argues that Plaintiff does not have a viable claim, because from the date
Omega purchased the subject cotton pickers in August 2006 until the fires occurred in the fall of
2010, the cotton pickers were used to harvest cotton and had encountered no problems; thus,
Defendant maintains that no defect was present at the time of purchase and this element of the
claim is not satisfied. Defendant cites in support of its argument Ford Motor Co. v. Fairley, 398
So. 2d 216 (Miss. 1981), in which the Mississippi Supreme Court determined that no breach of
implied warranty of merchantability existed when a car had been operated for 26,649 miles over
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two years before the problems started. This Court notes that a cotton picker, which is used only
during the cotton harvest season, would not encounter the same persistent use as an automobile,
and thus would not have as much opportunity to manifest problems. However, the Court cannot
at this stage of the litigation determine from the evidence before it at what point, if at any point, a
defect was present in the cotton pickers at issue. Accordingly, the Court finds that a genuine
dispute of material fact exists with respect to whether the cotton pickers were merchantable at
the time of sale. Thus, Defendant's motion is denied on this ground.
(3) Whether Notice of the Injury Was Given to Defendant
Defendant argues that Plaintiff s breach of implied warranty of merchantability claim is
not properly before the Court, because Plaintiff fails to allege that a reasonable opportunity to
cure was given to Defendant, and Defendant has no record of Omega or Plaintiff giving it an
opportunity to cure the alleged defect. Plaintiff argues in response that Omega did not discover
the defect-accumulation of debris in a concealed region of the cotton picker-until the fourth
cotton picker caught on fire and was observed by someone outside the cab of the picker which
allowed the location of the fire to be discovered and for the fire to be extinguished. Thus,
Plaintiff contends it had no opportunity to give notice to Defendant of the defect and any
opportunity to cure the defect until all three subject cotton pickers were already destroyed. At
that time, Plaintiff maintains that Defendant sent an investigator to examine all four of the cotton
pickers that were involved in the fires. Plaintiff contends that discovery in this case would reveal
that notice was provided to Defendant of the defect. Plaintiff argues that the opportunity for cure
required by Mississippi law is governed by a reasonableness standard and "[w]hat may be a
reasonable opportunity in the context of an underperforming but otherwise intact product may
not be reasonable in the case of product destroyed by itself before any defect could be
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identified." Finally, Plaintiff argues that if the parties lacked privity of contract, Plaintiff need
not have provided Defendant with the opportunity to cure.
Under Mississippi law, a buyer who accepts tender of goods "must within a reasonable
time after he discovers or should have discovered any breach notify the seller of breach or be
barred from any remedy." MISS. CODE ANN. § 75-2-607(3)(a). Notice need not entail "a
specific claim for damages or an assertion of legal rights." Miss. Chern. Corp. v. Dresser-Rand
Co., 287 F.3d 359, 368 (5th Cir. 2002) (quoting E. Air Lines, Inc. v. McDonnell Douglas Corp.,
532 F.2d 957, 976 (5th Cir. 1976) (citations omitted)). "[W]hether the notice requirement has
been complied with is a question which is particularly within the province of the jury." Carter
Equip. Co. v. John Deere Indus. Equip. Co., 681 F.2d 386, 396 (5th Cir. 1982) (quoting E. Air
Lines, Inc., 532 F.2d at 973).
Even if there was breach of the implied warranty of
merchantability, the seller has a right to attempt cure of the defect. Watson Quality Ford, Inc. v.
Casanova, 999 So. 2d 830, 834 (Miss. 2009) (citing Fitzner Pontiac-Buick-Cadillac, Inc., v.
Smith, 523 So. 2d 324, 328 (Miss. 1988)). Mississippi law provides that the seller's right to
attempt cure of an alleged defect is a "reasonable requisite" of a buyer's "right of recovery." Id.
The Court finds that a genuine dispute of material fact exists as to whether Plaintiff
provided Defendant with the required notice and opportunity to cure the alleged defect.
Accordingly, Defendant's motion is denied on this ground.
For all the foregoing reasons, Plaintiff's claim for breach of the implied warranty of
merchantability survives Defendant's motion.
3. Breach ofImplied Warranty ofFitnessfor a Particular Purpose Claim
Second, Plaintiff asserts that it is entitled to recovery under a theory of breach of the
implied warranty of fitness for a particular purpose.
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"[W]here the seller at the time of
contracting has reason to know any particular purpose for which the goods are required and that
the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is an
implied warranty that the goods shall be fit for such purpose." MISS. CODE ANN. § 75-2-315. To
present a cause of action for breach of this implied warranty, a plaintiff must show the following:
(1) the seller at the time of the contracting had reason to know the
particular purpose for which the goods were required;
(2) the reliance by the plaintiff as buyer upon the skill or judgment
of the seller to select suitable goods; and
(3) the goods were unfit for the particular purpose.
MacKenzie v. Chrysler Corp., 607 F.2d 1162, 1166 (5th Cir. 1979) (citing Garner v. S&S
Livestock Dealers, Inc., 248 So. 2d 783, 785 (Miss. 1971).
Defendant argues that the claim cannot be brought against Defendant if Defendant is not
a merchant. The Court has already determined that Defendant was a merchant with respect to
the cotton pickers at issue. However, the Court instructs the Defendant that a seller may be
subject to suit on the implied warranty of fitness for a particular purpose even if the seller is not a
merchant. See McNabb v. L.T. Land & Gravel, LLC, 77 So. 3d 1140, 1145
(~
20) (Miss. Ct.
App. 2012) (citing MISS. CODE ANN. § 73-2-315; Lacy v. Morrison, 906 So. 2d 126, 131
(~14)
(Miss. Ct. App. 2004)). Defendant's motion is denied on this ground.
Defendant also argues that Omega purchased the subject cotton pickers for their ordinary
use-to pick cotton-and thus that Plaintiffs claim fails because there was no implied warranty
of fitness for a particular purpose. The Court finds that Defendant's argument is well taken.
Under Mississippi law, a plaintiff does not have a viable claim for breach of the implied
warranty of fitness for a particular purpose when the product at issue was purchased for its
ordinary use. See Official Comment to UCC § 2-315 ("a 'particular purpose' differs from the
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ordinary purpose for which the goods are used in that it envisages a specific use by the buyer
which is peculiar to the nature of his business whereas the ordinary purposes for which goods are
used are those envisaged in the concept of merchantability and go to uses which are customarily
made of the goods in question"); Casanova, 999 So. 2d at 835; Fairley, 398 So. 2d at 219.
Because Omega undisputedly purchased the subject cotton pickers for their ordinary use, to pick
cotton, Plaintiffs claim for breach of the implied warranty of fitness for a particular purpose
must be dismissed as a matter of law. Thus, Defendant's motion is granted as to that claim.
D. Conclusion
In sum, the Court finds that Defendant's motion to dismiss for failure to state a claim, or
in the alternative, for summary judgment [8] shall be GRANTED with respect to Plaintiff's
claim for breach of the implied warranty of fitness for a particular purpose, and DENIED with
respect to Plaintiffs claim for breach of the implied warranty of merchantability.
A separate order in accordance with this opinion shall issue this day.
~ /j D~
THIS, the;tt :September, 2012.
SENIOR JUDGE
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