Mallory et al v. McCarthy Holthus, LLP
Filing
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ORDER that 13 Defendant's Motion to Dismiss Plaintiffs' First Amended Complaint is DENIED in part as to Plaintiffs' FDCPA claims, and GRANTED in part as to Plaintiffs' NDTPA claims; FURTHER ORDERED that Plaintiffs Robert Mallor y, Karen Mallory, and Alan Willey are granted leave to file a second amended complaint correcting the deficiencies of their NDTPA claim within ten (10) days of the entry of this order. Signed by Judge Kent J. Dawson on 5/11/15. (Copies have been distributed pursuant to the NEF - MMM)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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***
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ROBERT MALLORY, KAREN MALLORY
and ALAN WILLEY, on behalf of themselves
and all others similarly situated,
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Case No. 2:14-CV-00396-KJD-VCF
Plaintiffs,
ORDER
v.
MCCARTHY & HOLTHUS, LLP,
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Defendant,
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Before the Court is Defendant McCarthy & Holthus, LLP’s Motion to Dismiss (#13)
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Plaintiffs’ first amended complaint. Plaintiffs Robert Mallory, Karen Mallory, and Alan Willey
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filed a response in opposition (#17) to which Defendant replied (#18).
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I. Background
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Plaintiffs Robert Mallory and Karen Mallory (“the Mallorys”) are Clark County residents
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who obtained a mortgage loan to purchase a home in Las Vegas (#12, p. 5). Plaintiff Alan Willey
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(“Willey”) is a Clark County resident who obtained a mortgage loan to purchase a home in
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Henderson. Id. at 10. In 2013, Defendant, a multi-state law firm, sent a letter to the Mallorys and
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a letter to Willey (#13, p. 4). The letters, which are nearly identical, stated that Plaintiffs’
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mortgage payments were past due and their properties had been referred to foreclosure (#14, Ex.
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1, 2). Both letters indicated that Plaintiffs could avoid foreclosure by making their accounts
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current, obtaining a loan modification, or selling their properties through an approved short sale.
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Id. Each letter detailed Plaintiffs’ account information, including: the total amount needed to
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reinstate and avoid foreclosure, the amount in default, the current unpaid principal obligation
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under the mortgage, the amount of interest accrued, the amount of accrued late charges, and the
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estimate of fees imposed in connection with the power of sale. Id.
Several months later, Plaintiffs filed a complaint (#1) and a first amended complaint
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(#12) asserting that Defendant violated the Fair Debt Collection Practices Act (“FDCPA”) and
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the Nevada Deceptive Trade Practices Act (“NDTPA”) when it sent letters that, Plaintiffs
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alleged, were not in compliance with the FDCPA. Defendant filed the present motion to dismiss
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pursuant to FED. R. CIV. P. 12(b)(6).
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II. Legal Standard
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In considering a motion to dismiss, “all well-pleaded allegations of material fact are taken
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as true and construed in a light most favorable to the non-moving party.” Wyler Summit
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Partnership v. Turner Broadcasting System, Inc., 135 F.3d 658, 661 (9th Cir. 1998) (citation
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omitted). Consequently, there is a strong presumption against dismissing an action for failure to
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state a claim. See Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997) (citation
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omitted).
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To survive a motion to dismiss, a complaint must contain sufficient factual matter,
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accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 129 S.
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Ct. 1937, 1949 (2009). Plausibility, in the context of a motion to dismiss, means that a plaintiff
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has pleaded facts which allow the court to draw the reasonable inference that the defendant is
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liable for the misconduct alleged. Id.
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The Iqbal evaluation illustrates a two prong analysis. First, a court identifies the
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allegations which are legal conclusions, bare assertions, or merely conclusory. Id. at 1949-51.
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Second, a court determines if the remaining factual allegations plausibly suggest an entitlement
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to relief. Id. at 1951. If the allegations state plausible claims for relief, the claims survive the
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motion to dismiss. Id. at 1950.
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III. Analysis
Defendant contends that Plaintiffs’ first amended complaint should be dismissed because
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(1) Defendant did not engage in “debt collection,” as defined by the FDCPA; (2) Defendant is
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not a “debt collector,” as defined by the FDCPA; (3) Plaintiffs’ claim involving 15 U.S.C. §
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1692f is deficient; and (4) Plaintiffs failed to properly plead an NDTPA claim.
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A. The Fair Debt Collection Practices Act
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Congress passed the FDCPA to eliminate abusive debt collection practices by debt
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collectors, ensure that debt collectors who refrain from using abusive debt collection practices
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are not competitively disadvantaged, and promote consistent State action to protect consumers
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against debt collection abuses. 15 U.S.C. § 1692(e). To accomplish this, the FDCPA prohibits
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several debt collection practices and allows individuals to sue offending debt collectors. See 15
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U.S.C. §§ 1692a-p.
In their first amended complaint, Plaintiffs allege that Defendant violated three FDCPA
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provisions. The first provision, 15 U.S.C. § 1692g(a), requires a debt collector to send a
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consumer written notice within “five days after the initial communication with a consumer in
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connection with the collection of any debt,” and outlines the contents of that notice. The second
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provision, 15 U.S.C. § 1692e, prohibits a debt collector from using “any false, deceptive, or
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misleading representation or means in connection with the collection of any debt.” The third
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provision, 15 U.S.C. § 1692f, states that a “debt collector may not use unfair or unconscionable
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means to collect or attempt to collect any debt.”
Defendant first argues that it was not engaged in “debt collection,” as defined under the
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FDCPA. Thus, to survive Defendant’s motion to dismiss under Rule 12(b)(6), Plaintiffs must
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allege facts that allow the Court to reasonably infer that Defendant engaged in “debt collection.”
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See Iqbal, 129 S. Ct. at 1949. Plaintiffs allege that Defendant engaged in “debt collection” when
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it sent its letters to Plaintiffs because the letters state that they are an attempt to collect debt (#12,
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pp. 5-7, 10-11). Plaintiffs support this allegation with specific language found within each
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letter.12 Id. These factual allegations must be construed in a light most favorable to Plaintiffs.
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See Wyler 135 F.3d at 661. Viewed this way, they plausibly suggest that Defendant engaged in
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“debt collection.”
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Defendant next argues that it is not a “debt collector” under the FDCPA. The FDCPA
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defines a “debt collector” as any person who (1) “uses any instrumentality of interstate
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commerce or the mails in any business the principal purpose of which is the collection of any
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debts,” or (2) “regularly collects or attempts to collect, directly or indirectly, debts owed or due
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or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). The FDCPA also contains six
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classes of people or organizations that are excluded from its definition of “debt collector.” 15
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U.S.C.A. § 1692a(6)(A)-(F). Plaintiffs allege that Defendant regularly engages in debt collection
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both for itself and on behalf of others (#12, pp. 4-5). This clearly falls under the FDCPA’s
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definition of a “debt collector.” Defendant does not refute Plaintiffs’ assertion, nor does it claim
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one of the exceptions outlined in the FDCPA. Thus, these factual allegations, when viewed in a
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light most favorable to Plaintiffs, plausibly suggest that Defendant is a “debt collector.”
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Defendant finally argues that Plaintiffs’ claim involving 15 U.S.C. § 1692f is deficient
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because Plaintiffs fail to specify how Defendant’s conduct was unfair or unconscionable.
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Although § 1692f outlines specific conduct that violates the FDCPA, it also prohibits unfair or
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unconscionable collection means generally. See 15 U.S.C. § 1692f. Plaintiffs allege that
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Defendant engaged in unfair or unconscionable collection means when it sent the letters to
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collect on Plaintiffs’ debts, failed to include the federally required notices, failed to include the
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required statutory language, failed to identify to whom the debt was owed, failed to notify
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The Mallory letter states, in part: “NOTICE: THIS OFFICE MAY BE CONSIDERED A DEBT
COLLECTOR AND THIS MAY BE CONSIDERED AS AN ATTEMPT TO COLLECT A DEBT AND ANY
INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.” (#12, p. 7).
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The Willey letter states, in part: “NOTICE: THIS MAY BE CONSIDERED AS AN ATTEMPT TO
COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.”
(#12, p. 11).
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Plaintiffs’ of their legal rights to dispute, and failed to notify that the debt would be assumed
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valid unless it was disputed (#12, pp. 7-9, 11-13). When viewed in a light most favorable to
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Plaintiffs, these allegations state a plausible claim for relief.
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B. Nevada Deceptive Trade Practices Act
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Defendant contends that Plaintiffs failed to properly plead an NDTPA claim. The
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NDTPA is codified as NRS 598.0903-598.9694. If a party is found to have engaged in a
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“deceptive trade practice” under the NDTPA, it may be subject to civil liability under NRS
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41.600, which allows victims of consumer fraud to sue for damages, equitable relief, and
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attorney’s fees.
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Plaintiffs assert that the NDTPA incorporates the FDCPA through NRS 598.0923(3).
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Plaintiffs are incorrect. NRS 598.0923(3) states: “a person engages in a ‘deceptive trade practice’
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when in the course of his or her business or occupation he or she knowingly violates a state or
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federal statute or regulation relating to the sale or lease of goods or services.” Defendant’s debt
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collection efforts, as outlined in Plaintiffs’ first amended complaint, are not a “sale or lease of
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goods or services.” Defendant is not offering Plaintiffs any good or service; rather, it is
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attempting to recover on Plaintiffs’ pre-existing debts. Thus, Plaintiffs’ allegations, even when
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taken as true, do not establish that Defendant engaged in a “deceptive trade practice” under NRS
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598.0923(3).
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In their response, Plaintiffs contend that Defendant’s failure to include FDCPA notices in
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its letters is a “deceptive trade practice” under NRS 598.0915(15). The Court disagrees. Under
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NRS 598.0915(15), a person engages in a “deceptive trade practice” if, in the course of his or her
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business or occupation, he or she knowingly makes any other false representation in a
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transaction. In Nevada, the suppression or omission of a material fact is equivalent to a false
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representation only when a party is bound in good faith to disclose that material fact. See Nelson
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v. Heer, 163 P.3d 420, 426 (Nev. 2007). Plaintiffs do not identify how Defendant is bound, under
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Nevada law, to disclose the information found in the FDCPA notices. Plaintiffs also do not
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specify any affirmative misrepresentations Defendant made. Plaintiffs consequently fail to state a
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plausible NDTPA claim under NRS 598.0915(15).
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Plaintiffs’ first amended complaint does not state a plausible claim for relief under the
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NDTPA. However, the Court grants Plaintiffs leave to file a second amended complaint to
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correct these deficiencies within ten (10) days from the entry of this order.
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C. Defendant’s Other Arguments
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Defendant raises several other issues3 which argue facts, rather than the sufficiency of the
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complaint. Although Defendant may choose to raise these arguments in a motion for summary
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judgment, the Court declines to convert the present motion into a motion for summary judgment.
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IV. Conclusion
Accordingly, it is HEREBY ORDERED that Defendant’s Motion to Dismiss (#13)
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Plaintiffs’ First Amended Complaint is DENIED IN PART as to Plaintiffs’ FDCPA claims, and
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GRANTED IN PART as to Plaintiffs’ NDTPA claims;
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IT IS FURTHER ORDERED that Plaintiffs Robert Mallory, Karen Mallory, and Alan
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Willey are granted leave to file a second amended complaint correcting the deficiencies of their
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NDTPA claim within ten (10) days of the entry of this order.
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11th
DATED this ______ day of May 2015.
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_____________________________
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Kent J. Dawson
United States District Judge
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Defendant argues that its actions were foreclosure proceedings, which are not a “debt collection” under
the FDCPA. Defendant also argues that it is not a “debt collector” under the FDCPA because it was merely
enforcing a security interest in real property.
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