Las Vegas Development Group, LLC, a Nevada Limited liability company v. Steven et al
Filing
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ORDER denying ECF No. 95 Motion to Reconsider Order. Signed by Judge Robert C. Jones on 05/23/2017. (Copies have been distributed pursuant to the NEF - KW)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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LAS VEGAS DEVELOPMENT GROUP,
LLC,
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2:15-cv-01128-RCJ-CWH
Plaintiff,
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vs.
ORDER
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ROBERTO E. STEVEN et al.,
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Defendants.
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This case arises out of competing foreclosure sales of the same property. Now pending
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before the Court is a Motion to Reconsider the Court’s prior dismissal of this action. (Mot.
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Recon., ECF No. 95.) For the reasons given herein, the Court denies the motion.
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I.
FACTS AND PROCEDURAL BACKGROUND
On or about August 2, 1993, Defendants George and Marie Cooper acquired title to real
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property located at 1901 Fan Fare Drive, Las Vegas, Nevada 89032 (the “Property”). (Am.
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Compl. ¶¶ 19, 24, ECF No. 66.) Non-party Durable Homes, Inc. recorded a first deed of trust
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(the “DOT”) against the Property, and Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) later
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became the beneficiary of the DOT, re-recording it, as modified, on or about August 19, 2003.
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(Id. at ¶¶ 27–29.) The Property has been subject to recorded Covenants, Conditions, and
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Restrictions (“CC&Rs”) since before the DOT was first recorded. (Id. at ¶¶ 19, 32.)
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The Coopers defaulted on their HOA dues, and non-party Hidden Canyon Owners
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Association (the “HOA”) eventually conducted an HOA sale in accordance with state law on or
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about March 2, 2011, purchasing the Property itself for $3,780.82. (Id. at ¶¶ 19, 34–53; Trustee’s
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Deed Upon Sale, ECF No. 66-5 at 2.) Prior to the sale, Wells Fargo had not assigned the DOT to
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Defendant Secretary of Housing and Urban Development (“HUD”) or any other government
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agency or instrumentality. (Am. Compl. ¶ 62, ECF No. 66.) Nor did the United States or any
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agency or instrumentality thereof possess any interest in the DOT or the Property. (Id. at ¶ 63.)
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On April 6, 2011, the HOA quitclaimed the Property to Plaintiff Las Vegas Development Group,
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LLC (“LVDG”) for $5,000. (Id. at ¶¶ 78–79; Quitclaim Deed, ECF No. 66-6 at 2–3.)
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Wells Fargo and Defendant National Default Servicing Corp. (“NDSC”) then foreclosed
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the DOT under state law, selling the property to HUD on November 23, 2011. (Am. Compl. ¶¶
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82–86, ECF No. 66.) On February 28, 2012, HUD sold the Property to Defendant Roberto
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Steven. (Id. at ¶ 87.) Steven financed the Property via two mortgages from Defendant Evergreen
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Moneysource Mortgage Co. (“Evergreen”). (Id. at ¶¶ 15, 88–89.) One or more of Steven’s
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mortgages has been transferred to Defendant U.S. Bank National Association (“U.S. Bank”). (Id.
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at ¶¶ 16, 90.)
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LVDG sued Defendants in state court for: (1) quiet title; (2) unjust enrichment; (3)
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equitable mortgage; (4) slander of title; and (5) conversion. LVDG also sought equitable relief
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via the sixth and seventh nominal causes of action. HUD removed. The parties stipulated to the
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dismissal of HUD.
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On February 2, 2016, Wells Fargo filed a motion to dismiss, in which Evergreen, Steven,
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and U.S. Bank joined. (ECF No. 36.) The Court granted the motion, with leave to amend certain
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claims. (ECF No. 53.) On July 14, 2016, LVDG filed a First Amended Complaint (“FAC”),
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reasserting only its claims for quiet title, unjust enrichment, slander of title, and conversion.
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(ECF No. 66.) Wells Fargo then moved to dismiss the FAC for failure to state a claim under Rule
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12(b)(6). (ECF No. 79.) Evergreen, Steven, and U.S. Bank once again joined in Wells Fargo’s
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motion to dismiss. (ECF No. 81.)
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On December 6, 2016, the Court granted the motion to dismiss, holding in part that the
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HOA’s foreclosure sale could not have extinguished the DOT because the sale was conducted
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pursuant to NRS 116.3116, and the Ninth Circuit had recently ruled in Bourne Valley Court
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Trust v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), that the statute’s opt-in notice
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provisions are facially unconstitutional. LVDG now argues that the Court committed error in
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granting the motion to dismiss on this basis, and asks the Court to reconsider its ruling. (Mot.
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Recon., ECF No. 95.)
II.
LEGAL STANDARDS
Granting a motion to reconsider is an “extraordinary remedy, to be used sparingly in the
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interests of finality and conservation of judicial resources.” Carroll v. Nakatani, 342 F.3d 934,
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945 (9th Cir. 2003) (quoting 12 James Wm. Moore et al., Moore’s Federal Practice § 59.30[4]
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(3d ed. 2000)). “Reconsideration is appropriate if the district court (1) is presented with newly
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discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or
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(3) if there is an intervening change in controlling law.” Sch. Dist. No. 1J, Multnomah Cnty., Or.
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v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). In some cases, “other, highly unusual,
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circumstances” may also warrant reconsideration. Id.
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However, a motion to reconsider “may not be used to raise arguments or present evidence
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for the first time when they could reasonably have been raised earlier in the litigation.” Carroll,
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342 F.3d at 945; see also United States v. Lopez-Cruz, 730 F.3d 803, 811–12 (9th Cir. 2013).
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Moreover, “[a] motion to reconsider is not a second chance for the losing party to make its
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strongest case or to dress up arguments that previously failed.” United States v. Huff, 782 F.3d
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1221, 1224 (10th Cir.), cert. denied, 136 S. Ct. 537 (2015).
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III.
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ANALYSIS
a. The Scope and Effect of Bourne Valley
In Bourne Valley, the Ninth Circuit held that the “opt-in notice scheme” of NRS
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116.3116—included in the statute until its amendment in October 2015—was facially
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unconstitutional because it violated the procedural due process rights of mortgage lenders. In its
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ruling, the Court of Appeals found the state action requirement of the petitioner’s Fourteenth
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Amendment challenge was met, because “where the mortgage lender and the homeowners’
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association had no preexisting relationship, the Nevada Legislature’s enactment of the Statute is
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a ‘state action.’” Bourne Valley, 832 F.3d at 1160. In other words, because a mortgage lender
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and HOA generally have no contractual relationship, it is only by virtue of NRS 116.3116 that
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the mortgage lender’s interest is “degraded” by the HOA’s right to foreclose its lien. Id.
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Accordingly, by enacting the statute, the Legislature acted to adversely affect the property
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interests of mortgage lenders, and was thus required to provide “notice reasonably calculated,
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under all circumstances, to apprise interested parties of the pendency of the action and afford
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them an opportunity to present their objections.” Id. at 1159 (quoting Mennonite Bd. of Missions
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v. Adams, 462 U.S. 791, 795 (1983)). The statute’s opt-in notice provisions therefore violated the
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Fourteenth Amendment’s Due Process Clause because they impermissibly “shifted the burden of
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ensuring adequate notice from the foreclosing homeowners’ association to a mortgage lender.”
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Id. at 1159.
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The necessary implication of the Ninth Circuit’s opinion in Bourne Valley is that the
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petitioner succeeded in showing that no set of circumstances exists under which the opt-in notice
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provisions of NRS 116.3116 would pass constitutional muster. See United States v. Salerno, 481
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U.S. 739, 745 (1987) (“A facial challenge to a legislative Act is, of course, the most difficult
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challenge to mount successfully, since the challenger must establish that no set of circumstances
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exists under which the Act would be valid.”); see also William Jefferson & Co. v. Bd. of
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Assessment & Appeals No. 3 ex rel. Orange Cty., 695 F.3d 960, 963 (9th Cir. 2012) (applying
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Salerno to facial procedural due process challenge under the Fourteenth Amendment); Lopez-
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Valenzuela v. Arpaio, 770 F.3d 772, 789 (9th Cir. 2014) (applying Salerno to facial substantive
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due process challenge under the Fifth and Fourteenth Amendments). The fact that a statute
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“might operate unconstitutionally under some conceivable set of circumstances is insufficient to
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render it wholly invalid.” Id. To put it slightly differently, if there were any conceivable set of
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circumstances where the application of a statute would not violate the constitution, then a facial
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challenge to the statute would necessarily fail. See William Jefferson & Co., 695 F.3d at 963 (“If
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William Jefferson’s as-applied challenge fails, then William Jefferson’s facial challenge
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necessarily fails as well because there is at least one set of circumstances where application of
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§ 31000.7 does not violate a taxpayer’s procedural due process rights.”); United States v.
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Inzunza, 638 F.3d 1006, 1019 (9th Cir. 2011) (holding that a facial challenge to a statute
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necessarily fails if an as-applied challenge has failed because the plaintiff must “establish that no
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set of circumstances exists under which the [statute] would be valid”).
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Here, the Ninth Circuit expressly invalidated the “opt-in notice scheme” of NRS
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116.3116, which it pinpointed in NRS 116.31163(2). Bourne Valley, 832 F.3d at 1158; see also
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Bank of Am., N.A. v. SFR Investments Pool 1 LLC, No. 2:15-cv-691, 2017 WL 1043286, at *9
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(D. Nev. Mar. 17, 2017) (Mahan, J.) (“The facially unconstitutional provision, as identified in
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Bourne Valley, is present in NRS 116.31163(2).”). In addition, this Court understands Bourne
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Valley also to invalidate NRS 116.311635(1)(b)(2), which also provides for opt-in notice to
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interested third parties. According to the Ninth Circuit, therefore, these provisions are
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unconstitutional in each and every application; no conceivable set of circumstances exists under
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which the provisions would be valid. The factual particularities surrounding the foreclosure
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notices in this case—which would be of paramount importance in an as-applied challenge—
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cannot save the facially unconstitutional statutory provisions. In fact, it bears noting that in
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Bourne Valley, the Ninth Circuit indicated that the petitioner had not shown that it did not
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receive notice of the impending foreclosure sale. Thus, the Ninth Circuit declared the statute’s
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provisions facially unconstitutional notwithstanding the possibility that the petitioner may have
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had actual notice of the sale.
Accordingly, the HOA foreclosed under a facially unconstitutional notice scheme, and
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thus the HOA foreclosure cannot have extinguished the DOT.
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b. LVDG’s Motion to Reconsider (ECF No. 95)
LVDG has not presented a basis for the Court to reconsider its order. There is no newly
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discovered evidence, the Court did not commit clear error, and there has been no intervening
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change in controlling law. LVDG asserts that the Nevada Supreme Court recently ruled contrary
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to Bourne Valley. See Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortg.,
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388 P.3d 970, 974 (Nev. 2017). But state court rulings on federal issues (i.e., the constitutionality
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of NRS Chapter 116 under the U.S. Constitution) are only potentially persuasive authority. The
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Ninth Circuit’s rulings are binding on this Court. Moreover, to the extent LVDG now raises
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arguments it failed to raise in response to the motion to dismiss, the Court declines to consider
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them. A motion to reconsider “may not be used to raise arguments or present evidence for the
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first time when they could reasonably have been raised earlier in the litigation.” Carroll, 342
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F.3d at 945; see also United States v. Lopez-Cruz, 730 F.3d 803, 811–12 (9th Cir. 2013).
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CONCLUSION
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IT IS HEREBY ORDERED that the Motion to Reconsider (ECF No. 95) is DENIED.
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IT IS SO ORDERED.
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DATED: This 23rd day of May, 2017.
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_____________________________________
ROBERT C. JONES
United States District Judge
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