Prachun et al v. CBIZ Benefits & Insurance Services, Inc. et al
Filing
46
ORDER granting 8 Motion to Stay pending arbitration. The parties shall proceed to arbitration for a disposition of all of their claims. Signed by Judge Algenon L. Marbley on 9/3/2015. (cw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
PAUL AND LINDA PRACHUN,
Plaintiffs,
v.
CBIZ BENEFITS & INSURANCE
SERVICES, INC., et al.,
Defendant.
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Case No. 2:14-CV-2251
JUDGE ALGENON L. MARBLEY
Magistrate Judge Terence P Kemp
OPINION & ORDER
This matter is before the Court on Defendant Riverside Radiology and Interventional
Associates, Inc.’s1 (hereinafter “RRIA”) Motion to Stay Proceedings and to Compel Arbitration
pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. (Doc. 8). Defendant argues
that negligence claims fall within their arbitration agreement with Dr. Prachun, and this Court
should stay Plaintiffs’ claims pending resolution of those claims in arbitration. Plaintiffs respond
that their dispute with Defendant does not arise out of or relate to the employment agreements
with Dr. Prachun, and thus they are not required to resolve such disputes pursuant to the
arbitration clause within the employment agreement. For the reasons set forth herein,
Defendant’s Motion is GRANTED.
I.
BACKGROUND
In May 2011, RRIA hired Dr. Paul Prachun as a radiologist. At the time Dr. Prachun was
hired, and during the course of his employment, he signed two Employment Agreements (the
“Agreements”) with RRIA. Both parties signed and consented to the Agreements, and both
1
The other defendant, CBIZ Benefits & Insurance Services, Inc., does not join in this motion.
1
Agreements contain arbitration clauses. The first agreement2 was signed by both parties on
March 15, 2011, wherein both agreed that:
any and all disputes, controversies or claims arising out of or relating to this
Agreement or Employee’s employment by the Company shall be settled by
arbitration. The arbitration shall take place in Columbus, Ohio and shall be
conducted pursuant to the then-existing Commercial Arbitration Rules of the
American Arbitration Association. The arbitration shall be before the threemember panel, one appointed by Employee, one appointed by the Corporation,
and the third appointed by the two so chosen, and all of whom shall be
professionals experienced in the health care industry, either as physicians,
administrators, attorneys, consultants or other advisors.
(Doc 8-1 at 14). Both parties signed the second agreement on May 9, 2012, wherein both parties
agreed that:
any and all disputes, controversies or claims arising out of or relating to this
Agreement or Physician’s engagement by the Company shall be settled by
arbitration. The arbitration shall take place in Columbus, Ohio and shall be
conducted pursuant to the then-existing Commercial Arbitration Rules of the
American Arbitration Association (“AAA”). The arbitration shall be before a
single neutral arbitrator, who shall be (i) a professional experienced in the health
care industry, either as physician, administrator, attorney, consultant or other
advisor, and (ii) selected by mutual agreement. Absent agreement, any party may
petition AAA to appoint the arbitrator.
(Doc. 8-1 at 23).
On May 9, 2013, Dr. Prachun retired from RRIA. (Doc. 2 at 3). On May 16, 2013, Dr.
Prachun applied for Medicare Part B coverage during the Special Enrollment Period. Id. On or
about July 12, 2013, Dr. and Mrs. Prachun were advised that Dr. Prachun was not eligible to
enroll in Medicare Part B because he was not “actively employed” at RRIA. Id. Following the
denial of medical benefits, Plaintiffs filed a complaint in the Franklin County Court of Common
Pleas against RRIA, alleging Defendant breached a duty owed to Dr. Prachun to provide
competent and informed advice with respect to his medical insurance coverage. Specifically,
2
The first Agreement’s original term was defined as “[on]e (1) year from the date Employee first provides full-time
services to the Corporation.” (Doc 8-1 at 16).
2
Plaintiffs claim Defendant was negligent in allowing him to “drop his Medicare Part B coverage
while employed at RRIA, by failing to advise him that Continuation Coverage under COBRA
would be secondary to Medicare and by failing to advise that he was not eligible for Medicare
Part B benefits following his retirement.” Id. In addition, Plaintiffs claim that Defendant
breached an alleged duty to avoid causing Dr. Prachun and his spouse severe emotional distress.
Id. Pursuant to Defendant’s motion, this case was removed to federal court.
On February 2, 2015, the Magistrate Judge found, and this Court upheld, that the
Employee Retirement Income Security Act (“ERISA”) preempted Plaintiffs’ claim for benefits,
supporting the existence of federal jurisdiction in this case and the propriety of removal. (Doc.
21). Plaintiffs’ “claim is for benefits by a plan participant; it is cognizable under [29 USC]
§1132; and it is therefore completely preempted, even if phrased in terms of negligence.” (Id. at
10).
II.
MOTION TO COMPEL ARBITRATION STANDARD OF REVIEW
Under the FAA, “[a] written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle a controversy thereafter . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. Courts have “described this provision as reflecting
both a “liberal federal policy favoring arbitration.” AT&T Mobility LLC v. Concepcion, 131 S.
Ct. 1740, 1745-46, 179 L.Ed.2d 742 (2011) (citing Moses H. Cone Mem’l Hosp. v. Mercury
Const. Corp., 460 U.S. 1, 24 (1983)). Except where “the parties clearly and unmistakably
provide otherwise,” it is “the court’s duty to interpret the agreement and to determine whether
the parties intended to arbitrate grievances concerning” a particular matter. Granite Rock Co. v.
Int'l Bhd. of Teamsters, 561 U.S. 287, 295 (2010) (citing AT & T Technologies, Inc. v. Commc'ns
Workers of Am., 475 U.S. 643, 651 (1986)). The courts “discharge this duty by: (1) applying the
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presumption of arbitrability only where a validly formed and enforceable arbitration agreement is
ambiguous about whether it covers the dispute at hand; and (2) adhering to the presumption and
ordering arbitration only where the presumption is not rebutted.” Id. In examining the contract to
determine whether arbitration must be compelled, the court:
[f]irst, must determine whether the parties agreed to arbitrate; second, it must
determine the scope of that agreement; third, if federal statutory claims are
asserted, it must consider whether Congress intended those claims to be
nonarbitrable; and fourth, if the court concludes that some, but not all, of the
claims in the action are subject to arbitration, it must determine whether to stay
the remainder of the proceedings pending arbitration.
Fazio v. Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003) (citing Stout v. J.D. Byrider, 228
F.3d 709, 714 (6th Cir. 2002)).
Under the terms of the FAA, “the Act leaves no place for the exercise of discretion by a
district court, but instead mandates that district courts shall direct the parties to proceed to
arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original).
In evaluating motions to compel arbitration, “courts treat the facts as they would in ruling
on a summary judgment motion, construing all facts and reasonable inferences that can be drawn
therefrom in a light most favorable to the non-moving party.” Jones v. U-HAUL Co. of Mass.
and Ohio, Inc., No. 2:13-CV-1265, 2014 WL 1670099, at *4 (S.D. Ohio April 23, 2014) (citing
Raasch v. NCR Corp., 254 F. Supp. 2d 847, 851 (S.D. Ohio 2003)).
III.
ANALYSIS
Pursuant to the FAA, Defendant moves this Court to stay the proceedings and to order
arbitration in accordance with the parties’ Agreements. (Doc. 8 at 1). In support of its motion,
Defendant argues that the arbitration clauses in the Agreements must be enforced by this Court
because: (1) Dr. Prachun’s agreement to arbitrate is enforceable under the FAA; (2) the
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Plaintiffs’ claims are within the scope of the Agreement; and (3) Mrs. Prachun’s claim is a
derivative of Dr. Prachun’s potential claim and should be arbitrated. Id. Further, Defendant
points to the language within the Agreement that states “any and all disputes, controversies or
claims arising out of or relating to this Agreement or Employee’s employment by the Company
shall be settled by arbitration.” (Doc. 8-1 at 14:23).
Plaintiffs respond that their dispute with the Defendant does not arise out of or relate to
the Agreements or to Dr. Prachun’s employment with RRIA. (Doc. 14 at 2). Instead, Plaintiffs
argue that the disputes pertain to the Defendant’s breach of its duty to properly advise Plaintiff
with respect to medical coverage. Id. Plaintiffs contend that this duty is irrespective of the
employment contracts. Id.
This Court must apply the four-part Stout test to determine whether arbitration must be
compelled according to the employment Agreements between the parties.
A.
Enforceability of the Arbitration Agreement
Under the first prong of the Stout test, the Court must determine whether the parties
agreed to arbitrate. 228 F.3d at 714. Enforceability of an arbitration agreement is reviewed
“according to applicable state law of contract formation.” Morrison v. Circuit City Stores, Inc.,
317 F.3d 646, 666 (6th Cir. 2003) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
943–44 (1995)). Contract defenses such as “fraud, forgery, duress, mistake, lack of consideration
or mutual obligation, or unconscionability, may invalidate arbitration agreements.” Cooper v.
MRM Inv. Co., 367 F.3d 493, 498 (6th Cir. 2004). If the Court is “satisfied that the making of the
agreement for arbitration . . . is not [at] issue,” the Court shall order the parties to arbitration “in
accordance with the terms of the agreement.” 9 U.S.C. § 4.
Plaintiffs do not allege that Dr. Prachun entered into the Agreement unknowingly or
involuntary, or that Defendant ever threatened or coerced him. Furthermore, Plaintiffs do not
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assert any state contract defenses that would invalidate the arbitration agreement. Rather,
Plaintiffs argue that the arbitration agreement should not be enforced under these circumstances
because the underlying dispute pertains to Defendant’s negligence, not Plaintiff’s employment.
Accordingly, the Court concludes that the Agreements are enforceable.
B.
Scope of the Agreement
Under the second prong of the Stout test, the Court must determine the scope of the
agreement. Stout, 228 F.3d at 714. Generally, employment contracts fall under the FAA and the
agreement can subject all employment-related claims to arbitration. See Byrd v. CIGNA
Healthcare, No. 1:00-CV-337, 2002 WL 32059026, at *4 (E.D. Tenn. Feb. 8, 2002) (citing
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001)). For an arbitration to be imposed, all
claims sought must fall within the scope of the terms agreed to by the parties. Moses H. Cone
Mem’l Hosp., 460 U.S. at 24–25.
Plaintiffs claim that the arbitration agreement provision should not apply because their
negligence claims exceed the scope of the arbitration agreement. In Parsley, the District Court
outlined a two- step process to determine the scope of an arbitration agreement. Parsley v.
Terminex Int’l Co, L.P., No. C-3-97-394, 1998 WL 1572764, at *6 (S.D. Ohio. Sept. 15, 1998)
(Rice, J.). “First, the Court must determine the breadth of the arbitration agreement provision.
Second, the Court must conclude whether the claims fit within the scope of the provision.” Id.
1. Breadth of the Arbitration Provision
Both Agreements provide that “any and all disputes, controversies or claims arising out
of or relating to this Agreement or Employee’s employment by the Company shall be settled by
arbitration.” (Doc. 8-1 at 14, 23). Federal courts have interpreted the phrase “arising out of or
relating to” as broadly applying to tort actions, rendering such claims arbitrable under arbitration
agreements. See, e.g., Parsley, 1998 WL 1572764, at *6 (finding that plaintiff’s wrongful death
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action fit within the scope of “arising out of or relating to” language in arbitration agreement
contained within a contract for terminate extermination). Likewise, this Court takes a broad view
of the phrase “arising out of or relating to” and interprets it to “encompass all claims, contractual
or tort, touching on the contract.” Id.
2. Scope of the Arbitration Provision
In determining whether Plaintiffs’ negligence claims fit within the scope of “arising out
of or relating to” language, the Court must “focus on the factual allegations in the complaint
rather than the legal causes of action asserted, to determine whether the claims raised by Plaintiff
stem from performance of the agreement.” Id. (quoting Genesco, Inc. v. T. Kakiuchi & Co., Ltd.,
815 F.2d 840, 846 (2d Cir. 1987)) (internal quotation marks omitted). In addition, the Sixth
Circuit has stated broadly that “any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration.... If the matter at issue can be construed as within the scope of
the arbitration agreement, it should be so construed unless the matter is expressly exempted from
arbitration by the contract terms.” Simon v. Pfizer, Inc., 398 F.3d 765, 773 n. 12 (6th Cir. 2005)
(citations omitted). Moreover, claims that “‘hav[e] their origin or genesis” in a contract
containing a broad arbitration clause “arise out of’ that contract” “whether or not they implicate
interpretation or performance of the contract per se.” Highlands Wellmont Health Network, Inc.
v. John Deere Health Plan, Inc., 350 F.3d 568, 578 (6th Cir. 2003) (quoting Sweet Dreams
Unlimited, Inc. v. Dial-A-Mattress Int'l, Ltd., 1 F.3d 639, 641-42 (7th Cir. 1993)) (quotation
marks omitted.
RRIA argues that Plaintiffs’ negligence claims are covered under the employment
Agreement that Dr. Prachun agreed to during his employment. In support of its contention, RRIA
points to language contained in the 2011 Agreements providing: “Employee shall be entitled to
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participate in the various employee benefit programs provided by the Corporation to its
physician employees, as the same shall exist during the term of this Agreement, subject to
eligibility criteria and other terms and conditions contained in said programs,” (Doc 8-1 at 6), as
well as to language in the 2012 Agreement stating: “ [i]n addition to such compensation,
Physician shall be entitled to participate in the employee benefits program now in force or
hereafter established by the Company, including qualified retirements plans . . . .” (Doc 8 at 18).
The single inquiry is whether the alleged tortious breach by Defendant occurred within the scope
of the Agreement.
In Parsley, plaintiffs claimed that defendant, a termite exterminator plaintiffs had hired,
applied pesticides too close to their drinking water source, thus contaminating the water and
causing severe bodily injury. Parsley, 1998 WL 1572764, at *1. The Sixth Circuit determined
that the wrongful death and survival actions arose out of or related to the extermination
agreement between the two parties. Id. at *7. The Court relied on the broad language of the
arbitration clause and policy of resolving doubts in favor of arbitration. Id. Specifically, the
terms of the contract provided, in relevant part: “The Purchaser and Terminix agree that any
controversy or claim between them arising out of or relating to this agreement shall be settled
exclusively by arbitration.” Id. at *1. The Court determined that the plaintiff’s claims “stem from
the performance of the defendant’s contract to exterminate.” Id.
The same principles expressed in Parsley apply in employment contracts, as discussed in
McLean v. Byrider Sales of Indiana S, LLC, No. 2:13-CV-524, 2013 WL 4777199, at *1 (S.D.
Ohio Sept. 5, 2013) (Frost, J.). In that case, the plaintiff completed an employment application
for a posted management position at the company, Byrider. After learning that the plaintiff
would need to miss work one Friday each month for the next several years in order to fulfill his
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Army National Guard obligations, Byrider did not hire the plaintiff. Id. The plaintiff claimed the
defendant violated the Uniformed Services Employment and Reemployment rights Act
(“USERRA”), 38 U.S.C. § 4311, and Ohio Revised Code § 4112.02. Id. at *4. The District Court
determined that both claims fell within the scope of the arbitration agreement in the employment
application because the arbitration provisions covered “any and all claims, disputes, or
controversies arising out of or relating to [Plaintiff’s] application for candidacy for
employment.” Id.
The case upon which Plaintiffs rely in support of their contention is not applicable in the
present case. In Bentley v. Cleveland Browns Football Co., the Court found allegations of fraud
and negligent misrepresentation arising from bodily injury as a result of a football player’s
voluntary use of a team rehabilitation facility did not fall within the scope of a collective
bargaining agreement (“CBA”). 194 Ohio App. 3d 826, 832, 958 N.E.2d 585, 589 (8th Dis.
2011). It was undisputed that nothing in the CBA required Bentley to use the rehabilitation
facility. Id. Accordingly, the Court determined that “Bentley’s postsurgical rehabilitation would
not have contravened the CBA if he had chosen to go elsewhere;” therefore, “it would be
unnecessary to analyze the CBA to resolve the claims that arose from his contracting the staph
infection at the Cleveland Brown’s facility.” Id. The facts in Bentley are not analogues to the
present case. Unlike Bentley, this case involves tort claims that arise out of the employment
agreement between Dr. Prachun and RRIA. The negligence claims stem from allegations that
RRIA, as an employer, failed to provide competent advice in procuring medical insurance.
Furthermore, it is the behavior by RRIA, as an employer performing according to the terms of
the Agreements with Dr. Prachun, that caused Plaintiffs allegedly to suffer the tort of emotional
distress.
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Like the arbitable claims discussed above in Parsley, all of Plaintiffs’ claims flow from
Dr. Prachun’s employment relationship with Defendant. Plaintiffs’ entire Complaint is grounded
in Defendant’s conduct as his employer, and alleged breaches of the Agreements, and/or torts
related to the enforcement of the Agreements. As stated, the Agreements specifically cover
“benefits program[s] not in force or hereafter established by the Company.” (Doc. 8-1 at 2).
Considering “the broad language of the arbitration clause and the policy of resolving doubts in
favor of arbitration,” the Court finds that the phrase “arising out of or relating to” encompasses
all Plaintiffs’ claims here, both in contract and in tort. Parsley, 1998 WL 1572764, at *7.
The Court agrees with Defendants that Mrs. Prachun’s claim, as a bystander, for
negligent infliction of emotional distress as a result of RRIA’s alleged breach of duty are
similarly arbitable. It is undisputed that Mrs. Prachun was neither a signatory to the 2011
Agreement nor the 2012 Agreement. However, she seeks to make claims against RRIA that are
substantively the same as Dr. Prachun’s claims against RRIA. Mac Tools v. Diaz, No. 2:11-cv940, 2012 WL 1409395 at *5 (S.D. Ohio Apr. 23, 2012) (Smith, J.) (finding that plaintiff’s wife,
a nonsignatory, was bound by arbitration clause because she sought and expected benefit from
her husband’s agreement with defendant and their claims were substantively the same). The
Sixth Circuit has found that, “a nonsignatory may be bound to an arbitration agreement under an
estoppel theory when the nonsignatory seeks a direct benefit from the contract while disavowing
the arbitration provision.” Mac Tools, 2012 WL 1409395 at *5 (citing Javitch v. First Union
Sec., Inc., 315 F.3d 619, 629 (6th Cir. 2003)). Mrs. Prachun clearly expected to benefit from her
husband’s agreement with RRIA. Plaintiffs’ claims are inseparable insofar as they allege
misconduct and breach of duty by RRIA, thus both are bound to submit their claims against
RRIA to arbitration. Id. at *6.
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C.
Congressional Intent
Under the third prong of the Stout test, if federal statutory claims are asserted, the court
must consider whether Congress intended those claims to be nonarbitrable. Stout v. J.D. Byrider,
228 F.3d at 714. The Supreme Court provides guidance on determining Congressional intent:
The Arbitration Act, standing alone . . . mandates enforcement of agreements to
arbitrate statutory claims. Like any statutory directive, the Arbitration Act’s
mandate may be overridden by a contrary congressional command. The burden is
on the party opposing arbitration, however, to show that Congress intended to
preclude a waiver of judicial remedies for the statutory rights at issue. If Congress
did intend to limit or prohibit waiver of a judicial forum for a particular claim,
such intent will be deducible from the statute’s underlying purposes.
Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220 (1987). Plaintiffs allege that Defendant
breached its duty to properly advise Dr. Prachun with respect to medical coverage. This Court
has already determined that this claim falls within the scope of ERISA and is preempted by
ERISA. (Doc. 40). To override the Arbitration Act’s mandate in this case, the Plaintiffs must
demonstrate that Congress intended to make an exception to the Arbitration Act for claims
arising under ERISA. McMahon, 482 U.S. at 227. The Plaintiffs have not met their burden to
show ERISA claims are non-arbitable.
The Sixth Circuit has not spoken directly on whether ERISA preempts arbitration under
the FAA. See Simon, 398 F.3d 765, 775 (declining to answer whether ERISA preempts
arbitration under the FAA because the plaintiff’s ERISA claim did not fall within the narrow
scope of the arbitration clause). In Simon, the Sixth Circuit noted, however, that a majority of
courts considering whether ERISA preempts arbitration under the FAA have held that disputes
arising under ERISA, including COBRA claims, are subject to arbitration under the FAA. Id. at
774 (collecting cases). For example, in Bird v. Shearson Lehman/American Exp., Inc., the
participants and beneficiaries in a trust brought suit alleging breach of fiduciary duties under
ERISA after signing a standard customer agreement requiring submission to arbitration of all
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disputes relating to the trust fund or the contract. 926 F.2d 116, 117 (2d Cir. 1991).
Subsequently, the defendant filed a motion seeking a stay of the court proceeding in order to
submit the dispute to arbitration as required by the agreement. Id. at 118. In considering the
enforceability of the arbitration clause in the agreement, the court examined the text and the
legislative history of ERISA and found no evidence that Congress had intended to preclude the
use of a non-judicial forum for dispute resolution. Id. at 119. The court acknowledged the
language that Congress added to offer a measure of protection for employee benefit plan
participants by allowing them ready access to the federal court system. Id. at 120. However,
there was no explicit language in the statute that would indicate intent to preclude other forms of
dispute resolution. Id. The court held that when an enforceable agreement exists which requires
the use of arbitration to resolve disputes arising under ERISA, such an agreement is fully
enforceable under the provisions of the FAA. Id. at 122.
Furthermore, the Supreme Court has “repeatedly recognized that contractually required
arbitration of claims satisfies the statutory prescription of civil liability in court.” CompuCredit
Corp. v. Greenwood, 132 S.Ct. 665, 671 (2012). In CompuCredit Corp., the Court enforced an
arbitration agreement with respect to a cause of action created by the Credit Repair
Organizational Act (“CROA”) which was “silent on whether claims under the Act can proceed in
an arbitrable forum.” CompuCredit Corp., 132 S.Ct. at 673. The Court relied upon its previous
rulings that upheld arbitration agreements covering federal causes of action created by statutory
provisions.
Because (1) the asserted claim is within the scope of the Agreement; (2) ERISA is silent
on whether claims under the Act can proceed in an arbitrable forum; and (3) the authority of this
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Circuit and the Supreme Court suggests ERISA does not preempt the FAA, this Court finds
Plaintiffs’ ERISA claims arbitable.
D.
Stay
Under the fourth prong of the Stout test, the court must determine whether to stay the
remainder of the proceedings pending arbitration. All claims asserted by Plaintiffs are subject to
the arbitration provision in the Agreements. The court directs the parties to proceed to
arbitration.
IV.
CONCLUSION
For the reasons stated above, Defendant’s Motion to Compel Arbitration (Doc. 8) is
GRANTED and this case is STAYED pending arbitration. The parties shall proceed to
arbitration for a disposition of all of their claims.
.
IT IS SO ORDERED.
s/ Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
DATED: September 3, 2015
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