R.Q.C. LTD. v. JKM ENTERPRISES, INC. et al
Filing
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OPINION. Signed by Judge Mark R. Hornak on 9/23/14. (bdb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYL VANIA
R.Q.C. LTD. d/b/a REMBRANDT
CHARMS
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Plaintiff,
v.
Civil Action No.1: 13-cv-307 Erie
Judge Mark R. Hornak
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JKM ENTERPRISES, INC. d/b/a CHARMS
PLUS and PAUL T. MACHIELS,
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Defendant.
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OPINION
Mark R. Hornak, United States District Judge
Pending before the Court is a Motion to Dismiss for lack of personal jurisdiction pursuant
to Federal Rule of Civil Procedure 12(b)(2) filed by Defendants JKM Enterprises d/b/a Charms
Plus ("Charms Plus") and Paul T. Machiels ("Machiels") (collectively, "Defendants"). ECF No.
17. For the reasons which follow, Defendants' Motion is denied.
I.
BACKGROUND
Plaintiff R.Q.C. Ltd. ("RQC") is a New York corporation that designs and manufactures
charms and charm bracelets for sale to retailers. CompI.
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2. Charms Plus is a North Carolina
wholesale company that also sells charms and charm bracelets to retail companies. Id
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5.
Machiels, a citizen of North Carolina, is the owner and Vice President of Charms Plus. Id
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7;
Machiels Aff.
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1.
RQC contends that Defendants have copied, reproduced, and sold charms that are
substantially similar in design and presentation to those marketed and sold by RQC. CompI.
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18-22. RQC also maintains that Defendants are using the same unique names used by RQC to
describe the charms. Id RQC has registered the vast majority of the charms at issue with the
United States Copyright Office; many others are the subject of pending copyright registration
applications.
Id.
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15-17.
Consequently, RQC asserts that Defendants have unlawfully
reproduced their copyrighted charm designs in violation of the United States Copyright Act of
1976, 17 U.S.c. §§ 101 et seq., and state unfair competition law.
Apropos to the instant motion, it is undisputed that Charms Plus is not incorporated in
Pennsylvania and does not own or lease real estate, pay taxes, maintain any offices, or have any
employees in Pennsylvania. Machiels Aff.
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4.
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2. The same is true of Machiels individually. Id.
Consequently, RQC relies entirely upon Defendants' online activities as a basis for
exercising personal jurisdiction over Charms Plus and Machiels in Pennsylvania.
These
activities include advertising on social media and operating an interactive website,
www.jkmcharmsplus.com. through which Defendants market and sell the allegedly infringing
charms. Subjeck Decl.
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3; Subjeck DecL Ex. A. The website includes links and forms that
allow potential customers to view merchandise, contact the seller for more information, contact
the seller to place an order through an "Order Form," and submit a credit application. Id.
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4-5;
Subjeck Decl. Ex. B-C. According to Machiels, Charms Plus realized approximately $55,000 in
revenue from sales to Pennsylvania residents over the past five years, a figure representing 2.2%
of its total sales revenue. Machiels Aff.
II.
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3.
STANDARD FOR REVIEW
Rule 12(b)(2) of the Federal Rules of Civil Procedure permits a court to dismiss a
complaint for lack of personal jurisdiction. FED. R. CIV. P. 12(b)(2).
Once a challenge to
personal jurisdiction has been fairly raised, the plaintiff has the burden of establishing
"jurisdictional facts through sworn affidavits or other competent evidence." Patterson v. FB.!.,
893 F .2d 595, 604 (3 rd Cir. 1990) (citation omitted). Specifically, the plaintiff carries the burden
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of proving "either that the cause of action arose from the defendant's forum-related activities
(specific jurisdiction) or that the defendant has 'continuous and systematic' contacts with the
forum state (general jurisdiction)." Mellon Bank (East) PSFS, ,vA. v. Di Veronica Bros., Inc.,
983 F.2d 551, 554 (3 rd Cir. 1993) (citations omitted). I
In reviewing a motion to dismiss for lack of personal jurisdiction, the Court must accept
as true all allegations in the complaint. See D'Jamoos v. Pilatus Aircraft Ltd., 566 F.3d 94, 102
(3
rd
Cir. 2009); Marten v. Godwin, 499 FJd 290, 295-96 (3 rd Cir. 2007). However, "a plaintiff
may not solely rely on bare pleadings to satisfy his jurisdictional burden. Rather, the plaintiff
must offer evidence that establishes with reasonable particularity sufficient contact between the
defendant and the forum state to support jurisdiction." Square D Co. v. Scott Elec. Co., 2008
WL 4462298, *3 (W.D. Pa. Sept. 30, 2008) (quotations omitted). Disputes of fact created by
affidavits and depositions "are generally resolved in favor of the non-moving party." McMullen
v. European Adoption Consultants, Inc., 129 F.Supp.2d 805, 810 (W.D. Pa. 2001) (quoting
Elbeco Inc. v. Estrella de Plato, Corp., 989 F.Supp. 669, 673 n. 3 (E.D. Pa.l997)).
III.
DISCUSSION
Federal courts "may assert personal jurisdiction over a nonresident of the state in which
the court sits to the extent authorized by the law of that state." D'Jamoos, 566 F.3d at 102
(quoting Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434,436 (3 rd Cir.
1987». This determination entails a two-step inquiry. First, the court must determine whether
the long-arm statute of the forum allows courts of that state to exercise jurisdiction over the
defendant. FED. R. CIV. P. 4(e)(l). Second, if the forum state allows jurisdiction, the court must
I Where general jurisdiction exists, the forum state may exercise personal jurisdiction over the non-resident
defendant even for non-forum-related activities. Specific jurisdiction, on the other hand, allows for the exercise of
personal jurisdiction over a non-resident defendant only for actions arising out of or relating to the defendant's
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contact with the forum. See Mellon Bank (East) PSFA, Nat'/ Assn. v. Farino, 960 F.2d 1217, 1221 (3 Clr. 1992).
Because there is no claim of general jurisdiction in this case, the Court need only consider whether it may exercise
specific jurisdiction over the Defendants.
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detennine whether exerclSlng personal jurisdiction over the defendant in a given case is
consistent with the Due Process Clause of the United States Constitution. See IMO Industries,
Inc. v. Kiekert AG, 155 FJd 254, 259 (3 rd Cir. 1998).
Pennsylvania's long-ann statute provides that jurisdiction may be exercised "to the fullest
extent allowed under the Constitution of the United States and may be based on the most
minimum contact with this Commonwealth allowed under the Constitution of the United States."
42 Pa.C.S.A. § 5322(b) (1981). Thus, because Pennsylvania's long-ann statute is coextensive
with the dictates of the United States Constitution, the traditional two-step analysis is collapsed
into a single inquiry: "whether the exercise of personal jurisdiction would confonn with the Due
Process Clause." Poole v. Sasson, 122 F.Supp.2d 556, 558 (E.D. Pa. 2000); see also Renner v.
Lanard Toys Limited, 33 F.3d 277,279 (3d Cir. 1994) ("[T]his court's inquiry is solely whether
the exercise of personal jurisdiction over the defendant would be constitutional."). Due process
requires that the defendant have "minimum contacts" with the forum state. Remick v. Manfredy,
238 F.3d 248, 255 (3 rd Cir. 2001) (quoting International Shoe Co. v. Washington, 326 U.S. 310,
316 (1945)).
"Minimum contacts must have a basis in 'some act by which the defendant
purposefully avails itself of the privilege of conducting activities within the forum state, thus
invoking the benefits and protections of its laws.'" Remick, 238 F.3d at 255 (quoting Asahi Metal
Indus. Co., Ltd. v. Superior Court o/California, 480 U.S. 102, 109 (1987)).
In detennining whether specific personal jurisdiction exists, courts are directed to
undertake a three-part inquiry. See D'Jamoos, 566 F.3d at 102; Marten, 499 F.3d at 296. First,
the defendant must have "purposefully directed [its] activities" at the forum. Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 472 (1985) (internal quotation marks omitted); see Walden v. Fiore,
134 S.Ct. 1115, 1121-22, n.6 (2014). Second, "the litigation must 'arise out of or relate to' at
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least one of those activities." D'Jamoos, 566 F.3d at 102 (quoting Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984». Finally, if the first two requirements have
been met, a court may consider whether the exercise of jurisdiction would otherwise comport
with principles of "fair play and substantial justice." Burger King, 471 U.S. at 476.
As courts have frequently lamented, personal jurisdiction issues are "more complicated
when a defendant's contact with the forum state is primarily done through internet contacts."
Planet Goalie, Inc. v. Monkeysports, Inc., 2011 WL 3876178, *3 (M.D. Pa. Sept. 1,2011). The
seminal opinion in this regard is Zippo Mfg. Co. v. Zippo DOT Com, 952 F.Supp. 1119 (W.D. Pa.
1997). In Zippo, this court established a "sliding scale" analytical framework for internet-based
personal jurisdiction cases based upon the "level of interactivity and commercial nature of the
exchange of information that occurs on the Web site." Id. at 1124. The court explained:
[T]he likelihood that personal jurisdiction can be constitutionally
exercised is directly proportionate to the nature and quality of
commercial activity that an entity conducts over the Internet. This
sliding scale is consistent with well developed personal jurisdiction
principles. At one end of the spectrum are situations where a defendant
clearly does business over the Internet. If the defendant enters into
contracts with residents of a foreign jurisdiction that involve the knowing
and repeated transmission of computer files over the Internet, personal
jurisdiction is proper. At the opposite end are situations where a
defendant has simply posted information on an Internet Web site which
is accessible to users in foreign jurisdictions. A passive Web site that
does little more than make information available to those who are
interested in it is not grounds for the exercise personal jurisdiction. The
middle ground is occupied by interactive Web sites where a user can
exchange information with the host computer. In these cases, the
exercise of jurisdiction is determined by examining the level of
interactivity and commercial nature of the exchange of information that
occurs on the Web site.
Id. at 1124. The Third Circuit endorsed this general framework in Toys "R" Us, Inc. v. Step
Two, S.A., 318 F.3d 446 (3 rd Cir. 2003), but clarified that the plaintitTmust also provide evidence
of "the intentional nature of the defendant's conduct vis-a.-vis the forum state." Id. at 452. In
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other words, "there must be some evidence that the defendant 'purposefully availed' itself of
conducting activity in the forum state, by directly targeting its website to the state, knowingly
interacting with residents of the forum state via its website, or through sufficient other related
contacts." Id. at 454. 2
In the wake of Zippo and Toys "R" Us, most courts have concluded that a defendant that
intentionally conducts business transactions over an interactive website with customers in the
forum state has purposefully directed itself of the laws of that forum. In Square D, for example,
the defendant's website contained links providing "a [telephone] number and e-mail address for
the purpose of placing an order," information concerning product warranties, and a link that
permitted a potential purchaser to "submit a form specifying the manufacturer, catalog number,
and quantity of the product to be purchased, as well as the purchaser's company name, phone,
fax and e-mail." Square D., 2008 WL 4462298 at *3. There was also a space on the form for
additional "comments" concerning a proposed transaction. Id. Although a customer could not
directly order products using only the website, customers could "commence the ordering
process" by "provid[ing] much of the same type of information that would be required for an
order (e.g., manufacturer, quantity, catalog number, contact information)." Id. at *8. Indeed, the
court noted that the website had produced "twenty-four (24) Pennsylvania customers and a total
of$]0,238.25 in sales" for the defendant. Id. at *9. Although this amount represented "less than
1%" of the defendant's total sales, the Court concluded that it was sufficient to establish personal
jurisdiction in the state of Pennsylvania. Id. As explained by the court:
The website was more than a mere advertisement; rather, it was an
interactive site that allowed customers to take the first step in an ordering
process that could be completed with one phone call or e-mail. By
knowingly selling and shipping a product that is at issue in this litigation
2 These
principles appear to be entirely consistent with the Supreme Court's decision and reasoning in Walden, 134
S.Ct. at 1125, n.9.
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to a customer [in] Pennsylvania, the Moving Defendants purposefully
availed themselves of the laws and privileges of this forum.
Id. at *11.
Willyoung v. Colorado Custom Hardware, Inc. is similarly instructive. Willyoung, 2009
WL 3183061 (W.D. Pa. Sept. 30,2009). In Willyoung, the website at issue allowed visitors to
"request a catalog by supplying certain information according to the website prompts, contact the
company directly bye-mail, subscribe to [defendant's] on-line newsletter, and search, view, and
select products for on-line purchase via a 'shopping cart. '" Id. at * 12. Over a two-year period,
Pennsylvania customers had utilized the website to place 211 orders amounting to $41,566.05 in
sales. ld. Based on the foregoing, the court concluded that the defendant had purposefully
availed itself of the privilege of conducting business in the state of Pennsylvania by
"intentionally and repeatedly engag[ing] in internet-based sales of its products to Pennsylvania
residents via its website." Id. at * 13. Other courts have frequently reached the same conclusion.
See also Gentex Corp. v. Abbott, 978 F.Supp.2d 391, 398 (M.D. Pa. 2013) (finding personal
jurisdiction where non-resident defendant's interactive website was used by Pennsylvania
residents to place at least 17 orders over a three-year period); TRE Services, Inc. v. US. Bellows,
Inc., 2012 WL 2872830, *4-5 (W.D. Pa. July 12, 2012) (finding personal jurisdiction based on
defendant's commercially interactive website that accepted orders from Pennsylvania); Gourmet
Video, Inc. v. Alpha Blue Archives, Inc., 2008 WL 4755350, *3 (D. N.J. Oct. 29, 2008)
("Personal jurisdiction is properly exercised over a defendant using the Internet to conduct
business in the forum state."); L 'Athene, Inc. v. EarthSpring LLC, 570 F. Supp. 588, 593-94 (D.
Del. 2008) (defendants purposely availed themselves of doing business in state of Delaware
where they operated a website accessible in Delaware, received orders and payments from
customers in Delaware, and shipped their products to Delaware).
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After considering the foregoing caselaw and the available evidence, the Court readily
concludes that Charms Plus purposefully availed itself of the opportunity to conduct business
with Pennsylvania citizens via its website. As demonstrated by the screen captures attached as
exhibits by RQC, visitors to the Charms Plus website can view merchandise, contact the seller
for more information, submit an application to purchase merchandise on credit, and initiate the
ordering process by utilizing the "Order Form" on the website to specify the "items to be
ordered." Subjeck Decl.
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3; Subjeck Decl. Ex. B-C. In this regard, the website is clearly
interactive. See, e.g., Square D., 2008 WL 4462298 at *8-11; Willyoung, 2009 WL 3183061 at
* 13.
Moreover, there is ample evidence of the type of "intentional interaction with the forum
state" required by the Third Circuit for the exercise of personal jurisdiction. See Toys "R" Us,
318 F.3d at 451-52 (requiring evidence that the defendant has "intentionally interact[ed] with the
forum state).
Machiels' affidavit indicates that Charms Plus totaled $55,000 in sales to
Pennsylvania residents over the past five years. Machials Aff.
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3. At any probable price point,
this figure represents thousands of sales of charms to Pennsylvania residents. See Arcadipane
Decl.
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12. Moreover, a representative of RQC has submitted a declaration indicating that she
recently encountered an entire display of Charms Plus' allegedly infringing charms in the
merchandise of a Pennsylvania retail jewelry store. Id.
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4-10. Based on this evidence, it is
apparent that Charms Plus "repeatedly and consciously chose to process Pennsylvania residents'
applications" for orders of its products. See Toys "R" Us, 318 F.3d at 452 (quoting Zippo, 952
F. Supp. at 1126).
Defendants contend that jurisdiction is unfounded because only 2.2% of Charms Plus'
total sales revenue stemmed from sales to Pennsylvania residents. According to Defendants, the
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exiguity of this percentage belies any suggestion that it specifically targeted Pennsylvania
residents with its internet activities. Courts have repeatedly rejected similar arguments. See,
e.g., Square D., 2008 WL 4462298 at *9 n. 10 (concluding that an amount equal to less than 1%
of overall sales was sufficient to establish minimum contacts); Zippo, 952 F.Supp. at 1127
(exercising personal jurisdiction despite that only 2% of the defendant's customers were
Pennsylvania residents); L 'Athene, 570 F. Supp. 2d at 593-94 (exercising personal jurisdiction
despite that sales to the forum state constituted less than 1% of defendants' total annual sales
based on units sold). As noted in Zippo, "[t]he Supreme Court has made clear that even a single
contact can be sufficient." Zippo, 952 F.Supp. at 1127 (citing McGee v. Int'l Life Ins. Co., 355
U.S. 220, 223 (1957)); see also Square D., 2008 WL 4462298 at *9 n. 10 (noting that, while an
argument based on a minute number of overall sales might be "valid in the context of general
jurisdiction, in the context of specific jurisdiction it is evidence that supports Plaintiff's argument
that the Moving Defendants purposefully availed themselves of the laws and privileges of
Pennsylvania by selling and shipping products to residents of the Commonwealth.").
Having determined that Defendants purposefully availed themselves of the privilege of
conducting business with Pennsylvania residents through their website, the Court must next
consider whether this litigation "arise[s] out of and relate[s] to" those sales. D 'Jamoos, 566 F.3d
at 102. This requirement is readily satisfied because the allegedly infringing charms identified
by RQC are the precise same charms marketed and sold by Charms Plus to Pennsylvania
residents through its website. See, e.g., Willyoung, 2009 WL 3183061 at * 13 ("The second part
of our jurisdictional inquiry is also easily satisfied because this litigation arises out of and relates
to BGM's use of its web site to conduct internet-based sales of its merchandise to Pennsylvania
residents.") (internal quotation marks omitted); Square D., 2008 WL 4462298 at *11 (finding the
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relatedness requirement satisfied where "at least one" of the products sold to a Pennsylvania
resident by the defendant was from the allegedly infringing line of products at issue in the
litigation).
Finally, the Court must consider whether the exercise of jurisdiction would otherwise
comport with "traditional notions of fair play and substantial justice." 0 'Connor, 496 F .3d at
316 (quoting Int '[ Shoe, 326 U.S. at 316). Because the existence of minimum contacts makes
jurisdiction presumptively constitutional, the defendant at step three of the specific-jurisdiction
inquiry process "must present a compelling case that the presence of some other considerations
would render jurisdiction unreasonable." Id
(quoting Burger King, 471 U.S. at 477). The
burden upon the defendant at this stage of the inquiry is considerable. See Pennzoil Prods. Co. v.
Colelli & Assocs., Inc., 149 F.3d 197, 207 (3 Td Cir. 1998) (noting that if minimum contacts are
present, then jurisdiction will be unreasonable only in "rare cases"); Grand Entm 'I Group, Ltd v.
Star Media Sales, Inc., 988 F.2d 476,483 (3 rd Cir. 1993) ("The burden on a defendant who
wishes to show an absence of fairness or lack of substantial justice is heavy."). As the Third
Circuit has observed:
The Supreme Court has identified several factors that courts should
consider when balancing jurisdictional reasonableness. Among them are
the burden on the defendant, the forum State's interest in adjudicating
the dispute, the plaintiff s interest in obtaining convenient and effective
relief, the interstate [and international] judicial system's interest in
obtaining the most efficient resolution of controversies, and [t]he
procedural and substantive interests of other nations.
O'Connor, 496 F .3d at 324 (internal quotations omitted).
Notably, Defendants have intentionally declined to address this element in their motion to
dismiss and responsive brief. As such, they have failed to meet the "heavy" burden imposed
upon them at this stage. Grand Entm't Group, 988 F.2d at 483. In any event, the Court is
satisfied that several factors weigh in favor of the exercise of personal jurisdiction in the instant
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case. Foremost among these are Plaintiffs interest in obtaining convenient and effective reliefin
the forum of its choice and Pennsylvania's interest in protecting its citizens from the sale of
infringing goods within its borders. See Square D., 2008 WL 4462298 at *12 (concluding that
jurisdiction should be exercised in Pennsylvania "because the counterfeit goods in question
potentially pose a danger to the public and were sold to residents of this Commonwealth.");
Zippo, 952 F.Supp. at 1127 (noting Pennsylvania's strong interest in resolving trademark
infringement claims implicating its citizens and giving "due regard to the Plaintiff's choice to
seek relief in Pennsylvania"). As the court noted in Zippo, "[i]f [the defendant] had not wanted
to be amenable to jurisdiction in Pennsylvania, the solution would have been simple - it could
have chosen not to sell its [products] to Pennsylvania residents." Id. at 1126-27.
Finally, RQC asserts that the Court may appropriately exercise personal jurisdiction over
Machiels individually because, as the owner of Charms Plus, Machiels directed and authorized
the sale of infringing charms to Pennsylvania residents. In support of this proposition, RQC
directs the Court to Machiels' Linkedln page and several advertisements identifying Machiels as
the owner (and public face) of Charms Plus. See Subjeck Decl.
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7-8; Subjeck Dec!. Ex. A, E,
F. Notably, although Machiels contends that RQC's evidence is unsupported and speculative,
Machiels does not refute those allegations in his affidavit or supply any evidence to rebut the
suggestion that he directed and controlled Charms Plus' allegedly infringing activities. See
Machiels Aff.
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1-4. Consequently, the Court concludes that it may properly exercise specific
personal jurisdiction over Machiels at this stage in the proceedings.
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IV.
CONCLUSION
For the foregoing reasons, Defendants' Motion to Dismiss is denied. An appropriate
order will issue.
Mark R. Hornak
United States District Judge
Dated: September 23,2014
cc:
All counsel of record
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