Watson v. ARC Management Group, LLC (JRG2)
Filing
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MEMORANDUM OPINION AND ORDER: For the reasons set forth herein, it is hereby ORDERED that the plaintiff's motion for partial summary judgment, [Doc. 33], is DENIED and the defendant's motion for summary judgment, [Doc. 41], is GRANTED. A separate judgment shall enter. Signed by District Judge J Ronnie Greer on 12/18/2017. (AMP)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT GREENEVILLE
SANDRA K. WATSON,
Plaintiff,
v.
ARC MANAGEMENT GROUP, LLC,
Defendant.
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No. 2:16-CV-300
MEMORANDUM OPINION AND ORDER
Currently before the Court are (1) the plaintiff’s motion for partial summary judgment,
[Doc. 33]; and (2) the defendant’s motion for summary judgment, [Doc. 41], in this Fair Debt
Collection Practices Act (“FDCPA” or “the Act”), 15 U.S.C. § 1692 et seq., case. The plaintiff’s
motion seeks judgment in her favor only as to the liability of the defendant, ARC Management
Group, LLC, (“ARC”), reserving the determination of damages for a trial by jury. ARC has
responded to the plaintiff’s motion, [Doc. 36], contending that summary judgment for the plaintiff
is not appropriate. ARC argues that it did not violate the FDCPA by reporting a valid debt to a
consumer reporting agency, [Doc. 36 at 4-5]. The plaintiff has replied, [Doc. 40], and this motion
is ripe for disposition.
The defendant’s motion, [Doc. 41], seeks judgment in its favor on all of plaintiff’s claims.
The defendant’s motion reiterates many of the same arguments raised in its response to the
plaintiff’s motion, and states that these grounds entitle the defendant to judgment as a matter of
law. The plaintiff opposes the motion, [Doc. 43], again stating many of the same grounds raised
in her own summary judgment motion. The time for the defendant to file a reply brief has passed,
and this motion is also ripe.
For the reasons that follow, the plaintiff’s motion for partial summary judgment will be
DENIED, and the defendant’s motion for summary judgment will be GRANTED. This action will
therefore be DISMISSED in its entirety.
I.
BACKGROUND
As representative of the class, the plaintiff, Sandra K. Watson, brings this putative class
action lawsuit asserting violations of the FDCPA by ARC. The plaintiff is alleged to have incurred
a medical debt of $1,070 to Hamblen Emergency Group, LLC, [Doc. 29 ¶ 10]. 1 At some point,
the plaintiff allegedly defaulted on the medical debt, and the debt was assigned to ARC for
purposes of collection, [Doc. 29 ¶ 11]. ARC admits that it is a collection service as defined by
Tennessee state law, and that it reported the plaintiff’s medical debt to Equifax. Both parties agree
that “Equifax is an entity that regularly engages in the business of assembling, evaluating and
disseminating information concerning consumers for the purpose of furnishing credit reports to
third parties.” [Doc. 37 at 3]. ARC was not licensed in Tennessee as a collection service agency
at the time the debt was reported to Equifax, but since such time ARC has acquired a valid license
issued by the Tennessee Collection Service Board. The parties do not dispute that the Plaintiff
obtained copies of her Equifax credit report on April 29, 2016, August 15, 2016, and August 18,
2016, and each report indicated that the plaintiff’s medical debt was owed. Otherwise, ARC did
1
Although the plaintiff disputes that this debt is in fact valid in her response to defendant’s additional statement of
material facts, [Doc. 40 at ¶ 1 and 2], she later does not dispute the validity of the debt “for purposes of ruling on
ARC Management Group LLC’s [] Motion for Summary Judgment,” [Doc. 44 at ¶¶ 1 and 2]. She further states in
her own motion for partial summary judgment that “[p]laintiff makes no allegation in her Complaint that she
considers the debt to be false, deceptive[,] or misleading or that she contests or disputes the debt….” [Doc. 34 at 5].
Again, she reiterates this in her response to the defendant’s motion for summary judgment, [Doc. 43 at 6]. The
Court notes this inconsistency in the plaintiff’s factual assertions, and finds that both parties agree and do not dispute
that the medical debt incurred by the plaintiff is in fact a valid debt.
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not make any phone calls or send any letters to the plaintiff to collect on the debt, nor did they file
suit against the plaintiff to collect on the debt.
The plaintiff claims that ARC violated the FDCPA by reporting the debt to Equifax. She
further claims that ARC’s reporting of the debt to Equifax before they were licensed by the
Tennessee Collection Services Board constitutes a violation of the FDCPA.
II.
STANDARD OF REVIEW
Summary judgment under Rule 56 of the Federal Rules of Civil Procedure is proper “if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party bears the burden of
establishing that no genuine issues of material fact exist. Moore v. Philip Morris Cos., 8 F.3d 335,
339 (6th Cir. 1993). All facts and all inferences to be drawn therefrom must be viewed in the light
most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986); Burchett v. Kiefer, 310 F.3d 937, 942 (6th Cir. 2002). This Court’s function
at the point of summary judgment is limited to determining whether sufficient evidence has been
presented to make the issue of fact a proper question for the factfinder. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 250 (1986). The genuine issue must also be material; that is, it must involve
facts that might affect the outcome of the suit under governing law. Id. If this Court concludes
that a fair-minded jury could not return a verdict in favor of the non-moving party based on the
evidence presented, it may enter a summary judgment. Anderson, 477 U.S. at 251-52; Lansing
Dairy, Inc. v. Espy, 39 F.3d 1339, 1347 (6th Cir. 1994).
The party opposing a Rule 56 motion may not simply rest on the mere allegations or denials
contained in the party’s pleadings. Anderson, 477 U.S. at 256. Instead, an opposing party must
affirmatively present competent evidence sufficient to establish a genuine issue of material fact
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necessitating the trial of that issue. Id. Merely alleging that a factual dispute exists cannot defeat
a properly supported motion for summary judgment. Id. A genuine issue for trial is not established
by evidence that is merely colorable, or by factual disputes that are irrelevant or unnecessary. Id.
at 248-52.
III.
DISCUSSION
Congress enacted the FDCPA in order “to eliminate abusive debt collection practices by
debt collectors, to insure that those debt collectors who refrain from using abusive debt collections
practices are not competitively disadvantaged, and to promote consistent State action to protect
consumers against debt collection abuses.” 15 U.S.C. § 1692(e). In determining whether a debt
collector’s practice violates the FDCPA, the Court is required to use the objective “least
sophisticated consumer” test. Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 400 (6th Cir. 1998);
see also Kistner v. Law Offices of Michael P. Margelefsky, LLC, 518 F.3d 433, 428 (6th Cir. 2008);
Barany-Snyder v. Weiner, 539 F.3d 327, 333 (6th Cir. 2008).
15 U.S.C. § 1692e generally bars debt collectors from using false, deceptive or misleading
representations or means in order to collect a debt, while § 1692f prohibits debt collectors from
using unfair or unconscionable means to collect a debt.
The Sixth Circuit has noted that the Act is “extraordinarily broad” and must be enforced as
written, even when eminently sensible exceptions are proposed in the face of an innocent and/or
de minimis violation. See Frey v. Gangwish, 970 F.2d 1516, 1521 (6th Cir. 1992). While § 1692e
lists a number of examples of false or misleading representations, the text of the statute itself
indicates that the examples are not meant to limit its prohibition on the use of false, deceptive or
misleading representations in connection with the collection of a debt. 15 U.S.C. § 1692e.
Likewise, § 1692f contains the same language, making clear that the examples set forth therein do
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not “limit[ ] the general application” of its prohibition on the use of unfair or unconscionable means
to collect or attempt to collect any debt. 15 U.S.C. § 1692f. The Seventh Circuit observed that
the phrase “unfair or unconscionable” used in § 1692f “is as vague as they come.” Beler v. Blatt,
Hasenmiller, Leibsker & Moore, 480 F.3d 470, 474 (7th Cir. 2007).
A. Plaintiff’s Motion for Partial Summary Judgment
Plaintiff filed a motion for partial summary judgment on her claims only as to ARC’s
liability for violations of the FDCPA. The plaintiff argues that (1) ARC was not a licensed debt
collector at the time it reported the debt to Equifax, and (2) ARC illegally reported the debt to
Equifax in an attempt to collect the debt from the plaintiff. The plaintiff argues that ARC’s report
to Equifax violated specific provisions of the FDCPA including 15 U.S.C. §§ 1692e, 1692e(2)(A),
1692e(5), 1692e(9), 1692e(10), and 1692f.
1. Licensing Requirements
After the plaintiff defaulted on her debt to Hamblen County Emergency Group, LLC, ARC
was assigned the debt for purposes of collection. ARC does not dispute that it was not a licensed
collection service in Tennessee when it reported the plaintiff’s debt to Equifax. The FDCPA itself
does not require collection services to be licensed. However, the Sixth Circuit has previously held
that
Congress did not turn every violation of state law into a violation of the FDCPA.
But that does not mean that a violation of state law can never also be a violation of
the FDCPA. The proper question in the context of an FDCPA claim is whether the
plaintiff alleged an action that falls within the broad range of conduct prohibited by
the Act. The legality of the action taken under state law may be relevant….
Currier v. First Resolution Inv. Corp., 762 F.3d 529, 537 (6th Cir. 2014) (emphasis in original).
The Tennessee Collection Service Act (“TCSA”), Tennessee Code Annotated § 62-20-101 et seq.,
requires “all persons who commence, conduct or operate any collection services business” to
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obtain a license from the Tennessee Collection Service Board. Tenn. Code Ann. § 62-20-105. The
TCSA specifically exempts from these license requirements “any person that holds or acquires
accounts, bills or other forms of indebtedness through purchase, assignment, or otherwise; and
only engages in collection activity through the use of a licensed collection agency or an attorney
authorized to practice law in this state.” Tenn. Code Ann. § 62-20-103(a)(9).
Further, the Tennessee licensing requirements allow for persons who are alleged to have
conducted collection services without a valid license to “cure the default at any time, even after
collection may have started, by filing an application for a license with the collection services
board…” and such persons “[m]ay be subject to sanction by the collection service board, but may
not be subject to other civil action or defense based on such alleged violation.” Tenn. Code Ann.
§ 62-20-105(f) (emphasis added). In essence, so long as ARC used a licensed collection agency
to engage in all of their collection activities against the plaintiff, such actions would be exempt
from the Tennessee licensing requirements. Furthermore, even if ARC did in fact attempt the
collection of a delinquent account itself without first obtaining a Tennessee license, if ARC has
later obtained a valid collection license issued by the Tennessee Collection Service Board, this
fact, in effect, would cure ARC’s default.
The plaintiff disputes that ARC operated all collection efforts through a third party licensed
vendor in Tennessee. In the plaintiff’s response to ARC’s statement of material facts, [Doc. 44],
the plaintiff claims that “[t]here is no evidence for the Court to consider that ARC operated all
collection efforts during the relevant time at issue through a third party licensed vendor in
Tennessee….” [Doc. 44 at ¶ 7]. Other than pointing to the fact that ARC reported the plaintiff’s
debt to Equifax—a fact which ARC does not dispute—the plaintiff has not provided any other
factual evidence that ARC engaged in any other collection activities directly with the plaintiff.
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However, even if reporting the debt to Equifax was a collection activity 2, the plaintiff does not
dispute that “ARC [now] possesses a valid collection license issued by the Tennessee Collection
Service Board,” [Doc. 44 at ¶ 5]. ARC’s subsequent acquisition of a valid license issued by the
Tennessee Collection Board cures any licensing default they may have committed. 3
This Court recognizes that the satisfaction of the licensing requirements found in the
TCSA, as well as facts indicating the failure to adhere to these state licensing requirements, are all
relevant factors in determining whether plaintiff has alleged action that has fallen within the broad
range of conduct prohibited by the FDCPA. In other words, a violation of the Tennessee licensing
requirements does not necessarily constitute a violation of the FDCPA; “the conduct or
communication at issue must also violate the relevant provision of the FDCPA.” LeBlanc v.
Unifund CCR Partners, 601 F.3d 1185, 1192 (11th Cir. 2010). Indeed, there is no federal
requirement that debt collectors be licensed; the State of Tennessee has afforded these extra
protections for their citizens, but a license is not required to satisfy the provisions of the FDCPA,
and, in turn, the claims before this Court.
The Court finds that ARC’s current possession of a valid collection license from the
Tennessee Collection Service Board has cured any Tennessee licensing violation that may have
been present at the time ARC communicated the debt to Equifax. Therefore, given the particular
facts of this case and the lack of any violation specific to the Tennessee licensing requirements
found in the TCSA, the fact that ARC did not have a license issued by the Tennessee Collection
Service Board at the time of the communication does not, in and of itself, support a violation of
2
See infra Part III.A.2.
Plaintiff’s argument that “the Tennessee legislature cannot nullify [p]laintiff’s rights under federal law to bring a
claim against a ‘debt collector’ for violation of the FDCPA,” [Doc. 34 at 6], is misplaced because the licensing
requirements found in the TCSA actually provide more protection for consumers by requiring debt collectors to be
licensed, therefore not “nullifying” any provision of the FDCPA or federal right of the plaintiff.
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the FDCPA. Neither does this fact alone provide support for plaintiff’s argument that ARC
illegally attempted to collect on the debt because they were not licensed in Tennessee.
2. Reporting the Debt to Equifax
The next question presented to this Court is whether ARC’s act of reporting the debt to a
credit reporting agency qualifies as a “debt collection practice” under the FDCPA. The Court finds
no indication that providing credit information or furnishing a debt to a consumer reporting agency
is not a form of “communication” as defined in § 1692a(2). 4 However, of particular note is that
the FDCPA ordinarily allows debt collectors to communicate with reporting agencies so long as
otherwise permitted by law. 5
In a footnote in an unreported opinion, the Sixth Circuit has “assume[d] without deciding
that the reporting of [a] debt to Equifax constitutes a ‘collection activity.’” Purnell v. Arrow
Financial Services, LLC, 303 Fed. App’x. 297, 304 n.5 (6th Cir. 2008).
However, the
circumstances in Purnell are distinguishable from this case. There, Arrow Financial Services,
LLC, a “debt collector” for purposes of the FDCPA, acquired an account from GE Capital which
included a debt on an account that plaintiff had closed more than two decades before. See id. at
299. The defendant sent its first communication regarding the debt to the plaintiff in September
of 2001, and within 30 days, the plaintiff disputed the debt in writing. See id. Without verifying
the debt, Arrow Financial Services, LLC, reported the debt on a monthly basis to Equifax both
before and after the initial communication with the plaintiff. See id. Some of the reports to Equifax
included the “disputed” marker, while others did not. See id.
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For purposes of the FDCPA, the term “communication” means the conveying of information regarding a debt
directly or indirectly to any person through any medium.
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“[A] debt collector may not communicate, in connection with the collection of any debt, with any person other
than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law…” FDCPA § 1692c(b)
(emphasis added).
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The Court of Appeals considered the issue of whether the defendant’s reporting the debt to
Equifax was within the limitations period. The Court decided that in such a situation, the FDCPA
“does not require the debt collector to validate the debt at all, as long as it ceases any collection
activity,” after receiving notice that the debt is disputed. Purnell, 303 Fed. App’x at 303-04.
Further, the Court found that “each ‘failure to cease’ collection activity without having validated
the debt—like each ‘communication’ of false credit information under § 1692e(8)—present[ed] a
discrete claim for violation of the FDCPA such that only those collection activities taken outside
the limitations period would be time-barred.” Id. at 304.
In the present case, there are no facts at all that indicate that the plaintiff communicated
any dispute with the debt she owed to Hamblen County Emergency Group, LLC. Further, the
parties have not argued that the report to Equifax should have been validated, nor has either party
raised any issue with the limitations period for reporting the debt. Therefore, the Court of Appeals
finding in Purnell has little bearing on the issues presently before this Court.
Of course, the FDCPA generally guards against communications by a collection agency
that are false, deceptive, or misleading. See 15 U.S.C. § 1692e. In her motion, the plaintiff admits
that she “makes no allegation in her Complaint that she considers the debt to be false, deceptive[,]
or misleading or that she contests or disputes the debt….” [Doc. 34 at 5]. Specifically, the
plaintiff’s responses to the defendant’s statement of undisputed material facts include:
1. Plaintiff does not dispute that he[sic] debt incurred by Plaintiff Sandra K. Watson to
Hamblen County Emergency Group, LLC is valid.
RESPONSE:
Undisputed for purposes of ruling on ARC Management Group
LLC’s (ARC) Motion for Summary Judgment.
2. ARC reported a valid debt to a credit reporting bureau.
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RESPONSE:
Undisputed for purposes of ruling on ARC’s Motion for Summary
Judgment.
One of the main purposes of the FDCPA is to “eliminate abusive debt collection practices by debt
collectors….” 15 U.S.C. § 1692. There may very well be situations where reporting or threatening
to report a debt to a credit reporting agency would constitute an “abusive debt collection practice.”
In the present case, however, as discussed below 6, the Court concludes that ARC’s report of the
plaintiff’s valid debt to Equifax was not an abusive debt collection practice. Therefore, the
question of whether reporting a debt to a consumer reporting agency constitutes a “collection
activity” for purposes of FDCPA is a question which this Court need not presently decide.
B. The Defendant’s Motion for Summary Judgment
The defendant argues that it is entitled to summary judgment as to all of plaintiff’s claims.
In support of its motion, the defendant asserts that its reporting of a valid debt to Equifax was not
an act of collection against the plaintiff, and that because ARC later acquired a valid license from
the Tennessee Collection Services Board, any potential violation of Tennessee’s licensing law
would be cured. The defendant also asserts that plaintiff’s actions on behalf of the class is without
merit and does not rise to the standards of Rule 23 of the Federal Rules of Civil Procedure in
certifying a class.
The plaintiff’s first five stated causes of action 7 all require a showing that the debt collector
used a false, deceptive, or misleading representation in connection with the collection of plaintiff’s
debt. The plaintiff’s first cause of action is brought under the general provision against false,
deceptive, or misleading representations, while counts two through five of the plaintiff’s second
6
See infra Parts III.B.a., III.B.b.
Plaintiff alleges six (6) causes of action against ARC in her Second Amended Class Action Complaint. Plaintiff
alleges that ARC’s acts violate the six listed provisions of the Act, and although not explicitly defined, this Court
presumes each successive count relates to a violation of each successive listed provision of the Act.
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amended class action complaint each identify specific conduct which, per the FDCPA, constitute
false, deceptive, or misleading representations. The plaintiff’s final cause of action alleges that
ARC used unfair or unconscionable means to collect the debt.
a.
Counts I-V: 15 U.S.C. §§ 1692e, 1692e(2)(A), 1692e(5), 1692e(9), 1692e(10)
The general provision of this FDCPA prohibition states that “[a] debt collector may not use
false, deceptive, or misleading representation or means in connection with the collection of any
debt.” 15 U.S.C. § 1692e. In the present case, it is undisputed that the debt incurred by the plaintiff
was a valid debt and ARC reported this valid debt to Equifax. The plaintiff has provided no factual
evidence that ARC reported a false amount, or misled Equifax by representing an invalid debt as
valid. Further, there are no facts suggesting that any threats were made to the plaintiff by ARC,
nor are there facts indicating ARC made any deceptive representations. In fact, the plaintiff admits
that the debt was valid, thus the material facts are undisputed. This Court finds as a matter of law
that ARC’s reporting of a valid debt to Equifax was not a false, deceptive, or misleading
representation in connection with the collection of a debt. Therefore, summary judgment in favor
of the defendant is appropriate for count one. Furthermore, counts two through five allege specific
conduct which constitute false, deceptive, or misleading representations in connection with the
collection of a debt. Therefore, the Court’s finding as to count one necessarily entails these counts
as well, and summary judgment in favor of the defendant is also appropriate for counts two through
five.
b.
Count VI: 15 U.S.C. § 1692f
This provision of the FDCPA states that “[a] debt collector may not use unfair or
unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. “[A]
collection practice could be unfair without necessarily being deceptive.”
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Currier v. First
Resolution Inv. Corp., 762 F.3d 529, 534 (6th Cir. 2014). Although the Act does not explicitly
define the terms “unfair” or “unconscionable,” it does provide specific examples of conduct that
constitute “unfair” or “unconscionable” means including:
(1) The collection of any amount (including any interest, fee, charge, or expense
incidental to the principal obligation) unless such amount is expressly
authorized by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check or other payment
instrument postdated by more than five days unless such person is notified in
writing of the debt collector’s intent to deposit such check or instrument not
more than ten nor less than three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or other postdated
payment instrument for the purpose of threatening or instituting criminal
prosecution.
(4) Depositing or threatening to deposit any postdated check or other postdated
payment instrument prior to the date on such check or instrument.
(5) Causing charges to be made to any person for communications by concealment
of the true purpose of the communication. Such charges include, but are not
limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect dispossession or
disablement of property if—
A. There is not present right to possession of the property claimed
as collateral through an enforceable security interest;
B. There is no present intention to take possession of the
property; or
C. The property is exempt by law from such dispossession or
disablement.
(7) Communicating with a consumer regarding a debt by post card.
(8) Using any language or symbol, other than the debt collector’s address, on any
envelope when communicating with a consumer by use of the mails or by
telegram, except that a debt collector may use his business name if such name
does not indicate that he is in the debt collection business.
None of these circumstances have any relation to the issues presented to this Court. Further, the
plaintiff has not provided any facts whatsoever, nor any controlling case, to support a finding that
reporting a valid debt to a consumer credit agency is in any way “unfair” or “unconscionable.”
The Court concludes that ARC’s reporting of plaintiff’s valid debt to Equifax was not an unfair or
unconscionable means to collect on the debt. Therefore, summary judgment in favor of the
defendant is appropriate for count six.
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c.
Class Action Certification
Because the defendant is entitled to summary judgment in its favor as to all counts, this
Court need not consider the arguments raised in the defendant’s motion against class certification.
It is sufficient to hold, as this Court does, that all of the claims asserted in this potential class action
lawsuit should ultimately be resolved in favor of the defendant. Therefore, it would be needless
and costly to allow any further litigation to ensue on behalf of the potential class of persons
similarly situated.
IV.
CONCLUSION
For the reasons set forth herein, it is hereby ORDERED that the plaintiff’s motion for
partial summary judgment, [Doc. 33], is DENIED and the defendant’s motion for summary
judgment, [Doc. 41], is GRANTED. A separate judgment shall enter.
ENTER:
s/J. RONNIE GREER
UNITED STATES DISTRICT JUDGE
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