My Health, Inc. v. ALR Technologies, Inc.
Filing
131
MEMORANDUM OPINION AND ORDER re 81 SEALED MOTION TO DECLARE CASES EXCEPTIONAL AND FOR ATTORNEYS' FEES filed by ALR Technologies, Inc., McKesson Technologies Inc., MyNetDiary, Inc., InTouch Technologies, Inc... Signed by Magistrate Judge Roy S. Payne on 12/19/2017. (nkl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
My Health, Inc.,
Plaintiff,
v.
ALR Technologies, Inc.,
Defendant.
InTouch Technologies, Inc.,
Defendant.
MyNetDiary, Inc.,
Defendant.
McKesson Technologies Inc.,
Defendant.
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Case No. 2:16-cv-00535-RWS-RSP (Lead)
Case No. 2:16-cv-00536-RWS-RSP
Case No. 2:16-cv-00866-RWS-RSP
Case No. 2:16-cv-00881-RWS-RSP
MEMORANDUM OPINION AND ORDER
In May 2016, My Health filed a number of patent infringement lawsuits in the district, and
about ten months later, the Court declared the patent-in-suit (U.S. Patent No. 6,612,985) invalid
for failure to claim patent-eligible subject matter as required by 35 U.S.C. § 101. Defendants’
motions to dismiss were granted, and final judgment was entered. This outcome, in addition to
My Health’s extensive litigation campaign, the manner in which My Health litigated the cases,
and the weakness of My Health’s § 101 position, prompted the prevailing defendants to move for
their attorneys’ fees under 35 U.S.C. § 285. Dkt. No. 81. For the following reasons, the Court finds
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My Health’s cases exceptional, grants defendants’ motion for fees, and orders My Health to pay
$371,862.95 to the defendants.
BACKGROUND
My Health’s assertion of the ’985 patent began in April 2012, with a lawsuit filed against
ZeOmega Inc. 1 Although the lawsuit against ZeOmega remained pending for nine months, there
was never a determination on the merits, and the parties settled in January 2013. See id., Dkt. No.
59. My Health then sued five additional defendants in February 2013. 2 Aside from venue-related
motions filed in three of these cases, there was no significant activity in the case, and no merits
determination. One of the five defendants, Cadiocom, petitioned the Patent Trial and Appeal Board
(PTAB) for inter partes review (IPR) of the ’985 patent, and the PTAB instituted IPR, but My
Health settled with Cardiocom before trial. 3
My Health’s litigation campaign continued through 2017. In total, My Health filed 31
lawsuits in the district. In addition to these lawsuits, parties that were either sued or threatened
with suit filed eleven declaratory judgment actions in other districts. Of all these lawsuits, there
was never a determination regarding the merits until 2017. In My Health’s lawsuit against LifeScan
in 2015, the Court denied a motion to dismiss because of an apparent need for claim construction
in advance of determining whether the claims of the ’985 patent are directed to patent-eligible
subject-matter. 4 There was, however, no determination regarding whether the ’985 patent claims
were eligible under § 101.
Case No. 2:12-cv-00251 (E.D. Tex.).
Case Nos. 2:13-cv-00136, 2:13-cv-00137, 2:13-cv-00138, 2:13-cv-00139, and 2:13-cv-00140 (all
E.D. Tex).
3
IPR2013-00320.
4
My Health, Inc. v. LifeScan, Inc., Case No. 2:14-cv-00683-RWS-RSP, Dkt. No. 34 (E.D. Tex.)
1
2
2
Aside from the district court actions, there were five petitions for IPR, all of which settled
before trial. The PTAB granted IPR on all the petitions that made it to the point of an institution
decision, but a trial was never held. Other IPR petitions were dismissed before an institution
decision was made.
The district court cases and the IPR proceedings all ended with settlement. Some of
My Health’s settlement agreements, which were produced for in camera review, see Dkt. No. 118,
reveal a median settlement amount of about $50,000. The earlier agreements were for significantly
higher amounts than the later ones. In the lawsuits filed before 2014—before the Supreme Court’s
decision in Alice Corporation Pty. v. CLS Bank International, 134 S. Ct. 2347 (2014), was fully
understood—the median settlement amount was $240,000. That median value dropped to $42,500
in cases filed in 2014 and after. Of the seventeen settlement agreements reached after 2014, ten of
them fell between $25,000 and $50,000, and most of them were around $30,000. Three of the
agreements—involving different defendants—were all for exactly $30,000.
There is not much of a behind-the-scenes view between 2012 and 2014, but there is
evidence in the record regarding My Health’s litigation behavior in the cases filed in 2016. The
dispute with ALR Technologies (“ALRT”), for example, began with a cease and desist letter from
Patent Licensing Alliance (“PLA”), My Health’s licensing affiliate, asking ALRT to stop
infringing the ’985 patent. Dkt. No. 81-7. ALRT responded with a letter from counsel explaining
its belief that the ’985 patent was invalid under Alice. Dkt. No. 81-8. My Health did not respond
but eventually sued ALRT. Despite My Health’s knowledge that ALRT was represented by
counsel, My Health’s counsel sent a letter directly to ALRT’s CEO after filing the lawsuit. The
letter explained, among other things, that My Health will “remain open and willing to explore an
early resolution that would conclude the legal proceedings.” Dkt. No. 81-18.
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InTouch Technologies received a similar letter after My Health sued them. Dkt. No. 8120. Counsel for InTouch responded with a letter explaining, among other things, that My Health
was improperly reading the ’985 patent to cover “physician consultations and decisions” made by
a doctor, which according to InTouch, “reinforces the unsupportable and unpatentable claim
breadth My Health is advancing.” Dkt. No. 81-9. My Health did not respond. My Health did,
however, continue to make settlement demands.
Like ALRT, MyNetDiary also received a cease and desist letter from PLA before being
sued. Dkt. No. 81-19. MyNetDiary’s counsel responded with a detailed letter explaining how
“virtually all of the applications” mentioned in the cease and desist letter “are not covered or used
by MyNetDiary’s technology or its customers.” Dkt. No. 81-12 at 3. The letter also asked
My Health to “please make certain that any and all future correspondence, if any, with
MyNetDiary is directed solely to us as the attorneys for MyNetDiary.” Id. at 5. Despite this request,
PLA again sent a letter directly to MyNetDiary’s CEO expressing My Health’s desire for an
“amicable licensing arrangement.” Dkt. No. 81-14 at 1.
The letter to MyNetDiary was not taken lightly. MyNetDiary’s counsel responded to
My Health’s counsel with an email in January 2016. Dkt. No. 81-15. The email emphasized
MyNetDiary’s request to not be contacted directly by My Health’s counsel:
Please direct any future correspondence regarding this matter to me
and to me alone. I wish there to be no misunderstandings. My client
will not be entering into any licensing agreements with PLA, for the
reasons I have previously explained. I wish this to be very clear.
Should you contact me or my client(s) with any further unlawful
extortion requests, I will seek sanctions against you . . . . I hope I
have made myself imminently clear.
Id. The request was ignored. After My Health sued MyNetDiary, My Health’s counsel sent another
letter directly to MyNetDiary’s CEO, which emphasized My Health’s commitment to “an early
resolution that would conclude legal proceedings.” Dkt. No. 81-16.
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McKesson was sued in August 2016. Before McKesson’s answer to the complaint was due,
McKesson informed My Health’s counsel of McKesson’s belief that the allegations were
unsupportable and based on “unpatentable claim breadth.” Dkt. No. 81-10 at 1. McKesson also
informed My Health that the infringement allegations were based on “the Health Buddy
appliance,” which McKesson purchased from Bosch. See Dkt. No. 81-11 at 1. Because My Health
had previously filed and settled a lawsuit against Bosch, McKesson informed My Health that the
Health Buddy appliance was covered by the license My Health granted to Bosch. See id. My Health
never responded to McKesson’s inquiry regarding the Bosch license.
Despite My Health’s avoidance of any merits determination between 2012 and 2014, the
defendants remaining in the lawsuits filed in 2016 finally received such a determination. These
defendants moved to dismiss My Health’s complaint under Rule 12(b)(6) of the Federal Rules of
Civil Procedure, contending that the claims of the ’985 patent do not recite patent-eligible subject
matter. The Court agreed. See Case No. 2:16-cv-00535-RWS-RSP, Dkt. No. 66 (E.D. Tex. Feb.
14, 2017). Suffice it to say that the Court concluded that the claims of the ’985 patent are
“unquestionably ‘abstract’ within the meaning of Alice.” See id. at 3. The claims did not require
any hardware or software component and were broadly directed to “[a] method of tracking [a
patient’s] compliance with treatment guidelines.” See id. The Court explained its previous decision
to postpone the § 101 determination in the LifeScan case, noting that LifeScan’s § 101 arguments
were more dependent on particular claim terms, whereas the latter defendants more clearly
advanced arguments based on any plausible claim construction, in addition to analogizing the ’985
patent claims to others found unpatentable by the Federal Circuit. See id. at 6.
After defendants’ motions to dismiss were granted, final judgment was entered. The
defendants then filed a motion to declare My Health’s cases exceptional under § 285 and requested
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their attorneys’ fees. Dkt. No. 81. My Health appealed from the final judgment based on the § 101
decision, Dkt. No. 85, and requested that the motion for attorneys’ fees be stayed pending appeal,
Dkt. No. 89. That motion was denied. Dkt. No. 98.
On June 30, 2017, the day My Health’s appeal brief was due, My Health moved to
voluntarily dismiss the appeal. See Dkt. No. 106-1. My Health’s counsel made the following
statement in the motion filed with the Federal Circuit:
My Health request[s] that the Court grant the voluntary dismissal of
this appeal, with each side to bear its own costs. Undersigned
counsel has conferred with counsel for appellees and has been
informed that this motion is unopposed.
Id. at 1-2. The motion to dismiss was granted on the basis of this representation, and the order
declared that “[e]ach side shall bear its own costs.” See Dkt. No. 105 at 2. After the Federal Circuit
entered this order, the defendants filed a notice representing that My Health’s counsel never
conferred with them regarding the voluntary dismissal, and that they never agreed that each party
should bear its own costs for the appeal. See Dkt. No. 106 at 1.
While My Health’s appeal was pending, the Court had scheduled a hearing on defendants’
motion for attorneys’ fees on June 19, 2017. On June 13, My Health’s counsel filed a motion to
continue the hearing, citing a conflict due to another case that was scheduled for a July trial in
California. See Dkt. No. 100. The day after My Health’s counsel sought a continuance, but before
the Court had ruled on the motion, My Health’s counsel asked the California court to continue the
July trial to September, and that request was granted. See Dkt. No. 106 at 1-2. Without knowing
about the schedule change in California, the Court granted My Health’s motion to continue and
rescheduled the attorneys’ fees hearing for August 15, 2017.
During the hearing on the attorneys’ fees motion, My Health’s counsel focused largely on
arguments that were never raised in My Health’s briefing, including the sufficiency of My Health’s
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infringement contentions. My Health’s counsel also argued that My Health’s settlement
agreements reflected more than nuisance amounts. See Tr. at 18:22-19:11, Dkt. No. 129 (“[T]he
settlements that have been entered into in the past have been in the range of [$]400,000 for two,
[$]285,000 for one, [$]175,000 for another.”). Counsel emphasized some of the largest settlement
agreements, which the Court later found out—after ordering My Health to produce relevant
agreements for in camera review—were entered into well before the Alice decision. The trend in
settlement agreements made thereafter was never brought to the Court’s attention. Defendants
explained their view that the cases should be declared exceptional regardless of the amount of any
settlement agreement or the adequacy of My Health’s infringement contentions.
DISCUSSION
Section 285 of the Patent Act allows a district court, in an exceptional case, to award
reasonable attorney fees to the prevailing party. 35 U.S.C. § 285. “District courts may determine
whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the
totality of the circumstances.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.
1749, 1756 (2014). An exceptional case under § 285 is “simply one that stands out from others
with respect to the substantive strength of a party’s litigating position (considering both the
governing law and the facts of the case) or the unreasonable manner in which the case was
litigated.” Id.
My Health’s cases are exceptional for a number of reasons. The first is the weakness of
My Health’s post-Alice patent-eligibility position. Patient treatment and monitoring methods such
as those claimed by the ’985 patent had been declared ineligible long before My Health filed its
2016 lawsuits. See, e.g., SmartGene, Inc. v. Advanced Biological Labs., SA, 555 Fed. App’x 950
(Fed. Cir. 2014). Although SmartGene was an unpublished opinion, it was representative of
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numerous precedential opinions recognizing that “merely selecting information, by content or
source, for collection, analysis, and [announcement] does nothing significant to differentiate a
process from ordinary mental processes, whose implicit exclusion from § 101 undergirds the
information-based category of abstract ideas.” FairWarning IP, LLC v. Iatric Systems, Inc., 839
F.3d 1089, 1098 (Fed. Cir. 2016) (citation omitted).
As the Court recognized in evaluating defendants’ § 101 motion, “[s]uch claims have
universally been found to be unpatentable under Alice.” Dkt. No. 66 at 4. By the time My Health
filed its 2016 lawsuits, guidance from the Federal Circuit regarding claims in this category had
mounted to a level that would give any litigant a reasonably clear view of § 101’s boundaries. The
numerous cases invalidating claims directed to information collection and analysis, such as the
’985 patent claims, stood in stark contrast to the handful of cases reaching the contrary conclusion
under Alice, such as Enfish, LLC v. Microsoft Corporation, 822 F.3d 1327 (Fed. Cir. 2016), which
found a “specific improvement to the way computers operate” patent-eligible. There were of
course gray areas, but by the time My Health’s 2016 lawsuits were filed, it should have been clear
that the ’985 patent claims were “manifestly directed to an abstract idea.” See Inventor Holdings,
LLC v. Bed Bath & Beyond, Inc., No. 2016-2442, 2017 WL 6062460, at *4 (Fed. Cir. Dec. 8,
2017). There was no credible argument that the ’985 patent claims fell into one of the eligible
exceptions defined in cases such as Enfish.
The weakness in My Health’s § 101 position is by itself a sufficient basis for finding the
cases exceptional. As the Federal Circuit explained in Inventor Holdings, such a finding is well
within the Court’s discretion. See id. Indeed, declaring a case exceptional based solely on a party’s
weak position regarding patent eligibility “is necessary to deter wasteful litigation in the future.”
Id. (quoting lower court opinion).
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The Court’s previous denial of the motion to dismiss in the LifeScan case did not give
My Health a reasonable basis to continue asserting the ’985 patent. As in Inventor Holdings, this
Court never “endorsed the patent-eligibility of the asserted claims” because the denial of a motion
to dismiss is not a merits decision, but rather only the postponement of the merits decision. See id.
at *5. It was My Health’s responsibility to “reassess its case in view of new controlling law,”
namely decision after decision from the Federal Circuit finding claims in the information-based
category, such as those in the ’985 patent, ineligible under Alice. See id. at *6.
My Health stresses the ’985 patent’s presumption of validity, but the presumption is not
enough to avoid an exceptionality finding. See Dkt. No. 90 at 8-9. To My Health’s credit, the
presumption has been considered by courts denying fees on the basis of a weak validity position
under § 101. See, e.g., Garfum.com Corp. v. Reflections by Ruth, No. CV 14-5919-JBS-KMW),
2016 WL 7325467, at *4 (D.N.J. Dec. 16, 2016). In cases such as Garfum.com, however, the
reluctance to find exceptionality, based in part on the presumption of validity, is not unreasonable
when the examiner considered whether the patent was eligible under current § 101 law, as the court
in Garfum.com emphasized. See also Al-Site Corp. v. VSI Int’l, Inc., 174 F.3d 1308, 1323 (Fed.
Cir. 1999) (explaining relevance of the agency’s initial consideration of the question being raised
in litigation to the presumption of validity); B/E Aerospace, Inc. v. Zodiac Aerospace, No. 2:16cv-01417-JRG, 2017 WL 1684540, at *9 (E.D. Tex. Apr. 17, 2017). But the ’985 patent issued in
2003, well before Alice, and it would be a mistake to overemphasize the presumption. The
examiner that allowed the ’985 patent claims did not contemplate developments in the law that
unfolded more than a decade later.
My Health’s cases are exceptional for other reasons. The litigation campaign was
extensive—31 lawsuits, 11 declaratory judgment actions, and 5 IPRs—all without a determination
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on the merits until 2017, five years after My Health’s campaign began. To be sure, a volume
litigant does not automatically expose himself to attorneys’ fees simply because he files a lot of
lawsuits. But the number of lawsuits filed by My Health, many of which settled right on the cusp
of a merits determination (most for similar amounts), supports the conclusion that My Health was
filing lawsuits “for the sole purpose of forcing settlements, with no intention of testing the merits
of [the] claims.” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1350 (Fed. Cir. 2015).
This conclusion is bolstered by the similar settlement amounts reached with different
defendants. Most of the settlement agreements entered into after Alice were for remarkably similar
amounts, most of them falling between $25,000 and $50,000. Three settlement agreements
involving different defendants were all for exactly $30,000. Given the lack of a determination on
the merits in the district court actions or the IPRs until five years into the litigation campaign, the
similar settlement amounts strongly suggest that My Health was “exploiting the high cost to defend
complex litigation to extract a nuisance value settlement.” Eon-Net LP v. Flagstar Bancorp, 653
F.3d 1314, 1327 (Fed. Cir. 2011). The settlement amounts against the different defendants could
not have possibly been tied to a reasonable royalty for use of the claimed invention. There is
nothing in the record suggesting that the amounts were tied to the alleged invention’s footprint in
the marketplace. It would be implausible to suggest that so many different defendants had made
or sold roughly the same number of allegedly infringing units at the time of settlement.
Importantly, there is evidence in the record suggesting that the $25,000 to $50,000
settlement amounts do in fact represent a “nuisance” value, or in other words a value that is far
less than the cost of defending a patent infringement lawsuit. Each defendant seeking fees in this
case spent between $82,000 and $111,000 through the early discovery phase of the case, and the
most significant event in the cases was the defendant’s motion to dismiss. Most of My Health’s
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settlement amounts, at least those that arose after Alice, were for roughly half the amount each
defendant spent on the case before a claim construction hearing could be held, or in other words,
before any merits determination could be made. My Health’s settlement offers effectively ensured
that the ’985 patent’s susceptibility to invalidation under § 101 remained unexposed. See id. at
1327. This supports a finding of exceptionality. See Rothschild Connected Devices Innovations,
LLC v. Guardian Prot. Servs., Inc., 858 F.3d 1383, 1389-90 (Fed. Cir. 2017).
The cases are also exceptional in light of My Health’s conduct in dealing with and litigating
the cases against the defendants that are seeking fees. On at least two occasions, My Health’s
counsel directly contacted a defendant’s CEO after having been made aware that the defendant
was represented by counsel. See Dkt. Nos. 81-16 (My NetDiary) and 81-18 (ALRT). In the case
of MyNetDiary, the direct contact came after My Health’s counsel was given a stern warning not
to contact MyNetDiary directly. Dkt. No. 81-15. The warning was ignored.
My Health’s direct communication with the represented defendants was improper. At the
time My Health sent the letters to the represented defendants, My Health’s counsel was a member
of Utah bar. Utah, like most if not all other states, forbids a lawyer to “communicate about the
subject of the representation with a person the lawyer knows to be represented by another lawyer
in the matter, unless the lawyer has the consent of the other lawyer.” 5 Improper letters sent directly
to the defendant—who has hired a lawyer in part to be free and clear of any such contact—supports
the conclusion that My Health’s cases are exceptional.
Other aspects of My Health’s litigation behavior are troubling. My Health filed a notice of
appeal after the § 101 decision, followed by a motion to stay the determination on the fees motion.
After the motion to stay the fees determination was denied, My Health filed a motion to dismiss
5
Rule 4.2(a), available at https://www.utcourts.gov/resources/rules/ ucja/ch13/4_2.htm.
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the appeal with the Federal Circuit. My Health’s intention may not have been to evade a
determination on defendants’ fees motion, but the circumstances cast this conclusion in doubt.
Notably, My Health was ultimately unwilling to test this Court’s § 101 determination at the Federal
Circuit, even though there would have been only a single appellate issue to brief and argue.
The motion to dismiss the appeal My Health filed with the Federal Circuit is also troubling.
When an attorney signs a motion, he represents to the best of his knowledge that the contentions
being presented to the Court are accurate. See Fed. R. Civ. P. 11(b). My Health’s counsel
represented to the Federal Circuit that the parties had met and conferred, agreed to dismiss the
appeal, and agreed that each side would bear their own costs. Dkt. No. 106-1 at 1-2. That appears
to have been untrue. See Dkt. No. 106. My Health has never offered a satisfactory explanation for
the misrepresentation. Similar questionable avoidance tactics occurred here, with My Health’s
counsel representing that the hearing on the fees motions should be continued because of a conflict
that was in fact no conflict at all. See Dkt. No. 106 at 1-2. In sum, the totality of the circumstances
support the conclusion that My Health’s cases are exceptional.
The only remaining matter is the amount of fees. Defendants request the following:
ALRT
InTouch
MyNetDiary
McKesson
$82,198.95
$94,339.50
$83,329.50
$111,995.00
My Health does not dispute that counsel for the defendants charged reasonable hourly rates, but
My Health disputes the amount of the fees. My Health originally stated that without supporting
affidavits, there was no way for My Health to determine whether these fee amounts were
reasonable. In reply, the defendants submitted detailed time records justifying that the number of
hours worked was reasonable. See Dkt. Nos. 97-1 through 97-4.
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My Health’s only opposition to the amount of the fees award is at page five of My Health’s
surreply brief. See Dkt. No. 119 at 5. My Health argues that the invoices submitted by the
defendants are heavily redacted, making them difficult to assess. But the Court had no trouble
reviewing the invoices—only privileged information was redacted. Importantly, the invoices show
that the same time was not counted multiple times for each defendant but rather divided among
the defendants. See Dkt. Nos. 97-1 through 97-4.
Other than the argument about redaction, the only other argument My Health makes is that
at least $58,855.50 may have been billed for work on an IPR petition, which according to
My Health “is unrelated to My Health’s infringement claims.” See Dkt. No. 119 at 5 n.1. That
argument is not persuasive here; the defendants never would have sought IPR if they had not been
sued for allegedly infringing the ’985 patent. My Health should have known about the
susceptibility of the ’985 patent to invalidation under § 101 at the time the lawsuit was filed.
Subsequent events, including defendants’ pursuit of IPR, were necessarily caused by My Health’s
initiation of the lawsuits. Consequently, all of the defendants’ reasonable expenses after the day
My Health filed suit should be awarded. See Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct.
1178, 1186-90 (2017) (explaining but-for causation requirement for determining attorneys’ fees).
CONCLUSION
For these reasons, it is ordered and adjudged as follows:
(1) My Health’s cases are declared exceptional under 35 U.S.C. § 285.
(2) My Health is ordered to pay the following defendants’ attorneys’ fees, through
defendants’ counsel, within 60 days:
a. ALR Technologies, Inc.:
$82,198.95
b. InTouch Technologies, Inc.:
$94,339.50
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c. MyNetDiary, Inc.:
$83,329.50
d. McKesson Technologies, Inc.: $111,995.00
SIGNED this 3rd day of January, 2012.
SIGNED this 19th day of December, 2017.
____________________________________
ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE
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