Lipnicki et al v. Meritage Homes Corporation et al
MEMORANDUM AND ORDER granting 187 Motion to Decertify Collective Action and granting 215 MOTION to Intervene (Signed by Judge Gregg Costa) Parties notified.(arrivera, 3)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
DAVID LIPNICKI, et al,
MERITAGE HOMES CORPORATION,
§ CIVIL ACTION NO. 3:10-CV-605
MEMORANDUM AND ORDER
Plaintiffs David Lipnicki, Neil Alba, and Donna Armstrong filed this case as
a collective action under the Fair Labor Standards Act (FLSA).
plaintiffs are three Sales Associates for Meritage Homes Corp. who allege they
were denied overtime pay and minimum wage in violation of the FLSA. After the
Court conditionally certified the collective action, 104 Meritage Sales Associates
opted in but only 70 remain.1 Defendants now seek decertification (Docket Entry
No. 187), which the Court granted in a brief order on September 29, 2014 (Docket
Entry No. 205). This opinion further explains the Court’s reasons for decertifying
the case and addresses whether the opt ins should be allowed to intervene and
participate in this case on an individual basis.
The Court’s ruling that there was no evidence to support a finding of willfulness eliminated 34
opt-ins who did not work for Meritage in the two years prior to the filing of the lawsuit. That left
70 remaining opt-in plaintiffs and 3 named plaintiffs.
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Many of the relevant facts are discussed in the Court’s order denying cross
motions for summary judgment on liability. See Lipnicki v. Meritage Homes
Corp., 2014 WL 923524, at *1–9 (S.D. Tex. Feb. 13, 2014). Those motions
focused on the central issue in this case: whether Meritage properly classified the
Sales Associates as “outside salesm[e]n” who are exempt from the FLSA’s wage
requirements under 29 U.S.C. § 213(a)(1). Inside salespeople, on the other hand,
are covered by the FLSA. Plaintiffs’ jobs certainly involve sales; the difficulty is
determining whether that sales work is “inside” or “outside.” Part of the Sales
Associates’ duties are considered “inside” work because they take place in a
Meritage office located inside a model home, but duties performed on the new
home lots are deemed “outside” work pursuant to Department of Labor (DOL)
opinion letters. The DOL opinion letters also provide guidance on how to classify
a new home salesperson who performs this mix of inside and outside duties.
Finding that the DOL guidance announces a “more qualitative than quantitative”
standard, the Court determined the exemption applies “when most or ‘virtually all
of the indispensable components of the sales efforts are concentrated in the outside
period.’” Lipnicki, 2014 WL 923524, at *7 (quoting Wage & Hour Op. Letter
FLSA 2007–2, 2007 WL 506575, at *3 n.2 (Jan. 25, 2007)). Because “Plaintiffs
and Meritage management paint[ed] starkly contrasting pictures of where the
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primary sales activity takes place,” the Court found that summary judgment was
unwarranted as the “applicability of the outside sales exemption will . . . depend on
whose version of events the factfinder believes.” Id. at *8–9.
Defendant’s Motion to Decertify (Docket Entry No. 187) was filed soon
after the Court denied the cross motions for summary judgment on the
classification issue. In arguing that the Sales Associates are not similarly situated,
Defendants point to deposition testimony. Defendants contend that, despite having
the same job description and training, the opt-ins work in different communities
and physical settings, participate in varied outside sales activities, and generally
conduct their day-to-day duties in an individualized manner. Docket Entry No.
187 at 3. Plaintiffs argue that the Sales Associates have the same primary job
duties and perform those duties using Meritage’s standardized sales procedures,
which require Sales Associates to be physically present in the model home during
business hours. Docket Entry No. 190 at 9–24. Additionally, Plaintiffs point to
Meritage’s uniform classification of Sales Associates as exempt outside
salespeople to support its position that the case can be adjudicated collectively. Id.
Under the FLSA, employees who bring suit may do so individually or as a
collective action on behalf of “themselves and other employees similarly situated.”
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29 U.S.C. § 216(b). FLSA collective actions operate on an “opt-in” basis in which
potential class members must give affirmative notice of their consent to join the
suit. See Mooney v. Aramco Servs. Co., 54 F.3d 1207, 1212 (5th Cir. 1995),
overruled on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003).
The collective action tool allows plaintiffs “the advantage of lower individual costs
to vindicate rights by the pooling of resources.”
Hoffman-La Roche Inc. v.
Sperling, 493 U.S. 165, 170 (1989).
Courts typically follow the two-step certification process for collective
actions set forth in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987). See,
e.g., Mooney, 54 F.3d at 1213–14.
The first step, known as conditional
certification, results in notice being provided to potential plaintiffs who can then
choose to opt in. Id.; Vanzzini v. Action Meat Distribs., Inc., 995 F. Supp. 2d 703,
719–20 (S.D. Tex. 2014) (“[T]he first-stage test requires a minimal showing by the
plaintiff that (1) there is a reasonable basis for crediting the assertions that
aggrieved individuals exist, (2) that those aggrieved individuals are similarly
situated to the plaintiff in relevant respects given the claims and defenses asserted,
and (3) that those individuals want to opt-in to the lawsuit.” (citing Albanil v.
Coast 2 Coast, Inc., 2008 WL 493765, at *6 (S.D. Tex. Nov. 17, 2008))). The
standard for this initial notification phase is fairly loose, as it is “usually based only
on the pleadings and any affidavits which have been submitted.” Mooney, 54 F.3d
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at 1213; Vanzzini, 995 F. Supp. 2d at 720 (“[T]he standard is lenient and typically
results in conditional certification.”).
After the opt-in period and discovery, defendants often move for
decertification. This second step results in a more rigorous determination whether
the plaintiffs are similarly situated such that the action should be tried collectively.
Mooney, 54 F.3d at 1214. To determine whether there is sufficient similarity,
courts consider three relevant factors: “(1) the disparate factual and employment
settings of the individual plaintiffs; (2) the various defenses available to defendant
which appear to be individual to each plaintiff; and (3) fairness and procedural
considerations.” Roussell v. Brinker Int’l, Inc., 441 F. App’x 222, 226 (5th Cir.
2011) (quoting Mooney, 54 F.3d 1213 n.7).
Meritage claims that the opt-ins are not similarly situated because of
substantially different accounts of how and where they perform their sales duties.
Plaintiffs respond that a collective trial is appropriate because they are all subject
to the same Meritage decision to treat the Sales Associate position as an exempt
“outside sales” one.
The first and second certification factors—the disparate
factual and employment settings of the individual plaintiffs and the various
individualized defenses available to the defendants—thus largely merge into one
inquiry because the disparate factual and employment settings are relevant to
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whether the common “outside sales” defense can be tried collectively.
It is true that FLSA exemption cases are often tried collectively when
employees are subject to a common classification and perform similar duties that
resulted in that classification. See, e.g., Morgan v. Family Dollar Stores, 551 F.3d
1233, 1262–63 (11th Cir. 2008) (denying motion to decertify because discovery
showed that the plaintiffs shared similar job duties and day-to-day work); Clark v.
Centene Co. of Tex., L.P., 2014 WL 4385412, at *13 (W.D. Tex. Sept. 3, 2014)
(“Yet despite these vast swaths of uniformity among Plaintiffs’ job duties and daily
responsibilities, Centene maintains each Plaintiffs[’] position must be analyzed
individually to determine liability and assess damages.
omitted)); Jancich v. Stonegate Mortg. Corp., 2014 WL 1011480, at *3 (D. Kan.
Mar. 17, 2014) (“Because all Plaintiffs performed substantially similar duties, and
Defendant classified all of its loan officers as exempt employees during this time
period, whether the claimed administrative exemption is indeed applicable could
be determined across the board.”).
What was key to the “similarly situated”
finding in each of these cited cases, however, was not just the employer’s common
exemption decision, but that the employees performed their jobs pursuant to the
employers’ prescribed duties or in an otherwise uniform way. See also Falcon v.
Starbucks Corp., 580 F. Supp. 2d 528, 536–37 (S.D. Tex. 2008) (“Plaintiffs have
also provided significant evidence in support of their claim that all of the opt-ins
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either worked off-the-clock or had time shaved off of their hours by Store
Managers . . . This is true despite the fact that Starbucks had an official ‘time
worked is time paid’ policy.”). Absent similarity in actual job performance, a
uniform classification alone may be insufficient to meet the certification standard.
See Stevens v. HMSHost Corp., 2014 WL 4261410, at *5 (E.D.N.Y. Aug. 27,
2014) (“[I]t is well established ‘that blanket classification decisions do not
automatically qualify the affected employees as similarly situated, nor eliminate
the need to make a factual determination as to whether class members are actually
performing similar duties.’” (citing Gardner v. W. Beef Props., Inc., 2013 WL
1629299, at *7 (E.D.N.Y. Mar. 25, 2013) (collecting cases))).
That is the case here.
In spite of Plaintiffs’ uniform classification,
Plaintiffs’ testimony about their day-to-day routines is often inconsistent with
Meritage’s prescribed job duties that resulted in the classification. For example,
Steve Harding, Meritage’s Houston Division President, explained that “Meritage’s
salespeople are trained and expected to regularly and customarily engage in a nonexhaustive list of outside sales activities as part of their primary duty of selling
Meritage homes.” Harding Decl., Docket Entry No. 143-18 at 6. Sales Associate
Daniel McManaman describes something much different, explaining that he did
not customarily and regularly take customers to see homesites because he “had so
much business [he] didn’t need to leave. [He] had people coming in wanting to
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buy homes. There was no reason to leave.” McManaman Dep., Docket Entry No.
190-4 at 2–3. As the Court observed in denying summary judgment, the evidence
reveals “tension between what Meritage claims it trained Plaintiffs to do and how
Plaintiffs claim they actually performed their jobs.”
See Lipnicki, 2014 WL
923524, at *8. This benefitted Plaintiffs at the summary judgment stage, but has
adverse consequences for them when it comes to certification.
The record is replete with varying accounts of how the sales job is
performed. Most importantly, there are vast discrepancies in how much time the
salespeople say they spent on the home sites. Some opt-ins testified how they
unlocked model homes, staked out home sites with prospective buyers (to
demonstrate where a home would be built on an empty lot), did walk-throughs
with homebuyers, or checked on construction. See Willocks Dep., Docket Entry
No. 143-23 at 21–22 (unlocking and staking a lot for various clients); Anderson
Dep., Docket Entry No. 143-25 at 10 (stating she did a walk-through with the
homebuyer of every spec home under contract); Skelton Dep., Docket Entry No.
185-9 at 21 (explaining she went to see the construction process “a few times” but
was “very leery” of overstepping her role and encroaching on the construction
manager’s duties). And emails detail numerous instances of the Sales Associates
meeting clients on the lots to demonstrate a home or a home site. See Armstrong
Dep., Docket Entry No 143-1 at 60–69; Willocks Dep., Docket Entry No. 143-23
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at 18–23. But some of the deponents testified that they rarely or only occasionally
demonstrated a model home site to a potential buyer. See Kelly Dep., Docket
Entry No. 143-26 at 14–15; Bond Dep., Docket Entry No 143-28 at 11–12
(defining “occasionally” as twenty percent of the time); Hughes Dep., Docket
Entry No. 143-30 at 11 (stating that on “rare occasion” she would take prospective
homebuyers to see a spec house and defining “rare occasion” as around two to
three times per month). One Sales Associate testified he almost never took clients
to the lots as “there was no reason to leave” because business was good enough.
McManaman Dep., Docket Entry No. 190-4 at 2–3.
Other Sales Associates
claimed they rarely visited home sites once the homes were under contract or
during construction. See Lipnicki Dep., Docket Entry No. 190-1 at 40 (stating that
“[o]n rare occasion” he checked on houses under contract before the customer did
the “final walk” prior to closing); Hughes Dep., Docket Entry No. 143-30 at 12
(explaining she visited a home site under construction about once every two
As for marketing efforts and contact with realtors, the record again contains
disparities. Several of the deponents utilized realtor relationships to increase sales.
See Hughes Dep., Docket Entry No. 143-30 at 10 (discussing her attendance at
“Realtor Palooza” in California to generate business, placing flyers in her office for
realtors to take to their offices, and visiting one realtor’s office); Armstrong Dep.,
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Docket Entry No. 185-11 at 61 (explaining an email stating she took a realtor to
visit a home); Skelton Dep., Docket Entry No. 185-9 at 15 (stating she would
“make the rounds to drop off fliers” at realtor offices every couple of months). On
the other hand, some Sales Associates neither dropped flyers with realtors nor
generated traffic through realtors’ offices. See Kelly Dep., Docket Entry No. 1857 at 32–33 (testifying that although she “could” leave her sales office to meet with
Realtors to generate traffic, dropping off flyers was not something she chose to
Finally, some opt-ins testified that they “shopped the competition” by
visiting competitors’ homesites. See Hughes Dep., Docket Entry No. 185-14 at 13
(detailing her visit to a competitor’s grand opening to ascertain whether “they had
all the people and see if that’s why I didn’t have anybody in my development”);
Willocks Dep., Docket Entry No. 185-12 at 43 (explaining she drove through a
competitor’s property to “count their inventory”). In contrast, another opt-in relied
on phone calls and booklets that she collected instead of visiting the homes in
competitor communities. Skelton Dep., Docket Entry No. 185-9 at 17–18.
As these samples from the record demonstrate, Plaintiffs’ testimony
regarding what actually occurred “on the ground” varies significantly with respect
to considerations relevant to the outside sales determination. These disparities
convince the Court that all of the opt-ins are not similarly situated. Like many
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legal standards, “similarly situated” is vague. Given the concerns that animate the
certification inquiry, the Court believes it can best be analyzed by answering the
following question: is there a strong likelihood that a juror considering the
individual circumstances of all 70 opt-ins would reach the same result on the
applicability of the exemption? If so, the efficiency gains and remedial purposes
of collective actions warrant a single trial posing a single liability question to the
jury. Based on the current record in this case, however, the Court concludes that
there is a fair probability that a jury would find that some of the opt-ins conduct
most of the indispensable components of the sales process in “outside” areas, while
others do not. As another federal court explained in decertifying a similar case
involving new home salespeople who performed a mix of inside and outside work,
“broad variations” in the duties performed by individual plaintiffs made it
“impossible to make a blanket determination concerning the FLSA exempt status
of the entire class of putative plaintiffs . . . or to extrapolate the experiences of the
exemplar [salespeople] to the more than one hundred opt-in plaintiffs.” See Tracy
v. NVR, Inc., 293 F.R.D. 395, 399 (W.D.N.Y. 2013) (“The record demonstrates a
wide variety of employment practices and time management requirements among
the individual plaintiffs, which would require dozens of mini-trials to determine
whether each employee’s particular time away from the model home or trailer
meets the . . . threshold indicated by the Department of Labor for outside
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salespersons.”). Posing a single question to the jury in a collective action would
thus undermine the interests of both Meritage and those opt-ins who have the
strongest claims that they engaged in little or no substantial outside work.
In terms of the procedural and fairness considerations that are considered in
the decertification decision, the Court notes that this is not a case in which the
claims are so small that there is no incentive to proceed individually.
Hoffmann-La Roche, 493 U.S. at 170 (noting that collective actions allow plaintiffs
“the advantage of lower individual costs to vindicate rights by the pooling of
resources”). Although the incomes of Plaintiffs vary widely (if the employees are
covered by the FLSA, weekly income would be used to calculate the hourly wage
which would then be used to determine the overtime wage due), some had incomes
exceeding six figures. See Docket Entry No. 152 at 20, 28 (over $128,000);
Docket Entry No. 152-1 at 27 (over $240,000). Those who made much smaller
amounts are likely to still have sufficient damages to make a trial cost-effective
given the Court’s plan, discussed below, to have joint bellwether trials.
The Court’s decertification decision is made based on the current record
and the Court’s best guess about the issues that are likely to affect the “outside
sales” determination. It may turn out, however, that the numerous differences in
job duties discussed above are not outcome determinative. Perhaps the jury will
conclude that even Sales Associates with the fewest outside contacts still
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conducted most indispensable parts of their sales jobs “outside” and thus are
properly classified. Or maybe the jury will conclude that even Sales Associates
with the most outside contacts of the group are nonetheless improperly classified
because most of the indispensable aspects of their jobs were performed inside the
model home office. Therefore, if the evidence and verdict in the first bellwether
trial indicate that the exemption question can be answered collectively, the Court
may reconsider its decertification determination. See Nat’l Asbestos Workers Med.
Fund v. Philip Morris, Inc., 2000 WL 1364358, at *1 (E.D.N.Y. Sept. 20, 2000)
(“After [the bellwether] trial is completed, the parties will be in a better position to
address manageability and other requirements for certification.”).
INTERVENTION BY OPT-INS
In most cases, once a court decertifies a collective action, the opt-ins are
dismissed without prejudice. See, e.g., Mooney, 54 F.3d at 1214; Tracy, 293
F.R.D. at 401. As with Rule 23 class actions in which certification is denied,
however, members of a prospective FLSA collective action may intervene if they
satisfy the Rule 24 intervention requirements. See Stone v. First Union Corp., 371
F.3d 1305, 1312 (11th Cir. 2004) (reversing district court decision denying motion
to intervene from opt-in members of an ADEA collective action that had been
decertified); Roussell v. Brinker Int’l, Inc., 2009 WL 6496504, at *10 (S.D. Tex.
Jan. 26, 2009) (not allowing intervention of opt-in class members after
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decertification, but acknowledging its general availability in that situation by
engaging in an extensive analysis of both mandatory and permissive intervention);
NEWBERG ON CLASS ACTIONS § 16:11 (4th ed.) (“Intervention is liberally allowed
after the denial of class status for the protection of absent class members’
interests.”). Accordingly, after issuing the decertification order, the Court issued
an order directing any opt-ins wishing to participate in this case as individual
plaintiffs to file a motion to intervene under Rule 24(b), see Docket Entry No. 210,
and 70 opt-ins did so. Docket Entry No. 215. Meritage filed a response raising
only a venue objection as to the opt-ins who worked for Meritage outside Houston.
See Docket Entry No. 219 at 2.
The Court will allow permissive intervention of the opt-ins. “On timely
motion, the court may permit anyone to intervene who: . . . has a claim or defense
that shares with the main action a common question of law or fact.” Fed. R. Civ.
P. 24(b)(1)(B). If these conditions are met, the court then exercises its discretion in
deciding whether intervention should be allowed. See Kneeland v. Nat’l Collegiate
Athletic Ass’n, 806 F.2d 1285, 1289 (5th Cir. 1987) (“Permissive intervention ‘is
wholly discretionary with the [district] court . . . even though there is a common
question of law or fact, or the requirements of Rule 24(b) are otherwise satisfied.”
(alterations in original) (quoting New Orleans Pub. Serv., Inc. v. United Gas Pipe
Line Co., 732 F.2d 452, 470–71 (5th Cir. 1984) (en banc))). “In exercising its
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discretion, the court must consider whether the intervention will unduly delay or
prejudice the adjudication of the original parties’ rights.” Fed. R. Civ. P. 24(b)(3).
The application in this case is timely.
It was filed soon after the
decertification decision. See Roussell, 2009 WL 6496504, at *5–6 (finding timely
a motion to intervene filed by opt-ins within two months of decertification). Prior
to that time, there was no reason to intervene, as the case had been conditionally
certified. Id. (“Like class members of a class action, opt-ins to a collective action
are passive beneficiaries whose rights are protected by the class until it is
decertified.” (citing Am. Pipe & Constr. Co. v. Utah,2 414 U.S. 538, 553–54 (1974)
(recognizing that requiring potential class members to file “protective” motions to
intervene prior to the certification decision would “breed needless duplication of
One of the conditions set forth in Rule 24(b)(1) is also met, as there are at
least two significant common questions of law in this case on which the Court has
already ruled. The first common legal issue is the meaning and applicability of the
DOL opinion letters discussing the outside sales exemption in the new home
industry. Lipnicki, 2014 WL 923524, at *7–9. The second is whether Meritage
Although American Pipe is a Rule 23 case, its reasoning makes even more sense in the context
of an “opt in” collective action that had been conditionally certified. Because of the opt-in
requirement, the parties who now wish to intervene had previously made themselves known to
the Court, as opposed to the Rule 23 “opt out” class action in which absent class members may
have no awareness of or involvement in the case before seeking to intervene after a decision
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willfully violated the FLSA, assuming there was a misclassification. Id. at *9–11.
These two rulings, on which the parties and Court invested significant resources,
would apply to all those who seek to intervene. Cf. Adams v. Big Lots Stores, Inc.,
2009 WL 2160430, at *2 (E.D. La. 2009) (recognizing in Rule 20 permissive
joinder analysis that individual cases of former opt ins “unquestionably [involve]
some common questions of law and/or fact” even though court had decertified
FLSA collective action for failure to meet “similarly situated” standard).
That leaves the question of whether the Court will exercise its discretion to
allow intervention. Allowing the intervention results in little delay or prejudice to
the rights of the original parties. Two of the named Plaintiffs will have their cases
tried this month. The trial for the third will be scheduled soon thereafter. And the
cases between the opt-ins and Meritage will be resolved sooner in this single forum
than if the opt-ins are required to file numerous individual actions in courts that are
not already familiar with and have not already made key rulings in the case. Nor is
a case involving approximately 70 individual plaintiffs unmanageable. The Court
has another FLSA case on its docket in which approximately 70 individual
plaintiffs filed suit (never seeking collective treatment), and the Court is managing
that case through bellwether trials. See Davis v. Legend Energy Servs. LLC, No.
6:13-CV-1, Minute Entry (S.D. Tex. Oct. 7, 2014) (requiring both parties to submit
the names of four plaintiffs to go to trial in the first bellwether trial). Outside the
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FLSA context, the Court recently had on its docket a toxic tort case in which
hundreds of individuals filed suit, and such a case involves far more technical and
complex evidence than an overtime case. See Boyd v. BP Prods. N.A. Inc., No.
3:13-CV-175 (S.D. Tex. filed May 10, 2013).
That leaves Meritage’s venue objection to the opt-ins who are not from the
Houston area. A venue determination is not incorporated directly into the Rule 24
analysis. The Court therefore concludes that the best approach is to grant the
motion to intervene, and then treat Meritage’s objection as a Rule 12(b)(3)
challenge to venue for the non-Houston plaintiffs (just as the venue of regular
plaintiffs would be challenged after they are already parties to the case). Because
there “is almost no law on how the requirements of venue apply when intervention
is sought,” 5B CHARLES ALAN WRIGHT
FED. PRAC. & PROC. § 1918 (3d
ed.), this will allow the Court time to fully consider this issue. If the Court
determines that venue does not exist over the non-Houston intervenors, then the
Court can employ either of the two remedies for improper venue: transfer to
another forum or dismissal without prejudice. 28 U.S.C. § 1406(a).
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For the reasons discussed above, Defendants’ Motion to Decertify Collective
Action (Docket Entry No. 187) is GRANTED and the Motion to Intervene
(Docket Entry No. 215) is GRANTED.
SIGNED this 4th day of November, 2014.
United States Circuit Judge3
Sitting by designation
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