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I. INTRODUCTION
In their opposition brief, plaintiffs offer only a desultory defense of their counsel's unethical conduct. Plaintiffs instead argue, without citation to case law, that Polgar has no right to bring her motion, and that plaintiffs effectively waived any conflicts that obtained from Kronenberger's employment. But plaintiffs are wrong. Polgar has standing both as a USCF Executive Board member and as an aggrieved party to move to disqualify Kronenberger. The waivers Kronenberger attempted to obtain came too late and, moreover, should have been presented to the USCF's governing Board of Delegates rather than to his co-defendants in this and related litigations. Indeed, Polgar would have failed her fiduciary duties to the federation's membership if she hadn't brought this motion while there remains an opportunity for the organization to recover the funds that its directors have misappropriated. In short, plaintiffs' opposition is meritless. More telling is what plaintiffs concede. Plaintiffs do not contest that their counsel: * misrepresented in prior pleadings and statements to the Court that the federation's Executive Board had designated a "litigation committee" to initiate this lawsuit, when no such committee was formed until April 2009;1 * filed a lawsuit against Polgar in Illinois on behalf of the federation in contravention of the vote of the USCF's governing Board of Delegates;2 * attempted to interfere with Polgar's insurance defense in a related case, while contemporaneously holding himself out to her as an attorney who was conducting an unbiased investigation on behalf of the federation;3 * attempted to interfere with Polgar's husband's bankruptcy proceeding for what he perceived to be a strategic advantage;4 * fed information obtained through uncontested subpoenas, and designated confidential under the protective order in this case, to one of his co-defendants in the Texas litigation, who then discussed that evidence online;5 * never informed the USCF's governing Board of Delegates of Polgar's offer to settle with the federation for a dollar;6 * abused California's "doe" discovery procedures to seek evidence to defend himself in a related federal action;? and * advised naming Polgar as a defendant in this action without having obtained a single item of evidence during the "doe" discovery period that implicated Polgar in the alleged theft of a board member's email.8 In light of the extensive record of Kronenberger's ethical violations, Polgar respectfully requests that the Court grant her motion to disqualify. II. ARGUMENT Plaintiffs oppose the motion to disqualify on three grounds. They argue that Polgar lacks standing to bring it, because she and her husband understood that Kronenberger was adverse to them upon his retention, that Kronenberger disclosed his conflicts and interests in the subject matter of the litigation to plaintiffs and obtained appropriate waivers, and that disqualification would be expensive for the federation. See Opp. at 4-6. As set forth below, each of these contentions is either incorrect or irrelevant. A. Polgar Has Standing to Move to Disqualify Kronenberger Plaintiffs argue that Polgar lacks standing to move to disqualify their counsel under either Cal. R. Prof. Conduct ("Rule") 3-310(C) or 3-600(D) because Kronenberger never represented Polgar. See Opp. at 4.9 Plaintiffs are mistaken. Kronenberger owed Polgar duties of confidentiality and loyalty, at least until such time as he disclosed an interest adverse to hers, because Polgar is an Executive Board member of a client organization. See Rule 3-600(D). Further, even if Kronenberger had never owed Polgar any duties as his client, Polgar would still have standing to bring her motion because, as she has already set forth, Kronenberger's many ethical breaches have harmed her interests and continue to interfere with the just determination of her claims and defenses. See Motion at 9-14, 18-21, 24-25. 1. Non-Client Litigants May Move to Disqualify Opposing Counsel Although to plaintiffs it is "evident from the face of [Rule 3-310(C)] .... that the party moving to disqualify an attorney must be a client [or] former client of such attorney" (Opp. at 4), ! the courts disagree. "The right to disqualify counsel is within the discretion of the trial court as an exercise of its inherent powers." Visa U.S.A., Inc. v. First Data Corp., 241 F. Supp. 2d 1100, 1103-04 (N.D. Cal. 2003) (citing United States v. Wunsch, 84 F.3d 1110, 1114 (9th Cir. 1996)). A court may consider a motion to disqualify counsel brought by a "non-client litigant" based on its "obligation to manage the conduct of attorneys who appear before it and to ensure the fair administration of justice." Colyer v. Smith, 50 F. Supp. 2d 966, 971-72 (C.D. Cal. 1999) (citing Chambers v. Nasco, Inc., 501 U.S. 32, 43-44 (1991)). The moving party need only "establish a personal stake in the motion to disqualify sufficient to satisfy the 'irreducible constitutional minimum' of Article III." Colyer, 50 F. Supp. 2d at 971.1° "Where the ethical breach is so severe that it 'obstructs the orderly administration of justice,' the party who finds [her] claims obstructed has standing." Id. at 972 (citing Doe v. Madison Sch. Dist. No. 321, 177 F.3d 789, 790 (9th Cir. 1999)). Courts in this district and circuit have routinely considered motions to disqualify opposing counsel for breach of the duties of loyalty and confidentiality, where such a breach "impacts the moving party's interest in a just and lawful determination of her claims." Id. at 971. For example, in Decaview, the court held that a corporate subsidiary had a sufficient interest in its parent's financial records to grant it standing to move to disqualify the parent's counsel, when that lawyer failed to maintain the confidentiality of the information. Id., 2000 WL 1175583 at *10. The court was "convinced ... that the law in the Ninth Circuit regarding non-client , standing is sufficiently established as to allow [the subsidiary], a non-client, standing to raise an objection to the representation of an opposing party." Id. at *3.11 In Concat LP v. Unilever, PLC, 350 F. Supp. 2d 796, 818-19 (N.D. Cal. 2004), the court held that a non-client with an ownership interest in a party had standing to bring a motion to disqualify counsel for that party. The court noted that a "much stricter standard applied] to conflicts arising from concurrent representation," and suggested that in such cases a party seeking to establish non-client standing faced a lesser burden. Id. at 819; see also Simonca v. Mukasey, 2008 WL 5113757 at *4 (E.D. Cal. Nov. 25, 2008) (moving party has standing to disqualify if it demonstrates that "opposing counsel's representation in the case causes the movant injury"); In re Cellcyte Genetic Corp. Secs. Litigation, 2008 WL 5000156 at *1-*2 (W.D. Wa. Nov. 20, 2008) (recognizing non-client standing to disqualify counsel where concurrent representation interfered with "the integrity of the process" and the rights of the litigants); FMC Techs., Inc. v. Edwards, 420 F. Supp. 2d 1153, 1156-57 (W.D. Wa. 2006) (Non- client plaintiffs showed that "the ethical conflict at issue here sufficiently impacts the just and lawful determination of their claims and that the conflict involved is so intertwined with the current litigation that this Court must consider plaintiffs' motion to disqualify defendants' ' counsel"); Jameison v. Slater, 2006 WL 3421788 at *5 (D. Ariz. Nov. 27, 2006) (where plaintiff "demonstrated that an ethical breach of conduct by [counsel] in representing [defendants] would likely have a negative impact on her interest in obtaining a just and lawful determination of the claims at issue . . . the prudential barrier to litigating the rights and claims of third parties is overcome by the Court's inherent obligation to manage the conduct of attorneys who appear , before it and to ensure the fair administration of justice"). Polgar has already set forth the many ways in which Kronenberger's misconduct continues to harm her. First, the pendency of this lawsuit is itself a product of Kronenberger's simultaneous representation of the USCF and certain interested Executive Board members. Kronenberger apparently advised the USCF's Executive Director to initiate this lawsuit as a doe action (and later, to name Polgar as a defendant without having obtained any evidence to tie her to the hacking of a board member's personal email account), and advised a handful of interested Executive Board members to ratify those actions, in contravention of the USCF's bylaws. See Motion at 5-8, 22-24. The Board of Delegates has never been granted the opportunity to consider whether to commit the federation's resources to pursue an individual who allegedly accessed a board member's emails, nor has Kronenberger ever advised the delegates (or even, perhaps, the interested board members) that the federation will have to pay Polgar's attorney fees when she prevails. See 805 ILCS 105/108.75(c) (requiring indemnification of director who successfully defends lawsuit). The only evidence Kronenberger now offers in defense of his conduct in abetting a set of interested board members in the improper prosecution of this action is a self-serving declaration. He avers that "[r]egarding the initiation of the present action, the actions of the USCF were authorized by the Executive Board of the USCF and thereafter ratified two separate times." Deel. of Karl S. Kronenbeger ISO Opp. to Mot. to Disqualify ("Kronenberger Decl."), 10. But j Kronenberger is no longer credible. On the same day that he entered this declaration stating that the "Executive Board" authorized "the initiation of the present action," he filed a brief in which initiating litigation without prior formal approval of the full Executive Board." See Docket No. 1132 (Opp. to Mot. for Summary Judgment) at 8. These contradictory rationalizations are largely irrelevant. The federation's governing rules prohibit a majority of the Executive Board from acting outside of the context of a properly called Board meeting at which all members have the opportunity to vote. See Docket No. 97 (4/27/09 Decl. of Bill Hall ("Hall Decl."), Ex. G at 33-40 (Delegate Actions of Continuing Interest ("Delegate Actions"), 27(1)(b) ("A Board majority has no authority except as a majority vote within the context of a properly called Board meeting in which all members have had the opportunity to participate"). And even if the interested board members' attempted "ratifications" were permitted under the rules—if, that is, plaintiff were correct that the federation's bylaws don't apply to them because they hold a majority of the seats on the Executive Board—they would be inadequate because they contain no disclosure of Kronenberger's or the board members' interests in the subject matter of the litigations, nor do they disclose the penalties that the federation will face if it cannot prevail against Polgar. See Hall Decl., Ex. D. What plaintiffs can no longer dispute is that the Board of Delegates has never authorized the lawsuit, and that the Executive Board did not initiate it upon a properly-noticed resolution. See Motion at 8-9. The harm to Polgar, including the attorney fees she continues to incur, is immediate. Second, Kronenberger continues to misrepresent that the federation lacks internal procedures to resolve this and the related disputes.I2 See Motion at 19-20. But as Polgar set forth in her motion, Kronenberger himself requested in August 2008 that the delegates exercise their authority to sanction and remove Polgar and Truong. Id. Further, months before the federation filed this lawsuit, Bill Goichberg (the president of the federation's Executive Board, a third-party defendant in this case, and one of Kronenberger's co-defendants in the Texas litigation), acknowledged that "someone should have filed a complaint with the Ethics Committee," rather than air the core allegations of the related lawsuits publicly. Decl. of Matthew Springman ISO Reply re Mot. to Disqualify ("Springman Reply Decl."), Ex. A; see also id., Ex. B ("Mr. Goichberg said that he believed that Mr. Mottershead's report should not have been released publicly but instead should have been taken to the federation's ethics committee, which he said has the power to censor or reprimand a board member or even recommend the person be removed").13 Third, Kronenberger has interfered with Polgar's request for indemnification in this lawsuit. See Motion at 9-11, 21. Plaintiffs now claim that Kronenberger "passed on" Polgar's 1 requests for indemnification to David Herman, the federation's lawyer in the Illinois case. See Opp. at 4; Kronenberger Decl., ¶ 12. Plaintiffs do not address why Kronenberger represented to the Court that Herman had advised the USCF that Polgar's request was "premature," while Herman himself later denied that he represented or advised the federation regarding Polgar's indemnification, or even that the USCF had considered Polgar's requests at all. 10.14 Nor have plaintiffs explained why Polgar's request for indemnification for the costs she continues to incur while defending a frivolous litigation is "premature," while plaintiffs immediately indemnified themselves and various third parties in the related Texas case. See Motion at 11 n.16.15 Finally, plaintiffs have offered no justification for Kronenberger's November 2007 interference with Polgar's and her husband's insurance defense in the New York litigation, which occurred prior to the December 7, 2007 deadline for Truong to respond to the ; questions Kronenberger raised during the investigation he was retained to conduct. See Motion at 10-12.16 Fourth, Kronenberger violated his duty to communicate Polgar's settlement offer to the federation's delegates, or indeed to any competent body other than the interested board members he represents. See Motion at 14. Plaintiffs assert that this "claim is disingenuous" because "Polgar refused to settle with all of the Executive Board members she sued personally, and the USCF owes such Executive Board members indemnification." Opp. at 4. But plaintiffs have never explained why a handful of Executive Board members who pursued a frivolous lawsuit against a fellow board member, conspired to interfere with that board member's insurance defense in a related lawsuit, and ignored the federation's bylaws and the authority of its Board of Delegates, should be entitled to indemnification from the federation's purse. The question of 1 indemnification is for an independent body, and not the interested directors, to determine. See Hall Deel., Ex. G at 26-33 ("Bylaws"), Art. IX, § 12. Rather than having a duty to indemnify these interested parties, the federation will in fact be entitled to a return of the funds that those men have spent without authorization. See 805 ILCS § 105/103.20 ("All persons who assume to exercise corporate powers without authority to do so shall be jointly and severally liable for all debts and liabilities incurred or arising as a result thereof'). Kronenberger's failure to forward Polgar's settlement offer to the Board of Delegates was an automatic violation of his ethical responsibilities. See Rule 3-510(A) ("A member shall promptly communicate to the member's client: . (2) All amounts, terms, and conditions of any written offer of settlement made to the client").17 Kronenberger's ethical violations have marred the integrity of this litigation from its inception. The harm that Polgar continues to suffer demonstrates her "personal stake" in Kronenberger's representation. See Colyer, 50 F. Supp. 2d at 971. Because Kronenberger's present conflicts arise from a concurrent representation of the federation and a handful of its directors, disqualification is automatic. People ex rel. Dept. of Corps. v. SpeeDee Oil Change Sys., Inc., 20 Cal. 4th 1135, 1145 ( l999) ("Ulf an attorney . . . simultaneously represents clients who have conflicting interests . . . disqualification follows automatically, regardless of whether the simultaneous representations have anything in common or present any risk that confidences obtained in one matter would be used in the other"). If Kronenberger is replaced by counsel cognizant of his or her responsibilities to the federation and its governing Board of Delegates, as opposed to a handful of individuals who've misappropriated the federation's resources for their own ends, that harm will be largely redressed: at the very least, Polgar can expect her settlement offers and indemnification requests to reach the proper bodies. Thus, Polgar has standing to bring this motion. See Wilbur v. Locke, 423 F.3d 1101, 1107 (9th Cir. 2005) ("To satisfy the requirements for standing under Article III of the United States Constitution, the party seeking relief must show: (1) [she] has suffered an injury in fact that is concrete and particularized and actual or imminent; (2) the injury must be fairly traceable to the challenged action of the opposing party; and (3) it is likely that the injury will be redressed by a favorable decision").18 2. Kronenberger Owed Polgar Duties of Confidentiality and Loyalty Plaintiffs further argue that the Court should deny the present motion because Kronenberger never represented Polgar or Truong, and that Truong isn't a party to this litigation.1 See Opp. at 4-6. But at least one Executive Board member disagrees as to the scope of Kronenberger's representation before the USCF filed this lawsuit. Randy Bauer, a third-party defendant in this lawsuit, wrote in an email to another USCF member on August 17, 2008 that "it is important to remember that Mr. Kronenberger was hired to help us figure out the evidence and the claims by BOTH sides. He was not hired to 'prosecute' Paul. He reached his conclusions after analysis of all available evidence." Springman Reply Decl., Ex. E. In the context of the investigation for which he was retained, Kronenberger sent Truong a November 29, 2007 letter (cc'ing Polgar), in which he represented that the "USCF cannot draw any conclusions until such time as it has finished its investigation[.]" Kronenberger Decl., Ex. A at 1. Yet plaintiffs do not deny that well before the December 7, 2007 deadline Kronenberger had given Truong to respond to his questions, Kronenberger had already determined to persuade the USCF's insurer not to extend coverage to Truong or Polgar for the case that Sam Sloan had filed against them in New York. See Motion at 11. Kronenberger argued that cancellation of Polgar's and Truong's insurance coverage would bring financial pressures to bear on them and cause them to hire "lower quality" counsel. Id Plaintiffs provide no evidence that Kronenberger disclosed to Polgar or Truong that he'd prejudged the outcome of the investigation; indeed, the letter on which plaintiffs now rely states the opposite. Nor do plaintiffs deny that Kronenberger li fed the information Truong provided him to another USCF member to interfere in Truong's bankruptcy proceeding, or that Kronenberger injected Polgar's private child custody dispute into the investigatory committee's deliberations. See Motion at 12.19 Plaintiffs' argument that it was Truong, and not Po!gar, who sent information to Kronenberger is irrelevant. The record shows that Kroneberger was prepared to sabotage Polgar's interests because of the alleged actions of her husband. Plaintiffs cannot now claim that Polgar lacks standing to protest that malfeasance. B. Kronenberger's Disclosure of His Conflicts of Interest and Interest in the Subject Matter of this Litigation Was Inadequate and Untimely Plaintiffs also oppose the motion on the ground that Kronenberger obtained effective waivers of all potential conflicts from plaintiffs, and disclosed his interests in the subject matter of the litigation to them. See Opp. at 5.20 Notably, plaintiffs fail to identify when they provided ' such waivers. See id. But the privilege log produced by the USCF in the related Texas case shows that plaintiffs executed waivers only on December 19 and 23, 2008, months after they filed this lawsuit. See Springman Reply Decl., Ex. F.21 This was inadequate, for an attorney must obtain a waiver for conflicts arising from joint representation at the outset, if the waiver is to be effective. See Miller v. Alagna, 138 F. Supp. 2d 1252, 1256 (C.D. Cal. 2000). By the time that Kronenberger sought waivers, both this case and the related Texas lawsuit were well underway, and the conflicts between the interests of the federation and a handful of its directors had long ripened. Further, Kronenberger never disclosed his conflicts or interest in the subject matter of the litigation to the federation's governing board of delegates. His attempt to obtain waivers from the same Executive Board members who "ratified" the present lawsuit was futile, because each of those individuals is an interested party. As Polgar has already noted, in such a case the authority to consent to the dual representation of the organization and its interested directors lies with "an appropriate constituent of the organization other than the individual or constituent who is to be represented, or by the shareholder(s) or organization members." Rule 3-600. To allow a handful of third-party and counterclaim defendants in this case the right to waive the conflicts that Kronenberger's representation poses for the federation would render 3-600 meaningless. See Forrest, 58 Cal. App. 4th at 74. Only the delegates could have provided informed consent, and they did not. C. The Court Should Not Deny the Motion on the Ground That Disqualification Would Be Costly Plaintiffs' argument that disqualification would be "a significant financial setback" for the federation is also meritless. As a preliminary matter, the irony of plaintiffs' position should be obvious, given that they've attempted to impose financial burdens on Polgar throughout: plaintiffs' counsel interfered with Polgar's requests for indemnification in this case, and earlier sought to obtain a strategic advantage over Polgar and her husband by forcing them to hire "potentially lower quality (less expensive) counsel." See Motion at 9-11. Polgar doesn't dispute that this litigation has wasted the federation's resources; that's why a constituent other than a set of directors who face individual liability should have considered whether to bring it. More importantly, Polgar has not delayed in bringing this motion. From the outset of this litigation, she has sought information regarding the USCF's consideration of her indemnification requests, purported waivers of its counsel's conflicts of interest, and authorization of the present action. See Docket No. 27; Springman Reply Decl., Exs. G-H. After the Court ordered the federation to produce the records showing "that there was a vote taken authorizing this particular action," and after plaintiffs failed to produce such evidence, Polgar moved to disqualify in a matter of weeks. Because Polgar did not "unreasonably delay[] bringing this motion for tactical reasons," the prejudice plaintiffs will suffer is irrelevant. Visa U.S.A., Inc., v. First Data Corp., 1 241 F. Supp.2d 1100, 1106 n.6 (N.D. Cal. 2003) (citations omitted). Indeed, Kronenberger's disqualification and replacement by counsel cognizant of his or her ethical obligations to the Board of Delegates may help the federation financially. New counsel who does not align with a set of interested directors may advise the federation on its ability to recover the funds that those purported fiduciaries have misspent. See 805 ILCS 1 105/103.20 ("All persons who assume to exercise corporate powers without authority to do so shall be jointly and severally liable for all debts and liabilities incurred or arising as a result thereof"). ILL CONCLUSION For the reasons set forth above, Polgar respectfully requests that the Court grant her motion to disqualify. Dated: June 29, 2009 GONZALEZ & LEIGH, LLP By: ,/s/ G. Whitney Leigh G. Whitney Leigh Attorneys for Defendant SUSAN POLGAR Brian Lafferty |
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#2
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noauth wrote:
On July 1, 11:59 am, MrVidmar wrote: (skip unauthorized reproduction of certain documents) Dated: June 29, 2009 GONZALEZ & LEIGH, LLP By: /s/ G. Whitney Leigh G. Whitney Leigh Attorneys for Defendant SUSAN POLGAR Brian Lafferty If any further proof of Lafferty's position as rgcp's craziest poster was needed, here it is. The delusional net-kook thinks he (a retired Parking Ticket Clerk) is a member of an ace firm of attorneys, and he shamelessly appends his name to their name. Bizarre doesn't describe it. For the record, the ****wit Lafferty is not associated in any way with Gonzalez & Leigh, LLP. Any job application he sends G&L will be filed immediately in the cylindrical storage device - or in the crosscutter. Or did I mean the woodchipper? It isn't the first time that the ****wit has done this. It is about the twentieth. He's appended his name to Karl's Burger-flipping firm too, which at least is more in Lafferty's league. Lafferty's cowardly withdrawal from the USCF election won't save him from the retribution he so richly deserves. His actions have made it so personal. ) archived |
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#3
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On Sep 29, 10:26*am, MrVidmar wrote:
noauth wrote: On July 1, 11:59 am, MrVidmar wrote: *(skip unauthorized reproduction of certain documents) Dated: June 29, 2009 GONZALEZ & LEIGH, LLP By: /s/ G. Whitney Leigh G. Whitney Leigh Attorneys for Defendant SUSAN POLGAR Brian Lafferty If any further proof of Lafferty's position as rgcp's craziest poster was needed, here it is. *The delusional net-kook thinks he (a retired Parking Ticket Clerk) is a member of an ace firm of attorneys, and he shamelessly appends his name to their name. *Bizarre doesn't describe it. For the record, the ****wit Lafferty is not associated in any way with Gonzalez & Leigh, LLP. *Any job application he sends G&L will be filed immediately in the cylindrical storage device - or in the crosscutter. Or did I mean the woodchipper? It isn't the first time that the ****wit has done this. It is about the twentieth. He's appended his name to Karl's Burger-flipping firm too, which at least is more in Lafferty's league. Lafferty's cowardly withdrawal from the USCF election won't save him from the retribution he so richly deserves. His actions have made it so personal. ) archived- Hide quoted text - - Show quoted text - Charlie is beside himself over this ruling. Kudos to Judge Patel in showing that there is still justice coming out of some courts. |
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#4
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noauth wrote:
On July 1, 11:59 am, MrVidmar wrote: (skip unauthorized reproduction of certain documents) Dated: June 29, 2009 GONZALEZ & LEIGH, LLP By: /s/ G. Whitney Leigh G. Whitney Leigh Attorneys for Defendant SUSAN POLGAR Brian Lafferty If any further proof of Lafferty's position as rgcp's craziest poster was needed, here it is. The delusional net-kook thinks he (a retired Parking Ticket Clerk) is a member of an ace firm of attorneys, and he shamelessly appends his name to their name. Bizarre doesn't describe it. For the record, the ****wit Lafferty is not associated in any way with Gonzalez & Leigh, LLP. Any job application he sends G&L will be filed immediately in the cylindrical storage device - or in the crosscutter. Or did I mean the woodchipper? It isn't the first time that the ****wit has done this. It is about the twentieth. He's appended his name to Karl's Burger-flipping firm too, which at least is more in Lafferty's league. Lafferty's cowardly withdrawal from the USCF election won't save him from the retribution he so richly deserves. His actions have made it so personal. And what retribution might that be, Dumbass. It seems to me that Judge Patel made the correct decision in denying Polgar's motion to disqualify counsel. Sending the case to Judge Cummings is something she said for months she was leaning toward doing. No surprise there. Leigh's feeble attempt to prevent that by withdrawing his motion to transfer clearly wasn't going to impact a judge doing what she has the power to do sua sponte. So Dumbass, what was the point you thought you were making? ) |
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