Involuntary Dismissal should have been Granted because Damages Rested with LLC and Not Its Member

Posted by David Adelstein on November 17, 2018
Appeal, Trial Perspectives / Comments Off on Involuntary Dismissal should have been Granted because Damages Rested with LLC and Not Its Member

During a bench trial, the defendant moved for an involuntary dismissal after the plaintiff’s case-in-chief.  The defendant argued the plaintiff had no standing.  The trial court denied the motion and a judgment was ultimately entered in favor of the plaintiff.  The defendant appealed.  On appeal, the appellate court reviews on a de novo standard of appellate review a trial court’s ruling on a motion for involuntary dismissal.  In doing so, the trial court reversed the trial judge with directions to enter judgment in favor of the defendant.  Why?

Well, this case involved a member of a limited liability company (LLC), the plaintiff, filing a lawsuit against a third-party, the defendant, due to a real estate transaction.  The overriding problem for the plaintiff was that the damages he was suing for were damages associated with his LLC, and not him individually. “Generally, a shareholder of a corporation or a member of an LLC may not maintain an action in his or her own right if the cause of action is derived from the right of the corporation or the LLC to bring the action.” Home Title Co. of Maryland, Inc. v. LaSalla, 43 Fla.L.Weekly D2561a (Fla. 2d DCA 2018).  Because the plaintiff (member of the LLC) was suing for damages that directly belonged to the LLC, the cause of action rested with the corporation.  Id. (“The property belonged to the LLC, and thus, the LLC suffered the direct harm when Home Title [third-party] transferred the property…Even though LaSalla [plaintiff-member] is the only other member of the LLC who suffered as a result of the transfer, the harm to him individually was indirect and the result of the harm to the LLC.”). 

The moral of this case is make sure you have standing to sue for the damages/injuries you are suing for.  

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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The Less Stringent Frye Test is Baaaaack to Determine the Admissibility of Expert Testimony

Posted by David Adelstein on November 11, 2018
Expert Testimony / Comments Off on The Less Stringent Frye Test is Baaaaack to Determine the Admissibility of Expert Testimony

There are two competing tests for a trial court to determine the admissibility of reliable expert testimony / opinions.  One method is known as the Daubert test.  The other as the Frye test.  Both are named after respective cases.    The Daubert test is used in federal court.  The Frye test was used in Florida until 2013 when the Florida Legislature modified the evidence code to reflect the application of the Daubert test.  

The Daubert test is widely considered a more stringent test relative to the admissibility of expert opinions at trial where trial courts perform certain gatekeeper functions to determine the reliability of an expert’s methodology (Check this article here).   The trial court looks at whether the expert testimony is based on sufficient facts or data, is the product of reliable principles or methods, and whether an expert witness has reliably applied the principles or methods to the facts of the given case.

The Frye test, on the other hand, is widely considered less stringent because it only requires the court look at whether the expert testimony / opinion is based on methods generally accepted in the scientific community.   

Under Frye, “the burden is on the proponent of the evidence to prove the general acceptance of both the underlying scientific principle and the testing procedures used to apply that principle to the facts of the case at hand.”  Significantly, Frye applies only to “new or novel scientific evidence.” 

Delisle v. Crane Co., 43 Fla.L.Weekly S459a (Fla. 2018) (internal quotations omitted) (Pariente, J., concurring).

Recently, however, the Florida Supreme Court in Delisle ruled that the less stringent Frye test, and NOT the Daubert test, is to applied in Florida:

We recognize that Frye and Daubert are competing methods for a trial judge to determine the reliability of expert testimony before allowing it to be admitted into evidence. Both purport to provide a trial judge with the tools necessary to ensure that only reliable evidence is presented to the jury. Frye relies on the scientific community to determine reliability whereas Daubert relies on the scientific savvy of trial judges to determine the significance of the methodology used. With our decision today, we reaffirm that Frye, not Daubert, is the appropriate test in Florida courts.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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If You File a Frivolous Motion or Pleading: BEWARE

Posted by David Adelstein on November 03, 2018
Trial Perspectives / Comments Off on If You File a Frivolous Motion or Pleading: BEWARE

If you file a frivolous motion or pleading: BEWARE.  Appellate courts are taking seriously frivolous filings. Frankly, they should!  

In a recent case, Mark W. Rickard, P.A. d/b/a Law Guard v. Nature’s Sleep Factory Direct, LLC, 43 Fla.L.Weekly D2438b (Fla. 4th DCA 2018), a plaintiff voluntarily dismissed its lawsuit prior to trial.  The defendant than filed a motion for prevailing party attorney’s fees.  However, the defendant NEVER pled an actual entitlement to attorney’s fees. The plaintiff served a Florida Statute s. 57.105 motion that is designed to notify a party of a frivolous filing and give them a safe-harbor time period to withdraw the filing before sanctions (attorney’s fees and costs) can be imposed.  The defendant withdrew its motion, albeit too late–after the safe harbor period expired.  

The trial court denied the plaintiff’s Florida Statute s. 57.105 motion for sanctions. The plaintiff appealed and the appellate court reversed finding that the defendant’s motion for attorney’s fees without a basis was frivolous and its withdrawal of the motion was too late since it came after the expiration of the safe harbor time period: 

Section 57.105(1) provides for attorney’s fees as sanctions for being forced to participate in frivolous litigation. In determining whether to award such fees, “[t]he [trial] court determines if the party or its counsel knew or should have known that the claim or defense asserted was not supported by the facts or an application of existing law.” Motions for attorney’s fees count as “claims.” 

Typically, a party seeking attorney’s fees must specifically allege and request the award in the pleadings…. However, Appellees’ counsel failed to withdraw the meritless motion until well after the safe harbor period had passed….

Mark W. Rickard, P.A. d/b/a Law Guard, supra (internal citations omitted).

Frivolous filings are a big deal. A filing is deemed frivolous if a party or its counsel knew or should have known that a claim or defense was not supported by the facts or application of existing law.  In this case, the defendant and its counsel should have known the motion was frivolous under existing law.  The fact that the defendant’s counsel ultimately recognized this and withdraw the motion was of no moment because it was too late–after the expiration of the safe harbor period.  

Thus, if you file a frivolous motion of pleading: BEWARE

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

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Not Everything a Potential Judgment Debtor Does Constitutes a Fraudulent Transfer

Posted by David Adelstein on October 28, 2018
Trial Perspectives / Comments Off on Not Everything a Potential Judgment Debtor Does Constitutes a Fraudulent Transfer

Not everything a potential judgment debtor does constitutes a fraudulent transfer to avoid anticipated collection efforts from a judgment creditor.  This does not mean arguments cannot and should not be made.  It just means that just because a potential judgment debtor does something does not automatically translate into a fraudulent transfer.

In a recent post-judgment collection case, Villamizar v. Luna Capital Partners, LLC, LLC, 43 Fla.L.Weekly D2395a (Fla. 3d DCA 2018),  a plaintiff (judgment creditor) recovered a judgment against a defendant on unsecured promissory notes (i.e., the notes were not secured by any mortgage).  During the underlying lawsuit, the defendant sold condominium units to a bulk buyer for approximately $13 Million.  Although the defendant and buyer shared a similar name, they were unrelated parties, and there was no evidence that they were related parties.  Thereafter, the plaintiff recovered a judgment against the defendant and, through post-judgment collection efforts, sued the new buyer arguing that the bulk sale of condominium units was a fraudulent transfer. 

The plaintiff (judgment creditor) first argued that the new buyer had some duty to the plaintiff simply because it knew that the plaintiff was suing the defendant / seller of the units on unsecured promissory notes.  The appellate court, affirming the trial court, dismissed this argument, as it should:

Luna Capital’s [buyer of units] awareness that Mr. Nieto [plaintiff / judgment creditor] was suing the seller, Luna Developments [defendant / seller of units], on unsecured indebtedness that had not yet been reduced to judgment, did not create a legal duty on Luna Capital’s part. This is so because there is nothing in this record to suggest that Luna Capital was partially or totally controlled by Luna Developments at the time of the sale, or that these entities were under common control, or that they were anything other than a buyer and seller dealing at arm’s length.

***

Luna Capital’s alleged knowledge of Luna Development’s debts did not impose a legal duty on Luna Capital’s part to assure that specific unsecured creditors of Luna Development were paid. Luna Capital naturally assured that all liens against the condominium units were paid from the proceeds and satisfied of record, but payment of an unsecured claim in a lawsuit pending trial is not such a matter.

***

Buyers may insist (by contract) on escrows to cover claims-in-process “which, if successful” might become a judgment lien after the closing, but an arm’s length buyer at a fair market price is not under a legal duty to do so for the protection of such claimants.

Villamizar, supra.

The plaintiff / judgment creditor next argued that the property was not sold for reasonably equivalent value.  However, the plaintiff did not even retain an expert appraiser to support this argument, rendering this theory speculative from the get-go.  The appellate court, affirming the trial court, dismissed this argument too, as it should:

Mr. Nieto’s [plaintiff / judgment creditor] affiant [attorney expert] provided a back-of-the-envelope computation questioning whether the per-unit price was below market. Unsubstantiated “guesstimates” of what inflation might have done to values, or what appreciation or depreciation might have been expected during the period Luna Developments [judgment debtor] owned the property, create no genuine issue as against the competent, substantial evidence of an actual arm’s length sale between “a purchaser willing but not obliged to buy” and “one willing but not obliged to sell.” 

***

Mr. Nieto did not file an appraisal or other evidence probative of actual market value of the condominium units as of the July 2015 sale.

Villamizar, supra

The reality is that the defendant / judgment debtor sold condominium units prior to the plaintiff / judgment creditor obtaining a final judgment on unsecured promissory notes.  There was no evidence that the buyer was merely a straw party or that the sale was intended to delay, hinder, or defraud the defendant’s creditors, such as the plaintiff.  And, on top of that, there was nothing to suggest that the sale was not at fair market value or reasonably equivalent value such that the transaction was really not an arm’s length transaction.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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A Party may Not Expand the Scope of Judicial Review of an Arbitration Clause

Posted by David Adelstein on October 14, 2018
Trial Perspectives / Comments Off on A Party may Not Expand the Scope of Judicial Review of an Arbitration Clause

Arbitration is a creature of contract.  This means if you are going to arbitrate a dispute, as opposed to litigating a dispute, there must be an agreement to arbitrate.  However, whether a dispute should be arbitrated pursuant to the terms of the contract is an area that has been heavily litigated for a couple of reasons: 1) a party does not want to arbitrate the dispute and, therefore, files a lawsuit versus a demand for arbitration and 2) an opposing party that has been sued wants to enforce an arbitration provision in a contract.  As a result, an order granting or denying arbitration is an appealable non-final order

In a recent construction dispute between a general contractor and its millwork subcontractor, National Millwork, Inc. v. ANF Group, Inc., 43 Fla.L.Weekly D2207a (Fla. 4th DCA 2018), the subcontractor filed a lawsuit against the general contractor and the general contractor’s payment bond.  The general contractor moved to stay the litigation and compel arbitration pursuant to the arbitration provision in the subcontract.  The subcontractor argued that the arbitration provision was unenforceable, and, therefore, void, because it expanded the scope of judicial review after an arbitrator renders an arbitration award contrary to the Revised Florida Arbitration Code in Florida Statutes Chapter 682 (and, specifically, Florida Statute s. 682.014). 

The arbitration clause in the subcontract empowered the court to address on judicial review any failure by the arbitrator to properly apply the law and if the court or arbitrator failed to properly apply the law then this was subject to appellate review. 

This clause was creating an appellate basis to challenge an arbitration award based on a party’s position that the arbitrator did not correctly apply the law.  However, challenging an arbitrator’s award is very limited to discrete statutory circumstances and a party’s position that the arbitrator did not correctly apply the law is not one of them.   For this reason, the millwork subcontractor claimed the arbitration provision is void against public policy because it expanded the statutory circumstances to challenge an arbitration award set forth in the Revised Florida Arbitration Code.  The appellate court agreed: “A party may not expand the scope of judicial review of an arbitration agreement.”  National Millwork Inc., supra

The contract had a severability clause, an important clause in contracts.  Based on the severability clause, the appellate court remanded the issue back to the trial court to determine whether the unenforceable language in the arbitration clause that expanded judicial review of an arbitrator’s award could be severed from the clause such that the parties are still required to arbitrate without the expanded judicial review.   In other words, the appellate court wanted the trial court to determine whether severing the unenforceable language would still retain the essence of the arbitration clause or whether the entire clause was unenforceable because the offending language was integral to the agreement to arbitrate.  See National Millwork, Inc. supra, citing Obolensky v. Chatsworth at Wellington Green, LLC, 240 So.3d 6 (Fla. 4th DCA 2018).

It would seem that the offending language expanding the scope of judicial review of an arbitration award could be, and should be, severed.  This is the value and point of a severability clause in a contract.  It is uncertain why the appellate court did not make this ruling instead of remanding the matter back to the trial court which could lead to a further appeal.  Severing the offensive language still requires the parties to arbitrate, which is the basis of the arbitration clause, but without the appellate recourse / judicial review of a party challenging the arbitrator’s award based on an incorrect application of law. 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Spoliation of Evidence Claim Against Third-Party

Posted by David Adelstein on October 06, 2018
Uncategorized / Comments Off on Spoliation of Evidence Claim Against Third-Party

 

What is a spoliation of evidence claim?  Let’s find out…

The recent decision in Amerisure Insurance Company v. Rodriguez, 43 Fla.L.Weekly D2225b  (Fla. 3d DCA 2018) involved a case where an employee was injured.  While he was collecting worker’s compensation benefits, he sued the the party responsible for his injuries in a premise liability (negligence) claim.  He learned that his employer and its worker’s compensation insurer lost a copy of a videotape of his accident.  He claimed the video would help prove his premise liability claim.  For this reason, he also sued the insurer and his employer for spoliation of evidence—that these third-parties negligently destroyed evidence impacting his ability to prove his premise liability claim.  The trial court ordered this trial to occur at the same time as his premise liability trial.  A petition for writ of certiorari was taken.  

 

Distinction between First-Party and Third-Party Spoliation Claim

 

The appellate court first distinguished a first-party spoliation claim with a third-party spoliation claim, with the underlying case being the latter since it involved the plaintiff suing a third-party for spoiling evidence applicable to his premise liability claim:

“First-party spoliation claims are claims in which the defendant who allegedly lost, misplaced, or destroyed the evidence was also a tortfeasor in causing the plaintiff’s injuries or damages.”  In contrast, third-party spoliation claims “occur when a person or an entity, though not a party to the underlying action causing the plaintiff’s injuries or damages, lost, misplaced, or destroyed evidence critical to that action.” . The Florida Supreme Court has held that no independent cause of action for spoliation will lie against a first-party tortfeasor.  Instead, spoliation in that context should be addressed by the trial court imposing sanctions and presumptions.  Here, we are dealing with a classic third-party spoliation claim.

Amerisure Insurance Co., supra (internal citations omitted).

 

Timing of Third-Party Spoliation Claim

 

When it comes to third-party spoliation claims, the appellate court held it was premature for the spoliation claim to continue while the underlying premise liability (negligence claim) had not been resolved.  Hence, the third-party spoliation claim should be dismissed or abated / stayed until the underlying claim is resolved.  Notably, however, the appellate court refrained from deciding whether this applies in the products liability context based on older, questionable legal authority.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Appealing Correct Measure of Damages

Posted by David Adelstein on September 29, 2018
Appeal, Evidence / Comments Off on Appealing Correct Measure of Damages

In an earlier article, I wrote how economic damages MUST be supported by substantial competent evidence. 

In a recent case, Levy v. Ben-Shmuel, 43 Fla.L.Weekly D2229a (Fla. 3d DCA 2018), a plaintiff, after a bench trial, recovered a judgment against a defendant that included money damages associated with a claim for conversion.  During trial, and after the plaintiff’s case-in-chief, the defendant moved for an involuntary dismissal arguing the plaintiff failed to meet its burden in establishing the correct measure of damages at trial.  On appeal, the plaintiff ultimately conceded that he did not establish the correct measure of damages.  The issue was whether the plaintiff should be entitled to a new trial.  The Third District held NO!  The plaintiff is NOT entitled to a new trial on damages:

We also write to clarify the law within this [Third] district, and hold, as a general rule, that where this court determines, on appeal from a properly preserved claim, that a party failed to meet its burden of establishing the correct measure of damages at trial, that party is not entitled on remand to a new trial on damages, unless that party’s failure to meet its burden was the result of judicial error.

Levy, supra (“The generally prevailing rule is that a party will not be permitted a new trial on remand to remedy its own failure to present sufficient evidence to support its claim.”).

It is worth noting that in a bench trial, “the sufficiency of the evidence to support the judgment may be raised on appeal whether or not the party raising the question [objection] has made any objection thereto in the trial court or made a motion for rehearing, for new trial, or to alter or amend the judgment.”  Fla.R.Civ.P. 1.530(e).   Thus, in a bench trial, a party can challenge the sufficiency of the evidence for the first time on appeal.  In Levy, the defendant had actually moved for an involuntary dismissal after the plaintiff’s case-in-chief, but had he not done so, the objection to the sufficiency of evidence would still have been properly preserved for appeal.  

A jury trial, however, is different.  In a jury trial, “where a defendant fails to timely move for a directed verdict [as the sufficiency of evidence], and raises this issue for the first time in a motion for new trial, the proper remedy upon reversal and remand is a new trial.”  Levy, supra, n. 2.  Hence, in a jury trial, if a defendant does timely move for a directed verdict on such an issue, then the proper remedy is to enter judgment in favor of the defendant as the plaintiff is not entitled to a new trial. Id.  But, if the defendant first raises such an issue for the first time in a motion for new trial, then the proper remedy would be a new trial.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Economic Damages Must be Based on Competent Substantial Evidence

Posted by David Adelstein on September 22, 2018
Trial Perspectives / Comments Off on Economic Damages Must be Based on Competent Substantial Evidence

Economic damages must be supported by substantial competent evidence.  Stated differently, economic damages cannot be speculative and the amount of the damages must be quantifiable.  Putting on speculative, unquantifiable damages at trial can be fatal to a claim because damages should be the most important part of a claim.  If damages cannot be proven, there is no claim, so making sure damages can be supported with competent substantial evidence is beyond important.

The recent decision of Alvarez v. All Star Boxing, Inc., 43 Fla.L.Weekly D2102a (Fla. 3d DCA 2018) establishes what can happen if a party puts on speculative damages.  This case involved the famous professional boxer Canelo Alvarez.  He was sued by a former promoter and a jury found he was liable in unjust enrichment to the promoter to the tune of $8.5 Million.  Unjust enrichment damages typically focus on the reasonable value of the labor or services performed or the reasonable value of such labor or services to the party that was unjustly enriched.   Alvarez, supra.  In this case, however, the promoter put on a forensic accountant to support damages associated with a percentage of Canelo Alvarez’s earnings during a certain period—a type of lost profits methodology.  The appellate court avoided addressing the issue of whether lost profits can form unjust enrichment damages, and instead, focused on the fact that the methodology utilized by the promoter to calculate lost profits was wholly speculative. The methodology and damages did not rest on a reasonable basis but were grounded in a lot of guesswork.  As a result, the $8.5 Million jury verdict could not stand.  The appellate court remanded back to the trial court to reconsider a motion of remittitur–a motion to reduce the damages–to reduce the damages based on evidence at trial that supported the reasonable value of the promoter’s expenses and services and, if not, to enter judgment in favor of the defense. 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Quick Note: Competent Substantial Evidence to Support Mitigation of Damages

Posted by David Adelstein on September 15, 2018
Appeal, Burden of Proof / Comments Off on Quick Note: Competent Substantial Evidence to Support Mitigation of Damages

I recently discussed the defense of mitigation of damages as it applies to contract cases.  An issue dealt with whether an owner failed to mitigate his damages after his contractor walked off the job and breached the construction contract.  In the case referenced in the article, the trial court did not award the owner certain damages at trial finding that the owner should have mitigated his damages.  The owner appealed this issue which was reversed on appeal.  The reason it was reversed is because the trial court’s finding that the owner failed to mitigate his damages is reviewed on appeal for competent substantial evidence.  If competent, substantial evidence supports the trial court’s findings, the ruling would not be disturbed on appeal. At trial, however, there was NO competent substantial evidence presented by the contractor that the owner failed to mitigate his damages. Forbes v. Prime General Contractors, Inc., 43 Fla.L.Weekly D2094a (Fla. 2d DCA 2018) (“Here, there is no competent substantial evidence that the Forbeses [owner] could have taken any measure without undue effort or expense to avoid [mitigate] the damages they sought.”).

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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You Can’t Sue Someone for Unjust Enrichment when there is a Contract

Posted by David Adelstein on September 08, 2018
Trial Perspectives / Comments Off on You Can’t Sue Someone for Unjust Enrichment when there is a Contract

You cannot sue someone for unjust enrichment (or quantum meruit) if there is a contract between the parties.  You can sue them for breach of contract; but you cannot try to circumvent the parameters of the contract by suing them for unjust enrichment (an equitable quasi-contract theory of liability).  

For example, in Sterling Breeze Owners’ Association, Inc. v. New Sterling Resorts, LLC, 43 Fla.L.Weekly D2040c (Fla. 1st DCA 2018), a condominium association sued the developer for, among other claims, unjust enrichment.  The claim stemmed from the fact that the developer (in developing the condominium) reserved in the condominium documents ground floor units for its own commercial use.  The developer was required to maintain the interior of the units and pay for expenses including utilities relating to the units. The association claimed the developer did not pay and the association sued the developer under a theory of unjust enrichment for the collection of those expenses. However, the developer was already responsible for paying the expenses through the condominium documents.  Thus, the appellate court held the association had NO unjust enrichment claim: “[T]he agreement [in the condominium documents] specifically addresses the expenses for unpaid services and utilities sought in the Association’s lawsuit. Because a contract [i.e., the condominium documents] covers this matter, we reverse and remand the judgment on Count III and direct that judgment be entered for New Sterling Resorts [the developer] on this quasi-contractual claim.” Sterling Breeze Owners’ Association, Inc., supra.  The association could have sued on the contract, but it could not circumvent the contract by suing on an unjust enrichment theory!

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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