IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
February 2, 2005 Session
JAMES L. MILLIGAN, Jr. v. BOARD OF PROFESSIONAL
RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE
Appeal from the Chancery Court for Knox County
No. 156269-1 William H. Inman, Senior Judge, by designation
No. M2004-01765-SC-R3-BP - Filed June 28, 2005
Pursuant to the provisions of Tennessee Supreme Court Rule 9, section 1.3, the Tennessee Board of
Professional Responsibility (“the Board”) appeals from an order of the Chancery Court for Knox
County imposing the sanction of public censure upon James L. Milligan, Jr., Esq. (“Milligan”). The
Board contends that the Chancery Court erred in concluding that: (1) Milligan did not
misappropriate funds; (2) Milligan’s use of a client’s funds for personal purposes was not a serious
violation; and (3) public censure is the appropriate sanction. Because we conclude that Milligan did
misappropriate funds and did otherwise conduct himself in a manner inconsistent with the Rules of
Professional Conduct, as will be hereinafter detailed, we have determined that suspension for a
period of two years is appropriate.
Tenn. Sup. Ct. R. 9 § 1.3; Judgment of the Chancery Court Affirmed as Modified
ADOLPHO A. BIRCH , JR., J., delivered the opinion of the court, in which FRANK F. DROWOTA , III,
C.J., and E. RILEY ANDERSON , JANICE M. HOLDER , and WILLIAM M. BARKER, JJ., joined.
William Walter Hunt, III, Nashville, Tennessee, for the appellant, Board of Professional
Responsibility.
Stephen W. Gibson and Ronald L. Grimm, Knoxville, Tennessee, for the appellee, James L.
Milligan, Jr.
OPINION
I. Facts and Procedural History
Milligan is an attorney whose practice in Knoxville consists, in the main, of personal injury
and malpractice matters. This case involves three disciplinary complaints–two that allege
misappropriation of clients’ funds and one that alleges fraudulent conduct in representing a client.
Initially, two complaints were lodged against Milligan. The first, herein referred to as the
“Howard Matter,” alleged that Milligan had misappropriated funds from his client trust account.
According to the complaint, Milligan wrote a check in the amount of $216.67 from his client trust
account to his then-associate, G. Turner Howard, as commission for settlement of a client’s lawsuit.
Upon presentment to the bank, the check was dishonored, and the reason given was “insufficient
funds.” Milligan later paid Howard by cashier’s check.
The second complaint, herein referred to as the “Johnson Matter,” alleged that Milligan
settled Kerry Johnson’s personal injury claim for $16,000 without having first consulted Johnson,
forged the signatures on the release and the check, procured a Notary Public in his office to falsely
notarize the release, and deposited the funds into his personal account. Based on these two
complaints, the Board, on April 26, 2000, filed a Petition for Temporary Suspension of Milligan’s
law license. On May 5, 2000, this Court granted the petition.
On June 19, 2000, this Court reinstated Milligan’s license, pending a full disciplinary
hearing. The reinstatement was conditioned upon Milligan employing Terry Hall, a Certified Public
Accountant, to oversee the ongoing finances of Milligan’s law practice and upon Milligan employing
Leroy Bible, a Certified Fraud Examiner, to review some of Milligan’s law office accounts. It was
agreed that Bible would report those findings to the Board.
On August 17, 2000, the Board filed a Petition for Discipline against Milligan. The petition
alleged, in pertinent part, the substance of the Howard and Johnson Matters.
On May 22, 2001, a third complaint, herein referred to as the “Bible Matter,” was lodged.
That complaint was based on a report submitted to disciplinary counsel by Leroy Bible; the report
summarized Bible’s review of Milligan’s office accounts for the year 1999. According to Bible,
there were financial improprieties in the firm’s accounts, including its client trust account. He stated
further that Milligan had not cooperated with his review. On August 23, 2001, the Board filed a
Supplemental Petition for Discipline, essentially asserting the allegations in the Bible Matter.
A full disciplinary hearing before a panel of the Board was held on August 19-20, 2002. In
the Howard Matter, the Hearing Panel concluded that Milligan had, in fact, misappropriated funds.
Although the Panel acknowledged that the check to G. Turner Howard had been later paid by
cashier’s check, it noted that Milligan did not deny that the check had been returned for insufficient
funds. Accordingly, the Hearing Panel found that Milligan had violated Tennessee Supreme Court
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Rule 8, Disciplinary Rule1 (“DR”) 1-102(A)(4),2 (5),3 and (6);4 and DR 9-102(B)(3).5
In the Johnson Matter, the Hearing Panel found that in April 1999, Kerry Johnson retained
Milligan in a personal injury matter arising out of an automobile accident. Milligan later settled the
suit for $16,000. Milligan admitted that he affixed the Johnsons’ names6 to the settlement check and
release. He further admitted that he procured a notary in his office to falsely notarize the release
document. Moreover, he admitted that in January 2000, he placed the settlement funds directly into
his personal account and used the funds for his personal use.
Although Milligan claimed that he had prior oral authorization to settle Johnson’s case in the
range of $12,000 to $20,000, to deposit the funds into his personal account, and to personally use
the settlement funds in their entirety with the payment of interest, the Hearing Panel found that
Milligan’s testimony was not credible and that Milligan’s actions and office records were
inconsistent with and contradictory to the claimed prior authorization. Specifically, the Panel found
that there was no documentation authorizing him to settle Johnson’s case and sign the settlement
check and release. In addition, the Panel found that Milligan had later directed an employee to
inform a medical creditor of Johnson that there had been no recovery and that no payment of the
claim was possible. This was done despite the fact that Milligan had settled the case himself,
whether with authority or without. Finally, the Hearing Panel alleged that Milligan procured
affidavits from the Johnsons, ratifying the previous oral agreement.
Based on the foregoing, the Hearing Panel concluded that Milligan: (1) had settled the
Johnson case without the client’s authority; (2) had forged the signatures of Kerry and Kesha
Johnson on the settlement check; (3) had forged the Johnsons’ signatures on the release document
tendered by opposing counsel; (4) had procured an employee to falsely notarize, after the fact, the
forged signatures on the release document; (5) had deposited 100% of the settlement funds into his
personal account despite having been previously advised by a law practice consultant to deposit all
1
The proceedings in this case are governed by the Code of Professional Responsibility previously set forth in
Rule 8 of the Tennessee Supreme Court Rules (2002). The Code was replaced on March 1, 2003, by the Rules of
Professional Conduct.
2
DR 1-102(A)(4) (2002) provides: “A lawyer shall not . . . [e]ngage in conduct involving dishonesty, fraud,
deceit, or misrepresentation.”
3
DR 1-102(A)(5) (2002) provides: “A lawyer shall not . . . [e]ngage in conduct that is prejudicial to the
administration of justice.”
4
DR 1-102(A)(6) (2002) provides: “A lawyer shall not . . . [e]ngage in any other conduct that adversely reflects
on his fitness to practice law.”
5
DR 9-102(B)(3) (2002) provides: “A lawyer shall . . . [m]aintain complete records of all funds, securities and
other properties of a client coming into the possession of the lawyer and render appropriate accounts to the client
regarding them.
6
The check was apparently made payable to Kerry and Kesha Johnson.
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settlement proceeds into the trust account; and (6) had “procured false affidavits from the Johnsons
in an effort to conceal his misconduct.” Thus, the Panel found that Milligan had violated DR 1-
102(A)(3),7 (4), (5), and (6); DR 7-102(A)(3),8 (4),9 (5),10 (6),11 and (7);12 and DR 9-102(A)13 and
(B).14
In the Bible Matter, the Hearing Panel found that Milligan had overdrawn his client trust
account on at least twenty-four occasions during 1999, thereby incurring $806 in overdraft charges
against the client trust account.15 It noted that Bible’s audit of forty-six cases from 1999 revealed
thirty-two separate occasions upon which Milligan had withdrawn funds from the client trust account
prior to the deposit of settlement proceeds related to the funds. These “early withdrawals” ranged
from as far as 210 days prior to the settlement deposit to as recent as one day prior to the settlement
deposit. Milligan admitted withdrawing attorney’s fees in a number of cases prior to the time when
7
DR 1-102(A)(3) (2002) provides: “A lawyer shall not . . . [e]ngage in conduct involving moral turpitude.”
8
DR 7-102(A)(3) (2002) provides: “In the representation of a client, a lawyer shall not . . . [c]onceal or
knowingly fail to disclose that which the lawyer is required by law to reveal.”
9
DR 7-102(A)(4) (2002) provides: “In the representation of a client, a lawyer shall not . . . [k]nowingly use
perjured testimony or false evidence.”
10
DR 7-102(A)(5) (2002) provides: “In the representation of a client, a lawyer shall not . . . [k]nowingly make
a false statement of law or fact.”
11
DR 7-102(A)(6) (2002) provides: “In the representation of a client, a lawyer shall not . . . [p]articipate in the
creation or preservation of evidence when the lawyer knows or it is obvious that the evidence is false.”
12
DR 7-102(A)(7) (2002) provides: “In the representation of a client, a lawyer shall not . . . [c]ounsel or assist
the client in conduct that the lawyer knows to be illegal or fraudulent.”
13
DR 9-102(A) (2002) provides: “All funds of clients paid to a lawyer or law firm, including advances for costs
and expenses, shall be deposited in one or more identifiable insured depository institutions maintained in the state in
which the law office is situated.”
14
DR 9-102(B) (2002) provides:
A lawyer shall:
(1) Promptly notify a client of the receipt of the client’s funds, securities, or other properties.
(2) Identify and label securities and properties of a client promptly upon receipt and place
them in a safe deposit box or other place of safekeeping as soon as practicable.
(3) Maintain complete records of all funds, securities and other properties of a client coming
into the possession of the lawyer and render appropriate accounts to the client regarding
them.
(4) Promptly pay or deliver to the client as requested by a client the funds, securities or other
properties in the possession of the lawyer which the client is entitled to receive.
15
The Hearing Panel, as well as the trial court, did not address in their findings any specific cases in Leroy
Bible’s Report. However, one matter involving Milligan’s client, Michael Overton, was addressed in Bible’s deposition
and report, which was before both the Hearing Panel and the trial court. In addition, Bible testified regarding the Michael
Overton case during the proceeding in the trial court.
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the settlement proceeds were actually deposited in the trust account.
The Hearing Panel concluded that Bible’s audit of Milligan’s accounts “fully demonstrated
that [Milligan had] failed to maintain adequate records and that Milligan persisted in maintaining
an inadequate accounting system to support the client trust accounts.” The Panel also determined
that Bible’s report documented the inappropriate deposit of settlement proceeds into Milligan’s
personal checking account instead of the client trust account. Bible’s testimony was not controverted
by Milligan. Based on the foregoing, the Hearing Panel found that Milligan had violated DR 1-
102(A)(1),16 (4), (5), and (6); DR 2-106(A);17 DR 7-101(A)(4)(b)18 and (c);19 and DR 9-102(A)(2)
and (B)(3).
Based on the above-described violations and the applicable aggravating and mitigating
circumstances, the Hearing Panel ordered Milligan disbarred. Milligan appealed to the Chancery
Court for Knox County pursuant to Tennessee Supreme Court Rule 9, section 1.3.
On appeal, the trial court did not take proof on the Howard matter. In its memorandum
opinion, the court stated that Howard, in consultation with Milligan, had advised the Board of the
matter and that Howard had taken responsibility for not having waited long enough for the check to
clear. The court noted that a new accounting procedure had been implemented in Milligan’s office
since this incident. Thus, the trial court opined as follows: “This matter is de minimis, and need not
be further noticed; it did not involve fraud or dishonesty or deceit.”
In the Johnson Matter, the trial court accepted Milligan’s testimony and rejected the
Johnsons’ testimony. The fact that Kerry Johnson is a convicted felon made for heightened drama
regarding credibility decisions, but credibility aside, the trial court, addressing the Johnson Matter
rather obliquely, suggested that Milligan had misappropriated funds in the Johnson case.
Nevertheless, the court stated that according to Milligan, he had an oral agreement with the Johnsons
which authorized Milligan to use his discretion and experience to enter into settlement negotiations
with the insurance adjustor and to resolve the matter on their behalf. The court acknowledged that
Milligan had signed the Johnsons’ names to the release and deposited the money in his personal
account but stated that the Johnsons were ultimately pleased with the settlement and executed
affidavits ratifying the previous oral agreement. The court gave no weight to Kerry Johnson’s
recantation of his previous ratification of the agreement. In sum, the trial court found that Milligan
16
DR 1-102(A)(1) (2002) provides: “A lawyer shall not . . . [v]iolate a disciplinary rule.”
17
DR 2-106(A) (2002) provides: “A lawyer shall not enter into an agreement for, charge, or collect an illegal
or clearly excessive fee.”
18
DR 7-101(A)(4)(b) (2002) provides: “A lawyer shall not intentionally . . . [f]ail to carry out a contract of
employment entered into with a client for professional services, but a lawyer may withdraw as permitted under DR 2-110,
DR 5-102, and DR 5-105.”
19
DR 7-101(A)(4)(c) (2002) provides: “A lawyer shall not intentionally . . . [p]rejudice or damage the client
during the course of the professional relationship, except as required under DR 7-102(B).”
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had merely “exercised poor judgment” in his handling of the Johnson case.
Regarding the Bible Matter, the trial court stated that Milligan had made errors in judgment,
but it emphasized that he had corrected those errors. The court acknowledged that the disciplinary
rule addressing the need for preserving the identity of funds and property of a client “was violated
on occasion” and that those violations were “unacceptable and sanctionable.” However, the court
made much of the fact that Bible never found a client who had received less than what he or she was
due, a fact which “greatly lessen[s]” the seriousness of the violation, according to the trial court.
Finally, the court pointed out that Milligan had been required to pay Bible approximately $85,000
for his services.
Based on the trial court’s determinations, it concluded that public censure, not disbarment,
was the appropriate sanction. The Board appealed pursuant to Tennessee Supreme Court Rule 9,
section 1.3.
II. Standard of Review
This matter is before this Court as a result of the Board’s appeal pursuant to Tennessee
Supreme Court Rule 9, section 1.3, which provides the following:
Either party dissatisfied with the decree of the circuit or chancery court may
prosecute an appeal direct to the Supreme Court where the cause shall be heard upon
the transcript of the record from the circuit or chancery court, which shall include the
evidence before the hearing committee.
This Court’s standard of review is de novo upon the record of the trial court with a
presumption of correctness given to the trial court unless the evidence preponderates against those
findings. Bd. of Prof’l Responsibility v. Slavin, 145 S.W.3d 538, 546 (Tenn. 2004).
III. Analysis
In this appeal, the Board contends that the public censure recommended by the trial court is
an insufficient sanction. According to the Board, at a minimum, Milligan is guilty of
misappropriating client funds, forging a client’s signature on a settlement check and a release,
causing a notary to falsely notarize a client’s signature, and placing client funds in his personal
account. Milligan, on the other hand, makes no serious factual contest. Instead, he contends, with
regard to the handling of trust funds, that he simply made a series of accounting mistakes that do not
implicate a serious disciplinary violation. As to the Johnson Matter, Milligan continues to insist that
Johnson orally authorized the settlement and the “loan” of the proceeds to Milligan. He emphasizes
that no client suffered monetary loss. He does not, however, deny that he signed the Johnsons’
names to the settlement check and release, caused a notary public to falsely notarize the Johnsons’
signatures, and placed the Johnsons’ funds in his personal account, all in violation of ethical rules.
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We conclude that Milligan did misappropriate funds in the Howard Matter. The record
establishes, and Milligan did not deny, that he wrote a check on his client trust account that was later
returned for insufficient funds. The check was written as payment for Howard’s work on a case that
had settled. Thus, the funds for payment should have been in the client trust account before any
disbursements were made. In this regard, Milligan violated DR 1-102(A)(1), (4), (5), and (6); and
DR 9-102(B)(3).
Next, we consider the Johnson Matter. Even were we to assume, as Milligan urges, that
Johnson authorized Milligan to settle the case within a specified range, Milligan’s conduct bears
close examination. It is undisputed that Milligan used Johnson’s money for personal purposes.
Further, it is undisputed that Milligan signed both the Johnsons’ names to a release and had a notary
falsely notarize the signatures. Clearly, such conduct involves dishonesty, fraud, deceit, or
misrepresentation in violation of DR 1-102(A)(4), whether or not he acted with the Johnsons’
permission. In addition, such conduct is clearly “conduct that is prejudicial to the administration of
justice” in violation of DR 1-102(A)(5); and “conduct that adversely reflects on his fitness to practice
law” in violation of DR 1-102(A)(6). We find these violations to be very serious and indicative of
conduct that should not and will not be tolerated.
Also, in the Bible Matter, the record establishes, and Milligan did not deny, that Milligan had
overdrawn his client trust account on at least twenty-four occasions during 1999. Most egregious
is the case of Michael Overton, a client. The record indicates that Milligan settled Overton’s case
on May 7, 1999, for the amount of $50,000. This amount was deposited in Milligan’s trust account
on the same day. Milligan disbursed to Overton $29,924.21 on May 28, 2002. Between May 7,
1999, and May 28, 2002, the balance in Milligan’s trust account dipped below $29, 924.21.20 Indeed,
after depositing the proceeds, Milligan incurred overdraft charges of $766 from May 8, 1999,
through December 31, 1999, on this trust account.
Moreover, Milligan admitted that he had used client funds before the settlement proceeds had
been deposited in the client trust account. Milligan also did not deny that he had placed client funds
in accounts other than the client trust account–one of such accounts was his personal account. Thus,
we conclude that Milligan did, in fact, misappropriate funds in violation of DR 1-102(A)(1), (4), (5),
and (6); DR 2-106(A); DR 7-101(A)(4)(b) and (c); and DR 9-102(A)(2) and (B)(3).
Because we have concluded that the record before us establishes that Milligan
misappropriated funds and otherwise conducted himself in a manner inconsistent with the Code of
Professional Conduct, as we have detailed, we must now determine the appropriate sanction. The
Hearing Panel concluded that the appropriate sanction required by the record was disbarment. On
review, however, the trial court concluded that public censure was appropriate. Thus, we are offered
two conclusions–one imposing the maximum sanction possible, and the other a sanction close to the
minimum. Milligan chiefly insists that his conduct does not support the sanction of disbarment.
20
W e are willing to assume that $20,075.79 of the $50,000 represents Milligan’s fees and costs.
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The Board has adopted the Standards for Imposing Lawyer Sanctions promulgated by the
American Bar Association. Bd. of Prof’l Resp. v. Maddux, 148 S.W.3d 37, 40 (Tenn. 2004). Those
standards provide that “disbarment is an appropriate sanction for conduct involving dishonesty,
fraud, deceit, or misrepresentation when the lawyer engages in serious criminal conduct or any other
intentional conduct that ‘seriously adversely’ reflects on the lawyer’s fitness to practice law.” Id.
(citing Standards for Imposing Lawyer Sanctions § 5.11 (Am. Bar. Ass’n ed. 1986)). The Standards
further provide that suspension is appropriate when “‘a lawyer knowingly engages in criminal
conduct . . . that seriously adversely reflects on the lawyer’s fitness to practice.’” Maddux, 148
S.W.3d at 41 (quoting Standards for Imposing Lawyer Sanctions § 5.12 (Am. Bar Ass’n ed., 1986)).
In determining the appropriate sanction, this Court recognizes that “[w]e must evaluate each
instance of attorney discipline in light of its particular facts and circumstances.” Maddux, 148
S.W.3d at 40. However, “we must also consider the sanctions that have been imposed in prior cases
that present similar circumstances so as to maintain consistency and uniformity in disciplinary
proceedings.” Id.
The misuse and misappropriation of clients’ funds is, indeed, a serious violation. This Court
has previously reviewed similar cases of misappropriation, and in one, Board of Professional
Responsibility v. Bonnington, 762 S.W.2d 568, 571 (Tenn. 1988), an attorney served as the
administrator of an estate and improperly withdrew funds from the estate for his personal use.
Although the attorney self-reported the misappropriations to his firm, the probate judge, and the
Board of Professional Responsibility, as well as made restitution to the client, the trial court
imposed, and we affirmed, a four-year suspension based on the misappropriation of funds. Id. at
568, 571.
In Disciplinary Board of the Supreme Court v. Banks, 641 S.W.2d 501, 502 (Tenn. 1982),
an attorney entered into an agreement with a client whereby he would invest a sum of money for the
client and advise the client of any transactions made. Without notice to the client, the attorney
loaned the funds to two different corporations in which he, the attorney, held the controlling stock.
In his defense, the attorney claimed that the client had made an outright loan to him and that he had
agreed to pay her ten percent interest on those funds. The trial court concluded, as did we, that the
preponderance of the evidence did not support the attorney’s contention. This Court noted that the
attorney never intended to embezzle the funds from the client, but the mishandling of funds
warranted a one-year suspension. Id. at 504.
In Dockery v. Board of Professional Responsibility, 937 S.W.2d 863 (Tenn. 1996), the
attorney negotiated an automobile accident claim to settlement and deposited the funds in his escrow
account. The attorney had previously agreed to withhold and remit the doctor’s fees. Upon
settlement, the attorney failed to remit any of the funds to the doctor. In addition, the attorney failed
to provide the client with an accounting or other statement showing how the funds had been
disbursed. The Hearing Panel found that the attorney had commingled entrusted funds with his
personal funds, had misapplied and misappropriated to his own use and benefit the funds entrusted
to him, and had failed to maintain his records in a professional manner and imposed a two-year
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suspension. The trial court approved the two-year suspension imposed by the Hearing Panel, and
this Court affirmed. Id. at 865, 867.
Whether one concludes that Milligan’s conduct was “criminal,” as the Hearing Panel found,
or a series of inadvertent mistakes, as the trial court found, it is apparent to us, on de novo review,
that Milligan’s conduct seriously and adversely reflected on the lawyer’s fitness to practice law. Not
only did Milligan misappropriate client funds, he also procured a false notarization of the release in
the Johnson Matter. This conduct involves dishonesty and deceit. Such conduct also seriously and
adversely reflects on his fitness to practice law. Based on the violations and the relevant case law,
it is apparent that Milligan’s sanction must involve a period of suspension.
In determining the appropriate period of suspension, we consider also any applicable
aggravating and mitigating circumstances. “Aggravating and mitigating circumstances are any
considerations or factors that may justify an increase or reduction in the degree of discipline to be
imposed.” Maddux, 148 S.W.3d at 41. In the case at bar, the Hearing Panel found and applied the
following five aggravating factors: (1) Milligan received a public censure in 1994; (2) Milligan
received a public admonition in 1995; (3) Milligan received a private informal admonition in 1987;
(4) in 1999, Milligan (as required by the Board) consulted with and was advised by Suzanne Rose,
the “Tennessee Bar Law Practice Management Consultant,” about recommended changes in his
accounting procedures and failed to comply with her recommendations; and (5) Milligan failed to
fully cooperate with Leroy Bible in direct violation of a Supreme Court order.
After a thorough review of the record, we are unable to conclude that Milligan did not
cooperate with Leroy Bible’s audit. Although there is testimony that Milligan was evasive in
response to Bible’s questioning, there is insufficient evidence showing that he deliberately thwarted
Bible’s investigation. However, the evidence does support the remaining four aggravating factors
(his three prior sanctions and his failure to properly comply with Suzanne Rose’s recommendations).
The Panel also found and applied one mitigating factor: that Milligan “ultimately made good
the checks returned for insufficient funds and there is no evidence that any individual lost money as
a result of [Milligan’s] actions.” We agree that this factor should mitigate any sanction we impose,
and we have considered it as a mitigating factor.
Accordingly, based on the severity of Milligan’s violations, the applicable aggravating and
mitigating circumstances, the relevant case law, and the entire record, we conclude that a two-year
suspension from the practice of law is appropriate. It is further ordered that Milligan shall comply
in all respects with Tennessee Supreme Court Rule 9, and specifically with section 18 regarding the
obligations and responsibilities of suspended attorneys. Costs of this review are taxed to the
appellee, James L. Milligan, Jr., or his surety, for which execution may issue if necessary.
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ADOLPHO A. BIRCH, JR., JUSTICE
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