United States Court of Appeals
For the First Circuit
No. 09-2316
PUERTO RICO TELEPHONE COMPANY, ET AL.,
Plaintiff-Appellees,
v.
SISTEMA DE RETIRO DE LOS EMPLEADOS
DEL GOBIERNO Y LA JUDICATURA, ET AL.,
Defendants,
MARIA M. RIVERA, ET AL.,
Intervenor-Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, Jr., U.S. District Judge]
Before
Torruella, Leval* and Thompson, Circuit Judges.
Guillermo Ramos Luiña, for appellants.
María Isabel Rey with whom Pedro A. Busó García and Fiddler
González & Rodríguez, PSC were on brief, for appellees.
February 24, 2011
*
Of the Second Circuit, sitting by designation.
LEVAL, Circuit Judge. This is an appeal by putative
intervenors – twenty current and former employees of The Puerto
Rico Telephone Company (“PRTC”) – from an order of the United
States District Court for the District of Puerto Rico denying their
motion to intervene in a suit brought by PRTC and its affiliates
(“Plaintiffs”) against Sistema de Retiro de los Empleados del
Gobierno y la Judicatura (the “Commonwealth Retirement System” or
“Sistema de Retiro”) and its administrator (collectively,
“Defendants”). The intervenor-appellants (hereinafter,
“Intervenors” or “Appellants”) sought to set aside a judgment
declaring that Puerto Rico Act No. 234 of August 9, 2008 (“Act
234”), P.R. Laws Ann. tit. 3 § 764, is ineffective because it is
preempted by the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1002 et seq. Act 234 provides essentially
that certain PRTC employees, including Appellants, may withdraw
from coverage by PRTC’s private retirement plans and instead enroll
in the Sistema de Retiro government-administered plan.
PRTC brought the action against Sistema de Retiro seeking a
declaratory judgment that Act 234 is preempted by ERISA and
therefore void. Early in the litigation – indeed, at the first
scheduling conference – Defendants informed the district court that
they would consent to a judgment that Act 234 was a nullity because
it was preempted by ERISA. Shortly thereafter, and with the
written consent of Defendants, the district court issued an opinion
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proclaiming that conclusion and entered a declaratory judgment to
that effect. See Puerto Rico Tel. Co. v. Sistema de Retiro, No.
09-1085, 2009 WL 2366706 (D.P.R. July 29, 2009). Appellants moved
to intervene, but their motion was denied without explanation.
This appeal contests that ruling. Appellants also brought a
separate action against PRTC seeking to enforce their rights under
Act 234, which suit is being held in abeyance in the district court
pending the decision of this appeal.
Plaintiffs defend the district court’s denial of intervention
principally on the ground that the motion to intervene was
untimely. As discussed below, we believe there are reasonable
arguments to be made on both sides of the timeliness question, as
well as strong reasons that favored granting to Appellants, either
in the context of the present action or in their separate suit, a
full opportunity to advocate their contention that Act 234 is not
preempted and should therefore be given effect. For these reasons,
and, in part, because the district court gave us no clue on what
basis it denied the motion to intervene, we believe that a remand
is warranted for further consideration and explanation of the
ruling.
Our resolution in this appeal expresses no view on the merits
of the question whether Act 234 is preempted by ERISA. Appellants,
because they were not made parties to this action and were denied
the opportunity to be heard in opposition, are not precluded from
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challenging the district court’s preemption ruling. Nor should the
court’s preemption ruling serve as a precedent of any value against
their claim, given that it was not the product of contested
litigation but rather was arrived at by consent of the parties,
none of which was adversely affected by the ruling. Thus, whether
as intervenors in this action or in their separate suit against
PRTC, Appellants are entitled to a meaningful opportunity to
litigate the merits of the ERISA preemption question.
BACKGROUND
For purposes of this appeal, we assume the facts as stated in
the district court’s opinion and in the parties’ memoranda on
appeal.
I. PRTC Pension Plans and Act 234
From 1974 until 1999, PRTC was a public corporation owned by
the Telephone Authority of the Commonwealth of Puerto Rico (the
“Telephone Authority”). On May 5, 1994, another entity, the Puerto
Rico Communications Corporation (“PRCC”) merged with the Telephone
Authority. As a consequence of the merger, employees of PRCC
became employees of PRTC.
Prior to the 1994 merger, employees of PRCC participated in
the Sistema de Retiro retirement plan, a government-run pension
plan that is exempt from the provisions of ERISA. According to
Appellants, prior to the merger’s closing, the PRCC employees were
consulted as to whether they wished to continue participating in
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Sistema de Retiro or if they would rather participate in the PRTC
Retirement Plans. According to Appellants, they chose to stay with
Sistema de Retiro. In the years following the merger, these
employees (i.e., the former PRCC employees) made salary
contributions to the Sistema de Retiro plan, and PRTC made
contributions to Sistema de Retiro on their behalf.
In 1999, the Commonwealth sold a controlling interest in PRTC
to the GTE Corporation. At the time of the sale, 512 active PRTC
employees had accrued benefits under Sistema de Retiro. As part of
the stock purchase agreement with GTE, the Commonwealth and GTE
agreed that those 512 employees would participate in certain
replacement plans sponsored by PRTC. According to Appellants, they
were not given the option on this occasion of continuing with
Sistema de Retiro.
Approximately nine years later, on August 9, 2008, Puerto Rico
Act No. 234 was enacted into law. The Act grants to PRTC active
and retired employees who were participants in Sistema de Retiro at
the time of the sale to GTE in 1999 (the “Eligible Employees”),
including Appellants, the right essentially to switch back to the
Sistema de Retiro plan. Under the Act, the Eligible Employees
would have the right to count any years of service worked at PRTC
after the sale as years of service under Sistema de Retiro for
purposes of accruing pension benefits; employees who had already
retired would have the right to obtain a new calculation of
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benefits.
To take advantage of Act 234’s provisions, Eligible Employees
are required to: (1) return to Sistema de Retiro all the
contributions that were distributed to them after they ceased to
participate in the system; (2) pay the accumulated interest on the
amount of contributions previously distributed; (3) pay the total
principal amount of employee pension contributions due Sistema de
Retiro for each year of service worked after the sale with any
government branch, including PRTC; and (4) pay the accumulated
interest on the principal amount of such contributions for each
year of service. Act 234 also sets up a payment plan for employees
to pay any principal and interest owed. However, in order to
participate in the payment plan, Act 234 states that the employee
must pay what he or she owes of the principal and interest “after
the PRTC Retirement Plan returns to [Sistema de Retiro] any
contributions held for each participant.” P.R. Laws Ann. tit. 3 §
764.1
On September 24, 2008, an official at Sistema de Retiro sent
a letter to PRTC requesting a list of all Eligible Employees and
1
According to Plaintiffs, the PRTC Retirement Plans are non-
contributory plans; employees do not make contributions, and the
only entity that makes contributions is PRTC. According to
Plaintiffs, these contributions were not made “on behalf of
particular employees,” but were instead based “on an actuarial
analysis of how much money is necessary to keep the Retirement
Plans funded and in a condition to pay the accrued pension
benefits.”
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their salaries. On October 24, 2008, Sistema de Retiro’s
administrator sent a letter to the President of PRTC, furnishing
information as to the Act’s provisions. The letter advised that
once Eligible Employees resume their participation in Sistema de
Retiro, PRTC will be required to (1) deduct from their salaries the
amount each employee will be contributing to Sistema de Retiro, and
(2) pay an additional amount equal to 9.275% of each of said
employee’s salaries as the employer component of the contribution.
Prior to filing the instant case, several of the Eligible
Employees requested that PRTC transfer the pension contributions
each had accumulated in the PRTC Retirement Plans to Sistema de
Retiro. Some of these employees, including Appellants, allegedly
threatened to take legal action if PRTC refused to make the
transfers.
II. District Court Proceedings
PRTC and certain of its affiliates brought this suit on
January 27, 2009 for declaratory relief, inter alia, that Act 234
is preempted by ERISA, both as enacted and as applied. The
complaint named as defendants Sistema de Retiro and its
administrator. On April 13, 2009, Defendants – neither of whom
have appeared in this appeal – filed their answer. The next day,
the court set a date for an initial scheduling conference.
The initial scheduling conference was held on June 2, 2009.
We are advised by PRTC that during this conference Sistema de
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Retiro informed the Court that it agreed with PRTC that ERISA
preempted Act 234 and that they would consent to a judgment to that
effect. The court suggested continuing the conference on July 29,
2009 to finalize a judgment.2 On July 29, 2009, the parties and
the court discussed a draft opinion and agreed to unspecified
modifications, following which the court issued the opinion and
entered judgment.
On July 28, 2009, the day before the scheduled conference,
Appellants instituted a new action by filing a class action
complaint against PRTC, on behalf of themselves and other similarly
situated PRTC employees, seeking a ruling that Act 234 is not
preempted by ERISA, and injunctive relief requiring that PRTC
comply with Act 234’s provisions. Rivera v. Puerto Rico Tel. Co.,
No. 09-1723 (JP) (D.P.R.). Two weeks later, on August 12, 2009,
Appellants moved to intervene in the suit in which this appeal is
taken, to set aside the judgment, and to consolidate the two
actions. The same day, the district court denied intervention and
consolidation giving no reason for its ruling. And on August 13,
2009, the court denied the motion to set aside the judgment in the
same summary fashion. On August 26, 2009, Appellants timely filed
a notice of appeal.
On September 29, 2009, in Appellants’ separate action, Dkt.
2
If a transcript of the conference exists, it has not been
provided to us.
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No. 09-1723, the district court granted PRTC’s motion to stay the
proceedings until this Court’s decision in the present appeal with
the observation that the issue raised in the suit “could become
moot upon resolution of [this] appeal by the First Circuit.”
Rivera v. Puerto Rico Tel. Co., No. 09-1723 (JP), 2009 WL 3160839,
at *1 (D.P.R. Sept. 29, 2009).
DISCUSSION
The Intervenors ask that we overturn the district court’s
denial of their motion to intervene. To succeed on a motion to
intervene as of right pursuant to Federal Rule of Civil Procedure
24(a),3 the movant must establish “(i) the timeliness of its motion
to intervene; (ii) the existence of an interest relating to the
property or transaction that forms the basis of the pending action;
(iii) a realistic threat that the disposition of the action will
impede its ability to protect that interest; and (iv) the lack of
3
Federal Rule of Civil Procedure 24(a) provides in relevant
part:
On timely motion, the court must permit anyone to intervene
h
wo:
. . .
(2) claims an interest relating to the property or transaction
that is the subject of the action, and is so situated that
disposing of the action may as a practical matter impair or
impede the movant’s ability to protect its interest, unless
existing parties adequately represent that interest.
Fed. R. Civ. P. 24(a).
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adequate representation of its position by any existing party.”
R&G Mortgage Corp. v. Federal Loan Mortgage Corp., 584 F.3d 1, 7
(1st Cir. 2010); see also Fed. R. Civ. P. 24(a).
“We review the grant or denial of a motion to intervene for
abuse of discretion.” R&G Mortgage Corp., 584 F.3d at 7. Even
where a decision is committed to the discretion of the district
court, a federal appeals court is not limited in its review to
either affirm the decision if it falls within the lawful exercise
of the district court’s discretion or reverse if not. An appeals
court may remand for reconsideration of a ruling that does not
constitute an abuse of discretion on finding that the district
court may with further analysis reach a fairer or more efficient
result. Although we find no abuse of discretion, we remand for
such reconsideration.
PRTC defends the district court’s denial of intervention
principally by arguing that the petition to intervene was untimely,
and that a district court’s disallowance of intervention based on
a finding of untimeliness is entitled to considerable deference on
appellate review.
There are, however, several problems with this argument. The
district court conducted no hearings with respect to the petition
and gave no explanation for its denial. We are not told whether
the court denied the petition for untimeliness or for some other
reason. Furthermore, a conclusion that a petition to intervene is
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untimely involves consideration of a number of factors – in
particular the prejudice that would be suffered by the original
parties from allowance of the intervention, and the prejudice to
the petitioner from its denial.4 The court gave no explanation of
any prejudice PRTC and Sistema de Retiro might have suffered from
allowance of the intervention. According to our perception of the
record, they would have suffered no meaningful prejudice had the
district court allowed intervention, and the prejudice to the
Intervenors from denial could be substantial. We have no
indication what was the reasoning that underlay the district
court’s denial.
In stressing the importance of timely filing of a petition to
intervene, courts have repeatedly emphasized that the concept of
timeliness of a petition is not measured, like a statute of
limitations, in terms of specific units of time, but rather derives
meaning from assessment of prejudice in the context of the
particular litigation. Fiandaca v. Cunningham, 827 F.2d 825, 834
(1st Cir. 1987) (explaining that “[t]he timeliness requirement was
not designed to penalize prospective intervenors for failing to act
4
We have identified four factors that inform the timeliness
inquiry: “(i) the length of time that the putative intervenor knew
or reasonably should have known that his interests were at risk
before he moved to intervene; (ii) the prejudice to existing
parties should intervention be allowed; (iii) the prejudice to the
putative intervenor should intervention be denied; and (iv) any
special circumstances militating for or against intervention.” R&G
Mortgage Corp., 584 F.3d at 7; see Culbreath v. Dukakis, 630 F.2d
15, 20-24 (1st Cir. 1980).
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promptly[, but] rather [to] insure[] that existing parties to the
litigation are not prejudiced by the failure of would-be
intervenors to act in a timely fashion” (quoting Garrity v. Gallen,
697 F.2d 452, 455 (1st Cir. 1983))); see Banco Popular de Puerto
Rico v. Greenblatt, 964 F.2d 1227, 1232 (1st Cir. 1992) (“[T]he
purpose of the basic requirement that the application to intervene
be timely is to prevent last minute disruption of painstaking work
by the parties and the court.” (quoting Culbeath v. Dukakis, 630
F.2d 15, 22 (1st Cir. 1980))); Caterino v. Barry, 922 F.2d 37, 41
(1st Cir. 1990) (noting that “avoiding such prejudice [to existing
parties]” has been described as the basic purpose of the timeliness
requirement, and that in that case permitting intervention
“inevitably would delay the start of the trial – unquestionably a
detriment to the plaintiffs”); see also R&G Mortage Corp., 584 F.3d
at 8 (“The passage of time is measured in relative, not absolute
terms. . . . [W]hat may constitute reasonably prompt action in one
situation, may be unreasonably dilatory in another.”). Thus,
unjustified delay for a relatively short period of time can support
denial of intervention where the prejudice to the other litigants
would be significant. See NAACP v. New York, 413 U.S. 345, 367-68
(1973) (motion to intervene brought three weeks after intervenors
claim they learned of the suit, and only days after they learned of
defendants’ consent to entry of judgment, found untimely, because
by that point the suit “had reached a critical stage” and the
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granting of intervention “possessed the potential for seriously
disrupting the [Plaintiff] State’s electoral process”). Similarly,
much longer delays might not render the petition untimely where
under the circumstances no prejudice would be suffered by the other
litigants from allowance and the prejudice to the petitioner from
denial would be serious. See Geiger v. Foley Hoag LLP Ret. Plan,
521 F.3d 60, 65 (1st Cir. 2008) (motion to intervene brought nine-
months after suit’s filing adjudged timely where the case had not
“progressed beyond the initial stages,” and the “balance of
prejudices . . . weigh[ed] heavily in favor of [putative
intervenor]”); Zurich Capital Markets, Inc. v. Coglianese, 236
F.R.D. 379, 384-85 (N.D. Ill. 2006) (motion to intervene filed over
two years after putative intervenor was on notice that its
interests might be impaired by suit found timely where plaintiff
could point to no prejudice from the delay).
Addressing first the duration of arguably unjustified delay,
Intervenors assert, and we have no reason to doubt, that prior to
Sistema de Retiro’s filing at the end of May 2009 of its memorandum
in preparation for the first scheduling conference with the
district court, they had no reason to suspect that Sistema de
Retiro would not aggressively advocate the validity of Act 234.
They further assert that their counsel (who continues to represent
them on appeal) was unable to begin work on the matter until the
first week of July, as the result of involvement in other
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litigation in this Court in Boston, followed by two weeks of
illness. The motion to intervene was thus filed ten weeks after
the Intervenors were on theoretical notice that Sistema de Retiro
would not adequately defend their interests in the suit, and only
six weeks after Intervenors’ counsel became aware of the fact.
When the court entered judgment and shortly thereafter denied
Appellants’ motion to intervene, there had been no adverse
litigation between Plaintiffs and Defendants. The litigation was
in its infancy. No depositions had been taken. No motions had
been made. The court’s initial scheduling conference had barely
been concluded. At that conference on June 2, 2009, the defendants
advised the court that they would agree to the declaratory judgment
the plaintiffs were seeking. The court therefore adjourned the
conference to July 29 for preparation of a judgment reflecting the
agreement of the parties, at which time the parties discussed with
the court the proposed text and agreed on wording, whereupon the
court proceeded to enter the judgment. Granting the Appellants’
motion to intervene would not have required the parties to redo
depositions already conducted; nor would it have caused the waste
or repetition of any previously conducted proceedings. The court
might simply have set a proximate date for the Intervenors to
submit a brief in support of the viability of Act 234, allowed a
short time for response, and then decided whether, in the face of
opposing arguments supporting the viability of Act 234, the court
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nonetheless adhered to its conclusion, in which case it could
simply have reentered the judgment.
Not only would grant of intervention not have subjected the
parties to inefficiency, repetition, or waste, but, quite to the
contrary, it appears that the resolution of the validity of Act 234
would have been simpler, speedier, and more efficient for all had
intervention been permitted. That is because the court’s denial of
intervention and its entry of an uncontested judgment does not end
the matter. Prior to moving to intervene, Appellants had filed a
separate action against PRTC seeking essentially the same relief as
they sought to achieve through intervention – validation of Act 234
as against PRTC’s claim that it is preempted. Very likely Sistema
de Retiro will be joined as a party. That suit remains pending and
Appellants are entitled to an adjudication of the issue whether Act
234 is preempted.
On September 28, 2009, the court stayed Appellants’ suit
pending resolution of this appeal in the apparent belief that our
rejection of Appellants’ contentions in this appeal would moot
their separate action. That is not necessarily correct. The
Intervenors, who bring this appeal, were not parties to the prior
action. While they clearly have standing to appeal from the
court’s denial of their motion to intervene in it, it is not at all
clear that they have standing to appeal from the judgment in a
litigation in which they were not involved. Indeed, PRTC argues to
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us that “Appellants do not have Article III standing to contest the
judgment” that resolved the suit between PRTC and Sistema de
Retiro.
Although the parties have not raised the question of the
effect of this judgment on future litigation between them as to the
validity of Act 234, we note that Appellants are not precluded by
the judgment by reason of their own or Sistema de Retiro's
participation in the action. See Gonzalez v. Cruz, 926 F.2d 1, 6
(1st Cir. 1991). Appellants were neither participants in the suit,
although they sought to be, nor in Sistema de Retiro, although
their objective was to become such through operation of Act 234.
In its participation in the suit, Sistema de Retiro was not
representing their interests. Indeed, Sistema de Retiro expressly
advocated against their interests by agreeing with PRTC’s
contention that Act 234 was preempted.
Nor does the district court’s judgment in this action
represent a meaningful precedent against the viability of Act 234.
Law is not made by the agreement of nominally adverse parties,
whose interests are in fact aligned. See Langton v. Hogan, 71 F.3d
930, 935 (1st Cir. 1995). This judgment was not the result of the
court’s resolution of a dispute waged before it. No adverse
contentions with respect to the preemption question were presented
to the court. The judgment was entered on the consent of
Plaintiffs and Defendants. A judgment thus reached through the
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concurrence of parties with aligned interests, while it binds the
parties who participated, does not establish law that determines
the interests of strangers to the litigation.5 Id.
The Appellants, in other words, are entitled to one
opportunity to litigate their contention that under Act 234 they
may transfer their retirements to the Sistema de Retiro. They
could realize that opportunity as Intervenors in PRTC’s suit
against Sistema de Retiro, opposing PRTC’S demand for a declaration
that Act 234 is preempted. Alternatively, they could realize that
opportunity in the litigation of their own separate action. But
they may not suffer an adverse judgment on the ground that the
issue they raise has already been decided by a court. It appears
that granting to the Appellants their right to litigate the
preemption question could have been accomplished at least as
efficiently for all involved, and probably more so, by allowing
5
The district court’s order staying Appellants’ separate
action pending the resolution of this appeal appears to reflect a
misunderstanding of how this case came to judgment. The court
stated as justification for the stay, that PRTC “already completely
litigated the issue of whether ERISA preempts Law 234 and
succeeded,” 2009 WL 3160839, at *1 (emphasis added), and added that
“[Sistema de Retiro] appealed the judgment.” Id. Based in part on
those perceptions, the court concluded that the “issue [whether
ERISA preempts Act 234] could become moot on the resolution of the
appeal by the First Circuit.” Id. In fact, PRTC had not
“completely litigated” the preemption question; at the first
scheduling conference with the court, it obtained Sistema de
Retiro’s consent to the declaratory judgment. Nor did Sistema de
Retiro appeal, as the court stated, from a judgment to which it had
consented. The resolution of this appeal from a judgment entered
on consent will not moot the question whether ERISA preempts Act
234.
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them to intervene in the first suit, than by denying intervention
and having the question litigated in the second. At the very
least, it would have paved the way to speedy appellate resolution
of the preemption question without delay resulting from the
unnecessary interposition of the propriety of the denial of
intervention.
For the reasons stated, we remand for the district court to
determine whether the court finds it preferable to entertain
Appellants’ claims by now allowing them to intervene in PRTC’s
action and to challenge the judgment the court originally entered
on the consent of PRTC and Sistema de Retiro, or by adhering to its
denial of intervention while allowing the Appellants a full
opportunity to litigate their claims in their separate action. Our
ruling should not be construed as overturning the district court’s
denial of intervention or requiring that intervention be allowed.
The district court did not clarify the basis of its denial of
intervention. Although we believe there were significant arguments
that favored allowing the intervention, it may well be that the
district court had ample reasons to adjudicate the Appellants’
substantive claims in the context of their separate suit, rather
than through their intervention in PRTC’s suit. Furthermore, in
the time that has passed since the court’s original decision to
deny intervention, circumstances may have changed in a manner that
may influence how the court proceeds. Should the district court
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adhere on remand to its denial of intervention, we have no reason
to believe that decision would be subject to challenge, so long as
the court affords the rejected Intervenors the full opportunity to
advance their claims in their separate action.
Nor should our remand be interpreted as in any way endorsing
or supporting the Appellants’ substantive contention that Act 234
is not preempted. That issue has not been litigated in the
district court, and we express no views on it.
The sole conclusion underlying our ruling is that Appellants
are entitled to one opportunity to litigate their claim of
entitlement to reenter the Sistema de Retiro under authority of Act
234. The district court may afford them that opportunity either by
now allowing them to intervene in PRTC’s action or by allowing them
to litigate their separate action.
CONCLUSION
Remanded for reconsideration.
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