IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-41450
BRITTAN COMMUNICATIONS INTERNATIONAL CORPORATION,
Plaintiff-Appellant,
versus
SOUTHWESTERN BELL TELEPHONE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Texas
December 16, 2002
Before DeMOSS, STEWART, and DENNIS, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Brittan Communications International Corporation (“Brittan”) filed suit against Southwestern
Bell Telephone Company (“SWBT”) in Texas state court alleging, inter alia, violations of the
Communications Act of 1933 (“the Act”), common law fraud, and violations of the Texas Deceptive
Trade Practices Act (“DTPA”). SWBT remo ved the case to federal court and filed motions for
judgment on the pleadings and summary judgment. On November 9, 2001, the district court granted,
inter alia, SWBT’s motion for judgment on the pleadings with respect to Brittan’s claim under the
Communications Act and motion for summary judgment with respect to Brittan’s fraud claim and its
claims under the DTPA. The district court issued a final judgment and Brittan appealed. For the
following reasons, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Brittan began operating as a switchless reseller of long-distance telephone services in 1995.
Brittan did not have its own telecommunications facilities, but rather leased long-distance access from
two existing long-distance carriers (“Lessors”). It then resold the leased long-distance services to
its customers in forty-two states.
As is common in the telecommunications industry, Brittan billed its customers through local
exchange carriers (“LECs”), like SWBT. In order to do so, Brittan submitted its charges to a third-
party billing aggregator with whom Brittan had a contract, namely Billing Concepts or its subsidiaries
(collectively “Billing Concepts”). Billing Concepts performed billing aggregation services for multiple
long-distance providers, including Brittan. Billing Concepts aggregated Brittan’s charges with those
of other long-distance providers and submitted them to SWBT.1 SWBT would then place Brittan’s
charges on the bills of its local telephone service customers, collect the payments due, and forward
the monies received to Billing Concepts. Billing Concepts would then transfer the funds to Brittan.
On November 9, 1998, SWBT notified Billing Concepts that it would no longer accept billing
records from Brittan, effective the following day. Brittan allowed its customers to continue to make
long-distance calls, for which Brittan had to pay its Lessors, but Brittan was unable to bill those
customers through SWBT. According to SWBT, it suspended billing services for Brittan in response
1
Brittan and SWBT did not have a contractual relationship. Billing Concepts, however, had a
billing and collection contract with SWBT.
2
to a large number of “slamming” and “cramming” complaints by SWBT’s customers.2 In September
1998, SWBT received approximately 2400 customer complaints associated with charges that Billing
Concepts had tendered to SWBT for billing. In late October 1998, SWBT conducted a random
sampling of 100 of these 2400 customer complaints from September. The results of the survey
indicated that more complaints had been filed against Brittan than against any other long-distance
provider billing through Billing Concepts.
On November 2, 1998, SWBT wrote to Billing Concept s explaining that it intended to
suspend billing of charges generated by Brittan unless Billing Concepts could inform SWBT, by
November 7, 1998, of any reasons why it should not do so. Under the terms of its billing contract
with Billing Concepts, SWBT was not obligated to process “[c]harges for services which, in SWBT’s
sole opinion, may result in nuisance calls to SWBT.” On November 6, 1998, Brittan wrote Billing
Concepts placing blame for the complaints in the sample on Brittan’s Lessors. On November 9,
1998, SWBT notified Billing Concepts that SWBT would no longer accept billing records from
Brittan, effective November 10, 1998, because it had not received adequate assurances from Billing
Concept s that the number of complaints would be reduced in the future. In its letter to Billing
Concepts, SWBT indicated that Brittan must provide SWBT with a specific action plan designed to
reduce complaints in order to regain privileges. “These action plans must be specific, and need to
address future actions, not reasons for past failures.”
According to Brittan, SWBT’s survey of complaints was skewed in favor of Billing Concept’s
largest customer, Worldcom, and against Brittan. Brittan contends that it never engaged in cramming
2
“Cramming” refers to charging a customer for services that were not ordered, authorized, or
received. “Slamming” refers to switching a customer’s long-distance provider without the customer’s
consent.
3
and that all of the so-called cramming complaints in the survey were merely calls from customers who
were unfamiliar with new fees imposed on long-distance providers in 1998 by the Federal
Communications Commission (“FCC”). The FCC allowed long-distance providers to pass these fees
on to customers.3 Brittan simultaneously contends that the complaints in the survey were due to
errors in electronic transmission codes allegedly caused by SWBT.
On November 16, 1998, representatives of SWBT, Billing Concepts, and Brittan participated
in a conference call. During this call, SWBT and Billing Concepts agreed that Billing Concepts
would decide whether or not Brittan’s billing would be reinstated. Brit tan claims that SWBT’s
representative stated that billing services would promptly be restored as soon as Billing Concepts
made the decision to forward Brittan’s billing records to SWBT.
On or about November 24, 1998, Billing Concepts informed SWBT that Brittan should be
reinstated on SWBT’s billing tables. On December 15, 1998, SWBT resumed billing Brittan-
generated charges for Billing Co ncepts. The money collected from those bills was paid to Billing
Concepts in the normal course of business.
In June 2000, Brittan brought suit against SWBT in state court seeking damages stemming
from the suspension of its billing and collection services. SWBT removed the case to federal court
and filed motions for judgment on the pleadings and for summary judgment. On November 9, 2001,
the district court granted SWBT’s motions and entered final judgment. Brittan appeals.
DISCUSSION
3
Brittan concedes that it, like every long-distance provider, has had problems with slamming, but
claims to have taken extensive steps to address the problem.
4
Brittan presents the following issues on appeal: (1) whether the district court erred in granting
SWBT’s motion for judgment on the pleadings on Brittan’s claim under Title II of the
Communications Act of 1933, 47 U.S.C. § 202(a); (2) whether the district court erred in granting
summary judgment for SWBT on Brittan’s common law fraud claim; and (3) whether the district
court erred in granting summary judgment for SWBT on Brittan’s claims under the DTPA, TEX. BUS.
& COM. CODE ANN. §§ 17.45(5) and 17.46(b)(5) & (7).
I. Section 202(a) of the Communications Act
We review the grant of judgment on the pleadings pursuant to Federal Rule of Civil Procedure
12(c) de novo. St. Paul Fire & Marine Ins. Co. v. Convalescent Serv., Inc., 193 F.3d 340, 342 (5th
Cir. 1999). In doing so, we must look only to the pleadings and accept all allegations contained
therein as true. Id. Pleadings should be construed liberally, and judgment on the pleadings is
appropriate only if there are no disputed issues of material fact and only questions of law remain.
Voest-Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887, 891 (5th Cir. 1998). “[T]he
central issue is whether, in the light most favorable to the plaintiff, the complaint states a valid claim
for relief.” Hughes v. The Tobacco Inst., Inc., 278 F.3d 417, 420 (5th Cir. 2001) (quoting St. Paul
Mercury Ins. Co. v. Williamson, 224 F.3d 425, 440 n.8 (5th Cir. 2000)).
Title II of the Communications Act outlines the duties of common carriers in the provision
of interstate or foreign communication services and establishes procedures for enforcement of those
duties. 47 U.S.C. §§ 201-224. Brittan claims that SWBT’s temporary suspension of billing and
collection services violates § 202(a) of the Act. Section 202(a) states as follows:
It shall be unlawful for any common carrier t o make any unjust or unreasonable
discrimination in charges, practices, classifications, regulations, facilities, or services
for or in connection with like communication service, directly or indirectly, by any
5
means or device, or to make or give any undue or unreasonable preference or
advantage to any particular person, class of persons, or locality, or to subject any
particular person, class of persons, or locality to any undue or unreasonable prejudice
or disadvantage.
47 U.S.C. § 202(a) (2001).
The district court aptly looked for guidance from the FCC - the agency charged with
administration of the Communications Act - in determining whether Brittan’s claim fell within the
scope of § 202(a). After reviewing the pertinent FCC decisions, the district court determined that
“the relevant principle that can be extracted from these FCC decisions is that billing and collection
services that do not utilize communications over the common carrier’s wire or radio facilities are not
‘communications services’ regulated by Title II of the Communications Act.” Thus, the district court
concluded that Brittan had not alleged a cognizable § 202(a) claim. We agree that the FCC has stated
a clear po sition on this issue. In light of the FCC’s position, we agree with the district court’s
conclusion. See generally Verizon Communications Inc. v. FCC, 122 S. Ct. 1646, 1687 (2002)
(reinstating FCC pricing and unbundling rules because they effectuated a reasonable interpretation
of the Act).
To discern the FCC’s position, we look to the history and purpose of the agency’s decisions.
In 1986, the FCC issued a decision which resulted in the detariffing of billing and collection services
under Title II of the Act. In the Matter of Detariffing of Billing & Collection Services, 102 F.C.C.2d
1150 (1986). The FCC analyzed the scope of its jurisdiction under Title II and stated the following:
Two distinct questions must be asked in order to determine whether a particular
activity is subject to such Title II regulation. Is the activity an interstate or foreign
communication service? Is the person or entity offering the service as a common
carrier? Although carrier billing and collection for a communication service that it
offers individually or as a joint offering with other carriers is an incidental part of a
communication service, we believe that carrier billing or collection for the offering of
6
another unaffiliated carrier is not a communication service for purposes of Title II of
the Communications Act.
Id. ¶ 31 (emphasis added). Rather, the FCC explained that billing and collection were “financial and
administrative service[s].” Id. ¶ 32. Thus, according to the FCC, “billing and collection services
provided by local exchange carriers are not subject to regulation under Title II of the Act.” Id. ¶ 34;
see also Int’l Audiotext Network, Inc. v. AT&T, 893 F. Supp. 1207, 1223-24 (S.D.N.Y. 1994)
(noting that billing and collection services provided by local exchange carriers are not subject to
regulation under Title II of the Act which includes 47 U.S.C. § 202(a)); In the Matter of Policies and
Rules Concerning Local Exchange Carrier Validation and Billing Information for Joint Use Calling
Cards, 7 F.C.C. Rcd. 3528, 3533 n.50 (1992) (affirming that “[b]illing and collection, of course,
remains outside the scope of Title II because it is not a common carrier service”).
The FCC conducted its analysis in response t o the changed landscape of the
telecommunications industry due to the breakup of the Bell System. As the D.C. Circuit explained:
In 1986, the FCC reexamined both its post-breakup jurisdiction to regulate the LECs’
provision of billing and collection services and the desirability of continued regulation.
The FCC acknowledged that it could no longer exercise jurisdiction over billing and
collection services on the basis of Title II of the Act because it was now apparent -
after the breakup - that these services were not “common carrier services.” Instead,
it rested its jurisdiction in this area on its authority under Title I to regulate (or
deregulate) services “incidental” to the transmission of communication by wire.
Moreover, seeing that the LECs were facing competition in the billing and collection
area, and therefore that a market for these services was developing, it decided to
eliminate all rate regulation of the billing and collection services provided by the LECs
to interexchange carriers.
Pub. Serv. Comm. of Md. v. FCC, 909 F.2d 1510, 1512 (D.C. Cir. 1990) (citations omitted).
Brittan contends that the FCC has retreated in recent years from its earlier position that billing
and collection services are financial and administrative services, outsi de the scope of Title II.
7
Although it may be true that the FCC has moved away from the position that billing and collection
services are financial and administrative services, this does not persuade us to conclude that the billing
and collection services at issue in this case fall within Title II. Brittan has cited no FCC decision in
which t he FCC has altered its view that billing and collection services provided by LECs to
unaffiliated long-distance providers fall outside the scope of Title II. See In the Matter of Federal-
State Joint Board on Universal Service, 13 F.C.C. Rcd. 24,744, ¶ 70 & n.87 (1998) (finding that
billing and collection services are subject to Title II, but only as to a carrier’s own billing and
collections). Likewise, Brittan has cited to no case holding that billing and collection services fall
within the scope of Title II. Alternatively, Brittan contends that the FCC’s position is arbitrary, thus
it should not be afforded deference by this Court. We disagree. Accordingly, because the type of
claim asserted by Brittan does not fall within the scope of Title II, we affirm the district court’s grant
of SWBT’s motion for judgment on the pleadings with regard to Brittan’s § 202(a) claim.
II. Fraud Claim
We review the grant of summary judgment de novo. Mowbray v. Cameron County, Tex., 274
F.3d 269, 278 (5th Cir. 2001). Summary judgment is appropriate only when the record indicates “no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of
law.” FED. R. CIV. P. 56. “Questions of fact are reviewed in the light most favorable to the
nonmovant and questions of law are reviewed de novo.” Mowbray, 274 F.3d at 278-79.
In order to prove fraud under Texas law, Brittan must show that: (1) SWBT made a material
representation; (2) that was false; (3) SWBT knew that it was false or made it recklessly without
knowledge of its truth; (4) SWBT intended to induce Brittan to act upon the representation; (5)
Brittan actually and justifiably relied upon the representation; and (6) Brittan was injured as a result.
8
Ernst & Young L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001). The dispositive
element here is whether Brittan justifiably relied upon the representation. A “[d]etermination of
justifiable reliance turns on ‘whether - given the fraud plaintiff’s individual characteristics, abilities,
and appreciation of facts and circumstances at or before the time of the alleged fraud - it is extremely
unlikely that there is actual reliance on the plaintiff’s part.’ ” Quest Exploration & Dev. Co. v.
Transco Energy Co., 24 F.3d 738, 742 (5th Cir. 1994) (quoting Haralson v. E.F. Hutton Group, Inc.,
919 F.2d 1014, 1026 (5th Cir. 1990)).
On appeal, Brittan argues that it was harmed by SWBT’s misrepresentation regarding the time
frame for resuming billing services for Brittan. According to Brittan, during the November 1998
conference call, SWBT assured Brittan that it would “resume billing for Brittan promptly as soon as
Billing Concepts was willing to forward the billing.” Brittan contends that it relied on these
representations in making business decisions, most importantly allowing its customers to continue to
use long distance services at its expense.
The district court concluded that Brittan’s fraud theory was fatally flawed because Brittan
failed to claim that it justifiably relied on the alleged misrepresentation by SWBT, an element of the
claim. The parties agree that at the end of the conference call, the decision of when, and if, Billing
Concepts would resume submitting Brittan-generated charges to SWBT was left entirely up to Billing
Concepts, not SWBT. As the district court summarized the situation, “[b]ecause Brittan was aware
that Billing Concept s may not have ever agreed to resume its submission of Brittan’s charges to
SWBT, Brittan cannot prove that it justifiably acted upon the alleged misstatement by SWBT.”
(emphasis in original). We agree. Examining the “facts and circumstances at or before the time of
the alleged fraud,” it is clear that neither Brittan nor SWBT knew if Brittan’s billing services were
9
going to be restored by Billing Concepts. Any reliance, even if actual, was not justifiable. Any
alleged misrepresentation by SWBT regarding the length of time it would take to restore billing
services was essentially meaningless given that the decision of when, and if, to resume rested with
Billing Concepts.
For the foregoing reasons, we affirm the district court’s grant of summary judgment for
SWBT on Brittan’s fraud claim.
III. DTPA Claims
Brittan claims that SWBT’s alleged misstatement during the November 1998 conference call
forms the basis for its claims that SWBT committed “false, misleading, or deceptive acts” in violation
of § 17.46(b)(5) & (7), and acted unconscionably in violation of § 17.45(5).4 The district court
granted SWBT summary judgment on Brittan’s DTPA claims. As we explained above, we review
the district court’s grant of summary judgment de novo.
To maintain a cause of action under the Texas DTPA, Brittan must establish that (1) it is a
consumer under the DTPA with respect to its claim against SWBT; (2) SWBT committed a false,
misleading, or deceptive act under § 17.46(b) of the DTPA, breached an express or implied warranty,
4
Under § 17.46(b)(5), “representing that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has
a sponsorship, approval, status, affiliation, or connection which he does not” is a false, misleading,
or deceptive act. Under § 17.46(b)(7), “representing that goods or services are of a particular
standard, quality, or grade, or that goods are of a particular style or model, if they are of another” is
a false, misleading, or deceptive act. Finally, an “unconscionable action or course of action” under
the DTPA “means an act or practice which, to a consumer’s detriment, takes advantage of the lack
of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.” TEX. BUS.
& COM. CODE ANN. § 17.45(5) (Vernon 2002). “To prove an unconscionable action or course of
action, a plaintiff must show that the defendant took advantage of his lack of knowledge and that the
resulting unfairness was glaringly noticeable, flagrant, complete and unmitigated.” Bradford v.
Vento, 48 S.W.3d 749, 760 (Tex. 2001) (internal quotations omitted).
10
or engaged in an unconscionable action or course of action; and (3) these acts were the producing
cause of Brittan’s actual damages. Brown v. Bank of Galveston, N.A., 963 S.W.2d 511, 513 (Tex.
1998). The DTPA defines “consumer” as “an individual, partnership, [or] corporation . . . who seeks
or acquires by purchase or lease, any goods or services.” TEX. BUS. & COM. CODE ANN. § 17.45(4)
(Vernon 2002). To qualify as a consumer, and thus to have standing to sue under the DTPA, Brittan
must satisfy two requirements: (1) it must have sought or acquired goods or services by purchase or
lease; and (2) the goods or services purchased or leased must form the basis of the complaint.
Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex. 1981). “If either requirement is
lacking, the person aggrieved by a deceptive act or practice must look to the common law or some
other statutory provision for redress.” Id. For liability to be imposed under the DTPA, the
defendant’s deceptive conduct must have occurred “in connection with” a consumer transaction.
Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996).
SWBT argues that Brittan is not a “consumer” within the meaning of the DTPA because
Brittan bases its DTPA claims on its contention that SWBT wrongfully suspended its billing and
collection services and that SWBT did not promptly reinstate these services. Brittan does not claim
that it encountered problems with the quality of the billing and collection services themselves.
In American Distributing Corp. v. ACS Communications, Inc., this Court held that a former
exclusive distributor’s claim against a supplier who unilaterally terminated the distribution agreement
did not state a claim under the Texas DTPA because, although the distributor purchased goods from
the supplier, the claim was based on the suspension of the distributorship, rather than any fault in the
goods. 990 F.2d 223, 227 (5th Cir. 1993); see also Footloose, Inc. v. Stride Rite Children’s Group,
Inc., 923 F. Supp. 114, 116 (N.D. Tex. 1995) (holding that a dealer in shoes did not state a cause of
11
action against a manufacturer for violation of the DTPA, as the dealer alleged only that the
manufacturer wrongfully terminated the sales relationship, and had not made any claims that the shoes
were defective). We conclude that this case poses a similar situation. In light of our previous
decision in American Distributing Corp., we hold that Brittan does not qualify as a “consumer” under
the DTPA, and thus does not have standing. Thus, we affirm the district court’s grant of summary
judgment for SWBT on each of Brittan’s claims under the DTPA.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s grant of judgment on the pleadings
for SWBT on its claim under the Communications Act and its grant of summary judgment for SWBT
on Brittan’s common law fraud claim and its claims under the Texas DTPA.
AFFIRM.
12
DENNIS, Circuit Judge, concurring in part and dissenting in part:
While I join in the majority’s opinion on the Texas Deceptive Trade Practices Act claim, I
respectfully dissent on the Communications Act and common law fraud claims for the following
reasons.
I. Section 202(a) Claim
Because the FCC has reversed its position on whether it may regulate billing and collection
services under Title II of the Communications Act, Brittan should be allowed to maintain an action
based on Section 202(a) of the Communications Act.5 Therefore, the district court should not have
granted judgment on the pleadings.
In determining whether Brittan may maintain an action under Section 202(a) of the
Communications Act, we must examine whether the FCC considers billing and collection services to
be common carrier communication services, which are subject to regulation under Title II and Section
202(a). However, in conducting this inquiry, the question is not whether the FCC is actually
regulating billing and collection services under Title II, but rather whether the FCC can regulate
billing and collection services under this Title.
In 1986, the FCC held that billing and collection services were not subject to Title II
regulation because: (1) they were financial and administrative services, not communication services,
and (2) they were not common carrier services. In re Detariffing of Billing and Collection Services,
102 F.C.C.2d 1150 (1986). In 1992, the FCC changed its position and declared that billing and
5
Title II regulates common carrier communication services in general. More specifically,
Section 202(a) is a provision of Title II and prohibits discrimination involving common carrier
communication services.
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collection services were communication services, but not common carrier services. In re Policies and
Rules Concerning Local Exchange Carrier Validation and Billing Information for Joint Use Calling
Cards, 7 F.C.C.Rcd. 3528, 3533 n.50 (1992). Therefore, these services were still not subject to Title
II regulation. Id. However, in 1998, the FCC changed its position again and held that billing and
collection services are common carrier services and subject to Title II regulation. In the Matter of
Federal-State Joint Board on Universal Service, 13 F.C.C.Rcd. 24,774, ¶ 70 (1998)(“We believe that
a carrier’s billing and collection services are subject to regulation as common carrier services under
Title II.”).
Although the FCC has only chosen to regulate billing and collection services involving local
exchange carriers and its local telephone customers, this does not mean that Title II and Section
202(a) do not encompass all billing and collection services. In 1999, the FCC explained that whether
particular billing and collection services are actually regulated or not depends on whether regulation
is needed to protect competition. In re Calling Party Pays Services Offering in the Commercial
Mobile Radio Services, 14 F.C.C.Rcd. 10,861, ¶ 59 (1999)(“In considering the regulatory treatment
of billing and collection services, we observe that we have generally declined to regulate the provision
of billing and collection services unless regulation is needed to protect competition.”). Consequently,
although the FCC currently declines to regulate certain aspects of billing and collection services under
Title II, the FCC still has the capacity to regulate these services, including billing and collection
services involving long-distance providers such as Brittan.
Because the FCC considers billing and collection services to be covered by Title II and
Section 202(a), Brittan should be allowed to maintain its Communications Act claim against SWBT,
and the district court’s judgment on the pleadings should be REVERSED.
-14-
II. Common Law Fraud Claim
I also disagree that the district court properly granted summary judgment on the common law
fraud claim was proper because Brittan could not have justifiably relied on SWBT’s promise to
promptly restore service as a matter of law. Brittan could have reasonably believed that (1) Billing
Concepts would allow billing and collection services to resume and (2) after that approval came,
SWBT would restore service within a “day or two.” Therefore, Brittan could have justifiably relied
on SWBT’s promise to restore service, believing that SWBT would restore service within two days
after Billing Concepts ordered service to resume, not the three weeks it actually took.
It is true that Billing Concepts, not SWBT, controlled whether billing and collection services
would resume. However, the relationship between Brittan and Billing Concepts, as well as Billing
Concepts’ financial incentive in allowing SWBT to resume service, could allow Brittan to reasonably
believe that Billing Concepts’ approval was forthcoming. And in fact, on November 24, within eight
days of SWBT’s promise to restore service, Billing Concepts did order SWBT to reinstate billing and
collection services to Brittan.
Brittan could have believed that SWBT would restore service within a “day or two” after
Billing Concepts’ permitted service to restart. Jim Edwards, CEO of Brittan, testified in his
deposition that at the teleconference on November 16, 1998, Dick Oxler, SWBT’s Director of Billing
and Collection, stated that he could resume billing and collection services within “the next day or
two.” Even if Brittan could not have reasonably believed that service would be restored by
November 17 or 18, it could have justifiably relied on that statement to believe that service would be
restored on November 25 or 26, in “the next day or two” after Billing Concepts ordered SWBT to
restart service. Instead, SWBT did not restore service until December 15.
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Because Brittan could have justifiably relied on SWBT’s promise to restore service within a
“day or two” after Billing Concepts ordered service to resume, summary judgment should not have
been granted. Therefore, the district court’s decision to grant summary judgment on the common
law fraud claim should be REVERSED.
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