United States Court of Appeals
For the First Circuit
No. 16-1309
ARABIAN SUPPORT & SERVICES CO., LTD.,
Plaintiff, Appellant,
v.
TEXTRON SYSTEMS CORP.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lynch, Lipez, and Thompson,
Circuit Judges.
Haig V. Kalbian, with whom D. Michelle Douglas, Kalbian
Hagerty LLP, Martin F. Gaynor III, Nicholas D. Stellakis, and
Manion Gaynor & Manning LLP were on brief, for appellant.
Edwin John U, with whom John A. Tarantino, Brian R. Birke,
Adler Pollock & Sheehan P.C., Eugene F. Assaf, Erin C. Johnston,
Ronald K. Anguas, Jr., and Kirkland & Ellis LLP were on brief, for
appellee.
April 19, 2017
LIPEZ, Circuit Judge. In this diversity action, Arabian
Support & Services Co. ("ASASCO"), a Saudi Arabian business, seeks
compensation for assisting Textron Systems Corporation in its
efforts, over a number of years, to complete a deal to sell sensor
fuzed weapons ("SFWs") to the Saudi government. ASASCO claims
that Textron failed to abide by a promise to supplement the modest
fees paid under the parties' written consulting agreements through
an "offset" arrangement linked to the weapons sale.1 The district
court granted summary judgment for Textron on all of ASASCO's
claims after allowing limited discovery and declining to provide
ASASCO an opportunity to amend its complaint.
Although we agree that ASASCO's contract and tort claims
are not viable, we conclude that the district court erroneously
dismissed ASASCO's Chapter 93A misrepresentation claim based
1 The U.S. Department of Commerce describes "offsets" as "the
practice by which the award of defense contracts by foreign
governments or companies is conditioned upon commitments from the
defense contractor to provide some form of compensation to the
purchaser." U.S. Dep't of Commerce, Bureau of Indus. & Sec.,
Guidance for Complying with the Bureau of Industry and Security's
Procedures for Reporting on Offsets Agreements Associated with the
Sales of Weapon Systems or Defense-Related Items to Foreign
Countries or Foreign Firms,
https://www.bis.doc.gov/index.php/other-areas/strategic-
industries-and-economic-security-sies/contact-the-office-of-
strategic-industries-a-economic-security/guidance-for-reporting-
on-offset-agreements (last visited March 16, 2017). That
compensation can be directly related to the purchase, perhaps
through subcontracting within the purchasing country, or may take
the form of other types of investments made in the purchasing
country. Id.
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solely on the failure of the contract claim. See Mass. Gen. Laws
Ann. ch. 93A, § 11. Textron offers no persuasive alternative
rationale to support the court's ruling. Hence, ASASCO is entitled
to proceed with its claim that Textron engaged in an unfair
business practice by procuring ASASCO's agreement to low-fee
consulting contracts with the promise of a future offset benefit
and then, after successfully signing the weapons deal, disclaiming
any additional financial obligation to the Saudi company.
Accordingly, we vacate the summary judgment in part and remand for
further proceedings on ASASCO's misrepresentation theory.
I.
We will not review in full the parties' lengthy
relationship, which developed largely through interactions between
Mansour Al-Tassan, ASASCO's president, and Avedis Boyamian,
Textron's Director of Middle East Business Development. As the
history is well known to both parties, we choose here to recount
only those facts pertinent to our decision.
A. The Consulting Agreements
For three-plus years -- from March 2005 through August
2008 -- Textron and ASASCO signed successive consulting contracts
providing ASASCO with a monthly retainer of $10,000. Beginning
September 1, 2008, the consulting contract was extended in
increments of one to three months on a no-fee basis. That
arrangement continued for a year, until a new two-year agreement
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was signed that set ASASCO's monthly retainer at $500. The $500
fee remained in place through subsequent contract extensions until
August 31, 2013, at which point Textron terminated the consulting
arrangement. In the email sent on August 29 notifying ASASCO that
Textron had elected to end the relationship, the company
spokesperson stated that Textron was "not aware of any outstanding
obligations between the parties."
Each of the consulting contracts between 2005 and 2011
contained a provision stating that the parties agreed that "any
and all services rendered by CONSULTANT to the COMPANY shall be
deemed to have been given pursuant to this Agreement and no
additional payments [other than for approved travel expenses]
shall be due to or paid to CONSULTANT." However, the 2011
agreement for the first time contained an expanded version of this
no-other-payments statement, providing that the specified
compensation was "the exclusive remuneration to be paid by the
COMPANY" for "the services provide[d] by CONSULTANT." The 2011
agreement also featured an integration provision:
This Agreement constitutes the entire
agreement of the parties hereto with respect
to the subject matter hereof and supersedes
all prior agreements or understandings,
written or oral. Each party hereby waives the
right to assert any claim against the other,
its employees, customers or assigns, based on
any oral representations, statement, promise
or agreement whether made before or after the
date of this Agreement.
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B. The Offset Dialogue
Through the years of their consulting relationship,
beginning no later than May 2006,2 Textron and ASASCO regularly
discussed the opportunity for additional compensation to ASASCO
through its involvement in offset projects that were an anticipated
requirement of the Saudi weapons deal. The record also contains
internal Textron emails indicating that ASASCO's anticipated
offset activity -- and compensation -- would be independent of the
consulting agreement. This correspondence includes a draft
"Offset Services Agreement" prepared by Textron in June 2006, an
email from Boyamian to Al-Tassan that month stating that Textron
was "in the process of getting the Offset Provider Agreement
approved," and, on the same day, an internal Textron email asking
that "two books" be started for the company's business with ASASCO
("one for a new offset agreement with Asasco, and one for a renewal
of the consultant agreement").3
Textron and ASASCO never entered into a written offset
agreement. Instead, in February 2008, Textron and Blenheim Capital
2 Although Al-Tassan's declaration describes earlier
discussions between him and Boyamian on potential offset business,
we use this date because it is supported in the record by emails
between the two men.
3 In response to a question concerning the connection between
ASASCO's reduced consulting fee and its offset role, Boyamian
testified during his deposition that the "consultancy services and
offset providing services" were "two separate things."
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Partners Limited signed an Offset Services Agreement ("OSA") that
permitted but did not require Blenheim to subcontract with ASASCO
-- although no other subcontractor could be used without Textron's
"prior written consent." Six months later, in an internal email
dated September 8, Boyamian told colleagues at Textron that,
"Effective September 1st, 2008, [Textron] stopped paying ASASCO
the monthly consultancy fee because, [Textron] through Blenheim,
an offset service provider company based in UK, has an offset
service providing agreement with ASASCO for [Textron] business
offset requirements in Saudi Arabia." The email also reported
that a two-year renewal of ASASCO's consulting agreement was in
the works, "with a nominal monthly fee of $500/month." Boyamian
forwarded this email to Al-Tassan.
The Textron-Blenheim-ASASCO association was further
formalized in April 2009, when Blenheim and ASASCO entered into a
subcontracting agreement under which ASASCO was entitled to 75
percent of the fees paid by Textron to Blenheim under the OSA.
The Blenheim-ASASCO contract anticipated that these fees would be
deposited into an escrow account, which was to be created "as soon
as practicable," and, indeed, ASASCO's right to payment under that
contract was contingent on "the full amount of the applicable fee
under the Offset Services Agreement being paid to the Escrow
Account." Although Textron's agreement with Blenheim did not by
its terms provide for an escrow account, Boyamian appeared to
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believe that such an account would exist. In a November 2008 email
to Al-Tassan, Boyamian stated his understanding "that Textron will
be paying 8% of the contract value to the escrow account for
offset." So far as it appears from the record, no escrow account
was ever created.
From the time of Blenheim's appearance on the scene (in
2008) through early 2011, all three businesses -- Textron, ASASCO,
and Blenheim -- were involved in discussions about offset projects.
Among the later emails exchanged was one sent to Al-Tassan on March
2, 2011 from Steven Cahall of Blenheim, which
reviewed the possible fee arrangements among Textron, Blenheim,
and ASASCO depending upon whether Textron was required to make
offset investments.4 The three-way dialogue formally ended in
November of that year, however, when Textron sent Blenheim a letter
stating that the companies were mutually ending the OSA.5 By its
4 The companies had been discussing the possibility that the
offset obligation would be waived for the Textron weapons deal.
Cahall's email stated: "If there is an offset obligation then
ASASCO MUST INVEST ITS FEES ENTIRELY INTO THE OFFSET PROJECTS. If
there is a waiver of the offset obligation then ASASCO does not
have to invest the fees."
5 The termination letter sent from Textron to Blenheim, dated
November 28, 2011, was "[a]greed to and accepted" by Blenheim by
means of a signature dated January 12, 2012. The letter attributed
the termination to "recent changes to the offset guidelines in
Saudi Arabia." The letter also stated that "[t]he Offset Services
Framework Agreement between [Textron] and [Blenheim], dated
January 18, 2011 will remain in force for the duration of its term
and will cover all future offset activity for Saudi Arabia." The
parties do not explain this latter agreement in their briefs.
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terms, the Blenheim-ASASCO agreement also terminated when the OSA
terminated. ASASCO claims that it was not told, and did not know,
that Textron and Blenheim had ended the OSA until September 2013.
C. The Weapons Deal
On January 3, 2012, roughly a month after Textron sent
Blenheim the termination letter, Boyamian sent Al-Tassan an email
reporting that Saudi officials had, on December 24, signed a
"Letter of Offer and Acceptance" ("LOA") -- essentially a statement
of intent to make a deal -- "as a Christmas gift to us." Boyamian
concluded his message with "CONGRATULATIONS to all of us." Through
2012, allegedly without knowledge that its subcontract with
Blenheim had ended (upon termination of the OSA), ASASCO continued
to work with Textron to set up meetings with Saudi government
officials. The correspondence between the two companies included
reference to the offset requirement. In an email to Boyamian in
November 2012, Al-Tassan noted an effort to set up a meeting for
Textron's chairman with the Saudi Minister of Economy and Planning,
who "is also the Head of the Saudi Economic Offset which Textron
might want to explore with the minister."
Textron and Saudi Arabia finalized an agreement for the
weapons deal in late August 2013. About a week later, ASASCO
received the notification that Textron was terminating their
consulting relationship. In a deposition conducted on December
16, 2015, a Textron representative testified that, as of that date,
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the company had not yet reached an offset agreement with the Saudi
Arabian government, but he reported that Saudi officials had
confirmed that such an agreement was required.6
II.
In its lawsuit, ASASCO claims that, over an extended period
of time, it provided essential support at minimal cost for
Textron's pursuit of a weapons deal in Saudi Arabia based on
assurances from Textron that ASASCO would have a large financial
stake in any offset activity related to that deal. When the
weapons deal was finally made, ASASCO asserts, Textron backed away
from its promises. ASASCO's complaint presented this claim through
three theories of liability: (1) breach of contract, specifically
the OSA, based on a third-party beneficiary theory; (2) tortious
interference with ASASCO's business and contractual relationship
with Blenheim; and (3) violations of Chapter 93A, the Massachusetts
Deceptive Trade Practices Act, Mass. Gen. Laws Ann. ch. 93A, § 11.
6
Stephen Fogarty, whose job duties at Textron included review
of offset agreements, testified as follows:
[T]here is no question we will have an offset
obligation and there will be an offset
program.
The only thing that is in question at
this moment, is when will this offset
agreement be signed, when will this program
begin, and what will be the period of
performance for this offset program.
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When Textron moved to dismiss the complaint, ASASCO
sought leave to amend it to address any deficiencies and, possibly,
to add new claims, including fraudulent inducement, breach of the
covenant of good faith and fair dealing, and tortious interference
with prospective business advantage. No discovery had yet taken
place. Shortly thereafter, the district court entered an
electronic order notifying the parties that (1) it was reserving
ruling on the motion to dismiss, (2) it intended to convert that
motion into one for summary judgment, and (3) it would permit
limited discovery on two issues.7 Textron later moved for summary
judgment and renewed its motion for dismissal, and ASASCO again
asked for the opportunity to amend its complaint before the
district court's final disposition of the case. ASASCO also sought
additional discovery pursuant to Federal Rule of Civil Procedure
56(d), asserting that Textron's motions encompassed issues beyond
the scope of the limited discovery the court previously had
allowed.
7 The court described the two issues as follows:
(1) the authenticity of, and plaintiff Arabian
Support & Services Company (ASASCO)'s
knowledge of, the Termination Letter [from
Textron to Blenheim], . . . ; and (2) the
authenticity of the [2011-13] Consulting
Agreement [between Textron and ASASCO], as
well as the preclusive effect, if any, of its
terms, particularly with respect to the
operation of the integration clause.
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In its Memorandum and Order granting summary judgment
for Textron, the district court rejected ASASCO's third-party-
beneficiary contract theory based on the OSA between Textron and
Blenheim because "Textron did all that it was contractually
obligated to do." Arabian Support & Servs. Co. v. Textron Sys.
Corp., No. 1:15-cv-12951-RGS, 2016 WL 1048868, at *4 n.9 (D. Mass.
Mar. 11, 2016). The court also stated that, given the absence of
a contractual breach, "there is no viable allegation of tortious
interference or violations of Chapter 93A." Id. The court did
not address ASASCO's requests for leave to amend or additional
discovery.
We review the district court's grant of summary judgment
de novo, taking the facts and all reasonable inferences therefrom
in the light most favorable to ASASCO as the non-moving party.
Rando v. Leonard, 826 F.3d 553, 556 (1st Cir. 2016). "Summary
judgment is warranted where 'there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter
of law.'" Id. (quoting Fed. R. Civ. P. 56(a)).
We detect no error in the district court's conclusions
on two of ASASCO's three theories of liability. With respect to
the contract claim, even if ASASCO was an intended third-party
beneficiary of certain provisions of the OSA, Textron did not
violate any of the terms of that agreement. As permitted by the
contract, Textron and Blenheim ended the OSA by mutual agreement.
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In addition, the OSA did not require Textron to pay the fees that
were intended to reach ASASCO through Blenheim into an escrow
account.8 Only the subcontract between Blenheim and ASASCO
required the escrow arrangement. Thus, even if Textron made a
payment directly to Blenheim -- as ASASCO alleges and Textron
disputes -- Textron would not have violated any contractual
provision. Hence, ASASCO is without a breach on which to hang its
third-party-beneficiary contract claim.
Nor do we see a basis for relief from Textron for
tortious interference with ASASCO's business or contractual
relationship with Blenheim. ASASCO voluntarily entered into an
agreement that expressly made its continued relationship with
Blenheim contingent on Textron's voluntary relationship with
Blenheim. In the definitions section of the ASASCO-Blenheim
contract, "Termination Date" is defined as "the earlier of [] the
date on which the Offset Services Agreement is terminated for any
reason," or the date on which termination occurs for other
specified reasons. Moreover, the OSA did not even require Blenheim
to hire ASASCO as its offset subcontractor, although Textron
secured that relationship by stipulating that no other
subcontractor could be hired without Textron's permission. To say
8 The OSA stated that the fees specified therein "will be paid
to the account of BLENHEIM notified to [Textron]. Fees may not be
paid to BLENHEIM by way of cash or bearer instrument."
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that Textron then improperly interfered in ASASCO's association
with Blenheim when it ended the OSA disregards the limited
commitments made by the three businesses in the two Blenheim
agreements.
Put another way, the harm ASASCO seeks to vindicate is
not the elimination of the ASASCO-Blenheim collaboration per se,
but the elimination of its own participation in potential offset
activity -- as allegedly promised by Textron. The Blenheim-ASASCO
agreement was, for a time, the means by which ASASCO was to obtain
such involvement. With Textron's termination of the OSA, ASASCO
automatically lost its contractual right to offset business via
its own agreement with Blenheim -- but ASASCO has not presented a
supportable rationale for finding that Textron owed it a duty to
protect the ASASCO-Blenheim agreement by maintaining the OSA.
On the other hand, if Textron did promise ASASCO offset-
related remuneration, but then terminated the OSA without
providing ASASCO an alternative means to obtain it, we see room
for a viable Chapter 93A claim premised on Textron's
misrepresentations. As we have described, the gist of ASASCO's
complaint is that it was induced into providing ongoing consulting
services to Textron for both no fee and -- in Boyamian's words --
"a nominal monthly fee" by Textron's assurance of future offset
activity and compensation. See Compl. at ¶ 34 (alleging that,
after Blenheim "ceased its communications with ASASCO" in 2011,
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Textron "assur[ed] ASASCO that its role in the offset arrangement
was secure"); ¶ 37 (alleging that, by December 2011 or shortly
thereafter, Textron knew that "it did not intend to follow through
on its commitment to compensate ASASCO through the [Textron]-
Blenheim-ASASCO offset arrangement," yet failed to inform ASASCO
and "persisted in its offset-related discussions with ASASCO");
¶ 44 (alleging that Boyamian promised Al-Tassan that Textron "would
'find another way'" to provide "ASASCO's anticipated offset-
related compensation").
Textron points to the integration provision in the 2011
consulting contract as a barrier to any such claim based on verbal
representations. However, the clear division that was established
early on between ASASCO's consultant role and its future offset
role could mean that the integration provision was understood --
or represented by Textron -- to apply to the former but not the
latter. Moreover, such a provision does not always bar a
misrepresentation claim. See Kenda Corp. v. Pot O'Gold Money
Leagues, Inc., 329 F.3d 216, 226 (1st Cir. 2003) ("[I]t is well
settled in Massachusetts that '[a]n integration clause in a
contract does not insulate automatically a party from liability
where he induced another person to enter into a contract by
misrepresentation.'" (quoting Starr v. Fordham, 648 N.E.2d 1261,
1268 (Mass. 1995)) (second alteration in original)); Bates v.
Southgate, 31 N.E.2d 551, 558 (Mass. 1941) ("[I]t is entirely
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possible for a party knowingly to agree that no representations
have been made to him, while at the same time believing and relying
upon representations which in fact have been made and in fact are
false but for which he would not have made the agreement.").
Particularly where there has been a longstanding "history of
performance" between the parties, "reliance on the complained-of
duping conduct" could be found reasonable. HSBC Realty Corp. (USA)
v. O'Neill, 745 F.3d 564, 573 (1st Cir. 2014).
Hence, the integration clause does not necessarily exclude
the Chapter 93Aa claim, and the record contains facts that,
depending on the surrounding circumstances, could support an
inference of deception. The two actions by which Textron
eliminated its connection with ASASCO (first, indirectly, by
terminating the OSA and, second, by declining to renew the
consulting agreement) coincide with significant developments in
Textron's efforts to win the Saudi weapons contract. The end of
the OSA overlapped with the signing of the LOA for the weapons
deal, and ASASCO's consulting agreement ended right after the
weapons deal came to fruition. If Textron knew at the time it
signed the 2011 consulting agreement that it would soon end the
OSA, but did not tell ASASCO because it wanted to keep the Saudi
company on board at a low fee to help finalize the weapons deal,
Textron's silence could be found consequential. See, e.g., Incase
Inc. v. Timex Corp., 488 F.3d 46, 57 (1st Cir. 2007) (noting that
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"[s]ome cases have held that an act or practice is deceptive 'if
it could reasonably be found to have caused a person to act
differently from the way he or she otherwise would have acted'"
(quoting Aspinall v. Philip Morris Cos., 813 N.E.2d 476, 486 (Mass.
2004))); Lambert v. Fleet Nat'l Bank, 865 N.E.2d 1091, 1098 (Mass.
2007) (observing that "'stringing along' that induces detrimental
reliance can, in some cases, constitute a [Chapter] 93A
violation"); McEvoy Travel Bureau, Inc. v. Norton Co., 563 N.E.2d
188, 192 (Mass. 1990) ("Massachusetts law clearly states that
statements of present intention as to future conduct may be the
basis for a fraud action if . . . the statements misrepresent the
actual intention of the speaker and were relied upon by the
recipient to his damage.").9
Such a deliberate failure to disclose the impending
termination of the OSA would be even more significant if Textron
also was planning by that time to end any relationship with ASASCO
as soon as the weapons deal was finalized. Why Textron
substantially reduced the consulting fee -- and why ASASCO
9Textron asserts in its brief on appeal that "ASASCO cannot
now claim a right to be paid for separate 'offset services' when
it is undisputed that ASASCO never provided any such services."
However, ASASCO's contention is that it was denied a promised
opportunity to perform offset services. As noted above, Textron's
representative reported that "there is no question we will have an
offset obligation and there will be an offset program." See supra
note 6.
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acquiesced to the reduction -- also seem relevant, and potentially
revealing, for ASASCO's claim that it was promised offset-related
compensation outside of the consulting agreements.10 Likewise, the
Offset Services Framework Agreement between Textron and Blenheim,
which the district court described as "intended to replace the
OSA," may have significance, but the court (like the parties on
appeal) did not discuss the contents of that contract. Arabian
Support & Servs. Co., 2016 WL 1048868, at *2.
In sum, we disagree with the district court that
ASASCO's Chapter 93A claim -- or, indeed, other potential claims
resting on alleged misrepresentations by Textron -- necessarily
fail because Textron did not breach the OSA. To the contrary, as
described above, ASASCO has identified evidence that raises
sufficient doubts concerning Textron's actions and motivations
that a violation of Chapter 93A is viable. We therefore must
vacate the summary judgment on that claim and remand the case for
further proceedings on the misrepresentation theory.
10 Boyamian testified in deposition that Textron in 2008
sought to eliminate all consultant fees to reduce the company's
expenses. In addition, when asked if ASASCO was "doing a great
deal of work for Textron" while it was receiving the $500 monthly
stipend, he responded, "I don't think so." By contrast, Al-Tassan,
while acknowledging that he signed agreements with the reduced
fees, stated that "there were some representations on the other
side, so that's why."
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Relatedly, the district court denied ASASCO further
discovery and the opportunity to amend its complaint in apparent
reliance on its view that such efforts would be futile because
ASASCO did not have a viable misrepresentation-based claim. In
light of this decision, ASASCO should be given the opportunity to
amend its complaint to supplement its Chapter 93A claim with any
common-law misrepresentation claims supported by the record. See,
e.g., Grant v. News Group Bos., Inc., 55 F.3d 1, 5 (1st Cir. 1995)
(stating that, "unless there appears to be an adequate reason for
the denial [of leave to amend] (e.g., undue delay, bad faith,
dilatory motive on the part of the movant, futility of the
amendment), we will not affirm the denial"). We leave to the
district court the decision whether further discovery is
appropriate.11 We also leave to its discretion whether to allow a
renewed motion for summary judgment in light of any new theories
presented and the possibility of an expanded record on remand.12
11 As Textron points out, the district court did allow some
discovery by ASASCO beyond the express limits of the original
discovery order. The topics permitted included communications
between Textron and ASASCO "regarding changes in any monthly fees
paid to ASASCO," and "representations or statements made to
Plaintiff to encourage Plaintiff to enter into" the consulting
agreements with Textron. Hence, ASASCO already has had some
opportunity to obtain evidence related to the alleged
misrepresentations.
12 If the district court allows another round of summary
judgment motions on remand, it should also reconsider its order
striking parts of the Al-Tassan declaration and specify the
portions, if any, it strikes.
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Vacated and remanded. No costs.
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