United States Court of Appeals
For the First Circuit
No. 02-2128
JENNIFER HOULT,
Plaintiff, Appellee,
v.
DAVID PARKS HOULT,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Torruella, Lynch, and Lipez,
Circuit Judges.
Jordan L. Shapiro, with whom Edward J. Collins, Eric L.
Shwartz, and Shapiro & Hender were on brief, for appellant.
Laura D'Amato, with whom Adrienne M. Markham, Kevin P.
O'Flaherty, Pamela L. Signorello, Ellen C. Meyer, and Goulston &
Storrs, P.C. were on brief, for appellee.
June 22, 2004
LYNCH, Circuit Judge. On July 1, 1993, a federal jury in
the district of Massachusetts awarded Jennifer Hoult a $500,000
verdict against her father, David Hoult, for sexually abusing her
throughout her childhood. The verdict was affirmed on appeal in
Hoult v. Hoult, 57 F.3d 1, 2 (1st Cir. 1995). This case arises
from Jennifer's attempt to collect on that judgment, which, almost
eleven years later, has still not been paid in full.
On May 13, 2002, the district court found that David had
fraudulently conveyed over $130,000 in assets to avoid paying the
judgment. Two weeks later, on May 30, it entered an order
requiring him to deposit all his income in a designated
Massachusetts bank account and to limit his withdrawals from that
account to $2,900 per month, a sum meant to cover his reasonable
living expenses. David did not appeal from that order. He later
moved in the district court to strike from the order social
security benefits and Employee Retirement Income Security Act
(ERISA) pension benefits that he receives, arguing principally that
federal statutes prohibit the alienation of each of those benefits.
See 42 U.S.C. § 407(a) (social security); 29 U.S.C. § 1056(d)(1)
(ERISA). The court denied his motion. David, who has since been
found in civil and criminal contempt for refusing to comply with
the order, now appeals from that denial.
We find that the district court properly denied the
motion to strike as to ERISA benefits. ERISA's anti-alienation
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provision does not apply where, as here, the funds have already
been disbursed to the plan beneficiary. In so holding, we join
four other circuits and disagree with one.
More difficult questions are raised by the court's
refusal to strike social security benefits from the order, but we
need not resolve those questions here. The parties stated to the
district court that neither had any objection to an arrangement
that would exempt David's social security benefits from the order
but would reduce his $2,900 monthly withdrawal limit by the amount
of his monthly social security check (about $1,400 per month). We
confirmed this at oral argument. We affirm the denial of the
motion to strike the ERISA pension benefits and remand with
instructions to modify the order as to social security benefits.
I.
On July 29, 1993, four weeks after the verdict, Jennifer
moved for a preliminary injunction barring David and his current
wife (not Jennifer's mother) from transferring David's assets
except as necessary for ordinary living expenses. Jennifer alleged
that she had discovered that after she had filed suit in July 1988,
David had started transferring his assets to protect them from a
potential judgment. The district court granted the injunction on
August 4. David did not appeal that order.
On September 7, 1994, Jennifer filed a supplemental
complaint against David and his wife for fraudulent conveyance and
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civil contempt. A five-day bench trial was held on the fraudulent
conveyance claims in January 1996.1
In November 1996, before judgment had entered in the
fraudulent conveyance trial, Jennifer learned that David had
retired from his position as a senior research associate at the
Massachusetts Institute of Technology (MIT) and had begun receiving
approximately $4,800 in ERISA pension benefits from MIT each
month.2 On January 27, 1997, she moved to modify the August 4,
1993 preliminary injunction to require, inter alia, that David
deposit his monthly ERISA pension check in a designated bank
account and limit his withdrawals from that account to $1,700 per
month (which, according to his testimony in the fraudulent
conveyance trial, was the amount that he contributed each month to
his and his wife's living expenses). Her motion did not mention
social security benefits. The district court said that it would
allow the motion and requested Jennifer's counsel to file a
proposed form of order.
Before the order was issued and before judgment entered
in the fraudulent conveyance trial, David filed a voluntary
petition under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101
1
The court deferred its consideration of the contempt count
to a later date and eventually dismissed it.
2
Starting in April 1994, the court had garnished a portion
of David's wages each month to pay the judgment, but those payments
stopped when David retired in the fall of 1996.
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et seq., which automatically stayed the fraudulent conveyance
proceedings. See 11 U.S.C. § 362. The bankruptcy court ruled on
July 2, 1999 that David's MIT pension was not the property of his
bankruptcy estate. It also held on October 29, 1999 that David's
judgment debt to Jennifer and interest on that debt were
nondischargeable. David appealed both rulings. His appeals were
dismissed for lack of prosecution.
On November 22, 1999, Jennifer alerted the district court
to the bankruptcy court's rulings and renewed her request to modify
the August 4, 1993 order. She again did not mention social
security benefits in her motion. David opposed the motion. First,
he argued that Florida, not Massachusetts, law applied because he
was a Florida resident and maintained a Florida residence in
addition to his home in Massachusetts. He contended that Fla.
Stat. chs. 222.21(2)(a) and 222.14 exempted his ERISA pension
benefits from the claims of all creditors. Second, he argued that
the order would effectively be an execution of judgment and that
under Fed. R. Civ. P. 4.1, a district court sitting in
Massachusetts did not have the authority to execute on the assets
of a Florida resident. Finally, he argued that the proposed order
would violate ERISA's anti-alienation provision, which states that
"[e]ach pension plan shall provide that benefits provided under the
plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1).
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On May 13, 2002, the court entered its findings of fact
and conclusions of law as to the fraudulent conveyance claims,
finding that David had fraudulently conveyed over $130,000 in
assets.3 Two weeks later, on May 30, 2002, the court inserted the
following language into the August 4, 1993 preliminary injunction:
1. David Hoult shall place all monies, income and funds
he receives from any source in a single Massachuestts's
[sic] bank account in his name only (the "Account") on or
before June 14, 2002;
2. David Hoult shall not make any withdrawals from the
Account except for $2,900 per month; and
3. David Hoult shall provide Plaintiff's attorney . . .
with (i) the name of the bank and the account number of
the Account; (ii) a copy of each check or receipt which
documents monies or income he receives; and (iii) a copy
of the monthly statement of activity (the "Monthly
Statement") relative to the Account.
The order made no exception for either David's social security or
his ERISA pension benefits. Indeed, social security benefits may
have been included without the court being aware that "all income"
included social security payments.
David did not appeal the May 30 order. Initially, he
simply refused to comply with the order and was held in contempt.
After he began to comply on July 3, 2002, the court purged him of
that contempt. Then, on July 20, 2002, twenty days after the time
for filing an interlocutory appeal from the May 30 order had
expired, see Fed. R. App. P. 4(a)(1)(A), David filed a motion with
3
The court entered final judgment to this effect on March
24, 2003.
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the district court to strike social security and ERISA pension
benefits from the order. In that motion, he stated, "The instant
motion is directed only to social security and pension benefits.
Defendant recognizes that the [May 30 order] remains effective with
respect to all other 'monies, income or funds' he receives from any
other source." As to his ERISA benefits, David reiterated his
earlier arguments under Florida law and under ERISA's anti-
alienation provision.4 He also argued that, as written, the order
violated the anti-alienation provision of the Social Security Act,
which provides that "none of the moneys paid or payable or rights
existing under this title shall be subject to execution, levy,
attachment, garnishment, or other legal process, or to the
operation of any bankruptcy or insolvency law." 42 U.S.C. §
407(a). This was the first time the issue of social security
benefits was argued to the court.
Jennifer defended the order as to the ERISA benefits,
arguing, inter alia, that ERISA's anti-alienation provision does
not prevent alienation of benefits after they have been distributed
to beneficiaries and that David's citation to Florida law was
inapposite because Massachusetts law, rather than Florida law,
4
David also raised a new argument that Jennifer had taken
the position before the bankruptcy court that his ERISA benefits
should be excluded from his estate based on ERISA's anti-alienation
provision and, hence, that she should be judicially estopped from
seeking the order at issue in this case. David's counsel stated in
oral argument before us that he has abandoned this argument on
appeal.
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applied. As to the social security benefits, Jennifer argued that
the order did not violate the Social Security Act's anti-alienation
provision because it did not "attach" David's social security
income but merely required him to deposit it in a designated bank
account for monitoring. She said that she "would not object,
however, if concrete proof of the amount of his social security
payment is provided, to excluding that amount from the required
income deposit and, concomitantly, reducing the monthly amount
David may withdraw by that same amount." David's social security
payment is about $1,400 per month; the May 30 order allowed him to
withdraw $2,900 per month.
At a hearing on David's motion on August 2, 2002, the
district court asked David's counsel whether David had any
objection to Jennifer's proposal. He said that David did not. In
the end, though, the court decided that it was not necessary to
adopt Jennifer's proposal and, instead, simply denied David's
motion. The court ruled that the order did not need to be altered
as to social security benefits, reasoning that David's disposal of
his social security benefits was not restrained in any way because
his $2,900 monthly withdrawal limit far exceeded the $1,400 he
received in social security benefits. Nor did the order, the court
ruled, have to be amended as to the ERISA benefits. The court held
that ERISA's anti-alienation provision presented no bar once the
funds had been distributed to David. The court further determined
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that even if Florida law applied, it did not help David because its
relevant provisions applied only to honest debtors and David, based
on his history of fraudulent conveyances, was not such a debtor.
David filed this appeal from the denial of his motion to strike on
September 3, 2002.
While this appeal was pending, David stopped complying
with the May 30 order. On May 14, 2003, Jennifer filed a motion to
hold David in civil contempt, alleging that David had not produced
any of the monthly statements required under the May 30 order since
January 2003. A grand jury indicted David on August 27, 2003 for
three counts of felony criminal contempt. The indictment alleged
that in January 2003 David stopped depositing his income in the
designated Massachusetts account and started putting it in a
Florida account instead; that David exceeded his $2,900 withdrawal
limit virtually every month since November 2002; and that, by March
2003, there was only about $23 left in the Massachusetts account.
On January 16, 2004, the district court granted Jennifer's motion
for civil contempt and awarded $46,676 in damages. On February 24,
2004, David pleaded guilty to all three counts of felony criminal
contempt.
II.
David does not appeal from the issuance of the May 30,
2002 order but instead from the denial of his motion to strike
ERISA and social security benefits from that order. We review the
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denial of a motion to modify a preliminary injunction for abuse of
discretion. See Pub. Serv. Co. of N.H. v. Patch, 202 F.3d 29, 32
(1st Cir. 2000); 16 Wright, Miller & Cooper, Federal Practice &
Procedure § 3924.2 (West 1996). Under that standard, pure issues
of law are reviewed de novo, findings of fact for clear error, and
judgment calls with considerable deference. See Nieves-Marquez v.
Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2004).
David raises three sets of arguments on appeal. First,
he argues that the May 30, 2002 order constitutes an improper
execution of judgment under Fed. R. Civ. P. 69(a). Second, he
argues that the application of the May 30 order to his ERISA
pension benefits violates (1) Florida statutes that he reads as
exempting such benefits from creditors' claims, see Fla. Stat. chs.
222.21(2)(a), 222.14; and (2) the anti-alienation provision of
ERISA, 29 U.S.C. § 1056(d)(1). Third, he argues that the order's
application to his social security benefits violates the anti-
alienation provision of the Social Security Act, 42 U.S.C. §
407(a). We consider each argument in turn.
A. Authority to enter the May 30 order
David argues that the May 30 order is effectively an
attempt to execute on the judgment and that, on his reading of Fed.
R. Civ. P. 69(a), a writ of execution is required.5 Fed. R. Civ.
5
Rule 69(a) provides that "[p]rocess to enforce a judgment
for the payment of money shall be a writ of execution, unless the
court directs otherwise." David argues that the exception for
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P. 4.1 requires such writs to be served within the territorial
limits of the state in which the district court sits (here,
Massachusetts). David claims that he is a Florida resident and
that the district court in Massachusetts therefore does not have
authority to execute the judgment against him.
This argument comes too late. On appeal from the denial
of a motion to modify an injunction, "review does not extend to the
propriety of the original order." 16 Federal Practice & Procedure
§ 3924.2; see also Lichtenberg v. Besicorp Group, Inc., 204 F.3d
397, 401 (2d Cir. 2000). This argument is an attack on the
district court's authority to issue the May 30 order (and, indeed,
on its power to issue the original August 4, 1993 order), not the
court's refusal to strike ERISA and social security benefits from
that order. Accordingly, it is beyond the scope of our review. If
David wished to make such a challenge, he should have appealed
directly from the May 30 order within the thirty-day appeals
period. See 28 U.S.C. § 1292(a)(1) (interlocutory appeals may be
taken from preliminary injunctions); Fed. R. App. P. 4(a)(1)(A)
(allowing thirty days from the entry of the order to file an
appeal).
B. ERISA benefits
situations in which "the court directs otherwise" applies only when
execution is an inadequate remedy and says that no such showing has
been made here.
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We turn to the court's refusal to strike ERISA benefits
from the order. We first clear away the issue of whether state law
presents any barrier to the May 30 order. The parties dispute
whether the order was issued under Fed. R. Civ. P. 69 (post-
judgment executions) or Fed. R. Civ. P. 64 (pre-judgment orders).
Under either rule, the order must comport with the law of the state
in which the district court is held (here, Massachusetts), except
that any federal statute governs to the extent applicable.6
David raises a belated argument that the order violates
Massachusetts law, which requires that "amounts held by a trustee
for a defendant in a pension shall be reserved in the hands of the
trustee and shall be exempt from attachment." Mass. Gen. L. ch.
246, § 28 (defining "pension" as including all ERISA pensions).
This argument has been waived, as it was made for the first time in
David's reply brief. Andresen v. Diorio, 349 F.3d 8, 13 (1st Cir.
2003). Moreover, even were it not waived, the argument fails on
the merits. Section 28 is not applicable because the order does
not affect amounts held in trust for David by a third-party; the
order directs David himself to deposit pension funds in the
designated bank account after those funds reach his hands.
6
David argues that Florida law exempts pension money from
all claims of creditors and from all legal process, citing Fla.
Stat. chs. 222.21(2)(a), 222.14. But under both Rule 64 and Rule
69, the relevant law is that of Massachusetts, not that of Florida.
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David's primary argument is that the order violates
federal law: namely, ERISA's anti-alienation provision, 29 U.S.C.
§ 1056(d)(1). Jennifer responds that § 1056(d)(1) does not
restrict alienation of pension benefits that have already been
distributed to plan beneficiaries. If Jennifer is correct, the May
30 order does not violate § 1056(d)(1) because the order applies
only after the pension benefits are disbursed to David each month.
Four of the five courts of appeals to consider the
question have construed § 1056(d)(1) as applying to benefits only
while held by the plan administrator and not after they reach the
hands of the beneficiary. Wright v. Riveland, 219 F.3d 905, 919-21
(9th Cir. 2000); Robbins v. DeBuono, 218 F.3d 197, 203 (2d Cir.
2000); Guidry v. Sheet Metal Workers Nat'l Pension Fund, 39 F.3d
1078, 1081-83 (10th Cir. 1994) (en banc); Trucking Employees of
North Jersey Welfare Fund, Inc. v. Colville, 16 F.3d 52, 54-56 (3d
Cir. 1994). One court has held that § 1056(d)(1) bars alienation
of benefits after distribution to the beneficiary if those benefits
are post-retirement annuity payments (but not if they are pre-
retirement lump sum payments). United States v. Smith, 47 F.3d
681, 682-84 (4th Cir. 1995). We join the majority view.
The plain language of § 1056(d)(1) is that "[e]ach
pension plan shall provide that benefits provided under the plan
may not be assigned or alienated." That language governs only the
plan itself. Standing alone, it "does not read comfortably as a
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prohibition against creditors reaching pension benefits once they
have left the hands of the administrator." Robbins, 218 F.3d at
203. If Congress had intended § 1056(d)(1) to reach that far, it
could easily have employed the type of language found, for example,
in the Veterans Benefits Act, 38 U.S.C. § 5301(a), which prohibits
attachment of benefits "either before or after receipt by the
beneficiary." That Congress chose not to do so is significant.
The regulations promulgated by the Secretary of Treasury,
who has the authority to implement § 1056(d) of ERISA,7 further
reinforce our interpretation. Those regulations, which are
entitled to deference under Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 844 (1984), define the terms
"assignment" and "alienation" to cover:
(i) Any arrangement providing for the payment to the
employer of plan benefits which otherwise would
be due the participant under the plan, and
(ii) Any direct or indirect arrangement (whether
revocable or irrevocable) whereby a party
acquires from a participant or beneficiary a
right or interest enforceable against the plan
in, or to, all or any part of a plan benefit
7
Congress originally delegated this power to the Secretary
of Labor. 29 U.S.C. § 1135 (1974). In 1978, President Carter,
pursuant to the Reorganization Act of 1977, 5 U.S.C. §§ 901-12,
transferred that authority to the Treasury Secretary,
Reorganization Plan No. 4 of 1978, reprinted in 1978 U.S.C.C.A.N.
9814, 9815, and Congress ratified that transfer in 1984, Pub. L.
No. 98-532, 98 Stat. 2705 (1984). The Supreme Court has recognized
the Treasury regulations as the "applicable administrative
regulations" for § 1056(d). Guidry v. Sheet Metal Workers Nat'l
Pension Fund, 493 U.S. 365, 371-72 (1990).
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payment which is, or may become, payable to the
participant or beneficiary.
26 C.F.R. § 1.401(a)-13(c)(1) (emphasis added). Once benefits are
distributed to the beneficiary, a creditor's rights are enforceable
against the beneficiary, not against the plan itself; accordingly,
under the regulations, § 1056(d)(1) does not apply. The Treasury
Secretary's interpretation is a reasonable one, and given that
Chevron deference applies, we decline to disturb it.
The only court to have disagreed with this interpretation
is the Fourth Circuit in Smith. There, the majority held, over a
dissent, that § 1056(d)(1) prohibits alienation of pension funds
after the funds are distributed when those funds are received as
annuity payments during retirement, but not when those funds are
received as a lump sum payment before retirement. 47 F.3d at 683.
The Smith majority relied primarily on Hisquierdo v. Hisquierdo,
439 U.S. 572 (1979), which held that the anti-alienation provision
of the Railroad Retirement Act (RRA), 45 U.S.C. § 231m(a), covers
benefits after they are disbursed to beneficiaries. 439 U.S. at
583; see also Smith, 47 F.3d at 683-84.
We read the statute differently. Nothing in ERISA or in
the regulations supports a distinction in the anti-alienation
provision between pre-retirement lump sum payments and post-
retirement annuity payments. And Hisquierdo is not a useful
analogy because of differences in language between the anti-
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alienation provision of the RRA and that of ERISA. The RRA
provides, in relevant part, that:
Notwithstanding any other law of the United States, or of
any State, territory, or the District of Columbia, no
annuity or supplemental annuity shall be assignable or be
subject to any tax or to garnishment, attachment, or
other legal process under any circumstances whatsoever,
nor shall the payment thereof be anticipated.
45 U.S.C. § 231m(a) (emphasis added). In concluding that Congress
intended § 231m to reach benefits after distribution, the Supreme
Court emphasized the fact that the statute was written broadly to
prohibit creditors from subjecting the annuity to any "legal
process under any circumstances whatsoever." Hisquierdo, 439 U.S.
at 586. No similarly sweeping language exists in ERISA's anti-
alienation provision.8
C. Social security benefits
David also argues that the district court's refusal to
strike social security benefits from the order violates the anti-
alienation provision of the Social Security Act, 42 U.S.C. §
407(a), which provides that
The right of any person to any future payment under this
subchapter shall not be transferable or assignable, at
law or in equity, and none of the moneys paid or payable
or rights existing under this subchapter shall be subject
to execution, levy, attachment, garnishment, or other
8
Indeed, since Hisquierdo, the Supreme Court has expressly
reserved judgment on whether ERISA benefits may be alienated after
distribution, see Boggs v. Boggs, 520 U.S. 833, 845 (1997),
suggesting that the Court itself does not view Hisquierdo as
controlling on that issue.
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legal process, or to the operation of any bankruptcy or
insolvency law.
There is no question that § 407(a), unlike § 1056(d)(1), applies to
benefits after they have been distributed to beneficiaries.
See Philpott v. Essex County Welfare Bd., 409 U.S. 413, 414-16
(1973).
Jennifer argues, nonetheless, that the May 30 order does
not violate § 407(a) because it does not constitute an "execution,
levy, attachment, garnishment, or other legal process" within the
meaning of § 407(a). She contends that the order imposes no
restraint on David's ability to dispose of his monthly social
security check because it allows him to withdraw the full amount of
the social security check after depositing it in the designated
bank account. His social security check is approximately $1,400
per month; he is allowed to withdraw $2,900 per month. The only
effect of the order, Jennifer contends, is to track David's income
each month.
David, citing Robbins, 218 F.3d at 201, responds that the
term "other legal process" is construed expansively to cover all
express or implied threats to resort to legal processes such as
contempt. He points out that the order requires him, under threat
of contempt, to deposit his benefits in a bank account effectively
controlled by the court and to report those deposits to Jennifer.
That, he argues, is restraint enough to trigger § 407.
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The Supreme Court has recently provided some guidance on
the interpretation of "other legal process" in § 407. The Court
stated that
"other legal process" should be understood to be process
much like the processes of execution, levy, attachment,
and garnishment, and at a minimum, would seem to require
utilization of some judicial or quasi-judicial mechanism,
though not necessarily an elaborate one, by which control
over property passes from one person to another in order
to discharge or secure discharge of an allegedly existing
or anticipated liability.
Wash. State Dep't of Soc. & Health Servs. v. Keffeler, 537 U.S.
371, 385 (2003). The question whether the May 30 order "passes
control" over David's social security check to the court is a
difficult one.
That question, however, is not one that we need to
resolve. Both Jennifer and David stated to the district court that
they would have no objection to an arrangement that exempted
David's social security benefits from the May 30 order, required
David to report the amount of his monthly social security benefits,
and reduced his $2,900 monthly withdrawal limit by that amount.
Jennifer's counsel reiterated this position to us during oral
argument. In light of the parties' mutual amenability, we think
the best solution is to remand with instructions to adopt that
arrangement.
We anticipate that David may claim that he should not be
required under § 407 even to report the amount of his social
security benefits. Any such argument would fail. David has waived
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the argument and, even had it been preserved, such a reporting
requirement would not violate § 407. The arrangement to which
David has agreed depends on his accurate reporting of the amount of
his benefits.
III.
We vacate the denial of the motion to strike as to social
security benefits and remand with instructions to modify the order
to exempt social security benefits, to require David Hoult to
report the amount of his social security benefits each month, and
to reduce the monthly withdrawal limit by that amount. We affirm
the denial of the motion to strike in all other respects.
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