Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-md-01781/USCOURTS-cand-3_06-md-01781-0/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

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United States District Court

For the Northern District of California

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The AAA's Rules provide for four phases in a demand for class or collective arbitration: (1)

the clause construction phase, in which the arbitrator decides whether the parties' contract allows for

class actions, (2) the class certification phase, (3) the class notification phase, and (4) the merits phase.

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE: CINTAS CORP. OVERTIME PAY

ARBITRATION LITIGATION

 /

No. C 06-1781 SBA

ORDER

BACKGROUND

Veliz v. Cintas, No. 03-1180 SBA, was filed in May 2003 as a class action and collective

action on behalf of Service Sales Representatives (SSR's) employed by Cintas. The SSR's sought

overtime and back pay under the Fair Labor Standards Act (FLSA) and various state laws.

 Cintas moved to compel arbitration and, on April 5, 2004, this Court issued an Order

compelling 56 of the 65 Plaintiffs subject to Cintas' Motion to arbitrate their claims. On May 4,

2004, Plaintiffs filed a Demand for Classwide Arbitration with the American Arbitration Association

(AAA) in San Francisco. This Demand was filed by Veliz and nine other named claimants, "on

behalf of themselves and all others similarly situated." Dosker Decl. Ex. 1. The letter attached to

the AAA form stated that "[t]his demand for arbitration is also made on behalf of all individuals who

filed, or who hereafter file, Consents to sue in Veliz, except those whom Judge Armstrong has ruled

may litigate their FLSA claims in federal court." Pepich Decl. Ex. N. Cintas did not object to the

clause construction phase of the arbitration taking place in San Francisco.1

 See id. Ex. P. 

On May 4, 2005, this Court issued an Order clarifying its April 5 Order. In the clarification,

the Court held that the question of whether the agreements at issue permit arbitration on a class or

collective basis is for the Arbitrator, not the Court, to decide in the first instance. Id. May 4, 2005

Order at 9-10 (citing Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53 (2003)). Whether

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The Arbitrator issued a Clause Construction Award, and the parties filed cross-motions to

confirm in part and vacate in part the award. On December 5, 2005, this Court remanded to the

Arbitrator for clarification of the award. On December 20, 2005, Cintas filed a Notice of Appeal of that

Order. 

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In so ruling, the Court held that the Stay Motion Plaintiffs' arbitration agreements are

enforceable. See, e.g., Request for Judicial Notice Ex. 4 (transcript of hearing on Motion to Stay at 6).

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Approximately 1,800 Veliz Plaintiffs are Respondents in the 70 actions of which the MDL is

composed. Each action involves a subset of the 1,800 individuals who signed agreements with the same

place-of-arbitration clause.

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the Veliz Plaintiffs who are parties to the arbitration are permitted to arbitrate their claims on a class

or collective basis is a question still pending before the Arbitrator.2

Approximately 2,400 Plaintiffs opted in to the litigation. On June 6, 2005, Cintas filed a

Motion to Stay further litigation under Section 3 of the FAA as to approximately 1,900 of these

Plaintiffs, who had signed arbitration agreements and who had not already been compelled to

arbitrate. On February 14, 2006, this Court granted the motion, and stayed further proceedings until

each of these Plaintiffs (hereinafter "Stay Motion Plaintiffs") had arbitrated their disputes with

Cintas "in accordance with the terms of the agreement" into which they entered.3

Soon thereafter, Cintas filed 70 separate actions in different district courts, each of which is a

motion to compel arbitration by Cintas against a Veliz Plaintiff. The Judicial Panel on Multidistrict

Litigation ("MDL Panel") transferred these actions to this Court for "coordinated or consolidated

pretrial proceedings." In other words, the instant MDL consists of 71 actions, the first-filed of

which is Veliz v. Cintas. Every Respondent in the MDL cases is one of the Plaintiffs in Veliz.

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Cintas seeks to compel these individuals to arbitrate their claims, not in the Northern District of

California, but in the district where the motion to compel was filed and where the individual is or

was employed by Cintas. 

The MDL Panel's Transfer Order states that resolution of the 70 actions will require the

Court "to construe identical contractual arbitration clauses to determine i) whether the parties named

in each motion to compel are refusing to arbitrate within the meaning of § 4 of the Federal

Arbitration Act, and/or ii) whether the parties are complying with that obligation by seeking to

arbitrate collectively in an arbitration already occurring in the Northern District of California

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On January 9, 2007, Respondents filed an application for leave to file a reply brief [Docket No.

23]. Although the Court's Order regarding briefing did not give Respondents an opportunity to reply,

leave to file is GRANTED. However, having read and considered the arguments made in Respondents'

reply brief, the Court's decision on this matter is unchanged. 

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involving a subset of the Veliz plaintiffs." Transfer Order at 1-2.

On October 27, 2006, this Court ordered the parties to file briefs in support of their

respective positions on those questions. Based on the briefing, the Court now finds that it is

appropriate to REMAND the MDL cases to the transferor courts for further proceedings.5

ANALYSIS

1. Requests for Judicial Notice

Cintas requests judicial notice of the following documents contained in the record of Veliz v.

Cintas, No. 03-1180 SBA: (1) this Court's September 26, 2005 Order, docket no. 500; (2) a

stipulation and joint statement of the parties in response to the September 26, 2006 Order, docket no.

501; (3) excerpts from the transcript of a hearing before this Court on October 18, 2005; (4) excerpts

from the transcript of a hearing before this Court on October 27, 2005; (5) this Court's February 14,

2006 Order, docket no. 516; (6) this Court's May 4, 2005 Order, docket no. 426; (7) a minute entry

recording the results of the hearing before this Court on October 27, 2005, docket no. 514; (8) this

Court's April 5, 2004 Order, docket no. 140; (9) a one-page excerpt from Veliz's Opposition to

Cintas' Motion to Stay Proceedings, docket no. 477; and (10) a one-page excerpt from Veliz' Motion

Concerning Compliance with Court Orders, docket no. 451.

Under Federal Rule of Evidence 201(b), the Court may take judicial notice of documents

"capable of accurate and ready determination." A court may take judicial notice of its own records

in other cases. United States v. Wilson, 631 F.2d 118, 119 (9th Cir. 1980). Accordingly, the Court

GRANTS Cintas' Request for Judicial Notice with respect to these documents.

Cintas also requests judicial notice of a copy of each Respondent's employment agreement,

which was submitted as an exhibit in each of the 70 MDL cases. "Such documents are part of the

files that are in the record of this Court in the cases which are Member Cases under the abovecaptioned Lead Case and which are listed on the Appendix hereto." Request for Judicial Notice

(RJN) at ¶ 9. Finally, Cintas requests judicial notice of the Stipulation and Order "which addresses

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service of process among other matters" on file in 67 of the 70 MDL cases. RJN at ¶ 10. Cintas

includes an exemplar of such Stipulation and Order, which was filed in the United States District

Court for the District of Rhode Island, Case No. 06-112S. Cintas "offers to put into the Court's Lead

Case file copies of all the items referred to in paragraphs 9 and 10," but suggests granting judicial

notice "so as to avoid filling the Court's files with copies that together would be quite voluminous

and duplicative." Id. at ¶ 13.

Because these documents are part of this Court's files, they are certainly "capable of accurate

and ready determination." Respondents have voiced no objection. Therefore, Cintas' Request for

Judicial Notice is GRANTED.

Cintas submitted a supplemental Request for Judicial Notice along with its reply brief. In it,

Cintas requests judicial notice of twelve other documents contained in the record of Veliz v. Cintas. 

For the same reasons stated above, the request is GRANTED.

2. Questions posed by this Court's October 28, 2006 Order

i. Are the parties named in each Motion to Compel refusing to arbitrate within the

meaning of § 4 of the FAA?

Section 4 of the FAA provides that "[a] party aggrieved by the alleged failure, neglect, or

refusal of another to arbitrate under a written agreement for arbitration may petition any United

States district court which, save for such agreement, would have jurisdiction . . . of the subject

matter of a suit arising out of the controversy between the parties, for an order directing that such

arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4. 

Each of the transferor courts in this MDL, in deciding whether Cintas has the right to move

to compel arbitration, would have to decide whether Respondents have refused to arbitrate. See

PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1066 (3d Cir. 1995) (holding that "an action to compel

arbitration under the Federal Arbitration Act accrues only when the respondent unequivocally

refuses to arbitrate, either by failing to comply with an arbitration demand or by otherwise

unambiguously manifesting an intention not to arbitrate the subject matter of the dispute"); Kim v.

Colorall Technologies, Inc., 2000 WL 1262667 at *1 (N.D. Cal. 2000) (Walker, J.) (citing

PaineWebber). Accordingly, the MDL panel has instructed this Court to make that determination.

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Cintas argues that the Respondents have failed, neglected, or refused to arbitrate because

they have sought to litigate their claims in the Veliz action. In support of this theory, Cintas points

to case law holding that when a party commences litigation in court, that constitutes a refusal to

arbitrate. See PaineWebber, 61 F.3d at 1068; Roque v. Applied Materials, Inc., 2004 WL 1212110

at *4 (D. Or. 2004) ("By filing a complaint in court, a party gives the adverse party actual notice of a

refusal to arbitrate sufficient to satisfy § 4 of the FAA."). According to Cintas, by filing consents to

sue (and thus becoming party Plaintiffs) in the Veliz action, Respondents have "commenced

litigation." They have also done so by seeking "affirmative relief in litigation in the Veliz Action by

moving for an Order seeking to preemptively invalidate or otherwise not have to comply with the

place-of-arbitration term in each of their arbitration agreements." Cintas' Brief at 11. Here, Cintas

is referring to the fact that Respondents, in their capacity as Veliz Plaintiffs, resisted Cintas' Motion

to Stay and urged this Court to compel arbitration in this district. See RJN Ex. 5 (February 14, 2006

Order). 

Further, Cintas points out that prior to this Court's April 5, 2004 Order compelling

arbitration, the Veliz Plaintiffs vigorously opposed enforcement of the arbitration agreements. 

Finally, Cintas asserts that Respondents have refused to arbitrate by stating repeatedly in the Veliz

action that they object to, and reserve rights to seek appellate relief against, having to arbitrate. For

example, at the October 27, 2005 hearing on Cintas' Motion to Stay, the following exchange took

place:

Court: Why are you asking me to compel arbitration for 1700 people that there is no dispute

must arbitrate other than a strategic desire to have them in one location, which I don't

consider the court objective here.

Mr. Pepich: Because, your honor, we would not agree with Cintas that these people have to

arbitrate.

Mr. Pepich acknowledged that the Court's April 5 Order extended to the opt-in Plaintiffs, but stated

that he disputed the Court's analysis. RJN Ex. 4. See also RJN Ex. 10 (Plaintiffs' Opposition to

Cintas' Motion to Stay, stating that "Even though plaintiffs' cross-motion applies the Court's prior

arbitrability rulings, plaintiffs expressly reserved any and all appellate rights with respect to those

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arbitrability issues, including whether Cintas' arbitration agreements are unconscionable and

unenforceable in whole or in part."). 

Respondents deny that they are refusing to arbitrate within the meaning of § 4. On the

contrary, Respondents assert, "[t]hey are actively seeking to arbitrate in the Northern District of

California in connecting with the presently pending arbitration." Respondents' Brief at 2. 

Cintas provides no legal authority for the notion that the Veliz Plaintiffs' response to Cintas'

Motion to Stay constitutes a refusal to arbitrate – this is properly characterized not an affirmative

initiation of litigation, but rather as an attempt to control the place of arbitration. However, the

reasoning of PaineWebber and Roque persuades this Court that the MDL Respondents' decision to

affirmatively opt in to the Veliz litigation as Plaintiffs rather than pursuing arbitration constitutes a

refusal to arbitrate. See First Family Financial Services v. Fairley, 173 F. Supp. 2d 565, 572 (S.D.

Miss. 2001) ("The Court cannot conceive of a more explicit refusal to arbitrate than the bringing of

an arbitrable claim" in court). Further, Cintas is correct that Respondents only attempted to join the

ongoing arbitration in this District after this Court rejected their argument (advanced in their

capacity as Veliz plaintiffs) that the arbitration clauses should not be enforced. Cintas is also correct

that Respondents have voiced their resistance to arbitration at various stages of the Veliz litigation.

However, Cintas' stronger argument is that Respondents have refused to arbitrate within the

meaning of section 4 by pursuing arbitration in the Northern District of California, rather than the

fora specified in their arbitration agreements.

ii. Are the parties complying with their obligation to arbitrate by seeking to arbitrate

collectively in an arbitration proceeding already occurring in the Northern District of

California involving a subset of the Veliz plaintiffs?

Cintas argues that by attempting to arbitrate in San Francisco, Respondents have refused to

arbitrate. Cintas argues that an attempt to arbitrate in a forum other than the one identified in the

place-of-arbitration clause is a refusal to arbitrate "in accordance with the terms of the agreement." 

Cintas' Brief at 12-13. In support of this theory, Cintas relies on Bear, Stearns & Co., Inc. v.

Bennett, 938 F.2d 31, 32 (2nd Cir. 1991). In that case, the agreement specified New York City as

the place of arbitration. Bennett filed a demand for arbitration in Florida, and Bear Stearns filed a

petition in the Southern District of New York to compel arbitration in New York City. Without

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explicitly addressing whether Bear Stearns was "aggrieved" within the meaning of section 4 or

Bennett had refused to arbitrate, the court granted the petition to compel, because "Congress has

directed the district courts to order that arbitration proceed 'in accordance with the terms of the

agreement.'" Id. Cintas also relies on Sterling Financial Investment Group, Inc. v. Hammer, 393

F.2d 1223 (11th Cir. 2004), in which the agreement specified Florida as the place of arbitration but

one party initiated arbitration in Texas. The court held that the district court properly stayed the

Texas arbitration and compelled arbitration in Florida pursuant to section 4, but again, the court did

not say anything about whether the party had unequivocally refused to arbitrate.

Bear Stearns and Sterling provide support for Cintas' position that Respondents' efforts to

arbitrate in California constitute refusal to arbitrate within the meaning of section 4 of the FAA. 

Although Cintas does not identify any cases in which a party agreed to proceed with arbitration in a

forum other than that designated in the contractual place-of-arbitration clause, but resisted

arbitration in the contractually-specified forum, and the court squarely held that the party had

"refused" to arbitrate within the meaning of section 4, this Court is persuaded that such conduct

transgresses section 4.

Respondents argue that they have not refused to arbitrate by pursuing collective arbitration in

San Francisco. They point out that each of the Motions to Compel Arbitration at issue in this MDL

state that "Plaintiffs in the Northern California Action . . . did not deny that they were required to

arbitrate their FLSA claims against Cintas" and that they have "stated on the record in the Northern

California Action that they would seek to have the claims heard in arbitration in Northern

California." Thus, Respondents contend, Cintas has, in essence, admitted that they are not refusing

to arbitrate. Further, Respondents cite several cases holding that where a party agrees to arbitrate in

one venue, the opposing party is not "aggrieved" for purposes of § 4 because there is no refusal to

arbitrate. See, e.g., Broadcort Capital Corp. v. Dutcher, 859 F. Supp. 1517, 1520 (S.D.N.Y. 1994)

(holding that, where party refused to arbitrate in one forum but was attempting to proceed with

arbitration in another forum, there was no refusal to arbitrate); Scan-Graphics, Inc. v. Photomatrix

Corp., 1992 WL 2231 (E.D. Pa. 1992) (same). However, neither of these cases, nor the other cases

cited by Respondents, involved arbitration agreements with place-of-arbitration clauses. Thus, they

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are not directly applicable to the instant case.

Because there does not appear to be any controlling Supreme Court or Ninth Circuit

authority, the Court must decide which is more persuasive: the cases cited by Respondents, which

stand for the proposition that so long as the party is amenable to arbitration somewhere, he or she

has not refused to arbitrate and a motion to compel should not be entertained; or the cases cited by

Cintas, which stand for the proposition that a party refuses arbitration when he or she attempts

arbitration in a forum other than that specified in the arbitration agreement, and/or when he or she

initiates litigation in court. In the Court's view, the latter are more consistent with the language of

section 4, which speaks of a party's failure or refusal to arbitrate under a written agreement for

arbitration. If the written agreement contains a place-of-arbitration clause, then logically, a party's

attempt to arbitrate elsewhere is a refusal to arbitrate under the agreement. This interpretation is

also more consistent with the Supreme Court's admonition that private agreements to arbitrate

should be enforced according to their terms. See Volt Information Sciences, Inc. v. Board of

Trustees, 489 U.S. 468, 479 (1989).

Accordingly, the Court finds that Respondents have refused to arbitrate within the meaning

of section 4 of the FAA.

Respondents have also included, as part of their brief in response to this Court's Order, a

Motion to Dismiss Cintas' motions to compel arbitration. 

According to Respondents, the issue of where they may arbitrate is squarely within the

authority of the Arbitrator. See Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53 (2003)

(holding that aside from certain "gateway matters," such as the validity and applicability of the

arbitration clause, issues of contract interpretation and arbitration procedures should be left to the

arbitrator to decide); Richard C. Young & Co., Ltd. v. Leventhal, 389 F.3d 1, 4-5 (1st Cir. 2004)

(holding that a dispute over the interpretation of a forum selection clause must be decided by the

arbitrator: "[s]ince the dispute between the parties is concededly arbitrable, determining the place of

the arbitration is simply a procedural matter and hence for the arbitrator"). 

Respondents argue that this Court should dismiss the motions to compel for lack of subject

matter jurisdiction, because "neither this Court nor any of the 70 courts where these petitions were

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Cintas argues that only ten Veliz Plaintiffs are parties to the arbitration, because only ten

individuals were named in the Demand for Arbitration. However, these individuals purported to

demand arbitration on behalf of themselves and all others similarly situated – which would arguably

include all 56 Veliz Plaintiffs compelled to arbitrate. The Veliz Plaintiffs never moved for leave to

amend the Demand for Arbitration. See Dosker Decl. at ¶ 17; id. at Ex. 6.

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originally filed has subject matter jurisdiction to decide in the first instance the clause construction

issue at the heart of Cintas' 70 petition cases." Respondents' Brief at 12. In other words,

Respondents argue that it is clear that they must arbitrate, the only question is where, and that is a

question for the arbitrator to answer. In support of this theory, Respondents cite a case in which a

petition to compel arbitration was dismissed under Federal Rule of Civil Procedure 12(b)(1),

because the court found that the adverse party had not failed, neglected, or refused to arbitrate.

Hartford Accident & Indem. Co. v. Equitas Reinsurance Ltd., 200 F. Supp. 2d 102, 104 (D. Conn.

2002). This case does not support Respondents' argument, because the Court has held that

Respondents have failed, neglected or refused to arbitrate. Next, Respondents contend that the

Court could dismiss under Rule 12(b)(3), on the ground that the issues raised by Cintas are reserved

for the arbitrator. They cite several out-of-circuit district court cases in support of this theory. See,

e.g., Metropolitan Life Ins. Co. v. O'Malley, 392 F. Supp. 2d 1042, 1044-45 (N.D. Ill. 2005). 

However, that case did not involve dismissal of a petition to compel arbitration, and Respondents

mischaracterize its holding. The case stands for the straightforward principle that where the parties

have agreed to arbitrate, federal court is an improper venue and the case should be dismissed; it did

not hold that the location of arbitration must be decided by the arbitrator and not the Court, as

Respondents suggest. See Respondents' Brief at 13.

Further, the 1,800 Respondents are not parties to the ongoing San Francisco arbitration. At

most, the original 56 Veliz Plaintiffs compelled to arbitrate by this Court are part of the ongoing

arbitration.6 The arbitrator held in the initial clause construction award that the 1,900 opt-in

Plaintiffs could not become parties to the arbitration in this district, because that would be

inconsistent with the place-of-arbitration term in their agreements. Although this Court has

remanded to the arbitrator for clarification of the award (and Cintas has appealed that Order), that

portion of the award was not unclear, and the arbitrator may not revisit it. Thus, the interpretation of

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Respondents' arbitration agreements is not before the arbitrator, and the Bazzle line of cases is

inapposite.

Respondents also argue that this Court should invoke the doctrine of judicial estoppel. This

doctrine bars litigants from asserting inconsistent positions in the same litigation. See Hamilton v.

State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). According to Respondents, "Cintas'

current position that the clause construction issue should be resolved in 70 different jurisdictions is

clearly inconsistent with its previous position that the clause construction issue should be decided in

the San Francisco arbitration." Respondents' Brief at 16. Cintas asserts that this argument

misrepresents the record, in that it has always maintained that there can be no class or collective

arbitration because the place-of-arbitration term in each agreement is enforceable. "Thus, while

Cintas agreed that, if the AAA held clause construction proceedings as to the ten (10) individual

named claimants . . . it could do so in San Francisco, it was certainly not giving up any statutory

rights in the bargain – and certainly gave up nothing vis-a-vis those who are now Respondents here

but who have never been parties to the Veliz Arbitration." Cintas' Reply at 14. The Court agrees

with Cintas and will not apply judicial estoppel here: the fact that Cintas agreed to clause

construction proceedings in San Francisco for the original group of Veliz Plaintiffs compelled to

arbitrate is not inconsistent with its current position that the opt-in Plaintiffs (MDL Respondents)

should not be allowed to arbitrate collectively in San Francisco. 

Moreover, given that Respondents have refused to arbitrate with the meaning of section 4,

the transferor courts do have jurisdiction over the petitions to compel arbitration, and Respondents'

Motion to Dismiss must be denied on the merits.

Thus, Respondents' Motion to Dismiss the 70 MDL cases is DENIED. 

CONCLUSION

The Court holds that Respondents are refusing to arbitrate within the meaning of section 4 of

the FAA. Accordingly, all "pretrial proceedings" are complete. See 28 U.S.C. § 1407 (setting out

the role of transferee courts in multidistrict litigation, and stating that "[e]ach action so transferred

shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district

from which it was transferred unless it shall have been previously terminated"). 

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The file in Veliz v. Cintas, Case No. 03-1180 SBA, shall remain open and pending matters shall

not be terminated.

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 IT IS HEREBY ORDERED THAT the MDL cases are REMANDED to the transferor

courts for further proceedings. The clerk shall close the file and terminate all pending matters in

Case No. 06-1781 SBA.7

IT IS SO ORDERED.

Dated: 1/9/07 SAUNDRA BROWN ARMSTRONG

United States District Judge

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