Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-05472/USCOURTS-caDC-98-05472-0/pdf.json

Nature of Suit Code: 550
Nature of Suit: Prisoner - Civil Rights (U.S. defendant)
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 13, 1999 Decided December 21, 1999

No. 98-5472

Gilbert W. Galvan,

Appellant

v.

Federal Prison Industries, Inc.,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 96cv01722)

Thomas G. Corcoran, Jr. argued the cause and was on the

briefs for appellant.

Sally M. Rider, Assistant U.S. Attorney, argued the cause

for appellee. With her on the brief were Wilma A. Lewis,

U.S. Attorney, and R. Craig Lawrence, Assistant U.S. Attorney.

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Before: Edwards, Chief Judge, Williams and Garland,

Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge: The False Claims Act encourages

private parties to help fight fraud on the United States by

giving them the power to bring civil actions in its name, and

by providing both the government and the private party--

known as the "relator"--a share of any financial recovery and

reimbursement for their costs, including attorneys' fees. 31

U.S.C. ss 3729-3730 (1994). Under the Act any person who

knowingly presents false or fraudulent claims to an officer or

employee of the United States may be liable. Id. s 3729(a).

Gilbert W. Galvan, an inmate at the Federal Correctional

Institution in Oxford, Wisconsin, filed such an action--often

called by its Latin shorthand, qui tam (an abbreviation of qui

tam pro domino rege quam pro se ipso in hac parte sequitur)1--against his employer, Federal Prison Industries, Inc.

("FPI"). He alleged that it had falsely certified that the

communication cables and weapons parts that it produced for

the Department of Defense had been adequately tested and

met the requisite quality standards.

FPI is no ordinary employer; it is a "wholly owned government corporation," created to further the Bureau of Prison's

goal of providing meaningful work for inmates confined in

federal institutions. See id. s 9101; 28 CFR s 345.10 (1999).

But the suit had been brought in the name of the government, 31 U.S.C. s 3730(b)(1), and it is accordingly entitled to

intervene, 31 U.S.C. s 3730(b)(2), which it did here. This put

the Department of Justice in place as counsel on both sides of

__________

1 Black's Law Dictionary translates the phrase as "who as well

for the king as for himself sues in this matter." Black's Law

Dictionary 1262 (7th ed. 1999). There are other versions of the

complete Latin phrase, but none appears meaningfully different.

See, e.g., United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 746

n.3 (9th Cir. 1993) ("qui tam pro domino rege quam pro se imposo

sequitur"); Miami Copper Co. v. State, 149 P. 758, 761 (Ariz. 1915)

("qui tam pro domino rege, etc., quam pro se ipso in hac parte

sequitur").

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the action. It then moved under s 3730(c)(2)(A) for dismissal

of the suit, arguing that the court lacked subject matter

jurisdiction because Galvan's qui tam action pitted the United

States executive branch against itself. Further, representing

the FPI itself, the government moved to dismiss on grounds

of sovereign immunity. The district court accepted the nonjusticiability argument, and never reached the issue of sovereign immunity. We agree with the government's sovereign

immunity defense and affirm the dismissal on that ground,

leaving for another day the question of justiciability.

Before addressing sovereign immunity we must be sure

that we may properly do so before deciding whether the suit

presents a case or controversy. Jurisdiction must be established before a federal court may proceed to any other

question. Steel Co. v. Citizens for a Better Environment, 523

U.S. 83, 94-95 (1998). But later cases make clear what was

implicit in Steel Co.: There is an array of non-merits questions that we may decide in any order. Thus in Ruhrgas A.G.

v. Marathon Oil Co., 119 S. Ct. 1563 (1999), the Court held

that it may be perfectly proper for a court to resolve personal

jurisdiction, which is waivable, without having first determined subject matter jurisdiction. "[T]here is no unyielding

jurisdictional hierarchy." Id. at 1567. And in In re Minister

Papandreou, 139 F.3d 247, 255 (D.C. Cir. 1998), we considered an immunity defense despite considerable doubts about

the plaintiffs' standing, saying that "a court that dismisses on

other non-merits grounds ... makes no assumption of lawdeclaring power that violates the separation of powers principles." Id. at 255.

Sovereign immunity questions clearly belong among the

non-merits decisions that courts may address even where

subject matter jurisdiction is uncertain. The Supreme Court

has characterized the defense as jurisdictional, FDIC v. Meyer, 510 U.S. 471, 475 (1994), even while recognizing that it can

be waived, id. See also Deaf Smith County Grain Processors, Inc. v. Glickman, 162 F.3d 1206 (D.C. Cir. 1998);

First Va. Bank v. Randolph, 110 F.3d 75, 77 (D.C. Cir. 1997).

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And in Papandreou itself, we resolved the case on immunity

grounds, despite the presence of a defense that we assumed

arguendo was a matter of Article III standing. 139 F.3d at

255. Similarly, we here address sovereign immunity and do

not reach justiciability.

* * *

Galvan argues that FPI is not entitled to sovereign immunity because it is not, in fact, part of the sovereign. He is

mistaken. A suit is against the sovereign when "the judgment sought would expend itself on the public treasury or

domain, or interfere with the public administration." Dugan

v. Rank, 372 U.S. 609, 620 (1963) (quoting Land v. Dollar, 330

U.S. 731, 738 (1947)). FPI is a wholly owned Government

corporation, see 31 U.S.C. s 9101, and all money under FPI's

control is held by the U.S. Treasury to the credit of FPI.

See 18 U.S.C. s 4126(a) (1994). Thus, any judgment in

Galvan's favor would require FPI to pay damages directly

from the public treasury. See generally Sprouse v. FPI, 480

F.2d 1, 3 (5th Cir. 1973) ("[T]hough the prisoners vehemently

deny it, 'the conclusion is inescapable that the suit is essentially one designed to reach money which the government

owns.' " (quoting Mine Safety Appliances Co. v. Forrestal,

326 U.S. 371, 375, (1945))).

Pointing to 18 U.S.C. s 4126(b), which says that "[a]ll valid

claims and obligations payable out of said fund [the FPI fund

at Treasury] shall be assumed by the corporation," Galvan

characterizes the corporation as "self-sufficient." This is

quite immaterial. "Federal agencies or instrumentalities performing federal functions always fall on the 'sovereign' side of

[the] fault line" between suits against the sovereign and suits

against individuals, regardless of any independence of accounts. Auction Co. of America v. FDIC, 132 F.3d 746, 752

(D.C. Cir. 1997). "Diversion of resources from a private

entity created to advance federal interests has effects similar

to those of diversion of resources directly from the Treasury."

Id. In fact, as a government corporation FPI is not only a

federal instrumentality but is also an "executive agency," 5

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U.S.C. s 105, and on that account deserves sovereign immunity in the absence of congressional waiver. See FDIC v.

Meyer, 510 U.S. 471, 475 (1994) ("Absent a waiver, sovereign

immunity shields the Federal Government and its agencies

from suit.").

Galvan argues that Congress waived FPI's immunity both

in FPI's organic statute, 18 U.S.C. s 4121, and in the False

Claims Act, 31 U.S.C. s 3729. We first note the rather steep

incline that the Supreme Court has said a court must climb

before finding a waiver of the federal government's sovereign

immunity. Such waivers must be "unequivocally expressed in

statutory text, and will not be implied." Lane v. PeNa, 518

U.S. 187, 192 (1996) (internal citations omitted). If ambiguous, statutes must be construed in favor of immunity. See

United States v. Williams, 514 U.S. 527, 531 (1995). So long

as a statute supposedly waiving immunity has a "plausible"

non-waiver reading, a finding of waiver must be rejected.

United States v. Nordic Village, Inc., 503 U.S. 30, 37 (1992)

("plausible" alternative reading is enough to establish that a

"reading imposing monetary liability on the Government is

not 'unambiguous' and therefore should not be adopted.").

With this in mind we turn to Galvan's specific claims.

FPI's Organic Statute. Congress established FPI as "a

government corporation of the District of Columbia." 18

U.S.C. s 4121. Galvan would have us read this as manifesting a congressional intent to give FPI the legal characteristics of an ordinary corporation established under the general

corporation law of the District of Columbia. That law states

that such corporations are "capable of suing and being sued

in any court of law or equity in the District," D.C. Code Ann.

s 29-203 (1999),2 language which if applicable would constitute a waiver. See Meyer, 510 U.S. at 480; FHA v. Burr, 309

U.S. 242, 245 (1940).

On the surface (later we look below the surface) s 4121

seems capable of the meaning Galvan proposes. But there

are alternative meanings that seem plausible--namely readings of s 4121 as intended to establish a different kind of link

__________

2 This provision was codified at Code D.C. s 607 when FPI was

first established.

with the District of Columbia. Thus Congress may have

intended to specify that the headquarters of FPI should be in

the District (as it in fact is, see Federal Prison Industries

1996 Annual Report 82). Congress has so provided, more

specifically to be sure, in other statutes. See, e.g., 22 U.S.C.

s 2199(a) ("The [Overseas Private Investment] Corporation

shall have its principal office in the District of Columbia.");

12 U.S.C. s 4703(a)(1) ("The offices of the [Community Development Financial Institutions] Fund shall be in Washington,

D.C."). Or Congress may have intended to locate FPI in the

District specifically for purposes of venue, as it has for other

government corporations. See 22 U.S.C. s 2199(a) (Overseas

Private Investment Corp. deemed to be a resident of the

District of Columbia "for purposes of venue in civil actions");

22 U.S.C. s 3611(b) (Panama Canal Commission "is an inhabitant and resident of the District of Columbia"); cf. 7 U.S.C.

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s 1506(d) ("Any suit against the [Federal Crop Insurance]

Corporation shall be brought in the District of Columbia, or

in the district wherein the plaintiff resides."). Because 28

U.S.C. s 1391(e) provides venue for suits against "an agency

of the United States" in any judicial district where the

defendant "resides," a congressional purpose simply to establish the central administration in Washington would have the

consequence of locating venue in the District for any case

against FPI brought under general waivers of sovereign

immunity such as the Tucker Act, see id. ss 1346, 1491.

In deciding on the plausibility of the above interpretations,

it is worth noting how precisely Congress has spoken in

instances where it sought to incorporate attributes established by D.C.'s general corporation law. See 29 U.S.C.

s 1302(b) ("The [Pension Benefit Guaranty] corporation has

the powers conferred on a nonprofit corporation under the

District of Columbia Nonprofit Corporation Act."); cf. 40

U.S.C. s 875 (allowing Pennsylvania Avenue Development

Corporation to condemn property under the procedural provisions of a specific subchapter of the D.C. Code). The same is

true of Section 11 of the Shipping Act of Sept. 7, 1916, 39

Stat. 728, 731, which allowed the United States Shipping

Board to "form under the laws of the District of Columbia

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one or more corporations." In Sloan Shipyards Corp. v.

United States Shipping Board Emergency Fleet Corp., 258

U.S. 549 (1922), the Court found that this provision effected a

waiver. Id. at 565-68. Because of s 11's much more specific

statutory language, however, Sloan affords Galvan no aid.3

Looking at the context of s 4121, we find indicators militating against Galvan's view that Congress's reference to "a

government corporation of the District of Columbia" was

intended to incorporate the District's corporate law by reference. Congress purposefully kept FPI out of the commercial

world and limited its exposure to the courts. FPI cannot sell

its products to the public in competition with private enterprise, and even for its sales to the government must diversify

its operations to minimize competition with private industry

and to avoid capturing more than a reasonable share of the

government market for any specific product. See 18 U.S.C.

s 4122(a)-(b). Purchases of FPI products are considered

intragovernmental transfers, see id. s 4124(b), and FPI may

borrow money only from the Treasury itself, see id. s 4129.

When FPI's government customers challenge the "price,

quality, character, or suitability" of its products, their only

recourse is to binding arbitration before the Attorney General, the Administrator of General Services, and the President,

or their representatives. See id. s 4124(a)-(b).

Other aspects of FPI activity are removed from judicial

influence. The Attorney General has authority to promulgate

rules and regulations governing inmates' compensation for

__________

3 The current text of FPI's organic statute was adopted as part

of the enactment of Title 18 of the United States Code. See Act of

June 25, 1948, Pub. L. No. 80-772, 62 Stat. 683, 683. The language

of the original act demonstrated even more clearly that Congress

did not intend to adopt the District's corporation laws. The Act of

June 23, 1934 authorized the President to "create a body corporate

of the District of Columbia to be known as 'Federal Prison Industries', which shall be a governmental body." Act of June 23, 1934,

Pub. L. No. 73-461, 48 Stat. 1211, 1211. Its language reinforces

FPI's status as a governmental entity and suggests that its status

as a corporation is generic rather than specific to the District of

Columbia.

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injuries sustained and for work performed in connection with

FPI activities, see id. s 4126(c)(4). The Attorney General's

administrative scheme is the workers' exclusive remedy. See

28 CFR s 301.309 (1999); United States v. Demko, 385 U.S.

149, 152 (1966).

Reading s 4121 as literally making FPI a corporation

under the law of the District of Columbia creates still further

puzzles and contradictions. First, the management structure

of FPI conflicts directly with the laws in place when the

current statutory language was adopted.4 The D.C. Code

requires annual elections for the corporation's "trustees" (the

District's analogue of a director, see D.C. Code ss 29-202,

-204), see id. s 29-205, but FPI's board of directors is

appointed by, and serves at the will of, the President. See 18

U.S.C. s 4121. The District's laws also require that trustees

own stock in the company, see D.C. Code s 29-204, whereas

FPI's operating capital is maintained exclusively by the Treasury of the United States. See 18 U.S.C. s 4126(a). In

addition, in 1948 (the time of adoption of FPI's organic

statute in approximately its current form), a majority of a

corporation's trustees were required to be citizens of the

District, see D.C. Code s 29-204 (1940), but it seems unlikely

that this rule has bound the President in his selection of

FPI's directors.

Second, Congress granted FPI considerably fewer powers

than an ordinary District corporation while simultaneously

imposing extra, particularly governmental, burdens. For example, a District corporation has the specific power to mortgage its property, see s 29-203, and thus implicit power to

borrow money; but Congress authorized FPI to borrow

money only in 1988, and in so doing limited the source of

__________

4 The following citations refer to the current District of Columbia

and United States Codes, but each cited provision (with one exception) is identical in substance to the provision in effect when the

current version of FPI's organic statute was adopted: 18 U.S.C.

ss 4121-4128 (1948), and D.C. Code s 29-201 to -240 (1940). The

exception is that D.C. Code s 29-204 (1940) imposed a requirement

that "trustees" be citizens of the District, whereas the current

version does not.

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funds to the U.S. Treasury, see Pub. L. No. 100-690, 102 Stat.

4411 (codified at 18 U.S.C. s 4129 (1994)). Similarly, in

employing its assets, FPI is required to meet the requirements of a government agency rather than a District corporation. It can withdraw money from its accounts "only pursuant to accountable warrants or certificates of settlement

issued by the General Accounting Office," 18 U.S.C.

s 4126(a), and is required to act "in accordance with the laws

generally applicable to the expenditures of the several departments, agencies, and establishments of the Government," id.

s 4126(c).

Finally, the vast majority of the District's rules are either

indirectly superseded or have no relevance to FPI. For

example, the District required that shareholders pay 10% of

the capital stock into the corporate treasury before the

corporation could transact any business. See D.C. Code

s 29-209. FPI has no such capitalization requirement. The

other provisions of the D.C. Code concern the activities of

ordinary corporations. See, e.g., id. ss 29-209 to -212, -216

to -217, -230 to -235, -239 (capitalization and stock transactions); id. ss 29-218 to -219 (payment of dividends); id.

ss 29-205, -211, -220 to -222 (stockholder liability and voting

rights). They have no apparent application to FPI. The

dismal fit between FPI and the sort of private corporation

clearly contemplated by the D.C. Code makes it vanishingly

improbable that Congress meant to make FPI a corporation

governed by that code.5

Galvan attempts to save his waiver argument by arguing

that the typical presumption in favor of sovereign immunity

should not apply to government corporations, citing Keifer &

Keifer v. Reconstruction Fin. Corp., 306 U.S. 381 (1939).

__________

5 Section 11 of the Shipping Act of 1916, in contrast, anticipated

the questions of market capitalization, stock management, and the

exercise of voting rights. 39 Stat. at 731. The Act also refrained

from placing governmental burdens on these corporations' spending

decisions. There may be some incongruities between the management structure provisions of s 11 and the D.C. Code, but evidently

none was brought to the attention of the Supreme Court in Sloan.

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There the Court found that in authorizing the Reconstruction

Finance Corporation ("RFC") to create up to twelve "regional

agricultural credit corporations" and to appoint their management, Congress had not endowed the regional corporations

with sovereign immunity. Because the parent corporation,

the RFC, was subject to a "sue and be sued" clause, the

Court found that Congress "naturally assumed" that the

regional corporations would similarly lack immunity. Id. at

392-93. "Congress had a right to assume that the characteristic energies for corporate enterprise with which a few

months previously it had endowed [the RFC] would now

radiate through [the RFC] to [the regional corporations]."

Id. at 393-94. Because FPI is by no means the offspring of a

non-immune government entity, the grounds for the inference

drawn in Keifer are absent here.

Moreover, the Supreme Court seems to have abandoned

Keifer's fundamental premises. The Keifer Court said that

"the government does not become the conduit of its immunity

in suits against its ... instrumentalities merely because they

do its work." Id. at 388. More recent cases have taken the

opposite view. See FDIC v. Meyer, 510 U.S. at 475 ("Absent

a waiver, sovereign immunity shields the Federal Government and its agencies from suit."); Auction Co. of America,

132 F.3d at 752 ("Federal agencies or instrumentalities performing federal functions always fall on the 'sovereign' side of

th[e] fault line."). One treatise classifies Keifer as part of the

Supreme Court's "halting and irregular" pronouncements of

its doubts about sovereign immunity, standing in contrast to

the "regular reiterations ... of the conventional position,

which has been dominant in most recent Supreme Court

decisions." Richard H. Fallon, Jr. et al., Hart & Wechsler's

The Federal Courts and the Federal System 1040 (4th ed.

1996). Obviously we must apply the currently "conventional"

position.

In short, reading s 4121 as an incorporation of the details

of the District's general corporation law (including its "sue

and be sued" clause) is not especially plausible. That law has

a variety of specific features that are either irrelevant to FPI

or contradict provisions in its organic statute; the organic

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statute contemplates intra-governmental resolution of conflicts with FPI's primary customers; and the language of

s 4121 is nowhere near as specific as in the recognized

instances of such incorporation. More limited readings than

Galvan's, simply locating FPI in the District, are at least as

plausible. We find no waiver here.

The False Claims Act. Nor can we find a waiver in the

False Claims Act. The Act establishes liability for any

"person" who knowingly presents false or fraudulent claims.

31 U.S.C. s 3729. The term "person," however, is not defined for the relevant sections of the statute. Galvan contends that the term "person" should include government

corporations because 1 U.S.C. s 1 provides that the word

"person" is to include "corporations" unless "the context

indicates otherwise." The government responds by invoking

the counter canon that the term "person" does not ordinarily

include the sovereign. See Will v. Michigan Dep't of State

Police, 491 U.S. 58, 64 (1989) (citing Wilson v. Omaha Indian

Tribe, 442 U.S. 653, 667 (1979)).

The parties also point to specific contextual elements. Galvan urges that the language of 31 U.S.C. s 3730(b)(5), saying

that "no person other than the Government may intervene,"

implies that the term "person" includes the government and

thus resolves any ambiguity. He also argues that the exemption of certain officials from liability under s 3730(e)(2)(A)

implies that all other government entities are suable, and that

therefore government corporations fall within the definition of

person in 1 U.S.C. s 1. The government points to

s 3730(d)(2), which makes the "defendant" liable for a prevailing relator's expenses, and s 3730(f), which states that the

government cannot be found liable for the relator's expenses;

taken together, these provisions arguably imply that "the

government" cannot be the defendant.

There are answers to each of these arguments. That

s 3730(b)(5) uses the term "person" in excluding all possible

intervenors other than "the Government" sheds little light on

the congressional view of proper defendants. Section

3730(e)(2)(A)'s explicit but limited immunity for individuals

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holding specified offices is completely consistent with an

assumed immunity for government entities themselves; recovery from fraudulent individuals would not involve two

branches of the federal government running up litigation

costs so that one can collect from another. And the statutory

combination cited by the government, creating "defendant"

liability for attorneys' fees while protecting "the Government"

from such liability, can be explained by limiting the government's exemption to appearances in its capacity as intervenor.

In the end, none of these contextual arguments seems to offer

any strong ground for interpretation of "person" one way or

the other.

We note that the circuits have split over whether "person"

under the False Claims Act includes states. Compare United

States ex rel. Long v. SCS Business & Tech. Inst., 173 F.3d

870 (D.C. Cir. 1999) (finding that it does not), with United

States ex rel. Stevens v. Vermont Agency of Natural Resources, 162 F.3d 195 (2d Cir. 1998), cert. granted, 119 S. Ct.

2391 (June 24, 1999) (finding that it does), and United States

ex rel. Zissler v. Regents of the Univ. of Minn., 154 F.3d 870

(8th Cir. 1998) (same).6 The courts have necessarily resolved

this question under the presumption established in the Will

and Wilson cases; that two circuits found the presumption

overcome in that context is a source of caution. But for state

liability there was a stronger basis in the overall purpose and

legislative history for inclusion, see, e.g., Long, 173 F.3d at

875-81, and the analysis was not subject to any interpretive

guidance as strong as Nordic Village's instruction that the

presence of a "plausible" non-waiver interpretation compels

rejection of a waiver interpretation. Because the reading of

"person" to exclude agencies of the federal government is at

least plausible, we find no waiver.

__________

6 Since granting certiorari in Stevens, the Supreme Court has

added the broader question of whether a private person can have

standing to bring a qui tam action in the absence of particularized

injury attributable to the defendant's actions. See Stevens, 1999

WL 1045146, at *1 (U.S. Nov. 19, 1999) (adding standing question).

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At oral argument, Galvan's counsel attempted to raise an

additional theory under which Galvan could recover pursuant

to the False Claims Act. He argued that the Tucker Act, 28

U.S.C. s 1491--and the Little Tucker Act, id. s 1346(a)(2), to

the extent that the claim did not exceed $10,000--waived

sovereign immunity: s 1491(a)(1) waives for a claim "founded

... upon ... any Act of Congress," and the Supreme Court

has understood that to encompass any statute that "can fairly

be interpreted as mandating compensation by the Federal

Government for the damages sustained." United States v.

Mitchell, 463 U.S. 206, 218 (1983). The False Claims Act,

says Galvan, is such an act. As the False Claims Act does

not specifically impose any obligation on a branch of the

United States, Galvan's argument seems quite a stretch of the

Mitchell principle. But we shall not explore Galvan's argument because it was not raised before the district court or in

Galvan's submissions to this court. We do not normally

"consider all the implications of a theory vaguely raised for

the first time at oral argument on appeal." Tarpley v.

Greene, 684 F.2d 1, 7 n.17 (D.C. Cir. 1982).

Galvan's claim must be dismissed because the FPI enjoyed

an unwaived sovereignty immunity; the judgment of the

district court is

Affirmed.

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