Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_07-cv-00433/USCOURTS-casd-3_07-cv-00433-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Contract Dispute

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- 1 - 07cv433

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

JET SOURCE CHARTER, INC.,

Plaintiff,

CASE NO. 07CV433 JLS (JMA)

ORDER (1) GRANTING IN PART,

DENYING IN PART,

DEFENDANTS’ MOTION TO

DISMISS and (2) GRANTING

LEAVE TO AMEND

(Doc. No. 13)

vs.

GEMINI AIR GROUP, INC., and TIM

CARPAY,

Defendants.

Presently before the Court is Gemini Air Group, Inc.’s and Tim Carpay’s (collectively,

“defendants”) motion to dismiss the first amended complaint (“FAC”). (Doc. No. 13.) For the

reasons stated below, the Court grants in part and denies in part defendants’ motion. With respect

to all dismissed causes of action, the Court grants leave to amend. 

BACKGROUND

A. Factual Background

Jet Source Charter, Inc. (“plaintiff” or “JSC”) is a certified charter flight operator, and

Gemini Air Group, Inc. (“Gemini”) leases aircraft and provides flight crews. (Compl. ¶ 2; Memo.

ISO Motion, at 2.) On July 21, 2005, JSC and Gemini entered into an “Aircraft Charter

Agreement” (“Agreement”) for charter flights involving a Gemini Bombardier Challenger 604

aircraft (“aircraft”). (Agreement ¶ 1.1.) Mr. Carpay is the acting president of Gemini and pilot of

the aircraft. (Compl. ¶ 3.) During the Agreement’s twelve-month term, JSC guaranteed a certain

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1

 Part 91 governs the operations of noncommercial, private-use flights. Part 135 governs the

operations of charter, revenue-generating flights. (See Compl. ¶ 6.)

2

 Other alleged violations of FAA regulations were in the areas of maintenance, flight crew

compliance, and safety. (Compl. ¶ 8.) 

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amount of charter hours and agreed to pay Gemini an hourly rate for using the aircraft. 

(Agreement ¶¶ 2, 4.2-4.3.) JSC represented that it held the necessary certificates to comply with

part 135 of the Federal Aviation Regulations (“FAR”). (Id. ¶ 1.2.) For its part, Gemini agreed to

make the aircraft available for a certain number of days and to pay the necessary amounts for the

aircraft’s ongoing maintenance, certification, and operation. (Id. ¶¶ 3.1-3.2, 4.2.) Gemini would

retain “operational control” of the aircraft during its own flight operations, pursuant to FAR part

91.1 (Id. ¶ 1.3.)

If one party breached or defaulted on any provision, the Agreement specified, “the nondefaulting party may . . . recover from the defaulting party any and all damages or expenses which

the non-defaulting party shall have sustained by reason of the default.” (Id. ¶ 9(iii).) The

Agreement also contained a liability waiver “for indirect, incidental, consequential, special,

exemplary damages, or diminution of value following loss whether in contract or tort . . . such as

but not limited to loss of revenue, loss of use, or anticipated profits.” (Id. ¶ 10.) In the event of

termination or default, JSC was obligated to remove the aircraft from its FAR certificate. (Id. ¶

6(a).)

On September 21, 2006, Federal Aviation Administration (“FAA”) officials allegedly

conducted a ramp check of the aircraft and discovered that defendants were violating FAR 135

regulations by, inter alia, conducting FAR 135 flights and reporting them as FAR 91 flights.2

(Compl. ¶ 7; Memo. ISO Motion, at 6.) The FAA issued a “no fly” order for the aircraft. (Compl.

¶ 9.) JSC terminated the agreement and removed the aircraft from its FAR 135 certificate. (Id.)

B. Procedural Background

On December 20, 2006, plaintiff filed a complaint in the North County division of San

Diego County Superior Court. (Doc. No. 1, Exhibit A.) On March 8, 2007, defendants removed

the case to this Court. (Doc. No. 1.) Defendants moved to dismiss the complaint on April 2, 2007. 

(Doc. No. 5.) After plaintiff amended its complaint as a matter of right on May 17, 2007 (Doc.

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3

 This case was originally assigned to the Hon. M. James Lorenz, who denied as moot the

initial motion to dismiss. On October, 2007, after briefing on the presently pending motion to dismiss

had been completed, the case was reassigned to the Hon. Janis L. Sammartino. (Doc. No. 18.) 

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No. 9), the motion to dismiss was denied as moot (Doc. No. 11).3 

The FAC alleges five causes of action: (1) breach of contract, (2) fraud, (3) accounting, (4)

implied indemnity, and (5) negligence. All causes of action name Gemini; only the second, fourth,

and fifth causes of action name Mr. Carpay. On June 1, 2007, defendants moved to dismiss the

FAC. (Doc. No. 13.) Plaintiff filed its response in opposition on July 13, 2007. (Doc. No. 15.) 

Defendants filed their reply on July 23, 2007. (Doc. No. 16.) Finding the motion suitable for

adjudication on the papers, the Court then took the matter under submission, pursuant to Civil

Local Rule 7.1(d)(1). 

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) alleges that the

plaintiff’s complaint “fails to state a claim upon which relief can be granted.” Fed. R. Civ. P.

12(b)(6). A complaint may be dismissed “if it appears beyond doubt that the plaintiff can prove no

set of facts in support of [its] claim which would entitle [it] to relief.” Navarro v. Block, 250 F.3d

729, 732 (9th Cir. 2001) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)) (internal

quotations omitted). Such a situation arises when the complaint either lacks a cognizable legal

theory or fails to plead facts essential to a cognizable legal theory. Zamani v. Carnes, 491 F.3d

990, 996-97 (9th Cir. 2007); SmileCare Dental Group v. Delta Dental Plan of Cal., Inc., 88 F.3d

780, 783 (9th Cir. 1996).

In determining whether a complaint can withstand a Rule 12(b)(6) dismissal, “a court must

construe the complaint in the light most favorable to the plaintiff and must accept all well-pleaded

factual allegations as true.” Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000) (citing

Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996)). However, a court is not

required to credit “conclusory allegations of law and unwarranted inferences[.]” Schmier v. U.S.

Court of Appeals for the Ninth Circuit, 279 F.3d 817, 820 (9th Cir. 2002) (quoting Associated

Gen. Contractors of Am. v. Metro. Water Dist. of S. Cal., 159 F.3d 1178, 1181 (9th Cir. 1998)

(other quotations omitted)). To determine whether plaintiff can prove facts entitling it to relief, the

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Court may consider documents attached to the complaint. Nat’l Ass’n for Advancement of

Psychoanalysis v. Cal. Board of Psychology, 228 F.3d 1043, 1049 (9th Cir. 2000); Durning v. First

Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987); Santos v. County of L.A. Dep’t of Children &

Family Servs., 299 F. Supp. 2d 1070, 1075 n.8 (C.D. Cal. 2004). The Court may reject

“allegations that contradict matters properly subject to judicial notice or by exhibit.” Sprewell v.

Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); AMCAL Multi-Housing, Inc. v. Pac.

Clay Products, 457 F. Supp. 2d 1016, 1018 n.1 (C.D. Cal. 2006). 

DISCUSSION

A. Waiver

Defendants argue that all causes of action are barred by paragraph 10 of the Agreement,

which disclaims each party from liability to the other in tort or contract “for indirect, incidental,

consequential, special, exemplary damages, or diminution of value following loss.” Based on this

language, defendants ask the Court to dismiss plaintiff’s prayer for consequential,

economic/incidental, and punitive/exemplary damages. In opposition, plaintiff focuses on the

phrase “following loss,” which purportedly limits paragraph 10 to liability arising from the total

loss on the aircraft. To support this interpretation, plaintiff cites paragraph 8.2, which provides for

the immediate termination of the Agreement “[i]n the event of total loss or destruction of the

[a]ircraft[.]” Furthermore, plaintiff argues that a total bar on these kinds of monetary damages

would conflict with paragraph 9(iii), which allows the recovery of “any and all damages or

expenses which the non-defaulting party shall have sustained by reason of the default.” 

At the motion to dismiss stage, taking into account the other Agreement provisions which

plaintiff cites, the Court finds that plaintiff may be able to prove a set of facts entitling it to

monetary damages, despite the disclaimer of liability in paragraph 10. Therefore, the Court does

not dismiss any cause of action on waiver grounds. 

B. Breach of Contract

Plaintiff alleges that, for the duration of the Agreement, it had the exclusive right to use the

aircraft for FAR 135 flights and was, therefore, entitled to compensation for any of the aircraft’s

FAR 135 flights. (See Compl. ¶¶ 6, 12.) Plaintiff further alleges that defendants breached the

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Agreement by, inter alia, conducting FAR 135 flights without plaintiff’s consent or knowledge. 

(Id. ¶ 13.) Defendants ask the Court to dismiss the cause of action for breach of contract because

the Agreement “does not grant [JSC] the exclusive right to use of the Aircraft for [FAR 135]

charter service, or the right to collect revenues from any charter flight.” (Memo. ISO Motion, at 5-

6.) Defendants emphasize Agreement provisions that require Gemini to make the aircraft

available for charter flights on less than half of the days of the year and that give Gemini the right

to refuse any charter flight proposed by JSC. (Agreement ¶¶ 4.1, 4.3.) 

In opposition, plaintiff directs the Court to no explicit contractual language to support its

allegations of an exclusive right to conduct FAR 135 flights. Instead, plaintiff avoids the issue by

focusing on the FAC’s other allegations of breach. Specifically, plaintiff asks the Court to infer an

obligation on Gemini to comply with federal law whenever it operated the aircraft or reported the

aircraft’s flight status during the term of the Agreement. See Cal. Civ. Code § 1643 (requiring

construction that makes the contract lawful, if such an interpretation does not violate the parties’

intentions). Indeed, the FAC separately alleges a breach of the Agreement based on the illegal

operations and inaccurate reports, resulting in plaintiff’s noncompliance with FAR 135

regulations. (See Compl. ¶ 13, at ll.14-19.) However, reference to these other breaches is

essentially non-responsive to defendant’s arguments that plaintiff inadequately pled a breach based

on Gemini’s operation of FAR 135 flights without plaintiff’s consent and without sharing the

revenue. 

Plaintiff concedes that its cause of action for breach of contract “seek[s] recovery . . . as a

result of non-written agreements and implied in the conduct of the parties in their operation of the

businesses.” (Opp., at 7.) While plaintiff may proceed on a breach-of-contract theory

supplemented by such unwritten agreements and the parties’ conduct, the problem with its cause

of action for breach of contract, as currently pled in the FAC, is the exclusive reliance on the

Agreement. That Agreement is a written document which contains no provision giving JSC an

exclusive right to operate the aircraft for FAR 135 flights. To the contrary, the Agreement gives

JSC “operational control of the Aircraft during charter flight operations pursuant to this

Agreement” (see Agreement ¶ 1.3), with no explicit prohibition against Gemini’s making

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arrangements for flights with other charter service providers. Therefore, the Court rejects

plaintiff’s conclusory allegation in the “General Factual Allegations” section that it “was, as a

matter of law, the only entity under which the subject aircraft could engage in FAR 135 flight

operations.” (Compl. ¶ 6.) The Court likewise rejects the repetition of this conclusory allegation

within the cause of action for breach of contract, wherein plaintiff claims that the parties “entered

into a written contract whereby [JSC] was to be the sole charter provider for Gemini’s subject

aircraft and pursuant thereto, was required to be compensated for any and all FAR 135 flight

operations[.]” (Id. ¶ 12.) The Agreement itself, attached as an exhibit to the FAC, contradicts this

allegation of exclusivity. Plaintiff cannot presently proceed on the theory that unwritten

agreements and the parties’ conduct created such an exclusive right, because the claim as currently

pled relies on the Agreement alone and remains silent as to any such unwritten agreements or

conduct. 

Although defendants focus their arguments against plaintiff’s allegation that defendants

breached the Agreement by conducting FAR 135 flights without plaintiff’s participation, the

remaining allegations of breach are likewise pled insufficiently. Plaintiff fails to identify (even

generally) the source of defendants’ obligation to keep plaintiff in compliance with FAR 135

regulations. Therefore, while plaintiff claims Gemini “breached the agreement by threatening, or

actually causing, breaches of [JSC’s] FAR 135 conformity” (Compl. ¶ 13), plaintiff fails to plead

the contractual basis of defendant’s obligation to keep JSC in “conformity” with FAR 135

regulations. The existence of a contractual obligation is the first element in a cause of action for

breach of contract. Reichert v. Gen. Ins. Co. of Am., 68 Cal. 2d 822, 830 (Cal. 1968); accord Fed.

Sav. & Loan Ins. Corp. v. Musacchio, 695 F. Supp. 1044, 1049 (N.D. Cal. 1988). Plaintiff must

first allege a contractual obligation in order to plead breach adequately.

For reasons stated above, the Court grants defendants’ motion to dismiss the first cause of

action for breach of contract. The Court grants plaintiff leave to amend this cause of action

because justice so requires “in light of the strong policy permitting amendment,” Thomas-Lazear

v. Fed. Bureau of Investigation, 851 F.2d 1202, 1206 (9th Cir. 1988); see Fed. R. Civ. P. 15(a)

(directing court to grant leave to amend “when justice so requires”). 

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C. Fraud

“In all averments of fraud . . . , the circumstances constituting fraud . . . shall be stated with

particularity.” Fed. R. Civ. P. 9(b); see Moore v. Brewster, 96 F.3d 1240, 1245-46 (9th Cir. 1996)

(where plaintiff alleges state-law fraud in federal court, Rule 9(b) requires plaintiff to plead the

elements of that fraud with particularity). The allegations must be “‘specific enough to give

defendants notice of the particular misconduct which is alleged to constitute the fraud charged so

that they can defend against the charge and not just deny that they have done anything wrong.’”

United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1051-52 (9th Cir. 2001)

(quoting Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993)). Plaintiff must provide particular

facts concerning “time, place, persons, statements made, [and] explanation of why or how such

statements are false or misleading.” In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547 n.7 (9th

Cir. 1994) (en banc), superseded by statute on other grounds as stated in Marksman Partners, L.P.

v. Chantal Pharm. Corp., 927 F. Supp. 2d 1297, 1309-10 (C.D. Cal. 1996); In re Calpine Corp.

Sec. Litig., 299 F. Supp. 2d 1054, 1074-75 (N.D. Cal. 2003). However, a court “‘cannot make

Rule 9(b) carry more weight than it was meant to bear.’” Cooper v. Pickett, 137 F.3d at 627

(quoting GlenFed, 42 F.3d at 1554). Therefore, where a complaint alleged specific types of

improper revenue recognition on specific financial statements during specific quarters, the Ninth

Circuit held that the complaint survived Rule 9(b)’s particularity standard although the complaint

“d[id] not describe in detail a single specific transaction[.]” Cooper, 137 F.3d at 627. Failure to

plead fraud with sufficient particularity is grounds for dismissing the complaint under Rule 9(b). 

Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001). 

Here, the Court finds that plaintiff has not pled fraud with sufficient particularity pursuant

to Rule 9(b). In paragraph 17 of the FAC, plaintiff alleges that Mr. Carpay made the following

representations over an approximately fifteen-month period: 

a. That GEMINI had advised JET SOURCE of all flight operations of the

subject aircraft, and that such reports were accurate;

b. That GEMINI had advised JET SOURCE of the subject aircraft’s

operational status, and maintenance, and that such reports were accurate.

c. That GEMINI was not flying any passengers for hire, except those flights

that JET SOURCE maintained operational control and was contracting with

and billing such customers;

d. That GEMINI was following and adhering to any and all FAA regulations

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4

 With respect to subsection (c), plaintiff provides a sufficient explanation of why and how

these statements are false. I.e., where defendant allegedly represented that Gemini flew passengers

for hire only on flights where JSC had operational control and billed the customers, plaintiff

adequately pleads falsity by alleging that Gemini, in fact, flew passengers for hire on other flights.

(See FAC ¶ 18(c).) However, for the reasons stated herein, subsection (c) is nonetheless inadequate

because plaintiff does not provide sufficient particularity as to the other circumstances of fraud. 

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relating to the operation and control of the subject aircraft;

e. That certain flights were not subject to FAR 135, [but] were FAR 91 flight

operations for which no consideration was received from any passenger[.]

Plaintiff alleges that all these representations were false. (See FAC ¶ 18.) With respect to

subsections (a), (b),(d), and (e), however, the Court finds that plaintiff has not pled falsity with

sufficient particularity because plaintiff fails to explain precisely how such statements are false or

misleading. Plaintiff does not allege with particularity (1) the specific inaccuracies in Gemini’s

representations about the aircraft’s flight operations, operational status, and maintenance; (2) the

FAA regulations with which Gemini was actually not in compliance; or (3) the particular flights

which were represented to be FAR 91 operations, but were, in fact, FAR 135 flights for which

Gemini received compensation.4

With respect to all subsections ((a)-(e)), the Court finds that plaintiff has inadequately pled

the circumstances constituting fraud. Besides identifying a very broad period (more than a year)

during which Mr. Carpay made these misrepresentations, plaintiff fails to provide sufficiently

specific details concerning the time, place, and the manner of these misrepresentations. Plaintiff

does not explain how, where, or (except very generally) when Mr. Carpay communicated these

allegedly fraudulent misrepresentations to JSC. Unless plaintiff pleads fraud with greater

particularity, defendant does not have enough notice of the misconduct allegedly constituting fraud

to defend against the charge. Without “‘mak[ing] Rule 9(b) carry more weight than it was meant

to bear,’” Cooper, 137 F.3d at 627 (quoting GlenFed, 42 F.3d at 1554), the Court finds that the

FAC’s allegations of fraud are too general and nonspecific to satisfy the Rule 9(b) standard. 

Therefore, the Court dismisses the second cause of action for fraud, but grants plaintiff leave to

amend this cause of action because justice so requires. 

//

D. Implied Indemnity

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Plaintiff stipulates to a dismissal of its cause of action for implied indemnity because no

penalties have yet been imposed against JSC for defendants’ conduct. The Court dismisses this

cause of action without prejudice. Plaintiff may move to amend the complaint to re-plead this

cause of action when and if it becomes ripe. 

E. Accounting

Plaintiff alleges that Gemini “received profits and realized monies in violation of contract”

and requests an accounting of the realized profits and other amounts owed under the contract.

(Compl. ¶¶ 24-25.) Defendants ask the Court to dismiss plaintiff’s cause of action for an

accounting because the contract purportedly does not entitle JSC to revenue for FAR 135 flights

which Gemini did not approve for charter by JSC. 

The Court denies defendant’s motion with respect to this cause of action because the

Agreement expressly allows for an accounting. In the event of the termination or default of the

Agreement, “[w]ithin sixty (60) days, a full accounting shall be made by representatives of both

JSC and [Gemini] and all accounts settled between the parties.” (Agreement ¶ 6(b).) The

complaint alleges the termination of the Agreement. (Compl. ¶ 9.) Therefore, the express

language of the Agreement entitles plaintiff to the accounting which it seeks. 

F. Negligence

Plaintiff’s final cause of action alleges a special relationship between JSC and defendants,

which, in turn, gives rise to defendants’ duty of reasonable care “to protect the integrity” of JSC’s

charter license by complying with FAA regulations. (Compl. ¶ 29.) Defendants allegedly

breached this duty by violating those regulations, resulting in JSC’s improper documentation of its

records and loss of operational control over certain FAR 135 flights. (Id. ¶ 30.) In their motion to

dismiss, defendants argue that plaintiff’s negligence claim impermissibly restates the cause of

action for breach of contract, rather than alleging an independent duty in tort. See Aas v. Superior

Court, 24 Cal. 4th 627, 643 (Cal. 2000) (“A person may not ordinarily recover in tort for the

breach of duties that merely restate contractual obligations.”); Applied Equip. Corp. v. Litton

Saudi Arabia Ltd., 7 Cal. 4th 503, 515 (Cal. 1994) (“Conduct amounting to a breach of contract

becomes tortious only when it also violates an independent duty arising from principles of tort

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5

 Defendants further argue that plaintiff’s negligence claim is barred by the “economic loss

rule[.]” (See Memo. ISO Motion, at 20 (citing Seely v. White Motor Co., 63 Cal. 2d 9, 18 (Cal.

1965)). The Court finds that defendants fail to satisfy their burden on this motion merely by invoking

the rule in such conclusory fashion. Furthermore, North American Chemical Co. unambiguously

holds that, in a contract for services, a plaintiff may recover economic loss damages against a party

with whom the plaintiff is in contractual privity. 59 Cal. App. 4th at 785. Applied to the facts of this

case, that holding defeats defendants’ argument.

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law.”). 

The Court rejects defendants’ argument because the Court finds that plaintiff’s negligence

cause of action alleges an independent tort duty, separate from the contractual obligation. Read in

the light most favorable to plaintiff, the complaint alleges a duty of reasonable care arising from

the particular laws and regulations governing commercial charter flights, especially the legal

obligations which JSC had to follow to maintain its certification pursuant to FAR 135. (See

Compl. ¶ 29.) Gemini’s duty to conduct the aircraft’s flights in a way that ensured JSC’s ongoing

compliance with FAA regulations is separate from Gemini’s breach of its contractual obligations.

Where the tort duty is distinguishable from the breach of contract, California has long recognized a

cause of action for negligent performance of a contract. Eads v. Marks, 39 Cal. 2d 807, 810 (Cal.

1952); N. Am. Chem. Co. v. Superior Court, 59 Cal. App. 4th 764, 774 (Cal. Ct. App. 1997). 

Because the claim for negligent performance of contract is viable, the Court denies defendants’

motion to dismiss this cause of action.5

CONCLUSION

The Court GRANTS defendants’ motion to dismiss the causes of action for breach of

contract and implied indemnity, pursuant to Rule 12(b)(6), and for fraud, pursuant to Rule 9(b).

The Court GRANTS plaintiff leave to amend the causes of action for breach of contract and fraud. 

If plaintiff wishes to file a second amended complaint, plaintiff SHALL FILE that complaint

within thirty (30) days of the date this Order is electronically filed. When and if plaintiff’s claim

for implied indemnity becomes ripe, plaintiff MAY MOVE for leave to amend the complaint. 

//

//

//

//

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The Court DENIES defendants’ motion to dismiss plaintiff’s causes of action for an

accounting and for negligence.

IT IS SO ORDERED.

DATED: November 19, 2007

Honorable Janis L. Sammartino

United States District Judge

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