Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-93-05127/USCOURTS-ca10-93-05127-0/pdf.json

Parties Involved:
First National Bank of Turley, N.A.
Appellee
Internal Revenue Service
Appellee
Buel H. Neece
Appellant
Peggy Neece
Appellant
United States of America
Appellee

Document Text:

PUBLISH l ~ r: 1: ·: ,; ' ·. ~ . ...._ ... - ,. J : .. .- - :~ • • ..... ,. 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

PEGGY J. NEECE and ) 

BUEL H. NEECE, ) 

) 

Plaintiffs-Appellants, ) 

) 

v. ) No. 93-5127 

) 

INTERNAL REVENUE SERVICE OF ) 

THE UNITED STATES OF AMERICA; ) 

UNITED STATES OF AMERICA; and ) 

FIRST NATIONAL BANK OF ) 

TURLEY, N .A. I ) 

) 

Defendants-Appellees. ) 

------------------------------- PEGGY J. NEECE and ) 

BUEL H. NEECE, ) 

) 

Plaintiffs-Appellants, ) 

) 

v. ) No. 94-5075 

) 

INTERNAL REVENUE SERVICE OF ) 

THE UNITED STATES OF AMERICA; ) 

UNITED STATES OF AMERICA; and ) 

FIRST NATIONAL BANK OF ) 

TURLEY, N .A. I ) 

) 

Defendants-Appellees. ) 

Appeal from the United States District Court 

for the Northern District of Oklahoma 

(D.C. No. 88-C-1320-E) 

.;.I 

NOV 2 1 1994 

E. John Eagleton (and James R. Eagleton of Eagleton, Eagleton 

& Harrison, Inc., with him on the brief), Tulsa, Oklahoma, 

for Plaintiffs-Appellants. 

John J. McCarthy (Michael L. Paup, Acting Assistant Attorney 

General, and Loretta c. Argrett, Assistant Attorney General; 

David English Carmack, Department of Justice; Frederick L. 

Dunn, III, and Stephen Charles Lewis, United States 

Appellate Case: 93-5127 Document: 01019300997 Date Filed: 11/21/1994 Page: 1 
Attorneys; with him on the brief), Washington, D.C., for 

Internal Revenue of the United States of America and United 

States of America, Defendants-Appellees. 

Jerry Reed (Joseph R. Farris and Jody R. Nathan of Feldman, 

Hall, Franden, Woodard & Farris, with him on the brief), 

Tulsa, Oklahoma, for the First National Bank of Turley, N.A., 

Defendant-Appellee. 

Before LOGAN and McWILLIAMS, Senior Circuit Judges, and 

BROWN, Senior District Judge.* 

McWILLIAMS, Senior Circuit Judge. 

* Honorable Wesley E. Brown, Senior u.s. District Judge of 

the District of Kansas, sitting by designation. 

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Buel and Peggy Neece, husband and wife, brought suit in 

the United States District Court for the Northern District of 

Oklahoma against the Internal Revenue Service of the United 

States of America ("IRS"), and the First National Bank of 

Turley ("the Bank"), located in Tulsa, Oklahoma, alleging 

that the two defendants had violated the Right to Financial 

Privacy Act of 1978 ("the Act"), 12 U.S.C. §§ 3401-3422, 

wherein the Bank wrongfully disclosed plaintiffs' bank 

records to the IRS, with resultant injury to plaintiffs. 

The plaintiffs sought. damages from the defendants as 

follows: (1) $100 from each defendant as the statutory civil 

penalty; (2) actual damages in the amount of $1,200,000; (3) 

punitive damages in the amount of $100,000,000; and (4) costs 

and reasonable 

$1,500,000." On 

district court 

dants' motion. 

attorney's fees "believed to be in excess of 

cross-motions for summary judgment, the 

denied plaintiffs' motion and granted defenThe plaintiffs appealed and, on appeal, we 

reversed. Neece v. Internal Revenue Service of the United 

States, 922 F.2d 573 (lOth Cir. 1990). 

On remand, after a trial to the court, the district 

court found that defendants had violated the Act and awarded 

plaintiffs $200 from the defendants as a civil penalty provided for by statute, and $1,580 as actual damages, together 

with costs and reasonable attorney's fees. In so doing, the 

district court specifically declined to award plaintiffs any 

amount as punitive damages. Plaintiffs appeal the judgment 

thus entered by the district court on the ground that the 

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district court erred in fixing damages. That appeal is our ~-

No. 93-5127. 

After a subsequent hearing, the district court awarded 

the plaintiffs the amount of $58,383.75 as a reasonable fee 

"for the liability phase of the case wherein Plaintiffs were 

undisputably successful ... n As concerns the damage phase 

of the case, the district court awarded plaintiffs $10,500 as 

reasonable attorney's fees, noting that in that phase of the 

case plaintiffs "were only partially successful." So, the 

total amount of attorney's fees granted plaintiffs was 

$68,883.75 for "both phases of the proceedings." Also, the 

district court awarded plaintiffs their costs in the amount 

of $24,126.23. The district court further held that a "fee 

enhancement is not appropriate in the instant case." Plain- · 

tiffs appeal that judgment, and that particular appeal is our 

No. 94-5075. 

Both appeals were consolidated for the purpose of oral 

argument, and both will be treated in this opinion. We will 

not set forth the background facts out of which the present 

controversy arises any more than necessary to an understanding of the present opinion. For a more detailed recital, see Neece v. Internal Revenue Service of the United 

States, 922 F.2d 573 (lOth Cir. 1990). We note that the 

differences between the plaintiff Buel Neece and the IRS are 

of long standing. 

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No. 93-5127. Damages 

As indicated, after a trial to the court, sitting 

without a jury, the district court held that the two defendants had violated the Act. The defendants have not appealed 

that ruling. Although plaintiffs asked that they be awarded 

damages in excess of $100,000,000, the district court awarded 

them damages in a total amount of $1,780. Specifically, the 

district court entered judgment in favor of the plaintiffs in 

the amount of $100 against each defendant as provided for in 

12 u.s.c. § 3417(a) (1). The district court also awarded 

plaintiffs as actual damages the amount of $1,580. This sum 

represented the cost of repairing two automobiles and a 

bulldozer belonging to the plaintiffs which were damaged when 

IRS representatives seized them pursuant to a jeopardy assessment. 

In this appeal, the plaintiffs challenge the adequacy of 

the damage award, contending that the district court erred in 

not awarding them punitive damages, and in not awarding them 

additional actual damages for physical injuries and mental 

pain and suffering, as well as damages for having their 

properties encumbered over a period of some four years. 

Plaintiffs also contend the district court erred in not 

awarding them attorney's fees incurred in an earlier proceeding where the plaintiffs were successful in having the 

district court abate a jeopardy assessment brought by · the 

IRS. A word about the jeopardy assessment proceeding is in 

order. 

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After the Bank's disclosure to the IRS of certain of the 

plaintiffs' bank records on April 26, 1988, the IRS issued a 

notice of jeopardy assessment to the plaintiffs. The 

plaintiffs sought judicial review of the assessment and were 

successful in that they obtained an order of the district 

court abating the jeopardy assessment and ordering a return 

of the property seized by the IRS in connection with that 

assessment. On appeal, we dismissed the appeal in an unpublished opinion on the ground that the district court's 

order of abatement, under the applicable statute, was not 

appealable. 

12 U.S.C. § 3417 provides for the penalty to be imposed 

on agencies or departments of the United States or financial 

institutions which violate the Act. That statute reads as· 

follows: 

§ 3417. Civil penalties 

(a) Liability of agencies or departments of 

United States or financial institutions 

Any agency or department of 

States or financial institution 

disclosing financial records or 

contained therein in violation of 

is liable to the customer to whom 

relate in an amount equal to the 

the United 

obtaining or 

information 

this chapter 

such records 

sum of --

(1) $100 without regard to the volume of 

records involved; 

(2) any actual damages sustained by the 

customer as a result of the disclosure; 

(3) such punitive damages as the court· 

may allow, where the violation is found to 

have been willful or intentional; and 

·(4} in the case of any successful action 

to enforce liability under this section, the 

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costs of the action together with reasonable 

attorney's fees as determined by the court. 

In assessing damages, the district court first held that 

·the plaintiffs were entitled to $100 in damages from each of 

the two defendants as so-called statutory damages under 12 

U.S.C. § 3417(a) (1) for their violation of the Act. Such is 

not involved in this appeal. The district court next deter.mined that plaintiffs were also entitled to the·cost of 

repairing the damage done to two cars and a bulldozer taken 

in connection with the jeopardy assessment brought by the IRS 

as a result of the disclosure and, in this regard, set such 

damages at $1,580. That item of damages is not involved in 

this appeal. 

The district court declined to award plaintiffs as actual damages any sum for physical injury and mental distress, 

or for embarrassment, or loss of reputation. In so doing, 

the district court expressed doubt that such items constituted "actual damages," as that ter.m is used in 12 U.S.C. § 

3417(a) (2), but held that it did not have to decide that 

matter since the plaintiffs failed to prove any "compensable 

nonpecuniary losses." The district court also found that "no 

compelling testimony was offered as to any specific loss of 

income or business loss . . . occasioned by the violation of 

Plaintiffs' rights" under the Act. 

As stated, this was a trial to the court, sitting 

without a jury, and plaintiffs' position necessarily is that 

on the record as made, the district court was compelled to 

award plaintiffs damages for such items as physical injury 

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Appellate Case: 93-5127 Document: 01019300997 Date Filed: 11/21/1994 Page: 7 
and mental distress, embarrassment, loss of reputation, lost 

business opportunities, and the like, all caused, according 

to the plaintiffs, by the unlawful disclosure by the Bank of 

plaintiffs' bank records to the IRS which resulted in the 

jeopardy assessment. That is not our reading of the record. 

The judge, of course, was the one who assessed the credibility of all the witnesses, which means that a judge does 

not necessarily have to believe everything that a witness may 

testify to. Any determination of the credibility of a witness necessarily includes the right of the fact finder to 

disbelieve the witness. In our view, the record is such that 

the district court was not compelled to award plaintiffs 

damages beyond that which it did. 

Plaintiffs did make claim in the present proceeding, as 

one item of damage, the attorney's fees which they incurred 

in their successful federal district court challenge to the 

jeopardy assessment.l The district court, in the instant 

case, denied that particular claim on the ground that in the 

proceeding brought by plaintiffs to abate the jeopardy assessment the plaintiffs had sought attorney's fees, that 

their request had been denied, and that, accordingly, under 

the doctrine of res judicata the plaintiffs could not claim 

as damages in the present proceedings attorney's fees incurred in the earlier proceeding. 

1 On appeal of that judgment, this Court, in an unpublished opinion, dismissed the appeal for lack of appellate 

jurisdiction, and in that same unpublished opinion denied 

"plaintiffs' request for attorney's fees and costs on appeal." 

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It would appear that the plaintiffs did ask for 

attorney's fees in their action challenging the jeopardy 

assessment. However, we do not find in the record before us 

that plaintiffs renewed that request after the district court 

upheld their challenge to the jeopardy assessment. Be that 

as it may, we are unable to find in the record before us any 

order of the court in the abatement proceedings wherein it 

denied the request for attorney's fees. Such being the case, 

the district court's order in the instant case refusing to 

even consider plaintiffs' claim for attorney's fees incurred 

in the earlier proceeding in the district court solely on the 

ground of res judicata cannot be upheld.2 We do note that 

plaintiffs argue in this Court that their claim for 

attorney's fees against the Bank cannot be denied on res 

judicata grounds since the Bank was not a party to their 

court challenge against the jeopardy assessment. 

The plaintiffs also assert that the district court erred 

in refusing to award plaintiffs punitive damages. Again, the 

state of the record did not compel the district court to 

award plaintiffs punitive damages. In this regard, the 

2 In this Court, plaintiffs argue that they should also be 

awarded the attorney's fees incurred in proceedings before 

the tax and bankruptcy courts. Whether that request was 

before the district court when it denied plaintiffs' request 

for attorney's fees incurred by them in their challenge to 

the jeopardy assessment on the grounds of res judicata is 

unclear. It is clear that the district court did not rule on 

any such request. However, if plaintiffs' request· for 

attorney's fees and costs incurred in the tax and bankruptcy 

courts was presented to the district court, but not ruled on 

by the court, the district court, on remand, should consider, 

and rule on, such request. 

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district court stated that the conduct of the Bank and the ~ 

IRS was not so egregious that "anyone" should have recognized 

it as being unlawful, citing Andrews v. Veterans Admin., 838 

F.2d 418, 425 (lOth Cir. 1988) .3 12 U.S.C. § 3417(a) (3) 

provides that the district court •may• allow punitive damages 

where the violation of the Act is found to be willful or 

intentional. We decline plaintiffs' suggestion that the 

district court, sitting, in a sense, as a jury, had to award 

plaintiffs punitive damages.4 

No. 94-5075. Attorney's Fees 

12 U.S.C. § 3417(4) provides that an agency of the 

United States, or a financial institution obtaining financial 

records in violation of the Act, is liable to the customer to· 

whom such records relate in an amount equal to the sum of, 

inter alia, "in the case of any successful action to enforce 

liability under this section, the costs of the action together with reasonable attorney's fees as determined by the 

3 Andrews v. Veterans Admin. of the United States, 838 

F.2d 418 (lOth Cir. 1988) involved the Privacy Act of 1974, 5 

U.S.C. § 552a. Although Andrews apparently did not involve a 

claim for punitive damages, we reversed the district court 

and held that no damages for a violation of the Privacy Act 

should be awarded unless the conduct of the defendant was so 

patently egregious and unlawful that "anyone" should have 

known that his conduct was unlawful. Id. at 425. 

4 We reject any suggestion that because the IRS has. determined that it will not follow Neece v. Internal Revenue 

Service of the United States, 922 F.2d 573 (lOth Cir. 1990) 

"outside the Tenth Circuit," the district court was required 

to award plaintiffs punitive damages against the IRS. 

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Appellate Case: 93-5127 Document: 01019300997 Date Filed: 11/21/1994 Page: 10 
court." The key words in this statute would appear to be 

"successful" and "reasonable." 

Subsequent to the district court's order of May 21, 

1993, holding that the defendants had violated the Act and 

awarding plaintiffs as damages a total amount of $1,780, the 

plaintiffs filed an application for attorney's fees in the 

amount of $252,140.50, and costs in the amount of $24,126.23, 

stating that actually the total amount of attorney's fees 

incurred was $652,140.50, but that they would only ask for 

$252,140.50. Attached to the application were various affidavits and exhibits. Plaintiffs also sought enhancement of 

any fee awarded them based on their "establishment of new 

law.• At the hearing on attorney's fees, one of pl&intiffs' 

counsel testified that the request for attorney's fees in the· 

amount of $252,140.50, instead of $652,140.50, was based in 

part on his recognition that plaintiffs had not prevailed on 

their claim for punitive damages. 

As indicated, a hearing was held on plaintiffs' application for attorney's fees at which time both plaintiffs 

and defendants called witnesses who testified concerning the 

reasonableness, or lack of reasonableness, of the fees requested. At the conclusion of this hearing, the district 

court took the matter under advisement and issued its order 

on November 30, 1993. Plaintiffs have now appealed the order 

awarding attorney's fees, and their basic position is ·that 

the award is low and inadequate, and that the district court 

should have awarded them the entire amount sought, namely, 

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$252,140.50 and then should have, under Hensley v. Eckerhart, 

461 u.s. 424, 435 (1983), •enhanced" that award to $659,000. 

In awarding attorney's fees, the district court first 

considered the time spent by the attorneys on the liability 

phase of the case from the date the action was filed on 

September 16, 1988, to the date of our opinion in Neece v. 

Internal Revenue Service of the United States, supra, which 

was December 19, 1990. As we understand it, plaintiffs made 

claim for $58,931.75 as being a reasonable attorney's fee for 

services rendered between those dates, and the district 

court, with apparently some very minor adjustments, awarded 

plaintiffs $58,383.75 as reasonable attorney's fees incurred 

in connection with the liability phase of the case. 

As for legal services rendered the plaintiffs from De- · 

cember 19, 

fees held 

$491,248.50. 

1990, to the date of the hearing on attorney's 

on September 17, 1993, claim was made for 

The district court held that the bulk of this 

claim was based on attorney's fees incurred in connection 

with plaintiffs' claims for punitive damages and emotional 

injury suffered by plaintiffs, and that plaintiffs were unsuccessful on both matters. It was on this basis that the 

district court awarded plaintiffs the sum of $10,500 as being 

reasonable attorney's fees for services rendered between 

December 19, 1990, and September 17, 1993. In this connection, the district court found that "a reasonable number of 

hours for case preparation and trial during the phase of the 

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litigation is 70 hours at the rate of $150 per hour for a 

total fee of $10,500 for the damage phase." 

We find no error in the district court's handling of 

plaintiffs' request for attorney's fees. In this general 

connection, see Mares v. Credit Bureau of Raton, 801 F.2d 

1197 (lOth Cir. 1986) where we stated that an appellate court 

plays only a "limited role" in reviewing a district court's 

award of attorney's fees because the district court "saw the 

attorney's work first hand." Id. at 1200-01 (citing Poolaw 

v. City of Anadarko, 738 F.2d 364, 368 (lOth Cir. 1984), 

cert. denied, 469 U.S. 1108 (1985). In this general connection, we spoke as follows: 

Counsel contends the district court 

commdtted two errors of law in its wholesale 

reduction of hours: first, by failing to 

provide "a meaningful explanation of its 

judgment" so that "the court's thinking can be 

reviewed in a meaningful way," (citation 

omitted); second, by failing "to follow the 

task specific analysis adopted in Ramos," 

(citation omitted). Concerning the latter 

point, counsel suggests that our op~n~on in 

Ramos requires district courts "to identify 

what tasks must be performed to prepare for 

trial, what responses were necessitated to 

reply to the actions taken by the adversary, 

and what amount of time would have been required to perform each of the tasks." (citation omitted) . 

Ramos establishes no such procedure as a 

matter of necessity. There is no requirement, 

either in this court or elsewhere, that district courts identify and justify each disallowed hour. See New York State Association 

for Retarded Children v. Carey, 711 F.2d 1136, 

1146 (2d Cir. 1983); Copeland v. Marshall, 641 · 

F.2d at 903. Nor is there any requirement 

that district courts announce what hours are 

permitted for each legal task. Such a rule 

would lead to disagreement of the most odious 

sort between court and counsel. 

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No objective standard exists to resolve a 

dispute, for example, over ten hours logged 

for drafting interrogatories. A lawyer may 

insist the time was necessary, while a court, 

based upon experience and judgment, including 

knowledge of the case itself, may declare half 

the time to have been unnecessary. Under the 

theory proposed by plaintiffs' counsel, dozens 

of subsidiary questions then arise. Was the 

lawyer interrupted while drafting? Was the 

draft in longhand or dictated? Did the lawyer 

use previous forms on a word processor? Was 

research necessary? Were, for example, 

fourteen of thirty interrogatories really 

necessary? Is the lawyer a slow thinker, a 

poor writer (occasioning many drafts), or 

harassing the opposition for tactical purposes? 

Id. at 1202-03. 

We do not believe that our resolution of the attorney's 

fees issue in the present case does violence to Ramos v. 

Lamm, 713 F.2d 546 (lOth Cir. 1983). It is true that in 

Ramos we said, by way of dicta, that the fact that the monetary award in a civil rights action was minimal did not 

justify an automatic reduction of attorney's fees for the 

plaintiffs where the plaintiffs did prevail by vindicating an 

important policy consideration. Id. at 557. We do note that 

Ramos involved a civil rights action, which is not our case, 

and that the plaintiffs in Ramos sought no monetary relief. 

Be that as it may, in Ramos we spoke as follows: 

Parties acting as private attorneys general 

should be reasonably compensated for their 

vindication of the public policy even if they 

themselves do not receive a large financial 

benefit. If the court has the i~ression that 

a plaintiff spent an excessive amount of· 

la~er time and simply overwhelmed the defendant in a case in which the litigation 

onslaught was unnecessazy, the court should 

consider this factor in determining what 

amount of time was reasonably expended in the 

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litigation. It should not be expressed as a 

requirement that the fee award have a particular relationship to the amount of the 

monetary recovery. (emphasis added). 

Ramos, 713 F.2d at 557. 

Nor do we believe our disposition of this particular 

matter offends Nephew v. City of Aurora, 830 F.2d 1547 (lOth 

Cir. 1987). That case also involved a civil rights action 

based on an alleged assault on the plaintiffs by police officers of the City of Aurora. After trial, a jury found that 

constitutional rights of certain of the plaintiffs had indeed 

been violated, but awarded nominal damages of $1.00. The 

district court later awarded plaintiffs the sum of $12,500 as 

attorney's fees. 

In Nephew, the defendants appealed, and, on appeal, we 

affirmed, holding that a partially prevailing plaintiff could 

recover attorney's fees for legal services rendered on an 

unsuccessful claim, where the most important aspect of the 

judgment was a vindication of plaintiffs' civil rights and a 

"message to the police department." Id. at 1550-51. At the 

same time, in Nephew, we also recognized that once a fee has 

been determined, "the figure can be adjusted, upward or 

downward, according to certain factors, one of the most important of which is the 'results obtained'." Id. at 1549 

(citing Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). 

Further, we emphasized that in Nephew the district court had 

found that the •most important aspect of the judgment was the 

vindication of plaintiffs' civil rights." Id. at 1550. The 

district court made no such finding in this case, which, of 

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course, is not a civil rights case but is based on the Right ;a,._ • 

to Financial Privacy Act. Here, the plaintiffs sought damages in the sum of $1,200,000 in actual damages and 

$100,000,000 as punitive damages. It would seem to us that 

the principal thrust of the action was money, in which they 

were singularly unsuccessful, obtaining a judgment for actual 

damages in the sum of $1780 and getting no award as punitive 

damages. The "results obtained" were not, in our view, 

"fantastic," as claimed by counsel in their brief in this 

Court, but de mdnimis. 

As indicated, the district court denied any enhancement 

of the fee which it did award, citing Ramos v. Lamm, 713 F.2d 

546, 558 (lOth Cir. 1983). In Ramos, 713 F.2d at 557, we 

spoke as follows: 

We do not discount the possibility that 

in a particular case the plaintiff's lawyers 

may have performed so brilliantly that extraordinary compensation is warranted. But we 

think that this genius factor diminishes and 

eventually disappears as the number of hours 

expended on the case increases. A brilliant 

idea may shortcut one aspect of the case and 

save many hours, but in protracted litigation 

a lawyer is also likely to pursue blind alleys 

and expend many unproductive hours. In a case 

such as the one at bar, in which more than 

9000 hours were reported, we do not believe 

that any adjustment for extraordinary performance could be warranted. 

On appeal, counsel argues that because they were so 

"fantastically successful" in the trial court, the judge 

should have enhanced any award. Certainly, this is not· the 

case where a "brilliant idea" shortcut the legal process. 

This case has been going on for over six years. Under the 

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described circumstances, the district court was certainly not 

required to enhance the attorney's fee awarded plaintiffs. 

That part of the district court's order and judgment 

disallowing plaintiffs' claim for attorney's fees incurred in 

connection with their successful court challenge to the 

jeopardy assessment on the ground of res judicata is reversed 

and remanded for further consideration. Otherwise, the order 

and judgment is affirmed. 

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