# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 2- 18 92

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Brad le y Tim be rla nd Res ou rces

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Brad le y Lum be r Co m pa ny; W eb st er Bu si ne ss Cred it Co rp

.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Weste rn Dis tri ct of Ark an sa s - El Dora do

__ __ __ __ __ __

Su bm it te d: Marc h 1 4, 2 01 3
Fil ed : Ap ril 8, 2 01 3

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Befo re MUR PHY, SMITH, an d GRUENDER, Ci rcu it Ju dg es

.

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MURP HY, Circ ui t J ud ge

.

W eb st er Bu si ne ss Cred it Co rp or at io n ex te n d e d a lo an to Brad le y Lum be r

Co m pa ny whi ch was se cu red in pa rt by th e as se ts of it s affi li at e Brad le y Tim be rla nd

Res ou rces

. Afte r Brad le y Lum be r de fa u l t e d o n th e lo an , B rad le y Tim be rla nd su ed

W eb st er an d Brad le y Lum be r in st at e co ur t for frau d an d in te rfer en ce wit h bu si ne ss

ex pe ct an cy , cl ai m in g th at bo th pa rti es were li ab le fo r W eb st er's al le ge d

m is rep res en ta ti on s rel at ed to th e lo an

. The act io n was rem ov ed to fed eral co ur t, an dBrad le y Tim be rla nd m ov ed to rem an d. The di st r i c t co ur t co nc lu de d th at Brad le y 1

Tim be rla nd ha d frau du le n t l y jo in ed it s affi li at e Brad le y Lum be r as a de fen da nt in

or de r to de feat di ve rs it y juri sd ic ti on , an d it de ni ed th e m ot io n to rem an d. Afte r
de te rm in in g th at Brad le y Tim be rla nd 's cl a im s were ti m e ba rred

, th e di st ric t co ur t

gr an te d Webs te r's m ot io n t o d is m is s. Bra dl ey Tim be rla nd ap pe al s. We affir m

.

I.

Dav id Ch am

be rs own s an d op erat es co m pa ni es en ga ge d in va rio us as pe ct s of

th e lu m be r in du st ry in so ut he rn Ark an sa s. Ch am be rs is th e pr es id en t an d 90 % own er

of Brad le y Lum

be r, whi ch m il ls oa k an d pi ne lu m be r. He is a l s o t he ch ai rm an an d

70 % own er of Brad le y Tim be rla nd

, whi ch un ti l rece nt ly own ed ap pr ox im at el y 2 5

sq ua re m il es of Ar k a n s a s woo dl an d fro m whi ch Brad le y Lum be r's m at eri al s were

ha rv es te d.

In Octo be r 20 06 Ch am

be rs so ug ht a rev ol vi ng cred it li ne fro m W eb st er, a New

Yor k ba nk

, to fin an ce Brad le y Lum be r's op erat io ns

. W eb st er ag reed to es ta bl is h a $6

m il li on cred it li ne fo r Brad le y Lum be r to be se cu red by a s s et s in cl ud in g Brad le y

Tim be rla nd 's woo dl an ds

. Dur in g th e fal l of 20 07 W eb st er be cam e co nc ern ed ab ou t

Brad le y Lum

be r's li qu id it y

. Brad le y Tim be rla nd al le ge s th at W eb st er "d em an de d"

th at Brad le y Lum

be r "re cap it al iz e by se ll in g of f [Bra dl e y Tim

be rla nd 's] as se ts an d

ta ki ng th e m on ey ." Brad le y Tim be rla nd as se rts th at it co m pl ie d wit h th e req ue st by

se ll in g i ts woo dl an ds "at a lo ss fro m $7 00 to $8 00 pe r acr e."

W eb st er di d n o t r e n e w th e rev ol vi ng lo an aft er Brad le y Tim be rla nd so ld it s

woo dl an ds

. In Aug us t 20 08 W eb st er in st ead w r o t e to Brad le y Lum be r th at it ha d

pe rm an en tl y di sc on ti nu ed an y po ss ib il it y of fin an ci ng

. The ne x t mo n t h Brad le y

The Hon or ab le Ro be rt T. Dawso n, Uni te d St at es Dis tri ct Ju d g e fo r th e 1

W es te rn Dis tri ct of Ark an sa s.

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-Lum

be r ceas ed m ak in g pa y m en ts on th e lo an , an d in Octo be r W eb st er su ed Brad le y

Lum be r fo r de fau lt

. Afte r th ree y ears of li ti ga ti on , th e di st ric t co ur t en te red jud gm en t

in fav or of Webs te r fo r ap pr ox im at el y $2 m il li on in Decem

be r 20 11

.

In Aug us t 20 11

, whi le W eb st er's su it ag ai ns t Brad le y Lum be r wa s s t il l

on go in g, Brad le y Tim

be rla nd fil ed a co m

pl ai nt ag ai ns t W eb st er an d Brad le y Lum be r

in Arka ns as st at e co ur t. Brad le y Tim be rla nd all eg ed th at W eb st er h ad frau du le nt ly

in du ced it to se ll it s as se t s w i th a fal se pr om is e th at W eb st er wou ld th en ren ew
Brad le y Lum

be r's rev ol vi ng cred it li ne

. Brad le y Tim be rla nd a l s o cl ai m ed th at

W eb st er ha d in te rfer ed wit h it s bu si ne ss ex pe ct an cy be cau se ot he rwis e it "co ul d ha ve

st oo d to ga in m il li on s m or e th ro ug h th e co nt in ue d de ve lo pm en t an d sa le of " it s la nd

. Brad le y Tim

be rla nd fin al ly al le ge d a co ns tru ct iv e frau d cl ai m ag ai ns t Brad le y

Lum be r fo r it s " rep eat ed m is ta ke s" in rel y in g o n Webs te r's fal se pro m is es

.

W eb st er rem ov ed th e act io n to fed eral di st ric t co ur t in Sep te m be r, an d th e cas e

was as si gn ed to th e sa m e di st ric t co ur t jud ge who was pr es id in g ov er W eb st er's

la wsu it fo r de fau lt

. W eb st er m ov ed to di sm is s Brad le y Tim be rla nd 's c o mpla in t,

arg ui ng th at it s cl ai m s were ba rred by th e ap pl ic ab le th ree y ear st at ut e of li m it at io ns

. B r a d l ey Tim

be rla nd m ov ed to rem an d th e act io n to st at e co ur t, co nt en di ng th a t

rem an d was req ui red be cau se na m ed de fen da nt Brad le y Lum be r ha d no t joi ne d in th e

rem ov al act io n. See 28 U.S.C. § 14 46 (b )(2 )(A). Brad le y Tim be rla nd al so in si st ed

th at t h e " jo in de r of [Bra dl ey Lum be r] as a de fen da nt was no t frau du le nt , b ut rat he r

a le gi ti m at e an d go od fai th cl ai m ag ai ns t a se pa rat e de fen da nt th at as se rts a vi ab le

cl ai m un de r Ark an sa s l aw."

The di st ric t co ur t de ni ed Brad le y Tim be rla nd 's m ot io n fo r rem an d, co nc lu di ng

th at Brad le y Lum

be r ha d be en frau du le nt ly joi ne d to de feat di ve rs it y juri sd ic ti on

. It

reas on ed th at "t he rel at io ns hi p be twee n [Bra dl ey Tim be rla nd ] an d [Bra dl ey Lum be r]

pr ecl ud es ev en th e p o s s i b il it y of co ns tru ct iv e frau d" be cau se th e co m pa ni es were

"o wne d, fin an ced

, an d op erat ed " by th e sa m e pe rs on

. The di st ric t co ur t al so gr an te d

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-W eb st er's m ot io n to di sm is s aft er co nc lu di ng th at Brad le y Tim be rla nd 's cl ai m s were

ti m e ba rred

. Brad le y Tim be rla nd 's own co m

pl ai nt al le ge d th at th e frau d ha d oc cu rred

whe n W eb st er "m ad e se ve ral fal se rep res en ta ti on s" to Brad le y Lum be r in th e fal l of

20 07

. Si nc e Brad le y Tim be rla nd di d no t fil e su it un ti l Aug us t 20 11

, th e di st ric t co ur t

de te rm in ed th at th e act io n was ba rred by th e th ree y ear st at ut e of li m it at io ns fo r to rt

cl ai m s un de r Ark an sa s law. Brad le y Tim be rla nd fil ed a m ot io n for reco ns id erat io n
whi ch was d en ie d.

Brad le y Tim

be rla nd ap pe al s, co nt en di ng th at th e di st ric t co ur t erre d in de nyin g

it s m ot io n for rem an d t o s ta te co ur t an d i n g ran ti ng W eb st er's m ot io n t o d is m is s. It

al so arg ue s th at th e di st ric t co u r t a b u s e d it s di sc ret io n in de nyin g it s m ot io n fo r

reco ns id erat io n.

II.

Brad le y Tim

be rla nd fir st arg ue s th at th e di st ric t co ur t sh ou ld ha ve gr an te d it s

m ot io n to rem an d be cau se rem ov al to fed eral co ur t was im pr op er wit ho u t B r a dl ey

Lum be r's co ns en t. W hi le al l de fen da nt s m us t typic al ly joi n in a rem ov al act io n, se e

28 U.S.C. § 14 46 (b )(2 )(A), th e di st ric t co ur t co nc lu de d th at Brad le y Lum be r ha d be en

frau du le nt ly joi ne d to de feat di ve rs it y juri sd ic ti on an d th at it s co ns en t to rem ov al was

th eref or e no t req ui red

. W e rev ie w whe th er Brad le y Lum be r was frau du le nt ly joi ne d

de n ov o, res ol vi ng "al l do ub ts ab ou t fed eral juri sd ic ti on in fav or of rem an d."

W i l ki ns on v. Sh ack el fo rd

, 47 8 F.3 d 95 7, 96 3 (8 th Ci r. 20 07 ) (ci ta ti on om it te d)
(q uo ta ti on m ark s om it te d)

. A p a r ty ha s be en frau du le nt ly joi ne d if th ere is no

"re as on ab le ba si s fo r pr ed ic ti ng th at th e st at e la w m ig ht im po se li ab il it y ba se d up on

th e fac ts in vo lv ed ." Id . (ci ta ti on om it te d) (qu ot at io n m ark s o m it te d)

.

Brad le y Tim

be rla nd br ou gh t a co ns tru ct iv e frau d cl ai m ag ai ns t B r a d l ey

Lum be r, whi ch th e pa rti es ag ree is go ve rn ed by Ark an sa s la w. Und er Ark an sa s la w,

act ua l frau d req ui res "a fal se rep res en ta ti on (u su al ly o f a m at e r ia l fact ), kn owl ed ge

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-or be li ef by t h e d e f e n d an t th at th e rep res en ta ti on is fal se , in te nt to in du ce th e pl ai nt iff 's rel ia nc e, jus ti fia bl e rel ia nc e by th e pl ai nt iff

, an d res ul ti n g d a mage to th e pl ai nt iff ." Yarb or ou gh v. DeVil b i ss Air Po wer, In c., 32 1 F.3 d 72 8, 73 0 (8 th Ci r.

20 03 ) (ap pl y in g Ark an sa s la w). Co ns tru ct iv e frau d ha s th e sa m e el em en ts ex cep t th at

it ari se s fr om

a co nf id en ti al rel at io ns hi p a nd do es no t re qu ire pro of of s ci en te r. Id.

As pl ead ed in it s co m

pl ai nt

, Brad le y Tim

be r l an d's co ns tru ct iv e frau d cl ai m

al le ge s t ha t

Brad le y Lum

be r, sp eci fic al ly th ei r rep res en ta ti ve s, m ai nt ai ne d a le ga l
du ty to Brad le y Tim

be rla nd

. W hi le t h e y w e re no t di sh on es t in th ei r de al in gs wit h Brad le y Tim be rla nd

, th ei r rep eat ed m is ta ke s in rel y in g on th e as se rti on s m ad e by Webs te r an d su bs eq ue nt ro le in br in g in g ab ou t th e li qu id at io n of Brad le y Tim be rla nd as se ts is en ou gh to co ns ti tu te

co ns tru ct iv e fra ud

.

The di st ric t co ur t co nc lu de d th at Brad le y Lum be r ha d be en frau du le nt l y jo i n e d

be cau se th ere was no reas on ab le ba si s fo r im po si ng li ab il it y on Brad le y Lum be r fo r

co ns tru ct iv e frau d ba se d o n B rad le y Tim be rla nd 's pl ead in gs

. It th eref or e de ni ed

rem an d a nd di sm is se d t he cla im ag ai ns t Br ad le y

Lum be r.

W e ag ree th at Brad le y Lum be r was fr a u du le nt ly joi ne d in th is cas e. Brad le y

Tim be rla nd 's co m

pl ai nt fai ls to al le ge an y fal se r e p r e s en ta ti on m ad e by Brad le y

Lum be r. The fact s pl ead ed in th e co m pl ai nt on ly al le ge th at B rad le y Tim be rla nd
"jus ti fia bl y rel ie d on the rep res en ta ti on s m ad e by W eb st er" (em ph as is ad de d) an d th at

W eb st er's m is rep res en ta ti on s "u lt im at el y in du ced th e act io ns of Brad le y Lum be r an d

Brad le y T im

be rl an d" (e m

pha sis ad de d)

. Brad le y Tim be rla nd al so fai le d to pl ead fact s
de m on st rat in g Brad le y Lum be r's in te nt to in du ce rel ia nc e on a m is rep res en ta ti on or

i t s o wn jus ti fie d rel ia nc e. As th e di st ric t co ur t ob se rv ed

, in te nt io na l de cei t was

im po ss ib le be cau se Brad le y Lum be r an d Brad le y Tim

be rla nd "were ow ne d, fi na nc ed

,

an d op erat ed by th e sa m e pe rs on , Ch am be rs ." Brad le y Tim

be rla nd 's co nt en ti on th at

-5

-B r a d l e y Lu m be r face d a le gi ti m at e ris k of li ab il it y fo r co ns tru ct iv e frau d is al s o

co nt rad ic te d by th e fact th at Brad le y Lum be r di d no t ap pe ar be fo re th e di st ric t co ur t

or su bm it a br ie f on ap pe al

. Si nc e th ere is no "re as on ab le ba si s fo r pr ed ic ti ng th at th e

st at e la w m ig ht im

po se li ab il it y ba se d up on th e fact s in vo lv ed ," th e di st ric t co ur t di d

no t err in co nc lu di ng th at Brad le y Lum be r was frau du le nt ly joi ne d to de feat di ve rs it y juri sd ic ti on . See Wilk in so n, 4 78 F.3d at 9 63

.

The re is al so no m eri t to Brad le y Tim be rla nd 's arg um en t th at th e di st ric t co ur t

im pr op erl y pi erce d th e co rp or at e ve il b y co ns id eri ng th e own ers hi p st ru ct ur es of

Brad le y Lum

be r an d Brad le y Tim

be rla nd

. A c ou rt p i e r ces a co rp or at e ve il whe n it

di sr eg ard s a co rp or at e en ti ty to i m po se in di vi du al li ab il it y on it s sh areh ol de rs

. See

And ers on v. Stewar t, 23 4 S.W .3d 29 5, 2 96 (Ark . 20 06 ). The d is tri ct co ur t here di d

no t di sr e g a r d Brad le y Lum be r or Brad le y Tim

be rla nd 's co rp or at e fo rm bu t rat he r

co ns id ered th ei r own ers hi p st ru ct ur es in de te rm in in g whe t he r Brad le y Lum be r ha d

be en frau du le nt ly j oi ne d.

Brad le y Tim

be r l a n d n ex t arg ue s th at th e di st ric t co ur t erre d in gr an ti ng

W eb st e r ' s m ot io n to di sm is s. W e rev ie w th e gr an t of a m ot io n to di sm is s de no vo ,
ta ki ng th e fact s all eg ed in th e co m pl ai nt as tru e. Zut z v. Nels on , 60 1 F.3d 84 2, 84 8
(8 th Ci r. 20 10 ). To su rv iv e a m ot io n to di sm is s, a co m p l ai nt "n eed no t in cl ud e
de ta il ed fact ua l al le ga ti on s," C.N. v. W il lm ar Pu b. Sch s., In de p. Sch

. Dis t. No. 34 7,

59 1 F.3 d 62 4, 62 9 (8 th Ci r. 20 10 ), bu t it m us t co nt ai n "en ou gh fact s to st at e a cl ai m

to rel ie f th at is pl au si bl e on it s face ," Bel l Atl

. Co rp

. v. Twom bl y , 55 0 U.S. 54 4, 57 0
(2 00 7)

. The pl au si bi li ty st an da rd req ui res a pl ai nt iff to "p le ad [] fact ua l co nt en t th at

al lo ws the co ur t to dr aw th e reas on ab le in fere nc e th at th e de fen da nt is li ab le fo r th e

m is co nd uc t al le ge d." Ash cro ft v . Iqb al , 55 6 U.S. 6 62 , 67 8 (2 00 9)

.

A "m ot io n to di sm is s m ay be gr an te d whe n a cl ai m is ba rred un de r a st at ut e of

li m it at io ns ." Varn er v. Pet ers on Farm s, 37 1 F.3 d 10 11

, 10 16 (8 th Ci r. 20 04 ) (ci ta ti on

om it te d) (q uo ta ti on m ark s om it te d)

. Und er Ark an sa s l aw, th e st at ut e of li m it at io ns

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-fo r al l to rt act io ns "n ot ot he rwis e li m it ed by la w" is th ree y ears

. O'Mara v. Dy ke m a,

94 2 S.W .2d 85 4, 85 8 (Ark

. 19 97 ). The li m it at io ns pe rio d be g i n s to ru n whe n th e

wro ng oc cu rs , reg ard le ss of wh en it is di sc ov ered . Id.

The di st ric t co ur t di sm is se d Brad le y Tim be rla nd 's cl ai m s ag ai ns t W eb st er aft er

co nc lu di ng th at it s own pl ead in gs al le ge d th at th e cl ai m ed wro ng ha d be en co m m it te d

in th e fal l of 20 07 an d th at th e act io n ha d th eref or e accr ue d ap pr ox im at el y fo ur y ears
be fo re su it was fil ed ag ai ns t W eb st er on Aug us t 12

, 20 11

. The di st ric t co ur t al so to ok
jud ic ia l no ti ce of th e fact s pr es en te d in th e pr ev io us l aws ui t be twee n W eb st er an d

Brad le y Lum

be r, ci ti ng po rti on s of th a t r e c o r d whi ch rev eal ed th at Brad le y

Tim be rla nd ha d kn own th at W eb st er had di sc on ti nu ed fin an ci ng th e rev ol vi ng lo an
du rin g th e fal l of 20 07

. Brad le y Tim be rla nd co nt en ds on ap pe al th at it s cl ai m di d no t

a c c r ue un ti l it rece iv ed a le tt er fro m W eb st er's la w fir m on Aug us t 13

, 20 08 whi ch

in di cat ed th at th e fin an ci ng arra ng em en t was be in g " p e rm an en tl y di sc on ti nu [ed ]. "

Brad le y Tim

be rla nd cl ai m s th at it th us fil ed it s co m pl ai nt on e da y be fo re th e st at ut e

of li m it at io ns ran

.

W e co nc lu de th at Brad le y Tim be rla nd 's cl ai m s are ti m e ba rred

. In su pp or t of

it s frau d cl ai m , Brad le y Tim be rla nd pl ed th at "[s ]tar t i n g i n th e Fal l (la te Aug us t or
earl y Sep te m

be r) of 20 07 W eb st er m ad e se ve ral fal se rep res en ta ti on s." Fro m "t he

face of th e co m

pl ai nt it se lf" it is th eref

or e ap pa ren t th at Brad le y Tim be rla nd 's act io n

ag ai ns t W eb st er accr ue d du rin g th e fal l of 20 07 , s ee Varn er, 37 1 F

. 3 d at 10 16 , a nd

he nc e th e st at ut e of li m it at io ns ran du rin g th e fal l of 20 10

. Si nc e Brad le y Tim be rla nd

di d no t fil e s u i t a g a i n s t W eb st er un ti l Aug us t 20 11

, it s cl ai m s ag ai ns t W eb st er are
ba rred by Ark an sa s' th ree y ear st at ut e of li m it at io ns fo r frau d an d i nt erfe ren ce wi th

bu si ne ss ex pe ct an cy . See O'Ma ra, 9 42 S.W .2d at 8 58

.

Brad le y Tim

be rla nd fin al ly ch al le ng es th e di st ric t co ur t's de ni al of it s m ot io n

fo r reco ns id erat io n, whi ch we rev ie w fo r ab us e of di sc ret io n. Eld er-Ke ep v. Aks am it

, 46 0 F.3 d 97 9, 98 5– 86 (8 th Ci r. 2 0 0 6 )

. A m ot io n fo r reco ns id erat io n "s erv e[s ] th e

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-li m it ed fu nc ti on of co rrec ti ng m an ife st erro rs of la w or fact or

. . . pr es en t[i ng ] ne wly

di sc ov ered ev id en ce" aft er a fin al jud gm en t. Uni te d St at es v. Met ro

. St

. Lou is Sewer

Dis t., 44 0 F.3 d 93 0, 93 3 (8 th Ci r. 20 06 ) (ci ta ti on om it te d) (q uo ta ti on m ark s om it te d)

. It can no t be us ed to in tro du ce ne w ev id en ce whi ch co ul d ha ve be e n of fere d be fo re jud gm en t. Id

.

In it s m ot io n fo r reco ns id erat io n, Brad le y Tim be rla nd at te m

pt ed on ce m or e to

es ta bl is h th at W eb st er's fal se rep res en ta ti on s d id no t o ccu r un ti l t he fal l o f 20 08 . It

pr ov id ed an affi da vi t fro m a Brad le y Lum be r fin an ce m an ag er, em ai l co rres po nd en ce
be twee n Brad ley L um

be r an d W eb ster rep res en ta ti ve s, an d ba nk reco rd s sh owi ng th at

W eb st er ha d co nt in ue d to le nd m on ey to B r a d l e y Lum be r in 20 08

. Brad le y

Tim be rla nd arg ue d th at th e co ur t ' s "fa ct ua l m is un de rs ta nd in g" ab ou t th e ti m in g of

m is rep res en ta ti on s an d d efau lt were ev id en ce o f di sp ut ed fact s war ran ti ng tri al

.

Brad le y Tim

be rla nd 's pr of

fere d ev id en ce is irr el ev an t to th is cas e. Its cau se of

act io n accr ue d whe n th e a l le ge d m is rep res en ta ti on s were m ad e, se e O'Mara

, 94 2

S.W .2d at 8 58 , whi ch acco rd in g t o B rad le y Tim be rla nd 's c om

pl ai nt oc cu rred in th e

fal l o f 2 0 0 7

. Evi de nc e of a co nt in ui ng lo an arra ng em en t ha s no be ari ng on th e

accr ua l of Brad le y Tim

be rla nd 's frau d cl ai m s. Mo reo ve r, Brad le y Tim be rla nd 's ne w

ev id en ce was im

pr op erl y pr es en te d as pa rt of th e m ot io n fo r reco ns id erat io n be cau se

it co ul d ha ve be en of

fere d pr io r to th e di st ric t co ur t's jud gm en t. See Met ro

. St

. Lou is

Sewer Dis t., 44 0 F.3 d at 93 3. The di st ri c t c o u r t di d no t ab us e it s di sc ret io n in

de nyin g t he m ot io n fo r rec on si de rat io n.

III.

W e acco rd in gl y affi rm th e di st ric t co ur t's de ni al of Brad le y Ti mberl an d's

m ot io n fo r rem an d, it s gr an t of W eb st er's m ot io n to di sm is s, an d it s de ni al of Brad le y

Tim be rla nd 's m ot io n fo r rec on si de rat io n.

__ __ __ __ __ __ __ __ __ __ __ __ __ __

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