Court Opinion

ID: 3169795
Source: CourtListenerOpinion
Date Created: 2016-01-14 21:01:36.245761+00
Date Added: 2024-06-11T12:03:57.855211
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

 SOUTHERN CALIFORNIA EDISON,

         Plaintiff,
                v.                                          Civil Action No. 14-1041 (JEB)

 UNITED STATES POSTAL SERVICE,

         Defendant.

                                  MEMORANDUM OPINION

       When mail recipients decline to accept letters delivered by the United States Postal

Service, they can write “return to sender” on the envelope so that USPS will offer the sender an

opportunity to revise the destination address. In similar fashion, Defendant USPS here attempts

to return this Court’s Opinion for revision, seeking a more favorable delivery. More specifically,

Defendant moves under Federal Rule of Civil Procedure 59(e) to alter or amend this Court’s

Memorandum Opinion and separate Order issued September 29, 2015, granting in part and

denying in part both parties’ cross-motions for summary judgment. See ECF Nos. 46-47. As no

clear error of law or manifest injustice is present here to warrant alteration of the judgment, the

Court will deny the Motion.

I.     Background

       The background of this case is set forth in substantial detail in the Court’s Opinion, see S.

California Edison v. U.S. Postal Serv., No. 14-1041, 2015 WL 5730777 (D.D.C. Sept. 29, 2015),

and so only a cursory summary is warranted here. Mailer Southern California Edison is a public

utility that, during the period in question, sent monthly bills via the United States Postal Service

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to most of its approximately 14 million customers. USPS grants “workshare” discounts for

mailers who ease its receipt and delivery of bulk mail by presorting, prebarcoding, handling, and

transporting mail before it reaches the Postal Service. To qualify for such discounts, however,

mailers must comply with USPS’s Move Update standard, which compliance reduces the amount

of return-to-sender (RTS) and undeliverable-as-addressed (UAA) mail USPS receives from bulk

mailers.

       In early 2007, USPS’s Postal Inspection Service identified high rates of RTS and UAA

mailpieces sent by SCE and, in a subsequent investigation, determined that Plaintiff had failed to

comply fully with the Move Update standard. In a letter dated November 23, 2009, USPS issued

a revenue-deficiency assessment of $7,551,576.28, the difference between the discounted bulk-

mail price SCE paid and the undiscounted First-Class rate for 82,452,608 mailpieces SCE sent

between May 14, 2007, and November 26, 2008. See Revenue Deficiency Letter (Nov. 23,

2009) (JA0047). SCE opposed this assessment and appealed it to the Service’s Pricing &

Classification Service Center (PCSC) – the designated USPS appeals body for such an

assessment – raising several issues, two of which are relevant to USPS’s Motion for

Reconsideration. See Amended Appeal of Southern California Edison from Decision of Santa

Ana District (Nov. 21, 2011) (JA0005-JA0044).

       First, SCE opposed assessment of the First Class rate for all of its mail, as USPS had

identified only a small fraction of SCE’s total mailpieces sent (at most 1.4%) that were returned

UAA. While SCE acknowledged that it had mistakenly failed to implement several Move

Update standard protocols, it strived to do so once notified of the error. Second, SCE also

challenged the assessment on the basis that USPS’s Management Instruction – USPS’s guidance

in assessing revenue deficiencies – limited revenue-deficiency assessments to no more than the

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twelve months preceding the discovery of non-compliance with the Move Update standard.

USPS, however, had in this case assessed a revenue deficiency for over 18 months, including for

months after the discovery of non-compliance.

       The PCSC rejected SCE’s appeal and upheld the full revenue-deficiency assessment of

$7,551,576.28 for the 18-month period. SCE then filed its lawsuit in this Court, arguing that the

Service had acted unreasonably and ultra vires by violating the Postal statutes, see Compl.,

¶¶ 81-89, and had also violated the Due Process Clause of the Fifth Amendment. Id., ¶¶ 90-93.

In response, USPS amended its initial Answer to include a Counterclaim, seeking judgment on a

claim for debt under the Federal Debt Collection Procedure Act, 28 U.S.C. § 3001 et seq., unjust

enrichment, and declaratory relief. See Amend. Answer & Countercl., ¶¶ 34-49.

       In its Opinion, the Court largely sided with SCE. It concluded that USPS had not applied

reasoned decisionmaking in issuing the revenue-deficiency assessment, particularly in reaching

beyond the maximum twelve-month retrospective period. The Court remanded the matter to the

PCSC for reasoned decisionmaking in calculating the appropriate assessment. USPS now moves

for the Court to alter or amend its judgment.

II.    Legal Standard

       Federal Rule of Civil Procedure 59(e) permits the filing of a motion to alter or amend a

judgment when such motion is filed within 28 days after the judgment’s entry. The Court must

apply a “stringent standard” when evaluating Rule 59(e) motions, see Ciralsky v. CIA, 355 F.3d
661, 673 (D.C. Cir. 2004), for “‘[r]econsideration of a judgment after its entry is an extraordinary

remedy which should be used sparingly.’” Mohammadi v. Islamic Republic of Iran, 782 F.3d 9,

17 (D.C. Cir. 2015) (quoting 11 C. Wright & A. Miller, Fed. Prac. & Proc. Civ. § 2810.1 (3d ed.

2012)). “A Rule 59(e) motion is discretionary’ and need not be granted unless the district court

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finds that there is an ‘intervening change of controlling law, the availability of new evidence, or

the need to correct a clear error or prevent manifest injustice.” Firestone v. Firestone, 76 F.3d
1205, 1208 (D.C. Cir. 1996) (citation and internal quotation marks omitted); see also 11 Fed.

Prac. & Proc. Civ. § 2810.1 (“four basic grounds” for Rule 59(e) motion are “manifest errors of

law or fact,” “newly discovered or previously unavailable evidence,” “to prevent manifest

injustice,” and “intervening change in controlling law”). Rule 59(e), moreover, “is not a vehicle

to present a new legal theory that was available prior to judgment,” Patton Boggs LLP v.

Chevron Corp., 683 F.3d 397, 403 (D.C. Cir. 2012), or “to relitigate old matters, or to raise

arguments or present evidence that could have been raised prior to the entry of judgment.”

Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n.5 (2008) (citation and internal quotation

marks omitted).

III.   Analysis

       At the outset, the Court notes that USPS has not alleged “newly discovered or previously

unavailable evidence,” or an “intervening change in controlling law.” Instead, it takes direct aim

at the Court’s reasoning in its judgment, alleging clear errors of law and manifest injustice.

Among the issues it raises are four of particular note. First, Defendant believes that the Court

incorrectly concluded that it had subject-matter jurisdiction over claims relating to postal rates

and rate-related regulations, asserting that SCE’s challenge should have been filed before the

Postal Regulatory Commission (PRC), not in federal district court. See Mot. at 2. Second, it

maintains that the Court “failed to recognize” that the PCSC has only limited authority to

determine whether a mailer paid insufficient postage and cannot “create a new rate” for a

particular mailer that differs from the full undiscounted rate. Id. at 1-2. Third, it argues that

compliance with the Opinion would “effect a manifest injustice” to the Postal Service and the

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public. Id. at 14. Finally, if the Court adheres to its prior decision, Plaintiff seeks further

guidance upon remand. Id. at 21-22. The Court treats each point in turn.

       A. Jurisdiction

       The Service’s jurisdictional argument is hardly new, having been addressed in its

briefings at summary judgment; indeed, it dedicated substantial pages to the topic. See Def.

MTD/MSJ at 18-31; Def. Reply at 21-23. In an attempt to bolster its position, USPS cites to a

recent opinion in this District by Judge Rosemary Collyer, in which she found that the PRC had

exclusive jurisdiction to hear challenges over rates. See Sears, Roebuck & Co. v. U.S. Postal

Serv., No. 14-1031, 2015 WL 5729089, at *11-12 (D.D.C. Sept. 30, 2015). That decision, while

of course not binding, is nevertheless not inconsistent with this Court’s. Because Judge Collyer

held that USPS had engaged in reasoned decisionmaking – in contrast to this Court’s holding –

she then proceeded to resolve the plaintiff’s alternative argument that USPS had acted ultra vires

in the establishment of the rate in question. Only on that challenge did Judge Collyer find that

the PRC had exclusive jurisdiction. See id. at *7-9. She clearly acknowledged, moreover, that

“the Postal Service’s application of its own regulations and its deficiency assessments are

subjected to limited judicial review . . . [i.e.,] whether the Postal Service ‘engaged in reasoned

decision-making.’” Id. at *6 (citation omitted). That form of limited review is precisely what

this Court conducted in its Opinion.

       While the Court already addressed the Service’s jurisdictional arguments in its prior

Opinion, it adds here that it could not find a single case before the D.C. Circuit in which a mailer

had appealed a revenue-deficiency assessment issued by the PCSC to the PRC, and then later to

the Circuit — viz., the route urged here by USPS. Indeed, a review of every relevant case in this

Circuit makes manifest that cases appealed from the PRC concern broader, policy-making

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decisions, not individual revenue-deficiency assessments against a single mailer. In fact, in the

vast majority of cases in the Circuit involving the PRC, the Commission and the Postal Service

are the litigants, and many involve USPS challenges to PRC orders concerning the Service’s

broad rate-setting and mailing practices. See, e.g., U.S. Postal Serv. v. Postal Regulatory

Comm’n, 785 F.3d 740 (D.C. Cir. 2015) (USPS challenge to PRC rejection of USPS proposal to

implement price adjustments to certain market-dominant products); U.S. Postal Serv. v. Postal

Regulatory Comm’n, 747 F.3d 906 (D.C. Cir. 2014) (USPS challenge to PRC order equalizing

cost of first-class letter and flat DVD rates); U.S. Postal Serv. v. Postal Regulatory Comm’n, 717
F.3d 209 (D.C. Cir. 2013) (USPS challenge to PRC order that USPS revise discount for

presorted “workshare discount” mail); U.S. Postal Serv. v. Postal Regulatory Comm’n, 640 F.3d
1263 (D.C. Cir. 2011) (USPS challenge to PRC denial of USPS request to exceed annual cap for

postal-rate increases).

       Of the handful of cases not falling into this category, not a single one concerns a revenue-

deficiency assessment, contradicting USPS’s assertion that the Court acted in “clear error.” See,

e.g., Mittleman v. Postal Regulatory Comm’n, 757 F.3d 300 (D.C. Cir. 2014) (challenge to

proposed post-office closure); GameFly, Inc. v. Postal Regulatory Comm’n, 704 F.3d 145 (D.C.

Cir. 2013) (challenge to PRC’s remedial order resolving differential treatment by USPS among

businesses distributing DVDs by mail); LePage’s 2000, Inc. v. Postal Regulatory Comm’n, 674
F.3d 862 (D.C. Cir. 2012) (challenge to PRC’s classification of commercial licensing of third-

party mailing and shipping supplies as “nonpostal service”).

       Even more tellingly, the Court could not find a single case listed on the docket of the

PRC — past or present — that involved the appeal of a revenue-deficiency assessment against a

mailer. See Docket Search, Postal Regulatory Commission, http://www.prc.gov/dockets/search

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(last visited Jan. 13, 2016). Nor does USPS cite to a single case identifying such precedent. In

the absence of any cases in which a revenue-deficiency-assessment challenge proceeded first to

the PRC – as USPS alleges it must – and given at least one case in this District that reviewed

such a challenge on the merits, see Reese Bros., Inc. v. U.S. Postal Serv., 905 F. Supp. 2d 223

(D.D.C. 2012), USPS has not shown that this Court should revisit its jurisdictional

determination.

       B. Tampering with Rates

       While Defendant never defines outright what a “rate” is, it apparently implies that any

amount a mailer pays that is permitted by any organ of the USPS is a “rate,” even in the instance

of a remedial revenue-deficiency assessment. See Mot. at 2 (“At all times relevant to this matter,

the [Mail Classification Schedule] did not list a rate for a bulk mailing that was partially or even

substantially compliant with the Move Update requirements.”). The Service thus also objects to

the judgment on the ground that it construes the Court’s Order as requiring the PCSC to

“impose[] a new rate and rule on USPS,” Mot. at 13, something Defendant maintains the PCSC

may not do. The Service states that “the PCSC may not create a new rate; rather, only the PRC

can approve a new rate” because “[t]he PCSC had no authority to create a new rate or waive

compliance with Move Update regulations . . . .” Id. at 2. Defendant, however, mischaracterizes

the Court’s Order as requiring the PCSC “retroactively to apply a rate that has not been approved

by the PRC merely because of views on what might be equitable under specific circumstances

applicable to a particular mailer . . . .” Id. at 12. Revenue-deficiency assessments are not rates;

they are remedial assessments that result from mailer non-compliance, and the PCSC has wide

discretion in determining how to make such assessments.

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       Although the Court has already responded to these arguments in its Memorandum

Opinion, it will briefly explain further why USPS problematically elides the distinction between

the determination of a revenue-deficiency assessment and the setting of a postal rate. At its core,

USPS’s argument hinges on the assumption that if the Postal Service were to issue a revenue-

deficiency assessment for any amount other than the full undiscounted rate – for the entirety of

the mailing period in question and for all mailpieces sent at the discounted workshare rate – it

would “impose[] a new rate and rule on USPS” and would “provide[] SCE with an exemption

from the burden of complying with Move Update regulations that apply to all mailers that

qualify for lower rates,” resulting in “discriminatory pricing.” Id. at 13, 2. In other words, the

Service believes that there can be no discretion whatsoever in the assessment of a revenue

deficiency without the implementation of a “new” and “discriminatory” rate. And such

implementation the Court cannot order, for Defendant claims the PCSC lacks “authority to apply

rates to a specific mailer other than approved rates or to disregard postal regulations establishing

rate-eligibility requirements.” Id. at 15.

       Despite such an assertion, both USPS and the PCSC have a well-established history of

doing just what USPS claims cannot be done – namely, exercising discretion in the assessment of

revenue deficiencies. Most straightforwardly, the Service’s Management Instruction expressly

limits revenue-deficiency assessments to “no more than 12 months before the date the deficiency

was discovered” – even if the actual period of non-compliance is far greater. See Management

Instruction Assessing and Collecting Deficiencies in Postage or Fees, DM140-2008-1

[“Management Instruction”] at 2 (JA0227). By the Service’s logic, any revenue-deficiency

assessment issued by the PCSC that is limited to 12 months when the actual non-compliance

lasts for a longer period of time would constitute the application of “rates to a specific mailer

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other than approved rates” since some portion of the mailer’s non-compliant mailing would skate

by at the improperly discounted rate. For this reason alone, USPS’s position is fatally flawed in

arguing that anything less than a full assessment for the entire period of non-compliance would

be an exercise in off-piste rate-setting. Issuing a revenue-deficiency assessment is thus not an act

of rate-setting, as its own Management Instruction makes clear.

       In fact, an abbreviated period was imposed by the PCSC in this case: neither party

disputes the fact that some portion of SCE’s mailings remained non-compliant with the Move

Update standard from at least May 14, 2007, until as late as January 2010. See Def. MTD/MSJ

at 8 (“[SCE] failed to stop manually overriding address updates . . . until January 2010.”);

Compl., ¶ 80 (“SCE stopped manually overriding . . . addresses in January 2010.”). And no

evidence suggests SCE’s non-compliance only began on May 14, 2007. Yet the revenue-

deficiency assessment was imposed only for the period between May 14, 2007, and November

26, 2008, see Pl. MSJ at 29, the former date apparently chosen as being twelve months prior to

the discovery of non-compliance, and the latter date selected because “SCE took approximately

seven months to respond to Inspectors [sic] requests for documents.” Investigation

Memorandum (May 26, 2009) at 5 (JA0112). This latter consideration, of course, is one that

bears no relation to the factors identified in the Management Instruction, see Management

Instruction at 2 (“Assessment Criteria”) (JA0227), and provides further evidence that revenue-

deficiency assessments involve discretion, not the rote application of rates. Otherwise, the very

assessment USPS here defends would also have to be considered a “new rate” of “discriminatory

pricing,” something USPS alleges results in “manifest injustice.”

       Other provisions of the Management Instruction cast further doubt on USPS’s elision of

revenue deficiencies and rate-setting. The Instruction notes that only “for an amount of $500 or

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more” should a revenue deficiency be calculated according to these rules. Id. For lesser

amounts, in contrast, each deficiency is to be reported to a manager or postmaster for follow-up.

See id. The result is that any mailer whose noncompliance amounts to less than $500 in the

difference between the discounted rate and the First Class rate might not have a revenue-

deficiency assessment applied, since their deficiencies appear not always to be calculated in

accordance with the Management Instruction. This would constitute “discriminatory pricing” if

such assessments are, as USPS insists, rate-setting exercises. The Instruction also provides

exceptions in the case of “[f]raud or misrepresentation” or where “[m]ailing history discloses

evidence of repeated noncompliance with mailing standards.” Id. If fraud or misrepresentation

can alter the amount of an assessment, then such assessments are not, contra USPS’s assertion,

mere mechanical rate-setting exercises, but rather case-specific, fact-specific, ex post judgments.

In sum, these stated factors are evidence that the revenue-deficiency assessments are imposed

with thought and discretion, suggesting that the act of calculating and imposing a revenue-

deficiency assessment is not “impos[ing] a new rate or rule,” as USPS contends. See Mot. at 13.

       Given the Management Instruction’s general mailer-specific limits on revenue-deficiency

assessments and permissive view towards the exercise of discretion on the part of the PCSC and

the Postal Service’s fact-specific actual practices with regard to SCE, USPS’s argument that

issuing a revenue-deficiency assessment is an act of rate-setting carries no water. The Court,

consequently, will not reconsider its Opinion as to this issue.

       C. Manifest Injustice

       USPS’s own practices, moreover, directly contradict the Service’s contentions that “[t]he

PCSC had no authority to . . . waive compliance with Move Update regulations . . . ,” id. at 2,

and that “such a mailer-specific” assessment would “effect a manifest injustice.” Id. at 14. The

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Management Instruction specifically grants the Manager of the PCSC the ability to waive a

revenue-deficiency assessment altogether. See Management Instruction at 9 (JA0234) (“A

revenue deficiency may be waived only by the DFM, Manager of Pricing and Classification

Service Center, or Manger of Mailing Standards, Headquarters.”). Such a waiver would, under

USPS’s own understanding, be a “new rate or rule,” since it would allow one mailer to pay a

different rate from another, resulting in “discriminatory pricing” – if such a waiver were

considered rate-setting. Yet the Management Instruction envisions the precise “manifest

injustice” USPS so strongly condemns, and it expressly allows what USPS here claims is

prohibited: the ability of the PCSC to tailor remedies specifically to the deficiency without

“setting a new rate” in the process. Such discretion flies in the face of claims that mailer-specific

assessments ipso facto constitute manifest injustice.

       The Management Instruction, moreover, authorizes settlements between mailers and

USPS for only “a partial payment.” Id. Here, it is helpful to look at how such settlements take

place, for they are the precisely the sort of “retroactive exemptions” and “payment of a

discounted rate” that USPS claims is inherently not “just and reasonable.” Mot. at 14. Because

USPS alleges a real-world-effects parade of horribles should Plaintiff prevail, on this limited

issue, the Court takes note of the Report issued by the Office of Inspector General for USPS,

which states that numerous revenue deficiencies assessed by USPS have in fact “resulted in

settlement agreements,” presumably leading to only partial payments of assessments. See USPS

OIG Audit Report SA-AR-10-001, Move Update Program and Investigations (“OIG Report”) at

2 (May 12, 2010), available at https://www.uspsoig.gov/sites/default/files/document-library-

files/2013/SA-AR-10-001.pdf. More remarkably, USPS management’s own position in response

to that report was that “good faith effort,” “specific facts and circumstances unique to the

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mailer’s operations,” and “confidential information” may properly be considered by USPS in

reaching settlements with mailers assessed revenue deficiencies. See id., Appendix F:

Management’s Comments at 32-33. These practices suggest that USPS already encourages and

permits the very practices it alleges would wreak havoc and result in manifest injustice were the

Court’s Order to stand.

       Finally, although not germane to the legal outcome of this case, USPS recently proposed

a rule in the Federal Register that casts further doubt on its manifest-injustice claims. See

Address Quality Measurement Alternative, 79 Fed. Reg. 76,930 (Dec. 23, 2014). That proposed

rule seeks to remedy the problem of mailpieces returned UAA due to outdated addresses by

assessing fees against noncompliant mailers only for that portion of mail that is returned as

UAA, not for all mailpieces sent at the discounted rate. The proposed assessment process,

moreover, envisions assessing such fees only on the percentage of mailpieces that exceed a

published “error” threshold for incorrect addressing; in other words, USPS now envisions a

certain low level of noncompliance to be presumptively permissible. “Once the assessment fee

is in place, qualifying mailings will no longer be required to demonstrate or document other

USPS-approved Move Update methods that are being used to update their address list.” Id. at

76,930. It thus appears that the Service itself seeks to assess fees for UAA mailpieces on a

going-forward basis in precisely the manner it states here would lead to manifest injustice –

namely, on an individualized basis for only the small portion of actual noncompliant mailpieces.

While this proffered approach has no legal bearing on whether the PCSC engaged in reasoned

decisionmaking in upholding the revenue-deficiency assessment issued against SCE in 2009, it

further undermines Defendant’s argument that issuing revenue-deficiency assessments that are

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reasonably tailored to the particular circumstances of the mailer in question would necessarily

effect a manifest injustice.

       D. Remand

       Finally, “should the Court decline to reverse its remand ruling, USPS respectfully

requests that the Court clarify the specific issues in the FAD that the PCSC’s revised decision

should further consider . . . .” Mot. at 22. Although the Court’s Opinion endeavored to be clear

in instructing the PCSC to consider “the source, extent, and significance of [SCE’s]

noncompliance with Move Update standards . . . [to] correctly determine a reasoned and reduced

sum for the proper revenue-deficiency assessment,” S. California Edison, 2015 WL 5730777, at

*12, the Court hopes that identifying a few factors worthy of consideration will be helpful. On

remand, the Court would expect the PCSC to examine the costs incurred by USPS for the RTS

and UAA mailpieces sent by SCE during the relevant time period (estimated at $.506 per

mailpiece. See Investigation Memorandum at 6 (JA0113)). The PCSC might also consider the

differential between the First Class rate appropriate for mailpieces that did not comply with the

Move Update standard (estimated at $0.41 per mailpiece, see id. at 5 (JA0112)) and the lower

bulk-discount rate SCE actually paid for those mailpieces (a price the Court could not discern

from the record). These should provide a reasonable starting point for a proper assessment.

       In addition, the Management Instruction permits the Postal Service to “look back no more

than 12 months before the date the deficiency was discovered” in assessing a revenue deficiency.

See Management Instruction at 2. While USPS has elsewhere claimed that where “[m]ailing

history discloses evidence of repeated noncompliance with mailing standards,” id., it can bypass

the 12-month limit, SCE’s taking “approximately seven months to respond to Inspectors[’]

requests for documents,” see Investigative Memorandum at 5 (JA0112), falls far short of

                                                13
“evidence of repeated noncompliance.” At most, the PCSC should consider a revised revenue

deficiency for only the period looking back up to twelve months from May 2008, when “the

deficiency was discovered.” Id. at 4 (JA0111).

IV.    Conclusion

       As Defendant has fallen short of the high Rule 59(e) standard for altering the judgment,

the Court will deny its Motion. An Order to that effect will issue this day.

                                                      /s/ James E. Boasberg
                                                      JAMES E. BOASBERG
                                                      United States District Judge
Date: January 14, 2016

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