Court Opinion

ID: 5132228
Source: CourtListenerOpinion
Date Created: 2021-12-07 00:01:56.882004+00
Date Added: 2024-06-11T08:23:29.351691
License: Public Domain

Case: 21-1709    Document: 38    Page: 1   Filed: 11/12/2021

    United States Court of Appeals
       for the Federal Circuit
                  ______________________

        ROHM SEMICONDUCTOR USA, LLC,
               Plaintiff-Appellant

                            v.

        MAXPOWER SEMICONDUCTOR, INC.,
                Defendant-Appellee
              ______________________

                        2021-1709
                  ______________________

    Appeal from the United States District Court for the
 Northern District of California in No. 3:20-cv-06686-VC,
 Judge Vince Chhabria.
                 ______________________

                Decided: November 12, 2021
                  ______________________

     AARON M. FRANKEL, Kramer Levin Naftalis & Frankel
 LLP, New York, NY, argued for plaintiff-appellant. Also
 represented by SHANNON H. HEDVAT, CRISTINA MARTINEZ;
 JAMES R. HANNAH, LISA KOBIALKA, Menlo Park, CA.

     NANCY TOMPKINS, Roger Cook Law, San Francisco, CA,
 argued for defendant-appellee. Also represented by ROGER
 L. COOK.
                  ______________________

   Before LOURIE, O’MALLEY, and CHEN, Circuit Judges.
Case: 21-1709    Document: 38     Page: 2    Filed: 11/12/2021

 2                          ROHM SEMICONDUCTOR USA, LLC v.
                             MAXPOWER SEMICONDUCTOR, INC.

 O’MALLEY, Circuit Judge.
     ROHM Semiconductor USA, LLC (“ROHM USA”) ap-
 peals from the U.S. District Court for the Northern District
 of California’s decision compelling arbitration and dismiss-
 ing ROHM USA’s declaratory judgment action without
 prejudice. ROHM Semiconductor USA, LLC v. MaxPower
 Semiconductor, Inc., No. 20-CV-06686-VC, 2021 WL
 822932, at *1 (N.D. Cal. Feb. 4, 2021). Because we agree
 that an arbitrator must determine arbitrability of the dis-
 pute between ROHM USA and MaxPower Semiconductor,
 Inc. (“MaxPower”), we affirm.
                      I.     BACKGROUND
     In 2007, ROHM Japan and MaxPower entered into a
 technology license agreement (“TLA”). Under the TLA,
 ROHM Japan and its subsidiaries (collectively “ROHM”)
 were permitted “to use certain power [metal oxide semicon-
 ductor field effect transistors (‘MOSFET’)]-related technol-
 ogies of” MaxPower (“Licensor”) developed under a
 Development and Stock Purchase Agreement in exchange
 for royalties paid to MaxPower. J.A. 619 (TLA 2011
 Amendment ¶ A).
     The TLA, as amended in 2011, includes an agreement
 to arbitrate “[a]ny dispute, controversy, or claim arising
 out of or in relation to this Agreement or at law, or the
 breach, termination, or validity thereof.” J.A. 623–24 (TLA
 2011 Amendment ¶ 10 § 13.6). The arbitration agreement
 provides that arbitration is to be conducted “in accordance
 with the provisions of the California Code of Civil Proce-
 dure” (“CCCP”). J.A. 623–24 (TLA 2011 Amendment ¶ 10).
      In 2019, a dispute arose between ROHM Japan and
 MaxPower concerning whether the TLA covers ROHM’s
 silicon carbide MOSFET products. In September 2020,
 MaxPower notified ROHM Japan of its intent to initiate
 arbitration. Shortly thereafter, on September 23, 2020,
 ROHM USA, a subsidiary of ROHM Japan, filed a
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 complaint for declaratory judgment of noninfringement of
 four MaxPower patents in the Northern District of Califor-
 nia and four inter partes review petitions concerning those
 same patents. MaxPower filed a motion to compel arbitra-
 tion in the district court case. The district court granted
 MaxPower’s motion to compel arbitration and dismissed
 the case without prejudice, reasoning that the TLA “unmis-
 takably delegate[s] the question of arbitrability to the arbi-
 trator.” ROHM, 2021 WL 822932, at *1.
    ROHM USA appeals the district court’s decision. We
 have jurisdiction under 28 U.S.C. § 1295(a)(1).
                        II.   DISCUSSION
     We apply the law of the regional circuit when reviewing
 a district court’s dismissal of a case. OIP Techs., Inc. v.
 Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed. Cir. 2015).
 Similarly, “[w]e are obligated to follow regional circuit law
 on questions of arbitrability that are not ‘intimately in-
 volved in the substance of enforcement of a patent right,’”
 such as those presented here. See Microchip Tech. Inc. v.
 U.S. Philips Corp., 367 F.3d 1350, 1356 (Fed. Cir. 2004)
 (quoting Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362, 1365
 (Fed. Cir. 2001)). The Ninth Circuit is the relevant re-
 gional circuit in this case.
     The Ninth Circuit reviews a district court’s order com-
 pelling arbitration de novo and reviews underlying findings
 of fact for clear error. Bradley v. Harris Rsch., Inc., 275
 F.3d 884, 888 (9th Cir. 2001), abrogated in part on other
 grounds by Sakkab v. Luxottica Retail N. Am., Inc., 803
 F.3d 425 (9th Cir. 2015). The district court decision on ap-
 peal here rested entirely on legal determinations concern-
 ing whether the parties agreed to arbitrate arbitrability.
 We, therefore, review the entirety of that decision de novo.
       “When deciding whether the parties agreed to arbitrate
 a certain matter (including arbitrability), courts generally
 . . . should apply ordinary state-law principles that govern
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                              MAXPOWER SEMICONDUCTOR, INC.

 the formation of contracts,” with “an important qualifica-
 tion.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938,
 944 (1995). “Courts should not assume that the parties
 agreed to arbitrate arbitrability unless there is ‘clea[r] and
 unmistakabl[e]’ evidence that they did so.” Id. (quoting
 AT&T Techs. Inc. v. Commc’ns Workers of Am., 475 U.S.
 643, 649 (1986)). Absent that clear and unmistakable del-
 egation, the issue of arbitrability should be decided by a
 court. AT&T Techs., 475 U.S. at 649.
     ROHM USA argues that its TLA with MaxPower lacks
 clear and unmistakable evidence of an agreement to arbi-
 trate arbitrability. None of its arguments are convincing. 1
 Indeed, some border on the frivolous.
      ROHM USA first submits that the CCCP is ambiguous
 because it contains two provisions: § 1297.161, which pro-
 vides that an arbitrator “may rule on its own jurisdiction”
 in international commercial arbitration; and § 1281.2,
 which provides that “the court shall order the petitioner
 and the respondent to arbitrate the controversy if it deter-
 mines that an agreement to arbitrate the controversy ex-
 ists.” ROHM USA claims that this ambiguity prevented
 the district court from choosing between the provisions and
 deferring to the arbitrator on the question of arbitrability.
 But CCCP § 1297.17 provides that Title 9.3, which contains
 § 1297.161, “supersedes Sections 1280 to 1284.2, inclusive,
 with respect to international commercial arbitration and
 conciliation.” CCCP § 1297.17 (emphasis added). Thus,
 the CCCP cannot be ambiguous because only one of the
 provisions ROHM USA cites can be applicable to the dis-
 pute in this case—either CCCP § 1297.161 or § 1281.2, but

     1   We address all arguments properly presented by
 ROHM USA on appeal. ROHM USA has not argued on ap-
 peal that the TLA or its arbitration provision are unen-
 forceable or should be revoked.
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 not both. Which one of the two provisions governs turns on
 whether the dispute at issue is an international one. 2
      Not surprisingly, ROHM USA next argues that CCCP
 § 1297.17 and § 1297.161 do not apply because this dispute
 is not international in nature. ROHM USA contends that
 the dispute before us is a purely domestic one. It first in-
 sinuates that it is a non-party to the TLA and then de-
 scribes this matter as one between two companies based in
 the United States, involving United States patents, and
 filed in a United States district court. Oral Arg. at 4:00–
 5:00, available at https://oralarguments.cafc.uscourts.gov/
 default.aspx?fl=21-1709_10052021.mp3. Based on this
 contention, ROHM USA asserts that § 1297.161 is irrele-
 vant and that the District Court erred in relying upon it.
 ROHM USA is quite clearly wrong.
     ROHM USA’s contention that § 1297.161 is irrelevant
 to the dispute before us mistakes the record facts and

     2    In support of its ambiguity argument, ROHM USA
 relies on, among other arguments, its claim that § 1297.161
 is one in a sea of CCCP provisions relating to arbitration.
 But, while the CCCP does contain many provisions related
 to arbitration, only the two provisions referenced above
 could even arguably be applicable to this dispute. CCCP
 Titles 9, 9.1, 9.2, 9.3, 9.4, and 9.5 apply to various catego-
 ries of arbitration. Of these, Titles 9.1, 9.2, 9.4, and 9.5
 clearly are inapplicable because they, respectively, are di-
 rected to arbitration of medical malpractice claims, public
 construction contracts, real estate contracts, and fire-
 fighter and law enforcement officer labor disputes. That
 leaves only Titles 9 and 9.3 as potentially applicable provi-
 sions. As we discuss in the next section herein, it is clear
 that the provisions directed to international commercial ar-
 bitration in Title 9.3 apply. It is not difficult for sophisti-
 cated parties such as ROHM USA to understand how the
 CCCP is structured.
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                             MAXPOWER SEMICONDUCTOR, INC.

 ignores the key text of the code. While ROHM USA may
 not be a signatory to the TLA, it clearly is covered by, and
 obligated under, it. The TLA provides that it applies to all
 subsidiaries of ROHM Japan. See J.A. 651 (TLA) (“THIS
 TECHNOLOGY LICENSE AGREEMENT . . . is entered
 into . . . by and between MaxPower Semiconductor, Inc., a
 California corporation . . . and Rohm Co., Ltd., a Japanese
 corporation . . ., and its subsidiaries . . . .” (emphasis
 added)); see also J.A. 619 (TLA 2011 Amendment) (provid-
 ing an identical definition of the parties to the TLA in the
 context of the 2011 amendment). No matter how ROHM
 USA tries to pigeonhole this action into its “domestic ac-
 tion” moniker, moreover, this case is merely one aspect of
 a sprawling international dispute. MaxPower first raised
 its concerns about royalties allegedly owed under the TLA
 with ROHM Japan, ROHM USA’s parent company. It was
 only after MaxPower told ROHM Japan of its intent to take
 the dispute to arbitration under the very TLA at issue be-
 fore us that ROHM USA brought this declaratory judgment
 action seeking a declaration of noninfringement for the
 products on which MaxPower seeks royalties from ROHM
 Japan. And ROHM USA has also challenged MaxPower
 patents in Korea and China.
     Under the broad terms of § 1297.13, which defines in-
 ternational arbitration for the purposes of whether Title
 9.3 applies, this dispute has all the hallmarks of an inter-
 national dispute. CCCP § 1297.13 provides that:
     An arbitration or conciliation agreement is inter-
     national if any of the following applies:
     (a) The parties to an arbitration or conciliation
     agreement have, at the time of the conclusion of
     that agreement, their places of business in differ-
     ent states.
     (b) One of the following places is situated outside
     the state in which the parties have their places of
     business:
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         (i) The place of arbitration or conciliation if
         determined in, or pursuant to, the arbitra-
         tion or conciliation agreement.
         (ii) Any place where a substantial part of
         the obligations of the commercial relation-
         ship is to be performed.
         (iii) The place with which the subject mat-
         ter of the dispute is most closely connected.
     (c) The parties have expressly agreed that the sub-
     ject matter of the arbitration or conciliation agree-
     ment relates to commercial interests in more than
     one state.
     (d) The subject matter of the arbitration or concili-
     ation agreement is otherwise related to commercial
     interests in more than one state.
      It is undisputed that ROHM Japan and MaxPower
 have their places of business in different “states,” 3 Japan
 and the United States, respectively. Thus, the TLA is “in-
 ternational” under at least CCCP § 1297.13(a). It also ap-
 pears that the TLA is international under CCCP
 § 1297.13(b)(ii), (c), and (d), as the TLA permits ROHM to
 make, sell, and market products using the licensed tech-
 nology in a territory defined as “the entire world.” J.A. 653
 (TLA ¶¶ 1.12, 2). The TLA contains other similar “global”
 terms, such as its definition of “patents” as all of Max-
 Power’s patents “in all countries of the world” relating to
 the developed technology. J.A. 658 (TLA ¶ 8.2). The CCCP
 dictates that disputes governed by international commer-
 cial arbitration agreements as defined by CCCP § 1297.13

     3   CCCP § 1297.15 explains that, for the purpose of
 the above provision, “the states of the United States, in-
 cluding the District of Columbia, shall be considered one
 state.”
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 8                           ROHM SEMICONDUCTOR USA, LLC v.
                              MAXPOWER SEMICONDUCTOR, INC.

 shall be governed by the provisions of CCCP Title 9.3, in-
 cluding the jurisdictional provision of § 1297.161, and
 § 1297.17, which makes clear that other generally applica-
 ble arbitration provisions are superseded in such cases.
     ROHM USA next argues that, even if it is clear that
 this is an international dispute and that § 1297.161 ap-
 plies, that provision is not a clear and unmistakable dele-
 gation of authority to the arbitrator to decide the question
 of arbitrability because it is permissive. ROHM USA ar-
 gues that, because § 1297.161 states that “[t]he arbitral tri-
 bunal may rule on its own jurisdiction,” CCCP § 1297.161
 (emphasis added), it merely allows the parties to agree to
 waive a court determination, which ROHM USA does not
 want to do. Again, we disagree. ROHM USA is correct that
 “may” is generally a permissive verb. See, e.g., Patterson v.
 Wagner, 785 F.3d 1277, 1281 (9th Cir. 2015) (“The normal
 reading of ‘may’ is permissive, not mandatory.”). But
 “may” here does not mean “may also,” as ROHM USA
 urges. MaxPower’s interpretation of the permissive “may”
 as “may, if arbitrability is disputed,” makes much more
 sense in this context.
     Indeed, ROHM USA’s interpretation of “may” would
 render § 1297.161 meaningless.         It would interpret
 § 1297.161 to mean that the arbitral tribunal or a court
 may determine arbitrability. But that is already true ab-
 sent § 1297.161. Thus, ROHM USA’s interpretation would
 render § 1297.161 a dead letter. MaxPower’s interpreta-
 tion of “may,” on the other hand, makes sense in context.
 Use of the mandatory “shall” in this provision, rather than
 “may” would suggest that the arbitrator must decide arbi-
 trability as a threshold matter, even where arbitrability is
 not disputed, or risk being overturned on appeal for the
 failure to do so. Use of the permissive “may” allows the
 arbitrator to address arbitrability only where necessary.
 This interpretation is confirmed by our sister circuits’ in-
 terpretation of a similar phrase in the analogous United
 Nations Commission on International Trade Law
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 ROHM SEMICONDUCTOR USA, LLC v.                                9
 MAXPOWER SEMICONDUCTOR, INC.

 (“UNCITRAL”) rule, which states that “[t]he arbitral tribu-
 nal shall have the power to rule on its own jurisdiction.”
 U.N. Comm’n on Int’l Trade L., UNCITRAL Arbitration
 Rules art. 23, para. 1, U.N. Doc. A/RES/65/22 (Jan. 10,
 2011) (emphasis added). Multiple circuit courts have held
 that the UNCITRAL language vests the arbitrator with ap-
 parent authority to decide questions of arbitrability. See,
 e.g., Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069,
 1073 (9th Cir. 2013); Republic of Argentina v. BG Grp. PLC,
 665 F.3d 1363, 1371 (D.C. Cir. 2012); Schneider v. Kingdom
 of Thailand, 688 F.3d 68, 73–74 (2d Cir. 2012). As the dis-
 trict court found, there is no difference between “may” and
 “shall have the power to” in this context. J.A. 884–86.
     Indeed, the Ninth Circuit concluded in Oracle that
 “shall have the power to” in the UNCITRAL rules “vest[s]
 the arbitrator with the apparent authority to decide ques-
 tions of arbitrability. Oracle, 724 F.3d at 1073. In Oracle,
 the Ninth Circuit found that a contract that stated that ar-
 bitration would be administered “in accordance with the
 rules of the United Nations Commission on International
 Trade Law (UNCITRAL) (the ‘Rules’) in effect at the time
 of arbitration” was “clear and unmistakable evidence that
 the parties to the contract intended to delegate questions
 of arbitrability to the arbitrator.” Id. at 1071. In so finding,
 the Ninth Circuit explained its inquiry as: “whether the
 court or the arbitrator decides arbitrability is ‘an issue for
 judicial determination unless the parties clearly and un-
 mistakably provide otherwise.’” Id. at 1072 (quoting How-
 sam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)
 (emphasis added) (alteration and citation omitted)). The
 dispute in Oracle was over whether incorporation of
 UNCITRAL rules constituted clear and unmistakable evi-
 dence of the parties’ intent to delegate arbitrability. Id. at
 1073. The Ninth Circuit looked to cases from other circuits
 and concluded that it had no reason to deviate from the
 prevailing view that incorporation of the UNCITRAL arbi-
 tration rules is clear and unmistakable evidence that the
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 10                          ROHM SEMICONDUCTOR USA, LLC v.
                              MAXPOWER SEMICONDUCTOR, INC.

 parties agreed the arbitrator would decide arbitrability.
 Id. at 1074–75.
     Virtually all courts to consider the question, including
 this court, have concluded that, in contracts between so-
 phisticated parties, incorporation of rules with a provision
 on the subject is normally sufficient “clear and unmistaka-
 ble” evidence of the parties’ intent to delegate arbitrability
 to an arbitrator. See, e.g., id. at 1075 (interpreting a con-
 tract incorporating the 2010 UNCITRAL rules); Republic
 of Argentina, 665 F.3d at 1371 (1976 UNCITRAL rules);
 Schneider, 688 F.3d at 73–74 (1976 UNCITRAL rules); Pet-
 rofac, Inc. v. DynMcDermott Petroleum Operations Co., 687
 F.3d 671, 675 (5th Cir. 2012) (AAA rules); Fallo v. High-
 Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009) (AAA rules);
 Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1373 (Fed.
 Cir. 2006) (applying Ninth Circuit law and interpreting a
 contract incorporating the AAA rules), abrogated on other
 grounds by Henry Schein, Inc. v. Archer & White Sales,
 Inc., 139 S. Ct. 524 (2019); Terminix Int’l Co., LP v. Palmer
 Ranch Ltd. P’ship, 432 F.3d 1327, 1332 (11th Cir. 2005)
 (AAA rules).
     ROHM USA first argues that Oracle is distinguishable
 because the CCCP differs from the UNCITRAL rules.
 ROHM USA argues that because the CCCP is ambiguous
 about who determines arbitrability, it is unlike the much
 clearer statement in UNCITRAL. We have already ex-
 plained above why we do not agree that the CCCP is am-
 biguous in this context and why we see no daylight between
 the language in the relevant UNCITRAL rule and
 § 1297.161 of the CCCP.
     ROHM USA further argues that the mere incorpora-
 tion of rules, such as the UNCITRAL, AAA, or CCCP rules,
 is not a sufficiently clear and unmistakable delegation of
 authority to determine arbitrability under First Options of
 Chi., Inc. v. Kaplan, 514 U.S. 938 (1995). It argues that we
 should overrule Oracle (and apparently all other cases
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 ROHM SEMICONDUCTOR USA, LLC v.                              11
 MAXPOWER SEMICONDUCTOR, INC.

 listed above) on that ground. But Oracle—which was de-
 cided long after First Options and is binding on us in this
 appeal—expressly found to the contrary, relying on the
 very standard set out in First Options and reiterated in
 Howsam. The same is true with respect to the string of
 other cases upon which the district court relied and of our
 decision in Qualcomm.
      For the first time in its reply brief to this court, ROHM
 USA argues that the Third Circuit has disagreed with this
 prevailing view, including with our own decision in Qual-
 comm. See Qualcomm, 466 F.3d at 1373. It claims that the
 Third Circuit has held that the incorporation of AAA rules
 is not a clear and unmistakable delegation of arbitrability.
 See Chesapeake Appalachia, LLC v. Scout Petroleum, LLC,
 809 F.3d 746 (3d Cir. 2016). ROHM USA did not raise this
 argument before the district court or in its opening brief on
 appeal, so it is forfeited twice over. But, even not forfeited,
 we reject ROHM USA’s broad reading of Chesapeake Appa-
 lachia. There, the Third Circuit held that “[v]irtually every
 circuit to have considered the issue has determined that
 incorporation of the [AAA] arbitration rules constitutes
 clear and unmistakable evidence that the parties agreed to
 arbitrate arbitrability,” and it did not disagree with that
 view in principle. Id. at 763 (quoting Oracle, 724 F.3d at
 1074). The court went on, however, to find an exception to
 this general rule in the circumstances of that case, i.e., a
 class action. Id. In doing so, the Third Circuit relied on
 the contracts’ “total absence of any reference to classwide
 arbitration.” Id. at 759 (quoting Reed Elsevier, Inc. ex rel.
 LexisNexis Div. v. Crockett, 734 F.3d 594, 599 (6th Cir.
 2013)). It found that locating the AAA provision delegating
 class arbitrability to an arbitrator required “a daisy-chain
 of cross-references” from the contract to the AAA to one of
 the AAA’s fifty-plus sets of rules, the Commercial Rules,
 which refer only to bilateral arbitration, and from there to
 later-enacted Supplementary Rules, which refer to class
 arbitration. Id. at 761.
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      Here, the dispute concerns bilateral, not class, arbitra-
 tion. And finding the applicable CCCP provision does not
 require “a daisy-chain of cross-references.” As noted, the
 CCCP incorporated by the TLA has only six titles relevant
 to arbitration. And, as explained above, Title 9.3, directed
 to international commercial arbitration, is the only one ap-
 plicable to this dispute. The facts in Chesapeake Appala-
 chia are clearly distinguishable.
       The only case ROHM USA has located that has held to
 the contrary in the context of bilateral arbitration is a Flor-
 ida state court decision, Doe v. Natt, 299 So. 3d 599 (Fla.
 Dist. Ct. App. 2020), review granted sub nom. Airbnb, Inc.
 v. Doe, No. SC20-1167, 2021 WL 798838 (Fla. Mar. 2,
 2021). The state court criticized Oracle and other circuit
 court decisions we have identified, stating that: “none of
 these cases have ever examined how or why the mere ‘in-
 corporation’ of an arbitration rule such as the one before us
 . . . satisfies the heightened standard the Supreme Court
 set in First Options, nor how it overcomes the ‘strong pro-
 court presumption’ that is supposed to attend this inquiry.”
 Id. at 608.
     We decline to adopt the view of a single Florida state
 court, which itself is currently under review by the Florida
 Supreme Court, and reaffirm our agreement with the pre-
 vailing view of our sister circuits. See Qualcomm, 466 F.3d
 at 1373. In contracts between sophisticated parties, it is
 fair to hold the parties to all provisions of their contract,
 including those incorporated by reference. To hold other-
 wise would deprive sophisticated parties of a powerful tool
 commonly used to simplify their contract negotiations—
 adoption of provisions established by neutral third parties.
 And to refuse to give effect to the plain language of the con-
 tract, both its incorporation of the CCCP and the CCCP’s
 delegation of arbitrability to an arbitrator, would ignore a
 basic premise of contract law—that contracts are written
 legal instruments and their words are not to be ignored.
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                      III.   CONCLUSION
     For the foregoing reasons we affirm the district court’s
 decision.
                        AFFIRMED