Tort reformer Ted Frank and I have had our disagreements over the years. (See here and here.) In recent years, he has focused his work on filing objections to class action settlements through the Center for Class Action Fairness. Some of his work has focused on getting a better deal for class action members who, he alleged, weren’t receiving fair portions of the proposed settlement, but the bulk of his objections — at least to my knowledge — have focused on reducing the attorney’s fees claimed by the class counsel.

 

As Alison Frankel reported yesterday, it seems that, in the course of his contingent-fee work on behalf of people objecting to class action settlements, Frank has found himself in a situation he himself describes as “lurid, complex and Grishamesque.” The situation seems to have arisen from his personal goals as a lawyer being different from one of his client’s goals, and from his fee-splitting relationship with another firm, the very same issues he so frequently raises in his objections.

 

It would seem like a perfect opportunity for schadenfreude, but, in fact, all I can feel for him is sympathy — and his misfortune in the In Re: Capital One Telephone Consumer Protection Act Litigation presents a tremendous opportunity for tort reformers, politicians, the press, and the public to see just how difficult class actions, mass tort, and other large-scale litigation can be. In that case, Frank filed an appeal on behalf of a class member objecting to the fee claimed by Lieff Cabraser, and then everything went south. 
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The incomparable ability of estate litigation to drag on is literally a joke, a joke so old and so well-known that more than 150 years ago Charles Dickens opened the novel Bleak House with reference to the fictional Jarndyce and Jarndyce estate proceeding that had been going on for generations.

Sylvan Lawrence was one of the largest owners of real estate in downtown Manhattan when he died in December 1981. Last week, a mere 31 years, 5 months, and 2 weeks later, an appellate court in New York decided the fee dispute between his estate and Graubard Miller, the firm his wife (who died in 2008) hired in 1983 to represent the estate in litigation against one of his partners (who died in 2003). New York Law Journal article here; New York Appellate Division opinion here.

By the end of 2004, Lawrence’s widow, Alice Lawrence, had paid approximately $22 million in legal fees on an hourly fee basis for the estate litigation. Though by that point there was a $60 million offer to settle the case, and her attorneys had internally valued the case at $47 million, Lawrence thought she deserved more, but she was tired of those bills and the uncertainty. Lawrence thus asked the firm to represent her on a contingency fee agreement (40%) and they agreed.

Five months later, in May 2005, after the firm had put another 3,795 hours into the case, the case settled for $111 million.

Lawrence refused to pay the 40%. I wrote about the case before, back in 2007, noting “Ms. Lawrence obviously had the funds available to hire a large corporate firm on an hourly (or flat fee) basis, and to pay all costs of the litigation herself upfront. In so doing, she would have borne all the risk of spending enormous sums of money without a guaranteed return. Instead, she contracted with a firm to bear all of that risk; within five months, it had achieved a result with which she was content.” 
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[Update, March 21, 2013: Eric Turkewitz chimes in with his 10 Signs The New Matter is a Dog (Before you even consider the merits). I am more tolerant of #1, #3, and #4, depending on circumstances, but #2 and #5-#10 all pretty much guarantee I will not investigate further and will reject the case. One other big point that #2, #8, and #9 can reveal: do not take on hostile clients. It doesn’t matter how good their case looks, they are not worth it. If a potential client is rude to my secretary or paralegals, they are gone, no questions asked.]

Last week The Legal Intelligencer reported on the Pennsylvania Superior Court affirming dismissal of a Paxil birth defect case. (Opinion here.) The case involved a little girl born with a congenital heart defect known as hypoplastic left heart syndrome, who thereafter had a tragic course. There’s evidence tying SSRI antidepressants like Paxil to heart defects, so it’s unsurprisingly that a claim was filed, but the claim was, to put it mildly, challenging to prove. The plaintiff had no medical records from anywhere showing that she took Paxil, and no doctors who could remember prescribing her Paxil. As the trial court recounted:

Mary testified she first received Paxil from her family doctor, George Huntress, beginning September 1996. She claims Dr. Huntress gave her additional samples again in October and November 1996. Although she conceived approximately November 7, 1996, Mary testified she took Paxil until November 13, 1996 when her obstetrician confirmed [that she was pregnant]. Dr. Huntress no longer practices medicine, nor recalls treating Mary (he did not even recognize her photograph). Moreover, there are no available medical records showing he treated her at all let alone prescribing Paxil.

However, other contemporaneous medical records, including emergency room visits, indicate she took various other medications such as Ibuprofen, Bactrim, Motrin, Terazol and Flagyl. There is also evidence Mary’s obstetrician, Dr. Rick Visci, prescribed Zoloft which she took from approximately November 1995 until March 1996 and again after her pregnancy. He never prescribed Paxil.

The Philadelphia trial court dismissed the case, holding that, without medical records, the plaintiff would not be able to prove they took Paxil. (So much for the American Tort Reform Association’s claim Judge Moss is biased towards plaintiffs.) The Superior Court reversed that basis, holding that the plaintiff’s testimony created a factual issue for the jury, but then affirmed dismissal on another basis, a basis on which the plaintiff had waived its argument.

I don’t want to get into the nitty-gritty of the case, except to point out an important practice tip for plaintiff’s lawyers: don’t take cases where you don’t have any medical records to back up the plaintiff’s claims. I’ve never seen a medical record that was 100% in line with the recollections of the patient, their doctors, and their nurses, and we’ve had many cases in which we proved that medical records had inaccuracies or outright falsifications. That said, the absence of any evidence in the medical records that a plaintiff took a particular drug (if a drug case), or reported a particular symptom (if a malpractice case), or was diagnosed with the signs and symptoms of a particular injury (if an accident case) should be a big red flag for any plaintiff’s lawyer investigating the case.

The Paxil case was, in many ways, an exception that proves the rule. The case involved terrible damages (the little girl suffered a stroke at eight months old immediately following heart surgery, then passed away near their 10th birthday) and the presence of a pre-existing mass tort that made the case comparatively easier and less expensive to pursue in the pre-trial stages. So, if you have a case with huge damages, and you’re filing it alongside dozens or hundreds of similar cases, and you have a plan for proving the issue — e.g.., the plaintiff and their spouse will both testify credibly in support of the issue, like in the Paxil case — then consider it. Otherwise, kindly explain to them that the plaintiff bears the burden of proof, and recommend they get a second opinion from another lawyer before the statute of limitations runs.

So there’s our first rule: (1) don’t take cases where you don’t have any medical records to back up the plaintiff’s claims.

How about a couple more? 
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Last week, I wrote about a commonplace problem in product liability lawsuits: when courts forbid plaintiffs’ lawyers from sharing relevant discovery evidence amongst themselves, they inadvertently enable the defendants to engage in discovery fraud by cherry-picking which evidence they produce in each case. A new article by the federal judge (and the special masters he appointed) who oversaw the 9/11 Responders litigation reveals another critical component of a successful and fair resolution of high-stakes litigation: the cases need to move.

The article, Managerial Judging: The 9/11 Responders’ Tort Litigation (via TortsProf), is one-part guidance for future courts in similar situations and one-part a defense of Judge Hellerstein’s unorthodox methods in the case, which included his rejection of the initial proposed settlement — an exercise of judicial power that, while common in class actions, is unheard of in individual personal injury cases. (Judge Hellerstein himself notes in the article that his power was disputed, and says, “if I was right in asserting supervisory control of the litigation and rejecting the initial settlement, then those powers should be clearly set forth” by future statutes and rules.)

On the one hand, the 9/11 Responders litigation was indeed “unprecedented,” but, then again, so are most mass torts. Pharmaceutical liability mass torts are somewhat routine these days, but, for example, the consolidated asbestos litigation presented many of the same problems of scientific causation and varied individual exposure as the 9/11 Responders cases. Each case presents new and unique challenges.

In many ways, the most unique aspect of the 9/11 First Responders was the defendants’ interest in settling — the biggest defendant was the “Captive” billion-dollar insurance fund created by the government for the purpose of settling the claims.  That certainly didn’t make the case easy, but it added an element missing from most mass torts: some willingness among the defendants to settle for a reasonable amount. Usually, defendants want to tell people to take their cancer, their uncontrollable hemorrhaging, their heart attacks, and go home penniless.  

The part I found encouraging was the authors’ recognition of the reality of mass torts litigation as a war of attrition in which the defendant usually has far more money and far more time, than the plaintiffs:

Defendants exert leverage by pressuring the plaintiffs’ contingent fee structure. Defendants’ counsel are paid on a current and hourly basis and staff liberally. The result is extensive discovery, numerous motions, and a general prolongation of proceedings. It becomes expensive for plaintiffs’ counsel to fund the litigation, and a practice has grown of financing mass tort actions at high compound interest rates with repayment deferred until a settlement or recovery is accomplished.

As the article notes, the Responders’ lawyers, from the plaintiffs’ firms Napoli Bern Ripka Shkolnik and Worby Groner Edelman, “borrowed by 2010 more than thirty million dollars to help finance over seven years of litigation,” in loans personally guaranteed by the partners of the firm, with interest rates ranging from 6% to 18%, ultimately resulting in approximately $11 million dollars in interest fees alone. Carrying tens of millions of dollars in debt around your neck for years, without receiving a penny of income meanwhile, unsurprisingly has an effect on how you pursue the cases, and your evaluation of the cases’ settlement value. As Judge Strine in Delaware rightly recognized, the “real risk” in litigation grows the longer the case is in suit.
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“Referral fee” can mean a lot of different things in the law. The plainly unethical version involves lawyers paying non-lawyers (like doctors or tow truck drivers or union bosses) to send them potential cases, but, when plaintiff’s lawyers use the term “referral fee,” they usually mean: the part of a damages award or settlement that one lawyer takes from the overall contingent attorney’s fees for sending a potential client to another lawyer. Perhaps the most common is the “third of a third,” in which the client is represented on a one-third contingent fee (i.e., the lawyer takes one-third of any settlement or verdict), and then that fee is split between the lawyers so that the referring lawyer takes one-third of the fee while the lawyer who litigated the case takes two-thirds of the fee. If the underlying fee agreement with the client seeks 40%, then often the referral fee will be 40% of that fee.

Referral fees are the lifeblood of the injury, malpractice, and product liability world. Sure, the litigating attorneys frequently grumble about paying such a sizable fee given that the referring attorney “did no work” and “didn’t pay any costs.” But those same attorneys, when they’re the referring attorney, don’t hesitate to point out that the litigating attorney wouldn’t have the case at all without the referral fee, and that the referring attorney could have just as easily run with the case as co-counsel. (Indeed, referral attorneys often do stay around as “co-counsel” on the case, even if they do only nominal work, a point we’ll return to in a moment.)

The existence of referral fees creates a marketplace among lawyers for injury claims, and thus a marketplace for good lawyers. Take a look at the top plaintiff’s law firms in a given city and I can guarantee you that not one of them was built on television commercials, or Yellow Pages (yes, they still exist), or Avvo reviews, or search engine optimization — they were built on reputation and referral fees. Those lawyers proved themselves in court, and, as their good reputation grew, more and more cases were referred to them, providing stronger and larger cases and allowing them to be more selective, and the virtuous cycle continued.

Tort reformers press for an alternative to this system, one in which referral fees are banned.  If they get their way, the prohibition on referral fees would remove the incentive that drives “large net” advertising, which can be annoying but serves the purpose of connecting injuries people with appropriate legal counsel. Without referral fees, the lawyers with the inclination and the budgets to advertise won’t send clients to the lawyers who are best able to handle the client’s claim. That, in turn, would encourage lawyers who are not the best suited for a particular claim to “give it a shot” and to try to litigate the case themselves — to the detriment of the client.

Which brings us to the Law Offices of Catalano & Plache v. Brustin case reported by the New York Law Journal. I’m not familiar with Catalano & Plache, which, according to the NYLJ, “had an ongoing relationships with the Ramapough Tribe, which has a presence in Bergen County, N.J., and Rockland County, N.Y., and had represented the tribe’s interests for more than 17 years.” But I am familiar with the defendants, Neufeld Scheck & Brustin and Emery Celli Brinckerhoff & Abady, two of the most prominent civil rights law firms in New York City. You might be, too: the “Neufeld” and “Scheck” are the co-founders of the Innocence Project. 
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Earlier this week, The Legal Intelligencer published an article on attorney’s fees* in workers’ compensation** cases that’s currently pending before the Pennsylvania Supreme Court. (* For anyone curious about the answer to the age-old question of whether to use attorney fees, attorneys fees, attorney’s fees, or attorneys’ fees, consider this court opinion. ** For anyone curious about the other age-old question of whether to use worker’s compensation, workers’ compensation, or workers compensation, consider this blog post. Pennsylvania’s laws call them attorney’s fees and workers’ compensation, so I will, too.)

I’ve written a lot about contingent fee representation on this site, because there are a lot of misconceptions surrounding it. For example, few people — including many lawyers — realize just how expensive contingent fee litigation really is for the lawyers who represent plaintiffs. Take all the expenses you can imagine in a lawsuit (hiring experts, paying for court reporters, et cetera), then add more for the punitive tax treatment for contingent fee lawyers: unlike every other business in America, when we spend money on a case, we can’t deduct that cost from our income tax as “business expenses.” The tax code pretends that money we have paid to someone else exists as a profit until the case is entirely finished, often years after we paid the money, when it magically converts into either a loan (if it’s reimbursed from the settlement or judgment) or a “business expense” (if we have simply eaten the cost).

Workers’ compensation is supposed to be cheaper and more efficient for workers than a normal personal injury lawsuit, and by and large it is. The worker doesn’t have to prove their employer was negligent, just that the accident was work-related, and incentives are built-in to encourage lawyers to take the cases and to lower their contingency fees. For example, here in Pennsylvania, an employee in a contested case is entitled to “a reasonable sum for costs incurred for attorney’s fee, witnesses, necessary medical examination, and the value of unreimbursed lost time to attend the proceedings, though the attorney’s fee “may” be eliminated if the employer or insurer had a “reasonable basis” for the defense.

Because of those incentives, workers compensation attorneys generally charge a lower contingent fee than personal injury lawyers. Whereas the industry standard personal injury contingent fee is between 33% to 40% (depending on the type of case), the bulk of workers’ comp attorneys charge a 20% contingency. Indeed, many unions and injured workers’ advocacy groups, like the Pennsylvania Federation of Injured Workers, demand that any attorney who wants to be recommended by the union or group agree to charge no more than 20% (with a cap prohibiting deduction of future benefits more 250 weeks past the award), and further reduce the contingent to 15% if the claim is settled for a lump sum. (Here’s the PFIW’s panel attorneys’ agreement.) They similarly require attorneys not charge a fee for simple matters that can be cleared up with a phone call or a letter.

And that’s where the Pennsylvania Supreme Court case comes in. Prior to 2006, Pennsylvania’s workers’ compensation law imposed a 20% cap on the contingent fee, but allowed a higher fee to be approved in certain circumstances:


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Product liability claims are doubly challenging for plaintiffs’ lawyers. First, product liability law is in a state of flux (with the trend going against injured consumers). Second, product liability cases are notoriously time-consuming and expensive to pursue: in addition to all the ordinary expenses and burdens of personal injury litigation, product cases usually require hiring a bevy of experts who then have to spend hundreds of hours examining the products and preparing their reports. It’s not unusual for lawyers to spend over one hundred thousand dollars on a product liability case in out-of-pocket expenses alone (not including lost attorneys fees), and when you start talking about complicated products like cars, you’re talking about a quarter million dollars or more.

That’s part of why product liability court opinions often have such tragic facts: the claim needs to be worth $1 million or more to justify the risk, and generally speaking, brain injury, spinal cord injury, and wrongful death cases are most likely to produce those kinds of awards. Whatever the injury is, it needs to be permanent, otherwise you’re investing six figures into a case that will, after expenses, return far less than that — or nothing at all.

Correspondingly, because the product liability suits brought involve such huge damages, they never follow the sort of routine that car accident and slip and fall cases do — where production of medical reviews and review of any police report or witness statements will answer most of the factual questions, and so the case can be settled with minimal litigation long before trial. The manufacturer or seller of a defective product will virtually never offer any sort of reasonable settlement amounts until after summary judgment and Daubert motions (testing the sufficiency of the plaintiff’s expert witnesses) have been decided.

I’m more than happy to rail all day against the unfair, sometimes downright illogical, restrictions placed on plaintiffs in product liability cases, and I’ve done so many times on this blog (e.g., railing against the Third Restatement of Torts, the learned intermediary doctrine, the judicially-created implied pre-emption doctrine). But sometimes the problem really can be traced back to the plaintiff’s case.

Via Abnormal Use, I learned of two recent product liability summary judgment opinions dismissing the plaintiffs’ respective cases, one in the South Carolina Supreme Court and the other in the federal court in Massachusetts. They’re examples of how the lack of a proper expert opinion can doom a case before it’s ever put in front of a jury.


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There is no shortage of information on the Internet about how to start a solo or very small law practice, perhaps because there are too many recent law graduates unable to find firm jobs and so become “suddenly solo” young lawyers, and I don’t mean to add more general advice to that big pile. I’ve never been a solo practitioner; I am, however, responsible for my own cases and accountable for my own revenues and expenses, and I have also seen my fair share of other lawyers who struck out to be solos and then, well, struck out.

In the big picture, I think Jordan Rushie’s reality-check about starting a solo practice and this interview on The Girl’s Guide To Law School give some of the best single-article advice on the internet about running a practice. New lawyers with their own practice, if nothing else, should repeat to themselves “most malpractice and disciplinary actions result from a lack of follow-up and follow-through” 108 times daily, like a religious mantra, until the importance of process sinks in. (I’ve previously written my thoughts on marketing for young lawyers, and how litigators can improve their skills.)

Carloyn Elefant recently ignited another debate over solo practice with an anonymous guest post by a lawyer describing how his experiment in solo practice failed. Scott Greenfield challenges the author’s mistaken “expectation that he would not only be able to create a viable practice out of nothing, but that it would allow him work/life balance.” Sam Glover similarly notes that there is no free time in the first few years of a solo practice, there is merely more time for marketing and networking.

There was, in my opinion, another fundamental problem with the anonymous poster’s experiment. His business model misunderstood the nature of contingent fee litigation:

I planned to practice criminal defense, immigration, civil rights (police and corrections misconduct), and consumer law (debt defense and FDCPA).  My essential plan was to finance contingency civil rights work with revenue from flat-fee criminal, immigration, and consumer work and contingency FDCPA work.  

(Emphasis mine.)  Before I practiced contingent fee litigation, and perhaps in the first few years, I would have thought this contingency-and-fixed business model for a solo or small firm made sense. It looks like a good way to hedge bets: on the one hand the solo would have the regular income from the hourly and flat fee work, and on the other hand, have the irregular but potentially more lucrative income from the contingency fee work. I still hear lawyers talking about setting up their practice this way, mixing everything from family law to small business with personal injury or civil rights work.

Adding to the apparent sense of this business plan, there’s a handful of prominent lawyers in every city thriving on this model, usually (for reasons that will have to wait for another post) by mixing criminal defense along with catastrophic injury and wrongful death. Don’t be fooled. These success stories are the exception, not the rule, and they succeed because they have two things most solos likely don’t: a large referral network and big war chest. Their business model, however, does not scale down to the average solo practitioner’s size. Let’s review a little math to see why not.


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Over on Twitter, where all the major debates of our time are reduced to the length of text messages, I got into a discussion with Ted Frank. For those of you who don’t know Ted Frank, he’s a prominent “tort reform” advocate. Ted and Walter Olson are among the only “tort reform” advocates who offer substantive commentary and aren’t just whining hypocrites, which is why you’ll see them (as Point of Law and Overlawyered) in my blogroll over to the right.

One thing led to another — like text messages among adolescents, Twitter discussions rapidly devolve either into mutual admiration or mutual destruction —  and I criticized him for always advocating “substantive policy” that was usually little more than an excuse to deny injured persons compensation. In response, he challenged me to name “a non-substantive policy [he has] propounded,” to which I responded that his “injury plaintiffs should always lose” arguments were an example. I read his blog; whatever the issue is, he’s always against injured people and in favor of negligent corporations. I then challenged him in return to give five examples of jury verdicts over $1 million (or appellate court decisions) in favor of injured plaintiffs, with which he agreed.

I don’t think I’m being hypocritical on this point; I’ve been more than willing on my blog to discuss where I thought a plaintiff’s case was rightly dismissed (see #2 and #8 on this list of drug companies’ favorite court decisions of 2011, see this post concluding that Arthur Alan Wolk’s case against Walter Olson was rightly dismissed, and see my recommendation that it be made harder to file patent infringement lawsuits). I didn’t consider this a particularly difficult challenge: you don’t have to look far to find a company recklessly destroying people’s lives in the name of greed.

For example, just last week a brain injured woman in California won a $20 million jury verdict against commercial trucking company J.B. Hunt. In the case, the big rig truck driver ran through a red light, broadsided her at 35 to 40 miles per hour, then cowardly fled the scene, leaving her for dead. Did I mention that the driver had been fired twice before by J.B. Hunt, including for running over a fire hydrant and flooding an intersection, and that he had been fired from multiple trucking jobs over the past decade for safety violations, violent behavior, and attempting to cover up accidents? Scrooge trucking company offered only $2,000,000, far less than the woman’s future medical expenses, to settle the case.

Frankly, I don’t think it takes much to admit that J.B. Hunt deserved to get walloped in that case, both vicariously and directly, or to find similar cases where, gosh darnit, the plaintiff was right to bring a lawsuit and deserved more than a million dollars.

Ted Frank responded to my challenge with a list:

1. Dewey v. Volkswagen AG (3d Cir. 2012).

2. http://blog.chron.com/newswatch/2012/06/jury-awards-2-2-million-verdict-against-drunk-driver/

3. Gutierrez v. Girardi, 194 Cal.App.4th 925 (2011).

4. Burrow v. Arce, 997 SW 2d 229 (Tex. 1999).

5. Rufo v. Simpson, 103 Cal.Rptr.2d 492 (2001)

And I sighed. 
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Few insults draw the ire of personal injury lawyers like “ambulance chaser.” Unlike “trial lawyer,” which business interests have been trying to turn into a slur for years — despite the fact that the term means little to non-lawyers and, among lawyers, can be a compliment for both plaintiff’s and defendant’s counsel — “ambulance chaser” is unambiguously derogatory, implying a mixture of greed, desperation, and exploitation.

The term is doubly insulting because it strikes at the part of our work that is the most emotionally challenging and is the source of our greatest pride: the fact that we are trying to help injured people. In the last week I spoke with a woman who cannot work or even stand anymore because of the pain from titanium clips left inside her by an incompetent physician, and I prepared discovery in a case so tragic that, in every conversation — whether with a doctor, an expert, or even the defense lawyers — there will be a moment of stunned silence in which empathy instinctively forces us to consider that, every day, we do the same thing that family did, and that we have been spared their fate by sheer luck. Mention the word “ambulance,” and I will think of how, inside many ambulances, there is a very hurt person with a sad story that could or should have been prevented, a person that may end up in my office and on my mind every day for years to come. Like it’s my fault that Ethicon makes defective hernia mesh and Bayer’s Essure is a disaster?

Yet, as an amateur etymologist, the term bothers me for another reason: there’s no clear definition. Ask Wikipedia, and it equates “ambulance chasing” with barratry (“barratry can refer to a lawyer seeking clients at a disaster site, which is also known as ambulance chasing”), but there are two problems with that. First, barratry is a notoriously difficult term to define — just ask the Supreme Court, which has been trying for nearly two centuries to define it in the maritime context, see Patapsco Ins. Co. v. Coulter, 28 U.S. 222 (1830)(“It cannot be denied, that what with adjudged cases and elementary opinions, this doctrine has got into a great deal of confusion.”) — and, second, the legal usage of “barratry” usually refers to stirring up groundless litigation.

It certainly would be wrong for a lawyer to chase an ambulance, peddle their services, and then convince the injured person to file a baseless suit, but is that really what is meant by the term “ambulance chaser?” Or does it also refer to lawyers who improperly solicit clients with meritorious cases? 
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