589 F.2d 451

Clyde E. HARVEY and Neil J. Nielsen, co-partners doing business under the name of U-Serve Gas Company, Plaintiffs-Appellants, v. FEARLESS FARRIS WHOLESALE, INC., Fearless Farris Service Stations, Inc., Fearless Farris, Southern, Inc., Fearless Farris, Western, Inc., Fearless Farris of Burley, Inc., and Fearless Farris of Twin Falls, Inc., all being Idaho Corporations, Defendants-Appellees.

No. 77-2442.

United States Court of Appeals, Ninth Circuit.

Jan. 10, 1979.

Herbert W. Rettig (argued) of Rettig, Rosenberrg & Roberts, Caldwell, Idaho, for plaintiffs-appellants.

Ronald G. Carter (argued) of Carter, Gines & Rice, Boise, Idaho, for defendants-appellees.

Before VAN DUSEN,* WRIGHT and GOODWIN, Circuit Judges.

VAN DUSEN, Circuit Judge.

This dispute arose during a nationwide gasoline shortage in 1973. The appeal from summary judgment in favor of defendants raises these questions:

A. Does the evidence show a conspiracy in restraint of trade, in violation of 15 U.S.C. § 1, on the part of corporations, all of which were wholly owned and controlled by á single person?

*452B. Did an enforceable oral contract of sale exist between the parties, so as to require the seller to allocate a portion of its supplies to the buyer during the period of shortage?

C. Was summary judgment improper on this record?

The district court answered these questions, in the negative.1

I. HISTORY OF THE CASE

In 1972-73, Clyde E. Harvey and Neil J. Nielsen, plaintiffs-appellants in this case, were partners in retail gasoline service stations, doing business as U-Serve Gas Company (“U-Serve”). Defendant-appellee Fearless Farris Wholesale, Inc. (“Wholesale”) was a wholesaler of petroleum products and is wholly owned by Farris C. Lind. The other five named corporate defendants-appellees were retail gasoline service station companies (“Retail Companies”), also wholly owned by Lind.

Wholesale formerly sold its products both to the Retail Companies and to unaffiliated retailers, including U-Serve. Then the fuel shortage of 1973 set in. Beginning in January 1973, Wholesale reduced deliveries to U-Serve; later in that year Wholesale completely cut off U-Serve and six other retail customers, which included J. C. Penney Co., the Seven-Eleven chain, and Circle K. In February 1974, under the federal government’s mandatory allocation program, deliveries were partially restored.

Plaintiffs Harvey and Nielsen first filed a complaint against the defendant companies in March 1974. This complaint, as amended in January of 1975, sought recovery in three counts. Count I alleges, inter alia, a conspiracy in restraint of trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Count II alleges violation of Idaho Code § 28-2-615 (corresponding to § 2-615 of the Uniform Commercial Code), which pertains to a seller’s duty to allocate supplies to customers under a contract of sale; Count III charges tortious interference with contractual and business arrangements alleged to exist between plaintiffs and Wholesale.

The defendants moved for summary judgment in July 1974, supporting their motion with affidavits pursuant to F.R.Civ.P. 56. Plaintiffs filed counter-affidavits. In addition, both parties have taken depositions and have filed subsequent affidavits and counter-affidavits.

In a partial summary judgment order of September 5, 1975, the district court granted the defendant companies’ motion for summary judgment on the Count I (Sherman Act) claim, but allowed the other two counts of the amended complaint to remain on the merits. Harvey and Nielsen appealed from the partial summary judgment and both parties briefed the Sherman Act issue for this court. However, on February 3, 1977, this court dismissed the appeal for lack of a final order in the district court, remanding the matter for disposition of the remaining two counts. On June 10, 1977, the district court entered a final judgment in favor of defendants on these counts, and this appeal followed.

In accordance with this court’s order of February 3, 1977, the parties utilized their briefs prepared in the first appeal for their Sherman Act claim in this second appeal. Both parties, in addition, briefed on this appeal the issues arising under Count II. Plaintiffs did not pursue their Count III claim in briefs or at oral argument on this appeal.

II. SHERMAN ACT CLAIM: INTRA-ENTERPRISE CONSPIRACY

Plaintiffs allege that the defendant companies’ course of conduct during the period of fuel shortage constituted a “combination or conspiracy in restraint of trade” prohibited by § 1 of the Sherman Act.2 To prevail *453on this claim under § 1, plaintiffs ultimately would have to prove that the restraint alleged was an unreasonable one.3 First, however, they must surmount the threshold hurdle of showing a combination or conspiracy. Defendants argue that plaintiffs have not passed this threshold.

a. Factual Issues

The parties do not dispute the following facts: that the incorporators of all the defendant corporations are the same; that Farris C. Lind is the sole shareholder, President and Board Chairman of Wholesale and of all the Retail Companies; that Lind, his wife Virginia, and Neal R. Olson are the directors of each of these corporations; that Olson is Executive Vice President and General Manager of each corporation; that Virginia Lind has never taken an active part in management of the corporations; and that accounting convenience and tax benefits were the original reasons for doing business through separate corporations.

However, plaintiffs argue that there is at least a genuine issue of fact as to whether two or more persons participated in the decision to cut off supplies to them in 1973. An affidavit of Mr. Olson, dated July 2, 1974, states:

“From the inception of each of the Defendant corporations and of all other business affairs of Farris C. Lind, [Lind] has been and remains the sole party who has made all business decisions, including policy, customer relations, source of supply and customers to whom the products shall be sold. . . . Neal R. Olson has had the responsibility of the day-today implementation of the business decisions and policies as set by Farris C. Lind.”

Similarly, an affidavit of Mr. and Mrs. Lind, dated February 6, 1975, declares that “Lind is in total and complete control of each of the [defendant] corporations,” and specifically that the decision to discontinue supplies to plaintiffs “was a decision made solely by Farris C. Lind,” which Lind only subsequently communicated to Mr. Olson.

In an affidavit of September 23, 1974, in an affidavit of August 12, 1975, and in a deposition of January 16, 1975 plaintiff Harvey made statements the substance of which was as follows: that during several years of extensive dealings with Wholesale, Mr. Harvey had always conducted business directly with Mr. Olson and never with Mr. Lind; that Mr. Olson had often made on-the-spot sale agreements with Mr. Harvey and had promised not to cut off plaintiffs’ supplies in the event of a gasoline shortage; 4 that it was Mr. Olson who advised plaintiffs that Wholesale would not make further deliveries of gasoline in 1973; that neither then nor at any other time was Mr. Harvey informed that Mr. Lind had made the decision or policy which Mr. Olson was carrying out; that Mr. Olson was highly skilled and experienced in the petroleum industry, while Mr. Lind was (in 1975) sick and unable to move freely about. Plaintiffs also point to a deposition taken from Mr. Olson on March 7, 1977,5 wherein he *454states that he informed customers by telephone as to availability of supplies during the shortage months. In addition, plaintiffs note the provision for three directors under the defendant companies’ articles of incorporation and under Idaho Code § 30-139, and urge that the decision to refuse to deal with plaintiffs must necessarily have been made by all three directors.

Since this case is here on appeal from summary judgment, this court must determine whether plaintiffs have raised a genuine issue of material fact within the meaning of F.R.Civ.P. 56(c). We are mindful of the Supreme Court’s admonitions that “summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot,” Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); see Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 704, 89 S.Ct. 1391, 22 L.Ed.2d 658 (1969); and that on summary judgment motions “the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion,” United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); see Mutual Fund Investors v. Putnam Management Co., 553 F.2d 620, 624 (9th Cir. 1977); United States v. Perry, 431 F.2d 1020, 1022 (9th Cir. 1970). Nevertheless, the Poller case, supra, is not an insurmountable barrier to summary disposition of antitrust complaints, as the Supreme Court later emphasized when it granted summary judgment in First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). Accordingly, this court has adopted the following rule:

“Once the allegations of conspiracy made in the complaint are rebutted by probative evidence supporting an alternative interpretation of a defendant’s conduct, if the plaintiff then fails to come forward with specific factual support of its allegations of conspiracy, summary judgment for the defendant becomes proper.”

Mutual Fund Investors, supra, 553 F.2d at 624, quoting ALW, Inc. v. United Airlines, Inc., 510 F.2d 52, 55 (9th Cir. 1975).

Here the defendants have presented probative evidence that only a single person, Mr. Lind, made the decision to refuse to deal with certain customers of Wholesale. We can find no “specific factual support,” either direct or inferential, for plaintiffs’ assertions to the contrary. The fact that Mr. Lind had never dealt personally with a relatively minor customer like Mr. Harvey has no bearing on Lind’s capacity to make the policy decision that such customers should be cut off in times of shortage. Likewise, although Mr. Harvey asserted in his 1975 affidavit that “Farris Lind is in poor health and is unable to move freely without assistance,” this statement was in the present tense: plaintiffs produced no evidence that Mr. Lind was infirm in 1973 when the events at issue occurred, nor even that his infirmity was of the sort that would keep him from running his business. As for the fact that the Farris corporations each had three directors, to conclude therefrom that a particular policy decision made in response to a crisis was necessarily made by formal vote of the directors would be to make a legal presumption wholly at odds with reasonable factual inference.

In sum, although Mr. Olson was the conduit of communications with customers and had apparent authority to make subsidiary decisions as to purchase prices and terms of delivery, the most that can be plausibly *455inferred from the evidence presented is that Mr. Olson, in his capacity as general manager, carried out on a day-to-day basis the policy decisions of Farris C. Lind, the man who was sole owner and chief executive officer of Fearless Farris Wholesale. Thus, even viewing the evidence in the light most favorable to the plaintiffs, we are compelled to agree with the conclusion of the district court. Plaintiffs have failed to controvert the defendants’ showing that the decision to discontinue gasoline supplies was made by Mr. Lind alone, and that this decision was only subsequently communicated to Mr. Olson for implementation.I 6

b. Intra-enterprise Conspiracy

The question of law remaining under plaintiffs’ Sherman Act claim is whether a “combination or conspiracy” can be deemed to exist on the facts above, where one person is the sole owner and major decisionmaker for a group of affiliated corporations.

It is fundamental that a single person or economic entity cannot combine or conspire in isolation: there must be concerted action by a plurality of actors. E. g., Mutual Fund Investors, supra, 553 F.2d at 625; Nelson Radio & Supply Co. v. Motorola, 200 F.2d 911, 914 (5th Cir. 1952), cert. denied, 345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953); Windsor Theatre Co. v. Walbrook Amusement Co., 94 F.Supp. 388, 396 (D.Md. 1950), aff’d, 189 F.2d 797 (4th Cir. 1951); L. Sullivan, Handbook of the Law of Antitrust 323 (1977); 58 C.J.S. Monopolies § 21a, at 981, n. 66 (1948); Note, Intra-Enterprise Conspiracy Under Section 1 of the Sherman Act: A Suggested Standard, 75 Mich.L.Rev. 717 (1977). Thus it is generally accepted that there can be no conspiracy where only one corporation is involved in the alleged restraint of trade.7 However, there has been some controversy over whether separate corporations within the same corporate family or enterprise should always be deemed to constitute the requisite plurality of actors, or whether in some circumstances a family of formally distinct corporate units should be viewed realistically as a single economic entity incapable of taking concerted action with itself.8

On this question of intra-enterprise conspiracy, this court has in two recent cases *456taken the position that the mere formality of separate incorporation is not, without more, sufficient to provide the capability for conspiracy. In Knutson v. Daily Review, Inc., 548 F.2d 795 (9th Cir. 1976), a parent corporation and its wholly-owned *457subsidiary published various newspapers whose operations were horizontally integrated through shared printing, staff and advertising. A single individual owned controlling interest in the parent, was President of both corporations, and publisher of all the newspapers. The corporations did not hold themselves out as competitors. In dictum this court stated that “[ajrguably on these facts the two corporate units were incapable of conspiracy as a matter of law,” but that resolution of this issue was unnecessary because no restraint of trade had been shown. 548 F.2d at 803.

Similarly, in Mutual Fund Investors, supra, this court reiterated that “[sjeparate incorporation, like the lack of intraenter-prise competition, is not dispositive of the [conspiracy] question.” 553 F.2d at 626. There the corporations at issue were vertically integrated, as are the defendant companies in the instant case. However, there the record showed that none of the affiliated companies had “exercised its judgment approving [the principal corporation’s] refusal to deal,” and that no unreasonable restraint of trade had occurred. Id. at 627. In neither of these cases, therefore, was it necessary to decide definitively what additional factors are necessary before affiliated corporations will be deemed capable of conspiring together.

Nor is it necessary in the ease before us. For even if the defendant corporations, acting through their officers or agents, were deemed theoretically capable of conspiring, here in fact no conspiracy, no meeting of two or more minds, occurred. As discussed above, plaintiffs produced no probative evidence that anyone other than Farris Lind— sole stockholder, President and Chairman of the Board of Wholesale and the Retail Companies — made the decision to refuse to deal with plaintiffs. Mr. Olson’s subsequent implementation of this decision does not make him a participant in a conspiracy. He acted solely as Mr. Lind’s agent, after the allegedly exclusionary decision was made; it is fundamental that an agent cannot conspire with his principal. E. g., Nelson Radio & Supply Co., v. Motorola, supra, 200 F.2d at 914-15; Rayco Mfg. Co. v. Dunn, 234 F.Supp. 593, 598 (N.D.Ill.1964).

Plaintiffs might argue that even though Mr. Lind alone made the allegedly exclusionary decision to cease deliveries, there was a constructive plurality of actors in that decision because he himself legally embodies the six corporations of which he is sole owner. However, that position is conceptually indistinguishable from the position that mere separate incorporation is alone determinative of the question of in-tra-enterprise conspiracy. This theory we rejected in Mutual Fund Industries and Knutson.

Moreover, even if plaintiffs could show evidence of a meeting of two or more individual “minds” in the decision to cease deliveries, they would not automatically have established a conspiracy cognizable under § 1. The courts have almost universally rejected the position that two or more directors, officers or agents acting on behalf of a single corporation can be capable of conspiring in restraint of trade, either among themselves or with their corporation. See cases cited at note 7, supra. The “two or more minds” that meet in conspiracy must be minds representing the respective business interests of two or more corporations. The complaint in this case did not include Mr. Lind and Mr. Olson as defendants; it alleges only that the Farris corporations conspired. But plaintiffs have produced no evidence that Mr. Lind was acting in the interests of one corporation, while his general manager was primarily concerned with another corporation. Had the two individuals conspired, both would have been acting on behalf of the same corporations. Thus here, as in Mutual Fund Industries, supra, 553 F.2d at 627, the evidence does not show that any one of the five Retail Companies, through its human agent, “exercised its judgment approving” Wholesale’s refusal to deal or “colluded illegally with” Wholesale.

In sum, the district court correctly found that there was no material fact in dispute on the Sherman Act claim and that defendants were entitled to judgment on that *458claim as a matter of law. Although we agree that no conspiracy cognizable under Sherman Act § 1 in fact occurred on this record, we do not hold that there can never be a conspiracy in restraint of trade between corporations wholly owned and controlled by a single person. See, e. g., Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 141-42, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968) (family-owned businesses); Phi Delta Theta Fraternity v. J. A. Buchroeder Co., 251 F.Supp. 968, 980 (W.D. Mo.1966). Nor do we hold that a single common director or officer may with antitrust impunity make decisions on behalf of two or more corporations, where those corporations have antitrust significance as separate economic units. See Knutson, supra, 548 F.2d at 802 n. 4. Those questions we leave for an appropriate future appeal.

III. COUNT II: RIGHT TO APPORTIONMENT UNDER IDAHO CODE § 28-2-615

Plaintiffs contend that under Idaho Code § 28-2-615 they were entitled to an allocation of supplies during the shortage period. Section 28-2-615 (corresponding to § 2-615 of the Uniform Commercial Code) provides, in pertinent part, that where a “contingency the nonoccurrence of which was a basic assumption on which the contract was made” partially affects the capacity of a seller “under a contract for sale” to deliver to his buyer, then the seller “must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture.”9 Defendant Wholesale concedes that it made no such allocations to Harvey and Nielsen until February 1974, when the federal mandatory allocation program forced it to do so. Assuming, without deciding, that the gasoline supply shortage of 1973 constituted the sort of “contingency” envisaged by § 28-2-615, we nevertheless conclude that Wholesale did not violate the statute.

Plaintiffs argue that they were not mere “regular customers not then under contract,” dependent upon the good graces of the seller for allocation under § 28-2-615; they claim to be buyers under a “contract for sale,” to whom the seller had no choice but to allocate. Specifically, Mr. Harvey has claimed in his deposition that he had an oral agreement with Wholesale, made in 1967 or 1968, whereby Wholesale would supply U-Serve’s total “gasoline requirements” in Idaho at a “competitive price” to be determined by the seller (Deposition of Clyde E. Harvey, Jan. 16, 1975, at 18-21). In addition, Mr. Harvey claimed that Wholesale, through Mr. Olson, gave reassurances at an oil marketer’s convention in 1973 that it would continue to supply U-Serve in the event of a shortage (id. at 24-27). Neal Olson’s affidavit of February 21, 1975, on the other hand, stated that any such purported agreement was “a total fabrication.”

*459The district court, conceded, as do we, that plaintiffs have at least raised a genuine factual issue as to the existence of an agreement between the parties.10 Therefore, we assume, for purposes of summary judgment, that the parties did in fact reach an “agreement.” However, under the Uniform Commercial Code as adopted in Idaho, inquiry does not stop with this finding of fact. The question becomes whether the terms of that agreement have any legal consequences, so as to result in an enforceable legal obligation.11 If there was no enforceable contract for sale, the claim that Wholesale had a statutory duty to allocate deliveries to U-Serve must fail.

Since it is plaintiffs who insist that an oral agreement was made, it is they who must describe what the terms of the agreement were. Mr. Harvey, when questioned in deposition, made the following admissions about his understanding of the bargain:

“Q (Mr. Carter): ... If, under the agreement that you had with Mr. Olson which you have explained and which is in your Complaint, if, under that agreement you were able to buy gas at a cheaper price than Mr. Olson was willing to supply it were you free to make the purchase elsewhere?
“A Yes.
“Q You were free to purchase elsewhere, but they were not free to refuse to sell to you, is that correct?
“A That is correct.
. “Q And if you called Mr. Olson and agreed to pay his price, asked for delivery of gasoline and offered to pay his price, and he says, ‘I refuse to deliver it to you,’ that was contrary to the agreement? “A Right.
“Q Then, if I understand this correctly, you were free to seek the best bargain you could get, but at such time as you desired you could demand of him and he would have to deliver or be outside of the agreement? He would have to deliver, is this correct?
“A Yes.
“Q And that agreement was the agreement that . . . U-Serve had with these people?
“A Yes.”

Deposition of Clyde E. Harvey, Jan. 16, 1975, at 39, 75-76 (emphasis added).

The district court concluded that the purported agreement lacked mutuality of obligation under these admitted terms, whereby the purchaser was free to buy elsewhere while the seller was bound at all times to sell to the purchaser. The court held that where there was no mutuality, there was no enforceable contract under Idaho contract law, as set out in McCandless v. Schick, 85 *460Idaho 509, 380 P.2d 893 (1963).12 Thus, when the claimed “contract for sale” fell, so fell Harvey’s and Nielsen’s claim under § 28-2-615.

On appeal, plaintiffs do not dispute the district judge’s reading of the Idaho case law, making mutuality of obligation a prerequisite to enforceability of most executo-ry contracts. They dispute only the conclusion that that case law governs the type of agreement which they claim. Plaintiffs’ argument rests on the second sentence in § 28-1-201(3), which provides that “[wjhether an agreement has legal consequences is determined by the provisions of [the Idaho Uniform Commercial Code], if applicable; otherwise by the law of contracts . . .” (emphasis added). See also § 28-1-103, which provides that pre-ex-isting law continues as a supplement to the Code, “[u]nless displaced by the particular provisions of [the Code]” (emphasis added). Plaintiffs urge (a) that § 28-2-305 (open price term)13 is “applicable” to the arrangement they have described, thus displacing for present purposes the body of Idaho contract law relating to mutuality; and, moreover, (b) that their agreement constituted a requirements contract, which the Official U.C.C. Comment to § 28-2-306 (output, requirement & exclusive dealings)14 expressly declares to have mutuality. We reject both these contentions.

Section 28-2-305 provides that in certain circumstances a valid “contract for sale” can be concluded “even though the price is not settled” at the time of the contract. Plaintiffs argue that the terms of agreement described in the above deposition merely reflect an understanding that Wholesale’s prices would be competitive or market prices fixed in good faith, as required under § 28-2-305(2). We may assume arguendo that if the seller failed to fix a reasonable price in good faith under § 28-2-305(2), the buyer would be entitled to “treat the contract as cancelled” pursu*461ant to § 28-2-305(3), that is, to buy from another supplier.15 See Anderson, supra at 422. But a price fixed in good faith at the prevailing market level is not the same as “the best bargain you could get.” The latter might include, e. g., odd lots of surplus gasoline sold at “dumping” prices, below market. Nothing in the Idaho Code’s definitions of good faith, §§ 28-1-201(19)16, -2-103(l)(b)17, imposes an implicit requirement for a seller to match the lowest price available. Nor do plaintiffs contend that Wholesale expressly undertook to offer such prices. In sum, it appears that the provisions for “good faith” in § 28-2-305 do not make that section “applicable” to the terms of a purported agreement whereby buyer was free to buy from others if seller would not match their prices, while seller was bound to fill buyer’s requirements whenever buyer so demanded. The elastic in the term “good faith” should not stretch so far.

Nor does this purported arrangement constitute a requirements contract within the purview of § 28-2-306. It is elementary that a requirements contract is one in which the buyer “expressly or implicitly promises he will obtain his goods or services from the [seller] exclusively.” Bank of America Nat’l. Trust & Savings Ass’n v. Smith, 336 F.2d 528, 529 n. 1 (9th Cir. 1964) (emphasis added); see e. g., Lowell O. West Lumber Sales v. United States, 270 F.2d 12, 17 (9th Cir. 1959); Propane Industrial, Inc. v. General Motors Corp., 429 F.Supp. 214, 218 (W.D.Mo.1977); In re United Cigar Stores Co., 8 F.Supp. 243 (S.D.N.Y.), aff’d, 72 F.2d 673 (2d Cir. 1934); Shader Contractors, Inc. v. United States, 276 F.2d 1, 4,149 Ct.Cl. 535 (1960); 1A A. Corbin, On Contracts § 157 (2d ed. 1963); 1 S. Williston, On Contracts § 104A (3d ed. 1957); Note, Requirements Contracts: Problems of Drafting and Construction, 78 Harv.L.Rev. 1212, 1213 (1965). Yet in this case plaintiffs have expressly stated that the purported agreement permitted them to purchase an indefinite portion of their supplies from sellers other than Wholesale. Such an arrangement would not entail a promise to buy U-Serve’s'Idaho gasoline requirements from Wholesale, but merely to buy from Wholesale when it was advantageous to do so. Again, the provision for “good faith” in § 28-2-306 cannot stretch the statute to make such a one-sided executory agreement enforceable.18

In sum, plaintiffs have not shown the Idaho Uniform Commercial Code to be “applicable” to the peculiarly convenient arrangement they claim. We agree with the district court that the Idaho rules requiring mutuality of obligation thus govern and make that arrangement unenforceable. Therefore, there is no basis for the claim in Count II.

The Amended Final Summary Judgment filed June 10, 1977, will be affirmed.

Harvey v. Fearless Farris Wholesale, Inc.
589 F.2d 451

Case Details

Name
Harvey v. Fearless Farris Wholesale, Inc.
Decision Date
Jan 10, 1979
Citations

589 F.2d 451

Jurisdiction
United States

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