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by: Alberto Balistreri
Alberto Balistreri
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This 14 page Class Notes was uploaded by Alberto Balistreri on Saturday September 12, 2015. The Class Notes belongs to ECON T470 at West Virginia University taught by Staff in Fall. Since its upload, it has received 19 views. For similar materials see /class/202816/econ-t470-west-virginia-university in Economcs at West Virginia University.


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Date Created: 09/12/15
CHAPTER 9 WEST VIRGINIA LEGAL LIABILITY REFORM by Kristen M Leddy and Matthew T Yanni The Rule of Law 1 WEST VIRGINIA LEGAL LIABILITY REFORM Kristen M Leddy and Matthew T Y anni Torts scholar Kenneth Abraham de nes tort as a civil wrong arising out of contract 1 Although Abraham describes this de nition as both overinclusive and underinclusive2 this de nition is the best simple de nition that torts scholars offer Abraham identi es ve possible functions of the tort system corrective justice and civil redress optimal deterrence loss distribution compensation and redress of social grievances 3 Whether the individual sympathizes with the plaintifffriendly or victimfriendly school of thought or the defendantfriendly or businessfriendly school of thought is a matter of preference The plaintifffriendly school values compensating victims who have suffered grievous injuries or losses through the fault of others and the creation of an incentive for persons and rms to act to prevent potential causes of injury or death 4 and the defendantfriendly school values reducing the payment of compensatory and punitive damages to plaintiffs by abolishing the rule of joint and several liability abolishing the collateral source rule limiting punitive damages and limiting noneconomic damages 5 By applying the principles of economic analysis we attempt to divorce ourselves from these competing schools in order to explore the incentives and effects of West Virginia s tort system on the state s economy We begin by de ning the foundations of tort law and the role of the state in protecting citizens through a sound legal system with speci c emphasis on civil liability We next discuss some of the major complaints about West Virginia s legal system After an exploration of these complaints we outline three speci c legal liability reforms joint and several liability medical malpractice liability and venue shopping These reforms receive signi cant attention because they are fair likely to have a positive impact on the state s legal system and relatively easy to implement THE FOUNDATIONS OF TORT LAW Tort law should encourage individuals to take an efficient level of precaution in their interactions with other people and with others property6 A simpli ed version of tort law asks 1 Kenneth S Abraham The Forms andFunctions ofTort Law 1 2 Id 3 Id at 14 20 4 Richard A Brisbin Jr amp John C Kilwein The Future of the West Virginia Judiciary Problems and Policy Options 2 5 5 ATRA s lIission Real Justice in Our Courts 6 See Richard Posner Economic Analysis of Law 109 110 THERULE OFLAW whether the tortfeasor should have done something different than what he did and whether someone or something was injured as a result A tort cause of action is based either on a theory that the defendant negligently harmed the plaintiff or on a theory that the defendant intentionally harmed the plaintiff To recover in a negligence cause of action the plaintiff must prove that the defendant owed the plaintiff a duty that the defendant breached the duty he owed the plaintiff that the defendant s breach caused the plaintiff to receive an injury and that the defendant should pay the plaintiff money damages Judge Learned Hand established that a potential tortfeasor breached his duty of reasonable care if the burden of acting to prevent an injury is less than the expected probability of loss multiplied by the expected loss BltPL7 In order to minimize the social costs of negligent actions precautions should be taken until the marginal cost of the safety improvement is equal to the marginal benefit the safety improvement provides8 This ideal applies equally to plaintiffs and defendants Because many accidents can be prevented by victims at a lower cost than by injurers 9 the law s aim should be to make sure that the lowercost avoider is encouraged to take care 10 As such West Virginia courts should perform detailed evaluations of whether each party was exercising due care at the time of the accident in order to ensure that the lowercost avoider bears the liability for the action or inaction To recover in an intentional tort cause of action a plaintiff must establish that the defendant intended to cause some type of contact that the conduct was harmful or offensive to the plaintiff and either that the defendant intended to harm or offend or that the defendant knew that harm or offense was substantially certain to result from the contact In applying Hand s BltPL Posner finds that B is a negative number in an intentional tort because rather than saving resources by injuring the victim implying a positive B I would save resources by not injuring the victim implying a negative B since it must cost something to engage in an injurious act1 Posner also argues that P is much higher in an intentional tort than it would be in a negligence tort because wanting to do someone an injury makes it much more likely that an injury will occur than if the injury would be undesired byproduct of another activity 12 Based on this analysis Posner finds that the law is much more willing to award punitive damages in intentional tort cases than in negligence cases because the risk of deterring socially valuable conduct by imposing additional costs on the tortfeasor is minimized in the intentional tort case where the conduct is harmful or offensive by definition Posner also argues that there is no reason to allow a defense of contributory negligence in an intentional tort case since the cost of avoidance is plainly lower to the injurer than to the victim 7 is indeed negative to the injurer and positive to the victim The victim cannot be the lowercost avoider 13 West Virginia s liability system is designed to ensure that injured parties are compensated at least to the extent of their injuries In some cases this state fosters 7 United States v Carroll Towing Co 8 See Posner Economic Analysis of Law 9 Id at 172 10 11 Id at 206 12 131d CHAPTER 9 WEST VIRGINIA LEGAL LIABILITY REFORM 1 1 1 inefficiency by requiring tortfeasors to pay sums greater than their contribution to the injury14 As it relates to torts arising out of negligent actions overcompensating victims overdeters productive activity Unfortunately public sentiment and the resulting legislation have placed the interests of the injured party above the prosperity of the state and its citizens West Virginia lags behind all other states with respect to providing a fair and efficient system of injury compensation based on the 2007 U S Chamber ofCommerce State Liability Systems Ranking Stualy15 In the next section we explain the economic burden placed on West Virginia by its legal liability system THE ROLE OF THE STATE AND WEST VIRGINIA S LEGAL SYSTEM The father of economics Adam Smith states in The Wealth of Nations that one of the few roles of government is to establish a fair and independent judiciary16 The role of the judiciary in civil law cases is to enforce contracts and settle disputes A system that enforces contracts and creates incentives for citizens to respect the property of others creates the fundamental legal basis for longterm economic growth A good legal system hears cases and applies established precedent in a fair predictable and efficient manner Legal systems with these characteristics promote economic growth and development17 West Virginia s low ranking with respect to its legal liability system is a result of the State s legislation and commonlaw decisions Where the state s legislative executive and judicial bodies promote unfair transfers of wealth they distort the market system and the incentives businesses face Fortunately some simple legal reforms have been shown to remedy this situation in other states Adopting these reforms would lead to a more fair judicial system and greater prosperity for our state LEGAL LIABILITY REFORMS IN WEST VIRGINIA We base our recommendations for legal liability reform upon the notion of fairness the positive impact on the state s business climate and the constitutionality of implementing the reform in West Virginia18 The three legal reforms considered in the following sections include 1 eliminating the doctrine of joint and several liability in all civil tort claims 2 extending reform efforts in the area of medical malpractice liability and 3 ending venue shopping in products liability and class action lawsuits 14 See generally Kizer v Harper 2001 at n 26 This Court is not unmindful of the fact that Appellant who was charged with only 1 fault is being held liable for the full verdict under principles of joint and several liability Despite the seeming inequity of this result we cannot without turning the tort law of this state on its head reach a contrary result quoting Miller v Monongahela Power Co 1999 15 Institute for Legal Reform 200D 16 Adam Smith An Inquiry into the Nature and Causes afthe Wealth afNatians 17 Peter Boettke amp J Robert Subrick Rule of Law Development and Human Capabilities 18 Although it is possible to modify the West Virginia Constitution proposing reforms that are currently unconstitutional would change the nature of this project from a practical to a theoretical one If our goal is to help the state s economy grow we should concentrate on those reforms that may be implemented with relative ease We made this determination with respect to West Virginia s legal structure not necessarily with respect to political opposition or support 112 THERULE OFLAW JOINT AND SEVERAL LIABILITY Joint and several liability is a hybrid of joint liability and several liability and provides that each defendant in a tort lawsuit may be held responsible for the full amount of damages awarded in a case This holds true even when a defendant is found responsible for only a small percentage of the damage award Take a hypothetical case with two joint tortfeasors in which the jury finds that one party holds a certain percentage of the liability with the rest held by the other Under pure joint and several liability either defendant could be held responsible for the full amount of the judgment This is sometimes referred to as the deep pockets rule in which potential litigants search for parties with extensive financial resources to pay large verdicts Those best able to pay large verdicts are usually insurance companies and large businesses Joint and several liability unfairly requires that injured parties be compensated by parties not entirely liable for their injuries in the event one party cannot pay its proportionate share of an award This principle is not consistent with the societies interest in requiring that tortfeasors be required to pay only that damage they have caused Under the doctrine of joint and several liability tortfeasors can be required to pay for damages caused by another party Despite the social reasons to compensate injured parties it is both unfair and inefficient to force businesses to pay for damages they have not caused Proponents of joint and several liability on the other hand argue that it protects victims from being undercompensated if one of the defendants cannot pay his share of proportionate liability A joint tortfeasor who pays more than his proportionate liability has a right of contribution against his codefendant20 This often leads to inequitable results and procedural battles between defendants to enforce their contribution rights particularly where one defendant remains holding the bag Currently in West Virginia the doctrine of joint and several liability applies except where a defendant is found 30 percent or less at fault22 Under this exception the defendant39s liability shall be several and not joint and the defendant will only be liable for the damages attributable to him or her23 There are however some exceptions Joint and several liability always applies to those who commit intentional torts any party who acts in concert with another as part of a common plan or design resulting in harm negligent or willful unlawful emission disposal or spillage of toxic or hazardous substance or manufacture or sale of a defective product24 Also on motion a court can order reallocation of any uncollectable amount among the other parties though defendants less than ten percent at fault will not be subject to reallocation25 In cases involving medical professional liability West Virginia has adopted several liability26 Under several liability the defendant is responsible only for the value of damages he caused 19 Joint liability refers to liability shared by two or more parties while several or proportionate liability refers to liability where parties are liable only for their respective obligations 20 See e g Haynes v City of Nitro 1977 in which the right of contribution is the defendant s ability to pursue another defendant who fails to pay her proportionate share 21See Edward M Koch The Pennsylvania Supreme Court Declares the Fair Share Act Unconstitutional Z WVa Code Ann 55 7 24 d 25 Id 25 WVa Code Ann 557B 9 CHAPTER 9 WEST VIRGINIA LEGAL LIABILITY REFORM 1 13 Courts in neighboring states are split in their decisions on the application of joint and several liability Ohio applies modi ed joint and several liability in which joint and several liability only applies to economic losses if the defendant is more than 50 percent liable for unintentional torts or any percentage liable for an intentional tort27 Tennessee has eliminated joint and several liability28 In June 2002 the Pennsylvania Legislature passed the Fair Share Act which applied several liability unless a defendant39s proportionate negligence was greater than sixty percent with some exceptions However in September 2006 the Supreme Court of Pennsylvania affirmed a decision which made the Fair Share Act unconstitutional returning Pennsylvania to pure joint and several liability30 Maryland and Virginia apply pure joint and several liability as long as the injury to the plaintiff is indivisible31 Fortunately states applying pure joint and several liability are in the minority because about twothirds of the nation has either abolished joint and several liability or restricts its application to defendants that are at least fifty percent liable for a plaintiff39s injury32 A small reform on par with Ohio s system would require West Virginia to further restrict its application of joint and several liability to defendants with proportionate negligence of fifty percent or more At best West Virginia should enact a state law which extends several liability from cases involving medical professional liability to all civil cases in which each defendant will only be liable for its proportionate share of the plaintiff39s loss Proportionate liability will alleviate the threat of holding businesses accountable for substantial judgments not incurred by their actions MEDICAL MALPRACTICE LIABILITY In 2003 West Virginia enacted HB 2122 reforming its liability system with respect to the responsibilities of medical professionals33 Reducing state medical malpractice from joint and several liability to pure several liability in 2005 was an important victory for both patients and medical staff By limiting medical malpractice liability to pure several liability West Virginia has provided for patient care and helped to attract and retain high quality doctors and their staffs Despite recent successes there are still important reforms outstanding to decrease the burden medical malpractice places on the State and its medical providers We propose to limit expert medical testimony to that of established professionals in the same field as the defendant in medical malpractice cases This helps to curtail the use of medical experts in trial that do not have expert knowledge of pertinent issues at hand and are not sufficiently familiar with standard procedures in that field Implementing these reforms will help to reduce the burden placed on both the state court system and the medical professionals named as tortfeasors 27 Ohio Rev Code Ann 230722 28 See McIntyre v Balentine 1992 29 42 PaCSA 7102 30 See DeWeese v Cortes 2006 31 See Consumer Protection Division v Morgan 2005 and Maroulis v Elliot 1966 in which a plaintiffs injuries are indivisible if they cannot be split between defendants 32 See American Tort Reform Association Joint and Several Liability Rule Reform see also Dave Lenckus Courtrooms Playing Role in Reforming Tort System 33 Don Sensabaugh amp lIichele Grinberg HB 2122 Medical Professional Liability Reform 114 THERULE OFLAW VENUE SHOPPING We recommend the imposition of meaningful venue requirements to help eliminate venue shopping and jackpot justice in West Virginia as well as reduce the State s burden in providing a location for these trials to be held In 2003 it seemed that West Virginia was well on its way to accomplishing just that In that year the West Virginia Legislature amended the state s venue statute to restrict access to the state courts for nonresidents unless a substantial part of the acts or omissions giving rise to the claim occurred in the State or the plaintiff could not obtain jurisdiction against a defendant where the claim arose34 Furthermore each plaintiff had to independently establish that the venue was proper35 The Legislature amended the venue rules to stem abuse of West Virginia s courts by nonresidents who viewed the state as a magnet jurisdiction Magnet jurisdictions are plaintifffriendly jurisdictions with generous juries particularly for asbestosis cases36 where nonresidents can take advantage of liberal consolidation laws This increases the pressure plaintiffs can place on defendants and increases the size of a potential verdict Unfortunately this significant legislative reform measure was declared unconstitutional in 2006 by the West Virginia Supreme Court in Morris v Crown Equipment Corp In Morris the Supreme Court of Appeals held that a plaintiff cannot be denied the right to bring a products liability lawsuit in this state against a West Virginia corporation and an outofstate corporation merely because the plaintiff is the resident of another state In 2007 the West Virginia Legislature responded to the Court s decision in Morris by adopting the doctrine of forum non conveniens and repealing the parts of the 2003 venue reform statute which the Supreme Court of Appeals held unconstitutional as violating the Privileges and Immunities Clause of the US Constitution37 Under this doctrine if a defendant is a corporation venue is proper where the corporation s principal place of business is and if it is not in the state then where the corporation does business38 If the corporation is organized under West Virginia laws but has its principal place of business elsewhere then venue is proper in the circuit court of the county in which the plaintiff resides or the circuit court of the county in which the seat of government is located has jurisdiction over actions against the corporation The Chamber of Commerce has stated that the venue reform statute is fatally awed and contains loopholes which make it significantly weaker than the 2003 venue reform statute40 It is not West Virginia s responsibility to provide a venue for plaintiffs attorneys to exploit To the extent that it does the state fosters a perception of unfriendliness towards businesses and entrepreneurs OTHER POTENTIAL AVENUES 0F REFORM In this section we cover additional reforms that do not merit a full and thorough treatment 3 WVa Code Ann 56llc 35 36 See e g State ex rel Mobil Corp v Gaughan 2002 37 See httpwwwstatewvuswvscaAmicusLegisSummariesHB2956htm 38 WVa Code 5611 amended by HE 2956 Reg Sess WVa 200m 39 Id 40 Online at httpwww in tituteforle alrefnrm quot 700704257HP7WestViIginiacfm last visited 121008 CHAPTER 9 WEST VIRGINIA LEGAL LIABILITY REFORM 1 15 because they are less effective in their capacity to improve the state s legal climate than those reforms already analyzed We address the contentious issues of punitive damages and the collateral source rule We also discuss the problems with medical monitoring and explain why awarding damages for medical monitoring is harmful to West Virginia s economy LIMITING PUNITIVE DAMAGES According to the Institute for Legal Reform s 2007 US Chamber of Commerce State Liability Systems Ranking Stualy41 punitive damages reform is the most important issue to improve the litigation environment Punitive damages are damages awarded to a plaintiff in addition to compensatory damages when the defendant is found to have acted with recklessness malice or deceit These damages are intended to punish and deter blameworthy conduct Fortunately punitive damages compose a very small part of the tort system They are awarded in less than four percent of all tort injury verdicts42 Nonetheless controversy surrounds punitive damages because there is no generally accepted principle that governs the amount that should be awarded The determination of punitive damages is left to the jury Significantly juries often have little guidance and wide latitude in how to assess damages and courts are reluctant to interfere with the province of the jury even when an award is excessive 3 West Virginia imposes no statutory limits on punitive damages awards and the standard for determining whether to award punitive damages is a preponderance of the evidence This level of proof is required in most civil cases and it means that the finder of fact in a case must nd only that the facts are more probably one way than another Eleven other states employ this standard44 Thirtyone states require a higher level of proof clear and convincing evidence two states mostly prohibit punitive damages and five states prohibit punitive damages altogether45 Because punitive damages are designed to punish we recommend that West Virginia judges require that the jury nd at least clear and convincing evidence before allowing a punitive damages award THE COLLATERAL SOURCE RULE Defendants disfavor the collateral source rule because it prevents defendants from disclosing payments to plaintiffs made by collateral sources at trial Defendants would like to introduce evidence at trial showing that insurance or another similar source has already compensated the plaintiffs for part or all of the damage arising from the defendant s conduct Allowing otherwise defendants argue would permit the plaintiff to make a double recovery once from his insurer and then a second time from the defendant If the role of compensatory damages is to compensate the plaintiff for the full value of his or her injuries then plaintiffs may be made more than whole if they receive a compensatory payment greater than the value of their 1njur1es 41 httpwwwinstituteforlegalreformcom 42 See National Center for State Courts httpncsconlineorg 43 Anna Bamonte Torrance Legal Obstacles to Tort Reform in Pennsylvania 44 Id 451d 116 THERULE OFLAW On the other hand Posner argues that the economic purpose of the negligence system is not compensation but is the deterrence of inefficient accidents46 To permit the defendant to set up the plaintiff s insurance policy as a bar to the action would result in underdeterrence 47 If insurance companies bear the burden of paying for a defendant s wrongful actions then the defendants will be underdeterred in their decision to invest in caution or safety Furthermore subrogation eliminates plaintiff s double recovery In exchange for lower premiums plaintiffs frequently assign insurance companies the right to recover from the plaintiff s award the value of payments the insurance company made to the plaintiff arising from the defendant s conduct West Virginia has statutorily modified the collateral source rule such that its courts permit collateral source evidence in medical malpractice actions after the jury verdict but before damages have been awarded48 This reform would appear to mitigate against excessive recoveries in medical malpractice actions and it could potentially be extended to other types of tort cases such as personal injury or wrongful death actions However this is not a pressing area of reform for West Virginia because of the private remedy of subrogation largely operates to eliminate any double recovery MEDICAL MONITORING DAMAGES A medical monitoring claim seeks to recover the anticipated costs of longterm diagnostic testing necessary to detect latent diseases that could develop as a result of tortious exposure to toxic substances in the environment Medical monitoring has long been part of recoverable damages when there is present physical injury After a controversial decision in 1999 however plaintiffs in West Virginia courts can bring a claim for medical monitoring damages if wrongfully exposed to an injurious or toxic substance absent present physical injury50 This decision also authorizes the award of lump sums to plaintiffs51 To permit medical monitoring damages for plaintiffs who lack a present physical injury creates a number of potential problems including allowing the plaintiff to recover damages even when the plaintiff cannot prove that he or she suffered an actual physical injury much less that the defendant caused it52 Some potential problems include astronomical and unpredictable liability for defendants widespread and serious abuse by plaintiffs who may be awarded a lump sum payment with no requirement that the money be spent on medical monitoring and a legal system clogged with unreliable and trivial claims53 This potential source of legal reform is ripe for legislative change Some suggestions include requiring the proof of an actual injury for monitoring or eliminating the alternative of lump sum awards requiring that plaintiffs actually spend the award money on medical monitoring or even eliminating medical monitoring damages altogether 46 Posner Economic Analysis ofLaw at 200 48 w Va Code 557B 9a 49 David T Peterson Recent Developments in Medical Monitoring Claims in Mass Tort Litigation 50 Bower v Westinghouse 1999 emphasis added 51 Id 52 53 Victor E Schwartz and Mark A Behrens Judicial Activism in the Civil Justice System Problems and Solutions 5 CHAPTER 9 WEST VIRGINIA LEGAL LIABILITY REFORM 1 17 CONCLUSION We conclude that West Virginia is in need of meaningful legal liability reform if the state s residents wish to promote a healthy business climate and the longterm economic growth that it generates This chapter outlined the major avenues for meaningful legal liability reform in West Virginia and covered the issues of joint and several liability medical malpractice liability and venue requirements with suggestions for their improvement We hope that readers better understand the pertinent issues in the legal liability reform because we believe that reform has great potential to further the interests of the state 118 THERULE OFLAW REFERENCES Adam Smith An Inquiry into the Nature anal Causes of the Wealth of Nations Random House 1937 1776 American Tort Reform Association Joint and Several Liability Rule Reform available at httpwwwatraorgshow7345 last visited 121008 ATRA s Mission Real Justice in Our Courts 2008 available at httpwwwatraorgabout last visited 121008 Anna Bamonte Torrance Legal Obstacles to Tort Reform in Pennsylvania 2001 available at httpwwwphysiciansnewscomlaw601torrancehtml last visited 121008 Dave Lenckus Courtrooms Playing Role in Reforming Tort System available at http wwwbusinessinsurancecomcgibinarticleplarticleld14140ampaaampbtcurbing last visited 121008 David T Peterson Recent Developments in Medical Monitoring Claims in Mass Tort Litigation 2007 available at wwwenvinfocomwebcaststoXictortpetersonpdf last visited 121008 Edward M Koch The Pennsylvania Supreme Court Declares the Fair Share Act Unconstitutional 2006 available at httpwwwwhiteandwilliamscomCMNews AlertsPennsylvaniaSupremeCourtDeclaresFairShareActUnconstitutionalasp last visited 121008 George A Barrett amp Michael L Brookshire Assessing Damages in Personal Injury anal Wrongful Death Litigation 163 J Forensic Econ 315 2004 Goodwin Procter Products Liability anal Mass Torts Alert 2007 available at httpwwwgoodwinproctercommedia3ED1F81C51E0421BBDAA54A09C57765 BashX last visited 121008 Institute for Legal Reform 2007 available at httpwwwinstituteforlegalreformcom last visited 121008 Kenneth S Abraham The Forms anal Functions of Tort Law Foundation Press 3d ed2007 1997 Peter Boettke amp J Robert Subrick Rule of Law Development anal Human Capabilities 10 Sup Ct Econ Rev 109 2004 Richard A Brisbin Jr amp John C Kilwein The Future of the West Virginia Judiciary Problems anal Policy Options W Va Pub Affairs Rep 2 5 2007 available at httpwwwpolsciwvueduipaparreporter2472pdf Richard Posner Economic Analysis of Law Aspen Publishers 2007 Victor E Schwartz amp Mark A Behrens Jualicial Activism in the Civil Justice System Problems anal Solutions 5 Litigation News Federalist Society for Law and Public Policy Studies 1999 West Virginia Chamber of Commerce press release available at httpwwwinstitutefor legalreformcommediapressreleases200704257HP7WestVirginiacfm last visited 121008 CHAPTER 9 WEST VIRGINIA LEGAL LIABILITY REFORM 1 19 CASES CITED Bower V Westinghouse 206 WVa 133 522 SE2d 424 1999 Consumer Protection Division V Morgan 387 Md 125 874 A2d 919 2005 DeWeese V Cortes 588 Pa 738 906 A2d 1193 2006 Haynes V City of Nitro 161 WVa 230 240 SE2d 544 1977 Kizer V Harper 211 WVa 47 561 SE2d 368 2001 Maroulis V Elliot 207 Va 503 151 SE2d 339 1966 McIntyre V Balentine 833 SW2d 52 60 USLW 2764 1992 Miller V Monongahela Power Co 184 WVa 663 671 403 SE2d 406 414 1999 Morris V Crown Equipment Corp 219 WVa 347 633 SE2d 292 2006 State ex rel Mobil Corp V Gaughan 211 WVa 106 563 SE2d 419 2002 United States V Ca1roll Towing Co 159 F2d 169 1946 AMC 35 2d Cir 1947


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