Fiscal Note & Local Impact Statement

125 th General Assembly of Ohio

Ohio Legislative Service Commission

77 South High Street, 9th Floor, Columbus, OH 43215-6136 ² Phone: (614) 466-3615

² Internet Web Site: http://www.lsc.state.oh.us/

BILL:

Am. Sub. S.B. 80

DATE:

December 8, 2004

STATUS:

As Enacted – Effective April 7, 2005 (Certain provisions effective January 1, 2006)

SPONSOR:

Sen. Stivers

LOCAL IMPACT STATEMENT REQUIRED:

No —

Minimal cost

 


CONTENTS:

Makes numerous changes to civil practice and procedure, including generally specific causes of action, statutes of repose, trial, liability, damages, and judgment, and product liability actions, provides qualified immunity from civil damages for food manufacturers, sellers, and trade associations for claims resulting from a person's cumulative consumption, obesity, or weight gain or any health condition related to cumulative consumption, obesity, or weight gain, prohibits imputing any assurances or assumption of liability regarding public access to premises used for growing agricultural produce, precludes assumption of liability regarding the use of recreational trails, modifies the civil immunity for health care professionals and health care workers, specifies the nurses who may refer to themselves as advanced practice nurses, eliminates obsolete references to pilot programs for advanced practice nurses, requires the State Dental Board to issue volunteer certificates to retired dental practitioners upon submission of a complete application, and establishes limitations on successor asbestos-related liabilities relating to corporations

 

State Fiscal Highlights

 

STATE FUND

FY 2005

FY 2006

FUTURE YEARS

General Revenue Fund and Other State Funds

     Revenues

Potential loss,

magnitude uncertain

Potential loss,

magnitude uncertain

Potential loss,

magnitude uncertain

     Expenditures

Potential decrease, magnitude uncertain

Potential decrease, magnitude uncertain

Potential decrease,

magnitude uncertain

Note:  The state fiscal year is July 1 through June 30.  For example, FY 2005 is July 1, 2004 – June 30, 2005.

 

·        Healthcare expenditures.  It is difficult to establish a direct empirical or causal connection between the bill and its fiscal effects on the state, particularly in terms of various healthcare expenditures.  There is likely some proportion of medical costs incurred annually by the state that are the result of or directly affected by the current liability system.  It is not unreasonable to conclude therefore that state healthcare expenditures may experience some decrease as a result of the bill.  The precise fiscal impact of the bill on state healthcare expenditures, including the cost of providing state employees with healthcare coverage, is unclear. 

·        Immunity related to cumulative consumption, weight gain, or obesity.  Based on the parameters of the current litigation climate, the bill's immunity in actions provisions related to cumulative consumption, weight gain, or obesity would plausibly have no immediate and direct fiscal effects on the state as very few such civil actions have been brought across the country to date regarding certain food or beverage entities and obesity claims.  No tort actions have yet been brought forth in Ohio regarding certain food or beverage entities and obesity claims. 

·        Special counsel costs.  The bill may prevent any future action by the state should the decision have been made, absent the bill, to bring a civil obesity-related action against certain entities.  As such, expenditures by the state pertaining to the litigation may potentially be reduced if the state would have brought a civil action in the future absent the bill’s immunity provision.  That potential expenditure reduction appears to be minimal at most given the likelihood that the state would contract with special counsel under some sort of contingency fee arrangement.

·        Award or settlement revenues.  The bill’s qualified immunity provision theoretically at least prevents the state from bringing a civil action against parties associated with certain food or beverage entities.  A potentially significant fiscal effect of the bill involves the loss of future revenue from jury awards and/or settlements if such civil actions would have been successfully litigated by the state in an Ohio court absent the qualified immunity provision.


Local Fiscal Highlights

 

LOCAL GOVERNMENT

FY 2005

FY 2006

FUTURE YEARS

Counties and Municipalities

     Revenues

Factors leading to possible gains and losses in filing fee revenues, with likely net minimal effect in most local jurisdictions

Potential loss in filing fee revenues, likely to be no more than minimal, if that, in most local jurisdictions

Potential annual loss in filing fee revenues, likely to be no more than minimal, if that, in most local jurisdictions

     Expenditures

Factors increasing and decreasing civil justice system expenditures, with likely net minimal effect in most local jurisdictions

Potential decrease in civil justice system expenditures, likely to more than offset any associated revenue losses in most, if not all, local jurisdictions

Potential annual decrease in civil justice system expenditures, likely to more than offset any associated revenue losses in most, if not all, local jurisdictions

Note:  For most local governments, the fiscal year is the calendar year.  The school district fiscal year is July 1 through June 30.

 

·        Local civil justice systems generally.  The net effect of the bill’s various changes to civil practice and procedure over time is potentially that fewer suits will likely be filed against manufacturers and other defendants, including those involved in the food and nonalcoholic beverage industries, to recover alleged damages.  If there is in fact a reduction in the number of professional tort actions, product liability actions, civil actions related to health claims resulting from obesity, and other civil suits, there would in all likelihood be an overall savings realized in various local civil justice systems resulting from a decrease in judicial dockets and a reduction in the related workload of other court personnel.  The tort action cases likely to be most affected by the bill are handled by courts of common pleas.  Whether the resulting savings in annual operating costs for any given court of common pleas might exceed minimal is uncertain.  If the number of professional tort actions, product liability actions, and other civil suits are reduced, courts will likely see a loss in various filing fee revenues.  However, the savings realized by courts in terms of their personnel and related operating costs would likely be greater than any possible revenue loss.  Revenues from filing fees flow to county treasuries in the case of the courts of common pleas, county courts, and county-operated municipal courts.  In the case of noncounty-operated municipal courts, these revenues flow to treasury of the municipal corporation within which the municipal court is located.

·        Municipal and county court civil caseloads specifically.  The bill will likely reduce the number of cases being filed over time in municipal and county courts and perhaps make the disposition of said cases more efficient.  However, given the bill primarily addresses professional tort actions, product liability actions, and other large tort actions, any decrease in county and municipal court caseloads and related annual operating costs are expected to be no more than minimal, if that. 

·        Insurance premium costs.  If insurance premiums are reduced, or if there is a reduction in their growth as a result of tort reform, political subdivisions stand to gain as their expenditures for liability premiums would be reduced.  The biases and the dynamics involved with estimating future insurance losses and premiums make predicting any decreases in expenditures for political subdivisions nearly impossible, beyond stating any decreases are indeterminate.

·        Local health districts.  The bill may reduce the costs of insurance for local health districts that run health clinics by potentially increasing the number of people served by the health clinic that are considered indigent and uninsured and the types of services that fall under civil immunity.  These cost reductions, if materialized, may be minimal and would likely take a few years to fully accrue.

·        Potential one-time increase in civil action filings.  Following the enactment of Am. Sub. H.B. 350 of the 121st General Assembly, a “tort reform” bill, and prior to its effective date, courts of common pleas experienced a “one-time surge” in civil case filings.  The uncertainties created by Am. Sub. H.B. 350 apparently induced attorneys to get their cases filed with the court to avoid potential exclusion.  Many were subsequently settled out of court.  Thus, the passage of this bill (S.B. 80) could potentially produce a similar dynamic.  If it does so, then it seems very likely that the previous experience of the courts with changes of this magnitude would mean that the courts could absorb the short-term impact on civil case filings with no more than a minimal one-time administrative cost, if that.

·        Obesity claims:  award or settlement revenues.  The bill’s qualified immunity provision relative to obesity claims theoretically at least prevents a political subdivision of the state from bringing a civil action against certain entities associated with the food or beverage industries.  A potentially significant fiscal effect of the bill involves the loss of future revenue from jury awards and/or settlements if a political subdivision of the state would have successfully litigated such civil actions absent the qualified immunity provision.


 


 

Detailed Fiscal Analysis

 

Operation of the bill

 

For the purposes of this fiscal analysis, the bill most notably:

·        Changes civil practice and procedure relative to specific causes of action, statutes of repose, damage awards, and product liability actions.

·        Provides a qualified immunity from civil damages to certain manufacturers, sellers, and suppliers in actions related to cumulative consumption, weight gain, or obesity.

·        Modifies the civil immunity for volunteer health care professionals and volunteer health care workers providing services to the poor.

·        Modifies the “performance of an operation” and “delivery of a baby” exceptions to civil immunity for volunteer health care professionals and workers.

 

General changes to civil practice and procedure

 

Specific causes of action

 

Under the bill, if there is cause for a civil action for wrongful death, the cause of action accrues, or arises, either upon the date the claimant is informed by competent medical authorities that the decedent’s death was related to exposure to the product in question or by the exercise of reasonable diligence the claimant should have known that the decedent’s death was related to the product exposure.  In such a case, if a claimant chooses to bring forth a civil action for wrongful death, it must commence within two years after the cause of action accrues.

 

The bill also creates certain restrictions on the time frame in which specific legal actions for personal injury, based on product liability claims or exposure to certain hazardous chemicals, can be filed.

 

Statutes of repose

 

                The bill creates a ten-year statute of repose for:  (1) product liability claims, and (2) persons who performed services for the improvement to real property or a person who furnished the design, planning, or supervision of construction of the improvement to real property. 

 

Generally, the bill prohibits the commencement of a wrongful death action or another tort action later than ten years from the date that a product was delivered to its first purchaser or first lessee (product liability) or from the performance of services, design, planning, or construction in relation to the improvement to real property.

 

Subject to the statutes of repose, the bill retains certain statutes of limitations applicable to the commencement of specific civil actions and provides other exceptions to these provisions, such as a manufacturer engaging in fraud regarding information about a product and the fraud contributed to the harm.

 

            These changes to the statutes of repose may curtail some cases involving allegations of adverse long-term effects of certain products.  Should such products be hazardous or contain toxic chemicals, the time frame for a cause of action may be extended no more than two years beyond the statute of repose if the discovery of harm related to the product is not discovered until the end of the ten-year period in the statute of repose.

 

Damage awards

 

            Under the bill, there are several different provisions that affect trials and awards of damages.  For example:

 

·        Juries are to be instructed that an award of compensatory, punitive, or exemplary damages in all tort actions is or is not subject to state or federal income taxes.

·        If the defendant is a small employer, punitive damages are also limited to the greater of the amount of two times the amount of the compensatory damages awarded or 10% of the employer’s net worth when the tort was committed up to a maximum of $350,000.

·        The cap on punitive or exemplary damages does not apply in a tort action where the alleged injury, death, or loss of property resulted from the actions of a defendant that has been convicted of certain felony offenses.

·        Provides that upon a post-judgment motion, a trial court in a tort action must review the evidence supporting an award of compensatory damages for noneconomic loss that the defendant has challenged as excessive.  The court must consider whether the evidence presented or the arguments of the attorneys improperly influenced the determination of an award of compensatory damages for noneconomic loss.

 

Product liability claims

 

            The bill restricts some of the conditions under which some products would be considered defective, creates certain restrictions on the time frame in which specific legal actions for personal injury, based on product liability claims or exposure to certain hazardous chemicals, can be filed.  For example:

 

·        A product is considered defective only if, when it left the control of the manufacturer, the foreseeable risks exceeded the benefits associated with the design or formulation. 

·        The award of punitive damages against a manufacturer of over-the-counter drugs that are legally marketed and recognized as safe and effective is prohibited, unless the product is misbranded or fraudulently produced or marketed by the manufacturer.

·        No cause of action based on a product liability claim can accrue against the manufacturer or supplier of a product later than ten years from the date that the product was delivered to the purchaser.

 

            Generally, under the bill, if a manufacturer complies faithfully to all applicable regulations, and the product is generally recognized as safe when used as directed or the sum total of the benefits provided by the product and its design outweigh the foreseeable risks, manufacturers will likely not be subject to punitive damages to punish for past conduct and deter similar future conduct.  The bill does not insulate the manufacturer from compensatory damages.  This provision of the bill may result in some reduction of civil caseloads in which the intent is to seek large punitive damages and the pursuit of a settlement.

 

State fiscal effects

 

            It is difficult to establish a direct empirical or causal connection between the bill's general changes to civil practice and procedure and any subsequent fiscal effects on the state, particularly in terms of various healthcare expenditures.  There is likely some proportion of medical costs incurred annually by the state that are the result of or directly affected by the current liability system.  It is not unreasonable to conclude therefore that state healthcare expenditures may experience some decrease as a result of the bill's general changes to civil practice and procedure.  The precise fiscal impact on state healthcare expenditures, including the cost of providing state employees with healthcare coverage, is unclear. 

 

Local fiscal effects

 

Local civil justice systems generally.  From the perspective of local civil justice systems generally, the bill's general changes to civil practice and procedure will essentially:

 

·        Increase the “requirements” needed to win tort and civil action cases against manufacturers of products.

·        Set more stringent time limits on the commencement of suits against manufacturers.

·        Permit to a greater extent the introduction of negligence of the plaintiff in the determination of tort actions.

·        Provide that upon a post-judgment motion, a trial court in a tort action must review the evidence supporting an award of compensatory damages for noneconomic loss that the defendant has challenged as excessive.

 

The net effect of the bill’s various changes to civil practice and procedure over time is potentially that fewer suits will be filed against manufacturers and other potential defendants, and fewer suits will be filed to recover other damages by plaintiffs.

 

            If there is in fact a reduction in the number of professional tort actions, product liability actions, and other civil suits, there would in all likelihood be an overall savings realized in various local civil justice systems resulting from a decrease in judicial dockets and a reduction in the related workload of other court personnel.  The tort action cases most affected by the bill are handled by courts of common pleas, which hear professional tort actions, product liability actions, and all civil cases in which the amount in controversy exceeds $500.  Municipal and county courts are permitted to handle civil actions in which the amount in controversy does not exceed $15,000.

 

            As previously noted, the bill provides that upon a post-judgment motion, a trial court in a tort action must review the evidence supporting an award of compensatory damages for noneconomic loss that the defendant has challenged as excessive.  The court must consider whether the evidence presented or the arguments of the attorneys improperly influenced the determination of an award of compensatory damages for noneconomic loss.  If the trial court upholds an award of compensatory damages for noneconomic loss, it must do so in a written opinion.  Although it is difficult to be certain whether or not such a review of damage awards would be a frequent occurrence, there may be some increase in the administrative workload of the court to produce such requested reviews.  As of this writing, it appears very unlikely that the additional costs associated with such administrative tasks would exceed minimal in any given jurisdiction.

 

            If the number of professional tort actions, product liability actions, and other civil suits are reduced, courts will likely see a loss in various filing fee revenues.  However, the savings realized by courts in terms of their personnel and related operating costs would likely be greater than any possible revenue loss.  Revenues from filing fees flow to county treasuries in the case of the courts of common pleas, county courts, and county-operated municipal courts.  In the case of noncounty-operated municipal courts, these revenues flow to treasury of the municipal corporation within which the municipal court is located.

 

Municipal and county court civil caseloads specifically.  The bill’s general changes to civil practice and procedure will primarily affect professional tort, product liability actions, and other large tort actions filed in the court of common pleas.  However, some of the bill’s provisions, such as the provisions for frivolous conduct, could have an effect on those cases filed in municipal and county courts, primarily personal injury cases.  Municipal and county courts hear civil cases with damages up to $15,000.  The bill will likely reduce the number of cases being filed over time and perhaps make the disposition of said cases more efficient.  However, given the bill primarily addresses professional tort, product liability cases, and other large tort actions, any decrease in county and municipal court caseloads and related annual operating costs are expected to be no more than minimal, if that. 

 

Insurance premium costs.  It is sometimes argued that tort reform can reduce insurer losses and potentially reduce premiums.  However, before concluding that the bill will reduce losses and premiums paid by government entities, other factors should be considered.  First, a decrease in insurance losses does not necessarily mean reduced premiums.  Although the bill may cause a reduction in losses, premiums may still increase as other risk factors (such as inflation and investment performance) continue to influence the rate of premiums.  Thus, a “real” premium reduction may or may not be realized.  Premium reductions depend upon more than just decreased losses; there is also a large element of human and business behavior. 

 

If insurance premiums are reduced, or if there is a reduction in their growth as a result of tort reform, political subdivisions stand to gain as their expenditures for liability premiums would be reduced.  The biases and the dynamics involved with estimating future insurance losses and premiums make predicting any decreases in expenditures for political subdivisions nearly impossible, beyond stating any decreases are indeterminate.


            Potential one-time increase in civil action filings.  Following the enactment of Am. Sub. H.B. 350 of the 121st General Assembly, a “tort reform” bill, and prior to its effective date, courts of common pleas experienced a “one-time surge” in civil case filings.  According to the Franklin County Court of Common Pleas, this one-time surge in filings lasted about a week, and on the last day of that week, the court experienced 20 times the normal number of civil case filings.  An official with the court stated that most, if not all, of the more urban courts around the state experienced a similar one-time surge. 

 

From the perspective of the Franklin County Court of Common Pleas, if a similar “one-time surge” accompanies the enactment of this bill (S.B. 80), the court can prepare and accommodate such a one-time surge with currently available resources.  The court would not incur any additional cost by having to hire additional personnel or purchase any new equipment.  The net impact on court personnel would be a few long days and perhaps a small amount of overtime.

 

According to the Franklin County Court of Common Pleas, many of these additional case filings stemming from the enactment of Am. Sub. H.B. 350 were ultimately settled out of court and would not likely have been filed absent the enactment of Am. Sub. H.B. 350.  The uncertainties created by Am. Sub. H.B. 350 apparently induced attorneys to get their cases filed with the court to avoid potential exclusion.  Many were subsequently settled out of court.  Thus, the passage of this bill (S.B. 80) could potentially produce a similar dynamic.  If it does so, then it seems very likely that the previous experience of the courts with changes of this magnitude would mean that the courts could absorb the short-term impact on civil case filings with no more than a minimal one-time administrative cost, if that.

 

Immunity in actions related to cumulative consumption, weight gain, or obesity

 

Private civil actions

 

Since 2003, two civil actions have been brought nationally against the fast food industry seeking to recover damages for the health problems of the plaintiffs.  These civil actions were brought in federal court against McDonald’s and both were dismissed.

 

The net effect of the bill’s provision of immunity from civil damages for certain entities associated with the food and beverage industries is potentially that individuals alleging their poor health is the result of consuming the food or beverage products in question may bring fewer civil actions in Ohio than might have been the case absent the bill.  It should be noted though, that in the state of Ohio, such civil actions may not have been brought in the first place absent the bill, although the history of litigation surrounding similar issues involving the tobacco and firearms industries might suggest otherwise.  Some plaintiffs may still file civil action despite the immunity provided by the bill.  Such civil actions would presumably be resolved much more quickly as a result of the bill’s immunity from civil damages provision than if such matters were to be litigated under current law. 

 

If there were in fact a reduction in the number, or a more timely resolution, of all relevant damage actions as specified in the bill, there would in all likelihood be an overall savings realized in certain local civil justice systems resulting from somewhat smaller judicial dockets, a smaller workload for other court personnel, and the reduced likelihood of a jury trial.  The resulting savings in annual operating costs for any given local court will likely not exceed minimal in most jurisdictions. There have to date been only two civil actions brought forth against the fast food industry in the courts nationally, and both were filed in federal court. 

 

If the civil actions specified in the bill are successfully kept out of Ohio courts due to its qualified immunity provision, then the courts where such civil actions might have been brought will also collect less filing fee and court cost revenues than would have been collected absent this qualified immunity provision.  This potential loss of revenue would not likely exceed minimal in any given jurisdiction.  In all likelihood, any future expenditure savings would most likely more than offset any associated annual loss of filing fee and court cost revenues.

 

Civil actions filed by the state or a political subdivision of the state

 

Notwithstanding the currently observed pattern of single plaintiff lawsuits against certain entities associated with the food or beverage industries, the state of Ohio or a political subdivision of the state could make the decision to bring a civil action independently or to potentially become involved in the settlement negotiations pertaining to ongoing litigation should such a civil action arise. 

 

Award or settlement revenues.  The qualified immunity provided by the bill theoretically at least prevents any Ohio governmental or nongovernmental entities or persons from either filing or litigating tort liability suits against certain manufacturers, sellers, and suppliers.  Thus, a potentially significant fiscal effect of the bill involves the loss of future revenue from jury awards and/or settlements if such lawsuits would have been successfully litigated in the courts absent the bill’s qualified immunity provision.

 

            Legal services expenditures.  As the bill may prevent any future action by the state or a political subdivision of the state should the decision have been made, absent the bill, to bring a civil action against certain manufacturers, sellers, or suppliers, the litigation expenses of the state or that political subdivision may potentially be reduced if either would have brought a civil action in the future absent the bill’s qualified immunity provision. 

 

As any given political subdivision seems unlikely to have the specialized expertise necessary to adequately litigate such a matter, it would likely turn to the services of special counsel. Depending on the nature of that contractual arrangement, for example, an hourly rate versus a contingency fee, the magnitude of the potential savings in legal services expenditures could possibly exceed minimal.  In such matters, the state is likely to utilize special counsel under some form of contingency fee basis, which makes it somewhat less likely that the potential savings in state legal services expenditures might exceed minimal.

 

Civil immunity for certain health care individuals and entities

 

The bill expands the number of indigent persons who may be served by health care professionals, health care workers, and nonprofit shelter care or health care facilities acting under immunity from civil liability by specifying that the persons cannot have incomes exceeding 200%, rather than the current 150%, of the federal poverty line.  It is estimated that one million people in Ohio live between 150% and 200% of the federal poverty line, although LSC is unable to determine how many of those people would also be classified as indigent and uninsured.

 

Under current law, these additional, or second tier of, indigent persons could sue health care professionals, health care workers, and nonprofit shelter care or health care facilities because the immunity from civil liability does not apply for services rendered to them.  By extending the immunity from civil liability to these health care professionals, health care workers, and nonprofit shelter care or health care facilities providing services to those with incomes up to 200% of the federal poverty line, the bill theoretically prevents this second tier group from filing a civil action against these providers.  This provision of the bill therefore decreases the civil liability of health care professionals, health care workers, and nonprofit shelter care or health care facilities when serving indigent and uninsured persons between 150% and 200% of the federal poverty line.

 

The bill also modifies the term “performance of an operation” which is used to determine when the civil immunity provided in certain circumstances is not available to certain individuals and entities.  The effect of this modification will be to restrict what constitutes “performance of an operation” and by doing so broadens the types of procedures that are covered by the civil immunity.  This will allow certain individuals and entities to perform simple procedures such as taking care of an in-grown toenail without imposing liability concerns.

 

Local fiscal effects

 

As a result of:  (1) expanding the number of indigent persons to be served by health care professionals, health care workers, and nonprofit shelter care or health care facilities acting under immunity from civil liability, and (2) extending immunity to simple procedures that are not typically classified as surgery, it seems likely that the bill may result in a reduced number of civil actions being filed related to claims of medical malpractice.  In addition, if the bill were enacted, judges would theoretically have greater latitude to dismiss certain cases more quickly; thereby potentially reducing adjudication costs, including expenses associated with a possible jury trial.

 

If one of the effects of the bill was in fact to reduce the number of civil lawsuits filed annually, then counties and municipalities will lose filing fee and court cost revenues that would likely otherwise have been collected.

 

In any event, the number of civil lawsuits affected annually statewide is likely to be so few that the potential decrease in annual county and municipal adjudication-related expenditures would be minimal at most and the loss of any associated annual county and municipal filing fee and court cost revenues would be, at most, negligible.  The net of these two potential fiscal effects is likely to be a relatively small annual adjudication-related expenditure savings for various common pleas, municipal, and county courts.

 

Local health districts

 

The bill may also reduce the insurance costs of local health districts that run health clinics by potentially increasing the number of people served by a health clinic that are considered indigent and uninsured and the types of services that fall under the civil immunity.

 

These cost reductions, if materialized, may be minimal and would likely take a few years to fully accrue.  Economic theory predicts that cost reductions for business firms lead to reductions in the price of their goods in markets that are sufficiently competitive.  This projected cost effect hinges on the assumption that there are numerous insurance providers in the applicable markets, making these markets operate similarly to the idealized competitive model.

 

State fiscal effects

 

The bill requires the State Dental Board to issue a volunteer’s certificate within 30 days of receiving the appropriate application materials from a retired dentist who intends to provide dental services to indigent and uninsured persons.  In addition, the State Dental Board must make available through the Board’s web site the application form for the volunteer’s certificate, a description of the application process, and the list of requirements for the application.  Legislative Service Commission fiscal staff discussions with the State Dental Board indicate that, as it is already engaged in these activities related to volunteer dental services, this provision of the bill should have no fiscal effect on the Board’s annual operating expenses.

 

It does not appear that the bill will noticeably affect the workload of any other state agencies, departments, offices, institutions, boards, and commissions that are involved in health care-related activities.  Assuming that were true, then annual state revenues and expenditures should be unaffected by the bill.

 

 

 

LSC fiscal staff:  Joseph Rogers, Budget Analyst

 

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