                       NOT RECOMMENDED FOR PUBLICATION
                               File Name: 15a0708n.06

                                        No. 15-5383
                                                                                  FILED
                                                                              Oct 21, 2015
                                                                         DEBORAH S. HUNT, Clerk
                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT

CARDIOVASCULAR SUPPORT PERFUSION                      )
RELIANCE NETWORK, LLC; PERFUSION                      )
RELIANCE NETWORK, G.P.;                               )
CARDIOVASCULAR SERVICES HOLDINGS,                     )
G.P.; CARDIOVASCULAR PRODUCTS                         )
HOLDINGS, G.P.; CARDIOVASCULAR                        )
SUPPORT SERVICES, L.P.; CARDIOVASCULAR                )
SUPPORT PRODUCTS, LTD.;                               )
CARDIOVASCULAR SUPPORT PRODUCTS,                      )
LLC; CARDIOVASCULAR SUPPORT SERVICES                  )
GP, LLC; CARDIOVASCULAR SUPPORT                       )
SOUTHWEST, LTD; MEDICAL                               )
                                                           ON APPEAL FROM THE
TECHNOLOGIES, LLC,                                    )
                                                           UNITED STATES DISTRICT
                                                      )
                                                           COURT FOR THE MIDDLE
       Plaintiffs-Appellants,                         )
                                                           DISTRICT OF TENNESSEE
                                                      )
v.                                                    )
                                                                       OPINION
                                                      )
SPECIALTYCARE, INC., d/b/a SC SpecialtyCare,          )
Inc.; SPECIALTYCARE CARDIOVASCULAR                    )
RESOURCES, INC.; SPECIALTYCARE IOM                    )
SERVICES, LLC; SPECIALTYCARE MISS                     )
SERVICES, LLC; SPECIALTYCARE SURGICAL                 )
ASSIST, LLC, d/b/a SC SpecialtyCare Surgical          )
Assist, LLC,                                          )
                                                      )
       Defendants-Appellees.                          )


       BEFORE:        BOGGS, SUTTON, and STRANCH, Circuit Judges

       JANE B. STRANCH, Circuit Judge. This dispute arises out of an unconsummated

corporate acquisition. Cardiovascular Support Perfusion Reliance Network, LLC, SpecialtyCare,

Inc., and their affiliated entities are healthcare companies that provide perfusion services—
No. 15-5383,
Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

including personnel known as perfusionists who operate heart-lung bypass machines during

certain surgical procedures—to hospitals in the Dallas-Fort Worth area and other regions. The

companies were in talks for SpecialtyCare to acquire Cardiovascular Support, and had signed a

non-disclosure agreement governing their exchange of confidential business information, when

Cardiovascular Support learned that one of its longtime clients was ending their relationship and

signing a contract with SpecialtyCare instead. The acquisition talks subsequently failed, and

Cardiovascular Support filed suit against SpecialtyCare alleging that it violated the non-

disclosure agreement and various state laws by using confidential information to win the contract

with Cardiovascular Support’s client.    We AFFIRM the district court’s grant of summary

judgment in SpecialtyCare’s favor.

                                  I.       BACKGROUND

       A.      Facts

       Lloyd Yancey is a partner and part-owner of Cardiovascular Support and its affiliated

entities (collectively, Cardiovascular Support), all of which are headquartered in Texas. In

December of 2010, under Yancey’s direction, Cardiovascular Support signed a non-disclosure

agreement (NDA) with Tennessee-based SpecialtyCare, Inc. and its affiliated entities

(collectively, SpecialtyCare) in connection with discussions between the companies about the

potential sale of Cardiovascular Support’s perfusion business.          Pursuant to the NDA,

Cardiovascular Support agreed to provide SpecialtyCare with access to certain confidential

information on the condition that such information “be used solely for the purpose of evaluating,

negotiating, and if applicable, consummating the” potential transaction between the companies.

(R. 64-1, PageID 805, ¶ 2.)     The parties dispute precisely what confidential information

Cardiovascular Support provided to SpecialtyCare and when, but both sides generally agree that




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No. 15-5383,
Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

the first set of information sent to SpecialtyCare included various financial statements and tax

returns. SpecialtyCare’s mergers and acquisitions team, which consisted of Jim Lordeman, Alan

Isaacs, and Mike Harper, used the information to calculate Cardiovascular Support’s EBITDA—

an accounting term for a company’s earnings before interest, taxes, depreciation, and

amortization—and the parties discussed a purchase price based on that calculation.

       As the companies continued to negotiate, Yancey mentioned to SpecialtyCare that

Cardiovascular Support’s contract with Baylor University Medical Center for perfusion products

and services was set to expire soon. Cardiovascular Support and Baylor had signed consecutive

contracts for more than twenty years. But in 2011, Baylor expressed concern with the price of

Cardiovascular Support’s perfusion products—such as heart valves and disposable surgical

items—and Cardiovascular Support attempted to negotiate a new contract with Baylor.

Meanwhile, Cardiovascular Support’s acquisition talks with SpecialtyCare continued and

Yancey told SpecialtyCare’s mergers and acquisitions team that Mike Sanborn, Baylor’s Vice

President of Cardiovascular Services, had assured Yancey that Baylor would continue to contract

with Cardiovascular Support for perfusion services even if the hospital decided to purchase

products directly from a manufacturer.

       It is undisputed, however, that Sanborn reached out to SpecialtyCare’s then Vice

President of Sales Jonathan Womack and asked him to submit a bid for SpecialtyCare to take

over perfusion services at Baylor.       Sanborn met with Womack and other Baylor and

SpecialtyCare representatives to discuss a potential contract with SpecialtyCare as an alternative

to a contract with Cardiovascular Support. Sanborn and Womack both testified that Baylor gave

Womack information about its perfusion needs so that Womack could prepare a sales proposal.

Womack presented SpecialtyCare’s proposal to Sanborn and others on July 7, 2011. After



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No. 15-5383,
Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

Womack’s presentation, Sanborn continued to talk to both Cardiovascular Support and

SpecialtyCare about providing perfusion services, but Baylor signed a letter of intent with

SpecialtyCare in September of 2011, and then entered into a contract for perfusion services with

SpecialtyCare effective December 1, 2011.

       Sanborn informed Yancey in October that Baylor had decided to go with another vendor

and would not be contracting with Cardiovascular Support. Yancey learned that SpecialtyCare

was the other vendor, but acquisition talks between SpecialtyCare and Cardiovascular Support

initially continued. The companies even began to work together to recalculate Cardiovascular

Support’s EBITDA in light of the lost Baylor contract, but the acquisition never took place.

       B.      Procedural History

       Cardiovascular Support filed the instant action against SpecialtyCare on March 29, 2013,

in Texas state court. SpecialtyCare removed the case to federal court in Texas pursuant to

28 U.S.C. §§ 1332 and 1441, and the case was subsequently transferred to the District Court for

the Middle District of Tennessee with the parties’ consent. Prior to transfer, Cardiovascular

Support filed an amended complaint asserting five separate common-law claims, all of which

rest on the allegation that SpecialtyCare’s mergers and acquisitions team passed protected

confidential information about Cardiovascular Support’s relationship with Baylor to the

SpecialtyCare sales team, and that the sales team used that information to secure a contract with

Baylor. Specifically, Cardiovascular Support’s amended complaint contends that SpecialtyCare

is liable for: (1) breach of contract or, in the alternative, promissory estoppel; (2) fraud;

(3) negligent misrepresentation; (4) tortious interference with a prospective contract; and

(5) misappropriation of trade secrets.




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No. 15-5383,
Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

       Both parties moved for summary judgment on October 31, 2014. On February 18, 2015,

the court granted SpecialtyCare’s motion for summary judgment, concluding that Cardiovascular

Support had failed to present sufficient evidence that SpecialtyCare breached the NDA or used

Cardiovascular Support’s protected information to win the Baylor contract. Cardiovascular

Support filed a motion to alter or amend the court’s judgment pursuant to Federal Rule of Civil

Procedure 59(e). The court denied that motion, and Cardiovascular Support timely filed a notice

of appeal from the court’s grant of summary judgment. On appeal, Cardiovascular Support

contends that there is sufficient evidence in the record to support its claims for breach of

contract, fraud, negligent misrepresentation, tortious interference with a prospective contract, and

trade secret misappropriation. It does not raise its promissory estoppel claim. SpecialtyCare

maintains that there is insufficient record evidence to support key elements of Cardiovascular

Support’s various claims.

                            II.       STANDARD OF REVIEW

       We review a district court’s grant of summary judgment de novo. Johnson v. Memphis

Light Gas & Water Div., 777 F.3d 838, 842 (6th Cir. 2015). Summary judgment is appropriate

only if “there is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” Fed. R. Civ. P. 56(a). A fact is material if it “might affect the outcome of

the suit under the governing law[,]” and a dispute about a material fact is genuine “if the

evidence is such that a reasonable jury could return a verdict for the nonmoving party.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). At the summary judgment stage, we

consider the evidence in the light most favorable to the non-moving party and draw all

reasonable inferences in that party’s favor. See Chapman v. UAW Local 1005, 670 F.3d 677,

680 (6th Cir. 2012) (en banc). But the non-moving party “must present affirmative evidence in



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Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

order to defeat a properly supported motion for summary judgment.” Anderson, 477 U.S. at 257.

And a moving party is entitled to summary judgment when a non-moving party “fails to make a

showing sufficient to establish the existence of an element essential to that party’s case, and on

which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317,

322 (1986); see also Chapman, 670 F.3d at 680.

                                   III.       ANALYSIS

       The district court, relying on Tennessee choice-of-law rules, determined that Delaware

law governs Cardiovascular Support’s breach of contract claim while Texas law controls the

remaining claims. Neither party contests the district court’s choice-of-law analysis on appeal,

and we will apply Delaware and Texas law, respectively, in our de novo review.

       A.      Breach Of Contract

       Delaware law requires a plaintiff to prove three elements in order to prevail on a breach

of contract claim:   (1) “existence of” an “express or implied” contract; (2) “breach of an

obligation imposed by that contract; and” (3) “resultant damage to the plaintiff.” VLIW Tech.,

LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). It is undisputed in the present case

that the parties’ NDA constitutes an express contract. The issue is whether there is a genuine

dispute of material fact regarding the elements of breach and resultant damage.

       With respect to the element of breach, Sanborn (V.P. of Cardiovascular Services for

third-party Baylor) and Womack (SpecialtyCare’s sales representative) both testified that Baylor

itself gave SpecialtyCare’s sales team information about Baylor’s perfusion needs in order for

SpecialtyCare to prepare its sales proposal. Womack further testified that he did not receive any

information regarding Cardiovascular Support from SpecialtyCare’s mergers and acquisitions

team. Cardiovascular Support has not identified any affirmative evidence to dispute Sanborn and




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Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

Womack’s testimony. And turning to the record, there is insufficient evidence to support even

an inference that SpecialtyCare’s mergers and acquisitions team passed confidential information

to Womack or any other member of the sales team who worked on the Baylor contract.

Cardiovascular Support relies on emails and testimony showing that members of SpecialtyCare’s

sales team shared information with their mergers and acquisitions team about Cardiovascular

Support’s known clients.    But proof of information about known clientele flowing in one

direction from sales to mergers and acquisitions is not affirmative evidence that confidential

information about Cardiovascular Support flowed in the other direction from mergers and

acquisitions to sales. And Yancey’s testimony regarding his conclusory beliefs about the use of

Cardiovascular Support’s confidential information is not enough to support a reasonable

inference that SpecialtyCare breached the NDA. See Anderson, 477 U.S. at 248–52.

       Cardiovascular Support’s only argument to the contrary is that Sanborn’s testimony about

providing Womack with Baylor’s perfusion information is hearsay because SpecialtyCare has

not introduced into evidence documents proving that Baylor conveyed any perfusion-related

information to SpecialtyCare. This argument fails for at least two reasons. First, Sanborn’s

testimony is not hearsay. Sanborn was asked during his deposition whether “Baylor provide[d]

SpecialtyCare with information to assist it in putting together [a] proposal[.]” (R. 65-1, PageID

845, 20:10–12.) Sanborn answered:

               Yes. There was a standardized information request, I guess. I’m
               not sure exactly what the title of the document was, but an
               information request that had to do with case volume, average
               length of case, how many nurses are in the room, just things that a
               perfusionist would need to know, especially around the types of
               cases, valves versus bypass, those types of things. So we got that
               information from the operating room history and provided that
               information to SpecialtyCare.




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No. 15-5383,
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(Id. at PageID 845, 20:16–24.) Later in his deposition, when Cardiovascular Support’s counsel

asked if Sanborn was the person who sent the information to SpecialtyCare, Sanborn replied:

               I’m not sure if that information was sent by me or by purchasing or
               by our corporate director of perfusion, but it would have been one
               of the three of us. But we collectively compiled that information
               in conjunction with operating room staff. . . . I just don’t recall if I
               specifically sent that e-mail or if it would have been another
               Baylor person that specifically sent that e-mail, but it was
               communicated to SpecialtyCare.

(Id. at PageID 860, 81:6–22.) Federal Rule of Evidence 801(c) defines hearsay as “a statement

that: (1) the declarant does not make while testifying at the current trial or hearing; and (2) a

party offers in evidence to prove the truth of the matter asserted in the statement.” Fed. R. Evid.

801(c). Sanborn testified under oath at his deposition in the present case, and his testimony

therefore falls outside the definition of hearsay under the federal rules. See Fed. R. Evid. 801

advisory committee’s note to 1972 proposed rules (“Testimony given by a witness in the course

of court proceedings is excluded [from the definition of hearsay] since there is compliance with

all the ideal conditions for testifying.”). Second, even if the alleged absence of corroborating

documentary evidence might weaken Sanborn’s testimony, merely discrediting testimony is “not

[normally] considered a sufficient basis for” defeating a motion for summary judgment.

Anderson, 477 U.S. 256–57 (alteration in original) (quoting Bose Corp. v Consumers Union of

U.S., Inc., 466 U.S. 485, 512 (1984)). “Instead, the [non-moving party] must present affirmative

evidence in” support of its position, and “[t]his is true even where the evidence is likely to be

within the possession of the defendant, as long as the plaintiff has had a full opportunity to

conduct discovery[,]” id. at 257, as was the case here. To survive the motion for summary

judgment, Cardiovascular Support “need only present evidence from which a jury might return a

verdict in [its] favor.” Id. It has failed to do so with respect to the element of breach.



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Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

       Even assuming that Cardiovascular Support could show that SpecialtyCare breached the

NDA, it would still have to present sufficient evidence regarding the third element of breach of

contract, resultant harm.    In other words, Cardiovascular Support would have to point to

affirmative evidence that SpecialtyCare’s sales team used the confidential information in a way

that caused damage. Cardiovascular Support maintains that the sales materials SpecialtyCare

used to win the Baylor contract contained or reflected its “Baylor caseload/volumes, disposables

costs, personnel costs and salaries,” (Appellants’ Br. at 14) but provides no affirmative record

evidence to support that assertion. Sanborn and Womack both testified that Baylor provided

procedure volume information to SpecialtyCare, and Cardiovascular Support has not presented

any affirmative evidence to the contrary. And counsel for Cardiovascular Support conceded that

the SpecialtyCare sales documents do not reflect any Cardiovascular Support prices. As for

salary information, Yancey’s allegation that SpecialtyCare’s proposal included perfusionist

salaries that were higher than the salaries paid to SpecialtyCare’s perfusionists in Fort Worth is

insufficient to support an inference that SpecialtyCare based its proposed Baylor perfusionist

salaries on Cardiovascular Support’s confidential information—particularly since Yancey

testified that he was unsure whether or not Cardiovascular Support provided SpecialtyCare with

Baylor-specific salary information prior to losing the Baylor contract.

       Consequently, we hold that Cardiovascular Support has failed to present sufficient

evidence to allow a reasonable jury to conclude either that SpecialtyCare breached the NDA by

sharing confidential information with its sales department or that such a breach caused any

resultant damage to Cardiovascular Support.




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Cardiovascular Support Perfusion Reliance Network, et al. v. SpecialtyCare, Inc., et al.

         B.     Fraud And Negligent Misrepresentation

         Under Texas law, a claim for fraud “requires a material misrepresentation, which was

false, and which was either known to be false when made or was asserted without knowledge of

its truth, which was intended to be acted upon, which was relied upon, and which caused injury.”

Zorrilla v. Aypco Contsr. II, LLC, --- S.W.3d ---, 2015 WL 3641299, at *7 (Tex. June 12, 2015)

(citation omitted). Similarly, the elements of a claim for negligent misrepresentation include:

(1) a representation “made by a defendant in the course of his [or her] business, or in a

transaction in which he [or she] has a pecuniary interest;” (2) “false information” that the

“defendant supplies . . . for the guidance of others in their business; (3) the defendant[’s] . . .

[failure to] exercise reasonable care or competence in obtaining or communicating the

information; and (4) the plaintiff[’s] . . . justifiabl[e] rel[iance] on the representation” resulting in

“pecuniary loss[.]” Federal Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex.

1991).

         Cardiovascular Support asserts that SpecialtyCare falsely promised to safeguard its

information from SpecialtyCare’s sales department and that Lordeman misrepresented his job

duties at SpecialtyCare by failing to mention his alleged supervision of sales in an executive

capacity. According to Cardiovascular Support, both of these acts give rise to viable claims for

fraud and negligent misrepresentation because Cardiovascular Support would not otherwise have

shared its confidential information with SpecialtyCare, and SpecialtyCare, in turn, would not

have secured the contract with Baylor. Viewing the evidence in the light most favorable to

Cardiovascular Support, we conclude that both claims founder on the same shoals as the claim

for breach of contract. Cardiovascular Support has failed to present affirmative evidence that

SpecialtyCare shared and/or used Cardiovascular Support’s confidential information to secure



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the Baylor contract, and, therefore, there is insufficient evidence in the record to support an

inference that Cardiovascular Support’s reliance on SpecialtyCare’s alleged misrepresentations

“caused injury” or resulted in “pecuniary loss.” Cardiovascular Support has therefore failed to

demonstrate a genuine dispute of material fact with respect to an essential element of its claims

for fraud and negligent misrepresentation. See Celotex Corp., 477 U.S. at 322.

       C.      Tortious Interference With A Prospective Contract

       In Texas, the elements of a claim for tortious interference with a prospective contract are:

               (1) a reasonable probability that the parties would have entered
               into a contractual relationship; (2) an “independently tortious or
               unlawful” act by the defendant that prevented the relationship from
               occurring; (3) the defendant did such act with a conscious desire to
               prevent the relationship from occurring or knew that the
               interference was certain or substantially certain to occur as a result
               of his conduct; and (4) the plaintiff suffered actual harm or damage
               as a result of the defendant’s interference.

Faucette v. Chantos, 322 S.W.3d 901, 914 (Tex. App. 2010). “[I]ndependently tortious” means

“conduct that would violate some other recognized tort duty.” Wal-Mart Stores, Inc. v. Sturges,

52 S.W.3d 711, 713 (Tex. 2001). For instance, “a defendant who threatened a customer with

bodily harm if he did business with the plaintiff would be liable for interference because his

conduct toward the customer—assault—was independently tortious, while a defendant who

competed legally for the customer’s business would not be liable for interference.” Id. The only

independent tort Cardiovascular Support identifies is SpecialtyCare’s alleged breach of the

NDA; and, for the reasons explained above, there is insufficient record evidence to support even

an inference that SpecialtyCare breached the NDA by sharing Cardiovascular Support’s




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confidential information with SpecialtyCare’s sales team. Consequently, this claim, too, must

succumb to SpecialtyCare’s motion for summary judgment. See Celotex Corp., 477 U.S. at 322.1

         D.       Misappropriation Of Trade Secrets

         With respect to Cardiovascular Support’s last remaining claim, Texas law requires a

plaintiff alleging misappropriation of trade secrets to show that: (1) “a trade secret existed;”

(2) “the trade secret was acquired through a breach of a confidential relationship or discovered

by improper means; and” (3) “use of the trade secret without authorization from the plaintiff.”

Tewari De-Ox Sys., Inc. v. Mountain States/Rosen, LLC, 637 F.3d 604, 610 (5th Cir. 2011).

Texas courts weigh the following six non-dispositive factors and “the context of the surrounding

circumstances” in order “[t]o determine whether a trade secret exists”:

                  (1) the extent to which the information is known outside of the
                  business;

                  (2) the extent to which it is known by employees and others
                  involved in the business;

                  (3) the extent of measures taken to guard the secrecy of the
                  information;

                  (4) the value of the information to the business and to its
                  competitors;

                  (5) the amount of effort or money expended in developing the
                  information;

                  (6) the ease or difficulty with which the information could be
                  properly acquired or duplicated by others.

Id.    Cardiovascular Support maintains that the confidential information it provided to

SpecialtyCare constitutes a trade secret, that SpecialtyCare obtained that information through


1
 Cardiovascular Support attempts to argue that the district court improperly ruled sua sponte with respect to its
claims for tortious interference with contract and misappropriation of trade secrets. But SpecialtyCare moved for
summary judgment on these claims, and Cardiovascular Support had ample “notice that [it] had to come forward
with all of [its] evidence” or risk dismissal. Celotex Corp., 477 U.S. at 326; see also Bennett v. City of Eastpointe,
410 F.3d 810, 816 (6th Cir. 2005).


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false representations, and that SpecialtyCare used the information to secure the Baylor contract

without Cardiovascular Support’s consent. But even if we assume that the first and second

elements are met—that Cardiovascular Support’s confidential information constitutes a trade

secret that SpecialtyCare acquired improperly—Cardiovascular Support still has not presented

sufficient evidence to support its contention that SpecialtyCare used Cardiovascular Support’s

confidential information to win the Baylor contract. And, thus, the third essential element of

Cardiovascular Support’s claim for misappropriation of trade secrets is wanting and summary

judgment for SpecialtyCare is appropriate.

                                 IV.         CONCLUSION

        Cardiovascular Support has failed to demonstrate a genuine dispute of material fact with

respect to its claims, and SpecialtyCare is entitled to summary judgment as a matter of law.

See Fed. R. Civ. P. 56(a); Celotex Corp., 477 U.S. at 322.2 We AFFIRM the judgment and

order of the district court.




2
   Cardiovascular Support contends that the district court erred by failing to address
Cardiovascular Support’s arguments concerning SpecialtyCare’s affirmative defenses; we find,
however, that because the district court correctly held that Cardiovascular Support had failed to
carry its summary judgment burden as a matter of law, the court was not required to analyze
arguments related to affirmative defenses.


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