Appeal by defendants and the University of North Carolina from
orders entered 10 July and 24 July 2001 by Judge Russell J. Lanier,
Jr., in Sampson County Superior Court. Heard in the Court of
Appeals 21 January 2003.
White & Allen, P.A., by Thomas J. White, III; and Massengill
& Bricio, PLLC, by Francisco J. Bricio, for plaintiff
appellees.
Morris York Williams Surles & Barringer, LLP, by John F.
Morris and Keith B. Nichols, for defendant appellants.
Attorney General Roy Cooper, by Assistant Attorney General
Brent D. Kiziah, for the University of North Carolina
Hospitals and the University of North Carolina at Chapel Hill,
appellants.
Turner Enochs & Lloyd, P.A., by Melanie M. Hamilton and
Wendell H. Ott, for Amicus Curiae Duke University Medical
Center, Memorial Mission Hospital, Inc., Charlotte-Mecklenburg
Hospital Authority, d/b/a Carolinas Medical Center, Moses H.
Cone Memorial Hospital, The North Carolina Baptist Hospitals,
Incorporated, Wake Medical Center, The North Carolina Hospital
Association, and The North Carolina Medical Society.
Legal Aid of North Carolina, by Lori Elmer, Amicus Curiae.
McCULLOUGH, Judge.
Defendants W. Brent Jackson, d/b/a Jackson's Farming Company
and Companion Property and Casualty, along with the University of
North Carolina, for and on behalf of the University of North
Carolina Hospitals and the University of North Carolina at Chapel
Hill, appeal from the 10 July 2001 Order and the 24 July 2001
Supplemental Order granting appellees, the law firms of Massengill
& Bricio, P.L.L.C., and White Law Offices, P.A., attorneys' fees
based on incurred medical compensation recovered for their client,
J. Carmen Fuentes, in his claim for workers' compensation.
The facts leading to this appeal include Mr. J. Carmen
Fuentes' coming to work for defendant Jackson's Farming Company in
the summer of 1998 as part of a federal program. As per the
program, Jackson's Farming Company provided workers' compensation
insurance for the workers on its farms. On 10 July 1998, Mr.
Fuentes became overheated while working in the fields picking
tomatoes. He was not given immediate medical attention and his
condition worsened. By the end of the day, he was unconscious and
taken by emergency personnel to Sampson Regional Medical Center,
then to University of North Carolina Hospitals. It was determined
that Mr. Fuentes suffered a heatstroke. The heatstroke was so
severe that he is now permanently disabled and in a persistent
vegetative state.
Mr. Fuentes incurred substantial medical bills amounting to
$363,307.29 to the University of North Carolina Hospitals and
$44,256.00 to University of North Carolina Physicians and
Associates. Attorneys from the above-mentioned appellee law firms were
approached by the Fuentes family about representing their interests
on behalf of Mr. Fuentes in his workers' compensation claim, as the
claim had been denied by appellants. The appellee law firms
accepted the case on the premise that they would be reasonably
compensated by the Industrial Commission under provisions of the
Workers' Compensation Act, as the Fuentes family was not in a
position to pay a fee.
After exerting much time, money and expertise, the attorneys
representing Mr. Fuentes were successful in proving to the Deputy
Commissioner and the Full Commission that Mr. Fuentes' heatstroke
was compensable as an occupational disease. Mr. Fuentes was also
awarded a 10% penalty by the Deputy as defendant had violated OSHA
safety requirements. As part of the award, defendants were to pay
for the medical expenses incurred by Mr. Fuentes (past and future).
As these payments were past due by the time the Full Commission
heard the matter, another 10% was added on pursuant to N.C. Gen.
Stat. § 97-18(e) and (g) (2001). These rulings have not been
appealed.
The subject of this appeal is the issue of attorneys' fees.
The Deputy Commissioner awarded attorneys' fees to Mr. Fuentes'
attorneys in the amount of 25% of the indemnity award (compensation
due Mr. Fuentes for his loss of earning capacity). In addition,
the Deputy Commissioner found that defendant-carrier had acted in
bad faith in initially denying the claim, and thus defendant-
carrier was ordered to pay the attorneys' fees owed to Mr. Fuentes'attorneys pursuant to N.C. Gen. Stat. § 97-88.1 (2001). The Full
Commission affirmed this ruling.
What is in dispute is the request of Mr. Fuentes' attorneys to
receive an additional award of attorneys' fees based upon the
amount of medical compensation they procured for the medical
providers. The attorneys made motions before both the Deputy and
the Full Commission, asking for such an award. Both denied the
respective motions. The Full Commission noted that '[t]he
approval of attorneys' fees based on a percentage of the
compensation paid to plaintiff is limited to indemnity compensation
and penalties and sanctions added to such compensation, but does
not include expenses related to medical care and treatment,' citing
Hyler v. GTE Prod. Co., 333 N.C. 258, 425 S.E.2d 698 (1993).
The appellee attorneys are pursuing the additional fee award
because they expended an abnormal amount of time and money in the
preparation and litigation of the claim. They claim that a fee
award based on a percentage of the indemnity award is inadequate to
compensate them for their performance as this case is extraordinary
in that the indemnity award was very low when compared to the very
high amounts of incurred medical expenses. Further, this was a
very difficult case to litigate, as claimant had to prove that
heatstroke was compensable as an occupational disease. Making
matters worse was Mr. Fuentes' being in a permanent vegetative
state, and Mr. Fuentes' location, he and his family being in
Mexico. Thus, Mr. Fuentes' attorneys appealed to the Superior Court of
Sampson County pursuant to N.C. Gen. Stat. § 97-90(c) (2001) from
the Full Commission's decision not to allow attorneys' fees based
on a percentage of the awarded medical compensation.
The matter was heard before The Honorable Russell J. Lanier,
Jr. The trial court filed a very detailed order on 10 July 2001.
The order held that:
It appearing to the Court that this
appeal involves the exercise of the Court's
discretion under G.S. 97-90(c) to determine
what is a reasonable attorneys' fee to be
allowed in this cause, wherein plaintiff's
counsel had no fee agreement with their
incompetent client but had informed his family
that if they were successful they would be
entitled to receive a reasonable fee under the
Workers['] Compensation Act for their services
in recovering denied wage and medical
compensation, including consideration of the
appropriateness of counsel's contention that
under all the facts and circumstances, they
should be awarded a reasonable fee out of the
successful recovery by them of the denied
medical care expenses incurred by plaintiff as
well as out of the wage indemnity recovered[.]
The trial court made numerous findings of fact as to the extensive
efforts of appellees. According to the trial court, the final
tally of medical compensation already incurred was as follows:
$363,307.92 to University of North Carolina Hospitals; $44,256.00
to University of North Carolina Physicians; $3,000.00 to Sampson
Regional Medical Center. It further noted that these amounts,
totaling around $410,000.00, were far in excess of the accrued
indemnity compensation, which totaled around $24,000.00. The trial
court also noted that University of North Carolina Hospitals hadactually received from the insurance company far in excess of the
amount they had expected to recover in this matter.
The trial court apparently distinguished the Hyler case cited
by the Full Commission, and proceeded to employ an inherent
fairness analysis. Basically, it appears from the order that it
was the trial court's position that the hospitals would have
recovered little but for the extraordinary efforts of the
appellees, and thus the hospitals should be ordered to forfeit some
of their recovery to appellees.
We note the following conclusions of law by the trial court:
3. Because compensability is not disputed
in most workers' compensation claims and
medical compensation is routinely paid without
great dispute in cases of accepted
compensability, attorneys' fees are usually
based only upon the amount of the
wage/disability compensation component, not
the undisputed and accepted medical component.
Here, however, by far the greater portion of
the amount in controversy respecting the claim
of plaintiff's counsel for reasonable
attorneys' fees is the amount of accrued
medical care expenses plaintiff incurred at
Sampson Regional Medical Center, UNC Hospitals
and UNC Physicians and Associates.
4. Plaintiff's attorneys have rendered
valuable legal services to plaintiff's medical
care providers as much as they have to
plaintiff, in that but for the efforts of
plaintiff's counsel, the medical care providers would not have been paid anything in this denied claim,
as plaintiff had no health care insurance, no assets of any
consequence and no prospect of future earnings.
5. The Industrial Commission erred in not
considering the factors enumerated and
required by G.S. 97-90(c) in determining
reasonable fees, especially the time the
attorneys invested, the amount of the accrued
medical compensation involved, the exceptional
results achieved, the experience and skilllevel of counsel and the nature of their
services in an unusual claim involving complex
legal and medical issues stubbornly defended
by the defendants, and the risk of no fee at
all if not successful in this denied claim.
. . . .
7. G.S. 97-90 and its sub-parts do not
limit approval of attorneys' fees to a
percentage only of indemnity compensation to
the exclusion of medical care compensation
recovered by attorneys in denied claims. This
Court has reviewed the record and the
documentation submitted of plaintiff's
counsels' service and considered those factors
enumerated by G.S. 97-90(c) and others as
mentioned in the Court's findings of fact and
conclusions of law, and has determined in its
discretion that plaintiffs' counsel should be
awarded a reasonable fee based upon both of
the components of the compensation they have
recovered, wage indemnity and medical
expenses, in the amounts hereinafter set
forth.
The trial court set the percentage at 25% and awarded that
percentage of both the wage indemnity and the medical compensation,
either already paid or still outstanding, to appellees. Notably,
in its award the trial court stated:
2. That to the extent that the Carrier-
Defendant, despite its knowledge of the
pendency of this appeal (which continued at
issue the previously-asserted claim of
plaintiff's counsel), has already unilaterally
paid any such amounts to said providers, then,
in that event, Companion Property and
Casualty, the Carrier-Defendant herein, shall
nonetheless make payment of the amounts herein
awarded directly to plaintiff's counsel, but
may collect on its own, reimbursement to that
extent from such provider(s), who shall be
entitled, by the terms of this Order and Award
of attorneys' fees, only to the net amount
after allowance of the attorneys' fees[.]
(Emphasis added.) Defendants appeal.
Defendants claim that the trial court did not have authority
pursuant to N.C. Gen. Stat. § 97-90(c), any other section of the
Workers' Compensation Act, or case law to award appellees
attorneys' fees out of the reimbursement to be paid the medical
providers. We agree.
The trial court's order effectively reduced the award of
medical compensation to the hospitals. As can be gleaned from the
order, the trial court determined that appellees had done the
hospitals a great service, and therefore felt that the deduction
was justified in the interest of fairness and equity.
The hearing before the trial court was authorized pursuant to
N.C. Gen. Stat. § 97-90(c). That statute sets out the process
through which counsel fees are approved by the Commission and also
the procedure for disputing the Commission's decision on such
matters.
Creel v. Town of Dover, 126 N.C. App. 547, 551, 486
S.E.2d 478, 480 (1997). It provides in pertinent part:
In all other cases where there is no agreement
for fee or compensation, the attorney or
claimant may, by filing written notice of
appeal within five days after receipt of
notice of action of the full Commission
with
respect to attorneys' fees, appeal to the
senior resident judge of the superior court of
the district of the county in which the cause
arose or in which the claimant resides; and
upon such appeal said judge shall consider the
matter of such fee and determine
in his
discretion the attorneys' fees to be allowed
in the cause. The Commission shall, within 20
days after notice of appeal has been filed,
transmit its findings and reasons as to its
action concerning such fee or compensation to
the judge of the superior court designated inthe notice of appeal; provided that the
Commission shall in no event have any
jurisdiction over any attorneys' fees in any
third-party action. In any case in which an
attorney appeals to the superior court on the
question of attorneys' fees, the appealing
attorney shall notify the Commission and the
employee of any and all proceedings before the
superior court on the appeal, and either or
both may appear and be represented at such
proceedings.
The Commission, in determining an
allowance of attorneys' fees, shall examine
the record to determine the services rendered.
The factors which may be considered by the
Commission in allowing a reasonable fee
include, but are not limited to, the time
invested, the amount involved, the results
achieved, whether the fee is fixed or
contingent, the customary fee for similar
services, the experience and skill level of
the attorney, and the nature of the attorney's
services.
In making the allowance of attorneys'
fees, the Commission shall, upon its own
motion or that of an interested party, set
forth findings sufficient to support the
amount approved.
N.C. Gen. Stat. § 97-90(c) (emphasis added). The trial court noted
in conclusion of law #5 that the Full Commission did not make
findings as required by the statute as to attorneys' fees with
regard to the medical compensation. This is presumably because the
Full Commission felt as a matter of law that such an award was
untenable, as evidenced by their citation of the
Hyler case. We
note that it appears from the record that appellees complied with
the notice requirements of N.C. Gen. Stat. § 97-90(c). The focus here is the scope of the trial court's authority
under this section with respect to the award by the Full
Commission.
As we have seen, the focus of the statute itself is solely
upon attorneys' fees. It appears to grant the trial court broad
discretion without explicit limitations. Defendant Hospitals
contend that it was beyond the scope of authority granted to the
trial court by § 97-90(c) to alter the Opinion and Award with
respect to the medical compensation award. They bolster this with
the fact that § 97-90(c) was enacted to rectify the specific
problem of the trial court not having jurisdiction over attorneys'
fees in a workers' compensation cases.
See Brice v. Salvage Co.,
249 N.C. 74, 83, 105 S.E.2d 439, 446 (1958);
Priddy v. Cab Co., 2
N.C. App. 331, 335-36, 163 S.E.2d 20, 23 (1968).
Appellees contend that § 97-90(c) does not limit approval of
attorneys' fees to a percentage only of indemnity compensation to
the exclusion of medical compensation. Further appellees point out
that this Court has recognized that, under certain circumstances,
it is proper to base the attorneys' fees upon an item other than
the indemnity compensation award.
See Church v. Baxter Travenol
Laboratories, 104 N.C. App. 411, 409 S.E.2d 715 (1991);
Cole v.
Triangle Brick, 136 N.C. App. 401, 524 S.E.2d 79 (2000). The
analysis in
Church was as follows:
Defendants' final contention is that the
Commission had no authority to reduce the 100%
credit for disability payments to 75%, and to
award the remaining 25% to plaintiff as
attorney's fees. The thrust of defendants'contention is that plaintiff's case is
controlled by
Foster v. Western-Electric Co.,
320 N.C. 113, 357 S.E.2d 670 (1987).
Foster
concerned a situation in which an injured
employee was awarded $7,598.16 from her
employer's private insurer. Later the
Industrial Commission entered a worker's
compensation award in the amount of $6,741.96
and denied the employer
any credit for the
prior payment of $7,598.16. In reversing the
Commission's conclusion our Supreme Court
stated:
[P]olicy considerations dictate that
an employer such as defendant in
this case, who has paid an
employee's wage-replacement benefits
at the time of that employee's
greatest need, should not be
penalized by being denied full
credit for the amount paid as
against the amount which was
subsequently determined to be due
the employee under workers'
compensation.
Id. at 117, 357 S.E.2d at 673. We recognize
Foster's mandate, however, when
Foster is read
in view of G.S. 97-42 and policy
considerations, the decision of the Commission
must stand.
G.S. 97-42 dictates that any payments
made by an employer to the injured employee
during the period of her disability which were
not due and payable when made, may,
subject to
the approval of the Industrial Commission, be
deducted from the amount to be paid as
workers' compensation.
Foster recognized that
the Commission must not make a complete denial
of the credit to the employer; however, that
is not the situation here. In the instant
case, the Commission decided to award a credit
to the defendant-employer, albeit not a full
100% credit.
The Commission's justification for not
awarding the full credit was more than
adequate. Baxter Travenol's private insurer
paid the plaintiff only $2,797.44; the
Commission later awarded $3,769.79 toplaintiff. The difference between these awards
was less than $1,000 -- a very small amount
for any plaintiff to contest. In order to
award attorney's fees of any significance, the
Commission correctly calculated the fees on
the basis of the total award instead of the
$1,000 difference. As the Commission
recognized, in contested workers' compensation
cases today, access to competent legal counsel
is a virtual necessity. If attorney's fees
were allowed to be calculated from only the
difference between the workers' compensation
award and the private insurer's payment, then
almost no attorney could afford to take a
contested case where voluntary payments had
already been made. Leaving injured employees
without the representation they need to obtain
the complete and total amount of their
workers' compensation award would defeat the
purposes of the Act. In fact, employers would
be encouraged to contest liability and
meanwhile make voluntary payments less than
that required by the Workers' Compensation
Act.
The Commission's award in its discretion
of a 75% credit to defendant for payments made
through its private insurer and the award of
the remaining 25% to plaintiff to fund
attorney's fees based upon the full workers'
compensation award is well within the
Commission's discretionary authority. The
Commission's action compensated plaintiff's
counsel for his essential legal services, and
the award was within the Commission's
authority to approve fee payments pursuant to
G.S. 97-90(c).
Church, 104 N.C. App. at 415-17, 409 S.E.2d at 717-18.
While
Church is no doubt instructive as to policy, it is
distinguishable from the case at bar. The main difference is the
type of money being discussed. The present case does not involve
money that went to the employee as in
Church, but money that goes
to the hospitals that provided care to the employee. The Workers'
Compensation Act addresses medical payments in several provisions,which appear to provide implicit limitations upon the discretion of
the trial court under § 97-90(c).
See N.C. Gen. Stat. § 97-59
(2001) (stating [m]edical compensation
shall be paid by the
employer in cases in which awards are made for disability or damage
to organs as a result of an occupational disease after bills for
same have been approved by the Industrial Commission).
Id.
(emphasis added). The clearest mandate of the Act is under N.C.
Gen. Stat. § 97-26(a) & (b) (2001). Section (a) commands that the
Commission shall adopt a fee schedule for medical compensation to
determine how much reimbursement goes to providers and states that
fees adopted by the Commission in its schedule
shall be adequate to ensure that (i) injured
workers are provided the standard of services
and care intended by this Chapter, (ii)
providers are reimbursed reasonable fees for
providing these services, and (iii) medical
costs are adequately contained.
Id. Following this, section (b) states:
Each hospital subject to the provisions
of this subsection
shall be reimbursed the
amount provided for in this subsection unless
it has agreed under contract with the insurer,
managed care organization, employer . . . to
accept a different amount or reimbursement
methodology.
Except as otherwise provided herein,
payment for medical treatment and services
rendered to workers' compensation patients by
a hospital shall be a reasonable fee
determined by the Commission.
Id. (emphasis added).
Further, § 97-90(a) and § 97-91 put the approval of medical
fees squarely before the Commission.
See Hansen v. Crystal Ford-
Mercury, Inc., 138 N.C. App. 369, 376, 531 S.E.2d 867, 871 (2000). [T]he North Carolina Supreme Court has . . .
held that the jurisdiction of the Industrial
Commission, under N.C. Gen. Stat. § 97-91,
is not limited . . . solely to
questions arising out of an
employer-employee relationship or in
the determination of rights asserted
by or on behalf of an injured
employee.
Clark v. Ice Cream Co.,
261 N.C. 234, 134 S.E.2d 354, did
not so hold. On the contrary the
North Carolina Supreme Court has
held in
Worsley v. Pipes, 229 N.C.
465, 50 S.E.2d 504, and in
Macros v.
Owen, 229 N.C. 472, 50 S.E.2d 509,
that the sole remedy of a physician
to recover for services rendered to
an injured employee in cases where
the employee and his employer are
subject to the Workmen's
Compensation Act is by application
to the Industrial Commission in
accordance with the Act, with right
of appeal to the courts for review,
and that this remedy is exclusive.
These decisions are equally
applicable to charges for hospital
services rendered to employees in
Workmen's Compensation cases.
Wake County Hospital v. Industrial Comm., 8
N.C. App. 259, 261, 174 S.E.2d 292, 293
(1970),
overruled on other grounds by
Charlotte-Mecklenburg Hospital Authority v.
Industrial Comm., 336 N.C. 200, 211, 443
S.E.2d 716, 723 (1994).
Hansen, 138 N.C. App. at 375-76, 531 S.E.2d at 871.
The Industrial Commission has recognized that unusual cases
may warrant fees higher than that allowed under the fee schedule.
The Industrial Commission's Rule 407 provides in part:
However, in
special hardship cases where
sufficient reason is demonstrated to the
Industrial Commission, fees in excess of those
so published may be allowed. Persons who
disagree with the allowance of such fees inany case may make application for and obtain a
full review of the matter before the
Industrial Commission as in all other cases
provided.
Workers' Comp. R. of N.C. Indus. Comm'n 407(1), 2003 Ann. R. (N.C.)
829, 829 (emphasis added).
Thus, medical compensation is solely in the realm of the
Industrial Commission, and § 97-90(c) gives no authority to the
superior court to adjust such an award under the guise of
attorneys' fees.
But see Charlotte-Mecklenburg Hospital Authority
v. Industrial Comm., 336 N.C. at 211, 443 S.E.2d at 723 (While
individual compensation issues are within the purview of the
Industrial Commission, wholesale challenges to the fee schedules
and the like are proper subjects of Declaratory Judgment actions in
the superior court.). Doing so constitutes an improper invasion of
the province of the Industrial Commission, and constitutes an abuse
of discretion.
While the Industrial Commission recognizes that there may well
be unusual hardship cases that warrant higher medical
compensation in Rule 407, no such rule has been promulgated as to
exceptional legal services. We have seen the Industrial Commission
use its discretion to increase compensation to attorneys in
Church.
It focused on the concern that absent an increase in compensation,
counsel would have no incentive to take such cases in the future.
This result would leave deserving claimants uncompensated.
In the case at bar, the trial court was attempting to respond
to a hardship scenario by increasing the attorneys' fees in lightof the extraordinary job done despite a low indemnity recovery.
Yet, the trial court's justification that the hospitals owed the
attorneys for their performance is untenable.
Additionally, the trial court was apparently under the
impression that defendant carrier was attempting to circumscribe
the trial court's discretion by making payments to the hospitals
while the § 97-90 appeal was pending. In actuality, the payments
to the hospitals were required pursuant to N.C. Gen. Stat. § 97-18
(2001).
While we have held that the trial court cannot reduce the
amount of medical compensation by diverting a portion of such
compensation to attorneys' fees, that does not mean that it has no
authority to review the adequacy of the Industrial Commission's
decision regarding legal fees.
In determining the meaning of N.C. Gen. Stat. § 97-90(c), we
follow traditional rules of statutory construction:
Legislative intent controls the meaning
of a statute; and in ascertaining this intent,
a court must consider the act as a whole,
weighing the language of the statute, its
spirit, and that which the statute seeks to
accomplish. The statute's words should be
given their natural and ordinary meaning
unless the context requires them to be
construed differently.
Haler, 333 N.C. at 262, 425 S.E.2d at 701 (quoting
Shelton v.
Morehead Memorial Hospital, 318 N.C. 76, 82, 347 S.E.2d 824, 828
(1986)).
The legislature has placed no limitation on the superior
court's discretion in awarding fees pursuant to § 97-90(c). It hasmerely provided the Industrial Commission and the trial court with
guidance as to the factors to be considered when an attorneys' fees
award is being decided. The trial court, pursuant to its
discretion under § 97-90, appears to have the authority to fashion
an attorneys' fees award that would take into account the special
circumstances of a case such as the one at bar as the workers'
compensation rules provide for doctors in the medical compensation
realm. When an insurance carrier is responsible for attorneys'
fees pursuant to N.C. Gen. Stat. § 97-88.1, the trial court may
award attorneys an amount based on a percentage of the medical
compensation recovered to be paid by the bad faith carrier over and
above what they have already been ordered to pay to the medical
providers and the claimant. For example, the facts in the present
case were that the Industrial Commission awarded claimant indemnity
compensation (including penalties). Further, it ordered that the
medical providers be compensated for their bills, totaling
approximately $410,000.00. Both of these amounts were to be paid
by defendant carrier. The Commission then awarded appellees
attorneys' fees in an amount equal to 25% of the indemnity award.
This amount was also to be paid by the defendant carrier as it had
violated § 97-88.1. On appeal from the Industrial Commission, the
trial court, in its discretion pursuant to § 97-90(c), could
determine that the appellees should be further compensated. Upon
the proper findings of fact as to the work and the special nature
of the case, the trial court could order that the defendant carrier
should further pay appellees an amount based upon a percentage (beit 1%, 5%, 10% or so on) of the $410,000.00 medical compensation.
This amount would be over and above what was ordered by the
Industrial Commission to be paid by defendant carrier. Such a
result appears to be within the power of the trial court as
prescribed by § 97-90(c) and reviewable only for an abuse of
discretion.
This matter is therefore vacated and remanded to the trial
court for a determination of an appropriate attorney fee. The
trial court is not prohibited from utilizing a percentage of the
medical compensation as a basis for a fee. The trial court may
not, however, reduce the compensation paid to medical providers in
order to fund the fee award. In making its determination, the
trial court should be guided by the factors set forth in the N.C.
Gen. Stat. § 97-90(c).
Vacated and remanded.
Chief Judge EAGLES and Judge ELMORE concur.
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