The $50M ChampionsWorld lawsuit against MLS and USSF allowed to proceed


Charlie Stillitano just won’t go away

Remember ChampionsWorld? It was an organization setup by disgraced former MetroStars executive Charlie Stillitano to promote and organize friendlies between European and South American teams. After three years of promoting these matches, it went into Chapter 11 bankruptcy.

Since 2006, it has been engaged in a lawsuit against US Soccer and MLS claiming $50 million in damages and now, according to Sports Business Journal, an Illinois judge has allowed the suit to proceed into court with the case starting as early as Spring 2011.

According to the SBJ piece here are the basics:
Now, before I go on, allow me to add that I am not a lawyer, but it appears to me that the basic question is whether the Ted Stevens Olympic Sports Act allows for US Soccer to charge fees to promoters when the events don’t immediately relate to the “Olympics, Paralympics, and Pan-American Games.” Now, after reading the law (PDF) and specifically the part “Granting sanction for amateur athletic competitions,” it looks like US Soccer is granted the sole ability to sanction and charge fees for competitions held inside the US. But the law does say that the fee must be “reasonable and nondiscriminatory.”

If the intent of the lawsuit is to challenge the USSF’s exclusive ability to sanction soccer matches held within the United States, then I suspect it’s fairly doomed. That ability of US Soccer was one of the secondary elements settled when MLS players’ lawsuit failed a few years back.

Thus, that appears to leave open the question of whether the fees were “reasonable and nondiscriminatory.” I must admit, I have no idea what “reasonable” means in a legal context.

What do folks out there in comment-land think? If anyone out there is a lawyer, I’d be curious to see how you think this lines up.

UPDATE: Here is the ruling from the judge. This looks to me like ChampionsWorld is going after the sort of inherent anti-trust exemption given to national sports governing bodies by the Olympic Sports Act. I find it hard to see how the ruling in the MLS players lawsuit doesn’t stop this one cold, but I’d like to hear from those more adept in reading legal opinions than I am.

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44 thoughts on “The $50M ChampionsWorld lawsuit against MLS and USSF allowed to proceed

  1. So what’s their argument then?..that USSoccer conspired with SUM to take all the international friendly money?
    I get your argument about the Ted Stevens act and all. However in the bigger picture, you could also look at this this as an attack on FIFA and how they sanction international soccer events. If ChampionsWorld wins this, even only on the premise that the franchises fees were unfair, it would deal a blow (likely a very small, practically insignificant blow) to FIFA’s aspirations to be the world’s only soccer sanctioning body.

  2. FIFA sanctioned teams can’t play anywhere without FIFA approval. FIFA sanctioned teams can’t play in the US without USSF approval. A US court ruling isn’t going to change that.

  3. So if I’m an entrepreneur that wants to stage a France v Argentina friendly in the US, I need both FIFA and USSF sanctioning? I didn’t know that.
    Not a lawyer but that sure seems ripe for anti-trust litigation.

  4. Yes, the national associations govern the sport within their borders and their sanction is required. It effects things like referee assignments as well. If the match isn’t sanctioned, then US referees would not be assigned. And I would guess that FIFA would not allow officials from other countries to be involved either.

  5. Right but if the USSF is ruled to have unfairly/illegally held back international matches in the US, then FIFA by extension is also culpable. Like you said, this obviously won’t change the fact that FIFA sanctioned teams have to play FIFA sanctioned games. However, it could theoretically make parallel national teams and/or competitions more likely, but I think we both agree that is not going to happen.
    A more likely result is that we will see other individuals or governments more willing to take on FIFA and its affiliates.
    Quick question: if the US courts pick in favor of ChampionsWorld, will FIFA consider it government interference? If this was happening in…say…Benin, I think they undoubtedly would. As this is the USA, I don’t think they will risk ruining things in America by pulling the interference card here.

  6. Maybe if FIFA were a US-only organization, but FIFA is the global governing body…you wanna take on FIFA you may win in the US but kiss goodbye your ability to ever participate in FIFA sanctioned events (hello World Cup), or leagues (pretty much all of them) and you certainly won’t be playing against any teams or players that want to stay in FIFA-sanctioned events or leagues.

    But by all means, go ahead and start up some competing leagues and tournaments. You will, of course, need to bankroll all this yourself…and again, nobody who ever wants to play or coach or even serve tea in a FIFA-sanctioned setup will be joining you.

  7. I am an attorney. However, this is not my primary practice area, and I am not licensed outside of Washington (state) and Alaska. The following should not be relied upon blah blah. Consult an attorney in your jurisdiction blah blah.

    The reasonable and nondiscriminatory standard is the best we can do about the fact that FIFA rules the world. There is no anti-trust case to be made, unless USSF tries to muscle out even unsanctioned events.

    Nevertheless, there could be a case to be made if Sunil is charging non-SUM promoters a kabillion dollars, while his “charge” to SUM is that Don has to pick up the greens fees this Wednesday.

    The reasonableness standard is what a reasonable person in the same or similar circumstances would do.

  8. So I guess if ChampionsWorld wins, they’ll prove that outside organizations should have greater leeway to put on games.

    But teams from outside the U.S. would still be subject to FIFA, which wouldn’t look kindly on playing without USSF sanction.

    So ChampionsWorld could return to business … putting on games between U.S. teams.

  9. But the rest of that ruling has an awful lot of bad news for MLS and USSF. It’s only one judge’s opinion, of course, and there’s plenty more to be said. But the judge flat-out says USSF has no right to regulate pro soccer in the USA. Read it and shudder.

  10. Interesting read. I saw a couple things there:

    1) This may or may not be a serious issue, but I don’t know exactly what a “first-division exhibition” is. I do know that Fraser et al found “Division I professional soccer” not to be a relevant economic market for the purposes of anti-trust, and I find it strange that the court here did not cite it, at least to tell us why it didn’t apply.

    2) I know that Stillitano worked with the Creative Artists Agency on the World Football Challenge. I strongly suspect they were charged fees. It would be awfully interesting to hear if those fees were as high, because if CAA paid them, acting under Stillitano’s advice, and made any money doing so, it would seem to ruin his claim here.

  11. 1) Division I professional soccer is a category formed by a voluntary association (FIFA) and its subsidiary voluntary associations (including the USSF). It does not prevent other people forming soccer teams outside of that structure. Of course, telling a soccer player he is free to play outside of FIFA/USSF is like telling like me telling my cat he can catch bugs, as long as he does it on the Mir space station. As Cosell would say, more on that later.

    2) Not necessarily. It isn’t so much that USSF and SUM are colluding to form a trust so much as USSF is a “company town,” i.e. a quasi-government. Therefore, its actions cannot be so arbitrary that it is unreasonable, even as applied to classes not afforded special protection under the law, such as po’ folks, people with blue eyes, short people, tall people, people who play or promote soccer, etc.

    I haven’t read the briefs, but the anti-trust thing should be a secondary argument or it should be re-cast. The company town argument has more bite. Cobi, Cien, Lights out Lassiter, et al. could have broken away and formed the Non-FIFA Soccer Association, but that would have meant the end of their capacity to earn a living. It’s like the Union telling JP he can leave and anounce for another team as long as he does it in Pig Latin and having the U.S. government enforce the limitation. I am drawing on the reasoning behind the rulings against covenants not to compete, which are disfavored and must be reasonably limited in duration (not forever) and geographic scope (not the whole country or world).

    Fraser was probably wrong, but anti-trust arguments don’t help Joe Jock or Stillitano so much. The covenants not to compete cases and Company Town cases are more helpful to “the little guy.”

  12. I have no idea what a “division I exhibition” is–which is a subtle way of saying I’m pretty sure it doesn’t mean anything at all, because FIFA does not attach a ‘division’ to exhibition matches, or to the individual teams that might play in them (witness the ability of teams all over the world to change divisions), only to leagues. If the teams are playing outside of the context of their leagues, it isn’t ‘division I soccer.’

    In Fraser, the ruling was that it had no economic meaning because there were in fact other ways to make money–indoor, division II, foreign leagues. (Especially division II–the only economically relevant thing separating MLS from a ‘division II’ league was that MLS, in fact, paid more.)

    A lot of that wouldn’t apply to a one-shot exhibition promoter. . . but I’m surprised they used the term without the reference.

    But that’s the point–how would you define ‘arbitrary’ and ‘unreasonable’, other than by a) whether there’s a double-standard based on whether you work with MLS or not, and b) whether one can make money or not. CW is claiming both of these things, and I would guess there’s a lot of evidence in the friendlies of more recent years to either back those claims up, or else debunk them.

    USSF, it would seem (unless they charged CAA so much that they couldn’t continue in that line despite huge crowds), would have a good argument that they aren’t trying to make these friendlies impossible, just restrict their supply enough so as not to flood the market and to keep a domestic league alive. It would then have to argue, but I would think that it easily could, that keeping a domestic league alive is relevant to its mission of promoting the US National Soccer team in major international competition.

    They have no incentive not to pursue every avenue, the lawsuit is a creditor-run thing at this point. Heck, for all I know they’re just hoping for a settlement that pays pennies on the dollar. And at any rate, the court shot down USSF’s summary judgement arguments on nearly every point.

    I think USSF still has the right to argue at trial that it has an effective exemption as an NGB, it’s just that their argument to that effect is not obvious enough as a matter of law to prevent such a trial.

    It certainly is odd, the judge seemingly putting American soccer at odds with FIFA and arguing that it’s ‘far-fetched’ that FIFA would have a problem with this. I think FIFA’s about to bore the court to death with months of testimony that they would and have in the past.

  13. I’m not surprised that this finally has come up, though. FIFA vs US law will be interesting (because, in the end, that’s what this is about for soccer fans). FIFA probably is guilty of anti-trust by US law. Of course this really is all about “sue whom ever has $$”. I know of a situation where an employer was sued by their own insurance company for an accident that happened to their employee that was caused by another person while the person that cause the accident was not sued because the police made a technical error in the accident report. Why was the employer sued? Well, the employee was driving to lunch on their lunch hour so the court ruled that the employer was “involved” because the employee was on their lunch hour…. Go figure. But the judge is mistaken if he thinks that FIFA will not care about this.

  14. http://online.wsj.com/article/SB1000…googlenews_wsj

    Here’s the WSJ version, though there’s not much new here.

    One thing to make clear here is that it’s not really Stillitano suing. CW has folded, Stillitano is working for CAA now, and it’s only the creditors that are interested.

    Which makes me wonder whether there won’t be a settlement here. CW’s creditors probably don’t care about precedent, they just want money. And they probably don’t want the expense of a lengthy trial first.

  15. The finding in Fraser was that “Division I professional soccer players” is not a relevant labor market. Since this suit is not about labor, I don’t know how that fact matters either way in this case.

    Even if the promoter makes money while paying the fees, it doesn’t make the fees any less illegal (if they are really illegal in the first place).

  16. The LA Coliseum sued USSF because USSF was refusing to sanction matches during any window of a few days before or after a Galaxy home game. All the same antitrust complaints were made, but the suit was settled with the USSF agreeing to no longer enforce those windows in exchange for no further claims against the fed’s right to sanction matches and charge fees.

  17. But they found that to be true because Division I doesn’t mean anything. It may not mean anything to the suit, but I’m awful surprised they let the term pass here, especially for exhibition games, where it isn’t even technically true.

    Also, if you go back and look at that ruling, the court takes it as implicit that USSF has the right to govern professional soccer. I think it’s interesting the extent to which these two rulings talk past each other.

    That’s circular logic. If they’re illegal, then they’re illegal, yeah. But they have to be illegal on some kind of grounds first.

    There are two separate claims being made: one is that USSF has no authority to impose the fees in the first place; and the second was that even if they do, these fees are ‘arbitrary’ and ‘unreasonable’. It certainly speaks to the second of these if the same person was able to make money later paying the same ones. (CW’s creditors are alleging, among other things, that they were charged a fee that did not allow them to do business [‘unreasonable’] and that they were charged a greater one than others essentially because USSF didn’t like them [arbitrary]).

    Also, in order to win a lawsuit, you have to prove not only that the other party did something illegal, but that you were hurt by it, and USSF’s contention is that it wasn’t the fees that killed CW. If that’s true, then it would seem the most they’d be able to recover is the literal amount of the fees.

  18. The term “first-division soccer exhibitions” is only used once, in the background section, to describe what Champions World was. It’s poor terminology, but it’s not really used in any way that has any effect on the legal ruling. Nothing in the ruling hinges on any purported “first-division” status of any of Champions World’s events. All that really matters is the games were professional, and the judge ruled that the USSF has no right to sanction professional soccer, except when it’s related to professionals participating in the Olympics and related events.

  19. meant to read and make an enlightened comments about the article but could not get past the photo. Dude looks like Newman from Seinfeld. The 90s just came rushing back instead flag jerseys and all and reading was out.

  20. I could see that, I just wonder.

    To find anti-trust, you must define a relevant market first–if you fail to do so, all other questions become moot. (You might have yourself a RICO, but you won’t have anti-trust.) The definition ‘first division exhibition soccer’ will never fly, because there’s no such thing. If the market is all ‘professional soccer’, USSF can argue they’re really not trying to do that. It’s possible that the only thing the court would find improper is the differing fee between the games that involve MLS and those that do not.

    But MLS is not the only professional soccer league in the United States to host international exhibitions. The USL has as well. If USSF shows them a similar preference (and my guess is that they do, or else those games wouldn’t be affordable to what are generally some fairly small clubs), then the argument of a meaningful tie between USSF and MLS to constitute anti-trust would be weakened, I would think.

    Well, that’s not the only claim that CW made, nor the only argument USSF made for dismissal.

  21. I think you do have a point here. “ChampionsWorld alleges that USSF’s actions were part of an anticompetitive scheme to create a window of exclusivity for MLS by preventing other soccer entities or leagues from applying for first-division status in the United States.” (emphasis mine) So CW may be saying that antitrust violations prevented CW from becoming a first-division entity, whatever that is.

    Nonetheless, there remain six counts outside of antitrust that all hinge on the USSF’s sanctioning authority and charging of fees.

  22. Let me get this straight this portion of the issue is that CW wants a first division exhibition league and USSF said no? Cause USSF said no they are crying foul monopoly antitrust over it?

    How does the court have any legal authority to tell USSF how they should sanctions its leagues And that USSF is not allowed to sanction anything?

    Does this judge not get that if USSF has no right to sanction leagues that there can’t be any sanction soccer league in the US at all.

    I get the charging the fees part. But its the sanction issue that i’m a bit lost on

    Either way FIFA is gonna not gonna be happy over this one.

  23. Thing is…the top down, international governing body centric, national governing body running the sport, league sanctioning thing is quite literally a foreign concept in the US. Think about it, name another sport in this country where the top league has to be sanctioned by a national governing body for that sport. The NBA doesn’t need USA Basketball’s permission to keep it’s doors open. Same deal with the NFL/USA Football and MLB/USA Baseball. That’s why, in a US sports context, the whole idea of one body having sole authority to permitt professional soccer within the country smacks of anti-trust. And I get it, it works this way in every other country, FIFA wants it this way, yada yada yada, but don’t we all complain about the lack of accountability and oversight FIFA faces? Ultimately, the national soccer associations around the world should be answerable to the laws of their country. (sorry, those last couple of sentences vered off on a tangent that had nothing to do with your original post)

  24. Thank you. I’m new to the concept of having one body to control the sport myself.

    If the concept of one body controlling the sport is against ant-trust laws. How exactly can USSF still function as normal and yet still follow the US laws. That’s where i am confused at.

  25. The Ted Stevens Amateur and Olympic Sports Act gives the US Olympic Committee and its member federations for each Olympic sport (USSF in the case of soccer) a certain amount of antitrust exemption, but the dispute is over how far the exemption goes.

  26. The other issue i have with the judge say that USSF has no power to sanction Professional soccer and games.

    IF USSF can’t sanction US soccer games then who can?

  27. Again, I think the issue (from an American cultural standpoint) is why do you need someone to sanction the games at all. Looking at other sports governing bodies in the US, you find that they concern themselves almost entirely with 1) running the national team 2) running or oversight of youth sports and 3) outreach/spreading of the sport. I can’t think of a single example outside of soccer where they have any power over the professional game. So USA Basketball for example runs the national team for the Olympics and the FIBA WC, they are involved in running some pre high school youth leagues, and they have a couple of initiatives to help promote basketball to kids, but they don’t sanction the NBA or any other pro league, they don’t sanction any international friendlies played in the US, they don’t even sanction NCAA basketball. Other national sports federations run along similar lines. What I believe the judge is stating is “Yes the Ted Stevens ASA clearly gived the USSF the ability to run the National team and run amatuer and youth soccer in the US, but not monolithic control of the professional game” and the reason he is saying that is because no professional sports market in the US is under the jurisdiction of one group. You want to form a rivil basketball league to usurp the NBA? Go right ahead, it’s a free market. In soccer you need the USSF’s permission. That’s the problem.

  28. Well we are assuming an anti-trust violation will be found, this judgement is just on a preliminary motion by the USSF to throw the case of the court, and just because there is enough evidence to proceed to trial does not mean a victory for the plantiff is likely. I’m just giving my two cents on why, to someone not used to the way the world of soccer works, this is not as frivolous as we’d like to believe.

    Second, as many on the blog have pointed out, CW’s creditors are looking for money, not a USSF harming anti-trust precident. A settlement may prevent the issue from being ruled upon.

    Even if this does go all the way to trial and even if the judge does rule the USSF have no authority to sanction professional soccer in the US, it won’t be the end of the sport here. The USSF will have to limit it’s scope to running the National teams, running youth soccer, and promoting the sport. Pro soccer might be the wild west for a little while, there might be a couple of rival DII leagues co-existing for a while, there might even be a rival league to MLS started up. We might see more international exhibitions because the costs will be lower. FIFA I think would largely sit on their hands over this ruling because the US market is too lucrative to screw up by penalizing the USSF, and FIFA, while they might not fear Congress and the US courts, don’t want to actively antagonize and draw attention to themselves. The big issue such a ruling would cause would be the fate of SUM and by extension MLS. Without the need for sanctioning, any teams could come to the US and play, thus severely lessoning the need for SUM. SUM’s revenues could decrease which could put more financial pressure on MLS. All of this involves alot of hypotheticals of course, but that is how things might shake out if the case goes against the USSF.

  29. The closest examples would be some of the individual sports where amateur competition evolved into de facto professional competition, such as track & field and skiing. But in those cases a stronger link can be shown between the professional events and the Olympics, as those events determine world rankings which lead to Olympic eligibility and qualification.

  30. If case does goes against USSF, wouldn’t that create an even larger problem for the leagues itself not specifically MLS but in general. Ie players, referees and ability to play international teams and have players in national team events (world cup)

  31. Yes I agree that federations governing individual sports exercise more control, USA Track and Field running the US Olympic trials for example. But even then, if I as an independent promoter wanted to set up a track meet, I wouldn’t need to seek USATF sanctioning or pay USATF any of my revenue. Sure, the meet results likely wouldn’t count towards National or Olympic qualification, but I could still bill the meet as pure specticle and run it independently.

  32. I guess it would depend on how much of a hissy-fit FIFA would throw. They could claim any US leagues were “unsanctioned” and ban any players or officials from participation in other FIFA events, or FIFA could suspend the US from international play for “government interference”. However, I’m guessing two things will prevent any more than a strongly worded letter or repremand: 1) If FIFA suspends the US from international play or blacklists players and officials from MLS, they will set the sport in this country back at least 20 years maybe more. There is too much money at stake in the US as a market to risk that. 2) FIFA can get away intimidating other national governments to back away by threatening the “international suspention for government interference” card, and it works because soccer in those countries is the number one sport, it’s too precious to lose. In the US soccer is the number five team sport. US courts and Congress are not going to back down to FIFA because not enough people truely care if we lose soccer. Were FIFA to suspend the national team or blacklist MLS players, you can bet it would attract the attention of some member of Congress, and even if the US government has limited juridiction over FIFA, they can still make life and business very difficult for Blatter and friends if they get a bug up their butts to do something about it. FIFA’s leadership, whatever else they might be, aren’t stupid enough to attract Congressional attention by trying to bully the US away from enforcing it’s own laws.

  33. I’m not a lawyer, and I don’t know how strong ChampionsWorld’s case is, so I really don’t know. All my past few posts have been speculation on how a verdict against the USSF might change or not change business.

    Total gut feeling guess based on no legal evidence…unless CW’s case is really strong, some money by settlement is better than a chance at $50M minus legal fees, and the USSF doesn’t gain anything by a trial, so after some posturing and some more pre-trial motions back and forth, I think this will eventually settle.

  34. Hopefully this gets taken care of quickly. Don’t want to see US soccer suffer especially with the world cup 18/22 being decided in a couple months.

  35. Guys, of course US Soccer needs to sanction the match. If not, you can claim its the US and have a bunch of phoney’s playing. That’s normal. Now, what they charge should be reasonable.

  36. “But by all means Mr. Smith, go ahead and start up your own oil company. You will, of course, need to bankroll all this yourself and use the railroad company owned by your main competitor Standard Oil…and again, nobody who buys your oil will ever be allowed to have anything shipped on his railroad and he has a monopoly of them.”

    If it walks like a duck, and quacks like a duck…

  37. Which is one thing Europeans are completely incapable of understanding on why there is no such thing as promotion-relegation in U.S. sports. There is no governing body for example that declares the NFL is the #1 league, likewise NBA/MLB/NHL, they’re all private organizations not ran by a central governing body for the sport. A group of investors formed the UFL last year to be a minor-league pro football league, but there’s nothing saying however unlikely that the UFL could not one day pass the NFL and itself become the #1 league.

    I wonder if the USFL-NFL anti-trust case plays into this at all as far as historical precedent.

  38. Agreed whole-heartedly. I’ve always found it interesting that the lack of Pro/rel is always called communism/socialism, when in fact it is the most free market thing there is. Get a bunch of team owners together, form a league, and if you do a better job than the league currently out there, you’ll replace them. Pro/rel only exists when a single organization has the ability to control the whole sport within a single country.

    Anyway, I did some looking on the USLF-NFL lawsuit since you brought it up and found this. The following quote from the “Jury Verdict” section seemed particularly relevant:

    After five days of deliberations, the jury found that the NFL had maintained monopoly power in a market consisting of major-league professional football in the United States. However, the jury found that the USFL had only suffered nominal damages from the NFL’s unlawful conduct and, therefore, was entitled to only $1.00 in damages, a spectacular amount that, even when trebled, did not offer much consolation for the USFL. Essentially, the award of nominal damages suggested that the USFL’s failure to secure further revenue from television contracts or otherwise came at the fault of its own league owners and officials, rather than from the alleged anti-competitive actions of the NFL.

    The jury found that the NFL did not commit any overt act in furtherance of a conspiracy to monopolize. While the jury would later go on to find that an NFL monopoly on the sport of football existed – establishing a violation of Section 2 and the subsequent three dollar award of damages – the monopoly was not the result of anti-competitive practices of the NFL.

  39. There seems to be a few misconceptions on what CW suit is asking a court to decide. If one was to look at the TYPE of exhibitions that have been played over the last decade, it would reveal the shift in visiting clubs playing each other to visiting teams playing MLS clubs (i.e. MLS All-Star Game).

    Prior to this pattern, Celtic would play Manchester in Seattle (prior to Sounders in MLS). When SUM / MLS flexed its muscles, those Man. Utd. and Celtic matches were directly tied to SUM/MLS. See the difference ?

    In addition, the dates that a certain promoter would reserve at a stadium were negated because US Soccer wanted to do a game in the same venue (therefore the racketeering charges).

    Lastly, the fees that SUM were billed for their exhibition matches by US Soccer were less than those priced to outside promoters for similar exhibition matches. (unreasonable fees)

    The simple fact that Sunil Gulati has positions in BOTH the Federation and MLS constitutes a conflict of interest. Add that SUM is a marketing arm of MLS only adds fuel to the allegations.

    I do not think anyone is saying that US Soccer does not have a right to sanction professional soccer matches in the US region. However, they must do so on an equilateral terms allowing any business the same opportunity as its marketing partners.

    There really should not be any reason that a promoter in say Miami should not be able to organize a game while SUM runs a match in say Los Angeles. (see this weekend as MLS plays concurrent with USA-Argentina).

    In summation, there were several promoters who brought America quality exhibition matches in the years when USSF did not have a “pot to piss in”, could not pay their rent in New York City and had to rent two rooms at Kennedy Airport for offices. (yeah really)

    PS – FIFA could give a rat’s ass if the US Congress gets involved. If Concacaf executives did not have the power to get an additional qualification spot for the next World Cup, Rep-Dems surely do not have the weight to sway FIFA in their own business anymore than swaying the IOC on Olympic matters. Simply put, the USA never hosts another event while tiny nations like Qatar will. (remember Chicago 2016 ?)

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