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Date: 03-18-2018

Case Style: Quanta Computer, Inc. v. Japan Communications, Inc.

Case Number: B280042

Judge: Kriegler, Acting P.J.

Court: California Court of Appeals Fourth Appellate District on appeal from the Superior Court, Riverside County

Plaintiff's Attorney: Terry D. Garnett and Donald A. Miller

Defendant's Attorney: Andre J. Cronthall and Sarah A. K. Blitz

Description: A Taiwanese company entered into a contract to
manufacture and sell cellular telephones to a Japanese
company. The parties negotiated a forum selection clause
mandating that any dispute be resolved in a California court
under California law. Nothing in the creation, performance,
or alleged breach of the contract has any connection to
California. The Taiwanese company filed an action in the
Los Angeles Superior Court alleging breach of contract by
the Japanese entity. The trial court ordered the case
dismissed on forum non conveniens grounds. We hold the
trial court did not abuse its discretion in finding that
suitable alternative forums exist and that California has no
public interest in burdening its courts with an action lacking
any identifiable connection to the state. The order of
dismissal is affirmed.
Plaintiff and appellant Quanta Computer Inc., a
Taiwanese corporation, filed a breach of contract lawsuit in
the Los Angeles Superior Court against defendant and
respondent Japanese Communications Inc. (JCI). Quanta
alleged causes of action against JCI for breach of oral
contract, breach of written contract, breach of the covenant
of good faith and fair dealing, and quantum meruit. Quanta
is a “original design manufacturer” of various hi-tech
devices. Quanta’s principal place of business is in Tao Yuan
City, Taiwan. JCI is a Japanese corporation that sells
technology devices to end users. JCI’s principal place of
business is in Tokyo, Japan.
In March 2015, Quanta entered into a written
agreement to manufacture smart phone devices for JCI. JCI
ordered 70,000 devices under the contract. The agreement
contains a choice of law and forum selection clause:
“27.1 This Agreement shall in all respects
be governed by and construed in accordance with
the laws of the State of California, without
regards to its choice of law rules.
“27.2 Both parties agree to submit all
disputes arising out of or in connection with this
Agreement to the exclusive jurisdiction of the
courts in the State of California.”
In the agreement, Quanta warranted that each device
would not be defective under “relevant Japanese laws to
market the [devices] in Japan,” and that it would “assist JCI
to ensure that JCI can import the [devices] into Japan in
accordance with all customs laws, statutes, and regulations
. . . .” The agreement provides for primary and delivery
locations at airports in Tokyo. Notice of any breach or
termination of the contract was to be addressed to Quanta in
Taiwan and JCI in Japan.
JCI accepted delivery under the contract but failed to
pay for all of the devices within the terms of the agreement.
JCI claimed that 14,246 devices had “quality issues.”
Following negotiations, the parties orally agreed that
(1) Quanta would repair any quality issues that were
actually detectable by JCI or one of its end users; (2) JCI
would pay Quanta $1 million by the end of June 2016 as
partial payment for the devices; and (3) JCI would pay
Quanta the remaining balance owed for the devices by July
31, 2016. The oral agreement was memorialized in a June
2016 memorandum of understanding (MOU). A provision in
the MOU states that “[b]oth parties agree to submit all
disputes arising out of or in connection with this MOU to the
exclusive jurisdiction of the courts in the State of California.”
The complaint alleges that JCI failed to reimburse Quanta
under the MOU.
JCI’s Japanese Action
On September 26, 2016, JCI filed a lawsuit in Japan
against Quanta for breach of the agreement. In the lawsuit,
JCI seeks Ą630,462,963 (approximately $6.28 million) in
damages for defective devices and resulting harm for selling
defective smart phones. The complaint also sought
declaratory relief that it did not owe Quanta $2.17 million
claimed in damages.
Motion to Dismiss or Stay for Forum Non Conveniens
On the same day it filed a lawsuit in Japan, JCI filed a
motion to dismiss or stay for forum non conveniens,
contending that section 27.2 of the agreement should not be
enforced because the lawsuit “lacks any nexus to California.”
JCI argued that enforcement of the clause would be
unreasonable, and that the traditional forum non conveniens
factors under California Code of Civil Procedure sections
410.30 and 418.10 warranted dismissal.
In an attached declaration, JCI’s President and Chief
Operating Officer stated that Quanta manufactured the
smart phone devices in China. No discussions, meetings, or
telephone calls regarding the agreement involved individuals
located in California or the United States. All negotiations
took place in Japan or Taiwan. Every employee of Quanta
and JCI resides in Asia, except corporate counsel for JCI,
who does not reside in California. No aspect of JCI’s
performance took place in or impacted markets in the United
States or California. The devices at issue were delivered,
stored, and sold in Japan to Japanese end users. Some users
returned the phones after complaining of defects. Any
repairs made to the devices were made by Quanta
subsidiaries in China. The dispute relates to workmanship
and performance by businesses manufacturing products for
Japan, so the outcome of the case could influence Japanese
businesses’ ability to demand standards of quality and
performance. Relevant witnesses, documents, and materials
are located in Japan and China.
In opposition to JCI’s motion to dismiss or stay the
action, Quanta submitted a declaration of its Senior Director
of Sales. During negotiations, JCI initially proposed Japan
as the choice of law and forum. Quanta rejected Japan and
instead “proposed a neutral forum to settle disputes,
Singapore.” JCI, through its U.S. in-house attorney, rejected
Singapore and proposed “the State of California” as the
choice of law and forum. Quanta agreed to California
because it was a neutral location.
The opposition was also supported by JCI’s discovery
responses. In the responses, JCI agreed that it rejected
Singapore as the choice of law and jurisdiction under
sections 27.1 and 27.2. Although California was proposed in
oral discussions, JCI did not “specifically recall choosing or
agreeing to California in section 27.”
Trial Court’s Ruling
At the hearing on JCI’s motion to stay or dismiss the
action, the parties agreed the clause “was freely and
voluntarily entered into” between the two corporations.
After questioning the applicability of The Bremen v. Zapata
Off–Shore Co. (1972) 407 U.S. 1 (The Bremen), a case relied
upon by Quanta in its opposing papers,
1 the trial court
inquired whether it would have to balance the parties’
reasons for litigating the case in California. Quanta’s
attorney argued against balancing interests, citing Cal-State
Business Products & Services, Inc. v. Ricoh (1993) 12
Cal.App.4th 1666 (Cal-State), for the proposition that only
unreasonableness was determinative when deciding to
enforce a forum selection clause.
Following oral argument, the trial court adopted its
tentative ruling granting JCI’s motion and dismissed the
case without prejudice. The written tentative ruling
addressed the forum non conveniens and mandatory forum
selection issues separately. In first discussing traditional
forum non conveniens considerations, the court noted that
“[t]here are no contacts to California. California courts have
no expertise to determine whether Quanta failed to meet
quality standards tied to the Japanese, not the California,
market.” In the second portion of its analysis, addressing
the forum selection clauses, the court “in its discretion
[found] that California has no logical nexus to the parties or

1 The trial court distinguished The Bremen by stating
that the forum selected in that case (London) was
historically suited in dealing with the admiralty issues
presented in the case. Quanta’s counsel disagreed with the
court’s interpretation, stating that there was no evidence
proving the parties’ desire to litigate in London because of its
background in admiralty law, but that the parties choose
London because it was a neutral forum.
the case, and thus refrains from exercising its jurisdiction
. . . . In balancing the private interests of the litigants
against the interests of the public in retaining the action in
California, and as Japan is a suitable forum, this court
declines to burden the already overburdened court system in
Los Angeles with this litigation.” Quanta filed a timely
notice of appeal.
Quanta contends the trial court abused its discretion
by refusing to enforce the mandatory forum selection clause
and granting JCI’s motion to dismiss under the traditional
forum non conveniens doctrine. We conclude that JCI’s
forum non conveniens arguments are without merit, because
JCI agreed to (and most likely proposed) California as a
forum. This conclusion does not end our inquiry, because the
trial court also ruled that despite the forum selection clause,
it would decline to exercise its jurisdiction over the case as a
matter of discretion. We conclude the court had statutory
authority to decline to exercise its jurisdiction, and it did not
abuse its discretion by ordering the case dismissed without
JCI’s Forum Non Conveniens Motion
JCI moved to dismiss or stay the action by filing a
forum non conveniens motion under Code of Civil Procedure
section 410.30.
2 The parties in this case agree that section
27.2 constitutes a mandatory forum selection clause.3 We
conclude JCI failed to carry its burden of showing the forum
selection clause is unreasonable and should not be enforced.
California law is “in accord with the modern trend
which favors enforceability of such [mandatory] forum
selection clauses. (See The Bremen v. Zapata Off-Shore Co.,
supra, 407 U.S. 1; Central Contracting Co. v. Maryland
Casualty Co. (3d Cir. 1966) 367 F.2d 341, 344–345; Reeves v.
Chem Industrial Company (1972) 262 Ore. 95; Rest.2d
Conflict of Laws, § 80; Annot. 56 A.L.R.2d 300.) [¶] No
satisfying reason of public policy has been suggested why
enforcement should be denied a forum selection clause
appearing in a contract entered into freely and voluntarily
by parties who have negotiated at arm’s length. For the

2 “(a) When a court upon motion of a party or its own
motion finds that in the interest of substantial justice an
action should be heard in a forum outside this state, the
court shall stay or dismiss the action in whole or in part on
any conditions that may be just.
“(b) The provisions of Section 418.10 do not apply to a
motion to stay or dismiss the action by a defendant who has
made a general appearance.” (Code Civ. Proc., § 410.30.)
3 “In a contract dispute in which the parties’ agreement
contains a forum selection clause, a threshold issue in a
forum non conveniens motion is whether the forum selection
clause is mandatory or permissive.” (Animal Film, LLC v.
D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 471.)
foregoing reasons, we conclude that forum selection clauses
are valid and may be given effect, in the court’s discretion
and in the absence of a showing that enforcement of such a
clause would be unreasonable.” (Smith, Valentino & Smith,
Inc. v. Superior Court (1976) 17 Cal.3d 491, 495–496.)
JCI is in no position to claim the forum selection clause
is unenforceable under traditional forum non conveniens
grounds. “The factors that apply generally to a forum non
conveniens motion do not control in a case involving a
mandatory forum selection clause. (See, e.g., Great Northern
Ry. Co. v. Superior Court (1970) 12 Cal.App.3d 105
[collecting generally applicable factors]; Cal-State, supra, 12
Cal.App.4th 1666, 1683 [declining to apply ‘Great Northern
factors’ in light of forum selection clause].)” (Berg v. MTC
Electronics Technologies (1998) 61 Cal.App.4th 349, 358.)
Where there is a mandatory forum selection clause, “the test
is simply whether application of the clause is unfair or
unreasonable, and the clause is usually given effect. Claims
that the previously chosen forum is unfair or inconvenient
are generally rejected. (See, e.g., Appalachian Ins. Co. v.
Superior Court (1984) 162 Cal.App.3d 427.) A court will
usually honor a mandatory forum selection clause without
extensive analysis of factors relating to convenience. (See
Furda v. Superior Court (1984) 161 Cal.App.3d 418.)” (Id. at
pp. 358–359.)
JCI’s traditional forum non conveniens arguments offer
nothing to warrant ignoring its own negotiated agreement to
litigate in California. As the party who most likely
suggested California as a mandatory forum, JCI is hard
pressed to justify granting its motion on traditional forum
non conveniens grounds. JCI’s contention does not warrant
extended discussion. Instead, we next turn to the trial
court’s authority, if any, to refrain from hearing the case
despite the presence of jurisdiction.
The Trial Court’s Decision Not to Provide a California
As noted above, the trial court found no connection
between the parties, their dispute, and California. Based on
the lack of any “logical nexus to the parties or the case,” the
court elected to “refrain[] from exercising its jurisdiction.” In
doing so, the court balanced the private interests of the
litigants against the interests of the public in “retaining the
action in California, and as Japan is a suitable forum, this
court declines to burden the already overburdened court
system in Los Angeles with this litigation.” The questions
presented by the court’s ruling are whether a trial court may
take this action on its own motion, and if so, whether the
trial court acted within its discretion. We conclude the trial
court could act sua sponte, and in doing so, the court acted
within the bounds of reason and did not abuse its discretion.
Authority of the Trial Court to Act on Its Own Motion
The issue of a trial court’s sua sponte authority to raise
forum non conveniens issues is resolved by the plain
language of section 430.10, subdivision (a): “When a court
upon motion of a party or its own motion finds that in the
interest of substantial justice an action should be heard in a
forum outside this state, the court shall stay or dismiss the
action in whole or in part on any conditions that may be
just.” (Italics added.) (Accord, Wong v. PartyGaming, Ltd.
(6th Cir. 2009) 589 F.3d 821, 830 [“Under our precedent, a
district court does not abuse its discretion simply by sua
sponte raising forum non conveniens. [Citation.] The
doctrine falls within the court’s inherent authority”].)
We emphasize that the trial court’s ruling does not rest
on a finding that the court lacked jurisdiction. It is often
stated that a California court has the authority to determine
its own jurisdiction. (Barry v. State of California (2017) 2
Cal.5th 318, 326; Walker v. Superior Court (1991) 53 Cal.3d
257, 267.) The trial court here recognized its jurisdiction
based on the forum selection clause and Quanta’s complaint.
The trial court correctly analyzed the issue in terms of
whether that jurisdiction should be exercised.
Standard of Review
There is a split of authority regarding the appropriate
standard of review on whether a forum selection clause
should be enforced through a motion to dismiss for forum
non conveniens. In Cal-State, supra, 39 Cal.App.4th at
p. 1680, the court applied a substantial evidence standard of
review. More recent cases have utilized an abuse of
discretion standard of review. (See Schlessinger v. Holland
America, (2004) 120 Cal.App.4th, 552, 557; America Online,
Inc. v. Superior Court (2001) 90 Cal.App.4th 1, 9 (AOL);
Bancomer, S. A. v. Superior Court (1996) 44 Cal.App.4th
1450, 1457.) “The Cal–State decision represents the
minority view and has been criticized as inconsistent with
Supreme Court authority: ‘[G]iven existing guidance on this
question from our Supreme Court, and the more consistent
line of Court of Appeal decisions, which likewise apply the
abuse of discretion standard, we disagree with Cal–State’s
conclusion that the substantial evidence standard applies
instead.’ [Citations.] We join the majority of cases and
apply the abuse of discretion standard of review.” (Verdugo
v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 148.)
An abuse of discretion standard of review “scrutinizes
lower court decisions to determine if the ruling made
‘“exceed[s] the bounds of reason,”’ all circumstances before it
being considered. [Citation.] If not, the ruling will be
affirmed regardless of whether the appellate court might
have decided the issue differently.” (AOL, supra, 90
Cal.App.4th at pp. 7–8.) We presume that orders and
judgments of the trial court are correct and we indulge all
intendments and presumptions in favor of the correctness of
the order or judgment. (Winograd v. American Broadcasting
Co. (1998) 68 Cal.App.4th 624, 631.) “We review the trial
court’s action, not its precise reasoning, and especially not a
few of its words taken out of context.” (National Football
League v. Fireman’s Fund Ins. Co. (2013) 216 Cal.App.4th
902, 939; accord, Cal-State, supra, 12 Cal.App.4th at p. 1676
[“[i]t is axiomatic that we review judicial action and not
judicial reasoning”].)
The Trial Court Did Not Abuse Its Discretion
The trial court concluded Japan (as well as China,
Taiwan, and Singapore) is a suitable forum to hear the
dispute. There is nothing in the record to suggest these
locations are not suitable alternatives, and the parties do not
dispute there is a pending Japanese action. “An alternative
forum is suitable if the defendant is subject to its jurisdiction
and the cause of action is not barred by the statute of
limitations. [Citations.] ‘[S]o long as there is jurisdiction
and no statute of limitations bar, a forum is suitable where
an action “can be brought,” although not necessarily won.’
[Citation.]” (Aghaian v. Minassian (2015) 234 Cal.App.4th
427, 431; accord, Stangvik v. Shiley Inc. (1991) 54 Cal.3d
744, 752 (Stangvik.) Quanta does not challenge jurisdiction
in Japan or Article 522 of the Commercial Code of Japan,
which provides a five-year statute of limitations on
commercial transactions, and presumably both agreements.
“We proceed, then, to the second and more difficult
question, whether” the trial court erred in concluding that
dismissal was appropriate. (Stangvik, supra, 54 Cal.3d at
p. 752.)
Where, as here, “the plaintiff resides in a foreign
country, . . . the plaintiff’s choice of forum is much less
reasonable and is not entitled to the same preference as a
resident of the state where the action is filed. [Citation.] At
best, therefore, . . . the fact that plaintiff[] chose to file [its]
complaint in California is not a substantial factor in favor of
retaining jurisdiction here.” (Stangvik, supra, 54 Cal.3d at
p. 755, citing Piper Aircraft Co. v. Reyno (1981) 454 U.S. 235,
256 (Piper).) Here, neither Quanta nor JCI are California
corporations, nor do they have any connection to the state
other than the forum selection clause, and California has no
meaningful public interest whatever in retaining the action.
“Piper held that the jurisdiction with the greater interest
should bear the burden of entertaining the litigation. (Piper,
supra, 454 U.S. at pp. 260–261.)” (Id. at p. 757.) California’s
public interest certainly is less than that of the Asian
countries directly related to the dispute.
The trial court declined “to burden the already
overburdened court system in Los Angeles with this
litigation.” Applying the deferential abuse of discretion
standard of review, we see no error in the trial court’s
conclusion. The trial court could reasonably conclude that
the logistics involved in litigating a dispute in which most or
all witnesses are from Asia, many of whom may require the
assistance of an interpreter, would place an unnecessary
burden on the California courts. The parties do not dispute
that issues relating to the quality of Quanta’s product would
be addressed through “relevant Japanese laws.” Although
California may have been freely chosen given its neutrality,
this does not establish that California is a reasonable forum.
Nothing suggests that California courts have expertise in
Japanese product defect law. Negotiations, execution of the
agreements, their performance (i.e., delivery locations, end
user purchases, quality issue detection, and renegotiations),
all occurred in Japan or Taiwan. The disputes are therefore
essentially local to Taiwan and Japan.
In light of all these considerations, the trial court did
not abuse its discretion in declining to provide a forum for
the action. This case comes within the jurisdiction of a
California court only due to the forum selection clause.
Because there is a suitable alternative forum and the parties
to the dispute have no connection to California, the trial
court could conclude that it is unreasonable to require
California courts to accept the burden of the litigation.
California has no public interest in providing a forum for
resolution of a dispute between two Asian companies,
involving a contract formed and executed in Asian countries,
where there are suitable alternatives. The determination
not to burden our courts with this purely foreign litigation
was well within the court’s considerable discretion.
Section 410.40 Does Not Preclude a Court from
Exercising its Discretion in Dismissing a Purely Foreign
Although not directly raised by Quanta as an issue on
appeal, we briefly address the interplay between section
410.30, which codifies forum non conveniens, and section
410.40, which permits a party to file an action against a
foreign corporation in California under defined
circumstances. Section 410.40 provides that any person
“may maintain an action” against a foreign corporation
where the action arises out of or relates to any contract “for
which a choice of California law has been made in whole or
in part by the parties thereto,” and where the contract
relates to a transaction with a minimum aggregate value of
$1,000,000, and contains a provision whereby the foreign
corporation submits to the jurisdiction of California.
Section 410.40 was enacted by Assembly Bill No.3223
(1985-1986 Reg. Sess.) as introduced February 14, 1986, and
was intended “to attract to our legal community
international transaction[s] - particularly international
arbitration.” (Richard M. Mosk, Sanders, Barnet, Jacobson,
Goldman & Mosk, letter to Sen. Quentin Kopp, Mar. 18,
1991.) Proponents of the bill sought to exempt certain cases
from the doctrine of forum non conveniens so that California
could compete as an international arbitration center. “The
proponents believe this bill will have a minimal impact on
California courts since international contract disputes are
generally resolved through arbitration proceedings.” (Sen.
Com. on Judiciary, Analysis of Assem. Bill. No. 3223 (1985-
1986 Reg. Sess.) as introduced Feb. 14, 1986, p. 4.) In order
to limit the reach of section 410.30 to actions filed under
section 410.40, the bill added a new subdivision (b) to section
410.30, which expressly prohibited any forum non
conveniens analysis whenever section 410.40 applied.4
This creation of subdivision (b) to section 410.30 “was
only temporary, however; it had a sunset provision. The last
paragraph of the statute as amended in 1986 provided, ‘This
section shall remain in effect only until January 1, 1992, and
as of that date is repealed, unless a later enacted statute,
which is enacted before January 1, 1992, deletes or extends
that date. If that date is not deleted or extended then, on
and after January 1, 1992, pursuant to Section 9611 of the
Government Code, Section 410.30 . . . shall have the same
force and effect as if this temporary provision had not been
enacted.’ [¶] The Legislature did not later enact a statute,
prior to January 1, 1992, deleting or extending the date of
the temporary provision. Consequently, under both the
language of the enacting statute and of Government Code
section 9611 on which it is based, the temporary provision
. . . is no longer in effect.” (Beckman v. Thompson (1992) 4
Cal.App.4th 481, 487–488.)
Commentary leading up to the Legislature’s refusal to
extend the life of subdivision (b) of section 410.30 provides
guidance on the current interplay between sections 410.30
and 410.40. Referring to former section 410.30, the

4 Under the bill, section 410.30, subdivision (b)
mandated that “[s]ubdivision (a) does not apply to an action
arising out of, or relating to, a contract, agreement, or
undertaking to which Section 410.40 applies.”
Legislature in 1988 found that this state’s “judicial system
[is] being burdened by recent court decisions that enable
citizens of foreign countries claiming injury from products
used in foreign countries to nevertheless have their actions
heard in California courts.” (Sen. Bill No. 2683 (1987-1988
Reg. Sess.) as amended Apr. 28, 1988, § 2.) “[C]ourts should
consider whether hearing the case is necessary in order to
protect California residents from allegedly defective
products. [¶] There are also legitimate and substantial
interests that foreign countries have, without paternalistic
intervention, in determining and promoting for their own
citizens the appropriate accommodation among product
availability, product safety, product price, and other factors.”
As presently written, section 410.40 recognizes the
existence of jurisdiction in California for an aggrieved party
to file a lawsuit against a foreign corporation for wrongs that
have occurred abroad. This is not to say that the aggrieved
party is entitled to have its lawsuit heard in this state,
because section 410.30 continues to afford a trial court
discretion to dismiss the case for “legitimate and substantial
interests.” This is particularly true in this case where there
are no concerns of protecting Californians from allegedly
defective products, and where Japan has significant interest
in promoting product availability and safety for its own
citizens. (See Appalachian Ins. Co. v. Superior Court, supra,
162 Cal.App.3d at p. 440 [“The principle that the doctrine of
forum non conveniens protects the public interest as well as
that of the litigants is paramount in our determination that
the forum selection clause in this contract does not preclude
the application of the doctrine of forum non conveniens.”].)
The Decision in The Bremen Is Not Controlling
Finally, we reject Quanta’s argument that the trial
court’s ruling is inconsistent with the reasoning in The
Bremen, supra, 407 U.S. 1. In our view, The Bremen court
did not address the issue presented here. In The Bremen, a
Houston-based corporation contracted to have its oil rig
towed by a German company to the Adriatic Sea. (Id. at
p. 2.) The contract specified that any dispute must be
resolved before the London Court of Justice. (Ibid.) The oil
rig was damaged during transport, and the Houston
corporation filed suit in federal court in Florida where the
damaged rig had been towed, instead of in London as
mandated by the contract. (Id. at pp. 3–4.) The German
company sought to enforce the forum selection clause but
was unsuccessful in the district and circuit courts. In
reversing, the Supreme Court reasoned that “[t]here are
compelling reason why a freely negotiated private
international agreement, unaffected by fraud, undue
influence, or overweening bargaining power, such as that
involved here, should be given full effect.” (Id. at p. 12, fn.
omitted.) Observing that an accident to the rig might occur
in any one of several jurisdiction through which the rig
might travel, the court reasoned that “selection of a London
forum was clearly a reasonable effort to bring vital certainty
to this international transaction and to provide a neutral
forum experienced and capable in the resolution of admiralty
litigation.” (Id. at p. 17.)
What The Bremen decision did not address is what
would happen if the London-based court refused to exercise
jurisdiction on the basis that the contract and accident had
no connection to England, and England had no interest in
providing a forum for such foreign litigation. This
eventuality is what happened in instant case—the trial court
concluded, correctly, that the pending action had absolutely
no connection to California and that California had no
interest in provide a forum for the uniquely foreign dispute.

Outcome: The order of dismissal is affirmed. No costs are awarded on appeal.

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