Strong-ARM tactics dealt a stunning setback in Boschma v. Home Loan Center, Inc.

After the great real estate implosion, lenders have been very busy, attempting to justify a number of questionable practices and products.  One such loan product, the Option ARM, has been challenged in state and federal courts.  Option ARM loans are complex forms of adjustable rate loans that generally include several payments options during the early years of the loan.  One payment option includes the ability to make a "minimum" payment for several years.  However, many Option ARM loan minimum payments are insufficient to pay accruing interest after an initial "teaser" interest rate that is very low.  Once the "teaser" rate period expires, the unpaid interest is added onto the loan, increasing the principal balance owed on the loan (negative amortization).  Because of their complexity, clear disclosures to borrowers are essential.  In Boschma v. Home Loan Center, Inc. (August 10, 2011), the Court of Appeal (Fourth Appellate District, Division Three) held that a complaint alleging a lender's failure to disclose that negative amortization would definitely occur (instead describing that scenario as merely possible), was sufficient to state violations of the UCL and common law fraud.

The Court described the claims of the Second Amended Complaint:

The gravamen of plaintiffs' operative complaint is that defendant failed to disclose prior to plaintiffs entering into their Option ARMs: (1) "the loans were designed to cause negative amortization to occur"; (2) "the monthly payment amounts listed in the loan documents for the first two to five years of the loans were based entirely upon a low 'teaser' interest rate (though not disclosed as such by Defendants) which existed for only a single month and which was substantially lower than the actual interest rate that would be charged, such that these payment amounts would never be sufficient to pay the interest due each month"; and (3) "when [plaintiffs] followed the contractual payment schedule in the loan documents, negative amortization was certain to occur, resulting in a significant loss of equity in borrowers' homes, and making it much more difficult for borrowers to refinance the loans [because of the prepayment penalty included in the loan for paying off the loan within the first three years of the loan]; thus, as each month passed, the homeowners would actually owe more money than they did at the outset of the loan, with less time to repay it."

Slip op., at 13.  The Court began its analysis by explaining what was not at issue in the case at this time:

It is important to demarcate the boundaries of this dispute. The following is not at issue in this case: (1) should it be legal to offer Option ARMs to typical mortgage borrowers; and (2) should it be legal to utilize "teaser" ("discounted") interest rates (here 1.25 percent for the first month of a 30 year loan), which bear no relation to the actual cost of credit? Our only concern in this case is whether plaintiffs stated a cause of action under state law based on defendant‘s allegedly misleading, incomplete, and/or inaccurate disclosures in the Option ARM documents provided to plaintiffs.

Slip op., at 15.  The Court then observed that no California state court had addressed the exact issues presented in the case.  However, the Court noted that a number of federal courts had examined similar issues.

The Court began by addressing the Defendant's contention that strict compliance with TILA provided it with a safe harbor of sorts:

A string of cases (involving strikingly similar Option ARM forms/disclosures to those used in the instant case) have held that a borrower states a claim for a violation of TILA based on, among other disclosure deficiencies, the failure of the lender to clearly state that making payments pursuant to the TILDS payment schedule will result in negative amortization during the initial years of the loan.

Slip op., at 18.  The Court concluded that, since the allegations could support a cause of action for TILA violations, it would be nonsensical to dismiss the claims at this stage, based on a claim of compliance with TILA disclosure obligations.  Note:  There was no TILA claim asserted in this action, only UCL and fraudulent concealment claims.

Next, the Court considered the state law fradulent concealment claims.  The Court began its discussion by citing a number of federal cases that allowed state law claims to proceed along with TILA claims.  The Court then turned to the sufficiency of the fraud pleading.  The Court found that the failure to disclose the exceedingly low teaser rate adequately was a sufficient omission to suppor the fraudulent concealment claim: "The teaser rate creates an artificially low (compared to the actual cost of credit) initial payment schedule and guarantees that the actual applicable interest rate (after the first month of the loan) will exceed the interest rate used to calculate the payment schedule for the initial years of the loan."  Slip op., at 24.

Turning to the UCL, the Court found that the allegations were sufficient to support a UCL under all three prongs.  The "unfair" prong discussion was the most interesting of the three:

As noted above in our discussion of damages, it may be difficult for plaintiffs to prove they could not have avoided any of the harm of negative amortization — they could have simply paid more each month once they discovered their required payment was not sufficient to pay off the interest accruing on the loan. But plaintiffs may show they were unable to avoid some substantial negative amortization. And we see no countervailing value in defendant's practice of providing general, byzantine descriptions of Option ARMs, with no clear disclosures explaining that, with regard to plaintiffs' particular loans, negative amortization would certainly occur if payments were made according to the payment schedule. To the contrary, a compelling argument can be made that lenders should be discouraged from competing by offering misleading teaser rates and low scheduled initial payments (rather than competing with regard to low effective interest rates, low fees, and economically sustainable payment schedules). Finally, to the extent an "unfair" claim must be "tethered" to specific statutory or regulatory provisions, TILA and Regulation Z provide an adequate tether even though plaintiffs are not directly relying on federal law to make their claims.

Slip op., at 29.

Fun fact: the Court cited Kwikset when rejecting the Defendant's contention that the Plaintiffs did not adequately allege standing under the UCL.

Disclosure:  J. Mark Moore of Spiro Moss argued this matter before the Court of Appeal and contributed significantly to the briefing on appeal.

In the "Pitts" of despair, a "Terrible" attempt to pick off a class representative fails

I remember when what was probably the first Terrible Herbst gas station opened a mere block from my home in Las Vegas.  Refilled a lot of bike tires there.  But enough about my childhood.  Terrible Herbst isn't the friendly local gas station of my youth.  Now it's just another corporate slave to the whisperings of defense counsel skilled in the dark arts.  In Pitts v. Terrible Herbst, Inc. (August 9, 2011), the Ninth Circuit considered whether a rejected offer of judgment for the full amount of a putative class representative's individual claim moots a class action complaint where the offer precedes the filing of a motion for class certification.  The Ninth Circuit concluded that it did not.

Pitts filed a hybrid FLSA and Nevada labor law class action.  The defendant removed it to federal court.  With a discovery motion pending, Terrible made a Rule 68 offer of judgment in the amount of $900.  Pitts claimed $88.00 in damages but rejected the offer.  Terrible then sought to have the matter dismissed.  The Ninth Circuit rejected this attempt to impede consideration of the class certification question:

An inherently transitory claim will certainly repeat as to the class, either because “[t]he individual could nonetheless suffer repeated [harm]” or because “it is certain that other persons similarly situated” will have the same complaint. Gerstein, 420 U.S. at 110 n.11. In such cases, the named plaintiff’s claim is “capable of repetition, yet evading review,” id., and “the ‘relation back’ doctrine is properly invoked to preserve the merits of the case for judicial resolution,” McLaughlin, 500 U.S. at 52; see also Geraghty, 445 U.S. at 398; Sosna, 419 U.S. at 402 n.11.

Slip op., at 10453.  The Court then discussed the argument that the claims in this matter were not "inherrently" transitory:

We recognize that the canonical relation-back case—such as Gerstein or McLaughlin—involves an “inherently transitory” claim and, correspondingly, “a constantly changing putative class.” Wade v. Kirkland, 118 F.3d 667, 670 (9th Cir. 1997). But we see no reason to restrict application of the relation-back doctrine only to cases involving inherently transitory claims. Where, as here, a defendant seeks to “buy off” the small individual claims of the named plaintiffs, the analogous claims of the class—though not inherently transitory—become no less transitory than inherently transitory claims. Thus, although Pitts’s claims “are not ‘inherently transitory’ as a result of being time sensitive, they are ‘acutely susceptible to mootness’ in light of [the defendant’s] tactic of ‘picking off’ lead plaintiffs with a Rule 68 offer to avoid a class action.”

Slip op., at 10454.  Interestingly, the Court essentially found that the right to certify a class was an additional right not satisfied by the Rule 68 offer, and that right could not be extinguished unless certification were denied and all appellate efforts were exhausted.

Next, the Court ruled that it was error to find that Pitts failed to timely file a motion for class certification when the trial court refused to rule on a pending discovery motion to obtain evidence necessary for certification.

Other issues raised in the appeal were not addressed by the Court once it concluded that the trial court erred in its ruling regarding the timing of certification.

In NAACP of Camden County East v. Foulke Management Corp., New Jersey appellate court finds reasons to distinguish Concepcion

When you stamp down too hard, stuff leaks out the sides.  AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) was the boot.  Since then, we've been waiting to see what would leak out the sides.  There has been a good deal of discussion about the ramifications of Concepcion.  While Concepcion may make things harder for class actions, the severity of the opinion is also inspiring interesting challenges to arbitration agreements on many fronts.  In NAACP of Camden  County East v. Foulke Management Corp. (August 2, 2011), the Appellate Division of the New Jersey Superior Court concluded that convoluted and inconsistent arbitration provisions in an automobile purchase contract could not be enforced, reversing the trial court's order directing the matter to individual arbitration.

The opinion focused heavily on the concurring opinion of Justice Thomas for its conclusion that a confusing consumer contract provision related to arbitration would not be enforced:

Thus, in the aftermath of AT&T Mobility, state courts remain free to decline to enforce an arbitration provision by invoking traditional legal doctrines governing the formation of a contract and its interpretation. Applying such core principles of contract law here, we must decide whether there was mutual assent to the arbitration provisions in the dealership's contract documents. As part of that assessment, we must examine whether the terms of the provisions were stated with sufficient clarity and consistency to be reasonably understood by the consumer who is being charged with waiving her right to litigate a dispute in court.

Slip op., at 31.  The Court found ample evidence for the proposition that the consumer could not have reasonably understood the arbitration provisions.  The Court did take a moment to opine that the trial court was correct when it found that a class action waiver could not be invalidated on public policy grounds.  But the Court then found that the issue was irrelevant to the outcome, since the provisions were unenforcable on formation grounds.

Court of Appeal construes Labor Code section 2810, which authorizes suits against contractors by certain employees of subcontractors

Labor Code section 2810 states that "[a] person or entity may not enter into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided."   Section 2810 is a fairly new statute, and one that had not been the subject of any Court of Appeal decision.  But in Castillo v. Toll Brothers, Inc. (July 28, 2011), that changed.  I could tell you that this very exciting opportunity to read an opinion in a truly novel area of law prompted my review of the case.  But, in truth, it was just the defendant's name that caught my eye.

In any event, the trial court, dealing with summary judgment motions and lots of supplemental briefing, evidently had its hands full with a large number of arguments intersecting Labor Code section 2810.  The Court of Appeal commended the trial court's diligent efforts:

The order is a masterful synthesis of a sprawling factual record, reflecting the court's careful work with the parties over the course of several months. We recount the decision in some detail because it forms the foundation for our own ruling.

Slip op., at 6.

A key legal issue addressed in the appeal was determination of whether minimum wage or local prevailing wage sets the standard for insufficiency.  The Court also clarified that actual labor cost, and not the base wage, sets the correct standard.

As to the standard for insufficiency, the Court held that the "minimum wage" sets the standard:

Plaintiffs' position is untenable because there is no general law requiring an employer to pay its workers the average local wage for a particular skill or trade, if that average wage is higher than the legal minimum. Merely to pay less than the prevailing wage therefore violates no law. In the absence of a local, state, or federal law requiring the payment of a wage higher than the legal minimum, a contract cannot be insufficient under section 2810 merely because it does not provide sufficient funds to pay that higher wage, since section 2810 imposes nothing more than compliance with legal requirements.

Slip op., at 14.  (Note: Earlier in the opinion the Court clarified that "minimum wage" would depend upon the industry and wage order at issue in a particular case.)  While this soundbite quote seems clear enough, the opinion goes on for pages, reviewing legislative history and addressing, in detail, the contentions of the plaintiffs regarding the correct measure of sufficiency of funding.

On the second issue, the Court observed that compliance with all laws sets the standard for compliance, which requires analysis of total labor cost, not just the wage that would be paid to employees:

Because an employer is required to pay all of these costs to comply with applicable laws when employing a laborer, it is appropriate to use the total labor cost, rather than the worker‘s wage, in determining sufficiency under section 2810.

Slip op., at 7.

The second half of the opinion addresses (1) the sufficiency of evidence for summary judgement purposes on the issue of whether specific contracts were sufficiently funded, and (2) some over-reaching pre-emption arguments by Toll Brothers.  If that stuff floats your boat, this is a page turner.

Brown v. Ralphs Grocery Company decided, but dodges the Gentry-Concepcion issue and the NLRA prohibition on concerted activity bans

The Court of Appeal (Second Appellate District, Division Five) issued its opinion today in Brown v. Ralphs Grocery Company (July 12, 2011).  The opinion is notable for what it doesn't address.  As mentioned previously here, the Court had requested supplemental briefing on the issue of whether Concepcion dished out the Discover Bank treatment to Gentry v. Superior Court (2007) 42 Cal.4th 443.  After a few feverish days of writing an amicus brief (for CAOC) focused primarily on the fact that the National Labor Relations Act prohibits enforcement of any contract that would impede concerted activity by employees (including class actions to improve wages and working conditions), I was disappointed to see that the Court dodged the entire question, deciding the matter on the ground that a factual showing had not been made in the trial court to support the Gentry factors.  There is also a split decision discussion of how PAGA claims interact with motions to compel arbitration.

On balance, this non-opinion doesn't do much to answer the question of how Concepcion interacts with wage & hour class actions and the Gentry decision.  It will take another appellate vehicle to properly present those questions for review.

Securitas Security Services USA, Inc. v. Superior Court (Holland) tells us what ISN'T a split shift

"Split shift."  So easy to say, but surprisingly hard to define in a way that doesn't require a list of demonstrative examples and exclusions.  In Securitas Security Services USA, Inc. v. Superior Court (Holland) (July 7, 2011), the Court of Appeal (Second Appellate District, Division Three) issued an order to show cause to consider issues related to the interaction of the split shift definiion in Industrial Wage Commission‟s wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040) and the declaration of a "workday" by an employer (security guards worked shifts beginning in one "workday" and continuing into the next).  The trial court rejected the Securitas definition of "split shift" and denied its motion for summary judgment.  The Court of Appeal disagreed with the trial court's analysis, but agreed that summary judgment could not be granted.

For reference, the Court set forth the definitions at issue:

Wage Order No. 4 defines a “split shift” as “a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal breaks.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(Q).)

A “shift” is defined as “designated hours of work by an employee, with a designated beginning time and quitting time.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(P).) A “workday” is defined as “any consecutive 24-hour period beginning at the same time each calendar day.” (Id., subd. 2(T); see also Lab. Code, § 500, subd. (a).)

Slip op., at 6.  Jumping to the end of the story, the Court noted that "work schedule" is not tied to the definition of "workday."  The Court went with its common sense construction of the term: "In the context of a provision establishing minimum wages to compensate employees who are required to return to work after an interruption in their 'work schedule,' we believe that a 'work schedule' simply means an employee's designated working hours or periods of work."  Slip op., at 7.  Thus, consecutive overnight shifts that overlap a definied "workday" do not create split shifts because the "shift" is a continguous block, even though it overlaps a "workday."

The Court then discussed the policies behind overtime pay, split shift premiums, meal period premiums, and the like, quoting extensively from Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007).

After all that, the Court noted that Securitas failed to prove that the plaintiffs didn't work actual split shifts at other times.

Now we know one circumstance that isn't a split shift.  We are still left, however, without complete guidance as to what qualifies as a bona fide split shift.  Can an employer give its employees an hour and a half lunch without creating a split shift?  Can it give two hour lunches?  How many hours have to elapse between the end of one work period before it is viewed as a distinct and complete "shift?"  Bonus answer: probably more than 1 and less than 24.

Sullivan v. Oracle Corporation addresses how California law applies to nonresident employees working both in and outside California

Today, the California Supreme Court issued an Opinion following its acceptance of questions about the construction of California law from the United States Court of Appeals for the Ninth Circuit.  In Sullivan v. Oracle Corporation (June 30, 2011), the Court addressed (1) whether the Labor Code's overtime provisions apply to plaintiffs' claims for compensation for work performed in this state [with the ancillary question of whether the same claims can serve as predicates for claims under California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.)], and (2) whether the plaintiffs' claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states can serve as predicates for UCL claims.

The Court responded "yes" to the first question group, and "no" to the second.

On the first issue, the Court said:  "The California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979, 983.)"  (Slip op., at 18.)

On the related UCL question, the Court said: "Business and Professions Code section 17200 does apply to the overtime work described in question one. (See Sullivan III, supra, 557 F.3d 979, 983.)"  Slip op., at 19.)

The full answer to the last issues was:  "Business and Professions Code section 17200 does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case based solely on the employer's failure to comply with the overtime provisions of the FLSA."  (Slip op., at 23.)

The Opinion was issued by a unanimous Court.

Update on 2011-06-30 17:42 by The Complex Litigator

The post title was corrected after the initial posting.

Breaking News: Walmart Stores, Inc. v. Dukes decided by Supreme Court; Reversed

I'll preface this brief post by noting that I have not had a chance to read the entire opinion, but the opnion in Walmart Stores, Inc. v. Dukes (June 20, 2011) was released this morning by the United States Supreme Court.  The Court reversed the Ninth Circuit and the District Court, finding that the matter was not suitable for class certification.  The core majority was authored by Justice SCALIA. ROBERTS, C. J., and KENNEDY, THOMAS, and ALITO, JJ., joined in that opinion, and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined as to Parts I and III.  Justice GINSBURG authored an opinion concurring in part and dissenting in part.  BREYER, SOTOMAYOR, and KAGAN joined in Justice GINSBURG'S opinion.

Some key aspects of the holding are:

• Proof of commonality necessarily overlaps with respondents’ merits contention that Wal-Mart engages in a pattern or practice of discrimination. The crux of a Title VII inquiry is “the reason for a particular employment decision,” Cooper v. Federal Reserve Bank of Richmond, 467 U. S. 867, 876, and respondents wish to sue for millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.
• General Telephone Co. of Southwest v. Falcon, 457 U. S. 147, describes the proper approach to commonality. On the facts of this case, the conceptual gap between an individual’s discrimination claim and “the existence of a class of persons who have suffered the same injury,” id., at 157–158, must be bridged by “[s]ignificant proof that an employer operated under a general policy of discrimination,” id., at 159, n. 15. Such proof was absent here.
• Claims for monetary relief may not be certified under Rule 23(b)(2), at least where the monetary relief is not incidental to the requested injunctive or declaratory relief.
• The mere “predominance” of a proper (b)(2) injunctive claim does nothing to justify eliminating Rule 23(b)(3)’s procedural protections, and creates incentives for class representatives to place at risk potentially valid monetary relief claims.

Justice Ginsburg is concerned that the majority imported too much of the "predominance" analysis into the Rule 23(a) requirement that common questions of law or fact must exist:

The Court’s emphasis on differences between class members mimics the Rule 23(b)(3) inquiry into whether common questions “predominate” over individual issues. And by asking whether the individual differences “impede” common adjudication, ante, at 10 (internal quotation marks omitted), the Court duplicates 23(b)(3)’s question whether “a class action is superior” to other modes of adjudication.

Slip op., Ginsburg concurring and dissenting, at 9.  Otherwise, Ginsburg agrees that the class should not have been certified under Rule 23(b)(2) but would  have saved the issue of whether certification was appropriate under Rule 23(b)(3) for the District Court on remand.

The opinion looks as though it will prove to have the greatest impact on cases of this type.  While the Rule 23(a) construction seems to be inconsistent with well-settled standards, the balance of the opinion was predictable, given the massive size of the class.

Court of Appeal finds no privacy interest in residential address

I'm playing catch-up again, which explains the date on this post vis-a-vis the date on the opinion I want to mention.  In Folgelstrom v. Lamps Plus, Inc. (pub. ord. May 20, 2011, mod. June 7, 2011), the Court of Appeal (Second Appellate District, Division Five) reviewed a judgment entered following a successful demurrer to a complaint principally challenging the collection of customer zip codes during credit card transactions.  The super easy part of the decision was the portion where the Court said, "Based on the holding of Pineda v. Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524 (Pineda), we reverse the judgment and order the trial court to overrule the demurrer to plaintiff's cause of action alleging a violation of the SongBeverly Credit Card Act of 1971 (Credit Card Act) (Civ. Code, § 1747 et seq.)."  Easy.

That's not the interesting part.  That's the part where the plaintiff lucked out.  The interesting part comes when the Court discusses the causes of action that didn't pass muster: invasion of common law and constitutional rights to privacy, and violation of Business and Professions Code section 17200, the Unfair Competition Law (UCL).  Discussing the privacy interest in a residential address, the Court said:

Plaintiff offers no explanation of why we should find a privacy interest in plaintiff's address based on the Supreme Court's conclusion that performing a bodily function under the watchful eye of strangers implicates a privacy interest.

Slip op., at 4-5, referencing Hill v. National Collegiate Athletic Assn., 7 Cal. 4th 1 (1994).  Just another arrow in the quiver when arguing about whether a plaintiff is entitled to discovery of contact information for putative class members.

All credit cards issued for consumer credit purposes are protected under Civil Code section 1747.08, even if sometimes used for business purposes

Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524 (2011) added some clarity to the types of personal identification information protected from collection by merchants.  As it turns out, section 1747.08 of the Song-Beverly Credit Card Act of 1971 (SBCCA) (Civ. Code, § 1747 et seq.) even precludes collection of zipcodes.  But Pineda didn't answer every unresolved question related to SBCCA-based claims.  In Archer v. United Rentals, Inc. (May 19, 2011), the Court of Appeal considered several issues surrounding the SBCCA, described as follows:

This appeal presents these significant issues: (1) Have plaintiffs established standing to pursue a UCL claim by demonstrating they "suffered injury in fact and . . . lost money or property as a result of the unfair competition" (Bus. & Prof. Code, § 17204); (2) does the privacy protection of Civil Code section 1747.08 cover the use of a business credit card; (3) does such protection extend to a cardholder who uses a personal credit card regardless of whether such use is "primarily" or "occasionally" for business purposes; and (4) is class certification foreclosed by the unreasonableness of ascertaining class membership?

Slip op., at 2.  The Court of Appeal answered "no" to the first two questions, but reversed the trial court on the third when the Court concluded that a personal credit card was protected under the SBCCA, regardless of how often it was used for business purposes.  Having ruled as it did on the third issue, the Court then remanded for reconsideration of the ascertainability question, since the trial court's orginal ruling turned on the need to evaluate the frequency with which a credit card was used for business purposes.

The Court relied upon Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011) when it concluded that violation of SBCCA, alone, was insufficient to establish the requisite injury under the UCL.

Today, June 13, 2011, the Court issued a modification to its Order.  The modification adds a paragraph on the issue of standing to appeal:

Defendants contend plaintiffs lack standing to appeal the order denying class certification because they are not aggrieved by the trial court’s rulings in that they each were awarded $250 and “they should have moved for the substitution of new class representatives who do, in fact, have standing to appeal.” We disagree because plaintiffs were denied certification of their class claims. Issues regarding proper class representatives are for the trial court to address on remand. (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1351, fn. 35.)

June 13, 2011 slip op., at 1.