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22 BRIEF OF AMICI CURIAE HON. JOHN S. MCCAIN, III, HON. JEFF FLAKE, AND
HON. MATTHEW J. SALMON IN SUPPORT OF RESPONDENTS’
23 OPPOSITION TO PLAINTIFF’S APPLICATION FOR
24 PRELIMINARY INJUNCTION
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Case 2:16-cv-01538-NVW Document 91 Filed 03/14/17 Page 2 of 21
1 trust safeguards by voting in favor of Prop. 123 5 in the special election of May 17,
2 2016. 6
3 Based on their experiences, amici are familiar with the Enabling Act, the 1999
4 Amendments, and Prop. 123. Amici are familiar with the discretion Congress
5 conferred on Arizona in the 1999 Amendments to authorize—but only through the
6 arduous process of amending its Constitution—such annual distributions from the
7 Permanent Fund to the State’s public and charter schools as the State deems
8 consistent with its codified duty to manage its land trust and the resultant earnings
9 prudently. Amici participated in and are otherwise acquainted with discussions and
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legal analyses that took place in Congress in 2015 confirming the 1999 Amendments
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afforded the aforementioned discretion to Arizona and that its exercise of that
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discretion in the form of Prop. 123 would not require further congressional approval.
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Further, amici, like the other members of Arizona’s congressional delegation who
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reside and vote in Arizona, were exposed to the publicity and public debate
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surrounding Prop. 123 before its referral to and approval by the State’s electorate.
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Amici have an interest in ensuring the 1999 Amendments are construed by
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this Court in accord with their text and purpose when evaluating Mr. Pierce’s
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preliminary injunction application (the “Application”), and, in particular, his
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contention that he is likely to succeed on the merits of his claims. They also have an
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21 interest in ensuring that this Court, in assessing the balance-of-equities and the
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Laws 2015, 1st S.S., H.C.R. 2001, § 1, Prop. 123, approved election May 17,
2016, eff. May 26, 2016.
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All parties except for Mr. Pierce have consented to the filing of this brief. Amici
25 represent that no party’s counsel authored this brief in whole or in part, no party or
party’s counsel contributed money that was intended to fund the preparation or
26 submission of this brief, and no person—other than amici or their counsel—
27 contributed money that was intended to fund the preparation or submission of this
brief.
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1 public interest, has pertinent and reliable information at its disposal pertaining to
2 the procedural hurdles that a new—and, in Congress’s view, entirely unnecessary—
3 bill to amend the Enabling Act again would confront. In light of those interests, amici
4 submit this brief to address two matters in particular.
5 The first of those matters is Mr. Pierce’s contention that the Enabling Act, in
6 directing that “[d]istributions from the trust funds shall be made as provided in
7 Article 10, Section 7 of the [Arizona] Constitution,” constrains the State to distribute
8 earnings only as Article 10, Section 7 prescribed in 1999, irrespective of whether
9 Arizona’s electorate later amends that constitutional provision to authorize a
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different distribution formula or amount, as it did in approving Prop. 123. The second
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is Mr. Pierce’s contention that, if Congress concurs with Governor Douglas A. Ducey’s
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and the State’s (collectively, “Respondents”) arguments, it will “fix” the Enabling Act,
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rapidly. As amici are aware from their own experiences, Mr. Pierce’s contentions are
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irreconcilable with the text and purpose of the 1999 Amendments and the realities of
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the legislative process. His assertions are also incompatible with the primary purpose
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of the state land trust—i.e., to ensure Arizona’s public and charter schools have the
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funding they need to educate the State’s children.
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ARGUMENT
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In one fell swoop, Mr. Pierce seeks to frustrate both the will of Congress to
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afford Arizona greater latitude in managing its education-funding system and the will
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of Arizona’s Governor, Legislature, and most importantly, voters, to ensure there is
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23 adequate funding for Arizona’s cash-strapped public and charter schools. His
24 preliminary injunction initiative is flawed, dangerous, and contrary to the public
25 interest. It should be indulged no further.
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1 The plain meaning of the 1999 Amendments is that the State, when
2 distributing trust funds to the beneficiaries, must comply with the formula that
3 Article 10, Section 7 of the Arizona Constitution prescribes at that time. To contend
4 otherwise would be to endorse the proposition that the text of the 1999 Amendments
5 proscribes any effort by the people of Arizona to amend the distribution provisions of
6 Article 10, Section 7 of the Arizona Constitution, as they did through Prop. 123 in
7 2016 (and through Proposition 118 in 2012), or any effort by the State to distribute
8 trust funds in accordance with those amendments. Nothing in the text of the 1999
9 Amendments supports that sweeping assertion. Because Mr. Pierce’s interpretation
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would require this Court to read new, restrictive language into the 1999
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Amendments—i.e., “as provided in Article 10, Section 7 of the Constitution of the
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State of Arizona [in 1999]”—it represents an impermissible departure from the plain
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meaning of the text and must be rejected.
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The foregoing plain meaning analysis of the 1999 Amendments correctly
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reflects Congress’s intent that future changes to the distribution formula would no
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longer require congressional oversight. Instead, such changes must be effected
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through amendments of Article 10, Section 7 of the Arizona Constitution by the
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State’s electorate and comport with the State’s fiduciary duties. The purpose of using
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a simple statutory cross-reference like the one Congress placed in the 1999
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21 Amendments is to allow for amendments to the cross-referenced legislation without
22 having to rewrite the referencing statute. E.g., Hermann v. Cencom Cable Assocs.,
23 Inc., 978 F.2d 978, 983 (7th Cir. 1992) (“Writing a cross-reference rather than
24 repeating the text to be incorporated is useful precisely because the target may be
25 amended.”) (Easterbrook, J.). If Congress had wanted to lock Arizona into the specific
26 distribution mechanism that was embodied in Article 10, Section 7 of the Arizona
27 Constitution as of 1999, H.R. 747 and S. 415 would have been formulated differently.
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1 Congress would either have incorporated the distribution provisions of Article 10,
2 Section 7 into the 1999 Amendments verbatim, or it would have cross-referenced
3 “Article 10, Section 7” together with specific text freezing the cross-referenced
4 provision in time. Congress’s decision not to employ those conventions in 1999 was
5 not a matter of “sloppiness,” as Mr. Pierce previously represented to this Court. See
6 Transcript of Proceedings of February 7, 2017 (Feb. 7, 2017 Tr.) at 19:4-7 and 28:17-
7 19. The unambiguous text of the 1999 Amendments demonstrates that Congress did
8 exactly what it meant to do.
9 Finally, the changes effected to the trust fund distribution formula by Prop.
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123 comply with the plain meaning of the Enabling Act in every respect. The 1999
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Amendments provide that “[d]istributions from the trust funds shall be made as
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provided in Article 10, Section 7 of the [Arizona] Constitution” and Prop. 123 satisfies
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that requirement by amending Article 10, Section 7(G) of the Arizona Constitution.
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Prop. 123 was approved nearly a year ago. If the United States Department of Justice
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or the United States Attorney’s Office had perceived the 1999 Amendments and the
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amended version of Article 10, Section 7(G) to be incompatible, they presumably
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would have acted to enjoin enforcement of Prop. 123. Further, amici were members
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of Arizona’s congressional delegation and residents of Arizona when Prop. 123 was
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referred to the ballot in 2016. They were aware of the measure. Indeed, as discussed
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21 below, they sought and received confirmation of Arizona’s interpretation of the 1999
22 Amendments from Congress months before it was referred to the ballot.
23 B. The Legislative History and Context of the 1999 Amendments Reflect
Congress’s Intent to Eliminate the Need for Congressional
24 Authorization of Modifications to the Trust Fund Distribution
25 Formula by Arizona’s Voters.
26 Even if Congress had not fashioned the 1999 Amendments as plainly as it did,
27 the legislative history and other evidence corroborates that Congress intended to
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Case 2:16-cv-01538-NVW Document 91 Filed 03/14/17 Page 8 of 21
1 confer upon Arizona the discretion to authorize—but only through the painstaking
2 process of constitutional amendment—such annual distributions of trust funds to the
3 trust beneficiaries as the State deems consistent with its codified duty to manage the
4 trust and its earnings prudently.
5 In late 2015, Senator McCain, a sponsor of S. 415 in Congress, sought and
6 received confirmation from the Honorable Lisa Ann Murkowski of Alaska, Chair of
7 the same United States Senate Committee that reported S. 415 for chamber action in
8 1999—i.e., the Energy and Natural Resources Committee—that the 1999
9 Amendments extinguished the need for congressional approval of changes to the
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distribution formula set out in Article 10, Section 7 of the Arizona Constitution. The
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following passages from their recorded colloquy are illuminating:
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Mr. MCCAIN: * * * The [1999 Amendments] repealed
13 strict investment and distribution limitations imposed on
14 the fund by the Congress in the State’s enabling act. It also
granted the voters of . . . Arizona the authority to adjust
15 distributions to the fund beneficiaries. To accomplish that
16 objective, Congress specifically amended section 28 of the
[Enabling Act] to read, “Distributions from the trust funds
17 shall be made as provided in article 10, Section 7 of the
18 Constitution of the state of Arizona.”
19 The Congressional Budget Office estimate, which was
20 included in the House . . . Committee report, indicated that
“[e]nactment of this bill would give Arizona state officials
21 greater flexibility in investing and distributing the assets
22 of the state’s permanent funds.”
23 My understanding is that this reference to the
24 Constitution of the State of Arizona, in section 28 of the
enabling act, authorizes the voters of the State of Arizona to
25 amend their constitution to authorize different distributions
26 than those in place in 1999, including distributions that
may pay out more funds to the beneficiaries. I ask the
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senior Senator from Alaska: Would she agree?
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1 her memorandum to Mr. Salmon dated December 21, 2015, stated in pertinent part:
2 “The 1999 Amendments . . . authorize Arizona to specify in its constitution how to
3 make fund distributions. Because Prop. 123, if passed, would amend Arizona’s
4 constitution to specify a fund distribution procedure, Prop. 123 would appear to be
5 consistent with the amendments’ instruction that distributions be made according to
6 Arizona’s constitution. Consequently, there does not appear to be any need for Congress
7 to amend the Arizona Enabling Act or to take any other action in order for Prop. 123
8 to go into effect. Indeed, Arizona has previously made similar changes without
9 congressional approval. . . . Consistent with the Arizona 2012 constitutional
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amendments precedent, Prop. 123 would not appear to require congressional action
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to become effective. Moreover, New Mexico has achieved similar goals without
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Congress amending New Mexico’s comparable enabling legislation.”). Memorandum
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from Sarah Herman, Legislative Attorney, Congressional Research Service, to the
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Honorable Matt Salmon, dated December 21, 2015 (emphasis added), a true and
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correct copy of which is attached as Exhibit 13 to the Dwyer Decl. [Doc. 77-1]
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Senator Flake received essentially the same advice from CRS. CRS’s legislative
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attorney, in her memorandum dated December 11, 2015, stated in pertinent part:
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“There is a reported dispute between Governor Ducey and Arizona State Treasurer
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Jeff DeWit about whether the Governor’s proposal [Prop. 123] requires Congress to
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21 further amend the Arizona Enabling Act. . . . The Governor’s position appears correct.
22 The 1999 amendments mandate that fund investments be made prudently, and
23 Governor Ducey and Treasurer DeWit appear to disagree about whether the
24 Governor’s proposal meets that fiduciary requirement, which is a matter for the
25 courts to determine. . . . Indeed, Arizona has previously made similar changes without
26 congressional approval: In 2012, Arizona amended its constitution to specify that
27 distributions from the fund would be 2.5%. Now Arizona seeks to do the same thing,
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Case 2:16-cv-01538-NVW Document 91 Filed 03/14/17 Page 11 of 21
1 but with a larger distribution percentage. That said, Congress, if it so chooses, could
2 further amend the Arizona Enabling Act to define “prudent investing.” For now,
3 though, it appears that no action by Congress is needed for the Governor to pursue his
4 proposal. Moreover, New Mexico has achieved similar results without Congress
5 amending New Mexico’s comparable enabling legislation.” See Memorandum from
6 Sarah Herman, Legislative Attorney, Congressional Research Service, to the
7 Honorable Jeff Flake, dated December 11, 2015 (emphasis added), attached as
8 Exhibit 14 to the Dwyer Decl. [Doc. 77-1].
9 II. MOVANT GROSSLY UNDERESTIMATES THE TIME AND EFFORT
10 REQUIRED TO MAKE LAW IN THE U.S. CONGRESS.
11 Mr. Pierce asserts that Congress need only “fix” the Enabling Act to
12 accommodate Prop. 123, and he insinuates that this would happen rapidly after
13 introduction of a bill. There is no reason, however, to “fix” legislation that all
14 interested parties except for Mr. Pierce agree is not broken. As the unambiguous text,
15 legislative history, and context of the legislation demonstrate, the 1999 Amendments
16 conferred upon Arizona the discretion to authorize such annual distributions of trust
17 funds to the trust beneficiaries as the State deems consistent with its codified duty to
18 manage the trust and its earnings prudently, provided Arizona’s electorate authorizes
19 the distribution formula or amount through constitutional amendment. In all events,
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Mr. Pierce offers this Court nothing more than baseless conjecture to support his
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suggestion that Congress would pass a measure to amend the Enabling Act quickly.
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And, Mr. Pierce glosses over the fact that any such bill would require presidential
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signature as well.
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Although Congress would proceed as expeditiously as circumstances would
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permit to consider a bill to amend the Enabling Act, the timing and outcome are not
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assured. A bill to amend the Enabling Act would have to traverse the same path as
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Case 2:16-cv-01538-NVW Document 91 Filed 03/14/17 Page 12 of 21
1 most other measures in Congress. In the One Hundred Fourteenth Congress, less
2 than 4% of proposed bills and joint resolutions became law. 8
3 New bills are sent to standing committees based on their subject matter, and,
4 because the volume of bills and other measures is so large—more than 10,000 in the
5 One Hundred Fourteenth Congress—most bills are sent directly to subcommittee. As
6 was the case with the 1999 Amendments, another bill to amend the Enabling Act may
7 well be sent to the House Resources Committee, and in the Senate, to the Committee
8 on Energy and Natural Resources and the Subcommittee on Forests and Public Land
9 Management. If a bill to amend the Enabling Act were to be reported out of the
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committee in the House, it would proceed to a Rules Committee, which sets the
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conditions for amendment and debate. Rules for debate on the Senate floor are
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different than in the House. Senators may discuss as much about each bill as they
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like. No restrictions on amendments are allowed in the Senate. Both houses require
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a quorum (majority) of its members to be present for a vote. Passage of a bill generally
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requires a majority vote by the members present. The bill would require approval by
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the President.
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Against that backdrop, the balance of equities and considerations of public
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policy tip decidedly against the imposition of a preliminary injunction. While
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Congress would do what it could as expediently as circumstances would permit to
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21 address the panoply of severe economic injuries that an injunction would be expected
22 to inflict on Arizona’s public schools, schoolteachers, and students, see Response at
23 14-16 (expounding on the harms that would occasion an injunction), there is no way
24 to be certain how quickly a bill to amend the Enabling Act would move through
25 Congress or even that it would conclude its journey before the end of the current
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See Declaration of Robert A. Mandel, attached as Exhibit A.
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Case 2:16-cv-01538-NVW Document 91 Filed 03/14/17 Page 13 of 21
1 session on January 3, 2018. Meanwhile, paralyzing the State’s public schools for a
2 period of that length—indeed, for any period of time—would be nothing short of a
3 public policy disaster for Arizona.
4 RESPECTFULLY SUBMITTED this 13th day of March, 2017.
5 MANDEL YOUNG PLC
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By: /s/ Robert A. Mandel
8 Robert A. Mandel, SBN 022936
9 Taylor C. Young, SBN 020743
Peter A. Silverman, SBN 020679
10 2390 E. Camelback Rd., Ste. 318
11 Phoenix, Arizona 85016
(602) 374-4591 (Tel)
12 (602) 314-5296 (Fax)
13 rob@mandelyoung.com
courtorders@mandelyoung.com
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1 CERTIFICATE OF SERVICE