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The issue is due to a server hard limit of 1,000,500 files open at any one time. Don't forget we're on a shared server, so while that figure is ridiculously large, it isn't when you factor in how many other accounts are sharing the same server.
I've sought comment on how to move forward with this, and I'll keep you all informed.
Alcar...
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Oh yeah I forgot you're with one of those 'we'll put 10.000 accounts on one server and make mad money' hosts. Makes sense in that case.