This error occurs if either the original group or the new group contains clients with the same hardware key value. Duplicate hardware keys can occur when you deploy an image without following best practices. It can also occur when using Active Directory (AD) sync and "copying" a client to a non-AD group.
If the client in question is sync'd with Active Directory, you will need to delete the client and move it back to the original Active Directory group or remove the Active Directory group from the Endpoint Protection Manager.
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