October 4, 1993 UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT
No. 92-2342
JOHN P. MURRAY, ET AL.,
Plaintiffs, Appellants,
v.
ROSS-DOVE COMPANY, INC. AND
DOVETECH, INC.,
Defendants, Appellees.
ERRATA SHEET
The opinion of this Court issued on September 27, 1993, is amended as follows:
On page 12, last line of footnote 5, replace "continual" with "continued".
UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT
No. 92-2342
JOHN P. MURRAY, ET AL.,
Plaintiffs, Appellants,
v.
ROSS-DOVE COMPANY, INC. AND
DOVETECH, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ernest C. Torres, U.S. District Judge]
Before
Torruella, Circuit Judge,
Feinberg,* Senior Circuit Judge,
and Boudin, Circuit Judge.
Robert M. Duffy with whom Michael P. DeFanti and Hinckley, Allen
& Snyder were on brief for appellants.
Michael B. Waitzkin with whom Eric L. Lewis, Rima Sirota,
Nussbaum & Wald, Marc C. Hadden and Gidley, Sarli & Marusak were on
brief for appellees.
September 27, 1993
*Of the Second Circuit, sitting by designation.
BOUDIN, Circuit Judge. This is an appeal from a
decision of the district court withdrawing from the jury a
commercial dispute at the end of the plaintiffs' case.
Although we think that the plaintiffs' evidence failed to
show fraud and we treat an aiding and abetting claim as
abandoned, the evidence of negligence and injury was in our
view just adequate to foreclose a directed verdict.
Accordingly, we affirm the ruling as to the fraud claim but
vacate the judgment as to the negligence claims and remand
for further proceedings, strongly encouraging the parties to
explore settlement of this case.
I. BACKGROUND
Plaintiffs are three individuals, Franklin D. Crawford,
John P. Murray, Jr. and J. Michael Murray, known collectively
as "the Crawford Group," and an associated investment entity,
Bevmar Acquisition Corp. Defendants are Ross-Dove Company,
Inc., a commercial auction firm, and Dovetech, a division of
Ross-Dove (which may well not be a suable entity). The
dispute arises out of an appraisal done by Ross-Dove of
certain assets of Bevmar, Inc. ("Bevmar"), a California
corporation formerly engaged in the manufacture and sale of
electronic circuitry panels.
In 1989, one Robert H. Marik, an acquaintance of
Crawford, organized Bevmar Acquisition Corp. as part of an
effort to solicit investments in Bevmar. In aid of that
-2-
effort, an investment banker working with Marik engaged
Dovetech to appraise certain of Bevmar's assets. Dovetech's
appraisal was conducted by Bruce Schneider, with help from
other employees, and was completed in June 1989. That
appraisal valued Bevmar's machinery, equipment, molds and
dies at three different values, ranging from over $2 million
total to over $6 million depending on the circumstances of
sale. The appraisal said that the appraised value of molds
and dies should not decline for at least three years.
In September 1989, Marik invited Crawford to invest in
Bevmar, through the Bevmar Acquisition Corp., and Marik made
the Dovetech appraisal of Bevmar's assets available to
Crawford. Crawford contacted Schneider to explain his
interest in Bevmar and to determine the status of the
Dovetech appraisal. Schneider assured Crawford that the
appraisal was still valid. In October 1989 Crawford,
together with the two Murrays, paid $3 million for a stake in
Bevmar comprising a loan to Bevmar to be repaid at 20 percent
annual interest, a 40 percent equity interest in the company,
and a bonus depending on the fortunes of the company.
To secure the loan, Bevmar gave the Crawford group a
security interest in all of its machinery, equipment, molds
and dies. There were some discrepancies between items listed
in the Dovetech appraisal and items listed in the recorded
security filings, but the latter lists were delayed and the
-3-
discrepancies not immediately noticed. What did become
rapidly apparent was that Bevmar was in deep trouble.
Crawford invested a further $500,000 but in March 1990 a
chapter 7 petition was filed and Bevmar entered bankruptcy.
When its assets were liquidated, the amount realized on the
machinery, equipment, molds and dies was about $453,000.
The plaintiffs then commenced this suit in the district
court charging Ross-Dove and Dovetech with negligence,
negligent misrepresentation, fraud, and aiding and abetting
the torts of others.1 Actual damages in the amount of $4.5
million were sought, as well as punitive or exemplary
damages. The gist of the complaint was that Dovetech had
carelessly or dishonestly overestimated the value of the
assets it had appraised in June 1989 and that the Crawford
group had relied to its detriment on that appraisal in
investing in Bevmar.
After discovery, a four-day jury trial occurred in
September 1992. Plaintiffs offered testimony from a number
of witnesses, either in person or by deposition, including
the three Crawford group members, Schneider, two Bevmar
employees, an employee of the company that purchased the
molds and dies after Bevmar's bankruptcy, and an appraiser
who had appraised Bevmar machinery and equipment and given a
1The last of these claims is not discussed in the plaintiffs' brief on appeal, there is scant evidence to support such a claim, and we treat it as abandoned.
-4-
general opinion about the value of its molds and dies in
March 1989. Surprisingly, plaintiffs did not provide an
expert witness to testify as to the inadequacy or
incompetence of Dovetech's appraisal.2
At the close of plaintiffs' case, defendants sought
judgment as a matter of law under Fed. R. Civ. P. 50(a)(1),
the current name of the traditional relief afforded by a
directed verdict. On October 1, 1992, the district court
delivered a detailed oral opinion concluding that plaintiffs
had failed to show that the appraisal was inaccurate or that
defendants were at fault. Alternatively, the court found
failures of proof as to justifiable reliance on the appraisal
and as to causation of injury. Although we regard this case
as a close call, on balance we think that plaintiffs did at
the completion of their opening case have enough evidence to
reach a jury on a negligence theory.
II. ANALYSIS
On a Rule 50(a) motion, appellate review is plenary.
American Private Line Serv., Inc. v. Eastern Microwave, Inc.,
980 F.2d 33, 35 (1st Cir. 1992). The evidence and inferences
from it are considered in the light most favorable to the
2Plaintiffs belatedly attempted to add an expert witness but this was disallowed because the witness was not timely listed as required by pretrial orders. Plaintiffs complain but we see no error in this ruling. The district court did allow plaintiff to make use of deposition testimony of Steve Piletz, an expert appraiser who had appraised certain of the assets in March 1989.
-5-
party opposing the directed verdict, here, the plaintiffs.
Raymond Steel, Inc. v. Puerto Rican American Ins. Co., 954
F.2d 19, 22 (1st Cir. 1992). A directed verdict is proper at
the close of plaintiffs' case only when the plaintiffs'
evidence, viewed in this light, would not permit a reasonable
jury to find in favor of the plaintiffs on any permissible
claim or theory.
A reviewing court must thus ask whether the plaintiffs
have offered enough evidence to permit findings in
plaintiffs' favor on each of the elements necessary to prove
at least one cause of action. Here, the parties have assumed
that Rhode Island law defines the causes of action--why is
not clear--and we accept this premise. See In re Newport
Plaza Associates, L.P., 985 F.2d 640, 644 (1st Cir. 1993).
It also appears to be common ground that, under Rhode Island
law, a cause of action for negligence or negligent
misrepresentation exists if the Dovetech appraisal was
inaccurate, the inaccuracy stemmed from negligence, reliance
on the appraisal was justified, and the reliance proximately
-6-
resulted in injury.3 With this yardstick, we turn to the
evidence.
3Because plaintiffs' claims of negligence and negligent misrepresentation both allege negligent supply of false information, we will consider them as the same claim. See
Ralston Dry-Wall Co., Inc. v. United States Gypsum Co., 740
F. Supp. 926, 932 (D.R.I. 1990), aff'd, 926 F.2d 99 (1st Cir.
1991). The Rhode Island Supreme Court has not yet directly addressed a cause of action for negligent misrepresentation, Ostalkiewicz v. Guardian Alarm, 520 A.2d 563, 569 (R.I.
1987), but federal courts applying Rhode Island law have held that negligent misrepresentation is actionable. E.g., Banco
Totta e Acores v. Fleet Nat'l Bank, 768 F. Supp. 943, 946-47
(D.R.I. 1991); Ralston Dry-Wall Company, Inc., 740 F. Supp.
at 932.
-7-
A. Inaccuracy and Fault
The first two elements, inaccuracy in the appraisal and
negligence in its preparation, are closely related and need
to be considered together. In the abstract, an appraisal
could be inaccurate without fault, or it could be carelessly
prepared but correct in its conclusion. But in this case, as
in many, the issues overlap because if inaccuracy is shown,
the magnitude of the inaccuracy may be some evidence of
negligence. How strong the inference would be depends, as
usual, on the facts.
Here, plaintiffs' best case for error in the appraisal
and for negligence, stripped to its essentials, can be easily
summarized. First and most important, plaintiffs offered
evidence of a gross disparity between the appraisals of value
assigned by Dovetech to the Bevmar molds and dies in June
1989 and the value realized for the Bevmar molds and dies
about a year later. In the Dovetech appraisal, the molds and
dies were evaluated as follows:
AUCTION: $16,000 x 96 = $1,536,000 ORDERLY: $21,000 x 96 = $2,016,000 IN PLACE: $42,000 x 96 = $4,032,000
According to the appraisal, "auction" meant disposition "as
is" at an auction sale completed in a 30-40 day time frame;
"orderly" meant orderly liquidation over a maximum of six
months; and "in place" meant as part of an ongoing
enterprise.
-8-
When the 96 molds and dies were auctioned as a lot in
July 1990, the winning bid was $40,000 for the whole lot and
was made by Elcor Corporation, which had sold 96 molds and
dies to Bevmar in 1986. When its representative arrived to
collect the molds and dies, he found some to be in poor
condition and others to be incomplete, missing or claimed by
another company. Thus the plaintiffs' starting point was
their proof (subject to reservations yet to be discussed)
that molds and dies appraised at a minimum price of $1.5
million in 1989 had sold for less than 3 percent of the this
figure a year later.
There was far less of a disparity as to the machinery
and equipment; the minimum estimate provided by Dovetech was
around $676,000 and the auctions of these items returned
about $413,000. The district court, after evaluating the gap
between the appraisal and the realized price for the
machinery and equipment found no proof of material inaccuracy
at all. But the molds and dies represented about two-thirds
of the total value attributed by Dovetech to machinery,
equipment, molds and dies. A serious error in their
appraisal could by itself easily be an adequate basis for
finding the appraisal to be materially in error.
The disparity in the price predicted and the price
realized for the molds and dies is hardly conclusive. The
auction might not have been fair, although there is no
-9-
suggestion of that in this record. Or conditions might have
changed so materially that no negligence could be imputed
based on the disparity; in this instance, Crawford testified
briefly that market conditions had if anything improved. But
a very large and unexplained disparity offers a prima facie
case of error in the appraisal and at least some evidence of
negligence.
Whether the huge disparity here would be sufficient
evidence of negligence need not be decided, because there was
further evidence that cast an unfavorable light on the
appraisal. All of the Bevmar molds and dies were located at
Bevmar's California plant or at about eight other locations
where they were held by Bevmar subcontractors to make
products for Bevmar. Schneider testified that he visited
each of the nine locations in making his appraisal and then
consulted by telephone with subcontractors and others as to
what they would pay if the molds and dies were sold.
But Elcor's representative testified that after Elcor
won the bid a year later, he visited each of the nine
locations and found many of the items in poor condition, in
some cases even unusable. And a Bevmar employee testified
that Schneider had visited only three of the subcontractors
when doing his appraisal, had not even examined all the molds
and dies at these three stops, and had been told that some
items were missing. There was testimony that the molds and
-10-
dies were different and in different condition. Against this
background, a jury could have regarded Schneider's assignment
of a uniform figure to each of the 96 molds and dies (e.g.,
$16,000 apiece if auctioned) as highly suspicious and as
further evidence that Schneider had done a sloppy appraisal.
The deposition testimony of Schneider could also have
reinforced a jury's judgment that the appraisal was
negligent. His expert credentials were fairly thin but, far
worse, portions of his deposition transcript read to the jury
were littered with the entry "no response" when he was
pressed on the puzzling uniformity of figures and related
matters. There was no real evidence of fraud or of aiding
and abetting fraud, and we do not fault the trial court in
withdrawing this issue from the jury. Yet at least some of
the evidence that plaintiffs associate with fraud could have
further undermined the jury's confidence in Schneider's skill
and care.4
We think that the evidence recited would permit a
reasonable jury to conclude that Schneider's appraisal of the
molds and dies was erroneous in the sense that it was not a
4Schneider relied in appraising the machinery and equipment located on the East Coast on photographs sent to him by a Dovetech employee based in Massachusetts. He apparently knew that Marik was seeking a high appraisal figure. And he was associated, although the evidence was somewhat confused, with a possible proposal in September 1989 for Ross-Dove itself to offer $500,000 to Bevmar for all of the items in question, the same month in which he assured Crawford that the June 1989 appraisal was still valid.
-11-
responsible estimate of value and, further, to conclude that
its preparation was negligent. A jury might not so find, and
a strong defense case might make such findings less likely or
even impossible. Still, limiting ourselves to the evidence
as it stood at the close of plaintiffs' case, and resolving
inferences and issue of credibility in favor of the
plaintiffs, we think that a jury that found error and
negligence in the appraisal would not be irrational.
We turn now to the district court's discussion of the
molds and dies, a subject that the court fairly described as
difficult and to which it gave careful attention. The court
gave three reasons for disregarding the discrepancy between
appraisal and realized value. The first was that Schneider's
appraisal was based on the market value of the items as
functioning molds and dies whereas the molds and dies were
(in the district court's words) "apparently sold at auction
as scrap," some being operational and some not. This, said
the court, made a comparison between predicted and realized
price of the items a comparison of apples and oranges.
With respect, we think it might be more accurate to say
that Schneider appraised the molds and dies as apples but
they, or some of them, turned out to be oranges. It is not
clear what knowledge Elcor had of the molds and dies before
the auction. The molds and dies seem to have been advertised
for auction as operational, since pictures of the items they
-12-
could produce were offered. Having sold 96 molds and dies to
Bevmar in 1986, Elcor may have supposed that it already knew
what it was getting. At the same time, Elcor's bid was
certainly very low and may be open to the inference that
Elcor knew that many of the items were scrap or little more.
No doubt, as the district court assumed, it is implicit
in Schneider's estimate of $1.5 million that the molds and
dies would be bought for use, for $1.5 million is obviously
above scrap value.5 But by the same token it is also
implicit in the appraisal that they were capable of such use
and would normally be so employed, absent a major change in
market conditions or in the items themselves. Yet there is
no evidence that market conditions had changed by July 1990
or that the items themselves had unexpectedly deteriorated.
In sum, a jury could condemn Schneider for appraising the
molds and dies as useful when in fact they were largely
scrap.
Second, the district court observed that the buyer of
the molds and dies at the auction got only 20 to 40 of the
molds and dies. The court found these to be "a far cry" from
the 96 that were appraised by Dovetech, the more so because
the court said that the more valuable ones were excluded.
5Piletz, who appraised Bevmar's machinery and equipment in March 1989, offered an informed guess based on reproduction value--not an appraisal--that the molds and dies "might" sell for about $158,000 if sold as scrap and $634,000 if sold for continued use.
-13-
The court evidently believed that the discrepancy in
appraisal and price might have been explained by the fact
that Dovetech was appraising a more extensive and valuable
collection of molds and dies than the subset that was finally
bought by Elcor.
The evidence, however, permitted the jury to find that
Elcor bid on the list of 96 molds and dies without any
knowledge that some were missing or owned by others.6
Further, Crawford's testimony that Elcor had found only 20 to
40 dies is coupled with the statement that many were obsolete
and "[h]ad not been running for years." The jury could well
have thought that, whatever the number owned by Bevmar,
Schneider had no business appraising such items at an average
value apiece of $16,000 (auction) to $42,000 (in place).
Third, the district court held that because the
discrepancy reflected a difference between market value and
scrap value, plaintiffs were required to offer expert
evidence that Schneider had erred in adopting a market value
approach; absent such expert guidance, said the court, the
jury would be left to "speculate" on which approach was
correct. Rhode Island law, even assuming that it controls on
this issue, does not automatically require expert testimony
6The 96 molds and dies were advertised as a lot, and the Elcor testimony is open to the inference that its representative was surprised when the post-auction survey revealed fewer than had been promised.
-14-
to show negligence. Murphy v. United Steelworkers, 507 D.2d
1342, 1345-46 (R.I. 1986). But we agree that, if a choice
were required between competing concepts of value or
competing techniques of appraisal an expert might well be
required.7
Here, however, the evidence permitted the jury to assume
that Schneider's concept of market value was proper but to
conclude that he had negligently assigned excessive market
values to many of the molds and dies. And we conclude that
the jury was capable of appraising the plaintiffs' evidence
of disparity and fault on its own, although expert testimony
would surely have been prudent and helpful. There is nothing
recherche about the reasoning behind the inferences based on
the huge discrepancy between appraisal and proceeds, the
suspiciously uniform estimates, and Schneider's failure (if
the jury so found) to visit each of the sites and inspect the
molds.
B. Reliance and Causation
This brings us to the second element of the negligence
cause of action for which the district court found a failure
7Piletz' deposition suggests that he did believe that a different method of appraising molds and dies than the telephone survey used by Schneider was called for. It is very doubtful that Piletz' alternative approach was explained adequately to permit the jury to reject Schneider's method. But plaintiffs' far better case was that Schneider had used a permissible method but botched the job by failing to do any adequate inspection or make adequate inquiry.
-15-
of proof, namely, justifiable reliance. A bit of background
is required. The evidence suggested that there were
discrepancies, of several different kinds, between what
Dovetech appraised and what Bevmar actually owned. The
missing molds and dies and uncertainties about ownership of
others have already been mentioned. It also appears that
some of the machinery and equipment in the appraisal may have
belonged to a Rhode Island state entity but was counted in
the appraisal. The district court found a lack of
justifiable reliance because, it said, the plaintiffs were
not entitled to rely on the appraisal to establish that
Bevmar owned the items appraised. To the extent that the
items were not owned by Bevmar, naturally the security
interest in Bevmar's inventory of equipment, machinery, molds
and dies had a reduced value. Therefore, the court
concluded, "the evidence establishes as a matter of law that
there was no justifiable reliance on the appraisal to
establish the expected security interest in these assets."
Plaintiffs concede that the ownership of the items
appraised was not within the scope of the representations in
the appraisal. At most, the appraisal purported to appraise
property at Bevmar's facilities or, in the case of some molds
and dies, property Bevmar claimed to have lent to its
subcontractors. Thus it is true that plaintiffs would have
no case if their cause of action depended on showing that
-16-
they reasonably relied upon the appraisal to establish
Bevmar's title. It seems to us that plaintiffs' cause of
action, specifically the showing of reliance and injury, does
not depend on such a showing.
The problem is confused because plaintiffs in this case
have been somewhat fuzzy in their theory of damages. It is
often attractive for a plaintiff with evidence of wrongdoing
and evidence of loss to throw the evidence to the jury and
hope that the jury will make a causal connection. In this
case plaintiffs had available two different theories, and
there are hints of both in its pleadings and arguments. One
theory is that, but for the misappraisal, plaintiffs would
not have invested at all and would still have their $3.5
million; the other is that their security interest would have
been worth more if the appraisal had been accurate.
Plaintiffs offered their own testimony on the first
theory, namely, that they would not have made the initial
investment if they had known that the assets in question were
worth far less than the appraisal said.8 From this
standpoint, it does not matter whether some of the assets in
question belonged to Rhode Island or to Bevmar
8The testimony on this issue is not crystal clear but it was adequate for the jury to draw such a conclusion. And given the importance the Crawford group attached to the appraisal, evidenced by other facts (e.g., the inquiry to
Schneider and a separate inquiry into Ross-Dove's reputation), the conclusion is eminently plausible.
-17-
subcontractors. If plaintiffs' testimony is accepted, then
the mistaken appraisal "caused" the loss in the familiar "but
for" sense: but for the mistake, the loss would not have
occurred. (We defer for the moment questions of intervening
cause.) The validity of the security agreement simply does
not matter.
Its validity very much does matter on the second
possible theory of injury, namely, that the misrepresentation
caused loss insofar as it overstated the value of the
security interest, reducing plaintiffs' protection in the
event of bankruptcy. On this theory, any misestimate of
value would indeed be harmless as to those assets that were
misappraised but were not owned by Bevmar. Whether one
speaks of unjustified reliance or lack of causal connection,
plaintiffs' damage claims would be proportionately reduced.
Perhaps any damage recovery on this second theory might be
speculative on this record;9 but we need not decide the
point for there is nothing obviously wrong with the first
theory as a basis for getting to the jury.
Defendants on appeal offer a different argument as to
why Crawford's reliance on the appraisal could not be
justifiable reliance. They argue that the appraisal by its
9Arguably, it would be plaintiffs' responsibility to show which assets were owned by Bevmar and the extent to which, as to those assets, the appraisal figure exceeded the price received at auction. It is unclear whether the record permits such an allocation.
-18-
terms required the consent of Dovetech before it could be
distributed to third parties other than Marik and Bevmar and
that, at least implicitly, this caveat made reliance on it by
third party investors unreasonable. This view, if accepted,
would undercut both of plaintiffs' possible theories of
injury. It was not adopted by the district court as a basis
for the directed verdict.
There was evidence at trial that Dovetech knew that its
appraisal would be distributed to financing sources such as
plaintiffs. Crawford also testified that he told Schneider
that he (Crawford) and others were going to rely on the
appraisal in making their investment and Schneider reaffirmed
its validity. Piletz testified that appraisers know that
their work will be relied on by third parties. Thus a jury
might find that, even if the appraisal caveat is read as
defendants urge, Dovetech had waived its protection or had
treated the Crawford group as among those for whose benefit
the appraisal had been done.
Finally we turn to the district court's third and last
reason for its directed verdict, which can be described as
accepting an "intervening cause" defense. The district court
found that the lists of assets appraised by Dovetech did not
match the list of assets included in plaintiffs' security
agreement filing; that attorneys acting in some measure for
plaintiffs disbursed plaintiffs' money at the closing before
-19-
certain of plaintiffs' conditions were satisfied; and that
the bankruptcy trustee had challenged the validity of the
plaintiffs' security interest in the pending bankruptcy
proceedings (a challenge that has now apparently been
dropped).
The first and last of these "intervening causes" of
injury are irrelevant so far as the plaintiffs proceed on
their first theory of recovery: as already shown, that theory
does not depend on the validity of the security agreement at
all. The remaining "intervening cause" is the attorneys'
alleged failure to insist at the closing that other promised
third-party investments in Bevmar be committed and that
certain liens against its property be satisfied. The
district court's conclusion may rest on the assumption that,
if the client instructions had been followed, either the
initial $3 million would never have been paid over or, less
likely, the conditions if satisfied would have prevented the
failure of Bevmar.
There was some evidence of the attorneys' supposed
disregard of instructions, but very little about the
significance or consequences of such disregard. Rhode Island
law is not especially friendly to an intervening cause
defense, nor especially precise; and a jury instructed
-20-
according to the state's case law might have considerable
latitude.10 Measured against such language, we do not
think that the evidence presented as to counsel's alleged
mistake at the closing compelled a jury to decide that an
intervening cause was responsible for the plaintiffs' loss.
Whether in presenting their defense defendants could offer
more powerful evidence on this point is another matter.
III. CONCLUSION
To sum up, we agree with the district court that there
was insufficient evidence of fraud to submit that claim to a
jury. But in our view the jury did have sufficient evidence,
judged at the close of the plaintiffs' case, to find material
error in the appraisal and negligence in its preparation.
While plaintiffs may face hurdles on issues of justifiable
reliance, causation, and damages, we think for reasons
explained above that a directed verdict on those grounds
cannot be justified at this stage.
10Thus, "an intervening act will not insulate a defendant from liability if his negligence was a concurring proximate cause which had not been rendered remote by reason of the secondary cause which intervened." Roberts v.
Kettelle, 356 A.2d 207, 215 (R.I. 1976). The first negligent
act will be rendered remote if "a second actor has become aware of the existence of a potential danger caused by the negligence of a first actor and the second actor acts negligently with regard to the dangerous condition, thereby bringing about an accident with injurious consequences to others." Walsh v. Israel Couture Post, No. 2274 V.F.W., 542
A.2d 1094, 1096-97 (R.I. 1988). Further, "an intervening act of negligence will not insulate an original tortfeasor if it appears that such intervening act is a natural and probable consequence of the initial tortfeasor's act." Id. at 1097.
-21-
On remand this case should be settled, if humanly
possible. The discrepancy between the appraisal value and
the amount ultimately realized for molds and dies, coupled
with the doubts raised about the appraisal's thoroughness,
ought to make the defense quite uneasy about fault. On the
other hand, the defense may be able in its own case to do a
better job of explaining the discrepancy between the
appraisal and auction price of the 96 molds and dies
appraised by Schneider. How a jury will dispose of the
intervening cause defense is anyone's guess. And even if a
jury makes an award, the award can be appealed.
The parties now have a pretty fair gauge of the
respective strengths and weaknesses of their positions.
Money spent on further litigation is a loss to both sides
regardless of the outcome, since most litigation expenses are
not recoverable. Full reconstruction of the events in this
case for a jury is likely to be especially expensive. We
think counsel would not be serving the interests of their
clients if they failed to make an earnest effort to settle
this case.
The judgment of the district court is affirmed insofar
as it granted judgment as a matter of law on the claims of
fraud and aiding and abetting and is vacated with respect to
the negligence claims. The case is remanded for further
proceedings. No costs.
-22-