Opinion ID: 199312
Heading Depth: 5
Heading Rank: 2

Heading: Obsolescence

Text: 65 Seven of Invest Almaz's allegations of concealment relate to the obsolescence issue. According to Invest Almaz, Temple-Inland improperly failed to reveal that the plant was not capable of manufacturing OSB above cost in the current or foreseeable market; the plant was economically and functionally obsolete; the plant was closed because it lost money; the plant was one of the oldest OSB lines in America; the plant was characterized by Temple-Inland's CEO as economically not viable; the prior owner of the plant had gone bankrupt; and Temple-Inland knew as early as 1990 that the plant would never make money. 66 We have some doubt as to whether all seven of these allegations were seriously advanced below or are meaningfully pressed on appeal. Nor do we think that Invest Almaz's evidence supports the full breadth of these allegations. However, we find evidence in the record from which a reasonable jury could infer the truth of what we take to be the core of these allegations: that Temple-Inland's Claremont plant was old and, at least in its current location and configuration, unable to make a profit; 27 that its unprofitability was due in part to long-term changes in the regulatory regime and market in which it operated, including competition from newer, larger OSB plants able to operate with lower costs; and that Temple-Inland closed the plant because it was losing money. 67 Invest Almaz also introduced evidence generally tending to show that information of this kind was not revealed to Pathex or Invest Almaz by Temple-Inland. 28 However, on this point Invest Almaz's position was contradicted in part by an admission by Vladimir Semkin. In his videotaped deposition, Semkin testified that he was told by Earl Taylor that the plant was closed because it was loss-making and could not make a profit, a fact that Taylor allegedly attributed to increases in the price of obtaining timber. In addition, the record indicates that Taylor in fact told the Russian engineers that the plant began operation in 1981. 29 68 To establish the materiality of the concealed information, Invest Almaz introduced videotaped testimony of president Zapevalov. Zapevalov's testimony with respect to the materiality of the plant's alleged obsolescence, however, was not particularly helpful to Invest Almaz, as the following colloquy indicates: 69 Q: Were you ever told that production costs at the plant had exceeded the market price for the product? 70 A. No, I was never been told [sic] that. 71 Q: And when your representatives visited the plant in October 1993 were they told that? 72 A: No, they were not told that, but you have to bear in mind that the production cost in the United States can differ from that in Russia, but nevertheless nobody told us about the production price and the fair market value of the product. 73 Q: If you had been informed of those facts, would it have made a difference to you? 74 A: For us the most important is the production cost in Russian conditions, not in the United States, because we paid [sic] differently for electricity, for everything which comprises the production cost. 75 Zapevalov Dep. p. 50-51(emphasis added). No other testimony was introduced directly bearing on the materiality of the plant's obsolescence to Invest Almaz, although there was witness testimony and documentary evidence concerning the performance expectations Invest Almaz had for the rebuilt, relocated plant. 76 For the reasons discussed with respect to Invest Almaz's value claims, we do not think that Temple-Inland was under any general duty to disclose the information regarding obsolescence that Invest Almaz claims was concealed. It is apparent from Invest Almaz's allegations, and, indeed, conceded in Invest Almaz's brief, that the term obsolescence is meant to refer only to the alleged inability of the equipment to produce OSB profitably, not to any defects affecting its operation. See Pl's. Br. at 48 (The equipment was not obsolete in the sense that it did not work; it was obsolete in the sense that it was economically inefficient and could not make OSB at a competitive price.). Furthermore, as Invest Almaz's evidence regarding obsolescence indicates, the unprofitability of the plant was the result of circumstances -- such as increased energy and pollution control costs and the development of larger, more cost-effective plants -- external to the equipment itself. Invest Almaz has identified no precedent, and we are aware of none, obligating a seller as a general matter to reveal this kind of information, which appears relevant primarily to the suitability of the equipment for purposes and under conditions about which Invest Almaz plainly had superior knowledge. Such a duty seems particularly inappropriate here, where it was understood that the equipment would be put into operation only after extensive modification. 77 Invest Almaz has a stronger case that a limited duty of disclosure arose as a result of Taylor's alleged comments to the effect that high timber costs made the plant unprofitable. As noted above, the evidence at trial pointed to several other reasons why the plant could not make money. Given this, Taylor's statements could be construed as a partial disclosure requiring further clarification concerning the reasons why the plant closed. See, e.g., Dawe v. Am. Univ. Ins. Co., 417 A.2d 2, 4 (N.H. 1980) ([P]artial disclosure may give rise to a duty to fully disclose when the partial disclosure, standing alone, is deceptive.). 78 Ultimately, however, we do not think that this line of argument could have succeeded. First, it is not clear that Invest Almaz actually contends on appeal that Temple-Inland's duty to disclose obsolescence arose in this way. 30 Instead, Invest Almaz appears to rely on the same general grounds already considered and rejected as creating any duty of disclosure with respect to the value allegations. We consider it telling that Invest Almaz introduced no evidence in its affirmative case indicating that the information Taylor gave was actually false, that Taylor intended to mislead the Russian representatives by his statement, or that anyone else at Temple-Inland knew what Taylor told Invest Almaz. 31 79 In addition, we do not believe that a reasonable jury could find on this record clear and convincing evidence that the information Temple-Inland arguably came under a duty to disclose was material to Invest Almaz. As Zepavalov's deposition testimony plainly states, Invest Almaz's concern was with the ability of the equipment to operate profitably in its new location. Yet none of the reasons for the plant's unprofitability introduced as part of Invest Almaz's case are ultimately germane to that question. Zepavalov specifically acknowledges that the costs of production, which were the primary reasons for the plant's unprofitability in the United States, would be completely different in Russia. It is also far from self-evident that, in Russia, the plant would be directly competing with the same kinds of higher-volume facilities apparently dominating the North American market. 32 Invest Almaz introduced no evidence suggesting that parallels could be drawn between Russian and North American conditions, nor did it introduce any other evidence from which it could be inferred that the equipment could not be operated at a profit in Russia, or that it could not be rebuilt to meet the standards called for in the joint- venture agreement. Absent such evidence, we think any argument that the improperly concealed information was material to Invest Almaz would rest on sheer speculation. 80 For the foregoing reasons, we think judgment as a matter of law was appropriately granted with respect to the obsolescence allegations. 81