Court Opinion

ID: 9741215
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:51:42.5625+00
Date Added: 2024-06-11T07:24:22.918693
License: Public Domain

White, C.J.,
concurring.
I agree with the result reached by the majority; however, since the record clearly establishes that only one inference could have been drawn based on the evidence produced at trial, i.e., that the trial court should not have submitted the issue of proximate cause to the jury, I write separately.
The majority holds that “whether Coopers & Lybrand’s incorrect auditing practices caused World Radio financial harm damage was a factual question for the jury” and that “the trial court correctly submitted the issue of proximate cause to the jury.”
The majority relies on testimony that World Radio (WR) believed its financial status was sound (although both the chief executive officer and the chief financial officer knew of the missing payable and of the strange method used to account for that payable) and on WR’s assertion that it would have corrected the problems with its internal controls had it known of those problems. The majority also relies on “other testimony ... that Coopers & Lybrand’s failure to detect the weaknesses in [WR’s] internal accounting controls caused an irreparable decrease in [WR’s] profits and value.”
The conclusion is not justified by the evidence and is at best hopeful. An examination of the record reveals that WR, as a *286business, recovered from the effects of any negligence attributable to Coopers & Lybrand (C&L). The majority opinion disregards this evidence. Although WR was unwilling to pay its new auditors the additional costs involved in constructing full financial statements for 1985, WR’s creditors and other vendors continued to do business with WR. Its bank increased WR’s credit line once the financial statements were reconstructed. WR continued to expand its business, opening seven new stores in 1986 and 1987 and reaching several new markets. In 1986 and 1987, WR posted pretax earnings of over $1 million, with gross sales exceeding $40 million in 1987. Significantly, WR’s equity increased by over $2 million in 1986, just 1 year after the discovery of the defect in the financial statements.
Additionally, the evidence clearly shows that many factors other than C&L’s actions resulted in WR’s bankruptcy. After dismissing C&L in 1985, WR made significant changes in its management team, hiring a new chief financial officer and other personnel. WR’s new vice president of merchandising, Malcolm Ballinger, implemented significant changes in WR’s operations — he pushed for the liquidation of old, outdated inventory, reduced prices, increased sales commissions, introduced an entirely new product line in the form of extended warranty contracts, changed WR’s product mix from 10 percent video and 90 percent audio to 46 percent video and 54 percent audio, and created and staffed a new inventory control board that allowed WR to operate at lower inventory levels while still achieving desired sales and profit margins. In 1986, WR began to experience significant competition in several of its markets. WR also stated during its bankruptcy proceedings that a structured buyout of all of Larry Meyerson’s stock in 1988 rendered WR insolvent.
All of these changes occurred during the interim between the termination of C&L and WR’s eventual bankruptcy. By WR’s own admission, these were the factors that led to its demise. In a management memorandum dated March 29, 1988, nearly 3 years after WR dismissed C&L for failing to discover the payable, Luke Northwall and Ballinger blamed WR’s financial problems on market conditions: “[WR’s loss in fiscal 1988] can *287be directly attributed to operating in unprofitable markets, excessive compensation for selected employees, and disagreements over strategic plans for the future. . . . The Company is a viable entity if certain markets are closed.”
Although the question of proximate cause is ordinarily a determination for the jury, when, upon the evidence produced, only one inference can be drawn, it is for the court to decide whether a given act or series of acts is the proximate cause of the injury. Starlin v. Burlington Northern, Inc., 193 Neb. 619, 228 N.W.2d 597 (1975). An injury that could not have been foreseen or reasonably anticipated as a probable result of the negligence is not actionable, nor is an injury that is not a natural consequence of the negligence complained of, and would not have resulted from it but for the interposition of some new, independent cause that could not have been anticipated. Turek v. St. Elizabeth Comm. Health Ctr., 241 Neb. 467, 488 N.W.2d 567 (1992).
Upon the evidence produced at trial, only one inference could have been drawn — WR rebounded from any impact caused by the inaccuracies in its financial statements to generate record profits in 1986 and 1987 and to expand its business over the next several years. Five years later, WR simply fell prey to the highly competitive market in which it operated.
Fahrnbruch, J., joins in this concurrence.