Court Opinion

ID: 2962155
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:53:31.951548+00
Date Added: 2024-06-11T11:42:26.395194
License: Public Domain

USCA1 Opinion

	

          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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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                              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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -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-                                         -22-