Invest Almaz v. Temple-Inland Forest Products Corp.

United States Court of Appeals
For the First Circuit

No. 00-1340

INVEST ALMAZ,

Plaintiff, Appellant,

v.

TEMPLE-INLAND FOREST PRODUCTS CORPORATION,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. James R. Muirhead, U.S. Magistrate Judge]

Before

Boudin, Circuit Judge,
Bownes, Senior Circuit Judge,
and Stahl, Circuit Judge.

Mark H. Alcott, with whom John F. Baughman and Paul, Weiss,
Rifkind, Wharton & Garrison, were on brief, for appellant.
Russell F. Hilliard, with whom Charles W. Grau and Upton,
Sanders & Smith, were on brief, for appellees.

March 16, 2001
 STAHL, Circuit Judge. Plaintiff-appellant Invest Almaz

appeals from adverse rulings of the district court regarding

claims arising out of a failed attempt to purchase manufacturing

equipment from defendant-appellee Temple-Inland Forest Products

Corporation (“Temple-Inland”). Invest Almaz contends that the

district court abused its discretion by failing to order

restitution of funds retained by Temple-Inland after the deal

collapsed and by erroneously granting Temple-Inland's motion for

judgment as a matter of law on Invest Almaz's fraud claims.

Invest Almaz also contends that the jury was not properly

instructed on a claim that, in the course of these events,

Temple-Inland aided and abetted Invest Almaz's joint venture

partner, Pathex International Ltd. (“Pathex”), in breaching its

fiduciary duty to Invest Almaz. We affirm.

I.

Invest Almaz, a subsidiary of a Russian company engaged

in diamond mining, was formed for the purpose of investing the

pensions and savings of the parent company's employees. In

early 1993, Invest Almaz became interested in developing a plant

to manufacture oriented strand board (“OSB”), a wood and wafer

resin board used as a construction material. Invest Almaz's

intent was to build housing for the parent company's retired

employees and also to sell OSB for needed hard currency in the

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export market. After considering the possibility of building a

new plant for this purpose, Invest Almaz came to the conclusion

that it would be more cost-effective to purchase the equipment

from an existing plant in North America and have it transported

back to Russia.

With this in mind, Invest Almaz entered into

discussions with Pathex,1 a Canadian corporation with expertise

in the field, regarding the formation of a joint venture to

effectuate these plans. Under the arrangement contemplated by

the parties, Pathex would select and procure suitable equipment

from an existing plant, transport it to Russia, reconstruct and

upgrade the equipment once transported, and maintain it

thereafter. Invest Almaz would provide the capital, as well as

the land, labor and materials in Russia. During these

negotiations, Pathex allegedly represented that acquiring

suitable OSB manufacturing equipment would cost more than $17

million.2

1 Some of Pathex's actions with respect to these events
were undertaken through subsidiaries. For simplicity, we refer
to these entities collectively as “Pathex” unless otherwise
identified.
2 There is some dispute as to what this estimate was
understood to include. Invest Almaz contends that Pathex quoted
a purchase price of $17.25 million. Temple-Inland argues that
the price was understood to cover purchase, disassembly and
renovation of the equipment with only $8 million allocated to
the purchase price. We do not consider the difference

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 Unbeknownst to Invest Almaz, Pathex was at this time

already engaged in negotiating an option to purchase a

Claremont, New Hampshire OSB plant from Temple-Inland (a

Delaware corporation) for $5 million. The plant was complete

and operational, although it had been closed since 1988 because

it could not compete with newer plants in the North American

market. The option was structured to allow Pathex access to the

plant and the site prior to deciding whether to go forward with

the transaction. In addition, the option gave Pathex the choice

of purchasing the entire facility, including real estate,3 or

only the equipment and buildings.4 Although the option agreement

was finalized on August 5, 1993 -- before the joint-venture

agreement between Invest Almaz and Pathex was signed -- its

contents were never disclosed to Invest Almaz.

In late September 1993, representatives from Invest

Almaz traveled to Canada to finalize the joint-venture agreement

particularly germane to our analysis, especially as either
estimate exceeded the price Pathex actually expected to pay.
3 While only the equipment was of interest to Invest
Almaz, Pathex was willing to consider taking the real estate --
at no additional cost -- for possible resale. This issue was
left open in the option agreement because of questions
concerning the value of the real estate and the extent of
environmental contamination at the site.
4 The option required Pathex to purchase the buildings
because removal of the equipment would, in at least some
instances, require the buildings to be dismantled.

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with Pathex. Pathex arranged with Temple-Inland for Invest

Almaz's representatives to tour the Claremont OSB plant during

their stay, and Vladimir Semkin and Viktor Tikhov, both

engineers employed by Invest Almaz, were shown the facility by

Temple-Inland employee Earl Taylor. Semkin and Tikhov were

given written information about the plant and afforded

considerable opportunity to inspect the plant's equipment and

ask questions of Taylor, although Invest Almaz later came to

believe that the information it obtained about the equipment was

not entirely accurate, candid or complete.

Invest Almaz formally entered into the joint-venture

agreement with Pathex on October 4, 1993. The agreement

detailed the respective obligations of Invest Almaz and Pathex,

requiring Invest Almaz to contribute in excess of $21 million in

“investments and services” to the overall project and Pathex to

contribute a little less than half that amount, all in services.

The agreement also established a schedule for Invest Almaz's

payments. Although the agreement did not specifically identify

Temple-Inland’s facility as the source of the equipment that

would be purchased by the joint venture, Invest Almaz's

officials testified that they understood this to be the case,

and there is no evidence in the record that any other facility

was under consideration at the time.

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 While the final negotiations with Invest Almaz were

taking place, Pathex exercised its right under the option

agreement to inspect the Claremont plant, making a number of

visits with its own personnel, commissioning a professional

appraisal of the plant and requesting two assessments from an

environmental consultant, Aries Engineering (“Aries”). The

appraisal, received by Pathex in December 1993, revealed, among

other things, that the property and buildings were assessed for

tax purposes at $1.6 million. The environmental assessments,

received in March and May 1994, indicated that, while in

operation and subsequent to its closure, the plant had run afoul

of environmental regulations, including those governing

wastewater discharges and hazardous materials storage. The

Aries report noted the presence of lead and other potentially

hazardous substances in site soils and sediments, petroleum-

related contamination in the groundwater, and contaminant stains

on cement at various locations in the facility. Invest Almaz

never received copies of any of these documents from Pathex, nor

was it informed of the information they contained.

In March 1994, Pathex, through a subsidiary, exercised

its option to purchase the equipment at the Claremont plant.

Because of the environmental problems identified by Aries,

Pathex decided not to acquire the real estate. The Asset

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Purchase Agreement Pathex and Temple-Inland executed provided

for $2 million to be paid at the closing and the remaining $3

million to be remitted in the form of a non-recourse promissory

note,5 payable in three installments. The parties also executed

a Security Agreement, giving Temple-Inland a security interest

in the equipment. Invest Almaz was not informed by Pathex of

the terms of the Asset Purchase Agreement or the Security

Agreement.

Invest Almaz almost immediately failed to meet the

schedule of payments laid out in the joint-venture agreement,6

although it did eventually transfer over $6 million to Pathex

pursuant to that agreement. Of this amount, Pathex paid

approximately $2.3 million to Temple-Inland and used the

5 Although the promissory note indicates that there is
no recourse to Pathex, this provision is inconsistent with
language in the accompanying Security Agreement, which provides
that, in the event of default and foreclosure, Pathex would
remain liable for any deficiency (and also could recover any
surplus). Because the promissory note specifically states that,
if there is a default, “Payee [Pathex] shall look to the
security interests referenced in the . . . security agreement .
. . for satisfaction of payment of any amounts due”, we think it
likely that the Security Agreement language would control.
However, resolution of this anomaly is not ultimately necessary
to our analysis.
6 The first two installments required by the agreement
were $7.22 million in November 1993 and $5.5 million in February
1994. The record indicates that Invest Almaz's first payment
was made in February 1994 and was for only $1.3 million. A
second payment of $3.5 million was made in March 1994 and two
smaller payments were made in the fall of 1994.

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remainder for other purposes. 7 The bulk of the funds paid to

Temple-Inland went towards the $2 million down payment required

by the Asset Purchase Agreement. Subsequently, and in part as

a result of Invest Almaz's inability to make its own payments to

the joint venture, Pathex failed to make the three installments

required by the Agreement. After negotiating a series of

extensions with Temple-Inland -- and paying Temple-Inland a

further $300,000 in delinquency payments -- Pathex defaulted on

the debt.8

The Security Agreement gave Temple-Inland the right to

foreclose on the equipment to satisfy the debt in the event of

a default by Pathex. The Agreement also specified that, in the

event of foreclosure, Temple-Inland would have to account to

Pathex for any surplus resulting from the sale, while Pathex

would be responsible for any deficiency. Temple-Inland chose

not to foreclose, however. Instead, Temple-Inland and Pathex

7 Approximately $1.5 million of the Invest Almaz payments
were diverted, at Invest Almaz’s request, to a third party,
Burnell Limited, for purposes which are the subject of dispute.
The record does not detail the disposition of the remainder,
although Charles Kosa, former President of Pathex, testified
that what was not paid to Temple-Inland pursuant to the Asset
Purchase Agreement was used to defray other costs associated
with inspecting and purchasing the plant and implementing the
joint-venture agreement.
8 The final extension negotiated between Pathex and
Temple-Inland ran out on December 2, 1994.

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negotiated a “Mutual Release and Cancellation of Debt” (the

“Mutual Release”). Under the Mutual Release, Pathex's $3 million

debt was cancelled, and Temple-Inland regained title to the

purchased assets. Temple-Inland also was allowed to retain the

$2.3 million in payments already made by Pathex. In addition,

each party gave up any claims it might have had against the

other arising out of the Asset Purchase Agreement and associated

documents. The Mutual Release was executed by Pathex on

December 13, 1994. Although Invest Almaz was informed at the

time that Pathex was “terminating” the project, Invest Almaz was

not involved in the discussions concerning the Mutual Release

and was never informed of its terms.

In late 1996, attorneys representing Invest Almaz

contacted Pathex in an effort to determine what had become of

the funds Invest Almaz contributed to the joint venture.

Shortly thereafter, however, Pathex filed for bankruptcy.

Invest Almaz commenced the present action against Temple-Inland

in August 1997, filing a complaint that initially included only

an unjust enrichment count. The complaint was amended in

October 1997 to include an allegation that Temple-Inland had

aided and abetted Pathex in breaching a fiduciary duty to Invest

Almaz. Nearly two years later, in June 1999, Invest Almaz was

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allowed to amend its complaint once again, this time to add a

fraudulent concealment count.

The fraud and aiding and abetting claims were tried to

a jury while the unjust enrichment count was tried to the court.

The trial took place in December 1999, before Magistrate Judge

James Muirhead.9 At the end of plaintiff’s case, Temple-Inland

moved for judgment as a matter of law on the fraud and aiding

and abetting claims. Invest Almaz, in its response, sought

recognition that its fraud count also encompassed a theory that

Temple-Inland made affirmative misstatements to Invest Almaz.

Magistrate Judge Muirhead refused Invest Almaz's request to

include an affirmative fraud count in the case and granted

Temple-Inland's motion for judgment as a matter of law on the

existing fraudulent concealment count. The magistrate judge

denied Temple-Inland's motion with respect to the aiding and

abetting count and that count went to the jury. The jury

subsequently found in favor of Temple-Inland.

On February 8, 2000, the magistrate judge issued a

Memorandum and Order denying Invest Almaz's unjust enrichment

claim. The same day, final judgment was entered, incorporating

9 Magistrate Judge Muirhead exercised jurisdiction over
the case by consent of the parties, pursuant to 28 U.S.C. §
636(c).

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the magistrate judge's orders and the jury's verdict. This

appeal followed.

II.

On appeal, Invest Almaz challenges the magistrate

judge's rulings with respect to the unjust enrichment and fraud

claims and his instructions to the jury with respect to the

aiding and abetting claim. For the reasons set forth below, we

affirm the judgment of the district court in all respects.

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A. Unjust Enrichment

It is undisputed that when the dust settled on Invest

Almaz's failed attempt to purchase the Claremont plant, Temple-

Inland held title to the plant and also retained the

approximately $2.3 million in payments it had received from

Pathex. The question on appeal is whether, under the

circumstances, the magistrate judge erred in concluding that

Temple-Inland was not unjustly enriched by this outcome.10

In New Hampshire common law, “[t]he doctrine of unjust

enrichment is that one shall not be allowed to profit or enrich

himself at the expense of another contrary to equity.” Cohen v.

Frank Developers, Inc., 389 A.2d 933, 938 (N.H. 1978). A

defendant is unjustly enriched, and a plaintiff is entitled to

10 The body of this opinion analyzes in detail Invest
Almaz's restitution arguments under New Hampshire common law
principles. However, Invest Almaz's brief also presses a second
claim for restitution premised on section 201(1) of the
Restatement (Second) of Restitution. Section 201(1) provides
that “[w]here a fiduciary in violation of his duty to the
beneficiary transfers property or causes property to be
transferred to a third person, the third person, if he gave no
value or if he had notice of the violation of duty, holds the
property upon a constructive trust for the beneficiary.”
The magistrate judge rejected this claim on the alternative
grounds that: (1) it was not clear that a New Hampshire court
would adopt the principle contained in section 201(1); and (2)
Invest Almaz had failed to prove that Temple-Inland either had
notice of Pathex's wrongdoing or failed to provide value.
Finding nothing in Invest Almaz's conclusory arguments on appeal
sufficient to disturb the magistrate judge's ruling with respect
to this theory of recovery, we affirm the magistrate judge's
conclusion for the reasons set forth in his opinion.

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restitution, when the court determines that the defendant has

“received a benefit and it would be unconscionable for the

defendant to retain that benefit.” Nat'l Employment Serv. Corp.

v. Olsten Staffing Serv., Inc., 761 A.2d 401, 406 (N.H. 2000).

Of relevance in this case, a plaintiff in an unjust enrichment

case need not prove that the defendant obtained the benefit

through wrongful acts; passive acceptance of a benefit may also

constitute unjust enrichment. R. Zoppo Co. v. City of

Manchester, 453 A.2d 1311, 1313 (N.H. 1982); see also Petrie-

Clemons v. Butterfield, 441 A.2d 1167, 1172 (N.H. 1982) (“Unjust

enrichment may exist when an individual receives a benefit as a

result of his wrongful acts, or when he innocently receives a

benefit and passively accepts it.”). Nor does unjust enrichment

require a contractual relationship between the plaintiff and

defendant. Presby v. Bethlehem Vill. Dist., 416 A.2d 1382, 1383

(N.H. 1980). However, more than a moral claim for reimbursement

is required for restitution to be justified. Cohen, 389 A.2d at

937. Instead, “[t]here must be some specific legal principle or

situation which equity has established or recognized to bring a

case within the scope of the doctrine.” Id. Finally, in

determining the extent to which a defendant may have been

unjustly enriched, “the focus is not upon the cost to the

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plaintiff, but rather it is upon the value of what was actually

received by the defendants.” R. Zoppo Co., 453 A.2d at 1314.

The magistrate judge found that, because Invest Almaz

was the source of the $2.3 million paid to Temple-Inland by

Pathex, Invest Almaz had conferred a “benefit” on Temple-Inland.

However, he concluded that equity did not entitle Invest Almaz to

restitution for two reasons. First, he found that Temple-Inland

either provided value for or was otherwise legally entitled to

retain all of the $2.3 million it received from Pathex. One

million dollars of this amount represented option payments

($700,000) made prior to the sale11 or delinquency payments

($300,000) made after the closing to avoid a default on the

promissory note. The magistrate judge found that Temple-Inland

gave full value for these amounts, by keeping the plant off the

market during the option period and by agreeing to extend the

payment schedule after the sale, and was not required to return

them. A further $320,000 was not subject to restitution because

it defrayed a payment Temple-Inland was required to make to

11 Pathex paid $150,000 for the initial option with the
right to extend for four more months for $100,000 per month.
Temple Inland ultimately allowed Pathex to extend the option
still further for another $150,000, resulting in a total of
$700,000 in option payments being made to Temple-Inland.
Pursuant to the option agreement's terms, that amount was
credited towards the $2 million down payment required by the
Asset Purchase Agreement.

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General Electric (“GE”) if the equipment was removed from the

plant, as Invest Almaz's plans required.12 With respect to the

remaining $980,000, the magistrate judge relied on the principle

that a payor typically cannot recover in restitution from a payee

who accepts a payment in satisfaction of a third party’s debt --

even if it turns out the payor made the payment by mistake. See

United States v. Bedford Assocs., 713 F.2d 895, 904 (2d Cir.

1983) (holding that restitution is not available against a

defendant “where the defendant has received the payment in good

faith and used it in satisfaction of the debt of a third person

to the defendant”); Equilease Corp. v. Hentz, 634 F.2d 850, 853

(5th Cir. 1981) (“It is patently unfair to require an innocent

payee who has received and used the money to satisfy a debt to

repay the money.”). See generally Greenwald v. Chase Manhattan

Mortgage Corp., No. 00-1447, ___ F.3d ___, slip op. at 7-10 (1st

Cir. March 2, 2001) (analyzing and applying this principle in a

case involving Massachusetts law). Because Temple-Inland

12 This payment was made pursuant to a tax benefit
transfer agreement executed in 1981 by GE and the prior owner of
the facility. The agreement provided GE with certain tax
benefits if the equipment remained in use at the plant for
fifteen years. When Temple-Inland sold the equipment to Pathex
for removal to Russia, GE incurred a tax liability in the amount
of $320,000 that Temple-Inland was required to reimburse. The
magistrate judge found this expense chargeable against Invest
Almaz because it would not have been incurred if Temple-Inland
had sold the plant to a buyer that did not intend to remove the
equipment.

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innocently received the money as partial payment on Pathex's

debt, the magistrate judge reasoned, Temple-Inland was entitled

to keep it.

In the alternative, the magistrate judge held that

Invest Almaz's restitution claim failed because Invest Almaz had

introduced no evidence demonstrating that Temple-Inland was

unfairly advantaged by the outcome resulting from the Mutual

Release. Invest Almaz could have met its burden, the magistrate

judge suggested, with evidence establishing that a sale of the

secured assets (the equipment) would have yielded an amount

larger than the $3 million Pathex still owed on the promissory

note. Under the Security Agreement and New Hampshire law, any

such excess would have been returned to Pathex and potentially

could have been recovered by Invest Almaz. However, the court

found that Invest Almaz had “failed to present any evidence that

the equipment could have been sold at auction for an amount

greater than the . . . debt owed by Pathex.” In the absence of

such evidence, it was “neither unreasonable nor unconscionable to

allow Temple Inland to retain both the collateral and the funds

[Pathex] paid . . . .”

Familiar standards govern our review of the magistrate

judge's conclusions. The factual findings underlying the

magistrate judge's determination are reviewed for clear error.

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Fed. R. Civ. P. 52. By contrast, the magistrate judge's

“articulation and application of legal principles is scrutinized

de novo.” Texas P.R., Inc. v. Dept. of Consumer Aff., 60 F.3d

867, 874 (1st Cir. 1995). As a corollary of the latter

principle, findings of fact “predicated upon, or induced by,

errors of law . . . will be accorded diminished respect on

appeal.” Dedham Water Co. v. Cumberland Farms Dairy, Inc., 972

F.2d 453, 457 (1st Cir. 1992). Finally, to the extent that the

ultimate decision in a restitution case rests on a judgment

regarding the equities of the case, rather than application of an

established rule of restitution,13 that exercise of judgment is

reviewed only for abuse of discretion, reflecting our view that

the finder of fact “who has had first-hand exposure to the

litigants and the evidence is in a considerably better position

to bring the scales into balance than an appellate tribunal.”

Texas P.R., 60 F.3d at 875 (quoting Rosario-Torres v. Hernandez-

Colon, 889 F.2d 314, 323 (1st Cir. 1989)); see also Pella Windows

& Doors, Inc. v. Faraci, 580 A.2d 732, 733 (N.H. 1990) (“Unless

13 We have recently noted that, although “[t]he origins
of unjust enrichment actions largely lie in equity,” many
restitution decisions involve the application of restitution
“rules,” such as those articulated in the Restatement of
Restitution (1936), rather than purely equitable judgments as to
the fair or just result. Greenwald, slip op. at 12. To the
extent that a decision relies upon the “articulation and
application” of such rules, a less deferential standard of
review is arguably appropriate. See Texas P.R., 60 F.3d at 874.

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it is unsupported by the record, we generally defer to the trial

court's determination as to whether the facts and equities of a

particular case warrant [restititution].”).

Bearing in mind the foregoing, we conclude that Invest

Almaz has not demonstrated that the magistrate judge abused his

discretion in ruling for Temple-Inland on the unjust enrichment

claim. Invest Almaz’s argument that the magistrate judge

improperly analyzed the value Temple-Inland provided and costs it

incurred is largely conclusory and, with one exception, wholly

without merit.14 With respect to the $1 million in option and

delinquency payments made by Pathex, Invest Almaz states only

that there is “no evidence that Temple-Inland gave up a thing” in

exchange for these funds. This assertion is directly at odds

with the magistrate judge's finding that Temple-Inland did

provide the bargained-for consideration, in the first instance by

keeping the plant off the market for the agreed period of time15

14 In its preface to the arguments analyzed in the body
of this opinion, Invest Almaz contends that the court should not
have even attempted an independent analysis of costs incurred
and value provided because an internal memorandum from Temple-
Inland's financial officer showed a “profit” on the transaction
of $1,478,156. This is frivolous. As Temple-Inland correctly
notes, such internal calculations of cash flow are not
equivalent to a legal analysis of the benefits and burdens
resulting from a transaction.
15 Invest Almaz makes much of the fact that no other
purchasers appeared during the option period. However, Invest
Almaz cites no precedent, in New Hampshire or elsewhere,

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and in the second by extending the deadline for Pathex to make

payments under the Asset Purchase Agreement. Invest Almaz does

not suggest that the magistrate judge was wrong in finding that

Temple-Inland fulfilled its obligations under the two agreements.

Nor does Invest Almaz point to any evidence indicating, for

example, that the amount paid by Pathex for the option was

grossly unfair. Under the circumstances, we see no reason to

conclude that the magistrate judge erred in finding that Temple-

Inland “gave full value” for the $1 million received under the

option agreement or the subsequent extension payments.

So too, Invest Almaz provides no convincing reason for

us to conclude that the magistrate judge erred in allowing

Temple-Inland to retain a further $320,000 because of the payment

made to GE. Invest Almaz's sole argument is that the magistrate

judge improperly credited the testimony of George Vorpahl,

Temple-Inland's general counsel, who stated that the payment

would not have been required if the equipment were sold to most

other buyers, over that of Stacey Cooke, a financial analyst at

Temple-Inland, who stated that the payment would have been

required no matter who purchased the property. Had the

magistrate judge relied on the proper testimony, Invest Almaz

supporting its argument that Temple-Inland therefore failed to
“give value” in exchange for the payments.

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contends, he would have concluded that the payment was not

attributable to this particular sale and therefore could not be

offset against the payments Temple-Inland received. We are not

inclined to second-guess the magistrate judge's reasoned

conclusions concerning the credibility of competing testimony,

especially as Invest Almaz gives us no reason to believe that the

magistrate judge's decision was in fact incorrect.

With respect to the remaining $980,000 paid to Temple-

Inland, Invest Almaz first suggests that New Hampshire law does

not recognize the principle that a payor cannot recover in

restitution from a payee who accepts a payment in satisfaction of

the debt of a third party. Invest Almaz is incorrect. See

Winslow v. Anderson, 102 A. 310, 312 (N.H. 1917) (holding that,

where plaintiff mistakenly overpaid the creditor of a third

party, and the amount of the overpayment was innocently accepted

by the creditor as payment for additional debts owed by the third

party, equity would not require creditor to refund the amount of

the overpayment; plaintiff's only cause of action was against the

third party, who benefitted from the mistake).

Invest Almaz’s second and more compelling contention is

that the factual circumstances of this case counsel against

application of the foregoing rule to offset the $980,000 payment.

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Invest Almaz correctly notes that there is no indication in the

cases cited by the magistrate judge that the innocent

creditor/defendant ultimately received more than the third-party

debtor owed. The same appears to be true of Winslow. As a

result, the possibility of the defendant enjoying a double

recovery was not presented in these cases; the only issue before

each court was whether the plaintiff could get his money back

from the innocent defendant who was actually paid or had to

pursue the (unintentionally benefitted) third-party debtor

instead. By contrast, Temple-Inland ultimately received money

from Invest Almaz (via Pathex) and the facility from Pathex. To

the extent that this resulted in Temple-Inland recovering more

than the amount it was owed by Pathex, Invest Almaz argues, these

cases do not preclude Invest Almaz from obtaining restitution.

Invest Almaz's argument has a certain logic and is not

without precedential support. See Strubbe v. Sonnenschein, 299

F.2d 185, 192 (2d Cir. 1962) (holding, as an exception to the

general rule, that restitution is justified to the extent that a

payment to a third party's creditor “exceed[s] the amount due

[the creditor] from [the third party]”); see also Bedford Assoc.,

713 F.2d at 904 (distinguishing a case in which the creditor

ultimately received less than the total amount it was owed from

situation posed by Strubbe). However, accepting arguendo that

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Invest Almaz is correct, we think it evident that winning this

point does not conclusively resolve the issue in Invest Almaz's

favor. If Invest Almaz can potentially recover the excess

Temple-Inland received over Pathex's debt, the question becomes

whether, as a factual matter, Temple-Inland actually has

recovered more than it was properly owed by retaining the plant

plus the $980,000. The magistrate judge, in his alternative

holding, concluded that this had not been established. As a

result, all Invest Almaz’s argument accomplishes is to make the

third part of the magistrate judge’s offset analysis contingent

on his assessment of whether Temple-Inland recovered more than

was equitable as a result of the Mutual Release. Accordingly, we

turn to that question.

Invest Almaz raises two challenges to the magistrate

judge's analysis of the outcome of the Mutual Release. First,

Invest Almaz argues that, by requiring Invest Almaz to offer

proof that the value of the plant at auction would exceed the $3

million remaining on the promissory note, the magistrate judge

“introduced an element that simply is not part of a claim of

unjust enrichment, and then assigned Invest Almaz the burden of

proof on that element.” Invest Almaz offers no support for this

position and we find it unpersuasive. In order to establish that

Temple-Inland was unjustly enriched, Invest Almaz plainly had the

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burden of proving the extent to which Temple-Inland was

benefitted by the transaction in question. See, e.g., Moore v.

Knight Founds., Inc., 444 A.2d 546, 547 (N.H. 1982). We see no

error in the magistrate judge's methodology, which used the

amount that could be realized in a foreclosure sale as the

benchmark of the value of the plant at the time Pathex defaulted.

To the contrary, that approach is substantially in accord with

other cases using the market value of property to measure the

extent to which a party may have been unjustly enriched. See

Petrie-Clemons, 441 A.2d at 1172 (holding that, where plaintiffs

sought restitution for improvements made to premises leased from

defendants, the “appropriate basis for determining the amount of

the defendant's benefit is the difference between the market

value of the realty before and after the improvements”); see also

Moore, 444 A.2d at 547 (reversing restitution award to plaintiff

for improvements made to house prior to purchase where “plaintiff

presented no evidence as to any increase in the fair market value

of the real estate . . .”). The magistrate judge's approach also

strikes us as reasonable in light of the terms of the Security

Agreement, which specified that Temple-Inland could retake and

sell the collateral in the event of a default and apply the net

proceeds (after deducting the costs of the sale) towards the

amount due on the note. Under this provision, there would have

-24-
been no question of a surplus arising unless the net proceeds of

a foreclosure sale, after costs, exceeded the remaining

indebtedness.16

Indeed, the magistrate judge's approach could be

considered generous to Invest Almaz's case, because it assigns no

value to what Pathex and, indirectly, Invest Almaz, gained by

avoiding foreclosure. Under the Security Agreement, if the

amount realized at auction had been less than the $3 million

remaining on the note, Pathex could have been liable for the

deficiency. Agreeing to the Mutual Release avoided the

possibility of such a deficiency being assessed against Pathex.

Invest Almaz's second argument on this point is that

the magistrate judge improperly failed to consider the evidence

it did present concerning the value of the plant's assets at the

time of the default. Invest Almaz's evidence showed that, in May

1996, Temple-Inland entered into an agreement to sell the

Claremont plant for $5 million to another buyer, Ced-Or, Inc.

(“Ced-Or”). The transaction ultimately fell through, for reasons

the parties do not explain. At trial, Invest Almaz offered this

16 As the magistrate judge noted, this would also be the
result under the applicable provisions of the New Hampshire
Uniform Commercial Code. See N.H. Rev. Stat. Ann. § 382-A:9-504
(discussing secured party's right to dispose of collateral after
default and the order in which the proceeds of disposition are
to be applied).

-25-
evidence in support of its contention that the value of the plant

was approximately $5 million in December 1994, when Pathex

defaulted. The magistrate judge ruled the evidence inadmissible,

suggesting that significant changes in the economic climate

during the intervening period, of which he took judicial notice,

rendered the later transaction irrelevant to the value of the

plant at the earlier time.17

On appeal, Invest Almaz contends that the magistrate

judge improperly “chose to rely on personal and anecdotal

experience outside the record” in making his ruling on the

evidence. According to Invest Almaz, whether prices were

depressed in 1994, and whether the economy had begun to improve

17 With respect to the economic conditions at the time of
the default the magistrate judge stated:

In 1995, when every big bank in this state had gone
down the tubes, when people -- when the real estate
price, when all other prices in this state were
incredibly depressed, a fact of which I cannot but
take judicial notice because I lived here during that
time -- and in fact I practiced commercial litigation
during that time and had enough lender liability cases
to fill file drawers and tried those cases. You know
it's smoke and mirrors to say you would have sold that
equipment for $3 million.

Shortly thereafter, when Invest Almaz's counsel pressed the Ced-
Or agreement, the magistrate judge added:

What somebody is willing to pay a year or two later in
an economic climate which had hit the bottom and was
on its way up is not evidence of what somebody would
have paid at a foreclosure sale in 1995.

-26-
by 1996, are questions “subject to reasonable dispute,” and

therefore not proper subjects of judicial notice under Fed. R.

Evid. 201. See Fed. R. Evid. 201(b) (“A judicially noticed fact

must be one not subject to reasonable dispute in that it is

either (1) generally known within the territorial jurisdiction of

the trial court or (2) capable of accurate and ready

determination by resort to sources whose accuracy cannot

reasonably be questioned.”); see also Coalition for the Pres. of

Am. Brake Drum & Rotor Aftermarket Mfrs. v. United States, 15 F.

Supp. 2d 918, 928 (Ct. Int'l Trade 1998) (refusing, pursuant to

Fed. R. Evid. 201, to take judicial notice of the fact that the

economy grew and light auto sales increased in 1996). As a

result, Invest Almaz argues, the magistrate judge's reliance on

this information as a basis for rejecting the Ced-Or evidence

constituted an abuse of discretion. See United States v.

Pitrone, 115 F.3d 1, 7 (1st Cir. 1997) (stating that decisions

regarding admissibility of evidence are reviewed for abuse of

discretion); see also United States v. Roberts, 978 F.2d 17, 21

(1st Cir. 1992) (noting that an abuse of discretion may be found

“when a relevant factor . . . is overlooked, or when an improper

factor is accorded significant weight . . .”).

We find Invest Almaz's argument unavailing. To begin

with, we are not convinced that the magistrate judge had any

-27-
obligation to meet the judicial notice requirements of Fed. R.

Evid. 201 under the circumstances presented here. As Fed. R.

Evid. 104(a) and 1101(d)(1) make clear, Fed. R. Evid. 201

typically does not apply to facts considered by a court when

ruling on the admissibility of evidence. See Fed. R. Evid.

104(a) (stating that, when deciding “[p]reliminary questions

concerning . . . the admissibility of evidence[,] . . . [the

court] is not bound by the rules of evidence except those with

respect to privileges”); Fed. R. Evid. 1101(d)(1) (stating that

the Federal Rules of Evidence, except with respect to privileges,

are “inapplicable . . . [to] [t]he determination of questions of

fact preliminary to admissibility of evidence when the issue is

to be determined by the court under Rule 104"); see also 21

Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice

and Procedure § 5103, at 479 (1977) (“Where the judge is taking

judicial notice of a fact for the purpose of ruling on the

admissibility of evidence, he may do so without regard to Rule

201.”). Nor do we consider Invest Almaz's summary argument that

the state of the New Hampshire economy is “subject to reasonable

dispute” persuasive as to whether the requirements of Fed. R.

Evid. 201(b), even if applicable, were violated in this instance.

However, we need not reach the judicial notice issue,

as we conclude that the magistrate judge's finding that value had

-28-
not been established is supportable even if the magistrate judge

erred in considering the state of the New Hampshire economy. The

fact that the Ced-Or transaction occurred nearly eighteen months

later would undercut its probative value in any event, as would

the fact that the Ced-Or deal ultimately fell apart. We find in

the record no corroborative evidence, such as expert testimony,

supporting Invest Almaz's contention that the Ced-Or price of May

1996 was a good indicator of the plant's value in December 1994.

Absent such evidence, we think the magistrate judge reasonably

could have concluded that the mere fact of the Ced-Or transaction

was inadequate to establish the value of the plant.

Having accepted the magistrate judge's conclusion that

Invest Almaz did not establish that the plant's value exceeded

the $3 million owed on the promissory note, Invest Almaz's

restitution claim fails under either prong of his analysis.

Absent proof that Temple-Inland recovered more than it was owed,

Invest Almaz's argument that it is entitled to recover the last

$980,000 of the amount paid by Pathex evaporates, for reasons

already discussed. Given our agreement with the remainder of the

magistrate judge's analysis of value given and costs incurred by

Temple-Inland, there is no “enrichment” left on which an unjust

enrichment claim could be premised. In addition, Invest Almaz's

failure to introduce adequate evidence regarding the value of the

-29-
plant precludes its restitution claim on a more fundamental

level: without adequate evidence of the value left in Temple-

Inland's hands at the end of the day, there is no proof that

Temple-Inland experienced a net benefit even if the magistrate

judge's various offsets were disregarded. Affirmance is

justified on either ground.

B. Fraud

On appeal, Invest Almaz challenges both the magistrate

judge's denial of its belated motion to add an affirmative fraud

count to its complaint and the magistrate judge's ruling granting

Temple-Inland judgment as a matter of law on its fraudulent

concealment count. We treat each in turn.

-30-
 1. Refusal to Allow Invest Almaz to Add Affirmative
Fraud Count

As previously noted, Invest Almaz did not assert its

affirmative misrepresentation claims until very late in the

proceedings. No allegations of affirmative fraud were included

in Invest Almaz's second amended complaint, nor was this theory

of the case identified in Invest Almaz's proposed jury

instructions, final pretrial statement, or opening argument at

trial. Even when Invest Almaz finally asserted the claims at the

close of plaintiff's evidence, it did not do so directly.

Instead, Invest Almaz incorporated the claims into its opposition

to Temple-Inland's motion for judgment as a matter of law,

accusing Temple-Inland of “misreading Invest Almaz's theory of

the case” by “ignoring” the affirmative misrepresentation claims.

At the hearing on its motion, Temple-Inland commented

that the claims had never been pleaded, even though, under the

Rules, they needed to be pleaded “with some specificity.”

Temple-Inland did not, however, expressly contend that the

inclusion of the claims would be prejudicial. Invest Almaz, for

its part, did not dispute that the claims were being raised for

the first time. However, it argued that all it was requesting

was amendment of the pleadings to conform to the evidence already

introduced. Invest Almaz contended that doing so would not

-31-
prejudice Temple-Inland because the affirmative fraud claims

largely tracked the concealment claims.

At the conclusion of the hearing, the magistrate judge

denied Invest Almaz's request to add the affirmative fraud claims

to the case, holding that their last minute inclusion would be

prejudicial to Temple-Inland “in view of the very special fraud

pleading requirements of [Fed. R. Civ. P.] Rule 9.” The

magistrate judge did not refer to specific evidence of prejudice,

other than the “untimeliness” of the effort to amend. 18 On

appeal, Invest Almaz argues that it should have been allowed to

amend its pleadings to include the affirmative fraud count, in

view of the liberal policies governing amendments to conform

pleadings to the evidence contained in Fed. R. Civ. P. 15(b) and

the magistrate judge's failure to cite evidence that Temple-

Inland would be prejudiced by the amendment. Temple-Inland

responds that Invest Almaz failed to move to amend its pleadings

below, thus waiving this argument, or, in the alternative, that

Temple-Inland is entitled to judgment as a matter of law on the

merits of the affirmative fraud claims.

18 The magistrate judge also stated that, in his view,
omitting the claims would not prejudice Invest Almaz, because
the alleged affirmative misstatements could equally be construed
as actionable partial disclosures.

-32-
 As a threshold matter, we find Temple-Inland’s argument

that Invest Almaz failed to preserve the issue of amendment of

its pleadings unpersuasive. Although Invest Almaz chose to

broach its affirmative fraud claims for the first time in its

opposition to Temple-Inland's motion, Invest Almaz’s counsel

clearly indicated at the hearing that it wished to amend the

pleadings if the magistrate judge thought it necessary. In

addition, the magistrate judge himself framed his decision as a

denial of Invest Almaz’s request for leave to amend. Invest

Almaz’s appeal of the denial of leave to amend is therefore

properly before us.19

We turn to the merits of Invest Almaz's argument guided

by the following principles. “While leave to amend shall be

freely given when justice so requires . . . the liberal amendment

19 Although it does not change our conclusion, we note
that Invest Almaz’s characterization of what the magistrate
judge did is not, strictly speaking, correct. Invest Almaz
plainly believes it requested -- and was improperly denied --
leave to amend its pleadings to conform with the evidence
pursuant to Fed. R. Civ. P. 15(b). However, Rule 15(b) applies
under only two circumstances: when an issue not contained in the
pleadings is tried by consent (express or implied) of the
parties, or when a party objects to evidence as outside the
pleadings and the court exercises its discretionary right to
allow amendment. Neither circumstance is present here,
indicating that the magistrate judge's decision actually was
rendered pursuant to Fed. R. Civ. P. 15(a). Because the
arguments made by Invest Almaz are also relevant in the context
of Fed. R. Civ. P. 15(a), this error is not fatal to Invest
Almaz's appeal on this issue.

-33-
policy prescribed by Rule 15(a) does not mean that leave will be

granted in all cases.” Acosta-Mestre v. Hilton Int'l of P.R.,

Inc., 156 F.3d 49, 51 (1st Cir. 1998) (internal citations and

quotation marks omitted). “Among the adequate reasons for

denying leave to amend are 'undue delay' in filing the motion and

'undue prejudice to the opposing party' by virtue of allowance of

the motion.” Id. (quoting Foman v. Davis, 371 U.S. 178, 182

(1962)). Furthermore, “when considerable time has elapsed

between the filing of the complaint and the motion to amend, the

movant has the burden of showing some valid reason for his

neglect and delay.” Acosta-Mestre, 156 F.3d at 52 (quoting

Stepanischen v. Merchs. Despatch Transp. Corp., 722 F.2d 922, 933

(1st Cir. 1983)) (internal quotation marks omitted). We also

note that, in reviewing a decision denying leave to amend, we

accord significant deference to the decisionmaker below. Denial

of leave to amend is reviewed only for abuse of discretion, and

we will affirm the decision below “if any adequate reason for the

denial is apparent on the record.” Acosta-Mestre, 156 F.3d at 51

(quoting Grant v. News Group Boston, Inc., 55 F.3d 1, 5 (1st Cir.

1995)).

We find that the magistrate judge's refusal to allow

amendment withstands Invest Almaz's challenge. We concede that

the magistrate judge's finding of prejudice could have been

-34-
accompanied by a clearer explanation of its grounds than was

given.20 Nonetheless, we think the record adequate to sustain the

magistrate judge's conclusion. The fact that the theory

underlying the affirmative fraud counts had yet to be more than

obliquely mentioned, moments before Temple-Inland was scheduled

to begin presenting its case, certainly supports an inference of

prejudice to Temple-Inland's defense. The inference seems

particularly strong here, given that some of Temple-Inland's

testimony -- including the important testimony of Charles Kosa,

former president of Pathex and Temple-Inland's first witness --

was to be presented via videotaped deposition. Under the

circumstances, Temple-Inland had a limited ability to adapt its

defense on short order to counter Invest Almaz's new claims.

In addition, there is nothing in the record suggesting

that Invest Almaz met its burden of showing a “valid reason for

[its] neglect and delay” in proposing the amendment. Acosta-

20 Indeed, it is possible to read the transcript to
suggest that, because of the pleading requirements for fraud
claims imposed by Fed. R. Civ. P. 9, the magistrate judge simply
presumed that prejudice to Temple-Inland would result from
Invest Almaz's late inclusion of such claims. We do not believe
that any court has used Rule 9 to raise the Rule 15(a) bar in
this way and we are not inclined to do so now. Cf. 6 Charles
Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
and Procedure § 1300 & n.1 (2d ed. 1990) (stating that “[a]n
insufficient allegation of fraud or mistake is subject to the
liberal amendment provisions of Rule 15" and citing numerous
cases allowing amendments to cure insufficient fraud pleadings).

-35-
Mestre, 156 F.3d at 52. To the contrary, Invest Almaz's counsel

admitted at the hearing on Temple-Inland's motion that the

affirmative fraud claims were raised at this late stage simply

because it hadn't occurred to Invest Almaz to add them earlier.

As we recently said, “[w]hat the plaintiff knew or should have

known and what he did or should have done are relevant to the

question of whether justice requires leave to amend under this

discretionary provision.” Leonard v. Parry, 219 F.3d 25, 30 (1st

Cir. 2000). Such considerations counsel against amendment here.

2. Judgment as a Matter of Law on Fraudulent
Concealment Count

Invest Almaz's second amended complaint alleged that

Temple-Inland fraudulently failed to disclose a substantial

number of material facts regarding the plant. The alleged

omissions fell into three broad categories: omissions regarding

the monetary value of the plant (dubbed by the magistrate judge

the “value” claims); omissions regarding alleged obsolescence of

the plant's equipment (the “obsolescence” claims); and omissions

regarding environmental problems at the plant (the

“environmental” claims). Consistent with the elements of

fraudulent concealment, Invest Almaz alleged, with respect to

each omission: that the information was material; that Temple-

Inland intentionally concealed the information despite having a

duty to disclose it; that Invest Almaz reasonably relied upon the

-36-
omissions; and that Invest Almaz was damaged as a result. See

MAC Fin. Plan of Nashua, Inc. v. Stone, 214 A.2d 878, 880 (N.H.

1965) (summarizing the elements of fraudulent concealment); see

also Batchelder v. Northern Fire Lites, Inc., 630 F. Supp. 1115,

1118 (D.N.H. 1986) (discussing, in a case applying New Hampshire

law, the requirement that there be a duty to disclose and citing

cases).

At the close of Invest Almaz's case, Temple-Inland

moved for judgment as a matter of law with respect to all of

Invest Almaz's fraud claims. Following a hearing, the magistrate

judge granted the motion, concluding, for each category of

allegations, that Invest Almaz had failed to introduce evidence

sufficient to establish that Temple-Inland had intentionally

concealed the information in question:

[W]ith regard to the environmental claims
there were -- the evidence is that there were
substantial negotiations as to who is to be
responsible for what. That in fact Pathex
was given and ultimately Invest Almaz was
given unfettered access to the plant and to
the property with the full ability to
observe, to test. The fact that Aries [the
environmental consultant hired by Pathex] was
late with regard to its test was because they
didn't get in and do the test before the snow
fell and they themselves asked for an
extension; in other words, there was no
intentional concealment.

With regard to obsolescence, no reasonable
jury could determine that there was an
intentional concealment of the obsolescence

-37-
 where in fact there was a full right by
Pathex, which was in the equipment business,
to thoroughly inspect, nor even with respect
to Invest Almaz, where Invest Almaz sent two
engineers to inspect the equipment.

With regard to the value issue, there is no
evidence from which a reasonable jury could
determine that there was an intentional
concealment of value, particularly with
respect to all of the allegations of value,
vis-a-vis the Town of Claremont, the court
takes judicial notice of the fact that all of
those documents were public documents on
record in the Town of Claremont Tax
Assessor's office open to everyone in the
public. They were specifically referenced in
Exhibit Y [the appraisal prepared for Pathex
in December 1993]. And in fact there was no
evidence that the defendant ever represented
any value to Pathex or to Invest Almaz. They
simply negotiated a sales price.

On appeal, Invest Almaz argues, unsurprisingly, that it

introduced sufficient evidence with respect to each element of

fraudulent concealment, and each category of omission, that a

reasonable jury could have found in its favor; therefore, the

magistrate judge erred in granting judgment as a matter of law

for Temple-Inland. In addition, Invest Almaz argues that the

magistrate judge's analysis must be rejected because it proceeds

from a legal error: the magistrate judge assumed, for purposes of

his analysis, that any knowledge obtained from Temple-Inland by

Pathex was chargeable to Invest Almaz. Invest Almaz contends

that it is not chargeable with such knowledge under New Hampshire

agency law because Pathex was a “faithless agent.” Temple-

-38-
Inland, in turn, argues that Invest Almaz's faithless-agent

defense does not apply to this case and that the magistrate judge

was correct in concluding that no reasonable jury could find in

Invest Almaz's favor on the fraud claims. Because the

applicability of the faithless-agent defense is critical to our

review of the evidence, we address it first.

a. Invest Almaz's Faithless-Agent Defense

Invest Almaz’s argument that a principal is not

chargeable with knowledge obtained by a “faithless agent” relies

on Boucouvalas v. John Hancock Mut. Life Ins. Co., 5 A.2d 721

(N.H. 1939). In Boucouvalas, the defendant insurer sought to be

relieved of its obligations under a life insurance policy

procured through the fraud of its agent. The agent, in

completing paperwork for an illiterate applicant, had

deliberately omitted information the applicant provided

concerning a serious illness. When the applicant died shortly

thereafter from the same illness, the insurer argued that it was

not chargeable with knowledge of the plaintiff's illness and

therefore not bound by the policy.

The New Hampshire Supreme Court ruled for the

defendant, reversing an earlier decision, Domocaris v. Ins. Co.,

123 A. 220 (N.H. 1923), which had held that an insurer was

chargeable with knowledge of a deceitful agent. In its decision,

-39-
the Boucouvalas court cited back to pre-Domocaris precedent

holding that “the principal is not charged with the knowledge of

his agent when the latter is engaged in committing an

independent, fraudulent act on his own account, and the facts to

be imputed relate to this fraudulent act.” Brookhouse v. Union

Publ'g Co., 62 A. 219, 222 (N.H. 1905); see also Warren v. Hayes,

68 A. 193, 194 (N.H. 1907) (“The test, therefore, to determine

whether an agent's knowledge is to be imputed to his principal is

to inquire whether or not the agent was acting for the principal

when he did that in respect to which is sought to charge the

principal with his knowledge.”). The court acknowledged that

there was no evidence of wrongdoing by the applicant, but

nonetheless concluded that he (or, in this case, his beneficiary)

was entitled to no more than a refund of premiums paid. See

Boucouvalas, 5 A.2d at 724.

Although Boucouvalas has never been overruled, and has

been followed on at least one occasion, see LeClerc v. Prudential

Ins. Co. of Am., 39 A.2d 763 (N.H. 1944), we harbor some doubt

concerning its vitality and applicability to this case. In the

majority of jurisdictions, the law has evolved towards a

recognition that information given to even a fraudulent agent

should normally be imputed to the principal, unless the third

party providing the information has notice that the agent is

-40-
acting adversely or otherwise colludes with the faithless agent.

See B. H. Glenn, Insured's Responsibility for False Answers

Inserted by Insurer's Agent in Application Following Correct

Answers by Insured, or Incorrect Answers Suggested by Agent, 26

A.L.R.3d 6, 33-45 (1969 & Supp. 2000) (showing state courts to be

virtually unanimous in holding that knowledge of an insurance

agent will be imputed to insurer, despite fraud of agent, unless

the applicant has notice of the fraud); see also Restatement

(Second) of Agency § 282, cmt. d (adopting the same position as

a general principle of agency law). While the New Hampshire

Supreme Court has not yet formally adopted this view, it has

expressed clear misgivings about Boucouvalas. See Mut. Benefit

Life Ins. v. Gruette, 529 A.2d 870, 872-73 (N.H. 1987) (conceding

that the Boucouvalas rule “acts harshly as to [those] who fall

prey to devious agents” and noting public policy reasons

supporting its reversal, but concluding that factual

circumstances of the case -- including evidence of collusion

between the applicant and agent -- “[did] not furnish an

appropriate basis for returning to the rule of Domocaris”); see

also Perkins v. John Hancock Mut. Life Ins. Co., 128 A.2d 207,

208 (N.H. 1956) (questioning whether, in light of Boucouvalas,

New Hampshire insurance law “permits the issuance of a policy to

bind the insurer to the extent that reasonable person in the

-41-
position of the insured would understand that it did” but

concluding that the problem was more properly resolved by the

legislature); Taylor v. Metro. Life Ins. Co., 214 A.2d 109, 113

(N.H. 1965) (same). It also appears that Boucouvalas has been

limited to its facts by the New Hampshire Supreme Court: although

the pre-Domocaris cases to which Boucouvalas refers involved a

range of factual circumstances, we find no subsequent case

applying the rule except in the context of duplicitous insurance

agents.

Nonetheless, given our obligation in diversity cases to

“determine the rule that the state Supreme Court would probably

follow,” Moores v. Greenberg, 834 F.2d 1105, 1107 n.3 (1st Cir.

1987) (internal punctuation marks omitted), we find these doubts

to be insufficient grounds for ruling that Boucouvalas is either

invalid or inapplicable. The New Hampshire Supreme Court has not

seen fit to overrule Boucouvalas, and we cannot reasonably assume

that it would do so now, if it faced the issue directly. In

addition, we find support for Boucouvalas' holding and its

applicability to the present facts in New Hampshire's Uniform

Partnership Act (“UPA”), which states, in pertinent part:

Notice to any partner of any matter relating
to partnership affairs, and the knowledge of
the partner acting in the particular matter,
acquired while a partner . . . operates as
notice to or knowledge of the partnership,
except in the case of a fraud on the

-42-
 partnership committed by or with the consent
of that partner.

N.H. Rev. Stat. Ann. § 304-A:12 (emphasis added). 21 The New

Hampshire Supreme Court looks to state partnership law in

deciding cases involving joint ventures. Miami Subs Corp. v.

Murray Family Trust, 703 A.2d 1366, 1370 (N.H. 1997). Although

this provision of the UPA has not been given an authoritative

reading by the New Hampshire Supreme Court, we find its plain

language sufficiently persuasive to outweigh our doubts

concerning the applicability of the rule of Boucouvalas.

Having accepted that Invest Almaz's “faithless agent”

defense is available as a matter of New Hampshire law, we still

must determine whether there is sufficient evidence that Pathex

was engaged in a fraud against Invest Almaz to justify its

application here. Unlike Invest Almaz, we do not consider the

issue free from dispute. While the Pathex former president,

Charles Kosa, admitted that information regarding the plant was

not conveyed to Invest Almaz, Kosa suggested that this occurred

21 In its brief, Temple-Inland points us to a second
provision of the UPA which could be read to take a different
view. This provision states in substance that each partner will
be considered an agent of the partnership whose acts bind the
partnership, unless the partner lacks authority for the act in
question “and the person with whom [the partner] is dealing has
knowledge of the fact that he has no authority.” N.H. Rev.
Stat. Ann. § 304-A:9. We think it clear that section 304-A:12,
which specifically concerns the imputation of knowledge to a
partnership, governs here.

-43-
because Pathex believed the joint venture agreement assigned it

primary responsibility for selecting, purchasing and preparing a

suitable plant. Nonetheless, we think enough evidence was

introduced to permit a reasonable jury to find that Pathex

intentionally withheld the information as part of an effort to

conceal from Invest Almaz the condition and value of the

facility. Therefore, for purposes of Temple-Inland's motion for

judgment as a matter of law, Invest Almaz should not have been

charged with knowledge of information that was never revealed to

it by Pathex.

b. Judgment as a Matter of Law

Although we find that Invest Almaz was entitled to the

benefit of its faithless-agent defense for purposes of the Fed.

R. Civ. P. 50(a) motion, this result is not conclusive on the

question of whether Temple-Inland was entitled to judgment as a

matter of law. As we read it, the magistrate judge’s ruling

rested on two distinct grounds: first, that Temple-Inland's

grants of access to Pathex and/or Invest Almaz to inspect and

conduct tests negate any reasonable inference of fraudulent

intent; and, second, that the availability of certain information

to Pathex or Invest Almaz negates the inference that there was

-44-
ultimately any concealment. 22 Invest Almaz's faithless-agent

defense plainly weakens the second rationale, but it does not

affect the first. Nor are we limited to upholding the magistrate

judge's conclusion only for the reasons actually invoked in his

ruling. E.g., Hodgens v. Gen. Dynamics Corp., 144 F.3d 151, 172

(1st Cir. 1998) (noting, in the summary judgment context, that

this court “[w]ill affirm a correct result reached by the court

below on any independently sufficient ground made manifest by the

record”); Acushnet Co. v. Mohasco Corp., 191 F.3d 69, 80 (1st

Cir. 1999) (applying the same rule in reviewing a grant of

judgment as a matter of law). We therefore proceed to the merits

of Temple-Inland's Rule 50(a) motion.

We review a grant of judgment as a matter of law de

novo, “under the same standards as the district court.” Katz v.

City Metal Co., 87 F.3d 26, 28 (1st Cir. 1996). In so doing, we

“examine the evidence and all fair inferences in the light most

favorable to the plaintiff and may not consider the credibility

of witnesses, resolve conflicts in testimony, or evaluate the

22 While the language of the magistrate judge's ruling
suggests that he viewed this evidence as undercutting
“concealment,” our reading of New Hampshire precedent suggests
that it might more properly be viewed as undermining Invest
Almaz's ability to claim justifiable reliance. Cf. Cross v.
Lake, 441 A.2d 1179, 1180 (N.H. 1982) (holding that a buyer's
knowledge of the “true state of affairs” precluded the buyer
from claiming that he relied on seller's misrepresentations
concerning the acreage of a property offered for sale).

-45-
weight of the evidence.” Id. (quoting Richmond Steel, Inc. v.

P.R. Am. Ins. Co., 954 F.2d 19, 22 (1st Cir. 1992)) (internal

punctuation marks omitted). At the same time, it remains the

responsibility of the party with the burden of proof to present

“more than a mere scintilla” of evidence in its favor; and to do

more than “rely on conjecture or speculation” in support of its

position. Katz, 87 F.3d at 28. To the contrary, “[t]he evidence

offered must make the existence of the fact to be inferred more

probable than its nonexistence.” Id. (quoting Resare v. Raytheon

Co., 981 F.2d 32, 34 (1st Cir. 1992)). We also bear in mind the

plaintiff's burden of proof at trial. See Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 252 (1986) (“[T]he inquiry involved in

a ruling on a motion for summary judgment or for a directed

verdict necessarily implicates the substantive evidentiary

standard of proof that would apply at the trial on the merits.”).

New Hampshire common law provides that fraud must be proved by

“clear and convincing proof” and “will not be implied from

doubtful circumstances.” Sheris v. Thompson, 295 A.2d 268, 271

(N.H. 1971); accord Snow v. Am. Morgan Horse Ass'n, Inc., 686

A.2d 1168, 1170 (N.H. 1997). Ultimately, we will affirm the

magistrate judge's ruling if we find that “as a matter of law,

the record would permit a reasonable jury to reach only one

conclusion as to that issue.” Katz, 87 F.3d at 28.

-46-
 Because our analysis differs with respect to each

category of allegedly concealed information, we treat them

separately, employing, for simplicity, the magistrate judge's

labels.

i. Value

Invest Almaz's complaint alleges that Temple-Inland

fraudulently concealed three specific facts regarding the plant's

value: the “book value” of the Claremont OSB plant (carried in

Temple-Inland's internal records as $2.4 million); the fair

market value of the plant (calculated by Temple-Inland for tax

assessment purposes as $1.6 million); and the “fact” that Temple-

Inland could not have realized $5 million on a sale of the

equipment at auction.

We think that the trial record provided an adequate basis from

which a reasonable jury could have concluded that the alleged

“facts” were true and known to Temple-Inland, were not disclosed

by Temple-Inland to either Pathex23 or Invest Almaz, and were

material to Invest Almaz. However, we find that Invest Almaz has

presented no legally sufficient grounds for concluding that

23 Pathex eventually learned at least the market value
through its independent appraisal, a fact on which the
magistrate judge apparently relied in determining that there was
no concealment. However, there is no evidence that Pathex
passed the information up to Invest Almaz and, because of our
conclusion on the agency issue, we do not charge Invest Almaz
with this knowledge.

-47-
Temple-Inland was under any duty to reveal the information in

question.

In New Hampshire, as elsewhere, liability for

fraudulent concealment does not arise in the absence of a duty of

disclosure. Batchelder, 630 F. Supp. at 1118 (“[F]or a failure

to disclose to be actionable fraud, there must be a duty arising

from the relation of the parties to so disclose.”); Benoit v.

Perkins, 104 A. 254, 256 (N.H. 1918) (“[T]he fraudulent

concealment of known facts with intent to mislead, and which in

fact does mislead, . . . does not constitute actionable fraud,

unless there be some obligation which the law recognizes to

disclose the facts concealed.”); see also Restatement (Second) of

Torts § 551(1). Invest Almaz does not dispute this, but instead

argues that, under the circumstances of this case, Temple-Inland

acquired such a duty. Invest Almaz's first rationale is that

Temple-Inland’s invitation to representatives of the Russian

company to tour the plant, accompanied by the offer to answer

“any questions,” by itself gave rise to an obligation fully to

disclose information regarding the condition and value of the

plant. However, Invest Almaz provides no support for this

curious contention. Nor are we aware of any cases suggesting

that, simply by inviting a prospective purchaser to tour a

-48-
property, a seller assumes an obligation to volunteer its own

views as to the property's value.

Invest Almaz's second contention is that Temple-Inland

made “partial disclosures” concerning value which gave rise to a

duty of full disclosure. Of the examples of such statements

offered, only one merits discussion.24 At trial, Invest Almaz

played a videotaped deposition of Invest Almaz's president, Yurij

Zepavalov. Zepavalov testified that Viktor Tikhov – one of the

Invest Almaz engineers who toured the plant -- told Zepavalov

that he had asked tour guide Earl Taylor about the price of the

plant, but Taylor provided “no response” and, instead, “evaded

the question.” Although plainly hearsay, this statement

apparently entered the record because Temple-Inland's counsel

failed to object at the appropriate time.

Assuming, without deciding, that this statement is

appropriately part of the record for purposes of our review, we

24 The other examples of “partial disclosures” offered --
Temple-Inland's alleged descriptions of the plant as in “good
condition” and “well maintained” -- are frivolous. We do not
believe that such statements could reasonably be seen as
indicative of value and, therefore, could not create a duty of
further disclosure. Furthermore, these statements are exactly
the kind of “loose general statements made by sellers in
commending their wares” upon which purchasers are not entitled
to rely. Restatement (Second) of Torts § 542, cmt e; accord
Sipola v. Winship, 66 A. 962, 966 (1907) (noting that purchasers
are not entitled to rely on “mere general commendations or
expressions of opinion” made by a seller).

-49-
think it insufficient to support a finding that Temple-Inland

acquired a duty of disclosure with respect to value. Invest

Almaz points to no case, and we are aware of none, suggesting

that merely not answering a question, without more, creates a

duty of disclosure.25 While there is precedent in New Hampshire

case law for the proposition that a vendor offering a deceptive

opinion as to value may be liable in fraud, nothing in the

deposition testimony indicates that Taylor gave an opinion of

value,26 or, indeed, even knew the sale price of the plant.

Compare Shafmaster v. Shafmaster, 642 A.2d 1361, 1364 (N.H. 1994)

(holding that a defendant's inclusion of incorrect opinions of

value in a financial statement submitted as part of divorce

proceeding was fraudulent). We therefore conclude that Temple-

Inland had no duty to disclose the information respecting value

it is charged with concealing and that judgment as a matter of

law was appropriate with respect to these allegations.

25 We acknowledge that there are circumstances in which
silence could be deceptive, as, for example, when the party
asking the question states its own understanding as to a fact
and the respondent's silence could be taken as assent. Nothing
in the deposition testimony suggests that Tikhov understood
Taylor's response, whatever it actually was, to contain any such
implication.
26 In this context, we note that the jury also heard the
videotaped deposition of Vladimir Semkin, the other Invest Almaz
engineer on the tour. Semkin stated that he inquired as to the
price of the equipment of Taylor, and Taylor responded that he
“had no information about that.”

-50-
 ii. Obsolescence

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.”

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

27 Several pieces of evidence indicated that the plant's
ability to upgrade to compete was limited by the size of the
existing buildings and the site on which it was located. No
evidence was introduced concerning the equipment's ability to
operate profitably in any other location.

-51-
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.

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

28 Here, again, it is clear that Pathex eventually
obtained much of this information through its appraisal, but
there is no evidence that Pathex reported it to Invest Almaz.
29 This fact appears in notes taken by Invest Almaz
engineer Tikhov during the tour on Tikhov's copies of written
materials distributed by Taylor at that time. These materials,
including the notes, were introduced during plaintiff's case,
although the translation of Tikhov's notes was not placed in
evidence until after Invest Almaz rested its case.

-52-
 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:

Q. Were you ever told that production
costs at the plant had exceeded the
market price for the product?

A. No, I was never been told [sic]
that.

Q. And when your representatives visited
the plant in October 1993 were they
told that?

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.

Q. If you had been informed of those
facts, would it have made a difference
to you?

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.

Zapevalov Dep. p. 50-51(emphasis added). No other testimony was

introduced directly bearing on the materiality of the plant's

-53-
obsolescence to Invest Almaz, although there was witness

testimony and documentary evidence concerning the performance

expectations Invest Almaz had for the rebuilt, relocated plant.

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

-54-
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.

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.”).

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

30 It seems somewhat clearer that Invest Almaz did raise
this argument in its opposition to Temple-Inland's motion for
judgment as a matter of law.

-55-
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

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

31 This is particularly surprising because Taylor was
later called as a witness for Temple-Inland and Invest Almaz's
counsel cross-examined him at some length about the possibility
that he might have been biased in the information he gave Invest
Almaz. Had Invest Almaz wanted to put Taylor's intention at
issue, we think it would not have rested its own case without
attempting to develop this testimony.

-56-
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.

For the foregoing reasons, we think judgment as a

matter of law was appropriately granted with respect to the

obsolescence allegations.

iii. Environmental Problems

Invest Almaz's final allegation of fraud asserts that

Temple-Inland concealed “significant environmental problems at

the plant, including the presence of hazardous and non-hazardous

waste, chemical pollution, and radioactive material.” Like the

magistrate judge, who characterized the environmental issue as a

“red herring,” we view this allegation with particular

skepticism. While there were clearly environmental problems at

32 In fact, Zepavalov testified that, at least in 1993,
there were no OSB plants operating in all of Russia.

-57-
the plant -- including both historical noncompliance with

environmental regulations and present contamination of site soils

and sediments -- we find it hard to discern how those problems

were relevant to the equipment purchase Invest Almaz hoped to

accomplish.33 Invest Almaz does not appear to argue that the

equipment itself was contaminated. Nor does Invest Almaz point

to evidence suggesting that the plant was incapable of being

operated in a non-polluting manner. Indeed, as we read the

record, the environmental issues were only evaluated so that

Pathex could decide whether or not to purchase the property on

which the plant was built, an aspect of the transaction unrelated

to the joint venture’s purposes.

Furthermore, we think that the magistrate judge was

plainly correct in concluding that, in view of the extensive

interactions between Pathex and Temple-Inland regarding the

environmental issues, no reasonable jury could find that Temple-

Inland intentionally concealed environmental information in order

33 We acknowledge that Invest Almaz president Zepavalov
testified in his deposition that the environmental problems at
the plant would have been of importance to him. However, this
does not automatically establish the materiality of this
information as a matter of law. If it were objectively
unreasonable for Zepavalov to consider such information “in
determining his choice of action in the transaction,”
Restatement (Second) of Torts § 538(1)(a), materiality would
require a showing that Temple-Inland knew, or had reason to
know, that Zepavalov nonetheless viewed the information as
critical to his decision, id. § 538(1)(b).

-58-
to defraud either Pathex or Invest Almaz. See Hall v. Merrimack

Mut. Fire Ins. Co., 13 A.2d 157, 160 (N.H. 1940) (fraud requires

a “deliberate falsehood . . . made for the purpose or with the

intention of causing the other party to act upon it”).

Uncontradicted evidence in the record shows that the existence of

environmental problems at the facility and the parties'

respective obligations for analyzing and resolving those problems

were discussed throughout the negotiations between Pathex and

Temple-Inland, beginning, at latest, by mid-July 1993 -- before

Pathex entered into the option agreement with Temple-Inland and

well before Invest Almaz signed the joint-venture agreement. It

is also beyond dispute that Pathex fully understood the

importance of undertaking its own environmental assessment to

determine the full scope of the environmental problems at the

plant,34 and there is no evidence that Temple-Inland sought to

impede the assessments performed for Pathex by Aries.35

Furthermore, the record indicates that Pathex and Temple-Inland

34 In fact, Invest Almaz's attorney elicited
uncontradicted testimony from Temple-Inland General Counsel
Vorpahl indicating that responsibility for environmental
investigation was a critical component of the successive drafts
of the option agreement and Asset Purchase Agreement, and that
Temple-Inland took the position throughout that Pathex should
make an independent investigation.
35 To the contrary, the contents of the assessments make
clear that Earl Taylor, at least, provided significant
information to Aries.

-59-
continued to discuss the results of these environmental surveys,

the progress of Temple-Inland's cleanup efforts, and the impact

of environmental issues on the final shape of the Asset Purchase

Agreement, throughout the option period. In our view, this

uncontradicted evidence of extensive, ongoing discussions

regarding environmental matters, begun before any agreement was

signed and culminating in an unfettered opportunity to discover

the true state of affairs prior to purchasing the property,

precludes any reasonable jury from finding that Temple-Inland

intentionally concealed any environmental problems the plant may

have had.36

Invest Almaz's arguments against this result are

unpersuasive. Invest Almaz first suggests that giving Pathex

notice of the environmental problems and the opportunity to learn

more was not sufficient to avert a finding of fraudulent

concealment. Instead, Invest Almaz argues, Temple-Inland was

obliged to disclose the full environmental history of the plant

36 We acknowledge that Invest Almaz sought to develop, and
to some minor extent succeeded in developing, evidence to the
effect that Temple-Inland may have had a motive to “cut corners
and shade the truth in order to sell.” For example, Invest
Almaz elicited testimony indicating that Temple-Inland was
incurring substantial carrying costs on the facility. In the
face of the overwhelming evidence indicating that Temple-Inland
did reveal the existence of environmental problems at the plant,
we do not think Invest Almaz's circumstantial and speculative
evidence of a possible “motive” creates a trialworthy dispute
concerning Temple-Inland's intent.

-60-
and to do so from the outset. Invest Almaz offers no

precedential support for this proposition, which strikes us as

wholly at odds with established business practice. While we can

certainly imagine circumstances in which notice and an

opportunity to inspect would be inadequate -- as when the party

providing notice intentionally misdirects the other party or

prevents it from completing an investigation, see Bergeron v.

Dupont, 359 A.2d 627, 629 (N.H. 1976) (plaintiff's own

investigation not a defense to misrepresentation when the

investigation was restricted by bad weather and by defendant's

request that it be curtailed) -- we think it more generally the

case that accepting such an opportunity prevents a party from

later claiming that it acted in reliance on an adverse party's

representations. See Restatement (Second) of Torts § 547(1)

(“[T]he maker of a fraudulent misrepresentation is not liable to

another whose decision to engage in the transaction that the

representation was intended to induce . . . is the result of an

independent investigation by him.”); see also Sipola, 66 A. at

966 (noting that, although there is generally no duty of

purchaser to investigate the truthfulness of representations made

-61-
by a seller, such a duty arises when the purchaser has “knowledge

of his own, or of any facts which would excite suspicion”).37

Invest Almaz's second argument is that, notwithstanding

Temple-Inland's above-board dealings with respect to Pathex,

Temple-Inland remains liable vis á vis Invest Almaz, because it

failed to disclose the environmental problems at the plant during

the tour and Invest Almaz relied on that omission to its

detriment by signing the joint-venture agreement. Under this

theory, Temple-Inland's disclosures to Pathex are not evidence of

Temple-Inland's lack of fraudulent intent, because Temple-Inland

was engaged in a separate fraud against Invest Almaz

specifically. The problem with this contention is that it

presumes a degree of coordination between Pathex and Temple-

Inland for which there is simply no evidence. To conclude that

Temple-Inland intentionally defrauded Invest Almaz alone, a jury

would seemingly have to find that Temple-Inland withheld the

environmental information knowing that Pathex also had not and

would not reveal it; knowing that Invest Almaz was about to sign

37 Also relevant in this context is the fact that both
parties were experienced business entities, clearly having the
capacity to evaluate the information available to them. See
Smith v. Pope, 176 A.2d 321, 324 (N.H. 1961) (noting that, in
determining “whether the plaintiffs were justified in accepting
the defendant's statements at face value” the court applies “an
individual standard, based upon [the plaintiffs'] own capacity
and knowledge”).

-62-
a deal committing itself to this plant (although the option clock

still had time to run); and expecting and intending that Invest

Almaz would rely on these omissions. Although Invest Almaz's

briefs assert that such collusion occurred, the evidence

presented at trial does not begin to support this elaborate chain

of inferences.

Indeed, we think it questionable whether a reasonable

jury could conclude that Temple-Inland even withheld the

existence of environmental concerns from Invest Almaz during the

tour. The packet of written information given to Invest Almaz's

representatives by Earl Taylor specifically mentions that the

plant equipment includes gauges containing radioactive materials;

that the plant used phenol formaldehyde as a binder; and that

Temple-Inland contracted with an entity named Jet Line for

environmental services relating to hazardous waste, oil in the

ponds and drums of waste at the facility. This information would

appear sufficient to put Invest Almaz on notice and therefore to

defeat any claim of reliance. See Sipola, 66 A. at 966. At the

very least, we consider the fact that Taylor handed out this

information fatal to any argument that Temple-Inland intended to

conceal the plant's environmental problems during the tour.

-63-
 Given the foregoing, we conclude that judgment as a

matter of law was properly granted with respect to this final

group of allegations of fraudulent concealment.

C. Aiding and Abetting

Invest Almaz's final claim of error concerns the

instructions given the jury with respect to the knowledge element

of the tort of aiding and abetting a breach of fiduciary duty.

The magistrate judge, following the majority of jurisdictions

recognizing this tort, concluded that Invest Almaz had to prove

that Temple-Inland had actual knowledge that Pathex was breaching

a duty to Invest Almaz. Invest Almaz argued below, and presses

on appeal, that a constructive knowledge instruction should have

been given.

It is undisputed that, as the magistrate judge found,

the New Hampshire Supreme Court has yet to expressly consider

whether to adopt the tort of aiding and abetting a breach of

fiduciary duty. It was therefore the magistrate judge's duty to

determine whether New Hampshire's Supreme Court would recognize

the tort and how that Court would define the elements of the

cause of action. See Moores, 834 F.2d at 1107. The magistrate

judge, in a ruling that has not been appealed, concluded that the

New Hampshire Supreme Court would recognize the tort, and would

adopt a version incorporating the principles of aiding and

-64-
abetting liability set forth in the Restatement (Second) of

Torts. See Restatement § 876(b) (“For harm resulting to a third

person from the tortious conduct of another, one is subject to

liability if he . . . knows that the other's conduct constitutes

a breach of duty and gives substantial assistance or

encouragement to the other so to conduct himself . . . .”).

Following other jurisdictions relying on these principles, he

held that the tort would require Invest Almaz to prove three

elements: (1) a breach of fiduciary obligations by Pathex; (2)

knowing inducement or participation in the breach by the Temple-

Inland; and (3) damages to Invest Almaz as a result of the

breach. E.g., S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 847-

48 (2d Cir. 1987) (applying New York law); Spinner v. Nutt, 631

N.E.2d 542, 546 (Mass. 1994).

With respect to the “knowledge” element, the magistrate

judge noted that, in the majority of jurisdictions recognizing

the tort, actual knowledge of the breach of fiduciary duty is

required. Concluding that the New Hampshire Supreme Court would

adopt the majority rule on this issue, he instructed the jury as

follows:

In the context of this claim, to act
knowingly means to act with actual knowledge.
This means that Invest Almaz must prove that
Temple-Inland actually knew two things: That
Pathex owed a fiduciary duty to Invest Almaz,
and that Pathex was breaching that duty. It

-65-
 is not enough for Invest Almaz to show that
Temple-Inland would have known these things
if it had exercised reasonable care. However
. . . it is not required to show that Temple-
Inland acted with an intent to harm Invest
Almaz.

Invest Almaz's position, below and on appeal, is that the

magistrate judge should instead have followed a Second Circuit

case employing a constructive knowledge standard. See Diduck v.

Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 283 (2d. Cir.

1992) (holding that “[a] defendant who is on notice that conduct

violates a fiduciary duty is chargeable with constructive

knowledge if a reasonably diligent investigation would have

revealed the breach”). Invest Almaz further argues that the

magistrate judge's error entitles it to a new trial on the aiding

and abetting count. Because Invest Almaz properly preserved its

objection to the actual knowledge standard at all appropriate

points below, its request for a new trial will be considered

under the harmless-error standard of Fed. R. Civ. P. 61 if the

actual knowledge instruction is determined to be incorrect. See

Beatty v. Michael Bus. Mach. Corp., 172 F.3d 117, 120 (1st Cir.

1999).

We find no error and therefore do not reach the

harmless error analysis. As is clear from Diduck itself, the

constructive knowledge standard adopted in that case reflected

unique factual and policy considerations not relevant here. The

-66-
Diduck rule was developed by the Second Circuit as part of a

federal common law right of action against non-fiduciaries

arising under the Employee Retirement Income Security Act of

1974, 29 U.S.C. §§ 1101 et seq. as amended (ERISA). See id.

Following ERISA precedent, the court looked to trust case law and

provisions of the Restatement of Trusts in devising its

constructive knowledge rule. See Chemung Canal Trust Co. v.

Sovran Bank/Maryland, 939 F.2d 12, 16-18 (2d Cir. 1991)

(concluding that Congress intended the courts to “fill any gaps

in [ERISA] by looking to traditional trust law principles”); see

also Diduck, 974 F.2d at 283 (noting Restatement rule that a

defendant may be chargeable with notice either as to fiduciary's

status as trustee or that trustee is committing breach of trust)

(citing Restatement of Trusts § 326, cmt. b); Id. (noting

Restatement rule that a defendant on notice is chargeable with

constructive knowledge if a reasonable investigation would have

revealed the breach) (citing Restatement of Trusts § 297, cmt.

a). It is readily apparent that Diduck's constructive knowledge

holding has not been considered, even by courts in the Second

Circuit, to alter the actual knowledge standard applied in other

contexts. See, e.g., Kolbeck v. LIT Am., Inc., 939 F. Supp. 240,

246 (S.D.N.Y. 1996), aff'd, 152 F.3d 918 (2d Cir. 1998)

(unpublished table decision) (distinguishing Diduck and holding

-67-
that, in cases of aiding and abetting a breach of fiduciary duty

arising under New York common law, the actual knowledge standard

remains in force). We find nothing in Invest Almaz's unsupported

arguments remotely adequate to convince us that this unique rule

would be applied by the New Hampshire Supreme Court to this case.

IV.

Having invested over $6 million in a transatlantic deal

that ultimately came to naught, Invest Almaz's effort to recover

some part of what it lost is understandable. However, we find no

error in the magistrate judge's rulings and concur that the facts

of this case ultimately do not support a judgment against this

defendant on the theories proposed. The judgment of the district

court is affirmed in all respects.

It is so ordered.

-68-