
USCA1 Opinion

	




          June 19, 1995         [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 94-1598                          TIDEMARK BANK FOR SAVINGS, F.S.B.,                                Plaintiff - Appellant,                                          v.                           PETER R. MORRIS, AN INDIVIDUAL,                        AND MARSHALL AND STEVENS INCORPORATED,                               Defendants - Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                      [Hon. Patricia Saris, U.S. District Judge]                                            ___________________                     [Hon. A. David Mazzone, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                               Torruella, Chief Judge,                                          ___________                                Boudin, Circuit Judge,                                        _____________                           and Barbadoro,* District Judge.                                           ______________                                _____________________               Frederic N. Halstrom, with whom Halstrom Law Offices, PC was               ____________________            ________________________          on brief for appellant.               Joseph P. Musacchio, with whom Stephen W. Sutton and  Melick               ___________________            _________________      ______          & Porter were on brief for appellee Marshal and Stevens, Inc.          ________                                 ____________________                                        ____________________          *  Of the District of New Hampshire, sitting by designation.                                 ____________________                    BARBADORO,  District  Judge.   The  plaintiff, Tidemark                    BARBADORO,  District  Judge.                                _______________          Bank  for Savings,  F.S.B.  ("Tidemark"),1  appeals from  summary          judgment granted in favor of the defendant, Marshall and Stevens,          Inc.   Tidemark  argues  that the  district  court erred  in  its          choice-of-law  analysis  and,  as  a result,  applied  the  wrong          substantive  legal standard.  Finding  no error in  the choice of          law, we affirm the district court's order.                                    I.  BACKGROUND                                    I.  BACKGROUND                                        __________                    In   1985,  Peter   Morris   received   a  $2   million          construction loan from Tidemark to build a summer vacation  house          on  Martha's  Vineyard  in  Massachusetts.    Morris  decided  to          refinance the loan in 1987, and this time Tidemark agreed to loan          Morris $3.5  million subject  to several conditions,  including a          requirement  that Morris  have  the property  appraised.   Morris          engaged  Marshall and  Stevens  to prepare  the appraisal,  which          valued the property at $5.5 million.  Tidemark then made the loan          in reliance on the appraisal and obtained a first mortgage on the          Martha's  Vineyard  property.    Morris  subsequently  defaulted.          After foreclosure,  Tidemark sold  the property at  a substantial          loss.                    Tidemark  is a  Virginia savings  institution  with its          principle place of  business in Newport News, Virginia.  Marshall                                        ____________________          1    Newport  News Savings  Bank  was  the  plaintiff during  the          proceedings in district court.  In August 1993, Tidemark Bank for          Savings, F.S.B.,  was substituted for Newport  News Savings Bank.          Although the district court refers to the plaintiff as "Newport,"          we use "Tidemark," which has been the plaintiff's name during the          appeal.                                         -2-          and Stevens  is an Illinois corporation with  its principle place          of  business in  Des Plaines,  Illinois.   Morris is  an Illinois          resident.   Tidemark  filed  its complaint  against Marshall  and          Stevens in  the  district of  Massachusetts alleging  negligence,          negligent  misrepresentation,  and  breach  of  contract.2    The          district  court invoked  Massachusetts'  choice-of-law rules  and          determined  that  the  substantive  law of  Virginia  applied  to          Tidemark's  negligence  and  negligent misrepresentation  claims,          while  Illinois law  applied  to the  contract  claim.   It  then          granted Marshall  and Stevens'  motion for summary  judgment with          respect to all three claims.                     Tidemark  argues  on  appeal  that  the  district court          misinterpreted  Massachusetts'  choice-of-law   rules.3    As   a          result,  Tidemark contends  that the  district  court erroneously          judged  its  negligence  and negligent  misrepresentation  claims                                        ____________________          2   Tidemark sued Morris  in the  same action, but  later settled          those claims.           3  We assume  for purposes of analysis that a choice must be made          between  Massachusetts   and  Virginia  law   because  Tidemark's          negligence  and  negligent  misrepresentation  claims  would have          survived  if  they  had  been  judged  under  Massachusetts  law.          Compare  Page v.  Frazier, 445  N.E.2d 148,  153-54 (Mass.  1983)          _______  ____     _______          (recognizing negligence cause of  action for misrepresentation to          recover  purely  economic  loss  despite lack  of  privity  under          certain circumstances)  and Craig v.  Everett M. Brooks  Co., 222                                  ___ _____     ______________________          N.E.2d 752, 755  (Mass. 1967) (same) with Ward v.  Ernst & Young,                                               ____ ____     _____________          435  S.E.2d  628, 631-32  (Va. 1993)  (holding  that no  cause of          action exists for negligent misrepresentation absent privity) and                                                                        ___          Blake  Construction Co.  v. Alley,  353  S.E.2d 724,  726-27 (Va.          _______________________     _____          1987) (same).                                         -3-          under Virginia law,  rather than Massachusetts  law.4  We  review          the  district court's  resolution of  the choice-of-law  issue de                                                                         __          novo.   CPC Int'l  v. Northbrook Excess  & Surplus  Ins., Co., 46          ____    _________     _______________________________________          F.3d 1211, 1214 (1st Cir. 1995).                                      II. DISCUSSION                                    II. DISCUSSION                                        __________                    In  diversity of  citizenship cases,  we use  the forum          state's choice-of-law rules.   Klaxon Co.  v. Stentor Elec.  Mfg.                                         __________     ___________________          Co., 313  U.S. 487, 496 (1941);  American Title Ins. Co.  v. East          ___                              _______________________     ____          West Fin. Corp., 959 F.2d 345, 348 (1st Cir. 1992).  Accordingly,          _______________          we are guided  in our analysis by the applicable decisions of the          Massachusetts Supreme Judicial Court ("SJC").5                    Massachusetts  eschews   any  particular  choice-of-law          doctrine and instead employs a "functional approach" to choice of          law.   Cosme v.  Whitin Mach.  Works, Inc.,  632 N.E.2d  832, 834                 _____     _________________________          (Mass. 1994).  A court using this approach must consider "various          choice-influencing  considerations,  including those  provided in          the  Restatement (Second) of  Conflict of Laws  (1971), and those          suggested by various commentators."  Id. (citation omitted).  The                                               ___                                        ____________________          4  Because  Tidemark merely  alludes to its  contract claim,  and          neither briefed  nor argued any  issue concerning that  claim, we          deem it abandoned.   Ryan v.  Royal Ins. Co.,  916 F.2d 731,  734                               ____     ______________          (1st Cir. 1990);  Niziolek v. Ashe, 694  F.2d 282, 284  (1st Cir.                            ________    ____          1982).            5   Tidemark challenges our  denial of its motion  to certify the          choice-of-law  question to the  SJC.  Tidemark's  failure to seek          certification  in the  district court "considerably  weakens" its          argument  for certification.  See  Boston Car Co.  v. Acura Auto.                                        ___  ______________     ___________          Div., Am. Honda Motor Co., 971 F.2d 811, 817 n.3 (1st Cir. 1992).          _________________________          Moreover,  since  sufficient  controlling  precedent  is  readily          available  on   the  choice-of-law  standard,   certification  is          unnecessary.   Snow v.  Harnischfeger Corp., 12  F.3d 1154,  1161                         ____     ___________________          (1st Cir. 1993), cert. denied, 115 S. Ct. 56 (1994).                           ____________                                         -4-          SJC's most recent decisions on the subject suggest that the first          step in this  process is  to identify and  apply the  Restatement          sections  that are  most  analogous to  the  particular issue  in          dispute.   See,  e.g., New  England Tel. &  Tel. Co.  v. Gourdeau                     ___   ____  _____________________________     ________          Constr. Co., 647 N.E.2d 42, 44-45 (Mass. 1995); Cosme, 632 N.E.2d          ___________                                     _____          at  834-36; Travenol Labs., Inc. v. Zotal, Ltd., 474 N.E.2d 1070,                      ____________________    ___________          1073 (Mass. 1985);  Bushkin Assocs.,  Inc. v.  Raytheon Co.,  473                              ______________________     ____________          N.E.2d 662, 668  (1985).  The results obtained by  using the most          analogous Restatement sections are then evaluated in light of the          more general choice-influencing  considerations described in    6          of the Restatement and other  similar sources.6 Cosme, 632 N.E.2d                                                          _____          at  834-36.  Following this approach, we begin by identifying and          applying  the  section  of  the Restatement  which  most  closely          applies to Tidemark's claims.             A.  Restatement   148(2)          A.  Restatement   148(2)              ____________________                    Like the district court,  we conclude that    148(2) of          the Restatement is most  directly applicable to Tidemark's claims          since  that  section  governs  choice-of-law  issues   where  the          defendant's  misrepresentation  and   the  plaintiff's   reliance          occurred in  different states.  Restatement  (Second) of Conflict          of  Laws   148(s)  (1971).   Section  148(2) lists  the following          factors that  a court should consider  in resolving choice-of-law          questions in such cases:                                        ____________________          6   Although the SJC has not limited itself to the Restatement as          a  source  of  guidance, we  confine  our  analysis  here to  the          Restatement  since the parties do  not draw our  attention to any          additional  choice-of-law  principles  that  should   effect  our          analysis.                                         -5-                      (a)  the  place,  or  places,  where  the                      plaintiff  acted  in  reliance  upon  the                      defendant's representations,                      (b)   the   place  where   the  plaintiff                      received the representations,                      (c)  the place  where the  defendant made                      the representations,                      (d) the  domicil, residence, nationality,                      place  of  incorporation  and   place  of                      business of the parties,                      (e)  the  place  where a  tangible  thing                      which  is the subject  of the transaction                      between the parties  was situated at  the                      time, and                      (f) the  place where the plaintiff  is to                      render performance under a contract which                      he has been induced to enter by the false                      representations of the defendant.          Id.  We  first consider factors (a), (b), (c),  which concern the          ___          places  where the  misrepresentations  were  made, received,  and          acted upon.                    1.  The  place or  places where  the misrepresentations                    1.  The  place or  places where  the misrepresentations                        were made, received, and acted upon.                         were made, received, and acted upon.                    None of these three factors favors Tidemark's position.          Taken   chronologically,  factor   (c),  the   place  where   the          misrepresentations  were made,  favors neither  Massachusetts nor          Virginia law.   Although the appraisal was  partially prepared in          Massachusetts, it  was finalized  and released from  Marshall and          Stevens'  Illinois office.    Factors (b),  the  place where  the          misrepresentations were  received, and  (a), the place  where the          plaintiff acted in reliance  on the misrepresentation, both favor          Virginia  law since  Tidemark received  the appraisal,  agreed to          make  the loan, and disbursed the loan proceeds from its Virginia          office.   The record  does not identify the  place where the loan          closing occurred.   However,  even if, as  Tidemark alleges,  the                                         -6-          closing  had occurred  in Massachusetts, that  fact is  of little          significance since Tidemark's claims  concern the effect that the          appraisal had on its Virginia-based decision to make the loan and          its disbursal of the proceeds of the loan from Virginia.                    2.  Other factors.                    2.  Other factors.                    Factor   (d),  concerning   the   parties'  states   of          incorporation and  places of  business, also provides  no support          for Tidemark's position since  Tidemark is a Virginia corporation          based  in  Virginia, and  Marshall  and  Stevens is  an  Illinois          corporation based  in Illinois.    Even if,  as Tidemark  argues,          Morris should  be considered a resident  of Massachusetts because          he once used the Martha's Vineyard house as a vacation home,  his          place  of residence would be  irrelevant because Morris  is not a          party to the claims at  issue here.  Factor (f), the  place where          the plaintiff  performed the contract, favors  Virginia law since          Tidemark  performed its  primary obligation  to Morris  under the          loan contract by  disbursing the loan proceeds from  its Virginia          office.                     The only  factor that supports  Tidemark's position  is          factor (e), the location of the property which was the subject of          the  transaction.  The section's comment  states that this factor          "is of particular  importance when the subject of the transaction          is land."  Restatement (Second) of Conflict of Laws   148 cmt. i.          Nevertheless, the location of the  property carries comparatively          little weight in this case because the alleged misrepresentations          did not directly  affect the  property.  Instead,  the harm  that                                         -7-          Tidemark allegedly suffered occurred  primarily in Virginia where          the decision to make the loan was made.                      Considering  all  of the     148(2)  factors and  their          relative significance, we  agree with the district court that, on          balance, the   148(2) factors  favor the application of  Virginia          law.                                          -8-          B.  Restatement   6(2)          B.  Restatement   6(2)              __________________                    Tidemark  contends that  the  district  court erred  by          failing  to interpret  the results  of its    148(2)  analysis in          light  of  the  more  general  choice-influencing  considerations          described  in    6(2)  of the  Restatement.7   As  we demonstrate          below,  consideration  of  these factors  does  not  cause  us to          question the district court's conclusion.                     1.  The needs of the interstate system.                    1.  The needs of the interstate system.                    Neither party  has suggested that choosing  one state's          law  over the other would  impede the workings  of the interstate          system.  Although the impact  of various states' negligence rules          on interstate banking and the availability of interstate mortgage          transactions might raise concern in some cases, we find no reason          to address such issues on the record presented here.                        2.  The  relevant policies  and  relative interests  of                    2.  The  relevant policies  and  relative interests  of                        Massachusetts  and  Virginia   in  the   negligence                        Massachusetts  and  Virginia   in  the   negligence                        claims.                        claims.                    Virginia   plainly  has   a  significant   interest  in                                        ____________________          7  Section 6 provides the following factors:                      (a) the  needs  of  the   interstate  and                          international systems,                       (b) the relevant policies of the forum,                      (c) the relevant policies of other states                          and  the  relative interest  of those                          states  in  the determination  of the                          particular issue                      (d) the    protection     of    justified                          expectations,                      (e) the  basic  policies  underlying  the                          particular field of law,                      (f) certainty,     predictability     and                          uniformity of result, and                      (g) ease   in   the   determination   and                          application of the law to be applied.                                         -9-          litigation involving  a Virginia plaintiff.   Virginia has chosen          not  to recognize tort claims to recover purely economic loss for          negligently  supplied misinformation  absent privity  between the          parties.   Ward, 435 S.E.2d  at 631-32.   Instead, under Virginia                     ____          law,  a  plaintiff  may  recover economic  losses  caused  by the          failure of contractual  duties only  in a contract  action.   Id.                                                                        ___          The purpose of  Virginia's "economic loss  rule" is "to  preserve          the bedrock principle  that contract damages be limited  to those          'within the contemplation  and control of the  parties in framing          their agreement.'"   Richmond v. Madison  Management Group, Inc.,                               ________    _______________________________          918 F.2d 438, 446 (4th Cir. 1990) (quoting Kamlar Corp. v. Haley,                                                     ____________    _____          299 S.E.2d 514, 517 (Va. 1983)).                      Massachusetts, on the  other hand, has  little interest          in  this  case.    Although  Massachusetts'  policy  would  favor          compensating Massachusetts plaintiffs  and holding  Massachusetts          defendants accountable under its  own law, see Cosme,  632 N.E.2d                                                     ___ _____          at 836,  none  of  the  parties  are  Massachusetts  citizens  or          corporations.    Further,  although  the  appraised  property  is          located in Massachusetts, the transaction did not directly affect          the  property,  and  the  parties  no  longer  own  or  have  any          connection with  the property.   Thus, Massachusetts  has minimal          interest in the parties and the outcome of this case.                      3.  Protection of justified expectations.                    3.  Protection of justified expectations.                    This  factor  is  insignificant in  negligence  actions          where   the  parties  probably   acted  without  considering  the          significance of the applicable rule of law.  Restatement (Second)                                         -10-          of Conflict of Laws   6 cmt. g.  Tidemark contends, however, that          it expected  that Massachusetts  law would  apply to  all actions          related to  the loan because  the mortgage  document contained  a          choice-of-law  clause  specifying  that  the  mortgage  would  be          governed  by Massachusetts law.   Marshall and Stevens  was not a          party to the mortgage, and Tidemark's claims are not based on the          mortgage agreement.   If  Tidemark expected Massachusetts  law to          apply to  potential negligence claims against  an appraiser based          on the mortgage agreement, its expectation was unjustified.                    4.  Basic policies underlying the field of law.                    4.  Basic policies underlying the field of law.                    The policy  supporting  tort recovery  for  negligently          supplied information  is to  encourage honesty and  competence in          the undertaking.  See  Restatement (Second) of Torts   552 cmt. a                            ___          (1977).    Section  552  of the  Restatement  (Second)  of Torts,          pertaining to  negligent misrepresentation claims,  however, also          recognizes the importance of a countervailing policy to limit the          scope  of liability in light of the potentially broad circulation          of  misinformation.  Id.;  see, e.g., Berschauer/Phillips Constr.                               ___   ___  ____  ___________________________          Co. v.  Seattle Sch.  Dist. No.  1, 881  P.2d 986,  989-90 (Wash.          ___     __________________________          1994); Matthew S.  Steffey, Negligence, Contract  and Architects'                                      _____________________________________          Liability for Economic Loss, 82 Ky. L.J. 659, 701 (1994); William          ___________________________          C. Way,  The Problem  of Economic Damages:  Reconceptualizing the                   ________________________________________________________          Moorman Doctrine, 1991 U. Ill. L. Rev. 1169, 1186-87 (1991).   In          ________________          light of  this countervailing policy, a solid minority of states,          including  Virginia,  require  privity  in order  to  maintain  a          misrepresentation claim.   See Bily  v. Arthur Young  & Co.,  834                                     ___ ____     ___________________                                         -11-          P.2d  745, 755-59  (Cal. 1992)  (finding that  approximately nine          states  require  privity  while   at  least  seventeen  do  not).          Consequently, the  policies underlying this  area of  law are  in          conflict and support both states' interpretations.                      5.  Predictability and uniformity of result.                    5.  Predictability and uniformity of result.                    Predictability and uniformity of results are of limited          significance in  negligence actions  because parties do  not plan          their activities  in light  of the potential  legal consequences.          Restatement (Second) of  Conflict of Laws    6 cmt. i.   However,          the  Restatement also  notes  that a  choice  of law  that  would          further  the  predictability  and  uniformity  of  results  would          discourage forum  shopping.  Id.   Because Massachusetts  joins a                                       ___          majority  of  states  in  allowing economic  loss  suits  without          privity, application  of Massachusetts law arguably might further          a uniform legal standard.   There is little benefit,  however, in          encouraging  a majority  rule over  a significant  minority view.          Thus, this consideration is also inconclusive.                      6.  Ease in determination and application of the law.                    6.  Ease in determination and application of the law.                    Because  a federal  court was the  forum here,  we give          less  weight  to the  ease  of  applying Massachusetts  law  over          Virginia law.  See Allstate Ins.  Co. v. Hague, 449 U.S. 302, 326                         ___ __________________    _____          (1981)  (Stevens,  J.,  concurring).     Moreover,  Virginia  law          relating  to claims for  economic loss  without privity  is well-          developed.  Thus, we  find no obstacles to applying  Virginia law          in  a Massachusetts federal court in this case.  Indeed, Tidemark          faults the  district court's  choice but not  its application  of                                         -12-          Virginia law.                    In  summary,  the  predominance  and   significance  of          Virginia's contacts with the  parties and relevant occurrences in          this case weighs in favor of applying Virginia law.  Based on the          balance of the appropriate choice-influencing  considerations, we          hold that  the district  court's selection  of  Virginia law  was          correct.                                     IV. CONCLUSION                                    IV. CONCLUSION                                        __________                    We  conclude that the district court did not err in its          choice  of Virginia law.  Because Tidemark does not challenge the          district  court's  interpretation  of  that law,  our  review  is          complete.  The district court's judgment in favor of Marshall and          Stevens is affirmed.                       ________                                         -13-
