Providence County Superior Court (PB 10-4502) Associate
Justice Michael A. Silverstein
Plaintiff: Steven P. Wright, Pro Hac Vice Thomas F. Holt,
Jr., Esq. Joseph J. Rodio, Esq. Christopher J. Valente, Esq.
Defendant: Lauren E. Jones, Esq. Robert C. Shindell, Esq.
Robert S. Thurston, Esq.
Present: Suttell, C.J., Flaherty, Robinson, and Indeglia, JJ.
WILLIAM P. ROBINSON, III ASSOCIATE JUSTICE
defendant, Restivo Monacelli LLP (Restivo), appeals from a
February 1, 2016 judgment in Providence County Superior Court
in favor of the plaintiff, Rhode Island Resource Recovery
Corporation (Resource Recovery), in the amount of $5, 733,
648.18, inclusive of interest. That judgment was entered
following a jury trial and a verdict in Resource
Recovery's favor. On appeal, Restivo contends that the
trial justice erred in denying its motion for judgment as a
matter of law for the following reasons: (1) Resource
Recovery was required to, but did not, present expert
testimony with respect to proximate cause; and (2) Resource
Recovery did not have standing to assert a claim for
"investment losses." Restivo further claims that
"the trial justice committed prejudicial error in his
instructions to the jury * * *." Restivo posits,
additionally, that the trial justice erred as a matter of law
by holding that Resource Recovery was "'immune'
from the in pari delicto defense and that the
'adverse interest' exception to the defense applied
to [Resource Recovery]." Lastly, Restivo contends on
appeal that the trial justice erred in denying Restivo's
motion "to set off settlement amounts that [Resource
Recovery] received from other parties from the jury's
awarded damages * * *."
reasons set forth in this opinion, we vacate the judgment of
the Superior Court.
Facts and Travel 
Recovery is a quasi-governmental corporation established for
the purpose of operating and managing the Central Landfill in
Johnston. As will become clear from the discussion of the
trial testimony infra, in 2007, when a new Executive
Director of Resource Recovery (Michael
OConnell) was appointed, he uncovered a multitude of
problems at said corporation. These included very large
charitable donations to organizations which had no
relationship to Resource Recovery's mission, overpaying
for a purchase of real estate, and the fact that the funds in
several of Resource Recovery's trust funds were not
invested in accordance with Resource Recovery's policies.
After the new Executive Director reported those problems to
the Governor, a full forensic audit was undertaken, which
confirmed many of the matters of concern that had been
discovered by the new Executive Director. As a result,
necessary reforms were implemented within Resource Recovery.
This case arises out of a quest to determine the relative
fault of various entities and persons with respect to the
problems which plagued Resource Recovery and the time span
during which those problems persisted.
importance to the instant case is the fact that an audit of
Resource Recovery was undertaken in each fiscal year. For
fiscal years 1995 to 2005, the firm of Lefkowitz, Garfinkel,
Champi & DeRienzo, P.C. (LGCD) served as Resource
Recovery's auditor. However, for fiscal years 2006 and
2007, Restivo was hired to audit Resource Recovery. From 1996
to 2008, Van Liew Trust Company (Van Liew) was the trustee of
the two trusts at issue in this case.Subsequent to the
above-referenced chain of events, Resource Recovery filed
suit against LGCD, Van Liew, and Restivo. LGCD and Van Liew
entered into separate settlement agreements with Resource
Recovery. As such, we are confronted with only the suit by
Resource Recovery against Restivo.
suit was commenced on July 30, 2010, when Resource Recovery
filed a Complaint containing five counts against Restivo
arising from "the failures of Restivo * * * in its
provision of auditing and accounting services to the Rhode
Island Resource Recovery Corporation * * * during the time
period between the summer of 2006 and the termination of its
engagement on June 30, 2008." The five counts were as
follows: professional malpractice (Count One); breach of
contract (Count Two); aiding and abetting a breach of
fiduciary duty (Count Three); civil liability for giving a
false document to an agent, employee, or public official, in
violation of G.L. 1956 § 11-18-1 (Count Four); and civil
conspiracy (Count Five). On June 30, 2011, after
Restivo's motion for a more definite statement as to
Counts Three, Four, and Five was allowed by the trial
justice, Resource Recovery filed a document entitled
"Plaintiff's More Definite Statement."
Plaintiff's More Definite Statement contained the same
five counts as had been set forth in the original Complaint.
It went on to specifically allege that Restivo
"negligently failed to identify - or actively
participated in concealing - the true status of [Resource
Recovery's] financial statements * * *." According
to Resource Recovery, Restivo's "actions and/or
omission postponed the detection of the mismanagement,
wrongdoing, and corruption occurring at [Resource Recovery]
and delayed [Resource Recovery] and other authorities from
addressing the issues and avoiding subsequent losses."
on December 11, 2013, Counts Three, Four, and Five of the
Plaintiff's More Definite Statement were dismissed with
prejudice by stipulation, in accordance with Rule 41(a)(1)(B)
of the Superior Court Rules of Civil Procedure. The only
remaining counts were those alleging professional malpractice
and breach of contract (Counts One and Two). The case
ultimately progressed to a jury trial on those counts, which
trial took place over eleven days in October and November of
2015. We relate below the salient aspects of what transpired
at that trial.
The Testimony at Trial
The Testimony of Michael OConnell
OConnell testified for Resource Recovery. It was his
testimony that, at the time of trial, he was the Executive
Director of Resource Recovery and had held that post since
January of 2007. He testified that he was "responsible
for the day-to-day activities" at the Central Landfill
in Johnston and that he reported to the "board of
commissioners." He explained that, when he started at
Resource Recovery, the Chairman of the Board functioned as
Resource Recovery's Chief Executive Officer, whereas Mr.
OConnell, despite having the title of Executive Director, was
"just an administrator * * *." It was further his
testimony that, in his first few months working at Resource
Recovery, he identified "specific large issues"
within the entity with respect to "charitable
contributions; * * * consolidation of [Resource
Recovery's] investments with one financial corporation;
and * * * excessive prices that the corporation had paid for
land that [it] bought for [an] industrial park."
respect to the charitable contributions, Mr. OConnell
testified that, although charitable contributions had been
made by Resource Recovery, when he "looked at the
mission of the corporation, it wasn't what we were
supposed to do * * *." He stated that it was his
"goal to limit or restrict it or tie it to [Resource
Recovery's] mission." He further testified that,
from fiscal year 2003 until fiscal year 2007, Resource
Recovery had made charitable contributions in the amount of
$2, 092, 163.95. He confirmed in his testimony that Restivo
had conducted the audits of Resource Recovery for two of the
years in that time period-viz., fiscal years 2006
and 2007. He then detailed in his testimony certain
charitable contributions which were made during the years
that Restivo had conducted its audits but were not related to
the mission of Resource Recovery. He further testified that
funds were also spent on the involvement of board
commissioners and/or employees as participants in charity
golf events-"[a]pproximately $1, 000 for each golf
outing" and "approximately ten [outings] a
further Mr. OConnell's testimony that, at the start of
fiscal year 2006, Resource Recovery had approximately one
hundred million dollars in investments in the "employee
pension investments" (the pension trust) and the two
"landfill trust funds" (the two trusts at issue).
He explained that the money in the "landfill trust
funds" was set aside for the point in the future when
the landfill would be filled to capacity and would no longer
be taking in trash and, accordingly, no longer producing any
revenue; he added that the money in the "landfill trust
funds" was used "to make sure that the landfill is
properly maintained, it's properly fixed, it's
properly secure." It was further his testimony that Van Liew
managed all of the trust investments. He stated that he had
been concerned with having all of Resource Recovery's
investments under the management of one small
firm-viz., Van Liew. He also testified that, after
assuming the position of Executive Director, he learned that
a commissioner on the Resource Recovery Board of
Commissioners was also a paid board member of Van Liew.
Furthermore, he answered in the affirmative when asked if,
"at some point," he became "concerned with
whether Van Liew had been making investments in accordance
with the * * * rules and policies governing investments in
the trust?" He testified that he "came to
find" that the investments in the trust funds were
"in opposition to the investment strategy that the
Mr. OConnell's testimony that he expressed to the Rhode
Island Auditor General his "concern that [Resource
Recovery] had excessive charitable contributions, [and] had
concentration of assets [issues] to be resolved."
According to Mr. OConnell's testimony, he further
expressed his concern to the Auditor General that Resource
Recovery had "paid * * * inflated prices for real estate
property" and had "failed to properly record them *
* * on [its] financial statements." He then testified
that he also conveyed his concerns to the Governor at a
meeting on November 12, 2007. It was his testimony that the
Governor ordered "a 45-day preliminary examination * * *
to be done by the bureau of audits * * *." He further
testified that the Governor instructed two of the
commissioners on the Resource Recovery Board of Commissioners
not to attend any further board meetings, thereby precluding
the existence of a quorum. According to Mr. OConnell's
testimony, the Bureau of Audits issued a document entitled
"Preliminary 45-day Examination of Rhode Island Resource
Recovery Corporation, Summary of Findings, March 2008."
Mr. OConnell testified that, as a result of the conclusions
made in that document, the Governor "ordered a full
forensic audit." The full forensic audit resulted in a
very lengthy report dated September 22, 2009. In the
Executive Summary of that report, it is noted that "the
Bureau found numerous instances in which employees, vendors,
and various current and former Commissioners, appear to have
acted in ways that compromised their fiduciary and ethical
obligations to [Resource Recovery] and to the public."
OConnell further testified that he believed that Restivo had
"failed to do its job for Resource Recovery[.]" He
"[Restivo was] a professional accounting and auditing
firm who in the course of two years found no issues with
Resource Recovery. I came in in six months and I was tripping
over issues, I couldn't help it, they were everywhere.
And they found nothing."
testified that he terminated Restivo's services in June
of 2008. He went on to detail the damages that Resource
Recovery contended were incurred as a result of ...