## Facts

- John Burke, a wood carver and small-scale artifact collector, bought a woven textile at an antique mall for $115; the tag described it as a “1930’s Southwest wool handwoven throw,” and Burke used it as a rug.
- After being urged to investigate the textile’s origin, Burke contacted Kenneth Harman, an experienced collector with a substantial reference library on collectibles.
- Burke brought the textile to Harman’s home and asked what it was; Harman allegedly suggested it “could be Mexican.”
- Harman first offered $500 plus two Indian dolls; Burke declined, and Harman then purchased the textile for $1,000 cash.
- The textile was later identified as a rare Navajo chief’s blanket (first phase, Ute style). Harman sold it for $290,000; the parties stipulated $290,000 was its fair market value at the time of Burke’s sale to Harman.
- Burke sued for fraudulent misrepresentation and negligent misrepresentation, alleging Harman misrepresented (or negligently misrepresented) the blanket’s origin and value and, given Harman’s experience and library, should have known what it was.
- At trial, Burke sought to introduce the deposition testimony of Ralph Silverheels; Silverheels refused to answer certain cross-examination questions on collateral matters, and the court excluded the entire deposition.

## Issues

1. Whether the trial court erred by excluding Silverheels’ deposition because the witness refused to answer certain collateral cross-examination questions.
2. Whether the trial court erred in directing a verdict for Harman on negligent misrepresentation based on its view that Nebraska’s out-of-pocket damages rule left Burke with only de minimis damages.

## Decision

- The jury returned a verdict for Harman on Burke’s fraudulent misrepresentation claim.
- The trial court directed a verdict for Harman on Burke’s negligent misrepresentation claim, concluding Burke had essentially no recoverable out-of-pocket loss beyond his initial $115 expenditure.
- The Nebraska Court of Appeals held the trial court abused its discretion by excluding the Silverheels deposition when the unanswered questions were collateral and did not justify total exclusion.
- The Nebraska Court of Appeals held the trial court erred by directing a verdict on negligent misrepresentation because Burke’s claimed damages were potentially recoverable under the out-of-pocket rule.
- The Court of Appeals reversed and remanded for a new trial.

## Legal Principles

- Excluding an entire deposition because a witness refuses to answer collateral cross-examination questions is improper when the deposition otherwise contains relevant testimony; the refusal goes to weight and credibility rather than admissibility.
- Under Nebraska law, negligent misrepresentation damages are measured by the out-of-pocket rule, generally focusing on the difference between what the plaintiff gave up and what the plaintiff received due to the misrepresentation.
- For negligent misrepresentation, out-of-pocket loss may be assessed using fair market value at the time of the transaction; it is not necessarily limited to the plaintiff’s original acquisition cost of the property later conveyed.
- A directed verdict is improper when evidence would permit a reasonable jury to find negligent misrepresentation and resulting out-of-pocket damages under the correct measure.

## Conclusion

The Court of Appeals ordered a new trial because the trial court both improperly excluded deposition evidence based on collateral nonresponses and wrongly removed the negligent misrepresentation claim from the jury by applying an overly narrow view of out-of-pocket damages that could include the fair market value of the blanket minus the amount Burke received.


Burke v. Harman, 574 N.W.2d 156 (Neb. Ct. App. 1998)