'Mathi looked me in the eye this very morning and swore that the dwarves were proud to have the Elves of Duillond as neighbours. Such dishonesty, and right to my face! I thought he was truer than that, but I should have known better. No dwarf can be trusted, when you have works of art or history that he desires to possess!
Go to Mathi Stouthand and demand that he order his dwarves to release Avorthal. If he wants war, he shall have it. You must tell him this: I do not trust myself to speak to one so dishonest without striking him.
You will find Mathi on the upper levels of Gondamon. Make haste! We may have need to return at once to Duillon to prepare for war.'
You discovered that Avorthal is indeed being held captive by dwarves, which seems to confirm that they have turned against the Elves of Duillond.
Talk to Mathi
Mathi Stouthand is on the upper levels of Gondamon.
Gailthin, angered by Mathi Stouthand's apparent duplicity, has instructed you to confront the Lord of Gondamon with the evidence of Avorthal's captivity and demand the release of the Elf-prince.
At this point, the quest chain changes from Vol. 1, Prologue - Ered Luin Epic Prologue (Elf Path) to Vol. 1, Prologue - Ered Luin Epic Prologue (United Path)
Leads To: Mutual Dislike