                                                   [DO NOT PUBLISH]


           IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT           FILED
                  ________________________________ COURT OF APPEALS
                                                U.S.
                                                   ELEVENTH CIRCUIT
                                                   December 20, 2007
                            No. 06-11803            THOMAS K. KAHN
                  ________________________________      CLERK

                    D.C. Docket No. 02-00258-CV-4

TSG WATER RESOURCES, INC. (TSG),
TSG TECHNOLOGIES, INC., et al.,
                                                   Plaintiffs-
                                                   Counter-Defendants
                                                   Appellants,
                                versus

D’ALBA & DONOVAN CERTIFIED
PUBLIC ACCOUNTANTS, P.C.
                                                   Defendant-
                                                   Counter-Claimant
                                                   Appellee,

MORRIS BENCINI,
                                                   Defendant-Appellee.



                  _______________________________

              Appeal from the United States District Court
                 for the Southern District of Georgia
                _______________________________

                         (December 20, 2007)
Before CARNES and BARKETT, Circuit Judges, and COHN,* District Judge.

PER CURIAM:

       This appeal was brought following entry of final judgment against Plaintiffs

TSG Water Resources, Inc., et al. After considering the issues on appeal, we

reverse in part, affirm in part, and remand the case for further proceedings.

I.     Background

       TSG Tech, a wholly owned subsidiary of TSG Water, is a company that

builds and sometimes operates water treatment facilities. The issues in this case

relate to the preparation and auditing of TSG Tech’s financial statements for the

year 2000 and subsequent actions taken by its board members and other investors

allegedly in reliance on those statements.

       As of the year 2000, TSG Tech was being run by president James Walker,

who is not a party to this action, and a small number of officers. Appellee Morris

Bencini was hired as the Chief Financial Officer of the company in 1999, and was

responsible for preparing monthly and quarterly financial statements for the

company’s management, board of directors, and investors, including the financial

statements for the year 2000, as well as attending meetings of the board of



       *
          The Honorable James I. Cohn, United States District Judge for the Southern District of
Florida, sitting by designation.

                                                2
directors and answering questions about financial matters. Bencini was also

responsible for any attempts to acquire or merge with other companies, including

arranging financing for these acquisitions or mergers. Appellee D’Alba &

Donovan Certified Public Accountants, P.C. (“D&D”) was hired to conduct an

audit of the year 2000 financial statements.

      Due to a number of accounting errors, discussed in greater detail below, the

financial statements for the year 2000 significantly overstated the financial health

of the company and incorrectly indicated that it had turned a profit for the first

time in its history. The company’s cash flow situation reached a crisis point in

June 2001, and the board of directors was forced to decide whether to let the

company fail or to invest more capital. Believing the cash flow problems to be

short-term in nature, allegedly because of the positive outcome in the previous

year represented in the financial statements, several members of the board of

directors invested money themselves, and solicited outside investments from

friends and family members totaling over $1.45 million. When the accounting

errors were later discovered, and the true financial state of the company revealed,

the board of directors took steps to dilute Walker’s majority interest and remove

him as president.

II.   Procedural History

                                          3
      The case was originally filed in federal court, but was voluntarily dismissed

and re-filed in state court. The Complaint alleged claims of breach of fiduciary

duty, fraud, securities fraud, and breach of contract against both D&D and

Bencini. In addition, the Complaint alleged claims of professional negligence,

ordinary/gross negligence, and negligent retention and supervision against D&D.

Defendants D&D and Bencini removed the case to the United States District Court

for the Southern District of Georgia, asserting diversity jurisdiction. The District

Court denied Appellants’ Motion to Remand, finding that TSG Tech was a

resident of Georgia for purposes of diversity jurisdiction.

      Appellees each filed separate Motions for Summary Judgment. The District

Court issued an Order before the trial granting Bencini’s Motion in its entirety and

D&D’s Motion in part, leaving only the claims against D&D of professional

negligence, ordinary and/or gross negligence, and breach of contract for trial.

Following the trial, the jury reached a verdict in favor of TSG in the total amount

of $317,000, less 10% for contributory negligence. However, upon a renewed

Motion for Judgment as a Matter of Law, the District Court found that the

exculpatory language contained in the engagement letter was valid and barred

TSG’s remaining claims, and the Court entered final judgment in favor of D&D.

Appellants then filed the instant appeal.

                                            4
III.   Jurisdiction of the District Court

       On appeal to this Court, Appellants first contend that the District Court

lacked jurisdiction over the case and should not have denied their Motion to

Remand. The District Court found that Georgia was TSG Tech’s principal place

of business and state of incorporation, and denied the Motion to Remand.

Appellants contend on appeal that TSG Tech’s principal place of business is

Florida. Thus, Appellants argue, because Bencini is also a resident of Florida,

there was no complete diversity, and the District Court erred in denying the

Motion to Remand.

       We review rulings on the subject-matter jurisdiction of the District Court de

novo. MacGinnitie v. Hobbs Group, 420 F.3d 1234, 1239 (11th Cir. 2005);

Williams v. Best Buy Co., 269 F.3d 1316, 1317 (11th Cir. 2001). A clearly

erroneous standard of review is not applied to findings of fact that are premised

upon an erroneous view of controlling legal principles. Johnson v. Uncle Ben’s,

628 F.2d 419, 422 (5th Cir. 1980). The District Court’s factual findings regarding

a company’s principal place of business, however, are subject to a clearly

erroneous standard of review. Id.; Vill. Fair Shopping Ctr Co. v. Sam Broadhead

Trust, 588 F.2d 431, 434 (5th Cir. 1979). We examine the subject matter

jurisdiction of the trial court as a threshold matter before considering the merits of

                                          5
the appeal. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998).

      Complete diversity requires that no defendant in a diversity action be a

citizen of the same state as any plaintiff. 28 U.S.C. § 1332; Carden v. Arkoma

Assocs., 494 U.S. 185, 187 (1990). For purposes of diversity jurisdiction, a

corporation is a citizen of both the state in which it is incorporated and the state in

which it has its principal place of business. 28 U.S.C. § 1332(c). The legal

standard used in this Circuit to determine a company’s principal place of business

for purposes of diversity jurisdiction is the “total activities” test. MacGinnitie,

420 F.3d at 1239; Toms v. Country Quality Meats, Inc., 610 F.2d 313, 315 (5th

Cir. 1980). The “total activities test” is a combination of the “place of activities”

test and the “nerve center” test used in other circuits. MacGinnitie, 420 F.3d at

1239. Under the “place of activities” test, the location where most of the

company’s sales or production takes place is typically determined to be its

principal place of business. Id. Under the “nerve center” test, the location of the

company’s corporate offices is usually determined to be its principal place of

business. Id. When the results of these two tests differ, under the “total activities”

test, the district court must conduct a “somewhat subjective analysis” to choose

between the two results. Id. Eleventh Circuit cases have held that where a

company’s activities are not concentrated in one place, a district court may place

                                           6
greater emphasis on the “nerve center” test when determining principal place of

business. MacGinnitie, 420 F.3d at 1239 (interpreting Sweet Pea Marine, Ltd. v.

APJ Marine, Inc., 411 F.3d 1242, 1248 (11th Cir. 2005)).

      Appellants argue that the District Court placed inappropriate weight on the

“nerve center” factors because the physical activities of the company were

concentrated in Florida, not diffused throughout the Caribbean as the District

Court concluded. Upon review of the District Court’s Order, it appears that the

Court considered all the facts and made adequate findings to support its ruling. In

reciting the facts of the case, the Court stated that “on any given project, TSG

Tech does all of its design and engineering, much of its purchasing and most of its

fabrication in Gainesville [Florida].” (Order Denying Remand, p. 5.) However,

the Court also noted that “many of the water and waste water treatment plants that

TSG Tech operates are in the Caribbean” and “in 2002, most of TSG Tech’s

revenue came from work in the Caribbean.” (Id. at 3.) Ultimately, the Court

found that “while TSG Tech comes into contact with the public in Florida, many

of the daily activities of TSG Tech occur in Florida, and TSG Tech maintains its

tangible assets in Florida, the activity which occurs in Georgia is more

significant.” (Id. at 7.) Thus, the District Court clearly articulated its finding that

many of TSG Tech’s activities, though not a majority of them, were carried on in

                                           7
Florida. In light of the holding in MacGinnitie, this finding by the District Court

is adequate to support the conclusion that the “nerve center” factors should have

greater weight in the determination of the principal place of business.

      Furthermore, the record before the District Court contained substantial

evidence of TSG’s activities in Georgia that supports the Court’s ruling. TSG

Tech’s corporate records, banking records, accounting records, and original

contracts are maintained at the Savannah, Georgia headquarters of its parent

company, TSG Water. TSG Water directs the activities of TSG Tech and other

subsidiaries from the Georgia headquarters. The decision-makers for TSG Tech,

including its directors and two of its officers, are also located in Georgia. Only

one of the four officers is located in Florida, and the TSG Tech board of directors

has never met in Florida. The payroll, insurance, and accounts payable for TSG

Tech are controlled and directed by the Georgia office, which also prepares

financial statements and invoices. The accounting and legal professionals used by

TSG Tech are also located in Georgia. Additionally, TSG Tech’s primary

operating bank account is located in Georgia, and all the signatories to the account

are persons located in Georgia. On this record, and with greater emphasis properly

placed on the “nerve center” factors pursuant to MacGinnitie, the District Court’s

finding that TSG Tech’s principal place of business was in Georgia is not clearly

                                          8
erroneous. Thus, the District Court’s denial of the Motion to Remand is affirmed.

IV.   Summary Judgment

      Appellants also appeal the District Court’s grant of summary judgment in

favor of Appellee Bencini on the breach of fiduciary duty claim and in favor of

Appellees Bencini and D&D on the fraud, securities fraud, and negligence claims.

We review de novo the District Court’s grant of summary judgment, and apply the

same legal standard as the District Court. Watkins v. Ford Motor Co., 190 F.3d

1213, 1216 (11th Cir. 1999). The District Court may grant summary judgment “if

the pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.” Fed. R. Civ. P. 56(c).

      The District Court granted summary judgment in favor of Appellee Bencini

on the breach of fiduciary duty claim, basing its ruling on the business judgment

rule, and granted summary judgment in favor of Appellees Bencini and D&D on

the fraud, securities fraud, and negligence claims.

      A.     Business Judgment Rule and the Breach of Fiduciary Duty Claim

       In granting summary judgment in favor of Bencini on the breach of

fiduciary duty claim, the District Court concluded that Bencini was protected by

                                          9
the business judgment rule. Appellants contend, on appeal, that a genuine issue of

material fact exists as to whether Bencini acted fraudulently, in bad faith, or in an

abuse of his discretion. “The business judgment rule protects directors and

officers from liability when they make good faith business decisions in an

informed and deliberate manner.” In re Munford, Inc., 98 F.3d 604, 611 (11th Cir.

1996). The presumption is that they have acted “on an informed basis, in good

faith and in the honest belief that the action taken was in the best interests of the

company.” Cottle v. Storer Commc’n, Inc., 849 F.2d 570, 575 (11th Cir. 1988).

Unless this presumption is rebutted, they cannot be held personally liable for

managerial decisions. Stepak ex rel. Southern Co. v. Addison, 20 F.3d 398, 403

(11th Cir. 1994). However, officers may be held liable where they engage in

fraud, bad faith, or an abuse of discretion. Cottle, 849 F.2d at 574. To survive a

motion for summary judgment, a plaintiff “must allege specific facts that show a

genuine issue of material fact concerning fraud, bad faith or abuse of discretion.”

Id. at 575.

      The core of Plaintiffs’ claims against Bencini are the accounting errors he

made in preparing the financial statements and his failure to advise the board of

directors about those errors. Throughout the year 2000, Bencini provided

financial statements to management that showed the company was earning a profit.

                                          10
The consolidated financial statements for the entire year 2000 showed a profit of

over $38,000, making it the first year in which the company had ever shown a

year-end profit. Bencini engaged Appellee D&D to conduct an audit of these

year-end financial statements, and on April 27, 2001, D&D issued its report that

the company had earned an even greater profit of $68,926. Based on this

information, the board and management concluded that TSG Tech had “turned a

corner” financially.

      Subsequent review, however, revealed that a number of accounting errors

contained in the year-end reports resulted in a major over-statement of the

company’s financial well-being. These included:

             1.    Failure to follow percentage of completion rule, resulting in the

                   entire projected profit for the Burnt Store project being

                   included in a single year;

             2.    Booking of a deferred tax asset without adequate evidence that

                   the company would likely be profitable in the near future, as

                   required;

             3.    Improperly allowing capitalization of marketing costs;

             4.    Failing to account for the company’s liability for 401(k)

                   contributions;

                                        11
             5.    Capitalizing costs for development of vessel prototypes despite

                   the fact that the prototypes underwent destructive testing and,

                   thus, could not be added to inventory;

             6.    Failing to account for a tax liability to the United States Virgin

                   Islands.

      By May 2001, Bencini discovered that TSG was experiencing a cash flow

problem, and reexamined the accounting for the previous year. He discussed the

accounting errors with personnel at D&D, and informed TSG Tech’s president,

James Walker, of the impending cash flow problem, but did not warn the board of

directors or any investors. The annual meeting of directors and shareholders was

held on May 22, 2001, at which Walker told the attendees that the company had

“turned the corner” financially after becoming profitable for the first time in 2000.

Bencini remained silent at this meeting.

      In early June 2001, the threat of a lien on the Burnt Store project forced the

directors to make prompt decisions regarding whether to invest additional capital.

The board of directors convened a meeting at which Bencini was not present. At

this meeting, Walker provided explanations for the cash shortfall, and presented

the directors with a cash flow spreadsheet that Bencini had prepared showing that

the company could break even that year if it obtained certain projects and the

                                           12
proposed investments were made. The spreadsheets also showed monthly

overhead expenses totaling $250,000, which Appellants allege is actually

understated by approximately $80,000 per month. Several of the board members

and other investors invested varying amounts of money totaling over $1.45 million

in June and July 2001.

      The District Court concluded that the business judgment rule protected

Bencini’s discretionary decisions regarding the accounting treatment applied to

accurate core financial data in the year 2000 statements. The Court noted that no

allegations of self-dealing on the part of Bencini had been made, and concluded

that Bencini had discharged his duty to act in an informed and deliberate manner,

as required by the business judgment rule, by relying on outside accounting

experts. However, consulting with outside experts alone is not enough to satisfy

the requirements of the business judgment rule. The cases cited by the District

Court, and by Appellees in their briefs, stand only for the proposition that such

consultation weighs in favor of a finding that the officer did not act in bad faith or

abuse his discretion. In Munford, the court stated that “in this case, the record is

replete with evidence that the directors and officers consulted legal and financial

experts throughout the solicitation and negotiation for a purchaser for Munford,

Inc.,” and concludes that applying the business judgment rule, the directors

                                          13
satisfied their duties. Munford, 98 F.3d at 611. The Munford court considered the

totality of the facts in the case, not just the fact that the directors consulted with

outside professionals, and the holding of the case is not based solely on the

consultation. Similarly, in Cottle, the court reasoned that “the fact that the board

did consult [an outside financial advisor] simply weighs in favor of finding that

the directors did not abuse their discretion.” 849 F.2d at 578. The simple fact that

Bencini consulted with D&D is, therefore, not determinative.

      Furthermore, the allegations and evidence in this case do create a disputed

issue of material fact as to whether Bencini acted fraudulently, in bad faith, or in

an abuse of his discretion. Contrary to the District Court’s statement that no

allegations of self-dealing had been made, Appellants have presented evidence

that could indicate collusion between Bencini and D&D, including Bencini’s prior

relationships with individual accountants at D&D. Appellants have also presented

evidence indicating that Bencini had much to gain from misrepresenting the

financial health of the company. Even if Bencini did not act in bad faith, a

genuine issue of material fact exists as to whether he abused his discretion in

applying the incorrect accounting treatment and then not informing the board of

directors of the error. The record shows that Bencini was aware of the

inaccuracies sometime in May 2001, but he remained silent at a board meeting on

                                           14
May 22, 2001. Although he left the company on short notice soon after this

meeting, Bencini also prepared cash flow spreadsheets that were used specifically

for the purpose of facilitating the board’s decision regarding the company’s cash

flow crisis, and these spreadsheets allegedly understated overhead costs by

approximately $80,000 per month. These facts, at a minimum, demonstrate a

genuine issue of material fact as to whether Bencini acted in bad faith or abused

his discretion and are sufficient to defeat a motion for summary judgment.

Therefore, the District Court’s grant of summary judgment to Appellee Bencini on

the breach of fiduciary duty claim is reversed.

      B.     Fraud and Securities Fraud Claims

      The District Court also granted summary judgment in favor of both Bencini

and D&D on the fraud and securities fraud claims, concluding that there was

inadequate evidence in the record to support findings of proximate cause,

justifiable reliance, or intent. Appellants appeal this Order, arguing that the record

contained genuine issues of material fact regarding these issues.

      The tort of fraud has five elements: (1) false representation by a defendant;

(2) scienter; (3) intention to induce the plaintiff to act or refrain from acting in

reliance upon the representation; (4) justifiable reliance by the plaintiff upon the

representation; and (5) damage to the plaintiff directly and proximately caused by

                                           15
the reliance. Middleton v. Troy Young Realty, Inc., 572 S.E.2d 334, 336 (Ga. Ct.

App. 2002).

      Securities fraud under Georgia law also has five elements: (1) a

misstatement or omission, (2) of a material fact, (3) made with scienter, (4) on

which the plaintiff relied, (5) that proximately caused his injury. GCA Strategic

Inv. Fund v. Joseph Charles & Assocs., 537 S.E.2d 677, 682 (Ga. Ct. App. 2000).

“Misrepresentations are not actionable unless the complaining party was justified

in relying thereon in the exercise of common prudence and diligence.” Id.

      1.      Proximate Cause

      Proximate cause is ordinarily a factual determination to be made by the jury,

but “plain and indisputable cases may be decided by the court as a matter of law.”

Thomas v. Food Lion, LLC, 570 S.E.2d 18, 21 (Ga. Ct. App. 2002). In

determining whether or not summary judgment is appropriate, courts must

consider “whether the causal connection between the defendant’s conduct and the

injury is too remote for the law to countenance a recovery.” Id. The District Court

in this case concluded that “this is one of those plain and indisputable cases”

where no reasonable jury could find proximate cause. The Court’s analysis

focused on the company’s major financial problems, which were known to the

plaintiff investors before they chose to make major “last ditch effort” loans to save

                                         16
the company. The Court reasoned that the cause of the investors’ injuries was the

combination of the company’s extremely high expenses, lack of major income

generation, and poor management by Walker, not any misrepresentations made by

Bencini.

      Although Walker’s poor management and the company’s high operating

expenses certainly caused the company to reach a crisis point in June 2001, it is

the subsequent decisions of the board members and investors, in reliance on

Bencini’s representations, and the following consequences that form the basis of

the Complaint in this action. Appellants do not argue that the company would not

have faced a financial crisis absent the alleged misrepresentations, they argue that

the crisis would have been addressed differently and more effectively had they

been given accurate financial statements. The record contains testimony from

TSG’s directors that had they known the 2000 financial statements were incorrect,

they would have done in the summer of 2001 what they actually did do later in the

year when they discovered the errors: take control from Walker, fire him, and cut

payroll and expenses to save the company money. Furthermore, the year-end

profit shown in the erroneous accounting statements for the year 2000 provided

strong evidence to the board that the basic business model of the company was a

good one, and that any financial problems were temporary in nature. The

                                         17
individual investors testified that their decisions to invest further in the company

would have been very different had they known that the financial statements were

inaccurate and that the business model was not, in fact, working.

      The District Court characterized the board members’ testimony as a mere

“belief” that Walker would have lost control of the company earlier than he did,

and stressed that evidence showing that an affiant “believes” something to be true

is insufficient to defeat summary judgment. See Pace v. Capobianco, 283 F.3d

1275, 1278-79 (11th Cir. 2002). However, in light of the evidence that the board

did, in fact, remove Walker later in 2001, once the errors were discovered, it is

difficult to see how this testimony can be considered to be a mere “belief.” Given

this evidence in the record, we cannot agree with the District Court that it is “plain

and indisputable” that proximate causation could not have been established.

      2.     Justifiable Reliance

      Claims for both fraud and securities fraud require a finding of justifiable

reliance under Georgia law. To show justifiable reliance on the misrepresented

information in support of a securities fraud claim, a plaintiff “must show that ‘with

the exercise of reasonable diligence [it] still could not have discovered the truth

behind the fraudulent omission or misrepresentation.’” GCA Strategic Inv. Fund,

537 S.E.2d at 464. To show justifiable reliance to support a common law fraud

                                          18
claim, a plaintiff must “prove that it exercised due care to discover the fraud.” Id.

The fundamental principle on this issue is that “misrepresentations are not

actionable unless the complaining party was justified in relying thereon in the

exercise of common prudence and diligence.” Id. “While questions of due

diligence often must be resolved by the trier of fact, that is not always the case.

One may fail to exercise due diligence as a matter of law.” Fowler v. Overby, 478

S.E.2d 919, 921 (Ga. Ct. App. 1996).

       The District Court concluded that the investor plaintiffs, both those from

within the company’s board of directors and the outside investors,1 could not show

justifiable reliance as a matter of law. In reaching this conclusion, the Court

considered a Georgia Court of Appeals case that explained that “an investment

decision based solely or primarily on an accountant’s audit report would be, in

most cases, difficult to justify.” White v. BDO Seidman, LLP, 549 S.E.2d 490,

494 (Ga. Ct. App. 2001). The Court considered the evidence that the inside

investors were present at the June 2001 meeting and knew the dire financial

situation of the company. The Court concluded that, at a minimum, the negative


       1
          We, like the District Court, differentiate between “inside” and “outside” investors. The
“inside” investors are Directors of the company who also invested – Donald Mayer, Paul
Steward, and Jonathan Sprague. The “outside” investors are friends and family members of
Mayer who invested but were not otherwise involved with the company – Robert Bolz, John
Bolz, William Holden, and OGM Family Limited Partnership.

                                               19
information about the company’s financial health should have put the inside

investors on notice that they should “further explore the financial health of TSG

before making any more investments in the company.” (Order Granting Summary

Judgment, p. 18.)

      Based on White, we agree with the District Court that the investors cannot

maintain the fraud claims against D&D because they were not justified in relying

solely on D&D’s audit report. However, we cannot reach the same conclusion

with respect to the claims against Bencini. Unlike the situation presented in

White, these investors did not rely solely on the financial statements in deciding to

make their investments. These investors testified that they considered all the

financial information presented to them, and relied on the financial statements for

the purpose of evaluating whether the company was fundamentally “broken” or

the cash crisis was merely a short-term problem that could and should be remedied

with further investments. To that end, they looked to the 2000 financial

statements and relied upon them to the extent that they established that the

company had shown a profit in the recent past. Their reliance on the financial

statements as an accurate representation of the financial health of the company in

2000 was even more justifiable in light of the representations made by Walker at

the May 2001 board meeting that the company had “turned the corner,” to which

                                         20
Bencini did not object. In sum, the inside investors testified that they relied on the

2000 financial statements to gauge the severity of the crisis that arose in the

summer of 2001and to make decisions about how to address that crisis. In a

footnote, the Court noted that it “finds unpersuasive Plaintiffs’ attempts to

characterize TSG’s June 2001 severe cash flow problem as a short-term cash

shortfall.” (Order, p. 17.) This statement, however, appears to be a simple factual

determination that the Court may not make at the summary judgment stage, where

the facts must be construed in favor of the non-moving party. Given the evidence

in the record, there appears to have been a genuine issue of material fact regarding

justifiable reliance, and summary judgment on this basis was improper as to the

claims against Bencini.

      The outside investors, however, are in a distinctly different position from

the inside investors who actually reviewed and relied upon the financial

statements. The District Court concluded that the outside investors did not

reasonably rely on the 2000 financial statements. The evidence in the record is not

disputed on this point, and shows that these outside investors did not rely on any

financial statements, but rather relied on the representations of Mayer, one of the

inside investors who was privy to the information as discussed above. This type

of “indirect reliance” was clearly rejected in White, where the Georgia Court of

                                          21
Appeals held that Georgia law does not permit indirect reliance to substitute for

proof of actual reliance. 549 S.E. at 493. Accordingly, we affirm the District

Court’s entry of summary judgment on the fraud claims as to the outside investors.

      3.     Intent

      To prove a claim for fraud, a plaintiff must show intent to mislead. “A

misrepresentation is intended to deceive where there is intent that the

representation be acted upon by the other party.” Petzelt v. Tewes, 581 S.E.2d

345, 347 (Ga. Ct. App. 2003). Proof of fraud is typically not susceptible of direct

proof, and so circumstantial evidence must be used to establish fraudulent intent.

Id. Thus, “it is peculiarly the province of the jury to pass on these circumstances

showing fraud. Except in plain and indisputable cases, scienter in actions based

on fraud is an issue of fact for jury determination.” Id.

      The District Court concluded that “there is no evidence to support the claim

that Bencini and D&D knew that the Financial Statements would be used in

connection with an offer to sell securities in TSG or that the Investor Plaintiffs

would be solicited for investment capital.” (Order Granting Summary Judgment,

p. 21.) Contrary to Appellants’ arguments, a showing of recklessness under a

theory of constructive fraud does not provide an alternate theory on which

Appellants’ common law fraud claim may be based. Constructive fraud is “not

                                          22
creative of any independent right of action for damages in tort in favor of the

injured party; but [the misrepresentations] may support an action in equity to

rescind a contract so induced.” Penn Mut. Life Ins. Co. v. Taggart, 144 S.E. 400,

402 (Ga. Ct. App. 1928). Because Appellants seek to recover money damages in

this action, this theory is inapplicable, and Appellants may not satisfy the intent

element of their fraud claim with evidence of recklessness.

       However, a showing of severe recklessness is adequate to support

Appellants’ claims for securities fraud. Although common law fraud in Georgia

requires a showing that the misrepresentations were made with the intention and

purpose of deceiving the plaintiff, securities fraud under Georgia law requires only

that plaintiffs show that the representations were made with scienter. The United

States Supreme Court has left open the question of whether scienter in the context

of securities fraud can consist of not only intent, but also recklessness. See Ernst

& Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976). The Eleventh Circuit,

however, has concluded that a showing of “severe recklessness” can satisfy the

scienter requirement in a securities fraud case. McDonald v. Alan Bush Brokerage

Co., 863 F.2d 809, 814 (11th Cir. 1989).2 Thus, the District Court’s blanket


       2
          Although Ernst & Ernst and McDonald both involve federal claims for securities fraud,
they are instructive here. “[T]o evaluate a claim for securities fraud under [Georgia statutory
law], we look to the similar elements a plaintiff must allege under section 10(b) of the Securities

                                                23
finding that the record contained no evidence to show that D&D and Bencini

actually intended to deceive the investors fails to differentiate between the two

materially different state of mind standards in claims for fraud and claims for

securities fraud. In addition to actual intent, severe recklessness would also be

adequate to satisfy the scienter requirement in a claim for securities fraud.

“‘Severe recklessness is limited to those highly unreasonable omissions or

misrepresentations that involve not merely simple or even inexcusable negligence,

but an extreme departure from the standards of ordinary care, and that present a

danger of misleading buyers or sellers which is either known to the defendant or is

so obvious that the defendant must have been aware of it.’” McDonald, 863 F.2d

at 814 (quoting Broad v. Rockwell Int’l Corp., 642 F.2d 929, 961-62 (5th Cir.

1981)).

       We must now consider whether adequate evidence existed in the record to

create a genuine issue of material fact as to the intent requirement for Appellants’

fraud claim and the scienter requirement for Appellants’ securities fraud claim.

Appellants argue that the sheer magnitude, number, and nature of the errors could

give rise to a reasonable inference that Bencini intended to conceal the true

financial condition of the company and mislead them. They also point to an email


Act of 1934.” GCA Strategic Inv. Fund, 537 S.E.2d at 682.

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from Bencini to an accountant at D&D wherein he advises D&D that TSG was

attempting to acquire other businesses and would need as much as $50 million to

complete these desired acquisitions, of which $3 million to $10 million could be

raised through the sale of stock. This email indicates that as of February 2000,

when the email was sent, both Bencini and D&D were aware that significant

efforts to obtain capital would be forthcoming, and this evidence could also

support an inference that they intended to manipulate the accounting figures to

appeal to potential investors. The record in this case also shows that capital had

been raised from investments by the directors in the past, and so a jury could also

infer from this that D&D and Bencini knew the directors could be called upon to

invest again in the future. Although these pieces of evidence, taken individually,

may not provide adequate evidentiary support on the element of intent, taken

together they could support a reasonable inference by a jury that Bencini intended

to mislead investors. At the very least, this evidence could support a finding that

Bencini’s errors and subsequent failure to correct the board members’ impression

of the company’s financial health constituted severe recklessness. On this record,

we conclude that adequate evidence existed to preclude summary judgment on the

element of intent as to both the common law fraud and securities fraud claims.

V.    Judgment as a Matter of Law Based on Exculpatory Clause

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      Appellants also argue that the District Court erred in granting judgment as a

matter of law in favor of D&D on the claims of professional negligence, ordinary

and/or gross negligence, and breach of contract following the trial. The Court

based its decision on the exculpatory language contained in D&D’s engagement

letter, concluding that this language barred the claims raised against D&D as a

matter of law. The language on which the Court relied states that D&D is released

from liability for any consequential, indirect, lost profit, or similar damages

relating to D&D’s services, except where those damages were the result of willful

misconduct or fraud. (Order Granting D&D’s Renewed Motion for Judgment as a

Matter of Law, p. 2.) Because the Court had previously entered summary

judgment in favor of D&D on the fraud claims, and the jury’s verdict was based on

negligence, the Court concluded that this clause barred recovery.

      We review de novo the District Court’s grant of judgment as a matter of law

under Federal Rule of Civil Procedure 50, using the same standard as the District

Court. Cleveland v. Home Shopping Network, 369 F.3d 1189, 1192 (11th Cir.

2004). Judgment as a matter of law is appropriate “where there is no legally

sufficient evidentiary basis for a reasonable jury to find for that party on that

issue.” Id. We must review all the evidence in the record and draw all reasonable

inferences in favor of the nonmoving party. Id. “Credibility determinations, the

                                          26
weighing of the evidence, and the drawing of legitimate inferences from the facts

are jury functions, not those of a judge.” Id. (quoting Reeves v. Sanderson

Plumbing Prods., 530 U.S. 133, 150 (2000)).

      Appellants argue on appeal that it was error for the District Court to uphold

and apply the exculpatory clause because it violates public policy. “Contracts may

be avoided by the courts as against public policy only in cases free from doubt and

where the injury to the public is clear.” Emory Univ. Porubiansky, 282 S.E.2d

903, 904-905 (Ga. 1981) (citing Phenix Ins. Co. v. Clay, 28 S.E. 853 (Ga. 1897)).

However, Appellants point to no case in Georgia holding that an exculpatory

clause in an engagement letter from an accounting firm is violative of public

policy. Rather, they analogize to other types of professionals, such as medical or

dental professionals, who courts have held may not shield themselves from

liability with an exculpatory clause. See Porubiansky, 282 S.E.2d at 905; Olson v.

Molzen, 558 S.W.2d 429, 430 (Tenn. 1977). Appellants argue that, like doctors

and dentists, accountants must be licensed in Georgia, and that the state has a valid

interest in assuring that licensed accountants comport with the standards of care

established for the profession. Further, they argue that the separate common law

duty owed by D&D to the Appellants, arising apart from its contractual

obligations, is unique to licensed professionals and supports a conclusion that they

                                         27
may not contract out of their obligation to exercise reasonable care.

      However, this Court is not persuaded that the duties of an accountant are

analogous to the duties of a medical or dental professional. In fact, courts within

this Circuit have concluded that an exculpatory clause in a contract may be

enforced, even where the contracting party, a securities broker, is a professional

regulated by the state. Barton v. Peterson, 733 F. Supp. 1482, 1489 (N.D. Ga.

1990). In that case, the court emphasized that “the service is not one of practical

necessity, nor are brokers generally willing to perform their services for any

member of the public.” Id. The court further reasoned that the parties were not of

such unequal bargaining power to make the contract a contract of adhesion. Id.

Likewise, in the instant case, Appellee D&D is a firm of financial professionals

who provide accounting services to sophisticated clients with equal bargaining

power. Unlike medical or dental services, accounting services are not a practical

necessity. Furthermore, as D&D points out, there exists no state statute that

specifies a duty of care for accountants, as there is for medical professionals.

Given these distinct differences, we agree with the District Court that an

exculpatory clause in a contract for the services of an accounting professional is

enforceable.

      Even if, as a general rule, exculpatory language eliminating the duty of care

                                          28
for accountants was unenforceable as a matter of public policy, the particular

exculpatory clause at issue in this case would still be enforceable. This is because

the exculpatory language used by D&D in its engagement letter does not eliminate

the duty of care, or preclude legal action against D&D entirely, it simply limits the

type of damages that may be sought. The Porubiansky decision, in fact, explicitly

left the door open to the possibility that even medical or dental professionals could

limit liability in some ways, “agree[ing] that because the clinic is part of a teaching

facility it may require that prospective patients waive the right to insist on

complete treatment.” 282 S.E.2d at 904. Thus, we agree with the District Court

that the exculpatory language in D&D’s engagement letter does not violate public

policy and should be enforced. The District Court’s entry of judgment as a matter

of law in favor of Appellee D&D on the claims of professional negligence,

ordinary and/or gross negligence, and breach of contract is affirmed.

VI.   Attorneys’ Fees, Prejudgment Interest, and Correction of Final
      Judgment

      Finally, Appellants appeal the District Court’s denial of attorneys’ fees

incurred in proving that D&D was negligent in auditing the Burnt Store financials,

denial of TSG’s request for pre-judgment interest, and award of attorneys’ fees

and costs to Bencini. The decision whether or not to award attorneys’ fees based



                                          29
on D&D’s refusal to stipulate is within the discretion of the District Court, and we

find no abuse of discretion in this instance. Additionally, the issue of prejudgment

interest is now moot in light of our affirmance of the District Court’s entry of

judgment as a matter of law in favor of D&D. Thus, these two orders of the

District Court are affirmed. However, in light of our partial reversal of the order

of summary judgment entered in favor of Bencini, we reverse the District Court’s

entry of Final Judgment in favor of Bencini for attorney’s fees and costs, and

remand the matter to the District Court for further proceedings.

VII. Conclusion

      For the foregoing reasons, the District Court’s denial of the plaintiff’s

motion to remand this case to state court is AFFIRMED. The District Court’s

Order Granting Summary Judgment in favor of Bencini and D&D is VACATED

in part as to the breach of fiduciary duty claim of all plaintiffs against Bencini, and

the fraud and securities fraud claims of TSG and the inside investors against

Bencini. These claims are REMANDED to the District Court for further

proceedings consistent with this opinion. The District Court’s Order granting

judgment as a matter of law in favor of D&D on the claims of professional

negligence, ordinary and/or gross negligence, and breach of contract is

AFFIRMED. The District Court’s Order denying the plaintiffs’ request for

                                          30
attorneys’ fees and prejudgment interest is AFFIRMED. The District Court’s

entry of final judgment in favor of Bencini for attorneys’ fees and costs is

VACATED and remanded to the District Court for further proceedings consistent

with this opinion.




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