                                                                [PUBLISH]


           IN THE UNITED STATES COURT OF APPEALS
                                                              FILED
                  FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                    ________________________ ELEVENTH CIRCUIT
                                                       SEPTEMBER 23, 2011
                          No. 06-10715                     JOHN LEY
                    ________________________                CLERK


               D. C. Docket No. 04-00005-CV-HLM-4

JIMMY LEDFORD,
LARRY O'DELL,
BRYAN WALKER,
DYNAVISION GROUP, LLC,
SIGNATURE LEASING, LLC,


                                                       Plaintiffs-Appellants
                                                           Cross-Appellees,

                                versus

SHELBY PEEPLES, JR.,
PFLC, LLC,
INTERNAL MANAGEMENT, INC.,

                                                      Defendants-Appellees
                                                         Cross-Appellants.

                    ________________________

             Appeals from the United States District Court
                 for the Northern District of Georgia
                   _________________________

                        (September 23, 2011)
Before TJOFLAT, EDMONDSON and GIBSON,* Circuit Judges.

TJOFLAT, Circuit Judge:

       Upon the majority vote of the judges in this Court in active service, on

January 19, 2011, the en banc Court vacated this panel’s prior opinion and granted

rehearing en banc. See Ledford v. Peeples, 630 F.3d 1345 (11th Cir. 2011) (en

banc); 605 F.3d 871 (11th Cir. 2010), vacated and reh’g en banc granted, 630 F.3d

1345. The en banc Court has concluded that Appellees in their cross appeal have

not shown that the district court abused its discretion in denying sanctions.

       Because the en banc Court considered only the sanctions issue, we hereby

reissue Parts I, II, IV, and V of the panel opinion of May 6, 2010, as set forth

below as now Parts I, II, III, and IV. We affirm the district court’s grant of

summary judgment to Appellees.

       In this case, two parties, X and Y, each owned a fifty percent interest in a

limited liability company that manufactured and sold carpets. X provided the

financing; Y ran the company and marketed its product. The parties had a buy-sell

agreement that enabled either party to buy out the other at any time by offering to

purchase the other’s interest in the company at an offered price. After receiving an



*
 Honorable John R. Gibson, United States Circuit Judge for the Eighth Circuit, sitting by
designation. Judge Gibson retired from service on January 26, 2011. This case is decided by a
quorum of the panel pursuant to 28 U.S.C. § 46(d).

                                               2
offer, the offeree would have thirty days in which to accept the offer or elect to

purchase the offeror’s interest at the offered price.

      Y offered to purchase X’s interest for $3.5 million. X demanded to know

whether Y would be borrowing the funds from Z, who earlier had expressed an

interest in purchasing the company. Y said that neither Z nor anyone else would be

providing the money. X asked Z if it was financing Y; Z said no.

      X, unable to operate the factory and market its product without Y or

someone with Y’s expertise, had to sell and therefore accepted Y’s offer. Prior to

the date set for the closing, however, X told Y that it would not go forward with

the closing unless Y represented that no third party was providing the funds to pay

X. Y responded that it had no obligation to disclose the source of its funds and that

X was bound by contract to transfer its interest to Y unconditionally. X tacitly

agreed by appearing at the closing and transferring its interest to Y.

      X subsequently learned that Z had provided the purchase price and,

following the closing, had acquired the factory’s assets and hired Y to run the

business. After discovering Z’s involvement, X took Y to court. In a complaint

filed in state court, X alleged that Y breached a fiduciary duty to tell it that Z had

financed the purchase of its interest, and moreover, that Y’s failure to disclose Z’s




                                            3
involvement fraudulently induced X to sell its interest to Y.1 X also brought suit

against Z in federal district court, the case now before us, claiming that Z violated

federal securities law, state securities law, and state common law by denying

involvement in the transaction and causing X to sell its interest to Y.

       X lost both cases on summary judgment.2 Both courts concluded that Y’s

alleged misrepresentation about Z’s involvement in the buy-out did not cause X to

sell its interest. Rather, X sold because it was in X’s economic self-interest to do

so. X needed Y’s skills; had X purchased Y’s interest, it would have had no one to

run the carpet factory or to market its product. X therefore had no economically

viable option but to sell.

       The district court granted Z summary judgment. X appealed the district

court’s decision rejecting its claim. This opinion is organized as follows. Part I

identifies X, Y, and Z and sets out the events that have given rise to this

controversy.3 Part II canvasses the litigation as it evolved in state court and spread


1
  Invoking the same fiduciary duty and fraudulent inducement theories, X also claimed that Y
had wrongfully obtained the parcel of real estate on which the carpet factory was located.
2
  X lost its state case with the exception of a claim against Y involving the real estate referred to
supra note 1. That claim is still pending in state court.
3
  In doing so, we are mindful that we are reviewing a summary judgment. Thus, the facts we
recite in portraying the relevant events are those established by the evidence, taken in the light
most favorable to the non-movant, X, and the inferences reasonably drawn therefrom. Watkins
v. Ford Motor Co., 190 F.3d 1213, 1216 (11th Cir. 1999).


                                                  4
to federal court; describes the state trial and appellate courts’ disposition of X’s

claims against Y and the district court’s disposition of X’s claims against Z; and,

after that, delineates the issues that X’s appeal to this court presents. Part III

assesses the merits of X’s appeal as to the securities law claims. Part IV examines

X’s claim that Z aided and abetted Y’s breaches of fiduciary duty towards X.

                                             I.

                                             A.

       X is DynaVision Group, LLC (“DynaVision”)4 and its principal owners,

Jimmy Ledford, Larry O’Dell, and Bryan Walker.5 Y is Brenda Smith, Robert

Thomas, and Bryan Ownbey. Z is Shelby Peeples.

       In July 1998, Paul Walker, Bryan Walker’s father, approached Smith,

Thomas, and Ownbey, experienced managers in the carpet manufacturing industry

in Dalton, Georgia, with the idea of forming a company to manufacture and sell

carpets to hotels, motels, restaurants, and others engaged in the hospitality

4
  DynaVision and the other LLCs involved in this case were organized under the Georgia
Limited Liability Company Act, O.C.G.A. §§ 14-11-100, et seq.
5
   Ledford, O’Dell, and Walker each owned 29% of DynaVision. Lamar Dixon and Dan Bowen
owned the remaining 13% but had no active participation in the events that gave rise to the
litigation at hand. Under Georgia law, the ownership rights of the members of a limited liability
company are referred to as interests, rather than shares, which indicate ownership rights in a
corporation. See O.C.G.A. § 14-11-101 (defining “[l]imited liability company interest” as “a
member’s share of the profits and losses of a limited liability company and a member's right to
receive distributions”); O.C.G.A. § 14-2-140 (defining “shares” as the “units into which the
proprietary interests in a corporation are divided”).


                                                  5
business. Soon thereafter, Smith, Thomas, Ownbey, and Paul Walker formed

Signature Hospitality Carpets, LLC (“Signature”), dividing the company’s interests

equally between DynaVision on one hand and Smith, Thomas, and Ownbey on the

other.6

          Under Signature’s operating agreement, Smith, Thomas, and Ownbey

managed the company, and DynaVision provided the capital.7 Signature sold

carpet to hospitality customers—mainly through contacts that Smith, who was well

respected in the industry, had previously established—and arranged for

manufacturers in the Dalton area to fill the orders. DynaVision provided the funds

that Signature needed to pay the manufacturers by establishing a $200,000 line of

credit at a bank near Dalton, the First National Bank of Chatworth (“FNBC”).8

          Signature initially operated out of rented office space; once the company

established itself as a going concern, however, its owners decided to find their own


6
  Smith, Thomas, and Ownbey decided to share equal ownership of their one-half interest in
Signature; thus, each owned one sixth of Signature.
7
  The Georgia Limited Liability Company Act defines an “Operating Agreement” as “any
agreement, written or oral, as to the conduct of the business and affairs of a limited liability
company that is binding upon all of the members.” O.C.G.A. § 14-11-101. Signature,
DynaVision, Smith, Thomas, and Ownbey entered into the operating agreement under which
Smith, Thomas, and Ownbey commenced running the company on July 9, 1998. This initial
agreement is not part of the record.
8
 Ledford and O’Dell, who managed DynaVision’s affairs, arranged for the line of credit. Paul
Walker, who had formed DynaVision, played a limited role in its affairs. He looked after his son
Bryan’s interest in the company, and frequently spoke for Ledford and O’Dell as well as Bryan.


                                                 6
manufacturing plant. Anticipating that they would be able to acquire a suitable site

in the Dalton area, DynaVision, Smith, Thomas, and Ownbey entered into a new

operating agreement (the “Operating Agreement” or “Agreement”), on May 6,

1999. The Agreement referred to Smith, Thomas, Ownbey, and DynaVision as

Signature’s “Members,” and Smith, Thomas, and Ownbey as the “Active

Members.”9 It created a six-member Board of Directors, with three directors

appointed by DynaVision and three by the Active Members. The Active Members

appointed themselves; DynaVision appointed its accountant, Edward Staten, and

left two of its seats vacant. The Operating Agreement required the Board to

unanimously authorize all of Signature’s actions. This meant that DynaVision,

through Staten, could have blocked any action the Active Members wanted to take.

The Board rarely met, however, face to face or otherwise, so the Active Members

ran Signature’s operations without objection.

       Under the Agreement, Smith was the company’s president and the person in

charge of marketing, Thomas was the vice-president of sales, and Ownbey was the




9
  The district court, in its order granting summary judgment, used the term “Active Members” to
refer to Smith, Thomas, and Ownbey in the aggregate, and both sides have continued the use of
this term in briefing the case to this court. We adopt this use of this term for the remainder of
this opinion.


                                                7
vice-president of manufacturing.10 A non-solicitation clause provided that if a

Member sold his or her interest, that member could not for one year thereafter

“call, solicit, or fulfill orders” from “customers or prospects” of Signature.11 In

reality, the clause applied only to the Active Members, since they were the ones

who possessed Signature’s customer contacts.12

       The Agreement also contained a buy-sell provision, which is at the center of

the present controversy. This provision is contained in Article Nine of the

10
   Smith, Thomas, and Ownbey worked for Signature in these capacities as full-time employees,
terminable at will on the vote of four Board members. Since the Board had but four members,
there was no likelihood that the employment of an Active Member would be terminated unless
DynaVision completely filled the three Board positions it controlled.

11
   The non-solicitation clause appears in Article Ten of the Agreement, “Employment of Active
Member; Restrictive Covenant; Non-Solicitation; No Publication of Confidential Information,”
as § 10.4. It reads, in pertinent part, as follows:

       No Solicitation of Company Employees or Customers. In the event a Member
       sells his Interest in the Company, the Member . . . for a period of one (1) year
       after the sale of the Interest, shall not . . . call, solicit or fulfill orders from
       customers or prospects who have been contacted by the Company within twenty-
       four (24) months prior to the sale of the Interest . . . for the purpose of inducing
       those customers or prospects to cease doing business with the Company or to
       induce those customers to do business with another in competition with the
       business of the Company. . . .

On its face, § 10.4 appears to apply to DynaVision as well as the Active Members. In reality, it
applied only to the Active Members. DynaVision had no contact with Signature’s customers
and, if it sold its interest, lacked the know-how to compete with Signature. In this opinion, we
therefore treat § 10.4 as applying only to the Active Members.
12
   DynaVision needed the non-solicitation clause to protect its investment. Without the clause,
the Active Members, especially Smith, who had most if not all of the customer contacts, could
leave the company and immediately compete with Signature, thereby substantially depreciating
the value of DynaVision’s interest in Signature.


                                                 8
Agreement, entitled “Transfer and Assignment of Member Interests.” Section 9.5,

“Mandatory Put and Call,” reads as follows:

      At any time Dyna-Vision or the Active Members by majority vote
      within that group, may set a price per percentage Interest and give
      written notice of that price to the other group, (the “Notice of Offer to
      Sell or Purchase”). The Members receiving the Notice of Offer to Sell
      or Purchase shall have thirty (30) calendar days to decide whether to
      sell all their Interest at that price or to purchase all the Interest of the
      group giving Notice of Offer to Sell or Purchase at the Price set forth
      in the Notice of Offer to Sell or Purchase. If the Members receiving
      the Notice of Offer to Sell or Purchase fail to make an election . . . ,
      the Members receiving the Notice of Offer to Sell or Purchase shall
      have to sell their Interest at the price set forth in the Notice of Offer to
      Sell or Purchase.

      Following the execution of the Operating Agreement, the parties located a

site for Signature’s manufacturing plant and offices on Green Road in Chatsworth,

Georgia, a short distance from Dalton. To purchase the site, which included a

building that could be converted to accommodate Signature’s requirements, the

Active Members formed another limited liability company, Signature Leasing,

LLC (“Leasing”), with Ledford, O’Dell, and Bryan Walker.13 On October 19,

1999, Leasing purchased the property (“Green Road Property”) with the proceeds

of a $630,000 loan from Dalton Whitfield Bank. Bank employee Cynthia Trammel




13
 Smith, Thomas, and Ownbey owned 50% of Leasing in equal shares; Ledford, O’Dell, and
Walker owned 50%, presumably in equal shares.


                                            9
managed the paperwork for the loan.14 Once the building was equipped to

manufacture carpets, Signature moved in.15

       Signature then looked to FNBC for working capital. Over a period of

several months following its occupancy of the Green Road Property, Signature

received several unsecured loans from the bank.16 In October 2001, Signature

asked FNBC for a loan that would pay off its FNBC loans and the balance due on

the Dalton Whitfield Bank loan and provide Signature with additional working

capital. In total, Signature needed $911,000.

       At Signature’s request, Trammel, who had moved from Dalton Whitfield

Bank to FNBC the year before, handled the transaction. Trammel informed

Signature that, subject to the approval of the FNBC’s board of directors, the bank


14
  According to Trammel on deposition in the state court case, Smith, Thomas, Ownbey,
Ledford, and O’Dell, whom the bank considered to be Leasing’s principal owners, signed the
note and thereby guaranteed Leasing’s loan. Bryan Walker owned the same interest in Leasing
as Ledford and O’Dell. Why he was not required to sign the note and guarantee the loan is not
clear from the record. There is an inference, however, that Paul Walker had a significant
relationship with the bank and that the bank, acceding to his wishes, was willing to make the
loan without Bryan Walker’s participation.
15
   Leasing did not give Signature a formal lease for the property. According to Ledford on
deposition in the state court case, Signature paid Leasing each month for use of the property, but
he did not indicate the amount of the payments.
16
   Although the notes Signature gave the bank were neither made part of the record nor
published via witness testimony, we infer that they were unsecured. We draw this inference
because the bank significantly lowered the interest rate it was charging Signature when it
refinanced Signature’s debt with a loan secured by a deed to secure debt on the Green Road
Property.


                                                10
would make the loan on the following conditions: Signature would give the bank a

deed to secure debt on the Green Road Property and Signature’s carpet-

manufacturing machines; Smith, Thomas, Ownbey, Ledford, and O’Dell (the

“Guarantors”) would sign the note and thus guarantee its payment.17 Signature and

the Guarantors agreed to these conditions, the bank’s board approved the loan, and

Trammel proceeded to prepare for the closing.

         Trammel’s first task was to have FNBC’s counsel, Todd McCain,18 examine

the title to the Green Road Property. After examining the title, McCain sent

Trammel an opinion indicating that Leasing, not Signature, owned the Green Road

Property. Signature therefore could not give the bank a deed to secure the debt

with the property unless and until Leasing conveyed the property to Signature.

         Trammel overlooked the need for the conveyance, and the loan closed on

October 24, 2001 without Leasing having conveyed the property to Signature.

Therefore, as part of this transaction, Signature gave FNBC a deed to secure debt

for real property it did not own.19 A month or so later, Trammel happened to read


17
   Trammel apparently agreed to leave Bryan Walker out of the transaction for the same reason
he was not required to sign the note for the $630,000 loan the Dalton Whitfield Bank made to
Leasing so it could purchase the Green Road Property. See supra note 14.
18
     McCain was the principal attorney in the McCain Law Firm, located in Dalton.
19
  The note and deed to secure debt were not made part of the record before the district court and
thus are not before us.


                                                11
McCain’s opinion, noted that Leasing, not Signature, owned the Green Road

Property, and realized that Signature’s deed to secure the debt was worthless.

Something had to be done, so Trammel called McCain.20 In mid-January 2002,

McCain sent Trammel the document needed to solve the problem, a warranty deed

conveying the Green Road Property from Leasing to Signature.

       Trammel then contacted Smith, informing her that she and the other

Guarantors would have to return to the bank and sign a “document” that had been

neglected at the closing. The document was the warranty deed, although Trammel

did not explain the document’s significance to Smith at that time. Trammel asked

that Smith pass along this message to the other Guarantors, which Smith did.

       Smith, Thomas, and Ownbey promptly went to the bank and signed the

document before a notary public, Angela Garland, and in the presence of a witness,

Trammel. Smith read the document, which bore the heading “Warranty Deed,”

and recognized its significance—that Leasing was conveying the Green Road

Property to Signature to satisfy one of the conditions on which the bank had made

the loan.

       Ledford and O’Dell did not appear to sign the document, so Trammel asked

20
    Trammel spoke to McCain’s secretary in his absence. Trammel’s testimony on deposition in
the state court case is muddled as to precisely what Trammel said to the secretary. What is clear
is that, in response to Trammel’s call, McCain’s office sent Trammel a warranty deed, which
would convey the property from Leasing to Signature, for Leasing’s execution.


                                               12
Smith to remind them to do so. Smith thereupon called Ledford and asked him to

go to the bank and sign what she described as “a document that had been left out of

the closing.” She did not inform Ledford of the document’s legal significance.21

Smith also asked Ledford to contact O’Dell and remind him to sign the document.

Ledford did so, and, in early February, he and O’Dell separately went to the bank

and signed the warranty deed, also before Garland and Trammel. Trammel

forwarded the executed warranty deed to the McCain firm, which filed it with the

Clerk of the Murray County Superior Court on February 7, 2002.

         Ledford and O’Dell insist that they did not know that they were signing a

warranty deed; moreover, they claim that they had no understanding of the legal

significance of a warranty deed and would not have signed the instrument had they

known that it transferred the Green Road Property to Signature.22

                                                  B.

       In December 2001, Shelby Peeples, a Dalton businessman with interests in

the carpet-manufacturing industry, contacted Paul Walker and Ledford and



21
   Ledford, apparently curious about why he needed to sign a document at the bank, called
Trammel after his conversation with Smith. Trammel told him that there was some “paperwork”
that needed to be signed. She did not inform Ledford of the paperwork’s legal significance, and
Leford made no further inquiry on this point.
22
   Both men testified to this effect on deposition in the state court case and in the district court
proceeding now under review.


                                                  13
expressed an interest in purchasing Signature. Paul Walker, Ledford, and Peeples

had been involved in several business ventures and were on friendly terms.23 The

three men met at least once during December to discuss the possible sale of

Signature.24 At some point, Walker informed the Active Members that Peeples had

shown an interest in purchasing Signature.

       On January 9, 2002, Paul Walker, Ledford, O’Dell and the Active Members

met and agreed to offer Signature and the Green Road Property to Peeples for

between $10–12 million.25 They designated Paul Walker to represent them in

negotiations with Peeples. Later that day, Paul Walker, Thomas, and Ownbey met

with Peeples and some of his associates. Walker informed Peeples that the Green

Road Property was owned by a separate company but offered to sell both Signature

and the property for $12 million. Peeples rejected the offer. Walker countered

with an offer of $10 million. Peeples rejected that offer as well. Peeples then

asked Walker if he could meet separately with him and, after that, with the Active

23
   The Peeples and Walker families had strong personal ties. Bryan Walker, on deposition in the
state court case, testified that “the Peeples are like family to me, and Shelby’s son is my best
friend and has been forever.”
24
  In these and subsequent meetings involving the disposition of Signature or the Green Road
Property, Paul Walker acted for his son Bryan. He also appeared to speak for O’Dell in his
absence. See supra note 8.
25
  The $10–12 million figure was based on the Active Members’, Walker’s, and O’Dell’s off-
hand evaluation of the worth of the company absent a formal appraisal. Ledford believed the
company was worth more and opposed selling the company.


                                               14
Members. Walker said yes but that Peeples could meet with the Active Members

only once. Walker, having made that point clear, met with Peeples to discuss the

matter. Peeples offered him $2 million for DynaVision’s interest. Walker

apparently felt insulted, so Peeples increased the offer to $2.5 million. Walker

rejected it out of hand, and the discussion ended.

      As January wore on, Walker met with Peeples once or twice a week to

discuss some business ventures in which they were involved. During some of their

meetings, Walker asked Peeples whether he had been negotiating with the Active

Members. Peeples said no, but his denial was false. Peeples and the Active

Members had been meeting all along to discuss ways that Peeples could acquire

DynaVision’s interest in Signature without dealing directly with DynaVision.

Moreover, with the assistance of his lawyer, Peeples had memorialized the

substance of his discussions with the Active Members in a letter, which he faxed to

the Active Members on January 21.

      The letter mapped out the steps that Peeples and the Active Members would

take. First, the Active Members would acquire DynaVision’s interest in Signature

using the Mandatory Put and Call provision of the Operating Agreement.

According to the letter, “on terms and conditions to be set forth in a definitive,

legally binding, written agreement, . . . a company owned or controlled by . . .



                                           15
Peeples” would loan $3.5 million to the Active Members “for the purpose of

enabling the Active Members to complete the acquisition of the DynaVision

Interest.” This loan would be made after the Active Members acquired

DynaVision’s interest.26 Next, Peeples would purchase all of Signature’s assets

from the Active Members, forgive the $3.5 million loan, and pay the Active

Members $3 million.27 The Active Members would remain as managers of

Signature under five-year employment contracts, with annual salaries starting at

$160,000 and increasing each year and possible bonuses based on Signature’s

performance.28

       The letter contained sections entitled “Confidentiality” and “No Discussions

with Others.” The “Confidentiality” section provided, in pertinent part:

       None of the parties hereto will . . . (1) disclose or publicize in any
       manner (except as may be required by applicable law) that discussions
       relating to matters covered [in this letter] or the Loan or the
       Acquisition are taking place between or among the Active Members,

26
  The loan would be secured by “a first priority security interest in . . . all of the issued and
outstanding interests in Signature [and] a security interest in and to all assets of Signature.”
27
  The Active Members arrived at the $3 million price for their interest and the $3.5 million price
for DynaVision’s interest based on their unappraised evaluation of Signature’s worth.
28
  The bonus, to be shared equally amongst the Active Members, would “equal . . . twenty
percent (20%) of the amount by which the net pre-tax profits of [Signature] exceeded One
Million Five Hundred Thousand Dollars ($1,500,000) on an annual basis.” In 2001, Signature
paid the Active Members around $130,000 per year. Under the Operating Agreement, they were
eligible for collective bonuses of 20% of all of Signature’s yearly profits, if between
$500,000–$1,000,000, and 25%, if between $1,000,000–$2,000,000.



                                                  16
      the Peeples Group, Signature and/or Buyer, or (2) reveal the terms or
      proposed terms of either this Letter or the Loan . . . to any person or
      entity other than representatives [of Peeples who would be conducting
      a due diligence investigation into Signature after the Active Members
      purchased DynaVision’s interest].

The “No Discussion” section stated, again in pertinent part:

      [N]one of the Active Members . . . will, directly or indirectly (i)
      negotiate or discuss with any other person or entity any transaction
      involving any business combination involving Signature, or (ii) solicit
      . . . negotiate . . . or accept any offer, bid or proposal from any other
      person or entity respecting any transactions involving a sale of assets
      of Signature (except for sales of property in the ordinary course of
      business) or any other business combination involving Signature, or
      (iii) disclose or reveal . . . [information related to Signature’s financial
      condition or methods and plans of operations], other than in the
      ordinary course of business, to any person or entity not a party to this
      Letter in connection with the type of transactions described in clauses
      (i) and (ii) above . . . . In addition, the Active Members will
      immediately cease and cause to be terminated any previously
      undertaken or ongoing . . . negotiations with any other person or entity
      with respect to any transaction of the type described in the preceding
      clauses (i) and (ii) above.

      The letter stated additionally that, “to the extent of any conflict in the

provisions of this Letter and the provisions of the Signature Operating Agreement,

the provisions of the Signature Operating Agreement shall prevail and the

conflicting provision(s) of this Letter shall be void and of no effect whatsoever.”

      After the Active Members received the letter, they continued their

negotiations with Peeples, which, toward the end of January or early February, led




                                           17
to a verbal understanding. As indicated in the January 21 letter, Peeples would

loan the Active Members $3.5 million to purchase DynaVision’s interests. If the

purchase materialized, the Active Members would cause Signature to sell its assets

to Peeples.

       On February 8, Smith summoned Ledford and O’Dell to discuss tensions

between Ledford and O’Dell and the Active Members. Toward the end of this

meeting, Smith presented Ledford and O’Dell with the Mandatory Put and Call

pursuant to § 9.5 of the Operating Agreement. The Put and Call informed

DynaVision that the Active Members would purchase its interest in Signature for

$3.5 million unless DynaVision opted to purchase the Active Members’ interests

for $3.5 million within thirty days. The Put and Call also stated that if DynaVision

elected to purchase the Active Members’ interests, it would release the Active

Members from their obligations under the Operating Agreement’s non-solicitation

clause. Ledford asked Smith whether Peeples or anyone else would be providing

the purchase price. Smith’s reply, according to Ledford, was that we “are doing

this on our own.”29

29
   Ledford recalled his and O’Dell’s reaction to Smith’s presentation of the Put and Call in
testifying on deposition in the state court case:

       HORST [Counsel for the Active Members]: So they [the Active Members] talked
       to you about these Crescent Extrusions invoices, and then after that discussion,
       they hand you the February 8th put-and-call letter?


                                                18
         On February 22, DynaVision's lawyer, H. Greely Joiner, Jr.,30 wrote a letter

to the Active Members stating that because § 9.5 of the Operating Agreement

precluded the imposition of conditions on a Put and Call, DynaVision would not

honor the Put and Call with the non-solicitation clause condition. The Active

Members tacitly agreed. On February 25, they presented DynaVision with a new

Put and Call at the same price, $3.5 million, but without the requirement that

DynaVision void the non-solicitation clause. Paul Walker and DynaVision treated

this Put and Call as valid.



         LEDFORD: Well, it was — Larry [O’Dell] and I were sitting at the table, and
         Brenda [Smith] said something to the effect, “we may as well do this now,” or
         something. I don’t know. She was standing at that corner of her desk and she
         handed the put-and-call to us. I don’t know if we had stopped discussing the
         Crescent invoices. I don’t know if we had resolved any — I don’t know. I just
         know that we discussed that and then we got the put-and-call.
         HORST: What was your reaction when you got the put-and-call?
         LEDFORD: I was shocked.
         HORST: Why?
         LEDFORD: I thought we had a good partnership.
         HORST: What did you say to her when you got it?
         LEDFORD: Well, after we read it, I asked if there was anybody else involved or a
         third party funding it, and she said “No, this is us. We’re doing this on our own.”
         I said, “Is there any chance that this could be undone?” And I think Larry
         [O’Dell] made the comment that “This partnership is over with.” . . . .
         HORST: What else did Mr. O’Dell say at that meeting other than “This
         partnership is over with?”
         LEDFORD: I don’t recall.
         HORST: Didn’t he say something to the effect that, “Oh, hell, Jim [Ledford], you
         know who’s funding this and he’s going to screw us”?
         LEDFORD: He could’ve said something about that. I’m sure we had a real good
         idea who was funding it. . . .
30
     Joiner is a sole practitioner and owner of H. Greely Joiner, LLC.


                                                  19
       DynaVision’s principals were not pleased. They wanted Signature to

continue on, under the Active Members’ management, because they believed that

in time the company would become increasingly profitable. Nonetheless, they

recognized that they had two options—buy or sell—and thirty days to decide.

They did not want to sell because, as the prices ($12 million and $10 million) Paul

Walker quoted to Peeples in January indicated, they believed their half-interest in

Signature was worth substantially more than $3.5 million. But they did not want to

buy either because they lacked the contacts in the hospitality industry necessary to

enable them to market Signature’s products with any measure of success. Without

the Active Members—particularly Smith, with her extensive contacts in the

hospitality industry—DynaVision’s principals knew they could not operate

Signature at a profit.31 Faced with this dilemma, DynaVision’s principals looked

31
  Ledford, O’Dell, and Paul Walker all made statements to this effect on deposition in the state
court case and, later, in the district court in this case. In his deposition in the state court case,
Ledford testified:

       HORST: At any time did you say, “Hey, I'll kick in $1 million or $100,000 or
       some other amount if we can get some other people to kick in some money to buy out
       Bob [Thomas], Brenda [Smith] and Bryan [Ownbey]”?
       LEDFORD: We discussed — we discussed that, but the first thing was marketing.
       If we had marketing, we would have done — if we could have secured people to
       do the marketing, we would have been interested.
       HORST: So you needed people who could run the business like Bob, Brenda and
       Bryan had?
       LEDFORD: We needed people that could run the business, yes, sir.
       HORST: Because you within Dynavision didn’t have the competency or the skill
       set to run Signature Hospitality?
       LEDFORD: I didn’t have the experience with the customer base, no sir.


                                                  20
In his deposition in the district court case, Ledford testified:

        SINKFIELD [Counsel for Peeples]: . . . it was marketing help that was the key
        factor in your decision to sell rather than buy. Is that a fair statement?
        LEDFORD: Had we been able to retain Brenda, we would have purchased the
        company.
        SINKFIELD: Is it fair to say that marketing help was the key factor in your
        decision to sell rather than buy?
        LEDFORD: The lack of a marketing group forced us to sell the company.

In his deposition in the state court case, O’Dell testified:

        HORST: Now, Dynavision had the money to pay three and a half million dollars
        to the active members, didn’t it?
        O'DELL: I could have got the money
        HORST: Why didn’t you . . . .
        O'DELL: Without an operating group, a managing group, that would be most
        foolish on my part, in my decision or my opinion. . . .
        HORST: So you didn’t think that if Dynavision bought out Bob, Brenda, and
        Bryan, you guys would have the ability to compete with them?
        O’DELL: Not without qualified people in that field, no.
        HORST: The Dynavision people were not qualified people in that field?
        O’DELL: No, they weren’t.

In his deposition in the district court case, O’Dell testified:

        SINKFIELD: You are running out of time, correct?
        O'DELL: Uh-huh.
        SINKFIELD: Now, if you bought out the Active Members for 3.5 to give yourself
        time to complete [a deal with a potential third-party buyer for $8 million], that's
        what, about a million dollars differential . . . . that you could make just on turning
        it over . . . did you ever consider doing that?
        O'DELL: Well, that would have been a heck of a gamble to take. I mean, you
        could have, obviously, looked at it that way and thought well, I'll maximize this in
        another 30 days or 60 days but that would have been a gamble you were taking. I
        could have been left with a company without any managers, without anyone that
        knew anything about marketing. No, that was — that — I don't think that was an
        option we could take. . . .
        SINKFIELD: You thought about, but you did not want to take the risk of buying
        the Active Members' interest on the potential that you could turn it and either
        make a profit or find somebody who could run it in time to keep it from going
        under. Is that a fair statement?


                                                   21
for an immediate buyer who would be willing to pay $10 million for the company.

If they could find a buyer willing to pay as much as $8.5 million, they would opt

to buy out the Active Members for $3.5 million. The $5 million they would net


       O'DELL: Correct.

In his deposition in the state court case, Walker testified:

       HORST: Well, if you thought the company was worth more than the put-and-call
       offer, were you interested in trying to find somebody to lend you the money or for
       DynaVision to raise the money to buy out the company?
       WALKER: We would have had to have found a marketing group to replace the
       existing marketing group. So its [sic] more than just the money, its [sic] a matter
       of also finding a group that can continue to grow the company.
       HORST: You needed to find a marketing group because Dynavision did not have
       anybody that was associated with it that had the skill set that Bob, Brenda, and
       Bryan did; correct
       WALKER: That is correct . . . .
       HORST: So if you thought the offer that the active members made on February
       8th of three and a half million dollars was too low, why didn't Dynavision buy the
       active members out of Signature Hospitality?
       WALKER: I don't think that a marketing group could be found in the short period
       that they had to look for one.

In his deposition in the district court case, Walker testified:

       SINKFIELD: So to your knowledge, one, you did not seek to borrow money, get
       a core investor, or anyone to assist you in buying out the Active Members Group;
       is that correct? You didn't personally do that?
       WALKER: No.
       SINKFIELD: Why not?
       WALKER: There is no need to buy out the Active Members without a marketing
       group. The ability to obtain a marketing group first was necessary, since none of
       the Active — none of the Dyna-Vision Group were a part of the everyday
       management or marketing of Signature Hospitality.
       SINKFIELD: Is there any other reason they you did not personally seek a
       financial source to assist you in buying out the Active Members' interest?
       WALKER: That would have been the only reason.




                                                  22
was what they thought their half of Signature was worth.

         Ledford and O’Dell contacted three firms, Mohawk Carpets, Clay Miller

Carpets, and Matel Carpets, in their search for a buyer. They initially proposed a

$10 million price for Signature, eventually lowering the price to $8.5 million as the

thirty-day Put and Call period drew to a close. As part of his pitch to sell

Signature, Ledford told Jerry Thomas, Matel’s owner, that Thomas ought to buy

Signature to protect his company from Signature’s competition should Signature

fall into Peeples’s hands.32 Ledford stressed “the dynamics of what might happen

should a . . . company like [Signature] fall into the hands of . . . the Peeples

family.”33 But Thomas was not persuaded, nor was anyone else.34 With time

running out, Ledford asked Smith if she would be willing to stay on and run the

company if he and the others bought the Active Members’ interests. Smith was not

interested.

          Paul Walker and DynaVision’s principals discussed among themselves the

32
   Ledford and O’Dell identified the persons they contacted and spoke to at these three firms.
The record does not disclose what was said during the conversations with Mohawk and Clay
Miller; all that the record reveals is what was said in conversation with Jerry Thomas at Matel.
We infer that in making their sales pitches to Mohawk and Clay Miller, Ledford and O’Dell
urged them to consider purchasing Signature in order to avoid competition from Peeples.
33
     The quotation is taken from Ledford’s testimony on deposition in the state court case.
34
   Thomas considered the possibility of buying Signature if the Active Members remained with
the company, so he met with them to explore that possibility. They were not interested, so he
abandoned the idea.


                                                  23
possibility that Peeples had financed the Active Members’ February 25 Put and

Call. Motivated by these suspicions, Walker confronted Peeples directly. Peeples

denied any involvement.35 At one point, Walker warned Peeples that if he was

involved, he would not be getting the Green Road Property, because Leasing

owned it, not Signature.

                                             C.

       On March 27, the thirty-day election period provided by the Put and Call

expired. DynaVision had not exercised its option to purchase the Active Members’

interests within the election period; consequently, it had to sell its interest for the

$3.5 million Put and Call price. On March 28, DynaVision and the Active

Members began to negotiate the finer terms of the sale.

       A few days later, Joiner, presumably representing Ledford, O’Dell, and

Bryan Walker as one-half owners of Leasing, asked Smith if he could draw up a

lease for the Green Road Property between Leasing, as lessor, and Signature, as

lessee. Smith responded that Signature, not Leasing, owned the property. Joiner

checked the title and discovered the warranty deed from Leasing to Signature that

had been recorded on February 7. Paul Walker and Ledford then demanded that

the Active Members consent to a conveyance of the property back to Leasing. The

35
  Paul Walker also had previously suspected that Peeples was behind the Active Members’
February 8 Put and Call and confronted him. Peeples had denied any involvement.


                                             24
Active Members refused, explaining that it had been everyone’s intent to transfer

the property to Signature so that Signature could go forward with the FNBC loan

transaction; Signature had to have title to the property in order to give the bank a

valid deed to secure debt.

       Meanwhile, at a meeting of DynaVision’s members, the members

unanimously adopted resolutions authorizing O’Dell and Ledford to “negotiate,

execute and convey the interests of Dyna-Vision in Signature . . . to Smith,

Thomas, and Ownbey . . . .” The resolutions went on to allow O’Dell and Ledford

to set certain conditions on the conveyance including:

       the repayment of all loans due any [DynaVision] member or any
       affiliate of any member; the release of all [DynaVision] members
       from any guarantees issued on behalf of Signature to any financial
       institution or vendor; the repayment of any and all funds due Dyna-
       Vision by Signature with respect to any distributions which had not
       been authorized by the Board of Directors of Signature; and a long-
       term Lease Agreement between Signature and Leasing, with a
       minimum term of five (5) years at a rental rate of $11,000 per month
       plus taxes, insurance, maintenance and repair.

The minutes of this meeting indicate that DynaVision’s members knew that the

transaction would close on April 30. They provided that because O’Dell,

DynaVision’s chairman, would be out of town that day, Ledford would act for

DynaVision in his place.36

36
  The minutes also reflect that Ledford, O’Dell, and Bryan Walker simultaneously held a
meeting of Leasing’s members to discuss the status of the Green Road Property. Smith,


                                              25
       After this meeting adjourned, Ledford and O’Dell met with Joiner and

spelled out several conditions the Active Members would have to meet before

closing. Joiner informed the Active Members of these conditions in an April 11

letter to their attorney, Douglas Krevolin. One called for the Active Members and

DynaVision to execute an agreement Joiner had drafted and enclosed in his letter.

The agreement contained the following covenant, presumably designed to smoke

out the Active Members’ involvement with Peeples:

       [e]ach Assignee [i.e., Active Member] does hereby represent and
       warrant to the Assignor [i.e., DynaVision] that such Assignee has
       acquired the Interest from the Assignor for investments solely for said
       Assignee’s own account . . . without any intention of conveying . . .
       any portion of such Assignee’s Interest, and without the financial
       participation of any other Person in acquiring the Assignee’s Interest.

Another condition required the conveyance of the Green Road Property from

Signature to Leasing.

       Krevolin responded to Joiner’s April 11 letter with a letter dated April 16.

He informed Joiner that the Active Members would not consent to either of the two

conditions. Responding to the threat implicit in Joiner’s letter—that DynaVision

would not close if the Active Members refused to represent that they were


Thomas, and Ownbey, Leasing’s other members, who collectively owned 50% of Leasing, were
not present. Although Leasing’s Operating Agreement is not part of the record, we assume that
the terms of the agreement did not authorize Ledford, O’Dell, and Walker to call a meeting of
Leasing’s members without notifying Smith, Thomas, and Ownbey.



                                              26
acquiring DynaVision’s interest without the financial participation of a third

party—Krevolin said this: “If your client is not willing to proceed with the closing

in accordance with the terms of the Operating Agreement, the Active Members

may have no alternative but to seek a court order compelling it to close.”

      Joiner informed Ledford of what Krevolin had written and the position that

the Active Members would take if DynaVision refused to close, and Ledford

instructed Joiner to proceed with the closing on April 30.

                                          D.

      In late April, prior to the closing, the Active Members signed two

promissory notes and a collateral agreement. In the collateral agreement, entitled

“Collateral Assignment of Membership Interest,” they pledged, “as record and

beneficial” owner of Signature, all of their ownership interest in Signature as

collateral for a loan of $3.5 million from PFLC, LLC and a loan of $855,000 from

Internal Management, Inc., both companies owned by Peeples. The proceeds of

these loans were to be used, respectively, to pay for DynaVision’s interest in

Signature and to pay the balance due, $855,000, on the loan FNBC had made to

Signature the previous October.

      At some point between the April 30 closing and May 7, the Active Members

and Peeples signed an Asset Purchase Agreement pursuant to which the Active



                                          27
Members, as owners of all of Signature, caused the transfer of Signature’s assets to

Peeples for $5.75 million.37 Of that amount, $2.25 million went directly to the

Active Members, and $3.5 million served to cancel the loan Peeples had made to

enable them to buy out DynaVision. The agreement also contained Peeples’s

promise to indemnify the Active Members for any expenses, including those

arising from litigation, they might incur as a result of the transfer of the Green

Road Property from Leasing to Signature.

       Contemporaneous with the execution of the Asset Purchase Agreement,

PFLC, LLC entered into six-year employment contracts with the Active Members,

their compensation to consist of $118,000 signing bonuses, initial salaries of

$160,000 per year, annual salary increases of $10,000, and bonuses if Signature

made over $1.5 million in pre-tax profits in a calendar year.

                                                II.

                                                A.

       On November 15, 2002, DynaVision, Ledford, O’Dell, Bryan Walker, and

Leasing filed suit for equitable and legal relief against the Active Members and

Signature in the Superior Court of Murray County, Georgia. The plaintiffs all

37
   None of the exhibits in the record evidence the disposition the Active Members made, if any,
of their interests in Signature after they acquired DynaVision’s interest. The testimony taken as a
whole, however, creates the inference that at some point following the acquisition, they
transferred Signature’s assets to PFLC, LLC.


                                                28
retained Joiner as counsel, along with H. Lamar Mixon and David G. H. Brackett,

two partners in Bondurant, Mixon and Elmore, LLP. Their complaint38 was framed

in four counts and asserted six claims, all on behalf of the plaintiffs both

individually and collectively.39 Four claims were based on Leasing’s conveyance

of the Green Road Property to Signature; two involved the transfer of

DynaVision’s interest in Signature to the Active Members. We begin with the

claims regarding the Green Road Property.

       The first claim40 was that Leasing, and Ledford, O’Dell, Smith, Thomas, and

Ownbey as owners of interests in Leasing, mistakenly executed the warranty deed

conveying the Green Road Property to Signature and thus were entitled to a

rescission of that transaction. The second claim 41 was that Smith induced Ledford

and O’Dell to execute the warranty deed by falsely representing that FNBC needed

a corrective document without warning that the document was in fact a warranty


38
   DynaVision amended its complaint on December 27, 2002. Our references to the complaint
are to the amended complaint.
39
   Although the complaint is not clear on this point, we assume that each plaintiff asserted each
of the claims we describe, such that the complaint contained 30 causes of action in all.
40
  We place plaintiffs’ claims in an order different from the order in which they appear in the
complaint. The first claim appears in Count One.
41
  This claim appeared in Count Two. The complaint implied, if not alleged, that Thomas and
Ownbey were vicariously responsible for Smith’s conduct, as described in claims two and five.
For relief on this and the remaining claims described infra, plaintiffs sought compensatory and
punitive damages.


                                                29
deed. The third claim was that Smith and the Active Members breached their

fiduciary duties to Leasing, causing Leasing to lose the value of the Green Road

Property, on two occasions—when Smith induced Ledford and O’Dell to sign the

warranty deed under false pretenses and when the Active Members refused to

cause Signature to return the property to Leasing. The fourth claim 42 was that

Signature, Smith, Thomas, and Ownbey were unjustly enriched by the acquisition

of the Green Road Property.

         The fifth and sixth claims involved the transfer of DynaVision’s interest in

Signature.43 The fifth claim,44 a fraud claim, alleged that upon presenting the

conditional Put and Call on February 8, 2002, Smith falsely stated that the Active

Members were “doing this on our own,” intentionally inducing DynaVision to sell

its interest. The sixth claim45 alleged that by failing to disclose their discussions

and final arrangements with Peeples, the Active Members breached fiduciary




42
     This claim appeared in Count Three.
43
   We describe these claims in the text as the Murray County Superior Court and the Georgia
Court of Appeals, in Ledford v. Smith, 618 S.E.2d 627 (Ga. Ct. App. 2005), framed the claims in
their final dispositions.
44
     This claim appeared in Count Two.
45
     This claim appeared in Count Four.



                                              30
duties imposed by the Operating Agreement,46 the Georgia Limited Liability


46
  Plaintiffs’ theory that the Active Members had a fiduciary duty under the Operating
Agreement to disclose their final arrangement with Peeples, and that they breached that duty, is
based on § 9.2 of Article Nine of the Operating Agreement, entitled “Right of First Refusal,” and
two of its parts, §§ 9.2.1 and 9.2.3. These two sections state:

         9.2.1 Notice of Intended Disposition. No Member in the Company
               may sell less than all their Interest, and in the event a Member
               receives a bona fide offer from any person in an arms length
               transaction to purchase all of the Interest which they own in the
               Company and if the person receiving the offer of purchase desires
               to sell all the Interest that is the subject of the offer, notice of the
               desire to sell the Interest shall be given in writing to the other
               Members and the terms of the offer, which notice shall include the
               price offered, the name of the offeror, and the payment terms (the
               “Notice of Intended Disposition”).

        9.2.3 Option to Purchase – Sale by Active Member other than Dyna-Vision.
              Dyna-Vision shall have the right to purchase all of the . . .
              Interest[s] to be sold at the same price and under the same terms
              and conditions as described in the [Active Members’] Notice of
              Intended Disposition. The election to purchase by Dyna-Vision
              shall be exercised by giving written notice to [the Active]
              Members within . . . thirty (30) calendar days after receipt of [the
              Notice of Intended Disposition].

         The Active Members did not consider their discussions with Peeples and his offer to loan
them the funds to acquire DynaVision’s interest as a “bona fide offer” to purchase their interests
in Signature so as to require them to notify DynaVision pursuant to § 9.2.1; hence, they did not
notify DynaVision of the discussions. Accordingly, to prevail on their sixth claim based on §§
9.2.1 and 9.2.3, plaintiffs would have to prove that, prior to March 27 (when DynaVision
became obligated to sell its interest), Peeples made the Active Members a bona fide offer to
purchase their interests at a set price and on set terms, that they “desire[d] to sell” their interests
to Peeples, that § 9.2.1 therefore obligated them to notify DynaVision of the offer, that their
failure to notify DynaVision breached that obligation, and that but for the breach, DynaVision
would have exercised its right of first refusal and bought the Active Members’ interests at the
price and on the terms indicated in Peeples’s offer. Under this scenario, the Active Members’
February 25 Put and Call would become a nullity, replaced by the triggering of § 9.2.3 of the
Operating Agreement. That is, DynaVision would have purchased the Active Members’
interests pursuant to § 9.2.3 instead of selling its interest pursuant to the § 9.5 Put and Call
provision.


                                                  31
Company Act,47 and Georgia common law.

         On August 13, 2003, after the parties had joined the issues,48 plaintiffs

moved the state court for leave to amend their complaint to add Peeples and his

two companies, PFLC, LLC and Internal Management, Inc., as co-defendants.49

Plaintiffs represented that they had not learned of Peeples’s involvement until the

day before, August 12, when they took Ownbey’s deposition and Ownbey testified

that Peeples had provided the funds to enable the Active Members to trigger the

Put and Call.50

         The state court heard oral argument on the motion on September 25, 2003,

47
  The Act imposes a general duty of loyalty on the members and managers of a limited liability
company but does not explicitly create a duty to disclose particular facts. O.C.G.A. § 14-11-305
describes this duty as follows:

         In managing the business or affairs of a limited liability company:
         (1) A member or manager shall act in a manner he or she believes in good faith to
         be in the best interests of the limited liability company and with the care an
         ordinarily prudent person in a like position would exercise under similar
         circumstances. A member or manager is not liable to the limited liability
         company, its members, or its managers for any action taken in managing the
         business or affairs of the limited liability company if he or she performs the duties
         of his or her office in compliance with this Code section.
48
   Defendants’ answers are not in the record. We infer from what is in the record, and in the
Georgia Court of Appeals opinion in Ledford v. Smith, that the Active Members denied the
allegations underpinning plaintiffs’ several causes of action.
49
   Neither plaintiffs’ motion for leave to amend nor the proposed amended complaint are in the
record. The record does include, though, the superior court’s October 29, 2003 order denying
plaintiffs’ motion, and that order addresses the argument plaintiffs made in support of the
motion.
50
     Defendants deposed Ledford on the same day, August 12.


                                                  32
after discovery had closed.51 It denied the motion on October 29, 2003, concluding

that DynaVision “knew or should have known” at the time it filed its complaint

that Peeples was “involved.” In its order, the court noted that plaintiffs, in their

complaint, had alleged that a third party had been involved in negotiations with the

Active Members and DynaVision in early January 2002 over a possible purchase

of Signature, but that these negotiations were unsuccessful. Further, they had

alleged, “upon information and belief,” that a third party had financed the Active

Members’ acquisition of DynaVision’s interest in Signature and, after the Active

Members had DynaVison’s interest in hand, had purchased Signature’s assets. In

addition, Ledford had deposed that he knew that Peeples was involved in the

January negotiations. It should have been obvious to DynaVision that since

Peeples was involved in the January negotiations, he was the party that likely

financed the Active Members and purchased Signature. In addition, the court

reasoned, adding Peeples as a party at that late stage of the litigation, after

discovery had closed, would cause Peeples undue prejudice.

       Plaintiffs moved the court to reconsider its ruling. The court denied their

motion on March 8, 2004. In its order, the court was highly critical of plaintiffs’

delay in attempting to join Peeples as a party defendant:

51
   Discovery closed on September 7, 2003. The discovery included the taking of the depositions
of Peeples, the Active Members, DynaVision’s principals, and Paul Walker.


                                              33
        [As a result of Ledford’s deposition testimony] the Court [in its
        October 29 order] concluded that the Plaintiffs knew of the
        involvement of the Peeples Group, at the time the original Complaint
        was filed . . . . The Plaintiffs then waited nine months, until August
        13, 2003, before filing for leave to amend. The Plaintiffs had
        carefully waited until after the deposition of Shelby Peeples [on June
        27, 2003] and until after the close of discovery to have their motion
        heard [on September 25, 2003]. In making the October 2003 ruling,
        this Court determined that the Plaintiffs engaged in a deliberate
        scheme to delay joinder without excuse or justification. Therefore,
        the Court finds that the [Plaintiffs’] failure to offer evidence of excuse
        or justification is an independent reason that the Plaintiffs’ Motion
        [for Reconsideration] should be denied.

                                                  B.

                                                  1.

        On January 7, 2004, while their motion for reconsideration was pending in

state court, plaintiffs, still represented by Joiner, Mixon, and Brackett, brought the

instant lawsuit against Peeples52 in the United States District Court for the Northern

District of Georgia.53 The complaint was framed in 116 paragraphs and seven

counts. Each count incorporated by reference each preceding count, such that


52
   In addition to Peeples, the plaintiffs sued PFLC, LLC and Internal Management, Inc. We are
unable to discern from the allegations of plaintiffs’ complaint the nature of the claims asserted, if
any, against those two entities. We assume they were named as defendants solely for purposes
of declaratory or equitable relief involving the title to the Green Road Property or the status of
DynaVision’s former interest in Signature. Because such relief was not forthcoming, and
because plaintiffs do not contend on appeal that the district court erred in denying relief against
PFLC, LLC and Internal Management, Inc., we omit further reference to them.
53
   Plaintiffs invoked the district court’s subject matter jurisdiction to entertain their federal
securities law claims under 28 U.S.C. § 1331 and 15 U.S.C. § 78aa.


                                                  34
Count Seven amalgamated and asserted all of the claims of the preceding counts.

       Plaintiffs’ complaint is a “shotgun” pleading in that it lumps multiple claims

together in one count and, moreover, appears to support a specific, discrete claim

with allegations that are immaterial to that claim. See, e.g., Byrne v. Nezhat, 261

F.3d 1075, 1128-32 (11th Cir. 2001). When faced with a complaint like the one

here, in which the counts incorporate by reference all previous allegations and

counts, the district court must cull through the allegations, identify the claims, and,

as to each claim identified, select the allegations that appear to be germane to the

claim. This task can be avoided if the defendant moves the court for a more

definite statement or if the court, acting on its own initiative, orders a repleader.

       In this case, Peeples did not move the court for a more definite statement,

nor did the court require one on its own initiative. Consequently, it is left to this

panel to identify in the first instance what plaintiffs were claiming. We do so by

proceeding allegation by allegation and count by count, weeding out and

disregarding as extraneous the allegations that have no bearing on a claim.

       We begin this process with Count One, which alleged three violations of the

federal securities laws.54 First, after the Put and Call offers of both February 8 and

54
  Count One incorporated by reference the first eighty-one paragraphs of the complaint. Those
paragraphs alleged, in substance and not in the order we indicate, that (1) on February 8, 2002,
Smith falsely told Ledford and O’Dell that the Active Members, in issuing the Put and Call,
were “doing this on our own” and that no third party was involved; (2) on several occasions


                                               35
February 25, Peeples denied any involvement in the Active Members’ plan to

acquire DynaVision’s interest, thereby violating § 10(b) of the Securities Exchange

Act of 1934 (the “1934 Act”) and Rule 10b-5(b) promulgated thereunder.55

between February 8 and March 27, 2002, Peeples falsely told Paul Walker and/or Ledford that
he was not involved in the Active Members’ issuance of the Put and Call; (3) the statements
made in (1) and (2) above were made with the intent to induce detrimental reliance; (4) plaintiffs
did in fact rely on these statements to their economic detriment; (5) Peeples and the Active
Members conspired to defraud DynaVision of its interest in Signature by making these
statements and by failing to disclose the terms of the January 21 letter and the Asset Purchase
Agreement; (6) Peeples is liable for the Active Members’ fraudulent conduct because he
controlled such conduct within the meaning of 15 U.S.C. § 78t under the terms of the January
21, 2002, letter and the Asset Purchase Agreement; (7) Peeples is liable for the Active Members’
fraudulent conduct under the doctrine of respondeat superior; (8) the Active Members breached
their obligations to DynaVision under §§ 9.1 and 9.2.1 of the Operating Agreement by not
informing plaintiffs that Peeples was funding the February 8 Put and Call and that he had offered
to purchase Signature’s assets from the Active Members; (9) Peeples is liable for this breach as
the Active Members’ co-conspirator and/or aider and abettor; (10) the Active Members breached
their fiduciary duty to plaintiffs by not revealing that Peeples was providing the funds for their
acquisition of DynaVision’s interest in Signature and had agreed to purchase Signature’s assets
following their acquisition; (11) Peeples is liable for this breach under the doctrine of respondeat
superior, as a co-conspirator, and as an aider and abettor; (12) the Active Members, acting under
Peeples’s control and direction or in conspiracy with him, fraudulently induced Ledford and
O’Dell to execute the warranty deed by which Leasing conveyed the Green Road Property to
Signature; (13) the Active Members, acting under Peeples’s control and direction or in
conspiracy with him, breached their fiduciary duty to plaintiffs by not informing Ledford and
O’Dell that the instrument they signed at FNBC was a warranty deed and of the legal
consequences that would adhere to their signing it.
55
     Section 10(b) of the 1934 Act, 15 U.S.C. § 78j(b), makes it unlawful

          [t]o use or employ, in connection with the purchase or sale of any security
          registered on a national securities exchange or any security not so registered, or
          any securities-based swap agreement (as defined in section 206B of the Gramm-
          Leach-Bliley Act [15 U.S.C.S. § 78c note]), any manipulative or deceptive device
          or contrivance in contravention of such rules and regulations as the Commission
          may prescribe as necessary or appropriate in the public interest or for the
          protection of investors.

Rule 10b-5, 17 C.F.R. § 240.10b-5, was promulgated under § 10(b). Rule 10b-5 provides:



                                                  36
Second, Peeples “directly or indirectly control[led] the activities of the Active

Members” using the “Confidentiality” and “No Discussions with Others”

provisions of the January 21 letter, the “secret discussions” of January and

February 2002, and the Asset Purchase Agreement. As such, Peeples was

responsible for the Active Members’ conduct in violation of § 10(b) and Rule 10b-

5(b) as a “controlling person” under § 20(a) of the 1934 Act.56 Specifically,

Peeples was responsible for Smith’s statement that we are “doing this on our own”


          It shall be unlawful for any person, directly or indirectly, by the use of any means
          or instrumentality of interstate commerce, or of the mails or of any facility of any
          national securities exchange,
          (a) To employ any device, scheme, or artifice to defraud,
          (b) To make any untrue statement of a material fact or to omit to state a material
          fact necessary in order to make the statements made, in the light of the
          circumstances under which they were made, not misleading, or
          (c) To engage in any act, practice, or course of business which operates or would
          operate as a fraud or deceit upon any person, in connection with the purchase or
          sale of any security.

        “Rule 10b-5 encompasses only conduct already prohibited by § 10(b). Though the text
of the Securities Exchange Act does not provide for a private cause of action for § 10(b)
violations, the [Supreme] Court has found a right of action implied in the words of the statute
and [Rule 10b-5].” Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157,
128 S. Ct. 761, 768, 169 L. Ed. 2d 627 (2008) (citations omitted). In this opinion, we refer to the
§ 10(b) and Rules 10b-5(a) and (b) claims in this case as claims under Rules 10b-5(a) and/or (b).
56
     Section 20(a) of the 1934 Act, 15 U.S.C. § 78t(a), provides:

          Every person who, directly or indirectly, controls any person liable under any
          provision of this chapter or of any rule or regulation thereunder shall also be
          liable jointly and severally with and to the same extent as such controlled person
          to any person to whom such controlled person is liable, unless the controlling
          person acted in good faith and did not directly or indirectly induce the act or acts
          constituting the violation or cause of action.



                                                   37
and the Active Members’ breach of their fiduciary duty to DynaVision. Third,

Peeples and the Active Members engaged in a “scheme, device, and artifice to

defraud” DynaVision, in violation of § 10(b) and Rule 10b-5(a).57

         In support of their 10b-5(a) claim, plaintiffs, in their opposition to Peeples’s

motion for summary judgment, identified three components of the “scheme”: (1)

Peeples and the Active Members agreed not to disclose their negotiations, as

evidenced by the January 21 letter; (2) Peeples and the Active Members used the

Put and Call provision “to improperly exclude DynaVision from participating in

the sale of [Signature] to Peeples”; and (3) Peeples and the Active Members

collaborated to “deceive the individual Plaintiffs into signing [the] Warranty

Deed.”58

         Finally, the plaintiffs alleged that the misrepresentations, omissions, and

scheme described in Count One caused DynaVision to sell its interests and suffer

injury.59 Paragraph 64 of the district court complaint stated:


57
     See supra note 55.
58
  The complaint, in contrast to what plaintiffs stated in their opposition to Peeples’s motion for
summary judgment, simply averred that “[t]hrough the activities described above, the
Defendants employed a scheme, device, and artifice to defraud that, in fact, operated as a fraud
upon DynaVision.”
59
   The plaintiffs described the Active Members’ misrepresentations made by Smith, the scheme
to defraud, and the manner in which these wrongs caused injury in almost the same way they had
done so in state court.


                                                38
       Based upon the false and misleading information concerning
       [Signature] and the source of funding for the buy/sell offers, which
       had been provided by the Active Members and Defendants, and in
       reliance on their misrepresentations that there was no offer to
       purchase [Signature] outstanding, DynaVision chose to sell its interest
       in [Signature], rather than purchase the interest of the [Active
       Members]. As a result, in late March 2002, DynaVision became
       contractually required to sell its interest in [Signature] to the Active
       Members pursuant to the terms of the [Signature] Operating
       Agreement.60

       Counts Two through Five alleged causes of action under Georgia common

law and statutory provisions.61 Count Two, “Violation of the Georgia Securities

Act,” alleged that the same conduct that gave rise to the Count One claims for

relief rendered Peeples liable to plaintiffs under the Georgia securities laws.62

Count Three, “Conspiracy to Defraud,” alleged that Peeples conspired with the

Active Members to (1) fraudulently induce DynaVision to sell its interest in

60
   Similarly, paragraph 90 of the district court complaint stated: “DynaVision relied on
the [Active Members’] misrepresentations. DynaVision made its decision to sell under
the put and call based on the false representations that there were no outstanding offers to
purchase [Signature] and, in particular, no offers from a strategic purchaser such as the
Defendants.” Although paragraphs 64 and 90 refer to statements made by the Active
Members, the only conceivably actionable statement in the evidence is Smith’s February
8 statement to Ledford and O’Dell that the Active Members were “doing this on our
own.”
61
   These counts, like Counts Six and Seven, incorporated by reference all antecedent allegations
of the complaint. The complaint alleged that the district court had jurisdiction to entertain these
claims under the doctrines of “pendent” and “ancillary” jurisdiction.
62
   Plaintiffs alleged a violation of the Georgia Securities Act, O.C.G.A. § 10-5-12(a)(2) (2005).
Section 10-5-12 is “Georgia's equivalent of Rule 10b-5. A plaintiff must prove essentially the
same elements under the state provision as he must prove under the federal provision.” Pelletier
v. Zweifel, 921 F.2d 1465, 1511 (11th Cir. 1991).


                                                39
Signature and (2) fraudulently induce Leasing to convey the Green Road Property

to Signature. Count Four, “Aiding and Abetting Breach of Fiduciary Duties,”

alleged that the Active Members, aided and abetted by Peeples, breached the

following duties: (1) the fiduciary duty to DynaVision to inform it that Peeples

was supporting the February 25 Put and Call, (2) the fiduciary duty to Leasing, and

Ledford and O’Dell as Leasing’s part owners, to inform them that the document

they signed at FNBC was a warranty deed, and (3) the fiduciary duty to Leasing to

cause Signature to convey the property back to Leasing. Count Five, “Tortious

Interference with Business Relations,” alleged that Peeples tortiously interfered

with the Active Members’ business relations with DynaVision. Count Six,

“Attorneys’ Fees,” sought plaintiffs’ expenses, including attorney’s fees, incurred

in prosecuting Counts One through Five. Count Seven, “Punitive Damages,”

sought punitive damages as to each of plaintiffs’ claims on the ground that

Peeples’s “conduct” “was willful, wanton and . . . would raise a presumption of

conscious indifference to consequences.”

      On March 9, 2004, the day after the state court refused to reconsider its

October 29, 2003, order denying plaintiffs’ motion for leave to join Peeples as a

party defendant, Peeples moved the district court to dismiss plaintiffs’ complaint.

Alternatively, he requested that the district court stay further proceedings pending



                                          40
the state court’s resolution of Ledford v. Smith. He requested a stay because the

Active Members had moved the state court for summary judgment, which, if

granted, could settle through issue preclusion some of the factual issues involved in

plaintiffs’ district court claims. The state court heard argument on the summary

judgment motions on April 1, 2004. On May 17, 2004, the district court denied

Peeples’s motion to dismiss and, alternatively, for a stay. On June 6, 2004, Peeples

answered plaintiffs’ complaint.63

                                                2.

       On May 18, 2004, the state court ruled on the pending motions for summary

judgment. It granted defendants summary judgment on the fourth and fifth claims

and on the sixth claim in part. It denied summary judgment on the first, second

and third claims and on the sixth claim in part on the ground that material issues of

fact remained to be litigated. Regarding the sixth claim, the court found that the

Active Members had a fiduciary duty to inform DynaVision of Peeples’s

63
   Peeples’s answer responded to each of the complaint’s 116 paragraphs, admitting or denying
the allegations of the paragraph or stating that the defendant was without knowledge sufficient to
form a belief as to the truth of the allegations. The answer also contained twenty-nine
“defenses,” in three categories: (1) four were affirmative defenses either asserting or implying
that the complaint failed to state a claim for relief; (2) six were confession and avoidance
defenses; and (3) nineteen constituted general denials. The answer was a shotgun pleading in the
sense that many of the defenses in the first two categories failed to identify the claim or claims
for relief to which they were responding. This, coupled with the shotgun manner in which
plaintiffs chose to frame their complaint, may explain why the district court waited until the case
was submitted on motion for summary judgment to attempt to sort out the parties’ claims and
defenses.


                                                41
involvement under the Limited Liability Company Act and Georgia common law,

but not under the Operating Agreement.

      Plaintiffs appealed the court’s dismissal of the fifth claim, that the Active

Members fraudulently induced DynaVision to part with its interest in Signature.

The Active Members cross-appealed the court’s disposition of the first claim, that

Leasing conveyed the Green Road Property due to mutual mistake; the second

claim, that Smith fraudulently induced the transfer of the Green Road Property to

Signature by misrepresenting the warranty deed; and part of the sixth claim, that

the Active Members breached a fiduciary duty to inform DynaVision of Peeples’s

participation. Plaintiffs did not appeal the court’s disposition of their fourth claim,

unjust enrichment through the transfer of the Green Road Property, and the Active

Members did not appeal the court’s denial of summary judgment on plaintiff’s

third claim, that the Active Members had breached a fiduciary duty to Leasing,

O’Dell, and Ledford with respect to the transfer of the Green Road Property.

While these appeals were pending in the Georgia Court of Appeals, the district

court set February 26, 2005 as the discovery deadline.

                                           3.

      On July 12, 2005, the Georgia Court of Appeals handed down its decision.

Ledford v. Smith, 618 S.E.2d 627 (Ga. Ct. App. 2005). The court affirmed the



                                           42
summary judgment for the Active Members on plaintiffs’ fifth claim, reversed the

denial of summary judgment on plaintiff's second claim (effectively granting the

Active Members judgment on that claim), and reversed part of the sixth claim.

After the decision, only the plaintiffs’ first claim, which alleged that Leasing

conveyed the Green Road Property because of mutual mistake, survived.64

       The court of appeals explained why it held for the Active Members on all

but plaintiffs’ first claim. It began with plaintiffs’ sixth claim, that the Active

Members had a fiduciary duty under the Limited Liability Company Act and

common law to disclose their negotiations with Peeples. After observing that

default fiduciary duties are trumped by an operating agreement,65 Ledford, 618


64
   As to that aspect of the first claim, the court concluded that unresolved material issues of fact
precluded summary judgment.
65
   O.C.G.A. § 14-11-305(1), which imposes a general duty of loyalty on the managers of a
limited liability company, see supra note 47, is subject to modification as follows:

       (4) To the extent that, pursuant to paragraph (1) of this Code section or otherwise
       at law or in equity, a member or manager has duties (including fiduciary duties)
       and liabilities relating thereto to a limited liability company or to another member
       or manager:
         (A) The member’s or manager’s duties and liabilities may be expanded,
       restricted, or eliminated by provisions in . . . a written operating agreement;
       provided, however, that no such provision shall eliminate or limit the liability of a
       member or manager:
            (i) For intentional misconduct or a knowing violation of law; or
            (ii) For any transaction for which the person received a personal benefit in
       violation or breach or any provision of a written operating agreement; and
         (B) The member or manager shall have no liability to the limited liability
       company or to any other member or manager for his or her good faith reliance on
       the provisions of a written operating agreement, including, without limitation,


                                                 43
S.E.2d at 636,66 the court explained that Signature’s Operating Agreement allowed

the Active Members to obtain Peeples’s assistance in funding the Put and Call.

Citing § 7.3 of the Operating Agreement, which authorized the Active Members to

“engage in all . . . other business ventures . . . but no Active Member shall engage

in businesses similar to the business of the [Signature] by competing with the

business of the Company,” the court reasoned that:

         This provision gave the Active Members wide latitude to engage in all
         other business activities except those “similar to the business of”
         [Signature], that is, a “competing” carpet company. The provision was
         broad enough to allow the Active Members to negotiate with Peeples
         for the purpose of obtaining financing to fund their buy-out of Dyna-
         Vision’s interest in [Signature]. This activity did not “compete” with
         [Signature]; thus, it did not fall within the exception. Any fiduciary
         duty of disclosure that the Active Member’s [sic] may have owed
         Dyna-Vision with respect to such a business arrangement was
         eliminated by the terms of an operating agreement that allowed the
         business activity which occurred. See Stoker v. Bellemeade, 272
         Ga.App. at 824, 615 S.E.2d 1 (members of an LLC did not breach

         provisions thereof that relate to the scope of duties (including fiduciary duties) of
         members and managers.

O.C.G.A. § 14-11-305(4) (emphasis added).

66
     The Ledford court explained the basis for this policy:

         The contractual flexibility provided in [O.C.G.A. § 14-11-305] is consistent with
         O.C.G.A. § 14-11-1107(b) of the [Limited Liability Company] Act which
         provides that: “It is the policy of this state with respect to limited liability
         companies to give maximum effect to the principle of freedom of contract and to
         the enforceability of operating agreements.”

Ledford, 618 S.E.2d at 636 (quotation omitted).


                                                  44
      fiduciary duties by participating in other allegedly competing real
      estate developments because operating agreement allowed them to do
      so).

Ledford, 618 S.E.2d at 636.

      The court also rejected plaintiffs’ argument that the Operating Agreement’s

Right of First Refusal provision in § 9.2.1 created a fiduciary duty that required the

Active Members to disclose their intention to sell Signature's assets to Peeples.

The court explained:

      As the superior court correctly concluded, this provision was plainly
      “intended to prevent outsiders from buying into [Signature]. In this
      way, the Members maintained control over who their business
      ‘partners’ were to be.” Because the Active Members’ proposed buy-
      out of Dyna-Vision’s interest would not allow a third party to buy into
      [Signature] and become Dyna-Vision's business partner, the purpose
      of the right of first refusal was not implicated. Therefore, [Section]
      9.2.1 did not require the Active Members to disclose to Dyna-Vision
      how it intended to finance its buy-out offer.

Id. at 633–34.

      Turning to plaintiffs’ fifth claim, that the Active Members fraudulently

induced DynaVision to sell its interest, the court held that summary judgment was

appropriate because the Active Members’ failure to inform DynaVision of their

deal with Peeples did not cause DynaVision’s decision to sell. Once the Active

Members invoked the Operating Agreement’s Put and Call provision, DynaVision,

by its principals’ own deposition testimony, had no feasible option but to sell its



                                          45
interests. As the court observed:

      Moreover, both Ledford and O’Dell deposed that, even if they could
      have raised the money to buy out the Active Members, owning
      [Signature] without the Active Members would have been “foolish”
      and “made no sense” because the Active Members were the heart of
      [Signature’s] value. As O’Dell admitted “we didn’t really have a
      choice . . . . We didn’t have a management group . . . . The day the
      put and call came in, I wouldn’t give two cents for finding a group to
      replace them.” Because Peeples’ involvement did not affect the value
      of the Active Members’ interest, it was immaterial. Or, stated
      differently, [plaintiffs] cannot show that they suffered any damage as
      a result of their alleged reliance on the Active Members affirmative
      misrepresentation that Peeples was not involved in the buy-out.

Id. at 634–35.

      The court then addressed the plaintiffs’ second claim, that Smith, and thus

the Active Members, fraudulently induced Leasing to sign the warranty deed at

FNBC by asking Ledford and O’Dell to sign the deed without disclosing the nature

of the document. Because it found no evidence of misrepresentation, the court

concluded that on this claim, the Active Members were entitled to summary

judgment. It held:

      In this case, the evidence shows that FNBC, on its own initiative,
      drafted the warranty deed and asked all the parties to the loan closing
      to sign this “corrective paper.” Although Ledford and O'Dell contend
      they signed the document because Smith asked them to do so, the
      evidence only shows that Smith was relaying the bank's request. There
      is no evidence in the record that Smith caused the deed to be drafted,
      acted in concert with the bank, or misrepresented or concealed the
      document’s nature. In fact, it appears from the record that Smith was



                                         46
      as ignorant of the document’s significance as Ledford and O’Dell.
      Under these circumstances, we see no evidence of a fraudulent
      statement or the concealment of a material fact that Smith was under a
      duty to disclose.

Id. at 636–37.

                                           4.

      On July 15, 2005, shortly after the Georgia Court of Appeals’s opinion

issued, Peeples’s counsel sent a letter to plaintiffs’ counsel, requesting that

plaintiffs dismiss all claims against Peeples. On July 25, plaintiffs’ counsel

responded, stating that nothing in the court’s opinion warranted dismissal and that

they had moved the court of appeals for reconsideration. On July 28, 2005, the

motion for reconsideration was denied. On August 1, Peeples’s counsel again

wrote plaintiffs’ counsel, asking that plaintiffs agree to a stay of proceedings in the

district court. Plaintiffs’ counsel rejected that request the next day; they planned to

petition the Supreme Court of Georgia for a writ of certiorari.

      On September 22, Peeples moved the district court for summary judgment

on all of plaintiffs’ claims. In the brief accompanying the motion, Peeples cited the

court of appeals’s Ledford decision and stated:

      Should the Georgia Supreme Court deny Plaintiffs’ petition for
      certiorari or affirm the Georgia Court of Appeals’ order, then
      Plaintiffs’ derivative liability claims in the federal action are
      collaterally estopped. In the absence of affirmance or denial, the



                                           47
       reasoning of the Georgia Court of Appeals, the applicable Georgia law
       as cited, and the conclusions reached on the undisputed facts as
       present in this case are instructive and may be considered by this
       Court.

       On October 31, plaintiffs’ counsel responded to this statement in their brief

in opposition to Peeples’s motion for summary judgment:

       As an initial matter, throughout their brief, the Defendants refer to an
       Opinion of the Georgia Court of Appeals in a state court proceeding
       between the Plaintiffs and the Active Members . . . . The state court
       case has no effect on the central securities fraud claims in this action;
       the opinion is not binding on this Court. Furthermore, a petition for
       certiorari has been filed with the Georgia Supreme Court seeking to
       correct the multitude of legal and factual errors contained in that
       opinion.67

       On November 18, the Georgia Supreme Court denied plaintiffs’ petition for

certiorari review in the state court case. Ten days later, plaintiffs moved the Court

to reconsider its decision.68 The court denied plaintiffs’ motion on December 16.

The denial operated to make the court of appeals’s Ledford decision binding

authority on matters of Georgia law. See Lexington Developers, Inc. v. O’Neal

Const. Co., Inc., 238 S.E.2d 770, 770–771 (Ga. Ct. App. 1977).

       On December 22, the district court, in a comprehensive sixty-eight page


67
  Peeples’s counsel responded to this position on November 30, adhering to what they
had stated in People’s September 22 brief and informing the district court that the
Georgia Supreme Court had denied certiorari review.
68
   On December 2, the district court ordered counsel to inform it instanter of the supreme court’s
disposition of the motion.


                                                48
order, granted Peeples’s motion for summary judgment on all of plaintiffs’

claims.69 Using the doctrine of collateral estoppel, the court disposed of Count

Three, that Peeples conspired with the Active Members to defraud DynaVision into

selling its interest in Signature,70 and Count Five, that Peeples tortiously interfered

with the Active Members’ business relationship with DynaVision. The court

rejected plaintiffs’ Count Four claims, that Peeples aided and abetted the Active

Members’ breach of fiduciary duties, on the ground that Georgia law did not

recognize such claims. The court disposed of Counts One and Two, charging

Peeples with securities fraud, on the grounds that plaintiffs failed to demonstrate a

genuine issue of material fact as to the several elements of those claims.71

                                                 5.

         On January 9, 2006, Peeples moved the district court pursuant to Rule 59(e)

of the Federal Rules of Civil Procedure to alter and amend its judgment. He

argued that, with respect to plaintiffs’ federal securities law claims in Count One,

69
     The court entered a final judgment for Peeples the same day.
70
   The court granted Peeples summary judgment on the Count Three claims that he had
conspired with the Active Members fraudulently to induce Leasing to convey the Green Road
Property to Signature on the ground that plaintiffs abandoned that claim by failing to support it
in their brief in opposition to Peeples’s motion for summary judgment.
71
   Although the district court’s December 22 order made no explicit reference to Counts Six and
Seven, the court’s disposition of Counts One, Two, and Four and its invocation of the doctrine of
collateral estoppel to dispose of Counts Three and Five implicitly disposed of those two counts,
which sought, respectively, attorney’s fees and punitive damages.


                                                 49
the court had failed to issue the findings required under the PSLRA. The PSLRA

requires a district court, upon final adjudication of a federal securities law claim, to

“include in the record specific findings regarding compliance by each party and

each attorney representing any party with each requirement of Rule 11(b) of the

Federal Rules of Civil Procedure as to any complaint, responsive pleading, or

dispositive motion.” 15 U.S.C. § 78u-4(c)(1). Peeples urged the court to sanction

plaintiffs and their counsel for failing to comply with Rule 11. He also requested

sanctions for the Count One claims pursuant to 28 U.S.C. § 1927 and the district

court’s inherent power.72

       Plaintiffs and their attorneys filed separate responses to Peeples’s request for

attorney’s fees and expenses under the PSLRA. Plaintiffs, represented in the

matter of sanctions by new attorneys, claimed that they did not misrepresent the

historical facts to counsel, did not advise counsel regarding the law, and were not

responsible for the manner in which counsel litigated the case. Relying on our

decision in Byrne v. Nezhat, 261 F.3d 1075 (11th Cir. 2001), plaintiffs averred that

sanctions against them would not be appropriate. In their separate response,

plaintiffs’ attorneys asserted, in essence, that a reasonably competent attorney


72
   Peeples did not move the court to imposes sanctions under Rule 11(b), § 1927, or the court’s
inherent power with respect to plaintiffs’ prosecution of Counts Two through Seven of the
complaint.


                                               50
would have recognized that the claims set out in Count One of the complaint were

cognizable under the federal securities laws.

        On March 21, 2006, the district court granted Peeples’s motion to the extent

that it sought PSLRA findings, but refused to sanction plaintiffs or their counsel,

finding that they had acted in compliance with Rule 11 in pleading and prosecuting

their case.

                                                 6.

       All five plaintiffs now appeal the district court’s disposition of each of their

claims. Their brief, however, presents no argument as to Counts Three and Five

through Seven. We therefore treat as abandoned their appeal of the district court’s

disposition of those counts. We also treat as abandoned the appeal of the court’s

disposition of plaintiffs’ claims under two of the federal securities laws. As noted,

Count One contained claims under § 20(a) of the 1934 Act and Rules 10b-5(a) and

(b). Plaintiffs’ brief presents no argument in support of their § 20(a) and Rule 10b-

5(a) claims,73 and, as in the case of Counts Three and Five through Seven, we deem




73
   The district court did not address explicitly DynaVision’s Count One Rule 10b-5(a) claim,
and plaintiffs’ initial brief in this appeal contains no argument in support of the Rule 10b-5(a)
claim qua claim. Instead, the brief refers to a “scheme,” which forms the basis of a Rule 10b-
5(a) claim, in arguing that there was a genuine issue of material fact as to the “reliance” element
of Count One’s Rule 10b-5(b) claim. We therefore treat Count One’s Rule 10b-5(a) claim as
having been abandoned.


                                                 51
the appeal of the court’s disposition of those claims to have been abandoned.74

Accordingly, what remains are plaintiffs’ Count One claims under Rule 10b-5(b);

their Count Two claims under the comparable Georgia securities law provision;

and part of their Count Four claim, that Peeples aided and abetted the Active

Members’ breach of their fiduciary duty regarding the handling of the Green Road

Property.75 Peeples cross-appeals the district court’s refusal to sanction plaintiffs

and their counsel as required by the PSLRA for prosecuting Count One of the

complaint.

       Our review proceeds as follows. We first consider plaintiffs’ Count One

10b-5(b) claims.76 Next, we move to plaintiffs’ Count Four aiding and abetting

claims.

                                                 III.

       We address these claims in sequence, affirming the district court’s grant of



74
  We likewise deem abandoned plaintiffs’ Count Two state law claims that mirror the § 20(a)
and Rule 10b-5(a) claims. See O.C.G.A. § 10-5-12(a)(2)(A)–(C).
75
   Plaintiffs did not brief, and therefore abandoned, the issue of whether the district court erred
in dismissing the claim that Peeples aided and abetted the Active Members’ breach of a fiduciary
duty to inform DynaVision’s principals that he was providing the $3.5 million the Active
Members needed to close the purchase of DynaVision’s interest.
76
  What we say about the merits of the Count One claims applies to the Count Two claims. See
GCA Strategic Inv. Fund, Ltd. v. Joseph Charles & Assocs., Inc., 537 S.E.2d 677, 682 (Ga. Ct.
App. 2000) (“To evaluate a claim of securities fraud under OCGA § 10-5-12(a), we look to the
similar elements a plaintiff must allege under section 10(b) of the Securities Act of 1934. . . .”).


                                                 52
summary judgment for Peeples.

                                                 A.

       In a typical § 10(b) civil action for a violation of Rule 10b-5(b), a plaintiff

must prove (1) a material misrepresentation or omission by the defendant, (2)

scienter, (3) a connection between the misrepresentation or omission and the

purchase or sale of a security, (4) reliance upon the misrepresentation or omission,

(5) economic loss, and (6) loss causation. Stoneridge Inv. Partners, LLC v.

Scientific-Atlanta, 552 U.S. 148, 157, 128 S. Ct. 761, 768, 169 L. Ed. 2d 627

(2008).77

       To establish a genuine issue of material fact as to the reliance element,78


77
    The literal definition of a security under the 1934 Securities and Exchange Act, as codified in
15 U.S.C. §78c(a)(10), does not include an interest in a limited liability company. See Nelson v.
Stahl, 173 F. Supp. 2d 153, 164 (S.D.N.Y. 2001) (“The Exchange Act’s definition of security
does not refer to membership interests in limited liability companies.”). Nonetheless, plaintiffs
asserted in their complaint and in briefing to the district court that DynaVision’s interest in
Signature was a security. Peeples did not question this assertion, nor did the district court
analyze this issue on its own initiative.
        Our independent research of this issue indicates that whether DynaVision’s interest could
be considered a security is problematic. We are satisfied, however, that plaintiffs’ allegation that
DynaVision’s interest was a security passes the threshold test set forth in Bell v. Hood. See
Williamson v. Tucker, 645 F.2d 404, 416 (5th Cir. May 1981) (holding that the plaintiff’s
allegation that joint venture interests were securities was not so obviously frivolous as to fail the
low jurisdictional bar in Bell v. Hood). In the absence of any briefing on this issue by the
parties and in light of our resolution of plaintiffs' Rule 10b-5(b) claims in favor of Peeples, we
see no need to decide whether DynaVision’s interest was a security.
78
  The district court used the term “transaction causation” in referring to the reliance element.
That terminology is irrelevant, as “[t]ransaction causation” is no more than “another way of
describing reliance.” Robbins v. Koger Props., Inc., 116 F.3d 1441, 1447 (11th Cir. 1997); see
also Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341–342, 125 S. Ct. 1627, 1631 (2005)


                                                 53
plaintiffs79 had to present evidence that, in conversations with Paul Walker,

Peeples stated that he was not involved in the Active Members’ attempt to acquire

DynaVision’s interest in Signature, that his statements were false, that

DynaVision’s principals reasonably relied on the statements,80 and that because of

that reliance, the principals caused DynaVision “to engage in the transaction in

question.” Robbins v. Koger Props., Inc., 116 F.3d 1441, 1447 (11th Cir. 1997)

(quotation omitted). Put another way, plaintiffs had to demonstrate that but for

Peeples’s statements, DynaVision would not have sold its interest but, instead,

would have bought the Active Members’ interests. Huddleston v. Herman &

MacLean, 640 F.2d 534, 549 (5th Cir. Mar. 1981), rev’d on other grounds, 459

U.S. 375, 103 S. Ct. 683, 74 L. Ed. 2d 548 (1983) (“Reliance is a causa sine qua

non, a type of ‘but for’ requirement: had the investor known the truth he would not

have acted.”).



(explaining that reliance is one of the elements of a Rule 10b-5(b) claim and is “often referred to
in cases involving public securities markets (fraud-on-the-market cases) as ‘transaction
causation’”).
79
     We refer to all five plaintiffs.
80
   In an action for damages under Rule 10b-5(b) based on the defendant’s misrepresentation, the
plaintiff must show that he “reasonably relied on and was injured by the misstatement.” Pelletier
v. Zweifel, 921 F. 2d 1465, 1510 (11th Cir. 1991). In the Rule 10b-5(b) context, we have used
the words “justifiably relied” as the equivalent of “reasonably relied.” E.g., Bruschi v. Brown,
876 F.2d 1526, 1528 (11th Cir. 1989). Thus, “reasonably” and “justifiably,” for Rule 10b-5(b)
purposes, express the same element.


                                                54
       After carefully considering the evidence before it, the district court

concluded that no genuine issue of material fact existed as to this element:

Peeples’s denial of any involvement in the Active Members’ plan did not cause

DynaVision to sell its interest. The court explained:

       The evidence in the record, viewed in the light most favorable to
       Plaintiffs, shows that Plaintiffs themselves did not have the necessary
       experience, marketing skills, and expertise to run [Signature] in the
       absence of the Active Members, and that Plaintiffs’ attempts to obtain
       a management group and necessary personnel to work with
       [Signature] were unsuccessful. Plaintiffs themselves testified that it
       would be foolish or risky to purchase the Active Members’ interests in
       [Signature] without having a management group or marketing group
       in place to replace the Active Members. Although Plaintiffs
       summarily contend that they would have acted differently if they had
       known of Defendant Peeples’ involvement, that summary and
       conclusory contention is not sufficient to allow Plaintiffs to avoid
       summary judgment. Indeed, knowledge of Defendant Peeples’s
       involvement would not have changed the fact that Plaintiffs did not
       have the necessary experience, marketing skills, and expertise to run
       [Signature], and that Plaintiffs’ attempts to obtain a management
       group and necessary personnel to work with [Signature] were
       unsuccessful. The failure to disclose Defendant Peeples’ involvement
       thus did not cause Plaintiffs’ decision to sell Plaintiff DynaVision’s
       interest under the February 25, 2002, Put and Call . . . .81

81
   This is essentially verbatim what the Georgia Court of Appeals said in Ledford, that
DynaVision would have sold its interest notwithstanding Peeples’s involvement.
Ledford, 618 S.E.2d at 634–35; see also supra part II.B.2. The court of appeals, after
considering the evidence in the light most favorable to plaintiffs, inferred this ultimate
fact because the evidence pointed to the fact as a matter of law. The question for the
district court was whether it should invoke the doctrine of collateral estoppel and
conclusively rely on the court of appeals’statement of ultimate fact in determining
whether, in resolving plaintiffs’ Rule 10b-5(b) claim (and the comparable Georgia
securities law claim), DynaVision’s principals would have sold DynaVision’s interest
notwithstanding Peeples’s denial of involvement. The district court invoked the doctrine


                                                55
                                                B.

       To obtain a reversal of the district court’s resolution of the reliance issue,

plaintiffs must satisfy us that the evidence in the record creates a jury issue as to

whether DynaVision would have purchased the Active Members’ interests, rather

than sell its interest, had Peeples told Paul Walker and Ledford that he was

providing the Active Members the $3.5 million they needed to close the

transaction. There is no direct evidence that DynaVision would have elected to

buy the Active Members’ interests had Peeples admitted that he was providing the

money. Because there is no direct evidence that DynaVision would have elected to

buy, we ask whether such election can be inferred from the record. Specifically,

we ask whether it can be inferred as an ultimate fact from the subsidiary,

circumstantial facts shown by the evidence, viewed in the light most favorable to

plaintiffs.

       Plaintiffs argue that circumstantial facts sufficient to create the inference are

present. Peeples argues that they are not, that the circumstantial facts create the

contrary inference: DynaVision sold because doing so was in the economic self-



in deciding plaintiffs’ claims in Counts Three and Five, but not in deciding any of the
factual issues involved in plaintiffs’ federal and state securities laws claims. We decline
to consider the doctrine’s application to those claims as a matter of efficiency since the
parties have not briefed the issue.


                                                56
interest of its principals, and it would not have elected to buy even if it had known

of Peeples’s involvement.

      In assessing these opposing positions, our first task is to identify the

circumstantial facts that the evidence establishes as a matter of law. Once that is

done, we determine whether it would have been permissible for a jury to draw the

inference that DynaVision would have elected to purchase the Active Members’s

interests had it known that Peeples was providing the $3.5 million that enabled the

Active Members to close.

      The evidence discloses three sets of circumstantial facts, with inferences

flowing from each set. We summarize each set in the headings of the following

subparts and conclude that, as a matter of law, DynaVision’s principals would have

sold even if they had known about Peeples’s involvement.

                                          1.

DynaVision lacked the expertise necessary to operate Signature’s factory and

market Signature’s product. Consequently, if the Active Members left, there

would be no one to run the company, and Signature’s value would rapidly decline.

      There is no dispute regarding the roles that DynaVision’s principals and the

Active Members performed for Signature. The principals functioned as

Signature’s financiers. By establishing the $200,000 line of credit, they were able



                                          57
to provide Signature with the funds required to start the business and pay the bills

until carpet sales generated enough income to cover the company’s operating

expenses. The Active Members were the managers of the enterprise. Ownbey and

Thomas handled the manufacturing and sales. Smith, the company’s president,

was in charge of marketing, since she was well and favorably known in the

hospitality industry and thus capable of attracting a considerable volume of

business.

          By their own admission in depositions taken in the state court case and in

this case,82 DynaVision’s principals could not, themselves, replace the Active

Members, most notably Smith, for the principals had no experience in

manufacturing carpet and were virtually incapable of marketing Signature’s

products. Ledford testified that the principals had no “experience with [the]

customer base” and therefore could not run the company. He emphasized Smith’s

key role in marketing Signature’s products, stating that “had we been able to retain

Brenda, we would have purchased the company.”83 Paul Walker said that “none of

82
     This testimony appears in the question and answer format appearing in note 31 supra.
83
   The expert opinion testimony DynaVision proffered to the district court concerning
Signature’s value buttressed the fact that Signature’s value was tied to the Active Members’
management, marketing skills, and good will. DynaVision’s expert, in estimating that Signature
was worth $14 million, assumed not only that the Active Members would remain with the
company but also that Smith would increase her ownership interest in Signature to the point that
the firm would qualify as minority owned, and therefore receive additional
revenue—presumably from sales set aside for minority-owned entities. The expert provided no


                                                 58
the DynaVision Group were a part of the everyday management or marketing of

Signature” and that this “was [the] only reason” why DynaVision did not elect to

purchase the Active Members’ interest after the Put and Call issued. O’Dell

admitted that DynaVision’s principals were not qualified to run the company.

         In addition to this testimony, DynaVision’s principals’ conduct towards the

Active Members spoke volumes about how important the principals felt it was to

keep the Active Members in the company, at least until the principals themselves

decided to sell.84 The principals included in the Operating Agreement a provision

that made it highly unlikely that the Active Members would leave Signature before

the principals were ready to sell. If an Active Member sold his or her interest in

the company, § 10.4 of the Agreement would preclude that Member from

competing with Signature for a period of one year.85 Because they were not

financially independent, the Active Members would presumably need to find other

estimation as to Signature’s value without the Active Members’ presence.
84
   Under the “Right of First Refusal” provision of the Operating Agreement, if DynaVision’s
principals obtained a bona fide offer to sell DynaVision’s interest in Signature, and they desired
to sell the interest, they would have to notify the Active Members who, in turn, would have the
right to purchase DynaVision’s interest at the price set in the bona fide offer. See supra note 47.
Oddly enough, this right of first refusal would not be triggered if DynaVision’s principals
received a bona fide offer to sell their interests in DynaVision and decided to accept it. In other
words, DynaVision’s principals could sell their interests in Signature in two ways: (1) causing
DynaVision to sell its interest in Signature, which would trigger the Active Members’ Right of
First Refusal; or (2) selling their interests in DynaVision, which would not.
85
     See supra note 11.



                                                59
employment in the carpet business upon leaving the company. Lying idle for a

year would be burdensome, and an Active Member would therefore think twice

before leaving Signature.

          The principals also included a provision to make it hard for the Active

Members to buy out DynaVision before DynaVision was ready to sell. Section 9.1

of the Operating Agreement addressed the possibility that the Active Members

might attempt to buy DynaVision’s interest pursuant to the § 9.5 Put and Call

provision. DynaVision’s principals knew the Active Members lacked the personal

resources sufficient to make an offer that DynaVision’ principals would be tempted

to accept;86 consequently, the Active Members would have to borrow the money to

fund any buy-out.87 Obtaining a conventional loan from a bank or other lending

86
     In Ledford’s state court deposition, he testified as follows:

          HORST: Did it make any difference to you whether there was a third party
          involved in funding Bob, Brenda, and Bryan’s offer to purchase Dynavision . . . .
          LEDFORD: Yes, it would make a difference to me.
          HORST: Why?
          LEDFORD: Because if Bob, Brenda, and Bryan didn’t have financial backing
          from them, I don’t think they could have bought our interest and I don’t think this
          whole thing would have come up.
87
     In Ledford’s district court deposition, he testified as follows:

          SINKFIELD: Do you know whether collectively and without help from a third
          person in some form or the other they had the resources to pay three-and-a-half
          million dollars for the Dyna-Vision interest?
          LEDFORD: No, sir, I don’t know.
          SINKFIELD: You don’t know one way or
          the other . . . . Did you have any opinion on


                                                    60
institution would require collateral, and the only collateral they had of significant

value was their individual interests in Signature. Section 9.1, however, barred the

Active Members from pledging their interests to a lending institution.88 As a

       the subject at the time?
       LEDFORD: At the time we received the Put and Call . . . I had an opinion, yes,
       sir.
       SINKFIELD: And what was that opinion?
       LEDFORD: That they probably could not.
       SINKFIELD: And based on that opinion, how did you think they would pay for
       the Dyna-Vision interest if y’all decided not to buy them out?
       LEDFORD: I didn’t know.
       SINKFIELD: Did you have an opinion as to what they would have to do?
       LEDFORD: Well, I assumed if they bought us out . . . they would . . . have to
       borrow the money. If they couldn’t do that, they would have to get the money
       from someone else.

       In Walker’s district court deposition, he testified as follows:

       SINKFIELD: So you knew [the Active Members] had to have funding from [an
       outside] source, is that correct?
       WALKER: If they closed the deal, yes.
       SINKFIELD: And you knew, to the best of your knowledge, that they did not
       have sufficient resources among themselves to do it without outside funding; is
       that correct?
       WALKER: I would say with suspicion, they didn’t have. But to my initial
       knowledge, no.
       SINKFIELD: But to the best information you had told you they couldn’t fund it
       without outside help. Is that correct?
       WALKER: To the best information I had, yes.
88
  Section 9.1 of Article 9 of the Operating Agreement, “Restrictions on Transfers and
Encumbrances,” states, in pertinent part:

       The Members have . . . agreed that, without the express written consent of the
       Company and all other Members in the Company, they will not transfer, assign,
       sell, pledge, encumber, hypothecate . . . any of their Interests . . . except strictly in
       accordance with the terms and requirements of the this Agreement, the same
       being exhaustive of all methods and means by which such [Interests] may be
       transferred. Any purported transfer in violation of any provision herein shall be
       void and of no effect, and shall not operate to transfer any title or interest to the


                                                  61
practical matter, then, the only way the Active Members could attempt a buy-out of

DynaVision’s interest would be to find someone like Peeples—someone willing to

advance the purchase price on the condition that, after acquiring DynaVision’s

interest, the Active Members would sell him all or part of the business and agree to

stay on and run the company.

       Joiner revealed how indispensable the Active Members were to Signature’s

value in the letter he wrote to Krevolin on April 11, 2002, nineteen days before the

closing was to take place. In the letter, Joiner informed Krevolin that DynaVision

would refuse to close unless the Active Members signed a new agreement with

DynaVision and, as required by that new agreement, represented in writing that

they were acquiring DynaVision’s interest “solely for [their] own account . . .

without the financial participation of [a third party].”89


       purported transferee.

Like the Right of First Refusal Provision, supra note 46, this restriction had an uneven effect.
Although the Active Members would have to obtain DynaVision’s consent in order to pledge
their interests in Signature as collateral for a loan, DynaVision’s principals, namely Ledford,
O’Dell, and Walker, would not have to obtain the Active Members’ consent in order to pledge
their interests in DynaVision—and, indirectly, their interests in Signature—as collateral for a
loan. The Active Members’ consent would be necessary only if DynaVision itself wanted to
pledge its interest in Signature as collateral for a loan it was obtaining.
89
   Joiner was probably following Ledford’s instructions. DynaVision’s principals had
authorized Ledford to “negotiate, execute, and convey the interests of” DynaVision to the Active
Members “on such terms and conditions and [he] deem[ed] equitable and just.” See supra part
I.C. The representation called for by the new agreement was one of the “terms and conditions”
Ledford insisted on; if not, Joiner thought it up on his own.


                                                62
       Although Joiner pointed to nothing in the Operating Agreement that would

require the Active Members to make these representations, he or his clients

apparently thought Krevolin would agree that the Agreement, read as a whole,

required that the representations be made.90 If Krevolin had agreed, he would have

advised his clients that they could not honestly make such misrepresentations

without inviting DynaVision to claim fraud. See McFarland v. Kim, 275 S.E.2d

364, 366 (Ga. Ct. App. 1980) (holding that misrepresentations about present state

of mind are actionable as fraud). The misrepresentations would also have given

DynaVision an affirmative defense in the event the Active Members sued for

specific performance. Defending an action for fraud or countering an affirmative

defense in a suit for specific performance would be expensive and could be very

unpleasant; Joiner apparently thought Krevolin would therefore advise his clients

to abandon their plans and continue to manage Signature in partnership with

DynaVision.

       Krevolin’s response, in a letter to Joiner dated April 16, was brief: The

Active Members would not make the representations Joiner’s letter was seeking,

and moreover, if DynaVision refused to close, the Active Members would take it to

90
   Neither of plaintiffs’ briefs on appeal mentions the new agreement Joiner sent Krevolin in his
April 11 letter. Consequently, we do not know whether plaintiffs’ counsel discovered something
in the Operating Agreement that would have justified Joiner’s demand that the Active Members
make the representations that the new agreement, if executed, would have called for.


                                               63
court. As far as the Active Members were concerned, their business relationship

with DynaVision’s principals was at an end. The principals’ threat of litigation if

the Active Members did not abandon the Put and Call had gone for naught. Joiner

informed Ledford of Krevolin’s response, and, after considering DynaVision’s

options,91 Ledford instructed Joiner to go forward with the closing on April 30, as

previously agreed.92

                                               2.

DynaVision’s principals could not have persuaded the Active Members to remain

with the company, obtained a management team to replace them, or located a buyer

for Signature, even if Peeples admitted his involvement.

       DynaVision’s principals have conceded that they were unable to persuade

the Active Members or Smith individually to remain with Signature and that they

were unsuccessful in finding a suitable management team to replace them. They



91
   DynaVision’s principals had two options. One was to close the deal and take the $3.5 million
on the table. If they wanted to sue the Active Members, they could do that later—and they
eventually did. The other option was to refuse to close and defend the Active Members’
expected suit for specific performance. We infer that they eschewed this option because it was
less attractive economically.
92
   The record does not reveal what Joiner and Ledford said to one another after Joiner received
Krevolin’s letter. We infer that they decided that DynaVision had no basis for refusing to
transfer its interest to the Active Members; the § 9.5 Put and Call provision of the Operating
Agreement required them to capitulate. On April 25, Joiner wrote Krevolin and acknowledged
that the transaction would close on April 30. His letter made no reference of Krevolin’s
rejection of his demands regarding the representations and the Green Road Property.


                                               64
likewise have conceded that they had no success in locating a carpet company or

an investor willing to purchase the company. Two of the three carpet

manufacturers Ledford and O’Dell contacted, Mohawk Carpets and Clay Miller

Carpets, expressed no interest in buying Signature, even if doing so meant keeping

the firm out of Peeples’s hands.93 Jerry Thomas of Matel Carpets expressed

interest but only if Smith and the other Active Members would be willing to stay

with Signature, which they were not.

         In their brief to us, however, plaintiffs argue that Ledford and O’Dell would

have been able to find a buyer for $8.5 million if Peeples had simply admitted his

involvement in the Put and Call. With a buyer’s commitment in hand, DynaVision

would have then purchased the Active Members’ interest for $3.5 million and

reaped a $5 million profit.

         Plaintiffs explain that once Peeples admitted his involvement, DynaVision’s

principals would have discovered that he agreed to pay $10 million for Signature

(including $3.5 million to DynaVision). Ledford and O’Dell would have then had

two excellent selling points when offering Signature to Mohawk, Clay Miller, and

Matel. First, because Peeples was going to pay $10 million for Signature, their

asking price of $8.5 million was not only reasonable, it was an exceptional bargain.


93
     See supra part I.B.


                                            65
Second, Peeples saw Signature as an effective way to reach the hospitality

industry. By buying Signature, Peeples’s competitors could gain entry to the

hospitality market and, at the same time, keep Peeples out. Plaintiffs argue:

      Had [DynaVision] known the truth, DynaVision’s chances of finding
      a buyer willing to pay more than $7 million for [Signature] would
      have increased dramatically.
      ....
      Potential buyers and investors would certainly view the [Active
      Members’] agreement to sell [Signature] for $10 million to the
      Peeples Group as material. Thus, those contacted by DynaVision
      during the [thirty-day] election period may have acted differently,
      themselves, had they known of the agreement between the Peeples
      Group and the Active Members. Such knowledge may have increased
      their assessment of the value of the company or validated the value
      mentioned by DynaVision. Moreover, knowledge of a strategic
      acquisition by Shelby Peeples might have inspired those with
      marketing experience to assist DynaVision in order to maintain their
      competitive advantage. Knowledge of the truth could have enabled
      DynaVision to find a purchaser and/or marketing group for
      [Signature].

Appellants’ Br. at 39–40.

      Several flaws in plaintiffs’ argument are immediately obvious. First, there is

no support in the record for the statement that Peeples agreed to pay the Active

Members $10 million for Signature at any time, let alone during the thirty-day

election period. The most Peeples ever offered for Signature was roughly $6.5

million. In the January 21 letter of intent, Peeples discussed loaning the Active

Members $3.5 million to enable them to purchase DynaVision’s interest and then



                                          66
forgiving the loan and paying them $3 million for Signature’s assets once they

acquired the company.94 In actuality, Peeples paid around $6 million to acquire

Signature. Following the closing, he forgave the $3.5 million loan he had given

the Active Members and paid $2.25 million for Signature’s assets. He lowered the

price upon discovering an error in the company’s books.

           To arrive at the $10 million figure, plaintiffs add the bonuses Peeples

agreed to pay the Active Members under the Asset Purchase Agreement and

employment contracts95 to the amount he actually paid for Signature’s assets.96

The amount of these bonuses, however, was contingent on Signature’s future

performance; the Active Members would only be eligible if Signature made a

profit above a certain amount on a yearly basis.97 Consequently, the bonuses are


94
     See supra part I.B.
95
     These agreements are set out in the text in part I.D, supra.
96
     The Plaintiffs’ brief states:

          The defendants purchased the assets of [Signature] for consideration that was
          valued at over $10 million at the time of their agreement. . . . The bonuses in the
          Asset Purchase Agreement, which are capped at $5 million, combined with the
          direct payments to the Active Members and the forgiveness of the loan used to
          buy out DynaVision, exceeds $10 million.

There is no reference in the Asset Purchase Agreement to any bonuses “capped at $5 million,” so
we assume plaintiffs refer to the bonus provisions referred to in note 28, supra.
97
     The Asset Purchase Agreement states:

          In addition to the base salary, each of the Active Members shall be entitled to an


                                                    67
not part of Peeples’s payment for Signature; they are simply part of the Active

Members’ compensation arrangements for their continued service with the

company.

       Second, plaintiffs have not explained how they would have learned of the

price Peeples intended to pay for Signature.98 According to the Georgia Court of

Appeals, the Active Members had no obligation under the Operating Agreement to

reveal the details of their plan. Ledford, 618 S.E.2d at 633–36. If Paul Walker had

asked about these details, Peeples’s response would therefore undoubtedly have

been that it was none of his business. This is essentially what Krevolin told Joiner

when Joiner demanded that the Active Members represent prior to closing that they

were purchasing DynaVision’s interest “solely for [their] own account” and

“without the financial participation of any other Person,” meaning without

Peeples’s participation.


       annual bonus, equal to twenty percent (20%) of the amount by which the net pre-
       tax profits of [Peeples] exceed One Million Five Hundred Thousand Dollars on an
       annual basis: provided, however (a) shortfalls in annual net pre-tax profits shall
       be carried forward to succeeding years . . . .

The employment contracts add the caveat that “the maximum amount payable by Employer to
Employee [in bonuses] shall be one [$1.6 million].”
98
   In the state court case against the Active Members and Signature, plaintiffs claimed that it
was not until August 12, 2003, when they took Ownbey’s deposition, that they learned of the
price Peeples paid for Signature and the terms of his employment arrangement with the Active
Members. The next day, they moved the court for leave to amend their complaint to add Peeples
as a party defendant. See supra part II.A.


                                              68
       Plaintiffs would therefore not have been able to lure potential buyers by

telling them that Peeples offered $10 million for the company. Instead, plaintiffs’

best selling pitch was the one they actually used: Peeples was going to acquire

Signature, and Peeples’s competitors would benefit economically if they stepped

in, bought the company, and kept it from falling into Peeples’s hands.

                                                3.

The principals had to choose between purchasing the Active Members’ interest and

risking the loss of their investment or selling their interest for a $3.5 million profit.

       DynaVision’s principals had thirty days to decide whether to buy or sell.

They opted to sell and received a $3.5 million profit, an extraordinary return on

their initial investment.99 Ledford and O’Dell also received the release of their

obligation to FNBC to guarantee payment of the $911,000 loan the bank had given

Signature.100 Had they opted to buy instead, they would have assumed the risk that


99
  The record indicates that only a small initial investment was made. DynaVision’s principals
(1) obtained the $200,000 line of credit FNBC gave Signature when it commenced operations,
(2) guaranteed, in part, the $630,000 loan the Dalton Whitfield Bank gave Leasing to purchase
the Green Road Property in October 1999, and (3) guaranteed, in part, the $911,000 loan FNBC
gave Signature on October 24, 2001. See supra part I.A.
100
   Ledford and O’Dell were not entitled to such release. The § 9.5 Mandatory Put and Call
provision specified that the “sale [of DynaVision’s interest] shall be for cash at closing, but all
loans from and guaranties executed by the selling Members must be paid in full and released
prior to closing.” The Operating Agreement defines “Members” as DynaVision, Smith, Thomas,
and Ownbey. See supra part I.A. Ledford and O’Dell were members of DynaVision, but were
not Members within the meaning of the above language. Their personal guarantees should have
remained in force. Were DynaVision to have bought the Active Members’ interests instead of


                                                69
the company would have to close down unless they found a management team to

run it. Moreover, without a management team, they would have had great

difficulty selling the company. Potential buyers, knowing that Signature’s value

was diminishing, perhaps exponentially, would have been able to simply stand by

and wait for the day when the principals had no alternative but to take whatever

price they could get.

          Faced with these alternatives, DynaVision’s principals had to choose the one

that satisfied their economic self-interest: They had to sell. As the Georgia Court

of Appeals, drawing on what Ledford and O’Dell had to say on deposition,101

observed:

          Either the Active Members’ interest in [Signature] was worth $3.5
          million to Dyna-Vision or it was not. The fact that Peeples financed
          the offer could not have materially affected Dyna-Vision's decision-
          making with respect to [Signature’s] value, because if Dyna-Vision
          chose to buy the Active Member's interest, it could not force Peeples
          (or any other prospective buyer) to buy [Signature] for a fixed price.
          And there is no evidence in the record that Dyna-Vision had an
          interested buyer or that [Signature] had any value to any other
          prospective buyer. Moreover, both Ledford and O'Dell deposed that,
          even if they could have raised the money to buy out the Active
          Members, owning [Signature] without the Active Members would


selling out, in addition to paying the Active Members $3.5 million in cash, it would have been
required to obtain their release as guarantors of FNBC’s $911,000 loan to Signature and, further,
to satisfy any obligations they may have incurred on Signature’s behalf in the process of carrying
on the company’s business.
101
      The deposition testimony they gave in state court is part of the record here.


                                                   70
      have been “foolish” and “made no sense” because the Active
      Members were the heart of [Signature’s] value. As O'Dell admitted
      “we didn’t really have a choice. . . . We didn’t have a management
      group. . . . The day the put and call came in, I wouldn't give two cents
      for finding a group to replace them.” Because Peeples’ involvement
      did not affect the value of the Active Members’ interest, it was
      immaterial.

Ledford, 618 S.E.2d at 634–35.

      We began this discussion by stating that to obtain a reversal of the district

court’s determination that they failed to create a jury issue as to the reliance

element of their Rule 10b-5(b) claims, plaintiffs had to convince the court that the

evidence, considered in the light most favorable to them, yielded circumstantial

facts from which a jury reasonably could infer that if Peeples had not denied his

involvement in the Put and Call, DynaVision’s principals would have purchased

the Active Members’ interest. Peeples contends that the evidence establishes

circumstantial facts that yield but one inference: DynaVision’s principals had no

option but to sell. We agree. Peeples’s misrepresentations played no causative

role in the DynaVision principals’ decision to sell to the Active Members.

                                           C.

      Perhaps realizing the futility of the arguments they have advanced, plaintiffs

present an argument that they failed to present to the district court while it was

considering the merits of their claims. The argument is founded on § 9.1 of the



                                           71
Operating Agreement, which precludes a Member from pledging an interest in

Signature as collateral for a loan.102 Plaintiffs contend that the Active Members

breached this provision by pledging their interests in Signature as collateral for the

$3.5 million loan they obtained from Peeples.103 They did not know about the

pledge prior to the April 30 closing, they represent, but would have suspected it

had Peeples admitted that he was behind the Put and Call. DynaVision now argues

that had it suspected that the Active Members had pledged their interests in

violation of § 9.1, it would have rejected the Put and Call. Then, if the Active

Members sued for specific performance, it would have asserted the breach of § 9.1

as an affirmative defense, citing the Georgia principle of equity—that “a party

seeking specific performance of a contract must show substantial compliance with

his part of the agreement, and the breach of a material condition will bar a decree

of specific performance.” Saine v. Clark, 219 S.E.2d 407, 408–09 (Ga. 1975).

         The allegation that DynaVision’s principals would have rejected the Put and


102
      See supra note 88.
103
    Peeples was aware of § 9.1's prohibition against the Active Members pledging their interests
as collateral for a loan. In his January 21, 2002, letter to the Active Members, see supra part I.A,
he stated that, “to the extent of any conflict in the provisions of this Letter and the provisions of
the Signature Operating Agreement, the provisions of the Signature Operating Agreement shall
prevail and the conflicting provision(s) of this Letter shall be void and of no effect whatsoever.”
In other words, if DynaVision should have claimed that the Active Members had pledged their
interests in Signature as collateral for the $3.5 million loan, Peeples would have treated the loan
as unsecured.


                                                 72
Call had they suspected a violation of § 9.1 does not appear in plaintiffs’ complaint

as part of the Count One federal securities law claims. Nor was it made in

plaintiffs’ response to Peeples’s motion for summary judgment.104 Plaintiffs’

response on summary judgment does contain a factual statement that the Active

Members pledged their interests in disregard of § 9.1. This statement, however,

was not made as part of plaintiffs’ argument on the reliance element—plaintiffs did

not assert that but for Peeples’s misrepresentations, DynaVision would have

elected to purchase the Active Members’ interest.105 Moreover, in its order

granting Peeples summary judgment, the district court made no reference to the

argument plaintiffs now present, and the plaintiffs did not move the court pursuant

to Rule 59(e) to reconsider its decision on the ground that it had overlooked the

argument.

          The argument appeared for the first time in plaintiffs’ response to Peeples’s

post-judgment motion for PSLRA sanctions. Peeples, in his motion, argued that

plaintiffs lacked a factual basis to assert that DynaVision’s principals relied to their



104
      The plaintiffs also failed to raise this argument at any time during the state court litigation.
105
    During oral argument before this panel, Peeples’s attorney told the court that plaintiffs’
counsel was presenting a reliance argument he had not presented to the district court. Plaintiffs’
counsel disagreed, and cited a page in plaintiffs’ response to Peeples’s motion for summary
judgment where counsel said the argument appeared. The page contains the factual statement
that the Active Members breached § 9.1 without any reference to a reliance argument.


                                                     73
detriment on Peeples’s misrepresentations. Then, plaintiffs finally argued that had

they known about the misrepresentations, they would have rejected the Put and

Call and refused to close. If the Active Members sued, they would have pled the

breach of § 9.1 as an affirmative defense. The court’s order denying Peeples’s

motion for sanctions, however, made no reference to this argument.

      It requires no citation of authority to say that, except when we invoke the

“plain error doctrine,” which rarely applies in civil cases, we do not consider

arguments raised for the first time on appeal. A mere recitation of the underlying

facts, furthermore, is insufficient to preserve an argument; the argument itself must

have been made below. See City of Nephi v. Fed. Energy Regulatory Comm’n,

147 F.3d 929, 933 n.9 (D.C. Cir. 1998) (holding that a party does not preserve an

argument for appellate review by “merely informing the [district] court in the

statement of facts in its opening brief [of the factual basis for the claim]”); Wasco

Prods., Inc. v. Southwall Tech., Inc., 166 Fed. App’x 910, 911 (9th Cir. 2006)

(unpublished) (“Although [the argument was] stated in a statement of facts, it was

never argued and never ruled upon. Without any proffered explanation for this

default, the argument is waived.”). Here, plaintiffs did not use the factual

statement in arguing the reliance issue.

      Given what we have said thus far in this opinion, we think it appropriate to



                                           74
say a word about the reach of § 9.1. Even if an Active Member had attempted to

pledge of his or her interest in Signature as collateral for a loan without the consent

of DynaVision and the other Active Members, § 9.1 would have rendered the

pledge “void and of no effect.” If the lender attempted to seize the interest in

Signature to satisfy the debt, DynaVision and the other Active Members could

claim that the pledge was void.106 If the Active Member paid the loan, however,

and no seizure occurred, DynaVision and the other Active Members could not have

suffered injury on account of any § 9.1 breach. Nor could DynaVision have used

the pledge as the basis for a lawsuit against the breaching Active Member.107

                                                IV.

       We now address what remains of plaintiffs’ Count Four claims that Peeples

aided and abetted Smith, Thomas, and Ownbey in breaching their fiduciary duties


106
  If, prior to accepting the collateral, the lender knew that § 9.1 treated the pledge as void,
whether the lender would prevail in a contest with DynaVision would be questionable.
107
    To be sure, the Operating Agreement was structured so as to prevent either side, DynaVision
or the Active Members, from selling its interest in Signature to a third party if the other side
objected. The Georgia Court of Appeals made this observation in Ledford, in commenting on
the purpose behind § 9.2 of Article 9, the “Right of First Refusal” provision. Section 9.2 was
“plainly intended to prevent outsiders from buying into [Signature]. In this way, the Members
maintained control over who their business partners were to be.” 618 S.E.2d at 633. However,
once the Active Members invoked the Put and Call provision of § 9.5 and DynaVision did not
elect within 30 days to purchase their interests, “the right of first refusal provisions of the
Operating Agreement [became] moot since DynaVision [was] no longer . . . an owner in
[Signature] possessing a right of first refusal.” Ledford, 618 S.E.2d at 633. The court of
appeals’s analysis of the Operating Agreement’s structure is straightforward and comports with
logic and common sense. It should not have come as a surprise to plaintiffs’ counsel.


                                                 75
to Leasing and, separately, to Ledford and O’Dell as Members of Leasing.108

Plaintiffs argue that Peeples aided and abetted two separate breaches of the

obligation Smith, Thomas, and Ownbey assumed under the Limited Liability

Company Act, O.C.G.A. § 14-11-305(1), as members and managers of Leasing, to

“act in a manner” that they “believe[d] in good faith to be in the best interests” of

the company and “with the care an ordinarily prudent person in a like position

would exercise under similar circumstances.”109 We affirm the district court’s

dismissal of the claims and hold that Peeples could not have aided and abetted a

breach of fiduciary duty because, as a matter of law, no such breach occurred.

                                              A.

       In support of their aiding and abetting claim, plaintiffs allege two separate

breaches of fiduciary obligation. First, they contend that Smith breached her

108
    As indicated in part II.B.1, supra, Count Four alleged that Peeples aided and abetted Smith,
Thomas, and Ownbey in breaching two of their fiduciary duties: to inform the plaintiffs that
Peeples was supporting their Put and Call and to transfer the Green Road Property back to
Leasing. Here, plaintiffs do not challenge the district court’s reliance on the court of appeals’s
holding in Ledford v. Smith that the Active Members had no fiduciary duty to inform
DynaVision of Peeples’s involvement. Also, DynaVision obviously cannot state a Count Four
claim about the Green Road Property because DynaVision did not hold an interest in Leasing or
the Green Road Property and, therefore, could have suffered no injury by the alleged breach of
any fiduciary duty in connection with the transfer of that property. Accordingly, the district
court properly dismissed DynaVision’s Count Four claim relating to the Green Road Property.
109
    See supra note 47, for the full text of O.C.G.A. § 14-11-305(1). Leasing’s operating
agreement is not part of the record in this case. We assume arguendo that an operating
agreement existed and that Smith, as Leasing’s president, assumed the duties the statute
imposed. We also assume that Thomas and Ownbey were responsible for Smith’s conduct since
the complaint alleged that they were co-conspirators.


                                                76
fiduciary duty by failing to inform Ledford and O’Dell that the document they

signed before Cynthia Trammel at FNBC was a warranty deed. Had Smith

disclosed the nature of the document to Ledford and O’Dell, plaintiffs submit, they

would not have signed it. Second, plaintiffs contend that Smith, Thomas, and

Ownbey breached their fiduciary duties to Leasing, Ledford, and O’Dell by

refusing to convey the Green Road Property back to Leasing, pursuant to Paul

Walker’s demands, after the warranty deed was signed but before the sale of

DynaVision’s interest closed. Plaintiffs argue that Peeples aided and abetted these

breaches so that the Active Members would be in a position to give him title to the

Green Road Property after acquiring DynaVision’s interest.110

       The district court, concluding that Georgia did not recognize a cause of

action for aiding and abetting the breach of a fiduciary duty, dismissed plaintiffs’

claims. The Georgia Court of Appeals subsequently held, however, in Insight

Techs., Inc. v. FreightCheck, LLC, 633 S.E.2d 373 (Ga. Ct. App. 2006), that such




110
    As proof that Peeples induced Smith and the Active Members to commit these statutory
breaches, plaintiffs point to Peeples’s January 21 letter of intent to the Active Members, which
plaintiffs describe in their initial brief on appeal as a “contract[] to purchase the Green Road
Property as part of the assets of [Signature]” and the promise Peeples made in the Asset
Purchase Agreement to indemnify the Active Members for any expenses they might incur if held
liable for refusing to accede to Paul Walker and Ledford’s demand that Signature transfer the
property back to Leasing.



                                               77
an aiding and abetting claim is cognizable.111

         In light of the court of appeals decision in that case, we assume for purposes

of this case that the obligation § 14-11-305 imposes on limited liability company

members and managers is, as plaintiffs’ contend, a “fiduciary duty,” and we

therefore proceed to the merits of plaintiffs’ aiding and abetting claims. As

indicated above, plaintiffs’ claims are founded on two distinct breaches of their

statutory obligation. The breaches have to have occurred; otherwise, Peeples

cannot be held liable for aiding and abetting. We therefore determine whether, as a

threshold matter, a jury reasonably could find, as plaintiffs allege, that Smith and,

subsequently, Smith, Thomas, and Ownbey breached the obligations they assumed

under § 14-11-305 as members and managers of Leasing.

                                                B.

         We begin with plaintiffs’ argument that Smith should have explained the

significance of the warranty deed that Ledford and O’Dell signed before Cynthia
111
      The elements of the claim are:

         (1) through improper action or wrongful conduct and without privilege, the
         defendant acted to procure a breach of the primary wrongdoer's fiduciary duty to
         the plaintiff;
         (2) with knowledge that the primary wrongdoer owed the plaintiff a fiduciary
         duty, the defendant acted purposely and with malice and the intent to injure;
         (3) the defendant's wrongful conduct procured a breach of the primary
         wrongdoer’s fiduciary duty; and
         (4) the defendant's tortious conduct proximately caused damage to the plaintiff.

Insight Techn., Inc. v. FreightCheck, LLC, 633 S.E.2d 373, 379 (Ga. Ct. App. 2006).


                                                78
Trammel at FNBC. To analyze this argument, we proceed through the explanation

that, according to the plaintiffs, Smith should have given in order to fulfill her

fiduciary obligations. We then conclude that, as a matter of law, such an

explanation would not have caused the plaintiffs to act differently than they

actually did.

       Smith’s explanation, to be complete and leave no stone unturned, would

have taken Ledford and O’Dell back to October 2001, when Ledford, O’Dell, and

the Active Members applied to FNBC for a loan on behalf of Signature. That loan

was intended to pay off Signature’s current loans at FNBC, pay off the balance due

on the note Leasing gave the Dalton Whitfield Bank,112 and provide Signature with

additional working capital. Signature needed in excess of $900,000 to accomplish

all of this.

       Smith would have reminded Ledford and O’Dell that Cynthia Trammel—the

FNBC officer who processed their loan application and, before that, handled the

loan they had obtained from the Dalton Whitfield Bank for Leasing—had to

submit their application to FNBC’s board of directors for approval. She would

also have explained that the board approved the loan subject to certain conditions,


112
   The note was in the principal amount of $630,000, the sum of money Leasing needed, and
used, to purchase the Green Road Property. Smith, Thomas, Ownbey, Ledford, and O’Dell had
signed the note and guaranteed its payment. See supra note 14.


                                            79
among them (1) that Ledford, O’Dell, Smith, Thomas, and Ownbey sign

Signature’s note, and thus guarantee its payment and (2) that Signature, joined by

Ledford, O’Dell, Smith, Thomas, and Ownbey, give the bank a deed to secure debt

on the Green Road Property.113 This meant that if Leasing held title to the

property, it would have to convey the property to Signature so that Signature, in

turn, could deed the property unencumbered to FNBC to secure the loan. Ledford,

O’Dell, and the Active Members had agreed to these conditions.

       Next, Smith would have explained that Trammel, having obtained their

consent to these conditions, took the steps necessary to close the transaction. One

was to have the bank’s lawyer, Todd McCain, conduct a title search of the Green

Road Property. McCain conducted a search, issued an opinion, and delivered it to

Trammel. The opinion stated that title to the property was held by Leasing and that

Signature could not give the bank a deed to secure debt unless Leasing deeded the

property to Signature before the loan closed.

       Smith would have gone on to say that the closing went as planned except

that Signature gave the bank a deed to secure debt on property it did not own;

Leasing had neglected to convey the Green Road Property to Signature. Trammel

113
   In handling the $630,000 Leasing loan at the Dalton Whitfield Bank, Trammel required the
same five individuals sign the note and guarantee its payment. The inference is that they were
responsible for Signature’s business affairs to the same extent they were responsible for
Leasing’s affairs.


                                               80
had overlooked McCain’s caveat that the conveyance occur prior to closing. Her

failure to obtain the necessary warranty deed from Leasing to Signature did not

come to light until later, when she read McCain’s opinion letter.

       Upon reading McCain’s letter, Trammel realized that she had to obtain a

deed from Leasing to Signature so that the deed to secure debt Signature had given

the bank would not be worthless.114 To solve the problem, Trammel called

McCain’s office, and it prepared the warranty deed at issue. Trammel then called

Smith. She told Smith that a “document” needed to complete the loan closing had

to be signed and asked her to come to the bank with Ledford, O’Dell, Thomas, and

Ownbey for that purpose. Smith immediately informed the others of Trammel’s

request. A day or so later, she arrived at the bank with Thomas and Ownbey and

signed the document, the warranty deed, before a notary and a witness. When

Ledford and O’Dell failed to appear, Trammel called Smith again. Smith, in turn,

called Ledford, who contacted O’Dell, and they, too, signed the deed, before the

same notary and witness. At that time, plaintiffs argue, Smith should have

informed them that the document was a warranty deed.

       The position plaintiffs have taken throughout this litigation is that


114
   The record does not contain a copy of the deed to secure debt Ledford, O’Dell and the others
gave the bank; thus, we do not know whether, in signing it, they expressly warranted that
Signature was giving the bank title to property it owned.


                                              81
notwithstanding a full explanation by Smith—that Leasing had to convey the

Green Road Property to Signature so that the $911,000 loan could go

through—Ledford and Smith would not have signed the “document.” We question

whether Ledford and O’Dell would have refused to sign after Smith informed

Trammel of their noncompliance, Trammel referred the matter to the bank’s

lawyer, McCain, and McCain contacted Ledford and O’Dell’s lawyer. Ledford

and O’Dell’s lawyer would have informed them of the legal consequences that

might flow if they still refused to accede to the conveyance of the Green Road

Property to Signature. In any event, what counsel would have had to say has a

bearing on whether, in the final analysis, Smith’s failure to tell Ledford and O’Dell

that the “document” they were to sign was a warranty deed constituted a breach of

Smith’s § 14-11-305 obligation to “act in a manner . . . she believes in good faith

to be in the best interests of” Leasing and its members, “with the care an ordinarily

prudent person in a like position would exercise.”

      McCain would have told Ledford and O’Dell’s lawyer that Ledford, O’Dell,

Smith, Thomas, and Ownbey induced the bank to loan Signature $911,000 on the

condition that Signature give the bank a deed to secure debt on the Green Road

Property. To do that, Signature would have to possess clear title to the property.

Although the bank insisted that these five individuals guarantee the payment of the



                                          82
loan by co-signing Signature’s note, their guarantee was not enough; the bank

needed collateral in the form of a deed to secure debt from Signature. Another

reason why the bank needed this additional security is that part of the $911,000

loan would be used to pay off Leasing’s debt to the Dalton Whitfield Bank, thereby

relieving Leasing’s guarantors, including Ledford and O’Dell, of potential liability

for Leasing’s non-payment of the debt, and, at the same time, depriving Signature

of the full value of the loan.115

       McCain would have then observed that, in executing Signature’s deed to

secure debt, Ledford and O’Dell represented that Signature owned the property, on

the surface a false representation. If making such representation was intentional, as

their current position seems to imply, they obtained the bank’s funds under false

pretenses. And, moreover, Leasing lined its pockets, and the guarantors of

Leasing’s debt to the Dalton Whitfield Bank were relieved of potential liability, at

Signature and FNBC’s expense. McCain would inform Ledford and O’Dell’s

counsel of the elements of the federal bank fraud statute, 18 U.S.C. § 1344, that

according to the Eleventh Circuit Court of Appeals, in United States v. De La

115
    The record does not indicate the balance due on Leasing’s $630,000 note to the Dalton
Whitfield Bank. An inescapable inference is that the payoff consumed a goodly portion of the
amount due on that note and that Signature would be deprived of the benefit of the payoff unless
it owned the Green Road Property. Also inescapable is the inference that in inducing the FNBC
to make the loan on the conditions its board of directors dictated, Ledford, O’Dell, Smith,
Thomas, and Ownbey were acting as members of Leasing as well as on behalf of Signature.


                                               83
Mata, 266 F.3d 1275, 1298 (11th Cir. 2001), makes it a crime to knowingly make

materially false representations to a federally insured bank for the purpose of

obtaining money.116 Ledford and O’Dell might be subject to prosecution even if

they intended to repay Signature’s $911,000 loan.117

       Given the representations Smith and the others made to induce the FNBC to

make the Signature loan and the benefit that inured to Leasing and its guarantors

when its note to the Dalton Whitfield Bank was paid off, we fail to discern how

Smith could be said to have breached her § 14-11-305 obligation to Leasing,

Ledford, and O’Dell. She did precisely what she and the others had promised the

bank they would do. In sum, plaintiffs failed to establish a breach on Smith’s part

and, as a result, failed to make out a case of aiding and abetting against Peeples.

                                               C.

       This brings us to the second alleged breach, the refusal of Smith, Thomas,

and Ownbey to accede to Paul Walker and Ledford’s demand that they cause
116
   Although the record does not reveal that FNBC was insured by the Federal Deposit Insurance
Corporation, the probability is that it was. And if not, Ledford and O’Dell would be amenable to
prosecution under Georgia law for theft by deception. See, e.g., O.C.G.A. § 16-8-3; Gentry v.
State, 414 S.E.2d 696, 697 (Ga. Ct. App. 1992).

117
     See United States v. Hollis, 971 F.2d 1441, 1452 (10th Cir. 1992) (holding that a “person
violates the bank fraud statute when he knowingly executes a scheme to obtain money from a
financial institution by means of false or fraudulent representations . . . . [I]f a defendant
knowingly provided materially false information in order to induce the loan, the crime is
complete, and it is irrelevant whether or not he intended to repay or was capable of repaying
it.”).


                                               84
Signature to convey the Green Road Property to Leasing.118 According to

plaintiffs, O.C.G.A. § 14-11-305 obligated the Active Members, as members or

managers of Leasing, to make the conveyance. Plaintiffs ignore the fact that § 14-

11-305 actually obligated the Active Members, as managers of Signature, not to do

that: if they had made the conveyance, the Active Members would, in effect, have

given Leasing the part of the $911,000 FNBC loan proceeds Signature used to pay

off Leasing’s note to the Dalton Whitfield Bank while gaining Signature nothing in

return. Given our disposition of the first breach, it would be inconsistent to hold

that § 14-11-305 obligated the Active Members to cause Signature to transfer the

property back to Leasing. The second breach therefore fails as a foundation for

plaintiffs’ second aiding and abetting claim against Peeples.

       The district court, had it entertained Count Four on the merits, would have

been required to grant Peeples summary judgment. We accordingly affirm its

judgment dismissing the count for failure to state a claim for relief.

                                                V.

118
    Walker and Ledford made this demand on behalf of Ledford, O’Dell, and Bryan Walker, qua
Leasing members, after the Put and Call’s 30-day election period ended and DynaVision became
obligated by operation of § 9.5 of the Operating Agreement to transfer its interest in Signature to
the Active Members. If this were not the case, and DynaVision maintained its interest in
Signature until the April 30, 2002, closing, the Active Members could not have complied with
Walker and Ledford’s demand; Signature could not have conveyed the Green Road Property to
Leasing unless DynaVision’s representative on Signature’s board of directors, Edward Staten,
consented to the conveyance. His consent might be problematic since not all of DynaVision’s
members were members of Leasing as well.


                                                85
      For the reasons set out herein, we AFFIRM the district court’s judgment

granting defendants’ motion for summary judgment.

      AFFIRMED.




                                       86
