Wаlter R. ABBOTT, M.D., et al., Plaintiffs-Appellants, and Mrs. E. Elizabeth Turnbull and Louis R. Koerner, Plaintiffs-Appellants, v. The EQUITY GROUP, INC., et al., Defendants, The Home Insurance Company and the Graham Company, Defendants Appellees. In re Ronald C. ELLINGTON, et al., Debtors. Mrs. E. Elizabeth Turnbull and Louis R. Koerner, Claimants-Appellants.
No. 92-3376.
United States Court of Appeals, Fifth Circuit.
Sept. 28, 1993.
Rehearing and Suggestion for Rehearing En Banc Denied Nov. 12, 1993.
1 F.3d 613
Louis R. Koerner, Jr., New Orleans, LA, for Koerner.
Charles Thensted, Skye McLeod, Gelpi, Sullivan, Carroll & Gibbens, New Orleans, LA, for Abbott, et al.
Steven Jacobson, Charles C. Coffee, Simon, Peragine, Smith & Redfearn, New Orleans, LA, for Home Ins. Co.
J. Walter Ward, Jr., Daniel A. Rees, Christovich & Kearney, New Orleans, LA, for Graham Co.
Before REAVLEY, DUHÉ, and BARKSDALE, Circuit Judges.
BARKSDALE, Circuit Judge:
This appeal from a summary judgment turns for the most part on the reach of the federal securities laws for entities that are not the primary parties for securities violations, and on the relief vel non to be accorded parties who, subsequent to entry of judgment, raise a new theory of liability. Investors in Courtside Ltd., a Louisiana partnership formed to acquire and operate an apartment community in Houston, Texas, brought suit against, inter alia, The Home Insurance Company and The Graham Company. As to them, they alleged that Home and Graham’s continued participation as surety and bonding agent respectively for the Courtside transaction, despite their knowledge of misrepresentations and material omissions in the Private Placement Memorandum, violated, inter alia, federal securities laws and rendered the investors’ indemnity agreements with Home unenforceable. The district court granted summary judgment in favor of Home and Graham and refused, post-judgment, to allow a new theory of liability to be raised. We AFFIRM.
I.
In 1984, the Equity Group, Inc., formed Courtside, becoming the managing general
To obtain financing from Hibernia National Bank and Security Savings and Loan Association, Courtside pledged the limited partners’ first notes to Hibernia as collateral; the second, to Security. As additional security, in late December 1984, Home, through its agent, Graham,3 issued a financial guarantee bond in favor of each bank as permitted assignee, with the Courtside investors as principals, and the partnership (Courtside) as obligee. The bonds obligated Home to pay Hibernia up to $3,941,025 and Security up to $1,050,000.
Home received a premium of $257,060 for its issuance of the bonds (total obligation of almost $5 million). In addition, Home required each investor to execute a pledge of partnership interest to Home, and sign an indemnity agreement protecting Home against, inter alia, all losses in connection with the bonds.
Graham, as agent for Home, required that each investor execute a limited partner’s application for financial guarantee bond, and thus reviewed their creditworthiness. Home reserved the right to approve the language in any financial guarantee bond as well as in the general partner indemnification agreement, the limited partner indemnification and security agreement, and the remarketing agreement.
It is undisputed that neither Home nor Graham had direct communication with limited partners or their advisors prior to their investment in the partnership; rather, Equity solicited the limited partners primarily through the Private Placement Memorandum (PPM) (twice supplemented), and oral presentations. Alleged misrepresentations and material omissions in Equity’s solicitation initiatives form the basis of this action. As for Home and Graham’s involvеment, the investors primarily rely on a legal memorandum prepared for Graham by the Duane, Morris & Heckscher (Duane Morris) law firm.
In the course of analyzing the transaction for Home, Philip Glick, vice president of Graham, sent a copy of Equity’s PPM to Duane Morris for review, specifically requesting Donald Auten, a lawyer in the tax section,4 to “review the contents of this Memorandum and provide us with your comments on the structure and adequacy of disclosure, the reasonableness of the tax position taken and the adequacy of the tax opinion relative to the tax discussion”. Glick also welcomed “any other observations you [Auten] may have relative to the tax structure and legal disclosure in relation to other projects you may have seen”.
Auten prepared a 15 page memorandum (Duane Memo); he stated in his deposition that he was singularly responsible for its contents, and that he based his analysis solely on his review of the PPM.5 The Duane Memo began by stating that “[o]ur overall reaction to the adequacy of the disclosure in the PPM from a securities standpoint is that the PPM would appear deficient in several material rеspects and should be supplemented”. Among the items mentioned were (1) the absence of discussion and analysis relating to the prior history of the project;6 (2)
In September 1984, Glick (Graham) wrote a letter to Equity regarding changes to the PPM. He included several suggestions set forth in the Duane Memo, including the need to insert disclaimer language in the PPM and related surety documents. Shortly thereafter, Glick wrote a follow-up letter to Equity аnd attached a copy of the Duane Memo, noting that “this Memorandum highlights some additional technical corrections which we feel should be made in the Equity Group Offering Memorandum from a specific tax and securities disclosure standpoint”. Glick requested Equity’s “cooperation with us in including these changes in the supplement”, and related that,
[f]rom past experience we have found that obtaining another viewpoint on our clients’ Memorandums has often resulted in some worthwhile improvement, both from a legal and marketing standpoint. I hope these comments will be helpful to you and that they will provide additional comfort to the Home Insurance Company in conjunction with the issuance of its bond.
The first supplement to the PPM was released on November 21, 1984. It incorporated disclaimer language providing that Home and Graham “have not made any investigation ... as to the merits ... and make no representation nor express any opinion with respect thereto ... ”, along with an explicit acknowledgement that investment decisions were made without reliance on the surety (Home) or its agent (Graham). In additiоn, the supplement emphasized the investors’ unconditional obligation to Home under the indemnity agreement. It did not, however, incorporate a number of the other changes suggested in the Duane Memo.
During the latter part of 1984, 40 of the Courtside units remained unsold, with the offering period scheduled to end on January 24, 1985. Four Louisiana general partnerships (E-C One, E-C Two, E-C Three and E-C Four) were formed to purchase the unsold units. Hibernia loaned the funds to each E-C partnership, requiring the Equity principals to become E-C partners and requiring each non-Equity partner in the E-C partnerships to execute a solidary continuing guarantee of the entire Hibernia loan. Home agreed to act as surety for the Hibernia loan. The formation of the E-C partnerships was disclosed in the second supplement to the PPM, issued on January 18, 1985.9
Subsequent to the expiration of the offering on January 24, 1985, Courtside experienced financial problems and ultimately declared bankruptcy. Because Courtside failed to meet its financial obligations, the banks called the investors’ notes. The investors (limited partners) defaulted, thus obligating Home to make рayments under the terms of each bond. Home, in turn, looked to the investors for a full accounting, pursuant to the indemnity agreements.
In September 1986, over 40 Courtside investors brought suit against, inter alia, Equity, Home, and Graham. The complaint was amended several times, resulting in a third supplemental and amended complaint filed in March 1987. The investors made claims under, inter alia, violations of
As noted earlier, the suits were based on the contention that Equity induced plaintiffs’ investments through misrepresentations and omissions in the PPM, and misleading oral presentations. Specifically, they maintained that Equity, inter alia, misrepresented its financial health; the condition, location, occupancy, tenancy and fair market value of the property; and the soundness of the investment (i.e. “virtually risk free”).
After over four years of discovery and pretrial motions, Equity, as well as other defendants, announced settlement. (All defendants ultimately settled, except for the Gerald Teel Company, Hibernia, Home, and Graham.) That day, the court granted judgment on Home and Graham’s motion to reconsider its earlier denial of summary judgment on the remaining issues,11 thereby disposing of plaintiffs’ case and granting Home’s claims for enforcement of the indemnity agreements. The court issued written reasons approximately four months later (January 1990).
Over the next two years, the parties disputed issues of costs, interest, attorney’s fees, and amounts due Home. Therefore, final judgment was not entered until January 1992. Ten days later, plaintiffs moved for a new trial. Upon denying plaintiffs’ motions to file a supplemental memorandum raising a new theory of liability, and for reconsideration of same, the court denied plaintiffs’ motion for a new trial. Since then, all but five of the plaintiffs have settled.12
II.
Appellants challenge the district court’s disposition of the summary judgment motions, and also assert error based on the court’s post-judgment rulings.
A. Summary Judgment
We review a summary judgment de novo. E.g., Degan v. Ford Motor Co., 869 F.2d 889, 892 (5th Cir.1989). It may be granted if there is “no genuine issue as to
The movant has the initial burden of demonstrating the absence of material fact issues. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.1992), cert. denied, 506 U.S. 825, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992). To avoid summary judgment, the nonmovant must adduce evidеnce which creates a material fact issue concerning each of the essential elements of its case for which it will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). “[A] dispute about a material fact is ‘genuine’ ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party”. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. We resolve all factual inferences in favor of the nonmovant. Degan, 869 F.2d at 892. Needless to say, unsubstantiated assertions are not competent summary judgment evidence. Celotex Corp., 477 U.S. at 324, 106 S.Ct. at 2553.
1. Controlling Person
Sections 15 of the 1933 Act13 and 20 of the 1934 Act14 impose liability on “controlling persons” for securities violations committed by those under their control. Appellants maintain that material fact issues remain concerning Home and Graham’s liability as “controlling persons”. As discussed infra, we have no ruling by the district court of an underlying securities violation and thus assume a violation for purposes of our analysis.
The parties disagree on the elements for a prima facie case under §§ 15 and 20.15 Specifically, appellants take issue with Home and Graham’s assertion, based on G.A. Thompson & Co., Inc. v. Partridge, 636 F.2d 945 (5th Cir.1981), and Schlifke v. Seafirst Corp., 866 F.2d 935, 949 (7th Cir.1989), that this circuit has adopted the two part test of Metge v. Baehler, 762 F.2d 621 (8th Cir.1985), cert. denied, 474 U.S. 1057, 106 S.Ct. 798, 88 L.Ed.2d 774 (1986).
In Thompson, our court held that an officer and director, who owned 24% of the company, and was apparently involved in the day-to-day coordination of loan gathering,16 had the “requisite power to directly or indireсtly control or influence corporate policy”, and, thus, was a controlling party. 636 F.2d at 958. In so doing, our court rejected the contention that actual participation in the transaction underlying the violation was a prerequisite for a prima facie case, noting that “[l]ack of participation and good faith constitute an affirmative defense”. Id. At the same time, it noted that our precedent was “ambiguous on whether ‘effective day-to-day control’ is required”, and, without deciding the issue, noted that the evidence established sufficient day-to-day control. Id. at 958 n. 24.
It is clear that Thompson did not definitively address prong one of the Metge test, i.e. a required showing that the defendant exercised control over the general operations of the wrongdoer; nor did it adopt the two prong Metge test, as urged by appellees in reliance on the Seventh Circuit’s opinion in Schlifke, 866 F.2d at 949; and, conversely, Metge did not cite Thompson as support for its formulation of prong one (only, as stated supra, as support for prong two).
Thus, the law is somewhat more unsettled as to prong one than Home and Graham would have it. Our decision in Dennis v. General Imaging, Inc., 918 F.2d 496 (5th Cir.1990), however, provides some guidance on that narrow ground. There we adopted a district court opinion, which interpreted Thompson as requiring a plaintiff, for a prima facie case, to show “actual power or influence over the controlled person”.18 Id. at 509.
Dennis is consistent with Metge to the extent that both require a separate showing of control over the controlled entity (Equity); but appellants insist that our circuit only requires that they show Home and Graham’s power to control Equity, not the actual exercise of that power. We need not presently analyze the above distinction because, even assuming that only the former applies, a reasonable jury could not so find based on the record before us.
According to the affidavits of John MacGregor (assistant vice president of Home), and Glick (Graham), neither Home nor Graham nor their respective employees and representatives were stockholders, directors, officers, employees, or partners of Equity; they did not attend its board or committee meetings; they were not involved in decisions by Equity to purchase properties for syndications to investors; they were not involved in operations of properties purchased by Equity or its affiliates; and they were not otherwise involved in the general operations of Equity, including business, financial and marketing plans.
Appellants fail to contradict these statements with evidence of Home and Graham’s power to control the general affairs of Equity. Graham’s involvement with the issuance of financial guarantee bonds for other Equity projects,19 and correspondence reflecting that Equity kept Graham informed of the status of the Courtside offering, as well as others, do not indicate that Graham had such power, even assuming its participation in such discussions.
Appellants’ remaining evidence is less persuasive, as it narrоwly relates to Home and Graham’s involvement in the Courtside transaction.20 Although appellants make
2. Aider and Abettor
Appellants maintain that fact issues remain concerning Home and Graham’s liability under
To establish liability, the plaintiff must show (1) that the primary party committed a securities violation; (2) that the aider and abettor had “general awareness” of its role in the violation; and (3) that the aider and abettor knowingly rendered “substantial assistance” in furtherance of it. Abell v. Potomac Ins. Co., 858 F.2d 1104, 1126 (5th Cir.1988) (internal quotations omitted), vacated, Fryar v. Abell, 492 U.S. 914, 109 S.Ct. 3236, 106 L.Ed.2d 584 (1989).23
For the first element, we again assume underlying securities fraud. See notes 27 and 28, infra. Underlying the other two elements—“general awareness” and “knowing substantial assistance”—is a single sciеnter requirement that varies on a sliding scale from “recklessness” to “conscious intent”. Abell, 858 F.2d at 1126-27. The plaintiff must show conscious intent, unless there is some special duty of disclosure, or evidence that the assistance to the violator was unusual in character and degree. Akin, 959 F.2d at 526, 531.24 In the latter two instances, a recklessness standard applies.25 Id.
Throughout the district court proceedings, appellants maintained that Equity violated § 10 and
The district court concluded that the summary judgment record lacked probative evidence of Home and Graham’s “substantial assistance” in the alleged violations,27 relying primarily on its findings that they did not owe appellants a duty of disclosure, and that the activities described were simply “grist of the mill”. We agree, and stress that appellants also failed to meet the scienter requirement underlying the lаtter two elements of the prima facie case.28
First, we address appellants’ assertion that Home and Graham had a duty to disclose the contents of the Duane Memo. They urge, inter alia, that this duty of disclosure arises from Home’s status as their surety. Home and Graham counter by stating that generally, a surety has no legal duty of disclosure. As our court noted in Akin, the “theory” of liability based on a special duty of disclosure is “mushy and difficult to apply”, as the source and scope of such a duty is not based on any textual provision of the securities laws, but “appears to be a specie of federal common law”. 959 F.2d at 526. We thus refrain from specifically defining the disclosure obligations of a surety and its agent; rather, applying relevant factors annunciated by our court in First Virginia Bankshares v. Benson, 559 F.2d 1307 (5th Cir.1977), cert. denied, 435 U.S. 952, 98 S.Ct. 1580, 55 L.Ed.2d 802 (1978), and applied by other circuits, see Arthur Young & Co. v. Reves, 937 F.2d 1310, 1330 (8th Cir.1991), cert. denied, Reves v. Ernst & Young, 502 U.S. 1092, 112 S.Ct. 1165, 117 L.Ed.2d 411 (1992); Jett v. Sunderman, 840 F.2d 1487, 1493 (9th Cir.1988); Rudolph v. Arthur Andersen & Co., 800 F.2d 1040, 1043 (11th Cir.1986), cert. denied, 480 U.S. 946, 107 S.Ct. 1604, 94 L.Ed.2d 790 (1987),29 we conclude that Home and Graham did not have such a duty.
We first examine the parties, “relative access to the information to be disclosed”. First Virginia Bankshares, 559 F.2d at 1314. To be sure, the summary judgment record reflects that Home and Graham were privy to additional information due to their involvement with the issuance of the bonds, and from Graham’s prior dealings with Equity; however, as stated, the standard is “relative access to the information to be disclosed”. Id. (emphasis added). Because appellants neglect to demonstrate that such access supplied Home and Graham with superior knowledge of the allegedly misleading aspects of the PPM,30 this factor does not weigh in their favor.31
We next examine the benefit derived from the sale of securities. Home and Graham received a premium of $257,060 for bonding a risk of almost $5 million. Given the risk of loss, this factor only slightly supports a duty to disclose.
As for the third factor, “the defendant’s awareness of plaintiff’s reliance on defendant
Finally, we can quickly dispose of the fourth factor, “the defendant’s role in initiating the purchase or sale”, id., as it is undisputed that neither Home nor Graham had contact with investors regarding their investment decisions. In sum, we conclude from our analysis of the above factors that Home and Graham did not owe appellants a duty of disclosure.
Appellants next maintain that even if Home and Graham lacked a duty to disclose, their participation in the formation of the E-C partnerships constituted “substantial assistance”, unusual in scope and degree; thus, they need not prove conscious intent, only recklessness. Once again, we disagree.
Although there is evidence that Home and Graham were included in discussions regarding the possible failure to fully subscribe Courtside by the closing date, we agree with the district court that there is no evidence that their role extended beyond that of a surety and bonding agent. Rather, the only evidence of involvement by Home and Graham was their refusal to bond the remaining 40 units under one partnership, and subsequent agreement to bond the units under four partnerships (the E-C partnerships); decisions central to their designated function. We thus consider the above assistance, even if substantial, see Insurance Co. of North America v. Dealy, 911 F.2d 1096, 1101 (5th Cir.1990) (“the routine extension of a loan does not amount to substantial assistance”), to be merely “grist of the mill”.33
Because appellants failed to establish either a duty of disclosure or atypical assistance, they must provide evidence of conscious intent, rather than recklessness. (In considering whether they meet this burden, we assume, without deciding, that Home and
With apparently good intentions, Graham forwarded the Duane Memo to Equity, and suggested that Equity incorporate its counsel’s suggestions. Home and Graham’s continued participation, despitе Equity’s failure to adopt some of the suggestions, does not signal their intent to further the fraudulent scheme.34 As we stated in Abell, 858 F.2d at 1128, “[a]roused suspicions ... do not constitute actual awareness of one’s role in a fraudulent scheme. Moreover, to prove plainly that an alleged abettor intended to violate the securities laws, plaintiffs must prove more than that the abettor recklessly ignored danger signals”.
Likewise, Home and Graham’s receipt of a reasonable premium for participation in the transaction does not supply a motive. We agree with the Second Circuit that “almost any entity playing a role in a securities transaction will have some economic motivation for doing so”. National Union Fire Insurance Co. v. Turtur, 892 F.2d 199, 207 (2d Cir.1989).35
In sum, in view of the lack of evidence of intent, the district court properly disposed of appellants’ aiding and abetting claim.36
3. Fraud and Negligent Misrepresentation
Appellants maintain Home and Graham’s failure to disclose misrepresentations and material omissions in the PPM, brought to their attention through the Duane Memo, constitutes negligent misrepresentation under Louisiana law.37 To prevail, Louisiana requires proof of actual reliance. Abell, 858 F.2d at 1131 (applying Louisiana law).38 Upon reviewing the summary judgment record, we agree with the district court that there is no evidence of reliance on those
In fact, on appeal, appellants do not challenge the court’s finding on reliance;40 rather, for both fraud and negligent misrepresentation, they focus solely on the erroneous proposition that duty of care is a complex issue of fact not suitable for summary judgment. See Commercial Nat. Bank v. Audubon Meadow Partnership, 566 So.2d 1136, 1140 (La.App. 2d Cir.1990) (stating that the existence of a duty is a question of law); see also Hibernia Nat. Bank v. Carner, 997 F.2d 94, 98 (5th Cir.1993) (“it is insufficient for the nonmovant to argue in the abstract that the legal theory involved in the case encompasses factual questions”). Needless to say, this assertion of error is wholly without merit.
4. Indemnity Agreements
Appellants maintain that fact issues remain concerning the enforceability of their
In Dealy, we held that an indemnity agreement is unenforceable due to fraud in the subscription agreement where the surety was “a party to the fraud [as an aider or abettor] or a coconspirator in it”. 911 F.2d at 1100.44 We thus apply the reasoning of Dealy, and
Our analysis of Louisiana law produces the same result. Even if we construe the indemnity and subscription agreements as interdependent,45 we conclude that appellants, at a minimum, must meet the requirements of
To satisfy article 1956, appellants must not only show that a reasonable jury could find the requisite knowledge based on the Duane Memo (and subsequent insertion of exculpatory language in the PPM), but, also, that error resulting from the alleged misrepresentations and material omissions contained in the PPM, and referenced in the Duane Memo, “substantially influenced that сonsent”.
Appellants next assert that even if the indemnity agreement is independent, rather than interdependent, and thus unaffected by fraud in the inducement of the subscription agreement, it does not obligate them to indemnify Home. A contract of indemnity is construed in accordance with the general rules governing contract interpretation—“ [w]hen the words of a contract are clear, unambiguous, and lead to no absurd consequences, the contract is interpreted by the court as a matter of law.” Carter v. BRMAP, 591 So.2d 1184, 1188 (La.App. 1st Cir.1991) (emphasis in original). “Agreements to indemnify are strictly construed and the party seeking to enforce such an agreement bears the burden of proof.” Liem v. Austin Power, Inc., 569 So.2d 601, 608 (La.App. 2d Cir.1990).
The indemnity agreement provides:
The [investor] will protect, indemnify, and save harmless [Home] from and against any and all liability, loss, costs, damages, fees of attorneys, and other expenses which [Home] may sustain or inсur under
or in connection with the Bonds hereunder, or in connection with this Agreement, for: ...
(e) all demands, liabilities, losses, charges and expenses of every kind, which [Home] may become liable to pay or have paid by reason of or in consequence of the execution by [Home] of the Bonds in favor of the [investor].
The referenced bonds provide that “[a] default occurs regardless of whether the Principal for any reason shall have no legal obligation to discharge his, her or its obligations under the Notes to the Obligee or the Permitted Assignee whichever holds the Note(s) which are guaranteed in part by the Surety”. (Emphasis in original.) In the same paragraph, Home waives its defenses to payment.48
In view of this language, we conclude that the indemnity agreement encompasses fraud; however, even if we accept appellants’ assertion that the contract is ambiguous and thus look outside the contract to discern the parties’ intent, appellants nonetheless fail to create a material fact issue. The first supplement to the PPM evidences Home’s intent that the indemnity agreement impose an unconditional obligation on the investors.49 Appellants, on the other hand, did not adduce evidence demonstrating their intent. Accordingly, uncontradicted evidence establishes that the indemnity agreements do not provide a defense to enforceability. See Carner, 997 F.2d at 1192 (granting summary judgment where nonmovant failed to raise a genuine issue of material fact as to the contract’s proper interpretation).
We summarily dismiss appellants remaining two bases for nullifying their obligations.50 First, appellants’ reliance on codal suretyship arguments is misplaced. They seek to nullify the indemnity agreements, not their obligation to Home arising from Home’s issuance of the bonds.51 As stated in Commercial Union Ins. Co. v. Melikyan, 430 So.2d 1217, 1221 (La.App. 1st Cir.1983), a contract on indemnity is different from a contract on suretyship:
The contract of indemnity forms the law between the parties and must be interpreted according to its own terms and conditions .... [I]n an indemnity contract, the principal and indemnitors can be bound to the surety in any manner they elect in consideration of the surety issuing the bond covering the principal obligation.52
Second, we reject appellants’ attempt to void the indemnity agreеments pursuant to
In sum, appellants failed to establish a material fact issue regarding the enforceability of the indemnity agreements. Accordingly, in view of their plain meaning, we conclude, as a matter of law, that the investors are obligated to Home, and thus affirm the summary judgment. In so doing, we complete our review of the summary judgment, and turn to appellants’ contentions concerning the district court’s post-judgment rulings.
B. Post-Judgment Rulings
Appellants object to the rulings on their attempt to rely on a newly raised legal theory as a basis for reconsideration of the summary judgment. Judgment was entered on January 31, 1992. Ten days later (February 10), appellants moved for a new trial (
A month later (March 9), appellant-investor Turnbull enrolled new counsel, who, on March 27, filed a motion for leave to file a supplemental memorandum in support of the February 10 motion. The supporting memorandum, adopted by the other plaintiff-investors, asserted for the first time that Home and Graham had aided and abetted Equity in violation of
On April 1, the parties argued the merits of the original (February 10) motion for a new trial. In addition, Turnbull urged that the court consider the
Appellants do not dispute the district court’s disposition of their motion for a new trial; rather, they object to its refusal to consider Turnbull’s supplemental memorandum. For starters, they contend that simply by raising
Appellants also use more specific approaches to attempt to save this new issue. “[A] trial court may in the exercise of its sound discretion allow a tardy amendment stating an additional ground for a new trial.” Dotson v. Clark Equipment Co., 805 F.2d 1225, 1228 (5th Cir.1986) (emphasis in original). The district court certainly did not
First, we agree with the district court that the
The court was under no obligation to permit appellants to interject a new legal theory, without explanation, after they had failed to do so during three years of discovery, two additional years between the court’s granting summary judgment and entering judgment, and almost two months following that entry. See Allied Bank-West, N.A. v. Stein, 996 F.2d 111, 115 (5th Cir.1993) (internal quotations omitted) (“[m]otions for new trial cаnnot be used to argue a case under a new legal theory”); Simon v. United States, 891 F.2d 1154, 1159 (5th Cir.1990) (stating same with respect to a motion to alter or amend);59 see also Russ v. International Paper Co., 943 F.2d 589, 593 (5th Cir.1991) (denying
III.
For the foregoing reasons, the judgment of the district court is AFFIRMED.
Notes
Because the offering may close and the Project may be purchased with far fewer than 146 Units having been sold, if the Managing General Partner were to become financially embarrassed between October 1, 1984, and January 24, 1985 [final closing], the investors and Surety could be left in an unacceptable position.
Thus, it recommended a change in procedure: “[I]f closing on the project takes place before the minimum of 146 Units are sold, the Managing General Partner is required to put funds in escrow (or furnish an irrevocable letter of credit) to guarantee that on January 24, 1985, the Managing General Partner will be able to satisfy its obligation to purchase the remaining Units.
It added that “[t]he existing procedure completely undermines that concept of requiring a minimum number of Units to be sold before closing can take place”.
Under the terms of the Memorandum, the Managing General Partner must purchase on January 24, 1985 all unsold Units up to the
Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections [11 or 12], 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....
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....
The term ‘control’ ... means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.
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—
(b) To use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance ....
It shall be unlawful for any person, directly or indirectly ...
(a) to employ any device, scheme, or artifice to defraud,
(b) to make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statement made, in 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.
Severe recklessness is limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it.
As noted in Akin, 959 F.2d at 526 n. 2, although we used the modifier “severe”, our definition of recklessness is the same as applied by other circuits.
None of the information that affiant received from the Equity Group or its securities counsel during the course of his activities described herein, whether oral or written, and whether received prior or subsequent to affiant’s receipt of the PPM, in any way contradicted any of the information in the PPM.
THE SURETY AND ITS AGENT HAVE NOT MADE ANY INVESTIGATION OR DETERMINATION AS TO THE MERITS, OR RISKS, FINANCIAL OR OTHERWISE, OF THE LIMITED PARTNERSHIP INVESTMENT AND MAKE NO REPRESENTATION NOR EXPRESS ANY OPINION WITH RESPECT THERETO,....
IN EXECUTING THE INVESTOR APPLICATION, EACH INVESTOR ACKNOWLEDGES THAT SUCH INVESTOR HAS INDEPENDENTLY, AND WITHOUT RELIANCE ON THE SURETY, MADE SUCH INVESTIGATION AND INQUIRIES AS THE INVESTOR DEEMED NECESSARY AND PRUDENT TO REACH A REASONABLE INVESTMENT DECISION WITH RESPECT TO THE LIMITED PARTNERSHIP INVESTMENT.
As for the former, we conclude that the summary judgment evidence of Graham’s involvement as bonding agent for other Equity projects, see supra note 19, does not create the inference of particularly substantial or unusual assistance. Our finding to the contrary in Akin, 959 F.2d at 531, is distinguishablе. Suffice it to say, the scope and degree of involvement by the defendant/accountant in Akin was far greater than that before us.
As for the latter, the above-quoted statement is perhaps probative evidence of Home’s substantial assistance, but it is not sufficient evidence from which a jury could conclude that such assistance was unusual. Interpreting the statement, Pine explained that Home was critical to the closing, and more helpful than A.I.G. (National Union Insurance Company) due to its ability to efficiently process the multitude of documents. Of course, contrary inferences are possible, including that urged by appellants; however, such an inference is not sufficient to create a material fact issue.
In addition, Glick testified that the supplemental PPM sufficiently addressed the concerns of Home and Graham. Finally, in late December, 1984, Home and Graham received an opinion letter from counsel for Courtside stating that [n]othing has come to our attention, after inquiry, which would lead us to believe that the Memorandum (except for the financial statements and other financial and statistical data and the projections included therein, as to which we do not express any belief), on the date of the Memorandum, contained any untrue statement оf a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
Of course, Home and Graham are not responsible for oral misrepresentations inconsistent with, or not pertinent to, aspects of the PPM discussed in the Duane Memo, as appellants’ action against them is based on appellees’ failure to correct or otherwise disclose misleading information refеrenced in the Duane Memo, and their continued participation in the Courtside transaction despite their knowledge of same.
Because each investor’s obligation to the Surety under the Indemnification and Security Agreement is unconditional, the result may be that the investor will be obligated to make payments to the Partnership or a financial institution even though it may have a claim against the lender of the Term Debt or the Partnership. The essence of the Financial Guarantee Bond is that each investor’s obligation to make payments on the Installment Notes are absolute and may not be avoided or postponed for any reason.
It shall constitute a manipulative or deception device or contrivance, as used in section 10(b) of the Act, for any person, directly or indirectly, in connection with the offer or sale of any security, to make any representation:
...
(2) to the effect that the security is being offered or sold on any other basis whereby all or part of the consideration paid for any such security will be refunded to the purchaser if all or some of the securities are not sold, unless the security is part of an offering or distribution being made on the condition that all or a specified part of the consideration paid for such security will be promptly refunded to the purchaser unless (i) a specified number of units of the security are sold at a specified price within a specified time, and (ii) the total amount due to the seller is received by him by a specified date.
Appellants’ assertion that these arguments were raised previously is not supported by the record. Evidence of the formation of the E-C partnerships was used primarily to establish Home and Graham’s involvement with Equity, not to establish that formation of those partnerships contravened the terms of the offering in violation of
Even if the court abused its discretion in refusing to allow Turnbull to supplement the record for appeal, any error is harmless, because our review is limited to the record before the district court when it ruled. See Topalian, 954 F.2d at 1131-32 n. 10 (“This court’s inquiry is limited to the summary judgment record before the trial court: the parties cannot add exhibits, depositions, or affidavits to support their positions on appeal.”). For the same reason, we refuse to consider that evidence as it appears in Turnbull’s record excerpts.