Opinion for the Court filed by Circuit Judge ROGERS.
Peter and Sharon Labovitz, shareholders, directors, and officers of DCI Publishing, Inc., appeal the dismissal of several counts of their complaint alleging that the Washington Times, 1 a daily metropolitan newspaper, attempted to acquire DCI at a “distressed price.” The Labovitzes alleged that the Times’ dealings with them and DCI substantially reduced the value of their interests in DCI, triggered their personal guarantees of loans to DCI, and resulted in the seizure of personal property that they had pledged as. collateral for DCI’s obligations. Because, in their view, these injuries represent individual claims, the Labovitzes contend that the district court erred in dismissing them under Delaware and Virginia law on the ground that they were derivative of losses suffered by DCI. On cross appeal, the Times contends that the district court erred in excluding evidence relevant to its setoff defense that any injury Mr. Labovitz suffered from the alleged breach of the Times’ contract with him was “set off’ by his failure to make certain payments on behalf of DCI to a third-party bank.
Because a personal guarantor is sufficiently similar to a creditor of a corporation, and because the Labovitzes’ complaint does not allege facts showing a special injury to themselves, we affirm the dismissal of their claims for breach of fiduciary duty, fraud, and negligent misrepresentation as derivative under Delaware law. Because, further, the Labo-vitzes are not the real parties in interest to pursue claims of damage to their property interests in DCI under the Virginia Conspiracy Act, we affirm the dismissal of their claim under that statute. Finding no abuse of discretion by the district court in excluding evidence proffered as part of the Times’ setoff defense, we affirm the orders and judgment of the district court.
I.
In reviewing the order dismissing seven counts of the Labovitzes’ complaint, this court views the allegations in the complaint as true, although it need not accept “purely legal conclusions masquerading as factual allegations.”
Maljack Prods., Inc. v. Motion Picture Ass’n of America, Inc.,
Shortly thereafter, however, the Times began secret negotiations with John Hanes with the idea of committing DCI to purchase accounting and consulting services from the Times that it could not afford. In addition, the Times’ agents, Richard Jones and Michael Webb, proposed to Peter Labovitz that he relinquish day-to-day control of DCI in exchange for payments of $20,000 monthly for six months and a promise that the Times would provide further financial support to DCI. Within a few months after Peter Labovitz agreed to those terms, he was barred from access to DCI financial records, and the Times transferred DCI assets and personnel to the Times and elsewhere without his knowledge, instructing DCI employees to refrain from communicating with him. The Times also refused to pay him $20,000 monthly and demanded that he and Sharon Labovitz surrender their interests and involvement in DCI, which they declined to do. The Times then withdrew its financial support from DCI and demanded that DCI pay $2 million in deferred printing, composing, accounting, and consulting service costs. According to the complaint:
[t]he Times knew that its actions in withdrawing support from DCI would cause substantial injury to plaintiffs by (a) substantially reducing the value of plaintiffs’ interests in DCI; (b) triggering plaintiffs’ personal guarantees of DCI’s corporate debts, and (c) leading to the seizure of plaintiffs’ property, which had been pledged as collateral for DCI’s obligations.
In January 1993, DCI filed for bankruptcy, 4 and in 1995, the Labovitzes filed suit against the Times.
The district court granted the
Times’
motion to dismiss the complaint except for count seven (breach of contract). The court ruled that the dismissed counts involved claims for injuries that derived from losses suffered by DCI, and that under Delaware and Virginia law,
5
the La-bovitzes could not pursue their claims as individuals.
Labovitz v. Washington Times Corp.,
On appeal, both sides contend that the district court erred, the Labovitzes maintaining that the dismissed counts involved claims for individual injuries separate and apart from those suffered by DCI, and the
Times
maintaining that the exclusion of evidence that Peter Labovitz failed to make certain mortgage payments on behalf of DCI to an outside lender was relevant as a setoff defense. We address three primary issues, the first two
de novo, Maljack,
II.
A.
Under Delaware law, shareholders can bring an individual claim if they
The Labovitzes allege in their complaint that the
Times’ “de facto
control over DCI’s operations” created a fiduciary relationship “between the Times, on the one hand, and DCI and the [Labovitzes], on the other.” On appeal, the Labovitzes contend that because of this relationship the
Times
owed the Labovitzes a “special duty.” The Labovitzes, however, merely assert that such a duty exists without explaining its exact nature or citing any relevant authority. Although the Labovitzes contend that they suffered injuries in roles other than shareholder,
see Cowin,
The Labovitzes’ major contention on appeal focuses on their role as guarantors of DCI’s loan obligations. Specifically, they allege that the
Times’
failure to fund DCI fully as promised prevented DCI from making payments on its debt obligations, thereby triggering the Labovitzes’ personal guarantees. In effect, the
Times
allegedly set into motion a series of events that first injured DCI and then the Labovitzes. While acknowledging that Delaware courts had not yet addressed whether a stockholder-guarantor could bring suit for injuries suffered as a result of wrongdoing inflicted on a corporation, the district court relied on the analysis of the Seventh Circuit Court of Appeals in
Mid-State Fertilizer Co. v. Exchange Nat’l Bank of Chica
In Mid-State, the sole shareholders of Mid-State (Lasley and Maxine Kimmel) guaranteed their company’s financial obligations when it obtained revolving credit from a bank. When the bank discovered that Mid-State was operating at a loss, it placed restrictions on new credit, pushing Mid-State into default. Both Mid-State and the Kimmels sued the bank for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(a) and 1964(c), and the Bank Holding Company Act, 12 U.S.C. §§ 1972 and 1975. Id. at 1333-35. Applying general principles of corporate law, id. at 1335, the Seventh Circuit held that the Kimmels’ injuries were derivative of Mid-State’s because guarantors were no different from “shareholders, creditors, managers, lessors, suppliers, and the like [who] cannot recover on account of injury done the corporation,” in part because allowing such suits “restrict[s] recoveries to the directly-injured party.” 8 Id. at 1336. The court explained, persuasively in our view, that:
[t]he participants most directly affected by injury inflicted on the firm are the stockholders — for their investment is first to be wiped out. Creditors come next. Guarantors are contingent creditors. If the firm stiffs a creditor, that creditor can collect from the guarantor; the guarantor succeeds to the original creditor’s claim against the firm. We know that creditors cannot recover directly from injury inflicted on a firm, so guarantors as potential creditors likewise cannot recover.
Id.
In their various roles in the corporation, including as guarantors, the Kimmels “gained and lost with Mid-State. A blow costing Mid-State $1 could not cost the Kimmels more than $1, [and] [a]n award putting the $1 back in Mid-State’s treasury would restore the Kimmels to their former position.”
Id.
at 1335. The court concluded that guarantors “must take their place in line as creditors in the bankruptcy action (or outside of it), dependent now as before on the success of the firm in which they- invested.”
Id.
at 1336-37. Only “[w]hen they suffer direct injury— injury independent of the firm’s fate— ... may [they] pursue their own remedies.”
9
Id.
at 1336.
Weissman v. Weener,
The Labovitzes attempt to distinguish
Mid-State
and its progeny on three grounds. They first contend that the
Times
owed them a special duty, but, as discussed earlier, they fail to describe the exact nature or origin of such a purported duty.
See supra
p. 901. Assuming such a duty existed, however, an injury flowing from the triggering of the guarantees is a collateral consequence of the
Times’
direct injuries to DCI. As in
Weissman,
a shareholder-guarantor is not a “real party in interest” where he or she “is suing not the bank [collecting on the guarantee] but rather the third party whose alleged wrongdoing is said to have driven the corporation into bankruptcy.”
Finally, the Labovitzes attempt to distinguish
Midr-State,
where the plaintiffs failed to “establish a nexus between the bank’s wrongdoing and their agreement to enter into the guarantees,” Appellants’ Br. at 26, by relying on Judge Ripple’s concurring opinion cautioning parties not to read
Mid-State
to mean that guarantors can never bring a claim for injury because “there are situations — especially in the case of a closely held corporation — where the relationship between the corporation and the guarantor, combined with the conditions directly imposed by the bank on the guarantor, may require that the guarantor have standing to bring such actions.”
Mid-State,
Consequently, the district court properly dismissed counts one through four of the complaint because the Labovitzes’ alleged injuries derive from harm directly inflicted on DCI and are not any different from those suffered by other individuals (such as shareholders or creditors) in a similar position to the Labovitzes. As the Seventh Circuit in Mid-State observed, to allow recovery by individual shareholders for derivative claims
is a form of double counting. “Corporation” is but a collective noun for real people—investors, employees, suppliers with contract rights, and others. A blow that costs “the firm” $100 injures one or more of those persons. If, however, we allow the corporation to litigate in its own name and collect the whole sum (as we do), we must exclude attempts by the participants in the venture to recover for their individual injuries.... Divvying up the recovery [to the participants individually] would be a nightmare.... Why undertake such a heroic task when recovery by the firm handles everything automatically?—for investors, workers, lessors, and others share any recovery according to the same rules that govern all receipts.
IB.
The Labovitzes also contend that the district court erred in viewing their claims under the Virginia Conspiracy Act as alleging only derivative injuries.
14
In counts five and six, the Labovitzes allege that the
Times
“wilfully and maliciously” conspired with John Hanes and a consultant, hired by the
Times
to examine DCI’s management, to “injure the business and property interests of plaintiffs Peter Labo-vitz and Sharon Labovitz in DCI.” These counts, as the district court found, “clearly reveal that [the Labovitzes] are alleging
Under §§ 18.2-499 and -500 of the Virginia Conspiracy Act, a right of action exists “only when malicious conduct is directed at one’s business, not one’s person”; claims relating to one’s employment and employment reputation are not covered by the statute.
Buschi v. Kirven,
just as a stockholder of a corporation has no standing to sue third parties for wrongs inflicted by those third parties upon the business and property interest of the corporation, it is evident that First Management has no standing to sue [defendant] Holiday Inns for wrongs allegedly inflicted by Holiday Inns on the business or property interests of Picture Lake.
The Virginia Supreme Court’s subsequent decision in
Luckett v. Jennings,
C.
On cross-appeal, the
Times
contends that the district court improperly excluded evidence relating to Peter Labo-vitz’s failure to make mortgage payments owed to an outside lender, Burke & Herbert Bank, on behalf of DCI. The
Times
sought to introduce this evidence on the theory that any debt owed by the
Times
to Peter Labovitz should be “set off’ in part by the amount of these payments. The district court rejected the evidence as ir
The Times contends on appeal that Peter Labovitz’s failure to pay the outside lender forced DCI to make these payments in his stead, thereby creating a setoff against any injury he suffered from the Tim.es’ alleged failure to pay him $120,000 for relinquishing control of DCI. To demonstrate mutuality, the Times points to evidence such as a memorandum sent by John Hanes claiming that DCI paid Peter Labovitz certain mortgage payments that he failed to pass on to the Burke & Herbert Bank. At most, however, this evidence as well as the other documents and testimony identified by the Times only shows mutuality between DCI and Peter Labovitz, not between the Times and Labovitz. Attempting to link DCI with the Times by pointing to language in the complaint alleging that the Times acquired a fifty-percent ownership interest in DCI, the Times cites no authority for the proposition that a debt owed to a company is also owed individually to a shareholder. Indeed, the Times’ contention is inconsistent with its position that only DCI, and not its shareholders, can pursue claims against third parties for injuries that DCI suffered directly.
For the first time on appeal, the
Times
makes two additional contentions, first, that mutuality is not required for equitable setoffs where courts forgo the strict requirement of mutuality “for a clear equity or to prevent irremediable injustice,” and second, that the excluded evidence would show that Peter Labovitz “knew that he was dealing with DCI when he made the alleged arrangement to receive” $120,000 in exchange “for withdrawing from DCI leadership activities,” and that therefore the contract to surrender control of DCI was between Labovitz and DCI, not Labo-vitz and the
Times.
16
Having failed to raise either contention in the district court, the
Times
is barred from doing so now.
See United States v. Baucum,
Accordingly, because counts one through four are derivative claims, and the Labo-vitzes do not have a cause of action under the Virginia conspiracy statute, and because exclusion of the mortgage payment evidence proffered by the Times was not an abuse of discretion, we affirm the district court’s orders and the judgment.
Notes
. We will refer to both appellees, the Washington Times and its parent company, News World Communications, as "the Times.”
. Specifically, the complaint alleges that the Labovitzes owned "no less than one-half of the controlling interest” of DCI, while John Hanes and companies affiliated with him owned "approximately one-half.” The complaint's wording suggests that the Labovitzes and Hanes were the only shareholders in DCI; the Labovitzes’ brief, however, suggests that several of the companies under DCI’s control had minority shareholders.
. The Labovitzes allege that the Times wished to keep its involvement in DCI secret because of the newspaper's ties to the Unification Church and its leader Reverend Sun Myung Moon. The Times allegedly feared that publicity of its ownership interest in DCI would adversely affect DCI’s revenues due to negative public attitudes about the Unification Church.
.In July 1996, the bankruptcy court approved a settlement between NationsBank (one of DCI's creditors) and the
Times.
The settlement required that NationsBank, acting on behalf of DCI, agree to dismiss with prejudice its claims against the
Times
for breach of contract, breach of fiduciary duty, fraud, negligent misrepresentation, and equitable subordination, but it preserved the Labovitzes’ right to pursue any personal claims they might have against the
Times.
The Labovitzes agreed to the terms of the settlement. Although the
Times
contends that the Labo-vitzes violated this agreement by pursuing their claims, the court must first determine
. The district court applied Delaware law to counts pne through four and Virginia law to counts five and six. The Labovitzes do not appeal the dismissal of count eight for promissory estoppel; it became moot when the district court allowed Peter Labovitz to pursue his breach of contract claim under count seven.
. Although the
Times
characterizes this as a standing question, the issue here is who is the real party in interest,
see
Fed.R.Civ.F. 17(a), to bring a lawsuit "under the governing substantive law to enforce the asserted right."
Whelan v. Abell,
. The district court noted in its order that neither party addressed which state law governed claims one through four of the complaint. Conducting its own choice-of-law analysis, the district court concluded that Delaware law governed the Labovitzes’ shareholder claims of breach of fiduciary duty, fraud, and negligent misrepresentation because DCI was incorporated in that state — a conclusion the parties do not contest on appeal.
See also Cowin v. Bresler,
The Labovitzes’ complaint intermingles injuries that are clearly derivative under Delaware law, such as a loss in the value of stock affecting all shareholders,
see Kramer v. Western Pacific Indus., Inc.,
. Likewise, in
Taha v. Engstrand,
the Eighth Circuit Court of Appeals observed that "[sjhareholders, creditors or guarantors of corporations generally may not bring individual actions to recover what they consider their share of the damages suffered by the corporation.”
. The court specifically observed that "[t]he Kimmels do not contend that [the bank] broke the contracts by which the Kimmels guaranteed Mid-State’s borrowings.” Id. at 1336.
. The court in
Weissman,
however, noted that Judge Ripple’s view remained an open question in the Seventh Circuit Court of Appeals.
. Although this allegation appears in the La-bovitzes’ brief and not in the complaint, an exhibit attached to the complaint suggests that the Times may have sought "personal guarantees” from Peter Labovitz and John Hanes.
.
Buschmann v. Professional Men's Assoc.,
.During oral argument, counsel for the La-bovitzes argued that, as to several of the corporation’s loans, they were co-obligors, rather than "contingent lenders” as in the case of
Mid-State.
We need not explore the rights of co-obligors to sue in these circumstances, however, because the Labovitzes failed to raise this contention in their initial brief, and to the extent they mention in their reply brief
. Va Code Ann. § 18.2—499(A)(1) (Michie 1996) prohibits conspiracies "for the purpose of ... willfully and maliciously injuring another in his reputation, trade, business or profession by any means whatever....” Section 18.2-499(B) forbids attempts to procure the participation of another person to enter a conspiracy under § 18.2-499(A). Section 18.2-500 authorizes treble damages for violations of § 18.2-499.
. The
Luckett
court did not reach the defendants' argument that other cases barred the plaintiff's claim because he suffered an investor- or employee-related injury rather than a business-related injury.
Id.
at 306,
. The Times concedes that it “did not use the words 'impeachment evidence' in its proffer and opposition to the motion in limine" to exclude the setoff evidence, but maintains that the evidence, by its very nature, was impeachment evidence. We disagree that the Times' impeachment contention clearly flows from the mutuality arguments it made in the district court, or that the district court necessarily would have understood its proffer as such.