NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 11a0556n.06 No. 09-6456 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

F IF TH TH IRD BANK , P laintif f-App ellee,

v. L I N C O L N F I N A N C I A L S E C U R I T I E S CORP ORATION, Defendan t-Appellant. ) ) ) ) ) ) ON AP P EAL FROM THE UNITED STAT ES DIS TRICT C O U R T F O R T H E WEST ERN DISTRICT OF KENTUCK

Y O P I N I O N

BEFORE: KENN EDY, SILE R, and McK EAGU E , Circuit Judges. M c K e a gue, Circuit Judge. Fifth Third Ba nk sued L incoln Financ ial Se c u r it ie s Co r p o r a ti o n , alleg ing that L incoln Financ ial brea ched an Acc ount Control Ag ree ment, pursuant to which L incoln Financ ial had waived its rig hts i n a b ro k era g e acc ount held by Shaun and Chandra Schneider

. L incoln Financ ial and Fifth Third filed cross-motions for summary judgme nt, following which the district court denied L incoln Financ ial’s motion, g rante d Fifth Third’s motion, and awa rded a monetary judgme nt in favor of Fifth Third. L incoln Fina n ci al ap p eale d, challeng ing the district

cour t ’s order on numerous g rounds. Finding that L incoln Financ ial’s claims are either waived or without merit, we af

firm. I. BACKG ROUNDNo. 09-6456

Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation I n November 2005, Schneider Consulti ng , L L C soug ht to obtain a $3 milli on loan from Fifth Third Ba nk (“F ifth Third”)

. To secur e the loan, Fifth Third require d Shaun and Chandra Schneider to pledg e secur ities they held in a broker ag e acc ount mana ged b y L i n coln Financ ial Securities Corporation (“L in c o ln F in a n c ia l” )

. T o p ledg e these secur ities, the Schneider s executed a Br okera g e

1 Acc ount Pledge and Security Ag ree ment on Dec ember 21, 2005, which secur ed the master note in the principal loan amount of $3 milli on in f avor of Fifth Third. The loan proce eds wer e disbursed the next day , on Dec ember 22, 2005. At the t ime the l oan was funded, no one from Fifth Th i rd h ad comm unicated with any one from L incoln Financ ial. Howeve r, subsequent to disbursement, i n o rd er to perf ect Fifth Third’s interest in the secur ities in the broker ag e acc ount, an Acc ount Control Ag ree ment (“the Ag ree ment”)

was executed by Fifth Third, L incoln Financ ial, and the Schneider s. I nitially , Fifth Third mailed the Ag ree ment to L incoln Financ ial for signature, but L incoln Financ ial reje cted the Ag ree ment beca use it did not contain specific boilerplate lang uag e require d by L incoln Financ ial, there was a question about an acc ount number, and the balanc e ref lected in the Ag ree ment was highe r than the $400,000 balanc e ref

lected in L incoln Financ ial’s rec ords. L incoln Financ ial sent the Ag ree ment back for revisions, and Fifth Third’s Vice President for Commercial L ending , Rob Bing ham, co nta c te d Sh a u n Schneider about the proble ms with the Ag ree ment on Dec ember 29, 2005.

The orig inal defe ndant to this action was J eff erson Pilot Securities Corporation. Howeve r, 1 J eff erson merg ed with L incoln National Corporation and chang ed the name of J eff erson Pilot to L incoln Financ ial Securities Corporation. Thus, the corpor ate entity rema ined the same and only the name c hang ed. As such, w e will addre ss the defe ndant as L incoln Financ ial. - 2 -No. 09-6456

Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation T h at same day , Shaun Schneider delivere d a chec k for $2.8 milli on to J ere my Tincher, a L incoln Financ ial reg istered repr esentative and Schneider ’s broker

. T he next day , Tincher overnig hted t he check to L incoln Fin an ci al

. Tincher also emailed Bing ham t he langua g e L incoln Financ ial require d to be in the Ag ree ment, which Tincher had rec eived in an email from Anne J ones, L incoln Financ ial’s Manag er of Br okera g e Service s. A few day s later, on J anuar y 3, 2006, Tincher ag ain emailed Bingham, informing him that he should u s e a n ew ac count number and that the estimated value of the acc ount as of that date was $3,211,000. After t h e ch anges wer e made, the revised ag ree ment was signe d by the Schneider s and Fifth Third and sent back to L incoln Financ ial. Bing ham spoke direc tly t o J ones, who confirme d that she had rec eived the Ag ree ment, that the

acc ount was valued at $3.2 milli on, an d t h at a $ 2.8 milli on chec k had been deposited by Shaun Schneider

. The final version of the Ag ree ment, which is g overne d by Kentucky law, stated that L incoln Financ ial “re prese nt[ ed] and war rant[ed] to [t he Schneider s] and [Fifth Third] that (a) the Br okera g e Acc ount has been established in the name of” the Schneider s and that “the total marke t value of the proper ty of t he Broker ag e Account i s at l east” $3,211,000 as of J anuar y 3, 2006. The Agr eeme nt also stated that there wer e no distributions from the Br okera g e Acc ount betwee n J anuar y 3 and J anuar y 10, 2006, and that “except for the claims and interest of [t he Schneider s] and [Fifth Third] in the Br okera g e Acc ount, [L incoln Financ ial ] d o es n o t k n ow of any claim to or interest in the Br okera g e Acc ount or in any financ ial asset car ried there in.” The Ag ree ment also preve nted L incoln

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation Financ ial from making withdrawa ls from the acc ount on behalf of or at the reque st of the Schneider s without the prior written c onsent of F ifth Third. Additionally , the Ag ree ment contained a section entitled “Priority of L ien,” which stated that L incoln Financ ial would “not advanc e any marg in or other cre dit to [t he Schn ei d er s ] there in that would have the eff

ect of decr easing the total marke t value of the proper ty in the Br okera g e Acc ount below” the stated value of $3.2 milli on . Fu rt h er , L incoln Financ ial “wa ive[d] and rele ase[d] all liens, encumbr ance s, claims and rig hts of setoff it may have ag ainst the Br okera g e Acc ount or any financ ial asset car

ried in the Br okera g e Acc ount or any cre dit balanc e in the Br okera g e Acc ount.” L incoln Financ ial also ag ree d that, “except for pay ment of its cu s t o m ar y fees and commission p u rs u ant to the Br okera g e Ag ree ment, it [would] not asser t any such lien, encumbr ance , claim o r rig ht of the priority there of ag ainst the Br okera g e Acco u n t or any financ ial asset car ried in the Br okera g e Acc ount or any cre dit balanc e in t h e Br okera g e Acc ount.” Subject to the above restric tions, L incoln Financ ial was permi tted to “make trade s of financ ial assets held in the Br okera g e Acc ount at the instruction of [t he Schneider s], or their authorized repr esenta tives

. . . .” Howeve r, any transfe r of asset s o u t o f t he acc ount, including secur ities, could only be done upon

rec eipt of a letter of instruction signe d by Fifth Third and the Schneider s. The Agr eeme nt was signe d by the parties on J anuar y 9, 2006, though it desig nated Dec ember 21, 2005 as the date it beca me ef fec tive.
At the time the Ag ree ment was signe d, the broker ag e acc ount showed a balanc e of over $3.2 milli on, most of which was due to the larg e amount of s ec u rities purcha sed with the $2.8 milli on

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation chec k written by the Schneider s. Michae l Murra y , Vice President of L incoln Financ ial, testified that afte r t he securities wer e purc hased a nd the value added to the account, t he S chneide rs’ check was returne d due to insufficient funds. Af t er being notified by L incoln Financ ial, the Schneider s deposited another chec k to cover the purcha se of the secur ities. That chec k, howeve r, was also returne d beca

use of insuff

icient funds. When L incoln Financ ial rea liz ed that Pershing , the trade clea ring firm that executed trade s

on behalf of L incoln Financ ial, did not have sufficie nt funds to cover the purcha se of secur ities for the Schneider s, L incoln Financ ial had three options. One option was to exhaust available Reg ulation T extensions to extend the time in which the Schneider s could deposit sufficie nt funds for the purcha se of the secur ities. Howeve r, beca use all Reg ulation T extension reque sts had alre ady been exhausted, L incoln Financ ial had to choose betwee n its rema ining two opt i o n s : o rd ering a

canc ellation of the trade s or purcha sing the secur ities itself. The district court aptly summarized what followe d:
To s at i s fy its obligations to Pershing , L incoln Financ ial immediately order ed the canc ellation of t he tra des and adjusted t he brokerag e account balance to ref lect the canc elled transac tions. Mr. Murra y testified that to “ca

ncel the trade s ” m ea n s to “re verse , canc el, bust the transac tions within the client acc ount.” L incoln Financ ial repr esents that it expli citly reta ined the rig ht t o reverse unfunded trade s within its clients’ acc ounts pur suant to Sec tion 13( I )(g ) of the Br okera g e New Acc ount F orm executed betwe en it and the Schneider s which provides: “I f upon the purc hase/sale of secur ities by [L incoln Financ ial] at your direc tion, you fa i l t o p ay for or deliver monies or secur ities, y ou authorize [L incoln Financ ial] to take steps nece ssary to pay for/deliver such monies or secur ities. You further ag ree to re i m burse [L incoln Financ ial] for any

loss it m ay

sustain on y our beha lf.”

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation By canc elling the Schneider trade s, the balanc e in the Schneider acc ount fell fr o m at l east $3,211,000 to approximately $450,000. L incoln Financ ial states t hat Fifth Third Ba

nk’s ag ent, Rob Bing ham, was notified. During t his time, L incoln Financ ial states that Mr. Schneider also informed L incoln Financ ial that he w as under i n v estig ation for bank fra ud. On J anuar

y 19, 2006, the Fe dera l Burea u o f I nvestig ations (“F BI ”) issued a Fr eeze Orde r on the broker ag e acc ount. L i n co l n Financ ial throug h Pershing liqui d at ed and transfe rre d the assets in the subject broker ag e acc ount to the United States Marsha ls Service pursuant to an order of the FB I

. Subsequently , Schneider Consulti ng defa ulted on i t s l o an with Fifth Third Ba nk. By letter dated Fe bruar y 3, 2006, Fifth Third Ba

nk direc ted L incoln Financ ial to liquidate the balance of the brokerag e account to satisfy the loan pursua

nt to the Acc ount Control Ag ree ment. I n 2007, Fi ft h Third Ba nk rec eived two liquidation pay ments from L incoln Financ ial i n the total amount of $466,308.01. Fifth Third Ba nk was also notified that it will rec eive an additional $17,610.92 from the acc ount. Fifth T hird Bank v. Lincoln Fin. Sec . Corp. , No. 4:06CV-122-M, 2009 WL2523444, at *3 (W.D. Ky . Aug . 18, 2009) (inter nal footnote omitted). Fifth Third filed a complaint in the Daviess C i rc u i t C o urt in Kentucky alleg ing brea ch of contra ct by L incoln Financ ial. The complaint was remove d by L incoln Financ ial to the United States District Court for the Western Dis trict of Kentucky

. Shortly there afte r, F ifth Third filed a motion for summary judgme n t , whi ch was denied without prejudice as premature. Fifth Third Bank v. Jefferson Pilot Sec . Corp. , No. 4:06-cv- 00122 (W.D. Ky . Mar. 9, 2007)

. After eng ag ing in extensive discov er y , L incoln Financ ial then filed its own motion for summary judgme nt arguing that it was not re s p onsible for Fifth Third’s loss, which was instead

cause d by the Schneider s’ fra udulent scheme and “F ifth Third’s own failure to ve rify the acc urac y of Schneider ’s repr esenta

tions.” L incoln Financ ial argued that it acc urate ly repor ted the amount in

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation the Schneide rs ’ account at the time it signe d the Ag ree ment, as it had no knowledg e of the Schneider s’ fra

ud or that the chec k deposited by the Schneider s was actua lly worthless. Moreove r, it asser ted that beca

use the loan closed prior to the signing of the Ag ree ment, there was no way that Fifth Third could have relied on the Ag ree ment when it decide d to approve the Schneider s’ loan, and there fore L incoln Financ ial could not be liable for misrepre sent ation. Additionally , L incoln Financ ial claimed that it wa s not vic ariously liable for any acts taken by Tincher , who initiated the Schneider s’ secur ities trade , beca use he was an independe nt broker and Kentucky law prec luded the imposit ion of vicar ious liability for the tortious conduct of independe nt contra ctors. Finally , L incoln Financ ial alleg ed that Fifth Third’s brea ch of contra ct claim was unsupported, beca use the Ag ree ment was “ not a g uara nty for Schneider’s loan” and it did “not set forth specif ic obligations for the surre nder or liquidation of the Schneider broker ag e acc ount upon defa ult on [t he] Fifth Third loan.” I nstead, all that was require d by the Ag ree ment was for L incoln Financ ial to turn over control

o f t h e b rokerag e acc ount to Fifth Third in the event of defa ult by the Schneider s. Thus, L incoln Financ i al cl ai med that even assuming a brea ch had occur red, Fifth Third could show no damag e resulting from the brea ch beca use L incoln Financ ial rele ased the entire balanc e of the acc ount; the fac t that the acc ou n t “w as l es s valuable than Fifth Third expected resulted from Schneider ’s fra udulent scheme , not any

alleg ed bre ach by

[L incoln Financ ial].” Fifth Third filed a response to L incoln Financ ial’s motion that also serve d as its own second moti o n for summary judgme nt, in which it argued that L incoln Financ ial had brea ched the Ag ree ment when it (1) ref used to liquidate the acc ount upon rec eipt of the Notice of Ex clusive

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation Control from Fift h Third, (2) repr esente d and war rante d an incorre ct balanc e in the Schneider s’

acc ou n t , and (3) reve rsed the trade s in the S chneide rs’ account without Fifth Third’s permission. I n response to L incoln Financ ial’s motion, Fifth Third clar ified that althoug h L incoln Fi n an ci al addre ssed a purported misrepre sentation claim, no such claim was actua lly broug ht by Fifth Third.

I n its response to Fifth Third’s motion for summary judgme nt, L i ncoln Financ ial asser ted that: (1) the Ag ree ment was unenfor cea ble beca use there was no consideration and there was a lack of mutuality of obligation; (2) the contra ct must be resc inded on the basis of mutual mistake, beca use both parties believed that the Schneider s had the claimed fi nancia l resour ces that did not actua lly exis t; and (3) the ag ree ment was subject to resc ission based on the Schneider s’ fra ud. As to the merits of the claim of brea ch, L incoln Financ ial argued that (1) it never misrepre sented the balanc e in the Schneider s’ acc ount; (2) t h ere was nothing within the Ag ree ment that preve nted L incoln Financ ial from reve rsing the trade s wi t h i n t h e Schneider s’ acc ount, beca use the terms of the Agre ement permitted it to make trade s of financ ial assets held in the broker ag e acc oun t at t h e Schneider s’ instruction until Fifth T h i rd exercised exclusive control over the acc ount; and (3) it

never ref used to liquidate the acc ount. I t f urther argued in its sur-re ply that at no time did it or the Schneider s ev er own the secur ities in question, asser ting that Pershing , its clea ring firm, reta ined

owner ship of the sec urities while awa iting the c lear ance of the Schne iders’ c heck. After the motions wer e fully b ri ef ed , t h e district court issued an opinion g ranting Fifth Third’s motion for summary judgme nt and likew is e d e ny ing L incoln Financ ial’s motion. Fifth Third Bank , 2009 WL 2523444, at *10. The court deter mined that at the time the Ag ree ment was signe d,

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation the value of the acc ount was at least $3.2 milli on, beca use the secur ities had b ee n purcha sed and place d in the acc ount. Id. Once that occur red, L incoln Financ ial waived and rele ased all claims or rig hts of setoff ag ainst those assets and had no authority to remove them when the Schneider s’ chec k bounced. Id. Acc ording ly , the court conclude d that by cance ling the trade s, L incoln Financ ial brea ched the Ag ree ment. Id. The court also found t h at t h e Ag ree ment was supported by 2 consideration, that mutuality of obligation exis ted, and that there was no mutual mistake or fra ud sufficie nt to warra

nt rescission. Id . at *7–10. After judgme nt was enter ed, L incoln Financ ial filed a motion to alter the judgme nt pursuant to Fe dera l R u l e o f C ivil Procedur e 59, arguing that the court improperly interpre ted the express lang uag e of the Ag ree ment, that Section 3 of the Ag ree ment did not prec lude all trading within the Schneider s’ acc ount, that L incoln Financ ial had not waived its rig ht to canc el unfunded trade s, and that the damag es aw ard w as improper ly calc ulated. L incoln Financ ial also argued that the dist rict court err ed by adjudicating the rea sonablene ss of its relianc e on the Schneider s’ chec k, in deciding that L incoln Financ ial neg lige ntly failed to asce rtain the “mistake” in the Schneider s’ chec k and did not exercise ordinary diligenc e, in failing to interpre t the Ag ree ment as requiri ng only L incoln Financ ial’ s “ b e s t e f

forts,” and in deter

mining that sufficie nt consideration supported the Ag ree ment.

The court also addre ssed L incoln Financ ial’s arg ument that it did not own the secur ities, and 2 explained th at t his did not defe at the deter mination that L incoln Financ ial brea ched the contra ct beca use, if true, it would support Fifth Third’s claim of brea ch by repr esenting that the acc ount value was at least $3.2 milli on. Fifth T hird Bank , 2009 WL 5253444, at *6.

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation I n response, Fifth Third conceded that the court had used an incorrec t principal amount to calc ulate damag es, and the court order ed the parties to file supplemental briefs re garding the proposed judgme nt. Howeve r, it also deter mined that, “[w]i th the exception of the argument related to the judgme nt amount, the arguments raised in [L incoln Fin an cial’s] motion to rec onsider wer e either prev i o usly advanc ed by [L incoln Financ ial] and addressed by the C ourt or could have been advanc ed in [L incoln Financ ial’s] orig inal motion and response .” Fifth Third Bank v. Lincoln Fin. Sec. Corp. , No. 4:06CV-122-M (W.D. Ky

. November 4, 2009). I n a J anuar y 4, 20 1 0 order , the district court conclude d that an amende d judgme nt was appropr iate and awa rded judgme nt in favor of Fifth Third in the amount of $2,867,058.96, which included all prejudg ment interest, late fee s, and postjudgment intere st. L incoln Financ ial then filed a timely notice of a

ppeal. II. ANALYSIS A. Waiver As an initial matter, L incoln Financ ial raises a number of issues that Fifth Third asser ts have been waived on appea l. “I t is the g ener al rule, of course , that a federa l appellate court does not consider a

n issue not passed upon below.” Singleton v. W ulff , 428 U.S. 106, 120 (1976); see also Scottsdale Ins. Co. v. Flowers , 513 F.3d 546, 552 (6 t h C i r. 2008) (explaining that under the “tra ditional rules reg arding the waiver of issues” on appeal , “a n argume nt not raised befor e the district court is waived on appea l to this Court”). “[T] his g ener al policy is justified by two main policy g oals: ‘F irst, the rule ease s appellat e re v i ew b y having the district court first consider the issue. Second, the rule ensure s fairne ss to litigants by preve nting surprise issues from appea ring on

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation appea l.’” Rice v. Jefferson Pilot Fin. Ins. Co. , 578 F.3d 450, 454 (6th Cir. 2009) (quoting Scottsdale Ins. Co , 513 F.3d at 552). Certain ex ce p tions apply , howeve r, and this court has “‘de viated from the g ener al rule in exceptional case s or particular circumstance s or when the rule would produce a p l ain m iscarr iag e of justice.’” Scottsdale Ins. Co. , 513 F.3d at 552 (quoting Foster v. Barilow , 6 F.3d 405, 407 ( 6th Cir. 1993)). This circ uit’s lead i n g case on the matter is Pinney Dock & Transport Co. v. Penn Central Corporati on, 838 F.2d 1445 (6th Cir.1988). I n Pinney , this court explained that the rule is not jurisdictional, but rathe r is a rule of proce dure under which exceptions are permissible in limit ed circ umstances and are left to the discretion of the courts of appea ls based on the fac ts of individual

case s. Id. at 1461. I n deciding whether to exercise its discretion to hear a matter raised for t h e first time on appea l, this court is guided by the following fac tors: 1 ) whether the issue newly raised on appea l is a question of law, or whether it require s or nece ssitates a deter mination of fac ts; 2) whether the proper resolution of t h e new issue is clea

r bey ond doubt; 3) whether failure to take up the issue for the first time on appea l will re s u lt in a miscarr iag e of justice or a denial of substantial justice; and 4) the parties’ rig ht unde r our judicial sy stem to have the issues in their suit considered by

both a district judge and an a ppellate c ourt. Scottsdale Ins. Co. , 513 F.3d at 552 (quoting Friendly Farms v. Reliance Ins. Co. , 79 F.3d 541, 545 (6th Cir. 1996)); see also Fairlane Ca r W a s h , In c. v. Knight Enters., Inc. , 396 F. App’x 281, 286 (6th Cir. 2010) (explaining that this court “may rea ch an issue that is prese nted with sufficie nt clar ity and completene ss,” ty

pically “whe re the issue is one of law, and further development of the rec ord is unnece ssary ,” or wher e addre ssing the is s u e “w o u l d serve an overa rching purpose other than

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation simply rea ching the corr ect resu l t i n this case ,” such as “whe re the state of the law is uncer tain”) (interna l quotation marks omitted). Howeve r, we h a v e “ r a r e ly e xe r c is e d such discretion.” Scottsdale Ins. Co. , 513 F.3d at 552. I n fac t, this court has “re iterate d that the exceptions to the g ener al rule are

narr ow and intended to promote finality in litigation.” In re Morris , 260 F.3d 654, 6 6 4 (6 t h C ir. 2001); see also Foster , 6 F.3d 407 ( noting that “[t] he exceptions to the g ener al rule a re na rrow” ). I nstead, this court has “g ener ally focuse d on whether the issue was proper ly raised befor e the district court.” Scottsdale Ins. Co. , 513 F.3d at 553. 1. F ailure to Disclose L incoln Financ ial first argues that the district court err ed when it failed to find that a g enuine issue of materia l fac t exis ted reg arding Fifth Third’s failure to disclose to L incoln Financ ial an email
t hat sug g ested that Shaun Schneider might be eng ag ed in fra ud. L incoln Financ ial asser ts that 3 beca use of the email, Fifth Third knew prior to L incoln Financ ial executing the Ag ree ment that the Schneider s misrepre sented the value of the broke ra ge acc ount and that Fifth Third would have known that the Schneider s wer e eng ag ed in fra ud if they had done at least a “cur sory investigation.” So, argues L incoln Financ ial, it is rea sonable t o i n fe r t hat Fifth Third did not disclose this information in order to secur e L incoln Financ ial’s execution of the Ag ree ment. Furt h er, L incoln Financ ial asser

ts that “[i] f F ifth Third had a duty to disclose information of this nature to L incoln,

Acc ording to Bing ham’s deposition, he re ceive d an email approximately five day s befor e 3 the Ag ree ment was signe d, wh i ch wa s sent anony mously and contained a war ning about a “potential” F ifth Third borrow er that Bing ham under stood to mean Shaun Schneider

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation materia l issues of fac t exis ted” reg arding whether Fifth Third acte d in g ood faith and in acc ordanc e with rea sonable standa

rds of fa ir dea ling. As Fifth Third corr ectly arg ues, L incoln Financ ial did not proper ly raise this argument in the district court. L incoln Financ ial did ref ere nce the email in its statement of undisputed fac ts in its motion for summary judgme nt. L incoln Financ ial also stated in its motion that the loss at issue was “the conseque nce of S ch n ei d er’s fra udulent scheme and Fifth Third’s own failure to verify the

acc uracy of Schneider ’s repr esentations.” Howeve r, in that very same motion, L incoln Financ ial contra dictorily stated that the Schneider s wer e “misleading not only Fifth Third, but [ L incoln Financ ial] as well.” I t was not until L incoln Financ ial filed its reply in support of its Rule 59 motion that it prese nted a leg al argument reg arding Fifth Third’s alleg ed duty to disclose the email and asser t that Fifth Third did not act rea sonably afte r it beca me aw ar e o f “r ed flag s.” As this court has prev iously explained, though it has “neve r articulated prec isely what constitutes raising an issue with the district court, we have found issues to be wa i v ed when they are raised for the first time in motions reque sting rec onsideration or in replies to response s,” as occur red here

. Scottsdale Ins. Co. , 513 F.3d at 553. Moreove r, this issue does not fall within the exception to the g ener al rule of waiver beca use, as L incoln Financ ial acknow ledg es in its reply brief to both its Rule 59 motion and its brief

on appea l, resolution of this issue is not “cle ar bey ond doubt” and would require deter minations of materia l fac ts. Scottsdale Ins. Co. , 513 F.3d a t 552. 2. Causal Relationsh ip B etween Breac h and Dam ages Next, L incoln Financ ial argues that the d is tric t court err ed in finding that a causa l rela tionship exi s t ed b etwee n L incoln Financ ial’s brea ch and Fifth Third’s claimed damag es. Specifica lly , - 13 -No. 09-6456

Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation L incoln Fina n ci al ar gu es that even if it brea ched the Ag ree ment, it was “F ifth Third’s own neg lige nce [t hat] resulte d i n i t s loss well befor e L incoln executed the Ag ree ment,” beca use Fifth Third disburs ed t h e l o an proce eds prior to execution of the Ag ree ment and without verify ing the value of the proper

ty in the Schneider s’ acc ount. Thus, acc ording to L incoln Financ ial, Fifth Third’s damag es did not arise f

rom L incoln Financ ial’s alleg ed bre ach. This claim too has been waived by L incoln Financ ial. As noted, L incoln Financ ial asser ted conclusorily in its motion for summary judgme nt that Fifth Third’s loss was the result of both the Schneider s’ frau d and Fifth Third’s “own failure to verify the acc urac y of Schneider ’s repres en t at i o ns.” Howeve r, it failed to elabor ate on this statement or provide any argument in support of it. I nstead, L incol n Fi n an ci al argued that it was not obligated to pay Fifth Third any amount “beyond the actua l value of the Schneider acc ount” and that once that amount was rele ased, Fifth Third could not claim any resulting damag es. L incoln Financ ial argues in its reply brief to this court that it did raise this claim, ci t i n g t o a section in its reply filed in support of its motion for summary judgme nt in the district court, wher e it asser ted that there was no consideration to support the Ag ree ment and thus no relianc e “upon the all ege d war ranty in order to support” an “alleg ed ‘wa rra nty ’ claim” ag ainst it. Even assuming this is sufficie nt to have raised the argument befor e the district court, it was not raised until L incoln Financ ial’s reply , which would still result in waiver

. See Sc ottsdale Ins. Co. , 513 F.3d at 553. 3. Mitigation and “B est Eff orts” L incoln Financ ial also argues that the district court err ed in its conclusion that there was no g enuine issue of materia l f act reg arding Fifth Third’s alleg ed failure to mitig ate its damag es. This

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation claim was not rai s ed in any of L incoln Financ ial’s pleading s in the district court, and L incoln Financi al does not respond to or challeng e Fifth Third’s asser tion of waiver in its reply brief on appea l. Additionally , L incoln Financ ial arg ued that the district court err ed when it failed to consider the lang uag e of the Ag ree ment requiring that L incoln Financ ial use only its “best eff orts.” Howeve r, this argument was raised for the first time in L incoln Financ ial’s Rule 59 motion, and L incoln Financ ial does not dispute in its reply brief the alleg ation that it waived this claim. Acc ording ly , 4 these c laims are a lso waived on a ppeal. 4. Cancellation of T rades as Breac h I n the final claim allege d waived by Fifth Third, L incoln Financ ial argues t hat t he dis trict court err ed when it deter

mined t h at L i n coln Financ ial’s canc ellation of the Schneider s’ secur ities purcha se amounted to a brea ch o f t h e Agre ement. First, L incoln Financ ial asser ts that its

canc ellation of the Schneider s’ unfunded purcha se order “wa s a normal trading activity , not a claim

o r s etoff ag ainst the acc ount for the benef it of L incoln or Pershing .” Second, L incoln Financ ial al l eges that the court err ed when it “summarily adjudicat[ed] whether the parties intended th e Ag ree ment to apply to the unfunded secur ities,” asser ting that there is a latent ambi gu i t y in the lang uag e of the Ag ree ment as to whether t h e p ar t i es intended for L incoln Financ ial to waive its prac tice of c ance ling unfunded trade order s. Whil e L incoln Financ ial did argue bef ore the district

L incoln Financ ial did note in its reply in support of its motion for summary judgme nt that 4 its liability was limited, and i t cited to the Agre ement and the fact that L incoln Financ ial rec eived no compensation, that it had no liabili ty for makingtrade s, and that its oblig ations wer e limit ed to “best eff orts.” Howeve r, it did not put forth any additional argum en t o n this point sufficie nt to constitute raising the claim bef ore the district court.

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation court that the canc ellation of secur ities did not amount to a brea ch of the Ag ree ment, it did not at any time argue that the Ag ree ment was ambig uous reg arding the canc ellation of trade s. I n fac t, in all of its briefs submitt ed to the district court, L incoln Financ ial argued that the lang uag e of the Ag ree ment

was clea r in permitting L incoln Financ ial to make the “tra des” it did with the Schneider s’ acc ount. Acc ording ly , while we may addre ss the first part of L i n co l n Fi n ancial’s claim, the second part of L incoln Financ ial’s ar g ument is waived. As for the waiver exception, there is no support to apply the exception to any of L incoln Financ ial’s claims that are o t h er wise waived. Be cause L incoln Financ ial failed to proper ly raise these iss ues before the district court, Fifth Third was not g iven an opportunity to respond to these arguments. Moreove r, the resolution of these issues is not clea r bey ond a doubt, cer

tain issues would

nece ssitate making fac tual deter minations, and failure to take up the issues on appea l will not result in a miscarr iag e of justice or a denial of substantial justice. See Scottsdale Ins. Co. , 513 F.3d at 552; see also Rice , 578 F.3d at 454. Acc ording ly , we conside r o n l y t h e m er i ts of t he remaining issues discussed below. B. Motion f

or Sum m ary Judgm ent When parties file c ross-motions f or summary judgme nt, on appea l this court is “r equire [d] [] to ‘eva luate ea ch m o t ion on its own merits and view all fac ts and infere nces in the light most favor able to the non-moving party .’” Travelers Prop. Cas. Co. of A m. v. Hillerich & Bradsby Co. , 598 F.3d 257, 264 ( 6th Cir. 2010) (quoting Bec k v. City of Cleve land, 390 F.3d 912, 917 (6th Cir. 2004)). “‘In revie wing a g rant of summary judgme nt on cross-motions seeking such relief , we apply

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation the s ame lega l standards as the di strict court: wh ether, with the evidence viewed in the l ight most favor able to the non-moving party , there are no g enuine issues of materia l f act, so that the moving party is entitled to a judgment as a matter of l aw.’ ” In re Arctic Exp. Inc. , 636 F.3d 781, 791 ( 6th Cir. 2011) (quoting United States v. Petroff–Kli ne, 557 F.3d 285, 290 (6th Cir. 2009)). We revie w the district court’s order g ranting summary judgme nt de novo. Travelers Prop. Cas. Co. of Am. , 598 F.3d at 264. 1. Consid erat ion and Mutu ality of O bligation Of those issues rema ining that have not been waived, L incoln Financ ial first arg ues that the Account Control Ag ree ment was not supported by consideration. Under Kentucky law , “[c]onsi deration” is ‘ [a] benef it to the party promising, or a loss or detriment to the party to whom the promise is made.’ ” Smith v. Bethlehe m Sand & Grave l Co., LLC , –S.W .3d–, 2011 WL 1515180, at *4 (Ky

. Ct. App. Apr. 22, 2011) (quoting Phillips v. Phillips , 171 S.W .2d 458, 464 (Ky

. 1943)). “[G]enerally speaking , a substantial failur e o f consi deration ordinarily justifies resc ission of a contra ct.” Id. The district c ourt conclude d that sufficie nt c onsideration exis ted to suppor t the Ag ree ment b ec au s e L incoln Financ ial executed the Ag ree ment “[a]t the reque st and for the benef it of i t s customers” and, in exchang e for its promise to repr esent the value of the acc ount and waive its rig hts of setoff ag ainst the acc ount, L incoln Financ ial “re tained its customers and continued to rec eive the

corr esponding fee s and commissions pay able under the broker ag e acc ount ag ree ment.” Fifth Third Bank , 2009 WL 2523444, at *7. L incoln Financ ial, howeve r, argues on appea l that t h er e is no

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation evidenc e that Schneider would or could have transfe rre d his acc ount from L incoln Financ ial if it had not executed the Ag ree ment and that, absent such evidenc e, the dist ri ct court’s conclusion improperly “im puted consideration to the Ag ree ment based on speculation.” Corresponding ly , L incoln Financ ial arg

ues that there was no mutuality of obl i gat i o n beca use “F ifth Third did not assume any

leg al obligation or liabilit y to L incoln under the Ag ree ment.” Although the district court and L incoln Financ ial addre ssed the issue of consider ation as it perta ins to L incoln Financ ial’s customer rete ntion and rec eipt of fe es and c ommissi ons, Kentucky law actua lly provides strong er g rounds for finding that consideration exis ted to support the Ag ree ment. See City Mgmt. Corp. v. U.S. Chem. Co. , 43 F.3d 244, 251 (6th Cir. 1994) (noting that this court “may

aff irm on any g rounds supported by the re cord, e ven thoug h they may be diffe rent from the g rounds re lied on by the district court” ). As the Ke ntucky courts have explained:

I f consideration is sufficie nt for a contra ct in othe r respe cts, it doe s not matter from or to whom it moves. The consideration may move to the promisor or a third person, and may be g iven by the promisee or a third person. To constitute consideration, it is not n ec es s ar y that a benef it should acc rue to the promisor; it is sufficie nt that something valuable flows from the person to whom the promise is made and that the promise is the induceme nt to the transac tion.
W hitaker Bank, Inc. v. First Nat’l Bank and Trust of London , No. 2007-CA-000688-MR, 2008 WL 3165251, at *2 (Ky

. Ct. App. Aug

. 8, 2008) (quoting Am. J ur. 2d § 113); cf. Simpson v. JOC Coal, Inc. , 677 S.W .2d 305, 307–08 (Ky

. 1984) (explaining that a third party for whose benef it a contra ct is made may maintain an action pursuant to that contra ct, provided the third party was “a party to the consideration”). Fur

thermore , “‘[c]onsideration to support a p r o mi s e n e ed not even involve a benef it to the promi s or; it is sufficie nt if the benefit is derive d solely by a thi rd person or consist s only of - 18 -No. 09-6456

Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation detriment to the person to whom the promise is made.’” W hitaker Bank, I

nc. , 2008 WL 3165251, at *2 (quoting Am. J ur. 2d § 117).
Her e, the Schneider s obtained the benef it of the proce eds of the loan and, in order to perf ect Fifth Third ’ s s e c u

r ity interest in the broker ag e acc ount, they reque sted that L incoln Financ ial execute the Ag ree ment. By executing the Ag ree ment at the Schneider s’ reque st, the Schneider s g rante d an interest in the acc ount to Fifth Third that was supported by the consideration t h ey re ceived in the form of the loan. Fur

thermore , once considera

tion was “found to be prese nt, mutuality of obligation is not require d.” Ramler v. Spartan Constr. Inc. , No. 2002-CA-001646-MR, 2003 WL 22064334, at *5 (Ky

. Ct. App. Sept. 5, 2003). Acc ording ly , the distri ct co u rt d i d n o t err in finding that the Ag ree ment was supporte d by consideration.
2. Mutual Mistake Next, L incoln Financ ial argues that the district court err ed when it conclude d that there was

no mutual mistake reg arding the sufficie ncy of the assets in the broker ag e acc ount, and asser ts that the Agre ement shoul d have be en voided. Additionally , L incoln Financ ial claims that in resolving the mutual mi s ta

k e c la im, the court improperly conclude d that L incoln Financ ial acte d unrea sonably , neg lige ntly failed to asce rtain the mistake reg arding the assets in the acc ount, and assumed the risk of loss by treating the unc lear ed che ck as suf ficient.

I n Kentucky , wher e a party seeks to vary the terms of a writing on the g round of mutual mistake, it must establish: (1) that the m ist ak e wa s m u t u al, not unilatera l; (2) proof of the m utual mistake “beyond a rea sonable controve rsy by clear and convinc ing evide nce ”; and (3) that “the

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation parties had actua lly ag ree d upon terms di ffe rent from those exp re s s ed in the writt en ins trument.” Abney v. Nationw ide Mut. Ins. Co. , 215 S.W .3d 6 9 9 , 7 0 4 (K y . 2006) (interna l quotation marks omitted). Howeve r, wher e one party has acte d neg lige ntly in failing to asce rtain the fac ts or obtain the information that could have corr ecte d the mistake, that party is not entitled to r elief. See Allen Lumber Co. v. Howard , 72 S.W .2d 483, 487–88 (Ky . Ct. App. 1934).

L incoln Financ ial asser

ts that both parties wer e opera ting under a mutual mistake reg arding the Schneider s’ ability to fund the broker ag e acc ount such that its value exceeded the $3 milli on loan. Howeve r, the rec ord demonstrates that L incoln Financ ial was the only party operating under

a mistake. Her e, pursuant to the very terms of the Ag ree ment, L incoln Financ ial was responsible for

war ranting the value of the Schneider s’ broker ag e acc ount to Fifth Third. I n order to do so, L incoln Financ ial neede d to know that the funds provided by the Schneider s wer e sufficie nt to purcha se the

secur ities that made up the majority of the $3.2 milli on in the acc ount. Yet, at the time it signe d the Ag ree ment and represe nted the suff iciency of t he funds in the S chneide rs’ account, L incoln knew that the che ck had not y et clea red. L incoln Financ ial failed, how ever , to disclose this information to Fifth Third and still executed the Ag ree ment. Thus, L incoln Financ ial alone o p er at ed u n der a mistake, and ther efor e it was not entitled to resc ission on the basis of mutual mist ake.

L incoln Fi n an cial also arg ues that the district court improperly conclude d that L incoln Financ ial acte d unrea sonably and neg lige ntly failed to asce rtain the mistake reg arding the assets in the acc ount, and in doing so it assumed the risk of loss by trea ting the unclea

red chec k as sufficie nt. Be cause we find that the district court proper ly deter mined that there was only a unilatera l mistake,

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation and thus L incoln Financ ial was not entitled to relief on the basis of mutual mistake, there is no need to address whether L incoln Financ ial was neg lige nt in failing to obtain the i nformation that could have reme died its mistake. Moreove r, even if we wer e to addre ss i t , L incoln Financ ial’s claim is without merit. L incoln Financ ial argues that it was rea sonable for it to acc ept the Schneider s’ chec k beca use regulations g overning such purcha ses permit securities broker s to acc ept chec ks as immediate pay

ment. Howeve r, even assuming that acc epting the Schneider s’ chec k and purchasing the securities immediately was rea sonable, it cannot be said that L incoln Financ ial did not act neg lige ntly by warranti ng the value of the Schneider s’ acc ount befor e confirming that the secur ities repr esenting the bulk of that value had been paid for with sufficie nt funds. In repr esenting the value of the acc ount without any exception or limit ation, L incoln Financ ial assumed the risk that the funds would be insuffic ient.
3. Breac h Finally , L incoln Financ ial argues that the district court err ed in deter mining that it brea ched the Agre ement when it canc eled the unfunded purchase order of securities. Under Kentucky law, “[t] o prove a brea ch of con t ra ct, the complainant must establish three things: 1) exis tence of a contra ct; 2) brea ch o f that contra ct; and 3) damag es flowing from the brea ch of contra ct.” Metro Louisvill e/Je

fferson Cnty. Gov’ t v

. Abma , 326 S.W .3d 1, 8 (Ky

. Ct. App. 2009) . “I t is we ll se ttled that the interpre tation of contra cts is a n issue of law for the court to de cide.” Equitania Ins. Co. v

. Slone & Garrett, P.S.C. , 191 S.W .3d 552, 556 (K y . 2 0 0 6 ). I n so deciding , “[t] he int ention of t he parties to a w ritten instrument must be gathere d from the f our cor ners of that instrument.” Id.

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Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation As an initial matter, L incoln Financ ial continues to asser t on appea l that the secur ities “neve r settled” in the acc ount and the Schneider s never owned the secur ities that made up most of the value of t he brokerag e ac count, and ther efor e the true value of the ac count was that which was left after the trade s wer e canc eled and the secur ities sold. Howeve r, L incoln Financ ial war ran t ed in the Ag ree ment that the Schneider s’ acc ount was worth over $3.2 milli on, which was primarily based on the cre diting of the secur ities to the Schneider s’ acc ount. And, as L incoln Financ ial’s Vice President Michae l Murr ay stated at his deposition, when Pershing executes a trade on behalf of L incoln Financ ial, the secur ities are considere d purcha sed as of the date of the trade and the client’s acc ount is cre dited even if the funds to purcha se the secur ities have not clea red. Acc ording ly , reg ardle ss of who m ay have ow ned the se curities at the time the A g ree ment was signed, they had been credited to the Schneider s’ ac count, as L incoln Financ ial so repr esente d in the Ag ree ment. Fur ther, rathe r than absolving L incoln Financ ial from liability for brea ch, its a rg ument that the Schneider s never owned the secur ities actu al l y evidenc es L incoln Financ ial’s brea ch of the Ag ree ment. Specifica lly , L incoln Financ ial re p r e s e nte d a n d w a r r a nte d in the Ag ree ment that “except for the claims and interest of [t he Schneider s] and [Fifth Third] in the Br okera g e Acc ount, [L incoln Financ ial][ did] not know of any cl ai m t o o r interest in the Br okera g e Acc ount or in any financ ial asset car ried there in.” Yet, L incoln Financ ial admits that despite the cr ed i t t o the Schneider s’

acc ount, actual owne rship of the sec urities was re tained by Pershing and, in the eve nt the funds to purcha se the secur ities wer e insufficient, L incoln Financ ial would be responsible to Pershing for the purcha ses made within the Schneider s’ acc ount. As Murra y explained, if a client failed to proper ly fund a trade , L incoln Financ ial would either have to pa y Pershing or re verse the trade s. Howeve r, - 22 -No. 09-6456

Fifth T hird Bank v. Lincoln Financial Sec urities Corpor ation he explained that when a trade i s n ot paid, L incoln Financ ial’s policy is to order the sale of those

secur ities so that it would not have to purc hase the secur ities itself. I n other words, L incoln Financ ial knew at the ti m e i t signe d the Ag ree ment that it had an interest in the secur ities in the Schneider s’ acc ount and that, if the Schneider s’ funds wer e insufficient, it had a claim in the acc ount to the extent it would order sale of the secur ities if they otherwise wer e not paid for by the Schneider s. By war

ranting that no claim s o r interest exis ted in the acc ount or the assets there in, when L incoln Financ ial knew it ha d its own interest in those secur ities a nd that it would (and later did) asser t a claim by order ing sale of the s ecur it i es upon finding that the funds wer e ins ufficie nt, L incoln Financ ial brea ched the Ag ree ment. Moreove r, even acc epting L incoln Financ ial’s argument that the se c u r it ie s wer e never owned by the S chneide rs and therefor e we re not he ld in the brokera g e ac count, L incoln Financ ial’s orde r to Pershing to canc el the trade and sell the secur ities al s o woul d have violated the terms of the Agr eeme nt. Under Section 3, L incoln Financ ial was not permitted to “execut[e] sell order s o n

secur ities not held in the Br okera g e Acc ount

. ” I t s ca ncellation order then would have direc tly resulted in a brea ch of the Ag ree ment. As such, the district court did not err in finding that L incoln Financ ial brea ched the Ag ree ment when it ca ncele d the trade and orde red sa le of the se curities. III. CONCLUSION For the fore g oing reasons, we find that L incoln Financ ial waived the majority of its argum en ts for failure to proper ly raise them befor e the district court, and we AFF I RM the di strict court’s or der on the rema ining c laims properly befor e this court on appe al.

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