Opinion ID: 146047
Heading Depth: 1
Heading Rank: 8

Heading: The principals had to choose between purchasing the Active Members' interest and risking the loss of their investment or selling their interest for a $3.5 million profit.

Text: DynaVision's principals had thirty days to decide whether to buy or sell. They opted to sell and received a $3.5 million profit, an extraordinary return on their initial investment. [116] Ledford and O'Dell also received the release of their obligation to FNBC to guarantee payment of the $911,000 loan the bank had given Signature. [117] Had they opted to buy instead, they would have assumed the risk that the company would have to close down unless they found a management team to run it. Moreover, without a management team, they would have had great difficulty selling the company. Potential buyers, knowing that Signature's value was diminishing, perhaps exponentially, would have been able to simply stand by and wait for the day when the principals had no alternative but to take whatever price they could get. Faced with these alternatives, DynaVision's principals had to choose the one that satisfied their economic self-interest: They had to sell. As the Georgia Court of Appeals, drawing on what Ledford and O'Dell had to say on deposition, [118] observed: Either the Active Members' interest in [Signature] was worth $3.5 million to Dyna-Vision or it was not. The fact that Peeples financed the offer could not have materially affected Dyna-Vision's decision-making with respect to [Signature's] value, because if Dyna-Vision chose to buy the Active Member's interest, it could not force Peeples (or any other prospective buyer) to buy [Signature] for a fixed price. And there is no evidence in the record that Dyna-Vision had an interested buyer or that [Signature] had any value to any other prospective buyer. Moreover, both Ledford and O'Dell deposed that, even if they could have raised the money to buy out the Active Members, owning [Signature] without the Active Members would have been foolish and made no sense because the Active Members were the heart of [Signature's] value. As O'Dell admitted we didn't really have a choice.... We didn't have a management group .... The day the put and call came in, I wouldn't give two cents for finding a group to replace them. Because Peeples' involvement did not affect the value of the Active Members' interest, it was immaterial. Ledford, 618 S.E.2d at 634-35. We began this discussion by stating that to obtain a reversal of the district court's determination that they failed to create a jury issue as to the reliance element of their Rule 10b-5(b) claims, plaintiffs had to convince the court that the evidence, considered in the light most favorable to them, yielded circumstantial facts from which a jury reasonably could infer that if Peeples had not denied his involvement in the Put and Call, DynaVision's principals would have purchased the Active Members' interest. Peeples contends that the evidence establishes circumstantial facts that yield but one inference: DynaVision's principals had no option but to sell. We agree. Peeples's misrepresentations played no causative role in the DynaVision principals' decision to sell to the Active Members.
Perhaps realizing the futility of the arguments they have advanced, plaintiffs present an argument that they failed to present to the district court while it was considering the merits of their claims. The argument is founded on  9.1 of the Operating Agreement, which precludes a Member from pledging an interest in Signature as collateral for a loan. [119] Plaintiffs contend that the Active Members breached this provision by pledging their interests in Signature as collateral for the $3.5 million loan they obtained from Peeples. [120] They did not know about the pledge prior to the April 30 closing, they represent, but would have suspected it had Peeples admitted that he was behind the Put and Call. DynaVision now argues that had it suspected that the Active Members had pledged their interests in violation of  9.1, it would have rejected the Put and Call. Then, if the Active Members sued for specific performance, it would have asserted the breach of  9.1 as an affirmative defense, citing the Georgia principle of equityÔÇöthat a party seeking specific performance of a contract must show substantial compliance with his part of the agreement, and the breach of a material condition will bar a decree of specific performance. Saine v. Clark, 235 Ga. 279, 219 S.E.2d 407, 408-09 (1975). The allegation that DynaVision's principals would have rejected the Put and Call had they suspected a violation of  9.1 does not appear in plaintiffs' complaint as part of the Count One federal securities law claims. Nor was it made in plaintiffs' response to Peeples's motion for summary judgment. [121] Plaintiffs' response on summary judgment does contain a factual statement that the Active Members pledged their interests in disregard of  9.1. This statement, however, was not made as part of plaintiffs' argument on the reliance elementÔÇöplaintiffs did not assert that but for Peeples's misrepresentations, DynaVision would have elected to purchase the Active Members' interest. [122] Moreover, in its order granting Peeples summary judgment, the district court made no reference to the argument plaintiffs now present, and the plaintiffs did not move the court pursuant to Rule 59(e) to reconsider its decision on the ground that it had overlooked the argument. The argument appeared for the first time in plaintiffs' response to Peeples's post-judgment motion for PSLRA sanctions. Peeples, in his motion, argued that plaintiffs lacked a factual basis to assert that DynaVision's principals relied to their detriment on Peeples's misrepresentations. Then, plaintiffs finally argued that had they known about the misrepresentations, they would have rejected the Put and Call and refused to close. If the Active Members sued, they would have pled the breach of  9.1 as an affirmative defense. The court's order denying Peeples's motion for sanctions, however, made no reference to this argument. It requires no citation of authority to say that, except when we invoke the plain error doctrine, which rarely applies in civil cases, we do not consider arguments raised for the first time on appeal. A mere recitation of the underlying facts, furthermore, is insufficient to preserve an argument; the argument itself must have been made below. See City of Nephi v. Fed. Energy Regulatory Comm'n, 147 F.3d 929, 933 n. 9 (D.C.Cir.1998) (holding that a party does not preserve an argument for appellate review by merely informing the [district] court in the statement of facts in its opening brief [of the factual basis for the claim]); Wasco Products, Inc. v. Southwall Tech., Inc., 166 Fed. App'x 910, 911 (9th Cir.2006) (unpublished) (Although [the argument was] stated in a statement of facts, it was never argued and never ruled upon. Without any proffered explanation for this default, the argument is waived.). Here, plaintiffs did not use the factual statement in arguing the reliance issue. Because we are reversing the district court's rulings on the sanctions issues, and given what we have said thus far in this opinion, we think it appropriate to say a word about the reach of  9.1. Even if an Active Member had attempted to pledge of his or her interest in Signature as collateral for a loan without the consent of DynaVision and the other Active Members,  9.1 would have rendered the pledge void and of no effect. If the lender attempted to seize the interest in Signature to satisfy the debt, DynaVision and the other Active Members could claim that the pledge was void. [123] If the Active Member paid the loan, however, and no seizure occurred, DynaVision and the other Active Members could not have suffered injury on account of any  9.1 breach. Nor could DynaVision have used the pledge as the basis for a lawsuit against the breaching Active Member. [124]