Opinion ID: 151993
Heading Depth: 2
Heading Rank: 2

Heading: Legal Sufficiency of Proof Underlying Bases of Liability

Text: As an additional ground for reversal, Southern Farm argues that the judgment below cannot stand because liability was based on Southern Farm omitting one or more material facts in its disclosures to PSC, yet the evidence is insufficient as a matter of law to show that at least some of those omissions occurred. The verdict form's special interrogatories pertaining to the securities fraud claim asked the jury: Do you find from a preponderance of the evidence ... [t]hat the Defendant's conduct in connection with the transaction violated Rule 10b-5(b) by making a false representation of a material fact, or omitting a material fact (as explained in the Court's instructions)? Verdict Form: Special Interrogs., Dkt. 212 at 1. The jury answered Yes. As noted above, the alleged omissions set forth in the instructions were: (a) that [Southern Farm] was attempting to extend the Charter Treaty and that it could not do so without the consent of the debenture holder; (b) that Florida Holding and the Florida Federation would only consent to the extension of the Charter Treaty if [Southern Farm] first purchased the debenture; (c) that the Tillinghast Valuation did not consider (i) the Defendant's attempts to extend the Charter Treaty, (ii) Plaintiffs' control of any such extension, and (iii) [Southern Farm]'s need to purchase the debenture because Florida Holding and Florida Federation would only consent to the extension of the Charter Treaty if [Southern Farm] first purchased the debenture; (d) that contemporaneous with [Southern Farm]'s purchase of the debenture, it purchased a future income interest held by the Alabama Farm Bureau Federation using a discount rate of 4.9%; and (e) that in order to obtain the consent of the Texas Farm Bureau to extend the Charter Treaty, [Southern Farm] agreed to increase payouts to all ten (10) farm bureau federations by $82 million. Jury Instructions, Dkt. 208 at 11-12, 19-20. Instruction 9, which set forth the elements of a § 10b-5 claim, required the jury to find only that the Southern Farm omitted one or more of these material facts. Jury Instructions, Dkt. 208 at 12. Instruction 10, which set forth the elements of a common-law fraud claim, expressly instructed the jury that [i]t is not necessary that the Plaintiffs prove all of them in order to recover. Jury Instructions, Dkt. 208 at 20. Southern Farm argues that the unrefuted evidence shows that PSC's attorney, Brashear, had full knowledge of at least two of these alleged omissions. In light of our holding that Southern Farm did not have a duty to disclose material facts directly to PSC shareholders, we further hold that it was error to permit the jury to find liability on the basis of omissions that were known to Brashear, who was acting as PSC's agent. At trial, undisputed evidence showed that Brashear was fully aware of facts (a) and (b). In fact, upon learning that Southern Farm was attempting to extend the Charter Treaty, it was Brashear who wrote to Florida Holding to remind it that it could not vote to extend the Treaty without PSC's consent. PSC even conceded at trial that Mr. Brashear knew the functionality of the debenture as a veto power over anything that the Federation wanted to do with respect to extending or altering the value of Florida Holding. Trial Tr., Dkt. 254 at 185. Because Brashear acted as an agent of PSC in his dealings with both Florida Holding and Southern Farm, Brashear's knowledge with respect to those transactions is imputed to PSC: The general rule is well established that a corporation is charged with constructive knowledge, regardless of its actual knowledge, of all material facts of which its officer or agent receives notice or acquires knowledge while acting in the course of his employment within the scope of his authority, even though the officer or agent does not in fact communicate his knowledge to the corporation. Am. Standard Credit, Inc. v. Nat'l Cement Co., 643 F.2d 248, 271 n. 16 (5th Cir.1981) (quoting 3 W. Fletcher, Cyclopedia of the Law of Private Corporations's 790, at 12 (rev.perm. ed.1975)) (alteration omitted). [3] Thus, because Brashear knew that [Southern Farm] was attempting to extend the Charter Treaty and that it could not do so without the consent of the debenture holder, Southern Farm cannot be held liable for failing to disclose that information to PSC. The verdict form did not require the jury to state which omission(s) provided the basis for its liability finding, and it is clear that at least some of the alleged omissions cannot support the verdict. Unless PSC can support submission of each theory of liability submitted to the jury, we must remand the case for a new trial. Royal Typewriter Co. v. Xerographic Supplies Corp., 719 F.2d 1092, 1099 (11th Cir. 1983). Because some of PSC's theories of liability that are based on certain omissions are legally deficient, and because we cannot know from the verdict form whether the jury imposed liability on Southern Farm based on one of these impermissible theories, the judgment of the district court must be reversed on this additional ground. For the foregoing reasons, [4] we reverse judgment below and remand this case for proceedings consistent with this opinion. REVERSED and REMANDED. validity of the '306 and '763 patents. Cisco also appeals the district court's damages awards. This court has jurisdiction under 28 U.S.C. § 1295(a)(1).