[*1262] H. Lamar Mixson, David G.H. Brackett, Bondurant, Mixson & Elmore, LLP, Atlanta, GA, for Plaintiffs-Appellants Cross-Appellees.

Richard H. Sinkfield, Catherine M. Bennett, Shara Garwood Sanders, Rogers & Hardin, LLP, Atlanta, GA, for Defendants-Appellees Cross-Appellants.

Before EDMONDSON, Chief Judge, and TJOFLAT and GIBSON,^[*] Circuit Judges.

TJOFLAT, Circuit Judge:

In this case, two parties, X and Y, each owned a fifty percent interest in a limited liability company that manufactured and sold carpets. X provided the financing; Y ran the company and marketed its product. The parties had a buy-sell agreement that enabled either party to buy out the other at any time by offering to purchase the other's interest in the company at a set price. After receiving an offer, the offeree would have thirty days in which to accept the offer or elect to purchase the offeror's interest at the same set price.

Y offered to purchase X's interest for $3.5 million. X demanded to know whether Y would be borrowing the funds from Z, who earlier had expressed an interest in purchasing the company. Y said that neither Z nor anyone else would be providing the money. X asked Z if he was financing Y; Z said no.

X, unable to operate the factory and market its product without Y or someone with Y's expertise, had to sell and therefore accepted Y's offer. Prior to the date[*1263] set for the closing, however, X told Y that it would not go forward with the closing unless Y represented that no third party was providing the funds to pay X. Y responded that it had no obligation to disclose the source of its funds and that X was bound by contract to transfer its interest to Y unconditionally. X tacitly agreed by appearing at the closing and transferring its interest to Y.

X subsequently learned that Z had provided the purchase price and, following the closing, had acquired the factory's assets and hired Y to run the business. After discovering Z's involvement, X took Y to court. In a complaint filed in state court, X alleged that Y breached a fiduciary duty to tell it that Z had financed the purchase of its interest, and moreover, that Y's failure to disclose Z's involvement fraudulently induced X to sell its interest to Y.^[1] X also brought suit against Z in federal district court, the case now before us, claiming that Z violated federal securities law, state securities law, and state common law by denying involvement in the transaction and causing X to sell its interest to Y.

X lost both cases on summary judgment.^[2] Both courts concluded that Y's alleged misrepresentation about Z's involvement in the buy-out did not cause X to sell its interest. Rather, X sold because it was in X's economic self-interest to do so. X needed Y's skills; had X purchased Y's interest, it would have had no one to run the carpet factory or to market its product. X therefore had no economically viable option but to sell.

After the district court granted Z summary judgment, Z moved the court to sanction X and its counsel under the Private Securities Litigation Reform Act ("PSLRA"), Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and the court's inherent power on the grounds that X neither produced, nor at any time had available, any evidence to support its allegation that Z's conduct caused it to sell its interest rather than buy Y's interest. The court denied Z's motion.

X now appeals the district court's decision rejecting its claims. Z cross-appeals the court's denial of sanctions under the PSLRA. On X's appeal, we dismiss part of X's claims for lack of subject matter jurisdiction and affirm the district court's judgment as to the remainder. On Z's cross appeal, we conclude that Z is entitled to sanctions and therefore remand the case for their imposition.

This opinion is organized as follows. Part I identifies X, Y, and Z and sets out the events that have given rise to this controversy.^[3] Part II canvasses the litigation as it evolved in state court and spread to federal court; describes the state trial and appellate courts' disposition of X's claims against Y and the district court's disposition of X's claims against Z; and, after that, delineates the issues that X's appeal to this court presents. Part III addresses sua sponte whether the district court had jurisdiction to hear some of the federal securities law claims X brought[*1264] against Z and concludes that it did not. Part IV assesses the merits of X's appeal as to the remaining securities law claims. Part V examines X's claim that Z aided and abetted Y's breaches of fiduciary duty towards X. Part VI explains why the district court should have sanctioned X's counsel, and part VII concludes.

I.

A.

X is DynaVision Group, LLC ("DynaVision")^[4] and its principal owners, Jimmy Ledford, Larry O'Dell, and Bryan Walker.^[5] Y is Brenda Smith, Robert Thomas, and Bryan Owenby. Z is Shelby Peeples.

In July 1998, Paul Walker, Bryan Walker's father, approached Smith, Thomas, and Owenby, experienced managers in the carpet manufacturing industry in Dalton, Georgia, with the idea of forming a company to manufacture and sell carpets to hotels, motels, restaurants, and others engaged in the hospitality business. Soon thereafter, Smith, Thomas, Owenby, and Paul Walker formed Signature Hospitality Carpets, LLC ("Signature"), dividing the company's interests equally between DynaVision on one hand and Smith, Thomas, and Owenby on the other.^[6]

Under Signature's operating agreement, Smith, Thomas, and Owenby managed the company, and DynaVision provided the capital.^[7] Signature sold carpet to hospitality customers — mainly through contacts that Smith, who was well respected in the industry, had previously established — and arranged for manufacturers in the Dalton area to fill the orders. DynaVision provided the funds that Signature needed to pay the manufacturers by establishing a $200,000 line of credit at a bank near Dalton, the First National Bank of Chatworth ("FNBC").^[8]

Signature initially operated out of rented office space; once the company established itself as a going concern, however, its owners decided to find their own manufacturing plant. Anticipating that they would be able to acquire a suitable site in the Dalton area, DynaVision, Smith, Thomas, and Owenby entered into a new[*1265] operating agreement ("Operating Agreement" or "Agreement"), on May 6, 1999. The Agreement referred to Smith, Thomas, Owenby, and DynaVision as Signature's "Members," and Smith, Thomas, and Owenby as the "Active Members."^[9] It created a six-member Board of Directors, with three directors appointed by DynaVision and three by the Active Members. The Active Members appointed themselves; DynaVision appointed its accountant, Edward Staten, and left two of its seats vacant. The Operating Agreement required the Board to unanimously authorize all of Signature's actions. This meant that DynaVision, through Staten, could have blocked any action the Active Members wanted to take. The Board rarely met, however, face to face or otherwise, so the Active Members ran Signature's operations without objection.

Under the Agreement, Smith was the company's president and the person in charge of marketing, Thomas was the vice-president of sales, and Owenby was the vice-president of manufacturing.^[10] A non-solicitation clause provided that if a Member sold his or her interest, that member could not for one year thereafter "call, solicit, or fulfill orders" from "customers or prospects" of Signature.^[11] In reality, the clause applied only to the Active Members, since they were the ones who possessed Signature's customer contacts.^[12]

The Agreement also contained a buy-sell provision, which is at the center of the present controversy. This provision is contained in Article Nine of the Agreement, entitled "Transfer and Assignment of Member Interests." Section 9.5, "Mandatory Put and Call," reads as follows:

At any time Dyna-Vision or the Active Members by majority vote within that group, may set a price per percentage Interest and give written notice of that price to the other group, (the "Notice of Offer to Sell or Purchase"). The Members receiving the Notice of Offer to Sell[*1266] or Purchase shall have thirty (30) calendar days to decide whether to sell all their Interest at that price or to purchase all the Interest of the group giving Notice of Offer to Sell or Purchase at the Price set forth in the Notice of Offer to Sell or Purchase. If the Members receiving the Notice of Offer to Sell or Purchase fail to make an election ..., the Members receiving the Notice of Offer to Sell or Purchase shall have to sell their Interest at the price set forth in the Notice of Offer to Sell or Purchase.

Following the execution of the Operating Agreement, the parties located a site for Signature's manufacturing plant and offices on Green Road in Chatsworth, Georgia, a short distance from Dalton. To purchase the site, which included a building that could be converted to accommodate Signature's requirements, the Active Members formed another limited liability company, Signature Leasing, LLC ("Leasing"), with Ledford, O'Dell, and Bryan Walker.^[13] On October 19, 1999, Leasing purchased the property ("Green Road Property") with the proceeds of a $630,000 loan from Dalton Whitfield Bank. Bank employee Cynthia Trammel managed the paperwork for the loan.^[14] Once the building was equipped to manufacture carpets, Signature moved in.^[15]

Signature then looked to FNBC for working capital. Over a period of several months following its occupancy of the Green Road Property, Signature received several unsecured loans from the bank.^[16] In October 2001, Signature asked FNBC for a loan that would pay off its FNBC loans and the balance due on the Dalton Whitfield Bank loan, and provide Signature with additional working capital. In total, Signature needed $911,000.

At Signature's request, Trammel, who had moved from Dalton Whitfield Bank to FNBC the year before, handled the transaction. Trammel informed Signature that, subject to the approval of the FNBC's board of directors, the bank would make the loan on the following conditions: Signature would give the bank a deed to secure debt on the Green Road Property and Signature's carpet-manufacturing machines; Smith, Thomas, Owenby, Ledford, and O'Dell (the "Guarantors") would sign the note and thus guarantee its payment.^[17][*1267] Signature and the Guarantors agreed to these conditions, the bank's board approved the loan, and Trammel proceeded to prepare for the closing.

Trammel's first task was to have FNBC's counsel, Todd McCain,^[18] examine the title to the Green Road Property. After examining the title, McCain sent Trammel an opinion indicating that Leasing, not Signature, owned the Green Road Property. Signature therefore could not give the bank a deed to secure the debt with the property unless and until Leasing conveyed the property to Signature.

Trammel overlooked the need for the conveyance, and the loan closed on October 24, 2001 without Leasing having conveyed the property to Signature. Therefore, as part of this transaction, Signature gave FNBC a deed to secure debt for real property it did not own.^[19] A month or so later, Trammel happened to read McCain's opinion, noted that Leasing, not Signature, owned the Green Road Property, and realized that Signature's deed to secure debt was worthless. Something had to be done, so Trammel called McCain.^[20] In mid-January 2002, McCain sent Trammel the document needed to solve the problem, a warranty deed conveying the Green Road Property from Leasing to Signature.

Trammel then contacted Smith, informing her that she and the other Guarantors would have to return to the bank and sign a "document" that had been neglected at the closing. The document was the warranty deed, although Trammel did not explain the document's significance to Smith at that time. Trammel asked that Smith pass along this message to the others Guarantors, and Smith did.

Smith, Thomas, and Owenby promptly went to the bank and signed the document before a notary public, Angela Garland, and in the presence of a witness, Trammel. Smith read the document, which bore the heading "Warranty Deed," and recognized its significance — that Leasing was conveying the Green Road Property to Signature to satisfy one of the conditions on which the bank had made the loan.

Ledford and O'Dell did not appear to sign the document, so Trammel asked Smith to remind them to do so. Smith thereupon called Ledford and asked him to go to the bank and sign what she described as "a document that had been left out of the closing." She did not inform Ledford of the document's legal significance.^[21] Smith also asked Ledford to contact O'Dell and remind him to sign the document. Ledford did so, and, in early February, he and O'Dell separately went to the bank and signed the warranty deed, also before Garland and Trammel. Trammel forwarded the executed warranty deed to the McCain firm, which filed it with the Clerk of the Murray County Superior Court on February 7, 2002.

[*1268] Ledford and O'Dell insist that they did not know that they were signing a warranty deed; moreover, they claim that they had no understanding of the legal significance of a warranty deed and would not have signed the instrument had they known that it transferred the Green Road Property to Signature.^[22]

B.

In December 2001, Shelby Peeples, a Dalton businessman with interests in the carpet-manufacturing industry, contacted Paul Walker and Ledford and expressed an interest in purchasing Signature. Paul Walker, Ledford, and Peeples had been involved in several business ventures and were on friendly terms.^[23] The three men met at least once during December to discuss the possible sale of Signature.^[24] At some point, Walker informed the Active Members that Peeples had shown an interest in purchasing Signature.

On January 9, 2002, Paul Walker, Ledford, O'Dell and the Active Members met and agreed to offer Signature and the Green Road Property to Peeples for between $10-12 million.^[25] They designated Paul Walker to represent them in negotiations with Peeples. Later that day, Paul Walker, Thomas, and Owenby met with Peeples and some of his associates. Walker informed Peeples that the Green Road Property was owned by a separate company but offered to sell both Signature and the property for $12 million. Peeples rejected the offer. Walker countered with an offer of $10 million. Peeples rejected that offer as well. Peeples then asked Walker if he could meet separately with him and, after that, with the Active Members. Walker said yes but that Peeples could meet with the Active Members only once. Walker, having made that point clear, met with Peeples to discuss the matter. Peeples offered him $2 million for DynaVision's interest. Walker apparently felt insulted, so Peeples increased the offer to $2.5 million. Walker rejected it out of hand, and the discussion ended.

As January wore on, Walker met with Peeples once or twice a week to discuss some business ventures in which they were involved. During some of their meetings, Walker asked Peeples whether he had been negotiating with the Active Members. Peeples said no, but his denial was false. Peeples and the Active Members had been meeting all along to discuss ways that Peeples could acquire DynaVision's interest in Signature without dealing directly with DynaVision. Moreover, with the assistance of his lawyer, Peeples had memorialized the substance of his discussions with the Active Members in a letter, which he faxed to the Active Members on January 21.

The letter mapped out the steps that Peeples and the Active Members would take. First, the Active Members would acquire DynaVision's interest in Signature using the Mandatory Put and Call provision of the Operating Agreement. According[*1269] to the letter, "on terms and conditions to be set forth in a definitive, legally binding, written agreement, ... a company owned or controlled by ... Peeples" would loan $3.5 million to the Active Members "for the purpose of enabling the Active Members to complete the acquisition of the DynaVision Interest." This loan would be made after the Active Members acquired DynaVision's interest.^[26] Next, Peeples would purchase all of Signature's assets from the Active Members, forgive the $3.5 million loan, and pay the Active Members $3 million.^[27] The Active Members would remain as managers of Signature under five-year employment contracts, with annual salaries starting at $160,000 and increasing each year and possible bonuses based on Signature's performance.^[28]

The letter contained sections entitled "Confidentiality" and "No Discussions with Others." The "Confidentiality" section provided, in pertinent part:

[N]one of the parties hereto will ... (1) disclose or publicize in any manner (except as may be required by applicable law) that discussions relating to matters covered [in this letter] or the Loan or the Acquisition are taking place between or among the Active Members, the Peeples Group, Signature and/or Buyer, or (2) reveal the terms or

proposed terms of either this Letter or the Loan ... to any person or entity other than [representatives of Peeples who would be conducting a due diligence investigation into Signature after the Active Members purchased DynaVision's interest].

The "No Discussion" section stated, again in pertinent part:

[N]one of the Active Members ... will, directly or indirectly (i) negotiate or discuss with any other person or entity any transaction involving any business combination involving Signature, or (ii) solicit... negotiate ... or accept any offer, bid or proposal from any other person or entity respecting any transactions involving a sale of assets of Signature (except for sales of property in the ordinary course of business) or any other business combination involving Signature, or (iii) disclose or reveal ... [information related to Signature's financial condition or methods and plans of operations], other than in the ordinary course of business, to any person or entity not a party to this Letter in connection with the type of transactions described in clauses (i) and (ii) above ... In addition, the Active Members will immediately cease and cause to be terminated any previously undertaken or ongoing ... negotiations with any other person or entity with respect to any transaction of the type described in the preceding clauses (i) and (ii) above.

The letter stated additionally that, "to the extent of any conflict in the provisions of this Letter and the provisions of the Signature Operating Agreement, the provisions[*1270] of the Signature Operating Agreement shall prevail and the conflicting provision(s) of this Letter shall be void and of no effect whatsoever."

After the Active Members received the letter, they continued their negotiations with Peeples, which, toward the end of January or early February, led to a verbal understanding. As indicated in the January 21 letter, Peeples would loan the Active Members $3.5 million to purchase DynaVision's interests. If the purchase materialized, the Active Members would cause Signature to sell its assets to Peeples.

On February 8, Smith summoned Ledford and O'Dell to discuss tensions between Ledford and O'Dell and the Active Members. Toward the end of this meeting, Smith presented Ledford and O'Dell with the Mandatory Put and Call pursuant to Section 9.5 of the Operating Agreement. The Put and Call informed DynaVision that the Active Members would purchase its interest in Signature for $3.5 million unless DynaVision opted to purchase the Active Members' interests for $3.5 million within thirty days. The Put and Call also stated that if DynaVision elected to purchase the Active Members' interests, it would release the Active Members from their obligations under the Operating Agreement's non-solicitation clause. Ledford asked Smith whether Peeples or anyone else would be providing the purchase price. Smith's reply, according to Ledford, was that we "are doing this on our own."^[29]

On February 22, DynaVision's lawyer, H. Greely Joiner, Jr.,^[30] wrote a letter to the Active Members stating that because Section 9.5 of the Operating Agreement precluded the imposition of conditions on a Put and Call, DynaVision would not honor the Put and Call with the non-solicitation clause condition. The Active Members tacitly agreed. On February 25, they presented DynaVision with a new Put and Call at the same price, $3.5 million, but[*1271] without the requirement that DynaVision void the non-solicitation clause. Paul Walker and DynaVision treated this Put and Call as valid.

DynaVision's principals were not pleased. They wanted Signature to continue on, under the Active Members' management, because they believed that in time the company would become increasingly profitable. Nonetheless, they recognized that they had two options — buy or sell — and thirty days to decide. They did not want to sell because, as the prices ($12 million and $10 million) Paul Walker quoted to Peeples in January indicated, they believed their half-interest in Signature was worth substantially more than $3.5 million. But they did not want to buy either because they lacked the contacts in the hospitality industry necessary to enable them to market Signature's products with any measure of success. Without the Active Members — particularly Smith, with her extensive contacts in the hospitality industry — DynaVision's principals knew they could not operate Signature at a profit.^[31]

[*1272] Faced with this dilemma, DynaVision's principals looked for an immediate buyer who would be willing to pay $10 million for the company. If they could find a buyer willing to pay as much as $8.5 million, they would opt to buy out the Active Members for $3.5 million. The $5 million they would net was what they thought their half of Signature was worth.

Ledford and O'Dell contacted three firms, Mohawk Carpets, Clay Miller Carpets, and Matel Carpets, in their search for a buyer. They initially proposed a $10 million price for Signature, eventually lowering the price to $8.5 million as the thirty-day Put and Call period drew to a close. As part of his pitch to sell Signature, Ledford told Jerry Thomas, Matel's owner, that Thomas ought to buy Signature to protect his company from Signature's competition should Signature fall into Peeples's hands.^[32] Ledford stressed "the dynamics of what might happen should a ... company like [Signature] fall into the hands of ... the Peeples family."^[33] But Thomas was not persuaded, nor was anyone else.^[34] With time running out, Ledford[*1273] asked Smith if she would be willing to stay on and run the company if he and the others bought the Active Members' interests. Smith was not interested.

Paul Walker and DynaVision's principals discussed among themselves the possibility that Peeples had financed the Active Members' February 25 Put and Call. Motivated by these suspicions, Walker confronted Peeples directly. Peeples denied any involvement.^[35] At one point, Walker warned Peeples that if he was involved, he would not be getting the Green Road Property, because Leasing owned it, not Signature.

C.

On March 27, the thirty-day election period provided by the Put and Call expired. DynaVision had not exercised its option to purchase the Active Members' interests within the election period; consequently, it had to sell its interest for the $3.5 million Put and Call price. On March 28, DynaVision and the Active Members began to negotiate the finer terms of the sale.

A few days later, Joiner, presumably representing Ledford, O'Dell, and Bryan Walker as one-half owners of Leasing, asked Smith if he could draw up a lease for the Green Road Property between Leasing, as lessor, and Signature, as lessee. Smith responded that Signature, not Leasing, owned the property. Joiner checked the title and discovered the warranty deed from Leasing to Signature that had been recorded on February 7. Paul Walker and Ledford then demanded that the Active Members consent to a conveyance of the property back to Leasing. The Active Members refused, explaining that it had been everyone's intent to transfer the property to Signature so that Signature could go forward with the FNBC loan transaction; Signature had to have title to the property in order to give the bank a valid deed to secure debt.

Meanwhile, at a meeting of DynaVision's members, the members unanimously adopted resolutions authorizing O'Dell and Ledford to "negotiate, execute and convey the interests of Dyna-Vision in Signature... to Smith, Thomas, and Owenby ...." The resolutions went on to allow O'Dell and Ledford to set certain conditions on the conveyance including:

the repayment of all loans due any [DynaVision] member or any affiliate of any member; the release of all [DynaVision] members from any guarantees issued on behalf of Signature to any financial institution or vendor; the repayment of any and all funds due Dyna-Vision by Signature with respect to any distributions which had not been authorized by the Board of Directors of Signature; and a long-term Lease Agreement between Signature and Leasing, with a minimum term of five (5) years at a rental rate of $11,000 per month plus taxes, insurance, maintenance and repair.

The minutes of this meeting indicate that DynaVision's members knew that the transaction would close on April 30. They provided that because O'Dell, DynaVision's chairman, would be out of town that day, Ledford would act for DynaVision in his place.^[36]

[*1274] After this meeting adjourned, Ledford and O'Dell met with Joiner and spelled out several conditions the Active Members would have to meet before closing. Joiner informed the Active Members of these conditions in an April 11 letter to their attorney, Douglas Krevolin. One called for the Active Members and DynaVision to execute an agreement Joiner had drafted and enclosed in his letter. The agreement contained the following covenant, presumably designed to smoke out the Active Members' involvement with Peeples:

[e]ach Assignee [i.e., Active Member] does hereby represent and warrant to the Assignor [i.e., DynaVision] that such Assignee has acquired the Interest from the Assignor for investments solely for said Assignee's own account ... without any intention of conveying ... any portion of such Assignee's Interest, and without the financial participation of any other Person in acquiring the Assignee's Interest.

Another condition required the conveyance of the Green Road Property from Signature to Leasing.

Krevolin responded to Joiner's April 11 letter with a letter dated April 16. He informed Joiner that the Active Members would not consent to either of the two conditions. Responding to the threat implicit in Joiner's letter — that DynaVision would not close if the Active Members refused to represent that they were acquiring DynaVision's interest without the financial participation of a third party — Krevolin said this: "If your client is not willing to proceed with the closing in accordance with the terms of the Operating Agreement, the Active Members may have no alternative but to seek a court order compelling it to close."

Joiner informed Ledford of what Krevolin had written and the position that the Active Members would take if DynaVision refused to close, and Ledford instructed Joiner to proceed with the closing on April 30.

D.

In late April, prior to the closing, the Active Members signed two promissory notes and a collateral agreement. In the collateral agreement, entitled "Collateral Assignment of Membership Interest," they pledged, "as record and beneficial" owner of Signature, all of their ownership interest in Signature as collateral for a loan of $3.5 million from PFLC, LLC and a loan of $855,000 from Internal Management, Inc., both companies owned by Peeples. The proceeds of these loans were to be used, respectively, to pay for DynaVision's interest in Signature and to pay the balance due, $855,000, on the loan FNBC had made to Signature the previous October.

At some point between the April 30 closing and May 7, the Active Members and Peeples signed an Asset Purchase Agreement pursuant to which the Active Members, as owners of all of Signature, caused the transfer of Signature's assets to Peeples for $5.75 million.^[37] Of that amount, $2.25 million went directly to the Active Members, and $3.5 million served to cancel the loan Peeples had made to enable them to buy out DynaVision. The agreement also contained Peeples's promise to indemnify the Active Members for any expenses, including those arising from litigation, they might incur as a result of the transfer of the Green Road Property from Leasing to Signature.

[*1275] Contemporaneous with the execution of the Asset Purchase Agreement, PFLC, LLC entered into six-year employment contracts with the Active Members, their compensation to consist of $118,000 signing bonuses, initial salaries of $160,000 per year, annual salary increases of $10,000, and bonuses if Signature made over $1.5 million in pre-tax profits in a calendar year.

II.

A.

On November 15, 2002, DynaVision, Ledford, O'Dell, Bryan Walker, and Leasing filed suit for equitable and legal relief against the Active Members and Signature in the Superior Court of Murray County, Georgia. The plaintiffs all retained Joiner as counsel, along with H. Lamar Mixon and David G.H. Brackett, two partners in Bondurant, Mixon and Elmore, LLP. Their complaint^[38] was framed in four counts and asserted six claims, all on behalf of the plaintiffs both individually and collectively.^[39] Four claims were based on Leasing's conveyance of the Green Road Property to Signature; two involved the transfer of DynaVision's interest in Signature to the Active Members. We begin with the claims regarding the Green Road Property.

The first claim^[40] was that Leasing, and Ledford, O'Dell, Smith, Thomas, and Owenby as owners of interests in Leasing, mistakenly executed the warranty deed conveying the Green Road Property to Signature and thus were entitled to a rescission of that transaction. The second claim^[41] was that Smith induced Ledford and O'Dell to execute the warranty deed by falsely representing that FNBC needed a corrective document without warning that the document was in fact a warranty deed. The third claim^[42] was that Smith and the Active Members breached their fiduciary duties to Leasing, causing Leasing to lose the value of the Green Road Property, on two occasions — when Smith induced Ledford and O'Dell to sign the warranty deed under false pretenses and when the Active Members refused to cause Signature to return the property to Leasing. The fourth claim^[43] was that Signature, Smith, Thomas, and Owenby were unjustly enriched by the acquisition of the Green Road Property.

The fifth and sixth claims involved the transfer of DynaVision's interest in Signature.^[44] The fifth claim,^[45] a fraud claim, alleged that upon presenting the conditional Put and Call on February 8, 2002, Smith falsely stated that the Active Members were "doing this on our own," intentionally[*1276] inducing DynaVision to sell its interest. The sixth claim^[46] alleged that by failing to disclose their discussions and final arrangements with Peeples, the Active Members breached fiduciary duties imposed by the Operating Agreement,^[47] the Georgia Limited Liability Company Act,^[48] and Georgia common law.

On August 13, 2003, after the parties had joined the issues,^[49] plaintiffs moved the state court for leave to amend their[*1277] complaint to add Peeples and his two companies, PFLC, LLC and Internal Management, Inc., as co-defendants.^[50] Plaintiffs represented that they had not learned of Peeples's involvement until the day before, August 12, when they took Owenby's deposition and Owenby testified that Peeples had provided the funds to enable the Active Members to trigger the Put and Call.^[51]

The state court heard oral argument on the motion on September 25, 2003, after discovery had closed.^[52] It denied the motion on October 29, 2003, concluding that DynaVision "knew or should have known" at the time it filed its complaint that Peeples was "involved." In its order, the court noted that plaintiffs, in their complaint, had alleged that a third party had been involved in negotiations with the Active Members and DynaVision in early January 2002 over a possible purchase of Signature, but that these negotiations were unsuccessful. Further, they had alleged, "upon information and belief," that a third party had financed the Active Members' acquisition of DynaVision's interest in Signature and, after the Active Members had DynaVison's interest in hand, had purchased Signature's assets. In addition, Ledford had deposed that he knew that Peeples was involved in the January negotiations. It should have been obvious to DynaVision that since Peeples was involved in the January negotiations, he was the party that likely financed the Active Members and purchased Signature. In addition, the court reasoned, adding Peeples as a party at that late stage of the litigation, after discovery had closed, would cause Peeples undue prejudice.

Plaintiffs moved the court to reconsider its ruling. The court denied their motion on March 8, 2004. In its order, the court was highly critical of plaintiffs' delay in attempting to join Peeples as a party defendant:

[As a result of Ledford's deposition testimony] the Court [in its October 29 order] concluded that the Plaintiffs knew of the involvement of the Peeples Group, at the time the original Complaint was filed .... The Plaintiffs then waited nine months, until August 13, 2003, before filing for leave to amend. The Plaintiffs had carefully waited until after the deposition of Shelby Peeples [on June 27, 2003] and until after the close of discovery to have their motion heard [on September 25, 2003]. In making the October 2003 ruling, this Court determined that the Plaintiffs engaged in a deliberate scheme to delay joinder without excuse or justification. Therefore, the Court finds that the [Plaintiff's] failure to offer evidence of excuse or justification is an independent reason that the Plaintiffs' Motion [for Reconsideration] should be denied.

B.

1.

On January 7, 2004, while their motion for reconsideration was pending in state court, plaintiffs, still represented by Joiner, Mixon, and Brackett, brought the instant lawsuit against Peeples, PFLC, LLC, and Internal Management, Inc. in the United States District Court for the Northern District of Georgia.^[53] The complaint was framed in 116 paragraphs and seven counts. Each count incorporated by[*1278] reference each preceding count, such that Count Seven amalgamated and asserted all of the claims of the preceding counts.

Plaintiffs' complaint is a "shotgun" pleading in that it lumps multiple claims together in one count and, moreover, appears to support a specific, discrete claim with allegations that are immaterial to that claim. See, e.g., Byrne v. Nezhat, 261 F.3d 1075, 1128-32 (11th Cir.2001). When faced with a complaint like the one here, in which the counts incorporate by reference all previous allegations and counts, the district court must cull through the allegations, identify the claims, and, as to each claim identified, select the allegations that appear to be germane to the claim. This task can be avoided if the defendant moves the court for a more definite statement or if the court, acting on its own initiative, orders a repleader.

In this case, Peeples did not move the court for a more definite statement, nor did the court require one on its own initiative. Consequently, it is left to this panel to identify in the first instance what plaintiffs were claiming. We do so by proceeding allegation by allegation and count by count, weeding out and disregarding as extraneous the allegations that have no bearing on a claim.

We begin this process with Count One, which alleged three violations of the federal securities laws.^[54]First, after the[*1279] Put and Call offers of both February 8 and February 25, Peeples denied any involvement in the Active Members' plan to acquire DynaVision's interest, thereby violating section 10(b) of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-5(b) promulgated thereunder.^[55]Second, Peeples "directly or indirectly control[led] the activities of the Active Members" using the "Confidentiality" and "No Discussions with Others" provisions of the January 21 letter, the "secret discussions" of January and February 2002, and the Asset Purchase Agreement. As such, Peeples was responsible for the Active Members' conduct in violation of section 10(b) and Rule 10b-5(b) as a "controlling person" under section 20(a) of the 1934 Act.^[56] Specifically, Peeples was responsible for Smith's statement that we are "doing this on our own" and the Active Members' breach of their fiduciary duty to DynaVision. Third, Peeples and the Active Members engaged in a "scheme, device, and artifice to defraud" DynaVision, in violation of section 10(b) and Rule 10b-5(a).

In support of their 10b-5(a) claim, plaintiffs, in their opposition to Peeples's motion for summary judgment, identified three components of the "scheme": (1) Peeples and the Active Members agreed not to disclose their negotiations, as evidenced by the January 21 letter; (2) Peeples and the Active Members used the Put and Call provision "to improperly exclude DynaVision from participating in the sale of [Signature] to Peeples;" and (3) Peeples and the Active Members collaborated to "deceive the individual Plaintiffs into signing [the] Warranty Deed."^[57]

[*1280] Finally, the plaintiffs alleged that the misrepresentations, omissions, and scheme described in Count One caused DynaVision to sell its interests and suffer injury.^[58] Paragraph 64 of the district court complaint stated:

Based upon the false and misleading information concerning [Signature] and the source of funding for the buy/sell offers, which had been provided by the Active Members and Defendants, and in reliance on their misrepresentations that there was no offer to purchase [Signature] outstanding, DynaVision chose to sell its interest in [Signature], rather than purchase the interest of the [Active Members]. As a result, in late March 2002, DynaVision became contractually required to sell its interest in [Signature] to the Active Members pursuant to the terms of the [Signature] Operating Agreement.^[59]

Counts Two through Five alleged causes of action under Georgia common law and statutory provisions.^[60] Count Two, "Violation of the Georgia Securities Act," alleged that the same conduct that gave rise to the Count One claims for relief rendered Peeples liable to plaintiffs under the Georgia securities laws.^[61] Count Three, "Conspiracy to Defraud," alleged that Peeples conspired with the Active Members to (1) fraudulently induce DynaVision to sell its interest in Signature and (2) fraudulently induce Leasing to convey the Green Road Property to Signature. Count Four, "Aiding and Abetting Breach of Fiduciary Duties," alleged that the Active Members, aided and abetted by Peeples, breached the following duties: (1) the fiduciary duty to DynaVision to inform it that Peeples was supporting the February 25 Put and Call, and (2) the fiduciary duty to Leasing, and Ledford and O'Dell as Leasing's part owners, to inform them that the document they signed at FNBC was a warranty deed, and (3) the fiduciary duty to Leasing to cause Signature to convey the property back to Leasing. Count Five, "Tortious Interference with Business Relations," alleged that Peeples tortiously interfered with the Active Members' business relations with DynaVision. Count Six, "Attorneys' Fees," sought plaintiffs' expenses, including attorney's fees, incurred in prosecuting Counts One through Five. Count Seven, "Punitive Damages," sought punitive damages as to each of plaintiffs' claims on the ground that the "[d]efendants have[*1281] acted in bad faith and have been stubbornly litigious and caused Plaintiffs unnecessary trouble or expense."

On March 9, 2004, the day after the state court refused to reconsider its October 29, 2003 order denying plaintiffs' motion for leave to join Peeples as a party defendant, Peeples moved the district court to dismiss plaintiffs' complaint. Alternatively, he requested that the district court stay further proceedings pending the state court's resolution of Ledford v. Smith. He requested a stay because the Active Members had moved the state court for summary judgment, which, if granted, could settle through issue preclusion some of the factual issues involved in plaintiffs' district court claims. The state court heard argument on the summary judgment motions on April 1, 2004. On May 17, 2004, the district court denied Peeples's motion to dismiss and, alternatively, for a stay. On June 6, 2004, Peeples answered plaintiffs' complaint.^[62]

2.

On May 18, 2004, the state court ruled on the pending motions for summary judgment. It granted defendants summary judgment on the fourth and fifth claims and on the sixth claim in part. It denied summary judgment on the first, second and third claims and on the sixth claim in part on the ground that material issues of fact remained to be litigated. Regarding the sixth claim, the court found that the Active Members had a fiduciary duty to inform DynaVision of Peeples's involvement under the Limited Liability Company Act and Georgia common law, but not under the Operating Agreement.

Plaintiffs appealed the court's dismissal of the fifth claim, that the Active Members fraudulently induced DynaVision to part with its interest in Signature. The Active Members cross-appealed the court's disposition of the first claim, that Leasing conveyed the Green Road Property due to mutual mistake; the second claim, that Smith fraudulently induced the transfer of the Green Road Property to Signature by misrepresenting the warranty deed; and part of the sixth claim, that the Active Members breached a fiduciary duty to inform DynaVision of Peeples's participation. Plaintiffs did not appeal the court's disposition of their fourth claim, unjust enrichment through the transfer of the Green Road Property, and the Active Members did not appeal the court's denial of summary judgment on plaintiff's third claim, that the Active Members had breached a fiduciary duty to Leasing, O'Dell, and Ledford with respect to the transfer of the Green Road Property. While these appeals were pending in the Georgia Court of Appeals, the district court set February 26, 2005 as the discovery deadline.

3.

On July 12, 2005, the Georgia Court of Appeals handed down its decision. Ledford v. Smith, 274 Ga.App. 714, 618 S.E.2d 627 (2005). The court affirmed the summary[*1282] judgment for the Active Members on plaintiffs' fifth claim, reversed the denial of summary judgment on plaintiff's second claim (effectively granting the Active Members judgment on that claim), and reversed part of the sixth claim. After the decision, only the plaintiffs' first claim, which alleged that Leasing conveyed the Green Road Property because of mutual mistake, survived.^[63]

The court of appeals explained why it held for the Active Members on all but plaintiffs' first claim. It began with plaintiffs' sixth claim, that the Active Members had a fiduciary duty under the Limited Liability Company Act and common law to disclose their negotiations with Peeples. After observing that default fiduciary duties are trumped by an operating agreement,^[64]Ledford, 618 S.E.2d at 636,^[65] the court explained that Signature's Operating Agreement allowed the Active Members to obtain Peeples's assistance in funding the Put and Call. Citing Section 7.3 of the Operating Agreement, which authorized the Active Members to "engage in all ... other business ventures ... but no Active Member shall engage in businesses similar to the business of the [Signature] by competing with the business of the Company," the court reasoned that:

This provision gave the Active Members wide latitude to engage in all other business activities except those "similar to the business of" [Signature], that is, a "competing" carpet company. The provision was broad enough to allow the Active Members to negotiate with Peeples for the purpose of obtaining financing to fund their buy-out of Dyna-Vision's interest in [Signature]. This activity did not "compete" with [Signature]; thus, it did not fall within the exception. Any fiduciary duty of disclosure that the Active Members' may have owed Dyna-Vision with respect to such a business arrangement was eliminated by the terms of an operating agreement that allowed the business activity which occurred. See Stoker v. Bellemeade, 272 Ga.App. at 824, 615 S.E.2d 1 (members of an LLC did not[*1283] breach fiduciary duties by participating in other allegedly competing real estate developments because operating agreement allowed them to do so).

Ledford, 618 S.E.2d at 636.

The court also rejected plaintiffs' argument that the Operating Agreement's Right of First Refusal provision, in Section 9.2.1, created a fiduciary duty that required the Active Members to disclose their intention to sell Signature's assets to Peeples. The court explained:

As the superior court correctly concluded, this provision was plainly "intended to prevent outsiders from buying into [Signature]. In this way, the Members maintained control over who their business `partners' were to be." Because the Active Members' proposed buy-out of Dyna-Vision's interest would not allow a third party to buy into [Signature] and become Dyna-Vision's business partner, the purpose of the right of first refusal was not implicated. Therefore, [Section] 9.2.1 did not require the Active Members to disclose to Dyna-Vision how it intended to finance its buy-out offer.

Id. at 634.

Turning to plaintiffs' fifth claim, that the Active Members fraudulently induced DynaVision to sell its interest, the court held that summary judgment was appropriate because the Active Members' failure to inform DynaVision of their deal with Peeples did not cause DynaVision's decision to sell. Once the Active Members invoked the Operating Agreement's Put and Call provision, DynaVision, by its principals' own deposition testimony, had no feasible option but to sell its interests. As the court observed:

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's involvement did not affect the value of the Active Members' interest, it was immaterial. Or, stated differently, [plaintiffs] cannot show that they suffered any damage as a result of their alleged reliance on the Active Members' affirmative misrepresentation that Peeples was not involved in the buy-out.... Consequently, they could not prove causation or damages, which were essential to their fraud claims.

Id. at 634-35.

The court then addressed the plaintiffs' second claim, that Smith, and thus the Active Members, fraudulently induced Leasing to sign the warranty deed at FNBC by asking Ledford and O'Dell to sign the deed without disclosing the nature of the document. Because it found no evidence of misrepresentation, the court concluded that on this claim, the Active Members were entitled to summary judgment. It held:

In this case, the evidence shows that FNBC, on its own initiative, drafted the warranty deed and asked all the parties to the loan closing to sign this "corrective paper." Although Ledford and O'Dell contend they signed the document because Smith asked them to do so, the evidence only shows that Smith was relaying the bank's request. There is no evidence in the record that Smith caused the deed to be drafted, acted in concert with the bank, or misrepresented or concealed the document's nature. In fact, it appears from the record that Smith was as ignorant of the document's significance as Ledford and O'Dell. Under these circumstances, we see no evidence[*1284] of a fraudulent statement or the concealment of a material fact that Smith was under a duty to disclose.

Id. at 636-37.

4.

On July 15, 2005, shortly after the Georgia Court of Appeals's opinion issued, Peeples's counsel sent a letter to plaintiffs' counsel, requesting that plaintiffs dismiss all claims against Peeples. On July 25, plaintiffs' counsel responded, stating that nothing in the court's opinion warranted dismissal and that they had moved the court of appeals for reconsideration. On July 28, 2005, the motion for reconsideration was denied. On August 1, Peeples's counsel again wrote plaintiffs' counsel, asking that plaintiffs agree to a stay of proceedings in the district court. Plaintiffs' counsel rejected that request the next day; they planned to petition the Supreme Court of Georgia for a writ of certiorari.

On September 22, Peeples moved the district court for summary judgment on all of plaintiffs' claims. In the brief accompanying the motion, Peeples cited the court of appeals's Ledford decision and stated:

Should the Georgia Supreme Court deny Plaintiffs' petition for certiorari or affirm the Georgia Court of Appeals' order, then Plaintiffs' derivative liability claims in the federal action are collaterally estopped. In the absence of affirmance or denial, the reasoning of the Georgia Court of Appeals, the applicable Georgia law as cited, and the conclusions reached on the undisputed facts as present in this case are instructive and may be considered by this Court.

On October 31, plaintiffs' counsel responded to this statement in their brief in opposition to Peeples' motion for summary judgment:

As an initial matter, throughout their brief, the Defendants refer to an Opinion of the Georgia Court of Appeals in a state court proceeding between the Plaintiffs and the Active Members .... The state court case has no effect on the central securities fraud claims in this action; the opinion is not binding on this Court. Furthermore, a petition for certiorari has been filed with the Georgia Supreme Court seeking to correct the multitude of legal and factual errors contained in that opinion.^[66]

On November 18, the Georgia Supreme Court denied plaintiffs' petition for certiorari review in the state court case. Ten days later, plaintiffs moved the Court to reconsider its decision.^[67] The court denied plaintiffs' motion on December 16. The denial operated to make the court of appeals's Ledford decision binding authority on matters of Georgia law. See Lexington Developers, Inc. v. O'Neal Const. Co., Inc., 143 Ga.App. 440, 238 S.E.2d 770, 770-71 (1977).

On December 22, the district court, in a comprehensive sixty-eight page order, granted Peeples's motion for summary judgment on all of plaintiffs' claims.^[68] Using the doctrine of collateral estoppel, the court disposed of Count Three, that Peeples conspired with the Active Members to defraud DynaVision into selling its interest in Signature,^[69] and Count Five, that Peeples[*1285] tortiously interfered with the Active Members' business relationship with DynaVision. The court rejected plaintiffs' Count Four claims, that Peeples aided and abetted the Active Members' breach of fiduciary duties, on the ground that Georgia law did not recognize such claims. The court disposed of Counts One and Two, charging Peeples with securities fraud, on the grounds that plaintiffs failed to demonstrate a genuine issue of material fact as to the several elements of those claims.^[70]

5.

On January 9, 2006, Peeples moved the district court pursuant to Rule 59(e) of the Federal Rules of Civil Procedure to alter and amend its judgment. He argued that, with respect to plaintiffs' federal securities law claims in Count One, the court had failed to issue the findings required under the PSLRA. The PSLRA requires a district court, upon final adjudication of a federal securities law claim, to "include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion." 15 U.S.C. § 78u-4(c)(1). Peeples urged the court to sanction plaintiffs and their counsel for failing to comply with Rule 11. He also requested sanctions for the Count One claims pursuant to 28 U.S.C. § 1927 and the district court's inherent power.^[71]

Plaintiffs and their attorneys filed separate responses to Peeples's request for attorney's fees and expenses under the PSLRA. Plaintiffs, represented in the matter of sanctions by new attorneys, claimed that they did not misrepresent the historical facts to counsel, did not advise counsel regarding the law, and were not responsible for the manner in which counsel litigated the case. Relying on our decision in Byrne v. Nezhat, 261 F.3d 1075 (11th Cir.2001), plaintiffs averred that sanctions against them would not be appropriate. In their separate response, plaintiffs' attorneys asserted, in essence, that a reasonably competent attorney would have recognized that the claims set out in Count One of the complaint were cognizable under the federal securities laws.

On March 21, 2006, the district court granted Peeples's motion to the extent that it sought PSLRA findings, but refused to sanction plaintiffs or their counsel, finding that they had acted in compliance with Rule 11 in pleading and prosecuting their case.

6.

All five plaintiffs now appeal the district court's disposition of each of their claims. Their brief, however, presents no argument as to Counts Three and Five through Seven. We therefore treat as abandoned their appeal of the district court's disposition of those counts. We also treat as abandoned the appeal of the court's disposition[*1286] of plaintiffs' claims under two of the federal securities laws. As noted, Count One contained claims under section 20(a) of the 1934 Act and Rules 10b-5(a) and (b). Plaintiffs' brief presents no argument in support of their section 20(a) and Rule 10b-5(a) claims,^[72] and, as in the case of Counts Three and Five through Seven, we deem the appeal of the court's disposition of those claims to have been abandoned.^[73] Accordingly, what remains are plaintiffs' Count One claims under Rule 10b-5(b); their Count Two claims under the comparable Georgia securities law provision; and part of their Count Four claim, that Peeples aided and abetted the Active Members' breach of their fiduciary duty regarding the handling of the Green Road Property.^[74] Peeples cross-appeals the district court's refusal to sanction plaintiffs and their counsel as required by the PSLRA for prosecuting Count One of the complaint.

Our review proceeds as follows. We first consider our jurisdiction over plaintiffs' Count One 10b-5(b) claims.^[75] Next, we move to plaintiffs' Count Four aiding and abetting claims. After that, we take up the PSLRA sanctions issues.

III.

Before we assess the merits of plaintiffs' Rule 10b-5(b) claims, we address a threshold question: whether we have subject matter jurisdiction, under 28 U.S.C. § 1331^[76] and 15 U.S.C. § 78aa,^[77] to entertain the claims. Hernandez v. Att'y Gen., 513 F.3d 1336, 1339 (11th Cir.2008) ("[W]e must inquire into subject matter jurisdiction sua sponte whenever it may be lacking.").

We find the answer to that question in two Supreme Court decisions, Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), and Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946). Under Blue Chip Stamps, a plaintiff must be a purchaser or seller of a security to have a[*1287] private cause of action under Rule 10b-5. Here, one seller, DynaVision, sold, at most, one security, a fifty-percent interest in Signature. Accordingly, DynaVision, as the seller of a security, had standing to sue Peeples under Rule 10b-5. Ledford, O'Dell, Walker, and Leasing ("co-plaintiffs") did not.^[78]

The district court should have recognized this at the time it considered and ruled on Peeples's motion to dismiss the complaint.^[79] After concluding that co-plaintiffs failed to state a claim under Rule 10b-5, the court should have moved to the question of whether to dismiss their claims for want of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure.^[80]Bell v. Hood holds that "a suit may sometimes be dismissed for want of jurisdiction where the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous." 327 U.S. at 682-83, 66 S.Ct. at 776 (emphasis added). The word "may" implies that the dismissal of a claim for want of jurisdiction is committed to the sound discretion of the district court. But, just as in any instance where a district court has discretion, that discretion can be abused. Here, co-plaintiffs' federal securities fraud claims were plainly and indisputably frivolous. They were, in the Supreme Court's words, "so patently without merit as to justify ... the court's dismissal for want of jurisdiction." Id. Moreover, no amendment of the complaint could possibly have cured its patent, and fatal, deficiency, that co-plaintiffs lacked standing to sue. In such an extreme case, the district court abused its discretion in failing to dismiss co-plaintiffs' Count One claims for want of jurisdiction.

Co-plaintiffs' inability to invoke the district court's jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 78aa for Count One did not foreclose their right to litigate the claims asserted in Counts Two through Seven. Despite the fact that Counts Two through Seven do not implicate a federal question, they are joined in the case by a series of jurisdictional steps. First, because DynaVision sold a security, the district court had jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 78aa to adjudicate DynaVision's Count One securities fraud claims. Second, the court therefore had[*1288] supplemental jurisdiction under 28 U.S.C. § 1367^[81] to adjudicate any other claims DynaVision had against Peeples that were "so related to" the Count One claims that they formed part of "the same case or controversy."^[82] DynaVision's claims in Counts Two through Seven, given the manner in which the complaint presented them,^[83] appear to have been so related to DynaVision's Count One's allegations, that they formed part of the same case or controversy described in Count One.^[84] Finally, Rule 20 of the Federal Rules of Civil Procedure authorized co-plaintiffs to join DynaVision as plaintiffs in Counts Two through Seven since their claims arose out of "the same transaction, occurrence, or series of transactions or occurrences" forming the predicate for DynaVision's claims.^[85] Except as to Count One, therefore, we have jurisdiction to consider co-plaintiffs' claims.^[86]

IV.

With jurisdiction established, we now turn to plaintiffs' remaining securities fraud and aiding and abetting claims. We address these claims in turn, affirming the district court's grant of summary judgment for Peeples.

A.

In a typical section 10(b) civil action for a violation of Rule 10b-5(b), a[*1289] plaintiff must prove (1) a material misrepresentation or omission by the defendant, (2) scienter, (3) a connection between the misrepresentation or omission and the purchase or sale of a security, (4) reliance upon the misrepresentation or omission, (5) economic loss, and (6) loss causation. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 128 S.Ct. 761, 768, 169 L.Ed.2d 627 (2008).^[87]

To establish a genuine issue of material fact as to the reliance element,^[88] plaintiffs^[89] had to present evidence that, in conversations with Paul Walker, Peeples stated that he was not involved in the Active Members' attempt to acquire Dyna-Vision's interest in Signature, that his statements were false, that DynaVision's principals reasonably relied on the statements,^[90] and that because of that reliance, the principals caused DynaVision "to engage in the transaction in question." Robbins v. Koger Properties, Inc., 116 F.3d 1441, 1447 (11th Cir.1997) (quotation omitted). Put another way, plaintiffs had to demonstrate that but for Peeples's statements, DynaVision would not have sold its interest but, instead, would have bought the Active Members' interests. Huddleston v. Herman & MacLean, 640 F.2d 534, 549 (5th Cir. Mar.1981), rev'd on other grounds, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) ("Reliance is a causa sine qua non, a type of `but for' requirement: had the investor known the truth he would not have acted.").

After carefully considering the evidence before it, the district court concluded that[*1290] no genuine issue of material fact existed as to this element: Peeples's denial of any involvement in the Active Members' plan did not cause DynaVision to sell its interest. The court explained:

The evidence in the record, viewed in the light most favorable to Plaintiffs, shows that Plaintiffs themselves did not have the necessary experience, marketing skills, and expertise to run [Signature] in the absence of the Active Members, and that Plaintiffs' attempts to obtain a management group and necessary personnel to work with [Signature] were unsuccessful. Plaintiffs themselves testified that it would be foolish or risky to purchase the Active Members' interests in [Signature] without having a management group or marketing group in place to replace the Active Members. Although Plaintiffs summarily contend that they would have acted differently if they had known of Defendant Peeples' involvement, that summary and conclusory contention is not sufficient to allow Plaintiffs to avoid summary judgment. Indeed, knowledge of Defendant Peeples's involvement would not have changed the fact that Plaintiffs did not have the necessary experience, marketing skills, and expertise to run [Signature], and that Plaintiffs' attempts to obtain a management group and necessary personnel to work with [Signature] were unsuccessful. The failure to disclose Defendant Peeples' involvement thus did not cause Plaintiffs' decision to sell Plaintiff DynaVision's interest under the February 25, 2002, Put and Call ....^[91]

B.

To obtain a reversal of the district court's resolution of the reliance issue, plaintiffs must satisfy us that the evidence in the record creates a jury issue as to whether DynaVision would have purchased the Active Members' interests, rather than sell its interest, had Peeples told Paul Walker and Ledford that he was providing the Active Members the $3.5 million they needed to close the transaction. There is no direct evidence that DynaVision would have elected to buy the Active Members' interests had Peeples admitted that he was providing the money. Because there is no direct evidence that DynaVision would have elected to buy, we ask whether such election can be inferred from the record. Specifically, we ask whether it can be inferred as an ultimate fact from the subsidiary, circumstantial facts shown by the evidence, viewed in the light most favorable to plaintiffs.

Plaintiffs argue that circumstantial facts sufficient to create the inference are present. Peeples argues that they are not, that the circumstantial facts create the contrary inference: DynaVision sold because doing so was in the economic self-interest of its principals, and it would not[*1291] have elected to buy even if it had known of Peeples's involvement.

In assessing these opposing positions, our first task is to identify the circumstantial facts that the evidence establishes as a matter of law. Once that is done, we determine whether it would have been permissible for a jury to draw the inference that DynaVision would have elected to purchase the Active Members's interests had it known that Peeples was providing the $3.5 million that enabled the Active Members to close.

The evidence discloses three sets of circumstantial facts, with inferences flowing from each set. We summarize each set in the headings of the following subparts and conclude that, as a matter of law, DynaVision's principals would have sold even if they had known about Peeples's involvement.

1.

DynaVision lacked the expertise necessary to operate Signature's factory and market Signature's product. Consequently, if the Active Members left, there would be no one to run the company, and Signature's value would rapidly decline.

There is no dispute regarding the roles that DynaVision's principals and the Active Members performed for Signature. The principals functioned as Signature's financiers. By establishing the $200,000 line of credit, they were able to provide Signature with the funds required to start the business and pay the bills until carpet sales generated enough income to cover the company's operating expenses. The Active Members were the managers of the enterprise. Owenby and Thomas handled the manufacturing and sales. Smith, the company's president, was in charge of marketing, since she was well and favorably known in the hospitality industry and thus capable of attracting a considerable volume of business.

By their own admission in depositions taken in the state court case and in this case,^[92] DynaVision's principals could not, themselves, replace the Active Members, most notably Smith, for the principals had no experience in manufacturing carpet and were virtually incapable of marketing Signature's products. Ledford testified that the principals had no "experience with [the] customer base" and therefore could not run the company. He emphasized Smith's key role in marketing Signature's products, stating that "had we been able to retain Brenda, we would have purchased the company."^[93] Paul Walker said that "none of the DynaVision Group were a part of the everyday management or marketing of Signature" and that this "was [the] only reason" why DynaVision did not elect to purchase the Active Members' interest after the Put and Call issued. O'Dell admitted that DynaVision's principals were not qualified to run the company.

In addition to this testimony, DynaVision's principals' conduct towards the Active Members spoke volumes about how important the principals felt it was to keep[*1292] the Active Members in the company, at least until the principals themselves decided to sell.^[94] The principals included in the Operating Agreement a provision that made it highly unlikely that the Active Members would leave Signature before the principals were ready to sell. If an Active Member sold his or her interest in the company, Section 10.4 of the Agreement would preclude that Member from competing with Signature for a period of one year.^[95] Because they were not financially independent, the Active Members would presumably need to find other employment in the carpet business upon leaving the company. Lying idle for a year would be burdensome, and an Active Member would therefore think twice before leaving Signature.

The principals also included a provision to make it hard for the Active Members to buy out DynaVision before DynaVision was ready to sell. Section 9.1 of the Operating Agreement addressed the possibility that the Active Members might attempt to buy DynaVision's interest pursuant to the Section 9.5 Put and Call provision. DynaVision's principals knew the Active Members lacked the personal resources sufficient to make an offer that DynaVision' principals would be tempted to accept;^[96] consequently, the Active Members would have to borrow the money to fund any buy-out.^[97] Obtaining a conventional loan[*1293] from a bank or other lending institution would require collateral, and the only collateral they had of significant value was their individual interests in Signature. Section 9.1, however, barred the Active Members from pledging their interests to a lending institution.^[98] As a practical matter, then, the only way the Active Members could attempt a buy out DynaVision's interest would be to find someone like Peeples — someone willing to advance the purchase price on the condition that, after acquiring DynaVision's interest, the Active Members would sell him all or part of the business and agree to stay on and run the company.

Joiner revealed how indispensable the Active Members were to Signature's value in the letter he wrote to Krevolin on April 11, 2002, nineteen days before the closing was to take place. In the letter, Joiner informed Krevolin that DynaVision would refuse to close unless the Active Members signed a new agreement with DynaVision and, as required by that new agreement, represented in writing that they were acquiring DynaVision's interest "solely for [their] own account ... without the financial participation of [a third party]."^[99]

Although Joiner pointed to nothing in the Operating Agreement that would require the Active Members to make these representations, he, or his clients, apparently thought Krevolin would agree that the Agreement, read as a whole, required that the representations be made.^[100] If Krevolin had agreed, he would have advised his clients that they could not honestly make such misrepresentations without inviting DynaVision to claim fraud.[*1294] See McFarland v. Kim, 156 Ga.App. 781, 275 S.E.2d 364, 366 (1980) (holding that misrepresentations about present state of mind are actionable as fraud). The misrepresentations would also have given DynaVision an affirmative defense in the event the Active Members sued for specific performance. Defending an action for fraud or countering an affirmative defense in a suit for specific performance would be expensive and could be very unpleasant; Joiner apparently thought Krevolin would therefore advise his clients to abandon their plans and continue to manage Signature in partnership with DynaVision.

Krevolin's response, in a letter to Joiner dated April 16, was brief: The Active Members would not make the representations Joiner's letter was seeking, and moreover, if DynaVision refused to close, the Active Members would take it to court. As far as the Active Members were concerned, their business relationship with DynaVision's principals was at an end. The principals' threat of litigation if the Active Members did not abandon the Put and Call had gone for naught. Joiner informed Ledford of Krevolin's response, and, after considering DynaVision's options,^[101] Ledford instructed Joiner to go forward with the closing on April 30, as previously agreed.^[102]

2.

DynaVision's principals could not have persuaded the Active Members to remain with the company, obtained a management team to replace them, or located a buyer for Signature, even if Peeples admitted his involvement.

DynaVision's principals have conceded that they were unable to persuade the Active Members or Smith individually to remain with Signature and that they were unsuccessful in finding a suitable management team to replace them. They likewise have conceded that they had no success in locating a carpet company or an investor willing to purchase the company. Two of the three carpet manufacturers Ledford and O'Dell contacted, Mohawk Carpets and Clay Miller Carpets, expressed no interest in buying Signature, even if doing so meant keeping the firm out of Peeples's hands.^[103] Jerry Thomas of Matel Carpets expressed interest but only if Smith and the other Active Members would be willing to stay with Signature, which they were not.

In their brief to us, however, plaintiffs argue that Ledford and O'Dell would have been able to find a buyer for $8.5 million if Peeples had simply admitted his involvement in the Put and Call. With a buyer's commitment in hand, DynaVision would have then purchased the Active Members' interest for $3.5 million and reaped a $5 million profit.

Plaintiffs explain that once Peeples admitted his involvement, DynaVision's principals would have discovered that he[*1295] agreed to pay $10 million for Signature (including $3.5 million to DynaVision). Ledford and O'Dell would have then had two excellent selling points when offering Signature to Mohawk, Clay Miller, and Matel. First, because Peeples was going to pay $10 million for Signature, their asking price of $8.5 million was not only reasonable, it was an exceptional bargain. Second, Peeples saw Signature as an effective way to reach the hospitality industry. By buying Signature, Peeples's competitors could gain entry to the hospitality market and, at the same time, keep Peeples out. Plaintiffs argue:

Had [DynaVision] known the truth, DynaVision's chances of finding a buyer willing to pay more than $7 million for [Signature] would have increased dramatically.

. . .

Potential buyers and investors would certainly view the [Active Members'] agreement to sell [Signature] for $10 million to the Peeples Group as material. Thus, those contacted by DynaVision during the [thirty-day] election period may have acted differently, themselves, had they known of the agreement between the Peeples Group and the Active Members. Such knowledge may have increased their assessment of the value of the company or validated the value mentioned by DynaVision. Moreover, knowledge of a strategic acquisition by Shelby Peeples might have inspired those with marketing experience to assist DynaVision in order to maintain their competitive advantage. Knowledge of the truth could have enabled DynaVision to find a purchaser and/or marketing group for [Signature].

Appellants' Br. at 39-40.

Several flaws in plaintiffs' argument are immediately obvious. First, there is no support in the record for the statement that Peeples agreed to pay the Active Members $10 million for Signature at any time, let alone during the thirty-day election period. The most Peeples ever offered for Signature was roughly $6.5 million. In the January 21 letter of intent, Peeples discussed loaning the Active Members $3.5 million to enable them to purchase DynaVision's interest and then forgiving the loan and paying them $3 million for Signature's assets once they acquired the company.^[104] In actuality, Peeples paid around $6 million to acquire Signature. Following the closing, he forgave the $3.5 million loan he had given the Active Members and paid $2.25 million for Signature's assets. He lowered the price upon discovering an error in the company's books.

To arrive at the $10 million figure, plaintiffs add the bonuses Peeples agreed to pay the Active Members under the Asset Purchase Agreement and employment contracts^[105] to the amount he actually paid for Signature's assets.^[106] The amount of these bonuses, however, was contingent on Signature's future performance; the Active Members would only be eligible if Signature made a profit above a certain amount on a yearly basis.^[107] Consequently, the bonuses are not part of Peeples's payment[*1296] for Signature; they are simply part of the Active Members' compensation arrangements for their continued service with the company.

Second, plaintiffs have not explained how they would have learned of the price Peeples intended to pay for Signature.^[108] According to the Georgia Court of Appeals, the Active Members had no obligation under the Operating Agreement to reveal the details of their plan. Ledford, 618 S.E.2d at 633-36. If Paul Walker had asked about these details, Peeples's response would therefore undoubtedly have been that it was none of his business. This is essentially what Krevolin told Joiner when Joiner demanded that the Active Members represent prior to closing that they were purchasing DynaVision's interest "solely for [their] own account" and "without the financial participation of any other Person," meaning without Peeples's participation.

Plaintiffs would therefore not have been able to lure potential buyers by telling them that Peeples offered $10 million for the company. Instead, plaintiffs' best selling pitch was the one they actually used: Peeples was going to acquire Signature, and Peeples's competitors would benefit economically if they stepped in, bought the company, and kept it from falling into Peeples's hands.

3.

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.

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.^[109] 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.^[110] Had they opted to buy instead, they would have assumed the risk that the company would have to close down unless[*1297] 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,^[111] 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.

C.

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 Section 9.1 of the Operating Agreement, which precludes a Member from pledging an interest in Signature as collateral for a loan.^[112] 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.^[113] They did not know about the[*1298] 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 Section 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 Section 9.1 as an affirmative defense, citing the Georgia principle of equity — that "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 Section 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.^[114] Plaintiffs' response on summary judgment does contain a factual statement that the Active Members pledged their interests in disregard of Section 9.1. This statement, however, was not made as part of plaintiffs' argument on the reliance element — plaintiffs did not assert that but for Peeples's misrepresentations, DynaVision would have elected to purchase the Active Members' interest.^[115] 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 Section 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[*1299] 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.Appx. 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 Section 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, Section 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.^[116] 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 Section 9.1 breach. Nor could DynaVision have used the pledge as the basis for a lawsuit against the breaching Active Member.^[117]

V.

We now address what remains of plaintiffs' Count Four claims that Peeples aided and abetted Smith, Thomas, and Owenby in breaching their fiduciary duties to Leasing and, separately, to Ledford and O'Dell as Members of Leasing.^[118] Plaintiffs argue that Peeples aided and abetted two separate breaches of the obligation Smith, Thomas, and Owenby assumed under the[*1300] Limited Liability Company Act, O.C.G.A. § 14-11-305(1), as members and managers of Leasing, to "act in a manner" that they "believe[ed] in good faith to be in the best interests" of the company and "with the care an ordinarily prudent person in a like position would exercise under similar circumstances."^[119] We affirm the district court's dismissal of the claims and hold that Peeples could not have aided and abetted a breach of fiduciary duty because, as a matter of law, no such breach occurred.

A.

In support of their aiding and abetting claim, plaintiffs allege two separate breaches of fiduciary obligation. First, they contend that Smith breached her fiduciary duty by failing to inform Ledford and O'Dell that the document they signed before Cynthia Trammel at FNBC was a warranty deed. Had Smith disclosed the nature of the document to Ledford and O'Dell, plaintiffs submit, they would not have signed it. Second, plaintiffs contend that Smith, Thomas, and Owenby breached their fiduciary duties to Leasing, Ledford, and O'Dell by refusing to convey the Green Road Property back to Leasing, pursuant to Paul Walker's demands, after the warranty deed was signed but before the sale of DynaVision's interest closed. Plaintiffs' argue that Peeples aided and abetted these breaches so that the Active Members would be in a position to give him title to the Green Road Property after acquiring DynaVision's interest.^[120]

The district court, concluding that Georgia did not recognize a cause of action for aiding and abetting the breach of a fiduciary duty, dismissed plaintiffs' claims. The Georgia Court of Appeals subsequently held, however, in Insight Technology, Inc. v. FreightCheck, LLC, 280 Ga.App. 19, 633 S.E.2d 373 (2006), that such an aiding and abetting claim is cognizable.^[121]

In light of the court of appeals decision in that case, we assume for purposes of this case that the obligation section 14-11-305 imposes on limited liability company members and managers is, as plaintiffs' contend, a "fiduciary duty," and we therefore proceed to the merits of plaintiffs' aiding and abetting claims. As indicated above, plaintiffs' claims are founded on two distinct breaches of their statutory obligation.[*1301] The breaches have to have occurred; otherwise, Peeples cannot be held liable for aiding and abetting. We therefore determine whether, as a threshold matter, a jury reasonably could find, as plaintiffs allege, that Smith and, subsequently, Smith, Thomas, and Owenby breached the obligations they assumed under section 14-11-305 as members and managers of Leasing.

B.

We begin with plaintiffs' argument that Smith should have explained the significance of the warranty deed that Ledford and O'Dell signed before Cynthia Trammel at FNBC. To analyze this argument, we proceed through the explanation that, according to the plaintiffs, Smith should have given in order to fulfill her fiduciary obligations. We then conclude that, as a matter of law, such an explanation would not have caused the plaintiffs to act differently than they actually did.

Smith's explanation, to be complete and leave no stone unturned, would have taken Ledford and O'Dell back to October 2001, when Ledford, O'Dell, and the Active Members applied to FNBC for a loan on behalf of Signature. That loan was intended to pay off Signature's current loans at FNBC, pay off the balance due on the note Leasing gave the Dalton Whitfield Bank,^[122] and provide Signature with additional working capital. Signature needed in excess of $900,000 to accomplish all of this.

Smith would have reminded Ledford and O'Dell that Cynthia Trammel — the FNBC officer who processed their loan application and, before that, handled the loan they had obtained from the Dalton Whitfield Bank for Leasing — had to submit their application to FNBC's board of directors for approval. She would also have explained that the board approved the loan subject to certain conditions, among them (1) that Ledford, O'Dell, Smith, Thomas, and Owenby sign Signature's note, and thus guarantee its payment and (2) that Signature, joined by Ledford, O'Dell, Smith, Thomas, and Owenby, give the bank a deed to secure debt on the Green Road Property.^[123] This meant that if Leasing held title to the property, it would have to convey the property to Signature so that Signature, in turn, could deed the property unencumbered to FNBC to secure the loan. Ledford and O'Dell and the Active Members had agreed to these conditions.

Next, Smith would have explained that Trammel, having obtained their consent to these conditions, took the steps necessary to close the transaction. One was to have the bank's lawyer, Todd McCain, conduct a title search of the Green Road Property. McCain conducted a search, issued an opinion, and delivered it to Trammel. The opinion stated that title to the property was held by Leasing and that Signature could not give the bank a deed to secure debt unless Leasing deeded the property to Signature before the loan closed.

Smith would have gone on to say that the closing went as planned except that Signature gave the bank a deed to secure debt on property it did not own; Leasing had neglected to convey the Green Road Property to Signature. Trammel had overlooked McCain's caveat that the conveyance[*1302] occur prior to closing. Her failure to obtain the necessary warranty deed from Leasing to Signature did not come to light until later, when she read McCain's opinion letter.

Upon reading McCain's letter, Trammel realized that she had to obtain a deed from Leasing to Signature so that the deed to secure debt Signature had given the bank would not be worthless.^[124] To solve the problem, Trammel called McCain's office, and it prepared the warranty deed at issue. Trammel then called Smith. She told Smith that a "document" needed to complete the loan closing had to be signed and asked her to come to the bank with Ledford, O'Dell, Thomas, and Owenby for that purpose. Smith immediately informed the others of Trammel's request. A day or so later, she arrived at the bank with Thomas and Owenby and signed the document, the warranty deed, before a notary and a witness. When Ledford and O'Dell failed to appear, Trammel called Smith again. Smith, in turn, called Ledford, who contacted O'Dell, and they, too, signed the deed, before the same notary and witness. At that time, plaintiffs argue, Smith should have informed them that the document was a warranty deed.

The position plaintiffs have taken throughout this litigation is that notwithstanding a full explanation by Smith — that Leasing had to convey the Green Road Property to Signature so that the $911,000 loan could go through — Ledford and Smith would not have signed the "document." We question whether Ledford and O'Dell would have refused to sign after Smith informed Trammel of their noncompliance, Trammel referred the matter to the bank's lawyer, McCain, and McCain contacted Ledford and O'Dell's lawyer. Ledford and O'Dell's lawyer would have informed them of the legal consequences that might flow if they still refused to accede to the conveyance of the Green Road Property to Signature. In any event, what counsel would have had to say has a bearing on whether, in the final analysis, Smith's failure to tell Ledford and O'Dell that the "document" they were to sign was a warranty deed constituted a breach of Smith's section 14-11-305 obligation to "act in a manner ... she believes in good faith to be in the best interests of" Leasing and its members, "with the care an ordinarily prudent person in a like position would exercise."

McCain would have told Ledford and O'Dell's lawyer that Ledford, O'Dell, Smith, Thomas, and Owenby induced the bank to loan Signature $911,000 on the condition that Signature give the bank a deed to secure debt on the Green Road Property. To do that, Signature would have to possess clear title to the property. Although the bank insisted that these five individuals guarantee the payment of the loan by co-signing Signature's note, their guarantee was not enough; the bank needed collateral in the form of a deed to secure debt from Signature. Another reason why the bank needed this additional security is that part of the $911,000 loan would be used to pay off Leasing's debt to the Dalton Whitfield Bank, thereby relieving Leasing's guarantors, including Ledford and O'Dell, of potential liability for Leasing's non-payment of the debt, and, at the same time, depriving Signature of the full value of the loan.^[125]

[*1303] McCain would have then observed that, in executing Signature's deed to secure debt, Ledford and O'Dell represented that Signature owned the property, on the surface a false representation. If making such representation was intentional, as their current position seems to imply, they obtained the bank's funds under false pretenses. And, moreover, Leasing lined its pockets, and the guarantors of Leasing's debt to the Dalton Whitfield Bank were relieved of potential liability, at Signature and FNBC's expense. McCain would inform Ledford and O'Dell's counsel of the elements of the federal bank fraud statute, 18 U.S.C. § 1344, that according to the Eleventh Circuit Court of Appeals, in United States v. De La Mata, 266 F.3d 1275, 1298 (11th Cir.2001), makes it a crime to knowingly make materially false representations to a federally insured bank for the purpose of obtaining money.^[126] Ledford and O'Dell might be subject to prosecution even if they intended to repay Signature's $911,000 loan.^[127]

Given the representations Smith and the others made to induce the FNBC to make the Signature loan and the benefit that inured to Leasing and its guarantors when its note to the Dalton Whitfield Bank was paid off, we fail to discern how Smith could be said to have breached her section 14-11-305 obligation to Leasing, Ledford, and O'Dell. She did precisely what she and the others had promised the bank they would do. In sum, plaintiffs failed to establish a breach on Smith's part and, as a result, failed to make out a case of aiding and abetting against Peeples.

C.

This brings us to the second alleged breach, the refusal of Smith, Thomas, and Owenby to accede to Paul Walker and Ledford's demand that they cause Signature to convey the Green Road Property to Leasing.^[128] According to plaintiffs, O.C.G.A. § 14-11-305 obligated the Active Members, as members or managers of Leasing, to make the conveyance. Plaintiffs ignore the fact that section 14-11-305 actually obligated the Active Members, as managers of Signature, not to do that: if they had made the conveyance, the Active[*1304] Members would, in effect, have given Leasing the part of the $911,000 FNBC loan proceeds Signature used to pay off Leasing's note to the Dalton Whitfield Bank while gaining Signature nothing in return. Given our disposition of the first breach, it would be inconsistent to hold that section 14-11-305 obligated the Active Members to cause Signature to transfer the property back to Leasing. The second breach therefore fails as a foundation for plaintiffs' second aiding and abetting claim against Peeples.

The district court, had it entertained Count Four on the merits, would have been required to grant Peeples summary judgment. We accordingly affirm its judgment dismissing the count for failure to state a claim for relief.

VI.

Peeples argues that the district court abused its discretion in refusing to sanction plaintiffs and their attorneys under the PSLRA for prosecuting the federal securities laws claims in this case.^[129] The PSLRA required the district court, after disposing of those claims, to make "specific findings regarding compliance by each party and each attorney ... with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion."^[130] 15 U.S.C. § 78u-4(c)(1). Rule 11(b), at the time the district court ruled on sanctions, stated, in pertinent part:

(b) Representations to Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney ... is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, —

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims ... and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery ....

"If after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may ... impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation."^[131] Fed.[*1305] R.Civ.P. 11(c) (2006). The court may not, however, award monetary sanctions against a represented party for a subdivision (b)(2) violation. Fed.R.Civ.P. 11(c)(2)(A) (2006).

With this background in mind, our discussion of the PSLRA sanctions issues proceeds as follows. First, we recall briefly the federal securities law claims the complaint presented and why the court denied them. Next, we visit the findings of fact the district court made in support of its holding that plaintiffs' counsel satisfied the requirements of Rule 11(b). We determine that the court's findings of fact are inadequate but that a remand for further findings is unnecessary because the record is sufficient to enable us to assess counsel's performance. We make that assessment under the objective standard that governs the review of Rule 11(b) compliance,^[132] and we conclude that the district court was compelled to find that counsel failed to comply with the requirements of the rule.

A.

The federal securities law claims were presented initially in Count One and thereafter in Counts Two through Seven, each of which incorporated by reference all of the complaint's preceding allegations, including, of course, Count One. For ease of discussion, we refer to this seven-count[*1306] assertion of plaintiffs' federal securities law claims as the Count One claims. Count One alleged the following:

First, Peeples's falsely stated that he was not involved in the Put and Call that the Active Members issued on February 25, 2002. DynaVision's principals reasonably relied on these false statements^[133] and, as a result, caused DynaVision to sell its interest in Signature. This rendered Peeples liable to plaintiffs under Rule 10b-5(b).

Second, Peeples "directly or indirectly controlled the activities of the Active Members" in their management of Signature's affairs. This was evidenced by his January 21, 2002 letter of intent, the "secret discussions" he had with the Active Members prior to the issuance of the February 25 Put and Call, and the Asset Purchase Agreement he entered into with them after they acquired DynaVision's interest. He thereby became liable, as a "controlling person" under section 20(a) of the 1934 Act, for the false statement Brenda Smith made to Ledford and O'Dell on February 8 that the Active Members are "doing this on our own" and for the Active Members' failure to disclose the January 21, 2002 letter of intent and Peeples offer to purchase Signature.

Third, the Active Members, in violation of Rule 10b-5(a), engaged in a "scheme, device, and artifice to defraud" DynaVision. Smith made the we are "doing this on our own" statement pursuant to the scheme, and Peeples, as a participant in the scheme, became vicariously liable for her statement and for the Active Members' failure to disclose the January 21 letter of intent and Peeples's offer.

The district court denied the Rule 10b-5(b) claim based on Peeples's false statements because the statements played no role in DynaVision's decision to sell.^[134] It denied the section 20(a) claim because DynaVision's principals did not rely on Smith's February 8 we are "doing this on our own" statement in electing to sell DynaVision's interest and because, as the Georgia Court of Appeals held in Ledford v. Smith, the Active Members had no duty to disclose their arrangement with Peeples. Finally, the court denied the Rule 10b-5(a) claim without explication.

B.

Although it rejected the Count One claims, the district court declined to impose sanctions because

[the] evidence in the record ... permitted Plaintiffs and their counsel to present reasonable, good faith arguments that Plaintiffs acted as they did based on Defendant's conduct, and that Plaintiffs consequently had satisfied the causation and reliance elements of their securities law claims. The Court therefore cannot determine that Plaintiffs and their counsel lacked a reasonable basis in fact for filing this action, or that Plaintiffs and their counsel knew or should have known that they lacked a reasonable basis in fact.^[135]

[*1307] In assessing counsel's compliance with Rule 11(b), the district court failed explicitly to recognize that each of the five plaintiffs had sought relief under section 20(a) and Rules 10b-5(a) and (b) and that Count One therefore presented a total of fifteen claims in all. Instead, the court bunched the fifteen claims together and considered them as a whole.^[136] This is precisely how plaintiffs' counsel handled the claims in drafting the complaint: They bunched the federal securities fraud claims together^[137] along with allegations that the Active Members, in failing to disclose their arrangements with Peeples, breached the fiduciary duties imposed on them by the Operating Agreement, O.C.G.A. § 14-11-305, and Georgia common law, and conspired with Peeples to defraud plaintiffs.

When faced with incomplete findings of fact, we ordinarily vacate the district court's decision and remand the case for further findings, unless the record has been developed in such a way that the material facts are clear. Here, the material facts are clear, and further findings are thus unnecessary. We therefore proceed to assess counsel's compliance with Rule 11(b) with respect to each plaintiff's claims. In doing so, we are mindful that a PSLRA sanctions proceeding, like a hearing held pursuant to Rule 11(c), is, in essence, a bench trial, except that, under the PSLRA, the district court has the burden of assessing counsel's performance on its own initiative. 15 U.S.C. § 78u-4(c)(1). That a party has or has not moved the court to impose sanctions pursuant to Rule 11 is of no moment.

C.

By the time plaintiffs' counsel filed the complaint in this case, they were privy to all of the facts needed to determine whether they could establish any of the claims Count One alleged. Counsel had acquired those facts initially from their clients. Thereafter, during discovery in the state court case, they learned of the details of Peeples's dealings with the Active Members, including the negotiations that led to the $3.5 million loan. They also learned of the Asset Purchase Agreement and the employment contracts that the Active Members entered into with Peeples and PFLC, LLC, respectively.

In assessing counsel's compliance with Rule 11(b)'s requirements, the district court also had become privy to the facts underpinning the Count One claims. In addition to the deposition testimony taken under the federal discovery rules, the court had all of the testimony and exhibits that had been presented to the state court and had a bearing on the Count One claims. Finally, the court had the benefit of what plaintiffs' counsel presented in arguing that Peeples should be held answerable[*1308] in damages under section 20(a) and Rules 10b-5(a) and (b).

Accordingly, when it took Peeples's motion for summary judgment under advisement and, later, when it conducted its Rule 11(b) assessment of plaintiffs' counsel's performance, the district court was as well acquainted with this historical background as plaintiffs' counsel were when they filed the complaint in this case. The court was well equipped to determine whether counsel's factual allegations had the evidentiary support required by Rule 11(b)(3). The court was equally equipped to determine whether, in the language of Rule 11(b)(2), the Count One claims were "warranted by existing law."^[138]

1.

As noted above, the court, in assessing counsel's Rule 11(b) compliance, did not isolate the claims of each plaintiff; instead, it treated the claims as if they had been brought by one plaintiff. This was error. The court should have examined each claim of each plaintiff; had it done so, it would have concluded that the securities fraud claims of DynaVision's co-plaintiffs' were patently frivolous, as we hold supra part III. A reasonably competent attorney would have reached the same conclusion. When counsel filed the complaint in this case, they certified that co-plaintiffs' claims had legal and evidentiary support, as required by Rule 11(b)(2) and (3). They did so in manifest disregard of the Rule and, for that, the court should have imposed sanctions.

2.

This brings us to DynaVision's claims brought under section 20(a) and Rules 10b-5(a) and (b). In part IV, we analyzed the evidence bearing on the reliance element of the Rule 10b-5(b) claim. Plaintiffs claimed the reliance element was satisfied because but for Peeples's denial of involvement in the Put and Call, DynaVision would have purchased the Active Members' interests. We, however, agreed with the district court that, as a matter of law, Peeples's denial played no role in DynaVision's decision to forego the purchase. A reasonably competent attorney fully aware of the information plaintiffs had provided their attorneys and the evidence adduced in state court, including the damaging admissions Paul Walker, Ledford, and O'Dell had made on deposition, would not have filed this Rule 10b-5(b) claim. Plaintiffs' counsel nevertheless certified that the factual allegation that DynaVision opted not to purchase the Active Members' interests because it relied on Peeples's misrepresentations had evidentiary support. Counsel made the certification knowing that the allegation lacked evidentiary support and that the claim would fail. For that, sanctions should have been imposed.

Plaintiffs' attorneys argue that Section 9.1 of the Operating Agreement provided an adequate factual and legal basis for the Rule 10b-5(b) claim. They contend that if Peeples had admitted that he was loaning the Active Members the $3.5 million they needed to close, DynaVision's principals would have (1) concluded that the Active Members had pledged their interests as collateral for the loan and thereby breached Section 9.1 of the Operating Agreement, (2) rejected the Put and Call, and (3) obtained declaratory or injunctive relief barring the Active Members from enforcing[*1309] the Put and Call.^[139] This would have enabled DynaVision to maintain its fifty percent interest in what plaintiffs claimed to be a $10 million company.^[140]

Count One, however, did not allege that Peeples's misrepresentations kept DynaVision from going to court and obtaining declaratory or injunctive relief so that it could maintain the status quo ante.^[141] What plaintiffs' counsel seems to be saying, then, is that they could have presented a claim they did not bring and that, because the claim they did not bring had merit, they satisfied Rule 11(b)'s concerns.^[142] Such an argument could not serve as a justification for suing Peeples under the federal securities laws.

3.

Plaintiffs' brief on appeal does not challenge the district court's adverse dispositions of the claims DynaVision brought under section 20(a) and Rule 10b-5(a).^[143] Therefore, as for those dispositions, the appeal is deemed abandoned and the district court is affirmed. This does not relieve us, however, of the task of determining whether, in filing and prosecuting the section 20(a) and Rule 10b-5(a) claims, counsel disregarded Rule 11(b)'s requirements.

We first examine DynaVision's section 20(a) claim — that the Active Members, while under Peeples's control, breached a fiduciary duty to the plaintiffs.[*1310] This claim had two parts. The first part asserted that the Active Members breached a fiduciary duty by failing to disclose the contents of the January 21 letter and Peeples's offer. Because Peeples controlled the Active Members at the time of the breach, he became secondarily or derivatively liable to DynaVision. The second part asserted that Peeples was liable, as a controlling person, for Smith's we are "doing this on our own" statement, a misrepresentation actionable under Rule 10b-5(b) because it caused DynaVision to forego purchasing the Active Members's interests.^[144]

We determine whether a reasonably competent attorney would have brought this two-part section 20(a) claim against Peeples by considering first whether Peeples was a controlling person as defined by section 20(a).

In this circuit, a defendant is liable as a controlling person under section 20(a) if he or she "had the power to control the general affairs of the entity primarily liable at the time the entity violated the securities laws ... [and] had the requisite power to directly or indirectly control or influence the specific corporate policy which resulted in the primarily liability."

Brown v. Enstar Group, 84 F.3d 393, 396 (11th Cir.1996).^[145] In the situation at hand, "at the time the entity violated the securities laws" refers to February 8, 2002, when Smith uttered the we are "doing it on our own" statement. "[T]he entity primarily liable" refers to Smith and, because she allegedly spoke for Thomas and Owenby, the Active Members.

DynaVision posited that the following pieces of evidence established that Peeples controlled the Active Members' behavior in managing Signature and in dealing with DynaVision: (1) the January 21 letter of intent; (2) the "secret discussions" with the Active Members in January and February of that year; and (3) the Asset Purchase Agreement made after the Active Members acquired DynaVision's interest. The Asset Purchase Agreement was circumstantial proof of the non-binding discussions Peeples had with the Active Members before they issued the Put and Call, but it did not make him a controlling person at the time the Active Members committed the acts that allegedly rendered them primarily liable under Rule 10b-5. Neither did the secret discussions. The problem with relying on the January 21 letter of intent is the caveat appearing at the end of the letter: "to the extent of any conflict in the provisions of this Letter and the provisions of the Signature Operating Agreement, the provisions of the Signature Operating Agreement shall prevail and the conflicting provision(s) of this Letter shall be void and of no effect whatsoever." Peeples's lawyers drafted this language. They had read the Operating Agreement and were especially sensitive to its provisions. They were particularly attuned to the affirmative obligations that the Agreement imposed on the Active Members and the extent to which it restricted their activity — for example, to the prohibition on the Active Members pledging their interests in Signature as collateral for a loan. The caveat served to ensure that nothing Peeples had written, or that the parties[*1311] had discussed, could be considered as interfering with the Active Members' obligations to Signature and its Members. Peeples's lawyers wanted to avoid exposing their client, and the Active Members as well, to litigation.

A reasonably competent attorney would have rejected the idea that Peeples was a controlling person and, for that reason alone, would not have filed the Count One section 20(a) claim against Peeples. Even if Peeples had been a controlling person, however, the Active Members never breached any fiduciary duty, and Peeples therefore could not be secondarily liable.

The argument that the Active Members breached a fiduciary duty, like the argument that Peeples was a controlling person, lacked any legal or evidentiary support. Smith's "doing it on our own" statement was not actionable under Rule 10b-5(b)^[146] because it had nothing to do with DynaVision's decision to sell its interest in Signature rather than purchase the Active Members' interests.^[147] Absent Smith's primary liability under Rule 10b-5(b), Peeples could not be held secondarily liable under section 20(a).

Similarly, reasonably competent counsel would have concluded that there was no support for the allegation that the Active Members had fiduciary a duty to disclose the January 21 letter and Peeples's "offer." Such a disclosure is not required by Georgia common law, the Limited Liability Act, the Operating Agreement, or Rule 10b-5. In Ledford v. Smith, the Georgia Court of Appeals rejected the argument that the Limited Liability Act and/or the Operating Agreement required the Active Members, as fiduciaries, to disclose their pre-Put and Call negotiations or understandings with Peeples. 618 S.E.2d at 635-36.^[148] Reasonably competent counsel would therefore have concluded that Rule 10b-5 jurisprudence provided no support for the fiduciary duty DynaVision asserts.

DynaVision argues that, under the Supreme Court's decisions in Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), and its progeny, e.g., Chiarella v. United States, 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980), the Active Members were fiduciaries and that their silence — their failure to disclose the gist of their discussions and arrangements with Peeples — rendered them liable under Rule 10b-5. These cases are inapposite.

It is true, as the Chiarella Court stated, that

[A]dministrative and judicial interpretations have established that silence in connection with the purchase or sale of securities may operate as a fraud actionable under § 10(b) [of the 1934 Act] despite the absence of statutory language or legislative history specifically addressing the legality of nondisclosure. But such liability is premised on a duty to disclose arising from a relationship of[*1312] trust and confidence between parties to a transaction. Application of a duty to disclose prior to trading guarantees that corporate insiders, who have an obligation to place the shareholder's welfare before their own, will not benefit personally through fraudulent use of material, nonpublic information.

445 U.S. at 230, 100 S.Ct. at 1115-16.

A reading of the Operating Agreement makes it clear, however, that the Active Members, vis-a-vis DynaVision, were not akin to corporate insiders;^[149] nor was DynaVision like a corporation shareholder. Signature's six-person Board of Directors was divided equally between the Active Members and DynaVision. The Active Members appointed themselves; DynaVision filled only one of its spots, appointing its accountant, Staten, and left the other two vacant. This did not give the Active Members the upper hand because the Agreement specified that the Board had to approve "all" of Signature's "actions," which meant that, if the Active Members agreed to an action, Staten had to agree too, or that action could not be taken. In short, DynaVision had an equal voice in the conduct of Signature's affairs and unlimited access to Signature's business records and financial information.

DynaVision suggests that by engaging in secret negotiations with Peeples and involving him in the Put and Call, the Active Members became the equivalent of company insiders and therefore assumed a duty of disclosure.^[150] The Georgia Court of Appeals rejected this idea with the observation that Section 7.3 of the Operating Agreement "allow[ed] the Active Members to negotiate with Peeples for the purpose of obtaining financing to fund their buy-out of DynaVision's interest." Ledford, 618 S.E.2d at 636.^[151]

If Section 7.3 did not make it clear that the Active Members could negotiate with Peeples in secret, however, Section 9.2, entitled "Right of First Refusal," did.^[152] Section 9.2 gave a Member the right to receive a "bona fide offer" from a third party to purchase the Member's interest without informing the other Members of the offer. If a Member had the right to receive an offer, it also had the right to solicit an offer and, in doing so, to negotiate with the third party in secret. The Member's duty to inform the other Members of an offer would not arise unless and until the Member "desire[d]" to accept the offer, at which point the Member would have to notify the other Members of the offer. The notice would, in turn, trigger the other Members' right of first refusal.

In the scenario before us, the Active Members exercised their right to negotiate with Peeples in secret. Peeples made an offer, but it was not an offer to purchase the Active Members' interests and thus did not trigger an obligation to notify DynaVision. Even if we were to assume that[*1313] Peeples made an offer (evidenced by the January 21 letter of intent and the other pieces of evidence plaintiffs cite), the Active Members' failure to disclose it to DynaVision would not render the Active Members amenable to suit under Rule 10b-5, for they would not have breached a fiduciary duty. Perhaps DynaVision could sue them for breach of contract, but it evidently declined to bring that cause of action in Ledford v. Smith.^[153]

In sum, DynaVision's section 20(a) claim was baseless on two grounds: (1) Peeples was not a controlling person, and (2) neither Smith nor the Active Members could have been held primarily liable under Rule 10b-5. A reasonably competent attorney, aware of the evidence at plaintiffs' counsel's disposal prior to filing suit, would have recognized this and declined to prosecute the claim.

4.

Having concluded our analysis of the section 20(a) claim, we turn to the claim DynaVision brought under Rule 10b-5(a). Rule 10b-5(a) proscribes a "device, scheme, or artifice to defraud." To recover under this rule, the plaintiff must show not only that the defendant concocted a plan to defraud, but that the plan was successful — that is, that the defendant, acting with scienter, misrepresented a material fact on which the plaintiff relied to his detriment.^[154]See Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir.2001). The misrepresentations DynaVision relied on to establish this claim were those Peeples and Smith made. They were not actionable because DynaVision did not rely on them in electing not to purchase the Active Members's interest. DynaVision's Rule 10b-5(a) claim had no foundation in the evidence. The district court rejected the claim without discussion, because none was required. The court should have gone one step further and found that counsel ignored Rule 11(b)(3)'s admonition in bringing it.

For the foregoing reasons, we conclude that a reasonably competent attorney would not have filed and prosecuted DynaVision's Count One claims because the attorney could not certify that the claims had the evidentiary support required by Rule 11(b)(3), or the Count One claims of co-plaintiffs because the attorney could not certify that those claims had the evidentiary support required by Rule 11(b)(3) and were warranted by existing law.^[155] The district court was therefore required by the PSLRA to sanction plaintiffs' counsel, H. Greely Joiner, LLC., and H. Lamar Mixon, David G.H. Brackett, and their law firm, Bondurant, Mixon & Elmore, LLP.

5.

We now consider whether the district court should have sanctioned plaintiffs as well as their attorneys. A plaintiff is subject to monetary sanctions if the plaintiff misrepresented the facts alleged in the complaint. See Byrne v. Nezhat, 261 F.3d at 1117-18.^[156] In this case, we[*1314] assume that what the individual plaintiffs and Paul Walker told plaintiffs' counsel prior to filing suit was essentially what they stated on deposition in state court and repeated on deposition in the district court, to-wit: DynaVision chose to sell its interest because it would have "made no sense," it would have been "foolish," to elect the Put and Call option to purchase the Active Members' interests.^[157] These were straightforward, damaging admissions. The decision of these laymen to file suit and to continue on to the end here was made on the advice of counsel. That said, we find no basis for imposing monetary sanctions on plaintiffs.

The PSLRA presumes that "for substantial failure of any complaint to comply with any requirement of Rule 11(b) ... [the appropriate sanction] is an award to the opposing party of the reasonable attorneys' fees and other expenses incurred in the action." 15 U.S.C. § 78u-4(c)(3)(A)(ii).^[158] On receipt of our mandate, the district court shall determine the attorney's fees and expenses to Peeples incurred in defending the Count One claims.

VII.

The judgment of the district court disposing of plaintiffs' claims in favor of Peeples is AFFIRMED. The district court's order on sanctions is REVERSED, and the case is REMANDED for the imposition of sanctions on plaintiffs' Count One claims.

SO ORDERED.

EDMONDSON, Chief Judge concurring in the result in part and dissenting in part:

I concur in the result affirming summary judgment in favor of Defendants. But I cannot agree that Plaintiffs' lawyers must be sanctioned. I do not think that all Plaintiffs sought relief for securities fraud in the complaint; I instead read the complaint to assert those claims only on behalf of Plaintiff DynaVision Group, LLC: the undisputed seller of the security at issue here. Nor do I accept that no "reasonably competent lawyer" standing in the shoes of Plaintiffs' lawyers would have brought the claims for securities fraud. The claims could have seemed arguable at the time Plaintiffs sued Defendants in federal court: for example, no court had then ruled on the damaging effect of Plaintiffs' testimony in the related state case. Furthermore, it is important that the district court denied sanctions. As a matter of doctrine, we must afford the district court some deference about sanctions. See Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1448 (11th Cir.1998) ("The decision whether to impose Rule 11 sanctions is left to the district court's sound discretion."). Because I see no abuse of discretion in the decision of the district court declining to sanction Plaintiffs' lawyers, I dissent from the part of today's decision that concludes otherwise.

I would affirm the whole judgment — including the denial of sanctions — of the district court.

[*] Honorable John R. Gibson, United States Circuit Judge for the Eighth Circuit, sitting by designation.

No Solicitation of Company Employees or Customers. In the event a Member sells his Interest in the Company, the Member ... for a period of one (1) year after the sale of the Interest, shall not ... call, solicit or fulfill orders from customers or prospects who have been contacted by the Company within twenty-four (24) months prior to the sale of the Interest ... for the purpose of inducing those customers or prospects to cease doing business with the Company or to induce those customers to do business with another in competition with the business of the Company ....

On its face, section 10.4 appears to apply to DynaVision as well as the Active Members. In reality, it applied only to the Active Members. DynaVision had no contact with Signature's customers and, if it sold its interest, lacked the nohow to compete with Signature. In this opinion, we therefore treat section 10.4 as applying only to the Active Members.

HORST [Counsel for the Active Members]: So they [the Active Members] talked to you about these Crescent Extrusions invoices, and then after that discussion, they hand you the February 8th put-and-call letter?

LEDFORD: Well, it was — Larry [O'Dell] and I were sitting at the table, and Brenda [Smith] said something to the effect, "we may as well do this now," or something. I don't know. She was standing at that corner of her desk and she handed the put-and-call to us. I don't know if we had stopped discussing the Crescent invoices. I don't know if we had resolved any — I don't know. I just know that we discussed that and then we got the put-and-call.

HORST: What was your reaction when you got the put-and-call?

LEDFORD: I was shocked.

HORST: Why?

LEDFORD: I thought we had a good partnership.

HORST: What did you say to her when you got it?

LEDFORD: Well, after we read it, I asked if there was anybody else involved or a third party funding it, and she said "No, this is us. We're doing this on our own." I said, "Is there any chance that this could be undone?" And I think Larry [O'Dell] made the comment that "This partnership is over with." ....

HORST: What else did Mr. O'Dell say at that meeting other than "This partnership is over with?"

LEDFORD: I don't recall.

HORST: Didn't he say something to the effect that, "Oh, hell, Jim [Ledford], you know who's funding this and he's going to screw us"?

LEDFORD: He could've said something about that. I'm sure we had a real good idea who was funding it....

HORST: At any time did you say, "Hey, I'll kick in $1 million or $100,000 or some other amount if we can get some other people to kick in some money to buy out Bob [Thomas], Brenda [Smith] and Bryan [Owenby]"?

LEDFORD: We discussed — we discussed that, but the first thing was marketing. If we had marketing, we would have done — if we could have secured people to do the marketing, we would have been interested.

HORST: So you needed people who could run the business like Bob, Brenda and Bryan had?

LEDFORD: We needed people that could run the business, yes, sir.

HORST: Because you within Dynavision didn't have the competency or the skill set to run Signature Hospitality?

LEDFORD: I didn't have the experience with the customer base, no sir.

In his deposition in the district court case, Ledford testified:

SINKFIELD [Counsel for Peeples]: ... it was marketing help that was the key factor in your decision to sell rather than buy. Is that a fair statement?

LEDFORD: Had we been able to retain Brenda, we would have purchased the company.

SINKFIELD: Is it fair to say that marketing help was the key factor in your decision to sell rather than buy?

LEDFORD: The lack of a marketing group forced us to sell the company.

In his deposition in the state court case, O'Dell testified:

HORST: Now, DynaVision had the money to pay three and a half million dollars to the active members, didn't it?

O'DELL: I could have got the money

HORST: Why didn't you....

O'DELL: Without an operating group, a managing group, that would be most foolish on my part, in my decision or my opinion. ....

HORST: So you didn't think that if Dynavision bought out Bob, Brenda, and Bryan, you guys would have the ability to compete with them?

O'DELL: Not without qualified people in that field, no.

HORST: The Dynavision people were not qualified people in that field?

O'DELL: No, they weren't.

In his deposition in the district court case, O'Dell testified:

SINKFIELD: You are running out of time, correct?

O'DELL: Uh-huh.

SINKFIELD: Now, if you bought out the Active Members for 3.5 to give yourself time to complete [a deal with a potential third-party buyer for $8 million], that's what, about a million dollars differential .... that you could make just on turning it over . . . did you ever consider doing that?

O'DELL: Well, that would have been a heck of a gamble to take. I mean, you could have, obviously, looked at it that way and thought well, I'll maximize this in another 30 days or 60 days but that would have been a gamble you were taking. I could have been left with a company without any managers, without anyone that knew anything about marketing. No, that was — that — I don't think that was an option we could take....

SINKFIELD: You thought about, but you did not want to take the risk of buying the Active Members' interest on the potential that you could turn it and either make a profit or find somebody who could run it in time to keep it from going under. Is that a fair statement?

O'DELL: Correct.

In his deposition in the state court case, Walker testified:

HORST: Well, if you thought the company was worth more than the put-and-call offer, were you interested in trying to find somebody to lend you the money or for DynaVision to raise the money to buy out the company?

WALKER: We would have had to have found a marketing group to replace the existing marketing group. So its more than just the money, its a matter of also finding a group that can continue to grow the company.

HORST: You needed to find a marketing group because Dynavision did not have anybody that was associated with it that had the skill set that Bob, Brenda, and Bryan did; correct

WALKER: That is correct ....

HORST: So if you thought the offer that the active members made on February 8th of three and a half million dollars was too low, why didn't Dynavision buy the active members out of Signature Hospitality?

WALKER: I don't think that a marketing group could be found in the short period that they had to look for one.

In his deposition in the district court case, Walker testified:

SINKFIELD: So to your knowledge, one, you did not seek to borrow money, get a core investor, or anyone to assist you in buying out the Active Members Group; is that correct? You didn't personally do that?

WALKER: No.

SINKFIELD: Why not?

WALKER: There is no need to buy out the Active Members without a marketing group. The ability to obtain a marketing group first was necessary, since none of the Active — none of the Dyna-Vision Group were a part of the everyday management or marketing of Signature Hospitality.

SINKFIELD: Is there any other reason they you did not personally seek a financial source to assist you in buying out the Active Members' interest?

WALKER: That would have been the only reason.

9.2.1 Notice of Intended Disposition. No Member in the Company may sell less than all their Interest, and in the event a Member receives a bona fide offer from any person in an arms length transaction to purchase all of the Interest which they own in the Company and if the person receiving the offer of purchase desires to sell all the Interest that is the subject of the offer, notice of the desire to sell the Interest shall be given in writing to the other Members and the terms of the offer, which notice shall include the price offered, the name of the offeror, and the payment terms (the "Notice of Intended Disposition").

9.2.3 Option to Purchase — Sale by Active Member other than Dyna-Vision. Dyna-Vision shall have the right to purchase all of the ... Interest[s] to be sold at the same price and under the same terms and conditions as described in the [Active Members'] Notice of Intended Disposition. The election to purchase by Dyna-Vision shall be exercised by giving written notice to [the Active] Members within... thirty (30) calendar days after receipt of [the Notice of Intended Disposition].

The Active Members did not consider their discussions with Peeples and his offer to loan them the funds to acquire DynaVision's interest as a "bona fide offer" to purchase their interests in Signature so as to require them to notify DynaVision pursuant to Section 9.2.1; hence, they did not notify DynaVision of the discussions. Accordingly, to prevail on their sixth claim based on Sections 9.2.1 and 9.2.3, plaintiffs would have to prove that, prior to March 27 (when DynaVision became obligated to sell its interest), Peeples made the Active Members a bona fide offer to purchase their interests at a set price and on set terms, that they "desire[d] to sell" their interests to Peeples, that Section 9.2.1 therefore obligated them to notify DynaVision of the offer, that their failure to notify DynaVision breached that obligation, and that but for the breach, DynaVision would have exercised its right of first refusal and bought the Active Members' interests at the price and on the terms indicated in Peeples's offer. Under this scenario, the Active Members' February 25 Put and Call would become a nullity, replaced by the triggering of Section 9.2.3 of the Operating Agreement. That is, DynaVision would have purchased the Active Members' interests pursuant to Section 9.2.3 instead of selling its interest pursuant to the Section 9.5 Put and Call provision.

In managing the business or affairs of a limited liability company:

(1) A member or manager shall act in a manner he or she believes in good faith to be in the best interests of the limited liability company and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. A member or manager is not liable to the limited liability company, its members, or its managers for any action taken in managing the business or affairs of the limited liability company if he or she performs the duties of his or her office in compliance with this Code section.

To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 U.S.C.S. § 78c note]), any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

Rule 10b-5, 17 C.F.R. § 240.10b-5, was promulgated under section 10(b) and provides:

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,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the 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.

"Rule 10b-5 encompasses only conduct already prohibited by section 10(b). Though the text of the Securities Exchange Act does not provide for a private cause of action for section 10(b) violations, the [Supreme] Court has found a right of action implied in the words of the statute and [Rule 10b-5]." Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 128 S.Ct. 761, 768, 169 L.Ed.2d 627 (2008) (citations omitted). In this opinion, we refer to the section 10(b) and Rules 10b-5(a) and (b) claims in this case as claims under Rules 10b-5(a) and/or (b).

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, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.

(4) To the extent that, pursuant to paragraph (1) of this Code section or otherwise at law or in equity, a member or manager has duties (including fiduciary duties) and liabilities relating thereto to a limited liability company or to another member or manager:

(A) The member's or manager's duties and liabilities may be expanded, restricted, or eliminated by provisions in ... a written operating agreement; provided, however, that no such provision shall eliminate or limit the liability of a member or manager:

(i) For intentional misconduct or a knowing violation of law; or

(ii) For any transaction for which the person received a personal benefit in violation or breach or any provision of a written operating agreement; and

(B) The member or manager shall have no liability to the limited liability company or to any other member or manager for his or her good faith reliance on the provisions of a written operating agreement, including, without limitation, provisions thereof that relate to the scope of duties (including fiduciary duties) of members and managers.

O.C.G.A. § 14-11-305(4) (emphasis added).

[t]he contractual flexibility provided in [O.C.G.A. § 14-11-305] is consistent with O.C.G.A. § 14-11-1107(b) of the [Limited Liability Company] Act which provides that: "It is the policy of this state with respect to limited liability companies to give maximum effect to the principle of freedom of contract and to the enforceability of operating agreements."

Ledford, 618 S.E.2d at 636 (quotation omitted).

(a) ... in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.

Counts Two through Seven incorporated by reference the federal securities fraud claims asserted in Count One, and Counts Three through Seven incorporated the claims of all antecedent counts. See supra part II.B.1. The Count One claims were not culled out of Counts Two through Seven by the court on its own initiative or via a motion by Peeples for a more definite statement. Our discussion in the text proceeds under the assumption that the district court struck the Count One claims from Counts Two through Seven, and, moreover, struck from Counts Three through Seven all claims incorporated by reference.

(a) Permissive Joinder. All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these persons will arise in the action.

Our independent research of this issue indicates that whether DynaVision's interest could be considered a security is problematic. We are satisfied, however, that plaintiffs' allegation that DynaVision's interest was a security passes the threshold test set forth in Bell v. Hood. See Williamson v. Tucker, 645 F.2d 404, 416 (5th Cir. May 1981) (holding that the plaintiff's allegation that joint venture interests were securities was not so obviously frivolous as to fail the low jurisdictional bar in Bell v. Hood). In the absence of any briefing on this issue by the parties and in light of our resolution of plaintiffs' Rule 10b-5(b) claims in favor of Peeples, we see no need to decide whether DynaVision's interest was a security.

HORST: Did it make any difference to you whether there was a third party involved in funding Bob, Brenda, and Bryan's offer to purchase Dynavision ....

LEDFORD: Yes, it would make a difference to me.

HORST: Why?

LEDFORD: Because if Bob, Brenda, and Bryan didn't have financial backing from them, I don't think they could have bought our interest and I don't think this whole thing would have come up.

SINKFIELD: Do you know whether collectively and without help from a third person in some form or the other they had the resources to pay three-and-a-half million dollars for the Dyna-Vision interest?

LEDFORD: No, sir, I don't know.

SINKFIELD: You don't know one way or the other .... Did you have any opinion on the subject at the time?

LEDFORD: At the time we received the Put and Call ... I had an opinion, yes, sir.

SINKFIELD: And what was that opinion?

LEDFORD: That they probably could not.

SINKFIELD: And based on that opinion, how did you think they would pay for the Dyna-Vision interest if y'all decided not to buy them out?

LEDFORD: I didn't know.

SINKFIELD: Did you have an opinion as to what they would have to do?

LEDFORD: Well, I assumed if they bought us out ... they would ... have to borrow the money. If they couldn't do that, they would have to get the money from someone else.

In Walker's district court deposition, he testified as follows:

SINKFIELD: So you knew [the Active Members] had to have funding from [an outside] source, is that correct?

WALKER: If they closed the deal, yes.

SINKFIELD: And you knew, to the best of your knowledge, that they did not have sufficient resources among themselves to do it without outside funding; is that correct?

WALKER: I would say with suspicion, they didn't have. But to my initial knowledge, no.

SINKFIELD: But to the best information you had told you they couldn't fund it without outside help. Is that correct?

WALKER: To the best information I had, yes.

The Members have ... agreed that, without the express written consent of the Company and all other Members in the Company, they will not transfer, assign, sell, pledge, encumber, hypothecate ... any of their Interests... except strictly in accordance with the terms and requirements of the this Agreement, the same being exhaustive of all methods and means by which such [Interests] may be transferred. Any purported transfer in violation of any provision herein shall be void and of no effect, and shall not operate to transfer any title or interest to the purported transferee.

Like the Right of First Refusal Provision, supra note 47, this restriction had an uneven effect. Although the Active Members would have to obtain DynaVision's consent in order to pledge their interests in Signature as collateral for a loan, DynaVision's principals, namely Ledford, O'Dell, and Walker, would not have to obtain the Active Members' consent in order to pledge their interests in DynaVision — and, indirectly, their interests in Signature — as collateral for a loan. The Active Members' consent would be necessary only if DynaVision, itself, wanted to pledge its interest in Signature as collateral for a loan it was obtaining.

The defendants purchased the assets of [Signature] for consideration that was valued at over $10 million at the time of their agreement ... The bonuses in the Asset Purchase Agreement, which are capped at $5 million, combined with the direct payments to the Active Members and the forgiveness of the loan used to buy out DynaVision, exceeds $10 million.

There is no reference in the Asset Purchase Agreement to any bonuses "capped at $5 million," so we assume plaintiffs refer to the bonus provisions referred to supra note 28.

In addition to the base salary, each of the Active Members shall be entitled to an annual bonus, equal to twenty percent (20%) of the amount by which the net pre-tax profits of [Peeples] exceed One Million Five Hundred Thousand Dollars on an annual basis: provided, however (a) shortfalls in annual net pre-tax profits shall be carried forward to succeeding years ....

The employment contracts add the caveat that "the maximum amount payable by Employer to Employee [in bonuses] shall be one [$1.6 million]."

(1) through improper action or wrongful conduct and without privilege, the defendant acted to procure a breach of the primary wrongdoer's fiduciary duty to the plaintiff;

(2) with knowledge that the primary wrongdoer owed the plaintiff a fiduciary duty, the defendant acted purposely and with malice and the intent to injure;

(3) the defendant's wrongful conduct procured a breach of the primary wrongdoer's fiduciary duty; and

(4) the defendant's tortious conduct proximately caused damage to the plaintiff.

Insight Technology, Inc. v. FreightCheck, LLC, 280 Ga.App. 19, 633 S.E.2d 373, 379 (2006).

(c) Sanctions for abusive litigation

(1) Mandatory review by court

In any private action arising under this chapter, upon final adjudication of the action, the court shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint....

(2) Mandatory sanctions

If the court makes a finding under paragraph (1) that a party or attorney violated any requirement of Rule 11(b) ... as to any complaint ..., the court shall impose sanctions on such party or attorney in accordance with Rule 11....

The current version of Rule 11, with the exception of the above-quoted language and some stylistic changes, was adopted in 1993. The Advisory Committee's notes state:

The sanction should be imposed on the persons — whether attorneys, law firms, or parties — who have violated the rule or who may be determined to be responsible for the violation. The person signing, filing, submitting, or advocating a document has a nondelegable responsibility to the court, and in most situations is the person to be sanctioned for a violation. Absent exceptional circumstances, a law firm is to be held also responsible when, as a result of a motion under subdivision (c)(1)(A), one of its partners, associates, or employees is determined to have violated the rule. Since such a motion may be filed only if the offending paper is not withdrawn or corrected within 21 days after service of the motion, it is appropriate that the law firm ordinarily be viewed as jointly responsible under established principles of agency. This provision is designed to remove the restrictions of the former rule. Cf. Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120, 110 S.Ct. 456, 107 L.Ed.2d 438 (1989) (1983 version of Rule 11 does not permit sanctions against law firm of attorney signing groundless complaint).

The revision permits the court to consider whether other attorneys in the firm, co-counsel, other law firms, or the party itself should be held accountable for their part in causing a violation. When appropriate, the court can make an additional inquiry in order to determine whether the sanction should be imposed on such persons, firms, or parties either in addition to or, in unusual circumstances, instead of the person actually making the presentation to the court. For example, such an inquiry may be appropriate in cases involving governmental agencies or other institutional parties that frequently impose substantial restrictions on the discretion of individual attorneys employed by it.

(1) Plaintiffs and their counsel did not present this action for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) The claims and legal contentions presented by Plaintiffs and their counsel in this action were warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) The allegations and other factual contentions presented by Plaintiffs and their counsel had evidentiary support or were likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) Any denials of factual contentions made by Plaintiffs and their counsel were warranted on the evidence or were reasonably based on a lack of information or belief.