United States Court of Appeals,
Fifth Circuit.
No. 93-2742
Summary Calendar.
Alan GRANADER, Plaintiff-Appellant,
v.
Jim D. McBEE, Defendant-Appellee.
June 22, 1994.
Appeal from the United States District Court for the Southern
District of Texas.
Before REYNALDO G. GARZA, SMITH and WIENER, Circuit Judges.
PER CURIAM:
Alan Granader ("Granader") appeals the district court's grant
of summary judgment against him, and the district court's award of
Rule 11 sanctions. Finding no error, we AFFIRM the district court
on both points of appeal.
I. FACTS
In December of 1988, Alan Granader borrowed $50,000 from First
National Bank of Texas ("Bank") to purchase 5,000 shares of Bank
common stock for his children. When the Bank did not deliver his
stock, Granader made inquiries about the status of the stock. Upon
being provided a copy of the stock certificates in 1989, Granader
discovered that the stock had been incorrectly issued in his name,
rather than his children's names. He also discovered that the
stock was not a new issue, but a transfer of Jim D. McBee's, the
Bank's president, stock. In spite of this information, Granader
did not file suit or seek a correction.
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On July 23, 1992, the Bank was declared insolvent at which
time the FDIC was appointed Receiver of the Bank. Granader filed
a suit in Harris County state court against Jim D. McBee ("McBee")
and the FDIC. The FDIC removed the suit to federal court. McBee
moved for summary judgment and the district court granted summary
judgment in favor of McBee and the FDIC.1 McBee later filed a
motion for Rule 11 sanctions against Granader. The district court
granted the motion and ordered Granader to pay $8,890 in sanctions.
Granader timely appealed to this court.
II. DISCUSSION
Granader claims the district court erred in granting summary
judgment in favor of McBee, and in granting McBee's motion for Rule
11 sanctions.
A. Did the district court err in granting summary judgment?
Granader asserts that the district court erred in granting
summary judgment in favor of McBee, because McBee failed to meet
his summary judgment burden. Granader argues that the district
court granted summary judgment on all of his claims even though
McBee's motion failed to mention his claim under Section 33 of the
Texas Securities Act and his shareholder derivative claim.
Granader argues that silence and omission cannot inform the
district court of anything, nor identify parts of the record to
support summary judgment. See N.L. Industries v. GHR Energy Corp.,
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A prior panel of this court granted the FDIC's motion to
remand on the basis that it had not asked for summary judgment,
and Granader was not given proper notice that the district court
was going to grant summary judgment in favor of the FDIC.
2
940 F.2d 957, 965 (5th Cir.1991), cert. denied, --- U.S. ----, 112
S.Ct. 873, 116 L.Ed.2d 778 (1992) (This court rejected as
"disingenuous" defendant's efforts to support summary judgment on
all claims where it only sought summary judgment as to some
claims.).
Granader argues that in granting summary judgment on the
non-contract claims, the district court relied on the inaccurate
view that he brought his cause of action only after the Bank failed
and he lost his investment. Granader claims that he sued McBee in
1991 and sued the Bank on July 22, 1992, before the Bank failed on
July 23, 1992.
Granader also argues that even if we believe that McBee met
his summary judgment burden, clearly he met his burden of showing
that genuine issues of material fact exist. Granader claims that
McBee's motion is predicated on the following two arguments: (1)
McBee made no representations to Granader, hence, Granader could
not have relied on same; and (2) there was no agreement between
McBee and Granader. Granader, however, claims that he presented
evidence that McBee made oral representations about the Bank's
stock in at least one Bank board meeting and that these
representations were directly relayed to Granader by his brother,
Dan Granader.2 Granader also claims that he presented evidence
that McBee made written representations about the Bank's stock in
materials that the Bank directly relayed to Granader. Granader
2
Dan Granader was a First National Bank of Texas board
member.
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concludes that because of the conflicting evidence, fact questions
exist for jury resolution.
Granader further argues that a substantial portion of his suit
effectively involves fraud and misrepresentation of one specie or
another. Granader claims that under Texas law, "whether a fraud
has been committed is a fact question to be determined by the trier
of facts." Berquist v. Onisiforou, 731 S.W.2d 577, 580
(Tex.App.—Houston [14th Dist.] 1987, no writ). Finally, Granader
argues that there are fact questions present in his shareholder
derivative claim. He claims that although the funds from his
purchase of "new issue" stock were to go to the Bank to provide
additional working capital, the funds instead were diverted to
McBee in exchange for "old stock."
We review the district court's grant of summary judgment by
reviewing the record under the same standards which guided the
district court. Alexandria Associates, LTD., v. Mitchell Co., 2
F.3d 598, 600 (5th Cir.1993). A grant of summary judgment is
proper when no genuine issue of material fact exists that would
necessitate a trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-
25, 106 S.Ct. 2548, 2552-54, 91 L.Ed.2d 265 (1986). In determining
whether the grant was proper all fact questions are viewed in the
light most favorable to the nonmovant. Questions of law, however,
are decided de novo. Walker v. Sears, Roebuck & Co., 853 F.2d 355,
358 (5th Cir.1988). The moving party has the burden of showing
that there is no genuine issue of material fact and that the moving
party is entitled to judgment as a matter of law. Williams v.
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Adams, 836 F.2d 958, 960 (5th Cir.), reh. denied, en banc, 844 F.2d
788 (5th Cir.1988). Once the movant carries this burden, the
burden shifts to the nonmovant to show that summary judgment should
not be granted. Celotex, 477 U.S. at 324-25, 106 S.Ct. at 2553-54.
A party opposing a properly supported motion for summary judgment
may not rest upon mere allegations or denials of pleading, but must
set forth specific facts showing the existence of a genuine issue
for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57,
106 S.Ct. 2505, 2514-15, 91 L.Ed.2d 202 (1986).
The district court properly granted summary judgment in
McBee's favor. McBee disproved, as a matter of law, at least one
essential element of each of Granader's causes of action. By
Granader's own admission, there was no agreement between him and
McBee. Furthermore, they never discussed the purchase of the
Bank's stock. Hence, Granader cannot prove his cause of action for
breach of contract, because the uncontroverted evidence is that
there was no agreement whatsoever between Granader and McBee.
Granader also cannot prove his cause of action for common law
or securities fraud. Reliance is an element of both common law and
statutory fraud in a securities transaction. Haralson v. E.F.
Hutton Group, Inc., 919 F.2d 1014, 1025 n. 4 (5th Cir.1990) (Texas
imposes civil liability for false representations of material facts
or material promises that are relied on by [a plaintiff] in
entering into [a real estate or stock] contract.). By his own
admission, Granader cannot prove that he relied upon any
representation, communication or statement by McBee when he
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purchased the Bank's stock.
Furthermore, Granader cannot prove that McBee's conduct
constitutes grounds for recision pursuant to Section 33 of the
Texas Securities Act. Although reliance is not required in a
Section 33 action, materiality is. An omitted fact is material if,
there is a
substantial likelihood that, under all the circumstances, the
omitted fact would have assumed actual significance in the
deliberations of the reasonable shareholder. Put another way,
there must be a substantial likelihood that the disclosure of
the omitted fact would have been viewed by the reasonable
investor as having significantly altered the "total mix" of
information made available.
TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct.
2126, 2132, 48 L.Ed.2d 757 (1976). Granader's complaint that he
would not have purchased the stock if he had known that the stock
would be issued in his name rather than his children's names, does
not, as a matter of law, rise to the level of materiality.
Finally, Granader cannot prove his claim for negligent
misrepresentation. Reliance is an element of negligent
misrepresentation. Federal Land Bank Ass'n of Tyler v. Sloane, 825
S.W.2d 439, 442 (Tex.1991). By Granader's own admission, he cannot
prove that he acted in reliance upon any representation,
communication or statement by McBee when he purchased the stock.
B. Did the district court err in granting the motion for Rule 11
sanctions?
Granader argues that the district court's order granting Rule
11 sanctions should be reversed. He claims that the district
court's order fails to meet the requirements for appellate review.
He asserts that the district court failed to: (1) enter specific
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factual findings; (2) indicate in the record all the factors it
considered in choosing the attorney's fee award as a sanction; (3)
state in the record which alternative sanctions, if any, it also
considered; and (4) explain why the sanction it imposed was the
least severe sanction adequate to serve the purposes of Rule 11.
See Akin v. Q-L Investments, Inc., 959 F.2d 521, 534-35 (5th
Cir.1992).
Granader also asserts that the order constitutes an abuse of
discretion. Granader claims that the order is based on the
district court's erroneous view that his suit against McBee was
wholly frivolous. Granader further asserts that the order
constitutes an abuse of discretion because McBee waited until
termination of the suit to file his motion for Rule 11 sanctions.
Granader claims that this court has condemned this practice as
untimely, a failure to mitigate, and retaliatory. Thomas v.
Capital Sec. Services, Inc., 836 F.2d 866, 881 (5th Cir.1988) (en
banc).
As Granader points out, we review a district court's award of
sanctions for an abuse of discretion. Akin, 959 F.2d at 534
(citing, Thomas, 836 F.2d at 872.). The district court, in its
order awarding the sanctions, stated,
[McBee's] cross-motion for sanctions is GRANTED in the amount
of $8,890.00. It is the Court's opinion that the plaintiff's
suit against Jim D. McBee is wholly frivolous and should not
have been brought. The evidence shows no representations made
by McBee and no reliance on McBee by Granader. The
plaintiff's insistence on suing McBee is disingenuous to say
the least.
Contrary to Granader's assertions, the district court's order
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adequately meets the requirements for appellate review set out in
Akin. The district court made specific factual findings. The
district court found Granader's suit wholly frivolous, and stated
that it should not have been brought. It based this decision on
the fact that the evidence showed that McBee made no
representations and no reliance on McBee by Granader.
This court has stated that the relevant policy concerns
underlying Rule 11 are as follows:
"On the one hand, rule 11 sanctions are designed to deter
frivolous lawsuits. Sanctions also insure, to a large degree,
that victims of frivolous lawsuits do not pay the expensive
legal fees associated with defending such law suits....
On the other hand rule 11 only authorizes "reasonable' fees,
not necessarily actual fees."
Thomas, 836 F.2d at 879 (quoting, United Food & Commercial Workers
v. Armour and Co., 106 F.R.D. 345, 348-49 (1985)). When the
district court stated that Granader's suit was wholly frivolous and
should not have been brought, it explained why the award of McBee's
attorney's fees was the least severe sanction adequate to serve the
purposes of Rule 11.
Therefore, we find that the district court did not abuse its
discretion in awarding Rule 11 sanctions against Granader.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court's
grant of summary judgment in favor of McBee, and award of Rule 11
sanctions against Granader.
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