901 F.2d 1578 (11th Cir. 1990), 89-8601, Eberhardt v. Waters

Docket Nº:89-8601.
Citation:901 F.2d 1578
Party Name:Blue Sky , T.J. EBERHARDT, Plaintiff-Appellee, v. James L. WATERS, Defendant-Appellant, Lynda B. Waters, Dunwoody Medical Services, Inc., Defendants.
Case Date:May 23, 1990
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

Page 1578

901 F.2d 1578 (11th Cir. 1990)

Blue Sky ,

T.J. EBERHARDT, Plaintiff-Appellee,


James L. WATERS, Defendant-Appellant,

Lynda B. Waters, Dunwoody Medical Services, Inc., Defendants.

No. 89-8601.

United States Court of Appeals, Eleventh Circuit

May 23, 1990

Page 1579

John G. Haubenreich, John Archer Thompson, Jr., Greenfield Bost & Pendergast, for defendant-appellant.

Peyton S. Hawes, Jr., Robert Michael Dyer, Atlanta, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT and ANDERSON, Circuit Judges, and DYER, Senior Circuit Judge.

HATCHETT, Circuit Judge:

In this appeal, we affirm the district court's grant of summary judgment holding that an arrangement involving the sale of cattle embryos constituted the sale of a security under Georgia law.


Dr. T.J. Eberhardt, the appellee, invested in an investment program with International Cattle Embryo, Inc. ("ICE") a business entity engaged in producing and selling Santa Gertrudis cattle embryos. ICE provided a variety of services to purchasers, including the storing of the embryos in liquid nitrogen freezers, the transferring of embryos to recipient cows, the caring for any resulting calves, the registering of those calves, and the maintenance of all records.

ICE's operation involved the process of artificially inseminating superovulated "donor cows" for reproduction. Following insemination, if a pregnancy resulted, the embryos were flushed from the cows and stored in freezers cooled by liquid nitrogen. An investor, such as Eberhardt, could invest in the operation by purchasing embryos. Thereafter, the investors had the option of having the embryos implanted in recipient cows which ICE owned or leased, or of having the embryos transferred to an alternative ranch for implantation.

If a female calf were born from one of the embryos, ICE would care for it to maturity. Thereupon, the investor could use the cow as a donor, thereby giving the investor the ability to produce embryos rather than purchase them. In theory, the investor could use all female calves as potential donors. Because a male calf did not represent the same profit-making capability, the investor bore the risk that the calf would be born male.

Investors also had the option of trading purchased embryos for a heifer in order to obtain a donor without having to wait for a full-term pregnancy and the corresponding maturation period of their calves. By trading for the mature cow, investors could begin producing embryos at a much earlier time. An investor who purchased embryos from ICE had the option to engage ICE's management services, or to contract with another provider to have those services performed. The plan was attractive because an investor could obtain calves of a valuable breed without owning any cattle of the valuable breed.

Sometime in late 1985, ICE's directors, James L. Waters, William Earle Strother, and Hubert Peterson called upon Eberhardt and offered to sell him an interest in ICE's cattle embryo operation. Eberhardt, who had no experience with cattle, agreed to pay $100,000 to ICE for 40 Santa Gertrudis embryos. Later, he traded four embryos for a mature cow which bore one calf. Before Eberhardt had established a herd of Santa Gertrudis cattle to sell for profit, ICE encountered financial problems. Eberhardt attempted to transfer the cattle and embryos to another ranch, but the transfer never took place because the important records needed for the success of the project were either not kept as promised, or not transferred properly.

Page 1580


Eberhardt brought this lawsuit against ICE, Waters, Strother and Peterson seeking to recover the initial $100,000 investment, punitive damages, and other monetary damages. In Count IV of the complaint, Eberhardt alleged that the investment program was not registered with the Secretary of State of Georgia although it constituted the sale of a security under the Georgia Securities Act. He sought to rescind the agreement based on ICE's failure to register the security with the Georgia Secretary of State's Office as required by O.C.G.A. Sec. 10-5-5.

Following Eberhardt's voluntary dismissal of Peterson, the district court entered default judgments against ICE and Strother. Additionally, the district court granted summary judgment in favor of Eberhardt and against Waters on Count IV concluding that the sale of embryos constituted the sale of a security under the Georgia Securities Act.


Waters appeals the district court's grant of summary judgment contending that unresolved factual disputes remain. Eberhardt, on the other hand, contends that no genuine issues of material fact exist, and he is entitled to judgment as a matter of law because the transaction constituted the sale of a security under Georgia law.


The sole issue in this appeal is whether Eberhardt is entitled to summary judgment.


An order granting...

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