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IN RE:
DONALD J. TRUMP CASINO
SECUR I T I ES L:T IGATION
T AJ MAHAL LIT I G A T I ON
MDL 864
/1 1 JC.,
( JFG )
(Ciil Asig No .
9 0 - 0 91 9 )
O P I NI O N
APPEARAN CES:
R i chard D . Greenf i e l d , E s q .
Mark C . Rivkin , Es q .
Green f i e l d & Chim i c l e s
O n e Haverford Centre
H a v e r f ord , PA 1 9 0 4 1
S tuart Wechs l e r , Esq .
J o e l C . F e f f er , Esq.
Wech s l e r S k i rn i ck H a rwood H a l eb i an
& F e f fer
5 5 5 Madi son Avenue
New York , N . Y . 1 0 0 22
Attorneys
F J L E D
.,., 2
AT 6:30
for P l a int i f f s
C a r l D . Pop l a r , Esq .
1 0 1 0 Kings H i ghway South
Che rry H i l l , N . J . 0 8 0 34
L i a i s on Attorney for P l a in t i f f s
John J .
Clapp &
8 0 Park
New a rk ,
Barry , Esq .
E i s enberg , P . C .
P l aza
N . J . 07 102
i992
...
stuart J . B a s k in , Esq .
S h e a rman & S t e r l ing
One C i t icorp Center
1 5 3 East 5 3 rd S treet
New York , N . Y . 1 0 0 22
Attorney for Merr i l l , Lynch , P i e rc e ,
Fenner & S m i th , Inc . , D e f e nd a n t
GERRY ,
Ch i e f Judge
Trump ,
Trump T a j
Mahal
Inc . ,
P i e rce ,
with pre j ud i c e ,
Taj
( " Merr i l l
R.
Harvey s .
Robert S . Trump ,
Civ .
defendants '
Lynch" )
P.
for d i s m i s s a l
For the
12 ( b ) ( 6 ) .
mot i on is granted .
BACKGROUND
The Taj
Mahal
i s a hote ljcasino
Inc .
In 19 8 8,
( "the bonds" ) .
( "R e s o rts" )
as the
The
New Jersey .
in 1 4 %
f i rst
( " the
(
After l earn ing that the Taj
intended t o f il e
D i s t r i c t of New York ,
D i s t r i c t of New Jersey ,
the prospectus
i n the S outhern
and the
f raud l aws .
19 9 1 ,
memo r i a l i z ed i n a "Memorandum o f
( " MOU") .
In
couns e l .
Lynch ,
1 9 91.
This
f i l ed j o i n t l y b y t h e T rump d e f endants a n d
f o l l owed.
THE COMPLAINT
Count one o f p l a int i f fs 1
the prospectus
facts and
in v i o l a t i o n of sect i ons
Secur i t i es Act of 1 9 3 3 .
prospectus
11 ,
and
15
of the
i n v i o l a t i o n of sections lO ( b )
Exchange Act of 1 9 3 4 ,
12(a)
and 2 0 ( b )
o f the
a s part of the
securit i e s fraud c l a i m ,
is
Count f our is a
c l a ims .
1.
A l though cha l l eng i ng the prospectus d iect l y , p l a i nt i ffs
f a i l ed to a t t a c h a copy o f i t to the i r comp l a i nt.
Indee d ,
p l a i n t i ffs d i d not even r e f erence page numbers of the p o rt i ons of
the prospectus quoted or cha l l enged in the comp l a i nt .
De fendants
have submi t t e d a comp l e t e copy o f the pro spectus on t h i s
d i s m i s s a l mot i o n , and argue that w e should cons i d e r i t even
though p l a in t i f f s f a i l e d to attach it to their p l e a d ing , despite
the fact that 1 2 ( b ) ( 6 ) moti ons to d i s m i s s are to be l im ited to
matters r a i s e d in the pl ead i ngs .
We agree , and "dec l in e to c l o s e
our e y e s t o t h e contents o f the prospectus and t o c r e a t e a rule
perm i t t i ng a p l a i nt i f f to evade a prope r l y argued m o t i o n to
d i s m i s s s imp l y because p l a i nt i f f has chosen not to a t t a c h the
prospectus to the comp l a in t or to incorporate it by r e ference . "
I . Meye r P incus & Assoc . v. Oppe nheimer & Co. , 9 3 6 F . 2d 7 5 9 , 7 6 2
( 2d C i r . 1 9 9 1 ) .
See a l s o Roma n i v . S h e a rson Lehman Hutton , 9 2 9
F . 2d 8 7 5 , 8 7 9 n . 3 ( l st C i r . 1 9 9 1 ) .
According l y , w e w i l l cons ider
the prospectus together with the pl eadings on t h i s mot i o n .
4
'
i n b o l d p r i nt:
investors . "
There f o l l ows a s e c t i o n
fac i l i ty
"See
f o r a discu s s i o n o f cert a i n f a c t o r s t o
comp l e t i on ,
deta i l ed document .
i nt e r a l i a that
" [u]po n
prospectus summary
Prospectu s ,
at 3 . 2
sect i on:
Spec i al considerations
Maha l .
i n i t a l i c i z ed p r i n t :
2.
3 1 o f the prospectu s .
Bonds .
Prospectus at
l isted in the
" S pec i a l
( emphas is added ) .
s e c t i on i s
DISCUSSION
S t andards on M o t i on to Dismiss
I.
A Ru le 1 2 ( b ) ( 6 )
Scheuer v .
Rhodes ,
416 U . S .
Program ,
9 28
F.
favor .
2d 1 3 9 2
Exxon Co . I U . S . A .
Div .
236
( 19 7 4 ) .
We must
construe them l i b e ra l l y ,
in p l a int i f f 's
232 ,
S e e Unge r v .
( 3d Cir .
199 1 ) ;
o f Exxon Corp. ,
Supp .
v.
1100 (O.N.J.
(
.1991); Gutman v. Howard Sav. Bank,
1990); Leaty v. U.S.,
74 8 F. Supp. 254
(D.N.J.
If,
Plaintiffs urge
We disagree.
Ct. 1127
8 8 3 F.2d 245,
247
The
We do
not think that these materials fall within the ambit of the
comp l a i n t ,
1 2 ( b) ( 6 ) .
II .
within
from this
d i s t r ict but a l s o from the S outhern Di s t r ict of New York and the
Eastern D i s t r ict of New York ,
The que s t ion to be decided i s whether the law o f the Th i rd orS econd C i rcu i t cont r o l s our dec is ion .
In
1407 ,
the
law o f the trans feror forum must be g iven " c l o s e con s i d e r a t i o n , "
but the l aw o f the tran s feree
Cir.
1, 198 3 ,
8 29
F . 2d 1 1 7 1 ,
I n re
1 17 6
1987) .
The federal courts spread across
the country owe respect to each
other ' s e f f o rt s and should strive
to avoid c o n f l icts , but each has an
B e l l A t l an t i c
LEX I S 1 5 8 7 4
the comp l a int ,
m o t i o n to
i n cases
(_
Accord i ng l y ,
As d e f endants p o i nt out ,
issues
in the Th i rd C i rcu i t ,
wh i l e we
III .
The
15 u.s.c.
thereunder . 5
5.
10
and s ec t i o n
S ec t i o n
15 S . C .
78j (b) ,
15 u.s.c.
as
11,
as amended ,
7 7k ( a )
5.
false
( . . . continued)
( 2 ) every person who was a director
o f . . . or partner in , the issuer at
the time o f the f i l ing of the part
of the regi stration statement w i th
respect t o which his l i ab i l ity i s
a s s erted ;
( 5 ) every underwr iter
with respect to such secur i t y .
S ection l O ( b ) ,
1 5 u.s.c.
7 8 j ( b ) provides in
(
and mis l eading statements or omissions .
the
the
A l l the s e aspects
5.
D e fendants have argued va rious a l t e rnative grounds f o r
dismi s s a l , specific a l l y that the comp l aint f a i l s to s atis f y the
fraud pl eading requirements o f Fed . R . Civ . P . 9 ( b ) ; that it
fails to prope r l y p l e ad the statute o f limitations; and that it
fail s to adequa tely p l e a d reliance on the a l l eged
misrepresentations , an e s s entia l e l ement to recove ry under
sections 1 1 and lOb .
Because we dispo s e o f the motion o n the
1 1 b e speaks caution 11 and other rel ated b a s e s , we do not reach the s e
a l t e rnative arguments .
11
(
IV.
Fraud
See Romani
(1st Cir.
1991);
v.
I. Meyer Pincus
&
Associates v. Oppenheimer
1991); Sinay v. Lamson &
1991); Mo orhead v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 949 F.2d 243, 245-46
( 8th Cir. 199 1); In re Convergent Technologies Secu rities
Litigation,
A.
(
me r i t s f o r d e f endants a ft e r trial ,
Id . ,
5 52 F.2 d a t 8 06 ,
n.
28 .
Subsequent l y ,
Edelst e i n ,
as s em i nal .
pla i nt i f f s '
802 F . 2 d 4 9
The court
( 2d Cir.
1986 ) ,
a c a s e generally regarded
other
13
(
Id .
at 5 6
( emphas i s added ) .
approach c o n s i s t e nt l y .
See
Hagge rty
v.
( S . D.N.Y.
739 F.
Comstock G o l d Co . , L . P . ,
19 9 1 ) ;
Supp .
158 ,
162
(S .O.N.Y.
120 1-02
(S. D.N.Y.
v.
E . F.
1990 ) ;
1990)
F.
Supp .
111 ,
Cru ickshank v .
114
Go l d f e l d ,
( w i th respect to future
7 65
Hutton Group,
Friedman v.
730 F .
735 F .
Supp .
Arizona World
Supp .
5 2 1 , ?41
(S.O. N.Y.
v.
1989 ) ;
Stevens v.
1 9 8 0, Petrol/Coal Program 1,
( 2d Cir 1 9 9 1 ) ;
7 19
F.
Supp .
222 ,
694 F .
Supp .
1057,
1063
(S.O.N.Y.
b e specu l at iv e ) ;
168 ,
F . 2d 594
(S .O.N.Y.
19 8 8 )
927
17 1
document
Feinman v .
(S .O.N.Y.
19 8 8 )
677 F .
v.
Ede l s t e i n a l s o h a s b e e n c it e d w i th
Inc .
(O.N.J.
1989 )
Bondholde r s '
( Gerry ,
Supp.
In
Litigation ,
C.J.),
7 22 F .
Supp .
152 ,
17 1
14
(_
at 1 7 1
( c i t ations omitted ) .
"It
There fore ,
B.
Id.7
the
the Firs t ,
S econd ,
S ixth ,
Approach
Eighth
7.
National Smel ting is the onl y case in this circuit which has
O n l y one other
applied Luce and the " be s p e a k s caution" doctrine .
::: a s e in this circuit has r e f e rred to the " b espeaks caution"
approach of Luce v. Ede l s tein .
See Fitch v . Radnor Industries,
In
Ltd . , 1 9 9 0 U . S . Dist LEXIS 1 3 023 ( E . O . Pa . Octob e r 2 , 1 9 9 0 ) .
Fitch , the court refe rred to Luce but did not reach app l ication
f it because the court found dismis s a l warranted on Rul e 9 ( b )
grounds o f inadequat e l y p l ead fraud .
15
v.
In
the p l a i n t i f f s had a l l eg e d
Roman i ,
9 2 9 F . 2d at 8 7 6 .
Plaintiffs
The F i rs t C i r cu i t ,
prospectus:
Id.
at 8 7 9 .
horse-breed ing
wh ich
' clearly
i n the
Documents such a s th i s ,
. . . ."
Id.
P l a i nt i f fs
8.
The Th i rd C i rcu it has yet to cons ide r the i s sue .
have argued that a T h i rd C i rcuit c a s e , H e rskow i t z v.
Nutri/Sys t em , 8 5 7 F . 2 d 17 9 , 1 8 5 ( J d C i r . 1 9 8 8 ) , " rej ect s " the
" be s p e a k caut i o n " argument rel i e d upon by defendants .
However ,
Herskowitz nev e r addre s s e d the " b e speaks caut i o n " app roach and
Moreove r , in
there fore cou l d not have and did not re j ect i t .
Herskowitz the truth or f a l s ity o f an expert o p i n i on w a s at
The
i s su e , rather than management's forecasts and predict i o n s .
ana l y s i s for each is neces s a r i l y d i f f erent , because the l atter
dea l s m e r e l y w i t h specu l at i o n a s to future events and r e s u l ts ,
cond i t i o ne d on factors o f uncerta i n r e s o l ut i o n , rath e r than
e x i s t ing factual in forma t i on .
16
(
S im i l a rl y ,
Oppe n heimer
&
in I .
Meyer P incus
&
A s s o c i a t es v .
liabil ity"
on the b a s i s of
prospectus
[wh i ch )
c l e a rly
rather than
language o f t h e prospectus ,
"when r e a d i n context ,
mat e r i a l ly m i s l e a d i ng . "
Meyer P incus ,
I.
i s not
9 3 6 F . 2d a t 7 6 3 .
The
court a l s o cons idered important the fact that " the f i rs t sentence
of the P r o s p ectus Summa ry ,
qua l i f i ed
'is
in forma t i o n
unamb iguous ly
Lamson
Id .
&
(Empha s i s added . )
S e s s i o n s Co . ,
the S i xth
C i t i ng Pol i n ,
the
104 0 .
S inay ,
948 F . 2d at
17
Id .
( C i t a t i ons omitted . )
Id .
Indeed ,
actionab l e .
Supp .
795 ,
799
(S.O.N.Y.
i s not
658 F .
1987 ) .
d e f endants in
Moorhead v .
I
had brought a secur i t i e s
mis represent a t i ons
P l a i n t i f fs
in Moorhead
in a bond o f f e r i ng sttement.
They argued
omitted mat-er i a l
949
F . 2d at 2 4 5 .
court's h o l d i ng ,
However ,
in a f f irming the d i st r i ct
18
(
Id .
at
24 5-4 6.
The c a u t i o n a ry l anguage
94 9 F . 2d at 2 4 6 n .
( empha s i s added ) .
The document a l so
l a nguage.
Id.
the
the p l a i n t i f f s
when r e a d i n light
conveyed a f a l s e o r
P l a i nt i f fs
o r a failure
948
F 2 d at 512
fraud l aws
19
for
f rom the
(
o f f er ing statement .
However ,
court re l i ed on Vaughn
( 9 th C i r .
1980) ,
v.
T e l edyne,
Inc . ,
6 2 8 F . 2d 1 21 4 ,
the
1 22 1
The r e is no ev idenc e ,
however ,
Addit iona l l y ,
( empha s i s i n
Id .
the
C.
Id .
or
in the prospectu s
is an
(
untrue stat ement and a c t i onab l e under
L i t iga t i on ,
89 0 F . 2d 628 ,
645-46
Gagnon ,
766
F . 2d 770 ,
( 3 d C ir . ) ,
(1985 ) ;
Urbach v .
Say l e s ,
776
10 (b)
779 F .
( 3d Cir .
1989 ) ;
cert .
Supp .
E i s enberg v .
den i ed ,
351 ,
355
474 U . S .
(D.N.J.
946
1 9 91 )
l aws11 ) .
The
11Statements o f reasons ,
Ct .
27 4 9 ,
However ,
which 11 b e s p e a ks caution11
27 5 8
(1991) .
l ong as
fu l l d i s c l osure is made ,
and
unre a l i z ed future
in our
pro s p e c tu s ,
comp l a int .
in the
in a prospectus i s the
21
fraud l i a b i l ity ,
(
then p l a i nt i f fs '
I n ess ence ,
the
"bespeaks c a u t i on"
As the Eighth
specific
949
F . 2d at
24 5 - 4 6 (empha s i s added ) .
I n cons i d e r i ng
a l l egat i ons conta ined on the face of the omp l a int . "
Pincus ,
936
or
F . 2 d at 7 6 2 .
Thus ,
I.
Meye r
of the prospectus ,
in that text.
Moreover,
are act ionab l e ,
f a l s e when made.
cau t i on ,
in good fa ith ,
w a s made
Inc . ,
F . 2d 18 6 ,
bespoke
204
22
( 5th C i r . ) ,
cert .
M i ddle
denied ,
(
48 8 U.S .
926
( 19 8 8 )
( emph a s i s added ) .
Thus ,
whether a n o f f e ring
I ndeed ,
i s d i re c t l y
t h e c o u r t " must
id. ,
indicat ing
reasona b l e
No
future
Cra ftmat i c ,
8 9 0 F . 2 d at 6 4 6
( empha s i s
Thus ,
it
in context ,
199 0 ) ,
McN i f f ,
and Landy v .
744 F .
Mitche l l
23
Supp .
r e l y i ng f o r this
123 7 ,
125 3 - 5 4
(
C o rp . ,
7 3 4 F. Supp .
60 8 ,
619
(S . D . N . Y .
1990 ) .
P l ainti f f s
approach .
I n fact ,
approach .
The
744
F.
Supp .
at 12 53 .
Thus ,
pl ainti f f s '
a rgument that
approach ,
I t is
t o relieve
f ac t s . "
The
fraud
24
It
the touchstone of
It is
" be sp eaks
l anguage_
in a prospectus .
" risky,"
e s t imates
for examp l e ,
such as
25
c
v.
is that d e fendants
s e c t ion d i s cu s s ed
the first o f
abi l i ty
to
pay
interest
26
( empha s i s added ) .
The next sub - s ec t i on i n
ent i t l ed " S ecurity for the Bonds , " conta ins the f o l l o w i ng
pert i nent s t a tements:
I f an Event o f Default occurs p r i o r to
comp l etion of the Taj Mahal, upon fore c l o sure
a n d sale o f the C o l l ateral , t h e re wou l d not
b e s u f f i c i ent proceeds to pay the p r i n c i p a l
o f, a n d accrued interest on , the Bonds . . . .
I n addition, i f an Event o f Default occurs
with respect to the Bonds a f t e r comp l e tion o f
the Taj Mahal , there can b e n o assurance that
the l iquidation of the Co l l ateral would
produce proceeds in an amount which would be
s u f f i c i ent to pay the principal o f , and
a c c rued interest on , the Bonds .
See
and
Prospectus at 9
( emphasis added ) .
Fol l ow ing the " S pecial Cons iderations "
the
s ection is
It
( emphasis added ) .
cha l l enge
28
We must
in o r d e r to
B.
p o s s e s s e d no reasonable b a s i s
that they b e lieved the Taj
" Th e
. 11
l one
persuade the court that standing a l one and read out o f context it
is s u f f icient to state a federal securities fraud cl aim .
We are
not s o persuaded .
The above- quoted l anguage from the prospectus is a
striking examp l e of a document which t ru l y " bespeaks caution . "
Indeed ,
this prospectus
as
Hagge rty,
765 F . Supp .
at 1 1 5
7 3 9 F . Supp . at 162 ) .
29
as well a s the
howeve r ,
whi c h
t h a t actual operating
Thus ,
i s as true in a
s ecur i t i es
a
fraud c a s e .
fed e r a l securities
( 19 7 6 )
TSC I ndustr i e s ,
case a s
framework .
in any other
v.
Northway,
I nc . ,
426 U . S .
See,
4,
449
m a te r i a l ity i s
I.
Technologies ,
cauti on .
Meye r P incus ,
9 3 6 F . 2 d a t 7 63 ;
9 4 8 F . 2 d at 5 12 .
As a matter o f l aw ,
Convergent
b u r i e d in the middle
its e l f s h i e l d s d e fendants
is a care f u l l y crafted ,
U l t im a te l y ,
from l i ab i l ity ,
f u l l y d i s c l os i ng document .
30
the text o f
for it
(
I n Moorhead ,
case ,
a case factu a l l y s im i l a r t o t h i s
federal
secu r i t i e s
( management ' s )
9 4 9 F . 2 d at 2 4 5 .
b a s i s o f management ' s b e l i e f s .
the appra i s a l
the T a j .
itse l f w a s made
Howeve r ,
S i n ay ,
I.
Meyer
plaintiffs
i n tho s e c a s e s
in this ca s e .
cannot agree .
we
31
(
Th i s d i s t inction must ther e fore
c.
Fraud by H i n d s ight
We are wary ,
too ,
"The f a c t that a
stand ing
199 1 ) .
Urbach
v.
S ayles ,
779
F.
Supp .
351,
358
I ndeed ,
( t ] he story in this comp l a int i s
familiar i n secur i t i e s l i tiga t i o n .
At one time the f irm bathes itself
in a favorable ligh t .
Later the
f irm d i sclo s e s that things are less
rosy .
The pla in t i f f contends that
the d i f ference must be attributable
"Must b e " i s the
to fraud .
ical
phra
s e , for the complaint
crit
o f fers no i n f ormation other than
the d i f ferences between the two
statements o f the f irm ' s cond i t i on .
Because only a fraction o f
f inanc i al determinations re flects
fraud , pla int i f f s may not pro f fer
the d i f ferent f i nancial s t a t ements
and rest .
Investors mus t po int to
some facts suggesting that the
32
d i f ference 1 s attribut ab l e to
fraud .
D i Leo
v.
denied ,
&
Ernst
111
s .
9 0 1 F . 2d 624 ,
Young ,
Ct .
347
( 1990 ) .
627
( 7 th C i r . ) ,
In the c a s e a t b a r ,
fraud . "
Po l i n ,
though faulty ,
552
F.
S upp .
795 ,
799
does n o t ,
F . 2d at 805 .
not an a c t i o n a b l e c l a im .
1987)
but economi c
without more ,
In s h o rt ,
See S chwartz v .
(S.D.N.Y.
" d e f endants
not losses .
c e rt .
amount t o
fraud by h in d s ight i s
( " [ p ] l a int i f f
65 8
f a i l s t o o f fe r a
s i ngle obj ect ive fact to suggest that the pre d i c t i o n was other
than an hon e s t l y h e l d v i ew
a l l eg ing
. . . .
the success
of the Taj
Thu s ,
and the " bespeaks caut i o n " doctr ine go hand in hand .
P l a inti f f s have r e l i e d heav i l y ,
exc l us ively ,
a lmost
Mahal w i l l b e s u f f i c ient
( in t e r e s t and p r i n c i p a l ) . ,,
33
a c l a im b a s e d s o l e l y
f o r i t alleges
The Taj
w a s not ultimately
its debt
However ,
f a i l ur e o f an
fraud by h i n d s ight .
The comp l a i n t i t s e l f d i ctates th i s
o f p l a i nt i f f s '
bas i s "
P l a i nt i f fs '
c l a im .
a l l egat i o n o f
i n t e rp retation
" no r e a s o nable
a l l eg a t i ons
in the comp l a i nt .
P l a inti f f s prov i d e no
foundation
that b e l i e f .
Wh i l e we a r e
i n f erences
in
fraud can be
For examp l e ,
i n S in ay ,
or
" the
948
F . 2 d at 1 0 4 0 .
34
I n S i nay the
.
d i s t r i c t court dismis s e d the comp l a i n t pursuant to Rul e 1 2 ( b ) ( 6 ) ,
D i sm i s s a l i s approp r i at e on
D.
inqu i ry ,
or the a n a l y s i s emp l o ye d in
F i rst ,
" ed i t to wi n . "
respons i b i l i ty of
management ' s
to d r a f t
-rt
is
ful l d i s c l osure .
d i s c l o sure ,
investors ,
i s not a
an e s s en t i a l part o f such
i n retrospect ,
they
Nor
10 .
For examp l e , p l a i nt i f f s c l a im that the prospectus " fa i l ed
to d i s c l o se that the Taj Mahal would require an unprecedented
' ca s i n o w i n ' o f approximate l y $ 1 . 3 m i l l i o n per day on a
cont i n u i ng b a s i s to meet its enormous debt l oad , " f a i l ed to
d i s c l o s e that "a leading analyst o f the cas ino industry " had
warned Dona l d Trump that the Taj probab l y could not meet its debt
serv i c e , and " omitted t o state " that such a l arge c a s i n o win was
approximately f ive t imes the average c a s ino w i n for other
At l an t i c C i ty cas inos .
35
as required by Item 3 0 3
that there e x i s t ed
' known
. . .
of Regu l a t i o n S - K ,
uncerta in t i e s
regarding whether
i t s debt s e rv ice
. . . ."
It
F o r examp l e ,
the
r i s ks
once opened ,
some not
the T a j M a h a l w i l l b e pro f i t a b l e or
Given t h i s l anguage ,
wh i ch we
we f a i l to see how
36
E.
involved an
unwa rranted ,
and unprecedented
Out o f the $ 8 0 5
construction ,
represented capital
( or
contributions . "
Comp l aint ,
prospectus
therefore ,
s o vulnerab l e
Fin a n c i ng , "
the prospectus
sub- s ection
states that
(i)
fund amounts
incurred
. . . ,
. . . . "
and
( iii )
37
the
Prospectus at
. . .
24 .
Beneath that
(
s ources
o f Funds
(1)
(2)
(3)
Capital contribut i o n . . . . . . . . . . . . . . . . . . . . .
7 5 , 000 , 000
Other sources . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 5 , 0 0 0 , 000
Tota l
Footnote
(2)
Trump upon
p l a i n t i f f s cannot
such an
a l l eg a t i o n i s patently f a l s e .
However ,
It
" t h i n l y c a p i ta l i z ed . . .
[ re l a t i ve to ]
However ,
other A t l a n t i c C i t y c a s i n o
g iven t h i s i n ference ,
p l a int i f f s s t i l l
i s not required
( 2 d Cir .
See ,
1977)
Go ldberg
v.
Mer idor ,
567 F . 2d 2 09 ,
2 18
(
adj ectives ) ,
cert .
denie d ,
434 U . S .
1069
1989)
( c l a im that d e fendants
Del .
Val ente
19 7 8 )
719
v.
( 19 7 8 ) ;
F.
O ' Brien v .
Supp .
222 ,
228
failed to characterize
I nc . ,
( citing G o l db erg v .
454
F.
Meridor ) .
Supp .
122 8 ,
Accordin gl y ,
1253
this
to compare it s e l f ,
compet i tors .
and
u n f avora b l y or otherwise ,
to industry
r e a s o n a b l e investor .
This b r i ngs u s to the end o f p l aint i f f s '
that the dis c l o sures
fraudu l ent .
c l aim
mis l ea ding
c o u l d be granted ,
dismi s s e d .
VI .
39
According l y ,
we
first
(
examine the statements
compet i t i o n .
A.
The Prospectus
The risks
It
i s worth excerpt ing here the entire cont ents o f that sub - s e c t i o n :
Comp e t i t i on i n the A t l an t i c City
casino/hotel market is intens e .
At present ,
40
trends,
casino
Prospectus at 1 4
( empha s i s added ) .
Add i t i o na l l y ,
Intere s t "
Prospectus a t 1 4 .
s e c t i on
intense , " t h i s
f l o o r space . "
which
renovations and
future construction in
41
the Taj
Mahal .
Prosp ectus a t 3 4
B.
coupon programs .
( emph a s i s added ) .
Here aga in ,
And ,
the
these warnings
in-he
Howev e r ,
Moreover ,
s t atement does not say that the T a j w i l l draw more gaming patrons
43
(
away from Showboat and Resort s ,
the three c a s inos together a t that end o f the boa rdwa l k could
attract more patrons to the v i c in ity o f the Taj .
The comp l a i nt continues ,
" [ i ] n fact ,
i t would cost
more money t o attract gamb l e r s from one cas ino to another than
would be earned by any increase in bus in es s ,
incre a s i n g the cas ino win ,
thereby not
Aga in ,
the prospectus
and sets
These
cost money .
exactly the
I.
"
A s in I . Meye r P i n cu s ,
' f act '
that
Meye r Pincus ,
[ p l a int i f f ]
9 3 6 F . 2 d at 7 6 2 .
" f a i l ed to d i s c lose the mate r i a l fact that the open ing o f the Taj
Mahal
Plaz a ,
Trump Castle ,
Trump
44
the P l a z a or the T a j
This
Mahal would
f a i l ure would
a l l egedly " tarni sh" Donald Trump ' s name and bus i n e s s reputat i o n ,
further harming the T a j ,
according to p l a i nt i f f s .
Comp l a i nt ,
38.
The prospectus
i n Atlantic C i ty:
and w i l l
Mahal
for c a s ino ,
fraudu l ent i n
Aga i n ,
We
19 .
located in La s Vega s ,
for
Nevada ,
Comp l a int ,
45
(
Nevada ,
Puerto Rico ,
Y e t a ga i n ,
is precisely
t h e s o rt o f c l a im t o wh i ch the
addre s s e s i t s e l f .
This
First ,
and the
949
p l a i nt i f f s '
F . 2 d at 8 7 9
in the
inv e s t o r s
[]
Thus ,
1 1 the d ocumens
in a meaningful way
( emph a s i s adde d )
This renders
forth
i n f o rmation
&
S e s s i ons Co . ,
948 F . 2d 1037 ,
1041
See ,
( 6 th C i r .
the med i a ,
l o ca l l y
. . .
and nationa l l y .
There w a s no duty to
46
part i c u l a r l y a
, 39.
Comp l a i nt ,
f a r inc luded
in our op i n i on ,
entire treatment o f
I n the
fede ral secur ities fraud case by extract ing a s i ngle sentence
from the ent i re body of the prospectus ,
la nguage related to that sentence .
dismissal
is requ ired ,
regard l e s s of a l l other
Read i n context ,
a s it must be ,
VII .
P l a i nt i f f s '
Next ,
and
Th i s c l a im w i l l be d i sm i s s ed .
Th i rd C l a im -- Appr a i s a l s
p l a i nt i f f s chal lenge the treatment o f
The prospectus
47
Two o f
(
the s e appra i s a l s ,
Appra i s a l ,
the bond o f f e r i n g .
at the t im e o f
for management ' s rel iance on the apprai sed value of the T a j
We may
future worth ,
the AG I Report .
A.
The Prospectus
The " Appra i s a l s " aspect o f the " Sp e c i a l
48
(
Appra i s a l s are estimates or opini ons o f
value and cannot be r e l i e d upon as pre c i s e
measures o f value or worth .
I n addi tion , the
appraisal in the AGI Report is an estimate o f
the market value o f the Taj Mahal at a future
date .
The amount that the Partnership might
real i z e from the sale of the Property may be
more o r less than i ts apprai s e d market value ,
depending on i t s then current and anticipated
uses , and zoni ng , financial , economic , market
and other conditi ons that may a f f ec t a
property ' s value .
Moreover , the appraised
market value does not reflect vbat might be
real i z e d upon l iquidation o f the Taj Mabal or
the sale o f the Taj Mabal in a d i stress sal e .
Prospectus a t 1 7
( emphas i s added ) .
"Management ' s
appra i s a l s .
and repats
Prospectus at 3 9 .
Addit i o n a l l y ,
the appra i s a l s ,
were
Prospectus at 3 9 .
recogn i z ed methods of v a l u a t i o n
comparab l e s a l es approach ,
approach ,
. . . ,
the c o s t approach ,
the
Prospectus at 4 0 ,
41.
49
(
b e no a ssurance that the T a j
in
Pro spectus at 4 1 .
B.
other c l a ims .
First ,
we f in d that the
a prominent ,
spec i f i c way .
supports this
f i nding .
Next ,
104 0 .
Accord ing l y ,
S inay ,
they are based on management ' s re l i ance on the AGI R e p o rt are not
actiona b l e .
This c l a im appears to b e yet anothe r a t t empt to
hold de fendants l i a b l e f o r fraud by hinds ight .
[ p l a i nt i f f ]
1 1 I n e s sence
However ,
a s prev i o u s l y d i scussed ,
Nor have p l a in t i f f s
9 2 9 F . 2 d at
no i n f erence of
A s we noted
50
(
a l l eg a t i o n s devo id o f factual bas is .
There f ore ,
VI I I .
S ee D i Le o ,
supra .
t h i s c l a im w i l l b e d i sm i s s ed .
the
These present
woul d s u f f e r and be
l e s s than
if h i s
f i nancial
f a i l e d to d i s c l o s e the cap i t a l
heav i l y l everaged .
A.
sub - s e c t i on
ent i t l ed " Trump Comp l et i on Guaranty , " the prospectus notes that
wh i l e " Dona l d J .
Trump w i l l covenant ,
199 1 ,
. . .
Dona l d J.
T rump w i l l not ,
51
under any
,.
(
c i rcumstanc e s ,
prospectus ,
it
. . . . "
premium ,
if
P r o s p ectus at 1 3 .
is stated :
B.
Other
investors that h i s
-.
f o rth
in the prospectus .
H i s c a p i t a l c o ntribut i o n ob l igat i on w a s
l im i ted to a $ 7 5 m i l l i on amount .
P l a i n t i f fs do not al l ege ,
and he
in fact
n o r could they al l eg e ,
that h e
deal .
Indeed ,
as a matter o f law ,
this c l a im i s t o o
seek to draw are beyond the bounds o f management ' s respons i b i l ity
The
to d i s c l o s e .
Trump ' s
of the Taj
investor ,
is
we l l -known ,
f o r investors .
:raud l aws
i s d i s c l osure ,
Aga i n ,
n o t bus i n e s s j udgment .
53
Bus i n e s s
..
j udgment ,
i n f o rmat ion ,
inve s t o rs .
Prominent and spec i f i c i n f o rmat i o n in the
prospectus a l s o renders not act i o nab l e p l a i n t i f f s '
spur i o u s
in connection w i th p l a i nt i f fs '
Taj
fundi ng
the T a j ,
far
is
As
Bond
and that
was l ev e raged .
A l though p l a i nt i f f s state
54
(
v a l u e s o f a s s ets,
in the event o f
c.
in the Med i a
such as
a l l eg ing that
In the statements at
inter a l i a ,
be a tremendous succe s s ,
b i l l i o n d o l l ar s ,
i s sue,
P l a i n t i f f s argue that
We d i sa gree .
However,
1989 .
during 1 9 8 9 and 1 9 9 0 .
11.
P l a i nt i f fs did not attach to the comp l a int cop i e s o f the
a r t i c l e s from which they quoted .
55
(
fraud c l a im ,
Supp .
658 F .
at 7 9 5 .
See
" (N] o
[ p l a int i f f ' s )
694 F.
Supp .
( and
1057 ,
1064
Stevens v .
(S . D.N.Y.
Eguidyne Extractive
1988) .
subsequent to ,
these statements .
This
Thus the
named p l a inti f fs
772 F .
Acc ording l y ,
Supp .
1315 ,
1316
H a ft v .
(D.R. I .
Eastl and
1991)
( c itations
56
substantive
Because no c l a im is
..
acti onab l e ,
the feder a l
IX .
P l a i nti f f s '
o f this m o t i o n to dism i s s .
Howeve r ,
761 F .
Supp .
1164
(D.N.J.
Wh i l e l eave
see Panzca v .
1991 ) ,
it should not
See S i nay ,
F . 2 d a t 1 0 4 1 - 4 2 ; Ma sarsky v .
7 0 6 F . 2d 1 1 1 ,
948
12 .
I n fact , p l a inti f f s have not comp l i ed w i th our l oc a l rules
P l a int i f fs
concern i ng mot i on s for l e ave to amend a comp l a int .
have merely n o t ed in the i r oppos i t i on b r i e f the i r opin i o n that
" [ e ) ven i f the Comp l a int is held to be d e f ect ive , any defects c a n
be e a s i l y remed i ed , " a n d cited in a footnote t o the prop o s i t i on
that l eave t o amend a comp l a i nt is to be freely given pursuant t o
Fed . R . C iv . P . 1 5 ( a ) .
However , N e w Jersey Federal Pract i c e Rule
: 2 H provides that a motion to amend is to be f i l ed , together with
P l a i nt i f f s
" a copy o f the proposed pleading or amendments . . . . "
ne ither f i led a mot i on , nor attached t o the i r brief any proposed
amendment , thu s leav ing us without gu idance a s to how they would
amend the ir comp l a i nt i f granted l eave .
Desp ite the p rocedural
irregu l a r i t i e s , in the interests o f j us t i ce we w i l l cons ider
p l a i nt i f f s ' request as a formal motion to amend .
Th i s requires
us to extrap o l ate from p l a i nt i f f s ' subm i s s i ons the substance o f
any amendment t o the ir comp l a i nt .
57
(
125
( Jd Cir . ) ,
say ,
cert .
den i ed ,
464 U . S .
934
( 19 8 3 ) .
That i s t o
A c c o rd i n g l y ,
then
i n cons i d e ring
submi ss ions
Luce ,
8 0 2 F . 2 d at 5 7 .
We exami n e
in September 1 9 8 7 ,
I t was i s sued
pro j ect .
to T rump .
The f o l l ow i ng
13 .
In fact , at oral a rgument coun s e l f o r p l a i n t i f f s
e f fectively w i thdrew any request for amendmen t , stat i ng that the
comp l a int cou l d stand on its own as i s , w i thout any need f o r
I t i s we l l s e tt l ed that it i s not a n abuse o f
rev i s i on .
di scret ion f o r a d i st r i c t court to r e f u s e to grant amendment
where amendment is not s ought .
S ee , Roma n i , 9 2 9 F . 2 d a t
8 8 0 -8 8 1 .
Howev e r , i n t h e f a c e o f con f l i ct ing messages from
p l a i n t i f fs and the subm i s s i o n o f add i t i on a l mater i a l s , and
adhering to our duty to draw a l l reasonab l e i n f erences in
p l a i nt i f f s ' f a vor , we w i l l cons ider amend ing the comp l a i nt .
58
(
o f f i ce r s ,
Inc .
i f des ired ,
and ,
Jersey .
Otherwi se ,
referred to
. . .
or
p r o s pectus ,
P l a i nt i f f s '
Exh i b i t A a t 2 .
The Laventhol Report ' s proj ecti ons o f future
income and cash f l ow for the Taj Maha l d i f fer markedly from the
AGI Report proj ect ions incl uded in the prospectus .
I ndeed ,
m i rr o r more
the
Howeve r ,
mot i o n .
Furthermore ,
in the
papers .
would
i n c lude the
as evidenced by the
59
And ,
(
this
In short ,
as it was
nor author i z e d f o r
nor
some o f which
there f o re ,
Exh i b i t A at 2 .
P l a i nt i f f s '
Indeed ,
p l a intifs own
comp l a i nt ind i cates that the Laventhol Report could not correct
the d e f i c i encies we have h ighl ighted in this opinion .
c l a im that at the time the prospectus was f i l ed ,
P l a intiffs
" it w a s
How ,
then ,
reasonable est imate o f future worth any more than the attacked
AGI Repo rt ?
Report into the comp l a int would do nothing more than attempt to
estab l i sh ,
yet again ,
d i scussed supra ,
fraud by hindsight .
60
(
F inal l y ,
even without
is i n s u f f i cient to support a
n o i nforma t i o n
Investors must p o i n t to
D i Leo ,
examp l e o f
9 0 1 F . 2 d at 6 2 7 .
Thus ,
and
no amendment b a s ed on the
An a f f idav it by Peter R .
Tyson ,
o f Laventhol
Exhibit c at 3 .
and
(
the Taj
defendants .
However ,
t h i s a l s o corroborates d e fendant s
fraud b y
management ,
it was even more specu l at ive how it woul d p e r form under other
management , whether de f endants or any other p o t ent i a l buy e r .
Another document ,
p l a i nt i f f s '
prej udice .
x.
federal c l a ims w i l l be
United M i ne Workers v .
U.S.
715
( 19 6 6 ) .
Accordingl y ,
Gibb s ,
383
62
(
' "
conclus ion
XI .
o r to rely on
on an a.t tempt to " rewri t e " the prospectus in order t o phrase the
cautionary l anguage in terms they f ind more suitable but without
any pract i c a l d i f f erence in ef fect ,
by hinds ight ,
factual ba s i s .
of p l a int i f f s '
pre j udice .
..
,.\
.
14
An appropriate order
June 2 ,
DATED :
be entered .
\ '.
. /-\
19 9 2 .
14 .
l. I
....
63
i,.T f:31
1-VIlliAM T. WALSM
ClERK
_______
IN RE :
MDL 8 6 4
( J FG )
( t iv i l Act ion No .
90-0919)
ORDER
Trump ,
Trump Taj
Mahal Inc .
Robert S .
Inc . ,
Civ .
P.
P i e rc e ,
Fenner
12 ( b ) ( 6 ) ,
subm i s s ions ,
&
T a j Mahal Funding ,
I nc . ,
It is ,
Harvey s .
Trump ,
t h i s 2 nd day o f June ,
motion i s GRANTED ,
199 2 ,
R.
hereby ORDERED
DI S M I S S E D with prejudice .
\
\
\.\ ./-
__
\ ""' \ i .
Y
';
o=
F
N.
H
J
E
U
RR
I
C
E
FJ
,
--'
'J
64