## Facts

- Trump-related entities issued approximately $675 million in 14% first-mortgage bonds in November 1988 to finance completion and opening of the Trump Taj Mahal casino/hotel in Atlantic City.
- The bonds were sold pursuant to a prospectus that described the project’s financing structure and included statements that the partnership believed operating funds would be sufficient to service debt.
- The prospectus also included extensive risk disclosures, including that the project was highly leveraged, unusually large in scope, lacked an operating history, faced intense competition, and was subject to seasonal revenue variability, and that there was no assurance revenues would meet expectations.
- The Taj Mahal later experienced severe financial distress and entered Chapter 11 reorganization.
- Bond purchasers filed class actions alleging material misstatements and omissions in the prospectus under the Securities Act of 1933 and the Securities Exchange Act of 1934, including allegations concerning projected ability to meet debt service and allegedly omitted facts about Donald J. Trump’s finances and the project’s cash-flow needs.
- The actions were consolidated in multidistrict litigation in the District of New Jersey.
- The district court dismissed the complaints with prejudice under Rule 12(b)(6), concluding that the prospectus’s cautionary language rendered the challenged forward-looking statements and omissions immaterial as a matter of law under the “bespeaks caution” doctrine, and denied further leave to amend.

## Issues

1. Whether forward-looking statements and expressions of belief about the project’s ability to service debt were actionable when accompanied by detailed, specific risk disclosures in the same prospectus.
2. Whether the alleged omissions regarding Trump’s financial condition, capital contribution, and the project’s cash-flow needs were material in light of the prospectus’s overall disclosures.
3. Whether dismissal with prejudice and denial of further leave to amend were proper on futility grounds.

## Decision

- The Third Circuit affirmed the dismissal under Rule 12(b)(6).
- The court held that, read in context, the prospectus’s specific and extensive cautionary disclosures negated any materially misleading inference from the optimistic, forward-looking statements and opinions.
- The court held that the alleged omissions did not materially alter the total mix of information available to a reasonable bond purchaser given the disclosures already made.
- The court affirmed denial of further leave to amend because additional pleading would be futile in light of the prospectus’s cautionary statements and the nature of the claims.

## Legal Principles

- Under the “bespeaks caution” doctrine, forward-looking statements may be immaterial as a matter of law when meaningful, specific cautionary language directly addresses the risks that could cause actual results to differ.
- Materiality is assessed by considering the total mix of information; alleged misstatements and omissions must be evaluated in context rather than in isolation.
- Expressions of opinion or belief about future performance are less likely to be actionable where disclosed as such and accompanied by concrete warnings and “no assurance” qualifiers.
- Securities laws do not impose liability for failure to predict adverse future outcomes when the issuer provides adequate disclosure of relevant risks and does not guarantee results.
- Leave to amend may be denied where the pleadings’ deficiencies cannot be cured because the challenged statements are nonactionable as a matter of law.

## Conclusion

The Third Circuit held that the bond prospectus’s detailed, tailored risk disclosures rendered the challenged optimistic projections and alleged omissions immaterial, warranting dismissal at the pleading stage and making further amendment futile.


In re Donald J. Trump Casino Sec. Litig., 7 F.3d 357 (3d Cir. 1993)