## Facts

- In 1979, the Walter interests and Holiday Inns, Inc. formed a 50–50 partnership to develop and operate Harrah’s Marina Hotel & Casino in Atlantic City, New Jersey.
- Holiday controlled day-to-day operations, while major decisions were made through an executive committee with equal representation from both sides.
- The project experienced major cost overruns and required additional financing; in 1981, deteriorating market conditions and negative cash-flow projections led Holiday to issue cash calls to the Walter interests for additional capital contributions.
- The Walter interests declined to meet the cash calls; under the partnership agreement, Holiday funded the shortfalls and the Walter interests’ ownership interest was diluted.
- After dilution, the Walter interests agreed to sell most of their remaining interest to Holiday in 1981 and the final remainder in 1983.
- The casino later became highly profitable, prompting the Walter interests to challenge the buyout as unfair.
- The Walter interests claimed Holiday failed to disclose certain long-term projections and internal analyses before the buyout, including a 35-year projection (“Boxer Report”) and other internal cash-flow forecasts prepared for Holiday’s management.
- The Walter interests stipulated they were sophisticated investors and had unrestricted access to the partnership’s books and accounts during the relevant period.

## Issues

1. Whether, assuming a fiduciary relationship among 50–50 partners, Holiday breached a duty of disclosure by not providing internal projections and analyses before negotiating the buyout.
2. Whether nondisclosure of long-term projections and internal forecasts constituted omission of a material fact when the selling partners had full access to the underlying financial data and the ability to perform their own analysis.
3. Whether the jury verdict for Holiday on common-law fraud and federal securities claims should be set aside based on asserted misstatements, omissions, or trial error.

## Decision

- The Third Circuit affirmed judgment for Holiday on all claims.
- The court accepted, for purposes of analysis, that Holiday may have owed fiduciary duties, but held plaintiffs failed to prove any material misstatement or omission.
- The court held nondisclosure of the Boxer Report and internal cash-flow forecasts did not constitute a material omission given plaintiffs’ sophistication and unrestricted access to the partnership’s underlying financial information.
- The court upheld the jury’s verdict for Holiday on the fraud and federal securities claims, finding no reversible error and sufficient evidentiary support.

## Legal Principles

- A fiduciary-duty disclosure theory in a buyout dispute requires proof of a misrepresentation or omission of a material fact.
- Internal projections, valuations, and analyses may be treated as opinion-based or derivative information rather than independently material facts, particularly where they are generated from data available to both parties.
- Materiality is assessed in context, including the nature of the information (historical fact versus projection), the counterparty’s access to underlying data, and the counterparty’s sophistication.
- When a sophisticated partner has unrestricted access to the venture’s books and accounts, failure to provide a co-venturer’s internal forecasts—without more—may not support liability for fiduciary breach, fraud, or securities violations.

## Conclusion

The Third Circuit held that, even assuming fiduciary duties applied during the buyout negotiations, Holiday was not liable because the alleged nondisclosures concerned internal projections derived from financial data that the sophisticated selling partners could access and analyze themselves, and thus were not shown to be material omissions supporting fiduciary, fraud, or securities-law liability.


Walter v. Holiday Inns, Inc., 985 F.2d 1232 (3d Cir. 1993)