Page:In re Donald J. Trump Casino Securities Litigation.pdf/12

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7 FEDERAL REPORTER, 3d SERIES

(“Actions terminated in the transferee district court by valid judgment, including … judgment of dismissal …, shall not be remanded … and shall be dismissed by the transferee district court.”), as well as the views of commentators. See Manual for Complex Litigation, Second, § 31.122, at 254 (1985) (stating “[t]he transferee judge has the power to terminate actions by rulings on motions under Fed.R.Civ.P. 12”); Stanley A. Weigel, The Judicial Panel on Multidistrict Litigation, Transferor Courts and Transferee Courts, 78 F.R.D. 575, 582–83 (1978).

In sum, we are satisfied that § 1407 empowered the district court to dismiss the plaintiffs’ complaint under Rule 12(b)(6).^[1]

IV. The Alleged Affirmative Material Misrepresentations in the Prospectus

As we explained above, the plaintiffs assert that the Trump defendants had neither an honest nor a reasonable belief in their statement on page 28 of the prospectus that “[t]he Partnership believes that funds generated from the operation of the Taj Mahal will be sufficient to cover all of its debt service (interest and principal).” The plaintiffs contend that, in view of this allegation, they have stated a cause of action under the federal securities laws. We disagree.^[2]

A. General Legal Principles

At a minimum, each of the securities fraud provisions which the bondholders allege the Trump defendants violated requires proof that the defendants made untrue or misleading statements or omissions of material fact. See Shapiro v. UJB Fin. Corp., 964 F.2d 272, 280, 286 (3d Cir.), cert. denied, – U.S. —, 113 S.Ct. 365, 121 L.Ed.2d 278 (1992).^[3] We have squarely held that opinions, predictions and other forward-looking statements are not per se inactionable under the securities laws. Rather, such statements of “soft information” may be actionable misrepresentations if the speaker does not genuinely and reasonably believe them.^[4] See, e.g., Herskowitz v. Nutri/System, Inc., 857 F.2d 179, 184 (3d Cir.1988), cert. denied, 489 U.S. 1054, 109 S.Ct. 1315, 103 L.Ed.2d 584 (1989); Eisenberg v. Gagnon, 766 F.2d 770, 776 (3d Cir.), cert. denied sub nom. Wasserstrom v. Eisenberg, 474

↑ The transfer of the complaints filed in the Southern and Eastern Districts of New York to the District of New Jersey presents a potential choice of law issue in terms of whether Second or Third Circuit precedent controls. The district court followed the approach the D.C. Circuit adopted in the leading case on choice of law in multidistrict transfers, see In re Korean Air Lines Disaster, 829 F.2d at 1176. Consequently, the district court held that while only this court’s precedent would control, the Second Circuit’s precedent would merit close consideration. See In re Donald J. Trump Sec. Litig., 793 F.Supp. at 548. Because neither party has challenged the district court’s holding on this point, we assume without deciding that it was correct.
↑ Although the plaintiffs did not attach the prospectus to their complaint, the defendants appended it to their motion to dismiss. We recently held that “a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s claims are based on the document.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993). Because the complaint directly challenged the prospectus, the district court properly considered the prospectus in deciding whether to grant the Rule 12(b)(6) motion.
↑ There are substantial differences between the elements a plaintiff must establish under § 10 and Rule 10b–5 of the Securities Exchange Act of 1934 and under §§ 11 and 12(2) of the Securities Act of 1933. See Herman & MacLean v. Huddleston, 459 U.S, 375, 380–86, 103 S.Ct. 683, 686–89, 74 L.Ed.2d 548 (1983). Under the former, the plaintiffs must plead not only that the defendants made material omissions and/or misrepresentations, but also that they reasonably relied on them and that the defendants acted with knowledge or recklessness. See id. at 382, 103 S.Ct. at 687; Shapiro, 964 F.2d at 280. In contrast, §§ 11 and 12(2) impose no such requirements. See Herman & MacLean, 459 U.S. at 383–34, 103 S.Ct. at 688; Shapiro, 964 F.2d at 286. Because our analysis here is predicated on the materiality requirement, which is common to all the causes of action the plaintiffs allege, we do not here distinguish between the various securities law provisions that the plaintiffs invoke.
↑ “The term soft information refers to statements of subjective analysis or extrapolation, such as opinions, motives, and intentions, or forward looking statements, such as projections, estimates, and forecasts.” Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 642 (3d Cir.1989). See generally Victor Brudney, A Note on Materiality and Soft Information Under the Federal Securities Laws, 75 Va.L.Rev. 723 (1989).

[1] The transfer of the complaints filed in the Southern and Eastern Districts of New York to the District of New Jersey presents a potential choice of law issue in terms of whether Second or Third Circuit precedent controls. The district court followed the approach the D.C. Circuit adopted in the leading case on choice of law in multidistrict transfers, see In re Korean Air Lines Disaster, 829 F.2d at 1176. Consequently, the district court held that while only this court’s precedent would control, the Second Circuit’s precedent would merit close consideration. See In re Donald J. Trump Sec. Litig., 793 F.Supp. at 548. Because neither party has challenged the district court’s holding on this point, we assume without deciding that it was correct.

[2] Although the plaintiffs did not attach the prospectus to their complaint, the defendants appended it to their motion to dismiss. We recently held that “a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s claims are based on the document.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993). Because the complaint directly challenged the prospectus, the district court properly considered the prospectus in deciding whether to grant the Rule 12(b)(6) motion.

[3] There are substantial differences between the elements a plaintiff must establish under § 10 and Rule 10b–5 of the Securities Exchange Act of 1934 and under §§ 11 and 12(2) of the Securities Act of 1933. See Herman & MacLean v. Huddleston, 459 U.S, 375, 380–86, 103 S.Ct. 683, 686–89, 74 L.Ed.2d 548 (1983). Under the former, the plaintiffs must plead not only that the defendants made material omissions and/or misrepresentations, but also that they reasonably relied on them and that the defendants acted with knowledge or recklessness. See id. at 382, 103 S.Ct. at 687; Shapiro, 964 F.2d at 280. In contrast, §§ 11 and 12(2) impose no such requirements. See Herman & MacLean, 459 U.S. at 383–34, 103 S.Ct. at 688; Shapiro, 964 F.2d at 286. Because our analysis here is predicated on the materiality requirement, which is common to all the causes of action the plaintiffs allege, we do not here distinguish between the various securities law provisions that the plaintiffs invoke.

[4] “The term soft information refers to statements of subjective analysis or extrapolation, such as opinions, motives, and intentions, or forward looking statements, such as projections, estimates, and forecasts.” Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 642 (3d Cir.1989). See generally Victor Brudney, A Note on Materiality and Soft Information Under the Federal Securities Laws, 75 Va.L.Rev. 723 (1989).

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