Cite as 7 F.3d 357 (3rd Cir. 1993)
state regulatory authorities. See Prospectus at 11–13, 15–16, 35–37.
In this case the Partnership did not bury the warnings about risks amidst the bulk of the prospectus. Indeed, it was the allegedly misleading statement which was buried amidst the cautionary language. At all events, in addition to reading the allegedly misleading statement setting forth the Partnership’s belief that it could repay the principal and interest on the bonds, a prospective investor would have also read the dire warnings and cautionary statements a sampling of which we have just outlined. Moreover, an investor would have read the sentence immediately following the challenged statement, which cautioned: “[n]o assurance can be given, however, that actual operating results will meet the Partnership’s expectations.”
As we explained above, we must consider an alleged misrepresentation within the context in which the speaker communicated it. Here the context clearly and precisely relayed to the bondholders the substantial uncertainties inherent in the completion and operation of the Taj Mahal. The prospectus contained both general warnings that the Partnership could not assure the repayment of the bonds as well as specific discussions detailing a variety of risk factors that rendered the completion and profitable operation of the Taj Mahal highly uncertain. Within this broad context the statement at issue was, at worst, harmless.
C. The Bespeaks Caution Doctrine
The district court applied what has come to be known as the “bespeaks caution” doctrine. In so doing it followed the lead of a number of courts of appeals which have dismissed securities fraud claims under Rule 12(b)(6) because cautionary language in the offering document negated the materiality of an alleged misrepresentation or omission. See Sinay v. Lamson & Sessions Co., 948 F.2d 1037, 1040 (6th Cir.1991); I. Meyer Pincus & Assocs. v. Oppenheimer & Co., 936 F.2d 759, 763 (2d Cir.1991); Romani v. Shearson Lehman Hutton, 929 F.2d 875, 879 (1st Cir.1991); Polin v. Conductron Corp., 552 F.2d 797, 806 n. 28 (8th Cir.), cert. denied, 434 U.S. 857, 98 S.Ct. 178, 54 L.Ed.2d 129 (1977); cf. Huddleston v. Herman & MacLean, 640 F.2d 534, 543–44 (5th Cir.1981) (holding that a general warning was insufficient to render a known misrepresentation immaterial as a matter of law), modified, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983); see also In re Convergent Technologies Sec. Litig., 948 F.2d 507, 515–16 (9th Cir.1991) (applying but not explicitly referencing the bespeaks caution doctrine to uphold a grant of summary judgment for the defendant). We are persuaded by the ratio decidendi of these cases and will apply bespeaks caution to the facts before us.
The application of bespeaks caution depends on the specific text of the offering document or other communication at issue, i.e., courts must assess the communication on a case-by-case basis. See Flynn v. Bass Bros. Enters., 744 F.2d 978, 988 (3d Cir.1984) (holding courts must determine the materiality of soft information on a case-by-case basis). Nevertheless, we can state as a general matter that, when an offering document’s forecasts, opinions or projections are accompanied by meaningful cautionary statements, the forward-looking statements will not form the basis for a securities fraud claim if those statements did not affect the “total mix” of information the document provided investors. In other words, cautionary language, if sufficient, renders the alleged omissions or misrepresentations immaterial as a matter of law.
The bespeaks caution doctrine is, as an analytical matter, equally applicable to allegations of both affirmative misrepresentations and omissions concerning soft information. Whether the plaintiffs allege a document contains an affirmative prediction/opinion which is misleading or fails to include a forecast or prediction which failure is misleading, the cautionary statements included in the document may render the challenged predictive statements or opinions immaterial as a matter of law. Of course, a vague or blanket (boilerplate) disclaimer which merely warns the reader that the investment has risks will ordinarily be inadequate to prevent misinformation. To suffice, the cautionary statements must be substantive and tailored to the specific future projections, estimates
