or opinions in the prospectus which the plaintiffs challenge.
Because of the abundant and meaningful cautionary language contained in the prospectus, we hold that the plaintiffs have failed to state an actionable claim regarding the statement that the Partnership believed it could repay the bonds. We can say that the prospectus here truly bespeaks caution because, not only does the prospectus generally convey the riskiness of the investment, but its warnings and cautionary language directly address the substance of the statement the plaintiffs challenge. That is to say, the cautionary statements were tailored precisely to address the uncertainty concerning the Partnership’s prospective ability to repay the bondholders.
Moreover, contrary to the submission of the plaintiffs, the Supreme Court’s reasoning in Virginia Bankshares, Inc. v. Sandberg, – U.S. —, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991) supports rather than undermines the application of the bespeaks caution doctrine in this case. In Virginia Bankshares, the Court considered the actionability of statements of reasons, opinions or beliefs in the proxy-solicitation context under § 14(a) of the 1934 Act, i5 U.S.C. § 78n(a).[1] The Court rejected the defendants’ argument that a statement by corporate directors, made in the midst of an effort to effectuate a “freeze-out” merger, that in their opinion $42 a share was a fair price which would offer “high” value to the minority stockholders, was inactionable under the securities laws. Consistent with our decisions pre-dating Virginia Bankshares, see, e.g., Eisenberg v. Gagnon, 766 F.2d at 776, the Court held that statements of opinion or belief may be actionable when they expressly or impliedly assert something false or misleading about their subject matter. The Court further held that the specific statement at issue in the case was a proper basis for liability under § 14(a) because the minority shareholders reasonably understood it to rest on a factual basis. See – US. at —, 111 S.Ct. at 2758–60.
In addition, the Court in Virginia Bankshares reached two conclusions directly relevant to the case at bar. First, the Court held that a speaker’s subjective disbelief or motivation, standing alone, would be inadequate to state a claim under § 14(a).[2] Second, and more importantly, by recognizing that an accompanying statement may neutralize the effect of a misleading statement, the Court impliedly accepted the logic of the bespeaks caution doctrine. Id. at —, 111 S.Ct. at 2760. The Court explained:
While a misleading statement will not always lose its deceptive edge simply by joinder with others that are true, the true statements may discredit the other one so obviously that the risk of real deception drops to nil. Since liability under § 14(a) must rest not only on deceptiveness but materiality as well[,] … publishing accurate facts in a proxy statement can render a misleading statement too unimportant to ground liability.
Id.
The Court then refined this general principle to take on the same contours as what we have denoted as the bespeaks caution doctrine. In particular, the Court acknowledged that “not every mixture with the true will neutralize the deceptive. If it would take a financial analyst to spot the tension between the one and the other, whatever is misleading will remain materially so, and liability should follow.” Id. at —, 111 S.Ct. at 2760. In fact, this notion really comports with the general principle, because it merely
- ↑ Although the Court in Virginia Bankshares addressed § 14(a) of the 1934 Act, which concerns proxy statements, it is instructive here in addressing the plaintiffs’ claims brought under §§ 11 and 12(2) of the 1933 Act, §§ 10 and 20 of the 1934 Act and Rule 10b–5 promulgated thereunder, which involve corporate communications in the sale of securities. Cf. Basic Inc. v. Levinson, 485 U.S. 224, 232, 108 S.Ct. 978, 983, 99 L.Ed.2d 194 (1988) (adopting the materiality standard under § 14 for § 10 and Rule 10b–5).
- ↑ The Court stated: “We think that proof of mere disbelief or belief undisclosed should not suffice for liability under § 14(a), and if nothing more had been required or proven in this case we would reverse [the judgment in favor of the plaintiff] for that reason.” Virginia Bankshares, – U.S. at —, 111 S.Ct. at 2760.
