V. The Allegations Concerning Material Omissions
The complaint also includes allegations that the prospectus omitted material facts. More specifically, the plaintiffs contend that the prospectus was materially misleading due to its failure to disclose certain facts which, for purposes of this appeal, we assume are all true: 1) the precarious nature of Trump’s personal finances; 2) the fact that the Taj Mahal would require an average daily casino win of $1.3 million in order to repay the bonds in full; 3) the thinly-capitalized nature of the Taj Mahal; 4) the expense necessary to attract customers from other casinos to the Taj Mahal and the improbability that the Taj Mahal would be successful in such an effort; and 5) the likely effect of the already weakened economy on the future success of the Taj Mahal. Analyzing each in turn, we reject the plaintiffs’ contention that these allegations state actionable securities fraud claims.
A. Trump’s Personal Finances
We can readily dispose of the plaintiffs’ allegation that the prospectus made a material omission in its failure to disclose that Trump’s financial condition was “precarious” because he had made or was planning to make various financial guarantees on projects unrelated to the Taj Mahal. Complaint at ¶ 34.[1] The prospectus made clear that Trump was only obligated to contribute $75 million of his own funds toward the completion of the Taj Mahal and that he had promised to lend the venture up to $25 million under specified circumstances. It did not even suggest that Trump would contribute more of his personal wealth to the venture in order to repay the bondholders or otherwise to ensure the Taj Mahal’s successful completion and operation. Given the explicit limitations on Trump’s financial obligations toward the Taj Mahal as well as the fact that he, in fact, contributed the amounts he had promised, we fail to see the materiality of his actions or intentions with respect to the balance of his personal assets.[2]
B. Average Daily Casino Win
We also reject the plaintiffs’ argument that they state an actionable claim through their allegation that the prospectus failed to disclose that, for the Partnership to repay all of its debts, the Taj Mahal would require a $1.3 million average daily casino win. See Complaint at ¶ 33(a)–(b). As we discussed above, the prospectus went to
- ↑ The plaintiffs also alleged that Trump himself made misleading statements and failed to make material disclosures when he, in speaking with the press, denied that he was having financial troubles and boasted about his financial strength and the liquidity of his assets. See Complaint at ¶ 41. Our analysis with respect to the similar alleged omissions in the prospectus equally applies to the allegations concerning these statements.
- ↑ The prospectus stated that Trump “has advised the Partnership … that he has sufficient financial resources to perform his obligations…. He has further advised … that his net worth, determined in accordance with generally accepted accounting principles …, is at least $500,000,000.” If this account accurately portrayed Trump’s personal finances, then even after subtracting the amounts of the financial guarantees that the plaintiffs allege Trump made, he would still have retained adequate resources to contribute the $75 million as well as to advance the $25 million loan to the Taj Mahal. The consolidated complaint, however, counters that this $500,000,000 estimate is an exaggerated representation of Trump’s personal fortune because it was “based upon artificially inflated appraisals … [and was] not prepared in accordance with generally accepted accounting principles.” Complaint at ¶ 34. We cannot, however, assume this allegation to be true—as is the normal practice under Rule 12(b)(6)—because it is insufficiently specific to satisfy Rule 9(b), which, as we have explained above, see supra note 17, applies at least to the claims brought under § 10 and Rule 10b–5. The complaint wholly fails to allege the established accounting practices that the defendants supposedly departed from and the manner in which they supposedly did so. As we mentioned in our discussion of the allegations concerning the AGI Report, see supra note 17, under Christidis these defects in a complaint render the fraud allegations insufficiently exact to meet the requirements of Rule 9(b). See Christidis, 717 F.2d at 100.
established appraisal method the AGI Report should have used, (ii) how the capitalization of income approach departed from that method, and (iii) that the defendants recognized or should have recognized the unreasonableness of the capitalization of income approach as an estimate of the future value of the Taj Mahal. See Christidis v. First Pa. Mortgage Trust, 717 F.2d 96, 100 (3d Cir.1983) (holding that a complaint with similar deficiencies tailed to comply with Rule 9(b)).
