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

Rule:

Materiality cannot be determined in a vacuum. In business transactions, what is material must be evaluated in the context in which the statements or omissions occurred. This is true as well in partnership buy-outs.

Facts:

Plaintiffs are several individuals and a corporation who formed a 50-50 partnership with Holiday Inns, Inc. (Holiday) in 1979 to develop and operate Harrah's Marina Hotel and Casino in Atlantic City, New Jersey. In 1981, plaintiffs sold their 49% interest in the partnership to Holiday. In 1983, plaintiffs sold their remaining 1% interest to Holiday. In 1985, four years after the first sale, by which time the hotel/casino complex had become highly profitable, they filed this suit claiming that in the buy-out transaction Holiday committed common law fraud, violated federal securities laws, and breached the fiduciary duty it owed to plaintiffs. After plaintiffs presented their case, the district court granted Holiday's motion for judgment as a matter of law on the breach of fiduciary duty claim. At the conclusion of the trial, the jury decided for Holiday on the remaining claims. Plaintiffs appeal.

Issue:

Was there sufficient evidence to show that Holiday made any material misrepresentations or omitted providing material facts that it had a duty to disclose to plaintiffs?

Answer:

No

Conclusion:

The judgment of the district court was affirmed. The court held that the record failed to support plaintiffs’ argument that Holiday made any material misrepresentations or omitted providing material facts that it had a duty to disclose to plaintiffs. The court also held that no reasonable jury could have concluded that Holiday’s failure to make a certain report available to plaintiffs was a breach of any fiduciary duty owed by Holiday.