Business Associations, Pages 237–244

Walter v. Holiday Inns, Inc.

United States Court of Appeals for the Third Circuit, 1993


Plaintiffs formed a partnership with defendant to develop a hotel and casino in Atlantic City. The development went over budget and defendant gave plaintiffs a "worst case" projection of profit and loss. Shortly thereafter, two cash call letters were issued demanding that plaintiffs contribute $9.4 million and $7.85 million to the project. Plaintiffs decided not to because of the worst case projection, and their shares were diluted accordingly when defendant covered the whole costs. Soon thereafter, plaintiffs sold their interest to defendant, first 49% and then the remaining 1%. Then then sued claiming that in the buy-out, defendant committed fraud, violated federal securities laws, and breached its fiduciary duty to plaintiffs.

Procedural History:

District court granted defendant's judgment as a matter of law on the breach of fiduciary claim, and the jury decided for defendant on the remaining claims.


Did defendant breach its fiduciary duty to plaintiffs?


Even if defendant had a fiduciary duty to plaintiffs at the time of negotiating the buy-out, they must have misstated or omitted some material fact. Plaintiffs requested much data from defendant. While the projections may not have been relevant to plaintiffs' needs they had the underlying data with which they could have conducted their own analysis. Defendant's failure to disclose its cash flow predictions was not material. The group report was not completed at the time of the buy-out, and plaintiffs could have again conducted their own analysis on the underlying data.


No, defendant did not breach its fiduciary duty. Affirmed.