                                                                                                                           Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


4-2-1998

Trump Hotel & Casino v. Mirage Resorts Inc
Precedential or Non-Precedential:

Docket 97-5281




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Recommended Citation
"Trump Hotel & Casino v. Mirage Resorts Inc" (1998). 1998 Decisions. Paper 68.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/68


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Filed April 2, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 97-5281

TRUMP HOTELS & CASINO RESORTS, INC.,

       Appellant

v.

MIRAGE RESORTS INCORPORATED; THE STATE OF
NEW JERSEY; THE NEW JERSEY DEPARTMENT OF
TRANSPORTATION; THE SOUTH JERSEY
TRANSPORTATION AUTHORITY; THE CASINO
REINVESTMENT DEVELOPMENT AUTHORITY; THE NEW
JERSEY TRANSPORTATION TRUST FUND AUTHORITY;
JOHN J. HALEY, JR., in his capacity as Acting
Commissioner of the New Jersey Department of
Transportation; JAMES A. CRAWFORD, in his capacity as
Executive Director of the South Jersey Transportation
Authority; JAMES B. KENNEDY, in his capacity as
Executive Director of the Casino Reinvestment
Development Authority; STEVEN HANSEN, in his capacity
as Executive Director of the New Jersey Transportation
Trust Fund Authority

On Appeal from the United States District Court
for the District of New Jersey
Civil Action No. 97-cv-01371

Argued: February 11, 1998

Before: GREENBERG, NYGAARD and McKEE,
Circuit Judges

(Opinion Filed: April 2, 1998)
HERBERT J. STERN, ESQ. (Argued)
Stern & Greenberg
75 Livingston Avenue
Roseland, New Jersey 07068
Attorneys for Appellant

PETER VERNIERO, ESQ.
JEFFREY J. MILLER, ESQ.
Office of Attorney General of
New Jersey
Division of Law
Richard J. Hughes Justice Complex
CN 112
Trenton, New Jersey 08625
Attorney for Appellees, The State of
New Jersey, The New Jersey
Department of Transportation, The
New Jersey Transportation Trust
Fund Authority, John H. Haley, Jr.,
and Steven Hansen

GUY P. RYAN, ESQ.
MARC D. HAEFNER, ESQ.
 (On the Brief)
Gilmore & Monahan
10 Allen Street
Box 1540
Toms River, New Jersey 08754
Attorney for Appellees, The South
Jersey Transportation Authority and
James A. Crawford

KEVIN J. COAKLEY, ESQ. (Argued)
Connell, Foley & Geiser LLP
85 Livingston Avenue
Roseland, New Jersey 07068
    and

                        2
       MICHAEL R. COLE, ESQ.
       Riker, Danzig, Scherer, Hyland &
       Perretti LLP
       Headquarters Plaza
       One Speedwell Avenue
       Morristown, New Jersey 07962
       Attorneys for Appellees, the Casino
       Reinvestment Development Authority
       and James B. Kennedy

OPINION OF THE COURT

McKEE, Circuit Judge:

Trump Hotels & Casino Resorts, Inc., appeals from the
district court's Rule 12(b)(6) dismissal of this action which
Trump brought under Section 10(b) of the Securities
Exchange Act of 1934, 15 U.S.C. S 78j(b), and Securities
and Exchange Commission Rule 10b-5, 17 C.F.R.
S 240.10b-5. Trump also appeals the district court's
subsequent refusal to exercise supplemental jurisdiction
over state law claims. For the reasons that follow we agree
with the district court's conclusion that Trump lacks
standing, and we will therefore affirm.

I.

Mirage Resorts, Inc., and Trump Hotels and Casino
Resorts, Inc. own competing casinos in Atlantic City, New
Jersey. Although Trump brought this action under the
securities laws, the seeds of this dispute were sown when
a real estate development was planned in Atlantic City.
Although our inquiry does not need to address the details
of the planned development, a brief discussion of it is
necessary to place the dispute in context.

The action arises from a dispute involving the
redevelopment of a parcel of land known as the Huron
North Redevelopment Area ("H-Tract"). The H-Tract is
located in the Marina District of Atlantic City and is
comprised of approximately 178 acres, 150 of which are
owned by Atlantic City. The tract consists of wetlands that

                               3
were used as a municipal landfill until the 1960's. Trump
claims that the H-Tract is highly contaminated with
hazardous substances and is vacant except for a few
municipally maintained facilities.

In November of 1994, the City Council of Atlantic City
authorized the City Planning Board to prepare a
Redevelopment Plan for the H-Tract. On April 12, 1995, the
City Council of Atlantic City adopted the Redevelopment
Plan proposed by the Planning Board and began seeking a
developer for the H-Tract pursuant to that Redevelopment
Plan. Mirage emerged as a potential developer and proposed
to build a casino complex on the H-Tract. Thereafter,
Mirage entered into a series of agreements with the City
(including a Redevelopment Agreement, and a
Memorandum of Understanding) regarding the proposed
development of the H-Tract as a multi-casino resort. The
Redevelopment Agreement gave Mirage an option to acquire
and develop the H-Tract as a multi-casino resort in
exchange for Mirage's undertaking to remediate
environmental contamination and to pay for the relocation
of the City's existing facilities on the site.

Shortly before the execution of the Memorandum of
Understanding between Mirage and the City, the Atlantic
City delegation to the New Jersey State Legislature
introduced legislation known as the Municipal Landfill Site
Remediation & Redevelopment Act, N.J.S.A. 13:1E-116.1 -
116.7 (the "Remediation Act"). The Remediation Act was
subsequently enacted into law. According to Mirage, the
Remediation Act allows Mirage to be reimbursed for the
majority of the closure and remediation costs associated
with its clean-up of the H-Tract.1

The Redevelopment Agreement conditioned Mirage's
obligations to develop the H-Tract upon a number of
_________________________________________________________________

1. The Remediation Act "permits a developer who closes and remediates
an eligible site the opportunity to apply for reimbursement of up to 75
percent of the costs after commencement of a business operation on the
remediated site. The State makes the reimbursement from a fund
comprised of one-half of all state sales taxes collected from the business
on that site." State of New Jersey and The Casino Reinvestment
Development Authority v. Trump Hotels & Casino Resorts, No. ATL-L-
1373-97, slip opn. at 8-9 (N.J. Law Div., May 14, 1997).

                               4
contingencies. The most significant contingency for
purposes of this dispute was the approval and funding by
the State of New Jersey of a roadway called the"Westside
Connector." The plans for the Westside Connector include
the construction of a 2.2 mile long highway connecting the
Atlantic City Expressway to Brigantine Boulevard, and a
2,000 foot long tunnel. Trump claims that construction of
the tunnel portion of the Westside Connector requires the
acquisition and destruction of nine private homes and more
than 200 units of federally-assisted low income housing, 47
of which are currently occupied. Trump also claims that the
Westside Connector will provide direct access to the H-
Tract, that its primary purpose is to facilitate the
development of the H-Tract by Mirage, and that Mirage will
not proceed with the development of the H-Tract in the
absence of the Westside Connector.

On September 17, 1996, the New Jersey Department of
Transportation ("DOT") and Mirage entered into a
Memorandum of Understanding regarding the design and
construction of the Westside Connector. The Memorandum
of Understanding was followed by the execution of a Road
Development Agreement between Mirage, the State of New
Jersey, acting through the DOT, and the South Jersey
Transportation Authority ("SJTA").

The Road Development Agreement reflects a commitment
by the parties to move forward with the proposed Westside
Connector, and it defines the respective obligations of the
parties regarding the proposed construction and details
various conditions to the closing of the Road Agreement. It
also sets forth the funding sources for the project, which
include $65 million in proceeds from bonds issued through
the South Jersey Transportation Authority ("SJTA")
repayable from, and collateralized by, parking and
investment funds collected for use by the Casino
Reinvestment Development Authority ("CRDA") and $55
million in the proceeds of bonds issued through the SJTA
repayable from, and collateralized by, alternative
investment tax obligations of all casinos that will be located
on the H-Tract.

Trump currently owns three of the thirteen casinos in
Atlantic City. One of Trump's casinos, "Trump's Castle," is

                               5
located in the Marina District near the H-Tract. Trump
claims that it will be adversely affected by the construction
of the Westside Connector and the development of the H-
Tract in a number of ways. The Westside Connector will
significantly reduce access to Trump's Castle. During
construction it will effectively block access to Trump's
Castle for a year or more, and make it difficult for persons
from within and without the City to get to Trump Hotels'
Atlantic City casinos. Trump claims that its business will
thus be seriously injured. In addition, Trump claims that
the new road will increase traffic flow into the city and
therefore worsen local air quality conditions and traffic
congestion which already adversely affect Trump's patrons
and employees. Trump also alleges that the development
will endanger the community because the H-Tract is highly
contaminated. Trump alleges that since the Westside
Connector will bisect the city, the H-Tract development will
cause permanent injury to the City's entire Boardwalk area,
including Trump's Taj Mahal and Palace casinos, into
which Trump has invested enormous amounts of money.

On March 14, 1997, Trump filed a complaint against
Mirage, the State of New Jersey, the New Jersey DOT, the
SJTA, the CRDA and the New Jersey Transportation Trust
Fund in the United States District Court for the District of
New Jersey. Trump sought declaratory and injunctive relief
which would effectively bar the construction of the Westside
Connector and the development of the H-Tract by halting
the sale of the bonds that are a necessary component of the
funding scheme. Trump alleged that the funding scheme for
the planned construction of the Westside Connector and
the development of the H-Tract would violate numerous
statutes,2 state law3 and the New Jersey Constitution.
_________________________________________________________________

2. In addition to an allegation of impending securities fraud, Trump's
complaint also alleged violations of the following federal statutes:
Section
404 of the Clear Water Act, 33 U.S.C. S 1344; the Rivers and Harbors
Appropriation Act of 1899, 33 U.S.C. S 403; the Federal-Aid Highway Act,
23 U.S.C. S 109 and the Clean Air Act, 42 U.S.C. S 7506. The district
court granted defendants' 12(b)(6) motion as to those claims and Trump
has not appealed from the dismissal of those claims. The district court
dismissed the Clean Water Act because Trump failed to comply with the
act's notice requirement; dismissed the Rivers and Harbors Act claim

                               6
However, we are only concerned with Trump's allegations
that the funding mechanism violates the Securities and
Exchange Act of 1934, 15 U.S.C. S 78j(b), Securities and
Exchange Commission Rule 10b-5, 17 C.F.R. S 240.10b-5,
and Article IV, S 7, P 2 of the New Jersey Constitution.

The defendants initially moved to dismiss Trump's
complaint under Fed. R. Civ. P. 12(b)(6) alleging that the
complaint failed to state a claim. Simultaneously, they filed
a complaint in the Law Division of the Superior Court of
New Jersey naming Trump as a defendant and seeking a
declaration that the statutory provisions which allowed for
CRDA funding of various projects were constitutional.4
State of New Jersey and the Casino Reinvestment
Development Authority v. Trump Hotels and Casino Resorts,
Inc., No. ATL-L-1373-97 ("State litigation").

On May 1, 1997, the district court dismissed all of the
federal claims under Fed. R. Civ. P. 12(b)(6) and declined to
exercise supplemental jurisdiction over the state law
claims. Trump Hotels & Casino Resorts, Inc. v. Mirage
Resorts, Inc., 963 F.Supp. 395 (D.N.J. 1997). This appeal
followed. However, Trump only appeals from the district
court's dismissal of its 10b-5 claim and the refusal to
exercise supplemental jurisdiction over the New Jersey
constitutional claim. The district court held that Trump had
no standing to seek injunctive relief under Rule 10b-5
because the claimed injury was too indirect and remote
_________________________________________________________________

because the Act provides no private cause of action; dismissed the
Federal-Aid Highway Act claim because Trump's complaint admitted that
no federal funds would be used to fund the project; and dismissed the
Clean Air Act claim because Trump failed to allege federal funding and
failed to plead compliance with the statute's notice requirement.

3. The complaint also alleged a violation of the New Jersey Coastal Area
Facility Review Act, N.J.S.A. SS 13:19-1, et seq. The district court
declined to exercise supplemental jurisdiction over that state law claim
and Trump has not appealed from that decision.

4. The defendants believed that Trump's federal litigation created a cloud
that had to be removed before the CRDA could issue the bonds.
Appellees' Br. at 6. They also believed that the federal court did not
have
subject matter jurisdiction over the state constitutional question raised
by Trump in the federal litigation. Id.

                               7
from the alleged securities fraud. Id. at 402. In refusing to
exercise supplemental jurisdiction over Trump's state
constitutional challenge, the district court reasoned that
"state courts should be given the opportunity to interpret
their state constitutions," and since "[o]nly the New Jersey
Supreme Court can give an authoritative construction of
the New Jersey Constitution." Id. at 408, the court
exercised its discretion and refused to hear Trump's state
law claims.5

II.

Our standard of review of a dismissal under Rule 12(b)(6)
is plenary. When reviewing a motion to dismiss for want of
standing, we must accept as true all material allegations of
the complaint and must construe the complaint in favor of
the plaintiff. Warth v. Seldin, 422 U.S. 490, 501 (1975). A
complaint should be dismissed only if, after accepting as
true all of the facts alleged in the complaint, and drawing
all reasonable inferences in the plaintiff 's favor, no relief
could be granted under any set of facts consistent with the
allegations of the complaint. ALA, Inc. v. CCAIR, Inc., 29
F.3d 855, 859 (3d Cir. 1994).

III.

Trump argues that the use of bonds issued by the SJTA
as a part of the funding mechanism violates Article IV, S 7,
P 2 of the New Jersey Constitution, which Trump argues
strictly limits the use of casino derived revenues to projects
and programs that benefit senior and disabled citizens of
the State of New Jersey. Trump further argues that neither
the CRDA nor the SJTA plan to disclose this purported
constitutional infirmity to potential purchasers of the
bonds. Thus, argues Trump, the issuance of the bonds
would constitute securities fraud in violation of the
Securities and Exchange Act of 1934, and the Securities
_________________________________________________________________

5. On May 14, 1977, the New Jersey state court held that the statutes
challenged by Trump in the federal action were valid under the New
Jersey constitution. Trump has appealed that decision and briefs on the
appeal have been filed with the appellate division of the state court.

                               8
and Exchange Commission Rule 10b-5. Consequently,
Trump seeks to enjoin the sale of the bonds.6
_________________________________________________________________

6. Although we need not dwell upon the intricacies of New Jersey's
casino financing laws as part of our resolution of this appeal, this
dispute is best understood in context with applicable state statutes, and
relevant provisions of the New Jersey Constitution. Accordingly, we
briefly describe them here in the margin:

On November 2, 1976, New Jersey voters approved an amendment to
the New Jersey Constitution which permitted the Legislature to authorize
the establishment and operation of gambling casinos in Atlantic City.
However, the amendment required that any such legislation

       shall provide for the State revenues derived therefrom to be
applied
       solely for the purpose of providing funding for reductions in
property
       taxes, rental, telephone, gas, electric, and municipal utilities
charges
       of, eligible senior citizens and disabled residents of the State,
and
       for additional or expanded health services or benefits or
       transportation services or benefits to eligible senior citizens and
       disabled residents, in accordance with such formulae as the
       Legislature shall by law provide.

N.J. Const. art. IV, S 7, P 2, subparagraph D. The 1977 Casino Control
Act was enacted pursuant to this amendment. The Casino Control Act
established a tax on a casino's "gross revenues." N.J.S.A. 5:12-24. All
funds derived from this tax were to be placed in a special fund referred
to as the "Casino Revenue Fund." N.J.S.A. 5:12-145(a), which would be
used exclusively for programs to assist the elderly and disabled. N.J.S.A.
5:12-145(c). The Act also required casino licensees whose gross revenues
exceeded the capital cost of constructing their casinos to make
additional investments in Atlantic City. Any licensee that failed to make
the required investments would be subject to an alternative investment
tax on gross revenues dedicated to the Casino Revenue Fund. N.J.S.A.
5:12-144(b)(3); see State of New Jersey and the Casino Reinvestment
Development Authority v. Trump Hotels & Casino Resorts, Inc., No. ATL-L-
1373-97, slip opn. at 6 (N.J. Super. Ct. Law Div., May 14, 1997).

In 1984, the Casino Reinvestment Act of 1984 was enacted to spur
investment. State of New Jersey and the Casino Reinvestment
Development Authority, at 6. The Act created the Casino Reinvestment
Development Authority ("CRDA") to accelerate development and to
provide a focus for reinvestment by the casinos. N.J.S.A. 5:12-153. The
CRDA "was charged to maintain public confidence in the casino
gambling industry as a unique tool of urban development for Atlantic
City; to directly facilitate the redevelopment of existing blighted areas;
and to address pressing social and economic needs by providing eligible
projects in which casino licensees could invest." State of New Jersey, at
6.

                               9
Section 10(b) of the Securities Exchange Act of 1934
provides:

       It shall be unlawful for any person, directly or
       indirectly, by the use of any means or instrumentality
       of interstate commerce or of the mails, or of any facility
       of any national securities exchange . . .

        (b) To use or employ, in connection with the purchase
       or sale of any security, . . . any manipulative or
       deceptive device or contrivance in contravention of
       such rules and regulations as the Commission may
       prescribe . . . in the public interest or for the protection
       of investors.

15 U.S.C. S 78j(b)(emphasis added). Securities and
Exchange Commission Rule 10b-5 was promulgated
pursuant to Section 10(b) of the Act. That Rule provides:
_________________________________________________________________

In 1993, the New Jersey Legislature amended the Casino Control Act
by enacting the Parking Fee Act "to accelerate the CRDA's efforts to
develop the Atlantic City `corridor region' (the infrastructure connecting
the Atlantic City Expressway to the Boardwalk)." State of New Jersey, at
7. The Legislature imposed a $2.00 fee on consumers who parked at
casino-controlled parking facilities and required that $1.50 of this
amount to be remitted to the CRDA whether or not the consumer used
or entered the casino facility. N.J.S.A. 5:12-173.3. Id. Proceeds are
deposited in a special account in the State Treasury to be used for,
among other things, any project that the CRDA determines is "related to
improving highways, roads, infrastructures, traffic regulation and public
safety" in the corridor region. N.J.S.A. 5:12-173.4. The Legislature also
authorized the CRDA to sell bonds to finance such projects and to pledge
parking fee proceeds to repay the indebtedness. N.J.S.A. 5:12-173.6,
173.7.

Mirage, the State of New Jersey and its various agencies entered into
the Road Agreement under certain of these New Jersey statutes, viz.,
N.J.S.A. 5:12-173.1 - 173.7 (requiring the CRDA to collect parking fees
to fund "eligible projects") and N.J.S.A. 5:12-144.1 and N.J.S.A. 5:12-173
(requiring casino licensees both to purchase bonds issued by the CRDA
and to make investments in eligible projects approved by the CRDA). In
one of its state law causees of action, Trump asked the district court to
declare these enabling statutes unconstitutional under the New Jersey
Constitution. However, the district court refused to exercise
supplemental jurisdiction over the constitutional challenge and
dismissed it without prejudice.

                               10
       It shall be unlawful for any person, directly or
       indirectly, by the use of any means or instrumentality
       of interstate commerce, or of the mails or of any facility
       of any national securities exchange,

       (a) To employ any device, scheme, or artifice to
       defraud,

       (b) To make any untrue statement of a material fact or
       to omit to state a material fact necessary in order to
       make the statements made, in the light of the
       circumstances under which they were made, not
       misleading, or

       (c) To engage in any act, practice, or course of business
       which operates or would operate as a fraud or deceit
       upon any person, in connection with the purchase or
       sale of any security.

17 C.F.R. S 240.10b-5 (emphasis added). For our purposes,
the operative phrase in both the statute and the regulation
is "in connection with the purchase and sale." Trump does
not allege that it intends to purchase the bonds when, and
if, they are issued. Thus, the threshold issue is whether
Trump has standing to bring this action.

A.

"In essence the question of standing is whether the
litigant is entitled to have the court decide the merits of the
dispute or of particular issues." Warth v. Seldin, 422 U.S.
490, 498 (1975). Standing "subsumes a blend of
constitutional requirements and prudential considerations."
Valley Forge Christian College v. Americans United for
Separation of Church and State, Inc., 454 U.S. 464, 471
(1982). Obviously, satisfying the Article III "case or
controversy" requirement is the "irreducible constitutional
minimum" of standing.7 Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992). Article III constitutional standing
contains three elements: (1) the plaintiff must have suffered
_________________________________________________________________

7. The constitutional dimensions of the standing question bear a close
relationship to the questions of ripeness and mootness. See Warth v.
Seldin, 422 U.S. at 499 n.10.

                               11
an injury in fact -- an invasion of a legally protected
interest which is (a) concrete and particularized and (b)
actual or imminent, not conjectural or hypothetical; (2)
there must be a causal connection between the injury and
the conduct complained of -- the injury has to be fairly
traceable to the challenged action of the defendant and not
the result of the independent action of some third party not
before the court; and (3) it must be likely, as opposed to
merely speculative, that the injury will be redressed by a
favorable decision. Id. at 560-61 (citations, internal
quotations, brackets and ellipses omitted).

In addition to the " `immutable requirements of Article III,'
the federal judiciary has also adhered to a set of prudential
principles that bear on the question of standing." Bennett v.
Spear, ___ U.S. ___, 117 S. Ct. 1154, 1161 (1997) (citation
omitted). They are: (1) "the plaintiff generally must assert
his own legal rights and interests, and cannot rest his
claim to relief on the legal rights or interests of third
parties," Valley Forge Christian College, 454 U.S. at 474
(citation omitted); (2) "even when the plaintiff has alleged
redressable injury sufficient to meet the requirements of
Article III, the federal courts will not adjudicate abstract
questions of wide public significance which amount to
generalized grievances pervasively shared and most
appropriately addressed in the representative branches," Id.
at 474-75 (citation omitted); and (3) "the plaintiff 's
complaint must fall within the zone of interests to be
protected or regulated by the statute or constitutional
guarantee in question." Id. (citation and internal quotations
omitted).

It is this latter "zone of interests" consideration which is
of paramount concern here. Although the "zone of interests"
consideration had its origin in the context of judicial review
proceedings under the Administrative Procedures Act
("APA"), see Association of Data Processing Service
Organizations, Inc. v. Camp, 397 U.S. 150 (1970), it is now
clear that it applies "in suits not involving review of federal
administrative action," and it is one "among other
prudential standing requirements of general application."
Bennett v. Spear, 117 S. Ct. at 1161.

                               12
B.

It is by no means certain that Trump has alleged
sufficient injury to achieve Article III standing here.
However, even if the allegations of fraud in the issuance of
securities that Trump does not intend to purchase are
sufficient for purposes of Article III, they clearly fall outside
the zone of interests protected by the SJTA, section 10(b) of
the Securities Act, and Rule 10b-5.

The Supreme Court has held that only a purchaser or
seller of a security has standing to bring a private 10b-5
securities fraud action for money damages. Blue Chip
Stamps v. Manor Drug Stores, 421 U.S. 723 (1975).
However, Trump is not bringing a private damages action
under 10b-5. Rather, Trump seeks injunctive relief against
what it claims is an impending 10b-5 violation, and it
claims standing based on a pre-Blue Chip Stamps decision
of this court, Kahan v. Rosenstiel, 424 F.2d 161 (3d Cir.
1970). In Kahan, we carved out a narrow exception to the
"Birnbaum rule" and held that the non-purchasing or non-
selling plaintiff of a security has standing to request
injunctive relief for a 10b-5 violation.

The Birnbaum rule takes its name from Birnbaum v.
Newport Steel Corp., 193 F.2d 461 (2d Cir. 1952), which
was decided twenty-three years before the Supreme Court's
Blue Chip Stamps decision. In Birnbaum the court
examined the legislative history of securities legislation and
concluded that Rule 10b-5 "extended protection only to the
defrauded purchaser or seller" of the security at issue. Id.
at 464. Thus was born the Birnbaum purchaser/seller rule.
In Blue Chip Stamps, the Supreme Court expressly declared
that "Birnbaum was rightly decided." 421 U.S. at 731.

Kahan was decided eighteen years after Birnbaum, but
five years before Blue Chip Stamps. In Kahan we reviewed
then existing precedent in the Second Circuit and
concluded that, despite the Birnbaum rule, Second Circuit
jurisprudence allowed a non-purchasing or non-selling
plaintiff to bring an action for injunctive relief under 10b-5.
We stated "[t]he purchase-sale requirement must be
interpreted so that the broad design of the Exchange Act, to
prevent inequitable and unfair practices on securities

                                13
exchanges and over-the-counter markets, is not frustrated
by the use of novel or atypical transactions." 424 F.2d at
171. Accordingly, we held that

       [n]either the language of S 10(b) and Rule 10 b-5 nor
       the policy they were designed to effectuate mandate
       adherence to a strict purchaser-seller requirement so
       as to preclude suits for [injunctive] relief if a plaintiff
       can establish a causal connection between the
       violations alleged and the plaintiff's loss.

Id., at 173.

Trump argues that this "relaxed standing" rule of Kahan
survived Blue Chip Stamps. Mirage argues to the contrary
citing Cowin v. Bresler, 741 F.2d 410 (D.C. Cir. 1984) to
support its position that Blue Chip Stamps sounded the
death knell for the "relaxed standing" rule. In Cowin, the
court held that the Blue Chip Stamps purchaser-seller
limitation applies with equal force to equitable actions.

We have not, heretofore, squarely addressed this issue. In
Tully v. Mott Supermarkets, Inc., 540 F.2d 187, 194 (3d Cir.
1976), a panel of this court assumed that the "relaxed
standing" rule of Kahan survived Blue Chip Stamps, but
held that the case before it did not fit into that rule. 540
F.2d at 194. In Sharp v. Coopers & Lybrand, 649 F.2d 175,
186 n.15 (3d Cir. 1981), overruled in part on other grounds,
In re Data Access Systems Securities Litigation, 843 F.2d
1537 (3d Cir. 1988)(en banc), we wrote that Blue Chip
Stamps precludes a non-purchaser or non-seller from
seeking injunctive relief for an impending 10b-5 violation.
However, that reference is clearly dicta, and not part of the
holding. 649 F.2d at 187 n.15.

Thus, we have yet to decide whether a non-purchasing or
non-selling plaintiff continues to have standing to seek
injunctive relief for an alleged 10b-5 violation after Blue
Chip Stamps. However, resolution of that question must
await yet another day as we need not now decide it to
resolve the case at bar. Whether or not the relaxed standing
rule survives Blue Chip Stamps, the injuries that Trump
alleges here are not within the zone of protection
established by S 10(b) and Rule 10b-5 regardless of the
relief sought. Furthermore, Trump has not established the

                                14
prerequisite nexus between the injuries it claims, and the
securities violations that it alleges. Even under Kahan's
rule of relaxed standing, one seeking injunctive relief had to
establish a "causal connection between the violations
alleged" and the loss claimed. See Kahan, 424 F.2d at 173.
As noted above, there we stated that we would not strictly
adhere to the "purchase-seller requirement . . . if a plaintiff
could establish a causal connection between the violations
alleged and plaintiff's loss." (emphasis added). Here, Trump
has not established any such causal link. Accordingly, we
hold that the injuries that Trump alleges are insufficient to
confer standing to seek relief under either Blue Chip
Stamps, or our holding in Kahan.

Trump has no intention of purchasing the bonds, and,
therefore, is not a member of the universe of potential
investors.8 Consequently, it cannot demonstrate that it
would suffer an injury sufficiently connected to the
securities fraud it alleges.9 Trump argues, in part, that it
must be allowed to bring this action because of the unique
circumstances surrounding an offering of government
bonds. At oral argument Trump suggested that its role in
enjoining this sale of securities without proper disclosure is
tantamount to acting as a private attorney general on
behalf of the investing public, and the public in general,
and this is sufficient to confer standing. However, Trump is
obviously aware of the purported infirmity that it alleges in
this offering. The claimed constitutional infirmity was the
_________________________________________________________________

8. In view of Trump's allegations, it would not further Trump's position
to allege an intention to purchase as Trump could not, in good faith,
assert that it had relied upon the alleged fraudulent conduct. In order to
state a securities fraud claim under S 10(b) and Rule 10b-5, a private
plaintiff must plead that he or she "reasonably relied on the
misrepresentation or omission and . . . consequently suffered damage."
In re Westinghouse Securities Litigation, 90 F.3d 696, 710 (3d Cir. 1996).

9. Trump is not at all in the same position as was Kahan in Kahan v.
Rosenstiel. Kahan was a minority shareholder and, assuming the truth
of the allegations in his complaint, was being offered less money for his
shares than was the majority shareholder. Thus, Kahan stood to suffer
a loss in the value of his investment because of the alleged securities
fraud. Trump cannot demonstrate a loss from an investment it will never
make.

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basis of state court litigation and it must now be disclosed
to prospective purchasers. That disclosure adequately
protects the investing public without a tortured standing
analysis under federal securities laws. Section 10(b) and
Rule 10b-5 reflect a "strong federal interest .. . in ensuring
a proper flow of information between the parties to a
securities transaction." Lewis v. Chrysler Corp., 949 F.2d
644, 649 (3d Cir. 1991)(quoting Healey v. Catalyst Recovery
of Pennsylvania, Inc., 616 F.2d 641, 646 (3d Cir. 1980)). As
we wrote in Kahan:

       The Act was designed to eliminate deceptive and unfair
       practices in security trading and to protect the public
       from inaccurate, incomplete and misleading
       information. The thrust of the Act and the decisions
       interpreting it is to give the investing public the
       opportunity to make knowing and intelligent decisions
       regarding the purchase and sale of securities.

Kahan, at 173 (emphasis added).

Aside from nebulous allegations of environmental harm
and harm to the Atlantic City community, Trump's
essential complaint is that the proceeds from the sale of the
bonds will be used to build a highway and tunnel which
will funnel traffic from the Atlantic City Expressway to the
multi-casino complex Trump's competitor will build on the
H-Tract. The highway and tunnel, once completed, will be
a boon for Mirage and Trump fears economic loss.
Admittedly, there is a highly attenuated connection between
the funding scheme and Trump's claimed "injury". However,
that "injury" is much too tenuous to be regarded as arising
from the alleged securities fraud. The injury results from
the highway that will bring traffic to Trump's competitor.
Trump's assertion that the injuries are within the zone of
interests protected by S 10(b) and Rule 10b-5 requires us to
stretch reality as well as precedent past the breaking point.
We refuse to do so. Accordingly, we hold that Trump has no
standing to seek injunctive relief against the issuance of the
bonds.

IV.

Two small matters remain. First, Trump claims that the
district court abused its discretion by "failing to provide

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Trump with an opportunity to supply further particularized
allegations of fact to support its standing." Appellant's Br.
at 47. However, Trump never requested leave of the district
court to amend or supplement its complaint. Therefore, it
cannot raise that issue on appeal. Mann v. Conlin, 22 F.3d
100, 103 (6th Cir. 1994)(where plaintiff never requested
leave to amend in the district court, that argument is not
properly before appellate court).

Second, as noted above, Trump has appealed from the
district court's decision to refrain from exercising
supplemental jurisdiction over its state law claim that the
proposed funding scheme violates the New Jersey
Constitution. However, supplemental jurisdiction is
exercised as a matter of discretion. See Borough of West
Mifflin v. Lancaster, 45 F.3d 780, 788 (3d Cir. 1995). A
court may decline to exercise supplemental jurisdiction over
a state law claim where "the claim raises a novel or
complex issue of state law." 28 U.S.C. S 1367(c)(1). Clearly,
the question of whether the proposed funding scheme for
the Westside Connector violates the New Jersey
Constitution is a complex issue of state law which is better
left to the New Jersey courts to determine. See Doe v.
Sundquist, 106 F.3d 702, 708 (6th Cir. 1997)(declining to
exercise supplemental jurisdiction, in part, "out of respect
for the right of a state court system to construe that state's
own constitution."). Thus, we believe that the district court
did not abuse its discretion by refusing to exercise
supplemental jurisdiction over the state law constitutional
claim.

V.

For the above reasons, the judgment of the district court
will be affirmed.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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