Court Opinion

ID: 2964211
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Date Created: 2015-09-21 21:22:13.157+00
Date Added: 2024-06-11T08:37:27.860557
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USCA1 Opinion

	

                            United States Court of Appeals
                                For the First Circuit
                                 ____________________

        No. 95-2240

                             MORRIS I. GLASSMAN, et al.,

                               Plaintiffs, Appellants,

                                          v.

                         COMPUTERVISION CORPORATION, et al.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                     [Hon. William G. Young, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                Lynch, Circuit Judge,
                                       _____________

                            Coffin, Senior Circuit Judge,
                                    ____________________

                              Cummings, Circuit Judge.*
                                        _____________

                                 ____________________

            Peter J. Macdonald, with whom Jeffrey  B. Rudman, David E. Marder,
            __________________            __________________  _______________
        S.   Tara Miller, Hale and  Dorr, Bruce D. Angiolillo,  Nicholas Even,
        ________________  ______________  ___________________   _____________
        Elisabeth  Bassin, Simpson  Thacher &  Bartlett, Thomas  J. Dougherty,
        _________________  ____________________________  ____________________
        Dennis M. Kelleher, and Skadden, Arps, Slate, Meagher &  Flom, were on
        __________________      _____________________________________
        brief, for the defendants-appellees.

            Thomas  G. Shapiro,  with  whom Michelle  Blauner,  Shapiro  Grace
            __________________              _________________   ______________
        Haber &  Urmy, Glen  DeValerio, Norman  Berman, Michael  Lange, Berman
        _____________  _______________  ______________  ______________  ______
        DeValerio  &  Pease,  Daniel   W.  Krasner,  Peter  C.   Harrar,  Wolf
        ___________________   ____________________   __________________   ____

                            
        ____________________

        *Of the Seventh Circuit, sitting by designation.

        Haldenstein  Adler Freeman & Herz, L.L.P., I. Stephen Rabin, Joseph P.
        _________________________________________  ________________  _________
        Garland,   and Rabin  & Garland,  were on  brief, for  the plaintiffs-
        _______        ________________
        appellants.

                                 ____________________

                                    July 31, 1996
                                 ____________________

                      LYNCH, Circuit Judge.   Computervision Corporation,
                      LYNCH, Circuit Judge.
                             _____________

            a Massachusetts  high  technology company,  made  an  initial

            public  offering ("IPO")  of securities  on August  14, 1992.

            Six  weeks  later,  on  September  29,  1992,  Computervision

            announced  that its  revenues and  operating results  for the

            third  quarter of  1992 would  be lower  than expected.   The

            prices of Computervision's  stock and notes fell sharply.  On

            the day after this announcement, the first  investor suit was

            filed.   Computervision  and the  IPO underwriters  were sued

            under Sections 11  and 12(2)  of the Securities  Act of  1933

            (the  "Securities   Act").      The   investors   also   sued

            Computervision's principal officers  and directors,  alleging

            controlling  person   liability  under  Section  15   of  the

            Securities Act.   Plaintiffs  asserted that  they represented

            the class  of investors who  purchased common stock  or notes

            between August 14, 1992 and September 29, 1992.  The district

            court,  after   lengthy   pre-trial  proceedings   and   full

            discovery,  both dismissed  the case  for failure to  state a

            claim and denied  as futile plaintiffs'  motion for leave  to

            file  a second amended  complaint.  See  In re Computervision
                                                ___  ____________________

            Corp. Sec.  Litig. ("Computervision  II"), 914 F.  Supp. 717,
            __________________   __________________

            719 (D. Mass. 1996).

                      The  investors  appeal  from  the  denial of  their

            motion for leave to amend, arguing that their proposed second

            amended  complaint (the "Proposed Complaint") passed the Rule

                                         -3-
                                          3

            12(b)(6)  threshold.     They  say  the  Proposed   Complaint

            adequately alleged violations of  the securities laws in that

            the   Prospectus1   for    the   IPO   contained   actionable

            misrepresentations,"half-truths" or  omissions regarding: (1)

            the  factors considered  in  determining the  prices for  the

            offerings; (2) certain mid-quarter  information for the third

            quarter of  1992; (3) the importance  of Computervision's low

            backlog; (4)  the latest release of  Computervision's key new

            software product,  CADDS  5, which  Computervision  said  was

            commercially shipping  when (plaintiffs say) it  was not, and

            the development and commercial prospects of CADDS 5.

                      We affirm,  although our reasoning as  to the first

            claim differs from that of the district court.

                                          I.

                                      Background
                                      __________

                      Computervision   is  a  leading  supplier  of  work

            station-based  computer  aided  design  and   computer  aided

            manufacturing  ("CAD/CAM") software  and related  services to

            the  mechanical  design  automation  market.    Its  software

            products  are utilized  in the  design  of complex  parts and

            assemblies   for  the   automotive,   aerospace,  and   other

            mechanical industries.   Its products enable  users to reduce

                                
            ____________________

            1.  The  term "Prospectus" will  be used  throughout although
            there were two prospectuses, one for stock and one for notes.
            The  parties  treat  them   as  identical  for  all  material
            purposes. 

                                         -4-
                                          4

            the    time   required   for   designing,   engineering   and

            manufacturing a  product  before market  introduction.   This

            "time-to-market" is  a key factor  in ensuring  profitability

            and competitiveness.2

                      The company  was organized  in 1972 under  the name

            Prime  Computer, Inc.3  Until 1988, Prime was in the business

            of  making  and selling  computer  systems.   In  1988, Prime

            acquired  Computervision Corporation,  a leading  supplier of

            CAD/CAM hardware and software products.  In 1989, the company

            was  acquired  by DR  Holdings,  and shifted  its  focus from

            computer  systems  to  the   CAD/CAM  market.    A  principal

            shareholder of  DR Holdings, Shearson Holdings,4 provided the

            company with a  $500 million bridge  loan in connection  with

            the  acquisition.  That bridge loan was intended to be repaid

            with the proceeds from a high-yield bond offering.   However,

            that  offering  never  occurred  and  Computervision  instead

                                
            ____________________

            2.  At the  time of the IPO, Computervision  had an installed
            base  of 58,000  units,  predominantly in  North America  and
            Europe.    In  1991,  international  revenues  accounted  for
            approximately 66% of its total revenues.

            3.  The company's name was changed to Computervision Corp. at
            the time of the IPO at issue  here.  For clarity, we refer to
            the company as "Computervision" throughout.

            4.  Shearson  Holdings is  the  parent company  of a  co-lead
            underwriter for the IPO,  Shearson Lehman Brothers, Inc.   In
            addition  to Shearson  Holdings and  its  affiliate, Shearson
            Lehman Brothers  Capital  Partners II,  L.P.,  the  principal
            shareholders  of DR  Holdings  were J.H.  Whitney  & Co.  and
            affiliates and  the Prudential Insurance  Company of  America
            and affiliates.    

                                         -5-
                                          5

            refinanced  the bridge loan with  $500 million in  notes.  In

            December  1991, interest  on the  notes was  itself converted

            from cash  payments to  payments "in kind,"  i.e., additional
                                                         ____

            notes. 

                      The proceeds  from the  IPO were intended  to repay

            half  the principal  amount,  of the  notes held  by Shearson

            Holdings, with the rest  of the debt to Shearson  Holdings to

            be converted to Computervision common stock or written off by

            Shearson.   Both  Shearson  Holdings and  DR Holdings  signed

            "lock-up"  agreements, promising  not  to sell  their  equity

            positions  in  Computervision until  a  year  after the  IPO.

            Plaintiffs  posit  that Computervision's  worsening financial

            condition5 placed Shearson  Holdings' investment in  jeopardy

            by  increasing  the  likelihood  that   Computervision  would

            default on  its debt to  Shearson Holdings.   Allegedly,  the

            solution  was to take the company public and use the proceeds

            to repay a substantial  portion of the debt.   Plaintiffs say

            that defendants believed that if Computervision was not taken

            public  during  the  summer  of  1992,  the  opportunity  for

            Shearson Holdings to recoup its investment would be lost.

                                
            ____________________

            5.  In  the  three  and  a  half  years  prior  to  the  IPO,
            Computervision  suffered close to  $1 billion in  losses.  In
            1989, its net losses were $281 million; in 1990, $71 million;
            in 1991, $461 million;  and for the first six months of 1992,
            $143  million.    Computervision's CAD/CAM  revenues  for the
            first  six  months   of  1992  decreased   by  5%  from   the
            corresponding  period in  1991.   However, software  revenues
            from  the CADDS  line  increased 10%  from the  corresponding
            period in 1991.

                                         -6-
                                          6

                      On   August  14,  1992,  Computervision  sold  $600

            million  of securities in a registered IPO.  The offering was

            composed of 25 million shares of  common stock at $12 a share

            (for a total of $300 million); $125 million of 10-7/8% Senior

            Notes  due   1997;  and   $175  million  of   11-3/8%  Senior

            Subordinated Notes  due 1999.   The Computervision IPO  was a

            firm-commitment  underwriting,  in  which   the  underwriters

            purchased  the securities  from the  company and  assumed the

            risk that the market  would not accept the securities  at the

            price  set.   See Shaw  v. Digital  Equipment Corp.,  82 F.3d
                          ___ ____     ________________________

            1194,  1200 n.1 (1st  Cir. 1996).   Shearson Lehman Brothers,

            Inc.,  Donaldson,  Lufkin  & Jenrette  Securities  Corp., The

            First Boston Corp., and Hambrecht & Quist, Inc., were the co-

            lead underwriters  for the domestic offering,  representing a

            syndicate of over forty firms.

                      On   September  29,  1992,   six  weeks  after  the

            offering,  Computervision  announced  that  its  revenue  and

            operating results  for the  third quarter  of  1992 would  be

            below  expectations.  Within a day, the stock price fell 30%,

            to  $6.25, and  the notes  were  trading at  approximately 8%

            below face value. 

                      On  October 22, 1992, Computervision quantified its

            results for the  third quarter, which ended  on September 27,

            1992.   Computervision had suffered a net loss of roughly $88

            million,  including  a   $25  million  non-recurring   charge

                                         -7-
                                          7

            occasioned by  its decision to  lay off more than  11% of its

            work force.

                                         II.

                    Description of Actions and Procedural History
                    _____________________________________________

                      On September 30, 1992, one day after Computervision

            announced that its operating results for the third quarter of

            1992 would be lower than expected, plaintiffs filed the first

            of eighteen separate complaints.  In addition to claims under

            Sections 11, 12(2) and  15 of the Securities Act,  plaintiffs

            asserted  a  violation of  Section  10(b)  of the  Securities

            Exchange Act of 1934 and negligent misrepresentation.

                      The  eighteen actions  were  consolidated into  one

            class  action  and  on  June  11,  1993,  plaintiffs  filed a

            Corrected  Supplemental  Consolidated  Amended  Class  Action

            Complaint  (the  "1993  Amended  Complaint").6   Among  other

            things,    the  1993   Amended  Complaint  alleged  that  the

            Prospectus:  (i)  distorted Computervision's  earning trends;

            (ii) omitted disclosure of known uncertainties impacting upon

            Computervision's operating results; (iii)  omitted disclosure

            of the  increasing likelihood  that  Computervision would not

            meet its internally projected  results for 1992; (iv) omitted

                                
            ____________________

            6.  The 1993 Amended  Complaint formally withdrew any  claims
            of  fraud under  section 10(b).   Nevertheless,  the district
            court ruled that the complaint sounded in fraud and that Fed.
            R.  Civ. P. 9(b)'s strict pleading standards applied.  See In
                                                                   ___ __
            re Computervision Corp. Sec. Litig. ("Computervision I"), 869
            ___________________________________   ________________
            F. Supp. 56, 63-64 (D. Mass. 1994). 

                                         -8-
                                          8

            disclosure   of   known   declines   in    the   demand   for

            Computervision's  services  and  products;  and  (v)  omitted

            disclosure of software development problems.

                      On  November  23, 1993,  the  district court  heard

            argument on defendants' motion to  dismiss.  While the motion

            was  under advisement,  discovery commenced.   Discovery  was

            extensive.   Plaintiffs reviewed more than  130,000 documents

            and  deposed  over   twenty  witnesses.     Plaintiffs   have

            represented that,  should the case be reinstated, it does not

            require the reopening of discovery.

                      On November 22, 1994, the district court issued its

            decision,  dismissing  all  but   a  sliver  of  the  claims,

            primarily on  the grounds  that  they failed  to satisfy  the

            requirements  of  Fed. R.  Civ. P.  12(b)(6)  and 9(b).   See
                                                                      ___

            Computervision I, 869  F. Supp.  at 64.   The district  court
            ________________

            noted  that  the Prospectus  warned  investors  of the  risks

            involved   and  that,   with   one  exception,   the  alleged

            misrepresentations were  made in  a  context that  adequately

            "bespoke  caution."  Id. at 60-61.   As to the omissions, the
                                 ___

            court noted  that these,  in large part,  referred either  to

            information that was effectively disclosed, or to information

            for which there was no duty to disclose.  Id. at 62-63.
                                                      ___

                      On January 20, 1995, plaintiffs served a motion for

            leave to file a second amended complaint.   Defendants served

            their  opposition to  that motion  on February  24,  1995 and

                                         -9-
                                          9

            moved for  summary judgment on the  sole allegation surviving

            the  district  court's  1994  decision.7   The  parties  then

            entered  into a  Stipulation  of Dismissal,  dismissing, with

            prejudice, the surviving  claim.  The  stipulation was to  be

            effective  the day  after  the district  court  ruled on  the
                                _____

            motion for leave to amend.  

                      On May 1,  1995, plaintiffs moved for leave to file

            the  Proposed  Complaint  at  issue here.    The  court heard

            argument  on  September  13,  1995,  and  a  week  later,  on

            September  20, denied  the motion  for leave  to amend.   The

            basis for  the  denial was  futility,  in that  the  Proposed

            Complaint failed to state a  claim pursuant to Rule 12(b)(6).

            The  court  dismissed  the  case, entered  judgment  for  the

            defendants, and promised a full opinion.

                      Plaintiffs filed their notice of  appeal on October

            20,  1995.  Subsequently, on  February 12, 1996, the district

            court  issued   an  opinion  setting   forth  the   rationale

            underlying its September 1995  order.  Computervision II, 914
                                                   _________________

            F.  Supp.  at  717-22.   The  one  claim that  had  given the

            district court pause at oral argument was the allegation that

            the Prospectus  had misrepresented  that the  securities were

            "appropriately" priced. The district court nevertheless ruled

                                
            ____________________

            7.  Pursuant to  the  parties' Rule  16.1(D) Joint  Statement
            filed  December   28,  1994,  plaintiffs'   proposed  amended
            complaint and  summary judgment  motions were served  but not
            filed with the court.

                                         -10-
                                          10

            that that claim  failed because: (a)  the Prospectus had  not

            warranted  or insured the  appropriateness of the securities'

            prices; and (b) the  claim was keyed to the  nondisclosure of

            internal projections, which were not required to be disclosed

            in any  event.  Id. at 719-20.  The district court ruled that
                            ___

            plaintiffs'  other  misrepresentation  claims,   relating  to

            backlog and  CADDS  5,  failed because  they  were  based  on

            unreasonable inferences drawn  by reading  statements in  the

            Prospectus  out of  context.8   Id. at  719-22.   This appeal
                                            ___

            followed.

                                         III.

                                       Analysis
                                       ________

            A.  Standard of Review
                __________________

                      This appeal  lies from the district  court's denial

            of  plaintiffs' motion  to  file an  amended complaint.   The

            motion  was  denied  after   full  discovery  and  after  the

            dismissal of an earlier complaint.  The  district court ruled

            that amendment  would be futile.  The parties disagreed then,

            as they do now,  over the proper standard for  analyzing this

            motion  to amend.   See id. at  719.   Plaintiffs argued that
                                ___ ___

            leave  to  amend should  be  "freely  given when  justice  so

            requires,"  Fed. R. Civ. P. 15(a).  Computervision II, 914 F.
                                                _________________

                                
            ____________________

            8.  Since   there   were  no   actionable   misstatements  or
            omissions,    the    court    held   that    the    negligent
            misrepresentation  claim against  the underwriters  failed as
            well.  Computervision II, 914 F. Supp. at 722.
                   _________________

                                         -11-
                                          11

            Supp.  at  719.    Defendants  embraced  the  more  stringent

            "substantial  and convincing evidence"  standard set forth in

            Resolution  Trust Corp. v. Gold,  30 F.3d 251,  253 (1st Cir.
            _______________________    ____

            1994).  Computervision II, 914 F. Supp. at 719.  The district
                    _________________

            court did not decide the issue, finding the question academic

            "as the  plaintiffs cannot maintain this  action under either

            standard."  Computervision II, 914 F. Supp. at 719.
                        _________________

                      Denial of a motion to file an  amended complaint is

            reviewed  for abuse  of discretion.   See Romani  v. Shearson
                                                  ___ ______     ________

            Lehman  Hutton, 929 F.2d 875, 880 (1st Cir. 1991);  Arazie v.
            ______________                                      ______

            Mullane,  2  F.3d  1456,  1464-65 (7th  Cir.  1993)  (noting,
            _______

            however, that the relevant pleading standards must be kept in

            mind when  applying the abuse of discretion  standard).  Rule

            15(a) provides that  "leave [to amend] shall  be freely given

            when justice so  requires."   Unless there appears  to be  an

            adequate reason for the denial of leave to amend (e.g., undue
                                                              ____

            delay,  bad faith,  dilatory  motive, futility  of amendment,

            prejudice),  we  will not  affirm it.    Grant v.  News Group
                                                     _____     __________

            Boston, Inc., 55 F.3d 1, 5 (1st Cir. 1995). 
            ____________

                      Here, there was no finding that plaintiffs acted in

            bad  faith, or in an  effort to prolong  litigation.  Nor was

            there a finding that defendants would have been prejudiced by

                                         -12-
                                          12

            the amendment.9   See Ward Electronics  Serv., Inc. v.  First
                              ___ _____________________________     _____

            Commercial Bank, 819 F.2d 496, 496-97 (4th Cir. 1987). 
            _______________

                      Rather, the dismissal rested on other grounds.  The

            district  court's order  explicitly states:   "the  motion to

            further amend the complaint is denied as futile."  "Futility"

            means that the complaint,  as amended, would fail to  state a

            claim  upon which  relief could  be granted.   See  3 Moore's
                                                           ___    _______

            Federal Practice   15.08[4], at 15-80 (2d ed. 1993); see also
            ________________                                     ___ ____

            Vargas  v. McNamara, 608  F.2d 15,  17 (1st  Cir. 1979).   In
            ______     ________

            reviewing for "futility," the district court applies the same

            standard of legal  sufficiency as applies to a  Rule 12(b)(6)

            motion.  3 Moore's, at   15.08[4], at 15-81.
                       _______

                      The  Gold  standard, which  requires  that proposed
                           ____

            amendments  have  substantial  merit   and  be  supported  by

            substantial  and  convincing  evidence, is  inapplicable  for

            several reasons.  To date, it has only been applied where the

            motion  to  amend is  made after  a  defendant has  moved for
                                       _____

            summary judgment.   See e.g., Gold, 30 F.3d  at 253;  Torres-
                                ___ ____  ____                    _______

            Matos v. St. Lawrence  Garment Co., 901 F.2d 1144,  1146 (1st
            _____    _________________________

                                
            ____________________

            9.  It  is   unlikely   that  defendants   could  have   been
            prejudiced.  Plaintiffs have represented that the allegations
            of the Proposed Complaint do not require reopening discovery.
            There is also no claim that defendants  would need additional
            time  to change their trial strategy in light of the proposed
            amendment.  Cf. Tiernan  v. Byth, Eastman, Dillon &  Co., 719
                        ___ _______     ____________________________
            F.2d 1,  4-5 (1st  Cir. 1983)  (finding prejudice  even where
            additional discovery was not necessary; the additional claims
            "may well  have affected  defendants' planned  trial strategy
            and tactics" and  both defendants and the court  would likely
            have "required additional time to prepare for trial").

                                         -13-
                                          13

            Cir.  1990);  Cowen v.  Bank United  of  Texas, FSB,  1995 WL
                          _____     ___________________________

            38978, *9 (N.D.  Ill.), aff'd  70 F.3d 937  (7th Cir.  1995);
                                    _____

            Carey v. Beans, 500 F. Supp. 580, 582 (E.D. Pa. 1980), aff'd,
            _____    _____                                         _____

            659  F.2d  1065  (3d  Cir.  1981);  Artman  v.  International
                                                ______      _____________

            Harvester Co.,  355 F.  Supp. 476, 481  (W.D. Pa. 1972).   In
            _____________

            that  context, a plaintiff's motion to amend is an attempt to

            alter  the shape  of  the case  in  order to  defeat  summary

            judgment.

                      Here  plaintiffs served the  motion to amend before
                                                                   ______

            defendants moved  for summary judgment.   Further, the claims

            in the summary  judgment motion were dropped by  agreement of
                                                             _________

            the  parties and, as a result, no summary judgment motion was

            pending  when the  district  court considered  the motion  to

            amend.

                      Nor  does Gold  apply by  analogy.   This is  not a
                                ____

            situation in which plaintiffs  seek amendment solely to avert

            imminent defeat.  Cf. Cowen v. Bank  United of Texas, FSB, 70
                              ___ _____    __________________________

            F.3d 937,  944 (7th Cir. 1995).   Nor is this  a situation in

            which  it  is rational  to presume  that defendants  would be

            prejudiced by amendment.  Cf. Carey v. Beans, 500 F. Supp. at
                                      ___ _____    _____

            582 (calling prejudice to non-movant the "`touchstone for the

            denial of the amendment'" (quoting Cornell & Co. v. OSHA, 573
                                               _____________    ____

            F.2d  820,  823 (8th  Cir.  1978)).   Although,  under  these

            circumstances, plaintiffs  could be guilty of  undue delay or

            prejudice to defendants might  exist, the district court made

                                         -14-
                                          14

            no such finding.  Further, the district court did not rely on

            Goldandits reasoningwas almostpurelya legalfutility analysis.
            ____

                      Thus,  we  look  at  whether  the  district   court

            correctly  determined that  the Proposed Complaint  failed to

            meet  the pleading standards of  Rule 12(b)(6).   There is no

            practical difference, in terms of review, between a denial of

            a motion to amend based on futility and the grant of a motion

            to dismiss for failure  to state a claim.   See Motorcity  of
                                                        ___ _____________

            Jacksonville,  Ltd.  v.   Southeast Bank, 83  F.3d 1317, 1323
            ___________________       ______________

            (11th Cir. 1996); see  also Keweenaw Bay Indian  Community v.
                              ___  ____ ______________________________

            Michigan, 11 F.3d  1341, 1348 (6th Cir. 1993).   Review is de
            ________                                                   __

            novo.   See, e.g., Serabian v. Amoskeag Bank Shares, Inc., 24
            ____    ___  ____  ________    __________________________

            F.3d  357,  361  (1st  Cir.  1994)  (motions  to  dismiss are

            reviewed de novo).
                     __ ____

            B.  Securities Law Claims
                _____________________

                      "Sections 11 and  12(2) are enforcement  mechanisms

            for the  mandatory disclosure requirements  of the Securities

            Act."  Shaw,  82 F.3d at 1201.   Section 11 imposes liability
                   ____

            on signers  of a registration statement  and on underwriters,

            among  others, if  the registration  statement "contained  an

            untrue statement of  a material  fact or omitted  to state  a

            material fact  required to be stated therein  or necessary to

            make the  statements therein  not misleading."   15  U.S.C.  

            77k(a).   Section 12(2) provides that  any person who "offers

            or  sells"  a  security by  means  of  a  prospectus or  oral

                                         -15-
                                          15

            communication that contains  a materially false statement  or

            that  "omits to state a  material fact necessary  to make the

            statements,  in the  light of  the circumstances  under which

            they  were made,  not  misleading"  shall  be liable  to  any

            "person  purchasing such  security from  him."   15 U.S.C.   

            77l(2).

                      As  we said in Shaw,  there is a strong affirmative
                                     ____

            duty  of disclosure in the context of  a public offering.  83

            F.3d at 1202.  The same may be even more emphatically true in

            an  initial public  offering, where  the securities  have not

            before been  publicly traded.   Cf. Marcel  Kahan, Securities
                                            ___                __________

            Laws and  the Social Costs  of "Inaccurate" Stock  Prices, 41
            _________________________________________________________

            Duke  L.J. 977,  1014-15  (1992).   But  the main  thrust  of

            plaintiffs'  claims is  not based  on any  duty to  disclose.

            Rather,  they  say  that  this is  primarily  an  affirmative

            misrepresentation or half-truth case.

                      The Proposed  Complaint centers on  the claim  that

            Computervision affirmatively misrepresented that the offering

            price  was set  after the  exercise of  due diligence  by the

            underwriters, but  that in  fact the diligence  exercised was

            deficient  in  that  the  most current  information  was  not

            considered.    In  addition,  plaintiffs   contend  that  the

            Prospectus  omitted certain  mid-quarter information  for the

            third quarter of 1992 and contained material misstatements or

                                         -16-
                                          16

            omissions regarding Computervision's backlog and the state of

            its latest software product, CADDS 5. 

                      The district  court held that  the Prospectus would

            not bear the characterizations  plaintiffs sought to place on

            it, and  that the allegedly actionable "representations" were

            no more than unreasonable  inferences drawn by plaintiffs and

            unsupported by the surrounding  language.  Computervision II,
                                                       _________________

            914  F. Supp.  at 719.   Plaintiffs  argue that  the district

            court erred and that  they should have been allowed  to amend

            their complaint.

                      Defendants  respond  by asserting  that plaintiffs'

            pricing claims reduce to an argument that the securities were

            mispriced  because  their  prices   fell  subsequent  to  the

            offerings, and  that the omission of  mid-quarter information

            claims  reduce   to  nothing  more  than   an  argument  that

            Computervision   was  required   to  disclose   its  internal

            forecasts.     Plaintiffs'   position,  defendants   say,  is
            _________

            untenable because the securities  laws impose no duty upon  a

            company  to either  provide  a warranty  as  to price  or  to

            disclose  internal  projections.    They also  say  that  the

            alleged misstatements concerning backlog  and CADDS 5 are not

            actionably misleading  when considered in the  context of the

            Prospectus as a whole. 

            1.  Pricing/Due Diligence Claims
                ____________________________

                                         -17-
                                          17

                      The Computervision IPO  was unusual in one  respect

            which has bearing on  plaintiffs' claims.  Computervision had

            been owned by an entity, one of whose principal shareholders,

            Shearson  Holdings, was  affiliated with  one of  the co-lead

            underwriters,  Shearson Lehman  Brothers.   As a  result, the

            Prospectus informed investors:

                      Under the provisions of Schedule E to the
                      By-laws  of  the National  Association of
                      Securities  Dealers Inc. ("NASD"),   when
                      NASD  members  such  as  Shearson  Lehman
                      Brothers   Inc.,   participate   in   the
                      distribution     of    an     affiliate's
                      securities, the public offering price can
                      be no  higher than that recommended  by a
                      "qualified    independent    underwriter"
                      meeting certain standards.

            Hambrecht  & Quist (for  the stock) and  Donaldson Lufkin and

            First Boston (for the  notes) assumed the obligations of  due

            diligence  as   to  the  public  offering   prices,  and  the

            Prospectus explicitly represented that they had done so.

                      This   representation   in   the    Prospectus   is

            significant in two respects.  First, the fact that one of the

            lead underwriters was affiliated with a principal shareholder

            of Computervision arguably gave  that underwriter a reason to

            inflate  the offering  prices.   Second,  the Prospectus,  in

            effect, explicitly  assured  the  members  of  the  investing

            public that,  despite the link between  Shearson Holdings and

            Shearson  Lehman  Brothers, they  had  no reason  to  fear an

            inflated price.  The  Prospectus made a selling point  out of

            the  fact  that independent  underwriters  had  performed due

                                         -18-
                                          18

            diligence, set maximum prices,  and thus acted as gatekeepers

            against  possible misdeeds by  Shearson Holdings and Shearson

            Lehman  Brothers.     Cf.  John   C.  Coffee,  Re-Engineering
                                  ___                      ______________

            Corporate   Disclosure:  The   Coming  Debate   Over  Company
            _____________________________________________________________

            Registration, 52 Wash. & Lee L. Rev. 1143, 1168 (1995).
            ____________

                      (i) The Pricing Claims in the Proposed Complaint   
                          ____________________________________________

                      The  Prospectus  described  the  process  by  which

            Computervision and its underwriters arrived at prices for the

            offering:

                      Prior  to the  Share Offerings  there has
                      been  no  public  market for  the  Common
                      Stock.  The initial public offering price
                      was determined by  negotiation among  the
                      Company, the Representatives and the Lead
                      Managers.  Among  the factors  considered
                      in   determining  the   initial  offering
                      price, in addition  to prevailing  market
                      conditions, was  the Company's historical
                      performance,  estimates  of the  business
                      potential and earnings  prospects of  the
                      Company   and   market   prices  of   and
                      financial  and operating  data concerning
                      comparable companies.

                      These  representations  are  at the  heart  of  the

            Proposed Complaint, which alleges  in paragraphs 3(a) and 45,

            respectively:

                      The  Stock  Prospectus was  misleading in
                      stating   that   the   Stock   had   been
                      appropriately  priced.  The  price of the
                      Notes  was also  too high,  causing their
                      yields  to  be  too   low.    The   Stock
                                                    ___________
                      Prospectus stated that among  the factors
                      _________________________________________
                      considered  in  determining  the  initial
                      _________________________________________
                      public offering price were  "estimates of
                      _________________________________________
                      the   business  potential   and  earnings
                      _________________________________________
                      prospects of the  Company."  By  the time
                      _________________________________________
                      of   the    Offerings,   however,   those
                      _________________________________________

                                         -19-
                                          19

                      estimates were no  longer valid.   As  of
                      ________________________________
                      the date of  the Offerings, the Company's
                      revenues,   bookings,    visibility   and
                      backlog were all substantially  below the
                      plan   prepared  by   Computervision  and
                      reviewed    by   the    underwriters   in
                      connection with their  due diligence  and
                      pricing  for  the  Offerings   (the  "IPO
                      Plan"),  as well  as the  Company's other
                      internal  plans  and forecasts  (emphasis
                      added) (footnotes omitted).

                      The Stock Prospectus represented that the
                      initial  public  offering  price for  the
                      Stock was based upon, among other things,
                      "estimates of the business  potential and
                      earnings prospects  of the Company . . ."
                      The   Prospectuses   also   stated   that
                      "qualified independent underwriters"  had
                      recommended  the initial  public offering
                      price  for the  Shares and the  yields on
                      the   Notes.     Those   formal,  written
                      recommendations  were  based  on  factors
                      including  "estimates   of  the  business
                      potential  of the  company"  and  on  the
                      "economic,  market,  financial and  other
                      conditions" as they existed on August 13,
                      1992, the day  before the effective  date
                      of  the  Offerings.     Contrary  to  the
                      representations in  the Prospectuses, the
                      price of the Shares and the yields on the
                      Notes  did  not   properly  reflect   the
                      business potential, earnings prospects or
                      financial condition  of Computervision as
                      of that date.10

                                
            ____________________

            10.  Related allegations are found at paragraphs 46 and 84 of
            the Proposed Complaint, respectively:  

                      As of  the date of the  Offerings, all of
                      Computervision's  internal  planning  and
                      forecasting  devices showed  that results
                      during the first seven weeks of the Third
                      Quarter  were   substantially  below  the
                      budgets  set  in  the Company's  internal
                      plans and the IPO Plan which  the Company
                      had  presented to  the  Underwriters   in
                      conjunction with their due  diligence and
                      pricing of the Offerings.  In particular,

                                         -20-
                                          20

                                
            ____________________

                      at   the   time    of   the    Offerings,
                      Computervision's    U.S.    sales    were
                      materially  below   sales  at  comparable
                      points in the prior  five quarters.  Both
                      U.S.   and   international   sales   were
                      substantially below  the Company's plans.
                      In  addition,  Computervision  had a  $40
                      million   shortfall  in   visible  orders
                      needed  to  reach  its quarterly  budget.
                      The   Underwriters   failed  to   perform
                      adequate      due       diligence      on
                      Computervision's actual revenues,  sales,
                      orders, bookings and  visibility for  the
                      seven  weeks  during  the  Third  Quarter
                      before the Offerings.   The  Underwriters
                                              _________________
                      were  required  to  but  did  not  obtain
                      _________________________________________
                      information   necessary  to   verify  the
                      _________________________________________
                      Company's  false   statements  that  such
                      _________________________________________
                      results  were "more  or  less where  they
                      _________________________________________
                      were expected to be."   To the extent the
                      _________________________________________
                      Underwriters  obtained  any   information
                      _________________________________________
                      from   the   Company   concerning   these
                      _________________________________________
                      results,   the   Stock  and   Notes  were
                      _________________________________________
                      mispriced  because  the initial  offering
                      _________________________________________
                      price   and  the   yields,  as   well  as
                      _________________________________________
                      Underwriters'  recommendations,  did  not
                      _________________________________________
                      take  into  account these  low  levels of
                      _________________________________________
                      sales   and   the   $40   million   order
                      _________________________________________
                      shortfall.  Therefore, the representation
                      __________
                      in the Stock prospectus that the offering
                      price  was based  upon "estimates  of the
                      business potential and earnings prospects
                      of the Company" was false and misleading,
                      as  were  the   representations  in   the
                      Prospectuses        concerning        the
                      recommendations    of    the    qualified
                      independent     underwriters    (emphasis
                      added).

                      The   Underwriters   failed  to   perform
                      adequate due diligence  on the  Company's
                      actual    sales,    orders,     bookings,
                      visibility  and  backlog  for  the  first
                      seven  weeks of the  Third Quarter before
                      the  Offerings.    The Underwriters  were
                                         ______________________
                      required to  but either failed  to obtain
                      _________________________________________
                      and review or  ignored information  about
                      _________________________________________
                      actual    sales,    orders,     bookings,
                      _________________________________________

                                         -21-
                                          21

            Different claims, which require different analyses, appear to

            be asserted in these paragraphs.

                      (ii)  District  Court's  Characterization   of  the
                            _____________________________________________

            Pricing Claims
            ______________

                      In  dismissing  the  action,  the   district  court

            characterized plaintiffs' claim as  being that the prices set
                                                               ______

            for the  securities were  inappropriate.   Computervision II,
                                                       _________________

            914  F. Supp.  at 720.   The  district court  noted  that the

            Prospectus   never   represented   that   the   prices   were

            "appropriate" and  that if the Prospectus  language quoted in

            paragraph 48 of the Proposed Complaint:

                      constitutes  a  representation  that  the
                      initial    price    was    'appropriate,'
                      investors    would    effectively    have
                      insurance against any  decline in  price,
                      rendering their investments risk-free.

            Id.  We  agree with the  district court's view  of any  claim
            ___

            plaintiffs make  that  the Prospectus  represented  that  the

            price  itself  was  appropriate.    We  note,  however,  that

            plaintiffs vigorously deny that such was, or is, their claim.

                                
            ____________________

                      visibility   and  backlog   necessary  to
                      _________________________________________
                      verify the Company's statements that they
                      _________________________________________
                      were more or less on track.  As a result,
                      __________________________
                      the  Stock  and   Notes  were   mispriced
                      because the initial offering price of the
                      Stock and the yields on the Notes did not
                      take into account these  adverse results,
                      including the $40 million order shortfall
                      (emphasis added).

                                         -22-
                                          22

                      The  price set  for  an offering  of securities  is

            essentially  a forecast.   Price  can  be characterized  as a

            present  value calculation  of the  firm's future  streams of

            earnings  or dividends.    See  In  re VeriFone  Sec.  Litig.
                                       ___  _____________________________

            ("VeriFone  I"), 784  F. Supp.  1471, 1479  (N.D. Cal.  1992)
              ___________

            ("securities prices  on national exchanges  reflect . . . the

            expected  future cash  flows from  the security"),  aff'd, 11
                                                                _____

            F.3d 865 (9th Cir.  1993); Richard A. Brealey and  Stewart C.

            Myers, Principles of Corporate Finance, 61-63 (4th ed. 1991);
                   _______________________________

            cf. Niagara Hudson Power  Corp. v. Leventritt, 340  U.S. 336,
            ___ ___________________________    __________

            339 & n.7  (1951) (approving the SEC's valuation  of warrants

            in terms of current expectations of future events); Pommer v.
                                                                ______

            Medtest   Corp.,  961   F.2d   620,  623   (7th  Cir.   1992)
            _______________

            ("[p]robabilities determine the value  of stock"); Wielgos v.
                                                               _______

            Commonwealth Edison  Co., 892 F.2d  509, 514 (7th  Cir. 1989)
            ________________________

            (investors value securities  on the basis of how they believe

            the firm will do in the future, and not on past performance).

                      Since price is only a forecast of the firm's future

            performance,  it  is  not   actionable  merely  because   the

            forecast, in hindsight, does not turn out to be correct.  See
                                                                      ___

            In  re VeriFone Sec. Litig. ("VeriFone II"), 11 F.3d 865, 871
            ___________________________   ___________

            (9th Cir. 1993) (earnings  forecasts made on reasonable basis

            not actionable); Wielgos,  892 F.2d at 518;  Marx v. Computer
                             _______                     ____    ________

            Sciences  Corp.,  507  F.2d  485,  489-90  (9th  Cir.  1974).
            _______________

            Forecasts are not guarantees of, or insurance policies for, a

                                         -23-
                                          23

            firm's future performance, nor are they understood as such by

            reasonable investors.  Kowal  v. MCI Communications Corp., 16
                                   _____     ________________________

            F.3d 1271,  1276 (D.C.  Cir. 1994);  Raab v.  General Physics
                                                 ____     _______________

            Corp., 4 F.3d 286, 290 (4th Cir. 1993).  Hence, to the extent
            _____

            plaintiffs' "price" claim  rests on either the  fact that the

            initial offering  prices fell  shortly after the  offering or

            the fact that Computervision's  third quarter earnings turned

            out  to be worse than expected, it  fails.11  Cf. Pommer, 961
                                                          ___ ______

            F.2d at 623 ("[S]ecurities  laws approach matters from an  ex
                                                                       __

            ante perspective.").
            ____

                      (iii) Plaintiffs' Characterization  of the  Pricing
                            _____________________________________________

            Claims
            ______

                      Plaintiffs, however, argue that their attack is not

            on  the appropriateness  of the  offering prices  themselves.

            Instead,  they assert  that their  claim before  the district

            court was that the Prospectus materially misrepresented that:

                                
            ____________________

            11.  In addition, when the  Prospectus statements about price
            are  read  in  context, they  appear  to  be  anything but  a
            guarantee.   First,  the Prospectus  provided investors  with
            _________
            explicit and specific warnings as to factors that might cause
            the prices of the securities to fall.  Second, the Prospectus
            cautioned investors as to the possibility that no  market for
            the  securities  would  develop  or be  sustained  after  the
            offering.  These cautionary statements in the Prospectus are,
            in  and  of  themselves,  reason   to  find  this  claim  not
            actionable.  See Shaw,  82 F.3d at 1213 ("when  statements of
                         ___ ____
            `soft' information such as forecasts, estimates, opinions, or
            projections  are accompanied  by cautionary  disclosures that
            adequately  warn of  the possibility  that actual  results or
            events may  turn out  differently, the `soft'  statements may
            not be materially misleading"); In re Donald J.  Trump Casino
                                            _____________________________
            Sec. Litig., 7 F.3d 357, 371 (3d Cir. 1993)(same).           
            ___________

                                         -24-
                                          24

            (a)  certain  types of  information  were  considered by  the

            underwriters  and Computervision in  determining   prices for

            the offering, when, in fact,  the most current information of

            those  types  was  not  considered (or,  if  considered,  was

            ignored);  and  (b) the  underwriters  did  due diligence  in

            estimating the prices, when they did not because they did not

            consider the most current information.

                      As a threshold  matter, the explicit statements  in
                                                  ________

            the Prospectus that certain  factors were considered and that

            due  diligence was done are required by  law to be true as of
                                                                    _____

            the effective date  of the offering.  See 15  U.S.C.   77k(a)
            ___________________________________   ___

            (liability attaches for misstatements  in a prospectus at the

            time such part  becomes effective);   see also  3A Harold  S.
                                                  ___ ____

            Bloomenthal, Securities and Federal  Corporate Law   8.23, at
                         _____________________________________

            8-102 (1993)  ("[T]he prospectus  for purposes of  section 11

            speaks  as of  the  date the  registration statement  becomes

            effective.").   Thus, plaintiffs  assert that, to  the extent

            current  information up to the  date of the  offering was not

            incorporated  into   the  prices,   the  statements  in   the

            Prospectus presented  a  misleading half-truth  because  they

            suggested that the underwriters  and Computervision took into

            consideration  current  estimates of  business  potential and
                           _______

            earnings prospects.  Cf. Virginia Bankshares v. Sandberg, 501
                                 ___ ___________________    ________

            U.S.   1095,  1098   (1991)  (literally   accurate  statement

            deceptive  because only a half-truth).   As a general matter,

                                         -25-
                                          25

            we agree that such a theory, if sufficiently supported, could

            make out a viable legal claim.

                      It may  be asked whether  the alleged misstatements

            are actionable, given that  they were made in the  context of

            offering prices, which as noted, are essentially forecasts of

            future earnings.   While forecasts are  not actionable merely

            because they do not come true, they may be actionable to  the

            extent they are not reasonably based on,  or are inconsistent

            with, the facts at the time the forecast is made.  See Kowal,
                                                               ___ _____

            16 F.3d at 1278; cf. Virginia Bankshares, 501 U.S. at 1093-94
                             ___ ___________________

            (board of  directors' statement that merger  price was "fair"

            was actionable  to the extent  it was  not based  on, or  was

            inconsistent with, existing  and available facts);  Serabian,
                                                                ________

            24 F.3d at 361  ("predictions about the future that  prove to

            be off the mark likewise are immunized unless plaintiffs meet

            their  burden  of   demonstrating  intentional   deception");

            Eisenberg v. Gagnon, 766 F.2d 770, 776  (3d Cir.) (prediction
            _________    ______

            violates securities  laws if  it is  made  without a  genuine

            belief  or  reasonable basis),  cert.  denied,  474 U.S.  946
                                            _____  ______

            (1985); Billard v.  Rockwell Int'l Corp., 683 F.2d  51, 56-57
                    _______     ____________________

            (2d Cir. 1982) ("Although the  fairness of the offering price

            is not a  valid basis for an action under  Sections 10(b) and

            14(e) . . . , a  statement  that experts  have  examined  the

            price  and  certified  it as  fair  may  well  be a  material

                                         -26-
                                          26

            misrepresentation if those  experts have advised the  offeror

            that the price is unfair."). 

                      The  types  of  data  which  the  plaintiffs allege

            should have been considered are, in general terms, within the

            realm  of data relevant to  the determination of  price.  The

            alleged misstatement  as to factors that  were considered, as

            of the effective  date of the  offering, lists the  following

            factors:  (i)  the  company's  historical  performance;  (ii)

            estimates of the business potential and earnings prospects of

            the company; and  (iii) market prices  of, and financial  and

            operating data concerning, comparable companies with publicly

            traded  equity  securities.   This  list  of factors  is,  in

            effect, a  laundry list of general factors  that would likely

            be considered  in any  reasonable estimation  of price.   Cf.
                                                                      ___

            Lucian Arye Bebchuk and  Marcel Kahan, Fairness Opinions: How
                                                   ______________________

            Fair Are They And  What Can Be Done About It, 1989 Duke L. J.
            ____________________________________________

            27, 34-35 (1989) (listing  methods of estimating fair price);

            cf. generally Ronald J.  Gilson and Reinier H. Kraakman,  The
            ___ _________                                             ___

            Mechanisms of Market  Efficiency, 70 Va.  L. Rev. 549  (1984)
            ________________________________

            (describing the  types of  information that  are incorporated

            into securities  prices).   Therefore, if the  defendants did

            not  actually  consider  current  information  in  the  broad

            categories  of data  they claimed  to have  looked at,  it is

            possible that plaintiffs would have a reasonable basis claim.

                                         -27-
                                          27

                      The due diligence claim also comes down to one that

            the  setting  of the  price  was  done  without a  reasonable

            basis.12     The  statement   in  the  Prospectus   that  the

            independent  underwriters  conducted  due  diligence  was  an

            affirmative statement  that a reasonable investigation of the
            ___________

            company  was done  and  that, using  that and  other relevant

            information,  a fair price was  estimated.  See  15 U.S.C.   
                                                        ___

            77k(b)(3) (due diligence  defense under  Section 11  requires

            "reasonable  investigation") &  77l(2)  (due diligence  under

            Section  12  defined  as  "exercise  of  reasonable   care");

            Software  Toolworks, 50 F.3d  at 621 (9th  Cir. 1994) (noting
            ___________________

            that the two articulations of due diligence are "similar," if

            not identical). 

                      The law  on due  diligence is  sparse, but  for our

            purposes it makes clear that certain inactions may constitute

            a  failure to  perform due  diligence.   First, a  failure to

            continue to investigate the company up to  the effective date
                                                _________________________

            of  the  offering  is  likely  to  be  a  failure  to  do due
            _________________

            diligence.   See  Software Toolworks,  50 F.3d  at 625  & n.2
                         ___  __________________

            (intra-quarterly information available  before the  effective

            date  of offering  not taken  into account  by underwriters);

            Escott  v.  BarChris Constr.  Corp.,  283 F.  Supp.  643, 690
            ______      _______________________

                                
            ____________________

            12.  Due diligence  is  equivalent to  non-negligence.    See
                                                                      ___
            Ernst & Ernst v. Hochfelder, 425 U.S. 185, 208 (1975);  In re
            _____________    __________                             _____
            Software  Toolworks Inc. Sec.  Litig., 50 F.3d  615, 621 (9th
            _____________________________________
            Cir. 1994), cert. denied, 116 S. Ct. 274 (1995). 
                        _____ ______

                                         -28-
                                          28

            (S.D.N.Y.   1968)   (where   registration  statement   became

            effective on May  16, 1961, attorney did not  make reasonable

            investigation  where he  failed  to discover  that statements

            made  in January had become  inaccurate by May);  see also 3A
                                                              ___ ____

            Bloomenthal, Securities and Federal Corporate Law,   8.23, at
                         ____________________________________

            8-102-03.  Second, it also may be  a failure of due diligence

            to rely solely  on management representations as to the state

            of the company where  those representations can reasonably be

            verified.    See  Software   Toolworks,  50  F.3d  at  625-26
                         ___  ____________________

            (inadequate for underwriters to rely on company's  assurances

            as to  its financial condition where  underwriters had access

            to all available information); BarChris, 283 F. Supp. at 696-
                                           ________

            97 ("underwriters must make some reasonable attempt to verify

            the  data   submitted  to  them").     Notwithstanding  these

            generalities,  the specifics  of  plaintiffs' factual  claims

            must be scrutinized.

                      (iv) Rule 12(b)(6)
                           _____________

                      The  next and dispositive question is whether there

            are sufficient factual allegations  as to plaintiffs'  theory

            in the Proposed Complaint  for it to survive a  Rule 12(b)(6)

            motion.  We are mindful that  the case comes to us after over

            three years of litigation  and full discovery.  We  thus look

            more  closely  at the  factual  allegations  to see  if  they

            support  the legal conclusions pled.   As this  court said in

                                         -29-
                                          29

            Resolution Trust Corp.  v. Driscoll,  985 F.2d  44 (1st  Cir.
            ______________________     ________

            1993):

                      It is, of course,  true that at the start
                      of complex  litigation  a party  may  not
                      have  all the  facts, so  courts normally
                      hesitate to dismiss under Fed. R. Civ. P.
                      12(b)(6) at the outset.   At the start, a
                      reasonable  basis  for   belief  and   an
                      outline of what one might reasonably hope
                      to prove may suffice to  permit discovery
                      and   ward   off  premature   motions  to
                      dismiss.    But  [plaintiff's]  complaint
                      against  [defendant]  is deficient;  this
                      litigation has persisted  for almost  two
                      years;  and yet  even now  [plaintiff] is
                      unable    to    explain   what    exactly
                      [defendant]  did  that is  wrongful . . .
                      [plaintiff  still  has  not  supplied]  a
                      single, coherent, specific description of
                      what   [defendant]   has  done   that  is
                      wrongful.
              
            Id. at 48.   A complaint  must contain "factual  allegations,
            ___

            either  direct  or  inferential,  respecting   each  material

            element necessary to  sustain recovery under some  actionable

            legal theory."   Gooley v. Mobil Oil Corp., 851 F.2d 513, 515
                             ______    _______________

            (1st  Cir. 1988); see also Fleming v. Lind-Waldock & Co., 922
                              ___ ____ _______    __________________

            F.2d 20, 24  (1st Cir. 1990); cf. Dewey  v. University of New
                                          ___ _____     _________________

            Hampshire,  694 F.2d 1, 3 (1st Cir.  1982) ("it is not enough
            _________

            to  allege a  general scenario  which  could be  dominated by

            unpleaded  facts"), cert.  denied, 461  U.S. 944  (1983); cf.
                                _____  ______                         ___

            also  Murphy v.  United States,  45 F.3d  520, 522  (1st Cir.
            ____  ______     _____________

            1995);  Coyne v. City of  Somerville, 972 F.2d  440, 444 (1st
                    _____    ___________________

            Cir. 1992);  Correa-Martinez v. Arrillaga-Belendez,  903 F.2d
                         _______________    __________________

                                         -30-
                                          30

            49,  52 (1st Cir. 1990).13   "In deciding a motion to dismiss

            under Rule 12(b)(6), [we] must take all well-pleaded facts as

            true,  but   [we]  need   not  credit  a   complaint's  `bald

            assertions'  or legal  conclusions."  Shaw,  82 F.3d  at 1216
                                                  ____

            (citations omitted).

                      Plaintiffs'  legal  theory  breaks  down  into  two

            elements:  (i) that  defendants  explicitly  stated that  the

            prices had been set after a reasonable  investigation and the

            reasonable consideration  of  relevant facts;  and (ii)  that

            such an investigation  was not  done and  the relevant  facts

            were  not considered  (or were  ignored).14   But plaintiffs'

            factual pleadings fail to convince us that they have stated a

            claim that relevant information was not considered.

                      a. Failure to Consider Data 
                         ________________________

                      It  is  true that  a  failure  by the  underwriters

            either  to verify a company's  statements as to its financial

                                
            ____________________

            13.  Defendants argue  that the Proposed Complaint  sounds in
            fraud and hence  we should apply Fed. R. Civ.  P. 9(b), which
            requires that  claims of fraud be  pled with "particularity."
            See  Shaw, 82  F.3d at  1223 (although  Section 11  and 12(2)
            ___  ____
            claims do  not require allegations of  scienter and reliance,
            the  claims  may yet  sound in  fraud).   Since  the Proposed
            Complaint  fails to  meet even  the  lower threshold  of Rule
            12(b)(6) in the procedural  posture in which it comes  to us,
            we do not decide whether Rule 9(b) is applicable.   

            14.  Facts or information may  be "required" to be considered
            (e.g., if  a company  affirmatively represents that  such was
             ____
            considered)  but  do not  necessarily  have  to result  in  a
            reduction or increase in the offering  price.  The investment
            bankers  and/or company may well look  at the information and
            reasonably  think that  it has  already been  anticipated and
            incorporated into the price.

                                         -31-
                                          31

            state or to consider new information up to the effective date

            of  an offering would  almost certainly constitute  a lack of

            due diligence.  See Software Toolworks,  50 F.3d at 625-26 &
                            ___ __________________

            n.2. However,  it  is  plaintiffs'  responsibility  to  plead

            factual   allegations,   not  hypotheticals,   sufficient  to

            reasonably allow  the inference that the  defendants actually

            did not consider the up-to-date data as of the offering date.

             Cf.  Lefkowitz v. Smith Barney, Harris Upham & Co., 804 F.2d
             ___  _________    ________________________________

            154, 156  (1st  Cir. 1986)  (rejecting plaintiff's  suggested

            inferences  as  insufficiently  grounded  in  fact).    Here,

            plaintiffs provide none.

                      Plaintiffs'  1993  Amended  Complaint  acknowledged

            that  the "Stock  Offering Price was  twice lowered  from its

            initial $19  per share price  [as of  May 1992] to  its final

            price of $12 per  share" in August 1992.   Plaintiffs suggest

            that  these  downward  adjustments  in  price  reflected  the

            disappointing results for the second quarter of 1992, but not

            the negative  information from the  first seven weeks  of the

            third quarter of 1992.  However,  plaintiffs' claim that data

            from the first seven  weeks of the third quarter  was ignored

            both lacks factual support and is belied by context.

                      Not  only did  Computervision and  the underwriters

            lower the initially planned stock offering price by more than

            30%, but the Prospectus abounds with warnings that the market

            price might dip lower once trading commenced.  The Prospectus

                                         -32-
                                          32

            explicitly  warned  that  an  investment  in  the  securities

            involved  a  high degree  of  risk;  that Computervision  was

            highly leveraged;  that it  operated in a  highly competitive

            environment and that  its products might  not be accepted  by

            customers; and that  there had been a  history of significant

            losses  for at  least three  years.   As discussed,  price is

            essentially  a forecast  of  future earnings.   Reducing  the

            price  from $19 to $12 showed a reduced expectation of future
                                            ___________________

            earnings.   Plaintiffs give us  no basis from  which to infer

            that this  reduction in  price factored in  the disappointing

            second   quarter  results,   but  did  not   incorporate  the

            information  from   the  first  seven  weeks   of  the  third

            quarter.15    Additionally,  the cautionary  language  as  to

            potential price  drops belies plaintiffs' claim  that certain

            disappointing third quarter information was not considered. 

                                
            ____________________

            15.  Plaintiffs'  own Proposed Complaint  states that pricing
            meetings were held up to August  13, 1992, the day before the
            offering, and that the $12 price was established at a meeting
            on that  day.   Similarly, the  price recommendations  of the
            independent underwriters were not delivered  until August 13,
            1992.
                Plaintiffs, in  paragraphs 51 through 60  of the Proposed
            Complaint,  purport  to  describe the  pricing  process  that
            Computervision  and its  underwriters  went through.    These
            paragraphs mention an IPO  Plan prepared by Computervision as
            one of the pieces  of data considered by the  underwriters in
            ___
            their  due diligence  work.   The Proposed  Complaint alleges
            that the IPO Plan did not fully reflect the information as to
            the first seven weeks of the third quarter of 1992.  However,
            we cannot  reasonably infer that the  alleged shortcomings of
            the IPO  plan  (or other  company  forecasts) mean  that  the
                                      _______
            underwriters did not consider up-to-date information.
            ____________

                                         -33-
                                          33

                      Furthermore, the factual  context of the  offerings

            provides  no support  for  the inference  plaintiffs seek  to

            draw.   Here the offering  was conducted pursuant  to a firm-

            commitment underwriting, in  which the underwriters  bore all

            the initial risk that  the offering prices may have  been set

            too  high.16    Further,  as  part  of  the   offering,  both

            Shearson Holdings  and DR  Holdings agreed  to lock up  their

            Computervision stock  holdings for  an entire year  after the

            offerings,  thereby decreasing any  incentive they would have

            had  to inflate the short-term stock price as of the offering

            date.

                      It  has  been  over  three years  since  the  first

            complaint  in this  case was filed  and plaintiffs  have been

            allowed  full   discovery.    In  this   procedural  setting,

                                
            ____________________

            16.  Although one of  the lead underwriters, Shearson  Lehman
                          ___
            Brothers,  was  affiliated  with a  principal  shareholder of
            Computervision,  the offering also  involved three other lead
                                                         ________________
            underwriters, Donaldson Lufkin, First Boston, and Hambrecht &
            ____________
            Quist  (who also  played the  roles of  qualified independent
            underwriters).    Each  had both  monetary  and  reputational
            capital at risk  in the  offerings.  Cf.  Brealey and  Myers,
                                                 ___
            Corporate Finance,  at 351.   Further, the  lead underwriters
            _________________
            represented a syndicate of over forty underwriters.  There is
            not enough here  for us  to draw an  inference of  inadequate
            diligence on the  part of the underwriters.   Cf.  Harold  S.
                                                          ___
            Bloomenthal,  Going  Public  Handbook,     3.04[4],  at  3-20
                          _______________________
            (1996)(underwriters look  for a  price that assures  that the
            offering  will be  oversubscribed); James  D. Cox,  Robert W.
            Hillman and Donald C. Langevoort, Securities Regulation, 236-
                                              _____________________
            37  (1991) (empirical  research  on IPOs  shows that  initial
            offering  prices tend  to  be systematically  lower than  the
            short-term aftermarket prices, arguably  because underwriters
            want both insurance  against lawsuits and to ensure  that the
            offering is oversubscribed).    

                                         -34-
                                          34

            plaintiffs'  bald and  factually unsupported  hypothesis that

            the   underwriters  failed  to   obtain  and  use  up-to-date

            information  is   not,  standing  alone,   sufficient.    Cf.
                                                                      ___

            Driscoll, 985 F.2d at 48 (dismissal proper where after almost
            ________

            two years  of litigation  plaintiffs' complaint contained  no

            factual allegations to support its legal conclusions); Dewey,
                                                                   _____

            694 F.2d  at 3-4  (dismissal proper where  plaintiff, despite

            having eight months to make original complaint more specific,

            was not  able to  "fill in  the gaps" in  a "skeletal  set of

            bland allegations");  Gooley,  851 F.2d at 515  (if, "despite
                                  ______

            multiple opportunities  to finetune  the  complaint, a  naked

            conclusion,  unanchored in  any  meaningful  set  of  factual

            averments" is  the asserted  basis for relief,  dismissal may

            follow). 

                      In essence, all  the Proposed Complaint alleges  is

            that,  by the  close of  trading on  September 30,  1992, the

            prices  of Computervision's  securities  fell because  of  an

            announcement on September 29 that third quarter earnings were

            going to be lower than expected.  However, the assertion that

            the  future fell below projections is not enough in itself to

            render the projection actionable.  See Kowal, 16 F.3d at 1278
                                               ___ _____

            (failure  to  meet   performance  projections  "supports   no

            inference" that  projection  lacked a  reasonable basis  when

            made);  cf.   Virginia  Bankshares,  501   U.S.  at   1092-94
                    ___   ____________________

            (describing  the  type of  hard,  contemporaneous facts  that

                                         -35-
                                          35

            could  show a  statement about  the adequacy  of price  to be

            false).  A ruling to  the contrary would magnify the  risk of

            nuisance litigation.17   The district court  was justified in

            viewing the  Proposed Complaint's  pricing claims as  no more

            than an attempt  to seek a warranty of the accuracy of price,

            and  therefore as  insufficient.   Computervision II,  914 F.
                                               _________________

            Supp. at 720.  Rule 12(b)(6) may set a low  threshold, but it

            is real.  Gooley, 851 F.2d at 514.
                      ______

            2.  Mid-Quarter Information 
                _______________________

                      Plaintiffs  assert that,  as of  week seven  of the

            third   quarter  of   1992,  the   following  intra-quarterly

            information was  known, and  should have been  disclosed: (i)

            third  quarter domestic  bookings18  were only  about 24%  of
                                                                  _______

            Computervision's  internal  forecasts  for  those  weeks, and
            _____________________________________

            significantly below bookings at comparable points in the past

            five quarters; (ii) Computervision's international sales were
                                                                     ____

            also short  of internal forecasts;  and (iii)  Computervision
            _________________________________

            had a shortfall of  $40 million in visible19 orders  from its
                  _________________________                      ________

            internal forecasts and IPO Plan.
            _______________________________

                                
            ____________________

            17.  This  risk would be heightened in the case of new-growth
            high-technology  companies  that  have   especially  volatile
            prices.  See, e.g., James Bohn and Stephen Choi, Fraud in the
                     ___  ____                               ____________
            New-Issues Market:  Empirical  Evidence on  Securities  Class
            _____________________________________________________________
            Actions, 144 U. Pa. L. Rev. 903, 908 (1996). 
            _______

            18.  A "booking" represents the receipt of an order. 

            19.  "Visibility"  is a  measure of  the status  of potential
            orders and  the  likelihood that  they  will be  turned  into
            revenue producing sales.

                                         -36-
                                          36

                      But  alleged  deviations  from internal  forecasts,

            without  more, do  not  produce a  duty  to disclose  in  the

            Prospectus.  We recognize that investors may find information

            about  a  firm's internal  projections  and  forecasts to  be

            important.  See  Frank H. Easterbrook and  Daniel R. Fischel,
                        ___

            The  Economic  Structure of  Corporate  Law  305 (1991);  cf.
            ___________________________________________               ___

            Virginia  Bankshares,  501  U.S.  at  1090-91  (statement  of
            ____________________

            opinion by a board of directors can be materially significant

            because investors know that directors usually  have knowledge

            and  expertise far  exceeding that  of the  normal investor).

            Nonetheless,   the  federal  securities  laws  focus  on  the

            mandatory  disclosure  of backward-looking  hard information,

            not forecasts.   See Easterbrook and  Fischel, Corporate Law,
                             ___                           _____________

            at 305-06.   A firm has  the option to disclose  its internal

            projections, but  is not  required  to do  so.20   See In  re
                                                               ___ ______

            Lyondell Petrochemical  Co. Sec. Litig., 984  F.2d 1050, 1052
            _______________________________________

            (9th Cir.  1993); In re Convergent  Technologies Sec. Litig.,
                              __________________________________________

            948 F.2d 507, 516  (9th Cir. 1991)  (as amended on denial  of

            rehearing en banc); see also Arazie, 2 F.3d at 1468; Wielgos,
                                ___ ____ ______                  _______

            892  F.2d at  516.   "The federal  securities laws  impose no

            obligation  upon   an  issuer  to   disclose  forward-looking

            information such as internal projections, estimates of future

                                
            ____________________

            20.  That  internal forecasts  are disclosed  to underwriters
            does not make them any more susceptible to a duty to disclose
            to the investing public.  See Lyondell, 984 F.2d at 1053.
                                      ___ ________

                                         -37-
                                          37

            performance, forecasts, budgets, and similar data."  Shaw, 82
                                                                 ____

            F.3d at 1209.  

                      Plaintiffs' nondisclosure claims fail  because they

            base their allegations solely on discrepancies between actual

            (but    undisclosed)    intra-quarterly    information    and

            Computervision's  undisclosed  internal  projections.     Cf.
                                                                      ___

            VeriFone I, 784 F. Supp. at 1484 (in order to  assert a valid
            __________

            claim under the securities laws, plaintiffs must "establish a

            link  between a  misleading statement  or implication  in the

            prospectus and an  actual fact, not  a speculation about  the

            future,  omitted from  the document").    The mere  fact that

            intra-quarterly  results  lagged behind  internal projections

            does not, without more, require disclosure.  See In re Worlds
                                                         ___ ____________

            of  Wonder Sec. Litig., 35  F.3d 1407, 1419  (9th Cir. 1994),
            ______________________

            cert. denied, 116 S. Ct. 185 (1995).
            _____ ______

                      Plaintiffs   try  to   buttress  their   claims  by

            referring  to  SEC  Regulation  S-K, Item  303,  17  C.F.R.  

            229.303(a)(3)(ii)  which  requires  that  "known  trends  and

            uncertainties" about  results of  operations be disclosed  in

            the management's  discussion and analysis section  of certain

            SEC filings.  This rule, however,  has to be read in light of

            the  SEC's  instruction  to  this paragraph  which  expressly

            states  that   forward-looking   information  need   not   be

            disclosed.   17 C.F.R.   229.303(a),  Instruction 7; VeriFone
                                                                 ________

            II,  11 F.3d at 870; Lyondell, 984  F.2d at 1053.  Given this
            __                   ________

                                         -38-
                                          38

            context, the  phrase "known trends and  uncertainties" has to

            be understood  as referring to those  trends discernible from

            hard  information  alone.21     Here,  unlike  in  Shaw,  the
                                                               ____

            undisclosed  hard  information   pled  did  not   indicate  a

            "substantial likelihood that the quarter would turn out to be

            an  extreme   departure  from   publicly  known   trends  and

            uncertainties."    82  F.3d  at  1194.    Thus,  the  alleged

            nondisclosures  fell neither  within the  ambit of  17 C.F.R.

              229.303(a) or Shaw.  
                            ____

                      Indeed,  of the  three alleged  nondisclosures, the

            only  one  that  plaintiffs  compare  to  hard  data  is  the

            nondisclosure  as to  domestic bookings.    Plaintiffs assert

            that  domestic bookings as of week seven of the third quarter

            of 1992  were lower  than the  corresponding numbers  for the

            prior  five  quarters.     But   the  Prospectus   explicitly

            represented that Computervision suffered  cyclical variations

            in  quarterly  results,  with  its first  and  third  quarter

            results typically  being lower than  those of the  second and

            fourth quarters.   Given  those fluctuations, the  meaningful

            comparison of  Computervision's  third quarter  1992  booking

            numbers is to those of the  third quarter of 1991.  See Capri
                                                                ___ _____

                                
            ____________________

            21.  The    SEC    itself   distinguishes    "forward-looking
            information" from  "presently  known data  which will  impact
            upon future operating results, such as known future increases
            in  the  costs of  labor or  materials."   Instruction  7, 17
            C.F.R.   229.303(a).  

                                         -39-
                                          39

            Optics Profit Sharing v. Digital Equip. Corp., 950 F.2d 5, 10
            _____________________    ____________________

            (1st Cir. 1991).  And that comparison is unavailing.22

                      As we said in Shaw, "we reject any bright-line rule
                                    ____

            that  an issuer engaging in a public offering is obligated to

            disclose  interim   operating  results  for  the  quarter  in

            progress  whenever  it  perceives the  possibility  that  the

            quarter's results  may disappoint  the market."   82 F.3d  at

            1210.    We further  noted in  Shaw  that when  the allegedly
                                           ____

            undisclosed  information  (here  only  seven  weeks into  the

            quarter   --  and   where   mid-quarter  results   were   not

            particularly   predictive23)  is  more  remote  in  time  and

            causation  from the  ultimate events  of which  it supposedly

            forewarns, a nondisclosure  claim becomes  "indistinguishable

            from  a  claim  that  the issuer  should  have  divulged  its

            internal predictions about what would come of the undisclosed

            information."   Id.   That  quarterly results  for  the third
                            ___

            quarter  of  1992 did  in  fact  turn out  to  be  lower than

            expected  is not enough to  produce the inference  that as of

            the offering date Computervision had hard mid-quarter results

                                
            ____________________

            22.  The relevant numbers are  $2.5 million in domestic sales
            bookings as  of week seven  of the third quarter  of 1992 and
            $3.3 million for  the same period in 1991  -- a difference of
            $800,000, or less than  1% of the budgeted revenues  for that
            quarter.  This difference was immaterial as a matter of law.

            23.  Indeed,  the Prospectus  specifically warns  that early-
            quarter  results are  not  necessarily  predictive because  a
            substantial portion  of both orders  and shipments  typically
            occur in the last month of the quarter.

                                         -40-
                                          40

            that would have predicted a material departure in the end-of-

            quarter results.24

            3.  Backlog
                _______

                      Plaintiffs  separately  allege that  the Prospectus

            contained three material misstatements and omissions relating

            to backlog.  One  paragraph of the Prospectus is  the subject

            of these claims:

                      Shipments  are  generally made  within 30
                      _________________________________________
                      days of receiving an  order.  In light of
                      ___________________________
                      the short time between order and shipment
                      of  the  Company's products,  the Company
                                                    ___________
                      generally  has relatively  little backlog
                      _________________________________________
                      at any  given date, and the  Company does
                      __________________           ____________
                      not     believe    that     backlog    is
                      _________________________________________
                      representative of potential sales for any
                      ______________
                      future period (emphasis added).

            Plaintiffs say that: (i)  Computervision was required to, but

            failed to disclose the dollar  amount of backlog orders; (ii)

            Computervision  misrepresented  that  backlog  data  was  not

            significant   to  its  results;   and  (iii)  the  statement,

            "shipments are generally made within 30 days  of receiving an

                                
            ____________________

            24.  An issuer is not required to "disclose interim operating
            results for the quarter  in progress whenever it  perceives a
            possibility  that the  quarter's results  may  disappoint the
            market . . . .    Reasonable    investors   understand   that
            businesses  fluctuate,  and  that   past  success  is  not  a
            guarantee of  more of the  same.  There  is always  some risk
            that the quarter  in progress  at the time  of an  investment
            will turn out for  the issuer to be worse  than anticipated."
            Shaw, 82  F.3d at 1210.   It is  only when "the  issuer is in
            ____
            possession of [hard] nonpublic  information that the  quarter
            in  progress will be an  extreme departure from  the range of
            results  which  could  be   anticipated  based  on  currently
            available  information"  that  disclosure  might  be required
            under the securities laws.  Id.
                                        ___

                                         -41-
                                          41

            order,"  was false.  "Backlog"  is the dollar  amount, on any

            given day, of orders  received for which product has  not yet

            been shipped.   We address these  claims in turn and  find no

            error in the district court's rejection of them.

                      (i) Dollar Amounts of Backlog
                          _________________________

                      Item  101   of  Regulation  S-K  requires   that  a

            prospectus  disclose "to  the  extent  material, . . .  [t]he
                                  _________________________

            dollar amount of backlog  orders believed to be firm, as of a

            recent  date and  as of  a comparable  date in  the preceding

            fiscal year."25   17 C.F.R.    229.101(c)(1)(viii)  (emphasis

            added).  Information  is material when there is  a reasonable

            likelihood  that a  reasonable  investor  would  consider  it

            important.  See Shaw, 82  F.3d at 1219; Wielgos, 892  F.2d at
                        ___ ____                    _______

            517.    The Prospectus  disclosed  that  backlog levels  were

            usually low.  But, plaintiffs argue that that  disclosure was

            not enough.   They  argue that  the specific backlog  numbers
                                                ________

            were  material and hence required  to be disclosed.   This is

            so, they say, because  backlog entering the third quarter  of

            1992 was unusually low.  Plaintiffs support their argument by
                     _________

            comparing  the backlog  entering  the third  quarter of  1992

                                
            ____________________

            25.  Computervision issued its securities pursuant to Form S-
            1.  Item 11(a) of  the Instructions to Form S-1  requires the
            prospectus to furnish the information required by Item 101 of
            Regulation  S-K.    Liability  for failure  to  disclose  the
            information required to  be stated by  Item 101 arises  under
            Section 11 of the Securities Act.  See Shaw, 82 F.3d at 1204-
                                               ___ ____
            06  (describing the statutory scheme in the context of a Form
            S-3 shelf offering).  

                                         -42-
                                          42

            ($26,875,000)   to   that   entering   the   second   quarter

            ($39,897,000) -- a difference of approximately $13 million or

            thirty-two percent.

                      There  is a threshold flaw in plaintiffs' argument.

            As   Item  101(c)(1)(viii)   itself  says,   the  appropriate

            comparison  is  not  to   the  numbers  from  an  immediately

            preceding quarter, but to those from a comparable date in the

            preceding  fiscal  year.   17  C.F.R.    229.101(c)(1)(viii).

            This   is  particularly  true   here,  where  the  Prospectus

            specifically  stated that Computervision tended to experience

            seasonal  declines  in  revenues   in  its  first  and  third

            quarters.    See  Capri  Optics,    950  F.2d  at  10  (where
                         ___  _____________

            defendant's business was seasonal,  it was not meaningful for

            plaintiffs to compare results for  the quarter in question to

            those for the immediately preceding quarter).

                      Even  if  quarter-to-next-quarter comparisons  were

            appropriate,   Computervision's   failure  to   provide  more

            specific  information is nonetheless not actionable.  Roughly

            adjusting the numbers for seasonality, they show only a minor

            drop  in initial  backlog  levels (as  fractions of  budgeted

            quarterly revenues) between the  second and third quarters of

            1992.26   This minor drop  of a  few percent is  not adequate

                                
            ____________________

            26.  As the  defendants point  out, plaintiffs' numbers  have
            meaning only if  they are  adjusted for  seasonality.   While
            initial  backlog levels for the second  and third quarters of
            1992   were   $39,897,000   and  $26,875,000,   respectively,
            Computervision's  budgeted revenues  for those  quarters were

                                         -43-
                                          43

            to support the  claim that the  difference in backlog  levels
                                            __________

            between quarters  was  material and  hence required  specific

            backlog numbers to be disclosed.   Where a variable, although

            material, is of only minor predictive value, disclosure of  a

            rough estimate of that variable's  value can obviate the need

            for more specific disclosure.  Cf. Shaw, 82 F.3d at 1211 n.21
                                           ___ ____

            (disclosure of a "soft" projection may, in some cases, render

            the  "hard" information underlying  the projection immaterial

            as a matter of fact or of law).  Indeed, disclosure of only a

            rough  estimate  may  keep  investors  from  attaching  undue

            importance to minor shifts in the variable's value and avoids

            the  risk of  "burying  the [investors]  in  an avalanche  of

            trivial information."   San  Leandro Emergency  Medical Group
                                    _____________________________________

            Profit Sharing Plan v.  Philip Morris Cos., 75 F.3d  801, 810
            ___________________     __________________

                                
            ____________________

            $159,500,000  and  $121,000,000,   respectively.    When  the
            initial  backlog levels for the two quarters are looked at as
            fractions of  the budgeted  revenues for those  quarters, the
            result is  25% for the second quarter and 22.2% for the third
            quarter -- a difference of less than 3%.
                 The district court, in Computervision II, noted that the
                                        _________________
            Proposed Complaint calculated initial  backlog levels for the
            second and third quarters  of 1992 as a percentage  of actual
                                                                   ______
            revenues  (for  the second  quarter) and  forecasted revenues
            ________                                  ___________________
            (for  the  third  quarter),  respectively,  and  found  a  9%
            difference between the two percentages.  914 F. Supp. at 721.
            The district  court ruled  that this  9% differential was  an
            insufficient basis  to support plaintiffs'  claim.  Id.   Not
                                                                ___
            knowing the  degree to  which Computervision's  forecasts may
            have been systematically biased vis-a-vis actual results, and
            not  having  been  provided  with  this  information  by  the
            parties,  we  are reluctant  to  endorse  the plaintiffs'  9%
            number.    Cf. Wielgos,  892  F.2d at  515  (defendant's cost
                       ___ _______
            estimates were systematically biased).  Nevertheless, we note
            that our conclusion would not be different whether we used 3%
            or 9%.      

                                         -44-
                                          44

            (2d  Cir. 1996)  (quoting TSC  Industries, Inc.  v. Northway,
                                      _____________________     _________

            Inc.,  426 U.S. 438, 448 (1976)); Convergent, 948 F.2d at 516
            ____                              __________

            (same).      In   sum,   plaintiffs  have   no   claim   that

            Computervision's general statement  that backlog was  usually

            low,  without  the  disclosure   of  specific  numbers,   was

            materially  misleading  as  of  the  effective  date  of  the

            offering.  Cf.  Backman v.  Polaroid Corp., 910  F.2d 10,  16
                       ___  _______     ______________

            (1st Cir.  1990) (en  banc) ("Disclosing that  Polavision was

            being  sold below  cost  was not  [materially] misleading  by

            reason  of not saying how much below."); Worlds of Wonder, 35
                                                     ________________

            F.3d at 1419.

                      (ii) Immateriality of Backlog
                           ________________________

                      Plaintiffs  argue that  the Prospectus,  in stating

            that  "the   Company  does   not  believe  that   backlog  is

            representative of potential sales  for any future period," in

            effect falsely suggested that  backlog was not significant to

            Computervision's results.  Plaintiffs misread the Prospectus.

                      The statement  in the Prospectus does  not say that

            information  on  backlog  is  insignificant   or  immaterial.

            Instead, it says that such information should not be taken as

            representative.  The  statement cautions investors that  they

            should not  take  backlog levels  as  necessarily  predicting

            results for future periods.   In addition, there is  at least

            one other statement on  the very same page of  the Prospectus

                                         -45-
                                          45

            that warns investors that  data available early in  a quarter

            (i.e., opening backlog) is not necessarily a strong predictor
             ____

            of quarterly results because:

                      a  substantial  portion of  the Company's
                      orders and shipments  typically occur  in
                      the   last   month   of   each   quarter.
                      Therefore  . .  .  unexpected  delays  or
                      actions . . . could result in significant
                      quarterly  fluctuations in  the Company's
                      operating results.

            Hence, when read in context,  Computervision's statement that

            backlog was not representative of sales was plainly a warning

            that  investors should  not  draw too  many conclusions  from

            backlog  figures, and not a statement that backlog itself was

            immaterial or insignificant.

                      (iii) Shipments Within Thirty Days
                            ____________________________

                      Plaintiffs' final  argument on backlog is  that the

            district  court  erred  in  concluding   that  the  statement

            "shipments are generally made within thirty days of receiving

            an order" was not materially false or misleading.  Plaintiffs

            point  to a backlog aging  analysis from the  seventh week of

            the  third quarter of 1992,  which indicates that  39% of the

            backlog balance, at that time, was to be shipped in more than

            thirty  days.  The first  problem with the  argument is that,

            although plaintiffs attack  the word  "generally," they  base

            their  claim solely on data  from one portion  of one quarter

            and fail to allege anything meaningful about Computervision's

            general practice.  Second, even if one portion of one quarter

                                         -46-
                                          46

            could  be  taken   as  representative,  plaintiffs'   factual

            allegations  would  not  support  a  misrepresentation claim.

            Plaintiffs  allege that  approximately  sixty-one percent  of

            orders were shipped out in less than thirty days, six percent

            were shipped  in between thirty  and sixty days,  and thirty-

            three  percent   were  shipped  in  more   than  sixty  days.

            Computervision's statement said that shipments were generally

            made  within thirty days of receiving an order, not that they

            were always  made within thirty days.  That sixty-one percent

            of orders in one  portion of one quarter were  shipped within

            thirty days  is perfectly consistent with  the statement that

            orders were generally shipped within  thirty days.  There was

            no material misrepresentation.

            4.  CADDS 5
                _______

                      Plaintiffs' final allegations  focus on  statements

            concerning  CADDS  5,  Computervision's  then-newest  CAD/CAM

            software  product  and  the  centerpiece of  the  firm's  new

            business strategy.   Plaintiffs  allege  that the  Prospectus

            made  two sets  of material  misstatements or  omissions with

            respect to  CADDS 5: (i) the  Prospectus misrepresented that,

            as  of June 1992, CADDS  5 was a  "successful product," being

            shipped  in "volume,"  i.e., to  thousands of  customers; and
                                   ____

            (ii) the Prospectus materially overstated CADDS 5's potential

            for  success  when,  in  fact,  the  product  was beset  with

                                         -47-
                                          47

            problems.  As with the backlog claims, we affirm the district

            court's rejection of the CADDS 5 claims.

                      (i) Successful Product Shipping in Volume
                          _____________________________________

                      Plaintiffs'  Proposed  Complaint  alleged that  the

            "Prospectus[] misrepresented  CADDS 5 as a successful product

            commercially  shipping in  volume."   The Proposed  Complaint

            then  defined  "`[v]olume  commercial  shipments'"  as  those

            "involving several thousand customers."   The language in the

            Prospectus,  however,   neither  refers  to  CADDS   5  as  a

            "successful product shipping in  volume," nor to shipments to

            "several  thousand customers;" those  descriptions are wholly

            the plaintiffs'  own.  The  plain language of  the Prospectus

            speaks for itself:

                      Beta testing  of  CADDS 5  (release  2.0)
                      commenced  in March  1992 with 24  of the
                                                _______
                      Company's  largest  CADDS  customers  and
                                                 _________
                      early  introduction  sales  commenced  in
                      April  1992.    Commercial  shipments  of
                      CADDS 5 (release 2.0)  began in June 1992
                      and as of June  28, 1992, Release 2.0 had
                          _____________________________________
                      been  shipped  to 32  customers (emphasis
                      _______________________________

                      added).

            Far from  alluding to thousands of  customers, the Prospectus

            specified the  number of  customers to  whom the product  had
            _________

            been shipped  -- 24 in the  beta testing stage and  32 in the

            commercial shipping stage.   Plaintiffs' assertion that  this

            precise statement can be interpreted as implying that CADDS 5

            was  being shipped, or was ready to be shipped, to thousands,

            is baseless.

                                         -48-
                                          48

                      Further, the Prospectus  was replete with  language

            cautioning  investors that  the  market in  general (i.e.,  a
                                                                 ____

            large  volume of customers) had  not accepted CADDS  5 as yet

            and that the  product might need  further enhancements.   For

            example,  the Prospectus stated  that although Computervision

            hoped to replace its "declining hardware revenues and margins

            with sales  of higher margin CAD/CAM  software products . . .

            [n]o  assurance  can  be  given  that  the  Company  will  be
            _____________________________________________________________

            successful in achieving this objective" (emphasis added).  In
            ______________________________________

            addition, the Prospectus warned that "customer acceptance  of
                                                  _______________________

            CADDS  5  is  critical"  to continued  customer  purchase  of
            ______________________

            Computervision's  existing software  product, CADDS  4X, that

            the  "delayed release  of CADDS 5  (Release 2.0)  resulted in
                  _______________________________________________________

            customers delaying product purchases" and that:
            ____________________________________

                      the CAD/CAM industry is  characterized by
                      rapidly changing  technology and frequent
                                                       ________
                      new  product  introductions  and  product
                      _________________________________________
                      enhancements .  . . [and] [t]here  can be
                      ____________              _______________
                      no  assurance  that   the  Company   will
                      _____________
                      continue to be successful in identifying,
                      developing and marketing new  products or
                      enhancing  its   existing  products . . .
                      [or]  that new  customers will  change to
                            ___________________________________
                      the Company's  new products even  if they
                      _________________________________________
                      are  judged  to  be   superior  (emphasis
                      ______________________________

                      added).  

                      Computervision's statement that it had commercially

            shipped  CADDS 5 software to  32 customers must  be viewed in

            the context of the Prospectus' numerous cautionary statements

            that CADDS  5 might  never be  accepted by  the market.   See
                                                                      ___

                                         -49-
                                          49

            Shaw,  82  F.3d  at  1213  (if  a  statement  is  couched  in
            ____

            cautionary   language  that  disclaims   the  drawing   of  a

            particular  inference,   a  claim  that   the  statement  was

            materially  misleading may  fail as  a matter  of law).   The

            context confirms  that any possible misleading inference that

            might be  drawn from  Computervision's statement  is properly

            deemed immaterial as a matter of law.

                      (ii) Misleading Optimistic Statements
                           ________________________________

                      Plaintiffs' final claim  is that certain optimistic

            statements in  the Prospectus regarding  the development  and

            commercial prospects of CADDS 5 were materially misleading in

            light of  Computervision's alleged nondisclosure  of problems

            the  product was  facing.  See,  e.g., Hanon  v. Dataproducts
                                       ___   ____  _____     ____________

            Corp., 976 F.2d 497, 502 (9th Cir. 1992).
            _____

                      A  duty  to  disclose  technical  or  developmental

            problems  with  a product  may  arise where  a  company makes

            strongly optimistic or concrete statements about that product

            that  are in  stark contrast  to its  internal reports.   Cf.
                                                                      ___

            Serabian, 24 F.3d at  363-65 (sustaining Section 10(b) claims
            ________

            where there  was a  "contrast between what  company officials

            were  hearing  internally  . . .  and what  the  company  was

            telling the public at the same time" (emphasis in original)).
                               ________________

            But,  in this  case,  the statements  about  CADDS 5  in  the

            Prospectus  were  not  so  optimistic  as  to  be  materially

            misleading about the existence of developmental or commercial

                                         -50-
                                          50

            difficulties with CADDS 5.   To the contrary,  the Prospectus

            frequently  alludes to the  uncertainties associated with the

            release of a new product.     The  key statements  identified

            by the  plaintiffs are  that Computervision expected  CADDS 5

            "to broaden the  number of customers in  existing accounts as

            well  as attract  new  customers,"  and that  "Computervision

            believes  that CADDS 4X and CADDS 5  are likely to be used in

            tandem by major accounts in  the foreseeable future."   These

            statements, whether  read in isolation  or in the  context of

            Computervision's numerous warnings that  CADDS 5 might not be

            accepted   by   the    market   and   might    need   further

            enhancements,27  suggest,  at most,  the  hope  that CADDS  5

            will eventually gain acceptance  in the market.  Such  a hope

            is not  unusual for a company  releasing a new product.   Cf.
                                                                      ___

            VeriFone I,  784 F. Supp.  at 1484 ("securities  laws presume
            __________

            that  skilled  investors  are  aware  that   a  corporation's

            performance with a new product . . . is unlikely to replicate

            past successes").   Computervision's statements did  not rise

            to  the level of optimism  or certainty that  would make them

            materially misleading in the absence of disclosure of initial

            developmental problems the product was  facing.  Cf. Shaw, 82
                                                             ___ ____

                                
            ____________________

            27.  The Prospectus also states that "a significant delay" in
            the   availability  of   CADDS  5   would   adversely  affect
            Computervision  and that many of Computervision's competitors
            "have  greater financial  and operating  resources" and  that
            "there  can be no assurance that competitors will not produce
            equivalent or superior products." 

                                         -51-
                                          51

            F.3d   at  1219   n.33  (cautiously   optimistic  statements,

            expressing  at  most a  hope for  a  positive future,  do not

            trigger  a duty  to  update); San  Leandro,  75 F.3d  at  811
                                          ____________

            (subdued generally optimistic statements  constituted nothing

            more than puffery and were not actionable); In re Time Warner
                                                        _________________

            Inc.  Sec. Litig., 9 F.3d 259, 267 (2d Cir. 1993) (statements
            _________________

            at issue  lacked "definite positive projections"  of the sort

            that would  require later  correction), cert. denied,  114 S.
                                                    _____ ______

            Ct. 1397 (1994).   Further, the statements here are  markedly

            less enthusiastic than the  statements that other courts have

            found  actionable.  See In re Apple Computer Sec. Litig., 886
                                ___ ________________________________

            F.2d 1109, 1118-19 (9th Cir. 1989) (company executives stated

            that new  computer product would be  "phenomenally successful

            the first year  out of  the chute" and  would make  company's

            "growth before this look small"), cert. denied, 496  U.S. 943
                                              _____ ______

            (1990); Hanon,  976 F.2d  at 501-02 (company's  press release
                    _____

            stated  that new  product had  received "strong  interest and

            high acclaim from users  and analysts alike" and its  special

            features were  "rapidly making  [it] .  . .  one of the  most

            popular  in [the  company's] line").   Computervision's  mild

            statements of hope, couched  in strongly cautionary language,

            cannot be said to have become materially misleading.

                                         IV.

                                      Conclusion
                                      __________

                      The decision of the district court is affirmed.  
                                                            ________

                                         -52-
                                          52