Court Opinion

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Date Created: 2015-09-21 21:23:45.492455+00
Date Added: 2024-06-11T11:42:53.715714
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USCA1 Opinion

	

                            United States Court of Appeals
                            United States Court of Appeals
                                For the First Circuit
                                For the First Circuit
                                 ____________________

        No. 96-1088

                                     DAVID GROSS,

                                Plaintiff, Appellant,

                                          v.

                 SUMMA FOUR, INC., BARRY R. GORSUN, JAMES J. FIEDLER,
               JOHN A. SHANE, WILLIAM M. SCRANTON, AND ROBERT A. DEGAN,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

                    [Hon. Paul J. Barbadoro, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                 Stahl, Circuit Judge,
                                        _____________
                           Campbell, Senior Circuit Judge,
                                     ____________________
                              and Lynch, Circuit Judge.
                                         _____________

                                 ____________________

            Arthur R. Miller, with  whom Lee S. Shalov, Milberg Weiss  Bershad
            ________________             _____________  ______________________
        Hynes & Lerach LLP, Jules Brody, Mark  A. Levine, Stull Stull & Brody,
        __________________  ___________  _______________  ___________________
        Edward L. Hann, McLane, Graf,  Raulerson & Middleton, Joseph H. Weiss,
        ______________  ____________________________________  _______________
        and Weiss & Yourman, were on brief for appellant.
            _______________
            Peter J.  Macdonald, with whom Donald  J. Williamson and Hale  and
            ___________________            _____________________     _________
        Dorr, were on brief for appellees.
        ____

                                 ____________________

                                   August 12, 1996
                                 ____________________

                      STAHL, Circuit Judge.  Investor David Gross appeals
                      STAHL, Circuit Judge.
                             _____________

            from the district  court's dismissal of his  securities fraud

            claim  against Summa  Four, Inc.,  its  president, and  other

            Summa Four officers and directors.1   Gross claims that Summa

            Four committed  "fraud on the  market" by making a  series of

            public statements from  January to July 1994 that were either

            materially misleading in and of themselves, or incomplete and

            misleading  due to the omission of materially relevant facts.

            Gross further complains that Summa Four improperly overstated

            its revenue  during  the same  time  period.   After  careful

            review, we affirm  the district court's dismissal  of Gross's

            claims.

                                          I.
                                          I.
                                          __

                                      Background
                                      Background
                                      __________

                      Summa  Four  is  a Delaware  corporation  with  its

            principal place of business in Manchester, New Hampshire.  It

            develops and  manufactures advanced-technology  switching and

            signaling  systems  for use  in  telecommunications networks,

            which it markets and distributes to clients worldwide.

                      On September  23,  1993,  Summa  Four  successfully

            completed  an initial public  offering ("IPO") of  its common

                                
            ____________________

            1.  The  individual  defendants  are  Barry  Gorsun,  current
            president, CEO and Chairman  of the Board; James  J. Fiedler,
            president and director from July 1993 through July 1994; John
            A.  Shane, director since 1976; William M. Scranton, director
            since 1976; and Robert A. Degan, director since 1984.  Unless
            otherwise   indicated  we  will   refer  to   all  defendants
            collectively as "Summa Four" or "the company."

                                         -2-
                                          2

            stock.   The individual  defendants sold a  portion of  their

            shares  into  the IPO  (at a  price  of $17  per  share), but

            remained significant shareholders following the offering.  As

            provided in a  "lock-up" agreement with the  underwriter, the

            individual  defendants  were  prohibited  from  selling   any

            retained shares  in the  company for  180 days following  the

            date of  the offering.   In late February 1994,  however, the

            individual defendants  obtained special  permission from  the

            underwriter to sell,  and did  sell, over  130,000 shares  of

            Summa Four stock  at an average market price in excess of $38

            per share.    

                      Gross, who purports to sue on behalf of himself and

            all other  investors similarly situated, purchased 200 shares

            of  Summa  Four  stock  in  late  May  1994  at  a  price  of

            approximately $27.50 per share.  On July 5, 1994 (the closing

            date  of the class  period),2 Summa  Four's stock  price fell

            from  $22.25  to  $11.75 per  share  following  the company's

            announcement  that its expected results for the first quarter

            of fiscal year  1995 (ending June 30, 1994)  would fall short

            of  earlier projections.    Shortly  thereafter,  Summa  Four

            terminated  defendant James  Fiedler who  had  served as  its

            president throughout the class period.

            A.  Summa Four's Public Statements
            __________________________________

                                
            ____________________

            2.  The  purported "class  period" extends  from  January 18,
            1994, to  July 5, 1994.   The district court  never certified
            the class.

                                         -3-
                                          3

                      From  January  to  July  1994,  Summa  Four  issued
                      

            several public  statements touting the  company's performance

            and  profitability.    In  the  complaint,  Gross  relies  on

            excerpts from three  such statements to establish  his claims

            of securities fraud.   The first two excerpts  are taken from

            press  releases  dated January  18  and  May  3,  1994,  that

            accompanied the release of Summa Four's results for the third

            and  fourth quarters  of its  1994  fiscal year.   The  third

            excerpt  is  taken  from  a  June 29,  1994,  letter  to  the

            shareholders from Summa Four's then president  James Fiedler.

            The  June 29  letter was sent  in advance  of the end  of the

            first quarter of Summa Four's 1995 fiscal year.  The relevant

            portions of the three statements are quoted below.

                      1.  January 18, 1994, press release: 

                      Competition at all levels and alternative
                      technologies caused by divestiture in the
                      U.S. and  privatization in  other markets
                      are  fueling  growth for  new  customized
                      services.   We are also  seeing increased
                                                      _________
                      demand for our  SDS distributed switch in
                      ______ ___ ___  ___ ___________ ______
                      a   number   of   international   markets
                      including China, Chile and Columbia where
                      there    is    rapid    development    in
                      infrastructure.   .   .   .     The   SDS
                      distributed   switch   is   becoming  the
                      platform of choice for rapidly developing
                      and   deploying   network-based  enhanced
                      services worldwide.

                      2.  May 3, 1994, press release:

                      In the  fourth quarter [ending  March 31,
                      1994], the  Company received  significant
                                          ________  ___________
                      orders  from  AT&T, McCaw,  Sprint,  GTE,
                      ______
                      Unisys, and IBM to address a broad  range
                      of applications . . . .  These new orders

                                         -4-
                                          4

                      were   for   both    new   and   existing
                      applications,       domestically      and
                      internationally.

                                         -5-
                                          5

                      3.  June 29, 1994, letter to shareholders:

                      We  are  pleased to  report  to  you that
                      fiscal year  1994, ended March  31, 1994,
                      was  a  watershed  year  in Summa  Four's
                      history.    It  was a  year  in  which we
                      strengthened  our  competitive  position,
                      recorded our eighth  consecutive increase
                      in  quarterly  revenues,   and  generated
                      record net income.  

                      Our  strong   financial  performance   is
                      ___  ______   _________  ___________
                      primarily the  result of  our initiatives
                      in the  highly competitive  long distance
                      market . . .  .  Summa Four is  committed
                      to maintaining  its worldwide  leadership
                      position  in  the   public  network-based
                      distributed  switch  market.     We  have
                      preeminent  customers  worldwide,  broad-
                      based  strategic  distribution  channels,
                      public   network-certified  products,   a
                                                              _
                      strong   financial   position,   and   an
                      ______   _________   ________
                      experienced management team. 

                      Gross alleges  that, during the class period, Summa

            Four possessed internal reports, documents, and board meeting

            minutes revealing that the company was experiencing declining

            growth in revenue  and earnings, delayed orders,  significant

            increases in expenses, and difficulties in  its international

            operations.   Specifically, in  order to  support his  claims

            that the  three public  statements were  materially false  or

            misleading, Gross  relies on certain internal "Flash Reports"

            and "Monthly  Operating Reports"  for the  months of  January

            through  April  1994,  and recorded  minutes  from  board and

            internal operation meetings held in May and June 1994.  As we

            progress with our  analysis, we will  discuss in more  detail

            the content of these internal documents. 

                                         -6-
                                          6

            B.  The Present Lawsuit
            _______________________

                      On  July  12,  1994,  shortly  after  Summa  Four's

            announcement of its expected results for the first quarter of

            fiscal  year 1995  and the  ensuing sudden  decline in  Summa

            Four's  stock price, Gross filed this securities fraud action

            in the New Hampshire federal district court.  Gross purported

            to  bring  the  complaint  on  behalf  of all  investors  who

            purchased  Summa   Four  stock   during  the   class  period.

            Following  Summa  Four's  initial  motion   to  dismiss,  the

            district  court  granted  Gross  limited  discovery.     Upon

            completion of that discovery, Gross amended his complaint.  

                      Subsequently,  Summa  Four  moved  to  dismiss  the

            amended complaint.   After  briefing and  oral argument,  the

            district court granted  the motion, rejecting all  of Gross's

            claims.  The  court disagreed with  Gross that the  excerpted

            portions of  the statements  could be  viewed as  affirmative

            misrepresentations, stating that:

                      A reasonable person could  not infer from
                      the pleaded  acts that demand  for [Summa
                      Four's products]  was no  longer growing,
                      that  significant  orders  had  not  been
                      received from major corporations, or that
                      the   company  was   not  in   a  "strong
                      financial position" simply because it did
                      not    meet    its    short-term   budget
                      projections,  its  orders for  one  month
                      were   lower  than   expected,  and   its
                      international operations were  in a state
                      of disarray.

                      The  court also  rejected  Gross's  claim that  the

            statements  were misleading  by omission.    The court  noted

                                         -7-
                                          7

            that, while many  of the facts Gross alleged  to support that

            allegation  "might  have  been  important to  the  reasonable

            investor,"  they were  not sufficient  to  indicate that  the

            challenged statements were so incomplete as to be misleading.

            The court  further rejected  Gross's final  claim that  Summa

            Four  had   overstated  its   revenue,  reasoning  that   the

            allegations  on which Gross relied did not reasonably support

            the claim.  Gross now appeals.3

                                         II.
                                         II.
                                         ___

                                      Discussion
                                      Discussion
                                      __________

                      Gross  contends that  the  district court  erred in

            dismissing his claims.  He argues that the amended  complaint

            adequately  alleged that  Summa  Four had  a  duty, which  it

            breached, to  disclose material nonpublic information  in its

            possession  necessary  to  make  its  public  statements  not

            materially misleading.   Gross also contends that  Summa Four

            improperly overstated  its  revenue and  earnings during  the

            class period  by not following  generally accepted accounting

            principles ("GAAP").  After discussing the standard of review

            and the  relevant securities  law, we  address each  issue in

            turn.  

                                
            ____________________

            3.  The  amended  complaint  also included  claims  regarding
            alleged  misstatements  of  future  performance  and  alleged
            misstatements  by third-party analysts.   Gross has expressly
            abandoned those claims on appeal. 

                                         -8-
                                          8

            A.  Standard of Review
            ______________________

                      We review the district court's dismissal of Gross's

            amended   complaint   de   novo,   taking  all   well-pleaded
                                  __   ____

            allegations  as true  and  giving Gross  the  benefit of  all

            reasonable inferences.  See Roeder v. Alpha Indus., Inc., 814
                                    ___ ______    __________________

            F.2d  22, 25  (1st Cir.  1987).   Nonetheless,  because Gross

            alleges  fraud,  he  is subject  to  the  heightened pleading

            requirements  of Fed.  R. Civ.  P. 9(b), which  provides that

            "[i]n  all averments of  fraud or mistake,  the circumstances

            constituting  the fraud  or  mistake  shall  be  stated  with

            particularity."

                        Rule 9(b) sets  a demanding standard in  order to

            "minimize   the  chance  that  a  plaintiff  with  a  largely

            groundless  claim will  bring a  suit  and conduct  extensive

            discovery  in the hopes of obtaining an increased settlement,

            rather  than  in  the  hopes  that  the process  will  reveal

            relevant  evidence."  Romani  v. Shearson Lehman  Hutton, 929
                                  ______     _______________________

            F.2d  875, 878  (1st  Cir.  1991)  (internal  quotations  and

            citations  omitted).   We  have  been  especially  strict  in

            demanding adherence to  Rule 9(b) in the  securities context,

            id., expressly stating that 
            ___

                      "general    averments   of    defendants'
                      knowledge  of material  falsity will  not
                      suffice.  Consistent with Fed. R. Civ. P.
                      9(b),  the   complaint  must   set  forth
                      specific facts that make it reasonable to
                      believe that the defendant[s] knew that a
                      statement   was   materially   false   or
                      misleading.  The  rule requires that  the

                                         -9-
                                          9

                      particular times, dates, places, or other
                      details   of   the   alleged   fraudulent
                      involvement of the actors be alleged."

            Lucia v. Prospect St. High Income Fund, 36 F.3d 170, 174 (1st
            ______   _____________________________

            Cir. 1994) (quoting  Serabian v. Amoskeag Bank  Shares, Inc.,
                                 ________    ___________________________

            24 F.3d 357, 361 (1st Cir. 1994)).

                      Furthermore,  we  have  consistently  held  that  a

            securities  plaintiff does  not satisfy  the requirements  of

            Rule  9(b)   merely  by  pleading  "`fraud   by  hindsight.'"

            Greenstone v. Cambex  Corp., 975 F.2d 22, 25  (1st Cir. 1992)
            __________    _____________

            (quoting Denny v. Barber, 576  F.2d 465, 470 (2d Cir. 1978)).
                     _____    ______

            In  other words, "a  general averment that  defendants `knew'

            earlier what  later turned  out  badly" does  not convey  the

            necessary particularity  that Rule  9(b) requires.   Id.   In
                                                                 ___

            addition, the  heightened pleading  requirement of  Rule 9(b)

            applies even  when the  fraud relates  to matters  peculiarly

            within  the defendant's knowledge.   Lucia,  36 F.3d  at 174;
                                                 _____

            Romani, 929 F.2d at 878.    
            ______

            B.  Requirements of a 10b-5 Claim
            _________________________________

                      Gross  bases his fraud claims on alleged violations

            of   10(b) of the Securities  Exchange Act and the Securities

            and Exchange Commission's Rule  10b-5 promulgated thereunder.

            15 U.S.C.    78j(b); 17 C.F.R.    240.10b.5.   Together these

            provisions prohibit any person, directly  or indirectly, from

            committing  fraud in connection with  the purchase or sale of

            securities.  Id.; Shaw v. Digital Equip. Corp., 82 F.3d 1194,
                         ___  ____    ____________________

                                         -10-
                                          10

            1217  (1st Cir. 1996).   To state  a cause of  action under  

            10(b)  and  Rule  10(b)(5),  a  plaintiff  must  plead,  with

            sufficient particularity,  that  the defendant  made a  false

            statement  or omitted  a material  fact,  with the  requisite

            scienter, and that the plaintiff's reliance on this statement

            or omission caused the plaintiff's  injury.  Shaw, 82 F.3d at
                                                         ____

            1217; see  also San  Leandro Emergency  Medical Group  Profit
                  ___  ____ _____________________________________________

            Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 808 (2d Cir.
            ____________    __________________

            1996).  A misrepresented  or omitted fact will  be considered

            material  only if a reasonable investor would have viewed the

            misrepresentation  or   omission  as   "having  significantly

            altered the total mix of information made available."  Basic,
                                                                   ______

            Inc. v. Levinson, 485 U.S. 224, 231-32 (1988).
            ____    ________

                      By  itself, however, Rule 10b-5, does not create an

            affirmative duty of  disclosure.  Indeed, a  corporation does

            not commit securities fraud merely by failing to disclose all

            nonpublic  material information in  its possession.   Roeder,
                                                                  ______

            814 F.2d at  26 (citing Chiarella v. United  States, 445 U.S.
                                    _________    ______________

            222,  235 (1980));  see  also Shaw,  82 F.3d  at  1202.   The
                                ___  ____ ____

            corporation must first have a  duty to disclose the nonpublic

            material information  before the potential for  any liability

            under the securities  laws emerges.  Roeder, 814  F.2d at 26.
                                                 ______

            Such  a duty  may arise  if,  inter alia,  a corporation  has
                                          _____ ____

            previously  made a statement of  material fact that is either

                                         -11-
                                          11

            false,  inaccurate, incomplete, or misleading in light of the

            undisclosed information.  See id. at 27.4   
                                      ___ ___

                      Thus, "[w]hen a corporation does make a disclosure-

            -whether it be voluntary or required--there is a duty to make

            it complete and accurate."  Id.  at 26.  "This, however, does
                                        ___

            not mean that by revealing one fact about a product, one must

            reveal  all others that,  too, would be  interesting, market-

            wise, but means only such others,  if any, that are needed so

            that  what was  revealed would  not be  `so incomplete  as to

            mislead.'"  Backman  v. Polaroid Corp., 910 F.2d  10, 16 (1st
                        _______     ______________

            Cir. 1990) (en banc) (quoting  SEC v. Texas Gulf Sulphur Co.,
                        __ ____            ___    ______________________

            401 F.2d 833, 862 (2d Cir. 1968) (en banc), cert. denied, 394
                                              __ ____   _____ ______

            U.S. 976 (1969)).   Furthermore, the fact that  a company has

            reported accurately about  past successes does not  by itself

            burden  the company  with a  duty to  inform the  market that

            present  circumstances are less  positive.  Shaw,  82 F.3d at
                                                        ____

            1202; Serabian  v. Amoskeag Bank  Shares, Inc., 24  F.3d 357,
                  ________     ___________________________

            361 (1st Cir. 1994).

            C.  Analysis
            ____________

                      We turn first  to Gross's claims that  Summa Four's

            various public statements during the class period were either

                                
            ____________________

            4.  In Roeder, we also  alluded to two other  situations that
                   ______
            could  give rise to  a duty to disclose  material facts:  (1)
            when an  insider trades  in the company's  securities on  the
            basis of nonpublic  material information; (2) when  a statute
            or regulation mandates disclosure.  See Shaw, 82 F.3d at 1202
                                                ___ ____
            n.3 (discussing Roeder).
                            ______

                                         -12-
                                          12

            false  and  misleading in  and  of  themselves  or false  and

            misleading by omission.  We  take the claims arising from the

            June  29 letter  first, and then  address the  claims arising

            from  the  earlier  January  18 and  May  3  press  releases.

            Finally, we turn to Gross's claim that, by employing improper

            accounting  procedures,  Summa  Four  overstated its  revenue

            during the class period. 

                      1.  June 29 Letter
                      __________________

                      Gross complains that, given the letter's failure to

            disclose Summa Four's  impending poorer-than-expected results

            for the  first quarter  of fiscal  year 1995,  its statements

            that  the  company   had  experienced  a   "strong  financial

            performance" and  was in  "a strong  financial position"  are

            either  patently false  or  clearly  misleading by  omission.

            Summa  Four  disputes  this  contention,  arguing  that  both

            statements are completely borne out  by the facts alleged  in

            the amended  complaint.  Summa  Four argues that  the "strong

            financial  performance"   statement  is   a  backward-looking

            statement  referring to  its record  results  in fiscal  year

            1994.   Summa Four further  adds that nothing in  the amended

            complaint,  viz.,  allegations concerning  its  disappointing
                        ____

            first quarter 1995  results, supports the inference  that the

            company was not in a "strong financial position."  

                      While  the  issues  raised by  the  June  29 letter

            represent,  perhaps, Gross's  strongest  claims, we  need not

                                         -13-
                                          13

            choose between  the parties' contrary positions.   Regardless

            of the merits,  because Gross purchased his stock  on May 27,

            1994, well  before Summa Four  issued the June 29  letter, he

            has no standing to complain  about the statements included in

            the letter.  See Shaw, 82  F.3d at 1222 (only individuals who
                         ___ ____

            purchased shares after  allegedly misleading statement  could
                             _____

            have  suffered a  cognizable  injury);  Roots Partnership  v.
                                                    _________________

            Lands'  End, Inc.,  965  F.2d  1411,  1420  (7th  Cir.  1992)
            _________________

            (similar).  In  other words,  because Summa  Four issued  the

            letter after Gross had purchased his stock, the statements in

            the letter could not possibly  have inflated the market price

            that he paid  for those shares.  Roots  Partnership, 965 F.2d
                                             __________________

            at 1420.  Moreover, although  Gross purports to bring a class

            action on behalf of all individuals who purchased  Summa Four

            shares during the  class period, he cannot maintain an action

            on behalf of class members to  redress an injury for which he

            has no standing in his own right.  Id. at 1420 n.6; see Britt
                                               ___              ___ _____

            v. McKenny, 529 F.2d 44, 45 (1st Cir.) ("If none of the named
               _______

            plaintiffs  may maintain action on their own behalf, they may

            not seek such  relief on behalf of a  class."), cert. denied,
                                                            _____ ______

            429 U.S.  854 (1976);  see also Lewis  v. Casey,  64 U.S.L.W.
                                            
                                   ___ ____ _____     _____

            4587, 4590 (U.S. June 25, 1996). 

                      2.    January 18  Press  Release:   False
                      _________________________________________

                      Statement of Current Facts
                      __________________________

                                         -14-
                                          14

                      Apart  from the  claims arising  from  the June  29
                      

            letter,  Gross points  to one  statement  excerpted from  the

            January  18,  1994,  press release  as  constituting  a false

            statement of current facts.   Gross contends that the amended

            complaint sufficiently  alleged that  Summa Four's  statement

            that "We are  seeing increased demand for our SDS distributed
                                 _________ ______

            switch  in a number of international markets including China,

            Chile and Colombia" is patently false and a violation of Rule

            10b-5.  We disagree.

                      Though Gross adamantly  contends that the statement

            is false, the amended complaint provides little in the way of

            specific facts to  support this contention.   See Greenstone,
                                                          ___ __________

            975 F.2d at 25 ("complaint must set forth specific facts that

            make it reasonable to believe  that the defendant knew that a

            statement  was materially  false  or  misleading"); see  also
                                                                ___  ____

            Glassman  v. Computervision Corp.,  No. 95-2240, slip  op. at
            ________     ____________________

            31-34 (1st  Cir. July 31,  1996) (complaint failed  to allege

            sufficient   factual   basis   for   claim  that   up-to-date

            information was ignored in setting offering prices).  Indeed,

            when  pressed  by  the  district court  on  this  very  issue

            following  the  limited discovery,  Gross's  counsel conceded

            that the amended complaint failed  to point to any "documents

            that  expressly say that on January  18th or thereabouts that

            the [SDS] switch  [was] experiencing declining orders."   The

            only document contemporaneous to the January 18 press release

                                         -15-
                                          15

            that Gross  cites to support  his claim, a January  20 "Flash

            Report," made no comment on any product, or on any particular

            international market.  At best, the January 20 "Flash Report"

            revealed that Summa Four had experienced some slight negative

            variances  from its overall  budgeted revenues and  costs for

            the reporting period ending December 31, 1993.  Such evidence

            hardly  supports the inference  that the  demand for  the SDS

            switch was not increasing in the named international markets.

                      Moreover, the additional  statement in the  January

            20  "Flash Report" that  Summa Four's  "overall International

            sales  and marketing efforts  are currently under  review and

            will be revised"  provides little further support for Gross's

            claim.     That  Summa   Four  was   reviewing  its   overall

            international  marketing  efforts  does  not  contradict  the

            assertion in the January 18 press release that demand for the

            SDS switch was  increasing in certain areas.   Neither do the

            later reports  and meeting minutes adverted to in the amended

            complaint adequately  support the inference  that the excerpt

            from the  January  18 press  release  was false  when  made.5

                                
            ____________________

            5.  Summa  Four's January  Monthly  Operating Report,  issued
            February 25, 1994, states, inter alia, that
                                       _____ ____

                      [a]   major   reorganization   of   sales
                      responsibilities   in    [the   company's
                      international operations]  is planned  to
                      take  place during March.  It is intended
                      to refocus that  organization on European
                      opportunities   and   to   emphasize  the
                      development of  distribution channels  in
                      major  marketplaces  such as  France  and

                                         -16-
                                          16

            See,  e.g.,  Shaw,  82  F.3d  at 1223  (under  Rule  9(b),  a
            ___   ____   ____

            plaintiff may not  contrast a defendant's past  optimism with

            less  favorable actual results,  and then simply  contend the

            difference is fraud).  None of these later reports or minutes

            specifically  reflect on  demand  for the  SDS switch  in the

            China,  Chile,   or  Colombia  markets.    More  importantly,

            although   they  arguably   suggest  that   Summa  Four   was

            experiencing growing  difficulties in  the management  of its

            international  operations  at  the  time those  documents  or

            minutes were issued (in late February, April, and June), they

            do not adequately support the inference that the company knew

            of  these difficulties  (or that they  even existed)  when it

            issued the January 18 press release.

                      3.   May 3 Press Release:   Misleading Omissions of
                      ___________________________________________________

                      Current Facts  
                      _____________

                      Gross also contends  that Summa  Four made  several

            technically  accurate statements about  its receipt of orders

            without  disclosing  facts  known to  the  company  that were

                                
            ____________________

                      Germany.

            The report further states that a "corporate reorganization of
            Austrel's     domestic     and     international    marketing
            responsibilities  has  slowed  completion  of the  Australian
            opportunities."
                      Summa Four's March Monthly Operating Report, issued
            in April 1994,  indicated that the  company had replaced  the
            Managing Director of  Summa Four's European  operations along
            with  two other members of the international management team.
            In  addition, an excerpt from the minutes of a June 20, 1994,
            meeting  indicated that Summa  Four was  experiencing further
            difficulties in its international operations.

                                         -17-
                                          17

            necessary to  make the  disclosed statements  not misleading.

            Gross points principally  to an excerpt from the  May 3 press

            release,  stating that "[i]n the fourth quarter [ending March

            31, 1994], the Company [had] received significant orders from
                                         ________ ___________ ______

            AT&T, McCaw, Sprint, GTE, Unisys,  and IBM to address a broad

            range  of applications."6  Gross contends that this statement

            was materially  misleading because  Summa Four  did not  also

            tell investors that, at that time, it was experiencing delays

            in consummating contracts for  at least one of  these orders,

            in receiving other orders, and in shipping products.  We find

            Gross's arguments unavailing.7

                      First,  assuming  arguendo that  Gross  has alleged
                                        ________

            sufficiently particular facts to  support the inference  that

            the company  knew about the  purported delays at the  time it

            issued  the May 3 press release, we do not believe that those

            alleged  delays make  Summa  Four's  statement  that  it  had

            received "significant orders" in the prior quarter materially

                                
            ____________________

            6.  In  the amended complaint, Gross never quotes the portion
            of  the challenged statement that expressly indicates that it
            refers  to  orders   received  "[i]n  the   fourth  quarter."
            Nevertheless,  in reviewing  a  motion  to  dismiss,  we  may
            consider  in its  entirety  a  relevant  document  explicitly
            relied on by the  plaintiff in the  complaint.  See Shaw,  82
                                                            ___ ____
            F.3d at 1220; Philip Morris, 75 F.3d at 809. 
                          _____________

            7.  Gross also points to an excerpt from the January 18 press
            release, which noted that Summa Four had received orders from
            Unisys, Sprint, IBM, DEC, Pacific  Bell, USWest and AT&T.  We
            reject  Gross's  claims  with regard  to  this  statement for
            essentially the  same reasons that  we reject his  claim that
            the May 3 statement was materially misleading. 

                                         -18-
                                          18

            misleading.  As  Gross acknowledges, the statement  about the

            orders is not false:   Gross does not contend that Summa Four

            did   not  receive  the  orders.    Moreover,  the  statement

            specifically concerns past events -- the receipt of orders in

            the prior quarter.   We have consistently held  that the fact

            that a company makes an affirmative true statement about past

            results does  not give  rise  to a  duty  to comment  on  its

            current  status.   Serabian,  24 F.3d  at  361; Capri  Optics
                               ________                     _____________

            Profit Sharing  v. Digital Equip.  Corp., 950 F.2d 5,  8 (1st
            ______________     _____________________

            Cir. 1991). 

                 Moreover,  the cases  on  which  Gross  relies  for  the

            proposition  that the failure to disclose information similar

            to  that alleged  here was  a material  omission are  clearly

            distinguishable.  For  example, Gross cites Alfus  v. Pyramid
                                                        _____     _______

            Technology Corp., 764  F. Supp. 598, 603-04 (N.D. Cal. 1991),
            ________________

            as holding that a company's failure to  disclose, inter alia,
                                                              __________

            "manufacturing delays" and "flattening sales" was an omission

            sufficient to survive  the company's motion  to dismiss.   In

            Alfus, however, the public statements allegedly undermined by
            _____

            the nondisclosed  information were  more specific  statements

            about  the company's  revenue  and  earnings potentials  than

            those Gross  alleges here.   Where Gross  only points  to two

            public statements concerning  past orders  received by  Summa

            Four, the statements in Alfus dealt with definite projections
                                    _____

            (e.g., "[W]e forecast total revenue growth of  40 percent, to
             ____

                                         -19-
                                          19

            $110-120  million.     We   view  this   as  a   conservative

            estimate.").  Id. at 602; see also In re Sunrise Technologies
                          ___         ___ ____ __________________________

            Sec. Litig., [1992 Transfer Binder] Fed. Sec. L. Rep. (CCH)  
            ___________

            97,042 (N.D. Cal. Sept. 22, 1992) (similar).  In short, we do

            not believe that  Gross's allegations that the  company knew,

            but failed to  disclose, that it was suffering various delays

            in closing contracts, receiving orders, and shipping products

            are sufficient to  support a claim that its  statement in the

            May 3 press release about past orders received was materially

            misleading.   Furthermore, to  the extent that  the statement

            that Summa Four  had received "significant orders"  carries a

            positive implication about the its future success (viz., that
                                                               ____

            Summa Four received significant  orders last quarter  implies

            that  it  would  fill  and  profit  from  those  orders  this

            quarter), an so might,  arguably, be the basis for  a duty to

            update claim, we think this  statement falls in the  category

            of  vague and loosely  optimistic statements that  this court

            has held  nonactionable as  a matter of  law.   See Glassman,
                                                            ___ ________

            slip op. at 49-50; Shaw, 82 F.3d at 1217-19.
                               ____

                      In  any event, the  amended complaint does  not set

            forth  sufficiently particular  facts  from  which one  could

            reasonably  infer  that  Summa Four  knew  about  the alleged

            delays at the  time it issued the May 3 press release.  Gross

            first points to a March 17 report that stated both that Summa

            Four had  experienced "delays in  resolving several  customer

                                         -20-
                                          20

            issues  and gaining closure  on contracts [that]  caused some

            [revenue] slippage out of [February]" and that, due to delays

            of several  major orders in February, Summa  Four had reduced
                                        ________

            its internal bookings  and revenue forecasts for  the quarter

            ending  March 31,  1994.   Both  of these  excerpts, however,

            speak to  events that  occurred in February  1994 and  do not

            support  the  inference  that Summa  Four  was  continuing to

            experience  delays  in  May substantial  enough  to  make the

            statements in the May 3 press release materially misleading. 

                      Moreover, neither do we believe that the references

            in the minutes  of the  June 14  board meeting  to delays  in

            orders  that  the  company  was  experiencing  at  that  time

            sufficiently support the  inference that Summa Four  was (and

            knew  that it was) experiencing the  alleged delays and other

            difficulties at  the time of  the May 3  press release.   The

            June 14 board  meeting was held five weeks  after the company

            issued the  May 3 press  release.  Compare Philip  Morris, 75
                                               _______ ______________

            F.3d at 812  (cannot infer  that company  knew statements  in

            prospectus  concerning retail sales  were false when  made on

            the basis  that decline  in sales  was announced  three weeks

            later) with Shaw,  82 F.3d at  1224-25 (where prospectus  was
                   ____ ____

            issued just eleven days prior to the  end of the quarter with

            disappointing results -- and three weeks prior to  the actual

            disclosure of the  disappointing results -- the  proximity in

                                         -21-
                                          21

            time, although not sufficient by itself to survive Rule 9(b),

            provided some support for the fraud claims).

                      4.  Overstatement of Revenue
                      ____________________________

                      Gross  also  claims  that Summa  Four's  statements

            regarding  its revenue and  earnings during the  class period

            were materially misleading because,  contrary to GAAP,  Summa

            Four recognized revenue upon receipt of orders rather than on

            shipment  of  products.   Gross  claims  that  this premature

            recognition  of  income  allowed  Summa   Four  to  overstate

            significantly its  revenues  and earnings  during  the  class

            period. 

                      To support this claim, Gross alleges that, although

            Summa Four typically requires twelve  to twenty weeks to ship

            its switches  following the  placement of  an order,  Fiedler

            stated  at a  June 14  board meeting  that the  company could

            generate up  to  $4.7 million  in  new revenues  through  the

            receipt of new  orders in the two weeks  remaining before the

            end of the quarter.   Gross contends that, given the  time it

            takes  Summa   Four  to   fill  orders,   the  statement   is

            inexplicable unless  the company was recognizing revenue upon

            receipt of  orders instead  of  upon shipment.   Gross  finds

            further corroboration for this claim in Summa Four's May 1994

            board meeting minutes where it is recorded that the company's

            chief  financial  officer  was  working  on  a  new  "revenue

                                         -22-
                                          22

            recognition  policy"  that  was to  be  "more  formalized and

            somewhat more restrictive" than its previous policy.

                      Though these  contentions  give us  some pause,  we

            nonetheless agree with  the district court that  Gross failed

            to   plead  this  claim  with  sufficient  particularity  for

            purposes  of  Rule  9(b).    As we  have  noted,  "a  general

            allegation  that the practices  at issue resulted  in a false

            report of company  earnings is not a  sufficiently particular

            claim   of   misrepresentation  [to   satisfy   Rule  9(b)]."

            Serabian, 24 F.3d at 362 n.5.  In this case, Gross has failed
            ________

            to allege any  particulars to support his  general allegation

            of inflated earnings  through the use of  improper accounting

            methods.  Specifically, he has  not alleged the amount of the

            putative overstatement  or  the  net  effect it  had  on  the

            company's earnings.  See Shushany v. Allwaste, Inc., 992 F.2d
                                 ___ ________    ______________

            517,  522  (5th  Cir.  1993)  (allegation  that  company  had

            adjusted  the accounting of its inventory to inflate revenues

            and  earnings   does  not  sufficiently   plead  fraud  where

            complaint does not  explain, inter alia, how  the adjustments
                                         _____ ____

            affected the  company's financial statements and whether they

            were material  in light  of the  company's overall  financial

            position); Roots  Partnership, 965  F.2d at  1419 (allegation
                       __________________

            that company "failed  to establish adequate reserves  for its

            excessive  and outdated inventory" does not satisfy Rule 9(b)

            where  investor does not  allege "what  the reserves  were or

                                         -23-
                                          23

            suggest  how great the reserves should have been"); Decker v.
                                                                ______

            Massey-Ferguson,  Ltd.,  681  F.2d 111,  116  (2d  Cir. 1982)
            ______________________

            (allegation that  company's failure  to write  down value  of

            obsolete equipment  does not sufficiently  plead fraud  where

            plaintiff  did  not  allege amounts  at  which  equipment was

            carried--or should  have been  carried--on company's  books);

            Schick v.  Ernst & Young,  141 F.R.D. 23, 27  (S.D.N.Y. 1992)
            ______     _____________

            (allegations  that  accountants   "significantly  overstated"

            assets   of   company  in   prospectus  did   not  adequately

            particularize  the alleged  misrepresentations and  omissions

            where plaintiff failed to allege  the amount of the purported

            overstatement); cf.  Cohen v. Koenig, 25 F.3d  1168, 1173 (2d
                            ___  _____    ______

            Cir. 1994)  (fraud pleaded  with sufficient particularity  by

            setting out representations made, what financial figures they

            were given,  and what they  alleged to be the  true financial

            figures).  

                      Moreover, the  single statement  by Fiedler  during

            the minutes of the June 14 board meeting is far too tenuous a

            foundation  (at  least  for Rule  9(b)  purposes)  to support

            Gross's claim that Summa Four had fraudulently overstated its

            revenue.    Arguably,  the statement  supports  a  reasonable

            inference that  the company,  or at  least Fiedler,  may have

            contemplated  booking  revenue  upon  the receipt  of  orders

            rather than shipment for the quarter ending on June 30, 1994;

            however, we  do not think  that the statement, by  itself, is

                                         -24-
                                          24

            sufficient to indicate  that the company had  actually booked

            as  revenue  sales  instead  of  shipments  in  any  previous

            quarter.8     Moreover,  we   do  not  think   the  ambiguous

            statements  taken from  the  minutes of  the  May 1994  board

            meeting  concerning review of the company's accounting system

            corroborate  Fiedler's  June  14  statement  sufficiently  to

            overcome the deficiencies in Gross's pleadings.9

                                         III.
                                         III.
                                         ____

                                      Conclusion
                                      Conclusion
                                      __________

                      For  the foregoing reasons,  we affirm the judgment
                                                      affirm
                                                      ______

            of the district court.  Costs to appellee.
                                    Costs to appellee.
                                    _________________

                                
            ____________________

            8.  As with the June 29  letter, Gross would have no standing
            to assert a securities fraud claim that  Summa Four misstated
            its revenue only for the quarter ending June 30, 1994.

            9.  Gross  also contends  that the  district  court erred  in
            refusing to  consider two  additional affidavits  Gross filed
            with  the court to  accompany his motion  for reconsideration
            pursuant to Fed R. Civ. P. 59(e).  The district court refused
            to  consider the additional affidavits, noting that Gross had
            "not  demonstrated that  he  could  not  have  produced  this
            information in  response to  defendant's motion to  dismiss."
            In  that the affidavits address whether the amended complaint
            adequately alleged undisclosed facts to support the inference
            that a reasonable investor would have considered Summa Four's
            public  statements  to be  false and  misleading --  an issue
            clearly before the court on Summa Four's motion to dismiss --
            we find  no abuse of discretion by  the district court in its
            refusal to consider them.   See, e.g., Williams v. Poulos, 11
                                        ___  ____  ________    ______
            F.3d  271,  289  (1st  Cir.  1993)  (reconsideration  rulings
            reviewed only for abuse of discretion). 

                                         -25-
                                          25