Full opinion text
DECISION AND ORDER SMITH, District Judge. This case requires the Court to determine whether various allegedly fraudulent misrepresentations and omissions made by a company’s officers violate the federal securities laws. Plaintiffs George and Cynthia Scritchfield, erstwhile investors in the now defunct Log On America (“LOA”) and putative class action representatives, sue Defendants David R. Paolo and Kenneth Cornell, respectively the chief executive officer and chief financial officer of LOA. Presently before the Court is Defendants’ Motion to Dismiss the Amended Complaint. The Court heard oral argument on April 9, 2003, and having considered the parties’ positions, the Court finds that while a number of the Plaintiffs’ allegations fall short of the mark, Plaintiffs have set forth some claims for which relief may be granted under the heightened pleading standards applicable to securities fraud cases. The Court therefore denies Defendants’ motion for the reasons that are discussed in detail below. 1. Facts Founded by Paolo in 1992, LOA was a Providence, Rhode Island-based Internet access provider for residential and commercial customers. From 1992 to early 1999, LOA grew steadily into a company with nine full-time employees and revenues of just under $760,000. Appendix to Defendants’ Motion to Dismiss (“DefiApp.”), Tab 3. But with all of the “irrational exuberance” characteristic of telecommunications and Internet startup founders and investors in the 1990s, Defendants had grand plans to “go public,” in order to turn LOA into a major telecommunications player. In connection with LOA’s initial public offering (“IPO”) in April 1999, Defendants filed a prospectus (the “Prospectus”) notifying potential investors of various “Risk Factors” relevant to investing in LOA, including: (1) that LOA’s revenues in 1998 were only $759,878; (2) that in all of its years of operation, LOA had never made a profit, and, in fact, in 1998 had a net loss of $422,063, which was 51% higher than its net loss the preceding year; (3) that the IPO stock price of $10 was “substantially greater than the net tangible book value of LOA’s outstanding common stock”; (4) that as of April 1, 1999, LOA had only nine full-time employees and four part-time employees; (5) that as of April 1, 1999, the CEO of LOA (Paolo) was 31 years old and the CFO (Cornell) was 30 years old; and (6) that LOA faced competition from larger, more experienced, and better funded companies such as Bell Atlantic, America Online, and AT & T. See Def.App., Tab 3. Notwithstanding these warnings, on April 22, 1999 LOA sold 2,530,000 shares of common stock at $10 per share, raising approximately $22,450,000. Complaint, ¶ 52. On the first day of trading, LOA’s stock price rose as high as $37 per share and closed at $35 per share. See id. After going public, LOA used its capital to acquire various New England Internet Service Providers (“ISPs”) during the last half of 1999 and early 2000, and grew its customer base from 1,000 to over 30,000. See id. at ¶¶ 61, 67, 68, 70, 74, 78, 89, 98. LOA’s rapid expansion increased both its revenues and losses. On November 9, 1999, LOA announced that its net losses for the third quarter of 1999 were $1,338,894, more than a 1,000% increase from the company’s net losses in the third quarter of 1998. Def.App., Tab 19. When LOA announced its full-year net losses for 1999 as $5,291,772, LOA’s stock price dropped to about $20 per share. Id. at Tabs 1, 2, 26. Then, in 2000, the Internet stock bubble burst. For businesses such as LOA (known as Competitive Local Exchange Carriers or “CLECs”), the average stock price dropped 75%. Def. Tab. 43-44. And LOA was no exception: in 2000 its stock tumbled dramatically, until on November 20, 2000 it bottomed out at $1.50 per share. Complaint, ¶ 122. Plaintiffs allege that Defendants engaged in “a massive fraudulent scheme to deceive investors into thinking [LOA] was a successful ‘dominant’ telecommunications company, when in actuality it was not.” Lead Plaintiffs’ Memorandum of Law in Opposition to Defendants’ Motion to Dismiss (“Pl.Mem.”) at 2. This alleged scheme took shape in four ways: (1) misrepresentations concerning LOA’s market position and strength relative to its competitors; (2) misrepresentations regarding the size, type and quality of telecommunications services LOA provided; (3) gross inflation of LOA’s customer count and failure to disclose the type of customers it was acquiring; and (4) misstatements of LOA’s revenues and earnings. Id. The Court will address the facts underlying each of these four subcategories. A. Misrepresentations Concerning LOA’s Market Position and Strength Plaintiffs first and most essential claim is that Defendants engaged in numerous acts of fraud in a successful effort to deceive investors about the market strength and position of LOA. These acts include alleged misstatements in press releases and interviews to investors that (1) LOA was the “premier provider of high-speed DSL [Digital Subscriber Line] services in the Northeast corridor” (Complaint, ¶ 58); (2) LOA was “a Northeast Regional [CLEC] and Information Internet Service Provider (IISP) providing local dial-tone, in-state toll, long distance, high speed Internet access and cable programming solutions over traditional copper wire using DSL technology to residential and commercial customers through the Northeast” (Id.); (3) LOA was “one of New England’s leading providers of bundled communications services” (Id. at ¶ 74); (4) LOA was “a rapidly growing [CLEC] providing [DSL] and integrated communications solutions in the Northeast” (Id. at ¶ 78); (5) LOA was “in a dominant position in the market for integrated data and voice services” (Id. at ¶ 86); (6) LOA was “a dominant super regional communications player” (Id. at ¶ 89); (7) LOA was “a rapidly growing switched facilities-based D-CLEC+ providing broadband communications and data services to the commercial and small office/home office [‘SOHO’] markets” {Id. at ¶ 100); and (8) LOA was a company that had evolved from a simple ISP into “an organization that provides enhanced broadband telecommunications services to small and medium businesses as well as the SOHO market.” {Id. at ¶ 109). B. Misrepresentations Regarding Type of Telecommunications Services Provided Second, Plaintiffs claim that in April 1999, the only service LOA provided was access to the Internet primarily through dial-up service. Complaint, ¶ 26. Since it wanted to expand its services, LOA obtained approval in October 1998 to become a CLEC in Rhode Island. Id. At the time of its IPO, Plaintiffs maintain that the Prospectus stated that LOA’s goal was to grow its base of commercial customers through acquisitions and direct marketing. Id. at ¶ 27. Plaintiffs claim that Defendants never reached this goal, and that, “rather than admit [their] failings,” Defendants represented that LOA was a “leading provider” of “bundled” communications services in the Northeast, which was false. PL Mem. at 3. Plaintiffs also allege that after the IPO, LOA went on a “buying spree,” unwisely using inflated LOA stock to purchase five ISPs (which Plaintiffs believe sold primarily dial-up access) and acquiring more than 30,000 additional customers. Complaint, ¶ 42. LOA issued press releases with the acquisition of each of the ISPs, which Plaintiffs claim falsely touted the acquired ISPs as bringing capabilities (such as high speed DSL and local voice services) to LOA. PI. Mem. at 3; Complaint, ¶¶ 60-61, 69. Subsequent to these acquisitions, Plaintiffs claim that they conducted an investigation that revealed that LOA was unable to offer “bundled” telecommunications services, and that LOA “made no meaningful progress” with respect to its stated goals. Id. at ¶ 43. Nevertheless, LOA continued to issue press releases stating that LOA was able to offer services to its customers that it allegedly could not offer. One of the subjects of alleged fraud in this subcategory relates to the purchase by LOA of certain “switching” equipment from Nortel Networks. Plaintiffs allege that although this purchase occurred, LOA was unable to use the equipment to achieve its stated purpose, but nevertheless touted the equipment to its investors. Id. at ¶ 44, 58. Plaintiffs proffer the testimony of several anonymous former LOA employees who claim that the Nortel switch never became operational (although at one point it “went live”), despite LOA’s public statements to the contrary. Id. at ¶¶ 45, 115(c). By May 2000, the relationship between Nortel and LOA had become strained, but LOA and its principals did not make this known to investors. Id. at ¶ 44. C. Inflation of LOA’s Customer Count In the third subcategory of alleged fraud, Plaintiffs allege that Defendants emphasized a focus on commercial customers in LOA’s IPO Prospectus, but “[c]on-trary to defendants’ public statements, [LOA] did not acquire or maintain ‘high revenue, high margin commercial customers’ nor did it ‘evolve’ from an ISP into ‘an organization that provide[d] enhanced broadband telecommunications services to small and medium businesses as well as the [SOHO] market.’ ” PI. Mem. at 6-7. Plaintiffs allege that the customers, both for Internet and telephone, generated by LOA’s acquisitions after the IPO were residential, not commercial, but that Defendants did not disclose this. Complaint, ¶¶ 29, 42. Defendants also are alleged to have mischaracterized these new residential customers as SOHO customers in their public statements, in order to attract investors. PI. Mem. at 7. Furthermore, Defendants are alleged to have inflated LOA’s customer count, improperly including delinquent accounts and subscriber accounts no longer active. Complaint, ¶31. D. Inflation of LOA’s Revenues and Earnings In the final subcategory of alleged fraud, Plaintiffs allege that Defendants issued press releases and SEC filings, after the IPO, falsely reporting record earnings. Plaintiffs claim that Defendants did not disclose the “numerous ways in which LOA’s revenues were fraudulently misstated,” including (1) widespread billing errors that were known to, or recklessly disregarded by, Defendants; (2) Defendants’ refusal to write off bad debts; and (3) Defendants’ failure to establish an appropriate reserve for bad debts. PI. Mem. at 9; Complaint, ¶¶ 33-41. Again, Plaintiffs reference the statements of various anonymous erstwhile employees of LOA to support these claims. Id. at ¶¶ 33-41. On November 20, 2000, Plaintiffs allege that “the truth beg[an] to emerge” when LOA reported a third quarter net loss of $7.03 million, compared with a loss of $1.56 million for the year before. Id. at ¶ 121. Plaintiffs set forth two Counts in the Complaint: (I) Count I: violation of Section 10(b) of the Securities and Exchange Act (the “Act”) and Rule 10b-5 thereunder; and (II) Count II: violation of Section 20(a) of the Act. II. Analysis Before turning to an analysis of the adequacy of the Plaintiffs’ claims, some discussion of the framework for evaluating motions to dismiss in securities fraud actions is in order. A. The Basics: Elements of a Securities Fraud Action Section 10(b) of the Act and Rule 10b-5 of the regulations promulgated thereunder prohibit any person, directly or indirectly, from committing fraud in connection with the purchase or sale of securities. 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. To state a claim for securities fraud under these sections, a plaintiff must plead, with sufficient detail to satisfy Rule 9(b) and the Private Securities Litigation Reform Act (“PSLRA”), that a defendant (1) made a false statement or an omission, (2) which was material, (3) with the requisite scien-ter, and (4) that the plaintiffs justifiable reliance on this statement caused the plaintiffs injury. See Basic Inc. v. Levinson, 485 U.S. 224, 241-43, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988); Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1217 (1st Cir.1996). 1. Materiality Once a plaintiff has alleged that a representation is untrue, whether the statement is “material” under § 10(b) is determined under the “reasonable investor” standard: i.e., the question asked is whether a reasonable investor would have viewed the nonpublic information as “having significantly altered the total mix of information made available” to those making the investment decision. Basic, 485 U.S. at 231-32, 108 S.Ct. 978. The issue of materiality is generally one that is left for the trier of fact. See Lucia v. Prospect Street High Income Portfolio, Inc., 36 F.3d 170, 176 (1st Cir.1994). However, the fact that a corporation is in possession of material nonpublic information is not enough to sustain a § 10(b) claim. No matter how “material” undisclosed information might be, the securities laws are not implicated unless there was first a duty to disclose this information. See Gross v. Summa Four, Inc., 93 F.3d 987, 992 (1st Cir.1996). A duty to disclose arises when a corporation has previously made a statement of material fact that is either false, inaccurate, incomplete, or misleading in light of the undisclosed information. See id. at 992; Roeder v. Alpha Indus., Inc., 814 F.2d 22, 26 (1st Cir.1987) (“When a corporation does make a disclosure — whether it be voluntary or required — there is a duty to make it complete and accurate.”). 2. Scienter “[T]he courts of this Circuit ... require a securities plaintiff ‘to allege facts that give rise to a strong inference of fraudulent intent.’ ” Lirette v. Shiva Corp., 27 F.Supp.2d 268, 275 (D.Mass.1998) (citing Suna v. Bailey Corp., 107 F.3d 64, 68 (1st Cir.1997) (citations and internal quotation marks omitted)); 15 U.S.C. § 78u-4(b)(2). A securities fraud plaintiff must therefore allege “specific facts that make it reasonable to believe that defendant knew that a statement was materially false or misleading.” Greenstone v. Cambex Corp., 975 F.2d 22, 25 (1st Cir.1992). B. Standard of Review In a securities fraud action, the standard of review prescribed by Fed.R.Civ.P. 12(b) is augmented by Fed.R.Civ.P. 9(b) and the PSLRA. Rule 9(b) imposes a stringent pleading requirement on plaintiffs alleging fraud: “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed.R.Civ.P. 9(b). The PSLRA makes the pleading standard in securities fraud cases even more exacting. Under the PSLRA a complaint alleging securities fraud must set forth “each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(l). The First Circuit has “been especially rigorous in demanding such factual support in the securities context....” Romani v. Shearson Lehman Hutton, 929 F.2d 875, 878 (1st Cir.1991). To support an allegation of fraud in this context, pleadings must go beyond mere information and belief to specify the source of the information and the reasons for the belief. See id. at 878; New England Data Servs. v. Becher, 829 F.2d 286, 288 (1st Cir.1987). A complaint alleging securities fraud must specify (1) the statements that the plaintiff contends were fraudulent, (2) the identity of the speaker, (3) where and when the statements were made, and (4) why the statements were fraudulent. See Suna, 107 F.3d at 68 (citing Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1127-28 (2nd Cir.1994)). C. The Defendants’Motion Defendants advance four primary contentions supporting dismissal: (1) None of the alleged misrepresentations is actionable; (2) LOA’s stock price movements demonstrate that the alleged misrepresentations were not material; (3) the Complaint does not adequately plead scienter; and (4) Plaintiffs’ Section 20(a) claim should be dismissed because they have not pled a Section 10(b) claim. 1. Are the Alleged Misrepresentations Actionable? As an initial matter, in order to be actionable as a securities fraud violation, a misrepresentation must be (1) untrue, and (2) material. An omission (since it cannot be untrue) rises to actionable levels if it is material. Finally, in either case, the party misrepresenting or omitting a material fact must also be bound by a duty of disclosure. If, applying the armamentari-um of pleading standards set forth supra, the Court finds that Plaintiffs’ allegations meet these elements, then their securities fraud claim survives Defendants’ “actiona-bility” challenge. The Complaint is divisible into several discrete categories of alleged fraudulent misrepresentation and omission; the Court will review each such category against the rigorous standards outlined above. a. Alleged Misrepresentations Concerning LOA’s Overall Market Position The primary subset of alleged fraud concerns statements describing LOA’s general market status throughout the relevant time period. As set forth earlier, Defendants variously described LOA as the “premier provider of high-speed DSL services in the Northeast corridor,” “one of New England’s leading providers of bundled communications services,” “in a dominant position in the market for integrated data and voice services,” and “a dominant super regional communications player.” Defendants do not dispute that they characterized LOA in these ways. Rather, they raise the so-called “puffery” defense, contending that their “rosy statements about LOA’s general performance and prospects cannot have been material” to the reasonable investor. Defendants’ Memorandum in Support of Their Motion to Dismiss (“Def.Mem.”) at 19. Puffery has been defined as “exaggerated, vague, or loosely optimistic statements about a company....” In re Boston Technology, Inc. Securities Litigation, 8 F.Supp.2d 43, 54 (D.Mass.1998) (citing Summa Four, 93 F.3d at 995). “Vague predictions” about a company’s prospects are not actionable. Id. (citing Colby v. Hologic, Inc., 817 F.Supp. 204, 211 (D.Mass.1993) (“Prospects for long term growth are bright.”); Shaw, 82 F.3d at 1219 (statement that things were “[currently] going reasonably well” and statement that the company “should show progress [in the future]” both ruled immaterial)). The puffery exemption may apply both to an “issuer’s current state of affairs and its future prospects.” In re Boston Technology, 8 F.Supp.2d at 54 (emphasis in original). Notwithstanding these general pronouncements, the line of demarcation between puffery and actionable misstatement is often less than pellucid. See, e.g., Greebel v. FTP Software, Inc., 194 F.3d 185, 206-07 (1st Cir.1999) (“upbeat statements of optimism,” commenting on the company’s “excellent performance,” “increased” sales, or that its ventures were off to a “good start” were not actionable); Nathenson v. Zonagen Inc., 267 F.3d 400, 419 (5th Cir.2001) (defendants’ statements that drug was a “fast acting,” “improved formulation” were not actionable); Novak v. Kasaks, 216 F.3d 300, 315 (2nd Cir.2000) (statements that inventory situation was “in good shape” and “under control,” when defendants knew the opposite to be true, were actionable); Longman v. Food Lion, Inc., 197 F.3d 675, 684-85 (4th Cir.1999) (corporation’s public statements that it provided its employees with job security, good working conditions, and “some of the best benefits in the supermarket industry,” its statements about the cleanliness of its stores, and its statements expressing belief that it was one of the best-managed high growth operators in the food retailing industry were all immaterial puffery); Eisenstadt v. Centel Corp., 113 F.3d 738, 746-47 (7th Cir.1997) (Posner, C.J.) (characterizing the puffery inquiry as “whether [a company] said things that were so discordant with reality that they would induce a reasonable investor to buy the stock at a higher price than it was worth ex ante [,]” and holding that the defendant company’s statements that the bidding process in an auction for the sale of the company was “continupng] to go very well” and “very smoothly” were not actionable); Kafenbaum v. GTECH Holdings Corp., 217 F.Supp.2d 238, 250 (D.R.I.2002) (statements that a company is “on course to restore growth in the business ...and that the company “remains confident that our business is sound” are not actionable); Manavazian v. Atec Group, Inc., 160 F.Supp.2d 468, 480 (E.D.N.Y.2001) (statements that a company’s business scheme was a “framework” for “organic growth” and the “blueprint” for “hyper-growth,” that the company was “poised for future growth,” and that it occupied a “strategic position in the technology industry” were actionable because at the time defendants made these statements, defendants were aware that a “paradigm shift” in the industry had “hobbl[ed] the [cjompany’s basic health”); In re Splash Technology Holdings Inc. Securities Litigation, 160 F.Supp.2d 1059, 1077 (N.D.Cal.2001) (statements using the words “healthy,” “strong,” “increased awareness,” “robust,” “well positioned,” “solid,” “improved,” “better than expected,” and “unfolding as planned” were all deemed puffery and not actionable); Schaffer v. Timberland Co., 924 F.Supp. 1298, 1314 (D.N.H.1996) (“Given the caselaw, it is apparent that in many situations there is no standard by which a court can readily distinguish between actionable predictions and vague optimism or puffery.”). Judge Young of the District of Massachusetts recently has written extensively on the puffery defense. In In re Number Nine Visual Technology Corp. Securities Litigation, 51 F.Supp.2d 1 (D.Mass.1999), Judge Young applied a useful two-step test to determine whether or not a statement is puffery: “first, the court should evaluate whether the statement is so vague, so general, or so loosely optimistic that a reasonable investor would find it unimportant to the total mix of information; second, the court should ask whether the statement was also considered unimportant to the total mix of information by the market as a whole.” Id. at 20 (citing R. Gregory Roussel, Note, Securities Fraud or Mere Puffery: Refinement of the Corporate Puffery Defense, 51 Vand. L.Rev. 1049, 1064-66 (1998) (discussing the virtues of the “contextual standard,” as distinguished from other bright-line standards, in assessing whether a statement should be classified as puffery)). In concluding that the defendant company’s statement of its “broad product line” was non-actionable puffing, the court wrote: Number Nine’s “broad product fine” statement is ... “puffing or sales talk upon which no reasonable person could rely....” Notably, the Class does not challenge any of the specific factual assertions made in the “broad product line” statement; that is, the Class does not challenge that Number Nine offered products for the high-end and mainstream customer, or that it offered products at prices ranging from $150 to $2,000. Instead, the Class’ only quibble with the statement is the implicit meaning that they attribute to the phrase “broad product line.” The Court holds, however, that the phrase is incapable of supporting such an inference, as any reasonable investor would recognize the phrase simply as bullish corporate grandstanding. Id. at 20-21 (internal citations omitted) (emphasis in original). Number Nine therefore stands for the necessity of a highly contextualized analysis of each allegedly fraudulent statement, and minimizes the relevance of meanings that might be inferred solely from the challenged language itself. Next, in In re Peritus Software Services, Inc. Securities Litigation, 52 F.Supp.2d 211 (D.Mass.1999), Judge Young determined that the phrases “unprecedented market demand,” and “[w]e ... are extremely proud of our success and our focus on near and long term opportunities in the software evolution market,” when analyzed in context, represent! ] precisely the type of “rosy affirmation” which the First Circuit has held to be mere corporate puffery.... In this case, Peritus was announcing the availability of a new type of service that it could offer clients. Citing an “unprecedented market demand” for Peritus offerings was simply part and parcel of the standard corporate hyperbole that accompanies any new product or service announcement.... [Similarly,] [n]o reasonable investor would take a statement that corporate executives were “proud” of their accomplishments as anything more than a wholly subjective view. As such, the statement cannot have been material under any sensible analysis of corporate prospects.... Id. at 220 (internal citations omitted) (emphasis in original). The contribution of Per-itus is its emphasis on the objectively reasonable inferences, once again supported by context, that can be drawn from the challenged language; statements that only evince subjective beliefs or opinions are not actionable. In re Allaire Corporation Securities Litigation, 224 F.Supp.2d 319 (D.Mass.2002), is arguably the most instructive guidepost in understanding the contours and scope of the puffery defense. There, several allegedly fraudulent statements were measured against the puffery defense. The statement that the subject company’s performance “exceeded our expectations” was deemed puffery, while the statement that “Spectra [the company’s new product] was fueling growth” was actionable, because it was “a precise statement as to the basis for profit growth.... ” Id. at 331-32. The statement that “[m]a-jor [companies] ... are standardizing on the [Spectra] platform to bring their business to the web faster than ever before ” (emphasis in original) was held to be more than puffery, because it asserts that the platform will bring their business to the web faster than ever before. In Number Nine, 51 F.Supp.2d at 18, this Court noted that when a company initiates a comparison with other companies’ products, it must fully disclose.... Here, exactly such a comparison was made or implied. “Faster than ever before” clearly indicates that this product is faster than any previously available product. Accordingly, in the motion to dismiss context, this constitutes an actionable statement. Id. at 332. Likewise, the court held the statement, “Spectra customers have ‘gone live’ and brought their businesses to the Web faster and more cost effectively than ever before,” to be actionable, because the use of “faster than ever before” is an implied comparison with every product previously available, as is “more cost effectively”; thus, these portions of the statement are not puffery.... Id. at 336. Allaire continues to emphasize the context within which a statement is made, and focuses on a careful (and often rather subtle) scrutiny of the challenged words themselves, in an attempt to decide whether they may be read as conveying a comparative connotation. This Court finds persuasive and adopts the analytical framework set forth in Number Nine, Peritus, and Allaire, and will apply it to the challenged statements involved in this action. The representation that LOA was the “premier provider of high-speed DSL services in the Northeast corridor,” as it was described in a May 17, 1999 press release, DefApp., Tab 5, is much more than mere puffery: it is a statement of LOA’s present status and capabilities, and connotes that LOA is comparatively superior to all other high-speed DSL service providers in the Northeast corridor. Likewise, the statements that LOA’s transaction with Nortel would “help further solidify [LOA’s] dominant position in the market for integrated data and voice services,” DefApp., Ex. 20, and that LOA’s “proven early market entry strategy is positioning it as a dominant super regional communications player,” DefApp., Tab 22, are both actionable: they clearly imply a comparison to competitors and suggest that activities undertaken by LOA as of December 17, 1999 or February 10, 2000 had made or were making it “dominant” over all other competitors in its field. The same is true for the statement that, by October 28, 1999, LOA had become “one of New England’s leading providers of bundled communications services.” Def.App., Tab 15. Assuming that the substance of the statement is untrue (as Plaintiffs have alleged, and as Defendants have conceded for purposes of this motion), this statement is material, as it connotes superiority over the vast majority of other bundled communications services providers. The contextual approach to assessing the applicability of the puffery defense set forth in the Number Nine-Peritus-Allaire line of cases makes clear that a company’s statements that it is “premier,” “dominant,” or “leading” must not be assessed in a vacuum (ie., by plucking the statements out of their context to determine whether the words, taken per se, are sufficiently “vague” so as to constitute puffery); this deus ex machina approach is plainly insufficient. The statements are properly interpreted only by reference to the relevant circumstances that underlie their meaning. b. Alleged Misrepresentations in the Prospectus Concerning LOA’s Status Defendants next contend that the Complaint does not reveal any allegations “contradicting the truthfulness of the disclosures actually made in the IPO.” Def. Mem. at 8. As respects the Prospectus itself and the alleged misrepresentations made therein, Plaintiffs complain that, despite Defendants’ representations to the contrary, LOA was not able to provide a “wide range” of Internet and cable services at the time of the IPO, nor was it able to offer “bundled” telecommunications services. Complaint, ¶ 57(a), (c) and (d). But a careful reader of the Prospectus would not misapprehend the statements contained therein, as Plaintiffs have. The Prospectus states: In October 1998, we [LOA] were approved as a [CLEC] in the State of Rhode Island. A [CLEC] is a company that provides local access lines as opposed to long-distance or other services. This allows us to send a telephone line into a home or business and enables us to provide a full range of telecommunications services to our customers, such as Internet, voice data and cable programming. Def.App., Tab 8 at 16 (emphasis supplied). Nothing in this statement can be characterized as fraudulent or misleading. In fact, it is true that CLEC status empowers a company to offer the range of services listed. Furthermore, other statements in the Prospectus clearly differentiate between the services LOA was providing at the time of the IPO, as opposed to those services which it was LOA’s future intention to provide: As an [ISP], we currently provide a variety of Internet solutions to both commercial and residential customers. As a local exchange carrier, we plan to offer a full range of local telecommunication services.... Our plan is to initiate an acquisition campaign targeting Internet service providers. We currently do not have any plans or agreements regarding any potential acquisitions.... The following list summarizes and defines the specific products and services which we currently offer .... We intend to use this local exchange status to provide our Rhode Island customers ... with typical phone service such as dial tone, toll calls/in-state long distance, long distance, as well as high-speed Internet access. We intend to become a full service provider of local telecommunications services.... Id. at Tab 3 passim (emphasis supplied). Moreover, in addition to the extensive “Risk Factors” enumerated, the Prospectus contains the following prominent warning: The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements, the notes to our financial statements and the other financial information contained elsewhere in this prospectus. In addition to the historical information, this Management Discussion and Analysis of Financial Condition and Results of Operations and other parts of this prospectus contain forward-looking information that involve [sic] risks and uncertainties. Our actual results could differ materially from those anticipated by the forward-looking information as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this prospectus. Def.App., Tab 3, at 16. A variation of this warning also precedes the section entitled “Risk Factors:” You should carefully consider the following factors and other information in this prospectus before deciding to invest in shares of our common stock. This prospectus contains forward-looking statements which can be identified by the use of words such as “intend,” “anticipate,” “believe,” “estimate,” “project,” or “expect” or other similar statements. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward-looking” information. When considering these statements, you should keep in mind the risk factors described below and other cautionary statements in this prospectus. The risk factors described below and other factors noted throughout this prospectus, including certain risks and uncertainties, could cause our actual results to differ from those contained in any forward-looking statement. Id. at 6. It is precisely this type of “forward-looking” statement which forms the basis for Plaintiffs’ allegations of fraud in the Prospectus. The PSLRA explicitly exempts this type of statement from liability in its “safe harbor” provisions: (c) Safe Harbor (1) In general [I]n any private action arising under this chapter that is based on an untrue statement of a material fact or omission of a material fact necessary to make the statement not misleading, a person ... shall not be fiable with respect to any forward-looking statement, whether written or oral, if and to the extent that— (A) the forward looking statement is— (i) identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.... 15 U.S.C. §§ 77z-2(c)(l)(A)(i); 78u-5(c)(1)(A)®. Moreover, the caselaw makes clear that statements in an IPO prospectus regarding the potential to increase a company’s profits are not actionable as securities fraud when they are modified by another statement that “bespeaks caution.” See Number Nine, 51 F.Supp.2d at 21-22 (“ ‘[I]f a statement is couched in or accompanied by prominent cautionary language that clearly disclaims or discounts the drawing of a particular inference, any claim that the statement was materially misleading because it gave rise to that very inference may fail as a matter of law.’ ”) (citing Shaw, 82 F.3d at 1213); Fitzer v. Security Dynamics Techs., Inc., 119 F.Supp.2d 12, 31 (D.Mass.2000) (Young, C.J.) (in the context of a prospectus, “[t]he ‘bespeaks caution’ doctrine stands for the principle that when statements 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, these so-called ‘soft’ statements may not be materially misleading under the securities laws.”). Here, Defendants were careful in the Prospectus to caution putative investors of a whole host of risks that attended investing in LOA, accompanied by prominent and straightforward warnings discounting the weight of phrases (used ad nauseam throughout the Prospectus) such as “intend,” “anticipate,” “believe,” “estimate,” “project,” or “expect.” These statements are not actionable as securities fraud. c. Alleged Misrepresentations Concerning the Type — Commercial, SOHO or Residential — of LOA’s Customers Defendants next contend that they never misrepresented that LOA’s customer base was primarily commercial. This family of alleged misrepresentation comprises Defendants’ statements throughout the period that they were acquiring ISPs after the IPO. Plaintiffs claim that “[m]ost of the Internet customers obtained through acquisitions of ISPs ... were residential customers,” not commercial or SOHO customers. Complaint, ¶ 29. Plaintiffs also allege that LOA’s telephone customers (as distinguished from its Internet customers), which it began to acquire at least one year after the IPO, were primarily residential. Id. at ¶ 30. Plaintiffs do not dispute, however, that some portion of LOA’s customer base, both before and after the IPO, was commercial. The Complaint itself acknowledges repeatedly that LOA represented that it offered and was planning to offer telecommunications services “to residential and commercial clients” or to “business and residential clients.” See Complaint, ¶¶ 65, 67, 72, 74', 78. Nevertheless, Plaintiffs argue that “Defendants were not targeting commercial customers and, in fact, its [sic] customer base was primarily residential in nature.” Id. at ¶ 69(a) (emphasis supplied); see also ¶ 79(b) (“[LOA] had not been successful in penetrating the commercial market.”). Even if the Court accepts the allegation that “almost all” or the “vast majority” of LOA’s customers were residential, (PL Mem. at 18-19), rather than commercial, it does not discern any conduct with respect to this category of alleged misstatement that contravenes the Act. Plaintiffs argue that “[t]he federal securities laws require much more honesty” than that of the statements in this record. PI. Mem. at 19. No proposition of law buttresses this flourish of indignation. While it is reluctant to engage in legal rhabdomancy, the Court believes that Plaintiffs rely on the proposition (later articulated in their brief) that “once a company makes a disclosure, it is under a duty to make the disclosure complete and not misleading.” PI. Mem. at 20 (emphasis in original) (citing Lucia, 36 F.3d at 175; Helwig v. Vencor, Inc., 251 F.3d 540, 560-61 (6th Cir.2001)). Lucia was a section 10(b) securities fraud action involving investments in companies that offered a diversified portfolio of “junk bonds” — high yield fixed-income securities — the market for which plummeted after the investing public became aware that their default rate was considerably higher than initially believed. 36 F.3d at 172. Plaintiffs, purchasers of junk bonds, alleged that the defendant companies’ directors utilized a misleading statistical comparison in their prospectuses to portray the historic performance of junk bonds: in the ten years surveyed, the data indicated that junk bonds outperformed Treasury securities. Id. Plaintiffs claimed, however, that in the six years leading up to the Defendants’ public offerings, Treasury securities outperformed junk bonds, a fact which Defendants had not disclosed. Id. at 173. In concluding that this particular omission was material, the First Circuit first repeated the familiar refrain that information is material “only if its disclosure would alter the ‘total mix ’ of facts available to the investor and ‘if there is a substantial likelihood that a reasonable shareholder would consider it important’ to the investment decision.” Id. at 175 (citations omitted) (emphasis in original). Furthermore, the court noted that a statement’s literal truth cannot in all circumstances shield it from actionability: “[s]ome statements, although literally accurate, can become, through their context and manner of presentation, devices which mislead investors.” Id. Such was the case in the circumstances of Lucia: We begin by noting that the six years at issue are the six years leading up to the fund’s public offering. Moreover, while any one or two years might favor Treasury securities without amounting to an unfavorable trend, we think that a six-year comparison favoring Treasury securities is substantial enough to cast some doubt on the reliability of the reported ten-year figure. In other words, we cannot say as a matter of law that the undisclosed information about the six-year period would not alter the total mix of facts available to the investor. Id. at 176. The central point in Lucia, therefore, was that a jury might have found that the omission of this crucial information reflecting the performance of junk bonds in the six years immediately preceding the public offering was substantially likely to have been considered important by an investor. The same cannot be said with respect to the alleged misrepresentations and omissions about LOA’s customer base or the type of customer it was pursuing. As an initial matter, Plaintiffs’ allegations of fraud in this area rely on a selective and truncated reading of the language that is challenged. For example, LOA’s August 12, 1999 Form 10 QSB states, in relevant part: Our goal is to become a leading provider of a wide range of Internet, voice, data, video, and cable programming in the Northeast. To accomplish this goal, we intend to develop, utilize and package our services for the residential and commercial marketplace at competitive prices. To date, we have focused our efforts on high revenue, high' margin commercial clients which enter into term contracts for service, generally 12 months in duration. We intend to utilize these relationships and begin cross-selling additional services as we roll out our high speed DSL backbone. We will utilize this backbone to offer high margin, value added telecommunications services under one unified bill. We rely on service and performance to attract and retain our customers.... Def.App., Tab 10 (emphasis supplied). The cited paragraphs appear immediately below a clearly visible “bespeaks caution” statement of the type discussed earlier, warning the reader “not to place undue reliance on [the] forward-looking statements” that follow it. Id. Just as in the Prospectus, the “total mix” of the information provided here simply cannot be viewed as misleading. Any reasonable investor would recognize the totality of these statements as hortative— not as statements of present fact: LOA, barely four months after its public offering, framed its entire discussion in aspirational terms, frequently using the future tense and words such as “goal,” “intend,” “become,” and “develop.” A survey of Plaintiffs’ specific charges regarding these Form 10-QSB statements (at Complaint, ¶ 66(c), (e) and (f)) illustrates their legal insufficiency. First, Plaintiffs claim that “[LOA] was not obtaining ‘high revenue, high margin’ commercial clients.” Id. at ¶ 66(c) (emphasis supplied). But that is not what is stated in the Form 10-QSB, which reads: “To date, we have focused our efforts on high revenue, high margin commercial clients.” (emphasis supplied). Even if that statement is taken entirely out of context (as it should not be for purposes of this analysis), the fact that LOA had not actually obtained commercial customers at the time the statement was made does not logically compel the conclusion that Defendants were lying when they said that LOA had focused its efforts on acquiring commercial customers. See Eisenstadt, 113 F.3d at 746 (“Hindsight is not the test for securities fraud.”). Next, in paragraph 66(e) of the Complaint, Plaintiffs claim that “LOA had no ability to provide customers with a ‘unified bill[.]’” This allegation, once again, mis-eharacterizes the challenged statement: “We will utilize this backbone to offer high margin, value added telecommunications services under one unified bill.” This is a forward-looking statement, not a description of LOA’s present capabilities. It is therefore not actionable. Paragraph 66(f) alleges that “LOA’s services and customer care were seriously flawed and substandard and could not be relied upon to attract customers,” which ostensibly questions the veracity of the statement: “We rely on service and performance to attract and retain our customers.” This statement is not actionable. All that this statement stands for is the unchallenged proposition that LOA relies on its service and performance; it is not a judgment about the quality of that service and performance. Therefore, the allegation that LOA’s service and performance are flawed and substandard, even if believed, does not render the statement fraudulent. Each allegation of fraud relating to the type of customer LOA had acquired or intended to pursue suffers from the same fundamental legal defects — they are simply not actionable. Plaintiffs illuminate their' own allegation^ shortcomings, symptomatic of the infirmities afflicting this entire family of pleading, when they state: “Contrary to [LOA’s] stated intent, the customers it had acquired were largely residential, not commercial.” Complaint, ¶ 94(b). That LOA ultimately may have been unable to realize its dreams cannot transmogrify hopeful predictions into fraudulent dictions. d. Alleged Misrepresentations Concerning the Quality and Quantity of LOA’s Customers Plaintiffs allege repeatedly that Defendants’ public statements mischaracterized the socioeconomic status of LOA’s Internet and telephone customers and improperly inflated LOA’s counts of its Internet and telephone customers. The first challenged statement appears in an October 28, 1999 press release issued by LOA: “The acquisitions [of Twisted-Pair Networks, NetQuarters, and Uco-Nects] expand [LOA’s] business and residential base to 80,000.” Def.App., Tab 15. The acquisitions of these companies brought additional Internet customers to LOA, and, as Defendants point out, Plaintiffs have explicitly stated as much in the Complaint. See Complaint, ¶ 42 (“During the Class Period, LOA acquired some or all of the business of several other ISPs ... growing its customer base to more than 30,0000 [sic] Internet subscribers.”). This statement is not actionable because it is true. The second challenged statement appears in a February 29, 2000 press release issued by LOA: “During the year, we completed the first phase of our growth plan, the acquisition phase, which established a critical mass of customers throughout the New England states.” DefApp., Tab 25. Plaintiffs object to the phrase “critical mass.” Complaint, ¶ 94(b). The phrase is non-actionable puffery, just as the hypothetical claim that LOA had acquired “a lot” of customers would be puffery. These are purely subjective, unverifiable descriptions of the number of customers LOA had garnered as a result of the acquisitions (which Plaintiffs concede was in the tens of thousands). The third challenged statement appears in a May 23, 2000 press release issued by LOA: “[0]ver the last 60 days, [LOA] has signed up 8,000 new commercial and SOHO voice customers.... ” Def.App., Tab. 30. The objection is that, of these 8,000 new telephone customers, the “vast majority” were residential rather than SOHO or commercial, and that LOA made this statement merely to “boost its customer numbers.” Complaint, ¶ 106. Defendants rejoin that SOHO customers are necessarily residential, because they operate from a residence. Def. Mem. at 12. This argument is unconvincing. The Court may reasonably infer that by characterizing their 8,000 new telephone customers as “commercial and SOHO,” and omitting the word residential, Defendants wished to convey that they were augmenting their commercial customer base. The statement is actionable. The fourth challenged statement appears in a May 24, 2000 article reported in The Providence Joumal-Bulletin, wherein Cornell is represented to have stated that he expected LOA’s “customer count this year to hit 100,000.” Def.App., Tab 31. Plaintiffs believe the statement is fraudulent because “Defendants’ publicly reported customer counts were inflated because they included customers who had canceled their service with LOA, customers whose accounts were uncollectible, and customers of PivotNet, who were not LOA customers.” Complaint, ¶ 108(a). Even if accepted, however, this allegation has little, if any, relevance to Cornell’s statement. Cornell’s forecast that LOA would have 100,000 customers by the end of 2000 is a forward-looking statement and does not purport to be based on any factual information, whether or not properly calculated, available at that time. It is a naked prediction unsupported by any facts, and would not be deemed material by a reasonable investor. It is not actionable. The fifth challenged statement appears in an August 9, 2000 press release: “[LOA is] [providing service to 45,000 customers, a gain of 25% since March 31 and 50% for the six month period.” DefApp., Tab 32. Plaintiffs’ objection is that LOA’s “publicly reported customer count was inflated with persons and businesses who did not pay their bills, were not receiving services, or were not LOA customers.” Complaint, ¶ 115(b). A customer who does not pay his bills does not cease to become a customer; he is simply late in his payments. On the other hand, Plaintiffs’ allegation, supported by an anonymous source, that “LOA’s publicly disclosed customer count was never adjusted to remove subscribers who were no longer using LOA’s services,” Complaint, ¶ 31(a), is a more substantial claim. If true, it could affect materially (depending on the number of improperly included accounts) the number of customers LOA could justifiably assert it had acquired. This statement is actionable. e. Alleged Misrepresentations Concerning the Type of Services That LOA Offered The next subset of alleged fraud essentially concerns one statement that was repeated at the bottom of various 1999 press releases: “[LOA] is a ... ‘CLEC’ and ... TISP’ providing local dial-tone, instate toll, long distance, high-speed Internet access and cable programming solutions .... ” See Complaint, ¶¶ 58, 65, 72, 78; DefApp., Tabs 5,14,17. Counsel for Defendants conceded at oral argument that LOA was never able to offer cable programming at any time in the class period. Instead, Defendants argue that, given the context in which these statements were made (a few months after the IPO as LOA was in the process of acquiring ISPs) any reasonable investor (“[o]f course”) would surely know that LOA “had not managed suddenly to transform itself into a full-fledged provider of Internet, telephone, and cable services.” Def. Mem. at 14. This will not do. The statement is a representation of present and verifiable fact — LOA marketed itself and may have attracted investors because it represented itself as a company that could provide and was providing these services. If it could not or was not providing these services at the time it issued these statements, it may have committed actionable fraud. The statements are therefore actionable as a matter of law. f. Alleged Misrepresentations Concerning LOA’s Quality of Service This subset concerns a host of allegations that Defendants misrepresented the quality of their customer service as “great,” “truly exceptional,” “superior,” the “best,” and “world class.” Complaint, ¶¶ 65, 72, 83, 90. Plaintiffs claim that these modifiers are materially false because LOA’s customer service was poor, and cite various incidents of customer dissatisfaction. Complaint, ¶¶ 42-49. Plaintiffs also lump into this category the statements about LOA’s ability to offer its customers a “unified billing structure” for the range of services the LOA customer was to receive. Complaint, ¶ 109. Defendants point out that allegations of corporate mismanagement cannot support a claim for securities fraud, and the correlate principle that a failure to disclose purported mismanagement is likewise non-actionable. Def. Mem. at 15 (citing Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 479, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977); Fitzer, 119 F.Supp.2d at 31). The inquiry does not end here, however. Unlike in Santa Fe and Fitzer, Plaintiffs here allege that Defendants made statements describing the quality of customer service at LOA that they knew to be false, given the alleged management problems. The basis for the claims, therefore, is not the mismanagement, but the allegedly deceptive statements concerning the mismanagement: In this case, plaintiff alleges that defendants mismanaged Bell [Savings Bank], If this were all that plaintiff alleged, [Bell’s receiver] would be correct in its position that only Bell has a claim against defendants and that plaintiff may assert that claim only by satisfying the prerequisites of a derivative action. But plaintiff alleges more than mismanagement. He alleges that defendants made affirmative representations inconsistent with the state of corporate affairs they knew to exist. Hayes v. Gross, 982 F.2d 104, 106 (3rd Cir.1992); Serabian v. Amoskeag Bank Shares, Inc., 24 F.3d 357, 365 (1st Cir.1994) (“In this series of allegations, plaintiffs do more than simply identify management problems or point to statements that put a positive spin on the company’s circumstances, without indicating how or why defendants should have known the descriptions were inaccurate. Rather, these paragraphs present a contrast between what company officials were hearing internally about their loan review effectiveness and the adequacy of their [allowance for loan losses], and what the company was telling the public at the same time.”) (emphasis in original). Plaintiffs allege numerous specific and pervasive examples of sub-par customer service at LOA, several of which they allege were remarked upon at various times by LOA employees: from routine customer complaints about service and dial tone interruption, to long delays in service set up, to insufficient resources to handle customer problems. See, e.g., Complaint, ¶¶ 47-49. Defendants’ representations of “great,” “truly exceptional,” “superior,” the “best,” and “world class” customer service, when matched against these allegedly widespread problems (of which Defendants do not deny they were aware), constitute actionable statements at this stage in the proceedings. Likewise, the allegation in paragraph 109 that Paolo stated, in an interview with the Wall Street Transcript Corporation, that LOA was bundling all of its services into a unified bill is actionable. Plaintiffs claim that LOA was never able “to integrate the billing systems of the companies it acquired into one unified system.” Complaint, ¶ 49. This is more than simply an allegation of undisclosed mismanagement: it charges that Paolo misrepresented what LOA could provide its customers in terms of service. g. Alleged Misrepresentations Concerning the Reasons for LOA’s Losses The next group of alleged fraud deals with Defendants statements regarding the reasons for LOA’s losses. Plaintiffs allege that Defendants’ SEC filings and associated press releases were misleading because Defendants did not disclose that LOA’s losses were in some measure attributable to “uncontrolled spending on office space,” excessive salaries and bonuses for LOA’s officers, and payment of Defendants’ personal expenses. See Complaint, ¶¶ 50-51, 66(a), 94(a). Plaintiffs do not present any arguments supporting the viability of these allegations. These allegations are not actionable as a matter of law: even if true, they represent precisely the type of naked allegations of corporate mismanagement that are not proscribed by the securities laws. See Shaw, 82 F.3d at 1206-07. h. Alleged Misrepresentations Concerning the Status of LOA’s Relationship with Nortel Plaintiffs claim that Defendants misrepresented the status of LOA’s ultimately failed relationship with Nortel. Specifically, Plaintiffs assert that Defendants stated that the Nortel switch had gone “live” and was “established” but that it never actually functioned, because (according to an anonymous former network engineering manager at LOA) “the company never had the means to tie together the Nortel equipment it acquired into an operational network.” Complaint, ¶¶ 43-45. Typical of the Defendants’ representations regarding the Nortel switch are the following, which appeared, respectively, in May 23, 2000 and August 9, 2000 press releases: [LOA] announced that its first Nortel DMS 500 switch went live.... The company will now commence moving its existing customer traffic over to its own switch which will lead to increased control over service quality, the ability to offer enhanced high speed product offerings, and greater per line profitability. Def.App., Tab 30. The first Nortel switch and ten central offices in Rhode Island were established, in fine with our installation plan. An additional 50 central offices in Maine, Massachusetts, New Hampshire, and Vermont will be on line by year-end. Def.App., Tab 32. Plaintiffs once again plead their allegations imprecisely, therefore, in characterizing Defendants’ statements as representing that the Nortel switch had gone live and was established in toto. Defendants only stated that the “first Nortel switch” had gone live and been established. Nevertheless, Defendants’ argument that its statements about the success of the Nortel switch were technically true at the time they were made, despite the almost immediate failure of that first switch and Defendants’ subsequent failure to inform the public that the entire Nortel operation never functioned, must be rejected. Given the alleged total failure of the Nortel switch, LOA was under a duty to correct the optimistic, factual impression conveyed by its statement that the first Nortel switch had succeeded and the natural inference that other Nortel switches were imminent. See Summa Four, 93 F.3d at 992. Standing alone (as they do), these statements imply that the Nortel switch was proceeding on course. If it was not, investors had a right to know. The statements regarding the Nortel switch are actionable. i. Alleged Misrepresentations Concerning LOA’s Present and Future Revenues This subset of alleged fraud involves (1) LOA’s overstated revenues as a result of alleged widespread billing errors at LOA, Defendants’ refusal to write-off bad debts, and Defendants’ refusal to establish a reserve for bad debts; and (2) Paolo’s statement that he expected LOA to “continue its fast paced growth” and Cornell’s prediction that LOA’s year 2000 revenues would reach $15 million. As to the allegations of overstatement of LOA’s actual revenues, Defendants contend that they lack the requisite specificity to withstand dismissal because Plaintiffs neither set forth the amount nor estimate the magnitude of the alleged overstatement. Def. Mem. at 20-21. The pivotal case on this issue, both parties agree, is Aldridge v. A.T. Cross Corp., 284 F.3d 72 (1st Cir.2002). There, the plaintiffs “core claim [was] that the reported revenues and earnings in [the defendant’s] financial statements were artificially inflated and that the statements contained omissions of material fact,” and were not in compliance with GAAP. Id. at 79. With respect to the necessity of pleading precisely the amount of the alleged overstatement, the First Circuit’s approach is one of context rather than of adherence to a bright-line rule: “[We do] not hold that a plaintiff, before discovery, must in every case allege the amount of overstatement of revenues and earnings in order to state a claim that undisclosed price protection schemes were fraudulent.” Id. at 81 (citing Greebel, 194 F.3d at 204); see In re Cabletron Systems, Inc., 311 F.3d 11, 32-33 (1st Cir.2002). Here, the allegations that LOA improperly included revenues belonging to a company called PivotNet (which was not one of the ISPs LOA had acquired) as its own survive dismissal. Plaintiffs claim that CyberTours had, prior to its acquisition by LOA, an agreement in place with PivotNet whereby CyberTours would operate PivotNet’s network in exchange for 80% of the revenue collected from Pivot-Net customers. Complaint, ¶ 41. Plaintiffs further allege that LOA “improperly recognized 100% of the revenues from PivotNet’s customers, which amounted to an additional $30,000 to $45,000 per month in revenues for LOA.” Id. Plaintiffs identify a “former vice president of technical services” and another “