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        Bruce K. Cohen, Meredith & Cohen, Philadelphia, PA, Mark L.D. Wawro, Susman & Godfrey, Houston, TX, for plaintiffs Leonard Eisner Profit Sharing Plan, John McNamara, Albert Lichtman, Arnold Malakoff, Jane Malakoff, Northwoods Office Services Defined Benefit Pensions Plan.

        Bruce K. Cohen, Meredith & Cohen, Philadelphia, PA, for plaintiffs Herbert A. Krumbein, Norman, Ira Shapiro, Dorothy Lordo, L. Trustee Uchitel, J. Trustee Kaliser, Lloyd Kaufman.

        Harvey Greenfield, James, New York City, Theodore C. Anderson, Kilgore & Kilgore, Dallas, TX, for plaintiff Jerry Krim.

        Mel E. Lifshitz, Bernstein Liebhard & Lifshitz, New York, for plaintiffs Gila Dekel, Emile Dekel.

        Curtis V. Trinko, New York City, for plaintiff Benjamin Ileto.

        Daniel M. McClure, Fulbright & Jaworski, David J. Beck, Beck Redden & Secrest, Houston, TX, for defendants Browning Ferris Indus. Inc., William D. Ruckelshaus, David R. Hopkins, Fletcher Thorne Thomsen, John E. Drury.

        Joseph Eugene Clements, Clements O'Neill & Pierce, Houston, TX, for defendant John R. Stanton.

        Samuel J. Buffone, Jr., Ropes & Gray, Washington, DC, for defendant Howard S. Hoover, Jr.

        Daniel M. McClure, Fulbright & Jaworski, Houston, TX, for defendant Harry J. Phillips, Sr.

        ROSENTHAL, District Judge.

        Pending before this court are Joint Motions for Summary Judgment filed by defendants Browning-Ferris Industries, Inc. ("BFI"), John E. Drury ("Drury"), David R. Hopkins ("Hopkins"), Harry J. Phillips ("Phillips"), William D. Ruckelshaus ("Ruckelshaus"), Fletcher Thorne-Thomsen, Jr. ("Thorne-Thomsen"), John Stanton, Jr. ("Stanton"), and Howard S. Hoover, Jr. ("Hoover"). (Docket No. 104 and 115). Also pending before this court are Motions for Summary Judgment filed by defendant Stanton (Docket Entry No. 106) and defendant Hoover (Docket Entry No. 107). After careful consideration of the facts, the parties' submissions, and the applicable authority, this court GRANTS the joint motions as to the first and second class periods. The motions filed by defendants Hoover and Stanton are deferred, for the reasons set out below.

        I. Background

        A. The First Class Period

        BFI is a publicly traded company in the waste collection and treatment business.

Page 876

During a forty-eight hour period in November 1990, the market price of BFI's stock dropped 28 percent, from $30.25 per share on November 5, 1990, to $21.75 per share on November 7, 1990. (Docket Entry No. 129, Ex. 64). On November 6, 1990, a BFI press release announced income from continuing operations for its 1990 fiscal year ended September 30, 1990 of $256,786,000, or $1.68 per share. This included fourth quarter special charges of $67 million. In the prior fiscal year, BFI had net income from continuing operations of $278,065,000, or $1.84 per share. (Docket Entry No. 117, Ex. M).

        In April 1990, BFI had taken a $295,000,000 charge for discontinued operations. This charge occurred before the beginning of the first class period, and is not challenged here. The combination of the fourth quarter 1990 operating results and special charges, with the earlier charge for discontinued operations, led to a net loss of $44,743,000, or $.29 per share, for the 1990 fiscal year. This compared with fiscal year 1989 results of $262,555,000 net income, or $1.74 per share.

        A major factor in the fourth quarter 1990 results was the $67 million in one-time special charges. BFI had agreed to a $30.5 million proposed settlement of an antitrust suit (the "Cumberland Farms litigation") in October 1990. (Docket Entry No. 121, Ex. 1, at 47). BFI also took a charge against income of $25 million, primarily consisting of additional reserves for the unsuccessful Flying Cloud Sanitary landfill ("FCSL"). (Docket Entry No. 117, Ex. 1, 19).

        The first plaintiffs filed suit on November 7, 1990, one day after the press release. The present action consolidated several individually filed suits. Plaintiffs, representing a class of investors who purchased BFI stock from August 9, 1990 through November 6, 1990, alleged securities fraud under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. § 240.10b-5 (1993). Plaintiffs also claimed that defendants committed common law fraud, negligent misrepresentation, and violated section 27.01 of the Texas Business and Commerce Code (Vernon 1987).

        Plaintiffs' allegations concerning the first class period fall into three general categories. First, plaintiffs contend that BFI made projections about growth in revenues and earnings before the first class period began that were material misrepresentations. Plaintiffs claim that these projections remained alive during the class period and required correction. Plaintiffs specifically challenge statements in the 1989 Form 10-K and Annual Report, and statements by Chairman and Chief Executive Officer William Ruckelshaus in March and April 1990.

        Second, plaintiffs allege that BFI should have disclosed reserves for the Cumberland Farms antitrust litigation and the Flying Cloud Sanitary Landfill in the August 1990 third quarter Form 10-Q.

        Finally, plaintiffs allege that statements in the third quarter Form 10-Q and two statements made by defendant Thorne-Thomsen in September 1990 were false and misleading.

        B. The Second Class Period

        On September 3, 1991, BFI released a Form 8-K, revising its recently issued third quarter 1991 projection for the fourth quarter and year-end downward. BFI's stock price dropped approximately 16 percent, from a closing price of $25.75 on August 30, 1991, to $21.75 on September 3, 1991. Plaintiffs amended their complaint on October 8, 1991 to allege continuing securities violations from November 6, 1990 to September 3, 1991.

        Plaintiffs allege eight specific instances in which BFI's late 1990 and 1991 public disclosures violated the securities laws: (1) the press release of November 6, 1990; (2) the fiscal year 1990 Form 10-K, dated December 14, 1990; (3) the 1990 Annual Report dated January 23, 1991; (4) a Reuter's dispatch dated February 6, 1991; (5) the 1991 first quarter Form 10-Q dated February 12, 1991; (6) the 1991 second quarter Form 10-Q dated May 7, 1991; (7) the press release dated June 27, 1991; and (8) the 1991 third quarter Form 10-Q dated August 12, 1991.

        Plaintiffs assert that BFI's fiscal year 1991 projections were fraudulently intended to

Page 877

mislead investors into believing that the 1990 problems had been addressed when, in fact, they were much more serious than BFI disclosed. Plaintiffs point to the progressive decline in BFI's fiscal 1991 performance; BFI's actual year-end results; and the fact that some individual defendants sold BFI stock during this period, to support their claim that defendants made these misrepresentations with the required scienter.

        C. The Individual Defendants

        Plaintiffs named as individual defendants the following officers and directors of BFI:

     NAME                                     TITLE
John E. Drury                        President from 1982 to 1990
David R. Hopkins                     Controller and Chief Accounting Officer
Harry J. Phillips                    Chairman of the Executive Committee of the Board
                                     of Directors since 1988.
William D. Ruckelshaus               Chairman, Chief Executive Officer, and a Director
Fletcher Thorne-Thomsen, Jr.         Vice President, Investor Relations
R. John Stanton                      Chief Financial Officer, Vice-President, and a Director
Howard S. Hoover, Jr.                General Counsel

        Plaintiffs assert that the individual defendants are liable based on aiding and abetting under section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and as control persons under section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). Plaintiffs also assert that certain of the individual defendants are liable for insider trading under section 10(b) and Rule 10b-5.

        After extensive discovery, all defendants have moved for summary judgment as to each element of the federal securities law claims for both class periods.

        II. Standard for Summary Judgment

        Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. Under Fed. R.Civ.P. 56(c), the moving party bears the initial burden of "informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue for trial." Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Leonard v. Dixie Well Serv. & Supply, Inc., 828 F.2d 291, 294 (5th Cir.1987). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. A fact is "material" if its resolution in favor of one party might affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

        When the moving party has met its Rule 56(c) burden, the nonmovant cannot survive a motion for summary judgment by resting on the mere allegations of its pleadings. Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 199 (5th Cir.1988). The nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts ... [T]he nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1356 (quoting Fed.R.Civ.P. 56(e)) (emphasis in original); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Leonard, 828 F.2d at 294.

        In deciding a summary judgment motion, "[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255, 106 S.Ct. at 2513. If the evidence rebutting the motion for summary judgment is only colorable or not significantly probative, summary judgment should be granted. Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511; Lewis v. Glendel Drilling Co., 898 F.2d 1083, 1088 (5th Cir.1990), cert. denied, 502 U.S. 857, 112 S.Ct. 171, 116

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L.Ed.2d 134 (1991). If reasonable minds can differ regarding a genuine issue of material fact, summary judgment should not be granted. Anderson, 477 U.S. at 250-51, 106 S.Ct. at 2511.

        III. The Elements of Securities Fraud under Section 10(b) and Rule 10b-5

        Section 10(b) prohibits any person from using or employing any "manipulative or deceptive device" in connection with the sale of a security. Rule 10b-5 forbids the making of "any untrue statement of a material fact or [omitting] to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading."

        Under section 10(b) or Rule 10b-5, a plaintiff must prove: (1) a misstatement or omission; (2) of a material fact; (3) occuring in connection with the purchase or sale of a security; (4) that was made with scienter; (5) upon which the plaintiff justifiably relied; and (6) that proximately caused injury to the plaintiff. Rubinstein v. Collins, 20 F.3d 160, 166 (5th Cir.1994). The court may grant summary judgment for defendants if the plaintiffs' summary judgment evidence fails to raise a genuine issue of material fact as to any one of those elements. Fine v. American Solar King Corp., 919 F.2d 290 (5th Cir.1990), cert. dismissed, Hurdman v. Fine, 502 U.S. 976, 112 S.Ct. 576, 116 L.Ed.2d 601 (1991).

        A. Predictive Statements and the "Bespeaks Caution" Doctrine

        Rule 10b-5 can apply to predictive statements. In Rubinstein, 20 F.3d at 166, the Fifth Circuit reaffirmed the following statement from Isquith v. Middle South Util., 847 F.2d 186, 203 (5th Cir.1988):

        [W]hen necessary, courts have readily conceded that predictions may be regarded as "facts" within the meaning of the antifraud provisions of the securities laws.... Most often, whether liability is imposed depends on whether the predictive statement was "false" when made. The answer to this inquiry, however, does not turn on whether the prediction in fact proved to be wrong; instead, falsity is determined by examining the nature of the prediction with emphasis on whether the prediction suggested reliability, bespoke caution, was made in good faith, or had a sound factual or historical basis.

        Rubinstein, 20 F.3d at 166, quoting Isquith, 847 F.2d at 203-204. A forecast or prediction may be regarded as a "fact" within the meaning of the securities laws if: (1) the speaker did not genuinely believe the statement was true; (2) there was no reasonable basis for the speaker to believe the statement was true; and (3) the speaker was aware of an undisclosed fact tending seriously to undermine the accuracy of the statement. Rubinstein v. Collins, 20 F.3d at 166.

        A court must determine whether a challenged statement is a forecast or prediction, as opposed to a "soft" statement that generally lacks materiality because "the market price of a share is not inflated by vague statements predicting growth." Raab v. General Physics Corp., 4 F.3d 286, 289 (4th Cir.1993). As the Fifth Circuit has recently affirmed, "projections of future performance not worded as guarantees are generally not actionable under the federal securities laws." Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1446 (5th Cir.1993).

        In determining whether a predictive statement "suggested reliability, bespoke caution, was made in good faith, or had a sound factual or historical basis," a court must examine the context in which the statement is made. As the Fifth Circuit recently stated:

        [m]ateriality is not judged in the abstract, but in light of the surrounding circumstances. The appropriate inquiry is whether, under all the circumstances, the omitted fact or the prediction without a reasonable basis "is one [that] a reasonable investor would consider significant in [making] the decision to invest, such that it alters the total mix of information available about the proposed investment." Inclusion of cautionary language along with disclosure of any firm-specific adverse facts or assumptions is, of course, relevant to the materiality inquiry, for such inclusion or

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disclosure is part of the "total mix of information."

        Rubinstein, 20 F.3d at 168; Krim v. BancTexas Group, 989 F.2d at 1448-49; In re Trump Securities Litigation, 7 F.3d 357, 377 (3d Cir.1993), cert. denied, Gollomp v. Trump, ___ U.S. ___, 114 S.Ct. 1219, 127 L.Ed.2d 565 (1994).

        The courts have recently reaffirmed the "bespeaks caution" doctrine in cases involving predictive statements. At least seven circuits have adopted some form of the doctrine. In re: Worlds of Wonder Securities Litigation, 35 F.3d 1407, 1414 (9th Cir. 1994); Rubinstein v. Collins, 20 F.3d 160, 166-68 (5th Cir.1994); Kaufman v. Trump's Castle Funding (In re Donald J. Trump Casino Sec. Litig.), 7 F.3d 357, 371-73 (3d Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 1219, 127 L.Ed.2d 565 (1994); Moorhead v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 949 F.2d 243, 245-46 (8th Cir. 1991); Sinay v. Lamson & Sessions Co., 948 F.2d 1037, 1040 (6th Cir.1991); I. Meyer Pincus & Assocs. v. Oppenheimer & Co., 936 F.2d 759, 763 (2d Cir.1991); Romani v. Shearson Lehman Hutton, 929 F.2d 875, 879 (1st Cir.1991). As the Fifth Circuit held in Rubinstein:

        The "bespeaks caution" doctrine ... reflects a relatively recent, ongoing, and somewhat uncertain evolution in securities law, an evolution driven by the increase in the unique nature of fraud actions based on predictive statements. In essence, predictive statements are just what the name implies: predictions. As such, any optimistic projections contained in such statements are necessarily contingent. Thus, the "bespeaks caution" doctrine has developed to address situations in which optimistic projections are coupled with cautionary language in particular, relevant specific facts or assumptions affecting the reasonableness of reliance on the materiality of those projections. To put it another way, the "bespeaks caution" doctrine reflects the unremarkable proposition that statements must be analyzed in context.

        Rubinstein, 20 F.3d at 167 (footnotes omitted).

        B. Insider Trading

        The "disclose or abstain" rule can give rise to liability under section 10(b) and Rule 10b-5 when corporate insiders trade on the basis of material non-public information. Corporate insiders wishing to trade must either disclose the information or wait until it has been disclosed in the natural course of events before trading. See, e.g., In re Zenith Laboratories Sec. Litig., No. 86-3241A, 1993 WL 260683 at *7 (D.N.J. Feb. 11, 1993) ("A duty to disclose exists only under certain limited circumstances. One such circumstance is when a corporate insider has used material nonpublic information to profit in the securities markets. Directors, officers, and principal shareholders all qualify as corporate insiders under section 10(b), as long as they `have obtained confidential information by reason of their position with that corporation.'") (citations omitted)); In re Cady Roberts & Co., 40 S.E.C. 907 (1961); In re Compaq Securities Litigation, 848 F.Supp. 1307, 1310 (S.D.Tex.1993).¹

        IV. Summary Chart of the Disclosures Challenged as to the First Class Period

12/2/89       Fiscal 1989 Form 10-K

              Revenues                    $2,550,592,000        23% over prior year
              Income from Operations      $  465,009,000        21% over prior year

Statement:    "The Company believes that its revenue growth trend over the past five years
              will continue through fiscal 1990 and beyond."

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1/24/90    Press Release announcing first quarter fiscal 1990 results
           Revenues                  $715,451,000          22% over prior year
           Income from Operations    $125,383,000          21% over prior year

2/7/90     First Quarter 1990 Form 10-Q (for three months ended 12/31/90)

3/11/90    Ruckelshaus statement: "The company's growth prospects are just as attractive
           today as they have been in the last few years, and I don't see any near
           term diminishment of that ..."

4/5/90     Ruckelshaus statement: "[T]he future prospects of our solid waste collection
           and disposal business are extremely attractive."

4/23/90    Press release announcing second quarter fiscal 1990 results
           Revenues                  $708,475,000          21% over prior year
           Income from Operations    $134,886,000          22% over prior year
           Income from Continuing    $71,921,000           14% over prior year
           Operations

5/4/90     Second Quarter 1990 Form 10-Q issued (for six months ended 3/31/90)

7/19/90    Press release announcing third quarter fiscal 1990 results
           Revenues                  $767,562,000       18% over prior year
           Income from Operations    $152,400,000       15% over prior year
           Income from Continuing
                    Operations       $ 82,378,000        9% over prior year

8/9/90     First Class Period Begins. Third Quarter Form 10-Q issued (for nine
           months ended 6/30/90)

Statement: BFI does not believe that the Cumberland Farms litigation poses "a material
           risk of having a materially adverse effect on the Company's business."

9/12/90    News services report that Thorne-Thomsen is "comfortable" with analysts'
           fiscal year earnings estimates of $1.99-$2.00 per share.

9/26/90    Thorne-Thomsen states that BFI's business "has some recession resistant
           characteristics.... We are not dependent on any particular part of the
           country," and that he has "no quarrel" with analysts' fiscal 1990 earnings
           estimates.

11/6/90    First Class Period ends. BFI press release announces fiscal 1990 results
           Revenues                  $2,967,459,000     19% over prior year
           Income from Operations    $  490,684,000     0.4% over prior year
           Income from Continuing
                    Operations       $  256,786,000      -8% from prior year

        V. The Pre-Class Period Statements and the Duty to Correct

        A. Plaintiffs' Claim that BFI "Guaranteed" Annual Growth Rates for Revenue and Net Earnings

        On December 2, 1989, eight months before the first class period began, BFI made the following statement in the 1989 Form 10-K for the fiscal year ended September 30, 1989:

        The Company believes that its revenue growth trend over the past few years will continue through fiscal 1990 and beyond. However, the Company anticipates that net income may only grow at about the same pace during fiscal 1990 based on assumptions relating principally to the continuation of losses in the chemical waste segment, an increase in the effective income tax rate and interest expense associated with recent acquisitions and development projects.

        (Docket Entry No. 117, Ex. C, p. 28; Ex. D, p. 27). The 1989 Annual Report to Shareholders included the same language.

        Plaintiffs claim that this statement fraudulently "assured" investors that in fiscal year 1990, BFI would continue its historical annual growth rate for revenues (approximately 25 percent) and for earnings (approximately 15 percent). Plaintiffs assert that this "assurance"

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remained "alive" during the first class period and required correction when adverse developments occurred.

        1. There Was No Assurance or Guaranty

        The Fifth Circuit has recently affirmed that projections of future performance, not worded as guarantees, are generally not actionable under the federal securities laws. Krim v. BancTexas Group, 989 F.2d at 1446; Raab v. General Physics Corp., 4 F.3d at 290. In Krim, the court held that a statement by company management, that "[t]he Company is hopeful, although there can be no assurance, that the successful implementation of the Restructuring Plan will resolve its current financial problems,...." was not actionable. Krim, 989 F.2d at 1447. The Fourth Circuit held in Raab that statements in an annual report that "[r]egulatory changes ... have created a marketplace for the DOE Services Group with an expected annual growth rate of 10 percent to 30 percent over the next several years" and that "the DOE Services Group is poised to carry the growth and success of 1991 well into the future" were not actionable. Raab, 4 F.3d at 289. Such statements of management's opinion or hopes for future performance generally lack materiality as a matter of law because the market is not affected by such statements. Id.

        An examination of the context in which the challenged statement appears strengthens the conclusion that it was not a "guarantee" or "assurance." The challenged language appears in a section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." The context bears reprinting:

        Consolidated revenues for fiscal 1989 were $2,551 million, a 23% increase over the prior year. Net income and earnings per share increased 16% and 15% respectively, over fiscal 1988. The increase in revenues was due principally to the strong operating performance in the solid waste businesses and the impact of the Company's acquisition and market development programs. Although revenues increased significantly over fiscal 1989, net income growth was impacted negatively by losses in the chemical waste segment, increased levels of interest expense associated with acquisitions and an increase in the effective income tax rate. The Company believes that its revenue growth trend over the past few years will continue through fiscal 1990 and beyond. However, the Company anticipates that net income may only grow at about the same pace during fiscal 1990 based on assumptions relating principally to the continuation of losses in the chemical waste segment, an increase in the effective income tax rate and interest expense associated with recent acquisitions and development projects.

        (Docket Entry No. 117, Ex. C, at 28; Ex. D, p. 36) (emphasis added).

        The same section of the 1989 Form 10-K also reviewed operating costs. This discussion is relevant to plaintiffs' claim that BFI falsely and unreasonably projected a continuation of the historical net income growth trend. The Form 10-K stated as follows:

        During fiscal years 1989, 1988, and 1987, cost of operations increased $323 million (25%) $270 million (26%) and $200 million (24%) respectively. As a percent of revenues, the cost of operations for each of the three fiscal years 1989, 1988 and 1987 was 63.9% 63.2% and 62.6% respectively. Operating expenses during each of the three fiscal years were heavily influenced by higher landfill disposal related costs. Disposal costs, which are the largest single component of operating expense, rose over 20% in fiscal 1989 and in excess of 30% for each of the two previous fiscal years. Other operating costs increased as a percent of revenues during fiscal 1989, principally as a result of increased operating costs in the chemical segment and in the Company's international operations which expanded significantly during fiscal 1989. Other operating costs declined as a percent of revenues in the previous two fiscal years due to operating efficiencies and the continued emphasis on controlling variable operating expenses. The overall impact of the higher disposal and other operating costs caused a slight decline in the gross profit margin in fiscal 1989 from the prior

Page 882

years. The Company believes that disposal cost increases, which are largely attributable to the increasing scarcity of landfill airspace as well as the higher costs associated with environmental compliance, disposal site upgrading and landfill closure and post closure, will continue in future years. Management believes these increased costs can be recovered through increased prices thereby maintaining operating profits, although operating margins may continue to decline.

        (Docket Entry No. 117, Ex. C. p. 29).

        Like the statements in Raab and Krim, the opinion by BFI management as to BFI's future rates of growth was not a guarantee or assurance that these rates would be achieved. It was a statement of opinion, made in the context of disclosures about operating costs and other company-specific factors impacting income. No reasonable investor would have viewed the statements as to BFI's anticipated rates of growth as a "guaranty" or "assurance" that specific levels of growth would be, in fact, reached.

        2. "Bespeaks Caution"

        To determine the materiality of a statement coupled with cautionary language, a court must examine the statement and its context. Rubinstein, 20 F.3d at 168; Krim, 989 F.2d at 1446; Isquith, 847 F.2d at 208.

        BFI's forward-looking statement as to future growth rates for net income and revenues was made in the context of disclosures of industry-specific and company-specific negative factors that could affect BFI's revenues and earnings growth. BFI discussed in detail the increase in operating costs from fiscal years 1987 to 1989 and listed specific factors supporting management's belief that such costs would continue to rise.

        BFI's challenged statement was coupled with relevant specific facts and assumptions about the factors affecting BFI's costs and revenues. BFI's statement "bespeaks caution" under the applicable authorities. See, e.g., Rubinstein, 20 F.3d at 168; In re Trump Casino Securities Litigation, 7 F.3d 357, 369-73 (3rd Cir.1993); Romani v. Shearson Lehman Hutton, 929 F.2d at 879-80.

        3. A Duty to Correct During the First Class Period

        Plaintiffs also contend that the statement that the historical revenue growth trend "over the past few years will continue through fiscal 1990 and beyond," and that "income may only grow at about the same pace as fiscal 1990," made eight months before the class period began, "remained alive" until and during the class period and should have been corrected in light of adverse actual results.

        "[I]f a corporation voluntarily makes a public statement that is correct when issued, it has a duty to update that statement if it becomes materially misleading in light of subsequent events." Greenfield v. Hueblein, Inc., 742 F.2d 751, 758 (3rd Cir.1984), cert. denied, 469 U.S. 1215, 105 S.Ct. 1189, 84 L.Ed.2d 336 (1985). This principle applies to projections as well as other public statements. Kirby v. Cullinet Software, Inc., 721 F.Supp. 1444, 1450 (D.Mass.1989); In re: Kulicke & Soffa Industries, 697 F.Supp. 183, 185 (E.D.Pa.1988). However, a projection must become misleading as to a material matter to require later correction. Basic Inc. v. Levinson, 485 U.S. 224, 236-39, 108 S.Ct. 978, 986-87, 99 L.Ed.2d 194 (1988).

        During the first three quarters of fiscal year 1990, BFI published quantitative comparisons between the current and prior years' revenues, costs, and income. The publications included the first quarter Form 10-Q filed February 9, 1990; a press release dated April 23, 1990, with a consolidated statement of operations for the three months and six months ended March 31, 1990; the second quarter Form 10-Q dated May 4, 1990; a press release dated July 19, 1990, announcing third quarter and nine-month financial results; and the third quarter Form 10-Q filed August 9, 1990.

        The Forms 10-Q for the first, second, and third quarters of fiscal year 1990 contained detailed analyses of actual revenues, actual operating costs, and net income. The reported numbers showed a continuation in the multi-year upward trend of operating costs reported in the 1989 Form 10-K. BFI included

Page 883

in each of its fiscal 1990 Form 10-Q's "certain ratios (shown as a percent of revenues) which reflect profitability trends of the Company and the Company's ratio of earnings to fixed charges." (Docket Entry No. 159, Tab 4, p. 10; Tab 6, p. 11; Tab 8, p. 10). Throughout 1990, BFI published detailed information about BFI's actual trends in income, revenues, costs, and "profitability."

        Plaintiffs argue that "BFI's [fiscal 1990] internal monthly operating statements warned Defendants that forecasting a continuation of historical growth trends" would be false and misleading because BFI's year-to-date EBINT [Earnings Before Interest, National Overhead, and Taxes] growth (1) "had slowed to 13% through April"; (2) was "only 11% above the prior year" through May; (3) "June operating results reflected the same growth rate"; and (4) "July's operating results reflected a further slowdown in the rate of growth to 16%." (Docket Entry No. 128, p. 9).³ However, plaintiffs have not provided any competent summary judgment evidence that the "forecasts" in the 1989 Form 10-K "remained alive" during the first class period so as to become misleading as to a material matter eight months later, or require "correction."

        BFI has provided summary judgment evidence that throughout fiscal year 1990, BFI published its actual rates of earnings growth, actual revenues and costs, and "profitability trends." These disclosures became part of the "total mix" of information available before and during the first class period. This factual information, issued beginning on January 24, 1990 and continuing throughout the first class period, superseded BFI's statements of anticipated growth rates made in December 1989 and January 1990, in the 1989 Form 10-K and Annual Report. See TSC Ind. v. Northway, Inc., 426 U.S. 438, 448-49, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976). These statements did not remain alive during the class period and therefore did not require correction.

        B. Plaintiffs' claim that BFI's 1989 Form 10-K created a false and misleading impression that BFI's operations would not be materially affected by local economic conditions

        Plaintiffs allege that the 1989 Form 10-K created the misleading impression that BFI would not be materially affected by local economic conditions and that the waste disposal business was not price sensitive. Plaintiffs claim that BFI created this misimpression by stating that "no single customer or district accounts for a material amount of BFI's revenue or net income," and that "some Northeastern and Mid-Atlantic states are currently experiencing a critical shortage of suitable solid waste disposal facilities."

        Defendants have presented competent summary judgment evidence that in 1989, BFI had more than 315 operating districts in North America. (Docket Entry No. 117, Ex. C, p. 2). Plaintiffs have not provided summary judgment evidence to raise a disputed issue that any single customer or district did in fact account for a material amount of BFI's revenue or net income. There is no basis for finding that the statement was false.

        There is similarly no basis for finding that this statement created a "misleading impression" that BFI would be unaffected by local economic conditions and that its waste disposal business was not price sensitive. Plaintiffs ask this court to jump from BFI's true statement that no one district or customer accounted for a material amount of BFI's income or revenue to a "false assurance" that BFI was able to raise prices with impunity. There is no basis for this jump.

        BFI's statement that "some Northeastern and Mid-Atlantic states are currently experiencing a critical shortage of suitable solid

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waste disposal facilities," does not foster a misleading impression of immunity from local economic conditions. This statement was made in a section of the 1989 Form 10-K entitled "Waste Disposal Risk Factors." The context in which the challenged statement appeared was as follows:

        There are serious, often unforeseeable, business risks and potentially substantial cost exposures associated with the establishment, ownership and operation of solid waste sanitary landfill sites and other types of waste processing and disposal facilities. These risk factors include, but are not limited to: (i) an increasing shortage of disposal capacity in some parts of the United States, coupled with the difficulty of obtaining permits to expand or establish new sites and facilities and public and private opposition to the location, expansion and operation of these facilities ...

        If the Company were unable to continue using or disposing of planned volumes of wastes at existing solid waste landfills and unable to either expand existing landfills or establish new sites, it would be required to obtain the rights to use other disposal facilities or to suspend or curtail solid waste collection or disposal activities. If this were to occur on a widespread basis, together with the expenses and risks referred to above, it could substantially reduce certain revenues and increase the risk of impairing the value of the investment in these facilities. These developments could also result in the acceleration of closure costs and post-closure monitoring cost accruals for those landfills, with a corresponding negative impact on net income.

        Some Northeastern and Mid-Atlantic states are currently experiencing a critical shortage of suitable solid waste disposal facilities. Unless additional disposal capacity is developed, many private and governmental solid waste collection companies operating in the affected areas, including BFI, could be required to curtail or even suspend those operations.

        (Docket Entry No. 117, Tab C, pp. 4-5).

        Instead of creating or reinforcing an impression that BFI's revenues would not be affected, the statement about shortages in landfill space in the Northeast was a warning of possible future declines in revenues. The statement described a situation that could have a negative impact on BFI's revenues and net earnings. There is no fact issue that the statement, taken in context, fostered a "false impression" that BFI's waste disposal business was immune from adverse local economic conditions.

        C. Ruckelshaus's Statement to Investors on March 11, 1990

        On March 11, 1990, Ruckelshaus, BFI's Chairman and Chief Executive Officer, made the following statement during a meeting with between ten and fifteen investors:

        Our growth, as you know, has historically been fueled by a combination of increasing our customer base, increasing the value of our activities, increasing our prices on an annual basis, and through what we call market development or the acquisition of new companies, additional companies or through national contracts. This combination has historically led to a growth of something between 17 and 25% and we don't see any diminishment in that growth path ...

        [T]he company's growth prospects are just as attractive today as they have been in the last few years, and I don't see any near term diminishment of that....

        (Docket Entry No. 129, Ex. 47).

        Plaintiffs contend that this statement needed correction during the class period because it: (1) contradicted an internal memorandum dated October 1989 to Bruce Ranck, BFI Executive Vice-President for Solid Waste Operations-North America, from BFI President John Drury, noting the "seriousness of the current earnings situation"; (2) contradicted a BFI internal study dated January 1990, stating that BFI's ratio of new customers to lost customers was one to one; (3) was contradicted by an internal study dated March 21, 1990, stating that annualized margins had "declined significantly in recent years," and that EBINT growth had declined from 16.7 percent in 1986 to 2.8 percent in 1989; (4) was contradicted by an April 1990 memo from Stanton noting concern

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over a "serious problem with a declining earnings growth rate"; and (5) was contradicted by an April 1990 senior management group memo identifying a decline in real annual growth, a "record pace" in losing customers, and a resulting inability to raise prices.

        Plaintiffs argue that these internal company documents made Ruckelshaus's March 1990 prediction that historic growth trends would continue false and in need of correction during the class period. (Docket Entry No. 160, pp. 6-8).⁴

        The January 1990 internal BFI study, showing a one-to-one ratio of new to lost customers in the North American solid waste business, does not create a fact issue that Ruckelshaus's March 11, 1990 statement was false or unreasonable so as to require correction during the first class period. The study stated that: "[t]he major point is that 1989 revenue growth (September to September) for North American Solid Waste was only 15 percent, well below our historical trend and expectations. A similar first quarter 1990 to 1989 showed only 16 percent growth." (Docket Entry No. 121, Ex. 2, BFI029-00005). First, the internal study referred only to North American waste solid waste collection activities, not to BFI's operations as a whole. Second, after this study and before Ruckelshaus's statement, BFI issued its first quarter 1990 actual results, published on February 9, 1990. This Form 10-Q disclosed both a 23 percent increase in revenues over the first quarter of 1989 for BFI as a whole, and a 24 percent increase in the cost of operations.

        BFI's second and third quarter Form 10-Qs, also published after Ruckelshaus's statement, contained specific, quantitative data showing actual rates of growth in both revenues and costs, and comparisons with the prior year. The information about increasing revenues, increasing costs, and declining earnings, disclosed after Ruckelshaus's statements, provided current, factual information about operating results and trends before and during the first class period.

        This court does not find that Ruckelshaus made a projection of future revenues or earnings by stating on March 11, 1990 that "[t]he company's growth prospects are just as attractive today as they have been in the last few years, and I don't see any near term diminishment of that." This court merely points out that, even if the statement is characterized as a projection, it was superseded by the specific disclosures that occurred before the first class period began in August 1990. There was no duty to correct the statement during the first class period.

        D. Ruckelshaus's April 5, 1990 Statement

        Plaintiffs also assert that Ruckelshaus's April 5, 1990 statement that "the future prospects of our solid waste collection and disposal business are extremely attractive," was materially misleading.

        The statement was made as part of Ruckelshaus's disclosure that BFI was withdrawing from the hazardous waste business. Ruckelshaus stated:

        While we are confident that the substantial investments we have made in people and capital to get CECOS back on track would have eventually paid off, we feel that our resources are better directed in the future toward developing opportunities in our core solid waste business.

        The future prospects of our core solid waste collection and disposal business are extremely attractive. Recycling, medical waste collection and disposal, industrial solid waste disposal and international

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growth are business areas of great promise that we are pursuing aggressively.

        (Docket Entry 121, Exhibit 49, p. 2).

        This statement does not make any specific prediction of BFI's performance during a particular time period. This statement falls within the "puffery" category. See, e.g., Raab v. General Physics Corp., 4 F.3d at 290, in which the Fourth Circuit stated as follows:

        The whole discussion of growth is plainly by way of loose prediction, and both the range of rates cited, as well as the time for their achievement, are anything but definite. No reasonable investor would rely on these statements, and they certainly are not specific enough to perpetrate a fraud on the market. Analysts and arbitragers rely on facts in determining the value of a security, not mere expressions of optimism from company spokesmen. The market gives the most credence to those predictions supported by specific statements of fact....

        4 F.3d at 290.

        The challenged statement does not make any specific performance prediction. It is the type of statement that the Raab court found to be "mere puffery."

        VI. The First Class Period Statements

        A. Economic Conditions in the Northeast and Mid-Atlantic States

        Plaintiffs allege that defendants "concealed the extent to which BFI relied upon the operations of its Mid-Atlantic and Northeastern regions," which accounted for 26% of BFI's solid waste business. Plaintiffs allege that: "[a]s 1990 progressed and economic conditions worsened, BFI began to experience a material decrease in revenues and profits particularly in its third fiscal quarter ended June 30, 1990. To explain its third quarter results, BFI admitted only that its business in New England had been adversely impacted by economic conditions. Defendants concealed the extent to which BFI relied upon the operations of its Mid-Atlantic and Northeastern regions." (Docket Entry No. 23, 70).

        The undisputed summary judgment record shows that BFI's revenues increased throughout fiscal 1990. Income from continuing operations also increased throughout the first three quarters of fiscal 1990 as compared to the year before. Income from continuing operations decreased in the fourth quarter of fiscal year 1990. BFI did not "explain its third quarter results" by "admitting only that its business in New England had been adversely impacted by economic conditions." The explanation for the fourth quarter and fiscal 1990 results included, but was not limited to, the effect of economic conditions in the New England and Mid-Atlantic areas.

        BFI did discuss the impact of economic conditions in New England in the 1990 Form 10-K section entitled Management Discussion of Revenues. In that discussion, BFI stated, "[d]uring fiscal 1990, however, volume growth declined significantly due to greater competition for new business, weakening economic conditions, principally in the northeastern United States and along the Atlantic seaboard, and declines in landfill volumes at a number of large disposal sites." (Docket Entry No. 159, Tab 13, p. 15).

        Plaintiffs appear to argue that defendants should have explicitly stated that the New England and Mid Atlantic states accounted for 26 percent of BFI's solid waste business. These two regions, that are alleged to account for 26 percent of revenues, were two regions out of nine. The share of the total solid waste volume in two out of nine regions was not so disproportionate or anomalous as to require more specific disclosure. BFI did disclose that economic conditions in the northeastern United States and along the Atlantic seaboard were among the causes of the decrease in volume growth in 1990. Plaintiffs' complaint appears to boil down to an allegation that BFI had a duty to describe the effect quantitatively rather than qualitatively. A firm need not release all the data, assumptions and methods behind its public disclosures. Krim, 989 F.2d at 1446-47; Virginia Bankshares Inc. v. Sandberg, 501 U.S. 1083, 1094-95, 111 S.Ct. 2749, 2759, 115 L.Ed.2d 929 (1991). Plaintiffs have not provided summary judgment evidence to raise a

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disputed issue of fact that this "omission" was misleading or material.

        B. The Cumberland Farms Litigation and the Third Quarter Form 10-Q

        Plaintiffs allege that the 1990 third quarter Form 10-Q, filed on August 9, 1990, falsely represented that BFI's belief that the outcome of the Cumberland Farms antitrust lawsuit would not have a material adverse effect on BFI. Plaintiffs allege that BFI should have set and disclosed a reserve for the Cumberland Farms litigation in the third quarter Form 10-Q.

        In the 1989 Form 10-K, issued eight months before the first class period began, BFI's discussion of legal proceedings described the Cumberland Farms lawsuit. The following statement covered the legal matters described:

        Management of the Company believes that the ultimate resolution of these matters [including the Cumberland Farms litigation] does not pose a material risk of having a materially adverse effect on the Company's business or consolidated financial condition.

        ....

        While the resolution of any matter may have an impact on the Company's consolidated financial results for a particular reporting period, management believes that the ultimate disposition of these matters will not have a materially adverse effect upon the business or consolidated financial position of the Company.

        (Docket Entry No. 117, Tab C, pp. 20-21).

        BFI repeated the same statements in its 1990 third quarter Form 10-Q. (Docket Entry No. 117, Tab I, pp. 8-9). It is undisputed that before and on August 9, 1990, BFI warned investors that the Cumberland Farms litigation existed, and could "have an impact on the Company's consolidated financial results for a particular reporting period," but management did not believe it would have a materially adverse effect on BFI's business or consolidated financial position. The issue is whether this statement was materially misleading.

        On June 21, 1990, BFI management learned that its codefendant, Waste Management Inc. ("WMI"), had agreed to settle with the Cumberland Farms plaintiffs for $19.5 million. (Docket Entry No. 129, Exhibit 56). WMI and BFI had signed a defense sharing agreement in July 1989. (Docket Entry No. 117, Tab A). Plaintiffs contend that the sharing agreement obligated BFI to pay its "designated share" of the settlement, and that, as of June 21, 1990, BFI knew that it "had to" settle for at least as much as WMI. Plaintiffs argue that BFI should have set a reserve and disclosed it in the third quarter Form 10-Q, filed on August 9, 1990.

        A reserve is required for a contingent liability when it appears "probable" as opposed to "reasonably possible" or "remote" that a liability has been incurred, in an amount that can be "reasonably estimated." In re: Westinghouse Sec. Lit., 832 F.Supp. 948, 973 (W.D.Pa.1993); FAS, Statement of Financial Accounting Standards, No. 5 at 8.

        Plaintiffs' first contention is that WMI's settlement made BFI's settlement inevitable. The WMI/BFI defense sharing agreement stated that:

        Other than as set forth in Article III below, nothing in this Agreement shall be construed as requiring the remaining Party to reimburse the Settling Party for any Settlement Payments made by the Settling Party. In particular, if a Final Judgment is entered in favor of a Party and against a Claimant, it shall have no obligation to make any Payment to the other Party with respect to that Claimant.

        (Docket Entry No. 117, Tab A, Art. II(G)). The agreement also stated:

        If the Parties enter into a joint Settlement with a Claimant or a Final Judgment is entered against both Parties, the Parties shall make payment of their designated share of the amount of the joint Settlement or Final Judgment. If the Parties enter into separate Settlements with a Claimant, or if one Party settles with a Claimant and the other Party has a Final Judgment entered against it and in favor of that Claimant, the Parties shall make Payment of their designated shares of the aggregate

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total of the settlement amounts or the aggregate total of the Settlement and Final Judgment.

        (Docket Entry No. 117, Tab A, Art. III(A)(3)).

        The sharing agreement did not obligate BFI to pay merely because WMI had settled. This conclusion is consistent with the testimony of plaintiffs' own expert, Victor C. Moore, that "[u]nder the terms of the Sharing Agreement entered into between WMI and BFI in 1989 that I have reviewed, BFI had a contractual obligation to pay its pro rata share of any settlement, unless BFI took the matter to court and prevailed on the claims against it at trial." (Moore Affidavit, 10(a)). WMI's settlement did not create a probable liability for BFI requiring disclosure on August 9, 1990.

        A detailed review of the summary judgment evidence shows that, as of August 9, 1990, BFI did not expect to settle, did not reasonably believe that a loss was "probable," and could not reasonably estimate the amount of a loss or settlement. On June 5, 1990, two weeks before WMI's settlement became known, BFI's outside counsel wrote to Hoover as follows:

        The only change on this issue [settlement] since we last met is a meeting [CFL plaintiffs' attorney] had with Waste Management's lawyers. We opted not to attend ... [Plaintiffs' counsel] said he had a great case, particularly against us, because of the materials from Kelco. [Plaintiffs' counsel] therefore upped his settlement figure from $70 million to $100 million. As the foregoing demonstrates, [Plaintiffs' counsel] is a) senile; b) totally ignorant about the case, and; c) a big talker.

        What this all means is that the possibility of a settlement now is very small, absent very significant movement by the parties. There is certainly no reason for us to move now; our motions [for summary dismissal] filed and to be filed will put pressure on plaintiffs.... It makes little sense, in my view, to make a settlement overture now.

        (Docket Entry No. 129, Ex. 66, BFI3-001619, 1620).

        Plaintiffs point to the facts that BFI had a management meeting on June 25, 1990 in which the WMI settlement was discussed, and that on July 24, 1990, a lawyer representing BFI wrote a letter to counsel representing the Cumberland Farms plaintiffs, stating: "If you wish, I would be happy to discuss the matter [settlement] further at your convenience," as evidence raising a fact issue that before August 9, 1990, BFI knew it would settle and could reasonably estimate the amount.

        The mere fact that BFI management reviewed the WMI settlement on June 25, 1990 does not create a fact issue that a reserve had to be accrued. The letter from BFI's counsel was written in response to a letter from plaintiffs' counsel dated July 16, 1990, that raised settlement. BFI's counsel responded as follows:

        This is in response to your letter of July 16, 1990 concerning settlement.

        As you may know, the information set forth in your letter has been known to us for some time and does not, in my view, constitute evidence of a national conspiracy. Hence, our assessment of the case remains unchanged.

        We are, as I have told you, willing to discuss settlement on reasonable terms; indeed, I believe the case should be settled, if at all possible. However, we do not believe that $19.5 million you agreed to with Waste Management is reasonable in any sense as to BFI. In that regard, I would note that plaintiffs' proposed settlement with Waste Management appears to be limited to 14 geographic areas as to which governmental investigations were conducted. Of those, BFI did not even do business in 5 of them during the relevant periods, and only Waste Management and not BFI was charged with price fixing in Southern California, and South Florida. In fact, of the 14 geographic areas, BFI and Waste Management were charged with conspiracy in only 2 Toledo and Atlanta and the latter case was settled and releases given.

        (Docket Entry No. 129, Ex. 58).

        The Cumberland Farms plaintiffs' response to this letter, dated July 25, 1990,

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informed BFI that BFI's position made further settlement efforts useless. (Docket Entry No. 161, Tab 7, DBI00054). This exchange provides no support for plaintiffs' position.

        Plaintiffs also rely on an October 7, 1989 audit letter response by BFI's outside counsel, Dewey, Ballantine, Bushby, Palmer & Wood ("Dewey Ballantine") that stated: "At this point, we are unable to express our opinion on the probable outcome of this litigation or estimate the amount or range of potential loss." The summary judgment evidence is that BFI subsequently sent Dewey Ballantine a letter dated November 10, 1989, asking if Dewey Ballantine disagreed with BFI's belief that the litigation Dewey Ballantine was handling for BFI, which included Cumberland Farms, would not have a materially adverse effect on BFI's financial position. (Docket Entry No. 161, Tab 4). Dewey Ballantine responded shortly thereafter that it did not differ with this position. (Docket Entry No. 161, Tab 5). This does not create a fact issue as to BFI's duty to set a settlement reserve.

        A company need not attempt to quantify a contingent liability through rough guesses or speculation. S.E.C. v. Steadman, 967 F.2d 636, 645 (D.C.Cir.1992). In Steadman, the D.C. Circuit held that a mutual fund was not required to book a reserve for penalties for not registering under state Blue Sky laws when the S.E.C. calculated the fund liability at $694,000 and the mutual fund calculated its liability at $100,000. The court held that the fund should have disclosed the fact that it had violated Blue Sky laws by not registering, but did not need to set a reserve. In Steadman, liability was established, and only the amount was in question. The court held that the defendant was not required to set a reserve for the amount if the plaintiffs' estimates of liability differed vastly from the defendants.

        Unlike the defendant in Steadman, on August 9, 1990, BFI was not facing established liability and did not believe that an adverse result was probable. Like the defendant in Steadman, BFI had a much different estimate of possible settlement value than plaintiffs.

        The summary judgment evidence does not raise a fact issue that BFI's August 9, 1990 disclosure of the Cumberland Farms lawsuit was a material misrepresentation at the time it was made.⁵

        C. The Flying Cloud Sanitary Landfill

        On September 11, 1990, a BFI subsidiary, Woodlake Sanitary Service ("WSS"), announced that it was withdrawing its application for a permit to expand the Flying Cloud Sanitary landfill in Eden Prairie, Minnesota.

        Plaintiffs contend that BFI's third quarter Form 10-Q, signed on August 3, 1990 and filed on August 9, 1990, should have stated a loss reserve because problems in BFI's permit application for the Flying Cloud landfill would require BFI to withdraw the permit application.

        The third quarter 1990 Form 10-Q gave the following information with respect to the BFI's landfills, including Flying Cloud:

        The company and certain subsidiaries are involved in various other administrative matters or litigation, including environmental proceedings relating to governmental actions resulting from the involvement of various subsidiaries of the Company with certain waste sites (including Superfund sites), that could result in additional litigation or other adversary proceedings. While the resolution of any matter may have an impact on the Company's consolidated financial results for a particular reporting period, management believes that the ultimate disposition of these matters will not have a materially adverse effect upon the business or consolidated financial position of the Company.

        (Docket Entry No. 117, Tab I, p. 9).

        Plaintiffs complain of BFI's failure to disclose in the third quarter 1990 Form 10-Q that: (1) BFI had just learned that an employee at the Flying Cloud landfill had concealed

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the discovery of methane gas outside the permitted areas; (2) BFI would have to withdraw the permit application; and (3) a reserve for the costs of withdrawal would be required. (Docket Entry No. 128, pp. 26-27).

        1. Background: The Undisputed Summary Judgment Evidence

        On July 30, 1990, a technician at the BFI subsidiary, WSS, reported his suspicions that a recently retired WSS district manager had concealed the fact that methane gas had been found outside the permitted area. (Hutton Affidavit, Docket Entry No. 117, Tab 2, 8). The next day, July 31, 1990, BFI regional personnel conducted gas sampling tests, which appeared to confirm the technician's suspicions. (Id. 9.) The regional personnel contacted the BFI corporate legal department and requested assistance in the investigation. (Id.) Hutton, BFI's Regional Counsel for the Western Region, participated in the initial investigation.

        On August 2, 1990, facts concerning the discovery of methane gas at the Flying Cloud landfill were read into the record of the ongoing contested case hearing concerning the expansion permit. This was a public hearing. BFI's disclosures were widely reported in the press. (Hutton Affidavit, Docket Entry No. 117, Tab 2, 12; Plaintiffs' Memorandum of Law in Opposition to Defendant's Joint Motion for Summary Judgments to First Class Period Claims, Docket Entry No. 128, p. 28).

        Hutton made a preliminary report to Hoover (BFI's General Counsel) and Potwin (BFI's Associate General Counsel) on August 6, 1990. Hutton's August 6, 1990 memo stated that the information about the methane gas discovery was likely to have a "negative impact on the permit for expansion," and that the presence of refuse and/or methane in the nonpermitted area "may necessitate the redesign of the barrier well system and/or upgrading of the methane system." (Docket Entry No. 129, Ex. 61, BFI3-000741, BFI3-000744). Hutton recommended that BFI reveal the results of the internal investigation to regulatory authorities to the extent the results "relate[d] to technical issues," but revelation of the results concerning the "operational issues may or may not be appropriate, depending upon whether efforts to expand the landfill continue." (Docket Entry No. 121, Ex. 61, BFI3-000741).

        BFI told WSS to conduct an engineering investigation and make full disclosure of the results to the Minnesota Pollution Control Agency. (Hutton Affidavit, Docket Entry No. 117, Tab 2, 14). On August 10, 1990, WSS sought to continue the contested case hearing to continue its investigation into the source and extent of the methane and to reevaluate the technical merit of the project. (Id. at 15).

        BFI hired outside consultants during August 1990 to perform technical reviews of the methane system, barrier well system, and bluff stability, and to review the political factors that might affect the permit. The reviews were anticipated to take approximately two months. (Id., BFI3-000728). BFI's own investigation continued through August 27, 1990. (Hutton Affidavit, Docket Entry No. 117, Tab 2, 18).

        In early September 1990, the attorney general for the State of Minnesota threatened BFI with legal action. (Hutton Affidavit, Docket Entry No. 117, Tab 2, 21). On September 7, BFI decided not to allow WSS to continue its expansion application. (Ruckelshaus Affidavit, Docket Entry No. 117, Tab 4, 10). On September 11, BFI withdrew its application. (Docket Entry No. 117, Tab 2, 23). On September 12, BFI made a public announcement of the withdrawal.

        BFI began analyzing the financial consequences of the withdrawal after September 11, 1990. (Hopkins Affidavit, Docket Entry No. 117, Tab 1, 18). In early October, WSS entered into a consent order with the Minnesota Pollution Control Agency that imposed continuing obligations on WSS. On October 9, 1990, WSS entered into a settlement with the City of Eden Prairie, Minnesota and with the homeowners' association representing residents living near the landfill. (Docket Entry No. 177, Tab 2, 24).

        BFI's fourth quarter special charges, announced on November 6, 1990, included a $25 million charge against income relating to the

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Flying Cloud landfill and other landfill projects. (Docket Entry No. 117, Tab 1, 19).

        2. Duty to State a Reserve on August 9, 1990

        A reserve must be set when it appears "probable" as opposed to "reasonably possible" or "remote" that an asset has been impaired, by an amount that can be "reasonably estimated." In re: Westinghouse Sec. Lit., 832 F.Supp. at 973; Statement of Financial Accounting Standards, No. 5 at 8.

        Plaintiffs allege that "[d]efendants are the second largest waste management company in the country and have had years of experience in determining costs associated with closing landfills. While defendants might not have known the exact amount of any reserve, they certainly knew or were able to estimate a range within which the closing of a landfill, such as Flying Cloud, would typically cost [as of August 9, 1990]." (Docket Entry No. 128, at p. 29).

        The summary judgment evidence, however, does not support the application of this assumption to these facts. The record shows that, on August 9, 1990, BFI had not yet decided to withdraw the permit application. Even after that decision was made, the only evidence is that it then took BFI time to analyze the financial consequences.

        Plaintiffs argue that by August 9, 1990 BFI knew or recklessly disregarded that BFI would have to withdraw the permit application. (Docket Entry No. 128, p. 28).

        The discovery of methane gas outside the permitted area was read into the public record of the contested case hearing in Minnesota on August 2, 1990. The hearing and BFI's disclosures were both widely reported in the press. (Hutton Affidavit, Docket Entry No. 117, Tab 2, 12). Plaintiffs acknowledge in their Memorandum of Law in Opposition to Defendants' Joint Motion for Summary Judgment as to First Class Period Claims that the problems at the Flying Cloud landfill had received negative publicity before the third quarter Form 10-Q was issued. (Docket Entry No. 128, p. 28).⁶

        Plaintiffs rely on an August 6, 1990 memo from Hutton to Hoover to support their allegation that BFI knew that the permit would have to be withdrawn. This memo reveals that BFI management first learned of the possible presence of methane gas in unpermitted areas on July 31, 1990. Hutton issued his memo five days after BFI management first learned of the problem, and after two days of investigation.

        The Hutton memo discussed the possible implications of the recently discovered information, including that it could have a negative impact on the chances for an expansion permit. The memo also discussed alternative actions to be taken if the permit for expansion continued to go forward. (Docket Entry No. 129, Ex. 61, BFI3-000746). This memo does not raise a disputed issue of fact that by August 6, 1990, management had concluded or recklessly ignored the conclusion that the expansion permit would have to be withdrawn. BFI in fact undertook the investigations that Hoover outlined. Throughout August 1990, BFI continued to analyze different options.

        In an internal memorandum from Hutton to Hoover dated August 20, 1990, Hoover discussed the ongoing review of issues. This August 20, 1990 memo stated as follows:

Page 892

        Despite the difficulties arising out of the discovery of the document and the continuance [of the regulatory hearing], in the end the chances of success of this project have been strengthened. This is because Wood-lake has publicly turned away from a "win at all costs" strategy, acted in accordance with the highest ethical standards, and has begun to actively involve concerned citizens and municipalities in the operation of the landfill.

        (Docket Entry No. 161, Tab 8, BFI3-000729). On August 27, 1990, BFI completed its investigation. At that time, BFI Region personnel, and Hutton, concluded that WSS should continue to seek the permit. (Docket Entry No. 117, Tab 2, 19).

        When, as here, there is a very short period between the discovery of adverse facts (July 30 or 31, 1990) and the date on which disclosure was allegedly required, (August 6 or 9, 1990) the inquiry is as follows:

        ... [T]he information about which the issues revolve must be "available and ripe for publication" before there commences a duty to disclose. To be ripe under this requirement, the contents must be verified sufficiently to permit the officers and directors to have full confidence in their accuracy. It also means, as used by the Second Circuit, that there is no valid corporate purpose which dictates the information not be disclosed. As to the verification of the data aspect, the hazards which arise from an erroneous statement are apparent, especially when it has not been carefully prepared and tested. It is equally obvious that an undue delay not in good faith, in revealing facts, can be deceptive, misleading, or a device to defraud under Rule 10b-5.

        Financial Indus. Fund, Inc. v. McDonnell Douglas Corp., 474 F.2d 514, 519 (10th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 155, 38 L.Ed.2d 114 (1973), citing Mitchell v. Texas Gulf Sulphur Co., 446 F.2d 90 (10th Cir. 1971), cert. denied, 404 U.S. 1064, 92 S.Ct. 734, 30 L.Ed.2d 754 (1972).

        In McDonnell Douglas, the plaintiffs had complained that management violated the securities laws because they did not issue an earlier special earnings report. On May 27, 1966, the president of McDonnell Douglas had been advised that the aircraft division of the company was experiencing delays in deliveries of component parts. He sent corporate officials to determine the extent of the problems. The management group reported back on May 31 that delivery of 18 airplanes on the assembly line would be delayed until the next fiscal year. The company announced the delay on June 1. During the next three weeks the company studied the situation, and issued a press release on June 23 related to earnings. The Tenth Circuit held that there was no evidence that could lead a jury to conclude that the process of evaluating the situation had not been conducted with reasonable dispatch, considering the need to ascertain the details as to the particular problems, relate them to earnings, and to arrive at a conclusion with confidence that the statement when issued would be correct. McDonnell Douglas, 474 F.2d at 518.

        Plaintiffs in the present case have provided no summary judgment allegations or evidence that BFI unreasonably delayed its evaluation of the Flying Cloud landfill. Plaintiffs have presented no competent summary judgment evidence that the people involved in or responsible for the third quarter Form 10-Q knew about the problems at the Flying Cloud landfill before July 30, 1990. Plaintiffs have presented no allegations or evidence that defendants' failure to have earlier knowledge of the problems was reckless. Plaintiffs have not provided summary judgment evidence to raise a disputed fact issue that BFI's investigation was performed improperly, or that the investigation was made without the reasonable dispatch required by McDonnell Douglas.

        Plaintiffs assert that BFI had a duty to reach and disclose a decision to withdraw from a multi-year, multi-million dollar landfill project, within ten days. This is the type of decision that, as the Tenth Circuit realized, requires a careful evaluation of the developing facts. McDonnell Douglas, 474 F.2d at 518. BFI's decision as to how it should respond to the adverse facts as to the landfill, discovered on July 30, 1990, required verification of the facts and analysis. There

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is no evidence that BFI had done that work or made that decision on August 9, 1990.

        Plaintiffs have not shown a disputed issue of fact that, as of August 9, 1990, management actually knew or recklessly disregarded that the permit would have to be withdrawn. The summary judgment evidence does not create a disputed question of fact that BFI was fraudulent in failing to reach and announce such a conclusion in the ten days between the time that BFI management first learned of the methane gas and the time BFI filed the Form 10-Q on August 9, 1994.

        BFI Controller Hopkins has stated in his affidavit as follows: "[after September 11, 1990, when it was clear that the landfill would be closed rather than expanded, it was necessary to decide, what, if any, charge to earnings should be made on account of the Flying Cloud landfill. This required me, my accounting staff and Arthur Andersen to analyze a number of matters, including capital costs already incurred in connection with the Landfill and costs associated with closure and post-closure of the Landfill. Calculating closure and post-closure costs of the Landfill was particularly difficult since even after September 11, 1990, the case was still pending before the Minnesota Pollution Control Agency and no agreement had been reached at that time concerning the expenditures BFI would need to make to ultimately close the Flying Cloud Landfill]." (Hopkins Affidavit, Docket Entry No. 117, Tab 1, 18). This statement is consistent with the facts that BFI did not settle with the City of Eden Prairie and the local homeowners until October 9, 1990, and did not settle with the state regulatory authority until early October 1990.

        This court finds no basis in the summary judgment record for holding that BFI committed fraud by failing to disclose a reserve for withdrawing its permit application only ten days after BFI had first learned about important negative facts. The undisputed evidence is that on August 9, 1990, BFI was still in the process of ascertaining the information, relating the information to the financial consequences, and arriving at conclusions as to the financial impact that were correct. The information necessary to set a reserve was simply not "available and ripe for publication." McDonnell Douglas, 474 F.2d at 518.

        Because plaintiffs have not shown that there is a disputed issue of fact as to additional disclosures on the Flying Cloud landfill, summary judgment for the defendants is appropriate.

        D. Thorne-Thomsen's September 1990 Statements

        1. Recession-Resistant

        Plaintiffs assert that during a September 26, 1990 seminar for investment professionals, Thorne-Thomsen, BFI's Vice-President of Strategic Planning and Investor Relations, falsely assured the assembled market professionals that BFI was "recession-resistant." Thorne-Thomsen's comment was in the following context:

        We provide a service that has to be done every day of the week. It's not a service that can be postponed. It's a predictable service, and it is somewhat recession resistant. And that's something we've been saying for years, is that our business has some recession resistant characteristics. It is not recession proof, and one of the characteristics of a recession resistant business is that the growth rate perhaps slows during an economic downturn, but the growth rate does not stop. And I think that's an important characteristic of our business is that we have a broad geographic base. We are not dependent on any one particular part of the country. We don't quite have as many dots on the map as some of the other people anticipate that they are going to have, but nonetheless, we've got a number of dots on the map and about $3 billion worth of revenues. The importance of this slide is that we are not dependent on any one particular part of the country. For example, we are seeing some economic problems in the northeast and those numbers are affecting the company as a whole, but they don't

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have a dramatic impact on the company as a whole.

        (Docket Entry 129, Ex. 45, pp. 2-3).

        Thorne-Thomsen specifically stated that BFI's business was not recession-proof. His strongest statement was that the business had "some recession resistant characteristics" and is "somewhat recession resistant." He explained the basis for the statement. Plaintiffs have failed to raise a material issue of fact that this statement was a false "assurance."

        2. "Comfortable" with the Analysts' Estimates

        On September 12, 1990, news services reported that Thorne-Thomsen had stated that BFI was "comfortable" with analysts' earnings estimates for the year of $1.99-$2.00 per share.

        Defendants argue that because BFI did not have control over the media quotations of the remarks on September 12, 1990, the company cannot be held liable for the September 12, 1990 statement, citing Raab v. Gen. Physics Corp., 4 F.3d at 288. However, Thorne-Thomsen admitted making a remark similar to the September 12, 1990 remark on September 26, 1990. According to Thorne-Thomsen's affidavit, "a reporter persistently asked me to comment on the Wall Street analysts' estimates of BFI's earnings for 1990. I replied that, given the facts I knew at that time, I had no quarrel with the numbers he quoted. As I recall, he mentioned earnings per share of approximately $2.00 for the fiscal year 1990." (Thorne-Thomsen Affidavit, Docket Entry No. 117, Tab 3, 8). This court examines the remarks to determine if there is a disputed issue of material fact whether the remarks suggested reliability, bespoke caution, were made in good faith, or had a sound factual or historical basis. Isquith v. Middle South Util., 847 F.2d at 203-204.

        The September 12, 1990 statement included Thorne-Thomsen's comments that some analysts had been "too optimistic" in their forecasts; that BFI was concerned with the effect of weakness in the economy, particularly in the Northeast; and that "the company does not make earnings projections." (Docket Entry 159, Exhibit X, Tab 9). The September 26, 1990 statement was made after a lengthy prepared presentation at an analysts' seminar, during which Thorne-Thomsen cautioned that BFI was not recession-proof.

        Plaintiffs claim that by September 26, 1990, the July and August 1990 monthly operating results showed that there was "no possibility" that BFI would "come anywhere near" earning $.54 per share for the fourth quarter. There is no indication that on either September 12 or September 26, Thorne-Thomsen was asked about, or made any comment on, anticipated fourth quarter 1990 operational results.

        Plaintiffs also claim that Thorne-Thomsen's statement of his "comfort" with analysts' estimate of year-end earnings of $1.99-$2.00 per share was fraudulent. It is undisputed that the 1990 year-end earnings for continuing operations, announced on November 6, 1990, were $1.95 per share before the fourth quarter special charges. The difference between the $2.00 that analysts were predicting and the actual results of $1.68 came in large part from the one-time fourth quarter special charges.

        On September 12 and 26, 1990, the settlement of the Cumberland Farms case had not yet occurred and was not "probable." There is no basis for finding that on those dates, Thorne-Thomsen had a reasonable basis for believing that the year-end results could be materially impacted by special charges against net income for the Cumberland Farms settlement.

        However, on September 11, 1990, BFI had withdrawn the expansion permit for the Flying Cloud landfill. BFI had announced the withdrawal on September 12, 1990. BFI was still analyzing the financial impact of this development on September 26, 1990. The analysts' estimate of $2.00 per share was unchanged from the forecasts made before the September 12, 1990 announcement of the closing of the Flying Cloud landfill. By September 26, 1990, the closing of the landfill was already in the "total mix of information." See Raab v. General Physics Corp., 4 F.3d at

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289. There is no indication that Thorne-Thomsen was asked about the possible impact of the permit withdrawal on projected year-end income.

        Thorne-Thomsen was not asked whether he was comfortable with the analysts' numbers as an estimate of income from continuing operations, before any one-time special charges. The question is whether Thorne-Thomsen's failure to state that his "comfort" with the analysts' earnings estimate did not factor in possible special charges against operating income was material and was made with scienter.

        The few cases that have examined public comments by management on analysts' projections have found that such statements do not imply certainty of future results and are not actionable. Raab v. General Physics, 4 F.3d at 288-290; Borow v. nView Corp, 829 F.Supp. 828 (E.D.Va.1993); In re Marion Merrell Dow Inc. Securities Litigation II, 1994 WL 396187 (W.D.Mo.1994). In Borow, the court found that a comment by a company's president in an interview that he was "comfortable" with analysts' 1992 earnings estimates was not actionable. The court in Marion Merrell Dow held that an officer's statement at a research conference that analysts' earnings estimates for 1993 were "basically on target," and "pretty close," were not actionable as a matter of law. In Raab, the court held that a press release in which the company stated that "the results during the remainder of the 1992 [sic] should be in line with analysts' current projections," was not actionable as a matter of law. Thorne-Thomsen's statement that he was "comfortable" with analysts' earnings estimates is similar to the type of comment that these courts have found not actionable.

        However, for the purpose of this motion, this court will assume that Thorne-Thomsen's statements were "material." The question is whether there is a fact issue as to scienter that precludes summary judgment.

        The Fifth Circuit has defined the required scienter as follows:

        limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it.

        Shivangi v. Dean Witter Reynolds, Inc., 825 F.2d 885, 889 (5th Cir.1987). A plaintiff must present summary judgment evidence to raise a material disputed issue that defendant acted with an actual intent to deceive, manipulate, or defraud, or that the defendant acted with severe recklessness. Id. Severe recklessness is not ordinary or even unexcusable negligence.

        There is no evidence in the record that Thorne-Thomsen intentionally misled the market professionals into believing that his "comfort" with the $2.00 per share estimate included possible special charges against operating income. The evidence at most supports an inference that when Thorne-Thomsen responded to the questions at the press conference, he could have been clearer in explicitly stating that his "comfort" with the analysts' estimates was as to estimated operating income, and did not include possible special charges, including the possibility that the Flying Cloud permit withdrawal could lead to a substantial write-off.

        As noted above, on September 26, 1990, certain events important to BFI's analysis of the financial consequences from the permit withdrawal had not yet occurred, or were still in progress. BFI and Arthur Andersen were still studying the financial impact of the landfill closure. WSS's settlement with the City of Eden Prairie, the homeowners, and the Minnesota Pollution Control Agency had not yet occurred. Assuming that Thorne-Thomsen was negligent in failing to point out that his "comfort" with the analysts' estimates did not include the possible effect of the uncertain outcome of these events, this is not enough to raise a disputed fact issue that he intended to defraud or was severely reckless. See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S.Ct. 1375, 1381, 47 L.Ed.2d 668 (1976) (to violate section 10(b) defendants must have acted with an "intent to deceive, manipulate, or defraud"); Huddleston v.

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Herman & MacLean, 640 F.2d 534, 545 (5th Cir.1981), rev'd on other grounds, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1982); S.E.C. v. Steadman, 967 F.2d at 642-43, (D.C.Cir.1992). Summary judgment for the defendants on this issue is appropriate.

        3. "Market Malaise"

        Thorne-Thomsen was quoted in the Professional Investor Report as blaming general "market malaise" for a $1.75 drop in BFI's stock price on September 26, 1990. Plaintiffs have not provided any summary judgment evidence to show that there was, in fact, another cause for the drop in BFI's stock price on that day. Neither have plaintiffs provided any summary judgment evidence to show that Thorne-Thomsen knew at the time he made the statement of any other explanation for the drop in stock price. Summary judgment on this claim is appropriate.

        VII. The Second Class Period

        Plaintiffs allege that during the second class period, defendants engaged in "an integrated course of conduct ... to create the false and misleading impression that in fiscal year 1991, BFI was about to turn the corner from its disastrous fiscal 1990. Defendants, knowing that 1990 was a harbinger of worse things to come, succeeded in convincing investors that the worst was behind BFI and that operating income for 1991 would be at, or very near, the $257 million earned in 1990." (Docket Entry No. 121, p. 2-3). On September 3, 1991 BFI announced that it expected income from continuing operations to be 12 percent to 15 percent below fiscal 1990 results. At various times during the 1991 fiscal year, four of the individual defendants sold some of their BFI stock. Plaintiffs allege material misrepresentations made with the motive of inflating BFI's stock price.

        A. Summary of Challenged Second Class Period Disclosures

11/6/90     Press release stating that "[i]n spite of a disappointing quarter, the future for
            the Company looks bright. Our core markets continue to grow.... With
            these actions today, we have placed these matters behind us and we are poised
            for the next round of growth.... [o]ur core markets continue to grow with
            more emphasis on emerging business segments such as recycling and medical
            waste providing significant growth opportunities for the company."

12/14/90    1990 Form 10-K

Statement:  "[m]anagement currently expects that income from continuing operations for
            fiscal 1991 may be only slightly above the $257 million of income from
            continuing operations reported for fiscal 1990."

2/6/91      Reuters article stating that BFI "expects net income from continuing operations
            in the year ending September 3 [sic] may be only slightly above the 256.8
            mln dlrs [sic] reported for fiscal 1990, the annual report said."

1/23/91     BFI press release announcing fiscal 1991 first quarter results

            Revenues                   $801,799,000    15% over prior year
            Income from Operations     $118,110,000    - 9% from prior year
            Income from Continuing
                     Operations        $ 60,836,000    - 13% from prior year

2/12/91     First Quarter Form 10-Q (for the three months ending 12/31/90)

Statement:  "[M]anagement currently expects that income from continuing operations for
            fiscal 1991 may be somewhat less than the $257 million of income from
            continuing operations reported for fiscal 1990."

4/17/91     BFI press release announcing fiscal 1991 second quarter results

            Revenues                   $764,284,000    8% over prior year
            Income from Operations     $112,016,000    - 17% from prior year
            Income from Continuing
                     Operations        $ 57,328,000    - 20% from prior year

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5/9/91      Second Quarter Form 10-Q (for the three months ending 3/31/91)

Statement:  "[B]ased on the trends experienced to date, it is management's current belief
            that income from continuing operations could be somewhat below the $257
            million of income reported for the prior year."

6/27/91     Press release

Statement:  "Based upon trends experienced to date, management of BFI currently
            believes that results from continuing operations for the second half of fiscal
            1991 will approximate results from the first half of the fiscal year. As a result,
            income from continuing operations for fiscal 1991 will be lower than the $257
            million ($1.68 per share) reported for fiscal 1990."

7/19/91     Press release announcing fiscal 1991 third quarter results.

            Revenues                   $805,234,000    5% over prior year
            Income from Operations     $113,963,000    - 25% from prior year
            Income from Continuing
                     Operations        $ 58,927,000    - 28% from prior year

8/9/91      Third Quarter Form 10-Q (for the three months ending 6/30/91)

Statement:  "[I]ncome from continuing operations for fiscal 1991 will be approximately 10%
            lower than the $257 million ($1.68 per share) reported for fiscal 1990."

9/3/91      Form 8-K dated 8/31/91 filed, announcing management's belief that "results
            from continuing operations for the fourth quarter of the 1991 fiscal
            year will be approximately 15% to 25% less than the results experienced in
            the third quarter of fiscal 1991. As a result, management currently
            believes that income from continuing operations for fiscal 1991 will be
            approximately 12% to 15% lower than the $257 million ($1.68 per share)
            reported for fiscal 1990."

            BFI stock price drops 16 percent. The second class period ends.

        B. The Press Release of November 6, 1990