Winick

MEMORANDUM *

Plaintiffs’ Second Amended Complaint alleges that Defendants made material misrepresentations concerning the liquidity of Pacific Gateway Exchange, Inc. (“Pacific Gateway”) in violation of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder. We affirm the district court’s carefully considered Rule 12(b)(6) dismissal.

Plaintiffs allege that four statements made by Defendants were materially misleading. First, they point to a statement made in Pacific Gateway’s quarterly report for the first quarter of 1999. Plaintiffs contend that Defendants’ failure to reveal that the company was late on payments to vendors, specifically that the company had “defaulted” on a $2 million dollar obligation to Harris Corporation, rendered their statement misleading. The fact that the company may have, for undisclosed reasons, been late on payments to Harris Corporation or other vendors does not, however, render the challenged statement false or misleading. Nothing in the Second Amended Complaint suggests that there was any reason to suspect at the time this statement was made that the $200 million commitment letter Pacific Gateway had secured…