                                                     United States Court of Appeals
                                                              Fifth Circuit
                 IN THE UNITED STATES COURT OF APPEALS    FILED
                         FOR THE FIFTH CIRCUIT           May 19, 2006

                                                    Charles R. Fulbruge III
                                                            Clerk
                             No. 05-10007




     EDWARD M. MILKIE,


                                      Plaintiff-Appellant,


          versus


     EXTREME NETWORKS, INC.,

                                      Defendant-Appellee.




             Appeal from the United States District Court
                  for the Northern District of Texas



Before GARWOOD, CLEMENT, and PRADO, Circuit Judges.

PER CURIAM:*

     Edward M. Milkie (Milkie) appeals the district court’s

dismissal of his three claims against Extreme Networks, Inc.

(Extreme).     We affirm in part, vacate in part, and remand.

Milkie’s allegations of common-law fraud



     *
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
     The district court found that Milkie failed to plead

fraudulent intent with specificity, and dismissed Milkie’s claim

of common-law fraud under Federal Rule of Civil Procedure 9(b).

Liberally construing the complaint in Milkie’s favor and taking

as true all pleaded facts, we find that the district court erred

in holding that Milkie did not adequately allege that Extreme’s

Director of Investor Relations, John Carvell (Carvell) knew his

statements on September 27, 2002, that there was no material

adverse news coming from Extreme, were untrue.

     Specifically, we hold that Milkie sufficiently alleged that

Carvell, on Friday, September 27, was aware of the approximate

sales and earnings results for the quarter ending Sunday, September

29, as these results were contained in the press release issued

sometime before 5:30 a.m. Pacific time on September 30, and the

press release identified Carvell as one of the two points of

contact for more information.       We do not reach the question of

whether   the   allegations   are   sufficient   with   respect   to   any

statements made prior to September 27, and we note that the only

specific dates of statements by Carvell that are alleged are

September 18, September 26, and September 27.

     We also note that there are no factual allegations concerning

Extreme’s stock price from September 19 through September 27, nor

what its trading range was on September 30.      We do not suggest that

the complaint is sufficient to allow recovery for reduction in



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stock price between September 18 and September 27.

       We also note that the complaint proceeds on the assumption

that   revenue   and   earnings   projections   for   the   quarter   ended

September 29, 2002, were not met and that this was stated in the

press release.     The press release, however, said no such thing.

Instead, it stated that the company expected revenue for the

quarter to be approximately $100 million, as compared to $113

million in the previous quarter.           In addition, based on this

revenue, the company expected to report losses of $0.03 to $0.04

per share. The press release, however, does not say anything about

whether this information was expected or adverse.           Nothing in the

complaint alleges that Extreme made any prior projections of the

quarter’s revenues or earnings.          The record contains Extreme’s

Annual Report (Form 10-K) for the year ended June 30, 2002, which

was filed approximately September 30, 2002, and Extreme’s Quarterly

Report (Form 10-Q) for the quarter ended March 31, 2002, which was

filed approximately May 13, 2002.          Neither of these documents

suggests any projection of increased earnings or the like; indeed

quite the opposite.     As this was not addressed below, nor raised by

Extreme below or on appeal, we leave its legal significance to the

district court in the first instance on remand.

       Finally, we are concerned that Milkie’s allegations regarding

Carvell’s statements that there would be no materially adverse news

forthcoming likely can only reasonably be understood as referring



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to   facts    not   publicly    known,   as     otherwise,    the   stock   market

presumably would already reflect such information and the same

information in the September 30 press release would not drive the

price down.      The complaint proceeds on the theory that the press

release’s reflection of earnings and sales was inconsistent with

Carvell’s earlier statements and made them false; in other words,

that Carvell impliedly represented that earnings would be better

than those announced on September 30.                   Yet, it appears that

informing Milkie on September 26 or September 27 what the earnings

would be, and for Milkie to sell his stock on that basis before the

information     was   public,    would       violate   SEC   regulations.     The

district court did not address this issue and should do so in the

first instance on remand. Although Extreme attempted to raise this

issue to some extent below, it has not adequately briefed it on

appeal.      It may be that the issue is one best addressed on summary

judgment or the trial on the merits.

Milkie’s allegations of negligent misrepresentation

      The district court explicitly did not distinguish between

Milkie’s claim for negligent misrepresentation and his claim for

common-law fraud. The district court’s dismissal of Milkie’s claim

for negligent misrepresentation is vacated and remanded for the

reasons expressed above.

Milkie’s allegations of constructive fraud

      The dismissal of Milkie’s claim for constructive fraud is


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affirmed for the reasons stated by the district court.

     For the foregoing reasons, the dismissal of Milkie’s claims

for common-law fraud and negligent misrepresentation is vacated and

those claims are remanded for further proceedings consistent with

this opinion.

          AFFIRMED IN PART; VACATED IN PART and REMANDED.




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