Petition for Writ of Certiorari — James Everett Hunt, et al., Petitioners v. PricewaterhouseCoopers LLP
Supreme Court briefMar 18, 2026
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No. 25In the
Supreme Court of the United States
JAMES EVERETT HUNT, et al.,
Petitioners,
v.
PRICEWATERHOUSECOOPERS LLP,
Respondent.
On Petition for a Writ of Certiorari to the
United States Court of A ppeals for the Ninth Circuit
PETITION FOR A WRIT OF CERTIORARI
A dam M. A pton
Levi & Korsinsky, LLP
1160 Battery Street East,
Suite 100 – #3425
San Francisco, CA 94111
Reed R. K athrein
Lucas Gilmore
Hagens Berman Sobol
Shapiro LLP
715 Hearst Avenue,
Suite 202
Berkeley, CA 94710
Nicholas I. Porritt
Counsel of Record
Levi & Korsinsky, LLP
1101 Vermont Avenue NW,
Suite 800
Washington, DC 20005
(202) 524-4290
nporritt@zlk.com
Max E. Weiss
Levi & Korsinsky, LLP
33 Whitehall Street,
27th Floor
New York, NY 10004
Counsel for Petitioners
132038
A
(800) 274-3321 • (800) 359-6859
i
QUESTIONS PRESENTED
The Securities Act of 1933, 15 U.S.C. § 77a et seq. (the
“Act”), requires an issuer to register its securities to be
offered to the public by filing a registration statement with
the United States Securities & Exchange Commission. 15
U.S.C. § 77e. § 7(a) of the Act, 15 U.S.C. § 77g(a), together
with Schedule A, requires a registration statement to
include the issuer’s historical financial information,
including a balance sheet and a profit and loss statement.
15 U.S.C. § 77aa(25) and (26). The Act also requires
that the balance sheet and profit and loss statement
included in a registration statement be “certified by an
independent public or certified accountant.” Id. Where the
financial information contained in a registration statement
contains material misrepresentations, Section 11(a) of
the Act, 15 U.S.C. § 77k(a), provides that investors have
a claim against certain named defendants, including any
accountant who certified the misleading or erroneous
financial statements. 15 U.S.C. § 77k(a)(4). The accountant
may avoid liability by meeting its burden to prove it acted
with reasonable care. 15 U.S.C. § 77k(b)(3).
This petition arises from the Ninth Circuit’s affirmance
of the District Court’s dismissal of Petitioners’ claims
pursuant to Section 11(a) of the Act against Respondent
PricewaterhouseCoopers LLP (“PwC”). Hunt, et al. v.
PricewaterhouseCoopers LLP, 159 F.4th 603 (9th Cir. 2025).
That appeal arose from PwC’s certification of misleading
historical financial statements contained in the registration
statement of Bloom Energy Corporation. The petition
presents two issues where the Ninth Circuit’s decision
departs from decisions of this Court as well as other Circuits:
1. Whether to adequately plead a claim under Section
11(a)(4) of the Act against a certifying accountant based
ii
on material misrepresentations contained in certified
financial statements in a registration statement, a plaintiff
must plead facts showing that the accountant “did not have
a ‘reasonable ground to believe and did [not] believe, at
the time such part of the registration statement became
effective, that the statements therein were true’”, thus
anticipating and negating the accountant’s affirmative
due diligence defense under Section 11(b)(3), on which the
defendant bears the burden of proof.
2. Whether statements of historical financial
information such as revenue, net loss, and net loss per
share, reported in financial statements certified by an
independent accountant and later restated as materially
misstated, are actionable misrepresentations of fact under
Section 11(a) of the Act.
iii
PARTIES TO THE PROCEEDING
Petitioners are James Everett Hunt, Juan Rodriguez,
Kurt Voutaz, Joel White, Andrew Austin, Scott Kline, and
Ryan Fishman. Mr. Hunt was the Lead Plaintiff and the
other Petitioners were additional named plaintiffs in the
class action in the district court and the Appellants below.
Respondent PricewaterhouseCoopers LLP was a
defendant in the district court and the Appellee below. The
stock ticker symbol for Respondent is BE, and it trades
on the New York Stock Exchange.
iv
RELATED PROCEEDINGS
United States District Court (N.D. Cal.):
Hunt v. Bloom Energy Corp., No.19-cv-2935-HSG
(May 9, 2024)
United States Court of Appeals (9th Cir.):
Hunt v. PricewaterhouseCoopers LLP, No. 24-3568
(Dec. 29, 2025)
v
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED . . . . . . . . . . . . . . . . . . . . . . i
PARTIES TO THE PROCEEDING . . . . . . . . . . . . . . . iii
RELATED PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . iv
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . v
TABLE OF APPENDICES . . . . . . . . . . . . . . . . . . . . . viii
TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . ix
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OPINIONS BELOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
STATUTORY AND REGULATORY
PROVISIONS INVOLVED . . . . . . . . . . . . . . . . . . . . . 6
STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . 6
A. Factual Background . . . . . . . . . . . . . . . . . . . . . . . 6
B. Procedural Background . . . . . . . . . . . . . . . . . . . . 9
REASONS FOR GRANTING THE PETITION . . . . 12
vi
Table of Contents
Page
I.
THE NINTH CIRCUIT’S PLEADING
RULE FOR SECTION 11(b)(3) DUE
DI L IGENC E C ON F L IC T S W I T H
THIS COURT’S PRECEDENT AND
WARRANTS REVIEW . . . . . . . . . . . . . . . . . . . 12
A. The Decision Below Conflicts With
This Court’s Holding in Herman
& Ma c L e a n a n d t h e T e x t o f
Section 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.
Congress Designed Section 11
to Create Accountability for
Materially False Registration
Statements . . . . . . . . . . . . . . . . . . . . . . . 13
2. The Statutory Architecture of
Section 11 . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Section 11’s Plain Text Assigns
the Burden of Proving Diligence
to the Accountant, Not the Investor . . . 16
4. This Court’s Precedent and Other
Circuit Authority Confirms the
Bu rden A l locat ion — a nd the
Ninth Circuit Inverted It . . . . . . . . . . . 18
vii
Table of Contents
Page
5.
The Ninth Circuit Committed A
Textual Error That Renders the
Word “Certified” Superfluous and
Negates the Role for Due Diligence
Statutory Defense . . . . . . . . . . . . . . . . 20
B. The Decision Below Also Conflicts
With the Transsubstantive Rule That
Plaintiffs Need Not Plead Around
Affirmative Defenses . . . . . . . . . . . . . . . . . . 22
II. THE NINTH CIRCUIT’S DECISION
CONFLICTS WITH DECISIONS OF
THIS COURT, OTHER CIRCUITS, AND
THE NINTH CIRCUIT ITSELF BY
HOLDING THAT UNCONDITIONAL
STATEMENTS OF REVENUE, LOSS,
AND LOSS PER SHARE ARE “PURE
STATEMENTS OF OPINION” . . . . . . . . . . . . 25
III. THE QUESTIONS PRESENTED ARE
OF EXCEPTIONAL IMPORTA NCE
T O T H E IN T EGRI T Y OF T H E
SECURITIES MARKETS . . . . . . . . . . . . . . . . 31
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
viii
TABLE OF APPENDICES
Page
A P P E N DI X A — O P I N ION O F T H E
UNITED STATES COURT OF APPEALS
FOR T HE NIN T H CIRCU I T, FILED
NOVEMBER 10, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . 1a
APPENDIX B — ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA,
FILED SEPTEMBER 29, 2021 . . . . . . . . . . . . . . . 28a
APPENDIX C — JUDGMENT OF THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA,
FILED MAY 7, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . 83a
APPENDIX D — ORDER OF THE UNITED
STATES COURT OF APPEALS FOR THE
FOR T HE NIN T H CIRCU I T, FILED
DECEMBER 18, 2025 . . . . . . . . . . . . . . . . . . . . . . . . 85a
APPENDIX E — 15 U.S.C.A. § 77K . . . . . . . . . . . . . . 87a
ix
TABLE OF CITED AUTHORITIES
Cases
Page
Adams v. Kinder-Morgan, Inc.,
340 F.3d 1083 (10th Cir. 2003),
as amended on denial of reh’g (Aug. 29, 2003) . . . . 4, 29
Africa v. Jianpu Tech. Inc.,
2022 WL 4537973 (S.D.N.Y. Sept. 28, 2022) . . . . . . 29
Barrie v. Intervoice-Brite, Inc.,
397 F.3d 249 (5th Cir.),
opinion modified on denial of reh’g,
409 F.3d 653 (5th Cir. 2005) . . . . . . . . . . . . . . . . . . 4, 29
Bulldog Inv’rs Gen. P’ship v.
Sec’y of Commonwealth,
953 N.E.2d 691 (Mass. 2011) . . . . . . . . . . . . . . . . . . . 15
CFTC v. Monex Credit Co.,
931 F.3d 966 (9th Cir. 2019) . . . . . . . . . . . . . . . . . 23, 24
Cooper v. Pickett,
137 F.3d 616 (9th Cir. 1997) . . . . . . . . . . . . . . . . . . . . . 3
Cunningham v. Cornell University,
604 U.S. 693 (2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Edward J. Goodman Life Income Tr. v.
Jabil Cir., Inc.,
594 F.3d 783 (11th Cir. 2010) . . . . . . . . . . . . . . . . . 4, 29
x
Cited Authorities
Page
Ernst & Ernst v. Hochfelder,
425 U.S. 185 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . 1, 18
Escott v. BarChris Constr. Corp.,
283 F. Supp. 643 (S.D.N.Y. 1968) . . . . . . . . . . . . . . . . 18
Garbini v. Protection One, Inc.,
49 F. App’x 169 (9th Cir. 2002) . . . . . . . . . . . . . . . . . . 19
Gebhardt v. ConAgra Foods, Inc.,
335 F.3d 824 (8th Cir. 2003) . . . . . . . . . . . . . . . . . . 4, 29
Gimpel v. The Hain Celestial Grp., Inc.,
156 F.4th 121 (2d Cir. 2025) . . . . . . . . . . . . . . . . . . 3, 28
Gomez v. Toledo,
446 U.S. 635 (1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Gustafson v. Alloyd Co.,
513 U.S. 561 (1995) . . . . . . . . . . . . . . . . . . . . . 15, 19, 32
Hemmer Grp. v. SouthWest Water Co.,
527 F. App’x 623 (9th Cir. 2013) . . . . . . . . . . . . . . 27, 28
Herman & MacLean v. Huddleston,
459 U.S. 375 (1983) . . . 1, 2, 5, 11-13, 16-20, 24, 25, 28, 32, 35
Hunt, et al. v. PricewaterhouseCoopers LLP,
159 F.4th 603 (9th Cir. 2025) . . . . . . . . . . . . . . . . . . . . 6
In re Lehman Bros. Sec. & ERISA Litig.,
131 F. Supp. 3d 241 (S.D.N.Y. 2015) . . . . . . . . . . . . . 19
xi
Cited Authorities
Page
In re Morgan Stanley Info. Fund Sec. Litig.,
592 F.3d 347 (2d Cir. 2010) . . . . . . . . . . . . . . . . . . . 2, 19
In re Petrobras Securities Litigation,
No. 14-CV-9662 (JSR), 2016 WL 1533553
(S.D.N.Y. Feb. 19, 2016) . . . . . . . . . . . . . . . . . . . . . . . 30
In re Software Toolworks, Inc. Securities Litigation,
50 F.3d 615 (9th Cir. 1994) . . . . . . . . . . . . . . . . . . 27, 28
In re Worlds of Wonder Sec. Litig.,
35 F.3d 1407 (9th Cir. 1994) . . . . 1-3, 11, 12, 19, 24, 27, 28, 33
Jones v. Bock,
549 U.S. 199 (2007) . . . . . . . . . . . . . . . . . . . . . . . . 13, 23
Kress v. PricewaterhouseCoopers LLP,
No. 08-0965, 2013 WL 140102
(E.D. Cal. Jan. 10, 2013) . . . . . . . . . . . . . . . . . . . . . . . 15
Lone Star Ladies Inv. Club v. Schlotzsky’s Inc.,
238 F.3d 363 (5th Cir. 2001) . . . . . . . . . . . . . . . . . . 2, 20
Malone v. Microdyne Corp.,
26 F.3d 471 (4th Cir. 1994) . . . . . . . . . . . . . . . . . . . 3, 27
Matrix Cap. Mgmt. Fund, LP v.
BearingPoint, Inc.,
576 F.3d 172 (4th Cir. 2009) . . . . . . . . . . . . . . . . . . 4, 29
xii
Cited Authorities
Page
Monroe v. Hughes,
31 F.3d 772 (9th Cir. 1994) . . . . . . . . . . . . . . . . . . . . . 18
Omnicare, Inc. v. Laborers Dist. Council
Const. Indus. Pension Fund,
575 U.S. 175 (2015) . . . . . . . . 2, 3, 5, 9-11, 25-27, 30-35
Pension Tr. Fund for Operating Eng’rs v.
Kohl’s Corp.,
895 F.3d 933 (7th Cir. 2018) . . . . . . . . . . . . . . . . . . 3, 29
Perry v. Merit Sys. Prot. Bd.,
582 U.S. 420 (2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Pinter v. Dahl,
486 U.S. 622 (1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sec. & Exch. Comm’n v. N. Am. Fin. Co.,
214 F. Supp. 197 (D. Ariz. 1959) . . . . . . . . . . . . . . . . . 15
Sherman v. Abengoa, S.A.,
156 F.4th 152 (2d Cir. 2025) . . . . . . . . . . . . . . . . . . 3, 29
TRW Inc. v. Andrews,
534 U.S. 19 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
TSC Indus., Inc. v. Northway, Inc.,
426 U.S. 438 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Ultramares Corp. v. Touche,
174 N.E. 441 (N.Y. 1931) . . . . . . . . . . . . . . . . . . . . . . . 14
xiii
Cited Authorities
Page
United States v. Arthur Young & Co.,
465 U.S. 805 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
United States v. Page,
116 F.4th 822 (9th Cir. 2024) . . . . . . . . . . . . . . . . 23, 24
Williams v. Taylor,
529 U.S. 362 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
zCap Equity Fund LLC v. LuxUrban Hotels Inc.,
792 F. Supp. 3d 407 (S.D.N.Y. 2025),
reconsideration denied, 2025 WL 2962772
(S.D.N.Y. Oct. 21, 2025) . . . . . . . . . . . . . . . . . . . . . . . 29
Statutes and Other Authorities
15 U.S.C. § 11 . . . . . . . . . . . . . . . . . . . . . . . 5, 19, 22, 27, 33
15 U.S.C. § 11(b)(3) . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 12, 22
15 U.S.C. § 11(b)(3)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15 U.S.C. § 77a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
15 U.S.C. § 77aa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 15
15 U.S.C. § 77aa(25) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 15
15 U.S.C. § 77aa(26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
xiv
Cited Authorities
Page
15 U.S.C. § 77g(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15 U.S.C. § 77k(a) . . . . . . . . . . . . . . . . . . . . . . . . 1, 8, 16, 31
15 U.S.C. § 77k(a)(4) . . . . . . . . . . . . . . . . . . . . 1, 9, 17, 21-24
15 U.S.C. § 77(k)(b)(3)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . 2
15 U.S.C. § 77k(b)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15 U.S.C. § 77k(b)(3)(B)(i) . . . . . . . . . . . . . . . 13, 17, 18, 23
28 U.S.C. § 1254(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ERISA § 1108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
17 C.F.R. pt. 210 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17 C.F.R. §229.10(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 4, 25
Fed. R. Civ. P. 8(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 22
Fed. R. Civ. P. 12(b)(6) . . . . . . . . . . . . . . . . . . . . . . . . . 2, 20
Address to Congress by Franklin D. Roosevelt
(March 1933) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Harold Bloomenthal, Securities Law in Perspective
(1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
xv
Cited Authorities
Page
Da in C. Donelson & Rober t A . P rentice,
Scienter Pleading and Rule 10b-5: Empirical
A na lysis a nd Behav iora l Impl icat ions,
63 Case W. Res. L. Rev. 441 (2012) . . . . . . . . . . . . . . 14
Michael E. Doron, The Colonel Carter Myth
and the Securities Act: Using Accounting
History to Establish Institutional Legitimacy,
20 Accounting History 5 (2015) . . . . . . . . . . . . . . . . . 14
H.R. Rep. No. 85, 73d Cong., 1st Sess. (1933) . . . . . 15, 18
Elisabeth Keller, Introductory Comment: A
Historical Introduction to the Securities Act of
1933 and the Securities Exchange Act of 1934,
Ohio State L.J. 49 (1988) . . . . . . . . . . . . . . . . . . . . . . 14
William K. Sjostrom, Jr., The Due Diligence
Defense Under Section 11 of the Securities
Act of 1933, 44 Brandeis L.J. 549 (2006) . . . . . . . . . 18
1
INTRODUCTION
In 1933, Congress expressly enacted a remedy for
investors like plaintiffs who purchase securities traceable
to a registration statement that contains erroneous
financial statements. Section 11(a) of the Securities Act
of 1933, 15 U.S.C. § 77k(a), provides that investors have
a claim against certain named defendants, including
any accountant who certified a misleading or erroneous
financial statement included in the registration statement.
15 U.S.C. § 77k(a)(4). The accountant may avoid this liability
by meeting its burden to prove it acted with reasonable
care. 15 U.S.C. § 11(b)(3). This is entirely consistent with
the two-fold purpose of the Securities Act: to require
greater disclosures from issuers, especially of reliable
financial information certified by public accountants,
and a liability regime that places a “minimal burden” on
investors, Herman & MacLean v. Huddleston, 459 U.S.
375, 382 (1983), and allocates “the risk of uncertainty” of
liability to defendants. In re Worlds of Wonder Sec. Litig.,
35 F.3d 1407, 1423 (9th Cir. 1994). “The Securities Act of
1933 (1933 Act), 48 Stat. 74, as amended, 15 U.S.C. § 77a et
seq., was designed to provide investors with full disclosure
of material information concerning public offerings of
securities in commerce, to protect investors against fraud
and, through the imposition of specified civil liabilities, to
promote ethical standards of honesty and fair dealing.”
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 (1976).
By affirming the District Court’s dismissal of
Petitioners’ claims against PwC based on its certification
of misleading historical financial statements contained in
Bloom Energy’s registration statement, the Ninth Circuit
upended the framework created by Congress as well as
2
split from authority from this Court and other circuits.
First, the Ninth Circuit upheld dismissal of Petitioners’
claim because they failed to plead “that PwC did not have
a ‘reasonable ground to believe and did [not] believe, at
the time such part of the registration statement became
effective, that the statements therein were true.’” 17a
(citing § 77(k)(b)(3)(A)). Under Section 11(b)(3), however,
reasonable care is an affirmative defense on which PwC
has the burden of proof. It is hornbook law that a plaintiff
is not required to plead facts in its complaint to negate
a potential affirmative defense and this Court as well
as every other circuit court to address this issue have
repeatedly confirmed that plaintiff bears no such burden
under Section 11. Herman & MacLean, 459 U.S. at 382
(under Section 11, accountant bears burden of proving
due diligence); In re Worlds of Wonder Sec. Litig., 35 F.3d
1407, 1423 (9th Cir. 1994) (reversing summary judgment
in favor of accountant and ordering trial for accountant
to establish due diligence defense); see also In re Morgan
Stanley Info. Fund Sec. Litig., 592 F.3d 347, 360, at n.7
(2d Cir. 2010)(“Generally speaking, defendants bear the
burden of demonstrating the applicability of each of these
defenses, which are therefore unavailing as a means of
defeating a motion to dismiss pursuant to Rule 12(b)(6).”);
Lone Star Ladies Inv. Club v. Schlotzsky’s Inc., 238 F.3d
363, 369 (5th Cir. 2001)(defendants bear burden of pleading
and proving due diligence defense).
Second, the Ninth Circuit held that Bloom Energy’s
statements of total revenue, net loss, and net loss per
share, figures in audited financial statements that were
subsequently restated as materially wrong, were not
actionable misstatements of fact, but rather protected
“pure statements of opinion” under Omnicare, Inc. v.
3
Laborers Dist. Council Const. Indus. Pension Fund, 575
U.S. 175 (2015). Because those items reflected accounting
“judgments” about lease classification, the Ninth Circuit
held they could not be false unless plaintiffs pleaded that
Bloom Energy disbelieved its own numbers and PwC
disbelieved its own certification of them.
That holding cannot be squared with the Ninth
Circuit’s own controlling precedent, which held decades
ago that a company that “substantially overstate[s] its
revenues . . . make[s] false or misleading statements of
material fact.” In re Worlds of Wonder Sec. Litig., 35 F.3d
1407, 1418 (9th Cir. 1994) (quoting Malone v. Microdyne
Corp., 26 F.3d 471, 478 (4th Cir.1994)); see also Cooper v.
Pickett, 137 F.3d 616, 626-27 (9th Cir. 1997) (same). The
opinion did not mention Worlds of Wonder. More broadly,
the decision creates a circuit conflict. The Second Circuit
has held that a “subsequent restatement of its financial
results and disclosure of material weaknesses in its
internal controls and financial-reporting and accounting
practices suffice to establish that these statements were in
fact false at the time they were made.” Gimpel v. The Hain
Celestial Grp., Inc., 156 F.4th 121, 139–40 (2d Cir. 2025);
see also Sherman v. Abengoa, S.A., 156 F.4th 152, 167 (2d
Cir. 2025)(errors in applying percentage-of-completion
accounting in financial statements were sufficient to state
Section 11 claim for factual misrepresentation). Numerous
other circuits, including the Fourth, Fifth, Seventh, and
Eighth Circuits, are in accord with this treatment of
historical financial results as statements of fact that are
actionable under the Act if they are misstated.1
1. See Pension Tr. Fund for Operating Eng’rs v. Kohl’s Corp.,
895 F.3d 933, 938–39 (7th Cir. 2018)(restated balance sheet due
4
This case provides an excellent opportunity to address
the questions presented because the Ninth Circuit’s
opinion presents the issues cleanly. Petitioners’ complaint
was dismissed as a matter of law at the pleading stage so
there are no factual disputes or procedural complications.
At the pleading stage, the allegations of errors in Bloom
Energy’s financial statements certified by PwC are
presumed to be true. Few securities cases proceed to trial
so the opportunity to address this issue in the future will
be limited.
The stakes are substantial. Each year, hundreds of
billions of dollars in securities are offered to the public,
and investors in those offerings rely on audited financial
statements as the most important objective signal of an
issuer’s financial condition. The SEC has identified both
net income or loss and earnings or loss per share as
“financial items generally considered to be of primary
importance to investors . . . ”. 17 C.F.R. §229.10(b)(2). The
innovation by Congress in 1933 to require accountant
certification was central to its reform of the securities
offering legal regime following the stock market crash
to incorrect lease accounting were actionable false statements of
fact); Edward J. Goodman Life Income Tr. v. Jabil Cir., Inc., 594
F.3d 783, 790 (11th Cir. 2010)(plaintiff adequately pleaded falsity
based on restated financial statements); Matrix Cap. Mgmt.
Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 183 (4th Cir. 2009)
(plaintiff pleaded falsity of restated financial statements); Barrie
v. Intervoice-Brite, Inc., 397 F.3d 249, 258 (5th Cir.), opinion
modified on denial of reh’g, 409 F.3d 653 (5th Cir. 2005)(restated
earnings and revenue figures were adequately alleged to be false
when made); Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1104
(10th Cir. 2003), as amended on denial of reh’g (Aug. 29, 2003)(false
statements of net income and operating income were actionable);
Gebhardt v. ConAgra Foods, Inc., 335 F.3d 824, 829–31 (8th Cir.
2003)(restated revenues were misrepresentations of fact).
5
and the Great Depression. Congress required certification
by an independent accountant precisely because investors
cannot verify those numbers themselves and gave
them an explicit remedy when the numbers prove to be
false. As the Senate Report in 1933 noted: “If one of
two presumably innocent persons must bear a loss, it is
familiar legal principle that he should bear it who has the
opportunity to learn the truth and has allowed untruths to
be published and relied upon. Moreover, he should suffer
the loss who occupies a position of trust in the issuing
corporation toward the stockholders, rather than the
buyer of stock who must rely upon what he is told.” Sen.
Rep. 73-47, at 5.
The decision below undermines this Congressional
purpose and insulates both the issuer and its certifying
accountant from liability for misstated historical financial
information unless an investor can plead and prove fraud.
This contravenes the purpose of the Act which is designed
to place a “minimal burden” on investors. Herman &
MacLean, 459 U.S. at 382. In Omnicare, this Court
observed that limiting the scope of Section 11 created
a risk that issuers would have a “virtual carte blanche”
to publish information in registration statements “free
from worry about § 11.” Omnicare, Inc. v. Laborers Dist.
Council Const. Indus. Pension Fund, 575 U.S. 175, 193
(2015). Such a result “would ill-fit Congress’s decision to
establish a strict liability offense promoting ‘full and fair
disclosure’ of material information.” Id. (quoting Pinter v.
Dahl, 486 U.S. 622, 646 (1988)). The Ninth Circuit decision
in this case is a similar ill fit to the express words and
structure of Section 11.
This Court should grant certiorari.
6
OPINIONS BELOW
The opinion of the court of appeals (App., infra, 1a-27a)
is reported at 159 F.4th 603. The opinion of the district
court (App. Infra, 28-82a) is not published in the Federal
Supplement but is available at 2021 WL 4461171.
JURISDICTION
The court of appeals denied rehearing en banc on
December 18, 2025. App., infra, 85a-86a. This Court has
jurisdiction under 28 U.S.C. § 1254(1).
STATUTORY AND REGULATORY
PROVISIONS INVOLVED
Relevant statutory and regulatory provisions are
reproduced in full in the appendix to this petition. App.,
infra, 87a-93a.
STATEMENT OF THE CASE
A. Factual Background
On July 26, 2018, Bloom Energy became a public
company by offering its common shares to the public
pursuant to a registration statement filed with the SEC.
Dkt. 113 at 12-13, ¶50 of the Second Amended Complaint
for Violations of the Federal Securities Laws. 2 The
Registration Statement included Bloom Energy’s audited
financial statements for the years ended December 31,
2. Citations to “Dkt.” refer to docket entries from Hunt v.
Bloom Energy Corp., No.19-cv-2935-HSG.
7
2016 and 2017. Dkt. 113 at 25-26, ¶90; Dkt. 131-1 (Bloom
Energy Corporation, Amendment No.41 to Form S-1
Registration Statement (Form S-1/A) (July 24, 2018)).
PwC certified Bloom Energy’s 2017 financial statements
included in the registration statement. Dkt. 113 at 38-39,
¶¶170-72. Pursuant to Schedule A to the Securities Act,
15 U.S.C. § 77aa, Schedule of Information Required in
Registration Statement, Bloom Energy could not have
filed its registration statement without including its 2017
financial statements “certified by an independent public or
certified accountant” such as PwC. 15 U.S.C. § 77aa(25)
and (26).
The registration statement registered over 20.7
million shares at $15 per share and began trading on
July 25, 2018. Id., at 13, ¶51. Bloom Energy received
proceeds of $284.3 million, net of underwriting discounts,
commissions, and estimated offering costs. Id. Petitioners
purchased shares traceable to the registration statement.
Id., at 7-8, ¶¶ 8-14.
On February 12, 2020, Bloom Energy announced
that shareholders should not rely on its previously issued
financial statements, including its 2017 audited financial
statements included in its registration statement. Id., at
6, ¶3. Bloom Energy later admitted that its 2017 financial
statements that were certified by PwC and included in
the registration statement overstated its revenues by
over $10 million and understated its net loss by $13.7
million. Id., at 25-26, ¶90. A restatement is the “process
of revising previously issued financial statements to reflect
the correction of an error in those financial statements.”
Dkt. 138-6 (FASB Accounting Standards Codification
250-10-20 (Fin. Accounting Standards Bd.)). Under GAAP,
8
previously issued historical financial statements are not
adjusted to reflect a change in estimates, only to correct
errors, which include the use of an accounting principle
inconsistent with GAAP. Id. In announcing its restatement,
Bloom Energy admitted that “the terms of our Managed
Services Agreements and similar arrangements, including
the events of default provisions,” did not “satisfy[y] the
requirements for sales under the revenue accounting
standards.” Dkt. 131, at 25, ¶ 89.
Following its February 12, 2020, announcement that
shareholders should not rely on its previously issued
audited financial statements, Bloom Energy’s stock price
dropped from $10.46 per share at close on February 12,
2020, to open at $9.02 on February 13, 2020, a drop of
13.8% on high volume. Dkt. 131, at 30, ¶104; Dkt. 138-3,
at 3 (Bloom Energy Corp. (BE), Historical Data, Yahoo
Finance, https://finance.yahoo.com/quote/BE/history).
Following the filing of its 2019 Annual Report on Form
10-K with the SEC on March 31, 2020, which published
its correct financial statements dating back to the IPO
and quantified the extent of its previous errors, Bloom
Energy’s stock price dropped further from $5.23 per share
at close on March 31, 2020, to close at $4.46 per share on
April 1, 2020, a drop of 14.7% on high volume. Dkt. 131,
at 30, ¶104; Dkt. 138-3, at 2. Bloom Energy’s stock price
declined $2.21 per share following the announcements
of the misstatements in its audited financial statements
included in its registration statement, a decline of 21%
from its closing price on February 12, 2020.
Petitioners alleged claims pursuant to Section 11(a) of
the Securities Act, 15 U.S.C. § 77k(a) against PwC in their
Second Amended Complaint. Dkt. 131, 30-31, ¶¶105-123.
9
B. Procedural Background
1. District Court Proceedings. In 2019, Petitioners,
a putative class of former and current Bloom Energy
investors, filed a class action in the United States
District Court for the Northern District of California
against Bloom Energy, nine of its officers and directors,
and ten underwriters of the 2018 IPO. PwC was added
as a defendant following Bloom Energy’s restatement
of its historical financial information contained in its
registration statement. In their Second Amended
Complaint, Petitioners alleged that PwC was liable
under Section 11(a)(4) of the Securities Act because it
had certified the 2017 financial statements included in the
registration statement, which were materially misstated.
All Defendants moved to dismiss. The district
court partially dismissed the claims against the other
Defendants — Bloom Energy, its officers and directors,
and the underwriters — but dismissed the claims against
PwC in their entirety. As to PwC specifically, the district
court held that PwC’s audit opinion was an inactionable
statement of opinion under Omnicare, Inc. v. Laborers
District Council Construction Industry Pension Fund,
575 U.S. 175 (2015). 61a-67a. The court reasoned that
PwC’s certification said only that the financial statements
“present fairly, in all material respects, the financial
position of the Company . . . in conformity [with GAAP],”
and that such a statement reflected PwC’s professional
judgment rather than an assertion of objective facts.
64a-65a.
Second, the district court held that “the financial
statements are the responsibility of [Bloom Energy’s]
10
management” and that PwC had only “the responsibility
to express an opinion on [Bloom Energy’s] consolidated
financial statements based on [its] audits.” Id. The court
declined to hold PwC liable for the underlying revenue,
net loss, and net loss per share figures contained in Bloom
Energy’s financial statements, on the ground that those
figures were prepared by Bloom Energy’s management,
not by PwC.
Third, the district court rejected Petitioners’ theory
that PwC’s audit opinion incorporated, as embedded
statements of fact, the specific financial figures in the
underlying financial statements that PwC had audited and
certified. 65a-66a. The court held that PwC’s certification
was not a guarantee that those figures were accurate but
was limited to the conclusions expressed in PwC’s audit
opinion itself. 3
The district court entered its order dismissing all
claims against PwC on September 29, 2021, and granted
Petitioners leave to amend. After Petitioners settled their
remaining claims against all other Defendants the district
court entered final judgment dismissing all claims against
PwC. 83a-84a.
3. The Ninth Circuit’s Decision. Petitioners appealed
to the United States Court of Appeals for the Ninth
Circuit, Case No. 24-3568. The Ninth Circuit affirmed the
dismissal in full, relying on two independent holdings now
presented as Questions for this Court’s review.
3. The District Court did not address PwC’s argument that
the errors and misstatements in Bloom Energy’s 2017 financial
statements were not material. 35a.
11
First, the Ninth Circuit held that Section 11 does
not impose strict liability on accountants. The court
read Section 11(b)(3)(B) — which permits an accountant
to escape liability by demonstrating that it had “after
reasonable investigation, reasonable ground to believe
and did believe” that the statements it certified were true
— as establishing a negligence standard that displaces
liability at the pleading stage absent allegations that the
accountant lacked a reasonable basis for its belief. 2a.
The Ninth Circuit affirmed dismissal because Petitioners
had not pleaded facts establishing that PwC lacked a
reasonable ground to believe the financial statements
were accurate. 12a-23a. It did not cite, distinguish, or
otherwise address Herman & MacLean v. Huddleston,
459 U.S. 375 (1983), in which this Court held that under
Section 11 the accountant bears the burden of proving due
diligence, or the Ninth Circuit’s own precedent holding
that an accountant bears the burden of proving its due
diligence, not the plaintiff. In re Worlds of Wonder Sec.
Litig., 35 F.3d 1407, 1418 (9th Cir. 1994).
Second, the Ninth Circuit extended Omnicare to
accountants and held that neither PwC’s certification
nor the revenue, net loss, and net loss per share figures
in Bloom Energy’s financial statements were actionable
misrepresentations of fact. 2a-3a, 24a-27a. As to the
financial statements that Bloom Energy later restated as
in error, the Ninth Circuit held that they were statements
of opinion because they reflected accounting judgments
about Bloom Energy’s lease classification. Because those
figures were to be treated as opinions, Petitioners were
required under Omnicare to plead that Bloom Energy and
PwC subjectively disbelieved the accuracy of the revenue
and loss figures when they were initially published. The
12
Ninth Circuit did not cite or discuss In re Worlds of
Wonder Securities Litigation, 35 F.3d 1407, 1418 (9th Cir.
1994), in which the Ninth Circuit held that a company that
“substantially overstate[s] its revenues . . . make[s] false
or misleading statements of material fact.”4
Petitioners timely filed a Petition for Panel Rehearing
and Rehearing En Banc. The petition argued that the
two holdings directly conflicted with controlling decisions
of the Ninth Circuit and the Supreme Court and urged
the full Ninth Circuit to reconsider. The court denied
rehearing without opinion on December 18, 2025. 85a-86a.
This petition for a writ of certiorari follows.
REASONS FOR GRANTING THE PETITION
I.
THE NINTH CIRCUIT’S PLEADING RULE FOR
SECTION 11(b)(3) DUE DILIGENCE CONFLICTS
WITH THIS COURT ’S PRECEDEN T A N D
WARRANTS REVIEW.
Section 11’s liability structure is deliberately
sequential. A plaintiff establishes a prima facie case by
alleging that a registration statement contained a material
misstatement. Herman & MacLean v. Huddleston, 459
U.S. 375, 382 (1983). That showing triggers strict liability
for the issuer and a burden shift for other defendants
such as a certifying accountant: the defendant must then
4. Like the District Court, the Ninth Circuit appropriately
did not address the argument that the errors in Bloom Energy’s
2017 financial statements were immaterial as a matter of law.
See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976)
(materiality is a mixed question of law and fact that is rarely
appropriate for resolution as a matter of law).
13
come forward and prove, as an affirmative defense, that it
conducted a reasonable investigation and held a reasonable
belief that the certified statements were true. 15 U.S.C.
§ 77k(b)(3)(B)(i); Herman & MacLean, 459 U.S. at 382.
The plaintiff has no role in that second step. Under Rule
8(a) and the transsubstantive rule this Court confirmed in
Jones v. Bock, 549 U.S. 199, 212 (2007), a complaint need
not anticipate, address, or negate an affirmative defense
that the defendant has not yet raised. The Ninth Circuit
collapsed this two-step structure into one. By dismissing
Petitioners’ complaint because it did not allege that PwC
“lacked a reasonable ground to believe” its certification
opinion was true, the opinion imported the elements
of PwC’s affirmative defense directly into Petitioners’
prima facie case—converting Section 11’s minimal-burden
regime into one that requires plaintiffs to plead the
absence of due diligence.
A.
The Decision Below Conf licts With This
Court’s Holding in Herman & MacLean and
the Text of Section 11.
1.
Congress Designed Section 11 to Create
Accountability for Materially False
Registration Statements.
The Securities Act was Congress’s foundational
response to the market failures that produced the Great
Depression, a guarantee to the investing public that when
a company sells securities, the financial statements in the
offering documents have been independently verified and
that those who certify them stand behind that certification
with legal accountability.
14
The Securities Act of 1933 was introduced in the
fourth week of President Roosevelt’s administration,
as part of the rush of legislation known as the Hundred
Days. See Michael E. Doron, The Colonel Carter Myth
and the Securities Act: Using Accounting History to
Establish Institutional Legitimacy, 20 Accounting
History 5, 8–9 (2015). The major safeguard Congress
chose was full disclosure: Roosevelt told Congress that
“no essentially important element attending the issue
shall be concealed from the buying public.” See Elisabeth
Keller, Introductory Comment: A Historical Introduction
to the Securities Act of 1933 and the Securities Exchange
Act of 1934, Ohio State L.J. 49, 338–39 (1988) (quoting
Address to Congress by Franklin D. Roosevelt (March
1933). Roosevelt’s stated aim was to add to the ancient
rule of caveat emptor the further doctrine: “let the seller
beware.” Id.
Congress replaced the common-law view that auditors
could not be liable for negligence to third parties unless
those third parties were named in the engagement letter,
with the broad negligence liability of section 11 of the 1933
Act, which makes auditors potentially liable to all investors
in a public offering if the auditors cannot prove their due
diligence. Ultramares Corp. v. Touche, 174 N.E. 441, 44445 (N.Y. 1931) (adopting the privity view of auditor’s thirdparty liability for negligence); Dain C. Donelson & Robert
A. Prentice, Scienter Pleading and Rule 10b-5: Empirical
Analysis and Behavioral Implications, 63 Case W. Res.
L. Rev. 441, 509, n.16 (2012). Congress recognized that
“private actions for damages could play an important role
in assuring compliance” with the disclosure requirements.
See Keller, supra, at 344–45 (citing Harold Bloomenthal,
Securities Law in Perspective 64 (1977)).
15
The Securities Act ref lects the Congressional
determination that accountants certifying financial
statements are among “those whose moral responsibility
to the public is particularly heavy.” Gustafson v. Alloyd
Co., 513 U.S. 561, 581 (1995) (quoting H.R. Rep. No. 85,
73d Cong., 1st Sess., at 5 (1933)).
2. The Statutory Architecture of Section 11.
All registration statements must include certified
financial statements, as required by Sections 7(a) and
10 of the Securities Act, 15 U.S.C. §§ 77g(a), 77aa. Those
provisions obligate issuers to supply the thirty-two
categories of information set out in Schedule A, which
the statute treats as the core elements of a compliant
registration statement. Schedule A specifically requires
“a detailed balance sheet of the assets and liabilities of
the issuer certified by an independent public or certified
accountant.” 15 U.S.C § 77aa(25)) (emphasis added). The
certification of an accountant is not a formality; it is a
statutory prerequisite for including financial statements
in a registration statement. Sec. & Exch. Comm’n v. N.
Am. Fin. Co., 214 F. Supp. 197, 201 (D. Ariz. 1959) (“such a
certification cannot be dismissed under the Act as a mere
‘tag’ attached to financial statements.”); see also Bulldog
Inv’rs Gen. P’ship v. Sec’y of Commonwealth, 953 N.E.2d
691, 698 (Mass. 2011); Kress v. PricewaterhouseCoopers
LLP, No. 08-0965, 2013 WL 140102, at *8 n.20 (E.D. Cal.
Jan. 10, 2013).
Under the Securities Act, the independent auditor is
responsible for examining the issuer’s books and records
to determine whether its financial statements have been
prepared in accordance with generally accepted accounting
16
principles (GAAP). United States v. Arthur Young &
Co., 465 U.S. 805, 811 (1984). As this Court explained in
Arthur Young, the independent auditor “assumes a public
responsibility transcending any employment relationship
with the client” and owes “ultimate allegiance to the
corporations’ creditors and stockholders, as well as to the
investing public.” Id. at 817–18 (emphasis in original). This
“public watchdog” function “demands that the accountant
maintain total independence from the client at all times
and requires complete fidelity to the public trust.” Id.
The purpose of the audit report is to opine “whether the
financial statements, taken as a whole, fairly present the
financial position and operations of the corporation for the
relevant period.” Id. at 811.
It is precisely because the certification carries
such weight with investors, serving as the independent
imprimatur that the financial statements can be trusted,
that Congress made the certifying accountant directly
answerable when the information in the registration
statement is materially false. “Section 11 was designed
to assure compliance with the disclosure provisions of the
Securities Act by imposing a stringent standard of liability
on the parties who play a direct role in a registered
offering.” Herman & MacLean, 459 U.S. at 381–82.
3.
Section 11’s Plain Text Assigns the Burden
of Proving Diligence to the Accountant,
Not the Investor.
Section 11 of the Securities Act, 15 U.S.C. § 77k(a),
creates a straightforward liability regime. Section 11(a)
provides a cause of action for any person who acquired
a security in reliance on a registration statement that
17
“contained an untrue statement of a material fact or
omitted to state a material fact . . . necessary to make
the statements therein not misleading,” as against, inter
alia, “every accountant . . . who has with his consent been
named as having prepared or certified any part of the
registration statement . . . with respect to the statement in
such registration statement, report, or valuation, which
purports to have been prepared or certified by him.” 15
U.S.C. § 77k(a)(4) (emphasis added).
Any investor who purchases a security pursuant to a
registration statement containing a material misstatement
has a claim against the certifying accountant. 15 U.S.C.
§ 77k(a)(4). Congress gave investors a path to recovery
requiring no proof of fraud, no proof of reliance, and no
proof of loss causation. Herman & MacLean, 459 U.S. at
382. To establish a prima facie case, the investor need only
show that the registration statement contained a material
misstatement. Id. Congress then gave the accountant—
not the investor—the opportunity to escape liability
by proving that the accountant “had, after reasonable
investigation, reasonable ground to believe and did
believe, at the time such part of the registration statement
became effective, that the statements therein were true.”
15 U.S.C. § 77k(b)(3)(B)(i). This Court expressly confirmed
that the due diligence defense “is an affirmative defense”
on which “defendants bear the burden of demonstrating.”
Herman & MacLean, 459 U.S. at 382.
The liability regime enacted by Congress was
designed to place “minimal burden” on the plaintiff. Id.
The Securities Act of 1933 “was designed to provide
investors with full disclosure of material information
concerning public offerings of securities in commerce,
18
to protect investors against fraud and, through the
imposition of specified civil liabilities, to promote ethical
standards of honesty and fair dealing.” Ernst & Ernst
v. Hochfelder, 425 U.S. 185, 195 (1976) (citing H.R.Rep.
No.85, 73d Cong., 1st Sess., 1-5 (1933).
Section 11 affords the auditor a due diligence defense
if it had, “after reasonable investigation, reasonable
ground to believe and did believe, at the time such part
of the registration statement became effective, that the
statements therein were true and that there was no
omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.” 15 U.S.C. § 77k(b)(3)(B)(i) See generally
William K. Sjostrom, Jr., The Due Diligence Defense Under
Section 11 of the Securities Act of 1933, 44 Brandeis L.J.
549 (2006). The reasonable investigation standard requires
that accountants be held to the standard “recognized in
their profession.” Escott v. BarChris Constr. Corp., 283
F. Supp. 643, 703 (S.D.N.Y. 1968). An accountant’s “good
faith compliance” with GAAP “discharges the accountant’s
professional obligation to act with reasonable care” and
establishes the due diligence defense. Monroe v. Hughes,
31 F.3d 772, 774 (9th Cir. 1994).
4.
This Cou r t’s Precedent a nd O ther
Circuit Authority Confirms the Burden
Allocation—and the Ninth Circuit Inverted
It.
To state a claim against an accountant under Section
11, the accountant must have prepared or certified a
statement in connection with a registration statement that
was false or misleading. Herman & MacLean, 459 U.S.
at 382 n.13. (emphasis added).
19
A long line of precedent applying the statute’s plain
language provides that an auditor which consents to serve
as an accounting expert in connection with a registration
statement is liable under Section 11 for the misstatements
of material fact contained in the registration statement’s
certified financial statements. Herman & MacLean v.
Huddleston, 459 U.S. 375, 381-82, n. 13 (1983); Gustafson
v. Alloyd Co., 513 U.S. 561, 581 (1995); see also, In re
Lehman Bros. Sec. & ERISA Litig., 131 F. Supp. 3d
241, 259–60 (S.D.N.Y. 2015) (“It is difficult to imagine
what Congress might have meant by an accountant’s
certification if not auditor’s opinions such as those at issue
in this case.”).
The Ninth Circuit previously applied those principles
directly. In Worlds of Wonder, the Ninth Circuit reversed
summary judgment for an auditor because, despite
complex accounting issues, the auditor had to face liability
to investors if “the 1987 financial statements were in fact
misleading.” In re Worlds of Wonder Sec. Litig., 35 F.3d
1407, 1423 (9th Cir. 1994). Every other defendant had been
entitled to rely on the auditor’s expertise—and therefore
escaped liability. Id. at 1421. But not the auditor itself. Id.
Similarly, in Garbini v. Protection One, Inc., 49 F. App’x
169, 170 (9th Cir. 2002), the Ninth Circuit upheld a § 11
claim against an auditor based on misrepresentations
in the issuer’s financial statements, finding that factintensive inquiries into whether the issuer overstated
its earnings are best left to trial or summary judgment.
Other Circuit Courts were in accord. See In re Morgan
Stanley Info. Fund Sec. Litig., 592 F.3d 347, 360, at n.7
(2d Cir. 2010)(“Generally speaking, defendants bear the
burden of demonstrating the applicability of each of these
defenses, which are therefore unavailing as a means of
20
defeating a motion to dismiss pursuant to Rule 12(b)(6).”);
Lone Star Ladies Inv. Club v. Schlotzsky’s Inc., 238 F.3d
363, 369 (5th Cir. 2001)(defendants bear burden of pleading
and proving due diligence defense).
Here, the Ninth Circuit inverted this allocation of
burden. It affirmed dismissal because Petitioners had
not alleged in their complaint facts showing that PwC
did not have a reasonable ground to believe and did not
believe, at the time such part of the registration statement
became effective, that the financial statements contained
therein were accurate. In other words, the Ninth Circuit
required Petitioners to plead facts sufficient to negate
PwC’s affirmative due diligence defense before PwC had
ever been required to raise it, let alone prove it. This
directly contradicts Herman & MacLean and other circuit
authority which would assign that burden to PwC, not to
the investors.
The Ninth Circuit did not attempt to distinguish
Herman & MacLean or other authority. The conflict is
unambiguous and squarely presented.
5.
The Ninth Circuit Committed A Textual
Error That Renders the Word “Certified”
Superfluous and Negates the Role for Due
Diligence Statutory Defense.
The Ninth Circuit concludes its analysis on this issue
with “PwC’s audit opinion did not make any material
misstatements of fact or omissions but rather was merely
a statement of opinion based, again, upon the subjective
judgment of the MSA classification.” Thus, “PwC is not
liable for the statements in its audit opinion.” 9a. This
21
conclusion betrays a fundamental misunderstanding of
both the Act and Petitioners’ claims. Section 11(a)(4) of the
Act, 15 U.S.C. § 77k(a)(4) states that where a registration
statement contains a misrepresentation, investors have
a claim against “every accountant . . . with respect to
the statement in such registration statement, report,
or valuation, which purports to have been prepared or
certified by him.” Section 11(a)(4) does not, therefore
require, and Petitioners do not argue, that PwC’s audit
opinion itself contains any misrepresentation. The alleged
misrepresentation is contained in Bloom Energy’s financial
statements. PwC’s liability under Section 11(a)(4) of the
Act results from its certification of the financial statements
containing Bloom Energy’s misrepresentations. It is
conceded by PwC and the Ninth Circuit that PwC certified
Bloom Energy’s financial statements and, therefore, it
is liable for any misrepresentations contained therein,
subject to its due diligence affirmative defense.
Any other reading is illogical and renders the words
“or certified” entirely superfluous. § 11(a)(4) creates
liability for an accountant for statements that “have
been prepared or certified by him”. The audit opinion is
undeniably a document prepared by the accountant. Thus,
under the Ninth Circuit’s interpretation, where liability
is limited to the audit opinion, there are no actionable
statements against an accountant that were not “prepared
by him”. Thus, an accountant does not “certify” any
statement that is not already potentially actionable under
§ 11(a)(4). This is not an appropriate interpretation of a
statute, especially where there is another interpretation
that gives meaning to each word in § 11(a)(4). Williams
v. Taylor, 529 U.S. 362, 404–05 (2000)(every word in a
statute must be given effect if possible). Thus, under the
22
plain meaning of § 11(a)(4), an accountant such as PwC
is prima facie liable to investors for any misstatements
contained in its audit opinion itself (a statement prepared
by the accountant) or contained in the financial statements
of the issuer that are the subject of the audit opinion (a
statement certified by the accountant). Petitioners here
rely on the second option.
The Ninth Circuit’s interpretation of the pleading
standard pursuant to § 11(a)(4) of the Act also negates
any role for the due diligence defense expressly provided
to accountants in § 11(b)(3) of the Act. 15 U.S.C. § 77k(b)
(3). Under the standard applied by the Ninth Circuit, it
is a practical impossibility for any § 11 plaintiff to plead
and prove prima facie liability of an accountant without
proving at least negligence, if not fraud. According to the
Ninth Circuit, to establish liability, a plaintiff would have
to prove that either the accountant did not have a basis for
its audit opinion (negligence) or did not believe its audit
opinion was true when it was published (fraud). Once
liability was established under this standard, there would
be no remaining scope for any due diligence defense and
it would be rendered superfluous. Such an interpretation
should be rejected. TRW Inc. v. Andrews, 534 U.S. 19, 31
(2001)(“cardinal principle” that a statute ought not to be
construed that a clause shall be superfluous).
B. The Decision Below Also Conflicts With the
Transsubstantive Rule That Plaintiffs Need
Not Plead Around Affirmative Defenses.
The Ninth Circuit’s error violates a foundational
principle of federal pleading law. Federal Rule of Civil
Procedure 8(a) requires only “a short and plain statement
23
of the claim showing that the pleader is entitled to relief.”
This Court has made clear that a complaint need not
anticipate affirmative defenses to survive a motion to
dismiss. Jones v. Bock, 549 U.S. 199, 212 (2007); Gomez
v. Toledo, 446 U.S. 635, 640 (1980). The Ninth Circuit
itself has applied this principle repeatedly, holding that
“a plaintiff is not required to plead around affirmative
defenses.” United States v. Page, 116 F.4th 822, 829 (9th
Cir. 2024); accord CFTC v. Monex Credit Co., 931 F.3d
966, 972 (9th Cir. 2019).
These Supreme Court precedents establish that
plaintiffs must plead their prima facie case, not disprove
potential defenses. Here, that distinction reflects the
burdens that Congress confirmed when it expressly placed
due diligence on the defense side of the ledger in § 77k(b)
(3)(B)(i).
Most recently, the Supreme Court reaffirmed this
principle in Cunningham v. Cornell University, 604 U.S.
693 (2025). The Court held that ERISA § 1108 exemptions
are affirmative defenses, and that a plaintiff need only
allege the elements of a claim “notwithstanding the
potential applicability of a § 1108 exemption, because an
‘affirmative defense’ is ‘not something the plaintiff must
anticipate and negate in her pleading.’” 604 U.S. at 702.
The principle is transsubstantive: it applies across all civil
litigation. See also Perry v. Merit Sys. Prot. Bd., 582 U.S.
420 (2017) (“in civil litigation, a release is an affirmative
defense to a plaintiff’s claim for relief, not something the
plaintiff must anticipate and negate in her pleading”).
The opinion correctly noted that PwC certified,
within the meaning of Section 11(a)(4), the financial
24
statements included in its registration statement that
were later restated as erroneous. 18a. With sufficient
allegations of material misrepresentations in those
financial statements—as indicated by the subsequent
restatement—that should have been sufficient, under
Section 11(a)(4), 15 U.S.C. § 77k(a)(4), to plead a claim
against PwC. As in Worlds of Wonder, PwC would then
have had the opportunity to meet its burden to prove due
diligence.
Instead, the Ninth Circuit dismissed Petitioners’
claims at the pleading stage because they failed to allege
that PwC did not have a reasonable ground to believe and
did not believe, at the time such part of the registration
statement became effective, that the statements therein
were true. 23a. (“Plaintiffs made no allegation that PwC
did not sincerely believe that Bloom Energy’s classification
of the MSAs aligned with proper accounting principles
based on the evidence available at that time.”). The rule the
Ninth Circuit thus announced is that, to plead a Section 11
claim against an accountant for misstatements in certified
financials, a plaintiff must allege that, after reasonable
investigation, the accountant lacked reasonable grounds
to believe—and did not believe—those statements were
true and free of material omissions.
This conflicts with well-established authority in the
Ninth Circuit that plaintiffs are not required to “plead
around affirmative defenses.” Page, 116 F.4th at 829;
see also Monex Credit, 931 F.3d at 972. The pleading
requirements articulated by the Court below are also
inconsistent with the express language of Section 11 and
the recognized Congressional intent to place “minimal
burden” on plaintiffs. Herman & MacLean, 459 U.S. at
25
382. The Ninth Circuit did not address these conflicts in
its opinion.
The practical effect of the ruling below is severe. By
requiring Section 11 plaintiffs to plead facts negating the
accountant’s due diligence defense before the accountant
answers the complaint, the Ninth Circuit effectively
converted an investor-protective strict liability regime
into one requiring near-pleading of negligence. This
Court should grant certiorari to reaffirm what Herman
& MacLean already established and to correct the Ninth
Circuit’s departure from both the Securities Act and the
general federal pleading standard.
II. THE NINTH CIRCUIT’S DECISION CONFLICTS
WITH DECISIONS OF THIS COURT, OTHER
CIRCUITS, AND THE NINTH CIRCUIT ITSELF
BY HOL DI NG T H AT U NC ON DI T IONA L
STATEMENTS OF REVENUE, LOSS, AND LOSS
PER SHARE ARE “PURE STATEMENTS OF
OPINION”.
Bloom Energy’s 2017 financial statements, certified by
PwC and included in its registration statement, reported
total revenue of $375,996,000, a net loss attributable to
common stockholders of $262,599,000, and a net loss per
share of $26.97. The SEC has identified net income or
loss and earnings or loss per share as “financial items
generally considered to be of primary importance to
investors.” 17 C.F.R. § 229.10(b)(2). No reasonable investor
reading them would understand them as expressing a
belief or view rather than a reported result. That, as this
Court explained in Omnicare, is the defining difference
between a statement of fact and a statement of opinion.
26
The Ninth Circuit nonetheless held that these figures
were pure statements of opinion because they resulted
from accounting judgments and dismissed Petitioners’
claims on the grounds that Petitioners could not show
that Bloom Energy’s “subjective opinions were based on
untrue facts or information that it did not believe.” 27a.
That holding is wrong for four independent reasons and
creates an explicit conflict with decisions from at least
four other circuits.
First, Omnicare does not apply to unconditional
reported financial figures. This Court’s holding in
Omnicare rested on a foundational distinction: a statement
framed as an opinion (“We believe our contracts are in
compliance with applicable law”) conveys uncertainty in
a way that a bare assertion of fact does not. Omnicare,
Inc. v. Laborers Dist. Council Constr. Indus. Pension
Fund, 575 U.S. 175, 183 (2015). The statements at issue
in Omnicare were explicitly framed as beliefs—”We
believe our contract arrangements . . . are in compliance
with applicable federal and state laws” and “We believe
that our contracts with pharmaceutical manufacturers
are legally and economically valid arrangements.” Id. at
179–80. This Court emphasized that such framing signals
to investors that the speaker is offering a view rather than
a verified result, and that this uncertainty is precisely why
such statements are not subject to second-guessing. Id. at
189–90 (“Reasonable investors understand that opinions
sometimes rest on a weighing of competing facts; indeed,
the presence of such facts is one reason why an issuer
may frame a statement as an opinion, thus conveying
uncertainty.”). The Omnicare majority said nothing about
financial statements that are not framed as opinions. Its
reasoning does not extend to them.
27
Bloom Energy’s reported revenue, net loss, and net
loss per share contained none of the signals that Omnicare
identified as distinguishing opinion from fact. They were
not preceded by “we believe” or any equivalent hedge.
Nothing on their face indicated that the figures expressed
a view rather than a reported result or a statement
of fact. Furthermore, Bloom Energy could not have
become a publicly traded company without providing this
information and without PwC certification.
Second, the decision below conf licts with wellestablished Ninth Circuit precedent that the Court below
failed to address. Long before Omnicare, the Ninth Circuit
held that reported revenue figures, even those that result
from complex accounting analyses, constitute statements
of fact. In In re Worlds of Wonder Securities Litigation, 35
F.3d 1407 (9th Cir. 1994), the Ninth Circuit affirmed that
a company that “substantially overstate[s] its revenues by
reporting consignment transactions as sales . . . mak[es]
false or misleading statements of material fact,” and it
did so even though the underlying GAAP issues were
“enormously complex.” Id. at 1418, 1421 (quoting Malone
v. Microdyne Corp., 26 F.3d 471, 478 (4th Cir. 1994)).
Similarly, the revenue recognition in Software Toolworks
required analysis and exercise of judgment over the terms
of certain sales contracts and misstatements of revenue
were still held to be misstatements of fact. In re Software
Toolworks, Inc. Securities Litigation, 50 F.3d 615, 62022 (9th Cir. 1994); see also Hemmer Grp. v. SouthWest
Water Co., 527 F. App’x 623, 625–26 (9th Cir. 2013) (§11
claim alleged when the complaint “adequately alleges the
originally reported financial data, the restated financial
data, and the difference between the two” thus adequately
alleging falsity).
28
The Court below did not address Worlds of Wonder,
Software Toolworks, or Hemmer Group. Its holding that
accounting complexity converts unconditional financial
figures into unactionable opinions cannot be reconciled
with those decisions. This Court has been clear that Section
11 imposes broad liability without regard to reliance or
fraudulent intent for any material misstatements or
omissions contained in a registration statement, and that
the Act’s “stringent standard of liability” extends to all
parties who play a direct role in a registered offering.
Herman & MacLean, 459 U.S. at 381–82. The court’s
opinion is irreconcilable with those principles.
Third, the decision below conflicts with the Second
Circuit and other circuits to have addressed the question.
The rule the Ninth Circuit announced below, that
unconditional financial figures are “pure statements of
opinion” whenever they involve accounting judgments, has
not been embraced by other appellate courts. The conflict
is deep and wide.
The Second Circuit has squarely held that statements
contained in historical financial statements, even those
that depend on the application of complex accounting
standards, are not automatically transformed into
statements of opinion by virtue of that dependence. In
Gimpel v. The Hain Celestial Group, Inc., 156 F.4th
121, 139-40 (2d Cir. 2025), the Second Circuit held that a
subsequent restatement of financial results and disclosure
of material weaknesses was sufficient to establish that
the originally reported figures were false statements of
fact when made. 5 This is directly contrary to the holding
5. Courts in the Second Circuit regularly hold that while
restatements are not admissions of wrongdoing, they are a
29
by the Ninth Circuit in this case. Similarly, in Sherman
v. Abengoa, S.A., 156 F.4th 152, 167-69 (2d Cir. 2025), the
Second Circuit held that errors in applying percentageof-completion accounting were sufficient to state a Section
11 factual-misrepresentation claim.
Other Circuits are in accord in their treatment of
misstated and restated financials as statements of fact.
See Pension Tr. Fund for Operating Eng’rs v. Kohl’s
Corp., 895 F.3d 933, 938–39 (7th Cir. 2018)(restated
balance sheet due to incorrect lease accounting contained
actionable false statements of fact); Edward J. Goodman
Life Income Tr. v. Jabil Cir., Inc., 594 F.3d 783, 790 (11th
Cir. 2010)(plaintiff adequately pleaded falsity based on
restated financial statements); Matrix Cap. Mgmt. Fund,
LP v. BearingPoint, Inc., 576 F.3d 172, 183 (4th Cir. 2009)
(plaintiff pleaded falsity of restated financial statements);
Barrie v. Intervoice-Brite, Inc., 397 F.3d 249, 258 (5th
Cir.), opinion modified on denial of reh’g, 409 F.3d 653
(5th Cir. 2005)(restated earnings and revenue figures
were adequately alleged to be false when made); Adams
v. Kinder-Morgan, Inc., 340 F.3d 1083, 1104 (10th Cir.
2003), as amended on denial of reh’g (Aug. 29, 2003)
(false statements of net income and operating income
were actionable); Gebhardt v. ConAgra Foods, Inc., 335
F.3d 824, 829–31 (8th Cir. 2003)(restated revenues were
misrepresentations of fact).
sufficient basis for pleading that financial statements were false
when made. See zCap Equity Fund LLC v. LuxUrban Hotels
Inc., 792 F. Supp. 3d 407, 437-39 (S.D.N.Y. 2025), reconsideration
denied, 2025 WL 2962772 (S.D.N.Y. Oct. 21, 2025) (collecting
cases); see also Africa v. Jianpu Tech. Inc., 2022 WL 4537973, at
*9 (S.D.N.Y. Sept. 28, 2022) (“Courts in this District have generally
held that ‘misreported financial data are . . . false statements of
fact.’”) (internal citations omitted).
30
The Ninth Circuit’s decision in this case is thus an
outlier in holding that statements of historical revenue,
profit or loss, and earnings or loss per share are statements
of opinion rather than fact. This entrenched, multi-circuit
conflict warrants this Court’s review.
Fourth, even under Omnicare, Bloom Energy’s
f i n a nc i a l f i g u r e s c ont a i ne d emb e dde d fa c t u a l
representations that are independently actionable. SEC
Regulation S-X requires registration statements to
include financial statements reflecting an issuer’s actual
financial position, not the issuer’s speculation about what
that position might be. 17 C.F.R. pt. 210; see also In re
Petrobras Securities Litigation, No. 14-CV-9662 (JSR),
2016 WL 1533553, at *4 (S.D.N.Y. Feb. 19, 2016). When
Bloom Energy reported its revenue using operating-lease
accounting for its MSAs, that reporting carried with it
an embedded factual representation: that the terms of
those agreements qualified for that accounting treatment
and thus permitted the recognition of revenue as sales.
Bloom Energy subsequently conceded in its restatement
that “the terms of our Managed Services Agreements
and similar arrangements, including the events of
default provisions,” did not “satisfy the requirements
for sales under the revenue accounting standards.” That
concession confirms the falsity of the factual predicate
embedded in the original reporting, which PwC certified
as part of Bloom Energy’s registration statement. The
Ninth Circuit erred in treating those figures as “pure
statements of opinion” rather than recognizing the factual
representations they necessarily contained.
The decision below effectively immunizes from Section
11 liability any misstatement in a financial statement that
31
can be attributed to an accounting choice. That outcome
is irreconcilable with the statute. Section 11 imposes
liability for “untrue statement[s] of a material fact,” 15
U.S.C. § 77k(a), and the SEC identifies revenue, net loss,
and loss per share as among the most material facts a
registration statement can contain. The decision below
renders those figures essentially unactionable as a matter
of law, no matter how dramatically they overstate revenues
or understate losses. This Court should grant certiorari
to resolve the circuit conflict, restore Omnicare’s proper
and limited scope, and preserve the investor protections
that Section 11 was enacted to provide.
III. T H E QU ESTIONS PRESEN T ED A RE OF
E XC EP T IONA L I M P ORTA NC E T O T H E
INTEGRITY OF THE SECURITIES MARKETS.
The Ninth Circuit is the locus of American capital
formation. The Northern and Central Districts of
California handle more technology company IPOs than
any other federal judicial district. Hundreds of billions of
dollars in securities are offered each year to investors who
rely on audited financial statements as the most critical
signal of a company’s financial condition.
The decision below sends a disquieting message
to those investors. It tells them that when an auditor
certifies an issuer’s revenue and loss figures — figures
that the issuer is legally required to present, that the
auditor is legally required to certify, and that investors
depend on to evaluate the offering — and those figures
subsequently prove to be wrong enough to require formal
restatement, the investors may not even access discovery
to investigate the error. They must instead plead, in
32
their initial complaint, not only that the numbers were
wrong (which the restatement conceded) but that the
auditor secretly lacked a reasonable basis for believing
they were right. That information, uniquely within PwC’s
possession, is unavailable to Petitioners prior to discovery.
The Ninth Circuit’s pleading standard is therefore not
merely burdensome — it is systematically unachievable,
effectively immunizing certified financial statements
from Section 11 challenge in the circuit responsible for
supervising the majority of the nation’s technology sector
IPOs.
Congress wrote Section 11 to prevent precisely this
outcome. It placed independent accountants on the list
of named defendants because it understood their moral
responsibility to the investing public is “particularly
heavy.” Gustafson v. Alloyd Co., 513 U.S. 561, 581 (1995). It
gave investors a cause of action requiring minimal burden
and allocated the risk of uncertainty to the professionals
who certified the statements, because it understood
that investors cannot audit the auditors. See Herman &
MacLean, 459 U.S. at 382. The decision below nullifies
both of those choices.
The Questions presented here are also important
because they address a trend in lower courts regarding
the over-application of this Court’s decision in Omnicare.
This Court in Omnicare was explicit about preserving the
scope of potential liability under Section 11 of the Act. The
critical fact in Omnicare is that the statements at issue
were “pure statements of opinion”. 575 U.S. at 186. Indeed,
Justice Kagan noted that framing of a statement as an
opinion signifies to investors the uncertainty that may
surround that statement. 575 U.S. at 189-90 (“Reasonable
33
investors understand that opinions sometimes rest on a
weighing of competing facts; indeed, the presence of such
facts is one reason why an issuer may frame a statement
as an opinion, thus conveying uncertainty.”)
Despite the concern over “second-guessing” of opinion
statements by investors, the Court was more concerned
about excluding them from liability under Section 11
altogether. This was the position advocated by Omnicare
itself. The majority rejected this position, noting that it
would effectively eviscerate the liability regime under
the Securities Act. “Were Omnicare right, companies
would have virtual carte blanche to assert opinions in
registration statements free from worry about § 11. That
outcome would ill-fit Congress’s decision to establish a
strict liability offense promoting “full and fair disclosure”
of material information.” Id. at 193.
Perversely, this precise result has come about because
of the expansive application of Omnicare to any statement
in a registration statement that may involve any aspect of
subjectivity. This is vividly demonstrated by the differing
outcomes in this case compared with Worlds of Wonder,
35 F.3d 1407. The cases are legally indistinguishable;
both concern material misrepresentations of revenue
in an issuer’s financial statements involving complex
accounting judgment. Whereas the court in Worlds of
Wonder properly treated the statements as actionable
misrepresentations of fact with the remaining dispute
being whether the certified accountant can prove it
acted with due diligence, the Ninth Circuit in this
case dismissed the claims as a matter of law. This
result is purportedly required by this Court’s decision
in Omnicare, a case which did not concern financial
34
statements. Thus, a decision that was intended to preserve
potential liability under Section 11 has resulted in the
substantial curtailment of liability for any statement that
might involve an element of subjectivity, judgment, or
estimation; even statements such as “the company made
x million dollars in profit last year” that were previously
regarded as examples par excellence of statements of
fact. Not only is this result not required by Omnicare,
but Justice Scalia noted in his concurrence that financial
statements would not be subject to its framework because
such information would never be expressed as an opinion.
575 U.S. at 200. Certiorari is thus required to address
the unintended confusion resulting from this Court’s
Omnicare decision.
This case offers an excellent vehicle to address
the scope of liability under Section 11. The questions
presented are clean issues of interpretation. They were
thoroughly argued below and have produced a lengthy
opinion setting forth the Ninth Circuit’s reasoning. And
there are no jurisdictional, threshold, or prudential
barriers to this Court’s review. The importance of reliable
financial information was recognized by Congress when
it passed the Act in 1933 and is central to that Act’s
disclosure regime. The Ninth Circuit’s flawed reasoning
and mis-application of Omnicare undermines the
protections provided by Congress and is now the law of
one of the most important securities-related courts in
the Nation. There are no relevant factual disputes here;
instead, both questions presented involve pure questions
of law on which the lower courts are in disagreement.
This Court’s resolution of the questions presented would
bring urgently needed clarity to foundational securitieslaw requirements.
35
CONCLUSION
The Court should grant certiorari to correct the Ninth
Circuit’s unacknowledged departure from Herman &
MacLean, restore Omnicare to its proper and limited
scope, and preserve the investor protections that Section
11 was enacted to provide to the millions of Americans
who rely on audited financial statements when deciding
whether to invest their savings in a public offering.
Respectfully submitted,
A dam M. A pton
Levi & Korsinsky, LLP
1160 Battery Street East,
Suite 100 – #3425
San Francisco, CA 94111
Reed R. K athrein
Lucas Gilmore
Hagens Berman Sobol
Shapiro LLP
715 Hearst Avenue,
Suite 202
Berkeley, CA 94710
Nicholas I. Porritt
Counsel of Record
Levi & Korsinsky, LLP
1101 Vermont Avenue NW,
Suite 800
Washington, DC 20005
(202) 524-4290
nporritt@zlk.com
Max E. Weiss
Levi & Korsinsky, LLP
33 Whitehall Street,
27th Floor
New York, NY 10004
Counsel for Petitioners
APPENDIX
i
TABLE OF APPENDICES
Page
A P P E N DI X A — O P I N ION O F T H E
UNITED STATES COURT OF APPEALS
FOR T HE NIN T H CIRCU I T, FILED
NOVEMBER 10, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . 1a
APPENDIX B — ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA,
FILED SEPTEMBER 29, 2021 . . . . . . . . . . . . . . . 28a
APPENDIX C — JUDGMENT OF THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA,
FILED MAY 7, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . 83a
APPENDIX D — ORDER OF THE UNITED
STATES COURT OF APPEALS FOR THE
FOR T HE NIN T H CIRCU I T, FILED
DECEMBER 18, 2025 . . . . . . . . . . . . . . . . . . . . . . . . 85a
APPENDIX E — 15 U.S.C.A. § 77K . . . . . . . . . . . . . . 87a
1a
APPENDIX A — Appendix
OPINIONAOF THE UNITED
STATES COURT OF APPEALS FOR THE
NINTH CIRCUIT, FILED NOVEMBER 10, 2025
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 24-3568
D.C. No. 4:19-cv-02935-HSG
JAMES EVERETT HUNT; JUAN RODRIGUEZ;
KURT VOUTAZ; JOEL WHITE; ANDREW AUSTIN;
SCOTT KLINE; RYAN FISHMAN,
Plaintiffs-Appellants,
v.
PRICEWATERHOUSECOOPERS LLP (PWC),
Defendant-Appellee,
and
BLOOM ENERGY CORPORATION, JP MORGAN
SECURITIES, LLC, MORGAN STANLEY SMITH
BARNEY, LLC, CREDIT SUISSE SECURITIES
(USA) LLC, KEYBANC CAPITAL MARKETS INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, ROBERT W. BAIRD & CO.
INCORPORATED, COWEN AND COMPANY, LLC,
HSBC SECURITIES (USA) INC., OPPENHEIMER &
CO. INC., RAYMOND JAMES & ASSOCIATES, INC.,
Defendants.
2a
Appendix A
Filed November 10, 2025
OPINION
Argued and Submitted June 11, 2025
San Francisco, California
Appeal from the United States District Court
for the Northern District of California
Haywood S. Gilliam, Jr., District Judge, Presiding
Before: Milan D. Smith, Jr. and N. Randy Smith,
Circuit Judges, and Douglas L. Rayes, District Judge.*
Opinion by Judge N. Randy Smith
N.R. SMITH, Circuit Judge:
Under § 11 of the Securities Act of 1933, an independent
accountant is not strictly liable for the information in a
Registration Statement or a client’s financial statements
simply because the accountant certified the financial
statements prepared by the issuer. Instead, an independent
accountant certifies the underlying statements without
liability if, “after reasonable investigation, [the accountant
has a] reasonable ground to believe and did believe, at
the time such part of the registration statement became
effective, that the statements therein were true and that
there was no omission to state a material fact required
* The Honorable Douglas L. Rayes, United States District
Judge for the District of Arizona, sitting by designation.
3a
Appendix A
to be stated therein or necessary to make the statements
therein not misleading.” 15 U.S.C. § 77k(b)(3)(B)(i).
Moreover, an independent accountant is also protected
from liability for its opinions (not factual statements)
made about those underlying documents as long as the
opinion was sincerely held. See Omnicare, Inc. v. Laborers
Dist. Council Const. Indus. Pension Fund, 575 U.S. 175,
187–88, 135 S.Ct. 1318, 191 L.Ed.2d 253 (2015).
FACTUAL BACKGROUND
Bloom Energy designs, manufactures, sells, and (in
some instances) installs fuel-cell servers (Energy Servers)
that convert natural gas or biogas into electricity for onsite power generation.
This case arises because of the manner in which Bloom
Energy accounted for a type of contract that it used in
connection with these Energy Servers; such contracts are
known as Managed Services Agreements (MSA). MSAs
are a type of sale-leaseback arrangement, where Bloom
Energy first sells the Energy Server to a bank and then
leases it back from the bank. Bloom Energy then subleases
the Energy Server to a customer, whereby Bloom Energy
becomes the lessee (from the bank) and the lessor (to the
customer) of the Energy Server. At the time of the lease
to the customer, Bloom Energy also enters into another
contract with the customer to service the Energy Server
(from which customer payment for the service, Bloom
Energy pays its lease to the bank and generates income
for servicing the Energy Server).
4a
Appendix A
Bloom Energy can account for these types of saleleaseback arrangements in either of two ways: (1) as an
“operating lease,” accounting for the revenue it earns
when it sells the Energy Server to the bank; or (2) as a
“capital lease,” accounting for the revenue it earns when
it gets the payment from the customer over the course
of the service agreement with the customer. MSAs are
classified as either an operating lease or a capital lease
based on specific criteria. A capital lease is recognized
if it meets any of the following criteria: (1) ownership is
transferred to the lessee by the end of the lease term; (2)
the lease contains a bargain purchase option; (3) the lease
term is at least 75% of the property’s estimated remaining
economic life; or (4) the present value of the minimum lease
payments is 90% or more of the fair value of the leased
property. See Accounting Standards Codification (ASC)
840-10-25-11. If none of these criteria are met, the MSA is
1. A SC 840 -10 -25 -1 was superseded by Topic 842 in
the Accounting Standards Update 2016-02. See https://asc.
fasb.org/1943274/1855311/GUID-4073757B-B23C-4931-ABE08A1DF61EAFEA ((last visited Oct. 29, 2025). Lease classification,
as of February 25, 2016, can be found at ASC 842-10-25-2. This
section does not use 75% as a benchmark but rather a majority
standard (ASC 842-10-25-2(c): “[t]he lease term is for the major
part of the remaining economic life of the underlying asset”).
However, the February 2016 amendments were not effective
for public business entities until fiscal years beginning after
December 15, 2018, and the parties and the district court relied
upon ASC 840-10-25-1. Moreover, the district court did not find
the ASC to be dispositive: “ASC 840-10-10-1 merely states the
‘objectives’ underlying the more detailed provisions that follow,”
and “[d]espite Plaintiffs’ urging, it does not appear to provide the
definitive method for classifying a lease.”
5a
Appendix A
classified as an operating lease. Under an operating lease,
an Energy Server would not be recognized as an asset on
Bloom Energy’s books (because the Energy Server was
sold to the bank); instead, lease payments to the bank
would be recorded as an expense and payments from the
customer would be recorded as revenue. In contrast, a
capital lease would be recorded on Bloom Energy’s balance
sheet by recognizing the Energy Server as an asset with
a corresponding liability to the bank.
Initially, Bloom Energy accounted for MSAs as
operating leases. Bloom Energy determined that the
MSAs were best classified as operating leases because
the Energy Servers were not “integral equipment,” as
the cost to remove and relocate an Energy Server would
not exceed 10% of its original installation value. Bloom
Energy also determined that its MSAs failed to meet the
capital lease criteria because Bloom Energy determined
that Energy Servers had useful lives of 15–21 years, with
typical MSAs for each Energy Server having a lease term
of 6–10 years—less than 75% of the estimated life, thus
not triggering capital lease treatment.
In 2018 (after more than 15 years as a private
company), Bloom Energy decided to go public. To go public,
it had to conduct an initial public stock offering (IPO) and
file a Registration Statement with the Securities and
Exchange Commission (SEC). To prepare the materials
for the IPO and Registration Statement, Bloom Energy
had already prepared its own financial statements for
2016, 2017, and the first quarter of 2018. It also retained
responsibility for preparing all other financial statements
6a
Appendix A
for the IPO and Statement. However, Bloom Energy
engaged PricewaterhouseCoopers LLP (PwC), as an
outside accountant, to audit its 2016 and 2017 financial
statements, so it could include that audit opinion with the
Registration Statement.
PwC was hired to express an opinion on Bloom
Energy’s 2016 and 2017 financial statements based on
audits. In its audits, PwC would investigate the business,
operations, financial statements, and accounting of Bloom
Energy. Those audits included “performing procedures
to assess the risks of material misstatement of the
consolidated financial statements, whether due to error
or fraud, and performing procedures that respond to
those risks” and “examining, on a test basis, evidence
regarding the amounts and disclosure of consolidated
financial statements.” It also “conducted [its] audits of
the[ ] consolidated financial statements in accordance with
standards of the” Public Company Accounting Oversight
Board (PCAOB). 2
Following the audit, PwC concluded:
In our opinion, the consolidated financial
statements present fairly, in all material
respects, the financial position of the Company
as of December 31, 2017 and December 31, 2016,
and the result of its operations and its cash
flows for each of the two years in the period
2. Again, PwC did not prepare the 2016 and 2017 financial
statements because Bloom Energy’s management had prepared
them.
7a
Appendix A
ended December 31, 2017 in conformity with
accounting principles generally accepted in the
United States of America.
PwC’s audit did not identify any issue with Bloom Energy
classifying the MSAs as operating leases under Generally
Accepted Accounting Principles (GAAP) or Generally
Accepted Auditing Standards (GAAS).
When Bloom Energy prepared the Registration
Statement, it included the PwC audit opinion. The
Registration Statement also described an MSA and
how the sale-leaseback arrangement operated. The
Statement expressly stated an MSA may be “classified as
a capital lease or an operating lease”; that Bloom Energy
“[d]etermine[d] if the leaseback [was] classified as a capital
lease or an operating lease,” and stated that its MSA
“are classified as operating leases”; and it explained that
this classification affected Bloom Energy’s recognition of
revenue and liabilities.
Its Registration Statement registered over 20.7
million Bloom Energy shares for sale. These shares were
sold in the IPO at $15 per share and began trading on
July 25, 2018. Bloom Energy received proceeds of $284.3
million, net of underwriting discounts, commissions, and
estimated offering costs.
In 2019, Bloom Energy reviewed the accounting for
an MSA that had “closed on November 27, 2019 under an
MSA financing . . . , [wherein] PwC identified an issue it
had not previously identified related to the accounting for
8a
Appendix A
the Impacted MSA transactions.” Based upon this review,
Bloom Energy reevaluated its MSAs and determined
the MSAs should be treated as capital leases (loans from
the bank rather than sales). Thus, Bloom Energy (with
the advice of its Audit Committee and PwC) reclassified
certain MSAs as capital leases. To reflect these new
classifications, Bloom Energy revised its 2016 and 2017
financial statements, and restated its 2018 and 2019
financial statements. 3 The next day, the price of Bloom
Energy stock dropped by 13.8%.
PROCEDURAL BACKGROUND
In 2019, Plaintiffs (consisting of former and current
stockholders) filed a class action against Bloom Energy,
nine of its officers and directors, and ten underwriters
of the IPO. PwC was not a named defendant in the class
action complaint. The complaint asserted claims under
§ 10(b) and § 11 of the Securities Exchange Act of 1934,
based on alleged misstatements Bloom Energy made from
2018 to 2019 and alleged misstatements in the Registration
Statement. None of the allegations involved PwC or the
classification of MSAs.
A year into the litigation, Bloom Energy announced
the restatements of the 2018 and 2019 financial statements
that it deemed material and revisions of the 2016 and 2017
3. A restatement corrects a material error in prior financial
statements, whereas a revision corrects an error that is
“immaterial to the prior year financial statements.” SEC Staff
Accounting Bulletin No. 108, 71 Fed. Reg. 54,580, 54,582 (Sept.
18, 2006).
9a
Appendix A
financial statements that it deemed immaterial. After
the amendment, Plaintiffs amended their complaint to
add allegations, under § 10(b) and § 11, regarding the
classifications of the MSAs. As a part of that amendment,
PwC was added as a defendant. Plaintiffs alleged that
PwC was liable under § 11 for the actionable statements
and omissions in the Registration Statement because it
purported to have “conducted an adequate and reasonable
investigation into the business, operations, financial
statements, and accounting of Bloom Energy.”
All Defendants moved to dismiss all claims against
them. PwC moved to dismiss the § 11 claims against it. The
district court partially dismissed the claims against the
other defendants and dismissed the claims against PwC.
As to PwC, the court found that PwC’s audit opinion
was an inactionable opinion under Omnicare; that the
PwC opinion said only that the financial statements
“present fairly, in all material respects, the financial
position of the Company . . . in conformity [with GAAP]”;
that “the financial statements are the responsibility of
[Bloom Energy’s] management”; that PwC only had the
responsibility “to express an opinion on [Bloom Energy’s]
consolidated financial statements based on [its] audits”;
that the classification of “MSAs are complex”; and thus,
PwC was not liable. The district court also rejected
Plaintiffs’ argument that PwC’s opinions contained
within them, as “embedded statements of fact,” the
financial statements prepared by Bloom Energy. Lastly,
the district court held that PwC’s certification of the
financial statements was not a guarantee that they were
10a
Appendix A
accurate but rather was limited to the conclusions of the
audit opinion.
After the district court ruled on Defendants’ motions to
dismiss, Plaintiffs settled their claims with all Defendants
except PwC. Following the settlement, the district court
entered a final judgment, dismissing all claims against
PwC. However, the district court granted Plaintiffs leave
to amend as to PwC, but Plaintiffs conceded that an
amendment would be futile.
Instead, Plaintiffs filed this timely appeal, challenging
the alleged incorrect statements of revenue, net loss,
and net loss per share in Bloom Energy’s 2017 financial
statement (due to the improper treatment of the MSAs
as operating rather than capital leases).4
STANDARD OF REVIEW
We review de novo a district court’s order granting
a motion to dismiss for failure to state a claim. Dunn v.
Castro, 621 F.3d 1196, 1198 (9th Cir. 2010). We must accept
4. In their opening brief, Plaintiffs admit that they do not
challenge the dismissal of claims arising from their allegations
concerning: (1) the alleged incorrect disclosure in Bloom Energy’s
2017 financial statements of contingent liabilities arising from
MSAs; or (2) the alleged misrepresentations contained in PwC’s
audit opinion on Bloom Energy 2017 financial statements, meaning
they do not challenge the district court’s dismissal of claims that
the audit opinion itself was false or misleading apart from its
certification of the financial statements. Accordingly, those issues
are waived. See McKay v. Ingleson, 558 F.3d 888, 891 n.5 (9th
Cir. 2009).
11a
Appendix A
sufficient factual allegations in the complaint as true and
construe them in the light most favorable to the plaintiff.
See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937,
173 L.Ed.2d 868 (2009); In re Gilead Scis. Sec. Litig., 536
F.3d 1049, 1055 (9th Cir. 2008).
ANALYSIS
Under Omnicare, an accountant’s opinion is actionable
under § 11 if: (1) “the speaker did not hold the belief
she professed” and the supporting fact she supplied
is objectively untrue; (2) the opinion contains false
“embedded statements of fact”; or (3) the opinion omits
facts “whose omission makes the opinion statement at
issue misleading to a reasonable person reading the
statement fairly and in context.” 575 U.S. at 185–86, 194,
135 S.Ct. 1318. Before the district court, Plaintiffs focused
their arguments primarily on the assertion that PwC’s
audit opinion contained material misrepresentations or
omissions that met one or more of the three exceptions
under Omnicare. Because Plaintiffs’ allegations did not
meet any of the Omnicare exceptions, the district court
dismissed their case.
On appeal, Plaintiffs have abandoned those arguments.
Plaintiffs do not deny that Bloom Energy prepared its own
financial statements or that PwC neither prepared the
statements nor repeated those statements in its opinion.
Instead, they ask us to adopt the position that PwC is
strictly liable under § 11(a)(4) for Bloom Energy’s 2017
financial statement.
12a
Appendix A
I.
Section 11 of the Securities Exchange Act does not
provide for strict liability for accountants.
Section 11 of the Securities Act of 1933, 15 U.S.C.
§ 77k, provides a private cause of action for investors who
purchase securities pursuant to a registration statement
containing “an untrue statement of a material fact” or a
registration statement that omits “to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading.” Id. § 77k(a). Section
11 allows purchasers to file an action against anyone who
signed or helped prepare the registration statement,
including the issuer, underwriter, director, partner,
accountant, engineer, or appraiser. See id. However, § 11
does not impose the same type of liability on all of these
potential defendants.
Section 11 is a strict liability statute with respect to
issuers of securities, company directors, and partners
of issuers, without requiring proof of intent, negligence,
or scienter. Id. § 77k(a). However, the statute provides
defenses for other non-issuer defendants, such as experts,
based on their reasonable investigation and belief in the
accuracy of the registration statement. Id. § 77k(b). We
have also said that only “issuers are held strictly liable
under § 11 for damages resulting from misrepresentations
in a registration statement.” Monroe v. Hughes, 31 F.3d
772, 774 (9th Cir. 1994).
Relevant here, § 11(a)(4) imposes liability on an
accountant “who has with his consent been named as
having prepared or certified any part of the registration
13a
Appendix A
statement, or as having prepared or certified any
report or valuation which is used in connection with the
registration statement, with respect to the statement in
such registration statement, report, or valuation, which
purports to have been prepared or certified by him.”5
However, the statute allows accountants to raise a defense
to liability if they employed due diligence in preparing
or certifying statements the registration statement, by
showing that they “had, after reasonable investigation,
reasonable ground to believe and did believe, at the time
such part of the registration statement became effective,
that the statements therein were true and that there was
no omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.”6 Id. § 77k(b)(3)(B)(i). Courts have interpreted
§ 77k(b)(3)(B)(i) to require accountants “to investigate,
to various degrees, facts supporting and contradicting
inclusions in registration statements. They must undertake
that investigation which a reasonably prudent man in that
position would conduct.” Endo v. Albertine, 863 F. Supp.
708, 728 (N.D. Ill. 1994) (citation omitted); see 15 U.S.C.
§ 77k(c) (defining “standard of reasonableness” as “that
required of a prudent man in the management of his own
property”). In other words, accountants must exercise due
diligence in investigating the materials provided to them
using the accepted practices of their profession.
5. “The term certified, when used in regard to financial
statements, means examined and reported upon with an opinion
expressed by an independent public or certified public accountant.”
17 C.F.R. § 230.405.
6. PwC did not raise a due diligence defense in this case
because Plaintiffs did not identify any statements of fact made
by PwC.
14a
Appendix A
However, “[a]ccountants cannot be held liable under
Section 11 unless the misleading information can be
expressly attributed to them.” In re Worlds of Wonder Sec.
Litig., 694 F. Supp. 1427, 1434 (N.D. Cal. 1988). Thus, while,
§ 11(a)(4) outlines that investors may sue accountants for
materially false registration statements, accountants are
only subject to suit “with respect to the statement in such
registration statement . . . , which purports to have been
prepared or certified by [that accountant].” Id. § 77k(a)
(4). The statute distinguishes between “prepar[ing]” and
“certif [ying].” This distinction limits liability for certifiers
and expands it for preparers, who may be subject to more
general liability for the content they create. See id.
Nevertheless, the statute does not impose strict
liability on accountants for the statements or omissions
regardless of whether they prepared or certified them.
§ 77k(b)(3)(B)(i). Instead, because “an accountant has a
due diligence defense; § 11 therefore imposes a negligence
standard for an accountant’s liability.” Monroe, 31 F.3d
at 774 (citing Ernst & Ernst v. Hochfelder, 425 U.S.
185, 208, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)); see also
In re Wachovia Equity Sec. Litig., 753 F. Supp. 2d 326,
379 (S.D.N.Y. 2011) (“[A]lthough issuers are subject to
virtually absolute liability under Section 11, experts
such as accountants who have prepared portions of the
registration statement are accorded a due diligence
defense.” (cleaned up)).
As the Second Circuit correctly explained, strict
liability is limited to those persons involved in “enumerated
distributional activities.” See In re Lehman Bros. Mortg.-
15a
Appendix A
Backed Sec. Litig., 650 F.3d 167, 181 (2d Cir. 2011). “This
approach avoids the implausible result of transforming
every lawyer, accountant, and other professional whose
work is theoretically ‘necessary’ to bringing a security
to market into an ‘underwriter’ subject to strict liability
under § 11, a dramatic outcome that Congress provided
no sign of intending.” Id.
This approach is consistent with Omnicare and
extending its holding to accountants does not negate
the due diligence defense. In Omnicare, the Supreme
Court examined § 11 and addressed an issuer’s liability
for statements of opinion, because “Congress effectively
incorporated . . . [a] distinction [between facts and opinions]
in § 11’s first part by exposing issuers to liability not for
‘untrue statement[s]’ . . . (which would have included ones
of opinion), but only for ‘untrue statement[s] of fact.’” 575
U.S. at 183, 135 S.Ct. 1318 (quoting § 77k(a)) (alterations
in original). Focusing on the language of the statute,
the Supreme Court excluded statements of opinions
from liability. Under the Supreme Court’s reasoning,
accountants may be liable for statements of fact if they did
not act with due diligence; however, accountants will not
be liable for statements of opinion, even if they reflect a
subjective belief that admits there is a possibility of error,
as long as the statement of opinion was sincerely held. See
id. As the Supreme Court aptly explained:
A fact is “a thing done or existing” or “[a]n
actual happening.” Webster’s New International
Dictionary 782 (1927). An opinion is “a belief [,]
a view,” or a “sentiment which the mind forms
16a
Appendix A
of persons or things.” Most important, a
statement of fact (“the coffee is hot”) expresses
certainty about a thing, whereas a statement
of opinion (“I think the coffee is hot”) does
not. . . . Indeed, that difference between the
two is so ingrained in our everyday ways of
speaking and thinking as to make resort to old
dictionaries seem a mite silly. And Congress
effectively incorporated just that distinction in
§ 11’s first part by exposing issuers to liability
not for “untrue statement[s]” full stop (which
would have included ones of opinion), but only
for “untrue statement[s] of . . . fact.”
Id. (citations omitted). The Supreme Court further
explained a statement of opinion is not an “untrue
statement of a material fact” simply because it is later
determined to be incorrect (as here). Id. at 186–88, 135
S.Ct. 1318.
That said, Omnicare did not insulate accountants
from liability. Accountants may instead be challenged
based on their audit opinion as Omnicare outlines. The
opinion can still be subject to liability under § 11 as a
material misstatement, where (1) “the speaker did not
hold the belief she professed”; (2) “the supporting fact[s]
[the speaker] supplied were untrue”; or (3) the opinion
omits facts “whose omission makes the opinion statement
at issue misleading.” See id. at 186, 194, 135 S.Ct. 1318. In
the district court, Plaintiffs attempted to establish liability
for PwC under these standards and failed. Rather than
appeal that decision, they abandon those arguments.
17a
Appendix A
Simply stated, an accountant’s liability is limited
to “statement[s] in such registration statement, report,
or valuation, which purports to have been prepared or
certified by him.” § 77k(a)(4). Here, the PwC audit report
did not incorporate the alleged misstatements or untrue
facts, and clearly stated, in relevant part, that “[i]n our
opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of
[Bloom Energy] as of December 31, 2017 and December
31, 2016, and the results of its operations and its cash flows
for each of the two years in the period ended December
31, 2017 in conformity with accounting principles generally
accepted in the United States of America.”
Thus, in order for Plaintiffs to prevail, they must
establish that PwC did not have a “reasonable ground
to believe and did [not] believe, at the time such part
of the registration statement became effective, that
the statements therein were true.” § 77(k)(b)(3)(A).
As explained below, PwC made statements of opinion
protected under Omnicare. PwC did not make or prepare
any statements of material fact or omit any material
statements.
A.
PwC is not liable as a preparer.
In this case, Plaintiffs argue that, because PwC
certified Bloom Energy’s financial statements, it became
liable for any misstatements contained therein. However,
no one disputes that PwC did not prepare the financial
statements for 2017, or that Bloom Energy was responsible
for preparing the consolidated financial statements.
18a
Appendix A
Frankly, PwC was not permitted (under the regulations)
to prepare the financial statements. The regulations
make clear that an accountant, who prepares the financial
statements, is disqualified from being the independent
accountant authorized to certify it. See 17 C.F.R. § 230.405.
Although PwC expressed an opinion in its audit with
regard to Bloom Energy’s 2016–2017 financial statements,
there is no evidence that PwC prepared materially false
statements. Accountants do not, “by virtue of auditing a
company’s financial statements, somehow make, own or
adopt the assertions contained therein.” Deephaven Priv.
Placement Trading, Ltd. v. Grant Thornton & Co., 454
F.3d 1168, 1174 (10th Cir. 2006). Instead, PwC merely
affirmed that, in its opinion, Bloom Energy followed the
proper accounting principles, and those statements of
opinions are protected under Omnicare.
B. PwC is not liable as a certifier.
Plaintiffs also seek to have us impose strict liability
for PwC for Bloom Energy’s financial statements that they
certified in their audit opinion. We decline to interpret the
term “certify” so broadly.
Bloom Energy prepared “consolidated financial
statements,” which included the “accompany ing
consolidated balance sheets of Bloom Energy Corporation
and its subsidiaries as of December 31, 2016 and December
31, 2017, and the related consolidated statements
of operations, of comprehensive loss, of convertible
redeemable preferred stock and stockholders’ deficit
19a
Appendix A
and of cash flows for each of the two years in the period
ended December 31, 2017, including the related notes.”
PwC certified the “consolidated financial statements”
using audit procedures aimed to obtain reasonable
assurance. Section 11 does not require that PwC, by
certifying the financial statements, guarantee that the
documents provided by Bloom Energy were free from
error. Instead, PwC was required to act in compliance
with GAAP and GAAS, by performing a reasonable
investigation and having reasonable grounds to believe,
and did believe, that the statements provided by Bloom
Energy were true and that there were no omissions that
made the statement misleading. See 15 U.S.C. § 77k(b)
(3). It was not the job of PwC to “guarantee or insure”
the financial statements. Deephaven Priv. Placement
Trading, Ltd., 454 F.3d at 1174 (internal quotation marks
omitted); see also Dronsejko v. Thornton, 632 F.3d 658,
663 (10th Cir. 2011) (“A company’s management—not the
auditor—is responsible for the information contained in
its financial statements and the propriety of its underlying
accounting policies, including compliance with GAAP.”);
Fehribach v. Ernst & Young LLP, 493 F.3d 905, 910 (7th
Cir. 2007) (“The purpose of an audit report is to make
sure the audited company’s financial statements—which
are prepared by the company, not by the auditor, . . . —
correspond to reality, lest they either have been doctored
by a defalcating employee or innocently misrepresent the
company’s financial situation.”).
A n accountant “is in a position to express an
unqualified opinion on the financial statements when
the auditor conducted an audit in accordance with
20a
Appendix A
the standards of the Public Company Accounting
Oversight Board (“PCAOB”) and concludes that the
financial statements, taken as a whole, are presented
fairly, in all material respects, in conformity with the
applicable financial reporting framework.” AS 3101.02.7
“Misstatements arising from fraudulent financial
reporting are intentional misstatements or omissions of
amounts or disclosures in financial statements designed to
deceive financial statement users where the effect causes
the financial statements not to be presented, in all material
respects, in conformity with [GAAP].” AS 2401.06. The
independent accountant’s objective is to express “an
opinion on the fairness with which [he or she] present[s],
in all material respects, [the company’s] financial position,
results of operations, and its cash flows in conformity with
[GAAP].” AS 1001.01. However, “[e]ven with good faith
and integrity, mistakes and errors in judgment can be
made.” AS 1015.11. “[A]ccounting presentations contain
accounting estimates, the measurement of which is
inherently uncertain and depends on the outcome of future
events. The auditor exercises professional judgment in
evaluating the reasonableness of accounting estimates
7. AS references the Codification of Accounting Standards
and Procedures, Statement on Auditing Standards No. 1, § 150
(American Inst. of Certified Pub. Accountants 2001). Relevant
here, the PCAOB auditing standards were reorganized and went
into effect after Dec. 30, 2016, and were applicable to audits of
financial statements for fiscal years ending before Dec. 15, 2017.
See https://pcaobus.org/oversight/standards/auditing-standards
(last visited Oct. 29, 2025). Other revisions occurred after
December 15, 2017. However, the reorganized standards are
substantially the same and would not alter PwC’s review of the
2016 or 2017 financial statements.
21a
Appendix A
based on information that could reasonably be expected
to be available prior to the completion of field work.”
Id. To be sure, the division of responsibility is based on
practical realities: Bloom Energy “operate[s] the business
daily” and has superior knowledge of transactions, assets,
and liabilities, whereas PwC’s function was confined to
reasonable assurance through its audit. These limits
placed on accountants to assess a company’s financial
statements preclude its ability to ensure that there are
no misstatements, and thus, accountants should consider
risk factors such as:
conditions in the company’s industry and
environment, and company-specific factors,
such as the nature of the company, its activities,
and internal control over financial reporting.
For example, external or company-specific
factors can affect the judgments involved
in determining accounting estimates or
create pressures to manipulate the financial
statements to achieve certain financial targets.
Also, risks of material misstatement may relate
to, e.g., personnel who lack the necessary
financial reporting competencies, information
systems that fail to accurately capture business
transactions, or financial reporting processes
that are not adequately aligned with the
requirements in the applicable financial
reporting framework.
AS 2110.05.
22a
Appendix A
Again, “an accountant is not a guarantor of the reports
he prepares and is only duty bound to act honestly, in
good faith and with reasonable care in the discharge of
his professional obligations.” SEC v. Arthur Young & Co.,
590 F.2d 785, 788 (9th Cir. 1979) (citation omitted). Nor
does § 11 make accountants guarantors of every statement
made by the issuer; to make such a holding would turn the
whole accounting world upside down. Holding accountants
strictly liable as if they were preparers would transform
audits, making them prohibitively expensive. This was
not Congress’s goal. When Congress enacted the statute,
Congress was clear that it was limiting the liability of
accountants by only requiring a “reasonable investigation
and reasonable ground for belief, [for which] the standard
of reasonableness shall be that required of a prudent man
in the management of his own property.” § 77k(c).
Moreover, an accountant’s certification of financial
statements is nothing more than an opinion. The term
“certify” has been defined to mean that an independent
public or certified public accountant has “examined
and reported upon [the financial statements] with an
opinion.” 17 C.F.R. § 230.405. Omnicare protects opinions
from liability unless one of the three exceptions is met.
Omnicare made clear that “whether a statement is
‘misleading’ depends on the perspective of a reasonable
investor.” 575 U.S. at 186, 135 S.Ct. 1318. “Reasonable
investors understand that opinions sometimes rest on a
weighing of competing facts; indeed, the presence of such
facts is one reason why an issuer may frame a statement as
an opinion, thus conveying uncertainty.” Id. at 189–90, 135
S.Ct. 1318; see also Deephaven Priv. Placement Trading,
23a
Appendix A
Ltd., 454 F.3d at 1175 (explaining that “the phrase ‘in our
opinion’ indicates that there may be some information risk
associated with the [reviewed] financial statements, even
though the statements have been audited”).
In this case, PwC did just that. It conveyed its opinion
as to Bloom Energy’s financial statements. There may
have been some differing opinions with regard to the
Energy Server’s useful life, but “[a] reasonable investor
does not expect that every fact known to an [accountant]
supports its opinion statement.” Omnicare, 575 U.S. at
176, 135 S.Ct. 1318. And in this case, the classification and
reasons for classification were provided to the investor.
Thus, PwC’s “statement of opinion [was not] viewed in
a vacuum,” but rather allowed each investor to “read[ ]
each statement within such a document, whether of
fact or of opinion, in light of all its surrounding text,
including hedges, disclaimers, and apparently conflicting
information.” Id. at 190, 135 S.Ct. 1318.
In summary, Plaintiffs’ attempts to hold PwC liable
fail. PwC’s audit opinion did not make any material
misstatements of fact or omissions but rather was merely
a statement of opinion based, again, upon the subjective
judgment of the MSA classification. Plaintiffs made no
allegation that PwC did not sincerely believe that Bloom
Energy’s classification of the MSAs aligned with proper
accounting principles based on the evidence available at
that time. See id. at 186, 135 S.Ct. 1318.
Accordingly, PwC is not liable for the statements in
its audit opinion.
24a
Appendix A
II. The district court’s decision should also be affirmed
because Bloom Energy’s financial statements
regarding classification of the MSAs were opinions.
In this appeal, Plaintiffs challenge only the three
line items referenced in the Registration Statement
that related to whether MSAs should be classified as
operating or capital leases. These line items in Bloom
Energy’s financial report were based on Bloom Energy’s
subjective judgments (not statements of fact) concerning
the actual useful life of the Energy Server. Under ASC
840-10-25-1, an MSA qualifies as a capital lease if “[t]he
lease term is at least 75% of the property’s [i.e., the
Energy Servers’] estimated remaining economic life.”
Plaintiffs allege that the lease terms were 6 to 10 years;
that Bloom Energy improperly estimated that the Energy
Servers’ useful lives were 15-21 years. However, there is
no dispute that Bloom Energy was basing its estimates
on newly designed Energy Servers whose useful life was
unknown. Nevertheless, Plaintiffs allege that the actual
useful lives of these Energy Servers were “much shorter.”
With that shorter lease term, Plaintiffs claim that the 75%
rule required a capital lease classification.
However, the district court correctly concluded that
Plaintiffs failed to allege sufficient facts to establish that
Bloom Energy’s judgments were untrue. Throughout
the district court opinion, it properly outlines that Bloom
Energy’s classification of its MSAs was based on an
exercise of judgment related to its information about its
Energy Servers, which Bloom Energy used to classify
MSAs as operating or capital leases. For example, the
25a
Appendix A
district court highlighted that “Plaintiffs contend that
the service contracts ‘typically last[ ] from 10 to 21 years
and can last as long as 25 years,’ in total, and are renewed
each year at the customer’s option,” but failed “to explain
how Defendants could meaningfully estimate the length of
future contracts from such a large range.” “Plaintiffs also
suggest that Bloom knew the estimated life of its Energy
Servers and fuel cells because it had to replace some of
its earlier generation systems,” but “acknowledge[d],
Bloom also had newer systems in place, and Plaintiffs
[did] not explain how Defendants could extrapolate to
determine the life or replacement schedule for all its
Energy Servers.”
Thus, the district court correctly concluded that
Plaintiffs failed to adequately plead that the challenged line
items were statements of fact. Instead, the district court
recognized that Bloom Energy’s classification of the MSAs
was the product of accounting judgments; it determined
that those judgments “involve[d] complex consideration[ ]”
of various GA AP provisions in determining how to
evaluate the term of the MSAs and the value of the Energy
Servers. Thus, the district court found those three line
items to be opinions. Then, because Plaintiff failed to plead
nor argue any of the Omnicare exceptions to establish
liability, the district court concluded that those three line
items were not actionable. We agree.
On appeal Plaintiffs argue that “statements of
revenue, net loss, and net loss per share contained within
a company’s financial statements” cannot be opinions
because they are always statements of fact. However,
again Plaintiffs ignore the language in Omnicare.
26a
Appendix A
Omnicare does not limit an opinion to words over
figures. To be sure, the language of the statute is limited
to facts, not opinions. Thus, as long as Bloom Energy’s
statements were opinions and not facts, it is irrelevant
whether the subject matter being opined about were words
or figures. Instead, we need only determine whether
Bloom Energy had a “sincere statement of pure opinion.”
Omnicare, 575 U.S. at 186, 135 S.Ct. 1318. If it did, then
it does not qualify as an “‘untrue statement of material
fact,’ regardless whether an investor can ultimately prove
the belief wrong.” Id.
An “untrue statement of a material fact,” 15 U.S. C
§ 77k(a), “limited as it is to factual statements, does not
allow investors to second-guess inherently subjective
and uncertain assessments.” Omnicare, 575 U.S. at 186,
135 S.Ct. 1318 (emphasis added). Although figures, by
themselves, do not clearly convey whether it is an opinion
or a fact, “an investor [should] read[ ] each statement
within such a document, whether of fact or of opinion,
in light of all its surrounding text, including hedges,
disclaimers, and apparently conflicting information[,] . . .
tak[ing] into account the customs and practices of the
relevant industry.” Id. at 190, 135 S.Ct. 1318. “Section 11’s
omissions clause, as applied to statements of both opinion
and fact, necessarily brings the reasonable person into the
analysis, and asks what she would naturally understand
a statement to convey beyond its literal meaning.” Id. at
193–94, 135 S.Ct. 1318.
The district court correctly applied Omnicare’s
reasoning to conclude that numbers can sometimes be
27a
Appendix A
facts and other times be opinions, depending on whether
“the considerations underlying the figures—such as which
GAAP provisions apply and how to apply them— . . .
require the exercise of judgment.”
Plaintiffs do not explain what additional actions PwC
should have taken in its audit, nor do they allege any
facts that establish that PwC overlooked or disregarded
warning signs about the Energy Server’s useful life or
Bloom Energy’s MSA accounting.
Because Plaintiffs failed to show that Bloom Energy’s
subjective opinions were based on untrue facts or
information that it did not believe, see Omnicare, 575 U.S.
at 187, 135 S.Ct. 1318, Plaintiffs cannot demonstrate that
PwC certified untrue facts or information. Accordingly,
Plaintiffs have failed to establish liability for PwC’s
opinion. The record demonstrates that the classification of
MSAs was a judgment call, and the Registration Statement
thoroughly explained how it reached the classification.
PwC was reasonable under the circumstances to certify
Bloom Energy’s classification based on the evidence at
that time. 8
AFFIRMED.
8. Based on the foregoing, we need not decide whether the
line item errors were material.
28a
B THE UNITED
APPENDIX B —Appendix
ORDER OF
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA,
FILED SEPTEMBER 29, 2021
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
Case No. 19-cv-02935-HSG
JAMES EVERETT HUNT, et al.,
Plaintiffs,
v.
BLOOM ENERGY CORPORATION, et al.,
Defendants.
Filed September 29, 2021
ORDER GRANTING IN PART AND
DENYING IN PART MOTIONS TO DISMISS
Re: Dkt. Nos. 127, 129, 130
In his second amended complaint, Lead Plaintiff
James Everett Hunt and additional plaintiffs assert
violations of the federal securities laws under Sections
11 and 15 of the Securities Act of 1933 (the “Securities
Act”); Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 (the “Exchange Act”); and SEC Rule 10b-5
against Bloom Energy Corporation and certain of its top
29a
Appendix B
officials (collectively, “Defendants”). See Dkt. No. 113
(“SAC”) at ¶ 1.
Pending before the Court are three motions to dismiss
the second amended complaint. First, the Section 11
Defendants1 bring a motion to dismiss the Section 11
claims, as well as the Section 15 “controlling persons”
claims. Dkt. No. 130. Second, Pricewaterhouse Coopers
LLP (“PwC”), Bloom’s independent auditor, brings its
own motion to dismiss the Section 11 claims. Dkt. No. 127.
Third, the Section 10(b) Defendants2 bring a motion to
dismiss the Section 10(b) claims. Dkt. No. 129. The Court
finds these matters appropriate for disposition without
oral argument and the matters are deemed submitted.
See Civil L.R. 7-1(b). For the following reasons, the Court
GRANTS IN PART and DENIES IN PART the motions
to dismiss.
I.
BACKGROUND
Plaintiff Elissa M. Roberts initially filed this securities
class action on behalf of all persons who purchased or
otherwise acquired Bloom Energy Corporation common
stock during Bloom’s July 25, 2018 initial public stock
1. The Section 11 Defendants include Bloom Energy
Corporation, nine of Bloom’s current and former officers and
directors, and the ten underwriters of Bloom’s initial public
offering. See Dkt. No. 130.
2. The Section 10(b) Defendants include Bloom Energy
Corporation, Bloom’s CEO KR Sridhar, and Bloom’s former CFO
Randy Furr. See Dkt. No. 129.
30a
Appendix B
offering (the “IPO” or “Offering”). See Dkt. No. 1. The
original complaint asserted claims under Sections 11 and
15 of the Securities Act. Id. at ¶ 2. On September 3, 2019,
the Court 3 appointed James Everett Hunt as the lead
plaintiff in this action. See Dkt. No. 39. As part of the
motion granting the appointment, the Court granted Lead
Plaintiff Hunt leave to file an amended complaint. See id.
On April 21, 2020, Lead Plaintiff Hunt filed a second
amended complaint. See SAC. As relevant to the pending
motions, the SAC alleges that Bloom manufactures and
leases solid-oxide fuel cells, called “Energy Servers,”
which convert natural gas or biogas into electricity.
See id. at ¶¶ 2-3, 41. These Energy Servers provide
customers with an alternative to drawing energy from
the electrical grid. See id. at ¶ 41. After many years as
a private company, Bloom held its IPO on July 25, 2018.
Id. at ¶¶ 2, 50-51. The Registration Statement included
Bloom’s disclosures regarding the nature of its business,
risk factors, executive compensation, and numerous other
matters. See Dkt. No. 131-1, Ex. 1. It also included Bloom’s
financial statements for the years 2016 and 2017, and for
the first three months of 2018. The Registration Statement
also included PwC’s audit report on Bloom’s 2016 and
2017 annual financial statements. Id. The Registration
Statement registered over 20 million Bloom shares of
common stock for sale, and the stock sold in the IPO at $15
per share. See SAC at ¶ 51. Bloom received net proceeds
of $284.3 million from the IPO. Id.
3. On December 13, 2019, the matter was reassigned from the
Honorable Judge Orrick to this Court. See Dkt. No. 100.
31a
Appendix B
Plaintiffs allege that on September 17, 2019, a thirdparty market analyst, Hindenburg Research, issued a
critique of Bloom’s business. See id. at ¶ 72. The Hindenburg
authors projected that Bloom’s business would be massively
unprofitable in the future. They calculated that Bloom had
“an estimated [net] $2.2 billion in undisclosed servicing
liabilities” to repair and replace the Energy Servers that
Bloom had omitted from the Registration Statement at the
time of the IPO. Id. (alteration in original). In reaching
this conclusion, the authors reasoned that the lifespan of
Bloom’s fuel cells was materially shorter, their efficiency
was lower than represented, and they therefore needed
to be replaced years earlier than represented by Bloom
in the Registration Statement. Id. at ¶¶ 72-74.
Plaintiffs further allege that in February 2020, Bloom
restated the financial statements that it gave to investors
in the IPO. See id. at ¶¶ 3, 400-417. In doing so, Bloom
disclosed that (1) its net loss attributable to common
stockholders for 2017 was in fact $276.362 million, or 5.2%
worse than the loss of $262.599 million reported in its
Registration Statement; and (2) the net loss attributable
to common stockholders for the first three months in
2018 ending March 31, 2018 was $21.591 million, or 21.9%
worse than the loss of $17.716 million that Bloom initially
reported. See id. at ¶¶ 90, 413. Plaintiffs also allege that
Bloom had considerable “construction delays,” which
impeded Bloom’s ability to install the Energy Servers.
Id. at ¶¶ 55-59.
Plaintiffs allege that since the IPO, Bloom’s stock
price has declined from $15 per share of common stock,
32a
Appendix B
to a 52-week low of $2.44 per share of common stock.
See id. at ¶ 4. Plaintiffs bring their Securities Act and
Exchange Act claims on behalf of themselves and other
similarly situated persons who purchased or otherwise
acquired Bloom common stock in Bloom’s IPO and/or on
the public market between July 25, 2018 and February
12, 2020. See id. at ¶ 1.
II. LEGAL STANDARD
A.
Rule 12(b)(6) Standard
Federal Rule of Civil Procedure 8(a) requires that
a complaint contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). A defendant may move to dismiss a
complaint for failing to state a claim upon which relief
can be granted under Federal Rule of Civil Procedure
12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate
only where the complaint lacks a cognizable legal theory
or sufficient facts to support a cognizable legal theory.”
Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097,
1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a
plaintiff must plead “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). A claim is facially plausible when
a plaintiff pleads “factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009).
In reviewing the plausibility of a complaint, courts
“accept factual allegations in the complaint as true and
33a
Appendix B
construe the pleadings in the light most favorable to the
nonmoving party.” Manzarek v. St. Paul Fire & Marine
Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless,
Courts do not “accept as true allegations that are
merely conclusory, unwarranted deductions of fact, or
unreasonable inferences.” In re Gilead Scis. Secs. Litig.,
536 F.3d 1049, 1055 (9th Cir. 2008).
B. Heightened Pleading Standard
Section 10(b) of the Securities Exchange Act of
1934 provides that it is unlawful “[t]o use or employ, in
connection with the purchase or sale of any security
registered on a national securities exchange or any
security not so registered . . . any manipulative or
deceptive device or contrivance . . . .” 15 U.S.C. § 78j(b).
Under this section, the SEC promulgated Rule 10b-5,
which makes it unlawful, among other things, “[t]o make
any untrue statement of a material fact or to omit 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.” 17 C.F.R. § 240.10b-5(b).
To prevail on a claim for violations of either Section
10(b) or Rule 10b-5, a plaintiff must prove six elements:
“(1) a material misrepresentation or omission by the
defendant; (2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale
of a security; (4) reliance upon the misrepresentation
or omission; (5) economic loss; and (6) loss causation.”
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc.,
552 U.S. 148, 157 (2008).
34a
Appendix B
At the pleading stage, a complaint alleging claims
under Section 10(b) and Rule 10b-5 must not only meet
the requirements of Federal Rule of Civil Procedure 8,
but also satisfy the heightened pleading requirements of
both Federal Rule of Civil Procedure 9(b) and the Private
Securities Litigation Reform Act (“PSLRA”). In re Rigel
Pharm., Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012).
Under Rule 9(b), claims alleging fraud are subject to a
heightened pleading requirement, which requires that
a party “state with particularity the circumstances
constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
Additionally, all private securities fraud complaints are
subject to the “more exacting pleading requirements” of
the PSLRA, which require that the complaint plead with
particularity both falsity and scienter. Zucco Partners,
LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009).
III. DISCUSSION
A.
Section 11 Motion
Under Section 11 of the Securities Act, Plaintiffs
contend that Bloom’s Registration Statement contained
several untrue statements and omissions of material
facts. See SAC at ¶ 52. According to Plaintiffs, the
challenged statements involved (1) the existence and scale
of construction delays; (2) improper accounting under
Generally Accepted Accounting Principles (“GAAP”) for
loss contingencies and revenue relating to the Energy
Servers; (3) the life cycle of the fuel cells in the Energy
Servers; (4) weaknesses in Bloom’s internal controls; and
(4) the efficiency and emissions of the Energy Servers. See
35a
Appendix B
id. at ¶¶ 52-103. The Section 11 Defendants contend that
even under the more lenient Rule 8(a) standard, Plaintiffs
have failed to plausibly allege that these statements were
materially false or misleading. See Dkt. No. 130. They ask
the Court to dismiss Plaintiffs’ claims in their entirety.
“[S]ection 11 of the 1933 Securities Act creates a
private remedy for any purchaser of a security if ‘any
part of the registration statement, when such part
became effective, contained an untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading.’” In re Daou Sys., Inc., 411 F.3d
1006, 1027 (9th Cir. 2005) (quoting 15 U.S.C. § 77k(a)).
To allege a Section 11 claim, a plaintiff must show “(1)
that the registration statement contained an omission
or misrepresentation, and (2) that the omission or
misrepresentation was material, that is, it would have
misled a reasonable investor about the nature of his
or her investment.” Rubke v. Capitol Bancorp Ltd.,
551 F.3d 1156, 1161 (9th Cir. 2009) (quotation omitted).
Importantly, “[n]o scienter is required for liability under
§ 11; defendants will be liable for innocent or negligent
material misstatements or omissions.” In re Daou, 411
F.3d at 1027 (quotation omitted).
Unlike Section 10(b) claims, the heightened pleading
standards of the PSLRA do not apply to Section 11 claims.
See Rubke, 551 F.3d at 1161. Instead, “only allegations of
fraudulent conduct must satisfy the heightened pleading
requirements of Rule 9(b),” and “[a]llegations of nonfraudulent conduct need satisfy only the ordinary notice
36a
Appendix B
pleading standards of Rule 8(a).” In re Daou, 411 F.3d
at 1027. Here, Plaintiffs have explicitly disavowed “any
allegation that any Section 11 Defendant engaged in
fraud or any other deliberate and intentional misconduct.”
SAC at ¶ 49. Accordingly, the Rule 8(a) pleading standard
applies. Because Plaintiffs challenge discrete categories
of statements in the Registration Statement, the Court
addresses the Section 11 Defendants’ motion by category
below.
i.
Accounting Errors
Plaintiffs assert that the Section 11 Defendants
failed to follow the relevant GAAP provisions for Bloom’s
liabilities and revenue in its financial statements.4
a.
Maintenance Service Agreements
Plaintiffs first claim that Bloom failed to follow GAAP
in accounting for contingent liabilities related to Bloom’s
service contracts. Plaintiffs allege that when Bloom sells,
leases, or finances an Energy Server, it includes a oneyear warranty and performance guarantee as part of the
purchase price. SAC at ¶ 63. At the end of this one-year
4. Plaintiffs appear to have abandoned any argument that
Bloom failed to comply with or made “false and self-serving
statements” regarding the new revenue recognition guidance
under the Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) 606 for purposes of its Section
11 and Section 10(b) claims. See generally Dkt. No. 138; Dkt. No.
139; see also SAC at ¶¶ 78-80. The Court therefore GRANTS the
motion to dismiss on this basis.
37a
Appendix B
term, customers may then enter into Maintenance Service
Agreements (“service contracts”) to extend the initial
warranty and performance guarantee. See id. Customers
may elect to either renew or cancel their service contracts
for successive one-year terms for a period up to 20-25
years. Id. at ¶¶ 63, 68. Plaintiffs allege that “virtually no
customers have elected to cancel their [service contracts].”
See id. at ¶ 68. These service contracts generate both
revenue and expenses for Bloom. See id. at ¶¶ 63-64.
Under the terms of the agreements, Bloom must service,
repair, and replace Energy Servers when their output or
efficiency falls below a certain threshold. See id. at ¶ 64.
And customers, in turn, make annual service payments
to Bloom under these agreements. See id. at ¶ 63.
Plaintiffs allege that as of March 2018, “[t]he expenses
and/or contingencies associated with these repairs” were
approximately $2.9 billion, and exceeded any future
revenue from the service contracts by approximately $1.7
billion. See id. at ¶ 64. Plaintiffs allege that the Section
11 Defendants failed to disclose the $2.9 billion liabilities
from the service contracts. See id. at ¶ 65.
Rather, Bloom recognized revenue on these service
contracts ratably over the course of the one-year contract
term. See SAC at ¶ 382; Dkt. No. 131-1, Ex. 1 at 97. Bloom
recorded costs associated with the contracts in one of two
ways. If Bloom estimated a loss on the one-year contract,
it expensed the estimated loss value at the time of contract
renewal. See SAC at ¶ 382. If Bloom estimated a profit on
the one-year contract, it expensed the costs as incurred
within that period. Id. Plaintiffs urge that such practices
38a
Appendix B
violate various ASC provisions, as well as Item 303 of
Regulation S-K. See id. at ¶¶ 65-66. Plaintiffs therefore
conclude that Bloom’s Registration Statement contained
false and misleading statements about its contingent
liabilities.
As an initial matter, Defendants respond that such
statements in its financial reports reflect accounting
judgments, and are therefore opinion statements that
should be analyzed under the framework established
by the Supreme Court in Omnicare, Inc. v. Laborers
District Council Construction Industry Pension Fund,
575 U.S. 175 (2015). See Dkt. No. 130 at 9-10. In Omnicare,
the Supreme Court held that “a statement of opinion
is not misleading just because external facts show the
opinion to be incorrect,” so long as the opinion is honestly
believed. 575 U.S. at 188. Omnicare therefore limited
what constitutes an actionable opinion statement. Where,
as here, a plaintiff seeks to establish liability under the
omissions clause based on a statement of opinion, the
complaint must: (1) “identify particular [omitted] facts
going to the basis for the [defendant’s] opinion—facts
about the inquiry the [defendant] did or did not conduct
or the knowledge it did or did not have”; (2) establish that
the facts are material, i.e., that “there is a substantial
likelihood that a reasonable investor would consider [them]
important;” and (3) establish that the omission of the facts
rendered the opinion statement misleading to a reasonable
person reading it “fairly and in context,” i.e., “in light of
all its surrounding text, including hedges, disclaimers,
and apparently conflicting information,” as well as “the
customs and practices of the relevant industry.” Id. at
190, 194-96.
39a
Appendix B
A s Defendants note, the Supreme Cour t has
acknowledged that “[g]enerally accepted accounting
principles [] tolerate a range of reasonable treatments,
leaving the choice among alternatives to management.”
Thor Power Tool Co. v. C.I.R., 439 U.S. 522, 544 (1979)
(quotations omitted). The Ninth Circuit has also recognized
that the application of GAAP—at least at times—requires
a company to exercise its judgment, such that a company’s
financial statements may constitute opinions. See City
of Dearborn Heights Act 345 Police & Fire Ret. Sys. v.
Align Tech., Inc., 856 F.3d 605, 621 (9th Cir. 2017) (finding
statements related to company’s goodwill valuation were
opinion statements subject to Omnicare). But Plaintiffs
respond that their particular GAAP-based claims are
premised on “very clear bright line [GAAP] provisions,”
and therefore do not hinge on estimates or the exercise
of management’s judgment. See Dkt. No. 138 at 8, 13-14.
Plaintiffs’ argument is undermined by the plain
language of their GAAP-based claims. Plaintiffs first
cite ASC ASC 450-20-25-2, which discusses obligations
that are included in the sale of a product, rather than as a
separately priced contract. See SAC at ¶¶ 65, 67; see also
Dkt. No. 131-13, Ex. 14 (“ASC 450”). Even assuming ASC
450 would apply to the service contracts at issue here,
the provision requires companies to report “reasonable
estimates” of “probable” future losses. See id. Under ASC
450, therefore, Bloom had to determine the likelihood
that it would incur costs associated with service contracts
during the period covered by its financial statement, and
whether it could reasonably estimate such costs based on
its experience and other available data. As other courts
40a
Appendix B
have explained, ASC 450 thus asks companies to provide
“an educated approximation of future claims, i.e., an
opinion.” See Kanefsky v. Honeywell Int’l Inc., No. 18CV-15536, 2020 WL 2520669, at *5 (D.N.J. May 18, 2020)
(citing In re Hertz Glob. Holdings, Inc. Sec. Litig., 2017
WL 1536223, at *11 (D.N.J. Apr. 27, 2017)).
Plaintiffs also rely on ASC 605-20-25-6, which
discusses separately priced extended warranty and
product maintenance contracts. Dkt. No. 138-8, Ex. 33
(“ASC 605”). ASC 605 provides that “[a] loss shall be
recognized on extended warranty or product maintenance
contracts if the sum of expected costs of providing services
under the contracts and unamortized acquisition costs
exceeds related unearned revenue.” See ASC 605. Much
like ASC 450, ASC 605 asks companies to estimate
future costs for existing contracts. Companies must
estimate expected costs to determine whether they exceed
expected revenue.
Because both ASC 450 and ASC 605 require the
exercise of judgment, the Court finds that Bloom’s
statements about its contingent liabilities are opinion
statements, and the Omnicare framework applies. As an
initial step, Plaintiffs must therefore “call into question
[Defendants’] basis for offering the opinion” about Bloom’s
contingent liabilities. Id. at 175. To do so, Plaintiffs must
identify particular facts that Defendants omitted “about
the inquiry [Defendants] did or did not conduct or the
knowledge [they] did or did not have.” Omnicare, 575 U.S.
at 194. “[C]onclusory assertions” are insufficient. Id.
41a
Appendix B
Here, Plaintiffs do not directly explain how their
allegations satisfy Omnicare. See Dkt. No. 138 at 13-17.
The complaint does not address what “inquiry” Defendants
did or did not make with respect to the service contracts
or Bloom’s GAAP compliance. Nor does the complaint
address Bloom’s purported knowledge that the service
contracts should have been accounted for differently
under GAAP.
Rather, Plaintiffs identify several facts that Defendants
purportedly knew about the service contracts. More
specifically, Plaintiffs allege that Bloom had information
about (1) the cost to replace fuel cells; (2) the average
fuel cell life; (3) the length of time of an average service
contract; (4) the average number of times fuel cells
are replaced; (5) the current replacement cycle; (6) the
cumulative install base; and (7) the cost to replace the
Energy Servers. See SAC at ¶¶ 69-73. Plaintiffs allege
that based on these “known” facts, Defendants could
have—and should have—estimated the costs of the service
contracts and disclosed these contingent liabilities in the
Registration Statement. Plaintiffs then conclude, without
explanation, that the contingent liabilities from these
service contracts totaled $2.9 billion. Id. at ¶ 64.
The allegations about Defendants’ alleged knowledge,
however, are conclusory and belied by other allegations
in the complaint. For example, Plaintiffs contend that
the service contracts “typically last[] from 10 to 21
years and can last as long as 25 years,” in total, and are
renewed each year at the customer’s option. SAC at ¶¶ 63,
68 (emphasis added). But Plaintiffs fail to explain how
42a
Appendix B
Defendants could meaningfully estimate the length of
future contracts from such a large range. Plaintiffs also
suggest that Bloom knew the estimated life of its Energy
Servers and fuel cells because it had to replace some of
its earlier generation systems. See id. at ¶¶ 69-70. But as
Plaintiffs’ allegations inherently acknowledge, Bloom also
had newer systems in place, and Plaintiffs do not explain
how Defendants could extrapolate to determine the life
or replacement schedule for all its Energy Servers. See
id. at ¶ 75 (statement by Bloom that “[o]ver the years we
have made steady improvements in our fuel cell lives . . .”).
Instead, Plaintiffs appear to suggest that because
Hindenburg Research came up with an estimate of
contingent liabilities from the service contracts in
September 2019, Bloom should have done so as well. See
SAC at ¶¶ 72-73. Plaintiffs explain that the Hindenburg
authors estimated that Bloom had “$2.2 billion in
undisclosed servicing liabilities that the market has
missed.” Id. at ¶ 72. Plaintiffs do not explain how the
authors arrived at this figure or why it constitutes a
reasonable estimate. Plaintiffs also fail to provide any
information regarding the authors of this report or their
qualifications.
In opposition, Plaintiffs suggest that the Court
should simply consider the Hindenburg report—and
its analysis—in its entirety. See Dkt. No. 138 at 17. But
the report indicates that Hindenburg Research holds a
short position in Bloom’s stock. See Dkt. No. 138-4, Ex.
29 (“Hindenburg Report”) at 2, 51. The report recognizes
that Hindenburg “therefore stands to realize significant
43a
Appendix B
gains in the event that the price of any [Bloom stock]
declines.” Id. at 51. In short, Plaintiffs do not adequately
explain why this self-interested report supports their
claim of falsity. See In re Nektar Therapeutics, No. 18-CV06607-HSG, 2020 WL 3962004, at *10 (N.D. Cal. July 13,
2020). Even if the Court were to consider the report, it says
nothing about Bloom’s inquiry into or knowledge about
how to account for the service contracts under GAAP.
Plaintiffs have failed to plead that any of the opinion
statements about Bloom’s contingent liabilities were false
or misleading under Omnicare. The Court GRANTS the
motion to dismiss on this basis.
b.
Managed Service Agreements
Plaintiffs also challenge Defendants’ accounting for
Bloom’s Managed Service Agreements (“MSAs”). Under
an MSA, Bloom sells its Energy Servers to a bank, which
then leases the equipment back to the company. See SAC
at ¶ 400. Bloom, in turn, subleases the equipment to a
customer. Id. Under the MSAs, the customer pays the
bank a fixed fee for its use of the Energy Server and
also pays Bloom for its maintenance and operation of
the Energy Server. Id. at ¶¶ 81, 400. Plaintiffs note that
Bloom was therefore both “lessee” and “lessor” in this
arrangement. See id. at ¶ 81. Plaintiffs allege that when
Bloom filed its Registration Statement, it accounted for
MSAs as operating leases instead of capital leases, in
violation of GAAP. Id. at ¶¶ 81-93 (citing ASC 840-10-10-1,
ASC 840-10-25-1). Plaintiffs note that capital leases are
generally less desirable because companies must record
44a
Appendix B
both the asset and corresponding liability on its books.
See id. at ¶ 88. Plaintiffs assert that by accounting for the
MSAs as operating leases, Bloom improperly recognized
revenue from the “sales” of Energy Servers to the banks
upfront, rather than recognizing any revenue over the
term of the MSA. See id. at ¶¶ 89-91. Doing so, Plaintiffs
argue, materially misrepresented Bloom’s financial
position. Id. at ¶ 81.
Prior to late 2019, Bloom had concluded, and PwC
had concurred, that its treatment of MSAs was proper.
Id. at ¶ 400. But on February 12, 2020, Bloom announced
that it would “restate” certain prior financial statements
from 2018 and 2019 and “revise” other prior financial
statements for 2016, 2017, and 2018 to account for the
change in treatment of certain MSAs as financings
(i.e., loans from the banks rather than sales). Id. Bloom
acknowledged that this would alter its reported losses
and the timing of revenue recognition, with the company
recognizing revenue over the loan term as customers made
payments to the banks. See id.
Here too, Defendants urge that Omnicare applies
because Bloom’s treatment of the MSAs and its recognition
of revenue from them was the product of accounting
judgments. See Dkt. No. 130 at 17-19.
Plaintiffs respond that Bloom’s “statements of
total revenue, net loss, and net loss per share” are not
statements of opinion, but rather objective facts. See Dkt.
No. 138 at 7-8. However, the considerations underlying
these figures—such as which GAAP provisions apply and
45a
Appendix B
how to apply them—may require the exercise of judgment.
See Align, 856 F.3d at 621; In re AmTrust Fin. Servs., Inc.
Sec. Litig., No. 17-CV-1545 (LAK), 2019 WL 4257110, at
*14 (S.D.N.Y. Sept. 9, 2019). As the court in In re AmTrust
Financial Service aptly explained:
If the numbers underlying that data consist
only of figures that were then presently known,
fixed, or definite — e.g., the price of widgets and
number of widgets sold in a previous month —
then any resulting data would be a statement
of fact. Likewise, if the relevant provision of
GAAP or ASC topic applied to produce the data
called only for the application of or evaluation
under objective criteria, then the resulting
data would be a statement of fact. If, however,
the relevant accounting guidance called for
the exercise of judgment, then the resulting
data would be a statement of opinion. And, if
determining the relevant provision of GAAP
to apply in a certain area of accounting or with
respect to a certain transaction involved a
subjective evaluation, then any data resulting
from that application of GAAP would be a
statement of opinion.
In re AmTrust, 2019 WL 4257110, at *14. Plaintiffs assert
that the relevant ASC provisions here are “very clear
bright line provisions for when a lease should be classified
as a capital lease.” See SAC at ¶ 84; see also Dkt. No. 138
at 8-9.
46a
Appendix B
First, Plaintiffs point to ASC 840-10-25-1, which lists
four criteria to consider when determining whether to
classify a lease as a capital lease:
a. The lease transfers ownership of the
property to the lessee by the end of the lease
term.
b. The lease contains a bargain purchase
option.
c. The lease term is equal to 75 percent or
more of the estimated economic life of the
leased property.
d. The present value at the beginning of the
lease term of the minimum lease payments
. . . exceeds 90 percent of the excess of the
fair value of the leased property to the lessor
at lease inception . . . .
See Dkt. No. 131-15, Ex. 16 (“ASC 840”) at 2. As Plaintiffs
note in the complaint, “[i]f, at its inception, a lease meets
any of the [] four criteria, it is classified as a capital
lease by the lessee.” SAC at ¶ 84. The complaint focuses
exclusively on the third criterion. Plaintiffs assert that
“[t]he length of Bloom Energy’s MS[A] leases was 6 - 10
years, well in excess of the 75% of the Energy Servers’
actual useful life.” See SAC at ¶ 89. Plaintiffs therefore
conclude that Bloom should have treated the MSAs as
capital leases. Id.
47a
Appendix B
Second, Plaintiffs cite ASC 840-10-10-1, which
describes “[t]he objective of the lease classification
criteria” in ASC 840. See id. at ¶ 84; see also Dkt. No. 138
at 8. The provision states that the classification criteria
“derive[] from the concept that a lease that transfers
substantially all of the benefits and risks incident to the
ownership of property should be accounted for as the
acquisition of an asset and the incurrence of an obligation
by the lessee and as a sale or financing by the lessor. All
other leases should be accounted for as operating leases.”
See SAC at ¶ 83 (quoting ASC 840-10-10-1). Plaintiffs
argue that a “sale-leaseback” transaction like the MSAs
should not be treated as an operating lease because “the
seller-lessee never parted with the asset.” See id. at ¶ 86.
Plaintiffs further argue that compliance with ASC 840-1010-1 is a threshold requirement, and the Court need not
consider any other provisions in ASC 840 to determine
whether Defendants accurately classified the MSAs. See
Dkt. No. 130 at 8.
By its terms, however, ASC 840-10-10-1 merely states
the “objectives” underlying the more detailed provisions
that follow. Despite Plaintiffs’ urging, it does not appear to
provide the definitive method for classifying a lease. ASC
840-40-25-4, for example, appears to specifically address
a sale-leaseback and the recognition of related profits:
If the seller-lessee retains, through a leaseback,
substantially all of the benefits and risks
incident to the ownership of the property sold,
the sale-leaseback transaction is merely a
financing. The sellor-lessee shall not recognize
48a
Appendix B
any profit on the sale of an asset if the substance
of the sale-leaseback transaction is merely a
financing. Accordingly, this Subtopic does not
permit any profit to be recognized on a sale
if a related leaseback of the entire property
sold meets one of the criteria in paragraph
840-10-25-1.
Id. at 16 (emphasis added). This provision thus refers back
to the four criteria discussed above in ASC 840-10-25-1.
In their opposition brief, Plaintiffs do not even
reference ASC 840-10-25-1. Nor do they explain why the
application of this provision does not require the exercise
of judgment. Although a somewhat close call, in the
Court’s view, ASC 840-10-25-1 appears to involve complex
considerations of the specific terms of the MSAs and the
value of the Energy Servers.
Rather than discuss the ASC provision directly,
Plaintiffs rely heavily on the fact that Bloom decided to
revise and restate its financial statements as evidence
that Bloom’s treatment of the MSAs was “objectively
incorrect.” See Dkt. No. 138 at 8-10, & n.5-6. Plaintiffs
point out that “[a] restatement is the ‘process of revising
previously issued financial statements to reflect the
correction of an error in those financial statements.’” Id.
at 9 (quoting ASC 250-10-20). But Plaintiffs do not cite any
case law supporting their theory that a restatement alone
can establish that a statement is one of fact rather than of
opinion. As Defendants note, opinion statements can still
be wrong such that a company may seek to correct them.
49a
Appendix B
This does not, however, transform the opinion statement
into an objective statement of fact. The Supreme Court
in Omnicare implicitly recognized this, explaining that
“an investor cannot state a claim by alleging only that an
opinion was wrong; the complaint must as well call into
question the issuer’s basis for offering the opinion.” See
Omnicare, 575 U.S. at 194.
Plaintiffs have not alleged facts calling into question
Defendants’ basis for concluding that the MSAs could be
treated as sales rather than capital leases. Plaintiffs do
not sufficiently explain how the MSAs meet any of the four
criteria in ASC 840-10-25-1. In the complaint, Plaintiffs
do not specify the economic life of an Energy Server, a
necessary input to determine whether the lease term is
at least 75% of the Energy Servers’ estimated economic
life under the third criterion. As Defendants point out, the
only insight Plaintiffs provide is that Bloom represented
that the Energy Servers had useful lives of 15 to 21 years.
See SAC at ¶ 469. Even assuming a useful life of 15 years,
Plaintiffs have not established that the MSAs meet the
75% of estimated useful life threshold in ASC 840-10-251. And Plaintiffs do not allege that the MSAs meet any of
the other three criteria. The Court therefore GRANTS
the motion to dismiss regarding the treatment of Bloom’s
MSAs.
ii.
Fuel Cell Life
Plaintiffs next challenge Bloom’s representations
about the Energy Servers’ fuel cell life. In the Registration
Statement, Defendants included a letter from then-CFO
50a
Appendix B
Randy Furr. See SAC at ¶ 75; see also Dkt. No. 131-1, Ex. 1
at 68-70. In the letter, Mr. Furr acknowledged that Bloom’s
service business “experienced losses” historically as it
installed Energy Servers that had a lifespan below the
company’s break even point. See Dkt. No. 131-1, Ex. 1 at 68.
However, Mr. Furr expressed optimism that Bloom could
break even in its service business in the future “provided
the time between [fuel cell] stack replacements across all
of our fleet is five years or better.” Id. Mr. Furr explained
that although earlier generations of Bloom’s fuel cells had
needed replacement “typically [every] 12 to 18 months,”
“[o]ver the years we have made steady improvements in
our fuel cell lives, and from 2017 onwards we expect to
average over five years between replacements.” See id.
Plaintiffs assert that these statements were materially
false and misleading because in reality, “Bloom Energy
routinely replaced its fuel cells after just three years.” See
SAC at ¶ 77. Here again, Plaintiffs base their allegations
on the Hindenburg Research report. See id. at ¶ 76. In
their September 2019 report, the Hindenburg authors
explained that they had collected public utility records
for New York and California for generators installed after
2016, covering 35 of Bloom’s projects. Hindenburg Report
at 10-12, 46-48; see also SAC at ¶ 76. The authors concluded
that “[a]fter aggregating this data, [they] found that even
Bloom’s newest fuel cells will degrade below replacement
thresholds in under 3 years . . . .” Hindenburg Report at
11. The authors also cited to several unnamed experts who
said that they would be “highly skeptical” of solid oxide
fuel cells lasting five years or longer in the field. Id. at 11.
51a
Appendix B
Defendants again argue that Plaintiffs are challenging
statements of opinion. See Dkt. No. 130 at 13-14. They point
out that in the letter, Mr. Furr states that “we expect to
average over five years between [fuel cell] replacements”
from 2017 onward. See Dkt. No. 131-1, Ex. 1 at 68 (emphasis
added). The letter further said “we believe we can breakeven in our service business provided the time between
stack replacements across all of our fleet is five years
or better.” Id. (emphasis added). Plaintiffs respond that
Mr. Furr’s statements, taken in their entirety, contain
an embedded statement of fact that Defendants “saw
improvements in fuel cell life averaging five years between
replacements.” See Dkt. No. 138 at 21.
The Supreme Court in Omnicare recognized that the
use of “words like ‘I believe’” is not dispositive of whether
a statement is one of fact or opinion. See Omnicare, 575
U.S. at 185. For example, the Supreme Court provided
a hypothetical in which a CEO said “I believe our TVs
have the highest resolution available because we use a
patented technology to which our competitors do not
have access.” Id. The Court explained that the statement
not only affirms the CEO’s opinions about the company’s
TV resolution, “but also an underlying fact: that the
company uses a patented technology.” Id. Defendants do
not appear to contest that Mr. Furr’s statements contain
an embedded statement of fact like the hypothetical in
Omnicare. See Dkt. No. 145 at 6. And the Court agrees
that despite the use of the words “expect” and “believe,”
Mr. Furr’s letter represents that Bloom saw improvements
in fuel cell life. See Dkt. No. 131-1, Ex. 1 at 68. However,
the Court disagrees with Plaintiffs’ interpretation that
52a
Appendix B
Mr. Furr’s letter contains any embedded statement of
fact about how much improvement Bloom saw in fuel cell
life. Rather, Mr. Furr simply offered his opinion that
based on the improvement the company had seen in the
past, they expected “to average over five years between
[fuel cell] replacements” from 2017 onward. See Dkt. No.
131-1, Ex. 1 at 68.
Plaintiffs’ basis for concluding that this statement is
false appears to rest entirely on the Hindenburg report. As
the Court has already discussed, the authors of this report
are short sellers with a financial interest in highlighting
possible problems with Bloom’s business. See Hindenburg
Report at 2, 51. The Hindenburg authors state that they
analyzed California and New York public utility data. Id.
at 10-11. Given the deterioration that the authors saw in
the efficiency of Bloom’s newest generation fuel cells, the
authors explained that the cells were on track to need
replacement within three—not five—years. See id. As
Defendants note, however, this is just a projection. See
Dkt. No. 145 at 6. The public utility data does not appear
to bear on the veracity of Mr. Furr’s statement that Bloom
saw improvement in its fuel cell technology over time.
The Hindenburg authors also appear to rely on other
experts to buttress their analysis. The report cites to
unnamed experts who express skepticism that Bloom
could achieve an average fuel cell life over five years. See
id. The two quotations from “experts in the field” state
that they are “highly skeptical” and “doubt” Bloom’s claim.
Id. at 11. But critically, none of these experts claim to
have any experience with or knowledge of Bloom’s Energy
53a
Appendix B
Servers or their fuel cells. To the extent Plaintiffs rely on
these other anonymous experts, the Court does not find
this probative of falsity. The Court finds that Plaintiffs
have not plausibly alleged falsity as to Bloom’s average
fuel cell life and GRANTS the motion on this basis.
iii. Efficiency and Emissions
Plaintiffs also challenge statements that Bloom made
about the efficiency and emissions of its latest Energy
Server technology. See SAC at ¶¶ 96-103.
First, Plaintiffs challenge Defendants’ assertion in
the Registration Statement that the “latest generation of
[Bloom’s] Energy Servers” is capable of “beginning-of-life
efficiencies of 65%,” with an efficiency “range from 53%
to 65% over the project term depending on environmental
conditions and the age of the power modules.” See SAC at
¶ 97; see also Dkt. No. 131-1, Ex. 1 at 9, 14. To establish
the falsity of this statement, Plaintiffs cite a 2019 study
conducted by the University of Delaware in which the
author found that the actual operating efficiency of Bloom’s
fuel cells was only 45% in 2018. See SAC at ¶ 98; see also
Dkt. No. 131-21, Ex. 22. Defendants point out that in the
study, the author acknowledges that they did not evaluate
the newest model of Energy Server. See Dkt. No. 130 at
23. However, Bloom’s alleged misstatement was limited
to the “latest generation.” See SAC at ¶ 97. In their
opposition brief, Plaintiffs appear to acknowledge this
and do not explain why the University of Delaware study
is nonetheless evidence of falsity.
54a
Appendix B
Instead, Plaintiffs point out that the Hindenburg
report, which evaluated Energy Servers installed after
2016, found that “Bloom’s newer fuel cell installations” had
“a median starting efficiency of 58.3%,” which is below the
stated 65%. See Dkt. No. 138 at 22 (citing SAC at ¶ 76).
Defendants argue that the authors do not explain their
methodology. See Dkt. No. 145 at 13. However, the report
explains that the authors analyzed monthly performance
data from the California Self-Generation Incentive
Program and the New York State Energy Research and
Development Authority. See Hindenburg Report at 47. The
report also includes links to the reports, and notes how the
authors sorted the data to look at Bloom’s latest Energy
Servers. Id. Defendants also argue that the “58.3%
‘median’ figure does not show that the latest-generation
Energy Servers were not capable of 65% efficiency.” See
Dkt. No. 145 at 13. The Court is not persuaded. Defendants
no doubt disagree with the report’s conclusions and the
weight of the evidence Plaintiffs have pled. But at this
stage, Plaintiffs need only plead enough facts to make
it plausible that Bloom’s statement about the Energy
Servers was false, and they have done so.
Second, Plaintiffs challenge several of Bloom’s
statements regarding emissions. Plaintiffs identify
statements that (1) “Energy Servers deployed since 2012
running on natural gas produce nearly 60% less carbon
emissions compared to the average U.S. combustion power
generation”; and (2) “Energy Servers emit virtually no
criteria air pollutants, including NOx or SOx.” SAC at
55a
Appendix B
¶ 99. 5 Plaintiffs contend that these statements were false
because the Energy Servers in fact produce pollutants
such as nitrogen oxides, volatile organic compounds, and
hazardous solid waste. See id. at ¶ 100. Plaintiffs identify
recent litigation in the Superior Court of California in
which concerns were raised about the pollution from
Bloom’s technology. See id. (citing Bloom v. City of Santa
Clara, Superior Court of California, County of Santa
Clara, 19-cv-348838). The Hindenburg report also noted
that the Servers “generate more CO2 than the electric
grid in key states they operate in and produce CO2 levels
comparable to modern natural gas power plants.” Id. at
¶ 101. And in February 2020, 16 Delaware state senators
wrote to the Department of Natural Resources and
Environmental Control, expressing concern over Bloom’s
alleged misrepresentations about the Energy Servers’
CO2 emissions. See id. at ¶ 102.
Defendants argue that Plaintiffs are “comparing
apples to oranges,” and that none of the cited sources
establish that Bloom’s statements were false and
misleading. See Dkt. No. 130 at 23-24. Defendants urge
that Bloom “never represented
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