The Ninth Circuit on Monday affirmed the dismissal of claims that investors in Bloom Energy Corp. filed against PriceWaterhouseCoopers, saying that as the renewable energy company's outside accountant, PwC couldn't be held strictly liable for financial statements simply because it certified them.

In a published opinion, U.S. Circuit Judge Milan D. Smith Jr. wrote on behalf of a three-judge panel that Section 11 of the Securities Exchange Act does not impose strict liability on accountants for a client's financial statements or information in a registration statement, regardless of whether the accountant prepared or certified them.

And under U.S. Supreme Court precedent in Omnicare Inc. v. Laborers District Council Construction Industry Pension Fund, an independent accountant is also protected from liability for opinions it made about the documents "as long as the opinion was sincerely held," Judge Smith wrote.

Judge Smith wrote that PwC is not liable in this case as a certifier of Bloom Energy's financial statements because Section 11 "does not require that PwC, by certifying the financial statements, guarantee that the documents provided by Bloom Energy were free from error."

An audit opinion PwC made on Bloom Energy financial statements also "did not make any material misstatements of fact or omissions but was rather a subject of opinion" based on a "subjective judgment," Judge Smith wrote.

Bloom Energy designs, manufactures and sells fuel cell servers that convert natural gas or biogas into electricity, according to the Ninth Circuit opinion.

The Ninth Circuit's ruling stems from a proposed class action that current and former Bloom Energy stockholders filed in 2019 against the renewable energy company, several of its officers and directors and underwriters of its 2018 initial public offering.

According to the latest version of the suit, filed in April 2020, Bloom Energy made "materially false and misleading statements" that artificially inflated its stock price, including by misleading investors about construction delays that were "plaguing its business," misrepresenting the life cycle of its fuel cells and misrepresenting its energy savers' efficiency and pollution outputs.

The investors alleged that the misrepresentations and omissions allowed Bloom Energy to report decreased liabilities and increased revenue in financial statements included in its registration statement and those that were published afterward.

They said Bloom Energy was able to go public at a higher price due to "greater interest in its IPO, and to continue to inflate its stock price until the truth became known through revelations of third parties and ultimately defendants' admission on Feb. 12, 2020, that Bloom Energy's financial statements dating back to 2016 were misstated."

Bloom Energy's stock price declined from its IPO price of $15 per share to a 52-week low of $2.44 per share as a result of the misconduct, the investors alleged.

Meanwhile, PwC, which the investors said helped Bloom Energy prepare its financial statements for the IPO, was "strictly liable" to investors for actionable statements and omissions in Bloom Energy's registration statement, the investors asserted.

The investors settled their claims with all defendants except PwC after a California federal judge partially dismissed claims against the Bloom Energy parties and all claims against PwC.

In May 2024, the U.S. District Court for the Northern District of California entered final judgment and tossed all claims against PwC, prompting the investors' appeal to the Ninth Circuit.

Among the investors' arguments on appeal was that the lower court's decision to dismiss violated the "explicit language" of the Securities Act, was contrary to U.S. Supreme Court precedent and undermined the "entire purpose of the regulatory and liability regime minted by Congress."

They argued that PwC was liable for false statements in Bloom Energy's 2017 pre-IPO financial statements concerning revenue, net loss and net loss per share because PwC had certified them in the registration statement.

The investors, on appeal, challenged three line items referenced in Bloom Energy's registration statement that related to whether managed services agreements in the case should be classified as operating or capital leases, according to the Ninth Circuit.

But the Ninth Circuit agreed with the lower court's finding that the line items were opinions that were not actionable.

It said that because investors failed to show that Bloom Energy's opinions were based on untrue statements or information that the company did not believe, the investors "cannot demonstrate that PwC certified untrue facts or information."

Judge Smith said the investors thus "failed to establish liability for PwC's opinion."

"The record demonstrates that the classification of [managed service agreements] was a judgment call, and the registration statement thoroughly explained how it reached the classification," Judge Smith wrote. "PwC was reasonable under the circumstances to certify Bloom Energy's classification based on the evidence at that time."

U.S. Circuit Judges Milan D. Smith Jr. and N. Randy Smith and U.S. District Judge Douglas L. Rayes of the District of Arizona, sitting by designation, sat on the panel for the Ninth Circuit.

A PwC spokesperson told Law360 on Monday that the company is "pleased with the court's thoughtful and comprehensive rejection of the plaintiffs' radical attempt to expand auditor liability under Section 11."

"As the court correctly held, auditors are responsible only for their statements, not for the line items in an issuer's financial statements," the spokesperson said. "The court rightly ruled that the proposed unprecedented expansion advocated by plaintiffs was inconsistent with the statute, Supreme Court precedent and the role that auditors play in the securities offering process."

Counsel for the investors did not immediately respond to a request for comment.

The investors are represented by Nicholas I. Porritt and Adam M. Apton of Levi & Korsinsky LLP, and by Reed R. Kathrein, Lucas Gilmore and Kevin K. Green of Hagens Berman Sobol Shapiro LLP.

PwC is represented by E. Joshua Rosenkranz, Eliza Lehner, Jodie C. Liu and Edward H. Williams II of Orrick Herrington & Sutcliffe LLP, and by Lisa Bugni of King & Spalding LLP.

The case is James Everett Hunt et al. v. PricewaterhouseCoopers LLP et al., case number 24-3568, in the U.S. Court of Appeals for the Ninth Circuit.