Securities Regulation Daily Wrap Up, ACCOUNTING AND AUDITING—9th Cir.: Shareholders lose against PricewaterhouseCoopers on strict liability claim, (Nov 12, 2025)

By Jay Fishman, J.D.

Omnicare established that independent accountants’ sincerely held opinions are protected from Securities Act Section 11 strict liability.

The United States Court of Appeals for the Ninth Circuit extended California’s Northern District Court’s decision for the defendants to accounting firm PricewaterhouseCoopers (PwC), which the plaintiff shareholders exclusively named as the sole defendant on appeal. The defendant company’s own auditors prepared the “suspect” financial statements, so the appellate court gave weight to: (1) PwC’s expressing an opinion about those financial statements; and (2) the U.S. Supreme Court’s 2015 Omnicare, Inc. v. Laborers Dist. Counsel Const. Indus. Pension Fund case which held that independent accountants are protected from liability for their opinions (not factual statements) made about underlying documents as long as the opinions are sincerely held. The court debunked the plaintiffs’ argument that because PwC’s opinion consisted of numbers, the opinion was actually a statement of facts (Hunt v. PricewaterhouseCoopers, Ltd., No. 24-3568 (9th Cir. Nov. 10, 2025)).

Defendant company retains PwC following IPO. Defendant Bloom Energy, a designer, manufacturer and seller of fuel-cell servers that convert natural gas into electricity for on-site power generation, prepared its own financial statements for fiscal years 2016, 2017 and first-quarter 2018, during which time it conducted an IPO to change its previous private company status to public. In light of the IPO and some other factors, the company changed its revenue recognition method and retained PwC to express an opinion about the company’s financial statements in light of those factors.

Shareholders’ initial lawsuit. The plaintiff shareholders, suspecting the company’s executive officers made false and misleading representations and omissions about recognized revenue in the company’s 2018 and 2019 registration statements, brought a class action suit against them for fraud under Exchange Act Section 10(b) and Securities Act Section 11. While PwC was not a named defendant in this lawsuit, the lower court found PwC’s audit opinion inactionable under Omnicare, declaring that PwC’s opinion said only that Bloom Energy’s financial statements “present fairly, in all respects, the financial position of the Company and are the responsibility of Bloom Energy’s management, and that PwC’s certification of the financial statements was not a guarantee that they were accurate but rather was limited to the conclusions of the audit opinion.

The plaintiffs settled their claims with all defendants except PwC, against whom it filed this appeal. But on appeal, the shareholders dropped the Section 10(b) claim, acknowledging that the defendant company and not PwC prepared the financial statements and, instead, asserted that PwC was strictly liable under Section 11(a)(4) in connection with the company-prepared 2017 registration statement.

Appellate court: PwC exonerated from strict liability. The court began by proclaiming that Section 11 is a strict liability statute for the securities’ issuers, company directors and partners without requiring proof of intent, negligence or scienter. But other non-issuer defendants such as experts, e.g., accountants, have statutory defenses pertaining to their reasonable investigation and belief in the accuracy of the registration statement. Essentially, the court said, only “issuers are held strictly liable for damages resulting from misrepresentations in a registration statement.”

Turning to the experts themselves, the court stated that Section 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 statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, report, or valuation, which purports to have been prepared or certified by him.” But the court remarked on a key point here: that Congress intended for negligence, not strict liability, to be the standard for accountants—whether or not they prepared or certified the registration statement. And with the negligence standard, the court asserted, comes a built-in due diligence defense for accountants and other experts. And moreover, the due diligence defense is consistent with Omnicare.

Applying Omnicare to the due diligence defense, the appellate court here relied on the Supreme Court’s holding that excluded statements of opinion from liability. Specifically, 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.

Finally, in applying Omnicare and the due diligence defense to PwC, the appellate court concluded that the plaintiffs’ arguments fail because: (1) PwC did not prepare the registration statement (no party disputed this); (2) certifying the accuracy of the company’s registration statement under Section 11 does not require PwC to guarantee the documents were free from error; and (3) PwC reasonably believed the truth of its opinion when it gave that opinion, namely that the company followed the proper accounting principles. Because of the above three circumstances, the court determined that PwC’s opinion was a sincerely held belief in accordance with Omnicare.

This case is No. 24-3568.

Judge: Smith, N. R.

Attorneys: Nicholas I. Porritt (Levi & Korsinsky, LLP) for James Everett Hunt, Juan Rodriguez, Kurt Voutaz, Joel White, Andrew Austin, Scott Kline and Ryan Fishman. Lisa Bugni (King & Spalding LLP) for PricewaterhouseCoopers LLP [PwC].

Companies: PricewaterhouseCoopers LLP (PwC); Bloom Energy Corp.; JP Morgan Securities, LLC; Morgan Stanley Smith Barney, LLC; Credit Suisse Securities (USA) LLC; KeyBanc Capital Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., Robert W. Baird & Co. Inc., Cowen and Co., LLC, HSBC Securities [USA] Inc. and Oppenheimer & Co. Inc.

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