District of Delaware Denies BDO Motion to Dismiss Section 10(b) Claim Under Omnicare

On December 5, 2025, Judge Gregory Williams of the U.S. District Court for the District of Delaware overruled a magistrate judge’s recommendation to dismiss a putative securities class action against BDO USA relating to a private investment in a public entity (“PIPE”) offering conducted in connection with a SPAC merger. The investor plaintiffs alleged that the financial statements for the target company, audited by BDO and incorporated into the proxy statement for the transaction, were materially false and misleading because of mischaracterizations of certain equity transactions—an issue that the SEC later investigated and that led BDO to withdraw as the post-merger company’s auditor. The plaintiffs’ complaint alleged that BDO’s clean audit opinion was false and violated Section 10(b) because the firm would have discovered the alleged misclassifications “but for conducting either no audit or a sham audit.” 

In February 2025, Magistrate Judge Laura Hatcher issued a report recommending that the Court grant BDO’s motion to dismiss on the basis that BDO’s audit opinion was a statement of opinion under the Supreme Court’s decision in Omnicare and that none of the three Omnicare exceptions applied. We previously reported on Magistrate Judge Hatcher’s recommendation in the February 14, 2025 Auditor Liability Bulletin.

The Court adopted Magistrate Judge Hatcher’s recommendation that BDO’s audit opinion was a statement of opinion under Omnicare, but held that plaintiffs alleged particularized facts sufficient to show that BDO did not sincerely believe its audit opinion. Specifically, the Court held that plaintiffs’ allegations that “BDO knew of the auditing standards that required examination of the transaction at issue” but failed to comply with those standards “sufficiently supports that BDO did not sincerely believe the statements in its [audit opinion].”

Separately, the court adopted the magistrate judge’s recommendation that plaintiffs’ claims against certain individual defendants be dismissed because the plaintiffs failed to show that the defendants were “makers” of a false statement or that the defendants acted with scienter.

The case is Levy v. Luo, No. 23-cv-00653 (D. Del. Dec. 5, 2025). Plaintiffs are represented by Friedlander & Gorris and Robbins Geller Rudman & Dowd. BDO is represented by McDermott Will & Emery. The other defendants are represented by Paul, Weiss, Rifkind, Wharton & Garrison; Barnes & Thornburg; Berger McDermott; and Young, Conaway, Stargatt & Taylor. A copy of the opinion is available here.