|On May 22, 2023, Judge Beth Freeman of the United States District Court for the Northern District of California granted PwC’s motion to dismiss claims under Section 11 of the Securities Act and Sections 10(b) and 14(a) of the Exchange Act relating to a De-SPAC registration statement filed by View, Inc., a manufacturer of “smart” glass panels. The court held that that the Supreme Court’s Omnicare decision applied to PwC’s audit reports and dismissed all claims against PwC.
In June 2022, View disclosed that its previously reported liabilities associated with warranty-related obligations, and the cost of revenue associated with the recognition of those liabilities, were materially misstated. The Company further disclosed that the Company’s former Chief Financial Officer and certain other former accounting staff had intentionally failed to disclose certain information to the Board of Directors and PwC regarding the applicable costs incurred and expected to be incurred in connection with the warranty-related obligations. In light of these findings, View restated its 2019 and 2020 financial statements previously audited by PwC.
The court first held that the alleged false statements in PwC’s audit reports were statements of opinion under Omnicare. The court pointed to the language in PwC’s audit reports explicitly identifying the statements as opinions, and further noted that “GAAS and GAAP are a collection of broad standards [on] which reasonable professionals planning or conducting an audit reasonably and frequently could disagree.” Applying Omnicare, the court held that PwC’s audit report statements did not rest on the type of “underlying, verifiable fact[s]” necessary to constitute “embedded statements of fact.” The Court further held that plaintiff failed to plead that PwC’s audit report omitted any material facts about PwC’s inquiry or knowledge concerning its opinions. In addition, the Court held that plaintiff’s generalized allegations that PwC violated audit standards and ignored purported “red flags” did not give rise to a strong inference of scienter.
The case is Mehedi v. View, Inc., 21-cv-06374 (N.D. Cal. May 22, 2022). Plaintiff is represented by Glancy Progngay & Murray LLP. PwC is represented by Hueston Hennigan LLP. View, Inc. is represented by Munger, Tolles & Olson LLP. A copy of the decision is attached.