Courts Issue Key Rulings in Abengoa Investor Suit and BDO Auditor Liability Case

Robbins Geller Rudman & Dowd LLP secured favorable decisions for investors in two cases – one from the Second Circuit and another denying U.S. Supreme Court review of another Second Circuit decision – this week. The rulings may have significant implications for investors pursuing securities claims and for the scope of auditor liability under the federal securities laws.

Second Circuit Revives Investors’ Suit Against Abengoa

In Sherman v. Abengoa, S.A., the U.S. Court of Appeals for the Second Circuit revived a proposed securities class action against the now-defunct Spanish green infrastructure company Abengoa, holding that details from related Spanish criminal proceedings could be used to support U.S. investors’ fraud claims.

Investors alleged that Abengoa and certain of its executives misrepresented the company’s liquidity, cash flows, and overall financial condition in public statements to U.S. markets. The complaint contended that Abengoa overstated its financial strength and concealed severe liquidity issues that ultimately led to its insolvency.

The Second Circuit held that allegations from confidential witnesses, reports, and findings from other proceedings (here, the Spanish criminal case) may support inferences of fraudulent intent and false or misleading statements. The panel unanimously ruled that the district court erred by refusing to consider those allegations, and that – once taken into account – investors had plausibly alleged violations of §10(b) of the Securities Exchange Act of 1934 and §11 of the Securities Act of 1933. The decision remands the case for further proceedings.

Supreme Court Declines to Hear BDO Auditor Fraud Petition

In BDO USA, LLP v. New England Carpenters Guaranteed Annuity & Pension Funds, the U.S. Supreme Court declined to review a Second Circuit decision allowing securities fraud claims to proceed against BDO USA, LLP.

The underlying action arose from AmTrust Financial Services’ alleged violation of accounting rules for financial reporting that led to multi-year financial restatements. In addition to raising claims against AmTrust, investors alleged that BDO affirmatively and knowingly misrepresented its compliance with PCAOB auditing standards despite numerous deficiencies, thereby misleading the market about the reliability of AmTrust’s 2013 financial statements. The Second Circuit reversed the district court’s dismissal of the Securities Act claims against AmTrust while initially affirming dismissal of Exchange Act claims against BDO. In a rare grant of a petition for rehearing, the Second Circuit upheld the Exchange Act claims against BDO.

BDO petitioned the Supreme Court for review, warning that the Second Circuit’s ruling – which held that an auditor’s false claim that it conducted an audit in accordance with professional auditing standards may be “material” to investors under federal securities law – would set “a dangerous precedent” for public company auditors. By denying certiorari review, the Supreme Court left the Second Circuit’s decision intact, allowing claims to move forward and signaling potential exposure for auditors whose public filings misstate compliance with professional standards.

Sherman v. Abengoa, S.A., 156 F.4th 152 (2d Cir. 2025).

BDO USA, LLP v. New England Carpenters Guaranteed Annuity & Pension Funds, 2025 WL 2824451 (U.S. Oct. 6, 2025).