A California federal judge has thrown out a proposed investor class action against PG&E officers, directors and underwriters that blamed stockholder losses following deadly wildfires on previous statements by PG&E officials about the utility's safety practices, but said they could try a fifth time.

In his Tuesday order, U.S. District Judge Edward J. Davila granted motions from the defendants to escape the operative complaint, saying the investors didn't show that a Pacific Gas and Electric Co. officer made the allegedly false statements, nor even that the statements were indeed false.

The judge noted that the plaintiffs had pointed the finger at PG&E's former deputy general counsel and chief ethics and compliance officer Julie Kane as the officer who "controlled and authorized all of PG&E's statements regarding compliance." Out of 19 allegedly false or misleading statements, she reviewed and signed off on 12, and was responsible for overseeing PG&E's compliance program and reporting, the suit claims.

An officer may only be held liable for fraud under Section 10(b) of the Securities Exchange Act if they made the statements at issue, the judge said. The complaint doesn't sufficiently plead that, he said.

"To be sure, Kane's high-level position as CECO and her oversight over the utility's compliance program strongly suggest that she had a significant role in all PG&E compliance matters," the judge stated. "But oversight does not necessarily entail control over the content of every statement regarding compliance or their delivery."

In addition, it appears that Kane's compliance responsibilities were focused on internal reporting, Judge Davila said.

"Even assuming Kane had external reporting duties, the court cannot readily infer that those duties extend to making all of PG&E's compliance-related statements," he said.

After finding that the operative complaint failed to adequately allege that Kane made the bulk of the statements at issue, the judge followed with an analysis of the alleged misstatements, finding that the plaintiffs didn't sufficiently plead that the majority were false or misleading.

To start, he said, the investors didn't adequately plead that statements made by PG&E officials about the utility "doubling" its vegetation management spending were false.

The plaintiffs also said PG&E falsely assured the public that it complied with safety regulations, when it knew it was violating those laws, according to Judge Davila.

He said courts routinely find general statements about a continued or heightened focus on compliance efforts to be examples of "inactionable corporate optimism," because they are not detailed factual assertions. One statement, about implementing additional precautionary measures to reduce wildfire threats, was nothing more than "inactionable puffery," the judge said.

Similarly, statements by former PG&E CEOs Tony Earley and Geisha Williams to shareholders that the utility had "continued to demonstrate leadership and commitment on safety" could also be seen as puffery, the judge said.

The operative complaint also insufficiently pled falsity as to some statements related to a state regulatory requirement that PG&E develop a protocol for deenergizing power lines when conditions could lead to extreme fire, the decision says.

The suit claims that before a 2018 fire in Butte County, PG&E didn't execute the protocol that it said it had established.

Based on the evidence before the court, the judge said, "the more likely explanation" is that PG&E did not believe the criteria had been met to enact the protocol.

"Even if hindsight has revealed that determination to be incorrect, the securities laws do not permit plaintiffs to allege falsity based on PG&E's business judgment," Judge Davila said.

In another example, related to California's 2017 North Bay Fires, the plaintiffs claimed that now-retired senior vice president of electric operations Pat Hogan made a bogus statement in 2015 to a California Senate committee when he said PG&E was "just about done with" implementing a program that disabled power switches in areas at high risk for wildfires.

That statement was a prediction, the judge noted.

"That the recloser program had not been completed prior to the North Bay Fires in 2017, which were caused by an operative recloser, does not render false the statement made two years prior," the decision states.

This consolidated action includes claims from lead plaintiff the Public Employees Retirement Association of New Mexico and named plaintiff New York County, on behalf of the County of York Retirement Fund, City of Warren Police and Retirement System and Mid-Jersey Trucking Industry & Local No. 701 Pension Fund.

In January 2014, California declared a state of emergency due to drought, and the California Public Utilities Commission ordered PG&E to manage vegetation around its power lines to mitigate the wildfire risk created by the drought, Judge Davila noted.

"That risk was realized in September 2015 when the Butte Fire burned nearly 71,000 acres, destroyed more than 921 buildings, and caused two deaths," he said.

In April 2016, the California Department of Forestry and Fire Protection issued a press release concluding that the Butte Fire was caused by PG&E's safety violations.

Then, in October 2017, the North Bay Fire blazed across nine counties, destroying almost 8,900 buildings and killing 44 people. Cal Fire determined that 11 of the fires were caused by the utility's violations of state safety regulations, the judge noted.

One year later, the Butte County Camp Fire burned more than 153,000 acres and led to the deaths of 85 people, according to the decision.

Shortly after the plaintiffs filed their consolidated class action and second amended consolidated class action in November and December 2018, PG&E commenced voluntary Chapter 11 bankruptcy proceedings in the Northern District of California in January 2019.

Those proceedings triggered an automatic stay of the investors' lawsuit as to PG&E, Tuesday's decision underscores.

In September 2022, the court stayed the action, citing the overlap with the bankruptcy proceedings. That stay order was vacated by the Ninth Circuit, renewing the motions to dismiss.

After PG&E filed for Chapter 11, the bankruptcy court ordered it to proceed in alternative dispute resolution with the proposed class members who sued it.

In February 2020, the CPUC slapped PG&A with $2.137 billion in penalties, the largest it had ever assessed, for the bankrupt utility's role in igniting the wildfires.

A PG&E spokesperson told Law360 on Wednesday that the company "is currently considering the impact the district court ruling will have on the ongoing securities claims asserted against PG&E in the bankruptcy."

Representatives for the other parties did not respond to requests for comment Wednesday.

The proposed class and lead plaintiff Public Employees Retirement Association of New Mexico are represented by Thomas G. Hoffman, Jr., Thomas A. Dubbs and Michael P. Canty of Labaton Keller Sucharow LLP, and James M. Wagstaffe of Adamski Moroski Madden Cumberland & Green LLP.

The Securities Act plaintiffs are represented by Willow E. Radcliffe, Kenneth J. Black, Hadiya K. Deshmukh, Hailey S. Zanutto, Darren J. Robbins and Alexandra S. Bernay of Robbins Geller Rudman & Dowd LLP, and Thomas C. Michaud of VanOverbeke Michaud & Timmony PC

PG&E is represented by Michael J. Reiss and James E. Brandt of Latham & Watkins LLP.

The PG&E officers are represented by Steven S. Scholes, Paul M.G. Helms, Jason D. Strabo and Caitlyn M. Campbell of McDermott Will & Schulte LLP.

The PG&E directors are represented by Stephen P. Blake, Jonathan K. Youngwood and Nicholas S. Goldin of Simpson Thacher & Bartlett LLP.

The PG&E underwriters are represented by Neal A. Potischman, Charles S. Duggan, Dana M. Seshens and Craig T. Cagney of Davis Polk & Wardwell LLP.

The case is In re: PG&E Corp. Securities Litigation, case number 5:18-cv-03509, in the U.S. District Court for the Northern District of California.