Roberts v. Bloom Energy Corporation

Background

Elissa M. Roberts initially filed this securities class action for people who purchased or otherwise acquired Bloom Energy Corporation common stock during the company’s July 25, 2018 initial public offering. The original complaint asserted claims under Sections 11 and 15 of the Securities Act of 1933 against Bloom Energy and certain officers and directors. The court later appointed James Everett Hunt as lead plaintiff and allowed him to file an amended complaint.

While investigating Bloom Energy’s operations, Hunt interviewed Dwight Badger, a co-founder of Advanced Equities. The opinion says Advanced Equities had raised more than $200 million for Bloom Energy several years before the offering. Badger said his involvement with Bloom Energy gave him knowledge of its operations and finances. The Securities and Exchange Commission had sanctioned Badger in 2012 for disseminating false information about Bloom Energy to investors. After Badger threatened to sue Bloom Energy in connection with that investigation, Badger and Bloom Energy entered a private settlement agreement in 2014.

The agreement included a confidentiality provision generally prohibiting Badger and other covered persons from making written or oral statements about Bloom Energy or other released parties without prior consent. It listed limited exceptions, including statements necessary for a formal employment application. Badger said Bloom Energy’s counsel had warned that discussing the company could lead to legal action for violating the agreement. Badger also said he had no intention of disclosing nonpublic, trade-secret, or proprietary information.

Motion to Limit the Confidentiality Agreement

Hunt moved to limit the scope of the 2014 settlement agreement so Badger could assist the plaintiffs’ investigation and discuss Bloom Energy. At the hearing, the court asked what authority it had to evaluate and potentially rewrite an agreement involving individuals who were not parties to the securities action. Counsel did not identify a legal basis, and the court found none.

The court stated that if Hunt later subpoenaed Badger after the pleadings were finalized, and Badger sought to quash the subpoena based on the settlement agreement, the court might then need to consider the agreement’s scope. In the meantime, the court said Badger was free to provide information if he believed he could do so consistently with his obligations under the agreement.

The court also rejected the argument that public policy required intervention to prevent Bloom Energy from effectively silencing potentially relevant witnesses. It noted that the Private Securities Litigation Reform Act generally stays discovery in private securities actions while a motion to dismiss is pending, unless particularized discovery is needed to preserve evidence or prevent undue prejudice. The court found that Hunt had not adequately explained why it needed to facilitate factual investigation before the pending motions to dismiss were resolved.

The court therefore denied the motion to limit the scope of the confidentiality agreement.

Motions to File Documents Under Seal

Bloom Energy filed administrative motions to seal portions of its opposition brief, a declaration by Jessica Valenzuela Santamaria, and a supplemental declaration by her. The documents concerned the confidentiality agreement and an arbitration proceeding arising from it.

Because the documents were connected to a nondispositive motion, the court applied the lower “good cause” standard. That standard requires a particularized showing that disclosure would cause specific prejudice or harm. Bloom Energy explained that the materials contained information it was obligated to keep confidential under the 2014 settlement agreement, including specific settlement terms and information about the related arbitration. The court found that the materials concerned a third-party agreement not at issue in the securities action and that public disclosure could expose Bloom Energy to potential contract liability.

The court found good cause to seal the selected portions and granted the administrative motions to file under seal. It ordered that the documents covered by the granted motions would remain under seal under the court’s local rule.