Gillam

MEMORANDUM *

We affirm the dismissal of Plaintiffs’ Second Amended Complaint alleging violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder. Even if Defendants engaged in improper accounting, which we do not decide, Plaintiffs cannot, as a matter of law, establish that the challenged earnings statements were materially misleading. Such a ruling on a motion to dismiss is rare, but not unprecedented. See, e.g., Epstein v. Washington Energy Co., 83 F.3d 1136 (9th Cir.1996).

Plaintiffs contend that PG & E Corporation’s consolidated earnings figures for the second and third quarters of 2000 were materially misleading because they failed to reflect substantial “undercollections” incurred by Pacific Gas & Electric Company *712 (the “Utility”). 1 These undercollections resulted from the combination of California’s retail energy rate freeze, enacted under Assembly Bill 1890, and spiking wholesale energy rates. Plaintiffs concede, however, that Defendants disclosed the existence and extent of the Utility’s undercollections. Defendants explained to investors that they were treating those undercollections as regulatory assets on the…