Tindall v. Ahearn et al

Filing 45

ORDER granting #38 First Solar's Motion to Stay. Signed by Judge David G Campbell on 12/17/12.(TLJ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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In re First Solar Derivative Litigation,

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No. CV-12-00769-PHX-DGC
ORDER

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On September 14, 2012, nominal Defendant First Solar filed a motion to stay this

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derivative action pending resolution of a securities class action that involves substantially

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the same issues (Smilovitz v. First Solar Inc., et al., No. 2:12-cv-00555-DGC). Doc. 38.

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The motion has been fully briefed. Docs. 40, 42. For the reasons that follow the Court

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will grant Defendant’s motion and stay the derivative suit pending resolution of the class

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action.1

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I.

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Background.
First Solar manufactures solar panel modules.

On February 28, 2012, the

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company announced that losses from a manufacturing excursion or defect had been

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greater than the company anticipated and that the revenue and earnings for the fourth

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quarter of 2011 had been lower than expected. Doc. 38 at 6-7. The company also

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announced that it had increased its warranty reserve to account for additional product

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failures in hot climates. Id. The next day, First Solar’s stock prices decreased 11% and

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several lawsuits followed.

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Both the class action before this Court and this derivative suit allege that officers

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The request for oral argument is denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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and directors of First Solar withheld material information regarding the product defects,

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manipulated its cost-per-watt metric and warranty reserves, and engaged in insider

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trading. The derivative suit names additional director and officer defendants and includes

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several state law claims, but both the derivative suit and the class action rely on the same

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misrepresentations, omissions, and underlying facts.

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derivative suit for three reasons: (1) prosecuting this case now creates a risk of

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prejudicing the defense of the Securities Class Action, (2) Plaintiffs’ requested relief

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depends on the outcome of the Securities Class Action, and (3) because the cases are

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based on the same events and will require litigation of the same issues, staying this case

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will promote judicial efficiency. Doc. 38 at 11.

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II.

First Solar moves to stay the

Legal Standard.

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“A district court has discretionary power to stay proceedings in its own court.”

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Lockyer v. Mirant Corp., 398 F.3d 1098, 1109 (9th Cir. 2005) (citing Landis v. North

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American Co., 299 U.S. 248, 254 (1936)). The Court must weigh the competing interests

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affected by the granting or refusal of the stay, including “the possible damage which may

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result from the granting of stay, the hardship or inequity which a party may suffer in

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being required to go forward, and the orderly course of justice measured in terms of the

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simplifying or complicating of issues, proof, and questions of law which could be

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expected to result from a stay.” Id. (quoting CMAX, Inc. v. Hall, 300 F.2d 265 (9th Cir.

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1962)). The Court may also consider whether it is “efficient for its own docket and the

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fairest course for the parties to enter a stay pending resolution of independent

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proceedings which bear upon the case,” even if the issues in such proceedings are not

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necessarily controlling of the action before the Court. Id. (quoting Levya v. Certified

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Grocers of California, Ltd., 593 F.2d 857, 863-64 (9th Cir. 1979)). However, a “stay

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should not be granted unless it appears likely the other proceedings will be concluded

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within a reasonable time in relation to the urgency of the claims presented to the court.”

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Id. (quoting Levya, 593 F.2d. at 864).

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III.

Analysis.

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Defendant contends that litigating this derivative law suit at this time is not in the

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best interests of the corporation because the nature of the derivative suit will require First

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Solar to allege wrongdoing on the part of its officers and directors while maintaining the

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innocence of the same officers and directors in the class action. Several cases hold that

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this argument is a sufficient reason to stay a derivative action. See Brenner v. Albrecht,

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No. 6514-VCP, 2012 WL 252286 (Del. Ch. Jan. 27, 2012); Cucci v. Edwards, No. 07-

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532, 2007 WL 3396234 (C.D. Cal. Oct. 31, 2007); Burdno v. Wise, No. Civ. A. 19953,

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2003 WL 1874750 (Del. Ch. Apr. 1, 2003); but see Smith v. Sperling, No. CV-11-0722,

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2012 WL 79237 at *2 (D. Ariz. Jan. 11, 2012).

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The Court agrees with the cases that have imposed a stay in similar circumstances.

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Both suits involve the same public statements and disclosures. Although the derivative

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action includes state law claims that are not present in the class action, those claims are

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based on the same alleged wrongdoing as the class action. Defendant will face the

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practical difficulty of pursuing potentially divergent strategies if the two actions are

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litigated simultaneously. In addition, simultaneous litigation will increase the cost of the

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overall litigation in the near term, and it is at least reasonably possible that resolution of

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the class action case will lead to prompt resolution of the derivative action, saving

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litigation costs and court resources in the long term.

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Plaintiffs argue that the corporation will be harmed by a stay because their

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litigation could be delayed for years. The Court has no intention of permitting the class

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action to be litigated for years. The Court will set a vigorous schedule for resolution of

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the class action and will hold that parties to that schedule. Indefinite delay will not occur.

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IT IS ORDERED that First Solar’s motion to stay the derivative suit pending the

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resolution of the shareholder class action (Doc. 38) is granted.
Dated this 17th day of December, 2012.

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