Tindall v. Ahearn et al
ORDER denying 92 Motion for Extension of Time Deadline. Signed by Judge David G Campbell on 11/29/2016.(DGC, nvo)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
In re First Solar Derivative Litigation
Plaintiffs have filed a motion to continue the deadline for filing a fourth amended
complaint. Doc. 92. Plaintiffs ask the Court to extend the deadline until 30 days after the
Ninth Circuit rules on their appeal of this Court’s order denying their request to intervene
and obtain information filed under seal in the securities fraud action.
The Court has noted, several times, that Plaintiffs cannot conduct discovery to
establish demand futility under Federal Rule of Civil Procedure 23.1. Docs. 65 at 5; 82 at
24; 91 at 1. The Court viewed Plaintiffs’ motion to intervene in the securities fraud
action as an effort to avoid this rule. Doc. 413 at 7-8 (in CV12-555).
The Court has also noted, repeatedly, that Plaintiffs should pursue a books and
records review under Delaware law.
Plaintiffs apparently made such a request in
February, but then failed to respond for more than four months after First Solar asked that
the request be more narrowly tailored. Doc. 94 at 8. First Solar later offered to permit
Plaintiffs to inspect board minutes on relevant topics – minutes that may contain the very
information Plaintiffs have lacked, namely, information showing board knowledge of
various alleged facts – but Plaintiffs declined. Id. Plaintiffs have said in their most
recent briefing, and previously, that they were preparing to file an action for a books and
records under Del. Code Ann., Title 8, § 220, but they have yet to commence such an
The Court concludes that Plaintiffs have had ample opportunity to collect the
information needed to plead demand futility, if such information exists. Plaintiffs should
have collected that information before filing this case some four years ago. Rule 23.1
required Plaintiffs to explain their “reasons for . . . not making the effort” to obtain board
action. Fed. R. Civ. P. 23.1(b)(3)(B). Instead of alleging facts sufficient to justify their
decision not to seek board action, or securing the information through the procedures of
Delaware law, Plaintiffs essentially have sought discovery through the securities fraud
action, something the law does not permit as a means to satisfy their Rule 23.1 burden.
See In re Merck & Co. Securities Litigation, 493 F.3d 393, 400 (3d Cir. 2007) (“As we
have stated, derivative plaintiffs are required to establish that demand would have been
futile at the time they commenced litigation. A corollary of this rule is that discovery
generally may not be used to supplement allegations of demand futility.”) (citations
omitted); Beam v. Stewart, 845 A.2d 1040, 1056 (Del. 2004) (“In general, derivative
plaintiffs are not entitled to discovery in order to demonstrate demand futility.”); Rales v.
Blasband, 634 A.2d 927, 934 n.10 (Del. 1993) (“derivative plaintiffs . . . are not entitled
to discovery to assist their compliance with Rule 23.1”). Because Plaintiffs have had
sufficient opportunity to obtain needed information, the Court cannot justify delaying this
case further while Plaintiffs pursue an appeal of their effort to obtain improper discovery.
IT IS ORDERED that Plaintiffs’ motion for an extension (Doc. 92) is denied.
The clerk is directed to terminate this action.
Dated this 29th day of November, 2016.
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