Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00769/USCOURTS-azd-2_12-cv-00769-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 15:78m(a) Securities Exchange Act

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

In re First Solar Derivative Litigation, No. CV-12-00769-PHX-DGC

ORDER 

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

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

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

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

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

action.1

I. Background. 

First Solar manufactures solar panel modules. On February 28, 2012, the 

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

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

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

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

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

several lawsuits followed. 

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

 

1

 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, 

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

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

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

misrepresentations, omissions, and underlying facts. First Solar moves to stay the 

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

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

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

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

will promote judicial efficiency. Doc. 38 at 11. 

II. Legal Standard. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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III. Analysis. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

litigation costs and court resources in the long term. 

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

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

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

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

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

resolution of the shareholder class action (Doc. 38) is granted. 

 Dated this 17th day of December, 2012. 

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