FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CLIFFORD TINDALL; BRITT 

NEDERHOOD; ENG KWANG TAN;

ERIC FEIGIN,

Plaintiffs-Appellants,

v.

FIRST SOLAR INCORPORATED;

MICHAEL J. AHEARN; ROBERT J.

GILLETTE; MARK R. WIDMAR; JENS 

MEYERHOFF; JAMES ZHU; BRUCE 

SOHN; DAVID EAGLESHAM; CRAIG 

KENNEDY; JAMES F. NOLAN;

WILLIAM J. POST; J. THOMAS 

PRESBY; PAUL H. STEBBINS;

MICHAEL SWEENEY; JOSE H.

VILLAREAL,

Defendants-Appellees.

No. 17-15185

D.C. No.

2:12-cv-00769-

DGC

OPINION

Appeal from the United States District Court

for the District of Arizona

David G. Campbell, District Judge, Presiding

Argued and Submitted January 12, 2018

San Francisco, California

Filed June 13, 2018
2 TINDALL V. FIRST SOLAR INC.

Before: J. Clifford Wallace, Johnnie B. Rawlinson,

and Paul J. Watford, Circuit Judges.

Opinion by Judge Wallace

SUMMARY*

Demand Futility

The panel affirmed the district court’s dismissal of a 

shareholder derivative action under Fed. R. Civ. P. 23.1 for 

failure to show demand futility.

Shareholders of First Solar, Inc., alleged that officers and 

directors of the company breached their fiduciary duties by 

failing to disclose in financial statements and press releases 

the existence of manufacturing and design defects in First 

Solar’s solar panels. The shareholders made no demand to 

the board before bringing the derivative action.

Reviewing for an abuse of discretion, and applying 

Delaware law, the panel held that the shareholders failed to 

show demand futility. The panel held that the Aronson test 

for demand futility did not apply because it is limited to 

board business decisions. Under the Rales test, demand was 

not excused.

 * This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
TINDALL V. FIRST SOLAR INC. 3

The panel also held that the district court did not abuse 

its discretion in denying plaintiff’s motion to extend the 

deadline for filing their fourth amended complaint.

COUNSEL

George C. Aguilar (argued) and Brian J. Robbins, Robbins 

Arroyo LLP, San Diego, California; Yury A. Kolesnikov, 

Albert Y. Chang, and Francis A. Bottini Jr., Bottini & Bottini

Inc., La Jolla, California; for Plaintiffs-Appellants.

Anna Erickson White (argued), Robert L. Corez Webb, and 

Jordan Eth, Morrison & Foerster LLP, San Francisco, 

California; Sophia M. Brill and Brian R. Matsui, Morrison 

& Foerster LLP, Washington, D.C.; for DefendantsAppellees.

OPINION

WALLACE, Circuit Judge:

Plaintiffs appeal from the dismissal of their shareholder 

derivative action under Federal Rule of Civil Procedure 23.1 

for failure to show demand futility. We have jurisdiction 

under 28 U.S.C. § 1291, and affirm.

I.

First Solar, Inc. is one of the world’s largest producers of 

photovoltaic solar panel modules. Plaintiffs, shareholders of 

First Solar, appeal from the dismissal of their fiduciary duty 

claims against eight directors and five officers of the 

company. Plaintiffs allege that Defendants breached their 
4 TINDALL V. FIRST SOLAR INC.

fiduciary duties by failing to disclose in financial statements 

and press releases the existence of manufacturing and design 

defects in First Solar’s solar panels. This alleged 

wrongdoing was also an issue in a separate but related 

securities fraud case, Mineworkers’ Pension Scheme v. First 

Solar Inc., 881 F.3d 750, 752 (9th Cir. 2018). Plaintiffs did 

not make a litigation demand on First Solar’s board of 

directors before filing this action.

II.

The parties dispute the applicable standard of review. 

While the parties agree that our court applies abuse of 

discretion review to Rule 23.1 dismissals, Plaintiffs argue 

that such review is inconsistent with the de novo review that 

we apply to Rule 12(b)(6) dismissals. This argument has 

persuaded other courts. See Espinoza ex rel. JPMorgan 

Chase & Co. v. Dimon, 797 F.3d 229, 234–35 (2d Cir. 2015) 

(collecting cases). We, however, do not consider its merits 

because binding authority compels us, as a three-judge 

panel, to apply abuse of discretion review. Potter v. Hughes, 

546 F.3d 1051, 1056 (9th Cir. 2008).

III.

A derivative action is an action brought by a shareholder 

on behalf of a corporation. See Rosenbloom v. Pyott, 

765 F.3d 1137, 1147 (9th Cir. 2014). Before bringing the 

action, the shareholder must “demand action from the 

corporation’s directors or plead with particularity the 

reasons why such demand would have been futile.” La. Mun. 

Police Emps.’ Ret. Sys. v. Wynn, 829 F.3d 1048, 1057 (9th 

Cir. 2016), quoting Rosenbloom, 765 F.3d at 1148. Where, 

as here, the shareholders made no demand to the board 

before bringing the derivative action, they must show 

demand futility. Wynn, 829 F.3d at 1057. The law of the state 
TINDALL V. FIRST SOLAR INC. 5

of incorporation governs whether demand is futile. Arduini 

v. Hart, 774 F.3d 622, 628 (9th Cir. 2014). First Solar is a 

Delaware corporation and Delaware law, therefore, applies 

to this action.

Delaware has two tests for demand futility—the Aronson 

test and the Rales test. Wood v. Baum, 953 A.2d 136, 140 

(Del. 2008). The parties agree that Plaintiffs’ claims can 

survive, if at all, only under the Aronson test. The Aronson 

test “requires that the plaintiff allege particularized facts 

creating a reason to doubt that ‘(1) the directors are 

disinterested and independent or that (2) the challenged 

transaction was otherwise the product of a valid exercise of 

business judgment.’” Id., quoting Aronson v. Lewis, 

473 A.2d 805, 814 (Del. 1984). Aronson’s second 

alternative is the lynchpin of Plaintiffs’ appeal. Plaintiffs 

argue that if the Aronson test applies, a showing of gross 

negligence by the board would excuse demand under the 

second alternative. Plaintiffs concede the same is not true for 

the Rales test. Accordingly, we must first decide whether the 

Aronson or Rales test applies to this action.

Which test applies depends, in part, on the nature of the 

alleged wrongdoing. See Wood, 953 A.2d at 140. Plaintiffs 

argue the Aronson test applies to claims involving any 

affirmative action by the board. They style the alleged 

wrongdoing here as an “approval” of financial statements or 

press releases concealing the product defects. Plaintiffs point 

to authorities showing, they argue, that a director makes a 

“statement” for purposes of the securities laws where, as 

here, they sign financial statements filed with the Securities 

and Exchange Commission. Defendants counter that

whether the alleged wrongdoing was an affirmative action 

does not matter. The Aronson test, they say, applies not to all 

affirmative actions, but only to board business decisions.
6 TINDALL V. FIRST SOLAR INC.

We agree with Defendants. Delaware law appears clear 

that the Aronson test does not apply to all actions, but to 

board business decisions. In Rales v. Blasband, the Delaware 

Supreme Court held that the “essential predicate for the 

Aronson test is the fact that a decision of the board of 

directors is being challenged in the derivative suit.” 

634 A.2d 927, 933 (Del. 1993) (emphasis in original). The 

court further explained that the Aronson test does not apply 

“where the subject of the derivative suit is not a business 

decision of the board.” Id. at 934. More recently, in Wood 

v. Baum, the Delaware Supreme Court stated that “[t]he 

Aronson test applies to claims involving a contested 

transaction i.e., where it is alleged that the directors made a 

conscious business decision in breach of their fiduciary 

duties.” 953 A.2d at 140 (emphasis added); see also In re 

Citigroup Inc. S’holder Derivative Litig., 964 A.2d 106, 120 

(Del. Ch. 2009) (holding the Rales test applies “to show 

demand futility where the subject of the derivative suit is not 

a business decision of the board”); Guttman v. Huang, 

823 A.2d 492, 499–500 (Del. Ch. 2003) (holding the Rales 

test applied because the allegations “do not attack a specific 

business judgment of the board”).

Limiting the Aronson test to board business decisions 

makes sense because only those decisions implicate the 

business judgment rule invoked by Aronson’s second 

alternative. The business judgment rule is “a presumption 

that in making a business decision the directors of a 

corporation acted on an informed basis, in good faith and in 

the honest belief that the action taken was in the best interests 

of the company.” Gantler v. Stephens, 965 A.2d 695, 705–

06 (Del. 2009) (citation omitted) (emphasis added). “[T]he 

core rationale of the business judgment rule . . . is that judges 

are poorly positioned to evaluate the wisdom of business 

decisions . . . .” Corwin v. KKR Fin. Holdings LLC, 
TINDALL V. FIRST SOLAR INC. 7

125 A.3d 304, 313 (Del. 2015) (emphasis added). Without a 

business decision, it is “impossible to perform the essential 

inquiry contemplated by Aronson—whether the directors 

have acted in conformity with the business judgment rule in 

approving the challenged transaction.” Rales, 634 A.2d at 

933.

Even Plaintiffs seem to recognize that Aronson’s 

application is limited to business decisions by arguing in 

their reply brief that the approval of financial statements and 

press releases is, in fact, a business decision. Plaintiffs argue

that we should read “business decision” broadly because 

Delaware courts have associated business judgment not only 

with transaction decisions, but also with litigation decisions, 

delegations to experts, compensation decisions, and stock 

buyback decisions. But these types of decisions differ from 

those here because they involve judgments by the board as 

to whether to enter into a course of conduct, generally one 

that creates new rights or obligations on behalf of the 

company. By contrast, financial statements and press 

releases provide a snapshot of past conduct; they reflect 

business judgments already made. Approving financial 

statements and press releases generally does not involve 

weighing the risks and rewards of future conduct, which is 

the type of decision-making process the business judgment 

rule is designed to protect.

We view this case as more analogous to the board 

oversight claims to which Delaware courts regularly apply 

the Rales test. See, e.g., City of Birmingham Ret. & Relief 

Sys. v. Good, 177 A.3d 47, 55 (Del. 2017). Tellingly, 

Plaintiffs have cited no Delaware authority applying the 

Aronson test to a failure-to-disclose case, such as this one. 

Defendants have cited authorities that, while not dispositive, 

suggest the Rales test would apply. For example, in Guttman 
8 TINDALL V. FIRST SOLAR INC.

v. Huang, plaintiffs brought both failure to disclose claims 

and oversight claims. 823 A.2d at 494–97. While the 

Delaware Chancery Court in Guttman did not compare the 

tests because the parties had agreed Rales applied, the court 

explained the reason for the parties’ agreement was that “the 

plaintiffs do not challenge any particular business decision 

made by the [corporation’s] board as a whole.” Id. at 499. 

Likewise, Seminaris v. Landa involved claims that the 

“board failed to prevent [the CEO] from misrepresenting the 

corporation’s financial condition” and that “board members 

signed misleading statements on behalf of the corporation.” 

662 A.2d 1350, 1354 (Del. Ch. 1995). The Delaware 

Chancery Court held that Rales applied because “plaintiff 

[did] not challenge a decision of [the corporation’s] board of 

directors” or “any specific board action that approved or 

ratified these alleged wrongdoings.” Id.

In sum, we conclude that the approval of financial 

statements and press releases here was not a board business 

decision implicating the Aronson test. The Rales test applies 

to this action. We need go no further in our analysis because 

Plaintiffs concede here that the Rales test does not excuse 

demand. We also need not decide whether gross negligence 

could excuse demand under Aronson’s second alternative, 

since Aronson does not apply. Therefore, the district court 

did not abuse its discretion by dismissing Plaintiffs’ 

derivative action for failure to show demand futility.

IV.

Plaintiffs also appeal from the denial of their motion to 

extend the deadline for filing their fourth amended 

complaint. Plaintiffs argue the district court abused its 

discretion by failing to cite Federal Rule of Civil Procedure 

6(b)(1)(A), the rule governing requests for extensions of 

time made before the deadline expires. That rule provides 
TINDALL V. FIRST SOLAR INC. 9

that a district court may extend a deadline “for good cause.” 

Fed. R. Civ. P. 6(b)(1)(A).

We reject Plaintiffs’ argument. Rule 6 provides that the 

court may grant the motion for good cause, not that it must 

do so. Fed. R. Civ. P. 6(b)(1)(A). While district courts 

normally grant these requests in the absence of bad faith or 

prejudice to the adverse party, see Ahanchian v. Xenon 

Pictures, Inc., 624 F.3d 1253, 1259 (9th Cir. 2010), the 

district court properly concluded that Plaintiffs had not 

shown good cause. “That the district court did not recite the 

text of [the rule] or employ a specific phrase . . . is not 

determinative.” United States v. Ogles, 440 F.3d 1095, 1104 

(9th Cir. 2006) (en banc). What matters is that the district 

court actually considered the proper standard. See id. Here, 

the court viewed the deadline extension, which would have 

prolonged the time to amend until after the resolution of 

Plaintiffs’ motion to intervene in a related action, as an 

attempt to circumvent the district court’s prior rulings 

denying Plaintiffs discovery. The district court’s 

determination that “the Court cannot justify delaying this 

case further while Plaintiffs pursue an appeal of their effort 

to obtain improper discovery” is another way of saying 

Plaintiffs have not shown good cause. Our case of United 

States v. Signed Personal Check No. 730, 615 F.3d 1085, 

1091–92 (9th Cir. 2010) is not to the contrary. There, the 

district court erred not because it failed to recite the legal 

standard, but because this failure led it to apply the wrong

standard. Id. Here, the district court applied the right 

standard, simply without reciting it.

AFFIRMED.