Mineworkers' Pension Scheme v. First Solar Inc.
881 F.3d 750
9th Cir.2018Background
- First Solar, Inc. produced photovoltaic modules; plaintiffs are purchasers of its securities between April 30, 2008 and February 28, 2012.
- Plaintiffs allege First Solar concealed a manufacturing defect and a design defect causing accelerated power loss, understated costs/liabilities, and misreported financials.
- First Solar’s stock fell sharply during the Class Period, with major drops beginning July 29, 2010 after disclosures about defects, CEO departure, and poor results.
- Plaintiffs sued under §10(b) and §20(a) and SEC Rule 10b-5, claiming defendants’ misrepresentations caused their economic losses.
- Defendants moved for summary judgment; the district court granted in part, denied in part, and certified an interlocutory question about the correct Ninth Circuit loss-causation test.
- The Ninth Circuit affirmed, holding that a general proximate-cause test (tracing loss to the very facts misrepresented) governs loss causation and market revelation of fraud is not required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper test for loss causation | Loss causation satisfied if the misrepresented facts were a substantial factor in causing the loss (no need for fraud revelation) | Loss causation requires the market actually learn of the fraud and react to it | Use general proximate-cause test: plaintiffs may show loss by linking loss to the misrepresented facts; market revelation not required |
| Whether Ninth Circuit precedent conflicts | Nuveen/Berson/Daou support proximate-cause approach | Oracle/Metzler/Loos interpreted to require market revelation of fraud | Apparent conflict resolved: the "revelation" cases are fact-specific variants of the proximate-cause rule |
| Standard for assessing causation on summary judgment | Triable issues exist if evidence could show misrepresented facts caused price drops | Defendants argued absence of causal link for certain drops | District court applied correct test and found triable issues for five of six declines; Ninth Circuit affirmed |
| Role of market reaction in proving causation | Market reaction to disclosure of fraud is one available causation theory | Market revelation is a necessary precondition | Market revelation is neither necessary nor sufficient; it is one of many possible theories to establish proximate cause |
Key Cases Cited
- Nuveen Mun. High Income Opportunity Fund v. City of Alameda, 730 F.3d 1111 (9th Cir.) (loss causation may be shown by linking loss to the very facts misrepresented)
- Berson v. Applied Signal Tech., 527 F.3d 982 (9th Cir.) (stock drop after disclosure of misstated facts can establish loss causation)
- In re Daou Sys., Inc., 411 F.3d 1006 (9th Cir.) (proximate-cause approach to loss causation)
- Oregon Pub. Emps. Ret. Fund v. Apollo Grp., 774 F.3d 598 (9th Cir.) (evaluation of market-revelation causation theory)
- Loos v. Immersion Corp., 762 F.3d 880 (9th Cir.) (loss causation analysis in context of market disclosures)
- In re Oracle Corp. Sec. Litig., 627 F.3d 376 (9th Cir.) (discussing market revelation as a basis for loss causation)
- Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049 (9th Cir.) (pleading failure where alleged disclosures did not reveal the fraud)
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (U.S.) (loss causation is variant of proximate cause)
- Lloyd v. CVB Fin. Corp., 811 F.3d 1200 (9th Cir.) (clarifies that loss causation is context-dependent and proximate-cause based)