Stay current on changes and developments in corporate law with a wide variety of resources and tools.
July 5 — Investors can't proceed with claims alleging that First Solar Inc. directors and officers breached their fiduciary duties by failing to disclose the impact of two manufacturing defects, the U.S. District Court for the District of Arizona ruled June 30 ( In re First Solar Derivative Litig., 2016 BL 213443, D. Ariz., No. CV-12-00769-PHX-DGC, 6/30/16 )
In their lawsuit, the plaintiff investors charged that the defendants misrepresented the full impact of two defects that caused the Delaware corporation, one of the world's largest producers of solar panels, to incur nearly $254 million in warranty and related charges.
Judge David Campbell held that the plaintiffs failed to sufficiently plead that a pre-suit demand on First Solar's board to take legal action would have been excused. Applying Delaware law, the court found that the plaintiffs didn't plead that a majority of First Solar directors faced a substantial likelihood of personal liability from the alleged disclosure failures.
Under Delaware law, investors that file derivative lawsuits must show that they made a pre-suit demand on the board of the company on whose behalf the case is brought, unless doing so would be futile.
According to the court's decision, the company in March 2009 discovered a low-power-modules (LPM) defect that caused certain of its solar panels to experience power loss within months of installation. The company's board learned about a second defect in April 2011 that caused certain panels to experience problems in hot climates.
The court said there weren't facts to show that the directors acted in bad faith in failing to disclose information about the defects.
The court distinguished the case from other decisions in which demand was excused based on allegations that the board knew of and did nothing about the alleged illegal activity.
Specifically, Campbell found that each defect was “discrete, and dealt with relatively quickly.” Just over a year had passed before the company learned of and disclosed the LPM defect, and an even shorter time—10 months—passed between discovery and disclosure of the “hot climate” issue, he said.
There is an ongoing securities fraud action, now on appeal to the U.S. Court of Appeals for the Ninth Circuit, as to whether First Solar and certain top executives intentionally made misleading statements about the defects (12 CARE 1083, 9/5/14).
To contact the reporter on this story: Michael Greene in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Yin Wilczek at email@example.com
The opinion is available at http://src.bna.com/guf.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)