United States District Court, D. Arizona
Mark Smilovits, individually and on behalf of all others similarly situated, Plaintiffs,
First Solar, Inc.; Michael J. Ahearn; Robert J. Gillette; Mark R. Widmar; Jens Meyerhoff; James Zhu; Bruce Sohn; and David Eaglesham,
G, CAMPBELL SENIOR UNITED STATES DISTRICT JUDGE
parties have filed many motions in limine
(“MILs”). The Court previously ruled on
Plaintiffs' MILs 1 and 10. See Docs. 547 and
548. This order will rule on the remaining
MIL 2 (Doc. 492). Plaintiffs ask the Court to
preclude Defendants from introducing: (1) an
“intervening or superseding acts of third
parties” defense, and (2) a “reliance on
others” defense because Defendants failed to provide
Plaintiffs information required by discovery requests. But
these defenses have been withdrawn by Defendants and were
stricken by the Court with Defendants' consent. Doc. 401
at 46-47. As a result, these affirmative defenses are not
part of this case and will not be presented to the jury in
argument or instructions. Plaintiffs' MIL does not ask
that any other evidence be precluded, and therefore is
denied as moot.
MIL 3 (Doc. 493). Plaintiffs seek to preclude
Defendants from introducing: (1) a
“truth-on-the-market” defense, and (2) a
“safe harbor” or “bespeaks caution”
defense because Defendants failed to provide Plaintiffs
information required by discovery requests. These defenses
have also been withdrawn by Defendants and were stricken by
the Court with Defendants' consent. Doc. 401 at 46-47. As
a result, these affirmative defenses are not part of this
case and will not be presented to the jury in argument or
instructions. Plaintiffs' MIL does not ask that any other
evidence be precluded, and therefore is denied as
MIL 4 (Docs. 474 (lodged sealed version), 494 (public
redacted copy)). Plaintiffs ask the Court to
preclude defendants from introducing evidence or testimony at
trial that: (1) they received, considered, or relied on the
advice of counsel during the Class Period; (2) lawyers
reviewed or approved Defendants' public disclosures or
insider sales of First Solar stock during the Class Period;
or (3) Defendants relied on lawyers' involvement in any
such review or approval processes during the Class Period.
Plaintiffs contend that Defendants waived the
advice-of-counsel defense by withholding thousands of
documents on the basis of the attorney-client privilege,
including documents related to disclosure issues, and by
instructing witnesses not to disclose attorney-client
communications in depositions. Defendants respond that they
“will not assert an ‘advice of counsel'
defense or present evidence about the content of legal
advice.” Doc. 592 at 2.
Court rules as follows: (1) Defendants cannot present at
trial any attorney-client communication they refused to
disclose during discovery on privilege grounds. (2) There
will be no advice-of-counsel defense. Such a defense will not
be presented to the jury through argument or instructions.
(3) The Court cannot conclude, however, that Defendants'
refusal to disclose the contents of specific communications
should preclude them from making any reference to counsel in
their evidence and arguments at trial. The Court must draw
precise lines during trial, but its current view is that
Defendants may present evidence that counsel reviewed
corporate disclosures and stock-sale plans or attended
meetings, but may not present evidence that counsel approved
the disclosures or plans or that Defendants relied on what
the lawyers said about the disclosures or plans. Presenting
evidence of lawyer approval or Defendant reliance while
withholding the actual communications that constituted the
approval or resulted in the reliance would be unfair to
Plaintiffs. It would leave the impression that the lawyers
provided unqualified approval of all that Defendants did,
without actually disclosing what the lawyers said or did not
say and without affording Plaintiffs the opportunity to know,
test, or address the actual communications. Plaintiffs'
MIL 4 is granted in part and denied in part
as set forth above.
MIL 5 (Docs. 475 (lodged), 495 (public)). Plaintiffs
seek to preclude Defendants from introducing evidence,
questions, or argument concerning Plaintiffs'
experts' compensation in this case. Plaintiffs base this
request on the fact that a defense expert refused to provide
total compensation information. Defendants assert that
Plaintiffs took the same position in a deposition, but the
transcript does not support their position. See Doc.
594-2 at 4. The rule at trial will be the same for both
parties. Unless the parties reach a different agreement, both
sides will be limited to eliciting the following compensation
information: (a) the hourly rate paid for the expert's
time and the time of any of the expert's staff members,
and (b) the total hours incurred by the expert and his or her
staff members on this case. Experts should come to trial
prepared to answer these questions - the Court will not
accept an assertion that the expert does not know this
information. With this order in place, the MIL is
MIL 6 (Doc. 496). Plaintiffs ask the Court to
preclude Defendants' from calling Bernhard Beck to
testify at trial because Defendants never disclosed him as
required by Rule 26(a)(1)(A). Defendants do not dispute that
they failed to disclose Mr. Beck under Rule 26(a)(1)(A) or in
a supplement under Rule 26(e), but they oppose the motion.
first assert that Rule 26 disclosure was not required because
Mr. Beck's role as a key German customer of First Solar
with involvement in the LPM issue was well known to
Plaintiffs through the production of many documents, some of
which are now listed on Plaintiffs' exhibit list. But
none of these documents satisfied a primary purpose of Rule
26(a)(1)(A) - to inform Plaintiffs that Defendants might call
Mr. Beck as a witness at trial. Plaintiffs are
“entitled to rely on the ‘critical' purpose
of Rule 26(a)(1)(A) - ‘to inform them which witnesses
 the disclosing party may use to support its claims or
defenses.'” McCollum v. UPS Ground Freight
Inc., 2013 WL 105225, at *1-2 (D. Ariz. Jan. 9, 2013)
(citation omitted). This disclosure obligation continues
throughout the litigation under Rule 26(e). A party who fails
to timely identify a witness as required by Rule 26(a)(1)(A)
“is not allowed to use that . . . witness to supply
evidence . . . at a trial, unless the failure was
substantially justified or is harmless.” Fed.R.Civ.P.
37(c)(1). Defendants have not shown that the failure to
identify Beck as a potential witness was substantially
argue that they complied with Rule 26(a)(3) by disclosing
Beck more than 30 days before trial. True, but Rule 26(a)(3)
is a “pretrial” disclosure, not a discovery
disclosure. It is made in preparation for trial and expressly
states that it is “[i]n addition to the
requirements in Rule 26(a)(1).” Fed.R.Civ.P.
26(a)(3)(A) (emphasis added). It neither trumps nor satisfies
the Rule 26(a)(1)(A) disclosure obligation during discovery
and the Rule 26(e) duty to timely supplement. In this highly
complex case, a September 13, 2019 disclosure, less than
three months before trial and several years after the close
of fact discovery, is not harmless. Plaintiffs may have known
Beck's role in some events related to this case, but they
did not know that Defendants might call him to testify and
they lost the opportunity during discovery to depose him or
inquire further concerning his anticipated testimony.
Defendants failure to disclose Beck as required by Rule
26(a)(1)(A) was not substantially justified or harmless, Beck
may not testify at trial. Fed.R.Civ.P. 37(c)(1). The MIL is
MIL 7 (Docs. 476 (lodged), 497 (public)). Plaintiffs
seek to preclude Defendants from presenting evidence and
argument regarding the impact of a purported 5% measurement
tolerance on First Solar's 10-year performance warranty.
Plaintiffs first note that Defendants admitted in their
answer that First Solar warranted that solar modules
installed in accordance with agreed-upon specifications will
produce at least 90% of their initial nameplate power output
rating during the first 10 years, and at least 80% during the
following 15 years. Plaintiffs assert that this admission
precludes Defendants from now contending that the warranty
has a 5% measurement tolerance and that this tolerance means
the warranty is not triggered until 85% power production.
5% measurement tolerance is in the warranty itself,
immediately following the 90% and 80% warranties.
See Doc. 598 at 2. Whether that measurement
tolerance has the effect Defendants claim is a factual issue
for trial. Defendant's answer, which mirrors the actual
language from the warranty, does not foreclose an argument
about how the 90% and 80% warranties are to be measured.
the issue foreclosed by Defendants' withholding of
privileged documents that might bear on the measurement
tolerance issue. Plaintiffs do not contend that Defendants
incorrectly claimed that the relevant documents are
privileged. (If Plaintiffs believed the privilege was wrongly
invoked, they should have raised the issue with the Court
long ago.) Doc. 598 at 3-4. And if the documents are properly
privileged, then withholding them does not foreclose the
parties from litigating an issue on which they bear.
Privileged communications often bear on factual issues in a
dispute. Plaintiffs argue that Defendants cannot use the
privilege as a sword and a shield, but Defendants are not
using the privilege as a sword. They avow that they will not
base their 5% measurement tolerance position on legal advice
from counsel. Doc. 598 at 2.
Plaintiffs suggest that the 5% measurement tolerance is a
recently-raised defense, but, as noted above, the measurement
tolerance is in the warranty itself. And Defendants identify
documents and deposition testimony produced during discovery
that reflect Defendants' measurement tolerance position.
The MIL is denied.
MIL 8 (Doc. 498). Plaintiffs seek to preclude
Defendants from introducing evidence or argument at trial
regarding the lack of a restatement or government
investigation of First Solar's financial results.
Plaintiffs assert that such evidence is irrelevant and would
serve no purpose other than to mislead the jury about the
legal standards for a civil securities fraud suit. The Court
disagrees. While the lack of a restatement of the financials
and an SEC investigation do not establish the absence of
fraud as a matter of law, they are relevant facts in this
case that the jury may consider in deciding whether
Defendants made material misstatements or omissions with
scienter. Plaintiffs, of course, are free to counter this
evidence by showing that Defendants must approve any
restatement of the financials and that the SEC might decline
an enforcement action for any number of reasons. The Court
does not conclude that the probative value of this evidence
is substantially outweighed by the danger of unfair
prejudice, jury confusion, or waste of time. Fed.R.Evid. 403.
Plaintiffs may object or seek a clarifying instruction if
they believe this or any other evidence is improper or unduly
prejudicial at trial. The MIL is denied.
MIL 9 (Docs. 477 (lodged), 499 (public)). Plaintiffs
seek to preclude Defendants from introducing evidence of, or
opinions or argument relating to, events that post-date the
Class Period, including First Solar's post-Class Period
stock price movements. The MIL sweeps too broadly and is an
improper attempt to pre-try the case. Plaintiffs may object
at trial to evidence they believe is irrelevant or
inadmissible under Rule 403. The Court will be far better
equipped to rule on specific evidence issues at that time.
only specific evidence Plaintiffs identify are the
post-Class-Period prices of Defendants' stock. Plaintiffs
suggest that any such evidence would be an indirect attempt
to persuade the jury that Plaintiffs have not been damaged.
But the Court will instruct the jury on the proper measure of
damages, and Defendants note that their own damages expert,
Dr. Kleidon, does not calculate damages using
post-Class-Period share prices. Doc. 600 at 4. Defendants
also note that they do not intend to argue that damages
should be reduced by stock-price movements after the 90-day
PSLRA period. Id. The Court will consider any
objections or requests for clarifying instruction Plaintiffs
assert during trial. This MIL is denied.
MIL 11 (Docs. 478 (lodged), 501 (public)).
Plaintiffs seek to preclude Defendants from offering
evidence, argument, or testimony regarding a memorandum
prepared by its independent auditor, PricewaterhouseCoopers,
LLP (“PwC”), nearly a year after the Class Period
ended. Plaintiffs argue that the evidence is an irrelevant,
after-the-fact effort by PwC to justify its own auditing
work, and that any testimony about the memorandum would
constitute improper lay opinion evidence.
Court cannot conclude at this point that evidence regarding
the memorandum should be excluded. Its relevancy or lack of
relevancy will be clearer during trial. And whether testimony
about the memorandum will be admissible under Rule 701 will
also be clearer. The Court therefore denies
the MIL. To avoid the possibility of unfair prejudice,
however, Defendants are instructed not to mention the
memorandum in their opening statement or in evidence without
first raising this issue with the Court. This should be done
at a time when the Court and the parties can discuss the
evidence without keeping the jury waiting.
MIL 12 (Docs. 479 (lodged), 502 (public)).
Plaintiffs seek to preclude Defendants from offering
evidence, argument, or opinions related to China's
participation in the solar energy industry, asserting that
such evidence is irrelevant and inadmissible under Rule 403.
The Court denies the motion. The effect of
Chineses competition on First Solar's business, market
share, and stock price is relevant to loss causation -
whether the stock price drops identified by Plaintiffs were
due to Defendants' fraud or other market forces. The
Court cannot conclude that the evidence will improperly waste
time or confuse issues under Rule 403.
MIL 13 (Docs. 480 (lodged), 503 (public)).
Plaintiffs seek to preclude Defendants from arguing or
introducing evidence that First Solar did not develop, or
could not develop, a correlation between STBi and field power
loss prior to April 1, 2008. This request is based on the
assertion that Defendants did not produce documents created
before April 1, 2008, and thereby precluded Plaintiffs from
countering Defendants' assertion that the correlation was
not possible until 2010. Plaintiffs cite only Defendants'
initial discovery response in support of this argument. They
do not assert that they ever raised this specific issue with
Defendants, and they did not raise it with the Court despite
the fact that the Court made itself available for discovery
conference calls and held many with the parties. The
Court's Case Management Order stated that,
“[a]bsent extraordinary circumstances, the Court will
not entertain fact discovery disputes after the deadline for
completion of fact discovery.” Doc. 131 at 2. What is
more, documents dated April 1, 2008 and later give Plaintiffs
two years of information before the alleged correlation was
developed in 2010, and yet Plaintiffs cite no such document
to support their assertion that the correlation could have
been made earlier. The MIL is denied.
MIL 14 (Docs. 481 (lodged), 504 (public)).
Plaintiffs seeks to preclude defense experts William W.
Holder and John J. Huber from presenting overlapping and
duplicative testimony. The Court's Scheduling Order
states: “Each side shall be limited to one retained or
specially employed expert witness per issue.” Doc. 438
at 1 n.1. The Court will not permit overlapping and
duplicative expert testimony at trial. The Court cannot
conclude at this time, however, that Plaintiffs' MIL
should be granted. Defendants assert that they do not intend
to present duplicative testimony, but instead require two
experts to address the distinct GAAP and MD&A opinions of
Plaintiffs' expert, Paul Regan. This issue may be
addressed, if necessary, after Plaintiffs' expert has
testified and in light of the testimony Defendants propose to
elicit from their experts. The MIL is
MIL 15 (Docs. 482 (lodged), 505 (public)).
Plaintiffs seek to preclude Defendants from offering evidence
of, or argument relating to, the aggregate damages suffered
by the Class. Plaintiffs contend that damages will be
calculated on a per-share basis, not on an aggregate basis,
and that any argument or evidence regarding aggregate class
damages would be irrelevant and unfairly prejudicial.
Defendants agree that damages will be calculated on a
per-share basis and assert that they do not intend to present
any aggregate damages figure estimating what the overall
recovery would be for the Class. Defendants expect that the
verdict form will ask jurors to decide per-share damages. In
light of this agreement between the parties, the Court
denies Plaintiffs' MIL as moot. Should
any party conclude during trial that the aggregate class
recovery should be mentioned in any way, counsel should raise
the issue with the Court before mentioning it to the jury.
Court will not preclude the parties from presenting evidence
or argument comparing LPM or hot climate-related costs (or
lost revenue) to First Solar's loss in market value on
relevant disclosure dates. That analysis is used by experts
from both sides and provides an important basis for per-share
loss calculations and comparisons between the experts'
MIL 16 (Doc. 506). Plaintiffs seek to preclude
Defendants from calling Plaintiffs to testify through live
testimony or deposition or introducing class members'
trading records at trial. Plaintiffs contend that this is a
class action on behalf of all persons who purchased First
Solar stock during the Class Period, proceeding on the
fraud-on-the market theory of reliance, that the jury will be
tasked with adjudicating Defendants' class- wide
liability, and that Plaintiffs' transactions, conduct, or
knowledge, like those of every other Class member, are only
relevant to individualized issues.
respond that they do not intend to introduce evidence about
absent class members, but that they do intend to call the
Lead Plaintiffs and their investment manager and introduce
their investment documents. Defendants note, correctly, that
the presumption of reliance created by the
fraud-on-the-market theory is rebuttable. Basic v.
Levinson, 485 U.S. 224, 245-47 (1988). They assert that
the trial must address the claims of the Lead Plaintiffs, and
that their testimony will be relevant to rebut the
presumption of reliance.
the cases cited by the parties, the Court finds the
discussion in In re Vivendi Universal, S.A. Securities
Litigation, 765 F.Supp.2d 512 (S.D.N.Y. 2011), to be the