## Facts

- First Solar Inc. manufactured photovoltaic solar panel modules and sold publicly traded securities.
- Purchasers of First Solar securities during April 30, 2008 to February 28, 2012 alleged First Solar discovered (1) a manufacturing defect causing field power loss and (2) a design defect causing faster power loss in hot climates.
- The purchasers alleged First Solar and certain officers concealed the defects, misstated the cost and scope of the problems, and reported false financial information.
- First Solar’s stock price experienced steep declines during the period; the purchasers attributed drops to disclosures about defects and related costs, management changes, and disappointing financial results.
- The purchasers brought claims under Exchange Act § 10(b) and Rule 10b-5, and § 20(a) (control-person liability), alleging later disclosures and resulting price declines caused their economic loss.

## Issues

1. In a private § 10(b)/Rule 10b-5 action, must a plaintiff prove loss causation by showing the market learned the “truth” that earlier statements were fraudulent (a “revelation-of-the-fraud” requirement), or is a general proximate-cause test sufficient?

## Decision

- The Ninth Circuit affirmed the district court’s use of a general proximate-cause standard for loss causation.
- The court rejected a rigid requirement that the price drop be triggered by a disclosure expressly revealing that prior statements were fraudulent.
- The court held the interlocutory appeal resolved only the governing loss-causation standard, not the ultimate merits of summary judgment.

## Legal Principles

- Loss causation under § 10(b)/Rule 10b-5 requires a causal connection between the alleged misrepresentation or omission and the plaintiff’s economic loss; price inflation at purchase alone is insufficient.
- The proper test for loss causation is a general proximate-cause inquiry consistent with *Dura Pharmaceuticals, Inc. v. Broudo*.
- A plaintiff may establish loss causation where the concealed risk materializes and contributes to a price decline, even if the triggering disclosure does not explicitly state that earlier statements were fraudulently made.
- The loss-causation inquiry is fact-dependent and does not require a single, formulaic “corrective disclosure” admitting fraud.

## Conclusion

The Ninth Circuit held that plaintiffs in § 10(b)/Rule 10b-5 cases need only satisfy a flexible proximate-cause standard for loss causation, allowing theories based on later disclosures about the concealed problem or the materialization of the concealed risk without an express market “revelation” that earlier statements were fraudulent.


Mineworkers’ Pension Scheme v. First Solar Inc., 881 F.3d 750 (9th Cir. 2018)