Mehedi v. View, Inc. f/k/a CF Finance Acquisition Corp. II

Opinion

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 ASIF MEHEDI, et al., Case No. 21-cv-06374-BLF

8 Plaintiffs, ORDER DENYING SWETA 9 v. SONTHALIA’S MOTION FOR STAY OF PROCEEDINGS PENDING 10 VIEW, INC., et al., DISPOSITION OF WRIT OF MANDAMUS 11 Defendants. [Re: ECF No. 77] 12

13 Before the Court is Sweta Sonthalia’s motion to stay the above-captioned securities class 14 action pending disposition of her petition for a writ of mandamus before the Ninth Circuit. Ms. 15 Sonthalia and Stadium Capital LLC (“Stadium”) filed competing motions to be appointed Lead 16 Plaintiff, in which they disputed which party had the greater financial interest in the litigation based 17 on different recoverable loss formulas. See ECF Nos. 27, 31, 46–49, 61. The Court adopted 18 Stadium’s formula and appointed Stadium as Lead Plaintiff. See ECF No. 67. In response, Ms. 19 Sonthalia filed a mandamus petition requesting that the Ninth Circuit vacate the Court’s order 20 appointing Stadium as Lead Plaintiff. See Motion, ECF No. 77. Now, Ms. Sonthalia moves to stay 21 pending disposition of her mandamus petition. See Motion, ECF No. 77. Stadium opposes. See 22 Opposition, ECF No. 79. 23 Based on the below reasoning, the Court DENIES Ms. Sonthalia’s stay motion WITHOUT 24 PREJUDICE to seeking a stay from the Ninth Circuit. 25 I. BACKGROUND 26 On October 18, 2021, Ms. Sonthalia and Stadium filed competing motions to be appointed 27 Lead Plaintiff in this securities class action. See ECF Nos. 27, 31. The primary dispute between 1 Ms. Sonthalia and Stadium was how to calculate recoverable loss—under Ms. Sonthalia’s formulas, 2 she had a higher recoverable loss from Defendants’ alleged securities law violations, whereas under 3 Stadium’s formula, it had a higher recoverable loss. See ECF No. 61-1. On February 8, 2022, the 4 Court appointed Stadium as Lead Plaintiff and its counsel Kaplan Fox & Kilsheimer LLP as Lead 5 Counsel. See Order, ECF No. 67. The Court adopted Stadium’s recoverable loss formula, since it 6 sought to disregard fluctuations in View’s stock price prior to the single alleged corrective disclosure 7 in this case, whereas Ms. Sonthalia’s formula factored in these fluctuations. See id. at 10–15. The 8 Court granted Stadium and Defendants’ stipulation setting the deadline for filing an amended 9 complaint on April 19, 2022 and setting deadlines for briefing on any motions to dismiss. See 10 ECF No. 73. 11 On February 22, 2022, Ms. Sonthalia filed a motion for leave under Civil Local 12 Rule 7-9(b)(3) to file a motion for reconsideration of the Court’s order appointing Stadium as Lead 13 Plaintiff. See ECF No. 74. Ms. Sonthalia argued that the Court failed to consider the movants’ 14 purchase price and made improper findings of fact regarding loss causation at the Lead Plaintiff 15 stage in adopting Stadium’s recoverable loss formula. See ECF No. 74. The Court denied Ms. 16 Sonthalia leave to file a motion for reconsideration, finding that Ms. Sonthalia had failed to show 17 “[a] manifest failure by the Court to consider material facts or dispositive legal arguments which 18 were presented to the Court before such interlocutory order” under Civil Local Rule 7-9(b)(3). See 19 Order, ECF No. 76. 20 On March 14, 2022, Ms. Sonthalia filed a petition for a writ of mandamus requesting that 21 the Ninth Circuit vacate the Court’s order appointing Stadium as Lead Plaintiff and direct the Court 22 to appoint Ms. Sonthalia as Lead Plaintiff. See Ngo Decl., ECF No. 78, Ex. A. On March 17, 2022, 23 Ms. Sonthalia filed a motion to stay this case pending disposition of her petition for a writ of 24 mandamus, arguing that her mandamus petition raises serious questions regarding the Court’s order 25 appointing Stadium as Lead Plaintiff. See Motion, ECF No. 77; Reply, ECF No. 81. Further, Ms. 26 Sonthalia argues that irreparable harm, public interest, and judicial economy considerations favor 27 letting this case proceed under an improperly appointed Lead Plaintiff. See id. Stadium opposes, 1 mandamus petition related to an issue on which the Ninth Circuit has provided little guidance is too 2 slight for this case to be delayed to Stadium’s prejudice. See Opposition, ECF No. 79. 3 II. LEGAL STANDARD 4 Whether to issue a stay is “an exercise of judicial discretion . . . to be guided by sound legal 5 principles.” Nken v. Holder, 556 U.S. 418, 433–34 (2009) (citations omitted). A movant does not 6 have an absolute right to a stay “even if irreparable injury might otherwise result.” Id. at 433 (citing 7 Virginian Ry. Co. v. United States, 272 U.S. 658, 672 (1926)). Instead, the propriety of granting a 8 stay depends on the “circumstances of the particular case.” Id. (citing Virginian Ry., 272 U.S. 9 at 672–73). A court may accordingly “grant or deny a stay in accordance with its best judgment.” 10 Guifu Li v. A Perfect Franchise, Inc., No. 5:10–CV–01189–LHK, 2011 WL 2293221, at *2 11 (N.D. Cal. June 8, 2011). 12 Factors governing the issuance of a stay are “(1) whether the stay applicant has made a strong 13 showing that he [or she] is likely to succeed on the merits; (2) whether the applicant will be 14 irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other 15 parties interested in the proceeding; and (4) where the public interest lies.” Hilton v. Braunskill, 16 481 U.S. 770, 776 (1987). “The Ninth Circuit has . . . held that in order to qualify for a stay pending 17 appeal under the Hilton factors, a moving party must show (1) at least a ‘substantial case for relief 18 on the merits’ on appeal; (2) probable irreparable harm if no stay is granted; (3) that the balance of 19 harms tips in favor of the moving party; and (4) that a stay is in the public interest.” Guifu Li, 20 2011 WL 2293221, at *3 (citing Leiva-Perez v. Holder, 640 F.3d 962, 968 (9th Cir. 2011)). The 21 factors considered in determining whether a stay pending a petition for writ of mandamus is 22 warranted are the same as a stay pending appeal. See Powertech Tech. Inc. v. Tessera, Inc., 23 No. C 11-6121 CW, 2013 WL 1164966, at *1 (N.D. Cal. March 20, 2013) (citations omitted). An 24 alternative to this standard is the “substantial questions” test, which requires the moving party to 25 demonstrate “serious questions going to the merits and a hardship balance that tips sharply towards 26 the plaintiff,” along with a “likelihood of irreparable injury.” Id. (citing Golden Gate Rest. Ass’n v. 27 City & Cnty. of S.F., 512 F.3d 1112, 1116 (9th Cir. 2008)). III. DISCUSSION 1 The Court considers whether Ms. Sonthalia has made a sufficient showing as to each of the 2 Hilton factors, considering the various tests the Ninth Circuit has used to assess a motion for a stay 3 pending appeal implicating those factors. See Hilton, 481 U.S. at 776; Golden Gate, 4 512 F.3d at 1116. Under the Hilton factors for a stay pending appeal, courts consider whether the 5 moving party has shown (1) at least a ‘substantial case for relief on the merits’ on appeal; 6 (2) probable irreparable harm if no stay is granted; (3) that the balance of harms tips in favor of the 7 moving party; and (4) that a stay is in the public interest. See Guifu, 2011 WL 2293221, at *3. The 8 Court will consider each of these factors in turn. 9 A. Merits 10 First, the Court considers whether Ms. Sonthalia has made a sufficient showing of likelihood 11 of success on the merits. Ms. Sonthalia argues that based on the PSLRA and Supreme Court 12 precedent, she has raised serious questions going to the merits of the Court’s order appointing 13 Stadium as Lead Plaintiff in her mandamus petition. See Reply, ECF No. 81 at 3; Motion, 14 ECF No. 77 at 2. In response, Stadium argues that writs of mandamus are an extraordinary remedy 15 rarely accepted for review. See Opposition, ECF No. 79 at 1. Further, Stadium argues that the Ninth 16 Circuit has not adopted a specific formula to calculate losses for a motion to appoint Lead Plaintiff, 17 but rather has indicated that district courts “may select accounting methods that are both rational 18 and consistently applied.” See id. at 2 (quoting In re Cavanaugh, 306 F.3d 726, 730 n.4 (9th Cir. 19 2002)); id. at 5–6. 20 The Court agrees with Stadium. The Court recognizes the difficulty a court has in 21 determining the likelihood of a party’s success in overturning its own prior ruling. However, the 22 Court nonetheless finds that given the negligible likelihood that Ms. Sonthalia’s mandamus petition 23 is granted, she has not demonstrated a likelihood of success or a serious question going to the merits 24 of this case. “The remedy of mandamus is a drastic one, to be invoked only in extraordinary 25 situations.” Kerr v. U.S. Dist. Court, 426 U.S. 394, 402 (1976). Further, the Ninth Circuit has given 26 district courts considerable leeway in calculating recoverable loss amounts for the purpose of 27 appointing a lead plaintiff in securities class actions. See Cavanaugh, 306 F.3d at 730 n.4; 1 Perlmutter v. Intuitive Surgical, Inc., No. 10–CV–03451–LHK, 2011 WL 566814, at *3 (N.D. Cal. 2 Feb. 15, 2011) (“[N]either the PSLRA nor the Ninth Circuit specifies precisely how to calculate 3 which plaintiff has the largest financial interest.”). Ms. Sonthalia cannot point to a single example 4 of a court granting a stay under similar circumstances. See Borteanu v. Nikola Corp., No. 5 CV–20–01797–PHX–SPL, ECF No. 68, at 1 (D. Ariz. Mar. 1, 2021) (granting stay to which parties 6 had stipulated); In re Tesla, Inc. Secs. Litig., No. 18–cv–004865–EMC, ECF No. 211, at 1 (N.D. 7 Cal. Apr. 15, 2019) (granting stay motion where “[n]o party substantively opposed the motion”). 8 Ms. Sonthalia argues that she has raised “serious questions” going to the merits or 9 demonstrated a “substantial case” on the merits, pointing to the fact that the Ninth Circuit has found 10 such a showing sufficient when accompanied by a balance of hardships that tips sharply in the 11 movant’s favor. See Reply, ECF No. 81 at 2–3 (citing Golden Gate, 512 F.3d at 1116; Leiva-Perez, 12 640 F.3d at 970). Given the high standard for a mandamus petition and the fact that the Ninth Circuit 13 has not specified precisely how to calculate a party’s financial interest on a motion to appoint a Lead 14 Plaintiff, the Court disagrees that Ms. Sonthalia has met her burden as to these lower thresholds for 15 showing likelihood of success on the merits. Further, even if Ms. Sonthalia had raised “serious 16 questions” or presented a “substantial case,” she has failed to show that the balance of hardships is 17 anything more than even between her and Stadium, as the Court outlines below. 18 Accordingly, the Court finds that Ms. Sonthalia has not met her burden for showing that her 19 mandamus petition has a strong or substantial likelihood of success or that it raised a serious 20 question as to the merits. See, e.g., Powertech, 2013 WL 1164966, at *1; Leiva-Perez, 21 640 F.3d at 970. 22 B. Irreparable Harm without Stay 23 Second, the Court considers whether Ms. Sonthalia has adequately demonstrated that she 24 will suffer irreparable harm if the Court declines to stay the case. Ms. Sonthalia argues that the case 25 may proceed under the leadership of an improperly appointed Lead Plaintiff if it is not stayed. See 26 Motion, ECF No. 77 at 3; Reply, ECF No. 81 at 3. Further, Ms. Sonthalia argues that if Defendants 27 successfully move to dismiss Stadium’s amended complaint, there is no guarantee that the Court 1 Sonthalia presumes that Stadium’s amended complaint will be insufficient and that the Court will 2 not be able to fashion a remedy to allow Ms. Sonthalia to plead the same claims if her mandamus 3 petition is granted. See Opposition, ECF No. 79 at 4 n.7. 4 The Court agrees with Stadium. The irreparable harm Ms. Sonthalia points to is too 5 speculative. Stadium has not even filed an amended complaint, and if Defendants choose to file a 6 motion to dismiss, they may wait to do so until June 20, 2022. See Order, ECF No. 73 ¶ 2; see also 7 Opposition, ECF No. 79 at 6 n.9 (indicating potential delays to the schedule). Further, while the 8 Court cannot foreclose the possibility that it will deny leave to amend if it were to dismiss a 9 complaint not currently before it, courts commonly grant leave to amend when granting the first 10 motion to dismiss filed in a securities class action. See, e.g., Osher v. JNI Corp., 183 Fed.Appx. 604, 11 605 (9th Cir. 2006) (“Leave to amend is to be granted with extreme liberality in securities fraud 12 cases[.]”); Veal v. Lendingclub Corp., No. 18–cv–02599–BLF, 2020 WL 3128909, at *16 13 (N.D. Cal. June 12, 2020) (granting leave to amend where “the current motion to dismiss is the first 14 pleading to attack the sufficiency of Plaintiffs’ allegations, the current decision by the district court 15 is the first to address the sufficiency of those allegations, and Plaintiffs are seeking their first 16 opportunity to cure those deficiencies.”) (internal quotations and modifications omitted) (quoting 17 United States v. United Healthcare Ins. Co., 848 F.3d 1161, 1183 (9th Cir. 2016)); see also Arizona 18 Students’ Ass’n v. Ariz. Bd. of Regents, 824 F.3d 858, 871 (9th Cir. 2016). 19 Based on the above reasoning, the Court finds that Ms. Sonthalia has failed to show that she 20 is likely to suffer irreparable harm in the absence of a stay. 21 C. Balance of Harms 22 Third, the Court considers whether the balance of harms tips in Ms. Sonthalia’s favor. Ms. 23 Sonthalia argues that if no stay were issued, there is a concrete risk that the Court, counsel, and the 24 parties will spend time and effort on a motion to dismiss that could be rendered moot if the Ninth 25 Circuit grants Ms. Sonthalia’s mandamus petition. See Motion, ECF No. 77 at 3–4; Reply, 26 ECF No. 81 at 4. Further, Ms. Sonthalia argues that Stadium would not be prejudiced by a stay, 27 given the case’s early procedural posture and the high likelihood of delays pending View’s belated 1 Additionally, Ms. Sonthalia expects any stay would only last months given the timeline on which 2 the Ninth Circuit has adjudicated other mandamus petitions related to orders appointing a lead 3 plaintiff. See Motion, ECF No. 77 at 4. In response, Stadium argues that it would be harmed if the 4 case were delayed, since it would not be able to file its amended complaint, issue document 5 preservation subpoenas, or respond to “unexpected activities of the Defendants.” See Opposition, 6 ECF No. 79 at 6. 7 The Court finds that the balance of harms is at best even between Ms. Sonthalia and Stadium, 8 so Ms. Sonthalia has failed to show that it tips in her favor. Both sides have little more than 9 speculative harm to point to at this early stage of the case. While courts consider “economy of time 10 and effort” in assessing the propriety of a stay, Landis v. N. Am. Co., 299 U.S. 248, 254 (1936), Ms. 11 Sonthalia can only point to harms that will accrue to the parties and the Court if her mandamus 12 petition is granted—which, as the Court outlined above, is speculative. Stadium can only point to 13 harms from delay in the litigation, even though it appears that the case will face delays regardless 14 of whether a stay issues. See Opposition, ECF No. 79 at 6 n.9. 15 Based on the above reasoning, the Court finds that Ms. Sonthalia has failed to show that the 16 balance of harms weighs in favor of a stay—let alone that it “tips sharply” in her favor. See, e.g., 17 Powertech, 2013 WL 1164966, at *1. 18 D. Public Interest 19 Fourth, the Court considers whether the public interest favors a stay. Ms. Sonthalia argues 20 that the public would be served by a stay, because under the PSLRA, the putative class in a securities 21 fraud class action benefits from a Lead Plaintiff with the largest financial interest at issue. See 22 Reply, ECF No. 81 at 4. Further, Ms. Sonthalia argues that the putative class would benefit from 23 avoiding the unnecessary judicial costs of filing an amended complaint and briefing related to a 24 motion to dismiss that may ultimately be mooted by the Ninth Circuit. See id. In response, 25 Defendants argue that the extremely low probability of success as to Ms. Sonthalia’s mandamus 26 petition attenuates any public interest in a stay. See Opposition, ECF No. 79 at 7. 27 The Court agrees with Defendants. Any public interest in a stay is too speculative. Unless 1 Stadium from serving as Lead Plaintiff in this case, given that the Court has determined Stadium 2 || has the largest financial interest in this case. See Order, ECF No. 67. 3 Oe Ok 4 Since Ms. Sonthalia has failed to show a “strong” or “substantial” likelihood of success on 5 || the merits of her mandamus petition, or that her petition raised “serious questions going to the 6 || merits” of this action, she has failed to meet any of the alternative tests the Ninth Circuit has 7 provided for a stay motion pending appeal. See Powertech, 2013 WL 1164966, at *1; Leiva-Perez, 8 640 F.3d at 970. Further, Ms. Sonthalia has failed to show a likelihood that she will suffer 9 irreparable harm in the absence of a stay, that the public interest significantly favors granting a stay, 10 || or that the balance of harms in this case is anything more than even between Ms. Sonthalia and 11 Stadium. Leiva-Perez, 640 F.3d at 970. 12 Accordingly, the Court finds that Ms. Sonthalia has failed to meet her burden for showing 5 13 that a stay is appropriate in this case. 14 || IV. ORDER 15 For the foregoing reasons, IT IS HEREBY ORDERED that Ms. Sonthalia’s motion to stay 16 || the above-captioned case pending disposition of her mandamus petition is DENIED WITHOUT 3 17 PREJUDICE to seeking a stay from the Ninth Circuit. 18 19 || Dated: April 11, 2022 kom Lh han tn) 20 Me BETH LABSON FREEMAN 21 United States District Judge 22 23 24 25 26 27 28