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

Background

This order concerns only Sweta Sonthalia’s request to pause a securities class action while the Ninth Circuit considered her petition for a writ of mandamus. A writ of mandamus is an extraordinary request asking an appeals court to order a lower court to take a particular action. Sonthalia asked the Ninth Circuit to vacate the district court’s order appointing Stadium Capital LLC as lead plaintiff and to direct the district court to appoint her instead.

Sonthalia and Stadium had filed competing motions to become lead plaintiff. Their dispute centered on how to calculate recoverable losses from the alleged securities-law violations. The district court adopted Stadium’s formula and appointed Stadium as lead plaintiff, with its counsel appointed as lead counsel. The court later denied Sonthalia’s request for permission to seek reconsideration of that appointment order.

Legal standard

The court applied the factors used to decide whether to stay a case while an appeal or mandamus petition is pending. Those factors include whether the movant has shown a substantial chance of success or serious questions on the merits, whether the movant will suffer likely irreparable harm without a stay, whether the balance of harms favors a stay, and whether a stay would serve the public interest.

Court’s analysis

The court found that Sonthalia had not shown a strong or substantial likelihood that her mandamus petition would succeed, or that it raised serious questions about the appointment of Stadium. The court emphasized that mandamus is a drastic remedy used only in extraordinary situations and that the Ninth Circuit gives district courts considerable flexibility in calculating recoverable losses when selecting a lead plaintiff in a securities class action.

The court also found that Sonthalia’s claimed injury was too speculative. Stadium had not yet filed an amended complaint, and the possibility that later events could prevent Sonthalia from pursuing the same claims depended on several uncertain events. The court concluded that Sonthalia had not shown likely irreparable harm without a stay.

Regarding the balance of harms, the court found that the competing harms were at most even. Sonthalia identified the possibility that work on the case could later become unnecessary if the Ninth Circuit granted her petition, while Stadium identified harm from delaying the litigation. The court concluded that Sonthalia had not shown that the balance favored her, much less that it tipped sharply in her favor.

Finally, the court found that any public interest in a stay was too speculative. The court rejected the argument that avoiding possible future litigation costs justified a stay given the court’s conclusion that Sonthalia’s mandamus petition was unlikely to succeed.

Disposition

Judge Beth Labson Freeman ordered that Sonthalia’s motion to stay the case pending resolution of her mandamus petition was DENIED WITHOUT PREJUDICE to seeking a stay from the Ninth Circuit. This order did not decide the underlying securities claims.