in Re George Mersho v. United States District Court for the District of Arizona, Phoenix

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE G EORGE M ERSHO; VINCENT
C HAU; S TANLEY KARCZYNSKI,
GEORGE M ERSHO; V INCENT C HAU;
S TANLEY KARCZYNSKI, as the Nikola
Investor Group II,
Petitioners,
v.
UNITED S TATES D ISTRICT C OURT FOR
THE DISTRICT OF ARIZONA,
P HOENIX,
Respondent,
NIKOLA C ORPORATION ; S TEVE
GIRSKY; S TEVE S HINDLER ; M ARK
R USSELL; KIM J. B RADY ; TREVOR R.
M ILTON; ANGELO B AIO ; DENNIS J.
S TACY, S R .; T3 TRADING GROUP ;
M AHJABIN DINYARIAN ; ALBERT
HOLZMACHER ; M ICHAEL WOOD;
TATE WOOD ; J OSEPH R OE; P ATRICK
B ROSTOWIN ; NAYANKUMAR P ATEL;
S HAHAB S ANDHU ; NIKOLA INVESTOR
GROUP ,
Real Parties in Interest.
No. 20-73819
D.C. No.
2:20-cv-01797-
SPL
OPINION

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2 IN RE M ERSHO
Petition for Writ of Mandamus
Argued and Submitted June 18, 2021
San Francisco, California
Filed July 23, 2021
Before: Milan D. Smith, Jr. and Lawrence VanDyke,
Circuit Judges, and Andrew P. Gordon,* District Judge.
Opinion by Judge Gordon
SUMMARY**
Mandamus / Securities Fraud / Class Action
The panel granted in part a petition for a writ of
mandamus and ordered the district court to vacate its order
appointing an individual as lead plaintiff in a consolidated
securities fraud action against Nikola Corporation and
related defendants.
The panel held that in a securities fraud class action, the
Private Securities Litigation Reform Act requires the district
court to identify the presumptive lead plaintiff, who is the
movant with the largest financial interest and who has made
a prima facie showing of adequacy and typicality. At step
* The Honorable Andrew P. Gordon, United States District Judge
for the District of Nevada, sitting by designation.
** This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

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IN RE M ERSHO 3
one of the selection process, notice of the action is posted so
purported class members can move for lead plaintiff
appointment. The statute expressly allows a “group of
persons” to move for appointment. At step two, the district
court, applying the presumption, must determine which
movant is the most adequate plaintiff. At step three,
competing movants can rebut the presumption by showing
that the presumptive lead plaintiff will not fairly or
adequately represent the class.
The three petitioners moved to be lead plaintiff as a
group, referred to as “Group II.” The district court
concluded that Group II had the largest financial interest and
had made a prima facie showing of adequacy and typicality.
Nonetheless, the district court rejected Group II as lead
plaintiff, notwithstanding the presumption.
The panel held that the district court’s order was clearly
erroneous because it did not give effect to the presumption
and effectively left the burden on Group II to prove adequacy
at step three of the selection process, even though the burden
should have shifted to the competing movants to show
inadequacy. The district court considered petitioners’ joint
declaration detailing how they would work together but
declined to appoint Group II based on its “misgivings” about
how they would work together because petitioners had failed
to explain how they found each other. The panel concluded
that the district court failed to comply with the burden-
shifting process Congress established in the PSLRA.
Applying the Bauman test for mandamus relief, the panel
concluded that factor three, clear error, was satisfied. The
first and second Bauman factors weighed in favor of
granting the writ because petitioners had no realistic
alternative to challenge the district court’s decision absent

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4 IN RE M ERSHO
mandamus relief. The fifth factor also weighed in favor
because petitioners raised new and important issues about
how courts consider the cohesion of group plaintiffs. The
panel therefore granted the petition for writ of mandamus to
the extent it sought to vacate the district court’s order
appointing lead plaintiff. The panel, however, declined to
instruct the district court to appoint Group II as lead plaintiff.
The panel remanded to the district court to redetermine the
lead plaintiff in a manner consistent with the panel’s opinion.
COUNSEL
Jeffrey C. Block (argued), Jacob A. Walker, and Michael
Gaines, Block & Leviton LLP, Boston, Massachusetts;
Jeremy A. Lieberman and J. Alexander Hood II, Pomerantz
LLP, New York, New York; for Petitioners.
Robert K. Kry (argued), MoloLamken LLP, Washington,
D.C.; Laurence M. Rosen and Phillip Kim, The Rosen Law
Firm P.A., New York, New York; for Real Parties in
Interest.

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IN RE M ERSHO 5
OPINION
GORDON, District Judge:
George Mersho, Vincent Chau, and Stanley Karczynski
petition for a writ of mandamus to vacate the district court
order that declined to appoint their group as lead plaintiff.
They also request that the writ instruct the district court to
appoint their group as lead plaintiff instead and to clarify that
a group can be appointed as lead plaintiff. We grant the
mandamus petition in part and order the district court to
vacate its order appointing Angelo Baio as lead plaintiff.
FACTS AND PROCEDURAL BACKGROUND
The underlying litigation consists of several proposed
federal securities class actions against Nikola Corporation
and related defendants that have been filed in, or transferred
to, the United States District Court for the District of
Arizona. The plaintiffs allege they suffered losses from
buying Nikola Corporation securities after a non-party report
described apparent false statements made by the founder and
contained in company advertising materials. Plaintiffs filed
eight motions to consolidate, with six movants seeking to be
named lead plaintiff.
Petitioners Mersho, Chau, and Karczynski moved to be
lead plaintiff as a group under the name Nikola Investor
Group II (Group II). Group II’s motion indicated that it had
the largest financial interest in the litigation of
$6,010,333.00 and argued that it satisfies typicality and
adequacy. The motion included a joint declaration detailing
the Petitioners’ investing experience, their agreement to
move as a group for appointment as lead plaintiff, and their
plan to resolve any disagreements that might arise.

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6 IN RE M ERSHO
After granting consolidation, the district court turned to
the question of lead plaintiff appointment, which is governed
by the three-step process set out in the Private Securities
Litigation Reform Act (PSLRA), 15 U.S.C. § 78u-4. That
statute requires a district court to the identify the
presumptive lead plaintiff, who is the movant with the
largest financial interest and who has made a prima facie
showing of adequacy and typicality. Id. § 78u-
4(a)(3)(B)(iii)(I)(bb)–(cc). Once the presumption is
established, competing movants can rebut the presumption
by showing that the presumptive lead plaintiff will not fairly
or adequately represent the class. Id. § 78u-
4(a)(3)(B)(iii)(II)(aa).
To begin, the district court ranked the financial interest
of all the movants:
Movant Name Financial Interest
1. Nikola Investor Group II $6,010,333.00
2. Nayankumar Patel $1,525,627.35
3. The Investor Group $1,332,589.97
4. Angelo Baio $703,459.93
5. Shahab Sandu $548,114.30
6. Mahjabin Dinyarian $479,413.00
Notably, had the Petitioners moved for lead plaintiff
individually, Mersho and Chau would have had the first and
second largest financial interest ($2,446,429.00 and
$2,094,640.00, respectively), and Karczynski would have
had the fourth ($1,469,265.00). Because Group II had the
largest financial interest, the district court evaluated its
pleadings and declaration and determined that Group II
made a prima facie showing of adequacy and typicality.

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IN RE M ERSHO 7
The district court next considered the efforts by
competing movants to rebut that presumption. It outlined
four arguments advanced by Baio and Patel:
1) Nikola Investor Group II is a group of
unrelated individuals brought together by
counsel, 2) it has failed to explain why the
grouping and four law firms are necessary,
3) its filings are full of errors that suggest the
individuals are not involved and counsel is
running the litigation, and 4) it has not shown
it is a cohesive group and its members are
geographically diverse and unconnected.
Borteanu v. Nikola Corp., 507 F. Supp. 3d 1128, 1137 (D.
Ariz. 2020). The district court went on to discuss how courts
are “often hesitant” to appoint a group as lead plaintiff. Id.
It explained that courts “uniformly” refuse to appoint groups
of unrelated investors who are “brought together for the sole
purpose of aggregating their claims in an effort to become
the presumptive lead plaintiff.” Id. (quoting Tsirekidze v.
Syntax-Brillian Corp., No. CV-07-2204-PHX-FJM, 2008
WL 942273 at *3 (D. Ariz. Apr. 7, 2008)). The district court
also expressed concern that if a group serves as lead plaintiff,
the group’s counsel may actually drive the litigation, rather
than the individuals in the group. Id. Due to this “hesitancy,”
it noted “courts often focus on evidence of cohesion in the
group.” Id.
The district court then rejected Group II as lead plaintiff,
notwithstanding the presumption:
Here, the members are all from different
states and appear to have joined solely for
purposes of litigation. They have presented a
signed Joint Declaration showing that they

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8 IN RE M ERSHO
met telephonically to discuss the benefits and
detriments of proceeding as a group, and
litigation strategy going forward. They
promise to be the decisionmakers, direct the
activities of their counsel, and meet
telephonically to discuss strategy. However,
as competing movant Angelo Baio points out,
it is not clear how the members of Nikola
Investor Group II found each other, and
courts generally prefer group members to
have a pre-litigation relationship. Despite the
Joint Statement, the Court has misgivings
about the cohesion of Nikola Investor Group
II and its ability to control the litigation
without undue influence from counsel.
Therefore, the Court will not appoint Nikola
Investor Group II as lead plaintiff.
Id. at 1137–38 (internal citations omitted). The district court
declined to appoint the next two movants with the largest
losses because they did not satisfy the adequacy and
typicality requirements. Id. at 1138–40. It ultimately
selected Baio, the investor with the fourth largest losses of
just over $700,000. Id. at 1140.
Petitioners seek a writ of mandamus that vacates the
district court’s order, directs the district court to appoint
Group II as lead plaintiff instead, and clarifies that groups
are permitted to serve as lead plaintiff under the PSLRA.
Baio, as a real party in interest, opposes the petition.
DISCUSSION
This court has the authority to issue a writ of mandamus
under the All Writs Act, 28 U.S.C. § 1651. A writ is an
extraordinary remedy and Petitioners bear the burden of

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IN RE M ERSHO 9
showing that their right to it is “clear and indisputable.” In
re Boon Glob. Ltd., 923 F.3d 643, 649 (9th Cir. 2019)
(quotation omitted). To determine whether a writ of
mandamus should be granted, we weigh the five factors
outlined in Bauman v. United States District Court:
(1) The party seeking the writ has no other
adequate means, such as a direct appeal, to
attain the relief he or she desires. (2) The
petitioner will be damaged or prejudiced in a
way not correctable on appeal. (This
guideline is closely related to the first.)
(3) The district court’s order is clearly
erroneous as a matter of law. (4) The district
court’s order is an oft-repeated error, or
manifests a persistent disregard of the federal
rules. (5) The district court’s order raises
new and important problems, or issues of law
of first impression.
557 F.2d 650, 654–55 (9th Cir. 1977) (internal citations
omitted).
“The Bauman factors should not be mechanically
applied.” Cole v. U.S. Dist. Ct. for Dist. of Idaho, 366 F.3d
813, 817 (9th Cir. 2004). A showing of only one factor does
not mean the writ must be denied, nor does a showing of all
factors mean that the writ must be granted. Id. And not all
factors will be relevant in every case. Christensen v. U.S.
Dist. Ct. for Cent. Dist. of Cal., 844 F.2d 694, 697 (9th Cir.
1988). “Mandamus review is at bottom discretionary . . . .”
San Jose Mercury News, Inc. v. U.S. Dist. Ct., 187 F.3d
1096, 1099 (9th Cir. 1999).

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10 IN RE M ERSHO
I. Clear Error
Analysis of whether to grant a writ usually begins with
the third Bauman factor of “clear error, because the absence
of the third factor is dispositive.” In re Boon Glob. Ltd.,
923 F.3d at 649 (quotation omitted). “The clear error
standard is significantly deferential and is not met unless the
reviewing court is left with a ‘definite and firm conviction
that a mistake has been committed.’” Cohen v. U.S. Dist. Ct.
for N. Dist. of Cal., 586 F.3d 703, 708 (9th Cir. 2009)
(quoting Concrete Pipe & Prods. of Cal., Inc. v. Constr.
Laborers Pension Tr. for S. Cal., 508 U.S. 602, 623 (1993)).
A ruling usually cannot be clearly erroneous if there is no
Ninth Circuit authority on point, or the question has not been
addressed by any circuit court. See In re Grice, 974 F.3d 950,
955 (9th Cir. 2020); In re Swift Transp. Co. Inc., 830 F.3d
913, 916–17 (9th Cir. 2016) (per curiam). But a decision can
still be clearly erroneous in the absence of controlling
precedent if the “plain text of the statute prohibits the course
taken by the district court.” Cohen, 586 F.3d at 710; see also
In re Cavanaugh, 306 F.3d 726, 731 (9th Cir. 2002)
(granting a writ petition because the district court had gone
“off the statutory track”).
A. The PSLRA Process for Appointing Lead
Plaintiff
To determine whether there is clear error, we must look
to the lead plaintiff appointment process set out in the
PSLRA. Before the PSLRA, lead plaintiffs were usually
selected based on who was the first to file suit. In re
Cavanaugh, 306 F.3d at 729. This practice created concerns
that attorneys acting on a contingency basis were primarily
running the litigation on behalf of “figurehead” plaintiffs
who were unlikely to monitor their attorneys’ activities. In
re Cendant Corp. Sec. Litig. (Cendant II), 404 F.3d 173, 191

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IN RE M ERSHO 11
(3d Cir. 2005). Authors Elliot J. Weiss and John S.
Beckerman wrote an article about these concerns, proposing
that investors with multimillion-dollar interests in the class
actions should be selected as lead plaintiffs so that they
would have greater incentive to watch over counsel. Id. at
191–92 (citing Weiss & Beckerman, Let the Money Do the
Monitoring: How Institutional Investors Can Reduce
Agency Costs in Securities Class Actions, 104 Yale L.J.
2053, 2053–54, 2056, 2088 (1995)). This insight provided
the basis for the lead plaintiff provisions that Congress
adopted into the PSLRA. In re Cendant Corp. Litig.
(Cendant I), 264 F.3d 201, 262 (3d Cir. 2001) (citing S. Rep.
No. 104-98, at 11 n.32 (1995), reprinted in 1995
U.S.C.C.A.N. 679, 690 n.32).
The three-step process for the selection of lead plaintiff
under the PSLRA is “neither overly complex nor
ambiguous.” In re Cavanaugh, 306 F.3d at 729. In step one,
notice of the action must be posted so purported class
members can move for lead plaintiff appointment. 15 U.S.C.
§ 78u-4(a)(3)(A)(i)(I)–(II). The statute expressly allows a
“group of persons” to move for appointment. Id. § 78u-
4(a)(3)(B)(iii)(I).
In step two, the district court must determine which
movant is the “most adequate plaintiff,” which is defined as
the plaintiff “most capable of adequately representing the
interests of class members.” Id. § 78u-4(a)(3)(B)(i). To do
so, the district court must “adopt a presumption that the most
adequate plaintiff” is the movant with the largest financial
interest who “otherwise satisfies the requirements of Rule 23
of the Federal Rules of Civil Procedure.” Id. § 78u-
4(a)(3)(B)(iii)(I). This means the district court must identify
which movant has the largest alleged losses and then
determine whether that movant has made a prima facie

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12 IN RE M ERSHO
showing of adequacy and typicality.1 In re Cavanaugh,
306 F.3d at 730. Once the district court has determined that
the movant with the largest stake has made a prima facie
showing of adequacy and typicality, that movant “becomes
the presumptively most adequate plaintiff.” Id. (quotation
omitted). If the movant with the largest losses does not
satisfy the Rule 23 requirements, the district court must then
look to the movant with the next largest losses and repeat the
inquiry. Id. At this step, the process is not adversarial, so the
Rule 23 determination should be based on only the movant’s
pleadings and declarations. Id.
At step three, the process “turns adversarial.” Id. The
presumption may be rebutted “only upon proof by a member
of the purported plaintiff class that the presumptively most
adequate plaintiff . . . will not fairly and adequately protect
the interests of the class; or [] is subject to unique defenses
that render such plaintiff incapable of adequately
representing the class.” 15 U.S.C. § 78u-
4(a)(3)(B)(iii)(II)(aa)–(bb). But just because “the
1 Rule 23(a) provides that:
One or more members of a class may sue or be sued as
representative parties on behalf of all members only if:
(1) the class is so numerous that joinder of all members
is impracticable; (2) there are questions of law or fact
common to the class; (3) the claims or defenses of the
representative parties are typical of the claims or
defenses of the class; and (4) the representative parties
will fairly and adequately protect the interests of the
class.
We have determined that the lead plaintiff process focuses on typicality
and adequacy “in particular” because “[f]ailure to satisfy . . . numerosity
and commonality criteria[] would preclude certifying a class action at
all.” In re Cavanaugh, 306 F.3d at 730 & n.5.

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IN RE M ERSHO 13
presumption is rebuttable does not mean that it may be set
aside for any reason that the court may deem sufficient.” In
re Cavanaugh, 306 F.3d at 729 n.2. The statute requires
proof that the presumptive lead plaintiff is not adequate. Id.
The statute permits discovery if the movant can
“demonstrate[] a reasonable basis for a finding that the
presumptively most adequate plaintiff is incapable of
adequately representing the class.” 15 U.S.C. § 78u-
4(a)(3)(B)(iv). If the presumption is not rebutted, the
presumptively most adequate plaintiff must be selected as
lead plaintiff. Id. § 78u-4(a)(3)(B)(i).
Courts determine whether a plaintiff will adequately
represent a class by answering two questions: (1) do the
movant and its “counsel have any conflicts of interest with
other class members” and (2) will the movant and its
“counsel prosecute the action vigorously on behalf of the
class?” Ellis v. Costco Wholesale Corp., 657 F.3d 970, 985
(9th Cir. 2011) (quotation omitted) (applying those
questions to a Rule 23 class certification decision); see also
Cendant I, 264 F.3d at 265–66 (applying those questions to
a PSLRA lead plaintiff appointment). Under the PSLRA,
the district court must essentially do this analysis twice. At
step two, it will consider whether the movant has made a
prima facie showing of adequacy. In re Cavanaugh,
306 F.3d at 730. At step three, it will consider whether
competing movants have offered proof that the presumptive
lead plaintiff will not adequately represent the class. Id.
at 730–31. “The district court has latitude as to what
information it will consider in determining typicality and
adequacy.” Id. at 732.

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14 IN RE M ERSHO
B. Lack of Evidence About How Group II’s
Members Met Was Insufficient Proof to Rebut
the Presumption
In the present case, the district court determined at step
three that the competing movants rebutted the presumption
that Group II would be the most adequate plaintiff. It felt “it
[was] not clear how the members of Nikola Investor Group
II found each other” and it therefore had “misgivings” about
the group’s cohesion and ability to control counsel.
Petitioners argue that the district court made a clear error
at step three because it determined that the presumption had
been rebutted by its “misgivings” rather than any new
evidence providing “proof” that Group II would not be an
adequate lead plaintiff. Baio responds that the district court
acted within its discretion by reviewing evidence already in
the record and determining that a lack of a pre-litigation
relationship showed that Group II was not adequate. Baio
also argues that the district court’s decision cannot be clearly
erroneous because there is no prior Ninth Circuit authority
on the issue. Petitioners reply that the same evidence that
established the presumption cannot then rebut that
presumption, and that the district court strayed from the
statute.
In Cavanaugh, this court granted a writ of mandamus
after a district court erred in determining that the lead
plaintiff presumption had been rebutted. 306 F.3d at 731,
739. There, the district court held that a movant had rebutted
the presumption that an investor group was the most
adequate lead plaintiff by showing that the group’s choice of
counsel charged much higher attorney fees than the other
competing movants’ choice of counsel. Id. at 728.

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IN RE M ERSHO 15
This court held that the district court “went off the
statutory track . . . by failing to give effect to the
presumption.” Id. at 731. The district court impermissibly
compared attorney costs between movants instead of
focusing on whether the presumptive lead plaintiff was
adequate. Id. at 732. We cautioned that district courts cannot
“depart from the statutory text because they believe some
other arrangement would better serve the legislative goals.”
Id. at 731–32. “The district court has latitude as to what
information it will consider in determining typicality and
adequacy,” but a plaintiff’s choice of counsel is relevant only
to determine whether that decision “is so irrational, or so
tainted by self-dealing or conflict of interest, as to cast
genuine and serious doubt on that plaintiff’s willingness or
ability to perform the functions of lead plaintiff.” Id. at 732–
33; see also id. at 738 n.19 (“[T]he question is whether the
choices made by the movant with the largest losses are so
deficient as to demonstrate that it will not fairly and
adequately represent the interests of the class . . . .” (quoting
Cendant I, 264 F.3d at 266)).
Here, the district court made a similar error because it
did not give effect to the presumption. The district court
effectively left the burden on Group II to prove adequacy at
step three even though the burden should have shifted to the
competing movants to show inadequacy. It considered
Petitioners’ joint declaration detailing how they would work
together, but declined to appoint Group II based on its
“misgivings” about how they would work together because
Petitioners had failed to explain how they found each other.
By penalizing Petitioners for not explaining how they found
each other, the district court continued to place the burden
on them to prove adequacy. Further, it based its decision on
“misgivings” about a lack of cohesion or control over
counsel even though the only evidence it acknowledged—

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16 IN RE M ERSHO
the Petitioners’ joint declaration—contradicts such
conclusions.2 Misgivings are not evidence that cast
“genuine and serious doubt on [the] plaintiff’s willingness or
ability to perform the functions of lead plaintiff.” Id. at 733.
For the presumption to have meaning at step three,
competing movants must point to evidence of inadequacy.
Competing movants must convince the district court that the
presumptive lead plaintiff would not be adequate, not merely
that the district court was wrong in determining that the
prima facie elements of adequacy were met. That is the
purpose of the presumption and burden-shifting. The district
court made a prima facie determination at step two that
Group II was adequate. But at step three, it appeared to
change its mind because other courts usually prefer members
of the group to have a pre-litigation relationship. It pointed
to no evidence to support its decision, instead relying only
on the absence of proof by Group II regarding a pre-litigation
relationship and its misgivings. That does not comport with
the burden-shifting process Congress established in the
PSLRA.3
This amounts to clear error because the district court
acted contrary to the statutory process set out in the PSLRA.
2 The competing movants argued to the district court that Group II
was inadequate because Group II’s own filings contained errors and
inconsistent formatting, which showed a lack of cohesion. The district
court did not rely on this evidence in making its decision.
3 This decision is also troubling because it resulted in the
appointment of a lead plaintiff whose losses are less than half or one-
third of what each of the Petitioners suffered individually. Although
having the largest stake is not dispositive, the result here appears
incongruous with the PSLRA’s presumption that the investors with the
largest stake have the greatest incentive to supervise the litigation
closely.

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IN RE M ERSHO 17
Even though there is no Ninth Circuit precedent squarely on
point, a district court cannot take an action that “the plain
text of the statute prohibits.” Cohen, 586 F.3d at 710. We
are left with a “definite and firm conviction that a mistake
has been committed.” Id. at 708 (quoting Concrete Pipe &
Prods. of Cal., Inc., 508 U.S. at 623).
This is not to say that district courts are precluded from
considering pre-litigation relationships or cohesion
altogether. District courts have “latitude” in what
information they can consider to assess adequacy. In re
Cavanaugh, 306 F.3d at 732. Many district courts have
considered the lack of a pre-litigation relationship as part of
their adequacy analysis at step two because it may indicate
that members may not work together well to vigorously
prosecute the litigation or they might not be able to control
counsel. See, e.g., In re Cloudera, Inc. Sec. Litig., No. 19-
cv-03221-LHK, 2019 WL 6842021, at *6–8 (N.D. Cal. Dec.
16, 2019). District courts often consider a pre-litigation
relationship along with other factors such as the size of the
group, how the members found their counsel, and the
prosecution procedures set out in their filings. Id. at *6.
But the analysis must hew to the legal standard
prescribed by the statute. In re Cavanaugh, 306 F.3d at 732.
If a district court determines at step three that a movant is
inadequate, it must articulate how the evidence proves
inadequacy. Cendant I, 264 F.3d at 266–67 (stating that the
pre-litigation relationship of group members can “properly
enter into the calculus of whether that group would ‘fairly
and adequately protect the interests of the class,’ but it is this
test, not one of relatedness, with which courts should be
concerned”). Because the district court here based its
decision only on speculation that Group II lacks a pre-
litigation relationship, it left the burden on Group II at step

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18 IN RE M ERSHO
three, and it was clear error to find that the presumption had
been rebutted.
II. The Remaining Bauman Factors
Because the district court clearly erred, the third Bauman
factor is satisfied. We also look to the remaining Bauman
factors to determine whether a writ of mandamus is
appropriate. The first and second Bauman factors focus on
the availability of relief, while the fourth and fifth factors
focus on the extent to which the error arises in other cases.
See Bauman, 557 F.2d at 654–55. Including the third factor
of clear error, we find that four of the five Bauman factors
weigh in favor of granting the writ of mandamus.
Petitioners argue that the district court’s order is an
unappealable interlocutory order and they will be
irreversibly prejudiced by not receiving the benefit of the
presumption. They also argue that district courts commonly
err by restricting group eligibility to serve as lead plaintiff,
which creates unpredictability for investors that are
considering proceeding as a group. Baio responds that the
order can be reviewed on direct appeal and that Petitioners
face no prejudice because they will still receive the benefit
of any judgment the class recovers, or they can opt out to
pursue their own claims. He further contends that
conflicting district court rulings are not the product of oft-
repeated error but rather are the product of district courts
exercising their discretion in weighing the evidence.
“The first Bauman factor highlights the need for
mandamus to be used only when no other realistic alternative
is (or was) available to a petitioner.” Cole, 366 F.3d at 817.
The second Bauman factor is similar but focuses on whether
the harm to the petitioners cannot be corrected on a direct

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IN RE M ERSHO 19
appeal. San Jose Mercury News, 187 F.3d at 1099. These
factors are usually considered together. Id.
Here, the Petitioners have no realistic alternative to
challenge the district court’s decision absent mandamus
relief. An interlocutory appeal under the collateral order
doctrine is unavailable for an order designating lead
plaintiff. Z-Seven Fund, Inc. v. Motorcar Parts &
Accessories, 231 F.3d 1215, 1218–19 (9th Cir. 2000)
(holding that the order is not subject to interlocutory appeal
“because it is not a conclusive, immutable determination of
the issue” and because adequacy and typicality are
“intimately involved with the merits” (quotation omitted)).
Without the availability of an interlocutory appeal, “it is fair
to conclude that the plaintiffs do not have an adequate
remedy, other than mandamus, from the district court’s
order.” In re Cavanaugh, 306 F.3d at 740 (Wallace, J.
concurring); see also Cohen, 586 F.3d at 713 (“[M]andamus
is the proper vehicle to challenge the appointment of lead
plaintiff at this stage in the litigation absent certification of
an interlocutory appeal.”).
Petitioners could technically challenge the district
court’s order on direct appeal. Z-Seven Fund, 231 F.3d
at 1219; cf. N. Am. Acceptance Corp. Sec. Cases v. Arnall,
Golden & Gregory, 593 F.2d 642, 645 (5th Cir. 1979)
(holding that a motion to disqualify class counsel “is, in
effect, a claim that the class was not adequately represented.
And the requirement that the class be adequately represented
is reviewable on appeal from a final judgment”). But the
harm to Petitioners will not be meaningfully corrected on
appeal. Once the district court determined that Petitioners
satisfied step two, they became entitled to the lead plaintiff
presumption. By the time that the trial proceeds with a
different lead plaintiff and counsel, Petitioners will be

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20 IN RE M ERSHO
“denied their presumptive statutory right under . . . the
PSLRA to direct and oversee the litigation with their choice
of counsel.” In re Cavanaugh, 306 F.3d at 740 (Wallace, J.
concurring). The first and second Bauman factors therefore
weigh in favor of mandamus relief.
“[T]he fourth and fifth Bauman factors are often
mutually exclusive.” San Jose Mercury News, 187 F.3d at
1103. The fourth factor looks to whether the case involves
an “oft-repeated error,” while the fifth factor considers
whether the petition raises new and important problems or
issues of first impression. Bauman, 557 F.2d at 655. Here,
the fifth factor weighs in favor of mandamus relief because
Petitioners raise new and important issues about how courts
consider the cohesion of group plaintiffs. Although this
court laid out the lead plaintiff appointment steps in
Cavanaugh, its analysis focused on ensuring district courts
were not comparing adequacy between movants when one
movant had already established the statutory presumption. In
re Cavanaugh, 306 F.3d at 732–33. There are no cases from
the Ninth Circuit guiding district courts on how to consider
group cohesion at any stage of the process and many district
courts have taken it into consideration in the lead plaintiff
analysis. See Eichenholtz v. Verifone Holdings, Inc., No.
C07-06140MHP, 2008 WL 3925289, at *8 (N.D. Cal. Aug.
22, 2008) (collecting cases). Consequently, the fifth factor
also supports granting mandamus relief.
Because four of the five Bauman factors weigh in favor
of mandamus relief, a writ of mandamus is appropriate here.
We grant the petition for writ of mandamus to the extent it
seeks to vacate the district court’s order appointing Baio as
lead plaintiff. But we decline to instruct the district court to
appoint Group II as lead plaintiff. That is a matter the district

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IN RE M ERSHO 21
court should decide in light of the guidance we provide in
this opinion.4
CONCLUSION
We grant Mersho, Chau, and Karczynski’s petition for a
writ of mandamus to the extent it seeks to vacate the district
court’s order appointing Angelo Baio as lead plaintiff. We
remand to the district court to redetermine the lead plaintiff
in a manner that is consistent with this opinion.
WRIT GRANTED IN PART.
4 Additionally, to the extent Petitioners seek a writ to clarify that
groups can serve as lead plaintiff, that is clear from the statutory
language. The district court acknowledged a group can serve as a lead
plaintiff. No further clarification is needed.

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