Nvidia is pushing to get out of a securities fraud suit after cheating investors, the US Supreme Court said earlier this week.
On Wednesday, the U.S. Supreme Court closely examined Nvidia’s attempt to dismiss a securities fraud lawsuit that alleges the artificial intelligence chipmaker misled investors regarding the extent to which its sales were reliant on the unpredictable cryptocurrency market.
The justices heard arguments concerning Nvidia’s appeal against a lower court’s ruling that permitted a 2018 class-action lawsuit, led by the Stockholm-based investment management firm E. Ohman J: or Fonder AB, to move forward.
This case is one of two currently under review by the Supreme Court that could potentially make it more challenging for private litigants to hold companies accountable for alleged securities fraud.
The other case, which involves Meta, was argued on November 6.
A key question in the Nvidia case is whether the plaintiffs have met the stricter legal requirements for filing private securities fraud lawsuits, as outlined in the 1995 Private Securities Litigation Reform Act, which was designed to filter out frivolous claims.
Some justices voiced concerns about stepping into this case.
They questioned whether there is a distinct legal issue for them to address, rather than simply a factual dispute, and suggested that the technical complexities of the case may be beyond their usual scope.
Justice Elena Kagan, who is known for her liberal views, remarked to Nvidia’s attorney, Neal Katyal, “It seems you’re asking us to engage in an analysis that we’re not particularly good at and didn’t expect when we took this case.”
Similarly, Justice Ketanji Brown Jackson raised concerns about whether the standard Nvidia is requesting could impose an unreasonable burden on plaintiffs.
“My concern is that it seems you are requiring plaintiffs to have concrete evidence to make their case,” Jackson noted, emphasizing that essential evidence is often not available to plaintiffs until later in the litigation process.
The plaintiffs have accused Nvidia and its CEO, Jensen Huang, of violating the Securities Exchange Act of 1934 by making statements in 2017 and 2018 that minimized the role of cryptocurrency-related sales in Nvidia’s revenue growth.
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