By Anne Sherry, J.D.
The Supreme Court should not hear an appeal of a Ninth Circuit decision adverse to NVIDIA Corporation, according to the plaintiffs. The defendants’ cert petition argues that the Ninth Circuit panel created one circuit split by allowing an expert opinion to be used to prove falsity, and deepened another by allowing scienter claims to rest on speculation about what was in some internal reports. But the plaintiffs push back on the idea that there is a circuit split at all, arguing that the PSLRA’s stay on discovery means that some allegations will lack full evidentiary support in early stages of the litigation (NVIDIA Corp. v. E. Öhman J:or Fonder AB, Respondent's Brief in Opposition (U.S. May 6, 2024) (No. 23-970)).
Background. Last August, in a 2-1 decision, the appellate panel revived some claims alleging that the defendants fraudulently downplayed the extent to which Nvidia’s gaming revenues relied on the demand for cryptocurrency. Dissenting, Judge Sanchez observed that the complaint’s central falsity allegation was based entirely on a post-hoc analysis by an outside expert that relied on generic market research and questionable assumptions. Furthermore, the complaint did not put forward any internal report or data source that would have put executives on notice that their statements were false or misleading when made; the only specific allegation of an internal study supported the defendants’ statements.
Nvidia’s cert petition asks the Supreme Court to consider whether, as held by the Second, Third, Fifth, Seventh, and Tenth Circuits, plaintiffs alleging scienter must plead with particularity the contents of the internal documents on which they rely. Secondly, it asks whether plaintiffs can satisfy the PSLRA’s falsity requirement by relying on an expert opinion to substitute for particularized allegations of fact.
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