Supreme Court Seems Ready to Allow Securities Fraud Case Against Nvidia (original) (raw)
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The case, which is in an early stage, accused the giant technology company of misleading investors about its exposure to the cryptocurrency industry.
Wednesday’s argument before the Supreme Court was the second in a month involving a securities fraud suit against a leading technology company.Credit...Jason Andrew for The New York Times
Nov. 13, 2024
The Supreme Court seemed inclined on Wednesday to allow a lawsuit accusing Nvidia, the giant maker of computer chips, of misrepresenting its reliance on the cryptocurrency mining industry in 2017 and 2018.
The argument was the second one this month in a securities fraud suit against a leading technology company. Last week, the justices appeared torn about whether investors should be allowed to sue Facebook over whether it had adequately disclosed a data breach.
The two cases concerned different legal issues but the same practical one: If courts allow securities fraud suits seeking enormous sums to survive motions to dismiss at the earliest stages of a litigation, companies face pressure to settle the cases.
Justice Brett M. Kavanaugh made this point in the Facebook argument. “Just to put the real world into this for a second, getting past the motion to dismiss is kind of — it’s the game, right?” he asked.
In response to concerns like those, Congress in 1995 enacted the Private Securities Litigation Reform Act, which tightened the requirements for how much detail investors had to provide at the outset. The law, Justice Ruth Bader Ginsburg wrote in 2007, had “twin goals: to curb frivolous, lawyer-driven litigation, while preserving investors’ ability to recover on meritorious claims.”
At Wednesday’s argument, Neal K. Katyal, a lawyer for Nvidia, said the plaintiffs, an investment firm and a pension fund, had not cleared a hurdle imposed by the 1995 law requiring detailed accusations about which statements from the company were false. He added that the plaintiffs had also failed to satisfy a second part of the law requiring them to describe “facts giving rise to a strong inference” that company officials knew the statements were false.
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