August 20, 2024 – The Digital Chamber today filed an amicus brief in NVIDIA CORP. v. E. OHMAN J:OR FONDER AB, in support of NVIDIA’s motion for reversal of the judgment of the US Court of Appeals for the Ninth Circuit.
Why is this case important?
NVIDIA is the subject of a class action lawsuit in which plaintiffs allege that a significant portion of Nvidia’s gaming GPU sales were driven by purchases from cryptocurrency miners. Plaintiffs allege that NVIDIA’s CEO downplayed this in public statements and failed to disclose the potential impact of volatility in the cryptocurrency market, which later affected NVIDIA’s financial results.
The plaintiffs’ case relies on “expert” opinion based on unsupported assumptions about the cryptocurrency industry, constructing a theory disconnected from the facts of NVIDIA’s business.
This case revolves around the Private Securities Litigation Reform Act of 1995 (PSLRA) and two key PSLRA requirements: plaintiffs must allege with “particularity” facts that strongly suggest the defendant acted with scienter, and they must clearly state the facts supporting their belief that statements were misleading.
Our amicus brief provides the Supreme Court with crucial context about the PLSRA. The Act was enacted to deter nuisance lawsuits that burdened high-growth, high-tech companies with costly discovery and extortionate settlements. Congress specifically aimed to protect these vulnerable sectors, like the cryptocurrency industry, from abusive securities litigation, due to their inherent volatility. We explain how the proper application of the PSLRA’s strict pleading standards should protect the entire cryptocurrency industry.
Under the PSLRA, a complaint must clearly identify each statement claimed to be misleading, explain why it’s misleading, and provide detailed facts supporting that belief.
This case shows how allowing speculative expert opinion to substitute for particularized factual allegations of securities fraud (in other words, clear and detailed facts about the securities fraud) creates the very problems Congress tried to solve with the PSRLA.
In this case, the plaintiffs rely on non-evidence-based “expert opinions.” These opinions, based on general market research and unreliable or hidden assumptions, are NOT enough—undermining the purpose of the PSLRA.
If the plaintiffs win, it will set a dangerous precedent, allowing speculative and unsupported claims to succeed in court. This could lead to a surge in frivolous lawsuits against companies in the cryptocurrency industry, stifling innovation by burdening them with costly litigation and discouraging investment. Ultimately, this would slow the growth of blockchain technology and undermine the very protections that the PSLRA was designed to provide for emerging, high-tech industries.
“Today, TDC took its advocacy effort to the U.S. Supreme Court for the first time. We felt compelled to weigh in due to the grave risks of a potential increase in frivolous securities lawsuits based on nothing more than unfounded negative perceptions about the cryptocurrency industry and its high-growth business cycle,” said Perianne Boring, Founder and CEO of The Digital Chamber. “We are hopeful that the Supreme Court will consider the arguments laid out in our brief, and we will continue to support for fair and equivalent application of laws for the cryptocurrency industry.”
TDC’s counsel on the brief, Joshua B. Simmons of Wiley Rein LLP, said that “it is a privilege and an honor to have the opportunity to represent TDC before the U.S. Supreme Court. TDC is at the forefront of the cryptocurrency industry, and our firm understands well the intersection of technological innovation and policy. This brief reflects TDC’s key insights into this pivotal case.”
TDC is represented in this matter by Frank Scaduto, Joshua B. Simmons, Kevin B. Muhlendorf, Krystal B. Swendsboe, Joel S. Nolette, and Christina V. Lucas of Wiley Rein LLP. We appreciate the contributions to this initiative by the Wiley team and other members of The Digital Chamber.
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