“It’s less and less clear why we took this case and why you should win it,” Justice Elena Kagan said at another point during arguments.
The U.S. Supreme Court will let a class-action lawsuit accusing Nvidia of misleading investors continue.
According to The Associated Press, the court announced its decision on Wednesday, the same week that China said that it will begin investigating Nvidia for suspected violations of Chinese antitrust law. The justices had earlier heard Nvidia’s arguments to dismiss the lawsuit.
Instead, the Supreme Court elected to reject Nvidia’s petition, leaving intact an appellate ruling in the plaintiffs’ favor. Although the justices did not remark on the merits of the case, their decision returns it to a lower court, where it will continue to be litigated until it is settled, resolved, or again dismissed.
The Associated Press notes that the lawsuit was first filed by a Swedish investment management firm in 2018. In its initial complaint, the firm said that Nvidia misled investors about its past dependence on selling computer chips, many of which were purportedly used in the “mining” of valuable cryptocurrencies.
After Bitcoin and other cryptocurrencies plunged in value—at least temporarily—so too did Nvidia’s revenues fall short of projections. Nvidia’s stock, in turn, dropped by about 28%.
Nvidia has long since recovered, but it is continuing to litigate claims against the firm.
In the leadup to the Supreme Court’s ruling, attorneys for Nvidia argued that the lawsuit should be dismissed because it does not meet the criteria established by the Private Securities Litigation Reform Act of 1995.
Although a district court dismissed the lawsuit, it was quickly reinstated by an appellate court before being escalated. The federal Department of Justice has, under the Biden administration, backed the investors’ complaint.
During oral arguments last month, some of the justice appeared skeptical of Nvidia’s claims, while others said they couldn’t understand why the case warranted a blanket precedent-setting ruling.
“I’m not actually sure what rule we could articulate that would be clearer than our cases already say,” Justice Sonia Sotomayor said.
“It’s less and less clear why we took this case and why you should win it,” Justice Elena Kagan said at another point during arguments.
Deepak Gupta, an attorney for the investors, has since celebrated the ruling as an obvious “win for corporate accountability.”
“When corporations mislead shareholders, they undermine trust in our markets. Ensuring that investors can seek justice is essential to preserving fairness and transparency,” Gupta said. “The corporate Supreme Court bar, supported by the U.S. Chamber and its allies, often tries to gin up nonexistent legal issues in an effort to curtail class actions. We hope the Court will think twice the next time a corporation uses the same playbook.”
Nvidia has declined media requests for comment, but a corporate spokesperson said that the company plans to continue defending itself in appellate court.
“[We] are fully prepared to continue our defense,” the spokesperson said. “Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy, and we remain committed to supporting them.”
Sources
Supreme Court dismisses Nvidia’s appeal in securities lawsuit
US Supreme Court bails on NVIDIA case, allowing a shareholder lawsuit to proceed
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