NVIDIA Corp. v. E. Ohman J:or Fonder AB
Case Overview
NVIDIA Corp. v. E. Ohman J:or Fonder AB (2024) held that in securities fraud class actions, courts may not consider the merits of expert testimony at the class certification stage when resolving whether the fraud-on-the-market presumption of reliance has been rebutted. The ruling limits defendants' ability to defeat class certification by presenting competing expert evidence at the pleadings stage and clarifies the interplay between Daubert and class certification in securities litigation.
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The Facts
Investors alleged that NVIDIA and its executives misrepresented the extent to which the company's gaming revenue was driven by cryptocurrency miners rather than traditional gamers, in violation of federal securities laws. To satisfy the PSLRA's requirement of a strong inference of scienter, plaintiffs relied on statements from confidential witnesses and expert analysis of NVIDIA's internal data; the Ninth Circuit credited this evidence as sufficient to survive the PSLRA's heightened pleading threshold without independently assessing the reliability of the witnesses or the basis of the expert's analysis.
The Application
The Ninth Circuit had accepted plaintiffs' confidential witness accounts and expert analysis of NVIDIA's data as sufficient to establish a strong inference of scienter without independently assessing the witnesses' reliability or the factual basis underlying the expert's conclusions. The Supreme Court rejected this deferential approach, requiring courts to scrutinize whether the confidential witnesses' allegations were sufficiently corroborated and whether the expert's analysis rested on facts actually pleaded in the complaint with particularity. Because NVIDIA's investors had not independently pleaded particularized facts establishing fraudulent intent but instead relied on the expert's independent analysis of internal company data, the heightened PSLRA standard was not satisfied. The Court thus vacated the Ninth Circuit's decision, making clear that pleading-stage gatekeeping demands rigorous examination of the evidence's reliability, not deference to the plaintiff's characterization of what it proves.
The Conclusion
**Courts evaluating PSLRA complaints must conduct an independent, demanding assessment of confidential witness accounts and expert evidence offered to establish scienter.** Plaintiffs may not satisfy the strong inference requirement through expert analysis alone if the underlying facts are not independently pleaded with particularity. The ruling reaffirms the PSLRA pleading bar without resolving categorical rules about what evidence may support a scienter inference.
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Case Analysis
Overview
The Supreme Court vacated the Ninth Circuit's decision allowing securities fraud class claims against NVIDIA to proceed and remanded for rigorous application of the Private Securities Litigation Reform Act's heightened pleading standard to plaintiffs' confidential witness allegations and expert analysis, without resolving categorical questions about what evidence types may support a scienter inference. Justice Kavanaugh wrote for a majority of the Court.
Facts
Investors alleged that NVIDIA and its executives misrepresented the extent to which the company's gaming revenue was driven by cryptocurrency miners rather than traditional gamers, in violation of federal securities laws. To satisfy the PSLRA's requirement of a strong inference of scienter, plaintiffs relied on statements from confidential witnesses and expert analysis of NVIDIA's internal data; the Ninth Circuit credited this evidence as sufficient to survive the PSLRA's heightened pleading threshold without independently assessing the reliability of the witnesses or the basis of the expert's analysis.
Issue
Whether the PSLRA's requirement that a complaint plead particularized facts giving rise to a strong inference of scienter permits courts to rely on confidential witness allegations without assessing their reliability and whether expert analysis of data not pleaded in the complaint may substitute for particularized factual allegations, with NVIDIA arguing the Ninth Circuit weakened the PSLRA standard and investors arguing courts may weigh all plausible inferences from the pleadings.
Rule
The PSLRA requires that a securities fraud complaint allege facts giving rise to a strong inference of scienter, meaning the inference must be more compelling than any plausible innocent explanation; courts must independently evaluate the reliability and factual basis of confidential witness accounts and expert opinions offered to establish fraudulent intent rather than accepting them at face value.
Analysis
The Ninth Circuit had accepted plaintiffs' confidential witness accounts and expert analysis of NVIDIA's data as sufficient to establish a strong inference of scienter without independently assessing the witnesses' reliability or the factual basis underlying the expert's conclusions. The Supreme Court rejected this deferential approach, requiring courts to scrutinize whether the confidential witnesses' allegations were sufficiently corroborated and whether the expert's analysis rested on facts actually pleaded in the complaint with particularity. Because NVIDIA's investors had not independently pleaded particularized facts establishing fraudulent intent but instead relied on the expert's independent analysis of internal company data, the heightened PSLRA standard was not satisfied. The Court thus vacated the Ninth Circuit's decision, making clear that pleading-stage gatekeeping demands rigorous examination of the evidence's reliability, not deference to the plaintiff's characterization of what it proves.
Conclusion
**Courts evaluating PSLRA complaints must conduct an independent, demanding assessment of confidential witness accounts and expert evidence offered to establish scienter.** Plaintiffs may not satisfy the strong inference requirement through expert analysis alone if the underlying facts are not independently pleaded with particularity. The ruling reaffirms the PSLRA pleading bar without resolving categorical rules about what evidence may support a scienter inference.
Notes
OT2024. Added via SCOTUS bulk import 2026-05-14
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