WASHINGTON (Reuters) – The U.S. Supreme Court dismissed an appeal by artificial intelligence chipmaker Nvidia seeking to avoid a securities fraud lawsuit by shareholders who accused the company of misleading investors about how much of its sales depended on the volatile cryptocurrency market.
The justices, who heard arguments in the case on Nov. 13, opted not to render a decision on the underlying legal dispute and instead threw out Nvidia’s appeal of a lower court’s ruling that allowed the 2018 class action to move forward.
The lawsuit, led by the Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB, alleges that Nvidia’s CEO Jensen Huang and the company made false and misleading statements about how much of its revenue growth came from crypto-related purchases.
The plaintiffs accused Nvidia of violating a 1934 federal law called the Securities Exchange Act by making statements in 2017 and 2018 that falsely downplayed the company’s reliance on the cryptocurrency market.
The suit seeks unspecified monetary damages, in part to recoup the lost value of the Nvidia stock held by the investors. The company had agreed to pay $5.5 million to U.S. authorities to settle charges that it did not properly disclose the impact of cryptomining on its gaming business, without admitting or denying the findings of federal regulators.
Deepak Gupta, who represented the shareholders, called the dismissal “a win for corporate accountability.” “The corporate Supreme Court bar, supported by the U.S. Chamber of Commerce and its allies, often tries to gin up nonexistent legal issues in an effort to curtail class actions,” Gupta said. “We hope the court will think twice the next time a corporation uses the same playbook.”
Nvidia claimed that the plaintiffs failed to adequately show that the disputed corporate statements were false, or the company had intentionally or recklessly misled investors as required by law. The plaintiffs countered that their lawsuit contained strong enough allegations to survive Nvidia’s request for dismissal and proceed to the discovery stage of litigation.
The U.S. government supported the shareholders in the case, and the Supreme Court’s dismissal leaves the lower court’s decision in place. The dispute is one of two cases involving the right of private litigants to hold companies accountable for alleged securities fraud. The other case, involving Meta’s Facebook, was argued on Nov. 6 and also dismissed by the justices on Nov. 22.