“Affirming the Ninth Circuit’s view would reopen the floodgates to the same litigation abuses that led Congress to enact the PSLRA’s heighted pleading standard in the first place.”
—Cory Andrews, WLF General Counsel & Vice President of Litigation

Click here for WLF’s brief.

(Washington, DC)—Today Washington Legal Foundation (WLF) asked the U.S. Supreme Court to reverse a sharply divided decision of the U.S. Court of Appeals for the Ninth Circuit that gutted the critical pleading requirements of the Private Securities Litigation Reform Act (PSLRA). WLF was joined on its amicus brief by the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Retail Federation, and the Securities Industry and Financial Markets Association. The brief was drafted with pro bono assistance from James N. Kramer, Daniel A. Rubens, and Jodie C. Liu of Orrick Herrington & Sutcliffe LLP.

The case arose from plaintiffs’ claim that NVIDIA should have told investors that a substantial portion of its gaming revenue was derived from sales to cryptocurrency miners rather than gamers. But plaintiffs lacked any data showing that this was true, much less that NVIDIA’s executives knew it was true. So plaintiffs hired an expert to create data relying on undisclosed and unreliable assumptions, then asserted that NVIDIA’s executives should have known about this made-up data. Concluding that plaintiffs’ allegations did not plausibly state a claim under the PSLRA, the district court dismissed the suit, but a divided Ninth Circuit panel reversed.

In its amicus brief urging reversal, WLF explained why allowing securities plaintiffs to rely on hired-gun expert reports to establish falsity and scienter would permit securities-fraud plaintiffs to circumvent the PSLRA by substituting post hoc expert speculation for particularized factual allegations of falsity and scienter. Affirming the Ninth Circuit’s rule would therefore create an easy roadmap for future plaintiffs to engage in the kind of fishing expeditions the PSLRA was supposed to end.