ALF Urges Supreme Court To Apply Federal Evidence Rule 702 To Securities Fraud Complaints

ALF long has been an advocate for ensuring that only reliable expert opinions are considered by courts and/or juries during any phase of litigation. In support of a certiorari petition filed by NVIDIA Corporation in a securities fraud suit governed by the Private Securities Litigation Reform Act (“PSLRA”), ALF has filed an amicus brief arguing that an unreliable expert opinion cannot satisfy the PSLRA’s heightened pleading requirements for alleging “falsity.” ALF’s brief urges the Court to grant review and hold that district courts should use the reliability criteria established by Federal Rule of Evidence 702 to assess whether an expert opinion cited in a securities fraud complaint is reliable enough to help satisfy the PSLRA.

NVIDIA’s certiorari petition asks the Supreme Court to address the heightened pleading requirements for “scienter” and “falsity” that the PSLRA, 15 U.S.C.  §§ 78u-4(b)(1) & (2), and Federal Rule of Civil Procedure 9(b) establish for plaintiffs in private securities fraud actions. As to the requirements for pleading falsity (i.e., allegations that the defendant made false statements of material fact and/or made statements that omitted material facts), the question presented relates to the use of an expert opinion as a substitute for particularized allegations of fact.

Issue Areas:

Civil Justice, Free Enterprise

Read the Amicus Brief:
Question(s) Presented:

1. Whether plaintiffs seeking to allege scienter under the PSLRA based on allegations about internal company documents must plead with particularity the contents of those documents.

2. Whether plaintiffs can satisfy the PSLRA’s falsity requirement by relying on an expert opinion to substitute for particularized allegations of fact.

Additional Background:

NVIDIA’s certiorari petition indicates as follows: The company designs and markets high-speed “GeForce”-branded graphics processing units (GPUs) for video gaming. In 2017 some purchasers began using NVIDIA GeForce GPUs for cryptocurrency “mining”—which involves using computing power to solve complicated math problems to acquire cryptocurrency. To preserve the supply of GeForce GPUs for gamers, NVIDIA designed and marketed a new GPU, branded “Crypto SKUs,” specifically for cryptocurrency mining.

The plaintiffs contend that NVIDIA knowingly understated the extent to which NVIDIA’s gaming segment revenues were driven by sales of GeForce GPUs to cryptocurrency miners, as opposed to gamers. Rather than citing internal NVIDIA sales data to support their allegations, the plaintiffs hired an outside expert, whose opinion relies on generic market research rather than particularized facts and data.

ALF’s Amicus Brief:

ALF’s amicus brief explains that the PSLRA is intended to protect defendants from securities fraud suits where the plaintiffs do not have enough evidence to justify subjecting a company to the burdens, costs, and risks of litigation, including intrusive discovery and reputational harm. The statute, coupled with Rule 9(b), establish heightened requirements for pleading falsity, which is a necessary component of a securities fraud claim. More specifically, a securities fraud complaint subject to the PSLRA “shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.” 15 U.S.C.  § 78u-4(b)(1).

ALF’s brief discusses why an expert opinion is only as good as the data on which it relies. In the NVIDIA case, rather than alleging with particularity facts relating to falsity, the plaintiffs’ complaint cites  a conclusory expert opinion, which apparently was not even provided to the district court. ALF’s amicus brief argues that such an expert opinion cannot be used to satisfy, or even bolster, securities fraud pleading requirements if it is unreliable.

The brief further argues that to assess reliability, district courts should utilize the criteria established by Federal Rule of Evidence 702, which are used to determine whether proffered expert testimony is admissible. One of Rule 702’s reliability criteria requires that an expert opinion be “based on sufficient facts or data.” Acting as an expert opinion “gatekeeper,” a district court should find that an expert opinion fails to satisfy the PSLRA and Rule 9(b) pleading requirements for falsity if it is not based on facts or data sufficient to satisfy Rule 702.


The petition for a writ of certiorari was granted on June 1, 2024.


Email ALF Executive Vice President & General Counsel Lawrence Ebner.

Date Originally Posted: April 5, 2024

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