Over 25 years ago, Congress enacted heightened pleading standards for securities fraud claims to deter strike suits. A recent opinion from a divided 9th U.S. Circuit Court of Appeals panel held that plaintiffs satisfied those standards by relying on a retained expert who provided a post-hoc review of allegedly misleading statements.
The decision, E. Ohman J:Or Fonder AB v. NVIDIA Corp., 81 F.4th 918 (9th Cir. 2023), raises an interesting question: Can plaintiffs just hire an expert to survive a motion to dismiss a securities fraud complaint? The NVIDIA decision suggests the answer is “no,” even while sustaining the complaint before it, but as a dissenting opinion points out, the NVIDIA decision could lead to a gradual erosion of the pleading standards if courts do not test each expert’s submission for reliability and contemporaneous evidence of fraud.
‘Enforcement 40’ for 2020
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