Nvidia shareholder brings lawsuit against Nvidia officers

Quick Take

  • Yang v. Huang, et al.
  • Shareholder brings lawsuit against corporate officers of Nvidia
  • The lawsuit alleges that “the Individual Defendants made and/or caused the Company to make false and misleading statements indicating that the Company could withstand the volatility of the cryptocurrency market”

Disclaimer: These summaries are provided for educational purposes only by Nelson Rosario and Stephen Palley. They are not legal advice. These are our opinions only, aren’t authorized by any past, present or future client or employer. Also we might change our minds. We contain multitudes.

As always, Rosario summaries are “NMR” and Palley summaries are “SDP".

[related id=1]Yang v. Huang, et al., 3:19-cv-00766 (N.D. Cal. February 12, 2019)[NMR]

We’ve written a lot about class action lawsuits. Typically, the cases we covered involved companies that did, or tried to do, an ICO. Usually, things go south, people lose money, and you know the drill. This case is sort of like a class action lawsuit. It's a shareholder derivative lawsuit against the corporate officers of Nvidia brought by one of its shareholders on behalf of Nvidia. Huh? Yep.

Yuju Yang owns Nvidia stock and is suing the corporate directors of Nvidia for violating their duties to the company. Basically, in a shareholder derivative lawsuit the shareholder (that’s Yang) can sue on behalf of the corporation if the corporation has a valid cause of action, but is not pursuing the cause of action for some reason. Here, Yang is suing the corporate officers of Nvidia for mismanagement of the company, and related not-so-good stuff. So, what does any of this have to do with crypto?

Nvidia, for those of you who don’t already know, makes graphics processing units, or GPUs. The company is one of the two main GPU manufacturers, along with AMD, and has been doing its thing for 25 years now. GPUs are great for video games, but it turns out they can also be great for mining cryptocurrency, and that is where things get interesting with respect to this lawsuit.

There is something called “the business judgment rule” in corporate law. Essentially, judges don’t want to spend time second-guessing decisions made by businesses that are, well, business decisions. Put another way, in lawsuits against corporate officers the court will assume that the officers acted in the best interests of the corporation unless proven otherwise. Here, Yang, is suing the corporate officers of Nvidia alleging that they violated their duties and cost the company money in an egregious manner. The corporate officers will inevitably respond that, no they didn’t violate their duties, and instead they were making informed decisions that they believed were in the best interest of the company.

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