For nearly 30 years, the Private Securities Litigation Reform Act (PSLRA) has required private plaintiffs in securities litigation to plead both falsity and scienter with particularity. The Supreme Court will likely clarify the contours of this heightened pleading standard when it decides NVIDIA Corp. v. E. Ohman J:or Fonder AB this term.

One of the questions presented in NVIDIA is whether plaintiffs seeking to allege scienter under the PSLRA based on allegations about internal company documents must plead with particularity the content of those documents.

For companies and their counsel, some practical questions underlie the one before the Supreme Court: how did the NVIDIA plaintiffs get information about (and in one instance, direct access to) purported internal company documents—before discovery, no less? And what can be done about it? The use of internal documents in securities litigation (and beyond) poses myriad issues for companies and their counsel to weigh when considering how to protect proactively their confidential information.

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The NVIDIA Case

In NVIDIA, the plaintiffs (respondents in the Supreme Court) brought a class action under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, alleging that NVIDIA intentionally misrepresented the extent to which its chip sales to cryptocurrency miners, as opposed to gamers, were driving the company’s gaming-segment revenues.This was allegedly done because executives wanted to create the false impression that NVIDIA was insulated from crypto volatility.

To support these claims, the plaintiffs alleged that company leadership was aware of internal documents that showed that the volume of sales to crypto miners outstripped what had been acknowledged publicly. It appears that several former NVIDIA employees described such documents to the plaintiffs’ counsel and, in one instance, provided a document itself. The purported internal company documents included:

· A database that tracked global sales;