Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Nvidia’s past is coming back to haunt it. The Santa Clara graphics chip company was already dealing with government probes into stock option backdating and possible antitrust activities, as well as a former in-house counsel alleging age discrimination. Now it’s gearing for trial in a dispute over the value of a former rival’s assets, which the company bought in 2001. This bankruptcy case also has an open-courts twist: U.S. Bankruptcy Court Judge Roger Efremsky in San Jose has proposed having the public sign nondisclosure agreements at the door if they want to remain in the courtroom when documents Nvidia considers confidential will be presented at trial. The trial date is March 19, and Efremsky is expected to discuss his idea more in a hearing scheduled for today. Efremsky declined to comment on the issue because the case remains active. The judge’s notion sounded absurd to Peter Scheer, executive director of the California First Amendment Coalition. “I’ve never heard of a judge or anybody proposing that spectators, members of the public or the press, as a condition of their being present at a judicial proceeding, sign confidentiality agreements,” said Scheer, who was once the editor and publisher of The Recorder. “I think that that has to be analyzed the same way as a proposal to conduct a trial in secret.” The case revolves around now-bankrupt 3dfx, a San Jose company that ran neck-in-neck with Nvidia during the late 1990s in the race to produce superior computer chips for video-game graphics. Facing hard times as the century turned, 3dfx agreed to let Nvidia buy most of its assets. The company declared Chapter 11 bankruptcy not long after. Now, the trustee appointed to represent 3dfx’s creditors is suing Nvidia, saying the price it paid was too low. The trustee, William Brandt Jr., claims 3dfx’s assets were worth twice as much as the $70 million Nvidia paid for them. “Nvidia paid so far below the market value of the assets received that it constituted a fraud on the creditors of 3dfx,” said Brandt’s attorney Richard Darwin, senior counsel with Buchalter Nemer. But Nvidia argues it actually overpaid for the assets, which it contends were worth only about $14 million, according to court filings. Orrick, Herrington & Sutcliffe partner James Kramer, representing Nvidia, declined to comment on the case beyond saying Nvidia “is pleased with the opportunity to have the issue decided by the court, based on the evidence presented.” He added: “Nvidia is an honorable company that did the right thing.” The open-court issue reached a head last week after Brandt’s attorneys filed a motion to unseal the Nvidia documents they planned to use as exhibits in trial. The documents, Darwin said, offer insight into how Nvidia evaluated the 3dfx asset purchase. During discovery, both sides agreed to designate numerous Nvidia documents as “confidential,” but there haven’t been any hearings to discuss why the documents should be kept from the public during trial. The documents don’t contain proprietary information, argues Darwin, who says it would be cumbersome and time-consuming to clear the courtroom any time “confidential” evidence was to be discussed. “The burden is on them to come forward and say why they shouldn’t be disclosed,” Darwin said in a March 2 hearing, according to a transcript. Furthermore, witnesses are more inclined to tell the truth when they are subject to public scrutiny, Darwin said. At the same hearing, Judge Efremsky suggested that members of the public, including the press, could sign an agreement to keep confidential documents secret if they wanted to remain in the courtroom. That seemed to satisfy Kramer. “When people come in, they can sign it and we’d be comfortable with that,” he said at the time. Kramer declined to discuss the issue Thursday. In terms of the now-controversial transaction, Kramer’s co-counsel, Orrick partner Karen Johnson-McKewan offered some insight at a Feb. 21 motions hearing as to why Nvidia believes it overpaid. “Frankly, it sounds ridiculous today to pay $70 million for assets that are worth $14 million, but you also have to put yourself back in time a little bit,” she said, according to a transcript. “2000 in the Silicon Valley was a very, very different business climate than the one we’re in now and the one we’ve been in for the last several years. All kinds of crazy prices were being paid for transactions in those days that would never be � that would be unthinkable today. This is one of those transactions.” At the hearing last week, Efremsky acknowledged he wasn’t all that familiar with how the public-access issues had been resolved in other cases. But he vowed to find out. “I will definitely talk to some of my colleagues both in the bankruptcy court and the district court,” he said. “I’ve got to believe this issue comes up time and time again.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.