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Nvidia agrees to settlement in lawsuit for GTX 970 false advertising (update)

Customers to receive $30 payout for each purchase

Nvidia logo CES
Nvidia’s booth at the 2014 Consumer Electronics Show.

Nvidia has agreed to a preliminary settlement in a class-action lawsuit regarding the marketing of the company’s GeForce GTX 970 graphics card, according to documents filed in federal district court earlier this week.

The case is a set of 15 separate class-action lawsuits, filed starting in February 2015, that were condensed into one suit in the U.S. District Court for the Northern District of California. It is known as In Re: Nvidia GTX 970 Graphics Chip Litigation.

The plaintiffs in the case — all of whom are people who purchased a GTX 970 card — filed complaints against Nvidia and graphics card manufacturers Asus, EVGA and Gigabyte, charging that the companies misled consumers about the hardware specifications of the GTX 970. Their complaints centered around three allegations:

  1. The GTX 970 was marketed as a card with 4 GB of video memory, whereas the card actually has 3.5 GB of RAM, with the remaining 0.5 GB being a much slower "spillover segment" that is decoupled from the main RAM
  2. The GTX 970 was marketed as a card with 64 render output processors, whereas the card actually has 56 render output processors
  3. The GTX 970 was marketed as a card with an L2 cache capacity of 2,048 KB, whereas the card actually has a 1,792 KB L2 cache

"Through their concerted efforts, Defendants engaged in a scheme to mislead consumers nationwide about the characteristics, qualities, uses, and benefits of the GTX 970," the plaintiffs wrote in the amended class-action complaint. They charged that the companies engaged in unfair, deceptive and/or unlawful business practices, as well as false or misleading advertising, in violation of various state and federal laws.

"Defendants engaged in a scheme to mislead consumers nationwide"

The plaintiffs added that because the GTX 970’s true specifications were not as high as advertised, buyers "did not receive the full value of the product they paid for in terms of possessing the characteristics set forth above, yet paid a price premium for the GTX 970 device."

Nvidia and its co-defendants tried to have the case dismissed on multiple occasions; an Nvidia representative declined comment to Polygon today regarding the preliminary settlement.

With the proposed settlement, the customers will receive some financial compensation for their trouble. Under the terms of the settlement, Nvidia and its partners are not admitting any liability or wrongdoing, but have agreed to pay $30 for each GTX 970 unit to members of the settlement class. (The agreement defines the settlement class as any U.S. resident or entity that purchased a GTX 970 in the U.S. from the defendants, their partners or their authorized retailers prior to Aug. 24, 2016.)

The parties came up with the $30 figure by focusing on the main misrepresentation alleged by the plaintiffs: that they were cheated out of 0.5 GB out of a total of 4 GB of RAM (one-eighth, or 12.5 percent). Since the average retail price of a GTX 970 was approximately $350, the members of the settlement class could have expected to receive 12.5 percent of $350, or $43.75, as compensation — if the case had gone to trial and the plaintiffs had won. Thus, the proposed settlement argues, a $30 payout for each GTX 970 customer — nearly 70 percent of the $43.75 that they might have gotten — "constitutes an excellent recovery."

Aside from the settlement fund, which is unlimited, the defendants have agreed to pay as much as $1.3 million in attorneys’ fees and expenses. They have also agreed to pay incentive awards of up to $25,000 in total to the 23 named plaintiffs.

All class members who submit a claim that is verified by the settlement administrator will receive a $30 payout for each GTX 970 they have purchased during the class period. Since there is no cap on the claims, it’s impossible to know how much money Nvidia and its cohorts will end up having to pay if the settlement is approved. (Under the proposed settlement, class members must submit claim forms by the date of the agreement’s final approval hearing, which is currently set for Dec. 21, 2016.)

After the dust settles and all the claims are paid out, the total settlement is likely to cost a pretty penny for Nvidia, Asus, EVGA and Gigabyte. While sales figures are unavailable, it’s clear that Nvidia has sold a lot of GTX 970s since launching the card in September 2014. The GTX 970 is the baseline GPU for compatibility with virtual reality headsets such as the Oculus Rift and HTC Vive, which likely pushed price-conscious gamers to buy the card. And for more than six months, the GTX 970 has been the most popular GPU among Steam users, according to Valve’s monthly hardware survey — as of June, more than 5 percent of respondents were running that card.

Update (July 29): L. Timothy Fisher of the law firm Bursor & Fisher, co-lead counsel for the plaintiffs, said in a statement to Polygon that the plaintiffs’ attorneys are "very pleased with [the] settlement in the Nvidia GTX 970 case and believe that the settlement provides significant relief to GTX 970 purchasers."

Fisher confirmed that the court will hold a preliminary approval hearing on Aug. 24. He added, "If the Court grants preliminary approval, we will disseminate notice of the settlement to class members and the class members will be able to submit claim forms to get their money."

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