Meta, Nvidia seek Supreme Court protection from securities fraud suits

In a move that could significantly reshape the landscape of corporate accountability, tech titans Meta (Facebook) and Nvidia have appealed to the US Supreme Court in a bid to avoid facing securities fraud lawsuits from private investors, reports Reuters. The cases, which have reached the nation’s highest court, could have far-reaching implications for the power of private litigants to hold companies responsible for alleged misconduct.

The appeals come on the heels of a series of Supreme Court rulings in June that curtailed the authority of federal regulators, including the Securities and Exchange Commission (SEC), which oversees securities fraud cases. This latest development suggests the Court may be poised to further limit the ability of private plaintiffs to enforce federal rules aimed at punishing corporate wrongdoing.

“I think business interests will continue their recent pattern of aggressively challenging rules intended to hold them accountable, including by challenging the remaining private rights of action,” said Andrew Feller, a former SEC lawyer now in private practice.

Facebook’s Cambridge Analytica fallout and Nvidia’s crypto exposure

The Facebook case centres on the company’s alleged failure to disclose a 2015 data breach involving political consulting firm Cambridge Analytica, which affected over 30 million users. The plaintiffs, a group of Facebook investors led by Amalgamated Bank, accused the social media giant of misleading investors by portraying the risk of such incidents as purely hypothetical, rather than acknowledging the prior breach.

Facebook has argued that it was not required to state that the warned-of risk had already materialised, as “a reasonable investor would understand (risk disclosures) to be forward-looking and probabilistic in nature.” The company previously paid a $100 million settlement to the SEC and a separate $5 billion penalty to the Federal Trade Commission over the Cambridge Analytica issue.

In the Nvidia case, the chipmaker is seeking to dismiss a securities class action accusing it of downplaying the impact of crypto-related purchases on its revenue growth. The plaintiffs, led by the Stockholm-based investment firm E. Ohman J:or Fonder AB, alleged that Nvidia’s omissions misled investors and analysts who were interested in understanding the company’s exposure to the volatile cryptocurrency market.

Nvidia has argued that the plaintiffs failed to meet the legal standard for bringing private securities fraud suits, as established by the 1995 Private Securities Litigation Reform Act.

These cases come at a critical juncture, as recent Supreme Court rulings have weakened the authority of federal regulators. David Shargel, a lawyer who has represented clients before the SEC, believes that private securities litigation may now take on greater significance.

“This could further tax the commission’s resources, as well as those of other agencies looking to bring fraud-like claims, opening the door for more private litigation,” Shargel said.

The outcome of these cases could have significant implications for the ability of investors to hold tech companies accountable for alleged misconduct. As the Supreme Court prepares to hear arguments in the coming weeks, the financial and legal community will be closely watching to see how the nation’s highest court navigates the balance between corporate interests and investor protections.

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