Supreme Court to Hear Cases from Facebook and Nvidia

By John Kruzel

The U.S. Supreme Court is preparing to hear appeals from tech giants Facebook and Nvidia concerning federal securities fraud lawsuits. These cases may impact how private litigants hold companies accountable for corporate misconduct.

Following several Supreme Court rulings in June that limited the powers of federal regulators like the SEC, it seems the court may restrict private plaintiffs' rights to enforce federal regulations against corporate misconduct.

Andrew Feller, a former SEC lawyer, noted the recent trend of the Supreme Court favoring business interests, suggesting that Facebook and Nvidia might find a supportive audience among the justices. With a 6-3 conservative majority, this tendency could continue.

Feller noted that businesses are likely to challenge rules aimed at holding them accountable, including the right of private action, which allows individuals or groups to sue for damages.

Facebook argues its appeal stems from a lawsuit alleging it misled investors regarding a data breach linked to Cambridge Analytica. The lawsuit seeks to recover losses after the company's stock fell following media revelations about the breach, affecting millions of users. Facebook contends that its risk disclosures were reasonable and forward-looking.

Meanwhile, Nvidia faces a class-action suit claiming it failed to adequately disclose revenue influenced by cryptocurrency sales, misleading investors about the volatility tied to that sector. In its appeal, Nvidia argues that the plaintiffs did not meet the standards established by the Private Securities Litigation Reform Act.

Both companies’ cases might inspire more private securities litigation, as recent Supreme Court rulings have reduced the authority of federal regulators—the SEC is considered under-resourced to tackle the broad scope of its responsibilities. Legal experts speculate that private actions may become more significant as a means for investors to seek justice for securities fraud.

Summary:

The U.S. Supreme Court will hear Facebook and Nvidia's appeals against securities fraud lawsuits, which may limit private litigants' ability to hold corporations accountable for misconduct.