Supreme Court to Weigh In on Corporate Accountability
The US Supreme Court is poised to hear two significant cases that could reshape the landscape of corporate accountability. Tech giants Facebook and Nvidia are seeking to overturn federal securities fraud lawsuits, potentially limiting the power of private litigants to hold companies accountable for their actions.
A Shift in the Balance of Power
Recent Supreme Court rulings have weakened federal regulators, including the Securities and Exchange Commission (SEC). This trend may continue, with the court’s 6-3 conservative majority potentially favoring business interests. Andrew Feller, a former SEC lawyer, notes that the court’s recent decisions suggest that Facebook and Nvidia may find a “receptive audience” among the justices.
Facebook’s Data Breach Debacle
Facebook is appealing a class-action lawsuit accusing the company of misleading investors about a 2015 data breach involving Cambridge Analytica. The plaintiffs, led by Amalgamated Bank, claim that Facebook withheld information about the breach, which affected over 30 million users. The company argues that it was not required to disclose the breach in subsequent business-risk disclosures, as the risk was portrayed as hypothetical.
Nvidia’s Crypto Conundrum
Nvidia is facing a securities class-action lawsuit accusing the company of misleading investors about its sales to the cryptocurrency industry. The plaintiffs claim that Nvidia made false statements in 2017 and 2018, downplaying the impact of crypto-related purchases on its revenue growth. Nvidia argues that the plaintiffs failed to meet the legal standard for bringing private securities fraud suits.
The Importance of Private Rights of Action
Private rights of action allow individuals or groups to sue for alleged harm. Michael Perino, a law professor at St. John’s University, notes that these rights are essential for holding companies accountable, as public enforcement efforts may be under-resourced. “Securities class action lawsuits effectively deputize private attorneys to bring actions on behalf of aggrieved investors,” Perino says.
The Future of Corporate Accountability
The outcome of these cases could have significant implications for corporate accountability. If the Supreme Court rules in favor of Facebook and Nvidia, it may become harder for private litigants to hold companies accountable for their actions. David Shargel, a lawyer in private practice, notes that recent Supreme Court rulings weakening federal regulators could lead to an increase in private securities litigation. As the court hears these cases, one thing is clear: the stakes are high for corporate accountability in the United States.
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