Zoom Seeks Reconsideration of Dismissal Order in Securities Fraud Suit

A motion filed by Zoom Video Communications Inc., and remaining individual defendant CEO Eric Yuan in a securities suit argued that the Northern District of California court should revisit the order it issued last month as to the sole statement, one of fifteen, that survived dismissal. Monday’s request for reconsideration urges that the securities fraud case centered on whether Zoom misled investors about its end-to-end encryption capabilities and data collection practices “presents an extraordinary instance that warrants reconsideration.”

Law Street Media previously reported on Judge James Donato’s February 16 ruling. The court found that for all but one of the asserted statements, the plaintiffs failed to show that Yuan actually made them. The court permitted the plaintiffs leave to amend, though the March 9 deadline has now passed.

This week’s motion argues that the court should reconsider whether the “‘Technology and Infrastructure’ section of Zoom’s Prospectus, stating that Zoom ‘offer[s] robust security capabilities, including end-to-end encryption . . . .’” rises to an actionable false or misleading statement under federal securities law that was made with the requisite intent.

The filing contends that the complaint actually refutes that the statement was false insofar as the plaintiff also alleges that Zoom indeed offered end-to-end encryption as to another part of its communications platform, Zoom’s out-of-meeting messenger, Zoom Chat. Under the defendants’ theory, because the asserted statement did not specifically say that Zoom Meetings offered end-to-end encryption, yet Zoom offered end-to-end encryption on at least one other product, the statement is not false.

The motion also presses that the court overlooked key issues with regards to scienter. According to Zoom, the evidence relied on to show that Yuan intended to mislead investors “could not establish scienter because they did not ‘establish the falsity of an earlier statement.’” 

The investor and putative class are represented by Robbins Geller Rudman & Dowd LLP and Zoom by Cooley LLP.