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Zoom Video Communications, Inc. Securities Class Action Lawsuit

Case Summary

Company Name
Zoom Video Communications, Inc.
Stock Symbol
ZM
Class Period
April 18, 2019 to April 6, 2020
Court
Northern District of California

The Zoom Video Communications, Inc. securities class action lawsuit charges Zoom and certain of its officers with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers of Zoom securities between April 18, 2019 and April 6, 2020 (the “Class Period”).  The Zoom securities class action lawsuit was commenced on April 7, 2020 in the Northern District of California on behalf of and is captioned Drieu v. Zoom Video Communications, Inc., No. 5:20-cv-02353.

Zoom provides a video communications platform application that allows users to interact with each other primarily in the Americas, the Asia Pacific region, Europe, the Middle East, and Africa.  Zoom’s cloud-native platform enables face-to-face video experiences and connects users across various devices and locations in a single meeting.

The Zoom securities class action lawsuit alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose that: (i) Zoom had inadequate data privacy and security measures; (ii) contrary to Zoom’s assertions, Zoom’s video communications service was not end-to-end encrypted; (iii) as a result, users of Zoom’s communications services were at an increased risk of having their personal information accessed by unauthorized parties, including Facebook; and (iv) usage of Zoom’s video communications services was foreseeably likely to decline when these facts came to light.  As result of this information being withheld from the market, Zoom securities traded at artificially inflated prices during the Class Period, with the price of Zoom’s stock reaching a high of more than $159 per share.

The truth about the deficiencies in Zoom’s software encryption began to come to light as early as July 2019.  However, due in large part to Zoom’s obfuscation, it was not until the COVID-19 pandemic in March and April of 2020, with businesses and other organizations increasingly relying on Zoom’s video communications software to facilitate remote work activity during government shelter-in-place orders, that the truth was more fully disclosed.

For example, on March 26, 2020, Motherboard reported that Zoom’s “privacy policy do[es] [not] make clear . . . that the iOS version of the Zoom app is sending some analytics data to Facebook, even if Zoom users don’t have a Facebook account,” and that “Zoom is not forthcoming with the data collection or the transfer of it to Facebook.”  Then, following a series of subsequent disclosures regarding Zoom’s privacy issues, on April 6, 2020, New York City announced that it had banned the use of Zoom in the city’s classrooms, and it was reported on Yahoo! News that, “[o]n April 1st, an actor in a popular dark web forum posted a link to a collection of 352 compromised Zoom accounts,” which “included email addresses, passwords, meeting IDs, host keys and names, and the type of Zoom account,” and that “one belonged to a major U.S. healthcare provider, seven more to various educational institutions, and one to a small business.”  As a result, as it became clear through this series of disclosures that Zoom had significantly overstated the degree to which its video communications software was encrypted, and organizations consequently prohibited its employees from utilizing Zoom for work activities, the price of Zoom stock fell more than $37 per share, or nearly 25%, from $151 per share on March 27, 2020 to $113.75 per share on April 7, 2020.

Robbins Geller Rudman & Dowd LLP is one of the world’s leading law firms representing investors in securities class action litigation.  With 200 lawyers in 9 offices, Robbins Geller has obtained many of the largest securities class action recoveries in history.  For seven consecutive years, ISS Securities Class Action Services has ranked the Firm in its annual SCAS Top 50 Report as one of the top law firms in the world in both amount recovered for shareholders and total number of class action settlements.  Robbins Geller attorneys have helped shape the securities laws and have recovered tens of billions of dollars on behalf of aggrieved victims.  Beyond securing financial recoveries for defrauded investors, Robbins Geller also specializes in implementing corporate governance reforms, helping to improve the financial markets for investors worldwide.  Robbins Geller attorneys are consistently recognized by courts, professional organizations and the media as leading lawyers in the industry.

Class Period: April 18, 2019 - April 6, 2020
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