Case 3:20-cv-02353-JD Document 80 Filed 07/09/21 Page 1 of 24
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`ROBBINS GELLER RUDMAN
` & DOWD LLP
`SHAWN A. WILLIAMS (213113)
`JOHN H. GEORGE (292332)
`Post Montgomery Center
`One Montgomery Street, Suite 1800
`San Francisco, CA 94104
`Telephone: 415/288-4545
`415/288-4534 (fax)
`shawnw@rgrdlaw.com
`jgeorge@rgrdlaw.com
`Lead Counsel for Lead Plaintiff
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`)
`In re ZOOM SECURITIES LITIGATION
`Case No. 3:20-cv-02353-JD
`
`)
`LEAD PLAINTIFF’S OPPOSITION TO
`)
`DEFENDANTS’ MOTION TO DISMISS
`)
`THE CONSOLIDATED CLASS ACTION
`)
`COMPLAINT
`)
`)
`DATE:
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`TIME:
`
`COURTROOM:
`JUDGE:
`
`
`This Document Relates To:
`ALL ACTIONS.
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`
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`August 26, 2021
`10:00 a.m.
`11, 19th Floor
`Hon. James Donato
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`Case 3:20-cv-02353-JD Document 80 Filed 07/09/21 Page 2 of 24
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`TABLE OF CONTENTS
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`I. 
`II. 
`III. 
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`IV. 
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`Page
`INTRODUCTION AND STATEMENT OF FACTS .........................................................1 
`LEGAL STANDARD ..........................................................................................................2 
`ARGUMENT .......................................................................................................................3 
`A. 
`The Complaint Pleads Material Falsity ....................................................................3 
`The Complaint Pleads Material Falsity of Defendants’ Claims that
`1. 
`Zoom Enabled End-to-End Encryption and Used AES 256-Bit
`Encryption ....................................................................................................4 
`The Complaint Particularly Alleges Material Misrepresentations
`and Omission in Zoom’s Security Guide and Privacy Policy......................5 
`The Alleged Misrepresentations and Omissions Were Material,
`Defendants’ Truth-on-the-Market Defense Is Unavailable on the Motion to
`Dismiss .....................................................................................................................6 
`The Consolidated Complaint Pleads a Strong Inference of Scienter .......................9 
`The Complaint Alleges Defendants’ Knowledge or Deliberate
`1. 
`Disregard that Zoom Meetings Were Not End-to-End or 256-Bit
`Encrypted .....................................................................................................9 
`The Complaint Details Defendants’ Knowledge or Deliberate
`Disregard that Zoom Was Sharing Users’ Personal Data ..........................11 
`Defendants’ Late Class Period Admissions and Blog Post Revisions
`Support Falsity and Scienter ..................................................................................11 
`FTC Charges and Settlement Corroborate Allegations of Material Falsity
`and Scienter ............................................................................................................12 
`The Complaint Adequately Alleges Loss Causation .............................................13 
`F. 
`CONCLUSION ..................................................................................................................15 
`
`B. 
`
`C. 
`
`D. 
`
`E. 
`
`2. 
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`2. 
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`PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS - 3:20-cv-02353-JD
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`Case 3:20-cv-02353-JD Document 80 Filed 07/09/21 Page 3 of 24
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`CASES
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`TABLE OF AUTHORITIES
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`Page
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`Basic v. Levinson,
`485 U.S. 224 (1988) ...................................................................................................................6
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`Bos. Ret. Sys. v. Uber Techs., Inc.,
`2020 WL 4569846 (N.D. Cal. Aug. 7, 2020) ........................................................................7, 8
`
`Brody v. Transitional Hosps. Corp.,
`280 F.3d 997 (9th Cir. 2002) .....................................................................................................3
`
`City of Monroe Emps. Ret. Sys. v. Bridgestone Corp.,
`399 F.3d 651 (6th Cir. 2005) ...................................................................................................13
`
`Conn. Ret. Plans & Tr. Funds v. Amgen Inc.,
`660 F.3d 1170 (9th Cir. 2011), aff’d, 568 U.S. 455 (2013) .......................................................7
`
`Dura Pharms., Inc. v. Broudo,
`544 U.S. 336 (2005) ...........................................................................................................13, 14
`
`Eminence Capital, LLC v. Aspeon, Inc.,
`316 F.3d 1048 (9th Cir. 2003) .................................................................................................15
`
`Fecht v. Price Co.,
`70 F.3d 1078 (9th Cir. 1995) .....................................................................................................3
`
`Ganino v. Citizens Utils. Co.,
`228 F.3d 154 (2d Cir. 2000).......................................................................................................8
`
`Glazer Cap. Mgmt. LP v. Magistri,
`549 F.3d 736 (9th Cir. 2008) ...................................................................................................13
`
`In re Allied Nev. Gold Corp. Sec. Litig.,
`743 Fed. App’x. 887 (9th Cir. 2018) .......................................................................................12
`
`In re Alphabet, Inc., Sec. Litig.,
`_ F.4th _, 2021 WL 2448223 (9th Cir. June 16, 2021) .................................................... passim
`
`In re Apple Inc., Sec. Litig.,
`2020 WL 2857397 (N.D. Cal. June 2, 2020) .............................................................................6
`
`In re Apple Inc. Sec. Litig.,
`2020 WL 6482014 (N.D. Cal. Nov. 4, 2020) ......................................................................9, 12
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`Case 3:20-cv-02353-JD Document 80 Filed 07/09/21 Page 4 of 24
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`Page
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`In re BofI Holding, Inc., Sec. Litig.,
`977 F.3d 781 (9th Cir. 2020) .......................................................................................12, 14, 15
`
`In re LendingClub Sec. Litig.,
`254 F. Supp. 3d 1107 (N.D. Cal. 2017) .....................................................................................6
`
`In re Musical Instruments & Equip. Antitrust Litig.,
`798 F.3d 1186 (9th Cir. 2015) .................................................................................................13
`
`In re Rigel Pharms., Inc. Sec. Litig.,
`697 F.3d 1051 (9th Cir. 2012) ...................................................................................................6
`
`In re Tesla, Inc. Sec. Litig.,
`477 F. Supp. 3d 903 (N.D. Cal 2020) ......................................................................................13
`
`In Re Twitter, Inc. Sec. Litig.,
`2020 WL 4187915 (N.D. Cal. Apr. 17, 2020) .........................................................................11
`
`In re VeriFone Holdings, Inc. Sec. Litig.,
`704 F.3d 694 (9th Cir. 2012) .....................................................................................................3
`
`Kairalla v. Advanced Med. Optics, Inc.,
`2008 WL 2879087 (C.D. Cal. June 6, 2008) .............................................................................6
`
`Kelly v. Elec. Arts, Inc.,
`2015 WL 1967233 (N.D. Cal. Apr. 30, 2015) .......................................................................5, 6
`
`Khoja v. Orexigen Therapeutics, Inc.,
`899 F.3d 988 (9th Cir. 2018) ...........................................................................................3, 6, 12
`
`Lloyd v. CVB Fin. Corp.,
`811 F.3d 1200 (9th Cir. 2016) .................................................................................................13
`
`Loos v. Immersion Corp.,
`762 F.3d 880 (9th Cir. 2014) ...................................................................................................14
`
`Nguyen v. Endologix, Inc.,
`962 F.3d 405 (9th Cir. 2020) .....................................................................................................9
`
`No. 84 Employer-Teamster Joint Council Pension Tr. Fund v. Am. W. Holding Corp.,
`320 F.3d 920 (9th Cir. 2003) .....................................................................................................9
`
`Nuveen Mun. High Income Opportunity Fund v. City of Alameda,
`730 F.3d 1111 (9th Cir. 2013) .................................................................................................14
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`Case 3:20-cv-02353-JD Document 80 Filed 07/09/21 Page 5 of 24
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`Page
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`Perlman v. Zell,
`938 F. Supp. 1327 (N.D. Ill. 1996), aff’d, 185 F.3d 850 (7th Cir. 1999) ................................10
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`Provenz v. Miller,
`102 F. 3d 1478 (9th Cir. 1996) ..................................................................................................8
`
`Purple Mountain Tr. v. Wells Fargo & Co.,
`432 F. Supp. 3d 1095 (N.D. Cal. 2020) ...................................................................................15
`
`Reese v. Malone,
`747 F.3d 557 (9th Cir. 2014) ...................................................................................9, 10, 11, 12
`
`Retail Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co.,
`845 F.3d 1268 (9th Cir. 2017) ...................................................................................................3
`
`Ronconi v. Larkin,
`253 F.3d 423 (9th Cir. 2001) ...................................................................................................12
`
`S.E.C. v. Platforms Wireless Int’l Corp.,
`617 F.3d 1072 (9th Cir. 2010) .................................................................................................11
`
`Schueneman v. Arena Pharms., Inc.,
`840 F.3d 698 (9th Cir. 2016) ...................................................................................................11
`
`SEC v. Todd,
`642 F.3d 1207 (9th Cir. 2011) ...................................................................................................3
`
`Siracusano v. Matrixx Initiatives, Inc.,
`585 F.3d 1167 (9th Cir. 2009), aff’d, 563 U.S. 27 (2011) .......................................................10
`
`Tellabs Inc. v. Makor Issues & Rights, Ltd.,
`551 U.S. 308 (2007) ...............................................................................................................3, 9
`
`Wochos v Tesla, Inc.,
`985 F.3d 1180 (9th Cir. 2021) ...................................................................................................5
`
`Yourish v. Cal. Amplifier,
`191 F.3d 983 (9th Cir. 1999) ...................................................................................................12
`
`STATUTES, RULES AND REGULATIONS
`
`15 U.S.C.
`§78j(b) ....................................................................................................................................2, 8
`§78u-4(b)(1)(B) ..........................................................................................................................3
`§78u-4(b)(2)(A) .........................................................................................................................9
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`Federal Rules of Civil Procedure
`Rule 10b-5 ............................................................................................................................2, 13
`Rule 12(b)(6) ..............................................................................................................................3
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`17 C.F.R.
`§240.10b-5 .................................................................................................................................2
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`Case 3:20-cv-02353-JD Document 80 Filed 07/09/21 Page 7 of 24
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`I.
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`INTRODUCTION AND STATEMENT OF FACTS
`Plaintiff’s1 Consolidated Class Action Complaint for Violation of the Federal Securities
`Laws (ECF No. 63) (the “Complaint”) alleges a straightforward claim of securities fraud setting
`forth claims with the necessary detail required by the Private Securities Litigation Reform Act of
`1995 (“PSLRA”). Under the backdrop of heightened scrutiny on tech companies’ collection of
`vast amounts of user data, sometimes without adequately securing that data, Zoom seized on its
`user’s need for assurances that their private data would be secure. To that end, the Company
`emphasized its commitment and effort to secure private data, claiming it “put a high priority on
`security and data privacy.” ¶10.2 Its Security Guide published during the Class Period (April 18,
`2019 through April 6, 2020), specifically stated: “We’ve designed policies and controls to
`safeguard the collection, use and disclosure of your information,” and “are proud to exceed
`industry standards when it comes to your organizations communications.” ¶43. Defendants also
`repeatedly assured that its users could “[s]ecure a meeting with E2E encryption,” even highlighting
`this robust encryption as a necessity for financial and medical customers. See ¶¶29-30, 32, 42.
`These end-to-end encryption assurances of course had the “industry standard” meaning, i.e., only
`the people in the meeting had the keys to access messages and meeting content. See ¶¶9(a) n.5,
`34(a) n.7, 43, 56.
`In connection with data security and privacy, the Company Privacy Policy said: “We may
`collect . . . Personal Data about you,” and: “We may collect . . . Facebook3 profile information
`(when you use Facebook to login . . . .)” See ¶¶8, 29. The Complaint alleges that all of these
`statements were false. Zoom did not and could not enable end-to-end encryption and was
`ultimately forced to apologize for misleading the public and “incorrectly suggesting that Zoom
`meetings were capable of using end-to-end encryption.” ¶¶56, 62-63. Zoom was not only
`
`
`1
`“Plaintiff” is Lead Plaintiff Adam M. Butt. “Defendants” are Zoom Video Communications,
`Inc. (“Zoom” or the “Company”) and “Individual Defendants” Eric S. Yuan (“Yuan”) and Kelly
`Steckelberg (“Steckelberg”).
`2 All “¶_” citations herein are to the Complaint.
`3 Facebook, Inc. (“Facebook”).
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`collecting user personal data, Zoom was also sharing that personal data with Facebook including
`personal data belonging to users who were not on Facebook. ¶48. Defendants were called on
`these “shocking” violations of privacy and quickly announced they would remove the software
`that was unnecessarily collecting and sharing data with Facebook. ¶¶48-49. Stock price declines,
`investor losses and government investigations followed. ¶¶97-116.
`Despite these facts, which were admitted in the spring of 2020, there is a chasm between
`Defendants’ acknowledgements and apologies for the “confusion we have caused by incorrectly
`suggesting that Zoom meetings were capable of using end-to-end encryption,” (¶63), and
`Defendants’ Motion to Dismiss the Consolidated Class Action Complaint (ECF No. 78) (“MTD”),
`which argues that end-to-end encryption did not really mean end-to-end encryption and investors
`could not have been misled by the admitted misstatements. See MTD at 4. The chasm extends
`even further to a virtual rejection of bedrock principles of law, including that when choosing to
`tout an issue one is duty bound to speak truthfully and completely. Id. at 8. Instead, Defendants
`contend they simply had no obligation to inform users that Zoom was sharing their private data
`with Facebook. Id. And, despite Defendants’ admission that Facebook’s software development
`kit (“SDK”) “was collecting device information unnecessary for [Zoom] to provide [its] services,”
`and “therefore [Zoom] decided to remove the Facebook SDK,” the Company argues that its
`Privacy Policy made no misrepresentation or omission at all. ¶50; MTD at 8.
`Finally, unable to credibly challenge the adequacy of the Complaint, Defendants pack the
`record with documents outside of the pleadings, raising fact questions (mostly implausible) that
`cannot be decided on a motion to dismiss.
`The Complaint satisfies the PSLRA pleading requirement and the MTD should be denied.
`LEGAL STANDARD
`To establish a claim of securities fraud under §10(b) of the Securities Exchange Act of
`1934 (“Exchange Act”), 15 U.S.C. §§78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R.
`§240.10b-5, a plaintiff must allege: (1) a material misrepresentation or omission; (2) made with
`scienter; (3) in connection with the purchase or sale of a security; (4) relied upon by plaintiff; (5)
`a loss causally connected to the alleged fraud; and (6) economic loss or damages. Khoja v.
`
`II.
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`Orexigen Therapeutics, Inc., 899 F.3d 988, 1008 (9th Cir. 2018). In assessing a motion to dismiss
`under Fed. R. Civ. P. 12(b)(6), a court must “consider the complaint in its entirety,” “accept all
`factual allegations . . . as true” and construe those allegations in the light most favorable to the
`plaintiff. Tellabs Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007).4
`III. ARGUMENT
`A.
`The Complaint Pleads Material Falsity
`A complaint sufficiently alleges falsity when it “‘specifi[es] each statement alleged to have
`been misleading, [and] the reason or reasons why the statement is misleading.’” In re VeriFone
`Holdings, Inc. Sec. Litig., 704 F.3d 694, 701 (9th Cir. 2012) (quoting 15 U.S.C. §78u-4(b)(1)(B)).
`Even a literally true statement “may be misleading if it omits material information.” Khoja, 899
`F.3d at 1008-09; Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002) (an
`omission is actionably misleading when it “create[s] an impression of a state of affairs that differs
`in a material way from the one that actually exists”); Retail Wholesale & Dep’t Store Union Loc.
`338 Ret. Fund v. Hewlett-Packard Co., 845 F.3d 1268, 1275 (9th Cir. 2017). In other words,
`“‘once defendants [choose] to tout positive information to the market, they [are] bound to do so in
`a manner that wouldn’t mislead investors, including disclosing adverse information that cuts
`against the positive information.’” Khoja, 899 F.3d at 1009. “[O]nly if the adequacy of the
`disclosure or the materiality of the statement is ‘so obvious that reasonable minds [could] not
`differ’ are these issues ‘appropriately resolved as a matter of law.’”5 Fecht v. Price Co., 70 F.3d
`1078, 1080-81 (9th Cir. 1995); see also Todd, 642 F.3d at 1220.
`
`
`4 All citations and footnotes omitted unless otherwise indicated.
`5 Both Yuan and Steckelberg signed the Registration Statement which made the claim that the
`Company offered robust security capabilities including end-to-end encryption which was repeated
`throughout the Class Period on its website and blog posts. Even if the Court found that the
`Individual Defendants did not specifically make the alleged misstatements on Zoom’s website,
`they each had the power to control those statements and are liable under §20(a). ¶25; SEC v. Todd,
`642 F.3d 1207 (9th Cir. 2011). Defendants do not directly challenge Plaintiff’s §20(a) allegations.
`MTD at 15 n.14.
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`1.
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`The Complaint Pleads Material Falsity of Defendants’ Claims
`that Zoom Enabled End-to-End Encryption and Used AES
`256-Bit Encryption
`The Complaint specifically alleges that the Company materially misstated that Zoom
`Meetings were or could be “end-to-end encrypted” and such “end-to-end encryption” used 256-bit
`encryption, providing a high level of data security such that only the intended recipients can read
`the secured message. ¶¶6, 42-43. In truth, Zoom Meetings were not capable of end-to-end
`encryption as defined by industry accepted standards because Zoom maintained the encryption
`keys allowing it access to video conferences users understood to be protected. ¶¶9(a) n.5, 34(a),
`56. Defendants admit as much. ¶56 (Zoom spokesperson: “Currently it is not possible to enable
`E2E [end-to-end] encryption for Zoom video meetings . . . .”). Nor were Zoom Meetings secured
`with AES 256-bit encryption as the Company stated. ¶¶34(a), 71, 94. Rather, the Company used
`128-bit encryption, which is a lower level encryption subjecting user transmissions to substantially
`greater vulnerabilities than 256-bit encryption, including pressure from Chinese authorities as data
`flows to or from servers in China. See ¶¶34(a), 71. Defendants appear to concede that Plaintiff
`alleges that the representations concerning 256-bit encryption were false but incorrectly argue that
`the difference between 256-bit encryption and 128-bit encryption is not “material.” MTD at 7-8
`n.7 (emphasis in original). However, Defendants’ MTD purports to elevate the standard for
`pleading falsity to require that Plaintiff plead not only the false statement and the reasons why the
`statement is false, but also that it is impossible for the alleged misrepresentation to have any
`“theoretical” modicum of truth. MTD at 6 (arguing that Plaintiff does not allege the industry
`accepted definition as the exclusive definition for end-to-end encryption). Ironically, Zoom, a tech
`savvy online platform, whose IP is protected by multiple patents filed with the United States’
`patent office, contends that the industry accepted definition of end-to-end encryption is too “highly
`technical.” Id. at 6-7. Accordingly, even though end-to-end encryption has an industry accepted
`definition (see ¶9(a) & n.5), Defendants propose the Court inappropriately accept its alternative
`exculpatory definition. MTD at 7. Putting aside that Zoom’s Security Guide asserted that it
`“proud[ly] . . . exceed[ed] industry standards” (¶43), even if Defendants believed their usage of
`the phrase end-to-end encryption fit some alternative definition, the market and computer industry
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`experts roundly concluded that Zoom’s end-to-end encryption statements were misleading. ¶¶56-
`57. In March 2020, after a computer science expert implored Zoom to “just c[o]me clean,” Yuan
`admitted that Zoom “incorrectly suggest[ed] that Zoom meetings were capable of using end-to-
`end encryption consistent with the “commonly-accepted definition.” ¶¶58, 63.
`Defendants’ reliance on Wochos v Tesla, Inc., 985 F.3d 1180 (9th Cir. 2021), to support its
`non-exclusive definition argument is misplaced. MTD at 6. In that case, the Ninth Circuit affirmed
`the district court’s finding that plaintiff had failed to allege that Tesla’s use of the phrase
`“‘production car’ actually mean[t] ‘car[s] produced on a fully automated [production] line’” and
`that the term “would be understood [by the industry or the public] as referring exclusively to the
`fully automated production of identical vehicles.” Tesla, 985 F.3d at 1194 (emphasis omitted). In
`Tesla, there was no alleged industry accepted definition of “production car” to measure how the
`public would have understood Tesla’s usage of the term. Here, Defendants cannot reasonably
`dispute that “end-to-end encryption had an industry accepted definition. See ¶¶9(a) n.5, 72, 184
`(end-to-end encryption means that messages are encrypted in ways that only allows the parties to
`the communication to decrypt it). Defendants’ effort to extend Tesla’s logic to this case fails and
`Defendants’ reliance on Kelly v. Elec. Arts, Inc., 2015 WL 1967233 (N.D. Cal. Apr. 30, 2015) (no
`industry standard definition for the term “de-risk”), is similarly inapt. MTD at 6.
`2.
`The Complaint Particularly Alleges Material
`Misrepresentations and Omission in Zoom’s Security Guide
`and Privacy Policy
`The Complaint details that Zoom, in its Privacy Policy, the purpose of which is admittedly
`to inform Zoom users how the Company “collect[s], use[s] and disclose[s] personal data,” failed
`to disclose that that the Company, through its Facebook software development kit, was actually
`sharing customers’ personal data with Facebook. ¶¶45-46. Indeed, while Zoom’s Privacy Policy
`informed users that Zoom may “collect” personal data, nothing alerted investors or users that it
`was in fact collecting users’ personal data and that it was systematically sharing it with Facebook
`even if they were not Facebook users. ¶¶47-48. As reported by the Motherboard website on March
`26, 2020, “[t]here is nothing in the privacy policy that addresses that.” ¶¶48-49. Because of this
`fact, according to Yuan, the Company “decided to remove the Facebook SDK in [Zoom’s] iOS
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`client and have reconfigured the feature.” ¶50. Defendants also failed to disclose it was sharing
`users’ LinkedIn biographies and real names. ¶¶9(c), 47(c).6
`Defendants do not dispute these material misrepresentations and omissions are particularly
`pled. Instead, they incorrectly contend that despite assertions in the Privacy Policy: (i) Zoom
`simply had no duty to disclose that it was sharing users’ private data; and (ii) investors would not
`have read Zoom’s Privacy Policy as a promise that it would not do more with users’ private data,
`including sharing it with Facebook. MTD at 8. First, Zoom was far from silent about the strength
`and scope of its privacy protections and security systems, but rather boasted of its commitment to
`protecting user privacy and “ensuring [users] have a positive experience.” ¶¶28, 41, 43, 50. Its
`Privacy Policy highlighted its “data handling practices” and “in particular how we collect . . .
`and . . . disclose Personal Data.” ¶¶28, 46. The Privacy Policy even offered that if one logs in to
`Zoom through Facebook, Zoom might “collect” Facebook profile data. Id. Because Zoom often
`touted its privacy commitment and standards, and specifically discussed the collection of personal
`data, Zoom had a duty to disclose that it was collecting and sharing user data with Facebook.
`¶¶34(b), 39, 49; Khoja, 899 F.3d at 1010; see In re LendingClub Sec. Litig., 254 F. Supp. 3d 1107,
`1118 (N.D. Cal. 2017); In re Apple Inc., Sec. Litig., 2020 WL 2857397, at *11 (N.D. Cal. June 2,
`2020) (defendants’ statements touting high rates of phone upgrades, required to disclosure that
`new software, which slowed phone operations, allegedly contributed to the high upgrade rate).
`B.
`The Alleged Misrepresentations and Omissions Were Material,
`Defendants’ Truth-on-the-Market Defense Is Unavailable on the
`Motion to Dismiss
`Plaintiff alleges that each of the alleged misrepresentations and omissions was material,
`i.e., significantly affecting the mix of information available to investors. Basic v. Levinson, 485
`U.S. 224, 232 (1988). Here, due to Defendants’ repeated assurances, investors understood the
`
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`6 Defendants argue that without a promise to refrain from the alleged misconduct, even in the
`context of their affirmative Privacy Policy assurances, their omission that the Company would
`share their LinkedIn data and identification and reinstall web servers on Macs even after they are
`deleted, are inactionable. They cite Kairalla v. Advanced Med. Optics, Inc., 2008 WL 2879087
`(C.D. Cal. June 6, 2008) and In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 1051 (9th Cir. 2012),
`but neither supports such a proposition.
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`Company’s claims regarding end-to-end encryption to be important to the Company’s security
`measures. ¶¶47-48. The Company also repeatedly asserted that it was committed to privacy and
`its policy was “designed . . . to safeguard the . . . use, and disclosure of your information.” ¶¶43,
`50 (“[o]ur customers’ privacy is incredibly important to us”). This information was plainly
`material to investors See In re Alphabet, Inc., Sec. Litig., _ F.4th _, 2021 WL 2448223, at *10 (9th
`Cir. June 16, 2021) (“[p]ublic statements by [Company] executives . . . demonstrate the
`importance of user trust and public perceptions of security and privacy practices for the products
`and services central to [a Company’s] business”).
`Defendants argue that the alleged misrepresentations are not material because Zoom
`disclosed that the Company offered cloud recording of Zoom Meetings, which indirectly disclosed
`that its usage of “end-to-end encryption” was not the industry standard definition, i.e., that only
`the parties to the communication can access it. ¶¶9(a) n.5, 57, 72; MTD at 4; RJN Ex. 9.7 But,
`nothing in the disclosures concerning cloud recording even references end-to-end encryption. See
`RJN Exs. 9-10 (simply stating that recordings can be stored in the cloud).8 To push their version
`of the facts, Defendants attempt to introduce 21 documents (many from obscure publications) they
`claim prove that the market knew the truth concerning the alleged misrepresentations. This is no
`more than an assertion of a “truth-on-the market” defense that simply “is not available” on a motion
`to dismiss. Bos. Ret. Sys. v. Uber Techs., Inc., 2020 WL 4569846, at *6 (N.D. Cal. Aug. 7, 2020)
`(citing Conn. Ret. Plans & Tr. Funds v. Amgen Inc., 660 F.3d 1170, 1177 (9th Cir. 2011), aff’d,
`568 U.S. 455 (2013) (materiality is a mixed question of law and fact, proof of which is a matter
`for trial)). The court in Uber recently rejected a similar attempt to establish through the
`introduction of 26 news articles at the motion to dismiss stage that the risks of investing in Uber
`
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`7 All “RJN Ex. _” citations herein are to Defendants’ Request for Judicial Notice and
`Consideration of Documents Incorporated by Reference in Support of Defendants’ Motion to
`Dismiss the Consolidated Class Action Complaint (ECF No. 79).
`8 Defendants’ MTD also minimizes that the Company’s own 2019 Security Guide is contrary to
`the arguments advanced in their MTD as it specifically states that E2E encryption only allows
`intended recipients to read secured messages and ensures that sessions cannot be eavesdropped
`upon. ¶34(a) n.7.
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`shares were sufficiently well known to the market to