“A Pretty Big Signal”

Amicus briefs have been around for millennia and allegedly date back to the Roman Empire, when interested parties wrote letters to judges to advocate on behalf of certain issues or people. In 1823, former secretary of state and House Speaker Henry Clay filed the first amicus brief in the US Supreme Court.

Today groups file briefs to advocate for certain issues related to the case in question, but also to provide industry expertise, statistics, and legal arguments for the Supreme Court and lower courts to consider. Groups may also file amicus briefs if they believe a decision may affect their business or organization’s functions.

Amicus briefs grew into their modern version in the mid-1900s. During that time, the American Civil Liberties Union and other civil rights and consumer protection groups began filing numerous briefs in support of certain issues, which angered a prominent corporate lawyer named Lewis Powell. In 1971, Powell, just months before he was appointed to the Supreme Court, wrote a memo urging the US Chamber of Commerce to hire a “highly competent staff of lawyers” to write briefs on behalf of the business community.

The memo also urged pro-business groups to fund college campus organizations like the Federalist Society, which grew from small campus groups into a powerful organization that now helps select conservative Supreme Court justices.

Since 2010, there has been an “explosion of amicus briefs” — or amici curiae, Latin for “friends of the court,” briefs — with groups filing more than eight thousand briefs and participating in 96 percent of all cases before the high court, according to a 2020 National Law Journal article. Some of the most influential groups have had their briefs cited by the justices.

The Chamber of Commerce has become one of the most prolific amicus brief filers on a wide range of issues before the Supreme Court. During the most recent Supreme Court session, the Chamber filed twenty-eight amicus briefs, including in cases that helped criminalize homelessness and roll back environmental protections.

“The Chamber comes up in a lot of cases, not because they care immensely about the outcome of each case, but it’s to see the flow of policy move in a certain direction,” said Adam Feldman, with Empirical SCOTUS, a website dedicated to tracking the Supreme Court. “This is a business-friendly court that tends to side in the positions that the Chamber is supporting.”

Other frequent filers include the Washington Legal Foundation, the Koch-backed Cato Institute, and other groups connected to Leonard Leo.

In their last session, justices cited various amicus briefs in their opinions 145 times.

The justices themselves look for “signals” in these briefs, said Feldman, and one of the biggest signals is when groups file briefs urging the Court to hear a case.

“When you have a group that’s interested enough to file a brief in a case where they might not even get the case heard, it’s a pretty big signal,” Feldman said. “A lot of groups are doing it now; it wasn’t such a big practice twenty years ago.”

“Coordinated Flotillas”

A number of the groups filing briefs ahead of the upcoming Supreme Court session have similar funders and ideologies, and have been known to file briefs in “coordinated flotillas,” Whitehouse said in an October 2023 speech on the growing influence of amicus briefs.

Whitehouse highlighted how the moneyed connections between the Atlantic and Washington Legal Foundations, the Koch Network, the Lynde and Harry Bradley Foundation, and the Sarah Scaife Foundation have been used to shape the makeup and decisions of the high court.

“The billionaires who fund the justices’ gifts and entertainment also fund front groups that come in to tell the justices what to do,” Whitehouse said. “So the backdrop of the capture apparatus is that billionaires choose the justices, fund the campaigns for their confirmations, and then send in flotillas of billionaire-funded front groups to give instructions.”

The Washington Legal Foundation, author of briefs in both Supreme Court cases, reportedly received more than $580,000 between 1986 and 2012 from the Lynde and Harry Bradley Foundation, which was founded in 1942 to promote the free enterprise system and other libertarian values. More recently, the foundation has donated millions to Trump-affiliated legal organizations and conservative college campus groups with ties to the 2020 election conspiracies.

The Bradley foundation has also maintained investment interests in both of the tech companies involved in the cases.

The organization reported owning more than $312,000 worth of Nvidia stock in 2022 and selling 8,215 shares of Nvidia stock in 2020. The foundation also reported selling nearly 10,000 shares of Facebook stock and more than 2,000 shares of Facebook’s parent company Meta Platforms stock in 2021, and selling more than 18,000 Facebook shares in 2020.

In recent years, the Bradley Foundation has become a major backer of conservative nonprofits with close ties to Trump and helped bankroll voter suppression efforts.

In 2020 and 2021, the foundation reported donations to a variety of right-wing groups, including more than $1.3 million to the American Legislative Exchange Council, which writes model conservative legislation to be used by local, state, and national legislators; $600,000 to the Koch-founded libertarian think tank Cato Institute; $100,000 to the Daily Caller News Foundation, a news outlet founded by Tucker Carlson; and more than $650,000 to the Heritage Foundation, the group behind Project 2025.

The Sarah Scaife Foundation, meanwhile, reported giving more than $240,000 in 2020, 2021, and 2022 to the Atlantic Legal Foundation, author of the Nvidia amicus brief asking the court to raise the pleading standards that shareholders must meet in order to bring a lawsuit against companies.

Like the Bradley Foundation, the Sarah Scaife Foundation, a nonprofit that has used its largesse to fund climate denialism and the 2020 stolen-election conspiracy, has funded a variety of conservative nonprofits.

Between 2020 and 2022, the foundation reported donating more than $6 million to three Koch-backed groups: the American Enterprise Institute, the Competitive Enterprise Institute, and the Cato Institute.

The foundation is also a major funder of right-wing media outlets, giving more than $1 million to the Daily Caller News Foundation and $1.9 million to the Reason Foundation, the nonprofit behind the libertarian-focused Reason magazine, during those same years.

These backroom funds and the connections between the groups are part of the reason why there needs to be greater transparency on who is funding these organizations, Whitehouse said.

“We need real transparency to flag the real interests behind these briefs so judges, parties, and the public can see the connections,” Whitehouse said in a statement to the Lever. “That’s why I’ve asked the Judicial Conference to continue its work on transparency.”

“Fraudsters Are Not Going to Be Held Accountable”

If the companies are successful, both the Facebook and Nvidia cases before the Supreme Court could dramatically roll back public company disclosure requirements and raise the bar for plaintiffs wanting to bring lawsuits against company executives.

In both cases, executives have been charged with omitting key information from shareholder disclosures that publicly traded companies are legally required to file. If the Supreme Court finds that the companies weren’t required to submit this information, it could raise the pleading standards that plaintiffs must meet when alleging corporate fraud.

“The problem is that if these standards are too high, too rigorous, too unrealistic, too unfair, then very meritorious fraud claims are never going to be brought to trial, and the fraudsters are not going to be held accountable in corporate America,” said Hall with Better Markets. “If you make these requirements too onerous . . . at the initial stage, then you’re going to knock out these cases before they even get started.”

For the Nvidia case, the high court is focused on if the shareholders have the merits to even bring a fraud lawsuit against CEO Jensen Huang and other executives. The case before the court stems from a 2018 lawsuit against Huang and other officials for comments Huang made between 2017 and 2018 about the relationship between Nvidia and crypto miners and the company’s failure to disclose crypto miners as a core clientele group.

In multiple interviews, Huang downplayed the role crypto miners played in Nvidia’s clientele, telling one news outlet that “cryptocurrency is around, but it represented only a couple hundred million dollars, maybe $150 million or so. . . . Our core business is elsewhere.” In 2019, after the lawsuit was filed, Huang told CNBC that “cryptocurrency just gave [the company] that extra bit of juice.”

Shareholders allege that Huang misled investors with these statements and when crypto mining — a computer process that demands high-level computer processors such as those made by Nvidia and heaps of electricity — began to drop in 2018, Nvidia’s sales revenue declined by 7 percent. That year, Nvidia’s stock fell by almost 30 percent.

In 2022, the Securities and Exchange Commission settled charges against Nvidia for failing “to disclose that crypto mining was a significant element of its material revenue growth.” Nvidia agreed to pay a $5.5 million penalty without admitting guilt or denying the charges.

The Ninth Circuit Court of Appeals ruled that Huang made “false or misleading statements and did so knowingly or recklessly.” But Nvidia appealed the ruling to the Supreme Court, calling its petition a “paradigmatic case for this Court’s review,” and claiming that if the Ninth Circuit ruling were to stand, it would “expose companies to . . . abusive and speculative litigation.”

Nvidia claims that the investors have no grounds for a lawsuit and that they relied on a faulty expert report conducted on behalf of Nvidia shareholders that consisted of publicly available information.

The Washington Legal Foundation, the US Chamber of Commerce, and others wrote in an amicus brief that if the Ninth Circuit’s ruling were to stand, it imposes “immense costs on public companies” and “undermines global competitiveness.”

Additionally, the Atlantic Legal Foundation claimed in an amicus brief that “by relying on an expert opinion rather than facts to allege falsity,” the Nvidia shareholders are raising “the question of whether an expert’s opinion is an acceptable way for securities fraud plaintiffs to ‘know’ that a statement is false.”

But according to an amicus brief filed by the US Solicitor General’s Office, which supervises litigation involving the federal government, the Ninth Circuit relied on accurate information in the shareholders’ expert report, as well as other legitimate data, including similar findings in a Royal Bank of Canada report and statements from former Nvidia employees that “confirmed that crypto miners purchased enormous quantities” of Nvidia products.

“This is really a very meritorious fraud action, and the lawyers for the investors amply met the statute requirements,” Hall said. “The reason it mattered so much is that the crypto market itself is incredibly volatile, and therefore any business model that relies on that market substantially for revenue is at risk of suffering huge changes in its revenue.”

The Future of “Future Harm”

In Facebook’s case, shareholders are alleging that the company failed to adequately disclose that user data had been misused.

In a 2016 tax form, Facebook stated, “Security breaches and improper access to or disclosure of our data or user data, or other hacking and phishing attacks on our systems, could harm our reputation and adversely affect our business.”

Investors are alleging this statement amounted to fraud because at the time Facebook knew that data from more than 80 million Facebook profiles had been misused by British consulting firm Cambridge Analytica to help the 2016 Trump presidential campaign. Shareholders and the public wouldn’t learn about the misuse until 2018, when it was reported that Cambridge Analytica created an app to use the data for research purposes but sold the information to the 2016 Trump and Ted Cruz presidential campaigns.

“The bottom line here is that the allegation that Facebook experienced a massive [misuse] of its users’ data and failed to disclose it, and that it was deliberately concealed,” said Hall with Better Markets. “Not only that, but in their regulatory filings, they portray the threat of data [misuse] in purely hypothetical or conditional terms.”

The Ninth Circuit Court of Appeals ruled that Facebook was aware of Cambridge Analytica’s mishandling of user data and that its “statements about risk management ‘directly contradicted’ what the company knew when it filed its 2016 10-K.”

In court documents filed with the Supreme Court, Facebook counters that the risk sections in financial disclosures are to warn about “future harm,” not incidents that have already occurred.

In amicus briefs filed by the Chamber of Commerce and the Washington Legal Foundation, both groups claim that if the Ninth Circuit ruling were to stand, it could lead to sprawling risk disclosures that could confuse investors.

“Companies will be forced to bloat their future risk disclosures with descriptions of past events — even those that the company does not believe will have any real world impact on its business,” the Chamber wrote.

But investment and state retirement groups representing more than $5 trillion in retirement funds disagree.

According to an amicus brief filed by the National Conference on Public Employee Retirement Systems, the New York State Common Retirement Fund, the North Carolina Retirement Systems, the Indiana Public Retirement System, the Michigan Association of Public Employee Retirement Systems, the Public Employees Retirement System of Idaho, and eleven other groups, Facebook misled investors by not accurately disclosing the misuse of user data.

“This case shows how far afield a hypothetical event disclosure can be from the truth,” the groups wrote. “Here, Facebook ‘disclosed’ third-party misappropriation and misuse of user data only as a hypothetical possibility while knowing (but not disclosing) that third parties had already misappropriated and misused 30 million users’ data.”

Additionally, the investor groups wrote that risk disclosures in financial forms are “exceptionally important to institutional investors that seek stable returns for the millions that rely upon their investment choices.”

“Requiring non-misleading information . . . is hardly an earth-shattering ask,” the groups wrote. “Far from ‘overwhelming’ investors, it will provide them with the information needed to accurately assess future risks.”

If the tech companies and their pro-business supporters are successful, experts say these two pending Supreme Court cases could dramatically curtail not only shareholders rights, but public disclosure of corporate wrongdoing.

“It boils down to basically limiting the ability of those investors to hold wrongdoers accountable and to recover their damages,” Hall said.