California: A Litigation: Securities Overview

Last year, California continued to be an important venue for securities class action litigation, and this year promises to be no different. 2025 saw a 40% increase in total settlement value for accounting-related cases, rising to USD1.5 billion, and a simultaneous 40% drop in accounting case filings, which fell to a record low of 34 for the year. Many of these cases were in the Second and Ninth Circuits, as in years past (the Ninth Circuit reviews decisions from California federal courts). Given that California is home to many AI, media, hardware, software and biotechnology companies, which plaintiffs’ firms have targeted, there is good reason to believe that courts in California and the Ninth Circuit will continue to play a crucial role in the development of the federal securities laws. This article considers several important legal developments in California and the Ninth Circuit over the last year. 

The Securities and Exchange Commission (SEC)’s Power to Order Disgorgement Heads to the Supreme Court

On 20 April 2026, the United States Supreme Court heard argument in Sripetch v SEC, which addressed the SEC’s power to use disgorgement to force a wrongdoer to turn over its profits to the government without showing harm caused to the wrongdoer’s customers. The Ninth Circuit, in SEC v Sripetch, 154 F.4th 980 (9th Cir 2025), affirmed the judgment of the United States District Court for the Southern District of California ordering that the defendant disgorge his ill-gotten gains, reasoning that disgorgement under 15 USC Section 78u(d)(5) and (d)(7) does not require a showing that investors experienced pecuniary harm. The court joined the First Circuit (SEC v Navellier & Associates, Inc, 108 F.4th 19 (1st Cir 2024)) and rejected the Second Circuit’s contrary holding in SEC v Govil, 86 F.4th 89 (2d Cir 2023).

The SEC sued Ongkaruck Sripetch for his role in a fraudulent stock scalping scheme involving penny stock companies. Sripetch consented to judgment but opposed disgorgement, arguing – relying on Govil – that the Commission had not shown that his victims suffered pecuniary harm. The district court ordered disgorgement of USD2,251,923.16 in net profits. The Ninth Circuit affirmed, holding that no showing of pecuniary harm is required to order disgorgement.  

The United States Supreme Court granted Sripetch’s petition for certiorari, which continues the Court’s scrutiny of the SEC’s remedial powers. In this regard, previously, in Liu v SEC, the Supreme Court held that in an SEC enforcement action a disgorgement award that does not exceed a wrongdoer’s net profits and is awarded for victims as equitable relief is permissible under 15 USC Section 78u(d)(5). In SEC v Jarkesy, the Supreme Court ruled that the SEC’s routine practice of imposing fines in its administrative proceedings, used to penalize securities fraud, violates the Seventh Amendment “right of trial by jury” in all “suits at common law.” Sripetch will determine whether the SEC must demonstrate a concrete financial injury each time it seeks disgorgement of ill-gotten profits. This has serious real-world implications: last fiscal year alone, the SEC collected USD6.1 billion in disgorgement – a new record.

Private Securities Class Action Litigation – Robinhood

The Ninth Circuit was also active on the private litigation front. 

In Sodha v Golubowski, 154 F.4th 1019 (9th Cir 2025), the Ninth Circuit addressed the Robinhood IPO securities litigation. In this regard, Robinhood’s IPO occurred on 30 July 2021, one month after the close of its second quarter. Plaintiffs alleged that, even though Robinhood was not required to release its second-quarter results until mid-August, the company was obligated to disclose interim financial information for the second quarter – and for the then‑ongoing third quarter – in its IPO materials, because the business had significantly deteriorated between the close of the first quarter and the IPO. 

The plaintiffs relied on an omissions theory – contending that, under Section 11(a), Robinhood was required to affirmatively disclose its interim financial results. In this regard, Section 11(a) recognizes two circumstances in which an omission is actionable:

• under the “misleading omissions” prong, which requires disclosure when necessary to render statements in the offering documents not misleading; and
• under the “required statements” prong, which requires disclosure when required by another provision of the securities laws. 

The Ninth Circuit held that Robinhood could be liable under Section 11(a)’s misleading omissions prong for failing to disclose interim financial data when the omitted information is material – without requiring a separate inquiry into whether the omission rendered any specific statement misleading. The court reasoned that, if alleged omissions “involve the relationship between a prior statement concerning a particular time period and an event subsequent to that time period,” the materiality inquiry effectively subsumes the question of whether a duty to disclose exists. The defendants have filed a petition for a writ of certiorari with the United States Supreme Court, which is pending. 

Auditor Liability

In Hunt v PricewaterhouseCoopers LLP, 159 F.4th 603 (9th Cir 2025), the Ninth Circuit wrote on auditor liability for opinions. In that regard, investors in Bloom Energy challenged the classification of certain sale-leaseback arrangements. Plaintiffs also sued PwC, Bloom Energy’s outside auditor, arguing that PwC signed off on the financials, so PwC should be liable as well. The Ninth Circuit rejected this argument, stressing that an auditor’s opinion is an exercise of professional judgment, not a factual representation of the underlying numbers. To hold an auditor liable, a plaintiff must allege facts showing that either the auditor did not actually believe its own opinion or that it ignored concrete warning signs. Here, the plaintiffs did neither. The plaintiffs’ petition to the United States Supreme Court was denied. 

The Settlement Landscape

The median settlement amount in 2025 reached USD17.3 million, the highest since 1997 and a 20% increase from 2024. Settlements of Section 11 and 12(a)(2) claims reached an all-time high of USD32.5 million, more than three times the median for the prior nine years.