In re ALPHABET, INC. SECURITIES LITIGATION

Background

The lead plaintiff, the State of Rhode Island, Office of the Rhode Island Treasurer on behalf of the Employees’ Retirement System of Rhode Island, alleged that Google learned in March 2018 that a software bug had allowed third-party developers to access private user-profile data on Google+. The plaintiff also alleged that the investigation revealed other security vulnerabilities. According to the complaint, Alphabet did not disclose those issues in its April and July 2018 quarterly filings. The Wall Street Journal later reported on the issues, and the plaintiff alleged that the resulting disclosures harmed Alphabet’s share price.

After an earlier dismissal, the Ninth Circuit reinstated claims concerning alleged omissions in Alphabet’s April and July 2018 Forms 10-Q. The appellate court also affirmed dismissal of statement-liability claims based on ten other statements. On remand, the plaintiff moved to certify a class. Alphabet argued that the plaintiff’s claimed damages from an April 30, 2019 stock-price decline were not included in the existing complaint and that the plaintiff would need to amend the complaint before relying on that theory.

Motion to Supplement

The plaintiff separately moved under Federal Rule of Civil Procedure 15(d) to supplement the complaint with allegations about the April 2019 stock-price decline. The plaintiff alleged that Alphabet’s remedial measures—including stricter permissions and additional controls—reduced advertising effectiveness and volume, increased engineering costs, and contributed to the decline in the value of Alphabet’s Class A and Class C shares.

The court applied the liberal standard for supplemental pleadings and considered undue delay, bad faith, repeated failure to amend, prejudice, and futility. It found no undue delay because the timing was explained by the appeal and found no significant prejudice to Alphabet. It also rejected Alphabet’s bad-faith argument. On futility, the court evaluated whether the proposed allegations were facially plausible, accepting the pleaded facts as true and viewing them favorably to the plaintiff. The court concluded that the proposed allegations were not facially implausible and that the plaintiff met Rule 15’s pleading standard.

Disposition

The court GRANTED the plaintiff’s motion to supplement the complaint. It STRUCK the plaintiff’s motion to certify the class and LIFTED the stay on discovery. The order did not state that the court granted or denied class certification.