In re Alphabet, Inc. Securities Litigation

Google LLC (defendant) and its parent company, Alphabet, Inc. (defendant), launched Google+, a social-media network. Lawrence Page (defendant) was the chief executive officer of Alphabet. Sundar Pichai (defendant) was the chief executive officer of Google. Google and Alphabet discovered a security glitch that exposed Google+ user data to third parties. Google and Alphabet concealed the cybersecurity data breach in order to avoid regulatory and governmental scrutiny. Rather than disclosing the actual data breach, Alphabet made general statements in a Form 10-K and a Form 10-Q filed with the Securities and Exchange Commission (SEC) about potential cybersecurity risk factors and the importance of protecting the privacy of Google+ users. Alphabet’s Form 10-K and Form 10-Q also untruthfully stated that there had been no changes to the cybersecurity risk factors. After Alphabet and Google shut down Google+, a news article was published that revealed the data breach. Alphabet’s stock price fell. Alphabet’s investors (plaintiffs) filed suit, claiming that Alphabet, Google, Page, and Pichai had committed securities fraud by covering up the data breach. Alphabet moved to dismiss the complaint. The district court granted Alphabet’s motion, finding that the complaint failed to allege that Alphabet had made any material misrepresentations or omissions. The investors appealed.