Google has been accused by its shareholders of hiding security risks. These shareholders decided that they suffered financial losses because of this and so they did what anyone does in these situations – they filed a lawsuit against the company. And now Google has failed to get the suit tossed.
U.S. District Judge Jeffrey White in San Francisco had dismissed the case in February 2020, upholding Alphabet’s claims at the time when the company sought to have it thrown out on the merits. But now an appeals court has sided with the plaintiffs and has sent the case back to the district court for trial.
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So what is the big kerfuffle all about? Well shareholders in Alphabet, which is Google’s parent company, are angry that Google hid the information about security flaws which impacted 500,000 Google+ users. Back in 2018 The Wall Street Journal broke the news that Google hid the information because the company feared that it could be used against it by various governments pursuing anti-trust suits. Google, the Journal said, was also worried about greater regulatory scrutiny in general.
Once the story broke, Google shareholders lost a fortune over a three day period totaling $50 billion in paper wealth. The law suit was then filed by the State of Rhode Island. The 9th U.S. Circuit Court of Appeals in San Francisco has determined that the lawsuit may go forward. The court has held that the plaintiffs raised a “strong inference” that Alphabet’s then-Chief Executive Larry Page and his successor, Sundar Pichai, knew about the bugs and intentionally concealed the information from investors.
In the official written decision Federal Circuit Court Judge Sandra Ikuta stated that the shareholders’ argument that Alphabet stayed silent about the problem just to “buy time,” was a credible one. The judge further agreed that Google and Alphabet were likely concerned about scrutiny like that Facebook was facing at the time.
“As it turned out, Alphabet successfully bought itself about six months of time,” Ikuta wrote in her ruling. “The competing inference that Alphabet knew of this information but was merely negligent in not disclosing it is not plausible.”
“We are grateful to have the opportunity to sit down with Mr. Pichai, Mr. Page and others to get the bottom of what they did,” the plaintiffs’ lawyer Jason Forge said in an interview with Reuters.
