A shareholder class-action lawsuit against Google's parent company, Alphabet, led by the $10 billion Rhode Island Employees' Retirement System, Providence, will proceed, a U.S. federal appeals court ruled Wednesday.
The three-judge panel for the 9th U.S. Circuit of Appeals in San Francisco vacated a lower-court decision that had granted Alphabet's motion to dismiss the case.
In January 2019, Rhode Island ERS was named lead plaintiff in the case consolidating multiple similar class-action suits filed after it was revealed that Google executives knew about, but did not disclose, a breach in its Google Plus platform that compromised the personal information of an estimated 52.5 million users.
The appeals court opinion allowing the case to proceed, written by Judge Sandra S. Ikuta, disagreed with the lower court, saying that Rhode Island did adequately allege materially misleading misrepresentations or omissions in quarterly SEC reports, and that Alphabet officials knew about it.
"The panel held that Rhode Island's complaint plausibly alleged the materiality of the costs and consequences associated with the Privacy Bug," according to the order, "and how Alphabet's decision to omit information about the Privacy Bug in its 10-Qs significantly altered the total mix of information available for decisionmaking by a reasonable investor," a synopsis of the order said.
The appeals court also ruled that the lawsuit "raised a strong inference" that Alphabet executives were aware of, but did not disclose the problems.
"We are very grateful for the opportunity to sit down with (Alphabet executives) to get to the bottom of what they did to investors," said plaintiffs lead counsel Jason Forge, a partner at Robbins Geller Rudman & Dowd, in an interview.
In securities class actions like this, "one of the biggest goals is to deter corporations and their executives from cheating and from defrauding their investors," Mr. Forge said.
"Ultimately, the goal is get back the money that investors were cheated out of. And we would like some meaningful corporate governance reforms."