Amended Complaint
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19CV341522 Santa Clara – Civil Electronically Filed 1 OTTINI OTTINI INC B & B , . by Superior Court of CA, FrancisA.Bottini,Jr.(SBN175783) County of Santa Clara, 2 AlbertY.Chang(SBN296065) on 8/16/2019 3:18 PM YuryA.Kolesnikov(SBN271173) 3 Reviewed By: R. Walker 7817IvanhoeAvenue,Suite102 Case #19CV341522 LaJolla,California92037 4 Envelope: 3274669 Telephone:(858)914-2001 5 Facsimile:(858)914-2002 Email:[email protected] 6 [email protected] [email protected] 7 8 COHENMILSTEINSELLERS&TOLLPLLC JulieGoldsmithReiser( ) 9 MollyBowen( ) 1100NewYorkAvenue,N.W.,Suite500 10 Washington,D.C.20005 11 Telephone:(202)408-4600 Facsimile:(202)408-4699 12 Email:[email protected] [email protected] 13 14 15 [AdditionalCounselonSignaturePage] 16 SUPERIORCOURTOFTHESTATEOFCALIFORNIA INANDFORTHECOUNTYOFSANTACLARA 17 18 INREALPHABETINC.SHAREHOLDER LeadCaseNo.19CV341522 19 DERIVATIVELITIGATION 20 CONSOLIDATED 21 STOCKHOLDERDERIVATIVE ThisDocumentRelatesto: COMPLAINTFOR: 22 DEMANDFUTILITYACTION (1)BREACHOFFIDUCIARYDUTY; 23 (2)UNJUSTENRICHMENT; (3)CORPORATEWASTE;and 24 (4)ABUSEOFCONTROL 25 JURYTRIALDEMANDED 26 27 PUBLIC-REDACTSMATERIALSFROMCONDITIONALLYSEALEDRECORD 28 CONSOLIDATEDSTOCKHOLDERDERIVATIVECOMPLAINT 1 TABLE OF CONTENTS 2 I. INTRODUCTION ...................................................................................................... 2 3 II. JURISDICTION AND VENUE ............................................................................... 11 4 III. PARTIES .................................................................................................................. 11 5 A. Lead Plaintiffs ............................................................................................... 11 6 B. Defendants ..................................................................................................... 13 7 C. Doe Defendants ............................................................................................. 22 8 IV. FACTUAL ALLEGATIONS ................................................................................... 23 9 A. Alphabet’s Reputation as a “Good” Company is Key to Recruiting Valuable Employees and Collecting the User Data that Powers Its 10 Products ......................................................................................................... 23 11 B. Defendants Breached their Fiduciary Duties by Protecting and Rewarding Male Harassers ............................................................................ 25 12 1. Defendants Brin and Page, the Company’s Co-Founders, as 13 Well as Other Senior Executives, Set the Tone at the Top by Dating Female Subordinates .............................................................. 25 14 C. The Individual Defendants Tolerated Persistent Misconduct from 15 Andy Rubin Throughout His Tenure at Google ............................................ 28 16 1. Following the example of other senior leadership at the Company, Rubin had extramarital relationships with female 17 employees, culminating in an allegation of sexual harassment. ........ 31 18 2. The Board Pays Rubin an Excessive Severance Package Despite Finding Sexual Harassment Allegations against him 19 were Credible. .................................................................................... 31 20 3. Defendants’ Culture of Concealment Continued Even After a News Report Surfaced That Suggested Impropriety by Rubin .......... 35 21 4. The Board of Directors’ and Other Defendants’ Active, Direct, 22 and Intentional Role in the Wrongful Conduct Surrounding Rubin’s Departure .............................................................................. 36 23 D. Google Paid Another Executive, Amit Singhal, Millions After He 24 Sexually Harassed Google Employees .......................................................... 38 25 E. Google Asked Other Victims of Sexual Harassment to “Stay Quiet” After Their Allegations of Harassment Were Found to Be Credible 26 and May have Paid Off Other Executives ..................................................... 40 27 F. The Rubin and Singhal Scandals Epitomize the Hostile Workplace Environment that the Alphabet Board has allowed to Fester for years. ........ 42 28 -i- CONSOLIDATED STOCKHOLDER DERIVATIVE COMPLAINT 1 1. Alphabet’s Pervasive Sex Stereotyping and Sexual Harassment ....... 43 2 2. Alphabet’s Systemic Sex Discrimination in Pay and Promotions .......................................................................................... 45 3 G. Alphabet Employees and Shareholders Express Outrage at the 4 Board’s Protection of Male Executives ......................................................... 49 5 H. Defendants Breached their Fiduciary Duties by Hiding the Google+ Breach from the Public .................................................................................. 55 6 1. Alphabet’s History of Concealing Data Privacy Issues Had 7 Already Resulted in Heightened Legal Scrutiny and Penalties ......... 56 8 2. The WSJ reveals Defendants breached their fiduciary duties to the Company and their legal obligations by knowingly 9 concealing the Google+ breach to avoid regulatory scrutiny............. 57 10 3. Lawmakers Investigate Whether Alphabet’s Concealment Violates the FTC Consent Decree or Other Data Protection 11 Laws ................................................................................................... 61 12 I. Defendant Schmidt Leaves the Board ........................................................... 64 13 V. THE INDIVIDUAL DEFENDANTS BREACHED THEIR FIDUCIARY DUTIES .................................................................................................................... 65 14 A. The Individual Defendants Breached Their Fiduciary Duties to the 15 Company ........................................................................................................ 66 16 B. The Individual Defendants Breached their Duty of Good Faith ................... 66 17 C. The Individual Defendants Violated Google’s Corporate Governance Guidelines ...................................................................................................... 68 18 D. The Individual Defendants Violated Google’s Code of Conduct by 19 Permitting the Company to Engage in Unlawful Acts .................................. 69 20 E. The Audit Committee Defendants Breached the Duties Imposed by the Audit Committee Charter by Permitting Alphabet to Engage in 21 Conduct in Violation of the Law ................................................................... 70 22 F. The Leadership Development and Compensation Committee Defendants Breached the Duties Imposed by the Leadership 23 Development and Compensation Committee Charter by Approving Severance Payouts to Executives Who Should Have Been Terminated 24 for Cause ........................................................................................................ 71 25 G. The Governance Committee Defendants Breached the Duties Imposed by the Governance Committee Charter ......................................................... 72 26 H. The Director Defendants Caused Google to File Misleading Financial 27 Statements With the SEC .............................................................................. 74 28 I. Conspiracy, Aiding and Abetting, and Concerted Action ............................. 78 -ii- CONSOLIDATED STOCKHOLDER DERIVATIVE COMPLAINT 1 VI. DAMAGES TO THE COMPANY .......................................................................... 79 2 A. Damages From the Unlawful Severance Payments to Rubin and Singhal ........................................................................................................... 79 3 B. Costs to Defend the Securities Fraud Class Action Lawsuit ......................... 80 4 C. Sexual Harassment, Discrimination, and Retaliation .................................... 80 5 D. Data Privacy .................................................................................................. 81 6 E. Legal and Regulatory Penalties ..................................................................... 82 7 F. Reputation, Goodwill, and Workplace Harm ................................................ 82 8 VII. DERIVATIVE ALLEGATIONS ............................................................................. 84 9 VIII. DEMAND FUTILITY ALLEGATIONS ................................................................. 85 10 A. Demand is Excused Because Each Member of the Board Faces a 11 Substantial Likelihood of Liability ................................................................ 85 12 B. Demand is Futile Because a Majority of the Board Completely Abdicated Its Fiduciary Duties ...................................................................... 89 13 C. Demand is Excused Because a Majority of the Board is Not 14 Independent ................................................................................................... 90 15 D. Demand is Excused Because the Board is Entirely Controlled by Defendants Page and Brin ............................................................................. 97 16 IX. THE STATUTE OF LIMITATIONS DOES NOT BAR LEAD 17 PLAINTIFFS’ CLAIMS, OR, ALTERNATIVELY, WAS TOLLED .................. 101 18 FIRST CAUSE OF ACTION ............................................................................................ 101 19 SECOND CAUSE OF ACTION ....................................................................................... 103 20 THIRD CAUSE OF ACTION ..........................................................................................