Scanned with CamScanner 1 TABLE OF CONTENTS 2 I. NATURE AND SUMMARY OF THE ACTION ...........................................................5 3 II. JURISDICTION AND VENUE ......................................................................................10 4 5 III. THE PARTIES ..................................................................................................................11 6 A. Plaintiff .................................................................................................................11 7 B. Nominal Defendant ............................................................................................11 8 C. Executive Officer Defendants ............................................................................11 9 D. Director Defendants ............................................................................................15 10 11 E. Former Director Defendant Tilghman .............................................................18 12 F. Doe Defendants ...................................................................................................19 13 G. Unnamed Participants ........................................................................................19 14 IV. RESPONSIBILITIES AND DUTIES OF THE INDIVIDUAL DEFENDANTS ........20 15 A. Responsibilities of the Individual Defendants................................................20 16 B. Fiduciary Duties of the Individual Defendants ..............................................25 17 18 C. Breaches of Fiduciary Duties by Individual Defendants ..............................26 19 D. Conspiracy, Aiding and Abetting, and Concerted Action ............................27 20 V. SUBSTANTIVE ALLEGATIONS ..................................................................................28 21 A. Defendants Brin and Page, the Company’s Co‐Founders, as Well as 22 Other Senior Executives, Set the Tone at the Top by Dating Employees and Having Extra‐Marital Affairs ................................................29 23 24 B. In 2014 the Individual Defendants Investigated Allegations of Sexual Harassment by Defendant Rubin, and Found the Allegations 25 To Be Credible, But Concealed Rubin’s Harassment and Instead 26 Gave Him a Hero’s Farewell by Paying Him $90 Million in Severance ..............................................................................................................31 27 28 2 SHAREHOLDER DERIVATIVE COMPLAINT 1 2 C. The Board of Directors’ and Other Defendants’ Active, Direct, and Intentional Role in the Wrongdoing.................................................................33 3 D. Alphabet’s Current Board Failed to Come Clean in Late 2017, Even 4 After a News Report Surfaced That Suggested Impropriety by Rubin ......43 5 E. Google Paid Another Executive, Amit Singhal, Millions After He 6 Sexually Harassed Google Employees .............................................................44 7 F. Google Asked Other Victims of Sexual Harassment to “Stay Quiet” 8 After Their Allegations of Harassment Were Found to Be Credible ...........46 9 G. The Director Defendants Caused Google to File False Financial 10 Statements With the SEC ...................................................................................48 11 H. The Board’s Conduct Has Caused Substantial Damage to the 12 Company ..............................................................................................................51 13 VI. UNJUST COMPENSATION AWARDED TO SOME OF THE DEFENDANTS ................................................................................................................55 14 15 VII. DAMAGES TO ALPHABET AND GOOGLE .............................................................59 16 VIII. DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS ...................................60 17 A. Demand Is Futile Because the Demand Directors Lack Independence ......60 18 B. At the Outset, Demand Is Futile as to Defendants Page, Brin, 19 Schmidt, Greene and Pichai Because, as Alphabet Admits, These “Inside” Demand Directors Lack Independence............................................61 20 21 C. Demand Is Futile Because Defendants Page, Brin, and Schmidt Dominate and Control the Board .....................................................................61 22 D. Demand is Futile Because a Majority of the Board Completely 23 Abdicated Its Fiduciary Duties .........................................................................64 24 E. Demand Is Futile Because a Majority of the Board Cannot Conduct 25 an Independent and Objective Investigation of the Misconduct Due 26 to Their Close Professional and Personal Relationships ...............................65 27 28 3 SHAREHOLDER DERIVATIVE COMPLAINT 1 2 F. Demand Is Futile Because the Demand Defendants Face a Substantial Likelihood of Liability for Their Misconduct .............................73 3 G. The Statute of Limitations Does Not Bar Plaintiff’s Claims or, 4 Alternatively, Was Tolled ..................................................................................76 5 IX. CAUSES OF ACTION ....................................................................................................77 6 7 X. PRAYER FOR RELIEF ....................................................................................................79 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 SHAREHOLDER DERIVATIVE COMPLAINT 1 Plaintiff James Martin (“Plaintiff”), by and through his undersigned attorneys, 2 submits this Shareholder Derivative Complaint against certain directors and officers of 3 nominal defendant Alphabet Inc. (“Alphabet” or the “Company”), in connection with 4 their breaches of fiduciary duties. In support of these claims, Plaintiff alleges the 5 following (1) upon personal knowledge with respect to the matters pertaining to himself; 6 and (2) upon information and belief with respect to all other matters, based upon, inter 7 alia, the investigations undertaken by his counsel, which include a review of documents 8 produced by Alphabet in response to Plaintiff’s shareholder inspection demand, a 9 review of Alphabet’s legal and regulatory filings, press releases, SEC filings, analyst 10 reports, and media reports about the Company. Plaintiff believes that substantial 11 additional evidentiary support will exist for the allegations set forth below after a 12 reasonable opportunity for discovery. 13 I. NATURE AND SUMMARY OF THE ACTION 14 1. Plaintiff brings this shareholder derivative action against certain officers 15 and directors of Alphabet, the parent company of Google LLC (“Google”),1 for their 16 active and direct participation in a multi‐year scheme to cover up sexual harassment and 17 discrimination at Alphabet. 18 2. The Individual Defendants’ misconduct has caused severe financial and 19 reputational damage to both Google and Alphabet. As one current Google employee 20 succinctly put it: 21 When Google covers up harassment and passes the trash, it contributes to an environment where people don’t feel safe reporting 22 misconduct. They suspect that nothing will happen or, worse, that the men will be paid and the women will be pushed aside. 23 24 25 1 Google is one of Alphabet’s subsidiaries. As part of Alphabet’s reorganization in 26 2017, Google Inc. was converted into a limited liability company. 27 28 5 SHAREHOLDER DERIVATIVE COMPLAINT 1 See Daisuke Wakabayashi and Katie Benner, “How Google Protected Andy Rubin, the 2 ‘Father of Android,” THE NEW YORK TIMES (Oct. 25, 2018) (quoting Liz Fong‐Jones, a 3 Google engineer). 4 3. The Individual Defendants knew about sexual harassment by numerous 5 senior Google executives, including defendant Andy Rubin (the creator of Android 6 mobile software), against whom credible allegations of sexual misconduct were 7 confirmed through an internal investigation. Instead of disciplining these senior 8 executives, however, the Individual Defendants protected them. The Individual 9 Defendants failed to timely disclose the harassment, and then attempted to cover up the 10 harassment when news reports began to suggest that egregious sexual harassment and 11 discrimination had occurred at Google. 12 4. For example, in Rubin’s case, Rubin was allowed to quietly resign by 13 defendants Larry Page and Sergey Brin (Google’s co‐founders and Alphabet’s 14 controlling shareholders) after an internal investigation found the allegations of sexual 15 harassment by Rubin to be credible. As reported by The New York Times on October 16 26, 2018, Rubin coerced a Google employee to perform sex acts in 2013, while he was a 17 Google senior executive: 18 [A]n employee had accused Mr. Rubin of sexual misconduct. The woman, with whom Mr. Rubin had been having an extra‐marital 19 relationship, said he coerced her into performing oral sex in a hotel room in 2013 …. Google investigated and concluded her claim was credible …. 20 See Daisuke Wakabayashi & Katie Benner, “How Google Has Protected Its Elite Men,” THE 21 NEW YORK TIMES (Oct. 26, 2018). 22 5. While at Google, Rubin is also alleged to have engaged in human sex 23 trafficking – paying hundreds of thousands of dollars to women to be, in Rubin’s own 24 words, “owned” by him. Google, meanwhile, has paid lobbyists to oppose legislation in 25 Washington that had bi‐partisan support and sought to combat human sex trafficking. 26 See David McCabe, “Sex Trafficking Bill Hits a Nerve in Silicon Valley,” AXIOS, Sept. 7, 27 2017 (noting that Google’s “trade associations and the think tanks they fund have come 28 6 SHAREHOLDER DERIVATIVE