SAN FRANCISCO (LN) — U.S. District Judge Rita F. Lin granted the motion for class certification on May 18, rejecting Alphabet’s argument that individualized questions of reliance and damages would overwhelm common issues. The ruling clears the path for the case to proceed to trial on the merits, where the company faces allegations that it gave preferential treatment to bids submitted through the Facebook Advertising Network.
The certified class includes all persons and entities that purchased Alphabet stock between September 15, 2020, and January 23, 2023. The class definition excludes Alphabet’s subsidiaries, affiliates, officers, directors, and members of the immediate family of individual defendant Pichai.
At the heart of the lawsuit is a statement Pichai submitted to the House Judiciary Committee on September 14, 2020. In response to questions, Pichai stated that “[t]he channel through which a bid is received does not otherwise affect the determination of the winning bidder.”
Plaintiffs allege this statement was false because Google’s ad server gave preferential treatment to bids submitted through the Facebook Advertising Network, increasing their probability of winning. They argue this practice violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
The certification hinged on whether plaintiffs could trigger the presumption of reliance under Basic Inc. v. Levinson by proving the misrepresentation had a price impact on Alphabet’s stock. Judge Lin found that defendants failed to disprove price impact from at least two corrective disclosures: the December 2020 Texas antitrust lawsuit and the January 2023 Department of Justice lawsuit.
Defendants relied on expert reports from Harvard law professor Allen Ferrell, who argued that statistical evidence did not show a significant price drop. However, Lin found that plaintiffs’ expert, Stanford economist Dr. Zachary Nye, provided persuasive evidence of price impact using 24-hour intraday event windows.
Lin rejected the defense’s attempt to impose a rigid 95% confidence level, noting that borderline statistical results can still be probative of price impact. She found Nye’s models, which showed abnormal price drops at confidence levels ranging from 93.49% to 97.13%, sufficient to rebut the presumption.
The judge also rejected the defense’s argument that other news, such as a Colorado antitrust lawsuit, severed the link between the misrepresentation and the stock price decline. Lin noted that the Colorado suit was filed after the relevant trading window and that its allegations concerned Google’s broader search and advertising businesses, making it unlikely to be confounding.
On damages, Lin found that plaintiffs’ proposed "out-of-pocket" method, which uses event studies to isolate company-specific price movements, was susceptible to classwide measurement. She cited the Ninth Circuit’s decision in Lytle v. Nutramax Lab’ys, Inc., which held that plaintiffs need not execute their damages model at the certification stage, only show it is reliable.
Pomerantz LLP has been appointed as class counsel. The named plaintiffs include AMI - Government Employees Provident Fund Management Company Ltd., the City of Fort Lauderdale Police & Fire Retirement System, Menora Mivtachim Insurance Ltd., and Menora Mivtachim Pensions and Gemel Ltd.
The case, AMI - Government Employees Provident Fund Management Company Ltd. v. Alphabet Inc. et al, is pending before Judge Lin in the U.S. District Court for the Northern District of California.