Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—N.D. Cal.: Class certified in action over Google advertising auctions, (May 20, 2026)

By R. Jason Howard, J.D.

Class certified despite defendant’s contention that individualized questions of reliance and damages would predominate over common questions.

The Northern District of California has granted a motion for class certification in a securities case against Alphabet Inc., its subsidiary Google LLC, and Google's CEO, on allegations that the defendants “misrepresented that Google’s digital advertising auctions were agnostic to the channel by which a bid was received,” which artificially maintained Alphabet’s stock price, thereby violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, 17 C.F.R. § 240.10b-5 (AMI-Gov’t Emp. Provident Fund Mgmt. Co. Ltd., v Alphabet Inc., No. 3:23-cv-01186-RFL (N.D. Cal. May 18, 2026)).

Digital advertising. Alphabet and its subsidiary Google are in the digital advertising business. Online media companies, alternatively called publishers, use ad servers to sell their ad space. Google operates an ad server. Ad servers can solicit bids to fill ad space through ad exchanges and ad networks. Facebook operates the Facebook Advertising Network (FAN), an ad network. According to the plaintiffs, Google caused its ad server to give FAN preferential treatment, so bids submitted through FAN had a higher probability of winning.

Allegations. The plaintiffs asserted that the defendants misrepresented that practice which artificially maintained Alphabet’s stock price and cited to the Google CEO’s response to questions for the record from the House Judiciary Committee, in which he stated that “the channel through which a bid is received does not otherwise affect the determination of the winning bidder.” The plaintiffs asserted that statement was false because bids submitted through FAN were more likely to win. The plaintiffs pointed to six corrective disclosures that they argued demonstrated the falsity of the CEO’s statement.

Certification. The defendants did not contest that the plaintiffs satisfied the Rule 23(a) prerequisites of numerosity, commonality, typicality, and adequacy. The defendants also did not contest that the plaintiffs satisfied the Rule 23(b)(3) requirements of superiority which only left a dispute over the predominance requirement where it was the defendants' contention that the individualized questions of reliance and damages would predominate over common questions.

Reliance. Citing to Basic Inc. v. Levinson, 485 U.S. 224, 245 (1988), the court explained that to show reliance, a plaintiff must prove: “(1) that the alleged misrepresentation was publicly known; (2) that it was material; (3) that the stock traded in an efficient market; and (4) that the plaintiff traded the stock between the time the misrepresentation was made and when the truth was revealed.” Here, the court stated that the plaintiffs “undisputedly satisfied their burden to trigger the Basic presumption of reliance.”

In support, the court noted that the alleged misrepresentation was publicly posted on Congress’ website, Alphabet’s stock trades on the NASDAQ, a “quintessentially efficient market,” the plaintiffs and class members “purchased Alphabet stock between the time the alleged misrepresentation was made and the time the truth was revealed” and, at the certification stage, the plaintiffs were not required to prove materiality.

The burden of rebutting the Basic presumption then shifted to the defendants and they needed to show a lack of any price impact from the alleged misrepresentation.

Before turning to the corrective disclosures, the court addressed a dispute over what statistical evidence was sufficient to prove price impact, or lack thereof, and concluded that “even borderline statistical evidence of a price impact can still be evidence of a price impact.”

The court then looked to the corrective disclosures and highlighted a 2020 lawsuit in which Texas and nine other states filed an antitrust lawsuit against Google concerning its advertising technology business, and a 2023 antitrust lawsuit in which the DOJ, joined at first by eight states and later by nine more, alleged that Google rigged its advertising auctions in favor of Facebook.

Here, the court stated that the defendants failed to carry their burden of disproving price impact from the 2020 Texas lawsuit and they failed to meet their burden of showing a lack of price impact from the 2023 DOJ lawsuit, as both disclosed new information to the market which acted as partial corrective disclosures, resulting in a statistically significant price drop as demonstrated in two expert reports submitted by the plaintiffs.

The court concluded that the defendants had “not disproven back-end price impact from the first and last corrective disclosures within the class period.” Those two incidents of back-end price impact “supported plaintiffs’ theory that the alleged misrepresentation maintained the initial stock price at the front end.”

Damages. Here, the court explained that the plaintiffs were required to generally show that “damages are susceptible of measurement across the entire class,” but the calculations need not be exact at the certification stage. Rather, the plaintiffs “must show that they will be able to prove their case through common proof at trial.” So “plaintiffs may rely on an unexecuted damages model to demonstrate that damages are susceptible to common proof so long as the district court finds, by a preponderance of the evidence, that the model will be able to reliably calculate damages in a manner common to the class at trial.” The court found that the plaintiffs made such a showing in their expert reports.

Conclusion. The motion for class certification was granted and plaintiffs, AMI - Government Employees Provident Fund Management Company Ltd., City of Fort Lauderdale Police & Fire Retirement System, Menora Mivtachim Insurance Ltd., and Menora Mivtachim Pensions and Gemel Ltd., were appointed as class representatives. Pomerantz LLP was appointed as class counsel.

The case is No. 3:23-cv-01186-RFL.

Judge: Lin, R.

Attorneys: Emma Gilmore (Pomerantz LLP) for AMI - Government Employees Provident Fund Management Co. Ltd. Boris Feldman (Freshfields US LLP) for Alphabet Inc.

Companies: AMI - Government Employees Provident Fund Management Co. Ltd.; Alphabet Inc.

LitigationEnforcement: CorporateGovernance DirectorsOfficers FraudManipulation PublicCompanyReportingDisclosure ShareholderActivismNews CaliforniaNews