22 Cal.App.5th 336
Cal. Ct. App.2018Background
- Shareholder derivative suits filed in Feb 2014 against Google officers/directors alleging they entered no‑cold‑call agreements with competitors (e.g., Apple) that harmed Google financially and reputationally.
- The DOJ filed a civil antitrust complaint in Sept 2010 alleging Google and others agreed not to cold call each other’s employees; Google entered a stipulated judgment admitting no liability but accepting an injunction and publicly announced the settlement.
- Media widely reported the DOJ action and settlement; multiple employee class actions were filed in 2011 seeking over $3 billion in damages and later produced emails in discovery showing executive communications about hiring practices.
- Defendants moved for summary judgment arguing the three‑year Delaware statute of limitations barred the derivative claims because plaintiffs were on inquiry notice by Sept 2010; trial court granted summary judgment.
- On appeal the court applied Delaware law (internal affairs doctrine) and held that the DOJ complaint and publicity placed a reasonable shareholder on inquiry notice no later than Sept 2010, so the 2014 suit was time‑barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claims are time‑barred under Delaware 3‑year SOL | Claims were filed within tolling period because operative facts weren’t known until later (2012 emails) | Plaintiffs had inquiry notice by Sept 2010 (DOJ complaint/publicity), so limitations expired before 2014 filing | Held: Time‑barred; summary judgment affirmed |
| When inquiry notice arises for tolling purposes | Inquiry notice requires facts sufficient to investigate and plead a viable derivative claim (per Primedia) | Inquiry notice arises when public facts would prompt a reasonable shareholder to investigate, even without a “smoking gun” | Held: Public DOJ action sufficed to create inquiry notice in 2010; full proof not required |
| Tolling by fraudulent concealment or equitable reliance on fiduciaries | Google’s public statement sanitized settlement and nondisclosure in filings concealed facts, so equitable tolling should apply | Information was publicly available and would have prompted investigation; tolling exceptions end once inquiry notice exists | Held: Tolling exceptions do not apply because the DOJ action put plaintiffs on inquiry notice in 2010 |
| Timeliness of indemnification/contribution claims (accrual dates) | (Argued on appeal) those causes accrued later and thus were timely | Defendants: argument was not raised below; thus forfeited | Held: Forfeited on appeal for failure to raise in trial court; not considered |
Key Cases Cited
- Lonicki v. Sutter Health Central, 43 Cal.4th 201 (2008) (summary judgment review standard and construction of evidence against movant)
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (2001) (defendant bears burden to show complete defense on summary judgment)
- Hambrecht & Quist Venture Partners v. American Medical Internat., Inc., 38 Cal.App.4th 1532 (1995) (applying Delaware limitations law where Delaware governs)
- Desimone v. Barrows, 924 A.2d 908 (Del. 2007) (Delaware pleading standards require facts to plausibly suggest entitlement to relief)
- Weiss v. Swanson, 948 A.2d 433 (Del. 2008) (equitable tolling where plaintiff reasonably relies on fiduciary competence and good faith)
- In re Tyson Foods, Inc. Consol. S’holder Litig., 919 A.2d 563 (Del. 2007) (public availability of some information does not automatically trigger inquiry notice when inference of wrongdoing is not apparent)
- Solomon v. Pathe Communications Corp., 672 A.2d 35 (Del. 1996) (motion to dismiss standard accepting allegations and reasonable inferences)
- Neubauer v. Goldfarb, 108 Cal.App.4th 47 (2003) (materiality/context questions can preclude summary judgment on duty/breach issues)